Coface Maintains Solid Growth and Limits the Downslide in 2008 Results

New York – Coface announced its 2008 results with highlights that include:

• An increase in turnover of 7.1% in 2008 (6.5% at constant structure)
• A credit insurance loss ratio that has risen by 24 points up to 73%
• A net profit that has fallen to €94m (compared to €204m in 2007), the decrease being limited by contributions from the services and factoring business lines

In this context, Coface is preparing new tools to support companies throughout the crisis.

Annual turnover was €1,682m, reflecting 7.1% growth at current structure and 6.5% at constant structure and exchange rates. The two main growth drivers were the same as in 2007: development of the factoring line (+16.8%), and credit insurance and services outside Europe (+18.6%).

The credit insurance line saw a 5% rise in turnover compared to 2007. Coface strengthened its headway on the international front with standard receivables protection policies now available in 93 countries. Credit insurance is offered directly in 40 countries. (Offices in Taiwan, Bulgaria and Latvia opened in 2008.) Coface also bolstered leading positions in South America with the acquisition of a majority shareholding in SBCE, the export leader in Brazil, and in Asia, with over 30% growth in Greater China for the fifth year in a row.

The factoring line increased 16.8% due to strong internal growth and by the incorporation of acquisitions in Denmark, the Czech Republic and Slovakia. The factoring line is available in 28 countries, compared to 16 at the end of 2007, forming the leading global network in terms of geographic coverage. Coface is the market leader in factoring in Germany (Coface Finanz) and the third largest factor in France (Natixis Factor.) Natixis Factor’s factoring volume increased 10% for domestic invoices and 14% for export in 2008.

Service lines (rating and business information, receivables management and French public guarantees) grew by 8.2%. The information offering is available in 65 countries, and the launch of Coface’s financial rating is making headway. The worldwide receivables management network has been strengthened by acquisitions in Argentina and the Netherlands.

Costs are controlled, with management expenses rising by 2.8% at constant structure and exchange rates, representing a four-point variance in relation to the increase in turnover (+ 6.5%).

In January 2008, Coface announced the beginning of the fifth global credit crisis since the first oil price shock. In the fourth quarter, the credit crisis entered a second phase, causing forecasts for worldwide growth to be reviewed. The global GDP growth shock between 2007 and 2009 is now estimated to be 4.5 points, compared to the 4.9 points recorded when the system stalled in 1973 and 1975 and more than double those of the three previous world crises. The impact is felt worldwide and should reach 5.9 points in Emerging Europe, 5.2 points in Emerging Asia and South America, 4.5 points in the Euro area, and 4 points in the United States and Japan.

The downturn in growth explains the upturn in defaults recorded by Coface. The two crisis phases are clearly reflected in the credit insurance line loss ratio. From an all-time low of 49% in 2007, the loss ratio rose to 59% in the first three quarters of 2008 and to 109% in the fourth quarter alone. The ratio was 73% for the entire year.

Measures were taken in January to adapt to this second phase of the crisis by completing the “Act on the crisis” plan launched by Coface in January 2008. These measures forecast a further increase of at least 30% in credit insurance premiums and a reduction of 30% in exposure rated as “speculative” (representing 16% of the exposure of Coface).

The increased claims rate has caused a fall in profit with the loss for credit insurance at -€25m for the year. However, contributions to profit by services (+22%) and factoring (+27%) have provided Coface with a positive operating profit of €136m. Net profit decreased by 54% to €94m.

In 2009, Coface will be supported by its intact financial strength, rapid measures to regain technical equilibrium, and offerings aimed to restore confidence.

• Coface’s financial structure is still robust, supported by stable shareholders’ equity (€1165m at the end of 2008 versus €1176m at the end of 2007); by excess capital of €426m for insurance, and by a 2009 reinsurance treaty renegotiated under good terms with reinsurers. All reinsurers have ratings of A, AA or AAA.

• The measures implemented to restore technical equilibrium for credit insurance should allow Coface to return to a 70% loss ratio in 2009 and ensure a significantly positive profit.

• Coface aims to help companies and to reinforce trust between customers and suppliers during this difficult period with factoring, credit insurance guarantees (in France) and credit risk ratings.

About Coface
Coface Holding, Natixis’ Trade Receivables Line, brings together Coface and Natixis Factor. Coface Holding offers its 130,000 customers four product lines to fully or partly outsource trade relationship management and to finance and protect their receivables: credit insurance, business information and ratings, receivables management and factoring. Abroad, Coface Holding is present through Coface’s network of specialized brokers and local partners within the CreditAlliance Network. Due to the worldwide local service delivered by 7,000 staff in 65 countries, over 45% of the world’s 500 largest corporate groups are already customers of Coface.