Policyholders safe as provisional liquidators move in at Quinn

Quinn Group Limited (QG), the family-owned diversified group of which Quinn Insurance is a part, earlier this week stressed that the insurer has ample reserves and is profitable. It said that the regulator had acted because poorly performing investments had forced the company’s solvency ratio below its 150% minimum. QG said that the insurer needs some €100m to restore its solvency ratio. Irish policyholders of Quinn Insurance Limited can continue to renew policies, take out new business and make claims in the normal way under the new management of the company, said the regulator. The U.K. business of Quinn is, however, now closed to new business.hide“The appointment of joint provisional administrators will better protect policyholders. It will allow the firm to remain open for business, to continue to be run as a going concern under different management and to put the business on a sound commercial and financial footing,” said the regulator. The FR has an onsite presence at the firm to oversee its actions and to work with the new management. The FR said that it has also commenced an investigation into ‘certain matters within Quinn Insurance Limited that have very recently come to light.’ The FR said that existing U.K. policyholders would also not be affected by the decision to shut the business there, as existing policies will remain valid. “Customers can make claims in the normal way,” said the FR. “The effect of this action is to prevent Quinn Insurance Limited suffering further financial losses from its currently unprofitable U.K. business,” it added. The Quinn Life business, which is a separate entity, is not affected by these measures, confirmed the FR. Quinn was set up in 1996 as a direct underwriter of private and commercial motor property business and grew fast to become the second largest insurer in Ireland. Quinn’s U.K. operation also underwrites a range of commercial lines including professional lines for architects, accountants and solicitors. According to one broker, in commercial terms, the biggest impact will probably be felt by U.K. lawyers as the group was a leading professional indemnity insurer in this tricky line that is fast falling short of capacity as claims and prices rise in tandem. Neil Nimmo, Executive Chairman of broker Lockton Risk Solutions, said: “It is clearly too soon to state with absolute certainty how this development will affect the U.K. solicitors insurance market, but, we can say that Lockton is already in negotiations with a few insurers to find alternative solutions for those firms that have been caught up in this financial crisis.” QG issued a statement to reassure staff and customers of its other various businesses that the problems of the insurance business would not spread to the rest of the group. It said that the QG has borrowings of €1.2bn with annual cash profits of between €300m and €500m over the past five years. In an earlier statement the group described some of the reporting in ‘certain Sunday newspapers’ last week about the overall financial position of QG as ‘extremely inaccurate and misleading.’ It said that QG is forecasted to generate over €300m of EBITDA in 2010 and has exceeded its profit forecast at the end of the first quarter. “Prior to the recession QG was generating EBITDA of over €500m per annum,” it noted. The group said that it has no liquidity problems because it has about €70m of surplus cash. It added that profitability is ‘strong’ with cash profits of €47m generated in the first quarter. Moreover, according to the family-owned firm, Quinn Insurance has ‘ample’ liquidity with almost €1bn in cash reserves as well as other assets. It said that the company was ‘extremely profitable’ and generated about €18m in profits in March alone. But, the insurance company’s solvency ratio was hit by the impact of investment losses in excess of €220m over the last two years, said Quinn. This meant that the company requires about €100m to restore the solvency ratio to the FR’s requirement of 150%. The group said that guarantees issued by Quinn Insurance subsidiaries can ‘given appropriate time’ be withdrawn by the group’s lenders with no impact on the overall group borrowing of €1.2bn. “There is no cash requirement to achieve this. In other words, rectifying this situation only requires an increase in net indebtedness of €100m,” stated the group. It also said that because of primarily equity losses of about €3bn outside of the Quinn Group, the Quinn family owe Anglo Irish Bank €2.8bn. This debt is secured on the family’s international property portfolio and their shareholding in Quinn Group, explained the statement. “If Quinn Insurance can be removed from administration then there will be no difficulty in repaying both the group and family debt as well as continuing to provide long-term employment for all concerned,” it concluded.

Policyholders safe as provisional liquidators move in at Quinn

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