Mario C. Grech, Chairman of the Middlesea Group, announced a positive performance by all the companies within the Middlesea Group that contributed to an increase of 40% in the net profit before tax of  Lm2.15 million (June 2004 – Lm1.54 million)  for the half year ended 30 June 2005. 

The Group continued to enhance the pricing policy, together with stricter underwriting guidelines and a continuous drive to achieve a desirable portfolio business mix.  This resulted in a decrease of 6.6% in premium income; the anticipated reduction coming from Progress Assicurazioni S.p.A and Gibraltar, though business written locally assisted in mitigating this.  The positive effect of this underwriting strategy was reflected in the technical performance (general and group life) with an underwriting profit of Lm1.4 million as compared to Lm1.1 million generated during the same period last year.  The positive returns generated on the Group’s investment portfolio, also contributed to the overall improvement in results.

Progress Assicurazioni SpA, the Group’s Italian subsidiary, was in the process of consolidating its position by continuing to pursue a strictly technical pricing policy whilst assessing its agency network against performance criteria, even more so with currentl prevailing weaker market conditions.  The company has simultaneously worked on a new development plan which aims to curb the shortfall in business resulting from the application of these policies as well as to create further growth through concentration on identified market segments and products. The Group’s confidence in the Italian subsidiary was further demonstrated in July 2005 when Middlesea Insurance p.l.c. accepted an offer to purchase 38.97% of the shares in Progress Assicurazioni held by Corporacion Mapfre Compania Internacional De Reaseguros S.A.  The Middlesea Group now owns 99.97% of the shares of this Italian subsidiary.

Middlesea Valletta Life, the specialist life associate company of the Group, registered a further growth of 21% in the total business written to register Lm18.2 million for this period.  An interim valuation carried out by the company’s independent actuaries showed that the Life Fund and other technical provisions were further strengthened by 13.7% to Lm185.4 million.  The Group’s share of the surplus attributable to shareholders during the six month period was Lm0.40 million.

On 1 January 2005 the Group adopted the revisions under IAS 39 – Financial Instruments: Recognition and Measurement.  This standard has affected the categories of financial assets and financial liabilities of the Group for recognition and measurement purposes.  The principal impact of the revised standard as adopted by the Group concerns the accounting treatment of available-for-sale investments, which are comprised mainly of listed bonds and equities. In past years, such investments were measured at fair value, with movements thereon being generally accounted for through reserves.  As from 1 January 2005, such movements are accounted for directly in the profit and loss account.  This change, while introducing an unavoidable measure of volatility in the future results of the Group, is generally considered best practice as the profit and loss account now provides a more complete measure of the performance of the Group’s investments.  

In accordance with the IAS 39 (revised), the changes mentioned above were implemented retroactively with the effect of restating the financial statements as published last year, thus ensuring that all amounts reported, including comparative figures, were drawn up on a consistent basis. Under the revised accounting policies, the Group’s profit for the first six months of 2004 was restated upwards from Lm1.02   million to Lm1.20 million.  At the same time, the changes made have had a minimal impact on the Group’s balance sheet, where with few exceptions the Group’s investments were already carried at fair value.

The continued recovery of the local and international capital markets positively affected the investments held by the Group; and as a result of the rule changes mentioned above, this also positively affected the overall profit for the period of the Group.  The capital appreciation of group investments taken directly to the profit and loss account was Lm1.1 million (June 2004 – Lm 0.01 million), of which Lm 0.75 million (June 2004 – loss Lm0.03 million) was allocated to the technical accounts.  The total investment income generated by the Group was Lm2.12 million, compared to Lm0.96 million last year. 

The Group’s balance sheet was further strengthened when Group total assets increased by 4.1% (as at December 2004) to Lm105.61 million as at 30 June 2005.  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 Middlesea Valletta Life Assurance Co Ltd affected the net asset value of the Middlesea Group that increased from Lm2.01c per share as at December 2004 to Lm2.13c as at 30 June 2005

Mr Grech stated that:

Overall these are a sound set of results delivered by managing our business for value with strong and resilient returns.  Although a degree of stability has returned to investment markets, we anticipate that conditions will remain challenging in the second half of 2005.  We will continue to monitor developments closely in the capital markets as well as implementing corrective measures in our core underwriting operation. 

Our emphasis remains on developing our distribution network, ensuring strict cost and capital management, parallel to the implementation of underwriting disciplines across our businesses.  We believe that these measures combined with our resilient business model should give us the platform to succeed in our chosen markets.  The Middlesea Group is committed towards continuing its efforts to improve the shareholders’ return through its strategy of overseas growth and consolidation in the local insurance market.

The Board of Directors did not propose to pay an interim dividend in respect of the first six months of operations ended 30 June 2005 (30 June 2004 – Nil).

 Middlesea Group consists of Middlesea Insurance p.l.c., Middlesea Valletta Life Assurance Co. Ltd, Progress Assicurazioni S.p.A., International Insurance Management Services Ltd, Growth Investments Ltd and Malta International Training Centre all of which are regulated by their respective Regulatory Authorities.                                                                                                                                                       COM 280905