Coface records a very good start to the year with a net income of €68.4m, up 11.9%
Coface records a very good start to the year with a net income of €68.4m, up 11.9%
Paris, 6 May 2024 – 17.35
- Turnover: €464m, down -1.6% at constant FX and perimeter
- Trade credit insurance premiums decreased by -3.3%; growth in client activities was nil at the start of the year, after a negative H2-23
- Client retention still high (93.8%) but down from records; pricing effect remained negative (-1.3%)
- Double-digit growth in business information (+21.6% at constant FX) and debt collection (+24.1%); factoring down by -6.3%
- Net loss ratio at 35.8%, improved by 4.9 ppts; net combined ratio at 63.1%, improved by 3.2 ppts
- Gross loss ratio at 33.2%, improved by 7.5 ppts with stable opening year reserving and high reserve releases
- Net cost ratio up by 1.6 ppt to 27.3%, reflecting lower revenues and continued investments partially offset by better product mix
- Net income (group share) at €68.4m, up +11.9% compared to Q1-23
- Annualised RoATE1 at 14.8%
Unless otherwise indicated, change comparisons refer to the results as at 31 March 2023
Xavier Durand, Coface’s Chief Executive Officer, commented:
“Our results for the first quarter demonstrate the good execution of our strategy and reflect the current economic cycle. Our credit insurance revenues were affected by the decline in inflation and sluggish client activity, and they were down 3.3%, against a high comparison basis. Negative repricing has eased (-1.3%) in a still competitive market while our new business picked up, on the back of our past investments, in particular in the mid-market segment. Service revenues, which are less cyclical, continued their double-digit rise.
Consistently with the strategy developed in our Power the Core plan, we continued to invest in our risk infrastructure, to better serve our clients.
Last, our net income increased by +11.9% year on year, to €68.4m, as the combined ratio remained under control at 63.1%. RoATE stood at 14.8%, above our mid-cycle objectives.”
Key figures at 31 March 2024
The Board of Directors of COFACE SA examined the summary consolidated financial statements for the first three months (non-audited) during its meeting on 6 May 2024. The Audit Committee had previously reviewed them at its meeting on 3 May 2024.
| Income statements items in €m | Q1-23 | Q1-24 | Variation | % ex. FX* |
| Insurance revenue | 395.3 | 378.6 | (4.2)% | (3.3)% |
| Services revenue | 79.8 | 85.0 | +6.6% | +6.9% |
| REVENUE | 475.1 | 463.7 | (2.4)% | (1.6)% |
| UNDERWRITING INCOME/LOSS AFTER REINSURANCE | 95.3 | 100.3 | +5.2% | +6.5% |
| Investment income, net of management expenses | (2.6) | 17.9 | (786.7)% | (654.3)% |
| Insurance Finance Expenses | (2.4) | (11.4) | +382.6% | +423.3% |
| CURRENT OPERATING INCOME | 90.4 | 106.8 | +18.2% | +14.7% |
| Other operating income / expenses | (0.3) | (0.1) | (79.1)% | (75.5)% |
| OPERATING INCOME | 90.0 | 106.8 | +18.6% | +15.0% |
| NET INCOME | 61.2 | 68.4 | +11.9% | +5.3% |
| Key ratios | Q1-23 | Q1-24 | Variation | |
| Loss ratio net of reinsurance | 40.6% | 35.8% | (4.9) | ppts |
| Cost ratio net of reinsurance | 25.7% | 27.3% | +1.6 | ppt |
| COMBINED RATIO NET OF REINSURANCE | 66.3% | 63.1% | (3.2) | ppts |
| Balance sheet items in €m | 2023 | Q1-24 | Variation | |
| Total Equity (group share) | 2,050.8 | 2,118.5 | +3.3% | |
* Also excludes scope impact
1. Turnover
Coface recorded a consolidated turnover of €463.7m, down -1.6%% at constant perimeter and FX compared to Q1-23. As reported (at current FX and perimeter), turnover was down -2.4%.
