Analysis:For all the controversy around the prickly issue of risk equalisation, Seán Quinn's takeover of Bupa Ireland underlines the allure of a market in which more than two million consumers have private health insurance, writes Arthur Beesley, Senior Business Correspondent
Complex questions abound in the risk equalisation debate, but it is clear that a bigfoot deal-maker like Quinn sees a big opportunity in the health insurance business to add to his already considerable fortune. He is not alone. Wealthy financier Dermot Desmond entered the market in 2004 with his vehicle, Vivas.
Mr Quinn moved with lightning speed to execute yesterday's deal, which gives him a 22 per cent share of the market and a grand total of 475,000 clients.
The transaction came only five days after he entered serious talks with Bupa. Known for an impressive work rate, there was good reason for his haste on this particular occasion. The policies of 50,000 Bupa clients were to lapse at midnight last night.
Bupa's future had been in question ever since the company signalled its departure from the market in December, so there was a clear danger that tens of thousands of its clients would scatter to rival insurers if a deal was not done yesterday. This can only have weakened Bupa's hand considerably. After its dialogue with Minister for Health Mary Harney ended last Wednesday, the insurer moved quickly to approach Mr Quinn. By all accounts, Mr Quinn was ready to talk. As new owner of the Bupa franchise, Mr Quinn will write to all its clients with the "business as usual" message.
To sweeten the deal, the new owner has pledged to freeze Bupa's existing premiums for 2007. Of chief concern for the moment will be the preservation of its contracts with 50,000 Bupa clients. Expect a barrage of advertisements with a reassuring message.
The deal is speculated to have top line valuation in excess of €150 million, but payment of that sum is spread over several years. The sum is also heavily contingent on Bupa not losing clients following a long period of uncertainty over the risk equalisation issue. Should large numbers leave, the sum will fall sharply.
Mr Quinn's group said it had entered the market for the long haul. The group's assertion that it will be exempt from risk equalisation for three years "as a new health insurer" may yet be tested in the courts, but group chief executive Liam McCaffrey expressed "absolute" confidence yesterday that its position was safe. "It's a matter of fact and it's a matter of law."
Some 34 years after Seán Quinn set forth in business by exploiting a quarry on his father's farm, his entry into the health insurance sector only adds to a self-made empire that includes numerous and lucrative interests in the insurance, cement, hospitality, glass and plastics sectors.
The Bupa transaction is subject to the approval of the Irish Financial Services Regulatory Authority and the Competition Authority. It is expected to close in less than two months. Solicitors A&L Goodbody advised Bupa and Mason Hayes & Curran advised Quinn Group.
