TIDMHSD

RNS Number : 6792M

Hansard Global plc

23 September 2021

23 September 2021

Hansard Global plc

Results for the year ended 30 June 2021

Profit and earnings per share up 9% and 13% respectively, dividend maintained

Hansard Global plc ("Hansard" or "the Group"), the specialist long-term savings provider, issues its results for the year ended 30 June 2021 ("FY 2021").

Summary

 
                                 FY 2021     FY 2020    % Change 
----------------------------  ----------  ----------  ---------- 
 New business sales - PVNBP 
  (1) basis                    GBP173.0m   GBP159.8m         +8% 
 IFRS profit before tax          GBP5.1m     GBP4.7m         +9% 
 Underlying profit               GBP6.8m     GBP6.2m        +10% 
 Recommended final dividend 
  per share (2)                    2.65p       2.65p   Unchanged 
 IFRS earnings per share            3.6p        3.2p        +13% 
----------------------------  ----------  ----------  ---------- 
 
 
 As at                             30 June      30 June 
                                      2021         2020 
-----------------------------  -----------  -----------  ----- 
 Assets under Administration     GBP1.22bn    GBP1.08bn   +13% 
 Value of In-Force               GBP145.8m    GBP147.9m    -1% 
-----------------------------  -----------  -----------  ----- 
 
   (1)   Present Value of New Business Premiums 
   (2)   Subject to approval at the AGM 

Graham Sheward, Group Chief Executive Officer, commented:

"I am pleased to present Hansard's full year results for the 2021 financial year. O ur new business, profit before tax and assets under administration were all up compared to FY 2020 despite the on-going challenges presented by Covid-19. I would like to thank all our employees and distribution partners for their hard work and resilience in delivering this result.

We have continued to make progress with our strategic initiatives although the launch of our proposition in Japan is subject to the lifting of the current Covid-related restrictions. Once these are lifted, we believe this initiative can deliver significant growth for the Group.

Given these results and our current financial outlook, we are delighted to be in a position to maintain our dividend in line with last year."

As previously announced, our new business levels were GBP173.0m on a Present Value of New Business Premiums ("PVNBP") basis, 8.3% higher than FY 2020. Each of our regions achieved positive growth as we saw increased levels of high net worth contributions being made.

TRADING RESULTS

IFRS profit before tax for the year was GBP5.1m, up 8.5% from GBP4.7m in FY 2020. Excluding litigation defence costs and other non-recurring provisions, underlying profit was GBP6.8m compared with GBP6.2m in FY 2020.

Fee and commission income was GBP50.5m for the year (FY 2020: GBP49.5m) as increased fee income in Hansard International offset lower fee income in Hansard Europe which continues to run-off since closing to new business in 2013.

Administrative expenses, exclusive of litigation and non-recurring items, were GBP22.5m (FY 2020: GBP23.0m). Investment in our Japanese branch was offset by prudent cost management across a range of areas.

VIF represents the present value of expected future shareholder profits less the present value cost of holding capital required to support the in-force business. VIF totalled GBP145.8m as at 30 June 2021 compared to GBP147.9m at 30 June 2020.

While positive on a marginal cost basis, New Business Margin calculated on an EEV basis was negative 0.5% for the year as compared to negative 0.1% in FY 2020. This was primarily due to business mix and changes in economic and operating assumptions. We expect the primary drivers for margin improvement to be a successful launch of our new product into the Japanese market and the cost savings that will follow the implementation of our new IT systems.

Strategy IMPLEMENTATION

During the past financial year, the primary focus has continued to be on our two most significant near-term strategic initiatives :

   --    Bringing to market our locally-licensed investment product in Japan; and 
   --    Upgrading and streamlining our administration systems and IT infrastructure. 

We have completed the internal development of our Japanese product. In order to launch with our first distribution partner, we are dependent on the Covid-19 restrictions in Japan being lifted. It is our strong intention to go to market before the end of 2021. We continue to expect this initiative to deliver significant growth in the 2022 financial year.

Our new systems are ready to on-board new business from the Japanese product and we continue to work on enabling it for our existing products and ultimately for a full migration by the end of 2022.

DIVIDS

The Board has proposed a final dividend of 2.65p per share, the same level as last year. The Board considers this a prudent decision in the current environment.

This dividend, if approved by the shareholders at the Annual General Meeting on 3 November 2021, represents a total dividend of 4.45p (2020: 4.45p) per share in respect of the financial year. Such dividend will be paid on 11 November 2021 to shareholders on the register on 1 October 2021. The associated ex-dividend date is 30 September 2021.

policyholder LITIGATION

The Group continues to manage carefully its litigation exposures relating to the legacy operations of Hansard Europe. We continue to believe we have strong defences against the claims being made.

Exposures from o utstanding writs were GBP22.7m at 30 June 2021 compared to GBP23.4m at 30 June 2020. Settlement provisions of GBP0.4m (2020: GBP0.1m) have been made as at 30 June 2021 where we expect to make settlements for lower value cases.

During the year, the Group successfully defended sixteen cases with net exposures of approximately GBP1.6m (2020: nine cases with net exposures of approximately GBP0.6m), ten of which have been appealed by the plaintiffs. These successes affirm confidence in the Group's legal arguments. Our policy is to maintain contingent liabilities even where we win cases in the court of first instance if such cases have been subsequently appealed.

CURRENT TRADING

New business levels to date in Q1 FY 2022 are broadly in line with those of the prior year . There have been no significant post balance sheet events to report.

NEXT TRADING UPDATE

The first trading update in respect of the year ending 30 June 2022 is expected to be published on 4 November 2021.

For further information:

Hansard Global plc +44 (0) 1624 688 000

Graham Sheward, Group Chief Executive Officer

Tim Davies, Chief Financial Officer

Email: investor-relations@hansard.com

Camarco +44 (0) 7990 653 341

Ben Woodford, Hugo Liddy

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 often 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 annual report as Chairman of Hansard Global plc ("Hansard" or "Group"). As mentioned at the half year, I wish to formally thank Philip Gregory for his previous chairmanship, leadership and guidance provided to the Group over the past 9 years.

In March our CEO, Gordon Marr, decided he wished to retire after a 33-year career with Hansard. I would like to similarly thank Gordon for his many years' service and commitment to the Group. Having overseen the successful acquisition of our licence in Japan, Gordon leaves Hansard well-positioned for the future. Our new CEO, Graham Sheward, joined us in May and is working well with me and the whole Board to build on Hansard's long-term legacy and deliver the next phase of the Group's development and growth.

I also welcome David Peach to our Board as an additional independent non-executive director and Chairman of our Audit Committee.

New business

New business for the 2021 financial year ("FY 2021") improved to GBP173.0m (in Present Value of New Business Premiums ("PVNBP") terms), up 8.3% from the FY 2020 figure of GBP159.8m.

This was a significant success given the continuing challenges of Covid-19 and associated restrictions on travel and meeting with customers and distribution partners. W e have seen Hansard's on-line model and ability to accept business electronically as a strong factor in maintaining new business levels .

Financial performance

Our IFRS profit before tax for the year was GBP5.1m, up from GBP4.7m in 2020.

Fees and commissions were up GBP1.0m to GBP50.5m for the year (2020: GBP49.5m), reflecting a number of factors, including strong growth in assets under management.

Origination costs to acquire new business were down GBP1.6m to GBP16.4m, reflecting strong cost control over our new business activities while significant uncertainty existed around the impact of Covid-19.

Administration costs were up GBP0.2m to GBP29.5m. This reflects our continued investment in our Japanese branch and in our project to replace our policy administration systems. We have sought to offset these additional costs by prudent cost control and savings in other areas.

Litigation defence activity continued to be active with significant costs incurred during the year, primarily in Italy, Belgium and Germany. These costs, together with provisions for future settlements, totalled GBP1.9m compared to GBP1.3m in 2020.

Further detail and analysis is contained in the Business and Financial Review.

Japan

As noted in our 2020 Annual Report, the key to significantly increased new business lies in our ability to take advantage of the opportunity we have developed in Japan.

During the 2021 financial year we concluded the development of our innovative new product for the Japanese market. This is ready to 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.

The product launch timing currently rests with our first distribution partner who has placed new product launches on hold until Covid-19 challenges in Japan have abated. We will announce any material progress in this area as details emerge.

Capitalisation and solvency

The Group remains well capitalised to meet the requirements of regulators, contract holders, intermediaries and other stakeholders. We have not required any government-backed financial support as a result of Covid-19, nor placed any staff on furlough.

On a risk-based capital basis, total Group Free Assets in excess of the Solvency Capital Requirements of the Group were GBP58.7m (2020: GBP66.5m), a coverage of 168% (2020: 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 many years and economic cycles.

Dividends

The Board has resolved to pay a final dividend of 2.65p per share (2020: 2.65p). In making this decision, the Board has carefully considered its current and future cash flows, the risks and potential variabilities introduced by Covid-19, the outlook for future growth and profitability and the views of key stakeholders, including regulators and shareholders.

The dividend is subject to approval at the Annual General Meeting. If approved, this will represent total dividends for the financial year of 4.45p per share (2020: 4.45p). Upon approval, the final dividend will be paid on 11 November 2021. The ex-dividend date will be 30 September 2021 and the record date will be 1 October 2021.

Graeme Easton

Chairman

22 September 2021

GROUP CHIEF EXECUTIVE OFFICER'S OVERVIEW

I was delighted to join Hansard in May of this year as Group Chief Executive Officer. In the past four months I have spent time getting to know and understand the current business, and the future opportunities that exist. I have enjoyed getting to know my new colleagues to understand their roles and contribution to the Company. In essence, the core product and distribution diversification strategy remains critical, whilst near and short-term organisation improvement initiatives are already underway. The key strategic projects the Group has already embarked upon will continue at pace and with significant focus on completion and execution, namely:

   --      launching our new locally-licenced investment product in Japan, and; 

-- replacing our policy administration systems to support our next generation of products and to secure significant cost and efficiency gains.

These projects will improve financial performance by growing revenues while at the same time reducing the cost of administering the business. Both of these projects have made positive progress during the past financial year despite the challenging operational environment.

Our new investment product has been operationally ready to launch in the Japanese market for some time with its launch currently delayed by virtue of the Covid-19 pandemic restrictions in force in Japan, which are outside of our control. We are therefore reliant on an improvement in the Coronavirus environment in Japan to go to market before the end of 2021, which is our strong intention.

Our new operating systems are in place to administer our Japanese product and we have moved on to the next stage of the project to migrate our existing products onto the new platform. We expect this Phase Two project to complete by the end of 2022.

RESULTS FOR THE YEAR UNDER REVIEW

We believe that the following areas are the fundamental factors for the success of the Group:

-- Diversification of our product and distribution channels to enable origination of significant flows of new business from identified target markets;

   --      Managing our exposure to business risks; 

-- Positioning ourselves to incorporate ever-increasing levels of regulation into our business model;

   --      Leveraging our market-leading technology and systems; and 

-- Managing our cash flows through the cycle to fund the appropriate balance of investment in new business and dividends.

I would draw your attention to the following items below. Additional information is contained in the Business and Financial Review.

   1.         New business distribution 

Despite a challenging year due to Covid-19, the level of new business earned during the full year was GBP173.0m (using the PVNBP metric), up 8.3% from GBP159.8m in FY 2020.

Our largest region, Middle East & Africa, proved resilient despite the challenges of Covid-19 with new business up 7.9%. Our Far East region was the fastest growing region, up 28% albeit from a smaller base.

In general, we have seen lower case volumes but of higher value being sold, particularly single premium products. This likely reflects the fact that higher net worth individuals have saved funds during the pandemic and continue to have investment and wealth management needs.

   2.         Operational, Business and Financial Risks 

Our business model involves the acceptance of a number of risks on a managed and controlled basis. 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 year under review.

   2.1        Litigation Risk 

As explained more fully in the Business and Financial Review, we continue to manage complaints and litigation arising from our closed-book, Hansard Europe, where the performance of assets linked to a particular contract have suffered or become illiquid. We continue to maintain that we do not give investment advice and are not party to the selection of assets and therefore believe that such claims have no merit.

As at 30 June 2021, the Group had been served with cumulative writs with a net exposure totalling GBP22.7m (2020: GBP23.4m), arising from contract holder complaints and other asset performance-related issues.

During the year, the Group successfully defended sixteen cases with net exposures of approximately GBP1.6m, ten of which have been appealed by the plaintiffs. These successes continue to affirm confidence in the Group's legal stance.

We have previously noted that we expect a number of larger claims to be covered by our Group insurance policy. During FY 2021 we recorded GBP0.5m in insurance recoveries. We expect such reimbursement to continue for these claims.

We continue to estimate overall insurance coverage to be in the range of GBP6m to GBP13m should those large cases be ruled against us.

   3.         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.

As noted in previous reports, we have embarked on a project to replace our core administration systems and ensure our infrastructure is future-proofed for our next generation of products and strategic development. Phase One of this project has been completed and delivered operational readiness for our Japanese product. The migration of our existing products is scheduled for completion by the end of 2022.

Additional information concerning Hansard OnLine is set out in the Business and Financial Review.

   4.         Operating cash flows and dividends 

The Group generates operating cash flows to fund investment in new business and support dividend payments.

As outlined in the Cash Flow analysis section of the Business and Financial Review, t he Group generated GBP3.6m in overall net cash inflows before dividends (2020: inflows of GBP2.1m), after the investment of GBP16.5m (2020: GBP19.1m) in acquiring new business and GBP3.8m (2020: GBP3.0m) in IT software and equipment expenditure. Dividends of GBP6.1m were paid in the financial year (2020: GBP6.0m).

A final dividend of 2.65p per share has been proposed by the Board and will be considered at the Annual General Meeting on 3 November 2021. When the final dividend is paid at this level, dividends will total 4.45p per share in respect of the full 2021 financial year.

FINANCIAL PERFORMANCE

Results for the year

Financial performance is summarised as follows. A detailed review of performance is set out in the Business and Financial Review that follows this report.

 
                                         FY 2021   FY 2020 
                                            GBPm      GBPm 
--------------------------------------  --------  -------- 
 New business sales - PVNBP                173.0     159.8 
 IFRS profit before tax                      5.1       4.7 
 Underlying IFRS profit                      6.8       6.2 
 Assets under Administration             1,224.2   1,080.5 
 Value of In-Force (regulatory basis)      145.8     147.9 
--------------------------------------  --------  -------- 
 

IFRS results

IFRS profit before tax for the year was GBP5.1m, up from GBP4.7m in 2020. After eliminating litigation and non-recurring items, the underlying IFRS profit (a non-GAAP metric used by management) was GBP6.8m, up from GBP6.2m in 2020.

Fees and commissions were GBP50.5m for the year (2020: GBP49.5m). Fees from Hansard International were up GBP1.3m to GBP47.5m from 2020, reflecting a number of factors, including strong growth in assets under management. Income from our closed book, Hansard Europe, has continued to fall, as expected, and is GBP0.3m down on the prior year.

Administrative and other expenses were GBP29.5m for the year, slightly up on the 2020 level of GBP29.3m. This reflects our continued investment in our Japanese branch and in our project to replace our policy administration systems. We have sought to offset these additional costs by prudent cost control and savings in other areas.

Origination costs to acquire new business were down GBP1.6m to GBP16.4m, reflecting strong cost control over our new business activities while significant uncertainty existed around the impact of Covid-19.

Further detail and analysis is contained in the Business and Financial Review.

Capitalisation and solvency

Our 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 continues to be well capitalised.

Under risk-based capital methodologies, total Group Free Assets in excess of the Solvency Capital Requirements of our insurance subsidiaries were GBP59.2m (2020: GBP66.5m), a coverage of 168% (2020: 180%). Shareholder assets are typically held in a wide range of deposit institutions and in highly-rated money market liquidity funds. This prudent investment policy for shareholder assets minimises market risk and has provided a stable and resilient solvency position over recent years.

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 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, Hansard was awarded "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.

Covid-19

Our business has continued to operate during the Covid-19 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 concluded that temporary concessionary period and while we saw some additional contracts lapsing, the overall impact was not material.

We have also not encountered any material financial concerns with our IFA relationships and have therefore been in a position to write back the GBP0.2m provision we made at 30 June 2020.

Graham Sheward

Group Chief Executive Officer

22 September 2021

Our Business Model and Strategy

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 in secure life assurance 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.

Business Model

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 is regulated by the Isle of Man Financial Services Authority and has a branch in Malaysia, regulated by the Labuan Financial Services Authority, to support business flows from Asian growth economies. Through its relationship with a local insurer in the UAE, Hansard International reinsures business written in the UAE.

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 provide local language-based support services to financial advisors in key territories around the world, supported by our multi-language online platform, Hansard OnLine.

