Middlesea Insurance plc is to launch a rights issue in a bid to boost its capitalisation to meet regulatory obligations, the company said in a statement on the Malta Stock Exchange on Tuesday evening.
The company, one of Malta's top three insurers, has suffered "unprecedented strain" from the results of Italian subsidiary Progress Assicurazioni SpA. The group registered an interim pre-tax loss of €17.7 million this year. Progress contributed a loss of €19.4 million to the group's half-year results. Last year, Progress registered a post-tax loss of €19.1 million.
MSI has called an extraordinary general meeting for November 20 at the Hilton, St Julians, when the board will request shareholders' authorisation to issue up to a maximum 67 million ordinary shares of a nominal value of €0.60 each.
At the meeting, MSI will propose an increase in the authorised share capital of the company to €60 million divided into 100 million ordinary shares of a nominal value of €0.60 each.
The financial results of Bank of Valletta, which owns a 21.6 stake in Middlesea Insurance plc, for the year ended September 30 were also impacted by its negative share of the company's results which amounted to €9.9 million. Other major shareholders in Middlesea Insurance include Corporacion Mapfre and Munich Re.
The company said the pricing and cut-off date for eligible shareholders who can participate in the rights issue are being discussed with underwriters. The new ordinary shares are expected to be admitted to listing in late December and will rank in parallel with existing ordinary shares in respect of all voting, dividend or interest rights.
The proposed date for the opening of applications of the ordinary shares is November 25.
As at last March, Middlesea Insurance plc had around 4,490 shareholders.
Analysts told The Times Business that the very nature of insurance business made it difficult for the group to close an operation down although some Progress agencies in Italy had been shut.
Progress is the thorn in the side of MSI which operates an otherwise healthy insurance arm and life company. The Italian subsidiary was originally a good proposition but it grew too big for the group to handle, analysts said.
In May, MSI executive chairman Mario Grech explained that Progress, which was acquired in 2000/2001, stumbled after Italian authorities introduced a complex mandatory direct settlement system called CARD. It aimed to speed up settlement and facilitate motor claims between insurers for the benefit of the insured.
Under the system, an insurer is obliged to indemnify the full damages of his own insured (who is not liable for the accident) and then recover "fixed" amounts (in accordance to models based on national averages) from the party at fault's insurer - irrespective of the amount paid by the insurer settling the claim.