Here is more grist for the mill of Seán Quinn’s keen sense of victimhood. Accounts for Corebridge, the unit of the giant American insurer AIG, reported a gain of $652 million on the sale of Laya, the Irish health insurer, to Axa last year. Those are eyewatering returns for one of Quinn’s old businesses.
The deal illustrates the amazing change in fortunes for the health insurance market here over less than two decades. Bupa, a British insurer, established competition here in 1997, breaking VHI Healthcare’s monopoly. It left in 2006, disgruntled at risk equalisation rules that meant it, the minnow in the market, had to compensate the dominant VHI for its older and more claims-prone customer base.
Quinn bought the business when Bupa left. In 2012, when the cement tycoon’s empire imploded, management backed by Swiss Re, the reinsurance giant, took over and renamed Quinn Health as Laya. They sold to AIG for a reported €80 million in 2015.
AIG’s return on its investment is close to 750 per cent.
Interestingly, when AIG put the business on the market, it was reported that it could be worth €200 million. It sold for €690 million including the cash on its balance sheet.
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How did such a once-uninvestible business become so valuable?
Time has played its part. In 17 years the effects of risk equalisation have dimmed and will continue to dim as the customer bases of Laya and Irish Life Health, the other players in the market, have aged too.
Yet the market itself, overall, is ageing. So that makes it well nigh impossible for a new entrant to establish a foothold in the market.
At the end of 2022 VHI’s market share was 48.4 per cent, Laya Healthcare held 27 per cent and Irish Life Health controlled 20.5 per cent. The remainder consists of so-called hospital cash plans.
So Axa is buying into a very stable market, growing at a steady clip of 3 per cent a year where public confidence in the public system is low and only falling lower. Just as Irish Life looks to cross-sell from its life and pensions business, where it is the number one player, so too will Axa, the country’s largest general insurer.
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The competition authorities last looked at private health in 2007 following Bupa’s exit. The health insurance market is concentrated and so is the private hospitals sector. They are heavily interconnected. More than a decade and a half on, it might be worth asking, how healthy is the competition?
Left out of the loop on housing
It vaguely amusing when opposition parties queue up to say that, once in power, they will build so many tens of thousands of homes. Politicians do not build homes — well, apart from Mick Wallace back in his pre-parliamentary days. They do introduce policies that facilitate the building of houses. Judge the policies, not the promises.
Holly Cairns, leader of the Social Democrats, told the party faithful last weekend that, if they gained power, she would have “a laser focus” on housing and deliver 50,000 homes a year. This includes 12,000 social homes and 10,000 affordable units. That leaves 28,000 private homes. Sinn Fein is also undoubtedly dusting down the ready-reckoners to out-pledge its rivals.
It is hard to see how the left can deliver on housing when it adopts such a prescriptive approach to policy. The only thing the parties have been capable of raising is objections. In many cases they have run builders out of town. The left wing has virulently opposed build to rent and co-living. Neither was a panacea to the housing crisis yet both had their place addressing defined segments of the market.
When government launched Croi Conaithe, a €450 million scheme to bridge the “viability gap” for apartments outside Dublin, the Social Democrats said it was “a bailout for developers”. The west accounted for just 5 per cent of all housing commencements last year.
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The big problem that the government faces is delivery at scale. Goodbody, a wealth manager, revealed last week that the top ten housebuilders, led by Cairn, accounted for 38 per cent of non one-off commencements in 2023. Some 473 builders or contractors accounted for the rest, an average of 34 units each.
The problems met by the O Cualann co-housing alliance in a project in west Dublin raises doubts over whether the voluntary sector can shoulder the risk when delivering housing at scale. Private capital has a big role to play. Will a left-leaning administration recognise that?
