Preliminary Results 2012

PRESS RELEASE 22 MARCH 2013

PRELIMINARY RESULTS ANNOUNCEMENT

Tawa plc

 Preliminary results for the year ended 31 December 2012

2012 was a year focused on operational optimisation

Tawa plc ("Tawa" or "the Company" and its subsidiaries together "the Group") today announces preliminary results for the year ended 31 December 2012.

Financial highlights

·; Loss for the period attributable to owners of the Company was $22.5 million (2011: loss $21.6 million);

·; Risk carriers profit excluding QX Re was $8.1 million (2011: loss $18.6 million);

·; Loss for QX Re was $14.3 million (2011: profit $7.8 million);

·; Investment in incubators was $7.0 million (2011: $ 7.5 million);

·; Service business profit was $2.7 million before charging extraordinary costs of $3.2 million, giving a net loss of $0.5 million (2011: profit $6.0 million);

·; The Group's total equity has decreased by $19.7 million since 31 December 2011 to $178.5 million as at 31 December 2012;

·; Net assets per share in sterling decreased from £1.13 to £0.98 ($ decreased from $1.75 to $1.57); and

·; No dividend planned for 2012.

General activities during 2012

·; Asta Insurance Markets Limited ("Asta" - formerly Whittington Insurance Markets Limited acquired on 26 January 2012 by a consortium comprising Tawa, Skuld, and the Paraline Group, Ltd;

·; Hamburger Internationale Ruckversicherung AG ("HIR") acquired on 20 April 2012. HIR is the holding company for the Chiltington group of companies;

·; The proposed sale of KX Reinsurance Company Limited and its wholly owned subsidiary OX Reinsurance Company to Catalina was announced on 24 September 2012. This transaction is subject to regulatory approval; and

·; On 10 September 2012 the Board announced the launch of a formal sale process, aimed at expanding the search for further equity backers of the Group. The process was terminated on 30 November 2012.

Gilles Erulin, Chief Executive Officer of Tawa plc, commented:

"After an expansive external growth 2011 year, 2012 focussed on integration, turn around and replenishing our investment capacity. While we did not succeed on the latter point, we did achieve the two former goals.

Going back to basics, we actively and profitably downscaled our risk carriers, restructured our service cost basis and got our incubated companies off the ground.

We are disappointed by the QX Re outcome, which masks the results of a solid year of work from all our teams, and look forward to 2013 for those efforts to progressively crystallize into cash flow and net asset value".

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Enquiries:

Notes for Editors:

Tawa plc was formed in 2001 and is a specialised investor in the insurance industry. In the last few years, Tawa has moved from being a pure run-off risk owner towards being a multi-segment investor in the insurance market, expanding significantly in the servicing arena of the international insurance industry.

Tawa invests in acquiring run-off portfolios ("Portfolios", "Risk Carriers") and investing in servicing business. The Group also operates as an incubator for new projects and has invested alongside professional teams to create two new businesses, Q360 and Lodestar Marine, in addition to developing its own products to serve the insurance market as a wholesuch as STRIPE®.

On the portfolio front, Tawa has acquired, since its formation, nine insurance entities in run-off - CX Reinsurance Company Limited, Hamburger Internationale Rückversicherung AG, KX Reinsurance Company Limited, Lincoln General Insurance Company, PXRE Reinsurance Company, Island Capital Limited, Island Capital (Europe) Ltd, Pavant International Re S.A, and OX Reinsurance Company Limited. As an alternative technique to assuming run-off risks, Tawa established a dedicated reinsurance vehicle, QX Reinsurance Company Limited, in Bermuda to reinsure portfolios. On the service side, Tawa acquired Pro Insurance Solutions Ltd (Pro) in 2009 and the HIR group in April 2012. HIR owns the Chiltington Consulting Group. Through HIR, Tawa now offers a vehicle for European run-off portfolios transfers under the European Union portfolios transfer directive.

The Group's combined team of approximately 400 professionals provide underwriting, claims management, broking and consulting services to a broad array of international clients across the global insurance market, whether active underwriters or run-off. The Group has also established an innovative platform to provide turnkey services supporting clients wishing for immediate start of a new broking or MGA venture.

As part of its expansion in the Lloyd's market, in January 2012, Tawa became the owner of 33% of Asta Limited, the leading turnkey agency management services company in Lloyd's.