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 actively consider new and 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.

Strategy DEVELOPMENT

Our strategy team, led by Ollie Byrne our Commercial Director, has three main aims:

   i)          to capitalise on near term strategic opportunities; 

ii) to ensure the Group is correctly positioned for future regulatory developments and change; and

   iii)         to consider and plan for longer term industry and technological evolution. 

During the past financial year the primary focus has been on delivering our two most significant near-term strategic initiatives:

   --      bringing to market our locally-licensed investment product in Japan; and 
   --      upgrading and streamlining our systems and IT infrastructure. 

We are operationally ready with our Japanese product. We intend to launch with our first distribution partner on our new policy administration system when Covid-19 restrictions in Japan are relaxed. Completion of the IT implementation and migration is scheduled by the end of 2022.

Regulatory change

The Isle of Man Financial Services Authority (the "Authority") remains committed to maintaining a robust and up to date insurance supervisory framework appropriate to the Island's insurance businesses.

The Island's reputation as a well-regulated and internationally responsible jurisdiction is of vital importance to maintaining consumer confidence and therefore market share. The international standards applicable to effective insurance supervision are the Insurance Core Principles (ICPs), issued by the International Association of Insurance Supervisors (IAIS). The ICPs emphasise the need for insurers and regulators to understand the nature and degree of risks assumed and provide for them appropriately thus addressing financial stability risks with the ultimate aim of protecting the interests of consumers and wider stakeholders.

The Authority has continued its work to revise the framework for insurance regulation and supervision and maintain a high level of observance with the IAIS Insurance Core Principles. The Authority has sought to develop and implement these revisions in a way which is appropriate and proportionate for the Isle of Man's diverse insurance sector whilst promoting regulatory best practice and preserving the continued reputation of the Isle of Man as a stable and well-regulated jurisdiction.

Major milestones have already been enacted with the implementation of new risk-based capital corporate governance, enterprise risk management, conduct of business requirements and a Group Supervision regime.

We have continued our work to adapt the Hansard model and our strategic and business plans in line with the intent and objectives of the regulatory changes, working transparently with our regulators to shape the practical implementation of the Authority's roadmap and embed associated changes. The Group continues to monitor developments in our other regulatory jurisdictions.

Products

The Group's products are unit-linked regular or single premium life assurance and investment contracts which offer access to a wide range of investment assets. The contracts are flexible, secure and held within "wrappers" allowing life assurance cover or other features depending upon the needs of the client. The contract benefits are directly linked to the value of those assets that are selected by, or on behalf of, the client and held within the wrapper. The Group does not offer investment advice. Contract holders bear the investment risk.

The Group's products do not include any contracts with financial options and/or guarantees regarding investment performance and, hence, unlike the situation faced by some other life assurers, the Group carries no guarantee risk that can cause capital strain.

As a result of high levels of service, the nature of the Group's products, the functionality of Hansard OnLine, and the ability of the contract holder to reposition assets within a contract, we aim to retain the contract holder relationship over the long term.

Contract holder servicing and related activities are performed by Hansard Administration Services Limited, which is authorised by the Financial Services Authority of the Isle of Man Government to act as an Insurance Manager to insurance subsidiaries of the Group.

Revenues

The main sources of income for the Group are the fees earned from the administration of insurance contracts. These fees are largely fixed in nature and amount. Approximately 30% of the Group's revenues, under IFRS, are based upon the value of assets under administration. The new business generated in a particular year is expected to earn income for an average period of 14 years. Our business is therefore long term in nature both from a contract holder perspective and with regards to the income that is generated.

From this income we meet the overheads of the business, invest in our business, remunerate our distribution network and pay dividends.

Managing Risk

Risk can arise from a combination of macro events and company specific matters. On the macro side, events such as the UK exit from the EU, terrorist attacks, pandemics and geo-political tensions can cause significant volatility to stock markets and foreign exchange markets. We therefore continue to maintain a robust, low risk balance sheet. We believe this prudent approach to be appropriate to meet the requirements of regulators, contract holders, intermediaries and shareholders.

We are conscious that managing operational risk is critical to our business and we are continuously developing our enterprise risk management system and controls. Further details of our approach to risk management and the principal risks facing the Group are outlined in the Risk Management and Internal Control Section.

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, more efficient and cost-effective 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.

Continuous Improvements to our Online Proposition

When it comes to improving how we operate and the proposition we offer, we value the views of our clients and IFAs. This means that we regularly seek feedback through surveys and office visits in order to identify ways in which we can improve our systems and processes to best meet their needs. However, it is not just functionality that is important, we also have a continuous programme to enhance the overall user experience, for both IFA's and our clients.

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.

Excellent Customer Service

We strive to provide excellent customer service and turn-around times to our clients and our IFA community. We have won a number of external awards in this area over the years, most recently i n October 2020 when 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.

Key performance indicators

The Group's senior management team monitors a wide range of Key Performance Indicators, both financial and non-financial, that are designed to ensure that performance against targets and expectations across significant areas of activity are monitored and variances explained.

The following is a summary of the key indicators that were monitored during the financial year under review.

 
 New Business - The Group's internal indicator of calculating 
  new business production, Compensation Credit ("CC") reflects 
  the amount of base commission payable to intermediaries. Incentive 
  arrangements for intermediaries and the Group's Account Executives 
  incorporate targets based on CC (weighted where appropriate). 
  New business levels are reported daily and monitored weekly against 
  target levels. Compensation credit was down GBP0.7m compared 
  to 2020 due to the impact of Covid-19 on sales activity. Growth 
  i nitiatives in 2022 will focus on commercialising the opportunity 
  in Japan where significant upside exists. 
 Administrative Expenses (excl. litigation and non-recurring 
  items) - The Group maintains a rigorous focus on expense levels 
  and the value gained from such expenditure. The objective is 
  to develop processes to restrain increases in administrative 
  expenses to the rates of inflation assumed in the charging structure 
  of the Group's policies. 
 
  The Group's administrative and other expenses for the year (excl. 
  litigation and non-recurring items) were GBP22.5m compared to 
  GBP23.0m in the previous year. 
 Cash - Bank balances and significant movements on balances are 
  reported monthly. The Group's cash and deposits at the balance 
  sheet date were GBP63.5m (2020: GBP60.8m). Movements are reflective 
  of cash earned from new and existing business, commissions and 
  expenses paid and the level of dividends paid to shareholders. 
 Business continuity - Maintenance of continual access to data 
  is critical to the Group's operations. This has been achieved 
  throughout the year through a robust infrastructure. The Group 
  is pro-active in its consideration of threats to data, data security 
  and data integrity. Business continuity and penetration testing 
  is carried out regularly by internal and external parties. Business 
  continuity was further evidenced by successful switches to remote-working 
  at various points throughout the financial year due to the Covid-19 
  pandemic. 
 Risk profile - The factors impacting on the Group's risk profile 
  are kept under continual review. Senior management review operational 
  risk issues at least monthly. The significant risks faced by 
  the Group are summarised later in this Strategic Report. 
 

business AND FINANCIAL REVIEW

NEW BUSINESS PERFORMANCE FOR THE YEARED 30 JUNE 2021

The Group continues to focus on the distribution of regular and single premium products in a range of jurisdictions around the world, achieving well diversified new business growth.

New business performance for the year is summarised in the table below:

 
                                   2021    2020        % 
 Basis                             GBPm    GBPm   change 
-------------------------------  ------  ------  ------- 
 Present Value of New Business 
  Premiums                        173.0   159.8     8.3% 
 Annualised Premium Equivalent     23.1    24.0   (3.7%) 
-------------------------------  ------  ------  ------- 
 

In Present Value of New Business Premiums ("PVNBP") terms, new business for the year to 30 June 2021 was GBP173.0m, 8.3% up on the prior year.

The Annualised Premium Equivalent ("APE") measure shows a decline of 3.7% from 2020. The year on year change for APE is lower than PVNBP as it does not take into account the more detailed experience assumptions for regular premiums that are accounted for within the PVNBP methodology.

In general we have seen lower case count levels but higher value cases being sold, particularly single premiums. This likely reflects the fact that higher net worth individuals have saved funds during the pandemic and continue to have investment and wealth management needs.

Present Value of New Business Premiums ("PVNBP")

New business flows on the PVNBP basis for the Group are further analysed as follows:

 
                            2021    2020        % 
 PVNBP by product type      GBPm    GBPm   change 
------------------------  ------  ------  ------- 
 Regular premium           109.6   102.0     7.5% 
 Single premium             63.4    57.8     9.7% 
------------------------  ------  ------  ------- 
 Total                     173.0   159.8     8.3% 
------------------------  ------  ------  ------- 
 
                            2021    2020        % 
 PVNBP by region            GBPm    GBPm   change 
------------------------  ------  ------  ------- 
 Middle East and Africa     68.3    63.3     7.9% 
 Rest of World              50.7    48.5     4.5% 
 Latin America              40.3    37.3     8.0% 
 Far East                   13.7    10.7    28.0% 
------------------------  ------  ------  ------- 
 Total                     173.0   159.8     8.3% 
------------------------  ------  ------  ------- 
 

Our largest region, Middle East and Africa, rose 7.9% for the year. This is reflective of the Middle East emerging comparatively well from Covid-19 and the successful acquisition of a number of high net worth single premium policies.

The level of new business from the Rest of World region was up 4.5%, supported by higher value regular premium policies.

New business in Latin America rose by 8.0% despite experiencing some of the most challenging global Covid-19 conditions. Again, this was driven by higher value single and regular premium policies.

New business in the Far East rebounded significantly from the lower levels seen last year and the earlier part of this financial year.

The currencies premiums were received in remained relatively consistent, with the predominant currency being US Dollars:

 
                                               2021   2020 
 Currency denominations (as a percentage of       %      % 
  PVNBP) 
--------------------------------------------  -----  ----- 
 US dollar                                       81     82 
 Sterling                                        15     15 
 Euro                                             4      2 
 Other                                            0      1 
--------------------------------------------  -----  ----- 
                                                100    100 
--------------------------------------------  -----  ----- 
 

New business margins

New business margins (calculated on a PVNBP basis) are sensitive to sales levels and product mix (regular premium products and smaller single premium sizes typically have a higher margin). While positive on a marginal cost basis, our new business margin was a negative 0.5% for the year (2020: negative 0.1%) . The deterioration was primarily due to changes in business mix, changes in economic assumptions and changes in operating assumptions. We expect the primary catalyst for margin improvement to be a successful launch of our new product into the Japanese market in the 2022 financial year.

Presentation of financial results

Our business is long term in nature. The nature of the Group's products means that new business flows have a limited immediate impact on current earnings reported under International Financial Reporting Standards as adopted by the European Union ("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.

Results for the year

The following is a summary of key items to allow readers to better understand the results for the year. IFRS profit before tax for the year was GBP5.1m, up from GBP4.7m in 2020.

Operating profit prior to litigation and non-recurring items was GBP6.8m in 2021, up from GBP6.2m in 2020.

Abridged consolidated income statement

The consolidated statement of comprehensive income presented under IFRS reflects the financial results of the Group's activities during the year. This income statement however, as a result of its method of presentation, incorporates a number of features that might affect an understanding of the results of the Group's underlying transactions. These relate principally to:

-- Investment gains attributable to contract holder assets were GBP163.8m (2020: GBP0.1m). These assets are selected by the contract holder or an authorised intermediary and the contract holder bears the investment risk. They 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 2021 these were GBP5.3m (2020: GBP4.8m). These are reflected on a gross basis in both income and expenses under the IFRS presentation.

An abridged non-GAAP consolidated income statement in relation to the Group's own activities is presented below, excluding the items of income and expenditure indicated above.

 
                                                      2021     2020 
                                                      GBPm     GBPm 
-------------------------------------------------  -------  ------- 
 Fees and commissions attributable to Group 
  activities                                          45.2     44.7 
 Investment and other income                           0.5      2.5 
-------------------------------------------------  -------  ------- 
                                                      45.7     47.2 
 Origination costs                                  (16.4)   (18.0) 
 Administrative and other expenses attributable 
  to the Group, before 
 litigation and non-recurring items                 (22.5)   (23.0) 
-------------------------------------------------  -------  ------- 
 Operating profit for the year before litigation 
  and non-recurring items                              6.8      6.2 
 Litigation and non-recurring expense items          (1.7)    (1.5) 
-------------------------------------------------  -------  ------- 
 Profit for the year before taxation                   5.1      4.7 
 Taxation                                            (0.2)    (0.2) 
-------------------------------------------------  -------  ------- 
 Profit for the year after taxation                    4.9      4.5 
-------------------------------------------------  -------  ------- 
 

Fees and commissions

Fees and commissions for the year attributable to Group activities were GBP45.2m, up 1.3% on the 2020 total of GBP44.7m.

Contract fee income totalled GBP32.2m for the year (2020: GBP32.2m). C ontract fee income includes the amortised element of up-front income deferred under IFRS and contract-servicing charges. Amortisation of deferred income was broadly similar to the prior year, whilst immediately recognised fees, including surrender charges, have increased compared to the prior year. The continuing run-off of Hansard Europe which closed to new business in 2013 resulted in lower contract fee income of GBP0.3m compared to 2020.

Fund management fees accruing to the Group and commissions receivable from third parties totalling GBP8.3m (2020: GBP7.9m) are related directly to the value of assets under administration and are therefore exposed to market movements, currency rates and valuation judgements. With positive performance from global stock markets, average assets under management for 2021 were higher than 2020.

A summary of fees and commissions is set out below:

 
                                                         2021   2020 
                                                         GBPm   GBPm 
--------------------------------------------  ---------------  ----- 
 Contract fee income                                     32.2   32.2 
 Fund management fees accruing to the Group               8.3    7.9 
 Commissions receivable                                   4.7    4.6 
--------------------------------------------  ---------------  ----- 
                                                         45.2   44.7 
--------------------------------------------  ---------------  ----- 
 

Included in contract fee income is GBP16.7m (2020: GBP17.0m) representing the amortisation of fees prepaid in previous years, as can be seen in the analysis set out below:

 
                                                2021   2020 
                                                GBPm   GBPm 
---------------------------------------------  -----  ----- 
 Amortisation of deferred income                16.7   17.0 
 Income generated and earned during the year    15.5   15.2 
---------------------------------------------  -----  ----- 
 Contract fee income                            32.2   32.2 
---------------------------------------------  -----  ----- 
 

Investment and other income

Historically low UK and US interest rates continue to result in modest levels of interest income earned on the Group's deposits and money market funds.

 
                                                    2021   2020 
                                                    GBPm   GBPm 
------------------------------------------------  ------  ----- 
 Bank interest and other income receivable           1.4    2.3 
 Foreign exchange (losses)/gains on revaluation 
  of net operating assets                          (0.9)    0.2 
------------------------------------------------  ------  ----- 
                                                     0.5    2.5 
------------------------------------------------  ------  ----- 
 

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 anticipated life of that contract to match the longer-term income streams expected to accrue from the contracts issued this year. Typical terms range between 6 years and 16 years, depending on the nature of the product. Other elements of the Group's new business costs, for example recruitment costs, which reflect investment in distribution resources in line with our strategy, are expensed as incurred.

Origination costs incurred in 2021 have decreased as a result of less business being reinsured from the UAE which incurs a higher cost of acquisition and the cancellation of the majority of sales-related travel and promotional events due to Covid-19.

 
                                                  2021    2020 
                                                  GBPm    GBPm 
----------------------------------------------  ------  ------ 
 Origination costs - deferred to match future 
  income streams                                  16.9    18.9 
 Origination costs - expensed as incurred          2.3     3.4 
----------------------------------------------  ------  ------ 
 Investment in new business in year               19.2    22.3 
 Net amortisation of deferred origination 
  costs                                          (2.8)   (4.3) 
----------------------------------------------  ------  ------ 
                                                  16.4    18.0 
----------------------------------------------  ------  ------ 
 

Amounts totaling GBP14.1m (2020: GBP14.6m) have been expensed to match contract fee income earned this year from contracts issued in previous financial years, as can be seen in the analysis below.

Summarised origination costs for the year were:

 
                                                2021    2020 
                                                GBPm    GBPm 
---------------------------------------------  -----  ------ 
 Amortisation of deferred origination costs     14.1    14.6 
 Other origination costs incurred during the 
  year                                           2.3     3.4 
---------------------------------------------  -----  ------ 
                                                16.4    18.0 
---------------------------------------------  -----  ------ 
 

Administrative and other expenses

We continue to manage our expense base robustly to control administrative expenses while supporting our strategic developments and other new business growth activities with targeted expenditure.

