Credit Opinion: Compagnie Française d'assurance pour le Commerce

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1 Credit Opinion: Compagnie Française d'assurance pour le Commerce Global Credit Research - 24 Dec 2014 Paris, France Ratings Category Moody's Rating Rating Outlook STA Insurance Financial Strength A2 ST Insurance Financial Strength P-1 Coface SA Rating Outlook STA Commercial Paper P-2 LT Issuer Rating Baa2 Contacts Analyst Phone Laura Perez Martinez/London David Masters/London Simon Harris/London Key Indicators Compagnie Française d'assurance pour le Commerce[1] Gross premiums written (EUR Millions) 1,207 1,258 1,245 1,152 1,036 Net premiums written (EUR Millions) Net income as reported (EUR Millions) Shareholders' Equity (EUR Millions) 1,780 1,763 1,630 1,386 1,084 High Risk Assets % Shareholders' Equity 23% 9% 9% 17% 24% Reinsurance Recoverables % Shareholders' Equity 20% 20% 23% 23% 26% Goodwill & Intangibles % Shareholders' Equity 16% 17% 18% 24% 46% Net Underwriting Leverage [2] 101% 104% 112% 120% 152% Total Exposure % Shareholders' Equity [2] 190.8x 185.7x 198.9x 209.4x 267.5x Combined ratio, gross [2] 84% 83% 84% 94% 138% Sharpe Ratio on Return on Capital (5 yr. avg) 39% 30% 25% Financial Leverage 5% 5% 5% 18% 32% Earnings cover - 1yr 27.5x 27.2x 8.4x 17.7x -18.7x [1] Information based on IFRS financial statements [2] Moody's calculations Opinion SUMMARY RATING RATIONALE Moody's A2 insurance financial strength ratings (IFSR) of Compagnie Française d'assurance pour le Commerce Exterieur SA ("Coface") reflect the Group's strong position in the global credit insurance industry, good capitalisation, dynamic management of exposure and good risk monitoring tools. These strengths are offset by the company's relatively limited diversification from credit insurance, inherently a cyclical industry that can be

2 vulnerable to sharp deteriorations in economic environment, together with the highly competitive environment in the credit insurance industry as a whole. In addition, we note that the group's fixed income policy has changed recently from a portfolio concentrated in high-quality sovereign bonds to a more diversified portfolio, which we believe it entails higher levels of investment risk and we see as a credit negative. Coface's A2 IFSR does not incorporate any potential support from Natixis. Last June, Coface partially IPO 59% of its capital on Euronext stock exchange. The IPO consolidates a further important step in Coface's trajectory to become more autonomous from Natixis. Although Natixis remains Coface's largest shareholder at 41%, Natixis had announced its intention to dispose gradually its stake in Coface within as part of its strategic plan last year. On 13 March, 2014 Moody's Investors Service has assigned a Baa1(hyb) rating, stable outlook, to the planned guaranteed subordinated notes (notes) to be issued by COFACE SA (holding company) and guaranteed by Compagnie française d'assurance pour le commerce extérieur ("Coface ", operating company). Credit Strengths -Strong position in global credit insurance market and leading positions in key European credit insurance markets -Dynamic management of exposure and good risk monitoring tools Credit Challenges -Increasing levels of investment risk, which can lead to higher levels of volatility in economic capitalisation through the cycle -Underwriting discipline in an environment of growing competition in a subdued economic environment -Highly competitive environment in the credit insurance market as a whole -Limited diversification from credit insurance, albeit in line with peers Rating Outlook The outlook on Coface's ratings is stable. What to Watch For: -Significant deterioration in investment portfolio either through increase in higher-risk assets such as shares, property or through a significant deterioration in fixed income quality -Evolution of underwriting profitability What Could Change the Rating - Up -Substantial improvements in capitalisation with net total exposure as a proportion of shareholders' equity and net underwriting leverage consistently below 200x and 115% respectively together with a reduction of goodwill and intangibles -Improvement in the competitive position coupled with further economies of scale -Improvement in underwriting profitability through the cycle -Enhanced diversification from credit insurance business sources What Could Change the Rating - Down -Significant deterioration in the group's asset quality with a substantial deterioration in the quality of fixed income portfolio or significant exposure to higher-risk assets such as shares or property -Deterioration of capitalisation with net total potential exposure as a proportion of shareholders' equity or net underwriting leverage ratio rising above 270x and 160% respectively -Substantial weakening in the long term profitability of the Group with average combined ratios above 95% through

