23rd Sep 2008 07:00
RNS Number : 0326E
Tawa PLC
23 September 2008
PRESS RELEASE 23 September 2008
FOR IMMEDIATE RELEASE
Tawa plc
Interim results for the six months ended 30 June 2008
Tawa plc ('Tawa' or 'the Group'), the UK-quoted consolidator of non-life insurance run-off, today announces interim results for the six months ended 30 June 2008.
OPERATIONAL HIGHLIGHTS
On 31 March, Tawa completed the US acquisition of PXRE Reinsurance Company ("PXRE") from Argo Group.
The acquisition was funded by a $30 million debt facility and the issue of new shares raising $28.7 million.
A final dividend for 2007 of 2.96 cents (1.50 pence) per share was paid on 30 June 2008.
FINANCIAL HIGHLIGHTS
Profit before tax and discontinued operations for the half year $11.7 million (30 June 2007: $39.4 million).
Discontinued business has suffered from marking to market CX Re's bond portfolio, resulting in unrealised losses of $5m for the half year, bringing the total unrealised losses being carried by CX Re to $10m.
Profit after tax and discontinued operations for the half year $1.4 million (30 June 2007: $41.8 million).
Net assets increased by $26.3 million to $263.4 million at 30 June 2008 - $2.33 per share (31 December 2007 - $2.33).
Gilles Erulin, Chief Executive, commented: "The half-year was marked by the acquisition of PXRE which represents our first step into the US market and opens new acquisition opportunities for Tawa. In the US and elsewhere, growth opportunities will also arise from the current instability in financial markets which Tawa will pursue with the appropriate caution".
The full interim results for the six months ended 30 June 2008 will be sent to shareholders shortly and will be available on the Company's website at www.tawaplc.com
Enquiries:
|
Gilles Erulin, Chief Executive
Tawa plc
|
020 7068 8000
|
|
David Haggie or Peter Rigby
Haggie Financial
|
020 7417 8989
|
|
James Britton or Guy Wiehahn
KBC Peel Hunt (nominated adviser and broker)
|
020 7418 8900
|
Note for Editors
Tawa plc was formed in 2001 with the purpose of acquiring and managing the run-off portfolios of non-life insurance and reinsurance companies. It also provides run-off related services through a dedicated subsidiary, Tawa Management.
As a consolidator of the non-life run-off market, Tawa's strategy is to acquire companies and portfolios in run-off in the UK, US, continental Europe, Bermuda, Australia and elsewhere as opportunities arise.
By creating a diversified portfolio of run-off businesses at different stages of the run-off process Tawa will gain economies of scale whilst also enhancing and stabilising earnings.
Since its formation, Tawa has acquired CX Reinsurance Company Limited (CX Re), KX Reinsurance Company limited (KX Re) and PXRE Reinsurance Company and is managing the run-off of these businesses.
In July 2007 Tawa plc was floated on the AIM market.
Further information can be found on the Company's website:
www.tawaplc.com
Interim results
Summary
In 2008 Tawa continued its strategy to acquire run off companies and portfolios with the completion of its first US based acquisition PXRE on 31 March. The acquisition was funded by a $30 million debt facility and the issue of new shares raising $28.4 million (£14.2 million). All the new shares were issued to Karrick Limited at a price of $2.60 (£1.30) per share. Karrick Limited is a Guernsey registered company and is wholly-owned by Karrick Trust established for various members of the Lakshmi Mittal family.
The Group continues to seek further run-off opportunities in the market but notes that in the last six months the market has become increasingly competitive with discounts to net asset value narrowing and in some instances premiums to net asset value being paid. The Group seeks opportunities that fit its overall strategic objectives and that deliver acceptable returns to its shareholders.
Financial results
The profit for the period on continuing operations was $11.7 million and losses on discontinued operations was $10.3 million, resulting in a Group net profit of $1.4 million (6 months to 30 June 2007 $41.8 million).
Group net assets increased by $26.3 million to $263.4 million ($2.33/£1.17 per share) at 30 June 2008.
Dividend and dividend policy
In line with the Group’s dividend policy a final dividend of 2.96 cents (1.50 pence) per share was paid on 30 June 2008.
Operational results
The Group’s operations are underwriting run-off, run-off management and other corporate activities.
Underwriting run-off
Underwriting run-off comprises the Group's insurance subsidiaries in run-off, namely KX Re and PXRE. The objective for the Group is to reduce insurance liabilities by accelerating the natural run-off of the portfolios to enable extraction of capital with regulatory approval. The underwriting run-off profit for the period was $9.8 million and the Group reduced insurance liabilities by $19.7 million.
Run-off management
Run-off management is the results of the Group's providers of run-off management and consultancy services. The revenue comprises income from consultancy services, inspections performed, run-off fees and expenses recharged. Profit for the period was $2.4 million which was broadly in line with the business plan.
