Coface Sa · EURONEXT:COFA
Coface Sa — FY2018 Earnings Presentation
35 slides from Coface Sa's earnings presentation, Feb 11, 2019
Slide 1: FY-2018 Results: Presentation to Financial Analysts
FY-2018 RESULTS PRESENTATION TO FINANCIAL ANALYSTS FEBRUARY 11TH, 2019
Slide 2: FY-2018 Results: Net income at €122.3m and 100% pay-out
FY-2018 Results: Net income at €122.3m and 100% pay-out 1 2 3 4 5 FY-2018 FY-2018 CAPITAL KEY TAKE-AWAYS APPENDICES HIGHLIGHTS RESULTS MANAGEMENT & OUTLOOK 2 FY-2018 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 11 FEBRUARY 2019
Slide 3: Part 1: FY-2018 Highlights
coface PART 1 FY-2018 HIGHLIGHTS /
Slide 4: Coface reports €122.3m net income, reflecting strong underwriting discipline
Coface reports €122.3m net income, reflecting strong underwriting discipline in a riskier economic environment Turnover reached €1,384.7m y-t-d, up 4.6% at constant FX and perimeter − Q4-2018 up 6.3% y-o-y and 4.0% excl. one-offs1 − Trade Credit insurance growing at 5.7% at constant FX − Insured tur
Slide 5: Solvency ratio stands at 169%; 100% payout proposed
Solvency ratio stands at 169%1 ; 100% payout proposed RoATE stands at 7.7% for the year and 8.0%2 excluding non-recurring items Estimated solvency ratio above target range at c. 169%1 − Increased solvency ratio driven by operating performance and continued model optimization − Quota share reinsuranc
Slide 6: Fit to Win: The right strategy as world economy becomes more volatile
Fit to Win : The right strategy as world economy becomes more volatile Delivering on key metrics KPIs are making progress against targets Continuing to improve capital management ► Disciplined underwriting policy ► Solvency ratio above upper end of target 150% 164%1 169%2 ► Investments more than fin
Slide 7: Part 2: FY-2018 Results
coface PART 2 FY-2018 RESULTS /
Slide 8: Turnover growth at 4.6% driven by credit insurance premiums
Turnover growth at 4.6% driven by credit insurance premiums 2.2% 4.6% Total revenue up 4.6% vs. 2017 at constant FX and perimeter; In €m Q4-2018 is up 6.3% y-o-y (+4.0% excl. one-offs) 1,355 1,385 ► Trade credit insurance1 growing at 5.7% at constant FX Gross Earned Premiums (GEP) 1,110 1,143 ► Grow
Slide 9: Revenue growth driven by mature markets recovery and emerging markets
Revenue growth driven by mature markets recovery and emerging markets improved performance Western Europe Northern Europe Central Europe Mediterranean & Africa 1.1% 1.6% (0.3)% (0.2)% 4.8% 6.1% 6.4% 8.2% 304 303 370 281 284 348 128 134 FY-17 FY-18 FY-17 FY-18 FY-17 FY-18 FY-17 FY-18 Growth driven by
Slide 10: High volume effect and record high retention
High volume effect and record high retention New production1 139 138 129 New business slowly recovering, 116 reflecting selective growth strategy Q4-2018 slightly above Q4-2017 after slow start of the year FY-15 FY-16 FY-17 FY-18 Retention rate1 91.1% 89.7% 87.9% 88.0% Record / Highretention Record/
Slide 11: Gross loss ratio at 45.3%, stabilizing in a riskier environment
Gross loss ratio at 45.3%, stabilizing in a riskier environment Loss ratio before reinsurance and including claims handling expenses, in % 51.4 50.3 46.5 45.3 ► Good claims performance (past and new) 44.2 45.0 39.7 46.3* in a riskier economic environment 43.6* ► Q4-2018 gross loss ratio benefiting f
Slide 12: Improving mature market performance, while controlling emerging markets volatility
Improving mature market performance, while controlling emerging markets volatility Loss ratio before reinsurance, including claims handling expenses – in % 9%* 7%* 5%* Group North America Asia Pacific Latin America 146.8 113.4 100.6 85.0 63.3 51.0 51.4 44.2** 56.3 53.8 60.2 57.9** 49.0 39.1 35.9 23.
