Earnings call transcript: Coface Q1 2025 highlights cautious outlook

Coface reported its Q1 2025 financial results, showcasing a net income of €62.1 million and a 2% increase in turnover at constant exchange rates. The company emphasized its strong client retention rate of 95% and highlighted growth in its Business Information and Debt Collection segments. According to InvestingPro data, the company maintains robust financial health with an overall score of "GREAT" and impressive year-to-date returns of 26.84%. Despite these positive indicators, the company maintains a cautious outlook due to global economic uncertainties. Coface’s stock saw a modest increase of 1.75%, closing at €18.24.

Key Takeaways

• Net income reached €62.1 million.
• Turnover rose by 2% at constant FX.
• Client retention remained high at 95%.
• Business Information and Debt Collection grew by nearly 15%.
• The company maintains a cautious outlook amid economic uncertainties.

Company Performance

Coface demonstrated resilience in Q1 2025, with its net income reaching €62.1 million. The company saw a 2% increase in turnover at constant exchange rates, driven by its robust client retention and growth in Business Information and Debt Collection. With a P/E ratio of 10.55 and an attractive dividend yield of 7.68%, the company offers significant value to shareholders. However, the company is navigating a challenging economic landscape, with a conservative approach to underwriting and investments. For deeper insights into Coface’s valuation and financial metrics, InvestingPro subscribers have access to over 30 additional key indicators and exclusive analysis.

Financial Highlights

• Net income: €62.1 million
• Turnover: Up 2% at constant FX
• Trade credit insurance growth: 1.2%
• Loss ratio: 39.1%, up by 3.3 points
• Net combined ratio: 68.7%
• Return on Average Tangible Equity (RoTE): 12.7%

Market Reaction

Coface’s stock price increased by 1.75%, closing at €18.24. This movement reflects investor confidence in the company’s strategic initiatives and its ability to navigate economic uncertainties. The stock is trading near its 52-week high, with an impressive one-year total return of 36.86%. InvestingPro analysis suggests the stock is currently trading above its Fair Value, indicating investors should monitor valuation metrics closely. The stock’s beta of 0.67 suggests lower volatility compared to the broader market.

Outlook & Guidance

Coface maintains a cautious outlook due to heightened global economic policy uncertainty and a reduced economic growth forecast. The company anticipates slower economic growth and a potential increase in insolvencies, which informs its conservative underwriting and investment strategies. Coface’s next financial report is scheduled for July 31, 2025.

Executive Commentary

CEO Xavier Duran emphasized the company’s cautious stance, stating, "We’re going to have to see where the dust settles." He also highlighted the importance of strategic investments, saying, "We think there’s not going to be a better time to invest." These statements reflect Coface’s focus on risk management and long-term growth.

Risks and Challenges

• Global economic policy uncertainty may impact market conditions.
• Slower economic growth could affect client demand.
• Potential increase in insolvencies poses a risk to credit insurance.
• Volatility in North America and Latin America could affect loss ratios.
• Changes in global trade policies may influence business operations.

Q&A

During the earnings call, analysts inquired about the potential impact of US tariffs and the company’s conservative reserving approach. Coface addressed concerns about volatility in North America and Latin America, reiterating its commitment to managing risks in a challenging global trade environment.

Full transcript - Coface (COFA) Q1 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to Cofas First Quarter Results Presentation. At this time, all participants are in listen only mode. After the speakers’ presentation, there will be the question and answer session. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today, Xavier Duran. Please go ahead.

Xavier Duran, CEO, CoFAS: Thank you very much, and good evening. Thanks to all of you for joining. Happy to report today our first quarter twenty twenty five numbers. You will have seen from the headline, it continues to be a good story for CoFAS. We’re reporting net income at EUR 62,100,000.0.

The turnover is up 2% at constant FX and perimeter with trade credit insurance growing actually 1.2%. That’s an inversion of the trend that we had last year as we’ve had, I think, a negative or zero activity through most of the year. Client activity is up 1.2% for this quarter. Client retention near our record at 95%. Pricing still down, but in pretty much in line with the prior year and with historical trends.

