Interim Results

RNS Number : 7037D

Randall & Quilter Inv Hldgs PLC

18 September 2008

 



18 September 2008

Randall & Quilter Investment Holdings plc

('Randall & Quilter' or the 'Company')

Interim results for the six months ended 30 June 2008

Randall & Quilter reports a 50% rise in Group operating profit for the six months ended 30 June 2008, the acquisition of the KMS Group of companies, bolstering the Insurance Services Division, and a strategic alliance with Global Re, which will assist the Insurance Company Division to take advantage of the European run-off market estimated at more than 200 billion Euros. It will pay a maiden dividend of 4.8p, representing a yield of 3.4% (based on the current share price of 140.5p).

OPERATIONAL HIGHLIGHTS

• Group operating profit of £4.5m (2007 : £3.0m)
  
  
• Group net assets increased to £76.5m (December 2007 : £74.7m)
  
  
• Insurance Services Division operating result of £2.2m (2007 : £1.7m)
  
  
• Dividend of 4.8p declared
  
  
• The first service division acquisition since flotation - KMS Group of companies
  
  
• Strategic alliance with Global Re in Continental Europe
  
  
• £11m capital release from Chevanstell Ltd, a recovery of 85% of the acquisition cost within 18 months
  
  
• New £30m multicurrency revolving credit facility established for future acquisitions
  
  
• Investment return of 1.86% (2007 : 2.15%)
  
  
• Undiscounted net asset value per share at 30 June 2008 of 136.8p (December 2007 : 133.6p)
  
  
• Jerry McArthur joined the Group as CEO of US and Bermuda operations on 1 September 2008
  

FINANCIAL HIGHLIGHTS

	6 months ended 30 June 2008	6 months ended 30 June 2007	Year ended 31 December 2007
	£000	£000	£000
Group Results
Operating profit	4,541	3,025	8,720
Profit on ordinary activities before income taxes	4,420	2,214	7,025
Profit after tax	2,640	3,269	8,053
Total net assets	76,504	54,331	74,696

Commenting on today's announcement, Ken Randall, Chairman and Chief Executive Officer of Randall & Quilter, said:

'These encouraging results confirm the success of our business model, hence we can pay a dividend whilst retaining funds to exploit market opportunities'

The Chairman's Statement and Business Review follow and the full interim results for the six months ended 30 June 2008 will be sent to shareholders shortly and will be available on the Company's website at www.rqih.co.uk.

ENDS

Randall & Quilter is the holding company for a group of companies which operate in the non-life run-off insurance sector (the 'Group'). The Group comprises three divisions:

• Insurance Services Division. This manages insurance portfolios in run-off for both third party clients, including syndicates at Lloyd's, and for the Group's own insurance subsidiaries.

• Insurance Company Division. This acquires solvent insurance companies in run-off, avoiding companies with material personal lines business. Currently this division has eight companies in its portfolio.

• Liquidity Management Division. This acquires reinsurance receivables on a recourse or non-recourse basis and seeks to realise them for cash.

The Group has approximately 170 staff in its offices in the UK and the US and has recently been selected as 'Run-off Management Service Provider of the Year 2007' by the Association of Run-off Companies.

Enquiries:

Randall & Quilter Investment Holdings plc

Ken Randall                                             Tel: [phone]    Mobile: [phone]

Alan Quilter                                              Tel: [phone]    Mobile: [phone]

Noble & Company Limited

John Riddell                                             Tel: [phone]    Mobile: [phone]

Numis Securities Limited

Tom Booth                                               Tel: [phone]    Mobile: [phone]

Clean Communications

PJ Lewis                                                  Tel: [phone]    [e-mail]

Chairman's statement and business review

For the six months ended 30 June 2008

I am pleased to report interim operating profits of £4.5 million (2007: £3.0 million) before tax and £2.6m (2007: £3.3m) after tax.  

The pre tax profit is in line with expectation but the charge for tax is higher than anticipated because in the period the Group has earned a high proportion of its profits in R&Q Re (US), where we are in part unable to obtain tax relief through brought forward losses.

As previously indicated, we are paying our maiden interim dividend as an AIM traded company of 4.8p per share. The dividend is payable on 17 October 2008 to shareholders on the register on 26 September 2008.  We do not, at this stage, anticipate any further dividend will be payable in 2008.

