Boston-based Liberty Mutual has agreed to buy a controlling stake in Ireland’s Quinn Insurance, but much of the firm’s losses will be transferred to struggling Irish consumers.
Quinn Insurance, which has 275,000 customers, was put into administration last year amid losses linked to the collapse of Ireland’s property bubble.
The firm on Thursday announced a 2009 loss of 706 million euros ($1.05 billion) and estimated it lost a further 160 million euros in 2010.
Under a restructuring plan, administrators will create a new entity from Quinn Insurance assets, the Liberty Mutual Direct Insurance Co. Liberty Mutual has agreed to buy 51 percent of the new entity and will take full operating control.
"Liberty Mutual’s financial strength will provide assurance to many commercial brokers," said administrator Michael McAteer.
The sale ends the role in the firm of Sean Quinn, who became Ireland’s richest man by turning a small gravel mine into the Quinn Group, a multi-billion-euro construction and insurance conglomerate.
But he lost billions in a catastrophic investment in scandal-hit Anglo Irish Bank, prompting Ireland’s financial regulator to put Quinn Insurance into administration.
The restructuring will leave a 600 million-euro funding hole for Quinn Insurance policies, forcing the new entity to tap Ireland’s insurance compensation fund, a levy to be imposed on the country’s non-life insurance companies.
The decision has caused outrage among Irish consumers already reeling from tax hikes to pay off the billions of euros of debts of Anglo, which is being wound down by the government.
Twenty-five percent of the new entity’s profits will be channelled into the compensation fund.
Anglo Irish remains a major creditor and will take a 24.5 percent stake in the new firm in exchange for releasing assets it had held as collateral.
Administrators will invest 98 million euros in the new firm on behalf of Quinn Insurance, which will also control 24.5 percent but play no role in the company’s operations.
The new firm will assume 81 million euros of liabilities from Quinn Insurance, but will be "fully solvent" thanks to a combined investment of 200 million euros. All 1,570 workers will be retained.
Quinn Insurance’s UK policies, which administrators said accounted for a large part of 2009 operating losses, will remain under administration and will not be part of the new entity.
Also Quinn Healthcare, a separate insurance entity owned by the Quinn Group, will not be included in the deal.
The administrators said they had wound down Quinn Property Holdings (QPH), a subsidiary of Quinn Insurance, whose assets were written down by 147 million euros in 2009.
Of QPH’s 464 million euros of assets, 200 milllion will be paid to creditors while the remaining 264 million euros will be used to fund the funding shorfall left by Quinn Insurance. (Reuters)
