New Business Results

RNS Number : 4360W

Hansard Global plc

31 January 2012

 



31 January 2012

Hansard Global plc

("Hansard" or "the Group")

New business results for the six months ended 31 December 2011

Hansard Global plc, the specialist long-term savings provider, issues its new business results for the six months ended 31 December 2011 (H1 2012), reflecting continuing success in the Group's strategy to source regular premium new business from international growth markets leading to significantly higher new business margins.

Summary

·     Overall new business margin of 10.4% (H1 2011: 7.4%) reflects the continued increase in volume and proportion of regular premium business, in line with the Group's stated strategy. New business profits have increased by 9.4% over H1 2011;

·     Regular premium new business in H1 2012 is £67.6m on the basis of Present Value of New Business Premiums ("PVNBP") primarily from the growth markets of the Far East and Latin America, an increase of 41.1% over H1 2011 (£40.9m);

·     As a result of the Group's strategy of focussing on more profitable regular premium new business and uncertain economic conditions, single premium new business flows of £22.1m in the period have fallen by 66.8% from H1 2011;

·     Q2 2012 sales of £45.2m are marginally ahead of Q1 2012 levels despite market volatility over the period;

·     Assets under Administration of £1.1bn as at 31 December 2011 are broadly in line with the position at 30 September 2011, but have decreased by 14.6% since 30 June 2011 due to the declines in capital markets;

·     Over 1,000 policies have been introduced electronically in H1 2012 using the online new business facility through Hansard OnLine;

Leonard Polonsky, Chairman of Hansard Global plc, commented:

"We have recorded a strong new business performance in the second quarter of this financial year in spite of unfavourable economic conditions. The distribution initiatives and investments undertaken in previous quarters, and the Group's focus on growth markets, continue to bear fruit.

"We remain confident that the outlook for growth remains positive for the Group despite short-term impacts on IFRS profits."

For further information:

Hansard Global plc                                                                           [phone]

Leonard Polonsky, Chairman                                    

Gordon Marr, Managing Director

Vince Watkins, Chief Financial Officer                                                          

Pelham Bell Pottinger                                                                      [phone]

Daniel de Belder                                                                                                        

Hansard Global plc

New business results for the six months ended 31 December 2011

OVERVIEW

Despite the uncertain economic conditions over the six months to 31 December 2011 (H1 2012) and the turmoil in all major markets, Hansard's new business sales remain buoyant. Using the Group's internal metric, Compensation Credit, sales are almost 9% higher than those of H1 2011. The majority of the Group's sales are from the growth markets of the Far East and Latin America.

Notwithstanding capital market falls, new business sales volumes in each of the last four quarters have been broadly consistent and give grounds for optimism for increases when markets stabilise.

Successful activity to source higher levels of more profitable regular premium new business is reflected in an increase of 41% PVNBP over H1 2011, while volatile financial markets that have impacted the timing of investment decisions have contributed to reduced single premium sales of £22.1m in the period (H1 2011: £66.6m). Regular premium sales in the period were 75% of total new business flows (H1 2011: 42%).

New business flows are summarised as follows (comparisons are on an actual currency basis).

	Three months ended				Six months ended
	31 December				31 December
	2011	2010	%		2011	2010	%
Basis	£m	£m	change		£m	£m	change
Compensation Credit	4.3	4.8	(10.4)%		8.6	7.9	8.9 %
Present Value of New Business Premiums	45.2	62.7	(27.9)%		89.7	114.5	(21.7)%
Annualised Premium Equivalent	6.9	8.7	(20.7)%		13.5	15.0	(10.0)%

The Group's investment in distribution and other infrastructure in order to access additional sources of regular premium new business, and to enhance existing relationships with IFAs and other intermediaries in the Group's target markets continues. In particular the online new business facility through Hansard OnLine continues to be implemented and over 1,000 policies have been introduced electronically in H1 2012 by those financial advisors using the functionality. This represents approximately 76% of regular premium policies in H1.

The shift in business mix toward higher margin regular premium business has had a short-term impact on IFRS earnings, due to the negative impact of expense recognition in the early period of a policy's life, of approximately £0.8m lower compared to H1 2011. For business written this year, this is expected to unwind over the next 12-18 months.

