Charles Taylor Regulatory News (CTR)

PRESS RELEASE

Charles Taylor plc

Announcement of results for year ended 31 December 2017

· Revenue significantly increased

· Organic initiatives and further investment driving growth strategy

· Adjusted EBITDA increased

· Adjusted profit before tax and earnings increased

· Statutory profit before tax and earnings reduced

· Adjusting Services' working capital months significantly improved

· Refinancing completed on improved terms

· Net debt increased to fund growth strategy

· Final dividend increased

David Marock, Group Chief Executive Office, Charles Taylor plc said:

"Charles Taylor achieved a solid overall financial performance in 2017. We delivered significant revenue growth combined with steady growth in adjusted profits before tax and good growth in earnings. Investments have been made both to take forward our key strategic initiatives, whilst also improving the Group's underlying performance.

We are very positive about the long-term prospects for Charles Taylor. We are taking forward numerous growth initiatives and our investments are delivering good results overall. We are confident that our strategy will deliver further growth, increased profit and deliver greater shareholder value."

Consolidated financial highlights

For the year ended 31 December 2017

Notes:

1. Figures above are presented using unrounded numbers so minor rounding differences may arise.

2. Adjusted EBITDA is adjusted profit before tax plus depreciation, amortisation and finance costs, before pre-tax non-controlling interests.

3. Adjusted earnings per share is calculated by dividing the adjusted earnings by weighted average number of ordinary shares as disclosed in note 3.

4. Adjustments include non-recurring costs and amortisation of acquired intangible assets.

This announcement contains inside information within the meaning of article 7 of the EU Market Abuse Regulation (MAR).

Group Chief Executive Officer's Report

Charles Taylor achieved a solid overall financial performance in 2017. We delivered significant revenue growth combined with steady growth in adjusted profits before tax and good growth in earnings. Statutory profits were down year on year, largely due the amortisation of intangible customer relationship assets following the acquisition of CEGA in 2016 and non-recurring costs relating to office closures and operational efficiency. We do not consider that these costs reflect the Group's underlying performance. These are described in more detail in the Financial Review. We made excellent progress in executing our strategy by growing our businesses organically and investing to expand our capabilities for global clients. These investments held back the underlying short-term growth in adjusted profit before tax, which otherwise would have been substantially higher, but are expected to deliver improved long-term growth for shareholders.

Investments have been made both to take forward our key strategic initiatives, whilst also improving the Group's underlying performance. These include:

Growing our core businesses

· Growing InsureTech. The business has secured or has been selected as preferred provider for large and high-profile, multi-year contracts in Europe and Latin America.

· Developing our global property and casualty (P&C) loss adjusting capability with the creation of new teams, the expansion of existing teams and the opening of new offices in the UK, USA and Middle East.

· Securing significant new travel and medical assistance business wins from leading UK insurers, along with expanding our range of solutions utilised by clients.

Capturing new strategic opportunities

· Acquiring Criterion Adjusters, a loss adjusting business focused on the UK high net worth insurance sectors.

· Strengthening our US TPA capability by acquiring Metro Risk Management, a workers' compensation insurance claims administrator.

· Acquiring the book of Zurich International life insurance bonds and integrated them into the Group's wholly-owned Isle of Man life insurer.

Charles Taylor aims to deliver shareholder value by delivering a diversified set of income streams, providing reliable, sustainable year-on-year growth in earnings, while investing to create opportunities to achieve a step-change in longer term earnings growth.

We are well placed to grow our business by capitalising on the major market trends in the insurance market and providing services which meet the challenges our clients face. We believe these trends will encourage larger global insurers, brokers, and corporates to work with strategic partners like Charles Taylor. We can leverage our technical services and technological solutions to enable our clients to deliver services to their clients in fundamentally better ways. Our global network, deep insurance knowledge, technical capabilities and specialist solutions mean we are ideally positioned to serve our clients across the globe and in every area of their operating model.

The effectiveness of our growth strategy has been recognised at The European Business Awards, Europe's largest business competition. Charles Taylor was chosen by a panel of independent judges including senior business leaders, politicians and academics as the best in the UK in the 'Elite Award for Growth Strategy of the Year' category.

Group results - continuing business

Professional Services' performance

Owned Life Insurers' performance

Professional services

· The overall performance of our Management Services business was strong. The UK and International business enabled The Standard Club to achieve an excellent result and return premium to members. We also introduced significant changes to the operating model of The Strike Club to improve the financial performance of the club. The Americas business also delivered an outstanding result for its main client, Signal Mutual, achieving 100% renewal of members.

· The Adjusting Services business made good progress in strengthening its business to increase regular, repeatable income streams and delivered a material improvement in its working capital requirements. The business achieved good revenue growth, while our efforts to reduce costs, increase efficiency and grow the business delivered a pleasing increase in both profit and margin. The acquisition of Criterion and the expansion of other teams are expected to deliver further performance improvements.

