Interim Management Statement

RNS Number : 5878V

Hansard Global plc

04 November 2010

 



4 November 2010

Hansard Global plc

("Hansard" or "the Group")

Interim Management Statement

Hansard Global plc, the specialist long-term savings provider, issues its Interim Management Statement for the period from 1 July 2010 to date. All figures refer to the three months ended 30 September 2010 ("Q1 2011"), except where indicated.

Summary

·     New business on the basis of Present Value of New Business Premiums ("PVNBP") for the quarter is £51.8m, an increase of 58.4% over the same period in the previous financial year (Q1 2010: £32.7m);

·     Regular premium flows have grown by 29.8% over Q1 2010 and single premium flows by 77.6%, aided by a small number of single premium cases totalling £20.3m;

·     Fourth consecutive quarter of new business growth on the PVNBP basis;

·     Overall new business margin of 5.1% (Q1 2010: 5.8%) reflects the impact of large single premium cases. Underlying margins remain industry-leading;

·     £1.2bn Assets under Administration as at 30 September 2010, up 7.5% since 30 June 2010. Net positive policyholder cash flows have been maintained through the period;

·     Renewed focus on regular premium business with introduction of Market Development Manager programme in the period;

·     Continued development of Hansard OnLine.

Leonard Polonsky, Chief Executive of Hansard Global plc, commented:

"The performance of the Group in the first quarter of this financial year is encouraging. We have achieved a fourth consecutive quarter of profitable new business growth and have continued to generate strong net cash flows from policyholders, underpinning growth in Assets under Administration to £1.2 billion.

"While conditions remain uncertain over the short-term, particularly in Europe, we are confident that the outlook for growth in new business and profitability remains positive for the Group."

For further information:

Hansard Global                                                                                     [phone]

Leonard Polonsky, Chief Executive                                             

Gordon Marr, Managing Director

Vince Watkins, Chief Financial Officer                                                    

Pelham Bell Pottinger                                                                         [phone]

Daniel de Belder                                                                                                                                                               

Hansard Global plc

INTERIM MANAGEMENT STATEMENT

OVERVIEW

During the period, the Group has continued to generate IFRS profits backed by strong business persistency and a balance sheet unencumbered by debt. The Group continues to manage administrative and related expenses rigorously while investing in distribution infrastructurein 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.

EEV operating profits continue to be impacted by the effects of lower volumes and policyholder caution in relation to premium reductions as experienced in the previous financial years.

The Group continues to be strongly capitalised enabling it to satisfy operational, regulatory, intermediary and policyholder expectations.

The Group has achieved a fourth consecutive quarter of new business growth on the PVNBP basis. New business for the period of £51.8m on the PVNBP basis is 58.4% above the level of the corresponding period of the previous financial year (Q1 2010: £32.7m). New business performance in Q1 2011 reflects the impact of single premiums of approximately £20.3m received on five contracts. While this level of premium flow illustrates the continuing level of interest in Hansard's products among intermediaries and their clients, the large single premium cases have the effect of distorting reported new business flows and overall new business margins.

The Group is continuing the projects to develop Hansard OnLine, implement new business initiatives and streamline administrative processes.In particular, those financial intermediaries selected to pilot the online new business facility through Hansard OnLine are now using it for over 95% of their business. Over 300 new business cases have been processed by the Group since piloting commenced; the facility is now being extended to other intermediary groupings.

FINANCIAL PERFORMANCE AND POSITION - 3 MONTHS TO 30 SEPTEMBER 2010

·           International Financial Reporting Standards ("IFRS")

IFRS profit for the period was underpinned by high policyholder persistency and the strength of the book of existing policies. The level of the Group's investment income continues to reflect a low interest rate environment. We continue to manage our cost base effectively, while continuing to invest in the Group's sales and distribution infrastructure.

At the date of this report there has been no change in the status of the complaints reported in the Group's Annual Report & Accounts for the year ended 30 June 2010, nor in the taxation status of the Company and its Isle of Man-based subsidiaries. We do not anticipate that there will be any impact on the Group's taxation position in this financial year or the next.

·           European Embedded Value ("EEV")

The profitable new business written during the period, the persistency of cash flows and the lack of option instruments, guarantees or other such features within the products issued by the Group, have continued to generate EEV operating profit, reduced in part by the effects of premium reductions and other issues arising from the level of new business.

·           Capitalisation and Solvency

The Group continues to be strongly capitalised enabling it to satisfy operational, regulatory, intermediary and policyholder expectations. At 30 September 2010 the aggregate minimum regulatory margin remains covered approximately 16 times by the Group's capital resources.

The Group's solvency position is well insulated against the current challenging capital market conditions. At the date of this report, the Group's liquid assets are held with a wide range of deposit institutions and in highly-rated money market liquidity funds.

New Business Flows - THREE months ended 30 SEPTEMBER 2010

The Group has achieved a fourth consecutive quarter of new business growth.

