Middlesea Valetta Life Assurance Co. Ltd has registered a profit after tax of €1.92 million for the year ended December 31, 2008, a decrease of 63 per cent over the 2007 result.
Business written decreased by 19 per cent from €135.91 million in 2007 to €109.70 million in 2008, while the company's total assets increased marginally from €832.25 million in 2007 to €843.02 million at the end of 2008.
The chairman of MSV, Roderick Chalmers stated: "MSV's results for the year have to be seen in the context of the unprecedented financial turmoil that occurred during 2008. MSV's core insurance operations and investment portfolio, which, at year end, amounted to over €777 million, displayed resilience in the face of the very adverse market conditions, and the company was therefore in a position to register a post-tax profit despite having had to absorb fair value mark-downs on its investment portfolio."
Mr Chalmers added: "This was by far the most difficult year for MSV since its establishment in 1994. During 2008, the insurance industry internationally has suffered from steeply falling stock market valuations and dramatically widening bond spreads. The direct impact of the crisis on MSV was contained due to the fact that the company holds a defensively positioned and widely diversified investment portfolio of quality assets.
"Furthermore, MSV (as with the rest of the Middlesea Group), had no direct exposure whatsoever to any of the toxic assets that were one of the root causes of the crisis. The asset and currency mix, geographical spread and asset quality mean that MSV's investment portfolio is well positioned to capture the upturn in investment markets as and when this occurs".
The board of directors of MSV approved a resolution whereby differential rates of regular bonuses were declared in respect of with-profits plans held with MSV for the year ending December 31, 2008. These amounted to 3.65 per cent for the Comprehensive Life Plan (regular and single premium policies), 3.75 per cent in respect of the Comprehensive Flexi Plan (regular and single premium policies), 3.8 per cent under the Single Premium Plan and 3.8 per cent under the with-profits option of the MSV Investment Bond. On the "Old Series" endowment and whole life policies, a regular bonus of 2.2 per cent of the basic sum assured plus bonuses was declared. Finally, the board also approved a regular bonus of 3.45 per cent on those secure growth policies which formed part of the portfolio of business transferred to MSV from Assicurazioni Generali SpA during 2000.
Mario Grech, executive chairman of Middlesea Group and deputy chairman of MSV stated: "Ever since its establishment, MSV's investment strategy has always focused on three fundamental principles; to preserve the real capital value of its investments, to maintain a diversified portfolio of assets that have a high degree of liquidity, flexibility and marketability, and to invest only in quality assets. MSV is a long-term investor and has never compromised its prudent investment strategy for short-term returns."
Mr Grech added: "MSV's prudent policy of smoothing regular bonuses enabled the board of directors to declare regular bonuses that are only marginally lower than those declared for the previous year, despite the significant unrealized investment mark-downs registered during 2008. Smoothing entails establishing reserves from certain favourable years to compensate for unfavourable investment returns in certain other years during the policy term, so that bonuses declared in any one year do not reflect underlying investment returns in that year alone. As a result of smoothing, the investment risk of a with-profits investment is significantly lower than a direct investment in a single asset class.
"Notwithstanding the prudent investment policy adopted by MSV, past performance is no guarantee for the future. Although with-profits investments have generally provided policyholders with satisfactory returns when compared with other similar investment products, in the light of the current volatility in the capital markets, investment returns could fluctuate further. Fair value movements and lower investment returns impinge directly on the rates of bonuses declared by MSV. Regular Bonuses are therefore expected to vary over the lifetime of the policy."
David Curmi, CEO of MSV said: "For the first time in seven years, in 2008 MSV experienced a decrease in the amount of business written. This decrease in business written emanated from lower unit-linked business volumes as policyholders, in the current environment, showed a marked preference for savings and investment products that are safer, such as with-profits investments. Notwithstanding this reduction, during 2008 MSV successfully managed to increase its share of the individual life insurance market, from around 60 per cent to 62 per cent, as other classes of business performed well".
Mr. Curmi concluded: "MSV is well positioned to continue to grow its business in the local market through the development of innovative products and the enhancement of existing products aimed at creating prosperity and peace of mind for its customers. MSV is also committed to continue to diversify its distribution footprint to provide ease of access to its customers. While challenging times are clearly with us, the consistent performance and strong financial and operational base of MSV put it firmly on track to realise further growth, higher profitability and to take on the new challenges and opportunities that may arise in the future."
MSV will shortly be sending policy account and bonus statements to all policyholders holding with-profits investments with the company.