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2017-02-08

Coface SA : 2016 Results - Operating performance and progression of Fit to Win in line with plan

Paris, 8 February 2017 - 17h35

Coface results at 31 December 2016: Operating performance and progression
ofFit to Win
in line with plan, confirming our ambition to become the most agile global
credit insurer in the industry

* FY 2016 operating performance in line with guidance * Turnover in line with
previous quarters trends, at €1,411m down (3.6)% vs. '15 (ex. FX) * Net
loss ratio in target range at 65.5% * Net cost ratio at 31.9% ; supported
by tight expense control
* French State export guarantees management transfer finalised * Teams (~250
FTEs) and IT systems transferred as from Jan. 2nd '17
* Fit to Win launched and progressing in line with expectations * Launched
risk and cost actions as per schedule * Consultations well underway * First
benefits materialising
* Net income (group share) FY 2016 at €41.5m * Includes €36.5m French State
guarantees andFit to Win one-offs[1]
* Solvency ratio in target range at c.150% [2]; proposed dividend [3]: €0.13
per share, incl. €0.06 special
* 2017 guidance: net loss ratio below 61%

Unless otherwise stated, changes are in comparison with 12M 2015

Xavier Durand, CEO of Coface, commented:

"The second half of 2016 marks the beginning of the transformation of Coface.
We delivered a net profit of €41.5m in the year, successfully closed the
transfer of our French State export guarantees activity, and launched our
3-year strategic plan,
Fit to Win, the implementation of which is now well underway. During the last
quarter of
2016 we also finalised the strengthening of our senior leadership team to
enable us to drive the rigorous change management necessary to our plan's
success.
With Fit to Win, we aim ultimately to position ourselves to deliver a RoATE
(return on
average tangible equity) of 9% or above across the cycle. The uncertainty
dominating the economy is unlikely to lift in 2017, which will be a
transition year as we continue to execute on the strategic priorities that
guide the plan: to strengthen our risk management and information, drive
operational efficiency and enhance client service, and to implement selective
growth strategies."

Key figures as at December 31st2016

The Board of Directors of Coface SA examined the consolidated financial
statements for FY-2016 during its meeting on 8 February 2017. They were
subject to review by the Audit Committee. Non-audited financial statements;
they are being certified.

---------------------------------------------------------------------------------------------------------------------
| Income statement items - in €m FY-2015 FY-2016 V% V% ex. FX |
| Consolidated revenues 1,489.5 1,411.3 (5.3)% (3.6)% |
| of which gross earned premiums 1,185.9 1,115.1 (6.0)% (4.1)% |
| Underwriting income after reinsurance 143.4 12.8 (91.1)% |
| Investment income net of expenses 53.1 48.0 (9.5)% |
| Current operating income 196.5 60.9 (69.0)% |
| Other operating income and expenses (4.2) 53.5 |
| |
|incl. State guarantees mangt. transfer and Fit to Win one-offs in 2016 |
| Operating income 192.3 114.4 (40.5)% |
| Tax (48.8) (48.1) |
| Net result (group share) 126.2 41.5 (67.1)% (65.0)% |
| Key ratios |
| Loss ratio net of reinsurance 52.5% 65.5% +12.9 ppts. |
| Cost ratio net of reinsurance 30.5% 31.9% +1.4 ppts. |
| Combined ratio net of reinsurance 83.1% 97.4% +14.3 ppts. |
| |
| Balance sheet items - in €m 31/12/2015 31/12/2016 |
| Equity (group share) 1,761.0 1,755.2 (0.3)% |
| |
---------------------------------------------------------------------------------------------------------------------

1 Turnover

Coface registered a turnover of €1,411m for FY 2016, down (5.3)% against
FY-2015 and (3.6)% ex. FX.

Premiums followed a continuous trend throughout 2016, impacted by weaker
client activity and persisting soft conditions in mature markets,
particularly in our Northern and Western Europe regions; the latter was also
impacted negatively by the decrease in French State export guarantees
management fees.

In Central Europe, turnover was down (1.1)% ex. FX, driven by lower services
revenues (debt collection fees), in line with the low claims level in this
region.

In the Mediterranean&Africa region, good commercial momentum in Italy was
offset by premium refunds in Spain, where the risk environment is favourable.
Turnover was down (1.3)% against 2015.

In North America, turnover grew 4.0% (ex. FX), mainly driven by some global
clients.

