Poor 2013 results force Tawa to split business
Tawa, the AIM-listed business that has traditionally invested in run-off operations, has posted a poor set of results for 2013 – a year that has prompted a fundamental financial restructuring of the business set to be implemented from the second quarter of 2014.
Since its formation in 2001, Tawa has mainly specialised in run-off. It has acquired six insurance companies in run-off including PXRE and CX Re and reinsured a run-off portfolio, through the establishment of a dedicated reinsurance vehicle in Bermuda. In April 2012, Tawa acquired the HIR Group, which allowed it to offer a platform for European run-off portfolio transfers under EU regulations.
But the company has also acted as an incubator for new projects, supporting start-ups in the insurance industry by supplying a variety of functions including underwriting support, claims management, agency management, consulting services and system solutions.
Following substantial losses on the run-off investment side of the business, the company has announced plans to split the business into two, creating two distinct entities with different strategic, operational and economic characteristics and with separate management teams and boards of directors.
The part that focuses on servicing insurers, to be renamed Pro Insurance Solutions, will become a pure play service business. The business and assets of the risk carrier business will be transferred to a wholly-owned subsidiary called Tawa Associates.
In 2013, the business made a loss of $38.2 million on continuing operations compared with $22.5 million the year before. On its discontinued operations, it made a loss of $40.1 million compared with $2.3 million the year before. Its total equity decreased by $77.9 million since 31 December 2012 to $100.6 million as at 31 December 2013.
The company said the bulk of its losses stemmed from three things: $28.2 million adverse reserve development in QX Re; an IFRS accounting loss on the disposal of KX Re of $21.2 million; and the impairment of Tawa Associates goodwill of $13.2 million.
“This is the last set of annual accounts for the diversified group. These accounts once again confirm the necessity of freeing our company from the volatility of the riskier business we invest in, for the value of our more stable business to be recognised,” said Gilles Erulin, CEO of Tawa.
“The financial results announced today reflect the write off of losses prior to completion of the demerger plan and will enable the separate services business and risk carrier business to operate on a better footing going forward. Once again, I am certain that, the new Pro Insurance Solutions plc structure, under the stewardship of Artur Niemczewski, will enhance our service offerings to our clients and will enable us to attract and retain further talents to our organisation.”
