Half Yearly Results

PRESS RELEASE

Charles Taylor plc

Announcement of results for six months ended 30 June 2014

Consolidated financial highlights

For the six months ended 30 June 2014

Movements are calculated using unrounded numbers so minor rounding differences may exist.

· Interim dividend of 3.25p declared (2013: 3.25p)

Note:

1. The 2014 adjusted profit before tax figures exclude acquired intangible amortisation charges of £0.7m (2013: £0.5m), non-recurring costs of £0.2m (2013: £1.0m), pre-tax non-controlling interests of £0.2m (2013: £0.1m).

"Charles Taylor has had a steady start to 2014. Our Professional Services businesses have delivered a result in line with the prior year. This was a result of the strong performance of Management Services and Insurance Support Services and despite the impact of the benign claims environment on our Adjusting Services business and the strength of sterling. The Insurers in Run-off business performed satisfactorily. Our overall performance demonstrates the resilience of our business in difficult trading conditions."

David Marock

Group Chief Executive Officer

Business highlights

· Growth in revenue and statutory profit before tax

· At constant exchange rates revenue and statutory profit before tax are both up

· Lower adjusted PBT at actual exchange rates - but up at constant exchange rates

· Strong performance from Management Services and Insurance Support Services

· Adjusting Services affected by market-wide benign claims environment

· Interim dividend of 3.25p declared (2013: 3.25p)

Group Chief Executive Officer's Review

Charles Taylor has had a steady start to 2014. Our Professional Services businesses have delivered a result in line with the prior year. This was a result of the strong performance of Management Services and Insurance Support Services and despite the impact of the benign claims environment on our Adjusting Services business and the strength of sterling. The Insurers in Run-off business performed satisfactorily. Our overall performance demonstrates the resilience of our business in difficult trading conditions.

Group revenue for the first six months of 2014 increased to £56.8m (2014 CER: £59.3m, 2013: £56.1m). Statutory profit before tax was £4.1m (2014 CER: £4.5m, 2013: £4.1m). Adjusted profit before tax was £5.2m (2014 CER: £5.6m, 2013: £5.5m). Adjusted earnings per share were 10.69p (2014 CER: 11.52p, 2013: 11.26p) and statutory earnings per share were 8.83p (2014 CER: 9.65p, 2013: 8.19p).

The first half of 2014 has seen many of our new initiatives progress well. We have launched new services, opened new offices, recruited new senior people and secured new business wins. We believe the Group is well-positioned to benefit as the global economy recovers and insured losses return to more normal levels.

Professional Services

The Group's core Professional Services businesses made a steady start to the year as set out in the table below:

· Our Management Services business has delivered a strong performance even with the strength of sterling. The mutual insurance companies managed by the Group continue to perform well.

· The Adjusting Services business received a steady flow of new high quality instructions throughout its global office network. Its results were lower in the first half compared to its strong performance in the first half of 2013. This was largely a result of the unusually low level of insured losses across the whole insurance market during the first half of 2014. In fact Munich Re figures reports that claims from natural catastrophes are 32% lower than their 10 year average. The business has significant overseas earnings and was affected by the strength of sterling. We also invested in new people, offices and systems.

· The Insurance Support Services business had a strong start to the year and has seen an improvement in its pipeline of potential new business.

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

Insurers in Run-off:

The Insurers in Run-off business revenue was £2.0m (2013: £2.5m). The business achieved a break-even result before taking non-controlling interests into account (2013: £0.4m). The result attributable to shareholders was £0.2m (2013: £0.4m).

Management Services

Our Management Services business performed well in the first half of 2014. We continued to develop our services in both our UK & International and Americas businesses on behalf of our clients.

Management Services - UK & International

· Delivered positive results for the Standard Club: Charles Taylor has been manager of The Standard Club since it was founded in 1884. Today it provides protection and indemnity (P&I) insurance to approximately 10% of world shipping. Our work continues to deliver positive results for the club, which had a satisfactory 2014-15 renewal in February 2014. Free reserves rose to a record US$369 million. In July 2014, the club's credit rating was reaffirmed as 'A' (strong) by Standard & Poor's.

