Stock market review - Financial market turmoil leads to first-half loss at Middlesea
Middlesea Insurance plc published its interim results to June 30, this year following a board of directors' meeting. Similar to last year, no interim dividend was declared. The key highlights are: Gross premiums up 23 per cent to _64.8 million;...
Middlesea Insurance plc published its interim results to June 30, this year following a board of directors' meeting. Similar to last year, no interim dividend was declared.
The key highlights are:
Gross premiums up 23 per cent to _64.8 million;
Positive balance of group's technical accounts before allocation of investment returns;
Fair value losses on investment portfolio of _5.9 million;
Contribution from life assurance subsidiary declines to _0.41 million (2007: _0.92 million); and
Pre-tax loss of _2.1 million.
Total gross premiums written by the Middlesea Group during the first six months of this year increased by 23 per cent to _64.8 million mainly as a result of a 33 per cent growth (_11 million) in premiums written in the Italian market through Progress Assicurazioni. This subsidiary now accounts for 69 per cent of total gross premium income of the Middlesea Group. Gross premiums written in Malta during the first half of the year amounted to _19 million, an increase of 7 per cent (_1.3 million) from the level registered last year, while premium income generated by the Gibraltar office dropped 14 per cent to only _1.4 million.
The balance on the group's technical accounts before allocation of investment returns totalled _1.16 million during the period under review compared to the _1.22 million generated in the first half of 2007. The directors reported that the combined operational ratio for general business improved from 97.94 per cent in 2007 to 96.04 per cent during the period under review. The combined ratio measures claims and costs as a percentage of premiums (a figure below 100 per cent denotes an underwriting profit).
The capital market turmoil experienced in stockmarkets worldwide had a significant impact on the half year results of the Middlesea Group and as a result the positive performance from the technical accounts was offset by the very significant negative fair value movements experienced in the investments portfolio. The group's policy is to recognise fair value movements in the equity and bond portfolios in the profit and loss account. The company explained in the half-year report that the fair value losses on the group's investment portfolio totalled _5.9 million compared to a marginal gain of _0.16 million recorded during the comparative period last year.
The share of profits from the group's investment in Middlesea Valletta Life Assurance Co. Ltd decreased by 55 per cent to _0.41 million (2007: _0.91 million) also as a result of the negative performance of the investment portfolio of this life assurance company. The directors noted that the turbulence in the financial markets affected investors' risk appetite and Middlesea Valletta registered a decrease in business written due to lower sales of investment products. Premiums written by the life insurance company in the first six months of the year dropped by 11.7 per cent to _59.7 million.
The Middlesea Group registered a pre-tax loss of _2.1 million in the first half of this year (June 2007: profit of _4.5 million).
The group's balance sheet shows total assets of _314 million as at June 30, an increase of 4.3 per cent since the start of the year with shareholders' funds (including minority interests) decreasing to _80.8 million. The net asset value per share of the group declined to _3.21.
The Middlesea Group's core insurance business activities continued to register positive returns and the loss incurred during the first six months is solely attributable to the negative fair value movements in the investments portfolio. The directors stated that they remain confident that the group has the necessary measures in place to maintain the positive technical performance of its insurance portfolio but they warned that the results will remain influenced by the volatility in the financial markets.
• Mr Rizzo is director of Rizzo, Farrugia & Co (Stockbrokers) Limited
The key highlights are:
Gross premiums up 23 per cent to _64.8 million;
Positive balance of group's technical accounts before allocation of investment returns;
Fair value losses on investment portfolio of _5.9 million;
Contribution from life assurance subsidiary declines to _0.41 million (2007: _0.92 million); and
Pre-tax loss of _2.1 million.
Total gross premiums written by the Middlesea Group during the first six months of this year increased by 23 per cent to _64.8 million mainly as a result of a 33 per cent growth (_11 million) in premiums written in the Italian market through Progress Assicurazioni. This subsidiary now accounts for 69 per cent of total gross premium income of the Middlesea Group. Gross premiums written in Malta during the first half of the year amounted to _19 million, an increase of 7 per cent (_1.3 million) from the level registered last year, while premium income generated by the Gibraltar office dropped 14 per cent to only _1.4 million.
The balance on the group's technical accounts before allocation of investment returns totalled _1.16 million during the period under review compared to the _1.22 million generated in the first half of 2007. The directors reported that the combined operational ratio for general business improved from 97.94 per cent in 2007 to 96.04 per cent during the period under review. The combined ratio measures claims and costs as a percentage of premiums (a figure below 100 per cent denotes an underwriting profit).
The capital market turmoil experienced in stockmarkets worldwide had a significant impact on the half year results of the Middlesea Group and as a result the positive performance from the technical accounts was offset by the very significant negative fair value movements experienced in the investments portfolio. The group's policy is to recognise fair value movements in the equity and bond portfolios in the profit and loss account. The company explained in the half-year report that the fair value losses on the group's investment portfolio totalled _5.9 million compared to a marginal gain of _0.16 million recorded during the comparative period last year.
The share of profits from the group's investment in Middlesea Valletta Life Assurance Co. Ltd decreased by 55 per cent to _0.41 million (2007: _0.91 million) also as a result of the negative performance of the investment portfolio of this life assurance company. The directors noted that the turbulence in the financial markets affected investors' risk appetite and Middlesea Valletta registered a decrease in business written due to lower sales of investment products. Premiums written by the life insurance company in the first six months of the year dropped by 11.7 per cent to _59.7 million.
The Middlesea Group registered a pre-tax loss of _2.1 million in the first half of this year (June 2007: profit of _4.5 million).
The group's balance sheet shows total assets of _314 million as at June 30, an increase of 4.3 per cent since the start of the year with shareholders' funds (including minority interests) decreasing to _80.8 million. The net asset value per share of the group declined to _3.21.
The Middlesea Group's core insurance business activities continued to register positive returns and the loss incurred during the first six months is solely attributable to the negative fair value movements in the investments portfolio. The directors stated that they remain confident that the group has the necessary measures in place to maintain the positive technical performance of its insurance portfolio but they warned that the results will remain influenced by the volatility in the financial markets.
• Mr Rizzo is director of Rizzo, Farrugia & Co (Stockbrokers) Limited