[WATCH] 'We’ve got you covered’: LifeStar Insurance chairman on Malta investment and future plans

Professor Paolo Catalfamo, Chairman of LifeStar Insurance PLC, discusses the company’s recent challenges, successes and plans for the future

LifeStar Insurance chairman Paolo Catalfamo
LifeStar Insurance chairman Paolo Catalfamo

What prompted you to invest here in Malta? 

2015 was a very interesting year. I had just completed my three years of professorship at Villanova University in Philadelphia — it was very nice, very relaxing and a great experience — but I felt I was too young for full-time academic life. I’d been always involved in the asset management business, so I felt the attraction to go back into business. The asset management business I’d done a lot: for a number of years, I’d worked for Franklin Templeton — one of the largest companies in the world in mutual funds — then I had my own hedge fund business, so I felt I’d done pretty much anything I needed to do in asset management. I felt very intrigued by the world of life insurance, which I felt had a lot of potential and could develop in a number of ways, and, starting from a European platform, could really grow in niche ways in Europe. It was indicated that there was this company for sale in Malta, this attracted my attention and the company had been established for a number of years. It had life insurance, asset management and some other properties, so I thought it was a base to get started and build up from this into the European market.  

In terms of your client base, you have a product that is recognisable in Malta. How important was that? 

Absolutely very important. I have done different start-ups in my career, and start-ups are very exciting but also very difficult because you have a very long time of investment before you start really creating cash flow and profits. Additionally, especially in the insurance business, it takes five to seven years to build a stable business, because you need to create a market and add assets. Don’t forget that when you sell a life insurance policy, it’s on a timespan of 20 years, so the numbers are smaller but keep growing. There are big benefits in taking over an existing company. In this case it was very well established in the Maltese market as you’ve mentioned: we had over 30,000 clients, which now we have increased to 40,000, which is a big growth. It was very well rooted in the Maltese society, but also had some problems. The previous shareholders and management ran into some issues and, in fact, at the time of the acquisition, the majority shareholder went bankrupt in Mauritius. Some other shareholders had some issues, and, in general, the company didn’t enjoy a very good reputation in the market. But, at the time I didn’t know it — I thought it was a good opportunity and base to build on, and that was the main reason we decided to go ahead with investment.

What did you do to upgrade the efficacy and quality of the company, and to improve its credentials and visibility?

It was a lot of work. Initially, as I mentioned, I thought the base was good but just needed some restructuring. It turned out that the restructuring was much more drastic than we had imagined, primarily because the reputation of the company wasn’t good. We had a pretty complete overhaul of the top-level management and decided to completely separate the activities of the group, focusing primarily on the life and health insurance business. We emphasise the health insurance business, which is sold under license by BUPA, and we leverage on the great reputation and brand that BUPA enjoys in Malta. But most of all, it was a lot of work creating the new corporate governance, adapting to the new rules and regulations that the European Directive requires in life and health insurance as well as in asset management, and streamlining the processes — cutting off where the business was not profitable or had created problems in the past. So, after six years, I would say that the process was completed. The results have been very positive, especially in the insurance business. We’ve also decided to move out of the retail business in the financial products, which was the area that really created most of the issues for the reputation of the company in the past. We also created some synergies around the company so that the process is now very much focused on insurance with very good support for investment services.

Arguably, one of the most important things was rebranding the company under a different name, something which also supports potential growth beyond Malta. Was this accidental, or part of your vision for future expansion?

It was part of the plan from the very beginning. The reason we decided to make this investment was to use the company and its structures as a base and a platform to grow the business in Europe, and maybe even beyond. As such, the rebranding was a very strategic decision. To tell you the truth, I liked Global Capital — I think it was a great brand and was well known, but from the beginning I’d been pushed by different sides to rebrand and change the name because of some legacy issues the company had suffered. I resisted changing the name until the restructuring was complete, because I always believe in substance — before changing the name, I really wanted the substance of the company to be completely restructured and to be in the shape it should have been. Simply changing the name without changing the company doesn’t really help. So, when in 2021 we felt the transformations, restructuring and upgrades were completed, we decided to change the name. We studied the brand at length because, as you mentioned, we wanted a brand which is recognisable — not only in Malta, but also internationally. I always had an affinity with the word ‘star’. My holding company is named Investar, so we studied this brand and it came quite naturally. Being primarily in life insurance and health insurance, this also expresses our desire to provide our clients the life of a star — which, in a way, means, “live your life, because we are here to give you full protection. Live your life to the fullest, and we are here behind you to protect whatever may happen in your life.”

