Coface Sa · EURONEXT:COFA
Coface Sa — FY2019 Earnings Presentation
36 slides from Coface Sa's earnings presentation, Feb 5, 2020
Slide 1: FY-2019 Results: Presentation to Financial Analysts
FY-2019 RESULTS PRESENTATION TO FINANCIAL ANALYSTS 5 FEBRUARY 2020
Slide 2: FY-2019 Results: Net Income at €146.7M and €1.0 DPS
FY-2019 RESULTS: NET INCOME AT €146.7M AND €1.0 DPS 1 2 3 4 5 FY-2019 FY-2019 CAPITAL KEY TAKE-AWAYS APPENDICES HIGHLIGHTS RESULTS MANAGEMENT & OUTLOOK 2 FY-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 5 FEBRUARY 2020
Slide 3: Part 1: FY-2019 Highlights
coface PART 1 FY-2019 HIGHLIGHTS A
Slide 4: Coface Reports Record €146.7M Net Income, Up by +20%
COFACE REPORTS RECORD €146.7M NET INCOME, UP BY +20% Turnover reached €1,481.1m y-t-d, up 5.9% at constant FX and perimeter • Trade Credit Insurance growing at 7.0% at constant scope and FX • Client retention at record level and new business growing • All regions contributing to growth FY-2019 net l
Slide 5: Solvency Ratio Stands at 190%; €1.0 DPS Proposed
SOLVENCY RATIO STANDS AT 190%1 ; €1.0 DPS PROPOSED2 RoATE stands at 8.9% for the year and 9.1%3 excluding non-recurring items Estimated solvency ratio at c. 190%1 • Partial Internal Model now used for solvency calculation • Implemented new methodology in factoring • New target range set at 145-175%
Slide 6: Clearly Met or Exceeded Fit to Win Through the Cycle Objectives
CLEARLY MET OR EXCEEDED FIT TO WIN THROUGH THE CYCLE OBJECTIVES RoATE Savings Solvency ratio % €m % FTW objectives FTW objectives 8+1% 30 190* 8.9* 48 7.7* 39 164 169 5.3 150 19 -0.8 3 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 non-recurring items * Switch to Partial Internal Model
Slide 7: Part 2: FY-2019 Results
coface PART 2 FY-2019 RESULTS A
Slide 8: Turnover Growth at 5.9% Driven by Credit Insurance Premiums
TURNOVER GROWTH AT 5.9% DRIVEN BY CREDIT INSURANCE PREMIUMS 7.0% 5.9% 1,481 Total revenue up 5.9% vs 2018 at constant FX and perimeter In €m 1,385 • Trade Credit Insurance1 growing at 7.0% at constant FX and scope Gross Earned Premiums (GEP) 1,236 • Growth driven by record retention (91.6%) and past
Slide 9: All Regions Contributing to Growth
ALL REGIONS CONTRIBUTING TO GROWTH Western Europe Northern Europe Central Europe Mediterranean & Africa 3.8% 3.4% 1.5% 1.5% 10.6% 2.4% 6.4% 6.7% 370 394 284 295 303 307 134 148 FY-18 FY-19 FY-18 FY-19 FY-18 FY-19 FY-18 FY-19 Growing new sales and retention. Growth at constant scope driven by Growth
Slide 10: Record High Retention, Growing New Business Offset Slowing Activity
RECORD HIGH RETENTION, GROWING NEW BUSINESS OFFSET SLOWING ACTIVITY production* 138 129 133 116 Confirmed new business recovery while keeping New selective growth strategy FY-16 FY-17 FY-18 FY-19 91.1% 91.6% Retention 88.0% 89.7% rate* Record high retention FY-16 FY-17 FY-18 FY-19 -1.0% effect* Pric
Slide 11: Gross Loss Ratio Improving at 43.4% in a Riskier Environment
GROSS LOSS RATIO IMPROVING AT 43.4% IN A RISKIER ENVIRONMENT Loss ratio before reinsurance and including claims handling expenses, in % 45.3 45.9 45.8 44.2 43.4 39.8 41.9 46.3* 45.1* 44.4* ► Maintaining overall good performance in a riskier economic 42.2** environment FY-2018 FY-2019 Q4-18 Q1-19 Q2-
Slide 12: Improving Mature Market Performance
IMPROVING MATURE MARKET PERFORMANCE Loss ratio before reinsurance, including claims handling expenses – in % 8%* Group North America 9%* Asia Pacific Latin America 5%* 146.8 85.0 63.3 51.4 53.8 60.2 57.9** 60.1*** 44.2** 43.5*** 49.0 39.1 45.8 35.9 35.9 23.6 FY-16 FY-17 FY-18 FY-19 FY-16 FY-17 FY-18
Slide 13: Operating Leverage Drives Annual Cost Ratio Improvement
