25th Sep 2007 07:03
Tawa PLC25 September 2007 PRESS RELEASE FOR IMMEDIATE RELEASE Tawa plc Interim results for the six months ending 30 June 2007 Tawa plc ("Tawa" or "the Group"), the only UK-quoted consolidator of non-lifeinsurance run-off, today announces interim results for the six months ending 30June 2007. OPERATIONAL HIGHLIGHTS •On 4 May, Tawa completed the acquisition of KX Reinsurance Company Limited ("KX Re"), formerly Continental Management Services Limited, from the CNA Group. •On 26 July Tawa raised $50 million through an IPO and was admitted to AIM. FINANCIAL HIGHLIGHTS •Profit before tax and discontinued operations for the period $39.4 million (H1 2006: $4.6 million). •Reported net profit $41.8 million (H1 2006: $58.0 million). •Net assets at 30 June 2007 were $186.8 million. •Net assets increased to $236.5 million following the IPO on 26 July 2007 and net assets per share were £1.17. Gilles Erulin, Chief Executive, commented: "The acquisition of KX Re in May wasa key milestone for us, produced the bulk of profit for the period anddemonstrated the scalability of our business model. Our subsequent flotation inJuly was aimed at giving us additional currency for future acquisitions and hastherefore put us in an even stronger position to capitalise on current marketopportunities." The full interim results for the six months ended 30 June 2007 will be sent toshareholders shortly and will be available on the Company's website atwww.tawaplc.com. Enquiries: Gilles Erulin, Chief Executive 020 7204 8000Tawa plcDavid Haggie, Peter Rigby or Zoe Pocock 020 7417 8989Haggie FinancialJames Britton, Guy Wiehahn or Gordon Suggett 020 7418 8900KBC Peel Hunt (nominated adviser and broker) Note for Editors Tawa plc was formed in 2001 with the purpose of acquiring and managing therun-off portfolios of non-life insurance and reinsurance companies. It alsoprovides run-off related services through a dedicated subsidiary, TawaManagement. As a consolidator of the non-life run-off market, Tawa's strategy is to acquirecompanies 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 ofthe run-off process Tawa will gain economies of scale whilst also enhancing andstabilising earnings. Since its formation, Tawa has acquired CX Reinsurance Company Limited (CX RE)and KX Reinsurance Company limited (KX RE) and is managing the run-off of thesebusinesses. 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 Summary 2007 has been a year of significant development for the Tawa plc ("Tawa" or "theGroup"). On 4 May, Tawa completed the acquisition of KX Reinsurance CompanyLimited ("KX Re"), formerly Continental Management Services Limited, from theCNA group and on 26 July Tawa plc raised $50 million through an IPO and wasadmitted to AIM. These events represent key milestones in the group's strategicobjective to establish itself as the UK's principal consolidator of non-liferun-off portfolios. The Group intends to use future issues of share capital as acurrency to finance the acquisition of additional portfolios of run-offliabilities. The Group's operating segments are: •Underwriting run-off - results from the Group's investment in its subsidiary KX Re. CX Re's results were included in 2006 when it was a subsidiary of the Group; •Run-off management - results of the operations of Tawa Management Limited ("Tawa Management"), the Group's provider of run-off management and consultancy services; and •Other corporate activities - results from the acquisition of KX Re, the Group's investment in its associated undertaking CX Reinsurance Company Limited ("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 profit for the period was $41.8 million. Group net assets at 30 June 2007were $186.8 million and increased to $236.5 million ($2.31:£1.17 per share)following the IPO on 26 July 2007. Underwriting run-off The business of KX Re comprises a collection of mature portfolios of long-tailliabilities, including exposure to asbestos, environmental and other