Other corporate activities
Other corporate activities summarises acquisition activity, the Group’s investment in its associated undertaking CX Re, the change in the deferred consideration attributable to the sale of 87.35% of the shares of CX Re in March 2006 and the costs of developing the Group’s business.
·; The acquisition of PXRE was completed in the period and as a result of the acquisition $7.8 million profit has been reflected in the income statement, representing the difference between the total cost of the acquisition and the fair value of the net assets acquired.
·; Through its remaining investment in CX Re and the deferred consideration, which is dependent on the ultimate earn-out of the company, the Group’s results are affected by changes in the net assets of CX Re. The net assets of CX Re decreased by $11.6 million, detailed below, during the period to $80.5 million.
·; Net discounted claims reserves reduced in the period by $30 million to $182 million with a deterioration of $3.3 million.
·; During the first quarter an exercise was undertaken to review CX Re’s future resource requirements. This resulted in the reduction of some 28 staff positions and the redundancy costs associated with this review were $1.5 million.
·; As reported in CX Re’s 2007 annual accounts, the company continues to be exposed to the underperformance of the spread products market. The overall return as a result of the continuing global uncertainty surrounding spread products was a mark to market loss of $5 million on CX Re's portfolio, which resulted in an overall $1.5 million loss on portfolio performance for the period. CX Re continues to be affected by the effects of the credit spread on a mark to market basis. During the period CX Re has not had to make any write downs for impairment and the company will, in the context of liquidity requirements, continue to retain those securities with unrealised losses until the improvement of market conditions or the maturity of such investments. Cumulative unrealised losses in CX Re's balance sheet amount to $10 million which are expected to unwind as the investments approach maturity. The average credit rating of CX Re’s investment portfolio remains at AA+.
Future prospects
As noted earlier in this report the market for acquiring business in run-off has seen increased competition and keen prices being paid. The Group’s focus is moving away from the acquisition of UK risk carriers with more attention being given to the US and Continental Europe. In addition, the consulting business is receiving investment in new products and there are some innovative projects in sight. In the second half of 2008 and first half of 2009 considerable effort is being directed to consolidating the Group’s UK run-offs into one risk carrier with a significant saving in costs and the release of surplus regulatory capital.
Condensed consolidated income statement
For the period ended 30 June 2008
|
|
|
|
6 months
|
|
6 months
|
|
12 months
|
|
|
|
|
30 Jun 2008
|
|
30 Jun 2007
|
|
31 Dec 2007
|
|
|
Notes
|
|
$m
|
|
$m
|
|
$m
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
Insurance premium revenue
|
|
|
0.1
|
|
-
|
|
-
|
|
Insurance premium ceded to reinsurers
|
|
|
(0.1)
|
|
-
|
|
-
|
|
Net earned premium revenue
|
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
11.9
|
|
13.0
|
|
30.6
|
|
Investment return
|
|
|
2.6
|
|
1.2
|
|
11.5
|
|
Income
|
|
|
14.5
|
|
14.2
|
|
42.1
|
|
|
|
|
|
|
|
|
|
|
Insurance claims and loss adjustment expenses
|
|
|
6.4
|
|
0.4
|
|
5.0
|
|
Insurance claims and loss adjustment expenses recovered from reinsurers
|
|
|
0.4
|
|
(0.2)
|
|
1.2
|
|
Net insurance claims
|
|
|
6.8
|
|
0.2
|
|
6.2
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
(7.0)
|
|
(12.4)
|
|
(27.3)
|
|
Administrative expenses
|
|
|
(6.4)
|
|
(3.9)
|
|
(12.9)
|
|
Expenses
|
|
|
(13.4)
|
|
(16.3)
|
|
(40.2)
|
|
Results of operating activities
|
|
|
7.9
|
|
(1.9)
|
|
8.1
|
|
|
|
|
|
|
|
|
|
|
Share of results of associate
|
|
|
(1.5)
|
|
0.3
|
|
(0.8)
|
|
Negative goodwill recognised
|
11
|
|
7.8
|
|
41.5
|
|
41.3
|
|
Profit before finance costs
|
|
|
14.2
|
|
39.9
|
|
48.6
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
|
(2.5)
|
|
(0.5)
|
|
(2.8)
|
|
Profit before tax
|
|
|
11.7
|
|
39.4
|
|
45.8
