Q1-2019 RESULTS PRESENTATION TO FINANCIAL ANALYSTS APRIL 24 TH , 2019
Q1-2019 Results: Net income at € 36.4m; RoATE* stands at 9.0% 1 2 3 4 Q1-2019 Q1-2019 KEY TAKE AWAYS APPENDICES HIGHLIGHTS RESULTS & OUTLOOK * RoATE = Average return on tangible equity 2 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
PART 1 Q1-2019 HIGHLIGHTS
Coface reports € 36.4m net profit Fit to Win actions now fully effective Turnover reached € 365m y-t-d, up 6.7% at constant FX and perimeter − Most regions are contributing positively to growth − New production improving in mature markets; revenues supported by past client activity growth Q1-2019 net loss ratio up 2.8 ppts. from Q1-2018 record low at 42.6%; Net combined ratio at 74.5% − Gross loss ratio almost stable vs Q1-2018, driven by favourable recoveries and disciplined underwriting − Net cost ratio down by (0.7) pt at 31.9% reflecting positive operating leverage Net income (group share) at € 36.4 m, up +2.3% y-o-y (+3.4% excl. FX) RoATE at 9.0% Fit to Win execution continues: − Closed acquisition of PKZ, the leading credit insurer in Slovenia − Announced 2018 dividend per share of 0.79 € 1 − Coface is still targeting to apply for Partial Internal Model in the summer 2019. Discussions with the regulator continuing 1 Ex-dividend date is on May 22 nd 2019 and Payment date is on May 24 th 2019. The proposed distribution of 0.79 € per share is subject to approval of the Annual Shareholders’ Meeting that takes place on May 16 th 2019. 4 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
PART 2 Q1-2019 RESULTS
Turnover growth at 6.7% driven by credit insurance premiums 6.2% 6.7% 365 Total revenue up 6.7% vs. Q1 2018 at constant FX 344 In € m ► Trade credit insurance 1 premiums growing organically at 8.0% at constant FX. Gross Earned Premiums 299 (GEP) 278 ► Growth driven by client activity, higher new business and retention, easing price pressure Insurance related fees 39 39 Other revenue ► Services revenue up by 2.8% vs. 2018 27 27 Q1-2018 Q1-2019 13.8% 13.1% Fees / GEP ratio ► Fees up by 0.9% at constant FX Q1-2018 Q1-2019 1 Including Bonding and Single Risk V% V% ex. FX 6 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
Most regions are contributing positively to growth Western Europe Northern Europe Central Europe Mediterranean & Africa 5.4% 6.8% 0.1% (0.3)% 1.5% 1.7% 0.2% 2.1% 97 92 79 80 75 75 34 34 Q1-18 Q1-19 Q1-18 Q1-19 Q1-18 Q1-19 Q1-18 Q1-19 Growing new business in trade credit Insurance revenues growing at Insurance premiums growing while Growing trade credit insurance and insurance, lower single risk +2.3% monitoring risks tightly (Poland) bonding North America Asia Pacific Latin America 14.9% 7.0% 28.2% 20.7% 30.7% 53.0%* 27 31 27 21 21 16 Q1-18 Q1-19 Q1-18 Q1-19 Q1-18 Q1-19 Growing new business and retention Growing insurance due to Large global contracts and lower higher retention Growth at 10.4% excluding Q1-18 one off premium refunds * 28.8% excl. non domestic currency impact V% V% ex. FX Total revenue by region, in € m 7 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
Growing new production, record high retention and supportive client activity New production 1 49 43 Growing new production in mature markets (WER, 35 34 NER) confirms end of 2018 improvement Q1-16 Q1-17 Q1-18 Q1-19 94.0% 93.1% Retention rate 1 90.9% 91.3% Record/high retention in most regions Q1-16 Q1-17 Q1-18 Q1-19 Price effect 1 (1.2)% Lower pricing decline despite low claims (1.6)% (1.9)% (2.3)% Q1-16 Q1-17 Q1-18 Q1-19 Volume effect 1 1.8% 1.3% Client activity still growing although below 2018 1.1% 0.2% record level Q1-16 Q1-17 Q1-18 Q1-19 1 Portfolio as of March 31 st 2019; and at constant FX and perimeter. New Production: in m € . 8 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
Gross loss ratio at 39.8% in a more complex environment Loss ratio before reinsurance and including claims handling expenses, in % ► Gross loss ratio at low levels, improving versus recent quarters 46.5 45.3 45.0 39.7 39.8 46.3* 43.6* ► Favourable prior periods underwriting development 42.2** ► Positive impact from highly reinsured facultative business Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 ** excl. FX ** excl. FAC Loss ratio before reinsurance and excluding claims handling expenses, in % (15.8) (20.0) (35.0) (33.8) ► No change in reserving policy 71.5 72.4 71.3 71.1 ► Recoveries remain at a high level 55.6 51.5 37.4 37.2 Current underwriting year All underwriting years Prior underwriting years 9 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
