Euler Hermes: AA- rating with stable outlook affirmed by Chinese rating agency Dagong
Euler Hermes has received a AA- rating from leading Chinese credit rating agency Dagong, and is also the first insurance company in Europe to be rated by the agency.
The credit review referenced Euler Hermes’ very strong and resilient financial profile, prudent risk management practices and large capital base to cover growing net credit risk exposure. It also noted the rating is supported by a leading competitive position in the credit insurance industry and a strong and coherent development strategy. The credit review was conducted by Milan-based Dagong Europe.
“The AA- rating by Dagong is a particularly important milestone in our long-term growth plan,” said Wilfried Verstraete, chairman of the Board of Management of Euler Hermes. “As a geographically- and culturally-diverse group, Euler Hermes values perspectives on our business model from the countries where we operate. In this context, and as the global market leader in our sector, we welcome Dagong’s recognition of the strength of our business strategy and our robust performance. For our clients in China, and across the 55 countries we are active in, it also reflects our financial solidity and best-in-class risk management that helps them develop their business safely.”
The main considerations cited by Dagong Europe in affirming the Euler Hermes credit rating are:
• Successful strategy and strong competitive position: Successful execution of the strategy, with a leading 34% market share in the global credit insurance sector. Going forward, new opportunities are expected to come mainly from growth markets, in particular in Asia.
• Strong risk management: Prudent underwriting and sophisticated risk management tools, mitigating high tail risks and protecting from high volatility in earnings and capital. In addition, high geographic diversification also reduces sensitivity to economic downturns.
• Very strong capital: Large, stable and high-quality capital base, consisting primarily of shareholders’ equity comfortably supporting growth needs and providing a buffer against unfavorable losses.
“The stable outlook reflects our expectations that Euler Hermes will maintain and strengthen its competitive position, deliver on a steady and controlled growth strategy in emerging markets, and maintain a large capital base and strong profitability over the cycle,” said Carola Saldias, sector head, senior director Financial Institutions, Dagong Europe. “We anticipate return on equity to be above 12% and net combined ratio in the range of 75%-85%.
In addition, Euler Hermes is strategically important to and a highly integrated member of Allianz Group, providing diversification, high returns and growth opportunities. With its specialized niche product, it enables Allianz to provide a full product range, from retail to risk management solutions, for its corporate clients segment.”
Dagong was founded in 1994 with the joint approval of The People’s Bank of China and the former State Economic and Trade Commission. It holds all qualifications for credit rating recognized by the Chinese government. Dagong Europe was established in March 2012. In June 2013 it received authorization and registration from the European Securities Market Authority ('ESMA') under Article 16 of the CRA regulation. It is both the first Chinese and the first Asian company to register and obtained its credit rating license in Europe.
“Every day we invest in our business in Asia - particularly in China - helping our clients grow and make strategic trading decisions in this most dynamic part of the world,” said Fabrice Desnos, CEO, Euler Hermes APAC. “It is very encouraging to see this investment commitment and our country and industry sectors knowledge recognized in the Dagong report. This strong rating from experts in the Asian economic environment will be important to our banking and insurance partners here in China, and will support our continued penetration and growth in this key market for Euler Hermes.”
Euler Hermes’ presence in China began in 1999. Headquartered in Shanghai, it offers risk management and consulting services to local companies and insurance partners. It extended its footprint in 2012 with branches in Beijing and Shenzhen. In October 2013, Euler Hermes was named best credit service provider in China at the 10th China International Credit and Risk Management Conference held in Beijing.