Unédic Investor Presentation

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Unédic is the public related entity in charge of managing the compulsory French unemployment insurance system: Strategic role within the French Welfare system, the law has mandated the main trade unions and employers’ organizations (social partners) to manage the compulsory unemployment insurance system, the system is managed by Unédic, established in 1958 by the social partners as a non-profit organization

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  • “Millions of euros”
    ---Expenditure ---% of growth in GDP --- Expenditure trend
    NB: les chiffres à gauche (inaccessibles) devraient être séparés par un (,) et non pas par un espace. N-d-T.
    les chiffres à droite (inaccessibles) devraient être séparés par un (.) et non pas par un (,).
  • “Millions of euros”
    ---Expenditure ---% of growth in GDP --- Expenditure trend
    NB: les chiffres à gauche (inaccessibles) devraient être séparés par un (,) et non pas par un espace. N-d-T.
    les chiffres à droite (inaccessibles) devraient être séparés par un (.) et non pas par un (,).
  • -Bonds -Commercial Paper
  • - Americas -Asia -France -Europe, others -Others
  • Unédic Investor Presentation

    1. 1. 1UNEDIC – Investor Presentation – September 2015
    2. 2. 2UNEDIC – Investor Presentation – September 2015 CONTENTS Compensation by unemployment insurance Management of the insurance entrusted to the social partners Two public operators are in charge of collecting and the payment of benefits Continuity and sustainability of the scheme are guaranteed Unédic EMTN programme explicit guarantee
    3. 3. 3UNEDIC – Investor Presentation – September 2015 Compensation by unemployment insurance A compulsory insurance covering the risk of job loss Jointly Managed (Social Partners) Providing replacement income Employers’ organisations Medef, CGPME, UPA Trade unions CFDT, CFE-CGC, CFTC, CGT, CGT-FO
    4. 4. 4UNEDIC – Investor Presentation – September 2015 Compensation by unemployment insurance for 2014 COMPULSORY INSURANCE REPLACEMENT REVENUE Annual budgeted expenditure: 38 billion Euros 16.4 million employees covered out of 26 million employed in France (uncovered population consists of civil servants & entrepreneurs) 1.6 million companies covered 3,2 million workers are recipients of unemployment insurance* Contribution rate: 6.40% of base salary Benefit rate : 61% of previous base salary *at 12/31/2014
    5. 5. 5UNEDIC – Investor Presentation – September 2015 Management of the insurance entrusted to the social partners Responsibility of unemployment insurance COMPULSORY UNEMPLOYMENT INSURANCE SCHEME EVALUATES Produces the studies and analyses supporting the strategic decision making for the insurance scheme SOCIAL PARTNERS LAW MANAGES Ensures the financial management of unemployment insurance scheme while guaranteeing its independence PRESCRIBES AND CONTROLS Prescribes, guarantees and controls the conditions for implementing unemployment insurance scheme Labour Code Art. L 5422-13 Note: The unemployment insurance agreement is subject to government approval (Labour Code Art. 5422-21) Labour Code Art. L 5422-10 Labour Code Art. L 5427-1Implementation Non profit organisation managed by the social partners
    6. 6. 6UNEDIC – Investor Presentation – September 2015 Unédic mandates two public agencies in order to carry out operations of contribution collection and benefit payment EMPLOYERS EMPLOYEES JOBSEEKERS Payment of benefits and help jobseekers reintegrate labour market Recovery of contributions
