Half Yearly Report

http://www.rns-pdf.londonstockexchange.com/rns/0280A_1-2015-9-23.pdf 

Half Yearly Report

Pro Global Insurance Solutions plc

Unaudited interim results for the six months ended 30 June 2015

Pro Global Insurance Solutions plc (the "Company" or "Pro") today announces unaudited interim results for the six months ended 30 June 2015.

Pro is a specialist outsourcing and consulting service provider to the global insurance and reinsurance industry.

Highlights of interim results

• Delivery of "Client First" strategy on track

• An increase of 7% in revenue over the same period in 2014

• A reduction of 7% in expenses over the same period in 2014

Group result from continuing operations is a profit of £0.4 million which compares to a loss of £1.2 million in H1 2014.

The key strategic goals of Pro's "Client First" strategy, as an independent services company, are:

• To be the number one specialist service provider addressing complex operational needs of global insurers and reinsurers; and

• To achieve annual revenue of £60 million at a sustainable net margin of 15% in the medium term.

While 2014 was a year of transition, Pro views 2015 as a year of investment in growth and future value creation. The Pro brand, as an independent service entity, is gaining recognition in the market attracting new clients and talent. The Company is currently pursuing some significant opportunities.

Pro is well positioned to capture opportunities created by ongoing change in the global insurance and reinsurance markets, driven by regulatory, capital, and pricing pressures. Pro invests in innovation and solving client's problems of the future, e.g., Pro's STRIPE reinsurance trading platform is gaining increasing recognition in the market.

Pro also announces appointment of Andrew Donnelly, previously Group Financial Controller, as Interim CFO based in the UK. Andrew Donnelly succeeds Paul Mooney, who as the CFO has led Pro's finance function since demerger and has put in place an effective succession plan.

Artur Niemczewski, CEO of Pro Global Insurance Solutions Plc, commented: "The Pro team has a single-minded focus on delivering the "Client First" strategy. We drive profitable growth, improve efficiencies, and lift Pro's position in the market. Today's results are a positive step on that journey."

Enquiries:

 __________________________________________________________________________

Notes to Editors

About Pro plc

Pro plc is a specialist in the provision of operational outsourcing and consulting services, focusing solely on the global insurance and reinsurance industry. Our mission is to create value for our clients at each stage of their operations, by enabling them to focus on what they do best and helping them improve their operations. Our core purpose is to be the trusted delivery partner for the operations that matter to our clients.

Pro plc operates across the entire spectrum of client needs, from market entry to exit; from live to legacy business. We are best known for our ability to manage the operations that matter most to our clients and have been involved with some of the biggest and most complex assignments in the market. Examples include a cost reduction programme for a global reinsurer through centralisation of its operations from 15 to 2 locations and the management of over 25 legacy portfolios with collective liabilities in excess of $5bn.

 We add value in four main areas:

• Risk, Audit and Compliance: internal and external audits including peer reviews and cover holder audits; providing risk management and compliance frameworks to ensure compliance within a changing regulatory environment

• Operational consulting: helping improve the efficiency and effectiveness of client operations and manage major change

• Technical outsourcing: providing underwriting, claims and technical accounting support to complement internal teams; client sectors include risk carriers, brokers and MGAs

• Legacy solutions: managing discontinued business through outsourcing or consulting to extract maximum value and enable clients to focus on core business activities; client sectors include risk carriers and brokers

Our people are industry practitioners with many years of experience of running often complex reinsurance and insurance operations. As experienced professionals, we can be trusted to use our initiative, blending easily with our clients' ways of working and becoming effectively an extension of their teams.

Pro plc is a global company, operating from offices in London, New York, Hamburg, Zurich, and Buenos Aires, supported by operational centres in Gloucester (UK), York (US) and Sundern (Germany). Our local knowledge and global expertise ensures we provide a cost-efficient, round the clock service to support our clients' operations wherever they might be.

Pro plc comprises Pro Insurance Solutions Ltd, Pro IS Inc., the Chiltington Group and STRIPE as well as Assekuranz Service-und Sachverständigengesellschaft mbH, a leading German disability claims management company. Pro plc also owns 33% of Asta, the leading Lloyd's turnkey managing agency.

