PRESS RELEASE: Atradius -- acting prudently in a volatile economic climate
February 12, 2009
Note: The following is a "broker update" from Atradius: Trade credit insurer Atradius has recently taken measures to help preserve the strength of its customers and itself through the economic downturn. The company will move away from a few key areas of extreme economic deterioration in order to maintain -- and continue to provide -- cover on as much global trade as possible. In order to do this, Atradius has made the decision to proactively manage risk exposure in two ways. The first has been to work with customers who have voluntarily relinquished some of their unused credit limits, e.g., where commodity prices have fallen and the cover is surplus to requirements. Secondly, Atradius has decided to amend downwards a small percentage of the credit limits under the credit insurance policies of its customers as per November 2008 that are considered to be the most rapidly escalating risks. This is a measured response to the economic forecasting and interpretation of current economic conditions for the buyers of Atradius-insured customers. In the case of most policies, the amendment of credit limits does not affect already delivered and invoiced trade, which is still covered, as are pre-credit-risk arrangements where they have been taken out. Exposure
Despite the surge in insolvencies and the economic downturn, the measures taken by Atradius impact only around 5% of Atradius' total risk exposure globally and cover continues to be maintained on the remainder. Indeed, the decline in risk appetite has been gradual since April 2008, but still stands at just a 6% decrease YTD in Atradius' total portfolio. At the end of 2007, Atradius' total potential exposure (TPE) stood at around 450 billion Euros, a figure which has been maintained during the downturn. October 2008 saw a steady 0.5% increase in new business, their best October figure in two years.
This figure is still growing, currently standing at 488 billion Euros -- and new business is still being underwritten in sectors, industries and areas of the world where risk levels are deemed acceptable after prudent assessment and ongoing observation. In Atradius' leading markets, figures currently stand as follows:
N.B. In the above graph, "Global" refers to Atradius customers with global businesses, and is not an aggregation of the countries.Capital strength
Additionally, in the recent Standard and Poor's review announced on November 19, 2008, Atradius maintained its 'A' rating, despite the external economic climate. Atradius remains well capitalized and is more than able to meet its obligations towards creditors and counterparts over this difficult period, retaining the full support of a well diversified group of reinsurers, most of whom are also rated 'A' or higher by S&P as shown below.
In addition, Atradius has no material exposure to troubled financial institutions, nor to mortgages, credit derivatives or monoline insurers. S&P has reconfirmed the 'A/A-1' long- and short-term counterparty credit and insurer financial strength ratings of Atradius Credit Insurance N.V. and its 'A' long-term counterparty credit and insurer financial strength ratings on the core entities of Atradius. Moody's has also recently issued its credit opinion on Atradius and its operating entities, confirming its 'A2' ratings on October 13, 2008. Pricing strategy
As with any other kind of insurance, in times of heightened risk, prices increase. Put into context, however, over the past three years Atradius' average premium rate has actually decreased by almost 35% from 0.208% to 0.154%.
In the broader context of the credit crunch and the current tough economic climate, this needs to be recalibrated, and increases can be expected from here on. Rather than increases across the board, however, Atradius is adopting a pricing structure which is linked to risk. So areas of moderate risk may see as little as 20% change, where more rapidly escalating risks could see in excess of 50% in order to adequately reflect our risk assessment. In every case, it is Atradius' aim to support and facilitate global trade whenever possible. At present Atradius holds over 4.2 million credit limits for its customers and continues to add to this in a measured way to support good business through tough times. Atradius continues to work with brokers and customers and offers ongoing support to those affected in the current climate. About Atradius
Atradius provides trade credit insurance, surety and collections services worldwide, and has a presence in 40 countries. Its products and services aim to help reduce its customers' exposure to buyers who fail to pay for the products and services they purchase. With total revenues of approximately EUR 1.8 billion and a 31% share of the global trade credit insurance market, its products contribute to the growth of companies throughout the world by helping to protect them from payment risks associated with selling products and services on credit. With 160 offices, it has access to credit information on 52 million companies worldwide and makes more than 22,000 trade credit decisions daily.
For more information please contact Scott Pales, Atradius Trade Credit Insurance Inc., 5026 Campbell Blvd. Ste. C, Baltimore, MD 21236. Tel: 410-246-5578 or scott.pales@atradius.com.Insurance coverage in the Atradius Group is offered by Atradius Credit Insurance N.V., Atradius Trade Credit Insurance, Inc., Compañía Española de Seguros y Reaseguros de Crédito y Caución S.A. and Atradius Seguros de Crédito, S.A., which, for promotional purposes, are all referred to as Atradius. Exact coverage depends on the terms and conditions of the specific insurance policy. This statement is for informational purposes only. Atradius expressly disclaims any representation or warranty of any kind, whether express or implied.
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