TIDMPROG
RNS Number : 6746S
Pro Global Insurance Solutions PLC
26 September 2014
Pro Global Insurance Solutions plc
Unaudited interim results for the six months ended 30 June
2014
Pro Global Insurance Solutions plc (the "Company" or "Pro")
today announces unaudited interim results for the six months ended
30 June 2014.
Pro is a specialist outsourcing and consulting service provider
to the global insurance and reinsurance industry.
Highlights of interim results
-- Delivery of "Client First" strategy on track
-- Agreement with Swiss Re, a significant and longstanding
client, to extend its contractual relationship with Pro for a
further five years until 2019
-- A GBP1m reduction in the expense run rate on an annualised basis
-- Group results including the results from discontinued
operations show a GBP2.8 million profit for the interim period
compared to a loss of GBP0.9 million in 2013.
-- The loss from continuing operations, being the demerged
business without the volatile risk-carrier businesses, was GBP1.2
million compared to a loss of GBP1.5 million in 2013
-- 2014 is a year of transition and the Pro team is laying solid
foundations for 2015 and beyond.
The key strategic goals of Pro's "Client First" strategy, as an
independent services company, are:
-- To become the number one specialist service provider
addressing complex operational needs of global insurers and
reinsurers; and
-- To achieve annual revenue of GBP60 million at a sustainable
net margin of 15% in the medium term.
Pro is pleased to report that the team is making significant
progress in delivering on this "Client First" strategy and has:
-- Defined and launched Pro client's value proposition
-- Organised the business into two principal activities
(consulting and outsourcing) and four client-centric business
lines:
1. Risk audit and compliance (consulting)
2. Operational consulting
3. Technical outsourcing
4. Legacy solutions (outsourcing)
-- Reinvigorated Pro's sales activities, focused on expanding
its client base and broadening existing relationships
-- Instituted a rigorous and continuing evaluation of costs to
ensure an appropriate alignment of costs with revenues, evidenced
by the reduction Pro's expenses run rate of over GBP1 million on an
annualised basis.
Pro has recently reached agreement with Swiss Re, a significant
and long standing client, to extend its contractual relationship
for a further 5 years until 2019.
Artur Niemczewski, CEO of Pro Global Insurance Solutions Plc,
commented: "We are making rapid progress. This is shown by the
improvements in Pro's Gross Margin from 34% to 39%. The Pro team is
fully focused on delivering Pro's "Client First" strategy and
transforming Pro into successful services business. 2014 continues
to be a year of transition but we are building solid foundations
for 2015 and beyond."
Enquiries:
Artur Niemczewski, Chief Executive Officer, Pro Global
Insurance Solutions plc 020 7068 8123
-------------------------------------------------------- --------------
Guy Wiehahn, Peel Hunt (nominated adviser and broker) 020 7418 8900
-------------------------------------------------------- --------------
-
Notes to Editors
About Pro plc
Pro plc is a specialist in the provision of operational
outsourcing and consulting services, focusing solely on the global
insurance and reinsurance industry. Our mission is to create value
for our clients at each stage of their operations, by enabling them
to focus on what they do best and helping them improve their
operations. Our core purpose is to be the trusted delivery partner
for the operations that matter to our clients.
Pro plc operates across the entire spectrum of client needs,
from market entry to exit; from live to legacy business. We are
best known for our ability to manage the operations that matter
most to our clients and have been involved with some of the biggest
and most complex assignments in the market. Examples include a cost
reduction programme for a global reinsurer through centralisation
of its operations from 15 to 2 locations and the management of over
25 legacy portfolios with collective liabilities in excess of
$5bn.
We add value in four main areas:
-- Risk, Audit and Compliance: internal and external audits
including peer reviews and coverholder audits; providing risk
management and compliance frameworks to ensure compliance within a
changing regulatory environment
-- Operational consulting: helping improve the efficiency and
effectiveness of client operations and manage major change
-- Technical outsourcing: providing underwriting, claims and
technical accounting support to complement internal teams; client
sectors include risk carriers, brokers and MGAs
-- Legacy solutions: managing discontinued business through
outsourcing or consulting to extract maximum value and enable
clients to focus on core business activities; client sectors
include risk carriers and brokers
Our people are industry practitioners with many years of
experience of running often complex reinsurance and insurance
operations. As experienced professionals, we can be trusted to use
our initiative, blending easily with our clients' ways of working
and becoming effectively an extension of their teams.
Pro plc is a global company, operating from offices in London,
New York, Hamburg, Zurich, and Buenos Aires, supported by
operational centres in Gloucester (UK), York (US) and Sundern
(Germany). Our local knowledge and global expertise ensures we
provide a cost-efficient, round the clock service to support our
clients' operations wherever they might be.
Pro plc comprises Pro Insurance Solutions Ltd, Pro IS Inc, the
Chiltington Group and STRIPE as well as Assekuranz Service-und
Sachverständigengesellschaft mbH, a leading German disability
claims management company. Pro plc also owns 33% of Asta, the
leading Lloyd's turnkey managing agency.
Pro plc is listed on the AIM market.
For more information, visit our website:
www.pro-global.com/investor-relations
Interim results
---------------
Pro Global Insurance Solutions plc (the "Company" or "Pro") is a
specialist outsourcing and consulting service provider to the
global insurance and reinsurance industry.
In December 2013 Tawa plc announced that it was demerging into
two independent companies by distributing, to its then existing
shareholders, its risk carrier business. Following the demerger on
3 April 2014, the remaining subsidiaries are now engaged in the
principal business activity of providing specialised services to a
broad array of international clients across the insurance and
reinsurance markets. On 4 April 2014 Tawa plc was renamed Pro
Global Insurance Solutions plc.
The de-merger releases Pro from the natural and unexpected
volatility of the risk carrier business and enables Pro to focus on
its core purpose of being the trusted delivery partner for
operations that matter most to its clients.
