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H1-2016 Results In Line With July 4th Announcement

H1-2016 280x141

Net income (group share) down at €26m, of which €3m in Q2

  • Impacted by increased loss ratio, reaching 67% in Q2 in line with July 4th announcement

Turnover at €717m, down 5.7% vs. H1-2015 (-3.4% ex. FX), similar to Q1 trend

  • Price erosion in mature markets combined with the impact of risk measures taken in emerging markets and lower client activity

Net combined ratio at 92.2% (90.8% ex. one-offs[1]) for H1

  • Net loss ratio of 60.8% impacted by higher claims than expected in emerging markets, combined with longer collection times in these regions
  • Net cost ratio is stable at 30.0% excluding one-offs(31.4% reported), reflecting continued good cost control

Coface reiterates its expectation of a net loss ratio of 63% to 66% for full-year 2016

Solvency remains strong at 155%[2] allowing to confirm 60% long term pay-out policy; in addition an exceptional dividend of €0.06 per share proposed for 2016

State export guarantees transfer postponed to end-2016 / early-2017, driven by French State legal constraints

  • Exceptional gain of €73.4m before tax to be recorded at effective date of transfer

Fit to Win 2016-2019 strategic plan to position Coface as the most agile global trade credit partner in the industry by continuing to reinforce risk management capabilities in emerging markets, entirely offsetting, through cost savings, the shortfall linked to loss of State guarantees by 2018; driving differentiated profitable growth strategies by market, with the ambition to evolve to a more capital efficient model over the long-term

Unless otherwise stated, changes are in comparison with results at 30 June 2015


Commenting on the first-half 2016 results and main axes of the 3-year strategic plan, Xavier Durand, CEO of Coface, said:

“In line with what we communicated on July 4th, our results for the first half of 2016 have been impacted by a higher than anticipated increase in claims and longer recovery times in emerging markets: our net income stands at €26m, while our net loss ratio is 60.8% for the period, reflecting the 67% net loss ratio anticipated for Q2.

We have taken strong measures to proactively adapt our risk management and reserve policies to this new environment. This comes in addition to actions taken last year to reduce exposures in Latin America and as of end-2015 in Asia. Today, we continue to rigorously adjust our commercial and underwriting policies according to specific sector, debtor profile and geographic market evolutions.

Our strategic plan Fit to Win 2016-2019 is designed to transform Coface into the most agile global credit partner in the industry. The plan is structured around 3 core priorities: continue to enhance risk management and information capabilities in emerging markets; drive operational efficiency improvements under a much more client-centric business model; and put in place differentiated profitable growth strategies by market and customer segment. It is ambitious yet realistic – and consistent with the challenging global macro- and micro-economic environment we see today. In addition, we ambition to evolve to a more efficient capital model over the long-term.

By implementing the actions set out in Fit to Win, we aim to return to a normalized loss ratio over the cycle, adjust our cost structure to market realities and drive profitable growth over the long-term.

We will present this strategic plan extensively at our Investor Day to be held on September 22nd in London”.



The Board of Directors of Coface SA has examined the consolidated financial statements for the first half year 2016 during its meeting on July 27th 2016.  These interim consolidated financial statements have been subject to a limited examination by the Statutory Auditors. The Statutory Auditors’ review report is under preparation.




Coface registered a turnover of €717m in H1-2016, down 5.7% against H1-2015 (-3.4% ex. FX).

Mature markets – particularly France and Germany in the Western and Northern Europe regions - continue to experience price pressure given the relatively low level of domestic risk in these regions. In the Mediterranean & Africa region, Spain and Italy have been affected by the same trend, while other countries registered growth in turnover. Central & Eastern Europe continued to grow steadily (+2.0%, at constant scope and exchange rates compared with H1-2015).

In North America, business turnover was up 5.2% for the first half (ex. FX), mainly driven by global clients.

Emerging markets showed high risk volatility, leading Coface to take action on its portfolio in certain markets (Latin America and Asia Pacific), which had a knock-on effect on revenue growth.  

New business production dropped 5.0% vs. H1-2015 to €81m driven by a lower number of large deals. Coface’s client retention rate, however, remains strong, at 90.2%, buoyed by a targeted, customer-focused approach. Price effect is stabilizing at -1.8%.

Client activity, which also drives premiums, is still contributing to turnover growth but its impact is weakening, and is notably decreasing in some sectors (metals, commodities…).





Combined ratio

The Group’s net combined ratio stood at 92.2% (90.8% excluding one-offs[4]) for H1-2016.

The loss ratio net of reinsurance for the half year stood at 60.8% (+5.8 ppts compared with Q1-2016), i.e. 66.9% net loss ratio for Q2-2016, in line with the announcement made on July 4th. As indicated in this recent communication, the net loss ratio over the period is impacted by a higher than expected increase in claims in emerging countries, which also affected claims from exporting companies located in mature markets, combined with longer collection times in these emerging regions.  

The positive impact of risk reduction measures taken in Latin America over the last year are materializing, though the Brazilian environment remains risky, driven by a prolonged economic slowdown. The full effects of actions taken in late 2015 to reduce the Group’s risk exposure in Asia will translate into its results progressively.

Excluding one-offs5 (which had a -1.4 ppts impact), the net cost ratio was stable, at 30.0%, reflecting the Group’s continued good cost management. Expenses decreased in line with premiums to €347m[5] compared with €361m in H1-2015 (-2.0% at constant FX5), of which internal costs, excluding one-offs, stood at €272m (compared with €282m in H1-2015).


