Slide 1: FY-2016 Results
FY-2016 Results Operating performance and progression of Fit to Win in line with plan, confirming our ambition to become the most agile global credit insurer in the industry Presentation to financial analysts February 8th, 2017
Slide 2: Today’s agenda
Today’s agenda 1 Key business highlights for FY-2016 2 FY-2016 results 3 Capital management 4 Fit to Win update 5 Key take-aways & outlook Financial analysts presentation FY-2016 Results - February 8th 2017 / 2
Slide 3: Key business highlights for FY-2016
1 Key business highlights for FY-2016
Slide 4: FY-2016 financial highlights (1/2)
‘16 operating results in line with guidance FY-2016 financial highlights (1/2) • Operating trends evolving in line with guidance Turnover in line with previous trends, at €1,411m down (3.6)% vs. ‘15 (ex. FX) Net loss ratio in target range at 65.5% Net cost ratio: 31.9% ; keeping tight control
Slide 5: FY-2016 financial highlights (2/2)
‘16 operating results in line with guidance FY-2016 financial highlights (2/2) • Solvency ratio in target range at c.150%1 • Proposed dividend: €0.13 per share2 €0.07 normal, 62% of adjusted EPS3 €0.06 special in line with pre-announcement 1 Estimated coverage ratio calculated according to Cofac
Slide 6: FY-2016 Results
2 FY-2016 Results
Slide 7: Turnover driven by soft conditions and risk actions
Turnover driven by soft conditions and risk actions (5.3)% (3.6)% In €m 1,490 1,411 Continuous trends all through ‘16 Gross Earned Premiums ► Premiums impacted by weaker client activity and persisting (GEP) 1,186 1,115 soft conditions in mature markets Insurance related fees ► Effect of risk measure
Slide 8: Contrasted regional performances
Contrasted regional performances Western Europe Northern Europe Central Europe Mediterranean & Africa (10.0)% (8.4)% (5.3)% (5.3)% (3.2)% (1.1)% (2.5)% (1.3)% 363 327 325 340 332 307 125 121 FY-15 FY16 FY-15 FY16 FY-15 FY16 FY-15 FY16 Price continues to be under pressure Services revenues down (debt
Slide 9: Commercial performance reflects continued market trend
Commercial performance reflects continued market trend New production1 156 143 141 139 Stable new production outside of Asia FY-2013 FY-2014 FY-2015 FY-2016 87.6% 88.9% 87.7% 88.5% Retention rate1 Overall retention rate remains close to record levels, improves slightly vs. ‘15 FY-2013 FY-2014 FY-201
Slide 10: Risk actions plans impact materializing
Risk actions plans impact materializing Loss ratio before reinsurance and including claims handling expenses, in % Effects of risk reduction measures taken throughout 2015-2016 appear gradually 70.1 67.6 61.8 63.3 51.4 54.0 51.0 ► FY-16 loss ratio impacted by higher claims in emerging markets ► Q4-1
Slide 11: Loss ratio: Asia remains at very high levels, LatAm shows signs of improvement
Loss ratio: Asia remains at very high levels, LatAm shows signs of improvement Loss ratio before reinsurance, including claims handling expenses – in % 10%* 8%* 5%* Group North America Asia Pacific Latin America 146.8 63.3 85.0 100.6 105.2 113.4 51.1 51.0 56.3 59.9 60.2 47.6 51.4 19.3 24.1 26.0 FY-2
Slide 12: Costs under control, Fit to Win launched
Costs under control, Fit to Win launched Year-on-year evolution percentages mentioned below exclude FX effects In €m (2.0)% (0.6)% Continuous control of expenses 713 699 External acquisition costs (commissions) 162 (3.8)% 153 ► Year-to-date total expenses down (0.6)% External acquisition costs down
Slide 13: Reinsurance absorbs part of the loss ratio volatility
Reinsurance absorbs part of the loss ratio volatility In €m FY-2015 FY-2016 Gross earned premiums 1,185.9 1,115.1 Net earned premiums 920.2 857.6 22.4% 23.1% ► Increased ceded premiums driven by additional Premium cession rate 22.4% 23.1% non proportional cover purchased in ‘16 1 2 Gross claims expe
Slide 14: Combined ratio stabilizing, in line with expectations
Combined ratio stabilizing, in line with expectations FY-2016 net combined ratio in line with expectations +14.3ppts 97.4 Net combined ratio, in % 83.1 31.9 ► Year to date net combined ratio +14.3ppts, driven by Net cost ratio, in % 30.5 higher loss ratio in emerging markets Net loss ratio, in % 65.
