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PREPARING FOR PRIVATIZATION

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PARIS-French insurer Groupe des Assurances Nationales still is trying to put its finances in order, prior to its anticipated privatization by the French government.

A number of French and foreign insurance companies have expressed interest in acquiring GAN (BI, Aug. 4).

Didier Pfeiffer, chief executive officer of GAN in Paris, announced last week that in spite of a profitable first half, the company will make several charges against earnings, making its final result for the six-month period uncertain.

GAN will take a 500 million franc ($84 million) provision to cover its costs of settling pension sales disputes in Britain and another 500 million franc charge associated with writedowns of the value of its real estate holdings in France.

As a result, the insurer's first half results are expected to break even, said a spokeswoman for the insurer, who added that GAN's first-half results will be released in late October.

According to GAN, which has about a 5% share of the French life and non-life insurance market, an AGF buyout of GAN would give the combined group an 11.4% share of the French market. That would make the merged entity France's second-largest insurer, behind AXA-UAP, which has a 14.3% market share.

Meanwhile, a looming battle over who will buy GAN is becoming a political issue.

GAN earlier this year received a 23 billion franc ($3.86 billion) rescue package from the French government (BI, March 10), which first required the assent of the European Commission in Brussels. The bailout was granted with the requirement that the French government privatize the company by 1998, as well as sell off certain GAN holdings.

But internal E.U. documents alleging a preference for a non-French buyer for the insurance company are generating controversy in France.

Part of the internal document was published by the French press in August. The document alleged that the European Union would prefer a unit of German insurer Allianz A.G. Holding buy GAN rather than the French insurer Assurances Generales de France, which is widely regarded as a likely acquirer of GAN.

AGF has filed an offical complaint over the E.U. document with the European Commission. An AGF spokesman in Paris said the company objects to the sentiment in the document as published-it has not seen it in whole-saying the European Union has no right to pronounce any preference for a buyer for GAN.

"This was out of their competence," the spokesman said.

The E.U. document stated that Allianz would be preferable to AGF as a buyer because Allianz is richer and could inject more money into GAN.

Allianz is richer than AGF, acknowledged the AGF spokesman, but she said the remainder of the statement is not correct.

Insurance sources in France say AGF is trying to obtain financing assistance from two banks that are its own major shareholders-Banque Paribas and Societe Generale de Banque-to help AGF take over GAN once the French government issues a privatization decree.