Losses of €706m will lead to call on state fund

QUINN INSURANCE (QIL) made a total loss of €706 million in 2009 and is likely to report further losses of €160m for last year.

The figures mean that QIL is likely to make a call on the state’s Insurance Compensation Fund and could also result in an industry-wide levy being applied to non-life insurance customers.

The company — which has been in administration for just over a year but is about to be taken over by US insurer, Liberty Mutual — released its most up-to-date financial figures yesterday.

QIL’s joint administrators, Michael McAteer and Paul McCann of Grant Thornton, said that the 2009 loss comprised an operating loss of €559m (mainly relating to non-motor business at the company’s UK operations) and an investment loss of €147m due to a write-down in the value of Quinn Property Holdings assets.

Mr McAteer said the business has stabilised over the past 12 months, but warned that the 2010 accounts are likely to show further heavy losses.

“Since our appointment as joint administrators in March 2010, the losses suffered by the business have been stemmed and we’re confident that policies commenced since our appointment are profitable,” he said.

“However, we estimate that QIL will record a further loss in 2010 of €160m, mainly reflecting UK business written immediately prior to our appointment. A combination of the 2009 and 2010 losses will result in the company having a shareholder fund deficit of €496m as at December 31, 2010,” he added.

The administrators added that QIL’s results for both 2009 and 2010 will lead to a €600m call on the Insurance Compensation Fund — established to cover losses of insurance companies — with the first call amounting to around €180m and being made later this year.

Mr McAteer added, however, that 25% of profits generated by QIL’s incoming new owners will also be used to reduce the call on the fund.

“In accepting the proposal by Liberty Mutual Direct Insurance (LMDI), we have successfully mitigated against the worst-case scenario — one in which a sale of QIL didn’t occur and where, as a consequence, the Insurance Compensation Fund was liable for the total liabilities of the company.

“This scenario would have exposed the fund to a call significantly higher than is currently envisaged,” he said.

Meanwhile, a statement from the Quinn family last night said: “The Irish taxpayer needs a full explanation as to how we have arrived at this point considering that Quinn Insurance had over €1.1bn of liquid assets in addition to €464m of property at the end of March 2010.

“The repeated statements of the joint administrators to the High Court and to the media that the company was profitable and there would be no call on the Insurance Compensation Fund now need to be reconciled with the results announced today.”