Tawa plc is listed on the AIM market.

Further information can be found on the Company's website: www.tawaplc.co.uk.

To our Shareholders,

2012 was dominated by two themes for Tawa. One of these was ensuring the proper integration of the various businesses acquired and investments made in 2011. The other was the search for new equity backers, which took the form of a formal sales process.

Overview

Over the last three years, Tawa has moved from being a pure run-off risk carrier towards being a multi-segment player in the insurance market. Acting as a specialised investor in the insurance industry, Tawa owns run-off portfolios and insurance service providers. The Group also operates as an incubator for new projects in the sector and supports professional teams to launch and operate new business ventures.

In 2012 Tawa completed the previously announced acquisition of the Chiltington Group ("Chiltington"), a specialist in insurance consulting, and the acquisition of 33% of Asta (formerly known as Whittington), the leading turnkey agency management services company in Lloyd's, through a newly-created consortium. It also announced the sale, subject to regulatory approval, of KX Re to Catalina as part of its investment management program.

The priority in 2012 was the integration of recently acquired businesses and the optimisation of the operations and profitability of Tawa's business lines. Volatility reduction and portfolio downscaling received a great deal of attention in 2012. The risk carriers, excluding QX Re, returned a net profit of $8.1 million against a loss of $18.6 million in 2011. QX Re had a loss of $14.3 million (2011: profit $8.8 million) largely arising from strengthening reserves by $15.8 million. We expect these results will enable us to extract capital from the risk carriers in 2013 with regulatory consent.

The agreed KX Re sale to Catalina (subject to regulatory approval) will finalise a cash-on-cash return of $46.6 million (total purchase and interest costs of $71.7 million against total capital extractions, management fees and sale price of $118.3 million) for the Group and will enable us to deleverage the platform. While this disposal will result in a loss in 2013 of $20.0 million under IFRS accounting, cash-on-cash numbers are a better indicator of how our investment portfolio creates value for our shareholders.

Turning to the service business, in steering the business mix towards a more balanced portfolio, our subsidiaries have made significant investments to support new products. Meanwhile they continued to suffer from a high cost base. Profits of $2.7 million from Pro Insurance Solutions Limited ("Pro") and Chiltington were reduced to a loss of $0.5 million through exceptional restructuring costs to reduce the cost base going forward.

We have been successful in retaining more contract business for a longer period than had been expected as well as in replacing much of that business reaching the end of its natural lifecycle with new clients and more revenues from new business lines. Nonetheless, the staffing needs continued to change as a result of the changing business mix. Whilst we redeployed significant numbers of employees to new roles this year, we did let others go. We want to take this opportunity to thank each of them for their dedicated efforts on our behalf and to wish them well for the future.

On a more positive note, the continued development and profitability from Asta is an area of satisfaction. With 6 syndicates under management and the approval by Lloyd's of the new Nephila syndicate, Asta is on a steady course. It has met all its regulatory deadlines including the demanding Solvency II deadlines and expects to assist two of its incubated syndicates set up their own managing agencies in the next year or so. The free cash flow generated by the business has enabled a slightly accelerated repayment of the acquisition loans.

Also in 2012, Tawa invested $7.0 million in support of Lodestar Marine, the marine P&I MGA, the broking firm Q360, and in developing STRIPE®, an internet claims management system. Whilst we consider these outlays as investments expected to provide superior earnings in the future, under IFRS accounting they were fully expensed during the year rather than capitalised.

Lastly, your management team continue to pursue opportunities for significant overhead cost savings across the organisation. Those costs have reduced by $3.0 million year on year on a like for like basis, excluding the acquisition of the Chiltington Group.

Formal sale process

On 10 September 2012 the Board announced the launch of a formal sale process, aimed at expanding the search for further equity backers of the Group. Although a number of proposals for certain parts of the Group were received, no proposal satisfactory to the board was forthcoming. The process was terminated on 30 November 2012.

Accounts and dividends

On the accounting front, Tawa reported a full year loss of $21.9 million, bringing the net assets per share at 31 December 2012 to $1.57 per share (£0.98 per share) compared with 31 December 2011 of $1.75 per share (£1.13 per share) and a share price of 44p at the end of 2012.

