Middlesea published very good results for the six months ended June 30, 2005, with the insurance technical accounts ahead by 25 per cent over the equivalent period last year and investment income nearly doubling to Lm2.3 million.
General business contributed Lm1.2 million (six months 2004 restated: Lm1 million) while long-term (life) business contributed Lm0.6 million, increasing by 27 per cent, coming from Middlesea's own long-term business and via Middlesea Valletta, the joint venture with Bank of Valletta, which now has a Life Fund of Lm185 million.
Business from Gibraltar decreased slightly (to Lm0.8 million) but turned profitable (Lm0.1million), business from Italy fell by 13 per cent to Lm9.9 million but was associated with an increase in profit of 19 per cent (Lm0.7 million), while Malta business increased both in volume (by four per cent to Lm7.5 million) and profitability (by 27 per cent to Lm1.3 million). Overall, there was a fall in the ratio of total insurance costs to earned premiums from 88.3 per cent last year to 85.5 per cent this year. With the hardening of the insurance market, net reinsurance costs increased.
The decreased volume of gross premiums written resulted from higher pricing and stricter underwriting and Italian operations are being consolidated and critical aspects re-examined. Pricing is being kept to strict technical guidelines and the performance of the agency network is being re-assessed. The company has drawn up a new development plan in order to derive further benefits via the concentration of resources in certain market segments and products.
The group remains confident of the Italian company's growth potential and has recently bought nearly all the balance of shares it did not already own. At the same time, Corporacion Mapfre, from whom Progress Assicurazioni was purchased, has bought 21 per cent of Middlesea Insurance. Furthermore, it was recently announced that Munich Re acquired further shares in Middlesea and now holds 19.9 per cent.
Middlesea had massive returns from investment which increased from Lm1.2 million in the equivalent six months to Lm2.3 million these six months. This was the result of both stronger capital markets and a change in the accounting treatment of investments. The accounting was revised retroactively and the comparable figures were restated to Lm1.2 million, up by Lm0.18 million.
Administrative expenses, which are always hard to cut, fell slightly.
Operating profit before tax was up from Lm1.5 million in the January to June 2004 period, as restated, to Lm2.1 million during the first six months of this year, an increase of 40 per cent, a very handsome result.
The provision for tax was at the same level as for the equivalent period last year, probably due to the nature of the income reported. As a result profit was Lm1.8 million (2004:Lm1.2 million) and earnings per share shot up from 8c1 to 12c9.
This much higher earnings per share figure, when used to adjust the rolling earnings figures, puts Middlesea, along with Lombard Bank, among the most attractive shares on grounds of capitalisation and growth potential albeit both have rather subdued dividend yield and we know how the market loves dividends.
There were also some slight but perhaps significant balance sheet shifts which might be the result of management re-thinking some aspect of the company's business. Debtors increased by Lm1.5 million since the end of 2004, creditors increased by Lm1 million, cash was down by Lm1.7 million and investment, which proved to be so profitable, increased by Lm4.6 million.