The strong financial fundamentals and clear strategy of the Middlesea Group enabled it to register most encouraging results for the year 2007, notwithstanding various challenges including the high volatility in the international capital markets.

Mario C. Grech, Executive Chairman of the Middlesea Group said that through the  consistent growth in premium income (both general and long-term business), the shareholders would continue to benefit from the Group’s strategy based on the attainment of a balanced business mix from a geographical spread through varied distribution. All companies within the Group contributed to the generation of this year’s pre-tax profit of €9.3million (Lm4m), which represented an improvement of 9.4% on 2006. Mr Grech said, “This is the result of increased market shares and adherence to strict underwriting controls coupled with the management of expenses”.

The Group remained subject to taxation in the territories where business is underwritten. The provision for taxation of €2.4 million (Lm1.03m) for the financial year 2007 significantly impacted the post-tax profit of €6.91million (Lm2.97m), which reflected a reduction of 7.95% over 2006. Dissimilarity between the tax charge for these years also reflected a one-time favourable adjustment carried in 2006.

The Board of Directors’ meeting on Friday 25^th April 2008 considered and agreed the Company’s dividend policy, which focused on Balance Sheet enhancement together with the equitable distribution of generated profits to Shareholders. The Board agreed to recommend a higher distribution, in line with the existing Company’s results and Balance Sheet strength. In this respect, the Board recommended a final dividend to shareholders of €0.1281 (Lm0.055) per share, amounting to €3.2million (Lm1.38m) an increase of 22.2% over the 2006 distribution.

The Board of Directors also proposed an increase in the authorised and paid up value of each share in issue from €0.582343 (the euro equivalent of the current value of Lm0.25) to €0.60. This increase would be funded through the capitalisation of distributable reserves amounting to €441,425. 

The Executive Chairman stated that shareholders’ funds increased by 5% to €82.6million (Lm35.5m) at the end of 2007. This was in line with the Company’s commitment to its shareholders to maximize the value of their investment over time. The net asset value per €0.582343 (Lm0.25) share was strengthened further to €3.3 (Lm1.42).

In line with the Group’s growth strategy, the Gross written premium (excluding individual life) from Malta, Italy and Gibraltar for the financial year 2007 showed a record increase of 24.3% over the previous year. The total premium generated amounted to €104.2million (Lm44.7m). The general insurance business result continued to benefit from a favourable run-off in loss reserves. This emerged as a consequence of the settlement and re-assessment of the previous year’s claims, which reflected the prudent approach to claims reserving and the Group’s focus on claims management following developments in available technical information. This efficiency in claims handling, coupled with the Group’s continuous focus on disciplined underwriting criteria and strict cost control, yielded an increase of 15.5% in the technical results amounting to €6.96million (Lm2.99m). Furthermore the overall claims reserve increased by 13% to €109million (Lm46.9m).

Since its inception, the Group’s investment policy was prudent and non-speculative. This once again, benefitted the Group in managing the impact on returns in a turbulent global financial market. This was reflected in the investment return earned during 2007, which increased marginally by 0.1% over 2006, despite the high volatility experienced in the international capital markets. The Group’s total investments (excluding its share in Middlesea Valletta Life) amounted to €187.1million (Lm77.7m) as at the end of 2007.

The holding company, Middlesea Insurance plc, registered a pre-tax profit of €6.97million (Lm3m) during 2007, a growth of 7.8% over the 2006 profitability. MSI maintained its focus of growth in business and achieved an increase of 5.65% in turnover as compared to the previous year. The Gross premium written in 2007 for general and group life business was €32.8million (Lm14.1m).  MSI’s technical result continued to benefit from a surplus emerging on the settlement and re-assesment of prior year claims reflecting the company’s ongoing prudent approach to claims reserving and appropriate claims management. The run-off on claims reserves, held at the beginning of 2007, amounted to a favourable result of €3.6million (Lm1.55m) compared to the 2006 figure of €1.8million (Lm0.76m). MSI’s composite status continued to allow it to underwrite life insurance business for groups in addition to the non-life business.  Gross premiums written by MSI under life assurance contracts increased by 5.6% during 2007 and totaled €1.5million (Lm0.63m). MSI continued to operate through a branch office in Gibraltar, where the company underwrites a modest book of general insurance business commensurate with the size of the Island.

The specialised life assurance arm of the Group, the associate company Middlesea Valletta Life Assurance Company (MSV) registered a pre-tax surplus of €7.2million (Lm3.09m), an increase of 10.7% over the previous year. This result contributed a return to the Group of €2.63million (Lm1.13m) for 2007 when compared to €3.47million (Lm1.49m) in 2006. Whilst MSV registered an increase in pre-tax profit, a higher incidence of income tax expense reduced this improvement resulting in a post-tax profit to the Middlesea Group of €2.63million (Lm1.13m). 2007 witnessed an increase in the Maltese market’s demand for life assurance and investment-related products that resulted in the Group generating a total premium (including investment contracts without DPF) of €135.9million (Lm58.34million), a surge of 15% over the previous year. Total assets of this company increased by 16% to €832million (Lm357m). During 2007, MSV further strengthened its issued and paid-up capital to €35million (Lm15m) through a bonus share issue. Total equity as at the end of 2007 was €91.1million (Lm39.1m) representing an increase of 6.1% over the opening values of January 2007.

Progress Assicurazioni S.p.A. (Progress), the Group’s Italian subsidiary company underwriting General insurance business in Italy, focused its business activities during 2007 on planned growth. Progress operated in the Italian market through a diversified network of agencies that increased from 123 to 166 during 2007.  The distribution network was continuously revisited and monitored by Progress to enable it to introduce new agencies in various Italian regions whilst pruning from the network those intermediaries which did not produce the desired results. Progress managed the growth and mix of business on a territorial and product line basis. At the same time Progress reinforced its commitment to adequate pricing and underwriting criteria together with vigilant claims and cost management. During 2007, Progress generated a premium volume of €71.4million (Lm30.6m), an increase of 35% over 2006. The pre-tax contribution of Progress to the Group’s results marked a significant improvement of 74% and totalled €3.1million (Lm1.33m) for 2007 when compared to €1.78million (Lm0.77m) in 2006.

International Insurance Management Services Ltd (IIMS), the Group’s subsidiary company which provided management services to third party insurance clients as well as back-office services to the Group, registered a positive financial result during 2007.  IIMS increased its client base during the year and was actively pursuing promoters of insurance/reinsurance companies, who favourably considered setting up in Malta. IIMS was well equipped to provide highly competitive and professional management services to international companies.

Mr Grech stated: “The Middlesea Group has, during its 27 year history, been a leader in the provision of reinsurance and insurance services both locally and internationally. With its presence outside Malta and a growth strategy focusing on the Euro-Med region, the Group is enhancing its territorial diversification for the benefit of all its stakeholders.”  

Mr Grech added: “During 2008, the Board of Directors will be re-visiting the Group’s structure and the Balance Sheet strength of all companies within the Middlesea Group thus enabling us to focus on new business products through a lean and cost effective management. Through this process, the Group will be seeking to consolidate the financial growth achieved over the years and will provide the necessary infrastructure for future growth of the Group”.

Mr Grech ended with a word of caution: “It should be noted that the turbulence in the international financial markets increased in the first quarter of 2008. Such turbulence could impact negatively on the company’s performance during the current financial year”.