· Launched new P&I products: We continued to develop new products and services for The Standard Club. In the first half, we helped the club launch a fixed premium product for the club's London Class, which specialises in insuring European inland waterways, harbour and coastal operators for their P&I and related liabilities. We also arranged for the club to provide cover to Turk P&I, a fixed premium P&I insurer for Turkish costal vessels. We opened a new office in Brazil to provide clients of The Standard Club with access to our capabilities in Latin America.

Management Services - Americas

· Delivered continued growth for Signal Mutual: Charles Taylor has been the manager of Signal Mutual, the largest provider of Longshore workers' compensation insurance to the US maritime industry, since it was founded in 1983. Our work for Signal continued to deliver positive results for the mutual in the first half of 2014. Twelve new member companies joined Signal since the start of the 2013/14 membership year in October 2013. The total payroll of the member companies, on which calls (premiums) are calculated, is projected to reach US$ 3.7 billion by the October 2014 renewal, a 12.1% increase and a record for the mutual.

· New insurance covers: Our General Agency, established to market Charles Taylor developed products in North America has now been licenced in 40 US states. We created a new Maritime Employers' Liability cover for Signal Members in the first half of 2014; we have already received expressions of interest from brokers for the new product. We have also secured our first client for our new Hull & Machinery cover launched at the end of 2013. We are developing plans to launch a new Longshoreman Workers' Compensation Small Account program for businesses whose premiums are too small to join the mutual under the current rules. Plans are well advanced and we expect to progress the initiative in the second half of the year.

· SCALA, which provides workers' compensation to the majority of Canada's ship owners, continues to deliver a steady performance. More than 99% of members by premium volume renewed their cover for 2014 and the mutual has continued to grow its contingency fund.

Adjusting Services

The Adjusting Services business continues to receive a steady flow of new high quality instructions across its global office network, although its result for the first six months of 2014 was lower than its strong performance in the first half of 2013. This had been partly due to the unusually low level of insured losses in the market which has resulted in a reduced number of larger and more complex cases for our adjusters to handle. It has also been partly due to the strength of sterling, which has affected overseas earnings.

Preliminary figures reported by major insurers and brokers suggest that claims are running well below the average for recent years. Munich Re NatCatSERVICE statistics show that insured losses in US$ from natural catastrophes in the first half year of 2014 are 32% down on the 10 year average.

The volumes of loss adjusting work would be expected to increase considerably once there is a return to a more normal claims environment.

In the first half of 2014 we continued to invest for growth by acquiring a UK loss adjusting business, opening new offices, recruiting new senior staff, investing in IT and extending the range of services offered from our existing offices:

· Opened adjusting office in Brazil: We are expanding our adjusting network and opening offices where there is a demand for our services. In the first half of 2014, we opened an office in Rio de Janeiro, Brazil, to provide loss adjusting services to global and local insurance markets. The office will also provide clients with access to our Management Services capabilities in Latin America.

· Extended adjusting services from existing offices: In line with our business plan objective to deliver more adjusting services from existing offices, we appointed a senior loss adjuster in Singapore to build and lead our property and casualty adjusting capability in the region so we now have all our key disciplines represented in Singapore. We also appointed a senior executive adjuster to develop and lead our property and casualty adjusting practice in Sydney in addition to our existing aviation practice there.

· Acquired a UK loss adjusting business: In May 2014 we acquired Knowles Loss Adjusters, a UK loss adjusting business focused on UK and Ireland property and casualty (P&C) claims. The acquisition extended our UK office network with the addition of 10 offices and gives us a platform to penetrate further the UK loss adjusting market. We believe it positions us well to respond to tenders for international and national account nominations, which require a network of offices across the UK, as well as internationally.

Insurance Support Services

The Insurance Support Services business has had a good start to year and has seen a welcome improvement in its pipeline of new business.

Insurance Support Services - Non-life

The Non-life Insurance Support Services business includes Charles Taylor Insurance Services (CTIS) and our captive management, risk consulting and specialty risks business lines.

