REG - Hansard Global plc - Results for the six months ended 31 December 2023
07/03/2024 07:15
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RNS Number : 9683F Hansard Global plc 07 March 2024
7 March 2024
Hansard Global plc
Results for the six months ended 31 December 2023
Hansard Global plc ("Hansard" or "the Group"), the specialist long-term
savings provider, issues its results for the six months ended 31 December
2023. All figures refer to the six months ended 31 December 2023 ("H1 2024"),
except where indicated.
Financial highlights
· IFRS profit before tax was £4.1m for H1 2024, up 32% from £3.1m in H1
2023.
· The current year result has improved as a result of increases in fee
income and continuation of a higher interest rate environment, partially
offset by increased investment in strategic initiatives to improve future
performance.
· Fees and commissions earned totalled £23.9m for H1 2024, up 4%
compared to £22.9m for H1 2023 driven by higher fee income in Hansard
International.
· Investment and other income increased by £0.7m to £3.1m for H1 2024,
up 29% from £2.4m in H1 2023 as improved returns on surplus cash were offset
by lower foreign exchange gains.
· Administrative and other expenses were £14.7m for H1 2024 compared to
£14.1m in H1 2023 as a result of increased investment in strategic
initiatives.
· New business for the Group for H1 2024 was £36.2m in PVNBP ("Present
Value of New Business Premiums") terms (H1 2023: £43.4m). This reflects
ongoing uncertainties in global economic conditions and a general hesitancy by
clients to commit to long-term savings products.
· Assets under administration were £1.11 billion as at 31 December 2023,
largely unchanged from £1.10 billion as at 30 June 2023.
· Value of in-force business as at 31 December 2023 was £120.1m (30 June
2023: £124.4m).
· The Board has declared an interim dividend of 1.8p per share (H1 2023:
1.8p).
Strategic and operational highlights
· Hansard International has made significant progress developing a
distribution opportunity for its Japan proposition.
· In early March 2024, the Hansard OnLine platform migrated to a new
system environment, the culmination of a major strategic initiative that
delivers numerous benefits and improvements to advisors, their clients and the
Group. Implementation of the new system enables Hansard to deliver new
products to market more quickly.
H1 2024 H1 2023
IFRS profit before tax £4.1m £3.1m
IFRS fees and commissions £23.9m £22.9m
IFRS administrative and other expenses £14.7m £14.1m
IFRS basic earnings per share 2.9p 2.2p
Interim dividend - to be paid on 27 April 2023 1.8p 1.8p
As at 31 December 30 June
2023 2023
Assets under Administration £1.11b £1.10b
Value of In-Force (regulatory basis) £120.1m £124.9m
New Business Flows
New business flows for the half-year are summarised as follows:
H1 2024 H1 2023 %
Basis £m £m change
Present Value of New Business Premiums 36.2 43.4 (16.6%)
Annualised Premium Equivalent 5.5 6.4 (14.1%)
Present Value of New Business Premiums ("PVNBP")
New business flows on the basis of PVNBP are broken down as follows:
H1 2024 H1 2023 %
PVNBP by product type £m £m change
Regular premium 21.9 30.8 (28.9%)
Single premium 14.3 12.6 13.5%
Total 36.2 43.4 (16.6%)
H1 2024 H1 2023 %
PVNBP by geographical area £m £m Change
Middle East & Africa 16.2 19.5 (16.9%)
Latin America 10.6 13.7 (22.6%)
Rest of World 6.5 7.4 (12.2%)
Far East 2.9 2.8 3.6%
Total 36.2 43.4 (16.6%)
Assets under Administration ("AUA")
The composition and value of AuA is based upon the assets selected by or on
behalf of contract holders to meet their savings and investment needs.
Reflecting the wide geographical spread of the Group's customer base, the
majority of premium contributions and of AuA are designated in currencies
other than sterling. Over 60% of Group AuA are denominated in US dollars.
The total of such assets is affected by the level of new premium contributions
received from new and existing policy contracts, the amount of assets
withdrawn by contract holders, charges and the effect of investment market and
currency movements. These factors ultimately affect the level of fund-based
income earned by the Group. Net withdrawals are typically experienced in
Hansard Europe dac ("Hansard Europe") as it closed to new business in 2013.
The following analysis shows the components of the movement in AuA:
H1 2024 H1 2023
£m £m
Deposits to investment contracts - regular premiums 38.8 44.2
Deposits to investment contracts - single premiums 13.8 12.7
Withdrawals from contracts and charges (87.6) (73.2)
Effect of market and currency movements 39.5 23.0
Increase in period 4.5 6.7
Opening balance as at 1 July 1,101.5 1,092.3
Assets under Administration at 31 December 1,106.0 1,099.0
AuA is split as follows between Hansard International (incorporating business
reinsured from Hansard Worldwide) and Hansard Europe:
H1 2024 H1 2023
£m £m
Hansard International 1,044.5 1,032.7
Hansard Europe 61.5 66.3
Assets under Administration at 31 December 1,106.0 1,099.0
Outlook
Looking forward we are confident that our new product pipeline will lead to
increased sales and long-term growth in the business. We expect interest rates
will fall slightly from current levels, reducing returns on cash reserves and
product margins.
NOTICE OF TRADING UPDATE
A trading update in respect of our financial year ending 30 June 2024 is
expected to be published on 26 September 2024.
Graham Sheward, Group Chief Executive Officer, commented:
"Although the environment for investment and long-term savings plans remains
challenging, we have delivered an improved profit result to the prior year
comparative period.
We have successfully migrated to our new policy administration platform and
continue to make good progress with our strategic initiatives, allowing us to
target future new business growth and cost efficiencies."
For further information:
Hansard Global
plc
+44 (0) 1624 688 000
Graham Sheward, Group Chief Executive Officer
Thomas Morfett, Chief Financial Officer
Email: investor-relations@hansard.com
Camarco
LLP
+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 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 pleased to present to you Hansard Global plc's ("Hansard" or "Group")
financial results for the first six months of our 2024 financial year ("H1
2024").
We have continued to invest and position our business for the long-term future
in the face of a challenging external environment for new business, and we
remain on track to deliver on important initiatives in the next six months
which will see key new products come to market via our new policy
administration system and on-line portals.
Hansard International has also made significant progress developing a
distribution opportunity for its Japan proposition.
A new portfolio bond was launched through Hansard Worldwide Limited in January
2024, with customer policies administered on our new policy administration
system. Furthermore, our existing policy book was migrated over to the new
system in early March 2024, the culmination of a major strategic initiative
that we expect to benefit our policyholders, distribution partners and Group
performance through enhanced operational efficiency, increased scalability,
and cost savings.
Our profits, shareholder funds and regulatory capital have remained robust,
and we continue to benefit from the higher interest rate environment with
improved returns on our cash reserves and product margins.
New business
Reflecting continuing uncertainties in global economic conditions and a
general hesitancy by clients to commit to long-term savings products, new
business for H1 2024 was £36.2m on a Present Value of New Business Premiums
("PVNBP") basis, compared to £43.4m in H1 2023. However, we expect our new
portfolio bond and Japan proposition to yield new opportunities for growth
going forward.
Financial performance
The Group's profit before tax under International Financial Reporting
Standards ("IFRS") of £4.1m for the period was £1.0m higher than the
comparative period profit of £3.1m. Consolidated fees and commissions were
£23.9m (H1 2023: £22.9m), driven by higher fee income in Hansard
International. Administration and other expenses of £14.7m are up by £0.6m
on the prior year.
Capitalisation and solvency
The Group continues to be well capitalised to meet the requirements of
regulators, contract holders, intermediaries and other stakeholders. Free
assets in excess of the Solvency Capital Requirements of the Group were
£39.6m, a coverage of 150% (30 June 2023: £44.6m and 156%). We continue to
take a prudent approach with our investment policy for shareholder assets and
have maintained a resilient solvency position over recent years.
Dividends
Taking into account the current financial position and future outlook, the
Board has resolved to maintain its interim dividend at 1.8p per share (H1
2023: 1.8p per share). This will be paid on 25 April 2024 with an ex-dividend
date of 14 March 2024.
Board
Christine Theodorovics, Independent Non-executive Director has stepped down
from the Board with effect from 29 February 2024, following her appointment as
Chief Executive Officer of Baloise Luxembourg. On behalf of the Board, I would
like to thank Christine for her contribution as Independent Non-executive
Director and a member of all our Board Committees. We have appreciated
Christine's candour and advice during her tenure. The Board's search for a new
Independent Non-executive Director has commenced.
Philip Kay
Chair
6 March 2024
INTERIM MANAGEMENT REPORT
REPORT OF THE GROUP CHIEF EXECUTIVE OFFICER
GRAHAM SHEWARD
Strategy implementation and new business distribution
The Group provides regular and single premium savings products to expatriate
and local clients around the world seeking access to a range of international
investments from a safe-haven jurisdiction.
We continue to pursue our strategy of growing our business organically through
Independent Financial Advisor ("IFA") client relationships and the pursuit of
targeted opportunities to improve our scale.
Our strategic focus for the second half of this financial year remains the
delivery of two significant projects:
· Launching a new locally licenced investment product in Japan; and
· Ensuring our new policy administration systems support our next
generation of products whilst realising associated cost and efficiency gains.
Results for the period
IFRS profit for the period was £4.1m before tax (H1 2023: £3.1m). The
increase in profit was driven by increased fee income and improved returns on
Group investments, offset by increased investment in strategic initiatives.
Underlying operational expenses continue to be closely scrutinised and managed
in the face of persistent high inflation. Administrative costs excluding legal
and bad debt provisions were £11.4m compared to £10.6m for H1 2023 as a
result of increased investment in strategic initiatives as noted above.
A summary of the results for H1 2024 are as follows:
H1 2024 H1 2023
IFRS profit before tax £4.1m £3.1m
IFRS basic earnings per share 3.0p 2.2p
Interim dividend - to be paid on 25 April 2024 1.8p 1.8p
As at 31 December 2023 30 June 2023
Assets under Administration £1,106.0m £1,101.5m
Value of In-Force (regulatory basis) £120.1m £124.4m
The Value of In-Force ("VIF") on a regulatory basis as at 31 December 2023 was
£120.1m as compared to £124.4m as at 30 June 2023. VIF has decreased due to
dividend payments and lower new business volumes, offset by positive market
movements.
Details of the results for the period are contained in the Business and
Financial Review.
Capitalisation and solvency
A key financial objective is to ensure that the Group's solvency is managed
safely through the economic cycle to meet the requirements of regulators,
contract holders, intermediaries, and other stakeholders. The Group remains
well capitalised.
The Group's Solvency Capital Requirements under risk-based solvency
regulations have a coverage ratio of 150%, down slightly on the 30 June 2023
level of 156%. The Group's capital is typically held in a wide range of
deposit institutions and in highly rated money market liquidity funds.
Hansard OnLine
In early March 2024, the Hansard OnLine platform migrated to a new system
environment, the culmination of a major strategic initiative that delivers
numerous benefits and improvements to advisors, their clients and the Group.
Implementation of the new system enables Hansard to deliver new products to
market more quickly.
Contract holders will also benefit from the migration to a new system
environment, accessing a more intuitive, feature rich platform.
Our people
Our people continue to be critical to the success of the Group and demonstrate
a continued commitment, and resilience in managing both our on-going
day-to-day operations and our key strategic projects.
We maintain a commitment to the highest levels of service and quality in
relation to servicing contract holders and intermediaries, and we continue to
receive external recognition by our peers. We recently won three client
service awards at the 2023 International Investment awards - for Asia and
FinTech.
Regulation and risk management
The pace, scale, and complexity of regulatory developments continue to evolve,
and the Group devotes significant resources to meet these challenges.
Hansard Europe dac ("Hansard Europe")
Hansard Europe was closed to new business in 2013 and the Group's objective is
to run the business off in an efficient and well managed manner. We continue
to meet the requirements of the Hansard Europe's policyholders, regulators and
stakeholders while utilising operational efficiencies through the use of
Hansard OnLine. The servicing of policy contracts and other administrative
operations are performed at the Group's head office in the Isle of Man.
Regulatory control and management of outsourced activities are exercised from
the company's offices in Dublin. Hansard Europe remains well capitalised
with net assets of £13.3m.
