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Company Perspectives:
Groupama's guiding principles: Local presence. The mutual's elected r epresentatives 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. Responsib ility. Responsibility is both individual and collective and functions at every level of the organisation. It goes beyond legal responsibil ity and expresses a vision of the insurance business that includes pr eventive actions. Solidarity. Assisting each other is at the heart of a mutual's mission--sharing resources to come to the aid of people w ho have suffered a loss or an accident. Solidarity is well thought ou t and combines both financial and human solidarity.
Groupama S.A. is France's second largest insurance group, with total assets of more than EUR 70 billion and annual revenues from premium i ncome 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 e xpand into the Asian insurance market, with operations in Hong Kong, mainland China, and Vietnam. Groupama provides a full range of insura nce products, and also offers reinsurance products, asset management, and related banking services. Groupama's organizational structure re mains highly local in nature--the group operates through more than 7, 000 independent, local offices, regrouped under 3,000 local branch op erations. These in turn report to 11 regional mutuals, which in turn report to the group's national organization. Since the early 2000s, G roupama has been reducing its number of regional mutuals, previously 23 in number, to just nine. On a national level, Groupama operates th rough three structures: Groupama National Federation, which represent s its members and acts as a coordinator of group strategy; Groupama S .A., which operates the group's insurance business as a limited liabi lity company; and Groupama Holding company, owned by the group's regi onal offices, as the shareholding entity in Groupama S.A. Groupama tr aditionally focuses on France's large rural and agricultural market, which remains the group's core market. The group's products are avail able to nonmembers, however. In order to minimize the risk of over-ex posure to the French market, Groupama has developed a strategy of int ernational expansion for the 2000s. As part of that strategy, the gro up 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 industria l working class, a rapidly growing middle class, and a fully emancipa ted agricultural population, introduced the need for products and org anizations. The creation of "friendly societies" in England in the la te 18th century pointed the way toward the development of a mutual ai d and cooperative movement that quickly spread across Europe.
By the end of the first half of the decade, a growing number of Franc e's farmers had recognized the potential for grouping together to pro vide their own insurance against crop failures, the death of livestoc k, farm accidents, and other specific issues faced by the agricultura l community. The first insurance cooperative was founded in the Is&eg rave;re region in 1840, and was created specifically in order to prov ide fire insurance for its member farmers. The mutual movement quickl y swept across France, and developed a variety of other insurance pro ducts created specifically for the country's rural, agricultural popu lation. 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 acr oss the country. The development of the cooperative movement in gener al, and of the farmers' insurance market, was aided and encouraged by the French government, which began introducing legislation toward th e end of the century. In 1900, the government passed legislation gove rning the farmers' mutuals. Under this legislation, a new body was cr eated, 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 tow ard nationalized industries became particularly strong following Worl d War II, when the French government nationalized much of the insuran ce sector, creating a small number of large-scale companies, includin g 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 o f "capillaries." Local mutuals, while remaining independent, were gro uped along regional lines. The regional bodies, some 23 in number, th en provided representation to their farmer-members for decisions take n by the AMA. Local mutuals were typically operated on a part-time ba sis, often by a village priest or schoolteacher, who then received a commission on sales of the group's insurance products. This close pro ximity--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 prov iding farmers' risk insurance. Laws passed by the French government, starting in the late 1920s, had begun to put into place a system of s ocial security, protecting workers and their families in case of sick ness or death, and by providing maternity leave and retirement securi ty. 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 fa rmers' insurance. In 1963, the group's membership voted to allow the AMA to begin providing other insurance products, such as automobile a nd home insurance. In 1972, the AMA created a new entity, Soravie, an d began marketing its own life insurance products as well. The group' s highly developed local network, operated by salespeople who also he ld prominent roles in their communities, allowed the AMA to become a leading local insurance provider in France and one of the top insuran ce groups overall. The expansion into new products also allowed the g roup to attract clientele from beyond its core agricultural market.
The AMA became one of the first in France to offer traveler's assista nce insurance, launching SOS-AMA in 1975 to provide roadside assistan ce to its members. In 1981, the AMA placed SOS-AMA into a joint ventu re with another mutual group, creating Mutuaide. The AMA then took fu ll control of Mutuaide in 1990.