Strong growth continues with Business Information growing almost 15%, same as debt collection. Factoring slightly down, that’s really the reflection of the Industrial Germany and Central Europe business. As you can see, the loss ratio came in at 39.1%, which is up 3.3 points. That brings the net combined ratio at 68.7%, which is in line with Q4, slightly higher gross loss ratio at 38.7%, higher opening year reserving and pretty stable reserve releases from the prior vintages. The costs are up 2.2 points at 29.5.

We continue to invest deliberately according to our Power of the Core business plan, so no change in strategy, deliberate investments because we think it is actually the right strategy in what is a pretty volatile and uncertain environment. And I think we’re the company is well positioned. So total 62.1%, slightly down from last year and ROATE at 12.7%. We’ve added a page on Page five about the environment. Mean, it’s probably pretty obvious that the environment is as uncertain as it’s ever been.

On the left hand side of the page, you can see a chart that represents the global economic policy uncertainty. We are at the stage at a very high level driven by The U. S. Move away from free trade, which has sent this index to record highs. It’s very hard to see where this all settles, obviously.

There’s been a lot of announcements, changes and U turns. But I think whether or not it ends up at a very high or medium or lower level, for now, we are very likely to see a negative impact on world economy and trade just because people are uncertain and that slows down investments and spending. But it also means for us as a business that we see more demand for our business proposition, whether it is insurance or short term information. We think that our positioning basically on monitoring accurately or as accurately as possible short term risks, looking into details by industry, by trade corridor, by business, the expertise we have, the network we have are all extremely relevant in this environment. And so we think we’ve got the right strategy.

We continue to invest deliberately to make our Power of the Core plan a reality. If you go to Page seven, just a little bit more detail on turnover. So turnover is up 2% this quarter. As I said, trade credit insurance premiums are up 1.2 at all things equal. The other revenues are up 7.5.

I’ve mentioned business information at close to 15%, same for debt collection, to 15%, factoring slightly down. Insurance fees that we collect on our insurance contract continue to perform well at 4%, bringing the total insurance related fees to premiums ratio at 13.3%, which is a nice number. When you go to the next page, on Page eight, by geography, I think what you see here is really the description of the world economy with Northern Europe, Germany mainly down from last year. A strong growth though in services, close to 18%. Central Europe has had a bit of a one off with a large contract that’s been reduced and transferred to an Asian region, but still negative.

Western Europe doing a little bit better with France, The UK and Switzerland growing at about 1.9%. Med in Africa actually continues to drive growth at 5.1%, continued Southern Europe and dynamism in The Middle East. North America, tracking along at 1.5%, Asia at 3% and Latin America having a nice surge. Actually, we’re coming out of a period where we had been working on the risk quite a bit, and there’s obviously inflation underlying those numbers in Latin America. If you go to Page nine, the usual breakdown of our business, you see that it continues to be a strong new business year for us.

Actually, at the level of last year, I think there’s good momentum. We are seeing nice demand and nice continued growth in our direct business. We see retention at this stage at 95%, very close to our record 95.7 The market is competitive. People are aggressive. But at this stage, I think we are performing pretty well.

The price effect is still negative. That’s as you know, the long term trend in this business is something like negative 1.5%. So it’s pretty much in line with the first quarter of twenty twenty four. And then on the volume side, as I said, 1.2% is a nice change from the, I would say, the negative or slightly positive we had last year. So it’s a good start to the year.

It’s hard to say where this is going to go, obviously, as there’s lots of uncertainties on the trade as we’ve mentioned before. Going to then Page 10, you see the loss history by quarter on the top left. As we discussed priorly, insolvencies around the world continue to normalize or actually creep up slowly. The current environment is actually not helping. I would say the frequency that we are seeing is now back to normal conditions.

We are seeing the same number of claims that we had seen in 2019 prior to the COVID crisis and then the subsequent events. We see claims amount higher though because there’s been inflation since and that’s reflected in the amount of claims that we’re receiving. The severity is growing, but it is still below the, I would say, the historic average of the business. So nothing really surprising here. You can see on the bottom right hand corner that we still are cautious in underwriting the new vintage at 82% pre discounts and that we are still getting very nice throwbacks from the prior vintages at minus 43.6 So no change in our reserving policy, no change in our stance in the market.

