TIDMHSD
RNS Number : 0962R
Hansard Global plc
04 March 2021
4 March 2021
Hansard Global plc
Results for the six months ended 31 December 2020
Hansard Global plc ("Hansard" or "the Group"), the specialist
long-term savings provider, issues its results for the six months
ended 31 December 2020. All figures refer to the six months ended
31 December 2020 ("H1 2021"), except where indicated.
SUMMARY
-- Hansard's business remains resilient in light of the continuing challenges of Covid-19 ;
-- New business levels for the Group were GBP76.3m for H1 2021
on a Present Value of New Business Premiums ("PVNBP") basis, down
4.7% from H1 2020;
-- IFRS profit before tax was GBP2.9m for the period, up from
GBP2.6m in H1 2020, primarily due to lower new business acquisition
costs;
-- Revenue increased with GBP25.6m of fees and commissions
earned in H1 2021 compared to GBP25.5m in H1 2020;
-- Value of in-force remained stable in the period at GBP149.9m,
up from GBP147.9m at 30 June 2020;
-- Assets under administration increased to GBP1.17 billion, up 8.0% since 30 June 2020;
-- Continued investment in future growth; launch of first
distribution agreement in Japan on track for Spring 2021;
-- The Board has declared an interim dividend of 1.8p per share (H1 2020: 1.8p).
H1 2021 H1 2020
------------------------------------- --------- ---------
New business sales - PVNBP GBP76.3m GBP80.1m
IFRS profit before tax GBP2.9m GBP2.6m
IFRS basic earnings per share 2.0p 1.9p
Interim dividend - to be paid on 20 1.8p 1.8p
April 2021
------------------------------------- --------- ---------
As at 31 December 30 June
2020 2020
---------------------------- ------------ ----------
Assets under Administration GBP1.17b GBP1.08b
Value of In-Force (1) GBP149.9m GBP147.9m
---------------------------- ------------ ----------
(1) Regulatory basis
OUTLOOK
We expect the external global environment will remain
challenging throughout the remainder of our financial year.
Regional lockdowns and travel restrictions are expected to continue
until vaccination programmes have been completed. We are confident
our new business will continue to be resilient in the face of these
challenges albeit we expect it will continue to lag behind the
levels achieved last year.
We continue to invest for the future through the on-going
development of our Japanese proposition and the upgrade of our
systems environment. While Covid-19 presents challenges to these
projects, t he launch of our Japanese proposition with our first
distribution partner remains on track for Spring 2021.
Gordon Marr, Group Chief Executive Officer, commented:
"I am pleased to report that Hansard has delivered a positive
set of financial results under the on-going Covid-19 environment.
We continue to deploy and utilise our technology and customer
service strengths to support our brokers and clients wherever
possible. Additionally, we are investing for the future through the
on-going development of our Japanese proposition and the upgrade of
our systems environment. There is good momentum behind these
projects and we are working closely with our distribution partner
in Japan to deliver a launch for Spring 2021."
NEXT TRADING UPDATE
The next trading update in respect of our financial year ending
30 June 2021 is expected to be published on 6 May 2021.
For further information:
Hansard Global plc +44 (0) 1624 688 000
Gordon Marr, Group Chief Executive Officer
Tim Davies, Chief Financial Officer
Email: investor-relations@hansard.com
Camarco LLP +44 (0) 203 757 4981
Ben Woodford, Rebecca Noonan
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 controlled cost distribution model via 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 scalable.
-- The principal geographic markets in which the Group currently
services contract holders and financial advisors are the Middle
East & Africa, the Far East and Latin America. These markets
are served by Hansard International Limited and Hansard Worldwide
Limited.
-- Hansard Europe dac previously operated in Western Europe but
closed to new business with effect from 30 June 2013.
-- The Group's objective is to grow by attracting new business
and positioning itself to adapt rapidly to market trends and
conditions. The scalability 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.
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regime.
Legal Entity Identifier: 213800ZJ9F2EA3Q24K05
CHAIRMAN'S STATEMENT
I am delighted to present to you my first report as Chairman of
Hansard Global plc ("Hansard" or "Group") and wish to formally
thank Philip Gregory for his previous chairmanship, leadership and
guidance provided to the Group over the past 9 years.
Hansard, like almost every other business, has experienced a
period of challenge over the past 12 months as we navigated our way
through the constraints arising from the Covid-19 global pandemic.
This was achieved with notable success and resilience, keeping our
award-winning systems and customer service operations fully
operational at all times.
The Board and I remain confident in the future opportunities for
the business. We are now very close to the launch of our innovative
new product in Japan. This will launch on our newly implemented
administration system, bringing a highly-advanced platform that
will benefit our customers, our distribution partners and our own
operational efficiency. We expect to announce details of a launch
with our first distribution partner in the near future.
New business
New business for the first six months of our 2021 financial year
("H1 2021") was GBP76.3m on a Present Value of New Business
Premiums ("PVNBP") basis, down 4.7% over the comparative period
("H1 2020").
New business continued to be well-diversified around the world,
giving some protection against specific countries or regions being
hit hard by Covid-19 related lock-downs or other restrictions.
Overall we have seen Hansard's on-line model and ability to accept
business electronically as a strong factor in maintaining new
business levels.
Financial performance
The Group's profit after tax under International Financial
Reporting Standards ("IFRS") of GBP2.8m for the period is GBP0.2m
higher than the comparative period profit of GBP2.6m. In light of
the external environment and our continued investment in Japan and
our new systems, this was a resilient result.
Consolidated fees and commissions were up marginally to GBP25.6m
(H1 2020: GBP25.5m), with lower origination costs offsetting higher
administrative costs.
Litigation defence activity continued to be active with
significant costs incurred during the period, primarily in Italy,
Belgium and Germany. Further details can be found in the Business
and Financial Review section of this report.
Capitalisation and solvency
The Group continues to be well capitalised to meet the
requirements of regulators, contract holders, intermediaries and
other stakeholders. Free assets in excess of the Solvency Capital
Requirements of the Group were GBP63.8m (175% coverage) (30 June
2020: GBP66.5m and 180%). We have maintained our prudent investment
policy for shareholder assets, which minimises market risk and has
provided a stable and resilient solvency position over recent
years.
Dividends
Taking into account the current financial position and future
outlook, the Board has resolved to maintain its interim dividend at
1.8p per share (H1 2020: 1.8p per share). This will be paid on 20
April 2021 with an ex-dividend date of 11 March 2021.
Board membership
On 31 December 2020, we welcomed David Peach to our Board as an
independent non-executive director with a wealth of experience in
the cross-border unit linked insurance industry. David has also
been appointed as Chairman of our Audit Committee.
Graeme Easton
Chairman
3 March 2021
INTERIM MANAGEMENT REPORT
REPORT OF THE GROUP CHIEF EXECUTIVE OFFICER
GORDON MARR
Strategy implementation and new business distribution
The Group provides regular and single premium savings products
to expatriate and internationally minded clients around the world.
We continue to pursue our strategy of growing our business
organically through Independent Financial Advisor ("IFA")
relationships and the pursuit of targeted opportunities to improve
our scale, either through new licences or via new institutional
partnerships.
Our strategic focus for 2021 remains on our two most significant
projects:
-- Launching our new locally-licenced investment product in Japan via regional banks, and
-- Replacing our policy administration systems to support our
next generation of products and secure cost and efficiency
gains.
Both of these projects have made steady and positive progress
despite the challenges of Covid-19 where travel and face-to-face
contact have been constrained. We expect to announce details of a
launch with our first Japanese distribution partner in the near
future.
Details of the work being performed by our strategic development
team are contained in the Business and Financial Review
section.
Covid-19
As reported in our 2020 Annual Report and Accounts, our business
has operated throughout the pandemic without any significant
disruption to our corporate systems or customer service
provision.
Our technology and effective business continuity plans have
allowed us to switch seamlessly to working remotely whenever
required, both at our head office in the Isle of Man and our
subsidiary and branch offices around the world.
For our Independent Financial Advisor ("IFA") network around the
world, the difficulties in meeting clients, providing advice and
concluding sales remain challenging. We have implemented a number
of key actions to facilitate the on-boarding of new business, for
example rolling out additional tools to allow customers and IFAs to
provide and sign documentation electronically.
We noted in our 2020 Annual Report and Accounts that we were
supporting and working with our customers where they may be
experiencing personal financial difficulties, for example by
allowing for premium holidays without incurring any additional
charges or penalties. We have for the most part concluded that
initial concessionary period and come out the other side without
any material difficulties.
We have not encountered any material financial concerns with our
IFA relationships and have therefore been in a position to write
back GBP0.1m of the GBP0.2m provision we made at 30 June 2020.
Results for the period
IFRS profit for the period was GBP2.8m after tax (H1 2020:
GBP2.6m). Consolidated fees and commissions were up marginally to
GBP25.6m (H1 2020: GBP25.5m) with lower origination costs
offsetting higher administrative costs.
A summary of the results for H1 2021 are as follows:
H1 2021 H1 2020
---------------------------------- -------- --------
IFRS profit after tax GBP2.8m GBP2.6m
IFRS basic earnings per share 2.0p 1.9p
Interim dividend - to be paid on
20 April 2021 1.8p 1.8p
---------------------------------- -------- --------
31 December 30 June
As at 2020 2020
------------------------------------- ------------ ------------
Assets under Administration GBP1,167.0m GBP1,080.5m
Value of In-Force (regulatory basis) GBP149.9m GBP147.9m
------------------------------------- ------------ ------------
The Value of In-Force on a regulatory basis at 31 December 2020
was GBP149.9m as compared to GBP147.9m at 30 June 2020. This
movement is largely as a result of positive investment market
performance offset by adverse foreign exchange movements.
New business margins for H1 2021 were in line with those of the
comparative period, approximately break-even. Reductions in new
business were offset by lower expenses related to new business.
Details of the results for the period are contained in the
Business and Financial Review.
Capitalisation and solvency
A key financial objective is to ensure that the Group's solvency
is managed safely through the economic cycle to meet the
requirements of regulators, contract holders, intermediaries and
shareholders. The Group remains well capitalised.
The Group's Solvency Capital Requirements under risk based
solvency regulations basis have a coverage ratio of 175%, slightly
down from the 30 June 2020 level of 180%. The Group's capital is
typically held in a wide range of deposit institutions and in
highly-rated money market liquidity funds.
Hansard Europe dac's ("Hansard Europe") capital is considered
not available for distribution until there is better clarity over
the expected outcome of the litigation against the company.
Hansard Europe dac ("Hansard Europe")
Hansard Europe was closed to new business in 2013 and the
Group's objective is to run the business off in an efficient and
well managed manner. We continue to meet the requirements of the
company's policyholders, regulators and stakeholders while
utilising operational efficiencies through the use of Hansard
OnLine. The servicing of policy contracts and other administrative
operations are performed at the Group's head office on the Isle of
Man. Regulatory control and management of outsourced activities are
exercised from the company's offices in Dublin. The company remains
strongly capitalised with net assets of GBP16.8m.
We continue to deal with complaints in circumstances where a
policyholder believes that the performance of an asset linked to a
particular contract is not satisfactory. We do not give investment
advice and are not party to the selection of the asset and
therefore we feel that we are justified in robustly defending each
complaint. Sometimes these complaints progress to threatened or
actual litigation with the resulting increase in cost and resource
to the Group. In many cases the litigation relates to decisions
taken by individuals during, or as a result of, the global
financial crisis in 2007/2008.
We reported in our 2020 Annual Report that Hansard Europe was
facing litigation based on writs totalling EUR25.8m (GBP23.4m) as a
result of these and related complaints. As at 31 December 2020,
total writs were EUR27.4m (GBP24.6m). This increase was driven
primarily by a reduction in the fair value of investment assets
backing the claims .
We will continue to defend ourselves from all claims,
considering early settlement (without admission of liability) only
where there is a clear economic benefit. During the period cases
totalling less than GBP0.1m were settled.
We have previously noted that we expect a number of our larger
claims to ultimately be covered by our Group insurance cover. As a
result, we expect that a significant amount of the contingent
liabilities referred to above would be covered by insurance should
those cases be ruled against us. We continue to estimate insurance
coverage to be in the range of GBP6m to GBP13m. We also continue to
pursue recovery of litigation defence costs attaching to such
cases.
Hansard OnLine
Our award-winning IT systems and online customer platform are
key aspects of our proposition. Hansard OnLine is a powerful sales
and business administration tool that is used by independent
financial advisors ("IFAs") and clients the world over. It is an
integral part of the Group's operating model and allows us to
better service IFAs and clients, embed process efficiencies and be
flexible in operational deployment.
Hansard OnLine provides IFAs and clients with a reliable online
self-service model which they can access 24/7 from anywhere around
the world with an internet connection. It provides an important
foundation to our strategic goal of delivery of excellent customer
service. It has been a strong factor in facilitating the continued
smooth operation of the business during the Covid-19 pandemic. We
were delighted to see this recognised as part of winning
International Investment's "Excellence in Fintech" award in October
2020.
As noted in our 2020 Annual Report, we have embarked on a
project to replace our administration systems and ensure our
infrastructure remains fit for purpose for our next generation of
products and strategic development. Phase One of this project has
delivered the functionality for our Japanese product due to be
launched in the coming months. We have extended the timing for
migration of our existing products to 2022 to allow us to focus and
capitalise on the opportunities in Japan and recognising the
challenges of the current Covid-19 working environment.
Regulation and risk management
The pace, scale, and complexity of regulatory developments
continues to evolve and the Group devotes significant resources in
this area to meet these challenges.