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
|
|
-
|
|
-
|
|
-
|
|
Profit for the year from continuing operations
|
|
|
11.7
|
|
39.4
|
|
45.8
|
|
|
|
|
|
|
|
|
|
|
Net (loss) / profit attributable to discontinued operations
|
4
|
|
(10.3)
|
|
2.4
|
|
(2.9)
|
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
|
|
1.4
|
|
41.8
|
|
42.9
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Equity holders of the Group
|
|
|
1.4
|
|
41.8
|
|
42.9
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
From continuing and discontinued operations
|
5
|
|
|
|
|
|
|
|
Basic: Ordinary shares ($ per share)
|
|
|
0.01
|
|
0.41
|
|
0.42
|
|
Diluted: Ordinary shares ($ per share)
|
|
|
0.01
|
|
0.41
|
|
0.42
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
5
|
|
|
|
|
|
|
|
Basic: Ordinary shares ($ per share)
|
|
|
0.11
|
|
0.39
|
|
0.45
|
|
Diluted: Ordinary shares ($ per share)
|
|
|
0.11
|
|
0.39
|
|
0.45
|
Condensed consolidated balance sheet
As at 30 June 2008
|
|
|
|
30 Jun 2008
|
|
30 Jun 2007
|
|
31 Dec 2007
|
|
|
Notes
|
|
$m
|
|
$m
|
|
$m
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
53.9
|
|
74.2
|
|
38.5
|
|
Investments: Debt and equity securities
|
|
|
328.5
|
|
123.1
|
|
165.0
|
|
Loans and receivables including insurance receivables
|
|
|
40.4
|
|
10.5
|
|
18.8
|
|
Reinsurers' share of technical provisions
|
|
|
48.7
|
|
19.2
|
|
18.1
|
|
Property, plant and equipment
|
|
|
1.4
|
|
0.7
|
|
0.1
|
|
Deferred assets
|
7
|
|
94.4
|
|
109.2
|
|
104.3
|
|
Interests in associate
|
|
|
10.2
|
|
12.9
|
|
11.8
|
|
Goodwill
|
|
|
18.2
|
|
18.2
|
|
18.2
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
595.7
|
|
368.0
|
|
374.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Share capital
|
8
|
|
22.2
|
|
57.2
|
|
20.0
|
|
Share premium
|
8
|
|
111.4
|
|
-
|
|
85.2
|
|
Other reserve
|
|
|
0.6
|
|
-
|
|
-
|
|
Retained earnings
|
|
|
129.2
|
|
129.6
|
|
131.9
|
|
Total equity attributable to equity holders
|
|
|
263.4
|
|
186.8
|
|
237.1
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Creditors arising out of reinsurance operations
|
|
|
68.7
|
|
2.7
|
|
4.5
|
|
Other liabilities
|
|
|
8.2
|
|
6.8
|
|
6.8
|
|
Financial liabilities - borrowings
|
9
|
|
66.0
|
|
70.0
|
|
35.0
|
|
Technical provisions
|
|
|
189.4
|
|
101.7
|
|
91.4
|
|
Total liabilities
|
|
|
332.3
|
|
181.2
|
|
137.7
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
595.7
|
|
368.0
|
|
374.8
|
Condensed consolidated statement of changes in equity
As at 30 June 2008
|
|
|
Issued
|
|
Share premium
|
|
Other
|
|
Retained
|
|
Total
|
|
|
|
capital
|
|
reserve
|
|
reserve
|
|
earnings
|
|
|
|
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2007
|
|
57.2
|
|
-
|
|
-
|
|
85.3
|
|
142.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation differences
|
|
-
|
|
-
|
|
-
|
|
2.5
|
|
2.5
|
|
Profit for the period
|
|
-
|
|
-
|
|
-
|
|
41.8
|
|
41.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2007
|
|
57.2
|
|
-
|
|
-
|
|
129.6
|
|
186.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 July 2007
|
|
57.2
|
|
-
|
|
-
|
|
129.6
|
|
186.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital restructure
|
|
(37.2)
|
|
-
|
|
-
|
|
-
|
|
(37.2)
|
|
Premium arising on issue of equity
|
|
-
|
|
90.9
|
|
-
|
|
-
|
|
90.9
|
|
Expenses on issue of equity
|
|
-
|
|
(5.7)
|
|
-
|
|
-
|
|
(5.7)
|
|
Currency translation differences
|
|
-
|
|
-
|
|
-
|
|
1.2
|
|
1.2
|
|
Profit for the period
|
|
-
|
|
-
|
|
-
|
|
1.1
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2007
|
|
20.0
|
|
85.2
|
|
-
|
|
131.9
|
|
237.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2008
|
|
20.0
|
|
85.2
|
|
-
|
|
131.9
|
|
237.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issue
|
|
2.2
|
|
-
|
|
-
|
|
-
|
|
2.2
|
|
Premium arising on issue of equity shares
|
|
-
|
|
26.5
|
|
-
|
|
-
|
|
26.5
|
|
Expenses on issue of equity
|
|
-
|
|
(0.3)
|
|
-
|
|
-
|
|
(0.3)
|
|
Share based payments
|
|
-
|
|
-
|
|
0.6
|
|
-
|
|
0.6
|
|
Currency translation differences
|
|
-
|
|
-
|
|
-
|
|
(0.8)
|
|
(0.8)
|
|
Profit for the period
|
|
-
|
|
-
|
|
-
|
|
1.4
|
|
1.4
|
|
Dividends
|
|
-
|
|
-
|
|
-
|
|
(3.3)
|
|
(3.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2008
|
|
22.2
|
|
111.4
|
|
0.6
|
|
129.2
|
|
263.4
|
Condensed consolidated cash flow statement
