COFACE SA (COFA) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the conference call for the presentation of Coface results for the period ending December 31, 2020. [Operator Instructions] As a reminder, this conference call is being recorded. Your host for today's conference call will be Mr. Xavier Durand, CEO; and Carine Pichon, CFO. I would like to turn the call over to Mr. Xavier Durand. Sir, you may begin.

Thank you very much, and good evening, everybody. Thank you for joining this call. This is report for the full year 2020. As you see the headline, we report EUR 82.9 million of net profit with a strong end of the year. So for those of you who've been following the story, over the course of 2020. You know that this has been an extraordinary year by all means. We all went into confinement 2 weeks after the presentation of our Built to Lead strategic plan. And I would say, since then, nothing has happened as planned. But in the end, we end up delivering on a lot of the things we had set for ourselves, I think. You see the key metrics here on Page #4. Turnover is down 0.6% at constant FX and perimeter with trade credit insurance, slightly lower at 0.8%. As you know, we've been working on developing risk-free adjacencies in terms of -- which is consistent with our Build to Lead plan. And I think in the context of the global COVID pandemic that we've been through, the business has been performing well from an operating standpoint. Client retention, again, reaches a record level, better than the prior years. Our new business is actually the highest that it's been in the last 5 years. Our client activity is declining. And we know that was going to be the case. Price is improving for the first time in 11 years. I think the -- if you put in contrast, the 0.6% drop in turnover versus the 7% nominal drop in GDP that the world has been going through, I think that's -- sorry, 5.5% nominal and at constant outside of inflation, 7.1%, I think it's a pretty strong performance. Our factoring in debt collection businesses have been slowing because there's less activity on the delinquency side. At the same time, that is being made up by higher sales of business information. The loss ratio comes in at a 2.7% higher than last year at 47.7%. The net combined ratio comes in at 79.8%. If you exclude the government schemes, which, as you know, cover at this stage, 60% of our book, it comes in at 84.5%. Clearly, we are benefiting here from the unprecedented set of government measures, which have supported the economy. You see that our performance in Q4 is quite exceptional at -- a net loss ratio at 18.3%, 33.1%, if you exclude the government schemes that we have engaged into. And the favorable -- and the claims of the past continue to collect favorably. In 2020, the net cost ratio is down 0.6%. That's a trend that's very consistent with what you've seen in the prior quarters. So we're 0.6% better than last year at 32.1%. We've been dropping cost faster than turnover. The net combined ratio at 58.3% for the fourth quarter, that's 69.4%, if you exclude the government schemes is better by 22 points on what I would say is a record low level of net loss ratio. And then I think it's a natural consequence, but it's worth noting that the government schemes have actually cost us in 2020, a total of EUR 6 million, and it's notably quite significant in the fourth quarter because the government schemes have actually cost us EUR 13 million in the fourth quarter. So the net income group share comes in at EUR 82.9 million that means that the fourth quarter comes in at EUR 30.5 million, which I think is a very strong performance in light of what I just said before. The earnings per share are, therefore, coming in at EUR 0.55, which were down 43% from last year. On the next page, you see that our solvency ratio comes in at 205%. That's better than last year, is closing and including the fact that it includes a 100% payout proposal for the profit of 2020. The return on average tangible equity is down at 4.8%. The solvency ratio would be 191%, if we exclude the government schemes, that's still very much above our 155% to 175% range. Our retention of reinsurance has been stable at -- with total reinsurance sessions at 23%. We've renewed half of the program as we do every year. I would say despite the pressure from the reinsurance market to increase rates very significantly, we were able to renew them at conditions, which are kind of broadly stable or at least close to what we had before. In terms of capital management, we completed the EUR 15 million share buyback that we agreed to in the third quarter. That allows us to buy 1.8 million shares, which have -- are destined to be canceled. We're, therefore, proposing a EUR 0.55 dividend per share, corresponding to 100% payout ratio, which is, as you recall, in line with the target we've set for Build to Lead. There's also, obviously, an evolution in terms of the governance, with the arrival of Arch Capital into our capital. As you know, the transaction has been completed. So now Arch owns 29.5% of the capital of Coface. The Board members from Natixis have resigned. We've appointed -- elected 5 -- 4 new board members from Arch Capital Group, and a new Chairman in the name of Bernardo Sanchez Incera. And the other thing I just want to stress is while we've been going through the crisis in 2020, we haven't lost sight of the Built to Lead targets that we had set for ourselves. They remain completely valid, and the business has been continuing to move forward on a number of things, even though we were dealing with a quite impressive crisis. So if you go to Page 6, I just wanted to spend a little bit of time on the new governance for Coface. With our new Chairman, Bernardo Sanchez Incera, very broad experience in banking and in retail. As you know, retail