Doubt cast over Quinn Insurance's profitability

QUINN INSURANCE group may never have made a profit, an Oireachtas committee has been told.

The Joint Committee on Finance, Public Expenditure Reform was told by administrator Michael McAteer yesterday that a review of reserves, initiated in July 2010, came to an initial finding just a month later that there had been under-reserving in 2009 to the tune of €400 million.

“The effect of this was to eliminate the profit reserves of the company and question whether the company had been historically profitable,” Mr McAteer said.

The review was conducted by an actuarial firm, EMB, which confirmed its position by November 5th.

On the receipt of EMB’s analysis, actuarial provider Milliman, which worked for Quinn Insurance Ltd, and PricewaterhouseCoopers, which audited the QIL accounts, “revisited their draft 2009 reserves and ultimately moved to levels in line with those arrived at by EMB”.

Mr McAteer, who was appointed to QIL along with Paul McCann on March 30th, 2010, said they had come to the view that, prior to their appointment, there was a reluctance at Quinn Insurance to provide adequate reserves for large cases.

The State has, to date, paid €729 million into a court-administered fund to provide for losses at the company; a further €272 million is expected to be paid next year. After that, payments will drop to about €30 million a year.

At present, the worst case scenario for losses from the insurance group are €1.65 billion.

A levy imposed on all insurance policies bar health policies, in order to repay the State’s investment, will probably have to run for 15 years.

Mr McAteer said the company was examining whether it can recoup some of the money lost by sueing those who provided professional advice to QIL.

An initial stage in the process of deciding whether to take such an action was likely to be completed by late November, and an outcome would be notified to the courts, he told the committee.

Independent TD Richard Boyd-Barrett said the primary responsibility for what had happened rested with the “cowboy capitalism that the Quinn family engaged in, motivated by greed”.

When he said money was “essentially robbed out of the company”, he was asked by committee chairman, Ciaran Lynch, who yesterday replaced former chairman, Alex White, to be more “prudential” with his language.

Mr Boyd-Barrett said it was “pretty criminal by any public standard” to declare profits when making losses and he asked how this was not spotted by the Central Bank at the time.

The head of general insurance supervision with the Central Bank, Domhnall Cullian, told the committee that an annual statement of actuarial opinion was required to be sent to the regulator each year by insurance companies. Each year unconditional reports were sent by Milliman, which was a respected firm.

Asked by Kieran O’Donnell if he was going to pursue €200 million that was gifted out of Quinn Insurance in 2008 to other companies owned by the Quinn family, Mr McAteer said there was no point in chasing money that the party on the other side couldn’t repay.