The Eureko insurance group is expected to announce this week that its subsidiary Celtic will exit from the commercial lines insurance market at the end of the year. It is understood that the Hibernian Group will take over the business, which generated annual premium income of about £7 million a year for Celtic.
Hibernian and Celtic have been in discussion for some weeks about the Galway-based operation's commercial lines portfolio. The portfolio includes shops, offices, small hotels and businesses throughout the country. Individual sums insured understood to be well under £1 million.
Industry sources suggested that the business was not profitable for Celtic whose main business is direct personal lines insurance - motor and household business.
Aggressive underwriting to build market share meant that premium rates were too low for the company to generate profits on the portfolio, sources suggested. In addition the small size of the portfolio meant that Celtic was not getting any economies of scale on the business. In recent months Celtic had tried to improve the performance of its commercial business through significant premium increases.
It is understood that agreement has now been reached that Hibernian will take over the business from Celtic when it comes up for renewal at dates throughout 1998. This means that Hibernian which has a commercial portfolio of some £30 million to £35 million will have first refusal for the business at renewal.
Most of the business is written through brokers. While there is no guarantee that the Celtic clients will leave their business with Hibernian, the company has the advantage of direct and first access to the Celtic clients in a market where competition for new business is intense. Hibernian is to pay Eureko a fee for access to the renewal business and the opportunity to get the business on its books.
Eureko managing director Mr Adrian Hegarty said yesterday that he could not comment on any market rumours. Hibernian managing director Mr Adrian Daly said his company would look at any suitable opportunities that arose in the market, declining to comment on Celtic.
Markets sources said the decision that Celtic is to leave the commercial insurance market follows a detailed examination of the company's business. A decision was taken to re-focus the Celtic operation in the personal lines market to improve its profit performance, one source said.
Hibernian had been moving to increase its premium income in a competitive market through making agreements to takeover business from other underwriters. Earlier this year it entered an agreement with the Bank of Ireland-owned insurer Premier Direct to underwrite all Premier's motor business with effect from January 1st 1998. The Eureko Ireland group which comprises Friends Provident and Celtic International employs 560 people in Ireland and has total assets of £1.2 billion. Market sources said that Celtic has an annual premium income of about £25 million.
