FRENCH UNEMPLOYMENT INSURANCE INVESTOR PRESENTATION September - PowerPoint PPT Presentation

FRENCH UNEMPLOYMENT INSURANCE INVESTOR PRESENTATION September 2017 1 Investor Presentation - September 2017

TABLE OF CONTENT Compensation by unemployment insurance Management of the insurance entrusted to the social partners Two public operators are in charge of collection and payment of benefits Continuity and sustainability of the scheme are guaranteed 2 Investor Presentation - September 2017

COMPENSATION BY UNEMPLOYMENT INSURANCE 3 Investor Presentation - September 2017

COMPENSATION BY UNEMPLOYMENT INSURANCE FOR 2015 * at 12/31/2016 4 Investor Presentation - September 2017

MANAGEMENT OF THE INSURANCE ENTRUSTED TO THE SOCIAL PARTNERS 5 Investor Presentation - September 2017

UNÉDIC MANDATES TWO PUBLIC AGENCIES TO CARRY OUT OPERATIONS OF CONTRIBUTION COLLECTION AND BENEFIT PAYMENT 6 Investor Presentation - September 2017

CONTINUITY AND SUSTAINABILITY OF THE SCHEME ARE GUARANTEED Collective negotiation every 2 to 3 years to ensure financial balance “over the cycle” – A legal obligation for a balanced budget (Labour Code Art. L 5422-12) – Definition of the mechanisms for a 2 to 3 years term , depending upon the financial situation of the unemployment insurance, the job market and unemployment figures – Adjustable variables in order to reach equilibrium : • Contribution rate • Compensation rights • Amount and duration of benefits A scheme with a tacit guarantee from the French government – Compulsory nature of the unemployment insurance (Labour Code Art. L 5422-13) – Ministerial approval of the insurance agreements (Labour Code Art. L 5422-21) – Unédic is substituted by the government take- over should the social partners and employers’ organisations fail and reach an agreement or obtain its governmental approval Bonds issuance supported by an explicit State guarantee, renewed since 2011 • Amending Finance Law of 30 December 2016 (article 36): authorisation to provide guarantee • Ministerial Order granting the guarantee (6 March 2017) 7 Investor Presentation - September 2017

Financial Forecast Improvement of the macroeconomic situation in france Unédic Research and forecast Contribution steady increase Unedic cyclical and structural debt Expenditures closely tied to the economic situation A “ leverage effect ” upon the balance of unemployment insurance scheme Position in the economic cycle and cyclical balance Unedic structural balance since 1990 New 2017 rules for Unemployment insurance scheme Savings generated by the new convention 8 8 Investor Presentation - September 2017

IMPROVEMENT OF THE MACROECONOMIC SITUATION IN FRANCE After years of relative growth, various indicators show significant improvement of the situation Opinion survey index of business leaders Long term average Business climate Employment climate Source : INSEE 9 Investor Presentation - September 2017

IMPROVEMENT OF THE MACROECONOMIC SITUATION IN FRANCE After years of relative growth, various indicators show significant improvement of the situation Evolution of business failures Source : Banque De France 10 Investor Presentation - September 2017

IMPROVEMENT OF THE MACROECONOMIC SITUATION IN FRANCE After years of relative growth, various indicators show significant improvement of the situtaion GDP growth Long term average Japan United Kingdom Business climat United States Employement climat France Source : OECD 11 Investor Presentation - September 2017

IMPROVEMENT OF THE MACROECONOMIC SITUATION IN FRANCE The amelioration of the situation is starting to produce effects on employment Unemployement level (ILO) 9.2% Source : INSEE 12 Investor Presentation - September 2017

UNÉDIC RESEARCH AND FORECAST Forecast updated three times a year – Based on macro-economic fundamentals from the Consensus of Economists: • Forecast in change of GDP rate • CPI • Some hypotheses used by Unédic in its forecast model can differ from the State macro economic framework – Monitoring of the working population, wage rate change, unemployment benefits paid, etc. A steering tool for social partners – Forecasts reviewed by unemployment insurance managers. – A reference for the social partners negotiating the agreements: Unédic has an obligation to conduct a 3 year forecast and analysis of cyclical effects on its finances – Finance Law for 2014- 2019 Art. 29: “ Unédic reports every year to the Parliament and the Government, before the 30 June at the latest, its three year financial forecast, detailing in particular the cyclical effects of salaried employment evolution on the financial balance of the unemployment insurance scheme” 13 Investor Presentation - September 2017

