Delivering on our Strategy
September 2014
Disclaimer
This presentation does not constitute an invitation to subscribe for or otherwise to acquire or dispose of shares in Hansard Global plc. This presentation may contain forward-looking statements with respect to certain of the plans and current goals and expectations relating to the future financial conditions, business performance and results of Hansard Global plc. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of Hansard Global plc, including amongst other things, Hansard Global’s future profitability, competition with the markets in which the Company operates and its ability to retain existing intermediary clients and win new intermediary clients, changes in economic conditions generally or in the life assurance, savings and investment products sectors, terrorist and geopolitical events, changes in legal and regulatory regimes and practice, the ability of its owned and licensed technology to continue to service developing demands, changes in taxation regimes, exchange rate fluctuations, and volatility in the Company’s share price. As a result, Hansard Global’s actual future financial condition, business performance and results may differ materially from the plans, goals and expectations expressed or implied in these forward-looking statements. Hansard Global undertakes no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules). No statement in this presentation is intended to be a profit forecast
or be relied upon as a guide to future performance. In particular, past performance is no guide to future performance.
Introduction & Overview
Results – FY 2014
Our Business Strategy
New Business Plans
Summary
Questions 3
Meet the team Introduction & Overview
Gordon Marr Chief Executive Officer
Vince Watkins Chief Financial Officer
Graham Morrall Global Sales & Marketing Director
4
Overview – FY 2014 Introduction & Overview Launch of new business strategies - April 2014
Strongly positive cash flows •
Operating cash surplus of £37.8m (2013: £41.4m)
HIL New Business of £83.0m (PVNBP) (2013: £172.1m) •
Suspension of distribution relationship in Japan
•
Reduced new business margins of 4.0% (2013: 12.0%) driven by low volumes
•
EEV operating loss of £6.6m (2013: 11.7m profit)
Settled long-outstanding litigation (£0.7m) (2013: £1.6m)
5
Overview – FY 2014 - continued Introduction & Overview
Underlying IFRS profit of £14.7m (2013: £12.4m) before CEC provision
Increased final dividend of 5.0p per share in line with guidance Revised Operating Model implemented successfully for Hansard Europe
Board composition refreshed
6
New Business – Japan distribution Introduction & Overview Japanese Distributor Distributor suspended writing new business in October 2013 – regulatory breach
New business introduced - £10m PVNBP in FY 2014 (2013: £74m) Value of in-force at 30 June 2014 - £13m (2013: £24m) HIL has suspended taking business from Japanese residents
FY 2015 Objectives Policyholder retention - lapses during FY 2014 in line with other business Regulatory clarification
7
Chargeable Event Certificates Introduction & Overview Maximum estimated liability – £5m •
Compensation to HMRC on “tax lost” basis based on last 6 tax years
•
Estimated liability includes costs
•
Settlement discussions under way – technical issues to resolve
•
Liability is fully provided for
Preventative action •
Independent comprehensive data review
•
Control Function Structure review underway
•
Overseen by Audit Committee
8
Hansard Europe Introduction & Overview
Revised Operating Model •
Administration transferred to IOM
•
Regulatory control and litigation management in Dublin
•
Cash generating and capital-efficient model
Capital •
Surplus capital at 30 June 2014 – £13.4m
•
Assumed restriction on dividend distributions for estimated 3 years
Litigation •
Settlements of £0.7m in year (c.30% in value of writs served)
•
Fund performance issues
•
Outstanding writs total net £5.2m - Belgium, Germany, Italy and Madoff
9
Introduction & Overview
Results – FY 2014
Our Business Strategy
New Business Plans
Summary
Questions 10
Results – Full Year 2014
11
Summary Results – FY 2014 Results – FY2014 FY 2014
FY 2013
New business sales – Regular premiums * New business sales – Single premiums * New business margin Operating cash surplus Underlying IFRS profit after tax IFRS profit after tax
£63.7m £19.3m 4.0% £37.8m £14.7m £8.3m
£151.0m £21.1m 12.0% £41.4m £12.4m £10.4m
EEV Operating (loss) / profit after tax
(£6.6m)
£11.7m
5.00p
4.75p
FY 2014 £204m £944m
FY 2013 £226m £1,028m
Final dividend per share
European Embedded Value Assets Under Administration
*New business sales for FY 2013 have been restated to reflect closure of Hansard Europe to new business from 30 June 2013
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Profitable New Business Results – FY 2014
FY 2014
FY 2013*
£m
£m
Regular premiums
63.7
151.0
Single premiums
19.3
21.1
PVNBP
83.0
172.1
New Business Margin (PVNBP basis, after tax)
4.0%
12.0%
IRR of New Business sales in the year
6.7%
>15%
Present Value of New Business Premiums
Reductions in new business margin and IRR in FY 2014 reflect impact of reduced sales volumes
*PVNBP in FY 2013 has been restated to reflect the closure of Hansard Europe to new business
13
Positive Operating Cash Flows Results – FY 2014 50
FY 2014
FY 2013
£m
£m
37.8
41.4
20
1.0
1.6
10
38.8
43.0
0
(15.4)
(28.8)
Corporation tax (paid) / received
(0.2)
0.2
Capital expenditure
(1.4)
(0.6)
Net Cash inflow before dividends
21.8
13.8
(11.2)
(15.5)
10.6
(1.7)
