Some €333m of 2009 losses occurred in UK operations

THE BULK of Quinn Insurance’s losses in 2009 and early 2010 occurred in the UK operations, according to the joint administrators of the company.

The insurer made a loss of €706 million, which included an operating loss of €559 million and writedown on investments of €147 million. The company made a further loss of €160 million on unprofitable business written in the first three months of 2010, prior to the appointment of administrators in March 2010.

While the losses were on policies written before 2009 and the three-month period up to March 2010, the administrators said their role was not to be critical if Quinn Insurance chose to rack up losses to gain a foothold in the market.

Some €200 million in cash is being invested in a new insurer that will take over the policies of 275,000 customers once the deal is completed in 14 weeks.

The new company will be jointly owned by US insurer Liberty Mutual and State-owned Anglo Irish Bank and it will take over €792 million of claims liabilities – roughly half of Quinn Insurance’s original business. A further €264 million in assets, mostly cash, is going into the new company from the insurer’s assets.

Speaking at a press conference in Cavan, the administrators said the Republic of Ireland policies had been “de-risked” in the deal and that Liberty had an option to buy new UK policies taken on by the administrators until the end of 2012.

This business was either performing at break-even or a slight profit, they said. There had been a 20 per cent reduction in business under the administration, which was costing about €500,000 a month in fees and expenses.

Some €333 million of the operating losses in 2009 was in the UK, of which €195 million of the operating loss was incurred in the UK non-motor business. This includes €90 million on professional indemnity insurance cover for solicitors.

The investment writedowns included a significant reduction in the value of the group’s wind farm on Slieve Rushen in Co Fermanagh.

One of the insurer’s joint administrators, Michael McAteer of Grant Thornton, said the company started growing in the UK in 2006-7 when the market was “suffering significant losses”.

A review by four independent firms of actuaries last summer showed there had been large increases in reserves at insurers across the industry, he said.

On top of this, there was a “solvency problem” created at Quinn Insurance by guarantees provided on the company’s assets to lenders to the Quinn Group.

The other administrator Paul McCann said he was hopeful they would reduce Quinn Insurance’s €600 million call on the Insurance Compensation Fund from the sale of its 24.5 per cent stake in the new Anglo-Liberty company.

“We are comfortable with that – there is a good chance of a return especially with Liberty Mutual at the wheel,” he said.

“It is a day that we have signed a deal that we believe is the best day for everyone and gives the business a future,” said Mr McCann.

Mr McCann said the administration of QIL was the most complex corporate restructuring they had worked on. “By a country mile.”

Some €500 million of UK claims liabilities will stay at Quinn Insurance which will remain under administration and will be managed under an agreement with Liberty. The claims will reduce in time but could take up to 15 years to be settled.