Half Yearly Report

Pro Global Insurance Solutions plc

Unaudited interim results for the six months ended 30 June 2014

Pro Global Insurance Solutions plc (the "Company" or "Pro") today announces unaudited interim results for the six months ended 30 June 2014.

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

· Agreement with Swiss Re, a significant and longstanding client, to extend its contractual relationship with Pro for a further five years until 2019

· A £1m reduction in the expense run rate on an annualised basis

· Group results including the results from discontinued operations show a £2.8 million profit for the interim period compared to a loss of £0.9 million in 2013.

· The loss from continuing operations, being the demerged business without the volatile risk-carrier businesses, was £1.2 million compared to a loss of £1.5 million in 2013

· 2014 is a year of transition and the Pro team is laying solid foundations for 2015 and beyond.

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

· To become 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.

Pro is pleased to report that the team is making significant progress in delivering on this "Client First" strategy and has:

· Defined and launched Pro client's value proposition

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

1. Risk audit and compliance (consulting)

2. Operational consulting

3. Technical outsourcing

4. Legacy solutions (outsourcing)

· Reinvigorated Pro's sales activities, focused on expanding its client base and broadening existing relationships

· Instituted a rigorous and continuing evaluation of costs to ensure an appropriate alignment of costs with revenues, evidenced by the reduction Pro's expenses run rate of over £1 million on an annualised basis.

Pro has recently reached agreement with Swiss Re, a significant and long standing client, to extend its contractual relationship for a further 5 years until 2019.

Artur Niemczewski, CEO of Pro Global Insurance Solutions Plc, commented: "We are making rapid progress. This is shown by the improvements in Pro's Gross Margin from 34% to 39%. The Pro team is fully focused on delivering Pro's "Client First" strategy and transforming Pro into successful services business. 2014 continues to be a year of transition but we are building solid foundations for 2015 and beyond."

Enquiries:

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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 coverholder 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 (the "Company" or "Pro") is a specialist outsourcing and consulting service provider to the global insurance and reinsurance industry.

In December 2013 Tawa plc announced that it was demerging into two independent companies by distributing, to its then existing shareholders, its risk carrier business. Following the demerger on 3 April 2014, the remaining subsidiaries are now engaged in the principal business activity of providing specialised services to a broad array of international clients across the insurance and reinsurance markets. On 4 April 2014 Tawa plc was renamed Pro Global Insurance Solutions plc.

The de-merger releases Pro from the natural and unexpected volatility of the risk carrier business and enables Pro to focus on its core purpose of being the trusted delivery partner for operations that matter most to its clients.

Highlights

During the AGM on 19 June 2014 Pro presented its "Client First" strategy, as an independent services company, with the key strategic goals:

· To become 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.

Pro is pleased to report that the team is making significant progress in delivering on this "Client First" strategy and 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;

5. Risk audit and compliance (consulting)

6. Operational consulting

7. Technical outsourcing

8. Legacy solutions (outsourcing)

· Reinvigorated Pro's sales activities, focused 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

· Instituted a rigorous and continuing evaluation of costs to ensure an appropriate alignment of costs with revenues and wherever possible repositioning internal resources onto revenue-generating client activities, evidenced by the reduction Pro's expenses run rate of over £1 million on an annualised basis.

Pro has recently reached agreement with Swiss Re, a significant and long standing client, to extend its contractual relationship for a further 5 years until 2019.

Group results including the results from discontinued operations show a £2.8 million profit for the interim period compared to a loss of £0.9 million in the 1st half of 2013. The loss from continuing operations, being the demerged business without the volatile risk-carrier businesses, was £1.2 million compared to a loss of £1.5 million in 2013.

Revenue for the first half of 2014 was impacted by demerger activities as Pro has focused on restructuring and redefining its product groups. Since April 2014, Pro has focused on implementing its long term growth strategy and has already begun to see encouraging results. Pro is seeing a significant upturn in its consulting revenues towards the end of the second quarter and continuing into the third quarter. Pro sees this trend continuing in the short-to-medium term. Pro's pipeline remains strong. Pro's technical outsourcing businesses have continued to perform well and also have a robust pipeline. Legacy business remains profitable but there is limited market opportunity in the short term.

