Thank you. Good evening, everyone, and thank you for joining this call. We're happy to report our first half profit for 2022. As you probably saw in the headline, it's remained a very strong operating quarter in Q2 for Coface. EUR 144.4 million net profit for the first half, solvency at 192. I think if you look through the publications, and I'll highlight some of the numbers without necessarily commenting on each one of them, but you see a number of items that are actually quite strong, and quite a few instances constitute a record for Coface. Our turnover is up 14.6%, 16.5% on a reported basis.
Underneath that, you find trade credits at 16.1%. Retention of clients at, I think at our best ever, 93.9%. Pricing continues to be under pressure as we've experienced over actually the course of the last almost year. Business information, remember we had an 11% quarter in Q1. In Q2, we saw good momentum with slightly above 20% growth and strong high level growth in new business from last year. I mean, the losses remain really good at 39.4%. That brings our combined ratio to 66%.
Actually, if you exclude the impact that we had from the public schemes which we took in Q1, which was EUR 33 million, it's actually better in Q2 than in Q1. The net cost ratio is down almost 4 points at 26.6. I think that's clearly the best performance ever for Coface. We'll talk more about this. You know, when you look at the publication, I think it's a strong quarter, no question. EUR 78.2 million in Q2. Return on Average Tangible Equity at 15.4%. The Solvency Ratio well above the target range. I'll talk a little bit more on the publication about the board changes.
One more piece of good news, we were upgraded in terms of our ESG rating from AA to AAA by MSCI. Finally, just for the record, our NPS, which we really measure on a quarterly basis through thousands of clients across the entire globe, is up 10 points from last year at 37%. I think that's a pretty good number in this industry, if not the best. We added one page on page five to just show some of the changes that have happened from, you know, the time we started this transformation at Coface in the first half of 2016 to where we are today.
I thought it would be interesting to just, you know, reflect a little bit. You can see quite a lot of changes, a very significant deep transformation that's driving related metrics. Premiums up 33%. If you recall, we started off by reducing premiums 'cause we had to clean the book back in 2016. Client retention up almost four points, solvency up 37 points, shareholder equity up 11%, even though we've been paying out 100% of our net profit last year, if you recall, in terms of the dividend. The net cost ratio down by almost eight points. The net loss ratio obviously supported by a good environment, that's down 20%.
Our newborn, I would say, information business, which we really started to drive back in 2019, is up almost 50% from that period of time. That translates into a Return on Average Tangible Equity story, which you can see, I'm sorry, on the right-hand side of the chart, showing steady improvement to 15.4% now, with obviously the blip that we had in 2020, as we were going through the COVID crisis and in the whole government, you know, discussions that you're all familiar with. I mean, deep transformation, Coface executes. Coface has got a plan. Coface is focused on that plan while managing the, I would say, the whatever the environment's got to offer. The story really doesn't change.
The operating principles underlying the business don't change, but we are focused on execution and consistency through the different periods. I'm moving now to page six, and I wanted to give you two updates. One is on underwriting, just to highlight here that you're seeing some significant growth in our total exposures. We're up 9% from the end of last year to, I think our highest ever at EUR 642 billion. What's interesting is if you look back five years, you will see that actually the premiums have grown right in line with the exposures. Actually, premiums have grown slightly more than the exposures over time.
If you look at what's underneath that, you'll see that what we call lower quality exposures are actually close to record lows, and the average exposure rating is actually close to its record high. We are playing the game. We are supporting our clients through this recovery phase, but we are also attentive to what's going on in the environment and making sure that we remain consistent with our long-term strategy of creating value through the cycle. Another update on Russia. You may recall that we started this whole war with EUR 4.8 billion in exposures on Russia. As of today, it stands at EUR 1.4 billion.
If we use a constant FX, because, you know, as you know, the ruble has appreciated paradoxically through that period, we would be at EUR 1 billion. So it means we've pretty much reduced the exposures by about 80%, excluding FX, since the beginning of this event. The bulk of what we do now is related to domestic Russian exposures for the benefit of large international clients that we work with. We took some reserves, as you're aware, for what might happen in Russia initially when this started. Pretty much, you know, we're seeing claims so far being quite reasonable.
We are focused on maintaining our capabilities to one service our clients and two collect the monies that they are and we are owed in the country as we are also rightsizing operations because we, as you know, we're not writing any new business here in Russia. So far so good, I would say, but the situation that we are actively continuing to monitor. The next page really talks about our CSR strategy. I put as a background in light gray the slide that we showed you at the end of Q1. You will see on superimposition in green the items that are moving.
