Thank you for standing by. Welcome to the Coface SA H1 2024 Results Presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll 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. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speakers today, Xavier Durand, CEO, and Phalla Gervais, CFO. Please go ahead.
Thank you very much, and good evening, everyone. Welcome to this mid-year announcement for Coface. I realize that we're beginning of August and everybody's kind of nearing the end of the season, so thank you for. We really appreciate your time being with us. As you all have seen, I'll start directly with the highlights on page four. We've reported net income in the first half of 2024 of EUR 142.3 million, with very strong solvency at 195%. That means 10% profit growth from last year for Coface. You see the main points underneath, pretty much a continuation of, I would say, the story that we've been laying out for the last few quarters, actually a few years. Turnover is at EUR 923 million, which is down 3.1%, all else equal versus last year. Notably, trade credit insurance premiums are down 5.3% at cost and FX.
Pretty much the same trends going on, as I said, client activity, which remains actually slightly negative for the first half. Client retention continues to be high. It's down, though, from the record that we had in 2023. Pricing is better than last year, but pretty much in line with the historic trend of coming down by 1.5% a year. Good news on the business information, which again is growing double-digit at almost 17% at cost and FX. Factoring, which is sometimes seen as a bit of a precursor, is down 2.6%. Q2 was up 1%, so slightly better Q2 than Q1. You see that the losses have been pretty benign through the quarter again, with a net loss ratio at 35%, which is actually five points better than last year. That brings the net combined ratio to 63.5, by all means a very strong performance.
We have seen, as we write, stable opening year reserving, higher reserve releases on prior exercises. The cost ratio is increased by 3.2%, pretty much same trend as in the first quarter, with 28.4% at mid-year, which reflects both lower revenues, better mixed, and the continuation of our deliberate investments in line with our Power the Core strategic plan. So a few other changes. We are moving Western Africa and Morocco from the Mediterranean region to the Western Europe region. That's where most of the clients in that area are from, actually from France. So it makes more sense for us from an operating standpoint. And that will be affected from the third quarter reporting, so not yet in this one. As you have seen, the annualized return on average tangible equity at 15.3 is extremely high for Coface.
We have a solvency ratio which remains above the target range of 155-175, so by all means a very strong first half for Coface. In terms of the economy, I think, as you probably are all aware, I mean, we navigated a pretty uncertain world, and that remains. We have seen inflation decelerate. We have seen a slower economy, I would guess, weigh on premiums. Political uncertainty remains high. This is a high election year for many, many places in the world, actually probably a record this year. We've seen all the uncertainties in France coming from the anticipated elections. We still have to go to the U.S. elections. We continue to see an uptick in insolvencies in pretty much every market around the world. And by now, it is clear that the insolvencies are higher than what we saw in 2019 prior to the COVID crisis.
Of course, public debt and public deficits remain challenging. We have increased public debt through the COVID period, and that leaves less room for governments to navigate. Finally, we are seeing increased pressure on companies' earnings. I think that was pretty clear from the latest round of announcements over the last couple of weeks. Unclear where China is going. I mean, the economy is still growing, but slower than in the past. The tech boom that's been kind of driving a lot of attention. Uncertain whether that's going to last. We continue to see the normalization we've been talking about for now three years continues to happen. I think we've done a lot of progress, made a lot of progress on inflation, but we always thought that the last mile would be the hard one.
And so when and if central banks are going to respond and how they respond to a slower inflation, but not quite yet where they want it, and economic conditions that may be getting a little bit more difficult, that is a question that everybody's got on their minds. Trade has gone back to kind of normal after COVID, but we see more intense geopolitical activity, particularly in the Middle East, more challenges around trade between the big blocs, U.S., China, and Europe and China. Continued pressure on what does it mean to transition from an energy standpoint. So there's plenty really to go around in terms of things that can impact the economy. Very difficult to say where everything is going, but I think we remain extremely true to our motto, which is be prepared, help our clients deal with this volatility.
As you know, we are very much a short-term credit company, and our job is not to plan for one scenario, but to be ready to respond quickly and efficiently to whatever the world is holding for us. Making progress on our CSR strategy on page six. The darker green areas are the areas where we have been making some progress, notably during the quarter. We show the same page, so it might be a little bit repetitive for those of you who follow those calls, but we kind of track our progress versus the key goals, which are at the bottom of each one of the columns here. I just want to highlight that our exposure to ESG projects has doubled, and actually it's been going quite well on that front. We are continuing to drive down the emissions that we create through our investment portfolio.