For the period ended 30 June 2008
|
|
|
|
6 months
|
|
6 months
|
|
12 months
|
|
|
|
|
30 Jun 2008
|
|
30 Jun 2007
|
|
31 Dec 2007
|
|
|
Notes
|
|
$m
|
|
$m
|
|
$m
|
|
|
|
|
|
|
|
|
|
|
Net cash from operations
|
10
|
|
(8.4)
|
|
(0.4)
|
|
(12.1)
|
|
|
|
|
|
|
|
|
|
|
Cash payments to acquire equity and debt securities
|
|
|
(494.2)
|
|
(19.2)
|
|
(256.5)
|
|
Cash receipts from sale of equity and debt securities
|
|
|
515.3
|
|
9.9
|
|
85.9
|
|
Cash transferred from investing activities
|
|
|
(7.5)
|
|
(37.9)
|
|
81.4
|
|
Cash receipts from interest
|
|
|
4.5
|
|
1.1
|
|
6.5
|
|
Acquisition of subsidiary net of cash and cash equivalents
|
11
|
|
(49.4)
|
|
45.0
|
|
44.6
|
|
Cash used in investing activities
|
|
|
(31.3)
|
|
(1.1)
|
|
(38.1)
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(3.3)
|
|
-
|
|
-
|
|
Proceeds from issue of equity shares
|
8
|
|
28.4
|
|
-
|
|
48.0
|
|
Proceeds from financial borrowings
|
9
|
|
30.0
|
|
70.0
|
|
70.0
|
|
Repayments of financial borrowings
|
|
|
-
|
|
-
|
|
(35.0)
|
|
Cash flows generated from financing activities
|
|
|
55.1
|
|
70.0
|
|
83.0
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
15.4
|
|
68.5
|
|
32.8
|
|
Cash and cash equivalents at beginning of period
|
|
|
38.5
|
|
5.7
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
53.9
|
|
74.2
|
|
38.5
|
Notes to the condensed consolidated financial statements
For the period ended 30 June 2008
1 General information
Tawa plc (the “Company”) and its subsidiaries (together the “Group”) are engaged in two principal business activities:
·; The acquisition and run-off of insurance companies that have ceased underwriting, and;
·; The provision of run-off management services to acquired insurance companies.
The interim consolidated financial statements do not constitute statutory accounts as defined in section 240 of the Companies Act 1985 and should be read in conjunction with the Company's consolidated financial statements for the year ended 31 December 2007. 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 237(2) or (3) of the Companies Act 1985.
2 Accounting policies
The annual financial statements of Tawa plc are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this interim report have 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 financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2007.
3 Segmental information
Primary segment information - operating results by operating segment
The Group has 3 primary segments:
·; Underwriting run-off;
·; Run-off management services; and
·; Other corporate activities.
|
Six months ended 30 June 2008
|
|
Underwriting
|
|
Run-off
|
|
Other corporate
|
|
Eliminations
|
|
Total
|
|
|
|
run-off
|
|
management
|
|
activities
|
|
|
|
|
|
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
Insurance premium revenue
|
|
0.1
|
|
-
|
|
-
|
|
-
|
|
0.1
|
|
Insurance premium ceded to reinsurers
|
|
(0.1)
|
|
-
|
|
-
|
|
-
|
|
(0.1)
|
|
Net earned premium revenue
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
-
|
|
21.1
|
|
0.6
|
|
(9.8)
|
|
11.9
|
|
Investment return
|
|
2.2
|
|
-
|
|
0.4
|
|
-
|
|
2.6
|
|
Income
|
|
2.2
|
|
21.1
|
|
1.0
|
|
(9.8)
|
|
14.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance claims and loss adjustment expenses
|
|
6.6
|
|
(1.1)
|
|
0.6
|
|
0.3
|
|
6.4
|
|
Insurance claims and loss adjustment expenses recovered from reinsurers
|
|
0.4
|
|
-
|
|
-
|
|
-
|
|
0.4
|
|
Net insurance claims
|
|
7.0
|
|
(1.1)
|
|
0.6
|
|
0.3
|
|
6.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
(0.1)
|
|
(16.4)
|
|
-
|
|
9.5
|
|
(7.0)
|
|
Administrative expenses
|
|
0.7
|
|
(1.2)
|
|
(5.9)
|
|
-
|
|
(6.4)
|
|
Expenses
|
|
0.6
|
|
(17.6)
|
|
(5.9)
|
|
9.5
|
|
(13.4)
|
|
Results of operating activities
|
|
9.8
|
|
2.4
|
|
(4.3)
|
|
-
|
|
7.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of results of associate
|
|
-
|
|
-
|
|
(1.5)
|
|
-
|
|
(1.5)
|
|
Negative goodwill recognised
|
|
-
|
|
-
|
|
7.8
|
|
-
|
|
7.8
|
|
Profit before finance costs
|
|
9.8
|
|
2.4
|
|
2.0
|
|
-
|
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
-
|
|
-
|
|
(2.5)
|
|
-
|
|
(2.5)
|
|
Profit / (loss) before tax
|
|
9.8
|
|
2.4
|
|
(0.5)
|
|
-
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Profit / (loss) for the period from continuing operations
|
|
9.8
|
|
2.4
|
|
(0.5)
|
|