Highlights
During the AGM on 19 June 2014 Pro presented its "Client First"
strategy, as an independent services company, with the key
strategic goals:
-- To become the number one specialist service provider
addressing complex operational needs of global insurers and
reinsurers; and
-- To achieve annual revenue of GBP60 million at a sustainable
net margin of 15% in the medium term.
Pro is pleased to report that the team is making significant
progress in delivering on this "Client First" strategy and has:
-- Defined and launched Pro client's value proposition, aiming
to enhance Pro's reputation and market position;
-- Organised the business into two principal activities
(consulting and outsourcing) and four client-centric business
lines;
5. Risk audit and compliance (consulting)
6. Operational consulting
7. Technical outsourcing
8. Legacy solutions (outsourcing)
-- Reinvigorated Pro's sales activities, focused on expanding
its client base and broadening existing relationships, seeking
long-term high-margin revenue sources. This is evidenced by a
strong and more diverse pipeline; and
-- Instituted a rigorous and continuing evaluation of costs to
ensure an appropriate alignment of costs with revenues and wherever
possible repositioning internal resources onto revenue-generating
client activities, evidenced by the reduction Pro's expenses run
rate of over GBP1 million on an annualised basis.
Pro has recently reached agreement with Swiss Re, a significant
and long standing client, to extend its contractual relationship
for a further 5 years until 2019.
Summary of Interim Financial Results 30 Jun 2014 30 Jun 2013
GBPm GBPm
Operating activities
Revenue from Core Activities 2.4(1) 3.1(1)
Consulting 9.1(1) 9.3(1)
Outsourcing
Direct costs of core business (7.1) (8.2)
Gross Profit 4.4 4.2
------------------ -----------------
Gross Margin 38% 34%
Corporate operating overhead (6.4)(2) (5.6)(2)
Interest (0.3) (0.2)
Other income/(expenses) 0.4 (0.5)
Share of results from associate 0.7 0.9
Taxation - (0.3)
Loss from continuing operations (1.2) (1.5)
------------------ -----------------
Profit from discontinued operations 4.0(3) 0.6(3)
Profit/(loss) for the period 2.8 (0.9)
------------------ -----------------
Note 1: revenue values net of statutory eliminations and adjustments
Note 2: 2014 includes GBP0.4 million re-structuring and re-organisation costs, 2013 includes
GBP0.3 million provision release
Note 3: 2014 includes GBP1.2 million of restructuring and re-organisation costs.
Group results including the results from discontinued operations
show a GBP2.8 million profit for the interim period compared to a
loss of GBP0.9 million in the 1(st) half of 2013. The loss from
continuing operations, being the demerged business without the
volatile risk-carrier businesses, was GBP1.2 million compared to a
loss of GBP1.5 million in 2013.
Revenue for the first half of 2014 was impacted by demerger
activities as Pro has focused on restructuring and redefining its
product groups. Since April 2014, Pro has focused on implementing
its long term growth strategy and has already begun to see
encouraging results. Pro is seeing a significant upturn in its
consulting revenues towards the end of the second quarter and
continuing into the third quarter. Pro sees this trend continuing
in the short-to-medium term. Pro's pipeline remains strong. Pro's
technical outsourcing businesses have continued to perform well and
also have a robust pipeline. Legacy business remains profitable but
there is limited market opportunity in the short term.
The 2014 results include reorganisation and restructuring costs
of GBP1.6 million. The restructuring of Pro's organisation is
expected to reduce operating costs by over GBP1.0 million per year
on an ongoing basis. Pro's focus on long term cost reduction and
realignment of resources has already had a marked impact on the
Company's gross margins and overall operating results. Gross
margins for the interim period reached 38% compared to 34% in the
2013 comparable period. The Company anticipates further
improvements in gross margins during the latter half of 2014 as it
continues to work to achieve a target net margin of 15%.
Historically, the Company has reported its financial results in
US dollars since the vast majority of the Group's assets and
liabilities were held in US dollars. Following the demerger, the
remaining assets and liabilities are predominantly held in pounds
sterling and is the functional currency of the Group's principal
operating subsidiaries. As a result, Pro has changed its reporting
currency to pounds sterling. As a direct result of this and the
demerger, the Company has released GBP6.8 million (30 June 2013:
GBP16.8 million) of its translation reserve to the income
statement. These releases are recorded in discontinued
operations.
In January 2012, Pro acquired a 33% interest in Asta, the
leading turnkey managing agency Services Company in Lloyd's. This
strategy has been fully validated and Asta continues to perform
strongly with Pro's share of their results contributing GBP0.7
million and GBP0.9 million to the Group results in the six month
periods to 30 June 2014 and 30 June 2013 respectively. Asta paid
its first dividend of GBP1.25 million (for Pro's 33% share) in
August 2014.
The sale of the German risk carrier Hamburger Internationale
Rückversicherung AG to Compre Holdings Limited was closed during
August 2014 following regulatory approval from BaFin. This
contributed to strengthening the Company's cash resources during
the 2(nd) half of 2014.
The Pro team is fully-focused on delivering the "Client First"
strategy and transforming into a successful service business. 2014
is a year of transition and the team is laying solid foundations
for 2015 and beyond.
