US insurer gets to bid for Quinn Insurance

US INSURANCE giant Liberty Mutual has been granted preferred bidder status for Quinn Insurance (QIL), as part of a joint venture with Anglo Irish Bank.

The High Court has been told that no job losses among Quinn employees on the island of Ireland would result should the bid get the go-ahead from the relevant authorities.

While the joint bid for QIL — which has been under administration for just over a year — had been deemed the unofficial front- runner for a number of months, yesterday’s announcement puts paid to the only other possible alternatives, namely a takeover bid by Zurich Insurance and a Quinn Group-backed bid.

Quinn Group representatives had argued that the latter bid represented the only way of repaying the family’s €2.88bn debt to Anglo Irish Bank. However, the wider move yesterday, on Anglo’s part, of appointing a share receiver to the larger Quinn Group is now being seen as an easier way of recovering some of that debt for the taxpayer.

A successful conclusion to the QIL deal, is now likely to see Liberty Mutual, the US’s fifth largest property and casualty insurer, take over the day-to-day running of the insurance business.

Liberty and Anglo will now hold discussions with QIL’s administrators and the transaction should be formally concluded in the next three to four months.

Anglo, which is the majority partner in the proposed acquisition is to have “no involvement in the day-to-day operation in the new company, but would act in a loan recovery capacity”. No other offers for Quinn will be considered.

The matter was briefly mentioned before President of the High Court Mr Justice Nicholas Kearns as joint administrators Michael McAteer and Paul McCann of Grant Thornton previously indicated they wish- ed to keep the court informed of the sale process.

While no transaction terms have been made available, it is understood that all 1,570 Quinn Insurance staff on the island of Ireland will have the option of transferring to Liberty Mutual.

While QIL’s Navan facility will close, that office’s 100 employees will transfer to either Blanchardstown or Cavan, which will remain the company’s headquarters. The firm’s British office, in Manchester, will also close, with the 30 employees there being offered redundancy.

The firm will be centralised in three offices in Cavan, Blanchardstown and Enniskillen.

The announcement is said to not affect Quinn customers’ polices.

The joint administrators hired Merchant bankers Macquarie Capital Europe Ltd to help sell the group.

“We’re pleased to be able to say that there will be no loss of jobs in either the Republic or Northern Ireland as a result of the sale process. Our goal has always been to preserve the maximum number of jobs, and we’ve achieved that outcome,” QIL’s administrators said yesterday.

“We’re confident that this bidder is the best choice for QIL, its staff, customers and the Irish economy,” they added.

The employee representative committee in QIL also welcomed yesterday’s announcement on the future ownership of the firm.

Liberty Mutual has had a presence in Ireland since 1997, when it opened its Dublin-based professional liability underwriting facility.

The Financial Regulator put the insurer into administration after his office discovered guarantees had been provided by Quinn Insurance subsidiaries as far back as 2005 on Quinn Group debts of more than €1.2bn.

The regulator said the guarantees reduced the amount the firm had in reserve to protect policy holders against possible claims, putting 1.3 million customers at risk.

An investigation into breaches of insurance regulations was launched after the joint administrators were appointed.

Loan stress

By Niamh Hennessey

BORROWERS who fail to repay their loans can in extreme cases face the loss of their home or jail.

There is a typical process of collections escalation that a consumer would have to endure.

Depending on the bank, there would be a mix of phone calls, reminder letters and perhaps even house calls as the lender invokes its right to collect the debt.

Financial adviser Frank Conway said in some cases the lender could go to court, but this would often depend on the amount owed. “In more extreme cases, a debt can make it all the way to resulting in the loss of a home but this is extremely rare. Bottom line is that the law is clearly on the side of the lender,” he said.

Q&A

WHAT does this mean for the day-to-day running of the Quinn Group?

The group will keep its identity and there are no plans to dispose of any of its divisions — which stretch across construction, glass, packaging, hotels and plastics. Its 2,600-plus workforce will also be protected.

Who is managing the group?

All Quinn family involvement — including that of Seán Quinn — is being removed. The share receiver has appointed a number of non-executive directors to the Quinn Group board. Paul O’Brien — formerly of Belgian-based hotel operator, Four Leaf Investment — will succeed Liam McCaffrey as group chief executive.

What is the role of the share receiver?

KPMG’s Kieran Wallace will take control of the Quinn Group shares and manage its restructuring, but will have no impact on the day-to-day operations of the group’s divisions.

What does it mean for the Quinn debts?

The Quinn family owes Anglo Irish Bank €2.88bn and a further €1.3bn or so to other lenders. Anglo chief executive Mike Aynsley said that this approach — which protects the business — is the best way of maximising the debt repayment. However, he warned that some of the debt would likely be written off. Anglo has also agreed a five-year debt restructuring plan with the other lenders.

What becomes of Quinn Insurance?

A consortium of US insurance giant Liberty Mutual and Anglo Irish Bank has been granted preferred bidder status for the insurance business, which has been under administration for just over a year. Discussions over the details of the deal will be carried out over the next six weeks, with completion of the transaction not expected for a further 12-14 weeks.

Will the Quinn Insurance brand remain?

While that will, ultimately, be a decision for its new owners after the takeover deal finally concludes, industry sources have suggested that the company will probably be re-branded over time.

What does Quinn Insurance’s sale mean for customers?

For customers, it is a case of business as usual for now. Premiums and policies won’t be affected until the new owners come in, in three months’ time.

Where does this leave staff?

All 1,570 Quinn Insurance staff based on the island of Ireland will have the option of transferring to the Liberty-led new ownership. Some 30 redundancies are on the cards, however, at Quinn’s British facility in Manchester.

Will any offices be closing?

Cavan will remain the headquarters of the insurance operation. However, Navan and Manchester will close. But, staff in Navan — 100 in total — will relocate to either Blanchardstown or Cavan.

Timeline

* 2008: Quinn Group writes off €829 million on investments, primarily in Anglo, in its 2007 accounts, leaving it with a pretax loss of €425m.

* February 2009: Seán Quinn says the group is restructuring its board and the board of Quinn Insurance. He describes his recent investments, primarily in Anglo, as “ill-timed, costly and very much regretted”.

* January 20, 2010: The Sunday Times reports Mr Quinn lost €2.5 billion in Anglo, citing an internal report by the bank shortly before it was nationalised.

* March 23, 2010: Reports emerge suggesting Anglo is in discussions with the Quinn Group about restructuring its debts ahead of the bank’s own reorganisation.

* March 30, 2010: The High Court appoints two joint provisional administrators to Quinn Insurance.

* April 3, 2010: Anglo says it wants to put Quinn Insurance on a sound commercial footing in an attempt to secure the repayment of €2.8bn owed by Seán Quinn and his family.

* April 8, 2010: Quinn Group denies it needs €700m in cash, which Anglo says it wants to pump in as part of a restructuring package.

* April 15, 2010: The High Court confirms the appointment of a full-time administrator after the Quinn Group withdrew its objection.

* April 30, 2010: The administrator announces 900 job losses.

* May 25, 2010: Administrators Grant Thornton receives 900 applicants for redundancy, a figure they had sought.

* September 9, 2010: Quinn Insurance confirms it is likely to increase premiums by double-digit figures.

* April 14, 2011: Seán Quinn and his family confirm they will no longer have any role in the management of the Quinn Group after a move by Anglo Irish Bank. The bank has announced the appointment of a share receiver to take control of the family’s stake in the parent company of the Quinn Group.

— Stephen Rogers and Fiachra Ó Cionnaith