Euler Hermes 2006 annual results
Euler Hermes 2006 net profits up 14% at 326 million euros
The Directoire presented the results for 2006 to the Euler Hermes Supervisory Board on 16 February 2007.(Paris, 17/02/2007)
1. Activity
In the euro zone, Euler Hermes turnover was buoyed by strong growth in activity in France (6.9%), Italy (5.8%), Benelux (4.2%), and the Nordic countries (6.3%).
In Germany, Euler Hermes terminated its inwards reinsurance contracts as anticipated, which impacted 2006 turnover, falling 2.6%.
In the United Kingdom, activity was down by 5.6%. Premiums were forced down following a period of very low claims ratio.
In the United States, the activity continued its upward trend with revenues up 7.5% compared with 2005 (9.7% at constant consolidation and exchange rates).
In the new markets (Central and Eastern Europe, Southern Europe, Latin America and Asia), revenue growth was extremely dynamic and amounted to nearly 61 million euros, up over 43% compared with 2005. These markets now account for 10% of the group’s consolidated revenues.
2. Operating income
The combined ratio for 2006 came to 67.3% versus 64.5% in 2005 (*).
After a very favourable year in terms of run-off from previous years, this increase is the result of two opposing trends:
• An increase in the loss ratio from 44.8% to 49.2%, mainly due to a reduction in run-off from previous year
• Constant improvement in the group’s productivity due to its consolidation and the optimisation of its reinsurance structures, leading a decrease of the net cost ratio from 19.7% to 18.1%
Financial income in 2006 partly derived from an increase in net income from investments, up 6.9 million euros, and partly from the increase in net realised capital gains mainly on the equity portfolio, totalling 17 million euros.
The market value of the financial portfolio came to 3,349 million euros compared with 3,107 million euros at 31 December 2005, up 242 million euros. This increase was mainly due to the reinvestment of cash flow from operations. Despite realisations, unrealised capital gains remained relatively stable at 233 million euros, representing 7% of the investment portfolio.
The good performance of both the underwriting result and financial income produced operating income of 489.9 million euros, up 9.7%.
3. Net income
After financial expenses and tax, Euler Hermes’ net income amounted to 326.1 million euros, up 14.0% compared with 2005. Earnings per share came to 7.51 euros as against 6.74 euros in 2005.
4. Dividend
On the basis of these earnings per share of 7.51 euros, Euler Hermes will propose to the Annual General Meeting of 9 May 2007 the payment of a cash dividend of 4.00 euros per share, up 14% from the dividend of 2005. The dividend payment date will be 11 May 2007.
5. Shareholders’ equity
The group’s shareholders’ equity totalled 1,911.5 million euros compared with 1,744.9 million euros at the end of 2005, representing growth of 9.6% and return on equity of 18.0%, above Euler Hermes’ medium-term objectives.
6. Outlook for 2007
Euler Hermes is anticipating its 2007 performance with confidence.
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