We are making happen our Responsible IT plan, which means putting more pressure on those who we work with in terms of how much carbon is being consumed in providing those services or those equipment. We are making a lot of progress from an employee standpoint. Our last survey, which we did not long ago, shows that now the employee brand is actually strong, and the NPS score of our employees in terms of working for Coface is now clearly above the benchmark in our industry. So I think the fact that the company is performing is also being felt inside the company and creating a good environment for people to work. We are working more on disabilities because I think this inclusiveness and inclusion is a big theme here. We are conducting a new carbon footprint assessment.
We've done one a couple of years ago, and we want to show how much progress and make sure we track the progress we made. We are ready, I would say, we're going to be ready for the CSRD rollout, which is a big deal for companies like us. And then our ratings keep coming in. EcoVadis gave us a silver medal, which means we're in the top 15 companies. That was in June. So confirming that the efforts that we're making are being noticed in the market. And finally, we're making progress on including all of our employees and making sure our policies are clearly laid out and known, and we bring people into this initiative. So I would say good progress on CSR. Going back to the business on page eigth, I mentioned some of these numbers.
Revenues down 3.1%, premiums down 5.3%, pretty much stuff that you've seen in the first quarter. Other revenues, notably, though, up 6.5%. As I said, business information is going pretty well at almost 17%. Third-party debt collection, that's something that's pretty small, but we're seeing good traction. We now have good systems to do this on a global basis, and we're getting more than 20% growth on that line. Factoring, as I said, doing better in Q2, so that's encouraging. And then the fees we get from our insurance clients, even though the premiums are down five, the fees are up almost nine. So that makes a difference on our P&L. So I think very good execution from the teams here on fees. You see on page nine, the breakout by region. No big surprise here. Western Europe down almost four.
Northern Europe, Central Europe, so clearly the toughest part of the European economy now, which includes Germany and Central Europe, down about 7%. A bright spot in Med and Africa, which continues to grow. This is the region for us that's been growing the most consistently over time, so we're up 6% there. Negative growth again in North America, - 6 or -7. That's really driven by client activity, quite frankly. Asia-Pacific -9. In Latin America, after a couple of years of very strong growth, is seeing a bit of reduction at - 8. We've moved, as you are aware, Mexico from Latin America to North America. Thought it made more sense, so that's why you see some differences in the numbers. But nevertheless, kind of reflects, I would say, the global economy and the fact that commodity prices have normalized and clients' activities are being impacted.
On page 10, you see some of the same trends continue that we've already highlighted. New business is better. Actually, this is better in 2022 and 2023. We see increased demand for the product, clearly in an environment which is perceived as more risky. I think actually that helps. We're also benefiting from the investments that we've made and we have planned to make in our Power the Core plan. The retention rates remain extremely high, but not quite as high as it was in 2023 and 2022. That's, I think, reflects both a very competitive environment and the fact that we have put in place risk mitigation plans on a number of accounts that we felt weren't balanced in the way we'd like them to be. So a bit less there, but still very good. Prices, as you see, better than 2022, better than 2023.
Volume is really the big one that's explaining a lot of our turnover growth this year at -0.1% through the first half of the year. On the next page, losses, pretty benign stories. I said you can see the quarters lined up on the top and really not that much to talk about. We see the number of claims continue to increase. That started in the mid-2021 after the COVID incentives or mitigation plans were put in place by the governments. We are seeing, obviously, lower premiums have a mechanical effect on the loss ratio and severity. I mean, I think the insolvencies are on the rise. They started with the smaller companies, and clearly it's working its way up the food chain. And we see that the larger companies now have their P&L that is a little bit more under pressure than before.
You can see that on the bottom right, we continue to book reserves at pretty much the same levels as before. The blue part, -44, shows strong reserve releases from prior vintages. So again, very strong execution on risk here. On page 12 is the mid-year picture compared to full years. Not that much to report, frankly. We had a spike in Latin America in 2023. It's obviously better in this quarter. That's the smallest and most volatile region of Coface, only 4%. And you can see on page 13 the story developed by quarter. That's probably more interesting. So really a pretty benign story with the volatility I spoke about in Latin America, but clearly not an easy region, but one that is essential for us in terms of our ability to play a global game here.
