Hansard Global reports 'robust' profits as sales through advisers fall

Hansard reported IFRS profit before tax of £3.1m, up from £1.9m in H1 2022 for the six months ended 31 December 2022. Figures refer to the six months ended 31 December 2022 (H1 2023).

But fees and commissions earned totalled £22.9m for H1 2023 compared to £25.2m for H1 2022, reflecting lower levels of new business in the current financial year.

In the stock market statement on 9 March, Hansard said the current year result had improved as a result of reduced administrative expenses, improved interest rates and favourable foreign exchange movements.  

The prior year result included non-recurring provisions of £0.8m related to a range of funds in liquidation. 

The lower fees and commissions were mitigated by reduced administrative and other expenses which were £14.1m for H1 2023 compared to £15.4m in H1 2022.

Assets under administration were £1.10bn as at 31 December 2022, largely unchanged from £1.09bn as at 30 June 2022.

Litigation costs in defending claims against Hansard Europe of £0.6m for the period were on par with H1 2022. No further strengthening of the provision for claim settlements was required in H1 2023, it said. 

Philip Kay, chairman, said: "While the external environment for new business remains challenging, we have continued to invest and position our business for the long term future.  We believe 2023 will start to show the fruits of those initiatives and that we will emerge well positioned to capitalise on the opportunities before us.

"Over the next 12 months, we expect to see key new products come to market via our new policy administration system and on-line portals.  We will also migrate our existing policy book across to the new system enabling us to realise significant cost savings in 2024.

"Our profits, shareholder funds and regulatory capital continue to remain robust with the recent changes in the interest rate environment improving the return on our cash reserves and product margins."

He also highlighted the recent appointment of Christine Theodorovics, effective 23 January 2023,  who he said had 25 years' experience in financial services with a proven track record in management, business transformation, distribution, and strategic development across various senior positions in several countries.

Graham Sheward (pictured), group chief executive, said: "While the overall environment has remained challenging for investment and long-term savings plans, it was pleasing to deliver a much improved profit result compared to the comparable prior year period.

"We continue to make good progress with our strategic initiatives which are targeted to deliver future new business growth and cost efficiencies."

Sheward further said that Hansard continued to receive new business from a diverse range of financial advisers around the world. 

The majority of new business premiums were denominated in US dollars at approximately 91% (H1 2022: 81%), with approximately 6% denominated in sterling (H1 2022: 15%), and the remainder in euro or other currencies.

He continued: "In our largest region, Middle East and Africa, new business was down 13.7% for the six months ended 31 December 2022. 

"Having recruited additional sales management for this region, we have been working closely with both new and existing distribution partners to expand our proposition, targeting for example pensions and higher net worth clients. 

"In addition, we continue to make good progress towards launching a set of products for the Middle East that will leverage our new administration system and incorporate a new best in breed fund range."

As for new business in Latin America, it was down 4.9%: "Similar to the Middle East and Africa region, we are working on building business with new distribution partners to supplement our existing distribution.

"The Rest of World region was down 64.1% due to a decline in single premium business and business acceptance restrictions arising out of the Russia-Ukraine conflict.

"The 61.6% reduction in Far East business reflects a fluctuating smaller base of new business which experienced a spike in the prior year comparative. We have recently relocated a regional sales manager to our branch in Malaysia to drive business growth in this region.

"In addition to our new proposition developed for the Middle East, we also continue to make encouraging progress with distribution opportunities for our Japanese proposition and remain optimistic for future new business in that jurisdiction."

New business levels for H1 2023 are summarised as follows:

The following tables show the breakdown of new business calculated on the basis of PVNBP:

In a further section of the report, entitled ‘Going Concern', Hansard stated that "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 Covid-19, the Russia-Ukraine conflict 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."

Hansard further cited the following factors considered 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. 
• 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 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.