Middlesea Insurance registered a record loss of €55.2 million during 2009, as a result of the negative performance made by its Italian subsidiary Progress Assicurazzioni SpA.
The figures – announced yesterday by MSI Chairman Joe FX Zahra - are “inclusive” of the impairment charge on Progress Assicurazioni that adds up to €63.1million.
In 2008, Middlesea had made a loss of €20.6m.
“During the first part of 2010 important steps were undertaken in connection with this subsidiary with the result that Middlesea Insurance has now put Progress and its losses behind it,” the Group said, adding that the Board is also advised that as Middlesea has fully paid up the amount of share capital in Progress underwritten by it, and no further payments can be requested from Middlesea shareholders.
A series of aggressive, radical corrective actions were taken to remedy the position, Joe FX Zahra explained, adding that “with the help of expert professional consultants that were engaged to assist us, and through our close contact and collaboration with our Regulators throughout the year, we had expected to be able to turn the position. However, with regret this objective was not achieved.”
Last February, the company had requested the Italian Regulator ISVAP to put in train the processes for the orderly winding up of the company. As was reported in a Company Announcement issued on March 30, ISVAP placed Progress in Compulsory Administrative Liquidation.
The write-off of Progress implies that it would not be prudent for the Board of Directors to declare a dividend. This is only the second time that Middlesea Insurance plc had to pass on declaring a dividend following a positive twenty five year history of year on year dividend payouts.
“That is the bad news. The good news is that Middlesea has put Progress and its losses behind it, and the write-off of the investment in that company that we have taken in the FY 2009 accounts should represent the end of this very unfortunate saga” Joe FX Zahra stressed..
Despite the write off of the Italian operation, the fundamental strengths of the core operations and the balance sheet of Middlesea Insurance plc remain intact.
Notwithstanding the difficulties that were encountered in Italy, healthy profits were registered from local operations and Middlesea remains a financially strong company. Indeed the Group balance sheet shows that the shareholders’ equity as at December 31, 2009 stood at over €48 million, making Middlesea the highest capitalized insurance company in Malta.
On the domestic front, Middle Sea’s group operations have reportedly generated a total profit before tax and impairment charges of €8.7 million last year, compared to a loss of €2.98 million in 2008.
In a statement, MSI Group said yesterday that “notwithstanding the substantial loss taken by the group on Progress, Middlesea remains a financially strong company with shareholders’ equity at December 31 2009 of over €48 million on a consolidated basis.”
Associate company Middlesea Valletta Life Assurance, reported a considerable increase in profitability during 2009, with the group’s share of profit from this company amounting to €3.1 million when compared to €0.96 million during 2008.
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