Slide 15: Financial result pressured by low rates
Financial result pressured by low rates Keeping a diversified and proactive investment strategy €m 12M 2015 12M 2016 Investment Equities Real Estate Income from investment portfolio 2 49.9 43.5 5% 5% 3 o/w gains on sales 4.5 3.5 Investment management costs (2.7) (3.2) Loans, Deposit & Bonds 68% Othe
Slide 16: Effective tax rate impacted by unrecognized DTAs in loss making regions
Effective tax rate impacted by unrecognized DTAs in loss making regions Evolution of effective tax rate in % ► 2015 effective tax rate (ETR) was positively impacted by 6.4pts one-off adjustment of tax expenses in Italy +3.1 50.1 +12.5 ► Increase of 2016 ETR is mainly driven by unrecognized potential
Slide 17: FY‘16 net income at €41.5m
FY‘16 net income at €41.5m Proposed distribution €0.13 per share Income statement items - in €m FY-2015 FY-2016 Current operating income 196.5 60.9 Gain on State export guarantees transfer - 75.0 Fit to Win investments & restructuring expenses - (38.6) ► Earnings per share (EPS): €0.26 One-off gain
Slide 18: RoATE stands at 2.7% for FY-16
RoATE stands at 2.7% for FY-16 Change in equity 1,761.0 (75.3) 21.3 6.7 1,755.2 in €m 41.5 IFRS Equity Distribution to Net income Revaluation reserve Treasury shares, IFRS Equity attributable shareholders impact (financial currency translation attributable to owners of the instruments AFS) differenc
Slide 19: Capital management
3 Capital management
Slide 20: Modest balance sheet leverage
Modest balance sheet leverage FY 2016 simplified balance sheet FY 2016 Capital structure €m 7,061 7,061 Goodwill 216 & intangible assets Shareholders’ 1,761 18% equity Insurance investments 2,751 Financing liabilities 390 (including hybrid debt) Gross insurance 1,678 reserves Other assets 1,613 6x 8
Slide 21: 2016 Solvency II Available Own Funds
2016 Solvency II Available Own Funds €m 54.9 (27.4) 1,996.8 5.8 1,956.0 (6.4) 14.0 ► Increase in reevaluation reserve (unrealized gains on investment portfolio) ► Hybrid debt reevaluation based on updated interest rate curve ► Test adjustments linked to own funds availability within the group SII El
Slide 22: Solvency required capital at FY-2016
Solvency required capital at FY-2016 Standard model 150% Operational risk €m 1,997 - Client, product and business practices 33 - Employment practices and workplace safety, etc. 422 1,409 (221) 34 194 1,335 Counterparty risk 134 (47) 1,141 194 - Fixed income default risk 253 1,542 - Reinsurance defau
Slide 23: Robust solvency over time proved by stress tests
Robust solvency over time proved by stress tests Solvency ratio variation Low sensitivity to market shocks 5.5ppt (4.5)ppt Market sensitivity tested through instantaneous shocks 3.1ppt (1.3)ppt 150% 147% 2016 SCR cover (Std) 150% +100 bps Interest rates 146% +100 bps Spreads 145% 31/12/2015 Own fund
Slide 24: Fit to Win update
4 Fit to Win update
Slide 25: Fit to Win progressing as planned
Fit to Win progressing as planned Strengthen Risk Management & Information Implement Differentiated Growth Strategies • Drove enhanced information recruitments 75% • Some positive re-pricing in LatAm • Updated underwriting guidelines & processes 90% • New partnerships with BoC, UniCredit and BPCE •
Slide 26: Enhanced management framework and culture
Enhanced management framework and culture Fully staffed, with a re-centered Management Board Transforming company culture CEO ► Launched Lean process optimization program Internal Audit* Strategic planning & PMO Economic research ► Executed participative strategic Risk Management control Strategy &
Slide 27: Key takeaways & outlook
5 Key takeaways & outlook
Slide 28: Key takeaways & outlook
Key takeaways & outlook • Operating results in line with expectations – First signs of loss ratio improvement coming from LatAm ; Asia still high – Implementation of Fit to Win has started, progressing as planned • Tighter management structure and strengthened team • Business entirely focused on the
Slide 29: Annexes
Annexes
Slide 30: FY-2016 key figures excl. State guarantees management activity
FY-2016 key figures excl. State guarantees management activity FY-2016 SEGM* Income statement items - in €m FY-2016 excl. SEGM* impact The cession of this activity as of 2017 will impact the Group’s financials: Consolidated revenues 1,411.3 1,357.9 (53.4) of which gross earned premiums 1,115.1 1,115
Slide 31: Key figures (1/4)
Key figures (1/4) Q4-2016 focus 2015 2016 % % Income statement items - in €m Q4-2016 vs. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ex. FX Q4-2015 Consolidated revenues 389.6 370.7 366.0 363.2 365.0 351.7 348.7 345.9 (4.8)% (4.0)% of which gross earned premiums 306.9 296.1 291.1 291.8 288.5 277.2 275.8 273.6 (6.2)% (5
Slide 32: Key figures (2/4)
Key figures (2/4) FY-2016 focus 2015 2016 % % Income statement items - in €m FY-2016 vs. Q1 H1 9M FY Q1 H1 9M FY ex. FX FY-2015 Consolidated revenues 389.6 760.3 1,126.3 1,489.5 365.0 716.7 1,065.4 1,411.3 (5.3)% (3.6)% of which gross earned premiums 306.9 603.0 894.1 1,185.9 288.5 565.7 841.5 1,115
Slide 33: Key Figures (3/4)
Key Figures (3/4) Turnover by region 2015 2016* V% Turnover by region - by quarter - in €m Q4-2016 vs. Q4-2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ex. FX Northern Europe 88.6 77.4 82.0 76.6 83.4 74.7 76.8 72.4 (5.5)% Western Europe 95.7 91.9 89.2 86.6 84.9 83.8 82.2 81.7 (5.7)% Central & Eastern Europe 31.2 31.
