Strong profitability continues at Groupama Insurances

22nd February 2008

Impressive profits and return on equity
Exceptional storm and flood losses impact results

"Groupama Insurances has again delivered a strong bottom line performance, with an excellent return on capital employed and a valuable contribution to the Group. This is against the backdrop of extremely competitive market conditions, continuing consolidation among the UK's insurance intermediaries and some of the worst flooding for many years."

"Our concentration will always remain on the bottom line and we are content to sacrifice volume if we cannot achieve acceptable levels of return."

Chief Executive Officer, François-Xavier Boisseau

Business highlights 2007

UK profit and return on capital employed (ROCE)

Groupama Insurances generated profits of £23.1 million for 2007 (2006: £33.8 million) producing a return on capital employed of 18.0 % on an annualised basis. The results were impacted by exceptional storm and flood losses in January, June and July totalling £18.4 million (£14.4 million net of reinsurance).

UK Group Revenues

Revenues for 2007 were flat at £408.7 million (2006: £412.5 million). This reflects disciplined underwriting in the personal and commercial lines portfolios, the impact of ongoing consolidation, and continuing portfolio adjustment in the company's healthcare subsidiary, Groupama Healthcare.

Commercial Lines

Commercial Lines revenues lifted slightly in 2007 with premium income rising to £104.7 million including Fleets (2006: £101.8 million). The company's scheme business continued to perform well while open market business was challenging with softening premium rates continuing. Portfolio profitability remained excellent.

Personal Lines

Personal Lines business grew by 3.6% to £221.7 million (2006: £213.9 million) bolstered by continuing growth in the company's home and motor portfolios. There was an excellent performance from the motorcycle account following the release of a new product in the first quarter of the year.

Despite the impact of weather losses arising from the events in January, June and July 2007, the level of profitability in the Group's personal lines business remains very acceptable at this point in the cycle.

Competition in the UK's private car market remains very keen, although rates are now rising consistently. Groupama will continue to apply appropriate pricing increases to maintain profitability of this important area of the company's business.

Healthcare

Total Healthcare revenues for Groupama have eased back reflecting a continuing commitment to strict underwriting disciplines in a very soft rating environment.

Annual revenues amounted to £82.3 million (2006: £95.7 million)

2007 financial highlights

Commentary

François-Xavier Boisseau, Chief Executive Officer, Groupama Insurances

"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."

"Our selective underwriting approach and continuing concentration on schemes and niche business has helped us in commercial lines where we are seeing heavy competition for good quality, open market business. In the current market conditions, growth is a secondary consideration and I am really pleased with the profitability of our commercial portfolio. The market is badly in need of significant price increases – especially in liability classes – if the industry is to avoid the sort of losses experienced in 2000/2001."

"At Groupama Healthcare, our investment in people and high quality customer service means that we are winning new friends while we continue to re-engineer the portfolio towards the SME sector where we see the best potential for profitable growth. These new business contacts coupled with improving business profitability that is responding well to our underwriting and pricing strategy, bodes well for the future."

"Although burgeoning internet buying remains a real challenge in personal lines, it is encouraging that the private motor market shows some sign of hardening which should help to restore market profitability. We need similar action now in commercial motor business, as prices are currently far too cheap."

Ends