Mapfre Middlesea plc - Full-Year Results & Dividend Announcement

Middlesea Insurance plc published its 2007 Preliminary Profit Statement on 25 April 2008.

The key highlights are:
• Gross premiums up 24 per cent to €104.2 million;
• Balance on the Group’s technical insurance accounts up 15.5 per cent to €6.96 million;
• Share of profits from Middlesea Valletta Life down 24 per cent to €2.6 million;
• Pre-tax profit of €9.3 million (+9.4 per cent);
• Shareholders’ funds of €85.8 million (NAV per share of €3.43).

The Directors recommended the payment of a gross dividend of €0.1281 per share (Lm0.055) to all shareholders on the Company’s register as at close of trading on Tuesday 20 May 2008. This represents an increase of 22.2% over last year’s dividend distribution. As in previous years, this dividend is being paid out of an untaxed account and according to the Income Tax Act, upon distribution, the Company is obliged to withhold a 15% Final Withholding Tax to certain ‘recipients’ as defined by the Act. No withholding tax is deducted in respect of distributions made to those who do not fall within the definition of ‘recipient’. The dividend is expected to be paid on 3 July following its approval at the Annual General Meeting scheduled for 25 June. Moreover, the Directors are also recommending an increase in the nominal value from €0.582343 to €0.60 through the capitalisation of €0.44 million from distributable reserves.

During 2007 total gross premiums written by the Middlesea Group increased by 24.3% to €104.2 million mainly as a result of a 35% rise in premium income generated by the Group’s Italian subsidiary, Progress Assicurazioni Spa.  Progress now accounts for 68.5% of total Group premiums.

The balance on the Group’s technical accounts improved by 15.5% to €6.96 million (2006: €6 million) helped by a favourable run-off in loss reserves following the settlement and re-assessment of previous year’s claims. The share of profits from Middlesea Valletta Life Assurance Co. Ltd. (the Group’s specialist life assurance company) decreased by 24% to €2.6 million (2006: €3.5 million). Although premium income increased by 15% to €135.9 million and the company’s pre-tax profit rose by 10.7% to €7.2 million, a higher tax incidence reduced the profit for the year and thus impacted the share of profits to the Group.

Total income from insurance activities during 2007 was marginally higher at €9.6 million. The Directors reported that the combined operational ratio for general business improved from 98.9% in 2006 to 97.5% during the period under review. The combined ratio measures claims and costs as a percentage of premiums (a figure below 100% denotes an underwriting profit).

Net investment income during 2007 edged up to €5.75 million as the 13.3% increase in investment income was offset by a rise in investment expenses and charges including fair value losses from the Group’s investment portfolio and unfavourable movements in foreign exchange.

Other income generated by the Group increased by 5% to €1.5 million while administrative expenses dropped 15.8% to €2.85 million.

The Middlesea Group registered a pre-tax profit of €9.3 million during the year ended 31 December 2007, representing a 9.4% increase over the previous year. However, the Group incurred an increased tax charge of €2.4 million compared to the 2006 tax expense of €1 million. After accounting for minority interests, the increased tax resulted in a profit for the year of €6.75 million, 8.8% below the profit generated in 2006.

The Group’s balance sheet as at 31 December 2007 shows total assets increasing to €300.9 million (+19.1%) with shareholders’ funds (including minority interests) of €85.8 million. The net asset value per share increased by 15.2% during the year to €3.43 and compared to the current share price of €3.40, the equity is trading at its book value. Total investments including investment property as at 31 December 2007 amounted to €181 million with total cash rising to €9.9 million (2006: €4.5 million).

In a press release issued in conjunction with the Preliminary Profit Statement, Group Chairman and CEO Mr Mario C Grech stated “During 2008, the Board of Directors will be re-visiting the Group’s structure and the Balance Sheet strength of all companies within the Middlesea Group thus enabling us to focus on new business products through a lean and cost effective management. Through this process, the Group will be seeking to consolidate the financial growth achieved over the years and will provide the necessary infrastructure for future growth of the Group”. Moreover he warned that the turbulence in the international financial markets increased during the first quarter of 2008 and this could negatively impact Middlesea’s performance during the current financial year.

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