Coface announces good turnover resistance, a turnaround in its profits and a new credit insurance approach
Support to the insured’s and the economy has resulted in a total guaranteed exposure that has been stable between the end of 2007 and the end of 2009, at €370 billion euros (the only major credit insurer to deliver such stability).
A first increase of €50 million was decided in June and completed in July 2009. It reflected Coface commitment vis-à-vis its partners (clients, brokers and reinsurers) to maintain throughout the crisis an excess in solvency margin close to its level before the crisis, i.e. approximately €400 million.
A second increase of €175 million was decided by Natixis’ Board in December and will take place in March 2010.
The economic crisis went through three distinct phases: during the first three quarters of 2008, the limited impact of the financial crisis on the real economy and the targeted measures Coface took on the affected countries beginning in January 2008, substantially limited the repercussions on technical income. During the second phase (after the bankruptcy of Lehman), in the last quarter of 2008 and the first half of 2009, the sharp worsening of the crisis substantially deteriorated Coface’s technical balances. From the end of the first half of 2009, the decline of the crisis and the efficiency of the Coface’s second plan enabled a sharp rebound of its earnings.
The claim expenses and therefore profits followed these developments. The half-year loss ratios were 55% then 89% in 2008, and 116% in the first half of 2009. The loss ratio comes back to 94% in the third quarter of 2009 and to 63% in the fourth quarter.
The year 2010 should see a recovery in the world economy, according to the general consensus. Coface estimates world growth at 2.7%, after -1.9% in 2009, including 5.3% in emerging countries, 1.8% in the United States and only 0.9% in the Euro zone.
This signals the end of the global credit crisis, in the sense of a widespread increase in business failures, far beyond their normal level. However, there will still be zones of weakness (sectoral or geographical); some countries (Spain, Portugal, Ireland, Hungary, Baltic countries, etc.) should once again experience negative growth and therefore more bankruptcies in 2010 than in 2009.