In the first part of our interview with Euler Hermes CEO Wilfried Verstraete, we described how it has supported businesses for more than 100 years. In this second part, we concentrate on challenges and the global influence of credit insurance.
Then, shifting to a broader view: with all the economic turbulence, how can you be sure you know all the risks?
It’s true that global markets and trade routes are realigning and evolving, sometimes gradually, at other times with significant volatility. The key is to have people – expert analysts – in the markets, to be close to the clients and their buyers, and to monitor continuously.
The knowledge we share with our clients is based on three pillars.
First, worldwide risk-monitoring. Our unique proprietary worldwide risk information and financial performance database helps clients make the best-informed decisions about which companies to work with. We believe, we have the most extensive database in the industry.
Secondly, our experienced risk experts – a global network in more than 50 countries – provide a deep understanding of local businesses and market contexts. Our credit decisions are thus systematically made in the country closest to our clients’ buyers.
Finally, we have a strong reputation for economic research. Our in-house economists constantly analyze economic and industry sector trends to provide insights that support business needs.
What was the hardest decision you had to take during your time as Head of Euler Hermes?
There have been several. It’s never easy to make tough people decisions, restructure a job or department or an individual’s responsibilities. I look at a number of factors – performance, team morale, business impact, long-term sustainability – and especially attitude, before I or the Board of Management make a decision. It’s important that we bear in mind that our role is to lead by example, including managerial courage.
It’s also difficult to reduce or withdraw cover on a company, sector or country. You’re aware it’s going to affect livelihoods and futures, even when the financial case is compelling. But our role and responsibility is to protect clients whose goal is safer, sustainable growth and reduced risk.
Do you collaborate with other global lines like AGCS that also serve corporate customers? How does this collaboration work?
Absolutely. Close collaboration and increased cross-selling with Allianz colleagues is a key objective in our distribution strategy. Hence, we’re closely integrated with other Allianz specialist brands such as AGCS – so we can develop tailor-made risk management solutions for specific clients. This collaboration has become significantly tighter – successful in terms of signing new business – since early 2012.
And how is Euler Hermes performing?
Very well, thank you. Following months of unpredictable market and political events and foreign exchange headwinds, the company posted record consolidated revenues of Euro 2.5 billion in 2013, up by 5 percent at constant exchange rate compared to the previous year. Operating profit was solid at Euro 459 million, up by 6.2 percent. Insured global business transactions totaled Euro 789 billion in exposure at the end of 2013.
We made clear progress in each area of our three-pronged strategy: geographies, distribution and products. Growth in 2013 was driven by new markets, the multinational sector targeted by our World Agency unit, and new products. Europe showed positive growth signs, particularly in Eastern Europe, Germany, Italy, and in Spain with the Solunion joint venture. All regions contributed to strong operating income results through sound risk management and a selective and disciplined technical underwriting approach.
Our financial solidity and best-in-class risk management help our clients develop their business safely. And our industry leadership is recognized globally, though competition is fierce and expected to increase in the coming years.
What kind of challenges do you face ahead?
I see three main challenges: increased insolvencies; transforming our business to make us easier for customers to do business with us; and ensuring employees can meet the client demands for speed, quality and change.
After nearly six years of economic crisis and uncertainty, we believe growth opportunities are beginning to emerge, with increasing demand for trade credit insurance. In 2013, world GDP growth was limited to only more than 2.3 percent, its slowest pace since 2009. Many economies will begin to gain more traction in 2014, with world GDP growth expected to be up by 3.1 percent.
While the outlook for 2014 is generally positive, it is clear that many risks remain to the global recovery. In spite of the slight improvement in our insolvency outlook, the total number of insolvencies is expected to be 24 percent higher than during pre-crisis years. Therefore, we’ll continue to strengthen our product range and our distribution channels, while keeping a strong focus on sound underwriting management.
The second challenge is a common one across Allianz – how do we make it easier for our customers to do business with us? We’re taking a bottom up approach, gathering the best ideas from our employees on the front lines and implementing those innovations over the next few years.
And finally, all of this requires a highly skilled and engaged workforce. Our Allianz Engagement Survey scores which measure staff identification with the company have increased in the last few years but there is still more to do. We will continue to invest in our employees through more customized programs in the Euler Hermes Academy. And, due to the key role of our country CEOs, we will launch a specialized selection, onboarding and development program for them.
Our impact on the global economy coupled with these challenges make Euler Hermes an inspiring and interesting place to work!