In emerging markets, restoring profitability was the number one priority this
year: revenue growth was negatively impacted by portfolio adjustments in Asia
((10.9)% ex. FX), whereas some positive re-pricing helped drive an increase
in turnover in Latin America (+9.0% ex. FX).

------------------------------------------------------------------------
| Business turnover in €m FY-2015 FY-2016 V% V% ex. FX |
| Western Europe 363.3 327.2 (10.0)% (8.4)% |
| Northern Europe 324.5 307.3 (5.3)% (5.3)% |
| Mediterranean&Africa 340.3 331.9 (2.5)% (1.3)% |
| North America 131.3 136.1 +3.7% +4.0% |
| Central&Eastern Europe 125.3 121.3 (3.2)% (1.1)% |
| Asia-Pacific 121.3 109.8 (9.5)% (10.9)% |
| Latin America 83.5 77.7 (6.9)% +9.0% |
| Consolidated business turnover 1,489.5 1,411.3 (5.3)% (3.6)% |
------------------------------------------------------------------------
New business production, at €139m, was stable vs. 2015 outside of Asia.
Coface's client retention rate remains close to record levels at 88.5%, a
slight improvement compared with 2015. Driven by some re-pricing actions in
Latin America, price erosion slowed down compared to 2015 at (1.7)%.

Client activity, a key driver of premium growth, slowed down this year,
affected by strong declines in some sectors (metals, commodities.). However,
this trend improved slightly towards the end of the year.
1 Results

* Combined ratio

The Group's net combined ratio stood at 97.4% for FY 2016.

1 Loss ratio

Against the backdrop of a volatile and risky environment, Coface's loss ratio
was driven by claims in emerging countries. Measures were taken throughout
2015 and 2016 to reduce our risk exposures in these areas and their effects
are expected to materialise gradually.

Quarterly trends over the second half of 2016 pointed to first signs of loss
ratio improvement; this trend is mainly driven by Latin America, contrasting
with Asia where loss levels remain high. The Group's loss ratio after
reinsurance was down (4.4) points in Q4 2016, at 67.9% against 72.4% in Q3
2016 and stood at 65.5% at 31 December 2016, in the target range for 2016.

1 Cost ratio

Coface is keeping tight control on expenses outside ofFit to Win
investment areas: total expenses decreased to €699m (including €2.1mFit to Win
set-up costs in Q4), compared with €713m at 31 December 2015

((0.6)% ex. FX).
The Group's cost ratio after reinsurance stood at 31.9% for FY-2016.

* Financial income

Coface maintains a diversified and proactive investment strategy. However, the
current low rate environment is putting pressure on returns. Financial
income[4]stood at €48.0m (of which €3.5m gains on sales) at December 2016,
against €53.1m (of which €4.5m gains on sales) for FY-2015. The accounting
yield[5], excluding capital gains, was 1.6% for FY-2016, compared with 1.8%
for FY-2015.

* Operating income and net income

Operating income stood at €114.4m at 31 December 2016, including a €75.0m gain
on French State export guarantees transfer, €38.6mFit to Win
restructuring expenses, €14.1 of reserve releases linked to social benefits
and €5.1m actuarial rate change totalling €55.6m before tax.

Net income (group share) stood at €41.5m, to which the above mentioned
non-recurring elements contribute for €36.5m[6].

A distribution of €0.13 per share[7]will be proposed for 2016. In line with
previous communication, this distribution comprises €0.07 per share,
corresponding to 62% pay-out ratio on adjusted earnings[8](€0.11 per share)
and €0.06 special dividend.

1 Financial strength

At 31 December 2016, IFRS equity (group share) was €1,755.2m (flat vs 2015).
The change in equity is mainly the result of positive net income of €41.5m
offset by the distribution of €75.3m to shareholders linked to the FY 2015
dividend and an increase in re-evaluation reserves of financial assets
available for sale.

The new regulatory framework Solvency II came into force on 1stJanuary 2016.
On the basis of the standard formula, the coverage ratio of required capital
to insurance and factoring risk coverage remains strong at c.150%[9]as at 31
December 2016. This level is consistent with the Group's targeted comfort
level and allows Coface to confirm its long term pay-out policy of above 60%
of adjusted earnings, as proposed this year.

Ratings agencies Fitch and Moody's reconfirmed the Group's ratings (IFS) at
respectively AA- and A2 (stable outlook), on 29 September and 28 November
2016.

1 Fit to Win update

The Group launched in September 2016 its new strategic plan calledFit to Win,
which aims at positioning Coface as the most agile global trade-credit partner
in the industry, while evolving to a more capital efficient busines...

Författare Hugin

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