Building the future of insurance services Charles Taylor plc Half - - PowerPoint PPT Presentation

Building the future of insurance services

Charles Taylor plc Half Year Results 2018

12 September 2018

Highlights H1 2018 Delivering growth strategy

Revenue

+ 21%

Adjusted PBT

+ 10%

Adjusted EPS

• 11%

Dividend

+ 5%

Deliver growth in core businesses Capture new strategic

• pportunities

Optimise business

• perations

− Won global insurance technology contracts − Growing and diversifying loss adjusting contributing to improving margins − Started contract to provide medical assistance services to top three UK insurer − Acquired insurance technology provider, which is already delivering new UK business opportunities − Acquired US claims management business, which has already supported new business wins − Integrated Zurich International life business − Completed London property strategy, expected to marginally reduce long-term occupancy costs whilst providing opportunity to expand − Strengthened sales collaboration through business development forums, enhanced pipeline & relationship management − Creating scalable Finance & HR platform

Delivered strong top line growth in H1 2018

Adjusted EBITDA

+ 15%

1

Growth strategy update

Delivering growth in core businesses

Management Services

• Delivered 7% growth in insured tonnage for The Standard Club
• Preparing The Standard Club for Brexit
• Achieved 6% growth in members’ payroll for Signal Mutual

Adjusting Services

• Drove diversification strategy and operational efficiencies, delivering margin

improvement from 5% to 7% year-on-year

• Expanded capabilities in US and Middle East markets
• Developed UK major loss capabilities
• Embedded presence in HNW adjusting market

Insurance Support Services

• Secured a multi-year contract to deliver a delegated authority solution to the

Lloyd’s and London company insurance markets

• Appointed to implement core operating platform for Seguros SURA, a top

Latin American insurer in multiple jurisdictions

• Embedded contract win to provide assistance services to a top-3 UK insurer.

We are working to achieve leadership positions for all the Group’s businesses and to develop new, closely-related technical services and solutions. H1 initiatives included:

3

Capturing new strategic opportunities

Insurance Support Services

• May 2018: Acquired Inworx, a Latin

American based insurance-focused technology software provider, funded through an oversubscribed placing of the Group’s shares We are developing new capabilities and building our businesses through acquisitions, joint ventures and business investments. H1 successes included:

4

• Broadens global technology capabilities
• Expands presence in Latin America
• Added multiple international and local

market clients

• Delivering opportunities to implement

Inworx solutions for UK clients

• March 2018: Acquired Aasgard

Summit, a provider of marine claims management and related technical services focusing on the US West Coast states

• Supports growth in claim management

services in the USA

• Secures Charles Taylor’s position as a

specialist provider of claims services to the maritime community

Initiative Progress

Inworx is performing as expected and integration is progressing well

5 Software - solutions being aligned - with product gap analysis and updated documentation in English and Spanish Operations – integration activities underway Finance - invoicing and reporting being integrated

Inworx integration progressing well

Sales - governance and processes being developed and integrated. Customer and supplier contracts being novated to Charles Taylor Contract discussions to implement Inworx solutions for UK clients already in progress

Owns IP in advanced cloud-based SAAS product suite:

• Inbroker/Inbroker Re: core platform for (re)insurance brokers
• Smartix: insurance distribution platform for all types of insurance distributors
• Inlender: point-of-sale finance portal that integrates with Smartix to provide a joined-up

insurance and finance solution for retailers, finance providers and insurers

• Telesoft: CRM solution for insurers and banks
• BPM: workflow and business process management to support implementation projects

Deal terms:

• Initial consideration includes US$19m cash and US$3.5m shares
• Further US$21m deferred over four years, calculated on EBITDA delivered
• Total consideration capped at US$50.5m

HR - all Inworx staff being transferred onto Charles Taylor contracts

Charles Taylor InsureTech aims to transform Inworx to global insurance technology provider and for Inworx to accelerate Charles Taylor InsureTech’s growth in LatAm

