Euler Hermes 2017 first quarter results: Strong performance

Revenues at €656.6 million, down 0.7pt at constant exchange rates
Net combined ratio at 78.4%, down 0.9pt year on year
Ordinary operating income at €109.2 million, up 5.2% year on year
Net income at €88.2 million, up 11.9% year on year on a like-for-like basis 

“Euler Hermes has in 2017 once again posted strong first quarter results with a net combined ratio at 78.4%. Actions implemented during 2016 to protect profitability are bearing fruit. Commercial performance - especially in new business - is beginning to show signs of an upturn, even if not yet fully translated in Group financial results”, said Wilfried Verstraete, chairman of the Euler Hermes board of management. “In an economic environment characterized by uncertainties and still increasing geopolitical tension, we continue to transform the company for its digital future. Successfully launched digital initiatives include the broker portal pilot in the Netherlands, the geographical extension of E-bonds, and internal digital skills training. Bonding and transactional cover products are developing positively, and productivity plans in Germany and France are on track. Euler Hermes is well positioned to take advantage of an economic upside and to maintain high performance levels.”


I.Results for the first three months of 2017

A. Key figures

B. Turnover

At €656.6 million at the end of March, turnover is down -0.6% compared to Q1 2016. Foreign exchange impact is significant for some regions, but overall neutral at Group level. Topline is down, at -0.7% at constant FX, with earned premiums decreasing by -0.4% and service revenues by -2.3%.


Regional evolution varies. Growth ambition has been revised downward in Asia and the Middle East, which recorded negative turnover evolution compared to last year. The Americas increased only +0.4% at constant FX in the first quarter due to low insured volumes and negative rate variation, and in spite of good commercial performance otherwise. The pricing environment in DACH remains challenging. However, Northern Europe posts a strong commercial start and +2.7% growth at constant FX, and France benefits from good traction in specialty lines.

C. Operating income

The net combined ratio remains below 80% at 78.4%, down compared to last year (-0.9pt) and the net technical result is consequently up by +€6.1 million. Frequency claims improved noticeably, resulting in the net claims ratio being down to 52.8%, vs 53.9% for the same period in 2016. The net expense ratio is 25.6% for Q1 2017, in line with Q1 last year.

Net investment income is €25.0 million, almost the same level as last year.  As a result, ordinary operating income stands at €109.2 million, up +5.2% and entirely driven by the improved net loss ratio.

Including non-ordinary items, total operating income is €108.9 million in Q1 2017, compared to €127.2 million in Q1 last year, which included the gains from the sale of the Bürgel entities in Germany (€24.3 million before tax).

D. Net income

Net income stands at €88.2 million, -12.8% lower year-on-year. The deviation is explained by exceptional gains realized last year on the sale of Bürgel, partly compensated by the improved net combined ratio this year. On a like-for-like basis, net income improved by 11.9%.

E. Investment portfolio

At €4,631 million at the end of March 2017, the market value of the Group investment portfolio increased by €107 million vs year-end 2016, essentially driven by the positive cash-flows of the period.

F. Outlook 

The market outlook for 2017 remains uncertain, even if recent forecasts show signs of an upturn. Modest economic development is expected in Europe, and the US will accelerate, but emerging markets face continuing growth challenges. Some sectors will experience a bottoming out of prices and start recovering, however higher insolvency volumes or greater loss severity could also generate domino effects among fragile suppliers.

In this environment, Euler Hermes will continue its selective risk underwriting while supporting growth through new products and specialty lines. The focus on customer initiatives and services remains central to the strategy. The Group will also continue to accelerate its transformation through investments in digitalization, productivity and process optimization.


II. Results for the first quarter of 2017