Despite a turbulent economic environment on home soil, leading French insurance group Covéa (see Fig. 1) has managed to develop its business, improving the cooperation between its three subsidiary brands – popular French insurance choices MAAF, MMA and GMF – while expanding into international markets, where 12 percent of its business now lies.

Growing its presence in the UK through its subsidiary Covéa Insurance, the group has seen substantial success across the Channel, which it has further extended through a 100 percent stake in the UK firm Swinton Insurance. Here it saw a turnover of £304.6m in 2013. Reaching France’s number one spot for property and liability insurance as well as legal protection, Covéa has become the insurer of choice for one in every five French citizens.

As the country’s third biggest player for company insurance and a market leader in individual healthcare, motor and home insurance, the group has reached a customer base of over 11 million, harnessing the talent of a global, 26,000 strong workforce. Preparing itself for Solvency II – which is likely to transform the insurance market – the company has adapted to a new regulatory framework in France, and rolling out digital services to stay on top of a rapidly changing world. Covéa can attest it has had a lot on its plate.

World Finance spoke to CEO Thierry Derez about the group’s position in the market, its focus on collaboration, ambitious restructuring plans, and what the future holds in store for one of France’s biggest insurers.

Where does Covéa’s stand in the French insurance market?
Covéa is made up of three major brands in the French market: MAAF, MMA and GMF. In France the group is number one in property and liability insurance, and had a solvency ratio of 405 percent in 2013. In the same year Covéa served over 11 million policyholders, generating €15.5bn in premiums and receiving €824m in net income. Life and non-life turnover hit €15.5bn marking a 5.8 percent year on year increase, while equity capital totalled €10.6bn.

Covéa has become the insurer of choice for one in every five French citizens

The group posted net growth across all areas of the business in terms of the number of policies taken out, with motor insurance leading at 9.4 million policies (up two percent from the year before) followed by personal property and casualty insurance (8.1 million policies). Covéa has also seen success in its home insurance division, with 7.4 million policies taken out in 2013.

The public is not familiar with the ‘Covéa’ brand name, even though it insures one in five people in France. Why is this?
The group markets its products under its three different brands, all of which are well known in France but tap into different markets. We do not therefore see a need to develop the Covéa brand in itself. The group does however wish to strengthen the collaboration between its various components in order to increase its price competitiveness and deliver additional services to its policyholders.

With a view to achieving that, you recently announced restructuring plans for Covéa. What changes is the group likely to see?
The group is comprised of several different structures. While these structures are important, the general idea is to build, over a two to three year period, a single business that will strengthen the group’s competitiveness and profitability by simplifying the structure of the organisation. One of the major changes is that the overall strategy will be defined at the overall group level, rather than at the level of the individual brands. Several cross-group departments will be created, all with the aim of increasing collaboration across the organisation.

How do you see the French insurance market, and what is Covéa’s strategy?
The situation in the market has been complicated for several years now. The economic environment, weak growth and higher loss ratios naturally have a direct adverse impact on all insurance branches. In addition there is a lot of uncertainty in the financial markets, particularly in terms of very low bond yields, which limits financial income.

In these conditions we consider it particularly important to keep an eye on the fundamentals and make sure our business does not suffer as a result of an uncertain climate. Covéa therefore seeks to achieve steady but reasonable growth. This strategy enabled us to post profit in excess of €800m in 2013, which marks a strong year-on-year increase from 2012.

The French insurance market is undergoing significant regulatory changes. What effect is this likely to have on the market?
Apart from Solvency II, which will affect the entire European market that we have been preparing for several years, the French market is set to undergo several significant regulatory changes.

These are happening within health insurance, for example; an inter-branch agreement requires that all employees receive supplementary health insurance from 1 January 2016, provided at the level of the employer. That means that four million people will switch from individual policies to collective insurance policies.

In property and casualty insurance, a new law has been introduced that gives policyholders the option to terminate their policies at any time, with the idea of encouraging competition in the market. However, experience in other countries where similar laws exist, such as in the UK, suggests this could result in price increases because it requires additional marketing and administrative work, which can in turn be costly.

What effect has the digital revolution had on the insurance market?
Digital developments and the emergence of new players has not had much of an impact on price competition given that this has existed for several years and is now a permanent feature. However, the big data boom and the emphasis on responding to consumers’ new needs and expectations are obviously major issues for all insurers. The customer relationship needs to be at the centre of the system. With that in mind Covéa has set up a new technology department in order to focus on digital growth. It’s a great example of an area in which collaboration between each of the group’s brands is essential, given that they all face the same challenges.

What is your international strategy?
International expansion is an important source of diversification and growth for Covéa. However, it is difficult to connect our insurance operations across different international markets together as there is not really any such thing as a European insurance market, let alone a global insurance market; each market is different and so are the products. Our international investments therefore have to be at least as, if not more, profitable than our other investments.

Which countries do you operate in?
Covéa has had a presence in a number of countries outside of France for over 30 years. Although the majority of the group’s development takes place in France, growing the business on an international scale remains an important factor. Through its majority owned subsidiaries and equity interests, Covéa is active in Europe – mainly in Italy and the UK – as well as in North America. Non-life and life insurance abroad now account for 11.7 percent of earned premiums, and that’s before taking into account the brokerage business based in the UK. In general we focus on mature markets with relatively high standards of living and, most importantly, transparent regulations.

How did the group establish its presence in the UK successfully?
Covéa’s first full accounting year was in 2013 in the UK’s highly competitive market. The UK version of the business, named Covéa Insurance, was formed from the 2012 merger of Provident and MMA Insurance. It has maintained its results despite a challenging insurance climate following the UK’s bad weather conditions at the end of last year, which made insurers vulnerable to significant losses.

Today, Covéa Insurance offers competitively priced household and motor insurance, along with a range of commercial insurance products designed to meet the needs of most businesses. As a guaranteed subsidiary of Covéa, it has a nationwide network of intermediaries and handles the insurance needs of over 1.2 million policyholders. The company has developed a strong reputation, reflected in its high A rating from Standard & Poor’s. Covea group also owns Swinton Insurance, the biggest high-street broker, which delivers personal and commercial products to more than two million customers, thanks to its 350 branches and its 4,000 staff.