Coface Sa Adr

Good day and thank you for standing by. Welcome to the CoFace FAQ1 2026 results presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Xavier Duran, CEO. Please go ahead.

Thank you, and just on time, welcome, everyone, to this first quarter 2026 report in COFAS. You will have seen the numbers. We are reporting net income close to 54 million euros. down from last year, but I would call this a good quarter in an economic environment, which is obviously not easy. The turnover of $465 million is stable, like constant FX and parameter, and there's a few moving parts inside that. You see that interest revenue is down 1.3%. That's really driven by, I would say, slow economy and client activity being positive but low and lower than historic average. But the operating metrics of the business, as you will see later, remain really strong with retention close to our record. Pricing still negative but improving. And I think that's also linked to the environment. And at the same time, we see services growing close to 20% with business information on a consolidated basis growing 12% organically and almost 18% on a reported basis with the acquisition that we made last year. Debt collection strong at almost 32%, factoring positive after a few quarters of actually flat or negative. And when you look at the total parameter growth, including those businesses that are not consolidated, you see 15% organic for BI. and 40% for debt collection, so strong revenue growth on services. I think the other point, the strong point I think of the quarter is the net loss ratio standing at 37.6%, bringing the net combined ratio to 70%. We have, you'll see, really a very flat and benign story on the loss side. The net cost ratio is up three points to 32.5%. We are continuing our investments. I mean, I've been saying this now for a couple of years, in line with our Power the Core plan. And we continue to move and to move forward. So we've appointed a new CEO for Strategic Partnerships. This is Kasia Komposka, who is running Northern Europe. She's being replaced by the head of sales for that region, Christian Stoffel, who's been with us for a number of years and has been leading both our factoring business and then been the sales leader for that region. And then we have a succession of further changes down the chain, all internal, and I think it shows that we continue to move and we have strong talent. So, net income close to 54 million. Return on average tangible equity stands at 11%, which is the range that we had set ourselves through the cycle. Clearly, the economy is, as I said, and it's pretty obvious, not very supportive. We added a page, as we very often do on page five, to talk about Power the Core. I mean, we are really halfway through the plan. We issued the plan two years ago. And if you remember, this is all about data connectivity and technology. This is about building an ecosystem that really links clients, partners, distributors, building solutions around the credit space, and investing in digital tools, automation, and artificial intelligence-driven solutions, which are now enabled by the incredible surge in AI that we're seeing today. So we are executing on that plan. It requires investment, and we're making significant progress and significant investments. And I think it's given us a very unique and differentiated platform at a limited cost, as I've explained through many the last couple of years. We're doing this at pretty much a zero impact on the P&L. And the external revenues we generate from this activity are actually allowing us to fund the services growth and also some of these benefits percolate into the insurance business. What's different, I would say, from what we planned when we launched the plan is that the economy is tougher. Clearly, there's been tariffs. There's been de-globalization. There's the events in the Gulf and the war in the Middle East, a shock in energy. I think you're starting to see some of the impacts of that. The level of insolvency stands at a record for the last 13 years or so and continues to grow in advanced economies. Geopolitical headwinds, I don't think I need to explain the details. And so that's one side. The economy is not very supportive. And the other thing that's happening, I think, is the advance of AI and the huge changes we're seeing in the technology space. with AI now starting to impact all of the different areas of, frankly, a wide array of businesses. So if I step back and look, you know, three years back, I think we have the right orientation. I think we have the right strategy. It's just the environment is, on one hand, a little bit tougher on the economy and also accelerating on the digital space, which only reinforces our view that we should continue to invest and differentiate. To me, it's pretty clear. I've laid on the right-hand side of the chart here the revenues we generate from services, which is business information and debt collection, and you see that it's been growing about 20% a year for the last two years and is still growing about 20% this quarter. And when you look at it on an annualized basis, we're over 100 million euros now of revenues, which is starting to be meaningful for us. And the other thing I would say is that the total EFTs allocated to these businesses now is over 1,000 people. So, for COFAS, it's really material. It gives us capabilities, technical capabilities, intelligence, and knowledge that we didn't have. And again, I think it explains part of the performance that you're seeing here today. The usual pages, and I'm going to go relatively quickly through these pages because the numbers, first of all, they're always presented in the same way, and a lot of these I've already discussed. You see insurance revenue down 1.3. Other revenues, which includes factoring and services, up 9.2. And I've already mentioned the double-digit growth in both business information and third-party debt collection. The one thing I want to point out on this page seven is the performance on insurance fees, which are the fees we charge our clients. You see that we're at 13.9%, which I think is our record so far. Of course, part of this is because the premiums are lower, but also I think the fees are up 2.1%. And these are services that we charge to our clients inside our insurance contracts. And to me, what it means is that the services that we are proposing and we are offering are being taken up by clients and we're able to price them. And I think that's a recognition of the service side of this business that we've been driving both on the insurance side and on selling services independently. On the next page, eight, you're very accustomed to these charts. Nothing really new here except A couple things. Western Europe, Northern Europe, Central Europe, I think are showing very low growth. This is really driven by a slow economy and a slowing economy, I would say, even further than we had in 2025. And obviously, energy shock and tariffs and all of the, you know, the change in globalization is impacting Europe clearly. The new thing here is that Med in Africa, which used to grow historically at a 4% to 5% range, is now not growing anymore. Obviously, that contains the Gulf area and the Middle East, which is impacted, but also Southern Europe, and we're seeing slower growth there. The other thing news on this page from the prior quarters is the slowdown in emerging markets. Latin America and Asia Pacific had higher growth. Latin America came from a double-digit growth place to, as you see, flat or slightly negative. And this is client activity, which is slowing down. And clearly, emerging markets are impacted by what's happening in the economy and in geopolitics more probably or quicker because a lot of these countries are buying products that are now more expensive or in less supply. If you go to page nine, I think that's an important page because it highlights the operational performance of the business. And there's some good news here, actually. The new production is at a record level in the last five years. And you can see that the investments we're making in distribution, et cetera, are actually bearing fruit and continuing to drive some growth. At the first quarter, 94.8 is very close to the records we've ever had in this business. The pricing is still negative. I mean, the competition in the market continues to be very high. There's a lot of capital that's looking for a home and a place to be invested. But at the same time, you see that pricing, while being negative, is not as negative as it was in the prior years. There is demand in the market. And I think the execution on that front from COFAS is actually good. And then the volume effect remains very, very subdued. You can see that the Q1 at 0.7 is, of course, positive, but one of the slowest years that we've had historically. So good operational performance from the business. I will then go to page 10. to talk about losses, and you see here we had a good quarter with loss ratio before reinsurance, including claims handling expenses at 36.3%, comparing favorably to the first quarter of 2025 and most of the quarters in the prior year. A few comments here. First of all, claims are rising in number, and that's consistent with what I say about insolvencies, which are reaching a very high level across the majority of the economies around the world. At the same time, we're not seeing severity rise at the same level, and that's good news. I mean, it's also a tribute to the work that the teams in COFAS are doing to monitor the events and remain very close to the risk, and you see at the bottom that we haven't changed our reserving methodology. We still open the new vintage at a high level, 80%, and then we still see some very nice reserve throwbacks from the prior vintages, which continue to perform. So I would say really a benign for COFAS risk story here. I will skip page 11, which compares entire years 23, 24, 25, which is just the first quarter of 2026, to go to page 12, which describes the last five quarters. I think that's probably an easier way to look at the same numbers. And you see here that I really don't have much to report because things are extremely stable whether it is the large, more stable markets at the bottom, Western Europe, Northern Europe, Central Europe, and then in Africa, or even the, I'd say the more volatile, smaller places, North America, Latin America, and Asia Pacific. So really not much to say. The risk is continuing to be well under control. I will spend some time now on page, which talks about costs, and we've had this discussion now for several quarters that post the COVID shock, we have embarked inflation in our cost structure, and at the same time, we are seeing no more inflation in client activity, and that's creating headwind for us. You see that, again, this quarter, but at a lesser level. I would say than prior, the increase in cost from Q125 to Q126 is 5%. We had seen higher numbers, I think, in the prior quarters. And you see the cost ratio going up, driven by this difference in inflation between the cost and the premiums. That's 1.6 points. And continued investments that we make deliberately, both in insurance and in services, that drives another 1.8% cost ratio up. At the same time, we're getting some of this back through the increase in sales and services, and that's 1.2 points, which drives the cost ratio for the quarter at 35.2%. So I would say continuation of the story, no surprise, deliberate investments, and I think made even more critical by the change in the environment that I described before, i.e. more risk, We need to stay closer and make sure we invest the money that's going to allow us to keep the risk under control. And on the other side, developing new solutions, new ecosystems, and investing in the services side of the business, which so far has been a bottom-up story that is now 100 million euros annualized. With that, I'm going to pass it on to Farah, who's going to take us through the rest of the presentation.

