VHI, the largest health insurer in the country, wants to move into eastern European market by making an investment of up to €240m with a partner.

The company wants to raise up to €120m in its own right via bank debt and hopes a partner will be able to match this in a joint venture. Additional leverage of these funds may be considered.

Chief executive Jimmy Tolan said last week it was his ambition to expand the company's geographical footprint and this would involve moving into smaller markets where VHI could gain decent scale. The most likely locations were countries in the east, among them Poland.

He said no decision had been made on which country to invest in, but he hoped there was enough expertise in VHI to target the right market. He said it was not possible in the past for the company to expand outside Ireland. However once the company comes under the control of the Financial Regulator this restriction ends.

VHI, which last week reported a surplus of €55.4m, does not have an official credit rating, but because of its state ownership would receive a AAA rating if it wanted to raise a bond. Conventional bank loans are more likely to be the answer, said Tolan last week.

He said the company's focus remains on "quality healthcare at affordable prices" but the company needed to diversify beyond Ireland. The domestic market will be less encouraging in the year ahead and the company is pencilling in a lower surplus of €15m to €25m in 2008, although this will rise if any risk equalisation payments are submitted by its rivals.

Tolan said the ownership of the health insurer was not likely to change during his term and his main aim was to make sure the company was "fit for purpose''. He said rivals were finding that health insurance was far more complicated than other forms of insurance.

The company's surplus or profit margin was 4.8% and this would rise by about 2% if full community rating was in place in the market, said Tolan, a former senior executive with Fyffes.