Groupama profit slumps despite 6% revenue uplift

Groupama’s pre-tax profit fell to £18.5m in 2008, from £23.1m the previous year.

Francois-Xavier Boisseau, chief executive, said the insurer’s profits were hit by a combination of factors.

“Financial market performance means investment income was under pressure,” he said. “We’ve seen an increase in fraudulent activity – over the past six months we have seen an increase of 47% on fraud. Also in 2008, the rating environment was not as strong as it should have been.

“Everyone claimed rates would increase in motor but I didn’t see any rates increases going through the market to cover that. Between 2003 and 2007 the total motor market stayed exactly the same size in pounds sterling and is now under pressure and starting to run out of steam.”

Boisseau pointed out that Groupama had enjoyed six straight years of profitability and that it had made a 13.6% return on equity investments.

Groupama had not been able to increase rates in 2008, he said, in case it lost business.

“It’s a very delicate balance between maintaining your underwriting discipline and making sure that you don’t totally shoot yourself in the foot,” said Boisseau.

However, Groupama reported a 6% increase in revenues to £432.6m in 2008.

Personal lines revenue stood at £225.2m, up from £221.7m in 2007. Commercial lines revenue was £108.4m in 2008, up from £104.7m the previous year.

Boisseau plans to increase profit this year by investing in technology to tackle fraud and by being more selective in the types of risk Groupama underwrites.

“In times of recession, the quality of the underwriting through risk selection is going to be even more important,” he said.

“Some types of industries, such as restaurants, have been more affected than others by the impact of the recession, and this is a sector we are carefully underwriting at the moment.

“With more stringent risk selection and by fighting against fraud, we should be able to preserve our profitability in 2009.”