Good evening, all. So we are now on page 14 on the reinsurance page. I will start with the reinsurance results. You can see that we are passing on $25 million before tax to our reinsurers. This is plus 24% compared to last year, driven by the fact that the premium sessions have slightly increased, and the reinsurers following the fortune are benefiting from the decrease on the claims ratio. as the claim session, so it has decreased from 26 to 25%. This leads us to a net combined ratio at 70% on page 15. You can see that we're moving up 1.4 with the net loss ratio decreasing and the net cost ratio increasing following what Sylvie has described in terms of investment that we have made in our business. If we move to page 16, which is the financial portfolio. So the master market value is at 3,260,000,000. You can see that in terms of asset allocation, 15% is now holding on cash and liquid assets as we're going to pay almost 190 million euros of dividend by the end of the month. Otherwise, I think the asset allocation has not changed much. If we move to the right-hand side, which is the investment income, so the P&S side of our revenue of our investment portfolio, in terms of recurring revenue, the accounting yield is pretty much stabilized. Of course, we are now, we're not seeing any more interest rate increase, and it's stable at 0.8, so moving from 24.9 million to 25.7 million. I would have the same comment on the FX. I think you can see the FX line on the investment income at 0.3 in Q126. This is made of a loss, which is minus 4.6 million related to hypertension booking on Turkey. And this is compensated and more than compensated with the FX gains that we have in investment portfolio, 4.9. And as usual, on the light D side, which is what you see on the line, insurance finance expenses, minus 15.8, this FX gain is compensated or have not stepped on the likely side, as in the 15.8 of IFE, it includes 5.3 million FX loss. So net investment income, net of IFE, from one quarter to another, which We have increased the amount by 300K. This leads us to a net income, page 17. When you look at that, of course, the net income premium is down 4.4%. This is one of the key drivers on the revenues decrease, and this leads us to a net income decrease by 13%. Net book value is 15.1. Tangible book value is 15.3. I think we are trading today around 16, still slightly below 16 euros. We're now moving on page 18. Return on average tangible equity. The equity, our first equity is moving from 2.2 billion to almost stable as we accounted for the income of the period. And then we have the master markets. on our investment portfolio that goes to equity. So slight increase at the end of the day, and then return on average, tangible equity moving from 11.4 to 11. Of course, we have increased slightly the equity, and we have the net return that has decreased compared to last year.