The Group's Enterprise Risk Management ("ERM") Framework
provides for the identification, assessment, management, monitoring
and control of current and emerging risks, recognising that systems
of internal control can only provide reasonable and not absolute
assurance against material misstatement or loss. The Group's
internal control and risk management processes have operated
satisfactorily throughout the period under review.
Dividend
The Board has resolved to pay an interim dividend of 1.8p per
share (H1 2020: 1.8p). This dividend will be paid on 20 April
2021.
Our people
Our people are critical to our success. We have a dedicated
dynamic workforce across a number of locations around the world. I
would like to recognise and thank them for their continued
commitment, flexibility and resilience in managing both our
on-going day-to-day operations and our key strategic projects
throughout the challenges of the Covid-19 environment.
We have a commitment to service and quality at the highest level
in relation to servicing contract holders and intermediaries. It
was therefore pleasing to have again been recognised externally in
this area. In October 2020 we won "Excellence in Client Service -
Industry" from International Investor for both the Asian region and
as overall global winner. We also maintained our five-star rating
for customer service by AKG Financial Analytics in their 2020
review.
Gordon Marr
Chief Executive Officer
3 March 2021
BUSINESS AND FINANCIAL REVIEW
1. BUSINESS MODEL
Hansard is a specialist long-term savings provider that has been
providing innovative financial solutions for international clients
since 1987. We focus on helping financial advisors and institutions
to provide their clients (individual and corporate investors) with
savings and investment products within secure insurance wrappers to
meet long-term savings and investment objectives. We administer
assets in excess of GBP1 billion for just under 40,000 client
accounts around the world.
The Company's head office is in Douglas, Isle of Man, and its
principal subsidiaries operate from the Isle of Man, The Bahamas
and the Republic of Ireland.
Hansard International Limited ("Hansard International") is
regulated by the Financial Services Authority of the Isle of Man
Government. It has a branch in Malaysia, regulated by the Labuan
Financial Services Authority, and one in Japan to support its
Japanese proposition which is regulated by the Japanese Financial
Services Agency .
Launched in 2019, Hansard Worldwide underwrites international
and expatriate business around the world. It is regulated by the
Insurance Commission of The Bahamas.
Hansard Europe is regulated by the Central Bank of Ireland.
Hansard Europe ceased accepting new business with effect from 30
June 2013.
Our products are designed to appeal to affluent international
investors, institutions and wealth-management groups. They are
distributed exclusively through IFAs and the retail operations of
financial institutions.
Our network of Account Executives provides local language-based
support services to financial advisors in key territories around
the world, supported by our multi-language online platform, Hansard
OnLine.
2. VISION AND STRATEGY
Our vision for the Hansard Group is:
"to share success with our clients by providing simple,
understandable and innovative financial solutions".
To deliver this vision, client outcomes will be the central
focus within our business and consequently we will seek to evolve
all aspects of our products, processes and distribution in order to
constantly improve.
Our talented people are the foundation of our business. We have
created an empowering culture, which values innovation, quality,
integrity and respect.
Our strategy to improve, grow and future-proof our business will
be delivered through three key areas of strategic focus:
i. Improve our business: We will improve customer outcomes
through the introduction of new disclosures, the provision of new
products and services, focusing on the quality of our IFAs with
whom we work with and continuing to drive up the engagement of our
people within our business.
ii. Grow our business: In recent years we established a new life
company in The Bahamas and entered into a strategic alliance with
Union Insurance in the UAE. We have acquired the necessary licence
and approvals to access the Japanese market. We will continue to
seek out opportunities for locally licenced business in other
targeted jurisdictions over the coming years.
iii. Future-proof our business: We are actively testing
innovative technologies, propositions and business models. It
remains critical to support the online and digital needs of our
clients alongside improving organisational efficiency and
scalability.
3. HANSARD ONLINE
Hansard OnLine is a powerful and secure tool that is used by our
IFAs around the world. Available in multiple languages, it allows
them to access information about their clients, to generate reports
for their clients, to submit new business applications online, to
place dealing and switch instructions online, to access all client
correspondence and to access a library of forms and literature.
Almost all investment transactions are processed electronically
by intermediaries, on behalf of their clients, using Hansard OnLine
and over 90% of all new business applications are submitted via the
platform.
The straight-through processing of contract holder instructions
(whether received directly or through their appointed agents)
reduces the Group's operational risk exposures, as does the ability
of the Group to communicate electronically with contract holders
and intermediaries, irrespective of geographical boundaries. Data
validation happens in real-time to ensure there are no delays to
the investment of client funds.
Hansard OnLine Lite provides prospective IFAs with easy access
to a subset of the online system. Its purpose is to showcase our
online proposition to prospective and new IFAs and to allow easy
access to non-sensitive documents and functionality. Users can
access our online document library, the Unit Fund Centre, company
news and submit new business online.
The benefit of Hansard OnLine is recognised by many IFAs as
market leading and our online proposition has been nominated for
and won a number of independent industry awards in recent years.
Most recently this included winning International Investment's
"Excellence in Fintech" award in October 2020.
Online accounts
Whilst many of our IFAs are technologically sophisticated and
have been utilising our online offering for years, our client base
has typically lagged behind. However, we are now observing a
growing trend amongst our clients to take more control of their
financial wellbeing by embracing mobile technology to better
monitor and manage their finances.
To support our commitment to delivering 'excellent customer
service', we believe it is vital to provide our clients with a
modern and secure online platform that allows them to access their
finances easily and comprehensively, 24/7. We provide this through
our client-facing version of Hansard OnLine, called Online
Accounts.
Similar to our IFA-facing online platform, the client's Online
Account allows them to access all their policy information,
valuation statements, transaction history, premium reports, switch
funds online, access all correspondence, access a library of forms
and literature, and more.
A large and increasing number of clients have signed up for this
service which allows them to view all documentation and
communications relating to their contracts via their Online Account
as well as choosing to receive post electronically, rather than in
hard-copy form. This not only provides a more secure, faster and
cost efficient means of communication with clients but also the
convenience to manage their own contract within a timeframe which
is more suitable. This has gained further traction during the
restrictions encountered during the Covid-19 pandemic.
Cyber security
As cyber crime continues to increase and target commercial and
public enterprises alike, Hansard has continued to invest in its
cyber security. This includes continuous upgrades to our firewall
protection, encryption of data, tokenisation of sensitive data and
annual external review and testing.
4. New business
PROPOSITION
The Group's proposition is to develop and enhance relationships
with contract holders and intermediaries through the use of our
people, products and technology in a way that meets shared
objectives.
The results of activities in each region in H1 2021 are reported
in the table below.
New business performance for the six months ended 31 December
2020
New business for the first six months of our 2021 financial year
("H1 2021") was GBP76.3m on a PVNBP basis, down 4.7% from the
comparative period ("H1 2020"). While the Covid-19 pandemic
impacted new business across all locations, this result was a
positive reflection of our ability to manage resiliently through
the challenges presented by using our technology-driven tools and
process.
New business flows for H1 2021 are summarised as follows:
Six months Year ended
ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------- ------ ------ -----------
Present value of New Business
Premiums 76.3 80.1 159.8
Annualised Premium Equivalent 10.9 12.8 24.0
------------------------------- ------ ------ -----------
The following tables show the breakdown of new business flows
calculated on the basis of PVNBP:
Year
Six months ended ended
31 December 30 June
2020 2019 2020
By type of contract GBPm GBPm GBPm
--------------------- ------------- ------------ --------
Regular premium 49.6 51.6 102.0
Single premium 26.7 28.5 57.8
--------------------- ------------- ------------ --------
76.3 80.1 159.8
--------------------- ------------- ------------ --------
Year
Six months ended ended
31 December 30 June
2020 2019 2020
By geographical area GBPm GBPm GBPm
------------------------- ----- ----- --------
Middle East and Africa 28.6 30.8 63.3
Rest of World 24.3 24.1 48.5
Latin America 18.5 19.7 37.3
Far East 4.9 5.5 10.7
Total 76.3 80.1 159.8
------------------------- ----- ----- --------
We continue to receive new business from a diverse range of
financial advisors around the world. The majority of new business
premiums are denominated in US dollars at approximately 78% (H1
2020: 82%), with approximately 17% denominated in sterling (H1
2020: 16%), and the remainder in euro or other currencies.
Our largest region, Middle East and Africa fell 7.1% in H1 2021
but held up well in light of a number of challenges in the region.
These included Covid-19 restrictions and brokers adapting to
regulatory changes in the UAE which came into force in October
2020.
The Rest of World region was broadly consistent with the
comparative period, up 0.8%.
Despite Latin America being hit hard by Covid-19 and
experiencing a challenging Q1, new business recovered in Q2,
leaving new business for H1 2021 down 6.1% compared to H1 2020.
New business in our Far East region was down 10.9% from a low
base as Covid-19 restrictions reduced sales activity. As we have
noted in previous reports, our main strategic focus in the Far East
is to develop and bring our new Japanese proposition to market.
5. IFRS RESULTS FOR THE SIX MONTHSED 31 DECEMBER 2020
The Group administers, and earns fees from, a portfolio of
unit-linked investment contracts distributed to contract holders
around the world.
The nature of the Group's products means that new business flows
have a limited immediate impact on current earnings reported under
IFRS, as initial fees and acquisition costs from the contracts sold
are mostly deferred and amortised over the life of the contract.
The benefit of sales to fee income levels are felt in future
financial periods, noting also that our newer products have a
longer earning period than our older products.
The Group also continues to invest strategically for the future,
particularly in relation to new markets and new licensing
opportunities.
Results under IFRS
Consolidated profit after taxation for the period was GBP2.8m
(H1 2020: GBP2.6m), primarily driven by lower origination
costs.
The following is a summary of key items to allow readers to
better understand the results of the period.
Abridged income STATEMENT
The condensed consolidated statement of comprehensive income
which is presented within these half-year results reflects the
financial results of the Group's activities during the period under
IFRS. This statement however, as a result of its method of
presentation, incorporates a number of features that might affect a
clearer understanding of the results of the Group's underlying
transactions. This relates principally to:
-- Investment gains attributable to contract holder assets were
GBP98.0m (H1 2020: GBP7.0m). These assets are selected by the
contract holder or an authorised intermediary and the contract
holder bears the investment risk and are also reflected within
'Change in provisions for investment contract liabilities'.
-- Third party fund management fees collected and paid onwards
by the Group to third parties having a relationship with the
underlying contract. In H1 2021 these were GBP2.7m (H1 2020:
GBP2.5m). These are reflected on a gross basis in both income and
expenses under IFRS.
An abridged consolidated income statement is presented below,
excluding the items of income and expenditure indicated above.
Year
Six months ended ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
--------------------------------------- ---------- --------- --------
Fees and commissions 22.9 23.0 44.7
Investment and other income 0.5 0.5 2.5
--------------------------------------- ---------- --------- --------
23.4 23.5 47.2
Origination costs (8.4) (9.1) (18.0)
Administrative and other expenses
attributable to the
Group (11.4) (11.1) (23.0)
--------------------------------------- ---------- --------- --------
Operating profit for the period
before litigation and non-recurring
expense items 3.6 3.3 6.2
Net litigation and non-recurring
expense items (0.7) (0.7) (1.5)
Profit for the period before taxation 2.9 2.6 4.7
Taxation (0.1) - (0.2)
--------------------------------------- ---------- --------- --------
Profit for the period after taxation 2.8 2.6 4.5
--------------------------------------- ---------- --------- --------
Fees and commissions
Fees and commissions attributable to Group operations for H1
2021 were GBP22.9m, marginally lower than GBP23.0m in H1 2020. A
summary of fees and commissions attributable to Group activities is
set out below:
Six months Year ended
ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------ ------ ------ -----------
Contract fee income 16.3 16.5 32.2
Fund management fees 4.2 4.2 7.9
Commissions receivable 2.4 2.3 4.6
------------------------ ------ ------ -----------
22.9 23.0 44.7
------------------------ ------ ------ -----------
Included in contract fee income is GBP8.6m (H1 2020: GBP8.7m)
representing the amounts prepaid in previous years and amortised to
the income statement, as can be seen in section 7 in the
reconciliation of deferred income.
Net fund management fees, together with commissions receivable,
totalling GBP6.6m (H1 2020: GBP6.5m), are related to the value of
contract holder Assets under Administration ("AuA") but also have
elements amortised from previous periods.
Investment and other income
Six months Year ended
ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------- ------- --------- -----------
Bank interest and other income receivable 0.8 1.0 2.3
Foreign exchange (losses)/gains
on revaluation
of net operating assets (0.3) (0.5) 0.2
-------------------------------------------- ------- --------- -----------
0.5 0.5 2.5
-------------------------------------------- ------- --------- -----------
The Group's own liquid assets are held predominantly in sterling
and invested in highly rated money market funds and bank
deposits.
Further information about the Group's foreign currency exposures
is disclosed in note 4.1 to these condensed consolidated financial
statements.
Origination costs
Under IFRS, new business commissions paid, together with the
directly attributable incremental costs incurred on the issue of a
contract, are deferred and amortised over the life of that contract
to match the longer-term income streams expected to accrue from it.
Typical terms range between 6 and 16 years, depending on the nature
of the product. Other elements of the Group's new business costs,
which reflect investment in distribution resources in line with our
strategy, are expensed as incurred.
This accounting policy reflects that the Group will continue to
earn income over the long-term from contracts issued in a given
financial year.