· The Insurance Support Services business delivered excellent top line growth, benefiting from a full year's contribution from CEGA, which secured additional businesses from high profile UK insurers. Overall profit was down because of our increased investment to build the capabilities of our insurance technology business. We are seeing good progress in our efforts to establish Charles Taylor InsureTech as a global insurance technology provider. It has been selected to deliver large and high-profile, multi-year projects in the UK and Latin America.

· We participated in funding rounds for Fadata, an associated business, in July 2017 and March 2018 as part of our technology strategy. Fadata made losses in 2016 and 2017, largely due to long lead times for software licence sales and investment to establish the company in Western markets. Fadata is now seeing positive signs of a stronger sales pipeline, which includes significant sales opportunities in Latin America introduced by Charles Taylor InsureTech. We are confident in the business' long-term future and future growth prospects.

Owned Life Insurers

The Group's Owned Life Insurer's revenue decreased modestly. Profit was down given the prior year included a one-off contribution to profit on acquisition.

Following the acquisition of a closed book of Zurich International life insurance bonds in early 2017, the business was transferred successfully into LCL International Life Assurance Company, the Group's wholly-owned Isle of Man life insurer, which led to a gain on acquisition of £0.9m.

Balance sheet

We are managing actively the Group's cash profile while investing for growth. Net debt was £57.2m at the end of 2017 (2016: £37.5m) largely as a result of acquisitions and investments (£9.5m) and capital expenditure (£7.7m), as set out in the Financial Review. The Group's annual average net debt, which we believe better represents the Group's overall borrowing, was £39.5m for the year (2016: £12.9m). Free cash flow was £4.3m (2016: £7.2m). Taking into account the Group's annual cashflow profile, the Board considers that the level of net debt is appropriate.

Our significant efforts to reduce the working capital requirement of Adjusting Services are yielding positive results . The working capital requirement reduced by about one month, releasing around £5m, which was used to support the growth in the Adjusting business.

We completed a successful refinancing of the Group's debt facilities, due to mature in November 2018, on improved terms whilst increasing the Group's headroom to borrow to support further growth.

The Group's pension scheme deficit fell during 2017, principally due to good investment returns and the payment of deficit funding contributions by the participating employers. The Group's net pension liabilities were £44.7m at the year-end (2016: £52.5m). Net of deferred tax, the liability was £37.1m (2016: £43.5m), as set out in the Financial Review.

Dividend

An interim dividend for the year to 31 December 2017 of 3.31p (2016: 3.15p) per share was paid on 10 November 2017. The Directors recommend a final dividend of 7.70p (2016: 7.35p) per share to be put to shareholders at the Annual General Meeting on 15 May 2018. The total proposed dividend for the year is therefore 11.01p (2016: 10.50p). Subject to shareholder approval at the Annual General Meeting, the final dividend will be paid on 25 May 2018 to all shareholders on the register on 27 April 2018.

The Board

As announced at the Half Year, we were pleased to welcome Tamer Ozmen as a Non-Executive Director, from 29 June 2017. Tamer also joined the Audit, Remuneration and Nomination Committees with effect from the same date.

Tamer is an accomplished technology professional with over 20 years' senior management experience. He currently runs Microsoft UK Services, which supports UK customers to digitally transform themselves and works with them to disrupt their business models to achieve better results.

Management Services

The Management Services business earns fees from our mutual insurance company and association clients. Growth in the business of the mutuals and the number and extent of services we deliver, leads to growth in our management activities and ultimately to the level of management fees charged.

The performance of our largest managed mutual clients continues to be excellent - providing a positive long-term indicator of the performance of the Management Services business. The business also seeks to grow by developing new mutuals and insurance ventures and by tendering for the management contracts of other existing mutuals, insurance companies and associations.

The overall performance of our Management Services business was strong. The UK and International business line enabled The Standard Club to achieve an excellent result and return premium to members. It improved the operating model of The Strike Club to improve and strengthen future financial performance of the club. The Americas business delivered a strong result for its major client, Signal Mutual, achieving 100% renewal of members.

Management Services - UK & International

Delivered exceptional services to our mutual clients

· The Standard Club. Charles Taylor has managed The Standard Club since it was founded in 1884. The club provides protection and indemnity (P&I) insurance to around 10% of the world shipping market. Our work has delivered an excellent result for the club.

The club's entered tonnage grew by 7% growth during the 2016/17 policy year and 2% at renewal, an overall annual increase of 9%. This is well ahead of growth in the world fleet of 3% over the same period, demonstrating the quality of service and financial security which we enable the club to deliver to its members.

At the 2017/18 renewal, the club set no general increase and returned 5% of estimated total premium to members for the 2016/17 policy year, underlining the club's financial strength. The club had a total premium income of $339m and free reserves of $430m at the close of the 2016/17 policy year.

In other activity, we are helping the club to prepare for Brexit. In this regard, we intend to establish an Irish insurer for the club and open a Charles Taylor office in Dublin, specifically to serve the club's European Union based members post-Brexit.

