| Press Release |
Euler Hermes 2014 first quarter results: a solid start to 2014
PARIS - 30 APRIL 2014
- Revenues at €637.5 million, up 4% over Q1 2013 at constant exchange rates (+3% at actual exchange rates)
- Ordinary operating income up 20%, to €117 million
- Net income at €82.7 million, up 29% excluding one-off realized gains in 2013
"Euler Hermes starts the year in a very strong position with continued solid growth and a year-on-year drop of 6.1 points in the combined ratio to 74.6%," said Wilfried Verstraete, chairman of the Euler Hermes board of management. "We remain vigilant about the price/risk adequacy as the market is softening, and we are confident of delivering sustainable and profitable growth again this year. Anchored by prudent risk underwriting, the Group will continue to strengthen its product range, distribution channels and international presence."
A. Key figures*
| P&L € million | 31 March 2014 | 31 March 2013 | Variation vs. 31 March 2013 | |
| Earned premiums | 534.7 | 515.5 | 19.1 | 3.7% |
| Service revenues | 102.8 | 103.8 | -1.0 | -0.9% |
| Turnover | 637.5 | 619.3 | 18.2 | 2.9% |
| Net technical result | 93.9 | 64.6 | 29.3 | 45.3% |
| Net investment income | 23.4 | 32.9 | -9.5 | -28.8% |
| Ordinary operating income | 117.3 | 97.5 | 19.8 | 20.3% |
| Non-ordinary operating income & expense | -1.1 | 29.8 | -30.9 | -103.6% |
| Operating income | 116.3 | 127.3 | -11.1 | -8.7% |
| Net income, Group share | 82.7 | 85.3 | -2.6 | -3.1% |
| Net claims ratio | 49.1% | 57.7% | -8.6 | pts |
| Net expense ratio | 25.5% | 23.0% | 2.5 | pts |
| Net combined ratio | 74.6% | 80.7% | -6.1 | pts |
| Balance sheet information € million | 31 March 2014 | 31 December 2013 | Variation vs. 31 December 2013 | |
| Total assets | 6,319.7 | 6,062.7 | 257.0 | 4.2% |
| Shareholders' equity, Group share | 2,523.8 | 2,461.9 | 61.9 | 2.5% |
| Total financial liabilities | 262.9 | 261.7 | 1.2 | 0.5% |
*not audited
Shareholders' equity increased by €61.9 million in Q1 2014, driven primarily by the €82.7 million positive net income generated in the quarter.
B. Turnover
Revenues grew by 3.9% at constant FX rate versus the first quarter of 2013. Euler Hermes continues its growth trajectory, though at a slower pace than in 2013.
| Turnover € million | 31 march 2014 | 31 march 2013 (published) | Variation % | 31 march 2013 (1) | Variation % (1) |
| Regions | |||||
| Germany, Austria, Switzerland | 196.2 | 203.2 | -3.5% | 202.9 | -3.3% |
| France | 102.5 | 103.8 | -1.3% | 103.8 | -1.3% |
| Northern Europe | 141.1 | 137.1 | 2.9% | 134.9 | 4.6% |
| Mediterranean Countries, Middle East & Africa | 79.1 | 74.9 | 5.6% | 74.0 | 6.9% |
| Americas | 63.1 | 68.3 | -7.7% | 57.5 | 9.7% |
| Asia-Pacific | 25.7 | 23.1 | 10.9% | 20.7 | 24.0% |
| EH Reinsurance + others (2) | 29.9 | 8.7 | N/A | 19.6 | N/A |
| Euler Hermes Group | 637.5 | 619.3 | 2.9% | 613.4 | 3.9% |
| Area contribution : After intra-region eliminations & before inter-region eliminations | |||||
| (1) At constant exchange rates and pro forma ( Chile, Colombia & Mexico in 2013 in EH Re) | |||||
| (2) EH Reinsurance + Corporate entities + inter-region eliminations | |||||
Growth markets - the Americas, Asia, the Middle East - remain dynamic and drive most of the Group's growth. Asian revenues increased by 24%, while the Americas continue to grow at nearly double-digits.
The Group faces increased competitive pressure in its traditional European markets, especially in Germany, as a result of strengthening economic conditions. The subdued business environment in France is also reflected in the local top line.
Overall, premiums remain strong due both to new production and retention: at +4.6% vs Q1 2013 at constant FX rates (+3.7% at actual exchange rate). Insured volumes on the existing portfolio and prices are roughly stable.
Service revenues, the second component of turnover, decreased slightly, with monitoring fees globally flat and collection revenues following the downward trend in claims.
C. Operating income
Ordinary operating income is very solid at €117.3 million, up 20.3% year-on-year.
