“Returning Confidence”
FINANCE 4 GROWTH
2
Department / author Department / author
Who we are
Allianz Group
▪ Global leader in insurance and financial services
▪ Leading Property and Casualty insurer globally
▪ €110,8 billion total revenues (2013) / €10,1 billion operating
profit (2013)
▪ 83 million customers worldwide, products and solutions in
insurance and asset management
▪ € 1.361 billion third party assets under management (end
2013)
▪ 182% solvency ratio (2013)
▪ Present in in over 70 countries
▪ 148.000 employees worldwide
▪ Standard & Poor’s AA / Very strong
Euler Hermes
▪ Global leader in credit insurance with 34% market share
▪ #1 Credit Insurer
▪ €2.5 billion consolidated turnover (+3.7% vs. 2012)
▪ 52,000+ clients worldwide
▪ Tracks companies active in markets representing 92% of
global GDP
▪ €789 billion of business transactions covered globally
▪ Present in over 50 countries
▪ 6,000+ employees worldwide, incl. 1,500 risk experts
▪ Standard & Poor’s AA-
3
Department / author Department / author
Benefits of Credit Insurance
Allows you to grow your lending book securely
1. Ability to increase lending
2. Increase customer requirements through export
capabilities
3. Security taken from EH’s AA- S&P rating
4. Option to have assignment to the claims
… Allows you grow safely
1. Access to greater / improved lending facilities
2. Inclusion of export sales to a domestic facility
with insurance
3. Ability to find new sales on competitive trading
terms in export markets
4. Access to largest global network of proprietary
risk intelligence in the Credit Insurance market
…Enhanced three way
relationship with
insurance providing an
opportunity and the
security to grow
exports
4
Department / author Department / author
Euler Hermes “Simplicity” … focus on the Basics
Basics• Cover by default at 60%
• No credit limit requests
• No turnover declaration
• No requirement for historical loss details
• Fixed premium based on Turnover Band
• Minimal Administration
• Cover Optional grade requests
• Depending on Grade:
o 0%, 60% or 90%
o Basic ML or Enhanced ML
• Standard 60% indemnity for “blind” cover
• No need to apply for credit limits (innovative in the Credit Insurance world!)
• No requirement for previous bad debts to be supplied
5
Department / author Department / author
Euler Hermes “Simplicity” … focus on Pricing & Cover
1 Select estimated turnover band
for the next 12 months
2This provides the
premium figure to pay
3
Ability to “upgrade” to a higher policy
liability (and premium) as required4
Maximum liability per
individual buyer
PricingTurnover Band Annual Policy
ML
Basic Buyer ML
60% Indemnity
Enhanced Buyer
ML 90% Indemnity
Premium
€100,000 to €500,000 €50,000 €5,000 €20,000 €4,310
€500,001 to €1,000,000 €75,000 €7,500 €30,000 €5,050
€1,000,001 to €1,500,000 €100,000 €10,000 €40,000 €6,620
€1,500,001 to €2,000,000 €125,000 €12,500 €50,000 €8,100
€2,000,001 to €2,500,000 €150,000 €15,000 €60,000 €9,770
€2500,001 to €3,000,000 €175,000 €17,500 €70,000 €10,610
€3,000,001 to €3,500,000 €200,000 €20,000 €80,000 €11,450
€3,500,001 to €4,000,000 €225,000 €25,000 €100,000 €12,400
€4,000,001 to €5,000,000 €250,000 €30,000 €120,000 €13,970
6
Department / author Department / author
Euler Hermes “Simplicity” … focus on Export Markets
Insured Export
Markets
Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Hungary, Italy, Luxembourg, Malta, Netherlands,
Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,
Switzerland, United Kingdom, United States
✓ All markets endorsed as “standard”
✓ Open account terms
✓ No prior export experience required
✓ Common payment length allowed for all markets
✓ Commercial risks covered
7
Bad Debt and Insolvency Matters...