Condensed consolidated income statement For the period ended 30 June
2014
----------------------------------------------------------------------
6 months 6 months
30 Jun 30 Jun
2014 2013
(unaudited) (unaudited)
restated
Notes GBPm GBPm
================================================ ====== ======================= =============
Continuing operations
Revenue 11.5 12.4
Expenses (13.5) (13.8)
Other income/(expenses) 0.4 (0.5)
================================================ ====== ======================= =============
Results of operating activities (1.6) (1.9)
Share of results of associate 0.7 0.9
Finance costs (0.3) (0.2)
================================================ ====== ======================= =============
Loss before taxation (1.2) (1.2)
Taxation - (0.3)
================================================ ====== ======================= =============
Loss for the period from continuing operations (1.2) (1.5)
Profit for the period from discontinued
operations 7 4.0 0.6
================================================ ====== ======================= =============
Profit/(loss) for the period 2.8 (0.9)
================================================ ====== ======================= =============
Loss for the period from continuing operations (1.2) (1.5)
Profit for the period from discontinued
operations 4.0 0.6
================================================ ====== ======================= =============
Profit/(loss) for the period attributable
to owners of the Company 2.8 (0.9)
================================================ ====== ======================= =============
Earnings per share
From continuing and discontinued operations
Basic: Ordinary shares (pence per share) 8 2.47 (0.79)
Diluted: Ordinary shares (pence per share) 8 2.40 (0.79)
================================================ ====== ======================= =============
From continuing operations
Basic: Ordinary shares (pence per share) 8 (1.06) (1.32)
Diluted: Ordinary shares (pence per share) 8 (1.06) (1.32)
================================================ ====== ======================= =============
Condensed consolidated statement of comprehensive income For the period
ended 30 June 2014
-----------------------------------------------------------------------
6 months 6 months
30 Jun 30 Jun
2014 2013
(unaudited) (unaudited)
restated
GBPm GBPm
============================================= ============= =============
Profit/(loss) for the period 2.8 (0.9)
Other comprehensive (losses)/income
Items that may be reclassified subsequently
to profit or loss
Currency translation differences (0.1) 4.1
============================================= ============= =============
Total comprehensive income for the period 2.7 3.2
============================================= ============= =============
Total comprehensive (losses)/income for
the period from continuing operations (1.3) 2.6
Total comprehensive income for the period
from discontinued operations 4.0 0.6
Total comprehensive income for the period
attributable to owners of the Company 2.7 3.2
============================================= ============= =============
Condensed consolidated statement of financial position For the period
ended 30 June 2014
---------------------------------------------------------------------
30 Jun 2014 31 Dec 2013
(unaudited) (unaudited)
restated
Notes GBPm GBPm
======================================================================= ====== ====================== =============
ASSETS
Non-current assets
Property, plant and equipment 1.4 1.0
Goodwill 5.9 5.9
Other intangible assets 0.4 0.6
Interest in associate 7.3 7.2
Reinsurers' share of technical provisions - 0.4
15.0 15.1
======================================================================= ====== ====================== =============
Current assets
Loans and receivables including insurance receivables 17.4 13.3
Financial assets - investments - 45.6
Cash and cash equivalents 3.4 13.3
20.8 72.2
======================================================================= ====== ====================== =============
Assets classified as held for sale 9 65.7 86.7
Total assets 101.5 174.0
======================================================================= ====== ====================== =============
EQUITY AND LIABILITIES
Equity attributable to owners of the Company
Share capital 2.3 11.3
Share premium - 57.5
Other reserves 3.3 10.2
Retained earnings 1.7 (17.8)
======================================================================= ====== ====================== =============
7.3 61.2
Non-controlling interests (0.3) 0.4
Total equity 7.0 61.6
======================================================================= ====== ====================== =============
Non-current liabilities
Financial liabilities - borrowings 10.0 10.0
Technical provisions - 36.5
10.0 46.5
======================================================================= ====== ====================== =============
Current liabilities
Creditors arising out of insurance operations 10.8 9.6
Other liabilities 9.9 20.6
20.7 30.2
======================================================================= ====== ====================== =============
Liabilities directly associated with assets classified as held for
sale 9 63.8 35.7
Total liabilities 94.5 112.4
======================================================================= ====== ====================== =============
Total equity and liabilities 101.5 174.0
======================================================================= ====== ====================== =============
Condensed consolidated statement of changes in equity For the period
ended 30 June 2014
---------------------------------------------------------------------
Attributed to equity holders of the Company
=============================================================================================
Other reserves
==========================================
Share
Share based Capital
Share premium payments redemption Translation Retained Non-controlling Total
capital reserve reserve reserve reserve earnings Total interest Equity
$m $m $m $m $m $m $m $m $m
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Balance at 1
January 2013
reported in $m 22.2 110.6 4.1 - (0.7) 41.3 177.5 1.0 178.5
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Balance at 1
January 2013
restated in GBPm 11.3 56.1 2.5 - 22.6 18.0 110.5 0.7 111.2
Comprehensive
losses
Loss for the
period restated - - - - - (0.9) (0.9) - (0.9)
Other
comprehensive
income
Currency
translation
differences
restated - - - - 4.1 - 4.1 - 4.1
Total
comprehensive
income/(losses)
for the period - - - - 4.1 (0.9) 3.2 - 3.2
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Reclassification
of exchange
differences on
the disposal of
a foreign
subsidiary - - - - (16.8) - (16.8) - (16.8)
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Balance at 30
June 2013
(unaudited) 11.3 56.1 2.5 - 9.9 17.1 96.9 0.7 97.6
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
$m $m $m $m $m $m $m $m $m
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Balance at 1
January 2014
reported in $m 22.2 112.8 4.2 0.4 0.7 (40.4) 99.9 0.7 100.6
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Balance at 1
January 2014
restated in GBPm 11.3 57.5 2.7 0.3 7.2 (17.8) 61.2 0.4 61.6
Comprehensive
income
Profit for the
period - - - - - 2.8 2.8 - 2.8
Other
comprehensive
losses
Currency
translation
differences - - - - (0.1) - (0.1) - (0.1)
Total
comprehensive
(losses)/income
for the period - - - - (0.1) 2.8 2.7 - 2.7
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Reclassification
of exchange
differences on
demerger - - - - (6.8) (0.2) (7.0) - (7.0)
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Transactions with
owners
Capital reduction (9.0) (57.5) - - - 66.5 - - -
Share based
payments - - - - - - - - -
Non-cash
distribution - - - - - (49.6) (49.6) (0.7) (50.3)
Total
transactions
with owners (9.0) (57.5) - - - 16.9 (49.6) (0.7) (50.3)
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Balance at 30
June 2014