latentclaims. Net discounted reserves at 30 June 2007 were $74 million and net assetswere $119 million. The objective for KX Re is to reduce the company's liabilities by acceleratingthe natural run-off of the portfolio to enable extraction of the capital, withregulatory approval. Run-off management The revenue of Tawa Management comprises: •Management fees from and expenses recharged to CX Re and KX Re; •Income from consultancy service provided to a range of third party clients; •Income from inspections performed on behalf of CX Re; and •Expenses recharged to Tawa plc in relation to acquisitions and business development. Profit for the period was $1.8 million which was broadly in line with thebusiness plan. The scope for developing the contribution from this segment wasenhanced by the recruitment during the year of three professionals experiencedin providing advice on claims handling and reserve assessment within the LondonMarket business. Other corporate activities The acquisition of KX Re was completed in the period. As a result of theacquisition $41.5 million profit has been reflected in the income statement,representing the difference between the total cost of the acquisition and thenet assets acquired. The acquisition of KX Re was financed by a bridging loan from FinancierePinault, the ultimate parent company of the Group, and a facility from a bank of$35 million. The loan of $35 million from Financiere Pinault was repaid usingproceeds from the IPO in July 2007. Through its remaining investment in the shares of CX Re and the deferredconsideration which is dependent on the ultimate earn-out of the company, theGroup's results are affected by changes in the net assets of CX Re. The netassets of CX Re increased by $3 million during the period, representing thereturn on the investments supporting the surplus and after charging $2 millionin management fees payable to Tawa Management. The strategy for CX Re continuesto be the descaling of the company's portfolio of international insurance andreinsurance liabilities and the management of the risks impacting the assets andliabilities. During the first six months of the year, net claims deteriorationwas offset by the benefits from claims mitigation activities and gross claimsreserves, which were $2.2 billion at acquisition by Tawa in October 2002,decreased by $144 million to $436 million. Of this decrease, $72 million was dueto the transfer of the fully reinsured liabilities relating to IGI UnderwritingAgencies Limited to CNA Insurance Company Limited with effect from 1 January2007. Net discounted claims reserves reduced by $48 million to $270 million. The profit relating to CX Re is incorporated in the Income Statement as "Shareof results of associates" and "profit for the period from discontinuedoperations". Net assets attributable to CX Re are included in the balance sheetwithin the lines "Interests in associates" and "Deferred assets". As set out innote 7, deferred assets also include $20 million due to Tawa plc as afacilitation fee as part of the sale of the shares of CX Re to a consortium inMarch 2006. Asset and liability management The Group's strategy is to mitigate risks relating to liquidity and changes ininterest rates and foreign exchange rates and to assume controlled credit riskwithin its investment portfolios. Such mitigation is achieved by broadlymatching the duration and currency of assets and liabilities, subject to agreedstrategies on the investment of the group's surplus, and maintaining a highquality and readily realisable portfolio of fixed income securities. Sinceacquisition by Tawa, this approach has been applied to the investment of the KXRe portfolio. During the period, investment income was sufficient to cover the unwinding ofthe liabilities and the impact of changes in interest rates on net discountedreserves. Since the balance sheet date, the Group has been marginally affected by thespread-widening experienced across the global investment markets in