Slide 34: Key Figures (4/4)
Key Figures (4/4) gross loss ratio by region – per quarter Loss ratio before reinsurance, including claims handling expenses – in % North America Asia Pacific Latin America Group 171.3 173.4 169.7 164.5 146.2 70.1 67.6 61.8 51.4 54.0 98.4 83.6 84.0 83.2 83.2 84.5 75.3 52.0 39.8 39.4 Q4 Q1 Q2 Q3 Q4 Q
Slide 35: Exposure in EM reduced throughout 2015-2016
Exposure in EM reduced throughout 2015-2016 Maintaining a diversified portfolio of risks Evolution of total exposure1 by country of debtor In €bn Dec-2014 74% 26% 508.0 2016 total exposure1 by debtors’ trade sector Dec-2015 78% 22% 475.4 Agriculture, meat, agri-food and wine 1.6 1.0 Minerals, chemis
Slide 36: Overview of net combined ratio calculations
Overview of net combined ratio calculations Adjusted Net Earned Premiums Adjusted net operating expenses In €k Notes* FY 2015 FY 2016 In €k Notes* FY 2015 FY 2016 Gross earned premiums A 24 1,185,935 1,115,140 Total operating expenses 27 713,226 698,758 Ceded premiums 28 -265,710 -257,539 Net income
Slide 37: Q4-2016 results vs. consensus
Q4-2016 results vs. consensus in M€ # of reponses Consensus Actual Spread Comment Total turnover 6 344 346 2 Similar trends than in 9m-16 Gross Earned Premiums 5 281 274 -7 Continuing pressure in mature markets Net Earned Premiums 5 215 214 0 EM impacted by risk action plans NEP/GEP 4 78.3% 78.3% -
Slide 38: Financial strength acknowledged by rating agencies
Financial strength acknowledged by rating agencies Coface is rated ‘AA-’ by Fitch Ratings and ‘A2’ by Moody’s, both with a stable outlook The positive assessments by the two agencies is based on 3 key drivers: 1. Coface's strong competitive position in the global credit insurance market 2. Robus
Slide 39: Management team
Management team CEO Xavier Durand 25+ years of international experience in regulated financial services Working for Coface since 2016 Group central functions Strategy & Business Development CFO & Risk Director General Secretary Chief Operating Officer Director Carine Pichon Carole Lytton Valérie Bra
Slide 40: Corporate governance
Corporate governance Board of Directors Laurent MIGNON Chairman CEO of Natixis BPCE (Marguerite Non independent members Jean ARONDEL Jean-Paul DUMORTIER BERARD-ANDRIEU) ► BPCE ► BPCE ► BPCE Anne SALLE MONGAUZE Isabelle RODNEY ► BPCE ► BPCE Sharon MACBEATH Olivier ZARROUATI Eric HÉMAR Independent mem
Slide 41: Financial calendar & Investor Relations contacts
Financial calendar & Investor Relations contacts Calendar Next Event Date IR Contacts: investors@coface.com Q1-2017 Results 26 April 2017, after market close AGM 17 May 2017 Thomas JACQUET Q2-2017 Results 28 July 2017, before market opening Head of Investor Relations & Rating Agencies Q3-2017 Result
Slide 42: Important legal information
Important legal information IMPORTANT NOTICE: This presentation has been prepared exclusively for the purpose of the disclosure of Coface Group’s FY-2016 results, released on February 8, 2017. This presentation includes only summary information and does not purport to be comprehensive. The Coface Gr