ancora news Groupama
UPDATE 2-Groupama urged to speed up disposals-sources
Thu Nov 24, 2011 12:17am IST
* Groupama hopes to move to second round soon - sources
* AXA, Covea and Allianz seen as most likely suitors for GAN
* Groupama eyes up to 1 bln euros from sale (Adds further details on possible scenarios)
By Sophie Sassard and Victoria Howley
LONDON, Nov 23 (Reuters) - French mutual insurer Groupama is expecting indicative offers for its GAN Assurances unit this week, amid growing pressure from the French regulator to improve its solvency ratio quickly via asset disposals, several sources close to the transaction said.
Groupama is hoping to move into the second round of the process in about two weeks and to finalise the transaction by the end of the year, the sources added.
French insurers AXA and Covea and German peer Allianz have appointed advisers to review bids for the non-life GAN Assurances business, and were seen as the most likely suitors, the sources said.
Groupama is hoping to earn between 700 million and 1 billion euros from the sale, depending on whether all of GAN Assurance comes on the block, the sources said.
"The final details of the deal are still being hammered out", a person familiar with Groupama said.
Groupama is still actively discussing with the French regulator Autorite de Controle Prudentiel (ACP) the best ways to free up capital and promptly increase solvency, the sources said.
Groupama, hampered by bigger-than-average investments in equities and distressed eurozone government bonds, is the first big European insurer to suffer capital adequacy problems as a result of the sovereign debt crisis.
The company said in August its first-half net profit was up nearly 16 percent despite an 84 million euro provision related to its exposure to Greece. At the time, its net exposure to Portugal, Greece and Ireland was up to 770 million euros.
Net exposure to Italy was 1.5 billion euros while Spain's was 670 million.
The mutual group also took big losses in the late summer on two of the main equity stakes in its portfolio, French bank Societe Generale and water group Veolia Environnement .
It replaced its long-standing CEO Jean Azema on Oct. 25, after two ratings agencies cut its long-term ratings in September, prompting speculation that it would sell assets as part of plans to raise as much as 2 billion euros to reach capital requirements under new insurance regulation known as Solvency II due to come into effect in 2013.
The sources said Groupama's long-time advisers Ricol and Morgan Stanley will try to limit the discount on what is seen as a "distressed deal" compared to their book value.
"The value of insurance assets is not high, and being in the position of a forced seller would put even more pressure on their potential value," said Marc-Philippe Juilliard of credit rating agency Fitch, which in September downgraded Groupama's rating by two notches to BBB.
Picking up the rights assets for disposals is also key because freeing up the most capital-intensive activities would better help restore solvency, the sources said.
Groupama could also sound out interest for GAN Vie and Eurocourtage by the end of the year, sources said, although the company has so far been reluctant to offload its capital light brokerage business.
But luring buyers for GAN Vie may prove challenging, the sources said. They named French insurer CNP as the sole potentially interested party at the moment but added a state recapitalisation would likely be required to fund any deal.
GAN was first acquired in 1998, initiating a series of pricy acquisitions that contributed to the group's financial stress, the sources said.
"Even if they get GAN sold, the question then becomes: what happens to Groupama?", said a Paris-based sector banker said.
Credit Agricole has always been named as a likely partner but European banks' current difficulties might make CNP Assurances the most obvious choice, the banker said.
The French state would try to avoid a direct bail-out and would likely favour a rescue deal with CNP, the sources said.
Bringing in new investors via issuing shares is Groupama SA without implementing a radical demutualisation is also on the cards, two of the sources said, adding that this would only come at a later stage if disposals were not sufficient to fill the capital gap.
The source said touted white knights such as billionaire investor Warren Buffet and other insurers like Swiss Re were unlikely to directly invest in Groupama.
They could, however, re-insure part of Groupama's portfolios, providing the French mutual group with more time and financial headroom to find a sustainable solution, one of the sources said.
Group, CAP, Cove, AX, Alliance and ACP declined to comment. (Additional reporting by Myles Neligan and Lionel Laurent; Editing by Mike Nesbit and Jane Merriman)
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