Very satisfactory first-half 2007
Very satisfactory first-half performance for Euler Hermes: Turnover: + 4.6% to €1,052 million, Net income, group share: + 36% to €231 million
The Group Management Board presented Euler Hermes' results for the first half of 2007 to the Supervisory Board on 27 July 2007.(Paris, 27/07/2008)
1. Activity
Turnover for the six months to 30 June 2007 came to €1,052 million, up by 4.6% relative to the first half of 2006.
At constant consolidation scope and exchange rates, group turnover increased by 5.9% compared with the first half of 2006.
The dynamic trend in turnover during the first half of 2007 is attributable to the strong rebound in activity from April 2007 onwards.
Within Europe, Germany, the United Kingdom, France and Italy boosted growth in Euler Hermes' turnover in the second quarter of 2007.
Outside Europe, the group recorded strong growth in the United States with a 21.3% increase in turnover (in USD), in line with the growth recorded in the first quarter of 2007.
Turnover grew strongly in new markets (Eastern Europe, Southern Europe, Latin America and Asia) with an increase of 17.9% at constant scope and exchange rates, in keeping with the trend observed in the first quarter 2007.
2. Operating income
The firm trend in underwriting revenues on the one hand and in financial income on the other enabled the group to post operating income of €359.3 million, up by 37.8% compared with the first half of 2006.
The net combined ratio was 63.3% at end June 2007, marking a significant improvement relative to end June 2006 when it stood at 69.2%. The improvement was mainly due to the low level of claims in the first half of 2007. The loss ratio was 45.8% at end June 2007 versus 51.4% at end June 2006.
The expense ratio after reinsurance stood at 17.5% at 30 June 2007 compared with 17.8% at 30 June 2006.
First-half financial income came to €137 million compared with €97 million in the same period the previous year, corresponding to an increase of 41%. This performance was due mainly to the increase in net capital gains on the portfolio, which amounted to €76.6 million in the first half of 2007 compared with €46.2 million in the first half of 2006.
The portfolio's market value stood at €3,374 million at end June 2007 compared with €3,349 million at 31 December 2006.
3. Net income, group share
After financing expense and tax, Euler Hermes posted net income of €231.2 million, up by 35.8% compared with the first half of 2006.
4. International development
Euler Hermes has stepped up the pace of international expansion since the beginning of the year, by:
- opening sales offices in Argentina and Dubai,
- acquiring a 33.33% stake in ICIC, Israel's leading credit insurer,
- raising its stake in Portugal's leading credit insurer, COSEC, from 42% to 50%,
- acquiring United Mercantile Agencies (UMA), one of the leading debt collection and trade receivable management companies in the United States,
- opening a debt collection agency in Ireland.
5. Outlook
The group's performance in the second half will be boosted by growth in net premiums. However, the Group Management Board stresses that the low claims activity cannot be guaranteed over the full year. Also, Euler Hermes is not planning to realise significant gains on its investment portfolio in the second half, which will slow growth in net income in the period. However, the slower growth will be to some extent offset by the write back of provisions for deferred tax in Germany following the tax reform approved by the German government on 6 July. The estimated impact of this reform on group share of net income in the second half is at least € 35 million.
Based on these elements and given the current economic environment, the Group Management Board is confident that the group will be able to achieve a significant increase in net income relative to 2006.
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