Business Pipeline

Following our AIM listing last December, we have seen an increase in opportunities across all areas of our business. As regards the acquisition of solvent insurance companies in run-off, whilst we have seen evidence of increasing prices, we continue to explore a number of transactions where the returns still appear to justify the investment and the Group's particular skills can add value. We have achieved pleasing results in our Insurance Services Division (ISD), with a number of relatively small business wins, and in the Liquidity Management Division (LMD) where further new clients have been secured.

Revolving credit facility

As mentioned above, we are considering several acquisition opportunities. To complement the cash available within our business we have renegotiated our finance facility with The Royal Bank of Scotland. The Group now has in place a £30m multi currency revolving credit facility which currently remains undrawn.

Insurance Company Division (ICD)

The division has achieved a healthy operating profit in the half year of £3.8m (2007 £1.4m) despite the unexpected loss, which is being appealed, of a California court action where Transport Insurance Company is seeking recovery of substantial reinsurance debt (see further below under Transport Insurance Company).  

This division acquires solvent insurance companies in run-off, typically at a discount to net asset value, manages the liabilities to increase surplus assets and extracts cash through dividends and shares buybacks (with regulatory approval). A good example this year was the release of £11m of surplus capital from Chevanstell Limited representing a recovery of 85% of the total acquisition costs within 18 months.

At 30 June 2008, the total net assets of the owned insurance companies was £62.3m (2007: £72.7m).  This represents an increase of £0.6m after adjusting for the £11m capital release from Chevanstell. 

The investment return is a key component of the ICD performance and the return for the six months ended 30 June 2008 was 1.86% generating £5.4m (2007: 2.15% generating £6.8m) despite turbulent investment market conditions. We have maintained our policy of holding the vast majority of our insurance company investments in liquid, high grade fixed income securities and cash. The value we have locked in over a relatively short investment period gives  cause for optimism for the return we will achieve over the full year.

At 30 June 2008, the Group's cash and investments at market value totalled £266.9m:

	30 June 2008 £m		31 Dec. 2007 £m
Government Bonds	96.5		113.7
Corporate Bonds	97.0		67.8
Asset backed/Mortgage obligations	4.0		4.0
Equities	1.8		2.2
Cash & Cash Equivalents	67.6		84.8
	266.9		272.5

In general, the Group-owned insurance companies continue to operate in accordance with their detailed run-off plans. The key issues within the insurance companies are as follows:

R&Q Re (US)

I am pleased to report a good result for the half year which benefited from completed commutations and a positive reassessment of reserves for bad and doubtful debt following an intensive programme to improve collections.

R&Q Reinsurance Company (UK) 

As previously reported, this company is engaged in a dispute with Equitas involving more than 4,000 claims. The claims had been the subject of arbitration notices served by Equitas but more recently attention has been focussed on a more limited number of claims in respect of which Equitas has also commenced litigation in the high court. A trial date has now been fixed for June 2009. It remains the view of both the board of R&Q Re (UK) and its legal advisors that the majority of claims by value are not payable following prior Court of Appeal decisions and market practice. A favourable court ruling would mean a recovery of significant legal costs incurred by the company in respect of the dispute.

Transport Insurance Company

As reported in the 2007 accounts, this company is pursuing outstanding reinsurance recoveries of $12.9m in respect of the Aerojet claim from Seaton Insurance Company and TIG. The matter came to trial in May in California and against our strong legal advice, the case was unexpectedly lost. An appeal has been lodged but the full impact of the decision has been recognised in the Group's accounts to 30 June 2008. A reversal of the decision on appeal will provide a material benefit to future accounting periods.  

Insurance Services Division (ISD)

The operating profit of ISD for the period is £2.2m (2007: £1.7m).  A number of additional contracts for run-off related services (albeit relatively small in value) have been secured in the period together with assignments for third parties in respect of coverholder reviews and claims audit & inspection.

In my year end report, I announced the commencement of two new activities; reinsurance broker file replacement services and fee collection services, both trading under the RQBS banner. I am pleased to report that satisfactory progress has been achieved in both areas. In-house systems have been developed and the take-on of reinsurance files for Group-owned insurance companies is well under way. In addition, the first third party client has been contracted. As regards fee collection services, good relationships have been established in both the US and UK with contracts signed with a number of lawyers and loss adjusters for the 30 day recourse finance service and a number of contracts signed to collect legacy debt.  

