Middlesea Insurance's board of directors will tomorrow discuss a strategy to put Malta's largest insurance group firmly on track to consolidate its business within the local market, chairman Joseph F.X. Zahra told The Times Business.
At the meeting, directors will work to endorse a document prepared by chief operations officer Anne Marie Tabone, and lay out short- to medium-term plans for the insurance group to increase its share of the Malta market and widen its product portfolio.
The top brass at Middlesea House has been encouraged by the group's glowing first quarter figures: unaudited results for Middlesea Insurance plc released days ago showed a pre-tax profit of €2.8 million, compared to a loss of €5.3 million in the same period in 2009. The results were the first to be released after Middlesea's loss-making Italian subsidiary Progress Assicurazioni SpA ceased writing business earlier in the year before going into compulsory administrative liquidation in late March.
"The first quarter is a pure reflection of Middlesea's core business," Mr Zahra said. "Middlesea Insurance is concentrating on its operation in the market that it knows best. We are satisfied with these results and we intend to continue to work on these encouraging numbers. Of course, the insurance sector does not allow for guarantees on the results of the market, but, all other things remaining equal, the prospects are good."
Mr Zahra said shifting Middlesea's focus on its home market after putting the Progess episode firmly behind it was the challenge he took up with the company's chairmanship four months ago. In early February, after being named to lead the group, Mr Zahra travelled to Italy to meet with ISVAP, the regulators, informing them that the board wished to take the necessary measures to cease writing business in Italy and to wind up Progress in accordance with procedures established by the regulators. On February 10, ISVAP informed the company that it has appointed a provisional administrator. On March 30, the company was placed in compulsory administrative liquidation.
"The Italian operation was facing continuing unsustainable deterioration, and it was a serious distraction to both the board and the executives," he added. "We are focusing on strengthening our position in the market, fully aware that we need to update our internal processes to move from consolidation to further growth."
Mr Zahra explained the "revived" Middlesea will work to become increasingly customer centric by smoothening client interaction processes. Product innovation is another major priority.
He admitted morale within the firm's largely long-standing staff had been hit by the Progress situation. Mr Zahra has spearheaded efforts to improve internal communications, and meetings are held more regularly with teams who are encouraged to forward suggestions and air views. Development programmes are also to be boosted where soft skills, customer service, and management and supervisory training are concerned.
Business efficiency procedures and policies governing underwriting, claims management and reinsurance will be reviewed so that they are more relevant to the current market scenario.
Asked how Middlesea intended to repair the damage to its image following the Italian misadventure, Mr Zahra said: "These questions are a reflection of the anxiety in the market in 2009 and in the beginning of 2010. That is why we had to take drastic, decisive and rapid action. However, the anxiety was caused by speculation, but there are now decisions that have been taken, action that has been done, and the facts. Notwithstanding the concerns in the market, in 2009 Middlesea maintained the same level of business of the previous year. For us today, this is clearly not enough."
Mr Zahra explained the board was adamant to keep shareholders abreast of developments. Despite having an annual general meeting scheduled for June 9, shareholders were briefed at an extraordinary general meeting in March about the outcome of the Progress debacle, the new shareholding structure, and the reviewed direction of Middlesea and its subsidiaries. The board was aware it had to regain shareholders' confidence and that it had to prove itself.
Mr Zahra, a former chairman of Bank of Valletta and of the National Euro Changeover Committee, has made his Middlesea chairmanship his foremost priority, despite a packed diary with commitments linked to his various directorships.
With a total market share of 24 per cent and a balance sheet standing at €48 million as at December 31, 2009 (more than twice that of its closest competitor) dusting Middlesea off to take it to the next level is a challenge he admits he relishes.
Boosted by the "tremendous" support and increased involvement of its institutional shareholders Bank of Valletta, Mapfre and Munich Re, Middlesea is taking its future by the scruff of the neck.
As a team examines the potential of new products in collaboration with Mapfre, Middlesea is also looking to maximise on existing and alternative distribution channels, including additional online options.
It is widely accepted that Malta is remarkably under-insured and the market is relatively unsophisticated. Home and home content insurance is largely taken out for mortgage requirement compliance rather than households managing risk.
Health insurance is a major market with potential for growth. Clients tend to overlook the advantages of gaining access to private health care, relying on admittedly the more-than-satisfactory national health service. Retirement cover is also neglected but Middlesea will endeavour to make customers increasingly aware of good reasons to consider their options.
"The under-insurance in the local market is tied to cultural issues," Mr Zahra explained. "Many were not surprised to learn that the crane which crashed into the Marsa bridge, locking down most of Malta in the process some weeks back, was not insured. It is also scandalous at times to hear how importer businesses do not insure merchandise.
"Together with the Malta Insurance Association, Middlesea believes it has a social responsibility to educate the market because it is to our benefit, and to that of society and the economy in general. We will help to put clients in a position where they will be informed enough to ask the right questions. We have to be professional - hard sell always backfires."
Mr Zahra shares the apprehension at events taking place within the eurozone, but takes some comfort in the EU-IMF support of the bloc. He emphasised that there was no exchange rate risk in the internal market and there was a silver lining. A less expensive euro in the short term would likely boost exports to trading partners outside the monetary union and encourage tourism from the UK and US.
However, as in any downturn, the chairman emphasised, it was imperative that insurers had rigorous claims management in place to safeguard their business.