Whoever buys Quinn will have significant hurdles to overcome
The race is on for Quinn, with the deadline for a sale set by Macquarie Bank for 17 September. But potential bidders will face a hornets’ nest of problems.
Insurance Times extracted figures from Quinn’s last filed accounts, which were for 2008, which showed the biggest obstacle could be the motor book.
Motor makes up a little more than half of Quinn’s €1bn (£838,000) business.
Quinn churned out €566m premium in motor - €305m in the UK and €266m in the Republic of Ireland – making a €34.2m loss.
The Irish insurer did not take sufficient rating action to bring that book back into safety until March this year, when the Irish regulator forced the company to bolster rates between 20% and 25% as pre-condition of re-entering the market.
Run-off time?
That means Quinn will almost certainly have a poor motor book in 2009, which will be feeding through into this year’s claims experience.
Any company that buys Quinn will have to stomach those claims coming through. Will the buyer decide to put the book into run-off?
The buyer will have also lost out due to last week’s decision by the Irish regulator to ban Quinn from UK commercial.
The accounts show Quinn made a €25m profit on third-party liability business, but now that line has gone to the wall because the Quinn didn’t have enough capital and liquidity to meet claims.
Reputation, reputation
And let's not forget, Quinn’s reputation is badly damaged. Potential bidders could face rub-off onto their reputation.
One insurance executive told Insurance Times he didn't 'have a barge pole big enough’ when considering dealing with the business.
Any deal is almost certainly going to be complicated as nationalised Anglo Irish Bank, which is owed €3bn by Quinn.
The beleaguered bank is estimated to have cost Irish taxpayers €25bn, meaning the insurance sell-off could be complicated by politics.
Signs of health
One plus point is that Quinn’s health insurance business in Ireland is still going strongly. It showed profits of £17.1m in 2008, and the business is believed to be still performing strongly.
Sources suggested the business could be a good way for a foreign insurer to gain a foothold in a new market, grabbing the business on the cheap.
Whatever the outcome, this will not be an easy job. Quinn's buyer, whoever it may be, will be forced to clear some significant obstacles.