As you know, there are very few firms that are able to do this well. On the cost side, you see a continuation on page 14 of some of the trends I've highlighted in Q1. Costs are up overall 6.9%. The cost ratio, if you look to the bottom right, went from 29.6% to 32.6%, so that's a gross increase of three points. If you look at where that comes from, one point is due to the decrease in premiums. 1.6 point is the investments that we're making really clearly laid out in our Power the Core plan. Then we have embarked on a cost inflation of about 1.9 point, which is the result of some of the delayed cost increases that we've seen through the inflation period in 2023 and the end of 2022.
So this is partially offset by better fees, better Business Information revenues for 1.5 points. I think it's interesting to note here in terms of our execution of the Business Information strategy that despite all the investments that we're making in this line of business, and they are quite significant at this stage, we are well above 500 people in this business, and these did not exist four years ago. That has been a neutral investment, both in terms of the P&L and the cost ratio. So underneath the performance of Coface is also another revolution happening here. That gives us quite a lot of insights into data, into decision science, into technology that we didn't have before. So I'll turn it over to Phalla to talk about page 15 here.
Thanks, Xavier. So on the reinsurance side, if you look at it, it's pretty similar to what we have in Q1 with a premium cession rate at 27.7, a claim cession rate at 22.1. Of course, the reinsurers are also following the fortune that we have on the claim side. This leads us to a reinsurance result of -EUR 64 million. It's a good result for the reinsurers. And of course, I think we are negotiating good commissions in front of it. If we move to the following page, page 16, the net combined ratio at 63.4, -2 points compared to first half last year with a net cost ratio increasing and the net loss ratio decreasing by five points, knowing that, of course, in Q1 2023, we have these large claims in Latin America that we don't have this year.
If you look at the net cost ratio, 63.7, this is really pretty similar to what we had in Q1 2024. Moving to page 17, investment portfolio, the mark-to-market value stands at almost EUR 3.2 billion. This is pretty similar to what we had again in Q1 2024. Having said that, between the two quarters, we have paid EUR 194 million of dividends generated by, I think, the operating cash that we have from a very good business performance. It's helping on this side. The recurring income at half year 2024 amounted to EUR 48 million. You can see that the average accounting yield is increasing. I think it is now reaching 1.5 for half year, which is a very good performance. And our new money is now invested in a much higher rate than it used to be.
In terms of realized gain and loss, so we have realized gains coming from divestment in money market funds. Of course, last year we have a high level of cash in the asset class that we have invested in money market funds awaiting for the dividend payment and the first tranche of Tier II debt payments. And when we use this cash, of course, we sold the money market funds and we realized the gains. This more than offsets the continuous unrealized loss that we have booked in our investments in real estate funds, of course, at a much lower level than what we have booked last year. In terms of FX, we have booked. We continue to book the negative impact on hyperinflation in Turkey and Argentina. And again, at the lower level that we used to book in previous years.
Insurance finance expenses stabilized at almost EUR 18 million. This is pretty much a similar amount between the two first quarters. This leads us to a net income of EUR 142.3 million. As Xavier said, it's 10% up compared to last year with an operating income improvement by 17.5%. Return on average tangible equity. Now we're on page 19. The average equity is moving from EUR 2.051 billion to almost EUR 2 billion. Nothing much to be reported here except that we have paid our dividend, EUR 194 million, and we have accounted for the net income of the period. This leads us to a return on average tangible equity increase from 13.4 to 15.3, mainly driven by the very good financial results compared to last year. For this quarter, of course, it's half year, so we will have a part which is a capital management section.
Here, I'm moving to page 21. The total balance sheet stands at EUR 7.8 billion. We discussed about the insurance investments, which is our investment portfolio at EUR 3.2 billion. Factoring assets, almost EUR 3.1 billion, has not changed much, totally backed by factoring liabilities. And of course, our financing liabilities are Tier II debt, the two tranches of EUR 300 million that we have issued last year and the year before, including accrued interest that you should see on this page. I just want to remind you that we have been upgraded by AM Best at A, excellent with a stable outlook, which is very good for us. And the book value per share stands at EUR 13.4. We are trading slightly below this level today, but it used to be above this level in the past couple of weeks. Let's move now to the solvency ratio, very robust one again.
