Hansard Global's income attractions

Hansard Global is obviously doing something right because, despite the tough economic climate, business is rolling in. The company provides long-term savings plans for rich people, or more specifically, investment products within a life assurance wrapper, which is usually a tax-efficient way of investing for high tax payers. And, given the current volatility in financial markets, there is a lot of people looking for a relatively safe place to put their money. Indeed, the present value of new business premiums jumped by 37 per cent in the first nine months of the financial year, and profit margins on new business widened from 6.9 per cent to a sector-leading 8 per cent. Then there is the dividend, which currently generates a prospective 8 per cent yield; and the shares are still trading below their underlying net asset value.

Although Hansard is based in the Isle of Man and in Dublin and its shares are listed in London, it doesn't do any business in the UK, mainly because competition is too fierce. Nor does it operate in the US because its bosses think that market has too much regulation and too many lawyers. Most of its customers come from South America, the Middle East and Africa.

True, basic pre-tax profits were a little lower in the nine months to the end of March - down from £13.5m to £12.9m - but this was after taking into account extra spending to enhance the online service and streamline the administrative processes; in addition, there were extra costs relating to meeting regulatory requirements. However, on an underlying basis, operating profits rose 39 per cent in the first nine months to £13.9m.

So what is so attractive about Hansard Global? Partly, it's down to the business model that uses 540 independent intermediaries who are paid a commission to promote Hansard products. These agents work with the company primarily though its IT portal, Hansard Online, which gives them an easy-to-use sales and administrative tool. More than 98 per cent of new business is generated by intermediaries with access to the portal. For Hansard, this means a very lean cost base as it does not need a string of expensive overseas offices.

Of course, Hansard Global is not immune to global economic developments, and any significant deterioration in financial markets may scare off some customers and make others wary of putting new business Hansard's way. However, the group is well placed to meet such a deterioration. It has no debt and a useful cash pile of £77m. Meanwhile, its aggregate minimum regulatory margin is covered around 12.7 times by the group's capital resources.