    7. 7. 7UNEDIC – Investor Presentation – September 2015  Collective negotiation every 2 to 3 years to ensure financial balance “over the cycle” • A legal obligation for a balanced budget (Labour Code Art. L 5422-12) • Definition of the mechanisms for a 2 to 3 years term, depending upon the financial situation of the unemployment insurance, the job market and unemployment figures • Adjustable variables in order to reach equilibrium:  Contribution rate  Compensation rights  Amount and duration of benefits • Specific measures: The last collective negotiation of May 2014 witnessed the decision to implement and provide more incentives for unemployed workers to reintegrate the labour market. The new set of measures are expected to generate savings worth €3bn over 5 years between 2014 and 2018.  A scheme with a tacit guarantee from the French government • Compulsory nature of the unemployment insurance (Labour Code Art. L 5422-13) • Ministerial approval of the insurance agreements (Labour Code Art. L 5422-21) • Unédic is substituted by the government take-over should the social partners and employers’ organisations fail and reach an agreement or obtain its governmental approval  EMTN Bonds issues supported by an explicit State guarantee, renewed since 2011  Amending Finance Law of 29 December 2014 (article 111): authorisation to provide guarantee  Ministerial Order granting the guarantee (January 28th 2015)  The BMTN notes are not explicitly garanteed Continuity and sustainability of the scheme are guaranteed
    8. 8. 8UNEDIC – Investor Presentation – September 2015  Amendments to Finance Act for 2014 No 2014-1655 29 December 2014 • Art. 111: The minister in charge of economy is authorized to grant the State guarantee to the loan contracted by Unédic for 2015, in principal and interest, within a limit of a maximum global amount in principal up to 6 billion Euros. Unédic EMTN programme explicit guarantee  Order of 28 January 2015 granting the State guarantee to the bonds issued under the EMTN programme by Unedic for 2015 The ministry of finances and public accounts, In view of the amendments to Finance Act for 2014 (no 2014-1655 of 29 December 2014), in particular its article 111, Orders: Art. 1 – The standalone guarantee at first demand unconditional and irrevocable of the State is granted to the bonds issued in Euros for 2015 by Unedic in application of the decisions taken by its board of administrators. The guarantee pertains to a maximum amount in principals of 6 billion Euros and all additional fees and interest relative to it. Art. 2 – The present order will be published in the Offical Journal of the French Republic Done the 28 January 2015
    9. 9. 9UNEDIC – Investor Presentation – September 2015 CONTENTS Unédic Research and financial forecast France Economic outlook Expenditures closely tied to the economic situation Contributions steady increase A “leverage effect” upon the balance of unemployment insurance scheme Balance and net banking indebtedness of unemployment insurance scheme Financial Forecast
    10. 10. 10UNEDIC – Investor Presentation – September 2015 Unédic research and financial forecast  Projections updated three times a year • Based on macro-economic fundamentals from the Consensus of Economists:  Forecast in change of GDP rate  CPI • Monitoring of the working population, wage rate change, unemployment benefits paid, etc.  A steering tool for social partners • Forecasts reviewed by unemployment insurance managers. • A reference for the social partners negotiating the agreements:  Starting this year, Unédic has an obligation to conduct a 3 year forecast and analysis of cyclical effects on its finances • Finance Law for 2014-2019 Art. 29: “Unédic reports every year to the Parliament and the Government, before the 30 June at the latest, its three year financial forecast, detailing in particular the cyclical effects of salaried employment evolution on the financial balance of the unemployment insurance scheme”
