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Coface reports a new record result of €84.0m in Q3-2022. Annualised return on tangible equity at 16.4%
Coface reports a new record result of €84.0m in Q3-2022. Annualised return on tangible equity at 16.4%
Paris, 27 October 2022 – 17.35
Turnover of first nine months: €1,363m, up 15.2% at constant FX and perimeter and up 17.7% on a reported basis
Trade Credit Insurance premiums growing by 16.6% driven by high client activity in still inflationary environment
Client retention at record highs (93.5%); pricing down (-3.0%) in line with H1-22
Business information momentum continues (revenues up +15.6% at constant FX)
9M-2022 net loss ratio at 36.9%, up by 11.5 ppts ; net combined ratio at 63.8%, up by 7.7 ppts
Gross loss ratio up by 5.0 ppts at 30.2%, as normalization of risk environment continues
Net cost ratio down by (3.8) ppts at 26.9% reflecting continued operating leverage and higher reinsurance commissions
Q3-2022 net combined ratio at 59.6% on continued low loss ratio
Net income (group share) at €228.4m, including €84.0m for Q3-2022; annualised RoATE1 at 16.4%
Successful early refinancing of its grandfathered T2 debt, de-risking 2024 deadline
Moody’s confirmed its credit rating for Coface and raised its outlook to "Positive"
Unless otherwise indicated, change comparisons refer to the results as at 30 September 2021.
Xavier Durand, Coface’s Chief Executive Officer, commented:
“The third quarter brought no improvement in terms of the major risks facing the global economy: monetary tightening remains aggressive as inflation remains high, the conflict in Ukraine is continuing and the European energy crisis remains acute. The situation in the United Kingdom served as a reminder that governments have little financial leeway and that fiscal and monetary policies need to be aligned. As expected, global growth forecasts have been downgraded.
Bankruptcies are continuing to rise, especially in developed countries. Coface maintains its prudent reserving policy on Russia. This environment did not prevent Coface from achieving record net income of €84m in the third quarter, with the YTD figure now totalling €228m, higher than in fiscal year 2021. This corresponds to annualised return on tangible equity of 16.4%.
Investments in adjacent businesses are continuing. Information services (+15.6%) and factoring (+13.0%) recorded continued growth in turnover. Coface is also continuing to focus on service quality, reflected in the record high retention rate and an improvement in the net promoter score (NPS) to 38%.
We welcome Moody’s decision to assign our credit rating a positive outlook. This acknowledges the work done by all of Coface's teams over the past few years and our strengths at the beginning of a more complex stage in the economic cycle."
Key figures at 30 September 2022
The Board of Directors of COFACE SA examined the consolidated financial statements at 30 September 2022 (non-audited figures) at its meeting of 27 October 2022. The Audit Committee at its meeting on 26 October 2022 also previously reviewed them.
Income statements items in €m | 9M-21 | 9M-22 | % | % |
Gross earned premiums | 969.5 | 1,152.1 | +18.8% | +16.6% |
Services revenue | 188.9 | 211.0 | +11.7% | +7.9% |
REVENUE | 1,158.4 | 1,363.1 | +17.7% | +15.2% |
UNDERWRITING INCOME/LOSS AFTER REINSURANCE | 235.2 | 295.7 | +25.7% | +29.8% |
Investment income, net of management expenses | 30.9 | 39.1 | +26.5% | +26.8% |
CURRENT OPERATING INCOME | 266.1 | 334.8 | +25.8% | +29.4% |
Other operating income / expenses | (0.8) | (5.0) | +499.8% | +484.7% |
OPERATING INCOME | 265.3 | 329.8 | +24.3% | +28.0% |
NET INCOME | 190.9 | 228.4 | +19.6% | +24.7% |
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Key ratios | 9M-21 | 9M-22 | % | % |
Loss ratio net of reinsurance | 25.4% | 36.9% | +11.5 | ppts |
Cost ratio net of reinsurance | 30.7% | 26.9% | (3.8) | ppts |
COMBINED RATIO NET OF REINSURANCE | 56.1% | 63.8% | +7.7 | ppts |
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Balance sheet items in €m | 2021 | 9M-22 | % | % |
Total Equity (group share) | 2,141.0 | 1,955.2 | (8.7)% |
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* Also excludes scope impact
1. Turnover
Coface recorded a consolidated turnover of €1,363.1m over the first nine months of 2022, up +15.2% at constant FX and perimeter compared to 9M-21. On a reported basis (at current FX and perimeter), turnover was up +17.7%.
