Coface plans to evolve it’s capital model

Coface, the international trade credit insurer, has announced plans to become the most agile global trade credit partner in the industry and to enhance its capital-efficient business model.

Xavier Durand, CEO of Coface, said building on Coface’s long-standing reputation, its technical expertise and having the largest geographic footprint in the industry, the Fit to Win strategy is structured around three priorities to strengthen Coface’s risk management expertise and infrastructure.

“Once fully implemented, we aim to deliver an ambitious but realistic return on average tangible equity of above 9%. Credit insurance still has a relatively low penetration in its potential markets which gives further opportunities to grow.”

“Coface will leverage its competitive strengths, namely its global presence, integrated data management and debt collection infrastructure. Our client base is extensive with more than 50 000 clients in 100 countries.”

“However, the trade credit industry is evolving as is the global economy. Businesses are faced with slower and more divided economic growth, a more volatile economic and risk environment especially in emerging markets, and is seeing the impact of new technologies. Coface has to adapt its infrastructure to accommodate these changes and the loss of its State Guarantees business in France.”

“Building on its strong technical infrastructure and more than 1 500 risk specialists throughout the world, Coface will further invest in information quality and data tools, continue to strengthen its underwriting risk processes, increase the granularity of its risk assessment capabilities, and further align its commercial and risk underwriting. The Group will invest in technology, recruitment and training through the creation of a central team of senior underwriters able to support operating entities as needed and to share best practice across the Group.”

“The expected cost savings an operational efficiency will be about EUR30m in 2018 and will fully compensate the loss of the French State Guarantees margin and costs. The gain made on the transfer of this activity to Bpifrance (EUR70m) will be used to cover both restructuring and implementation costs of EUR35m, as well as funding additional investments of EUR35m in technology and process transformation,” said Mr Durand.

He said Coface is committed to maintaining a strong capital position, with a targeted solvency ratio towards the upper end of 140%-160% and a minimum single A financial strength rating.

“Without compromising these fundamentals, Coface has identified ways to further improve its capital efficiency, in particular, through increased use of reinsurance. This will allow the Group to improve its RoATE by over 100 bps from its current position, contributing to its ambition to achieve more than 9% RoATE across the cycle.”

“This capital management action will further strengthen Coface’s return on capital to shareholders, as evidenced by our commitment to continue to distribute over 60% of normalised earnings as a dividend, and to address any excess capital beyond the upper end of the targeted solvency ratio (160%) with special dividends or buyback, over time,” said Mr Durand.


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