OPERATING LEVERAGE DRIVES ANNUAL COST RATIO IMPROVEMENT 3.2% 2.3% 6.1% 4.9% In €m 690 712 185 175 176 177 174 Cost ratio before reinsurance, in % External acquisition 163 165 40 42 costs (commissions) 41 41 42 36.0 33.2 34.6 33.7 35.9 Internal costs 527 547 134 134 137 132 144 Q4-18 Q1-19 Q2-19 Q3-1
Slide 14: Reinsurance Cession Rate at 23% for 2020
REINSURANCE CESSION RATE AT 23% FOR 2020 12M-18 12M-19 Gross earned premiums 1,142.6 1,235.6 Net earned premiums 815.1 882.0 ► Starting on January 2020, cession rate has moved to 23%, split 28.7% 28.6% into 2 quota shares Premium cession rate ► Slightly improving conditions secured in a tightened ma
Slide 15: Net Combined Ratio at 77.7%
NET COMBINED RATIO AT 77.7% (1.9) ppt. In % Net combined ratio 79.6 77.7 ► Net combined ratio improved to 77.7% (vs 79.6% in 2018) due to stable losses and positive operating leverage Net cost ratio 34.5 32.7 ► Cost ratio down 1.8 ppt. as revenues grow faster than costs Net loss ratio ► FY-2019 net
Slide 16: Financial Portfolio: Stabilised Yield and Lower Realized Gains
FINANCIAL PORTFOLIO: STABILISED YIELD AND LOWER REALIZED GAINS €m FY-18 FY-19 Investment Real Estate Income from investment portfolio without gains on sales** 40.7 44.6 8% Gains on sales and impairment / impairment's release 4.7 10.1 Equities 6% FX effect 8.2 1.8 Loans, Other (2.5) (19.6) Deposit &
Slide 17: FY-2019 Net Income at €146.7M of Which €29.4M in Q4-2019
FY-2019 NET INCOME AT €146.7M OF WHICH €29.4M IN Q4-2019 Income statement items - in €m 12M-18 12M-19 Current operating income 208.9 224.9 ► Current operating income at €224.9m is up 7.7% at new record level Fit to Win investments & restructuring expenses (5.7) (7.5) ► Investments & restructuring ex
Slide 18: RoATE Stands at 8.9%, Up 1.2 ppt
ROATE STANDS AT 8.9%, UP 1.2 PPT 78.0 12.9 1,924.5 Change in equity In €m 146.7 1,806.2 (119.4) IFRS Equity Distribution to Net income impact Revaluatuion reserve Treasury shares, IFRS Equity attributable to owners shareholders (financial instruments currency translation attributable to owners of th
Slide 19: Part 3: Capital Management
coface PART 3 CAPITAL MANAGEMENT A
Slide 20: Solid Balance Sheet
SOLID BALANCE SHEET 2019 simplified balance sheet In €m 7,383 7,383 Goodwill 221 & intangible assets 1,925 Shareholders’ ► Shareholders’ equity reaches record high on profitability and higher equity invested assets values Insurance investments 2,991 389 Financing liabilities (including hybrid debt)
Slide 21: New Comfort Scale Under Partial Internal Model
NEW CONFORT SCALE UNDER PARTIAL INTERNAL MODEL Coface comfort scale % 175% Capital management principles remain unchanged 145% 130% ► Comfort range increased to reflect potential higher volatility from new solvency model ► Higher mid-point reflects commitment to maintain strong balance sheet through
Slide 22: Robust Solvency Over Time
ROBUST SOLVENCY* OVER TIME FY-2019 estimated Solvency ratio above target range 190% Low sensitivity to market shocks 187% 187% (11.3) ppts 8.7 ppts 190% market sensitivity tested through instantaneous shocks 5.7 ppts 175% 169% 164% 145% 130% 31/12/2019 SCR cover (PIM) 190% 150% +100 bps Interest rat
Slide 23: Solvency Required Capital at 31 December 2019
SOLVENCY REQUIRED CAPITAL AT 31 DECEMBER 2019 Partial Internal Model 190%1 2,187 37 419 €m Operational risk 1,178 37 (136) 213 1,150 120 (104) Counterparty risk 937 213 1,731 323 Market risk 937 937 Tier 3 Non-life underwriting risk 697 Tier 2 Tier 1 SCR components Diversification Tax adjustments To
Slide 24: Part 4: Key Take-Aways & Outlook
PART 4 KEY TAKE-AWAYS & OUTLOOK
Slide 25: Key Take-Aways & Outlook
