What next for Groupama?

Ageas’s definitive decision to buy Groupama UK will be welcome news for the currently French-owned insurer. But while Groupama UK’s future ownership is now accounted for, the deal leaves several unanswered questions.

The acquisition will come as little surprise to most. When Ageas announced earlier this month that it was in exclusive discussions to buy Groupama UK, many rightly assumed it was a done deal.

There was a sticking point in the shape of Groupama UK’s £40.6m pension scheme deficit, but this particular hurdle has been deftly cleared by Groupama agreeing to pay off £40m of the liability and transfer the pension fund to French parent company Groupama SA.

The deal also removes the shadow of Groupama SA’s BB financial strength rating, which had prompted some brokers to reconsider placing business with the UK arm. Groupama UK was unable to obtain its own rating, and so was forced to trade under its parent’s weak rating despite its own relative financial strength.

This will not be a problem at Ageas. AG Insurance, the main underwriting unit of the Belgian Ageas group, has an A- financial strength rating from Standard & Poor’s. Ageas Insurance Ltd in the UK has a BBBpi financial strength rating from S&P, but this is an unsolicited rating based solely on publicly available information (hence the pi suffix). These types of ratings are typically lower than a full rating would be.

While Groupama UK’s future looks more certain, it is unclear what will become of Groupama UK chief executive François-Xavier Boisseau and his senior team under its new parent. Ageas says Groupama UK will become a wholly owned subsidiary, which suggests its business will not simply be absorbed into Ageas and that Groupama will retain something of its own culture and structure.

Ageas may also be keen to retain a talented executive such as Boisseau, who has ably steered the company and helped it to become a highly respected general insurer.  But it remains to be seen whether he will be happy running a subsidiary of a European insurer’s UK arm, rather than a whole UK arm. And while neither Boisseau nor Ageas UK chief executive Barry Smith is egotistical or combative, is there really room for both?

There is also the unanswered question about profitable, well-respected motorbike broker Carole Nash, the only segment of Groupama’s overall UK operations that is unaccounted for. Lark has completed its management buy-out, and Bollington is heading down the same route, but while there are noises that Carole Nash will follow suit, nothing more substantive has yet emerged.

One thing is certain - Ageas will want to maintain the relationship with Carole Nash to continue to gain access to its business.