An analysis of administrative and other expenses is set out in notes 8 and 9 to the consolidated financial statements under IFRS. The following summarises some of the expenses attributable to the Group's own activities.

 
                                                  2021   2020 
                                                  GBPm   GBPm 
----------------------------------------------  ------  ----- 
 Administrative salaries and other employment 
  costs                                           11.0   10.6 
 Other administrative expenses                     8.0    7.7 
 Professional fees, including audit                2.6    2.9 
----------------------------------------------  ------  ----- 
 Recurring administrative and other expenses      21.6   21.2 
 Growth investment spend                           0.9    1.8 
----------------------------------------------  ------  ----- 
 Administrative and other expenses, excl. 
  litigation and non-recurring expense items      22.5   23.0 
 Litigation defence and settlement costs           1.9    1.3 
 Provision for doubtful debts in respect 
  of broker balances                             (0.2)    0.2 
 Total administrative and other expenses          24.2   24.5 
----------------------------------------------  ------  ----- 
 

Salaries and other employment costs have increased by GBP0.4m or 4% to GBP11.0m, reflecting the expansion of headcount in our Japan branch and the costs of short-term contractors supporting our systems project. Cost inflation was contained by not awarding any inflation-based salary increases during the year.

The average Group headcount for the 2021 financial year was 191 people (2020: 192 people).

Other administrative expenses increased from GBP7.7m to GBP8.0m. During the year there were additional lease costs arising from our move of head office premises and non-capitalised IT expenditure associated with our systems project.

Professional fees including audit are down a further GBP0.3m (2020: GBP0.3m) as a result of a savings programme which was commenced in 2019. These costs include amounts totalling GBP0.4m paid to the Group's auditor (2020: GBP0.5m); GBP0.5m (2020: GBP0.6m) for administration, custody, dealing and other charges paid under the terms of the investment processing outsourcing arrangements; recruitment costs of GBP0.1m (2020: GBP0.2m), costs of investor relations activities of GBP0.2m (2020: GBP0.2m) and general legal and professional fees of GBP1.4m (2020: GBP1.3m).

Growth investment spend represents internal and external strategic costs to generate opportunities for growth. This includes the costs of our strategy team and costs associated with developing our Japanese proposition which have reduced in the current year as the project has neared conclusion

Litigation defence and settlement costs represent those costs (net of insurance recoveries) incurred in defending Hansard Europe against writs taken against it, as described more fully in note 25 to the consolidated financial statements. At 30 June 2021, a provision of GBP0.4m has been made for expected future settlements.

Provision for doubtful debts relate to amounts due from brokers which are deemed to be irrecoverable. The GBP0.2m provided for in 2020 represented an estimate due to increased risk perceived for brokers who may not be in a financial position to repay upfront commissions on lapsed business due to Covid-19. This risk did not crystalise in 2021 and therefore has been released.

Cash Flow ANALYSIS

The operational cash surplus (fees deducted from contracts and commissions received, less operational expenses paid) for the year was GBP23.8m (2020: GBP22.7m). Operating cash flows have increased this year as a result of the increase in fee income levels and lower acquisition costs.

Writing new business, particularly regular premium business, produces a short-term cash strain as a result of the commission and other costs incurred at the inception of a contract. Annual management charges offset this strain and produce a positive return over time.

Future increases in new business levels can be funded where necessary by the Group's significant cash resources, but over time as the level of contract holder assets is built up, the annual management charges that are earned from the Group's newer products will become sufficient to sustain new business growth and dividends.

During 2021, the Group invested GBP3.3m (2020: GBP2.9m) as part of a project to replace its administration systems. These costs are capitalised as computer software on the Group's consolidated balance sheet. In addition, GBP0.5m was incurred as part of the Group's move to its new head office.

The following non-GAAP tables summarise the Group's own cash flows in the year. Overall Group cash and deposits have increased from GBP60.8m at 30 June 2020 to GBP63.5m at 30 June 2021.

 
                                                  2021     2020 
                                                  GBPm     GBPm 
---------------------------------------------  -------  ------- 
 Net cash surplus from operating activities       23.8     22.7 
 Interest received                                 0.4      1.6 
---------------------------------------------  -------  ------- 
 Net cash inflow from operations                  24.2     24.3 
 Net cash investment in new business            (16.5)   (19.1) 
 Purchase of property and computer equipment     (3.8)    (3.0) 
 Corporation tax paid                            (0.3)    (0.1) 
 Net cash inflow before dividends                  3.6      2.1 
 Dividends paid                                  (6.1)    (6.0) 
---------------------------------------------  -------  ------- 
 Net cash outflow after dividends                (2.5)    (3.9) 
---------------------------------------------  -------  ------- 
 
 
 
                                                        2021        2020 
                                                        GBPm        GBPm 
------------------------------------------------  ----------  ---------- 
 Net cash outflow after dividends                      (2.5)       (3.9) 
 Increase/(decrease) in amounts due to contract 
  holders                                                3.6       (0.2) 
------------------------------------------------  ----------  ---------- 
 Net Group cash movements                               1.1        (4.1) 
 Group cash and deposits - opening position             60.8        65.3 
 Effect of exchange rate movements                       1.6       (0.4) 
 Group cash and deposits - closing position             63.5        60.8 
------------------------------------------------  ----------  ---------- 
 

Group bank deposits and money market funds

The Group holds its liquid assets in highly-rated money market liquidity funds and with a wide range of deposit institutions to minimise market risk. Deposits totalling GBP6.8m (2020: GBP21.2m) have original maturity dates typically greater than 3 months and are therefore excluded from the definition of "cash and cash equivalents" under IFRS and are instead included within 'Deposits and money market funds' in the consolidated balance sheet. The following table summarises the total shareholder cash and deposits at the balance sheet date.

 
                                                  2021   2020 
                                                  GBPm   GBPm 
-----------------------------------------------  -----  ----- 
 Money market funds and immediately available 
  cash                                            52.6   35.0 
 Short-term deposits with credit institutions      4.1    4.6 
-----------------------------------------------  -----  ----- 
 Cash and cash equivalents under IFRS             56.7   39.6 
 Longer-term deposits with credit institutions     6.8   21.2 
 Group cash and deposits                          63.5   60.8 
-----------------------------------------------  -----  ----- 
 

Abridged consolidated balance sheet

The consolidated balance sheet presented under IFRS reflects the financial position of the Group at 30 June 2021. 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 GBP1,224.2m (2020: GBP1,080.5m). 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.

 
                                          2021    2020 
                                          GBPm    GBPm 
--------------------------------------  ------  ------ 
 Assets 
 Deferred origination costs              125.1   122.3 
 Other assets                             15.2    15.0 
 Bank deposits and money market funds     63.5    60.8 
--------------------------------------  ------  ------ 
                                         203.8   198.1 
--------------------------------------  ------  ------ 
 Liabilities 
 Deferred income                         142.5   137.8 
 Other payables                           36.6    34.4 
--------------------------------------  ------  ------ 
                                         179.1   172.2 
--------------------------------------  ------  ------ 
 Net assets                               24.7    25.9 
--------------------------------------  ------  ------ 
 Shareholders' equity 
 Share capital and reserves               24.7    25.9 
--------------------------------------  ------  ------ 
 

Deferred origination costs

The deferral of origination costs 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 movement in value over the financial year is summarised below.

 
                                                  2021     2020 
 Carrying value                                   GBPm     GBPm 
---------------------------------------------  -------  ------- 
 At beginning of financial year                  122.3    118.0 
 Origination costs deferred during the year       16.9     18.9 
 Origination costs amortised during the year    (14.1)   (14.6) 
---------------------------------------------  -------  ------- 
                                                 125.1    122.3 
---------------------------------------------  -------  ------- 
 

Deferred income

The treatment of deferred income ensures that contract 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 year relates 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 financial year is summarised below.

 
                                               2021     2020 
 Carrying value                                GBPm     GBPm 
------------------------------------------  -------  ------- 
 At beginning of financial year               137.8    133.2 
 Initial fees collected in the year and 
  deferred                                     21.4     21.6 
 Income amortised during the year to fees 
  income                                     (16.7)   (17.0) 
------------------------------------------  -------  ------- 
                                              142.5    137.8 
------------------------------------------  -------  ------- 
 

CONTRACT HOLDER Assets under administration

In the following paragraphs, contract holder assets under administration ("AuA"), refers to net assets held to cover financial liabilities, as analysed in note 17 to the 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 withdrawals, charges, premium holidays affecting regular premium policies and by market valuation movements.

The majority of premium contributions are designated in currencies other than sterling, reflecting the wide geographical spread of those contact holders. The currency composition of AuA at the balance sheet date is similar to that as at 30 June 2020, with 68% of AuA designated in US dollar (2020: 67%) and 10% in euro (2020: 11%).

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 value of AuA at 30 June 2021 was GBP1,224.2m, up 13.3% from 30 June 2020. During 2021, significant gains were achieved as a result of positive global stock markets, offset by a weaker US dollar versus sterling. The following table summarises the movements in the year:

 
                                                                        2021      2020 
                                                                        GBPm      GBPm 
-----------------------------------------  ---------------------------------  -------- 
 Deposits to investment contracts - 
  regular premiums                                                      84.7      85.8 
 Deposits to investment contracts - 
  single premiums                                                       64.1      57.2 
 Withdrawals from contracts and charges                              (167.2)   (142.3) 
 Effect of market and currency movements                               162.1       0.1 
-----------------------------------------  ---------------------------------  -------- 
 Movement in year                                                      143.7       0.8 
 Opening balance                                                     1,080.5   1,079.7 
-----------------------------------------  ---------------------------------  -------- 
 Closing balance                                                     1,224.2   1,080.5 
-----------------------------------------  ---------------------------------  -------- 
 

The analysis of AuA held by each Group subsidiary to cover financial liabilities is as follows:

 
                                    2021      2020 
 Fair value of AuA at 30 June       GBPm      GBPm 
------------------------------  --------  -------- 
 Hansard International           1,134.8     986.5 
 Hansard Europe                     89.4      94.0 
------------------------------  --------  -------- 
                                 1,224.2   1,080.5 
------------------------------  --------  -------- 
 

Assets acquired by Hansard Worldwide are administered by 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 contracts are surrendered or mature.

DIVIDS

An interim dividend of 1.8p per share was paid in April 2021. This amounted to GBP2.5m.

The Board has considered the results for the full year ended 30 June 2021, the Group's continued cash flow generation and its future expectations and has resolved to pay a final dividend of 2.65p per share (2020: 2.65p). Subject to approval at the AGM, this dividend will be paid on 11 November 2021.

complaints and litigation

In valuation issues such as those referred to above, financial services institutions can be drawn into disputes in cases where the performance of assets selected directly by or on behalf of contract holders through their advisors fails to meet their expectations. This is particularly relevant in the case of more complex products distributed throughout 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.

As at 30 June 2021, the Group had been served with cumulative writs with a net exposure totalling EUR26.5m, or GBP22.7m in sterling terms (30 June 2020: EUR25.8m / GBP23.4m) arising from contract holder complaints and other asset performance-related issues. All such writs relate to historic business written by Hansard Europe prior to its closure to new business in 2013. The increased exposure since 30 June 2020 was driven by a reduction in the fair value of investment assets backing the claims.

During the year, the Group successfully defended sixteen cases with net exposures of approximately GBP1.6m, ten of which have been appealed by the plaintiffs (2020: successfully defended nine cases with net exposures of GBP0.6m). These successes continue to affirm confidence in the Group's legal arguments.

Our policy is to maintain contingent liabilities even where we win cases in the court of first instance if such cases have been subsequently appealed. This includes our largest single case in Belgium.

We have previously noted that we expect a number of our larger claims to ultimately be covered by our Group insurance cover. During FY 2021 we recorded GBP0.5m in insurance recoveries. We expect such reimbursement to continue during the course of those claims.

As a result we also expect that a significant amount of the GBP22.7m of 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.

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 25 to the consolidated financial statements. Where there is an established pattern of settlement for a grouping of claims, a provision has been made for the remaining exposures and included in note 19 'Other Payables'.

Net asset value per shaRE

The net asset value per share on an IFRS basis at 30 June 2021 is 17.9p (2020: 18.8p) based on the net assets in the Consolidated Balance Sheet divided by the number of shares in issue, being 137,557,079 ordinary shares (2020: 137,557,079).

Risk management and internal control

The Group is naturally exposed to both existing and emerging internal and external risks as it pursues its strategic and business objectives. All such risks, are managed as part of the corporate model via the governance, risk management and internal control arrangements which constitute the ERM Framework. This has never been more clearly demonstrated than via the unprecedented circumstances and associated challenges presented by the Covid-19 pandemic, which continued to dominate the landscape throughout the reporting period, presenting societal, economic and corporate level impacts, which manifested at macro and micro levels around the world.

The Group ERM Framework has remained central to the Board's ability to take swift, decisive and informed decisions in response to the range of possible risks which the pandemic presented to the Group, its employees, customers and wider stakeholder groups. Pandemic-specific business resilience planning and the inherent strength of the Group's systems infrastructure have continued to support smooth and stable remote working arrangements, which have remained robust and resilient throughout the various periods of 'lockdown' which have taken effect locally and at international levels.

Risk metrics and key performance indicators, targeted to identify and assess both prudential and conduct elements of the principal and subordinate risk universe, have remained under scrutiny, together with those via which the broader risk spectrum is monitored and managed. These metrics have supported continuous monitoring of operational resilience, stakeholder impacts and the potential consequences of market volatilities, together with 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, as necessary and appropriate.

Approach

Having regard to the Financial Reporting Council's 'Guidance on Risk Management, Internal Control and Related Financial and Business Reporting', the ERM Framework 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 continuous compliance with applicable laws and regulations as well as with internal policies governing 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.

The Board of Hansard Global plc ("the Board") has overall responsibility for the effective operation of the ERM Framework and the Directors retain responsibility for determining, evaluating and controlling the nature and extent of the risks which the Board is willing to accept across the spectrum of risk types, taking account of varying levels of strategic, financial and operational stresses, potential risk scenarios and emerging as well as existing risk exposures. This approach ensures that risk appetite remains an integral element of decision-making by both the Board and the Executive Management Team, including in the setting of strategy, ongoing business planning and business change initiatives.

The ERM Framework has been designed to be appropriate to the nature, scale and complexity of the Group's business at both corporate and subsidiary level. The Framework components are reviewed on at least an annual basis and refined, if necessary, to ensure they remain fit for purpose in substance and form and continue to support the Directors' assessment of the adequacy and effectiveness of the Group's risk management and internal control systems. Such assessment depends upon the Board maintaining a thorough understanding of the Group's risk profile, including the types, characteristics, interdependencies, sources and potential impact of both existing and emerging risks on an individual and aggregate basis. The disciplines of the ERM Framework seek to coordinate risk management in respect of the Group as a whole, including for the purpose of ensuring compliance with capital adequacy requirements, liquidity adequacy requirements and regulatory capital requirements, in line with the Isle of Man Financial Services Authority's risk-based capital regime.

Governance, risk management and internal control protocols remain structured upon a 'three lines' model, which determines how specific duties and responsibilities are assigned and coordinated. Front line management are responsible for identifying risks, executing effective controls and escalating risk issues and events to the Group's Control Functions. The Group Risk and Compliance teams oversee and work in collaboration with the First Line, ensuring that functions and operations are consistent with rules, limits and risk appetite constraints. The Group Internal Audit Department provides independent assurance services to the Board and Executive Management Team on the adequacy and effectiveness of the Group's governance, risk management and internal control arrangements.

The ERM Framework seeks to add value through embedding risk management and effective internal control systems as continuous and developing processes within strategy setting, programme level functions and day-to-day operating activities. The ERM Framework also acknowledges the significance of organisational culture and values in relation to risk management and their impact on the overall effectiveness of the internal control framework.

Emerging Risks

The ERM Framework promotes the pursuit of its overarching performance, information and compliance objectives through focus on five interrelated elements, which enable the management of risk at strategic, programme and operational level to be integrated, so that layers of activity support each other. The five interrelated elements are defined as: -

   --      Management oversight and the control culture 
   --      Risk recognition and assessment 
   --      Control activities and segregation of duties 
   --      Information and communication 
   --      Monitoring activities and correcting deficiencies 

Risk management processes are undertaken on both a top-down and bottom-up basis. The top-down aspect involves the Board assessing, analysing and evaluating what it believes to be the principal existing and emerging 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.

Stress and scenario testing is used to identify emerging risks as well as to analyse and assess any changes in existing aspects of the 'Risk Universe', which are monitored via the ERM Framework. Such analyses use both quantitative tests and qualitative assessments to consider reasonably plausible risk events, including those stresses and scenarios that could lead to failure of the business, approximated to the range of impact types which can be envisaged. The results of the stress and scenario testing are considered and explored by the Operational and Executive Risk Committees, the Audit and Risk Committee and the Board, as necessary and appropriate.

