Half Yearly Report

PRESS RELEASE

Charles Taylor plc

Announcement of results for six months ended 30 June 2013

Consolidated financial highlights

For the six months ended 30 June 2013

Note:

1. The 2013 adjusted profit before tax figures exclude customer relationship intangible amortisation charges of £0.5m (2012: £0.6m), pre-tax non-controlling interests of -£0.1m (2012: £0.3m) and non-recurring costs of £1.0m (2012: £nil).

2. The interim dividend is payable on 29 November 2013 to shareholders on the register on 18 October 2013.

3. 2012 figures have been restated for IAS 19 (revised 2011), see note 2 to the Financial Statements.

"Charles Taylor has had a positive start to 2013. We have benefited from improved trading conditions for our Adjusting Services business, while our Management Services and Insurance Support Services businesses have delivered a steady performance."

Rupert Robson

Chairman

Business Highlights

· Increase in Group statutory profit before tax and adjusted profit before tax

· Increase in statutory earnings per share and adjusted earnings per share

· Professional Services operating segment profit up with improved trading conditions for Adjusting Services

· Cautious outlook for H2 with more demanding conditions for much of Professional Services

· Interim dividend of 3.25p declared

Chairman's Statement

Charles Taylor has had a positive start to 2013. We have benefited from improved trading conditions for our Adjusting Services business, while our Management Services and Insurance Support Services businesses have delivered a steady performance.

Results

Revenue was up 5.9% in the first six months of 2013 to £56.1m (2012: £53.0m) and Group statutory profit before tax was up 16.8% to £4.1m (2012: £3.5m). Adjusted profit before tax increased by 25.1% to £5.5m (2012: £4.4m). Adjusted earnings per share was up 24.3% to 11.26p (2012: 9.06p) and statutory earnings per share increased by 9.7% to 8.19p (2012: 7.47p).

Dividend

An interim dividend of 3.25p per share (2012: 3.25p) is declared and will be paid on 29 November 2013 to shareholders on the register on 18 October 2013.

Balance sheet

Net debt at the half year was £19.7m compared to £29.5m at December 2012 year end, and £34.2m at June 2012 half year. The reduction in net debt over the period is largely due to the advance payment of the annual fee by one of our mutual insurance company clients. Without the effect of this advance payment, the net debt would be in line with the June 2012 level, reflecting a working capital increase linked to growth in the Adjusting Services business and timing differences on trade payables.

The net pension liabilities at 30 June 2013 were £23.2m, compared to £31.6m at the year end and £38.8m at 30 June 2012.

Board

Alistair Groom has informed the Board that he intends to retire from Charles Taylor and from the Board at the end of February 2014. I am pleased to confirm that he has agreed to continue to have a close involvement with Charles Taylor through the Standard Club after he retires.

As announced in the 2012 Annual Report Julian Avery has decided to retire from the Board. We are making progress on the recruitment of his successor.

Current trading and outlook

Our core Professional Services businesses are performing steadily. The prospects for Management Services are good. Adjusting Services is continuing to invest in new people, offices and systems. It also remains subject to the volume of large claims in the market for the rest of the year. Progress in the smaller Insurance Support Services business is slower than anticipated. Our Insurers in Run-off business is performing satisfactorily, although it will not benefit from a repeat of the substantial profit and cash release seen in 2012.

Our performance in the first half of 2013 has been positive and current trading conditions are satisfactory. We are, however, cautious about the outlook for the second half.

Rupert Robson

Non-Executive Chairman

29 August 2013

Group Chief Executive Officer's Statement

The first half of 2013 has been a period of continued progress for Charles Taylor. We have delivered a positive first half performance and have taken forward strategic initiatives across all of our business lines. We have also continued to focus on improving operational efficiency, while maintaining the highest standards of client service.

Business Performance

Professional Services

The Group's core Professional Services businesses - Management, Adjusting and Insurance Support Services - delivered revenue of £55.4m, up by 6.5% in the first half (2012: £52.0m), with operating segment profit up 19.5% to £6.0m (2012: £5.0m).

Management Services revenue was £19.1m (2012: £18.1m). Operating segment profit was slightly down at £2.2m (2012: £2.5m) partly due to an increase in employment costs. The underlying performance of our mutual insurance clients remains positive. Signal Mutual is performing very well and the Standard Club is making steady progress. We have also launched new products and services including a hull insurance cover for Standard Club members, with others under development.