When you look back over the last six years, including the last two years through the COVID-19 pandemic, what would you say your successes have been? That is, primarily in terms of tangible results, and away from simply the restructuring. 

The financial results are very good, but I will say that the biggest and most rewarding result for me has been the team of people we were able to create. This was very evident during COVID-19 when, for instance, our company encountered a lot of struggles due to people not being able to come to the office and instead working from home. Our business requires a lot of documents: medical documents and other very sensitive documents, and the team was great — we had people volunteering to go to the office from time to time to pick up the documents which were missing. In a way, during this time of problems and hurdles we created a very good feeling in the team, a lot of loyalty to the company and a lot of resistance to adversity. I will say that the results that we experienced last year were, in spite of these events, probably our best in terms of financial results. The results that we experienced these years in terms of sales and in spite of the post-COVID and the war in Ukraine is 99 percent given by the greatness of the team, which day after day after day, and with a lot of enthusiasm and dedication, continues to believe in the growth of the company and the strength of the company.

Looking forward, in terms of expanding your operations, creating employment and additional multiplayer effects — not only within our territory, but most especially within our territory — what are the things you are looking forward to?

The environment is extremely complicated particularly because of the uncertainties — the macroeconomic issues such as inflation and interest rates, as well as political issues which are completely out of our control. Clearly, either the continuation of the war [in Ukraine] or peace will have completely different effects. Restrictions from central banks or belief in the short-term inflation situation will also create different scenarios. Because we are investing with long-term horizons as I mentioned before, our clients on average are with us for 20 to 25 years, so we are really in charge of taking care of their savings, pensions and retirements, so for us it’s very important to set a strategy and not to change it. Our advantage on the other side is that we are long-term investors, so we take a view which is not based so much on contingent events and we try to maximize the results for our clients over a lifetime. In a way, this is easier for us and makes our life easier because we’re less dependent on day-by-day events. At the same time, we need to make sure that our liabilities — which are the commitments that we have taken with our policyholders — are always matched with sufficient assets. This is done through very complicated and sophisticated actuarial calculations and statistical tables, but we always make sure that even under the most adverse circumstances and severe stress test, the money of our policyholders is always protected; that their lifetime savings and retirement plans are always there and keep growing, because that’s what they’re there for. 

You refer to the successes of the company in terms of the challenges of the last six years, but if we were to discuss figures and audit reports from financial advisors who have looked at the company, what have they been saying about Lifestar?

We had a valuation of the company about two years ago. The value was in the range of €40 million, which is a great result considering the valuation of the company six years ago when we took it over. In terms of financial results, I can tell you that 2021 was a particularly good year. We finished with a profit of about €1.6 million, and the growth of assets was quite amazing. We passed from about €120 million in assets, to in excess of €180 million in about five years, so the growth has been quite exceptional and the results have been very positive. Now, obviously the next step is to grow the company outside Malta’s borders, because even if it’s a very important market for us in terms of numbers and the establishment of the company in history, the numbers of the markets are what they are and the market is very dominated by banks — particularly BOV and HSBC, who have the larger share of the insurance market. That’s why we need to expand to other markets; since we are a small company, we need to play smart and not try to compete with the bigger guys, instead finding some niche markets where we can win in terms of flexibility and innovative technologies. That’s where we have been investing substantially in the last couple of years. 

If I were to interview you in a year’s time, without revealing what is happening behind the scenes, do you think you will be able to talk about growth outside Malta?

Yes, we are looking to a number of growth options, some through internal growth and some through acquisitions. We are looking to banking, because obviously the bank-insurance model is a winning one, especially in Europe. We’re looking to expand in other non-life business, but we’re also looking to other kinds of synergistic businesses which are not necessarily strictly financial services. Obviously, we would like to grow, and in Malta we’ve been growing a lot and right now employ about 120 people. Unfortunately, I must say that following the greylisting, the attitude and position of the regulator has not always been particularly favourable to investors and to foreign investors. Hopefully, when this issue is sorted out, we can go back to a more standard relationship. At this time, this could be a deterrent for us to invest more in financial services in Malta, but we continue to remain optimistic.