GBGI.L Regulatory News (GBGI)

GBGI Limited

30 March 2017

Interim Results

30 March 2017

GBGI Limited

("GBGI" or the "Company" and, together with its subsidiary undertakings, the "Group")

Interim Results

GBGI Limited (AIM: GBGI), a leading integrated provider of international benefits insurance, is pleased to announce its interim results for the six months ended 31 December 2016.

Financial Highlights

· Strong first half performance, with Gross Written Premiums ("GWP") up 12.2% to US$106.0m (H1 FY16: US$94.4m)

· Increased retention of risk premium, with Net Written Premiums ("NWP") increasing 34.3% to US$75.9m (H1 FY16: US$56.6m)

· Strong performance across all income streams, with total revenues up 22.0% to US$62.1m as compared to US$50.9m in the equivalent prior year period

· Continuation of underwriting performance and discipline, with policy year loss ratios continuing to improve for each policy year since 2014

· Proven, profitable business model, with Profit before Tax growing 10.7% to US$5.2m (H1 FY16: US$4.7m). EBITDA was US$5.8m during the period, up 5.3% over the same period in FY 2016

· Strong financial position, with solvency coverage1 of 160.6 % at 31 December 2016, excluding the benefit from proceeds from our successful IPO on AIM in February 2017

· Dividend policy in place, with intention to pay maiden dividend at the time of the full year results to 30 June 2017

Business Highlights

· Strategic partnership with AXA, beginning in October 2016 covering collaboration across reinsurance, client referrals and new market access

· Launch of GBG Assist, GBGI's worldwide assistance offering in July 2016 providing new fee based income stream

· Acquisition of QHM, a Florida-based third party administration (TPA) firm in January 2017, together with launch of GBG Assist, augments the Group's income stream from providing services to 3rd party insurers. Forecasted to add approximately US$1.5M of revenue in the second half of FY 2017

GBGI's CEO, Bob Dubrish commented:

"Our strong performance in the period reflects our ability to meet clear market demand for our innovative, international benefits insurance solutions.

"We serve a large but underserved niche market via our international network of distributors, operating across 120 jurisdictions. We offer clients a differentiated proposition; our agile underwriting and responsive product design enable us to deliver flexible solutions in line with actual needs.

"Our commitment to underwriting discipline continues with the delivery of excellent loss ratio performance over the interim period. Our underwriting results underpin our highly profitable business and we expect continued positive underwriting performance momentum through the fiscal year end.

"We see continued impetus in the second half giving us confidence that we can continue to grow our business in both existing and new territories."

For further information please contact:

Key

1 Prescribed Capital Requirement using the solvency model supplied by the Guernsey Financial Services Commission (GFSC)

Notes to Editors

GBGI is a leading integrated provider of international benefits insurance, operating globally across over 120 jurisdictions. Trading principally as "The Global Benefits Group" or "GBG", the Group distributes and underwrites health, life and disability, and travel insurance, with a client base that spans multinational corporations, expatriates, local HNWIs, international schools, non-profit organisations and international students. GBGI is a fully integrated insurance group providing services from policy sales to claims administration and servicing and is committed to delivering high levels of customer service. GBGI is incorporated in Guernsey.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement this inside information is now considered to be in the public domain.

Review of the Interim Period

Positioned for profitable growth

This is the Company's maiden set of interim results as a listed company following our successful IPO on AIM in February 2017. Our IPO marks the next stage in GBGI's growth story and underlines our commitment to London, where we have one of our operational centres, as a primary global insurance hub.

Our business was originally founded in 1981; we have a rich heritage and a successful track record in the international benefits insurance market. We have in place a global network of trusted intermediaries who introduce business to us. The quality of our underwriting, as demonstrated by our consistent loss ratio performance, has given us the confidence to increase our retention levels in a measured manner in recent years. We currently retain circa 60% of the health, life and disability business we write, supported by our quota share partners. These higher retention levels, supplemented by our scalable distribution platform as well as the opportunities arising out of our strategic arrangement with AXA have added further impetus to our already sustainable profitable growth story. Our balance street is strong, with a solvency coverage ratio1 of 160.6 %, giving us a highly resilient growth platform.

