Loss of cash cow will be a major blow for group

ANALYSIS:There is a lot of interest in Quinn Insurance – a solvent, profitable, established business

THE SUN shone on Cavan town yesterday afternoon, but it did little to lift the gloom of the workers at Quinn Insurance, where 900 posts are to be made redundant over the next 15 months under a plan drawn up by its joint administrators.

So, where does the company go from here? Early yesterday, the Quinn Group, the Border-based conglomerate controlled by Seán Quinn and his family, finally capitulated and said they would work with the joint administrators to find a new owner for the company. They had fought tooth and nail over the previous month to retain control of the insurer, lobbying politicians and local businesses to come to its aid.

The hope of many in Quinn Insurance’s offices in Ireland and the UK was that a quick sale might save some jobs.

There is plenty of interest. Paul McCann, joint administrator, said “more than 40” expressions of interest have been received from parties in Ireland, the UK and the US. These are thought to include FBD and Allianz, two of the biggest insurance players in the Irish market. “We will explore all options,” McCann said yesterday. “This is a solid business and has a lot of value as a going concern.”

Neither he nor his Grant Thornton colleague Michael McAteer were prepared to put a timeframe on any sale process. A sale is complicated by the fact that Quinn Group remains its sole shareholder, and agreement also has to be secured from the Financial Regulator.

The administrators stressed that Quinn Insurance is solvent. Its liabilities relate to the policies it has written and any claims that might accrue, but the insurance levy is available to cover those in a worst-case scenario.

“Policyholders are fully covered,” McAteer stressed.

Some light was shone on the UK business yesterday. It made underwriting losses in 2009 of €52 million. After a 30-day period when it was precluded from writing new business, it is now open for motor policies.

On a positive note, Quinn has started to be relisted by comparison websites in the UK, a valuable sales tool for insurers.

But the model has changed. The administrators said premiums have been adjusted upwards to make these lines of business profitable. “The company was writing too many policies at prices that were not profitable,” McAteer explained, adding that the increase in premiums ranges from 10-50 per cent, depending on the segments.

It plans to open talks with the Financial Regulator next week on re-entering some commercial lines. It will not be renewing the professional indemnity insurance policies of 3,000 lawyers in Britain when they fall due.

The administrators must wait and see what impact the shift in pricing will have on renewals and new inquiries in the UK.

In Ireland, the picture is brighter. The business is profitable. McAteer said Quinn has achieved a 90 per cent rate of renewals on the consumer side since being placed in administration on March 30th, and about 70 per cent in commercial, which is more dependent on brokers.

In terms of its solvency ratios, which are deficient, McAteer said “nothing has changed”.

This is not a problem for the administrators. Solvency ratios will be a matter for any potential new owner and the Financial Regulator to resolve.

Eighty per cent of Quinn Insurance’s business was split evenly between the UK and Ireland last year, with Quinn Healthcare comprising the balance of the book. This is likely to have changed in the past month but the administrators are hopeful their business plan for the UK division will see it to profitability.

How will the sale of Quinn Insurance impact on the health of the wider Quinn Group? This remains to be seen. It was a profitable subsidiary, and an important cash cow for the group. Its loss is a major blow to a company seeking to restructure billions of euro of debt.

There is also the thorny issue of Quinn Group loans supported by guarantees from subsidiaries of Quinn Insurance. “That’s not a matter for us, our focus is solely in the insurance company,” McAteer said. Fair enough – but it is very much a problem for Seán Quinn.