Revenues from insurance activities (including bonding and Single Risk) was down by -3.3% at constant FX and perimeter due to a decline in inflation and the economic slowdown. Client retention remains high at 93.8% (down -1.9% on Q1-23), in a competitive market where Coface implemented risk mitigation plans. Buoyed by an increase in demand and the positive effects of investments for growth, new business rose to €37m, up €5m compared to Q1-23.
Growth in client activities was zero over the first three months of the year after two negative quarters in 2023. The price effect remained negative at -1.3% in Q1-24 but improved slightly compared to Q1-23 (-1.5%). This is largely due to very low past losses offset by the current normalisation environment.
Turnover from non-insurance activities was up +6.5% compared to Q1-23. However, not all business lines enjoyed the same momentum. Turnover from factoring was down -6.3%, mainly due to the fall in volumes refinanced in Germany (-7.7%). Information services turnover continued to grow, by +21.6% (vs. +15.0% in Q1-23). Fee and commission income (debt collection commissions) increased +24.1% due to the increase in claims to be collected. Commissions were up +7.3%.
| Total revenue – in €m (by country of invoicing) |
Q1-23 | Q1-24 | Variation | % ex. FX2 |
| Northern Europe | 102.2 | 97.8 | (4.2)% | (4.2)% |
| Western Europe | 96.6 | 91.7 | (5.1)% | (5.8)% |
| Central & Eastern Europe | 45.0 | 45.1 | +0.2% | (3.5)% |
| Mediterranean & Africa | 133.2 | 138.9 | +4.3% | +7.3% |
| North America | 41.9 | 42.6 | +1.6% | (6.7)% |
| Latin America | 26.4 | 18.6 | (29.5)% | (11.0)% |
| Asia Pacific | 29.8 | 28.9 | (3.1)% | (0.4)% |
| Total Group | 475.1 | 463.7 | (2.4)% | (1.6)% |
In Northern Europe, turnover was down by -4.2% at constant FX and -4.2% at current FX. The region was hit by a slowdown in client activities and the selective renewal of some loss-making policies. This decline was partially offset by the growth in adjacent activities. Factoring turnover declined by -7.7%.
In Western Europe, turnover was down by -5.8% at constant FX (-5.1% at current FX). The slowdown in client activities was partially offset by information sales. Q1-23 benefited from a positive accounting effect, the renewal of which impacted turnover by 1.5 ppt.
In Central and Eastern Europe, turnover fell -3.5% at constant FX (+0.2% at current FX) due to the decline in client activities, which weighed on credit insurance.
In the Mediterranean and Africa region, which is driven by Italy and Spain, turnover rose +7.3% at constant FX and +4.3% at current FX on the back of robust sales in credit insurance and services and a stronger economic environment.
In North America, turnover was down -6.7% at constant FX but increased by +1.6% as reported due to the integration of Mexico. The region saw a slump in client activity despite higher retention.
In Latin America, turnover fell by -11.0% at constant FX and -29.5% at current FX. The region was hit by a fall in client activity, mainly in commodities and metals, and the transfer of Mexico to the North America region.
In Asia-Pacific, turnover decreased by -0.4% at constant FX and -3.1% at current FX, due to a slowdown in client activities.
2. Result
- Combined ratio
The combined ratio net of reinsurance stood at 63.1% for Q1-24 (an improvement of 3.2 ppts year on year and 4.1 ppts compared to the previous quarter).
(i) Loss ratio
The gross loss ratio stood at 33.2%, down 7.5 ppts compared to the previous year. This improvement reflects the gradual normalisation of the loss experience, offset by high reserve releases. The number of mid-sized claims was below long-term trends.
The Group’s provisioning policy remained unchanged. The amount of provisions related to the underwriting year, although discounted, remained in line with the historical average. Strict management of past claims enabled the Group to record 43.7 ppts of recoveries.
The net loss ratio improved by 4.9 ppts compared to Q1-23, at 35.8%.
(ii) Cost ratio
Coface is pursuing a strict cost management policy while maintaining its investments, in line with the Power the Core strategic plan. In Q1-24, costs rose by +6.2% at constant perimeter and FX, and +5.6% at current FX.
The cost ratio net of reinsurance was 27.3% in Q1-24, up 1.6 ppt year on year. This rise was mainly due to the decline in revenues (1.3 ppt), cost inflation (1.3 ppt) and ongoing investments (1.1 ppt). In contrast, the improved product mix (information services, debt collection and fee and commission income) had a positive effect of 1.4 ppt. High reinsurance commissions explain the remaining of the variation.
