Amsterdam, 4 March 2009 - Atradius reports 2008 results
Atradius, a global leader in trade credit insurance and debt collection, today reported a loss of EUR 193.4 million on a 40% increase in turnover, excluding investment income, to EUR 1,841.8 million. This increase largely reflects the January 2008 business combination with Crédito y Caución, Spain’s largest credit insurer. Excluding Crédito y Caución, turnover excluding investment income decreased by 0.7% reflecting a more restrictive underwriting approach. The results highlight the rapid deterioration of the economic environment in the second half of 2008, especially in markets in which Atradius has a leading position. The ratio of net claims to insurance revenues increased from 42.4% in 2007 to 97.4% in 2008. The net claims ratio for the Group, excluding Crédito y Caución was 70.1%.
Isidoro Unda, CEO of Atradius commented, “We have stood beside our customers providing insurance cover throughout this economic downturn despite the harsh business environment in some markets where we have a leading position. This clearly demonstrates our commitment to supporting the business community and our willingness to assume reasonable trade credit risks, for our customers, in good and bad times. We have experienced many recessions over the years and we are managing this cycle by building a stronger company with a clear leadership in the global credit insurance market.”
- Gross insurance revenues increased 40.7% to EUR 1,774.0 million from EUR 1,261.2 million in 2007. Excluding Crédito y Caución, gross insurance revenues decreased by 1.7%
- Service and other income increased 20.3% to EUR 74.3 million from EUR 61.8 million in 2007
- Net investment result of EUR 47.8 million compared to EUR 79.7 million in 2007
- Net loss of EUR 193.4 million compared to net profit of EUR 164.2 million in 2007
- Equity, including the combination with Crédito y Caución, increased 19.0% to EUR 1,016.0 million at year end 2008 compared to year end 2007
- Total assets increased 42.1% to EUR 4,035.2 million at year end 2008 compared to year end 2007
- Net claims ratio of 97.4% compared to 42.4% in 2007 (Atradius stand-alone 2008: 70.1%; Crédito y Caución 156.4%)
- Net expense ratio of 32.2% compared to 37.9% in 2007 (Atradius stand-alone 2008: 39.7%; Crédito y Caución 16.1%)
- Net combined ratio of 129.7% compared to 79.2% in 2007 (Atradius stand-alone 2008: 109.8%; Crédito y Caución 172.6%)
2008 a challenging year
January 2008 started with the completion of the business combination with Crédito y Caución becoming part of the Atradius Group. This acquisition raised Atradius’ profile in Spain and Portugal and resulted in a larger and more diversified insurance group with a global market share of approximately 31% and an increased capital base.
During the second half of 2008 however, the risk environment deteriorated rapidly, particularly in Spain, which following the combination became the company’s largest market. The net claims ratio for the second half of 2008 was 134.2% compared to 62.8% in the first half of 2008. Dedicated and tailored measures in both buyer and policy underwriting have been implemented in order to rebalance the risk-return ratio and to guide customers through the economic cycle. These measures have included amongst others, price increases to reflect the higher risk business environment and reductions of cover on buyers that are deemed to represent imbalanced risks. It is anticipated that the positive effects of these measures will materialise in 2009 and 2010 strengthening Atradius’ market leadership position.
Mr Unda added, “The credit risk environment has substantially deteriorated and we anticipate a continued challenging business environment in 2009. Therefore we have had to increase prices and prudently manage our risk positions. While we see meaningful opportunities to grow premiums, we will temper that growth with a conservative underwriting policy. Our customers remain our primary concern. We will continue to support their worldwide trade activities and entrepreneurial actions throughout this economic contraction through responsible coverage of trade credit risks and guidance.”
Gross earned premiums grew 40.7% to EUR 1,616.4 million. Excluding Crédito y Caución, premiums fell by 1.1%. Income from credit limit fees increased by 40.0% to EUR 157.6 million. Excluding Crédito y Caución, credit limit fees fell by 7.5%.
Traditional trade credit insurance revenues grew 46.7% to EUR 1,560.9 million. Excluding Crédito y Caución, these revenues decreased by 2.2%. Several markets showed higher demand however falling levels of insurable sales have contributed to a reduction in revenues. In addition, prices began increasing in many markets, reflecting the changed risk environment in the second half of 2008. The proposition offered to multinational companies as well as the operations in emerging markets did well in 2008, leading to an increase in revenues of 9.1% to EUR 279.7 million. Income from non-traditional and political risk solutions continued to show considerable growth increasing 27.3% to EUR 45.6 million in 2008.
Gross earned premiums from Crédito y Caución amounted to EUR 480.5 million and credit limit fees amounted to EUR 53.4 million. This additional income, arising from the business combination, contributes to the growth in income of the Atradius Group. On a stand alone basis Crédito y Caución has seen a 15.5% and 26.2% increase in gross earned premiums and credit limit fees respectively from 2007 reflecting pricing changes in reaction to the deteriorating underwriting conditions, primarily in the Spanish market.
Bonding revenues increased by 6.3% to EUR 91.3 million. Excluding Crédito y Caución, revenues fell by 9.9% primarily as a result of the ongoing active portfolio optimisation in Italy.
Bonding operations in Sweden, Finland and Spain reported higher revenues. Revenue from assumed reinsurance business improved 7.2% to EUR 89.4 million and the business of instalment credit protection reported a 15.9% increase in revenues to EUR 32.5 million.
Despite the challenging year, the insurance entities continue to have a strong solvency position.
Service revenues excluding information fees increased 20.3% to EUR 74.3 million. Debt collection income which contributes 74% of the service revenues grew, 19.7% benefiting from growing payment defaults and demand. Here the counter-cyclical characteristics of the industry materialise. Atradius Collections geographic presence was expanded to 18 countries in 2008 with the addition of new offices in the Czech Republic and Mexico.
Mr Unda continued, “The current business environment will provide us with many new opportunities to grow our service income, most notably our debt collections revenues. The expansion of our debt collections capabilities over the last two years has put us in a much stronger position to capitalise on these opportunities.”
Regionally, the addition of Crédito y Caución provided a substantial increase in revenues in Spain and Portugal. However, Atradius’ dominant position in these markets has resulted in a comparatively high exposure to the Spanish economy which has been one of the most affected by the global recession. Australasia continued to show strong growth in revenues of 43.6%, whereas other regions remained comparable to 2007 reflecting reductions in insurable sales and a more conservative underwriting policy towards the second half of the year.
Globally, insolvencies and buyer payment defaults are expected to continue to rise in 2009. The heightened risk environment, coupled with growing demand, will allow for higher premium rates that more accurately reflect the economic environment positively driving credit insurance premiums and collections revenue. Claims levels are expected to be higher in the first half of 2009 and to begin tapering off later in the year.
Mr Unda concluded, “The current global economic climate requires prudent attention to the risk levels of the portfolio. Credit insurers and sellers of products and services need to be selective in the risks they choose to accept. Those businesses that have the discipline to steer away from imbalanced risks should come through this period stronger and in a better position to prosper when the economy returns to an upward trend.”
The numbers in this press release are unaudited.
The Atradius Group provides trade credit insurance, surety and collections services worldwide, and has a presence in 42 countries. Its products and services aim to reduce its customers’ exposure to buyers who fail to pay for the products and services they buy. With total revenues of more than EUR 1.8 billion and a 31% share of the global trade credit insurance market, its products contribute to the growth of companies throughout the world by protecting them from payment risks associated with selling products and services on credit. With 160 offices, it has access to credit information on 52 million companies worldwide and makes more than 22,000 trade credit limit decisions daily.