is a significant part of what we do in terms of credit insurance. You then have 5 independent directors, which have been with us for quite some time now and know the business very well. And we are happy to welcome 4 new Board members from Arch, with a large variety of experiences in risk and in operations and in financial space more broadly as well as legal. So we now have a total of 10 directors, the Chairman and 5 directors are independent. So we have 60% independents, 40% female, 40% non-French. It's a very experienced and very diverse group to lead Coface, and we're excited about writing the next page of Coface's history with this new board and shareholder. Going to Page 7, talk a little bit about the environment. So I was mentioning on the top left that this has been an incredibly extraordinary year, with GDP dropping 7.1% in '20 from 2019 in terms of volume, 5.5% in terms of nominal. We are expecting a rebound in 2021. So as you know, this is a this is a sanitary crisis. We have now a line of sight to vaccination, but at the same time that this is giving us some hope. There's also clearly, attempts by the virus to circumvene that new tool through mutation. So I think it's going to be a cat-and-mouse game here. But we do expect the effect of the vaccine to take hold I would say, by the middle of the year. And we do expect a gradual recovery, more likely in the second half of the year. We do see that when people are allowed out again, there is pent-up demand and there's a strong propensity of people to spend money. It's noteworthy on the bottom left to see that this has been a very unequal crisis by sector. I mean, some sectors have actually fared very well during this crisis. Pharma, that's obvious, agro, electronics, electronic distribution have been doing very well. At the same time, travel, leisure hotels, tourism have been doing very poorly. More importantly, I think COVID-19 has accelerated a number of ships, and we see it in our own business. I mean, we all went in work-from-home mode in the space of a day, and none of us would have thought about doing something that crazy but the COVID crisis showed us that not only could we do it, but it was also effective that we could do it without impacting service levels with clients that our productivity was actually increased and that the engagement of our staff is actually better than it was last year by 24 points. So digitization is clearly accelerating. The zombification of the economy, i.e., a range of companies who have been given support will be facing difficulties paying those monies back. There is a temptation by a number of countries to pull back and to try to protect themselves. So regionalization, protectionism is on the rise. The decarbonization of the economy is also going to become a much bigger theme as a result of this crisis. So still a lot at stake, a lot of uncertainty in the environment. The U.S. and Europe are expected to rebound. China has actually benefited, I guess, from the crisis in relative terms to the rest of the world. Emerging markets continue to -- will continue to be volatile. I think what's new here is that the governments have supported the economy like never before. And this has created a disconnect between the macroeconomic impact, which you see on the top left of the chart, and what we've seen in terms of delinquencies. Actually, in a lot of countries, company insolvencies have actually been reduced in 2020, which is completely counterintuitive, but the result of the unprecedented actions of the government. We know that this will not last forever, that the virus crisis will abate. And at some point, the governments will have to pull back their support. And so clearly, we do expect the things to normalize. And we do expect the insolvencies to -- on the rise at some point in time. We do believe monetary policies will remain highly expansionary and the world has shifted into something new. As you are aware of most of the credit insurance schemes that have been put together by the governments have been expanded for the first half of the year or are being expanded as we speak. On Page 8. I've shown this graph many times, but you see on the top left now, we have been extremely active multiplying by more than 2 the number of prevention actions that we've led on the portfolio. The bulk of that actually took place in Q2 and Q3. It's reduced in Q4, but it's still higher than it was historically. Our total exposures are down 9.5% year-to-date. Again, with more than 2/3 of that having happened in the first half, the drop from the end of June is only 3.5% -- 3.3%, actually -- with actually some momentum starting again in the industry as we speak. You can see the reductions being very different by markets, much more limited in Western Europe, Northern Europe. And as we get into more risky parts of the world, actually, they have been much more impacted as Latin America with being the -- probably the extreme example at almost 28%. If I go to Page 9, we just wanted to highlight a little bit more about the government schemes. So they cover 64.2% of our balance sheet in terms of the 2020 underwriting. In terms of 2021, we're just slightly below at 63%. We have -- the terms are slightly different, a little bit better in Germany and Northern Europe and better in France, where our quota share is down from 75% to 20%. But still, we do -- these schemes have been extended for the most part for the first half of 2021, remains to be seen what happens later. We believe these schemes have been helpful in terms of transitioning the world from '19 to the crisis world. But at some point, we do believe that things have to get back to normal, and we've never counted on the governments actually to perform our underwriting of the business. On the right-hand side, we describe our reinsurance