We are very conscious of the environment and we are actually being very close to our clients in managing the risks, knowing that the full effects of the tariff situation will probably develop over the next part of the year. On the next page, we see the Q1 compared to the prior years. I don’t think it’s very relevant during the first quarter to look at this because we’re comparing one quarter with full years. So I’d rather turn to Page 12, where we are seeing the sequence of the last five quarters that the business has gone through. And pretty much, I think what we see here is there’s not much to talk about.

I mean on Western Europe, Northern Europe, Central Europe, Med and Africa, which are the largest and historically more stable markets that we operate in. You can see that the risk is really contained. It operates at levels anywhere from, let’s say, 5% to 50%, but very, very stable. On the three smaller and traditionally more volatile markets that we’re in, North America, Latin America, again, some claims here and there, but no real trend. And as you see, for example, in Asia Pacific, we had a low Q3, a higher Q4 and lower Q1, sorry.

So not much to report in terms of the risk side. On the cost side, on Page 13, as I mentioned, we are continuing to invest deliberately in our direct origination capabilities, in our technology, in our data and in our business services. So the costs in total from Q1 twenty twenty four are up 5.7%. That brings the cost ratio before reinsurance on the bottom right from thirty one point seven thirty three point one, that’s an increase of 1.4 points. And that’s driven by a number of things.

Investments, as I mentioned, are up increased the ratio by 2.9 points. Cost inflation that’s been embarked from the past is still there and creates 1.4 points of drag. It’s offset by the revenues that we get from the new business services by 2.6 points and then some growth that we had in the premiums, which lowered the ratio by 0.4. So the net cost ratio is up 2.2, very slightly lower reinsurance commissions. Fano is going to take us through this.

But pretty much for us, a continued investment in our expertise and our people and our capabilities, which makes a ton of sense in this current market. And with that, I’m actually going to turn it over to Paula to take us through the rest of the pages.

Paula, CFO, CoFAS: Yes. Thank you, Xavier. So premium session rate, we’re close to where we are we were last year. What is changing is, of course, the claim session rate. You can see the increase from 21% to 26.4%, reflecting the increase in the loss ratio that we have we are seeing.

As a result, we’re passing on this result to the reinsurer, moving from minus EUR 30,000,000 to minus EUR 20,000,000 pretax. Lead us to a net combined ratio of EUR 68,700,000.0, very similar to what we’ve seen in Q4 twenty twenty four with an increase in net cost ratio and an increase in the net loss ratio, but still below 70%. If we move to the next page, so we’re now on Page 16, financial portfolio. The mark to market of our investment portfolio stands at EUR 3,350,000,000.00 with a high level in terms of liquid asset cash, which is 17% of the total portfolio. Of course, we are holding cash as we’re going to pay our dividend at the end of this month of about EUR 200,000,000.

In terms of investment income, if we look at the first two lines of investment, recurring income and realized gain and loss, you can see that it is translated in the fact that we are increasing slightly the accounting yield with and without gain and loss. Sometimes it’s moving up. And the new money is now well invested at 3.8%, which is slightly below the level of investment that we have last year, but still above 3%. If we move to the FX line, so I think we have you can see the minus EUR 12,400,000.0. This includes EUR 4,500,000.0 related to hyperinflation mainly in Turkey, which means that the remaining part is the FX negative impact.

You can see the offset actually of this FX negative impact in the IFE line. You can see that the IFE is moving from minus 11,000,000 to minus €4,000,000 And out of the minus 4,000,000 you have 6,000,000 or 7,000,000 related to realized positive P and L impact on FX. So it’s an offset in two geographies of booking between financial results and technical results. IFE, as I said, if you exclude the FX impact, it will be pretty similar at the similar level that what we have in Q1 twenty twenty four, which is more or less EUR 10,000,000 to 11,000,000. This leads us to a net income of €62,000,000 Still very strong net income despite, I think, the decrease versus last year, but this is driven by the fact that our net combined ratio has increased.

Return on average tangible equity, we’re now on Page 18. Total IFRS is moving from EUR 194,000,002,000 to CHF 2,234,000,000.000. This is mainly driven by the net income of the period. And then we have, I think, some trends also some CTAs or translation currency translation impact on our equity. Return on average tangible equity from 13.9% to 12.7%.