I thought it would be a practical way to just highlight the fact that we're not losing the plot here, we're continuing to move ahead. A few things have changed. We are integrating climate in our risk monitoring. You know, among all the scenarios we look at the stress that the climate events would create on the company. We have now a formal diversity and inclusion policy approved by the board. We have completed a full carbon footprint assessment of the company, which will be the basis from which we will build a plan to reduce it and eventually, if we can, become net carbon zero.
I also already mentioned the upgrade in MSCI rating to AAA, and we have put in place a full CSR governance organization and structure within Coface. We're continuing to move ahead on that important topic. Finally, one last update on page eight about the board. You're aware that we've had quite a few changes over the last year. Bernardo Sanchez Incera is now our Chairman. We have five independent directors, two of which just joined. Laetitia Léonard-Reuter is the CFO for Generali France, so really understands in depth the insurance sector and finance. Laurent Musy leads a global business with Tereos and brings a wealth of international experience.
Some of the metrics are interesting now. We have the three committees led by female independent directors. If you look at our pool of directors, 60% are independent, 50% are female, 50% are non-French. I think we really have a good mix and a level of expertise and experience here that positions us well. With that, I am going to go to the usual presentations. Starting with page 10, talking about turnover growth, 14.6%, quite a high figure historically for Coface, probably the best I've seen and probably the highest we've had as a business. We see that underneath this, trade credit insurance is growing at 16.1%, and on a reporting basis, it's 18%.
Other revenues are picking up some speed with 8.5% in the first half. Business information, as I mentioned, had a good quarter at over 20% in the second quarter. We still do not see the kind of collection fees that we would normally see through the cycle because the losses and the claims remain relatively moderate. Then factoring is up almost 12% for the first half. Fees up 5.6%. I think there's quite a good momentum in the metrics here. When you look on page 11 across the regions.
Actually, I'm not gonna comment every one of them because the trends underneath here are some of the pretty much the same, which is good retention and good client activity, which leads to double-digit growth in every single part of the world. You see some of the metrics that are actually a bit more dynamic here with Central Europe at 18%, North America at 14%, Asia at 20, almost 23%, Latin America almost 24%. Then some of our factoring businesses with in Eastern Europe almost 50% growth as we see opportunities here for us to position ourselves. On the next page, the makeup of our growth really hasn't changed that much from the prior quarters.
You're seeing a little bit less new production. I think we remain committed to disciplined underwriting, I would say, in an environment, as you're aware, which we consider to be skewed towards the downside, and also in a market where competition remains, in my view, a bit exuberant. The retention rate is the highest we've had. We are obviously seeing some price effect, but nothing different from what we've highlighted so far. In terms of the volume effect, which is a combination of the dynamism of the activity of our clients plus the inflation, you're seeing 8%, which is a very strong number. I move on to the next page about losses, which is page 13.
You see we had another really good quarter here with a 32.2% loss ratio for the second quarter, bringing the first half at 30.6%. Almost the same as we had in 2021. We do, as I have already said, I don't know how many times, we do see normalization underway. The frequency has been increasing since the middle of last year, about a year ago. More large losses, even though they're still below, I would say the average we expect in a cycle. A relatively contained amount of claims related to the crisis in Ukraine, which as I said, we're monitoring very closely. We haven't changed the reserving policy.
You see that, we opened the new year at a higher level to account for the fact that the environment is more risky in our view. We still get really good boni from the prior years, including from the year 2021, which includes some Russian risk. You know, another, I would say, very strong quarter on the loss side. You can see that story split out on page 14 across the different regions with the four large, more stable markets that I usually highlight first at the bottom of the page. Very stable, I would say, and below historical levels. Central Europe, a little blip here with the reserves we had booked in Russia, but that's not news.
On the more volatile markets on the top side, still very benign picture, a bit of a tick up in North America. If you look on page 15, you'll see more and more quarterly splits. In North America, what's happening is you have the combination of one larger claim with a progressive normalization, which is taking place like any other places around the world. Pretty much, not much more to add on the losses side. In terms of the costs on page 16. You see that our total cost is up 8.7%. That includes obviously double-digit growth on the external acquisition costs, which are driven by broker fees, essentially.
I would say continued but lower growth in the internal costs. We are gaining operating leverage. We continue to be disciplined on cost execution. Our premiums are growing faster than our internal costs. We are seeing the cost ratio before reinsurance obviously down by three points from last year. You can see the net cost ratio is actually, as I've mentioned earlier, is driven by also a reinsurance benefit. I have to say this cost management does not prevent us from investing in the business. For one, we're spending money on technology, on systems, and stuff like that. We haven't lost any of these things in terms of our sight. We continue to invest in our information business in a very dynamic way.
We still don't see much revenues from collections, and I think that's tied to the environment. I think again another good scorecard, I would say, on the cost side. With that, I'm gonna turn it over, as I usually do, to Phalla Gervais to take us through the next few pages.
