Coface Sa

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.

So just to wrap it up, and then we will have the usual Q&A session. I think it's a good quarter in what I would describe as a soft economy. Clearly, you're starting to see some of the geopolitics percolate into the economy. Companies are hesitant to invest. There's obviously a lot of increase in commodity prices, but also much less volume, etc., etc., And I would say the whole credit insurance market or industry is affected by this, and we are too. Our services strategy is paying off. We're seeing almost 20% growth in that. The combined ratio is holding up very well in a world where insolvencies are, I would say, at a record in the last 13 or more years. ROE at 11% is in line with through the cycle targets, even though we're, I think, in the slowest growth economy we've seen in a very, very long time. So, clearly, we don't like the environment, but the business continues to perform. We are investing, despite this uncertainty, we're investing along the lines that we've described for power the core. We know that I think it's the right strategy. We are building technology and skills and an ecosystem and solutions that are valued by clients. We know that the data and AI revolution supports the choices we've made. We didn't think it would go as fast as it does, quite frankly. And so it only reinforces our conviction that we need to continue to invest because I think slowing down in this world would be actually probably more dangerous than taking the risk of investing and not getting everything right. So I think, for me, this is important, and we're right in line with things we said, and the business continues to perform. So with that, I think we will open it up for questions.

Thank you. To ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We will now go to the first question. One moment, please. And your first question today comes from the line of Michael Huttner from Barenburg. Please go ahead.

Fantastic. Thank you very much. I just have two. One is what are insurance services? So you've got, you know, all the different, your business information, the debt collection, but I just wondered what an insurance service which is different from that. And then the other question is if commodity prices are increasing, if US CPI is kind of aging up a little bit, when do you think we'll see the benefit in your revenues? Thank you.

All right. So the insurance services are things we do on behalf of our client inside the insurance contract. Like if they ask us for a limit, a new limit, or if they ask us for help on collections or stuff like this, we will do that inside the insurance contract, right? So it's a different source of revenues from the contracts we have, which do not include insurance but only services, right, standalone.

But the debt collection appears as both, right?

Yes, it appears on both sides. I mean, clearly. But I would say the bulk of this pertains to management of credit lines, probably, you know.

Oh, okay.

The monitoring of portfolios and stuff like this. Your second question was about inflation, so... Yeah, we're entering a world, I think it's pretty clear, that we're entering a world with lower growth, lower, I would say, effective growth, and then we have more inflation, and we're starting to see it. You saw the numbers just released in the U.S. But it's not clear that one's going to compensate for the other. I mean, we're getting closer to a stagflation situation where nominal growth is actually – probably the combination is the combination of actual growth of the economy plus the inflation. But I think right now the combination is not favorable. I mean, I think that's basically what you're seeing. It's hard to say where it goes because I think you have a first effect on commodity prices. You have a second effect on businesses that produce from these commodities that are going to be seeing increasing costs and they're going to try to pass on those increased costs to businesses. And then the question is, how is that going to affect demand? And then you have central banks that are going to say, wait, inflation is coming back, so what are we going to do about it? And are we going to raise interest rates, which is going to further potentially, if that happens, and it might reduce demand further. So, you know, this is a process that's going to take some months. It depends how long the golf prices last. But I think elevated commodity prices, that's going to last a while. It's not going to return to normal anytime soon. And if it lasts for several more months, the bulk of the impact will be 27. So that's really the issue here. Thank you.

Thank you. We will now go to our next question. And our next question comes from the line of Benoit Fallot from OdoBHS. Please go ahead.

Yes, hi, good afternoon. Thank you for taking my question. I have two questions, if I may. The first one is regarding to this appointment of a new CEO strategic partnerships. Can you please elaborate a little bit what you are targeting in terms of what is behind, as you said, strategic partnerships and the potential of growth coming from those partnerships? I have a second question. You mentioned that you still need to invest into data, AI, and so on. Does it mean that you plan maybe to revisit the profitability targets you had for your BI business in 2027 in order to capture opportunity and to continue to invest on technology, or is it maybe too early for you to have a view on next year's contribution from this business unit? And I have a short question, if I may, regarding loss ratio per geographical area. you have a negative low threshold in LATAM in Q1. I know that LATAM is part of your business, and you also have a negative low threshold, by the way, in Q3 last year, but it's a bit unusual. Is there anything special which explains this negative low threshold in Q1? Thank you.