Of course, we’re comparing year end return on average tangible equity to an annualized Q1. So I think this the impact would probably be much more meaningful,

Xavier Duran, CEO, CoFAS: I

Paula, CFO, CoFAS: would say, throughout the year than what we’ve seen in Q1. We you know that we don’t disclose any solvency in Q1. What we can say that it will be anyway above the upper range of our comfort zone. Olivier, maybe the floor back to you.

Xavier Duran, CEO, CoFAS: Yes. So a relatively short presentation today. I mean, clearly, we think this is another good quarter for CoFAS. Combined ratio is at 68.7%. It’s stable versus the Q4 of twenty twenty four.

We’re getting nice income from our investment portfolio. The RoTE is above our targets, as you know, through the cycle. Clearly, this is a complicated environment, I mean, not just for CoFast, but for every one of our clients and every industry participant. There’s been lots of announcements made. Some hikes have actually taken place and are starting to weigh.

There’s clearly a lot of discussions, a lot of U turns, it’s very unclear as to where exactly this settles in the end, negotiations that need to take place, etcetera, etcetera. I think when we see this, our emphasis is on, one, staying very close to the action. So we’ve really broken down the world in different segments, and we’re talking 700, eight sorry, 600 different segments that we look at and looking at each individual industries and each individual sector’s impact. It’s I think this environment justifies what we do. I mean, we have experts all over the world, we have data that we’ve been investing on, we have technology, we have processes, we’re very close to our clients, and we’re making sure that we stay current with everything that’s happening in the macroeconomic environment as well as with the individual situations of our clients.

So I think our strategy, which is to be really the best at doing this, investing in risk free services, investing in our technology and our people and our processes, think that makes a ton of sense and we feel we’re as well positioned as possible in this environment. So that’s pretty much what we have for you today. A bit shorter than usual. We are going to turn it over for questions for all of those on the call.

Conference Operator: Thank you, dear participants. Now we’re going to take our first question. And it comes from the line of Michael Huttner from Berenberg. Your line is open. Please ask your question.

Michael Huttner, Analyst, Berenberg: Fantastic. Thank you very much. I hand over to you. Could you give us a feel for how conservative the loss pick, the 82.2 is? It’s just to get a feel.

If I if I look at the slide slide 10, the little blue band, which I kind of think of the the conservatism, maybe I’m wrong, is a little bit narrower than in previous year, but maybe I’m wrong. Any comment here would be useful. The second is you said your number of claims is similar now to 2019, but your combined ratio is not quite 10 points better. I don’t have the quarter, but I think in the year, were at 77% back then. You’re now first quarter, ’60 ’8 point ’7 percent, so nine points or better.

And I just wondered if you can get a feel my feeling is what’s changed is that just like you said, you focus more on clients, etcetera, but the your balance sheet is immensely stronger than it was back then, both in terms of the mix of assets, some more fixed income, less real estate maybe, but probably also more reserving. I don’t know. Any comment here would be helpful. And then I know you said that it’s similar, but I always think as the CEO is a kind of magic region, and it does stand out at 51.8%. And I know you might say, well, 1.8 given where we’ve seen, isn’t a big variation.

But the previous numbers have only ever well, in the past few quarters, only above 41%. So I just wondered if there’s something there which is unusual. Thank you.

Xavier Duran, CEO, CoFAS: Just on that one, one quarter ago, we were at 13%, right?

Paula, CFO, CoFAS: Exactly. And it’s something you can see that sales is only 10% the total premium. So it’s still a little bit volatile. And if you have one or two claims that we had actually, this drives the big. Other than this, there’s nothing unusual to be reported.

Xavier Duran, CEO, CoFAS: And there’s a couple claims that could tell the balance. But I mean, it’s the law of large number only starts to work at for large places. On your Michael, I wouldn’t try to read into the I guess you’re referring to the dotted blue

Paula, CFO, CoFAS: Which is the discounted effect.

Xavier Duran, CEO, CoFAS: That’s the discount effect. So I wouldn’t try to read in that number anything else than the interest rate discount, the interest rate that we’re using for the discounting, right? So my comment to you on this one is we haven’t changed our underwriting stance. We haven’t changed our reserving methodology. There’s really nothing new in these numbers as far as this quarter versus the year before or the two years before.

In terms of your comparison with 2019, yes, had the same number of claims, but the business was smaller at the time because we also have had more premiums, right? So the claims are larger in amount, but so are the premiums. So I think you also have to factor that part of the equation in.