    11. 11. 11UNEDIC – Investor Presentation – September 2015 France economic outlook  The most recent economic outlook shows improvement for activity in France • Preliminary results for growth improved for 2015 first quarter:  +0,6% according to INSEE • Consensus Economists forecasts improved 2015 predicted growth for France:  up to +1,1% for 2015 and +1,6% for 2016 • Inflation should remain low over the period:  +0,2% for 2015 and +1,1% for 2016 • Insee business prospect indicator shows a betterment of the business climate:  based on business owners representative of France’s main activity sectors answer source: Consensus Economists, INSEE, May 2015 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 GDP Growth (in volume) -2,9% 1,9% 2,1% 0,2% 0,7% 0,2% 1,1% 1,6% 1,7% 1,6% Unemployment (ILO) 8,7% 8,9% 8,8% 9,4% 9,9% 10,1% 9,9% 9,7% 9,5% 9,4% source: INSEE, July 2015
    12. 12. 12UNEDIC – Investor Presentation – September 2015 Expenditure closely tied to the economic situation Contributions and expenditures relative to GDP Source : Unédic, Unédic calculations 1,0% 1,1% 1,2% 1,3% 1,4% 1,5% 1,6% 1,7% 1,8% 1,9% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Contributions to GDP (%) Expenditures to GDP (%) Prevision
    13. 13. 13UNEDIC – Investor Presentation – September 2015 Contributions steady increase Sources: Unédic, INSEE, May 2015, Unédic Calculations 2009 2010 2011 2012 2013 2014 2015 (Prev.) 2016 (Prev.) 2017 (Prev.) 2018 (Prev.) Annual revenues (€M) 30 310 31 188 31 855 32 466 33 274 33 938 33 945 34 674 35 533 36 475 Wage bill growth -1,2% 1,9% 3,6% 2,1% 1,2% 1,5% 0,9% 2,1% 2,8% 2,9% GDP growth (in volume) -2,9% 1,9% 2,1% 0,2% 0,7% 0,2% 1,1% 1,6% 1,7% 1,6%  Unemployment insurance contributions are tied to the economic situation, but less so than the expenditures
    14. 14. 14UNEDIC – Investor Presentation – September 2015 With the current parameters of unemployment insurance (contribution rate and compensation rate), the contributions of roughly 9 affiliated employees are necessary to compensate 1 jobseeker A “leverage effect” upon the balance of unemployment insurance 1 employee losing his job has a compounded negative effect upon the finances of unemployment insurance: - 1 contributor + 9 contributions consumed 1 jobseeker finding a job has an enhanced positive effect upon unemployment insurance finances: + 1 contributor + 9 contributions available There usually is a delay of 6 months to a year before this levered effect can be noticed
    15. 15. 15UNEDIC – Investor Presentation – September 2015 Balance and net indebtedness of unemployment insurance Source : Unédic, Unédic calculations (€M) Change in cash balance of unemployment insurance Prevision 6 years 4 years 8 years ?
    16. 16. 16UNEDIC – Investor Presentation – September 2015 CONTENTSDebt Analysis Unédic cyclical and structural debt research Position in the economic cycle and cyclical balance Breakdown of Unédic cyclical and structural balance Sensitivity measurement
    17. 17. 17UNEDIC – Investor Presentation – September 2015 Unédic cyclical and structural debt research  Unédic research and analysis on the cyclical and structural balance of its debt • Unédic has a legal obligation to keep a balanced budget (Labour Code Art. L 5422-12) • The social partners have made the choice to prioritize the social nature of unemployment insurance by monitoring the debt over the economic cycle • 2014 Finance Law prompted Unédic to conduct further analysis on its debt and the identification of its structural and cyclical components • The methodology used to measure the cyclical component of Unédic year-end result is based on the position in the economic cycle. Its evaluation is based on the “output gap”, the amount by which the actual output of the economy falls short of its potential level. It is the most used method by international organizations (IMF, OECD…) Source : Unédic, Unédic calculations
    18. 18. 18UNEDIC – Investor Presentation – September 2015 -3,0 -2,0 -1,0 0,0 1,0 2,0 3,0 4,0 -4 000 -3 000 -2 000 -1 000 0 1 000 2 000 3 000 4 000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Output gap and cyclical balance Cyclical Balance Output gap Sources : Unédic, Unédic calculations (€M) Position in the economic cycle and cyclical balance Prevision Since 2009, the cyclical balance of Unédic has been continuously negative due to prolonged negative output gap over the period.
