François-Xavier Boisseau says prices need to go up "to stem the bleeding" as profits plummet

Groupama chief executive François-Xavier Boisseau has revealed how the "critical" state of the motor market impacted on the insurer's motor portfolio in 2009.

The insurer, which posted a fall of more than 50% in pre-tax profits for 2009 to £14.1m (2008: £30.1 million), explained how its profitability was affected by "unprecedented motor claims inflation and weather related losses."

The insurer said underwriting activities were affected by the results of the private car portfolio where "inadequate market pricing, significant claims inflation and some unprofitable schemes impacted performance." Severe weather in the first and final quarters of the year produced claims totalling £6m.

“In 2009 the detrimental effect of unprecedented claims inflation on our motor underwriting activities has been considerable," said François-Xavier Boisseau. "In addition we also had to navigate unfavourable economic conditions, the impact of two severe weather events and the effects of an underwriting cycle approaching its lowest point. In what were very testing times the ability of our operations to continue to generate a profitable return is very pleasing and again demonstrates our clear focus on the bottom line.”

"With the exception of private car, our underwriting performance has been solid and there have been excellent performances from our household, healthcare, motorcycle and small fleet portfolios. With market conditions beginning to improve this bodes well for the future.”

“It is encouraging that premiums are finally beginning to rise in personal lines. However, in motor the market will need to see continuing increases throughout 2010 if it is to stem the bleeding. Frankly, with a market combined ratio estimated at 120% this particular patient remains on the critical list and will still need major surgery to return to better health. The combined challenges of claims farming, credit hire and fraud are very serious and the market needs to work together to find solutions – in the meantime, premium rates must continue to rise.”

Total revenues increased 3.9% to £450.3m (2008: £433.3 million). Combined revenues in the group’s broking businesses were £66.5m (2008: £66.4 million).

In personal lines, revenue lifted to £267.9m (2008 £225.2 million). it said volumes in the personal motor portfolio reduced significantly to correct adverse profitability.

Total commercial lines revenues moved up 13.1% to £135.1m (2008: £119.5 million).

In its healthcare operations, Groupama said total private medical insurance (PMI) revenues eased back almost 10% as it focused on bottom line profitability.

Boisseau added: "As predicted, 2009 was an extremely tough year. Underwriting activities at Groupama Insurances suffered as a result of unprecedented levels of claims inflation and the poor premium rating environment that affected our core private car portfolio. In addition, performance was also impacted significantly by the severe weather events encountered in January and during the final quarter of the year.

However, even in what were very challenging economic conditions our broking subsidiaries delivered a robust set of results and made a valuable contribution. Given the very challenging conditions encountered in 2009 it is pleasing that we were still able to produce a profitable performance for Groupama.”