CREDIT INSURANCE MARKET SURVEY 2 01 9 CREDIT INSURANCE MARKET 2019 INSURERS & SHARES MARKET SHARE The trade credit insurance market remains very 2018 (source: www.icisa.org). Euler Hermes remains the oligopolistic and the Top 3 «global» insurers represent leading credit insurance carrier with 34.1% of market more than 75% of the total premium. ICISA estimates share followed by Atradius 24.6%, and Coface with a total market size around €6.7 billion in premium in 17.1% as of December 31st 2018. 17,3% 34,1% • Euler Hermes 24,3% • Atradius 24,6% • Others • Coface This calculation is an estimate by AU Group, excluding China Export insurance company which achieved a turnover of approximatively & Credit Insurance Corporation (“Sinosure”), the public Chinese €1.4 bn (2016 figures, total short term premium). TYPES OF INSURERS The International Credit Insurer & Surety Association “Niche” insurers, characterised by expertise in: (ICISA) comprises more than 50 members that provide ➤ particular products: Excess of loss, shared excess Trade Credit Insurance535 402 across the world. However, two cover, top-up, single risk (e.g.: AIG, Chubb, Garant, Nexus, main categories of insurers can be distinguished: “Global” 600000 466 379 Liberty Mutual, Lloyd’s, Markel, QBE, Tokio Marine, XL and “Niche” insurers. Catlin, Zurich etc.) 500000 335 270 ➤ certain geographical areas (e.g.: ATI, Cesce, Credendo, “Global” insurers, characterised by: FCIA, ICIC, QBE, Sace etc.) 400000 ➤ a strong international presence ➤ different types of risk: political risk, non-transfer 300000➤ detailed information on a very large number of buyers (e.g.: Garant, Beazley, Liberty Mutual, Lloyd’s, Zurich...) in their global databases • Atradius 200000➤ global capabilities in providing credit• Coface management services • Euler Hermes 100000 Leading insurers in this category are: Atradius, Coface, Euler 0Hermes. Turnover per capita 02 - Confidential A.U.Group © Atradius Coface Euler Hermes 140 130 120 110 100 Profitability level 90 80 70 60 50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 23% 25% • Atradius 35% 17% • Coface • Euler Hermes • Others CREDIT INSURANCE MARKET 2019 TRENDS & FINANCIAL PERFORMANCE TURNOVER OF THE MAIN INSURERS (M€) 2 705 • 2014 • 2015 • 2016 • 2017 • 2018 2500 1 898 2000 1 385 1500 1000 500 0 Atradius Coface Euler Hermes The trade credit market has returned to growth and ➤ Coface is back to growth and has fully succeeded all the main insurers are showing good performance in its turnaround: +2,2% (+4.6% at constant scope and following the trend of the overall market. FX rate). It has shown a good performance in emerging market (Mediterranean & Africa +6,4%) and a solid ➤ Atradius continues its very regular growth over the past 5 years. The improvement of its Trade Credit growth of its clients’ business. Insurance activity has been consistent in all regions of ➤ Euler Hermes posted the best performance: +5,4% the world, with their “Global” business unit (in charge of (+7% at constant scope and FX) reaching 2,7 billion international groups) has excelled in 2018. euros in revenues. Their new business result has been higher than ever, combined with dynamic organic growth and strong policy retention. 431 • 2008 • 2009 • 2010 • 2011 • 2012 • 2013 • 2014 • 2015 • 2016 • 2017 • 2018 Turnover variation 2018 vs 2017 Calculated growth 300 Atradius 3,3% Coface 2,2% 203 Euler Hermes 5,4% 200 122 100 0 Atradius Coface Euler Hermes -100 -200 03 - Confidential A.U.Group © 23% 25% • Atradius 35% 17% • Coface • Euler Hermes • Others 2 705 • 2014 • 2015 • 2016 • 2017 • 2018 2500 1 898 2000 1 385 1500 1000 500 0 CREDITAtradius INSURANCofaceCE MARKET Euler2019 Hermes TRENDS & FINANCIAL PERFORMANCE NET PROFIT (M€) 431 • 2008 • 2009 • 2010 • 2011 • 2012 • 2013 • 2014 • 2015 • 2016 • 2017 • 2018 300 203 200 122 100 0 Atradius Coface Euler Hermes -100 -200 The “big three” presented strong profitability the last few ➤ Euler Hermes profit has increased dramatically to years with all showing better results in 2018 than in 2017. €431M, being not only the highest in the industry, but the highest in Euler Hermes’ history. This excellent perfor- ➤ Atradius posted a result of €203M, +8,8% compared to 2017 and only slightly lower than in 2016 (€212M); mance is visible in its net profitability ratio of15,9% . its net profitability ratio (= NPAT / TURNOVER) shows a good level of 10,7%. ➤ In 2017, Coface’s profitability had already doubled from €42M in 2016 to €83M. This year the increase in PBT is equally impressive reaching +48% and €122M. This comes as a result of their restructuring plans and reduces the gap with its competitors. However, its net profitability ratio remains the weakest among the insurers at8.8% . 