Kelly, Kevin

by Terry Clavin

Kelly, Kevin (1941–2012), businessman, was born John Kevin Kelly on 5 June 1941 in Westport Road, Castlebar, Co. Mayo, the son of John Kelly, a tax inspector of Castlebar, and his wife Mary (née Crowe). When he was five, his family moved to Cork city where he attended the Christian Brothers College and formed a lifelong attachment to the county. He was passionate about sports, without being skilled in any, wanting first to be a sports journalist. On finishing school, he moved with his family to Dublin and began working there for the Hayden Stewart accounting firm in 1960, qualifying as a chartered accountant in 1965.

He was soon hired by international accounting firm Price Waterhouse, spending one year working in Rome and three in The Hague. In 1969 he joined Coopers & Lybrand in London where he set up and ran a management development and training unit. As three Dublin firms had merged to form a Coopers & Lybrand practice in Ireland, he was regularly dispatched there to train Irish staff. He displayed a commitment to continuous training for all organisational levels unusual for Ireland and which he sustained throughout his career.

In 1972 he returned to Ireland and spent time in Cork establishing a Coopers & Lybrand office and building up a client base among overseas manufacturers moving into Munster. After becoming the youngest Coopers & Lybrand partner in Ireland (1974), he moved to the Dublin office (1975) where he was put in charge of national development (1976). Throughout the 1970s he lectured on accounting and business matters for the Irish Management Institute (IMI) and on promotion tours with the IDA. In 1975 he married Mary Keane, a hotel receptionist originally from Listowel, Co. Kerry. They settled in Donnybrook, Dublin, and had one son and two daughters.

Kelly became increasingly involved in insolvency work, mainly receiverships. His first significant receivership, that of the Liptons supermarket chain, proved controversial. Following his appointment in 1976, it quickly became clear that liquidation was inevitable, but the receivership dragged on for years over complex tax issues. Unsecured creditors were left nursing losses, and strongly criticised Kelly for not freezing payments sooner.

Although he was overshadowed by more high-profile Coopers & Lybrand partners, his diligence, rigour and tact marked him out as a future managing partner. His succession was brought forward when Coopers & Lybrand lost business amid successive embarrassments as its audit team failed to spot a major fraud, it was sued over a dubious company valuation, and a building firm part-owned by its managing partner Donal Flinn was involved in a financial scandal. Upon Flinn's early retirement in 1982, nobody mounted a serious challenge to Kelly. A unifying figure within an amalgamation of six separate practices, he took over Ireland's third largest accounting firm, comprising thirty partners and 400 staff, in November 1982.

By then Coopers & Lybrand had been hired by the government to examine the accounts of PMPA, Ireland's dominant motor insurer. PMPA was found to be hopelessly insolvent, raising the spectre of a mass abandonment of motor insurance, given that many of the 400,000 drivers covered by PMPA's 300,000 policies would baulk at the higher premiums otherwise available. On 19 October 1983 legislation was rushed through the oireachtas appointing Kelly administrator of PMPA and imposing a two per cent levy on all non-life insurance premiums to cover PMPA's deficit. The role of administrator was a new one, akin to that of a receiver, but with broader powers, conferring more time and flexibility. His surprising refusal to delegate this assignment to more experienced specialists indicated the high stakes involved.

A retiring individual, happiest immersed in work, Kelly was uncomfortable in the limelight and the pressure intensified as a thorough inspection of PMPA's under-provisions for claims led him to put the deficit at £207 million or nearly two per cent of GNP. (His strategic pessimism subsequently allowed him to write-back £40.7 million in provisions.) Soft-spoken, yet implacable, he displayed a capacity for remaining calm while rapidly absorbing information before making quickfire decisions. Helped by other insurers' aversion to PMPA's disproportionately youthful customers, he halted an alarming fall in policy renewals by initially maintaining the unsustainably cheap premiums and by mounting an aggressive advertising campaign. The cash coming in from the levy also allowed him to abandon the policy of legally contesting doubtful claims in favour of quick settlements, saving money in the long run.

The legislation aimed at salvaging the insurance company, but not its fifty or so subsidiaries, including a department store, thirty-four garages, a provincial newspaper, a large car dealership venture and a car leasing business. Kelly sold or closed these lossmaking concerns and achieved voluntary redundancies from insurance staff, cutting some 1,200 out of 2,200 jobs from the PMPA Group within a year. Twelve garages were retained because they kept down the labour cost element of insurance claims for repairs. His ploy of liquidating these garages before buying them back saved 200 jobs, but stung trade creditors. Similarly, he saved on compensation payments by exploiting loopholes in the redundancy laws and offered no comfort to the 5,600 depositors at PMPS, a small bank controlled by PMPA that collapsed after lending heavily to PMPA Group companies: the depositors were not fully repaid until 2005.