- Financial result
Net financial income was +€17.9m over the first quarter. This amount includes realised capital gains, which more than offset negative market value adjustments on real estate investments (-€6.5m) and an FX effect of -€2.7m, mostly due to the application of IAS 29 (Hyperinflation) in Turkey and Argentina (service company).
The portfolio’s current yield (i.e. excluding capital gains, depreciation and FX) was €19.9m. The accounting yield3, excluding capital gains and fair value effect, was 0.6% in Q1-24. The yield on new investments was 3.9%.
Insurance Finance Expenses (IFE) stood at €11.4m for the first quarter due to higher discount rates and higher loss reserves.
- Operating income and net income
Operating income amounted to €106.8m, up 18.6%.
The effective tax rate was 27%, compared to 25% for Q1-23.
In total, net income (group share) stood at €68.4m, up 11.9% compared to Q1-23.
3. Shareholders’ equity
At 31 March 2024, Group shareholders’ equity stood at €2,118.5m, up €67.7m, i.e. +3.3% (compared to €2,050.8m at 31 December 2023.
This change is mainly due to positive net income of €68.4m.
The annualised return on average tangible equity (RoATE) was 14.8% in Q1-24, mainly due to the improvement in underwriting income.
4. Outlook
There were no major changes in the Global economic growth outlook in the first quarter of the year. Coface continues to expect full year growth to be down slightly from last year, with continued outperformance from the United States compared with Europe.
On the inflation front, the slowdown in price increases led the market to anticipate several interest rate cuts. However, the start of the year saw an about-turn in market expectations. The market is now expecting more moderate rate cuts in the United States, where growth and the labour market remain robust. Europe should act sooner to reduce rates. As a result, the environment is likely to remain risky as diverging monetary policies generally cause financial tension and higher risks. High interest rates for a prolonged period typically put greater pressure on highly indebted companies.
Political risk remains higher than ever with many elections still to come and several conflicts that have potential to take a turn for the worse.
In this environment of continued uncertainty and modest growth outlook, Coface continues to implement its Power the Core strategic plan. The first quarter of 2024 marked an excellent start to this plan, with most key performance indicators positive.
Conference call for financial analysts
Coface’s results for 3M-2024 will be discussed with financial analysts during the conference call on Monday 6 May at 18.00 (Paris time). Dial one of the following numbers:
- By webcast: Coface Q1-24 results – Webcast
- By telephone (for the sell-side analyst): Coface Q1-24 results – conference call
The presentation will be available (in English only) at the following address:
http://www.coface.com/Investors/financial-results-and-reports
Appendix
Quarterly results
| Income statements items in €m quarterly figures |
Q1-23 | Q2-23 | Q3-23 | Q4-23 | Q1-24 | % | % ex. FX* |
|
| Insurance revenue | 395.3 | 407.8 | 384.7 | 371.3 | 378.6 | (4.2)% | (3.3)% | |
| Other revenues | 79.8 | 76.8 | 73.4 | 79.2 | 85.0 | +6.6% | +6.9% | |
| REVENUE | 475.1 | 484.5 | 458.1 | 450.4 | 463.7 | (2.4)% | (1.6)% | |
| UNDERWRITING INCOME (LOSS) AFTER REINSURANCE |
95.3 | 103.5 | 91.2 | 105.4 | 100.3 | +5.2% | +6.5% | |
| Investment income, net of management expenses |
(2.6) | 4.0 | 13.0 | (2.0) | 17.9 | (786.7)% | (654.3)% | |
| Insurance Finance Expenses | (2.4) | (12.3) | (15.4) | (9.9) | (11.4) | +382.6% | +423.3% | |
