The global economy is slowing down and corporate bankruptcies are at record historical highs. In this context, COFACE, the world's third-largest credit insurer, is in the front row. Hello Xavier Durand.
Thank you for being with us. Xavier, you are the CEO of COFACE and you have a near real-time view of the health of companies around the world. Describe your activity as simply as possible.
Well, Coface insures companies against the risk of not being paid by their customers. So we have 100,000 clients worldwide and for them, we manage 5 million credit lines on 3 million companies in 200 countries. This gives us a completely unique exposure and view of the global economy. We insure in all sectors of the economy, in all countries, and therefore in direct contact with the global economy.
So precisely, what are your perspectives, your views on the global economy with the crisis in the Middle East? What are your scenarios?
I think we have been living in a situation of great uncertainty for a while now. Crises follow one another, and there are two major trends. On one hand, the increase in this uncertainty which translates into a slowdown in growth, and on the other hand, the emergence, we may talk about it later, of new technologies and artificial intelligence which is growing exponentially. To come to the scenarios, the Gulf crisis, which has now been going on for 10 weeks and is continuing, will have consequences. I think we have gone from a scenario of global growth estimated at around 2.8% at the beginning of this year to a baseline scenario that is already much lower because we still do not see exactly how this crisis will be resolved, and this crisis will have lasting consequences because even if everything returned to normal concerning the Strait of Hormuz, oil and gas prices would remain high for quite a long time. So our central scenario is a global economy returning to 2.1% growth. It is also inflation accelerating globally. We saw the US figures yesterday but globally, we think there will be an additional 1.5 points of inflation. And oil and gas prices will remain high throughout 2026 and 2027.
Do you believe in an escalation?
Well, escalation is uncertain. The answer is in the hands of those who lead. But it would be a scenario that is not our central scenario, but it would aggravate this phenomenon and would result in even lower growth and even higher inflation with consequences that would hit various sectors of the economy one after another.
So, you published your results yesterday, your revenue is broadly stable, but we see a slowdown in your clients' activity, particularly in Southern Europe and emerging countries. Do you already feel a real brake on global trade?
Well, all this uncertainty for companies means it is increasingly difficult to make decisions and everyone tends to be conservative. So we see a slowdown in their activity. We invoice companies as a percentage of their revenue. And what we saw in our accounts published yesterday is indeed insurance premiums slightly down, compensated elsewhere by strong growth we have been developing for several years now, and overall stable revenue but a performance level, I would say, that is good in this very uncertain context.
And your net income is down 14%. What does this figure tell us about the current economic environment?
Well, it remains good because the combined ratio, which is the measure of the company's performance today, is at 70%, which is a very good level and is below what we estimate to be the average cycle performance of the company. So good operational performance, there is demand for credit, for credit insurance. We see that clients stay with us, we have a retention rate that is at a record level. But at the same time, we see that economic activity is less dynamic than expected, and so it is the combination of these phenomena that makes up our result.
On the other hand, as you said, your service, information, and recovery activities are growing strongly. Do companies today need more to anticipate risks and recover their cash faster?
Well, it is very clear that today, in all certainty, there is strong demand to try to navigate the short term as best as possible. But to survive in the long term, you first need to try to avoid having big problems in the short term. And so we are here to do that. We have very important databases. We have a database of 250 million companies. We collect and gather data. We have scores, we will talk about it, we have technologies, we invest a lot in data, and so we allow companies to try to navigate this very uncertain short-term world in the most efficient way possible. And there is demand. Yes.
So, corporate bankruptcies are at a record level in France and the trend is global. Coface predicts, I believe, another 8% increase in bankruptcies worldwide in 2026. Is that right? Is this a continuation of a post-Covid catch-up or is it something deeper?
Well, it has been 7 years since Covid that we have seen a continuous increase in corporate bankruptcies, not only in France but throughout the developed world. We are now at the highest level of bankruptcies in the last 13 years, practically since the end of the great financial crisis. And we think it will continue because the economic context we just described translates into an even greater slowdown in the global economy, and then there will be effects on supply chains, there will be effects of rising interest rates perhaps if inflation picks up, which will further weigh on the economy and corporate financing. So we do expect a continuation of the rise in corporate bankruptcies this year given the context we just discussed.
What is striking in your data is that it no longer only affects very small businesses. Larger, more structured companies are also starting to fall. Is this a warning signal?
