Atradius, the global credit insurance and management company, has reported significantly higher profit after tax of €50mn for 2004 compared to €15.3mn in 2003. The sharp increase in profits was driven by a 13.5% improvement of the claims expense ratio, 9.7% reduction in combined ratio and continued strong investment income.
Wilfried Verstraete, chief executive officer of Atradius, states; “The substantial improvement in results further highlights the turnaround we have been working towards. We are building on this with better performance from our core credit insurance activities. Despite a pre-tax charge for restructuring provisions of €
49mn, we are very pleased to show that the company is making great progress in translating operational excellence into strong financial performance.”
49mn, we are very pleased to show that the company is making great progress in translating operational excellence into strong financial performance.”
Financial highlights:
* Net profit increased 228% to €
50mn (2003: €
15.3mn) on virtually stable turnover. Net profit benefited from substantial improvement in net claims expense, investment income, reinsurance results and a lower effective tax rate of 14% (2003: 48%).
* Net profit increased 228% to €
50mn (2003: €
15.3mn) on virtually stable turnover. Net profit benefited from substantial improvement in net claims expense, investment income, reinsurance results and a lower effective tax rate of 14% (2003: 48%).
* Pretax profit rose 104% to €
58mn (2003: €
28.4mn).
* The claims expense ratio fell from 61% in 2003 to 47.5% in 2004 and the combined ratio from 101.2% in 2003 to 91.5% in 2004.
* Redundancy provisions, including pension curtailment, of €
54mn.
* Net investment income up 6.7% to €
64.6mn (2003: €
60.6mn) supported by realised gains in investments in both years.
* Equity increased 32.0% to €
522.1mn (2003: €
395.5mn) largely the result of an €
86mn capital increase (6.6mn new shares placement) with existing shareholders and strong retained earnings.
* Return on equity (RoE) was 12% on average shareholders equity, excluding the share capital increase.
* 2003 financial statements have been restated due to re-interpretation of the IFRS (International Financial Reporting Standards) pension accounting standard that disallows recognition of certain pension assets. Net income was restated from €
17.5mn to €
15.3mn and shareholders equity, per year-end, from €
409.3mn to €
395.5mn in 2003.
* The company will pay a dividend of €
0.10 per share ( €
5.66mn).
Pretax profits in Atradius’ core insurance activities, including investment activities, improved 125% to €
67.3mn (2003: €
29.9mn) on slightly lower turnover. The improvement is largely the result of the reduction in the claims expense ratio to 47.5% and the increase in investment return. The lower claims expense reflects improved underwriting and a favourable risk environment. Bonding was impacted by two large claims in The Netherlands and Germany. The actions taken in 2003, in respect to bonding operations in Italy, have shown promising results in 2004.
58mn (2003: €
28.4mn).
* The claims expense ratio fell from 61% in 2003 to 47.5% in 2004 and the combined ratio from 101.2% in 2003 to 91.5% in 2004.
* Redundancy provisions, including pension curtailment, of €
54mn.
* Net investment income up 6.7% to €
64.6mn (2003: €
60.6mn) supported by realised gains in investments in both years.
* Equity increased 32.0% to €
522.1mn (2003: €
395.5mn) largely the result of an €
86mn capital increase (6.6mn new shares placement) with existing shareholders and strong retained earnings.
* Return on equity (RoE) was 12% on average shareholders equity, excluding the share capital increase.
* 2003 financial statements have been restated due to re-interpretation of the IFRS (International Financial Reporting Standards) pension accounting standard that disallows recognition of certain pension assets. Net income was restated from €
17.5mn to €
15.3mn and shareholders equity, per year-end, from €
409.3mn to €
395.5mn in 2003.
* The company will pay a dividend of €
0.10 per share ( €
5.66mn).
Pretax profits in Atradius’ core insurance activities, including investment activities, improved 125% to €
67.3mn (2003: €
29.9mn) on slightly lower turnover. The improvement is largely the result of the reduction in the claims expense ratio to 47.5% and the increase in investment return. The lower claims expense reflects improved underwriting and a favourable risk environment. Bonding was impacted by two large claims in The Netherlands and Germany. The actions taken in 2003, in respect to bonding operations in Italy, have shown promising results in 2004.
