Good day and thank you for standing by. Welcome to the Coface Full Year 2023 Results Presentation Call and Webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. If you will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Mr. Xavier Durand, CEO. Please go ahead, sir.
Thank you very much and good morning, everyone. Thank you for joining this call. We are very happy to report our full year results for 2023. Apologies for changing the usual timing of the call. Personal situation on my side here, so I appreciate the flexibility. But nevertheless, you all have had more time to digest a little bit of our publication. So I'm just going to, as usual, take you through the first half of the presentation. In terms of page 4, you've seen that we've reported EUR 240 million of net profit, pretty much in line with last year, which means EUR 50.8 million in the Q4 of 2023. Some of the same trends you've seen at play through the Q3 continue. Turnover is up 6% at constant effects and perimeter, with trade insurance premiums growing 5.5%.
We've seen a slowdown in the second half, as we already highlighted in Q3, pretty much driven by the economy around the world. A very good year in terms of retention at 93%. I think it's clearly our record. Pricing has been down 1.9%, but it's pretty much closer to historical trends and better than it was in 2022. Pleased with the business information growth at 17.3% for the year, with a good Q4 at 23.4%. Factoring's slowing down. Clearly, the quickest one of our businesses to react to economic conditions. On the loss side, I think it was another great quarter with a net loss ratio at 37.7%, actually two points better than last year. The net combined ratio ends the year at 64.3%. It's three points better than 2022. I remind everyone that we're presenting now all the accounts in the IFRS 17 methodology.
We'll talk more later about the normalization of the risk environment, which continues, albeit at a slow pace, but continues clearly. A very good year in terms of our cost ratio. We're at 26.6%. Again, that's a record for us. It's both our discipline, high reinsurance commissions, and despite all of that, we continue to invest. And then the combined ratio at 59% for Q4, I think, is really strong. And we've had some favorable developments on some large cases that we had to reserve in the past. So I think a strong quarter, another very good year for Coface. Just one admin situation: we've moved Mexico, which was part of Latin America to North America just to reflect the economy and the economic corridor between Mexico and the U.S., which is taking more and more importance.
As you know, a lot of manufacturing is actually being redirected from Asia into Mexico, which has become the largest trading partner of the U.S. now. So we'll make that change happen. You'll see it in the Q1 reporting, just to align the reporting with the way we run the business. On the next page, solvency remains very strong at close to 200%. We've proposed a EUR 1.30 dividend per share. This has been our best year in terms of Return on Average Tangible Equity at 13.4%. The solvency is above the upper end of our target range. We've actually maintained our reinsurance conditions. The renewals went well. And despite the fact that the market is still tight, I think we've been able to renew all of our treaties at stable conditions.
So EUR 1.30 per share, that's 81%, just slightly above the 80% that we target and Build to Lead. I think, as importantly, perhaps more importantly, we've continued to deliver on our key operational milestones. We've transitioned to IFRS 17, went one full year in 2023 on the reporting cycle. We've also confirmed, and I think you'll see it in the presentation, that the business information continues to grow, and it is a very highly synergistic business that fits very well within our core activity. Very happy to report that I've signed up for another four years, as expected. And we're excited about presenting our new plan. We've kind of lifted the veil on its name. It's going to be Power the Core, and we'll explain to you why that name on the 5th of March, when we will have our investor date. So that's pretty much the story.
I'm going to take you through page six now, just to remind everyone of the Build to Lead. Build to Lead is officially over now. We've pretty much beaten every one of the metrics we'd set for ourselves. You can see the combined ratio, which for three years in a row has been significantly lower. Actually, for the last five years, sorry, we were below the 80% target, with a slight increase during the COVID in 2020. We've maintained a payout ratio above 80%, with a couple of years where we were actually at 100%. The solvency ratio has remained very strong and above our target range, and our return on tangible equity has improved progressively to this record level last year at 13.3%. So clearly, we're happy with what's happened during Build to Lead. Just one slide on page seven on the situation in Argentina.
