The new CEO Jean-Marc Pillu stated: “After a difficult 2009, Coface’s operating profit improved by €355 million in 2010, bolstered by a 45-point improvement in the loss ratio and faster expansion in credit insurance, our core business. This very positive trend was accompanied by a significant increase in exposures provided to our clients to support their development.”
Consolidated premium growth was up 4% from 2009. Loss ratio declined from 98% in 2009 to 53%. Growth came from two key markets, Germany up 12.5% and the Americas growing at 11.2%. Premium growth in Asia seems to be still anemic with a below average growth of 3.7%. Factoring services (7% of total revenues) grew an impressive 19% indicating an increasing trend in a shift to alternative financing by businesses rather than relying on bank loans. Services (commercial credit information and debt collection) declined by 10% which more than reported by its peer groups. In 2010, Coface booked €48 million in non-recurring expenses as a result of its efforts to enhance productivity and strategically refocus on higher added-value businesses.
Coface also announced a strategic reorientation to refocus on its core business, which is credit insurance. It will exploit opportunities in factoring services which offer a high level of synergy with credit insurance. In regard to the services segment Coface plans a gradual reduction of low value-added services. It will also cancel the European ratings agency project, however, as part of its credit insurance business; Coface will continue to issue private ratings on companies, which cannot be used for regulatory purposes. Source: Coface Press Release
Strategic Implications: This latest Coface announcement puts an end to two ‘hobby horses’ of the previous CEO Jerome Cazes: His first aim was to build a global commercial credit information business as an alternative to D&B. His second aim was to create a European rating agency as a credible alternative to Fitch, Moody’s and Standard & Poor’s. Last year Cazes openly criticized the credit rating industry for their role in the global financial crisis indicating that he could create a better alternative. Obviously his shareholders did not buy into such a strategy.
By exiting the commercial credit information business it may raise the specter of a competitive realignment in Europe. One wonders were Coface largest information assets (Graydon and SCRL) may end up. Disinvesting the many minority interest all over the world may take a bit longer. There is also Coface’s investment in the EASY Number (a unique business identification number) which was launched several years ago with its partner Creditreform. According to the EASY Number Website approximately 60 million records have been assigned an EASY Number. D&B announced recently that is D-U-N-S numbered global data file has now reached over 215 million records.