Thanks, Xavier. We are now on page 17, and we're talking about the reinsurance results. I just want to remind you that in H1 2021, all the public schemes were still in force till the end of June 2021. That explains of course the premium cession rate that was at 48.5%. And then on the claim cession rate side at 62.7%, again, we are at probably the top of the reserving period related to the COVID last year. I will go back to this year, H1 2022, which is a completely different story. If you look at the cession rate at 27.4%, we are much closer to our usual cession rates related to the, I would say, third-party reinsurance treaty that we usually have.
On the claim cession rate side, 6.5. Couple of things here. Remember that in Q1 we took EUR 33 million of costs related to the tail end, I will put it this way, of the public schemes that went back to the government that put in place such schemes. Of course, 6.5 is low and it just illustrate and reflects the low loss environment that we have. As a bottom line, the reinsurance results really reflect this low past losses, and the results goes down from -384 to -102. Net combined ratio at 66, moving up from 51.9 the first half last year to 66.
If we want to, again, compare apples to apples, I will look at the chart of the combined ratio without the public scheme impact. Here we're moving from 61.5 to 60, with a net cost ratio down almost 4% as Xavier mentioned. This is really thanks to the cost discipline that we put in place despite the inflationary environment and the higher commissions that we have negotiated at the renewal. Net loss ratio moves up from 31 to 33.7, in which we have embedded the reserve buildup on the Russian and Ukrainian crisis. With this, I'm moving to page 18 or 19, sorry, on the financial portfolio. The mark-to-market value of our investment portfolio ends up at EUR 2.8 billion.
A couple of things to be highlighted here. On one side, we have been, of course, negatively impacted by the turbulent financial markets with the increase of interest rates, with increase of spread, and with the drop of the equity market. We have also paid out EUR 225 million, almost EUR 225 million of dividends end of May. On the other hand, our operating performance and business performance has contributed a lot of cash, and we have a good cash generation here, which, you know, explains that our strategic asset allocation has not changed much. If you look at the fixed income, the bonds will be closer to 70%.
What we can see here as well is that the liquidity level is still very, very high, thanks to the cash generations from the business. We keep it at 18%, waiting for policy deployment to pick up the interest rate. That increasing interest rate environment will benefit in the yield and investment income. Tactically, what we've done as well to make our portfolio even more resilient is to shorten some of the duration gap that we have. We have reduced the duration of our investment portfolio by almost one year. We have equity hedges in place that turns out to be very efficient, as you can see, as our net investment income move up from 15.9 to 24.4.
As a result, a very strong, super strong net income for the first half at EUR 144 million, out of which only EUR 78 million coming from the second quarter. This is up EUR 72 million compared to last year with the tax rate almost stable and at 25%. Return on Average Tangible Equity. I will start with a change in equity. We let's look at the book from the full year 2021, EUR 2.1 billion. Of course, we pay out our dividends to the shareholders. We accounted for the net income of the Q2, and then you have this mark-to-market movement impact overall -EUR 163 million + EUR 29 million. And then this is, you know, this has driven down the mark-to-market investment portfolio. Return on Average Tangible Equity from 12.2% to 15.4%.
The work is only explained by the technical results and the financial results net of tax. Nothing more. Let's move to the capital management. Now I'm on page 23. Total balance sheet at EUR 8.5 billion. Nothing changed in the structure itself of our balance sheet. You can see that the hybrid debt is remaining the same. We just paid the coupons. And the financial, I think the factoring assets are fully backed by factoring liabilities. IFRS 17 funding project is going on as planned. Nothing to be added here. Financial strength, something to be highlighted, of course, the fact that AM Best has confirmed the fact that we are, our rating is A, which is excellent rating in April 2022. Book value per share at EUR 12.9.
I'll just give you your own appreciation of where we are today. Tangible book value per share at 11.3. If we move to the next page, on page 24. Solvency Ratio, I think it is down 4% from 186 to an estimated 192. Here something to be highlighted is the fact that our given the resilience of our investment portfolio, this has not impacted much the Solvency Ratio compared to last year. I just want to refer you to the stress test that we did in Q4, and that was shown to the, well, to you guys. This, I think at end of June, we're already at this level of stress, and this has been proven now to be very resilient.
If we move to next page 25, you can see, you know, how the 192 is made of. Not much change since last year. With this, I turn it back to Xavier for the key takeaways and the outlook.
Thank you. As you've seen, I think we had another very strong operating performance in the second quarter. Double-digit revenue growth in most business lines, Return on Average Tangible Equity of 14.5, Solvency Ratio well above the target range. I would say despite the growth in the business, because we do have to fund the growth in the business and some turbulence in the financial markets. We're not losing track of our clients. I've highlighted our NPS score. It's the most important thing for us. We think the outlook for the world has deteriorated markedly.