(unaudited) 2.3 - 2.7 0.3 0.3 1.7 7.3 (0.3) 7.0
================== ============ ============ ============ ============= ============= ============ ======= ================= ========
Condensed consolidated statement of cash flows For the
period ended 30 June 2014
----------------------------------------------------------------------------------------------------------------------------------------------
6 months 6 months
30 Jun 2014 30 Jun 2013
(unaudited) (unaudited)
restated
Notes GBPm GBPm
============================================================= ======= ====================== ======================
Net cash (used in)/generated from continuing operations 10 (6.2) 6.2
Net cash used in discontinued operations 7 (0.6) (2.9)
Cash (used in)/generated from operations (6.8) 3.3
============================================================= ======= ====================== ======================
Investing activities
Cash receipts from interest - 1.3
Purchases of property, plant and equipment (0.6) -
Cash and cash equivalents relating to demerged entities (8.7) -
Net cash from the disposal of subsidiaries - (6.6)
Cash generated from discontinued investing activities 7 0.1 1.0
Cash used in investing activities (9.2) (4.3)
============================================================= ======= ====================== ======================
Financing activities
Repayments of financial borrowings - (5.1)
Cash used in discontinued financing activities 7 (0.4) (0.9)
Cash flows used in financing activities (0.4) (6.0)
============================================================= ======= ====================== ======================
Net decrease in cash and cash equivalents (16.4) (7.0)
Cash and cash equivalents at the beginning of the period 23.8 35.5
Effects of exchange rate changes on the balance of cash held in
foreign currencies (0.5) 1.3
Cash and cash equivalents at the end of the period 6.9 29.8
============================================================= ======= ====================== ======================
As presented in the consolidated statement of financial
position
Cash and cash equivalents 13.3 35.5
Assets classified as held for sale 9 10.5 -
============================================================= ======= ====================== ======================
Cash and cash equivalents at the beginning of the period 23.8 35.5
============================================================= ======= ====================== ======================
As presented in the consolidated statement of financial
position
Cash and cash equivalents 3.4 29.8
Assets classified as held for sale 9 3.5 -
Cash and cash equivalents at the end of the period 6.9 29.8
============================================================= ======= ====================== ======================
Major non-cash transactions
On 26 March 2014 the Company's share premium of GBP57.5 million
was cancelled and the nominal value of 113,375,177 ordinary shares
was reduced from 10 pence to 2 pence.
On 3 April 2014 the Company made a non-cash distribution,
dividend in specie, of GBP50.3 million.
Notes to the condensed consolidated financial statements For the
period ended 30 June 2014
------------------------------------------------------------------
1. General information
----------------------
On 4 April 2014 Tawa plc was renamed Pro Global Insurance
Solutions plc (the "Company"). The risk carrier business was
demerged on 3 April 2014 and the remaining subsidiaries (together
the "Group") are now engaged in the principal business activity of
providing specialised services to a broad array of international
clients across the insurance market.
The demerger is fully disclosed in note 6.
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
2013. 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 assets
compared to the 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. 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 interim results have been reviewed by the Group's auditors,
Mazars LLP.
2. Significant accounting policies
------------------------------------
The annual financial statements of the Company 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
2013, except for the adoption of new standards and interpretations
effective as of 1 January 2014. During the interim period the Group
changed its presentation currency from US dollars to pounds
sterling, this is considered a change in accounting policy and the
details are disclosed in note 4.
During the period the Group adopted the following standards and
revisions to standards:
-- The standards on consolidation, joint arrangements,
associates and related disclosures have been issued or amended. The
standards need to be applied collectively and are effective for
annual periods beginning on or after 1 January 2014:
-- IAS 27 (2011) Separate Financial Statements - Now only deals
with the requirements for separate financial statements,
requirements for consolidated financial statements are now
contained in IFRS 10 Consolidated Financial Statements;
-- IAS 28 (2011) Investments in Associates and Joint Ventures -
The standard supersedes IAS 28 and prescribes the accounting for
investments in associates and joint ventures and sets out the
requirements for the application of the equity method of
accounting;
-- IFRS 10 Consolidated Financial Statements - The standard
introduces a single consolidation model for all entities based on
control, irrespective of the nature of the investee. Under IFRS 10,
control is based on whether an investor has:
-- Power over the investee;
-- Exposure, or rights, to variable returns from its involvement with the investee; and
-- The ability to use its power over the investee to affect the amount of the returns.
-- IFRS 11 Joint Arrangements - The standard replaces IAS 31
Interest in Joint Ventures and requires a party to a joint
arrangement to determine the type of joint arrangement in which it
is involved by assessing its rights and obligations and then
account for those rights and obligations in accordance with that
type of joint arrangement. Joint arrangements are either joint
operations or joint ventures; and
-- IFRS 12 Disclosure of Interests in Other Entities - Requires
extensive disclosure to enable users of the financial statements to
evaluate the nature of, and risks associated with, interests in
other entities.
-- Amendments to IFRS 10 Consolidated Financial Statements, IFRS
11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other
Entities - To provide additional transition relief by limiting the
requirement to provide adjusted comparative information to only the
preceding comparative period. Effective for annual periods
beginning on or after 1 January 2013, however as EFRAG has not
endorsed the standards effective dates these amendments are
effective for annual periods beginning on or after 1 January
2014;
-- Investment entities amendments to IFRS 10 Consolidated
Financial Statements, IFRS 12 Disclosure of Interests in Other
Entities and IAS 27 Separate Financial statements - Provide
investment entities (as defined) an exemption from the
consolidation of particular subsidiaries and instead requires their
measurement at fair value through profit or loss in accordance with
IFRS 9 Financial Instruments or IAS 39 Financial Instruments:
Recognition and Measurement. Effective for annual periods beginning
on or after 1 January 2014;
-- Amendments to IAS 32 Financial Instruments Presentation - To
clarify the application of the requirements on offsetting financial
assets and financial liabilities effective for annual periods
beginning on or after 1 January 2014;
-- Amendments to IAS 36 Impairment of Assets - To reduce the
circumstances in which the recoverable amount of assets or
cash-generating units is required to be disclosed, clarify the
disclosures required and to introduce an explicit requirement to
disclose the discount rate used in determining impairment (or
reversals) where recoverable amount (based on fair value less costs
of disposal) is determined using a present value technique.