Origination costs in the period were:
Six months Year
ended ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------ ------- ------ --------
Origination costs - deferred to
match future
income streams 8.6 10.2 18.9
Origination costs - expensed as
incurred 1.2 1.7 3.4
------------------------------------------ ------- ------ --------
Investment in new business in period 9.8 11.9 22.3
Net amortisation of deferred origination
costs (1.4) (2.8) (4.3)
------------------------------------------ ------- ------ --------
8.4 9.1 18.0
------------------------------------------ ------- ------ --------
Reflecting the long-term nature of the Group's income streams,
amounts totalling GBP7.2m (H1 2020: GBP7.4m) have been expensed to
match contract fee income of GBP8.6m (H1 2020: GBP8.7m) earned in
H1 2021 from contracts issued in previous financial years. This
reflects the profitability of the existing book.
Origination costs incurred in H1 2021 have decreased as a result
of lower levels of new business and the cancellation of the
majority of sales-related travel and promotional events due to
Covid-19.
Summarised origination costs for the period were:
Six months Year ended
ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------- ------- ----- ----------------
Amortisation of deferred origination
costs 7.2 7.4 14.6
Other origination costs incurred
during the period 1.2 1.7 3.4
-------------------------------------- ------- ----- ----------------
8.4 9.1 18.0
-------------------------------------- ------- ----- ----------------
Administrative and other expenses
We continue to manage our expense base robustly to control
administrative expenses while investing strategically in our
systems infrastructure and our Japanese proposition.
A summary of administrative and other expenses attributable to
the Group is set out below:
Six months Year
ended ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
----------------------------------------- ----------------- ------- --------
Salaries and other employment costs 5.6 5.5 10.6
Other administrative expenses 4.3 3.5 7.7
Professional fees, including audit 1.1 1.4 2.9
----------------------------------------- ----------------- ------- --------
Recurring administrative and other
expenses 11.0 10.4 21.2
Growth investment spend 0.4 0.7 1.8
A dministrative and other expenses,
excl. litigation and non-recurring
expense items 11.4 11.1 23.0
Net litigation defence and settlement
costs 0.9 0.7 1.3
Provision for doubtful debts in respect
of broker balances (0.2) - 0.2
Total administrative and other expenses 12.1 11.8 24.5
----------------------------------------- ----------------- ------- --------
Salaries and other employment costs have increased by GBP0.1m
over the comparative period to GBP5.6m, reflecting the expansion of
our Japanese branch and additional contractors. The average Group
headcount for H1 2021 was 185 compared to 192 for the full 2020
financial year. Headcount at 31 December 2020 was 185.
Other administrative expenses have increased by GBP0.8m over the
comparative period to GBP4.3m but are broadly in line with H2 2020.
The increase is driven by additional lease costs associated with a
new head-office premises which the Company will be moving into over
the course of 2021, together with additional non-capitalised IT
expenditure associated with our systems project.
Professional fees including audit (excluding litigation defence
costs) have decreased by GBP0.3m over the comparative period to
GBP1.1m as a result of tight cost control during the period.
Growth investment spend of GBP0.4m represents internal and
external costs to generate opportunities for growth. This includes
the costs of our head office strategy team and development costs
associated with our Japanese proposition.
Litigation costs in defending claims against Hansard Europe of
GBP0.9m for the period were higher than H1 2020 as H1 2020 included
the benefit of GBP0.5m insurance recoveries. A provision of GBP0.3m
has also been made for expected future settlements.
Provision for doubtful debts reflects the release of a provision
previously recognised for expected broker bad debts in relation to
Covid-19 which have not materialised.
6. CASH FLOW ANALYSIS
The sale of the Group's products typically produces an initial
cash strain as a result of the commission and other costs incurred
at inception of a contract.
The following summarises the Group's own cash flows in the
period:
Six months Year ended
ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------ ------------ ------------ -----------
Net cash surplus from operating
activities 11.5 11.1 22.7
Interest received 0.2 0.5 1.6
------------------------------------------- ------------ ------------ -----------
Net cash inflow from operations 11.7 11.6 24.3
Net cash investment in new business (8.3) (10.2) (19.1)
Purchase of software, computer equipment
and property (1.9) (1.5) (3.0)
Corporation tax paid (0.1) - (0.1)
------------------------------------------- ------------ ------------ -----------
Net cash inflow/(outflow) before
dividends 1.4 (0.1) 2.1
Dividends paid (3.6) (3.6) (6.0)
------------------------------------------- ------------ ------------ -----------
Net cash outflow after dividends (2.2) (3.7) (3.9)
------------------------------------------- ------------ ------------ -----------
Cash flows from operating activities have increased in H1 2021
reflecting lower cash expenses. Initial new business cash strain is
shown within "net cash investment in new business" and varies
depending on the level and type of new business written. GBP1.9m
was spent d uring the period on the project to upgrade the Group's
IT infrastructure.
The factors described above, together with the payment of our
final dividend for 2020, led to a net cash outflow of GBP2.2m (H1
2020: GBP3.7m outflow) in the Group's own cash resources since 1
July 2020 . The Group continues to maintain significant cash
reserves to cover short-term outflows during this period of
strategic investment.
Six months ended Year ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------- --------- -------- ------------
Net cash outflow after dividends (2.2) (3.7) (3.9)
Decrease in amounts due to contract
holders (0.7) (0.8) (0.2)
-------------------------------------- --------- -------- ------------
Net Group cash movements (2.9) (4.5) (4.1)
Group cash - opening position 60.8 65.3 65.3
Effect of exchange rate movements 1.1 (0.9) (0.4)
-------------------------------------- --------- -------- ------------
Group cash - closing position 59.0 59.9 60.8
-------------------------------------- --------- -------- ------------
Bank deposits and money market funds
The Group's liquid assets at the balance sheet date are held in
highly-rated money market liquidity funds and with a wide range of
deposit institutions, predominantly in sterling. This approach
protects the Group's capital base from stock market falls.
Deposits totalling GBP12.2m (H1 2020: GBP19.1m) have original
maturity dates greater than 3 months and are therefore excluded
from the definition of "cash and cash equivalents" under IFRS.
The following table summarises the total shareholder cash and
deposits at the balance sheet date.
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
---------------------------------- --------- ------------ -------------
Money market funds 38.0 39.3 35.0
Short-term deposits with credit
institutions 8.8 1.5 4.6
Cash and cash equivalents under
IFRS 46.8 40.8 39.6
Longer-term deposits with credit
institutions 12.2 19.1 21.2
----------------------------------- --------- ------------ -------------
Group cash and deposits 59.0 59.9 60.8
----------------------------------- --------- ------------ -------------
7. Abridged consolidated balance sheet
The condensed consolidated balance sheet presented under IFRS
reflects the financial position of the Group at 31 December 2020.
As a result of its method of presentation, the consolidated balance
sheet incorporates the financial assets held to back the Group's
liability to contract holders, and also incorporates the net
liability to those contract holders of GBP1,167m (31 December 2019:
GBP1,080m). Additionally, that portion of the Group's capital that
is held in bank deposits is disclosed in "cash and cash
equivalents" based on original maturity terms, as noted above.
The abridged consolidated balance sheet presented below,
adjusted for those differences in disclosure, allows a better
understanding of the Group's own capital position. Additional
factors impacting upon the Group's capital position at the balance
sheet date are summarised in section 8 of this Review.
As at 31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
-------------------------------- ------ ------ --------
Assets
Deferred origination costs 123.7 120.8 122.3
Other assets 15.6 13.5 15.0
Bank deposits and money market
funds 59.0 59.9 60.8
--------
198.3 194.2 198.1
-------------------------------- ------ ------ --------
Liabilities
Deferred income 139.7 135.1 137.8
Other payables 33.5 32.8 34.4
--------
173.2 167.9 172.2
-------------------------------- ------ ------ --------
Net assets 25.1 26.3 25.9
--------------------------------- ------ ------ --------
Shareholders' equity
Share capital and reserves 25.1 26.3 25.9
--------------------------------- ------ ------ --------
Deferred origination costs
The deferral of origination costs ("DOC") reflects that the
Group will earn fees over the long-term from contracts issued in a
given financial year. These costs are recoverable out of future net
income from the relevant contract and are charged to the
consolidated statement of comprehensive income on a straight-line
basis over the life of each contract.
The tables below show an increase in total deferred origination
costs since the comparative periods. While new business activity
(and associated origination costs) were lower in H1 2021, the level
of origination costs deferred in the period remains higher than the
costs amortised from previously deferred balances.
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------ ------ ------ --------
At beginning of financial year 122.3 118.0 118.0
Origination costs deferred during
the period 8.6 10.2 18.9
Origination costs amortised during
the period (7.2) (7.4) (14.6)
------------------------------------ ------ ------ --------
123.7 120.8 122.3
------------------------------------ ------ ------ --------
Deferred income
The treatment of deferred income ensures that initial fees are
taken to the consolidated statement of comprehensive income in
equal instalments over the longer-term, reflecting the services to
be provided over the period of the contract. This is consistent
with the treatment of deferred origination costs. Deferred income
at the balance sheet date is the unamortised balance of accumulated
initial amounts received on new business.
The proportion of income deferred in any one year is dependent
upon the mix and volume of new business flows in previous years.
The Group's focus on regular premium business means that these fees
are received over the initial period of the contract, rather than
being received up front, as is often the case with single premium
contracts.
The majority of initial fees collected during the period relate
to charges taken from contracts issued in prior financial years
demonstrating the cash generative nature of the business. Regular
premium contracts issued in this financial year will generate the
majority of their initial fees over the next 18 months on
average.
The movement in value of deferred income over the period is
summarised below.
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------- ------ ------ --------
At beginning of financial year 137.8 133.2 133.2
Initial fees collected in the period
and deferred 10.5 10.6 21.6
Income amortised during the period
to fee income (8.6) (8.7) (17.0)
139.7 135.1 137.8
-------------------------------------- ------ ------ --------
8. Assets under administration
In the following paragraphs, AuA refers to net assets held to
cover financial liabilities as analysed in note 13 to the condensed
consolidated financial statements presented under IFRS. Such assets
are selected by or on behalf of contract holders to meet their
investment needs.
The Group receives investment inflows to its AuA from single and
regular premium contracts which are offset by charges, withdrawals,
premium holidays affecting regular premium policies and by market
valuation movements.
The majority of premium contributions and AuA are designated in
currencies other than sterling, reflecting the wide geographical
spread of those contract holders. The currency denomination of AuA
at 31 December 2020 is similar to that of 31 December 2019 and
consists of approximately 68% denominated in US dollars, 21% in
sterling and 10% denominated in euro, as reflected in note 4 to the
condensed consolidated financial statements.
Certain collective investment schemes linked to customers'
contracts can from time to time become illiquid, suspended or be
put into liquidation. In such cases, the Directors are required to
exercise their judgement in relation to the fair value of these
assets. The cumulative impact on the balance sheet is not
material.
The following table summarises Group AuA movements for H1
2021:
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
----------------------------------------- -------- -------- ---------
Deposits to investment contracts -
regular premiums 42.3 42.0 85.8
Deposits to investment contracts -
single premiums 26.7 29.6 57.2
Withdrawals from contracts and charges (78.2) (77.9) (142.3)
Effect of market and currency movements 95.7 7.0 0.1
------------------------------------------ -------- -------- ---------
Movement in period 86.5 0.7 0.8
Opening balance 1,080.5 1,079.7 1,079.7
------------------------------------------ -------- -------- ---------
Closing balance 1,167.0 1,080.4 1,080.5
------------------------------------------ -------- -------- ---------
Group AuA increased to GBP1,167.0m during H1 2021, an increase
of GBP86.5m from the position at 30 June 2020. This was driven by
positive global stock markets offset by a weaker US dollar versus
sterling.
The analysis of AuA held by each Group subsidiary to cover
financial liabilities is as follows:
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
----------------------- ----------- ---------- --------
Hansard International 1,074.2 975.8 986.5
Hansard Europe 92.8 104.6 94.0
----------------------- ----------- ---------- --------
1,167.0 1,080.4 1,080.5
----------------------- ----------- ---------- --------
Premiums acquired by Hansard Worldwide are reinsured to Hansard
International and therefore are included within Hansard
International's total AuA.
Since it closed to new business in 2013, Hansard Europe's AuA
has been declining broadly in line with expectations as withdrawals
are made or contracts mature.
9. CAPITALISATION AND SOLVENCY
The Group's life insurance subsidiaries continue to be well
capitalised with free assets in excess of the regulatory
requirements in each relevant jurisdiction. There has been no
material change in the Group's management of capital during the
period.
Solvency capital is a combination of future margins, where
permitted by regulation, and capital. Where future margins are
denominated in non-sterling currencies, it is vulnerable to the
weakening of those currencies relative to sterling. All of the
Group's excess capital is invested in a wide range of deposit
institutions and highly-rated money market liquidity funds,
predominantly in sterling. This approach protects the Group's
capital base from stock market falls.
The in-force portfolio has no material investment options or
guarantees that could cause capital strain and retains very little
of the mortality risk that it has accepted (the balance being
reinsured with premium reinsurers). There is no longevity risk
exposure.
Policy on capital maintenance
It is the Group's policy to maintain a strong capital base in
order to:
-- satisfy the requirements of its contract holders, creditors and regulators;
-- maintain financial strength to support new business growth and create shareholder value;
-- match the profile of its assets and liabilities, taking
account of the risks inherent in the business;
-- generate operating cash flows; and
-- fund dividend requirements.