Our differentiated business model is robust, profitable and cash generative. We are ideally positioned for profitable growth, with a clear dividend policy in place to deliver shareholder returns and value.

Trading Highlights

Sustainable profitability supported by a strong balance sheet

Our strong first half performance was in line with our expectations, delivered against the backdrop of our IPO preparations. Gross Written Premiums of US$106m, were 12.2% higher than the first half of 2016. We continue to grow market share, but will not substitute top line growth for lower risk adjusted returns. Higher retention levels, supported by our proven underwriting excellence, drove Net Written Premium growth of 34.3% to US$75.9m. Total revenues, including underwriting fees and commission grew 22% to US$62.1m. Underwriting performance, the bedrock our profitability, has continued to improve year on year from policy years 2014 through to policy year 2016.

Operating costs increased by US$4.9m to US$18.97m reflecting the growth in the business and ongoing investment in operations to support both our sales efforts and outstanding service levels. Of this increase US$0.6m reflects the shift in our service model from outsourced assistance to our in-house GBG Assist offering, which we see as a fundamental positive for our business through the long term. Unlike smaller competitors we are an integrated operator; we believe it is vital to control the value chain to enable us to support policyholders throughout the life of the policy. High service levels have delivered high retention levels in line with our expectations and a growing, profitable back book. A further US$1.4m of the difference relates to the prescribed adoption of a new accounting policy since the prior half year period for cost recognition which has seen certain expenses accrued over the year rather than being fully expensed on purchase, and hence influencing the direct comparability of the cost performance period on period. Our ongoing process to decentralise our operations is ongoing.

Overall, our profitable growth trajectory continued with profit before tax for the period up 10.6% to US$5.2m. We intend to pay a maiden dividend in respect of our full year results in line with the policy disclosed at the time of our IPO.

Our capital position has been reinforced through profitability and the post period end capital raise pursuant to our IPO. Our solvency coverage ratio1 at 31 December 2016 (pre the IPO capital raise) was 160.6%, giving us significant headroom to grow the business from a position of strength.

Diversified by product, customer and geography

The Group provides its solutions across over 120 jurisdictions via a scalable distribution model incorporating nearly over 100 independent distributors. This network has been built up over many years, and the strength of the relationships is an important component of our success. The Group's primary product remains Health, which contributed 86% to GWP in the period.

In the Latin American market, the Group's largest market, we were pleased with the rapid progress in group health sales, a direct result of our strategy to cross sell into existing intermediaries. The Company also continued to strengthen its portfolio within the Africa region by entering into a partnership with a leading Egyptian insurance company to develop and distribute health insurance products in Egypt. A further highlight in the region was a new five-year contract to provide health insurance benefits to non-US expatriate employees for an embassy located in Manama, Bahrain.

In the Asia Pacific region, we entered into fronting arrangements with partners in Vietnam and Thailand, enabling us to develop and distribute health, life and disability products in those countries. The Central and Eastern European region entered into a strategic relationship with Acibadem for the development and distribution of health products across a number of territories.

Despite increased competition from global insurance carriers and brokers, TIECARE continued to demonstrate that it is the market leader in the international school segment by renewing 93% of its existing clients and adding ten new group clients. We entered the international student market segment in 2015, a decision which has yielded positive results contributing US$3.3m of GWP in the period.

GBG Assist, the Group's assistance offering to third party insurers, built out its offering via the bolt-on acquisition of QHM in January, a third party administrator business located in Florida. This acquisition provides GBG Assist with a platform from which to more broadly market and administer its services. GBG Assist launched in July 2016.

The Group benefits from having a diversified book of business across product, customer and geography. Its scalable and flexible distribution model allows the Group to write business and allocate capital across this diversified offering set so as to maximise risk adjusted returns.

Commitment to operational excellence and high service levels

GBGI's integrated operations gives it control over the core aspects of the value chain. We pride ourselves on being there for our customers when they need us most, at the time of a claim. We support our policyholders via a global network of offices providing medically-trained 24/7 support.

We continued our strategic process of decentralising operations into the regions through additional levels of staffing, training and building of information technology infrastructures. Whilst this has an impact on operational costs, we view this as necessary investment in the foundations of the business, enabling us to maintain the levels of support and assistance which sets our offering apart.

