Daily briefing: Thursday - Who will be Groupama's buyers?

Roll up, roll up. The big insurance sale has begun, this time with Groupama’s decision to sell its UK assets, as predicted by Insurance Times.
 
The sale will include the insurance company and also its broking assets, comprising chiefly of Carole Nash, Bollington and Lark.
 
So let’s start with the insurance arm. This year, Groupama’s gross written premium will be between £450m and £500m. The book is comprised mainly of private and commercial motor, along with combined commercial.
 
At first glance, such a heavily loaded motor book may put off bidders. But what’s interesting is that chief executive François-Xavier Boisseau and managing director Laurent Matras have worked assiduously to focus the business on specialisms.
 
They reckon that this year, around 60% of the private motor book will be in specialist business following the commercial book. In other words, they’ve made an effort to turn their backs on the aggregators.
 
That could appeal to insurers that want to grow their business and not have to deal with too much high-volume, thin-margin motor business.

The contenders

Top of the list to buy Groupama’s UK insurance operation has to be RSA. With a book of Scandinavian and UK gilts, it has eschewed the eurozone crisis.
 
This week it was revealed that there could be as much as £300m or more in reserve redundancy.
 
RSA clearly has the strength to make a move. This could be the first big decision for new chief executive Simon Lee: does he make a play for Groupama?
 
The insurer’s UK offering could also appeal to Zurich, which could acquire Groupama to make up for the lost motor business that UK boss Stephen Lewis purposefully shed last year.
 
Less certain is AXA, as it is currently cutting costs – plus, its share price has taken a pounding because of the eurozone crisis.

The outsiders

Aviva is currently bogged down by its holdings of Italian sovereign debt, so it’s doubtful that we’ll see them make a move. Capital preservation is the order of the day for the UK’s top general insurer, but you never know.
 
There’s also Allianz. It has the firepower as the largest insurer in the world, but an aggressive move for a £450m book wouldn’t fit with the culture of the firm.
 
A dark horse could be Peter Cullum teaming up with private equity. Cullum is understood to be an admirer of the Groupama business and, as an underwriter at heart, he could be tempted to get back involved with insurance.

He clearly has the appetite, the know-how and, most importantly, the passion to take charge of a business like Groupama.

Private equity

Meanwhile, back at Groupama’s headquarters, Boisseau and Matras will surely be hoping that private equity makes a play for Groupama.
 
Normally private equity is seen as the villain but, in this case, it would be the saviour.
 
An insurer would likely roll the Groupama brand into its wider business, cutting costs by jettisoning staff at all levels to prevent duplication.
 
However, private equity would almost certainly retain the brand, and the excellent management, perhaps even offering the top guys a share in the business.

Broking bidders

As for Groupama’s broking businesses, you’d have to back Towergate’s private equity investor Advent to make some kind of move.
 
Lark would probably be the best fit, as it would give a nice corporate angle to Towergate’s SME book. Lark could also interest Marsh, which has been prowling the UK for an acquisition.
 
Carole Nash, and especially Bollington, which still has large shareholding from management, are ripe for management buy-outs.
 
Whatever happens with this sale, it’s going to be an interesting 2012 for Groupama, with plenty of happy hunting going on.