By Paul Kunert2 December 2008
Euler Hermes, the largest credit insurer in the channel has
issued a profit warning after being hit by the bankruptcy of Woolworths and a
steep rise in claims that will drag down its profits for the year.
The firm which underwrites around 70% of credit provided in
the UK channel said this morning that it expects profits for the final three
months of 2008 to be in the region of €100m (£84.9m) to €110m.
Since the collapse of Woolworths last week Euler Hermes has registered
claims declarations on this risk largely in the UK and Germany which will weigh
heavily on its financials.
“After a full review of all outstanding credit limits, Euler
Hermes expects a global negative impact of 15 points on its Q4 loss ratio,” it
added.
This compounds “a general worsening of the claims’
environment in the last quarter 2008. Euler Hermes estimates a negative result
in Q4 2008 and reviews its outlook for its full year profit to between €100m to
€110m.”
A fall in consumer spending and tightening financial
conditions will continue to weigh heavily on the liquidity of corporates and
economies in general, Euler added.
“Euler does not expect any major improvement of the actual
claims environment in the coming months,” it claimed.
As revealed by MicroScope recently the cost of credit
insurance for resellers has doubled in the last year and with profit warnings
from Euler and a rise in claims across the board that price will only increase.
It was inevitable that premiums would continue to rise but
that was understandable in the current climate, said Eddie Pacey, director of
credit services for Europe at Bell
Microproducts
This point was echoed by Nick Tiltman, credit director at
Computer 2000 but he said resellers and distributors with a history of low bad
debt should not accept a rise willingly and negotiate.
