The sale of Groupama Insurances is likely to be delayed by several months, according to leading industry sources.

French mutual insurer Groupama was hoping to complete the sale of its UK arm by the end of October, but analysts have cast doubt on whether this is a realistic target, given the current economic downturn.

UBS Warburg analyst Roger Hill said: “The marketplace at the moment is not conducive to selling a business.

“I am not sure that insurers would want to add another complication at the moment.”

He added that across all financial sectors, mergers and acquisitions were being suspended or called off.

HSBC analyst David Hudson said the insurance market had suffered a big hit as a result of the World Trade Centre attacks and investors would be put off.

“When the market is like this, companies tend to look inwards rather than outwards and it becomes a buyer's rather than a seller's market,” he said.

“Certainly Groupama's asking price will be knocked down.”

Groupama, one of the UK's top ten insurers, has been in talks with about 20 companies, but has narrowed down the number of bidders to a final few.

Groupama director Paul Picknett, who is involved in the sale, said potential buyers included both UK and foreign insurance companies. He added there could be no guarantee the company would be sold as a going concern.

It is understood that one of the bidders is the Winterthur Group, a subsidiary of Credit Suisse and owner of Churchill, one the UK's top insurers, but Winterthur has refused to confirm or deny whether it has made a bid.

It is understood, however, that Churchill Group is interested in Groupama as a going concern.

Groupama has recently expanded its portfolio of products by introducing a high net worth arm and by relaunching its intermediary-sold fleet motor policy, in order to boost its attractiveness to a potential buyer.

The decision to sell the UK arm was part of a major overhaul by the group, which has recently teamed up with French bank Société Générale to set up a new bank, to be launched by 2003.

Groupama also announced recently that it had agreed to sell its holdings in life insurer Socapi, non-life group Serenis and bank

Credit Industriel et Commercial for e1.37bn (£86.2m).