We're moving from 199 at the end of 2023 to 194. You can see the work here. I think we have been negatively impacted by the capital consumptions on the insurance part, but this is partially offset by the very good business performance that is shown on the Own Funds variation and the Own Funds creation. On the right-hand side, we have the usual stress test. So the first block is the financial market stresses. And you can see that in all cases, we will be above the upper range of our comfort zone. The second block is the crisis scenarios, one in 50 scenarios being the 2008 financial crisis, similar scenario. And here again, we will be at the upper range of our comfort zone. Moving to page 23, this is just the details of our SCR, so our capital requirements.
You can see the first part, which is the insurance underwriting risk, of course, market risk, counterparty risk. And then you have the factoring capital requirement, 243 has not moved much with the total SCR, so capital requirement of EUR 1.377 million to be compared to our own funds eligible solvency own funds of EUR 2.68 billion. Xavier, I'm giving the floor back to you.
Yeah, clear. So just to wrap it up, a good start to the year, up 10% in terms of net profit at EUR 142.3. You've seen that the combined ratio at 63.4% remains below or through the target, through the cycle targets. The economy is clearly kind of slow. Where it's going, I think, is anybody's guess at this stage. We're very well aware of the tension between trying to bring down inflation and at the same time not kill the economy that the governments are going through. A lot of political uncertainty, a lot of geopolitics, a lot of trade issues, a lot of technology changes and questions. So I would say, in a way, a good place for our business in terms of demand, clearly more uncertain in terms of risk. Returns are good.
I think what we feel good about is the growth in our business information business and fees compensates now. It's visible in our balance sheet, some of the decline of the trade credit insurance. So even though these businesses are still kind of small, they are helping the overall picture for Coface. We're making investments, but these investments are covered by the revenues. We now have well above 500 people dedicated to this in the company. This is core growth, and it really gives us better insights and helps us understand better the power of technology and how we can use it to put it to work for the company. So we're going to continue to do what we said we would do, which is invest in data and connectivity and services as we described during the Power the Core plan at the beginning of the year.
So the credit cycle clearly is entering a new complicated phase, I guess, but that's what we do, is to help our clients navigate through this environment. So that's about as much as I can say. I think we're going to turn it over to those on the call for questions as we do usually.
Thank you. 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. We will now go to your first question. One moment, please. And your first question comes from the line of Michael Huttner from Berenberg. Please go ahead.
Thank you. Good afternoon, Xavier. Good afternoon, Phalla, and to my guest. I had lots of little questions as usual, but I suppose the bigger one is when you think about what the past couple of days does anything where you think, "Oh my gosh, this is something which really does affect us," or there could be something hidden out there that we hadn't thought about or we have thought about and it's now coming true. I don't know. The share prices and the interest rate changes have been quite sudden. That's the first one. And then lots of little questions. The one is on the Business Information. Q1 was +22% growth. Q2, if I use the 17 and stuff, is +12. I know you don't like giving guidance, but the trend is not up here. Is there anything you can say about this?
Then on the real estate, Q1 was -EUR 6.5 million. I noticed you say total impairments or whatever were -EUR 4.something million in H1. Does that imply that real estate turned positive in Q2? These are lots of little questions. Thank you.
Okay. So I'll leave the real estate question for Phalla, and I'll try to provide some clarity on the other ones. Lots of volatility, yeah, but this is market volatility, right? I mean, very hard to comment or derive any fundamental views from what's happening in the markets. I mean, I think there's been a lot of hype around technology, AI, and there's been the seven incredible stocks that people have been following. Has it gone too high? I don't know. I mean, as you know, we don't base our strategy on markets. We are very conservative in terms of our own portfolio. The thing we have noticed is companies' earnings are more under pressure, I think, than in the past. And again, is it a surprise? I would say not really. What's more interesting is the timing.
I think we have seen normalization over the course of the last few years. We probably would have expected pressure to build up a bit sooner. So QE had lasting effects. We're seeing now that the companies are a little bit more under pressure, and that's something that we thought would happen. It's anybody's guess exactly when that is going to be. Your question around business information, I mean, it's pretty much I've made that comment, I think, several times over the course of the last couple of years. But I wouldn't try to read too much into one quarterly result or another, by the way, whether it's higher up or it's still a fairly small business that has some volatility or some chunky bits into it. So I wouldn't try to derive too much out of one figure. Phalla, you want to talk about?