Michael Huttner, Analyst, Berenberg: But if I may if I may say, but it’s not a nice word, but anyway, you you did highlight the reserving point. So I feel I feel still hungry for an answer if if you highlighted it. I thought it was fair to ask. That’s the 82.2%, you actually said it’s higher. That’s why I asked.

Xavier Duran, CEO, CoFAS: Well, mean, I think we as I said, we haven’t changed our stance, right? So we are we have been I think I’ve mentioned over this call, I don’t know, time and time and time again, that we’ve taken a relatively conservative stance when it comes to looking at the market, knowing that a slow but steady normalization was underway for something like four years now, and that hasn’t changed. So we continue to see normalization, I don’t know if that’s the right word, but we continue to see slow and progressive increase in the insolvencies around the world. We continue to be careful about what we underwrite. We continue to reserve appropriately for whatever might lie ahead.

And that’s it. That’s all we’re saying here in these numbers.

Michael Huttner, Analyst, Berenberg: Okay. Thank you.

Conference Operator: Thank you. Now we’re going to take our next question. And the next question comes from the line of Amelie Droshkovic from Deutsche Bank. Your line is open. Please ask your question.

Amelie Droshkovic, Analyst, Deutsche Bank: Yes. Hello. Good afternoon. This is Amelia from Deutsche Bank. Thank you so much for taking my questions.

I just have two, if I may. And it’s mainly just, I mean, on the sort of the commentary around the impact of global trade and business figures. I was just wondering if you sort of have any more color to add on sort of how this impacts your outlook for 2025. And I mean, are you building any new assumptions? Are you building in potential recessions?

How are you sort of how are you thinking about the outlook more generally? And then, I mean, you touched a bit on you oh, sorry.

Xavier Duran, CEO, CoFAS: Go ahead. Go ahead. Got you.

Amelie Droshkovic, Analyst, Deutsche Bank: No. Then my second question is just I was just curious a bit on the demand side. I mean, you’ve touched a bit on demand for trade credit, but I was just wondering if you could add a bit more color on sort of where in particular you’re seeing demand coming from. Yes, that would be great. Thank you.

Xavier Duran, CEO, CoFAS: Okay. So on the economic outlook, I think, frankly, no one was last year expecting the barrage of tariffs and all the activity that took place in the first one hundred days of the U. S. Administration. And so this has been I mean, I’m not this is no news for anyone here on the call, but this has been a bit of a shock to a lot of people.

And clearly, are two effects or there’s a multiplicity of effects that we think are going on. First, people in the short term probably stocked goods, so that probably increased the level of trade short term. Second, nobody knows where the tariffs really end, but I think we’ll have to wait for actuals before we can form a view on how much impact there is today. If you think of 145% tariff between China and The US, it pretty much means trade will be very, very, very difficult. So it’s anticipated this would not be the case.

But is it from let’s say from ’20 to 01/1945, there’s a whole big world out there. So it’s very hard to predict. The one thing though is everybody understands that it’s uncertain, everybody understands it’s volatile. And so I think after trying to protect the very short term by stocking up and making sure you did what you can for the next few months, people are probably being cautious in how they invest, how they spend. It’s very hard to make an investment decision today on factory or on anything.

So our assumption is it’s going to slow down the economy. I think our outlook for the world economy was something like 2.7% growth this year and we’ve brought that down at this stage by 0.4% or something like this to 2.3%. Same for Europe, we’re going from 1.1% to 0.5% growth outlook. It is what it is. It’s worth what it’s worth for now, until things change.

But it’s clearly, I think, in our view, an anticipation that the economy is going to be slower. Probably inflation will be higher in heavily hit sectors of The US economy, and it’s very likely, most likely, that insolvencies will keep going up in that environment because the adjustment to that new world is gonna take some time and not everybody’s gonna do perfect. On the demand for trade credit, I think it’s just the uncertainty. Mean, it’s a natural phenomenon. When you start to see that the world is riskier, start to think about how do I protect my business and you start to look for people who might have answers.

We don’t have an answer on where this all ends, but we do have means to look at your short term counterparties and figure out how well they’re doing, at least as good as anybody can. So I think that’s where the demand comes. It comes from, I would say, almost all segments in the market. There is obviously interest in looking at what we have to offer and seeing if that can be put to use, to good use in the different segments that we operate in.