    19. 19. 19UNEDIC – Investor Presentation – September 2015 Breakdown of Unédic cyclical and structural balance Sources : Unédic, Unédic calculations -5 000 -4 500 -4 000 -3 500 -3 000 -2 500 -2 000 -1 500 -1 000 -500 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Unedic year-end result breakdown since 2010 Cyclical balance Structural balance Prevision Since 2010, most of the deficit of Unédic is cyclical due to the nature of its insurance activity and the very strong correlation of its contributions and expenditure to the economic cycle
    20. 20. 20UNEDIC – Investor Presentation – September 2015 Sensitivity measurement Sources: Unédic, Unédic calculations Reading note: For 2015, the strutural balance is estimated at €-1,5bn with a margin of error equal to more or less €1bn Note: output gap sensitivity measurement from Insee (March 2014) -0,5 -1,5 -1,1 -1,3 -1,6 -3,0 -2,5 -2,0 -1,5 -1,0 -0,5 0,0 0,5 1,0 2014 2015 2016 2017 2018 Structural balance sensitivity measurement € bn The results of the study are to be taken with caution. Estimating the structural component of Unédic year-end balance is sensitive to the measurement of potential GDP.
    21. 21. 21UNEDIC – Investor Presentation – September 2015 CONTENTS New set of measures since 2014 The social partners are able to alter the finances trajectory Investment-grade rating reflects Unédic rigorous management Financing Programme for 2015 Unedic new BMTN programme Unédic signature strengthened internationally Bond issues welcomed by institutional investors Unédic rating FINANCIAL MANAGEMENT
    22. 22. 22UNEDIC – Investor Presentation – September 2015 New set of measures since 2014 Source : Unédic, Unédic calculations
    23. 23. 23UNEDIC – Investor Presentation – September 2015 Social partners are able to alter the finances trajectory  Specific measures: • The last collective negotiation of May 2014 witnessed the decision to implement and provide more incentives for unemployed workers to reintegrate the labour market. The new set of measures are expected to generate savings worth €330M and €830M for 2014 and 2015 respectively  Collective negotiation every 2 to 3 years to control financial balance “over the cycle” • A legal obligation to keep a balanced budget over the cycle (Labour Code Art. L 5422-12) • Definition of the mechanisms for a 2 to 3 years term, depending upon the financial situation of the unemployment insurance, the job market and unemployment figures • Possible adjustable variables in order to reach equilibrium:  Contribution rate  Compensation rights  Amount and duration of benefits Source : Unédic, Unédic calculations
    24. 24. 24UNEDIC – Investor Presentation – September 2015 Investment-grade rating reflects Unédic rigorous management  Capital market financing • EMTN Programme (€ 31 billion) – Explicit guarantee • BMTN Programme (€ 5 billion) – Implicit guarantee • French Commercial Paper Programme (€ 12 billion)  Active management of the French CP Programme • Setting of a duration target and active maturity management • Setup of a liquidity buffer  Risk management • No foreign exchange risk • Interest rate risk managed through issuance along the yield curve of the rates representing the economic outlook for Unédic
    25. 25. 25UNEDIC – Investor Presentation – September 2015 Financing programme for 2015  Commercial paper • Duration target of 3 months minimum and active maturity management  BMTN • Fixed rate, in Euros, maturity up to 5 years • No explicit guarantee • ECB-eligible (Tier-1) • 0% risk weight  EMTN issuance programme of €6bn for 2015, €5bn for 2016 • Fixed rate, in Euros, maturity up to 12 years • First demand guaranty from the French State • ECB-eligible (Tier-1) • 0% risk weight Unédic debt structure end of June 2015 Source : Unédic
    26. 26. 26UNEDIC – Investor Presentation – September 2015 Unedic aiming for longer average maturity on outstanding debt structure  Unedic objective is to structure its debt by the economic cycle and extend the average maturity of its outstanding debt • 7 months average maturity for the outstanding Commercial Papers • 3 years 4 months average maturity for the outstanding BMTN • 6 years 6 months average maturity for the outstanding EMTN • 5 years average maturity for the overall outstanding debt of Unédic • The maximum maturity for new EMTN and BMTN issuance is 12 years and 5 years respectively  Maturity management to keep Debt Service Coverage Ratio lower than 30% Source : Unédic