These results stem mainly from the $15.8 million adverse reserve development in QX Re, the Bermudian regulated special purpose insurer formed in March 2011 to provide reinsurance for a book of US lead paint exposure. Tawa has given the cedant company notice of potential claims arising out of the transaction documents. Ongoing discussions are being held with respect to resolution of these notified claims.

As noted above the $7.0 million invested in Lodestar Marine, Q360 and STRIPE® was fully expensed during the year rather than capitalised.

In light of these results, Tawa will not recommend any dividend in 2013 relating to the results for 2012.

2013 Prospects

2013 will see a continuation of our efforts to grow the service business. Volatility reduction and downscaling will continue for our risk carriers. At Group level our agenda remains: deleveraging, cost savings and the restoration of an internal and external investment capacity.

Risk management and compliance

Tawa perceives the current regulatory environment, which is imposing a high toll on the industry in terms of expense and management focus, to be beneficial to its business model as high standards of compliance and risk management are increasingly becoming a USP for our service business.

Tawa and its subsidiaries are committed to respond positively and proactively to regulatory evolution and are allocating increased resources in the areas of risk management, compliance and internal audit. Our responsibility to our various shareholders is to assume and manage business risk, whilst ensuring that our low tolerance of other forms of risk is addressed through effective systems of internal control.

The Tawa senior team is closely involved in all companies in our portfolio to ensure our systems and controls are consistent with the size and the complexity of our different businesses. This requires constant improvement and an approach that ensures we are never complacent about what we perceive as a key business enabler.

Practically, the leadership teams run a balance between hands-on day to day management, what might be termed "management by walking around", and a more formalised approach to risk management.

* * * * * *

In conclusion, we would like to thank each of our shareholders for their strong support during 2012. The company has started to build on foundations laid in 2011 to develop a larger high-end, stand-alone service unit and the momentum for a stronger and more profitable Group.

To achieve our goals, your company will rely on what makes us different from other places, namely our people: people across the world with high expertise, skills and integrity, working together to achieve our common purpose. On your behalf, we would like to thank each of them for their continuing contribution to the Group.

Lastly, thanks also go to the Directors for their active contribution and support.

Introduction to the Group's business

Tawa plc ("Tawa"), was formed in 2001 and is a specialised investor in the insurance industry. In the last few years, Tawa has moved from being a pure run-off risk owner towards being a multi-segment investor in the insurance market, expanding significantly in the servicing arena of the international insurance industry.

Tawa invests in acquiring run-off portfolios ("Portfolios", "Risk Carriers") and investing in servicing business. The Group also operates as an incubator for new projects and has invested alongside professional teams to create two new businesses, Q360 and Lodestar Marine, in addition to developing its own products to serve the insurance market as a whole such as STRIPE®.

On the portfolio front, Tawa has acquired, since its formation, nine insurance entities in run-off - CX Reinsurance Company Limited, Hamburger Internationale Rückversicherung AG, Island Capital Limited, Island Capital (Europe) Ltd, KX Reinsurance Company Limited, Lincoln General Insurance Company, Pavant International Re S.A, OX Reinsurance Company Limited and PXRE Reinsurance Company. As an alternative technique to assuming run-off risks, in 2011 Tawa established QX Reinsurance Company Limited, a special purpose reinsurer in Bermuda to reinsure a book of US lead paint exposure. In 2012 the Group has been focused on volatility reduction, portfolio downscaling and potential sale of some assets. 

On the service side, Tawa acquired Pro in 2009 and the HIR group in April 2012. HIR owns the Chiltington Consulting Group. Through HIR, Tawa now offers a vehicle for European run-off portfolio transfers under the European Union portfolio transfer directive. Tawa currently services a number of significant insurance clients, and aims to continue the development of this platform. This development of the service business remains a key focus of the Group and it has changed the Group's metrics from being only a balance sheet cash extraction driven business to a more balanced mix between recurring cash flows matched with release of excess capital from the risk carriers.

In addition, since 2011, the Group has operated as an incubator for new and innovative products and projects in the insurance market. Tawa is investing significant financial and operating resources in this area as a means to diversify into the live insurance market and thereby provide the Group with enhanced business opportunities. Tawa has developed a web-based platform allowing principal to principal processing of claims and post-placement transactions which is branded as the STRIPE® system. In addition, in 2012 Pro expanded its intermediary management capacity to support brokers and managing general agency ("MGA") turnkeys. On this basis, Tawa launched and funded two new "incubation projects", namely Q360, a London-based broker, and Lodestar Marine, a MGA.