Administrative and other expenses have increased by approximately £1.0m over H1 2011. This includes increased compliance, risk management and legal expenses announced in H2 2011 which, in addition to targeted market development activity, contributed approximately £0.5m.          

The Sterling-Euro exchange rate continued to deteriorate during Q2 and this will impact the carrying value of the Group's assets denominated in Euros (principally the regulatory capital of Hansard Europe Limited), and reduce IFRS profits by approximately £0.9m in H1 2012 compared with a gain of £0.5m in H1 2011.

As a result of the above, the Board expects IFRS profit for the full year to be significantly below expectations. Nevertheless the Group's Embedded Value at H1 2012 is in line with our expectations and our balance sheet remains highly robust.

New Business Flows - THREE months ended 31 December 2011

New business sales in Q2 2012, on all metrics reported by the Group, remained at levels broadly consistent with periods earlier this year, prior to the market corrections in the summer.

Continued development of relationships with financial advisors and establishment of new relationships, particularly in the Far East, has underpinned new business in the quarter and has contributed to increased levels of more profitable regular premium sales.

·     Compensation Credit ("CC")

Compensation Credit is the Group's prime indicator of new business activity. CC measures the relative value of each piece of new business to allow the Group to maintain margins, protect capital and is used in all financial incentive arrangements established by the Group.

Despite adverse market conditions globally, sales of £4.3m CC in Q2 2012 remained at the level experienced in Q1 2012, reflecting the attractiveness of long term investment products among financial advisors and their clients.

·     Present Value of New Business Premiums ("PVNBP")

Regular Premium sales of £33.7m are 9.1% above Q2 2011 and, despite current market sentiment, only marginally below regular premium sales in Q1 2012. Lack of investor confidence is more markedly seen in low levels of single premium business in the quarter, which is down 63.8% against last year and, as a result, total new business for the quarter of £45.2m is 27.9% below the level of Q2 2011.

While we continue to see interest from the market for our products the lead time in translating this into confirmed sales has increased, again reflecting current investor sentiment. With little evidence of any sustained recovery in markets or, investor confidence in markets, this is unlikely to change in the near future.

Reflecting the success of the Group's strategy, regular premium flows in Q2 2012 comprised almost three-quarters of total new business, compared to just under half in the corresponding quarter. Sustained levels of new business and the emphasis on regular premium sales has resulted in market leading new business margins of 10.4% for the half-year (H1 2011: 7.4%).

Established relationships in the Far East continue to deliver significant new business. Q2 2012 sales of £19.2m, which are primarily regular premium policies, have increased over both Q2 2011 and Q1 2012. Sales of £35.6m for the six month period have increased by 42% over H1 2011.

While new business from the regions of EU and EEA, and the Rest of the World has decreased against the comparative period, the comparison is distorted by the issue of a small number of high value single premium cases issued in H1 2011.  More encouraging, however, is an increased amount of regular premium sales from the EU region in H1 2012.

Flows of £10.0m from Latin America, while down by £3.1m from Q1 2012, have shown signs of recovery through December, despite the Christmas and New Year break.

The overall level of business in Q2 2012 has remained consistent with Q1 2012, demonstrating the resilience of our sales model.

	Three months ended				Six months ended
	31 December				31 December
	2011	2010	%		2011	2010	%
PVNBP by product type	£m	£m	change		£m	£m	change
Regular premium	33.7	30.9	9.1 %		67.6	47.9	41.1 %
Single premium	11.5	31.8	(63.8)%		22.1	66.6	(66.8)%
Total	45.2	62.7	(27.9)%		89.7	114.5	(21.7)%

	Three months ended				Six months ended
	31 December				31 December
	2011	2010	%		2011	2010	%
PVNBP by geographical area	£m	£m	change		£m	£m	change
Far East	19.2	18.7	2.7 %		35.6	25.0	42.4 %
EU and EEA	11.1	16.7	(33.5)%		21.0	29.9	(29.8)%
Latin America	10.0	14.4	(30.5)%		23.1	24.7	(6.5)%
Rest of World	4.9	12.9	(62.0)%		10.0	34.9	(71.3)%
Total	45.2	62.7	(27.9)%		89.7	114.5	(21.7)%

New business margins

The Group continues to issue new business on terms that meet target returns and contribute to profit. The new business margin is sensitive to volumes and the product mix: as a result of the substantial value of regular premium business issued in H1 2012, which is more profitable to the Group than single premium business, the overall new business margin for H1 2012 is approximately 10.4% (H1 2011: 7.4%). The profit from new business is £9.3m, an increase of 9.4% over H1 2011.

