TIDMHSD
RNS Number : 0244O
Hansard Global plc
28 September 2023
The following amendments have been made to the ' Results for the
year ended 30 June 2023' announcement released on 28/09/23 at 07:00
under RNS No 9188N
The payment date for the final dividend is 16 November 2023, and
not 14 November 2023 as stated in the original announcement. The
record date for the final dividend is 6 October 2023, and not 4
October 2023 as stated in the original announcement. The
ex-dividend date for the final dividend is 5 October 2023, and not
3 October 2023 as stated in the original announcement.
All other details remain unchanged.
The full amended text is shown below.
28 September 2023
Hansard Global plc
Results for the year ended 30 June 2023
Dividend maintained in challenging year for new business
Hansard Global plc ("Hansard" or "the Group"), the specialist
long-term savings provider, issues its full-year results for the
year ended 30 June 2023 ("FY 2023").
Summary
FY 2023 FY 2022
-------------------------------- --------- ----------
New business sales - PVNBP (1) GBP85.7m GBP120.5m
basis
IFRS profit before tax GBP5.9m GBP3.8m
Underlying profit GBP7.4m GBP5.9m
Recommended final dividend per
share (2) 2.65p 2.65p
IFRS earnings per share 4.10p 2.60p
-------------------------------- --------- ----------
As at 30 June 30 June
2023 2022
---------------------------- ---------- ----------
Assets under Administration GBP1.10bn GBP1.09bn
Value of In-Force GBP124.4m GBP128.5m
---------------------------- ---------- ----------
(1) Present Value of New Business Premiums
(2) Subject to approval at the AGM
Graham Sheward, Group Chief Executive Officer, commented:
"Our results for the 2023 financial year demonstrate a marked
improvement in the profitability of the business reflecting
additional investment revenue opportunities arising from higher
interest rates, and continued discipline with respect to management
expenses. As the group has no external debt, there are no
additional interest costs.
While 2023 was another challenging year for new business, we
continue to work hard to improve sales through new product
development and new broker relationships.
Our key strategic initiatives - our new Japanese proposition and
our new policy administration system - continue to make good
progress.
Given the profitability and underlying strength of the business
the board recommends maintaining the dividend in line with last
year."
NEW BUSINESS
As previously announced, our new business levels were GBP85.7m
on a Present Value of New Business Premiums ("PVNBP") basis, down
28.9% from GBP120.5m in FY 2022.
New business continued to be impacted by economic uncertainty,
geopolitical developments, and a general hesitancy by clients to
commit to long-term savings products, both contractual regular
premium and single premium investments.
TRADING RESULTS
IFRS profit before tax for the year was GBP5.9m, up from GBP3.8m
in FY 2022. Excluding litigation defence costs and other
non-recurring provisions, underlying profit was GBP7.4m compared
with GBP5.9m in FY 2022.
Fee and commission income was GBP45.7m for the year (FY 2022:
GBP48.8m) with lower transaction based income in Hansard
International and lower income from Hansard Europe which continues
to run-off since closing to new business in 2013.
Income on shareholder investments was GBP3.5m for the year (FY
2022: GBP0.1m) as the Group has been able to take advantage of
higher interest rates.
Administrative and other expenses were GBP29.0m for the year (FY
2022: GBP29.8m). The Group maintained tight control over general
overheads and expenses, despite inflationary pressures.
Value in Force ("VIF") represents the present value of expected
future shareholder profits less the present value cost of holding
capital required to support the in-force business. VIF totaled
GBP124.4m as at 30 June 2023 compared to GBP128.5m at 30 June 2022
reflecting additional VIF from new business levels being lower than
the realisation of profits in the year from the in-force
business.
Assets under administration were GBP1.1bn as at 30 June 2023, in
line with GBP1.1bn at 30 June 2022.
OUTLOOK
While the economic environment and long-term savings market
remain challenging, we continue to make progress in Japan in
respect of our new proposition as well as in developing new
products. We continue to benefit from a strong balance sheet with
no external debt and look forward to reporting further progress in
due course.
policyholder LITIGATION
The Group continues to manage carefully its litigation exposures
relating to the legacy operations of Hansard Europe. We continue to
believe we have strong defences against the claims being made.
Contingent liabilities arising out of o utstanding writs were
GBP22.4m as at 30 June 2023 compared to GBP22.2m as at 30 June
2022.
The Group successfully defended 15 cases during the year with
net exposures of approximately GBP1.9m, 14 of which may be appealed
by the plaintiffs. These successes continue to affirm confidence in
the Group's legal arguments. Our policy is to maintain contingent
liabilities even where we win cases in the court of first instance
if such cases have been subsequently appealed.
DIVIDS
The Board has proposed a final dividend of 2.65p per share, the
same level as last year.
This dividend, if approved by the shareholders at the Annual
General Meeting on 8 November 2023, represents a total dividend of
4.45p (2022: 4.45p) per share in respect of the financial year.
Upon approval, the dividend will be paid on 16 November 2023 to
shareholders on the register on 6 October 2023. The associated
ex-dividend date is 5 October 2023.
HALF-YEARLY RESULTS
The results for the half-year are expected to be published on 7
March 2024.
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 +44 (0) 7990 653 341
Ben Woodford, Hugo Liddy
Notes to editors:
-- Hansard Global plc is the holding company of the Hansard
Group of companies. The Company was listed on the London Stock
Exchange in December 2006. The Group is a specialist long-term
savings provider, based in the Isle of Man.
-- The Group offers a range of flexible and tax-efficient
investment products within a life assurance policy wrapper,
designed to appeal to affluent, international investors.
-- The Group utilises a controlled cost distribution model via a
network of independent financial advisors, and the retail
operations of certain financial institutions who provide access to
their clients in more than 170 countries. The Group's distribution
model is supported by Hansard OnLine, a multi-language internet
platform, and is scalable.
-- The principal geographic markets in which the Group currently
services contract holders and financial advisors are the Middle
East & Africa, the Far East and Latin America. These markets
are served by Hansard International Limited and Hansard Worldwide
Limited.
-- Hansard Europe dac previously operated in Western Europe but
closed to new business with effect from 30 June 2013.
-- The Group's objective is to grow by attracting new business
and positioning itself to adapt rapidly to market trends and
conditions. The scalability and flexibility of the Group's
operations allow it to enter or develop new geographic markets and
exploit growth opportunities within existing markets often without
the need for significant further investment.
Forward-looking statements:
This announcement may contain certain forward-looking statements
with respect to certain of Hansard Global plc's plans and its
current goals and expectations relating to future financial
condition, performance and results. By their nature forward-looking
statements involve risk and uncertainties because they relate to
future events and circumstances which are beyond Hansard Global
plc's control. As a result, Hansard Global plc's actual future
condition, performance and results may differ materially from the
plans, goals and expectations set out in Hansard Global plc's
forward-looking statements. Hansard Global plc does not undertake
to update forward-looking statements contained in this announcement
or any other forward-looking statement it may make. No statement in
this announcement is intended to be a profit forecast or be relied
upon as a guide for future performance.
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regime.
Legal Entity Identifier: 213800ZJ9F2EA3Q24K05
Chairman's Statement
Introduction
I am pleased to present the Group's annual report for the
financial year ended 30 June 2023. During the year we strengthened
our board composition with the addition of Christine Theodorovics
and Thomas Morfett, who both bring highly relevant skills and
experience. In turn, following his departure, I would like to thank
Tim Davies for his contribution and commitment to the Group.
Hansard, like many other businesses, has continued to experience
a challenging external environment as we navigate our way through
ongoing challenges in the global economy, including the effects of
the Russia/Ukraine conflict. While new business was lower than the
prior year comparative, the business has remained resilient, with
our systems and client services functions fully operational at all
times.
The Board and I remain confident in the future opportunities for
the business. We are operationally ready to launch our innovative
new product in Japan and continue to make progress with
distribution opportunities.
We have also made significant progress with the project to
replace our policy administration systems. This will provide an
advanced, modern platform that will benefit our policyholders,
distribution partners and Group performance through enhanced
operational efficiency, increased scalability, and cost
savings.
Financial performance
Our IFRS profit before tax for the year was GBP5.9m compared to
GBP3.8m in 2022.
Fees and commissions were down GBP3.1m to GBP45.7m for the year
(2022: GBP48.8m), reflecting lower transactional income within
Hansard International and the continuing run-off of Hansard
Europe.
Returns on group investments improved to GBP3.5m for the year
(2022: GBP0.1m) as a result of increasing interest rates as a
counter to inflationary pressures, with the Group managing its cash
position to take advantage of improving yields wherever
possible.
Administrative and other expenses were GBP29.0m for the year,
compared to GBP29.8m in 2022. The 2022 result incorporated a
GBP1.0m provision for fees and other balances that were deemed
likely to be irrecoverable from a set of legacy funds in the
process of liquidation. The Group maintained tight control over
general overheads and expenses.
Further detail and analysis are contained in the Business and
Financial Review on pages 12 to 22.
New business
New business for the 2023 financial year was GBP85.7m (using the
PVNBP metric), down 28.9% from GBP120.5m in 2022. New business
levels were impacted by economic uncertainty, geopolitical
developments, and a general hesitancy by clients to commit to
long-term savings products, particularly those with contractual
regular premiums.
Initiatives are underway to improve new business levels and are
further outlined in the Business and Financial Review.
Capitalisation and solvency
The Group remains well capitalised to meet the requirements of
regulators, contract holders, intermediaries and other
stakeholders.
On a risk-based capital basis, total Group Free Assets in excess
of the Solvency Capital Requirements of the Group were GBP44.6m
(2022: GBP50.7m), a coverage of 156% (2022: 165%). We have
maintained our prudent investment policy for shareholder assets,
which minimises market risk and has provided a stable and resilient
solvency position over many years and economic cycles.
Dividends
The Board has resolved to pay a final dividend of 2.65p per
share (2022: 2.65p). In making this decision, the Board has
carefully considered its current and future cash flows, the risks
and potential impact of the global economic situation, the outlook
for future growth and profitability and the views of key
stakeholders, including shareholders and regulators.
The dividend is subject to approval at the Annual General
Meeting. If approved, this will represent total dividends for the
financial year of 4.45p per share (2022: 4.45p). Upon approval, the
final dividend will be paid on 16 November 2023. The ex-dividend
date will be 5 October 2023 and the record date will be 6 October
2023.
Philip Kay
Chair
28 September 2023
GROUP CEO REVIEW
Despite a challenging economic environment adversely influencing
new business sentiment in our savings and investment target
markets, I'm pleased to present this strong set of key financial
results as testament to the resilience of the Hansard Group over
many years. Organisational improvements and key person hires -
including Thomas Morfett as our new CFO and John Whitehouse
promoted to a newly created COO role - have enabled us to tighten
focus on cost control and maximise returns on Group cash whilst
building our refreshed product pipeline to improve new business
revenue.
Focus over the past financial year has been on creating and
leveraging capacity in our Commercial team, to explore additional
distribution channels for our Japan proposition, and to refresh our
existing product portfolio to reflect changing investor trends. A
pipeline of improved products will begin to be offered from the end
of this calendar year to address declining sales volumes in our
traditional markets.
In addition, we've continued to make positive progress with our
major technology project to replace our policy administration and
associated systems, which will yield tangible cost savings and
efficiency gains in the near future.
Despite macro-economic double-digit inflationary pressure, tight
cost control has reduced the impact to less than 1% of our prior
year cost base, reflecting an increase of GBP0.2m excluding
litigation costs and provision for bad debts which remain closely
managed. These actions have enabled us to pay a consistent dividend
yield to shareholders with minimal impact on reserves, whilst
building opportunities to improve top-line growth now and for the
future.
The range of activities within the Group referred to above has
required colleagues across the business to manage multiple
priorities at pace, and I would like to take this opportunity to
thank my executive team and all Hansard Group colleagues for their
commitment and hard work. In addition, Hansard colleagues were
delighted to be recognised for their commitment to servicing the
needs of advisors and their clients, picking up awards for
Excellence in Client Service and Excellence in Fintech at the
October 2022 International Investment awards.
Our Culture Change Programme has entered its third year and we
were pleased to measure our progress via a recent Colleague
Engagement Survey which evidenced 70% of "engaged colleagues", up
from 40% in early 2021. We will continue to strive to ensure that
Hansard is a company that colleagues are proud to work in.
This has been an important year of making significant progress
across all our major strategic priorities, and I fully appreciate
that we must now deliver on these well-developed plans to ensure
Hansard remains a relevant, innovative, and sustainable business
for all stakeholders.
RESULTS FOR THE YEAR UNDER REVIEW
We believe that the following areas are fundamental for the
continued success of the Group:
-- Proposition enhancement, product improvement and
diversification of our distribution channels to enable generation
of significant flows of new business from identified target
markets.
-- Completing our technology change project to deliver
meaningful cost savings in the near and medium term.
-- Proactively managing our cash flows through the cycle to fund
the appropriate balance of investment in new business and
dividends.
-- Managing and mitigating our exposure to business risks; and
-- Positioning ourselves to incorporate increasing levels of
regulation into our business model.
I draw your attention to the following items below. Additional
information is contained in the Business and Financial Review on
pages 12 to 22.
1. New business distribution
New business for the 2023 financial year was GBP85.7m (using the
PVNBP metric), down 28.9% from GBP120.5m in FY 2022. New business
levels were impacted by economic uncertainty, geopolitical
developments, and a general hesitancy by clients to commit to
long-term savings products, both regular and single premium.
Activities in train to progress new business levels are further
outlined in the Business and Financial Review.
2. Operational, Business and Financial Risks
Our business model involves the acceptance of a number of risks
on a managed and controlled basis. The Group's Enterprise Risk
Management ("ERM") Framework continues to provide for the
identification, assessment, management, control and reporting of
current and emerging risks, recognising that systems of internal
control can only provide reasonable and not absolute assurance
against material misstatement or loss. The Group's internal control
and risk management processes have operated satisfactorily
throughout the year under review, with the benefit of iterative
enhancements as we continue to embed our approach and benefit from
the relative maturity of the ERM Framework.
2.1 Litigation Risk
As explained more fully in the Business and Financial Review, on
pages 12 to 22, we continue to manage complaints and litigation
arising from our closed book, Hansard Europe, where the assets
linked to contracts written before 2014 have fallen in value or
become illiquid. Hansard does not and did not give investment
advice and were not therefore party to the selection of policy
assets, and maintain that such claims have no merit against
Hansard.
As at 30 June 2023, the Group had been served with cumulative
writs with a net exposure totalling EUR26.1m, or GBP22.4m in
sterling terms (30 June 2022: EUR24.6m / GBP21.2m) arising from
contract holder complaints and other asset performance-related
issues.
In this financial year we successfully defended 15 cases with
net exposures of approximately GBP1.9m, 14 of which may be appealed
by the plaintiffs. These successes continue to affirm the Group's
legal stance.
3. Hansard OnLine
Our award-winning IT systems and online customer platform are
key aspects of our proposition. Hansard OnLine is a powerful sales
and business administration tool that is used by independent
financial advisors ("IFAs") and clients the world over. It is an
integral part of the Group's operating model and allows us to
better service IFAs and clients, embed process efficiencies and be
flexible in operational deployment.
Hansard OnLine provides IFAs and clients with a reliable online
self-service model which they can access 24/7 from anywhere around
the world with an internet connection. It provides an important
foundation to our strategic goal of the delivery of excellent
customer service.
As noted in previous reports, we have embarked on a project to
replace our core administration systems and ensure our
infrastructure is future-proofed for our next generation of
products and strategic developments.
Additional information concerning Hansard OnLine is set out in
the Business and Financial Review on pages 12 to 22.
4. Operating cash flows and dividends
The Group generates operating cash flows to fund investment in
operating systems, new business origination and to support dividend
payments.
As outlined in the Cash Flow analysis section of the Business
and Financial Review, t he Group generated GBP1.6m in overall net
cash outflows before dividends (2022: inflows of GBP5.3m), after
commission and other new business acquisition costs of GBP8.5m
(2022: GBP11.5m) and the investment of GBP6.6m (2022: GBP4.5m) in
IT software and equipment expenditure. Dividends of GBP5.9m were
paid in the financial year (2022: GBP6.1m).
A final dividend of 2.65p per share has been proposed by the
Board and will be considered at the Annual General Meeting on 8
November 2023. If approved, this will represent total dividends for
the financial year of 4.45p per share (2022: 4.45p).
FINANCIAL PERFORMANCE
Results for the year
Financial performance is summarised as follows. A detailed
review of performance is set out in the Business and Financial
Review that follows this report.