Revenues from insurance activities (including bonding and Single Risk) increased by +16.6% at constant FX and perimeter (and by +18.8% at current FX) compared to 9M-21. Growth benefited from an increase in client activity and continued high retention.
The retention rate reached a record level of 93.5%, up +1.4% compared to 9M-21. New business totalled €82m, down €20m compared to 9M-21 in an increasingly competitive market.
The growth in Coface’s client activity had a positive impact of +11.1% over 9M-22. This record increase for the first nine months reflects the scale of the recent economic recovery and inflation. The price effect continued to reverse, coming in at -3.0% in 9M-22, in line with the -3.0% fall in H1-22. This is largely due to previous very low loss experience.
Revenues from other activities were up +7.9% compared to 9M-21, still with contrasting trends in the different businesses. Turnover from factoring rose +13.0%, mainly due to the increase in volumes refinanced in Poland. Revenues from information services continued to grow, rising +15.6% (vs. +13.4% in 9M-21). Fee and commission income (collection fees) was impacted by the decline in claims to be recovered and dropped -37.9% while commissions were up by +6.7%.
Total revenue - in €m | 9M-21 | 9M-22 | Variation | % |
Northern Europe | 250.4 | 277.3 | +10.7% | +9.6% |
Western Europe | 233.6 | 271.0 | +16.0% | +14.8% |
Central & Eastern Europe | 115.3 | 135.6 | +17.6% | +16.8% |
Mediterranean & Africa | 313.8 | 362.0 | +15.4% | +17.2% |
North America | 99.3 | 125.1 | +26.0% | +12.4% |
Latin America | 55.3 | 78.2 | +41.3% | +29.8% |
Asia Pacific | 90.7 | 114.0 | +25.7% | +16.6% |
Total Group | 1,158.4 | 1,363.1 | +17.7% | +15.2% |
In Northern Europe, turnover increased by +9.6% at constant FX (+10.7% at current FX). Trade credit insurance benefited from the increase in client activity and a high retention rate. Factoring turnover increased by +7.0%.
In Western Europe, turnover was up by +14.8% at constant FX (+16.0% at current FX) thanks to a high retention rate and client activity.
In Central and Eastern Europe, turnover was up by +16.8% and by +17.6% at constant FX, due to high retention, and growth in trade credit insurance driven by client activity. Factoring turnover continued to increase significantly, rising by +36.9%.
In Mediterranean and Africa, a region driven by Italy and Spain, turnover grew by +17.2% and by +15.4% at current FX. This was due to high levels of new business and high retention. Revenues from services increased by +27.7%.
In North America, turnover increased +12.4% at constant FX and +26.0% as reported, driven by high client activity and positive FX effect, which were partially offset by premium refunds.
In Latin America, turnover was up +29.8% at constant FX and +41.3% at current FX, driven by strong retention as well as growth in client activity driven by the rise in commodity prices.
In Asia-Pacific, turnover increased +16.6% at constant FX and +25.7% at current FX. This growth was driven by high retention and increased client activity as well as a positive currency effect.
2. Result
Combined ratio
The combined ratio, net of reinsurance, stood at 63.8% for 9M-22 (a rise of 7.7 points compared to 9M-21).
(i) Loss ratio
The gross loss ratio stood at 30.2%, up 5.0 ppts compared to the previous year. This reflects an increased claims frequency since H1-21, with the number of claims close to pre-Covid levels and the return of relatively large claims, which nevertheless remain below average. Coface increased its provisions relating to the residual exposure in Russia.