The system of internal control is designed to understand and manage rather than eliminate risk of failure to achieve business objectives and can only provide reasonable, rather than absolute assurance against material misstatement or loss.

Review of risk management and internal control systems

The results of the risk management processes combine to facilitate identification of the principal business, financial, operational and compliance risks and any associated key risks at a subordinate level. Established reporting cycles enable the Board to maintain oversight of the quality and effectiveness of risk management and internal control activities throughout the year and ensure that the entirety of the governance, risk management and internal control frameworks, which constitute the ERM Framework, are operating as intended. These processes have been in place throughout the year under review and up to the date of this report.

Independently of its quarterly and ad hoc risk reporting arrangements the Board has conducted its annual review of the effectiveness of the Company's risk management and internal control systems including financial, operational and compliance controls. This review is undertaken in collaboration with the Audit Committee and is based upon analysis and evaluation of:

-- Attestation reporting from the key subsidiary companies of the Group as to the effective functioning of the risk management and internal control frameworks and the ongoing identification and evaluation of risk within each key subsidiary.

-- Formal compliance declarations from senior managers at divisional level that key risks are being managed appropriately within the functional and operational areas falling under their span of control and that controls have been examined and are effective.

-- The cumulative results of cyclical risk reporting by senior and executive management via the Operational Risk Committee and the Executive Risk Committee, covering financial, operational and compliance controls.

-- Independent assurance work by the Group Internal Audit Department to identify any areas for enhancements to internal controls and work with management to define associated action plans to deliver them.

The Board has determined that there were no areas for enhancement which constituted a significant weakness for the year under review and they are satisfied that the Group's governance, risk management and internal control systems are operating effectively and as intended, having particular regard to the disruptions and risks arising from the Covid-19 pandemic.

Financial reporting process

Integral to ERM monitoring and reporting arrangements are the conventions which ensure that the Board maintains a continuous understanding of the financial impacts of the Group failing to meet its objectives, due to crystallisation of an actual or emerging risk, or via the stress and scenario events, which the Board considers to be reasonably plausible. This includes those stresses and scenarios that could lead to a failure of the business. Planning and sensitivity analyses incorporate Board approval of forecast financial and other information. The Board receives regular representations from the senior executives in this regard.

Performance against targets is reported to the Board quarterly through a review of Group and subsidiary company results based on accounting policies that are applied consistently throughout the Group. Financial and management information is prepared quarterly by the Chief Financial Officer ("CFO") and presented to the Board and Audit Committee. The members of the Audit Committee review the financial statements for the half year ended 31 December and for the full financial year and meet with the CFO to discuss and challenge the presentation and disclosures therein. Once the draft document is approved by the Audit Committee, it is reviewed by the Board before final approval at a Board meeting.

Outsourcing

The majority of investment dealing and custody processes in relation to contract holder assets are outsourced to Capital International Limited ("CIL"), a company authorised by the Isle of Man Financial Services Authority and a member of the London Stock Exchange.

These processes 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, which includes Key Performance Indicators.

CIL is required to confirm on a monthly basis that no material control weaknesses have been identified in their operations; this is overseen via service delivery monitoring performed by the Relationship Manager. Each year CIL are required to confirm and evidence the adequacy and effectiveness of their internal control framework through a formal Assurance Report on Internal Controls. An external independent review has also been completed during the year ended 30 June 2021. The review did not reveal any material control deficiencies in the period.

Risks relating to the Group's financial and other exposures

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 policy 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 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 3 to the consolidated financial statements.

The Board believes that the principal risks facing the Group's earnings and financial position are those risks which are inherent to the Group's business model and operating environment. The regulatory landscape continues to evolve at both a local and international level and the risk management and internal control frameworks of the Group must remain responsive to developments which may change the nature, impact or likelihood of such risks.

Principal Risks

The following table sets out the principal inherent risks that may impact the Group's strategic objectives, profitability or capital and 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 and for the year ended 30 June 2021 have continued to specifically consider the impacts, uncertainties and any emerging risks (see also Risk Management and Internal Control section).

 
 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                In addition, the Group operates internationally 
  or a combined scenario            and earns income in a range of different currencies, 
  manifesting                       the most significant being US dollars. The 
                                    vast majority of its operational cost base 
                                    is denominated in Sterling. A significant 
                                    adverse currency movement over a sustained 
                                    period would present an exposure to reported 
                                    income levels. 
                                    Extreme market conditions also have the capacity 
                                    to influence the selection and 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 commercial outlooks within overall 
                                          business strategy. This promotes a greater 
                                          understanding of market and currency risk, the limits 
                                          of the Company's resilience and the range of possible 
                                          mitigating options. 
 
 
                                     *    Stress testing performed during the year-ended 30 
                                          June 2021 assessed the impacts of reasonably 
                                          plausible market risk events and scenarios, including 
                                          those resulting from macroeconomic environmental 
                                          triggers, such as that experienced via 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 environments, including the 
                                    continued emergence of new and/or updated 
  Arising from changes              compliance obligations and data submissions 
  in the regulatory landscape,      pre-date the pandemic environment. Changes 
  which adversely impact            to rule sets and supervisory expectations 
  the Group's business              have gathered pace with the easing of pandemic 
  model, or from a failure          related restrictions, requiring efficient 
  by the Group, or one              and effective ways to evidence and demonstrate 
  of its subsidiary entities,       how compliance obligations are met, whilst 
  to meet its legal,                compliance analytics and high-quality data 
  regulatory or contractual         driven insights are becoming increasingly 
  obligations, resulting            important. 
  in the risk of loss               The direction of regulatory travel and the 
  or the imposition of              bridges now firmly established between prudential 
  penalties, damages                and conduct risk demand renewed attention 
  or fines                          to the capacity, competence and capability 
                                    of resourcing across all business areas, having 
                                    particular regard to the extent of risk interdependencies 
                                    and the embedding of personal accountability 
                                    regimes. 
                                    The interpretation or application of regulation 
                                    over time may impact market accessibility, 
                                    broker relationships and / or competitive 
                                    viability. If the Group fails to monitor the 
                                    regulatory environment or adequately integrate 
                                    the management of associated obligations within 
                                    strategic, business model or business planning 
                                    processes there may be material risk to the 
                                    achievement of strategic objectives both in 
                                    the short and longer term. 
                                    How we manage the risk: 
                                     *    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. 
--------------------------------  ----------------------------------------------------------------------- 
 Fraud and Financial               The Board has remained cognisant of the potential 
  Crime Risk:                       for an increase in fraudulent activity due 
                                    to Covid-19, fuelled by the exploitation of 
  Arising from the potential        economic stimulus schemes and any temporary 
  increase in fraud and             adjustment to control environments - contingent 
  deception activity                with industry level transition to and reliance 
  due to Covid-19                   upon remote working arrangements. The recessionary 
                                    environment and increased pressures on profitability 
                                    are also recognised to present an increased 
                                    risk of poor-quality business being written 
                                    by market participants and potentially diminishing 
                                    third party attention to due diligence procedures 
                                    and processes. 
                                    How we manage the risk: 
                                     *    An increasingly holistic approach to mitigating 
                                          heightened financial crime risks. Rigorous anti-money 
                                          laundering, counter-terrorist financing and 
                                          anti-bribery and corruption measures, together with 
                                          effective sanctions screening. 
 
 
                                     *    Implementation of controls to identify and mitigate 
                                          any emerging risks associated with the exploitation 
                                          of economic stimulus schemes, prolonged dependencies 
                                          upon remote working or other measures to counteract 
                                          the impacts of the pandemic. 
 
 
                                     *    Continuous review of measures to support activity 
                                          during the pandemic, including those measures relied 
                                          upon by key business partners. 
--------------------------------  ----------------------------------------------------------------------- 
 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 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 have 
                                              continued to maintain close contact with our 
                                              distribution partners and deploy technological 
                                              solutions, where appropriate, to overcome challenges 
                                              presented by the Covid-19 environment. 
--------------------------------  ----------------------------------------------------------------------- 
 Conduct Risk:                          Failure to adequately assess, monitor, manage 
                                         and mitigate risks to the delivery of fair 
  Arising from any failure               customer outcomes, or to market integrity, 
  of governance, risk                    can be expected to result in material detriment 
  management and internal                to the achievement of strategic objectives 
  control arrangements,                  and could incur regulatory censure, financial 
  via corporate or individual            penalty, contract holder litigation and / 
  actions, leading to                    or reputational damage. 
  customer detriment 
                                         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. 
 
 
                                          *    Forward looking risk indicators and executive 
                                               leadership in respect of understanding and addressing 
                                               the drivers of conduct risk focus on all core areas 
                                               with assessment at strategic, functional and 
                                               operational levels. 
 
 
                                          *    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. 
--------------------------------  ----------------------------------------------------------------------- 
 Operational Resilience            The Covid-19 pandemic has clearly demonstrated 
  Risk:                             the scale and speed with which disruptive 
  (emerging risk)                   operational risk events might impact the availability 
                                    of important business services and cause wide-ranging 
  Arising from any exposure         harm to customers, stakeholders, individual 
  to risk events with               firms, financial market infrastructures and 
  the capacity to cause             the financial sector as a whole. 
  operational failures 
  or wide scale disruptions         Regulators across the UK, EU and US are moving 
  in financial markets              quickly to finalise new measures which promote 
                                    a principles-based approach to improving operational 
                                    resilience and strengthen the ability of financial 
                                    services firms to withstand operational risk 
                                    related events. 
 
                                    How we manage the risk: 
                                     *    ERM conventions are guiding the identification and 
                                          assessment of events or scenarios presenting risk to 
                                          operational resilience - typically pandemics, cyber 
                                          incidents, technology failures or natural disasters - 
                                          as well as supply chain disruption impacts to 
                                          critical processes, business continuity and good 
                                          governance. 
 
 
                                     *    Impact tolerances, together with mapping and testing 
                                          allow the identification of services which could 
                                          cause harm, if disrupted and identify any areas of 
                                          vulnerability. 
 
 
                                     *    Stress testing and continuity planning provide for 
                                          continuous review of the adequacy and effectiveness 
                                          with which the business is able to respond to and 
                                          recover from disruptions. 
--------------------------------  ----------------------------------------------------------------------- 
 Information Systems               The mounting sophistication and persistence 
  and Cyber Risk:                   of cybercrime and the growing adoption of 
                                    highly advanced, nation-state type tools by 
  Arising from the increased        cyber criminals, underscore the challenges 
  digitalisation of business        that both regulators and the industry face 
  activities and reliance           in understanding and anticipating the nature 
  upon technology                   of cyber threats they will face next. Simultaneously 
                                    the pandemic has served to accelerate the 
                                    efforts of organised crime to exploit weaknesses 
                                    in cyber defences and explicitly target remote 
                                    working vulnerabilities, whilst new technological 
                                    capabilities and use of third party platforms 
                                    add to the complexity of understanding the 
                                    extent of cyber exposures, which may originate 
                                    outside the traditional regulatory perimeter. 
                                    Building resilience to continuously evolving 
                                    cyber risk is a priority for all stakeholders. 
                                    Growing levels of regulatory scrutiny, focussed 
                                    on three core areas - cyber risk identification, 
                                    cyber risk governance and cyber risk resilience 
                                    - is clearly foreseeable. Increased pressure 
                                    for licence holders to evidence and demonstrate 
                                    how they are addressing emerging regulatory 
                                    concerns and the timeliness of their actions 
                                    can also be expected. 
                                    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, this could result 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 as a core element of our 
                                          Operational resilience mapping. 
 
 
                                     *    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 and Disaster Recovery 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. 
 
 
                                     *    Horizon scanning to identify and assess supervisory 
                                          pilot initiatives advocating and promoting good 
                                          practice in cyber resilience and associated industry 
                                          developments. 
--------------------------------  ----------------------------------------------------------------------- 
 Environmental, Social                       Climate Change Risk and broader ESG considerations 
  and Governance (ESG)                        are well marked on international regulatory 
  Risk:                                       agendas. The global economy continues to be 
  (emerging risk)                             threatened by the impacts of the Covid-19 
                                              crisis and the World Economic Forum (WEF) 
  Arising from a failure                      anticipates geopolitical stability to remain 
  to anticipate and respond                   critically fragile over the next five to ten 
  to emerging sustainability                  years. Climate-related issues make up the 
  risks or successfully                       bulk of the WEF's 2021 Global Risks Perception 
  integrate ESG considerations                Survey. However, infectious diseases sit at 
  and policy positions                        the top of their impact list - recognising 
  into strategy and business                  that the immediate human and economic costs 
  planning                                    of Covid-19 are severe, threatening to scale 
                                              back years of progress on reducing global 
                                              poverty and inequality, damaging social cohesion 
                                              and global cooperation. Wealth inequalities 
                                              across the globe have been amplified and the 
                                              fight against the pandemic is diverting resources 
                                              from other critical health challenges. 
                                               *    Short term threats sit at a personal level and 
                                                    include infectious diseases, livelihood crises, 
                                                    digital inequality and consumer disillusionment. 
 
 
                                               *    Risks over the medium-term sit at a macro level and 
                                                    extend to asset bubble bursts, IT infrastructure 
                                                    breakdown, price instability and debt crises. 
 
 
                                               *    Risks in the long-term are flagged as weapons of mass 
                                                    destruction, state collapse, biodiversity loss and 
                                                    adverse technological advances. 
 
 
 
                                              Simultaneously, advances in regulatory conduct 
                                              obligations are converging with stakeholder 
                                              interest in and scrutiny of ESG practices, 
                                              whilst clear connections are being drawn between 
                                              the issues affecting firms' culture and functioning 
                                              and lack of progress on diversity and inclusion. 
                                              These developments demonstrate the reach of 
                                              ESG considerations across the risk portfolio. 
 
 
                                              How we manage the risk: 
                                               *    Actively building sustainability considerations into 
                                                    strategy development and business planning processes 
                                                    through structured analysis, formal assessment 
                                                    mechanisms and cross-functional collaboration 
 
 
                                               *    Factoring emerging sustainability risk issues into 
                                                    key decision-making and understanding the impacts for 
                                                    the tools and methodologies currently used to manage 
                                                    risk, including governance structures, risk 
                                                    ownerships, risk and control self-assessment 
                                                    principles, regulatory developments, third party 
                                                    service provisions and effective reporting. 
 
 
                                               *    Developing and updating relevant components in 
                                                    relation to the sustainability risk domain - 
                                                    including policies, procedures, risk indicators, 
                                                    management data and stress testing. 
 
 
                                               *    'In flight' initiatives addressing cultural alignment 
                                                    and structural resilience encompass core ESG 
                                                    considerations. 
--------------------------------  ----------------------------------------------------------------------- 
 Employee Engagement               Delivery of the Group's strategy has core 
  and Cultural Risk:                dependencies on attracting and retaining experienced 
                                    and high-performing management and staff and 
  Arising from any failure          building a strong and sustainable culture, 
  to drive and support              driven by our purpose, our leadership, our 
  the right corporate               performance management regime and our governance 
  culture and attract,              principles and objectives. 
  develop, engage and 
  retain key personnel              The knowledge, skills, attitudes and behaviours 
                                    of our employees, and the success with which 
                                    these shape and define our culture, are central 
                                    to our success. 
 
                                    Clear and heightened regulatory expectations 
                                    of individual and corporate accountability 
                                    continue to connect governance, risk and compliance 
                                    obligations directly to cultural imperatives 
                                    and the responsibilities assigned to individual 
                                    Senior Managers. 
 
                                    How we manage the risk: 
                                     *    Significant investment in initiatives to address and 
                                          support cultural change and development, including 
                                          deployment of a 'culture survey' to provide important 
                                          culture diagnostics, shape strategy and inform 
                                          tactical solutions. 
 
 
                                     *    Forums established for employees to provide feedback 
                                          for continuous improvement. 
 
 
                                     *    Group Performance Management regime targets the 
                                          measurement of both hard and soft skills. 
 
 
                                     *    Group Training and Development Strategy guides talent 
                                          management and promotes the use of staff development 
                                          opportunities to support succession planning and 
                                          mitigate 'key person' risks. 
 
 
                                     *    Remuneration models and trends monitored closely by 
                                          the Group's Human Resources Department and the 
                                          Remuneration Committee. 
--------------------------------  ----------------------------------------------------------------------- 
 

Further detail around financial risks is outlined in note 3 (Financial Risk Management) to the consolidated financial statements.