It seems like every quarter, every six months, we have another one of these volatile situations to manage somewhere around the world. I thought it'd be helpful to let you know that we have EUR 1.5 billion of exposure to Argentinian debtors. Clearly, we have a strong franchise there. What we do in Argentina matters because this is a part of the world that is difficult, and that gives us credibility and great commercial arguments in writing business in other parts of the world. So you can see on the left-hand side of the chart that the Argentine peso's value versus the USD was divided by four in the course of the year. Clearly, the election in December was also a turning point. This has had an effect on us.
We have changed our functional currency from Argentine peso to the U.S. dollar because the majority of what we do over there is actually in U.S. dollars. It also still means that importers of goods in Argentina have to pay us in USD, and USDs are hard to find when you're in Argentina. Actually, sometimes very difficult. So we are managing this dynamic situation, I think, as we've gained experience of doing so in the past years and decades. We've booked some reserves to reflect the increased level of risk, and pretty much we're on this like we've been on all the other topics that showed up in the past in Coface. On page eight, just a quick summary update on our CSR. We've set some very clear targets for ourselves and see them at the bottom of each one of the columns.
The darker green areas are the areas where we have been actively focusing on during the year 2023. I've had several opportunities already to take you through this page, but just to remind you, we've continued to expand our commercial exclusion policy progressively as governments become clearer and clearer in defining the taxonomy of what's black and what's green. We continue to restrict our intervention in the areas that are more carbon-intensive. We have clearly allocated double the amount of funds to single-risk exposure on ESG projects, and that's going extremely well. And then we have continued to decrease the emissions of our investment portfolio. Our target is 30% by 2025, and we are on target to deliver. We've actually improved the company in terms of being an employer.
We measure the engagement of our employees three times a year through an external firm, and we've seen that it's been continuously improving to where now we are above the industry benchmark. We have a clear goal of getting to 40% women in the top 200 managers by 2030, and we're making steady progress. Then finally, in terms of being a responsible enterprise, we want to reduce our carbon emissions by 11% for our operations, which means a 28% reduction from where we started at. And it's really we've got a tool to measure this. It's really about three main things. It's usage of cars and transport. It's about office space, heating, and air conditioning. And it is about the use of technology and the carbon that goes into making and powering that technology. So we're working on that. Actually, working-from-home policies actually help us a lot.
We're driving the culture. I mean, there's a lot of communications that needs to be done, whether it is reporting or actually, I think, making the investing community aware of and all the stakeholders here aware of what we are doing. I think it's very clear we're focused. We are making it happen. On the next page, I will go through the usual stack. You'll recognize those pages for those who've now followed us for years. Page 10 shows our growth, 6% for the year. We've seen, as I said, a slowdown in Q3. Very clear. All countries, inflation is coming down, and economic growth has become much slower in the second half. That explains our trade credit insurance premiums going at 5.4% in the year. Very high retention, as I said. Some good news, though. Other revenues are up more than 10% from 2022.
Information sales up 17% in 2023 and 2024. I've already said this. Third-party collection, it's small, but it's growing nicely at 42%. And it just shows that the risk level in the market is growing up. Factoring has slowed down, actually, faster. It started at the beginning of the year and is up still at 2.6% for the year. And then, as you know, we don't just charge premiums but also fees. So the fees we are getting from the insurance activity continue to grow faster than the premiums at 8.7%, and that's important for us. If you look at page 11, you see the spread of the growth amongst the different parts of the world. Western Europe slowed down, still growing at 6%. Northern Europe, Germany, the whole industrial base has been hit, actually, harder than probably some of the other parts of the world, so growing at 2%.
Central Europe, negative. But if you correct for the, I would say, the rundown of our business in Russia, it would have been pretty much a 1.3% growth, pretty similar to Germany. A bright spot in Med and Africa. The southern Europe countries have actually fared better with a regain of tourism, and those economies actually performed better last year, and you see that in our numbers as well. Continued growth in North America, Asia-Pacific at 5%-6%. And then Latin America, still 11%, but that's a much decreased number than what we've seen in the prior couple of years as the commodities surge is coming to an end, and they are falling back on more normal growth numbers. So that's the story by region. On the next page, you see the different parts of the way we look at growth.