We have worked to enable the club to deliver its diversification strategy. The Standard Syndicate, established in 2015 is now established in the Lloyd's market. After a difficult start in remarkably soft and challenging market conditions, the syndicate is now poised for growth. In common with most new market entrants, The Standard Syndicate's business plans for 2015-2017 which were approved by Lloyd's, anticipated losses, due to start-up costs. The Standard Syndicate's business plan for 2018 which was approved by Lloyd's, which moves the syndicate beyond its start-up phase and is focused on profitable underwriting.

The club diversified its business by agreeing a new mutual excess cover facility with the Korea P&I Club. This will help to expand the club's business in the important Korean shipping market.

· The Strike Club. The Strike Club is the only dedicated mutual insurer covering the running costs of vessels delayed by strikes, shore delays, collisions, groundings and other incidents outside an owner's or charterer's control.

We delivered a good result overall for the club in 2017, extending the range of insurance covers available, achieving a 95% renewal and welcoming new members for the 2017/18 policy year. We worked to improve the club's efficiency and operations, closing the Monaco office in June 2017 and centralising its operations in London.

· The Offshore Pollution Liability Association (OPOL). We provide financial, administrative and IT support to OPOL. OPOL is a mutual association, established to manage offshore pollution claims in the North Sea. The membership of the association remained stable during the year despite a dip in the oil price. We anticipate that the membership may now start to grow as activity increases in the North Sea on the back of improving oil prices.

Management Services - America

The Management Services - America business supported the further growth of Signal Mutual, increased the membership of SafeShore and delivered management services to SCALA.

Secured growth for our mutual clients

· Signal Mutual. Charles Taylor has been the manager of Signal Mutual, the largest provider of Longshore workers' compensation insurance to the US maritime industry, since it was founded in 1986.

Our work in 2017 helped ensure a very strong year for the Association. The Association achieved 100% retention of members for the 2017/18 policy year and reduced the advanced call charged to members for the 15th successive year. This reflects a reduction in the frequency of claims, driven by the highly effective safety services we provide to the Association's members. As the US economy strengthens, it leads to greater trade volumes through the ports and terminals operated by Signal's members. As a result, we are expecting growth in the payroll of Members to $4.0bn in 2017/18.

SafeShore, the Longshoreman Workers' Compensation Small Account program, backed by Signal Mutual is growing strongly. We established SafeShore as a 'for profit' programme on behalf of Signal in 2014 to offer a further source of high quality income for the mutual. 195 covered employers were entered in the programme in the 2016/17 policy year (which is an increase of 16 over the prior year), with payroll increasing to $60.4m, up from $40.6m in the prior year.

Our work establishing SafeShore was recognised by the industry when we won the 'Launch of the Year' award at the prestigious Insider Honours awards in 2017.

· SCALA. Charles Taylor has managed SCALA, which has provided marine workers compensation insurance the majority of Canadian ship owners since 1978. SCALA continued to perform well on behalf of its Members.

Adjusting Services

Adjusting Services made good progress in strengthening its business to increase regular, repeatable income streams and delivered a material improvement in its working capital requirements. The business increased revenue by 14.5%, while our efforts to improve business performance, increase efficiency and grow, delivered a pleasing increase in margin and more than doubled the profit for the year. This year's improvement is part of our longer-term strategy and we are focused on delivering further improvements in 2018 and subsequent years. In particular, the acquisition of Criterion Adjusters and the expansion of our existing teams are expected to deliver further performance improvements.

Diversified into profitable P&C lines: Our strategy to expand our business into specialist profitable property & casualty sectors is achieving positive results. In 2017, we:

· Entered the high-net worth (HNW) adjusting market with the acquisition of Criterion Adjusters, a prominent player in the HNW sector. Criterion handles a significant share of the UK's HNW property, fine art and antique-related claims as well as being the preferred loss adjuster to many specialist HNW insurers.

· Developed our US adjusting team. We appointed a new CEO and Regional Head for our US adjusting business in January 2017. Over the year, we have created a commercial property adjusting capability, enhanced our existing business lines and significantly strengthened our business development capabilities. We welcomed 15 senior adjusters to the team, extending our coverage across the country, including opening an office in Fort Lauderdale to increase our superyacht adjusting capabilities. Over the year, the US team won over 100 new clients.

· Delivered a positive performance for our UK construction and engineering team, established in 2016. We have benefited from considerable market support with important account nominations on major contractors and infrastructure providers' annual covers and significant commercial, residential, road, rail and waste to energy specific nominations.

· Extended our UK professional indemnity loss adjusting capability by establishing a new team and opening an office in Leeds.

Focused on core loss adjusting business: We believe we are the only major global loss adjuster to have dedicated specialist teams for larger and more complex aviation, marine, natural resources and property & casualty claims. Our core adjusting business lines are focused mainly on complex high value incidents, so their performance is more dependent on the number and value of these type of claims in the market. These core business lines performed well, throughout the year.