In the late 1970s, the AMA entered a new market, founding a reinsuran ce subsidiary, Sorema. The reinsurance operation, created in 1978, al so exposed the mutual to the international insurance market for the f irst time. As part of the development of Sorema, for example, the com pany 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 privatiz e much of the nationalized insurance sector. In the late 1970s, a num ber of government-controlled insurance bodies had been allowed to lis t their stock on the Paris Stock Exchange. In 1986, the government an nounced its intention to privatize all ten government-owned insurance companies, allowing them to reincorporate as limited liability compa nies the following year. The privatization effort accompanied the lau nching of a deregulation effort in the insurance and financial market s in general. The AMA responded to the changing market by restructuri ng itself from a federation of local businesses into a more unified o rganization. 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 interes t in international expansion into the 1990s. The company's target tur ned first to the European market. For this, the company targeted the more developed financial markets, establishing a subsidiary in Switze rland, for example. In 1995, Groupama entered the United Kingdom, pay ing £83 million to acquire Lombard Insurance. That company had been formed in 1993 from a management buyout of the U.K. operations o f U.S.-based Continental. Lombard was renamed as Groupama UK followin g 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 fas t-growing, publicly listed competitors. Groupama held several key pos itions in the French insurance sector, including a 63 percent share o f the agricultural risks market, and an 80 percent share of the marke t providing insurance to agricultural cooperatives. The company attem pted to attract a wider and more diversified client base; in 1995, Gr oupama opened up its membership to nonagricultural policyholders for the first time. Nonetheless, the rural market remained the dominant s ource for the company's revenues, with towns of population of 10,000 or less accounting for 70 percent of group revenues.
The merger of longtime mutual insurance rival AXA with UAP in 1997 cr eated the dominant player in the French insurance market and forced G roupama to launch an effort to build its own scale, and especially to diversify its client base. The company attempted to buy up Athena, a nother French insurer, in 1997, but lost the bid to AGF.
Groupama had better luck in 1998, when the French government announce d that it was going to complete a long-awaited privatization of its G AN (Groupe des Assurances Nationales) insurance operation. Groupama j oined the bidding, against rival Swiss Life. Despite GAN's larger siz e, Groupama won the bid, adding GAN's $8.7 billion in revenues an d four million clients. The addition of GAN catapulted Groupama to th e number two position in the French insurance market. At the same tim e, GAN's client base proved complementary to Groupama's, helping it t o achieve a greater diversity of customers.
With its position in France secured, Groupama was able to turn its at tention to developing an international presence. In the beginning of the 2000s, the company decided to revise its foreign strategy and ref ocus 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 com pany to put these sales on hold, however. Although the Swiss operatio n was finally sold by 2005, the U.K. operation had in the meantime ma de 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 speci alist in the healthcare insurance sector.
Groupama, which had already established a subsidiary in Spain, booste d 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 cl aimed 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 u p 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, Gro upama 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 offer ing. As part of this process, the group had begun streamlining its or ganization, reducing the number of regional offices from 24 to just n ine, and its number of local offices from more than 10,000 to just 7, 000. Groupama also created a new administrative structure, establishi ng a holding company, Groupama Holding, for its business operations, known as Groupama S.A. After more than 150 years as a mutual insuranc e group, Groupama hoped to go public as early as 2006.
Principal Subsidiaries: Assuvie; Caisse Fraternelle d'É pargne; Caisse Fraternelle Vie; Cofintex Luxembourg Reinsurance; Comp agnie 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 P ortugal Seguros; Gan Portugal Vida; Gan Prévoyance; Gan UK plc ; Groupama Assurance-Crédit; Groupama Banque; Groupama Biztosi to (Hungary); Groupama General Insurances CL (United Kingdom); Groupa ma Holding; Groupama Holding 2; Groupama International; Groupama Plus Ultra (Spain); Groupama Protection Juridique; Groupama S.A.; Groupam a Transport Insurance; Groupama Vie; Günes Sigorta (Turkey); Lux life Insurance (Luxembourg); Mutuaide Assistance; Rampart Reinsurance (United States); Scepar Investments; Sepac; Silic.
Principal Competitors: Confederation Nationale du Credit Mutue l; AXA Group; Banque Federative du Credit Mutuel; Credit Lyonnais; MA AF; MAIF.
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