Interesting to see that after several years of decrease, new business is actually up and starting to pick up. We've seen increased demand. As I've said many times on the call, it's a very competitive and kind of brutal market, but we are holding our own. The retention rate is at a record for this company, and we're very proud of our partnership and our ability to service clients in ways that convince them to stick with us through the long term. The prices are down, but as you've seen, they've recovered from the lull in 2022 and the two kind of exceptionally positive years that we've had in 2020 and 2021. Historically, this business is one where prices come down year after year to the tune of 1%-1.5%, and we're pretty much there.
And then volume effect, after two impressive years in 2021 and 2022, which we hadn't seen, actually, in a very, very long time, it's come back down on the back of lower inflation and lower growth to 2.3%. And I think that really explains the bulk of our slowdown and turnover. On page 13, you see our loss story. Continues to be a very, very strong story with a quarter to Q4 2023 at 26% loss ratio before reinsurance. Normalization, I've been talking about this for two and a half, almost three years now. It's happening, but it's happening slowly. The number of claims has been increasing during that period. It's now about 8% lower than it was in 2019, but the claims amount have been in 2023 pretty much similar to what we had in 2019. Severity, still below, I would say, the historic average.
You can see on the bottom right-hand side that we've opened a new vintage quite high, actually, at close to 84% to reflect the political and economic uncertainty that we are seeing in the world. At the same time, the bonuses from prior years have been actually pretty strong compared to historic levels. As I said, we've had some significant reserve releases on some files that we had, particularly in Brazil. If you look at the next page 14, you see a pretty benign story. This is the yearly view of risk for the different parts of the world where we operate. The four largest, more stable economies at the bottom, pretty much everything at 40% or lower with very stable results. The three smaller and more volatile, traditionally, markets on the top, still pretty benign stories.
We know that we had one situation to manage in Latin America last year, and I think we've pretty much got that under control. You can actually look on page 15, the quarterly story, with very much nothing to report on the bottom four regions. And when you look at the top, it's been an incredibly well-controlled environment with North America at 22%, Latin America now again in the low teens, and then Asia-Pacific actually having negative losses again on 33% . So very, very good. We feel good on the risk side. In terms of the cost ratio, on page 16, you see that our total cost went up about 7% for the year.
The cost ratio, sorry, the cost for the Q4 was up about 4%, and the cost ratio on the right-hand side that was in Q3 2023 was actually below what we had seen last year by about 0.3%. Our total internal costs were up 8.4%. You've got wage inflation in there for 2.5 points. You've got the investments that we've made in the business information space for another 2.5 points. And so we haven't stopped investing. We continue to put money in the things we think are important, whether it's technology or information or growth in our sales forces. And you can see on the bottom right-hand side of the chart that we end the year under the IFRS 17 methodology at 31.5%, which is lower than 2022.
So despite the slowdown in the growth, we are still making some gains in cost ratio and continuing to invest, I would say, more than ever in our business. I think it's very consistent with the story that we've been telling all of you for now several years in a row. With that, I'm going to turn it over to Phalla to take us through the next pages.
Thanks, Xavier. Let's move to the reinsurance page, page 17. On this side, premium cession rate at 27%, claim cession rate at 23%. I must say that we're going back to the pre-COVID strict application of our third-party reinsurance treaty.
What has to be noted here is that, first, we have renewed all our treaties, the proportional and non-proportional, successfully in the sense where all the terms and conditions that we had last year have been renewed at the same level. What needs to be highlighted as well is that in Q1, we had these large losses in Latin America where, for the first time in COVID, in Coface's history, we have reached the first level of our excess. With the release that we got, the recovery that we got in the Q4 , of course, I think we're going back to the we're going back to the initial situation. Again, I think Coface has never reached the first level of excess of loss treaty. Moving to the next page, net combined ratio at 64.3%. A couple of things to be highlighted.