The quality of our work has been recognised by the industry and we won the Cuthbert Heath award at the Insurance Honours awards. This prestigious award recognises the best response to a major insurance loss and was awarded for our work in spearheading the response to Hurricane Odile, which caused over US$1bn in damage in Mexico.

Natural disasters: 2017 has been remarkable for the high number of insured losses from Hurricanes Harvey, Irma and Maria and earthquakes in Mexico. We led the programme to adjust losses relating to government infrastructure in Mexico. We have also been active adjusting property claims in the USA and yacht losses in Florida and the Caribbean. While these claims have supported our overall performance, we are not dependent on future major natural catastrophes to achieve further business growth. Most catastrophe-related adjusting is focused on high volumes of lower value property claims. We are not active in the volume 'cat' market, as our expertise is focused mainly on complex high value incidents.

Improved operational efficiency: Our focus has been on both significantly improving a small number of under-performing offices, including closing our Halifax office in Canada, as well as improving business performance generally. Our programme, which includes restructuring teams and installing stronger central and local management is delivering improved results. These initiatives will remain the key area of focus in 2018.

We have focused on improving adjuster utilisation, by flexing our teams to respond to demand surge wherever it occurs in the world. For example, our Canadian adjusters provided significant support and resources to our Mexico adjusting team, enabling them to respond effectively to the inevitable increase in claims management activity following the country's recent earthquakes.

Reduced working capital: Our significant efforts to reduce our working capital requirement by invoicing faster and collecting debts more quickly are also yielding positive results. We have overhauled our invoicing and credit control process, particularly in the key London market collections and have also strengthened our working capital management across all our business lines. This has resulted in an overall 10% reduction in our working capital from 9.1 to 8.2 months which releases over £5m in working capital. Average Work-In-Progress months have reduced from 4.6 to 4.2 months and our debtors from 4.5 to 4.0 months. We believe that this positive reduction in working capital requirement will continue in 2018.

Educated the next generation: It is critical to the development of the business that we invest in training to develop the next generation of loss adjusters. This year we saw a success for three of our marine loss adjusters, who passed the last module of the Association of Average Adjusters exams and have become Fellows of the Association of Average Adjusters. There are very few Fellows worldwide, so to add three in one year is a great achievement and significantly strengthens our marine adjusting business.

Insurance Support Services

The Insurance Support Services business delivered excellent top line growth, benefiting from a full year's contribution from CEGA, which secured additional businesses from high profile UK insurers. Overall profit was down because of our increased investment to build the capabilities of our Insurance technology business, Charles Taylor InsureTech.

CEGA is a market-leading provider of assistance and travel claims management services to insurers. It provides a high-quality, seamlessly integrated end-to-end service, which combines medical assistance with claims and case management, pre-travel advice, medical screening and corporate travel contingency planning.

CEGA has delivered a strong performance and integrated well into the Group in 2017. As reported at the Half Year, it has been appointed as travel and medical assistance provider by major UK clients and has since been awarded a contract with another top-three insurer, extending its reach in the UK market. Onboarding of these new clients has now been completed successfully. CEGA has also renewed one of our largest insurer contracts with additional revenues.

The business has built and launched a new medical screening technology proposition, which has won strategically important new business.

CEGA has also made substantial progress in delivering services to the Group's other businesses. It has added insurance fraud investigation services to Charles Taylor's loss adjusting capabilities. CEGA has developed a major-medical cost-containment programme, to reduce insured medical treatment costs for our insurance clients. The business has introduced new insurer clients to Adjusting Services and has won new business from existing Charles Taylor clients, including The Standard Club and Signal Mutual, to provide medical assistance and repatriation.

Charles Taylor InsureTech draws together provision of the Group's specialist and bespoke technology solutions, systems development and implementation solutions into a single client-focused business.

We are making very good progress in our efforts to establish Charles Taylor InsureTech as a global insurance technology provider. It has been selected to deliver large and high-profile, multi-year contracts in Europe and Latin America.

It has been chosen to deliver TIDE, our delegated authority management solution, for the London insurance market. We have won the contract to implement a multi-country life, health and general insurance policy administration system for one of Latin America's largest insurers.

Charles Taylor InsureTech has also been selected by one of the world's largest employee benefit (re)insurance providers to transform its technology infrastructure. Implementation of the new technology platform will support the client to deliver its ambitious business growth plans across Europe. Our solution will be based on Fadata's INSIS policy administration software and InsureTech's TIDE solution. The contract for the initial phase of work has been signed, the full project is expected to deliver consultancy, implementation and long-term support revenues for InsureTech and licencing income for Fadata.

As part of our technology strategy, we participated in a funding round of €1.7m for Fadata, an associated business, in July 2017, and a further funding round of €1.9m in March 2018. Fadata is the specialist insurance policy administration software business acquired by the Group and The Riverside Company, a global private equity firm, in December 2015. The investments support Fadata's on-going development and enabled it to make a strategic investment in IMPEO, a German digital insurance technology specialist.

