Results for year ended 30 June 2009 24 September 2009
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
Index Highlights and overview Hansard OnLine developments Financial performance Summary Appendices 2
Highlights and overview 3
Financial summary Resilient performanc e across the business 2009 2008 IFRS profit before tax 20.8m 23.6m EEV operating profit after tax 11.3m 47.9m Shareholder cash generation 25.0m 21.6m Contribution from new business 10.1m 20.3m Cash payback on new business 2.9 years 2.2 years New business margin 6.1% 7.8% Embedded value 236.6m 243.1m IFRS basic earnings per share 14.7p 17.0p Interim dividend paid per share 5.25p 5.0p Recommended final dividend per share 7.35p* 7.0p** Assets under Administration 1,002m 1,137m Highlights and overview 4 * Subject to approval by shareholders ** Paid 27 November 2008
Operational summary Robust performance in current markets Current market environment remains challenging Hansard s business model is well placed to deal with these conditions: Over 1 billion Assets under Administration (AUA) New business flows at industry leading margins Persistent regular premium flows Unit-linked investment (risk reduction) with no options or guarantees Well positioned for growth when market conditions improve Group profitability underpinned by: In-force policies at start of period provide >95% of fees and commissions Policyholder retention guarantees positive operating cash flows Low-cost operating model Hansard OnLine No borrowings to service and increased cash balances Highlights and overview 5 Stability of Assets under Administration
m m m m Financial stability in challenging conditions Embedded value 300 250 200 150 100 1,200 1,000 800 600 400 Assets under Administration 50 200 0 2005 2006 2007 2008 2009 IFRS profit 25 20 As at 30 June 0 2005 2006 2007 2008 2009 As at 30 June EEV operating profit 60 50 15 40 10 5 30 20 10 Highlights and overview 6 0 2005 2006 2007 2008 2009 0 2005 2006 2007 2008 2009 Year ended 30 June
Pence per share m Times covered Well capitalised with no debt 60 50 40 30 20 10 0 Shareholders' capital - as at 30 June 20 18 16 14 12 10 8 6 4 2 0 Required minimum solvency margin cover - as at 30 June 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Continued dividend stream (1) 14 12 10 8 6 6 7 7.35 Final Interim 4 Highlights and overview 7 7 2 0 4 5 5.25 (1) Dividends quoted are those relating to the profits in the financial years stated above 2007 2008 2009
2. Hansard OnLine developments 8
Continued investment in technology Intermediaries can upload scanned documents directly to the company, increasing data security while reducing cost. Clients can see copies of correspondence issued by the life companies via their client sites. Access to Hansard OnLine (HOL) is available in Mandarin and Japanese. In addition to English, languages available include French, Dutch, Norwegian, Portuguese, Spanish and Swedish. Other 18% HOL - % Split of Languages English 50% Hansard OnLine 9 9 Mandarin 32%
3. Financial performance 10 Financial information is prepared under IFRS and is audited. EEV information presented, other than APE information, has been subject to a review by the Reviewing Actuaries.
New Business Volumes Industryleading margins in volatile markets Year ended 30 June 2009 2008 m m Annualised regular premiums (RP) 12.0 18.5 Single premiums (SP) 10.4 15.2 Annualised Premium Equivalent 22.4 33.7 Compensation Credit (internal measure) 11.6m 17.0m PVNBP 166.2m 261.8m New Business Margin (%) PVNBP basis 6.1% 7.8% Financial Performance 11 11
% split % split Global distribution - new business (APE) 52.9% South America and Far East main drivers for growth 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Annualised RP SP 50.4% 47.1% 45.1% 49.6% 52.9% 54.9% 2006 2007 2008 46.4% 53.6% 2009 100 % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 16% Latin America 21% 14% Other 17% 32% 24% Far East EU 38% & EEA 38% 2008 2009 Increased % of RP business year on year SP business more susceptible to market volatility South America and Far East are main drivers for growth in RP Continued investment in Account Executives and distribution infrastructure Financial Performance 12
Abridged consolidated income statement Resilient profits despite market conditions Year ended 30 June 2009 2008 m m Fees and commissions 47.5 49.6 Investment income attributable to the Group 6.0 7.4 Other operating income 0.7 0.5 54.2 57.5 Origination costs (16.4) (18.1) Administrative and other expenses attributable to the Group (17.0) (15.8) Profit for the year before taxation 20.8 23.6 Financial Summary 13
m Sources of fees and commissions year ended 30 June 2009 Robust fee income through 60 50 40 30 design 35.6 35.4 3.4 4.9 8.4 9.3 Commission receivable 20 10 Fund management fees Contract fee income 0 30-Jun-09 30-Jun-08 Year ended 30 June Contract Fee Income analysis ( m) 30 June 2009 30 June 2008 Establishment fees and other charges 22.1 24.4 Charges on policyholder-directed activity (e.g. fund switching) 6.4 4.3 Service charge (inflation linked) 7.1 6.7 Financial Summary 14 Total 35.6 35.4
Abridged consolidated balance sheet Continued growth in cash and capital As at 30 June 2009 2008 m m Assets Plant and equipment 1.1 0.9 Deferred origination costs 104.1 102.5 Other receivables 12.7 12.9 Cash and cash equivalents 76.1 69.6 Total assets 194.0 185.9 Liabilities Deferred income reserve 125.2 116.5 Amounts due to investment contract holders 9.2 11.0 Other payables 3.9 6.0 Total liabilities 138.3 133.5 Net assets 55.7 52.4 Shareholders' equity 55.7 52.4 Financial Summary 15
Analysis of movement in Assets under Administration Asset value supported by positive cash flows Year ended 30 June 2009 2008 m m Deposits to investment contracts 188.6 224.7 Deductions from contracts (177.3) (220.0) FX movements 98.4 74.6 Market movements (245.0) (72.1) Movement in year (135.3) 7.2 As at 1 July 1,137.4 1,130.2 As at 30 June 1,002.1 1,137.4 Financial Summary 16
