FRENCH UNEMPLOYMENT INSURANCE

Transcription

1 FRENCH UNEMPLOYMENT INSURANCE INVESTOR PRESENTATION June 2018 Investor Presentation June

2 Unédic institution Management of the insurance entrusted to the social partners Two public operators are in charge of collection and payment of benefits Continuity and sustainability of the scheme are guaranteed Possible future changes of the french unemployment insurance Investor Presentation June

3 MANAGEMENT OF THE INSURANCE ENTRUSTED TO THE SOCIAL PARTNERS Investor Presentation June

4 UNÉDIC MANDATES TWO PUBLIC AGENCIES TO CARRY OUT OPERATIONS OF CONTRIBUTION COLLECTION AND BENEFIT PAYMENT Investor Presentation June

5 CONTINUITY AND SUSTAINABILITY OF THE SCHEME ARE GUARANTEED Collective negotiation every 2 or 3 years to ensure financial balance over the cycle A legal obligation for a balanced budget (Labour Code Art. L ) 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 levels Adjustable variables in order to reach equilibrium: Contribution rate Unemployment insurance eligibility criteria Amount and duration of benefits A scheme with a tacit guarantee from the State Compulsory nature of the unemployment insurance (Labour Code Art. L ) Ministerial approval of the insurance agreements (Labour Code Art. L ) 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 Bond issuance supported by an explicit State guarantee, renewed since 2011 Amending Finance Law of 29 December 2017 (article 82): authorisation to provide an explicit guarantee Ministerial Order granting the guarantee for EUR 2bn (10 April 2018) Investor Presentation June

6 POSSIBLE FUTURE CHANGES OF THE FRENCH UNEMPLOYMENT INSURANCE FROM THE PRESIDENTIAL ELECTION CAMPAIN TO APPLICABLE MEASURES During the election campaign, President Macron announced new plans for unemployment insurance: Opening up unemployment benefits to new populations including independant and resigning workers Changes in payroll charges substituting contributions paid by the employees by increasing CSG taxes (General Social Contribution) The social partners reached an agreement at the end of February 2018 regarding the possible changes to the scheme Unédic has been involved in the expert group in charge of documenting baseline data for the dialogue: Legal implications Financial risks of the changes Verification and evaluation of the data gathered in the baseline data The new plans could lead to a stronger involvement of the State in the French unemployment insurance In order to define a possible new role for Unédic and open new rights for resigning workers, new specific laws should be passed during the summer Investor Presentation June

7 Economic outlook in France Improvement of business climate Drop in business failures Labor participation rate by age group Unemployment decrease Investor Presentation June

8 IMPROVEMENT OF THE MACROECONOMIC MACRO-ECONOMIC SITUATION IN FRANCE After years of relative growth, various indicators show significant improvement of the situation Opinion survey index of business leaders Long terme average Source: INSEE Investor Presentation June

9 IMPROVEMENT OF THE MACRO-ECONOMIC SITUATION IN FRANCE Evolution of business failures (12-months period) Source: Banque De France Investor Presentation June

10 IMPROVEMENT OF THE MACROECONOMIC EMPLOYMENT SITUATION SITUATION IN FRANCE IN FRANCE Better macro-economic situation directly improves the employment situation Labor participation rate by age group Source : OECD Source: INSEE, last observation 2016 Investor Presentation June

11 IMPROVEMENT OF THE EMPLOYMENT SITUATION IN FRANCE leading to a decreasing unemployment rate Unemployement (ILO) 9,2% Source : INSEE Investor Presentation June

12 Financial Forecast Research methodology and forecasts Unédic hypotheses, revenue and expenditure Stable revenue, expenditure negatively correlated to the economic situation Unédic financial outlook Unédic debt forecasts A leverage effect upon the balance of the unemployment insurance Investor Presentation June

13 UNÉDIC RESEARCH METHODOLOGY AND FORECASTS Forecast updated three times a year Based on macro-economic indicators from the Consensus of Economists: Forecast in change of GDP rate CPI Some hypotheses used by Unédic in its forecast model can differ from the State macro economic framework Careful monitoring of the working population, wage bill change, unemployment benefits paid, etc. Forecasts reviewed by unemployment insurance managers for daily management Unédic has an obligation to conduct every years a 3 year forecast and analysis of cyclical effects on its finances Finance Law for Art. 29 The 3 year forecast and structural and cyclical balance analysis help the social partners adapt the rules for the Unemployment insurance Unédic has to keep a balanced budget over the economic cycle Investor Presentation June

14 UNÉDIC HYPOTHESES, REVENUE AND EXPENDITURE Unédic financial balance is based on the following macroeconomic indicators The macroeconomic hypotheses used for Unédic forecasts are based on the Consensus Forecasts : (f.) 2019 (f.) 2020 (f.) 2021 (f.) GDP growth (in volume) 0,2% 0,6% 1,0% 1,0% 1,1% 2,3% 1,9% 1,8% 1,6% 1,6% Wage bill growth 2,1% 1,2% 1,5% 1,7% 2,4% 3,5% 3,6% 3,2% 3,3% 3,3% Unemployment level 10,1% 10,1% 10,5% 10,2% 10,0% 9,0% 8,9% 8,6% 8,1% 7,7% Unédic careful statistical method and indicators result in revenue and expenditure forecast : (f.) 2019 (f.) 2020 (f.) 2021 (f.) Annual revenues ( M) 32,466 33,274 33,936 34,520 35,146 36,364 37,975 38,745 39,930 40,900 Annual expenditures ( M) 35,193 37,271 37,746 38,769 39,503 39,874 39,378 38,875 38,327 37,313 Sources: Unédic, INSEE, Consensus Forecasts May 2018, Unédic calculations Note: Unédic forecasts are based on hypotheses which may differ from the State macro-economic framework Investor Presentation June

