State-owned health insurer VHI is paying €8.1 million a year to Warren Buffett's Berkshire Hathaway in interest payments for the €90 million subordinated debt that it put in place last year to bolster its capital position.
This emerges in the company’s annual report for 2015, which has been put before the Dáil.
It shows that VHI is paying an interest rate of 9 per cent annually on the loan from Berkshire Hathaway, a listed holding company led by Mr Buffett. This debt helped to bolster VHI's capital resources in advance of it receiving authorisation from the Central Bank of Ireland to comply with EU directives.
Its capital resources rose to €611.6 million at the end of 2015, up from €466.3 million a year earlier .
VHI achieved a surplus of €45.5 million last year, down from €54.5 million in 2014. Its gross written premiums were flat at €1.43 billion while gross claims paid out rose by 10 per cent to €1.37 billion.
Its reinsurance premiums more than halved in the year to €429 million while reinsurers’ share of claims reduced by 27 per cent to €511 million. Premiums were raised on average by 2 per cent from November 1st, 2015.
Other income
The accounts also show that VHI’s other income – including SwiftCare clinics, travel insurance and medical centres – rose by 38 per cent to €27.8 million.
The health insurer’s defined benefit pension scheme deficit declined last year to €5.6 million from €16.6 million. This was due to a sharp rise in the value of “other” assets, to €63.5 million from €37.4 million in 2014.
The report shows that while the total remuneration of chief executive John O’Dwyer was unchanged at €323,403, there was a 30 per cent increase to €2.6 million in the cost of its directors and key management personnel.
Remuneration paid to board members, including executive directors, more than doubled to €1 million last year from €400,000 in 2014. This reflected an increase in fees paid to non-executive directors and its chairman, and the addition of two executive directors to the board: Brian Walsh and Declan Moran.
VHI has 11 board members, including chairman Liam Downey and Mr O'Dwyer. Annual remuneration for the chairman and non-executive directors were increased by the Government to €31,500 (€20,520 in 2014) and €15,750 (€11,970) respectively.
Headcount increased
The company’s headcount increased by 84 to 1,132 while its bill for wages and salaries rose by 7 per cent to €54.4 million. This included a 0.5 per cent pay rise for staff during the year.
In his chief executive’s statement, Mr O’Dwyer expressed his “concern” about the rising costs of beds in public hospitals. “The Health (Amendment) Act 2013 provides for the introduction of charges for all private in-patients, including those accommodated in public beds,” he said.
“When the legislation was introduced it was estimated that the additional cost of this would not exceed €30 million in 2014 and €45 million in a full year. However, our claims data would suggest that it will be more than this.”
VHI processed almost 926,000 claims last year. Of this total, 731,000 were for in-patient and day-care claims, with 195,000 being for outpatient and primary care claims.
It paid out €188.2 million for cancer and related care, €159.8 million for the heart and circulatory system, €147.3 million on orthopaedic care, €102.1 million on the digestive system, €72.3 million on respiratory illnesses, and €70.2 million on the central nervous system.