| CURRENT OPERATING INCOME | 90.4 | 95.2 | 88.9 | 93.5 | 106.8 | +18.2% | +14.7% | |
| Other operating income / expenses | (0.3) | (0.4) | (0.2) | (4.0) | (0.1) | (79.1)% | (75.5)% | |
| OPERATING INCOME | 90.0 | 94.8 | 88.6 | 89.5 | 106.8 | +18.6% | +15.0% | |
| NET INCOME | 61.2 | 67.7 | 60.9 | 50.8 | 68.4 | +11.9% | +5.3% | |
| Income tax rate | 25.5% | 21.9% | 24.2% | 36.0% | 27.2% | +1.8 ppt. | ||
Cumulated results
| Income statements items in €m cumulated figures |
Q1-23 | H1-23 | 9M-23 | 2023 | Q1-24 | % | % ex. FX* |
||
| Insurance revenue | 395.3 | 803.1 | 1,187.8 | 1,559.1 | 378.6 | (4.2)% | (3.3)% | ||
| Other revenues | 79.8 | 156.6 | 230.0 | 309.2 | 85.0 | +6.6% | +6.9% | ||
| REVENUE | 475.1 | 959.7 | 1,417.8 | 1,868.2 | 463.7 | (2.4)% | (1.6)% | ||
| UNDERWRITING INCOME (LOSS) AFTER REINSURANCE |
95.3 | 198.8 | 290.0 | 395.4 | 100.3 | +5.2% | +6.5% | ||
| Investment income, net of management expenses |
(2.6) | 1.4 | 14.5 | 12.4 | 17.9 | (786.7)% | (654.3)% | ||
| Insurance Finance Expenses | (2.4) | (14.7) | (30.1) | (40.0) | (11.4) | +382.6% | +423.3% | ||
| CURRENT OPERATING INCOME | 90.4 | 185.5 | 274.4 | 367.9 | 106.8 | +18.2% | +14.7% | ||
| Other operating income / expenses | (0.3) | (0.7) | (0.9) | (5.0) | (0.1) | (79.1)% | (75.5)% | ||
| OPERATING INCOME | 90.0 | 184.8 | 273.4 | 362.9 | 106.8 | +18.6% | +15.0% | ||
| NET INCOME | 61.2 | 128.8 | 189.7 | 240.5 | 68.4 | +11.9% | +5.3% | ||
| Income tax rate | 25.5% | 23.7% | 23.8% | 26.8% | 27.2% | +1.8 ppt. | |||
* Also excludes scope impact
CONTACTS
ANALYSTS / INVESTORS
Thomas JACQUET: +33 1 49 02 12 58 – thomas.jacquet@coface.com
Benoît CHASTEL: +33 1 49 02 22 28 – benoit.chastel@coface.com
MEDIA RELATIONS
Saphia GAOUAOUI: +33 1 49 02 14 91 – saphia.gaouaoui@coface.com
Adrien BILLET: +33 1 49 02 23 6394 – adrien.billet@coface.com
FINANCIAL CALENDAR 2024
(subject to change)
Annual General Shareholders’ Meeting 2023: 16 May 2024
H1-2024 results: 5 August 2024 (after market close)
9M-2024 results: 5 November 2024 (after market close)
FINANCIAL INFORMATION
This press release, as well as COFACE SA’s integral regulatory information, can be found on the Group’s website:
http://www.coface.com/Investors
For regulated information on Alternative Performance Measures (APM), please refer to our Interim Financial Report for H1-2023 and our 2023 Universal Registration Document (see part 3.7 “Key financial performance indicators”).
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COFACE: FOR TRADE
COFACE SA is quoted in Compartment A of Euronext Paris
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DISCLAIMER – Certain declarations featured in this press release may contain forecasts that notably relate to future events, trends, projects or targets. By nature, these forecasts include identified or unidentified risks and uncertainties, and may be affected by many factors likely to give rise to a significant discrepancy between the real results and those stated in these declarations. Please refer to chapter 5 “Main risk factors and their management within the Group” of the Coface Group’s 2023 Universal Registration Document filed with AMF on 5 April 2024 under the number D.24-0242 in order to obtain a description of certain major factors, risks and uncertainties likely to influence the Coface Group’s businesses. The Coface Group disclaims any intention or obligation to publish an update of these forecasts, or provide new information on future events or any other circumstance.
1 Return on average tangible equity
2 Also excludes scope impact
3 Book yield calculated on the average of the investment portfolio excluding non-consolidated subsidiaries.
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