-
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year from discontinued operations
|
|
-
|
|
-
|
|
(10.3)
|
|
-
|
|
(10.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) for the period
|
|
9.8
|
|
2.4
|
|
(10.8)
|
|
-
|
|
1.4
|
|
Six months ended 30 June 2007
|
|
Underwriting
|
|
Run-off
|
|
Other corporate
|
|
Eliminations
|
|
Total
|
|
|
|
|
run-off
|
|
management
|
|
activities
|
|
|
|
|
|
|
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
-
|
|
15.2
|
|
-
|
|
(2.2)
|
|
13.0
|
|
|
Investment return
|
|
0.7
|
|
0.3
|
|
0.2
|
|
-
|
|
1.2
|
|
|
Income
|
|
0.7
|
|
15.5
|
|
0.2
|
|
(2.2)
|
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance claims and loss adjustment expenses
|
|
0.1
|
|
-
|
|
-
|
|
0.3
|
|
0.4
|
|
|
Insurance claims and loss adjustment expenses recovered from reinsurers
|
|
(0.2)
|
|
-
|
|
-
|
|
-
|
|
(0.2)
|
|
|
Net insurance claims
|
|
(0.1)
|
|
-
|
|
-
|
|
0.3
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
-
|
|
(13.4)
|
|
(0.8)
|
|
1.8
|
|
(12.4)
|
|
|
Administrative expenses
|
|
(0.2)
|
|
(0.3)
|
|
(2.0)
|
|
(1.4)
|
|
(3.9)
|
|
|
Expenses
|
|
(0.2)
|
|
(13.7)
|
|
(2.8)
|
|
0.4
|
|
(16.3)
|
|
|
Results of operating activities
|
|
0.4
|
|
1.8
|
|
(2.6)
|
|
(1.5)
|
|
(1.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of results of associate
|
|
-
|
|
-
|
|
0.3
|
|
-
|
|
0.3
|
|
|
Negative goodwill recognised
|
|
-
|
|
-
|
|
41.5
|
|
-
|
|
41.5
|
|
|
Profit / (loss) before finance costs
|
|
0.4
|
|
1.8
|
|
39.2
|
|
(1.5)
|
|
39.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
-
|
|
-
|
|
(0.5)
|
|
-
|
|
(0.5)
|
|
|
Profit / (loss) before tax
|
|
0.4
|
|
1.8
|
|
38.7
|
|
(1.5)
|
|
39.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Profit / (loss) for the period from continuing operations
|
|
0.4
|
|
1.8
|
|
38.7
|
|
(1.5)
|
|
39.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period from discontinued operations
|
|
-
|
|
-
|
|
2.4
|
|
-
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) for the period
|
|
0.4
|
|
1.8
|
|
41.1
|
|
(1.5)
|
|
41.8
|
|
Primary segment information - balance sheet by operating segment
|
As at 30 June 2008
|
|
Underwriting
|
|
Run-off
|
|
Other corporate
|
|
Total
|
|
|
|
run-off
|
|
management
|
|
activities
|
|
|
|
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
Investments, cash and cash equivalents
|
|
379.7
|
|
1.1
|
|
1.6
|
|
382.4
|
|
Reinsurers' share of technical provisions
|
|
45.6
|
|
-
|
|
3.1
|
|
48.7
|
|
Property, plant and equipment
|
|
-
|
|
1.4
|
|
-
|
|
1.4
|
|
Other assets
|
|
32.7
|
|
7.4
|
|
123.1
|
|
163.2
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
458.0
|
|
9.9
|
|
127.8
|
|
595.7
|
|
|
|
|
|
|
|
|
|
|
|
Technical provisions
|
|
174.2
|
|
-
|
|
15.2
|
|
189.4
|
|
Financial liabilities - borrowings
|
|
-
|
|
-
|
|
66.0
|
|
66.0
|
|
Other liabilities and equity
|
|
69.3
|
|
5.8
|
|
265.2
|
|
340.3
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
243.5
|
|
5.8
|
|
346.4
|
|
595.7
|
|
As at 30 June 2007
|
|
Underwriting
|
|
Run-off
|
|
Other corporate
|
|
Total
|
|
|
|
run-off
|
|
management
|
|
activities
|
|
|
|
|
|
$m
|
|
$m
|
|
$m
|
|
$m
|
|
Investments, cash and cash equivalents
|
|
187.5
|
|
9.1
|
|
0.7
|
|
197.3
|
|
Reinsurers' share of technical provisions
|
|
19.2
|
|
-
|
|
-
|
|
19.2
|
|
Property, plant and equipment
|
|
-
|
|
0.7
|
|
-
|
|
0.7
|
|
Other assets
|
|
8.7
|
|
0.9
|
|
141.2
|
|
150.8
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
215.4
|
|
10.7
|
|
141.9
|
|
368.0
|
|
|
|
|
|
|
|
|
|
|
|
Technical provisions
|
|
93.0
|
|
-
|
|
8.7
|
|
101.7
|
|
Financial liabilities - borrowings
|
|
-
|
|
-
|
|
70.0
|
|
70.0
|
|
Other liabilities and equity
|
|
2.7
|
|
-
|
|
193.6
|
|
196.3
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
95.7
|
|
-
|
|
272.3
|
|
368.0
|
Secondary segment information – Geographical analysis
The Group's operations are located in the United Kingdom and the United States of America. The underwriting run-off segment is located in both countries; run-off management and other corporate activities are all carried out in the United Kingdom. All of the Group's revenue is derived from providing services within the United Kingdom irrespective of the origin of services. The following is an analysis of the assets and liabilities on a geographical basis.
