Groupama S.A.

8-10 rue d'Astorg
Paris
F-75383 Cedex 08
France
Telephone: +33 1 44 56 77 77
Fax: +33 1 44 56 72 74
Web site: http://www.groupama.com

Private Cooperative
Incorporated: 1900 as Caisses d'Assurances Mutelles Agricoles
Employees: 33,000
Sales: EUR 12.8 billion ($14 billion) (2004)
NAIC: 524113 Direct Life Insurance Carriers; 524114 Direct Health and Medical Insurance Carriers; 524126 Direct Property and Casualty Insurance Carriers

Groupama S.A. is France's second largest insurance group, with total assets of more than EUR 70 billion and annual revenues from premium income of nearly EUR 13 billion ($13.5 billion) in 2004. Groupama is a mutual insurance company, with more than four million members in France, and operations in the United Kingdom, Spain, Portugal, Italy, and Hungary. In the mid-2000s, Groupama also has begun a drive to expand into the Asian insurance market, with operations in Hong Kong, mainland China, and Vietnam. Groupama provides a full range of insurance products, and also offers reinsurance products, asset management, and related banking services. Groupama's organizational structure remains highly local in nature—the group operates through more than 7,000 independent, local offices, regrouped under 3,000 local branch operations. These in turn report to 11 regional mutuals, which in turn report to the group's national organization. Since the early 2000s, Groupama has been reducing its number of regional mutuals, previously 23 in number, to just nine. On a national level, Groupama operates through three structures: Groupama National Federation, which represents its members and acts as a coordinator of group strategy; Groupama S.A., which operates the group's insurance business as a limited liability company; and Groupama Holding company, owned by the group's regional offices, as the shareholding entity in Groupama S.A. Groupama traditionally focuses on France's large rural and agricultural market, which remains the group's core market. The group's products are available to nonmembers, however. In order to minimize the risk of over-exposure to the French market, Groupama has developed a strategy of international expansion for the 2000s. As part of that strategy, the group expects to go public as early as 2006.

Farmers' Mutual Assistance in the 1840s

The democratization of much of Europe in the 19th century stimulated the growth of new models for the financial industry. Whereas previous banking and insurance models had been oriented in large part toward the wealthy, the rise of new social strata, including a new industrial working class, a rapidly growing middle class, and a fully emancipated agricultural population, introduced the need for products and organizations. The creation of "friendly societies" in England in the late 18th century pointed the way toward the development of a mutual aid and cooperative movement that quickly spread across Europe.

By the end of the first half of the decade, a growing number of France's farmers had recognized the potential for grouping together to provide their own insurance against crop failures, the death of livestock, farm accidents, and other specific issues faced by the agricultural community. The first insurance cooperative was founded in the Isère region in 1840, and was created specifically in order to provide fire insurance for its member farmers. The mutual movement quickly swept across France, and developed a variety of other insurance products created specifically for the country's rural, agricultural population. The development of this network of locally controlled mutual assistance groups occurred more or less spontaneously, with as yet no central coordination to speak of.

The new "mutuelles" soon became an important facet of French farming life. By the beginning of the 1890s, France counted more than 550 across the country. The development of the cooperative movement in general, and of the farmers' insurance market, was aided and encouraged by the French government, which began introducing legislation toward the end of the century. In 1900, the government passed legislation governing the farmers' mutuals. Under this legislation, a new body was created, called the Caisses d'Assurance Mutuelles Agricoles, or AMA, to provide centralized oversight to the sector. The mutuals themselves remained local and more or less autonomous in their operation.

The financial crises in the 1930s led the French government to force a consolidation of the banking and insurance industries. The move toward nationalized industries became particularly strong following World War II, when the French government nationalized much of the insurance sector, creating a small number of large-scale companies, including GAN, AFF, and UAP.

During this period, the AMA, too, emerged as a full-fledged corporate entity, becoming the heart of what has been described as a network of "capillaries." Local mutuals, while remaining independent, were grouped along regional lines. The regional bodies, some 23 in number, then provided representation to their farmer-members for decisions taken by the AMA. Local mutuals were typically operated on a part-time basis, often by a village priest or schoolteacher, who then received a commission on sales of the group's insurance products. This close proximity—and often intimate knowledge—of the local market enabled the AMA to become the agricultural community's leading provider of life insurance by the 1960s.

The AMA had by then begun expanding beyond its original focus on providing farmers' risk insurance. Laws passed by the French government, starting in the late 1920s, had begun to put into place a system of social security, protecting workers and their families in case of sickness or death, and by providing maternity leave and retirement security. The social security system was expanded to include not only farm employees, but the farmers themselves, and sparked the development of what was called the "social insurance" system.