I mean, you're all aware of, I mean, the list goes on and on and on of, you know, geopolitical risk, health risks, inflation, interest rates, social risks, et cetera, supply chains, COVID, I mean, you name it. We're very well aware that the world may be at a turning point and there could be downside risks. The higher interest rates environment does offer some more attractive investment opportunities which we expect to materialize progressively over time. I think we've said that again and again. In this context, we remain disciplined. I think that, you know, the keyword to Coface, we're focused and we're disciplined. We're focused on the things we highlighted during the rollout of the plan Build to Lead. Clients first.
We rely on our culture to make sure that we have the best expertise available, that we are absolutely committed to the clients, that we are collaborating very efficiently, and that we have the courage to address the situations that need to be addressed. We are consistent with our promise to create value through the cycle and not just be looking for volume for volume's sake. We continue to invest in our business for operations, for systems, for technology, and for new business development as we have been illustrating, I think with the Credit Intelligence business. That's where we are. I'm very happy to take questions if you have some, which I expect usually going forward.
I think we can turn it over to questions for the operator.
Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star and one and one on your telephone. We're now taking our first question. Please stand by. The first question from Hadley Cohen from Morgan Stanley. Please go ahead.
Hi. Thanks very much, everyone. I have four questions, if I may. First two on solvency. I was just wondering if you could just talk with Phalla Gervais a bit more around the walk through from the 196% to the 192% at the end of the first half. In particular, the extent to which the sort of de-risking of the investment portfolio led to a positive impact on the solvency ratio in the first half, and how we should think about the potential for more of that positive benefit to come through going forward.
The second one related to the solvency is maybe I'm missing something obvious, but I noticed that the sensitivities to the stress scenarios has increased quite a lot this time around relative to previous sensitivities given. I'm just wondering if there's anything going on with that. Third question is on costs and cost ratio. Apologies, Xavier, if I missed this in the discussion. Should we be thinking about this sort of 26.5%-27% level as a sustainable level going forward? I mean, typically, we've always sort of thought of the 80% normalized as a 50-30 sort of split.
Do you now see the expense ratio as staying sustainably below 30% in the current environment? The final question is around reinsurance and how you're thinking about that. I guess specifically, you know, in a scenario where we start to see increased loss activity and more defaults and insolvencies and what have you, presumably you will be looking to reduce your net insured exposures. I'm just wondering how you're thinking about the balance of reducing your gross insured exposures and/or increasing your reinsurance protection going forward. Thanks very much.
Okay. I don't know if Valérie.
Yeah. I would take the solvency question. That's two things. Let's talk about the work related to the investment portfolio. Couple things to be highlighted here. As you can see, the mark-to-market impact, of course, is impacting our equity. It's the numerator impact. If you look at, I think on page 25, the market risk has decreased since last year. Last year it was at 388. This year it's 295. Which means that what we are losing, per se, or the impact on firm related to the mark-to-market is compensated or more, even more than compensated by, of course, the SCR, so the capital consumption. Of course, this is Solvency II.
If when you are in a very depressed market, you're falling from a lower level on the capital consumptions. This, put another way around, is really proving out the resilience of our portfolio, our investment portfolio. Which is, we're going through all the shocks, investment, interest rate, spread widening and equity. Of course, you have the impact on your mark-to-market, but you're consuming less SCR. No impact, absolutely no impact on your solvency because your portfolio is really resilient. You can see the spread that we've made in half-year, which is based on the half-year situation, and you know that the spread has been widening quite a lot already.
It's still the same kind of outcome, which is beyond our comfort zone. The second thing related to the stress test, the 1 in 50 and the 1 in 10, couple of things. One thing, key highlights here is the fact that of course we have increased our exposure, you know, by almost 10% from EUR 590 to EUR 640. Of course, this in the stress scenario costs you more. However, what I also want to highlight is that all the stress tests in this scenario, the 1 in 20 and the 1 in 10 is before any management action.
In real life, it's really, you know, in real life, what you do is when you see the loss environment going through the roof, you start to cut exactly what we did during the COVID period. The stress test per se doesn't reflect this management actions.
On your question around the cost ratio, I would distinguish between. I would say the gross cost ratio, which we show on the cost page, which really represents the execution in the business of, let's say, the premium growth and the cost growth. What we would call net cost ratio, which is impacted by the terms of our reinsurance contract, which may vary based on the cycle. I think what you're seeing here is two things, and right now they work in the same direction, is a continued, and you've seen that story develop over the course of the last six years.