Within the Group each subsidiary company manages its own
capital. Capital generated in excess of planned requirements is
returned to the Company by way of dividends. Group capital
requirements are monitored by the Board. The capital held within
Hansard Europe is considered not to be available for dividend to
Hansard Global plc until such time as the legal cases referred to
in section 11 below are substantially resolved.
10. DIVIDS
A final dividend of 2.65p per share in relation to the previous
financial year was paid in November 2020. This amounted to
GBP3.6m.
The Board has considered the results for H1 2021, the Group's
continued cash flow generation and its future expectations and has
resolved to pay an interim dividend of 1.8p per share (H1 2020:
1.8p). This dividend will be paid on 20 April 2021.
11. complaints and potential litigation
The Group continues to deal with contract holder complaints,
principally in relation to asset performance issues arising from
contract holders resident in Europe. Even though the Group does not
give any investment advice, as this is left to the contract holder
directly or through an agent, advisor or an entity appointed at
their request or preference, the Group has been subject to a number
of complaints in relation to the performance of assets linked to
contracts.
Some of these complaints escalate into litigation. As at the
date of the 2020 Annual Report, the Group faced litigation based on
writs totalling EUR25.8m or GBP23.4m. The corresponding figure as
at 31 December 2020 was EUR27.4m or GBP24.6m (31 December 2019:
EUR24.6m or GBP20.8m). Between 31 December 2020 and the date of
this report, there have been no material changes.
We expect that a significant amount of the GBP24.6m of
contingent liabilities referred to above would be covered by
insurance should those cases be ruled against us. As of 31 December
2020, we continue to estimate coverage to be in the range of GBP6m
to GBP13m.
While it is not possible to forecast or determine the final
results of such litigation, based on the pleadings and advice
received from the Group's legal representatives and experience with
cases previously successfully defended, we believe we have a strong
chance of success in defending these claims. Other than smaller
cases where based on past experience it is expected a settlement
might be reached, the writs have therefore been treated as
contingent liabilities and are disclosed in note 18 to the
condensed consolidated financial statements.
12. Net asset value per shaRE
The net asset value per share on an IFRS basis at 31 December
2020 is 18.2p (31 December 2019: 19.1p) based on the net assets in
the consolidated balance sheet divided by the number of shares in
issue, being 137,557,079 ordinary shares (31 December 2019:
137,557,079).
13. Risk Management
As with all businesses, the Group is exposed to risk in pursuit
of its objectives. The Board has overall responsibility for the
Group's system of risk management and internal control and for
reviewing its effectiveness. The schedule of powers reserved to the
Board ensures that the Directors are responsible for determining,
evaluating and controlling the nature and extent of the principal
risks which the Board is willing to take in achieving its strategic
objectives and the Board oversees the strategies for principal
risks that have been identified.
The Executive Management Team works within the risk appetite
established by the Board and the governance, risk management and
internal control arrangements which constitute the Group Enterprise
Risk Management ("ERM") Programme.
Having regard to the Financial Reporting Council's 'Guidance on
Risk Management, Internal Control and Related Financial and
Business Reporting', the ERM Programme encompasses the policies,
processes, tasks, behaviours and other aspects of the Group's
environment, which cumulatively:
-- facilitate the effective and efficient operation of the Group
and its subsidiaries by enabling appropriate responses to be made
to significant business, operational, financial, compliance and
other risks to business objectives, so safeguarding the assets of
the Group;
-- help to ensure the quality of internal and external
reporting. This requires the maintenance of proper records and
processes that generate a flow of timely, relevant and reliable
information from within and outside the Group;
-- seek to ensure compliance with applicable laws and
regulations and also with internal policies with respect to the
conduct of business; and
-- Drive the cultural tone and expectations of the Board in
respect of governance, risk management and internal control
arrangements and the delegation of associated authorities and
accountabilities.
Risk management processes are undertaken on both a bottom-up and
top-down basis. The top-down aspect involves the Board assessing,
analysing and evaluating what it believes to be the principal risks
facing the Group. The bottom-up approach involves the
identification, review and monitoring of current and
forward-looking risks on a continuous basis at functional and
divisional levels, with analysis and formal reporting to the
Executive Risk Committee, established by the Board, on a quarterly
basis and onward analytical reporting to the Board. The terms of
reference of the Committee are published on the Company's
website.
The system of internal control is designed to manage rather than
eliminate risk of failure to achieve business objectives, and can
only provide reasonable and not absolute assurance against material
misstatement or loss.
Hansard's business model involves the controlled acceptance and
management of risk exposures. Under the terms of the unit-linked
investment contracts issued by the Group, the contract holder bears
the investment risk on the assets in the unit-linked funds, as the
contract benefits are directly linked to the value of the assets in
the funds. These assets are administered in a manner consistent
with the expectations of the contract holders. By definition, there
is a precise match between the investment assets and the contract
holder liabilities, and so the market risk and credit risk lie with
contract holders.
The Group's exposure on this unit-linked business is limited to
the extent that income arising from asset management charges and
commissions is generally based on the value of assets in the funds,
and any sustained falls in value will reduce earnings. In addition,
there are certain financial risks (credit, market and liquidity
risks) in relation to the investment of shareholders' funds. The
Group's exposure to financial risks is explained in note 4 to the
condensed consolidated financial statements.
A comprehensive review of risk management and internal control,
including the principal risks and uncertainties facing the business
and the Group's approach to managing these risks and uncertainties,
is outlined on pages 22 to 27 of the 2020 Annual Report. These
principal risks and uncertainties have not changed materially since
the 2020 Annual Report was published.
In relation to the Covid-19 pandemic, the Group ERM Framework
enabled the Board to take swift, decisive and informed decisions in
response to the immediate risks which the pandemic presented to the
Group, its employees, customers and wider stakeholder groups. The
early invocation of pandemic-specific business continuity planning
and the inherent strength of the Group's systems infrastructure
supported a smooth and stable transition to remote working, which
have remained robust and resilient throughout the period of
'lockdown' measures introduced at local and international
levels.
Established ERM protocols enabled targeted risk metrics and key
performance indicators to be rapidly invoked, addressing both
prudential and conduct elements of the principal and subordinate
risk spectrum. These metrics have supported continuous monitoring
of operational performance, customer and intermediary impacts and
the potential consequences of market volatilities and related
stresses to global economies. Operational and Executive Risk
Committee Meetings have maintained close scrutiny of these
monitoring activities with formal reporting to both the Board and
the Group's regulators.
Principal Risks
The following table sets out the principal inherent risks that
may impact on the Group's strategic objectives, profitability or
capital and an provides an overview of how such risks are managed
or mitigated. The Board robustly reviews and considers its
principal risks on at least an annual basis. The below principal
risks consider the impacts, uncertainties and any emerging risks
generated by the Covid-19 pandemic.
Risk Risk Factors and Management
-------------------------------- -------------------------------------------------------------
Market Risk: While the Group does not invest shareholder
funds in assets subject to any significant
Arising from major market risk, the Group's earnings and profitability
market stresses, or are influenced by the performance of contract
fluctuation in market holder assets and the fees derived from their
variables, resulting value. Significant changes in equity markets
in falls in equity and interest rates can adversely affect fee
or other asset values, income earned.
currency movements
or a combined scenario In addition, the Group operates internationally
manifesting and earns income in a range of different currencies.
The vast majority of its operational cost
base is denominated in Sterling. The movement
of Sterling against US Dollars is the most
significant exposure to reported income levels.
Extreme market conditions also have the capacity
to influence the purchase of financial services
products and the period over which business
is retained.
How we manage the risk:
The Board recognise that market volatilities
and currency movements are unpredictable and
driven by a diverse range of factors and these
risks are inherent in the provision of investment-linked
products.
Business plans are modelled across a broad
range of market and economic scenarios and
take account of alternative economic outlooks
within overall business strategy, which provide
for a greater understanding of market and
currency risk, the limits of the Company's
resilience and the range of possible mitigating
options.
The stress testing referred to in our 2020
Annual Report considered the impacts of both
market and currency shocks, having regard
to the risks inherent to the Company's unit-linked
business and macroeconomic environment generated
by an extreme and aggressive event, such as
the Covid-19 pandemic.
The long-term nature of the Group's products
serves to smooth currency movements over time
reducing the need for active hedging policies.
However, long term trends are monitored and
considered in pricing models.
-------------------------------- -------------------------------------------------------------
Credit Risk: In dealing with third party financial institutions,
including banking, money market and settlement,
Arising from the failure custody and other counterparties, the Group
of a counterparty is exposed to the risk of financial loss and
potential disruption of core business functional
and operational processes.
How we manage the risk:
The Group seeks to limit exposure to loss
or detriment via counterparty failure through
robust selection criteria, minimum rating
agency limits, pre-defined risk-based limits
on concentrations of exposures and continuous
review of positions to identify, evaluate,
restrict and monitor various forms of exposure
on an individual and aggregate basis.
During the reporting period we have closely
monitored credit exposures with counterparties
and have not identified any material change
in risk exposure arising out of the Covid-19
environment.
-------------------------------- -------------------------------------------------------------
Liquidity Risk: If the Group does not have sufficient levels
of liquid assets to support business activities
Arising from a failure or settle its obligations as they fall due,
to maintain an adequate the Group may be in default of its obligations
level of liquidity and may incur significant sanction, loss or
to meet financial obligations cost to rectify the position.
under both planned How we manage the risk:
and stressed conditions The Group maintains highly prudent positions
in accordance with its risk appetite and investment
policies which ensures a high level of liquidity
is available in the short term at all times.
Generally, shareholder assets are invested
in cash or money market instruments with highly
rated counterparties.
During the reporting period we have maintained
a prudent approach to the availability of
short-term cash but have not identified any
material change in risk exposure arising out
of the Covid-19 environment.
-------------------------------- -------------------------------------------------------------
Legal and Regulatory The scale and pace of change in regulatory
Risk: and supervisory standards at an international
level continue to drive developments at a
Arising from changes jurisdictional level. The interpretation or
in the regulatory landscape, application of regulation over time may impact
which adversely impact market accessibility, broker relationships
the Group's business and / or competitive viability. If the Group
model, or from a failure fails to monitor the regulatory environment
by the Group, or one or adequately integrate the management of
of its subsidiary entities, associated obligations within strategic, business
to meet its legal, model or business planning processes there
regulatory or contractual may be material risk to the achievement of
obligations, resulting strategic objectives both in the short and
in the risk of loss longer term.
or the imposition of
penalties, damages How we manage the risk:
or fines * Robust strategic planning processes informed by
analytical review of the external environment and
consideration of associated risk in the short and
longer term.
* Continuous monitoring and review of developments in
international law and regulation and proactive
management of how such developments might shape
jurisdictional specific reaction.
* Active and transparent engagement with regulatory
authorities and industry bodies on a
multi-jurisdictional basis, including active
engagement in and responding to regulatory
consultation exercises.
* Maintenance of robust governance, risk management and
internal control arrangements to ensure that legal
and regulatory obligations are substantively met on a
continuing basis.
* Active engagement with professional advisors to
address specific risks and issues that arise.
-------------------------------- -------------------------------------------------------------
Distribution Risk: The business environment in which the international
insurance industry operates is subject to
Arising from market continuous change as new market and competitor
changes, technological forces come into effect and as technology
advancement, loss of continues to evolve. Hansard may be unable
key intermediary relationships to maintain competitive advantage in commercially
or competitor activity significant jurisdictions, or market segments,
or be unable to build and sustain successful
distribution relationships, particularly in
the event of any prolonged uncertainties consequent
to the current pandemic environment.
How we manage the risk:
* Close monitoring of marketplaces and competitor
activity for signs of threats to forecast new
business levels.
* Stress and scenario modelling considers the
consequences of production falling materially above
or below target and enables the Board to ensure that
forecasting and planning activities are sufficiently
robust and revised product and distribution
strategies are designed to add additional scale to
the business, on a more diversified basis, through
organic growth at acceptable levels of risk and
profitability.
* Continuous investment in and development of
technology.
During the reporting period we maintained
close contact with our distribution partners
and deployed technological solutions where
appropriate to overcome challenges presented
by the Covid-19 environment.
-------------------------------- -------------------------------------------------------------
Conduct Risk: Any failure to adequately assess, monitor,
Arising from any failure manage and mitigate risks to the delivery
of the Group's governance, of fair customer outcomes, or to market integrity,
risk management and can be expected to result in material detriment
internal control arrangements to the achievement of strategic objectives
and could incur regulatory censure, financial
penalty, contract holder litigation and /
or reputational damage.
How we manage the risk:
* Developments in the Group's ERM framework continue to
drive and deliver the integration of conduct risk
management at both a cultural and practical level.
* Business activities designed to manage the volume and
velocity of regulatory change are fundamentally
concerned with ensuring compliance with conduct risk
obligations, managing conflicts of interest,
preventing market abuse and building robust
governance arrangements around new product
development and product suitability processes.
* The Group maintains regular dialogue with its
regulatory authorities and with its advisors in
relation to developments in the regulatory
environment in which we operate.
Information Systems The increasing digitalisation of business
and Cyber Risk: activities incurs an inherent exposure to
Arising from the increased the risk of cybercrime together with the risk
digitalisation of business of significant, costly interruptions, customer
activities and reliance dissatisfaction and regulatory censure.
upon technology In the event of any material failure in our
core business systems, or business processes
or if the Group fails to take adequate and
appropriate measures to protect its systems
and data from the inherent risk of attack,
disruption and/or unauthorised access by internal
or external parties could arise, resulting
in confidential data being exposed and/or
systems interruption. A significant cybercrime
event could result in reputational damage,
regulatory censure and financial loss.
