Groupama has dismissed reports that it plans to dispose of its UK
general insurance operations for £700m.Royal & Sunalliance (R&SA) is believed to be the lead bidder

for Groupama's UK business, although other insurers, including Axa and CGNU, are also thought to be interested.

However, HSBC analyst David Hudson said R&SA would have to undergo major restructuring to finance the £700m sale.

He said: “R&SA has little in the way of spare cash and would either have to borrow the funds or raise fresh equity from a volatile stock market.

“A more likely option is for R&SA to complete the purchase of Groupama UK by releasing capital from its life business.”

French mutual Groupama announced two months ago that it was reviewing the future of its UK arm, formed by the merger of Gan and Lombard six years ago.

Director general Jean Azema said the insurer wanted to focus on its southern European operations.

According to The Sunday Telegraph, Groupama has hired investment bank Lazards to handle the sale.

But a spokeswoman for Groupama dismissed reports that its UK division was for sale, stressing they were based purely on market rumours.

R&SA refused to comment on whether it was seeking to acquire Groupama's general insurance business. However, the UK's second largest insurer has moved quickly to acquire parts of Independent Insurance's commercial and personal lines business and its loss adjusting arm – Property and Casualty Services.

R&SA added that it expected to announce the outcome of its review of the capital held in its life insurance operations at its interim results on August 2.