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Coface SA FY-2015 results: net income EUR126M and proposed dividend stable at EUR0.48 per share
Paris, 9 February 201
At the end of 2015, a year marked by a deterioration in the global economic environment, Coface recorded a slight increase in net income (group share), at EUR126M (EUR125M in 2014). Turnover for the year grew by 3.4% (+1.2% at constant scope and exchange rate), supported by emerging markets. The Group's loss ratio net of reinsurance has stabilized over the last six months, at 52.5%. Coface is prepared for Solvency II, which came into force on 1 January 2016. The ratio of capital required to cover subscribed risks stands at 147% , a level in line with Coface's risk appetite and dividend pay-out policy of 60% of net income.
On the basis of its net income per share, stable at EUR0.80, the Group will thus propose a dividend of EUR0.48 per share.
In 2015, Coface's consolidated turnover was EUR1 489.5M, up 3.4% compared with 2014 (+1.2% at constant scope and exchange rates). This increase is a consequence of the commercial strategy implemented by the Group, based on product innovation, multi-channel distribution and the strengthening of its sales processes and sales monitoring.
New contract production was lower than in the previous year, which was marked by the signature of some large contracts. Retention of our client portfolio was good, at 88.2%.
The competitive environment and sound profitability of contracts in mature markets weighed on pricing throughout 2015. However, this price pressure remained controlled: the price effect on contracts was stable compared to 30 September 2015, at -2.4%.
Growth in the Group's turnover was supported by emerging markets. In the United States, the reorganization of the entire country's agency network explains the contraction in performance. In mature markets, where contracts profitability is higher, competition remained fierce and put pressure on prices.
The loss ratio net of reinsurance stood at 52.5%, stabilized over the last six months as a result of reducing exposure to the most fragile companies and sectors. During this period Coface continued to reduce its coverage, particularly in emerging markets, and the effects of this approach are materializing progressively, depending on the payment behavior.
Internal overheads remained under control: excluding exceptional items these decreased by 1.8% at constant scope and exchange rates (-0.5% at current scope and exchange rates), a level significantly lower than growth in premiums, which was up 2.0% (+4.7% at constant scope and exchange rates). The distribution costs grew faster than premiums in 2015, due in particular to stronger turnover growth in regions where contracts are commercialized through brokers or partners. The cost ratio net of reinsurance was 30.5% at 31 December 2015, and 29.5% excluding exchange rate effects and exceptional items, an increase of 0.2 points compared with 31 December 2014.
In total, the combined ratio stood at 83.1% at 31 December 2015, up 3.4 points compared with 31 December 2014, reflecting the deterioration in the macro-economic environment over the last year.
Thanks to the diversification of the financial portfolio, illustrated by investments made in non-quoted pan-European real estate funds, financial income was EUR53.1M (of which EUR4.5M externalization of capital gains) at 31 December 2015, against EUR42.8M (of which EUR8.4M externalization of capital gains) in 2014.
Excluding restated items, operating income stood at EUR194,1M and net income (group share) at EUR140.9M.
On the basis of net income per share of 0.80, a dividend of EUR0.48 euro per share will be proposed for 2015, an amount stable compared with 2014.
At 31 December 2015, IFRS equity (group share) was EUR1 760.9M. The change in equity is mainly the result of positive net income of EUR126.2M offset by the distribution of EUR75.5M to shareholders and a decrease in re-evaluation reserves of financial assets ready for sale.
Coface is prepared for the new regulatory framework, Solvency II, which came into force on 1 January 2016. In this context, Coface plans to complete its capital management tools and intends to set up a contingent capital line to protect its solvency during extreme case scenario .
Calculated on the basis of the standard formula, the coverage ratio of required capital to insurance and factoring risk coverage was 147% , a level in line with the Group's risk appetite and dividend pay-out policy of 60% of net income per share, proposed again this year.
Ratings agencies Fitch and Moody's reconfirmed the Group's ratings (IFS) at respectively AA- and A2 (stable outlook), on 17 September and 13 October 2015.
Work is on-going by Bpifrance to prepare for the transfer of public guarantees activity currently carried out by Coface on behalf of the French State. The transfer is subject to modification of the applicable legislative and regulatory framework , which will come into effect by decree. Coface will continue to be remunerated by the French State until the transfer of this activity becomes effective, at a date which is not yet known.
The current macroeconomic environment is demanding (weak growth in advanced economies, greater risks in emerging markets, and the volatility of financial markets), and no significant change in this situation is anticipated for the year 2016. In the absence of significant rebound in global activity, and taking into account the transfer of the management of the public guarantees activity, the targets of growth and profitability (return on average tangible equity or RoATE) that Coface settled two years ago for the period ending 2016, will not be achieved. However, Coface's business model, its financial strength, and its pay-out ratio of about 60%, are not undermined.
As announced on January 15 2016, Xavier Durand takes over from Jean-Marc Pillu as CEO of Coface with effect as from today. Xavier Durand, 52, a graduate of , spent most of his career in GE Capital. Over the last 25 years he has acquired senior-level operational experience in general management of regulated financial services in more than 30 countries.
Commenting on his new appointment, CEO of Coface, said:
May 4 2016: publication of Q1-2016 results
May 19 2016: general shareholders' meeting
July 27 2016: publication of H1-2016 results
November 3 2016: publication of 9M-2016 results
This press release, as well as Coface SA's integral regulatory information, consolidated accounts and FY-2015 analyst presentation, can be found on the Group's website: http://www.coface.com/Investors
The Coface Group, a worldwide leader in credit insurance, offers companies around the globe solutions to protect them against the risk of financial default of their clients, both on the domestic market and for export. In 2015, the Group, supported by its ~4,500 staff, posted a consolidated turnover of EUR1.490 billion. Present directly or indirectly in 99 countries, it secures transactions of 40,000 companies in more than 200 countries. Each quarter, Coface publishes its assessments of country risk for 160 countries, based on its unique knowledge of companies' payment behaviour and on the expertise of its 340 underwriters located close to clients and their debtors.
In France, Coface manages export public guarantees on behalf of the French State.
www.coface.com
Coface SA. is listed on Euronext Paris - Compartment A
ISIN: FR0010667147 / Ticker: COFA
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