Consistent underwriting performance

GBGI's underwriting performance for the first half of the fiscal year continued to underpin profitability levels.

At December 31, 2016, GBGI's health business had the following loss ratio trends for the open policy years 2013 through 2015.

Policy years 2013 and 2014 are in run-off status with final claims being assessed and processed prior to their formal closure, expected in summer 2017. The loss ratio statistics noted for policy year 2015 are shown at the 24th month of its triangulation. There are still three more months of data collection and analysis to determine final policy year 2015 figures prior to closure. Results for policy year 2016, although still early in its triangulation summary, were up slightly as compared to 2015 and were continuing to meet or exceed expectations.

During the period GBGI also completed a strategic change in its health reinsurance panel, switching to AXA. In addition to reinsurance capacity, the AXA partnership will provide GBGI with strategic access to numerous fronting arrangements in various regions along with added distribution avenues. GBGI is anticipating migrating its life and disability reinsurance program to AXA in January 2018.

GBGI's performance for the first half in its life and long term disability business also demonstrated continued strength. The summary shown below highlights the loss ratio trend for Life and Disability for the Group for the period 2013 through 2016.

For the period January 1, 2016 through December 31, 2016, GBGI recorded approximately US$13.5m in Net Earned Premium and US$1.8m of claims and reserves for a loss ratio of 13.3%. These results would represent the lowest loss ratio the Group has ever experienced. However, it should be noted that the relatively low size of the life and disability book can make the loss ratio results susceptible to variations.

Strong solvency position

GBGI's solvency calculations as at 31 December 2016 were 160.6% as measured against the Prescribed Capital Requirements (PCR) and 918.2% as measured against the Minimum Capital Requirements (MCR) using the solvency model supplied by the Guernsey Financial Services Commission ("GFSC"). These results are based on the GBG Insurance Ltd balance sheet.

Management

As previously announced Bob Dubrish, our CEO, was taken ill earlier this month and stepped back from his duties. We are pleased to report that Bob has made a full recovery. We anticipate Bob will resume his position in the coming weeks.

Dividend

As previously announced, for the financial year ending 30 June 2017, the Company has a target payout ratio of 60% of annual distributable profits, with the intention to see the dividend per share grow in absolute terms thereafter. The intention is to split the annual dividend one third as an interim dividend and two thirds as a final dividend.

For the financial year ending 30 June 2017 the Directors intend therefore to pay two thirds of annual distributable profits as a final dividend; no interim dividend will be paid in respect of the financial year ending 30 June 2017. The details of the Company's dividend policy is set out in the Admission document.

Strategic initiatives

The Group has a number of initiatives underway to support its clear growth strategy. These include: growing the International Students health business via strategic hiring and a refined marketing plan; reinvigorating growth in China via developing an existing strategic relationship and via strategic acquisitions and; building on our momentum in Group Health in Latin American via ongoing distributor training.

We have continued the process to decentralize operations into regional headquarters. This decentralisation will provide continuous improvement to the Group's service offering by putting the operations closer to the clients. GBG India will remain as the Group's Centre for Operational Excellence, providing back-office support in enrollment, fulfillment and claims processing, regional training and audit as necessary.

Outlook

We are seeing continued momentum in the second half of the current fiscal year, giving us confidence that we can continue to grow our business in both existing and new territories, with Gross written premiums trending well and a solid revenue outlook for the full year. We expect further investment in operations to support both our sales efforts and outstanding service levels. We remain confident in the outlook for the business and the ability to continue to deliver profitable growth.

Financial Statements

The interim financial statements presented herein comprises the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, and consolidated statement of cash flows prepared on the basis of the accounting policies set out in the Group accounts for the period ended 31 December 2016. It is unaudited but has been reviewed by the auditor using agreed upon procedures.

This information does not constitute statutory accounts for the purpose of section 435 of the Companies Act of 2006. A copy of the statutory accounts for the year ended 30 June 2016, reported under International Financial Reporting Standards, as adopted for use in the European Union, is available for review at the GBGI Corporate headquarters located at Level 5, Mill Court, La Charroterie, St. Peter Port, Guernsey GY 1 1EJ.

A copy of this Interim Statement is being sent to all shareholders and copies are available for collection indefinitely from the GBGI Corporate headquarters or at the Group's website (www.gbg.com).