Effective for annual periods beginning on or after 1 January 2014;
and
-- Amendments to IAS 39 Financial Instruments: Recognition and
Measurement - To clarify that there is no need to discontinue hedge
accounting if a hedging derivative is novated, provided certain
criteria are met. Effective for annual periods beginning on or
after 1 January 2014.
3. Critical accounting judgements and estimates
-------------------------------------------------
The judgements and estimates made by management which are
relevant and have a significant effect on the condensed
consolidated financial statements are consistent with those
disclosed in the Group's consolidated financial statements for the
year ended 31 December 2013.
Assets and liabilities classified as held for sale, Hamburger
Internationale Rückversicherung ("HIR")
Regulatory approval for the sale of HIR and certain subsidiaries
was received on 14 August 2014 from BaFin, the German regulator,
and the transaction completed subsequent to the reporting period.
At 30 June 2014 management considered it appropriate to classify
the assets and related liabilities as held for sale.
QX Reinsurance Company Limited ("QX Re")
As noted in Note 6, the ownership of QX Re was not transferred
as part of the demerger. However, the economic rights and therefore
the exposure to and rights to variable returns relating to this
entity are no longer held by Pro. As a result, at 30 June 2014, it
is management's view that Pro does not control QX Re and it has not
been consolidated.
4. Change in accounting policy
------------------------------
Following the demerger the Group's revenues, profits and cash
flows are primarily generated in pounds sterling, and are expected
to remain principally denominated in sterling for the foreseeable
future. Historically the Group presented its consolidated financial
statements in US dollars. During the period the Group changed the
currency in which it presents its financial statements from US
dollars to pounds sterling, in order to better reflect the
underlying performance of the Group.
A change in the presentation currency is considered a change in
accounting policy and has been accounted for retrospectively.
Financial information included in the financial statements for the
periods ended 30 June 2013 and 31 December 2013 previously reported
in US dollars have been restated into pounds sterling using the
following procedures:
-- assets and liabilities were translated into pounds sterling
at the closing rates of exchange on the relevant reporting
dates;
-- income and expenditure were translated at the average rates
of exchange prevailing for the relevant periods; and
-- the translation reserve was recalculated from accumulated
gains and losses using average rates of exchange prevailing for the
relevant periods.
5. Segmental information
--------------------------
Prior to the demerger of the Group, Pro Global Insurance
Solutions plc represented a single segment within the financial
accounts. The demerged Group's revenue is generated in a number of
countries, United Kingdom, United States, Europe and Latin America,
with the activities divided into two key segments.
Outsourcing
Outsourcing is provided within the reinsurance and insurance
industry with services provided through the Company's legacy
solutions product to books of business that are in run-off. The
technical outsourcing product provides outsourcing services to both
start up and established operators.
Consultancy
Consultancy services are provided within the reinsurance and
insurance industry to provide services in two key areas:
-- Risk, audit and compliance; and
-- Change management including project management, process
engineering, business analysis and data engineering.
Other
Other includes revenue from STRIPE Global Services Limited and
incidental revenue that is generated outside of these core services
by shared services resources.
For management purposes the Group is divided into the four
product groups, although these have been combined into outsourcing
and consultancy as they share the same distribution and margin
styles. The Group is monitored on both a product and territory
split by management, with assets and liabilities being monitored on
a Group basis.
The segments identified, although dependant on clients' demands
which can affected by peak holiday periods, are not materially
impacted by seasonality. The segments have no infrastructure,
assets or liabilities separately identified from the Group.
(a) Segment income and results
The following is an analysis of the Group's revenue and results
by reportable segment.
Eliminations Discontinued
Outsourcing Consulting Other and adjustments operations Consolidated
For the period ended
30 Jun 2014 GBPm GBPm GBPm GBPm GBPm GBPm
======================== ============= ============ ======= ================== ============== ==============
Revenue
Third party 9.3 2.4 0.1 (0.3) - 11.5
Inter-segment 0.3 0.2 0.4 (0.9) - -
Total revenue 9.6 2.6 0.5 (1.2) - 11.5
======================== ============= ============ ======= ================== ============== ==============
Profit/(loss) on
continuing operations 1.1 (0.6) (0.2) (1.5) - (1.2)
Profit on discontinued
operations - - - - 4.0 4.0
======================== ============= ============ ======= ================== ============== ==============
Eliminations
and Discontinued
Outsourcing Consulting Other adjustments operations Consolidated
For the period
ended
30 Jun 2013 GBPm GBPm GBPm GBPm GBPm GBPm
================== ============= ============ ======= ============== ============== ==============
Revenue
Third party 9.2 3.1 - 0.1 - 12.4
Inter-segment 0.9 - 0.7 (1.6) - -
Total revenue 10.1 3.1 0.7 (1.5) - 12.4
====================== ============= ============ ======= ============== ============== ==============
Profit/(loss) on
continuing
operations 0.8 0.2 0.3 (2.8) - (1.5)
Profit on
discontinued
operations - - - - 0.6 0.6
====================== ============= ============ ======= ============== ============== ==============
No adjustments are required for revenue recognition.
The eliminations and adjustments include consolidation of Group
revenue, small exchange rate differences and transactions within
Pro Global Insurance Solutions plc.
(b) Geographical Information
Revenue is generated in a number of territories; the revenue is
booked within the territory that is providing the resources to
fulfil the contract.
