Mr Mario C. Grech, Chairman of the Middlesea Group, announced consolidated Group profits after tax of Lm1.07 million (€2.5m) for the year ended 31 December 2003 (Lm1.14 million in 2002).  Middlesea Group has come through a third consecutive year in a market that continued to experience formidable challenges in an environment of slow worldwide economic growth with regulatory authorities globally maintaining their focused attention to improve overall standards, compliance and transparency within stricter parameters.  The organisational structure and the strategy of the Group have contributed to the overall positive result in 2003.

Consonant with our dividend policy in the context of the balance sheet, contingencies and sustainability, the Board is recommending the payment of a dividend of 5c per share, totaling Lm625,000 (2002 - Lm568,750).

Gross Written Premiums (GWP) in 2003 amounted to Lm35.2 million (€81.6m), an increase of 11% over 2002. Shareholders' funds increased by 3% to Lm21.9 million (€50.7m). The net asset value per 50c share was Lm1.75 and the earnings per share reduced from 9c1 to 8c5. Total Group assets increased by 16% to Lm93.7 million (€217.1m).

Motor insurance remained the largest class of non-life business and, as in most countries, was the classic high-volume, low margin, difficult class of insurance business, mainly due to inadequate pricing and it being prone to a high claims ratio. Concentrated effort in the implementation of corrective measures appeared to be reaping the desired result in that the gross loss ratio improved from 94% in 2002 to 82% in 2003. The 15 September storm impacted heavily on the result attained from the Property business with a gross loss (before reinsurance) of Lm1.7 million (€3.9m) which produced a loss ratio of 99% (2002 - 32%). The current market pricing on Property business needed to be revisited to reflect the unfavourable terms and high costs of reinsurance with particular reference to the catastrophe XL protection. The gross underwriting result of Health, Liability, Accident and Group Life generated a profit.

In Italy, the importance of Middlesea's investment in Progress Assicurazioni was reflected in the year-to-year increase in Gross Written Premiums of 18% to Lm21.9 million (€50.7m) generated primarily through a network of 111 agents operating in Sardegna, Lazio, Campania, Puglia, Calabria and Sicily. This company continued with its planned strategy of applying technically correct pricing, ensuring adequate reserving and pursuing growth with a territorial spread and optimal portfolio mix between motor and general business. Total pre-tax profit was Lm0.9 million (€2.1m) resulting in a contribution of a profit after tax and minority interest of Lm0.31 million (€0.7m) to the Middlesea Group.

Middlesea Valletta Life Assurance Company (MSV), also contributed positively to the Group's result with the share of profit after tax increasing to Lm0.65 million (€1.5m). The demand for life assurance shifted positively and in reflection of increased customer confidence, MSV registered an improvement in sales, whereby the GWP increased by 15% to Lm22 million (€51m). The Life Fund increased by 27% to Lm120.8 million (€279.9m), whilst shareholders? funds increased to Lm20 million (€46.3m). The benefit of this investment was reflected in the increase of the embedded value (the discounted value of projected future profits on secured business) from Lm10.8 million (€25m) to Lm11.9 million (€27.6m).

The Group's total investments excluding its share in MSV amounted to Lm52.7 million (€122.1m) and investment income (excluding unrealised capital gains) after expenses and charges amounted to Lm1.65 million (€3.8m). Assets benefited from the improved sentiment in capital markets reflected in price appreciation of investments which had a positive effect on the Group's reserves.

With a view to streamlining functions and improving corporate processes for Group efficiency the outsourcing of non-technical operations to the subsidiary International Insurance Management Services Ltd (IIMS) continued. IIMS was focusing on the generation of third party business in the field of risk management and the management of captive insurance and reinsurance companies operating from Malta. During the year, the Middlesea Group continued to benefit following the adoption of corporate governance principles through the various Group committees made up of the Investments Committee, Audit Committee, Remuneration Committee, Compliance Committee and the Corporate Management Committee. Members of the Board actively participated on these Committees with the assistance, when required, of the executive members of management. This underscored the Group's recognition of traditional values which became a permanent part of our structure to ensure best corporate practice.

Mr Grech concluded:

"Our focus on overseas development in primary markets is concentrated on the Euro-Mediterranean region; indeed, a further development during 2004 is the anticipated establishment of a life branch office in Italy subject to the approval of the regulatory authorities MFSA and ISVAP. Changes to regulation and accounting practices are also key challenges faced by all European insurers and reinsurers in the medium term. This will force fundamental structural change at company and sector level. The expected structural change in the Maltese insurance sector wherein foreign insurers are being replaced by newly-established indigenous insurers will impact upon the quality of competition which in the past was not considered to be on a level playing field. In the medium to long term this should benefit the Middlesea Group which, with its strong balance sheet and international experience, is considered as the leading Insurance Group in Malta.

With the historic event of Malta's accession to the European Union on 1 May 2004, the Middlesea Group is poised for continued growth in an enlarged European market as we continue to build momentum organically, while also remaining opportunistic for external expansion with strategic partners who offer real synergy."

Middlesea Group is comprised of Middlesea Insurance p.l.c, Middlesea Valletta Life Assurance Company Ltd, International Insurance Management Services Ltd, Progress Assicurazioni S.p.A, Malta International Training Centre and Growth Investments Ltd all of whom are licensed by their respective authorities.

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