July andAugust in corporate and asset backed securities. The groups asset and liabilitymanagement philosophy is to match asset and liability durations and currencieswith the aim of insulating the group from foreign exchange and interest raterisk whilst retaining credit spread risks in only a minority of the portfolio.At 31 August 2007 the Group's investment portfolio had an average rating of AA+.The impact of recent market turmoil has been thus reduced by this conservativestrategy. The estimated unrealised reduction in the Group's surplus due to assetand liability management in the two months to the end of August is less than $2million. Moreover, the matching of group cash flows, including overheadsattributable to our run-off operations, means that no sales of assets outsidenormal operating requirements have taken place or are required. Followingdiscussion with the Group's asset managers, no change has been made to theGroup's investment strategies or guidelines. Future prospects The delivery of business objectives for CX Re and KX Re is broadly in line withexpectations. These objectives, which form the bulk of the Group's prospectivecash flow in the next few years, remain key priorities. As to development prospects, Tawa continues to process a range of investmentopportunities in various parts of the world and is confident of its ability tobring one or more of these targets to acquisition. Active targets continue torun at recent high levels. The complex nature of the potential transactionsplays to the Group's strengths and provides an opportunity to differentiate Tawafrom the competition. As such, Tawa remains well positioned to capitalise oncurrent investment opportunities. CONSOLIDATED INCOME STATEMENT Notes 6 months 30 6 months 30 12 months 31 ------ June 2007 June 2006 Dec 2006 -------- -------- -------- $m $m $m Continuing operationsRevenue 13.0 6.2 21.9Investmentreturn 4 1.2 0.2 0.6Other income - 0.1 0.1 -------- -------- ---------Net income 14.2 6.5 22.6 Insuranceclaims andlossadjustmentexpenses 0.4 - -Insuranceclaims andlossadjustmentexpensesrecovered fromreinsurers (0.2) - - -------- -------- ---------Net insuranceclaims 0.2 - - Cost ofservices (12.4) (6.3) (18.6)Administrativeexpenses (3.9) (1.8) (4.3) -------- -------- ---------Expenses (16.3) (8.1) (22.9)Results ofoperatingactivities (1.9) (1.6) (0.3) Share ofresults ofassociates 8 0.3 6.2 5.6Negativegoodwillrecognised 41.5 - - -------- -------- ---------Profit beforefinance costs 39.9 4.6 5.3 Finance costs (0.5) - (0.2) -------- -------- ---------Profit beforetax 39.4 4.6 5.1 Income tax 5 - - - -------- -------- ---------Profit for theperiod fromcontinuingoperations 39.4 4.6 5.1 Profit for theperiod fromdiscontinuedoperations 2.4 53.4 47.9 ----------------------- ----- -------- -------- ---------Profit for theperiod 41.8 58.0 53.0======================= ===== ======== ======== ========= Attributable to:Equity holdersof the Company 41.8 58.0 53.0 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 6 months 30 6 months 30 12 months 31 ------------------------- ----- June 2007 June 2006 Dec 2006 ------- -------- -------- $m $m $m Currencytranslationdifferences 2.5 (1.7) 1.1 -------- -------- ---------Net income /(expense)recogniseddirectly inequity 2.5 (1.7) 1.1 Profit for theperiod 41.8 58.0 53.0 Total recognised income and expense for theperiod -------- -------- ---------attributableto equityholders of theCompany 44.3 56.3 54.1 ======== ======== ========= CONSOLIDATED BALANCE SHEET Notes 30 June 2007 30 June 2006 31 Dec 2006 ------------------------- ------ ------- ------- ------- $m $m $m AssetsCash and cash equivalents 74.2 6.9 5.7Investments: Debt andequity securities 123.1 - -Loans and receivablesincluding insurancereceivables 10.5 2.9 3.7Reinsurers' share oftechnical provisions 6 19.2 - -Property, plant andequipment 0.7 0.9 0.8Deferred assets 7 109.2 109.3 106.0Interests in associates 8 12.9 13.1 12.6Goodwill 9 18.2 18.2 18.2---------------------- ----- -------- -------- --------Total