The Group’s reserving policy remains unchanged. Strict management of past claims enabled Coface to record 53.1 ppts of recoveries. The loss ratio for the 2022 underwriting year is still high at 80.9%, signalling that Coface anticipates an increase in the number of bankruptcies in the coming quarters, and an increase in reserves on Russia.
The loss ratio net of reinsurance came out at 36.9%, up by 11.5 ppts compared to 9M-21.
(ii) Cost ratio
Coface is following its strict policy of cost management. In the third quarter 2022, costs rose by +16.0% at constant FX and perimeter, and +20.1% at current FX. This increase is in line with the growth in turnover, even though Coface continued to invest. The cost ratio before reinsurance was 32.2%, an improvement of 0.8 ppt over one year.
The cost ratio, net of reinsurance was 26.9% for the first nine months, an improvement of 3.8 ppts year-on-year, reflecting lower gross cost ratio and higher reinsurance commissions.
Financial result
Net financial income for 9M-22 was €39.1m, up by €8.2m compared to 9M-21. This figure includes €10.7m in realised capital gains and positive hedging results as well as a currency effect of €3.2m. This performance was achieved against a particularly turbulent market backdrop, primarily due to the effectiveness of hedging policies.
The portfolio’s current yield (i.e. excluding capital gains, depreciation and FX impact) is €29.5m (compared to €25.2m in 9M-21). The accounting yield3, excluding capital gains and depreciation, stood at 1.0% in 9M-22, up compared to the previous year (0.9%), mainly due to higher reinvestment rates.
Operating income and net income
Operating income for 9M-22 was €329.8m, up +24.3%, mainly due to increased growth and a still low loss ratio.
The effective tax rate was 26%, compared to 24% for 9M-21.
In total, net income (group share) was €228.4m, up +19.6% compared to 9M-21, of which €84.0m in Q3-22.
3. Shareholders’ equity & solvency
At 30 September 2022, Group shareholders’ equity stood at €1,955.2m, down €185.8m, or -8.7% (compared to €2,141.0m at 31 December 2021).
This change is mainly due to the positive net income of €228.4m, the payment of the dividend (-€224.8m) and the fall in unrealised capital gains (-€240.5m).
The annualised return on average tangible equity (RoATE) was 16.4% at 30 September 2022, mainly due to the improvement in underwriting income.
4. Outlook
The risks threatening global growth were confirmed in the third quarter. The leading central banks continued to tighten monetary policy in a bid to curb inflation, which remains high. There was no improvement in the conflict in Ukraine and the energy crisis in Europe remains acute. European countries are taking substantial financial measures to limit the consequences of the crisis but there are considerable disparities in the extent of their intervention and the lack of coordination is undermining their effectiveness. The Chinese economy continues to be periodically affected by local lockdowns and is facing the consequences of the bursting of the property market bubble.
As expected, growth forecasts for the global economy continue to be downgraded. Coface has lowered its financial outlook for 49 economic sectors, following significant downgrades to its country risk assessments in the second quarter.
It is continuing to monitor the worsening economic environment. With its strong underwriting discipline and its reserving policy, which remains unchanged, Coface is well positioned to successfully navigate this more complex stage in the economic cycle. The raising of its credit rating outlook by Moody’s attests to the robustness of Coface's business model and its careful risk management.
Coface is continuing to invest in expanding its service activities such as information services (growth of +15.6%) and factoring (+13.0%). Its record retention rate (93.5%) and the steady rise in its net promoter score (NPS) to 38% reflect client recognition of its constant focus on service quality.
