Coface Sa Adr

Thank you very much. Good evening. Welcome, everybody. Thank you for joining on the hot summer evening like this for our report on the mid-year 2026. You will have seen from the numbers, we had another strong quarter of execution in what I would qualify as a pretty tough environment at COFAS. Just reminding everybody of the headlines, net income at $108 million or close. solvency at 194%, so a very strong position. We had a quarter in Q2 where we saw a relative rebound of volumes versus the first quarter, so insurance premiums grew 1.4% versus a negative 1.3% in Q1, and I'll explain a little bit more in the next pages where that comes from. Most of the operating metrics, as you will see, have been strong. The retention is close to record at 93.6%. Pricing is negative, but above historic average at minus 1.3. We continue to grow business information double digits, including the total parameter. The organic growth is 12% for the semester and 19.1% with the acquisition of Cedar Rose. Debt collection growing almost 32%. And also good news on factoring, which is up 3.5%. After many quarters I was subdued of subdued performance, I would say, in the current economy. I think the other good news for the quarter is the losses. The net loss ratio is better by 2.7 points versus last year at 37.4. That brings a strong combined ratio, which is stable at 71.3% for the first half. The net cost ratio is increased by 2.7% as we continue to deliberately invest in line with our strategic plan. And I'll go through more of that detail in the next pages. If we step back a little bit, we are now past mid-plan for COFAS, two and a half years into Power the Core. and we'll take a look at our main financial targets but we are reconfirming these and actually over the last two and a half years we have beaten all of our metrics combined ratio return on average tangible equity solvency and the payout ratio we as you know we evolve in an environment which is both slower growth and also an acceleration in digital and AI and connectivity we know that at this point what matters most for us is the long-term value creation with the BI business versus short-term profitability so we think that the the guidance we've given around the 50 basic points ROHE contribution in 2007 and 27 is now irrelevant we are planning to however adjust the 2027 dividend which will be paid out in 2028 upwards to compensate for the difference. As I said, net income at 108, annualized ROAT at 10.9% with a strong solvency at 194%, which is almost 20 points above the upper range of our targets. We've appointed two new directors, the board on the ARCH representation, Hugh Sturgis, who is president and CEO of ARCH Insurance International, and Christine Todd, who is a chief investment officer at ARCH Capital. So two strong appointments here, insurance professionals through the COFAS board, and a lot of continuity on the ARCH side. on page five just remind everybody of the financial targets that we had set for power the court and I again I'll say it this is these metrics these goals were how we plan to position the company over the over the course of the plan to be able to deliver and if you look at the actuals in blue versus the targets you see that we've actually done better The average combined ratio for the first two and a half years is at 72.2, which is way lower than the 78% we had targeted undiscounted in the plan. As I mentioned, our solvency is about 20 points above, actually 21 points above the upper limits of the range that we targeted, the 155 to 175. We continue to pay out over 80% of our profits to shareholders on a regular basis and maintaining a high level of profitability through this cycle. And the ROATE to date is at 12.3%. And I'll just remind everybody that obviously this is influenced by the high level of equity that we retain in the business. So I would again qualify this as overperformance with us versus the plan that we had in place. On page six, I just wanted to give you some perspective on the market. On the left-hand side, this is not news, but putting it in a graph like this, I think highlights where we stand, are the global corporate insolvencies index that we've developed to represent what's going on in the world. And you see that where we are in the cycle is actually at a peak in the last 13 years. We thought things would stabilize a little bit this year, but actually the events in the Gulf keep putting pressure on companies. So we see continued increases in insolvencies. You see the drop that happened after COVID when governments flooded the economies with, I would say, free money. So that had a dampening effects on insolvencies. And then there's been normalization since. And we've gone back to, I would say, a much more normal behavior here. But the point is we are at a tough place in the cycle. And on the top right hand, I think I just want to illustrate also the slowdown in the economy is weighing on our core markets here. It is not often that we see negative growth in our core markets in Europe, like the UK is down five and a half, Germany, five percent, France, four and a half, Netherlands, almost a percent or a half percent. and then the traditional growth engines in the TCI markets, which are Spain and Italy, are still growing, but at much lower rates. Italy has been a growth engine for this industry for many, many years and is now growing 3%. So my main comments here is global insolvencies at a decade-high