Operating cash surplus Interest and other income Cash inflow
Operating cash surplus at year ended 30 June 37.8
£m
40 30
2010
Dividends paid Net Cash flow for the year
2011
2012
2013
2014
Shareholder cash at 30 June
£m
Investment in new business
90 80 70 60 50 40 30 20 10 0
78.5
2010
2011
2012
2013
2014
Cash flows support investment in profitable contracts and dividends
14
Abridged Income Statement - IFRS Results – FY 2014 FY 2014
FY 2013
£m
£m
55.2
52.8
0.2
2.2
55.4
55.0
Origination costs
(21.2)
(21.2)
Administrative expenses before settlements and discontinued activities
(19.5)
(21.1)
14.7
12.7
(6.4)
(2.0)
8.3
10.7
-
(0.3)
8.3
10.4
Fees and commissions Investment and other income Increased levels of fee income and reduced underlying expenses. CEC estimated liability of £5m, litigation settlements of £0.7m and Hansard Europe new business closure costs of £0.7m
CEC settlement, litigation settlements and discontinued activities Profit for the period before taxation Tax Profit for the period
15
Strong IFRS Balance Sheet Results – FY 2014
Other assets Shareholder cash and bank deposits Total assets
FY 2013 £m
140
123.9
131.0
100
7.3
7.8
78.5
67.2
209.7
206.0
123.9
120
£m
Deferred origination costs
Deferred Origination Costs at 30 June
FY 2014 £m
80 60 40 20 0 2010
Other payables Net assets
141.2
137.6
31.6
28.6
172.8
166.2
36.9
39.8
2012
2013
2014
Deferred Income at 30 June 145
141.2
140
£m
Deferred income
2011
135 130
125
Shareholders’ Equity
36.9
39.8
120 115 2010
2011
2012
2013
2014
Continued investment in profitable contracts – at lower margins
16
Resilient EEV Balance Sheet Results – FY 2014
EEV Balance Sheet as at 30 June
Value of Future Profits
150.4
FY 2013 £m 20.0 24.6 44.6 181.1
300
£m
Free surplus Required Capital Net Worth
FY 2014 £m 28.3 25.1 53.4
250 200 150
53.4
Net Worth
100
VIF 150.4
50
European Embedded Value
203.8
225.7
0 2010
2011
2012
2013
2014
Fast conversion of VIF to cash – 50% will convert within 5 years Deferral of dividends from Hansard Europe for estimated 3 years – Required Capital
17
EEV return impacted by new business shortfall Results – FY 2014
EEV return driven by new business profit and assumption changes. Experience variances include £5m for estimated CEC liability.
FY 2014 £m
FY 2013 £m
New business profit
3.3
22.5
Expected return
1.5
1.5
Experience variances
(6.7)
(5.5)
Assumption and other changes
(4.7)
(6.8)
EEV Operating loss after tax
(6.6)
11.7
Investment return variances
(8.2)
7.9
4.1
(2.6)
(10.7)
17.0
Economic assumption changes EEV loss after tax
18
Our Business Strategy
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Strategic objective Our Business Strategy
To add significant scale to the business, on a more diversified basis, through organic growth at acceptable levels of risk & profitability
To be the preferred choice of distributors when recommending international savings and investment products to their clients
20
Strategic objectives Our Business Strategy
More long-term relationships with distributors
Excellent customer service
Motivated & engaged workforce
Better value For Customers
A more visible profile in the market
Market leading online systems
21
New Business Plans
22
More long-term relationships with distributors
Maintain and grow local distribution • Brazil • Russia
Grow new Distribution Channels
Regional Development Focus
• Expatriate IFA • Insurance Companies • HNW Banks
•Latin America •Asia •Middle East & Africa •Europe
Business Acceptance • Continue nonadmitted • Increase admitted capability
23
More long-term relationships with distributors New Business Plans
Rebuilding Distribution
Rebuilding Sales Team Regional Round Up – diversification and risk reduction
Marketing and Proposition focus in support of new business
24
More long-term relationships with distributors Our Business Strategy New business in 2013 (excluding Japan) was introduced by 71 active* brokers
In 2014 we have added 33 brand new Terms Of Business with networks – representing over 200 brokers to our available distribution
North Asia Europe
X 6 TOB
X 6 TOB
South East Asia
X 8 TOB Latin America
X 3 TOB
Middle East/Africa
X 10 TOB
*Active brokers means all brokers that produced more than £10k NICC
25
More long-term relationships with distributors Our Business Strategy
New team and new segmented distribution base
North Asia
• • • •
South East Asia
• Malaysia • Expatriate
Middle East & Africa
• NRI • Expatriate • Arab
Latin America
• Local Brazil • Local other countries • Expatriate
Europe
China Western Expatriate Japanese Expatriate Korea
• Worldwide Expatriate • Russia and Eastern European States
26
Summary
27
Summary Strategic plans being implemented Extending distribution potential in target markets •
33 new Terms of Business
•
Over 200 brokers on the ground
•
Larger networks, longer leadtimes
Settled long-outstanding litigation Strongly positive cash flows Underlying IFRS profit of £14.7m (2013: £12.4m) before CEC provision of £5.0m
Increased final dividend of 5.0p per share in line with guidance
Q&A
29
Appendix
FINANCIALS
30
Appendix
BUSINESS MODEL
31
Business Model
INTERNATIONAL POLICYHOLDERS
Client Funds
Hansard OnLine
INTERNATIONAL NETWORK OF INTERMEDIARIES
Investment within a Hansard life assurance wrapper Hansard reinsures the life insurance risk
Client Funds
Hansard OnLine
High net worth, mass affluent and expatriate segments
Hansard OnLine supports IFA / policyholder needs
IFAs / Private Banks / Other Financial Institutions
Policy retention drives fees and commissions receivable £0.94bn AuA at FY 2014 (FY 2013: £1.03bn)
UNDERLYING INVESTMENTS
32