We continue to robustly defend litigation arising out of circumstances where
policyholders consider that the performance of an asset linked to a particular
contract is not satisfactory. As outlined more fully in section 11 of the
Business and Financial Review, total writs were £22.0m as at 31 December 2023
(30 June 2023: £22.4m).
Dividend
The Board has resolved to pay an interim dividend of 1.8p per share (H1 2023:
1.8p). This dividend will be paid on 25 April 2024.
Graham Sheward
Chief Executive Officer
6 March 2024
BUSINESS AND FINANCIAL REVIEW
1. BUSINESS MODEL
Hansard is a specialist long-term savings provider that has been providing
innovative financial solutions for international clients since 1987. We focus
on helping financial advisors and institutions to provide their clients
(individual and corporate investors) with savings and investment products
within secure insurance wrappers to meet long-term savings and investment
objectives. We administer assets in excess of £1 billion for just under
40,000 client accounts around the world.
The Company's head office is in Douglas, Isle of Man, and its principal
subsidiaries operate from the Isle of Man, The Bahamas and the Republic of
Ireland.
Hansard International Limited ("Hansard International") is authorised by the
Isle of Man Financial Services Authority and has a branch in Malaysia,
authorised by the Labuan Financial Services Authority, to support business
flows from Asian growth economies. Hansard International also has a branch in
Japan to support its Japanese proposition, which is authorised by the Japanese
Financial Services Agency. 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 Independent Financial Advisers ("IFAs") and the retail operations of
financial institutions.
Our network of Regional Sales Managers provides local language-based support
services to independent financial advisors in key territories around the
world, supported by our multi-language online platform, Hansard OnLine.
2. VISION AND STRATEGY
Our vision for the Hansard Group is:
"To share success with our clients by providing simple, understandable and
innovative financial solutions".
To deliver this vision, client outcomes will be the central focus within our
business and consequently we will seek to evolve all aspects of our products,
processes and distribution in order to constantly improve.
Our talented people are the foundation of our business. We have created an
empowering culture, which values innovation, quality, integrity and respect.
Our strategy to improve, grow and future-proof our business will be delivered
through three key areas of strategic focus:
i. Improve our business: We will continue to 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: We have acquired the necessary
licence and approvals to access the Japanese market and have made significant
progress developing a distribution opportunity for our Japanese proposition.
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, and have recently
launched our new policy administration system.
3. HANSARD ONLINE
In early March 2024, the Hansard OnLine platform migrated to a new system
environment, the culmination of a major strategic initiative that we expect
will deliver numerous benefits and improvements to advisors and their clients.
The policy details of thousands of existing contract holders were successfully
transferred to the new platform, providing them access to a new, intuitive and
feature-rich portal.
Furthermore, the arrival of the new platform enables Hansard to develop and
deliver new products to market more quickly. The first of these, 'Global
Select', Hansard's new open architecture, single premium bond, was launched to
a select number of advisors in January 2024, with other product launches
scheduled in the coming months.
Hansard OnLine is a powerful and secure tool that is used by advisors around
the world. Available in multiple languages, it allows them to access
information regarding their clients' policies, to generate reports, submit new
business applications online, place dealing and switch instructions online,
and to access all client correspondence.
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 reduces the Group's operational risk
exposures, as does the ability of the Group to communicate electronically with
contract holders and advisors. Data validation happens in real-time to ensure
there are no delays to the investment of client funds.
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 2023.
Online Accounts
As more contract holders become technologically savvy, there is an increasing
trend for them to take more control of their financial wellbeing by embracing
mobile technology to better monitor and manage their finances, via their
personalised, Hansard Online Account.
Supporting our commitment to delivering 'excellent customer service', we
believe it is vital to provide our clients with an intuitive, secure online
platform that allows them to access their finances easily and comprehensively,
24/7.
Similar to our advisor-facing online platform, the client's Online Account
enables the client to access all policy information, valuation statements,
transaction history, premium reports, correspondence, and a library of forms
and literature, to switch funds online; and to receive post electronically,
rather than in hard-copy form. This not only provides a more secure, faster
and more cost-efficient means of communication with clients, but also the
convenience to manage their own contract within a timeframe which is
convenient to them.
Cyber security
Hansard continues to invest in its cyber security infrastructure with the
implementation of a Security Operations Centre, operating at an ISO27001
(Information Technology Security Standard) standard, to provide further
enhanced surveillance of our systems and external threats.
4. New business
PROPOSITION
The Group's proposition is to develop and enhance relationships with contract
holders and intermediaries through the use of our people, products and
technology in a way that meets shared objectives.
The results of activities in each region in H1 2024 are reported in the table
below.
New business performance for the six months ended 31 December 2023
New business for H1 2024 was £36.2m on a PVNBP basis, down 16.6% from £43.4m
H1 2023. This reflected continuing uncertainties in global economic conditions
and a general hesitancy by clients to commit to long-term savings products.
New business levels for H1 2024 are summarised as follows:
Year
Six months ended ended
31 December 30 June
2023 2022 2023
£m £m £m
Present Value of New Business Premiums 36.2 43.4 85.7
Annualised Premium Equivalent 5.5 6.4 12.7
The following tables show the breakdown of new business calculated on the
basis of PVNBP:
Year ended
Six months ended
31 December 30 June
2023 2022 2023
By type of contract £m £m £m
Regular premium 21.9 30.8 55.7
Single premium 14.3 12.6 30.0
36.2 43.4 85.7
Year ended
Six months ended
31 December 30 June
2023 2022 2023
By geographical area £m £m £m
Middle East and Africa 16.2 19.5 42.4
Latin America 10.6 13.7 25.7
Rest of World 6.5 7.4 12.1
Far East 2.9 2.8 5.5
Total 36.2 43.4 85.7
PVNBP and other terms are defined in the Glossary contained within the Group's
annual financial statements, which are available from the Group's website
(www.hansard.com).
We continue to receive new business from a diverse range of financial advisors
around the world. The majority of new business premiums are denominated in US
dollars at approximately 86% (H1 2023: 91%), with approximately 9% denominated
in sterling (H1 2023: 6%), and the remainder in euro or other currencies.
In our largest region, Middle East and Africa, new business was down 17.1% in
H1 2024 compared to H1 2023. Although lower than expected we have made good
progress with distribution relationships following the launch of our new
single premium proposition in January 2024 and remain optimistic for new
business in these regions for H2 2024.
New business in Latin America was down 22.5% in H1 2024 compared to H1 2023.
This reflects a general trend in client preference towards single premium
business. We have had a positive reaction to our new single premium
proposition launched in January 2024, and continue to work on building
business with new distribution partners to supplement our existing
distribution.
The Rest of World region was down 12.6% in H1 2024 compared to H1 2023 as a
result of consolidation of advisors in the region due to the continued
uncertainty, mostly arising from the current geopolitical environment.
The 4.3% increase in Far East business in H1 2024 compared to H1 2023 reflects
a change in support structure which has had a positive impact for the region
and early development and engagement with advisors around a new proposition
change for the region.
Our new single premium proposition was the first product to launch
successfully on our new advisor and client portal. This was the foundation for
the migration of our full operating system at the beginning of March,
following which the system now enables more nimble proposition development for
key distributors in the future.
We also continue to make encouraging progress with distribution opportunities
and future new business for our Japanese proposition.
5. IFRS RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023
The Group administers, and earns fees from, a portfolio of unit-linked
investment contracts distributed to contract holders around the world.
The nature of the Group's products means that new business flows have a
limited immediate impact on current earnings reported under IFRS, as initial
fees and acquisition costs from the contracts sold are mostly deferred and
amortised over the life of the contract. The benefit of sales to fee income
levels are felt in future financial periods, noting also that our newer
products have a longer earning period than our older products.
The Group also continues to invest strategically for the future, particularly
in relation to new markets and new licensing opportunities.
Results under IFRS
Consolidated profit before taxation for the period was £4.1m (H1 2023:
£3.1m). The increase on the prior year period is driven by increased fee
income in Hansard International and improved investment returns as a result of
sustained higher interest rates, partially offset by increased investment in
strategic initiatives.
The following is a summary of key items to allow readers to better understand
the results of the period.
Abridged income STATEMENT
The condensed consolidated statement of comprehensive income which is
presented within these half-year results reflects the financial results of the
Group's activities during the period under IFRS. This statement however, as a
result of its method of presentation, incorporates a number of features that
might affect a clearer understanding of the results of the Group's underlying
transactions. This relates principally to:
· Investment gains attributable to contract holder assets were
£41.7m (H1 2023: £21.6m). These assets are selected by the contract holder,
or an authorised intermediary and the contract holder bears the investment
risk, and these gains are therefore also reflected within 'Change in
provisions for investment contract liabilities'.
· Third party fund management fees collected and paid onwards by
the Group to third parties having a relationship with the underlying contract.
In H1 2024 these were £2.5m (H1 2023: £2.7m). These are reflected on a gross
basis in both income and expenses under IFRS.
An abridged consolidated income statement is presented below, excluding the
items of income and expenditure indicated above.
Year
Six months ended ended
31 December 30 June
2023 2022 2023
£m £m £m
Fees and commissions 21.5 20.2 40.5
Investment and other income 3.1 2.4 5.4
24.6 22.6 45.9
Origination costs (8.3) (8.1) (16.2)
Administrative and other expenses attributable to the
Group (11.4) (10.6) (22.3)
Operating profit for the period before litigation and non-recurring expense 4.9 3.9 7.4
items
Net litigation and non-recurring expense items (0.8) (0.8) (1.5)
Profit for the period before taxation 4.1 3.1 5.9
Taxation (0.1) (0.1) (0.2)
Profit for the period after taxation 4.0 3.0 5.7
Fees and commissions
Fees and commissions attributable to Group operations for H1 2024 were £21.5m
(H1 2023: £20.2m). A summary of fees and commissions attributable to Group
activities is set out below:
Six months Year ended
Ended
31 December 30 June
2023 2022 2023
£m £m £m
Contract fee income 15.2 14.0 28.1
Fund management fees 3.9 3.9 7.7
Commissions receivable 2.4 2.3 4.7
21.5 20.2 40.5
Included in contract fee income is £9.1m (H1 2023: £8.4m) representing the
amounts prepaid in previous years and amortised to the income statement, as
can be seen in section 7 in the reconciliation of deferred income.
Net fund management fees, together with commissions receivable, totalling
£6.3m (H1 2023: £6.2m), are related to the value of contract holder Assets
under Administration ("AuA") but also have elements amortised from previous
periods.
Investment and other income
Six months Year ended
Ended
31 December 30 June
2023 2022 2023
£m £m £m
Bank interest, interest on bonds and other income receivable 2.7 1.6 4.5
Foreign exchange gains/(losses) on revaluation
of net operating assets 0.4 0.8 0.9
3.1 2.4 5.4
The Group's own liquid assets are held predominantly in sterling and invested
in highly rated money market funds and bank deposits.
Further information about the Group's foreign currency exposures is disclosed
in note 4.1 to these condensed consolidated financial statements.
Origination costs
Under IFRS, new business commissions paid, together with the directly
attributable incremental costs incurred on the issue of a contract, are
deferred and amortised over the life of that contract to match the longer-term
income streams expected to accrue from it. Typical terms range between 8 and
16 years, depending on the nature of the product. Other elements of the
Group's new business costs, which reflect investment in distribution resources
in line with our strategy, are expensed as incurred.
This accounting policy reflects that the Group will continue to earn income
over the long-term from contracts issued in a given financial year.
Origination costs in the period were:
Six months Year
Ended ended
31 December 30 June
2023 2022 2023
£m £m £m
Origination costs - deferred to match future
income streams 3.7 4.5 8.8
Origination costs - expensed as incurred 1.2 1.3 2.7
Investment in new business in period 4.9 5.8 11.5
Net amortisation of deferred origination costs 3.4 2.3 4.7
8.3 8.1 16.2
Reflecting the long-term nature of the Group's income streams, amounts
totaling £7.1m (H1 2023: £6.8m) have been expensed to match contract fee
income of £9.1m (H1 2023: £8.4m) earned in H1 2024 from contracts issued in
previous financial years. This reflects the profitability of the existing
book.