|
|
|
30 Jun 2008
|
|
30 Jun 2007
|
|
31 Dec 2007
|
|
|
|
$m
|
|
$m
|
|
$m
|
|
United Kingdom
|
|
|
|
|
|
|
|
Assets
|
|
349.6
|
|
368.0
|
|
374.8
|
|
Liabilities
|
|
162.5
|
|
181.2
|
|
137.7
|
|
|
|
|
|
|
|
|
|
Assets and liabilities in the United Kingdom
|
|
187.1
|
|
186.8
|
|
237.1
|
|
|
|
|
|
|
|
|
|
United States of America
|
|
|
|
|
|
|
|
Assets
|
|
246.1
|
|
-
|
|
-
|
|
Liabilities
|
|
169.8
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Assets and liabilities in the United States of America
|
|
76.3
|
|
-
|
|
-
|
4 Discontinued operations
On 21 March 2006, the Company sold a significant proportion (87.35%) of its "A" shareholding in CX Reinsurance Company Limited to a consortium in which the Company participates. The majority of the consideration receivable is in the form of deferred consideration. The results of the discontinued operation which have been included in the consolidated income statement are as follows:
|
|
|
30 Jun 2008
|
|
30 Jun 2007
|
|
31 Dec 2007
|
|
|
|
$m
|
|
$m
|
|
$m
|
|
(Loss) / profit on sale of investment
|
|
(10.3)
|
|
2.4
|
|
(5.1)
|
|
Other income on sale of investment (see below)
|
|
-
|
|
-
|
|
2.2
|
|
|
|
|
|
|
|
|
|
Net (loss) / profit attributable to discontinued operations
|
|
(10.3)
|
|
2.4
|
|
(2.9)
|
Other income on the sale of investment relates to the receipt of a transaction facilitation fee by the Company with regards to the sale of shares in CX Reinsurance Company Limited. No tax is payable on the profit on sale of investment or other income on the sale of investment.
5 Earnings per share
|
|
|
30 Jun 2008
|
|
30 Jun 2007
|
|
31 Dec 2007
|
|
Earnings
|
|
$m
|
|
$m
|
|
$m
|
|
Earnings for the purposes of basic earnings per share from continuing and discontinued operations being net profit attributable to equity holders of the Group
|
|
1.4
|
|
41.8
|
|
42.9
|
|
|
|
|
|
|
|
|
|
Earnings for the purposes of basic earnings per share from continuing operations being net profit attributable to equity holders of the Group
|
|
11.7
|
|
39.4
|
|
45.8
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares for the purposes of basic earnings per share
|
|
105,589,733
|
|
101,891,017
|
|
101,891,017
|
|
Effect of dilutive potential ordinary shares:
|
|
|
|
|
|
|
|
Share options
|
|
1,740,000
|
|
-
|
|
1,015,000
|
|
Weighted average number of ordinary shares for the purposes of diluted earnings per share
|
|
107,329,733
|
|
101,891,017
|
|
102,906,017
|
|
|
|
|
|
|
|
|
|
From continuing and discontinued operations
|
|
|
|
|
|
|
|
Basic: Ordinary shares ($ per share)
|
|
0.01
|
|
0.41
|
|
0.42
|
|
Diluted: Ordinary shares ($ per share)
|
|
0.01
|
|
0.41
|
|
0.42
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
|
|
|
|
|
|
Basic: Ordinary shares ($ per share)
|
|
0.11
|
|
0.39
|
|
0.45
|
|
Diluted: Ordinary shares ($ per share)
|
|
0.11
|
|
0.39
|
|
0.45
|
6 Dividends
During the interim period a final dividend of 2.96 cents per share was paid to the shareholders.
