Turnover up 5.4% year-on-year: €2,397.9 Satisfactory net combined ratio: 75.2% Robust operating income: €424.7 million Net income: €300.2 million Customer retention at record levels: 92% Proposed dividend: €4.00 per share
Wilfried Verstraete, chairman of the Euler Hermes Board of Management, said: “Euler Hermes achieved excellent results in 2012 in a challenging environment. Thanks to the investments made in Brazil, California, China, the Middle East, Russia and Turkey in recent years, we were able to capture growth in our top line. Our focus on customer services was also rewarded by an all-time-high retention rate of 92%. This growth combined with a selective and disciplined technical underwriting allowed us to post a solid €300.2 million net income, below 2011 yet ahead of 2010."
I. Results at the end of December 2012
A. Key figures
Euler Hermes’ turnover for 2012 was €2,397.9 million, up 5.4% versus the prior year, boosted by growth outside traditional European markets. Operating profit remained strong at €424.7 million in the difficult economic context thanks to a strong underwriting discipline combined with adequate reinsurance protection. Both new production and retention reached another record high, with new production reaching €286 million and retention at 92% of the opening portfolio.
Growth was particularly strong in strategic markets such as Asia and the Americas. Top line growth was also partly driven by a positive exchange rate impact.
Evolution of turnover by region
Turnover growth was slow in traditional European markets despite a positive commercial balance between new production, cancellations and rates. Slow GDP growth impacted insured turnover volumes, which contributed negatively to the growth in countries like France. However, the Group reaped the benefits of the strong strategic focus placed on the Americas and Asia in the last two years, achieving good growth in these areas where economies have also been more resilient. Initiatives in Turkey and the Gulf Countries also paid off and boosted growth in the Mediterranean region.
C. Operating income
Operating income, which is below last year by 8.4%, remained very solid, driven by strong and profitable growth outside Europe and selective underwriting in the core European markets.
In 2012, the net claims ratio increased 6.6 points year-on-year to 51.7%, of which 2.6 points are linked to three claims, including the Schlecker case. The remaining increase is modest, in a context of rising insolvencies, and considering the exceptionally low claims levels witnessed in 2011.
The net expense ratio is 1.4 points lower than last year at 23.4%, benefiting from effective cost control and better reinsurance conditions.
The net combined ratio is 75.2% compared to 70.0% last year, and remains strong given adverse market conditions.
Net investment income decreased from €113.1 million in 2011 to €109.0 million in 2012, mainly due to a lower foreign exchange result. Investment income is otherwise almost stable as the impact of decreasing yields on the performance of the bond portfolio has been offset through diversification and a slight increase in duration, as well as higher realized gains.
D. Investment portfolio
At end December 2012, the market value of the Group's investment portfolio increased by €317 million to €4,235 million, after €192 million in dividends were paid in June.
E. Net income
Net income is €300.2 million in 2012, compared to €330.3 million in 2011, a decrease of 9.1% which follows the decrease in operating profit.
On the basis of a net result of €6.84 per share, the Euler Hermes management board will propose the distribution of a dividend of €4.00 per share, down from €4.40 last year, representing a pay-out ratio of 60%.
G. Shareholder’s equity
Shareholders’ equity Group share at the end of December 2012 was €2,467 million versus €2,278 million at end December 2011. This increase is mainly driven by the 2012 result (+€300 million) and the increase of investment portfolio (+€60 million) net of the dividend paid in 2012 (-€192 million).
In 2013 we anticipate a gradual recovery of the global economy but only from the second half of the year. After five consecutive years of crisis, world GDP should only benefit from a modest growth as the Eurozone will still face economic, political and social headwinds.
We believe companies will increasingly turn to trade credit insurance in this period for the insight it offers in differentiating between true opportunities and risks.
Euler Hermes will continue to actively seek growth outside its traditional markets, while keeping a strong focus on underwriting discipline given the continuing negative global trend in business insolvencies, especially across Europe.
II. Results for the fourth quarter of 2012
Please view attached PDF below.
The financial documentation section includes the press release, the consolidated financial statements and the presentation of the quarterly results to analysts.