Deal struck as Quinn reveals losses

Quinn Insurance, the leading insurance firm founded by tycoon Sean Quinn, had losses of €706m in 2009.

As the staggering financial results were announced, administrators said a takeover deal has been finalised with US insurance giant Liberty Mutual and nationalised Anglo-Irish Bank.

All 1,570 staff in the Republic and the North will be retained under the sale, the administrators said.

But as part of the deal and due to the huge losses suffered by Quinn Insurance, Irish consumers in will be forced to repay €600m under a special levy.

The cash penalty is being imposed because the new owners – Liberty and Anglo - will call on the State to dip into its Insurance Compensation Fund to cover losses.

Joint administrators Michael McAteer and Paul McCann said the losses have stemmed since they took over the day-to-day running of the business 14 months ago.

“In accepting the proposal by Liberty Mutual Direct Insurance, as announced today, we have successfully mitigated against the worst case scenario – one in which a sale of Quinn Insurance Ltd did not occur and where, as a consequence, the Insurance Compensation Fund was liable for the total liabilities of the company,” they said.

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

The Central Bank said tapping the fund had been expected.

“The need to access the ICF is not unexpected in light of the serious and persistent solvency problems at QIL which led to its administration,” it said.

“The Central Bank will carry out a review of the financial position of the fund in the coming weeks and will make a recommendation to the Minister for Finance (Michael Noonan) regarding the funding that the minister may provide to the fund based on the outcome of this review.”

It added: “The Central Bank worked closely with the administrators to ensure that the funds required from the ICF were limited as much as possible.

“The Central Bank’s main concern is to ensure that policyholders’ claims are paid as they fall due.”

The penalties on consumers to cover the use of the fund could range from 2% up as high as 6% on an insurance premium for one year. The levies could also be in place for a decade, reducing year on year.

The first amount taken from the fund will be €180m.

Quinn Insurance financial returns show that the vast bulk of the €706m losses came from unprofitable business in the UK valued at €559m.

Elsewhere, the administrators said investments in property by another division of the Quinn Group, Quinn Property Holdings, were significantly hit by the downturn.

Quinn Insurance lost €147m in these deals.

The administrators expect losses of €160m for 2010, mainly due to business written in the UK in the months prior to their appointment.

The administrators also said that buyers Liberty Mutual and Anglo will divert 25% of profits to cover some of the cost of tapping the state compensation fund.

Mr Quinn and his family were stripped of their entire business empire earlier this month.

It was the final act in a series of punishing initiatives by Anglo and the state to try to recoup about €3bn losses the entrepreneur built up buying a secret 25% share in the bank.

The Government was also under pressure to retain as many jobs in the group as possible as Quinn’s heartland is the unemployment blackspot around the border.

The Quinn jobs are estimated to be worth €100m to the local economy.

Mr Quinn has lost control of the insurance wing – in administration for 14 months since regulators identified a huge hole in its finances – his hotel, pub and property division, cement production and other manufacturing interests.

At the height of his wealth, Forbes listed Mr Quinn as the 164th richest in the world and valued his fortune at close to $6bn (€4bn).