level, premiums under pressure in our key markets, and that explains also why These low volumes drive intense competition and you still have pressure on prices. There's a lot of needs for companies to invest and catch up in AI, make sure they stay up to the pace of what's going on in the market. So we see a tendency, and that's true across all of our businesses, of large companies to delay large purchase decisions, whether it's in TCI or BI or others. And yet, I would say that COFAS is outperforming on both volumes and margin. And I think that's just that. I wanted to put that in perspective of what the markets look like. On page seven, we have a regular update on CSR. I think I've already highlighted in the last quarter, one, the key achievements that we've had in 2025 versus the interim goals that we had set for ourselves. And then the message is we pretty much beat every single target that we had set for ourselves. And I also highlighted the 2030 goals, new goals that we set, further improving our performance on the key pillars. What I can say is on responsible insurer, we continue to weigh carefully how we invest the portfolio to continue to drive down the carbon emissions carried by that book. So the efforts continue. And in terms of being a responsible employer, Our key goal here was to have 40% women in the top 200 jobs in the company. Now, what's happened over the course of the last few years is we've added 1,000 jobs in the data, tech, and digital space. And these are typically areas which are male-dominated. So for us to maintain that ratio requires work, and we're really thoughtful and proactive in that area. And then as a responsible enterprise, we want to further reduce our own carbon emissions. And the focus right now is on responsible IT and procurement. So we're working our providers hard to make sure that they also do what's required to lower the emissions that are linked to them in our own accounting. And obviously we are switching all of our fleet of vehicles and things like this to 100% electric and renewable energies. In terms of the culture, we have an EcoVetis rating which puts us in the top 23% of companies that they rate. A few years ago we had a really strong MSCI rating as well. I think there's space here continuing to work on the way we report our business and the actual efforts that are ongoing in the business to continue to improve the way we meet the reporting needs of these agencies and continue to strengthen our rating. So not much to report, but the work continues. Let's go to page nine. So this is my, I think, 40-second presentation to this group. So the format, as you see, doesn't change quarter on quarter. I'll just comment on page nine that, as I said, total revenue is up 0.8%. A better quarter in Q2 than we had in Q1 with insurance revenue for the first semester up 0.1%. Our other revenues continue to drive the growth of the business at almost 9%. We spoke about Disney BI growing 12% organic and 19% with Cedar Rose. confirms actually that we are able to grow these acquisitions and we we make them the we see a clear uptick from being integrated into the cofast network third-party debt collection up at 32 factoring having a good quarter and in q2 was almost 5% which as you know we were mainly a factoring business in Germany and in Poland and obviously there's been a lot of work going on in that space and things seem to be rebounding a little bit good performance on fees broadly stable, I would say, in terms of percentage of fees on premiums in a market which has a strong tendency to give away the fees in order to win the business. So I take it as a sign that our clients are willing to pay for the services that we provide alongside the insurance policies. On page 10, we have the usual breakdown by region. I think what you see here as a headline is is subdued growth around the world. I mean, clearly that affects a lot of areas, but it affects more Europe, I would say, than the rest of the world. You see almost zero growth in Western Europe, almost the same in Central Europe. Slightly better news, actually, in Northern Europe, which includes Germany. And I already mentioned that within Germany, factoring has been doing pretty well. met in Africa has traditionally been a growth engine for us and it is still growing but at much lower rate we used to see more like five six percent growth on a regular basis so we're down to two percent we see that the Gulf region is holding up remarkably well I think the government's in the in the area are pouring money on the economy in an effort to sustain growth and that's affecting us and Some FX in North America, but I think overall, outside of AI, a quite flat economy. I think the good news is more in the emerging markets. So you don't see it here in these numbers because we have tough comparisons for the first half of 2025. But underneath those numbers, there are good growth momentum in Asia. I think this is the place where I think a lot is happening today in the world. Latin America still growing much less than before but there's a disproportionate amount of that business which is actually driven by European contracts with an extension in Latin America so but when you look at it I think at this stage a lot of the growth in the world around the world is driven by emerging markets on page 11 we show the usual metrics of our performance you see that new business is almost at a record and I think that They almost is because, as I