The administrators of Quinn Insurance have announced the company lost €706m in 2009, the year before they were appointed.
The administrators have also signed a deal to sell the company to US insurance giant Liberty Mutual, and Anglo Irish Bank. All 1,570 jobs will be retained in the new company, which will be called Liberty Mutual Direct Insurance.
Michael McAteer and Paul McCann of Grant Thornton said the sale was the best that could be achieved for the Irish economy. The administrators said the sale preserved jobs on both sides of the border and ensured competition in the insurance market.
Quinn Insurance lost €706m in 2009. €559m of this was operating losses, while €147m was due to the writedowns of assets.
€333m of the loss comes from the UK insurance business, the bulk of that loss relating to non-motor insurance.
The joint administrators to the company, Michael McAteer and Paul McCann said they estimate that Quinn Insurance will record a further loss of €160m in 2010, mainly due to the UK business written immediately before their appointment.
They added, however, that since their appointment in March of last year, the company's losses have been stemmed.
The administrators said the company's performance in 2009 and 2010 would contribute to a call on the Insurance Compensation Fund totalling €600m. The first call on the fund - of about €180m - would occur towards the end of the year.
However, they added that 25% of the profits generated by Liberty Mutual Direct Insurance will be used to reduce the call on the fund.
The fund is there to make sure customers of all insurance companies get paid, even if their own particular insurer gets into financial difficulty. It was used twice in the 1980s when AIB's insurance arm, ICI, got into trouble and two years earlier, in 1983, when the insurer PMPA collapsed.
Structure of Quinn Insurance deal
The Quinn Insurance results for 2009 come on the day that the administrators to Quinn Insurance signed the deal the sell the company to Liberty Mutual and Anglo Irish Bank
Liberty will inject €102m and a joint venture between Anglo and Quinn Insurance will put in €98m to recapitalise the new company, which will be known as Liberty Mutual Direct Insurance. This means Liberty will hold 51% and the joint venture 49%. A brand name for the company will be decided later.
The company will continue to employ 1,570 people at its three locations in Fermanagh, Cavan and Blanchardstown in Dublin.
'In accepting the proposal by Liberty Mutual Direct Insurance, we have successfully mitigated against the worst case scenario - one in which a sale of Quinn Insurance Limited did not occur and where, as a consequence, the Insurance Compensation Fund was liable for the total liabilities of the company,' commented Mr McAteer.
Under the deal, banks and bondholders owed money by Quinn Insurance subsidiary Quinn Property Holdings will released guarantees over its assets in return for €200m. This comes about as a result of Anglo's role in restructuring the overall Quinn Group.
As QPH has assets of €464m, this will release €264m, which will be transferred to Quinn Insurance to reduce the amount of money needed from the Insurance Compensation Fund. €98m of this will go towards the joint venture's investment in the new company.
The new company will have net assets of €119m, meeting financial targets set out by the Central Bank.
Central Bank to look at insurance fund
The Central Bank said it noted today's announcement from Quinn Insurance and would carry out a review of the financial position of the Insurance Compensation Fund in the coming weeks.
The bank said it would then make a recommendation to the Minister for Finance about how much the Minister may provide to the fund based on the outcome of this review. The Central Bank said any levy imposed would apply to non-life insurance companies.
The Joint Administrators of Quinn Insurance will have to apply to the High Court for funding and the Accountant of the High Court will pay out amounts ordered by the court.
The Central Bank said it worked closely with the administrators to ensure that the funds needed from the ICF were limited as much as possible.