programs, which really haven't changed. As we mentioned, and Carine will speak more about this. We've been able to renew them at reasonable rates. So we've kept the retention stable. If I go to Page 11, a little bit more detail on the turnover, down 0 6%, as I said. Notably, we were up actually in Q4 by 0.4%. Trade credits is down by 0.8%, but we had a strong new business flow, which means that the net production is actually positive. Service revenues were up 7%. I think that's a pretty good number. Information sales up 11%, so double digits, in line with our Built to Lead plan. Factoring is down 8.3%. The team that we've hired is actually doing a really good job turning this business around and working the profitability versus risk equation as we go through this crisis. And I would expect this business to rebound at some point as the economy starts to pick up again. Fees are up by 3.3%. So I think the business has been executing well in terms of managing this downturn. When you go to Page 12, you see the splits by region. What I would say here is that Western Europe, Northern Europe are down. Northern Europe, a little bit more because there's more industrials and also, this is where we have our factoring business, which, as I mentioned before, is down 8%. So a slight decline in Western Europe, Northern Europe. Central Europe, same thing. We have a factoring business in Poland. And these economies are very much tied to the German economy. But we did have, although modest, some growth in Med and Africa by 1.6%. North America, slightly positive. Asia Pacific, which has been less impacted at 2.7%. And Latin America, despite the hardships over there, still growing a little bit at 3.7%. If I go to Page 13, this is where I think you can -- we can point to the operating performance of the business. New production at 138 is actually the best in the last 5 years. Kudos to our sales teams that haven't let things down as we went through these tough times. Retention, again, slightly better than it was -- is probably our record at this stage, historically. Price is better by 1.4%, first time in 11 years. I think that we are able to show positive price. And then the volume effect is negative. Nothing here surprising. That will rebound at some point, but it will very much be linked to what we discussed earlier in terms of the pickup in the economy. Going to Page 14. That's the most surprising page, I guess, with full year loss ratio before reinsurance and including claims handling expenses at 51.8% versus 43.4% last year. And you can see to the right of that, the quarterly sequence. Q1 was impacted by a couple of one-off losses. We had explained this. Q2 saw the arrival of the crisis. And hence, we had to write the new 2020 vintage at a higher inception rate, which we decreased in Q3 as we were seeing lower claims than expected, then we decreased again in Q4 as we are seeing more drop in claims. And the Q4 comes in at 34.9%. On the same topic, I go to the bottom right, you see that in total, the 2020 year has been incepted at 78.4%, which is something like 5 points higher than the average, I guess, of the last few years. But the collections on past years has actually been -- continued to be strong, and that's, I think, good news, showing that companies have the liquidity to face their obligations as in the past. So we got 29.3% of voting on the price on the past years, bringing the net loss ratio, excluding claims handling cost, at 49%. If I go to Page 15, you see the same numbers divided by region. We usually show the 4 largest and more stable markets at the bottom, and you see that it's been quite benign year overall, with Western Europe ending the year at 47%, so well below the 50% mark. Northern Europe is actually continuing to drop from last year at 37%. Central Europe at 46%, very stable. Med and Africa, slightly higher, mainly reserves. North America, Asia Pacific and Latin America are the smallest and most volatile markets. So clearly, on the rise in North America, Asia, still very good and Latin America at 69%, if we exclude the impact of exchange rates, I guess, higher than prior years, but I think it's worth going to Page 16 and show the quarterly sequence here. And what you see here is actually that the claims are dropping in every geography in Q4. Western Europe at 20% is extremely low. Northern Europe at 16% or 17%. Central Europe, below 40%, Med and Africa coming down sharply from the 62% in Q2 and then you see the same things. Although I would say, in the markets above, it is the actions of what Coface has been driving. There was much less government support in these parts of the world or needed to be in the case of Asia. So we are coming in at 41% for Asia, 31.8% for North America and Latin America, most difficult market, ends up at 27%. So I think that's a strong testimony of the work that's been done there. If we go to Page 17, you see that our costs for the year are down 1.6%. We've been -- we continue to be thrifty. We continue to invest in the core business, but we continue to be thrifty where we can. So costs are down more than the revenues, which means that our expense ratio, you see that on the bottom right-hand side of the chart, goes from 34.4% to 33.7%. We still benefit from some of the structural changes that have been initiated over the last few years, plus we obviously had some cost avoidance linked to COVID. We, for example, stopped traveling. We have to spend more money on IT and technology and things like this. And we postponed some of the plans to grow in some more risky markets that we have and we have earmarked in Built to Lead, but we thought the timing just wasn't right in terms of, for example, going very aggressive in North America. So that's the story. With this, I'm going to turn it over to Carine to take us through the next few pages.

