The positive technical results registered by the Middlesea Group as at 30 June 2008 were outweighed by the significant unfavourable fair value movements experienced in the investment portfolios. 

Commenting on the Company’s results, Middlesea Group Executive Chairman Mr Mario C. Grech stated: “Technical insurance results before investment income have shown positive movements in our operations. However, as advised in my statements in May and June, the turmoil experienced in the capital markets, both locally and internationally, during the first six months of 2008 have had a significant negative impact on the half year results of 2008”.

The Group registered a post tax loss of €1.61 million for the first six months of 2008 as compared to a profit of €2.84 million in 2007. In line with the Group’s accounting policies, fair value movements on the equity and bond portfolios were taken directly to the Profit & Loss account, and thus the cyclical nature of the financial markets had a direct impact on the positive technical result. The fair value losses on the investment portfolio amounted to €5.9 million, as compared to a marginal gain of €0.16 million in the previous year. 

Middlesea Insurance plc registered an increase in turnover of 6% in business written in Malta and Gibraltar during this reporting period as compared to 2007.  The technical results reflect the prudent underwriting strategy adopted by the company.  Before the impact of the investment return, Middlesea Insurance plc registered a positive technical result of €1.44 million as compared to €0.99 million in 2007. Further strengthening was registered in the gross technical reserves of the company which increased by 8.5% to €53 million during the six month period.

Progress Assicurazioni S.p.A., continued to pursue its strategy of growth in the Italian market with premiums written totalling €44.8 million, an increase of 33% over 2007. The contribution of this subsidiary towards the result after tax of the Group also reflected the negative impact of the international financial markets which reduced the subsidiary’s performance to a loss of €0.52 million from a profit of €1.28 million in June 2007.

The turbulence in the financial markets during the first six months of 2008 had, as expected, an adverse effect on investors’ risk appetite, which in turn impacted sales of savings and investment products by life insurance companies. As a result Middlesea Valletta Life Assurance, the associate company, registered a decrease in turnover with business written amounting to €59.7 million during the reporting period as compared to €67.6 million in the previous year.  With an investment portfolio of €671 million, the investment return of this company reflected the negative performance experienced in the financial markets.  Nevertheless the associate company’s contribution towards the Group’s result for the six months up to 30 June 2008 remained positive, at € 0.41 million, as compared to €0.9 million for the same period last year. 

The Group’s gross technical reserves reflect an increase of 7.7% over the reserves at 31 December 2007, and totalled €187.27 million. Total assets increased by 4.3% during the six months and the Group holds a total position of €313.82 million. The Shareholders’ funds at the end of June 2008 amounted to €77.2 million, a reduction of €5.4 million from December 2007.  This reduction resulted from the Group’s loss for the period together with the distribution of dividends of €3.2 million approved by the shareholders during the Annual General Meeting held on the 25 June 2008. The Middlesea Group Balance Sheet at €80.4 million remained very strong in line with the current strategies.

Mr. Grech said “the volatility experienced in the capital markets during the first half of 2008 resulted in a loss for the period for the first time since its establishment”.  Mr Grech added that “the economic and financial scenario will continue to present challenges during 2008. Whilst the Group is confident that it has the necessary measures in place to maintain the positive technical performance of its insurance portfolios during the second half of the year, Group results will continue to be affected by the turbulence in the financial markets, although one notes that there is cautious international expectation that this turbulence may stabilize during the second half of 2008”.

Middlesea Group is comprised of Middlesea Insurance p.l.c., Middlesea Valletta Life Assurance Company Ltd, International Insurance Management Services Ltd, Growth Investments Ltd and Progress Assicurazioni S.p.A. which are licensed by their respective regulatory authorities. COM 070808A.