Adjusting Services revenue was £28.3m (2012: £25.4m) and operating segment profit was up to £3.6m (2012: £2.6m). We benefited from an upturn in claims activity and appointments across all our loss adjusting business lines. We have experienced some staff movement and have stepped up our programme of identifying highly qualified senior adjusting specialists to join our team where they can deliver increased business. We expect increased operational costs including on-going investment in new offices and people to impact second half performance.

Insurance Support Services revenue was £8.0m (2012: £8.5m) and operating segment profit was £0.2m (2012: £0.0m). We won an important Lloyd's claims management client in the first half. Despite this, progress is slow with market demand for some services abating and new services taking longer than anticipated to gain traction. We expect this to impact full year performance and have taken further steps to cut costs. Looking forward we remain positive about the prospects for the business and are exploring a number of promising new initiatives.

Insurers in Run-off

The Insurers in Run-off revenue was £2.5m (2012: £2.6m) and operating segment profit was £0.4m (2012: £0.1m). When adjusted for non-controlling interests in the business, adjusted profit before tax was £0.4m (2012: £0.5m). The Life business performed steadily and the claims experience of the Non-Life businesses improved compared to the prior year.

I am enthusiastic about the potential for growth in the market for insurance services and the opportunity for Charles Taylor to increase revenue and profit from professional services.

David Marock

Group Chief Executive Officer

29 August 2013

Strategic update

Charles Taylor has significant competitive advantages in delivering specialist Professional Services to insurers, their clients and advisers on a worldwide basis. Over the last two years we have made good progress in reinforcing the Group's foundations and our strategic focus is now increasingly on creating growth in core professional services. Our Professional Services business strategy has three key elements: Reinforce the foundations; Create growth in the core Professional Services businesses; and Explore medium-term strategic options.

Reinforce the foundations:

Strengthen the Group's core capabilities and support services to underpin growth.

Progress in the first six months of 2013:

· Improved operational efficiency, streamlining the business and removing costs.

· Invested in on-going project to transform Adjusting Services' claims management system.

· Continued focus on working capital improvements in Adjusting Services.

· Revitalised the Group finance team with senior appointments.

· Offshored some ICT services to a low cost jurisdiction.

Create growth in the core Professional Services businesses:

Achieve leadership positions in all the Group's businesses and develop new, closely-related, insurance services.

Progress in the first six months of 2013:

· Progressed new products and services including the launch of Standard Club Hull and the development of North American safety services.

· Established onshore US captive management capability.

· Broadened Adjusting Services reach with new offices in Saudi Arabia, continued development in Colombia and expansion of property and casualty adjusting in Indonesia.

· Appointed by a leading Lloyd's managing agent for Taylored Claims Management.

Explore medium term strategic options:

Develop new Professional Services business lines, organically, through joint ventures or through M&A opportunities.

We continue to explore opportunities in this space.

Our Insurers in Run-off business strategy

Our primary focus is on building our Professional Services business. However, we are also seeking tactical acquisitions in the offshore life insurance run-off sector while reducing our exposure to the non-life insurance run-off sector.

Progress in the first six months of 2013

· Progressed transfer of Global Life Assurance business to our Isle of Man life business.

Group Chief Financial Officer's report

Results

The Group's performance in the first half was positive both in terms of revenue growth and profitability. The results for the period are summarised in the following table and are explained in more detail in the Professional Services and Insurers in Run-off reviews.

Note: Small rounding differences can arise in the total amounts above.

As explained in note 2 to the financial statements, the Group adopted IAS 19 "Employee Benefits (Revised 2011)" in 2013. The retrospective adoption of this revised accounting policy impacts operating profit and other comprehensive income in 2012, which has been accordingly restated. It has no impact on the balance sheet. As a result of the restatement, the operating profit for the full year 2012 has decreased by £0.45m (for the six months to 30 June 2012: £0.22m) and other comprehensive income has increased by the same amount. Adjusted earnings per share for the full year 2012 have been restated to 18.33p (for the six months to 30 June 2012: 9.06p) from the previously published figure of 19.44p (six months to 30 June 2012: 9.62p).

The adjusted financial measures exclude acquired customer relationship intangible charges, material non-recurring items and non-controlling interests as set out in the table below. As stated in the Group's 2012 Annual Report, the Group's adjusted profit before tax measure has been amended versus previous years to adjust the proportion attributable to non-controlling interests as this better reflects the performance of the Group attributable to its shareholders.

Non-recurring items represent a restructuring charge incurred as part of the cost reduction initiatives taken to address costs across the Group in the first six months of the year.

