Groupama UK profits leap 70%

Groupama’s UK business has reported a massive rise in pre-tax profit, up almost 70% to 23.7m (2009: £14.1m) on total revenue of £470.9m (2009: £450.3m).

The insurer attributed the spike in profit to the performance of its commercial lines division and double digit rate increases in private car boosting its personal lines business.

Revenue in Groupama’s combined UK broking operations, GUK Broking Services, fell slightly to £60.5m (2009: £62.4m), blamed on the UK’s recessionary business climate and continuing pressure on premium rates.

When broken down, personal lines revenues rose 8.3% to £289m (2009: £266.7m) and total commercial lines revenues fell slightly to £131.8m (2009: £136.3m).

The insurer described rating levels in the SME arena as “wholly inadequate”, and hit out at rival insurers for ‘chasing volume rather than profitability’.

Groupama added that volumes in its core private car portfolio declined as the company continued to apply double digit rating increases and tough underwriting action to improve profitability.

In Groupama Healthcare, the company’s private medical insurance (PMI) business, total PMI revenues increased 6%.

Groupama chief executive François-Xavier Boisseau said in a statement: “Our performance over 2010 has been encouraging and we have made some promising progress in terms of beginning to return our private car book to profitability.

"However, we still have a way to go and although market pricing has increased markedly, this will need to continue in 2011 if the market has aspirations to move back into the black.

“Sadly, there is little evidence of such sanity in the commercial lines arena. At best, rates remain rooted at the bottom of the cycle and we are still seeing a fight for volume among major players who are offering enhanced commission and adopting dual pricing to attract business. I am sad to say that the bad old days are definitely back.”

He continued: “The double digit rate increases that we have seen in private car are very welcome and are a sign that the market is intent on returning pricing to a level where it might return to profit. However, the challenges presented by claims farming, credit hire and fraud are very real and the market will need to keep increasing rates in 2011 to help balance the books.

"Claims inflation and fraud are also issues in Commercial Lines and Healthcare and these markets need to take the necessary pricing and underwriting actions to deliver the necessary corrections.”

On household and the impact of cold weather claims, he said: “Business remains under-priced by the market which is still not accounting for significant weather events and the costs of the associated escape of water. In Q4 of 2010 alone Groupama met over £7m of claims following the coldest weather for 100 years and this followed events earlier in the year and during 2009.

"The market cannot continue to absorb these losses within current rating levels and premium rates need to rise to reflect the cost of such recurring weather events.”