Atradius, the leading credit insurance and credit management firm with 25% market share, has reported a €17.5mn profit after tax for 2003 compared to a Eu75.1mn loss after tax for 2002.
The turnaround was achieved during a year of momentous change which saw Atradius emerging from the former Gerling NCM as a financially stable and robust company, fully separated and independent from the Gerling Group. It ranks number two in world credit insurance with very strong business positions in key markets and more than 90 offices in 40 countries.
Following the publication of the Atradius annual report and results for 2003, chief executive officer, Wilfried Verstraete, said: “This result is an encouraging start for our new life as an independent, streamlined and innovative entity, under new ownership and with increased capitalisation. Now, after a period of consolidation and integration, we are developing a strategy to generate sustainable growth.”
Verstraete became CEO on May 1, 2004 in succession to Paul-Henri Denieuil who joined the supervisory board of Atradius and was subsequently appointed its chairman on June 23, 2004 in place of Rudolf Kellenberger, deputy CEO of Swiss Re, who became vice-chairman.
Despite economic uncertainty and difficult trading conditions, 2003 recorded a reasonably good result for the core credit insurance services, an improvement that continued in the 2004 first quarter.
Bonding activities in Italy were much less positive, mainly on account of the deteriorating Italian economy. As a result, substantially higher levels of provisioning for Italian bonding exposure have been made. However, important measures were taken, including ceasing non-profitable bonding activities and tightening underwriting rules. The Italian situation had a significant impact on the group result, and on the gross combined ratio which stood at 101.7% (2002: 106.2%).
Despite the economic downturn and stricter risk underwriting, the consolidated gross earned premium increased by 1% to Eu1.097tn (2002: Eu1.084tn).
Factoring income increased by 3% to Eu27mn (2002: Eu26.3mn).
Service income, including checking fee income linked to the credit insurance business, decreased by 10% to Eu137.4mn (2002: Eu152.1mn). This was mainly on account of lower credit insurance turnover
Net claims expenses increased to Eu295.9mn (2002: Eu277.3mn). This was the result of higher provisions in the Italian bonding business. In other key countries the claims situation develop very positively, compared to 2002.
The gross expense ratio decreased to 40.7% (2002: 41.4%). This positive development was in spite of several additional one-off costs related to the shareholder restructuring and migration from Gerling Group
Net investment income was, at Eu60.6mn, significantly up from 2002 (- Eu50.3mn), a year dominated by exceptional impairments, as a result of negative developments in world equity markets
At the end of 2003, the equity of Atradius totalled Eu409mn, an increase of 3.4% compared to the Eu396mn at the end of 2002. The risk capital was strengthened in 2003 through the issuance of a subordinated loan of Eu110mn, underwritten by our shareholders, to support the A ratings
Atradius’ three main goals remain:
Completion of the three-year merger integration plan covering business, finance and legal systems, that started in 2002, to establish a seamless service platform.
Continuation of well-balanced risk underwriting in a volatile market, to maintain a well-controlled overall claims ratio for the whole product portfolio.
Development of profitable growth in the core businesses through high quality services, leveraging out core competencies in credit and receivables management, and developing new and innovative solutions for an expanding customer base.
The group aims for further strengthening through an internal legal restructuring leading to the creation, subject to the necessary approvals, of a single European insurance carrier based in The Netherlands, with branches throughout Europe and elsewhere.
This will ensure the group is more cost effective and transparent, optimise its internal capital base and create one risk capital base.
It also aims for further harmonisation of principles groupwide such as provisioning, pricing and capital allocation and the further improvement in the financial reporting system and in long-term capital planning.
There will be initiation of a three-year plan to reduce the cost ratio, while improving customer service and continuing to work within strict risk governance procedures and strengthening the strategic partnership with CyC as part of the growth strategy.
Strategic geographic and product expansion will continue. Growth in non-risk products such as third party collection business (already in the UK, France, Belgium, Germany, The Netherlands and now to be rolled out in Italy and Scandinavia) will help to reduce volatility of earnings and risk. A new information tool called Secoba,
developed for small and medium-sized French businesses to facilitate the financing of trade receivables, will also be rolled out in all major markets. A comprehensive credit information and modelling service called Credit Risk Tracker, covering SMEs and medium-sized companies has already been launched in Germany in partnership with Standard & Poor’s. It will also be introduced in other countries.
Atradius has a meaningful presence in key markets, where it intends to consolidate its position and increase profitability, claims the group. New positions are also being developed in regions where it sees strong growth potential, such as Latin America, Asia and Central and Eastern Europe. It has opened a branch in Prague in the Czech Republic and will open branches in Poland and Hungary, where it is currently present via fronting partners.
It is actively investigating potential partnerships in Asia, where it has further strengthened an existing co-operation with Indian market leader, The New India Assurance (NIA). Further growth is also expected in the North American Free Trade Area (Nafta).