Fadata has made a loss in 2016 and 2017, largely due to long lead times for software licence sales and the cost of investment to establish the company in Western markets. The business is taking longer than anticipated to contribute to the Group's performance. Fadata's INSIS software is highly rated by the leading industry analysts and the business is now taking steps to transform its operating model and processes to capitalise on the competitive advantage inherent in its INSIS software. Fadata is seeing positive signs of a stronger sales pipeline, including significant sales opportunities in Latin America introduced through Charles Taylor InsureTech. We are confident in the business's long-term future and growth prospects and anticipate that its performance will improve in 2018.

Charles Taylor Managing Agency has experienced some turnover in its senior staff over the year as the business moved from it start-up phase to becoming a more established business. It has delivered high quality services to its client, The Standard Syndicate, over the year. It is working to ensure that its systems and operations meet or exceed the governance standards required to win management contracts to manage further Lloyd's insurance vehicles.

Charles Taylor TPA is a global Third Party Administrator (TPA), which manages claims for insurers, coverholders and self-insured employers. The business takes on some or all our clients' claims management function, from white-labelled first notification of loss services, through to claims investigation and delegated claims settlement and loss fund management.

Charles Taylor TPA has made good progress in the US and UK markets. It has appointed a senior industry practitioner to the new role of Director, Strategy and Performance to be responsible for strategy, sales and marketing performance and business development.

As part of our growth strategy, we acquired Metro Risk Management, a US West Coast-based TPA specialising in US Longshore and State Act workers' compensation claims. The acquisition will further strengthen the business' presence in these major markets.

Separately, we extended our range of capabilities into the international fund administration market with the completion of the acquisition of Allied Dunbar International Fund Managers, announced in the Group's 2016 annual report. These services complement the life policy administration services the Group provides in the Isle of Man.

Charles Taylor Insurance Services covers two separate business lines, providing outsourced insurance services to life insurance and non-life clients. Both performed steadily during the period.

In the life sector, the business provides policy administration services to both life insurance businesses writing live business and those in run-off. In the non-life sector, Charles Taylor Insurance Services provides services clients in the Lloyd's, London and international insurance markets.  Both businesses performed in line with management expectations.

Other business lines, including the Group's investment management, captive management, risk consulting businesses, performed in line with management's expectations.

Owned Life Insurers

The business' revenue decreased modestly. As expected, profit was down, given there was a one-off contribution to profit on acquisition in the prior year.

Charles Taylor's strategy of acquiring and consolidating life insurers in run-off creates benefits from economies of scale. Small insurers typically have operational inefficiencies, often relating to legacy systems and manual processes, and have high fixed costs to cover, such as management, audit, director and regulatory fees. Such cost structures are an important factor in small to medium sized insurers holding actuarial reserves on a prudent basis. By acquiring such insurers and then merging them, legally and operationally, with another insurer, economies of scale in the annual running costs are created for the current period and future years. As estimation of future expected expenses over many years can be a major factor in setting the actuarial reserves, such economies of scale can trigger reductions in those reserves, which can lead to positive revaluations, profits and cash releases arising at trigger points such as acquisition, reinsurance and following schemes of transfer.

Following the acquisition of a closed book of Zurich International life insurance bonds, this business was transferred successfully into LCL International Life Assurance Company, the Group's wholly-owned Isle of Man life insurer.

Other Group strategy initiatives

During 2017, we took forward further initiatives to optimise our core capabilities and support services to underpin growth:

Implementing London property strategy: Charles Taylor currently operates from three London offices. We have been working to rationalise our operations into a single London location, to improve efficiency and support joint working and collaboration between our business units. We have now agreed lease terms on a high specification London office on competitive terms and are exiting our existing lease commitments. Our London operations and business units will relocate to the new office this summer. We will adopt an agile working model in the new office which will increase efficiency and collaboration whilst enabling us to reduce our total London property footprint.

Strengthened technology infrastructure: We have improved the security and flexibility of our IT infrastructure by moving most systems and data into the 'cloud'. We established a new IT Service Portal to improve the efficiency and cost effectiveness of our technology support for our staff.

Enhanced learning and development: During the year, we introduced a programme to provide new people managers with the tools and techniques to enhance their skills. We also extended our core curriculum to add further learning and development opportunities.

Furthering diversity and inclusion: We recognise that encouraging greater diversity and more inclusive practices brings benefits to our business, so we have developed a strategy to ensure that we recruit, develop and retain high quality staff irrespective of age, gender, race or sexual orientation. These initiatives are at an early stage, but include creating a diversity and inclusion forum, delivering educational and training programmes and establishing a health and wellbeing strategy.

Current trading and outlook

Charles Taylor has had a solid start to 2018. At this early stage, we anticipate that our full year performance will be in line with market expectations. We are making good progress in delivering our growth strategy:

· Our Management Services business continues to provide a solid core to our business with deep and long-standing client relationships and the delivery of steady, reliable growth. The UK and International business delivered a strong renewal for The Standard Club for the 2018/19 policy year, attracting new members and delivering year-on -year growth. The Americas business is building on the outstanding performance delivered for Signal Mutual at the 2017/18 policy year.

