Middlesea's Lm3.65 million profit in 2006

Middlesea Insurance plc (MSI) registered an operating profit before tax of Lm3.65 million for the year ended December 31, 2006. Mario C. Grech, executive chairman of the MSI Group, observed that the previous year's figures had been favourably impacted by an exceptional net fair value movement in investments of Lm2.2 million, mainly as a result of a sharp rise in the value of domestic equities, against a loss of Lm0.17 million in 2006.

The other item affecting the comparative results was the favourable run-off in incurred claims of Lm1.10 million in 2005, compared to Lm0.37 million in 2006. Other companies within the group posted encouraging results, reflecting a strong, varied operational portfolio and the continued successful implementation of the group's strategy.

The board of directors, meeting last Thursday, agreed that, in line with the company's dividend policy to ensure the sustainable enhancement of its balance sheet, they would recommend the payment of a final dividend of 4.5c per ordinary share of 25c.

This amounts to Lm1,125,000, an increase of 29% over 2005 (exclusive of the special dividend paid in that year on the occasion of the company's 25th anniversary).

Mr Grech recalled the previous year's message that "future expectations need to be based on a prudent analytical appreciation. The inherent uncertain nature of insurance business, which is also exposed to cyclical movements in capital markets, presents a continuous challenge in achieving well defined objectives."

Middlesea's shareholders' funds grew by 9% to Lm33.74 million during 2006. The net asset value per 25c share increased to Lm1.35. Earnings per share decreased to 12c7. Total group assets increased by 9% to Lm118.2 million. Gross technical reserves remained very strong, increasing by over 8% from last year to Lm65.40 million.

The group's gross written premium, which included gross premia by the Italian subsidiary, increased by 6.4% to Lm36 million. The prudent reserving methodology adopted by the group gave a favourable result, albeit lower than 2005. Selective underwriting and a disciplined approach to pricing, coupled with efficient claims handling and strict cost control, achieved the satisfactory technical result for the year of Lm2.58 million.

Mr Grech said it was encouraging that the group's overall business net operating ratio (net of reinsurance but before allocation of investment income) was running at 98%. After taking into consideration investment income, it improved to 91%. A return of 9.4% was registered on capital employed and the ratio of net technical reserves to net premiums remained unchanged at 181%.

International Insurance Management Services (IIMS) continued to face strong competition. The company offers professional management services to international companies, including insurers and reinsurers wishing to register and operate from Malta.

The group believes that there are distinct opportunities in this market and continued with its endeavours to increase the portfolio of clients. The company pursued its policy to invest in the professional development of its most important asset - a professional workforce that satisfies clients' expectations.

The group's total investments (excluding its share in MSV) amounted to Lm73.4 million at the end of 2006 and generated an income of Lm2.55 million during the year.

Middlesea's associate, Middlesea Valletta Life Assurance Company Ltd (MSV), contributed positively to the group's overall result with a share of profit after tax of Lm1.49 million. The demand for life assurance and investment-related products in Malta increased substantially, as evidenced by the take-up of the various products offered by MSV.

The company continued to experience strong demand for savings products with the Euro Capital Guarantee Bond Fund and the MSV Single Premium Plan being the largest contributors to the total business written by the company. This amounted to Lm50.4 million.

The group maintained its presence in Gibraltar and was seeking further growth over the short to medium term. Mr Grech said the group's strategy was to continue moving towards achieving a greater territorial spread, having a better mix of business and varied distribution channels, as well as to diversify into non-risk insurance operations.

The spread was evidenced by the increased business generated overseas, which represented 68% of total general business. Contracts concluded in Italy and Sicily represented 64% of general business.

The group sought to expand further in the Italian market via its associate, MSV. A development that has occurred this year was that the company was authorised by the MFSA to carry on long term business under the provisions of freedom to provide services in Italy.

Mr Grech said the group remained committed to expanding outside Malta's shores, while recognising risks of such ventures.

He added that Middlesea remained faithful to the values that have defined the company since its inception, and which were articulated in 2007 in the revised and focused mission statement and business philosophy. These contained the fundamental principles and rules of conduct that governed the group's relations with the various parties with which it interacted in conducting its business.

These principles were aimed at protecting the interests of the individual parties and all stakeholders, and constituted an integral part of the group's strategy. These are Mr Grech's concluding comments:

"Middlesea seeks to increase client satisfaction and to become the preferred company in our industry. Being 'preferred' means being chosen by clients on the basis of our ability to differentiate ourselves from the competition through the quality of our advice and service, as well as through product innovation and the proximity of our distribution channels to clients. As direct insurers, we follow the fortunes of the jurisdictions in which we operate. The past will continue to serve us well in our endeavours to meet future challenges and opportunities successfully. I am confident of our collective ability to retain the leading role in the Maltese insurance sector."