FY 2023 FY 2022
GBPm GBPm
-------------------------------------- -------- --------
New business sales - PVNBP 85.7 120.5
IFRS profit before tax 5.9 3.8
Underlying IFRS profit 7.4 5.9
Assets under Administration 1,101.5 1,092.3
Value of In-Force (regulatory basis) 124.4 128.5
-------------------------------------- -------- --------
IFRS results
IFRS profit before tax for the year was GBP5.9m, up from GBP3.8m
in 2022. After eliminating litigation and non-recurring items, as
shown on page 14, the underlying IFRS profit (a non-GAAP metric)
was GBP7.4m, up from GBP5.9m in 2022.
Fees and commissions were GBP45.7m for the year (2022:
GBP48.8m). Fees from Hansard International and Hansard Worldwide
were down GBP2.7m to GBP43.6m from 2022, reflecting lower
transactional based income and lower new business generally. Income
from our closed book, Hansard Europe, has continued to fall as
expected, and was GBP0.5m down on the prior year.
Returns on group investments increased to GBP3.5m (2022:
GBP0.1m) as central banks sought to counter inflation with higher
interest rates, leading to higher yields on the Group's bank
deposits.
Administrative and other expenses were GBP29.0m for the year,
compared to GBP29.8m in 2022. The 2022 result incorporated a
GBP1.0m provision for fees and other balances that were deemed
likely to be irrecoverable from a set of legacy funds in the
process of liquidation. The Group maintained tight control over
general overheads and expenses.
Origination costs to acquire new business of GBP16.2m is in line
with the 2022 result. Origination costs in respect of new business
decreased to GBP11.5m (2022: GBP13.6m). The amortisation of
deferred origination costs increased to GBP4.7m (2022:
GBP2.6m).
Further details and analysis are contained in the Business and
Financial Review on pages 12 to 22 .
Capitalisation and solvency
Our key financial objective is to ensure that the Group's
solvency is managed safely through the economic cycle to meet the
requirements of regulators, contract holders, intermediaries and
shareholders. The Group continues to be well capitalised.
Under risk-based capital methodologies, total Group Free Assets
in excess of the Solvency Capital Requirements of the Group were
GBP44.6m (2022: GBP50.7m), a coverage of 156% (2022: 165%).
Shareholder assets are typically held in a wide range of deposit
institutions, investment grade corporate bonds, and highly rated
money market liquidity funds. This prudent investment policy for
shareholder assets minimises market risk and has provided a stable
and resilient solvency position over recent years.
GLOBAL ECONOMIC SITUATION
The financial year began with a slow return to pre-pandemic
business practice, and we were able to start reconnecting
face-to-face with our broker community, particularly in our core
markets in the Middle East and Latin America. Following the
escalation of the Russia-Ukraine conflict in February 2022, the
challenges to the rest of the world are becoming clearer as energy
and food prices spiked leading to higher inflation.
The direct impacts to our business as a result are now expected
to be three-fold. Firstly, it has exacerbated hesitancy amongst our
target clients in investing in long term savings plans and this has
impacted our 2023 new business results. Secondly, we can expect
cost pressures within our business in our 2024 financial year as
energy costs increase, suppliers and professional advisors increase
their charges and inflationary pressure is felt across our
workforce. And lastly, stock market and foreign exchange volatility
will continue to have a direct impact on income.
We will seek to manage these challenges. We aim to build on our
existing markets by opening new channels and developing new product
opportunities and we will continue to target cost savings to help
mitigate inflationary pressures elsewhere.
our people
Our people are critical to our success and I would like to
recognise and reiterate my thanks to each of my colleagues for
their continued commitment, flexibility, and resilience in managing
both our on-going day-to-day operations and our key strategic
projects.
I have been delighted by the level of engagement seen within our
programme of cultural change referenced earlier and look forward to
continuing in our goals of fostering an engaged and innovative
workforce to meet our ambitions, and the expectations of our
stakeholders.
Graham Sheward
Group Chief Executive Officer
28 September 2023
OUR BUSINESS MODEL AND STRATEGY
Our Business Model and Strategy
Hansard is a specialist long-term savings provider that has been
providing innovative financial solutions for international clients
since 1987. We focus on helping our customers with savings and
investment products in secure life assurance wrappers to meet their
long-term savings and investment objectives.
We administer assets in excess of GBP1 billion for just under
40,000 client accounts around the world.
Business Model
The Company's head office is in Douglas, Isle of Man, and its
principal subsidiaries operate from the Isle of Man, The Bahamas
and the Republic of Ireland.
Hansard International is 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. The Company 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.
Hansard Worldwide underwrites international and expatriate
business around the world. It is authorised by the Insurance
Commission of The Bahamas.
Hansard Europe is authorised 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.
Vision and Strategy
Our vision for the Hansard Group is:
"to share success with our clients by providing simple,
understandable and innovative financial solutions" .
To deliver this vision, client outcomes will be the central
focus within our business and, consequently, we will seek to evolve
all aspects of our products, processes, and distribution in order
to constantly improve.
Our talented people are the foundation of our business. We have
created an empowering culture, which values innovation, quality,
integrity, and respect.
Our strategy to improve, grow and future-proof our business will
be delivered through three key areas of strategic focus:
i. Improve our business: We will improve customer outcomes
through the introduction of new disclosures, the provision of new
products and services, focusing on the quality of our IFAs with
whom we work with and continuing to drive up the engagement of our
people within our business.
ii. Grow our business: In recent years we established a new life
company in The Bahamas and entered into a strategic alliance with
Union Insurance in the UAE. We have acquired the necessary licence
and approvals to access the Japanese market. We will continue to
seek out opportunities for locally licenced business in other
targeted jurisdictions over the coming years.
iii. Future-proof our business: We actively consider new and
innovative technologies, propositions, and business models. It
remains critical to support the online and digital needs of our
clients alongside improving organisational efficiency and
scalability.
Strategy DEVELOPMENT
Our current strategy has three main aims:
i) To capitalise on near term strategic opportunities.
ii) To ensure the Group is well positioned to respond and adapt
to regulatory change and development; and
iii) To consider and plan for longer term industry and technological evolution.
During the past financial year, the primary focus has continued
to be on delivering our two most significant near-term strategic
initiatives:
-- bringing to market our locally licensed investment products in Japan; and
-- upgrading and streamlining our systems and IT infrastructure.
We have completed internally the development of our two new
Japanese products and continue to make positive progress with
distribution opportunities for them.
Core functionality for our new IT platform has been delivered as
at 30 June 2023.
Regulatory change
Transformational change remains high on the agenda of the Isle
of Man Financial Services Authority (the Authority) as it continues
to maintain a robust regulatory environment and keep pace with
international standards. The Island's reputation as a
well-regulated and internationally responsible jurisdiction remains
of vital importance to its competitive positioning in the global
marketplace and maintaining consumer confidence in the Island's
financial services sector. The Regulator's strategic priorities are
also closely aligned with the Isle of Man Government's vision to
build a secure, vibrant and sustainable Manx economy.
The Authority has continued its work to drive continuous
improvement in the Isle of Man's regulatory environment, targeting
the protection of customers, the deterrence of financial crime and
upholding confidence in the financial services sector. Supervisory
emphasis remains focused on the delivery of outcomes that enhance
the Island's reputation as a well-regulated jurisdiction and a high
level of compliance with international standards. Major milestones
have been enacted in recent years with the implementation of new
risk-based capital, conduct and governance regimes. More recently
the Regulator has completed the transition from a predominantly
sector risk-based supervisory approach to a wider impact and
risk-led model, which deploys regulatory resources in the most
appropriate and efficient way.
Throughout the reporting period the Hansard Group has continued
its work to adapt to and embrace the intent and objectives of
regulatory change and development, working transparently with all
the Group's Regulatory bodies to shape our responses and embed
associated changes in strategy, policy, practice and culture.
Products
The Group's products are unit-linked regular or single premium
life assurance and investment contracts which offer access to a
wide range of investment assets. The contracts are flexible, secure
and allow life assurance cover or other features depending upon the
needs of the client. The contract benefits are directly linked to
the value of assets that are selected by, or on behalf of, the
client. The Group does not offer investment advice. Contract
holders bear the investment risk.
The Group's products do not include any contracts with financial
options and/or guarantees regarding investment performance and,
hence, unlike the situation faced by some other life assurers, the
Group carries no investment guarantee risk that can cause capital
strain.
As a result of high levels of service, the nature of the Group's
products, the functionality of Hansard OnLine, and the ability of
the contract holder to reposition assets within a contract, we aim
to retain the contract holder relationship over the long term.
Contract holder servicing and related activities are performed
by Hansard Administration Services Limited, which is authorised by
the Financial Services Authority of the Isle of Man Government to
act as an Insurance Manager to insurance subsidiaries of the
Group.
Revenues
The main sources of income for the Group are the fees earned
from the administration of insurance contracts. These fees are
largely fixed in nature and amount to GBP40.5m. Approximately 30%
of the Group's revenues, under IFRS, are based upon the value of
assets under administration.
From this income we meet the overheads of the business, invest
in our business, remunerate our distribution network, and pay
dividends.
Managing Risk
Risk can arise from a combination of macro events and
company-specific matters. On the macro side, the lingering effects
of the Covid-19 pandemic, the Russia-Ukraine conflict and other
geo-political tensions can cause significant volatility to stock
markets, foreign exchange markets, interest rates and expense
inflation. We therefore continue to maintain a robust, low risk
balance sheet. We believe this prudent approach to be appropriate
to meet the requirements of regulators, contract holders,
intermediaries, and shareholders.
We are conscious that managing operational risk is critical to
our business and we remain committed to iterative development and
enhancement of our enterprise risk management system and controls.
Further details of our approach to risk management, and the
principal risks facing the Group, are outlined in the Risk
Management and Internal Control Section at pages 23 to 32.
Hansard OnLine
Hansard OnLine is a powerful and secure tool that is used by our
IFAs around the world. Available in multiple languages, it allows
them to access information about their clients, to generate reports
for their clients, to submit new business applications online, to
place dealing and switch instructions online, to access all client
correspondence and to access a library of forms and literature.
Almost all investment transactions are processed electronically
by intermediaries, on behalf of their clients, using Hansard OnLine
and over 90% of all new business applications are submitted via the
platform.
The straight-through processing of contract holder instructions
(whether received directly or through their appointed agents)
reduces the Group's operational risk exposures, as does the ability
of the Group to communicate electronically with contract holders
and intermediaries, irrespective of geographical boundaries. Data
validation happens in real-time to ensure there are no delays to
the investment of client funds.
Hansard Online Lite provides prospective IFAs with easy access
to a subset of the online system. Its purpose is to showcase our
online proposition to prospective and new IFAs and to allow easy
access to non-sensitive documents and functionality. Users can
access our online document library, the Unit Fund Centre, company
news and submit new business online.
The benefit of Hansard OnLine is recognised by many IFAs as
market leading and our online proposition has been nominated for
and won several independent industry awards. Most recently this
included winning International Investment's "Excellence in Fintech"
award in October 2022, the third year in a row to win this
prestigious award.
Online Accounts
Whilst many of our IFAs are technologically sophisticated and
have been utilising our online offering for years, we remain
committed to supporting greater take up by our clients, enabling
them to realise the benefits of our technology solutions, including
ease of access and improved security. However, we are now observing
a growing trend amongst our clients to take more control of their
financial wellbeing by embracing mobile technology to better
monitor and manage their finances.
To support our commitment to delivering 'excellent customer
service', we believe it is vital to provide our clients with a
modern and secure online platform that allows them to access their
finances easily and comprehensively, 24/7. We provide this through
our client-facing version of Hansard OnLine, called Online
Accounts.
Similar to our IFA-facing online platform, the client's Online
Account allows them to access all their policy information,
valuation statements, transaction history, premium reports, switch
funds online, access all correspondence, access a library of forms
and literature, and more.
A large and increasing number of clients have signed up for this
service which allows them to view all documentation and
communications relating to their contracts via their Online
Account, as well as choosing to receive post electronically, rather
than in hard-copy form. This not only provides a more secure, more
efficient and cost-effective means of communication with clients
but also the convenience to manage their own contract within a
timeframe which is more suitable.
Continuous Improvements to our Online Proposition
When it comes to improving how we operate and the proposition we
offer, we value the views of our clients and IFAs. This means that
we regularly seek feedback through surveys and office visits in
order to identify ways in which we can improve our systems and
processes to best meet their needs. However, it is not just
functionality that is important, we also have a continuous
programme to enhance the overall user experience, for both IFA's
and our clients.
Cyber Security
Hansard has continued 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.
Excellent Customer Service
We strive to provide excellent customer service and turn-around
times to our clients and our IFA community. We have won several
external awards in this area over the years, most recently in
October 2022 when we won 'Excellence in Client Service - Industry'
from International Investor for the Asian region, Africa region and
as overall global winner. We also maintained our five-star rating
for customer service by AKG Financial Analytics in their 2022
review.
Key performance indicators
The Group's senior management team monitors a wide range of Key
Performance Indicators, both financial and non-financial, that are
designed to ensure that performance against targets and
expectations across significant areas of activity are monitored and
variances explained.
The following is a summary of the key indicators that were
monitored during the financial year under review.
New Business - The Group's internal indicator of calculating new
business production, Compensation Credit ("CC") reflects the amount
of base commission payable to intermediaries. Incentive arrangements
for intermediaries and the Group's Regional Sales Managers incorporate
targets based on CC (weighted where appropriate).
New business levels are reported daily and monitored weekly against
target levels. Compensation credit was down GBP2.6m compared to
2022 driven by client hesitancy to commit to long-term savings and
other economic headwinds on sales activity.
Administrative Expenses (excl. litigation and non-recurring items)
- The Group maintains a rigorous focus on expense levels and the
value gained from such expenditure. The objective is to develop
processes to restrain increases in administrative expenses to the
rates of inflation assumed in the charging structure of the Group's
policies.
The Group's administrative and other expenses for the year (excl.
litigation and non-recurring items) were GBP22.3m compared to GBP22.1m
in the previous year. Further detail is contained in the section
on Administrative and other expenses.
Cash - Bank balances and significant movements on balances are
reported monthly. The Group's cash and deposits at the balance sheet
date were GBP65.4m (2022: GBP74.5m). Movements are reflective of
cash earned from new and existing business, commissions and expenses
paid, investments in new systems, the level of inflight transactions,
and the dividends paid to shareholders.
Business continuity - Maintenance of continual access to data is
critical to the Group's operations. This has been achieved throughout
the year through a robust infrastructure. The Group is pro-active
in its consideration of threats to data, data security and data
integrity. Business continuity and penetration testing is carried
out regularly by internal and external parties. Business continuity
is further evidenced by ongoing remote working as a normal business
practice.
Risk profile - The factors impacting on the Group's risk profile
are kept under continuous review. Senior management review actual
and emerging risk issues at least monthly. The principal risks faced
by the Group are summarised in the Principal and Emerging Risks
section below.
Solvency - The Solvency Capital Requirement ("SCR") of the Group
and its' subsidiaries is monitored frequently and reported to the
Board. The SCR as at June 2023 is reported in Other Information.
business AND FINANCIAL REVIEW
NEW BUSINESS PERFORMANCE FOR THE YEARED 30 JUNE 2023
The Group continues to focus on the distribution of regular and
single premium products in a range of jurisdictions around the
world, achieving well diversified new business growth.
New business performance for the year is summarised in the table
below:
2023 2022 %
Basis GBPm GBPm change
------------------------------- ----- ------ --------
Present Value of New Business
Premiums 85.7 120.5 (28.9%)
Annualised Premium Equivalent 12.7 16.4 (22.6%)
------------------------------- ----- ------ --------
In Present Value of New Business Premiums ("PVNBP") terms, new
business for the year to 30 June 2023 was GBP85.7m, 28.9% down
compared to the prior year.
The Annualised Premium Equivalent ("APE") measure shows a
decline of 22.6% from 2022 to GBP12.7m.
Present Value of New Business Premiums
New business flows on the PVNBP basis for the Group are further
analysed as follows:
2023 2022 %
PVNBP by product type GBPm GBPm change
------------------------ ----- ------ --------
Regular premium 55.7 76.9 (27.6%)
Single premium 30.0 43.6 (31.2%)
------------------------ ----- ------ --------
Total 85.7 120.5 (28.9%)
------------------------ ----- ------ --------
2023 2022 %
PVNBP by region GBPm GBPm change
------------------------ ----- ------ --------
Middle East and Africa 42.4 44.3 (4.3%)
Rest of World 25.7 33.9 (24.2%)
Latin America 12.1 28.2 (57.0%)
Far East 5.5 14.1 (61.0%)
------------------------ ----- ------ --------
Total 85.7 120.5 (28.9%)
------------------------ ----- ------ --------
New business for the financial year was impacted by economic
uncertainty, geopolitical developments, and a general hesitancy by
clients to commit to long-term savings products as the global cost
of living crisis impacted the outlook for savings, particularly in
the contractual regular premiums market. We saw a number of large
single premium cases which gives a glimpse of potential opportunity
as we roll out our new single premium proposition.
