TIDMTAW
RNS Number : 7878O
Tawa PLC
23 September 2011
PRESS RELEASE
Tawa plc
23 September 2011
Tawa plc
Interim results for the six months ended 30 June 2011
An active first half of year for Tawa
Tawa plc ("Tawa" or "the Group") today announces interim results
for the six months ended 30 June 2011.
Highlights
-- Profit for the half year was $11.0 million (2010: $1.4
million);
-- Group net assets are $234.6 million (2010: $223.9
million);
-- Net assets per share in US dollars are $2.08 (GBP1.27) per
share (31 December 2010: $2.00 / GBP1.26);
-- A capital extraction of $22.8 million from its Connecticut
domiciled subsidiary PXRE Reinsurance Company Limited was achieved
during the period. This represents free cash available to Tawa plc
and has been used to repay debt;
-- On 10 March 2011, the Group completed the transaction to
acquire Oslo Reinsurance Company (UK) Limited;
-- On 31 March 2011, Tawa plc set up QX Reinsurance Company
Limited, a Bermudian regulated special purpose insurer which
provides reinsurance coverage for a book of lead paint exposure
that was underwritten by Pennsylvania National Mutual Casualty
Insurance Company;
-- On 7 April 2011, Tawa plc entered into a definitive agreement
to acquire for $1 a 51% stake in LGIC Holdings, LLC the sole
shareholder of Lincoln General Insurance Company, a Pennsylvania
run-off, which is awaiting regulatory approval;
-- An interim dividend for the year ended 31 December 2010 of 2
cents (1.23 pence) per share was paid on 1 June 2011, with a final
dividend for the same amount to be paid on 2 December 2011.
Tawa plc holds capital extraction and free cash flow generation
as its main performance indicator. In this context a capital
extraction of $22.8 million from its Connecticut domiciled
subsidiary PXRE Reinsurance Company Limited was achieved during the
period, which has been used to repay debt. This continues to
reflect the progress made on reduction of the volatility achieved
by downscaling the liability portfolios owned by the Group.
Gilles Erulin, Chief Executive, commented:
"This first half of the year has been busy and profitable for
our company. We have invested considerable effort into our
servicing arm to create a solid performer across all segments of
the insurance market. Since the acquisition of Pro, nearly two
years ago, Tawa has positioned Pro as 'best in class' outsourcing
provider and moved its consulting services towards higher value
added. The soon to be completed acquisition of Chiltington, and now
Whittington, will give our servicing business outstanding coverage
of the UK insurance market, and a US and Continental reach.
"On the insurance portfolio front we are keeping a good momentum
in our cash investment-cash extraction model. Overall the first
half of the year results were more volatile than we would have
expected in relation to the insurance portfolios we are carrying,
but capable of being absorbed by solid acquisitions generated
profits of the QX transaction earlier this year. QX is an
innovative way to assume discontinued portfolios, when a company
transfer is not possible. The engineering of this transaction by
both Tawa and Penn National Insurance illustrates where Tawa makes
a difference, enabling this innovative structure to be developed
and established.
"Overall, Tawa has reaped the benefits of cross synergies
between its servicing business and its portfolio acquisition
capacity. Service provision enhances our ability to access
portfolio opportunities and the portfolios acquired by Tawa feed
our servicing business and increase the skilled professional staff
which forms the bulk of our consulting capacity.
While this first part of the year has been a great ride, we keep
in mind that those transactions are only valuable to our
shareholders if we ensure new investments contribute to solid
sustainable earnings in the future."
--ENDS-
Enquiries:
Gilles Erulin, Chief Executive, Tawa plc 020 7068 8000
Victoria Sisson or Alexandra Thompson, FWD 020 7623 2368
James Britton, or Guy Wiehan, Peel Hunt (Nominated
Adviser and Broker) 020 7418 8900
Note for Editors
Tawa plc was formed in 2001 with the purpose of acquiring or
developing assets and business in the insurance industry. Tawa is
interested in acquiring portfolios of insurance and reinsurance
companies, companies and businesses providing services to the
insurance industry and in developing its own products to serve the
insurance market as a whole.
Since its formation, Tawa has acquired CX Reinsurance Company
Limited, KX Reinsurance Company Limited, PXRE Reinsurance Company,
Island Capital Limited, the Pro group of companies and OX
Reinsurance Company Limited. It also set up QX Reinsurance Company
Limited, a Bermudian regulated reinsurance company, to write
reinsurance business. It has recently announced the acquisition of
Chiltington Group of companies, and its acquisition, as part of a
consortium, of Whittington Insurance Markets Limited.