Charles Taylor Insurance Services is the largest of the non-life Insurance Support Services business lines. It provides outsourced back office insurance services to the Lloyd's, London and international insurance markets. As reported at the year end, we are now seeing promising signs that the business's performance is improving in both new services and run-off servicing.

· Launched a new delegated claims adjusting services: We launched three new services under the Taylored Claims Management (TCM) banner. These provide support to Lloyd's managing agents for volume, complex and legacy claims under the Lloyd's Claims Transformation Programme. These new services have already secured new clients in 2014.

· Secured a new run-off servicing mandate: We have been appointed as run-off manager for a general reinsurance business. CTIS is managing the entire operation and conduct of the business as well as the management of assets and liabilities.

· Established a new MGA: We have been providing administrative services to Managing General Agencies (MGA) under our MGA Service since 2013. In early 2014 we were appointed to establish a new MGA and to provide ongoing services. This holds promise for our service going forward.

· The Third Party Administrators (TPA) Central Database launched on behalf of the Lloyd's Market Association at the end of 2013 has now been set up and a number of TPAs have signed up for the service.

Other Insurance Support Services - Non-life

· Charles Taylor KnowledgeCenter, the specialist provider of tailored IT business solutions to the insurance industry, acquired by the Group in 2013, is seeing a stronger pipeline of new business. In 2014 it has won new business for its Bordereau Manager services from major Lloyd's managing agents and has been appointed by a leading Middle Eastern insurer for its workflow and diary management services.

· The Group's new Workers' Compensation TPA launched in the USA in 2013 has secured new business.

· Our Captive Management business has performed steadily in the first six months of 2014.

· The Risk Consulting business has delivered a much improved performance, albeit from a low base.

· Charles Taylor Investment Management has delivered steady performance.

· Charles Taylor Services, the Group's managing general agency has made good progress, with new business wins secured for its Hull & Machinery, D&O and Maritime Employers Liability covers.

· We are delivering an increasing range of outsourced IT consultancy and systems development services for the Group's clients.

· We launched a new service, Cyber-ATLAS, in partnership with a number of specialist suppliers to help protect businesses against cyber-attacks.

Insurance Support Services - Life

The UK offshore life run-off servicing business performed steadily in the first half. It also made good progress on its initiatives to position the business for future growth.

· Launched Charles Taylor Insurance Services Isle of Man (CTIS (IOM)): We rebranded our life insurance administration business, LCL Services, under the CTIS name. This initiative has integrated it more fully into the Group and allows it to capitalise on the Group's global presence and reputation.

· Appointed to provide TPA services:  CTIS (IOM) won a contract to provide life policy administration services to a major Caribbean-based life business.

· Launched Charles Taylor Insurance Fund Services: We established this service with the support of a leading fund administration software provider. The new business will provide specialist fund services for life companies' unitised funds and portfolio bonds.

Insurers in Run-off

Performance for the six months to 30 June 2014 and to 30 June 2013

Life Run-off

In line with our business strategy, we continue to seek further UK international 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 delivered an operating loss.

Optimise business operations

In line with our business strategy, we took positive steps to strengthen the Group's core capabilities and support services to underpin growth. In the first half of 2014 we:

· Expanded our new IT team based in Vietnam to help develop our new Adjusting Services management system, to deliver development work of our new P&I system for Management Services and to support system development in Insurance Support Services. As reported at the end of 2013, this takes advantage of the high levels of IT literacy and lower operating costs in Vietnam

· Appointed a new Group Human Resources Director from a leading international professional services business and a Group Chief Financial Officer to continue to drive forward the development of the Group's financial management

· We promoted the Chief Operating Officer of Signal Administration to the new role of President of Management Services - Americas, with responsibility for implementing our long term strategy and the management of all operational and administrative functions of the business

· We appointed a Performance and Strategy Director for Management Services - UK and International to be responsible for driving business results and launching new products and services as well as the development and delivery of the longer-term strategy of the business

· We appointed Chief Operating Officers for Non-life Insurance Support services and our Captive Management business. We believe that both appointments will help to focus and accelerate the progress of our new business and service initiatives

Current trading and outlookOur core business is performing steadily. The strength of Sterling has moderated the result of our Management Services business which would otherwise have delivered an even stronger performance. With insured claims across the global market resulting from natural catastrophes in H1 32% below their 10 year average (according to Munich Re), Adjusting Services' performance will depend on whether there is an upturn in the volume of large claims in the market for the rest of the year. We are continuing to invest in people, offices and systems to support our growth strategy. The Insurance Support Services business has had a strong start to year and continues to trade well. Our Insurers in Run-off business is performing satisfactorily.

