Coface Sa Adr

Good day, and thank you for standing by. Welcome to QFAS first quarter results presentation. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star, one, one, on the telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question, please press star, one, one, again. Please be advised that this conference is being recorded. I would now like to hand the conference over to our speaker today, Xavier Durand. Please go ahead.

Thank you very much and good evening. Thanks to all of you for joining. Happy to report today our first quarter 2025 numbers. You all have seen from the headline, it continues to be a good story for COFAS. We're reporting net income at $62.1 million. The turnover is up 2% at constant FX and parameter with trade credit insurance growing actually 1.2%. That's an inversion of the trend that we had last year as we've had, I think, a negative or zero activity through most of the year. Client activity is up 1.2% for this quarter. Client retention near our record at 95%. Pricing still down, but pretty much in line with the prior year and with historical trends. Strong growth continues with business information growing almost 15%, same as debt collection. Factoring slightly down, that's really the reflection of the industrial Germany and Central Europe business. As you can see, the loss ratio came in at 39.1%, which is up 3.3 points. That brings the net combined ratio at 68.7, which is in line with Q4. Slightly higher gross loss ratio at 38.7. Higher opening year reserving and pretty stable reserve releases from the prior vintages. The costs are up 2.2 points at 29.5. We continue to invest deliberately according to our Power of the Core business plan, so the no change in strategy, deliberate investments because we think it is actually the right strategy in what is a pretty volatile and uncertain environment. And I think we're the company's well-positioned. So total 62.1, slightly down from last year, and ROAT at 12.7%. We've added a page on page five about the environment. I mean, it's pretty obvious that the environment is as uncertain as it's ever been. On the left-hand side of the page, you can see a chart that represents the global economic policy uncertainty. We are at the stage at a very high level driven by the US move away from free trade, which has sent this index to record highs. It's very hard to see where this all settles, obviously. There's been a lot of announcements, changes and U-turns, but I think whether or not it ends up at a very high or medium or lower level, for now we are very likely to see a negative impact on world economy and trade just because people are uncertain and that slows down investments and spending. But it also means for us as a business that we see more demand for our business proposition, whether it is insurance or short-term information. We think that our positioning basically on monitoring accurately, or as accurately as possible, short-term risks, looking into details by industry, by trade corridor, by business, the expertise we have, the network we have, are all extremely relevant in this environment. And so we think we've got the right strategy. We continue to invest deliberately to make our Power of the Core plan a reality. If you go to page seven, just a little bit more detail on turnover. So turnover is up 2% this quarter. As I said, trade credit insurance premiums are up 1.2 at all things equal. The other revenues are up 7.5%. I've mentioned business information at close to 15%. Same for debt collection, close to 15%. Factoring slightly down, insurance fees that we collect on our insurance contract continue to perform well at 4%, bringing the total insurance-related fees to premiums ratio at 13.3%, which is a nice number. When you go to the next page, on page 8, by geography, I think what you see here is really the description of the world economy with Northern Europe, Germany, mainly down from last year. Strong growth, though, in services, close to 18%. Central Europe has had a bit of a one-off with a large contract that's been reduced and transferred to an Asian region, but still negative. Western Europe doing a little bit better with France, the UK, and Switzerland growing at about 1.9%. Med in Africa actually continues to drive growth at 5.1%. continued southern Europe and dynamism in the Middle East. North America striking along at 1.5, Asia at 3%, and Latin America having a nice surge, actually. We're coming out of a period where we have been working on the risk quite a bit, and there's obviously inflation underlying those numbers in Latin America. If you go to page nine, the usual breakdown of our business, you see that it continues to be a strong new business year for us. Actually, at the level of last year, I think there's good momentum. We are seeing a nice demand and nice continued growth in our direct business. We see retention at this stage at 95%, very close to our record 95.7. The market is competitive. People are aggressive. But at this stage, I think we are performing pretty well. The price effect is still negative. As you know, the long-term trend in this business is something like negative 1.5. So it's pretty much in line with the first quarter of 2024. And then on the volume side, as I said, 1.2% is a nice change from, I would say, the negative or slightly positive we had last year. So it's a good start of the year. It's hard to say where this is going to go, obviously, as there's lots of uncertainties on the trade, as we've mentioned before. Going to then page 10, you see the loss history by quarter on the top left. As we discussed priorly, insolvencies around the world continue to normalize or actually creep up slowly. The current environment is actually not helping. I would say the frequency that we are seeing is not back to normal conditions. We are seeing the same number of claims that we had seen in 2019 prior to the COVID crisis and then the subsequent events. We see claims amount higher though because there's been inflation since and that's reflected in the amount of claims that we're receiving. The severity is growing, but it is still below, I would say, the historic average of the business. So nothing really surprising here. You can see on the bottom right-hand corner that we still are cautious in underwriting the new vintage at 82% pre-discount. And we are still getting very nice throwbacks from the prior vintages at minus 43.6%. So no change in our reserving policy, no change in our stance in the market. We are very conscious of the environment and we are actually being very close to our clients in managing the risks, knowing that the full effects of the tariff situation will probably develop over the next part of the year. On the next page, 11, we see the Q1 compared to the prior years. I don't think it's very relevant during the first quarter to look at this because we're comparing one quarter with full years. So I'd rather turn to page 12 where we are seeing the sequence of the last five quarters that the business has gone through. And pretty much I think what we see here is there's not much to talk about. On Western Europe, Northern Europe, Central Europe, Med and Africa, which are the largest and historically more stable markets that we operate in, you can see that the risk is really contained. It operates at levels anywhere from, let's say, 25% to 50%, but very, very stable. On the three smaller and traditionally more volatile markets that we're in, North America, Latin America, again, some claims here and there, but no real trend. And as you see, for example, in Asia Pacific, we had a low Q3, a higher Q4, and a lower Q1. So not much to report in terms of the risk side. The cost side on page 13, as I mentioned, we are continuing to invest deliberately in our direct origination capabilities, in our technology, in our data, and in our business services. So the costs in total from Q1 24 are up 5.7%. That brings the cost ratio before reinsurance on the bottom right from 31.7 to 33.1. That's an increase of 1.4 points. And that's driven by a number of things. Investments, as I mentioned, are up, increased the ratio by 2.9 points. Cost inflation that's been embarked from the past is still there and creates 1.4 points of drag. It's offset by the revenues that we get from the new business services by 2.6 points, and then some growth that we have in the premiums, which lower the ratio by 0.4. So the net cost ratio is up 2.2, very slightly lower insurance commissions. Fala is going to take us through this, but pretty much for us, a continued investment in our in our expertise, in our people, in our capabilities, which makes a ton of sense in this current market. And with that, I'm actually going to turn it over to Paula to take us through the rest of the pages.

