123.ie deal undermines Quinn's traditional model
Published 29/07/2010 | 05:00
THINGS aren't getting any easier for those trying to place a hefty valuation on Quinn Insurance (below, with former chairman Sean Quinn), particularly after this week's deal for 123.ie. Already, Quinn Insurance lands on the sales block with disadvantages -- it is not profitable; has a solvency problem; there are worries over future claims costs; and it is spread out over Ireland in a way that few buyers find appealing.
As against that, it writes a lot of business, generally is competitively priced and has a large market share in several key segments of the insurance market. But UK insurance giant Royal & Sun Alliance (RSA) appears to have found a more suitable acquisition target in online Irish insurer 123.ie.
123.ie has assets of just €20m, but RSA is prepared to pay €65m for the business -- and possibly more. It is effectively paying just over one year's premium income. Overheads at 123.ie are small, with just 64 staff producing €60m of premium income a year.
This is the kind of acquisition the major international players want to make in Ireland. Fast growing, non-labour intensive, online and with only limited claims risk and no brokers to pay commissions to. Quinn Insurance doesn't fit snugly into that category.
However, Quinn is coming right gradually after recent price increases were put through and it could yet surprise in terms of valuation.