7 Deferred assets
Deferred assets relate to the consideration outstanding on the disposal of a subsidiary CX Reinsurance Company Limited, as described in note 4. Part of the deferred consideration is related to the net asset value of CX Reinsurance Company Limited and is subject to net asset value adjustments through the income statement. Deferred consideration consists of $24.0 million (Jun 2007: $20.6 million, Dec 2007: $23.8 million) in respect of a transaction facilitation fee and $70.4 million (Jun 2007: $88.6 million, Dec 2007: $80.5 million) of proceeds on the disposal of CX Reinsurance Company Limited, a total of $94.4 million (Jun 2007: $109.2 million, Dec 2007; $104.3 million).
8 Share capital
Share capital as at 30 June 2008 amounted to $22.2 million. During the period the Group issued 11,096,147 £0.10 shares, increasing the shares in issue from 101,891,017 shares to 112,987,164 shares. The shares were issued at a premium of £1.20 per share increasing the premium reserves by $26.5 million. Against this was offset costs of raising capital of $0.3 million.
9 Financial liabilities – borrowings
The Group obtained an additional bank loan of $30 million on 27 March 2008. The loan bears interest at LIBOR plus 3.75% - 4.75% and is repayable by 31 March 2012. The proceeds were used to acquire subsidiary PXRE Reinsurance Company.
10 Net cash from operations
|
|
30 Jun 2008
|
|
30 Jun 2007
|
|
31 Dec 2007
|
||||||
|
|
Contin- uing
|
Discon- tinued
|
Total
|
|
Contin- uing
|
Discon-tinued
|
Total
|
|
Contin-uing
|
Discon-tinued
|
Total
|
|
|
$m
|
$m
|
$m
|
|
$m
|
$m
|
$m
|
|
$m
|
$m
|
$m
|
|
(Loss) / profit for the period
|
11.7
|
(10.3)
|
1.4
|
|
39.4
|
2.4
|
41.8
|
|
45.8
|
(2.9)
|
42.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
- share of results of associate
|
1.5
|
-
|
1.5
|
|
(0.3)
|
-
|
(0.3)
|
|
0.8
|
-
|
0.8
|
|
- discontinued operations
|
-
|
10.3
|
10.3
|
|
-
|
(2.4)
|
(2.4)
|
|
-
|
2.9
|
2.9
|
|
- depreciation
|
0.2
|
-
|
0.2
|
|
(0.1)
|
-
|
(0.1)
|
|
0.7
|
-
|
0.7
|
|
- share based payment expense
|
0.3
|
-
|
0.3
|
|
-
|
-
|
-
|
|
0.3
|
-
|
0.3
|
|
- additions to fixed assets
|
(1.5)
|
-
|
(1.5)
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
- negative goodwill
|
(7.8)
|
-
|
(7.8)
|
|
(41.5)
|
-
|
(41.5)
|
|
(41.3)
|
-
|
(41.3)
|
|
- amortisation of risk premium
|
(0.6)
|
-
|
(0.6)
|
|
-
|
-
|
-
|
|
(4.0)
|
-
|
(4.0)
|
|
- investment return for the period transferred to investing activities
|
(2.6)
|
-
|
(2.6)
|
|
(1.5)
|
-
|
(1.5)
|
|
(11.5)
|
-
|
(11.5)
|
|
- (loss) / profit on foreign exchange
|
(0.8)
|
-
|
(0.8)
|
|
4.6
|
-
|
4.6
|
|
2.5
|
-
|
2.5
|
|
Change in operating assets and liabilities
|
0.4
|
-
|
0.4
|
|
0.6
|
-
|
0.6
|
|
(6.7)
|
-
|
(6.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in insurance receivables and liabilities
|
(12.4)
|
-
|
(12.4)
|
|
(0.7)
|
-
|
(0.7)
|
|
(2.7)
|
-
|
(2.7)
|
|
Net increase / (decrease) in loans and receivables
|
0.5
|
-
|
0.5
|
|
(1.8)
|
-
|
(1.8)
|
|
(4.2)
|
-
|
(4.2)
|
|
Net increase in other operating liabilities
|
1.4
|
-
|
1.4
|
|
1.5
|
-
|
1.5
|
|
1.5
|
-
|
1.5
|
|
Cash used in operations
|
(10.1)
|
-
|
(10.1)
|
|
(0.4)
|
-
|
(0.4)
|
|
(12.1)
|
-
|
(12.1)
|
|
Interest paid
|
1.7
|
-
|
1.7
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operations
|
(8.4)
|
-
|
(8.4)
|
|
(0.4)
|
-
|
(0.4)
|
|
(12.1)
|
-
|
(12.1)
|
11 Business combinations
On 31 March 2008, 100% of the issued share capital of PXRE Reinsurance Company, an insurer in run-off, was acquired by WT Holdings Inc, a wholly owned subsidiary. This transaction has been accounted for by the purchase method of accounting. The net assets acquired in the transaction, and the goodwill arising, are as follows:
|
|
|
Book value
|
|
Fair value adjustments
|
|
Fair value on acquisition
|
|
|
|
$m
|
|
$m
|
|
$m
|
|
Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
10.3
|
|
-
|
|
10.3
|
|
Investments: Debt and equity securities
|
|
187.5
|
|
-
|
|
187.5
|
|
Loans and receivables including insurance receivables
|
|
22.6
|
|
-
|
|
22.6
|
|
Reinsurers' share of technical provisions
|
|
31.1
|
|
0.4
|
|
31.5
|
|
Liabilities
|
|
|
|
|
|
|
|
