Coface Sa Adr

Good day and thank you for standing by. Welcome to the CoFACE SA nine month 2025 results presentation. At this time, all participants are in the listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Saria Durant, CEO. Please go ahead, sir.

Thank you very much, and good evening to all. Thank you for logging in this call. We'd like to start on time. Well, I mean, as you well have seen by the announcement, we're recording another very solid quarter in the third quarter of the GoFAST. The number is 52 million for Q3 2025 of net income, which brings the total year-to-date to 176.3. A lot of the discussions and points that I'm going to make are actually very much in line with the trends we discussed in the prior quarter, so really no big surprise. You see total revenue for the first nine months up 1.8%, that same FX and then parameter. with the premiums for insurance growing 1.1%. You see revenues from other activities that are up almost 11% in the third quarter, which continues to validate the strategy we've put in place to develop an ecosystem around the credit management space. We see client retention, which is back up close to our 2023 record. at 93.5%. Pricing continues to be down 1.8%, so clearly the market is competitive and there's pressure on prices. A little bit below or in line with the historic trend. The business information continues to show nice growth at 14.5% through the first nine months, and debt collection is up 38.5%. while we are seeing also a pretty good quarter in Q3 for factoring, which after a couple of negative quarters is now up 0.4%. On the client activity front, we'll discuss that later, but it's slightly positive, but clearly we're in the soft part of the market here. The loss ratio is up four points to 39.6, bringing the net combined ratio at 71.9 for the first nine months. I think that's a actually best performance in this industry. The gross loss is up four points. We are not changing our stance in terms of reserving or reserve releases. We still see nice throwbacks from the prior vintages. The cost ratio, pretty much like we've discussed in the prior quarters, is up 3.4 points. And that's really driven by our investments, which, again, are around distribution and TCI, around data, around business information, around connectivity and technology. The return on average tangible equity stands at 12 pro points, and we continue to change our leadership team and to prepare for the next phases. with the appointment of Christina and the CEO for North America. Her background in credit is an asset to keep growing this part of the world. We added, as we often do, one page on page five, which talks about actually our services businesses. You can see on the right-hand side of the chart, when we add up BI and debt collection in dark blue and factoring in the light blue, you can see how the percentage of these businesses as a percentage of the total increases steadily, regularly. We're almost at 11% for 2025. And I think that shows that the strategy is starting to be more material for COFAS as we go ahead. We continue to see nice growth, as I said, in business information. Actually, the new business that we've signed this year in annual contract value is up more than 50%. versus the first nine months of 24. So I think we're starting to see performance here in a lot of geographies. We're seeing the integration of Cedar Rose, which we closed not long ago, going well. This will be consolidated in the fourth quarter of 2025. We're actually starting to see good performance on the larger accounts and being able to sign more substantial deals. Debt collection itself is continuing to show that it's counter-cyclical, and the volumes that have been entrusted to us are up 35%. So I think these strategies are paying off. At the same time that we're experiencing what I call the tougher part of the credit cycle, clearly the market is not growing in our business. There's, as you know, lower inflation, slowing economies. Commodity prices are pretty low. The good news is our risk management is active as ever and has been very effective. So far we've kept away from the recent flow of large bankruptcy news that you've been able to hear about. And we are seeing about a 16% increase in the number of risk actions that the risk prevention activity that we carry out on the different sectors as the news develop and the market continues to evolve in a pretty actually unpredictable but pretty active ways. So going into the next pages that you're very familiar with now, on page seven, I've already described a lot of these numbers. Just one thing I want to highlight is that the insurance-related fees to a percentage to the total premiums that we collect is held up really nicely from last year. So that's a substantial source of income for us. and the profitability for our business. And they've been growing the fees at the same level as the insurance revenue at plus 1.6%. On page eight, we describe the growth by region. And I think what you see here is, given the nature of our business, a reflection of the state of the global economy. I usually talk first about Northern Europe, which is essentially the German area, Germany area. and Central Europe, which economy is very connected to Germany. And you can see here that this part of the world has actually slowed down. Same for Western Europe, which is France and the U.K. At the same time, you see MET in Africa doing a little bit better, but this is a region in the world where we used to see more like 5%, 6% annual growth, which has slowed down to 2.5% at this point. North America, with an economy that outside of the AI bubble seems to be slowing, is seeing 0.6% growth. And really where we are seeing more dynamic growth is now in the emerging markets. So this is the case for Asia Pacific and Latin America, which have been less affected, I would say, by the slowdown that we've seen in Europe or what's going on in the U.S. If we go to the next page, You continue to see, again, here the story is very similar to prior quarters, record new production at 102 million. That's really driven by the investments that we're making and by the strategy we've pursued in terms of partnerships and distribution. As I said, the retention is at near record level, so we are very active. take good care of our clients. We're very aware of their options, and we're still being disciplined in the way we manage risk, but I think that that's our trademark. In terms of prices, it's down 1.8%, so it continues to be a very competitive market. We continue to see capacity being added into the market. And then finally, in terms of activity, we are back in positive territory, albeit just above the zero mark at 2.1%, which historically, if you were to go back in the last six, seven years, would be a low level. If I go to the cost side, sorry, the loss side, You can see that we had another good quarter at 35.1 loss ratio before reinsurance and including the claims handling expenses. As I've discussed already several times, the number of claims is more or less at the 2019 level, while the claims amount is higher by almost 13%. What's changing is that we continue to see an increase in the average amount of the claims We see more material cases showing up in terms of bankruptcies or insolvencies. We've seen a number of recent high-profile U.S. cases. As I said before, we were absolutely not touched by these. As you see on the bottom, we continue to open the new vintage at pretty much the same level, 78%. You see a nice throwback from prior vintages at 41.9 from the prior years. And clearly, the business continues to perform in terms of risk management. I'll skip page 11. That represents the total year loss ratios. I mean, all I can say is that it's slowly but steadily moving upwards. The page 12. shows the quarterly story and really there's nothing to report on this page of any worth. It continues to be in the four largest markets and more stable markets that we have on the bottom of the page. It continues to be pretty benign in absolute terms. And then if you look at the smaller and more volatile markets on the top of the page, again, not much to report here. There's inherent volatility given that these are smaller places and more volatile Volatile economies, but at the same time we're performing well and so not much going on on that on that page If you look at page 13 where we talk about cost So we've already discussed again those metrics costs are up 8% from the same period Last year as we did in prior quarters. We disclose on the right hand side how the cost ratio evolves from 2024 to 2025 And like we said in the prior quarters, inflation accounts for 1.1 points of increase of the cost ratio. At the same time, we are making investments which are costing us 2.4 points of cost ratio, and these are compensated partially by the contribution of services which are growing fast, which are lowering our cost ratio by about 1 point. Out of the 2.4 points of increase in investments, we have about 40% that are tied to the insurance business and 60% which are tied to the business information and debt collection businesses. And it's pretty much the story in terms of cost. So we are able to make those investments because I think our cost base is actually good and I think the current environment completely validates our strategy of investment in business information and data and technology and connectivity and distribution for the credit insurance business, which I think varies the performance of the data. I'll turn it over to Farah for the next two pages, as we usually do.

