Being tied to its downgraded French parent is frustrating for the UK business
Groupama’s luck has gone from bad to worse. The UK business is in the midst of a sale that has dragged on for most of this year and left brokers with no certainty about its future.
Then, yesterday’s announcement by ratings agency Standard & Poor’s (S&P) that it had downgraded the French insurer’s ratings to BB from BBB-, also known as ‘junk’ status, cast more shadows.
Where does this leave the UK business now? Well for one, frustrated. Being tied to its parent company’s rating leaves it vulnerable as it is entirely at the mercy of the group rating.
Attempts by UK chief executive François-Xavier Boisseau to get a standalone rating earlier this year fell on deaf ears with the agencies, which insisted it was not their policy to give a subsidiary a separate rating higher than the parent. This meant more frustration for the UK. And this despite Groupama UK having ring-fenced its assets from the group through an agreement with the FSA.
FXB came out with a strongly worded defence of his company’s financial strength in a last-ditch attempt to quell brokers’ fears. But some brokers can only rely on these ratings because they don’t have access to more sophisticated resources. While others, despite wanting to back Groupama, will have little choice if they are restricted from dealing with insurers by rating level.
For FXB and the UK staff, the sale cannot come quickly enough. He played down the amount of business it could lose in the UK and said the downgrade won’t affect the sale. The insurer’s top line is down 6.6% as of the end of May, but put half of the fall down to “portfolio cleansing” as the company is cutting its commercial fleet book. For now, the uncertainty will continue.