18 June 2003

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Middlesea declares 7c gross dividend, Lm1.14m in profits

At its 22 AGM held this week, Middlesea Insurance declared total Group profits of Lm1.14 million. Interestingly for shareholders, its strategic position in the market has permitted the maintenance of a dividend policy that seeks to enhance shareholder value. Based on the Board’s recommendation, the meeting approved the payment of a gross dividend of 7c per 50c share - equivalent to a return of 3.18 per cent.
The Meeting also passed an Extraordinary Resolution authorising the company to buy back its own shares, intended to permit the company to avail itself of the added flexibility already provided for in the Company's Articles of Association and the Companies' Act, permitting it to participate in the market when circumstances so dictate.
Middlesea’s Chairman, Mario C. Grech, reviewing his Statement to shareholders saying that it represented the Company’s activities in 2002, which was a year of unprecedented financial challenges for the insurance industry. Whereas insurance and reinsurance companies’ balance sheets and investment portfolios suffered badly, at the same time positive signs were being seen for the insurance business with continued development on price adjustments of risks worldwide. Overall, international capital markets continued to be very volatile and recorded their third successive year of overall decline.
In uncertain markets such as those experienced in 2002, risk management in financial planning became critical, and Middlesea demonstrated its resilience in the face of a market scenario constituting the aftermath of the 11 September event, the downturn in the world economy, global major uncertainty and political tensions that depressed the capital markets. Investor confidence was further undermined by the high profile corporate scandals in the US. The negative effects on the financial industry continued into 2002 as the international political and economic situation increased negative investor sentiment.
Reviewing the subsidiaries’ operations, Mr Grech said that Middlesea Valletta Life Assurance Company contributed positively to the Group’s result with the Group’s share of profit increasing by 101% to Lm250,843. The benefit of this investment is reflected in the increase of the embedded value from Lm9.5 million to Lm10.79 million. Progress Assicurazioni S.p.A., the Group’s subsidiary in Italy, was also a significant contributor to the technical operations. The importance of this company was reflected in the year-to-year increase in premium income of 55.7% to Lm18.45 million and its contribution of a profit after minority interest of Lm533,585 to the Middlesea Group.
The improvement of corporate processes and overall Group efficiency continued through the rationalisation of organisational structures, in particular the outsourcing of mainly non-technical operations to the subsidiary International Insurance Management Services (IIMS). It was expected that the services provided by IIMS will be actively marketed further internationally thereby creating a source of additional non-risk income.
Mr Grech said that during 2002, investors and customers turned towards companies that could offer them reassurance and stability. At the same time, volatile conditions continue to create a greater need for responsiveness and flexibility. The insurance and reinsurance industry had gone back to basics. This meant that insurers had to be adequately capitalised and had to charge a price that was adequate, correct and commensurate with the risk that they underwrote. Consistently applied, these simple but vital and proven principles create true value. In this context, the Group continued to review its planned growth. As in the past, Middlesea will continue to allocate capital resources to those areas of business that are considered most suitable for the ultimate benefit of customers and shareholders.
As a result of the economic conditions and investor concerns, Regulators worldwide have been working to develop new approaches on governance controls and risk management. Middlesea has always been committed to the principles and implementation of good corporate governance. The company recognises the valuable contribution that this makes to long-term business prosperity and to ensuring accountability to its shareholders. To this end, The Board assigned certain functions to various Board Committees that report back to it. The Board determined the terms of reference of each committee.
24 weeks into 2003, it is apparent that international capital markets continue to be volatile and given this market scenario we are operating in, it is evident that the foreseeable operational environment continues to present a nebulous scenario. Therefore, it becomes imperative that the companies within the Group have to focus on the basic fundamentals of correct pricing for their products and services commensurate with the attainment of positive cash flow. This will enable Middlesea to manage the level of business and achieve a balance between value creation and capital adequacy."
Immediately after the General Meeting, the Board of Directors appointed Mario Grech as Chairman and Joseph FX Zahra as Deputy Chairman.

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Editor: Saviour Balzan
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