Yeah, I'm taking the real estate. Yes, that's true. So it has been reduced because we received some, the real estate also received some not dividends, but the rental from the real estate. So yes, it compensates the unrealized loss that we booked in Q1 a little bit. And I'm not saying, Michael, don't make me say it. I'm not saying that it will be the same trend in Q3. I don't know.
Just to understand, so I was right in -6.5 and -4.5, and the positive is +2.
Yeah, exactly.
Okay.
Yeah, it's a mark-to-market. So the mark-to-market has been a little bit more positive, but who knows?
Excellent. Okay. Thank you.
Thank you. We will now go to the next question. Your next question comes from the line of Benoit Valleaux from ODDO BHF. Please go ahead.
Yes, hi, good evening. A few questions myself. The most important one is regarding to your activity. When I look at your TCI premiums, it has decreased at a constant effect by 3% in Q1 and broadly 7% in Q2. When I look at volume effect, it's still close to 0% as in Q1. Prices don't broadly as in Q1, but client retention is still decreasing a little bit. And it seems that in terms of new production, the increase in Q2 versus Q2 is relatively modest. So I just wanted to understand when you look at the equalizer, what is in your view coming really from purely the client activity from maybe stronger competition and from a more strict underwriting policy because it seems that you are relatively, we say, conservative in your underwriting policy.
Linked to this question, I know that you would like to provide any guidance, but anyway, is it fair to assume after this decrease in H1 that on a full-year basis, we might assume a slight decrease? I know that H2 should be a bit more favorable in terms of comparison basis, but any color or any comment on this will be great. The second question, just to know regarding France in terms of risk management, if you took any measures linked to political uncertainties or not? The third question is related to your solvency margin, which is at 195% or 20 percentage points above the high end of your target trend. So it's great to have a solvency margin in current environment. But the main question is, how do you see your target trend? Because I know the economic growth is quite modest.
So do you plan to use part of this excess solvency next year, for example, by changing a little bit the part of your reinsurance treaty, which will come to renewals? Or I mean, are you fine with 995 and you can keep it at this high level for quite a long period of time? Thank you.
Okay. So quite a broad range of questions here. On the activity, so you understand how this works, right? We set a minimum premium in the contracts with the clients, and then the clients make declarations of actually what their turnover is, and that varies by region and by contract in terms of how frequently it's done. So it kind of reflects the turnover of our own clients. We tend to be more towards material goods than services and tend to be a little bit more sensitive to commodity prices. So I think that's really what these numbers say. I mean, we're comparing to a pretty high base last year because we had both growth and inflation, and this year it's the reverse.
I'm not going to make any forward-looking statements because I think it's anybody's guess, actually, where the economy is headed and whether we are going to see a slowdown, a real slowdown in the economy or not. But I would just like you to think through how it's basically we had a couple of years with strong activity driven in part by inflation. Inflation has clearly come down, and the economy now is returning back to its, I would say, 2-something, 2.4% growth rate. And so that's what you're seeing in these numbers. In terms of France, we don't take broad measures on the basis of, by the way, what kind of certainty do you have on anything right now?
It's unclear what is going to change, when it's going to change, how it's going to change, and to what extent it is going to be bad or unfavorable or good or whatever for companies. So way too early to have any view. I think we have to see what plays out, and we have to understand. I think that's the mantra of what we do as a business, is we don't take broad measures or take those kinds of bets, but we are keen on understanding what certain policies and what certain trends do to companies in detail, company by company. We have 5 million counterparties out there. So when we understand what's going on, then we will derive consequences, if it's needed, if it's required, if it's warranted, if it makes sense.
I don't see anything that I can point to at this stage that would allow us to do that. The only thing I would tell you is France is about 14% of our business, so it is by far not the majority of what we do. In terms of solvency, I think we've always, for the last few years, had the same line, and I'll repeat it again. We are above, it's true, our target. I think, as you said, and I assure that you, it is good to be with a strong solvency position. By the way, a strong, profitable business at this point in the cycle, I think it's a good place to be. We always said that we would manage capital in a very disciplined way. So we will allocate capital to growth, core growth, if core growth is there.