3 the cycle -Deterioration financial flexibility with financial leverage above 25% or substantial increase in operational debt to refinance factoring programme Notching Considerations On 13 March, 2014 Moody's Investors Service has assigned a Baa1(hyb) rating, stable outlook, to the planned guaranteed subordinated notes (notes) to be issued by COFACE SA (holding company) and guaranteed by Compagnie française d'assurance pour le commerce extérieur ("Coface ", A2 Insurance Financial Strength Rating IFSR). The Baa1(hyb) rating assigned to the notes reflects the fact that the notes are unconditionally and irrevocably guaranteed by Coface (operating company) on a subordinated basis and reflects standard notching (vs. the guarantor's insurance financial strength rating) for subordinated debt that lacks a mandatory trigger we consider to be "meaningful". The subordinated notes are intended to qualify as Tier 2 Capital under Solvency II and do not contain "variation or substitution" provisions that may lead to mandatory interest deferral or principal write-down which are materially less favourable to an investor. If Coface is not permitted under the final Solvency II rules to treat the subordinated notes as Tier 2 capital, the issuer has the option to redeem the notes in whole but not in part. For more information please refer to The P-2 rating reflects the holding's strong liquidity sources, namely backing the full size CP programme by committed multi-bank credit facilities, an intercompany liquidity account, which facilitates loans between holding and affiliates, as well as cash and short-term investments at the holding company. The CP programme is used to refinance part of the factoring receivables, thereby reducing Coface's current reliance on Natixis in funding such business. Moody's believes that the change in refinancing of factoring receivables deteriorates to some extent the group's financial flexibility, but this remains fully commensurate with the current rating. DETAILED RATING CONSIDERATIONS Moody's rates Coface A2 for insurance financial strength, which is in line with the rating indicated by Moody's insurance financial strength rating scorecard. Market Position and Distribution: A - STRONG MARKET POSITION AS ONE OF THE LARGEST CREDIT INSURERS GLOBALLY Coface is one of the largest credit insurer in the world with a global market share of around 18% at YE2013 (Moody's calculations based on ICISA's industry data). The revenues of the company are well diversified geographically, although it is still dependant on three core markets: Germany, France and Italy. Additionally, Coface plays a key role as manager of the French Government Export Guarantee Scheme. Coface's distribution network is significant reliant on brokers in line with the commercial nature of credit insurance industry, which to an extent limits the company's ability to control pricing. Nevertheless, direct sales are somewhat above peers at a significant 33% of premiums at year-end In addition, Coface does manage to maintain a strong and flexible access, as evidenced by the various partnerships concluded with smaller credit insurers in many parts of the globe, banks and multiline insurers. Therefore, Coface's Market Position and Distribution is in line with an A-rating. Product Risk and Diversification: A - LIMITED BUSINESS DIVERSIFICATION FROM CREDIT INSURANCE, PARTIALLY MITIGATED BY DYNAMIC MANAGEMENT OF EXPOSURE AND GOOD RISK MONITORING TOOLS Moody's views product risk and diversification as good driven by Coface's diversification and granularity of the portfolio together with its dynamic management of exposure and good risk monitoring tools. Coface's business diversification is similar to its peers with most of the business sourced from credit insurance revenues, which limits the group's diversification by business line (YE 2013: 78% credit insurance revenues excluding checking fees). Credit insurance is inherently a cyclical industry vulnerable to sharp changes in economic environment.

