“Our new strategic plan Build to Lead will leverage the successes of Fit to Win."

Build to Lead will seek to take further the business and cultural transformation undertaken under Fit to Win

The strategic plan Build to Lead is based on strong beliefs: credit insurance is an attractive service business, with strong barriers to entry and growth potential where Coface has strong capabilities which it will seek to deepen: its skills, scale and agility.

The economic environment in which Coface operates is becoming less predictable. Since 2017, global economic growth is slowing, because of long-term trends (ageing population, market saturation). The accumulation of private debt and the pursuit of non-conventional monetary policy by numerous central banks has seen the multiplication of “zombie” companies. Consequently, risks are on the rise (lower client activity, progressive increase in defaults, rising frequency of difficult to or impossible to forecast events, political, social or even health related). But this environment also offers opportunities for Coface (stronger demand for insurance, rising financing needs, higher demand for relevant information, risk re-pricing opportunity).

This new plan will broaden and deepen ongoing transformations at Coface to be recognized as a leader in its industry. It includes two types of initiatives to drive the business forward: the first for the core credit insurance business and the second for the specialty businesses that can leverage its capabilities and know-how.

Our trade credit insurance business is targeting the highest standards in the industry, through three strategic directions:

• Simplify and digitize our operating model: a simpler operating model is key to reaching a better quality of services, reducing costs and risks of errors. It also allows to free up resources to be reinvested in innovation which also can be more easily integrated in existing systems;
• Differentiate through risk and information expertise: Coface will continue to boost its risk underwriting, its information and claims management capabilities. It will invest in new technologies and will integrate the benefit of its partial internal model in its underwriting;
• Create value through selective growth: Coface will continue to invest in select markets, favoring differentiated growth. Lastly, Coface will maintain its segmented approach to drive profitable growth.

Build to Lead will leverage Coface assets in specialty businesses, adjacent to credit insurance. It will leverage the Group’s existing risk and legal infrastructure, building a portfolio of growth options:

• Factoring: Coface defined an action plan implemented by a new leadership team in Germany to generate profitable growth and bring margins of the factoring business in Germany and in Poland in line with the group’s overall target;
• Single Risk and bonding: from a clean base and within its unchanged risk appetite, Coface wants to grow either through existing business (Single Risk) or through prudent and progressive extension to new businesses or geographies for bonding;
• Information and services: The information world is undergoing massive change. Coface is confident in its unique assets and wants to monetize existing offers betters and explore new commercial offers to accelerate growth of this capital-light activity.

Coface will seek, after the implementation of this plan, to achieve higher financial targets

With this strategy, Coface will reach more demanding financial targets than in the Fit to Win plan. Specifically:

• An ~80% combined ratio through the cycle, a 3 ppt improvement
• An average return on tangible equity of 9.5% through the cycle. The target is increased despite the continuous decline in investment yields. Coface has deliberately chosen not to change its risk appetite or asset allocation
• Dividend pay-out ratio to be at least at 80%, a 20 points increase compared to Fit to Win, with a solvency ratio in a new target range (155-175%)