I am pleased to be able to confirm the acquisition of the KMS Group of Companies, a London based provider of insurance services, on 15 September 2008. This acquisition will bring further skills to our Group to bolster its ability to administer liquidated estates, to manage schemes of arrangement and will further strengthen the senior management team within the ISD.  

I look forward to reporting further progress in all of these areas in subsequent reports.

Liquidity Management Division (LMD)

Further new clients have been secured in 2008 and two major contingency clients have renewed contracts to the end of 2008 and beyond including the addition of administration fees beyond the normal contingency fees to reward the performance to date. We are looking to increase purchases of reinsurance debt and the creditor positions for certain insolvent insurance estates. Offers have been made to creditors and are under their review. We continue to explore new initiatives and new revenue streams including opportunities overseas, particularly in the US.

Litigation

The long-running case alleging fraudulent misrepresentation and concealment (as these terms are defined in the US) against Cavell USA Inc, a wholly owned Group subsidiary, and me, personally, by Seaton Insurance Company and Stonewall Insurance Company continues.  We have previously announced that the New York Court dismissed their claim, although Seaton and Stonewall have appealed. Meanwhile, we are seeking damages in the English High Court for their breach of a settlement agreement signed in February 2006.

Run-off Market Perspective

In my view investors in non-life insurance business will increasingly seek to dispose of discontinued portfolios in order to focus capital into their core business and this has been borne out by the level of disposal activity in 2008. Our new AIM traded status has meant that opportunities to tender either alone or in conjunction with partners have increased our pipeline for acquisitions. The current environment of decreasing premium rates and increased claims frequency will, I believe, increase the trend to date and provide significant further opportunities.  

I have believed for some time that European insurers will acknowledge the adverse financial impact of holding discontinued business on their balance sheets and start to follow the trend of disposal that has been seen in the UK and US. In this connection we have recently announced the formation of a strategic partnership with Global Re, headquartered in Germany, for the purchase and management of non-life run-off insurers in mainland Europe. Under the agreement, Global Re, which does not itself purchase run-off operations, will actively seek out opportunities, assist RQIH in the acquisition process and manage the run-off companies involved.

Although the scope of opportunities continues to widen, I am determined to maintain a disciplined approach to the prices we will pay for such portfolios. This may mean that innovative approaches will be required to remain ahead of our competition.

It remains our objective to secure additional third party management contracts within ISD.  

The increasing impact on debt financing caused by the global credit crunch creates an environment where insurance entities will be under ever more pressure to convert debt into cash. This will provide opportunities for our LMD, supported by Group credit lines.

Staffing

We continue to recruit quality people to our management team.  John O'Neill joined as the Chief Operating Officer of our UK Insurance Services Division at the beginning of the year and Jerry McArthur has been appointed Chief Executive Officer of our US & Bermuda operations on 1 September 2008.

I am encouraged that we can attract such high calibre staff which is clearly crucial to the ongoing development of the business.

Outlook

The group is in good shape following our listing on AIM last December. Our net asset position is likely to increase if the US Dollar and Euro strengthening against Sterling is sustained.  Trading results overall are in line with our expectations and we have a good pipeline of acquisition opportunities. Whilst there is evidence of increased competition for straightforward run-off portfolios, I remain optimistic about our prospects for continued growth. We have no external debt, money in the bank through retained earnings and the release of £11m from Chevanstell and a new £30m borrowing facility with RBS available for further acquisitions.

K E Randall

Chairman and Chief executive officer

17 September 2008

Condensed consolidated income statement

For the six months ended 30 June 2008

			6 months  30 June  2008		6 months  30 June  2007		Year  31 December  2007
	Note		£000		£000		£000
Gross premiums written			424		422		1,460
Reinsurers’ share of gross premiums			188		130		35
Earned premium net of reinsurance			612		552		1,495
Net investment income	4		5,418		6,753		15,941
Other income			4,530		3,475		9,629
			9,948		10,228		25,570
Total income	3		10,560		10,780		27,065
Gross claims paid			(25,112)		(24,605)		(61,722)
Reinsurers’ share of gross claims paid			15,414		14,616		33,860
Claims paid, net of reinsurance			(9,698)		(9,989)		(27,862)
Movement in gross technical provision			28,756		22,081		71,282
Movement in reinsurers’ share of technical provisions			(14,430)		(11,534)		(43,204)
Net change in provision for claims			14,326		10,547		28,078
Net insurance claims released			4,628		558		216
Operating expenses			(10,647)		(8,313)		(18,561)
Result of operating activities before impairment of intangible assets	3		4,541		3,025		8,720
Impairment of intangible assets			(67)		-		-
Result of operating activities			4,474		3,025		8,720
Finance costs			(54)		(811)		(1,695)
Profit on ordinary activities before income taxes			4,420		2,214		7,025
Income tax (charge)/credit	5		(1,780)		1,055		1,028
Profit for the period	3		2,640		3,269		8,053
Attributable to equity holders of the parent
Attributable to Ordinary shareholders			2,640		3,257		7,996
Minority interests			-		12		57
			2,640		3,269		8,053
Earnings per ordinary share for the profit attributable to the ordinary shareholders of the Company:
Basic	7		4.7p		13.0p		29.5p
Diluted			4.6p		13.0p		28.0p