Origination costs incurred in H1 2024 have increased due to the higher
amortisation of previously deferred origination costs.
Summarised origination costs for the period were:
Six months Year ended
Ended
31 December 30 June
2023 2022 2023
£m £m £m
Amortisation of deferred origination costs 7.1 6.8 13.5
Other origination costs incurred during the period 1.2 1.3 2.7
8.3 8.1 16.2
Administrative and other expenses
We continue to manage our expense base robustly to control administrative
expenses while investing strategically in our systems infrastructure and our
Japanese proposition.
A summary of administrative and other expenses attributable to the Group is
set out below:
Six months Year
Ended Ended
31 December 30 June
2023 2022 2023
£m £m £m
Salaries and other employment costs 5.5 5.4 10.7
Other administrative expenses 4.1 4.0 7.7
Professional fees, including audit 0.8 0.8 3.1
Recurring administrative and other expenses 10.4 10.2 21.5
Investment in strategic initiatives 1.0 0.4 0.8
Administrative and other expenses,
excl. litigation and non-recurring expense items 11.4 10.6 22.3
Net litigation defence and settlement costs 0.7 0.6 1.4
Provision for doubtful debts 0.1 0.2 0.1
Total administrative and other expenses 12.2 11.4 23.8
Salaries and other employment costs have increased by £0.1m over the
comparative period to £5.5m. We continue to take a prudent approach to
headcount, salaries and variable compensation. The average Group headcount for
H1 2024 was 194 compared to 184 for the full 2023 financial year. Headcount
at 31 December 2023 was 183.
Other administrative expenses have increased marginally by £0.1m to £4.1m
against the comparative period.
Professional fees including audit (excluding litigation defence costs)
remained static at £0.8m, with inflationary pressures well controlled.
Investment in strategic initiatives of £1.0m represents internal and external
costs to generate opportunities for growth. This includes the costs of our
head office strategy team, support costs for our new operating platform and
development costs associated with our Japanese proposition.
Litigation defence and settlement costs represent those costs incurred in
defending claims against Hansard Europe of £0.7m for the period, compared
with £0.6m in H1 2023. No further strengthening of the provision for claim
settlements was required in H1 2024.
Provision for doubtful debts reflects the provision for balances considered
unlikely to be recoverable.
6. CASH FLOW ANALYSIS
The sale of the Group's products typically produces an initial cash strain as
a result of the commission and other costs incurred at inception of a
contract.
The following summarises the Group's own cash flows in the period:
Six months Year ended
Ended
31 December 30 June
2023 2022 2023
£m £m £m
Net cash surplus from operating activities 10.5 6.5 15.9
Interest received 2.2 0.9 3.0
Net cash inflow from operations 12.7 7.4 18.9
Net cash investment in new business (3.3) (4.5) (8.5)
Purchase of software, computer equipment and property (2.4) (3.2) (6.6)
Net cash investment in bond portfolio - - (5.0)
Cashflows from investing activities (5.0) - -
Corporation tax paid - (0.1) (0.4)
Net cash inflow/(outflow) before dividends 2.0 (0.4) (1.6)
Dividends paid (3.6) (3.5) (5.9)
Net cash outflow after dividends (1.6) (3.9) (7.5)
Initial new business cash strain is shown within "net cash investment in new
business" and varies depending on the level and type of new business
written. £2.4m was spent during the period, primarily on the project to
upgrade the Group's IT infrastructure.
The factors described above, together with the payment of our final dividend
for 2023, led to a net cash outflow of £1.6m (H1 2023: £3.9m outflow) in the
Group's own cash resources since 1 July 2023. The Group continues to
maintain significant cash reserves to cover short-term outflows during this
period of strategic investment.
Six months ended Year ended
31 December 30 June
2023 2022 2023
£m £m £m
Net cash outflow after dividends (1.6) (3.9) (7.5)
Increase/(decrease) in amounts due to contract holders 2.6 (0.3) 0.6
Net Group cash movements 1.0 (4.2) (8.1)
Group cash - opening position 65.4 74.5 74.5
Effect of exchange rate movements 0.1 0.4 (1.0)
Group cash - closing position 66.5 70.7 65.4
Bank deposits and money market funds
The Group's liquid assets at the balance sheet date are held in highly rated
money market liquidity funds and with a wide range of deposit institutions,
predominantly in sterling. This approach protects the Group's capital base
from stock market falls.
Deposits totalling £20.7m (H1 2023: £13.7m) have original maturity dates
greater than 3 months and are therefore excluded from the definition of "cash
and cash equivalents" under IFRS.
The following table summarises the total shareholder cash and deposits at the
balance sheet date.
31 December 30 June
2023 2022 2023
£m £m £m
Money market funds 34.7 46.0 41.2
Short-term deposits with credit institutions 11.1 11.0 11.0
Cash and cash equivalents under IFRS 45.8 57.0 52.0
Longer-term deposits with credit institutions 20.7 13.7 13.2
Group cash and deposits 66.5 70.7 65.4
7. Abridged consolidated balance sheet
The condensed consolidated balance sheet presented under IFRS reflects the
financial position of the Group as at 31 December 2023. 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
incorporates the net liability to those contract holders of £1,106.0m (31
December 2022: £1,099.0m). Additionally, that portion of the Group's capital
that is held in bank deposits is disclosed in "cash and cash equivalents"
based on original maturity terms, as noted above.
The abridged consolidated balance sheet presented below, adjusted for those
differences in disclosure, allows a better understanding of the Group's own
capital position. Additional factors impacting upon the Group's capital
position at the balance sheet date are summarised in section 9 of this Review.
As at 31 December 30 June
2023 2022 2023
£m £m £m
Assets
Deferred origination costs 114.5 120.2 117.8
Other assets 30.0 24.8 27.6
Bank deposits and money market funds 66.5 70.7 65.4
211.0 215.7 210.8
Liabilities
Deferred income 142.2 145.7 144.8
Other payables 46.8 48.5 44.2
189.0 194.2 189.0
Net assets 22.0 21.5 21.8
Shareholders' equity
Share capital and reserves 22.0 21.5 21.8
Deferred origination costs
The deferral of origination costs ("DOC") reflects that the Group will earn
fees over the long term from contracts issued in a given financial year. These
costs are recoverable out of future net income from the relevant contract and
are charged to the consolidated statement of comprehensive income on a
straight-line basis over the life of each contract.
The table below shows lower origination costs deferred during the period as a
result of lower levels of new business sold compared to last year.
31 December 30 June
2023 2022 2023
£m £m £m
At beginning of financial year 117.8 122.5 122.5
Origination costs deferred during the period 3.7 4.5 8.7
Origination costs amortised during the period (7.0) (6.8) (13.4)
114.5 120.2 117.8
Deferred income
The treatment of deferred income ensures that initial fees are taken to the
consolidated statement of comprehensive income in equal instalments over the
longer-term, reflecting the services to be provided over the period of the
contract. This is consistent with the treatment of deferred origination costs.
Deferred income at the balance sheet date is the unamortised balance of
accumulated initial amounts received on new business.
The proportion of income deferred in any one year is dependent upon the mix
and volume of new business flows in previous years. The Group's focus on
regular premium business means that these fees are received over the initial
period of the contract, rather than being received up front, as is often the
case with single premium contracts.
The majority of initial fees collected during the period relate to charges
taken from contracts issued in prior financial years demonstrating the cash
generative nature of the business. Regular premium contracts issued in this
financial year will generate the majority of their initial fees over the next
18 months on average.
The movement in value of deferred income over the period is summarised below.
31 December 30 June
2023 2022 2023
£m £m £m
At beginning of financial year 144.8 145.1 145.1
Initial fees collected in the period and deferred 6.5 9.0 16.5
Income amortised during the period to fee income (9.1) (8.4) (16.8)
142.2 145.7 144.8
8. Assets under administration ("AuA")
In the following paragraphs, "AuA" refers to net assets held to cover
financial liabilities as analysed in note 13 to the condensed consolidated
financial statements presented under IFRS. Such assets are selected by or on
behalf of contract holders to meet their investment needs.
The Group receives investment inflows to its AuA from single and regular
premium contracts which are offset by charges, withdrawals, premium holidays
affecting regular premium policies and by market valuation movements.
The majority of premium contributions and AuA are designated in currencies
other than sterling, reflecting the wide geographical spread of those contract
holders. The currency denomination of AuA at 31 December 2023 is similar to
that of 31 December 2022 and consists of approximately 71% denominated in US
dollars, 19% in sterling and 8% denominated in euro as reflected in note 4.1
to the condensed consolidated financial statements.
Certain collective investment schemes linked to customers' contracts can from
time to time become illiquid, suspended or be put into liquidation. In such
cases, the Directors are required to exercise their judgement in relation to
the fair value of these assets. The cumulative impact on the balance sheet
is not material.
The following table summarises Group AuA movements for H1 2024:
31 December 30 June
2023 2022 2023
£m £m £m
Deposits to investment contracts - regular premiums 38.8 44.2 86.1
Deposits to investment contracts - single premiums 13.8 12.7 30.2
Withdrawals from contracts and charges (87.6) (73.2) (147.7)
Effect of market and currency movements 39.5 23.0 40.6
Movement in period 4.5 6.7 9.2
Opening balance 1,101.5 1,092.3 1,092.3
Closing balance 1,106.0 1,099.0 1,101.5
Group AuA increased to £1,106.0m during H1 2024, an increase of £4.5m from
the position at 30 June 2023, reflective of positive global stock markets
during the period. Since 31 December 2022, AuA have increased £7.0m (0.6%)
reflecting the move in global stock markets over the period.
The analysis of AuA held by each Group subsidiary to cover financial
liabilities is as follows:
31 December 30 June
2023 2022 2023
£m £m £m
Hansard International 1,044.5 1,032.7 1,037.7
Hansard Europe 61.5 66.3 63.8
1,106.0 1,099.0 1,101.5
Premiums acquired by Hansard Worldwide are reinsured to Hansard International
and therefore are included within Hansard International's total AuA.
Since it closed to new business in 2013, Hansard Europe's AuA has been
declining broadly in line with expectations as withdrawals are made or
contracts mature.
9. CAPITALISATION AND SOLVENCY
The Group's life insurance subsidiaries continue to be well capitalised with
free assets in excess of the regulatory requirements in each relevant
jurisdiction. There has been no material change in the Group's management of
capital during the period.
Solvency capital is a combination of future margins, where permitted by
regulation, and capital. Where future margins are denominated in non-sterling
currencies, it is vulnerable to the weakening of those currencies relative to
sterling. All of the Group's excess capital is invested in a wide range of
deposit institutions, highly rated money market liquidity funds, and
high-quality corporate bonds, predominantly in sterling. This approach
protects the Group's capital base from stock market falls.
The in-force portfolio has no material investment options or guarantees that
could cause capital strain and the Group retains very little of the mortality
risk that it has accepted (the balance being reinsured with premium
reinsurers). There is no longevity risk exposure.
Policy on capital maintenance
It is the Group's policy to maintain a strong capital base in order to:
· satisfy the requirements of its contract holders, creditors and
regulators;
· maintain financial strength to support new business growth and
create shareholder value;
· match the profile of its assets and liabilities, taking account
of the risks inherent in the business;
· generate operating cash flows; and
· fund dividend requirements.
Within the Group each subsidiary company manages its own capital. Capital
generated in excess of planned requirements is returned to the Company by way
of dividends. Group capital requirements are monitored by the Board. The
capital held within Hansard Europe is considered not to be available for
dividend to Hansard Global plc until such time as the legal cases referred to
in section 11 below are substantially resolved.
10. DIVIDENDS
A final dividend of 2.65p per share in relation to the previous financial year
was paid in November 2023. This amounted to £3.6m.
The Board has considered the results for H1 2024, the Group's continued cash
flow generation and its future expectations and has resolved to pay an interim
dividend of 1.8p per share (H1 2023: 1.8p). This dividend will be paid on 25
April 2024.
11. complaints and litigation
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 in Europe prior to
2014.
Even though the Group has never given any investment advice, as this is left
to the contract holder directly or through an agent, advisor or an entity
appointed at their request or preference, the Group has been subject to a
number of complaints in relation to the performance of assets linked to
contracts, some of which have escalated into litigation.