said, we see large deals being slower. Companies are investing in AI, trying to save costs, trying to manage the situation in the Gulf and putting off where they can decisions that are not absolutely critical. In terms of retention, we're near a record, and that's been now for years quite stable. Prices are still negative, but they're a little bit better than they were last year and generally speaking in the last few years. And then the activity that we get from our own clients business growth is quite subdued at 1.5%. So that's really not exciting, but I think that reflects the world economy here. On page 12, we have an update on the risk. I think the good news is that you see the sequence on the top left of the quarterly loss ratio before reinsurance. including claims handling expenses, and the story is really flat, quarter on quarter. When you look into the details here, you see that the number of claims is back to 2019 levels, so pretty stable. The amounts have grown because there's been quite a bit of inflation since 2019, and that's reflected in an average amount, which is up by 4.6%. At the same time, we've seen still pretty good severity with a limited number of large cases that have come to hit us. So keeping our fingers crossed here, I think the business is executing. We haven't changed our reserving policy. We have opened the new vintage at a level of 81.2%, which you see as historically reflects, I would say, the political and economic uncertainty. So it's pretty conservative. And then we have enjoyed continued strong releases from the prior vintages here with almost 44% throwback from the prior vintages. So I would say happy to not have much to report on the risk side actually. You can see that on page 13. I'm not actually going to spend any time here because there's really not that much to talk about. And so I will just skip that one and go to page 14. where we have the quarterly numbers. It's an easier sequence to follow. And again here, there's really not that much going on. A very slight uptick in Western Europe. That's because of the COFAS geography. We have actually Senegal in the COFAS Western Europe segment. And as you know, that's a country that's going through a little bit of a challenge right now. But outside of that, there's really nothing going on in the rest of the world. Latin America has volatility. I think every quarter, every single quarter, I comment on that. And there's no news here. But frankly, on the risk side, there's not much to talk about. On page 15, we talk about the cost. So as we've seen, the premiums are a bit better for the quarter. The cost is still growing 3.4% quarter on quarter. But for those of you who have been here for a long time, this is the second best quarter in 22 quarters in a row, so in five years. So we've highlighted how the cost increases are slowly coming down quarter over quarter, and that's true again this quarter. And if you look at what makes up the increase in the cost ratio on the top right-hand side, you see there's still 0.6 points that is driven by the difference in cost inflation versus premium inflation, but that's coming down, as I said. and the rest is really deliberate investments we're making. I mean, the business is performing and we are investing deliberately according to our plan in sales for trade credit insurance and connectivity and data and technology and BI and debt collection. So that's two points, I mean, cost increase. And we get 0.8 back this quarter from the increase in sales that we have in the services area. I can say that these investments are really important. They position us differently. They make us better at managing the core business, insurance, and I think it's the right choice in an environment which otherwise is quite subdued and not easy. So that's what I have to say on cost, and I'm going to pass it over to Fala to talk about the rest of the pitch.

Thank you, good evening everybody. So let's go now to page 16 on Huenshun's site. We can see that the premium sessions rate is stable compared to first half last year, 27.7, while the claim sessions rate has increased from 23.3 to 26.5. You know that our quota share I think is divided by, there's two sections, right? On the DCI side, the quota share is 26%, on our specialties, which is single risk and bonding, the quota shares at 50%. So it's really driven by the mix of our business, and we have been able to some of the reserves that we put, naming, I think I can name it, the Senegal one, for instance, 50% of reserve going back to the reinsurers, that tract is increased. So as a result, I think we have the reinsurance income or loss for us, but income for them has moved from 52 million last year to 46 this year. Leading us to the next page, the net combined ratio you see is very good, one at 71.3, very stable compared to half year last year with a decrease in the net cost ratio and a decrease, similar increase, decrease in the net loss ratio. from a Q2 perspective from Q2 29 to Q2 36 has a decrease from 74 to 72.4 and remember the last year the 41.1 there are some noises in terms of accounting related to the FX where you have a little bit more in the loss net loss ratio and the I would say the FX gain will sit in the financial income This year, I think it's a little bit back to normal, but still, I think we have a very good net loss ratio. Let's move to the next page. I think it's page 18 now, financial portfolio. The market stands at 3.3 billion, 190 million after the payment of our dividends of 186 million at the end of May. Asset allocation-wise, no changes really with a high level of cash as usual. 