Graeme Easton

Chairman

22 September 2021

 
 Consolidated Statement of Comprehensive Income 
  for the year ended 30 June 2021 
 
                                                     Year ended   Year ended 
                                                        30 June      30 June 
                                                           2021         2020 
                                             Notes         GBPm         GBPm 
------------------------------------------  ------  -----------  ----------- 
 
 
 Fees and commissions                          5           50.5         49.5 
 
 Investment income                             6          163.3          1.9 
 
 Other operating income                                     0.9          0.7 
 
                                                          214.7         52.1 
------------------------------------------  ------  -----------  ----------- 
 
 Change in provisions for investment 
  contract liabilities                                  (163.7)        (0.1) 
 
 Origination costs                             7         (16.4)       (18.0) 
 
 Administrative and other expenses             8         (29.5)       (29.3) 
------------------------------------------  ------  -----------  ----------- 
                                                        (209.6)       (47.4) 
------------------------------------------  ------  -----------  ----------- 
 Profit before taxation                                     5.1          4.7 
 
 Taxation                                     10          (0.2)        (0.2) 
------------------------------------------  ------  -----------  ----------- 
 Profit and total comprehensive income 
 for the year 
 after taxation                                             4.9          4.5 
------------------------------------------  ------  -----------  ----------- 
 
 
 
 
 Earnings per share 
 
                     2021   2020 
              Note    (p)    (p) 
---------    -----  -----  ----- 
 
 Basic         11     3.6    3.2 
 
 Diluted       11     3.6    3.2 
-----------  -----  -----  ----- 
 
 

Consolidated Statement of Changes in Equity

for the year ended 30 June 2021

 
                                      Share      Other   Retained 
                                    capital   reserves   earnings   Total 
                                       GBPm       GBPm       GBPm    GBPm 
 --------------------------------  --------  ---------  ---------  ------ 
 At 1 July 2019                        68.8     (48.5)        6.9    27.2 
 
 Profit and total comprehensive 
 income for the                           -          -        4.5     4.5 
 year after taxation 
 
 Equity settled share based 
  payments reserve                        -        0.2          -     0.2 
 
 Transactions with owners 
 
 Dividends paid                           -          -      (6.0)   (6.0) 
---------------------------------  --------  ---------  ---------  ------ 
 At 30 June 2020                       68.8     (48.3)        5.4    25.9 
---------------------------------  --------  ---------  ---------  ------ 
 
 
                                      Share      Other   Retained 
                                    capital   reserves   earnings   Total 
                                       GBPm       GBPm       GBPm    GBPm 
 --------------------------------  --------  ---------  ---------  ------ 
 At 1 July 2020                        68.8     (48.3)        5.4    25.9 
 
 Profit and total comprehensive 
 income for the                           -          -        4.9     4.9 
 year after taxation 
 
 Transactions with owners 
 
 Dividends paid                           -          -      (6.1)   (6.1) 
---------------------------------  --------  ---------  ---------  ------ 
 At 30 June 2021                       68.8     (48.3)        4.2    24.7 
---------------------------------  --------  ---------  ---------  ------ 
 
 
 Consolidated Balance Sheet 
  As at 30 June 2021 
                                                        30 June   30 June 
                                                           2021      2020 
                                               Notes       GBPm      GBPm 
----------------------------------------     --------  --------  -------- 
 
 Assets 
 Intangible assets                              13          9.2       5.9 
 Property, plant and equipment                  13          3.3       3.6 
 Deferred origination costs                     14        125.1     122.3 
 
 Financial investments 
  Measured at fair value: 
   Equity securities                                       58.0      40.7 
   Investments in collective investment 
    schemes                                             1,033.1     883.5 
   Fixed income securities 
    Measured at amortised cost:                            57.5      52.6 
   Deposits and money market funds                         84.2     126.6 
 
 Other receivables                              15          2.7       5.2 
 Cash and cash equivalents                      16         56.7      39.6 
-------------------------------------------  --------  --------  -------- 
 Total assets                                           1,429.8   1,280.0 
-------------------------------------------  --------  --------  -------- 
 
 Liabilities 
 Financial liabilities under investment 
  contracts                                     17      1,224.2   1,080.5 
 Deferred income                                18        142.5     137.8 
 Amounts due to investment contract 
  holders                                       17         27.4      23.9 
 Other payables                                 19         11.0      11.9 
-------------------------------------------  --------  --------  -------- 
 Total liabilities                                      1,405.1   1,254.1 
-------------------------------------------  --------  --------  -------- 
 Net assets                                                24.7      25.9 
-------------------------------------------  --------  --------  -------- 
 
 Shareholders' equity 
 Called up share capital                        21         68.8      68.8 
 Other reserves                                    22    (48.3)    (48.3) 
 Retained earnings                                          4.2       5.4 
-------------------------------------------  --------  --------  -------- 
 Total shareholders' equity                                24.7      25.9 
-------------------------------------------  --------  --------  -------- 
 
 
 Consolidated Cash Flow Statement 
  for the year ended 30 June 2021 
                                                                       2021        2020 
                                                                       GBPm        GBPm 
 ---    ------------------------------------------------  -----------------  ---------- 
 
 Cash flow from operating activities 
 Profit before tax for the year                                         5.1         4.7 
 Adjustments for: 
 Depreciation                                                           0.9         0.7 
 Dividends receivable                                                 (5.7)       (4.9) 
 Interest receivable                                                  (0.4)       (1.9) 
 Movement in share based payments reserve                                 -         0.2 
 Foreign exchange (gains) / losses                                    (1.6)         0.4 
 
 Changes in operating assets and liabilities 
 Decrease / (increase) in other receivables                             2.5       (0.5) 
 Dividends received                                                     5.7         4.9 
 Interest received                                                      0.3         1.6 
 Increase in deferred origination costs                               (2.8)       (4.3) 
 Increase in deferred income                                            4.7         4.6 
 Increase / (decrease) in creditors                                     3.1       (0.2) 
 (Increase) / decrease in financial investments                     (135.3)         3.1 
 Increase in financial liabilities                                    149.6         0.8 
--------------------------------------------------------  -----------------  ---------- 
 Cash flow from operations                                             26.1         9.2 
 Corporation tax paid                                                 (0.3)       (0.1) 
--------------------------------------------------------  -----------------  ---------- 
 Cash flow from operations after taxation                              25.8         9.1 
--------------------------------------------------------  -----------------  ---------- 
 Cash flows from investing activities 
 
 Investment in property, plant and equipment                          (3.8)       (3.0) 
 Proceeds from sale of investments                                      0.1         0.2 
  Purchase of investments                                             (0.1)           - 
--------------------------------------------------------  -----------------  ---------- 
 Cash flows used in investing activities                              (3.8)       (2.8) 
--------------------------------------------------------  -----------------  ---------- 
 Cash flows from financing activities 
 Dividends paid                                                       (6.1)       (6.0) 
 Principal elements of leased liabilities                             (0.4)       (0.5) 
--------------------------------------------------------  -----------------  ---------- 
 Cash flows used in financing activities                              (6.5)       (6.5) 
 Net increase / (decrease) in cash and cash 
  equivalents                                                          15.5       (0.2) 
 Cash and cash equivalents at beginning of 
  year                                                                 39.6        40.2 
 Effect of exchange rate movements                                      1.6       (0.4) 
--------------------------------------------------------  -----------------  ---------- 
 Cash and cash equivalents at year end                                 56.7        39.6 
--------------------------------------------------------  -----------------  ---------- 
 

Notes to the consolidated financial statements

   1      General Information 

Hansard Global plc ("the Company") is a limited liability company, incorporated in the Isle of Man, whose 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 wholly owned subsidiaries include the transaction of life assurance business and related activities. Hansard Europe was closed to new business with effect from 30 June 2013. The principal subsidiaries of the Company are as follows:

   Company name                                                Incorporated                Activity 

Hansard International Limited Isle of Man Life Assurance

   Hansard Worldwide Limited                                The Bahamas                Life Assurance 
   Hansard Europe Designated Activity Company   Ireland                          Life Assurance 

Hansard Administration Services Limited Isle of Man Administration Services

   Hansard Development Services Limited              Isle of Man                    Marketing and 

Development Services

The registered office of the Company is 55 Athol Street, Douglas, Isle of Man, IM99 1QL.

The Company has its primary listing on the London Stock Exchange.

   1.1        Principal accounting policies 

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below or, in the case of accounting policies that relate to separately disclosed values in the primary statements, within the relevant note to these consolidated financial statements. These policies have been consistently applied, unless otherwise stated.

   1.2        Basis of presentation 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRSs"), International Financial Reporting Standards Interpretations Committee ("IFRSIC") interpretations, and with the Isle of Man Companies Acts 1931 to 2004. The 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. The Group has applied all International Financial Reporting Standards adopted by the European Union and effective at 30 June 2021.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting year. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 2.

Except where otherwise stated, the financial statements are presented in pounds sterling, the functional currency of the Company, rounded to the nearest one hundred thousand pounds.

The following new standards, amendments and interpretations are in issue but not yet effective and have not been early adopted by the Group and are not expected to have a significant impact;

   --      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

-- Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets effect 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 financial statements.

               1.3        Basis of consolidation 

The consolidated financial statements incorporate the assets, liabilities and the results of the Company and of its subsidiary undertakings. Subsidiaries are those entities in which the Company directly or indirectly has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Where necessary, accounting policies applied by subsidiary companies have been adjusted to present consistent disclosures on a consolidated basis. Intra-group transactions, balances and unrealised gains and losses arising from intra-group transactions, are eliminated in preparing these consolidated financial statements.

               1.4        Going concern 

The Group's capital position is 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 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 where lock-downs and travel restrictions exist. 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.

-- The Group's products include charges for early surrender, which protects against a scenario of significant lapses.

-- 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. 
   2      C ritical a ccounting e stimates and j udgements in a pplying a ccounting p olicies 

Estimates, assumptions and judgements are used in the application of accounting policies in these financial statements. Critical accounting estimates are those which involve the most complex or subjective judgements or assessments. Estimates, assumptions and judgements are evaluated continually and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes may differ from assumptions and estimates made by management.

   2.1        Accounting estimates and assumptions 

The principal areas in which the Group applies accounting estimates and assumptions are in deciding the type of management expenses that are treated as origination costs to be deferred and the period and method of amortisation of deferred origination costs and deferred income. Estimates are also applied in determining the recoverability of deferred origination costs.

   2.1.1     Origination costs 

The judgements exercised in the deferral and amortisation of origination costs affect amounts recognised in the consolidated financial statements as deferred origination costs and investment contract benefits.

Additional details of deferred acquisition and origination costs are provided in notes 7 and 14. Any other expenses are expensed as incurred.

   2.1.2     Amortisation of deferred origination costs and deferred income 

Deferred origination costs and deferred income are amortised on a straight-line basis over the estimated life of the underlying investment contract.

Additional details of deferred income are provided in note 18.

   2.1.3     Recoverability of deferred origination costs 

Formal reviews to assess the recoverability of deferred origination costs on investment contracts are carried out at each balance sheet date to determine whether there is any indication of impairment based on the estimated future income levels.

If, based upon a review of the remaining contracts, there is any other indication of irrecoverability or impairment, the contract's recoverable amount is estimated. Impairment losses are reversed through the consolidated statement of comprehensive income if there is a change in the estimates used to determine the recoverable amount. Such losses are reversed only to the extent that the contract's carrying amount does not exceed the carrying amount that would have been determined, net of amortisation where applicable, if no impairment loss had been recognised.

   2.1.4     Fair value of financial investments 

Where the Directors determine that there is no active market for a particular financial instrument, fair value is assessed using valuation techniques based on available relevant information and an appraisal of all associated risks.

   2.2        Judgements 

The primary areas in which the Group has applied judgement in applying accounting policies are as follows:

-- The classification of contracts between insurance and investment business. All contracts are treated as investment contracts as they do not transfer significant insurance risk; and

-- To determine whether a provision or contingent liability is required in respect of any pending or threatened litigation, which is addressed in note 19 and note 25.

    3     Financial risk management 

Risk management objectives and risk policies

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. 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. Additionally, the Board and the Boards of subsidiary companies have established a number of Committees with defined terms of reference. These are the Audit, Risk, Actuarial Review, Executive, Investment and Broker Monitoring Committees. Additional information concerning the operation of the Board Committees is contained in the Corporate Governance section of this Annual Report and Accounts.

The more significant financial risks to which the Group is exposed are set out below. For each category of risk, the Group determines its risk appetite and sets its investment, treasury and associated policies accordingly.

   3.1        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 fair value of contract holder assets). Other financial assets and liabilities held outside of contract holder 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 movements 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 contract holders.

   (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 30 June 2021 was GBP1,148.6m (2020: GBP976.8m). 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 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 (2020: GBP1.2m).

   (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% per annum in interest rates will result in an increase or decrease of approximately GBP0.6m (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 3.2.

   (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 regular conversion 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:

 
                                    2021    2021      2021     2020    2020      2020 
                                    US$m    EURm       Yen     US$m    EURm     Yen m 
                                                         m 
-------------------------------  -------  ------  --------  -------  ------  -------- 
 Gross assets                       20.8     6.3     223.7     13.8     5.2     145.8 
 Matching currency liabilities    (17.3)   (5.7)   (239.9)   (13.0)   (4.2)   (120.2) 
-------------------------------  -------  ------  --------  -------  ------  -------- 
 Uncovered currency 
  exposures                          3.5     0.6    (16.2)      0.8     1.0      25.6 
-------------------------------  -------  ------  --------  -------  ------  -------- 
 Sterling equivalent 
  (GBPm)                             2.6     0.5     (0.1)      0.6     0.9       0.2 
-------------------------------  -------  ------  --------  -------  ------  -------- 
 

The approximate effect of a 5% change: in the value of US dollars to sterling is GBP0.1m (2020: less than GBP0.1m); in the value of the euro to sterling is less than GBP0.1m (2020: less than GBP0.1m); and in the value of the yen to sterling is less than GBP0.1m (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% (2020: 67%); euro: 10% (2020: 11%); sterling: 21% (2020: 21%); other: 1% (2020: 1%).

   3.2    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 30 June 2021 and 2020, 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, and attested periodically by external advisors. Investment risk is borne by the contract holder.

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. 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. The following table sets out information about the credit quality of the Group's deposits with credit institutions and its investments in unitised money market funds.

 
                                                             2021     2020 
                                                             GBPm     GBPm 
---------------------------------------------------  ------------  ------- 
 Deposits with credit institutions and investments in unitised 
  money market funds 
 (Based on Standards & Poor's 
  ratings) 
  AAA                                                        30.1     23.4 
  AA- to AA+                                                  2.9      2.0 
  A- To A+                                                    9.1     19.2 
---------------------------------------------------  ------------  ------- 
 
   Cash at bank                                              21.4     16.2 
---------------------------------------------------  ------------  ------- 
 Group cash and deposits                                     63.5     60.8 
---------------------------------------------------  ------------  ------- 
 
 

Financial assets held at amortised cost, as disclosed in the table above, are impaired using an expected credit loss model. The model splits financial assets into those which are performing, underperforming and non-performing based on changes in credit quality since initial recognition. At initial recognition financial assets are considered to be performing. They become underperforming where there has been a significant increase in credit risk since initial recognition, and non-performing when there is objective evidence of impairment. Twelve months of expected credit losses are recognised in the statement of comprehensive income and netted against the financial asset in the statement of financial position for all performing financial assets, with lifetime expected credit losses recognised for underperforming and non-performing financial assets.

Trade receivables are designated as having no significant financing component. The Group applies the IFRS 9 simplified approach to measuring expected credit losses for trade receivables by using a lifetime expected loss allowance.

Expected credit losses are based on the historic levels of loss experienced for the relevant financial assets, with due consideration given to forward looking information. The group expected credit loss charged in the year is GBP0.0m (30 June 2020: GBP0.0m).

There have been no changes in the assets in the year ended 30 June 2021 attributable to changes in credit risk (30 June 2020: nil).

At the balance sheet date, an analysis of the Group's cash and deposit balances was as follows:

 
                                     2021   2020 
                                     GBPm   GBPm 
----------------------------------  -----  ----- 
 Longer term deposits with credit 
  institutions                        6.8   21.2 
 Cash and cash equivalents under 
  IFRS                               56.7   39.6 
----------------------------------  -----  ----- 
 Group cash and deposits             63.5   60.8 
----------------------------------  -----  ----- 
 
   3.3    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 is averse to liquidity risk and seeks to minimise this risk by not actively pursuing it except where necessary to support other objectives.

The Group's objective is to ensure that it has sufficient liquidity over short-term (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-term 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.

   3.4    Undiscounted contractual maturity analysis 

Set out below is a summary of the undiscounted contractual maturity profile of the Group's assets.