assets 368.0 151.3 147.0====================== ===== ======== ======== ======== EquityShare capital 10 57.2 57.2 57.2Retained earnings 11 129.6 87.5 85.3 -------- -------- --------Total equity attributableto equity holders 186.8 144.7 142.5 LiabilitiesCreditors arising out ofreinsurance operations 2.7 - -Other liabilities 6.8 6.6 4.5Financial liabilities -borrowings 12 70.0 - -Technical provisions 6 101.7 - - -------- -------- --------Total liabilities 181.2 6.6 4.5 ---------------------- ------ -------- -------- --------Total liabilities & equity 368.0 151.3 147.0====================== ====== ======== ======== ======== CONSOLIDATED CASH FLOW STATEMENT 6 months 30 June 2006 12 months 31 Dec 2006 ------------------- ------ ------ --------------- --------------- ------ ------ ------ ------ Notes 6 mnths 30 June Contin- Discon- Total Contin- Discon- Total 2007 uing tinued uing tinued ------------------- ------ ------ ------ ------ ------ ------ ------ ------ $m $m $m $m $m $m $m Cash used inoperatingactivities 13 (0.4) (2.5) (46.3) (48.8) (4.2) (46.3) (50.5) ------ ------ ------ ------ ------ ------ ------ Cash paymentsto acquireequity anddebtsecurities (19.2) - (88.0) (88.0) - (88.0) (88.0)Cash receiptsfrom sale ofequity anddebtsecurities 9.9 - 125.6 125.6 - 125.6 125.6Cashtransferredfrom investingactivities (37.9) - - - - - -Cash receiptsfrom interestand dividends 1.1 0.2 - 0.2 0.7 - 0.7Acquisition ofsubsidiary netof cash andcashequivalents 45.0 - - - - - - ------ ------ ------ ------ ------ ------ ------Cash (used in)/ generatedfrom investingactivities (1.1) 0.2 37.6 37.8 0.7 37.6 38.3 Proceeds fromfinancialborrowings 70.0 - - - - - - ------ ------ ------ ------ ------ ------ ------Cash flowsgenerated fromfinancingactivities 70.0 - - - - - - Net increase /(decrease) incash and cashequivalents 68.5 (2.3) (8.7) (11.0) (3.5) (8.7) (12.2) Cash and cashequivalents atbeginning ofperiod 5.7 9.2 14.3 23.5 9.2 14.3 23.5Cash held inassociates - - (5.6) (5.6) - (5.6) (5.6)------------------- ------ ------ ------ ------ ------ ------ ------ ------Cash and cashequivalents atend of period 74.2 6.9 (0.0) 6.9 5.7 (0.0) 5.7=================== ====== ====== ====== ====== ====== ====== ====== ====== NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. General information Tawa plc (the "Company") and its subsidiaries (together the "Group") are engagedin 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. On 21 March 2006, the Company disposed of the majority of its 100% shareholdingin CX Reinsurance Company Limited ("CX Re"), whose primary business activity hadbeen the carrying out of reinsurance contracts written prior to August 2001,when it ceased underwriting new business. As a result of the disposal, theclassification of the Company's shareholding in CX Re changed from "subsidiary"to "associate" as the Company retains 49.95% of the voting power. Consequently,the operating results, assets and liabilities have been treated as discontinuedfor all years up to the date of sale. The profit on disposal was included in"Profit for the year from discontinued operations" in the Income Statement.Deferred consideration related to the disposal of CX Re has been recorded in thebalance sheet. Any future adjustments to deferred consideration are accountedfor as adjustments to the profit on disposal in the years in which theadjustments to the deferred consideration arise. The Group acquired the entire share capital of KX Reinsurance Company Limited inMay 2007. 2. Accounting policies These interim consolidated financial statements have been prepared in accordancewith the accounting policies that are anticipated to be used in preparation ofthe annual financial statements for the year ended 31 December 2007. Theseaccounting policies were published in the AIM Admission Document dated 20 July2007. A summary of the key differences between IFRS and UK GAAP is presented innote 18. 