Net loss ratio is decreasing by 2 points. I would say that's really related to some reserve release that we had, even if we have booked up some reserve related to Argentina and other spaces. Net cost ratio down 1.4%, and this one, I think this is the lowest level in the Coface story. I wanted to highlight the fact that we have, I think, really thanks to also cost discipline, but also the commissions we see from the reinsurers that have been helping us in the net cost ratio in 2023. If we move to page 19, financial portfolio, the mark-to-market value ending at EUR 3.3 billion. A couple of things to highlight. You know that in November last year, we have issued a new EUR 300 million of Tier 2 debt.
And of course, this is in advance to a repayment of our first tranche of Tier 2 debt that will happen in a couple of weeks now, which is by the end of March. We will have to repay EUR 230 million. So the mark-to-market value that you're seeing here will go down and will pretty much to the historical level of EUR 3 billion, which is our run rate. I will put it this way. In terms of asset allocation, we have not changed anything. We have already dealt with our investment portfolio, and we'll continue, as you know, to divest in our real estate investment funds. If we move to the right-hand side, which is the investment income, a couple of things to be highlighted.
Of course, the recurring income, you can see that it has now reached EUR 65 million in, well, as an annual basis, which is probably doubling what we had in 2021. With the new money invested at 3.9%, we're still enjoying the fact that the interest rate is still high and the yield curve is still inversed. Realized gain and loss -3.7%. We have taken some realized gain that only partially offsets the negative mark-to-market ratio that we got on the real estate investment funds that we already commented a lot during 2023. Total negative impact is -EUR 29 million. We believe that this will have put behind us a big chunk of this devaluation in an investment fund. Of course, we will expect some of that also happening in Q1 and Q2, but not at the same level that we had in 2023.
FX, we largely explained that, I think, in the previous page, coming from Argentina. We also booked, as usual, hyperinflation, unfortunately, in Turkey and Argentina service entity. I will finish with the insurance finance expense at EUR 40 million. This is totally in line with what we saw in Q3. I think Q3 was EUR 30 million. Now we're just having another quarter adding up. This leads us to a very good net income to EUR 40 million, 5%. This is probably in line with what we had last year with the similar tax rate. Return on average tangible equity, starting with the change in equity, IFRS equity starting at EUR 2.019 billion. This is probably a straightforward work with payment of dividends and record, of course, our net income of the year, leading to an ending IFRS equity at EUR 2.051 billion.
Leads us to a return on average tangible equity of 12.7%. We, of course, have our technical result, financial result, net of tax, and end up with 13.4%, which is, again, one of the highest that Coface has seen since a long time. I'm moving now to the capital management side. Solid balance sheet, EUR 7.9 billion of total assets, total liabilities. We discussed about the insurance investments at 3.3%. Factoring assets, 2.9% backed by factoring liabilities. What needs to be highlighted, I would like to highlight, is the EUR 832 million of hybrid debt. Here, we have, as I said, the three tranches, and EUR 230 million will be repaid at the end of March 2024, which is probably in a couple of weeks now. So we're going back to the usual situation of Tier 2 debt at EUR 600 million for 10 or 11 years now.
Has not changed any rating. Financial strength has been used. You can see the upgrade from Moody's in September and the stable outlook from Fitch and S&P. Tangible book value per share at 12.2% and book value per share at 13.8%. Moving to the solvency part, so we're moving from 201% last year to almost 199% this year. You can see that the own funds generation, which is the 28.7% contributions to the solvency ratio, is more than offsetting the capital consumptions coming for our business growth, either in insurance or in factoring. And of course, we have allowed for the dividend payment that will happen in May 2024. On the right-hand side, we have the usual financial stock shocks and economic shocks. I will start with the financial market shocks with interest rate increase, price increase, and equity market shocks.
