Unédic Investor Presentation

1 UNEDIC – Investor Presentation – October 2014


CONTENTS

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 Summary of the modifications made to the Unemployment Insurance Agreement


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


Compensation by unemployment insurance in 2013

COMPULSORY INSURANCE REPLACEMENT REVENUE

Annual budgeted expenditure:

37 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

3,1 million workers are recipients of unemployment insurance*

Contribution rate: 6.40% of base salary

Benefit rate : 61% of previous base salary

*at 12/31/2013


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 5427-1 Implementation

Non profit organisation managed by the social partners


Unédic mandates two public agencies for carrying out operations of

contribution collection and benefit payment

EMPLOYERS EMPLOYEES

JOBSEEKERS

Payment of benefits and help jobseekers reintegrate

labour market Recovery of contributions


An unemployment insurance scheme with guaranteed continuity and

sustainability

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 €825M and €775M for 2015 and 2016 respectively

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

Amending Finance Law of 30 December 2013 (article 75): authorisation to provide guarantee

Ministerial Order granting the guarantee (January 29st 2014)


CONTENTS

Unédic’s economic model is closely correlated to the macroeconomic situation Expenditures closely tied to the economic situation A “leverage effect” upon the balance of unemployment insurance scheme Balance and net banking indebtedness of unemployment insurance scheme Reliable financial forecasts for anticipating financial needs

FINANCIAL

SITUATION


Unédic’s economic model is closely correlated to the macroeconomic

situation (Annual percentage changes)

Correlation between growth in revenues and GDP

2009 2010 2011 2012 2013 2014 (Prev.) 2015 (Prev.)

Annual

revenues (€M) 30 310 31 188 31 855 32 466 33 233 33 808 34 347


Expenditures closely tied to the economic situation

(Annual percentage changes)

Expenditure developments amplify the economic cycle


Expenditures closely tied to the economic situation

Contributions and expenditures relative to GDP


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


Balance and net indebtedness of unemployment insurance

Source : Unédic, Unédic calculations

(€M)

Change in cash balance of unemployment insurance, € million

Prévision

4 years 5 years 7 years ?


Reliable financial forecasts

Projections updated three to four 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:

The contribution rate can be adjusted

Conditions of access to compensation

The level of benefits and duration of compensation


CONTENTS

Investment-grade rating reflects Unédic’s rigorous management Unédic net indebtedness at end of year 2013 Financing Program for 2014 Unédic‘s rating Unédic’s signature strengthened internationally Bond issues welcomed by institutional investors

FINANCIAL

MANAGEMENT


AA (Stable watch)

Aa1(Negative watch)

Investment-grade rating reflects Unédic’s rigorous management

Capital market financing

• EMTN Program (26 billion) - Fixed rate, explicitly guaranteed by the French State

• BMTN Program (3 billion) - Fixed rate

• French Commercial Paper Program (12 billion)

Active management of the French CP Program

• 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

AA+ (Stable watch)


Unédic net indebtedness at year 2013 end: €17.6 billion

Total indebtedness in percentages :

77% of fixed rates

23% of floating rates

€4,150 bn of short term debt (variable rate)


Financing program for 2014

Commercial paper

• Duration target of 3 months and active maturity management

BMTN

• €3 billion BMTN program, first issuances starting October 2014

• Fixed rate, in Euros, maturity up to 3 years

Debt issuance program of €7 billion

• Fixed rate, in Euros, maturity up to 10 years

• First demand guaranty from the French State

• ECB-eligible (Tier-1)


Unédic is rated AA by Standard & Poor’s, Aa1 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.

“ “

“

“

“

“

Aa1


Unédic’s signature strengthened internationally

A growing interest among international investors for the Unédic’s EMTN program

A total of €17,6bn 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


Bond issues welcomed by institutional investors

Ever-increasing demand 35,5% increased Chinese demand for 2014 15% increased European demand (excluding France) for 2014 due to

the quality of Unédic’s signature and trustworthy relationships built with investors

KEY FIGURES More than 35% increase in the share held by

Insurance companies in the portfolio, due to the stability of Unédic’s signature

A portfolio diversified among different types of investors

Data from primary issue books

À changer


Unédic 4, rue Traversière

75012 PARIS

+33 1 44 87 64 00

INVESTOR RELATIONS

Philippe Eberschweiler Chief Financial Officer [email protected] +33 1 44 87 64 47

www.unedic.fr/investors


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 12-060 dated 13 February 2012 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

Economy & Finance

Unédic Investor Presentation