Conference Operator: Thank you. Thank you. Now we’re going to take our next question. Just give us a moment. And the question comes from the line of Benoit Valeau from ODDO BHF.

Your line is open. Please ask your question.

Benoit Valeau, Analyst, ODDO BHF: Good evening. Thank you for taking my question. Three questions on my side, if I may, sorry to come back on current economic environment. But can you maybe give us more color on the risk management action you’ve taken over the last, let’s say, weeks and months and year to date in terms of number of action, in terms of or your total credit exposure has evolved or maybe, for example, some figures regarding the potential reduction on your exposure to low quality business? Second question, and I know it’s quarterly only figures.

And but when I look sorry to come back also on your loss ratio per geographies. Is there anything specific you mentioned for LatAm? And regarding North America, So it’s only a quarter, but it seems that there is an increasing trend in terms of loss ratios. I just would like to have your view on that. And maybe the third question is regarding cost.

When you look at your internal cost, in absolute term, it has increased by broadly 8% or EUR 14,000,000 versus Q1 last year. So it’s a significant increase. You mentioned, of course, you’ve made some investment. What has been the increase which is related to BI in absolute terms within this EUR 14,000,000, just to look at the, I would say, underlying trend? Thank you.

Xavier Duran, CEO, CoFAS: Yes. So let me start with the risk question. So on risk management, as I said, we’ve kind of broken down the world in, let’s say, 600 different segments that our economists look at. We track the effect of the measures that are actually being put in place because all the other ones can change so fast, on each one of these sectors. And then we drill down within those sectors and into the companies that are most likely affected and those where we have the biggest exposures or those where we have the weakest participants.

And so there’s a whole amount of work going on. By the way, this is no different than anything that we’ve done in the past. It’s just more intensity because there’s more action and there’s more news coming. The news flow is actually stronger. So we stay very close to our clients.

I mean, I think our teams are busy. We’re not sitting idle. We’ve been working on some of these sectors or industries for quite some time. I mean, we all know that the automobile industry is right in the bullseye, the steel industry, the aluminum industry, so these are all areas that our analysts are reviewing very, very diligently. In terms of the quarterly figures, you mentioned The U.

S, I think we had a couple of claims, larger claims, would say, at the beginning of the year, but that number has been coming down. I mean, it’s again, it’s 9% on one quarter. So we’re talking about something that if you look at it small enough, it’s going to be volatile.

Paula, CFO, CoFAS: Exactly. I think, Bob, for North America and LatAm, if you exclude, I think, one or two claims, large claims that we have, I think the loss ratio is really benign.

Xavier Duran, CEO, CoFAS: Yes. The other question was Latin America? Yes. Yes, but look at Latin America, mean, if you look back in the history of our business, it keeps oscillating from 0% to 100%. This is 4% on one quarter.

So this is really 1% of our yearly turnover. It’s going to be volatile. Then in terms of our investments, I mean, we are really to the letter sticking to our Power of the Core playbook, right? I mean, we’re managing the costs very tightly, and we are deliberately investing in those things that we said we would. So those things that we said we would invest in have to do, of course, with BI, which has been a significant investment.

I didn’t mention that, I think, on the call, but we probably have between BI and debt collections, 700 people at the end of the quarter. I mean that’s a very significant increase from, I would say, the 50 people or so we had four, five years ago. We’re investing in the technology that relates to this area. We’re investing in the data. We’re investing in the sales origination for the insurance business, and in the technology in general, because that’s where I think the game is moving slowly but surely, actually not so slowly.

So we’re really completely aligned with our plan. There’s no surprise in these numbers. I just think there’s not going to be a better time to invest. I mean, the environment is what it is. There’s no reason to slow down the investment because I think we are also delivering on growth in these areas.

And we’re creating something that has value for the future and which is differentiating in the market. And the more we invest in data and technology, the more we learn about what this the power that it has and the value that it can have, both in terms of new revenues, risk free revenues, but also in making our insurance business better. That’s pretty much what I would have to say.

Benoit Valeau, Analyst, ODDO BHF: Okay. Thank you very much.

Conference Operator: Thank you. Now we’re going to take our next question. And this comes from the line of Michael Huttner from Berenberg. Your line is open. Please ask your question.