04 - Confidential A.U.Group © 17,3% 34,1% • Euler Hermes 24,3% • Atradius 24,6% • Others • Coface 535 402 600000 466 379 500000 335 270 400000 300000 • Atradius 200000 • Coface • Euler Hermes 100000 0 Turnover per capita CREDIT INSURANCE MARKET 2019 MEASURE OF PERFORMANCE NET COMBINED RATIO (in%) Atradius Coface Euler Hermes 140 130 120 110 100 Profitability level 90 17,3% 80 34,1% 70 60 50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ➤ The insurers’ profitability is determined by their Loss ➤ The top 3 insurers are showing close results in 2018, Ratio (claims/premiums) and their Combined Ratio (Loss but Atradius heads its competitors with a net combined • Euler Hermes ratio plus overhead expenses). During the financial crisis, ratio of 76,7% 24,3% • Atradius insurers were shaken by increased payment defaults, 24,6% • Others Coface bankruptcies and the resulting claims paid to their insureds. Net Combined • Atradius Coface Euler Hermes ➤ The theoretical break-even point of the combined ratio ratio (in%) is an estimated 100% (above which Insurers consider 2014 78,4 79,7 75,4 that their operations generate a loss). 2015 77,9 83,1 80,1 2016 77,4 97,4 79,8 2017 75,5 86,5 80,5 2018 76,7 79,6 77,9 HEADCOUNT 535 402 Underwriters Atradius Coface Euler Hermes 600000 466 379 Numbers employed 3 545 4 131 5 800 500000 Turnover per capita 535 402 335 270 466 379 335 270 400000 The headcount to revenue ratio reflects the company’s productivity. Atradius is the company presenting the best combined ratio and 300000 turnover per capita. Atradius • 200000 • Coface • Euler Hermes 100000 0 Turnover per capita 05 - Confidential A.U.Group © Atradius Coface Euler Hermes 140 130 120 110 100 Profitability level 90 80 70 60 50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CREDIT INSURANCE MARKET 2019 FINANCIAL RATING (update MAY 2019) FINANCIAl rating OF THE top INSURERS Financial Strength Rating Companies Standar & Poors Moody’s Fitch A.M. Best A+ A2 A+ A AIG outlook stable outlook stable outlook Negative outlook stable A2 A ATRADIUS outlook stable outlook stable AA A++ CHUBB outlook stable outlook stable A2 AA- COFACE outlook stable outlook stable A- CREDENDO outlook stable AA Aa3 A+ EUlER HERMES outlook stable outlook stable outlook stable A A2 A lIBERTY MUTUAl outlook stable outlook stable outlook stable A A2 A MARKEl outlook stable outlook stable outlook stable A+ A1 A+ A QBE outlook stable outlook stable outlook stable outlook stable AA- Aa3 A+ ZURICH outlook stable outlook stable outlook stable 06 - Confidential A.U.Group © ABOUT AU Group supports its clients in structuring, negotiating and implementing solutions for the: PROTECTION AGAINST PAYMENT DEFAUlT ➤ by transferring the risk to the most suitable market MANAGEMENT OF TRADE RECEIVABlES ➤ by optimising credit management tools & techniques with the use of IT solutions FINANCING AND WORKING CAPITAl SECURITISATION ➤ by pledging trade receivables to appropriate finance companies PROTECTING YOUR INTERNATIONAl PROJECTS AGAINST POlITICAl RISKS ➤ by structuring appropriate cover for your contracts and your assets AU Group is the leading global broker specialised in these areas 1929 30 COUNTRIES CREATED IN A TEAM OF 100% 260 PRIVATElY OWNED STAFF WORldwide +4500 ClIENTS € 300 b. MORE THAN € 300 BIllION OF TRADE COVERED PER YEAR 51 OFFICES DISClAIMER Document («the Survey») is published by AU Group for information purposes only. The Survey cannot be considered as providing specific advice. Readers should make their own independent assessment of this information in order to make their own decisions. The Survey was prepared on the basis of information published by ICISA, insurance companies operating in the credit insurance market and rating companies. It contains data and estimates made by AU Group based on several assumptions. Although the information collected from ICISA, insurance companies, and rating companies are believed to be reliable, they have not been independently verified by AU Group. AU Group gives no warranty (express or implied) with respect to this information, regarding the accuracy, completeness or adequacy of this information. AU Group cannot be responsible for any loss or damage resulting in AU Group any way from the use of the Survey. In no event will AU Group, its related companies, partners, agents or employees, be liable to anyone for any decision made or action taken in reliance on the information contained in this study, nor for any consequential, direct or indirect, damages. www.au-group.com Unless otherwise stated, any views, forecasts and estimates are those of AU Group as at 30/05/2019 and are subject to change without notice. HQ : 91 rue du Faubourg Saint Honoré This document is the exclusive property of AU Group. It cannot be used, reproduced, represented, modified or communicated in any other format without the prior and express permission of AU Group. - F - 75008 Paris - +33 1 42 66 66 46 This document is not intended to be distributed in any jurisdiction in which this would be prohibited. 07 - Confidential A.U.Group © .