How we manage the risk:
* Continuous focus on the maintenance of a robust,
secure and resilient IT environment that protects
customer and corporate data.
* Control techniques deployed to evaluate the security
of systems and proactively address emerging threats
both internally within the organisation and
externally, through regular engagement with internet
and technology providers and through industry forums.
* Maintenance of detailed and robust Business
Continuity Plans, including full data replication at
an independent recovery centre, which can be invoked
when required.
* Frequent and robust testing of business continuity
and disaster recovery arrangements.
The Covid-19 environment, particularly during
periods of remote working, involved enhanced
vigilance in this area. Regular communications
were made to ensure employees were aware of
heightened risks such as with phishing attempts.
Our business continuity plan operated well
in practice and our IT environment remained
robust, secure and operationally effective.
------------------------------- -------------------------------------------------------------
Employee Engagement Delivery of the Group's strategy is dependent
and Cultural Risk: on attracting and retaining experienced and
Arising from any failure high-performing management and staff. The
to drive the right knowledge, skills, attitudes and behaviours
corporate culture and of our employees are central to our success.
attract, develop, engage We must attract, integrate, engage and retain
and retain key personnel the talent required to deliver our strategy
and have the appropriate processes and culture
in place. The inability to retain key people,
and adequately plan for succession can be
expected to negatively impact the performance
of the Group.
How we manage the risk:
* Significant resources focussed on communicating
strategy and desired cultural behaviours to all
employees.
* Forums established for employees to provide feedback
for continuous improvement.
* Employee engagement monitored and measured through
periodic employee surveys.
* Group performance management system in place, which
measures both hard and soft skills.
* Training and development strategy in place to manage
talent, provide development opportunities and address
any skill gaps.
* Remuneration models and trends monitored closely by
the Group's Human Resources Department and the
Remuneration Committee.
* Succession planning strategy in place, to manage and
mitigate 'key person' risk.
We have not experienced any significant increase
in risk in this area during the Covid-19 environment
with no increase in employee turnover rates.
Remote working produces challenges around
training, development and engagement but this
risk has been reduced in the Isle of Man with
lock-down periods having been relatively limited.
Regular communication and surveys have been
undertaken to understand what has worked well
or not so well.
------------------------------- -------------------------------------------------------------
Further detail around financial risks is outlined in note 4
(Financial Risk Management) to the condensed consolidated financial
statements.
Statement of Directors' responsibilities
The Directors, whose names are reflected on the Company's
website, www.hansard.com, confirm that, to the best of their
knowledge, this condensed set of consolidated interim financial
statements has been prepared in accordance with IAS 34 as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- An indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed consolidated financial statements, and a description of
the principal risks and uncertainties for the remaining six months
of the financial year and;
-- Material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the Isle of Man governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
By order of the Board
G M Easton G S Marr
Non-executive Chairman Chief Executive Officer
3 March 2021
Condensed Consolidated Statement of Comprehensive Income
Year
Six months ended ended
31 December 31 December 30 June
2020 2019 2020
Notes GBPm GBPm GBPm
--- -------------------------------------------- -------------- ----------------- ------------ --------
Fees and commissions 6 25.6 25.5 49.5
Investment and other income 98.5 7.5 2.6
-------------------------------------------------- -------------- ----------------- ------------ --------
124.1 33.0 52.1
-------------------------------------------------- -------------- ----------------- ------------ --------
Change in provisions for investment
contract liabilities (98.0) (7.0) (0.1)
Origination costs (8.4) (9.1) (18.0)
Administrative and other expenses 7 (14.8) (14.3) (29.3)
-------------------------------------------------- -------------- ----------------- ------------ --------
(121.2) (30.4) (47.4)
-------------------------------------------------- -------------- ----------------- ------------ --------
Profit on ordinary activities before
taxation 2.9 2.6 4.7
Taxation on profit on ordinary
activities 8 (0.1) - (0.2)
-------------------------------------------------- -------------- ----------------- ------------ --------
Profit and total comprehensive
income for
the period after taxation 2.8 2.6 4.5
-------------------------------------------------- -------------- ----------------- ------------ --------
Earnings Per Share
Year
Six months ended ended
31 December 31 December 30 June
2020 2019 2020
Note (p) (p) (p)
--------- ------ ----------------- ------------ --------
Basic 9 2.0 1.9 3.2
Diluted 9 2.0 1.9 3.2
----------- ------ ----------------- ------------ --------
The notes on pages 27 to 42 form an integral part of these
condensed financial statements.
Condensed Consolidated Statement of Changes in Equity
Share Other Retained
Capital reserves earnings Total
Note GBPm GBPm GBPm GBPm
-------------------------------- ----- -------- --------- --------- ------
Shareholders' equity at
1 July 2019 68.8 (48.5) 6.9 27.2
Profit and total comprehensive
income
for the period after taxation - - 2.6 2.6
Share based payments reserve - 0.1 - 0.1
Transactions with owners
Dividends 10 - - (3.6) (3.6)
-------------------------------- ----- -------- --------- --------- ------
Shareholders' equity at 31 December
2019 68.8 (48.4) 5.9 26.3
--------------------------------------- -------- --------- --------- ------
Share Other Retained
Capital reserves earnings Total
Note GBPm GBPm GBPm GBPm
-------------------------------- ----- -------- --------- --------- ------
Shareholders' equity at
1 July 2020 68.8 (48.3) 5.4 25.9
Profit and total comprehensive
income
for the period after taxation - - 2.8 2.8
Transactions with owners
Dividends 10 - - (3.6) (3.6)
-------------------------------- ----- -------- --------- --------- ------
Shareholders' equity at 31 December
2020 68.8 (48.3) 4.6 25.1
--------------------------------------- -------- --------- --------- ------
The notes on pages 27 to 42 form an integral part of these
condensed financial statements.
Condensed Consolidated Balance Sheet
31 December 31 December 30 June
2020 2019 2020
Notes GBPm GBPm GBPm
Assets
Intangible assets 11 7.8 4.4 5.9
Property, plant and equipment 11 3.2 1.8 3.6
Deferred origination costs 12 123.7 120.8 122.3
Financial investments
Equity securities 50.8 34.4 40.7
Collective investment schemes 972.2 923.8 883.5
Fixed income securities 56.6 47.1 52.6
Deposits and money market
funds 101.1 95.7 126.6
Other receivables 4.6 5.8 5.2
Cash and cash equivalents 46.8 40.8 39.6
------------------------------------- ------ ------------ ------------ --------
Total assets 1,366.8 1,274.6 1,280.0
------------------------------------- ------ ------------ ------------ --------
Liabilities
Financial liabilities under
investment contracts 13 1,167.0 1,080.4 1,080.5
Deferred income 14 139.7 135.1 137.8
Amounts due to investment contract
holders 23.2 23.4 23.9
Other payables 15 11.8 9.4 11.9
------------------------------------- ------ ------------ ------------ --------
Total liabilities 1,341.7 1,248.3 1,254.1
------------------------------------- ------ ------------ ------------ --------
Net assets 25.1 26.3 25.9
------------------------------------- ------ ------------ ------------ --------
Shareholders' equity
Called up share capital 16 68.8 68.8 68.8
Other reserves (48.3) (48.4) (48.3)
Retained earnings 4.6 5.9 5.4
------------------------------------- ------ ------------ ------------ --------
Total shareholders' equity 25.1 26.3 25.9
------------------------------------- ------ ------------ ------------ --------
The notes on pages 27 to 42 form an integral part of these
condensed financial statements.
The condensed financial statements on pages 23 to 42 were
approved by the Board on 3 March 2021 and signed on its behalf
by:
G S Marr T N Davies
Director Director
Condensed Consolidated Cash Flow Statement
Year ended
Six months ended
31 December 31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
--- ----------------------------------------- ------------ ------------ ----------------
Cash flow from operating activities
Profit before tax for the period 2.9 2.6 4.7
Adjustments for:
Depreciation 0.4 0.4 0.7
Dividends receivable (2.5) (2.6) (4.9)
Interest receivable (0.2) (0.6) (1.9)
Movement in share based payments
reserve - 0.1 0.2
Foreign exchange (gains)/losses (1.1) 0.9 0.4
Changes in operating assets and
liabilities
Decrease in other receivables 0.6 (1.1) (0.5)
Dividends received 2.5 2.6 4.9
Interest received 0.1 0.6 1.6
Increase in deferred origination
costs (1.4) (2.8) (4.3)
Increase in deferred income 1.9 1.9 4.6
Decrease in creditors (0.5) (1.5) (0.2)
Increase in financial investments (77.4) 5.5 3.1
Increase in financial liabilities 86.5 0.7 0.8
------------------------------------------------ ------------ ------------ ----------------
Cash flow from operations 11.8 6.7 9.2
Corporation tax paid (0.1) - (0.1)
------------------------------------------------ ------------ ------------ ----------------
Net cash from operations after taxation 11.7 6.7 9.1
------------------------------------------------ ------------ ------------ ----------------
Cash flows from investing activities
Investment in intangible assets (1.9) (1.5) (3.0)
Proceeds from sale of investments 0.1 0.1 0.2
Cash flows used in investing activities (1.8) (1.4) (2.8)
------------------------------------------------ ------------ ------------ ----------------
Cash flows from financing activities
Dividends paid (3.6) (3.6) (6.0)
Principal elements of lease liabilities (0.2) (0.2) (0.5)
------------------------------------------------ ------------ ------------ ----------------
Cash flows used in financing activities (3.8) (3.8) (6.5)
Net increase/(decrease) in cash
and cash
equivalents 6.1 1.5 (0.2)
Cash and cash equivalents at beginning
of period 39.6 40.2 40.2
Effect of exchange rate changes 1.1 (0.9) (0.4)
------------------------------------------------ ------------ ------------ ----------------
Cash and cash equivalents at period
end 46.8 40.8 39.6
------------------------------------------------ ------------ ------------ ----------------
The notes on pages 27 to 42 form an integral part of these
condensed financial statements.
Notes to the Condensed Consolidated Financial Statements
1 General information
Hansard Global plc ("the Company") is a limited liability
company, incorporated in the Isle of Man, who shares are publicly
traded. The principal activity of the Company is to act as the
holding company of the Hansard Group of companies. The activities
of the principal operating subsidiaries include the transaction of
life assurance business and related activities.
The Company has its primary listing on the London Stock
Exchange.
These condensed consolidated interim financial statements are
unaudited and do not include all of the information required for a
complete set of financial statements prepared in accordance with
IFRS Standards. Selected explanatory notes are included to explain
events and transactions that are significant to an understanding of
the changes in the Group's financial position and performance since
the last annual financial statements. The condensed consolidated
interim financial statements were approved by the Board of
Directors on 3 March 2021.
The Board of Directors approved the Group's statutory financial
statements for the year ended 30 June 2020 on 23 September 2020.
The report of the independent auditor on those financial statements
was unmodified and did not contain an emphasis of matter
paragraph.
2 Basis of presentation
These condensed consolidated interim financial statements for
the half-year ended 31 December 2020 have been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority ("DTR") and with IAS 34 "Interim
Financial Reporting" as adopted by the European Union ("EU"). The
condensed consolidated interim financial statements should be read
in conjunction with the annual financial statements for the year
ended 30 June 2020, which were prepared in accordance with
International Financial Reporting Standards as adopted by the
EU.
The condensed consolidated interim financial statements have
been prepared under the historical cost convention as modified by
the revaluation of financial investments and financial liabilities
at fair value through profit or loss.
Except where otherwise stated, all figures included in the
condensed consolidated interim financial statements are stated in
pounds sterling, which is also the functional currency of the
Company, rounded to the nearest hundred thousand pounds.
The following new standards, amendments and interpretations are
in issue but not yet effective for these financial statements and
have not been early adopted by the Group. The following amended
standards are not expected to have a material impact on the Group's
reported results:
-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) - effective from January
2021
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments
to IAS 37) - effective from January 2021
-- 2022 Annual Improvements to IFRS Standards 2018 - 2020 - effective from January 2022
-- Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16) - effective from January 2022
-- Reference to the Conceptual Framework (Amendments to IFRS 3) - effective from January 2022
-- IFRS 17 Insurance Contracts - effective from January 2023
-- Classification of liabilities as current or non-current
(Amendments to IAS 1) - effective from January 2023
There are no other standards, amendments or interpretations to
existing standards that are not yet effective, that would have a
material impact on the Group's reported results.
Going Concern
As shown within the Business and Financial Review, the Group's
capital position is strong and well in excess of regulatory
requirements. The long-term nature of the Group's business results
in considerable recurring cash inflows arising from existing
business. The Directors believe that the Group is well placed to
manage its business risks successfully.
The Directors are satisfied that the Company and the Group have
adequate resources to continue to operate as a going concern for
the foreseeable future and have prepared the condensed consolidated
financial statements on that basis.
In making this statement, the Directors have given specific
consideration to the impact of the Covid-19 pandemic on the
business. They have reviewed financial forecasts that include
plausible downside scenarios as a result of Covid-19 and its impact
on the global economy. These show the Group continuing to generate
profit over the next 12 months and that the Group has sufficient
cash reserves to enable it to meet its obligations as they fall
due.
The Group has not placed any of its staff on furlough schemes
nor taken any other form of government financial assistance.
The Directors expect the acquisition of new business will
continue to be challenging throughout the remainder of the
financial year. The impact of this however is not immediate to the
Group's profit and cash flows and therefore allows for longer term
adjustments to operations and the cost base. Long periods of lower
new business or indeed lower AuA would be addressed by reducing the
cost base and where necessary, the dividend paid.