m Abridged cash flow Statement (1) Strong positive cash flows from existing book of business (1) The summarised cash flow statement reflects cash flows relating to Shareholders activities only and excludes investment of Shareholder funds and cash flows relating to investment contracts Financial Summary 17 Year ended 30 June 2009 2008 m m Net cash inflow from operating activities 20.0 14.6 Foreign exchange differences 0.8 2.2 Interest on investments 4.2 4.8 Cash inflow 25.0 21.6 Purchase of plant and equipment (0.7) (0.6) Corporation tax paid (1.1) - Dividends paid (16.8) (22.0) Cash outflow (18.6) (22.6) Net cash inflow / (outflow) 6.4 (1.0) Operating cash generated 30 25 20 15 10 5 0 2005 2006 2007 2008 2009 Year ended 30 June
EEV Operating Profit Product profitability offset by reduced volumes and policyholder behaviour Year ended 30 June 2009 2008 m m New Business Contribution 10.1 20.3 Expected Return on Existing Business 9.7 9.4 Experience Variances (5.3) (3.1) Operating Assumption changes (8.0) 2.8 Model changes 2.0 15.7 Expected Return on Net Worth 2.8 2.8 EEV Operating Profit after tax 11.3 47.9 Investment Return Variances (2.1) (0.2) Economic Assumption Changes 1.1 (0.6) EEV Profit after tax 10.3 47.1 Financial Summary 18
m EEV Balance Sheet Continued growth in net worth offset by market movements Financial Summary 19
4. Summary 20
Summary & Outlook Strong financial track record with no borrowings. Continued strong cash generation Solid performance with IFRS PAT of 20.1m, EEV resilient, despite capital market volatility Business from a strong and diversified intermediary base at industry leading margins Experienced management team with Gordon Marr now appointed to position of Managing Director Continued dividend policy with record final dividend of 7.35p per share Increased investment in distribution relationships Conditions for new business remain challenging in the short term particularly regarding single premium new business flows Isle of Man included on OECD white list Well positioned for growth when market conditions improve Summary 21
Appendix 22
Experienced Management Team Dr Leonard Polonsky, Executive Chairman. Dr Polonsky founded the Group in 1970. Paul Harwood, Managing Director: Hansard Administration Services. Paul joined the Group in 1996. He is a Fellow of the Institute of Actuaries and the Society of Actuaries in Ireland. Joseph Kanarek, Chief Distribution Officer. Joe joined the Group in 2000. Previously he was an executive vice-president of the American Life Insurance Company. Gordon Marr, Managing Director. Gordon joined the Group in 1988. He was appointed to his new role on 1 July 2009; formerly, he was Group Counsel. He is a Solicitor of the Supreme Court and member of the Law Society. Appendix 23 23 Vince Watkins, Chief Financial Officer. Vince joined the Group in 1995. He is a member of the Institute of Chartered Accountants in England and Wales.
What Hansard Does Expat clients interact with their IFA IFA recommends a life wrapper for their clients IFA agrees with the client the funds in which to invest Reinsure all Life Risk Client has access to Hansard OnLine 24 / 7 to see his policy and investment performance but client only sees the IFAs branding Client can switch underlying investment funds Malaysia IFA Italy IFA Mexico IFA Belgium IFA Hansard takes fee for initial investment, fund switching and investment administration Client rarely sees Hansard itself Egyptian Client Brazilian Client German Client Clients will switch investments, but the life wrapper means they rarely change the administrator, Hansard Business model mitigates risk Appendix 24
Hansard Business Model Resilience in volatile markets Appendix 25 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 = Long-term resilience
US$ Trillion Hansard s Marketplace Market expected to recover 8.6 million individuals worldwide held at least US$1 million in financial assets at 31 December 2008. Global HNWI wealth totalled US$32.8 trillion Emerging markets, especially those in the Middle East and Latin America, have been the most resilient regions during the downturn 60 HNWI Wealth Forecast - 2006-2013F (1) (1) Datasource: Merrill Lynch / Cap Gemini World Wealth Report 2009(2) Compound Annual Growth Rate 2007 to 2013 Appendix 26 50 40 30 20 10 0 0.9 1.4 5.1 1 1.7 6.2 8.4 9.5 10.1 10.7 0.8 1.4 5.8 7.4 8.3 11.3 11.7 9.1 1 1.9 Global CAGR (2) 8.1% 7.6 13.5 11.4 12.7 2006 2007 2008 2013 (F) Africa Middle East Latin America Asia Pacific Europe North America
Where is Hansard s marketplace? Diversified distribution base New Business by Geography (1) Over 540 active intermediaries servicing over 43,000 policyholders in over 170 countries Latin America 21% EU and EEA 38% Hansard Europe Limited writes policies sold by intermediaries in EEA markets; Hansard International Limited writes policies sold by intermediaries in the remainder (not US) Other 17% Far East 24% Appendix 27 (1) New business premiums for year ended 30 June 2009 on APE basis
Why Do Intermediaries Choose Hansard? Attractive proposition for intermediaries Hansard provides 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 Appendix 28
Timeline 1970 - Liberty Life founded by Dr Polonsky in the UK 1986 - Hansard International incorporated on the Isle of Man 1995 - Liberty Life sold 1995 - Hansard Europe incorporated in Dublin, Republic of Ireland 1999 - Hansard OnLine launched 1999 - Direct sales channel closed 2000 - Fund management company sold 18 December 2006 - Hansard Global plc listed on London Stock Exchange 29 December 2007 Hansard Global included in the UK FTSE All-Share Index