This strong performance is driven by a significant improvement in the net technical result (+€29.3 million) linked to the low combined ratio of 74.6%, down -6.1 points from Q1 2013.
The net claims ratio dropped significantly, 8.6 points in Q1 2014, to 49.1% from 57.7% in Q1 2013. Most regions contributed to the improvement, particularly the Mediterranean and Northern Europe regions which were hit last year by a high claims frequency. The year-on-year run-off ratio is also much higher in 2014 (11.7% versus 4.3%) as Q1 2013 included a large negative run-off on a Spanish case.
The net expense ratio is up 2.5 points against prior year, as the service margin - which is a component of the expense ratio - begins to feel pressure from decreasing claims and related collection revenues, and as we have a lower reinsurance commission on non-credit insurance business lines.
Investment income continues to be negatively impacted by foreign exchange headwinds: of the - €9.5 million decline in income between Q1 2013 and Q1 2014, €7.2 million is foreign exchange-related.
Last year, operating income was positively impacted by a €31.7 million gain linked to the legal contribution of Spanish and Argentinean entities to the Solunion joint venture.
The decrease in the operating income from €127.3 million in Q1 2013 to €116.3 million in Q1 2014 is due to this one-off effect in Q1 2013.
D. Investment portfolio
At the end of March 2014, the market value of the Group's investment portfolio had increased by €133 million to €4,296 million compared to year-end 2013, driven by positive operating cash flows and a re-evaluation of the bond portfolio.
E. Net income
Net income stands at €82.7 million, an increase of 29.2% over the quarter at comparable basis. The year-on-year decline of -3.1% is solely linked to the one-off gain generated in Q1 2013 from contributing entities to our new Solunion JV with MAPFRE.
F. Outlook
After falling to +2.3% in 2013 - the slowest pace since the 2009 crisis - we expect world GDP growth to show a slight improvement in 2014. However, the number of insolvencies is expected to remain high. The modest GDP uptick should support another year of positive growth for Euler Hermes, and enable the company to penetrate new markets and segments more deeply. The company will draw on its demonstrated ability to be both agile and robust in a softening market, and will retain its dual focus on helping clients to trade safely while managing their risks effectively.
# # #
Financial and regulated information are available on Euler Hermes' website
http://www.eulerhermes.com/finance/
The financial documentation section includes the press release, the consolidated financial statements and the presentation of the quarterly results to analysts.
On Wednesday, 30 April 2014, the Group Management Board of Euler Hermes (ELE.PA), a worldwide leader in credit insurance and in the areas of bonding, surety and collections, presented its consolidated quarterly results as of 31 March 2014 to the Euler Hermes Supervisory Board. The results have been reviewed by the Audit Committee.
CONTACTS
| Euler Hermes Investor Relations | |
| Clarisse Kopff +33 (0)1 84 11 51 38 | |
| clarisse.kopff@eulerhermes.com | |
| Euler Hermes Group Media Relations | Publicis Consultants |
| Remi Calvet +33(0)1 84 11 61 41 remi.calvet@eulerhermes.com | Romain Sulpice +33 (0)1 44 82 46 21 romain.sulpice@mslfrance.com |
Euler Hermes is the global leader in trade credit insurance and a recognized specialist in the areas of bonding, guarantees and collections. With more than 100 years of experience, the company offers business-to-business (B2B) clients financial services to support cash and trade receivables management. Its proprietary intelligence network tracks and analyzes daily changes in corporate solvency among small, medium and multinational companies active in markets representing 92% of global GDP. Headquartered in Paris, the company is present in over 50 countries with 6,000+ employees. Euler Hermes is a subsidiary of Allianz, listed on Euronext Paris (ELE.PA) and rated AA- by Standard & Poor's and Dagong. The company posted a consolidated turnover of €2.5 billion in 2013 and insured global business transactions for €789 billion in exposure at the end of 2013.
Further information: www.eulerhermes.com, LinkedIn or Twitter @eulerhermes.
Cautionary note regarding forward-looking statements: The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words "may", "will", "should", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Euler Hermes Group's core business and core markets, (ii) performance of financial markets, including emerging markets, and including market volatility, liquidity and credit events (iii) the frequency and severity of insured loss events, including from natural catastrophes and including the development of loss expenses, (iv) persistency levels, (v) the extent of credit defaults, (vi) interest rate levels, (vii) currency exchange rates including the Euro/U.S. Dollar exchange rate, (viii) changing levels of competition, (ix) changes in laws and regulations, including monetary convergence and the European Monetary Union, (x) changes in the policies of central banks and/or foreign governments, (xi) the impact of acquisitions, including related integration issues, (xii) reorganization measures, and (xiii) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.
The company assumes no obligation to update any forward-looking statement.