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 Under- Run-off Other Corporate Elimi-nations TotalJune 2007 Manage-ment Activities writing Run-off ----------------- ------ --------- ---------- --------- ------ $m $m $m $m $mContinuing operationsInvestmentreturn 0.7 0.3 0.2 - 1.2Revenue - 15.2 - (2.2) 13.0Other income - - 1.0 (1.0) - --------- --------- ---------- --------- ------Net income 0.7 15.5 1.2 (3.2) 14.2 Insuranceclaims andlossadjustmentexpenses 0.1 - - 0.3 0.4Insuranceclaims andlossadjustmentexpensesrecovered fromreinsurers (0.2) - - - (0.2) --------- --------- ---------- --------- ------Net insuranceclaims (0.1) - - 0.3 0.2 Cost ofservices - (13.4) (0.8) 1.8 (12.4)Administrativeexpenses (0.2) (0.3) (2.0) (1.4) (3.9) --------- --------- ---------- --------- ------Expenses (0.2) (13.7) (2.8) 0.4 (16.3)Results ofoperatingactivities 0.4 1.8 (1.6) (2.5) (1.9) Share ofresults ofassociates - - 0.3 - 0.3Negativegoodwillrecognised - - 41.5 - 41.5 --------- --------- ---------- --------- ------Profit /(loss) beforefinance costs 0.4 1.8 40.2 (2.5) 39.9 Finance costs - - (0.5) - (0.5) --------- --------- ---------- --------- ------Profit /(loss) beforetax 0.4 1.8 39.7 (2.5) 39.4 Income tax - - - - - --------- --------- ---------- --------- ------Profit /(loss) for theperiod fromcontinuingoperations 0.4 1.8 39.7 (2.5) 39.4 Profit for theperiod fromdiscontinuedoperations - - 2.4 - 2.4 -------------- --------- --------- ---------- --------- ------Profit /(loss) for theperiod 0.4 1.8 42.1 (2.5) 41.8============== ========= ========= ========== ========= ====== -------------------- ------- ------- ------- ------ -----Six months ended 30 June 2006 Under- Run-off Other Corporate Elimi-nations Total Manage-ment Activities writing Run-off ----------------- ------ --------- ---------- --------- ------ $m $m $m $m $mContinuing operationsInvestmentreturn - 0.2 - - 0.2Revenue - 12.9 - (6.7) 6.2Other income - - 0.2 (0.1) 0.1 --------- --------- ---------- --------- ------Net income - 13.1 0.2 (6.8) 6.5 Insurance claims and loss - - - - -adjustment expensesInsurance claims and loss - - - - -adjustment expenses recovered --------- --------- ---------- --------- ------from reinsurersNet insurance claims - - - - - Cost ofservices - (12.0) - 5.7 (6.3)Administrativeexpenses - (0.4) (1.4) - (1.8) --------- --------- ---------- --------- ------Expenses - (12.4) (1.4) 5.7 (8.1)Results ofoperatingactivities - 0.7 (1.2) (1.1) (1.6) Share ofresults ofassociates - - 6.2 - 6.2Negative goodwill recognised - - - - - --------- --------- ---------- --------- ------Profit /(loss) beforefinance costs - 0.7 5.0 (1.1) 4.6 Finance costs - - - - - --------- --------- ---------- --------- ------Profit /(loss) beforetax - 0.7 5.0 (1.1) 4.6 Income tax - - - - - --------- --------- ---------- --------- ------Profit /(loss) for theperiod fromcontinuingoperations - 0.7 5.0 (1.1) 4.6 Profit for theperiod fromdiscontinuedoperations (9.7) - 63.1 - 53.4 --------------- --------- --------- ---------- --------- ------Profit /(loss) for theperiod (9.7) 0.7 68.1 (1.1) 58.0=============== ========= ========= ========== ========= ====== -------------------- ------- ------- ------- ------ ------Year ended Under- Run-off Other Corporate Elimi-nations Total Manage-ment Activities31 December 2006 writing Run-off----------------- ------ --------- ---------- --------- ------ $m $m $m $m $mContinuing operationsInvestmentreturn - 0.6 - - 0.6Revenue - 28.6 - (6.7) 21.9Other income - - 0.1 - 0.1 --------- --------- ---------- --------- ------Net income - 29.2 0.1 (6.7) 22.6 Insurance claims and loss - - - - -adjustment expensesInsurance claims and loss - - - - -adjustment expenses recovered --------- --------- ---------- --------- ------from reinsurersNet insurance claims - - - - - Cost ofservices - (24.3) - 5.7 (18.6)Administrativeexpenses - (4.3) - - (4.3) --------- --------- ---------- --------- ------Expenses - (28.6) - 5.7 (22.9)Results ofoperatingactivities - 0.6 0.1 (1.0) (0.3) Share ofresults ofassociates - - 5.6 - 5.6Negative goodwill recognised - - - - - --------- --------- ---------- --------- ------Profit /(loss) beforefinance costs - 0.6 5.7 (1.0) 5.3 Finance costs - (0.2) - - (0.2) --------- --------- ---------- --------- ------Profit /(loss) beforetax - 0.4 5.7 (1.0) 5.1 Income tax - - - - - --------- --------- ---------- --------- ------Profit /(loss) for theperiod fromcontinuingoperations - 0.4 5.7 (1.0) 5.1 Profit for theperiod fromdiscontinuedoperations (9.7) - 57.6 - 47.9 --------------- --------- --------- ---------- --------- ------Profit /(loss) for theperiod (9.7) 0.4 63.3 (1.0) 53.0=============== ========= ========= ========== ========= ====== Secondary segment information - Geographical analysis All of the Group's revenue is derived from providing services to UK entities andthe assets and liabilities are not managed on a geographical basis. Accordinglyno geographical segmental information has been provided. 4. Investment return 6 months 2007 6 months 2006 12 months 2006 --------------------------- -------- ------- ------- $m $m $m Cash and cash equivalentsinterest income 1.1 0.2 0.6Realised gains and losses oninvestments (0.1) - -Unrealised gains and losseson investments 0.2 - - --------- --------- ---------- 1.2 0.2 0.6 ========= ========= ========== 5. Income tax 6 months 2007 6 months 2006 12 months 2006 --------------------------- -------- ------- ------- $m $m $m Current tax (continuing activities) - - - ========= ========= ==========Current tax (discontinuedactivities) - (2.3) (2.3) ========= ========= ========== Deferred tax (continuing and - - -discontinuing activities) ========= ========= ========== UK corporation tax is calculated at 30% (31 December 2006 & 30 June 2006 30%) ofthe estimated assessable UK profit for the year. The tax charge for the 31December 2006 period presented varied from the stated rate of UK corporationtax. 6. Technical provisions 30 June 2007 30 June 2006 31 Dec 2006 --------------------------- -------- -------- -------Gross claims outstanding $m $m $mProvision for claims outstanding,reported and not reported 122.6 - -Discount (43.9) - - -------- -------- -------- 78.7 - -Claims handling provisions 14.3 - -Insurance risk premium 8.7 - - -------- -------- --------Total gross claims outstanding 101.7 - - -------- -------- -------- ReinsuranceProvision for claims outstanding,reported and not reported 31.5 -Discount (12.3) - -------- -------- --------Total reinsurers' share of claimsoutstanding 19.2 - - -------- -------- -------- Undiscounted claims outstanding,net of reinsurance 114.1 - -Discount (31.6) - - -------- -------- --------Claims outstanding net ofreinsurance 82.5 - - ======== ======== ======== 7. Deferred assets Deferred assets relate to the consideration outstanding on the disposal of CXRe, as described in note 1. Part of the deferred consideration is related to thenet asset value of CX Re and is subject to net asset value adjustments throughthe income statement. Deferred consideration consists of $20.6 million inrespect of a transaction facilitation fee and $88.6 million of proceeds on thedisposal of CX Re, a total of $109.2 million. Of this sum, $47 million arisesthrough the offset of CX Re's tax losses for its accounting period ended 31December 2006 by the shareholders against their respective taxable profits.These proceeds will not be released to the Group until the claiming companiesagree their tax returns for the relevant periods with HMRC. 8. Interests in associates On 21st March 2006, the Company disposed of 87.35% of its shareholding in CX Re.The retained shareholding of 12.65% has been accounted for under the equitymethod since that date. The Company retains 49.95% of the voting shares. Thefollowing table provides a summary of the financial results and position of CXRe for the period 21st March 2006 to 30th June 2007: Associate: CX Re $m---------------------------- -------- -------- ------- Carrying value at 21 March 2006 6.912.65% Share of associate's profits