As at the date of the 2023 Annual Report, the Group faced litigation based on
writs totalling €26.1m or £22.4m. The corresponding figure as at 31
December 2023 was €25.2m or £22.0m (31 December 2022: €26.6m or £23.6m).
Between 31 December 2023 and the date of this report, there have been no
material changes.
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.
We have previously noted that we expect a number of our larger claims and
litigation costs to ultimately be covered by our Group insurance cover.
During the period to 31 December 2023 we recorded £0.7m in insurance
recoveries in relation to litigation expenses (31 December 2022: £nil). We
expect such reimbursement to continue during the course of those claims.
We continue to estimate insurance coverage against the £22.0m of contingent
liabilities referred to above to be in the range of £3m to £10m.
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 21 to the condensed
consolidated financial statements.
12. Net asset value per shaRE
The net asset value per share on an IFRS basis at 31 December 2023 is 16.2p
(31 December 2022: 15.6p) based on the net assets in the consolidated balance
sheet divided by the number of shares in issue, being 137,557,079 ordinary
shares (31 December 2022: 137,557,079).
13. 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 plan objectives. All
such risks, are identified, assessed, monitored, managed and reported under
the governance, risk management and internal control protocols, which
constitute the Group's ERM Framework, and which remain central to the Board's
oversight, direction and control of the Company.
For the period ended 31 December 2023 the Board has continued to monitor
sources of potential risk in the internal and external environments, including
climate transition risks, factors presenting increased cyber vulnerabilities,
barriers to international mobility, supply chain disruptions, protectionism,
geopolitical instabilities and inflationary pressures.
The Board has also remained cognisant of geopolitical instabilities and their
capacity to provoke a confluence of socioeconomic risks with a range of actual
or potential impacts, including those to economic and global financial
markets, rising inflation and supply chain disruption. The nature and duration
of such conflict and the potential for further escalation, additional
sanctions and global reactions to ongoing developments warrant close
scrutiny.
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, reporting
conventions, behaviours and other aspects of the Group's environment, which
cumulatively:
· Support the Board's assessment of existing and emerging risks,
together with combinations of those risks in the form of plausible stresses
and scenarios, which have the potential to threaten the Company's business
model, future performance, solvency, liquidity or reputation. Such assessment
includes analysis of the likelihood, impact and time horizon over which such
risks, or combinations of risks might emerge or crystallise.
· Facilitate the effective and efficient operation of the Group and
its subsidiary entities by enabling a consolidated and comprehensive approach
to the management of risks across the Group, with specific attention to
aggregate impacts and effects, 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, enabling the Board to form their own view on the effectiveness of risk
management and internal control arrangements through the regular provision of
relevant information and assurances.
· Seek to ensure continuous compliance with applicable laws and
regulations as well as with internal policies governing the conduct of
business.
· 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 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 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 Functions oversee and work in collaboration with the First Line,
ensuring that the business is conducted in a manner 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, structured to promote improved organisational performance through
better integration of strategy, risk, control and governance.
The top-down aspect involves the Board assessing, analysing and evaluating
what it believes to be the principal risks facing the Group, with focus on
current and forward-looking risks. The bottom-up approach involves the
identification, review and monitoring of risk issues and emerging risks at
functional and divisional levels, with analysis and formal reporting to the
Group Risk Forum on a quarterly basis and onward analytical reporting to the
Board.
Stress and scenario testing is used to explore 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 Group Risk Forum, 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 value 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 effectively and 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 and Risk 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 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 respective 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 Group Risk Forum, 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.
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 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 & Risk Committee. The members of the
Audit & Risk Committee review the interim financial statements for the
half year ending 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 & Risk 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, with an external independent review performed every second year.
The last such independent report for the 2023 financial year was issued on 31
January 2024 and did not contain any material issues that could impact on the
financial reporting of HG. However, some control deficiencies, particularly
relating to the evidencing of the operation of controls, were identified, and
will be addressed as a priority by CIL.
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 precise match between the investment assets and the contract holder
liabilities, and so the market risk and credit risk lie with contract holders.
The Group's exposure on this unit-linked business is limited to the extent
that income arising from asset management charges and commissions is generally
based on the value of assets in the funds, and any sustained falls in value
will reduce earnings. In addition, there are certain financial risks (credit,
market and liquidity risks) in relation to the investment of shareholders'
funds. The Group's exposure to financial risks is explained in note 4 to the
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, or the time horizon
within which they might crystallise.
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 period ended 31 December 2023 have continued to consider specifically the
likelihood, impacts and timescales within which such risks might crystallise,
together with assessment of contingent uncertainties and any emerging risks.
Risk Risk Factors and Management
Distribution Risk: The business environment in which the international insurance industry
operates is subject to continuous change as new market and competitor forces
come into effect and as technology continues to evolve. The Group may be
unable to maintain competitive advantage in commercially significant
Arising from market changes, technological advancement, loss of key jurisdictions, or market segments, or be unable to build and sustain
intermediary relationships or competitor activity 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, competitor activity and
consumer sentiment for signs of emerging risks and 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.
· Investment in new markets and expansion of existing markets,
developing new key distributor relationships and new product development for
specific markets and globally.
Market Risks: Market risks are an inherent element of the Group's unit linked business and
are routinely assessed and monitored via the Group ERM Framework, having
regard to the balance sheet and profit reduction impacts of a drop in
equities, causing a reduction in fees derived from the value of contract
Arising from major market stresses, or fluctuation in market variables, holder assets, as well as the contagion effects for aspects of the broader
resulting in falls in equity or other asset values, currency movements or a risk portfolio. Such contagion might include deferred impacts to profit
combined scenario manifesting through reduced sales activity, concentration risks on fund
holdings/underlying assets, and reduced incomes through increased lapse rates.
The Board also recognises that extreme market conditions and prolonged
macroeconomic challenges may have the capacity to influence consumer appetite
for the selection and purchase of financial services products and the period
over which business is retained. Inflation quickly moved to become a
significant driver of economic volatilities during the reporting period, with
prevailing uncertainty as to how effective typical policy responses might be
and the potential for wide ranging and profound changes to be triggered. In
addition, the Group operates internationally and earns income in a range of
different currencies, with the majority of premiums denominated in USD whilst
the vast majority of its operational cost base is denominated in GBP. A
significant adverse currency movement over a sustained period remains a
principal risk to the Group.
How we manage the risk:
· The Board recognises 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.
· The currencies of assets and liabilities are matched within set
tolerances and certain expenses are invoiced in US Dollars to match against US
Dollar income streams.
· 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 Group's resilience and the range of possible
mitigating options.
· Stress testing performed during the year-ended 30 June 2023
assessed the impacts of reasonably plausible market risk events and scenarios,
including those resulting from macroeconomic challenges driven by geopolitical
instabilities, rising inflation, uncertainties in commodity price and currency
volatilities.
· The long-term nature of the Group's products serves to smooth
short term currency fluctuations. However, longer term trends are monitored
and considered in pricing models.
Credit Risk: In dealing with third party financial institutions, including banking, money
market and settlement, custody and other counterparties, the Group is exposed
to the risk of financial loss and potential disruption of core business
functional and operational processes.
Arising from the failure of a counterparty
Financial loss can also arise when the funds in which contract holders are
invested become illiquid, resulting in past and future fee income not being
received. The failure of Independent Financial Advisors ("IFAs") can also
result in loss where unearned commissions can be due back to the Group.
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 continued to closely monitor
geopolitical developments and potential disruptions to international payment
systems and capital markets arising from the extensive sanctions in force in
the context of the Russia-Ukraine conflict.
Liquidity Risk: If the Group does not have sufficient levels of liquid assets to support
business activities or settle its obligations as they fall due, the Group may
be in default of its obligations and may incur significant sanction, loss or
cost to rectify the position.
Arising from a failure to maintain an adequate level of liquidity to meet
financial obligations under both planned and stressed conditions How we manage the risk:
· The Group maintains highly prudent positions in accordance with
its risk appetite and investment policies which ensures a high level of
liquidity is always available in the short term. 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, with no material change in risk
exposures.
Legal and Regulatory Risk: The scale and pace of change in regulatory and supervisory environments,
including the continued emergence of new and/or updated compliance obligations
and increasingly granular data submission requirements has maintained the
momentum gathered post-Covid. Changes to rule sets and supervisory
Arising from changes in the regulatory landscape, which adversely impact the expectations continue to require efficient and effective ways to evidence and
Group's business model, or from a failure by the Group, or one of its demonstrate how compliance obligations are met, whilst compliance analytics
subsidiary entities, to meet its legal, regulatory or contractual obligations, and high-quality data driven insights are becoming increasingly important.
resulting in the risk of loss or the imposition of penalties, damages or fines
The direction of regulatory travel demands continued investment in the
capacity, competence, and capability of resourcing across all business areas,
having regard to the extent of risk interdependencies and the embedding of
personal accountability regimes. The impacts associated with crystallisation
of a significant compliance failing, including financial penalties, public
disclosures, restrictions on activities and other forms of intervention, have
been escalated by sea-changes in political landscapes and shifting supervisory
attitudes to regulatory effectiveness.
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 Crime Risk: Regulators are taking - and expecting from firms - an increasingly holistic
approach to mitigating heightened financial crime risks. Fraud and scam
activities continue to target weaknesses in internal control environments -
contingent with greater reliance upon remote working arrangements. Emerging
Geo-economic uncertainties and cost of living pressures have the capacity to risk research further indicates the bulk of the largest operational risk
provoke an increase in the source and form of fraud and financial crime risks. losses across financial services companies continues to emanate from mega
These have combined with geopolitical instabilities and the mobilisation of frauds, indicative of macro-economic pressures and their propensity to drive
unprecedented levels of sanctions against Russia in the context of the episodes of internal fraud. These challenges and increased pressures on
Russia-Ukraine conflict profitability are also seen as increasing the risk of poor-quality business
being written and potentially diminishing the attention paid to due diligence
procedures and processes. Regulators retain substantial leeway to take
enforcement action 'in hindsight' and financial crime systems and controls are
one of the most significant areas of enforcement risk as supervisory
authorities seek to demonstrate the effectiveness of the regulatory
environment.
How we manage the risk:
· Rigorous anti-money laundering, counter-terrorist financing and
anti-bribery and corruption measures.
· Rapid, scalable, and effective sanctions screening mechanisms to
ensure robust, effective and compliant understanding of the landscape on a
continuing basis.
· 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 in the context
of divergent economic recoveries from the pandemic, including those measures
relied upon by key business partners.
Culture and Conduct Risk: Organisational culture remains under scrutiny by the Board on the basis that
it is recognised as a fundamental driver of corporate success, prudential
Arising from any failure of governance, risk management and internal control soundness, and compliant conduct. Any failure to adequately assess, monitor,
arrangements, via corporate or individual actions manage and mitigate risks to the delivery of fair customer outcomes, or to
market integrity, can be expected to result in material detriment to the
achievement of strategic objectives and could incur regulatory censure,
financial penalty, contract holder litigation and / or material reputational
damage.
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:
· Programme level initiatives to address and support cultural
change and development have remained in active progress during the reporting
period with the results of investment in culture diagnostics informing
strategic decision-making and tactical solutions to drive cultural change,
where needed.
· Iterative enhancements to 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 include a core focus on 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 external advisors in relation to developments in the
regulatory environments in which we operate.
Operational Resilience Risk: The ability to maintain critical services or operations during periods of
disruption is receiving increasing levels of regulatory scrutiny with
Arising from any exposure to risk events with the capacity to cause concurrent growth in the formalisation of regulatory expectation. 'Resilience
operational failures or wide scale disruptions in financial markets Principles' build on the real-world tests presented by the Covid-19 pandemic
and the near-term threat of disruption of key global infrastructure in the
context of the ongoing Russia-Ukraine conflict. Resilience risk and associated
regulatory expectations directly extend to threats originating via third
parties, including external providers, supply chains networks and outsourcing
architectures intended to leverage economies of scale, gain access to
specialist expertise, or deliver advanced technologies supporting innovative
services.
