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Gov schemes benefit Coface in Q3 but 9M net income falls 55%

27th October 2020 - Author: Luke Gallin

Credit insurer Coface has reported net income of €28.5 million (USD 33.7mn) for the third-quarter of 2020 and an improved combined ratio of 77.4%, driven by the temporary positive impact of government schemes.

CofaceThe state-guaranteed COVID-19 reinsurance scheme, designed to support French SMEs by covering credit insurance risks, benefited the company’s combined ratio by 6.8 percentage points in Q3 2020, as the ratio strengthened to 77.4%.

Additionally, government plans improved the firm’s net cost ratio by 1.1 percentage point and the net loss ratio by 5.7 percentage points. Although, at 50%, the net loss ratio did deteriorate by 2.8 percentage points on Q3 2019, but did come in 7.4 percentage points lower than H1 2020, which the firm attributes to low loss activity in the period.

For the first nine months of the year the picture is slightly different, with Coface reporting total net income of €52.4 million (USD 61.9mn) and a combined ratio of 85.3%. This compares with net income of €117.3 million (USD 138.5mn) and a combined ratio of 76.8% for the same period last year.

In the nine month period in 2020, Coface’s loss ratio increased by 10.1 percentage points to 55.2% while the cost ratio fell by 1.6 percentage point to 30.1%, compared with the same period in 2019.

While still positive at €74.6 million (USD 88.1mn), the company’s underwriting income, after reinsurance, fell by almost 49% in 9M 2020, year-on-year. At the same time, investment income fell by more than 17% from €28.4 million (USD 33.5mn) in 9M 2019 to €23.5 million (USD 27.8mn) in 9M 2020.

“The third quarter was marked by a resurgence of the COVID-19 pandemic, as well as travel restriction measures implemented by many countries aimed at containing the spread of the coronavirus,” notes Coface.

Adding: “The rapid phase of economic recovery that followed the end of lockdown is now over. Nevertheless, the unprecedented level of support for the economy from numerous central banks and governments has so far prevented an increase in business insolvencies.

“Coface’s teams are continuing to work closely with clients to help them adapt their levels of risk. This focus on customer service has made it possible to achieve positive net production, despite the pricing adjustment made necessary by the current circumstances.

“To date, most of the governmental support schemes implemented in 2020 will continue until the end of the year.”

In light of its strong performance through 2020 and a solid balance sheet, the credit insurer has announced the launch of a share buyback programme for a maximum amount of €15 million (USD 17.7mn), or 2.4 million shares.

“The development of the economic situation will depend on the pandemic, and the accompanying measures, which will be implemented by governments and central banks. Coface is confident that its agility and efficiency will allow us to navigate in this challenging period successfully. The objectives of the Build to Lead strategic plan remain unchanged,” says Coface.

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