Middlesea's overall performance, with a Group profit of Lm1.14 million for the year ended 31 December 2002, and its strategic position in the market have permitted the maintenance of a dividend policy that seeks to enhance shareholder value. Based on the Board's recommendation, the Meeting approved the payment of a gross dividend of 7.0c per 50c share. This is equivalent to a return of 3.18% based on the closing price on Friday 11 April 2003.

Middlesea's Chairman, Mr Mario C. Grech, reviewed his Statement to shareholders saying that it represented the Company's activities in 2002, which was a year of unprecedented financial challenges for the insurance industry. Whereas insurance and reinsurance companies' balance sheets and investment portfolios suffered badly, at the same time positive signs were being seen for the insurance business with continued development on price adjustments of risks worldwide. Overall, international capital markets continued to be very volatile and recorded their third successive year of overall decline.

In uncertain markets such as those experienced in 2002, risk management in financial planning became critical, and Middlesea demonstrated its resilience in the face of a market scenario constituting the aftermath of the September 11th event, the downturn in the world economy, global major uncertainty and political tensions that depressed the capital markets. Investor confidence was further undermined by the high profile corporate scandals in the US. The negative effects on the financial industry continued into 2002 as the international political and economic situation increased negative investor sentiment.

Disappointing news from companies caused the stock markets to slump further during 2002. The local equity market also delivered a negative return. In the circumstances, the Board applied a write down on certain equities of Lm0.25 million which had a direct impact on this year's Group profits. Bond markets provided some relief with an investor flight to safety prompting positive returns for major bond indices.

The Company has always sought to be reinsured with prime reinsurers of quality security rating. Given the soaring reinsurance costs to the primary insurance industry as a result of attritional catastrophe losses, the rising cost of court awards, the spectre of terrorism, and the dismal investment climate, it is evident that the foreseeable operational environment continued to present considerable challenges with a hardening reinsurance market. This was reflected in 2002 with additional cost of reinsurance protection to Middlesea which resulted in an increased overall total cost of Lm473,281.

While 2002 was not a year of strong operational performance for the Middlesea Insurance p.l.c, certain classes of business, particularly Group Life, Health and Accident produced another year of positive results. However, the overriding negative technical result from the indigenous motor vehicle and liability classes of business, together with the ongoing turmoil in the local and international capital markets adversely affected Middlesea's result. Corrective measures were being introduced gradually to address the motor and liability classes.

When reviewing the subsidiaries' operations, Mr Grech said that Middlesea Valletta Life Assurance Company contributed positively to the Group's result with the Group's share of profit increasing by 101% to Lm250,843. The benefit of this investment is reflected in the increase of the embedded value from Lm9.5 million to Lm10.79 million. Progress Assicurazioni S.p.A., the Group's subsidiary in Italy, was also a significant contributor to the technical operations. The importance of this company was reflected in the year-to-year increase in premium income of 55.7% to Lm18.45 million and its contribution of a profit after minority interest of Lm533,585 to the Middlesea Group.

The improvement of corporate processes and overall Group efficiency continued through the rationalisation of organisational structures, in particular the outsourcing of mainly non-technical operations to the subsidiary International Insurance Management Services (IIMS). It was expected that the services provided by IIMS will be actively marketed further internationally thereby creating a source of additional non-risk income.

Mr Grech said that during 2002, investors and customers turned towards companies that could offer them reassurance and stability. At the same time, volatile conditions continue to create a greater need for responsiveness and flexibility. The insurance and reinsurance industry had gone back to basics. This meant that insurers had to be adequately capitalised and had to charge a price that was adequate, correct and commensurate with the risk that they underwrote. Consistently applied, these simple but vital and proven principles create true value. In this context, the Group continued to review its planned growth. As in the past, Middlesea will continue to allocate capital resources to those areas of business that are considered most suitable for the ultimate benefit of customers and shareholders.
As a result of the economic conditions and investor concerns, Regulators worldwide have been working to develop new approaches on governance controls and risk management. Middlesea has always been committed to the principles and implementation of good corporate governance. The company recognises the valuable contribution that this makes to long-term business prosperity and to ensuring accountability to its shareholders. To this end, The Board assigned certain functions to various Board Committees that report back to it. The Board determined the terms of reference of each committee.

Mr Grech concluded,
"Amongst other consequences, since the 11 September event, primary insurers experienced reduced reinsurance capacity which served to accelerate adjustments in pricing and limitations of risks. As a result, 2002 proved to be a very hard reinsurance market with limited quality capacity and increased pricing especially in non-proportional protections. That trend continued during 2003 and consequently primary insurance terms and conditions have been strengthened across most lines of business internationally. To my mind, this has not yet been fully reflected in the Maltese market.

Twenty-four weeks into 2003, it is apparent that international capital markets continue to be volatile and given this market scenario we are operating in, it is evident that the foreseeable operational environment continues to present a nebulous scenario. Therefore, it becomes imperative that the companies within the Group have to focus on the basic fundamentals of correct pricing for their products and services commensurate with the attainment of positive cash flow. This will enable Middlesea to manage the level of business and achieve a balance between value creation and capital adequacy."

The Chairman, after answering to a number of questions from the floor then thanked all the shareholders for their trust in the Middlesea Group.

The following members were appointed on the Board of Directors until the Twenty Third Annual General Meeting: Mr H. Attard Montalto, Mr J. Camilleri, Mr V. Galea Salamone, Dr J.C. Grech, Mr M.C. Grech, Mr M. Grima, Dr M. Sparberg, Mr F. Xerri de Caro and Mr J.F.X. Zahra.

Moreover, as there were as many nominations as there were vacancies, pursuant to the Articles of Association, no election took place and the following nominees were automatically appointed Directors.

Mr G. Bonnici, Dr E. Caruana Demajo, Mr G. Debono Grech, Mr L. Grech, Mr L. Spiteri and Mr D. Sugranyes

The General Meeting passed an Extraordinary Resolution authorisng the Company to buy back its own shares. The Extraordinary Resolution is intended to permit the Company to avail itself of the added flexibility already provided for in the Company's Articles of Association and the Companies' Act, permitting it to participate in the market when circumstances so dictate.

Immediately after the General Meeting, the Board of Directors appointed Mr M.C. Grech as Chairman and Mr J.F.X. Zahra as Deputy Chairman.

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