The recruitment of last year has helped establish new
relationships and support ongoing relationships through this
difficult time. Activities around new business generation remain
high as we work with key advisors around both existing and new
opportunities.
The Head of Sales has taken oversight of our global IFA-channel
sales team and is tasked to deliver our key distribution and
relationship initiatives, with particular focus around delivery of
the new proposition developments into key markets and to maximise
the opportunities that this will create. Alongside this the Head of
New Business Development is tasked with developing business
relationships with new distributors globally and further
invigorating relationships with current distributors. Several new
relationships have already started producing business and this work
will continue in the forthcoming year to expand further our
networks of distributors.
The sales team is well positioned to drive broker and product
initiatives to increase new business in the 2024 financial year and
beyond. This includes the development and launch of new products
for key target markets, updates and improvements to existing
products and launch of our new system that will serve as the
foundation of product and service in the future.
Premium currencies remained relatively consistent year on year,
with the predominant currency being US Dollars:
2023 2022
Currency denominations (as a percentage % %
of PVNBP)
----------------------------------------- ----- -----
US dollar 87 82
Sterling 8 15
Euro 4 3
Other 1 -
100 100
----------------------------------------- ----- -----
Presentation of financial results
Our business is long term in nature. The nature of the Group's
products means that new business flows have a limited immediate
impact on current earnings reported under International Financial
Reporting Standards as adopted by the United Kingdom ("IFRS"), as
initial fees and acquisition costs from the contracts sold are
mostly deferred and amortised over the life of the contract. The
benefit of sales to fee income levels are felt in future financial
periods, noting also that our newer products have a longer earning
period than our older products.
Results for the year
The following is a summary of key items to allow readers to
better understand the results for the year.
IFRS profit before tax for the year was GBP5.9m, up from GBP3.8m
in 2022. The primary drivers behind the increase are higher
investment returns as central bank rates have increased throughout
the year, and lower administration expenses.
Operating profit prior to litigation and non-recurring items was
GBP7.4m in 2023, up from GBP5.9m in 2022.
Abridged consolidated income statement
The consolidated statement of comprehensive income presented
under IFRS reflects the financial results of the Group's activities
during the year. This income statement however, as a result of its
method of presentation, incorporates a number of features that
might affect an understanding of the results of the Group's
underlying transactions. These relate principally to:
-- Investment gains attributable to contract holder assets were
GBP40.2m (2022: loss of GBP103.6m). These assets are selected by
the contract holder, or an authorised intermediary and the contract
holder bears the investment risk. They are also reflected within
'Change in provisions for investment contract liabilities' and
together have no net impact on IFRS profit.
-- Fund management fees are collected and paid onwards by the
Group to third parties having a relationship with the underlying
contract. In 2023 these were GBP5.2m (2022: GBP5.6m). These are
reflected on a gross basis in both income and expenses under the
IFRS presentation on page 98. Deducting the GBP5.2m from GBP45.7m
for fees and commissions and GBP29.0m for administrative and other
expenses in the consolidated statement of comprehensive income
results in the figures of GBP40.5m, GBP22.3m and GBP1.5m presented
below.
An abridged non-GAAP consolidated income statement in relation
to the Group's own activities is presented below, adjusted for the
items of income and expenditure indicated above.
2023 2022
GBPm GBPm
------------------------------------------------------- -------- --------
Fees and commissions attributable to Group activities 40.5 43.2
Investment and other income 5.4 1.0
------------------------------------------------------- -------- --------
45.9 44.2
Origination costs (-16.2) (-16.2)
Administrative and other expenses attributable to the
Group, before
litigation and non-recurring items (-22.3) (-22.1)
------------------------------------------------------- -------- --------
Operating profit for the year before litigation and
non-recurring items 7.4 5.9
Litigation and non-recurring expense items (-1.5) (-2.1)
------------------------------------------------------- -------- --------
Profit for the year before taxation 5.9 3.8
Taxation (-0.2) (-0.2)
------------------------------------------------------- -------- --------
Profit for the year after taxation 5.7 3.6
------------------------------------------------------- -------- --------
Fees and commissions
Fees and commissions for the year attributable to Group
activities were GBP40.5m, 6.3% lower than the 2022 total of
GBP43.2m.
Contract fee income totalled GBP28.1m for the year, down GBP2.0m
on the 2022 comparative of GBP30.1m. C ontract fee income includes
the amortised element of up-front income deferred under IFRS and
contract-servicing charges. Amortisation of deferred income in
Hansard International was broadly similar to the prior year, whilst
immediately recognised fees, including surrender charges from
redemptions, decreased compared to the prior year. This was
reflective of lower levels of redemptions compared to the prior
year. The continuing run-off of Hansard Europe which closed to new
business in 2013 resulted in lower contract fee income of GBP2.0m
(2022: GBP2.5m).
Fund management fees accruing to the Group and commissions
receivable from third parties totalled GBP12.4m (2022: GBP13.1m).
Such fees are related directly to the value of assets under
administration and are affected by market movements, currency rates
and valuation judgements.
A summary of fees and commissions is set out below:
2023 2022
GBPm GBPm
-------------------------------------------- --------------- -----
Contract fee income 28.1 30.1
Fund management fees accruing to the Group 7.7 8.3
Commissions receivable 4.7 4.8
-------------------------------------------- --------------- -----
40.5 43.2
-------------------------------------------- --------------- -----
Included in contract fee income is GBP16.8m (2022: GBP16.6m)
representing the amortisation of fees prepaid in previous years, as
can be seen in the analysis set out below:
2023 2022
GBPm GBPm
--------------------------------- ----- -----
Amortisation of deferred income 16.8 16.6
Income earned during the year 11.3 13.5
--------------------------------- ----- -----
Contract fee income 28.1 30.1
--------------------------------- ----- -----
Investment and other income
Investment income has improved significantly as UK and US
interest rates have increased from their historically low
levels.
2023 2022
GBPm GBPm
---------------------------------------------------- ----- ------
Bank interest and other income receivable 4.5 1.3
Foreign exchange profits / (losses) on revaluation
of net operating assets 0.9 (0.3)
---------------------------------------------------- ----- ------
5.4 1.0
---------------------------------------------------- ----- ------
Origination costs
Under IFRS, new business commissions paid, together with the
directly attributable incremental costs incurred on the issue of a
contract, are deferred and amortised over the anticipated life of
that contract to match the longer-term income streams expected to
accrue from the contracts issued this year. Typical terms range
between 6 years and 16 years, depending on the nature of the
product. Other elements of the Group's new business costs, for
example, salaries of sales staff, are expensed as incurred.
Origination costs incurred in 2023 have decreased by GBP2.1m
from the prior year. Origination costs were lower in line with
lower new business levels but offset by increased amortisation of
prior year balances.
2023 2022
GBPm GBPm
------------------------------------------------ ----- -----
Origination costs - deferred to match future
income streams 8.8 11.3
Origination costs - expensed as incurred 2.7 2.3
------------------------------------------------ ----- -----
Investment in new business in year 11.5 13.6
Amortisation of deferred origination costs net
of new deferrals 4.7 2.6
------------------------------------------------ ----- -----
16.2 16.2
------------------------------------------------ ----- -----
Amounts totaling GBP13.5m (2022: GBP13.9m) have been expensed to
match contract fee income earned this year from contracts issued in
previous financial years, as can be seen in the analysis below.
Summarised origination costs for the year were:
2023 2022
GBPm GBPm
-------------------------------------------------- ----- ------
Amortisation of deferred origination costs 13.5 13.9
Other origination costs incurred during the year 2.7 2.3
-------------------------------------------------- ----- ------
16.2 16.2
-------------------------------------------------- ----- ------
Administrative and other expenses
We continue to manage our expense base robustly to control
administrative expenses while supporting our strategic developments
and other new business growth activities with targeted
expenditure.
An analysis of administrative and other expenses is set out in
notes 8 and 9 to the consolidated financial statements under IFRS.
The following summarises some of the expenses attributable to the
Group's own activities, excluding the t hird-party fund management
fees collected and paid onwards by the Group to third parties
having a relationship with the underlying contract of GBP5.2m
(2022: GBP5.6m).
2023 2022
GBPm GBPm
--------------------------------------------- ----- -----
Salaries and other employment costs 10.6 10.8
Other administrative expenses 7.7 7.3
Professional fees, including audit 3.1 2.8
--------------------------------------------- ----- -----
Recurring administrative and other expenses 21.5 20.9
Growth investment spend 0.8 0.8
--------------------------------------------- ----- -----
Administrative and other expenses, excl.
litigation and non-recurring expense items 22.3 21.7
Litigation defence and settlement costs 1.4 1.1
Provision for doubtful debts 0.1 1.4
Total administrative and other expenses 23.8 24.2
--------------------------------------------- ----- -----
Salaries and other employment costs have decreased by GBP0.2m or
1.9% to GBP10.6m as a result of close scrutiny of headcount and a
lower variable compensation element.
The average Group headcount for the 2023 financial year was 187
people (2022: 189 people).
Other administrative expenses increased marginally to GBP7.7m
from GBP7.3m as we actively managed the Group cost base despite
high inflationary pressure.
Professional fees including audit increased by GBP0.3m to
GBP3.1m. These costs include amounts totalling GBP0.8m paid to the
Group's auditor (2022: GBP0.5m) with the increase driven by
additional fees in respect of the prior year, and fees for
assurance work in respect of ESG; GBP0.5m (2022: GBP0.5m) for
administration, custody, dealing and other charges paid under the
terms of the investment processing outsourcing arrangements;
recruitment costs of GBP0.2m (2022: GBP0.2m), costs of investor
relations activities of GBP0.2m (2022: GBP0.2m) and general legal
and professional fees of GBP1.4m (2022: GBP1.4m).
Growth investment spend represents internal and external
strategic costs to generate opportunities for growth. This includes
the costs of our commercial development team and costs associated
with developing our Japanese proposition which have reduced in the
current year as the project has neared conclusion.
Litigation defence and settlement costs represent those costs
(net of insurance recoveries) incurred in defending Hansard Europe
against writs taken against it, as described more fully in note 26
to the consolidated financial statements. Legal costs recovered
from insurers were GBP0.1m (2022: GBP0.5m). No further additional
provisions have been required in the current year with the balance
of the provision as at 30 June 2023 being GBP0.1m (2022:
GBP0.2m).
Provision for doubtful debts relate to the provision in full of
fees and other balances likely to be irrecoverable from a set of
primarily Hansard Europe legacy funds which are in the process of
liquidation.
Cash Flow ANALYSIS
The operational cash surplus (fees deducted from contracts and
commissions received, less operational expenses paid) for the year
was GBP15.9m (2022: GBP21.1m). Operating cash flows have decreased
this year as a result of the reduction in fee income.
Writing new business, particularly regular premium business,
produces a short-term cash strain as a result of the commission and
other costs incurred at the inception of a contract. Annual
management charges offset this strain and produce a positive return
over time.
Future increases in new business levels can be funded where
necessary by the Group's significant cash resources, but over time
as the level of contract holder assets is built up, the annual
management charges that are earned from the Group's newer products
will become sufficient to sustain new business growth and
dividends.
During 2023, the Group invested GBP6.6m (2022: GBP4.2m) as part
of a project to replace its administration systems. These costs are
capitalised as Intangible Assets on the Group's consolidated
balance sheet.
Net cash outflows before dividends was GBP1.6m (2022: inflows of
GBP5.3m), with a reduction in cash from operating activities offset
to some extent by interest received as a result of increases in
interest rates.
Overall Group cash and deposits have decreased from GBP74.5m to
GBP65.4m as at 30 June 2023, primarily driven by lower new business
as noted above.
The following non-GAAP tables summarise the Group's own cash
flows in the year:
2023 2022
GBPm GBPm
-------------------------------------------------- ------ -------
Net cash surplus from operating activities 15.9 21.1
Interest received 3.0 0.3
-------------------------------------------------- ------ -------
Net cash inflow from operations 18.9 21.4
Net cash investment in new business (8.5) (11.5)
Purchase of property and computer equipment (6.6) (4.5)
Net cash investment in bond portfolio (5.0) -
Corporation tax paid (0.4) (0.1)
Net cash (outflow) / inflow before dividends (1.6) 5.3
Dividends paid (5.9) (6.1)
-------------------------------------------------- ------ -------
Net cash outflow after dividends (7.5) (0.8)
-------------------------------------------------- ------ -------
2023 2022
GBPm GBPm
-------------------------------------------------- ------ -------
Net cash outflow after dividends (7.5) (0.8)
(Decrease) / increase in amounts due to contract
holders (0.6) 9.8
-------------------------------------------------- ------ ---------
Net Group cash movements (8.1) 9.0
Group cash and deposits - opening position 74.5 63.5
Effect of exchange rate movements (1.0) 2.0
Group cash and deposits - closing position 65.4 74.5
-------------------------------------------------- ------ ---------
The below table reconciles the key lines for the current year in
the above non-GAAP cash flow to the key lines in the consolidated
cash flow shown on page 101.
Non-GAAP Consolidated
Cash Flow Cash Flow
Statement
GBPm GBPm
--------------------------------------------- ----------- -------------
Net cash flow from operations before tax 13.9 7.4
Adjust for net movement in policyholder
financial assets and liabilities - 2.4
--------------------------------------------- ----------- -------------
13.9 9.8
--------------------------------------------- ----------- -------------
Purchase of property and computer equipment
(tangible and intangible) (6.6) (6.6)
--------------------------------------------- ----------- -------------
Corporation tax paid (0.4) (0.4)
--------------------------------------------- ----------- -------------
Dividends paid (5.9) (5.9)
--------------------------------------------- ----------- -------------
Net cash investment in business (8.5) -
Decrease in amounts due to contract holders (0.6) -
Net movement in assets and liabilities
relating to contract holders - (5.0)
--------------------------------------------- ----------- -------------
(9.1) (5.0)
Net Group cash movements (8.1) (8.1)
--------------------------------------------- ----------- -------------
Group bank deposits and money market funds
The Group holds its liquid assets in highly rated money market
liquidity funds and with a wide range of deposit institutions to
diversify counterparty risk. Deposits totalling GBP13.2m (2022:
GBP15.6m) have original maturity dates typically greater than 3
months and are therefore excluded from the definition of "cash and
cash equivalents" under IFRS and are instead included within
'Deposits and money market funds' in the consolidated balance
sheet. The following table summarises the total cash and deposits
at the balance sheet date.
2023 2022
GBPm GBPm
----------------------------------------------- ----- -----
Money market funds and immediately available
cash 41.2 54.2
Short-term deposits with credit institutions 11.0 4.7
----------------------------------------------- ----- -----
Cash and cash equivalents under IFRS 52.2 58.9
Longer-term deposits with credit institutions 13.2 15.6
Group cash and deposits 65.4 74.5
----------------------------------------------- ----- -----
Abridged consolidated balance sheet
The consolidated balance sheet on page 100 presented under IFRS
reflects the financial position of the Group at 30 June 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 GBP1,101.5m (2022: GBP1,092.3m).
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.
2023 2022
GBPm GBPm
-------------------------------------- ------ ------
Assets
Deferred origination costs 117.8 122.5
Other assets 27.6 20.4
Bank deposits and money market funds 65.4 74.5
-------------------------------------- ------ ------
210.8 217.4
-------------------------------------- ------ ------
Liabilities
Deferred income 144.8 145.1
Other payables 44.2 50.1
-------------------------------------- ------ ------
189.0 195.2
-------------------------------------- ------ ------
Net assets 21.8 22.2
-------------------------------------- ------ ------
Shareholders' equity
Share capital and reserves 21.8 22.2
-------------------------------------- ------ ------
Other assets include intangible assets, property, plant and
equipment and other receivables. Other payables include amounts due
to investment contract holders and other payables.
Deferred origination costs
The deferral of origination costs reflects that the Group will
earn fees over the long-term from contracts issued in a given
financial year. These costs are recoverable out of future net
income from the relevant contract and are charged to the
consolidated statement of comprehensive income on a straight-line
basis over the life of each contract. The movement in value over
the financial year is summarised below.
2023 2022
Carrying value GBPm GBPm
--------------------------------------------- ------- -------
At beginning of financial year 122.5 125.1
Origination costs deferred during the year 8.7 11.3
Origination costs amortised during the year (13.4) (13.9)
--------------------------------------------- ------- -------
117.8 122.5
--------------------------------------------- ------- -------
Deferred income
The treatment of deferred income ensures that contract fees are
taken to the consolidated statement of comprehensive income in
equal instalments over the longer-term, reflecting the services to
be provided over the period of the contract. This is consistent
with the treatment of deferred origination costs. Deferred income
at the balance sheet date is the unamortised balance of accumulated
initial amounts received on new business.