CONTRIBUTIONS STEADY INCREASE Unédic revenue shows stable and steady increase despite a period of economic difficulties 2012 2013 2014 2015 2016 2017 (f.) 2018 (f.) 2019 (f.) 2020 (f.) Annual revenues (€M) 32,466 33,274 33,936 34,520 35,146 35,935 37,044 37,909 38,845 Wage bill growth 2.2% 1.2% 1.6% 1.7% 2.4% 2.7% 2.5% 2.5% 2.8% GDP growth (in volume) 0.2% 0.6% 1.0% 1.0% 1.1% 1.5% 1.5% 1.5% 1.5% Sources: Unédic, INSEE, Consensus Forecasts June 2017, Unédic Calculations Note: Unédic forecasts are based on hypotheses which may differ from the State macro economic framework 14 Investor Presentation - September 2017

EXPENDITURE CLOSELY TIED TO THE ECONOMIC SITUATION Contribution and expenditure relative to GDP Sources: Unédic, INSEE, Consensus Forecasts June 2017, Unédic Calculations Note: Unédic forecasts are based on hypotheses which may differ from the State macro economic framework 15 Investor Presentation - September 2017

UNEDIC FINANCIAL SITUATION FORECAST Significant improvement of Unédic financial forecast Sources: Unédic, INSEE, Consensus Forecasts June 2017, Unédic Calculations Note: Unédic forecasts are based on hypotheses which may differ from the State macro economic framework 16 Investor Presentation - September 2017

A “LEVERAGE EFFECT” UPON THE BALANCE OF UNEMPLOYMENT INSURANCE With the current parameters of unemployment insurance (contribution rate and compensation rate), the contributions of roughly 9 affiliated employees are necessary to compensate 1 jobseeker 1 employee losing his job has a 1 jobseeker finding a job has an enhanced compounded negative effect upon the positive effect upon unemployment finances of unemployment insurance: insurance finances: - 1 contributor + 1 contributor + 9 contributions consumed + 9 contributions available There usually is a delay of 6 months to a year before this levered effect can be noticed 17 Investor Presentation - September 2017

UNÉDIC CYCLICAL AND STRUCTURAL DEBT RESEARCH Unédic research and analysis on the cyclical and structural balance of its debt – Unédic has to keep a balanced budget over the economic cycle – The social partners have made the choice to prioritize their mission and the social nature of unemployment insurance which is to serve a replacement revenue to eligible jobseekers and help them return to employment – 2014 Finance Law prompted Unédic to conduct further analysis on its debt and the identification of its structural and cyclical components – Unédic uses the methodology used by international organizations (IMF, OECD…) to measure the cyclical component of its year- end result based on the analysis of the “output gap” estimating the present position in the economic cycle 18 Investor Presentation - September 2017

POSITION IN THE ECONOMIC CYCLE AND CYCLICAL BALANCE Output gap Sources : European commission Since 2009, the cyclical balance of Unédic has been continuously negative due to prolonged negative output gap over the period. 19 Investor Presentation - September 2017

STRUCTURAL AND CYCLICAL BALANCE Structural and cyclical balance relative to the economic cycle Structural balance : Surplus years or surplus Financial situation compensate for years of deficit. time -> indebtedness remains at zero Deficit Negative structural balance or structural Financial Structural deficit = € 1,5bn deficit : years of surplus situation can not compensate enough for years of deficit. Cyclical deficit -> indebtedness increases Source : Unédic 20 Investor Presentation - September 2017

UNÉDIC STRUCTURAL BALANCE SINCE 1990 Structural balance Between 2010 and 2016, the structural balance of Unédic was negative and represents up to -1,5bn Euros on average each year. Sources: Unédic, INSEE, Consensus Forecasts June 2017, Unédic Calculations Note: Unédic forecasts are based on hypotheses which may differ from the State macro economic framework 21 Investor Presentation - September 2017