You see continued search for efficiency and operating leverage while we continue to invest, and we're not losing track of the longer term plot here, invest in systems and technology and digitization and information and whatever else, market development and things like this. Then you see the benefit of a low claims environment translating into better reinsurance terms, which also adds the net cost ratio impact. I think that actually answers both of your questions. If I may, probably.
Yeah. Thanks very much. Can I just quickly come back on the first solvency question? If we were to assume that interest rates remain where they are at current levels, presumably your own funds doesn't change, but presumably you're also still reinvesting in higher quality assets, so your market risk should continue to reduce. It's a net positive for solvency. Is that fair?
Yeah. I will hire you as my investment director. Yeah, it's fair.
Okay, cool. Thank you.
Thank you for your question. We are going now to take our next question. Please stand by. The next question from Michael Huttner from Berenberg.
Fantastic. Hi there. Thank you so much. The, I was trying to think of a good question on your core business, and I suppose it's, it follows on a little bit from what Hadley asked, which is, you know, if the environment is looking so clouded, you know, why are you not cutting exposures? I suppose that would be my first one. The second one is, Phalla, I'm really, really sorry. I wasn't paying attention. Could you repeat what you said on liquidity, how much liquidity you have and how much was upstream and something? That would really help. I'll try and look through the slides and I couldn't follow. I'm really sorry. The third question is on deals.
I imagine, because you're extra well managed, you've got strong solvency, you've got cash, et cetera, a lot of people are knocking on your door saying, "Ooh, would you like to buy this?" I just wondered what the outlook is there. You said you're investing in information services. I could maybe guess at the figure, but maybe you can kind of within the EUR 304 million, which I think is the internal cost in the first half, what proportion of that or just a feel for how much is the investment bit. My last question is on the board members and you and the board members, just to get a feel for the composition.
Could you distinguish or say how much of your board now represents the your 30% shareholder and how much is other kind of independent? Thank you.
All right. I'll take three and I'll leave one for Phalla. On the board members, we have four board members from Arch Capital. It's not changed since they joined. They replaced the four board members we have from Natixis. There's nothing new in terms of the governance here. In terms of deals, yeah, I mean, we're open to doing M&A. I think our scope is both on the insurance side and on any other things that would add value to our core franchise, which we define as per our Build to Lead plan. You know, the main pillar and the adjacent businesses.
We're looking, but as you know, we've always been, I would say picky in a good sense that we wanna do the right deal. We're just not looking for growth for growth's sake. We're open. In terms of the environment, you're well aware that we're in an inflationary environment. The economy is recovering from COVID or it has recovered from COVID. We're talking about obviously the first half of this year. We're here to support our clients, so we're growing our exposures to support our clients. They have legitimate business needs. We monitor the quality of the book. I just point out that over the long term, our premiums have grown just in line with our exposures, and I think I said that during the call.
That the quality of our exposures is the highest it's ever been. Yes, I mean, we gotta play the game. Last thing I would say is we are in a very competitive market and we need to stand our ground here, and we're absolutely committed to doing this, because what makes us good is our long-term client relationships. Phalla, do you
I think the question is on liquidity. I think on page 19 of the financial portfolio, we can see, the percentage. Everything's related to liquidity is low deposits and all that. It's 18% as of June, which is high.
With time. You, I think you explained how much the cash flow was.
Well, I said that there's a lot of cash flows coming through. Even, well, despite the fact that we have paid almost EUR 225 million of dividends by end of May.
Great. Fantastic. On the cost, the information services, how much are the EUR 304 million?
Oh, we're not splitting that out. All I can say is this business has been pretty much self-funding its growth investments.
Yeah.
You know, I'm not.
We're not disclosing.
We don't typically disclose costs by product line.
Great. Thank you.
Thank you for your question. We're now going to take our next question. Please stand by. The next question from Benoît Valleaux. Please go ahead.
Yes, good evening. A few questions. I start maybe first with the activity. You still have record very high level of client retention rate, but you're also mentioning a bit stronger competition. And at the same time, we've seen a decrease compared to last year in terms of new production. So I'd just like if you can elaborate a little bit on this. I mean, is this competition on one country, for example, in Germany, where you gain some market share during the crisis, or is it more across the board? And do you believe, for example, that despite this, we might expect some price increase going forward with normalization in claims frequency? Second question is still related also to Solvency II.
Usually at the end of June, we've seen in the past that solvency is a bit weak and weaker than at your end. It is not really the case yet. I mean, we've not seen any drop in H1. I mean, have you applied any change in methodology just to understand? Can we assume maybe that you have further strengthened your level of reserve in H1 as you did last year or not, which could maybe partly explain which is a good solvency to level. Maybe my last question, sorry, is on IFRS 17. I don't know if you can elaborate a bit more on the expected impact for you. Thank you.
