Coface pricing down 1.9% but claims costs now above pre-pandemic levels

Trade credit insurer Coface said rates were down 1.9% last year but has so far avoided a spike in claims from business failures, which it said are still below pre-pandemic numbers. But the firm added that claims values are now running above 2019.

“Large losses have become relatively significant in size again while remaining below the historical average” it said.

The comments came as the French-based international group reported flat net income of €240.5m for 2023, down 10% excluding the impact of foreign exchange rates, after Q4 recorded a 7% drop to €50.8m.

Preventive measures put in place in the face of economic uncertainty resulted in growth of 13.4% in underwriting income to €395.4m last year, and strengthened the combined ratio to 64.3% from 67.6%.

The insurer predicted a “drawn-out soft landing” for the global economy in 2024 with growth of 2.2%, a slowdown from 2.5% in 2023. Coface said the economic picture is still uncertain.

“Downside risks are real, in particular due to the unprecedented number of political elections in the world, culminating with the US presidential election at the end of the year,” the company warned.

Coface said the “most pessimistic” economic scenarios for 2023 did not materialise, with a disappointing performance from China offset by the US. It added that the economic impact of higher interest rates was delayed, while the second half of the year began to see inflation increases fall.

The group booked a rise of 3.8% in turnover to €1.87bn for the year, up 6% at constant foreign exchange rates, after a 2.9% increase in trade credit insurance premiums to €1.56bn. However, it said growth for the year was carried by a rise in client activity in the first half, followed by negative activity in the second half amid economic slowdown and a fall in inflation.

The group recorded a 6% drop in insurance revenues between the first half and second half of 2023. Moreover, insurance rates averaged 1.9% lower for the year, although stabilised in Q4.

Coface’s Mediterranean and Africa unit booked the group’s highest share of revenue at €526m, up 8.6% at current exchange rates, driven by Italy and Spain. Western Europe operations recorded revenue growth of 5.7% to €380m, with clients activities described as “resilient”.

Northern Europe saw growth of 1.7% to increase revenue to €380m after a slump in client activity. Central and Eastern Europe operations recorded a 2.7% fall in revenue to €177m, although the unit booked growth of 1.3% excluding the impact of Russia.

Outside of Europe, North America business booked revenue of €172m, up 2.1%, and Latin America’s contribution fell 0.5% at current exchange rates to €100m. This came after a slump in client activity and the devaluation of the Argentine peso. Asia-Pacific operations saw turnover increase 2% to €133m for 2023.

Xavier Durand, CEO of Coface with a renewed mandate for four more years, said: “Coface delivered another strong year in a volatile and relatively weak global economic environment in 2023. Our turnover rose 6.0% at constant FX over the year due to an excellent first half, client retention that remained at record highs, and an increase of service revenues.”