• Net Profit: EUR 207.7 million for the first 9 months, EUR 65.5 million in Q3.
• Net Insurance Revenue: Decreased by about 4% at constant FX.
• Client Retention Rate: 92.7%.
• Business Information Growth: 17.2% in the first 9 months.
• Net Loss Ratio: 35.5%, improved by almost 5 points from last year.
• Net Combined Ratio: 64.4%.
• Net Cost Ratio: Increased by 3.2 points to 28.9%.
• Annualized ROATE: Almost 15%, highest in the last 9 years.
• Total Revenue: Down 2.1%, with Services up 6%.
• Trade Credit Insurance Revenue: Down 4%.
• Insurance Fees: Up 8.3% for the quarter.
• New Business Growth: Up 8% from last year, 17% from 2022.
• Gross Cost Ratio Before Reinsurance: 33.7%.
• Investment Portfolio: EUR 3.23 billion, with recurring income reaching almost EUR 71 million.
• Net Income Increase: Almost 10% compared to last year.
• Return on Average Tangible Equity (ROATE): Increased from 13.4% to 14.8%.

• Warning! GuruFocus has detected 2 Warning Signs with ECSNF.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Coface SA (CFACY) reported a net profit of EUR 207.7 million for the first nine months of 2024, with EUR 65.5 million in the third quarter alone.
• The company achieved a high client retention rate of 92.7%, indicating strong customer loyalty.
• Business Information services experienced double-digit growth of 17.2% in the first nine months, showcasing successful expansion in this segment.
• The net combined ratio improved to 64.4%, reflecting strong operational efficiency.
• Coface SA (CFACY) achieved an annualized ROATE of almost 15%, the highest in the last nine years, demonstrating robust financial performance.

Negative Points

• Net insurance revenue decreased by about 4% at constant FX, indicating challenges in the core insurance business.
• The net cost ratio increased by 3.2 points to 28.9%, driven by lower revenues and continued investment in growth and technology.
• Trade credit insurance revenue declined by 4%, reflecting ongoing economic challenges.
• The company faces a hardening economic environment with increased insolvencies, posing potential risks to future performance.
• Cost inflation, particularly in wages and outside services, continues to impact the company's financials, with costs growing faster than revenues.

Q & A Highlights

Q: Despite higher insolvencies compared to 2019, Coface's loss ratio has improved. What is driving this performance? A: Xavier Durand, CEO: Coface has maintained a disciplined and value-oriented approach to underwriting, continuously improving tools and processes. The market is normalizing slowly, allowing effective risk management, contributing to strong performance despite a hardening market.

Q: Can you explain the impressive 60% gross margin in Business Information and its impact on the P&L? A: Xavier Durand, CEO: The gross margin reflects the combination of employee costs and technology expenses. While the math is close to reality, it includes technology and external service costs. The business is profitable, with investments in technology and personnel supporting growth.

Q: What are Coface's expectations regarding cost inflation and premium growth? A: Xavier Durand, CEO: While specific forward-looking statements are not provided, the cycle shows that initial revenue increases from inflation are followed by cost increases. Currently, client turnover is decreasing, impacting top-line benefits, while cost pressures from past inflation persist.

Q: How might the U.S. election impact Coface's business model, particularly regarding tariffs? A: Xavier Durand, CEO: The outcome and economic policy implications of the U.S. election are uncertain. Coface focuses on staying close to market developments, making timely credit decisions, and adapting to changes, rather than predicting specific scenarios.

Q: What are the expectations for reinsurance pricing in upcoming renewals? A: Xavier Durand, CEO: It's too early to comment on reinsurance pricing as negotiations occur at year-end. Factors like natural disasters and the credit cycle will influence discussions, but specifics are not yet determined.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.