Yeah, thank you, Xavier. So premium session rate, way, way close to where we were last year. What is changing is, of course, the premium session rate. You can see the increase from 21 to 26.4%. reflecting the increase in the loss ratio that we are seeing. As a result, we're passing on this result to the reinsurer, moving from minus 30 to minus 20 million euros pre-tax. Leading us to a net combined ratio of 68.7, very similar to what we've seen in Q4-24, with an increase in net cost ratio, and increasing the net loss ratio, but still below 70%. If we move to the next page, so we're now on page 16, financial portfolio, the market to market of our investment portfolio stands at 3.35 billion euros. with a high level in terms of liquid asset cash, which is 17% of the total portfolio. Of course, we are holding cash as we're going to pay our dividend at the end of this month for about 200 million euros. In terms of investment income, if we look at the first two lines for investment, material income and realized gain and loss, You can see that it is translated in the fact that we are increasing slightly the accounting yield with and without gain and loss. It's moving up. And the new money is now invested at 3.8, which is slightly below the level of investment that we had last year, but still above 3%. If we move to the FX line, something we have, you can see the minus 12.4, this includes 4.5 million related to hyperinflation, mainly in Turkey, which means that the remaining part is the FX negative impact. You can see the offset, actually, of this FX negative impact in the IFE line. You can see that the IFE is moving from minus 11 to minus 4, and out of the minus 4, you have six or seven million related to realized, well, positive P&L impact on ethics. So it's an offset in two geographies of booking between financial results and technical results. IFE, as I said, if you exclude the ethics impact, It will be pretty similar, at a similar level that what we have in Q1, 24, which is more or less 10, 11 million euros. These leaders to a net income of 62 million, still very strong net income, despite, I think, the decrease versus last year, but this is driven by the fact that our net combined ratio has increased. We turn on average tangible equity. We're now on page 18. Total life for us is moving from $2,194,000 to $2,234,000. This is mainly driven by the next net income of the period. And then we have, I think, some CTA, so currency translation impact on our equity. We turn on average tangible equity from 13.9 to 12.7. Of course, we're comparing year-end return on average negligible equity to an annualized Q1, so I think the impact would probably be much more meaningful, I would say, throughout the year than what we're seeing in Q1. You know that we don't disclose any solvency in Q1, but we can say that it will be anyway above the upper range of our control zone.