Global supervisory attention is focussed on regulating for resilience by
ensuring that strategies such as grounding resilience analyses in key delivery
requirements, appreciating the potential for systemic vulnerabilities and
embracing a diversity of approaches combine to strengthen the ability of
financial services firms to withstand operational risk related events.
How we manage the risk:
· ERM conventions guide 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, continuity planning and recovery and resolution
strategies provide for continuous review of the adequacy and effectiveness
with which the business can respond to and recover from disruptions.
Cyber and Information Security Risk: The nature and complexity of cyber threats and cyber risk are recognised by
the Board as presenting the single most significant risk to financial services
Arising from the increased digitalisation of business activities and growing firms. The mounting sophistication and persistence of cybercrime and the
dependence upon technology in the context of exposure to elevated and more growing adoption of highly advanced, nation-state type tools by cyber
pernicious forms of digital and cyber risk criminals, underscore the challenges in understanding and anticipating the
nature of cyber threats and cyber risks.
The pandemic 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 complete reach of cyber
and information security exposures. More recently geopolitical tensions at a
global level and the escalation of the Russia-Ukraine conflict are considered
to have triggered unprecedented cyber risks for Western governments and
corporations.
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 regulated
entities 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.
· Periodic independent third-party systems penetration testing and
review of controls.
· Horizon scanning to identify and assess supervisory initiatives
advocating and promoting good practice in cyber resilience and associated
industry developments.
Environmental, Social and Governance (ESG) Risk: Climate change is recognised by the Board as presenting a potential source of
high-impact, high-probability risk, requiring a strategic response which is
Arising from a failure to anticipate and respond to emerging sustainability value-driven in terms of improving resilience and demonstrating to clients,
risks or successfully integrate ESG considerations and policy positions into investors, regulators, and wider stakeholder groups that the risks and
strategy and business planning opportunities of climate change are understood. The Board has identified that
climate risk factors affecting the Group can be grouped into two main
categories of risk exposure:
· Physical risks: arising from increased damage and losses from
physical phenomena associated both with climate trends - typically changing
weather patterns and sea level rises - and physical events, including natural
disasters and extreme weather events; and
· Transition risks: arising from disruptions and shifts associated with
the transition to a low-carbon economy, which may affect the value of assets
or the costs of doing business. Transition risks may be motivated by changes
in policyholder, or other stakeholder expectations, market dynamics,
technological innovation, or reputational factors. Key examples of transition
risks include policy changes and regulatory reforms which affect
carbon-intensive sectors. Policy and regulatory measures may also affect
specific classes of financial assets relevant for investments available
through an insurer's platform, whilst social movements and civil society
activism - such as that aiming to motivate divestment from and cessation of
underwriting to the fossil fuel sector - may pose a risk of reputational
damage to firms, if appropriate risk mitigation strategies (and communication
actions) are not implemented appropriately.
How we manage the risk:
· Development of adaptation plans, which embrace forward-looking
analysis and support strategic decision-making, with consideration of relevant
business planning, operations, underwriting and investment activities to
contribute to a sustainable transition to net-zero targets and provide
effective mitigation of climate change related risks,
· Climate and other ESG risks could cause macroeconomic stresses in
future, including impacts to markets, interest rates, inflation and exchange
rates. The business manages its exposure to these macro-economic risks as
described in the market risk section above.
· 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
ownership, 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 and Talent Risk: 'Talent risk' is growing in prominence on the operational risk agenda at
industry level with the emergence of unprecedented challenges linked to
Arising from any failure to drive and support the right corporate culture and attracting and retaining employees across all financial services sectors. The
attract, develop, engage and retain key personnel most material concern attaches to the shortfall in skilled employees to fill
open vacancies, with a real danger that a skills shortage leads to weak
oversight of business operations, particularly in critical
functions/personnel, with the capacity to result in regulatory breaches
through direct compliance failings, or as the result of poor governance
protocols in terms of business structuring, capacity, and competence.
Simultaneously, delivery of the Group's strategy has core dependencies on
attracting and retaining experienced and high-performing management and
employees and building a strong and sustainable culture, driven by our
purpose, our leadership, our performance management regime and our governance
principles and objectives. The knowledge, skills, attitudes and behaviours of
our employees, and the success with which these attributes shape and define
our culture, are central to our success.
How we manage the risk:
· Significant investment in initiatives to address and support
cultural change and development, shape strategy and inform tactical solutions.
· Continuation of our 'Culture Programme' with clearly defined
areas of focus under three core pillars, those being:
- High Performance Culture
- Learning Culture
- Environment & Wellbeing
These remain in active progress led by the Executive Management Team with
oversight by the Board.
Further details around financial risks are outlined in note 4 (Financial Risk
Management) to the condensed consolidated financial statements.
Statement of Directors' responsibilities
The Directors, whose names are reflected on the Company's website,
www.hansard.com, confirm that, to the best of their knowledge, this condensed
set of consolidated interim financial statements has been prepared in
accordance with IAS 34 as adopted by the United Kingdom and that the interim
management report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
• An indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed
consolidated financial statements, and a description of the principal risks
and uncertainties for the remaining six months of the financial year; and
• Material related party transactions in the first six months and
any material changes in the related party transactions described in the last
annual report.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation on the Isle of Man governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
By order of the Board
Philip Kay Graham Sheward
Non-executive Chief Executive Officer
Chairman
6 March 2024
Condensed Consolidated Statement of Comprehensive Income
Year
Six months ended ended
31 December 31 December 30 June
2023 2022 2023
Notes £m £m £m
Fees and commissions 6 23.9 22.9 45.7
Investment and other operating income 44.3 23.3 44.5
Other operating income 0.6 0.7 1.5
68.8 46.9 91.7
Change in provisions for investment contract liabilities (41.7) (21.6) (40.6)
Origination costs (8.3) (8.1) (16.2)
Administrative and other expenses 7 (14.7) (14.1) (29.0)
(64.7) (43.8) (85.8)
Profit on ordinary activities before taxation 4.1 3.1 5.9
Taxation on profit on ordinary activities 8 (0.1) (0.1) (0.2)
Profit and total comprehensive income for
the period after taxation 4.0 3.0 5.7
Earnings Per Share
Year
Six months ended ended
31 December 31 December 30 June
2023 2022 2023
Note (p) (p) (p)
Basic 9 2.9 2.2 4.1
Diluted 9 2.9 2.2 4.1
The notes on pages 30 to 49 form an integral part of these condensed financial
statements.
Condensed Consolidated Statement of Changes in Equity
Share Other Retained
Capital reserves earnings Total
Note £m £m £m £m
Shareholders' equity at 1 July 2022 68.8 (48.3) 1.7 22.2
Profit and total comprehensive income
for the period after taxation - - 3.0 3.0
Transactions with owners
Dividends 10 - - (3.5) (3.5)
Reserve for own shares within EBT - (0.2) - (0.2)
Shareholders' equity at 31 December 2022 68.8 (48.5) 1.2 21.5
Share Other Retained
Capital reserves earnings Total
Note £m £m £m £m
Shareholders' equity at 1 July 2023 68.8 (48.5) 1.5 21.8
Profit and total comprehensive income
for the period after taxation - - 4.0 4.0
Transactions with owners
Dividends 10 - - (3.6) (3.6)
Reserve for own shares within EBT - (0.2) - (0.2)
Shareholders' equity at 31 December 2023 68.8 (48.7) 1.9 22.0
The notes on pages 30 to 49 form an integral part of these condensed financial
statements.
Condensed Consolidated Balance Sheet
31 December 31 December 30 June
2023 2022 2023
Notes £m £m £m
Assets
Intangible assets 11 22.3 16.6 19.9
Property, plant and equipment 11 2.6 2.5 2.8
Deferred origination costs 12 114.5 120.2 117.8
Financial investments
Measured at fair value:
Equity securities 58.5 50.0 52.0
Collective investment schemes 923.6 909.5 915.5
Fixed income securities 66.9 50.5 63.3
1,049.0 1,010.0 1,030.8
Measured at amortised cost:
Deposits and money market funds 84.5 104.1 90.2
Other receivables 5.0 5.4 4.9
Cash and cash equivalents 45.8 57.0 52.2
Total assets 1,323.7 1,315.8 1,318.6
Liabilities
Financial liabilities under investment contracts 13 1,106.0 1,099.0 1,101.5
Deferred income 14 142.2 145.7 144.8
Amounts due to investment contract holders 39.2 37.0 36.6
Other payables 15 14.2 12.6 13.9
Provisions 16 0.1
Total liabilities 1,301.7 1,294.3 1,296.8
Net assets 22.0 21.5 21.8
Shareholders' equity
Called up share capital 17 68.8 68.8 68.8
Other reserves 18 (48.7) (48.5) (48.5)
Retained earnings 1.9 1.2 1.5
Total shareholders' equity 22.0 21.5 21.8
The notes on pages 30 to 49 form an integral part of these condensed financial
statements.
The condensed financial statements on pages 27 to 49 were approved by the
Board on 6 March 2024 and signed on its behalf by:
Graham Sheward
Thomas Morfett
Director
Director
Condensed Consolidated Cash Flow Statement
Year ended
Six months ended
31 December 31 December 30 June
2023 2022 2023
£m £m £m
Cash flow from operating activities
Profit before tax for the period 4.1 3.1 5.9
Adjustments for:
Depreciation 0.2 0.3 1.1
Dividends receivable (2.6) (2.2) (4.7)
Dividends received 2.6 2.2 4.7
Interest receivable (2.2) (0.9) (3.0)
Interest received 2.2 0.9 3.0
Foreign exchange (gains)/losses (0.1) (0.4) 1.0
Changes in operating assets and liabilities
(Increase) in debtors (0.1) (1.2) (0.6)
Decrease in deferred origination costs 3.4 2.3 4.7
(Decrease)/increase in deferred income (2.6) 0.5 (0.4)
Increase/(decrease) in creditors 3.1 (1.6) (1.7)
(Increase) in financial investments (12.5) (4.7) (11.7)
Increase in financial liabilities 4.4 6.6 9.1
Cash flow from operations (0.1) 4.9 7.4
Corporation tax paid - (0.1) (0.4)
Net cash from operations after taxation (0.1) 4.8 7.0
Cash flows from investing activities
Investment in intangible assets and property, plant & equipment (2.4) (3.2) (6.6)
Proceeds from sale of investments - 0.1 -
Purchase of investments - - 0.4
Purchase of own shares (0.3) (0.2) (0.1)
Cash flows used in investing activities (2.7) (3.3) (6.3)
Cash flows from financing activities
Dividends paid (3.6) (3.5) (5.9)
Principal elements of lease liabilities (0.1) (0.3) (0.4)
Cash flows used in financing activities (3.7) (3.8) (6.3)
Net (decrease) in cash and cash
Equivalents (6.5) (2.3) (5.6)
Cash and cash equivalents at beginning of period 52.2 58.9 58.9
Effect of exchange rate changes 0.1 0.4 (1.1)
Cash and cash equivalents at end of period 45.8 57.0 52.2
The notes on pages 30 to 49 form an integral part of these condensed financial
statements.
Notes to the Condensed Consolidated Financial Statements
1 General information
Hansard Global plc ("the Company") is a limited liability company,
incorporated in the Isle of Man under the Isle of Man Companies Act 1931 -
2004, whose shares are publicly traded. The principal activity of the Company
is to act as the holding company of the Hansard Group ("the 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.
These condensed consolidated interim financial statements are unaudited and do
not include all of the information required for a complete set of financial
statements prepared in accordance with IFRS Standards and the Isle of Man
Companies Acts 1931 - 2004. Selected explanatory notes are included to explain
events and transactions that are significant to an understanding of the
changes in the Group's financial position and performance since the last
annual financial statements. The condensed consolidated interim financial
statements were approved by the Board of Directors on 6 March 2024.
The Board of Directors approved the Group's statutory financial statements for
the year ended 30 June 2023 on 27 September 2023. The report of the
independent auditor on those financial statements was unmodified and did not
contain an emphasis of matter paragraph.
2 Basis of presentation
These condensed consolidated interim financial statements for the half-year
ended 31 December 2023 have been prepared in accordance with the Disclosure
and Transparency Rules of the Financial Conduct Authority ("DTR") and with IAS
34 "Interim Financial Reporting" as adopted by the United Kingdom ("UK"). The
condensed consolidated interim financial statements should be read in
conjunction with the annual financial statements for the year ended 30 June
2023, which were prepared in accordance with International Financial Reporting
Standards as adopted by the UK.