Condensed consolidated balance sheet

As at 30 June 2008

	Note		30 June 2008 £000		30 June 2007 £000		31 December 2007 £000
Assets
Intangible assets			12,215		11,742		12,215
Property, plant and equipment			273		244		205
Investment properties			1,209		996		1,108
Financial assets			213,090		226,617		218,719
Reinsurers' share of insurance liabilities			226,230		271,697		239,681
Current tax assets			1		-		269
Deferred tax asset			5,159		4,415		5,320
Insurance and other receivables			36,094		32,062		37,053
Cash and cash equivalents			57,873		68,388		57,681
Total assets			552,144		616,161		572,251
Liabilities
Insurance contract provisions			439,995		514,604		466,382
Financial liabilities			5,003		19,277		4,814
Deferred tax liabilities			3,382		4,451		4,343
Insurance and other payables	8		27,260		23,498		22,016
Total liabilities			475,640		561,830		497,555
Equity
Share capital			1,118		-		1,118
Other Reserves			17,405		1,272		17,401
Retained earnings			57,981		53,044		56,177
Attributable to equity holders of the parent			76,504		54,316		74,696
Minority interests in subsidiary undertakings			-		15		-
Total equity			76,504		54,331		74,696
Total liabilities and equity			552,144		616,161		572,251

Consolidated cash flow statement

for the six months ended 30 June 2008

			6 months 30 June 2008 £000		6 months 30 June 2007 £000		Year ended 31 December 2007 £000
Net cash used in operating activities			(399)		(21,972)		(33,618)
Purchase of property, plant and equipment			(160)		(77)		(132)
Net cash used in investing activities			(160)		(77)		(132)
Repayment of borrowings			-		-		(25,228)
Redemption of preference D shares			-		(580)		(580)
New borrowing arrangements			-		1,891		14,352
Equity dividends paid			-		-		(1,400)
Interest and other finance costs paid			(54)		(347)		(1,231)
Receipts from issue of shares			4		-		15,966
Net cash from financing activities			(50)		964		1,879
Net decrease in cash and cash equivalents			(609)		(21,085)		(31,871)
Cash and cash equivalents at beginning of period			57,681		90,857		90,857
Foreign exchange movement on cash and cash equivalents			801		(1,384)		(1,305)
Cash and cash equivalents at end of period			57,873		68,388		57,681

Condensed consolidated statement of recognised income and expense

For the six months ended 30 June 2008

			6 months  30 June   2008  £000		6 months 30 June 2007 £000	Year ended 31 December 2007 £000
Recognised in the financial period:
Exchange losses			(689)		(158)		(49)
Pension scheme actuarial losses			(206)		-		(447)
Deferred tax on pension scheme actuarial losses			59		-		134
Net expense recognised directly in equity			(836)		(158)		(362)
Profit for the period			2,640		3,269		8,053
Total recognised income for the period			1,804		3,111		7,691
Attributable to:
Equity holders of the parent			1,804		3,099		7,634
Minority interests			-		12		57
Total recognised in the period			1,804		3,111		7,691

Notes to the interim financial statements

for the six months ended 30 June 2008

1.             Basis of preparation

The condensed financial statements have been prepared using accounting policies consistent with International Financial Standards and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

The consolidated interim financial information for the 2008 and 2007 half years is unaudited, but has been subject to review by the Company's auditors.  The financial information has been prepared in accordance with the accounting policies adopted for the year ended 31 December 2007.

The comparative figures for the 31 December 2007 are based upon the consolidated Group financial statements. These accounts have been reported on by the Company's auditors and have been delivered to the Registrar of Companies on 7 July 2008. 

