Hibernian in talks on taking stake in Vivas

Insurance group Hibernian is believed to be in talks with Dermot Desmond's International Investment and Underwriting (IIU) about acquiring its 33 per cent stake in Vivas, Ireland's third-biggest health insurer.

It is understood that negotiations between the two sides are at an advanced stage.

Informed sources said Vivas is being valued at about €130 million, placing a price of about €43 million on IIU's shareholding.

A spokesman for Hibernian said: "We do not respond to market speculation."

When contacted, Vivas said it "never comments on shareholder matters". No comment was available from IIU.

Vivas was set up in October 2002 and has three main shareholders - IIU, AIB and its management team, which is led by chief executive Oliver Tattan. Each group has a one-third stake in the business.

Hibernian has long been rumoured to be interested in entering the health insurance market here.

The company, which is owned by global insurance group Aviva, already sells a product called Hibernian Health, which is underwritten by Vivas.

It is an equivalent product to VHI's Plan B, its most popular scheme. It is sold through Hibernian's branch network.

Although it is less than four years old, Vivas has quickly established itself as an alternative provider to State-owned VHI and Quinn Insurance, the business formerly run by Bupa.

Its market share is estimated at 7 per cent and 120,000 customers.

Its latest accounts, for 2006, show it had gross premiums of €29.8 million, although more than €19 million of this figure was attributable to reinsurers.

It made a pre-tax loss of €262,394 that year and had accumulated losses of €6.8 million.

It is understood, however, that the gross premiums written in 2007 rose to about €65 million and that the current "run rate" suggests that it could hit €120 million this year.

Vivas, which employs more than 40 people, is believed to be close to breakeven at this year.

Hibernian is one of Ireland's biggest general and life insurance and pension groups. It has more than 1 million customers here and employs about 2,000 staff.

Its group operating profit for 2006 was €188.9 million and gross premium income was €1.4 billion.

In 2005, AIB sold 75 per cent of its interest in Ark Life to Hibernian for a cash sum of €205 million. The bank continues to own 25 per cent of the investment manager.

With Vivas in growth mode, IIU's decision to sell its stake will surprise some observers. There are, however, uncertainties over community rating and risk equalisation payments, which prompted Bupa to quit the market.

The company might also need to raise more capital in the near future to help promote the business and to allow it continue to grow the level of premiums that it writes itself.