The Progress affair was a terrible experience "but this must be put behind us", Middlesea Insurance chairman Joseph Zahra said at the company's extraordinary general meeting yesterday.
Mr Zahra said that after acquiring Progress Assicurazioni SpA in Italy in 2000 and after a number of years of positive and encouraging results, Middlesea had been looking to that firm as the strategic platform upon which to build its business outside Malta.
"Unfortunately, it was not to be, and the time had come to cut losses and exit the market... The events of the past two years have been a huge strain and a debilitating distraction on the management and staff of Middlesea and its subsidiary companies," he said.
Middlesea ceased its operations in the Italian subsidiary last month after it was established that the faltering company required a further capital injection that was not deemed feasible.
The subsidiary had suffered "an inexplicable spike in claims despite the closing down of a number of agents", and was being kept afloat by repeated capital injections.
The EGM was convened to approve, through an extraordinary resolution, a series of proposed amendments to the memorandum and articles of association of the company, and to elect the board of directors.
Mr Zahra said that to re-establish the capital position of the group and to satisfy regulatory obligations after Progress had caused severe damage to Middlesea's balance sheet position, it was necessary for the company to stage a rights issue to raise €40.2 million from its shareholders. This was concluded in December.
The bulk of the issue (89 per cent) was taken up by the institutional shareholders and the final shareholding position resulted in the three major institutional shareholders holding approximately 82 per cent of the issued share capital.
These shareholders informed the company they wished to reconstitute the board of directors to better reflect the new shareholding structure together with certain changes to the governance of Middlesea.
Mr Zahra said: "I want to stress that I am very optimistic about the future for Middlesea. The domestic operations have had good results for financial year 2009. We are receiving strong support from Bank of Valletta."
Mr Zahra said "in the post-Progress era" the company believed the complex group structures should be dismantled and Middlesea should concentrate on becoming Malta's leading domestic insurer.
International Insurance Management Services should focus hard on being the provider of solutions to external third parties - and be an important player in Malta's efforts to become a leading financial services centre. Middlesea Valletta should be a self-sufficient, stand-alone company, focus on retaining its leading position in the life assurance, long-term savings and, in due course, the pensions market.
The chairman informed the shareholders the existing board of directors was stepping down and the new board was being appointed - Roderick Chalmers, Tonio Depasquale, Javier Fernàndes-Cid, Andrez Jimenez Herradon, Michael Sparberg, Lino Spiteri and Mr Zahra were appointed to the board of directors.
Since the number of nominations did not exceed the vacancies, there was no need for a contest, and Gaston Debono Grech and Paul Testaferrata Moroni Viani were automatically appointed directors.
Immediately after the meeting, the new board of directors appointed Mr Zahra chairman and co-opted Pedro Lopez Solanes executive director.