Irish state-owned health insurer Vhi Insurance DAC borrowed money from Warren Buffett’s Berkshire Hathaway Inc. to help avoid a bailout as the company comes under central bank regulation for the first time.
Berkshire gave Vhi a 90 million-euro [$97.6 million) subordinated loan, the Dublin-based insurer said in a statement Tuesday, pushing the company’s total capital reserves to more than 540 million euros [$585.4 million]. The deal builds on a reinsurance accord established between the two companies in 2013, which moved risk from the Irish firm’s balance sheet to Berkshire.
“There was a lot of talk” in Parliament “and the media that the state would have to put somewhere between 200 million euros and 300 million euros into Vhi,” Chief Executive Officer John O’Dwyer said in a phone interview. “Our good results, coupled with the reinsurance deal and raising of private subordinated debt, means there’s no need for state intervention.”
Vhi said it posted a 49.8 million-euro [$54 million] “net surplus” last year on gross earned premiums of 1.46 billion euros [$1.6 billion]. O’Dwyer declined to give financial details of the reinsurance or subordinated debt agreements, citing commercial sensitivity.
The company had missed a series of deadlines that it needed to meet in order to be regulated by the nation’s central bank. The European Union’s highest court ruled in 2011 that the government had breached EU rules by not requiring Vhi to be subject to such regulation, and the latest deadline was due to run out at the end of this this month.
“Completion of the authorization process removes Ireland’s exposure to substantial EU fines,” Health Minister Leo Varadkar said in an e-mailed statement. “Vhi’s newly authorized companies will operate from July 31.”
Vhi, established in 1957 and a monopoly until 1996, last year extended a one-year accord for Berkshire to reinsure a share of the Irish company’s policies by four years. As much as 60 percent of Vhi’s policies will be reinsured by Berkshire over the course of the deal, O’Dwyer said.
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