Slide 13: Cost ratio improving while investing in key processes
Cost ratio improving while investing in key processes 1ex. one-off in Italy: 1 2.0% 4.4%1 4.3% 5.5% 1.1% 3.5% In €m 683 690 171 175 175 168 169 External acquisition 44 41 163 40 40 38 costs (commissions) 158 €6.0m Italy 6 one-off 127 131* 35.6 131 131 134 519 527 Internal costs Q4-17 Q1-18 Q2-18 Q3-
Slide 14: Reinsurance: second quota share successfully renewed
Reinsurance : second quota share successfully renewed 12M-17 12M-18 Gross earned premiums 1,109.7 1,142.6 ► Cession rate now shows full impact of higher cession Net earned premiums 808.2 815.1 contracts 27.2% 28.7% Premium cession rate ► Second 13% quota share successfully renewed for 2 years. Overa
Slide 15: Net combined ratio at 79.6%
Net combined ratio at 79.6% (7.0) ppts. In % Net combined ratio 86.6 79.6 ► Net combined ratio improved to 79.6% (vs. 86.6% in 2017) due to lower losses Net cost ratio 35.2 34.5 and cost discipline ► Cost ratio down 0.7ppt as investments are Net loss ratio fully financed by cost savings 51.4 45.1 ►
Slide 16: Financial portfolio: stabilised yield and lower realized gains
Financial portfolio: stabilised yield and lower realized gains Investment €m FY-2017 FY-2018 Real Estate 8% Equities Income from investment portfolio without gains on sales 2 37.5 40.7 7% Gains on sales and impairment / impairment's release 12.3 4.7 FX effect 8.0 8.2 Bonds 66% Other (2.5) (2.5) Loan
Slide 17: FY-2018 net income at €122.3m of which €24.1m in Q4-2018
FY-2018 net income at €122.3m of which €24.1m in Q4-2018 Income statement items - in €m 12M-17 12M-18 ► Operating income at €203.9m is back to historical Current operating income 155.0 208.9 highs ► Investments & restructuring expenses at €(5.7)m Fit to Win investments & restructuring expenses (0.4)
Slide 18: RoATE stands at 7.7%, up 2.4ppts on stable equity base
RoATE stands at 7.7%, up 2.4ppts on stable equity base Change in equity In €m 122.3 (18.0) (47.8) 1,802.6 (52.9) 1,806.2 IFRS Equity Distribution to Net income impact Revaluation reserve Treasury shares, IFRS Equity attributable to owners shareholders (financial instruments currency translation attr
Slide 19: Part 3: Capital Management
coface PART 3 CAPITAL MANAGEMENT /
Slide 20: Solid balance sheet
Solid balance sheet ►IFRS 9 “Financial instruments” 2018 simplified balance sheet − Coface meets criteria to apply temporary exemption of IFRS 9 for its insurance business, until 1 Jan 2022 €m − IFRS 9 implemented for factoring entities (in Germany & Poland) as of 1 Jan 2018, with a limited impact o
Slide 21: Robust solvency over time
Robust solvency over time FY-2018 estimated Solvency ratio in target range Low sensitivity to market shocks market sensitivity tested through instantenous shocks 2 3.7 ppts. (0.6) ppts. 1.4 ppts. 169% FY-2018 31/12/2018 SCR cover (Std) 169% 1 169%2 164% 1 160% +100 bps Interest rates 164% 140% +100
Slide 22: Solvency required capital at 31 December 2018
Solvency required capital at 31 December 2018 Standard model 169%1 Operational risk 2,091 €m 36 - Client, product and business practices - Employment practices and workplace safety, etc. 416 1,317 Counterparty risk (209) 35 101 251 1,238 - Fixed income default risk (121) - Reinsurance default risk,
Slide 23: Part 4: Key Take-aways & Outlook
PART 4 KEY TAKE-AWAYS & OUTLOOK
Slide 24: Key take-aways & outlook
