FRENCH UNEMPLOYMENT INSURANCE INVESTOR PRESENTATION May 2017 1 - - PowerPoint PPT Presentation
FRENCH UNEMPLOYMENT INSURANCE INVESTOR PRESENTATION May 2017 1 Investor Presentation - May 2017 TABLE OF CONTENT Compensation by unemployment insurance Management of the insurance entrusted to the social partners Two public operators are
Investor Presentation - May 2017 1
May 2017
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Compensation by unemployment insurance 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
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COMPENSATION BY UNEMPLOYMENT INSURANCE
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COMPENSATION BY UNEMPLOYMENT INSURANCE FOR 2015
*at 12/31/2015
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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 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:
– NEW measures: The last collective negotiation of April 2017 witnessed the decision to implement new
measures for the Unemployment insurance scheme. The new set of measures are expected to generate savings projected around €900M by 2022. The new rules implementation will start in October 2017 after the necessary change in ACOSS and Pole emploi IT systems.
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
Bonds issuance supported by an explicit State guarantee, renewed since 2011
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Unédic Research and financial forecast Contributions steady increase Change in cash position and net indebtedness of Unédic Unedic cyclical and structural debt Expenditures closely tied to the economic situation A “leverage effect” upon the balance of unemployment insurance scheme Position in the economic cycle and cyclical balance Unedic structural balance since 1990 New 2017 rules for Unemployment insurance scheme Savings generated by the new convention
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UNÉDIC RESEARCH AND FINANCIAL FORECAST Projections updated three times a year
– Based on macro-economic fundamentals from the Consensus of Economists:
– 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:
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”
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CONTRIBUTIONS STEADY INCREASE Unemployment insurance contributions are tied to the economic situation, but less so than the expenditures
Sources: Unédic, INSEE, Consensus Forecasts February 2017, Unédic Calculations
Note: Unédic forecasts are based on hypothesis which may differ from the State macro economic framework
2011 2012 2013 2014 2015 2016 (est.) 2017 (f.) 2018 (f.)
Annual revenues (€M)
31 855 32 466 33 274 33 936 34 520 35 146 35 817 36 665
Wage bill growth
3,6% 2,2% 1,2% 1,6% 1,7% 2,4% 2,5% 2,5%
GDP growth
2,1% 0,2% 0,6% 0,7% 1,2% 1,1% 1,3% 1,4%
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UNEDIC FINANCIAL SITUATION FORECAST Change in cash balance of Unedic before 2017 new rules
Sources: Unédic, INSEE, Consensus Forecasts February 2017, Unédic Calculations Note: Unédic forecasts are based on hypothesis which may differ from the State macro economic framework
Unedic net indebtedness at year end 2016 amounted to €30,5bn
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UNÉDIC CYCLICAL AND STRUCTURAL DEBT RESEARCH
Unédic research and analysis on the cyclical and structural balance of its debt
– Unédic has to keep a balanced budget over the economic cycle – The social partners have made the choice to prioritize their mission and the social nature of unemployment insurance which is to serve a replacement revenue to eligible jobseekers and help them return to employment – 2014 Finance Law prompted Unédic to conduct further analysis on its debt and the identification
– Unédic uses the methodology used by international organizations (IMF, OECD…) to measure the cyclical component of its year-end result based on the analysis of the “output gap” estimating the present position in the economic cycle
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EXPENDITURES CLOSELY TIED TO THE ECONOMIC SITUATION Contributions and expenditures relative to GDP
Sources: Unédic, INSEE, Consensus Forecasts February 2017, Unédic Calculations Note: Unédic forecasts are based on hypothesis which may differ from the State macro economic framework
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A “LEVERAGE EFFECT” UPON THE BALANCE OF 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:
+ 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
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BALANCE AND NET INDEBTEDNESS OF UNÉDIC BEFORE 2008 Historical data of Unédic financial situation before the financial crisis
Sources: Unédic, INSEE, Consensus Forecasts February 2017, Unédic Calculations Note: Unédic forecasts are based on hypothesis which may differ from the State macro economic framework
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POSITION IN THE ECONOMIC CYCLE AND CYCLICAL BALANCE Output gap
Sources : European commission Note: Unédic studies are based on hypothesis which may differ from the State macro economic framework
Since 2009, the cyclical balance of Unédic has been continuously negative due to prolonged negative output gap
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UNÉDIC STRUCTURAL BALANCE SINCE 1990 Structural balance
Sources: Unédic, INSEE, Consensus Forecasts February 2017, Unédic Calculations Note: Unédic forecasts are based on hypothesis which may differ from the State macro economic framework
Between 2010 and 2015, the structural balance of Unédic was negative and represents up to -1,4bn Euros on average each year.
