Middlesea Insurance p.l.c. held its Twenty Fifth Annual General Meeting at the Hilton Conference Centre on Friday, 16 June 2006.

In line with Middlesea’s dividend policy of enhancing its balance sheet and ensuring future sustainability, the Meeting approved a dividend distribution of a final dividend of 7 cents per share amounting to Lm875,000, an increase of 17% over last year.  To mark Middlesea’s 25^th Anniversary, the Meeting also approved the payment of a special commemorative dividend of 3cents per share, amounting to Lm375,000..  This amount will again be paid from the company’s untaxed account and will therefore be subject to a final withholding tax of 15% on distribution.  This was the 22^nd consecutive year that a dividend was declared and distributed.

Furthermore, the General Meeting approved a resolution whereby each share of nominal value 50 cents will be split into two shares of 25 cents each.  The process for the share split would be undertaken in accordance with the Bye-Laws of the Malta Stock Exchange.

Middlesea’s Chairman, Mario C. Grech made reference to the development of Middlesea by identifying the milestones that brought the Group to its 25^th Anniversary.  On 29 June 1981, Middlesea Insurance p.l.c. was established as the first public insurance company on the Island.  Its early beginnings saw it operating as a reinsurer with the role of recipient of the reinsurance legal cession.  It became obvious that long-term growth could only be achieved overseas.  Thus, the company immediately set up a London contact office, which, in 1987, was upgraded to a branch office operating in the international reinsurance market.  The abrogation of the compulsory reinsurance legal cession, created an opportunity for the company to refocus its underwriting activities.  These consisted mainly of Direct Underwriting in both general and long-term business (local and overseas) and Management Services to international companies.  In June 2000, in line with Middlesea’s development strategy, the Company obtained a licence from the Gibraltarian Financial Services Commission to operate a Branch in Gibraltar.

The year 1994 witnessed two major events.  Middlesea along with Bank of Valletta p.l.c. and the Munich Reinsurance Company set up a pioneering bancassurance operation, namely Middlesea Valletta Life Assurance Co. Ltd.  The listing of Middlesea Insurance plc on the Malta Stock Exchange was the second event along with the orderly restructuring of the shareholding.

In 2000 Middlesea purchased 51% of the share capital of the Italian insurance company Mapfre Progress S.p.A partly through the subscription of shares in the Company and partly through the purchase of shares from Corporación Mapfre Compania Internacional de Reaseguros S.A.  The Company was later renamed Progress Assicurazioni SpA.  The synergy that existed with Corporación Mapfre allowed for this acquisition.  During 2005, Middlesea bought Corporación Mapfre’s holding and thereby increased its own to 89.98%.  Middlesea Valletta Life holds 10% with the balance held by individuals.

International Insurance Management Services Ltd was established in 1991 to act as an insurance manager specialising in captive formation, risk management, and offering administrative and other management services to insurance, reinsurance and affiliated insurance companies operating in and from Malta. 

Concurrent with the evolution of the company was the change in shareholder base.  Initially, the company’s shareholders were primarily parastatal companies.  As the company evolved into an indigenous composite insurer, the shareholder base was restructured over time to reflect changes in strategy.  In 2005, Münchener Rückversicherungs-Gesellschaft acquired the remaining shares held by the Government of Malta thus increasing its shareholding to 19.9%.  Furthermore, Corporación Mapfre consolidated its position by increasing its shareholding to 21%.  Hence, the shareholding today includes international and prestigious names in financial services together with our local strategic partner Bank of Valletta plc.

Today, 25 years on, Middlesea has grown into a group of general, long-term insurance and insurance management companies with emphasis on primary insurance markets locally and overseas.  The operations of all Group companies contributed positively to the overall result, and it was appropriate that on the 25^th anniversary an operating profit before tax of Lm6.51m was registered for the year ended 31 December 2005 - an increase of 79% over 2004.

This was mainly the result of the strong technical performance registered across all business activities by all companies within the Middlesea Group, which included a favourable run-off in incurred claims, a strong investment return from capital markets (particularly in the domestic market), the implementation of revised International Financial Reporting Standards (IFRSs) and the company’s focus on improving cost efficiency. 

During 2005, the Group companies continued to apply strict underwriting guidelines and maintained a continuous drive to achieve a desirable business mix in the overall portfolio.  This was sustained by the Group’s strategic direction based on consolidation for the short to medium term in a highly challenging competitive scenario, both in the local and overseas markets.

The Gross Written Premiums of the holding company, Middlesea Insurance plc, were Lm13.90 million.  The technical result was impacted favourably by a net claims run-off of Lm0.98 million.  Middlesea’s uniquely balanced distribution range covering agents, brokers, sub-agents and direct sales meant that there was less dependence on any one product or distribution channel.  Also selective pricing action enabled Middlesea to maintain its disciplined approach to underwriting, coupled with efficient claims handling and strict cost control.

