11 March, 2020 Blog
“Our new strategic plan Build to Lead will leverage the successes of Fit to Win."
Build to Lead will broaden and deepen the business and cultural transformation initiated in Fit to Win. In particular the new plan will:
- Continue to strengthen risk management and underwriting discipline
- Improve service, and commercial and operational efficiency
- Invest in select growth initiatives in trade credit insurance as well as in specialty lines
- Maintain balance sheet strength
Coface raises all its financial targets, that are valid through the cycle:
- Combined ratio at ~80% through the cycle, a 3 ppt. improvement versus Fit to Win
- RoATE through the cycle at 9.5%, a target that takes into account the expected decline in investment returns
- Dividend pay-out ratio to be at least at 80%, a 20 points increase compared to Fit to Win, with a solvency ratio in a new target range (155-175%)
Xavier Durand, Coface CEO, announced:
“Our new strategic plan Build to Lead will leverage the successes of Fit to Win, our previous plan. It is anchored in several convictions: credit insurance is a service business, with strong barriers to entry and long term structural growth. Coface has major assets to leverage in this appealing market: strong domain expertise, scale and agility which we will continue to reinforce. We will deepen and broaden the business and cultural transformation underway at Coface to become a recognized leader in the industry.
Build to Lead will also aim to develop the specialty businesses (factoring, single risk & bonding, information services) which benefit from the global Coface infrastructure and can generate profitable growth opportunities.
As global growth and trade slows, and volatility and unpredictability rise, the principles that have driven our past success are even more relevant today:
Priority will remain to disciplined underwriting, while reaching a better quality of service and a greater efficiency
- The pursuit of profitable growth, differentiated by markets and segments
- The protection of a robust balance sheet to support profitable growth initiatives and opportunities
- Attractive returns and long term value creation
From a financial standpoint, we are raising all our targets: a through the cycle combined ratio around 80% and an average return on tangible equity of 9.5%, an increase despite the expected decline in the investment portfolio return due to low interest rates. Finally, we plan to return at least 80% of our average net profit to our shareholders.
The commitment of our employees and partners throughout the world will drive our success and the quality of our client experience.”
The Fit to Win strategic plan delivered or exceeded all targets
Coface has met or even exceeded all the targets of the Fit to Win plan.
First, by strengthening its risk infrastructure, whether on prevention or management, Coface has restored its technical profitability in an economic environment that has progressively become less favorable. The cost savings plan has significantly exceeded its €30m 2018 target, reaching €48m annual savings in 2019, almost 10% of the initial cost base. The combined ratio reached 77.7% in 2019, well below the 83% targeted through the cycle.
By focusing on quality of service, client retention has reached record high levels. The pursuit of greater commercial efficiency has boosted the new business figures. And, for the first time in many years, Coface has announced two acquisitions, PKZ and GIEK Kredit. They will expand its network and further strengthen its capabilities in two regions that are important for its long term growth strategy.
On the capital efficiency front, the French regulator ACPR allowed Coface to use its Partial Internal Model to compute its solvency capital requirement. At the end of 2019, Coface’s solvency has reached a record level at 190%. Throughout Fit to Win, Coface will have returned €390m to its shareholders, without deteriorating its capital position nor its ability to invest.
With a brief introduction from Frédéric Bourgeois Managing Director UK and Ireland, Coface's John Nicholas, Hans Meijer and Andrew Share will be giving their insights to: The UK economy, Corporate Insolvency & Governance Bill
01 December, 2020
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