14% of assets held in cash or very liquid assets. In terms of return on investments, you can see that if you look at the first line, which is the recurring income for an investment portfolio before again and again on sales and a lot from sales moving from 52 million to 53 with an accounting yield moving from 1.7 to 1.8. This is half year, of course. As usual, I would comment on the FX impact, of course, less than last year because the US dollars and related money has not moved or a little bit less volatile this year than last year. The minus 2.4, I think it's just two elements here. The first one, of course, we have the usual hyperinflation accounting in Turkey, stands for minus 8 million at half year. And then you have the unrealized gain on FX, 5.6. Usually offset, you can see that in terms of geography of booking with the unrealized FX loss of 9 million in the insurance finance expense line. Nothing more to be added. I think it's on this page. So we can move to the next one. So the half-year net income at 107.8. down 13% compared to last year, the same period. I think it's a little bit better than if you want. The net income was down 13.7. So we're improving on this front as well. Lead us to the next page, page 20. We turn on average tangible equity. I start with the equity. We're moving from 2,213,000,000 euros to 2,166,000,000. We paid our dividend and we accounted for the net income of the period. And then they have managed changes related to interest rate movement, but not very significant, lead us to a decrease of our return on average tangible equity from 11.4 at the end of full year 25 to almost 11% at half year 26, of course, with the decrease of our net income compared to last year. For this quarter, you know that management, so this balance sheet, total balance sheet at 8.9 billion euros. We commented on investment portfolio at 3.2. The factoring assets, 3.5, is reflecting the increase of our factoring activities backed by the factoring liabilities, which is, of course, the refinancing that we have in front of this. book value per share 14.5. I think we're trading at almost 16. I think we're at 1580 something, which is above this level. And then we can move to the next page, which is the summity ratio moving from 197 at the end of December last year to 194. You can see that the capital requirements have decreased the summity ratio by 11 points. offset by the on-front generations, which is a good performance of our business. This is just showing that we are financing our organic growth with the level of balance sheet that we have. On the right-hand side, as usual, you have the two types of stress tests. The first one from the financial market shocks. you know we have already commented that previous quarters the portfolio is pretty much de-risked now so we have we can really we can cope with all the financial market shocks and then the crisis scenarios the one 15 and one in 20 again we will be above the upper range of our comfort zone in in in the shock scenarios if we move to the next page page 24 just laid out how the 194% of submissive ratio is made up, 2.7 billion of submissive to own funds to be compared to the 1.4 billion of capital requirements. That's pretty much it, so very, very strong again in terms of balance sheets within 194% of submissive ratio.

if the fallback to that yeah just just to wrap it up I think I mentioned this so the we're in a slow growth environments we have a lot of certainty out there I mean the story in the Strait of Hormuz continues to evolve almost by the hour but we don't see at the stage what the outcome is going to look like I think a lot of companies are dealing with this It's going to create longer, higher interest rates. It's going to create some inflation. It's going to create slower growth, and we see that at play. Obviously, for Europe, it's not easy. Emerging markets are doing a little bit better. There's the AI craze going on with a lot of investments, a huge amount of investments going into that space, which also creates a need for companies to invest correlatively. In that environment, I think we have a really strong performance with a 71% combined ratio, which is well below our through-the-cycle targets. We are seeing a little bit better quarter in terms of growth for insurance and continued growth in our services activities for non-insurance activities. I think we feel good about the strategy and the choices we've made. the economy is weaker than we anticipated the data stuff is going faster than we anticipated but at least we got we got the direction right uh we're beating our financial targets that we had set for the business after the uh after the plan is completed so we're doing that already uh and we've re we're reaffirming all these targets we are however prioritizing I would say long-term value creation or mid-term value creation in BI versus the short-term profitability, because I think that business continues to see needs in terms of investments and building up at scale. We're going to compensate the difference, which is a few cents by share, in the payout that will be made in 28 for the 2027 dividend. And that's pretty much it. I think we had discussed that a couple times before in a prior call. So No big news here. And with that, I'm going to leave it open for questions.