2010 was Middlesea’s ‘year of stabilisation, turnaround’ -JFX Zahra

Addressing the group’s Annual General Meeting, Zahra said that “a challenging, eventful and overall satisfactory year, marked by an important turnaround in performance, testament to the hard work put in by the Board of Directors, management and the people at Middlesea, together with the support of our shareholders, in particular our industrial shareholder Mapfre.”

The group strengthened its balance sheet with total shareholders’ equity increasing to €54 million as at 31 December 2010 and boosted its solvency position which currently stands at 360%.

The Chairman reported that Middlesea Insurance plc registered a satisfactory profit before tax of €8.86 million in 2010 when compared to the comparative loss of €62.88 million registered in 2009.

The Middlesea Group reported a profit before tax of €6.44 million when compared to the consolidated loss of €54.4 million registered in 2009. On a consolidated basis, Middlesea’s shareholders’ equity in 2010 improved by €6.2million, standing at €54.9 million as at 31 December 2010.

As 2010 was a significant year for Middlesea’s prospects going forward, the shareholding development that took place a few days before the Annual General Meeting marks an important and significant strategic step for the future potential of the Company

The AGM was held in the wake of the announcement that subject to regulatory approval by the Malta Financial Service Authority, Mapfre Internacional reached an agreement, with Munich Re to acquire the shareholding of 19.9% held by Munich Re. 

Once regulatory go ahead is confirmed, this would mean that Mapfre Internacional, an expert subsidiary company responsible for international expansion within the Mapfre Group, would have a controlling interest in the company with its shareholding position of 50.8%.

During the annual general meeting, the shareholders expressed satisfaction that their company has attracted such interest and investment from a global insurance giant.  Mapfre, which originated in Spain in the 1930s is an international brand present in 5 continents and operating in 43 different markets. 

Group Mapfre which operates in direct life and non life insurance, in reinsurance and in other related assistance services employs some 37,000 people worldwide.  

Zahra explained that “it is the leader in the whole Spanish Insurance Market and the leader in the whole Latin American continent in the non-life insurance business”. 

He stated that “the relationship between Middlesea and Mapfre started in 2000, with Mapfre increasing its shareholding in the company over the years, growing to a 31 per cent shareholding in 2009 following a Rights Issue. Mapfre has contributed during the last year in the areas of technical expertise in information technology, internal audit, risk management, internal financial reporting protocols, human resources and product development.”

During the meeting, the shareholders also approved with a strong vote the extraordinary resolution which was proposed by the Board of Directors in order to restore the company’s ability to declare future prudent dividend distributions. 

Notwithstanding the satisfactory profits registered during the last financial yearending 31 December 2010, the Board of Directors could not recommend the payment of a dividend due to regulatory requirements imposed by the Companies Act that did not allow the Company to make a dividend distribution, because of the negative accumulated reserves on the Profit & Loss a/c featuring in the Balance Sheet. 

Such a negative balance had developed from the losses incurred during the Progress Assicurazioni Spa saga over the previous 2 years and the write off of the whole investment in that subsidiary.  “That is the bad news” Zahra said. 

“The good news is that we have found a solution to restore the company’s ability to distribute dividends”.  As contemplated in the Companies Act, the solution to set off the accumulated losses against the issued share capital and share premium account of the company was accepted with a resounding yes vote. 

The approved resolution not only restored the company’s future ability to pay dividends based on future profits but it also ensured that there was no impact on the shareholders’ funds, on the net asset value and on the solvency of the company “thus keeping the fundamentals intact” as emphasised by Mr Zahra.  All other resolutions presented during the AGM were approved.

In conclusion  Zahra thanked Munich Re for all the expert support that it had provided to the Middlesea Group both as a business and a strategic partner over the past years. 

Expressing his gratitude to his fellow directors, management, the people at Middlesea and all policyholders, he expressed a strong appreciation for the support received by all the shareholders, advising them that: “Together we have recorded a successful year and made a positive turnaround. Our commitment to repay your trust and investment remains intact”