Coface Sa Adr

Good day and thank you for standing by. Welcome to COFAS SA 9 months 2026 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 1 1 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Xavier Durand, CEO. Please go ahead.

Thank you very much. Good evening, everyone, and thank you for logging in. We're happy to report our Q3 results for 2026, which I would qualify as another good quarter for COFAS in an increasingly uncertain environment. You can see from the headline, sorry, we reported $155 million of net profit for the first nine months. almost $48 million for Q3. I mean, some of the same stories that we've been going through now quarter after quarter with a few twists. Revenue is up 1.7% at Constant FX and Perimeter. There is a rebound in the entrance revenue, which grew by 2.5% in Q3 at Constant FX. We'll go through the details, but you'll see client activity a little bit better. Client retention close to record highs. Pricing, while still negative, is a little bit better than it was in the prior years. You see continued double-digit growth in our business information line. Organic, above 11, and with the acquisition of Cedar Rose last year, we're above 15%. Debt collection strong at 28%. And the rebound of factoring actually this year, which is up 7.3% for the year. and above 14% for the quarter. Total revenue growth for Q3 is at 5.4% with all the activities contributing. So that's I think a pretty good quarter from a growth standpoint. The loss ratio as you see from the first nine months at 37.7 is improved by almost two points. The net combined ratio for the first nine months stands at 72.4, so continued very strong performance. We haven't changed our reserving or our methodologies. The net cost ratio is increased by 2.4 points and we'll go through the details here as we continue to invest with determination in line with the strategy that we set up for Power the Core. I mentioned the net profit. The ROATE for the first nine months stands at 10.7%. We have a new board member in John Gaines, who is head of actuarials for Arch Capital's mortgage insurance business, replaces Yves Chabonneau in the same capacity. The one thing is we want to stress that we're in an environment where higher commodity prices and higher interest rates, which is something relatively recent, are going to continue to put pressure on the solvency of corporates. We are at a record level. We've mentioned this several times since 2019, and we are seeing a flow of larger cases coming from larger companies being hit by this kind of environment. In a higher interest rate world, and I'm going to move to page five, We wanted to mention a few things. First of all, how our strategy is little by little transforming COFAS. You can see it here on the left-hand side that the share of services and revenue from factoring continues to increase year after year by about a point every year. So we went from 22 to today, from 8 to about almost 12% of insurance revenues. Also, we'll talk about this, but German factoring is well positioned. We see less liquidity in the European market and there's more demand for our factoring business, allowing us to accelerate the growth and actually to cross-sell products because we do sell both factoring and credit insurance at the same time in the German markets and other markets related to it. So I think what we've been doing over the last few years positions us pretty well to take advantage of some of those situations. And then there's three things I wanted to say about higher interest rates on the right-hand side. Concern in the market about exposure to France and the, as you know, the elections coming up and the sovereign situation there. Just want to stress that France, while we are headquartered in France and we're originally a French company, we are a French company, Our percentage of revenues derived from France is 14%. It's about 10% of our total exposures. And in terms of our investment portfolio, the French sovereign bonds are about 5% of our total. So we do have exposure, but it's pretty well diversified in terms of geographies and industries. We've seen a sharp increase in large cases for credit insurance. I think there's no particular sector or geography. I think the combined pressure of higher energy and commodities and larger higher interest rates as you know that we've always had a pretty consistently conservative stance on risk and we are focused on risk so we are aware of the situation but I think it's clearly another phase in the cycle and then in terms of Our investment portfolio, as the yields and the spreads have been growing, this translates into a lower valuation for our investment portfolio, a higher cost of IFP, and Phalla will take you through this, with a temporary impact on the solvency, which is right in line with the simulations that we showed at Medir when we detailed our solvency position. So nothing new on that front, but as you can expect, with a portfolio of three to four years maturity, there is some impact. On page seven more detail on the growth so 1.7% as I said interest revenue up almost one point for the total year but two and a half in Q3 so clearly we started seeing an acceleration in Q2 and now we're seeing it confirmed in Q3. Other revenues up 10% and it's really all the different business lines contributing here with at 11 and 15 with your acquisition. As I said, strong debt collection at 28%, factoring almost 15% in Q3. So there's really demand out there. And then another point I just want to stress is that our insurance fees that we collect along inside our insurance contracts have held up pretty well at plus 1.2%. And you see the fees to premiums ratio on the left-hand side at 12.6%, which If we compare that to the industry standards, it's actually a very good number. So I think the business continues to develop an ecosystem that allows us to justify those levels of fees because of the service that we provide to the clients. On page eight, we describe the growth by region. And I think what you're seeing here is actually a pretty good description of the world economy. Western Europe, which includes France, is subdued and slightly negative. We don't see much client activity here. Good growth in specialties. Northern Europe, which includes Germany, is doing much better and we've already started to see that in Q2 and it's confirmed in Q3. I mean, this is where factoring actually is located for us. We see strong growth in factoring, strong growth in services, better client activity, and some of that is obviously driven by the government outlays and infrastructure and other things. Central Europe, very flat, remains a low growth economy. Better numbers in MED in Africa, both because southern Europe is actually pretty resilient and also because the Middle East paradoxically has actually been a pretty good growth area for us. North America underneath the numbers we are seeing some pretty good commercial momentum Asia-Pacific that's a big region that's 55% of global GDP growth and we are seeing underlying the numbers forget the accounting here but we are seeing underlying some good growth levels in that part of the world and a slowdown in Latin America in client activity strong new business but a slowdown in activity and I think you know a lot of what we read a about that part of the world explains the situation. You go into page nine, and I think what you see here is a strong level of new production. So we are at a record over the last few years. We've actually accelerated in Q3, and so the year to date new production is at a record level. We see continued demand for our products. It also is the payback of the efforts that we've led to continue to develop our distribution over the years. So, you know, consistent with our growth strategy, power of the core. The retention rate stands close to its historical levels and to the record of the business. Pricing is still negative, but you can see that's slightly better than what we've had in the prior years. So I'd say the market is still very competitive and so far has been quite aggressive, but we are seeing A slightly improved ability to price. And then in terms of activity, it's better than the last few years. Not anything spectacular, but I think you probably have in those numbers a little bit of the inflation that's coming back in the European market in particular, but in other parts of the world as well. So I would say a pretty good growth quarter when you look at Q3 in general. We go to page 10 on the losses, and you can see the headline here, really stable, I think is the way to describe it. I would say claims activity is back to historical levels. We're more or less at the same number of claims that we had in the first nine months of 2019. Amounts are higher, but there's been quite a bit of inflation since then. I think what's new here is more severity, and we've had a particularly benign, I would say, summer, and things have been I've been picking up a little bit since then and I don't think that's really surprising given the environment that we are in. You see at the bottom right that we haven't changed our methodology. We opened the new vintage at 79.2 undiscounted. We continue to see significant throwbacks from prior vintages and we haven't changed anything in terms of the way we think about the business. So I would say from a Q3 perspective it stands as another strong quarter for COFAS if we go to page 11 you can see the description of the different years and the nine month year to date 2026 there's really not that much to talk about because everything is actually very stable and if you go to page 12 which is the quarterly view again I mean a lot of stability here nothing material on the large four more stable markets at the bottom and on the top the only place that continues to be volatile that's not news because it's been like this for 10 years it's Latin America we keep oscillating up and down based on some large claims and as you know this is a place where we are the smallest obviously and also where we have large European contracts that derive fairly Significant limits for large contracts globally. So nothing here that is to be surprised about. On page 13, you can see that our costs, Q3 25 or Q3 26 are up 5.3 points. We've been seeing that number evolve over the last few couple of years progressively, but also it used to grow More than the premiums actually this quarter you see the on the top right hand side of the chart We see that inflation and premium and inflation and costs are almost the same. So we're back almost to a neutral position here What differs is that we continue to invest in the business. So we've got an increase of 2.4 Points that is driven by the investments we make about one point of that is distribution and insurance and and 1.4 is investment in and our services business. And we get one point of that back through the increase in turnover of the services business, which drives the cost ratio from 35.4 to 36.8. So we continue to invest in the business. I think it's focused on distribution. It's focused on digital, on data, on technology, on connectivity. It helps us develop the skills and the tools to run the business well, both on the insurance side, obviously, but also to offer a broader set of products to our clients across the different product sets. That's pretty much what I have to say about cost and I'm going to turn it over to Phalla to take us through the second part of the presentation.

