Middle Insurance plc (of which I am a director, though I do not write in that capacity) has been in the forefront of the financial news throughout 2009. It remained right there at the end of the year, with Mario Grech, the man with whom the company had become synonymous, stepping down from his executive role and Joe F.X. Zahra, very well known in the financial and broader economic sector, stepping in as non-executive chairman.
Middlesea was the first fully fledged domestic insurance company to be set up nearly three decades ago. Mario Grech was there right from the start. He served as CEO under three chairman, starting with Albert Mizzi, followed by a long spell under Sunny Borg and ending with Dr Giannello Caruana Demajo, who then moved on to become a judge. He then took over both roles.
Mr Grech, with the aid of an excellent young team of executives, built up the company from scratch. The task became harder when preferential treatment of it via a legal cession of general insurance written locally was scrapped in the early 90s.
The company had to compete in the open market. It did so manfully and built up a leading share of domestic business. In time, in an inspired association engineered by Mario Grech with the Bank of Valletta, then under the chairmanship of John C. Grech, Middlesea moved more directly in the life business. Middlesea Valletta became a top success story. Mario Grech's input through this long period was indefatigable and far-reaching. What the man does not know about insurance is not worth knowing.
Expert though one may be, however, external factors can never be controlled, and cannot always be fully safeguarded against. The global financial crisis and its impact on financial investments hit the Middlesea Group like it did insurance companies the world over. The worst hammering though, came from the company's subsidiary in Italy, Progress Assicurazioni.
Middlesea took over this company from the renowned insurer Mapfre' of Spanish and Latin American fame. Through hard endeavour and rising with an upturn in the general insurance market Progress was turned round into a very successful venture. Until, that is, a coincidence of negative factors began hitting it with a sledgehammer.
The drop in the value of financial investments was one of these factors. A law - still bearing the name of its proposer and called the Bersani Law - worked out an intricate arrangement supposedly to protect the insured, but in the process ended by harming the smaller insurance companies in particular. These two factors also coincided with a downturn in the insurance cycle.
It is now emerging, as is also being detailed through reports in the Italian media, that criminal raids are taking place on insurance companies in the peninsula, ingenuously using small claims of around €1,000 to €2,000 to mountain systematic attacks on insurers. Progress came well into the line of fire, affecting its mother company, Middlesea Insurance as well as, indirectly, the Bank of Valletta plc.
Middlesea now moves forward under new stewardship. Mario Grech is still expected to play a notable part by acting as special adviser to the boards of the group. Mr Zahra, though non-executive chairman, will surely bring to bear the dedication and organisational abilities he displayed at Bank of Valletta and Middlesea Valletta among others the latter of which he chaired for eight years, and his role in the almost seamless changeover to the euro, not to mention his successful personal company (in partnership with Lawrence Zammit) plus various positions in the private sector.
The stepping down of Mario Grech from his executive position will also ring in changes at the executive level. Furthermore, the changes of ownership brought about by the recent rights issue by Middlesea Insurance see a very significant development come about. Mapfre' and Bank of Valletta are now the two major shareholders, with equal shares in around two-thirds of the company. Munich Re, the German reinsurer of world renown, continues to hold another 19 per cent.
All the indications are that Mapfre' and the BoV in particular will be taking a closer interest in the running of the Middlesea Group, which may also see some restructuring. This should be of comfort to the remaining 19 per cent of shares held by the public.
Shareholders went without a dividend (for the first time) for the year 2008 (the annual general meeting was held in June 2009). They also saw the market price of their shares dive, though it has recovered somewhat in recent weeks. The smaller shareholders must, by now, be as aware as anybody else that these are difficult times in Italy, although the domestic companies of the group are doing well. Resolving the Italian problem to stem further losses by Progress - under the watchful eye of the Maltese and Italian regulators, the MFSA and Isvap - is the main challenge for Middlesea.
The knowledge that Mapfre' in particular is behind these efforts, alongside the Bank of Valletta and Munich Re, suggests that no stone will be left unturned to meet this challenge. There are gritty times ahead and it might work out that the shareholding, personnel and structural changes to be undertaken by the Middlesea Group will prove to be a sea of change taking place at the right moment in time.