Half-yearly results For the 6 months ended 31 December 2006 29 March 2007
Disclaimer This presentation does not constitute an invitation to subscribe for or otherwise to acquire or dispose of shares in Hansard Global plc. This presentation may contain forward-looking statements with respect to certain of the plans and current goals and expectations relating to the future financial conditions, business performance and results of Hansard Global plc. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of Hansard Global plc, including amongst other things, Hansard Global s future profitability, competition with the markets in which the Company operates and its ability to retain existing intermediary clients and win new intermediary clients, changes in economic conditions generally or in the life assurance, savings and investment products sectors, terrorist and geopolitical events, changes in legal and regulatory regimes and practice, the ability of its owned and licensed technology to continue to service developing demands, changes in taxation regimes, exchange rate fluctuations, and volatility in the Company s share price. As a result, Hansard Global s actual future financial condition, business performance and results may differ materially from the plans, goals and expectations expressed or implied in these forward-looking statements. Hansard Global undertakes no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules). No statement in this presentation is intended to be a profit forecast or be relied upon as a guide to future performance. In particular, past performance is no guide to future performance. 1
Table of Contents 1. Overview and Highlights Leonard Polonsky 2. Operational Review Gordon Marr 3. Financial Review Vince Watkins 4. Summary & Outlook Leonard Polonsky 2
1. Overview and Highlights Leonard Polonsky Chairman
Overview Hansard is a specialist long term savings provider, based on 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 Hansard sells policies exclusively through a network of over 470 financial services intermediaries, independent financial advisers and the retail operations of certain financial institutions (collectively Intermediaries ), who provide access to their clients in more than 170 countries The Group completed a successful IPO in December 2006 Strong first half performance Interim dividend of 4 pence per share 4
Highlights Half-year ended 31 December 2006 2005 % change UK GAAP PAT ( millions) 10.6 8.3 +27.7% UK GAAP EPS (pence) 7.7p 6.0p +28.3% New Business Contribution ( m) 10.3 9.8 +5.1% APE ( m) 17.3 15.9 +8.8% New Business Margin (%) PVNBP basis 8.0% 8.0% - 5
Highlights (cont) Half-year ended 31 December 2006 2005 % change EEV ( m) 193.2 162.8 +18.7% Assets under Administration ( m) 1,034.6 886.3 +16.7% Coverage of Capital Requirements 12.3 x 10.9 x +12.8% 6
2. Operational Review Gordon Marr Chairman of Hansard Europe and Group Counsel
What Hansard Does UNDERLYING INVESTMENTS INTERMEDIARIES POLICYHOLDERS Approximately 195 third party funds Personalised portfolios Packages investment products within a life assurance wrapper Approx. $2 billion of AuA (1) Hansard Online IFAs / Private Banks / Financial Institutions They sell products to end customers (Policyholders) Hansard Online Sales Hansard focuses on high net worth, mass affluent and expatriate segments Hansard supports its intermediaries via Hansard Online and Regional Managers Addressing the high end of the $33 trillion wealth management market, expected to grow by 6% p.a. (2) Competitors include: Skandia, Friends Provident International, Generali (1) Assets under administration (2) Cap Gemini and Merrill Lynch World Wealth Report 2006 8
Operational Review APE up 8.8%; new business margin stable New business initiatives providing growth Enhanced ability to attract and compete for new business from a wider range of Intermediaries Four new non-executive directors added to the Board Hansard Online continues to differentiate 9
3. Financial Review Vince Watkins Chief Financial Officer! "
Highlights PAT up 28% to 10.6m from corresponding period in prior year EEV up 8% to 193m as at 31 December 2006 (30 June 2006: 179m) APE of 17.3m up 8.8% (H1 05/06: 15.9m) New business margin maintained at 8.0% (H1 05/06: 8.0%) Fees and commission income up 14% to 24.2m Strong positive cash flows Interim dividend of 4 pence per share 11
P&L Under UK GAAP ( millions) Fees and Commission Investment Income Other Operating Income Net Income Half-Year Ended 31 December H1 06/07 H1 05/06 24.2 21.2 51.1 85.1 1.8 0.7 77.1 107.0 FY 05/06 44.5 102.6 0.8 147.9 Change in Investment Contract Liabilities (49.9) (84.0) (99.3) Origination Costs (7.9) (6.7) (14.6) Administrative and Other Expenses (8.7) (8.0) (16.3) Profit on Ordinary Activities before Tax 10.6 (8.3) 17.7 Tax (0.0) (0.0) (0.0) Profit for the Year 10.6 8.3 17.7 Growth in PAT 28% 12
