French govt to sell controlling stake in CCR Re valuing reinsurer at €1bn
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CCR is aiming to drive its market reinsurance unit CCR Re to achieve Tier 2 status as a reinsurer by 2027 on the back of a €200 million capital increase combined with a sale of existing shares, so that CCR would keep a 30 percent stake overall. This operation aims at sustaining CCR Re’s growth, in the continuity of the 2016–2022 development plans, with a goal of €2 billion in gross premiums by 2027.
That is the message from Edouard Vieillefond (pictured), deputy chief executive officer of CCR since September 2022. He was appointed, alongside Bertrand Labilloy (who remains CCR CEO and CCR Re chairman and CEO), partly to bolster CCR’s executive management team to support this operation.
“The aim is to enable CCR Re to attain Tier 2 status in the next few years,” Vieillefond said. “We have set this target of achieving €2 billion gross written premiums by 2027 with a return on equity of or close to 10 percent. We do not believe we will need to reposition the business mix to achieve that, but the injection of new capital will speed the process up.”
He added that French government-backed CCR is open to negotiating with either a single investor or a consortium of parties as it seeks the investor to take a 70 percent total stake in the business. He expects the process to be complete by July 2023.
“CCR wants to refocus its core business activity back towards public sector reinsurance.” Edouard Vieillefond, CCR
By spinning the reinsurance unit out, CCR wants to refocus its core business activity back towards public sector reinsurance, particularly with a view to dealing with the challenges that lie ahead, such as reinsurance for natural disasters. It believes this will allow CCR Re to reach the “critical size and level of profitability” it needs to self-finance its growth in line with market benchmarks.
“The move will allow CCR Re to grow quickly and execute its strategic plan but at a faster pace than would otherwise have been possible within CCR Group,” Vieillefond said.
“The capital increase is not needed per se—CCR Re is a perfectly sound and strong company—but it is to accelerate and to get the Tier II status more quickly, in a bit less than five years’ time. That will allow CCR to focus in parallel on its public missions. It will mean a bifurcation of the two companies.”
These sentiments echo a statement made by Jacques Le Pape, chairman of CCR’s board of directors, when the announcement was first made. “We are going to provide CCR Re with the resources it needs to grow and become autonomous. This will allow CCR to strengthen its public sector activities, at a time when natural disasters are becoming more frequent and more intense,” he said.
A big change
CCR should retain a 30 percent stake in CCR Re for the medium term. Vieillefond said this is partly to ensure a smooth transition into new ownership and partly to safeguard what he calls the industrial and social aims of the group.
“We will be very cautious and attentive on the price and transition but also the industrial and social aims of the new owner. We want a say in the governance of the business on those issues.”
He admits it will be a big change for both businesses, but he does not foresee any major change in CCR Re’s business plan. He stresses that the business already has a presence in enough countries and sectors to be successful—the business mix is good, it just needs to write more business in those sectors.
“We want to ensure we find the right fit for CCR and CCR Re.”
“We have no intention of changing CCR Re’s underwriting rules or strategic footprint, although that may develop over time led by the new strategic investor. CCR Re’s financial strength should also remain at least as strong as is currently the case.
“Maybe there are opportunities in some geographies where we do not have a strong presence yet. We are strong in France, Canada and the Middle East for instance and growing in some other areas, but some of it may be further accelerated, such as in Latin America. But we do have the footprint already, as well as an efficient platform. It is a question of stable expansion.”
He reiterates that the plan is to close the deal before the summer of 2023. “We have launched the process. We are now expecting offers and there will likely be a two-phase process we will go through in the next few months.
“We want to ensure we find the right fit for CCR and CCR Re, both financially and in terms of industrial and social aims,” he concluded.
Baden Baden 2022, CCR, Capital, Share Sales, GWP, Insurance, Reinsurance, Edouard Vieillefond, Europe