The proportion of income deferred in any one year is dependent
upon the mix and volume of new business flows in previous years.
The Group's focus on regular premium business means that these fees
are received over the initial period of the contract, rather than
being received up front, as is often the case with single premium
contracts.
The majority of initial fees collected during the year relates
to charges taken from contracts issued in prior financial years
demonstrating the cash generative nature of the business. Regular
premium contracts issued in this financial year will generate the
majority of their initial fees over the next 18 months on
average.
The movement in value of deferred income over the financial year
is summarised below.
2023 2022
Carrying value GBPm GBPm
------------------------------------------ ------- -------
At beginning of financial year 145.1 142.5
Initial fees collected in the year and
deferred 16.5 19.2
Income amortised during the year to fees
income (16.8) (16.6)
------------------------------------------ ------- -------
144.8 145.1
------------------------------------------ ------- -------
CONTRACT HOLDER Assets under administration
In the following paragraphs, contract holder assets under
administration ("AuA"), refers to net assets held to cover
financial liabilities, as analysed in note 17 to the consolidated
financial statements presented under IFRS. Such assets are selected
by or on behalf of contract holders to meet their investment
needs.
The Group receives investment inflows to its AuA from single and
regular premium contracts which are offset by withdrawals, charges,
premium holidays affecting regular premium policies, and by market
valuation movements.
The majority of premium contributions are designated in
currencies other than sterling, reflecting the wide geographical
spread of those contact holders. The currency composition of AuA at
the balance sheet date is similar to prior year, with 71% of AuA
designated in US dollar (2022: 71%) and 8% in euro (2022: 8%).
Certain collective investment schemes linked to customers'
contracts can from time to time become illiquid, suspended or be
put into liquidation. In such cases, the Directors are required to
exercise their judgement in relation to the fair value of these
assets. The cumulative impact on the balance sheet is not
material.
The value of AuA at 30 June 2023 was GBP1,101.5m, 0.8% higher
than 30 June 2022. Significantly lower single premiums were offset
by lower withdrawals, and market and currency movements increased
as global stock markets regained ground lost as a result of
economic concerns arising out of the Russia/Ukraine conflict and
the impact of monetary tightening with high levels of
inflation.
The following table summarises the movements in the year:
2023 2022
GBPm GBPm
----------------------------------------- -------- --------
Deposits to investment contracts -
regular premiums 86.1 86.2
Deposits to investment contracts -
single premiums 30.2 43.8
Withdrawals from contracts and charges (147.7) (158.4)
Effect of market and currency movements 40.6 (103.5)
----------------------------------------- -------- --------
Movement in year 9.2 (131.9)
Opening balance 1,092.3 1,224.2
----------------------------------------- -------- --------
Closing balance 1,101.5 1,092.3
----------------------------------------- -------- --------
The analysis of AuA held by each Group subsidiary to cover
financial liabilities is as follows:
2023 2022
Fair value of AuA at 30 June GBPm GBPm
------------------------------ -------- --------
Hansard International 1,037.7 1,024.5
Hansard Europe 63.8 67.8
------------------------------ -------- --------
1,101.5 1,092.3
------------------------------ -------- --------
Assets to cover the financial liabilities of Hansard Worldwide
are held by Hansard International and therefore are included within
Hansard International's total AuA.
Since it closed to new business in 2013, Hansard Europe's AuA
has been declining broadly in line with expectations as contracts
are surrendered or mature.
DIVIDS
An interim dividend of 1.8p per share was paid in April 2023.
This amounted to GBP2.5m.
The Board has resolved to recommend a final dividend of 2.65p
per share (2022: 2.65p) for shareholder approval at the AGM. In
making this recommendation, the Board has carefully considered its
current and future cash flows, the risks and potential impacts
introduced by global economic conditions, geopolitical factors
(including the ongoing Russia-Ukraine conflict), the outlook for
future growth and profitability, and the views of key stakeholders,
including shareholders and regulators. Subject to approval at the
AGM, this dividend will be paid on 16 November 2023.
complaints and potential 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 throughout Europe prior to
2014.
Even though the Group have 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.
As at 30 June 2023, the Group had been served with cumulative
writs with a net exposure totalling EUR26.1m, or GBP22.4m in
sterling terms (30 June 2022: EUR24.6m / GBP21.2m) arising from
contract holder complaints and other asset performance-related
issues. These are disclosed as contingent liabilities in note 26 to
the consolidated financial statements . The principal reasons for
the increase in contingent liabilities are a case which was
previously defended successfully, being subject to a new claim, and
a further new claim
During the year, the Group successfully defended 15 cases with
net exposures of approximately GBP1.9m, 14 of which may be appealed
by the plaintiffs (2022: successfully defended 24 cases with net
exposures of GBP3.2m). These successes continue to affirm
confidence in the Group's legal arguments.
Our policy is to maintain contingent liabilities even where we
win cases in the court of first instance if such cases have been
subsequently appealed. This includes our largest single case in
Belgium.
We have previously noted that we expect a number of our larger
claims to ultimately be covered by our Group insurance cover.
During FY 2023 we recorded GBP0.1m in insurance recoveries in
relation to litigation expenses (2022: GBP0.5m). We expect such
reimbursement to continue during the course of those claims.
We continue to estimate insurance coverage against the GBP22.4m
of contingent liabilities referred to above to be in the range of
GBP3m to GBP10m.
While it is not possible to forecast or determine the final
result 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 26 to the
consolidated financial statements. Where there is an established
pattern of settlement for a grouping of claims, a provision has
been made for the remaining exposures and included in note 20
'Provisions'.
Net asset value per shaRE
The net asset value per share on an IFRS basis as at 30 June
2023 is 15.9p (2022: 16.1p) based on the net assets in the
Consolidated Balance Sheet divided by the number of shares in
issue, being 137,557,079 ordinary shares (2022: 137,557,079).
Risk management and internal control
The Group is naturally exposed to both existing and emerging
risks, as it pursues its strategic and business plan objectives,
which may arise via the internal or the external environment. 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 Group.
For the year ended 30 June 2023 the Board has remained sensitive
to the disruptions provoked by the outbreak of war in Ukraine,
which coincided with the residual stresses of the Covid-19
pandemic. Particular focus has been maintained on understanding and
assessing the capacity for risks in the external environment, which
have more immediate prominence - including energy supply risks,
cost of living crises, rising inflation and cyberattacks on
critical infrastructure - to impede the visibility of other
emerging challenges, including climate transition risks, broader
increase in cyber vulnerabilities, persistent barriers to
international mobility, wider supply chain disruptions,
protectionism, geopolitical instabilities and inflationary
pressures. The nature and duration of uncertain and unpredictable
events, over short, mid and longer-term time horizons remains under
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 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.
During the year ended 30 June 2023 the Group Risk Forum ("GRF"),
previously established during the 2022 Financial Year to replace
the pre-existing Executive and Operational Risk Committees, has
continued its work to further enhance the evidencing and
demonstration of risk ownership, ensuring responsibilities and
accountabilities for risk management and risk-based decision making
are transparent and proactively owned at all business levels. The
GRF has continued to drive clearer and more dynamic interfaces
between the governance, risk management and internal control
conventions of the ERM Framework and those constituting the Group
and subsidiary Own Risk and Solvency Assessment ("ORSA") cycles.
The Group ORSA report reflects the cycle of ongoing activities and
arrangements which enable the Group Board and the Executive
Management Team to properly assess and understand at a practical
level the short- and longer-term risks facing the Group and the
capital required to cover those risks, under both normal and
stressed conditions. The ORSA considers the major sources of risk
that the Group, or a subsidiary entity may face under the principal
and subordinate risk designations of the ERM Framework. Both
internal and external risks are considered, together with emerging
risks and any risks associated with the Group's systems of
governance. The ORSA includes capital, performance and strategic
information and provides management with key information for
decision making.
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; and
-- 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, assess, and
quantify 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 assessment and 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 seeks to 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 GRF, having regard to the 'five
pillar' structure of the ERM Framework, which drives analytical
reporting to the Audit and Risk Committee. 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 companies' 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 the Audit and Risk Committee. The members of the Audit and Risk
Committee review the interim financial statements for the half year
ending 31 December and for the full financial year and engage with
the CFO to discuss and challenge the presentation and disclosures
therein. Once the draft document is approved by the Audit and 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 monthly 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.
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. The Group maintains
a precise match between the investment assets held and the contract
holder liabilities, and so the market risk and credit risk lie with
contract holders.
The Group's exposure on this unit-linked business is limited to
the extent that income arising from asset management charges and
commissions is generally based on the value of assets in the funds,
and any sustained falls in value will reduce earnings. In addition,
there are certain financial risks (credit, market, and liquidity
risks) in relation to the investment of shareholders' funds. The
Group's exposure to financial risks is explained in note 3 to the
consolidated financial statements.
The Board believes that the principal risks facing the Group's
earnings and financial position are those risks which are inherent
to the Group's business model and operating environment. The
regulatory landscape continues to evolve at both a local and
international level and the risk management and internal control
frameworks of the Group must remain responsive to developments
which may change the nature, impact or likelihood of such risks, 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 year ended 30 June
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
Arising from market change as new market and competitor forces come
changes, technological into effect and as technology continues to evolve.
advancement, loss of The Group may be unable to maintain competitive
key intermediary relationships advantage in commercially significant jurisdictions,
or competitor activity or market segments, or be unable to build and
sustain successful distribution relationships,
particularly in the event of any prolonged uncertainties
consequent to the pandemic environment.
How we manage the risk:
* Close monitoring of marketplaces, 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
Arising from major and monitored via the Group ERM Framework, having
market stresses, or regard to the balance sheet and profit reduction
fluctuation in market impacts of a drop in equities, causing a reduction
variables, resulting in fees derived from the value of contract holder
in falls in equity assets, as well as the contagion effects for aspects
or other asset values, of the broader risk portfolio. Such contagion
currency movements might include deferred impacts to profit through
or a combined scenario reduced sales activity, concentration risks on
manifesting 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 it's 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,
Arising from the failure custody and other counterparties, the Group is
of a counterparty exposed to the risk of financial loss and potential
disruption of core business functional and operational
processes.
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
Arising from a failure settle its obligations as they fall due, the Group
to maintain an adequate may be in default of its obligations and may incur
level of liquidity significant sanction, loss or cost to rectify
to meet financial obligations the position.
under both planned How we manage the risk:
and stressed conditions * The Group maintains highly prudent positions in
accordance with its risk appetite and investment
policies which ensures a high level of liquidity is
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 The scale and pace of change in regulatory and
Risk: supervisory environments, including the continued
emergence of new and/or updated compliance obligations
Arising from changes and increasingly granular data submission requirements
in the regulatory landscape, has maintained the momentum gathered post-Covid.
which adversely impact Changes to rule sets and supervisory expectations
the Group's business continue to require efficient and effective ways
model, or from a failure to evidence and demonstrate how compliance obligations
by the Group, or one are met, whilst compliance analytics and high-quality
of its subsidiary entities, data driven insights are becoming increasingly
to meet its legal, important.
regulatory or contractual The direction of regulatory travel demands continued
obligations, resulting investment in the capacity, competence, and capability
in the risk of loss of resourcing across all business areas, having
or the imposition of regard to the extent of risk interdependencies
penalties, damages and the embedding of personal accountability regimes.
or fines 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 Regulators are taking - and expecting from firms
Crime Risk: - an increasingly holistic approach to mitigating
heightened financial crime risks. Fraud and scam
Economic challenges activities continue to target weaknesses in internal
flowing from the pandemic control environments - contingent with greater
persist, provoking reliance upon remote working arrangements. Emerging
an increase in the risk research further indicates the bulk of the
source and form of largest operational risk losses across financial
fraud and financial services companies continues to emanate from mega
crime risks. These frauds, indicative of macro-economic pressures
have combined with and their propensity to drive episodes of internal
geopolitical instabilities fraud. These challenges and increased pressures
and the mobilisation on profitability are also seen as increasing the
of unprecedented levels risk of poor-quality business being written and
of sanctions against potentially diminishing the attention paid to
Russia in the context due diligence procedures and processes. Regulators
of the Russia-Ukraine retain substantial leeway to take enforcement
conflict 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 Organisational culture remains under scrutiny
Risk: by the Board on the basis that it is recognised
Arising from any failure as a fundamental driver of corporate success,
of governance, risk prudential soundness, and compliant conduct. Any
management and internal failure to adequately assess, monitor, manage
control arrangements, and mitigate risks to the delivery of fair customer
via corporate or individual outcomes, or to market integrity, can be expected
actions. 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 The ability to maintain critical services or operations
Risk: during periods of disruption is receiving increasing
Arising from any exposure levels of regulatory scrutiny with concurrent
to risk events with growth in the formalisation of regulatory expectation.
the capacity to cause 'Resilience Principles' build on the real-world
operational failures tests presented by the Covid-19 pandemic and the
or wide scale disruptions near-term threat of disruption of key global infrastructure
in financial markets 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 The nature and complexity of cyber threats and
Security Risk: cyber risk are recognised by the Board as presenting
Arising from the increased the single most significant risk to financial
digitalisation of business services firms. The mounting sophistication and
activities and growing persistence of cybercrime and the growing adoption
dependence upon technology of highly advanced, nation-state type tools by
in the context of exposure cyber criminals, underscore the challenges in
to elevated and more understanding and anticipating the nature of cyber
pernicious forms of threats and cyber risks.
digital and cyber risk 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 Climate change is recognised by the Board as presenting
and Governance (ESG) a potential source of high-impact, high-probability
Risk: risk, requiring a strategic response which is
Arising from a failure value-driven in terms of improving resilience
to anticipate and respond and demonstrating to clients, investors, regulators,
to emerging sustainability and wider stakeholder groups that the risks and
risks or successfully opportunities of climate change are understood.
integrate ESG considerations The Board has identified that climate risk factors
and policy positions affecting the Group can be grouped into two main
into strategy and business categories of risk exposure:
planning * 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 'Talent risk' is growing in prominence on the
and Talent Risk: operational risk agenda at industry level with
Arising from any failure the emergence of unprecedented challenges linked
to drive and support to attracting and retaining employees across all
the right corporate financial services sectors. The most material
culture and attract, concern attaches to the shortfall in skilled employees
develop, engage and to fill open vacancies, with a real danger that
retain key personnel 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.
During March 2023, we completed an in-house Employee
Engagement survey which recorded progress against
all surveyed areas. Feedback from the survey has
helped inform the Culture Programme activities
for 2023/2024 (as set out above).
-------------------------------- -----------------------------------------------------------------
Further details around financial risks are outlined in note 3 of
the consolidated financial statements.
Philip Kay
Chair
28 September 2023
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2023
Year ended Year ended
30 June 30 June
2023 2022
Notes GBPm GBPm
------------------------------------------ ------ ----------- -----------
Fees and commissions 5 45.7 48.8
Investment income 6 44.5 (103.5)
Other operating income 1.5 1.0
91.7 (53.7)
------------------------------------------ ------ ----------- -----------
Change in provisions for investment
contract liabilities 17 (40.6) 103.5
Origination costs 7 (16.2) (16.2)
Administrative and other expenses 8 (29.0) (29.8)
------------------------------------------ ------ ----------- -----------
(85.8) 57.5
------------------------------------------ ------ ----------- -----------
Profit before taxation 5.9 3.8
Taxation 10 (0.2) (0.2)
------------------------------------------ ------ ----------- -----------
Profit and total comprehensive income
for the year
after taxation 5.7 3.6
------------------------------------------ ------ ----------- -----------
Earnings per share
2023 2022
Note (p) (p)
--------- ----- ----- -----
Basic 11 4.1 2.6
Diluted 11 4.1 2.6
----------- ----- ----- -----
Consolidated Balance Sheet
As at 30 June 2023 30 June 30 June
2023 2022
Notes GBPm GBPm
---------------------------------------- ------ -------- --------
Assets
Intangible assets 13 19.9 13.4
Property, plant and equipment 13 2.8 2.7
Deferred origination costs 14 117.8 122.5
Financial investments
Measured at fair value:
Equity securities 3 52.0 55.7
Investments in collective investment
schemes 3 915.5 903.4
Fixed income securities, bonds and
structured notes 3 63.3 50.6
-------- --------
1,030.8 1,009.7
Measured at amortised cost:
Deposits and money market funds 90.2 99.7
Other receivables 15 4.9 4.3
Cash and cash equivalents 16 52.2 58.9
------------------------------------------- ------ -------- --------
Total assets 1,318.6 1,311.2
------------------------------------------- ------ -------- --------
Liabilities
Financial liabilities under investment
contracts 17 1,101.5 1,092.3
Deferred income 18 144.8 145.1
Amounts due to investment contract
holders 17 36.6 37.3
Other payables 19 13.8 14.1
Provisions 20 0.1 0.2
Total liabilities 1,296.8 1,289.0
------------------------------------------- ------ -------- --------
Net assets 21.8 22.2
------------------------------------------- ------ -------- --------
Shareholders' equity
Called up share capital 22 68.8 68.8
Other reserves 23 (48.5) (48.3)
Retained earnings 1.5 1.7
------------------------------------------- ------ -------- --------
Total shareholders' equity 21.8 22.2
------------------------------------------- ------ -------- --------
Notes to the consolidated financial statements
1 General Information
Hansard Global plc ("the Company") is a limited liability
company, incorporated in the Isle of Man under the Isle of Man
Companies 1931 to 2004, whose shares are publicly traded. The
principal activity of the Company is to act as the holding company
of the Hansard group of companies. The activities of the principal
operating wholly owned subsidiaries include the transaction of life
assurance business and related activities. Hansard Europe was
closed to new business with effect from 30 June 2013. The principal
subsidiaries of the Company are as follows:
Company name Incorporated Activity
Hansard International Limited Isle of Man Life Assurance
Hansard Worldwide Limited The Bahamas Life Assurance
Hansard Europe Designated Activity Company Ireland Life Assurance
Hansard Administration Services Limited Isle of Man Administration Services
Hansard Development Services Limited Isle of Man Marketing and Development Services
The registered office of the Company is 55 Athol Street,
Douglas, Isle of Man, IM99 1QL.