40%of a Company’s assets are typically in the form of
its outstanding sales ledger
8
Department / author Department / author
Case Study –
- An Irish SME founded in 1982 Kildare-based Com-Plas packaging supplies plastics pots, punnets, buckets
and bulk products, including a range of environmentally friendly biodegradable packaging, to the food,
pharmaceutical and chemical industries.
- “Simplicity has given us the confidence to seek new customers and quote for new business that we
might not have done in the past” (Financial Director Lorraine Ledingham)
- “When Simplicity came along we were able to get up to €25,000 cover per customer with no questions
asked, and up to €100,000 for our larger customers”. (Financial Director Lorraine Ledingham)
- “In the past year we have already made a couple of claims as a result of customers going into
liquidation. The claims process was all conducted via email and it all went very smoothly”. (Financial
Director Lorraine Ledingham)
- Simplicity has given them the confidence to export their products in support of their growth plans.
9
Insolvencies could decrease by 2% worldwide
but remain 10% above their pre-crisis levels
Global business insolvencies: -2% in 2016 but still 10% above pre-crisis levels.
DSOs increasingly used as a financing tool.
Business insolvencies,
2015 vs 2003-2007 average
Source: Euler Hermes Sources: Bloomberg, Euler Hermes
Data takes into account listed companies only.
Days Sales OutstandingBusiness insolvencies,
annual growth in 2014 and 2015
Source: Euler Hermes
10
United Kingdom Weight 2014 2015 2016 2017
GDP 100% 3.1 2.2 1.6 0.7
Consumer Spending 65% 2.2 2.5 2.5 1.0
Public Spending 20% 2.3 1.4 0.9 0.3
Investment 21% 5.9 3.5 -0.6 -2.3
Construction 9% 8.1 3.6 0.0 -1.6
Business investment 10% 3.9 5.0 -1.9 -3.9
Stocks * -3% 0.4 0.1 0.3 -0.1
Exports 30% 1.5 4.8 2.1 3.3
Imports 33% 2.5 5.8 3.2 1.3
Net exports * -3% -0.4 -0.5 -0.4 0.6
Current account ** -85 -100 -107 -114
Current account (% of GDP) -4.7 -5.4 -5.6 -5.8
Employment 2.4 1.3 1.7 1.8
Unemployment rate 5.7 5.1 5.1 5.2
Wages 2.3 3.3 3.2 2.0
Inflation 1.3 0.0 0.7 2.5
General government balance ** -102 -79 -81 -80
General government balance (% of GDP) -5.6 -4.2 -4.2 -4.1
Public debt (% of GDP) 88.2 89.2 88.0 88.0
Nominal GDP ** 1 822 1 870 1 920 1 953
Change over the period, unless otherwise indicated:
* contribution to GDP growth
** GBP bn
Recession risk has been delayed, but growth
remains depressed by uncertaintyEconomic forecasts UK
Sources: ONS, Eurostat, Euler Hermes forecasts
Higher volatility
Fragile business confidence
Strong GBP depreciation
Demand shock (slowing imports, consumption)
Contraction of domestic investment
Contraction of incoming Foreign Direct Investment
Trickle down of Brexit vote impact
Business nervousness has increased since Art.
50 was triggered (in March 2017?)