The Group's combined team of 300 professionals service a number
of the largest insurance businesses in the UK and Europe and
deliver a market-wide third-party servicing capability and cover
London's company and Lloyd's markets as well as Europe, Bermuda and
the USA.
Tawa also operates as an incubator for new projects and launched
the STRIPE(R) system in September 2010. STRIPE(R) is a web based
platform enabling insurers and cedants to deal with their
(re)insurers directly, reducing re-processing of data. STRIPE(R)
supports the single keying of data and allows the rapid and secure
delivery of all transactions.
Tawa plc was floated on the AIM market in July 2007.
Further information can be found on the Company's website:
www.tawaplc.co.uk.
Interim results
Highlights
The consolidated net earnings of Tawa plc after tax were $11.0
million for the half year (2010 $1.4 million). These results were
driven principally by the $19.6 million profit generated by QX
Reinsurance Company Limited's ('QX Re') reinsurance of lead paint
exposure underwritten by Pennsylvania National Mutual Casualty
Insurance Company ('Penn National') and offset by the $5.3 million
loss on discontinued operations, finance costs of $2.1 million and
group costs of $4.8 million.
As to cash generation capacity, which Tawa plc views as its main
performance indicator, a capital extraction of $22.8 million from
its Connecticut domiciled subsidiary PXRE Reinsurance Company
Limited ('PXRE') was achieved during the period. This represents
the extraction of trapped regulatory capital and is free cash
available to Tawa plc. The $22.8 million has been used to repay
debt. This continues to reflect the significant progress made on
reduction of the volatility achieved by downscaling the liability
portfolios owned by the Group.
On 10 March 2011, the Group completed the transaction to acquire
Oslo Reinsurance Company (UK) Limited ('Oslo Re (UK)'), a small
London market company which has been in run-off since 1994. Most of
the business has been removed by schemes and commutations; however
the acquisition is strategically important as the company will be
able to accept portfolio transfers or reinsurance of liabilities
from other companies managed by Tawa or from external entities,
subject to approval from the FSA. The company has been renamed OX
Reinsurance Company Limited ('OX Re').
On 31 March 2011, Tawa plc set up QX Re, a Bermudian regulated
special purpose insurer which will provide reinsurance coverage for
a book of lead paint exposure that was underwritten by Penn
National. The company will operate as a reinsurance vehicle and is
an innovative way for Tawa to assume discontinued portfolios when a
company transfer is not a viable option. QX Re received $56.9
million in reinsurance premium and booked a claims provision of
$35.9 million. There were $1.3 million of costs associated with the
deal.
On 7 April 2011, Tawa plc announced that it had entered into a
definitive agreement to acquire for $1 a 51% stake in a newly
formed US holding company, LGIC Holdings, LLC ('LGIC'). Subject to
regulatory approval, LGIC will acquire a majority of Walshire
General Assurance Company, the sole shareholder of Lincoln General
Insurance Company. The other investor in LGIC will be Kingsway
Financial Services Inc, the former indirect owner of Walshire
General Assurance Company. Pennsylvania-based Lincoln General, in
run-off since 2009, reported statutory gross assets of $412 million
and net assets of $3.2 million at the end of 2010. Previously
Lincoln General wrote a broad book of predominantly commercial and
personal lines insurance. After making allowances for fair value
adjustments Tawa anticipates that the transaction will have minimal
impact on net assets.
Financial review
During the first six months of 2011, Tawa recognised net profits
of $11.0 million compared to net profits of $1.4 million in the six
months to 30 June 2010. During the period Group net assets
increased by $8.3 million, from $226.3 million at 31 December 2010
to $234.6 million ($2.08/GBP1.27 per share) at 30 June 2011 mainly
as a result of the continued expansion of the group, notably
through QX Re.
Dividend and dividend policy
In line with the Group's dividend policy an interim dividend for
the year ended 31 December 2010 of 2 cents (1.23 pence) per share
was paid on 1 June 2011, with a final dividend for the same amount
to be paid on 2 December 2011. The Group does not propose the
payment of a dividend relating to the interim period.
Operational results
The Group's operations are underwriting run-off, insurance
portfolios management, insurance services (Pro), development of IT
tools for the insurance industry (STRIPE(R)) and other corporate
activities.
Underwriting run-off and insurance
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