Adjusted profit before tax was 25.1% above prior year, with the improved result in Professional Services. Within Professional Services, Adjusting Services had a strong six months, compensating for the slightly lower result in Management Services which was partly due to increased employment costs. Insurance Support Services was steady. Insurers in Run-off showed a stable result when adjusting for minority interests, with our Life business continuing to perform steadily, and improved claims experience in the Non-Life businesses compared to prior year.

Net debt, cashflow and financing

Net debt reduced by £9.8m over the first half, which is after the £2.7m payment in May of the final dividend for 2012. This favourable movement was caused by the positive impact of the upfront payment of the annual fee by one of our mutual insurance company clients in February, offset by the build-up of working capital due to the strong growth and opening of new offices in Adjusting Services and seasonal movement in accounts payable.

Movements in debt are outlined in the following table:

The Group's senior credit facilities are due to expire on 30 May 2014 and the Company is making good progress towards having new facilities in place before the year end.

Retirement benefit scheme

The retirement benefit obligation in the Group balance sheet at 30 June 2013 was £23.2m, compared to £31.6m at the year end and £38.8m at 30 June 2012. The reduction in the obligation was driven primarily by favourable market conditions resulting in lower liabilities and investment gains on the plan assets. Multi-year programmes are in place to address these obligations in agreement with the pension schemes' trustees

Dividends

The interim dividend for the period is 3.25p (2012: 3.25p).

Taxation

The effective tax rate on current year adjusted profits for the period is 16.6% (2012: 18.4%), reflecting the expected tax rate for the 2013 full year.  This reflects the change in the proportion of group profits generated in different tax regimes as well as a reduction in the UK corporate tax rate from 24% to 23% effective from 1 April 2013.

Related party transactions

There have been no related party transactions in the period that have materially affected the financial position or performance of the company.

Principal risks and uncertainties

The nature of the principal risks and uncertainties for the first half of 2013 remain unchanged from those explained in the 2012 annual report and accounts. They include risks and uncertainties relating to revenue concentration, service quality, staff, acquisitions, the Group's geographical spread and range of services, conflicts of interest, insolvency of insurance companies in run-off and a range of information technology, regulatory compliance and financial risks, including liquidity and pension risks.

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly they continue to adopt the going concern basis in preparing the condensed financial statements.

Tito Soso

Group Chief Financial Officer

29 August 2013

Professional services review

Management Services: The Management Services business provides end-to-end management of insurance companies. We deliver a complete outsourced management service covering every aspect of the companies' operations from the marketing and the management of underwriting and claims, to the provision of regulatory, accounting and administrative operations.

Adjusting Services: The Adjusting Services business provides loss adjusting services across the energy, marine, aviation, property, casualty and special risks sectors along with marine average adjusting and technical support services. The business primarily focuses on larger and more complex commercial losses arising from major insured incidents and claims.

Insurance Support Services: The Insurance Support Services business provides professional services which enable our clients to select the specific stand-alone services they require:

· Managed claims services

· Coverholder services

· Financial reporting services

· Managing general agency (MGA) services

· Run-off servicing

· Investment management

· Alternative risk services including captive management and niche insurance covers

Management Services business

Highlights

· Revenue up to £19.1m (2012: £18.1m)

· Operating segment profit slightly down at £2.2m (2012: £2.5m)

· Standard Club steady performance, increasing insured tonnage

· Hull insurance for Standard Club clients launched

· Signal Mutual, strong growth in membership and payroll

Management Services had a steady start to the year. Revenue grew while operating segment profit was slightly down, largely as a result of increased staff costs in the UK/International business. The business worked effectively on behalf of our three major mutual insurance company clients: the Standard Club, Signal Mutual and SCALA.

Management Services - UK/ International

Our work for the Standard Club, which provides liability insurance to almost 10% of world shipping, delivered steady results for the club. In a difficult market for underwriting, insured tonnage increased by 9% to 135m tons during the club's financial year to 20 February 2013. Free reserves increased to US$363m (2012: US$353m).

In line with our business plan objectives we launched a new hull and machinery insurance cover for members of the Standard Club. The new policy, which is already attracting interest from club members and has gained its first client, is a good example of joint working across the Group, combining skills from Management Services with our coverholder and loss adjusting teams.