Source: Euler Hermes
Prolonged period of uncertainty ahead,
bouts of nervousness expected in H2 2017
11
Firms’ payment behavior is expected to
deteriorate
Reversing decreasing trend in business
insolvencies: expect +8.5% in 2017Business insolvencies by sector
as of Q1 2016, last 4Q y/y
Sources: ONS, Euler Hermes
Several sectors are already suffering from
deteriorating payment behaviorPast dues as of Q2 2016(severity rates, 4Q/4Q y-1)
Sources: Euler Hermes proprietary data
12
GBP Depreciation
Automotive; Chemicals; Paper
Aeronautics; Machinery and equipment; Agri-food;
Retail; Textile; Pharma; Metals
Construction; Utilities; Transport; IT services;
Energy
Less investments
Energy; Chemicals; Textile; Retail; Automotive; Machinery and equipment;
Metals
Agri-food; Construction; Machinery and equipment;
Aeronautics; IT services
Transport; Metal; Pharma; Paper
Domestic demandSlowdown
Textile; Agri-food; Automotive; Construction
Retail; Chemicals; Pharma; Household equipment; Metals;
Machinery and equipment; Transport; IT services;
Energy; Paper
Aeronautics
Expect future headwinds for sectors
Three main channels of impact for businesses: GBP depreciation (import cost), less
investments (domestic and foreign) and the domestic demand slowdown
Sources: ITC, OECD, Euler Hermes Economic Research
Main channels of impact for sectors by the official EU exit (2019?)
13
Stay Leave Stay Leave StaySoft Leave -
exit with a FTA
Hard Leave -
exit w.o. a FTA
Real GDP growth 1.8% 0.7% 1.7% 1.0% 1.7% 0.2% -1.3%
Nominal GDP growth 3.3% 3.2% 3.3% 3.0% 3.2% 2.5% 1.2%
Goods export gains
(GBPbn)35 30 25 18 20 -9 -30
Services export gains
(GBPbn)10 6 12 3 14 -5 -11
GBP trend Stable~5%
depreciation
> 5%
appreciation
~2%
depreciation
> 5%
appreciation
> 10%
depreciation
> 20%
depreciation
Net investment from
abroad (GBPbn)> 50 < 10 > 50 < 10 > 50 -60 -210
Firms' turnover
(annual growth)3.5% 2.0% 4.0% 1.0% 4.0% 1.2% -1.0%
Firms' margins (pp) 0.5 -1.0 1.0 -1.5 1.0 -1.0 -2.0
Business insolvencies 3.0% 8.5% 1.0% 6.0% 0.0% 9.0% 15.0%
2017 2018 2019
The worst is yet to come…in 2019
The economy is expected to remain relatively resilient by 2019, the year when a formal
EU exit is expected
Sources: ONS, Eurostat, Euler Hermes forecasts
Impact of a Brexit on the United Kingdom (2017-2019)
14
Brexit checklist for Irish companies
Source: Euler Hermes
Does Brexit have an impact on your business with or in the UK?
…exporting to the UK
…importing from the UK
…having a branch/subsidiary in the UK
GBP depreciation
Lower GDP growth in the UK (lower turnover growth and lower margins)
Rising insolvencies in the UK
Lower RoW investment in the UK
EU tariffs on imports from the UK
UK tariffs on imports from the EU
Changes in regulation and additional administrative costs
Restrictions on movement of people
Restrictions on capital flows
Restrictions on services
European companies… Impact
Ongoing
Ongoing
Q4 2016
Q4 2016
Early 2019 with the
EU exit
Early 2019
Early 2019
Early 2019
Early 2019
Early 2019
15
Country Risk Map at end of 2015
The balance of risk has shifted towards higher level due to severe hot spots
16
Europe will be go to region for Irish export growth
Eurozone will perform above global average
in 2016-2017 underpinned by improvements
in private consumption and investment
Large countries like US and China will see
mixed performance with sizeable gains but
below trend for import growth
17
Corporate risk Assessment The EH Grading system
© Copyright Euler Hermes 16/06/2017
Exceptional Virtually no risk of loss
Very strong Minimal risk of loss
Strong Low risk of loss
Good Below average risk of loss
Average Average risk of loss
Watch Above average risk of loss
Weak Increased risk of loss
Distressed High risk of loss
Uninsurable Very high risk of loss
Failures
Good credit gradingof a company and/or sector
low default probability
Bad credit gradingof a company and/or sector
high default probability
1
2
3
4
5
6
7
8
9
10