Michael Huttner, Analyst, Berenberg: Fantastic. Thank you for this second opportunity. I had three. One is Q2, what we’ve seen most recently? Has there been any because the tariffs came in after the end of Q1.

The second is on tax. I think in tax, from memory, Q4, you put a big amount aside kind of thinking about what might happen going forward. And now the tax seems to normalize again. Is there anything to say here? Have you been too prudent or, you know, has has the tax issue now settled?

And and the last one is on the I’ve forgotten. It will come back to me in a second. Sorry about that.

Xavier Duran, CEO, CoFAS: Maybe we start with the tax while you find the you try to Well,

Paula, CFO, CoFAS: no, that’s in Q4, tax rate was and it used to be usually in Q4, we have have a higher tax rate. But last year, if you would collect, we booked some impact related to the worldwide 15% tax, the Pillar two, and it has an impact of EUR 2,000,000 was booked in Q4. I think this year, in Q1, we’re just going through the normal computation. What needs to be highlighted, though, is the fact that, of course, our tax composition is depending on the results and the level of income tax of all our geography. As we are passing on less results to our reinsurer, I think, of course, the reinsurance company they were having in Switzerland taxed at 50% is is driven now our average tax rate down compared to last year.

So it’s really a matter of geography of of results that drives the tax impact.

Xavier Duran, CEO, CoFAS: And as pertains to your first question on Q2, I mean, there’s really nothing to add here. All the comments I made pertain to where we are today, right?

Michael Huttner, Analyst, Berenberg: Excellent. Thank you. Yes, the question was exactly on what Fallout said, the reduction in the cost of reinsurance from EUR 30,000,000 to EUR 20,000,000. Is there anything particular here?

Paula, CFO, CoFAS: Well, no, because it’s it’s just that, you know, as you can see, it’s it’s just the fact that we are passing on the more claims to our reinsurers as it’s reflecting the increase on our loss ratio. Nothing unusual, I would say, and this is where our tax treaty is paying its worth.

Michael Huttner, Analyst, Berenberg: And and would that be if does it depend on the pattern of claims? In other words, would reinsurance cover you better if you had more smaller claims or fewer big claims? Is there some kind of difference here?

Paula, CFO, CoFAS: No. Remember, our reinsurance schemes, we have three level, right? You have the proportion of the quota share of 23%. That has not changed for years now. And then you have, of course, stop loss and excess of loss.

As far as I know, there’s no stop loss like this has not been been has occurred for years now. So it’s really the cottage share that’s playing that’s playing its role.

Michael Huttner, Analyst, Berenberg: And the last, if I may. The number which I mean, all your numbers actually, given the environment, very strong. The number which appears particularly strong given the current environment is the, what I call, reserve release, the EUR 40 odd million. Is there anything here to say? Is that more related to past prudence?

Or is it just the quality of reserving, which flexes unchanged at the time?

Paula, CFO, CoFAS: The prior development is just, you know, the again, I think that the our our reserving policy has not changed. So, of course, you know, just reflecting what we used to do to do and what we’re doing. Nothing in particular to be highlighted here, Michael.

Xavier Duran, CEO, CoFAS: We remain very consistent. And actually, that number hasn’t moved now. You can see it on the page, right, for for literally years. Right?

Michael Huttner, Analyst, Berenberg: Exactly. Yes. No, that’s outstanding. Excellent. Okay.

Thank you.

Conference Operator: Thank you. Now we’re going to take our next question. And it comes from the line of Pierre Chedwell from CIC. Your line is open. Please ask your question.

Pierre Chedwell, Analyst, CIC: Yes. Thank you. Apparently, I was not in the line of question. So I don’t have a lot of question left. Maybe a general comment because you said a lot of things regarding the evolution of the economic climate, etcetera.

But I am a little bit surprised by your your tone, if I may say. You seem a little bit more, I wouldn’t say, optimistic, but positive compared to your traditional stance on outlook which is quite conservative and we can see this conservatism in your targets notably your targets on combined ratio. What would you say regarding your outlook? You’re quite optimistic or pessimistic? And my second question is a follow-up on reinsurance.

Do you see any increase in premiums of reinsurance due to the current environment and what you said? And could it change a little bit or marginally your policy in this area? Thank you.