The Company has its primary listing on the London Stock
Exchange.
1.1 Principal accounting policies
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below or, in
the case of accounting policies that relate to separately disclosed
values in the primary statements, within the relevant note to these
consolidated financial statements. These policies have been
consistently applied, unless otherwise stated.
1.2 Basis of presentation
The consolidated financial statements have been prepared in
accordance with UK Adopted International Accounting Standards
("IFRSs"), International Financial Reporting Standards
Interpretations Committee ("IFRSIC") interpretations, the Isle of
Man Insurance Act 2008, and with the Isle of Man Companies Acts
1931 to 2004. The financial statements have been prepared under the
historical cost convention as modified by the revaluation of
financial investments and financial liabilities at fair value
through profit or loss. The Group has applied all International
Financial Reporting Standards adopted by the United Kingdom and
effective at 30 June 2023.
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 products under IFRS
4 'Insurance Contracts' as they do not transfer significant
insurance risk.
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting
year. The estimates and associated assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the year in which the estimate is revised if the revision affects
only that year or in the year of the revision and future years if
the revision affects both current and future years.
The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to the
consolidated financial statements, are disclosed in note 2.
Except where otherwise stated, the financial statements are
presented in pounds sterling, the functional currency of the
Company, rounded to the nearest one hundred thousand pounds.
The following new standards, amendments and interpretations are
in issue but not yet effective and have not been early adopted by
the Group and are not expected to have a significant impact;
-- IFRS 17 Insurance Contracts - effective for periods beginning after January 2023
-- Classification of liabilities as current or non-current
(Amendments to IAS 1) - effective from January 2023
-- Disclosure of Accounting Policies (Amendments to IAS1 and
IFRS Practice Statement 2) - effective from January 2023
-- Definition of Accounting Estimate (Amendments to IAS 8)
-- Deferred Tax related Asset and Liabilities Arising from a
Single Transaction - Amendments to IAS 12 Income Taxes - effective
1 January 2023
-- Sale or Contribution of Assets between an Investor and its
Associate or Joint Ventures (Amendments to FRS 10 and IAS 28)
-- 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.
1.3 Basis of consolidation
The Group's financial statements consolidate those of the parent
company and all its subsidiaries as at 30 June 2023.
All transactions between Group companies are eliminated on
consolidation between Group companies. Amounts reported in the
financial statements of subsidiaries have been adjusted where
necessary to ensure consistency with the accounting policies
adopted by the Group.
1.4 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 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
the ongoing Russia-Ukraine conflict and global economic conditions.
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. 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 external market and economic 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 without any material
impact to processing and servicing levels. Its control environment
continued to operate effectively during this time.
-- The Group places the majority of 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;
and
-- The Group has no borrowings.
2 C ritical a ccounting e stimates and j udgements in a pplying a ccounting p olicies
Estimates, assumptions, and judgements are used in the
application of accounting policies in these financial statements.
Critical accounting estimates are those which involve the most
complex or subjective judgements or assessments. Estimates,
assumptions, and judgements are evaluated continually and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. Actual outcomes may differ from assumptions and
estimates made by management.
2.1 Accounting estimates and assumptions
The principal areas in which the Group applies accounting
estimates and assumptions are the period and method of amortisation
of deferred origination costs and deferred income. Estimates are
also applied in determining the recoverability of deferred
origination costs.
2.1.1 Amortisation of deferred origination costs and deferred income
Deferred origination costs and deferred income are amortised on
a straight-line basis over the estimated life of the underlying
investment contract. Estimates are determined based on an analysis
of recent experience. The estimate life is between 7 and 15 years
depending on the product type. Certain contracts are amortised on
actual life.
2.1.2 Recoverability of deferred origination costs
Formal reviews to assess the recoverability of deferred
origination costs on investment contracts are carried out at each
balance sheet date to determine whether there is any indication of
impairment based on the estimated future income levels.
If, based upon a review of the remaining contracts, there is any
indication of irrecoverability or impairment, the contract's
recoverable amount is estimated. Impairment losses are reversed
through the consolidated statement of comprehensive income if there
is a change in the estimates used to determine the recoverable
amount. Such losses are reversed only to the extent that the
contract's carrying amount does not exceed the carrying amount that
would have been determined, net of amortisation where applicable,
if no impairment loss had been recognised.
2.1.3 Fair value of financial investments
Where the Directors determine that there is no active market for
a particular financial instrument, fair value is assessed using
valuation techniques based on available relevant information and an
appraisal of all associated risks as detailed in note 3.
2.2 Judgements
The primary areas in which the Group has applied judgement in
applying accounting policies are as follows:
-- to determine whether a provision or contingent liability is
required in respect of any pending or threatened litigation, which
is addressed in note 20 and note 26.
-- the type of expenses that are treated as origination costs to
be deferred. Any other expenses are expensed as incurred.
1.3 Intangible assets
The carrying amount, residual value and useful life of the
Group's computer software is reviewed annually to determine whether
there is any indication of impairment, or a change in residual
value or expected useful life. If there is any indication of
impairment, the asset's carrying value is revised.
3 Financial risk management
Risk management objectives and risk policies
The Group's objective in the management of financial risk is to
minimise, where practicable, its exposure to such risk, except when
necessary to support other objectives. The Group seeks to manage
risk through the operation of unit-linked business whereby the
contract holder bears the financial risk. In addition, shareholder
assets are invested in highly rated investments.
Overall responsibility for the management of the Group's
exposure to risk is vested in the Board. To support it in this
role, the Group ERM Framework is in place comprising risk
identification, risk assessment, control and reporting processes.
Additionally, the Board and the Boards of subsidiary companies have
established a number of Committees with defined terms of reference.
These are the Audit & Risk, Executive and Investment
Committees. Additional information concerning the operation of the
Board Committees is contained in the Corporate Governance section
of this Annual Report.
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.
3.1 Market risk
This is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market
prices, analysed between price, interest rate and currency risk.
The Group adopts a risk averse approach to market risk, with a
stated policy of not actively pursuing or accepting market risk
except where necessary to support other objectives. However, the
Group accepts the risk that the fall in equity or other asset
values, whether as a result of price falls or strengthening of
sterling against the currencies in which contract holder assets are
denominated, will reduce the level of annual management charge
income derived from such contract holder assets and the risk of
lower future profits.
Sensitivity analysis to market risk
The Group's business is unit-linked, and the direct associated
market risk is therefore borne by contract holders (although there
is a secondary impact as shareholder income is dependent upon the
fair value of contract holder assets). Other financial assets and
liabilities held outside of contract holder unitised funds
primarily consist of units in money market funds, cash and cash
equivalents, and other assets and liabilities. Cash held in
unitised money market funds and at bank is valued at par and is
unaffected by movements in interest rates. Other assets and
liabilities are similarly unaffected by market movements.
As a result of these combined factors, the Group's financial
assets and liabilities held outside unitised funds are not
materially subject to market risk, and movements at the reporting
date in interest rates and equity values have an immaterial impact
on the Group's profit after tax and equity. Future revenues from
annual management charges may be affected by movements in interest
rates, foreign currencies and equity values. The Group does not
control the asset selection strategy as assets are chosen by the
contract holders.
(a) Price risk
Unit linked funds are exposed to securities price risk as the
investments held are subject to prices in the future which are
uncertain. The fair value of financial assets (designated at fair
value through profit or loss) exposed to price risk at 30 June 2023
was GBP1,030.8m (2022: GBP1,009.7m). 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.
An overall change in the market value of the unit-linked funds
would affect the annual management charges accruing to the Group
since these charges, which are typically 1% per annum, are based on
the market value of contract holder assets under administration.
The approximate impact on the Group's profits and equity of a 10%
change in fund values, either as a result of price, interest rate
or currency fluctuations, is GBP1.6m (2022: GBP1.7m).
(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% per annum in
interest rates will result in an increase or decrease of
approximately GBP0.6m (2022: GBP0.7m) 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 3.2.
(c) Currency risk
Currency risk is the risk that the Group is exposed to higher or
lower returns as a direct or indirect result of fluctuations in the
value of, or income from, specific assets and liabilities arising
from changes in underlying exchange rates.
(c) (i) Group foreign currency exposures
The Group is exposed to currency risk on the foreign currency
denominated bank balances, contract fees receivable and other
liquid assets that it holds to the extent that they do not match
liabilities in those currencies. The Group receives 87% (2022: 82%)
of premiums in US Dollars and settles the majority of expenses in
Sterling. The impact of currency risk is minimised by regular
conversion of excess foreign currency funds to sterling. The Group
does not hedge foreign currency cash flows.
At the balance sheet date the Group had exposures in the
following currencies:
2023 2023 2023 2022 2022 2022
US$m EURm Yen US$m EURm Yen m
m
------------------------------- ------- ------- -------- ------- ------- --------
Gross assets 23.2 11.1 255.0 26.3 13.9 164.3
Matching currency liabilities (20.5) (10.4) (285.0) (24.1) (12.8) (217.6)
------------------------------- ------- ------- -------- ------- ------- --------
Uncovered currency exposures 2.7 0.7 (30.0) 2.2 1.1 (53.3)
------------------------------- ------- ------- -------- ------- ------- --------
Sterling equivalent (GBPm) 2.1 0.5 (0.2) 1.8 1.0 (0.3)
------------------------------- ------- ------- -------- ------- ------- --------
The approximate effect of a 5% change: in the value of US
dollars to sterling is GBP0.1m (2022: GBP0.1m); in the value of the
euro to sterling is less than GBP0.1m (2022: less than GBP0.1m);
and in the value of the yen to sterling is less than GBP0.1m (2022:
less than GBP0.1m).
(c) (ii) Financial investments by currency
Certain fees and commissions are earned in currencies other than
sterling, based on the value of financial investments held in those
currencies from time to time.
The sensitivity of the Group to the currency risk inherent in
investments held to cover financial liabilities under investment
contracts is incorporated within the analysis set out in (a)
above.
At the balance sheet date the analysis of financial investments
by currency denomination is as follows, US dollars: 71% (2022:
71%); euro: 8% (2022: 8%); sterling: 20% (2022: 20%); other: 1%
(2022: 1%).
3.2 Credit risk
Credit risk is the risk that the Group is exposed to lower
returns or loss if another party fails to perform its financial
obligations to the Group . The Group has adopted a risk averse
approach to such risk and has a stated policy of not actively
pursuing or accepting credit risk except when necessary to support
other objectives.
The clearing and custody operations for the Group's security
transactions are mainly concentrated with one broker, namely
Capital International Limited, a member of the London Stock
Exchange. At 30 June 2023 and 2022, substantially all contract
holder cash and cash equivalents, balances due from investment
brokers 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, its investments in unitised
money market funds and it's investment in a bond portfolio. To
manage these risks; deposits and the bond portfolio are placed in
accordance with established policy, with credit institutions having
a short-term rating of at least F1 or P1 from Fitch IBCA and
Moody's respectively and a long-term rating of at least A or A3.
Investments in unitised money market funds are made only where such
fund is AAA rated. Additionally, maximum counterparty exposure
limits are set both at an individual subsidiary company level and
on a Group-wide basis.
These assets are considered to have a high degree of credit
worthiness and no assets of a lower credit worthiness are held. The
following table sets out information about the credit quality of
the Group's deposits with credit institutions and its investments
in unitised money market funds.
2023 2022
GBPm GBPm
------------------------------------------------ ------------ -------
Deposits and cash with credit institutions and investments
in unitised money market funds
(Based on Standards & Poor's
ratings)
AAA 26.3 29.9
AA- to AA+ 6.0 4.9
A- to A+ 10.8 15.4
------------------------------------------------ ------------ -------
Total deposits 43.1 50.2
AA- to AA+ 0.3 3.9
A- to A+ 22.0 20.4
------------------------------------------------ ------------ -------
Total cash at bank 22.3 24.3
------------------------------------------------ ------------ -------
Group cash and deposits 65.4 74.5
------------------------------------------------ ------------ -------
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 consideration
given to forward looking information. The following table sets out
the movement in expected credit losses.
2023 2022
GBPm GBPm
--------------------------------- ----- -----
At 1 July 1.8 0.4
Credit loss charges in the year 0.1 1.4
--------------------------------- ----- -----
At 30 June 1.9 1.8
--------------------------------- ----- -----
There have been no changes in the assets in the year ended 30
June 2023 attributable to changes in credit risk (30 June 2022:
nil).
At the balance sheet date, an analysis of the Group's cash and
deposit balances was as follows:
2023 2022
GBPm GBPm
---------------------------------- ----- -----
Longer term deposits with credit
institutions 13.2 15.6
Cash and cash equivalents under
IFRS 52.2 58.9
---------------------------------- ----- -----
65.4 74.5
---------------------------------- ----- -----
3.3 Liquidity risk
Liquidity risk is the risk that the Group, though solvent, does
not have sufficient financial resources to enable it to meet its
obligations as they fall due, or can only secure them at excessive
cost.
The Group's objective is to ensure that it has sufficient
liquidity over short-term (up to one year) and medium-term time
horizons to meet the needs of the business. This includes liquidity
to cover, amongst other things, new business costs, planned
strategic activities, servicing of equity capital as well as
working capital to fund day-to-day cash flow requirements.
Liquidity risk is principally managed in the following ways:
-- Assets of a suitable marketability are held to meet contract
holder liabilities as they fall due.
-- Forecasts are prepared regularly to predict required
liquidity levels over both the short-term and medium-term.
The Group's exposure to liquidity risk is considered to be low
since it maintains a high level of liquid assets to meet its
liabilities.
3.3.1 Undiscounted contractual maturity analysis
Set out below is a summary of the undiscounted contractual
maturity profile of the Group's assets.
2023 2022
GBPm GBPm
-------------------------------------------------- -------- --------
Maturity within 1 year
Shareholder deposits and money market funds 65.4 74.5
Other shareholder assets 4.8 4.3
-------------------------------------------------- -------- --------
70.2 78.8
-------------------------------------------------- -------- --------
Maturity from 1 to 5 years
Other shareholder assets - -
-------------------------------------------------- -------- --------
- -
-------------------------------------------------- -------- --------
Shareholder assets with maturity values within
5 years 70.2 78.8
Other shareholder assets (no defined maturity
profile) 146.9 140.1
-------------------------------------------------- -------- --------
Shareholder assets 217.1 218.9
Gross assets held to cover financial liabilities
under investment contracts 1,101.5 1,092.3
-------------------------------------------------- -------- --------
Total assets 1,318.6 1,311.2
-------------------------------------------------- -------- --------
There is no significant difference between the value of the
Group's assets on an undiscounted basis and the balance sheet
values.
Assets held to cover financial liabilities under investment
contracts are deemed to have no fixed maturity since the
corresponding unit-linked liabilities are repayable and
transferable on demand. In certain circumstances the contractual
maturities of a portion of the assets may be longer than one year,
but the majority of assets held within the unit-linked funds are
highly liquid. The Group actively monitors fund liquidity.
Set out below is a summary of the undiscounted contractual
maturity profile of the Group's liabilities.