Assets under Administration ("AUA")

Notwithstanding the large number of regular premium contracts administered by the Group, the value of AUA has been eroded by the market falls in Q1 2012 reported in the Group's Interim Management Statement in November. While positioning of policyholder assets and reduced confidence in timing of investment decisions have meant that AUA levels have not benefitted from the market recovery in Q2, the level of £1.1bn at 31 December 2011 remains only marginally below the level reported at 30 September 2011. This represents a decrease of 14.6% since 30 June 2011.

Although the changing mix of business towards regular premium contracts has significantly affected net policyholder cash flows in H1 2012, when compared with H1 2011, we believe that increasing the level of regular premium contracts (with more stable, recurring cash inflows) will be value enhancing in the longer term.

	Three months ended			Six months ended
	31 December			31 December
	2011	2010		2011	2010
	£m	£m		£m	£m
Deposits to investment contracts	32.3	55.4		66.0	106.9
Withdrawals from contracts	(44.3)	(52.7)		(92.7)	(90.5)
Effect of market and currency movements	(1.4)	80.7		(152.5)	152.2
Increase in period	(13.4)	83.4		(179.2)	168.6
Opening balance	1,063.8	1,219.9		1,229.6	1,134.7
Assets under Administration	1,050.4	1,303.3		1,050.4	1,303.3

Included in the market movements for H1 2012 are amounts totalling £21m (of which £8m is included in Q2 2012) representing the book value of a number of assets that ceased trading on normal terms in the period and have therefore been written down in accordance with our normal practice. In common with assets similarly treated in prior periods, this write-down results in a reduction in the Group's asset-based fee income.

Deposits to investment contracts in H1 2011 includes large single premium cases referred to above, totalling £20m.

Results for the half-year

Trading results for the half-year ended 31 December 2011 are expected to be announced on 23 February 2012.

Outlook

While economic conditions remain uncertain we are optimistic that the Group's focus on the growth markets of the Far East and Latin America and our continuing investment in distribution infrastructure, systems and online platform, will position us for growth. We believe that Hansard's prospects remain strong.

Notes to editors:

·    Hansard Global plc is the holding company of the Hansard Group of companies. The Company was listed on the London Stock Exchange in December 2006. The Group is a specialist long-term savings provider, based in the Isle of Man.

·    The Group offers a range of flexible investment products within a life assurance policy wrapper, designed to appeal to affluent, international investors.

·    The Group utilises a low-cost distribution model by selling policies exclusively through a network of independent financial advisors and the retail operations of certain financial institutions, who provide access to their clients in more than 170 countries. The Group's distribution model is supported by Hansard OnLine, a multi-language internet platform, and is scaleable.

·    The principal geographic markets in which the Group currently services financial advisors and policyholders are the Far East, the Middle East, and Latin America in the case of Hansard International Limited, and Western Europe in the case of Hansard Europe Limited, the Group's two life assurance companies.

·    The Group's objective is to grow its business by attracting new business and positioning itself to adapt rapidly to market trends and conditions. The scaleability and flexibility of the Group's operations allow it to enter or develop new geographic markets and exploit growth opportunities within existing markets without the need for significant further investment.

Forward-looking statements:

This announcement may contain certain forward-looking statements with respect to certain of Hansard Global plc's plans and its current goals and expectations relating to future financial condition, performance and results. By their nature forward-looking statements involve risk and uncertainties because they relate to future events and circumstances which are beyond Hansard Global plc's control. As a result, Hansard Global plc's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in Hansard Global plc's forward-looking statements. Hansard Global plc does not undertake to update forward-looking statements contained in this announcement or any other forward-looking statement it may make. No statement in this announcement is intended to be a profit forecast or be relied upon as a guide for future performance.

 

END

 

 

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