The 2014 results include reorganisation and restructuring costs of £1.6 million. The restructuring of Pro's organisation is expected to reduce operating costs by over £1.0 million per year on an ongoing basis. Pro's focus on long term cost reduction and realignment of resources has already had a marked impact on the Company's gross margins and overall operating results. Gross margins for the interim period reached 38% compared to 34% in the 2013 comparable period. The Company anticipates further improvements in gross margins during the latter half of 2014 as it continues to work to achieve a target net margin of 15%.

Historically, the Company has reported its financial results in US dollars since the vast majority of the Group's assets and liabilities were held in US dollars. Following the demerger, the remaining assets and liabilities are predominantly held in pounds sterling and is the functional currency of the Group's principal operating subsidiaries. As a result, Pro has changed its reporting currency to pounds sterling. As a direct result of this and the demerger, the Company has released £6.8 million (30 June 2013: £16.8 million) of its translation reserve to the income statement. These releases are recorded in discontinued operations.

In January 2012, Pro acquired a 33% interest in Asta, the leading turnkey managing agency Services Company in Lloyd's. This strategy has been fully validated and Asta continues to perform strongly with Pro's share of their results contributing £0.7 million and £0.9 million to the Group results in the six month periods to 30 June 2014 and 30 June 2013 respectively. Asta paid its first dividend of £1.25 million (for Pro's 33% share) in August 2014.

The sale of the German risk carrier Hamburger Internationale Rückversicherung AG to Compre Holdings Limited was closed during August 2014 following regulatory approval from BaFin. This contributed to strengthening the Company's cash resources during the 2nd half of 2014.

The Pro team is fully-focused on delivering the "Client First" strategy and transforming into a successful service business. 2014 is a year of transition and the team is laying solid foundations for 2015 and beyond.

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.

On 4 April 2014 Tawa plc was renamed Pro Global Insurance Solutions plc (the "Company"). The risk carrier business was demerged on 3 April 2014 and the remaining subsidiaries (together the "Group") are now engaged in the principal business activity of providing specialised services to a broad array of international clients across the insurance market.

The demerger is fully disclosed in note 6.

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 2013. 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.

The annual financial statements of the Company are prepared in accordance with IFRS as adopted by the European Union. The condensed set of 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.

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the preparation of the Group's consolidated financial statements for the year ended 31 December 2013, except for the adoption of new standards and interpretations effective as of 1 January 2014. During the interim period the Group changed its presentation currency from US dollars to pounds sterling, this is considered a change in accounting policy and the details are disclosed in note 4.

During the period the Group adopted the following standards and revisions to standards:

• The standards on consolidation, joint arrangements, associates and related disclosures have been issued or amended. The standards need to be applied collectively and are effective for annual periods beginning on or after 1 January 2014:

• IAS 27 (2011) Separate Financial Statements - Now only deals with the requirements for separate financial statements, requirements for consolidated financial statements are now contained in IFRS 10 Consolidated Financial Statements;

• IAS 28 (2011) Investments in Associates and Joint Ventures - The standard supersedes IAS 28 and prescribes the accounting for investments in associates and joint ventures and sets out the requirements for the application of the equity method of accounting;

• IFRS 10 Consolidated Financial Statements - The standard introduces a single consolidation model for all entities based on control, irrespective of the nature of the investee. Under IFRS 10, control is based on whether an investor has:

• Power over the investee;

• Exposure, or rights, to variable returns from its involvement with the investee; and

• The ability to use its power over the investee to affect the amount of the returns.

• IFRS 11 Joint Arrangements - The standard replaces IAS 31 Interest in Joint Ventures and requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and then account for those rights and obligations in accordance with that type of joint arrangement. Joint arrangements are either joint operations or joint ventures; and

• IFRS 12 Disclosure of Interests in Other Entities - Requires extensive disclosure to enable users of the financial statements to evaluate the nature of, and risks associated with, interests in other entities.