2023 2022
GBPm GBPm
-------------------------------------------------- -------- --------
Maturity within 1 year
Amounts due to investment contract holders 36.6 37.3
Other payables 11.1 12.1
Provisions 0.1 0.2
-------------------------------------------------- -------- --------
47.8 49.6
-------------------------------------------------- -------- --------
Maturity from 1 to 5 years
Other payables 2.7 2.0
-------------------------------------------------- -------- --------
2.7 2.0
-------------------------------------------------- -------- --------
Liabilities with maturity values within 5 years 50.5 51.6
Other liabilities (no defined maturity profile) 144.8 145.1
-------------------------------------------------- -------- --------
Shareholder liabilities 195.3 196.7
Maturity within 1 year
Financial liabilities under investment contracts 43.4 32.3
Maturity from 1 to 5 years
Financial liabilities under investment contracts 209.0 199.6
Maturity greater than 5 years
Financial liabilities under investment contracts 849.1 860.4
-------------------------------------------------- -------- --------
Financial liabilities under investment contracts 1,101.5 1,092.3
-------------------------------------------------- -------- --------
Total liabilities 1,296.8 1,289.0
-------------------------------------------------- -------- --------
Any difference between the total liabilities in the above table
and the total liabilities per the consolidated balance sheet
represents the impact of discounting liabilities with a maturity
profile of more than one year.
3.4 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.
3.4.1 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.
3.5 Classification and subsequent measurement of financial assets and liabilities
The Group recognises deposits with financial institutions and
loans and borrowings on the date on which they are originated. All
other financial instruments are recognised on the trade date, which
is the date on which the Group becomes a part to the contractual
provisions of the instrument.
A financial asset or financial liability is initially measured
at fair value plus, for a financial asset or financial liability
not measured at 'fair value through profit and loss' ("FVTPL"),
transaction costs that are directly attributable to its acquisition
or issue.
On initial recognition, a financial asset is classified as
measured at amortised cost, 'fair value through other comprehensive
income' ("FVOCI") or FVTPL.
Financial assets are not reclassified subsequent to their
initial recognition. A financial asset is measured at amortised
cost if it meets both of the following conditions and is not
designated as at FVTPL:
-- It is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
-- Its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest.
A financial asset is measured at FVOCI if it meets both of the
following conditions and is not designated as at FVTPL:
-- It is held within a business model whose objective is
achieved by both collecting contractual cash flows and selling
financial assets; and
-- Its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest.
All financial assets not classified as measured at amortised
cost or FVOCI as described above are measured at FVTPL. The
classification of each financial asset and liability is commented
on within each respective financial statement note. As at 30 June
2023 and 30 June 2022, only financial assets measured at amortised
cost and FVTPL are held.
The subsequent measurement of each class of financial assets is
defined in the below table:
Class of asset Subsequent measurement
Financial assets at FVTPL Measured at fair value. Net gains and
losses, including any interest or dividend
income and foreign exchange gains and
losses, are recognised in profit or
loss.
--------------------------------------------
Financial assets at amortised Measured at amortised cost using the
cost effective interest method. Interest
income, foreign exchange gains and losses
and impairment are recognised in profit
or loss. Any gain or loss on derecognition
is also recognised in profit or loss.
------------------------------ --------------------------------------------
On initial recognition, a financial liability is designated as
amortised cost or FVTPL. The criteria for classification and
subsequent measurement mirrors that of the financial assets, albeit
the classification of 'FVOCI' does not exist for financial
liabilities. Therefore, any liabilities which do not meet the
amortised cost classification criteria, are designated as
FVTPL.
3.6 Fair value of financial assets and liabilities
The Group closely monitors the valuation of assets in markets
that have become less liquid. Determining whether a market is
active requires the exercise of judgement and is determined based
upon the facts and circumstances of the market for the instrument
being measured . Where the Directors determine that there is no
active market for a particular financial instrument, for example
where a particular collective investment scheme is suspended from
trading, fair value is assessed using valuation techniques based on
available, relevant, information and an appraisal of all associated
risks. When a collective investment scheme recommences regular
trading, the value would be transferred back to Level 1. This
process requires the exercise of significant judgement on the part
of Directors.
Due to the linked nature of the contracts administered by the
Group's insurance undertakings, any change in the value of
financial assets held to cover financial liabilities under those
contracts will result in an equal and opposite change in the value
of contract liabilities. The separate effect on financial assets
and financial liabilities is included in investment income and
investment contract benefits, respectively, in the consolidated
statement of comprehensive income.
IFRS 13 requires the Group to classify fair value measurements
into a fair value hierarchy by reference to the observability and
significance of the inputs used in measuring that fair value. The
hierarchy is as follows:
-- Level 1: fair value is determined using quoted prices
(unadjusted) in active markets for identical assets.
-- Level 2: fair value is determined using inputs other than
quoted prices included within Level 1 that are observable for the
asset either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
-- Level 3: fair value is determined using inputs for the asset
that are not based on observable market data (unobservable
inputs).
The following table analyses the Group's financial assets and
liabilities at fair value through profit or loss, at 30 June
2023:
Level Level Level Total
1 2 3
Financial assets at fair value GBPm GBPm GBPm GBPm
through profit or loss
-------------------------------- -------- ------- ------- ----------
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 or 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 Level Total
2 3
GBPm GBPm GBPm GBPm
-------------------------------- ---------- ---------- ------- ----------
Deposit and money market funds 90.2 - - 90.2
-------------------------------- ---------- ---------- ------- ----------
Total financial assets at fair
value through profit or loss 1,042.7 20.9 57.4 1,121.0
-------------------------------- ---------- ---------- ------- ----------
Financial liabilities at fair
value through profit or loss - 1,101.5 - 1,101.5
-------------------------------- ---------- ---------- ------- ----------
Financial liabilities at fair value through profit or loss are
classified as level 2 on the basis that they relate to policies
investing in financial assets at fair value through profit and
loss.
During the year there were no transfers between the fair value
hierarchy levels.
The following tables analyse the Group's financial assets and
liabilities at fair value through profit or loss, at 30 June
2022:
Level Level Level Total
1 2 3
Financial assets at fair value through GBPm GBPm GBPm GBPm
profit or loss
---------------------------------------- -------- ------- ------- ----------
Equity securities 55.7 - - 55.7
Collective investment schemes 892.6 4.0 6.8 903.4
Fixed income securities, bonds and
structured notes - 6.8 43.8 50.6
Total financial assets at fair value
through profit or loss 948.3 10.8 50.6 1,009.7
---------------------------------------- -------- ------- ------- ----------
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------- ------ --------
Deposit and money market funds 99.7 - - 99.7
-------------------------------------- -------- -------- ------ --------
Total financial assets at fair value
through profit or loss 1,048.0 10.8 50.6 1,109.4
-------------------------------------- -------- -------- ------ --------
Financial liabilities at fair value
through profit or loss - 1,092.3 - 1,092.3
-------------------------------------- -------- -------- ------ --------
During the year ended 30 June 2022, GBP4.0m of collective
investment scheme investments were transferred from Level 1 to
Level 2 following a review of their pricing frequency. A further
GBP2.1m of similar assets were reclassified from Level 1 to Level 3
as a result of the same classification review, reflecting that the
value of these assets are not based on observable market data.
GBP43.8m of structured notes were transferred from Level 2 to Level
3 during the year. This move was a reflection of the underlying
market volatility in that asset class experienced in the latter
part of the financial year and the resulting impact on the
observable and unobservable inputs used in the valuation
methodologies for this type of security.
Valuation techniques and significant unobservable inputs
The following tables show the valuation techniques used in
measuring Level 2 and Level 3 fair values for financial instruments
in the statement of financial position, as well as the significant
unobservable inputs used.
Type Valuation technique Significant Sensitivity
unobservable to changes
input in unobservable
inputs
Suspended assets Latest available information Discount factor If the NAV
GBP5.3m (2022: including or such as (5%) and NAV was higher/lower,
GBP6.8m) net asset values (NAV) the fair value
or other communication would be higher/lower.
received If the discount
factor was
higher/lower,
the fair value
would be lower/higher.
------------------------------------ ---------------- ------------------------
Bonds and structured Market comparison/ discounted Level 2: Not Level 2: Not
notes cash flow: The fair value applicable. applicable.
Level 2: GBP10.0m is estimated considering:
(2022: GBP6.8) (i) current or recent Level 3: Level 3:
Level 3: GBP52.0m quoted prices for identical Underlying Significant
(2022: GBP43.8m) securities in markets volatility increases/
that are not active; decreases in
and this input
(ii) a net present value in isolation
calculated using discount would result
rates which are determined in a higher
with reference to observable or lower fair
market transactions in value
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.
The reconciliation between opening and closing balances of Level
3 assets are presented in the table below:
2023 2022
GBPm GBPm
-------------------------- ------ ------
Opening balance 50.6 12.2
Unrealised losses (6.5) (1.5)
Transfers into level 3 1.6 46.3
Transfers out of level 3 - (5.2)
Purchases, sales, issues
and settlements 11.7 (1.2)
Closing balance 57.4 50.6
--------------------------- ------ ------
4 Segmental information
Disclosure of operating segments in these financial statements
is consistent with reports provided to the Chief Operating Decision
Maker ("CODM") which, in the case of the Group, has been identified
as the Executive Committee of Hansard Global plc.
In the opinion of the CODM, the Group operates in a single
reportable segment, that of the distribution and servicing of
long-term investment products. New business development,
distribution and associated activities 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 incurred during the year as set
out in the Business and Operating Review section of this Annual
Report and Accounts.
2023 2022
GBPm GBPm
----------------------------------- ----- -----
Middle East and Africa 2.7 2.9
Latin America 2.4 2.9
Rest of World 0.5 1.0
Far East 0.1 0.7
Net Issued Compensation Credit 5.7 7.5
Other commission costs paid to
third parties 3.4 3.6
Enhanced unit allocations 1.0 1.2
------------------------------------ ----- -----
Direct origination costs incurred
during the year 10.1 12.3
------------------------------------ ----- -----
Revenues and expenses allocated to geographical locations
contained in sections 4.1 to 4.4 below reflect the revenues and
expenses generated in or incurred by the legal entities in those
locations.
4.1 Geographical analysis of fees and commissions by origin
2023 2022
GBPm GBPm
--------------------- ----- -----
Isle of Man 43.1 45.7
Republic of Ireland 2.1 2.5
The Bahamas* 0.5 0.6
---------------------- ----- -----
45.7 48.8
--------------------- ----- -----
* 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. These amounted to GBP3.2m in 2023
(2022: GBP2.0m). The fees shown in the table above in respect of
Hansard Worldwide represent fees received from Hansard
International.
4.2 Geographical analysis of profit before taxation
2023 2022
GBPm GBPm
--------------------- ------ ------
Isle of Man 6.5 4.2
Republic of Ireland (1.0) (0.9)
The Bahamas 0.4 0.5
---------------------- ------ ------
5.9 3.8
--------------------- ------ ------
4.3 Geographical analysis of gross assets
2023 2022
GBPm GBPm
--------------------- -------- --------
Isle of Man* 1,229.8 1,216.5
Republic of Ireland 87.0 92.5
The Bahamas 1.8 2.2
---------------------- -------- --------
1,318.6 1,311.2
--------------------- -------- --------
* Includes assets held in the Isle of Man in connection with
policies written in The Bahamas. As at 30 June 2023 these amounted
to GBP178.5m (30 June 2022: GBP134.9m).
4.4 Geographical analysis of gross liabilities
2023 2022
GBPm GBPm
--------------------- -------- --------
Isle of Man 1,043.8 1,074.8
Republic of Ireland 73.3 77.6
The Bahamas 179.7 136.6
---------------------- -------- --------
1,296.8 1,289.0
--------------------- -------- --------
5 Fees and commissions
Fees are charged to the contract holders of investment contracts
for contract administration services, investment management
services, payment of benefits and other services related to the
administration of investment contracts. Fees may be chargeable on
either a fixed fee basis, a fee per transaction or as a percentage
of assets under administration. Fees are recognised as revenue as
the services are provided. Initial fees that exceed the level of
recurring fees and relate to the future provision of services are
deferred in the balance sheet and amortised on a straight-line
basis over the life of the relevant contract. These fees are
accounted for on the issue of a contract and on receipt of
incremental premiums on existing single premium contracts.
Regular fees charged to contracts are recognised on a
straight-line basis over the period in which the service is
provided. Transactional fees are recorded when the required action
is complete.
Commissions receivable arise principally from fund houses with
which investments are held. Commissions are recognised on an
accruals basis in accordance with the relevant agreement.
2023 2022
GBPm GBPm
------------------------- ----- -----
Contract fee income 28.1 30.1
Fund management charges 12.9 13.9
Commissions receivable 4.7 4.8
------------------------- ----- -----
45.7 48.8
------------------------- ----- -----
Fund management charges and commissions receivable (39% of the
total above (2022: 28%)) are a function of the level of assets
under administration.
6 Investment income
Investment income comprises dividends, interest, and other
income receivable, realised and unrealised gains and losses on
investments. Movements are recognised in the consolidated statement
of comprehensive income in the period in which they arise.
Dividends are accrued on the date notified. Interest is accounted
for on a time proportion basis using the effective interest
method.
2023 2022
GBPm GBPm
------------------------------------- ------- --------
Interest income 3.5 0.1
Dividend income 4.7 4.6
Gains on realisation of investments 51.3 63.4
Movement in unrealised losses (15.0) (171.6)
------------------------------------- ------- --------
44.5 (103.5)
------------------------------------- ------- --------
7 Origination costs
Origination costs include commissions, intermediary incentives,
and other distribution-related expenditure (note 2.2). Origination
costs which vary with, and are directly related to, securing new
contracts and incremental premiums on existing single premium
contracts are deferred to the extent that they are recoverable out
of future net income from the relevant contract. Deferred
origination costs are amortised on a straight-line basis over the
life of the relevant contracts. Typical terms range between 6 years
and 16 years. Origination costs that do not meet the criteria for
deferral are expensed as incurred.
2023 2022
GBPm GBPm
-------------------------------------- ----- -----
Amortisation of deferred origination
costs 13.5 13.9
Other origination costs 2.7 2.3
---------------------------------------- ----- -----
16.2 16.2
---------------------------------------- ----- -----
8 Administrative and other expenses
Included in administrative and other expenses are the
following:
2023 2022
GBPm GBPm
------------------------------------------------ ----- -----
Auditors' remuneration:
- Fees payable for audit services
0.7 0.4
* Fees payable for audit related services
pursuant to legislation 0.1 0.1
- Fees payable for non -audit services - -
Employee costs (see note 9) 10.3 10.9
Directors' fees 0.4 0.4
Fund management fees 5.3 5.7
Renewal and other commission 0.9 0.7
Professional and other fees 4.2 3.5
Litigation fees and settlements 1.5 1.1
Credit loss allowance 0.1 1.4
Licences and maintenance fees 2.4 2.4
Insurance costs 0.9 0.9
Depreciation of property, plant and
equipment 1.1 0.8
Communications 0.2 0.2
------------------------------------------------- ----- -----
9 Employee costs
The Group provides a range of benefits to employees, including
annual bonus arrangements, paid holiday arrangements and defined
contribution pension plans.
Short term benefits, including holiday pay and other similar
non-monetary benefits, are recognised as an expense in the period
in which the service is received.
The Group pays fixed pension contributions on behalf of its
employees (defined contribution plans). Once the contributions have
been paid the Group has no further payment obligations. The
contributions are recognised as an expense when they are due.
Amounts not paid are shown in accruals in the balance sheet. The
assets of the plan are held separately from the Group in
independently administered funds.
The Group operates an annual bonus plan for employees. An
expense is recognised in the consolidated statement of
comprehensive income when the Group has a legal or constructive
obligation to make payments under the plan as a result of past
events and a reliable estimate of the obligation can be made.
9 .1 The aggregate remuneration in respect of employees
(including sales employees and executive Directors) was as
follows:
2023 2022
GBPm GBPm
-------------------------- ----- -----
Wages and salaries 9.7 10.2
Social security costs 0.8 0.9
Contributions to pension
plans 1.0 0.9
11.5 12.0
-------------------------- ----- -----
Total salary and other employee costs for the year are
incorporated within the following classifications:
2023 2022
GBPm GBPm
----------------------------------- ----- -----
Administrative and other expenses 10.3 10.9
Origination costs 1.2 1.1
11.5 12.0
----------------------------------- ----- -----
The above information includes Directors' remuneration
(excluding non-executive directors' fees).
9.2 The average number of employees during the year was as follows:
2023 2022
No. No.
---------------------------- ----- -----
Administration 119 136
Distribution and marketing 18 15
IT development 50 38
187 189
---------------------------- ----- -----
10 Taxation
Taxation is based on profits and income for the period as
determined with reference to the relevant tax legislation in the
countries in which the Company and its subsidiaries operate. Tax
payable is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date. Tax is recognised
in the consolidated statement of comprehensive income except to the
extent that it relates to items recognised in equity. Tax on items
relating to equity is recognised in equity.