Established as Pragma Systems by current CEO Renamed as Inworx Acquired Telesoft CRM solution Acquired Smartix distribution platform Acquired by Charles Taylor InsureTech Won 3 major global broking clients in early 2000s

2000s 1988 1998 2008 2011 2018

Marketing - campaigns, materials and website being integrated

Group results H1 2018

Charles Taylor performed well in H1 and is on track to meet Board’s full year expectation

Group results H1 20171 H1 2018 Change Revenue (£m) 102.3 123.4 21% Adjusted EBITDA (£m) 10.5 12.1 15% Adjusted PBT (£m) 7.8 8.5 10% Adjusted EPS (p) 11.51 10.22

• 11.2%

Dividend per share (p) 3.31 3.48 5% − 81% of H1 revenue increase from organic growth initiatives − Acquired revenue growth from acquisitions in the year 30 June 2017 to 30 June 2018 is £4m. − Tax charge in 2018 of between 15% and 20% following fully recognising deferred tax assets at FY 2017 (H1 2018: £1.2m; H1 2017 £Nil)

7

1. H1 2017 revenue and profit has been restated to amend recognition of revenue from the Signal contract (Management Services) as a result of adopting IFRS 15. No full year impact.

Strategy to create

• rganic growth in core

businesses feeding through into strong top- line performance

8

Statutory profit impacted by increased amortisation and deferred consideration arising from acquisitions and the London office move

£m Comment Adjusted PBT 8.5 Acquisitions Amortisation of intangibles arising from acquisitions (3.5) No cash impact in current year; intangible asset recognised on acquisition and amortised over the period of the earn out Deferred consideration on the acquisitions of Inworx, Criterion and Aasgard Summit accounted for as employee remuneration (1.5) No cash impact in current year but supported strategic acquisitions Acquisition costs (0.7) Cash cost largely Inworx related Operations Consolidating the Group’s three London offices into a single City location (2.4) Cash neutral and expected to reduce long-term

• ccupancy costs with opportunity to expand

Centralising and standardising elements of Finance and HR

• perations

(0.4) Cash cost but expected to deliver future cost savings Non-controlling interests (0.2) No cash impact Statutory PBT 0.2

Adjusted Segmental Operating Profit

H1 2017 H1 2018 Change Management Services 29.6 29.4

• Adjusting Services

35.2 40.2 +14% Insurance Support Services 37.4 52.4 +40% Total Professional Services 102.2 122.0 +19% Owned Insurance Companies 2.2 3.6 +65% Eliminations

• 2.1
• 2.2
• Total

102.3 123.4 +21%

9

H1 2017 H1 2018 Revenue1 Adjusted segmental

• perating

profit1 Adjusted segmental

• perating

margin Revenue Adjusted segmental

• perating

profit Adjusted segmental

• perating

margin Management Services 29.6 5.2 18% 29.4 5.4 18% Adjusting Services 35.2 1.7 5% 40.2 2.9 7% Insurance support Services 37.4 1.4 4% 52.4 0.7 1% Total Professional Services 102.2 8.2 8% 122.0 9.1 7% Owned Insurance Companies 2.2 0.3 14% 3.6 0.4 11% Eliminations

• 2.1
• 2.2
• Total

102.3 8.5 8% 123.4 9.5 8%

1. H1 2017 revenue and profit has been restated to amend recognition of revenue from the Signal contract (Management Services) as a result of adopting IFRS 15. No full year impact.