 
                                                        2021      2020 
                                                        GBPm      GBPm 
--------------------------------------------------  --------  -------- 
 Maturity within 1 year 
 Deposits and money market funds                        63.5      60.8 
 Other assets                                            4.2       6.9 
--------------------------------------------------  --------  -------- 
                                                        67.7      67.7 
--------------------------------------------------  --------  -------- 
 Maturity from 1 to 5 years 
 Other assets                                              -         - 
--------------------------------------------------  --------  -------- 
                                                           -         - 
--------------------------------------------------  --------  -------- 
 Assets with maturity values                            67.7      67.7 
 Other shareholder assets (no defined maturity 
  profile)                                             135.3     130.4 
--------------------------------------------------  --------  -------- 
 Shareholder assets                                    203.0     198.1 
 Gross assets held to cover financial liabilities 
  under investment contracts                         1,226.8   1,081.9 
--------------------------------------------------  --------  -------- 
 Total assets                                        1,429.8   1,280.0 
--------------------------------------------------  --------  -------- 
 

There is no significant difference between the value of the Group's assets on an undiscounted basis and the balance sheet values.

Assets held to cover financial liabilities under investment contracts are deemed to have no fixed maturity since the corresponding unit-linked liabilities are repayable and transferable on demand. In certain circumstances the contractual maturities of a portion of the assets may be longer than one year, but the majority of assets held within the unit-linked funds are highly liquid. The Group actively monitors fund liquidity.

Set out below is a summary of the undiscounted contractual maturity profile of the Group's liabilities.

 
                                                          2021      2020 
                                                          GBPm      GBPm 
----------------------------------------------------  --------  -------- 
 Maturity within 1 year 
 Amounts due to investment contract holders               27.4      23.9 
 Other payables                                            8.8       9.4 
----------------------------------------------------  --------  -------- 
                                                          36.2      33.3 
----------------------------------------------------  --------  -------- 
 Maturity from 1 to 5 years 
 Other payables                                            2.6       3.2 
----------------------------------------------------  --------  -------- 
                                                           2.6       3.2 
----------------------------------------------------  --------  -------- 
 Liabilities with maturity values                         38.8      36.5 
 Other shareholder liabilities (no defined maturity 
  profile)                                               142.5     137.8 
----------------------------------------------------  --------  -------- 
 Shareholder liabilities                                 181.3     174.3 
 Financial liabilities under investment contracts      1,224.2   1,080.5 
----------------------------------------------------  --------  -------- 
 Total liabilities                                     1,405.5   1,254.8 
----------------------------------------------------  --------  -------- 
 

The difference between the total liabilities in the above table and the total liabilities per the consolidated balance sheet represents the impact of discounting liabilities with a maturity profile of more than one year.

   3.5    Insurance risk 

Insurance risk is the risk of loss arising from actual experience being different than that assumed when an insurance product was designed and priced. For the Group, the key insurance risks are lapse risk, expense risk and mortality risk. However, the size of insurance risk is not deemed to be materially significant. From an accounting perspective all contracts have been classified as investment contracts.

3.5.1 Lapse risk

A key risk for investment contracts is policyholder behaviour risk - in particular the risk that contracts are surrendered or significant cash withdrawals are made before sufficient fees have been collected to cover up-front commissions paid by the Group. The risk is mitigated by charging penalties on the early surrender of contracts.

   3.6    Classification and subsequent measurement of financial assets and liabilities 

The Group recognises deposits with financial institutions and loans and borrowings on the date on which they are originated. All other financial instruments are recognised on the trade date, which is the date on which the Group becomes a part to the contractual provisions of the instrument.

A financial asset or financial liability is initially measured at fair value plus, for a financial asset or financial liability not measured at 'fair value through profit and loss' ("FVTPL"), transaction costs that are directly attributable to its acquisition or issue.

On initial recognition, a financial asset is classified as measured at amortised cost, 'fair value through other comprehensive income' ("FVOCI") or FVTPL.

Financial assets are not reclassified subsequent to their initial recognition. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

-- It is held within a business model whose objective is to hold assets to collect contractual cash flows; and

-- Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest.

A financial asset is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

-- It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

-- Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. The classification of each financial asset and liability is commented on within each respective financial statement note. As at 30 June 2021, only financial assets measured at amortised cost and FVTPL are held.

The subsequent measurement of each class of financial assets is defined in the below table:

 
 Class of asset                  Subsequent measurement 
 Financial assets at FVTPL       Measured at fair value. Net gains and 
                                  losses, including any interest or dividend 
                                  income and foreign exchange gains and 
                                  losses, are recognised in profit or 
                                  loss. 
                                -------------------------------------------- 
 Financial assets at amortised   Measured at amortised cost using the 
  cost                            effective interest method. Interest 
                                  income, foreign exchange gains and losses 
                                  and impairment are recognised in profit 
                                  or loss. Any gain or loss on derecognition 
                                  is also recognised in profit or loss. 
------------------------------  -------------------------------------------- 
 

On initial recognition, a financial liability is designated as amortised cost or FVTPL. The criteria for classification and subsequent measurement mirrors that of the financial assets, albeit the classification of 'FVOCI' does not exist for financial liabilities. Therefore, any liabilities which do not meet the amortised cost classification criteria, are designated as FVTPL.

   3.7    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 Directors.

Due to the linked nature of the contracts administered by the Group's insurance 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 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 table analyses the Group's financial assets and liabilities at fair value through profit or loss, at 30 June 2021:

 
                                   Level 1   Level   Level     Total 
                                                 2       3 
 Financial assets at fair value       GBPm    GBPm    GBPm      GBPm 
  through profit or loss 
--------------------------------  --------  ------  ------  -------- 
 Equity securities                    58.0       -       -      58.0 
 Collective investment schemes     1,026.1       -     7.0   1,033.1 
 Fixed income securities, bonds 
  and structured notes                   -    52.3     5.2      57.5 
 Total financial assets at fair 
  value through profit or loss     1,084.1    52.3    12.2   1,148.6 
--------------------------------  --------  ------  ------  -------- 
 

All other financial assets and liabilities are designated as held at amortised cost which approximates to fair value.

During the period under review, GBP52.3m of fixed income securities, bonds and structured notes were transferred from Level 1 to Level 2 following a review of their classification. A further GBP5.2m of similar assets were reclassified from Level 1 to Level 3 as a result of the same classification review, reflecting that the value of these assets are not based on observable market data.

 
                                    Level     Level   Level     Total 
                                        1         2       3 
                                     GBPm      GBPm    GBPm      GBPm 
-------------------------------   -------  --------  ------  -------- 
 Financial liabilities at fair 
  value through profit or loss          -   1,224.2       -   1,224.2 
--------------------------------   ------  --------  ------  -------- 
 

Financial liabilities at fair value through profit or loss are classified as level 2 on the basis that they relate to policies investing in financial assets at fair value through profit and loss.

The following tables analyse the Group's financial assets and liabilities at fair value through profit or loss, at 30 June 2020. 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 value through     GBPm    GBPm    GBPm    GBPm 
  profit or loss 
----------------------------------------  ------  ------  ------  ------ 
 Equity securities                          40.7       -       -    40.7 
 Collective investment schemes             866.9       -    16.6   883.5 
 Fixed income securities, bonds and 
  structured notes                             -    52.6       -    52.6 
 Total financial assets at fair value 
  through profit or loss                   907.6    52.6    16.6   976.8 
----------------------------------------  ------  ------  ------  ------ 
 

During the year ended 30 June 2020, no assets were transferred from Level 1 to Level 2, other than the restatement noted above.

 
                                         Level     Level   Level     Total 
                                             1         2       3 
                                          GBPm      GBPm    GBPm      GBPm 
-------------------------------------  -------  --------  ------  -------- 
 Financial liabilities at fair value 
  through profit or loss                     -   1,080.5       -   1,080.5 
-------------------------------------  -------  --------  ------  -------- 
 

Valuation techniques and significant unobservable inputs

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values for financial instruments in the statement of financial position, as well as the significant unobservable inputs used.

 
 Type                Valuation technique                   Significant       Sensitivity 
                                                            unobservable      to changes 
                                                            input             in unobservable 
                                                                              inputs 
 Suspended           Latest available information          Discount factor   If the NAV 
  assets GBP7m        including or such as net              and NAV           was higher/lower, 
  (2020: GBP16.6m)    asset values (NAV) or                                   the fair value 
                      other communication received                            would be higher/lower. 
                                                                              If the discount 
                                                                              factor was 
                                                                              higher/lower, 
                                                                              the fair value 
                                                                              would be lower/higher. 
                    ------------------------------------  ----------------  ------------------------ 
 Bonds and           Market comparison/ discounted         Not applicable    Not applicable 
  structured          cash flow: The fair value             (Level 2) 
  notes GBP52.3m      is estimated considering: 
  (2020: GBP52.6m)    (i) current or recent 
                      quoted prices for identical 
                      securities in markets 
                      that are not active; and 
                      (ii) a net present value 
                      calculated using discount 
                      rates which are determined 
                      with reference to observable 
                      market transactions in 
                      instruments with substantially 
                      the same terms and characteristics 
                      including credit quality, 
                      the remaining term to 
                      repayments of the principal 
                      and the currency in which 
                      the payments are made. 
                    ------------------------------------  ----------------  ------------------------ 
 

Level 3 sensitivity to changes in unobservable measurements

For financial assets assessed as Level 3, based on its review of the prices used, the Company believes that any reasonable change to the unobservable inputs used to measure fair value would not result in a significantly higher or lower fair value measurement at year end, and therefore would not have a material impact on its reported results.

The reconciliation between opening and closing balances of Level 3 assets are presented in the table below:

 
                                             2021     2020 
                                             GBPm     GBPm 
      ----------------------------  ----  -------  ------- 
  Opening balance                            16.6     26.8 
  Unrealised gains /(losses)                (1.7)   (14.3) 
       Transfers in to level 3                5.4      4.7 
        Transfers out of level 3            (0.3)        - 
        Purchases, sales, issues            (7.8)    (0.6) 
         and settlements 
      ----------------------------  ----  -------  ------- 
  Closing balance                            12.2     16.6 
 ----------------------------------  ---  -------  ------- 
 
   4      Segmental information 

Disclosure of operating segments in these 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 undertaken by its Irish subsidiary, Hansard Europe Designated Activity Company, 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. NI CC is the 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 incurred during the year as set out in the Business and Operating Review section of this Annual Report and Accounts.

 
                                       2021   2020 
                                       GBPm   GBPm 
-----------------------------------   -----  ----- 
 Middle East and Africa                 4.7    5.1 
 Latin America                          3.8    4.3 
 Rest of World                          1.4    1.6 
 Far East                               0.8    0.8 
 Net Issued Compensation Credit        10.7   11.8 
 Other commission costs paid to 
  third parties                         5.3    6.6 
 Enhanced unit allocations              1.7    1.5 
------------------------------------  -----  ----- 
 Direct origination costs incurred 
  during the year                      17.7   19.9 
------------------------------------  -----  ----- 
 

Revenues and expenses allocated to geographical locations contained in sections 4.1 to 4.4 below reflect the revenues and expenses generated in or incurred by the legal entities in those locations.

4.1 Geographical analysis of fees and commissions by origin

 
                          2021   2020 
                          GBPm   GBPm 
 ---------------------   -----  ----- 
  Isle of Man             46.8   45.5 
  Republic of Ireland      3.0    3.3 
  The Bahamas*             0.7    0.7 
 ----------------------  -----  ----- 
                          50.5   49.5 
  ---------------------  -----  ----- 
 

* Hansard Worldwide, which is based in the Bahamas, fully reinsures its business to Hansard International. All external fees and commissions for Hansard Worldwide are therefore presented within the Isle of Man category. Fees shown in respect of Hansard Worldwide represent fees received from Hansard International.

4.2 Geographical analysis of profit before taxation

 
                           2021    2020 
                           GBPm    GBPm 
 ---------------------   ------  ------ 
  Isle of Man               5.5     5.0 
  Republic of Ireland     (1.0)   (0.9) 
  The Bahamas               0.6     0.6 
 ----------------------  ------  ------ 
                            5.1     4.7 
  ---------------------  ------  ------ 
 

4.3 Geographical analysis of gross assets

 
                             2021      2020 
                             GBPm      GBPm 
 ---------------------   --------  -------- 
  Isle of Man*            1,314.1   1,158.7 
  Republic of Ireland       114.0     120.0 
  The Bahamas                 1.7       1.3 
 ----------------------  --------  -------- 
                          1,429.8   1,280.0 
  ---------------------  --------  -------- 
 

* Includes assets held in the Isle of Man in connection with policies written in The Bahamas. As at 30 June 2021 these amounted to GBP111.6m (30 June 2020: GBP51.2m).

4.4 Geographical analysis of gross liabilities

 
                             2021      2020 
                             GBPm      GBPm 
 ---------------------   --------  -------- 
  Isle of Man             1,194.5   1,100.3 
  Republic of Ireland        98.2     102.6 
  The Bahamas               112.4      51.2 
 ----------------------  --------  -------- 
                          1,405.1   1,254.1 
  ---------------------  --------  -------- 
 
   5      Fees and commissions 

Fees are charged to the contract holders of investment contracts for contract administration services, investment management services, payment of benefits and other services related to the administration of investment contracts. Fees may be chargeable on either a fixed fee basis, a fee per transaction or as a percentage of assets under administration. Fees are recognised as revenue as the services are provided. Initial fees that exceed the level of recurring fees and relate to the future provision of services are deferred in the balance sheet and amortised on a straight-line basis over the life of the relevant contract. These fees are accounted for on the issue of a contract and on receipt of incremental premiums on existing single premium contracts.

Regular fees charged to contracts are recognised on a straight-line basis over the period in which the service is provided. Transactional fees are recorded when the required action is complete.

Commissions receivable arise principally from fund houses with which investments are held. Commissions are recognised on an accruals basis in accordance with the relevant agreement.

 
                            2021   2020 
                            GBPm   GBPm 
-------------------------  -----  ----- 
 Contract fee income        32.2   32.2 
 Fund management charges    13.6   12.7 
 Commissions receivable      4.7    4.6 
-------------------------  -----  ----- 
                            50.5   49.5 
-------------------------  -----  ----- 
 
   6      Investment income 

Investment income comprises dividends, interest and other income receivable, realised and unrealised gains and losses on investments. Movements are recognised in the consolidated statement of comprehensive income in the period in which they arise. Dividends are accrued on the date notified. Interest is accounted for on a time proportion basis using the effective interest method.

 
                                           2021     2020 
                                           GBPm     GBPm 
---------------------------------------  ------  ------- 
 Interest income                            0.1      1.3 
 Dividend income                            5.7      4.9 
 Gains on realisation of investments        9.8     25.7 
 Movement in unrealised gains/(losses)    147.7   (30.0) 
---------------------------------------  ------  ------- 
                                          163.3      1.9 
---------------------------------------  ------  ------- 
 
   7      Origination costs 

Origination costs include commissions, intermediary incentives and other distribution-related expenditure. Origination costs which vary with, and are directly related to, securing new contracts and incremental premiums on existing single premium contracts are deferred to the extent that they are recoverable out of future net income from the relevant contract. Deferred origination costs are amortised on a straight-line basis over the life of the relevant contracts. Origination costs that do not meet the criteria for deferral are expensed as incurred.

 
                                           2021   2020 
                                           GBPm   GBPm 
  --------------------------------------  -----  ----- 
 Amortisation of deferred origination 
 costs                                     14.1   14.6 
 Other origination costs                    2.3    3.4 
----------------------------------------  -----  ----- 
                                           16.4   18.0 
----------------------------------------  -----  ----- 
 
   8      Administrative and other expenses 

Included in administrative and other expenses are the following:

 
                                                        2021   2020 
                                                        GBPm   GBPm 
----------------------------------------------------   -----  ----- 
 Auditors' remuneration: 
 - Fees payable for the audit of the 
  Company's annual accounts                              0.1    0.1 
 
   *    Fees payable for the audit of the Company's 
        subsidiaries 
  pursuant to legislation                                0.3    0.4 
 - Other services provided to the Group                    -    0.1 
 Employee costs (see note 9)                            11.4   11.1 
 Directors' fees                                         0.4    0.4 
 Fund management fees                                    4.9    4.8 
 Renewal and other commission                            0.3    1.7 
 Professional and other fees                             3.8    2.8 
 Litigation fees and settlements                         1.9    1.3 
 Licences and maintenance fees                           2.0    1.7 
 Insurance costs                                         1.0    1.4 
 Depreciation of property, plant and 
  equipment                                              0.9    0.7 
 Communications                                          0.4    0.3 
-----------------------------------------------------  -----  ----- 
 
   9      Employee costs 

The Group provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans.

Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

The Group pays fixed pension contributions on behalf of its employees (defined contribution plans). Once the contributions have been paid the Group has no further payment obligations. The contributions are recognised as an expense when they are due. Amounts not paid are shown in accruals in the balance sheet. The assets of the plan are held separately from the Group in independently administered funds.

The Group operates an annual bonus plan for employees. An expense is recognised in the consolidated statement of comprehensive income when the Group has a legal or constructive obligation to make payments under the plan as a result of past events and a reliable estimate of the obligation can be made.

9 .1 The aggregate remuneration in respect of employees (including sales staff and executive Directors) was as follows:

 
                              2021   2020 
                              GBPm   GBPm 
--------------------------   -----  ----- 
 Wages and salaries           10.6   10.7 
 Social security costs         1.1    1.0 
 Contributions to pension 
  plans                        0.9    1.0 
                              12.6   12.7 
 --------------------------  -----  ----- 
 

Total salary and other staff costs for the year are incorporated within the following classifications:

 
                                       2021   2020 
                                       GBPm   GBPm 
-----------------------------------   -----  ----- 
 Administrative and other expenses     11.3   11.1 
 Origination costs                      1.3    1.6 
                                       12.6   12.7 
 -----------------------------------  -----  ----- 
 

The above information includes Directors' remuneration (excluding non-executive Directors' fees). Details of the Directors' remuneration, share options, pension entitlements and interests in shares are disclosed in the Report of the Remuneration Committee.

          9.2        The average number of employees during the year was as follows: 
 
                                2021   2020 
                                 No.    No. 
----------------------------   -----  ----- 
 Administration                  133    144 
 Distribution and marketing       16     15 
 IT development                   42     33 
                                 191    192 
 ----------------------------  -----  ----- 
 
   10    Taxation 

Taxation is based on profits and income for the period as determined with reference to the relevant tax legislation in the countries in which the Company and its subsidiaries operate. Tax payable is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Tax is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised in equity. Tax on items relating to equity is recognised in equity.

The corporation tax expense for the Group for 2021 was GBP0.2m (2020: GBP0.2m). 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 branch                23.4% (2020: 23.4%) 
   Labuan                          24% (2020: 24%) 
   The Bahamas                0% (2020: 0%) 
 
                                                  2021   2020 
                                                  GBPm   GBPm 
----  -----------------------------------------  -----  ----- 
 Current year tax provisions                       0.2    0.1 
 Adjustment to prior year tax provisions             -    0.1 
-----------------------------------------------  -----  ----- 
                                                   0.2    0.2 
 ----------------------------------------------  -----  ----- 
 
 

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.

   11    Earnings per share 
 
                                               2021    2020 
 -----------------------------------------   ------  ------ 
    Profit after tax (GBPm)                     4.9     4.5 
    Weighted average number of shares 
     in issue (millions)                      137.6   137.6 
------------------------------------------   ------  ------ 
    Basic and diluted earnings per share 
    in pence                                    3.6     3.2 
------------------------------------------   ------  ------ 
 

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 3.6p per share (2020: 3.2p).

   12    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 year:

 
                                    Per share   Total   Per share   Total 
                                         2021    2021        2020    2020 
                                            p    GBPm           p    GBPm 
--------------------------------   ----------  ------  ----------  ------ 
    Final dividend in respect 
     of previous 
    financial year                       2.65     3.6        2.65     3.6 
    Interim dividend in respect 
     of current 
    financial year                       1.80     2.5        1.80     2.4 
                                         4.45     6.1        4.45     6.0 
 --------------------------------  ----------  ------  ----------  ------ 
 

The Board has resolved to pay a final dividend of 2.65p per share on 11 November 2021, subject to approval at the Annual General Meeting, based on shareholders on the register on 1 October 2021.

   13    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.

 
                      2021   2020 
                      GBPm   GBPm 
-------------------  -----  ----- 
 Intangible assets     9.2    5.9 
-------------------  -----  ----- 
 

Amortisation is calculated so as to amortise the cost of intangible assets, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned and is included in administration and other expenses in the consolidated statement of comprehensive income.

The carrying amount, residual value and useful life of the Group's computer software is reviewed annually to determine whether there is any indication of impairment, or a change in residual value or expected useful life. If there is any indication of impairment, the asset's carrying value is revised.

The economic lives used for this purpose are:

 
 Computer software   3 to 15 years 
------------------  -------------- 
 

The increase in intangible assets relates to capitalised costs associated with the development of a replacement policy administration system. This development is expected to be completed and put into use during 2022, at which point amortisation will commence over an expected life of 15 years.

The cost of computer software at 30 June 2021 is GBP9.9m (2020: GBP6.6m), with a net book value of GBP9.2m (2020: GBP5.9m). Accumulated amortisation at 30 June 2021 is GBP0.7m (2020: GBP0.7m). All amortisation relates to externally generated costs.

The cost of computer software includes GBP5.7m of externally generated costs (2020: GBP4.1m) and GBP4.2m of internally generated costs (2020: GBP2.5m).

Property, plant and equipment

Property, plant and equipment includes both tangible fixed assets and 'right of use assets' recognised in accordance with IFRS 16 'Leases'.

 
                                  2021   2020 
                                  GBPm   GBPm 
-------------------------------  -----  ----- 
 Property, plant and equipment     0.9    0.6 
 Right of use assets               2.4    3.0 
                                   3.3    3.6 
-------------------------------  -----  ----- 
 

Property, plant and equipment is stated at historical cost less depreciation and any impairment. The historical cost of property, plant and equipment is the purchase cost, together with any incremental costs directly attributable to the acquisition.

Depreciation is calculated so as to amortise the cost of tangible assets, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned and is included in administration and other expenses in the consolidated statement of comprehensive income.

The carrying amount, residual value and useful life of the Group's plant and equipment is reviewed annually to determine whether there is any indication of impairment, or a change in residual value or expected useful life. If there is any indication of impairment, the asset's carrying value is revised.

The economic lives used for this purpose are:

 
 Freehold property         50 years 
 Computer equipment    3 to 5 years 
 Fixtures & fittings        4 years 
--------------------  ------------- 
 

Right of use assets are depreciated over the useful life of the lease.

The cost of property, plant and equipment at 30 June 2021 is GBP10.6m (2020: GBP10.1m), with a net book value of GBP0.9m (2020: GBP0.6m). Additions during 30 June 2021 total GBP0.5m (2020: GBP0.1m). Disposals during the year were negligible.

Accumulated depreciation at 30 June 2021 is GBP9.7m (2020: GBP9.5m). The depreciation charge for the year ending 30 June 2021 is GBP0.2m (2020: GBP0.3m).

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 year to 30 June 2021, 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 30 June 2021 was 4%.

The recognition of the right-of-use asset represents an increase in the property, plant and equipment figure of GBP2.4m (30 June 2020: GBP3.0m). Lease liabilities relating to the right-of-use asset are included within other payables. The interest recognised on the lease liabilities in respect of the right of use asset was less than GBP0.1m (30 June 2020: less than GBP0.1m).

During 2021, the Group has entered into a sub-lease for part of a building that is reported as a right-of-use asset. The group has classified the sub-lease as an operating lease, as it does not transfer substantially all of the risks and rewards incidental to the ownership of the sub-let asset. During the year ending 30 June 2021, the Group recognised rental income of less than GBP0.1m (2020: nil).

 
 
                                                            2021      2020 
                                                            GBPm      GBPm 
 ------------------------------------------  ----  -------------  -------- 
 Right of use asset recognised 1 July                        3.0         0.9 
 Additions during the period                                 0.1         2.6 
 Depreciation                                              (0.7)     (0.5) 
--------------------------------------------  ---  -------------  -------- 
 Net book value of right of use asset 
 as at 30 June                                               2.4       3.0 
-------------------------------------------  ----  -------------  -------- 
 
 Lease liability recognised 1 July                           3.0       0.9 
 Additions during the period                                 0.1       2.6 
 Lease payments made during the period                     (0.4)     (0.5) 
-------------------------------------------------  -------------  -------- 
 Lease liability recognised as at 30 
  June                                                       2.7       3.0 
-------------------------------------------------  -------------  -------- 
 
 Of which are: 
            Current lease liabilities                        0.5       0.4 
            Non-current lease liabilities                    2.2       2.6 
-------------------------------------------------  -------------  -------- 
 
 
   14    Deferred origination costs 

Amortisation of deferred origination costs is charged within the origination costs line in the consolidated statement of comprehensive income.

Formal reviews to assess the recoverability of deferred origination costs on investment contracts are carried out at each balance sheet date to determine whether there is any indication of impairment. If there is any indication of irrecoverability or impairment, the asset's recoverable amount is estimated. Impairment losses are reversed through the consolidated statement of comprehensive income if there is a change in the estimates used to determine the recoverable amount. Such losses are reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of amortisation where applicable, if no impairment loss had been recognised.

The movement in value over the financial year is summarised below.

 
                                                  2021     2020 
                                                  GBPm     GBPm 
---------------------------------------------  -------  ------- 
 At beginning of financial year                  122.3    118.0 
 Origination costs incurred and deferred 
  during the year                                 16.9     18.9 
 Origination costs amortised during the year    (14.1)   (14.6) 
---------------------------------------------  -------  ------- 
                                                 125.1    122.3 
---------------------------------------------  -------  ------- 
 
 
                                              2021    2020 
 Carrying value                               GBPm    GBPm 
------------------------------------------  ------  ------ 
 Expected to be amortised within one year     11.8    11.4 
 Expected to be amortised after one year     113.3   110.9 
------------------------------------------  ------  ------ 
                                             125.1   122.3 
------------------------------------------  ------  ------ 
 
   15    Other receivables 

Other receivables are initially recognised at fair value and subsequently measured at amortised cost, less any provision for impairment.

 
                              2021   2020 
                              GBPm   GBPm 
  -----------------------    -----  ----- 
  Commission receivable        1.4    1.7 
  Other debtors                0.1    2.3 
  Prepayments                  1.2    1.2 
                               2.7    5.2 
 ------------------------    -----  ----- 
 
 
 Estimated to be settled within 
  12 months                           2.7   5.2 
 Estimated to be settled after 12       -     - 
  months 
-----------------------------------  ----  ---- 
                                      2.7   5.2 
 ----------------------------------  ----  ---- 
 

There are no receivables overdue but not impaired (2020: GBPnil). Due to the short-term nature of these assets the carrying value is considered to reflect fair value.

   16    Cash and cash equivalents 

Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with a minimal cost to be converted to cash, typically with original maturities of three months or less, net of short-term overdraft positions where a right of set-off exists. In the below table, money market funds includes all immediately available cash, other than specific short term deposits.

 
                                    2021   2020 
                                    GBPm   GBPm 
---------------------------------  -----  ----- 
 Money market funds                 51.4   35.0 
 Short-term deposits with credit 
  institutions                       5.3    4.6 
---------------------------------  -----  ----- 
                                    56.7   39.6 
---------------------------------  -----  ----- 
 
   17    Financial liabilities under investment contracts 

17.1 Investment contract liabilities, premiums and benefits paid

   17.1.1   Investment contract liabilities 

Investment contracts consist of unit-linked contracts written through subsidiary companies in the Group. Unit-linked liabilities are measured at fair value by reference to the underlying net asset value of the Group's unitised investment funds, determined on a bid basis, at the balance sheet date.

The decision by the Group to designate its unit-linked liabilities at fair value through profit or loss reflects the fact that the liabilities are calculated with reference to the value of the underlying assets.

   17.1.2   Investment contract premiums 

Investment contract premiums are not included in the consolidated statement of comprehensive income but are reported as deposits to investment contracts and are included in financial liabilities in the balance sheet. On existing business, a liability is recognised at the point the premium falls due. The liability for premiums received on new business is deemed to commence at the acceptance of risk.

   17.1.3   Benefits paid 

Withdrawals from policy contracts and other benefits paid are not included in the consolidated statement of comprehensive income but are deducted from financial liabilities under investment contracts in the balance sheet. Benefits are deducted from financial liabilities and transferred to amounts due to investment contract holders on the basis of notifications received, when the benefit falls due for payment or, on the earlier of the date when paid or when the contract ceases to be included within those liabilities.

17.2 Movement in financial liabilities under investment contracts

The following table summarises the movement in liabilities under investment contracts during the year:

 
                                               2021      2020 
                                               GBPm      GBPm 
 ----------------------------------------  --------  -------- 
 Deposits to investment contracts             148.8     143.0 
 Withdrawals from contracts and charges     (167.2)   (142.3) 
 Change in provisions for investment 
  contract liabilities                        162.1       0.1 
-----------------------------------------  --------  -------- 
 Movement in year                             143.7       0.8 
 At beginning of year                       1,080.5   1,079.7 
-----------------------------------------  --------  -------- 
                                            1,224.2   1,080.5 
-----------------------------------------  --------  -------- 
 
 
                                            2021      2020 
                                            GBPm      GBPm 
--------------------------------------  --------  -------- 
 Contractually expected to be settled 
  within 12 months                          40.2      36.7 
 Contractually expected to be settled 
  after 12 months                        1,184.0   1,043.8 
--------------------------------------  --------  -------- 
                                         1,224.2   1,080.5 
--------------------------------------  --------  -------- 
 

The change in provisions for investment contract liabilities includes dividend and interest income and net realised and unrealised gains and losses on financial investments held to cover financial liabilities. Dividend income, interest income and gains and losses are accounted for in accordance with note 6.

17.3 Investments held to cover liabilities under investment contracts

The Group classifies its financial assets into the following categories: financial investments and trade receivables. Financial investments consist of units in collective investment schemes, equity securities, fixed income securities and deposits with credit institutions. Collective investment schemes, equity securities and fixed income securities are designated at fair value through profit or loss. Deposits with credit institutions are designated at amortised cost.

The decision by the Group to designate its financial investments at fair value through profit or loss reflects the fact that the investment portfolio is managed, and its performance evaluated, on a fair value basis.

The Group recognises purchases and sales of investments on trade date. Investment transaction costs are written off in administration expenses as incurred.

All gains and losses derived from financial investments, realised or unrealised, are recognised within investment income in the consolidated statement of comprehensive income in the period in which they arise.

The value of financial assets at fair value through profit or loss that are traded in active markets (such as trading securities) is based on quoted market prices at the balance sheet date. The quoted market price for financial assets held by the Group is the current bid price. Investments in funds are valued at the latest available net asset valuation provided by the administrators or managers of the funds and companies, unless the Directors are aware of good reasons why such valuations would not be the most appropriate or indicative of fair value. Where necessary, the Group uses other valuation methods to arrive at the stated fair value of its financial assets, such as recent arms' length transactions or reference to similar listed investments.

Loans and receivables are financial assets with fixed or determinable payments that are not quoted on an active market. Loans and receivables consist, primarily, of contract fees receivable, long-term cash deposits (i.e. with an original maturity duration in excess of three months) and cash and cash equivalents.

The following investments, cash and cash equivalents, other assets and liabilities are held to cover financial liabilities under investment contracts. They are included within the relevant headings on the consolidated balance sheet.

 
                                               2021      2020 
                                               GBPm      GBPm 
   --------------------------------------  --------  -------- 
 Equity securities                             58.0      40.7 
 Investments in collective investment 
 schemes                                    1,033.1     883.5 
 Fixed income securities, bonds and 
  structured notes                             57.5      52.6 
 Deposits and money market funds               78.1     105.1 
 Total assets held to cover financial 
 liabilities                                1,226.7   1,081.9 
 Other payables                               (2.5)     (1.4) 
-----------------------------------------  --------  -------- 
 Financial investments held to cover 
  financial liabilities                     1,224.2   1,080.5 
-----------------------------------------  --------  -------- 
 

The other receivables and other payables fair value approximates amortised cost.

17.4 Amounts due to investment contract holders

Where financial liabilities under investment contracts mature or are redeemed by contact holders, such amounts payable are recorded as amounts due to investment contract holders.

   18    Deferred income 

Fees charged for services related to the management of investment contracts are recognised as revenue as the services are provided. Initial fees which exceed the level of recurring fees and relate to the future provision of services are deferred. These are amortised over the anticipated period in which services will be provided. The recognition of balances in the deferred income reserve is based on actuarial assumptions around future income over the life of each policy. These actuarial assumptions are complex in nature and are subject to estimation uncertainty. The actuarial assumptions are reviewed regularly by the Appointed Actuary.

The movement in value of deferred income over the financial year is summarised below.