The following factors are considered as supportive to the
Group's resilience to Covid-19:
-- The Group's business model focuses on long term savings
products, a majority of which are regular premium paying products
which continue to receive cash inflows regardless of the amount of
new business sold.
-- The Group earns approximately a third of its revenues from
asset-based income which is not immediately dependent on sourcing
new business.
-- New business channels are geographically dispersed and
therefore less exposed to specific regional lock-downs.
-- The largest expense associated with new business is
commission expenditure which reduces directly in line with reduced
sales.
-- The Group has, and continues to the date of this report to
have, a strong capital position with significant levels of
liquidity and cash (as outlined in the Business and Financial
Review).
-- The business has demonstrated operational resilience in being
able to operate remotely from its offices during government-imposed
lock-down without any material impact to processing and servicing
levels. Its control environment continued to operate effectively
during this time.
-- The Group places its shareholder assets into conservative,
highly-liquid, highly-rated bank deposits and money market funds.
These are typically not subject to price fluctuation and protect
the Group's assets against potential market volatility.
-- The Group has no borrowings.
3 Principal accounting policies
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, this condensed set of consolidated
financial statements has been prepared applying the accounting
policies and standards that were applied, and the critical
accounting estimates and judgements in applying them, in the
preparation of the Group's published consolidated financial
statements for the year ended 30 June 2020. The published
consolidated financial statements for the year ended 30 June 2020
can be accessed on the Company's website: www.hansard.com .
4 Financial risk management
Risk management objectives and risk policies
The Group's operations expose it to a variety of financial
risks. The Group's objective in the management of financial risk is
to minimise, where practicable, its exposure to such risk, except
when necessary to support other objectives. The Group seeks to
manage risk through the operation of unit-linked business whereby
the contract holder bears the financial risk. The Group's exposure
is limited to the extent that certain fees and commission income
are based on the value of assets in the unit-linked funds. In
addition, shareholder assets are invested in highly rated
investments.
Overall responsibility for the management of the Group's
exposure to risk is vested in the Board. To support it in this
role, an Enterprise Risk Management ("ERM") framework is in place
comprising risk identification, risk assessment, control and
reporting processes. Information concerning the operation of the
ERM framework to manage financial and other risks is contained
within the Report and Accounts for the year ended 30 June 2020, and
particularly in note 3 thereto, "Financial risk management".
The more significant financial risks to which the Group is
exposed, and an estimate of the potential financial impact of each
on the Group's IFRS earnings, are set out below. For each category
of risk, the Group determines
its risk appetite and sets its investment, treasury and associated policies accordingly.
4.1 Market risk
This is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market
prices, analysed between price, interest rate and currency risk.
The Group adopts a risk averse approach to market risk, with a
stated policy of not actively pursuing or accepting market risk
except where necessary to support other objectives. However, the
Group accepts the risk that the fall in equity or other asset
values, whether as a result of price falls or strengthening of
sterling against the currencies in which contract holder assets are
denominated, will reduce the level of annual management charge
income derived from such contract holder assets and the risk of
lower future profits.
Sensitivity analysis to market risk
The Group's business is unit-linked and the direct associated
market risk is therefore borne by contract holders (although there
is a secondary impact as shareholder income is dependent upon the
markets, as mentioned above). Financial assets and liabilities to
support Group capital resources held outside unitised funds
primarily consist of units in money market funds, cash and cash
equivalents, and other assets and liabilities. Cash held in
unitised money market funds and at bank is valued at par and is
unaffected by movement in interest rates. Other assets and
liabilities are similarly unaffected by market movements.
As a result of these combined factors, the Group's financial
assets and liabilities held outside unitised funds are not
materially subject to market risk, and movements at the reporting
date in interest rates and equity values have an immaterial impact
on the Group's profit after tax and equity. Future revenues from
annual management charges may be affected by movements in interest
rates, foreign currencies and equity values. The Group does not
control the asset selection strategy as assets are chosen by the
policyholders.
(a) Price risk
Unit linked funds are exposed to securities price risk as the
investments held are subject to prices in the future which are
uncertain. The fair value of financial assets (designated at fair
value through profit or loss) exposed to price risk at 31 December
2020 was GBP1,079.6m (31 December 2019: GBP1,005.3m). In the event
that investment income is affected by price risk then there will be
an equal and opposite impact on the value of the changes in
provisions for investment contract liabilities in the same
accounting period. The impact on the profit or loss before taxation
in a given financial year is negligible.
An overall change in the market value of the unit-linked funds
would affect the annual management charges accruing to the Group
since these charges, which are typically 1% per annum, are based on
the market value of contract holder assets under administration.
The approximate annual impact on the Group's profits and equity of
a 10% change in fund values, either as a result of price, interest
rate or currency fluctuations, is GBP1.7m (H1 2020: GBP1.6m).
(b) Interest rate risk
Interest rate risk is the risk that the Group is exposed to
lower returns or loss as a direct or indirect result of
fluctuations in the value of, or income from, specific assets
arising from changes in underlying interest rates.
The Group is primarily exposed to interest rate risk on the
balances that it holds with credit institutions and in money market
funds. The Group has mitigated its exposure to cash flow interest
rate risk by placing a proportion of its cash holdings on
longer-term, fixed-rate deposits.
Taking into account the proportion of Group funds held on
longer-term, fixed-rate deposits, a change of 1% p.a. in interest
rates will result in an increase or decrease of approximately
GBP0.6m (H1 2020: GBP0.6m) in the Group's annual investment income
and equity.
A summary of the Group's liquid assets at the balance sheet date
is set out in note 4.2.
(c) Currency risk
Currency risk is the risk that the Group is exposed to higher or
lower returns as a direct or indirect result of fluctuations in the
value of, or income from, specific assets and liabilities arising
from changes in underlying exchange rates.
(c) (i) Group foreign currency exposures
The Group is exposed to currency risk on the foreign currency
denominated bank balances, contract fees receivable and other
liquid assets that it holds to the extent that they do not match
liabilities in those currencies. The impact of currency risk is
minimised by frequent repatriation of excess foreign currency funds
to sterling. The Group does not hedge foreign currency cash
flows.
At the balance sheet date the Group had exposures in the
following currencies:
31 December
2020 2020 2020 2019 2019 2019
US$m EURm Yen US$m EURm Yen
m m
--------------------- ------- ------ -------- ------- ------ --------
Gross assets 16.6 5.3 190.6 14.4 4.5 172.6
Matching currency (13.1) (4.5) (130.9) (10.7) (3.5) (160.1)
--------------------- ------- ------ -------- ------- ------ --------
Uncovered currency
exposures 3.5 0.8 59.6 3.7 1.0 12.5
--------------------- ------- ------ -------- ------- ------ --------
Sterling equivalent
of
exposures (GBPm) 2.6 0.8 0.4 2.8 0.9 0.1
--------------------- ------- ------ -------- ------- ------ --------
The approximate effect of a 5% change in the value of US dollars
to sterling is GBP0.1m (H1 2020: GBP0.1m); in the value of the euro
to sterling is less than GBP0.1m (H1 2020: less than GBP0.1m); and
in the value of the yen to sterling is less than GBP0.1m (H1 2020:
less than GBP0.1m).
(c) (ii) Financial investments by currency
Certain fees and commissions are earned in currencies other than
sterling, based on the value of financial investments held in those
currencies from time to time. The sensitivity of the Group to the
currency risk inherent in investments held to cover financial
liabilities under investment contracts is incorporated within the
analysis set out in (a) above.
At the balance sheet date, the analysis of financial investments
by currency denomination is as follows; US dollars: 68% (H1 2020:
65%); sterling: 21% (H1 2020: 22%); euro: 10% (H1 2020: 12%);
other: 1% (H1 2020: 1%).
4.2 Credit risk
Credit risk is the risk that the Group is exposed to lower
returns or loss if another party fails to perform its financial
obligations to the Group. The Group has adopted a risk averse
approach to such risk and has a stated policy of not actively
pursuing or accepting credit risk except when necessary to support
other objectives.
The clearing and custody operations for the Group's security
transactions are mainly concentrated with one broker, namely
Capital International Limited, a member of the London Stock
Exchange. At the balance sheet date, substantially all contract
holder cash and cash equivalents, balances due from broker and
financial investments are placed in custody with Capital
International Limited. These operations are detailed in a formal
contract that incorporates notice periods and a full exit
management plan. Delivery of services under the contract is
monitored by a dedicated relationship manager against a documented
Service Level Agreement and Key Performance Indicators.
The Group has an exposure to credit risk in relation to its
deposits with credit institutions and its investments in unitised
money market funds. To manage these risks; deposits are made, in
accordance with established policy, with credit institutions having
a short-term rating of at least F1 or P1 from Fitch IBCA and
Moody's respectively and a long term rating of at least A or A3
respectively. Investments in unitised money market funds are made
only where such fund is AAA rated. Additionally maximum
counterparty exposure limits are set both at an individual
subsidiary company level and on a Group-wide basis.
These assets are considered to have a high degree of credit
worthiness and no assets of a lower credit worthiness are held.
There have been no changes in the assets in the period ended 31
December 2020 attributable to changes in credit risk (31 December
2019: nil).
At the balance sheet date, an analysis of the Group's
shareholder cash balances was as follows:
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
----------------------------------------------- ------ ------ --------
Longer term deposits with credit institutions 12.2 19.1 21.2
Cash and cash equivalents under IFRS 46.8 40.8 39.6
----------------------------------------------- ------ ------ --------
59.0 59.9 60.8
----------------------------------------------- ------ ------ --------
4.3 Liquidity risk
Liquidity risk is the risk that the Group, though solvent, does
not have sufficient financial resources to enable it to meet its
obligations as they fall due, or can only secure them at excessive
cost.
The Group's objective is to ensure that it has sufficient
liquidity over short (up to one year) and medium-term time horizons
to meet the needs of the business. This includes liquidity to
cover, amongst other things, new business costs, planned strategic
activities, servicing of equity capital as well as working capital
to fund day-to-day cash flow requirements.
Liquidity risk is principally managed in the following ways:
-- Assets of a suitable marketability are held to meet contract
holder liabilities as they fall due.
-- Forecasts are prepared regularly to predict required
liquidity levels over both the short and medium term.
The Group's exposure to liquidity risk is considered to be low
since it maintains a high level of liquid assets to meet its
liabilities.
4.4 Fair value of financial assets and liabilities
The Group closely monitors the valuation of assets in markets
that have become less liquid. Determining whether a market is
active requires the exercise of judgement and is determined based
upon the facts and circumstances of the market for the instrument
being measured. Where the Directors determine that there is no
active market for a particular financial instrument, for example
where a particular collective investment scheme is suspended from
trading, fair value is assessed using valuation techniques based on
available, relevant, information and an appraisal of all associated
risks. When a collective investment scheme recommences regular
trading, the value would be transferred back to Level 1. This
process requires the exercise of significant judgement on the part
of the Directors.
Due to the linked nature of the contracts administered by the
Group's undertakings, any change in the value of financial assets
held to cover financial liabilities under those contracts will
result in an equal and opposite change in the value of contract
liabilities. The separate effect on financial assets and financial
liabilities is included in investment income and investment
contract benefits, respectively, in the condensed consolidated
statement of comprehensive income.
IFRS 13 requires the Group to classify fair value measurements
into a fair value hierarchy by reference to the observability and
significance of the inputs used in measuring that fair value. The
hierarchy is as follows:
-- Level 1: fair value is determined using quoted prices
(unadjusted) in active markets for identical assets.
-- Level 2: fair value is determined using inputs other than
quoted prices included within Level 1 that are observable for the
asset either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
-- Level 3: fair value is determined using inputs for the asset
that are not based on observable market data (unobservable
inputs).
The following tables analyse the Group's financial assets and
liabilities at fair value through profit or loss, at 31 December
2020:
Level Level Level Total
1 2 3
Financial assets at fair GBPm GBPm GBPm GBPm
value through profit or loss
-------------------------------- -------- ------ ------ --------
Equity securities 50.8 - - 50.8
Collective investment schemes 961.3 - 10.9 972.2
Fixed income securities, bonds
and structured notes - 56.6 - 56.6
Deposits and money market
funds 101.2 - - 101.2
1,113.3 56.6 10.9 1,180.8
-------------------------------- -------- ------ ------ --------
During the period under review, GBP56.6m of assets were
transferred from Level 1 to Level 2 following a review of their
classification. Assets with a value of less than GBP0.1m were
transferred from Level 1 to Level 3 as the Directors believe that
valuations can no longer be obtained for these assets from an
observable market price due to suspension in trading or the asset
becoming illiquid. There were no other reclassifications of assets
between the different Levels in the fair value hierarchy in the
period. No assets were transferred from Level 3 to Level 1 or Level
2 during the period.
The fair value of Level 3 assets has reduced since 30 June 2020
by GBP3.0m as a result of specific assets being revalued to nil and
also due to a number of distribution payments being made to
contract holders. In addition, a further GBP2.0m reduction is the
result of revised valuations based on updated underlying fair value
information being available. The residual movement reflects other
changes in valuations.
