Credit Insurance in Latin America Coface Latin America 18 th 20 th March 2014
1 Credit Insurance in Latin America
Latin America: Market Trends Total Market Dec 2012: USD 289 mln (EUR 219 mln) (+11%) Average growth 10 years: 16% p.a. Average growth 3 years: 6% p.a. Sept 2013: USD 222 mln (EUR 164 mln) (+1%!) Little growth (<1%) in Brazil, Chile and Colombia. Coface Market share 38.2 % (Sept 2013) EUR 17.4 mln in new business in 2013 10% 8% 2% 2% 33% Brazil Chile 300.00 250.00 200.00 Others Ecuador Mexico Argentina 150.00 Colombia Argentina 20% Colombia Ecuador Others 100.00 50.00 Mexico Chile Brazil 26% Regional Markets - Latam USD COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 3
Latin America: Market Trends - 2 Potential Market Dec 2012: USD 289 mln (EUR 219 mln) Highest penetration index in Chile: 2.81 Hypothesis for growth: Based on 75% of the Chilean Penetration index across the main Latin American economies, the total Credit Insurance market grows to USD1.1bn (EUR 830 mln) Brazil grows from USD 94 mln to USD 500 mln (5x) Mexico grows from USD 57 mln to USD 250 mln (5x) Argentina grows from USD 28 mln to USD 100 mln Colombia grows from USD 21 mln to USD 80 mln Horizon: 10 years 3,00 2,50 2,00 1,50 1,00 0,50 2,81 Penetration Index: Credit Insurance Premium / GDP * 10,000 Source: LatinInsurance 0,74 0,62 0,58 0,51 0,47 0,34 0,27 0,13 0,13 0,10 - Chi Ecu Col Arg Reg Méx Bra Uru Per Ven Bol Credit Insurance Maturity: 16 years Coface pioneered Credit Insurance with a company in Chile and Argentina (1997-98) Continental Chile is the only local legacy player still existing (now 49% Atradius) High growth started in 2006 with significant investments by Coface, followed by Euler- Hermes, Cesce and Atradius. Distribution Channels (Coface) Portfolio Multinationals 40% Local policies 60% New Business Direct Sales 30% Brokered Sales 30% Multinationals 40% COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 4
Latin America: Competitive Environment Coface Leading Market position 38.2% (Sept 2013) Leader in 5 countries: Brazil (53% ), Argentina (67% ), Ecuador (75% ), Peru (55% ) and Uruguay (87% ) Second player in Chile (25% ) Third player in Mexico (24% ), Colombia (17% ) Highest sustained growth Most infrastructure (Countries Cities dedicated staff) Integrated Regional Team 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Coface Atradius Solunion Cesce Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Sep-11 Sep-12 Sep-13 Market Shares 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Ecuador Argentina Brazil Chile Mexico Colombia Latam Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Sep-11 Sep-12 Sep-13 Coface Market Share COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 5
Latin America: Competitive Environment -2 Atradius Group Second Market position 25% (Sept 2013) Leader in Chile (55% ) through Continental (49% Atradius) Second Player in Argentina (15% ), Peru (25% ) through Insur Second player in Mexico (30% ) direct through Atradius Third player in Brazil (14% ) direct through Credito y Caucion Continental is aggressive (low retention high loss ratio) 4 brands and 3 distinct management profiles Atradius in Mexico, CyC in Brazil and Continental/Insur in Chile Solunion (including Euler Brazil) Recent merger between Euler Hermes & Mapfre Mexico, Colombia, Chile & Argentina Brazil is not included Third Market position 22% (Sept 2013) Leader in Colombia (Mapfre 56%), Mexico (34% ) Second player in Brazil (Euler 20% ) Third player in Argentina (12% ) Fourth player in Chile (8% ) Transition turbulence 22% 8% 7% 38% Coface Atradius Solunion Cesce Others 25% Market shares Sept 2013 COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 6
Latin America: Competitive Environment -3 Others Cesce Reduced activity in the region, both in Credit Insurance and in Bonds & Guarantees, linked with the changes in Cesce Head office in Madrid Eroding Credit Insurance Market position in the region 8% Since introduction of new policy with variable pricing Lack of regional integration Focusing on Bonds & Guarantees Active in Brazil (5% ), Chile (2% ), Mexico (8% ), Argentina (6% ), Colombia (27% ) and Peru (20% ) Magallanes Local player only active in Chile (3 rd player 11% ) General Insurer with Bonds & Guarantees and Credit Insurance activity Mainly focusing on Domestic Chilean transactions Chartis/AIG Active in Brazil (4% ) and Mexico (3% ) Different product: Excess of loss (XOL) and with Non-Cancelable limits COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 7
2 Coface Latin America 2013
EUR Mln Coface Latin America - Sales High sustained turnover growth in the credit insurance market Average annual growth (in USD) 24% p.a. over last 10 years vs. 16% for market 21% p.a. in EUR 12% p.a. over last 3 years vs. 6% for market 11% p.a. in EUR EAV increased 36% in 3 years (2010-2013) Growth comes from both Organic growth Expansion of footprint 2006 establishment of Coface Insurance Brazil, with high growth in 2008 2006 start (fronting) in Panama (Mundial) and Ecuador (Oriente) 2007 establishment of Coface Insurance Mexico 2007 start with Credit insurance (through fronting) in Colombia (Mundial) 2010 start Insurance Branch in Ecuador 2013 start (fronting) in Uruguay (Sancor) 2014 start Insurance company in Colombia 100 80 60 40 20 Other Factoring Services Insurance Earned TO Market share continues to evolve 24% in 2004 38.2 % in 2013 (Sept) - COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 9