• Amendments to IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities - To provide additional transition relief by limiting the requirement to provide adjusted comparative information to only the preceding comparative period. Effective for annual periods beginning on or after 1 January 2013, however as EFRAG has not endorsed the standards effective dates these amendments are effective for annual periods beginning on or after 1 January 2014;

• Investment entities amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial statements - Provide investment entities (as defined) an exemption from the consolidation of particular subsidiaries and instead requires their measurement at fair value through profit or loss in accordance with IFRS 9 Financial Instruments or IAS 39 Financial Instruments: Recognition and Measurement. Effective for annual periods beginning on or after 1 January 2014;

• Amendments to IAS 32 Financial Instruments Presentation - To clarify the application of the requirements on offsetting financial assets and financial liabilities effective for annual periods beginning on or after 1 January 2014;

• Amendments to IAS 36 Impairment of Assets - To reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. Effective for annual periods beginning on or after 1 January 2014; and

• Amendments to IAS 39 Financial Instruments: Recognition and Measurement - To clarify that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met. Effective for annual periods beginning on or after 1 January 2014.

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 2013.

Assets and liabilities classified as held for sale, Hamburger Internationale Rückversicherung ("HIR") 

Regulatory approval for the sale of HIR and certain subsidiaries was received on 14 August 2014 from BaFin, the German regulator, and the transaction completed subsequent to the reporting period. At 30 June 2014 management considered it appropriate to classify the assets and related liabilities as held for sale.

QX Reinsurance Company Limited ("QX Re")

As noted in Note 6, the ownership of 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 2014, it is management's view that Pro does not control QX Re and it has not been consolidated.

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.

Prior to the demerger of the Group, Pro Global Insurance Solutions plc represented a single segment within the financial accounts. The demerged 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 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.

The eliminations and adjustments include consolidation of Group revenue, small exchange rate differences and transactions within Pro Global Insurance Solutions plc.

(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.

On 20 December 2013 the Group announced its plan to demerge the risk carrier business with the remaining service business becoming the focus of the Group.

On 26 March 2014 the High Court approved a reduction of the Company's share capital to facilitate the demerger, share premium of £57.5 million was cancelled and the nominal value of the ordinary shares was reduced from 10 pence to 2 pence. These changes are detailed in the statement of changes in equity.

On 3 April 2014 the demerger became effective and the risk carriers' and other companies' net assets were transferred by means of a dividend in specie.

The economic rights to the deferred assets relating to CX Reinsurance Company Limited ("CX Re") have transferred to the risk carrier business; this asset is currently shown as held for sale as the transfer is not yet complete. However, the Group's remaining 12.65% interest in CX Re (as an associate) was deemed as disposed of on the date of the demerger as the Group no longer has significant influence over this entity. Subsidiaries QX Re and LGIC Holdings, LLC continue to be owned by the Group but certain economic rights have transferred to the risk carrier business.

The demerged subsidiaries and transferred economic rights are detailed below:

Analysis of assets and liabilities over which control was lost

Gain/(loss) on demerger

Net cash flow on the demerging of entities

Demerger of Tawa Associates Limited ("TAL")

On 3 April 2014 the Group effected the demerger of the risk carrier business. The results and gain on demerger are presented as discontinued in both the current and comparative year. The entities which have been transferred to the TAL group have been presented in note 6.

CX Reinsurance Company Limited ("CX Re")

Following the Group's disposal in 2006 of the majority of its shareholding in CX Re any adjustments to the deferred consideration are accounted for as a profit/(loss) on sale of investment in the year in which the adjustments to the deferred consideration arise. CX Re formed part of the demerger however at the period close the transfer to TAL had not yet been completed, therefore the deferred asset and related liability to TAL remain classified as held for sale.

Hamburger Internationale Rückversicherung AG ("HIR")

On 20 December 2013 the Group announced the sale of the entire issued share capital of HIR and its subsidiaries Pavant SAS, Chiltington International Holdings Limited, and Hamburg International Reinsurance Ltd to Compre Holdings Limited whilst retaining the Chiltington consulting companies in Argentina, USA, UK and Germany. Regulatory approval was received on 14 August 2014 from BaFin, the German regulator, and the transaction completed subsequent to the reporting period. The results are presented as discontinued in both the current and comparative year and the related net assets are disclosed as held for sale.

KX Reinsurance Company Limited ("KX Re") and OX Reinsurance Limited ("OX Re")

On 14 April 2013, the Group disposed of its risk carrier KX Re and its direct subsidiary OX Re. The results and the loss on disposal are presented as discontinued operations in the comparative year.

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.

Hamburger Internationale Rückversicherung AG ("HIR")

On 20 December 2013 the Group announced the sale of the entire issued share capital in HIR and its subsidiaries as detailed in note 7. The assets and related liabilities are classified as held for sale at 30 June 2014.