4 Coface also offers factoring and low-risk fee-based services, such as company information and receivables management, but these ancillary services reduced in recent years driven by management actions in order to enhance the group's profitability. Coface shrank the size of the factoring refinancing programme (down by 37% at year-end 2012), in order to reduce its reliance on funding from Natixis, its current shareholder, and to focus on the most profitable contracts. Since then, the size of factoring refinancing has been slightly increasing. Factoring revenues are EUR53 million at Q3 2014, up by 2% compared to Q Within the credit insurance business, Coface's portfolio is well diversified and granular. Additionally, Moody's believes that the low average duration of Coface's policies as well as its dynamic management of exposure and good risk monitoring tools enable the company to act quickly and to actively manage its exposure, as evidenced by the strong measures (such as cutting limits, increasing premiums and reducing acceptance rates) Coface has taken consistently from 2009 onwards to limit the impact of the sovereign crisis on its profitability. The company's underwriting discipline and dynamic management of the liability can be evidenced by the consistently good reported loss ratios in recent years despite the difficult economic environment (Q3 2014: 47.1%, YE 2013: 51.1%, YE 2012: 51.5%). Notwithstanding this, Coface continued to experience volatile loss ratios in challenging countries such as Italy (9% of the group's exposure), although loss ratios have been trending down consistently over a number of quarters following a number of risk mitigating actions. The Mediterranean region experienced an estimated loss ratio of 61% at Q3 2014, down from 70% in 2013 (69% in 2012). The slowdown in emerging markets in 2013, particularly Latin America (7% of group's exposure), also led to a particular rise in loss ratio from 43% in 2012 to 105% 2013, driven by both a rise in frequency and severity in claims. Nevertheless, loss ratio in this region sharply improved to an estimated 58% at Q Asset quality: A - ADEQUATE INVESTMENT PORTFOLIO, WITH DETERIORATING QUALITY IN THE FIXED INCOME PORTFOLIO We consider Coface's asset quality as good. Nevertheless, we believe that the group's investment risk has significantly increased from a prudent investment portfolio oriented to sovereign bonds to a lower-rated fixed income with meaningful exposure to non-investment grade, lower-quality investment grade bonds and modest increases in exposure to equities. High risk asset ratio as % of shareholders' equity increased to a still low 23% at YE2013 from 9% at YE2012 with an increase in the exposure to non-investment grade bonds (EUR181 million-10% of Shareholders' Equity) and equities (EUR 100 million- 6% of Shareholders' Equity). The investment portfolio has a significant proportion of deposits and money market funds at 31.4% of investments given the short duration of the liabilities,. Nevertheless, Coface has changed its investment policy towards a lower credit quality -albeit more diversified-, which we overall view as a credit negative. At Q3 2014, the fixed income portfolio rated above A3 has reduced further to 47% of the total portfolio, compared to 62% in 2013 and 85% in 2012.The exposure to Baa bonds is material at 33% of the fixed income (against 25% at YE 2013 and 15% at YE 2012) and non-investment grade bonds represented a high 20% of the fixed income at Q against 14% at YE More positively, credit exposure to reinsurance companies is relatively low due to the high retention levels and the high quality of the reinsurance panel. The level of intangibles at Coface remained low at 16% in 2013, which declined significantly in recent years (YE2009: 46%). This meaningful reduction was mainly driven by the internal sale of non-core subsidiaries to Natixis HCP (Natixis Holding of Coface Participation), a subsidiary of Natixis. Liquidity is also strong, supporting Coface's P-1 short term IFS rating. Coface has good levels of quality liquid assets with relatively short liability profiles. Cash and deposits make up a fair amount of the asset portfolio and equities and bonds held are sufficiently liquid. Capital adequacy: A - GOOD CAPITALISATION BENEFITING FROM DYNAMIC LIABILITY MANAGEMENT BUT WITH INCREASING INVESTMENT RISK LEVELS Moody's views capitalisation as good and benefits from Coface's dynamic liability management. Nonetheless, the group's appetitive for investment risk is increasing, which we believe it can add further volatility to the company's economic capital at the downturn of the business cycle. Total Exposure to Shareholders' Equity (Moody's calculations) modestly deteriorated to 174.6x at YE 2013 from at YE 2012 driven by 1)- the higher level of investment risk which is partially captured in the denominator of the ratio, and to a less extent 2)- modest increase in exposure. Shareholders' equity slightly increased to EUR1,780 million at YE 2013, however shareholders' equity at Q was down to EUR1,710 million after a