Financial income

Financial income[6] was €24.6m (of which -€1.3m loss on sales) at June 30th 2016, against €28.2m (of which €7.9m gains on sales) for H1-2015. Given its diversified portfolio and proactive investment strategy, Coface’s accounting yield[7], excluding capital gains and losses, was stable at 0.9% for H1-2016, compared with 1.0% for H1-2015, in spite of the current low rates environment.


Operating income and net income

Operating income stood at €52m and net income (group share) at €26m.



At June 30th 2016, IFRS equity (group share) was €1 734.5m. The change in equity is mainly the result of positive net income of €26m offset by the distribution of €75m to shareholders and an increase in re-evaluation reserves of financial assets available for sale.

Coface is prepared for the new regulatory framework, Solvency II, which came into force on January 1st 2016. Calculated on the basis of the standard formula, the coverage ratio of required capital to insurance and factoring risk coverage remains strong at 155%[8] as at June 30th 2016, allowing the Group to confirm its long term pay-out policy in addition to a proposed exceptional dividend of €0.06 per share for 2016.[9]

Ratings agencies Fitch and Moody’s reconfirmed the Group’s ratings (IFS) at respectively AA- and A2 (stable outlook), on June 10th and May 23rd 2016.



The transfer of Coface’s State export guarantees activity to Bpifrance remains subject to modification of the French applicable legislative and regulatory framework, which will come into effect by decree. Coface will continue to be remunerated by the State until the effective transfer, now postponed to end of 2016/early 2017 due to French State legal constraints.

As agreed with the French State and communicated in July 2015, the amount due to the Group on the transfer of the public guarantees activity is €89.7 million before tax. The exceptional net gain of €73.4 million after immediate depreciation charges (estimated at €16.3 million euros before tax as at December 31st 2015) will be recorded when the transfer becomes effective, and is now expected at end 2016/early 2017. Coface continues to manage the activity and will be remunerated until the effective date of transfer.

An agreement between the two parties signed in April 2016 defines the terms of cooperation between Coface and Bpifrance to ensure maintenance of a seamless service for all insured parties.



The ambition of Coface’s strategic plan,Fit to Win, is to transform Coface into the most agile global trade credit partner in the industry while seeking ways to evolve to a more capital efficient model.

Fit to Win is built around three key strategic priorities:

  • Reinforce risk management capabilities and information quality in emerging markets;
  • Significantly improve operational efficiency and client service; and
  • Implement differentiated profitable growth strategies, adapted to specific market/sector/customer profiles.

Fit to Win aims notably at returning progressively to a normalised loss ratio over the cycle and to adjust the Group’s cost structure to market realities and a challenging global environment. This includes an objective to entirely offset the loss of the French state export guarantees business by 2018, which represented a shortfall of c. €30m as at December 31st 2015[10].

The plan is coherent with a global economic environment that has significantly changed in the aftermath of the 2008 crisis, bringing an era of slower growth in developed economies, major challenges for emerging economies, shorter economic cycles and greater uncertainty. It will be presented in full on September 22nd 2016.



Coface remains cautious overall for 2016.

As announced on July 4th, the Group, faced with a greater than anticipated increase in risk in emerging countries, has taken strong measures to adjust its risk management policies in these regions and continues to strengthen its teams accordingly.

The development of claims in emerging countries at a higher level than expected, also affecting claims from exporting companies located in mature markets, combined with an increased average cost of claim and longer collection times in emerging regions, lead Coface to foresee a net loss ratio of 63% to 66% for FY 2016 (compared with 52.5% in 2015).

In mature markets, where risks are low, commercial pressure should remain strong. While the positive impacts of the risk reduction measures taken last year in Latin America are beginning to materialize, the environment remains risky in Brazil due to a prolonged slowdown, and the Group anticipates that the effects of risk actions taken end 2015 in Asia Pacific will translate progressively in its results over time.

Coface continues to focus on finely managing and adjusting its risk exposures as required by the current environment and on improving its operational and structural efficiency.




[1]  Restated one-off items at €5.8m: former CEO severance costs (€2.6m) + State guarantees revenues adjustment for 2015 (€2.7m) + others (€0.5m). Others include contingent capital costs, audit and consultant fees. One-off after taxes : €4.9m

[2] Coverage ratio calculated according to Coface’s interpretation of Solvency II standard formula.  See Interim Financial Report (First-Half 2016) for the calculation.

[3] Restated one-off items at €5.8m: former CEO severance costs (€2.6m) + State guarantees revenues adjustment for 2015 (€2.7m) + others (€0.5m). Others include contingent capital costs, audit and consultant fees. One-off after taxes: €4.9m.

[4] Adjustment of state guarantees management revenues for FY2015 (€2.7m), CEO severance (€2.6m), and other items (€0.5m). Other items include costs linked to implementation of contingent equity line, audit and consultancy fees

[5] Excluding CEO severance (€2.6m), and other items (€0.5m). Other items include costs linked to implementation of contingent equity line, audit and consultancy fees

[6] Investment income net of expenses, excluding cost of debt. O/W gains (losses), exclude investments in non-consolidated subsidiaries and derivatives.

[7] Accounting profitability ratio calculated on average investment portfolio

[8] Coverage ratio calculated according to Coface’s interpretation of Solvency II standard formula.  See Interim Financial Report (First-Half 2016) for the calculation.

[9] Proposals subject to approval of the Shareholder’s Assembly for the accounting year concerned

[10] Total shortfall before tax as at 31/12/2015: €10m lost margin (incl. adjustment of State guarantees management remuneration made in Q1-2016 for FY-2015) and €20m retained fixed costs

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Annie Lorenzana

North America
MOB: +1 (407) 221-3496