THE €288 MILLION in loans issued by Quinn Insurance this year, and used to invest in Anglo Irish Bank, "materially reduced" the minimum statutory solvency margin of the company, according to a note to its 2007 accounts, writes Colm Keena,Public Affairs Correspondent.
The interest-bearing loans were advanced to a fellow subsidiary of the Quinn Group, for investments in Anglo Irish Bank and other investments.
The Financial Regulator has imposed a record €3.2 million fine on Quinn Insurance, and a €200,000 fine on the group's founder and main shareholder, Seán Quinn, for failing to notify it of the loan.
Mr Quinn has resigned from the board of Quinn Insurance, the largest Irish insurance company in the State, and has accepted that a mistake was made.
One source last night said more was at issue that a simple failure to notify the regulator of the loans. "Effectively they had to get approval before doing anything like that, and they didn't," the source said.
The fine imposed, according to the source, can be seen as a reflection of the seriousness of the loans in the context of the company's solvency margin.
The loans made to the subsidiary have now been repaid. Quinn Insurance is part of the Quinn Group, which is in turn owned by Mr Quinn and his family.
The note to the Quinn Insurance accounts for 2007 states the recovery of the €288 million "is subject to significant uncertainties including future investment performance and material credit risks."
If valued according to certain accountancy rules, they would be impaired. "While the company continues to maintain a surplus of free assets over its minimum statutory solvency margins, the extent of this surplus has been materially reduced since the year end."
In its 2007 accounts, the Quinn Group Ltd wrote off €829 million in loans it had advanced to investment companies outside the group that made investments on behalf of the Quinn family, again in Anglo Irish Bank and other companies.
The Quinn Insurance accounts state that during 2007 it made "gifts" worth €135 million to Quinn Group Family Properties Ltd, a related company. This compared with gifts totalling €175 million the previous year. The latest available accounts for Quinn Group Family Properties are for 2006 and state it is involved in hotels and the letting of pubs. Its main bankers are Anglo Irish and Bank of Ireland.
The accounts show that at year's end the company and its subsidiaries were owed €558 million from property and investment companies owned by Mr Quinn and his family.
The 2007 accounts for the Quinn Group Ltd, the overall parent company of the Quinn group, show it had an average of 6,234 staff during the year, and paid out €241 million in staff costs. Directors' emoluments were €1.3 million.
The accounts state that during the year the group sold its shares in the Slieve Russell Hotel Ltd to related parties for €60 million.
They also state that during the year it acquired the trade of Bupa Ireland Ltd for €52 million. "Cash balances on acquisition were €42 million."
They also state that the group acquired Quinn Windfarm Holdings Ltd from a related party and that the purchase consideration inclusive of costs was €138 million.
The accounts also state that in addition to the Quinn Windfarm and Slieve Russell transactions, the group engaged in other transactions with Mr Quinn and his family, or entities owned by them. These included sales of goods and services: €15.4 million; and interest charged: €69.8 million.
Jim Quigley has been appointed chairman of Quinn Insurance, which owns Quinn Direct and Quinn Healthcare. Mr Quinn remains chairman of the group.
Last week the group said its insurance business remains in a strong financial position with €2 billion in assets.
