|Seán Quinn founded his business in 1973 and it became Ireland's biggest private company with a payroll of over 5,000. The insurance business had been the cash cow of the operation. Business and personal debts amount to €4.0bn with €2.8bn owed by the Quinn family to the bankrupt State-controlled Anglo Irish Bank, following a disastrous reckless bet, which brought the family crashing to earth. |
In a dramatic illustration of the
upheavals in Ireland following the crash of the Celtic Tiger, the nationalised
Anglo Irish Bank announced today that it had seized control of the Quinn Group
from ex-billionaire Seán Quinn and his family.
Seán Quinn, Ireland's once richest man,
built up a conglomerate originally from quarrying and later he moved into cement
and glass production. In the hospitality area he operated hotels and golf
courses but his biggest cash cow was Quinn Insurance that beat rivals on price
and convenience using phone sales in the pre-internet age.
He was felled by a disastrous
gambling bet that shares in the famed 'builders' bank Anglo would keep on rising
and as the recession began to bite with personal losses mounting, the group
became increasing reliant on the cash cow.
On March 30, 2010, provisional
administrators were appointed to take control of Quinn Insurance, which had 1.3m
customers, including those who transferred from the health insurance business of
the Irish unit of UK company BUPA in late 2007. The Financial Regulator had
claimed that Quinn was in serious breach of regulatory rules, by providing
guarantees for borrowing by other units of the Quinn Group.
Quinn Insurance had posted a loss of
€788.4m in unaudited accounts for 2009, which had been provided to the Financial
Regulator by the court appointed administrators. The loss comprised a trading
loss of €127.5m on its underwriting activities and exceptional costs of €677.6m
resulting from the writedown of certain non-core assets held by subsidiaries,
understood to be a wind farm in Derrylin, Co. Fermanagh and a number of hotel
properties. The losses on underwriting activities was made up of €41m related to
its business in the Republic and €86m to the UK.
The Quinn Group had ended up owing
the former builders' bank €2.8bn and €1.2bn to other lenders including
Kieran Wallace of KPMG has been
appointed share receiver and has power to take control of the family’s interests
in the group. He will oversee the appointment of a new board of directors.
Anglo chief executive Mike Aynsley said the appointment would have no impact on
the day-to-day operation of the company. "A share receiver is different from
normal receiver, which takes over the assets of a company," he said.
Aynsley said that there "will no doubt be some write offs" associated
with the overall level of debt owed to Anglo Irish Bank by Quinn.
It was also announced today that a
joint venture of US insurer Liberty Mutual and State-owned Anglo Irish Bank has
been confirmed as the preferred bidder for the general insurance business of
Quinn Insurance Ltd (QIL).
The deal has yet to be finalised, and the contracts of sale have yet to be
signed but it has been made clear that there will no job losses in either the
Republic or Northern Ireland as a result of the sales process.
About 1,570 employees are to transfer to the new commercial entity and Quinn
Insurance’s offices in Navan and Manchester will close but the 100 staff in
Navan will be offered positions at Cavan or Blanchardstown, West Dublin. About
30 staff in Manchester are to be offered redundancy.
If successful, the bid would see Liberty Mutual, the fifth largest insurer in
the US, take control of the operation of the new business. Joint administrators
Michael McAteer and Paul McCann said Anglo Irish Bank would have no involvement
in the day-to-day operation of the new company, but would act in a loan recovery
The Central Bank of Ireland
said it notes the announcement by the Joint Administrators on the preferred
bidder for Quinn Insurance Limited (QIL) (under administration). The proposal is
still subject to formal regulatory approval. However, the Joint Administrators
have been keeping the Central Bank appraised throughout the sale process.
The Joint Administrators have announced that
the proposal of the preferred bidder is that a new insurance company will be
established, subject to Central Bank approval. This company will be majority
owned by Liberty Mutual. It is also proposed that Liberty Mutual will provide
the management and insurance expertise. Anglo Irish Bank will retain a minority
shareholding in the new firm but will have no dealings in the day to day
management of the new company.
This announcement does not affect
policyholders of QIL, Quinn Healthcare (QHC) or Quinn Life Direct (QLD).
Policyholders of QIL, QHC and QLD can continue to renew policies, take out new
business and make claims in the normal way.
Minister for Finance
The Minister for Finance, Michael
Noonan T.D., today noted that Anglo has appointed a share receiver over the
Quinn family’s shares in the Quinn Group.
The Minister stated:
“I welcome the debt restructuring plan which has been agreed in principle
between Anglo Irish Bank and the Group’s lenders. This structure will enable the
good and strong businesses to continue to trade and grow. It is particularly
important that there will be no impact on employment, on trade creditors or on
day to day operations of the Quinn Group.”
In relation to Quinn Insurance Limited, the Minister said:
“I am constrained in what I can disclose in respect of a commercial sales
process, which remains ongoing. It is important to note that responsibility for
the sales process is a matter for the Joint Administrators who were appointed by
the High Court.
I note that the sale of Quinn Insurance is nearing completion with the joint
venture between Liberty Mutual (a large US insurance company) and Anglo
identified by the Joint Administrators as the preferred bidder. This is subject
to regulatory approval, and the completion of contract details.
I welcome the positives of the proposed agreement in that almost all 1,500 jobs
in Quinn Insurance will be retained.”
A Reckless Gamble
Quinn had built up a stake in Anglo Irish Bank through a financial betting
product called Contracts for Difference (CFD). The CFD's allowed him to acquire
a right to buy shares by providing 10% of the value and the tax regime was also
favourable compared with an outright purchase. He was expecting the price of
Anglo's shares to continue rising.
By 2008 Quinn had used
CFDs to build a potential stake of 25% in Anglo but the Anglo price was sliding
and in July 2008 to cut his potential future losses, he converted the CFDs into
an ordinary 15% shareholding. It cost him around €2.5bn and some of the shares
were bought with borrowings from Anglo. Besides, the remainder of his position
was bought out by 10 major customers of Anglo and the bank lent them the money
for the deal.
In October 2008, the Financial Regulator fined Quinn Insurance a record €3.25m
for breach of insurance regulations and Seán Quinn was fined €200,000.
In 2010, Quinn Insurance was still acting as a funder/guarantor of other units
of the Quinn Group and the business was put under official administration.
Anglo Irish Bank closed at 22 euro cent on the Irish Stock Exchange, on
its last day of trading, Jan 16, 2009, before becoming a State-owned bank.
On February 21, 2007, the ISEQ index rose to an-all time high of 10,041
and the Financial sub-index rose to 18,098. Bank of Ireland closed at
€18.65; Anglo Irish closed at €16.64 and AIB closed unchanged at €23.95.
A year later, on February 21, 2008, AIB closed at €13.80, Anglo Irish
Bank finished at €8.84, while Irish Life & Permanent closed at €10.20
and Bank of Ireland traded at €9.50.