Condensed consolidated statement of cash flows For the period
ended 30 June 2011
6 months 6 months 12 months
30 Jun 2011 30 Jun 2010 31 Dec 2010
(Unaudited) (Unaudited) (Audited)
Notes $m $m $m
---------------------------- ------ ------------ ------------ ------------
Net cash generated by/(used
in) operations 11 37.1 (14.6) (17.8)
---------------------------- ------ ------------ ------------ ------------
Investing activities
Cash payments to
acquire debt
securities (669.7) (260.6) (1,021.4)
Cash receipts from
sale of debt
securities 606.3 310.0 1,047.6
Cash transferred from
investing activities 26.9 0.8 (1.4)
Cash receipts from
interest 2.4 2.8 6.2
Purchases of property,
plant and equipment - (0.6) (0.8)
Acquisition of
subsidiary net of
cash and cash
equivalents 2.4 - 23.0
---------------------------- ------ ------------ ------------ ------------
Cash (used in)/generated by
investing activities (31.7) 52.4 53.2
---------------------------- ------ ------------ ------------ ------------
Financing activities
Dividends paid (2.3) (4.0) (4.1)
Own shares purchased (1.6) - (1.1)
Proceeds from
financial borrowings 27.6 - -
Repayments of
financial borrowings (23.4) (3.8) (12.7)
---------------------------- ------ ------------ ------------ ------------
Cash flows generated
by/(used in) financing
activities 0.3 (7.8) (17.9)
---------------------------- ------ ------------ ------------ ------------
Net increase in cash and
cash equivalents 5.7 30.0 17.5
Cash and cash equivalents
at beginning of period 48.5 30.9 30.9
Cash and cash equivalents
at end of period 54.2 60.9 48.5
---------------------------- ------ ------------ ------------ ------------
Notes to the condensed consolidated financial statements For the
period ended 30 June 2011
1 General information
Tawa plc (the "Company") and its subsidiaries (together the
"Group") are engaged in three principal business activities:
-- The acquisition and run-off of insurance companies that have
ceased underwriting;
-- The provision of run-off management services to acquired
insurance companies; and
-- The provision of insurance services to external clients.
On 10 March 2011, the Group completed the transaction to acquire
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 Re.
Participant Run-Off (Pro) Iberica was placed into liquidation on
11 March 2011. This has no impact upon the Groups' net assets as
the value of the investment was written down to nil in 2009.
On 31 March 2011, Tawa plc set up QX Re, a Bermudian regulated
special purpose insurer which will initially provide reinsurance
coverage for a book of lead paint exposure that was underwritten by
Pennsylvania National Mutual Casualty Insurance Company. 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.
The interim consolidated financial statements do not constitute
statutory accounts as defined in section 434 of the Companies Act
2006 and should be read in conjunction with the Group's
consolidated financial statements for the year ended 31 December
2010. 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 498(2) or 498(3) of the Companies Act 2006.
The Directors have considered the position of the Group's
investments and assets compared to the technical provisions and
other liabilities. In addition they have assessed the Group's
liquidity with regard to expected future cash flows. They have also
considered the performance of the business, as discussed in the
interim results. During the period, approval was given for the
capital extraction of $22.8 million from subsidiary PX RE, which
was used to part repay the Group loan from Natixis bank. In light
of these reviews the Directors have concluded that it is
appropriate to adopt the going concern basis in preparing the
interim report.
The Directors confirm that the risks disclosed in the Company's
consolidated financial statements for the year ended 31 December
2010 are still relevant for the current period and the remaining
period to the year end. A description of these risks is included in
note 5 to the 31 December 2010 consolidated financial statements,
namely; insurance risk, market risk (including interest rate risk),
currency risk, credit risk, liquidity risk, and risk related to the
Group's deferred assets.
The interim results have been reviewed by the Group's auditors,
Mazars LLP, and their review report is set out on page 20.
2 Significant 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 has 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 consolidated financial
statements as were applied in the preparation of the Group's
consolidated financial statements for the year ended 31 December
2010.
During the period ended 30 June 2011 the Group adopted the
following significant standards and revisions to standards:
-- IAS 24 (amended) Related Party Disclosures - In November
2009, the IASB issued amendments to IAS 24, effective for annual
periods beginning on or after 1 January 2011, with earlier
application permitted. The revised standard modifies the definition
of a related party and simplifies disclosures for
government-related entities.
3 Financial risk management
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, fair value interest
rate risk, cash flow interest rate risk and price risk), credit
risk and liquidity risk.
The interim condensed consolidated financial statements do not
include all risk management information and disclosures required in
the annual financial statements, and should be read in conjunction
with the group's annual financial statements as at 31 December
2010. There have been no changes since the year end in any risk
management policies.
The Group measures its financial instruments at fair value,
grouped into levels 1 to 3 based on the degree to which the fair
value is observable. As disclosed in the annual financial
statements as at 31 December 2010, the directors of CX Re have
allocated one fixed income bond with a market value of $2.3 million
(31 December 2010: $2.4 million) to Level 3 following review of its
investment portfolio. This allocation to level 3 continues to
reflect the limited liquidity in the market for investments of this
nature. All other assets are allocated to Level 2.
4 Acquisition of subsidiaries
Island Capital
On 22 October 2010, 94.3% of the issued ordinary share capital
of the Island Capital group of companies comprising: Island Capital
Limited, and Island Capital (Europe) Limited, were acquired by the
Company. This transaction has been accounted for by the acquisition
method of accounting. The net assets acquired in the transaction,
and the negative goodwill arising, are as follows:
The initial accounting for the business combination and amounts
recognised in the 2010 annual financial statements were
provisional. The fair values of the acquired assets were
provisional pending the final valuations of these assets. The fair
value exercise has been revised during the current year, but still
remains provisional at this stage. A final fair value exercise will
be completed and accounted for in the 2011 annual financial
statements.
Revised Fair Provisional
Fair value value on Fair value on
Book value adjustments acquisition acquisition
$m $m $m $m
--------------- ----------- --------------- --------------- --------------
Assets
Cash and cash
equivalents 30.4 - 30.4 30.4
Loans and
receivables
including
insurance
receivables 18.5 - 18.5 18.5
Reinsurers'
share of
technical
provisions 5.6 - 5.6 5.6
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