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
-------------------------- ------- -------- ------ --------
Financial liabilities at
fair value
through profit or loss - 1,167.0 - 1,167.0
-------------------------- ------- -------- ------ --------
The following tables analyse the Group's financial assets and
liabilities at fair value through profit or loss, at 31 December
2019. The classification of fixed income securities, bonds and
structured notes has been restated to be presented on a consistent
basis to the current period:
Level Level Level Total
1 2 3
Financial assets at fair GBPm GBPm GBPm GBPm
value through profit or loss
-------------------------------- -------- ------ ------ --------
Equity securities 34.4 - - 34.4
Collective investment schemes 905.0 - 18.8 923.8
Fixed income securities, bonds
and structured notes - 47.1 - 47.1
Deposits and money market
funds 95.7 - - 95.7
1,035.1 47.1 18.8 1,101.0
-------------------------------- -------- ------ ------ --------
During the period-ended 31 December 2019, no assets were
transferred from Level 1 to Level 2, other than the restatement
noted above. Assets with a value of GBP0.2m were transferred from
Level 1 to Level 3 as the Directors believe that valuations can no
longer be obtained for these assets from an observable market price
due to suspension in trading or the asset becoming illiquid. There
were no other reclassifications of assets between the different
Levels in the fair value hierarchy in the period. No assets were
transferred from Level 3 to Level 1 or Level 2 during the
period.
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
-------------------------- ------- -------- ------ --------
Financial liabilities at
fair value
through profit or loss - 1,080.4 - 1,080.4
-------------------------- ------- -------- ------ --------
5 Segmental information
Disclosure of operating segments in these condensed consolidated
financial statements is consistent with reports provided to the
Chief Operating Decision Maker ("CODM") which, in the case of the
Group, has been identified as the Executive Committee of Hansard
Global plc.
In the opinion of the CODM, the Group operates in a single
reportable segment, that of the distribution and servicing of
long-term investment products. New business development,
distribution and associated activities in relation to the Republic
of Ireland ceased with effect from 30 June 2013. All other
activities of the Group are continuing.
The Group's Executive Committee uses two principal measures when
appraising the performance of the business: net issued compensation
credit ("NICC") (weighted where appropriate by product line) and
expenses. NICC is a measure of the value of new in-force business
and top-ups on existing single premium contracts . NI CC is the
total amount of basic initial commission payable to intermediaries
for business sold in a period and is calculated on each piece of
new business . It excludes override commission paid to
intermediaries over and above the basic level of commission.
The following table analyses NICC geographically and reconciles
NICC to direct origination costs during the period as set out in
section 5 of the Business and Financial Review.
Six months ended Year ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
--------------------------------- --------- -------- -----------
Middle East and Africa 2.2 2.6 5.1
Latin America 2.1 2.3 4.3
Rest of World 0.7 0.9 1.6
Far East 0.3 0.5 0.8
Net issued compensation credit 5.3 6.3 11.8
Other commission costs paid to
third parties 2.7 3.6 6.6
Enhanced unit allocations 0.9 0.8 1.5
--------------------------------- --------- -------- -----------
Direct origination costs during
the period 8.9 10.7 19.9
--------------------------------- --------- -------- -----------
Revenues and expenses allocated to geographical locations
contained in sections 5.1 to 5.4 below, reflect the revenues and
expenses generated in or incurred by the legal entities in those
locations.
5.1 Geographical analysis of fees and commissions by origin
Six months ended Year
ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
--------------------- --------- -------- --------
Isle of Man 24.0 23.7 46.2
Republic of Ireland 1.6 1.8 3.3
The Bahamas * - - -
--------------------- --------- -------- --------
25.6 25.5 49.5
--------------------- --------- -------- --------
* Hansard Worldwide, which is based in the Bahamas, fully
reinsures its business to Hansard International. All fees and
commissions for Hansard Worldwide are therefore presented within
the Isle of Man category.
5.2 Geographical analysis of profit/(loss) before taxation
Six months Year
ended ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
--------------------- ------ ------ --------
Isle of Man 3.0 2.6 5.0
Republic of Ireland (0.4) (0.3) (0.9)
The Bahamas 0.3 0.3 0.6
--------------------- ------ ------ --------
2.9 2.6 4.7
--------------------- ------ ------ --------
5.3 Geographical analysis of gross assets
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
--------------------- -------- -------- --------
Isle of Man * 1,247.3 1,142.3 1,158.7
Republic of Ireland 118.2 131.1 120.0
The Bahamas 1.3 1.2 1.3
--------------------- -------- -------- --------
1,366.8 1,274.6 1,280.0
--------------------- -------- -------- --------
* Includes assets held in the Isle of Man in connection with
policies written in The Bahamas.
5.4 Geographical analysis of gross liabilities
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
--------------------- -------- -------- --------
Isle of Man 1,161.1 1,109.0 1,100.3
Republic of Ireland 101.7 113.0 102.6
The Bahamas 78.9 26.3 51.2
--------------------- -------- -------- --------
1,341.7 1,248.3 1,254.1
--------------------- -------- -------- --------
6 Fees and commissions
Six months ended Year ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
----------------------- --------- -------- -----------
Contract fee income 16.4 16.5 32.2
Fund management fees 6.8 6.7 12.7
Commission receivable 2.4 2.3 4.6
----------------------- --------- -------- -----------
25.6 25.5 49.5
----------------------- --------- -------- -----------
7 Administrative and other expenses
Included in Administrative and other expenses are the
following:
Year ended
Six months ended
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------ ---------- --------- -----------
Auditors' remuneration
- Fees payable to the Company's
auditor for the audit of the Company's
annual accounts 0.1 0.1 0.1
- Fees payable for the audit of
the Company's subsidiaries pursuant
to legislation 0.2 0.2 0.4
- Other services provided to the
Group 0.1 0.1 0.1
Employee costs 5.8 5.7 11.1
Directors' fees 0.2 0.2 0.4
Fund management fees 2.6 2.5 4.8
Renewal and other commission 0.4 0.3 0.8
Professional and other fees 1.5 1.4 2.8
Provision for doubtful debts 0.3 - 0.9
Litigation defence and settlement
costs 0.9 0.7 1.3
Licences and maintenance fees 1.0 0.8 1.7
Insurance costs 0.6 0.7 1.4
Depreciation of property, plant
and equipment 0.4 0.4 0.7
Communications 0.2 0.2 0.3
------------------------------------------ ---------- --------- -----------
8 Taxation
The corporation tax expense for the Group for H1 2021 was
GBP0.1m (H1 2020: nil). The increase in taxation arose from
increased activity in our Japan branch. Corporation tax is charged
on any profits arising at the following rates depending on location
of the company or branch:
Isle of Man 0% (2020: 0%)
Republic of Ireland 12.5% (2020: 12.5%)
Japan 23.4% (2020: 23.4%)
Labuan 24% (2020: 24%)
The Bahamas 0% (2020: 0%)
No deferred tax asset is currently being recorded in relation to
losses arising in Hansard Europe.
There is no material difference between the current tax charge
in the consolidated statement of comprehensive income and the
current tax charge that would result from applying standard rates
of tax to the profit before tax.
9 Earnings per share
Six months Year ended
ended
31 December 30 June
2020 2019 2020
----------------------------------- ------ ------ -----------
Profit after tax (GBPm) 2.8 2.6 4.5
Weighted average number of shares
in issue (millions) 137.6 137.6 137.6
------------------------------------ ------ ------ -----------
Earnings per share in pence 2.0p 1.9p 3.2p
------------------------------------ ------ ------ -----------
The Directors believe that there is no material difference
between the weighted average number of shares in issue for the
purposes of calculating either basic or diluted earnings per share.
Earnings under either measure is 2.0 pence per share (H1 2020:
1.9p).
10 Dividends
Interim dividends payable to shareholders are recognised in the
year in which the dividends are paid. Final dividends payable are
recognised as liabilities when approved by the shareholders at the
annual general meeting.
The following dividends have been paid by the Group during the
period:
Year ended
Six months ended 31 December 30 June
2020 2019 2020
Per share Total Per share Total Per share Total
p GBPm p GBPm p GBPm
------------------ ---------- ------ ---------- ------ ---------- ------
Final dividend
paid 2.65 3.6 2.65 3.6 2.65 3.6
Interim dividend
paid - - - - 1.80 2.4
2.65 3.6 2.65 3.6 4.45 6.0
------------------ ---------- ------ ---------- ------ ---------- ------
The Board have resolved to pay an interim dividend of 1.8p per
share. This amounts to GBP2.4m and will be paid on 20 April 2020 to
shareholders on the register at 12 March 2020.
11 Intangible assets and property, plant and equipment
Intangible assets
The historical cost of computer software is the purchase cost
and the direct cost of internal development. Computer software is
recognised as an intangible asset.
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------- ------ ------ --------
Intangible assets 7.8 4.4 5.9
------------------- ------ ------ --------
The increase in computer software relates to capitalised costs
associated with the development of a replacement policy
administration system. The first segment of this development is
expected to be put into use during Spring 2021, at which point
amortisation will commence over its estimated expected life.
Property, plant and equipment
Property, plant and equipment includes both tangible fixed
assets and 'right of use assets' recognised in accordance with IFRS
16.
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------- ------ ------ --------
Property, plant and equipment 0.6 0.7 0.6
Right of use assets 2.6 1.1 3.0
3.2 1.8 3.6
------------------------------- ------ ------ --------
IFRS 16 - Leases
The right-of-use assets for property leases are measured at an
amount equal to the lease liability adjusted by the amount of any
prepaid or accrued lease payments recognised immediately before the
date of initial application, being the commencement date. The
liabilities are measured at the present value of the remaining
lease payments, discounted using an incremental borrowing rate. The
weighted average incremental borrowing rate applied to the lease
liabilities on 30 June 2020 was 4%.
The Group leases various offices around the world to service its
clients and operations. Rental contracts are typically made for
periods of 1 to 10 years, incorporating break clauses where
applicable. Lease terms are negotiated on an individual basis and
contain differing terms and conditions. The lease agreements do not
impose any covenants.
In determining the lease terms utilised in assessing the
position under IFRS 16, management considers break clauses in
leases, where appropriate. Potential future outflows exist on two
leases beyond break clauses of GBP3.3m. These have not been
included in the lease liability but would be payable in the event
that the relevant lease clauses were not exercised. The current
position assumes that these break clauses will be exercised.
Leases (other than those classified as short-term leases or
leases of low-value assets) are recognised as a right-of-use asset
and a corresponding liability at the date at which the leased asset
is available for use by the Group. Each lease payment is allocated
between the liability and a finance cost. The finance cost is
charged over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each
period. The right-of-use asset is depreciated over the shorter of
the asset's useful life and the lease term on a straight-line
basis.
Short-term leases (those with a lease term or useful life of
less than 12 months at inception) and leases of low value assets
(comprising IT-equipment and small items of office furniture) are
recognised on a straight-line basis as an expense in administration
and other expenses in the consolidated statement of comprehensive
income.
During the period to 31 December 2020, the Group entered into
extensions to existing leases and recognised these under IFRS 16
accordingly. The weighted average borrowing rate applied to the
lease liabilities at 31 December 2020 was 4%.
The recognition of the right-of-use asset represents an increase
in the property, plant and equipment figure of less than GBP2.6m
(31 Dec 2019: GBP1.1m). Lease liabilities relating to the
right-of-use asset are included within other payables.
2020 2019
GBPm GBPm
------------------------------------------ ---- ------------- --------
Right of use asset recognised 1 July 3.0 0.9
Additions during the period - 0.4
Depreciation (0.4) (0.2)
-------------------------------------------- --- ------------- --------
Net book value of right of use asset
as at 31 December 2.6 1.1
------------------------------------------- ---- ------------- --------
Lease liability recognised 1 July 3.0 0.9
Additions during the period - 0.4
Lease payments made during the period (0.2) (0.2)
------------------------------------------------- ------------- --------
Lease liability recognised as at 31
December 2.8 1.1
------------------------------------------------- ------------- --------
Of which are:
Current lease liabilities 0.5 0.5
Non-current lease liabilities 2.3 0.6
------------------------------------------------- ------------- --------
12 Deferred origination costs
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
--------------------------------- ----------- ------- ----------
At beginning of financial
year 122.3 118.0 118.0
Origination costs incurred
during the period 8.6 10.2 18.9
Origination costs amortised
during the period (7.2) (7.4) (14.6)
-------------------------------------- ------- ------- ----------
123.7 120.8 122.3
---------------------------------- ----------- ------- ----------
31 December 30 June
2020 2019 2020
Carrying value GBPm GBPm GBPm
---------------------------------- ----------- ------- ----------
Expected to be amortised within
one year 11.5 11.4 11.4
Expected to be amortised after
one year 112.2 109.4 110.9
---------------------------------- ----------- ------- ----------
123.7 120.8 122.3
---------------------------------- ----------- ------- ----------
13 Financial investments held to cover liabilities under investment contracts
The following investments, other assets and liabilities are held
to cover financial liabilities under investment contracts. They are
included within the relevant headings on the condensed consolidated
balance sheet.
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------- -------- -------- --------
Equity securities 50.8 34.4 40.7
Investment in collective investment
schemes 972.2 923.6 883.5
Fixed income securities, bonds
and structured notes 56.6 47.1 52.6
Deposits and money market funds 89.3 76.6 105.1
Total assets 1,168.9 1,081.7 1,081.9
Other payables (1.9) (1.3) (1.4)
------------------------------------- -------- -------- --------
Financial investments held to
cover
liabilities 1,167.0 1,080.4 1,080.5
------------------------------------- -------- -------- --------
The other receivables and other payables fair value approximates
amortised cost.