By the early 1960s, the AMA sought to branch out from its focus on farmers' insurance. In 1963, the group's membership voted to allow the AMA to begin providing other insurance products, such as automobile and home insurance. In 1972, the AMA created a new entity, Soravie, and began marketing its own life insurance products as well. The group's highly developed local network, operated by salespeople who also held prominent roles in their communities, allowed the AMA to become a leading local insurance provider in France and one of the top insurance groups overall. The expansion into new products also allowed the group to attract clientele from beyond its core agricultural market.

The AMA became one of the first in France to offer traveler's assistance insurance, launching SOS-AMA in 1975 to provide roadside assistance to its members. In 1981, the AMA placed SOS-AMA into a joint venture with another mutual group, creating Mutuaide. The AMA then took full control of Mutuaide in 1990.

In the late 1970s, the AMA entered a new market, founding a reinsurance subsidiary, Sorema. The reinsurance operation, created in 1978, also exposed the mutual to the international insurance market for the first time. As part of the development of Sorema, for example, the company established an office in New York, placing its subsidiary closer to the world financial market.

In the meantime, the French government had been preparing to privatize much of the nationalized insurance sector. In the late 1970s, a number of government-controlled insurance bodies had been allowed to list their stock on the Paris Stock Exchange. In 1986, the government announced its intention to privatize all ten government-owned insurance companies, allowing them to reincorporate as limited liability companies the following year. The privatization effort accompanied the launching of a deregulation effort in the insurance and financial markets in general. The AMA responded to the changing market by restructuring itself from a federation of local businesses into a more unified organization. The group then adopted a single brand name, Groupama, in 1986.

International Growth for the New Century

With competition rising at home, Groupama began developing an interest in international expansion into the 1990s. The company's target turned first to the European market. For this, the company targeted the more developed financial markets, establishing a subsidiary in Switzerland, for example. In 1995, Groupama entered the United Kingdom, paying £83 million to acquire Lombard Insurance. That company had been formed in 1993 from a management buyout of the U.K. operations of U.S.-based Continental. Lombard was renamed as Groupama UK following the acquisition.

Into the late 1990s, however, Groupama was described as a "minnow" in France's insurance market, with a distant fifth place behind its fast-growing, publicly listed competitors. Groupama held several key positions in the French insurance sector, including a 63 percent share of the agricultural risks market, and an 80 percent share of the market providing insurance to agricultural cooperatives. The company attempted to attract a wider and more diversified client base; in 1995, Groupama opened up its membership to nonagricultural policyholders for the first time. Nonetheless, the rural market remained the dominant source for the company's revenues, with towns of population of 10,000 or less accounting for 70 percent of group revenues.

Company Perspectives:

Groupama's guiding principles: Local presence. The mutual's elected representatives and Group staff are in close contact with customers on the ground, and present throughout France, listening to the needs of members and customers. They act to find genuine solutions. Responsibility. Responsibility is both individual and collective and functions at every level of the organisation. It goes beyond legal responsibility and expresses a vision of the insurance business that includes preventive actions. Solidarity. Assisting each other is at the heart of a mutual's mission—sharing resources to come to the aid of people who have suffered a loss or an accident. Solidarity is well thought out and combines both financial and human solidarity.

The merger of longtime mutual insurance rival AXA with UAP in 1997 created the dominant player in the French insur-ance market and forced Groupama to launch an effort to build its own scale, and especially to diversify its client base. The company attempted to buy up Athena, another French insurer, in 1997, but lost the bid to AGF.

Groupama had better luck in 1998, when the French government announced that it was going to complete a long-awaited privatization of its GAN (Groupe des Assurances Nationales) insurance operation. Groupama joined the bidding, against rival Swiss Life. Despite GAN's larger size, Groupama won the bid, adding GAN's $8.7 billion in revenues and four million clients. The addition of GAN catapulted Groupama to the number two position in the French insurance market. At the same time, GAN's client base proved complementary to Groupama's, helping it to achieve a greater diversity of customers.

With its position in France secured, Groupama was able to turn its attention to developing an international presence. In the beginning of the 2000s, the company decided to revise its foreign strategy and refocus its expansion effort on the one hand to developing its business in southern Europe, as well as entering the Asian market. As part of that strategy, the group announced its decision to sell off its U.K. and Swiss subsidiaries in 2001. Poor market conditions forced the company to put these sales on hold, however. Although the Swiss operation was finally sold by 2005, the U.K. operation had in the meantime made substantial progress in gaining market share, and its sale was put on hold indefinitely. Instead, in October 2005, Groupama backed its U.K. subsidiary's expansion with the acquisition of Clinicar, a specialist in the healthcare insurance sector.

Groupama, which had already established a subsidiary in Spain, boosted its presence in the market in 2002 when it acquired Spanish insurer Plus Ultra Generales. Groupama then merged its existing business in Spain into Plus Ultra's, forming Groupama Plus Ultra. That company claimed a spot in the top ten nonlife insurers in Spain, and in the top 20 in the country's overall insurance market.

