ANALYSIS:Not since PMPA went into administration has a firm with such far-reaching tentacles undergone such a move, writes SIMON CARSWELLFinance Correspondent
ONCE AGAIN, liabilities within Seán Quinn’s conglomerate have caused trouble for his subsidiary, Quinn Insurance, the largest Irish-owned insurance company, causing significant collateral damage to the Fermanagh businessman.
The High Court appointed joint provisional administrators to Quinn Insurance, the non-life part of Mr Quinn’s insurance business, yesterday, on an application by the Financial Regulator.
The court was told concerns about the manner in which the company was conducting its affairs and fears about its ability to meet its liabilities to policyholders had prompted the regulator’s urgent application during a vacation sitting of the court.
Mr Justice John Cooke installed administrators Paul McCann and Michael McAteer of Dublin accountants Grant Thornton, who will take over the running of the business with a view to putting it on a sound commercial footing.
The two accountants will run the business, which includes Quinn Direct and Quinn Healthcare, independently of both the regulator and Quinn’s existing management team at the firm.
Quinn’s group has lost control of a key part of its business, an insurer founded by Quinn in 1996 which is now the second largest player in the health insurance market. The group has about one million insurance customers, some of whom would be customers of the life business which is not affected by the application.
Not since insurers PMPA and AIB-owned Insurance Corporate of Ireland (ICI) went into administration in the 1980s has a company with tentacles reaching into so many businesses and households been subjected to such a move.
The regulator informed the court that Quinn Insurance had “significantly breached” its solvency ratios. At the centre of the concerns are guarantees totalling €1.2 billion – dating from 2005 to 2008 – provided by eight subsidiaries of Quinn Insurance to cover the debts owing by the wider Quinn Group to bondholders.
The net effect of the guarantees provided was to reduce the insurer’s assets by €448 million, which had “wiped out” the company’s solvency cushion – a big no-no for an insurance company with so many policyholders.
The court heard that the guarantees have left the insurer effectively insolvent, going from a position where it had a surplus of assets over liabilities of €200 million to having an excess of liabilities of more than €200 million.
The regulator said it had “very serious” concerns about the company’s ability to meet its debts.
It has launched an investigation into the company, with regulatory staff carrying out inquiries at its head office in Cavan town where the company employs 2,400 staff.
It is understood that the regulator only received details about the guarantees from the company last week.
A third party acting on behalf of a creditor of the Quinn Group discovered the guarantees as part of a review of the creditor’s exposure to the broader Quinn business, which also includes cement, glass-making, property, hotel and pub interests.
Creditors were notified of the guarantees’ existence, with Quinn Insurance chairman Jim Quigley informing the regulator on March 24th.
The court heard yesterday that a number of Quinn Insurance directors were unaware of the guarantees.
Quinn Group owes about €1.2 billion to its bondholders and about €2.8 billion in further loans to State-owned Anglo Irish Bank.
This is not the first time liabilities at Quinn Insurance have harmed the company’s solvency.
In October 2008, the regulator imposed a record fine of €3.2 million on Quinn Insurance and €200,000 on Mr Quinn for a loan of €288 million provided to cover his family’s disastrous investment in Anglo Irish Bank. The loan materially reduced the minimum statutory solvency margins of the firm.
Quinn resigned from the board of the insurer at that time.