Seán Quinn, the new owner of health insurer Bupa, has claimed that the State-owned VHI set out to lose money after years of profitable growth. His claims were immediately dismissed by VHI.
Mr Quinn said the State company's financial losses last year left the Government with no option but to introduce emergency legislation in February. The legislation closed the legal loophole that gave Mr Quinn, as a new health insurer, a three-year break from making multi-million euro risk equalisation payments to VHI from Bupa.
At a Cavan County Enterprise Board conference, in the presence of more than 400 people, Mr Quinn suggested losses were engineered by the VHI to trigger a requirement for risk equalisation payments from Bupa. Such payments, which run to millions of euro, are designed to compensate VHI for the older age profile of its clients, who are more likely to make insurance claims for healthcare.
Pointing out that VHI's gross profits increased to €139 million in 2004 from €26 million in 1999, Mr Quinn claimed that VHI's loses of some €29 million in 2006 were deliberate.
He said he could run VHI at a healthy profit without receiving any risk equalisation payments. He had also offered to take over VHI and provide €1 billion to meet its liabilities.
Mr Quinn said: "There's a huge increase in profits from '99 up to 2004, from €26 million to €139 million. What has happened since? What happened since is very clear." What had happened was the VHI had created a circumstance whereby risk equalisation would have to trigger in and the company wanted money from Bupa, he said.
This was a result of Bupa's strength in the market, Mr Quinn claimed. The VHI was not happy that it was going to lose a bit of market share. It had 70-75 per cent of the market. It did not feel that was good enough, so it wanted to get Bupa into a loss-making situation.
Such claims were rejected in their entirety by VHI, which said Mr Quinn appeared not to understand the health insurance business. "It is simply ludicrous to suggest that the chief executive officer could manipulate figures given that they have been reviewed and approved by the board of VHI Healthcare, are based on the work of external actuaries and are independently audited by external auditors."
Mr Quinn took control of Bupa in January after that company's British owners said the imposition of risk equalisation payments meant their Irish business was unviable. He believed as a new health insurer that he would not have to make the payments, a situation reversed by the Government's closure of the loophole.
Mr Quinn said that the Government intervention was a result of the VHI's actions.
He went on: "How our legislators allowed that to happen I just don't know. I'm not angry with Bertie Ahern. I'm not angry with Mary Harney. Put it bluntly, I don't give a damn. We are going to make a great success of Bupa."
Mr Quinn said the losses at VHI were a result of four separate actions. Firstly, the company had gone for very minimal price increases. Secondly, it had become much less efficient, and its costs and running operation deteriorated fairly dramatically. Thirdly, it had dramatically increased its reserves for every outstanding claim. And finally it had introduced some loss-making products in addition to the ones it already had.
VHI said it was a non-profit making organisation. "We are one of the most efficient health insurers in the world."