Middlesea Group registers increased premiums, profits and earnings for 2001

Middlesea Group chairman Mario C. Grech announced consolidated profits of Lm1.42 million for the year ended December 31, 2001, a significant increase over the profits of Lm0.76 million (US$1.67 million) achieved in 2000. In its 20th year of operation, Middlesea Insurance has started to reap the benefits of strategic decisions taken in previous years.

Gross premiums written in general business in 2001 amounted to Lm23.84 million, (US$52.75 million) an increase of 58% over 2000. The full effect of the acquisition of 51 per cent shareholding in Progress Assicurazioni SpA is being reflected for the first time this year. While the main reason for this increase can be attributed to the consolidation of premiums written by Progress Assicurazioni SpA, a significant increase of 19 per cent was also registered in premium written by the holding company. The 2001 accounts also reflect the reduction of premium income previously generated from international reinsurance business.

As from January 1, the Group adopted two new International Accounting Standards, IAS 39 - Financial Instruments: Recognition and Measurement and IAS 40 - Investment Properties.

On the backdrop of the international and local investment scene, the Group`s investment portfolio suffered due to a disappointing equity performance. However the overall investment result was favourably affected by the realisation of certain positions that mitigated the negative effect leaving an overall positive investment return.

Shareholders` funds stood at Lm20.51 million, a marginal decrease from total funds at December 31, 2000, of Lm20.92 million. The low returns on the local and international markets and the introduction of IAS 39 and IAS 40 affected the Group`s shareholders funds adversely, but was partly mitigated by the registered profits of Lm1.42 million. Total assets increased to Lm71.48 million and earnings per share increased by 90% from 6c to 11c4.

The board is recommending an increase in the gross final dividend of 3% to 7c per share, which is equivalent to 14% on the nominal value of each share.

Mr Grech said that 2001 was a year of growth - building on the achievements and activities that commenced in the previous years. This has led to greater emphasis on those lines of business where the company has either market-leading strengths or influence in pricing decisions.

The rapid pace of change within the financial industry persisted, with participants in the indigenous market competing head-to-head across the market. Middlesea entered 2001 with a number of important objectives. These included dedicating its activities to the management of spread and assumption of risk at the primary level only; preserving a balanced approach to growth between the various lines of business; responding more effectively to its customers` needs and thereby improving its potential to realise profits; and strengthening its human resource capital via an active policy of training and knowledge sharing.

Although the company placed the international reinsurance operation in run-off on November 1, 2000, the nature of the business is such that the company remained exposed to certain catastrophe risks during 2001. The two natural catastrophes - the El Salvador and Indian earthquakes, including the run-off accounting, adversely affected the overall technical result by Lm270,495.

Middle Sea Valletta Life Assurance Co. Ltd, in which the Holding Company has a strategic 51% interest, continued to register growth which is reflected in the premium income for the year of Lm22.1 million. The Life Fund also increased by 22% to Lm80.9 million, while shareholders` funds increased to Lm15.9 million inclusive of an additional capital injection of Lm1 million.

The benefit of this investment is also reflected in the increase of the embedded value from Lm8.87 million to Lm9.5 million. This represents the discounted value of projected future profits of secured business. Despite the considerable unrealised losses in capital markets, this company contributed positively towards the Group. The Group`s share of profits at December 31, 2001 was Lm124,631.

Progress Assicurazioni S.p.A., was a significant contributor to the technical operations of the Group. During its first full year of operation, the company concentrated on correcting pricing, reviewing reserving and pursuing growth, paying due attention to territorial spread and balance.

To this end Progress enhanced its distribution network through the opening of 24 new agencies and commenced operations in the regions of Lazio and Sardinia.

Today 56% of the company`s agents are located on the Italian mainland compared to 34% in 2000. The implementation of this strategy resulted in an increase in premium income of 42% to Lm11.8 million and contributed a profit after minority interest of Lm133,854 to the Middlesea Group.

In order to allow the various Group companies to focus on their core underwriting activities, it was decided that the operations of International Insurance Management Services Ltd (IIMS) be used as a vehicle to create more effective cost control within the Group companies.

IIMS, which is licensed to act as an insurance manager under the Insurance Business Act, 1998, and under separate agreements subject to MFSC`s authority, will provide back office operations that previously formed part of the administration departments within the holding company. IIMS will continue to offer risk management services to international companies operating from Malta.