· The Adjusting Services business is well-positioned to generate growth and improve profitability from its core business lines and diversification strategy. Adjusting Services is building its presence in selected property and casualty markets and continuing its efforts to increase efficiency and reduce its working capital requirements.

· The Insurance Support Services business includes established and newer businesses with the potential to deliver a material change in earnings in the longer term. The established travel assistance and claims management business is performing well for its existing and new clients. In the insurance technology space, we anticipate that we will successfully conclude contract negotiations with further major clients in Europe and Latin America.

We continue to look at ways to optimise our operational activity across the Group by making our processes more consistent, regulatory compliant, robust, scalable and efficient. Our aim is both to strengthen the Group's current businesses and to provide a stronger platform for future organic and inorganic growth.

We intend to further strengthen our Group by continuing to make carefully targeted acquisitions, joint ventures and business investments. These build scale, leverage our infrastructure and expand our range of services for our global clients. We have an attractive pipeline of acquisition opportunities under consideration. All potential acquisitions are tested against our criteria of having a compelling strategic and financial rationale, strong cultural fit and acceptable risk profile.

Our work is focused on enabling the insurance market to meet the continually evolving challenges it faces and to make the business of insurance work fundamentally better. This could not be achieved without the full commitment of our highly professional team. I would like to thank all our staff for their hard work and dedication throughout the year.

We are very positive about the long-term prospects for Charles Taylor. We are taking forward numerous growth initiatives and our investments are delivering good results overall. We are confident that our strategy will deliver further growth, increased profit and deliver greater shareholder value.

David Marock

Group Chief Executive Officer

14 March 2018

Financial Review

The results for the year are summarised in the table below and explained in more detail in the Group Chief Executive Officer's Report.

Note: Figures above are presented using unrounded numbers so minor rounding differences may arise.

1. Adjustments include non-recurring costs and amortisation of acquired intangible assets.

2. Adjusted EBITDA is adjusted profit before tax plus depreciation, amortisation and finance costs, before pre-tax non-controlling interests.

Adjustments

Charles Taylor is a global provider of technical services to the insurance market. We operate through three professional services businesses: Management, Adjusting and Insurance Support Services. We also own and consolidate international life insurance businesses through our Owned Life Insurers business.

The Professional Services businesses provide specialist services to the insurance market. We are continually developing new technical services capabilities through carefully targeted acquisitions, joint ventures and business investments which have a compelling strategic rationale, strong cultural fit, a persuasive financial rationale and an acceptable risk profile. Our strategy includes the execution of selected larger investments. Material acquisitions and the significant expansion of new businesses, in any given financial year are infrequent so the associated costs of such investments are not representative of the underlying performance of these businesses.

The Owned Life Insurers business consolidates life insurance businesses which are primarily in run-off, creating value through targeted acquisitions and operational efficiency. Its strategy is to identify, acquire and then merge them, legally and operationally, with another insurer, achieving economies of scale in the annual running costs. This business has acquired five life companies over the last five years. Profit releases on acquisitions are dependent on the merging of businesses, requiring regulatory approval, leading to profit fluctuations; acquisition related costs are considered to be a core element of this business' underlying performance.

For these reasons, the Group makes adjustments to statutory profit before tax in order to report profit before tax which better reflects the Group's underlying performance ("adjusted profit before tax"). These adjustments, the largest of which are listed below, are as follows in 2017:

· The amortisation of intangible assets recognised on acquisitions by the Professional Services division of £5.5m (2016: £3.0m) is adjusted because this expense, which is higher in 2017 than 2016 because of the Criterion and Metro Risk Management acquisitions, does not relate to underlying performance.

· The Adjusting Services business also incurred costs optimising their business operations, including rationalising legacy remuneration and office locations. These expenses do not relate to the underlying performance of this business and £1.6m has been adjusted as a result.

· In 2017 the Management Services business closed The Strike Club's Monaco office in June and centralised operations in London resulting in a net restructuring cost of £0.5m. These costs do not relate to the underlying performance of this business and have been adjusted.

· The Professional Services business incurred £0.5m in acquiring Criterion Loss Adjusters and Metro Risk Management and refinancing its debt facilities and the Group's share of an associate's acquisition and refinancing costs; these costs do not relate to the Group's underlying performance and have been adjusted.

Net debt, cash flow and financing

The Group ended 2017 with net debt of £57.2m (2016: £37.5m) largely as a result of investments in Zurich International Portfolio Bonds/Allied Dunbar International Fund Managers, Criterion Adjusters, Metro Risk Management, Funds at Lloyd's and Fadata AD (through REF Wisdom Limited) of £9.5m and capital expenditure of £7.7m, which includes £5.1m of capitalised development costs. Free cash flow was £4.3m (2016: £7.2m). We are continuing to focus on managing our debt while investing for growth.

