Life partners

FRESH FROM THE FIRST PHASE OF RESTRUCTURING, NEW MIDDLESEA VALLETTA LIFE ASSURANCE CEO DAVID CURMI TALKS ABOUT THE COMPANY’S FUTURE PROSPECTS

You have just been appointed CEO of Middlesea Valletta Life Assurance Co Ltd., how would you define your role?
Middlesea Valletta Life is Malta’s largest life assurance company, which I am now heading. It is a fairly young company, being established in 1994 but it has grown substantially in a very short space of time. We now have a balance sheet value of around Lm300 million and annual revenues of circa Lm50 million, being generated purely from the domestic market. We transact business purely in Malta, having not yet gone outside our country.

Is your appointment phase one of a restructuring, and probably a change of the overall management?
Yes, my appointment is part of a group restructuring, and I was appointed Chief Executive of Middlesea Valletta Life Assurance and a colleague was appointed Chief Executive of Progress Assicurazzioni SpA of Italy, which is our Italian non-life company, and Mario Grech has now assumed the role of Executive Chairman but has also retained responsibility for Middlesea Insurance, which transacts general insurance and is the group holding company. Middle Sea Valletta Life is a jointly owned company, 50% by Bank of Valletta and 50% by Middlesea Insurance.
I started off with Middlesea, I was actually the first person at Middlesea back in 1981, after having started my insurance career in 1979. I spent ten years at Middlesea, left for a few years and rejoined in 2001.

Since 1994 the group has flourished spectacularly, is the restructuring part of this expansion?
Well the Middlesea Group was started in 1981. It was Middle Sea Valletta Life that was created in 1994, with three founding shareholders, Middlesea Insurance plc (51%), Bank of Valletta (39%) and the Munich Reinsurance Co., Germany (10%). This shareholding was maintained until 2005 when a restructuring of the shareholding resulted in BOV acquiring 1% from Middlesea and 10% from Munich to become 50% joint owners with Middlesea. That however is not to be interpreted as a decision by Munich to pull out of our group, because they then increased their shareholding in our holding company, of which they now hold 19%. So in our group we now have three very important shareholders, the three of them having roughly equal shareholdings of around 20% each; that’s BOV, Munich and Corporation Mate of Spain. The balance is held by individual shareholders.

Do you work closely with BOV?
We obviously have a very good relationship with Bank of Valletta, they own half of us and they are our main distribution channel. The success in any life assurance company depends on distribution; our business has to be sold, to be distributed and that is where the partnership with BOV assumes major importance for us. Our products are distributed through the branches of the Bank of Valletta.

You are reputed to transact 65% of the life assurance business in Malta; does your share of the market reflect the company’s policy on service to the customer?
This has been a process over the last five years where we have paid a lot of attention to our relationship with the customer. We have extremely good relationships with our distribution network, both the BOV and the 100 or so financial intermediaries, who are licensed to transact our business. Over the past five years we have worked hard to ensure that they and we deliver excellence to our customers, in terms of service, and this has included many initiatives. Firstly we have invested heavily in our IT platform, which is crucial to our ability to deliver the service. We now have a unique IT system belonging to us which we have developed together with IT providers which enables us to issue our policies at branch level. This IT platform is not commonly found in other territories, so if a client walks into a BOV branch in say, Mellieha, and he needs a straightforward life policy, without medical examinations, that is a relatively young person, we can actually pull out the policy at that branch. This has been crucial to our relationship with the customer. It was one initiative but possibly the one which was most important in terms of money.
Then we have other internal measures, starting with our literature because we pride ourselves in our literature that it contains all the product features that our customers need.
Every one of our products are translated into Maltese, so that all information is available in Maltese, and I think we were the first company to do that.
Anyone who is going to buy a product from us can be absolutely assured that they will receive all necessary information in basic terms. In addition we offer one to one advice, either through the BOV network or through the network of our financial intermediaries. We also operate a very efficient client services department which is technically a call centre, for post transaction information, so that anyone, after contracting with the company, can come to, email or phone our clients service section with any problems or queries they may have. The staff of this department are very experienced who can help all our policyholders with their day to day requirements.
As required by the MFSA, we also operate a very efficient complaints procedure, through which we give a lot of attention to all complaints, whether serious or not so serious. In fact the procedure states that all complaints should be addressed to the CEO, so it is my office that deals with complaints. This is because we believe that complaints give a very good pulse of the state of the business, and fortunately despite the large number of policies, some 77,000, we have very few complaints. In fact last year we trained all our staff to be conscious of the fact that the most important person in our company is the client.
That was an internal strategy which is now bearing fruit. Of course there are also delicate situations such as separations and inheritances and we have also had to train our people to deal with these in the most diplomatic and sympathetic manner possible.
During 2007 we shall also be establishing a Customer Charter which will set out terms of service, such as all complaints and queries should be dealt with within six days.

