“It will be quite a while before we recoup the investment we made in Romania,” said Coste, who has been running the local Groupama subsidiary for two years. The company has invested EUR700 million so far, most of which on acquisitions, he added.
Groupama Asigurari has been posting losses every year since entering the local market and the crisis only served to make matters worse, causing the French-owned insurer to miss its breakeven deadline initially set for 2011. Groupama posted 88 million lei (EUR20 million) loss last year but Coste says the insurer has definitely made progress towards profitability this year.
“We will reach breakeven next year,” Groupama Asigurari CEO said. This year’s estimated loss is about RON25 million, largely because of the provisions set up, and the company is three years behind its initial breakeven deadline, he added.
A major source of losses, which amounted to several hundred million lei, Groupama’s CEO says, was the loan insurance portfolio it took over when it entered the market. Loan insurance accounted for one fifth of Asiban’s portfolio and for some 6% of BT Asigurari’s. Groupama acquired the two in 2007 and 2008 and merged them under its brand in 2009, at the onset of the crisis.
The French insurer then took steps to cut personnel spending, resize territorial network, optimize operations and focus on a portfolio mix in order to curb losses, which cost it several dozen million euros in form of capital increases every year.
As a result, it reduced exposure to high loss-making segments such as auto liability insurance (RCA) and is now focusing on comprehensive auto insurance (CASCO), where gross premiums written remained relatively stable, despite the overall market decline of 8% in the first nine months, Coste explained.
Comprehensive insurance accounted for some 46% of Groupama’s insurance portfolio at the end of September and policy sales generated RON245 million revenue in the first nine months. Sales of auto liability insurance policies dropped 25% to RON113 million in the same period.
Another important business for Groupama is property insurance, where it saw 21% rise in sales of policies to corporate customers in January-September, Francois Coste said. Property insurance premiums amounted to RON98 million in first nine months.
A key segment in Groupama’s strategy is agricultural insurance and especially crop insurance. The agricultural insurance segment is developing in Romania, as shown by the increase in claim frequency, the company’s CEO said.
Groupama has a 25% share of the agricultural insurance market, with some RON25 million in gross written premiums covering 650,000 hectares.
The Romanian subsidiary is also training a number of Chinese insurance specialists to take the local know-how and apply it to agricultural insurance in their country, Coste added.
Groupama’s CEO says that his company will focus on providing insurance solutions to exporters in the automotive and construction sector mainly in the coming period and is considering infrastructure projects, as well. It is also looking at the life insurance business, where there is an obvious need for protection.
Life insurance generates only 6% of the company’s revenue, RON32 million in the first nine months. (EUR1=RON4.4552)
(English version by Loredana Fratila-Cristescu)