The Italian subsidiary Progress Assicurazioni SpA, consolidated its position and through its pursuance of a strict pricing policy in 2005, booked a gross premium of Lm19.9 million.  Furthermore, it continued to assess its agency network performance criteria in prevailing soft market conditions.  Through the application of these policies, the Management continued in its work to curb the shortfall in business as well as to create further growth in identified market segments and products.  In the short to medium term, the market is expected to remain highly competitive with a likely adverse effect on our profit margin.

International Insurance Management Services (IIMS) continued to project Malta’s efforts to attract international companies, including insurers and reinsurers, to register and operate from Malta.  These efforts were reflected in the registration of the first insurance company under the new legislative regime.  Malta’s accession to the European Union has triggered considerable interest from international companies in the Maltese financial centre, which, over the years, has established itself as an attractive jurisdiction in the Euro Med region. 

In 2005, Middlesea’s associate Middlesea Valletta Life Assurance Company (MSVL) continued with its success story.  This Company increased its competitive advantage through its varied distribution network.  Business generated, including non-participating contracts, increased to Lm39.3million.  The Company continued to meet customer demand for products with and/or without discretionary participation features.  The Life Fund increased by 34% to Lm218.6million  whilst the total investments increased by 34% to Lm224.4million.

The Board believed that good corporate governance and an understanding of the impact of operations locally and overseas, were important aspects of the way business was conducted.  Adoption of corporate governance principles remained high on the agenda through the various Group committees whose duties were set out clearly in formal terms of reference, which would continue to be reviewed in accordance with future required changes. 

As new challenges continued to emerge, Middlesea Group operated to high standards of ethics and corporate governance and had a demanding programme of corporate social responsibility.  Mr Grech emphasised that correct pricing was of fundamental importance, and indeed rates had been adjusted to reflect the new risk dimensions.  The risk management of cash flow was continually monitored.  Underpinning this was the drive to ensure adequacy of capital.  Solvency II, the EU-initiated concept which aims at creating a more risk-related solvency model, was a key priority and was likely to have an impact on future capital requirements of the companies within the Group.  In this context, the Group continued to review its planned growth. 

The implementation of revised accounting standards, together with the inherently uncertain nature of insurance business, meant that the reported results of insurance companies were exposed to considerable volatility.  Both capital markets and the insurance market were prone to cyclical movements.  With this in mind, it became imperative that the companies within the Group ensured the application of fundamentals.  This would enable Middlesea to manage the level of business, achieve a balance between value creation and capital adequacy and continue to strive to be a low-cost producer, quality service provider and insurer of choice.  Of course, it had to be borne in mind that future expectations needed to be based on a prudent analytical appreciation.  Hence, it remained fundamental to approach the future imponderables with prudence but with an absolute resolve to succeed.

Mr Grech concluded: “Middlesea’s future direction is based on its clear strategy of providing a broad range of products through multi-channel distribution, applying technically correct pricing, ensuring adequate reserving, pursuing growth with a territorial spread and portfolio mix, together with an absolute resolve to succeed.  We will continue to employ an efficient capital structure across the Middlesea Group through the allocation of our shareholder equity with the ultimate aim of maximising our potential for profitable growth.  With the strength of its balance sheet, MSI is in a strong position to continue on its path of growth and development both locally and overseas.  Underlying this is our awareness of our size.  It is our belief that there is scope for a medium sized company specialising in niche areas and operating in an international market.  We can provide a professional personal service of high quality and a strong financial base.  As I have always maintained, we have to be realistic in our approach and keep in mind that our objective of seeking growth overseas is a continuous uphill task in its own right.

Now, more than ever, insight into tomorrow is the difference between success and failure. The past should only be looked at as a platform for learning purposes, focusing our attention on the expected changes in the international market.  We should adopt a positive outlook by focusing our endeavours to maximise on positive opportunities which will continue to present themselves through the continuous process of ‘change’.”

The following members were appointed on the Board of Directors until the Twenty Sixth Annual General Meeting namely Mr R.E.D. Chalmers, Mr T. Depasquale, Dr J.C. Grech, Mr A. Jimenez Herradon, Dr M. Sparberg, Mr D. Sugranyes Bickel, Mr F. Xerri de Caro and Mr J.F.X. Zahra.

Pursuant to the Articles of Association, as there were as many nominations as there were vacancies, the following nominees were automatically appointed Directors, namely Mr G. Bonnici, Dr E. Caruana Demajo, Mr A. Corsi, Mr G. Debono Grech, Mr V. Galea Salomone,and Mr L. Spiteri.

Mr Mario C. Grech, was re-elected Director of the Company until the conclusion of the Twenty Sixth Annual General Meeting pursuant to the Company’s Articles of Association.

The Extraordinary Resolution authorising the Company to buy back its own shares was withdrawn.

Immediately after the General Meeting, the Board of Directors appointed Mr M.C. Grech as Chairman and Mr R.E.D. Chalmers as Deputy Chairman.

Middlesea Insurance p.l.c. is a company authorised by the MFSA to carry on both Long Term and General Business under the Insurance Business Act, 1998.