You are president of the Malta Insurance Association, and as financial services and insurance could be a market in which Malta can export expertise, does this affect thinking?
Yes this is my first year as president, and in fact we have already seen, through the initiatives taken by the MFSA, that we have been promoting Malta as a domicile for captives and for back office operations. We have started to see some companies coming, and more importantly, we have seen management companies set up in Malta for the first time. Captive business and affiliated company business is a difficult business because it is a catch-22 situation. Unless you have the management companies set up in Malta to attract these companies it is very difficult to get them, but then management companies will not come unless they feel confident that the captive business is going to come.
So the fact that we have now seen various management companies set up in Malta is a good indication of confidence that Malta is going to be a thriving domicile for captives and affiliates.

Are the actuaries still as important in the insurance world as they used to be?
Yes actuaries are still very important to our business and as a company we have long recognised this. In fact for as long as the company has been established we have always had external actuaries, based in the UK; we use Watson Wise as our external actuaries.
However, because of the development and expansion of our business, we are more dependent on actuarial techniques for business planning, so we felt the need last year to employ a full-time in-house fully qualified actuary from the UK.
We feel that was a very important progressive step, because an actuary is involved in the whole process of a life assurance company; as soon as we think of launching a new product we have to talk to our actuary. He has the responsibility to calculate and be sure that the product we sell is going to be profitable to the company over a long term and he carries out what is known as a “profit test”. This is an actuarial model which is used to make sure the policy is profitable and sellable to the client.
The actuary also has the responsibility to value the business of the company on an ongoing basis, so that we can carry out various valuations of our book of business throughout the year. Most of the work is done in-house but is checked by our external actuaries, who sign off our statutory valuations, as required by the law. Furthermore, the actuary is involved in business planning, costings, projections, and investment strategies.
Malta has never produced actuaries; we produce mathematicians and statisticians but no actuaries, because the university does not have the facility. So our company is building a small actuarial team, training a Maltese graduate, who is now more than half way through his course to become the first Maltese actuary. We have also taken on two other graduates to train them in this business, but the process is very long, seven years, and very tough. It is a long process but we have been investing in these young people and in a few years’ time we shall start producing our own Maltese actuaries.

Some of your recent press releases have mentioned doing business in Italy and Europe – is this a live proposition?
This is very much a live proposition, and we have been working on it for at least two years. We are aware that the market share we have of the local market could in itself be a threat to us because with a 65% share of a market you really have to look elsewhere for business. In terms of the local market our strategy is that we want to grow by creating new products. We are not interested in taking the market share of any of our competitors.
We know that the pension business will be promising once it is decided how and when it will be done, and will generate an amount of new business, for which we are very much prepared.
We know we have to look at overseas markets so for two years we have been looking hard at the Italian market. Initially we plan to go into Italy under the freedom of services, which means that we will sell services in Italy without necessarily having an establishment there. The crux of going into a new territory is not the product or the people, it’s who is going to sell your product. Italy is currently the third highest life market in Europe, having overtaken Germany, so we are looking at a very, very large market.
Middlesea Valletta is not known, so distribution will be vital. Through the contacts the Group has built over the years, through our shareholding, we firmly believe we can find the right niche in which to operate, in the very short term.

Is doing business in a foreign country a risk?
Every territory presents risk to any other business. Fortunately our business is in calculating risk so we should be able to take the right decisions. Also we have a company in our Group which has been operating in the Italian market for some six or seven years, through which we have gathered a lot of experience. So we are quietly confident we are taking the right decisions.