We have taken forward our initiatives in the first six months of 2014, many of which are now gaining real traction in the market. We also enjoy strong, long-term relationships with our established clients. We believe the prospects for further growth in Professional Services from our insurance clients remains strong and we look forward to growing our business for the benefit of our shareholders, clients and staff.

David Marock

Group Chief Executive Officer

28 August 2014

Group Chief Financial Officer's Review

Results

The results for the period are summarised in the following table and are explained in more detail in the Group Chief Executive Officer's Review.

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

The adjusted financial measures exclude acquired customer relationship intangible charges, non-recurring items and non-controlling interests as set out in the table below.

Non-recurring items are related to a restructuring charge incurred as part of the continuing cost reduction initiatives started in the prior year.

Net debt, cashflow and financing

Net debt at the half year was £21.9m compared to £19.7m at June 2013 half year. We have again benefited from the advance payment of the annual fee by one of our Management Services clients which reduced debt from the year-end figure.

The year-on-year rise reflects the impact the cash consideration paid for the acquisition of the business and assets of KnowledgeCenter in the second half of 2013, an increased investment in IT systems during the period and an increase in the working capital of the Adjusting Services business.

The advance fee payment results in net debt gradually rising over the year and we believe that a 12-month rolling average figure is a better way to represent the Group's underlying borrowings. At 30 June 2014, our average net debt was £23.7m, down from £24.5m at 30 June 2013. We continue to focus on managing our debt while investing for the future.

Retirement benefit scheme

The retirement benefit obligation in the Group balance sheet at 30 June 2014 was £31.4m, compared to £26.7m at the year end and £23.2m at 30 June 2013. The increase in obligation is a result of falls in corporate bond yields, giving rise to a lower discount rate. We also updated our mortality assumptions.

Dividends

An interim dividend of 3.25p per share (2013: 3.25p) has been declared and will be paid on 28 November 2014 to shareholders on the register on 17 October 2014.

Foreign exchange

Charles Taylor has significant overseas revenues which have been affected by the recent strength of Sterling. Many of our costs are also incurred in local currencies, so the strength of Sterling has had a proportionally greater effect on revenue than profit. The rates at which we have translated the Group's overseas profits have fallen significantly year on year. Examples include US$ profits translated at 1.67 (2013: 1.55), Canadian $ at 1.82 (2013: 1.58), Singapore $ at 2.11 (2013: 1.92) and Australian $ at 1.83 (2013: 1.54).

Taxation

The effective tax rate on adjusted profits for the period is 17.7%, reduced to 14.2% by a US tax refund, (2013: 16.6%). The movement in the effective tax rate reflects the profit mix across different taxation jurisdictions.

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 2014 fall into the three categories of business, financial, and regulatory compliance risks. These remain unchanged from those explained in the 2013 annual report and accounts. The Group's risk management systems are designed to manage the risk of failing to achieve our business objectives. We have an embedded and continuing process for identifying, evaluating and managing the principal risks which the Group faces.

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

28 August 2014

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 28 August 2014.

Tito Soso Director

28 August 2014

Condensed consolidated cash flow statement

Condensed consolidated statement of changes in equity

Own shares comprise 251,905 (30 June 2013: 253,960; 31 December 2013: 258,453) shares held by the Charles Taylor Employee Share Ownership Plan Trust ("ESOP"). The market value of these shares was £579,382 (30 June 2013: £477,445; 31 December 2013: £651,302) at the balance sheet date.

The trustee of the ESOP is Summit Trust International SA, an independent professional trust company registered in Switzerland. 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.