30 Jun 2014 30 Jun 2013
Revenue from external customers GBPm GBPm
================================= ============= =============
United Kingdom 8.2 8.1
United States 2.3 2.6
Europe 0.8 1.3
Latin America 0.2 0.4
Total revenue 11.5 12.4
================================= ============= =============
The following is a geographical analysis of the Group's
non-current assets. Non-current assets for this purpose consist of
property, plant and equipment, intangible assets and investments in
associates.
30 Jun 2014 30 Jun 2013
Location of non-current assets GBPm GBPm
================================ ============= =============
United Kingdom 8.8 8.4
Europe 0.3 0.4
Total non-current assets 9.1 8.8
================================ ============= =============
6. Demerged entities
----------------------
On 20 December 2013 the Group announced its plan to demerge the
risk carrier business with the remaining service business becoming
the focus of the Group.
On 26 March 2014 the High Court approved a reduction of the
Company's share capital to facilitate the demerger, share premium
of GBP57.5 million was cancelled and the nominal value of the
ordinary shares was reduced from 10 pence to 2 pence. These changes
are detailed in the statement of changes in equity.
On 3 April 2014 the demerger became effective and the risk
carriers' and other companies' net assets were transferred by means
of a dividend in specie.
The economic rights to the deferred assets relating to CX
Reinsurance Company Limited ("CX Re") have transferred to the risk
carrier business; this asset is currently shown as held for sale as
the transfer is not yet complete. However, the Group's remaining
12.65% interest in CX Re (as an associate) was deemed as disposed
of on the date of the demerger as the Group no longer has
significant influence over this entity. Subsidiaries QX Re and LGIC
Holdings, LLC continue to be owned by the Group but certain
economic rights have transferred to the risk carrier business.
The demerged subsidiaries and transferred economic rights are
detailed below:
Place of incorporation (or Portion of ownership
Demerged entities registration) and operation interest transferred Net assets transferred GBPm
============================ ============================ ============================ ============================
Tawa Associates Limited Great Britain 100.00% 21.8
Tawa Management Limited Great Britain 100.00% 1.6
WT Holdings Incorporated United States Delaware 100.00% 12.7
PXRE Reinsurance Company United States Connecticut 100.00% 16.6
Tawa Management (Bermuda)
Limited Bermuda 100.00% (0.1)
Amberley Alternative Assets
Limited Great Britain 100.00% 0.1
CX Reinsurance Company
Limited Great Britain 12.65% 0.8
ICL Holdings Incorporated United States Delaware 100.00%
============================
Island Capital (Europe)
Limited (in Liquidation) Great Britain 94.30%
Island Capital Limited Bermuda 94.30% 11.0
============================ ============================ ============================ ============================
Pocono Holdings Limited Great Britain 100.00% 0.1
Q360, Inc United States Delaware 100.00%
============================
Q360 Limited Great Britain 100.00% (3.7)
============================ ============================ ============================ ============================
Lodestar Marine Limited Great Britain 100.00% (5.9)
Economic rights transferred
============================ ============================ ============================ ============================
CX Reinsurance Company
Limited, deferred asset Great Britain n/a 30.9
QX Reinsurance Company
Limited Bermuda 100.00% 0.7
LGIC Holdings, LLC United States Delaware 51.00% -
============================ ============================ ============================ ============================
Consolidation and IFRS valuation adjustments (36.3)
Total net assets transferred 50.3
========================================================== ============================ ============================
Analysis of assets and liabilities over which control was
lost
Consolidation and IFRS Economic rights Net assets transferred
Entities demerged valuation adjustments transferred 3 April 2014
GBPm GBPm GBPm GBPm
===================== ================== =========================== ===================== =======================
Assets
Investments in
subsidiaries 39.3 (39.3) - -
Intercompany
balances 4.7 (4.7) - -
Property, plant and
equipment 0.1 - - 0.1
Interest in
associate 2.8 0.4 - 3.2
Deferred assets - 2.5 28.4 30.9
Reinsurers' share of
technical
provisions 2.4 - - 2.4
Loans and
receivables
including insurance
receivables 15.0 4.7 - 19.7
Financial assets -
investments 20.7 - - 20.7
Cash and cash
equivalents 8.7 - - 8.7
===================== ================== =========================== ===================== =======================
Total assets over
which control was
lost 93.7 (36.4) 28.4 85.7
===================== ================== =========================== ===================== =======================
Liabilities
Financial
liabilities -
borrowings 19.6 - - 19.6
Technical provisions 6.7 (0.1) - 6.6
Creditors arising
out of insurance
operations 3.3 - - 3.3
Other liabilities 5.9 - - 5.9
===================== ================== =========================== ===================== =======================
Total liabilities
over which control
was lost 35.5 (0.1) - 35.4
===================== ================== =========================== ===================== =======================
Net assets over
which control was
lost 58.2 (36.3) 28.4 50.3
===================== ================== =========================== ===================== =======================
Gain/(loss) on demerger
30 Jun 2014
GBPm
====================================== ====================
Dividend in specie (50.3)
Fair value of net assets transferred 50.3
-
====================================== ====================
Net cash flow on the demerging of entities
30 Jun 2014
GBPm
===================================================== ====================
Consideration received in cash and cash equivalents -
Less: cash and cash equivalents disposed of (8.7)
(8.7)
===================================================== ====================
7. Discounted operations
------------------------
Demerger of Tawa Associates Limited ("TAL")
On 3 April 2014 the Group effected the demerger of the risk
carrier business. The results and gain on demerger are presented as
discontinued in both the current and comparative year. The entities
which have been transferred to the TAL group have been presented in
note 6.
CX Reinsurance Company Limited ("CX Re")
Following the Group's disposal in 2006 of the majority of its
shareholding in CX Re any adjustments to the deferred consideration
are accounted for as a profit/(loss) on sale of investment in the
year in which the adjustments to the deferred consideration arise.
CX Re formed part of the demerger however at the period close the
transfer to TAL had not yet been completed, therefore the deferred
asset and related liability to TAL remain classified as held for
sale.
