HIH Insurance was Australia's second largest insurance company, which was placed into provisional liquidation on 15 March 2001. The demise of HIH is considered be the largest corporate collapse in Australia's history, with liquidators estimating that HIH's losses totalled up to $5.3 billion. Liquidation, or winding up, refers to a business whose assets are converted to money in order to pay off debt. ... March 15 is the 74th day of the year in the Gregorian Calendar (75th in Leap years). ... 2001: A Space Odyssey. ... Liquidation, or winding up, refers to a process whereby the assets of a business are converted to money. ...

HIH Insurance corporate logo

HIH Insurance corporate logo File links The following pages link to this file: HIH Insurance ...

History

HIH Insurance was founded in 1968 by Ray Williams and Michael Payne and at this time it was known as "M W Payne Underwriting Agency Pty Ltd". It was acquired in 1971 by British company CE Heath PLC and Ray Williams was appointed to the board of CE Heath PLC in 1980. The business operations of this CE Heath PLC were transferred to "CE Heath International Holdings Ltd" in 1989 and CE Heath PLC retained 90% ownership of CE Heath International Holdings. In 1992, CE Heath International Holdings floated on the Australian Stock Exchange. 1968 (MCMLXVIII) was a leap year starting on Monday (the link is to a full 1968 calendar). ... 1971 (MCMLXXI) was a common year starting on Friday (the link is to a full 1971 calendar). ... 1980 (MCMLXXX) was a leap year starting on Tuesday. ... 1989 (MCMLXXXIX) was a common year starting on Sunday of the Gregorian calendar. ... 1992 (MCMXCII) was a leap year starting on Wednesday. ...

In 1995, CE Heath International Holdings acquired CIC Insurance Group and the remaining 48% holding that CE Heath PLC maintained in CE Heath International Holdings was sold to an offshoot of CIC Insurance Group called CIC Holdings Limited. CIC Holdings increased its share in CE Heath International Holdings to 50% and CIC Holdings was purchased by Winterthur Swiss Insurance Company (Winterthur Swiss). In May 1996 CE Heath International Holdings changed its name to HIH Winterthur. 1995 (MCMXCV) was a common year starting on Sunday of the Gregorian calendar. ... 1996 (MCMXCVI) was a leap year starting on Monday of the Gregorian calendar, and was designated the International Year for the Eradication of Poverty. ...

Through 1997 and 1998, HIH Winterthur acquired a large number of companies both in Australia and globally, including Colonial Ltd General Insurance's operations in Australia and New Zealand, Solart in Argentina and Great States Insurance Co in the United States. Most notably however, HIH acquired the large Australian insurance company FAI Insurance, whose chief executive Rodney Adler became a director of HIH in 1999. Winterthur Swiss sold its 51% share in HIH Winterthur to the public and HIH changed its name to HIH Insurance Ltd. 1997 (MCMXCVII) was a common year starting on Wednesday of the Gregorian calendar. ... 1998 (MCMXCVIII) was a common year starting on Thursday of the Gregorian calendar, and was designated the International Year of the Ocean. ... HIH Insurance was Australias second largest insurance company, which was placed into provisional liquidation on 15 March 2001. ... 1999 (MCMXCIX) was a common year starting on Friday, and was designated the International Year of Older Persons by the United Nations. ...

Collapse

HIH directors Charles Abbott, Geoffrey Cohen, Justin Gardener & Randolph Wein met (as well as barrister Robert Stitt, who took part through a conference call) during the evening of 14 March 2001 with KPMG audit firm partners Tony McGrath & Tom Riddell. The directors were there to review a report, entitled "Solvency Review," that had been prepared by McGrath & Riddell for HIH. March 14 is the 73rd day of the year in the Gregorian Calendar (74th in Leap years) with 292 days remaining in the year. ... 2001: A Space Odyssey. ...

With $7.8 billion in assets, HIH was considered one of Australia's largest insurance firms. However after offsetting its assets with debts and potential insurance claims against the company, HIH was left, on paper, with net assets of $133 million. McGrath & Riddell described HIH's solvency as "marginal" and stated in their report that "an extremely small movement (just 1.7%) in the value of assets could move the balance sheet into net asset deficiency." Even the slightest setback to HIH would cause the company to become insolvent. This article is in need of attention. ...

After considering the Solvency Review, the directors had decided to place HIH and its 19 subsidiaries into provisional liquidation. Liquidation, or winding up, refers to a business whose assets are converted to money in order to pay off debt. ...

HIH received permission from the New South Wales Supreme Court to be placed into provisional liquidation on 15 March 2001.Tony McGrath of KPMG was appointed as provisional liquidator to HIH and 17 of its controlled entities. Provisional liquidation is a temporary form of administration giving HIH time for the provisional liquidators review of HIH operations and assessment of financial position. On the same day, HIH was to announce its first-half result for the six months to 31 December 2000. The announcement had already been delayed once and rumours suggested that HIH's first-half result was a loss of $100 million. This figure quickly ballooned to $200 million and then $300 million. Although the result was never announced. When McGrath announced his appointment as provisional liquidator he estimated that HIH lost over $800 million during the six months to 31 December 2000. He attributed HIH company failures to rapid expansion, unsupervised delegation of authority, extensive and complex reinsurance arrangements, underpricing, reserve problems, false reports, reckless management, incompetence, fraud, greed, and self–dealing. March 15 is the 74th day of the year in the Gregorian Calendar (75th in Leap years). ... 2001: A Space Odyssey. ... December 31 is the 365th day of the year (366th in leap years) in the Gregorian Calendar. ... This article is about the year 2000. ... December 31 is the 365th day of the year (366th in leap years) in the Gregorian Calendar. ... This article is about the year 2000. ...