Groupama also had begun to explore expansion in Asia. The group set up a subsidiary in Vietnam, and began providing agricultural insurance there. In January 2005, Groupama's Vietnamese subsidiary, struggling to achieve profitability in its narrow market, was granted a license to offer an expanded range of insurance products there. In 2003, Groupama received a license to sell insurance products in China, leading to the establishment of its first branch office in Chengdu in 2004. By 2005, Groupama had opened four offices in China.

As mid-decade approached, Groupama began preparing for a public offering. As part of this process, the group had begun streamlining its organization, reducing the number of regional offices from 24 to just nine, and its number of local offices from more than 10,000 to just 7,000. Groupama also created a new administrative structure, establishing a holding company, Groupama Holding, for its business operations, known as Groupama S.A. After more than 150 years as a mutual insurance group, Groupama hoped to go public as early as 2006.

Principal Subsidiaries

Assuvie; Caisse Fraternelle d'Épargne; Caisse Fraternelle Vie; Cofintex Luxembourg Reinsurance; Compagnie Foncière Parisienne; Gan Assurances Iard; Gan Assurances Vie; Gan Eurocourtage Iard; Gan Eurocourtage Vie; Gan Italia S.p.A.; Gan Italia Vita; Gan Outre-mer Iard; Gan Patrimoine Insurance; Gan Portugal Seguros; Gan Portugal Vida; Gan Prévoyance; Gan UK plc; Groupama Assurance-Crédit; Groupama Banque; Groupama Biztosito (Hungary); Groupama General Insurances CL (United Kingdom); Groupama Holding; Groupama Holding 2; Groupama International; Groupama Plus Ultra (Spain); Groupama Protection Juridique; Groupama S.A.; Groupama Transport Insurance; Groupama Vie; Günes Sigorta (Turkey); Luxlife Insurance (Luxembourg); Mutuaide Assistance; Rampart Reinsurance (United States); Scepar Investments; Sepac; Silic.

Principal Competitors

Confederation Nationale du Credit Mutuel; AXA Group; Banque Federative du Credit Mutuel; Credit Lyonnais; MAAF; MAIF.

Key Dates:

1840:

The first farmers' mutual insurance group, providing fire insurance, is formed.

1900:

The French government establishes AMA as the central farmers' mutual body.

1963:

AMA begins diversifying products, adding automotive insurance, etc.

1972:

Life insurance operations are launched.

1975:

The roadside assistance subsidiary, SOS-AMA, is launched.

1978:

The Sorema reinsurance subsidiary is launched.

1980:

SOS-AMA is merged into Mutuaide.

1986:

The AMA network is regrouped under the single Groupama brand name.

1990:

The company acquires full control of Mutuaide.

1995:

Membership is opened to nonagricultural policyholders; Lombard Insurance in the United Kingdom is acquired.

1998:

Groupama acquires GAN and becomes the number two French insurance company.

2002:

Plus Ultra in Spain is acquired.

2003:

The company receives a license to sell insurance in China.

2004:

The company opens its first Chinese branch, in Chengdu.

2005:

The company receives a license to expand product offerings in Vietnam; Groupama UK acquires Clinicare.

Further Reading

Anker, Guy, "Groupama Sets Out to Treble Its Business," Post Magazine, March 31, 2005.

Buliard, Fabien, "Groupama Plans Listing in 2006 to Boost Expansion," Insurance Day, November 21, 2003.

"Does Floatation Suggest a Groupama Sea Change?," Post Magazine, September 22, 2005.

"French Insurance Giant Groupama Keen on China," Asianinfo Daily China News, December 31, 2001.

Groom, Brian, "Globalisation Shakes Groupama Rural Idyll," Financial Times, August 27, 2004.

"Groupama Facing Acid Test in China," SinoCast China Financial Watch, September 21, 2005.

"Groupama Opens Chengdu Branch," SinoCast China Business Daily News, October 27, 2004.

"Groupama souhaite grossir avant peut-être d'aller en bourse," L'Expansion, March 23, 2005.

Jack, Andrew, "Groupama Emerges from Obscurity," Financial Times, July 2, 1998, p. 32.

Kielmas, Maria, "Groupama Buys GAN," Business Insurance, July 13, 1998, p. 17.

Rouse, Lynn, "Clinicare Deal Offers Groupama PMI Boost," Post Magazine, October 20, 2005.

Swift, Jonathan, "Groupama Looks at UK Acquisitions," Post Magazine, September 22, 2005.

Tieman, Ross, "A Gaelic Response to Keeping Your Customers Local," Financial Times, November 16, 1999, p. 20.