to 30 June 2006 6.2 ------- Carrying value at 30 June 2006 13.112.65% Share of associate's profits to 31 December 2006 (0.5) ------- Carrying value at 31 December 2006 12.612.65% Share of associate's profits to 30 June 2007 0.3 ------- Carrying value at 30 June 2007 12.9 ======= 9. Goodwill 30 June 2007 30 June 2006 31 Dec 2006 --------------------------- -------- ------- -------- $m $m $m Carrying value at 31 December and30 June 18.2 18.2 18.2 ======== ======== ======== Goodwill acquired in a business combination is allocated, at acquisition, to thecash generating units (CGUs) that are expected to benefit from that businesscombination. Before recognition of impairment losses, the carrying amount ofgoodwill had been allocated to the run-off services segment. The Group testsgoodwill annually for impairment, or more frequently if there are indicationsthat goodwill might be impaired. The recoverable amounts of the CGUs aredetermined from value in use calculations. 10. Share capital 30 June 2007 30 June 2006 31 Dec 2006 -------------- ------------ ------------ ------------ Number '000 $m Number '000 $m Number '000 $mAuthorised:Preferredshares of£0.10 1,499,990 293.9 1,499,990 293.9 1,499,990 293.9Deferredshares of£0.10 10,000 - 10,000 - 10,000 - -------- ------ -------- ------ -------- ------Totalauthorised 1,509,990 293.9 1,509,990 293.9 1,509,990 293.9 ======== ====== ======== ====== ======== ====== Allotted, called up and fully paid:Preferredshares of£0.10 29,200 57.2 29,200 57.2 29,200 57.2Deferredshares of£0.10 2 - 2 - 2 - -------- ------ -------- ------ -------- ------Totalallotted,called up andfully paid 29,202 57.2 29,202 57.2 29,202 57.2 ======== ====== ======== ====== ======== ====== 11. Reserves Retained ----------------------------------- Earnings ----------- $mAs at 31 December 2005 31.2 Profit for the period 58.0Translation loss - gross (1.7) -----------As at 30 June 2006 87.5 =========== As at 1 July 2006 87.5 Loss for the period (5.0)Translation gains - gross 2.8 -----------As at 31 December 2006 85.3 =========== As at 1 January 2007 85.3 Profit for the period 41.8Translation gains - gross 2.5 -----------As at 30 June 2007 129.6 =========== 12. Financial liabilities - borrowings 30 June 2007 30 June 2006 31 Dec 2006 --------------------------- -------- ------- ------- $m $m $mBridging loan from parent company 35.0 - -Bank loan falling due after morethan one year 35.0 - - -------- -------- -------- 70.0 - - ======== ======== ======== Interest was payable at LIBOR + 1% on the bridging loan from Financiere Pinault. Interest was payable at LIBOR + 2.5% on the bank loan. 13. Cash (used in) / generated from operations 6 months 30 June 2006 12 months 31 Dec 2006 ------ --------------- --------------- ------ ------ ------ ------ 6 mnths 30 June Contin- Discon- Total Contin- Discon- Total 2007 uing tinued uing tinued ------ ------ ------ ------ ------ ------ ------ $m $m $m $m $m Profit for theperiod 41.8 10.1 47.9 58.0 5.1 47.9 53.0Adjustments for: - depreciation (0.1) (0.1) - (0.1) 0.4 - 0.4 - (additions) / disposals of fixed asset (41.5) 30.8 - 30.8 25.3 - 25.3Investmentreturn for theperiodtransferred toinvestingactivities (1.5) - (6.3) (6.3) - (6.3) (6.3)Loss /(profit) onforeignexchange 1.9 (1.5) 7.6 6.1 (0.1) 7.6 7.5 ------ ------ ------ ------ ------ ------ ------ 0.6 39.3 49.2 88.5 30.7 49.2 79.9Change in operating assets and liabilitiesNet change ininsurancereceivablesandliabilities (0.7) - (42.1) (42.1) - (42.1) (42.1)Net increasein loans andreceivables (1.8) (43.9) (54.2) (98.1) (35.1) (54.2) (89.3)Net increasein otheroperatingliabilities 1.5 2.1 0.8 2.9 0.2 0.8 1.0 ------------------- ------ ------ ------ ------ ------ ------ ------Cash used inoperations (0.4) (2.5) (46.3) (48.8) (4.2) (46.3) (50.5)=================== ====== ====== ====== ====== ====== ====== ====== 14. Business combinations On 4th May 2007, 100% of the issued share capital of KX Reinsurance CompanyLimited was acquired by KX Re Holdings Limited, a wholly owned subsidiary. Thetable below shows the consideration paid, the net assets at fair values(considered equal to carrying values) and the negative goodwill arising onacquisition. $m ---------------------------------------- ------- Cost 68.1 Less:Assets 216.3Liabilities (98.0) -------Net assets acquired 118.3 ------- 50.2 Insurance risk premium (8.7) -------Negative goodwill on acquisition 41.5 ======= Since acquisition, the acquired company and its subsidiary have contributedprofits of $0.2m after the elimination of intra-group income and expenses. 