Management Services - Americas

Our work for Signal Mutual, the largest provider of Longshore workers' compensation insurance to the US maritime industry, has delivered positive results for the mutual. Signal continues to grow, attracting 17 new members since the October 2012 renewal. Total payroll, on which calls (insurance premium) are calculated, is estimated to exceed US$ 3.3bn by the mutual's year end on 30 September 2013, a 10% increase on the previous year's payroll. We have also agreed a new fee arrangement with Signal, from 1 October 2013, which will base our income on the total payroll of members, more closely linking our remuneration to the work required on behalf of the mutual and its members.

SCALA, which provides workers' compensation insurance to the majority of Canadian ship owners, delivered a steady performance in the first half.

Adjusting Services business

Highlights

· Revenue £28.3m (2012: £25.4m).

· Operating segment profit up to £3.6m (2012: £2.6m).

· Good performance across all adjusting business lines.

· Intensified efforts to recruit new top talent.

· Saudi Arabia office opens, continued development of Colombia offices and expansion of property and casualty adjusting in Indonesia.

Adjusting Services benefited from an upturn in claims activity and appointments across all loss adjusting business lines.

· Aviation offices in the UK, Miami and Dubai performed well with a strong contribution from our Singapore office reflecting growth in our aviation business in Asia. Our small, UK-based, aviation asset management business also made a positive contribution to the result.

· Our energy business, the largest of the adjusting lines, performed steadily, important instructions included a large case off the African coastline. We experienced some movement in energy staff which we anticipate will impact second half performance.

· The marine adjusting business line had a good first half, with an increase in claims spread across our principal offices in Europe and the Asia Pacific. Our Ports and terminal claims management business also made a useful contribution to the result.

· Property, Casualty and Special Risks (Non Marine) performed strongly, including a strong performance from the UK offices and further growth from our Jakarta office.

We further extended our network of offices into geographies where there is a demand for our services by completing the purchase of a majority stake in a loss adjusting business in Saudi Arabia. We believe this move gives us a competitive advantage in the Middle East where we are one of the few international adjusters with broad representation and the ability to handle claims across all principal market sectors. We are well advanced in integrating our new Colombian offices into our network and the San Francisco office, opened in 2012, is making a positive contribution.

We intensified our programme of identifying highly qualified engineering and senior adjusting specialists to join our team where they can deliver increased business. We expect a number of new senior adjusters to join the business in the near future.

Our initiatives to reduce the business's working capital requirement further improved the speed of invoicing work. Work-in-progress months reduced to 4.9 at the half year, down from 5.7 in the corresponding period in 2012.

Insurance Support Services business

Highlights

· Revenue £8.0m (2012: £8.5m).

· Operating segment profit £0.2m (2012: £0.0m).

· Secured important contract from a major Lloyd's managing agency.

· Slow business development progress in insurance services.

· Established North American captive management capability.

Insurance Support Services, the smallest of out three professional services businesses, had a steady first half.

Insurance Services: Charles Taylor Insurance Services (CTIS), the largest constituent of the business secured an important new contract from a major Lloyd's managing agency, which integrated our Taylored Claims Management service into its claims handling system. While our new claims and MGA services have been well received by the market and are generating new business, overall progress has been slower than anticipated. We are also seeing slowing demand for some of our older and more mature services. We expect these issues to impact full year performance and have taken further steps to cut costs.

Looking forward we are exploring a number of promising new initiatives. There is an on-going move in the Lloyd's market to offer greater choice of outsourcing partners to market participants. We believe we are well positioned to capitalise on this trend and remain positive about future prospects.

Other Insurance Services: We have taken an important step forward to further develop our onshore captive management capabilities in the USA by establishing a captive management operation in Delaware. We also won three new captive management contracts in Bermuda in the first half, subject to regulatory approval. Our new North American Safety Management Service, launched in 2012, is proving attractive to clients and is generating initial revenue. We have further strengthened our investment management team to extend the range of services the business can offer to our clients.

Insurers in Run-Off business

The insurers in Run-off business owns life and non-life insurance companies which are closed to new business and runs off their liabilities in an orderly manner.

Offshore Life Run-off: The integration of the Global Life Assurance business, acquired in 2012, is progressing well and we expect it to be transferred into our Isle of Man run-off life business in the second half, generating a small cash release. In line with our business strategy we are seeking further potential offshore life insurance acquisitions which meet our criteria. These also benefit our Insurance Support Services business through increased run-off servicing contracts.

Non-life Run-off: The Group's three non-life insurance companies are running off satisfactorily, with claims experience improving compared to the prior year. We continue to consider our options in the non-life market following our decision not to acquire any further non-life run-off businesses.

