The Catalana Occidente group, recently renamed GCO, has opened a new stage with the merger of all its Spanish subsidiaries under a single brand, Occident, as a previous step to try to take a great leap forward. "We want to grow and we have the financial capacity to do it alone," says Hugo Serra, recently appointed CEO of the company founded by his grandfather, Jesús Serra Santamans, and of which the family still controls 62.5%.
In recent months, GCO has bid unsuccessfully for the purchase of Liberty Seguros, an operation valued at 2,300 million euros, and also for the Portuguese company Tranquilidade, for 600 million euros. Yes, however, he was able to close the purchase of Mémora, the leader in funeral services in Spain, for which he has paid 600 million euros. "The three strategic branches in which we want to grow in traditional insurance are life risk, auto and above all health," says Serra. It is in this last branch, which he considers strategic due to its customer loyalty value and the opportunity to cross-sell, that the group is least strong. "It is a highly concentrated line of business with narrow margins, but it is growing very strongly and it is a line for the future."
Last year GCO exceeded 5,000 million euros in turnover for the first time, "a milestone for the group," said Serra, of which 54% comes from traditional insurance, in which it operates only in Spain with the brands Catalana Occidente, Plus Ultra, Seguros Bilbao and Nortehispana, specialized in deaths, which are now integrated. The rest comes from credit insurance, with the companies Atradius and Crédito y Caución. In recent quarters, two thirds of the profit is provided precisely by credit insurance, which is also the fastest growing, but Serra acknowledges that it is an anomalous situation. “The injections of liquidity from governments after the pandemic have practically eliminated insolvencies. But now that they are leaving, the situation will normalize." The company is preparing for it, he explains, with the support of reinsurance, to which it cedes 37% of the risk. "This helps us stabilize the result of a branch that is volatile."
GCO is the second largest credit insurer in the world. In total, the firm operates in 50 countries and has 1,500 offices. In addition, in Spain it is the fourth largest insurance group and also the largest funeral group, with Mémora and Asistea (the funeral home of Basque origin that it already controlled).
In the traditional business, the group wants to grow with the purchase of groups of complementary services, such as Mémora, or of competing companies or portfolios. However, Serra assures that "in the coming months, insurers will play the game in controlling expenses", because inflation has tightened the seams of the sector. In the auto industry, for example, the compulsory third-party liability insurance has a combined ratio of more than 100%: companies lose money. “The frequency of accidents has increased, and inflation has raised the cost of repairs. We will all have to raise prices”.
Occident has a margin in cars that is 5 points higher than the rest of the sector "because through our subsidiary Prepersa we control a network of workshops, experts and specialized lawyers." Along these lines, the merger of the Spanish companies is accompanied by a voluntary redundancy plan for 448 workers, which will be applied gradually until the end of next year. Also in the funeral business they expect to gain profitability with the integration of Mémora and Asistea, the simplification of processes and the introduction of technology. “We have a strict cost discipline” assures Serra.
The group has introduced technology for contracting insurance online, but maintains its commitment to sell through brokers and, above all, affected agents. "They allow loyalty, better service and cross-selling, because it is what makes us be close to the customer." With a network of 3,000 agents "the result of an effort of more than 50 years," recalls Serra, the group invests each year in a program to train new agents and subsidize them for five years, until they have a portfolio that allows them to finance themselves. "We are introducing artificial intelligence in this process, to detect the qualities that make them successful, because it is a business in which it is not easy to consolidate," she says. Distribution with agents allows the group to choose the risks it underwrites. Thus, “we are selective on car insurance,” she says.
The rise in interest rates has also taken its toll on the company: it has reduced its own resources by 700 million due to the loss of value of its investments in fixed income, only partially offset by the rise in its investments in equities in recent years. months. "The rise in interest rates has had very little impact on us because we were always clear that this would end and we prioritized being in liquidity and investing in real estate, which accounts for 15% of our assets", for a value of 1,900 million euros, with capital gains of 542 million unaccounted for. With the rates high again, Serra points out, the firm is once again focusing its investment on fixed income.
The evolution of the share on the stock market has not accompanied the good evolution of the company in recent years. "The stock moves little on the stock market," acknowledges Serra, because the free float is in the hands of institutional investors who do not sell because the company pays out a stable and ever-growing dividend. The family, however, is not considering selling part of its shares or undertaking a merger that increases the free float. “We have our own funds and borrowing capacity to undertake any purchase. And the current situation gives us a lot of agility to make decisions”.
