On 25 March 2021, Mapfre Middlesea plc published its preliminary statement of annual results for the financial year ended 31 December 2020.
During 2020, pre-tax profits of the non-life insurance business dropped significantly to €6.39 million (2019: €23.8 million) mostly due to the sharp contraction in investment income which amounted to just €1.15 million compared to €19.9 million in 2019. In this respect, Mapfre Middlesea explained that investment income was negatively impacted by the lower amount of rental income generated throughout the year, lower gains on properties, the low or negative yields on financial instruments, as well as an impairment of ‘available-for-sale’ equities. Moreover, dividends received from Group companies were only limited to those received from the associate company Middlesea Assist Ltd as Mapfre MSV Life plc had to cancel the dividend that was previously proposed in view of the effects of the pandemic on financial markets and the subsequent consequences on its Solvency Ratio. Elsewhere, gross premiums written increased by 1% to €75.1 million which also resulted in a marginal increase in the company’s market share. Although the subdued economic environment due to COVID-19 pandemic had a negative impact on the growth in demand, technical results improved largely due to a reduction in the claim frequency in the motor insurance segment as well as the fewer incidence of large losses.
Meanwhile, Mapfre MSV Life plc (which is jointly owned by Bank of Valletta plc [50%] and Mapfre Middlesea [50%]) posted a pre-tax profit of €15 million compared to €14.5 million in 2019. The life insurance associate recorded a turnover (including investment contracts without Discretionary Participation Feature) of €273.2 million (2019: €285.7 million) as the lower interest rate climate and the softening of demand for single premium business offset the growing demand for smaller sized longer term regular premium savings and retirement products. Mapfre MSV’s ‘With Profit’ fund returned a gross return of 2.75% (€62.7 million) compared to 11% (€234.9 million) in 2019 reflecting the more volatile market conditions throughout 2020 principally due to COVID-19.
Overall, the Group reported a 5.6% increase in pre-tax profits to €21.2 million (2019: €20.1 million). After accounting for a tax charge of €6.91 million and minority interests of €5.16 million (relating to the 50% shareholding of Mapfre MSV Life plc owned by Bank of Valletta plc), Mapfre Middlesea reported a net profit of €9.12 million which is 5.3% lower than the €9.63 million figure recorded in the 2019 financial year. The post-tax return on average equity deteriorated to 9.6% from 10.6% in 2019.
The Statement of Financial Position shows that total assets increased by 2.7% to €2.69 billion mostly due to higher balances of investments (+€32.5 million) and cash (+€26.1 million). Similarly, total liabilities increased by 2.2% to €2.51 billion largely driven by the growth in insurance contracts and investment contracts with Discretionary Participation Feature (+€45.9 million). Shareholders’ funds expanded by 12.4% to €100.6 million which, in turn, translates into a net asset value per share of €1.094 (31 December 2019: €0.973).
The Directors are recommending a net dividend of €0.03478 per share. This is payable on 25 May 2021 to all shareholders as at the close of trading on 10 May 2021 subject to shareholders’ approval at the upcoming Annual General Meeting scheduled to be held on 30 April 2021.
Commenting on the outlook, the Directors explained that they are cautiously optimistic for 2021. Although the pandemic continues to have a negative effect on economic activity, with the vaccine rollout gaining traction, the Maltese economy is poised to start recovering in line with the restraint of the virus. Mapfre Middlesea also added that it expects the demand for general business to grow at a lower rate than that experienced in recent years while that for the protection savings and investments products in life to remain strong.