Health insurer Bupa Ireland made an operating profit of €24.3 million last year and the company is forecasting operating profits of €17.3 million in 2005 and in 2006.

The 2004 operating profit rose from €15.7 million in 2003 and €13.1 million in 2002, according to figures given to the Health Insurance Authority by the insurer as it fights moves to trigger the "risk equalisation" system allowed under the health insurance industry legislation.

The system is designed to compensate VHI for the older age profile of its customers, although Bupa claims it is akin to "piracy".

A month ago the Health Insurance Authority concluded that the VHI customer profile posed a risk to the stability of the industry and said that risk equalisation should be introduced. It said the benefit to consumer that would flow from the introduction of risk equalisation outweigh counterveiling factors.

VHI argues that the absence of risk equalisation leads to higher prices for health insurance, while Bupa argues that the system would result in a "subsidy" of €32.7 million to the State company this year on the basis of Bupa's performance last year.

On the budgeted figures for 2005, there would be transfer of some €42.5 million to the VHI next year.

According to the Bupa figures - which have been seen by The Irish Times - such payments would have resulted in an operating loss at Bupa of €8.4 million for 2004 and would result in an operating loss of €25.2 million for 2005 on the basis of current projections.

To maintain its profit margin, Bupa has concluded it would have to increase premiums by 22 per cent on average.

In the submission to the Health Insurance Authority, which will make a final recommendation on risk equalisation by the end of April to Tánaiste Mary Harney, Bupa argue that it would be unrealistic to expect the company to remain in the Irish market while sustaining such losses.

Bupa has long been a strident opponent of risk equalisation, although the company has never sought to support its case by releasing detailed financial figures for its Irish operation.

The VHI claims Bupa can earn "huge windfall profits" by doing business with a younger customer base, which is less likely to make health insurance claims.

Because VHI is obliged to charge the same premiums to young and older customers, who are more likely to make claims, it argues it should receive compensation from Bupa to equalise the risk faced by both insurers.

While the VHI made a surplus after tax of €62.3 million in the year to March 2004, the company said last month that profits fell in the following year and said it "may lose money" this year because risk equalisation has not yet started.

Bupa's premium income increased to €149.2 million last year from €115 million in 2003 and €81.5 million in 2002. It is budgeting for premiums of €175.8 million this year and €200.5 million in 2006.

These figures, verified by KPMG, were presented to Bupa's board of directors in Ireland. They indicate that claims paid out rose to €105 million last year from €82.4 million in 2003 and €54.6 million in 2002. The underwriting surplus last year was €44.2 million, up from €32.6 million in 2003 and €26.9 million in 2002.