Thank you, Xavier. Good evening, everyone. So as usual, I will start while commenting reinsurance results, which reflects government schemes. You see on the top right that we have ceded almost 50% of our premium and for claims, which is quite different of '19 and the previous year, where we were more under 30%. The impact of government schemes already said there's negative pretax of minus EUR 5.9 million. And particularly on the last quarter, minus EUR 13 million. But if we exclude that minus EUR 5.9 million of the total cost of reinsurance of EUR 44 million, in any case, we see that we have a decline of the cost of reinsurance, which is usual because reinsurance result is also there to be able to absorb part of the increasing loss. Continuing on the net combined ratio, which is Slide 19, at 79.8%, so a very strong end of the year. I will say only an increase by 2.1 point of percentage with cost ratio declining, so very strong cost discipline. And loss ratio, which is up by 2.7 points but which we analyze as a strong achievement in a crisis context. On a quarterly basis, on the bottom of the same slide, you see the decline after the peak in Q2 of combined ratio. Q3 was already done at 77.4% and even 58.3%, which is very, very low and far below the average cycle target we have of 80%. But I think it's important to have a good picture of the underlying economic situation of where we are. To look at Slide 20, which is a new one. We decided to insert in that slide is the impact of government scheme on ratio. As a whole, on the left, you see the full year impact is a little less than 5 points. So we have a combined ratio of 84.5% without the government scheme. And when you look at the quarterly basis, clearly, no impact on the first quarter knowing that no scheme were in force. However, for the next 3 quarters, you see between 6.6, 6.8 impact and even 11.1 points. The reason of this higher impact in the fourth quarter is the fact that we have included in Q4 Italian scheme, which, as you know, is one of our largest countries. So that's the reason of that gap. But if you exclude it so having said all that, you see that the underlying combined ratio is 69.4% on the right for the Q4, which is very good and particularly a very low loss ratio at 33.1%. One or two words on our financial portfolio. You see Page 21. You remember at the start of the crisis, we decided to increase the level of liquidity because we did not know exactly where we were going. I think nobody knew it was before all the liquidity inflow coming from European Central Bank and other banks. We did it quite quickly, and -- but it's clear that the yield on liquidity, as you know, is very low. So we are progressively redeploying liquidity and -- that globally and on the accounting yield on average investment portfolio. You see the decline compared with '19 from 1.6% to 1.2%, knowing that we have also a very short duration on our financial portfolio. So for instance, the yield is limited, decreasing. But let's say, quite a stable and robust financial portfolio during the year. To be mentioned, on the last quarter, we decided to anticipate and to put an impairment charge on one real estate fund to take into consideration current uncertainties and revenues and due to the crisis. It has represented a decline on a loss of EUR 4.6 million. Only in Page 22, net income at EUR 82.9 million, already said, current operating income decreasing by 30%, but I remind you that '19 was a very record level. We have had some one-off investment and restructuring expenses on the last quarter. And tax rate used -- to be to normalize a little more, used to be 37%. It was far higher the previous quarter, but lower on the Q4 at 25%. And finally, net income, as you see at 82.9%, and we propose that I would recommend that the EUR 0.55 per share as a dividend. The return on average tangible equity, Page 23 at 4.8%. So all what we have described, considering the impact of the crisis, even if it is less than what we could have anticipated 1 year ago, still negative at 2.7% and also financial result 0.4 and tax and other 1.4 -- 1.1. But when looking at the top of the chart, what is very important to be mentioned is that equity have increased. So I think globally our solidity has improved, is strengthened. We went from EUR 1.9 billion of equity -- IFRS equity to -- not so far from EUR 2 billion, result is there. It's clear. But also revaluation reserves was positive, meaning that we have unrealized gains on our financial portfolio, which have increased compared with last year. So we clearly have a stronger balance sheet at the end of 2020 that at the end of 2019. And that makes a good transition in our usual capital management part. Starting with Slide 25, where financial strength, you remember where we kept a rating, which is, I think, also a proof of operating agencies that they believe on our capacity to be agile, to be resilient. We have -- I remember, AA minus by Fitch, A2 by Moody's. They put us on negative outlook. I am hoping that in a certain way with all of good results, we may have some positive expectation on that, but let's say that shows also that rating agencies recognize what we are doing within the company. And that's also what you may see, Page 26, which is the solvency according to Solvency II. Just maybe because a lot of figures, but in the center, you see 205% is the estimated solvency ratio, including the proposal of 100% of payout ratio. And also including, I would say, effect we should be of the government scheme by around 14 points. But even with recruiting side, we are far above the target range. We have been able to also monitor correctly, factoring required capital, which I will come back as increased. And looking at the right because we may think but what can be next because the time are clearly uncertain. I think everybody agrees on it. But even if we have to try to estimate what could be a crisis 1 of 50 years. You remember, it's equivalent to 2008 crisis. We would have been at 189%. So really, I would say, a robust solvency over time, that's the way we manage capital. And clearly, I will say that the proof of what happened during that unprecedented crisis. Looking at 27, solvency required capital, you have more detail. Total eligible on funds amounted at EUR 2.2 billion. So higher than the equity I mentioned before, but it's because we have the debt included in it. And even capital requirement at a little more than EUR 1 billion. I mentioned factoring required capital have been able to manage correctly and to be reduced. And globally, we -- as I said, 205% estimated solvency ratio for the end of the year. So having said that, now, I'll let the floor to Xavier for key takeaways and outlook.

