Wednesday 18 October 2017

Liberty close to a €100m deal to buy rest of Quinn insurance business

Discussions with liquidator KMPG over sale of IBRC stake in insurer

Former billionaire Sean Quinn is one of those expected to benefit from the shorter bankruptcy discharge period
Former billionaire Sean Quinn is one of those expected to benefit from the shorter bankruptcy discharge period

Nick Webb and  Roisin Burke

The rest of the former Quinn dynasty insurance business is to be sold to the Boston insurer that already owns 51 per cent of the company, the Sunday Independent has learned.

In a deal due to close before Christmas, Liberty Insurance will pay around €100m for the remainder of the company following several months of negotiations that kicked off after IBRC's liquidation.

The IBRC liquidator-controlled 49 per cent share of Liberty is among the former Anglo assets that must be either sold or transferred to Nama next year.

Liberty, led in Ireland by Patrick O'Brien, has long wanted to gain 100 per cent control over the car and home insurer.

Liberty paid €103m for a 51 per cent stake in what was then Quinn Insurance in November 2011. It was always its intention to buy out the rest of the business within five years, a process that was accelerated by the IBRC liquidation. The US insurer generally does not do joint ventures.

Following the Liberty Insurance acquisition, former Anglo Irish Bank (IBRC) took the 49 per cent balance of the business as part of a €200m recapitalisation of the insurer.

IBRC provided €99m as part of that recapitalisation, which was deemed to be the value of a 49 per cent stake in the business.

New account information just filed says: "Using Tangible Net Assets as the valuation measure, IBRC's 49 per cent stake is worth €82.05m."

Negotiations on the sale are believed to have been mainly conducted from the Boston parent office rather than locally.

Offering a crumb of comfort to the taxpayer, the proceeds of the sale are believed to be earmarked to go into the State's insurance compensation fund, which all consumers with motor and home insurance are forced to pay a two per cent levy into for at least the coming decade to pay for Quinn Insurance's collapse. Around €1.65bn is needed to make up for the Quinn collapse and shore up against claims against the insurer, according to a report by administrators Grant Thornton.

Fees to administrators in Ireland and Britain have cost over €14m to date.

In 2010 the Central Bank put Quinn Insurance into administration after it emerged that it had breached its solvency requirements by 250 per cent – €830m – by the end of 2009.

Further alarm bells rang when it emerged that assets of the insurance group had also been used to guarantee loans issued by Anglo Irish Bank to Quinn companies associated with foreign property investments.

An expansion into underwriting in Britain was a lossmaking disaster: once the star of the Quinn Group generating hundreds of millions in cash and employing 2,700 people, it became a massive corporate and regulatory failure.

Latest Liberty Insurance accounts record a slight operations loss of €1.2m and profit before tax was €20.14m. In 2012, it generated total income of €224m.

The directors' report said that "this has been the first full year of trading for the company and not unexpectedly, the performance of the business has been challenged".

Liberty's spokesman declined to comment on the process, as did the IBRC special liquidators.

Sunday Independent

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