Shareholder proposes cut in directors' pay

Middlesea Insurance shareholders applauded a suggestion to slash directors' remuneration after dividends were forfeited because of the failed investment in Progress Assocurazioni SpA.

"I think we should see directors take a pay cut in line with the principle of burden sharing because we shareholders have remained without our dividends," a woman in her 50s told the annual general meeting on Wednesday to applause from others.

Middlesea chairman Joseph Zahra replied that one of the resolutions before the AGM was for the capping of directors' remuneration at €250,000, down from the previous €349,000. He pointed out that this was capping and not necessarily a pay-cut for directors. "However, your comment is being noted in the AGM's minutes," he told the shareholder.

Over 4,000 shareholders did not get any dividends for 2009, when the Middlesea Group registered a loss of €55 million despite making a profit from its local operations.

The Floriana-based company lost €63 million when it wrote off its investment in Italian subsidiary Progress Assicurazioni SpA, which had been doing badly since 2008. This happened even as Middlesea's domestic operations registered a profit of €8.7 million last year, a radical improvement over a loss of over €20 million in 2008.

Mr Zahra said the positive performance on the local front was not enough to compensate for the write-off of the full investment in the Italian subsidiary. "That is the bad news. The good news is that Middlesea is looking to the future with renewed vigour and optimism. I am optimistic about the future of this group," he said.

Despite remaining without dividends, only a handful of shareholders spoke up to complain at the meeting, although the few who did were applauded by their colleagues.

Mr Zahra praised the employees: "We are confident that, through the hard and dedicated work of our people, product innovation and improved client focus, we will not only create value for our customers but also drive the earnings to achieve attractive returns in the medium and long term."

There were a number of factors that brought down the Italian subsidiary. Among these, he said, was a drastic increase in claims in Italy and the underperformance of Italian agents.