As part of its expansion in the Lloyd's market, in January 2012, Tawa acquired 33% of Asta Insurance Markets Limited (formerly Whittington Insurance Markets Limited), the leading turnkey agency management services company in Lloyd's.

Tawa has the following divisions with clearly identified lines of business, namely:

·; risk carriers/insurance division which holds the Group's acquired insurance entities in run-off (risk carriers). Profitability is achieved by effectively managing these assets and liabilities;

·; service providers which comprise a platform that generates income from consulting and outsourcing. Consulting typically includes work provided directly for clients and the outsourcing division includes work done on behalf of clients on Tawa's platform; and

·; corporate division which comprises incubators, all group overheads, corporate costs, acquisition activities and financing.

Summary of 2012 financial results

·; Loss for the period attributable to owners of the Company was $22.5 million (2011: loss $42.5 million excluding profit of $20.9 million on set-up of QX Re);

·; The Group's total equity has decreased by $19.7 million since 31 December 2011 to $178.5 million as at 31 December 2012;

·; Net assets per share in sterling decreased from £1.13 to £0.98 ($ decreased from $1.75 to $1.57); and

·; The Group's net tangible assets are $154.6 million (2011: $173.5 million).

On 26 January 2012, a consortium comprising Tawa plc, Skuld, and Paraline Group Limited completed the acquisition of Whittington Insurance Markets Limited. The company has since been renamed Asta Insurance Markets Limited under a new holding company set up by the consortium named Asta Capital Limited ("Asta"). This transaction provides Tawa with a platform through which to expand its range of services to the Lloyd's market. Asta is the leading franchise in the Lloyd's agency management market and provides the Group with real scale as a provider of insurance services to the live market. This is highly complementary with the range of consulting and outsourcing services currently provided through Pro.

On 20 April 2012, Tawa completed the acquisition of Hamburger Internationale Rückversicherung AG ("HIR"), the holding company for the Chiltington group of companies ("Chiltington"). Chiltington provides consultancy and outsource services to the international (re)insurance industry. While strengthening Tawa's UK and US units, this transaction provides a strong footprint in Continental Europe and a unique insurance consulting platform in South America. Also, through HIR, Tawa now offers a vehicle for European run-off portfolio transfers under the European Union portfolio transfer directive such as the Austrian Oberoesterreichische portfolio received in May 2012, following the Sparkassen portfolio received in late 2011.

Acquisitions

Tawa is in the business of acquiring, managing and then, if appropriate, divesting assets. On the portfolio front, during 2012 the divestment strategy has been prevalent, highlighted by the sale, subject to regulatory approval, of two of its risk carriers. In contrast, Tawa has pursued and generated acquisition targets through its servicing business clients and also special situations where the skill sets and expertise of its staff created a unique selling point for Tawa. On the servicing front the 2012 goal for Tawa was moving its internal resources towards providing more high-end, value-added consulting. This was supplemented by increasing its offering both geographically and into the Lloyd's market. Those strategies were achieved, the latter demonstrated by the acquisitions of HIR and Asta respectively.

Details of Tawa's acquisitions for the year are below:

Hamburger Internationale Rückversicherung AG

On 20 April 2012 the Group acquired 100% of the issued share capital of Hamburger Internationale Rückversicherung AG ("HIR"). HIR is the parent company of a group of companies detailed below which are involved in reinsurance, management and advisory services:

Chiltington Holdings Limited Chiltington International GmbH

Chiltington International Limited Chiltington Internacional S.A.

Chiltington International Holding GmbH Pavant International Re S.A. ("PIR")

Chiltington International Inc Hamburg International Reinsurance Limited

This transaction was accounted for by the purchase method of accounting. The initial accounting for the business combination is incomplete and the amounts recognised in these financial statements are provisional. The fair values of the acquired intangible assets remain provisional pending the final valuations of these assets. The net assets acquired in the transaction, and the goodwill arising, are as follows:

The initial accounting for the business combination is incomplete and the amounts recognised in these financial statements are provisional.

