Vol. 369 No. 3
asked the Minister for Industry and Commerce if, following the publication of the accounts of the Insurance Corporation of Ireland in June last, he can now give the total estimated cost of the collapse of ICI; if he will state the proportion of this which will be paid by the Exchequer, the Central Bank and the commercial banks; and if he will make a statement on the matter.
16.
asked the Minister for Industry and Commerce if he will give details of the final projected losses of the ICI insurance company; and the method by which it is intended to meet these losses.
I propose to take Questions Nos. 12 and 16 together. The accounts of the Insurance Corporation of Ireland for the two year period ended 31 December 1985 which were prepared by the administrator and subjected to detailed audit by the statutory auditors disclose a net balance sheet deficiency of £226 million.
As I already stated in this House on the occasion of the Adjournment Debate on 10 June last, no part of the cost of administration will fall on the Exchequer.
The cost of arranging the £100 million loan already advanced is being borne by the banking sector in line with the Central Bank's statement of 4 October 1985. If any further funds are required in the medium term to finance working capital these will be arranged on the basis of commercial borrowing, the cost of which will be serviced by the company.
Will the Minister give details of how this £226 million deficit occurred? In reply to a similar question of mine in May last the Minister told me that the deficit amounted to £164 million. At that time the Minister felt that with a deficit of £164 million the £100 million was adequate and that the Central Bank could deal with the matter. In view of the extra net deficit of £100 million that has been disclosed, will the Minister state if he believes the £100 million from the Central Bank will be adequate? How can he give an assurance that either the Central Bank or the taxpayer will not have to throw in another £100 million?
The figure of £164 million quoted by the Deputy was arrived at by the administrator after a short time in the company and was based on the best actuarial and legal advice available to him at that stage. The audited accounts of ICI up to 31 December 1985 reflect the administrator's judgment of the company's financial position in the light of further adjustments and more detailed examination. On the question of the adequacy of the £100 million loan I should like to tell the Deputy that according to the balance sheet of 31 December 1985 the liquidator has liquid assets to the tune of £173 million. The company is continuing to operate well and is generating a cash flow. I am confident that should there be a requirement for further working capital it will be arranged on the basis of commercial borrowing by the administrator.
Will the Minister confirm that the insurance company is continuing to trade at an operating profit?
I can confirm that the company is operating at an operating profit now.
Is the Minister aware that a recent court decision would seem to suggest that the figures initially indicated by the administrator might not be the final outturn of the deficit? Has the Minister, or the administrator, made any estimate of the possible impact of that court decision on the final outturn?
In arriving at the estimated balance sheet deficit at the end of December 1985 the administrator made prudent allowance for eventualities that might occur in pursuing legal enforcement. I am satisfied that he has adequately done so.
Will the Minister reconfirm that irrespective of the circumstances that evolve the taxpayer will not have to foot the bill for ICI losses?
As I said I am quite content that the present position will not require any contribution from the Exchequer.
Will the Minister give a breakdown, in simple terms, of the deficit of £226 million? How much of that money has come from the Central Bank, how much from the Exchequer and how much from AIB?
The deficit refers to a balance sheet deficit; it is not a contribution that has been financed by anybody. A loan of £100 million has been advanced to the ICI and it is composed of £70 million from Allied Irish Banks and the balance from the Central Bank. The interest on that money is being paid and the contributions towards the interest are predominantly from the AIB and the other banks.
I should like to get clarification about the £226 million deficit. I understand from the accounts that the deficit prior to Mr. McCann taking over was more than £300 million — that was up to the end of 1983 — and I should like to know if the £226 million deficit occurred prior to 1983?
No, the £226 million is the deficit according to the balance sheet as of 31 December 1985 and it allows for the auditor's estimates of liabilities he will have to meet over a period of years. It takes into account the assets he has on hand in the company. It is a net figure, netting out the liabilities expected to occur over a number of years and the existing assets.
There were losses of more than £300 million prior to Mr. McCann taking over. Is it true that there were further losses of £85 million since then? If that is so, the losses of the company would be of the order of £400 million.
The Deputy is confusing liabilities outstanding with the net balance sheet position. An insurance company will always have liabilities to meet over a period of years but it also has assets. The figure of £226 million is a net balance sheet deficiency.
Is it not correct to say that there have been cumulative losses of £400 million.
I do not have the liability figure to hand but it is of that order.
Will the Minister comment on the fact that ever since this unfortunate saga commenced, when the administrator was put in, the figure given for the deficit has increased by leaps and bounds on each occasion it was quoted? Originally the Minister's figure for the deficit was £50 million, later it was £160 million and now it is £226 million. Is that not a cause for concern?
The figure is £399 million.
Will the Minister assure the House that there will be no further increase from this on out?
The Minister of State cannot do that.
The figure of £399 million does not refer to a net balance sheet deficit and it is a spurious one to be introducing in this context. As I explained earlier, the £164 million was the provisional figure arrived at by the administrator after a relatively short period in the company. Insurance some time is required by the administrator to get a firm hold of the figures. The figure he has produced is the net balance sheet deficit at the end of December 1985, based on a detailed examination. That figure has been confirmed by the auditors.
My figure of £500 million will be reached before too long judging by the way things are shaping up.