Charles Taylor has significant borrowing headroom after allowing for debt-funded growth strategy acquisitions

− Net debt lower relative to FY 2017 due to cash incentives received on London property costs not yet incurred − Annual average net debt better reflects the Group’s overall borrowing levels − The Group has total available facilities of £83.0m, plus £25m acquisition accordion facility − The Board considers this an appropriate level of debt in relation to the Group’s cashflow profile

HY 2017 FY 2016 FY 2017

Net debt (£m) Annual average net debt (£m)

10

HY 2018

37.5 12.9 35.6 30.1 57.2 39.5 52.7 49.0

Total facilities (£m)

54.7 56.2 85.0 83.0

Net debt bridge

11

Net debt at 31 December 2017 (57.2) Operating activities Cash generated from operations 21.0 Net interest paid (1.0) Tax paid (1.0) Financing activities Proceeds from issue of shares 17.5 Investing activities Acquisitions and investments (17.5) Payment of deferred consideration (0.2) Capital expenditure (7.3) Purchase of own shares (1.7) Dividends paid (5.3) Net debt at 30 June 2018 (52.7)

Delivering year-on-year progress in reducing the working capital requirement of Adjusting Services

• We have restructured our

working capital team as part

• f a Group-wide initiative to

centralise and standardise processes and thus provide a scalable platform to support the Group’s growth.

• We believe this will enable

us to continue to achieve further reductions in our

• verall working capital

requirements.

Working capital months WIP months Debtors months

12

1 2 3 4 5 6 7 8 9 10

months

FY 2015 FY 2016 FY 2017 FY 2013 FY 2014 9.2 8.8 9.1 9.1 8.2 5.2 4.8 4.8 4.6 4.2 4.0 4.0 4.3 4.5 4.0 HY 2017 HY 2018 4.6 4.3 4.4 4.4 9.0 8.7

Outlook 2018

Charles Taylor has performed well in H1 2018. We anticipate that our full year performance will be in line with the board’s expectations

− Solid, reliable long-term core client base − Growth initiatives in Adjusting Services and Insurance Support Services are delivering results − We are well-placed to deliver further growth, increased profit and greater shareholder value

Delivering growth in our core businesses: − Performing well for core mutual insurance clients − Building Adjusting Services’ presence in selected new P&C markets − Reducing Adjusting Services’ working capital requirements − Bedding in new travel assistance and claims management clients and securing new TPA business − Executing major insurance technology contracts Capturing new strategic opportunities: − Seeking carefully targeted acquisitions, joint ventures and business investments to build scale, leverage our infrastructure and expand

• ur range of services for our global clients

Optimising business operations: − Making processes more efficient, robust and scalable − Strengthening sales collaboration and business development capabilities

Well-placed for growth

14

Appendices

Appendix: Charles Taylor strategy and services

Our strategy combines our vision, business model and growth strategy

Our business model capitalises on our capabilities & people, process & organisation and strategy & growth to deliver technical services and solutions to clients across the global insurance market 2. For investors we target a diversified set of income streams, providing in aggregate reliable, sustainable year-on-year growth in earnings, while investing to create opportunities to drive higher future earnings growth. Our growth priorities fall into three areas: Optimise our business operations, Deliver growth in our core professional services businesses and create new strategic opportunities. 3. Our vision is to enable the insurance market to meet the continuall evolving challenges it faces and to make the business of insurance fundamentally better. 1. Building

a global professional services business where superior technical skills are valued

Achieving

leading market positions for each of our business and expanding into growing economies and markets

Developing

new services that deliver sustainable revenue and profit

Capitalising

• n the opportunities for cross-

referral, cross-business unit working and other synergies between our businesses and across our international network

Our vision includes:

17

Optimise business operations

Completed the Group’s London property strategy, successfully relocating staff from three London offices into a single City location to increase efficiency and collaboration whilst providing opportunity to expand Strengthened sales collaboration, holding the Group’s first business development forum and establishing disciplines for managing key client relationships and new business pipelines Restructuring elements of our Finance and HR operations to provide a scalable platform to support the Group’s growth Prepared for the introduction of the General Data Protection Regulation Delivered diversity and inclusion initiatives, to recruit, develop and retain people from the widest possible talent pool. Strengthened the Group’ s technology infrastructure, rolling out Windows 10 platform and cloud- computing across offices globally We are strengthening the Group’s core capabilities and support services to underpin growth. Progress in H1 included:

18

Our distinctive range of services and technologies enable our clients to address their challenges /

A full suite of technology solutions for insurers, brokers, MGAs and affinity players to enable clients to transform

• perating models and

customer experience

Insurance technology

Loss adjusting, technical services and end-to-end claims programme management that combine expertise, process efficiency and technology to optimise claims outcomes

Claims management

The establishment and end-to-end management

• f mutuals, syndicates,

MGAs, captives, run-off vehicles and other insurance programmes under a model of long- term partnership

Insurance management

Our distinctive range of services and technologies enable our clients to address their challenges /

Insurance technology

• Distribution portals
• Delegated authority

systems

• Claims platforms
• Business process

automation & workflow

• Core P&C, life, health

and broking systems

• Digital transformation

Insurance management Claims management

• Loss adjusting

− Aviation − Marine − Natural resources − P&C

• Technical services

(pre- and post-event)

• Claims programme

management

• Mutual management
• Captive management
• Runoff management
• Offshore life

administration

• Lloyd’s Managing

Agency

• MGA support
• Investment

management

Appendix: Charles Taylor InsureTech developments

Established Charles Taylor InsureTech Acquired sizeable stake in Fadata delivering access to INSIS insurance process platform Opened Technology Centre of Excellence in LatAm Appointed to implement life system for Peru’s 4th largest life insurer by value of premiums Developed Delegated Underwriting Authority (DUA) solution Appointed by Lloyd’s to implement market-wide DUA solution Appointed to implement solutions for London market brokers Appointed by Seguros Sura one of LatAm’s largest insurers to implement core system Concluding initial project to transform the technology infrastructure of a global EB (re)insurer

22

Charles Taylor InsureTech is developing a strong track record of growth

Fadata investment delivered access to INSIS Built significant insurance- specific software IP, both fully-

• wned and via investments

Offers deep insurance technology knowledge, consultancy and implementation

2015 2016 2017 2018

Developed in-house technology capabilities Developed TRAX London market claims solution in 2013

Pre-2015

Acquired KnowledgeCenter in 2013 Expects revenues and earnings from major contract wins in Europe and LatAm to flow through in 2018 and onwards Short-listed as “Oracle ISV Partner of the Year” UK & Ireland Partner of the Year Awards 2018 Acquired Inworx, a Latin American-based insurance-focused technology software provider

Insurers

Inworx’s product suite complements and extends Charles Taylor InsureTech’s existing product set, while broadening its client base globally

23

End to end admin INSIS from Fadata InBroker

Brokers Other insurance market participants

InBroker Portals and distribution Smartix Smartix Smartix Inlender Market Solutions TIDE Trax TIDE System integrators KCenter Telesoft KCenter BPM Telesoft Inworx InsureTech

Accessing the global business

• f Inworx’s top-tier LatAm

broking clients Cross-selling Inworx’s products globally, starting with UK market Cross-selling InsureTech’s solutions in Latin America

Offering exciting growth prospects

Integrating InsureTech’s and Inworx’s products to offer broader solutions Continuing Inworx’s track record of growth in Latin America

Charles Taylor InsureTech secured major, multi year technology contracts

24

Solution for London Insurance Market

• Selected by London Market

Group and Lloyd’s to deliver a delegated authority management solution for the Lloyd’s market

• c.60 Lloyd’s managing agents,

c.250 brokers and over 3,500 of global coverholders in scope

• Expected to be multi-year

recurring revenue contract

• Solution based on Tide enabling

the quick submission of risk, premium and claims data

• Strong pipeline of insurers and

brokers considering Tide

• Set up as Platform as a Service
• n Microsoft Azure
• Tide is jointed owned by Charles

Taylor InsureTech and the software developers, with 51% and 49% stakes respectively

Transforming business in LatAm

• Selected by Latin America’s

fourth largest insurer, by value of premiums, to undertake a multi- year implementation of a multi country life, health and general insurance policy administration system