The Group underwrites a small amount of insurance business. Management has
undertaken an assessment of the impact of accounting for this business as
investment business rather than insurance business and concluded that this
would not have a material impact on the financial statements. This assessment
has been refreshed to consider the impact of IFRS 17, and management have not
changed their conclusion that accounting for the business as investment
business would not have a material impact on the financial statements.
Management will keep this assessment under review and should the outcome
change in future the Group accounting treatment will be reassessed.
Consequently, the Group's products are designated as investment rather than
insurance contracts under IFRS 17 'Insurance Contracts as they do not transfer
significant insurance risk'.
The condensed consolidated interim financial statements have been prepared
under the historical cost convention as modified by the revaluation of
financial investments and financial liabilities at fair value through profit
or loss.
Except where otherwise stated, all figures included in the condensed
consolidated interim financial statements are stated in pounds sterling, which
is also the functional currency of the Company, rounded to the nearest hundred
thousand pounds.
The following new standards, amendments and interpretations are in issue but
not yet effective for these financial statements and have not been early
adopted by the Group. The following amended standards are not expected to have
a material impact on the Group's reported results:
• Non-current liabilities with covenants (Amendments to IAS 1) -
effective from 1 January 2024
• Lease liability in a Sale and Leaseback (amendments to IFRS 16) -
effective from 1 January 2024
There are no other standards, amendments or interpretations to existing
standards that are not yet effective, that would have a material impact on the
Group's reported results.
Going Concern
As shown within the Business and Financial Review, the Group's capital
position is strong and well in excess of regulatory requirements. The
long-term nature of the Group's business results in considerable recurring
cash inflows arising from existing business. The Directors believe that the
Group is well placed to manage its business risks successfully.
The Directors are satisfied that the Company and the Group have adequate
resources to continue to operate as a going concern for the foreseeable future
and have prepared the condensed consolidated financial statements on that
basis.
In making this statement, the Directors have reviewed financial forecasts that
include plausible downside scenarios as a result of geo-political factors and
resultant impacts 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 Directors expect the acquisition of new business will continue to be
challenging throughout the remainder of the financial year. The impact of
this however is not immediate to the Group's profit and cash flows and
therefore allows for longer term adjustments to operations and the cost
base. Long periods of lower new business or indeed lower AuA would be
addressed by reducing the cost base and where necessary, the dividend paid.
The following factors are considered as supportive to the Group's resilience
to business and external environment challenges:
· 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. Initial fees in respect of new business are broadly offset by
initial commissions, limiting the impact of any reduction in new business.
· New business channels are geographically dispersed and therefore
less exposed to specific regional challenges.
· 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 where required without any material
impact to processing and servicing levels. Its control environment continued
to operate effectively during this time.
· The Group places the majority its shareholder assets into
conservative, highly-liquid, highly rated bank deposits and money market
funds. These are typically not subject to price fluctuation and protect the
Group's assets against potential market volatility.
· The Group has no borrowings.
3 Principal accounting policies
As required by the Disclosure and Transparency Rules of the Financial Conduct
Authority and IAS 34, this condensed set of consolidated financial statements
has been prepared applying the accounting policies and standards that were
applied, and the critical accounting estimates and judgements in applying
them, in the preparation of the Group's published consolidated financial
statements for the year ended 30 June 2023. The published consolidated
financial statements for the year ended 30 June 2023 can be accessed on the
Company's website: www.hansard.com (http://www.hansard.com) .
4 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. Information concerning the operation of the
ERM framework to manage financial and other risks is contained within the
Report and Accounts for the year ended 30 June 2023, and particularly in note
3 thereto, "Financial Risk Management".
The main 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.
4.1 Market risk
This is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices, analysed
between price, interest rate and currency risk. The Group adopts a risk averse
approach to market risk, with a stated policy of not actively pursuing or
accepting market risk except where necessary to support other objectives.
However, the Group accepts the risk that the fall in equity or other asset
values, whether as a result of price falls or strengthening of sterling
against the currencies in which contract holder assets are denominated, will
reduce the level of annual management charge income derived from such contract
holder assets and the risk of lower future profits.
Sensitivity analysis to market risk
The Group's business is unit-linked and the direct associated market risk is
therefore borne by contract holders (although there is a secondary impact as
shareholder income is dependent upon the 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 as at 31 December 2023 was £1,049.0 (31 December 2022:
£1,010.0m). In the event that investment income is affected by price risk
then there will be an equal and opposite impact on the value of the changes in
provisions for investment contract liabilities in the same accounting period.
The impact on the profit or loss before taxation in a given financial year is
negligible.
An overall change in the market value of the unit-linked funds would affect
the annual management charges accruing to the Group since these charges, which
are typically 1% per annum, are based on the market value of contract holder
assets under administration. The approximate annual impact on the Group's
profits and equity of a 10% change in fund values, either as a result of
price, interest rate or currency fluctuations, is £1.5m (H1 2023: £1.7m).
(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.
Taking into account the proportion of Group funds held on longer-term,
fixed-rate deposits, a change of 1% p.a. in interest rates will result in an
increase or decrease of approximately £0.6m (H1 2023: £0.7m) in the Group's
annual investment income and equity.
A summary of the Group's liquid assets at the balance sheet date is set out in
note 4.2.
(c) Currency risk
Currency risk is the risk that the Group is exposed to higher or lower returns
as a direct or indirect result of fluctuations in the value of, or income
from, specific assets and liabilities arising from changes in underlying
exchange rates.
(c) (i) Group foreign currency exposures
The Group is exposed to currency risk on the foreign currency denominated bank
balances, contract fees receivable and other liquid assets that it holds to
the extent that they do not match liabilities in those currencies. The impact
of currency risk is minimised by frequent repatriation of excess foreign
currency funds to sterling. The Group does not hedge foreign currency cash
flows as a matter of course but may take advantage of historically strong or
weak sterling exchange rates to do so where appropriate.
At the balance sheet date, the Group had exposures in the following
currencies:
31 December
2023 2023 2023 2022 2022 2022
US$m €m ¥m US$m €m ¥m
Gross assets 20.8 13.2 286.9 16.8 11.3 291.9
Matching currency liabilities (21.1) (11.9) (386.2) (19.5) (10.9) (206.3)
Uncovered currency
exposures (0.3) 1.3 (99.3) (2.7) 0.4 85.6
Sterling equivalent of
exposures (£m) (0.2) 1.2 (0.6) (2.2) 0.3 0.5
The approximate effect of a 5% change in the value of US dollars to sterling
is less than £0.1m (H1 2023: £0.1m); in the value of the euro to sterling is
£0.1m (H1 2023: £0.1m); and in the value of the yen to sterling is less than
£0.1m (H1 2023: less than £0.1m).
(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: 71% (31 December 2022: 71%); sterling:
19% (31 December 2022: 20%); euro: 8% (31 December 2022: 8%); other: 2% (31
December 2022: 1%).
4.2 Credit risk
Credit risk is the risk that the Group is exposed to lower returns or loss if
another party fails to perform its financial obligations to the Group. The
Group has adopted a risk averse approach to such risk and has a stated policy
of not actively pursuing or accepting credit risk except when necessary to
support other objectives.
The clearing and custody operations for the Group's security transactions are
mainly concentrated with one broker, namely Capital International Limited, a
member of the London Stock Exchange. At the balance sheet date, substantially
all contract holder cash and cash equivalents, balances due from broker and
financial investments are placed in custody with Capital International
Limited. These operations are detailed in a formal contract that incorporates
notice periods and a full exit management plan. Delivery of services under the
contract is monitored by a dedicated relationship manager against a documented
Service Level Agreement and Key Performance Indicators.
The Group has an exposure to credit risk in relation to its deposits with
credit institutions and its investments in unitised money market funds. To
manage these risks; deposits are made, in accordance with established policy,
with credit institutions having a short-term rating of at least F1 or P1 from
Fitch IBCA and Moody's respectively and a long-term rating of at least A or A3
respectively. Investments in unitised money market funds are made only where
such fund is AAA rated. Additionally maximum counterparty exposure limits are
set both at an individual subsidiary company level and on a Group-wide basis.
These assets are considered to have a high degree of credit worthiness and no
assets of a lower credit worthiness are held. 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.
31 December 30 June
2023 2022 2023
£m £m £m
Deposits with credit institutions and investments in unitised money market
funds
(Based on Standards & Poor's ratings)
AAA 24.2 23.2 26.3
AA- to AA+ 3.7 5.0 6.0
A- to A+ 17.9 11.3 10.8
BBB to BBB- - 2.5 -
Total deposits 45.8 42.0 43.1
AA- to AA+ 0.3 - 0.3
A- To A+ 20.4 28.0 22.0
BBB to BBB- - 0.7 -
Cash at bank 20.7 28.7 22.3
Group cash and deposits 66.5 70.7 65.4
Financial assets held at amortised cost 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 period is
less than £0.1m (H1 2023: less than £0.1m).
There have been no changes in the assets in the period ended 31 December 2023
attributable to changes in credit risk (31 December 2022: nil).
At the balance sheet date, an analysis of the Group's shareholder cash
balances was as follows:
31 December 30 June
2023 2022 2023
£m £m £m
Longer term deposits with credit institutions 20.7 13.7 13.2
Cash and cash equivalents under IFRS 45.8 57.0 52.2
66.5 70.7 65.4
4.3 Liquidity risk
Liquidity risk is the risk that the Group, though solvent, does not have
sufficient financial resources to enable it to meet its obligations as they
fall due, or can only secure them at excessive cost.
The Group's objective is to ensure that it has sufficient liquidity over short
(up to one year) and medium-term time horizons to meet the needs of the
business. This includes liquidity to cover, amongst other things, new business
costs, planned strategic activities, servicing of equity capital as well as
working capital to fund day-to-day cash flow requirements.
Liquidity risk is principally managed in the following ways:
· Assets of a suitable marketability are held to meet contract
holder liabilities as they fall due.
· Forecasts are prepared regularly to predict required liquidity
levels over both the short and medium term.
The Group's exposure to liquidity risk is considered to be low since it
maintains a high level of liquid assets to meet its liabilities.
4.4 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.
4.4.1 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.
4.5 Fair value of financial assets and liabilities
The Group closely monitors the valuation of assets in markets that have become
less liquid. Determining whether a market is active requires the exercise of
judgement and is determined based upon the facts and circumstances of the
market for the instrument being measured. Where the Directors determine that
there is no active market for a particular financial instrument, for example
where a particular collective investment scheme is suspended from trading,
fair value is assessed using valuation techniques based on available, relevant
information and an appraisal of all associated risks. When a collective
investment scheme recommences regular trading, the value would be transferred
back to Level 1. This process requires the exercise of significant judgement
on the part of the Directors.
Due to the linked nature of the contracts administered by the Group's
undertakings, any change in the value of financial assets held to cover
financial liabilities under those contracts will result in an equal and
opposite change in the value of contract liabilities. The separate effect on
financial assets and financial liabilities is included in investment income
and investment contract benefits, respectively, in the condensed consolidated
statement of comprehensive income.
IFRS 13 requires the Group to classify fair value measurements into a fair
value hierarchy by reference to the observability and significance of the
inputs used in measuring that fair value. The hierarchy is as follows:
· Level 1: fair value is determined using quoted prices
(unadjusted) in active markets for identical assets.
· Level 2: fair value is determined using inputs other than quoted
prices included within Level 1 that are observable for the asset either
directly (i.e., as prices) or indirectly (i.e., derived from prices).
· Level 3: fair value is determined using inputs for the asset that
are not based on observable market data (unobservable inputs).
The following tables analyse the Group's financial assets and liabilities at
fair value through profit or loss, at 31 December 2023:
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss £m £m £m £m
Equity securities 58.5 - - 58.5
Collective investment schemes 911.0 8.8 3.8 923.6
Fixed income securities, bonds and structured notes
1.6 7.9 57.4 66.9
Total financial assets at fair value through profit and loss 971.1 16.7 61.2 1,049.0
All other financial assets and liabilities are designated as held at amortised
cost which approximates to fair value.