Pro plc is listed on the AIM market.

For more information, visit our website: www.pro-global.com/investor-relations

Pro Global Insurance Solutions plc 

Interim Report 30 June 2015

Interim results

Condensed consolidated income statement

Condensed consolidated statement of comprehensive income

Condensed consolidated statement of financial position

Condensed consolidated statement of changes in equity

Condensed consolidated statement of cash flows

Notes to the condensed consolidated financial statements

1. General information

2. Significant accounting policies

3. Critical accounting judgements and estimates

4. Change in accounting policy

5. Segmental information

6. Earnings per share

7. Assets and liabilities classified as held for sale

8. Cash (used in)/generated from continuing operations

9. Related party transactions

10. Contingent liabilities

11. Events after reporting period

Independent review report to Pro Global Insurance Solutions plc

Pro Global Insurance Solutions plc Company information

Pro Global Insurance Solutions plc (the "Company" or "Pro") is a specialist outsourcing and consulting service provider addressing complex operational needs of global insurers and reinsurers;.

· Following its demerger from Tawa in April 2014, Pro outlined its "Client First" strategy, as an independent services company and set about implementing that strategy.

Since the launch of the strategy Pro has:

· Defined and launched Pro client's value proposition, aiming to enhance Pro's reputation and market position;

· Organised the business into two principal activities (consulting and outsourcing) and four client-centric business lines;

a. Risk audit and compliance (consulting)

b. Operational consulting

c. Technical outsourcing

d. Legacy solutions (outsourcing)

· Focused Pro's sales activities on expanding its client base and broadening existing relationships, seeking long-term high-margin revenue sources. This is evidenced by a strong and more diverse pipeline; and

· Addressed Pro's costs to ensure an appropriate alignment of costs with revenues and repositioning internal resources onto revenue-generating client activities. This is evidenced by the reduction Pro's direct expenses, while maintaining the run rate of operating overheads, i.e., reinvesting overhead savings into business development

While 2014 was a year of transition, Pro views 2015 as a year of investment in growth and future value creation. The Pro brand, as an independent service entity, is gaining recognition in the market attracting new clients and talent.

Pro is well positioned to capture opportunities created by ongoing change in the global insurance and reinsurance markets, driven by regulatory, capital, and pricing pressures. Pro invests in innovation and solving client problems of the future, e.g., Pro's STRIPE reinsurance trading platform is gaining increasing recognition in the market

The business is facing the risk of declining legacy revenues from existing clients but Pro is pursuing alternative strategies to replenish those revenues.

Pro is actively investing in the US platform where we see a vast market for Pro's service proposition and promising 'green shoots' in opportunities to deliver underwriting support and claims services, especially to London Market insurers operating in the US. 

The Pro team continues its single-minded focus on delivering the "Client First" strategy and transforming Pro into a successful standalone service business.

Group results show a £90 thousand operating profit for the interim period compared to an operating loss of £1.6 million in the 1st half of 2014. Total profit for the group was £0.4 million compared to £2.9 million profit in the comparative period. The 2014 comparative included £4.0 million profit from discontinued operations.

Since the demerger in 2014, Pro has focused on implementing its long-term "Client First" growth strategy and has already begun to see encouraging results. The 2015 results show revenue growth of 7% with strong growth in consultancy revenue, up 60% on the same period in 2014. New outsourcing revenue of £0.5 million has been offset by the natural decline in revenue from the closed books of business which continue to run off, resulting in net 4% decline. Gross margins have improved across all business lines from 32% in H1 2014 to 44% primarily as a result of the restructuring completed in 2014 combined with higher levels of utilisation of client facing employees.

Operating overheads remain flat year on year. This reflects the restructuring savings from 2014 reinvested in business development in the US and Germany.

In January 2012, Pro acquired a 33% interest in Asta, the leading turnkey managing agency Services Company in Lloyd's. Asta continues to perform strongly with Pro's share of their results contributing £0.6 million and £0.7 million to the Group results in the six month periods to 30 June 2015 and 30 June 2014 respectively. Asta paid its dividends of £0.2 million (for Pro's 33% share) in 2015 and re-purchased £1 million of preference shares reducing Pro's holding to £5.5 million at the end of 2014.