Factoring income realised a 14% increase in turnover with a stable contribution. Although factoring showed solid growth, it is not in a position from which it can achieve sufficient critical mass. Therefore, the company plans on divesting its factoring business and focusing its resources on the credit insurance and collections businesses where it can more effectively create customer and shareholder value.
Better results in collections produced an improved operating result of 5%.
This result offset a reduction in services revenues of 3%, which reflects lower credit application income due to the overall lower economic activity with Atradius’ insured customers.
This result offset a reduction in services revenues of 3%, which reflects lower credit application income due to the overall lower economic activity with Atradius’ insured customers.
Outside of Germany, Nordic and indirect underwriting segments where turnover grew 5.3%, 10.2% and 52.8% respectively, turnover was flat or lower than in 2003. This reflected volatile economic conditions and more cautious, well-balanced underwriting in bonding.
Verstraete continues, “Growth both in turnover and in profits are our two primary goals both in the short- and long-term. We introduced a strategic growth plan at the end of 2004 that will help us achieve these goals through a more efficient, focused approach to our business, more co-operative relationships with our brokers and customers and a more effective, streamlined customer friendly operating model.”
Atradius has set its goals as:
* Completion of the legal restructuring and the three-year merger integration plan that started in 2002 covering business and finance systems. A substantial part of the legal restructuring is finalised and completion is anticipated in the second half of 2005.
* Building global brand awareness of Atradius and products and services as well as expanding general recognition of the benefits of credit insurance.
* Continued expansion of product offerings and geographic footprint to meet the evolving needs of today’s global economy.
* A 15% reduction in full time equivalents (FTEs) through 2006. The staff reductions began late in 2004 with the successful introduction of a voluntary leave program in which 240 of our staff participated.
* Increased turnover and improved operating efficiencies through a combination of organic growth, strategic acquisitions and increased operating efficiencies.
* Completion of the legal restructuring and the three-year merger integration plan that started in 2002 covering business and finance systems. A substantial part of the legal restructuring is finalised and completion is anticipated in the second half of 2005.
* Building global brand awareness of Atradius and products and services as well as expanding general recognition of the benefits of credit insurance.
* Continued expansion of product offerings and geographic footprint to meet the evolving needs of today’s global economy.
* A 15% reduction in full time equivalents (FTEs) through 2006. The staff reductions began late in 2004 with the successful introduction of a voluntary leave program in which 240 of our staff participated.
* Increased turnover and improved operating efficiencies through a combination of organic growth, strategic acquisitions and increased operating efficiencies.
The global credit insurance market in 2005 has seen increased competition and greater willingness of credit insurers to take on more risk. This trend is likely to continue into 2006 as heightened competition further affects prices, claims Atradius. We see new products and expansion into emerging markets providing the greatest opportunities for growth as larger more established economies require innovative solutions to new challenges and low penetration rates in emerging markets offer opportunities for market expansion through education and product benefit awareness.
To facilitate growth Atradius has introduced the Special Products Unit whose focus is on developing and introducing new products that are designed to meet the changing needs of today’s global companies.
Atradius’ commitment to building its presence in strategic and emerging markets are being fortified through the 2004:
* signing of a new reinsurance treaty with New India Assurance,
* official commencement of operations in the Czech Republic and
Poland, and the
* acquisition of International Collections Inc in the US.
In early 2005, these expansion commitments and overall global growth are being further solidified with:
* the planned co-operation agreement with the Tokio Marine & Nichido
Fire Insurance Co, Ltd in Japan,
* the opening of Atradius’ new office in Hungary and
* a global marketing campaign designed to increase awareness of both
Atradius and the value-added benefits of credit insurance.
* signing of a new reinsurance treaty with New India Assurance,
* official commencement of operations in the Czech Republic and
Poland, and the
* acquisition of International Collections Inc in the US.
In early 2005, these expansion commitments and overall global growth are being further solidified with:
* the planned co-operation agreement with the Tokio Marine & Nichido
Fire Insurance Co, Ltd in Japan,
* the opening of Atradius’ new office in Hungary and
* a global marketing campaign designed to increase awareness of both
Atradius and the value-added benefits of credit insurance.