Level 1 Level 2 Level 3 Total
£m £m £m £m
Deposits and money market funds 84.6 84.6
Total financial assets at fair value through
profit or loss 1,055.7 16.7 61.2 1,133.6
Financial liabilities at fair value
through profit or loss - 1,106.0 - 1,106.0
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 or loss.
The following tables analyse the Group's financial assets and liabilities at
fair value through profit or loss, at 30 June 2023:
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss £m £m £m £m
Equity securities 52.0 - - 52.0
Collective investment schemes 899.3 10.9 5.3 915.5
Fixed income securities, bonds and structured notes
1.2 10.0 52.1 63.3
Total financial assets at fair value through profit and loss 952.5 20.9 57.4 1,030.8
All other financial assets and liabilities are designated as held at amortised
cost which approximates to fair value.
Level 1 Level 2 Level 3 Total
£m £m £m £m
Deposit and money market funds 90.2 - - 90.2
Total financial assets at fair value through profit or loss 1042.7 20.9 57.4 1,121.0
Financial liabilities at fair value through profit or loss - 1,101.5 - 1,101.5
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 unobservable input Sensitivity to changes in unobservable inputs
Suspended assets £3.8m (30 June 2023: £5.3m) Latest available information including or such as net asset values (NAV) or Discount factor (5%) and NAV. If the NAV was higher/lower, the fair value would be higher/lower.
other communication received
If the discount factor was higher/lower, the fair value would be lower/higher.
Bonds and structured notes Market comparison/ discounted cash flow: The fair value is estimated Level 2: Not applicable Level 2: Not applicable
considering:
Level 2: £7.9m (30 June 2023: £10.0m)
Level 3: Underlying volatility. Level 3: Significant increases/ decreases in this input in isolation would
Level 3: £57.4m (30 June 2023: £52.0m) (i) current or recent quoted prices for identical securities in markets that
result in higher or lower fair value.
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.
Significant unobservable inputs are developed as follows:
Underlying Volatility
In the absence of implied volatility until the maturity and moneyness of the
instrument, the best estimate is the use of extrapolated implied volatility or
historical volatility. The inputs used are derived against other independent
valuation sources and the reasonableness of the assumptions is evaluated as
part of the process.
A reconciliation between opening and closing balances of Level 3 assets is
presented in the table below:
31 December 30 June
2023 2022 2023
£m £m £m
Opening balance 57.4 50.6 50.6
Unrealised losses (5.6) (9.8) (6.5)
Transfers into level 3 0.1 1.6 1.6
Transfers out of level 3 - - -
Purchases 9.3 8.0 11.7
Closing balance 61.2 50.4 57.4
During the period under review, £0.1m of assets were transferred into Level
3, reflecting that the value of these assets were no longer based on
observable market data or inputs. Separately there were no assets transferred
out of Level 3 where they were again able to be valued based on observable
market data or inputs. Unrealised losses include additional fair value
impairments to a range of assets in liquidation which have resulted in £nil
of bad debt provisions being made to fees and other receivables as shown in
note 7.
Within Investment and other operating income, the Group has incurred losses of
£5.6m attributable to Level 3 assets noted above. These assets are classed as
financial investments held to cover liabilities under investment contracts
(note 13).
5 Segmental information
Disclosure of operating segments in these condensed consolidated financial
statements is consistent with reports provided to the Chief Operating Decision
Maker ("CODM") which, in the case of the Group, has been identified as the
Executive Committee of Hansard Global plc.
In the opinion of the CODM, the Group operates in a single reportable segment,
that of the distribution and servicing of long-term investment products. New
business development, distribution and associated activities in relation to
the Republic of Ireland ceased with effect from 30 June 2013. All other
activities of the Group are continuing.
The Group's Executive Committee uses two principal measures when appraising
the performance of the business: net issued compensation credit ("NICC")
(weighted where appropriate by product line) and expenses. NICC is a measure
of the value of new in-force business and top-ups on existing single premium
contracts. NICC is the total amount of basic initial commission payable to
intermediaries for business sold in a period and is calculated on each piece
of new business. It excludes override commission paid to intermediaries over
and above the basic level of commission.
The following table analyses NICC geographically and reconciles NICC to direct
origination costs during the period as set out in section 5 of the Business
and Financial Review.
Six months ended Year ended
31 December 30 June
2023 2022 2023
£m £m £m
Middle East and Africa 1.1 1.3 2.7
Latin America 0.9 1.3 2.4
Rest of World 0.4 0.3 0.5
Far East 0.1 - 0.1
Net issued compensation credit 2.5 2.9 5.7
Other commission costs paid to third parties 1.5 1.7 3.4
Enhanced unit allocations 0.4 0.6 1.0
Direct origination costs during the period 4.4 5.2 10.1
Revenues and expenses allocated to geographical locations contained in
sections 5.1 to 5.4 below, reflect the revenues and expenses generated in or
incurred by the legal entities in those locations.
5.1 Geographical analysis of fees and commissions by origin
Six months ended Year ended
31 December 30 June
2023 2022 2023
£m £m £m
Isle of Man 22.9 21.2 43.1
Republic of Ireland 0.7 1.1 2.1
The Bahamas * 0.3 0.6 0.5
23.9 22.9 45.7
* 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.
5.2 Geographical analysis of profit/(loss) before taxation
Six months ended Year ended
31 December 30 June
2023 2022 2023
£m £m £m
Isle of Man 4.3 3.4 6.5
Republic of Ireland (0.4) (0.5) (1.0)
The Bahamas 0.2 0.2 0.4
4.1 3.1 5.9
5.3 Geographical analysis of gross assets
31 December 30 June
2023 2022 2023
£m £m £m
Isle of Man * 1,235.7 1,225.4 1,229.8
Republic of Ireland 85.7 88.7 87.0
The Bahamas 2.3 1.7 1.8
1,323.7 1,315.8 1,318.6
* Includes assets held in the Isle of Man in connection with policies
written in The Bahamas. As at 31 December 2023 these amounted to £203.2m (31
December 2022: £148.8m).
5.4 Geographical analysis of gross liabilities
31 December 30 June
2023 2022 2023
£m £m £m
Isle of Man 1,024.1 1,068.3 1,043.8
Republic of Ireland 72.4 76.1 73.3
The Bahamas 205.3 149.9 179.7
1,301.8 1,294.3 1,296.8
6 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.
Six months ended Year ended
31 December 30 June
2023 2022 2023
£m £m £m
Contract fee income 15.2 14.0 28.1
Fund management fees 6.3 6.6 12.9
Commission receivable 2.4 2.3 4.7
23.9 22.9 45.7
7 Administrative and other expenses
Included in Administrative and other expenses are the following:
Six months ended Year ended
31 December 30 June
2023 2022 2023
£m £m £m
Auditors' remuneration
- Fees payable to the Company's auditor for the audit of the Company's 0.1 0.1 0.7
annual accounts
- Fees payable for the audit of the Company's subsidiaries pursuant to 0.3 0.3 0.1
legislation
- Other services provided to the Group - - -
Employee costs 5.5 5.0 10.3
Directors' fees 0.2 0.2 0.4
Fund management fees 2.5 2.7 5.3
Renewal and other commission 0.4 0.4 0.9
Professional and other fees 1.8 1.9 4.2
Litigation defence and settlement costs 0.7 0.6 1.5
Credit loss allowance - 0.2 0.1
Licences and maintenance fees 1.9 1.1 2.4
Insurance costs 0.4 0.5 0.9
Depreciation of property, plant and equipment 0.2 0.3 1.1
Communications 0.1 0.1 0.2
8 Taxation
Taxation is based on profit 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 H1 2024 was £0.1m on a rounded
basis (H1 2023: £0.1m). Corporation tax is charged on any profits arising at
the following rates depending on location of the company or branch:
Isle of Man 0% (2023: 0%)
Republic of Ireland 12.5% (2023: 12.5%)
Japan 23.2% (2023: 23.2%)
Labuan 24% (2023: 24%)
The Bahamas 0% (2023: 0%)
No deferred tax asset is currently being recorded in relation to losses
arising in Hansard Europe.
There is no material difference between the current tax charge in the
consolidated statement of comprehensive income and the current tax charge that
would result from applying standard rates of tax to the profit before tax.
9 Earnings per share
Six months ended Year ended
31 December 30 June
2023 2022 2023
Profit after tax (£m) 4.0 3.0 5.7
Weighted average number of shares in issue (millions) 137.6 137.6 137.6
Earnings per share in pence 2.9p 2.2p 4.1p
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
3.0 pence per share (H1 2023: 2.2p).
10 Dividends
Interim dividends payable to shareholders are recognised in the year in which
the dividends are paid. Final dividends payable are recognised as liabilities
when approved by the shareholders at the annual general meeting.
The following dividends have been paid by the Group during the
period:
Year ended
Six months ended 31 December 30 June
2023 2022 2023
Per share Total Per share Total Per share Total
p £m p £m p £m
Final dividend paid 2.65 3.60 2.65 3.50 2.65 3.60
Interim dividend paid - - - - 1.80 2.50
2.65 3.60 2.65 3.50 4.45 6.10
The Board have resolved to pay an interim dividend of 1.8p per share. This
amounts to £2.5m and will be paid on 25 April 2024 to shareholders on the
register at 15 March 2024.
11 Intangible assets and property, plant and equipment
Intangible assets
The historical cost of computer software is the purchase cost and the direct
cost of internal development. Computer software is recognised as an intangible
asset.
31 December 30 June
2023 2022 2023
£m £m £m
Intangible assets 22.3 16.6 19.9
The increase in computer software relates to capitalised costs associated with
the development of a replacement policy administration system. The system went
live in early March 2024, at which point amortisation has commenced over its
estimated Useful Economic Life.
Property, plant and equipment
Property, plant and equipment includes both tangible fixed assets and 'right
of use assets' recognised in accordance with IFRS 16.
31 December 30 June
2023 2022 2023
£m £m £m
Property, plant and equipment 0.3 0.8 0.4
Right of use assets 2.3 1.7 2.4
2.6 2.5 2.8
IFRS 16 - Leases
During the period to 31 December 2023, there were no changes to lease terms
for any of the Group's Leases recognised under IFRS 16 and the Group did not
enter into any new leases or lease extensions. The weighted average borrowing
rate applied to the lease liabilities at 31 December 2023 was 7.0% (31
December 2022: 6.3%).
The recognition of the right-of-use asset represents an increase in the
property, plant and equipment figure of £2.3m (31 December 2022: £1.7m).
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 £0.1m (31 December 2022: less than £0.1m).
During the year ended 30 June 2021, the Group 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 period ending 31 December 2023, the Group recognised
rental income of less than £0.1m (31 Dec 2022: less than £0.1m).
31 December 30 June
2023 2022 2023
£m £m £m
Right of use asset recognised b/f 2.4 1.9 1.9
Additions during the period - - 0.9
Depreciation (0.1) (0.2) (0.4)
Net book value of right of use asset c/f 2.3 1.7 2.4
Lease liability recognised b/f 2.9 2.3 2.3
Additions during the period - - 0.9
Lease payments made during the period (0.2) (0.3) (0.4)
Interest on leases 0.1 - 0.1
Lease liability recognised c/f 2.8 2.0 2.9
Of which are:
Current lease liabilities 0.2 2.0 0.2
Non-current lease liabilities 2.6 - 2.7
12 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 period under review is summarised below.
31 December 30 June
2023 2022 2023
£m £m £m
At beginning of financial year 117.8 122.5 122.5
Origination costs incurred during the period 3.8 4.5 8.7
Origination costs amortised during the period (7.1) (6.8) (13.4)
114.5 120.2 117.8
31 December 30 June
2023 2022 2023
Carrying value £m £m £m
Expected to be amortised within one year 16.6 11.8 11.9
Expected to be amortised after one year 97.9 108.4 105.9
114.5 120.2 117.8
13 Financial 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 greater than three months) and cash and cash
equivalents.
The following investments, other assets and liabilities are held to cover
financial liabilities under investment contracts. They are included within the
relevant headings on the condensed consolidated balance sheet.