Well, thanks to the fact that we have already dealt with our investment portfolio, you can see that the shocks have a very minimal impact on our solvency. In terms of economic crisis, we have the 1 in 20, usual 1 in 20 events, and 1 in 50 events. I used to say that the 1 in 50 events in the 2008 period crisis. Here, again, we will be above the upper range of our comfort zone. Very strong balance sheet and healthy, I would say, solvency ratio. If we move to page 25, this is where you have the breakdown of the SCR, which is the Solvency Capital Requirement, and the eligible own funds.
Nothing in particular to be added except the fact that if you look at the eligible own funds, the Tier 2 Debt that is allowed to be taken into account in our solvency calculation is at 626% to be compared to the 832% that stands in our balance sheet. This is due to the fact that in solvency, you have this threshold, and we are taking already the haircuts related to this threshold, which means, in a nutshell, that the 199% of solvency ratio as of the end of December, all being equal after the repayment of our first tranche of Tier 2 Debt, will go down to 198%, which is not changing much to the strength of our balance sheet today. With this, I will turn back again to Xavier for the final remarks. Xavier? Okay. You might have some you might have a connection.
Oh, I'm sorry. I'm sorry. I was. I'm sorry. I thought it was an echo. I put myself on mute, so I started speaking. Sorry, everyone. So just to wrap this up, this has been another very good year. You've seen that we've come in just symbolically above last year in terms of net profits. The economy is slowing. We've got a very good net combined ratio at 64.3%. Return on average tangible equity at 13.4% is clearly our record. You see that some of the initiatives that we've taken are actually paying off, the business information, debt collection are growth opportunities for us. We've managed the volatility. I mean, it continues in the market, and nobody knows what's next. But clearly, I think we continue to demonstrate that we're able to manage these situations. We're at the end of Build to Lead. I think we had a good run.
We've met or exceeded all of our targets. We're excited about what we're going to talk about next, actually, on the 5th of March. That's coming up very, very soon, so hold your breath. It's not far now. We're going to build on Build to Lead. It's an interesting way to look at it and highlights what we're going to do in the next chapter of our growth story. That's the wrap-up. We're very happy to take questions now, as we usually do.
Thank you, sir. As a reminder to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. Thank you. We are now going to proceed with our first question. The questions come from the line of Hadley Cohen from Deutsche Bank. Please ask your question. Your line is opened.
Yeah. Morning, everyone. Thank you very much. Hopefully, you can hear me well. First question, I was wondering if you could, Xavier, give us a little bit of insight into your thought process around the dividend proposal, please. I mean, I understand it's an 80% payout ratio, and it implies a 10% cash dividend yield at current price levels, so I'm certainly not complaining. But objectively, your earnings are pretty much flat year-on-year. Solvency is pretty much flat year-on-year, and it sounds like your outlook is at least in line, if not slightly better, than 12 months ago. So I'm just wondering why the dividend proposal is lower year-on-year.
Second question is linked to that, and I guess essentially is, is 155%-175% still the right target range for solvency? The reason why I ask that is solvency is obviously well above that range. And I think, Phalla, as you mentioned, even after adjusting for the debt repayment, it remains at that level. And even after a 1 in 50 stress scenario, it's still above the upper end of the target range. So I'm just wondering if that is still the right range. And if it is, at what point can we start thinking about deployment or usage of some of that excess capital? And then my final question, a very quick one, and apologies if I've missed this, but I think in the Q4 , the combined ratio was obviously benefiting from the release in Brazil.
But my understanding, I think, is that there is at least some offset coming from more conservatism in your initial loss picks in relation to Brazil and Argentina. So I'm just wondering if you could give us what the net positive effect on the net combined ratio was in the Q4 . Thanks very much.
Okay. Yeah. You're right relative to the reserves. I mentioned that on the call. Let's Phalla talk about this. I just want to address your first question, which is really one, actually. It's around the capital allocation and capital management policy. I think we've been very, very consistent from actually, that probably consistency is what I'm trying to do here in general.
