CU takes stake in French insurer

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The Independent Online
Commercial Union yesterday announced it was expanding its position in France, Europe's largest single market for life assurance products, by paying pounds 126m for a 55.8 per cent stake in Union Financiere de France. The stake is being bought from Credit Agricole Indosuez.

However, the deal was overshadowed by CU's new business figures for the first half of 1997 which, while perceived as generally good by analysts, showed that the French market was the company's weakest area. CU's shares fell 19p to 674.5p.

Union Financiere is a quoted company with 32 branches employing 880 financial advisers that sell products direct to 135,000 clients, both individuals and small companies.

CU already has an 11.7 per cent stake held through Abeille Vie, the French life assurance company that it bought in 1994. Analysts expect CU to make a further offer to the remaining minority shareholders.

UFF has Fr23bn (pounds 2.3bn) under management and made a profit of Fr276m in 1996. The purchase price is around 10 times UFF's annual earnings exclusive of interest. The acquisition would be financed out of cash reserves and it would enhance group earnings immediately, said CU's finance director, Peter Foster. UFF will provide a new distribution channel for Abeille Vie's insurance, pensions and savings products.

CU's latest figures showed that new business worldwide rose 21 per cent to pounds 1.58bn in the first half of 1997. New single premiums worldwide were up 17 per cent to pounds 1.22bn and new annual premiums were 38 per cent up at pounds 154m. Single premium business in the UK grew by 75 per cent to pounds 265m. and annual premium business rose 4 per cent to pounds 25m.

But overseas business was adversely affected by the strength of sterling against European currencies and business in France in particular was affected by the elections in May and by a reorganisation of the sales force.

Single premium sales in France were down 15 per cent to pounds 624m and annual sales were 30 per cent lower at pounds 11m after allowing for exchange rate movements.

Despite the poor performance in France, which was widely expected, the country represented a long-term strategic investment, Mr Foster said.

Separately, Eagle Star, the insurer owned by BAT the tobacco giant, has paid Friends Provident pounds 50m for Preferred Direct, a telephone insurer.