Most likely buyers are already in market here
ON the face of it, all the omens look good for a sale of Quinn Insurance.
Sean Quinn insists the company is making millions every month. And almost 30 companies have apparently expressed interest in buying in. Leading industry executives, however, have painted a very different picture.
They stress the chances of another insurance player coming into the Irish market are very limited. The insurance market is contracting, as the country's economic woes mean people are insuring less valuable cars and houses, and companies are insuring smaller turnovers and lower value properties.
The most likely buyers, then, are the insurers already active in the Irish market.
The health business will be the easiest sell.
AXA bid for Bupa when Quinn Insurance took it over in 2007 and retains a keen interest in getting into the health area.
Aviva took out Vivas and is eager to build its health book. And Allianz writes health globally, and does expatriate health business out of Dublin.
Three obvious bidders, and the auction hasn't even officially begun. Selling on the rest of the business, however, looks more complex.
The main asset Quinn has is its policyholders.
If nobody buys Quinn and the company is shut down, those policyholders will automatically get distributed amongst the existing insurance players.
"If we're all going to get the business anyway why would we need to buy it?" as one executive put it.
Then there is the massive sums of money that could be involved in any purchase.
The Financial Regulator's initial assessment of Quinn said the insurer's liabilities outstripped its assets by a couple of hundred million euro.
There's also the contentious issue of pricing and predicting claims.
Each insurer has very specific policies they follow when they write business.
If insurer A quotes €600 for a policy and insure B quotes €800, it is because they both believe the policy will have a different claims cost in the long term.
If Quinn has written a policy for €600 and another insurer would have charged €1000 for that policy, the second insurer is unlikely to want to buy that business from Quinn, because the second insurer believes the cost of that business is 40pc higher than what Quinn believes.