 
                                           2021     2020 
                                           GBPm     GBPm 
--------------------------------------  -------  ------- 
 At beginning of financial year           137.8    133.2 
 Income received and deferred during 
 the year                                  21.4     21.6 
 Income amortised and recognised 
  in contract fees during the year       (16.7)   (17.0) 
--------------------------------------  -------  ------- 
                                          142.5    137.8 
--------------------------------------  -------  ------- 
 
 
 
                                         2021    2020 
 Carrying value                          GBPm    GBPm 
-------------------------------------  ------  ------ 
 Expected to be amortised within 
  one year                               13.6    13.0 
 Expected to be amortised after one 
 year                                   128.9   124.8 
-------------------------------------  ------  ------ 
                                        142.5   137.8 
-------------------------------------  ------  ------ 
 
 
   19    Other payables 

Other payables are initially recognised at fair value and subsequently measured at amortised cost. They are recognised at the point where service is received but payment is due after the balance sheet date.

 
                                       2021   2020 
                                       GBPm   GBPm 
------------------------------  ----  -----  ----- 
 Commission payable                     1.7    1.8 
 Other creditors and accruals           6.2    7.0 
  Provisions                            0.4    0.1 
 Lease liabilities                      2.7    3.0 
                                       11.0   11.9 
 -----------------------------------  -----  ----- 
 

Provisions represent amounts to settle a number of the claims referred to in Note 25 'Contingent Liabilities' where it is economically beneficial to do so. Such provisions are calculated where there is an established pattern of settlement for that grouping of claims. The following table reflects the movement in the provision during the period under review.

 
                                    2021 
                                    GBPm 
 Settlement provision as at 1 
  July 2020                          0.1 
Additional provisions made in 
 the period                          0.5 
Released from the provision for 
 settlements                       (0.2) 
Settlement provision as at 30 
 June 2021                           0.4 
 

Further information outlined within IAS 37.85 is not disclosed on the basis that it may prejudice the Company's position.

With the exception of the lease liabilities shown in note 13, and the provisions referred to above, all other payable balances, including amounts due to contract holders, are deemed to be current. Due to the short-term nature of these payables the carrying value is considered to reflect fair value.

   20    Capital management 

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 and;

   --      generate operating cash flows to meet 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 Company monitors capital on two bases:

   --      the total shareholder's equity, as per the balance sheet 

-- the capital requirement of the relevant supervisory bodies, where subsidiaries are regulated.

The Group's policy is for each company to hold the higher of:

   --      the Company's internal assessment of the capital required; or 
   --      the capital requirement of the relevant supervisory body, where applicable. 

There has been no material change in the Group's management of capital during the period. The Group continued to perform additional modelling around risks arising from the Covid-19 pandemic and to give consideration to emerging market practice and regulatory expectations around capital conservation. All regulated entities within the Group exceed significantly the minimum solvency requirements at the balance sheet date.

The Group's lead regulator, Isle of Man FSA, monitors capital requirements for the Group as a whole. The insurance subsidiaries are directly supervised by their local regulators. The lead regulator's approach to the measurement of capital adequacy is primarily based on monitoring the relationship of the Solvency Capital Requirement ('SCR') to regulatory capital. All regulated entities within the Group exceed the minimum solvency requirements at the balance sheet date. 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 note 25 are resolved.

   21    Share capital 
 
                                                 2021    2020 
                                                 GBPm    GBPm 
Authorised: 
200,000,000 ordinary shares of 50p              100.0   100.0 
                                                       ------ 
Issued and fully paid: 
137,557,079 (2019: 137,557,079) ordinary 
 shares of 50p                                   68.8    68.8 
 
 

No shares (2020: nil) were issued or bought back in the year.

   22    Other reserves 

Other reserves comprise the merger reserve arising on the acquisition by the Company of its subsidiary companies on 1 July 2005, the share premium account and the share save reserve. The merger reserve represents the difference between the par value of shares issued by the Company for the acquisition of those companies, compared to the par value of the share capital and the share premium of those companies at the date of acquisition.

 
                                 2021    2020 
                                 GBPm    GBPm 
Merger reserve                 (48.5)  (48.5) 
Share premium                     0.1     0.1 
Share based payments reserve        -     0.4 
Share save reserve                0.1     0.1 
Reserve for own shares held 
 within EBT                         -   (0.4) 
                               (48.3)  (48.3) 
 

At 30 June 2020, included within other reserves was an amount representing 510,000 ordinary shares held by the Group's employee benefit trust ('EBT') which were acquired at a cost of GBP0.4m (see note 23.2). The ordinary shares held by the trustee of the Group's employee benefit trust are treated as treasury shares in the consolidated balance sheet in accordance with IAS 32 "Financial Instruments: Presentation".

This reserve arose when the Group acquired equity share capital under its EBT, which is held in trust by the trustee of the Group's employee benefit trust. Treasury shares cease to be accounted for as such when they are sold outside the Group or the interest is transferred in full to the employee pursuant to the terms of the incentive plan. 498,000 shares vested on 1 July 2020 in line with the terms of the EBT and were subsequently sold or transferred from the EBT, leaving 12,000 remaining in the EBT. See note 23.2 for further details.

   23    Equity settled share-based payments 

The Company has established a number of equity-based payment programmes for eligible employees. The fair value of expected equity-settled share-based payments under these programmes is calculated at date of grant using a standard option-pricing model and is amortised over the vesting period on a straight-line basis through the consolidated statement of comprehensive income. A corresponding amount is credited to equity over the same period.

At each balance sheet date, the Group reviews its estimate of the number of options expected to be exercised. The impact of any revision in the number of such options is recognised in the consolidated statement of comprehensive income so that the charge to the consolidated statement of comprehensive income is based on the number of options that actually vest. A corresponding adjustment is made to equity.

The estimated fair value of the schemes and the imputed cost for the period under review is not material to these financial statements.

23.1 SAYE programme

This is a standard scheme approved by the Revenue authorities in the Isle of Man that is available to all employees where individuals may make monthly contributions over three or five years to purchase shares at a price not less than 80% of the market price at the date of the invitation to participate.

At the date of this report, the following options remain outstanding under each tranche:

 
                  2021      2020 
                No. of    No. of 
Scheme year    options   Options 
2015                 -    61,763 
2016                 -         - 
2017            20,717    62,730 
2018           270,279   384,083 
                        -------- 
               290,996   508,576 
                        -------- 
 

A summary of the transactions in the existing SAYE programmes during the year is as follows:

 
                                          2021                   2020 
                                           Weighted               Weighted 
                                            average                Average 
                                  No. of   exercise      No. of   Exercise 
                                 options  price (p)     options  price (p) 
Outstanding at the start 
 of year                         508,576         64     838,196         65 
Granted                                -          -           -          - 
Exercised                              -          -           -          - 
Forfeited                      (217,580)         66   (329,620)         66 
                              ----------  ---------  ----------  --------- 
Outstanding at end of year*      290,996         63     508,576         64 
                              ----------  ---------  ----------  --------- 
 

*None of these options are exercisable as at 30 June 2021.

There were no new options granted during the current financial year.

23.2 Incentive Plan Employee Benefit Trust

An Employee Benefit Trust was established in February 2018 to hold shares awarded to employees as an incentive on a deferred basis.

Shares awarded under the scheme are purchased by the Trust in the open market and held until vesting. Awards made under the scheme would normally vest after three years. There were 498,000 share awards which vested during the year (2020: 75,000 shares).

The Trust was funded with a loan of GBP446,000 during 2018 and as at 30 June 2021 the Trust held 12,000 shares (2020: 510,000 shares). As at 30 June 2021, the outstanding balance on the loan was GBP12,000 (30 June 2020: GBP446,000).

   24    Related party transactions 
               24.1      Intra-group transactions 

Various subsidiary companies within the Group perform services for other Group companies in the normal course of business. The financial results of these activities are eliminated in the consolidated financial statements.

   24.2      Key management personnel compensation 

Key management consists of 11 individuals (2020: 10), being members of the Group's Executive Committee and executive Directors of direct subsidiaries of the Company.

The aggregate remuneration paid to key management during the year-ended 30 June was as follows:

 
 
                                 2021    2020 
                                 GBPm    GBPm 
Short-term employee benefits      1.8     1.9 
Post-employment benefits          0.3     0.3 
Total                             2.1     2.2 
 

There were no outstanding amounts as at 30 June 2021 (2020: nil).

The total value of investment contracts issued by the Group and held by key management is zero (2020: zero).

   24.3      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. In the year to 30 June 2021, the investment contract was redeemed by Dr Polonsky resulting in no balances with the Group as at 30 June 2021 and to the date of this report.

   24.4   Incentive Plan Employee Benefit Trust 

An Employee Benefit Trust was established in February 2018 to hold shares awarded to employees as an incentive on a deferred basis. The Trust was funded with a loan of GBP446,000 during 2018 and as at 30 June 2021 the Trust held 12,000 shares (2020: 510,000). Awards totalling 498,000 shares vested during the year (2020: 75,000).

   25     Contingent liabilities 
   25.1   Litigation 

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 30 June 2021, the Group had been served with cumulative writs with a net exposure totalling EUR26.5m, or GBP22.7m in sterling terms (30 June 2020: EUR25.8m / GBP23.4m) arising from contract holder complaints and other asset performance-related issues. The increase in euro terms since 30 June 2020 was driven by a reduction in the fair value of investment assets backing the claims.

During the year, the Group successfully defended sixteen cases with net exposures of approximately GBP1.6m, ten of which have been appealed by the plaintiffs (2020: successfully defended nine cases with net exposures of GBP0.6m). These successes continue to affirm confidence in the Group's legal arguments.

Our policy is to maintain contingent liabilities even where we win cases in the court of first instance if such cases have been subsequently appealed. This includes our largest single case in Belgium.

We have previously noted that we expect a number of our larger claims to ultimately be covered by our Group insurance cover. During 2021 we recorded GBP0.5m in total recoveries during the year. We expect such reimbursement to continue during the course of that litigation.

As a result, we also expect that a significant amount of the GBP22.7m of 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.

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 in the best interests of the Group and its shareholders to reach a commercial resolution with regard to certain of these claims. Where an established pattern of settlement is established for any grouping of claims, a provision for expected future settlements is made in line with IAS 37. This is outlined in Note 19.

It is not possible at this time to make any further estimates of liability.

Between 30 June 2021 and the date of this report, there have been no material developments.

   25.2   Isle of Man Policyholders' Compensation Scheme 

The Group's principal subsidiary, Hansard International is a member of the Isle of Man Policyholders' Compensation Scheme governed by the Life Assurance (Compensation of Policyholders) Regulations 1991. The objective of the Scheme is to provide compensation for policyholders should an authorised insurer be unable to meet its liabilities to policyholders. In the event of a levy being charged by the Scheme members, Hansard International would be obliged to meet the liability arising at the time. The maximum levy payable in accordance with the regulations of the Scheme in respect of the insolvency of the insurer is 2% of long term business liabilities. Hansard International's products include a clause in their terms and conditions permitting it to recover any monies paid out under the Scheme from contract holders.

   26     Foreign exchange rates 

The Group's presentational and functional currency is pounds sterling, being the currency of the primary economic environment in which the Group operates.

Foreign currency transactions are translated into sterling using the applicable exchange rate prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange prevailing at the balance sheet date, and the gains or losses on translation are recognised in the consolidated statement of comprehensive income.

Non-monetary assets and liabilities that are held at historical cost are translated using exchange rates prevailing at the date of transaction; those held at fair value are translated using exchange rates ruling at the date on which the fair value was determined.

The closing exchange rates used by the Group for the conversion of significant consolidated balance sheet items to sterling were as follows:

 
 
               2021  2020 
US Dollar      1.38  1.24 
Japanese Yen    153   134 
Euro           1.17  1.10 
 
   27    Non statutory accounts 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 June 2021 or 2020, but is derived from those accounts. The auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report.

   28    Annual report 

The Company's annual report and accounts for the year ended 30 June 2020 is expected to be posted to shareholders by 5 October 2021. Copies of both this announcement and the annual report and accounts will be available to the public at the Company's registered office at Harbour Court, Lord Street, PO Box 192, Douglas, Isle of Man, IM99 1QL and through the Company's website at www.Hansard.com .

Responsibility statement of the directors in respect of the annual financial report

The Directors confirm to the best of their knowledge that:

-- The financial statements have been prepared in accordance with International Reporting Financial Standards as adopted by the EU and give a true and fair view of the assets, liabilities, financial position and profit for the Company and the undertakings included in the consolidation as a whole as required by the Disclosure and Transparency Rules Chapter 4.2.4; and

-- Pursuant to Disclosure and Transparency Rules Chapter 4, the Directors' report of the Company's annual report and accounts includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties faced by the business.

On behalf of the Board

 
           G Easton                      T Davies 
           Director                      Director 
           22 September 2021 
 

OTHER INFORMATION

Risk Based Solvency Capital

A) Risk Based Solvency capital position

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 30 June 2021 has been reported below on this basis.

The Group Risk Based Solvency free assets at 30 June 2021 were GBP58.7m (30 June 2020: GBP66.5m;), before allowing for payment of the 2021 final ordinary dividend.

All Risk Based Solvency and related data presented in this section is subject to change prior to submission to regulatory authorities.

 
                                     30 June  30 June 
Group Risk Based Solvency capital       2021     2020 
 position                              Total    Total 
                                        GBPm     GBPm 
Own Funds                              145.5    149.1 
Solvency Capital Requirement            86.8     82.6 
Free assets                             58.7     66.5 
Solvency ratio (%)                      168%     180% 
 

All Own Funds are considered Tier 1 capital.

The following compares Own Funds as at 30 June 2021 and 30 June 2020:

 
                      30 June    30 June 
                         2021       2020 
                    Own Funds  Own Funds 
                         GBPm       GBPm 
Value of In-Force       145.8      147.9 
Risk Margin            (29.4)     (29.5) 
Net Worth                29.1       30.7 
Total                   145.5      149.1 
 

B) Analysis of movement in Group Solvency surplus

A summary of the movement in Group Solvency surplus from GBP66.5m at 30 June 2020 to GBP58.7m at 30 June 2021 is set out in the table below.

 
 
                                                GBPm 
Risk Based Solvency surplus at 30 June 2020     66.5 
Operating experience                           (3.1) 
Investment performance                          18.0 
Changes in assumptions                         (4.6) 
Impact of dividends paid                       (5.6) 
Foreign exchange                              (12.5) 
Risk Based Solvency surplus at 30 June 2021     58.7 
 

The movement in Group Risk Based Solvency surplus in 2021 was reduced by dividends paid, operating experience and assumption changes offset by overall positive market movements.

New business written had a GBP(1.0)m impact on solvency surplus for the period.

C) Analysis of Group Solvency Capital Requirement

The analysis of the Group's Solvency Capital Requirement ("SCR") by risk type is as follows:

 
Split of the Group's Solvency Capital Requirement *    30 June   30 June 
                                                          2021      2020 
Risks                                                 % of SCR  % of SCR 
Market 
    Equity                                                 52%       48% 
    Currency                                               12%       12% 
Insurance 
   Lapse                                                   44%       48% 
   Expense                                                 20%       21% 
Default                                                     2%        1% 
Operational                                                16%       15% 
 

* Figures are the capital requirements prior to diversification benefits expressed as a percentage of the final diversified SCR.

D) Reconciliation of IFRS equity to Group Risk Based Solvency Shareholder Own Funds

 
                                                     30 June  30 June 
                                                        2021     2020 
                                                        GBPm     GBPm 
IFRS shareholders' equity                               24.7     25.9 
Elimination of DOC                                   (125.1)  (122.3) 
Elimination of DIR                                     142.5    137.8 
Value of In-Force                                      145.8    147.9 
Liability valuation differences*                       (3.8)    (4.7) 
Impact of risk margin                                 (29.4)   (29.5) 
Other**                                                (9.2)    (6.0) 
Risk Based Solvency Shareholder Own Funds              145.5    149.1 
 

* Liability valuation differences relate to additional provisions made for risk-based capital purposes, notably for contingent liabilities.

** Other is related to Intangible Assets not recognised on the solvency balance sheet.

E) Sensitivity analysis

The sensitivity of the Own Funds of the Group and of the Group's life insurance subsidiaries to significant changes in market conditions is as follows:

 
                                                      30 June  30 June 
                                                         2021     2020 
                                                        Group    Group 
                                                         GBPm     GBPm 
Own Funds                                               145.5    149.1 
Impact of: 
   10% instantaneous fall in equity markets            (10.5)    (9.2) 
   100 basis points decrease in interest rates          (2.8)    (1.3) 
   10% increase in expenses                             (9.3)    (9.0) 
   1% increase in expense inflation                     (7.1)    (6.8) 
   10% strengthening of sterling                        (8.0)    (9.2) 
 

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