French connection

Despite Franaois-Xavier Boisseau's recent success, his education suggested a different career path. He studied aerodynamics and mechanics at university and says he had no predisposition to go into the insurance world. Deciding to work in insurance because of its people-orientated nature, he joined French giant Axa and, after three years in France, where he worked with agents designing, pricing and selling products, he moved to its UK Cardiff office in 1993. At this time Axa had only 350 staff in the UK. This suited Boisseau, as he claims small companies are good training grounds for an executive because of the exposure to the diversities of the business, such as the accounting side.

An important relationship was also established at the rival French insurer. Groupama's current chairman and chief executive officer - a role he previously held at Axa UK - Pierre Lefevre was working at Axa's Cardiff office when Boisseau joined.

What Boisseau saw was large differences between the UK and French insurance environments. He thinks the UK is the most competitive market in Europe and possibly the world, despite consolidation leading to Norwich Union and the Royal Bank of Scotland having large slices of the sector. According to Boisseau, consumers in the UK have a different attitude, for example, constantly looking for the best deal and price in personal lines and, to a lesser extent, on commercial lines.

Also, contracts can be cancelled at any time which makes competition to keep the customer more fierce, while in France, for example, there is an automatic renewal unless a company replies within a subscribed time. Moreover, technology is more prevalent in the UK where, for example, electronic data interchange in personal lines has been active for many years. He feels the transaction of business between customer, broker and insurer is "miles ahead" of other markets.

Boisseau rose to become director of underwriting and claims at Axa, which by then had a portfolio of £1.7bn and over 4000 staff. This was the position he held before he joined Groupama in June 2003. Pierre Lefevre had already moved to the company in March 2002.

At Axa, Boisseau had restructured the portfolio after it was making heavy losses. However, his ambition and impatience led him to change jobs after 14 years. He says moving to Groupama was a fantastic opportunity to turn around an insurance company.

The size of the task was not for the fainthearted. Between 1998 and 2002 Groupama lost more than £300m, and had seen the integration of the GAN and Lombard Insurance Groups.

One of the first jobs was to cull its extensive book of business. Boisseau says: "There was a lot of poor business, and Groupama needed to restructure the portfolio. It needed to move away from unprofitable business by shrinking the gross written premium from £500m to £300m in two years." Moving away from unprofitable larger businesses to the small to medium-sized enterprise market was one of the key pieces of restructuring. Another priority was to cut expenses and from a starting point of 1200 staff under Boisseau, there are now 750.

The strategy paid dividends. The company made £10m profit in 2003, and £20m in 2004.

The speed of the turnaround was especially pleasing for Boisseau. He comments: "It took three years to turn around Axa, but at Groupama it only took 12 months."

In this period, there was only one agency relationship - with Saga - which was terminated.

When asked about the balance between increasing gross written premium and profits, his approach is predictable. He comments: "Profit must come first - all chief executive officers will tell you that. Not many companies took the brave step of reducing their top line by 40%, however, you cannot shrink year after year, you need to stabilise and then grow."

He continues: "In 2005, we are proud to have grown the top line by 12% - excluding the acquisition of Clinicare."

Boisseau's confidence in his ability is clear when he says: "People are always classified as a troubleshooter or a grower. I want to be both."

He believes 2005 saw the full benefits of the changes. It also included a healthy investment result, partly because of investing in gilt and bonds as opposed to shares. In addition, the combined ratio was 95%, a 4% improvement on 2004.

Especially impressive was the firm's personal lines combined ratio of 92.5%, of which 80% is a motor book.

Groupama controls its motor book by writing certain age groups and avoiding older cars. He says: "Our footprint is quite selective and we have been writing here for many years and we have an in-depth knowledge. Even if you looked at the past 10 years our record is good here. However, why our record is so good will remain a secret - many would like to know."

Unlike some of its rivals, Groupama is determined to continue its policy of not outsourcing or offshoring claims. Boisseau believes the strength in the company is a combination of claims handlers, underwriters, IT and salespeople.

In IT, Groupama was one of the first to go live with imarket, and this is typical of the insurer's progressive attitude to technology. On imarket, Boisseau comments: "People must realise it is one of the biggest technology advances since EDI, which also took a long time, but people forget how long that took, so why should it be different with imarket? Second, what the broker wants is clear: for SME, they want a comparative quote engine. So far it is sequential quotes - a system which will pick up the data from their back office, send it to imarket and have four or five quotes back. We only approached the software houses in a meaningful way a year ago. We are between six and 12 months away. It will be a step change."

However, Groupama is not immune to losing its quality. Amanda Blanc, distribution and customer service director, has been poached by Towergate where she is heading up its broking division; incidentally, she also worked at Axa.