5 share premium distribution of EUR227 million to Natixis, subsequent to the EUR380 million hybrid issuance. The group's total exposure increased by 3% to EUR452.5 billion at year-end 2013, which reflects a combination of reductions in countries with a more challenging claims environment (e.g. exposure down by 9% in Italy and by nearly 3% in France and Brazil, respectively), more than offset by growth out of Europe. Furthermore, although gross exposure has increased in recent years significantly to above pre-crisis levels, the risk mitigation actions implemented thorough the sovereign debt crisis significantly reduced the exposure to lower rated buyers enhancing the overall quality of the exposure compared to The level of reinsurance remains relatively lower than peers, and we remain cautious about the potential volatility of available reinsurance capacity. Coface has changed its reinsurance program for 2014 with a cession of 20%, down from 25%. Coface also has excess of loss protection per debtor risk and per country risk. In addition, the reduction in group's exposure together with the ongoing improvement in the credit quality of the portfolio implemented in recent years eases some of the capital constraints. The quality of capital, measured as the proportion of intangibles to shareholders' equity, has improved in recent years following the ultimate disposal of non-core subsidiaries, although we note that these were internally sold to Natixis HCP. Profitability: A - GOOD PROFITABILITY LIKELY TO CONTINUE ON THE BACK OF SLIGHTLY IMPROVED ECONOMIC OUTLOOK Moody's views profitability as good supported by the group's dynamic management of liability. Going forward, profitability metrics will likely remain good supported by a relatively more benign economic outlook, despite our expectations of higher levels of competition in the credit insurance industry as whole. Coface reported a satisfactory set of results particularly given the still difficult economic environment in Europe in Net income was modestly up to EUR127 million at YE 2013 from EUR124 million at YE 2012 ultimately driven by realised investment gains, which offset a 3% reduction in revenues to EUR1,440 million (1.6% reduction adjusting for discontinuing operations and foreign exchange impact). The underwriting profitability continued to be strong with a reported gross combined ratio of 81.5% (YE 2012: 80.9%) with a modest increase in the gross expense ratio to 30.5% (YE 2012: 29.4%). At Q3 2014, Net income was EUR104 million up by 5% compared to Q The reported gross loss ratio continued to improve to 47.1% at Q3 2014, down from 51.1% in Like other credit insurers, the volatility of the bottom-line results in the last five years has been meaningful due to the loss in 2009, which leads to a weak Sharpe ratio on return on capital of 40.2% across the cycle. Reserve Adequacy: A - CONSERVATIVE RESERVE POLICY-GOOD RESERVE RELEASES LIKELY TO CONTINUE Although Coface has generally reported favourable reserve development, negative reserves development were reported in 2009, due to the exceptionally high claims frequency experienced at the end of 2008 and the subsequent challenging assessment of IBNR. Nonetheless, Coface has reported good levels of reserve releases in recent years and we expect the group to be able to report positive reserve releases in the coming quarters. Therefore we consider reserve adequacy at Coface to be consistent with its rating level. Financial Flexibility: A - GOOD FINANCIAL LEVERAGE BUT SUBSTANTIAL OPERATIONAL DEBT AS PART OF REFINANCING OF FACTORING BUSINES Coface's financial flexibility remains good and the group's financial leverage has remained low in recent years. The group's financial leverage was low at 5% at YE2013. In March 2014, Coface issued EUR380 million of subordinated guaranteed notes, which were intended to qualify as Tier 2 capital. The subordinated notes will lead to an estimated increase in leverage to 22%, which is fully consistent with the A rating. Earnings coverage is expected to remain strong in line with the still low level of financial leverage. Coface carries a significant amount of senior debt to support its factoring business, that Moody's currently classifies as operating debt (YE 2013: EUR2,109million). Nonetheless, Natixis has reduced its contribution to the funding of the factoring business since In this context, Coface has significantly reduced its reliance on funding from Natixis. Coface raised EUR1.1 billion through a securitisation programme, initially launched in February 2012, which represented 49% of the factoring needs at YE 2013 (53% at YE 2012). In addition, Coface's holding company extended the CP programme to EUR500 million programme in October 2013 from EUR250 million. Coface has fully backed committed banking facilities for the total size of the CP programme with several

6 banks. Moody's believes that the change in refinancing program deteriorates to some extent the group's financial flexibility, although we expect this to be commensurate with an A rating. Rating Factors Compagnie Française d'assurance pour le Commerce[1] Financial Strength Rating Scorecard [1] Aaa Aa A Baa Ba B Caa Score [2]Adjusted Score Business Profile A A Market Position, Brand and Distribution A A (10%) Market Share X Distribution and Access to New Markets X Product Risk and Diversification (20%) A A Business Diversification X Flexibility of Underwriting X Risk Diversification X Financial Profile A A Asset Quality (15%) Aaa A High Risk Assets % Shareholders' Equity 22.6% Reinsurance Recoverables % 19.5% Shareholders' Equity Goodwill & Intangibles % Shareholders' 15.7% Equity Capital Adequacy (20%) Aa A Net Total Exposure % Shareholders' 191x Equity Net Underwriting Leverage % Profitability (20%) Ba A Combined Ratio (5 yr. avg) 96.3% Sharpe Ratio of Return On Capital (5 yr. avg) 39.5% Reserve Adequacy (5%) Caa A Worst Reserve Development (last 10 X years, % of Initial Reserves) Financial Flexibility (10%) Aa A Financial Leverage 5.3% Earnings Coverage (5 yr. avg) 12x Operating Environment (0%) Aaa-A Aaa-A Aggregate Profile A2 A2 [1] Information based on IFRS financial statements [2] The Scorecard rating is an important component of the company's published rating, reflecting the stand-alone financial strength before other considerations (discussed above) are incorporated into the analysis This publication does not announce a credit rating action. For any credit ratings referenced in this publication,

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