In October 2017, the Group completed a refinancing of its debt facilities, due to mature in November 2018, on improved terms. The finance has been provided by Charles Taylor's existing UK lenders, HSBC and Royal Bank of Scotland with the addition of a new lender, the Bank of Ireland. These increased facilities will support Charles Taylor in driving forward its growth strategy.

The new financing provides an increase in facilities over a five-year term, maturing in October 2022 with the option to extend by a further year. The details as follows:

· Revolving credit facility: £70m, increased from £40m, including the repayment of an existing £10m term loan

· Accordion facility: £25m, increased from £10m

The amended facilities are subject to a 'margin ratchet' with the margin varying from 2.00% - 3.00% over 3-month LIBOR. This is an improvement of 25bp on the previous terms of 2.25% - 3.25%.

The facilities contain two key financial covenants which are tested quarterly: (i) the interest cover in respect of any 12-month period ending on a quarterly test date shall not be less than 5:1 and (ii) leverage in respect of any 12-month period ending on a quarterly test date shall not exceed a target of 1.75: and 2.5:1. The leverage covenant is calculated as Adjusted EBITDA to Net debt, including a full 12 months of any acquired EBITDA.

The leverage covenant is calculated on a 12-month rolling basis and we will be able to include the 12-months EBITDA for all acquisitions including the Zurich book, Criterion and Metro Risk, irrespective of the date of acquisition.

In addition, the Group has a US$9m facility with Citizens Bank which remains in place and additional local overdraft facilities. Following the refinancing and including existing facilities, but excluding the Accordion, Charles Taylor has total available facilities of c. £85m (sterling equivalent).

Retirement benefit schemes

The Group's pension scheme deficit fell during 2017, principally due to good investment returns and the payment of deficit funding contributions by the participating employers. The retirement benefit obligation in the Group balance sheet at 31 December 2017 was £44.7m, compared with £52.5m at the previous year-end. Net of deferred tax, the liability was £37.1m (2016: £43.5m). There are multi-year programmes in place to recover pension scheme deficits fully on a regulatory funding basis and funding costs are reflected in management fees charged by the Group, where appropriate.

Dividend

The final dividend for 2017 is 7.70p (2016 7.35p) making the total dividend for the year 11.01p (2016: 10.50p).

Foreign exchange

The Group manages its exposure to foreign currency fluctuations by using forward foreign exchange contracts and options to sell currency in the future. The contracts open during the year and at the year-end were put in place to protect the Group's exposure to movements between US $ and Sterling. The US$ profits of the Group were translated at US$1.30 in 2017 (2016: US$1.36). The sensitivity of the Group's results to movements in exchange rates is explained in note 28 to the Financial Statements.

Taxation

During 2017, the effective tax rate on statutory profit was -23.8% (2016: 0%) due to the recognition of deferred tax assets in respect of brought forward UK tax losses. Following a detailed review and our confidence in future profits, the remaining deferred tax asset was released at year end which resulted in £1.8m credit to Statutory profit before tax and a £1.5m credit to Adjusted profit before tax.

Mark Keogh

Group Chief Financial Officer

14 March 2018

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

The financial statements were approved by the Board of Directors and signed on its behalf by

Mark Keogh

Director

14 March 2018

Company number: 03194476

Cash Flow Statement

Consolidated Statement of Changes in Equity

The capital reserve and merger reserve arose on formation of the Group and are non-distributable capital reserves.

Own shares comprise 324,247 (2016: 311,120) shares held by the Charles Taylor Employee Share Ownership Plan Trust (ESOP). The market value of these shares was £0.9m (2016: £0.8m) at the balance sheet date.

The trustee of the ESOP is Summit Trust International SA, an independent professional trust company registered in Switzerland. The ESOP is a discretionary trust for the benefit of employees of the Group and provides a source of shares to distribute to the Group's employees (including Executive Directors and officers) under the Group's various bonus and incentive schemes, at the discretion of the trustee acting on the recommendation of a committee of the Board.

The assets, liabilities, income and costs of the ESOP are incorporated into the consolidated financial statements.

There are no significant restrictions on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans or advances other than company law requirements dealing with distributable profits, and in the case of the insurance companies, regulatory permissions and solvency limits.

Notes to the Financial Statements

1. Basis of accounting

The financial information set out above does not constitute the statutory accounts of Charles Taylor plc for the year ended 31 December 2017, but is derived from those statutory accounts, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) and also in accordance with IFRSs adopted by the European Union and therefore they comply with Article 4 of the EU IAS Regulation.

Statutory accounts for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General Meeting.

The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498 (2) or (3) Companies Act 2006.

2. Segmental information

Identification of segments

For management and internal reporting purposes the Group is currently organised into four operating businesses whose principal activities are as follows:

· Management Services business - provides end-to-end management services to insurance companies, mutuals and associations.

