18th February 2010

A challenging year at Groupama UK

• Revenues up 3.9% at Groupama Insurances
• Robust performance from UK broking division
• Profitability affected by unprecedented motor claims inflation and weather related losses

"As predicted, 2009 was an extremely tough year. Underwriting activities at Groupama Insurances suffered as a result of unprecedented levels of claims inflation and the poor premium rating environment that affected our core private car portfolio. In addition, performance was also impacted significantly by the severe weather events encountered in January and during the final quarter of the year.

However, even in what were very challenging economic conditions our broking subsidiaries delivered a robust set of results and made a valuable contribution. Given the very challenging conditions encountered in 2009 it is pleasing that we were still able to produce a profitable performance for Groupama."

François-Xavier Boisseau - CEO

Business highlights

Revenues

In highly competitive market conditions, total revenues at Groupama Insurances rose 3.9% to £450.3 million (2008: £433.3 million).

The private car policy count reduced to correct adverse profitability whilst commercial lines and healthcare (PMI) revenues remained under pressure as a result of difficult business conditions and continuing fierce competition in the company's core SME business. The household portfolio performed particularly strongly and there was also encouraging development in the motorcycle, fleet, personal accident and travel accounts.

Combined revenues in the Group's broking businesses also held up well at £66.5 million (2008: £66.4 million)

Profitability

Combined profitability for the UK operations (before tax and amortization) reduced to £14.1 million (2008: £30.1 million) reflecting the challenging economic environment and tough trading conditions.

Underwriting activities at Groupama Insurances were affected by the results of the private car portfolio where inadequate market pricing, significant claims inflation and some unprofitable schemes impacted performance. In addition, severe weather in the first and final quarters of the year produced claims totalling £6 million.

In all other business areas Groupama Insurances delivered an encouraging performance and the Commercial Lines Division and Groupama Healthcare continued to do well.

Overall broking operations again generated a valuable contribution to the combined results of the UK businesses.

Personal lines

Personal lines revenues at Groupama Insurances lifted to £267.9 million (2008 £225.2 million).

The company's household, motor cycle, personal accident and travel business developed strongly following the acquisition of a number of specialist scheme opportunities.

Volumes in the personal motor portfolio reduced significantly to correct adverse profitability

Commercial lines (including fleet, commercial vehicle and schemes)

Total commercial lines revenues moved up 13.1% to £135.1 million (2008: £119.5 million).

Although competition in the open market for SME business remained intense, the Commercial Lines Division continued to develop schemes in niche areas and to build its growing e-business capabilities. The company benefited from significant enhancements to its on-line broker trading facilities and from Optima Small Fleet, the innovative e-traded product for smaller fleets that again delivered very encouraging growth.

Private medical insurance – Groupama Healthcare

The company's healthcare operations continued to reap the rewards of improving performance as a result of its focus on bottom line profitability. Total private medical insurance (PMI) revenues accordingly eased back almost 10%.

Pleasingly, 2009 was also marked by an improving trend in new business activity at Groupama Healthcare as the market began to show some signs of rate strengthening. Groupama's reputation for service excellence was also reinforced again with two major industry awards during the year.

UK broking operations

Although in 2009 the poor economic environment had a severe impact on the UK's insurance broking community, Groupama's broking subsidiaries still delivered an improved result that made a valuable contribution to the performance of the combined UK business.

Commentary

François-Xavier Boisseau, CEO, Groupama Insurances:

"In 2009 the detrimental effect of unprecedented claims inflation on our motor underwriting activities has been considerable. In addition we also had to navigate unfavourable economic conditions, the impact of two severe weather events and the effects of an underwriting cycle approaching its lowest point. In what were very testing times the ability of our operations to continue to generate a profitable return is very pleasing and again demonstrates our clear focus on the bottom line."

"With the exception of private car, our underwriting performance has been solid and there have been excellent performances from our household, healthcare, motorcycle and small fleet portfolios. With market conditions beginning to improve this bodes well for the future"

"It is encouraging that premiums are finally beginning to rise in personal lines. However, in motor the market will need to see continuing increases throughout 2010 if it is to stem the bleeding. Frankly, with a market combined ratio estimated at 120% this particular patient remains on the critical list and will still need major surgery to return to better health. The combined challenges of claims farming, credit hire and fraud are very serious and the market needs to work together to find solutions – in the meantime, premium rates must continue to rise."

"The major players within the healthcare market are slowly beginning to increase prices and this is good news for our business. In recent years Groupama Healthcare has been working hard to improve the bottom line and we are now very well placed to reap the benefits as market conditions harden and our award winning reputation for quality service gives us the opportunity to grow."