Well, that one is, I'll start with that one. I mean, this is 4% of our business divided by one quarter, you know, so it's a very small number. A lot of the business we write in Latin America are actually linked to international contracts. And so, and we take risk in Latin America that are disproportionate to the premiums we get in Latin America because these are global contracts, right? So whenever you have one file that moves up or down, it throws off either a high loss ratio or it can even become negative when we recover and we release the reserve. So there's really not that much to, Much more to say, you know, it's just the mechanics of running a very small business inside a larger group. On the CEO partnerships strategy, this is a recognition that for a firm like us, which is now developing services on top of credit insurance and other things, these services can become solution and PCI, by the way, can become solutions for a broader set of partners out there. We have had longstanding partnerships in Europe or in other parts of the world with large institutions, could be financial institutions, could be technology, could be anything. And I think it's a way for us to make our offering relevant to a broader set of clients that we will never be able to reach ourselves directly because we just don't have the manpower or the reach or the brand or whatever it is. You know, there's only 5,000 people in COFAS covering the world. If you compare that to the EFTs of the services industry, minuscule, right? So that's the idea here, and we're making that a group position because I think it is something that matters and that we should pay attention to. In terms of data and AI, I mean, I've basically described what we've done over the last few years, right? We have... We have been investing from scratch, basically, to create the whole data and services area, which I just described during the prior discussion. And it's been growing nicely, and it requires investment, obviously. And these investments are benefiting, obviously, the services business, but also directly and indirectly the insurance business, because every time we develop a new score, we have a data lab, we have new solutions, we have more connectivity. It's increased service, increased predictability for the insurance business, et cetera, et cetera. I think the way things are evolving, I see the need to continue to invest. It's very clear. I mean, I think AI was probably on the charts, but the rhythm at which it is coming at us is a surprise, I think, for most businesses around the world, including for us. So it's working. We need to continue to invest. We've ran it so far. very close to the neutral line, so where, you know, we make a little bit of money or we lose a little bit of money. And that's been what I've been saying now for several years. It's not changing. There's a natural rhythm at which we can invest efficiently or smartly and there's a natural rhythm at which the business can grow efficiently and smartly. Some of this will be probably impacted by what's happening in the Gulf or, you know, because none of this is completely immune to the geopolitics either. It's a bit hard, as you say, to know exactly where this is going. The only thing I can tell you is the business has been overall, if you take the overall COFAS performance, it's been, I would say, above our targets for the last few years. And I know that we need to continue to invest. So I think this is a question that we'll have to look at. From a... business needs standpoint, I think there's potential for growth and there's need for investment.

Okay, thank you very much.

I think that's, I think these were your three questions, right?

Yes. Yes, thank you.

Thank you. Your next question today comes from the line of Pierre Cheterville from CIC. Please go ahead.

Yes, good evening. Two questions from my side. I would like you to come back on slide 7 because I did not really understand why you were so happy. regarding insurance-related fees, because when we look at figures, it's 51 and 51, so it's a very slight increase. So if you could come back on the fact that you're happy with these figures, it was not very clear for me. Second question, a more structural one. It's about your combined ratio, which is obviously very good this quarter. And particularly if you compare quarter on quarter and not year on year. Of course, I get that kind of seasonality and also effect in cost ratio. But I would like to know if you feel that your performance is going to be structurally better than what you previously anticipated. in your previous comments in terms of a cautious stance, or if you think that we are going to have an increase in the combined ratio as we have seen last year in Q2, Q3, and Q4 compared to Q1 in 2025. Thank you very much.

That's a tough one. So let me first address the fees, the interest-related fees to the insurance premiums ratio, right? So it's 51 to 51. We're saying in the document that the fees grew 2%. At the same time, we're saying that the premiums shrank by 4%. So that's what I'm happy about. It means that within the insurance contract, the premiums are driven by the activity of our clients. Once you sign the deal, we bill them a percentage of their turnovers. So, if their turnover grows, our premiums grow. If their turnover doesn't grow or shrinks, our premiums shrink, right? So, that's one thing that there's some mechanics about this. On the other hand, the fees we charge are relative to the management of their portfolios, and they're accessing some of the services we provide within these contracts, and I think that's holding. I don't know if that clarifies for you.

Yes, okay, I understand. Okay. Thank you.