· Adjusting Services business -provides loss adjusting services across the aviation, energy, marine, property & casualty and special risks sectors.

· Insurance Support Services business - provides a wide range of professional, technology and support services, enabling our clients to select the specific services they require.

· Owned Life Insurers business - consolidates life insurance businesses which are primarily in run-off, creating value through targeted acquisitions and operational efficiency.

Management information about these businesses is regularly provided to the Group's chief operating decision maker to assess their performance and to make decisions about the allocation of resources. Accordingly, these businesses correspond with the Group's operating segments under IFRS 8 Operating Segments. Businesses forming part of each business which might otherwise qualify as reportable operating segments have been aggregated where they share similar economic characteristics and meet the other aggregation criteria in IFRS 8.

In the Management Services business, a higher proportion of revenue arises in the second half of the financial year. There is no significant seasonality or cyclicality in the other businesses.

Measurement of segmental results and assets

Transactions between reportable segments are accounted for on the basis of the contractual arrangements in place for the provision of goods or services between segments and in accordance with the Group's accounting policies. Reportable segment results and assets are also measured on a basis consistent with the Group's accounting policies. Operating profit for the individual segments includes an allocation of central costs. The Adjustments column includes elimination of inter-segment revenue, share of results of associates and the adjustments set out in the Finance Review. Reconciliations of segmental results to the Group profit before tax are set out below.

Information about major customers

The Group derived revenue within its Management services business, of £36.1m (31 December 2016: £34.3m) from one external customer which accounts for more than 10% of Group revenue.

1 Excluding deferred tax.

3. Earnings per share

The earnings and weighted average number of shares used in the calculation of earnings per share are as shown below. The shares held by the ESOP have been excluded from the calculation because the trustees have waived the right to dividends on these shares.

4. Acquisition of subsidiaries

Metro Risk Management

On 4 September 2017 Charles Taylor acquired all of the equity of Metro Risk Management LLC ("MRM"). MRM is an insurance claims third party administrator ("TPA") that specialises in managing workers' compensation claims in California. This acquisition helps the Group to expand its US TPA business.

Charles Taylor has committed to pay deferred consideration, of £0.4m ($0.5m), in three years, based on profitability targets being met. Acquisition-related costs of £0.1m are included in administrative expenses in the consolidated income statement and in the operating cash flows in the cash flow statement.

Criterion

On 9 August 2017 Charles Taylor acquired all of the equity of Criterion Adjusters Limited, Criterion Surveyors Limited and Criterion Claims Management Limited. These three companies, which are described collectively as "Criterion", were separately owned by the vendors, rather than via a holding company. Criterion Adjusters is a loss adjusting practice specializing in the high net worth insurance market. Criterion Surveyors provides insurance surveys for listed, high value or unique properties. Criterion Claims offers a desk-based service for lower value, less complex claims.

This acquisition gives Charles Taylor access to the lucrative high net worth adjusting market and should provide stable, repeatable revenues with lower working capital requirements than the Group's core adjusting business.

Charles Taylor has committed to pay deferred consideration, subject to a cap on the total initial cash and deferred consideration of £14.6m, undiscounted, over the next three years, based on profitability targets being met. The fair value of contingent consideration of £6.5m was estimated by calculating the present value of future expected cash flows using a discount rate of 2.49%.

Acquisition-related costs of £0.2m are included in administrative expenses in the consolidated income statement and in the operating cash flows in the cash flow statements.

Closed book of Zurich International Portfolio Bonds and Allied Dunbar International Fund Managers Limited

On 28 April 2017, Charles Taylor Group completed the acquisition of the closed book of Zurich International Portfolio Bonds (the Book) from Zurich International Life Limited and 100% of the equity of Allied Dunbar International Fund Managers Limited (ADIFM) from Zurich Insurance Company Ltd.

The transaction will enable Charles Taylor to increase its revenue by managing the closed book and by providing policy administration services. The acquisition of ADIFM, which manages a collective investment scheme, will also enable Charles Taylor to generate fund management revenues and further extend its range of professional services by entering the international fund administration services market. Charles Taylor Group's wholly-owned Isle of Man life insurance subsidiary, LCL International Life Assurance Company Limited, will reinsure the Book and subsequently accept the legal transfer of the majority of the Book, subject to regulatory and court approval.

ADIFM has been renamed as Charles Taylor International Fund Managers (IoM) Limited.

The amounts recognised in respect of the identifiable assets are liabilities assumed are as set out in the table below.

If the above acquisitions had been completed on the first day of the financial year, the combined revenue and statutory profit before tax would have been £215.7m and £7.9m respectively.

Deferred consideration

Included in the prior year deferred consideration of £11.7m, as set out below, is the amount of £1.7m included within total liabilities in insurance business. Acquisitions include the Zurich International Portfolio Bonds/Allied Dunbar International Fund Managers, Criterion Adjusters and Metro Risk Management, as described above, offset by revisions for acquisitions within 12 months. £2.7m of the total is due within one year.