The corporation tax expense for the Group for 2023 was GBP0.2m
(2022: GBP0.2m). Corporation tax is charged on any profits arising
at the following rates depending on location of the company or
branch:
Isle of Man 0% (2022: 0%)
Republic of Ireland 12.5% (2022: 12.5%)
Japan branch 23.2% (2022: 23.2%)
Labuan 24% (2022: 24%)
The Bahamas 0% (2022: 0%)
2023 2022
GBPm GBPm
--- ----------------------------------------- ----- -----
Current year tax provisions 0.2 0.2
Adjustment to prior year tax provisions - -
---------------------------------------------- ----- -----
0.2 0.2
--------------------------------------------- ----- -----
No deferred tax asset is currently being recorded in relation to
losses arising in Hansard Europe.
There is no material difference between the current tax charge
in the consolidated statement of comprehensive income and the
current tax charge that would result from applying standard rates
of tax to the profit before tax.
11 Earnings per share
2023 2022
----------------------------------------- ------ ------
Profit after tax (GBPm) 5.7 3.6
Weighted average number of shares
in issue (millions) 137.6 137.6
------------------------------------------ ------ ------
Basic and diluted earnings per share
in pence 4.1 2.6
------------------------------------------ ------ ------
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 4.1p per share (2022: 2.6p).
12 Dividends
Interim dividends payable to shareholders are recognised in the
year in which the dividends are paid. Final dividends payable are
recognised as liabilities when approved by the shareholders at the
Annual General Meeting.
The following dividends have been paid by the Group during the
year:
Per share Total Per share Total
2023 2023 2022 2022
p GBPm p GBPm
-------------------------------- ---------- ------ ---------- ------
Final dividend in respect
of previous
financial year 2.65 3.5 2.65 3.6
Interim dividend in respect
of current
financial year 1.80 2.4 1.80 2.5
4.45 5.9 4.45 6.1
-------------------------------- ---------- ------ ---------- ------
The Board has resolved to pay a final dividend of 2.65p per
share on 16 November 2023, subject to approval at the Annual
General Meeting, based on shareholders on the register on 6 October
2023.
13 Intangible assets and property, plant and equipment
Intangible Assets
The historical cost of computer software is the purchase cost
and the direct cost of internal development. Computer software is
recognised as an intangible asset.
2023 2022
GBPm GBPm
------------------- ----- -----
Intangible assets 19.9 13.4
------------------- ----- -----
Amortisation is calculated so as to amortise the cost of
intangible assets, less their estimated residual values, on a
straight-line basis over the expected useful economic lives of the
assets concerned and is included in administration and other
expenses in the consolidated statement of comprehensive income.
The economic lives used for this purpose are:
Computer software 3 to 15 years
------------------ --------------
The increase in computer software relates to capitalised costs
associated with the development of a replacement policy
administration system. The first segment of this development is
expected to be put into use during FY 2024, at which point
amortisation will commence over its estimated expected life.
2023 2022
Computer software GBPm GBPm
----------------------------------------- ---- -------- --------------- ------ ------
Costs as at 1 July 14.1 9.9
Capitalised additions 6.6 4.2
Cost as at 30 June 20.7 14.1
----------------------------------------------- -------- --------------- ------ ------
Accumulated amortisation at 1 July (0.7) (0.7)
Charge for the year (0.1) -
Accumulated amortisation as at 30 June (0.8) (0.7)
------------------------------------------------ -------- ---------- ---------- ------
Net Book Value 19.9 13.4
------------------------------------------------ -------- ---------- ---------- ------
The cost of computer software includes GBP11.2m of externally
generated costs (2022: GBP7.5m) and GBP8.7m of internally generated
costs (2022: GBP6.6m). All amortisation currently relates to
externally generated costs.
Property, plant and equipment
Property, plant and equipment includes both tangible fixed
assets and 'right of use assets' recognised in accordance with IFRS
16 'Leases'.
2023 2022
GBPm GBPm
------------------------------- ----- -----
Property, plant and equipment 0.4 0.8
Right of use assets 2.4 1.9
2.8 2.7
------------------------------- ----- -----
Property, plant and equipment is stated at historical cost less
depreciation and any impairment. The historical cost of property,
plant and equipment is the purchase cost, together with any
incremental costs directly attributable to the acquisition.
Depreciation is calculated so as to amortise the cost of
tangible assets, less their estimated residual values, on a
straight-line basis over the expected useful economic lives of the
assets concerned and is included in administration and other
expenses in the consolidated statement of comprehensive income.
The economic lives used for this purpose are:
Freehold property 50 years
Computer equipment 3 to 5 years
Fixtures & fittings 4 years
-------------------- -------------
Right of use assets are depreciated over the useful life of the
lease.
2023 2022
Property plant and equipment GBPm GBPm
----------------------------------------- ---- -------- -------------- ------
Cost as at 1 July 10.7 10.6
Additions - 0.1
Disposals (0.4) -
Cost as at 30 June 10.3 10.7
----------------------------------------------- -------- -------------- ------
Accumulated depreciation as at 1 July (9.9) (9.9)
Charge for the year - -
Accumulated depreciation as at 30 June (9.9) (9.9)
------------------------------------------------ ------- -------------- ------
Net Book Value 0.4 0.8
------------------------------------------------ ------- -------------- ------
IFRS 16 - Leases
The right-of-use assets for property leases are measured at an
amount equal to the lease liability adjusted by the amount of any
prepaid or accrued lease payments recognised immediately before the
date of initial application, being the commencement date. The
liabilities are measured at the present value of the remaining
lease payments, discounted using an incremental borrowing rate. The
weighted average incremental borrowing rate applied to the lease
liabilities on 30 June 2023 was 7% (2022: 4%).
The Group leases various offices around the world to service its
clients and operations. Rental contracts are typically made for
periods of 1 to 15 years, incorporating break clauses where
applicable. Lease terms are negotiated on an individual basis and
contain differing terms and conditions. The lease agreements do not
impose any covenants.
In determining the lease terms utilised in assessing the
position under IFRS 16, management considers break clauses in
leases, where appropriate. No potential future outflows exist on
leases beyond the break clause (2022: GBP1.6m). During the year the
Group made the decision to change their position on the likelihood
of exercising the break clause for the leases at the Group's head
office. The previous position assumed that these break clauses
would be exercised. The Group now believes that the terms of the
leases have become more favorable in the current high inflation
environment, as well as the amount spent on infrastructure at the
property means it is likely that the leases will continue past
their break clause. As a result, the company has recognised
additions of GBP0.9m in both the right-of-use asset and lease
liability as at 30 June 2023.
Leases (other than those classified as short-term leases or
leases of low-value assets) are recognised as a right-of-use asset
and a corresponding liability at the date at which the leased asset
is available for use by the Group. Each lease payment is allocated
between the liability and a finance cost. The finance cost is
charged over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each
period. The right-of-use asset is depreciated over the shorter of
the asset's useful life and the lease term on a straight-line
basis.
Short-term leases (those with a lease term or useful life of
less than 12 months at inception) and leases of low value assets
(comprising IT-equipment and small items of office furniture) are
recognised on a straight-line basis as an expense in administration
and other expenses in the consolidated statement of comprehensive
income.
The recognition of the right-of-use asset represents an increase
in the property, plant and equipment figure of GBP2.4m (30 June
2022: GBP1.9m). 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
GBP0.1m (30 June 2022: GBP0.1m).
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 year ending 30 June 2023, the Group recognised rental income of
less than GBP0.1m (2022: less than GBP0.1m).
2023 2022
GBPm GBPm
--------------------------------------- ---------- -------
Right of use asset recognised 1 July 1.9 2.4
Additions during the period 0.9 0.1
Depreciation (0.4) (0.6)
Net book value of right of use asset
as at 30 June 2.4 1.9
---------------------------------------- ---------- -------
Lease liability recognised 1 July 2.3 2.7
Additions during the period 0.9 0.1
Lease payments made during the period (0.4) (0.5)
Interest on leases 0.1 -
----------------------------------------- ---------- -------
Lease liability recognised as at 30
June 2.9 2.3
----------------------------------------- ---------- -------
Of which are:
Current lease liabilities 0.2 0.3
Non-current lease liabilities 2.7 2.0
----------------------------------------- ---------- -------
14 Deferred origination costs
Amortisation of deferred origination costs is charged within the
origination costs line in the consolidated statement of
comprehensive income.
Formal reviews to assess the recoverability of deferred
origination costs on investment contracts are carried out at each
balance sheet date to determine whether there is any indication of
impairment. If there is any indication of irrecoverability or
impairment, the asset's recoverable amount is estimated. Impairment
losses are reversed through the consolidated statement of
comprehensive income if there is a change in the estimates used to
determine the recoverable amount. Such losses are reversed only to
the extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of
amortisation where applicable, if no impairment loss had been
recognised.
The amount of deferred origination costs amortised each year is
determined by the estimated lives of the Group's products (note 2).
Reducing the estimated life of the total portfolio by 1 year would
increase the annual amortisation for the next financial year by
GBP1.7m. Increasing the estimated life of the total portfolio by 1
year would reduce the annual amortisation for the next financial
year by GBP1.3m. Offsetting movements would also arise in deferred
income as outlined in note 18.
The movement in value over the financial year is summarised
below.
2023 2022
GBPm GBPm
--------------------------------------------- ------- -------
At beginning of financial year 122.5 125.1
Origination costs incurred and deferred
during the year 8.7 11.3
Origination costs amortised during the year (13.4) (13.9)
--------------------------------------------- ------- -------
117.8 122.5
--------------------------------------------- ------- -------
2023 2022
Carrying value GBPm GBPm
----------------------------------------- ------ ------
Expected to be amortised within one
year 11.9 12.2
Expected to be amortised after one year 105.9 110.3
----------------------------------------- ------ ------
117.8 122.5
----------------------------------------- ------ ------
15 Other receivables
Other receivables are initially recognised at fair value and
subsequently measured at amortised cost, less any provision for
impairment.
2023 2022
GBPm GBPm
----------------------- ----- -----
Commission receivable 1.4 1.2
Other debtors 2.2 1.9
Prepayments 1.2 1.2
4.8 4.3
------------------------ ----- -----
Estimated to be settled within 12
months 4.8 4.3
Estimated to be settled after 12 - -
months
------------------------------------ ---- ----
4.8 4.3
----------------------------------- ---- ----
Due to the short-term nature of these assets the carrying value
is considered to reflect fair value.
16 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks, and other short-term highly liquid investments
with a minimal cost to be converted to cash, typically with
original maturities of three months or less, net of short-term
overdraft positions where a right of set-off exists. In the below
table, Money market funds includes all immediately available cash,
other than specific short-term deposits.
2023 2022
GBPm GBPm
--------------------------------- ----- -----
Money market funds 46.8 54.2
Short-term deposits with credit
institutions 5.4 4.7
--------------------------------- ----- -----
52.2 58.9
--------------------------------- ----- -----
Cash and cash equivalents are recognised on receipt prior to
investment to contract holder funds.
17 Financial liabilities under investment contracts
17.1 Investment contract liabilities, premiums and benefits
paid
17.1.1 Investment contract liabilities
Investment contracts consist of unit-linked contracts written
through subsidiary companies in the Group. Unit-linked liabilities
are measured at fair value by reference to the underlying net asset
value of the Group's unitised investment funds, determined on a bid
basis, at the balance sheet date.
The decision by the Group to designate its unit-linked
liabilities at fair value through profit or loss is to eliminate a
measurement inconsistency that would otherwise arise from measuring
the investments at FVTPL and the contract liabilities at amortised
cost.
17.1.2 Investment contract premiums
Investment contract premiums are not included in the
consolidated statement of comprehensive income but are reported as
deposits to investment contracts and are included in financial
liabilities in the balance sheet. On existing business, a liability
is recognised at the point the premium falls due. The liability for
premiums received on new business is deemed to commence at the
acceptance of risk.
17.1.3 Benefits paid
Withdrawals from policy contracts and other benefits paid are
not included in the consolidated statement of comprehensive income
but are deducted from financial liabilities under investment
contracts in the balance sheet. Benefits are deducted from
financial liabilities and transferred to amounts due to investment
contract holders based on notifications received, when the benefit
falls due for payment or, on the earlier of the date when paid or
when the contract ceases to be included within those
liabilities.
17.2 Movement in financial liabilities under investment
contracts
The following table summarises the movement in liabilities under
investment contracts during the year:
2023 2022
GBPm GBPm
---------------------------------------- -------- --------
Deposits to investment contracts 116.3 130.0
Withdrawals from contracts and charges (147.7) (158.4)
Change in provisions for investment
contract liabilities 40.6 (103.5)
----------------------------------------- -------- --------
Movement in year 9.2 (131.9)
At beginning of year 1,092.3 1,224.2
----------------------------------------- -------- --------
1,101.5 1,092.3
----------------------------------------- -------- --------
2023 2022
GBPm GBPm
-------------------------------------- -------- --------
Contractually expected to be settled
within 12 months 43.4 32.3
Contractually expected to be settled
after 12 months 1,058.1 1,060.0
-------------------------------------- -------- --------
1,101.5 1,092.3
-------------------------------------- -------- --------
The change in provisions for investment contract liabilities
includes dividend and interest income and net realised and
unrealised gains and losses on financial investments held to cover
financial liabilities. Dividend income, interest income and gains
and losses are accounted for in accordance with note 6.
17.3 Investments held to cover liabilities under investment
contracts
The Group classifies its financial assets into the following
categories: financial investments and trade receivables. Financial
investments consist of units in collective investment schemes,
equity securities, fixed income securities and deposits with credit
institutions. Collective investment schemes, equity securities and
fixed income securities are designated at fair value through profit
or loss. Deposits with credit institutions are designated at
amortised cost.
The decision by the Group to designate its financial investments
at fair value through profit or loss reflects the fact that the
investment portfolio is managed, and its performance evaluated, on
a fair value basis.
The Group recognises purchases and sales of investments on trade
date. Investment transaction costs are written off in
administration expenses as incurred.
All gains and losses derived from financial investments,
realised or unrealised, are recognised within investment income in
the consolidated statement of comprehensive income in the period in
which they arise.
The value of financial assets at fair value through profit or
loss that are traded in active markets (such as trading securities)
is based on quoted market prices at the balance sheet date. The
quoted market price for financial assets held by the Group is the
current bid price. Investments in funds are valued at the latest
available net asset valuation provided by the administrators or
managers of the funds and companies, unless the Directors are aware
of good reasons why such valuations would not be the most
appropriate or indicative of fair value. Where necessary, the Group
uses other valuation methods to arrive at the stated fair value of
its financial assets, such as recent arms' length transactions or
reference to similar listed investments.
Loans and receivables are financial assets with fixed or
determinable payments that are not quoted on an active market.
Loans and receivables consist, primarily, of contract fees
receivable, long-term cash deposits (i.e. with an original maturity
duration in excess of three months) and cash and cash
equivalents.
The following investments, 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.
2023 2022
GBPm GBPm
-------------------------------------- -------- --------
Equity securities 52.0 55.7
Investments in collective investment
schemes 915.4 903.4
Fixed income securities, bonds and
structured notes 58.7 50.6
Deposits and money market funds 77.4 84.4
Total assets 1,103.5 1,094.1
Other payables (2.0) (1.8)
----------------------------------------- --------
Financial investments held to cover
financial liabilities 1,101.5 1,092.3
--------
The other receivables and other payables fair value approximates
amortised cost.
17.4 Amounts due to investment contract holders
Where financial liabilities under investment contracts mature or
are redeemed by contact holders, such amounts payable are recorded
as amounts due to investment contract holders.
18 Deferred income
Fees charged for services related to the management of
investment contracts are recognised as revenue as the services are
provided. Initial fees which exceed the level of recurring fees and
relate to the future provision of services are deferred. These are
amortised over the anticipated period in which services will be
provided. The recognition of balances in the deferred income
reserve is based on actuarial assumptions regarding the estimated
life of each policy. These actuarial assumptions are complex in
nature and are subject to estimation uncertainty (note 2). The
actuarial assumptions are reviewed regularly by the Appointed
Actuary.
The amount of deferred income amortised each year is determined
by the estimated lives of the Group's products. Reducing the
estimated life of the total portfolio by 1 year would increase the
annual amortisation for the next financial year by GBP2.2m.
Increasing the estimated life of the total portfolio by 1 year
would reduce the annual amortisation for the next financial year by
GBP1.7m. Offsetting movements would also arise in deferred income
as outlined in note 14.
The movement in value of deferred income over the financial year
is summarised below.