When asked if she is irreplaceable, he replies: "Nobody is irreplaceable. I'm not irreplaceable. It is good practice to ensure we find the best person for the job. The reason I can take my time to replace her is because she had a strong staff." He continues: "People can leave Groupama but they cannot take Groupama with them."

Groupama has an agency base of over 2000, and around 350 to 400 that are "very active". However, consolidation in the market is not conducive to this expanding. Boisseau takes a swipe at the competition when he says: "Unlike some companies who are interested in big brokers, we deal with small brokers. We aren't snubbing them."

He continues: "On personal lines we have a big relationship with Swinton and Budget, who are buying small brokers. Consolidation does not make us smile or make us cry. It is a transfer of relationships and we don't see that as a threat. What is more of a threat is when our competitors buy brokers."

Commercial lines consolidation is possibly a disadvantage says Boisseau, however, he feels it is too early to judge the situation.

He says: "Normal business practice is that consolidation leads to increased commission. It is not reflected in price increases and, therefore, there is less margin for the risk carrier. The ones who are suffering are the 'big five'. The portfolio is becoming consolidated at the same price but with higher commission.

"If I was a big insurer then I would say it is a threat. At Groupama it could be an opportunity to grow our book."

Another opportunity for Groupama is to establish the company as a dominant player in healthcare. Last November, Groupama completed a deal with health insurer Clinicare, which has £38m GWP and its integration is expected to be finalised by the end of May.

There is now a total of £55m of private medical insurance business, including via Goodhealth, which offers PMI for expatriates. The target is £100m within three to four years - the size Boisseau believes helps you gain advantage in negotiations, and also in making investment in IT and people.

Broker Jelf, which now has a £50m book of PMI, is leading the way in cross-selling opportunities, especially following the recent acquisition of Goss. Boisseau also says there is a clear divide between PMI specialists and commercial brokers at the moment but questions whether the divide will remain.

Groupama Healthcare will remain and will operate from one site in Letchworth, which is three times the size of Tonbridge. The aim is to build upon the service, people and IT systems of Clinicare.

The acquisition was completed within Groupama Insurances' own fund. However, there is money available from Groupama's central fund to buy a similar sized target to Clinicare but the "group's blessing" is needed for more if, for example, they were to buy a firm of £300m GWP.

One of Groupama's ambitions is to be listed on Euronext Paris, the Paris Stock Exchange, however, according to Boisseau, they will do this only after a major acquisition. He added it could be in the UK, if the right target is identified.

Looking at the rest of the year, Boisseau predicts: "In the second half of 2006 we will start to see some price increases in motor - even if claims inflation is slow it is still around 3% or 4%. The Royal Bank of Scotland and Norwich Union have tried to raise prices in the market; it is not the question of who but when."

However, he gives this warning: "People are starting to go beyond what is reasonable. In March, one of our competitors dropped its price by 12%. You have to be crazy, this is huge. There is clearly an agenda to grow the top line and if you have big players making double digit price decreases it is bound to have an impact on the market, except if they correct it in three months time. One or two big players can destabilise the market." After further consideration, he adds: "Who knows how 2006 is going to look like?"

What has struck him about the commercial property market is that everybody has hung onto renewals: "I have not heard of big price competition there - to some extent, I want to see more competition. There is more competition among brokers."

Despite its success last year, he has a warning for the market: "For many insurers profits went up in 2005 because of their investment result, rather than their combined ratio. There are some underlying trends masked by the good profits. We can't improve further on 95% combined operating ratio or our investment returns."

He continues: "There is an expectation from shareholders who want to see a continuation of profits on the same scale, however, a significant weather event has not happened for several years. At some stage you have to make a choice. We are clear you cannot grow both top and bottom lines - good luck to them. People should be vigilant and we must act as an industry to manage the underlying trends, and if we don't there will be a more brutal correction in two years time. Don't become complacent - there are worrying trends behind those glossy numbers."

When asked about his home country's meandering progress towards implementing the Insurance Mediation Directive, Boisseau jokes that the French have always been creative in making laws but then not applying them. It is a "generic trend of our culture" and "the British make fewer laws but are quick to adopt them."

Showing off his people person credentials he enthuses: "Broking managing directors are all very different, some small brokers are more professional than big brokers, they are more entrepreneurial than others. You get the whole range but they like our corporate and direct style. They all like consistency and people who are upfront. They are all different, which is nice. They have their own cultures and this makes it more enjoyable doing business. Most of them are risk takers."

CV

2003 Managing director, Groupama Insurances

2000 Director of underwriting and claims, Axa Insurance UK

1998 Deputy managing director, Axa Global Risks

1993 Director of customer service, Axa Insurance UK

1990 Joined the Axa Group from SNPE.