Conference call for financial analysts
Coface’s results for 9M-2022 will be discussed with financial analysts during the conference call on Thursday 27 October at 18.00 (Paris time). Dial one of the following numbers:
By webcast: Coface 9M-22 results - Webcast
By telephone (for the sell-side analyst): Coface 9M-22 - 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 statement items in €m - Quarterly figures | Q1-21 | Q2-21 | Q3-21 | Q4-21 | Q1-22 | Q2-22 | Q3-22 |
| % | % |
Gross earned premiums | 312.1 | 326.7 | 330.7 | 343.2 | 361.3 | 392.7 | 398.1 |
| +20.4% | +17.6% |
Services revenue | 65.9 | 63.4 | 59.6 | 66.3 | 69.5 | 71.4 | 70.1 |
| +17.6% | +10.2% |
REVENUE | 377.9 | 390.1 | 390.4 | 409.5 | 430.8 | 464.1 | 468.2 |
| +19.9% | +16.4% |
UNDERWRITING INCOME(LOSS) AFTER REINSURANCE | 74.3 | 81.5 | 79.4 | 38.7 | 84.9 | 98.1 | 112.7 |
| +41.9% | +51.7% |
Investment income, net of management expenses | 5.7 | 10.1 | 15.0 | 11.3 | 12.3 | 12.0 | 14.7 |
| (2.3)% | (13.5)% |
CURRENT OPERATING INCOME | 80.0 | 91.6 | 94.5 | 49.9 | 97.2 | 110.1 | 127.4 |
| +34.9% | +42.0% |
Other operating income / expenses | (0.4) | 0.8 | (1.3) | (2.3) | (1.2) | (3.2) | (0.7) |
| (49.0)% | (58.6)% |
OPERATING INCOME | 79.6 | 92.4 | 93.2 | 47.6 | 96.1 | 106.9 | 126.8 |
| +36.0% | +43.4% |
NET INCOME | 56.4 | 66.9 | 67.7 | 32.9 | 66.2 | 78.2 | 84.0 |
| +24.1% | +33.9% |
Income tax rate | 24.6% | 23.0% | 23.3% | 20.6% | 27.2% | 23.0% | 27.0% |
| + 3.7 ppts | |
Cumulated results
Income statement items in €m | Q1-21 | H1-21 | 9M-21 | FY-21 | Q1-22 | H1-22 | 9M-22 |
| % | % ex. FX* |
Gross earned premiums | 312.1 | 638.7 | 969.5 | 1,312.6 | 361.3 | 754.0 | 1,152.1 |
| +18.8% | +16.6% |
Services revenue | 65.9 | 129.3 | 188.9 | 255.2 | 69.5 | 140.9 | 211.0 |
| +11.7% | +7.9% |
REVENUE | 377.9 | 768.0 | 1,158.4 | 1,567.9 | 430.8 | 894.9 | 1,363.1 |
| +17.7% | +15.2% |
UNDERWRITING INCOME(LOSS) | 74.3 | 155.8 | 235.2 | 273.9 | 84.9 | 183.0 | 295.7 |
| +25.7% | +29.8% |
Investment income, | 5.7 | 15.9 | 30.9 | 42.2 | 12.3 | 24.4 | 39.1 |
| +26.5% | +26.8% |
CURRENT OPERATING INCOME | 80.0 | 171.6 | 266.1 | 316.0 | 97.2 | 207.3 | 334.8 |
| +25.8% | +29.4% |
Other operating income / expenses | (0.4) | 0.4 | (0.8) | (3.2) | (1.2) | (4.3) | (5.0) |
| +499.8% | +484.7% |
OPERATING INCOME | 79.6 | 172.1 | 265.3 | 312.9 | 96.1 | 203.0 | 329.8 |
| +24.3% | +28.0% |
NET INCOME | 56.4 | 123.2 | 190.9 | 223.8 | 66.2 | 144.4 | 228.4 |
| +19.6% | +24.7% |
Income tax rate | 24.6% | 23.8% | 23.6% | 23.2% | 27.2% | 25.1% | 25.8% |
| + 2.2 ppts | |
* 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
Corentin HENRY: +33 1 49 02 23 94 – corentin.henry@coface.com
FINANCIAL CALENDAR 2022/2023
(subject to change)
FY-2022 results: 16 February 2023 (after market close)
Annual General Shareholders’ Meeting 2022: 16 May 2023
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 H1-2022 and our 2021 Universal Registration Document (see part 3.7 “Key financial performance indicators”).
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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 2021 Universal Registration Document filed with AMF on 6 April 2022 under the number D.22-0244 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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