Mario C. Grech, Chairman of the Middlesea Group announced that all Companies within the Group registered an improved technical performance in the first half year of 2006 as compared to previous year. The overall performance of the international capital markets, in particular the unfavourable movements in the foreign bond market, impinged negatively on the overall result of the Group resulting in a registered reduced profit before tax of Lm1.24 million.  The overall profit attributable to shareholders after tax as at June 2006 was Lm1.55 million, a reduction of 3% over previous year. After taking account of minority interests and taxation, earnings per share reduced from 6c4 in 2005 to 6c2. This data reflect the share split effected in June 2006.

Progress Assicurazioni SpA (Progress), the Group’s Italian subsidiary, registered an increase a premium of Lm11.04 million (€25.71 million), an increase of 11% over 2005.  Progress reported an improvement in its net combined ratio from 101.7% last year to 99.5% this year.  This company implemented a new development plan which aimed at creating further growth through concentration on identified market segments and products.  The decline in international bond values affected this company such that the improvement in the technical results was adversely affected by the incurred unrealised losses.  This was also reflected in the overall net underwriting result of Lm0.12 million up to June 2006 (Lm0.59 million – June 2005).

The Group continued to enhance its pricing policy, together with stricter underwriting guidelines and a continuous drive to achieve a desirable portfolio business mix.  The premiums written by the Group increased to Lm18.7 million. The underwriting profit (general and life business) before the allocation of investment income for the first half of 2006 was Lm0.36 million as compared to a loss of Lm0.07 million incurred during the same period last year.  Reduced investment returns, most notably for Progress reduced the net underwriting profits, after allocation of investments, from Lm1.4 million to Lm0.91 million.

The holding Company’s net underwriting profit on its core business generated in Malta and Gibraltar amounted to Lm0.69 million (Lm0.66m - June 2005).  Premium generated from this source of business decreased by 7.4% to Lm7.26 million.  The net combined ratio (i.e. the ratio of all net technical costs as a percentage of gross earned premium) improved from 98.9% last year to 96.5%. Net Reinsurance costs decreased mainly due to higher retentions and a lower cost for reinsurance protections.

Middlesea Valletta Life Assurance Company (MSV), the specialist life associate of the Group registered Lm26.4 million of business written representing an increase of 47%.  An interim valuation carried out by the company’s independent actuaries showed that the Life Fund and other technical provisions were further strengthened by 11.5% to Lm243.3 million.  The value of in-force business increased to Lm17.3 million at June 2006.  The Group’s share of the surplus attributable to shareholders during the six month period was Lm0.53 million (2005 – Lm0.40 million), whilst its share of the growth in the value of in-force business was Lm0.35 million (2005 – Lm 0.47million). 

The subdued returns on the local capital markets contributed an unrealised gain of Lm0.15 million to the Group results.  These however were affected by the negative returns from foreign bond markets which resulted in unrealised losses of Lm0.9 million.  The total investment income generated by the Group which, as reported in 2005 now took account of unrealised capital gains or losses directly into the Group’s Profit and Loss Account,  was Lm0.74 million, compared to Lm 2.12 million last year. 

The net asset value of the Middlesea Group increased from Lm1.24c per 25c share as at December 2005 to Lm1.26c at 30 June 2006.  The contributing factors to this increase were the retained profits after taxation generated during the period and the Group’s share of the increase in the value of in-force business of MSV.  Total assets of Lm112.65 million of the Group represented an increase of 4% over 2005.  The Group’s total gross technical reserves also increased to Lm62.6 million.

Mr Grech reiterated: “As I had reported in 2005, both capital markets and the insurance markets were prone to cyclical movements both of which impinge on the overall result of the Group.  In the first six months, the Group’s result was adversely affected by the negative bond market.The focus by all companies within the Group on the correct pricing for products and services commensurate with the underlying risk business, together with close monitoring on developments in the capital markets remains of fundamental importance.The Middlesea Group is committed to its strategy of attaining a balanced business mix from a territorial spread through varied distribution coupled with providing quality service to its clients and a satisfactory return to its shareholders.”

Middlesea Group consists of Middlesea Insurance p.l.c., Middlesea Valletta Life Assurance Co. Ltd, Progress Assicurazioni SpA, International Insurance Management Services Ltd, Growth Investments Ltd and Malta International Training Centre all of which are regulated by their respective Regulatory Authorities.  COM220906B