Good evening everyone. So I'm on page 14 on the Winchell's site. If you look at the Winchell's results, minus 74 million, this is better than last year. If we look inside this number, the premium sessions were very stable, and we have a slightly higher CLIP sessions rate. This is due to the fact that we had some facultatives with a higher sessions rate that we have been passing on to the ranchers, especially in Q2, actually, while in Q3 only, I think we're back to normal. nothing else to be added I think we still have high labor commissions that we used to have but for now probably two or three years and we are enjoying it. Leaders to page 15 net combined ratio at 72.4 compared to the 71.9 which is you know slight increase but not that much year over year with the increase coming from the net If we look at the bottom side, which is the net combined ratio by quarter, really nothing to be added here. I think we're increasing from 73 to 74.6 and coming from the net cost ratio, but nothing major to be highlighted. Moving to page 16, so the financial portfolio, the market to market at 3 billion 17, we were at 3 billion 19 at the end of Q2. Here, of course, you look at the asset allocation. We're still very high in terms of asset classes related to the cash and monetary funds and liquid asset at 15%. We have divested a little bit Our investment in real estate funds, I think moving from 3% to 2%. And of course, we have an impact, market to market on impact coming from the interest rate increase related to our fixed income assets. And in fact, this amount, I think we amounted 71 million euros. And of course, it's unrealized losses that we booked in OCI, so in equity. On the right-hand side, which is the investment income, if you look at the recurring income, we're moving from 77.7 to 79, so accounting yield is still increasing slightly. We're now investing new money at 4%. Of course, we are taking the full advantage of the increased interest rate. If we look at the FX, the line that we always comment every quarter now, and the FX effect of minus 6.7 out of which minus 11 is coming from the hyperinflation in Turkey. We're used to it now. And we have some unrealized FX gain 4.3 that is offsetting the minus 11.7 of FX unrealized loss on the IFE line. Nothing to be added. Of course, the IFE, the discounted effect on the LIBD side is increasing because of the interest rate increase. But again, this is timing as we already explained. I think over two years time, it will go back to normal. Lead us to page 17, net income at 155. Look at the operating income is down 7%. I think it was down 9% at the end of Q2. And the net income is down 11.8. and then it was down 30% at the end of Q2. Book value per share 14.3. Today we're trading at 15.7. So still above the book value per share. Page 18, return on average tangible agency. IFRS equity is moving from 2.2 billion to 2.1. Of course, we paid our dividend. We have a debt income at the period and here you can see the The market impact related to interest rate increase minus 71 million. And again, I just want to highlight that we are in a buy and hold strategy, which means that at the end of the day, in two or three years time, this will recover the same way that we have recovered our negative market impact at the end of 2022, when we have this huge interest rate increase. so it's not new new but you know it's recovering over time return on average changeable equity moving from 11.4 to 10.7 this reflects the the net income decrease from last year so look in terms of this pretty short presentation this is actually not that much news um just in take in terms of the takeaways