Improving mature Europe performance with stabilizing emerging markets Loss ratio before reinsurance, including claims handling expenses – in % 9%* 7%* 6%* Group North America Asia Pacific Latin America 146.8 85.0 ** 63.3 60.2 57.9 51.4 ** 51.3 44.2 49.0 53.8 39.8 44.6 39.1 35.9 23.6 28.6 FY-16 FY-17 FY-18 Q1-19 FY-16 FY-17 FY-18 Q1-19 FY-16 FY-17 FY-18 Q1-19 FY-16 FY-17 FY-18 Q1-19 **51.8% excl. FX **43.8% excl. FX 9%* 21%* 22%* 26%* Central Europe Western Europe Northern Europe Mediterranean & Africa 58.5 ** 50.3 49.7 32.7** 57.2 49.8 49.6 48.8 54.0 48.4 44.5 48.9 47.2 40.7 38.5 34.6 21.8 FY-16 FY-17 FY-18 Q1-19 FY-16 FY-17 FY-18 Q1-19 FY-16 FY-17 FY-18 Q1-19 FY-16 FY-17 FY-18 Q1-19 **48.9% excl. FX ** excl. FAC * % of Total revenue by region 10 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
Positive operating leverage drives cost ratio down 3.0% 2.7% In € m 176 175 175 169 171 External acquisition 41 44 41 40 38 costs (commissions) Cost ratio before reinsurance, in % 37.0 35.7 36.0 34.8 33.2 Internal costs 134 134 131 131 131 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 V% V% ex. FX ► Continue to control costs while investing in strategic 34.8% (2.5)% and regulatory projects ( € 2m) 33.2% +0.6% +0.3% ► Q1-2019 gross cost ratio at 33.2% down by 1.6 pts thanks to positive operating leverage and seasonally favourable revenues Q1 2018 Earned premiums Internal External Q1 2019 overheads acquisition cost 11 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
Reinsurance result impacted by low loss ratios Q1-18 Q1-19 Gross earned premiums 278.4 299.0 Net earned premiums 198.6 212.3 ► Premium cession rate stabilized 29.0% 28.7% Premium cession rate ► Lower claims cession rate due to recoveries on highly reinsured facultatives Gross claims expenses (110.4) (119.0) Net claims expenses (79.1) (90.5) 28.4% 24.0% Claims cession rate Q1-18 Q1-19 V% Underwriting income before reinsurance 68.9 78.7 +14% Reinsurance result N.S. (16.5) (26.6) Underwriting income after reinsurance 52.4 52.0 (1)% 12 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
Net combined ratio at 74.5% well below through the cycle average 2.0 ppts. Net cost ratio improved to 31.9% (vs. 32.7% in In % ► 82.8 81.5 81.4 74.5 72.5 Q1-18) Net combined ratio 34.4 35.0 35.9 31.9 Net cost ratio 32.7 Investments fully financed by cost savings ► 1 Loss ratio at 42.6%, well below through the cycle 48.5 45.5 ► 46.6 42.6 39.8 Net loss ratio average Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 13 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
Financial portfolio: stabilised yield and lower hedging contribution Keeping a diversified investment strategy Investment €m Q1-18 Q1-19 Real Estate 8% Income from investment portfolio without gains on sales 2 10.0 10.6 Equities 6% Gains on sales and impairment / impairment's release 2.3 3.4 Bonds FX effect (3.1) (1.1) 66% Loans, Other (0.9) (7.7) Total Deposit & 8.3 other € 2.79bn 1 Net investment income financial 5.1 20% Accounting yield 0.4% 0.5% on average investment portfolio Accounting yield average investment portfolio excl. gains on sales & 0.4% 0.4% depreciations / release depreciations 1 Excludes investments in non-consolidated subsidiaries 2 Excludes investments in non-consolidated subsidiaries, FX and investment management costs ► Accounting yield not annualized at 0.5% in a low rate environment ► Lower derivatives results due to market conditions ► Negative contribution from non consolidated entities; following decisions to restructure Peruvian operations 14 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
Q1-2019 net income at € 36.4m Q1-18 Q1-19 Income statement items - in €m Current operating income 60.7 57.2 Fit to Win investments & restructuring expenses (2.2) (0.3) Other operating income and expenses (0.2) 0.1 Operating income 58.4 56.9 ► Robust operating income in a more complex environment Finance costs (4.4) (5.3) Share in net income of associates 0.6 0.0 Income tax (19.0) (15.2) ► Tax rate keeps improving to 29% Tax rate 35% 29% Non-controlling interests 0.1 (0.1) Net income (group share) 35.5 36.4 ► Net income up 2.3% 15 Q1-2019 RESULTS | PRESENTATION TO FINANCIAL ANALYSTS | 24 APRIL 2019
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