Okay. Well, let me talk about the market here. It's a very dynamic market. There's a lot of competition. I think we are pretty much since, you know, we had basically the crisis, the COVID crisis back in 2020 that created a spike in insolvencies and quite frankly, quite some concern across the economy. I think we gained share throughout those last couple years. We're taking a more, I would say, prudent or conservative or consistent, I don't know what to call it, stance, as we think in a world where the downside risk is, the bias is towards the downside.
We're remaining completely consistent with our strategy of long-term value creation. I mean, the competition level is not abating, not at all. We're very, very focused on our client base and doing the right thing and staying very close and helpful to our clients. I just point one thing on the solvency is that we make money, right? That we're creating capital.
Mm-hmm.
That helps, right? And then on IFRS is something which is to come, which will introduce a number of changes in the way we count. I think we'll have to take you guys through what that means and how that's gonna work. We're gonna have to. Obviously, there will be some changes, but it's, I think, a bit too early to talk about how that's gonna work.
On your questions on Solvency II, we have not changed any methodology. This is for sure. This is one thing. It's clear. On IFRS 17, we're not disclosing any impact because we're still going through this. However, what I can tell you is that we're using the Premium Allocation Approach, and this has been approved by our auditor.
Okay. On the level of reserves, I mean, you have to assume that you have strengthened a little bit your reserves in H1 or not? I mean, loss ratio, of course.
We haven't changed our.
We haven't changed our methodology, so we're always using the same.
Reserving policy
Same reserving policies. No change.
Okay. Okay. Thank you.
Thank you for your question. We're going now to take our next question. Please stand by. The next question from Thomas Fossard from HSBC. Please go ahead.
Yes. Good evening, everyone. Two questions on my side, which will be related to the, to the evolution of the, economic environment. Could you, please indicate if you've seen, in the, Q2, close, if you've seen any change in momentum in the economy? It seems to be that, you know, since a couple of weeks, clearly the environment seems to be deteriorating pretty fast, actually leading to significant, GDP cuts for H2 and 2023. I was wondering if you've noticed yourself, a kind of, change, in, velocity in terms of, you know, maybe, the recessionary, environment, beginning in Europe. The second question would be related to, your view regarding, Germany especially.
Actually Germany is a big market for all the credit insurers. Here the outlook seems to be a bit tricky regarding gas supply. Could you maybe put a focus on how big Germany is for you in terms of geographical exposure and potentially what are the kind of industries you're the most exposed to, specifically related to.
Have we lost Thomas?
I don't know.
No? Oh, you had two questions. Is that all, Thomas?
Yeah, yeah. That's all for now. Yeah, sorry. Yep, yeah.
Okay, that's good.
One on the velocity of the deterioration and one more focused on Germany.
Yeah. Well, look, I mean, you know how our business works. If there's gonna be a change within our clients, we can see it through obviously the discussions we have with them, or we can see it through their request for limits, or we can see it through the claims, right? That takes a little bit of time. It doesn't happen like within timeframe of a couple weeks.
I would say what we focus our attention more on is how we see the economic environments, what our team of economists and our analysts forecast and that's. It's really our job, it's our value add to look at the different countries and the different sectors and to monitor the level of risk in each one of these components. If you're aware, if you follow what we did, we publish both country risk assessments and sector risk assessments, and you've seen that the latest batch is clearly skewed towards the downside. No mystery here. We manage our exposures as a result of that anticipation, I would say.
We put the attention of our analysts on the sectors where we believe there's the most either downside or upside, you know, and where things need to be monitored closely. Nothing new for us. I mean, that's what we do. It's not something that's just suddenly starting in the onset of Q3. It's something we've been doing now for a very long time, and there's a continuum here in terms of Coface. In terms of Germany, it's obviously a huge market for credit insurance. It is, I think our largest market close with others. It's one where we've been operating now for the longest time.
I'll just remind you that next year we will be 100 years in Germany. Coface is gonna celebrate in 2023 our century. We've gone through a few crises over there. You know, clearly, Germany, the big question right now is gas and energy and how that affects their industry. It's not something new, something that's been on the agenda. It seems more likely to materialize probably now than it did a few months back. Still, I mean, something we're very attentive to. That's about as much as I can say. Nothing surprising if I may say in terms of the developments that could happen there. We just have to take that into account.
Maybe, Xavier, one last question for you, because I think that in the past, you know, compared to your peers, I think that, you know, in the past Coface has been less reactive to cut exposure or it's been late to cut exposure. Since you came, actually, you've strengthened all your risk analysis and risk framework and things like that, maybe in order to take more timely decision and also maybe more commercially driven decision. I think that yes, it's going in both direction, but what is striking me that actually you know, you've downgraded so much ratings for a number of country risks and also industries.
Still, it's still a bit surprising to see you ending Q2 at historic high level in terms of your risk exposure. I fully understand that, you know, the risk quality is strong and you've got probably better tool to monitor compared to what you had in the past or what you inherited from when you took over. It seems to me. I mean, have you already started to reduce? Or, I mean, are you still happy to go into H2 with the same level of risk exposure overall?
Yeah, one thing, Thomas, you have to keep in mind is the economy, the underlying activity of our clients is growing. I mean, it's not like you're aware of the headlines on inflation around the world, so our clients are growing. We are growing not just the exposures, we're growing the premiums. I think if you tracked our premiums to our exposures, you would see that they perfectly match. So we got a bigger business in nominal terms, there's no question. The exposure level per amount of premium is actually very consistent. It's, as I said, higher quality. You know, it's all based on real stuff going on in the real economy here.
It's not like we have changed or suddenly changed our risk appetite or something like this, you know.
Okay. Thank you.
Thank you for your question. We are going now to take our next question. The next question from Michael Huttner.
Thank you. It's very lucky. I try and keep them short. Thank you very much. The first one is maybe if you could talk about, you know, the trading conditions here now in July? What do you see in terms of any particularly large claims or whatever? The second, I was trying to. You've got these lovely charts with the curve, the low loss ratio across most regions, both at Q1 and in H1. Using that, and excuse my math, Central Europe ex-Russia feels as if it's below 30%. Would that be roughly the right level? The reason I ask is if Russia, you put a big lump of provisions in Q1, it'll tend to normalize over years, and it's just to give me a feel.
The last question is, you did mention the large claim in North America, and I just wondered if you could say a few words more, 'cause again, I missed it. I'm sorry. Thank you.
Yeah. Well, the credit environment, there's nothing that I would say that I haven't said already. We reached a low point a year ago. We're seeing normalization happening. I give it to you that it's been probably slower than anybody was anticipating it might happen a year ago, but frequency has been rising. Large claims are still below the cycle, but they are rising. They are happening across the industry you would expect. You know, obviously there's a lot of tension on the raw materials. There's people that are squeezed in supply chains, and you've seen, you know, some of the insolvencies. The most, I would say, high-profile insolvencies lately has been Marelli in the auto space. It's been Geoxia in France on the construction industry.
All these guys are impacted by cost of materials and inflation and supply chains and all that good stuff. You also have some pressure on the retail space. Nothing new actually, but stuff that was already going on before the crisis, which has been eased a little bit during COVID because there's been a lot of stuff put in place and then now it's kind of catching up with people. Nothing we're surprised with, or we can claim that we would be surprised with. In terms of North America, it is one large file. We don't typically discuss them, but it's one where we have reduced our exposures quite significantly in time, and there's some residual stuff out there that we need to take into account, and we're being conservative.
In terms of Central Europe, I don't know what the number is, and we don't typically disclose numbers in partial sub numbers because I think we'd go crazy. We did point out that we had booked some reserves in Central Europe relative to the Russian crisis. As you know, the claims will happen in a kind of random distribution in terms of geography. We can never forecast where the claim's gonna come from because we don't know which client is gonna be impacted and which one of his tens of thousands of buyers is going to be the one that creates the issue. We had to book it somewhere. We put it in Central Europe.
That's really helpful. Thank you.
Thank you for your question. We are going now to take our next question. Please stand by. The next question from Benoît Valleaux. Please go ahead.
Yes, good evening. Two quick follow-up questions on my side. First one is on client activity. As you mentioned, it has been very strong in H1. Can you please share with us what are your expectations for H2? I mean, do you start to see some slowdown, and do you expect some slowdown in the second part of the year? Second question related to inflation. Is it fair or not to assume that during a crisis there should be an increasing demand? I mean, with the crisis to come, should we assume that there should be some additional growth on top of your already strong growth or not? Thank you.
Well, on two things. On client activity, typically there's a delay between what goes on in the economy and the activity that's reported to us, right? Because the activity has to first happen, and then it has to be reported, and we take that into account into our premium calculation and booking. So it's always gonna be a somewhat backward-looking indicator. But I think your guess is as good as mine. I mean, it's a macro play. We finance literally every sector and every country in the world, so we're very much linked to what happens in the global economy. Are we headed for a stagflation or recession and this or this? That's a debate that's open, and we won't have the answer in a year.
I think, you know, from that standpoint, I don't have much more to say. Your second question was?
Information.
