Insurers to hold acquisition talks over the next four weeks

Ageas UK chief executive Barry Smith and Groupama UK chief executive Francois-Xavier Boisseau

Ageas UK is in talks with Groupama to buy its UK insurance business. 

The insurer this morning confirmed that the two parties are holding exclusive talks over the French insurer’s up-for-sale UK non-life insurance business. The discussions do not include Groupama’s broking arms.

The exclusivity period is set to last up to four weeks. 

“Both parties will refrain from any further comment until the discussions have been concluded,” said a statement. 

Valuable asset

Groupama UK’s parent company, Groupama SA, decided to cash in on it’s valuable UK asset in January to relieve pressure on its exposure to the euro zone crisis. At the time, it was thought a sale could raise between £250m and £300m.

One of Groupama’s broking arms, Lark, was sold to its management last month

Bollington is also thought to favour an MBO, while Carole Nash is understood to have received several expressions of interest. 

Downgrade woes

Since announcing the sale, Groupama SA’s Standard & Poor’s (S&P) rating has been downgraded to BB from BBB-, known as ‘junk’ status. This forced many brokers to heavily restrict trade with the UK arm, despite Groupama UK’s capital being ring-fenced from the main group.

The UK business had made a strong start to the year, reporting a profit before tax and amortisation of £22.2m in the first half of 2012, up 20% on the £18.5m profit it made in the same period last year.

For Ageas, the deal would represent an opportunity to achieve a long-term aim of growing its commercial book, as well as complimenting its existing personal lines motor offerings.