Groupama chief laments missed opportunity to raise rates after flooding.
Insurers face their most challenging year yet after the industry missed a key opportunity to raise rates following the summer floods, warned Groupama chief executive François-Xavier Boisseau.
Groupama’s year-end results attributed a £10m dip in profits compared to the previous year on 2007’s weather catastrophes. Boisseau said industry rates should have gone up 10% to 15% after the floods, but insurers were too focused on turnover.
He said: “This was the best opportunity to increase pricing and I think that opportunity has been missed. 2008 will be the toughest yet. Because people didn’t take action in 2007 there will be pessimism over the next two years. People will feel significant pressure in 2008 from their boards and will start to see a deteriorating bottom line.”
Groupama Insurances generated profits of £23.1m, down from £33.8m in 2006, and reported a combined ratio of 101.8% – which it said would have been 98.5% if the year’s storm and flood losses totalling £18.4m were excluded.
Despite the losses, the insurer was able to increase commercial lines revenue slightly by £3m, which it attributed to the strength of its schemes business. Its personal lines business grew by 3.6% to £221.7m.
Boisseau said 2006 was an exceptional year for Groupama Insurances with record levels of profitability and this was always going to be difficult to repeat.
“However, at this point in the cycle we are content to maintain our highly disciplined approach to underwriting and pricing and to preserve the bottom line – even if this slows our business development.
“For us, it will continue to be the sanity of consistent profitability rather than the vanity of a dash for growth. We see this as the key to long term success.”
Boisseau said the company would focus on strengthening its current business and would not be actively looking to buy brokers. So far it has acquired Carole Nash, Bollington and Lark.
He added that Groupama had no interest in “building a broker giant”, but if the right company came along that fitted with the insurer’s plans to continue writing niche business, he would consider an acquisition.