The Irish Independent reports that the gravy train of earnings flowing from Irish insurance companies to their international parents finally ended last year as dividends paid by insurers plunged more than 65pc.

The collapse in profit distributions is revealed in the Financial Regulator's insurance statistical review, which charts the sector's descent into loss-making territory.

In the heady days of the insurance boom, dividends from insurers operating out of Ireland surged as high as €2.4bn in 2007. By 2008, the figure had contracted to just under €1.6bn.

New figures out today show that less than €560m was distributed by Irish-based insurance companies last year, including €188.45m from life companies and €370.8m from general insurers.

The biggest payouts came from Aviva, which paid €110m from its general insurance arm, €4m from its health arm and €21.4m from its life insurance wing.

Allianz was also a substantial payer, with just over €50m, while FBD's dividends came in at €48m for the year. Barclay's controversial payment divisions paid about €22m, sharply down on the record €687m it paid in 2008.

Quinn Insurance Ltd (QIL), which paid hundreds of millions in dividends in the good years, paid out nothing last year.

The lower dividend payments come against a stark trading environment, with the non-life insurance sector plunging into the red and life insurance sales falling marginally.

The overall Irish insurance market posted a net underwriting loss of €124.5m for the year, against a profit of €121.9m for the year, as a fall in life insurance activity and spiralling general insurance cost took their toll.

Life insurance sales to the Irish market fell by 14.5pc last year, while the general insurance industry was racked by more than €250m of flooding costs.

There was better news for insurers writing international business out of Ireland though, was their premiums rose by 12.1pc in life insurance and by 111pc for general insurance.

The international business written from Ireland is also showing improved profitability, recording an under-writing result of €179.8m for 2009 against the €109m profit achieved a year earlier.

The surge in foreign risk written from Ireland also pushed the overall industry's gross written premium into positive territory, with this year's €40.19bn marginally higher than 2008's €38.39bn.

The Irish Independent also reports that the previous lending record of Anglo Irish Bank was the key reason the Government and the EU Commission shot down the 'good bank/bad bank' model proposed by the bank's senior management.

Sources familiar with the talks involving the EU, the Department of Finance, the Central Bank, Anglo and the NTMA told the Irish Independent that staff previously associated with lending decisions at the bank could have taken key roles in the new bank and this made key players nervous.

The good bank/bad bank idea would have involved putting between €2bn and €3bn of fresh capital into a new bank and this would have been lent into new sectors by the bank's existing staff. Property would have been a large part of the lending.

At several meetings, government representatives expressed concern about the past record of staff members, although they expressed satisfaction with the recent work done by the Mike Aynsley-led management team.

Baulked

Government representatives are believed to have baulked at the idea of Anglo lending such large sums into segments of the market previously ignored by the bank.

The EU Commission retained its opposition to this idea right to very end. Instead, the bank will be split in two -- a savings bank and an asset recovery bank -- and both will have to be capitalised with funds decided by the Financial Regulator Matthew Elderfield.

Yesterday, chairman of Anglo Alan Dukes admitted there was no certainty the capital required for the two new banks plus funds already committed would not exceed €25bn.

The two banks will be separate, but the savings bank will end up funding the recovery bank. This will be done by a bond that could be as big as €45bn. A source described the arrangement as like one bank branch lending to another. The new savings bank will be able to gather deposits from a range of markets including European countries and the Isle of Man.

This savings bank is unlikely to need much capital, but the recovery bank will need a lot of regulatory capital, with some sources suggesting it may need 10pc of assets in equity capital to cover for the inherently risky nature of the loans.

The new Anglo Irish recovery bank, which will take €38bn of loans, is getting a banking licence to prevent loans being added to the budget deficit, the Irish Independent has learned.

Under the original good bank/bad bank idea proposed by Anglo's management, the entity taking the loans was not going to be a bank, but a simple commercial company, without a banking licence.

