Interim Management Statement

RNS Number : 8182R

Hansard Global plc

10 November 2011

 



10 November 2011

Hansard Global plc

Interim Management Statement

Hansard Global plc ("Hansard" or "the Group"), the specialist long-term savings provider, issues its Interim Management Statement for the period from 1 July 2011 to date. All figures refer to the three months ended 30 September 2011 ("Q1 2012"), except where indicated. Hansard confirms that the overall performance and financial position of the Group is in line with the Board's expectations.

Summary

·     Regular premium new business flows of £33.9m PVNBP in the quarter, primarily from the growth markets of Latin America and the Far East, have almost doubled from the level of Q1 2011 (£17.0m) and are 10% higher than Q4 2011;

·     As a result of the Group's strategy of focussing on more profitable regular premium new business, single premium flows of £10.6m have reduced from £34.8m received in Q1 2011. This also reflects a small number of large single premium cases totalling £20m issued in Q1 2011 and the impact of volatile markets  which is affecting the timing of investment decisions;

·     Overall new business margin of 9.7% (Q1 2011: 5.1%) 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 64% over Q1 2011;

·     Despite profitable new business, EEV at 30 September 2011 has fallen by 2.7% since 30 June 2011, following falls in market levels;

·     The value of Assets under Administration as at 30 September 2011 reflects market volatility since 30 June 2011 and has fallen by 13.5% to £1.06bn.

Leonard Polonsky, Chairman of Hansard Global plc, commented:

"These positive results have been delivered in a difficult period for global stock markets. I believe that in spite of the current economic uncertainties the Group remains well placed for continued growth in new business and profitability for the remainder of the year and over the longer term."

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

INTERIM MANAGEMENT STATEMENT

OVERVIEW

Despite significant volatility in global markets in the quarter ended 30 September 2011 (Q1 2012), new business levels remain strong. Hansard's strategy to acquire more profitable regular premium new business continues to be rewarded and regular premium new business levels have doubled over Q1 2011.  The growth of single premium new business has been restrained by a number of factors including market volatility and the comparison with the prior year is distorted by a small number of large cases issued in Q1 2011.

New business margins on the PVNBP basis have risen to approximately 9.7%, primarily as a result of increased volumes of regular premium new business (30 June 2011: 8.3%).

Our strategic decision to focus on non-EU markets, and the Far East and Latin America in particular, has been vindicated given the recent turmoil in the eurozone. We believe that this positions us well for future growth.

As would be expected, the volatility in major capital markets has had a negative impact on the value of policyholder Assets under Administration and on the Group's embedded value at 30 September 2011, when compared with 30 June 2011.

FINANCIAL PERFORMANCE AND POSITION - 3 MONTHS TO 30 SEPTEMBER 2011

·           International Financial Reporting Standards ("IFRS")

During the period, the Group has continued to generate IFRS profits backed by strong business persistency. Profit after tax for Q1 2012 is marginally above Q1 2011 which reflects a reversal of unrealized foreign exchange gains and continued 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.

·           European Embedded Value ("EEV")

EEV operating profit continues to be generated through 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. The effect of the falls in major capital markets in Q1 2012 has been to reduce our expectations of future asset-based income streams and therefore to contribute to a reduction in EEV at 30 September to £250m, compared with £257m at 30 June 2011.This fall of 2.7%, when compared with the falls in global capital markets in the period, demonstrates the resilience of the Group's embedded value.

·           Capitalisation and Solvency

The Group continues to be strongly capitalised enabling it to satisfy operational, regulatory, intermediary and policyholder expectations. At 30 September 2011 the aggregate minimum regulatory margin remains covered approximately 15 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 2011

The Group's success in attracting continuing new business flows is reflected primarily in an increase of 38.7%, on its internal metric, Compensation Credit, over Q1 2011.

On both the PVNBP and APE bases, the impact of a small number of large single premium cases in Q1 2011 totalling £20m distorts the pattern of growth in new business. Excluding those contracts, the underlying growth on those bases would be as shown below.

New business flows for the three-month period ended 30 September 2011 are summarised as follows (comparisons to Q1 2011 are on actual currency basis):

	As reported			Underlying
	Q1 2012	Q1 2011	%	Q1 2012	Q1 2011	%
Basis	£m	£m	change	£m	£m	change
Compensation Credit	4.3	3.1	38.7 %	4.3	3.1	38.7%
Present Value of New Business Premiums	44.5	51.8	(14.1)%	44.5	31.8	39.9%
Annualised Premium Equivalent	6.7	6.3	6.3 %	6.7	4.3	55.8%

·    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 £4.3m CC for the period compared with £3.1m in Q1 2011, an increase of 38.7%.

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

In line with the Group's strategy to acquire regular premium new business from the growth markets of Latin America and the Far East, regular premium new business levels in the quarter have doubled over Q1 2011, and are approximately 10% higher than the levels of Q4 2011.  This has been achieved despite the extremely volatile market conditions during the quarter which, among other factors, has restrained single premium investments.

Regular premium new business represented 76% (Q1 2011: 33%) of total new business flows. This increased proportion of regular premium new business has contributed to an increase in new business margins.

Reflecting volatile market conditions and deferred investor appetite for lump-sum investing, single premium new business levels of £10.6m are significantly reduced from the levels of the last few quarters and are almost 70% below Q1 2011. As mentioned above, Q1 2011 numbers are inflated by a small number of large single premium cases with a combined PVNBP of £20m. This illustrates the sensitivity of the Group's PVNBP reporting to large single premium cases.

	Q1 2012	Q1 2011	%
PVNBP by Premium type	£m	£m	change
Regular premium	33.9	17.0	99.4 %
Single premium	10.6	34.8	(69.5)%
PVNBP	44.5	51.8	(14.1)%

	Q1 2012	Q1 2011	%
PVNBP by residence of policyholder	£m	£m	change
Far East	16.4	6.3	160.3 %
Latin America	13.1	10.3	27.2 %
EU and EEA	9.9	13.2	(25.0)%
Rest of world	5.1	22.0	(76.8) %
PVNBP	44.5	51.8	(14.1)%

Over 66% of new business in the period is sourced from Latin America and the Far East regions (Q1 2011: 32%), reflecting the success of actions taken to establish and consolidate our presence there. Incorporated within this are regular premium sales of £26.9m or 60% of total PVNBP sales for the quarter. (Q1 2011; £13.7m or 26.4%)

·    New business margins

The Group's strategy is to focus on issuing 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 regular premium new business issued in the period, which is more profitable to the Group than single premium business, the overall new business margin is approximately 9.7% (Q1 2011: 5.1%).

Assets under Administration ("AUA")

While a continued flow of regular premiums underpins AUA, falls of 15%-20% in major capital markets in the quarter are reflected in a decrease of 13.5% in AUA since 30 June 2011. The value at 30 September 2011 was £1.06bn.

The changing mix of business towards regular premium contracts significantly affected net policyholder cash flows in the quarter, as can be seen from the table below.

The overall movement in AUA before market and currency effects is as expected, given the group's focus on higher margin, regular premium new business.  Future withdrawals from matured existing single premium contracts are expected to continue, with new regular premium contracts replenishing AUA at a slower rate.  Hansard believes that moving the balance of its business towards regular premium contracts (with more stable, recurring cash inflows) will be value enhancing in the longer term.

The comparative figure for deposits to investment contacts includes those single premiums totalling £20m referred to above.

	Unaudited
	Quarter ended
	30 September
	2011		2010
	£m	£m
Deposits to investment contracts	33.7	51.6
Withdrawals from contracts	(48.4)	(37.7)
Effect of market and currency movements	(151.1)	71.3
Increase in period	(165.8)	85.2
At 1 July	1,229.6	1,134.7
Assets under Administration	1,063.8	1,219.9

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

HANSARD ONLINE

The Group is continuing to develop Hansard OnLine, implement new business initiatives and streamline administrative processes. In particular, over 2,500 regular premium new business cases have been processed online by the Group since piloting commenced in November 2009.

Results for the half-year ENDING 31 December 2011

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

Outlook

While economic conditions remain uncertain, particularly in Europe, we are optimistic that the Group's focus on non-EU markets including the Far East and Latin America and our continuing investment in distribution infrastructure, systems and Hansard OnLine, will position us for further 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 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 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 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, Latin America and the Middle East, 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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