We will allocate capital to acquisitions if we find good ones at the right price with the right, as I always say, skills or scale benefits for Coface. And then we will be disciplined about returning capital as we have to shareholders that we don't believe we need. So no change here in terms of our policy or the way we think of the business.
Okay. If I may, just regarding retention or reinsurance coverage, I mean, could you envisage to change a little bit or to increase your retention or not at all? I mean, you still want to keep, as you said, long-term?
Well, I mean, again, these decisions are made once a year. They are made towards the end of the year. We don't, again, provide any forward-looking statement. And the other thing I would tell you is partnerships with reinsurers is a long-term deal, right? We need reinsurers to take the risks, the individual risk, and the collective risk that we cannot keep on our own. We have long-term partnerships. It's a very stable base of reinsurers that we work with. So I would say these are things that need to be considered over the long term, not just the short term.
Okay. Thank you very much.
Thank you. We will now take the next question. The question comes from the line of Amalie Zdravkovic from Deutsche Bank. Please go ahead.
Good afternoon. This is Amalie from Deutsche Bank. Thanks so much for taking my question. I just have one from my side. So given what we're seeing in the economy and the markets now and kind of what you've touched upon already, which industries and geographies are you sort of looking to reduce exposures in, and which do you sort of see as more attractive markets and geographies now? Thank you.
Well, Amalie, this is a question, again, that is dealt with on a micro basis. So Coface has about EUR 700 billion, as you know, of credit exposures on something like 5 million different lines covering 200 different countries. And we're pretty much invested, as you know, in virtually all the aspects of the world economy, with a skewed, I would say, more presence, I would say, in industrials and a bit less in services, about 50% Europe, 50% rest of the world, and no huge geographic concentration. So I think what we have seen over the course of the last few years is those economies that had variable interest rates had more difficulties around construction and real estate. We have seen retail be difficult. We have seen actually supply chains impact and change in technology impact the automobile industry.
So for me, there's not a whole lot of news at this point. I think what we tend to do is we tend to, as I said in response to the other question, is to look at a micro company-by-company trends. We publish, obviously, sector and country evaluations, and these are revised on a regular basis, and they're public, and they're available. But then we tend to make decisions on a company-by-company basis based on where they are exactly in their value chain and which of these things are impacting them more. So very hard to answer on a broad base because that's not the way we run the business, actually.
Thank you. Thank you. We will now take the next question. It comes from the line of Phil Ross from BNP Paribas. Please go ahead.
Oh, hi there. Good afternoon. A higher-level question from me first, please. If I look at slide 11, the bullet point commentary on the right-hand side is quite negative around claims frequency, severity, and pricing as well. But then if I look at the quarterly prints on the left-hand side, you're trending downwards quite nicely over the quarters. Just looking for your perspective on how you would link those two aspects and how you're navigating?
I'm sorry. You're reading page 11.
Slide 11.
Sorry to interrupt. So slide 11, you're looking at the comments on the top right, right?
Yeah. So the three aspects of normalization versus the fact that your loss ratio pre-reinsurance is trending downward quite nicely in a positive direction. So I guess it's a chance to give yourself some credit. I don't know whether you feel that you're navigating the negative scenarios by observed trends, good loss control, good loss management, etc.?
Well, I mean, clearly, we're disciplined. I mean, the one thing I would say is so I've been saying this for three years. So apologies to those of you who have heard this probably 12 times already, but I'll say it one more time. We expected at the end of the COVID measures, mid-2021, we said we think normalization is starting, and it's taken three years, I mean, right, to get to where we are. And we have seen, we don't have it here, but we sometimes provide those curves, we have seen company insolvencies rise from a very low point in the middle of 2021. That was the lowest point, I think, historically that I've ever seen because the governments threw a lot of money at companies, and these companies were kind of, in some ways, would probably have had more difficulties without that money and earlier.
And then that continues, right? So we've been prepared for this. It's not like we didn't see it coming. It happened slowly, which gives us an opportunity to really dose very precisely how long we want to stay in a given name and when we think it's not reasonable to be there anymore. So that's the work that the company is doing. And we make 12,000 credit decisions per day. So back to Amalie's question, it's hard to—it pinpoints just to a very industrial and very detailed way of managing risk, which is not broad-based, which is not based on making bets on where the economy is going, but really looking at what's happening company by company. And as things have been developing steadily up in terms of risk, but at the same time, under some long time, I would say it has given us the opportunity to adjust.