Hamburger Internationale Rückversicherung AG ("HIR")
On 20 December 2013 the Group announced the sale of the entire
issued share capital of HIR and its subsidiaries Pavant SAS,
Chiltington International Holdings Limited, and Hamburg
International Reinsurance Ltd to Compre Holdings Limited whilst
retaining the Chiltington consulting companies in Argentina, USA,
UK and Germany. Regulatory approval was received on 14 August 2014
from BaFin, the German regulator, and the transaction completed
subsequent to the reporting period. The results are presented as
discontinued in both the current and comparative year and the
related net assets are disclosed as held for sale.
KX Reinsurance Company Limited ("KX Re") and OX Reinsurance
Limited ("OX Re")
On 14 April 2013, the Group disposed of its risk carrier KX Re
and its direct subsidiary OX Re. The results and the loss on
disposal are presented as discontinued operations in the
comparative year.
30 Jun 2014 30 Jun 2013 (restated)
============================== ========================================
TAL CX Re HIR Total TAL CX Re KX Re HIR Total
Discontinued operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================================ ====== ====== ====== ====== ====== ====== ======= ====== =======
Net earned premium 0.7 - - 0.7 1.4 - - - 1.4
Revenue 1.3 - - 1.3 2.2 - - - 2.2
Investment return 0.1 - - 0.1 0.7 - - 0.3 1.0
Other income 0.1 - 0.5 0.6 - - - 0.1 0.1
Net insurance claims 0.7 - - 0.7 (1.4) - - 0.4 (1.0)
Expenses (2.9) - (0.9) (3.8) (4.7) - - (0.9) (5.6)
Share of results of associate (0.1) - - (0.1) - - - - -
Finance costs (0.4) - - (0.4) (0.9) - - - (0.9)
============================================ ====== ====== ====== ====== ====== ====== ======= ====== =======
Loss from discontinued operations before
taxation (0.5) - (0.4) (0.9) (2.7) - - (0.1) (2.8)
Taxation (0.1) - - (0.1) - - - - -
Impairment of demerged subsidiary (0.7) - - (0.7) - - - - -
Reclassification of translation reserve 6.8 - - 6.8 - - 16.8 - 16.8
(Loss)/profit on disposal of discontinued
operations (0.3) (0.8) - (1.1) - 0.3 (13.7) - (13.4)
(Loss)/profit for the period from
discontinued operations 5.2 (0.8) (0.4) 4.0 (2.7) 0.3 3.1 (0.1) 0.6
============================================ ====== ====== ====== ====== ====== ====== ======= ====== =======
30 Jun 2014 30 Jun 2013
Cash flow statement from discontinued operations GBPm GBPm
======================================================= ============ ============
Net cash used in discontinued operations (0.6) (2.9)
Cash generated from discontinued investing activities 0.1 1.0
Cash used in discontinued financing activities (0.4) (0.9)
======================================================= ============ ============
8. Earnings per share
---------------------
30 Jun
30 Jun 2014 2013
restated
Earnings GBPm GBPm
================================================== ============= ============
Earnings for the purposes of basic earnings
per share from continuing and discontinued
operations being net profit/(loss) attributable
to equity holders of the Group 2.8 (0.9)
Earnings for the purposes of basic earnings
per share from continuing operations
being net loss attributable to equity
holders of the Group (1.2) (1.5)
Earnings for the purposes of basic earnings
per share from discontinued operations
being net profit attributable to equity
holders of the Group 4.0 0.6
30 Jun
Number of shares 30 Jun 2014 2013
================================================== ============= ============
Weighted average number of Ordinary Shares
for the purposes of basic earnings per
share 113,329,848 113,375,177
Effect of dilutive potential Ordinary
Shares: Share options 3,228,816 1,915,304
Weighted average number of Ordinary Shares for
the purposes of diluted earnings per share 116,558,664 115,290,481
================================================== ============= ============
30 Jun
30 Jun 2014 2013
restated
Basic earnings per share UK pence UK pence
================================================== ============= ============
From continuing and discontinued operations
Basic: Ordinary Shares (pence per share) 2.47 (0.79)
Diluted: Ordinary Shares (pence per share) 2.40 (0.79)
================================================== ============= ============
From continuing operations
Basic: Ordinary Shares (pence per share) (1.06) (1.32)
Diluted: Ordinary Shares (pence per share) (1.06) (1.32)
================================================== ============= ============
From discontinued operations
Basic: Ordinary Shares (pence per share) 3.53 0.53
Diluted: Ordinary Shares (pence per share) 3.43 0.52
================================================== ============= ============
9. Assets and liabilities classified as held for sale
-----------------------------------------------------
Demerger of Tawa Associates Limited ("TAL")
On 20 December 2013 the Group announced its plan to demerge the
Group's risk carrier business and the related assets were shown as
held for sale at 31 December 2013. On 3 April 2014 the Group
transferred these net assets by means of a dividend in specie, with
the exception of CX Re's deferred asset, which has remained as held
for sale and the transfer is progressing. As the economic rights of
this asset have transferred to TAL a related liability is shown as
due to TAL.
Hamburger Internationale Rückversicherung AG ("HIR")
On 20 December 2013 the Group announced the sale of the entire
issued share capital in HIR and its subsidiaries as detailed in
note 7. The assets and related liabilities are classified as held
for sale at 30 June 2014.
30 Jun 2014 31 Dec 2013 (restated)
======================================== ==================================
HIR CX Re Total TAL CX Re Total
Net assets held for sale GBPm GBPm GBPm GBPm GBPm GBPm
======================================== ============ ============ ============ ============ ============ ======
Assets
Property, plant and equipment - - - 0.1 - 0.1
Interest in associate - - - 3.3 - 3.3
Deferred asset - 29.7 29.7 - 32.1 32.1
Reinsurers' share of technical
provisions 0.3 - 0.3 2.4 - 2.4
Loans and receivables including
insurance receivables 2.1 - 2.1 16.6 - 16.6
Financial assets - investments 30.1 - 30.1 21.7 - 21.7
Cash and cash equivalents 3.5 - 3.5 10.5 - 10.5
Total assets held for sale 36.0 29.7 65.7 54.6 32.1 86.7
======================================== ============ ============ ============ ============ ============ ======
Liabilities
Financial liabilities - borrowings - - - 17.9 - 17.9
Technical provisions 19.1 - 19.1 6.9 - 6.9
Creditors arising out of insurance
operations 3.7 - 3.7 4.2 - 4.2
Other liabilities 11.3 29.7 41.0 6.7 - 6.7
Total liabilities held for sale 34.1 29.7 63.8 35.7 - 35.7
======================================== ============ ============ ============ ============ ============ ======
Net assets held for sale 1.9 - 1.9 18.9 32.1 51.0
======================================== ============ ============ ============ ============ ============ ======
10. Cash (used in)/generated from continuing operations
---------------------------------------------------------
30 Jun 2014 30 Jun 2013
(unaudited) (unaudited)
restated
GBPm GBPm
================================================================== ============= ======================
Loss for the period from continuing operations (1.2) (1.5)
Adjustments for:
- depreciation 0.1 0.2
- share based payment expense 0.1 -
- amortisation of intangible asset 0.2 0.1
- other gains and losses (1.2) 3.6
================================================================== ============= ======================
(2.0) 2.4
Change in operating assets and liabilities
Net increase/(decrease) in insurance receivables and liabilities 3.9 (4.6)
Net increase in loans and receivables (8.2) (5.0)
Net increase in other operating liabilities 0.4 13.9
================================================================== ============= ======================
Cash (used in)/generated from operations (5.9) 6.7
================================================================== ============= ======================
Interest paid (0.3) (0.2)
Taxation paid - (0.3)
================================================================== ============= ======================
Net cash (used in)/generated from continuing operations (6.2) 6.2
================================================================== ============= ======================
11. Related party transactions
------------------------------
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Tawa Associates Limited and its
subsidiaries are considered related parties as both the entity and
the Group have the same ultimate parent.
Trading transactions
Two of the Company's subsidiaries Pro Insurance Solutions Ltd
and Pro IS, Inc provide insurance run-off management services to
Tawa Associates Limited and its subsidiaries. On 3 April 2014
associate CX Reinsurance Company Limited was transferred to Tawa
Associates Limited.
Run-off management revenue is provided on a negotiated fee
basis. Run-off management expenses are recharged at cost by Pro
Insurance Solutions Ltd and Pro IS, Inc.
During the period Group companies entered into the following
transactions with related parties who are not members of the
Group:
30 Jun 2014 30 Jun 2013
restated
GBPm GBPm
===================================================== ========================== ======================
Revenue
Tawa Associates Limited, and its subsidiaries below 0.1 -
Amberley Alternative Assets Limited 0.1
PXRE Reinsurance Company 0.2 -
Lodestar Marine Limited 0.2 -
Associate CX Reinsurance Company Limited 1.0 0.4
Total revenue with related parties 1.6 0.4
===================================================== ========================== ======================
Recharged expenses
Tawa Associates Limited, and its subsidiaries below 0.4 -
Q360 Limited 0.2 -
Lodestar Marine Limited 0.5 -
Associate CX Reinsurance Company Limited - 1.4
Total expenses with related parties 1.1 1.4
===================================================== ========================== ======================
At the period end, the following balances with related parties
who are not members of the Group were outstanding:
30 Jun 2014 30 Jun 2013
restated
GBPm GBPm
===================================================== ============= ======================
Tawa Associates Limited, and its subsidiaries below (3.3) -
Amberley Alternative Assets Limited 0.1 -
Pocono Holdings Limited (0.1) -
Tawa Management Limited (0.1) -
Associate CX Reinsurance Company Limited 0.3 0.3
Total outstanding balances with related parties (3.1) 0.3
===================================================== ============= ======================
Key management personnel
The Group considers its key management personnel to include its
Executive and Non-Executive Directors and those members of
management reporting directly to its Board that have executive
management responsibility for Group-wide operations.
Remuneration of key management personnel
The remuneration of key management included in the income
statement is set out below:
30 Jun 2014 30 Jun 2013
restated
GBPm GBPm
=============================== ============= =============
Short-term employee benefits 1.1 2.6
Post-employment benefits 0.1 0.3
Share based payments - 0.1
Total management remuneration 1.2 3.0
=============================== ============= =============
A dividend in specie of GBP50.3 million was made in the period
as outlined in note 6 (30 June 2013: GBPnil). As at 30 June 2014
the Group had no loans outstanding to key management (31 December
2013: GBPnil).
Immediate and ultimate parent company
The immediate and ultimate parent company is Financière Pinault
S.C.A., a Société en commandite par actions incorporated in France.
The Pinault family members are, in the opinion of the Directors,
the ultimate controlling parties of the Company. 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.
12. Contingent liabilities
----------------------------
31 December 2013; the Group may have additional exposure of $2.0
million on the QX Re reinsurance treaty before the loss
deterioration reverts back to Penn National. Management believe
that the information received when initiating the reinsurance
transaction was incomplete and as a consequence Tawa has commenced
legal action against Penn National in the Delaware Federal Court
seeking to rescind the reinsurance treaty on grounds of fraud. On
this basis management believes that it has no exposure to any
further losses arising from the reinsurance treaty.
Some of the Group's subsidiaries are routinely involved in
litigation or potential litigation related primarily to 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 2014 (31 December 2013: no
contingent liabilities).
13. Events after reporting period
-----------------------------------
The sale of the entire issued share capital in Hamburger
Internationale Rückversicherung AG and its subsidiaries Pavant SAS,
Chiltington International Holdings Limited, and Hamburg
International Reinsurance Ltd concluded on 14 August 2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUPWBUPCGRA
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