Thank you. So just a quick few remarks to end this presentation. I think we're showing our resilience in what is extraordinary in terms of the environment. Clearly, the intervention of the governments are changing the way the economy reacts. The claims experience is decorrelated from GDP numbers. Nevertheless, we have been very strict in our underwriting process. We have worked, nevertheless, very closely with our clients and stayed true to our promise to always look at risk on a case-by-case basis and to not trigger any automated moves here. We've been continuing to grow our client portfolio. We've been able to adjust pricing on a case-by-case basis to then reflect a higher level of uncertainty. And I think the -- we weren't expecting to have to test our agility as quickly as that in our Build to Lead plan, but we don't decide these things. So I think that's -- so far, the business has been performing well. It's coming out of this first phase of the crisis strongly in terms of capital and solvency. Clearly, I think what it tells us, we're not done with this crisis. The environment remains volatile, and there will be, obviously, many more things happening. We have to tame the virus. We have to get the economy started again and then we have to deal with all the debt, that's been accumulated and find a way to withdraw the government support that's been provided. So there's still a lot to go through. But I think what this tells us so far is that our strategy works, that the culture that we've put in place is right, that things we wanted to prove, i.e., agility and resilience so far have been there. As you know, as I've said, we welcome Arch Capital to our shareholders. We welcome 4 new Board members and a new Chairman. They have reaffirmed their confidence in the management and in the strategy. We are showing, I think, our confidence by proposing a 100% payout of the profits of 2020. And I think we are confirming our targets for Built to Lead. So that's what I have to say. I'm now going to turn it over to the group for questions.