The information business. Well, I mean, if there's risk, there's gonna be demand for risk monitoring, right, I guess. I would expect that, like anything, if there's more turbulence, people will be more curious. Now, as you know, this is a business which is really new for us in a way. It's not new, but it's something that we've put the focus on recently, and we still have to go through it. It's literally a startup within a broader organization. There's just many things that are gonna affect the growth of that business, including the investments, the ramping up, you know, and of course, the level of demand.
I don't think that the level of demand is the main constraint today.
Okay. Thank you.
Thank you for your question. We are going now to take our next question. The next question from Benoît Pétrarque . Please go ahead.
Yes, good afternoon, actually. Yeah, the first question, just to come back on the cost ratio, because the gross cost ratio is clearly low and lower than it was before. I think we were at 30.6% in H1. Considering you are running currently at a low level, speaking about the normalized combined ratio of 80%, all you have to think about kind of the normalized level of combined ratio, will that be currently probably below the 80% level, or you are still kind of keeping your 80% normalized combined ratio through the cycle? The second one is on the normalization of the combined ratio towards the 80%.
I think you have been talking about normalization for quite some time. You are still running below the 70%. I was wondering, could you talk about the kind of speed of the normalization for the rest of the year? Will that be an acceleration or you still think it's going to be well below the normalized level for this year? On your theoretical maximum exposure, so the gross exposure, I think in the past you said that the actual usage of this exposure is around 30%-40%. Would that still be the case currently? Do you have a bit of granularity on your internal ratings, kind of, how much in % will be like below investment grade currently on your total gross exposure?
Could you guide us a bit on the underlying re-risk exposure on this total exposure? Then the last question is just to think about Russia and the gas cut potentially. Are you already in discussion with European states and probably Germany around kind of support in this next potential crisis of gas cuts into the winter a bit like we had with COVID? Do you think the states will be asking you to support the economy again, or is that something you are talking with the governments or you know, just wondering about that side. Thank you.
Well, I mean, maybe I'll start with this one. I can tell you so far there's been no discussion whatsoever. What the governments are gonna do, I think is a question. What they can, what they want to do, what they can afford to do, how they're gonna agree between the different countries on who bears the weight of such and such item. It's not just gonna be gas. I think it's also gonna be debt. It's gonna be how the governments in Europe agree to support Italy if there's some fragmentation in Italy. I think it's all up in the air. Quite frankly, I think first credit insurance is probably very far away from their core considerations right now.
I'm sure that if there were a crisis, that we always see it and the governments would obviously start paying attention. It usually happens during the downturns. In terms of the cost ratio, as I said, you know, we've got the gross cost ratio, which is really more geared towards the core operating performance of the business. There is also, and I think I've said this for years now. There's some permeability between cost and loss. The reason is some of the costs get offset by reinsurance commissions, which explains the difference between the gross and the net. Those conditions could vary during a crisis. The second thing is some fees change during upturns or downturns.
The most obvious one is the collection fees, which have been extremely low at a record low for the last couple of years. If claims go up, we have more losses. We also have more fees from the collection fees, which also plays into the cost ratio. I'm not gonna change the guidance, obviously, that we've given, that we have a four-year plan. We have a clear guidance that we've given in terms of what we wanna achieve. There's some permeability. I think I'm just saying this business is focused on executing best we can, and we don't miss a beat in the sense that we don't slack up because, I don't know, things would be good and suddenly we just relax.
No, we don't relax. We continue to execute. We invest, we spend money, we save where we can. We allocate our resources where we think they're the best. We try to improve the profile of the business in terms of its resilience and its ability to navigate whatever the environment's gonna have to offer, you know? As I said, your guess on that front is just as good as mine. The one thing I would say for everybody here is I think it's become harder and harder to forecast the global economy. You know, what an individual in his office decides to do with the gas faucet that he has is anybody's guess, and it's not in any economic model, right?
The reaction of governments to a certain crisis is not in anybody's economic model. I think political risk has probably risen, and that's something quite new for the world. It pertains to energy, it pertains to conflict, armed conflict, it pertains to food, it pertains to all sorts of stuff, elections, whatever. That makes, I think, the world a bit more hard to forecast. As such, I think what matters more, and I've been saying this again for years, so, is your ability to deal with whatever is handed versus your ability to focus on one scenario and try to outsmart everybody else, which I think over the medium term is gonna be harder.
Thank you.
Okay. All right. Well, for once, we've gone a little bit past the hour. Thank you for your interest. I mean, we appreciate you guys, you know, following the company and probing, and it keeps us as well on our toes, and it's a good dialogue, appreciate it. Thank you for joining. I think we're gonna leave it here. As usual, we'll be able to follow up individually if there's questions. We will all see you for our Q3, which we'll, you know, story continues, and then we'll be able to talk about whatever the scenario develops. Thank you, everyone.