Middlesea Group posts €9.3 million profit

The strong financial fundamentals and clear strategy of the Middlesea Group enabled it to register encouraging results for 2007, notwithstanding various challenges including the high volatility in the international capital markets.

All companies within the group contributed to the generation of this year's pre-tax profit of €9.3million (Lm4 million), which represented an improvement of 9.4% on 2006. "This is the result of increased market shares and adherence to strict underwriting controls coupled with the management of expenses," Mario C. Grech, executive chairman of the Middlesea Group, commented.

The group remained subject to taxation in the territories where business is underwritten. The provision for taxation of €2.4 million (Lm1.03 million) for the financial year 2007 significantly impacted the post-tax profit of €6.91million (Lm2.97 million), which reflected a reduction of 7.95 per cent over 2006. Dissimilarity between the tax charge for these years also reflected a one-time favourable adjustment carried in 2006.

The board of directors' meeting on April 25 agreed the company's dividend policy, which focused on balance sheet enhancement with the equitable distribution of generated profits to shareholders. The board recommended a final dividend to shareholders of €0.1281 (Lm0.055) per share, amounting to €3.2 million (Lm1.38 million) an increase of 22.2 per cent over the 2006 distribution.

Directors also proposed an increase in the authorised and paid-up value of each share in issue from €0.582343 (Lm0.25) to €0.60. This increase would be funded through the capitalisation of distributable reserves amounting to €441,425. Mr Grech said that shareholders' funds increased by five per cent to €82.6 million (Lm35.5 million) at the end of 2007. The net asset value per €0.582343 (Lm0.25) share was strengthened further to €3.3 (Lm1.42).

The gross written premium (excluding individual life) from Malta, Italy and Gibraltar for the financial year 2007 showed a record increase of 24.3 per cent over the previous year. The total premium generated amounted to €104.2 million (Lm44.7 million). The general insurance business result continued to benefit from a favourable run-off in loss reserves. Efficiency in claims handling, coupled with the group's continuous focus on disciplined underwriting criteria and strict cost control, yielded an increase of 15.5% in the technical results amounting to €6.96 million (Lm2.99 million). The overall claims reserve increased by 13 per cent to €109 million (Lm46.9 million).

Since its inception, the group's investment policy was prudent and non-speculative. This was reflected in the investment return earned during 2007, which increased marginally by 0.1 per cent over 2006, despite the high volatility experienced in the international capital markets. The group's total investments (excluding its share in Middlesea Valletta Life) amounted to €187.1 million (Lm77.7 million) as at the end of 2007. The holding company, Middlesea Insurance plc, registered a pre-tax profit of €6.97 million (Lm3 million) during 2007, a growth of 7.8 per cent over the 2006 profitability. MSI maintained its focus of growth in business and achieved an increase of 5.65 per cent in turnover as compared to the previous year. The gross premium written in 2007 for general and group life business was €32.8 million (Lm14.1 million).

MSI's technical result continued to benefit from a surplus emerging on the settlement and re-assesment of prior year claims reflecting the company's ongoing prudent approach to claims reserving and appropriate claims management. The run-off on claims reserves, held at the beginning of 2007, amounted to a favourable result of €3.6 million (Lm1.55 million) compared to the 2006 figure of €1.8 million (Lm0.76 million).

MSI's composite status continued to allow it to underwrite life insurance business for groups in addition to the non-life business. Gross premiums written by MSI under life assurance contracts increased by 5.6 per cent during 2007 and totalled €1.5 million (Lm0.63 million). MSI continued to operate through a branch office in Gibraltar, where the company underwrites a modest book of general insurance business commensurate with the size of the market.

The specialised life assurance arm of the Group, the associate company Middlesea Valletta Life Assurance Company (MSV) registered a pre-tax surplus of €7.2 million (Lm3.09 million), an increase of 10.7 per cent over the previous year. This result contributed a return to the group of €2.63 million (Lm1.13 million) for 2007 when compared to €3.47 million (Lm1.49 million) in 2006.

While MSV registered an increase in pre-tax profit, a higher incidence of income tax expense reduced this improvement resulting in a post-tax profit to the Middlesea Group of €2.63 million (Lm1.13 million). 2007 witnessed an increase in the Maltese market's demand for life assurance and investment-related products that resulted in the group generating a total premium (including investment contracts without DPF) of €135.9 million (Lm58.34 million), a surge of 15 per cent over the previous year.