14 Deferred income
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------ --- ---------- ---------- --------
At beginning of financial
year 137.8 133.2 133.2
Income received and deferred
in period 10.5 10.6 21.6
Income recognised in contract fees
in the period (8.6) (8.7) (17.0)
----------------------------------------- ---------- ---------- --------
139.7 135.1 137.8
----------------------------------------- ---------- ---------- --------
31 December 30 June
2020 2019 2020
Carrying value GBPm GBPm GBPm
------------------------------------- -------------- ---------- --------
Expected to be amortised within
one year 13.1 13.0 13.0
Expected to be amortised after
one year 126.6 122.1 124.8
------------------------------------- -------------- ---------- --------
139.7 135.1 137.8
------------------------------------- -------------- ---------- --------
15 Other payables
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------ ------ ------ --------
Commission payable 1.8 1.9 1.8
Other creditors and accruals 7.2 6.4 7.1
Lease liabilities of which:
Current lease liabilities 0.5 0.5 0.4
Non-current lease liabilities 2.3 0.6 2.6
------------------------------------------ ------ ------ --------
11.8 9.4 11.9
------------------------------------------ ------ ------ --------
16 Called up share capital
31 December 30 June
2020 2019 2020
GBPm GBPm GBPm
------------------------------------
Authorised:
200,000,000 ordinary shares
of 50p 100.0 100.0 100.0
Issued and fully paid:
137,557,079 ordinary shares
of 50p
(30 June 2020: 137,557,079 ordinary
shares) 68.8 68.8 68.8
17 Related party transactions
Intra-group transactions are eliminated on consolidation and are
not disclosed separately here.
There have been no significant related party transactions in the
period other than noted in 17.1 below, nor changes to related
parties. Related party transactions affecting the results of
previous periods and an understanding of the Group's financial
position at previous balance sheet dates are as disclosed in the
Annual Report & Accounts for the year ended 30 June 2020.
There have been no awards during the period under the Save As
You Earn (SAYE) share-save programme for employees. The estimated
fair value of the schemes and the imputed cost for the period under
review is not material to these financial statements.
17.1 Transactions with controlling shareholder
Dr L S Polonsky is regarded as the controlling shareholder of
the Group, as defined by the Listing Rules of the Financial Conduct
Authority. As at 30 June 2020, Dr Polonsky had an investment
contract issued by the Group on terms available to employees in
general. This contract had a fair value of GBP0.9m as at 30 June
2020 (31 December 2019: GBP0.9m). In the period to 31 December
2020, the investment contract was redeemed by Dr Polonsky resulting
in no balances with the Group as at 31 December 2020 and to the
date of this report.
18 Contingent liabilities
The Group does not give any investment advice. Investment
decisions are taken either by the contract holder directly or
through a professional intermediary appointed by the contract
holder. Contract holders bear the financial risk relating to the
investments underpinning their contracts, as the policy benefits
are linked to the value of the assets. Notwithstanding the above,
financial services institutions are frequently drawn into disputes
in cases where the value and performance of assets selected by or
on behalf of contract holders fails to meet their expectations. At
the balance sheet date a number of fund structures remain affected
by liquidity or other issues that hinder their sales or redemptions
on normal terms with a consequent adverse impact on policy
transactions.
As reported previously, the Group has been subject to a number
of complaints in relation to the selection and performance of
assets linked to contracts. The Group has been served with a number
of writs arising from such complaints and other asset-related
issues. All such writs relate to historic business written by
Hansard Europe prior to its closure to new business in 2013.
As at the date of the 2020 Annual Report and Accounts, the Group
had been served with cumulative writs with a net exposure totalling
EUR25.8m or GBP23.4m in sterling terms arising from contract holder
complaints and other asset performance-related issues. The
corresponding figure as at 31 December 2020 was EUR27.4m or
GBP24.6m (31 December 2019: EUR24.6m or GBP20.8m). The increase
since 30 June 2020 was driven primarily by a reduction in the fair
value of investment assets backing the claims.
We have previously reported that we expect a number of our
larger claims to ultimately be covered by our Group insurance cover
and that during the financial year 2020 we received our first
insurance payment on account for legal expenditure in Italy,
recording GBP0.5m in total recoveries. We expect such reimbursement
to continue during the course of that litigation.
As a result, we also expect that a significant amount of the
GBP24.6m of contingent liabilities referred to above would be
covered by insurance should those cases be ruled against us. As of
31 December 2020, we continue to estimate coverage to be in the
range of GBP6m to GBP13m.
While it is not possible to forecast or determine the final
results of pending or threatened legal proceedings, based on the
pleadings and advice received from the Group's legal
representatives, the Directors believe that the Group has strong
defences to such claims. Notwithstanding this, there may be
circumstances where in order to avoid the expense and distraction
of protracted litigation, the Board may consider it to be in the
best interests of the Group and its shareholders to reach a
commercial resolution with regard to certain of these claims. Such
cases totalled less than GBP0.1m (H1 2020: less than GBP0.1m)
during the period. A provision of GBP0.3m has been established
where based on past experience it is expected that future
settlements may be reached.
It is not possible at this time to make any further estimates of
liability.
Between 31 December 2020 and the date of this report, there have
been no material developments.
19 Foreign exchange rates
The closing exchange rates used by the Group for the translation
of balance sheet items to sterling were as follows:
31 December 30 June
2020 2019 2020
US Dollar 1.36 1.33 1.24
Japanese Yen 141 144 134
Euro 1.11 1.18 1.10
20 Events after the reporting period
This report for the period ended 31 December 2020 was approved
for issue on 3 March 2021. No material events have occurred between
the reporting date and the issue date that require disclosure under
IAS 10.
INDEPENT REVIEW REPORT TO HANSARD GLOBAL PLC
Conclusion
We have been engaged by the company to review the condensed
consolidated set of interim financial statements in the half year
report for the six months ended 31 December 2020 which comprises
Consolidated Statement of Comprehensive Income, Consolidated
Statement of Changes in Equity, Consolidated Balance Sheet,
Consolidated Cash Flow Statement and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
December 2020 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union
and the Disclosure Guidance and Transparency Rules ("the DTR") of
the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the latest annual financial statements
of the group were prepared in accordance with International
Financial Reporting Standards as adopted by the EU and the next
annual financial statements will be prepared in accordance with
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM1 1LA
Risk Based Solvency Capital
A) Risk Based Solvency capital position at 31 December 2020
The Group is subject to the Isle of Man (Insurance Group)
Supervision Regulations 2019.
It has adopted the default consolidated accounts method ("Method
1") to calculate the Group Solvency Capital Requirement ("SCR") and
Own Funds as required by these regulations. The solvency position
as at 31 December 2020 and 30 June 2020 have been reported below on
this basis. Previously, only the life companies within the Group
were subject to a risk based solvency regime. The inclusion of the
Group's non-insurance subsidiaries had the effect of increasing the
total Value of In-Force, Risk Margin and SCR.
The Group shareholder Risk Based Solvency surplus at 31 December
2020 was GBP63.8m (30 June 2020: GBP66.5m), before allowing for
payment of the 2021 interim dividend. All Risk Based Solvency and
related data presented in this section is subject to change prior
to submission to regulatory authorities.
31 Dec 30 June 31 Dec
Group Risk Based Solvency capital position 2020 2020 2019
Total Total Total*
GBPm GBPm GBPm
Own Funds 149.4 149.1 141.5
Solvency Capital Requirement 85.6 82.6 62.3
Surplus 63.8 66.5 79.2
Solvency ratio (%) 175% 180% 227%
Totals may differ due to rounding
* SCR and some components of Own Funds were only calculated for
life subsidiaries prior to introduction of the Group supervision
regime in the Isle of Man on 30 June 2020. For this reason, the
more relevant comparative figures are the 30 June 2020 reported
figures. The 31 December 2019 reported metrics were calculated on
the old basis and included for reference.
All Own Funds are considered Tier 1 capital.
The following table analyses the components of Own Funds:
31 Dec 30 June 31 Dec
2020 2020 2019
Own Funds Own Funds Own Funds*
GBPm GBPm GBPm
Value of In-Force 149.9 147.9 135.7
Risk Margin (29.7) (29.5) (22.2)
Net Worth 29.2 30.7 28.0
Total 149.4 149.1 141.5
* SCR and some components of Own Funds were only calculated for
life subsidiaries prior to introduction of the Group supervision
regime in the Isle of Man on 30 June 2020. For this reason, the
more relevant comparative figures are the 30 June 2020 reported
figures. The 31 December 2019 reported metrics were calculated on
the old basis and included for reference.
Own Funds slightly increased due to positive market impacts
outweighing dividend payments and investment in a new policy
administration system.
B) Analysis of movement in Group capital position
A summary of the movement in Group Risk Based Solvency surplus
from GBP66.5m at 30 June 2020 to GBP63.8m at 31 December 2020 is
set out in the table below.
Analysis of movement in Group shareholder surplus GBPm
Risk Based Solvency surplus at 30 June 2020 66.5
Operating experience 0.1
Investment performance 11.1
Changes in assumptions (2.2)
Dividends paid (3.6)
Foreign exchange (8.1)
Risk Based Solvency surplus at 31 December 2020 63.8
The movement in Group Risk Based Solvency surplus in the first
half of the 2021 financial year was the result of dividends paid
and adverse exchange rate movements, offset by positive investment
market performance.
New business written added GBP0.6m to the surplus for the
period.
C) Analysis of Group Solvency Capital Requirements
The analysis of the Group's Solvency Capital Requirement by risk
type is as follows:
Split of the Group's Solvency Capital Requirement* 31 Dec 30 June 31 Dec
2020 2020 2019
Risks % of SCR % of SCR % of SCR**
Market
Equity 51% 48% 49%
Currency 12% 12% 22%
Insurance
Lapse 45% 48% 47%
Expense 21% 21% 13%
Default 1% 1% 1%
Operational 14% 15% 14%
* Figures are the capital requirements prior to diversification
benefits expressed as a percentage of the final diversified
SCR.
** SCR was only calculated for life subsidiaries prior to
introduction of the Group supervision regime in the Isle of Man on
30 June 2020.
D) Reconciliation of IFRS equity to Group Risk Based Solvency
Shareholder Own
Funds
31 Dec 30 June 31 Dec
2020 2020 2019
GBPm GBPm GBPm***
IFRS shareholders' equity 25.1 25.9 26.3
Elimination of DOC (123.7) (122.3) (120.8)
Elimination of DIR 139.7 137.8 135.1
Value of In-Force 149.9 147.9 135.7
Liability valuation differences* (4.6) (4.7) (8.2)
Impact of risk margin (29.7) (29.5) (22.2)
Other** (7.3) (6.0) (4.4)
Risk Based Solvency Shareholder Own Funds 149.4 149.1 141.5
* Liability valuation differences relate to additional
provisions made for risk based capital purposes, notably for
contingent liabilities in 2020 and also non-linked reserves in
2019.
** Other is related to Intangible Assets not recognised on the
solvency balance sheet and some other accounting changes for IFRS
16 'Leases'.
*** SCR and some components of Own Funds were only calculated
for life subsidiaries prior to introduction of the Group
supervision regime in the Isle of Man on 30 June 2020.
E) Sensitivity analysis
The sensitivity of the Own Funds to significant changes in
market conditions is as follows:
Impact of market sensitivities 31 Dec 30 June 31 Dec
2020 2020 2019
Group Group Life Companies
GBPm GBPm GBPm
Own Funds 149.4 149.1 131.2
Impact of:
10% instantaneous fall in equity markets (10.1) (9.2) (6.8)
10% increase in expenses (9.1) (9.0) (5.0)
1% increase in expense inflation (7.4) (6.8) (3.5)
10% strengthening of sterling (9.0) (9.2) (6.0)
Contacts and Advisors
Registered Office Media Enquiries
Harbour Court Camarco
Lord Street 107 Cheapside
Box 192 London
Douglas EC2V 6DN
Isle of Man Tel: +44 (0)20 3757 4980
IM99 1QL
Tel: +44 (0)1624 688000
Fax: +44 (0)1624 688008
www.hansard.com
President Broker
Dr L S Polonsky, CBE Panmure Gordon (UK) Limited
Leonard.Polonsky@hansard.com One New Change
London
EC4M 9AF
Tel. +44 (0)20 7886 2500
Non-executive Chairman Registrar
G M Easton Link Market Services (Isle
Graeme.Easton@hansard.com of Man) Limited
Clinch's House
Lord Street
Douglas
Isle of Man
IM99 1RZ
Tel (UK): 0871 664 0300*
Tel: +44 (0)20 8639 3399
Financial Advisor
Macquarie Capital (Europe)
Limited
28 Ropemaker Street
London
EC2Y 9HD
Tel: +44 (0)20 3037 2000
Independent Auditor UK Transfer Agent
KPMG LLC Link Market Services Trustees
Heritage Court Limited
41 Athol Street The Registry
Douglas 34 Beckenham Road
Isle of Man Beckenham
IM1 1LA Kent
Tel: +44 (0)1624 681000 BR3 4TU
Tel (UK): 0871 664 0300*
Tel: +44 (0)20 8639 3399
* NB: 0871 Number - calls cost 12p per minute plus network
extras. If you are outside the United Kingdom, please
call +44 371 664 0300. Calls outside the United Kingdom
will be charged at the applicable international rate.
The helpline is open between 9.00 am - 5.30 pm, Monday
to Friday excluding public holidays in England and Wales.
Financial Calendar
Ex-dividend date for interim 11 March 2021
dividend 12 March 2021
Record date for interim dividend 20 April 2021
Payment date for interim dividend 6 May 2021
Third quarter trading update
Announcement of fourth quarter 22 July 2021
new 23 September 2021
business results
Announcement of full year results
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END
IR GZGGFRFDGMZM
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March 04, 2021 02:00 ET (07:00 GMT)
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