But this could have meant the company's loans would have been added to the general government balance (GGB), the European version of the annual budget deficit.

The Irish Times reports that key elements of the Government’s new rescue plan for Anglo Irish Bank are already being questioned in Brussels as EU competition commissioner Joaquín Almunia awaits formal submission of the proposal from Minister for Finance Brian Lenihan.

Separately Jean-Claude Trichet, president of the European Central Bank, has proposed that eurozone members that break the region’s rules on public finances should be excluded temporarily from Europe’s political decision-making.

The controversial suggestion by Mr Trichet, in an interview published in the Financial Times today, would be part of a “quantum leap” in the governance of Europe’s monetary union, needed to prevent a future Greece-style economic crisis.

It is understood Mr Almunia may seek clarification on whether Anglo’s “funding bank”, which will operate alongside the “asset recovery bank”, should be allowed to take new deposits from customers. Further questions surround the State’s ultimate financial liability to Anglo, something the Government will not specify until October.

Mr Almunia has said he views the new plan positively, but maintains “important” aspects of the plan will have to be clarified before the EU executive can give the go-ahead to the proposal.

Some but not all of these concerns are understood to centre on the funding arrangements for the two entities and the extent to which they would be guaranteed by the State.

Further uncertainty surrounds plans for the “funding bank” to accept new deposits, an institution described by Mr Lenihan as a Government-backed guarantee specialist deposit bank. Owned by the Minister, this entity is designed to provide a secure home for Anglo’s existing depositors and “any new customers” who wish to lodge funds in it. The “funding bank” will not, however, engage in any new lending.

The precise nature of Mr Almunia’s concerns remains unclear. In theory at least, the fact that the “funding bank” will have the benefit of State backing while competing for deposits with banks who engage in lending may raise competition concerns.

While such questions remain to be resolved, the new plan is seen in Brussels as a “neater” resolution of the State aid questions surrounding the rescue of Anglo. In the period since its nationalisation in January 2009, the bank has already received some €25 billion in emergency recapitalisation from the State.

Meanwhile, Mr Trichet’s comments highlight how he is trying to shape the debate on eurozone reform, which is expected to culminate in the coming weeks when Herman Van Rompuy, president of the European Council, reports on how to revamp the rules.

Following Greece’s public debt crisis in May, the bank has been at the forefront of lobbying for tougher rules – backed by sanctions – and the independent monitoring of public finances.

The Frankfurt-based bank has rejected the idea of a eurozone member being thrown out. But Mr Trichet said the “temporary suspension of voting rights is something that should be explored”. His proposals could run into trouble with member states, especially as it is not clear that the withdrawal of voting rights would be possible without changing EU treaties.

German chancellor Angela Merkel has called for similar measures, but most other EU leaders are against it as they do not want to reopen the treaties. In Ireland’s case, this would require a referendum – a step the Government would be loath to take.

The Irish Times also reports that Quinn Insurance recorded a deficit of €788.4 million in unaudited accounts for 2009 that have been provided to the Financial Regulator.

This involved a trading loss of €127.5 million on its underwriting activities and exceptional costs of €677.6 million relating to the write down of certain non-core assets held by subsidiaries.

These include a wind farm in Derrylin and certain hotel properties.

Of the trading losses on its underwriting activities, €41 million related to its business in the Republic and €86 million to the UK.

These figures will emerge today from the publication of the Central Bank’s annual statistical review for the insurance sector.

Quinn Insurance’s joint administrators at Grant Thornton yesterday moved to reassure the public about the current financial viability of the company.

They said the 2009 underwriting losses primarily resulted from increased flood claims, the introduction of the Government health levy and an increase in claims provisions in line with market trends.

The increase in asset writedowns was in line with regulatory requirements and take account of potential commitments to third parties of Quinn Insurance subsidiaries.

They added that the company is operating profitably at present and business volumes are strong both here and in the UK.