Balance Sheet Under UK GAAP ( millions) 31 Dec 06 31 Dec 05 30 June 06 Assets Tangible Assets 0.6 0.6 0.6 Investments 1,034.6 886.3 947.3 Deferred Origination Costs 90.1 81.6 86.6 Other Receivables 12.0 11.9 11.7 Cash and Cash Equivalents 64.4 44.5 57.9 Total Assets 1,201.7 1,024.9 1,104.1 Liabilities Financial Liabilities Under Investment Contracts 1,034.4 886.1 947.2 Amount Due to Investment Contract Holders 8.7 9.0 10.2 Deferred Income Reserve 105.7 98.6 103.0 Other Payables 5.4 3.7 6.8 Total Liabilities 1,154.2 997.4 1,067.2 Net Assets 47.5 27.5 36.9 Shareholders Equity 47.5 27.5 36.9 13
New Business Volumes Half Year Ended 31 December ( millions) 2006 2005 Annualised Regular premiums 8.7 8.3 Single premiums 8.6 7.6 Annualised Premium Equivalent 17.3 15.9 New Business Margin (%) 8.0% 8.0% 14
1 6 0 1 4 0 1 2 0 1 0 0 68 0 4 0 2 0 0 1 2 9. 6 1 4 7. 3 1 1 0.9 1 2 5.2 1 8.7 2 2.1 2 0 0 4 2 0 0 5 EEV Balance Sheet MAKE UP OF EMBEDDED VALUE (EEV BASIS) 200 180 160 140 ( m) 142.6 162.8 178.6 193.2 120 100 80 113.1 127.0 135.3 140.3 Value in Force Value in Force Net Worth 60 40 20 0 52.9 35.8 43.3 29.5 Jun-05 Dec-05 Jun-06 Dec-06 Net Worth Value in Force 15
Analysis of Change in EEV ( millions) New Business Contribution Expected Return on Existing Business Experience Variances Operating Assumption Changes Expected Return on Net Worth Investment Return Variances Economic Assumption Changes EEV Operating Return 31 Dec 2006 10.3 3.2 1.2 (3.9) 1.0 2.3 0.5 14.6 31 Dec 2005 9.8 2.6 1.9 0.0 0.6 5.4 0.0 20.3 16
Cash flow Half Year Ended 31 December ( millions) 2006 2005 Net Cashflow from Operating Activities 4.7 2.4 Returns on Investment 1.8 1.1 Capital Expenditure (0.1) 0.0 Net Cash Inflow 6.4 3.5 17
4. Summary & Outlook Leonard Polonsky Chairman
Summary Strong results with Profit After Tax up 28% APE up 8.8% and margins maintained High margin, low cost, scaleable, flexible business model Simple, risk reduced business model: products, distribution & geography Online service will continue to differentiate Maiden interim dividend Well positioned to continue profitable growth 19
Q&A
Appendix
Legal Structure Hansard Global plc (Isle of Man) Hansard Europe Limited (Ireland) Hansard International Limited (Isle of Man) Hansard Development Services Limited (Isle of Man) Hansard Administration Services Limited (Isle of Man) Hansard Information Services Limited (Isle of Man) Life Assurance Life Assurance Distribution Administration Information Systems Fully regulated life assurance companies Global marketing and intermediary relationship management Administration and fulfilment platform Authorised Insurance Manager Hansard OnLine 22
Strongly Capitalised Business REQUIRED MINIMUM MARGIN (RMM) COVERAGE (1) 70 60 ( m) 8.1x 9.6x 12.5x 50 40 48.9 51.5 30 36.6 20 10 0 3.8 3.9 4.1 Jun-05 Jun-06 Dec-06 RMM Shareholder Capital (1) (2) x RMM Coverage The Group has no borrowings, either long-term or short-term (1) Shareholder capital of Hansard International Limited and Hansard Europe Limited as presented in their accounts (2) GBP equivalent of RMM for Hansard International Limited and Hansard Europe Limited on a basis consistent with 2006 23
Details of EEV Methodology Which parts of the Group are reported on an EEV basis? The entire Group, excluding future new business but including: both life companies subsidiaries providing administration, distribution and other services. the holding company How do we define new business? New policies taken out in the period Non contractual premiums received in the period for existing policies 24
Key Areas of Hansard s EEV Methodology Allowance for risk A market consistent approach future cash flows are discounted at the risk free rate the assumed return on assets is also equal to the risk free rate (Hansard s business has no guarantees over future investment return that require techniques used to price options) Cost of holding required capital capital needs to be retained in the business to back the promises given to policyholders to pay their benefits when due. for EEV the level of required capital is equivalent to 150% of the minimum amount required by the regulators the EEV recognises the cost to the business of holding this level of required capital 25
Key Areas of Hansard s EEV Methodology Allowance for risk (continued from previous page) Other assumptions for future uncertainties the assumptions reflect management s best estimate of future experience, for example of future persistency rates and expenses the risk that actual experience may vary from assumptions, is included in the costs of holding the required capital Allowance for operational risk industry approach to recognising operational risk in EEV remains diverse and Hansard has retained a transparent approach hold an additional provision of 5m for operational risk this is equivalent to a 0.7% increase to the risk discount rate 26
Hansard Business Model Low fixed costs Benefits of online functionality Centralised product design & manufacturing Attractive intermediary proposition Wide range of underlying funds Online platform supports intermediaries Relationship managers in the field Ability to white-label products Risk-reduced No direct sales force No unpriced options or guarantees Diversified distribution base Profit-driven strategy Not driven by market share Products priced for profitability Not competing on price Operational Gearing Core of long-term intermediaries Growing assets under management Intermediaries assume mis-selling risk Financial exposure on policies reduced Attractive new business margins History of profitable, cash generative growth High profitability & scalability 27
Sources of Revenue Revenue is generated from Contract fee income Establishment fees and other charges Charges on policyholderdirected activity (e.g. fund switching) Service charge (inflation linked) Fund management fees 22% Commission receivable 7% FEES BY TYPE (1) 24.2 million Fund management fees Annual management charge (%) Contract fee income 71% Commission receivable marketing allowances (1) For the six months ended 31 December 2006 28
Product Features Unit linking provides exposure to approximately 195 investment funds across a wide range of asset types Approx. 35% (1) of assets under administration invested through Fidelity, BlackRock Merrill Lynch, JP Morgan Fleming and Invesco Regular performance review by Hansard No guarantees over investment performance and no unpriced options Pricing strategy allows group to manage product bias emerging from intermediaries or market trends Policyholders of Hansard International Limited protected up to 90% of value under Isle of Man legislation (1) As at 31 December 2006 29
Secure, Robust and Resilient Online Platform Hansard OnLine Hansard Intermediaries Policyholders Highly visible audit trail for intermediary & policyholder contact Managing policyholder expectations Scaleable (incremental cost) Ease of delivery of data (& continual improvement) Business continuity management Multi-language, multicurrency capability Data mining opportunities 24/ 7/ 365 access to information commission status client correspondence agency management marketing database news/ info/ literature Customised investment reporting by client (intermediary branded) Easier to manage client mobility Continual updating Secure, location independent information 24/ 7/ 365 access to information policy info investment info valuation reports (historic & current) Continual updating Secure, location independent information Very low downtime levels 30
Hansard Product Suite Hansard uses three product families to construct a suite of single and regular premium investment opportunities Retirement Programme Capital Builder Personal Portfolios These can be customised and configured at minimal cost to Hansard - in many different combinations, to meet specific intermediary and policyholder requirements Risk reducing design: Unit linked products No unpriced options or guarantees Reassurance protection for life assurance components 31
How does Hansard Distribute? Exclusively through intermediaries These intermediaries are: Independent financial advisers (IFAs) / individuals Groups of IFAs (e.g. devere) Institutional intermediaries (banks, private banks, broker-dealers) Supported by our network of 14 relationship managers spread throughout the world Hence product is always delivered locally Risk reducing approach: Policyholder selling relationship rests with the intermediary Thorough vetting of intermediaries 32
Where Do Hansard s Intermediaries Distribute? NEW BUSINESS BY GEOGRAPHY (1) South America 8% Africa 2% Other (excl. USA) 7% Middle East 11% Europe (excl. UK) 48% Far East 24% Over 470 active intermediaries servicing over 43,000 policies in over 170 countries Hansard Europe Limited writes policies sold by intermediaries in EEA markets; Hansard International Limited writes policies sold by intermediaries in the remainder (not US) (1) New business premium for FYE Jun 2006 on APE basis 33
Why Do Intermediaries Choose Hansard? Hansard offers them local presence and support (through its relationship managers) Hansard Online provides them with a valuable support tool White labelling allows intermediary to promote their brand Helps build their business Client monitoring capabilities Policyholder access reduces the intermediary s administrative burden Hansard can customise products specifically to meet their requirements (or the requirements of end policyholders) through Product structure, Language, Underlying asset classes Reliable, steady presence in their local marketplace multi-language, multi-currency capability High levels of repeat business We do not need to compete on price alone 34
Hansard Online Award Winning Platform Significant operational efficiency for intermediaries & Hansard 2.1 million queries processed online (1) 61,000 queries by phone / fax (1) Award winning International Investment magazine - Best Internet Servicer Award in 2003 & 2004 International Investment Fund and Product Best Internet and Technology Provider for 2006 Portfolio International Best Software Provider or Web-based Application 2006 Cost efficient and scaleable platform (1) Estimated data for the year to 30 June 2006 35