For the period ended 30 June 2015

For the period ended 30 June 2015

As at 30 June 2015

As at 30 June 2015

For the period ended 30 June 2015

Major non-cash transactions

On 26 March 2014 the Company's share premium of £57.5 million was cancelled and the nominal value of 113,375,177 ordinary shares was reduced from 10 pence to 2 pence.

On 3 April 2014 the Company made a non-cash distribution, dividend in specie, of £50.3 million.

For the period ended 30 June 2015

The interim consolidated financial statements do not constitute statutory accounts as defined in section 434 of the Companies Act 2006 and should be read in conjunction with the Group's consolidated financial statements for the year ended 31 December 2014. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified, did not include a reference to any matters to which the auditors draw attention by way of emphasis without qualifying the report, and did not contain any statements under section 498(2) or 498(3) of the Companies Act 2006.

The Directors have considered the position of the Group's assets compared to the liabilities. In addition they have assessed the Group's liquidity with regard to expected future cash flows. They have also considered the performance of the business, as discussed in the interim results. In light of these reviews the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the interim report.

The interim results have been reviewed by the Group's auditors, Mazars LLP, and their review report is set out on page 15.

a. Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") adopted for use in the European Union. The financial statements also comply with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is contained in the report of the Directors.

The financial statements are presented in thousands of pounds sterling, rounded to the nearest thousand, the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

b. Basis of consolidation

These financial statements consolidate all the enterprises over which the Group exercises control either directly or indirectly (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit or loss from the effective date of acquisition or up to the effective date of disposal. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

The judgements and estimates made by management which are relevant and have a significant effect on the condensed consolidated financial statements are consistent with those disclosed in the Group's consolidated financial statements for the year ended 31 December 2014.

Accounting Judgements

QX Reinsurance Company Limited ("QX Re")

QX Re was not transferred as part of the demerger. However, the economic rights and therefore the exposure to and rights to variable returns relating to this entity are no longer held by Pro. As a result, at 30 June 2015, it is management's view that Pro does not control QX Re and it has not been consolidated.

Accounting Estimates

Provisions for future liabilities or work in progress accruals for future revenue are only accrued on the basis that the asset or liability is certain. The values that are included are calculated based on the information that is available and an assessment of the likely outcome. 

Following the demerger the Group's revenues, profits and cash flows are primarily generated in pounds sterling, and are expected to remain principally denominated in sterling for the foreseeable future. Historically the Group presented its consolidated financial statements in US dollars. During the period the Group changed the currency in which it presents its financial statements from US dollars to pounds sterling, in order to better reflect the underlying performance of the Group.

A change in the presentation currency is considered a change in accounting policy and has been accounted for retrospectively. Financial information included in the financial statements for the periods ended 30 June 2013 and 31 December 2013 previously reported in US dollars have been restated into pounds sterling using the following procedures:

§ assets and liabilities were translated into pounds sterling at the closing rates of exchange on the relevant reporting dates;

§ income and expenditure were translated at the average rates of exchange prevailing for the relevant periods; and

§ the translation reserve was recalculated from accumulated gains and losses using average rates of exchange prevailing for the relevant periods.

Following consideration by the Directors, with effect from 1 January 2015 the accounting policy for depreciation has been amended to the following: Computer equipment - 3 years, Office equipment - 4 years and Furniture - 10 years. This change in accounting policy resulted in a credit of £0.2 million in the 2015 interim accounts. No adjustment has been made to prior year results as the impact is deemed to be immaterial.

The Group's revenue is generated in a number of countries, United Kingdom, United States, Europe and Latin America, with the activities divided into two key segments.

Outsourcing

Outsourcing is provided within the reinsurance and insurance industry with services provided through the Company's legacy solutions product to books of business that are in run-off. The technical outsourcing product provides outsourcing services to both start up and established operators.