Coface Latin America Supporting Customers Largest team and infrastructure 400 Colleagues in countries with 7 insurance companies and 1 single Brand & 1 single team Providing support and security in turbulent times Credit insurance as risk-mitigation for companies and corporates 300% 250% 200% 150% 100% 50% Latin America - WeeklyInstantaneous Loss Ratio Ceiling 50% rolling 6 months average 2013 YTD; 122% 500 450 400 350 300 250 200 150 100 50 0 Regional Peru Andes México Chile Argentina Brazil Productivity 0% 2011 2012 2013 Staff COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 10
Coface Latin America - Organization Matrix Regional Management structure 7 Regional Managers focusing on transversal functions in the region Commercial Risk Underwriting Finance Claims & Information Legal & Compliance Information technology Human Resources 7 Country Managers focusing on Operational activity within a country Each entity has a Management Committee ( Manco ) reflecting the 7 Functional Managers and with dual reporting to the Country Manager and Regional Manager Each Country has the operational resources for growth. Commercial team, Risk Underwriting team, Enhanced Information team, Claims & Collections team Regional teams Basic company information Produced in Coface Services Peru Coface Peru also serves as back-office (+ Spain & USA) Global Solutions distributed team to service Large Multinationals Dedicated staff in Brazil, Mexico, Chile and Argentina 11% 4% 3% 2% 43% Brazil Argentina Chile Mexico Colombia 17% 20% Ecuador Peru Coface Latin America T.O. COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 11
Coface Latin America - Specificities Information Basic Company information Produced by Coface Services Peru for 19 Spanish Speaking countries 65,000 reports (full & light) per year Alternate source for Mexico and Colombia Enhanced information To enrich basic information with local knowledge, detailed financials & monitoring Dedicated teams in Brazil, Argentina, Chile, Mexico, Colombia, Ecuador & Peru Debt Collection 7 collection centers covering 35 countries Collection partially outsourced Project in Mexico, Brazil, Colombia, Chile Collection rate 37.57% (Nov 2013) Legal collection outsourced (Lawyers) 55% 50% 45% 40% 35% 30% 25% 20% LATIN AMERICA 15% 10% 5% 0% PROTRACTED 2012 INSOLVENCY 2012 GLOBAL 2012 INSOLVENCY 2013 PROTRACTED 2013 GLOBAL 2013 TARGET 2013 COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 12
Coface Latin America - SWOT Strenghts Market Leader (38%) Largest foot-print with dedicated teams in 7 countries (and 7 local insurance companies) Stable & Experienced Management Team. Far-reaching regional integration both at Management and at Operational level. Risk Underwriting close to the risk with high local & regional delegation, supported by local Enhanced information teams Opportunities Continuing investment both inside countries (distribution) and with new insurance companies, leading to strengthening of market position New product offering (such as TopLiner and SME policy) opens new business segments Growth Region, strong emerging markets Weakness New staff in a growing organization, requires training and support. Economic slowdown in some countries Threats Some competitors commoditizing the product Competitors offering non-cancelable limits to large multinational clients COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 13
3 Credit Insurance in Mexico
Credit Insurance in Mexico Market Reached MXN 787 mln in 2013 (just short of USD 43 mln) Average growth 10 years: 13% BUT average growth last 3 years only 7%, and in 2013 only 5% 3 rd market in credit insurance in the region Coface outperforming the market 20% average growth in last 3 years, and 11% in 2013 Market evolved From 2 players in 2000 to 6 players in 2008 Now the 3 global credit insurers have 88% of the market. 300.0 250.0 200.0 150.0 100.0 50.0 0.0 Atradius Solunion Coface Cesce AIG Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Mexico MXN 70% 60% 50% 40% 30% 20% 10% 0% Coface Atradius Solunion Cesce AIG Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Market Share COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 TH & 20 TH March 2014 / 15
4 Conclusion
Coface Latin America {towards 2018} Drivers for sustained growth 2018: 4 different axis for growth Footprint: Expand the presence of Coface as Direct Insurance company Expand through additional fronting schemes where it creates added value or additional distribution (Central America, Caribbean, others) Distribution Channels: Sales through General Insurance Companies and Guarantee specialists Through Coface Partners network Regional Players in large countries Continued efforts with banks to expand Credit Insurance Increase the number of Agencies Organic growth: Enlarged and focused Direct Sales Teams New Cities with a Coface Office Short term Project in Brazil Global Solutions Team Focus on Multi-Latinas Product innovation (TopLiner, SME Policy) Economic Growth Relative low inflation, leading to increased Supplier Credit Regionalization of large companies, creation of Multi Latinas Low level of Bank Loans and increasing growth of SME s COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 17
Conclusion & Key Facts Coface is the Largest Credit-insurer in Latin America 102 Mln in 2013 Earned Turnover Highest sustained growth amongst competitors 38.2% market share (sept 2013) Credit Insurance Offer in 9 countries Presence in 19 Cities in the region covering all Industrial and Services centers ±400 dedicated staff Experienced and stable management team (>10 years track record as a team) Specialized teams for (1) Multinational Clients and (2) Basic company information Continued investments in future growth Direct «Coface presence» in main countries Distribution agreements COUNTRY RISK CONFERENCES COFACE LATIN AMERICA 16 / TH & 20 TH March 2014 18