2.       Significant accounting policies 

The condensed financial statements have been prepared under the historical cost convention, except that financial assets are stated at their fair value.

The same accounting policies, presentation and methods of computation are followed in these condensed financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2007.

3.       Segmental information

The Group has three primary segments:

•    Insurance companies in run-off

•    Insurance services (including liquidity management)

•    Other corporate activities

Primary segment information - Segment result for the six months ended 30 June 2008

	Insurance run-off		Insurance services		Other corporate	Consolidation adjustments				Total
	£000		£000		£000		£000				£000
Earned premium net of reinsurance	612		-		-		-				612
Net investment income	5,376		166		45		(169)				5,418
Other income	-		11,056		3		(6,529)				4,530
Total income	5,988		11,222		48		(6,698)				10,560
Claims paid, net of reinsurance	(9,698)		-		-		-				(9,698)
Net change in provision for claims	14,326		-		-		-				14,326
Net insurance claims released	4,628		-		-		-				4,628
Operating expenses	(6,777)		(9,067)		(1,501)		6,698				(10,647)
Operating result before impairment of intangible assets	3,839		2,155		(1,453)		-				4,541
Impairment of intangible assets	-		-		(67)		-				(67)
Result of operating activities	3,839		2,155		(1,520)		-				4,474
Finance costs	-		-		(54)		-				(54)
Management charges	-		(169)		169		-				-
Profit/(loss) on ordinary activities before income taxes	3,839		1,986		(1,405)		-				4.420
Income tax (charge)/credit	(1,066)		(797)		83		-				(1,780)
Profit/(loss) for the period	2,773		1,189		(1,322)		-				2,640
Segment assets	538,481		14,763		41,243		(42,343)				552,144
Segment liabilities	477,122		9,160		12,256		(22,898)				475,640

During the period the distributable reserves of the parent company increased by £8.6m as a result of the release of £11m from Chevanstell. As a result of the Group's consolidation this is not shown in the 'Other Corporate' column above. 

The consolidation adjustments are largely due to fees payable by the insurance companies to the insurance service division in the period.

Primary segment information - Segment result for the six months ended 30 June 2007

	Insurance run-off		Insurance services		Other corporate	Consolidation adjustments			Total
	£000		£000		£000		£000		£000
Earned premium net of reinsurance	552		-		-		-		552
Net investment income	6,618		182		14		(61)		6,753
Other income	-		10,532		205		(7,262)		3,475
Total income	7,170		10,714		219		(7,323)		10,780
Claims paid, net of reinsurance	(9,989)		-		-		-		(9,989)
Net change in provision for claims	10,547		-		-		-		10,547
Net insurance claims released	558		-		-		-		558
Operating expenses	(6,334)		(9,005)		(297)		7,323		(8,313)
Result of operating activities	1,394		1,709		(78)		-		3,025
Finance costs	-		-		(811)		-		(811)
Management charges	-		(1,438)		1,438		-		-
Profit on ordinary activities before income taxes	1,394		271		549		-		2,214
Income tax (charge)/credit	(354)		1,409		-		-		1,055
Profit for the period	1,040		1,680		549		-		3,269
Segment assets	615,963		13,678		27,180		(40,660)		616,161
Segment liabilities	545,837		8,793		22,762		(15,562)		561,830

The consolidation adjustments are largely due to fees payable by the insurance companies to the insurance service division in the period.

Primary segment information - Segment result for the year ended 31 December 2007

	Insurance run-off		Insurance services		Other corporate		Consolidation adjustments		Total
	£000		£000		£000		£000		£000
Earned premium net of reinsurance	1,495		-		-		-		1,495
Net investment income	15,819		103		19		-		15,941
Other income	-		22,239		208		(12,818)		9,629
Total income	17,314		22,342		227		(12,818)		27,065
Claims paid, net of reinsurance	(27,862)		-		-		-		(27,862)
Net change in provision for claims	28,078		-		-		-		28,078
Net insurance claims released	216		-		-		-		216
Operating expenses	(12,629)		(17,154)		(1,596)		12,818		(18,561)
Result of operating activities	4,901		5,188		(1,369)		-		8,720
Finance costs	-		-		(1,695)		-		(1,695)
Management charges	-		(3,226)		3,226		-		-
Profit on ordinary activities before        income taxes	4,901		1,962		162		-		7,025
Income tax (charge)/credit	(427)		1,474		(19)		-		1,028
Profit for the year	4,474		3,436		143		-		8,053
Segment assets	569,416		9,261		35,144		(41,570)		572,251
Segment liabilities	493,702		3,642		12,583		(12,372)		497,555

The consolidation adjustments are largely due to fees payable by the insurance companies to the insurance service division in the period.