31 December 30 June
2023 2022 2023
£m £m £m
Equity securities 58.5 50.0 52.0
Investment in collective investment schemes 923.6 909.5 915.4
Fixed income securities, bonds and structured notes 61.5 50.5 58.7
Deposits and money market funds 63.8 89.9 77.4
Total assets 1,107.4 1,099.9 1,103.5
Other payables (1.4) (0.9) (2.0)
Financial investments held to cover liabilities 1,106.0 1,099.0 1,101.5
The other receivables and other payables' fair value approximates amortised
cost.
14 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 period is summarised below:
31 December 30 June
2023 2022 2023
£m £m £m
At beginning of financial year 144.8 145.1 145.1
Income received and deferred in period 6.5 9.0 16.5
Income recognised in contract fees in the period (9.1) (8.4) (16.8)
142.2 145.7 144.8
31 December 30 June
2023 2022 2023
Carrying value £m £m £m
Expected to be amortised within one year 18.7 14.7 15.1
Expected to be amortised after one year 123.5 131.0 129.7
142.2 145.7 144.8
15 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.
31 December 30 June
2023 2022 2023
£m £m £m
Commission payable 1.1 1.8 1.4
Other creditors and accruals 10.3 8.7 9.5
Provisions 0.1 0.1 -
Lease liabilities of which:
Current lease liabilities 0.2 2.0 0.2
Non-current lease liabilities 2.6 - 2.7
14.3 12.6 13.8
16 Provisions
Provisions represent amounts to settle a number of the claims referred to in
Note 21 '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.
31 December 2023
£m
Settlement provision as at 1 July 2023 0.1
Additional provisions made in the period -
Released from the provision for settlement -
Settlement provision as at 31 December 2023 0.1
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.
17 Called up share capital
31 December 30 June
2023 2022 2023
£m £m £m
Authorised:
200,000,000 ordinary shares of 50p 100 100.0 100.0
Issued and fully paid:
137,557,079 ordinary shares of 50p
(30 June 2023: 137,557,079 ordinary shares) 68.8 68.8 68.8
18 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.
31 December 30 June
2023 2022 2023
£m £m £m
Merger Reserve (48.5) (48.5) (48.5)
Share premium 0.1 0.1 0.1
Share Save Reserve 0.1 0.1 0.1
Reserve for own shares held within EBT (note 19) (0.4) (0.2) (0.2)
(48.7) (48.5) (48.5)
Included within other reserves is an amount representing 1,182,101 (2022:
412,000) ordinary shares held by the Group's employee benefit trust ('EBT')
which were acquired at a cost of £0.5m (see note 19). 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 EBT. 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.
19 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 the
market value of the shares at the date granted 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
shares granted that are expected to be exercised. The impact of any revision
in the number of shares granted 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 shares 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.
19.1 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.
31 December 30 June
2023 2022 2023
Share Awards No. of Shares No. of Shares No. of Shares
Outstanding at start of period 601,684 - -
Granted 463,823 556,547 631,446
Forfeited - - (29,762)
Vested (74,899) - -
Outstanding at end of period 990,608 556,547 601,684
The Trust was funded with an initial loan of £446,000 during 2018, with
further loan funding provided when necessary. During the period the Trust was
funded with a further loan of £332,000. As at 31 December 2023, the balance
on the loan was £554,000.
31 December 30 June
2023 2022 2023
Shares Held by the Trust No. of Shares No. of Shares No. of Shares
Outstanding at start of period 557,000 12,000 12,000
Purchased 700,000 400,000 545,000
Forfeited - -
Vested (74,899) - -
Outstanding at end of period 1,182,101 412,000 557,000
During the period the expense arising from share-based payment transactions
was £82,000 (2022: £18,000).
20 Related party transactions
Intra-group transactions are eliminated on consolidation and are not disclosed
separately here.
There have been no significant related party transactions in the period, nor
changes to related parties. Related party transactions affecting the results
of previous periods and an understanding of the Group's financial position at
previous balance sheet dates are as disclosed in the Annual Report &
Accounts for the year ended 30 June 2023.
Details of any share-based transactions with employees during the period are
set out in note 19.
21 Contingent liabilities
21.1 Litigation
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 in Europe prior to
2014.
Even though the Group has never given any investment advice, as this is left
to the contract holder directly or through an agent, advisor or an entity
appointed at their request or preference, the Group has been subject to a
number of complaints in relation to the performance of assets linked to
contracts, some of which have escalated into litigation.
As at the date of the 2023 Annual Report, the Group faced litigation based on
writs totalling €26.1m or £22.4m. The corresponding figure as at 31
December 2023 was €25.2m or £22.0m (31 December 2022: €26.6m or £23.6m).
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.
We have previously noted that we expect a number of our larger claims and
litigation costs to ultimately be covered by our Group insurance cover.
During the period to 31 December 2023 we recorded £0.7m in insurance
recoveries in relation to litigation expenses (31 December 2022: £nil). We
expect such reimbursement to continue during the course of those claims.
We continue to estimate insurance coverage against the £22.0m of contingent
liabilities referred to above to be in the range of £3m to £10m.
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.
At this time, it is not possible to make any further estimates of liability.
Between 31 December 2023 and the date of this report, there have been no
material developments.
21.2 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.
22 Foreign exchange rates
The closing exchange rates used by the Group for the translation of balance
sheet items to sterling were as follows:
31 December 30 June
2023 2022 2023
US Dollar 1.27 1.20 1.27
Japanese Yen 180 159 184
Euro 1.15 1.13 1.17
23 Events after the reporting period
This report for the period ended 31 December 2023 was approved for issue on 6
March 2024. In early March 2024, the Group migrated its policyholder book to a
new policy administration system. No other material events have occurred
between the reporting date and the issue date that require disclosure under
IAS 10.
INDEPENDENT REVIEW REPORT TO HANSARD GLOBAL PLC
Conclusion
We have been engaged by Hansard Global Plc (the "Company") to review the
condensed set of consolidated financial statements in the half-yearly
financial report for the six months ended 31 December 2023 of the Company and
its subsidiaries (together, the "Group"), which comprises the statement of
financial position, the statement of comprehensive income, the statement of
changes in equity, the statement of cash flows and the related explanatory
notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 31 December 2023 is not
prepared, in all material respects, in accordance with IAS 34 Interim
Financial Reporting and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued by the Financial
Reporting Council for use in the UK. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. We read the other information contained in the half-yearly
financial report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
consolidated financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Scope of review section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However future events or conditions may cause the the Group
and the Company to cease to continue as a going concern, and the above
conclusions are not a guarantee that the the Group and the Company will
continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
interim financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual consolidated financial statements of
the Group are prepared in accordance with UK-adopted international accounting
standards. The directors are responsible for preparing the condensed set
of consolidated financial statements included in the half-yearly financial
report in accordance with IAS 34 Interim Financial Reporting.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group and the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless they either intend to liquidate
the Group or the Company or to cease operations, or have no realistic
alternative but to do so.
INDEPENDENT REVIEW REPORT TO HANSARD GLOBAL PLC (continued)
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of consolidated financial statements in the half-yearly financial report
based on our review. Our conclusion, including our conclusions relating to
going concern, are based on procedures that are less extensive than audit
procedures, as described in the scope of review paragraph of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report, or for the conclusions we have reached.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man
IM1 1LA
6 March 2024
Risk Based Solvency Capital
A) Risk Based Solvency capital position at 31 December 2023
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 Group shareholder Risk Based Solvency surplus at 31 December 2023 was
£39.6m (30 June 2023: £44.6m), before allowing for payment of the 2023
interim dividend. All Risk Based Solvency and related data presented in this
section is subject to change prior to submission to regulatory authorities.
31 Dec 31 Dec 30 June
Group Risk Based Solvency capital position 2023 2022 2023
Total Total Total
£m £m £m
Own Funds 118.7 127.7 124.9
Solvency Capital Requirement 79.2 76.7 80.3
Surplus 39.6 51.4 44.6
Solvency ratio (%) 150% 166% 156%
Totals may differ due to rounding
All Own Funds are considered Tier 1 capital.
The following table analyses the components of Own Funds:
31 Dec 31 Dec 30 June
2023 2022 2023
Own Funds Own Funds Own Funds
£m £m £m
Value of In-Force 120.1 124.9 124.4
Risk Margin (25.7) (24.1) (24.9)
Net Worth 24.3 26.3 25.4
Total 118.7 127.1 124.9
Own Funds decreased due to dividend payments, expenses and low new business
volumes, offset by positive market movements.
B) Analysis of movement in Group capital position
A summary of the movement in Group Risk Based Solvency surplus from £44.6m at
30 June 2023 to £39.6m at 31 December 2023 is set out in the table below.
Analysis of movement in Group shareholder surplus £m
Risk Based Solvency surplus at 30 June 2023 44.6
Operating experience (0.6)
Investment performance 1.1
Changes in assumptions (3.0)
Dividends paid (3.3)
Foreign exchange 0.8
Risk Based Solvency surplus at 31 December 2023 39.6
The movement in Group Risk Based Solvency surplus in the first half of the
2024 financial year was the result of dividends paid, changes in assumptions
and operating experience, offset by positive investment market performance and
exchange rate movements.
New business written had a negative £0.1m (H1 2023: positive £0.1m) impact
on Own Funds for the period.
C) Analysis of Group Solvency Capital Requirements
The analysis of the Group's Solvency Capital Requirement by risk type is as
follows:
Split of the Group's Solvency Capital Requirement* 31 Dec 31 Dec 30 June
2023 2022 2023
Risks % of SCR % of SCR % of SCR
Market
Equity 44% 43% 44%
Currency 14% 12% 14%
Insurance
Lapse 50% 50% 50%
Expense 18% 18% 17%
Default 1% 2% 2%
Operational 16% 19% 18%
* 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
31 Dec 31 Dec 30 June
2023 2022 2023
£m £m £m
IFRS shareholders' equity 22.3 21.5 21.8
Elimination of DOC (114.5) (120.2) (117.8)
Elimination of DIR 142.2 145.7 144.8
Value of In-Force 120.1 124.9 124.4
Liability valuation differences* (3.4) (4.1) (3.5)
Impact of risk margin (25.7) (24.1) (24.9)
Other** (22.3) (16.6) (19.9)
Risk Based Solvency Shareholder Own Funds 118.7 127.1 124.9
* 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 to significant changes in market conditions
is as follows:
Impact of market sensitivities 31 Dec 31 Dec 30 June
2023 2022 2023
Group Group Group
£m £m £m
Own Funds 118.7 127.7 124.9
Impact of:
10% instantaneous fall in equity markets (8.5) (8.1) (8.6)
100 basis points decrease in interest rates (0.9) (0.8) (0.8)
10% increase in expenses (7.5) (7.5) (7.4)
1% increase in expense inflation (5.8) (5.4) (5.3)
10% strengthening of sterling (11.0) (11.7) (11.5)
Contacts and Advisors
Registered Office Media Enquiries
55 Athol Street Camarco
107 Cheapside
Douglas
London
Isle of Man
EC2V 6DN
IM99 1QL
Tel: +44 (0)20 3757 4980
Tel: +44 (0)1624 688000
Fax: +44 (0)1624 688008
www.hansard.com
President Broker
Dr Leonard Polonsky, CBE Panmure Gordon (UK) Limited
Leonard.Polonsky@hansard.com 40 Gracechurch Street
London
EC3V 0BT
Tel. +44 (0)20 7886 2500
Non-executive Chairman Registrar
Philip Kay Link Market Services (Isle of Man) Limited
Philip.Kay@hansard.com PO Box 227
Peveril Buildings
Peveril Square
Isle of Man
IM99 1RZ
Tel (UK): 0871 664 0300*
Tel: +44 (0)20 8639 3399
Financial Advisor
Rothschild & Co.
New Court
St. Swithin's Lane
London
EC4N 8AL
Tel: +44 (0)20 780 7966
Independent Auditor UK Transfer Agent
KPMG Audit LLC Link Market Services Trustees Limited
Heritage Court The Registry
41 Athol Street 34 Beckenham Road
Douglas Beckenham
Isle of Man Kent
IM1 1LA BR3 4TU
Tel: +44 (0)1624 681000 Tel (UK): 0871 664 0300*
Tel: +44 (0)20 8639 3399
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