Financial Statements

Condensed consolidated income statement

Condensed consolidated statement of comprehensive income

Condensed consolidated balance sheet

The financial statements were approved by the Board of Directors and authorised for issue on 29 August 2013.

Tito Soso

Director

29 August 2013

Condensed consolidated cash flow statement

Condensed consolidated statement of changes in equity

Own shares comprise 253,960 (30 June 2012: 72,420; 31 December 2012: 238,920) shares held by the Charles Taylor Employee Share Ownership Plan Trust ("ESOP"). The market value of these shares was £477,445 (30 June 2012: £115,510; 31 December 2012: £402,580) at the balance sheet date.

The trustee of the ESOP is the Codan Trust Company Limited, an independent professional trust company registered in Bermuda. The ESOP is a discretionary trust for the benefit of employees of the Group and provides a source of shares to distribute to the Group's employees (including executive directors and officers) under the Group's various bonus and incentive schemes, at the discretion of the trustee acting on the recommendation of a committee of the Board.

The assets, liabilities, income and costs of the ESOP are incorporated into the condensed set of financial statements.

There are no significant restrictions on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans or advances other than company law requirements dealing with distributable profits, and in the case of the insurance companies' regulatory permissions and solvency limits.

Notes to the condensed set of financial statements

1. General information

The information for the year ended 31 December 2012 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2. Accounting policies

Basis of preparation

The annual financial statements of Charles Taylor plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.

Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Changes in accounting policy

In the current financial year, the Group has adopted the amendments to IAS 1 "Presentation of Items of Other Comprehensive Income", IAS 19 (revised 2011) "Employee Benefits" and IFRS 13 "Fair Value Measurement". Otherwise, the same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.

The amendments to IAS 1 require items of other comprehensive income to be grouped by those items that will be reclassified subsequently to profit or loss and those that will never be reclassified, together with their associated income tax. The amendments have been applied retrospectively, and hence the presentation of items of comprehensive income has been restated to reflect the change. The effect of these changes is evident from the condensed consolidated statement of comprehensive income.

IAS 19 (revised 2011) and the related consequential amendments have impacted the accounting for the Group's defined benefit scheme, by replacing the interest cost and expected return on plan assets with a net interest charge on the net defined benefit liability. For the six months to 30 June 2012 the restated profit is £223,500 lower and other comprehensive income £223,500 higher than it would have been prior to the adoption of IAS 19 (revised 2011). For the year to 31 December 2012 the equivalent impact is £447,000.

As the Group has always recognised actuarial gains and losses immediately there has been no effect on the prior year defined benefit obligation.

IFRS 13 impacts the measurement of fair value for certain assets and liabilities, as well as introducing new disclosures, however the directors do not consider the impact of these changes on the financial statements to be material.

3. Segmental information

Identification of segments

For management and internal reporting purposes the Group is currently organised into four operating businesses whose principal activities are as follows:

· Management Services business - mutual management service.

· Adjusting Services business - energy, aviation, non marine and marine (including average) adjusting.

· Insurance Support Services business - non-life and life insurance support services, including captive management, investment management and risk management.

· Insurance Companies Run-off business - non-life and life insurance companies closed to new business.

Management information about these businesses is regularly provided to the Group's chief operating decision maker to assess their performance and to make decisions about the allocation of resources. Accordingly, these businesses correspond with the Group's operating segments under IFRS 8 "Operating Segments". Businesses forming part of each business which might otherwise qualify as reportable operating segments have been aggregated where they share similar economic characteristics and meet the other aggregation criteria in IFRS 8.

In the Management Services business, a higher proportion of revenue arises in the second half of the financial year. There is no significant seasonality or cyclicality in the other businesses.

Measurement of segmental results and assets

Transactions between reportable segments are accounted for on the basis of the contractual arrangements in place for the provision of goods or services between segments and in accordance with the Group's accounting policies. Reportable segment results and assets are also measured on a basis consistent with the Group's accounting policies. Operating segment profit includes an allocation of central costs across the four businesses and excludes non-recurring adjusting items. Reconciliations of segmental results to the Group profit before tax are set out below.

Information about major customers

The Group derived revenue of £14.9m (to 30 June 2012: £13.3m, full year 2012: £28.7m) from one external customer which accounts for more than 10% of Group revenue, and is included within the Management Services business.

4. Income tax expense

Tax for the six month period is charged at 16.6% (to 30 June 2012: 18.4% (restated)) representing the best estimate of the average annual effective tax rate expected for the full year, applied to the adjusted pre-tax income of the six month period.