On that topic, we've also been very consistent of one, having a strong balance sheet and proving to the market that we are resilient and that this company will continue to perform and can manage the environments. The second thing is that we are ready to seize the opportunities that the market might offer us. We've said that, I think, several times over the course of the last few years. First of all, on the range, the range is a discussion that we have with the regulator about where should we be as an institution. That's not something we change unilaterally here. I think that's a level that we've agreed with them when we launched our internal model, and it was approved. That's really the range that I think matches the needs of this company.
Now, in terms of capital allocation, we are pursuing three goals. One is core growth, and we want to be able to fund core growth. I mean, nobody thought in 2021, 2022, that we even 2023, that we would have that kind of growth in this industry because this is an industry that used to pretty much grow as GDP. It grows as nominal GDP. So our ability to feel very comfortable, even if inflation picks up or whatever, I think, is important. The second thing is we do want to remain open to opportunities. We've done a few acquisitions. They weren't very big. But I think this is something we like to be able to do, not necessarily very big ones, but ones that matter for the business. And then third, I think we've consistently have been returning capital at or higher than the targets that we've set.
I mean, I understand that 1% is not much more than 81% is not much higher than 80%, so it's more symbolic. But still, I mean, I think we've, in the past, been a company that was one of the first to be authorized after COVID to redistribute some equity or some capital by the regulators to the markets. And that's part of our story. So this is what we do. I think the company is performing. And I think we'll talk, obviously, during the plan. We'll talk about this kind of stuff. But that's really our position here. Phalla, you want to talk about the?
Yeah. I was thinking about the second question related to the reserve release that we have on the large claims in Q4 that will count for a range of 7-8 points.
Okay. Great. Thank you very much.
Thank you. We are now going to proceed with our next question. The questions come from the line of Michael Huttner from Berenberg. Please ask your question.
I'm hesitating to ask questions because A, the results are so good, but B, the 5th of March is almost with us. So I only had two, actually. The first one is that reserving figure that you just said, the 7-8 points. Is that the net or the slightly higher than normal initial loss pick and the release of Brazil, or is it just the release of Brazil? And then the other question is my traditional question because I always forget the answer. And I'm really sorry. On reinsurance, so you said that in Q1, due to the Brazil large loss, you had actually impacted the excess of loss treaty. But now, because of the reimbursement, this has kind of receded.
I just wondered, can you remind us what's the level of this loss treaty? I always have a figure in mind of EUR 50 million, but I'm hopeless on this. Then the last one, you said deals. And there have been many smaller deals. I just wonder if you can give us a total figure for the period, maybe whether it was EUR 50 million or EUR 100 million, whatever, just to get a feel for it, basically. I did have one last one, but it's not particularly relevant, is to try and gauge the EUR 1.5 billion to exposure to Argentina. What's the exposure to Russia now after all the dust has settled? Thank you.
Phalla, actually, I'm tempted to let you answer all these questions pretty much. Well, I think this was two.
So reserving release, when we talk about the 8 points, it's really the release on the large claims that we had in Q4 that I was answering the questions of Hadley. The second one, in terms of excess of loss, I think it is the first tranche of excess of loss. And I think it's pretty much disclosed. It's EUR 54 million.
And just to check, 64 you said, 64?
54.
54. Bigger problem. Thank you.
It increased, actually. Last year, we were because all the we reflected inflation in our treaties.
Yeah. Thank you.
And your question on the deals, sorry. Your question on the deals, they were quite small, quite frankly, so far, right?
Yeah. Oh, the deal was very small. And the last question on Russia, the total exposure at the end of 2023 is around EUR 430 million before reinsurance, of course.
Thank you very much.
Thank you. Once again, as a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Thank you. We are now going to proceed with our next question. The questions come from the line of Benoît Valleaux from ODDO BHF. Please ask your question. Your line is open.
Y es. Hello. Good morning. A few questions on my side. The first one, maybe on the business. So you said last year, price decreased by 1.9%. Long-term, it's more decreased between 1%-1.5%. I mean, what do you see as a trend beginning of the year? Because we say that the economy is slowing down clearly. But at the opposite, your combined ratio or your loss ratio remained very good last year.
