The sad saga of the Irish insurer leaves the popcorn stage.
Final bids should be coming in as I write this. Laura Noonan of the Irish Independent has been the go-to for the saga, so I’ll let her take over:
Several trade players including Aviva, RSA, FBD and US giant Liberty Global are likely to indicate their interest in proceeding to the next stage of the bidding process.Sources also confirmed that a number of private equity groups have been running the rule over the Cavan insurer and may contact Macquarie before tonight’s deadline.
Anglo Irish Bank, which is trying to protect its €2.8bn exposure to the wider Quinn Group, is developing a bid that would see the insurer remain part of the Quinn Group.
Anglo Irish Bank, recall, wants to buy Quinn and use profits to pay off all the debt that was piled on the insurer by Quinn’s former parent company – sort of like garnishing wages. I’m still trying to figure out how bankers who proved they can’t bank will do better by an insurance company, but just call me Debbie Downer. There are ways, of course:
The key unknown in Anglo’s strategy is whether the bank will proceed on its own or submit a joint bit with a trade partner, most probably Liberty.
The bank does have its fans in this peculiar race:
Irish businesses warned of disastrous consequences if the Cavan and Fermanagh insurance giant Quinn Insurance is not kept intact, as the bid process for the insurer cranked into gear.Concerned Irish Business (CIB) was set up earlier in the summer to lobby for the insurer’s salvation, and represents nearly 300 companies who do business with Quinn Insurance and the wider Quinn Group, founded by Co Fermanagh man Sean Quinn.
The group wants Quinn Insurance Limited (QIL) to be taken over by Anglo Irish Bank – a deal they say would allow both QIL and the Quinn Group to remain intact.
What disasters await if outsiders buy Quinn? We’ll let the gentlemen speak for themselves:
Any other deal could see thousands of jobs lost amongst companies that trade with Quinn, since it could trigger the collapse of the entire Cavan conglomerate, CIB warned.
Oh, and their rates might go up:
John Roche, general secretary for the Irish Amusements Trades Association, warned of dire consequences for the industry’s 13,000 staff if QIL does not remain intact.
“Before Quinn, we were held to ransom by big insurance companies,” said Mr Roche.
“With Quinn, we formed a group scheme, and members reduced their premiums by 20%, 30%, even 50%.
“If our business has to go back paying the same premiums we were paying eight or nine years ago, we might as well close down.”
Hotelier Denis McCoy, who employs 230, said he’d already been told his insurance premium would rocket from €150,000 to €300,000 if he had to move to another provider.
“We were told we were lucky that it was only going to be doubled,” he added.
Now I’m not privy to what the proper rate for Irish hotels and amusement parks is. However, I will point out that only upon its takeover, Quinn Insurance hired its first actuaries. And said actuaries revealed the company needed to increase professional liability premiums more than ten-fold to be adequate. And the company just this week failed to gain re-entry to the UK commercial market because its finances were too dodgy.
So perhaps – but only perhaps – rates would go up because they are currently too low.
A couple of random add-ons:
- This process has been slow. In the U.S., a takeover like this would be done within days. This has been going on five months. Usually you would only hear about the state’s intervention after a new owner has been found. Insureds generally find our process more comforting.
- I’m not the expert, but I’d be surprised if Liberty partners with the bank. Liberty is going public, filing for a $1.2 billion IPO this week. So they should have the capital to buy Quinn outright, if that’s their desire. Capital-constrained Anglo Irish Bank won’t be bringing cash to the table. They won’t be bringing special insurance knowledge. What will they bring?