• Achieved sale of multi-country

license

• Solution based on Fadata’s

INSIS policy administration software

• Work started on first

implementation in Panama

European EB technology platform

• Selected by one of the world’s

largest employee benefit (re)insurance providers

• Contract for the initial phase of

work signed and project underway

• Full project expected to deliver

consultancy, multi-year implementation and long-term support revenues

• Solution will be based on

Fadata’s INSIS policy administration software and Charles Taylor InsureTech’s TIDE solution

Appendix: Major acquisitions update

Inworx has delivered strong growth and a robust financial performance

26

43% 13% 1% 12% 1% 31%

Inbroker Professional services** Smartix Telesoft InLender General insurance

Revenue by product 2017

(Note: minor rounding differences in % figures)

Revenue Adjusted PBT*

2015 2016 2017 2015 2016 2017

$10.6m $12.3m $14.7m $2.9m $2.7m $3.7m

27.4% 22.0% 25.2% PBT margin

CAGR 17.7% CAGR 13.0%

* 2017 adjusted PBT based on the most recently filed statutory accounts for all but one of the relevant entities (based on management accounts for other entity), adjusted for differences in accounting standards and reporting currency and to remove the impact of intercompany payments with entities not in scope. 2015, 2016 PBT and 2015, 2016, 2017 revenues based on management accounts ** Professional Services refers to the provision of outsourced technology development services to major financial institutions

Reduction in 2016 PBT driven by extra investment in product development, expensed via the P&L. Product development expenses also had a negative impact on PBT in 2017

65 30

Fadata is a provider of software solutions for insurance companies

• worldwide. It helps insurers

compete by implementing digital processes needed to connect faster and more effectively:

Fadata – a strategic investment providing access to INSIS solution

27

Fadata Charles Taylor acquired a 25% minority stake in December 2015 for €5.1m in cash, being almost 20% of Rights Issue proceeds. The Riverside Company acquired a majority stake as part of the same transaction

Results taking longer than anticipated to come through Participated in follow on funding rounds €1.7m in July 2017, €1.9m in March 2018 and 0.6m in September 2018. Funding round of €2m in H2 2018 Funding supports Fadata’s development and working capital requirements

INSIS is an advanced, integrated insurance process platform that combines all major insurance core processes and lines of business on a single, flexible platform. Implementations in Countries Recognised by leading research reports, including Gartner and Celent.

INSIS Platform

INSIS Non-Life INSIS Platform INSIS Life INSIS Health

Weaker performance largely due to long lead times for software licence sales and investment to establish the Company in Western markets Fadata is taking steps to transform its operating model and is seeing positive signs of a stronger sales pipeline Fadata is core to Group's technology strategy and instrumental to recent successes in Latin America and Europe

Appendix: Financial statements

Performance in H1 2018 continued the track record of year-on-year growth

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

+87% +53%

Revenue £m Adjusted PBT £m

113 122 143 169 211 10.0 11.4 14.2 15.3

29

H1 2017 H1 2018

102 123

+21%

H1 2017 H1 2018

+10%

7.8 8.5 14.8

The pension deficit reduced on rising bond yields

− DB deficit reduction since FY 2017 primarily due to changes in bond yields

• ver the period

− Multi year recovery plans are in place

FY 2016

Retirement benefit obligations (£m) Net of deferred tax (£m) 52.5

30

HY 2017 FY 2017 HY 2018

43.5 44.8 37.2 44.7 37.1 33.2 25.7

Financial overview

H1 2017 H1 2018

Revenue 102.3 123.4 Adjusted segmental operating profit 8.5 9.5 Share of (loss)/profit of associates (0.4) (0.5) Acquired intangible assets amortisation (2.3) (3.5) Non-recurring costs (0.7) (5.0) Finance costs (0.3) (0.3) Statutory profit before tax 4.8 0.2 Non-controlling interests

• (0.2)

Adjustments 3.0 8.5 Adjusted profit before tax 7.8 8.5 Income tax

• (0.3)

Tax on adjustments

• (0.9)

Adjusted earnings 7.8 7.3 Adjusted earnings per share (p) 11.51 10.22 Adjusted profit before tax 7.8 8.5 Depreciation and amortisation 2.4 3.1 Finance costs 0.3 0.3 Non-controlling interests

• 0.2

Adjusted EBITDA 10.5 12.1

31

Segmental balance sheet

H1 2017 H1 2018 Professional Services Owned Insurers Group Professional Services Owned Insurance Group Non-current assets

122.2 1.8 124.0 161.7 1.6 163.3

Current assets

226.6 1,135.1 1,361.8 265.3 1,030.7 1,296.0

Total assets

348.9 1,136.9 1,485.8 427.0 1,032.3 1,459.3

Current liabilities

(191.5) (1,124.5) (1,316.0) (230.7) (1,017.8) (1,248.6)

Deferred consideration

(5.7)

• (5.7)

(3.7)

• (3.7)

Net current assets

29.4 10.7 40.1 30.9 12.9 43.8

Non-current liabilities

(84.7)

• (84.7)

(105.3)

• (105.3)

Deferred consideration

(3.7)

• (3.7)

(5.3)

• (5.3)

Total liabilities

(285.6) (1,124.5) (1,410.1) (345.0) (1,017.8) (1,362.9)

Net assets

63.2 12.5 75.7 82.0 14.5 96.4

Non-controlling interests

(2.0)

• (2.0)

(1.9)

• (1.9)

Equity attributable to the

• wners of the Company

61.2 12.5 73.7 80.1 14.5 94.5

32

UK retirement benefit schemes

Certain Group employees are members of one of four UK DB schemes operated by the Group. The schemes are subject to independent triennial valuations at which point funding is reviewed.

33

Charles Taylor & Co Limited Retirement Benefits Scheme Richards Hogg Pension & Life Assurance Scheme ER Lindley & Co Limited Pension Plan Wm Elmslie & Sons 1972 Pensions & Life Assurance Fund

Last valuation date 1 July 2016 1 May 2015 1 July 2014 1 January 2015 Deficit at H1 2018 (£m) 20.3 12.5 0.2

• FY 2018 estimated contributions (£m)

4.2 1.7

• Note: Group deficit of £33.2m includes £0.2m relating to an overseas scheme. Net of deferred tax

Group deficit is £27.6m

Banking facilities as at 30 June 2018

34

UK facilities Review date Currency Facility Revolving credit facility October 2022 GBP (m) 70.0 RBS overdraft Annual GBP (m) 2.5 HSBC overdraft Annual GBP (m) 2.5 Total UK facilities GBP (m) 75.0 Overseas facilities Review date Currency Facility (local currency) Spot rate Facility (GBP equivalent) Citizens US facility Bi-annual USD (m) 4.8 0.78 3.7 HSBC Hong Kong facility Annual USD (m) 3.8 0.78 2.9 HSBC Canadian facility Annual CAN (m) 1.8 0.60 1.1 Total overseas facilities GBP (m) 7.7 Total facilities GBP (m) 83.0 Acquisition facility GBP (m) 25.0

Charles Taylor plc

www.ctplc.com www.linkedin.com/company/charles-taylor-plc @ctaylorplc

Disclaimer: This presentation is intended to provide a general update on its subject matter and is for guidance purposes only. Nothing in this presentation shall constitute legal or other advice and should not be relied upon as such. Any information within this presentation referring to statute, law, regulation, guidance or any

• ther publication should not be regarded as a substitute for

reading in full and seeking professional advice on the relevant statute, law, regulation, guidance or other publication and any amendments to such documentation from time to time. Charles Taylor shall have no liability for any loss arising from any reliance

• n the information provided in this presentation.