Xavier Duran, CEO, CoFAS: Well, I think that, frankly, the two questions kind of participate in the same underlying question, which is what’s going to happen. And I think nobody knows. I mean, if you have a clue, let us know because as I said before, mean, with such high numbers being mentioned of where the tariffs are going to land, it could be anything. So I don’t know if it’s I don’t know if I can be positive or negative. I I think we just don’t know.

And we’re gonna have to see where the dust settles, and then we’re gonna have to do the work of going line by line and figuring out who’s impacted and who’s not. I mean, for me, it’s not about being optimistic or pessimistic. It’s about taking whatever the world is gonna decide for us and dealing with it. And the only thing I can tell you is this business has been, over the years, investing in its people, its process, in its technology, in this and this and that. I think, you know, we were in as good a shape as we’ve been, but the environment is what it’s gonna be, and there’s not much I can do about it.

So I tend to try to worry about things I control and less about things I don’t control, I think is probably the way to think about it. And as far as the reinsurance, I think it’s the same thing. The question is, where is that going to be? I think in the end of the year is when we renegotiate our insurance contracts. And I think in the next nine months or eight months, we’re going to know a lot more about what’s going on in the world.

So that will, again, not be for me to decide, but we’ll have to take whatever the market’s going to give us.

Benoit Valeau, Analyst, ODDO BHF: Okay. Thank you.

Conference Operator: Thank you. Now we’re going to take another question. And it comes from the line of Michael Huttner from Berenberg. Your line is open. Please ask your question.

Michael Huttner, Analyst, Berenberg: Thank you. Last one, sorry. Demand versus volume, which way do you think the coin settles? Is it up or down?

Xavier Duran, CEO, CoFAS: Demand versus

Paula, CFO, CoFAS: This is volume.

Xavier Duran, CEO, CoFAS: What do you mean?

Michael Huttner, Analyst, Berenberg: So you’ve got your clients asking for more cover or being more worried and and but the underlying world trade environment being more more more more challenging. And which way It’s

Xavier Duran, CEO, CoFAS: hard to say because, you know, I think on one hand, it can be very different by sector, by area. I mean, inflation in The US will drive activity in The US, but that’s not our biggest region. I would say a slowdown in the economy drives lower activity. I would say, general, the commodities going lower is not helping our activity. So that’s never been a great thing for us.

General uncertainty drives demand. For smaller clients who start to struggle, sometimes it also means they can’t pay their premiums or they don’t want to pay their premiums or whatever. So I mean it’s a mixed set of things.

Paula, CFO, CoFAS: And even on volume, Michael, I think volume is driven by, first, of course, the volume of activity of our customers that might decrease if, you know, if if the the GDP what what GDP is going down, but inflation is is pushing up the volume.

Amelie Droshkovic, Analyst, Deutsche Bank: So at

Paula, CFO, CoFAS: the end of the day, I don’t even know where it’s where it’s going. It’s really the $1,000,000 question.

Michael Huttner, Analyst, Berenberg: A lot

Xavier Duran, CEO, CoFAS: of unknowns here.

Michael Huttner, Analyst, Berenberg: A lot

Xavier Duran, CEO, CoFAS: of unknowns. All

Michael Huttner, Analyst, Berenberg: I can say is in light of unknowns, the numbers look really good. Thank you.

Xavier Duran, CEO, CoFAS: At least you know what the consequences are, but we don’t know what we don’t know what the cause is going to be.

Michael Huttner, Analyst, Berenberg: Absolutely. Thank you very much.

Conference Operator: Thank you. Speakers, there are no further questions. I would now like to hand the conference over to Xavier Durang for any closing remarks.

Xavier Duran, CEO, CoFAS: Well, thank you very much. I mean, for all of you who have been listening in and have been asking questions, I mean, we didn’t mean to close this early, but I mean, I guess, it’s a good thing. Let’s see. We will be speaking again, I think, on the July 31 for the Q2 first half results. The general I’ll just remind everybody, the general assembly of COFAS takes place on the May 14.

And so I guess to all of those questions about what the environment holds, I think we’ll probably know a little bit more. But who knows? We’ll see. Thank you for calling in, and looking forward to speaking with you soon.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now all disconnect. Have a nice day.

Amelie Droshkovic, Analyst, Deutsche Bank: Thank you.

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