Contrary to speculation that Kelly charged over £1 million for the first year of his administration, Coopers & Lybrand earned £297,000 for the first thirteen months; its annual fees dropped to £62,000 for 1985 and £39,000 from 1986. From June 1984 Kelly oversaw phased premium increases and more selective underwriting at PMPA. Despite PMPA's lack of investment assets, this turned the £54 million in trading losses sustained during 1982–3 into a £4.2 million trading profit for 1987. The company broke even on underwriting, the best performance within an Irish motor insurance market plagued by falling car sales, extravagant compensation awards and a high incidence of uninsured drivers. Kelly did well to sell PMPA, shorn of its debts, to British insurance giant GRE for £62 million in 1989.

His capable stewardship of PMPA was widely praised and the attendant good publicity restored Coopers & Lybrand's standing. Then an active Fine Gael member, he was close to the Fine Gael–Labour coalition government (1983–7), which yielded valuable consultancy work. In 1989 he left Coopers & Lybrand, spurning offers from more eminent quarters to become chief executive of a meat company, Agra Trading. Agra had ambitious plans for creating a premium quality brand of chilled Irish beef for sale in continental Europe, but the project was scrapped in March 1990, and with that the need for Kelly.

He was unveiled that autumn as the financial director of Ireland's largest bank, Allied Irish Banks (AIB). (As well as overseeing Coopers & Lybrand's AIB audit for over a decade, he had advised AIB during 1984–5 on the catastrophic losses incurred by its insurance subsidiary and on the ensuing negotiation of a government rescue.) Joining the AIB's board in March 1991, he impressed his executive colleagues and like them was lavishly rewarded for his efforts during a period of strong growth and profits, especially from the mid-1990s. Further to an annual pay package that peaked at £470,000, he held share options worth £3.5 million in 1999, the bulk constituting paper profits. In February 1999 he bought 50,000 shares at an option price of £1.56 for sale into the market at £12.54, realising a £550,000 gain. There were several such transactions.

To give him the banking experience needed to become chief executive, in February 1996 he was put in charge of AIB's retail operations in Ireland and Britain, entailing responsibility for 13,000 employees spanning 300 branches. Labour relations had been poor, but he conciliated staff, gaining their acceptance for the introduction of computer technology. In early 2000 he inaugurated a period of internal harmony by securing a partnership deal with the Irish Bank Officials' Association. Other challenges overcome included the delicate process of converting customers to online banking, the switch to the euro and the recruitment and integration of 2,000 additional employees. He also made AIB into a patron of the arts, being a member and sometime chairman of Cothú (latterly Business2Arts). As well as collecting art, he enjoyed photography and golf.

After media reports exposed AIB's enabling of tax evasion through the proliferation of bogus non-resident accounts during 1987–91, he came before the dáil public accounts committee in October 1998 and questioned the motives of AIB's 'whistle blower' while also contending unavailingly that an informal amnesty had been given by the Revenue Commissioners. AIB's unrepentant stance angered the general public and his reputation was further tarnished when, during subsequent testimony in his capacity as president of the Irish Banking Federation (1996–2000), he admitted that the federation lacked a code of ethics. His chance of becoming chief executive gone, he retired from AIB in 2001.

Over the next decade he variously served as chairman of the IMI (2001–3), headed a committee which in 2004 delivered a review of capital spending in third level education and sat on the boards of Siamsa Tíre, IMMA, Schroder Private Equity Funds, the Kerry Group and Project Management Holdings; he was also chairman of Project Management. From November 2003 to December 2004 he chaired the interim Health Service Executive (HSE), a body responsible for the most comprehensive public sector reform yet attempted in Ireland – the amalgamation of over forty health boards, voluntary hospitals and health agencies. He also chaired the steering committee, which oversaw the health service reforms.

Although Department of Health officials and health workers viewed him as unsympathetic to the health sector ethos, he impressed the government ministers concerned and persuaded health minister Mary Harney to give the HSE budgetary autonomy. Intended to depoliticise the health services, this radical departure blurred the lines of authority between the HSE and the Department of Health and left the elected government with responsibility without power. He tried to forestall the inevitable resistance by pursuing the transition rapidly, causing organisational confusion worsened by the refusal of administrators and hospital consultants to cooperate. With an administrators' strike looming in December 2004, Kelly was excluded from negotiations, which resulted in assurances that nobody would be made redundant or moved to another workplace and that the existing, seniority-driven pay and promotion structures would continue.

Having failed to find a suitable and willing candidate, he became interim chief executive of the newly launched HSE on 1 January 2005, as such taking charge of 100,000 employees and a quarter of state spending. (In fact, the old health board executives continued for another six months.) He presided stoically over the HSE's chaotic beginnings, which combined with overcrowded accident and emergency units to create the impression of a bloated, unaccountable bureaucracy dominated by vested interests. Following prolonged and fraught negotiations, Kelly persuaded Brendan Drumm to accept the position of HSE chief executive and resigned in August 2005, resuming his otherwise congenial semi-retirement. He died on 4 January 2012 in St. Vincent's Hospital, Co. Dublin, and was buried in Kilmashogue Cemetery in Rathfarnham, Co. Dublin.