HIH insurance is now in run–off, which means it is managing its outstanding claims and not writing any new business. This could take several years to complete; some have suggested as long as 10 years.

The demise of HIH was the largest corporate failure in Australia's history. HIH liquidators estimated that the company collapsed with losses totalling up to $5.3 billion.

Royal Commission

Following the failure of HIH, Prime Minister John Howard announced that a Royal Commission would be established to inquire into the company's collapse. Justice Neville Owen headed the Royal Commission, which tabled its report to Parliament on 16 April 2003. The findings of the Royal Commission are available on the HIH Royal Commission web site. John Winston Howard (born 26 July 1939) is an Australian politician and the countrys 25th and current Prime Minister. ... In countries that are Commonwealth Realms a Royal Commission is a major government inquiry into an issue. ... April 16 is the 106th day of the year in the Gregorian calendar (107th in leap years). ... 2003 (MMIII) was a common year starting on Wednesday of the Gregorian calendar. ...

Adler Pleads Guilty

Former HIH director Rodney Adler was sentenced on 14 April 2005 to four and a half years jail, with a non-parole period of two and a half years. Adler's jail sentence comes after pleading guilty on 16 February 2005 to four criminal charges, which included: HIH Insurance was Australias second largest insurance company, which was placed into provisional liquidation on 15 March 2001. ... April 14 is the 104th day of the year in the Gregorian calendar (105th in leap years). ... 2005 (MMV) was a common year starting on Saturday of the Gregorian calendar. ... February 16 is the 47th day of the year in the Gregorian Calendar. ... 2005 (MMV) was a common year starting on Saturday of the Gregorian calendar. ...

• two counts of disseminating information knowing it was false
• one count of obtaining money by false or misleading statements
• one count of being intentionally dishonest and failing to discharge his duties as a director in good faith and in the best interests of the company

The sentence was a lenient one, since the judge accepted the defendant's plea of mitigation, citing that he had not sold any of his own shares, or personally benefitted from his actions.

Stock Market Manipulation

Criminal charges for stock market manipulation were laid against Adler after an investigation by the Australian Securities & Investment Commission (ASIC) into the purchase of HIH shares by Pacific Eagle Equities Pty Ltd, an Adler-controlled company. Pacific Eagle Equities purchased 1,873,661 HIH shares on 15 June 2000, 951,339 HIH shares on 16 June 2000 and 425,000 HIH shares on 19 June 2000 (ASIC, 2002) with HIH funds after Adler persuaded Ray Williams to shift $10 million from HIH to Pacific Eagle Equities. Adler's defence team negotiated with the Commonwealth Director of Public Prosecutions to drop charges of stock market manipulation in exchange for a guilty plea to other charges (Elias, 2005). The Australian Securities & Investments Commission (ASIC) is an independent Australian government body that acts as Australias corporate regulator. ... June 15 is the 166th day of the year in the Gregorian calendar (167th in leap years), with 199 days remaining. ... This article is about the year 2000. ... June 16 is the 167th day of the year in the Gregorian calendar (168th in leap years), with 198 days remaining. ... This article is about the year 2000. ... June 19 is the 170th day of the year (171st in leap years) in the Gregorian Calendar, with 195 days remaining. ... This article is about the year 2000. ...

Disseminating False Information

Alder attempted to induce investors to purchase HIH shares by telling a finance journalist on 19 June 2000 and 20 June 2000 that he had purchased 1,873,661 HIH shares on 15 June 2000 and 951,339 HIH shares on 16 June 2000 for himself (ASIC, 2002). Adler also told the journalist that he believed the share price for HIH was undervalued and presented an opportunity for a quick profit (Elias, 2005). June 19 is the 170th day of the year (171st in leap years) in the Gregorian Calendar, with 195 days remaining. ... This article is about the year 2000. ... June 20 is the 171st day of the year (172nd in leap years) in the Gregorian Calendar, with 194 days remaining. ... This article is about the year 2000. ... June 15 is the 166th day of the year in the Gregorian calendar (167th in leap years), with 199 days remaining. ... This article is about the year 2000. ... June 16 is the 167th day of the year in the Gregorian calendar (168th in leap years), with 198 days remaining. ... This article is about the year 2000. ...

Intentionally Acting Dishonestly

In October 2000 a company in which Adler had an interest, Business Thinking Systems (BTS), was in financial trouble. Adler sought a $2 million investment from HIH. Williams had been told by Adler that the company had raised $2.5 million, which it had not, and that Adler was prepared to invest $500,000, which he had no intention of doing, if HIH invested $2 million in BTS. HIH executive John Ballhausen was then told by Adler that he had invested the $500,000. The HIH board discussed and approved the $2 million investment in BTS in a November 2000 meeting. Adler attended the meeting and failed to disclose his financial interest in the business. Nor did he disclose his knowledge of its financial affairs (Elias, 2005).

Williams Jailed

Former HIH Insurance chief executive Ray Williams sentenced to a minimum of two years and nine months imprisonment, with a maximum term of four years and six months.

References

• Westfield, Mark (2003). HIH: The Inside Story of Australia's Biggest Corporate Collapse. John Wiley & Sons Australia. ISBN 1-74031-064-0
• Kehl, David (29 November 2001) HIH Insurance Group Collapse. Parliamentary Library (Parliament of Australia)
• ASIC (14 April 2005) Rodney Adler sentenced to four-and-a-half years' jail. Media Release.
• ASIC (3 December 2002) Rodney Stephen Adler charged. Media Release.
• Elias, David (17 February 2005). Adler guilty on 4 charges. The Age.