I mean... Okay. The second thing on the quarterly results, I mean, there's always some seasonality here, obviously, because all the billings and the costs and expenses and the reserving, it doesn't happen completely in a linear manner through the year. So there is some seasonality. But your question is also what's going to happen in the next few quarters. I mean, we never make forward-looking statements, but you understand that the environment is what it is, right? So it can go either way. The Gulf thing could disappear tomorrow, in which case things will get better probably over a period of time, or it could go on for another six months, and then I think we're going to have some pretty interesting impacts across all sorts of industries, across all sorts of geographies, and that's going to go well into 2027. So, very hard to predict what the environment looks like. Do you want to say something, Fala?

Yeah, I think what is important to say is that we kept exactly the same reserving methodology. So, here, I think, as David said, we have opened the quota pretty high at 80% for the new vintage. I think that That's probably what you have to look at. I think probably more in the consistency of the way that we're observing. And of course, we're not doing full on looking.

We're not changing our methods. It's just that we adjust our risk management to the environment. Okay. Very interesting.

Thank you.

Thank you. As a reminder, if you wish to ask a question, please press star 1 1 on your telephone keypad. That is star 1 1 to ask a question. We will now go to the next question. And the next question comes from the line of Michael Hutner from Barenburg. Please go ahead.

Fantastic. Thanks for this second opportunity. Actually, so reinsurance pricing... and how it benefits you, the growth in business information. It feels like we've got an inflection point, but maybe I'm wrong. And then finally, business information relative to the U.S. I always feel that the U.S. is the bit where there's not, and I just wondered whether something's changed there. So on reinsurance pricing, I was hoping to see numbers which showed that you're a beneficiary of low reinsurance costs, but I can't see them. Maybe you could point me in the right direction. On the growth of business information, so clearly the total growth, 19.5% or 20% or whatever, is really lovely. And it feels like it's accelerating. Am I right? Have we reached the kind of inflection point? And then finally on the U.S., where I think one of your major, one of them, it's a market which almost acts like a closed shop. And I just wondered, do you have a strategy there? where you think you will be able to break into it. Thank you.

All right, so a few things on reinsurance. These are long negotiated contracts that span three years. So you're not going to see change in reinsurance dramatically over the course of the year.

It's annual negotiations. What we can say is that we have negotiated I think it's probably one of the highest conditions rate that we have received. So the current condition has been pretty good for us. And, of course, if we perform the same way we are performing so far, the discussion will happen again at the renewal. That's all I can say. And it is true that today what we see in the market is that the original size is a stock market. This is something that we will take into account at the next negotiation discussion.

On DI, I mean, I've said this either way, because we had quarters where, if you recall in the past, growth was less. And then we have sometimes quarters where growth is better or whatever. I wouldn't derive any big conclusion from a quarter, you know. So I think you need to look at this not on a quarterly basis, but you need to look at this on a on a multi-year basis. This is an endeavor we started probably six, seven years ago from nothing. And that's also linked to the prior discussion we had. We're looking at building something over a number of years, not what's going to happen over the next quarter. I would really caution around that. And in terms of the U.S. market, I'm not going to comment that much here because there's only a certain level of of information I'm willing to share, you know. But it's a big market. All I can say is it's a big market with probably the most sophisticated players in the world. But that's fine. It's an important market for us too.

And just on the business information, just one more. You did highlight a couple of times or three times, you know, the 100 million, kind of a benchmark, you're now above that on an annualized basis. How significant is that? And at what level do you kind of say, yeah, we really have achieved what we aim to do? Yeah, just get a feel for where we are.

I really... You know, Michael, I really don't know the answer to your question. What I can say is, for us, it's meaningful in the sense that we have 1,000 people, 100 million euros, which is $120 million of a business. So if you look at it and say, how many startups have I seen that get to 1,000 people and $120 million of turnover and cost zero? Two thousand. That in itself, I think, deserves notice. On the other hand, we are nowhere close to being done. I mean, because this is a huge market. There's formidable competition. It's evolving as, you know, daily, et cetera, et cetera. So that's all I can say. But at least we got to this point, you know, which was not a given from the get-go, I would say.

Thank you.

Thank you. I will now hand the call back to Xavier Duran for closing remarks.

All right. Well, it seems like for once we're ahead of schedule here. I don't have much more to say. COFAS is focused. The environment is what it is. We will know more in a quarter and we will see you in July. But the business is focused on execution and we And that's where we are. So thank you very much for your participation. Looking forward to the next call in July.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Goodbye.