More than 4,000 shareholders will not be receiving any dividends for last year after Middlesea Group registered a loss of €55 million despite making a profit from its local operations.
The Floriana-based company lost a staggering €63 million after writing off its investment in Italian subsidiary Progress Assicurazioni SpA, which had been doing badly since 2008.
However, Middlesea's domestic operations posted a profit of €8.7 million last year, after registering a loss of almost €3 million in 2008. The group had made a loss of over €20 million in 2008.
"This was better than predicted," Middlesea chairman Joseph Zahra said, as he described the results of the domestic operations during a press conference yesterday.
He said the predictions for this year were positive, although he cautiously added that in the insurance world one could not tell until the last day.
"We are confident on the way forward for the company," said Mr Zahra, who became Middlesea chairman in January.
He said the company's board had decided it would not be prudent to declare a dividend. This will be the second time in 25 years that the company's 4,600-odd shareholders will not be seeing a return on their investment.
"This is the bad news. The good news is Middlesea has put Progress and its losses behind it," he said, adding that the Italian subsidiary, which was acquired by Middlesea in 2000, was still profitable until 2007.
The local company stopped its operations in Progress in February after it was established that the company required further capital injection that was deemed unfeasible.
It had suffered from an abnormal spike in claims, late reported claims, an extraordinary deteriorating performance of agents in southern Italy and the challenges of the down cycle in the motor car insurance market. Progress was also affected negatively by regulatory changes introduced in the Italian market at a time when it was seeking to expand its operations.
"We have completely concluded the unfortunate story in Italy," Mr Zahra said.
Middlesea shareholders will not be asked for further payments for Progress because the company has fully paid the amount of share capital underwritten by it.
He said investigations were still ongoing, but were in the hands of the liquidator.
Mr Zahra said that despite the Progress story, the group retained its strength and the stakeholders' equity stood at more than €48 million at the end of last year, making Middlesea the highest capitalised insurance company in Malta.
He said the problems of Progress were a test for shareholders and while the big shareholders backed the company, the smaller ones were more cautious. In fact, there was a shift in shareholders with institutional shareholders taking up 82 per cent of the 92 million shares, up from 61 per cent, while smaller shareholders have 18 per cent of the shares, down from 39 per cent.
Mr Zahra said Middlesea's vision was geared towards maintaining its leadership in the local market. He said Malta was still underinsured and more innovation was needed in the insurance business.