COFACE (COFA) Q2 2024 earnings summary

Executive summary

• Net income for H1 2024 reached €142.3 million, up 10.4% year-over-year, with annualized ROATE at 15.3% and solvency ratio at 195%, above the target range.

• Turnover was €923 million, down 3.1% year-over-year, mainly due to a 5.3% drop in trade credit insurance premiums; services revenue grew 6.5%.

• Business information revenues grew 16.9%, while factoring was down 2.6% but rebounded 1.0% in Q2-24; third-party debt collection up over 20%.

• Client retention remained high at 92.8%, though slightly down from 2023, with pricing down 1.4% and new production rebounding to €69m.

• Annualized return on average tangible equity rose to 15.3%.

Financial highlights

• Net combined ratio improved to 63.4% (down 2.1 ppts year-over-year), with net loss ratio at 35.0% (down 5.3 ppts) and net cost ratio at 28.4% (up 3.2 ppts).

• Operating income rose 17.5% year-over-year to €217.2m.

• Investment income increased to €48.0m, with accounting yield on average investment portfolio at 1.7%.

• Book value per share at €13.4; tangible book value per share at €11.8.

• Mark-to-market investment portfolio value stood at nearly €3.2 billion.

Outlook and guidance

• Management refrained from providing forward-looking statements due to economic uncertainty, but continued investment in data, connectivity, and services is planned.

• Strategic focus on growing business information and services to offset short-term declines in trade credit insurance.

• Management expects ongoing pressure from slowing economies and inflation, with claims normalization continuing.

• Credit cycle entering a more complicated phase; focus remains on strategic plan execution.

• Demand for credit insurance is rising in a riskier environment, but client retention is slightly down from record levels.