I think that's what you see in those numbers. I don't know if that was your question, but.
Yeah. No, I appreciate you have said things along those lines previously, but it's just helpful to hear how you see it currently. So thank you for the observations. I had one more slightly detailed question, if that's okay. On the half-year statement, I was looking for the risk adjustment for non-financial risk, which I think you gave us before half-year last year, and obviously at year-end. I can't see it in the report, so I'm just wondering if that has changed or if there is a number you can give us for the risk adjustment figure. Thank you.
That's one for a follower here.
Yeah. We'll follow up on this one. I think it's just an adjustment. We'll follow up with you, Phil.
Okay. All right. Thank you.
Thank you. We will now take the next question. The next question is a follow-up from Michael Huttner from Berenberg. Please go ahead.
Thank you. Thanks for this opportunity. I had three. The first one, the kind of scenarios, really. If interest rates were to continue falling sharply, so 100 basis points or whatever, can you explain what the impact would be on the discounting and on the investment financial expense? I know they would both go down, but I wonder what is the relative speed and how much would they go down? Just to gain a color, how much of a drag would that be in the very short term in terms of reported numbers? And then the next one is on inflation. I think I misunderstood your inflation in the past. I thought it was just the inflation when I buy my coffee, and it keeps going up. But I think the implication I hear is inflation is for you because you have lots of clients which are in commodity businesses.
And so when commodities are high, you get more revenues, and when they're low, you actually get lower revenues. It's not just the rate of change which changes. It's actually you get less revenues. And I just wondered whether you can give us a feel for how much of a factor that is or could be. And then the last one is a very cheeky one. I think you explained once that thanks to technology and the more data stuff and everything, you can now reach decisions kind of almost globally very, very quickly. We use Zoom, but maybe you use Teams or just a phone call or whatever. You can get all your people together very quickly and make decisions. How many of those calls have you been, or has the frequency of these calls changed much? Thank you.
Okay. Let me start. Well, I'll leave the first 1 for a follower, I mean, but I'll take the next two. Inflation is indeed how much you pay for stuff, right? So what can I say? If you buy your coffee EUR 5 and the next day EUR 1, that's a significant change. You don't tend to see those kinds of changes in consumer products, but when it comes to commodities, you do see much rapid and much more magnitude in the changes. So for those clients of us who sell the product, we ensure that they get paid for the value of that product when they sold it. And that can vary quite significantly. And our billing is based on a percentage of that price, right?
So it's exactly the same thing as inflation, except the inflation for commodities is stronger, or there's more volatility and more short-term movement than you see in consumer prices. When it comes to technology, I mean, I think this is something we continue to invest on very regularly with determination. It's not a short-term endeavor. It's a long-term endeavor. We see every year technology allows us to improve our scores, to improve our speed, to improve our accuracy, to make less errors, to connect people better between themselves. So what technology does is that a lot of the decisions that we make initially manually become more automatable. We tend to see that the digital tools become more reliable, more effective. The Gini scores improve. It's not one-size-fits-all. It's score by score, sector by sector, country by country.
So it's really bottom-up groundwork, and it takes a long time to develop those skills and those tools. So I think you're seeing that improvement happen, by the way, in every industry, but in our industry as well. And it's percolating through our system. So I can't tell you how many calls we make because actually, today, 60% of the decisions we make are made by computers, right? So there is actually not a call happening. There is a computer decision that we make 12,000 of these every day. So we don't have people calling 12,000 times. It would not be manageable.
Brilliant. Thank you. And I know I'm being really cheeky, and I know you don't provide guidance, but is there any Warren Buffett calls it people swimming naked when the tide goes out that you're aware of at the moment?
What do you mean? Like, counterparties out there, companies?
Yeah. So I don't know if we basically, I suppose I'm asking about Q3, really. Now, in July, will there have been any larger events that would be worth flagging?
