What’s Quinn worth?

It’s always buyer beware in insurance purchases, but Quinn Insurance – the Irish flameout of 2010 – is a special case.

The Irish Independent points out that Quinn had been making money from the financial crisis, but much of that came from an investment strategy that seems, reading tea leaves from an ocean away, inappropriately aggressive for a p&c insurer. More recent years have been money losers, and there’s some issues with inadequate reserves to sort through.

Insurers have been selling for between six and nine times most recent profit reports, the Independent says. That means the company could fetch on the order of €1.5 billion, assuming it could return to its late aughts profitability. But the deep, deep recession in Ireland would seem to depress that.

And, from the sounds of Jonathan McMahon, No. 2 at Ireland’s Financial Regulator, the business model sounds broken, a characteristic it shares with one of its more aggressive suitors:

Quinn Insurance had a deeply troubled business model. Anglo Irish Bank, again, had a deeply troubled business model. To sustain high returns they had to take high risks.

In a different article, the Independent reports the company has been profitable in recent weeks. That’s on the back of a 25% increase in auto premiums in UK. The company is writing less business there, but revenues are higher.

Good luck, guys, but I would think a hike that steep in a competitive market like auto insurance would tempt adverse selection, so your loss-ratio assumptions on your renewals may be a tad low. But administrator Grant Thornton is filled with people smarter than me, so maybe things will work out.

Advertisements
Tagged ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: