Mining the resources of our business model 

Thanks to its long term strategy, Covéa is less impacted by the crisis than its competitors. Its solid financial foundation, its mutual values and its mutualised organisation represent major assets in preparing for the future.

How did Covéa perform in 2008?

Thierry Derez: It was a turbulent year, and the ability of Covéa to resist the crisis both in terms of business and profits is quite remarkable. This is a testimony of the soundness of our model.

Has the financial crisis had a strong impact on Covéa?

T. D.: The crisis has affected almost every company, and Covéa is no exception, but it has impacted us less than others. We have never acquired "toxic" products, and therefore are not exposed to the related financial difficulties. The crisis affects us in a more general manner, by the fall of the stockmarket value for example, but our exposure is very limited. Unlike most of our competitors, our business approach has sheltered us from the most serious risks - since 2007 we have been reducing our exposure to shares in favour of government bonds.

What resources has Covéa implemented to confront the current situation?

T. D.: Because it affects every branch of industry, the crisis reduces the overall demand for insurance. Falling new car sales are therefore a concern for all insurers, and it is not realistic for us to raise insurance rates during this time of crisis. As a result, we cannot count on sustained increases in sales, yet our operating costs will remain steady. We have therefore made a pledge to remain as attentive as possible to our technical fundamentals, especially in terms of selecting risks and managing our portfolio. This rigour will enable us to balance our accounts without the support of financial products. At the same time, we will develop our assets as a group in order to gain market share.

What assets in particular?

T. D.: The first is our business model, which offers us a great deal of freedom in choosing what resources to share. In addition, Covéa is backed by a solid financial foundation. Our solvency is slightly higher than three times the legally required minimum, which affords us substantial room for manoeuvre and keeps us competitive with other players on the market.

Our mutualised organisation represents another asset because it is a safeguard against tactical errors. Since the Group does not have any shareholders to pay, there is no pressure on our short-term results. Our long-term vision helps us better prepare for the future. Our legal structure and mutual values are fully in harmony with our duties as an insurer. A further asset is our brand recognition and image. According to a recent study, each of our brands ranks in the top positions for insurance companies in France. Finally, our structure gives us a unique ability to streamline, improve and innovate.

What are some of the other advantages of the partnership?

T. D.: Each brand is responsible for its own HR policy, but I have asked the three HR departments to study the possibilities for increasing inter-company mobility. This process is important to the Group and, as always, in the common interest of the employees and the company. The objective is to offer more attractive career opportunities while supporting the exchange of expertise. More broadly, I should also like to underline the advantage of our pooled structure in protecting jobs. In this period of crisis, unlike many other sectors, Covéa continues to take a long-term approach to HR management.

What other projects will help you prepare for the future?

T. D.: Only 4% of our business is in the international markets and we would like to increase this figure. This need is even more pressing in light of Solvency 2, the new European regulations for risk management which recommends geographical diversification.

In 2008, the planned membership of Ethias in the SGAM was cancelled because of the crisis. We are still receptive to proposals for membership or selective acquisitions, as new opportunities may emerge from the current economic situation. Another major project is the adaptation of our organisations to the increased importance of the Internet. In order to stay in tune with our members and customers, we have fully integrated the possibilities offered by the Internet, which will play an essential role in the future success of our three brands.

Thierry Derez, Chairman and Managing Director of Covéa, GMF and MAAF, Chairman of MMA
(June 2009)