Middlesea profits trimmed to Lm1.24 million in first half

Middlesea Group chairman Mario C. Grech announced that all companies within the group registered an improved technical performance in the first half year of 2006 as compared to the previous year.

The overall performance of international capital markets, in particular the unfavourable movements in the foreign bond market, impinged negatively on the overall result of the group, resulting in a reduced profit before tax of Lm1.24 million.

The overall profit attributable to shareholders after tax as at last June was Lm1.55 million, a reduction of 3% over the previous year. After taking account of minority interests and taxation, earnings per share fell by 0c2 from 6c4 in 2005 to 6c2. These data reflect the share split effected last June.

Progress Assicurazioni SpA (Progress), the Group's Italian subsidiary, registered an 11% increase in premium over 2005 amounting to Lm11.04 million (€25.71 million). Progress reported an improvement in its net combined ratio from 101.7% last year to 99.5% this year.

The company implemented a new development plan, which aimed to create further growth through concentration on identified market segments and products. The decline in international bond values affected it leading to the improved technical results being adversely affected by the incurred unrealised losses.

This was also reflected in the overall net underwriting result of Lm0.12 million, up to June 2006 (Lm0.59 million in June 2005).

The group continued to enhance its pricing policy, together with stricter underwriting guidelines and a continuous drive to achieve a desirable portfolio business mix. The premiums written by the group increased to Lm18.7 million.

The underwriting profit (general and life business) before the allocation of investment income for the first half of 2006 was Lm360,000 as compared to a loss of Lm70,000 incurred during the same period last year.

Reduced investment returns, most notably for Progress, reduced the net underwriting profits, after allocation of investments, from Lm1.4 million to Lm910,000.

The holding company's net underwriting profit on its core business generated in Malta and Gibraltar amounted to Lm0.69 million (Lm0.66m in June 2005). Premium generated from this source of business decreased by 7.4% to Lm7.26 million.

The net combined ratio (i.e., the ratio of all net technical costs as a percentage of gross earned premium) improved from 98.9% last year to 96.5%. Net reinsurance costs fell, mainly due to higher retentions and a lower cost for reinsurance protections.

Middlesea Valletta Life Assurance Company (MSV), the group's specialist life associate, registered Lm26.4 million of business written, a 47%increase. An interim valuation carried out by the company's independent actuaries showed that the life fund and other technical provisions were further strengthened by 11.5% to Lm243.3 million.

The value of in-force business increased to Lm17.3 million last June. The group's share of the surplus attributable to shareholders during the six-month period was Lm0.53 million (2005 - Lm0.40m), and its share of the growth in the value of in-force business was Lm0.35 million (2005 - Lm0.47m).

The subdued returns on the local capital markets contributed an unrealised gain of Lm150,000 to the group results. These however were affected by the negative returns from foreign bond markets, which resulted in unrealised losses of Lm900,000.

The total investment income generated by the group which, as reported last year now took account of unrealised capital gains or losses directly into the group's profit and loss account, was Lm740,000, compared to Lm2.12 million last year.

The net asset value of the Middlesea Group increased from Lm1.24c per 25c share as at last December to Lm1.26c on June 30. The contributing factors to this increase were the retained profits after tax generated during the period and the group's share of the increase in the value of in-force business of MSV.

Total group assets of Lm112.65 million represented a 4% increase over 2005. The group's total gross technical reserves also increased to Lm62.6 million.

Mr Grech reiterated: "As I had reported in 2005, both capital markets and the insurance markets were prone to cyclical movements, both of which impinge on the overall result of the group. In the first six months, the group's result was adversely affected by the negative bond market.

"The focus by all companies within the group on the correct pricing for products and services commensurate with the underlying risk business, together with close monitoring on developments in the capital markets, remains of fundamental importance.

"The Middlesea Group is committed to its strategy of attaining a balanced business mix from a territorial spread through varied distribution coupled with providing quality service to its clients and a satisfactory return to its shareholders."