Secondary segment information - geographical analysis

As at 30 June 2008
	UK		United  States		Europe		Total
		£000		£000		£000		£000
Gross assets		219,115		342,668		21,259		583,042
Intercompany eliminations		(29,118)		(1,780)		-		(30,898)
Segment assets		189,997		340,888		21,259		552,144
Gross liabilities		171,965		312,594		21,979		506,538
Intercompany eliminations		(26,372)		(2,476)		(2,050)		(30,898)
Segment liabilities		145,593		310,118		19,929		475,640
Segment income		5,182		5,019		359		10,560

Secondary segment information - geographical analysis

As at 30 June 2007
	UK		United  States		Europe		Total
		£000		£000		£000		£000
Gross assets		242,410		381,026		21,492		644,928
Intercompany eliminations		(26,889)		(1,878)		-		(28,767)
Segment assets		215,521		379,148		21,492		616,161
Gross liabilities		199,003		373,166		19,715		591,884
Intercompany eliminations		(24,129)		(5,027)		(898)		(30,054)
Segment liabilities		174,874		368,139		18,817		561,830
Segment income		5,972		4,349		459		10,780

Secondary segment information - geographical analysis 

As at 31 December 2007
	UK		United  States		Europe		Total
		£000		£000		£000		£000
Gross assets		227,684		352,929		21,074		601,687
Intercompany eliminations		(27,499)		(1,937)		-		(29,436)
Segment assets		200,185		350,992		21,074		572,251
Gross liabilities		165,111		340,358		21,522		526,991
Intercompany eliminations		(26,058)		(2,541)		(837)		(29,436)
Segment liabilities		139,053		337,817		20,685		497,555
Segment income		15,971		11,039		55		27,065

Primary segment information - other information

 

 

As at 30 June 2008	Insurance companies  in run-off		Insurance services		Other corporate services		Eliminations		Total
	£000		£000		£000		£000		£000
Capital expenditure	13		147		-		-		160
Depreciation	6		77		-		-		83

Primary segment information - other information 

As at 30 June 2007	Insurance companies  in run-off		Insurance services		Other corporate services		Eliminations		Total
	£000		£000		£000		£000		£000
Capital expenditure	-		77		-		-		77
Depreciation	33		97		-		-		130

As at 31 December 2007	Insurance companies  in run-off		Insurance services		Other corporate services		Eliminations		Total
	£000		£000		£000		£000		£000
Capital expenditure	1		131		-		-		132
Depreciation	35		183		-		-		218

4.       Investment return

 

		6 months   30 June   2008		6 months   30 June   2007		Year ended  31 December  2007
		£000		£000		£000
Cash and cash equivalents interest income		6,094		7,181		12,756
Realised gains/(losses) on investments		1,670		(788)		305
Unrealised gains/(losses) on investments		(2,146)		503		3,425
Investment management expenses		(200)		(143)		(545)
		5,418		6,753		15,941

 

5.       Income tax

		6 months   30 June  2008		6 months  30 June   2007		Year ended  31 December  2007
		£000		£000		£000
Current tax		(2,536)		(523)		(1,551)
Deferred tax		756		1,578		2,579
		(1,780)		1,055		1,028

The current tax charge largely results from profits in R&Q Re (US), where the Group is in part unable to obtain tax relief through brought forward losses.

6.       Technical provisions

Gross		6 months   30 June   2008		6 months  30 June  2007		Year ended  31 December  2007
		£000		£000		£000
Claims outstanding at 1 January		466,382		543,504		543,504
Claims paid		(25,112)		(24,650)		(61,722)
(Release)/strengthening of reserves		(3,644)		2,524		(9,560)
Net exchange differences		2,369		(6,774)		(5,840)
As at 30 June		439,995		514,604		466,382

Reinsurance		6 months   30 June  2008		6 months  30 June  2007		Year ended  31 December  2007
		£000		£000		£000
Reinsurers share of claims outstanding at 1 January		239,681		286,673		286,673
Reinsurers share of gross claims paid		(15,414)		(14,616)		(33,860)
(Release)/strengthening of reserves		984		3,082		(9,344)
Net exchange differences		979		(3,442)		(3,788)
As at 30 June		226,230		271,697		239,681