Well, I mean, there's always, I mean, imagine, Michael, we manage 5 million credit lines, right? So there's always something going on in the world. I mean, that's our world, right? We have exposures of EUR 600-something billion on 5 million different lines on probably 3 million companies in 200 different markets. So pretty much anything that happens in the credit space, we are kind of involved in one way or another, right? So it's a bit difficult to answer your question because, yes, there are things going on. There's always something going on in our business. I mean, that's what our people do. And we monitor those very clearly. The whole game is to try to be there as long as it is reasonable to be there and try to get out before it's not reasonable to be there anymore.
Brilliant. Thank you.
Thank you. We will now take the next question. Your next question comes from the line of Benoit Valleaux from ODDO BHF.
Yes. Hi, sorry. A few follow-up questions also on my side. Maybe the first one is related to BI. When you look at your Q1 figures, you reported a small benefit from this activity. Now it's neutral in H1. So, as you said, we'll have to pay too much attention on quarterly figures. You mentioned it on the revenue side, but just wanted to know if there is or there has been an acceleration in your investment in Q2 or not really. And if you want to maintain the same pace of growth in your investment by year-end and maybe 2025, knowing that you have this RoATE contribution target for 2027. So I don't know. So if you expect this business to start to be profitable in 2025 or 2026 or maybe more early at the end of the plan. So that's the first question.
Maybe the second question, sorry, is related to IFI, insurance finance expenses. There's some volatility on quarterly figures. If you look at last year, Q1 was very low, but Q2 increased. The peak has been reached in Q3 last year, then decreased in Q1, increased in Q4, sorry, increased in Q1, decreased in Q2. So do you have any view on what could be—I would say what could we expect for H2 this year at this point of time? And maybe the third question is related to your solvency margin again, sorry. I know there is this Solvency Il review. You have your own internal model. I mean, do you have any room to improve your model? I mean, do you have any plan to improve this in the near future or not at all? Thank you.
I'll start with the last one here. I mean, model improvements is something we work on all the time, right? I mean, but it's a very regulated space with very clear, detailed rules with regulators basically controlling everything we do. So there is a program to continuously try to improve and refine our internal model as we do for scores, for credit scores. But it's never something that is radical, or there's a whole program around it which is being worked on in very close supervision and coordination with the regulators. So that's as much as I can tell you there. In terms of Business Information, our view hasn't changed. I mean, this is an internal startup which we think warrants our time, our attention, and the investments that we're making into it.
We weren't intending to send any particular signal by saying it's neutral. It's roughly neutral on a P&L. I wouldn't try to read any quarterly number, all that smartly, because it is such a moving space in which we're making quite a lot of investments, where we're signing up new clients, we're developing new tools, we have new people, we have new value propositions literally every week. So I wouldn't try to read too much. I think the goal here, as we said in our Power the Core plan, is to both try to grow it as quickly as it is feasible without, obviously, impacting the P&L in a way that would be hard to bear. And we set a goal in 2027 just to highlight the fact that we think over the medium term, this thing is going to be profitable. This hasn't changed. We haven't changed our view.
It is a space that is actually allowing us to learn a lot because we have a lot more brains. We have a lot more, I would say, resources around data and technology than we had before. So I think it's good for the company. But I wouldn't try to read anything specific in terms of timing or profits or growth. I don't know. Xavier, if you want to take the IFI discussion.
Yeah, I would take the IFI discussion. I'll come back to the first question on IFI. A couple of things on IFI. You know that it really depends on two items. The first one is the level of technical reserves. And of course, the basis, which is our technical reserve, has increased compared to last year. The second item that leads the changes in IFI is the level of interest rate. But on this side, last year, the interest rate movement has been much more, I would say, volatile than this year. So this year is probably a little bit more stable. And I think that's driven the comparisons that you are mentioning between the two periods. So level of technical reserve that has increased, the basis has increased. And last year, I think the IFI was really linked to the movement of interest rates that are probably more volatile.
This year, you can look at the interest rate is probably much more stable. That explains the level of IFI we have.
Okay. So it's still more stable for now?
For now. Oh, I'm talking about half year, of course.
Yeah, yeah. Okay.
Thank you. There are currently no further questions. I will hand the call back for any closing remarks.
Well, look, I think we're right on time. So I just want to thank all of you for logging in on the beginning of a summer day in a summer week in August. So we will be meeting again for Q3. And in the meantime, thank you very much for your attendance today.
Thank you. This concludes today's conference call. Thanks.