Creditors arising out of reinsurance operations
|
|
62.8
|
|
2.8
|
|
65.6
|
|
Technical provisions
|
|
118.1
|
|
0.7
|
|
118.8
|
|
|
|
70.6
|
|
(3.1)
|
|
67.5
|
|
Negative goodwill on acquisition
|
|
|
|
|
|
7.8
|
|
|
|
|
|
|
|
|
|
Consideration paid
|
|
|
|
|
|
59.7
|
|
Consideration paid net of cash and cash equivalents
|
|
|
|
|
|
49.4
|
In determining the fair value of PXRE Reinsurance Company's assets and liabilities acquired, the technical provisions have been increased to include an insurance risk premium which reflects managements' assessment of the uncertainty of the technical provisions acquired. At acquisition the risk premium was assessed at $8 million.
The acquisition was funded by a $30 million debt facility and the issue of new shares raising $28.4 million.
Since acquisition PXRE Reinsurance Company has contributed profits of $8.3 million after the elimination of intra-group income and expenses. If the acquisition of PXRE had been completed on the first day of the financial year, Group profit attributable to equity holders of the parent would have been $12.6 million.
12 Related party transactions
Associate - CX Reinsurance Company Limited
Two of the Company’s subsidiaries, Tawa Management Limited and Tawa Consulting Limited, provide insurance run-off management services to CX Reinsurance Company Limited an associate of the Group in which the company has a 12.65% share interest and a 49.95% voting interest.
Run-off services are provided on a negotiated fee basis, the terms and pricing of which are at arm’s length. Run-off management expenses are recharged at cost by Tawa Management Limited and at an hourly charge out rate by Tawa Consulting Limited.
For the interim period to 30 June 2008 a run-off management fee of $2 million was charged to CX Reinsurance Company Limited by Tawa Management Limited and expenses recharged at cost amounted to $9.0 million. $0.1 million was charged by Tawa Consulting Limited.
On 18 June 2008 a sale and repurchase agreement was entered into between CX Reinsurance Company Limited and the Company's subsidiary, KX Reinsurance Company Limited. CX Reinsurance Company Limited sold a bond to KX Reinsurance Company Limited for $23.5 million with the option to repurchase this bond on 18 December 2008.
Key management personnel
The Group considers its key management personnel to include its executive and non executive Directors.
Remuneration of key management personnel
The remuneration of the Directors is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. For the period to 30 June 2008 this included 9 individuals (30 Jun 2006: 9, 31 Dec 2007: 9).
|
|
|
30 Jun 2008
|
|
30 Jun 2007
|
|
31 Dec 2007
|
|
|
|
$m
|
|
$m
|
|
$m
|
|
Short-term employee benefits
|
|
2.2
|
|
0.3
|
|
1.6
|
|
Post-employment benefits
|
|
0.4
|
|
-
|
|
0.3
|
|
|
|
|
|
|
|
|
|
Management remuneration
|
|
2.6
|
|
0.3
|
|
1.9
|
Share and loan transactions with members of key management
As at 30 June 2008, the Group had no travel loans outstanding to key management (30 Jun 2007: $0.1 million, 31 Dec 2007: $0.1 million). Share based payments granted to the Directors in the period were $0.2 million (30 Jun 2007: $nil, 31 Dec 2007: $0.2 million).
Immediate and ultimate parent company
In the opinion of the Directors, the immediate and ultimate parent is Financière Pinault S.C.A., a Société en commandite par actions incorporated in France. 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.
13 Contingent liabilities
Certain of the Group's subsidiaries and its associate are routinely involved in litigation or potential litigation related to primarily the settlement of insurance claims liabilities. However, none of such actual or proposed litigation that had not been provided for met the definition of a contingent liability. Consequently, the Group had no insurance related, or other, contingent liabilities as at 30 June 2008 (30 Jun 2007 and 31 Dec 2007: no contingent liabilities).
14 Post balance sheet events
There are no post balance sheet events that require adjustment to, or disclosure in, the financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
Related Shares:
ACH.L