15. Related party transactions One of the Company's subsidiaries, Tawa Management Limited, provides insurancerun-off management services to CX Reinsurance Company Limited an associate ofthe Group in which the company has a 12.65% share interest and a 49.95% votinginterest. Run-off services are provided on a negotiated fee basis, the terms and pricingof which are at arm's length. Run-off management expenses are recharged at cost. A run-off management fee of $2 million was charged to CX Reinsurance CompanyLimited by Tawa Management Limited. Expenses recharged at cost amounted to $10.7million. Parent - Financiere Pinault Loans made to the group by Financiere Pinault: $m ---------------------------------------- -------Bridging loan granted 04 May 2007 35.0 -------Balance at 30 June 2007 35.0 ======= The loans from Financiere Pinault were subject to a general treasury agreementfor the Financiere Pinault group. Interest was payable at LIBOR + 1%. Thisagreement was terminated on the 27 July 2007. The bridging loan of $35 million was repaid in full on the 30 July 2007.Interest of $0.3 million was paid on the loan during the period. During the period the Group paid $0.05 million to Financiere Pinault for variousservices including access to some key employees. Immediate and ultimate parent company In the opinion of the Directors, the immediate and ultimate parent company isFinanciere Pinault S.C.A., a company incorporated in France. The group financialstatements of Financiere Pinault S.C.A. may be obtained from the Tribunal deCommerce de Paris, 1 Quai de Corse, 75004 Paris, France. 16. Contingent liabilities Some of the Group's subsidiaries are routinely involved in litigation orpotential litigation related to primarily the settlement of insurance claimsliabilities. However, none of such actual or proposed litigation that had notbeen provided for met the definition of a contingent liability. Consequently,the group had no insurance related, or other, contingent liabilities as at 30June 2007 (2006: no contingent liabilities). 17. Post balance sheet events The Group was admitted to the Alternative Investment Market (AIM) on 26 July2007. $50 million, net of costs, was raised as a result of the flotation, ofwhich $35 million was used to repay the bridging loan made by the parentcompany, Financiere Pinault. Following the flotation, the number of shares inissue was 101.9 million. 18. Transition to IFRS As part of the transition from UK GAAP to IFRS, the following changes have beeneffected: • The accounts have been prepared as consolidated accounts, incorporating the results and net assets of the Company's subsidiaries • The Company has chosen the exemption under IFRS 1 not to reconsider business combinations prior to the date of transition • The Company has chosen to retain the value of property, plant and equipment as under prior GAAP and not to revalue them 19. Statutory accounts The information for the year ended 31 December 2006 does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Noconsolidated statutory accounts for that year were prepared nor delivered to theRegistrar of Companies since Tawa plc was not required to prepare consolidatedfinancial statements. 20. Independent review The interim results have been reviewed by the Group's auditors, Deloitte &Touche LLP. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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