Key take-aways & outlook Solid results in 2018 demonstrate Coface’s ability to perform in a riskier environment − Improved underwriting infrastructure allowed to control higher volatility (Argentina, Turkey) − Net combined ratio at 79.6% driven by a net loss ratio of 45.1% − Operating profit at €203
Slide 25: Part 5: Appendices
coface PART 5 APPENDICES /
Slide 26: Key figures (1/2)
Key figures (1/2) Quarterly and cumulated figures Income statement items in €m Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 % % ex. FX Quarterly figures Gross earned premiums 282.2 283.4 271.6 272.5 278.4 282.3 292.2 289.7 +6.3% +8.4% Services revenue 66.1 60.0 57.9 61.2 65.6 58.7 58.5 59.3 (3.1)
Slide 27: Key figures (2/2)
Key figures (2/2) Revenue by region: quarterly and cumulated figures Total revenue Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 V% ex. FX by quarter - in €m Northern Europe 79.8 75.1 74.7 74.2 79.0 73.2 76.2 74.7 +0.6% Western Europe 73.1 69.3 68.5 69.8 74.8 68.4 69.6 71.2 +1.9% Central Europe 31
Slide 28: Exposure in EM maintained at a stable share
Exposure in EM maintained at a stable share Total exposure up 5.4% vs. end of the year, in line with client activity increase Evolution of total exposure1 by country of debtor FY-2018 total exposure1 – Top 10 countries vs. others In €bn In % Germany 14.4% France Dec-2015 78% 22% 475 Italy 36.0% 11.6
Slide 29: Loss ratio for the quarter at 45.3% (46.3% excl. FX impact)
Loss ratio for the quarter at 45.3% (46.3% excl. FX impact) Loss ratio before reinsurance, including claims handling expenses – in % 9%* 7%* 5%* Group North America Asia Pacific Latin America 94.1*** 79.4 63.5 65.8 59.5 50.9 37.8 50.3 39.7 45.0 46.5 45.3** 31.1 ** 28.9 26.6 9.8 -6.4 -2.9 -20.4 -7.9
Slide 30: Combined ratio calculation
Combined ratio calculation In €k FY-2017 FY-2018 ► Combined ratio before reinsurance Earned Premiums (B) (C) Gross earned premiums [A] 1,109,697 1,142,608 loss ratio before reinsurance + cost ratio before reinsurance (A) (A) Ceded premiums (301,545) (327,541) Net earned premiums [D] 808,152 815,067
Slide 31: Q4-18 results vs. consensus
Q4-18 results vs. consensus # of in M€ Consensus Q4-2018 Spread Comment replies Total revenue 5 346 349 +3 Revenue increase driven by mature markets, Gross Earned Premiums 5 281 290 +9 high retention and higher client activity Net Earned Premiums 5 199 209 +10 NEP/GEP 5 70.8% 72.0% +1.2 ppt Higher c
Slide 32: Management team
Management team GROUP CENTRAL FUNCTIONS CEO Xavier Durand — 30+ years of international experience in regulated financial services Working for Coface since 2016 CFO & Risk Director General Secretary Strategy & Business Underwriting Director Carine Pichon Carole Lytton Development Director Cyrille Cha
Slide 33: Corporate governance
Corporate governance Board of Directors François RIAHI Chairman CEO of Natixis Non independent members Daniel KARYOTIS Jean ARONDEL Jean-Paul DUMORTIER ► BPCE ► BPCE ► BPCE Anne SALLE MONGAUZE Isabelle RODNEY ► BPCE ► BPCE Sharon MACBEATH Olivier ZARROUATI Eric HÉMAR Independent members ► Tarkett ►
Slide 34: 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 TOTAL % Total of Voting Agreement (cancellation) (in shares) # Shares rights Q1-2019 Results April 24th, 2019 after market close 31/12/2018 126,637 7
Slide 35: 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 2018. This presentation includes only summary information and does not purport to be comprehensive. The Coface G