2023 2022
GBPm GBPm
At beginning of financial year 145.1 142.5
Income received and deferred
during the year 16.5 19.2
Income amortised and recognised
in contract fees during the
year (-16.8) (-16.6)
144.8 145.1
2023 2022
Carrying value GBPm GBPm
Expected to be amortised within
one year 15.1 14.8
Expected to be amortised after
one year 129.7 130.3
144.8 145.1
19 Other payables
Other payables are initially recognised at fair value and
subsequently measured at amortised cost. They are recognised at the
point where service is received but payment is due after the
balance sheet date.
2023 2022
GBPm GBPm
Commission payable 1.4 2.0
Other creditors and accruals 9.5 9.8
Lease liabilities of which:
Current lease liabilities 0.2 0.3
Non-current lease liabilities 2.7 2.0
13.8 14.1
20 Provisions
Provisions represent amounts to settle a number of the claims
referred to in Note 26 '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.
2023 2022
GBPm GBPm
Settlement provision as at 1
July 0.2 0.4
Additional provisions made in - -
the period
Released from the provision for
settlements (0.1) (0.2)
Settlement provision as at 30
June 0.1 0.2
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.
21 Capital management
It is the Group's policy to maintain a strong capital base in
order to:
-- satisfy the requirements of its contract holders, creditors and regulators.
-- maintain financial strength to support new business growth and create shareholder value.
-- match the profile of its assets and liabilities, taking
account of the risks inherent in the business; and
-- generate operating cash flows to meet dividend requirements.
Within the Group each subsidiary company manages its own
capital. Capital generated in excess of planned requirements is
returned to the Company by way of dividends. Group capital
requirements are monitored by the Board.
The Company monitors capital on two bases:
-- the total shareholder's equity, as per the balance sheet; and
-- the capital requirement of the relevant supervisory bodies,
where subsidiaries are regulated.
The Group's policy is for each company to hold the higher
of:
-- the Company's internal assessment of the capital required; or
-- the capital requirement of the relevant supervisory body, where applicable.
There has been no material change in the Group's management of
capital during the period. The Group continued to perform
additional modelling around risks arising from the ongoing
Russia/Ukraine conflict and global economic conditions, and to give
consideration to emerging market practice and regulatory
expectations around capital conservation. All regulated entities
within the Group exceed significantly the minimum solvency
requirements at the balance sheet date.
The Group's lead regulator, the Isle of Man FSA, monitors
capital requirements for the Group as a whole. The insurance
subsidiaries are directly supervised by their local regulators. The
lead regulator's approach to the measurement of capital adequacy is
primarily based on monitoring the relationship of the Solvency
Capital Requirement ('SCR') to regulatory capital. All regulated
entities within the Group exceed the minimum solvency requirements
at the balance sheet date. The capital held within Hansard Europe
is considered not to be available for dividend to Hansard Global
plc until such time as the legal cases referred to in note 26 are
substantially resolved.
22 Share capital
2023 2022
GBPm GBPm
Authorised:
200,000,000 ordinary shares of 50p 100.0 100.0
Issued and fully paid:
137,557,079 (2022: 137,557,079) ordinary
shares of 50p 68.8 68.8
No shares (2022: nil) were issued or bought back in the
year.
23 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.
2023 2022
GBPm GBPm
Merger reserve (48.5) (48.5)
Share premium 0.1 0.1
Share save reserve 0.1 0.1
Reserve for own shares held
within EBT (0.2) -
(48.5) (48.3)
Included within other reserves is an amount representing 557,000
(2022: 12,000) ordinary shares held by the Group's employee benefit
trust ('EBT') which were acquired at a cost of GBP0.2m (see note
24). 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.
24 Equity settled share-based payments
The Company has established a number of equity-based payment
programmes for eligible employees. The fair value of expected
equity-settled share-based payments under these programmes is
calculated at date of grant using a standard option-pricing model
and is amortised over the vesting period on a straight-line basis
through the consolidated statement of comprehensive income. A
corresponding amount is credited to equity over the same
period.
At each balance sheet date, the Group reviews its estimate of
the number of options expected to be exercised. The impact of any
revision in the number of such options is recognised in the
consolidated statement of comprehensive income so that the charge
to the consolidated statement of comprehensive income is based on
the number of options that 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.
24.1 SAYE program
This is a standard scheme approved by the Revenue authorities in
the Isle of Man that is available to all employees where
individuals may make monthly contributions over three or five years
to purchase shares at a price not less than 80% of the market price
at the date of the invitation to participate.
At the date of this report, the following options remain
outstanding under each tranche:
2023 2022
No. of No. of
Scheme year options Options
2017 - 20,717
2018 29,031 58,062
-------
29,031 78,779
-------
A summary of the transactions in the existing SAYE programs
during the year is as follows:
2023 2022
Weighted Weighted
average Average
No. of exercise No. of Exercise
options price options price (p)
(p)
Outstanding at the start
of year 78,779 65 290,996 63
Granted - - - -
Exercised - - - -
Forfeited (49,748) 66 (212,217) 62
--------- -------- ---------
Outstanding at end of year* 29,031 62 78,779 65
--------- -------- ---------
* None of these options are exercisable as at 30 June 2023.
There were no new options granted during the current financial
year.
24.2 Incentive Plan Employee Benefit Trust
An Employee Benefit Trust was established in February 2018 to
hold shares awarded to employees as an incentive on a deferred
basis. Shares awarded under the scheme are purchased by the Trust
in the open market and held until vesting. Awards made under the
scheme would normally vest after three years.
2023 2022
No. of No. of
Share Awards Shares Shares
Outstanding at start of period - -
Granted 631,446 -
Forfeited (29,762) -
Vested - -
------
Outstanding at end of period 601,684 -
------
The Trust was funded with a loan of GBP446,000 during 2018 and
as at 30 June 2023 the Trust held 557,000 shares (2022: 12,000).
During the year the Trust was funded with a further loan of
GBP187,000. As at 30 June 2023, the outstanding balance on the loan
was GBP199,000 (30 June 2022: GBP12,000).
2023 2022
No. of No. of
Shares Held by the Trust Shares Shares
Outstanding at start of period 12,000 12,000
Granted 545,000 -
Forfeited - -
Vested - -
-------
Outstanding at end of period 557,000 12,000
-------
During the period the expense arising from share-based payment
transactions was GBP0.05m (2022: GBPnil).
25 Related party transactions
25.1 Intra-group transactions
Various subsidiary companies within the Group perform services
for other Group companies in the normal course of business. The
financial results of these activities are eliminated in the
consolidated financial statements.
25.2 Key management personnel compensation
Key management consists of 20 individuals (2022: 21), being
members of the Group's Executive Committee, executive Directors of
direct subsidiaries of the Company and the non-executive Directors
of both the Group and subsidiary companies.
The aggregate remuneration paid to key management during the
year-ended 30 June was as follows:
2023 2022
GBPm GBPm
Short-term employee benefits 2.5 2.3
Post-employment benefits 0.2 0.3
Total 2.7 2.6
There were no outstanding amounts as at 30 June 2023 (2022:
nil).
The total value of investment contracts issued by the Group and
held by key management is nil (2022: nil).
25.3 Transactions with controlling shareholder
Dr L S Polonsky is regarded as the controlling shareholder of
the Group, as defined by the Listing Rules of the Financial Conduct
Authority. In the year ending 30 June 2023 there were no
transactions with Dr Polonsky (2022: nil).
25.4 Incentive Plan Employee Benefit Trust
An Employee Benefit Trust was established in February 2018 to
hold shares awarded to employees as an incentive on a deferred
basis. The Trust was funded with a loan of GBP446,000 during 2018,
and a further loan of GBP187,000 was made during the year. As at 30
June 2023 the Trust held 557,000 shares (2022: 12,000). No awards
vested in the year ended 30 June 2023.
26 Contingent liabilities
26.1 Litigation
The Group does not and has never given any investment advice.
Investment decisions are taken either by the contract holder
directly or through a professional intermediary appointed by the
contract holder. Contract holders bear the financial risk relating
to the investments underpinning their contracts, as the policy
benefits are linked to the value of the assets. Notwithstanding the
above, financial services institutions are frequently drawn into
disputes in cases where the value and performance of assets
selected by or on behalf of contract holders fails to meet their
expectations. At the balance sheet date a number of fund structures
remain affected by liquidity or other issues that hinder their
sales or redemptions on normal terms with a consequent adverse
impact on policy transactions.
As reported previously, the Group has been subject to a number
of complaints in relation to the selection and performance of
assets linked to contracts. The Group has been served with a number
of writs arising from such complaints and other asset-related
issues. All such writs relate to historic business written prior to
the closure to new business of Hansard Europe in 2013.
As at 30 June 2023, the Group had been served with cumulative
writs with a net exposure totalling EUR26.1m, or GBP22.4m in
sterling terms (30 June 2022: EUR24.6m / GBP21.2m) arising from
contract holder complaints and other asset performance-related
issues. The primary reason for the increase in contingent
liabilities relates to a case which was previously defended
successfully, being subject to a new claim.
During the year, the Group successfully defended 15 cases with
net exposures of approximately GBP1.9m, 14 of which may be appealed
by the plaintiffs (2022: successfully defended 24 cases with net
exposures of GBP3.2m). These successes continue to affirm
confidence in the Group's legal arguments.
Our policy is to maintain contingent liabilities even where we
win cases in the court of first instance if such cases have been
subsequently appealed. This includes our largest single case in
Belgium.
We have previously noted that we expect a number of our larger
claims to ultimately be covered by our Group insurance cover.
During 2023 we recorded GBP0.1m in total recoveries during the year
in relation to costs paid by the Group (2022: GBP0.5m). We expect
such reimbursement to continue during the course of that
litigation.
We estimate insurance coverage against the GBP22.4m of
contingent liabilities referred to above to be in the range of
GBP3m to GBP10m.
While it is not possible to forecast or determine the final
results of pending or threatened legal proceedings, based on the
pleadings and advice received from the Group's legal
representatives, the Directors believe that the Group has strong
defences to such claims. Notwithstanding this, there may be
circumstances where in order to avoid the expense and distraction
of protracted litigation the Board may consider it in the best
interests of the Group and its shareholders to reach a commercial
resolution with regard to certain of these claims. Such cases
totalled less than GBP0.1m (2022: less than GBP0.1m) during the
period. A provision of GBP0.1m (2022: GBP0.2m) has been provided
where based on past experience it is expected that future
settlements may be reached. Where an established pattern of
settlement is established for any grouping of claims, a provision
for expected future settlements is made in line with IAS 37. This
is outlined in Note 20.
It is not possible at this time to make any further estimates of
liability.
Between 30 June 2023 and the date of this report, there have
been no material developments.
26.2 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.
27 Foreign exchange rates
The Group's functional currency is pounds sterling, being the
currency of the primary economic environment in which the Group
operates. The Group's presentational currency is also pounds
sterling.
Foreign currency transactions are translated into sterling using
the applicable exchange rate prevailing at the date of the
transactions. Monetary assets and liabilities denominated in
foreign currencies are translated into sterling at the rates of
exchange prevailing at the balance sheet date, and the gains or
losses on translation are recognised in the consolidated statement
of comprehensive income.
Non-monetary assets and liabilities that are held at historical
cost are translated using exchange rates prevailing at the date of
transaction; those held at fair value are translated using exchange
rates ruling at the date on which the fair value was
determined.
The closing exchange rates used by the Group for the conversion
of significant consolidated balance sheet items to sterling were as
follows:
2023 2022
US Dollar 1.27 1.21
Japanese Yen 184 165
Euro 1.17 1.16
28 Events after the reporting period
This report for the year ended 30 June 2023 was approved for
issue on 27 September 2023. No material events have occurred
between the reporting date and the issue date that require
disclosure under IAS 10.
29 Annual report
Copies of both this announcement and the annual report and
accounts will be available to the public at the Company's
registered office at 55 Athol Street, Douglas, Isle of Man, IM99
1QL and through the Company's website at www.Hansard.com .
Responsibility statement of the directors in respect of the
annual financial report
The Directors confirm to the best of their knowledge that:
-- The financial statements have been prepared in accordance
with UK Adopted International Accounting Standards ("IFRSs") and
give a true and fair view of the assets, liabilities, financial
position and profit for the Company and the undertakings included
in the consolidation as a whole as required by the Disclosure and
Transparency Rules Chapter 4.2.4; and
-- Pursuant to Disclosure and Transparency Rules Chapter 4, the
Directors' report of the Company's annual report and accounts
includes a fair review of the development and performance of the
business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties faced by the
business.
On behalf of the Board
G Sheward T Morfett
Director Director
28 September 2023
OTHER INFORMATION
Risk Based Solvency Capital
A) Risk Based Solvency capital position
The Group is subject to the Isle of Man Insurance (Group
Supervision) Regulations 2019.
It has adopted the default consolidated accounts method ("Method
1") to calculate the Group Solvency Capital Requirement ("SCR") and
Own Funds as required by these regulations. The solvency position
as 30 June 2023 has been reported below on this basis.
The Group shareholder Risk Based Solvency surplus at 30 June
2023 was GBP44.6m (30 June 2022: GBP50.7m;), before allowing for
payment of the 2023 final ordinary dividend.
All Risk Based Solvency and related data presented in this
section is subject to change prior to submission to regulatory
authorities.
30 June 30 June
Group Risk Based Solvency 2023 2022
capital position Total Total
GBPm GBPm
Own Funds 124.9 129.1
Solvency Capital Requirement 80.3 78.4
Free assets 44.6 50.7
Solvency ratio (%) 156% 165%
All Own Funds are considered Tier 1 capital.
The following compares Own Funds as at 30 June 2023 and 30 June
2022:
30 June 30 June
2023 2022
Own Funds Own Funds
GBPm GBPm
Value of In-Force 124.4 128.5
Risk Margin (24.9) (26.7)
Net Worth 25.4 27.3
Total 124.9 129.1
B) Analysis of movement in Group Solvency surplus
A summary of the movement in Group Solvency surplus from
GBP50.7m at 30 June 2022 to GBP44.6m at 30 June 2023 is set out in
the table below.
GBPm
Risk Based Solvency surplus at 30 June 2022 50.7
Operating experience (7.4)
Investment performance 4.6
Changes in assumptions 5.3
Impact of dividends paid (5.4)
Foreign exchange (3.2)
Risk Based Solvency surplus at 30 June 2023 44.6
The movement in Group Risk Based Solvency surplus the 2023
financial year was the result of dividends paid, operating
experience and negative exchange rate movements, offset by changes
in assumptions and positive investment market performance.
New business written had a negative GBP4.1m impact on solvency
surplus for the period.
C) Analysis of Group Solvency Capital Requirement
The analysis of the Group's Solvency Capital Requirement ("SCR")
by risk type is as follows:
Split of the Group's Solvency Capital Requirement * 30 June 30 June
2023 2022
Risks % of SCR % of SCR
Market
Equity 44% 43%
Currency 14% 11%
Insurance
Lapse 50% 50%
Expense 17% 20%
Default 2% 1%
Operational 18% 19%
* Figures are the capital requirements prior to diversification
benefits expressed as a percentage of the final diversified
SCR.
D) Reconciliation of IFRS equity to Group Risk Based Solvency
Shareholder Own Funds
30 June 30 June
2023 2022
GBPm GBPm
IFRS shareholders' equity 21.8 22.2
Elimination of DOC (117.8) (122.5)
Elimination of DIR 144.8 145.1
Value of In-Force 124.4 128.5
Liability valuation differences* (3.5) (4.1)
Impact of risk margin (24.9) (26.7)
Other** (19.9) (13.4)
Risk Based Solvency Shareholder Own Funds 124.9 129.1
* Liability valuation differences relate to additional
provisions made for risk-based capital purposes, notably for
contingent liabilities.
** Other is related to Intangible Assets not recognised on the
solvency balance sheet.
E) Sensitivity analysis
The sensitivity of the Own Funds of the Group and of the Group's
life insurance subsidiaries to significant changes in market
conditions is as follows:
30 June 30 June
2023 2022
Group Group
GBPm GBPm
Own Funds 124.9 129.1
Impact of:
10% instantaneous fall in equity markets (8.6) (8.0)
100 basis points decrease in interest rates (0.8) (1.2)
10% increase in expenses (7.4) (8.4)
1% increase in expense inflation (5.3) (6.0)
10% strengthening of sterling (11.5) (12.0)
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END
FR FZGZLGRKGFZM
(END) Dow Jones Newswires
September 28, 2023 06:42 ET (10:42 GMT)
Hansard Global (LSE:HSD)
過去 株価チャート
から 11 2024 まで 12 2024
Hansard Global (LSE:HSD)
過去 株価チャート
から 12 2023 まで 12 2024