So I will expect some broadly similar price decrease this year or not. And linked to this, do you tend, to some extent, to change a little bit your risk appetite? Or do you plan to remain, I would say, as conservative as you've been last year? The second question is related to solvency. When I looked at your sensitivity to an economic crisis, this sensitivity has reduced at your end compared to what it was at the end of June. So I don't know if there is any specific explanation linked to this, just to check if you have changed or not at all your attachment points regarding your reinsurance coverage in the case of loss. And the first point may be related to EFI. So it was EUR 40 million for year 2023, EUR 10 million in Q4.
But there have been some sensitivity, some volatility, sorry, over the year depending on quarters. Do you have any view on what could be the amount of EFI for this year? Thank you.
So let me talk about price first. I mean, as I said, this industry makes productivity gains. These gains are passed on to clients pretty much through time. The price decrease at -1.9% is just a little more than we see on average. It probably went down 1.5% over the last 10 years, something like this. You're right to say we have strong results. And despite the environment being more risky, I mean, we see more demand in the market, but the competition remains very strong. So I would say that trend is likely to continue because of the level of competition we see in the market.
And everybody's aware that I mean, our combined ratio is something that is just the aggregation of what our clients see. So clearly, there's continued pressure on price. In terms of the sensitivity to the shocks, there's an element of cyclicality in that, which means that when things are good, the shocks look also better. And when things are bad, the shocks also look worse. But I'll let Phalla talk about whether there are any changes in what we've done. And then I'll also let her answer the question on the IFE, okay?
Yeah. So I think we have not changed the model, so there's no big changes. We have lower, indeed, the attachment point. But this has always been taken into account in Q2. So there's no change much either on this side.
So no, I think if you look at the sensitivity and why in the 150 we're at this level, that's exactly what Xavier said, which is the, well, core cycle over the model. And if we are open at the level that we have open, the new vintage, of course, when you have a shock, the shocks hit you less than if you have opened at a lower level. I will put it this way. But no, we're not changing. There's no big changes in our model. In terms of IFE, so the sensitivity, of course, it all depends on the interest rate.
But if we keep it if the interest rate is not moving that much up and down, the level that we have in 2023 will be pretty. I think 2024 will be pretty similar to what we have in 2023, of course, subject to big swing in interest rate.
Okay. Thank you very much.
Thank you. We are now going to proceed with our next question. And the questions come from the line of Philip Ross from BNP Paribas. Please ask your question. Your line is opened.
Hi there. Thanks for taking questions. First one, on reserve releases or the reserving approach. You gave us the figures for the Q4 net change related to Brazil, which was helpful. Thank you. I guess that was related to the timing of the change on what I think the specific client was.
There was an event in Q4 in December, so that makes sense. But I'm just wondering, is there any seasonality we should expect going forward on reserve releases or your reserve review? So should we be thinking about Q4 as the time every year when you make some changes? Or does IFRS 17 give you less control over when you might make some noticeable reserve releases and hence when that might affect the profit numbers? That's the first question. Second question, just a quick update, if I can, on business information. You highlighted at Q3 that a big share of that business was from Israel, albeit it was relatively low growth. And I think last week, we started to see some GDP headlines for Q4 from Israel. So I just wondered whether there was any update or a change in that situation.
It doesn't really look like it's been much of a drag on growth, but any update would be helpful. Thank you.
I'll take that one. Yeah. You're right. You're right to say that. Sorry. Yeah. Yeah. Sure. Sure. Sure.
Yeah. I was just going to comment on. I think this one related to reserve release. So the reserve release that we had on Brazil in Q4 is not coming from the model or IFRS 17. It's coming from the fact that we have some recoveries coming through. So it is really actual recoveries that lead to this reserve release. Hope it answers your question.
Yeah. Sorry. Yes. I understand it's related to actual, but I was just wondering about the is there anything we can any steer you can give us on the sort of timing or process of releases when you might do a reserve review every year? Is that going to be a Q4 thing, or could it happen at any time? Sorry.
