Groupama's chief explains why distribution is king
Francois-Xavier Boisseau, Groupama’s new chief executive, is remarkably candid about the insurer’s rationale for buying commercial brokers.
The strategy is simple, says the charismatic Frenchman, expressing surprise that many in the market seem unable to fathom it. It’s all about buying access to distribution - something that other insurers have been less willing to admit.
“Why do people claim to understand AXA’s strategy but not Groupama’s,” he asks bullishly, referring to AXA’s broker acquisition strategy which has seen it buy brokers controlling nearly £500m of premium this year.
Boisseau, who took over the top job at the insurer after his predecessor Pierre Lefevre moved to Groupama in Italy, is widely known in the market as FXB. He says candidly that Groupama’s broker acquisition strategy is aimed at overcoming the fact that the company is struggling to grow its commercial lines business.
In the last year the company has hit the headlines with its acquisition of majority stakes in brokers Bollington and Lark Group.
The soft market, says Boisseau, means Groupama is finding it hard to win business, losing out to the major SME insurers like AXA and Norwich Union.
“There has been a lot of consolidation and the market has gone soft. There are fewer brokers and the top five insurers are dominating the books of the top provincial brokers, so it is difficult to get our voice heard,” he says.
The result is that for the first time Groupama’s commercial book will not grow this year.
Boisseau says Groupama had a choice; it could either rely solely on e-commerce initiatives such as its own extranet and imarket in order to develop its commercial lines presence, or it could invest in distribution.
It chose to do the latter.
“The aim is to capture access to market and to diversify our profit stream by not just relying on the underwriting cycle,” he says.
The expectation is that within four years, profit from its broker investments will amount to 20-25% of Groupama’s total UK profit
At present, Groupama underwrites practically none of the business controlled by Bollington and Lark – just over 1% of Bollington’s £65m business and less than 0.5% of the £75m of premium with Lark.
That will change, with Boisseau looking to increase significantly the amount of the brokers’ business underwritten by Groupama.
Pushed to give an estimate of what level he would be looking for he says: “I don’t want it to be 5%, but I don’t want it to be 40% as it would be difficult to say they are independent. 20% would be reasonable.”
It is a bold strategy by Groupama, particularly at a time when the acquisition of brokers by insurers has raised concerns about the independence of the acquired businesses.
AXA has made great efforts to stress that its broker purchases are not “land grabs” for premium. Indeed, Venture Preference, AXA’s broking arm, has been keen to highlight deals struck with other insurers as "proof" of its continuing independence.
Likewise, Boisseau swiftly dismisses suggestions that Groupama’s strategy is the start of creating tied agents. He is adamant that the acquired brokers will remain independent.
“We are able to grow the accounts without disturbing the broker model. It is no different to a broker setting up an exclusive agreement with an insurer," insists the Frenchman with typical passion.
“It is the broker making the decision [where to place business]. [Bollington and Lark] still own a significant minority so they wouldn’t do anything that would adversely affect the business.”
In fact Boisseau is critical of companies such as Allianz and Norwich Union who are buying minority stakes in brokers. He describes them sarcastically as the “white knights” of the insurance industry.
Allianz and NU have acquired small stakes in a number of brokers in recent months, including Giles (NU), Oval (Allianz) and Jelf (both). The pair have insisted that their investments are aimed at supporting independent brokers and will not influence the where brokers place their business.
“What annoys me are the companies that take minority stakes to preserve independent brokers. What do they get from the counterparty in return?” questions Boisseau.
Boisseau says Groupama will be looking to expand its underwriting of business placed by Bollington and Lark through mechanisms such as exclusive schemes.
“It will allow us to widen our footprint.”
For instance, Groupama is, for the first time, writing motor trade business through Bollington, taking advantage of the broker’s expertise in the sector. Groupama will not be Bollington’s exclusive provider of motor trade cover.
It will also be looking to develop new product areas with Bollington and Lark.
“We are looking to explore the development of new things with the brokers rather than just trying to covert existing business,” he says.
Boisseau says Groupama could, for example, look to distribute its private medical insurance (PMI) product through Lark, which does not currently have a PMI offering.
Would Groupama consider developing a high net worth product to take advantage of Lark’s expertise in that field?
“HNW is quite a leap for us,” he says. “I am not ruling it out, but it is not something we are considering at the moment.”
Boisseau says the company is just at the beginning of the process of developing its product strategy with its acquired brokers. “We are not looking at significant changes to our underwriting areas. We have existing areas we want to push first, such as health.”
He adds: “In the future we will look at expanding our underwriting footprint. For a company of our size we have to be different.”
Will Groupama buy stakes in other brokers? Boisseau says: “We will still invest in commercial and personal lines brokers, but it will have to fit the profile [required].
For personal lines brokers, Groupama is not looking to compete with the direct insurers in volume business, rather it is looking for businesses which operate within a niche market or which markets its products in a different way.
The company bought motorcycle broker Carole Nash last year.
“If we find that we will go for it,” he says.
In the commercial lines field, Boisseau says Groupama will look at helping Bollington and Lark acquire businesses themselves as well as acquiring other brokers to sit alongside the pair.
The key factor is that he does not want to invest in brokers whose management want to take the money and leave. “We are not interested in people who want to sell and disappear.”
Groupama’s commercial broking investments have been based on the purchase of a majority stake, thought to be in the region of 60%, leaving the broker’s management with a significant stake to keep them involved in the business. “We have no skills in broking,” explains Boisseau.
This is in contrast with Groupama’s Carole Nash acquisition, where it acquired 100% of the business. “It was a strong brand that was not linked to an individual person,” explains Boisseau.
As to the size of future acquisitions, Boisseau says scale is irrelevant; he does not rule out the acquisition of a consolidator.
What is important, he says, is that the business has to fit with the type of business that Groupama would be looking to underwrite.
He concludes: “France is ready to invest in the UK.” And FXB will be leading the charge.
François-Xavier Boisseau joined the AXA Group in 1990 from SNPE. In 1993 he moved to the UK with AXA Insurance UK where he held various senior positions, including director of customer service.
In 1998 François-Xavier moved to AXA Global Risks as Deputy Managing Director, and he returned to AXA UK as Director of Underwriting and Claims in 2000.
François-Xavier joined Groupama Insurances as managing director in 2003 and was appointed chief executive Officer in November 2007.