Euler Hermes 2017 half-year results: Sustained profitability, improved commercial developments in Europe

Revenues at €1,286.0 million, down 1.1pt at constant exchange rates
Net combined ratio at 78.8%, down 1.0pt year on year
Ordinary operating income at €214.1 million, up 6.4% year on year
Net income at €163.8 million, up 11.0% year on year on a like-for-like basis 
Estimated Solvency ratio: 165%


“In the second quarter, Euler Hermes again proved its robustness and agility, with a net combined ratio at 78.8%, while paving the way for a return to turnover growth”, said Wilfried Verstraete, chairman of the Euler Hermes board of management. “Revenues still lag behind ambition, but as noted in Q1, we see some encouraging signs on new business and rates. Northern Europe, France, and the multinational segment are posting positive premium development, and Germany is stabilizing premium income. While revenues in non-mature markets are still affected by our previously-revised underwriting risk stance, profitability has been restored. Consequently, our global net loss ratio is at its lowest level since Q3 2015. This strong performance enables us to continue our digital transformation and investment in service innovations that bring us closer to customers. This includes our recently launched EH Sync online broker portal.”



I. Results for the first six months of 2017

A. Key figures


B. Turnover

At €1,286.0 million at the end of June, turnover is down 1.2% compared to half-year 2016 published figures. Foreign exchange impact is overall neutral at Group level. Topline is down, at -1.1% at constant FX, with earned premiums decreasing by -0.7% and service revenues by -3.4%.


European growth has resumed due to specialty lines and encouraging commercial development: Northern Europe posted a +3.5% growth proforma and at constant foreign exchange, the development of specialty lines in France is in line with expectations, and DACH is progressively regaining ground quarter after quarter. Non mature markets such as Asia and the Middle East are significantly affected by our previously-revised underwriting stance.




C. Operating income

The net combined ratio is at 78.8%, improved by 1.0pt compared to last year; the net technical result is consequently up by +€8.7 million.

The attritional claims are at a low level, after a continuous decrease during 2016, and the overdue levels have improved significantly in emerging markets. At the end of June, the net loss ratio for all attachment years stands at 51.8%, its lowest level since September 2015.

The net expense ratio of 27.1% increased (+0.5pt) due to lagging topline growth and internal investments in digital and process transformations, where underlying productivity gains are not yet visible.

Net investment income is €53.4 million, up +8.3% compared to last year. 

As a result, ordinary operating income stands at €214.1 million, up +6.4% and driven mostly by the improved net loss ratio.

Including non-ordinary items, total operating income is €212.7 million in the first six months of 2017, compared to €219.1 million for the same period in 2016, which included gains from the sale of the Bürgel entities in Germany (€24.3 million before tax).



D. Net income

Net income stands at €163.8 million, down -3.7% 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 11.0%.

E. Investment portfolio

At €4,379 million at the end of June 2017, the market value of the Group investment portfolio decreased by €145 million vs December 2016, essentially driven by decreased bonds and loans market value.



F. Solvency II Capitalization

The estimated Solvency II economic ratio for Euler Hermes Group was 165%  at end of June 2017. The ratio was 166% at end of December 2016. 

G. German export business 

On March 3, 2017, PriceWaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (« PwC ») and Euler Hermes Deutschland AG (“EH AG”) signed three amendments to reallocate business services within the German export support scheme. Following the closing of deal as of July 1, 2017, Euler Hermes will be fully in charge of the Export Credit Guarantee (”ECG”’) service activity and the Untied Loan Guarantee (“ULG”) service activity, while PwC will remain in charge the Investment Guarantee (“IG”) service activity.

The transfer of PwC employees working in the fields of ECG and ULG to EH AG, and know-how took effect on July 1, 2017.



H. Outlook 

The world’s economic recovery is finally picking up, especially in the U.S. However, high private and public indebtedness and political uncertainty are risks to be taken into account. Moreover, continued high payment delays and a rise in large insolvencies demonstrate that global economic momentum is not without its challenges for corporates.
Euler Hermes will continue to accompany its customers in this uncertain environment, and also tightly monitor its risks and remain alert to signals on the claims front. In parallel, Euler Hermes will continue to increase its digital transformation and further improve customer service, our first priority.


II. Results for the first six months of 2017