[Operator Instructions] The first question comes from Hadley Cohen from Deutsche Bank.

A very, very good set of results. I mean, I only had one area of questioning, actually. And that's the solvency ratio of 205%. I mean if we think about that relative to your 155% to 175% target, and you've got 30 points of excess, which is roughly equivalent to more than 20% of the current market cap. So I'm just wondering how you're thinking about that capital buffer at the moment? Are you seeing it as an additional buffer, given the ongoing volatility in the market? At what point should we be thinking about you potentially looking to deploy that capital and be it directly to shareholders or to fund growth? And just -- and then my second question is just a clarification. The dividend proposal of EUR 0.55. Just to confirm, is that, that has been -- presumably, you -- that has been approved by the French regulator?

Yes. So I guess, yes, we wouldn't propose this dividend if we didn't think we would not be allowed to do it. That's on the second point. But you -- but it brings me back to your first point, which is, yes, we have 30 points of excess capital. Now recognizing that, as Carine said, 14 points of that is linked to the extraordinary government schemes that have been put in place during this -- in which we've subscribed to, at least we get some benefit from them from that standpoint. I would just say a few things. Yes, we are subject to authorization in terms of dividend. Yes, there's still some uncertainty out there. And then we're still also looking at ways to deploy this capital. I didn't mention this, but we completed during 2020, the acquisition of GIEK in Norway. We've now integrated this business. It's performing well, and we remain open to ideas in terms of deploying this capital if we can find ways to do that. So I think that's what I would say. Carine, would you have any other comment?

No, I think it's exactly that. I mean we are I think 100% payout is considering the time is a good proposal, I think, and a good balance for investors. And even if our capital management policy feels the same. I think we will see at the end of the year, what to adjust.

Okay. If I can just -- sorry, just very quickly ask a very quick follow-up question. With regards to returning capital to shareholders going forward, with Arch now at 29.5%, does that effectively rule out buybacks from you guys going forward, given that it could, in theory, take them passively above 30%?

I think the answer is probably not, but I think we will leave that question to the Board to decide on.

The next question comes from Ashik Musaddi, JPMorgan.

Very good set of numbers. So congratulations for that in such a tough environment. I mean what I was trying to understand is basically, how are you thinking about 2021. Clearly, third quarter, if I look at the loss ratios, in majority of the geographies, improved quite a lot. If I look at the fourth quarter, loss ratio, it improved further. So how do you think about 2021? Is it -- is there a big risk, a wave of risk coming that a lot of bankruptcies that were supposed to come in 2020 didn't come and now we might end up seeing that in 2021? So can you give us some ground-level thoughts on that? Secondly, if I look at the growth in premiums that you have delivered in the fourth quarter as well as in year 2020, it looks like you are taking some bet in -- on LatAm as well as on Asia. So what gives you enough confidence to grow and start growing in those markets? Because if I remember correctly, I mean, please pardon me if I'm wrong. If I remember correctly, Asia has been a bit of a pain in the past for the credit insurer. So what gives you enough confidence to grow up on the growth curve in Asia and LatAm specifically? And thirdly is on the government scheme, I mean, now what is the visibility of that getting renewed for another 6 months? So I can see it is renewed till June this year, but where are we on that? Will it solely depend on how the vaccines work? Or are there any other discussions on that front?