15 STABLE REVENUE, EXPENDITURE NEGATIVELY CORRELATED TO THE ECONOMIC SITUATION Contribution revenue and expenditure relative to GDP Sources: Unédic, INSEE, Consensus Forecasts May 2018, Unédic calculations Note: Unédic forecasts are based on hypotheses which may differ from the State macro-economic framework Investor Presentation June

16 UNÉDIC FINANCIAL OUTLOOK Significant improvement of Unédic financial forecast In April 2017, the social partners agreed on new measures to rebalance Unédic structural deficit estimated at EUR 1,5bn : 2017 Agreement new set of measures EUR + 930M Reform of cross-border workers between European States EUR +480M Stabilisation of Unédic balance in the medium term Sources: Unédic, European Commission, Consensus Forecasts May 2018, Unédic calculations Note: Unédic forecasts are based on hypotheses which may differ from the State macro-economic framework Investor Presentation June

17 UNÉDIC DEBT FORECAST Significant improvement of Unédic financial forecast Debt forecast Sources: Unédic, Consensus Forecasts May 2018, Unédic calculations Note: Unédic forecasts are based on hypotheses which may differ from the State macro-economic framework Investor Presentation June

18 A LEVERAGE EFFECT UPON THE BALANCE OF THE UNEMPLOYMENT INSURANCE 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 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 Investor Presentation June

19 Financial management Unédic funding programmes Funding Programme for 2018 Longer average maturity funding EMTN programme investors NEU MTN programme investors Unédic Investors website Investor Presentation June

20 UNÉDIC S 3 FUNDING PROGRAMMES AT A GLANCE NEU CP (ex Billets de Trésorerie) NEU MTN (ex BMTN) EMTN Maximum outstanding: EUR 10bn EUR 8bn EUR 37bn Maturity: Up to 1 year Between 1 and 7 years Between 1 and 15 years Maturities currently used: Up to 1 year Between 1 and 7 years Between 8 and 15 years Nature of guarantee: No explicit guarantee No explicit guarantee Explicit guarantee* Ratings (Moody s / S&P / Fitch): P-1 / - / F-1+ Aa2 / - / AA Aa2 / - / AA Governing Law: French Law French Law French Law Listing: Not applicable Euronext Paris Euronext Paris ECB Repo Eligibility: Yes Yes Yes LCR Treatment: HQLA Level 1 HQLA Level 1 HQLA Level 1 Risk Weighting: 0% 0% 0% PSPP Eligibility: Not applicable Yes Yes * First demand, unconditional and irrevocable guaranty from the French State, covering EUR 2bn of new issuances in All Unedic's issuances are conducted in EUR, Fixed rate only Investor Presentation June

21 FUNDING PROGRAMME FOR 2018 NEU CP programme (French commercial paper, ex-billets de trésorerie) Daily issue of commercial paper Minimum 3 months WAM Between EUR 2bn and EUR 5.4bn outstanding in 2017 NEU MTN programme (ex-bmtn) Fixed rate, in Euros, maturity up to 7 years No explicit guarantee ECB-eligible (Tier-1) 0% risk weight EUR 2.70bn issued in 2017 EMTN programme of EUR 2bn for 2018 Fixed rate, in Euros, maturity up to 15 years First demand explicit guarantee from the French State ECB-eligible (Tier-1) 0% risk weight EUR 5bn issued in 2017 Investor Presentation June

22 LONGER AVERAGE MATURITY FUNDING Unédic objective is to structure its debt by the economic cycle and extend the average maturity of its outstanding debt 5 months average maturity for the outstanding NEU CP 3 years average maturity for the outstanding NEU MTN 6 years 5 months average maturity for the outstanding EMTN The maximum maturity for new EMTN and NEU MTN issuance is 15 years and 7 years respectively Investor Presentation June

23 UNÉDIC EMTN PROGRAMME: INVESTORS BREAKDOWN IN 2016 & 2017 A growing interest among international investors for the Unédic s EMTN programme A total of EUR 28,250 bn 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 Investor Presentation June

24 UNÉDIC NEU MTN PROGRAMME DISTRIBUTION Unédic NEU MTN Programme allows for flexible financing The NEU MTN is a flexible note format for OTC fixed rate debt issuance The maximum outstanding amont of the programme was increased to EUR 8bn in 2017 from EUR 6bn The maximum maturity of the programme was extended to 7 years (previously limited to 6 years) Investor Presentation June

25 FOR MORE INFORMATION, VISIT UNÉDIC INVESTORS WEBSITE Investor Presentation June

26 DISCLAIMER 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 dated 16 May 2018 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, Paris, France and on its website 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. Investor Presentation June