The insurer's share price has looked peaky ever since the deal was announced 10 days ago. Traders have fretted about whether the purchase is yet another example of reckless expansion, as the cash starts to flow after the recession, and also about how to finance the likely rights issue when funding details are revealed in a few weeks.
For its part, CU can argue the bid is part of a renewed trend towards cross-border activity in the insurance industry. John Carter, chief executive, said when he announced the bid that it would 'develop our position as a major European insurer with an important spread of international businesses'.
CU beat off rivals, including the Italian insurer Assicurazioni Generali and BAT Industries, parent of Eagle Star and Allied Dunbar, to clinch the deal.
Its proposed bid is the biggest of a batch of recent deals, ahead of next Friday's liberalisation of the industry when a new European Union directive comes into force.
Germany's Allianz recently bought 30 per cent of Berner Holding, a Swiss insurer, for an undisclosed sum. January saw Switzerland's Winterthur pay pounds 360m for Germany's DBV. And in March 1993, the UK composite insurer Sun Alliance bought Denmark's Hafnia for pounds 129m.
The flurry of deals follows a drought in corporate activity, prompted by the cyclical downturn in insurance business that began in 1989 and was reinforced by some disastrous 1980s cross-border acquisitions, such as CU's loss-making US expansion and GRE's takeover of an Italian motor insurer.
The upturn in the cycle, furthest under way in Britain and Italy, has put expansionist insurance companies in a position to finance deals once again. Insurers are on the march, seeking to buy into countries at an earlier point in the cycle from their own, where market share is more cheaply available.
For British companies, there is also the lure of joining the big league. Even if the CU deal goes ahead, Britain will have only two other insurance companies in the European top 10 - BAT Industries and Prudential.
Martin Broughton, chief executive of BAT Industries, says: 'Not all insurance markets follow the same cycle. Having significant operations in other territories helps spread the risk. Europe is a big part of the world market and is attractive in principle to look at.'
Another UK composite insurer, Sun Alliance, says its Danish acquisition has made it much less dependent on the British market. A spokesman says: 'We regard Europe as a key area for development.'
Paul Found, CU's financial controller, explains that although the French market is competitive, it is particularly attractive now. He says: 'There are clear signs the cycle has turned.'
French insurers' earnings started to fall from 1989. The recession led to a sharp increase in claims, but these are now beginning to diminish as the economy recovers. In most types of business, the insurers are also starting to enjoy price increases, which are expected to continue through 1995.
But CU has another argument with which to rebut its sceptics. France is appealing as a location in which to expand: it offers the prospect of rapid growth in demand for life insurance because of pension reform. Late this year, the French government is likely to supplement the country's pay-as-you-go pension system - under strain because there are too many pensioners drawing on it compared with workers paying in - with a funded scheme expected to be based on privately funded personal pensions.
Life business has already been growing at 20 per cent a year for a decade as demand for long-term savings products rose. The industry plainly expects further reform to bring a bonanza. Morgan Stanley, which advised CU on the Victoire deal, puts the private pensions boost to the life assurance market at Fr40bn ( pounds 4.7bn) a year.
Given these prospects, it is hardly surprising that British firms are tempted to cross the Channel. In Groupe Victoire, CU has bought the number seven in the French market by size of premium income - Fr23.5bn in 1993.
The share of CU's premium income from Europe will double, to just under 50 per cent. Two-thirds of Victoire's business, through its subsidiary, Abeille Vie, is life assurance.
Only 29 per cent of CU's premium income comes from life insurance, and the group plans a strategic increase of that proportion. Abeille Vie's channels of distribution, through an independent sales force, brokers and agents, complement those of CU's existing French subsidiary, which has its own direct sales force.
More important, with the acquisition CU has bought a 5 per cent share of France's life insurance market and 3 per cent of the non- life market. Despite the 1 July introduction of European Union rules deregulating the insurance industry, the culturally specific structure of insurance products means that the acquisition of a local business remains the easiest route to a significant presence.
A British insurance executive says: 'We are all looking for companies to buy. France is a tough market, but good luck to CU.' The problem for Europhile British insurers is the shortage of Continental firms for sale.
Derek Elias, insurance analyst at Paribas, says: 'To get into any market in a sizeable way is difficult, and nobody else is going to sell a company like Victoire, with a high reputation in the French market, at this stage of the cycle.' Victoire's parent, Compagnie de Suez, needs the cash.
The only other firms known to be takeover candidates are a few Italian insurers and a handful of small British mutuals. Analysts believe that cross-border expansion by developing businesses from scratch will be one option.
Tim Dawson, insurance analyst at Lehman Brothers, says: 'From July it will become much easier to set up yourself within the EU, especially in direct selling of non-life business where the products are a bit more uniform.' In Britain, the Netherlands and Spain, more than 10 per cent of non-life insurance sales are already made through direct sales channels.
In other European countries, direct selling is in its infancy. In Switzerland, Winterthur - owner of Churchill, one of Britain's biggest direct insurers - has just established a telephone sales operation. CU set up its own direct writing motor insurer in France in 1992.
Another option will be moving into markets outside western Europe, where the insurance industry is competitive and demand growing relatively slowly. Asia, Latin America and eastern Europe offer faster growth. Indeed, CU set up a life insurance subsidiary in Poland 18 months ago, which it has built from scratch to one of the country's biggest life companies with an expected 50,000 policy sales this year.
Opinions may be divided on whether CU has got it right in opting to buy Victoire. But one thing is certain: whatever the route other British firms will take - acquisition, new subsidiaries or new markets - the tide of overseas expansion will continue to flow.
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