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News : Irish Last Updated: Apr 15, 2011 - 9:01 AM

Ireland seizes Quinn Group from ex-billionaire Seán Quinn
By Michael Hennigan, Founder and Editor of Finfacts
Apr 14, 2011 - 3:02 PM

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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 bondholders.

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.

Quinn Insurance

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 capacity.

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

Seán 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.

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© Copyright 2011 by Finfacts.com

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