    27. 27. 27UNEDIC – Investor Presentation – September 2015 Unedic new BMTN Programme  Unedic new BMTN Programme allows for flexible financing • The BMTN is a flexible programme for OTC fixed rate debt issuance • The maximum outstanding amount of the programme was increased to €5bn in 2015 from €3bn • The maximum maturity of the programme was extended to 5 years (previously limited to 3 years) Source : Unédic, Unédic calculations
    28. 28. 28UNEDIC – Investor Presentation – September 2015 Unédic EMTN signature strengthened internationally A growing interest among international investors for the Unédic’s EMTN programme A total of €18,8bn outstanding, more than 60% of which is held by foreign investors Germany and the United Kingdom are the primary European investors after France. Investors present over 5 continents and in more than 30 countries Data derived from primary issue books  Unedic EMTN Programme increased popularity • Every year, the increasing interest for Unedic EMTN programme allows for bigger issuance and more diverse investor distribution • Unedic bonds’ spread vs. OAT benchmark are tightening every year on both primary issuance and secondary markets Source : Unédic, Unédic calculations Geographical breakdown end of June 2015
    29. 29. 29UNEDIC – Investor Presentation – September 2015 Bond issues welcomed by institutional investors Ever-increasing demand  25% increased Chinese demand for 2015  15% increased European demand (excluding France) for 2015  due to the quality of Unédic signature and trustworthy relationships built with investors KEY FIGURES  More than 30% increase in the share held by Insurance companies in the portfolio, due to the stability of Unédic signature  A portfolio diversified among different types of investors Data from primary issue books 0% 10% 20% 30% 40% 50% Middle East & Africa Germany & Austria France Other Europe Asia Evolution Ask 2015/Benchmark 2015 Total Source : Unédic Breakdown by investor type end of June 2015
    30. 30. 30UNEDIC – Investor Presentation – September 2015 Unédic is rated AA by Standard & Poor’s, Aa2 by Moody’s and AA by Fitch Ratings AA AA As the cornerstone of the unemployment insurance scheme, Unédic has historically benefited from strong state support […] […] Unédic has implemented conservative and prudent liquidity policies. […] […] Unédic benefits from a significant tax levy to pay down its debt, with compulsory subscription to the unemployment insurance system that provides it with a wide fiscal base of around 16.5 million employees […] we expect Unédic to continue to cover its expected deficits comfortably. “ “ “ “ “ “ Aa2
    31. 31. 31UNEDIC – Investor Presentation – September 2015 Unédic 4, rue Traversière 75012 PARIS +33 1 44 87 64 00 INVESTOR RELATIONS Philippe Eberschweiler Chief Financial Officer investors@unedic.fr +33 1 44 87 64 47 www.unedic.fr/investors
    32. 32. 32UNEDIC – Investor Presentation – September 2015 This document is a draft for discussion purposes only, it is highly confidential and proprietary and should not be transmitted to any person other than its original addressee(s) without the prior written consent of Unédic. Prices and margin are meant to be indicative only and are subject to change at any time depending on market conditions. Unédic cannot be held responsible for any financial loss or other consequences of the implementation of the transactions described in this document. The French Autorité des Marchés financiers granted its visa under number 15-048 dated 6 February 2015 with respect to a base prospectus (hereinafter referred to as the “Base Prospectus”) which details this operation. The Base Prospectus is available at no cost at Unédic registered office, 4, rue de Traversière, 75012 Paris, France and on its website www.unedic.org. You are invited to report to the section “risks” of the Base Prospectus before taking a decision with respect to the implementation of the transactions described in this document or in the Base Prospectus. Should you so require, you should contact your financial, legal or tax advisor, or any other specialist, in order to confirm that any decision taken is consistent with your personal financial situation. Disclaimer

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