New business flows for the three-month period ended 30 September 2010 are summarised as follows (comparisons to Q1 2010 are on actual currency basis).

	Q1 2011	Q1 2010	%
Basis	£m	£m	change
Compensation Credit	3.1	2.3	34.7%
Present Value of New Business Premiums	51.8	32.7	58.4%
Annualised Premium Equivalent	6.3	4.2	50.0%

·    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.

New business flows totalled £3.1m CC for the period compared with £2.3m in Q1 2010, an increase of 34.7%.

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

New business for the period of £51.8m PVNBP is 58.4% above the level of the corresponding period of the previous financial year. Regular premium flows have grown by 29.8% over Q1 2010 and single premium flows by 77.6%.

	Q1 2011	Q1 2010	%
PVNBP by Premium type	£m	£m	change
Regular premium	17.0	13.1	29.8 %
Single premium	34.8	19.6	77.6 %
PVNBP	51.8	32.7	58.4 %

	Q1 2011	Q1 2010	%
PVNBP by residence of policyholder	£m	£m	change
EU and EEA	13.2	14.9	(11.4) %
Latin America	10.3	8.3	24.1 %
Far East	6.3	5.5	14.5 %
Rest of world	22.0	4.0	450.0 %
PVNBP	51.8	32.7	58.4 %

New business premiums on the PVNBP basis during the period totalled £51.8m. This represents an increase of 58.4% compared with £32.7m in Q1 2010.

Regular premium flows for the quarter were £17.0m, an increase of 29.8% over Q1 2010. The Group has continued to direct its resources to attract further sources of regular premium new business flows. This is reflected in continuing growth in flows from Latin America and the Far East regions and in the recent placing of a number of Market Development Managers in those regions. We have already seen a small number of new business cases from relationships established by those individuals.

Single premium contracts totalled £34.8m or 67.2% of new business flows on this basis (Q1 2010: £19.6m or 60%), of which five contracts issued for the Rest of the World region accounted for approximately £20.3m (Q1 2010: the biggest five cases amounted to £3.3m). This illustrates the sensitivity of the Group's PVNBP reporting to large single premium cases. One contract represents $16.9m or approximately £10.9m.

Notwithstanding the large single premium cases reported above, the flow of single premium business in certain parts of the EU and EEA regions remains restrained as a result of volatile market conditions and regulatory complexity. While we have reduced our exposure to those markets pending clarification, we continue to source new business in other EU jurisdictions.

·    New business margins

The Group continues to issue new single and regular premium business on terms that meet target returns and contribute to profit. The new business margin is sensitive to the product mix: as a result of the substantial value of single premium business issued in the period, which is less profitable to the Group than regular premium business, the overall new business margin is approximately 5.1% (Q1 2010: 5.8%). New business margins on the Group's underlying new business flows for the period were approximately 7.9% (Q1 2010: 6.1%).

·    New business by currency

Hansard receives business from a strong and well-diversified range of intermediaries around the world in a number of currencies. The significant levels of single premiums received in the quarter under review in US Dollars and Euro has materially distorted the reported principal currency receipts set out below, from those of Q1 2010.

	Q1 2011	Q1 2010
Currency	% PVNBP	% PVNBP
US Dollars	49.5	40.3
Euro	32.1	24.6
Sterling	8.7	25.5

Assets under Administration

Despite the volatility in capital markets and in exchange rates during the period ended 30 September 2010, net positive policyholder cash flows have been received. The value of Assets under Administration ("AUA") at that date was £1.22bn, an increase of 7.5% since 30 June 2010.

	Unaudited	Unaudited
	Three months ended 30 September 2010	Three months ended 30 September 2009
	£m	£m
Deposits to investment contracts	51.6	34.9
Withdrawals from contracts	(37.7)	(50.0)
Effect of market and currency movements	71.3	134.3
Increase in period	85.2	119.2
At 1 July	1,134.7	1,002.1
Assets under Administration	1,219.9	1,121.3

There have been no significant changes since year end in the volumes of illiquid assets or impaired fund structures held in AUA, nor in the currency composition of AUA.

Results for the half-year

New business results for the half-year ending 31 December 2010 are expected to be announced on 27 January 2011. Trading results for the half-year are expected to be announced on 24 February 2011.

Outlook

While conditions remain uncertain, particularly in Europe, we are optimistic that the Group's focus on the Far East and Latin America and our continuing investment in its distribution infrastructure, systems and online platform, will position us for growth in volume and profitability. 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 on 18 December 2006. The Group is a specialist long-term savings provider, based in the Isle of Man.

·    The Group offers a range of flexible and tax-efficient 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 financial services intermediaries, independent financial advisers and the retail operations of certain financial institutions (collectively "Intermediaries"), who provide access to their clients in more than 170 countries. The Group's distribution model is supported by Hansard OnLine, an award-winning, multi-language internet platform, and is scaleable.

·    The principal geographic markets in which the Group currently services Intermediaries 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.

 

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