French unemployment insurance - UNEDIC 2018 06.pdf · Two public operators are in charge of...
Transcript of French unemployment insurance - UNEDIC 2018 06.pdf · Two public operators are in charge of...
Investor Presentation – June 2018 1
FRENCH UNEMPLOYMENTINSURANCE
INVESTOR PRESENTATION
June 2018
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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
Unédic institution
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MANAGEMENT OF THE INSURANCE ENTRUSTED TO THE SOCIAL PARTNERS
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TO CARRY OUT OPERATIONS OF CONTRIBUTION COLLECTION AND BENEFIT PAYMENT
UNÉDIC MANDATES TWO PUBLIC AGENCIES
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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 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 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 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
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)
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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 lawsshould be passed during the summer
POSSIBLE FUTURE CHANGES OF THE FRENCH UNEMPLOYMENT INSURANCE
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Improvement of business climate
Drop in business failures
Labor participation rate by age group
Unemployment decrease
Economic outlook in France
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Opinion survey index of business leaders
Source: INSEE
IMPROVEMENT OF THE MACROECONOMIC SITUATION IN FRANCE
After years of relative growth, various indicators show significant improvement of the situation
IMPROVEMENT OF THE MACRO-ECONOMIC SITUATION IN FRANCE
Long terme average
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Evolution of business failures (12-months period)
Source: Banque De France
IMPROVEMENT OF THE MACRO-ECONOMIC SITUATION IN FRANCEIMPROVEMENT OF THE MACRO-ECONOMIC SITUATION IN FRANCE
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Labor participation rate by age group
Source : OECD
Better macro-economic situation directly improves the employment situation…
IMPROVEMENT OF THE MACROECONOMIC SITUATION IN FRANCEIMPROVEMENT OF THE EMPLOYMENT SITUATION IN FRANCE
Source: INSEE, last observation 2016
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Source : INSEE
Unemployement (ILO)
… leading to a decreasing unemployment rate
9,2%
IMPROVEMENT OF THE EMPLOYMENT SITUATION IN FRANCE
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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
Financial Forecast
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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 2014-2019 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
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Unédic financial balance is based on the following macroeconomic indicators
The macroeconomic hypotheses used for Unédic forecasts are based on the Consensus Forecasts :
Unédic careful statistical method and indicators result in revenue and expenditure forecast :
UNÉDIC HYPOTHESES, REVENUE AND EXPENDITURE
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
2012 2013 2014 2015 2016 2017 2018 (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%
2012 2013 2014 2015 2016 2017 2018 (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
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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
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In April 2017, the social partners agreed on new measures to rebalance Unédic structural deficitestimated 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
UNÉDIC FINANCIAL OUTLOOK
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
Significant improvement of Unédic financial forecast
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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
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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 acompounded negative effect upon thefinances of unemployment insurance:
- 1 contributor+ 9 contributions consumed
1 jobseeker finding a job has an enhancedpositive effect upon unemploymentinsurance finances:
+ 1 contributor+ 9 contributions available
There usually is a delay of 6 months to a year before this levered effect can be noticed
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Unédic funding programmes
Funding Programme for 2018
Longer average maturity funding
EMTN programme investors
NEU MTN programme investors
Unédic Investors website
Financial management
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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 2018.
All Unedic's issuances are conducted in EUR, Fixed rate only
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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
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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
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UNÉDIC EMTN PROGRAMME: INVESTORS BREAKDOWN IN 2016 & 2017
A growing interest among international investorsfor 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 primaryEuropean investors after France
– Investors present over 5 continents and in more than30 countries
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UNÉDIC NEU MTN PROGRAMME DISTRIBUTION
Unédic NEU MTN Programme allows for flexible financing
– The NEU MTN is a flexible note format for OTC fixedrate 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 wasextended to 7 years (previously limited to 6 years)
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FOR MORE INFORMATION, VISIT UNÉDIC INVESTORS WEBSITE
https://www.unedic.org/investors
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DISCLAIMER
This document is a draft for discussion purposes only, it is highly confidential and proprietary and shouldnot be transmitted to any person other than its original addressee(s) without the prior written consentof Unédic. Prices and margin are meant to be indicative only and are subject to change at any timedepending on market conditions. Unédic cannot be held responsible for any financial loss or otherconsequences of the implementation of the transactions described in this document. The French Autoritédes Marchés Financiers granted its visa under number 18-179 dated 16 May 2018 with respect to a baseprospectus (hereinafter referred to as the “Base Prospectus”) which details this operation. The BaseProspectus is available at no cost at Unédic registered office, 4, rue de Traversière, 75012 Paris, Franceand on its website www.unedic.org. You are invited to report to the section “risks” of the BaseProspectus before taking a decision with respect to the implementation of the transactions described inthis document or in the Base Prospectus. Should you so require, you should contact your financial, legalor tax advisor, or any other specialist, in order to confirm that any decision taken is consistent with yourpersonal financial situation.