Consultancy

Consultancy services are provided within the reinsurance and insurance industry to provide services in two key areas:

• Risk, audit and compliance; and

• Change management including project management, process engineering, business analysis and data engineering.

Other

Other includes revenue from STRIPE Global Services Limited, Debt Purchase and incidental revenue that is generated outside of these core services by shared services resources.

For management purposes the Group is divided into the four product groups, although these have been combined into outsourcing and consultancy as they share the same distribution and margin styles. The Group is monitored on both a product and territory split by management, with assets and liabilities being monitored on a Group basis.

The segments identified, although dependant on clients' demands which can affected by peak holiday periods, are not materially impacted by seasonality. The segments have no infrastructure, assets or liabilities separately identified from the Group.

(a) Segment income and results

The following is an analysis of the Group's revenue and results by reportable segment.

No adjustments are required for revenue recognition.

(b) Geographical Information

Revenue is generated in a number of territories; the revenue is booked within the territory that is providing the resources to fulfil the contract.

The following is a geographical analysis of the Group's non-current assets. Non-current assets for this purpose consist of property, plant and equipment, intangible assets and investments in associates.

Demerger of Tawa Associates Limited ("TAL")

On 20 December 2013 the Group announced its plan to demerge the Group's risk carrier business and the related assets were shown as held for sale at 31 December 2013. On 3 April 2014 the Group transferred these net assets by means of a dividend in specie, with the exception of CX Re's deferred asset, which has remained as held for sale and the transfer is progressing. As the economic rights of this asset have transferred to TAL a related liability is shown as due to TAL.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Tawa Associates Limited and its subsidiaries are considered related parties as both the entity and the Group have the same ultimate parent.

Trading transactions

Two of the Company's subsidiaries Pro Insurance Solutions Ltd and Pro IS, Inc provide insurance run-off management services to Tawa Associates Limited and its subsidiaries. On 3 April 2014 associate CX Reinsurance Company Limited was transferred to Tawa Associates Limited.

Run-off management revenue is provided on a negotiated fee basis. Run-off management expenses are recharged at cost by Pro Insurance Solutions Ltd and Pro IS, Inc.

During the period Group companies entered into the following transactions with related parties who are not members of the Group:

At the period end, the following balances with related parties who are not members of the Group were outstanding:

Key management personnel

The Group considers its key management personnel to include its Executive and Non-Executive Directors and those members of management reporting directly to its Board that have executive management responsibility for Group-wide operations.

Remuneration of key management personnel

The remuneration of key management included in the income statement is set out below:

Immediate and ultimate parent company

The immediate and ultimate parent company is Financière Pinault S.C.A., a Société en commandite par actions incorporated in France. The Pinault family members are, in the opinion of the Directors, the ultimate controlling parties of the Company. The group financial statements of Financière Pinault S.C.A. may be obtained from the Tribunal de Commerce de Paris, 1 Quai de Corse, 75004 Paris, France.

At 30 June 2015 the Group did not have any contingent liabilities

On 22nd July 2015 Asta's Board of Directors approved the repurchase of 27.3% of the preference shares resulting in a £1.5 million redemption payment to Pro which was received on August 7th 2015, of which £1 million will be used to reduce group debt. This reduces Pro's preference share holding in Asta to £4 million.

We have been engaged by Pro Global Insurance Solutions plc to review the condensed set of consolidated financial statements in the interim report for the six months ended 30 June 2015 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and related notes 1 to 13. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of consolidated financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Respective responsibilities of Directors and auditor

The interim report, including the condensed set of consolidated financial statements contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim report in accordance with the AIM Rules issued by the London Stock Exchange, which require that the interim report be prepared and presented in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. As disclosed in note 2, the condensed set of consolidated financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility is to express to the Company a conclusion on the condensed set of consolidated financial statements in the interim report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the interim report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules issued by the London Stock Exchange.

Mazars LLP

Chartered Accountants

Tower Bridge House

St Katharine's Way

London E1W 1DD

23 September 2015

Notes:

(a) The maintenance and integrity of the Pro Global Insurance Solutions web site is the responsibility of the Directors; the work carried out by us does not involve consideration of these matters and, accordingly, we accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.