Deferred consideration payable as reserved dividends are due to the sellers as illustrated in the table below:

Tawa's actuaries have computed an expected fair value of $1.0 million.

Since acquisition the HIR group of companies have contributed a profit of $0.6 million after the elimination of intra-group income and expenses, comprising a profit of $1.4 million from the risk carriers offset by a loss of $0.8 million from the service division. If the acquisition of the HIR group of companies had been completed on the first day of the financial year, Group profit attributable to equity holders of the parent would have increased by $0.1 million.

On 5 June 2012 Swiss Re transferred 74% of its shares of ASS Assekuranz Service-und Sachverständigen GmbH ("ASS") to Chiltington International Holding GmbH (73%) and PRO Insurance Solutions Limited (1%). ASS is a specialised service provider in disability claims handling. Swiss Re will retain 26% of the shares. The transaction is of no value in the current year.

Asta Capital Limited

On 26 January 2012, the consortium comprising Tawa plc, Skuld, and Paraline Group Limited completed the acquisition of Whittington Insurance Markets Limited. The company has since been renamed Asta Insurance Markets Limited under a new holding company set up by the consortium named Asta Capital Limited ("Asta"). Tawa's share of associate as at 31 December 2012 is:

Tawa's results for the year summarised by division are:

* CX Re loss is $0.2 million through deferred consideration.

Risk carriers/insurance division

Tawa generates value from run-offs in a variety of ways, depending on the nature of each run-off entity in question. These approaches include:

·; Buying net assets at a significant discount to economic value and accelerating capital extraction; and

·; Buying volatile books of business and applying management techniques to create value and reduce volatility.

This division comprises the results from the following run-off companies in which Tawa held the following interests at the reporting date:

CX Re was initially a subsidiary of the Group but on 21 March 2006 Tawa disposed of 87.35% of its shareholding. In accordance with IFRS, the retained shareholding of 12.65% has been accounted for as an associate since that date. Although the Company disposed of 87.35% of CX Re the deferred consideration receivable on the sale will reflect the current net asset value of CX Re. As at 31 December 2012, the total deferred consideration was $48.7 million (2011: $53.8 million). The reduction in the year reflects the cash settlement of £3.0 million in respect of the transaction facilitation fee.

During the course of a run-off, the Group is exposed to a range of risks that need to be identified and managed. These risks include adverse loss development (insurance risk), liquidity, operational risks, fluctuating foreign exchange rates, interest rates and credit risk both in respect of investments and reinsurer solvency. The Group's focus is to manage and mitigate these risks.

The liabilities of the run-off companies typically comprise claims outstanding, being the estimated cost of settling all claims incurred but not paid, whether reported or not, together with provisions for future costs related to the management of the run-off. The claims outstanding reserves are estimated by the Group's actuaries.

The assets of a run-off company typically comprise cash, investments, subrogation recoveries and reinsurance recoverables. From these assets, and any associated investment income, the Group must meet the cost of administering and paying all claims that arise on policies issued prior to the run-off. The residual balance, if any, will be returned to shareholders once all liabilities have been repaid or when the relevant regulator is satisfied, inter alia, that the volatility is reduced to a level where capital can be released. This is based on estimates of the appropriate level of reserves and capital that the business requires to settle all valid claims.

The Group's net technical provisions (claims outstanding less reinsurance recoveries) will be paid over a period of many years dependent upon the nature of the underlying risk, the claims outstanding and the related reinsurance recoveries. The Group's policy is, where appropriate to discount the technical provisions at the risk-free rate applicable to the relevant currency at the duration of the liabilities where these have a mean term in excess of 4 years. Currencies held in the Group are US dollar, sterling and euro.

The Group's strategic principles for its asset and liability management ("ALM") in the insurance entities are to:

·; Provide liquid funds to finance liability and capital management;

·; Mitigate exposure to changes in interest and foreign exchange rates;

·; Assume measured credit risk in line with agreed guidelines; and

·; Invest the Group's surplus in line with agreed guidelines.

The ALM return represents the change in value to the Group statement of financial position from investment activities after taking into account the unwinding of the discount and fees. The discount is unwound over the lives of the portfolios, which represents a charge to the income statement and actual investment income is measured against this to ensure that it remains appropriate to continue to discount at the chosen rate.

