Buffett’s vote of confidence in VHI

VHI chief executive John O’Dwyer said that an extension of a reinsurance deal with the VHI for a further four years by Warren Buffett’s Berkshire Hathaway was "a real vote of confidence" in the insurer.

Buffett’s vote of confidence in VHI

The health insurance boss in an interview on RTÉ’s Morning Ireland said that signing the deal ultimately means that its capital position is improved and, along with its business strategy, this will help the insurer to reach appropriate solvency levels, He said the deal will mean that the VHI will not need to go to the Government to seek a handout.

Last July Warren Buffett signed what it said then was a €700m reinsurance deal with VHI. The deal, which was VHI’s first reinsurance deal, involved the billionaire’s company, Berkshire Hathaway, taking over some of the risks of the insurer, to a value of up to €700m. It has been reported that the new deal will save the Government from pumping in up to €200m into the VHI’s reserves. In 2011, the Government believed that it would face a request of €293m from the VHI.

“We are going to stand on our own two feet. We have a plan for the future that a company like Berkshire Hathaway has expressed confidence in,” said Mr O’Dwyer.

Nevertheless, he refused to rule out further price rises but said that, although VHI had put up prices recently, the 3% rise was the lowest in the market. He said, over the past two-and-a-half years, the VHI had average price increases of 4.5%.

Mr O’Dwyer said that the key reason for a €65m surplus achieved by VHI last year was a “cost containment agenda”. That compared with a €54.3m surplus last year.

Mr O’Dwyer said that part of this focus on cost containment was on “unusual patterns” of payouts. A “beefed up” special investigations unit, that included forensic accountants, had identified €15m of these payments.

Mr O’Dwyer said that VHI had lost 70,000 customers last year and now had almost 1.1m customers.

Health Minister James Reilly said that VHI’s results were “a positive indication of the future sustainability of the Irish private health insurance market.”

- Business Post News Service

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