“On a month-by-month basis we are making money,” joint administrator Michael McAteer told The Irish Times yesterday.

“We have introduced significant price rises in the UK and we’re very confident that the business is profitable.”

After a period of being barred from writing business in the UK following their appointment on March 30th, the administrators have allowed Quinn re-enter the motor market and premium prices have been increased by an average 20 per cent.

“Even with the hardening in prices we’re not seeing a reduction in volumes,” Mr McAteer said.

He said there had been “no significant price change” in the Irish market.

When asked if Quinn Insurance would record a profit for 2010, Mr McAteer said it would be “borderline” due to legacy issues that still have to be washed out of the business.

Mr McAteer confirmed that Quinn Insurance has already paid out in excess of €500 million in customer claims so far in 2010, and continues to process claims as normal.

The joint administrator said Quinn Insurance was “trading above its business plan”.

The stronger-than-expected volumes meant that up to 100 out of a planned 902 voluntary redundancies would not now proceed.

This related mainly to an office in Enniskillen in Northern Ireland.

He said an application to re-enter the commercial market in the United Kingdom was currently being considered by the Financial Regulator.

The costs of the administration process are running at €400,000 a month, Mr McAteer added.

The Irish Examiner reports that Irish banks are at the bottom of the world league competitiveness table, according to a survey of 139 countries.

The Global Competitiveness Report, compiled by the World Economic Forum, placed Irish institutions last in the "soundness of banks" rankings, behind even Iceland and Greece.

Irish banks were also near the bottom of the access to loans charts – ranked 117th of countries survey.

In terms of overall competitiveness, Ireland has fallen four places to 29th in the 2010-11 report.

Meanwhile, Anglo’s chief executive predicted the final bill to taxpayers of the bank’s bailout could be closer to €30 billion.

Mike Aynsley told Reuters the €25bn originally estimated would have been correct if management’s preference for a "good bank-bad bank" structure had been adopted. However, the Government has rejected these proposals and instead opted for what it calls a "variation" on them.

Anglo will still be split into two banks – a funding bank to hold deposits and an asset recovery bank to work out loans – but both will likely be wound down over 15 years.

Anglo had previously warned that a long-term wind-down could cost €30bn. And Mr Aynsley said yesterday he expected the original €25bn bill would now increase by between €3.5bn to €5bn.

"All things being equal and subject to the details we’re going through, I suspect it is going to be somewhere between what we would have expected in a long-term wind down versus a good bank-bad bank," he said.

The Financial Regulator is preparing estimates for how much capital each of the banks will require.

Clegg seeks to ease fears over cuts - - Deputy PM says pain ‘will be spread’ over four years.

Trade deficit rises to postwar record  - - Analysts reassured by strength of domestic economy; The pick-up in UK imports is seen as a sign that demand at home looks to be carrying some of the robustness of the second quarter into the third.

Coverage of Koran Case Stirs Questions on Media Role - - Terry Jones put himself at the center of a controversy by using the news lull of summer and a 24-hour news cycle to promote his anti-Islam cause; The pastor, Terry Jones, said at one point that he had canceled his plan to burn the Koran. Later he said it was suspended.

Top Adviser to Lead Panel on Economy - - President Obama will promote Austan Goolsbee to chairman of his Council of Economic Advisers.

Ron Bloom Is Obama’s Manufacturing Emissary - - The administration has pledged tax credits and subsidies to spur manufacturing but has said the lead must come from the private sector; Manufacturing’s share of gross domestic product topped out at nearly 30 percent in the 1950s. It is 11 percent today.

Things Could Be Worse - - Paul Krugman says Japan and the United States both had real estate bubbles that burst and led to crisis. Both responded with half-measures. What happens now, especially if Republicans win big in November?

Budget Woes Hit Defense Lawyers for the Indigent - - Public defenders in Missouri say the budget is interfering with their ability to provide poor defendants with their right to a lawyer.