Net		6 months   30 June  2008		6 months  30 June  2007		Year ended  31 December  2007
		£000		£000		£000
Net claims outstanding at 1 January		226,701		256,831		256,831
Net claims paid		(9,698)		(10,034)		(27,862)
Release of reserves		(4,628)		(558)		(216)
Net exchange differences		1,390		(3,332)		(2,052)
As at 30 June		213,765		242,907		226,701

Significant uncertainty exists as to the likely outcome of any particular claim and the ultimate costs of completing the run off of the Group's insurance operations.

The reserves carried by the Group are calculated using a variety of actuarial techniques. The reserves are calculated and reviewed by the Group's internal actuarial team; in addition the Group periodically commissions independent external actuarial reviews. The use of external advisors provides management with additional comfort that the Groups internally produced statistics and trends are consistent with observable market information and other published data.

7.       Earnings per share

		6 months   30 June   2008		6 months   30 June   2007	Year ended  31 December  2007
		£000		£000		£000
Profit for the period attributable to Ordinary shareholders		2,640		3,257		7,996
		No. 000's		No. 000's		No. 000's
Weighted average number of Ordinary shares		55,909		25,000		27,113
Effect of dilutive share options		1,420		-		1,430
Weighted average number of Ordinary shares for the purposes of diluted earnings per share		57,329		25,000		28,543
Basic earnings per share		4.7p		13.0p		29.5p
Diluted earning per share		4.6p		13.0p		28.0p

The reduction in EPS is largely the result of the increased share capital following the flotation in December 2007.

8.       Insurance and other payables

		6 months  30 June 2008		6 months 30 June 2007	Year ended 31 December  2007
		£000		£000		£000
Structured liabilities		294,000		297,000		294,000
Structured settlements		(294,000)		(297,000)		(294,000)
		-		-		-
Other creditors		27,260		23,498		22,016
		27,260		23,498		22,016

The carrying values disclosed above reasonably approximate their fair values at the balance sheet date.

The Group has purchased annuities from third party life insurance companies for the benefit of certain claimants. In the event that any of these life insurance companies were unable to meet their obligations to these annuitants, any remaining liability would fall upon the respective insurance company subsidiaries. The Directors believe that, having regard to the quality of the security of the life insurance companies, the possibility of a material liability arising in this way is very unlikely. The life companies will settle the liability directly with the claimants and no cash will flow through the group. Accordingly, these assets and liabilities have been offset to reflect the substance of the transactions and to ensure that the disclosure of the balances does not detract from the users' ability to understand the Group's future cash flows. 

9.       Borrowings

The bank facility provided by The Royal Bank of Scotland has been renegotiated. The group now has in place a £30m revolving multicurrency facility which has yet to be drawn upon.

10.     Issued share capital

Issued share capital as at 30 June 2008 amounted to £1,118,260.  This represents an increase of £210 from 31 December 2007.

11.     Reserves 

		6 months 30 June 2008		6 months   30 June   2007	Year ended   31 December   2007
		£000		£000		£000
Shares to be issued		150		-		151
Share premium		17,255		1,022		17,250
Capital redemption reserve		-		250		-
		17,405		1,272		17,401

Shares to be issued		6 months 30 June 2008		6 months 30 June 2007	Year ended 31 December  2007
		£000		£000		£000
Balance at 1 January		151		-		-
Share based payments		-		-		151
Issued shares		(1)		-		-
Balance period end		150		-		151

Share Premium		6 months   30 June   2008		6 months   30 June   2007	Year ended  31 December   2007
		£000		£000		£000
Balance at 1 January		17,250		1,022		1,022
Issued shares		5		-		20,544
Bonus issue of shares		-		-		(250)
Expenses of share issue		-		-		(4,066)
Balance period end		17,255		1,022		17,250

Capital redemption reserve		6 months   30 June   2008		6 months   30 June   2007	Year ended  31 December  2007
		£000		£000		£000
Balance at 1 January		-		134		134
Redemption of Preference D Shares		-		116		116
Bonus issue of shares		-		-		(250)
Balance period end		-		250		-

12.     Contingencies and commitments 

The Group is routinely involved in litigation related to 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 contingent liabilities at 30 June 2008.

 

END

 

 

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