KEY TAKE-AWAYS & OUTLOOK Fit to Win has met or exceeded all its targets • Upgraded risk infrastructure and cost base aligned with revenues • Coface is back on a growth path with higher retention and revived commercial momentum • Profitability reached record highs • Balance sheet has been strengthene
Slide 26: Part 5: Appendices
coface PART 5 APPENDICES A
Slide 27: Key Figures (1/2)
KEY FIGURES (1/2) Quarterly and cumulated figures Income statement items in €m / Quarterly figures Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 % % ex. FX* Gross earned premiums 278.4 282.3 292.2 289.7 299.0 306.3 312.6 317.7 +9.7% +8.0% Services revenue 65.6 58.7 58.5 59.3 66.4 60.8 58.3 59.9 +1
Slide 28: Key Figures (2/2)
KEY FIGURES (2/2) Revenue by region: quarterly and cumulated figures Total revenue Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 V% ex. FX* by quarter - in €m Northern Europe 79.0 73.2 76.2 74.7 80.2 75.9 76.7 74.7 (0.1)% Western Europe 74.8 68.4 69.6 71.2 74.9 72.6 71.9 75.3 +4.9% Central Europe
Slide 29: Exposure in EM Maintained at a Stable Share
EXPOSURE IN EM MAINTAINED AT A STABLE SHARE Total exposure up 5.3% vs prior year, growing less than premiums Evolution of total exposure1 by country of debtor FY-2019 total exposure1 – Top 10 countries vs. others In €bn In % Germany Dec-2016 79% 21% 493 13.6% France Italy 36.3% USA Dec-2017 79% 21%
Slide 30: Loss Ratio for the Quarter at 45.8%
LOSS RATIO FOR THE QUARTER AT 45.8% Loss ratio before reinsurance, including claims handling expenses – in % 9%* 8%* 5%* Group North America Asia Pacific Latin America 72.4*** 59.5 62.3 63.5 66.2**** 45.9 46.2 50.9 51.3 49.4 45.3** 39.8 41.9*** 44.6 40.2 36.5 31.7 28.6 28.9** 20.2 Q4-18 Q1-19 Q2-19
Slide 31: Combined Ratio Calculation
COMBINED RATIO CALCULATION In €k FY-2018 FY-2019 ► Combined ratio before reinsurance Earned Premiums (B) (C) Gross earned premiums [A] 1,142,608 1,235,597 loss ratio before reinsurance + cost ratio before reinsurance (A) (A) Ceded premiums (327,541) (353,585) Net earned premiums [D] 815,067 882,012
Slide 32: Q4-19 Results vs Consensus
Q4-19 RESULTS VS CONSENSUS # of in M€ Consensus Q4-2019 Spread Comment replies Total revenue 6 353 378 +25 Revenue increase driven by high retention Gross Earned Premiums 6 289 318 +29 and past client activity Net Earned Premiums 6 206 229 +23 NEP/GEP 6 71.4% 72.1% +0.7 ppt Stable cession rate in 20
Slide 33: Management Team
MANAGEMENT TEAM GROUP CENTRAL FUNCTIONS Xavier DURAND CEO 30+ years of international experience in regulated financial services Working for Coface since 2016 Pierre BEVIERRE Nicolas de BUTTET Cyrille CHARBONNEL Nicolas GARCIA Human Resources Director Transformation Office Director Underwriting Direc
Slide 34: Corporate Governance
CORPORATE GOVERNANCE Board of Directors Chairman François RIAHI CEO of Natixis Non independent members Jean ARONDEL Nathalie BRICKER Daniel KARYOTIS BPCE Natixis BPCE Marie PIC-PARIS Isabelle RODNEY Anne SALLE MONGAUZE BPCE BPCE BPCE Independent members Eric HÉMAR Isabelle LAFORGUE Natha
Slide 35: Financial Calendar & Investor Relations Contacts
FINANCIAL CALENDAR & INVESTOR RELATIONS CONTACTS Calendar Own shares transactions Own shares transactions Next Event Date Date Liquidity LTIP Buy-back Agreement (cancellation) TOTAL % Total of Voting Investor Day 25 February 2020 - Paris (in shares) # Shares rights 31/12/2019 104,486 896,266 0 1,000
Slide 36: Important Legal Information
IMPORTANT LEGAL INFORMATION IMPORTANT NOTICE: This presentation has been prepared exclusively for the purpose of the disclosure of Coface Group’s results for the period ending 31 December 2019. This presentation includes only summary information and does not purport to be comprehensive. The Coface G