Yes. And just on this one because I mentioned that, I think, in my presentation, yes, the governments, I think, are under pressure to show that they are supporting the economy. I mean there's a lot of political pressure, a lot of pressure from trade unions in different industries. So they've looked for extensions in the first half. I think what happens beyond that is a question. I don't think I have all the answers here. We'll have to see. We -- as I said, we want to stand on our own 2 feet, and we believe that we're completely capable of doing our own underwriting. At the same time, we want to be good corporate citizens and there's some elements of pressure that we cannot escape when the government comes with certain requirements. So it's a very fluid situation. I don't think I can predict exactly what's going to happen. In terms of the economy, clearly, the governments, I believe, have supported this crisis like never before, at least, if you compare that to 2007. Clearly, there was no moral hazard this line because the culprit is a virus, not a banker. So I think they felt -- and they've learned from the past crisis that if you drop the ball, the consequences will be dire. But at some point, this will have to end. And so I think that you've got 2 levels of uncertainty. One is how do we get this virus under control and when? And do we ever get it under complete control? Or is it going to be some remnants? I believe that's probably a likely course. And then the second thing is, how do we withdraw all the support that's been out there and at which rhythm? I don't think losses will remain extremely low forever. So they will be going back I think we're not exempt from seeing medium size, some medium-sized companies facing difficulties. And I think we continue to see a trickle of them actually. And at some point, yes, losses will normalize or there will be a progressive increase. Now how to find that? I don't know. I think it's very much a function of the 2 other things I mentioned, which is how do we get the virus under control? How do we get the economy growing again? And when does the government pull the support back? And I think you have just as much info as I do at this stage in terms of that. In terms of the growth, I wouldn't over overemphasize the growth in Asia or in Latin America. I mean, these are small regions. So yes, we have some growth. In Latin America, it's largely very large contracts, as I've explained throughout that we do with large multinationals. In Asia, Asia has been less impacted by COVID, quite frankly, than before. And I think over time, we do want to grow in Asia. We have to be able to underwrite appropriately. But I think Asia is a huge growth area for the world. And so yes, we do have the ambition to be present and to continue to grow our business in Asia. So nothing here that I think is surprising in terms of those numbers. I hope that answers your question.

No, absolutely. That's very clear.

The next question comes from Benoit Valleaux, ODDO BHF.

Two questions on my side. First of all, regarding pricing, it seems that prices have increased by roughly 2.5% in Q4. I know that you are doing also a case-by-case approach. But just can you give us some view on what do you expect in terms of trend for Q1 or beginning of the year? I mean, do you expect more or less similar price increase or maybe an acceleration of this price increase? And second question is related to solvency and the sensitivity of solvency to some further economic crisis. Can you please give us the figures, excluding state schemes? And if I look at your sensitivity to a crisis which I'm looking one, every 20 year, the negative impact should be at minus 4 percentage points this time compared to if I remind, 8 percentage points at the end of June. So I'd just like to understand what may -- explain the lower sensitivity to any potential further crisis? And maybe the third question is related to a recovery rate. You are mentioning an improvement into your recovery rate. I know that partly linked to the specificity of this crisis, but do you expect also some structural improvement in recovery rate or not?

So I'm going to take question 1 and 3, and I'll let Carine think about question 2 while I respond. In terms of price, yes, we are reviewing price on a case-by-case basis because I mean, you have such a huge variety of cases. I mean as I just mentioned, if you -- today, if you're in ecommerce, you're doing great. If you're in cruises, you're doing horrible. So depending on who the client is and which industries and which parts of the world you're talking about, there are huge differences. So it's a case-by-case basis. But the second thing I would say is given that the losses are so low, it's probably harder in these circumstances to continue to drive prices up. At some point, I think the market will become more competitive. In terms of recovery rate, I think what we were concerned about in the crisis is that companies being strapped for cash would mean that on past vintages claims, we would not be able to recover as much money. And we've seen that happen in crisis before. And this has not happened. So the recoveries have not floundered. They've been good, and they've stayed that way. And so I think that's what we're saying here. I don't expect them to get better, but they've stayed up.

So maybe I can answer on solvency question, Benoit. So I will say that the 189% or 209%, roughly, you have more or less the same magnitude on the impact of the schemes. So I will make a gross assumption around minus 14%. The reason why, I will say, when you compare both the sensitivity between June and now, is that in June, in fact, we have anticipated our September only 2020 government scheme renewal. And now we have taken as assumption, it's more than an assumption. The fact that it has been signed that we have 6 months more. So I think if you exclude the effect of government scheme in figures, we were looking at in June and the one now, you will have between 3 and 4 points of gap, which is the difference you have in sensitivity. I hope it answers your question.