STATE-CONTROLLED HEALTH insurer VHI ended 2009 almost €42 million in the red and lost 120,000 customers during the year, its annual accounts show.
The company indicated it is likely to seek the Government’s permission to increase premium charges early next year, but has not decided at this stage how much it will seek.
VHI earned €1.314 billion in premium income in 2009, compared to just over €1 billion the previous year. The cost of claims grew to €1.341 billion from €972 million, while administrative costs were €92.4 million.
The overall deficit on its underwriting business was €104.7 million. The health insurance levy and age-related tax relief resulted in a gain of €29.8 million, resulting in an underwriting shortfall for the year of €75 million compared to €31.3 million in 2009.
Investment income came to €26.7 million, compared to a €42 million loss in 2008. This gain, combined with a tax credit, meant the company’s overall shortfall for last year was €41.7 million, against €65 million in 2008.
Chief executive Jimmy Tolan said the company lost 120,000 customers in 2009. This was partly due to clients leaving for its competitors, Aviva and Quinn, and partly due to people losing jobs.
The company said yesterday its legal advice was that it had to ensure its income at least matched spending in 2011.
Mr Tolan indicated that VHI was likely to seek an increase in premium charges early next year. However, it had yet to decide by how much.
VHI’s solvency ratio – the ratio of its premium income to reserves – stands at 22.3 per cent. The reserves themselves stood at €307 million at the end of last year against premium income of €1.3 billion. The company said its reserves were 18 times those of its main competitor, Aviva, which has €17 million.
VHI has more older, high-risk customers on its books than either of its competitors, which means it is paying out more in claims than either. Mr Tolan said yesterday that for every €100 the State company earns in premium income, it pays out €99 in claims.
On average, it spent €900 on healthcare for each of its customers, which it estimated was around twice what its competitors were paying out. According to VHI’s figures, Aviva makes a profit of 6 per cent of its premium income as a result.
However, Aviva reacted last night by accusing VHI of deliberately incurring losses at a high cost to the taxpayer in order to preserve its market share.
“VHI is the only health insurer that is not regulated by the Financial Regulator, and urgent action must be taken to put VHI on a sound regulatory and financial footing immediately,” Aviva said in a statement.
The Government is committed to bringing VHI under the charge of the Financial Regulator. This could require it to have a solvency ratio of up to 40 per cent of premium income, which could require it to have up to €500 million of free reserves.