The risk carriers' net loss of $6.2 million (2011: loss of $32.0 million), excluding taxation which is subject to group relief and any intergroup fees which are eliminated on consolidation, is summarised below:

(1) ICG includes the results of ICL and ICE.

(2) HIR Group includes the results of HIR and PIR.

(3) The 31 December 2011 comparative excludes the profit of $20.9 million recognised following the set-up of QX Re.

This division has experienced losses of $6.2 million during the year due mainly to volatility on liability management. A dividend of$2.4 million was paid by OX Re during the year.

The table below illustrates the risk carriers' assets and liabilities:

The business of KX Re comprises a collection of mature portfolios of long-tail liabilities, including exposure to asbestos, environmental and other latent claims. The Group's objective for KX Re was to reduce the company's liabilities by accelerating the natural run-off of the portfolio to enable the extraction of capital with regulatory approval. Since acquisition Tawa has extracted capital of $75.0 million from KX Re by way of dividends to the holding company. In 2012, Tawa announced the sale, subject to regulatory approval, of KX Re to Catalina. In 2012 the investment return for KX Re, which includes the return on the surplus, was $0.6 million more than the discount unwind (2011: $0.9 million more than the discount unwind). KX Re's contribution to the Group's results was a loss of $1.7 million (2011: profit $1.7 million). This loss was due to claims deterioration of $1.7 million, group relief payment of surrendered tax losses of $2.0 million and expenses of $1.5 million being offset by debt purchase income received of $2.8 million and favourable ALM returns of $0.6 million, as discussed above.

PXRE is mainly comprised of catastrophe exposures. In 2012 the investment return for PXRE was in line with the discount unwind (2011: $1.0 million less than the discount unwind). Since acquisition Tawa has extracted $34.8 million from PXRE by way of dividends to the holding company. This reflects the significant progress made in reducing the volatility, achieved by de-scaling the liability portfolios in this risk carrier. During the year PXRE made a profit of $4.1 million (2011: loss $5.0 million). This profit was primarily due to favourable movements on net claims reserves of $4.0 million.

Island Capital Group ("ICG"), which comprises ICL and ICE, is an insurance group with a specialist underwriting portfolio of trade credit and political risk insurance business, which went into run-off in November 2008 following the sale of its trade credit and political risk insurance underwriting platform. ICG made a profit of $1.0 million during the year (2011: loss $5.3 million). This profit was primarily due to favourable ALM results of $1.0 million, with an improvement in net claims reserves of $0.2 million being offset by expenses.

OX Re is a small London market company which has been in run-off since 1994, which Tawa acquired in 2011 for strategic reasons. During the year OX Re made a loss of $0.1 million due to expenses (2011: loss $0.5 million). A dividend of $2.4 million was paid by OX Re during the year.

QX Re is a Bermudian regulated special purpose insurer which Tawa set up in 2012. The company provides reinsurance coverage for a book of lead paint exposure underwritten by Penn National and, for a book of this nature, is considered short tail. QX Re has made a loss of $14.3 million as a result of experiencing continuing claims deterioration seen in the latter half of 2011 reflecting the large upswing in the number of new claimants. The claims deterioration of $15.8 million has been partially offset by favourable ALM results of $1.9 million.

Since acquisition in April 2012, the HIR risk carriers have contributed a profit of $1.4 million to the Group. This follows the completion of an actuarial review undertaken in the year, which identified a €5 million reduction against the reserves held. A reduction of €1.3 million has been recognised locally by HIR, with a further reduction of €2.0 million being recognised as a fair value adjustment at acquisition by the Group.

The associate CX Re has a book of reinsurance contracts written prior to August 2001, when the company ceased underwriting new business. The company has consistently maintained a portfolio of highly rated, readily realisable assets which broadly matches the duration and currency of the liabilities, plus a substantial tax asset, the recovery of which depends on the satisfactory resolution of pending litigation with HMRC. In 2012 the investment return for CX Re was $2.0 million in excess of the discount unwind (2011: $1.0 million less than the discount unwind). CX Re made a small loss of $0.2 million in the year (2011: loss of $14.3 million), with the deterioration in net discounted claims reserves of $1.5 million and management fees $0.6 million being offset by the favourable ALM result noted above.

Service providers

Tawa's servicing platform comprises income from both consulting and outsourcing. Consulting typically refers to work provided directly for its clients and the outsourcing division refers to work Tawa does on behalf of clients on its operating platform.

This division comprises the results from the following service companies, in which Tawa had the following interests at the reporting date:

(1) Chiltington group of companies reported under this segment comprises all entities listed in Note 40, with the exception of the risk carriers HIR and PIR.

The service providers' net loss of $0.5 million, excluding any taxation, is summarised below:

In accordance with the terms of the Pro sale and purchase agreement, from 1 January 2010 the Group shares this segment's after tax profits with Swiss Re on a 50/50 basis over the five financial years to 31 December 2014, subject to a cumulative cap of £12 million.

(1) Pro includes the results of Pro and Pro IS.

A dividend of $3.5 million was paid by Pro during the period (2011: $3.3 million).

A key focus within the division during the latter half of 2012 was to rationalise and reduce the cost base of the service platform. The effect of measures taken including manpower reduction and potential savings through identifying synergies within the division following acquisition of Chiltington will offer future financial savings.

Corporate division

This division incorporates corporate costs and Group overheads, incubator costs, acquisition activities and financing resulting in a loss of $12.3 million.

Corporate costs

Corporate costs, excluding any taxation and the investment in incubators, were $4.5 million for the year (2011: $7.2 million).

Although Tawa's associate Asta Capital Limited returned a trading profit for the period of $6.8 million, before finance costs of $2.2 million, it reported an overall loss for the period of $3.5 million, of which Tawa has a 33.33% share. The main contributory factors for this loss were fees in relation to the acquisition being expensed and a one-off acquisition completion bonus payable to executives and staff.

Tawa's investment in incubators

Tawa incubates new projects the Group is developing by providing capital to carefully selected projects, while Pro provides the operating platform (reporting, compliance and other support) to develop these projects until they can operate as independent, profitable businesses. Current incubation projects are:

·; The STRIPE® system, a proprietary web-based platform that was launched in September 2010, allowing principal to principal processing of claims and other post placement transactions between ceding company and reinsurer;

·; Q360 Limited ("Q360"), a new London-based broking operation; which was launched in February 2012 with Tawa providing the capital backing. Q360 will initially operate within the business sectors of onshore energy, property, binding authorities, professional indemnity and non-recourse construction finance. Central to the company's operational platform is the technology used, using innovative processing software, as well as web-based products giving an efficient binding authority facility. Tawa's subsidiary, Pro, has been retained to provide Q360's post-placement services; and

·; Lodestar Marine, an MGA set up by Tawa in 2011 to write marine protection and indemnity insurance for vessels of a defined tonnage. Lodestar Marine commenced writing business in September 2012.

A further investment of $7.0 million has been made in the incubators during the current year (2011: $7.5 million). Q360 costs are $2.9 million, Lodestar Marine costs are $3.2 million and STRIPE® costs are $0.9 million. As this segment comprises the development of new projects it is expected that the generation of positive cash flows will take varying amounts of time.

Acquired company

Tawa's acquisition of Chiltington resulted in an immediate gain in the income statement of $0.3 million in 2012.

Goodwill shown in the Statement of Financial Position, being the excess of the cost of an acquisition over the fair value of the assets and liabilities acquired, as at 31 December 2012 was $22.8 million (2011: $23.4 million). This goodwill has been allocated to Tawa Management Limited, the incubators, and the Pro group of companies. Goodwill is tested annually for impairment and no impairment losses have been recognised in the current year (2011: $nil).

Acquisition related costs for the year were $0.2 million.

Financing

The corporate division also contains the Group's financing arrangements.

At the beginning of the year, the Group had an outstanding balance of $27.2 million on the $50 million facility set up originally to finance the creation of QX Re. A second facility was set-up during the year and $24.1 million (£15.0 million) was drawn down during 2012 to fund the Group's investment in its new associate Asta, Chiltington and the incubators.

As part of the acquisition of ICG in 2010, the Group took on $10 million of that company's debentures repayable in 2035 with an interest rate of LIBOR +3.75%.

The total Group debt at 31 December 2012 is $60.5 million (2011: $36.6 million) which represents 33.9% of shareholders' funds (2011: 18.4%).

The finance costs in relation to these loans in 2012 were $3.2 million (2011: $2.1 million).