Good evening, everybody. So let's look at the insurance page. Now we are on page 14. In terms of prima sessions rate, you can see that has not changed last year. It's pretty stable. Claims session rate has increased a little bit. Of course, this follows the fact that our claims ratio is deteriorating a bit. This leads us to reinsurance results at minus 83 million. I think we're coming back for this quarter as a normal level of reinsurance results. We move to the next page, leading us to a net combined ratio of 71.9, still below the pseudo-cycle level. The net cost ratio increased by 3.4. This is coming from the fact that the gross cost ratio is increasing. Net loss ratio up 4.1. Again, I think this is following the gross loss ratio increase. In terms of quarterly net combined ratio of 73.1, I just want to remind you, I think that we're probably close to the mid-cycle now. Compared to previous quarter, I'll just remind everybody that last quarter we had this impact on the net loss ratio related to the US dollars dropped that we haven't seen in this quarter. If we move to page 16, financial portfolio, the market value at 3.3 billion. You can see that we're still holding a high level of cash and liquid assets at 16%, which is now, with the new money, invested at 3.7%. We haven't changed the rest of the asset allocation for a while now because we have de-risked our investment portfolio. In terms of net investment income, I think there's two lines to be The first one, of course, is the recurring income, and you can see that even without gain, realized and unrealized gain and loss, and the accounting yield is increasing compared to last year. If we look at the FX impact, the minus 29.4 million, just again, I think this is also coming from, you know, just a result of the U.S. dollars dropped this year. by more than 10%, out of which the other 29, we have 20 million coming from the FX impact, negative impact related to US dollars, and the minus 9 million related to hyperinflation, especially in Turkey. The offset of the FX impact is booked, actually, in insurance finance expenses on the minus 9 million euros, out of which 23 million is coming from the FX gain. So only not much impact from the U.S. dollars movement, but it's just the geography of booking that shows different lines. If we move to page 17, I think as a result, net income at 176.3, down 15% compared to last year. Just again to remind everybody that last year we had a really, really high, almost a report in terms of net income. We're coming from a very good result, but I think this year 176 is a strong performance of our business, as Xavier highlighted. We're trading above the book value per share and above the tangible book value per share. Return on average tangible equity starts with a change in equity, moving from 2.193 million euros to 2.153 million euros, No change, you know, at all in the work. You know, you organize the distribution of dividends. We book the net income of the period, and that's pretty much it. This leads to the return on average eligible equity moving from 13.9 to 12%.