Middlesea Insurance p.l.c. held its Twenty Eighth Annual General Meeting (AGM) at the Hilton Conference Centre on Friday 26 June 2009.

In his address Mr Mario C. Grech, Middlesea’s Executive Chairman, recalled to shareholders that during the previous year’s AGM he had reported that the inherent uncertain nature of insurance business was reflected in cyclical movements both in the capital and technical operations. In fact, he said that during 2008 Middlesea’s Group operations were adversely affected by the crisis in the world financial markets and a considerable technical loss by the Italian subsidiary, Progress Assicurazioni. These two factors broke the 27 year history of positive financial results for the Middlesea Group. The overall group result for the year ended 31 December 2008 amounted to a loss after tax of €20.6 million, compared to a profit of €9.3 million in 2008.

The Executive Chairman explained that since its establishment Middlesea Insurance had paid out to its shareholders total gross dividends amounting to €38.5 million. The Board of Directors that met on Monday 27 April 2009 considered the importance of the company’s dividend policy, which focused on balance sheet strength, together with the equitable distribution of generated profits to shareholders. For prudence’s sake the Board concluded that it would not recommend the payment of a dividend for 2008, due to the result of the loss incurred for the financial year 2008.

Addressing the AGM, Mr Grech reviewed the operations of the companies within the Middlesea Group during 2008. Furthermore he stated that during the first quarter of 2009, the deterioration in the technical performance of the Italian operation together with the continued volatility in the capital financial markets persisted.

The Group’s Gross Premiums Written in general business increased by 15% over the preceding year reaching €118 million. Middlesea Insurance registered an increase of 4% in turnover, with total premium underwritten in both general and group life business increasing to €34 million.

The holding company, Middlesea Insurance,produced an overall positive technical result which was, however, outweighed by the capital losses reported on local and foreign investments that amounted to €7.4 million.  The company registered a loss after tax of €3.6 million during 2008. The Italian subsidiary company, Progress Assicurazioni SpA, generated gross premiums written of €86 million, an increase of 20% on 2007. The pre-tax contribution of Progress to the Group’s results, however was a gross loss of €26.8 million, a very marked deterioration from the positive return of €3.10 million in 2007. The introduction in Italy of the Convenzione tra Assicuratori per Risarcimento Diretto, (CARD), the mandatory Direct Indemnification system in February 2007 as expected created uncertainties and negatively impacted the 2008 technical results. During 2008, Progress undertook a further strengthening of its technical provisions which, together with the unfavourable impact of the CARD system, and the increased reserves in personal injuries and fatalities, impacted negatively on the results. An overall increase in the frequency of motor liability claims, late reported claims and a concentration in the challenging Campania region also contributed to the deterioration of the RCA results.

International Insurance Management Services, the Group’s subsidiary company that provides management services to international clients as well as to the group companies, further strengthened its international client base during the year. The company registered a positive financial result and its post-tax profit contribution to the Group amounted to €0.99 million. IIMS increased its international client base which now contributes 21% of its revenue.

In 2008, Middlesea’s associate, Middlesea Valletta Life Assurance, the specialised life company of the Group, registered a profit after tax of €1.92 million. Business written decreased by 19% to €110 million, whilst the company’s total assets increased marginally to €843 million as at the end of the year. The investment return of MSV decreased from an income of €26.5 million in 2007 to a loss of €31.8 million in 2008, after taking into account fair value mark downs on the investment portfolio. The direct impact of the financial crisis on MSV was somewhat mitigated due to its prudent investment policy, whereby the company holds a defensively positioned and widely diversified investment portfolio of quality assets, locally and overseas.

Middlesea Group’s investment strategy of aiming to preserve capital value whilst maintaining liquidity and maximising returns, continued to apply throughout the Group, said Mr Grech. This strategy contributed towards the containment of fair value losses incurred during the year.  However, the Group could not but follow the fortunes of the financial sector.

Mr Grech continued:

“The considerable loss incurred by Progress in 2008, together with the immediate future challenges emerging in the Italian market have necessitated taking important decisions on the future direction. These decisions will need to be made by the Board of Directors before the end of this current year.”

The Board of Middlesea Insurance plc was currently examining the structure of the group, looking ahead at the long term needs of the business. Today, Middlesea Insurance plc is both an insurance company operating principally in the Maltese market and a holding company of a group that has interests in Italy, a large investment in Middlesea Valletta Life Assurance Co., in partnership with Bank of Valletta, an insurance management services arm (IIMS) and some property holding companies. This structure was not designed in this manner when Middlesea Insurance plc was founded but, it so evolved in this manner over time. Consequently the process to propose restructuring to the shareholders for their consideration had commenced. The envisaged change, which would first require various regulatory approvals, would not impact in any way the interests of shareholders. It would however enhance management focus and business flexibility.

In conclusion Mr Grech said that :

“During 2008 the Middlesea Group continued to focus on future challenges that arose continually from market forces and increased statutory and regulatory requirements. The future direction of our subsidiary, Progress, together with the Group restructuring will be our priority in 2009.

The prospect of an early return to profitability becomes even more challenging when considering the current grey economic environment and the continuing uncertainties in the financial markets. The companies forming the Group follow the fortunes of the countries in which they operate, which in turn are showing signs of soft market conditions and cut-throat competition. Nonetheless, our collective determination is to strive without remittance to overcome these huge tasks.”

Mr Roderick E.D. Chalmers, Mr Tonio Depasquale, Dr John C. Grech, Mr Andrez Jimenez Herradon, Dr Michael Sparberg, Mr Javier Fernàndes-Cid and Mr Joseph F.X. Zahra were appointed on the Board of Directors, by the three shareholders holding more than 7% of the company’s shareholding until the Twenty Ninth Annual General Meeting.

Pursuant to the Articles of Association, since the number of nominations did not exceed the vacancies, there being no need for a contest, the following nominees were automatically appointed Directors, namely Mr George Bonnici, Dr Evelyn Caruana Demajo, Mr Gaston Debono Grech, Mr Victor Galea Salomone and Mr Lino Spiteri.

The   Annual  General  Meeting  approved  the  proposal  made by  the  shareholders to decrease

€1,000 from the  amount  due  as  emoluments to  Directors.

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

Immediately after the General Meeting, the new Board of Directors appointed Mr Mario C. Grech as Executive Chairman and Mr Roderick E.D. Chalmers as Deputy Chairman.

The Middlesea Group is composed of Middlesea Insurance p.l.c. (C-5553), International Insurance Management Services Ltd. (C-23610) and Progress Assicurazioni SpA.

Middlesea Valletta Life Assurance Co. Ltd (MSV) (C-15722) is an associate company of Middlesea Insurance p.l.c. Growth Investments Ltd. (C-21821) is a subsidiary of MSV.

All the Companies are authorised by the respective regulatory authorities in Malta and Italy.  

Euro Globe Holdings Ltd. (C-30503), Church Wharf Properties Ltd. (C-25653) and EuroMed Risk Solutions Ltd. (C-37185) also form part of the Middlesea Group. COM 260609203