reference document 2003 - Euler Hermes Kreditversicherungs-AG

Underwriting result
After allocation to the equalisation reserve
and allocation of investment income, the
Ordinary income
2003 2002 % change 2002
(pro forma) (reported)
Turnover 1,769,802 1,760,925 0.5% 1,419,613
Cost of claims excluding management expenses – 763,984 – 1,059,618 – 27.9% – 770,337
Gross operating expenses – 731,337 – 707,483 3.4% – 581,905
Reinsurance income (loss) – 92,463 41,529 ns – 3,838
Allocated investment income 43,840 68,448 – 36.0% 52,250
Change in equalisation reserve – 15,645 53,445 – 129.3% 15,784
Credit insurance underwriting result 210,213 157,246 33.7% 131,565
Net income from unallocated investments 33,739 5,566 ns 1,483
Employee profit sharing – 7,566 – 5,517 37.1% – 5,517
Elimination of inter-sectoral transactions 2,027 – 1,521 ns – 1,521
Ordinary income from credit insurance 238,413 155,773 53.1% 126,010
Financial income
The early part of 2003 was marked by the
war on Iraq while the later part of the year
saw a recovery in the financial markets
driven by signs of economic recovery in the
United States, hopes of an improvement in
Europe, and a dynamic Asian economy
driven by growth in China.
In the first half, after reaching a low in mid-
March with the Dow Jones and the
Eurostoxx down by, respectively, 10% and
17% since the beginning of the year, the
equity markets rallied on the back of what
seemed a rapid end to military operations
in Iraq. The rally became more pronounced
toward the end of the year as estimates of
corporate earnings were revised upward,
underwriting result for the credit insurance
business came to 210.2 million euros compared
with 157.2 million euros on a pro
due largely to the restructuring carried out.
2003 therefore ended on a positive note in
the equity markets, with gains of 18.1% for
the Eurostoxx, 25.3% for the Dow Jones
and 15% for the Nikkei.
In the bond market, where there was still
an underlying risk of deflation due to the
difficulty of evaluating the economic consequences
of the war on Iraq, interest rates
continued to decline and reached a low in
June. However, 10-year rates ended the
year virtually unchanged after a period of
very strong volatility.
All in all, financial income came to 77.6 million
euros, up by 44.4% on a reported
basis, and up by 4.8% pro forma (74.0 million
euros).
forma basis in 2002 and 131.6 million euros
on a reported basis in 2002.
Excluding interest expenses of 28.3 million
euros, relating mainly to the acquisition of
Hermes, net financial income amounted to
105.9 million euros, up by 14.1% on a pro
forma basis from 92.8 million euros in
2002.
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