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SAVINGS GENERATED BY THE NEW 2017 RULES FOR UNEMPLOYMENT INSURANCE
0,05% additional exceptional contribution paid by employers for the next three years. Considering the same legal framework, 10% of the additionnal revenue will be redistributed to Pôle emploi.
expenditures are projected to decrease by €280-400M each year.
2018 and €600M for 2019.
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SAVINGS GENERATED BY THE NEW 2017 RULES FOR UNEMPLOYMENT INSURANCE
Sources : Unédic, Unédic calculations April-May 2017 Note: Unédic studies are based on hypothesis which may differ from the State macro economic framework Calculation methodology for Unemployment benefits
Adaptation and standardisation of the minimum requirements for Unemployment benefits Change in calculation of the daily reference wage in order to avoid arbitration on very short contract Standardisation of the last day of February Removal of Appendix 4 (occasional workers of the entertainment and show industry)
Benefit payment
Better round up of benefits on overlapping part-time jobs Inapplicability of certain voluntary separation Application of specific benefit payment delay before ARCE
Specific benefit payment delay
Limited to 150 days (instead of 180 days) Change in calculation
Employer contributions
Removal of the exceptional contribution on short term contracts and disculpation for long term contracts (for employees under 26 years old)
Article 4 Rules and benefit of temporary benefits for self-employed earners Specific measures for senior workers
New age requirements for senior unemployed jobseekers receiving benefits (from 50 years old to 53 years old) Longer benefit eligibility if the jobseeker undergoes professional training
TOTAL Employer contributions
Exceptional contribution for 3 years (0,05%)
Article 2
+€448M +€280M (asa 2018) +€400M +€28M +€6M (effects after 3 years)
Article 1 Article 2 MEASURES Financial results (at full effect, by 2022) Article 6
+€45M +€448M
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SAVINGS GENERATED BY THE NEW 2017 RULES FOR UNEMPLOYMENT INSURANCE
Sources : Unédic, Unédic calculations April-May 2017 Note: Unédic studies are based on hypothesis which may differ from the State macro economic framework
Revenue increase Expenditure savings Expenditure increase (additionnal Pole emploi’s financing by Unedic) Net savings
Projected savings generated between 2018 and 2022
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Unédic funding programmes at a glance Investment-grade rating reflects Unédic rigorous management Funding Programme for 2017 Unedic aiming for longer average maturity funding Unédic EMTN programme 2016 Unédic NEU MTN programme 2016 Unédic 2017 new primary issuance Bond issues welcomed by institutional investors Unédic rating
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UNEDIC’S 3 FUNDING PROGRAMMES AT A GLANCE
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INVESTMENT-GRADE RATING REFLECTS UNÉDIC RIGOROUS MANAGEMENT Capital market financing
– EMTN Programme (€ 37 billion) – Explicit guarantee – NEU MTN (ex BMTN) Programme (€ 8 billion) – Implicit guarantee – NEU CP French Commercial Paper Programme (€ 10 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
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FUNDING PROGRAMME FOR 2017 NEU CP (French commercial paper, ex-Billets de trésorerie)
– Daily issue of commercial paper
NEU MTN (ex-BMTN)
– Fixed rate, in Euros, maturity up to 7 years – No explicit guarantee – ECB-eligible (Tier-1) – 0% risk weight
EMTN programme of €5bn for 2017
– Fixed rate, in Euros, maturity up to 15 years – First demand guarantee from the French State – ECB-eligible (Tier-1) – 0% risk weight
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UNEDIC AIMING FOR LONGER AVERAGE MATURITY FUNDING
structure its debt by the economic cycle and extend the average maturity of its
the outstanding NEU MTN
the outstanding EMTN
and NEU MTN issuance is 15 years and 7 years respectively
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UNÉDIC EMTN PROGRAMME 2016
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UNEDIC NEU MTN (EX BMTN) PROGRAMME 2016
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UNÉDIC IS RATED AA2 BY MOODY’S AND AA BY FITCH RATINGS
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FOR MORE INFORMATION, VISIT UNEDIC INVESTORS WEBSITE
http://www.unedic.org/investors-center
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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
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 17-100 dated 17 March 2017 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
personal financial situation.