Well, it will happen. Well, it happens anytime because you know that we are short-term business. So as I said, after two years, cash being cash, the reality is that your development will finish in two years' time. And if you have put some reserve at the beginning and you're not using it, after two years, you release this reserve by vintage. So. So there's nothing particular thing in the model that tells you that in any particular quarter, you will have more release than the others. It really depends on the vintage of your reserving.
And then on Israel, yeah, we did highlight that we have this historic business in Israel, which is one of the two places where we started from in Coface.
So we've been working that business, which is not exactly the same model as what we're developing, which is more elaborate risk services here. But it has been performing fine, I would say, throughout this crisis. As usual in a crisis, there's some stress, but there's also opportunities because our services tend to be in demand. So Israel has been okay, actually, through this period.
Okay. Thank you. Thank you.
We are now going to take our next question. It comes from the line of Michael Huttner from Berenberg. Please ask your question. Your line is open.
Thank you so much. Looking forward, there are really just two. One is Mexico. So you're moving that to North America. I just wondered how big that is, what impact. The second is on discounting. I'm sure there's a number somewhere, but I couldn't find it.
I just wondered if you can say how much the impact was on the combined ratio. The third is, I think in the past, you've had 3-year plans, and this sounds like it'll be a 4-year plan. Can one infer anything from that, meaning the future is bright or I don't know, anything? And then the final numbers is I estimated, and I'm not quite sure how I did the math. So apologies. You had, I think, initial loss peak in Q3 or nine months of about 77% or something. And now you're at 83%. And I tried to estimate, but that's 83% for the year. So the change may be about 20 points on the last quarter. And I estimated from that that you added EUR 90 million to reserves. But A, I'm not sure if that's the right number.
But, B, also, you traditionally add to reserves in the last quarter. So I just wondered if you can kind of suggest what is the moving part here, which is a relevant one. Thank you.
I'll take the three versus four-year in Mexico. And you can talk about the rest, Phalla. But last year, the plan, Build to Lead, was a four-year plan. The only 3-year plan we did was when I joined. We had Fit to Win, which was a really restructuring and get your basics right kind of thing. And that was a three-year plan. Then we moved to a four-year plan because I think this business is really trying to write a long-term value creation story. And I think four years is a good period to show significant progress on some of these fundamentals. So that's why we are.
We've stayed on four years since then. In terms of Mexico, I mean, it's a tier-two country for us, but it's so imbricated with the U.S. I mean, you have all the maquiladoras, which pretty much subcontract work for the large industrials and services in the U.S. We were running, actually, the Latin American region from Mexico a few years back. And now, I think our center of gravity has moved back to South America over there. And it made more sense for us to run Mexico with North America. We have actually started to put servicing centers for the U.S. in Mexico. So there's also an element of productivity here. And that's why we made the move. But I think it's more convenient, more logical, more intertwined, closer, I mean, etc., etc. Do you want to take the rest, Phalla?
Yes. Yes, indeed. So in terms of discounting rate and impact on solvency we're talking about. And has not changed much, around three points in the net combined ratio. Then the last question is related to the Q4 reserving. And you're right. We will leave some reserve, but we also have booked up some reserve, as Xavier said, on Argentina. And we'll book it up in a region where the risk has been underrated.
So, it was my guess of EUR 90 million.
Was that too excessive, or should I do it comparison year-on-year or something? I don't know. What do you mean by too excessive?
Y eah. We booked up some reserve in Q4. So basically, if you look at the Q4 only, I think the new vintage has been opened at very high level. Thank you.
Thanks, sir. That's very helpful. Thank you.
Thank you. We have no further questions at this time. I will now hand back to you for closing remarks.
Well, look, thank you. I mean, it's a bit of an awkward situation because we are literally in a week where we're going to be talking about the next four years. So hopefully, you'll find that interesting, and it'll give you a broader perspective on our journey to date and going forward. So I look forward to that discussion. I just want to thank you for calling in. Obviously, the next meeting is going to be a lot longer, and we'll have a lot to talk about. So thank you very much, and see you soon.
Thank you.
See you next week. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.