28.10.2014
  • Turnover up 2.2% at constant exchange rates (+1.8% at current exchange rates) to €1,894 million
  • Ordinary operating income, increasing by 7.8% to €337 million
  • Net income up 5% year-on-year to €232.5 million
 

 

 

“Credit insurance will be of even greater importance to our clients given recent macroeconomic news,” declared Wilfried Verstraete, Chairman of the Euler Hermes Board of Management. “If this translates into another slowdown in Europe, in particular in Germany and France, it could lead to a resurgence in insolvencies. We are equipped for this scenario, as demonstrated by past results and shown again this quarter. Our growth engines outside Europe have delivered the expected momentum and operating income is solid.”

 

I. Results for the first nine months of 2014

 

A. Key figures

 

P&L information
€ million
9M2014
9M2013
Variation vs.
30 September 2013
 
 
 
 
 
Earned premiums
1,588.6
1,553.4
35.1
2.3%
Service revenues
305.0
307.5
-2.4
-0.8%
Turnover
1,893.6
1,860.9
32.7
1.8%
 
 
 
 
 
Net technical result
271.0
242.0
29.0
12.0%
Net investment income
66.0
70.7
-4.7
-6.6%
Ordinary operating income
337.0
312.7
24.3
7.8%
Non-ordinary operating income & expenses
-21.7
21.8
-43.5
-199.8%
Operating income
315.2
334.4
-19.2
-5.8%
 
 
 
 
 
Net income, Group share
232.5
221.4
11.1
5.0%
 
 
 
 
 
Net claims ratio
48.2%
52.6%
-4.4
pts
Net expense ratio
26.5%
24.2%
2.3
pts
Net combined ratio
74.7%
76.8%
-2.1
pts
 
 
 
 
 
 
 
 
 
 
Balance sheet information
€ million
30 September 2014
31 December 2013
Variation vs.
31 December 2013
Total assets
6,417.5
6,062.7
354.8
5.9%
Shareholders' equity, Group share
2,494.7
2,461.9
32.8
1.3%
Total financial liabilities
273.4
261.7
11.7
4.5%

Shareholders’ equity increased by €32.8 million during the first nine months of 2014, driven by the positive operating cash flows partly offset by the dividend payment made in June.
 

B. Turnover

 
 
At the end of September, the Group grew its total turnover by 2.2% at constant exchange rates.
While growth markets (including Americas, Asia and the Middle East) increased their business by 13.9% versus the previous year at constant exchange rates, mature markets overall posted limited growth (+0.3%).
 
Turnover
€ million
 30 September 2014
30 September 2013
(published)
Variation %
30 September 2013
(1)
Variation %
(1)
Regions
 
 
 
 
 
Germany, Austria, Switzerland
570.3
596.4
-4.4%
596.4
-4.4%
France
302.5
305.0
-0.8%
305.0
-0.8%
Northern Europe
413.1
409.1
1.0%
410.8
0.6%
Mediterranean Countries, Middle East & Africa
245.9
230.3
6.8%
227.7
8.0%
Americas
196.0
204.4
-4.1%
176.0
11.4%
Asia-Pacific
76.2
69.2
10.1%
66.2
15.0%
Non-consolidated OE's and other (2)
89.6
46.6
N/A
70.8
N/A
Euler Hermes Group
1,893.6
1,860.9
1.8%
1,852.8
2.2%
 
 
 
 
 
 
 

Premiums grew by 2.3% at actual exchange rates and 2.7% at constant exchange rates. Good commercial traction in non-mature markets and a strong momentum in new products are compensating pressure on prices and flat insured turnover volumes in mature markets, especially in Germany and France.
Service revenues, the second component of turnover, remained under pressure as collection revenues follow the downward trend in frequency claims.

 

C. Operating income

 
 
Euler Hermes delivered a robust ordinary operating income at €337.0 million, up 7.8% year-on-year.
This improvement is driven by the net technical result (+€29.0 million), which is a result of a lower combined ratio (74.7% vs. 76.8% end of September 2013).
The net loss ratio stands at a healthy level of 48.2%, 4.4 pts below last year, driven by lower claims in all regions and all lines of business. The net loss ratio also benefits from a 15.5% positive net run-off from previous attachment years, which compares to 9.6% at the end of September 2013, which was impacted by one large claim in Spain.
The net expense ratio is up 2.3 points compared to the same period in 2013 (26.5% versus 24.2%), due to a lower contribution from reinsurance commissions and pressure on the collection margin.
Net investment income is €66.0 million vs. € 70.7 million at the end of September 2013, primarily due to lower reinvestment yields on the bond portfolio.
Non-ordinary operating expenses include a €17.2 million impairment at the end of September 2014 related to Germany headquarters in Hamburg, following the decision to dispose of the premises and move to a new building in 2018. Conversely, in 2013, the non-ordinary operating income included a €31.7 million gain linked to the contribution of entities to the Solunion joint venture. Hence the 5.8% year-on-year decrease in total operating income. Excluding these two one-off impacts in 2014 and in 2013, operating income is up 9.8%.

D. Investment portfolio

 

At the end of September 2014, the market value of the Group’s investment portfolio is up €201 million to €4,364 million versus €4,163 million at 2013 year-end, driven by positive operating cash flows.
 

E. Net income

 

Net income rose by 5.0% year-on-year, standing at €232.5 million. This increase is linked to the good performance of Solunion, captured in the income from entities consolidated at equity, combined with a lower average tax rate.
 

F. Outlook

 

A swift recovery in Europe is now unlikely as the necessary building blocks still need to be secured. Though we expect timid positive developments in 2015, both for emerging and advanced economies, liquidity, demand and political risk will continue to subdue global growth (+2.9% in 2015, after +2.5% in 2014) and global trade (+4.5% in 2015, after +3.7% in 2014).

In this environment, growing the business outside traditional markets remains our priority. Vigilance in risk underwriting is the steady rudder by which we will continue to steer, in order to ensure the enduring profitability of our business.
 
II. Results* for the third quarter of 2014
 
 
P&L
€ million
Q3 2014
Q2 2014
Q1 2014
Q4 2013
Q3 2013
Variation vs.
Q3 2013
 
 
 
 
 
 
 
 
Earned premiums
524.5
529.3
534.7
525.6
508.9
15.6
3.1%
Service revenues
100.4
101.8
102.8
99.8
99.3
1.2
1.2%
Turnover
625.0
631.1
637.5
625.3
608.2
16.8
2.8%
 
 
 
 
 
 
 
 
Net technical result
75.1
101.9
93.9
103.3
75.1
0.1
0.1%
Net investment income
17.1
25.4
23.4
15.5
13.3
3.8
28.4%
Ordinary operating income
92.3
127.3
117.3
118.8
88.4
3.9
4.4%
Non-ordinary operating income & expenses
-19.7
-1.0
-1.1
5.4
-7.3
-12.4
N/A
Operating income
72.6
126.4
116.3
124.2
81.1
-8.5
-10.5%
 
 
 
 
 
 
 
 
Net income, Group share
59.3
90.5
82.7
92.3
55.0
4.3
7.8%
 
 
 
 
 
 
 
 
Net claims ratio
50.9%
44.4%
49.1%
44.3%
52.8%
-1.8
pt
Net expense ratio
27.1%
27.0%
25.5%
26.6%
24.9%
2.2
pts
Net combined ratio
78.0%
71.5%
74.6%
70.9%
77.6%
0.4
pt
*Not audited