Euler Hermes International Insolvencies Outlook - A remarkable acceleration in business insolvencies

    PARIS, France, June 4 /CNW Telbec/ - Number one credit insurer Euler
Hermes is forecasting a 35% increase in corporate worldwide insolvencies for
2009, after +27% in 2008. This dramatical rise is the consequence of the
financial and economic crisis.
    "In the current recessionary economic environment, we will witness a
sharp worsening of the insolvency trend everywhere in the world, at least up
to the end of 2009. We expect our Global Insolvency Index to rise by 35%,
stated Karine Berger, head of research, Euler Hermes. As for next year, it is
unlikely that the levels of business insolvencies will abate: they may stop
rising in some countries, but the very light winds of recovery we anticipate
will not save many more businesses in 2010 than they will in 2009."

    2008: a significant 27% increase in the Global Insolvency Index

    In its latest International Insolvencies Outlook, which is published
twice a year, Euler Hermes gives a detailed description of registered and
expected business failures for 29 countries. The Euler Hermes Global
Insolvency Index, which reflects the change in business insolvencies across
the globe (see "our methodology" at the end of the document), rose sharply by
27% in 2008 (against our forecast of +25% in the last edition of Euler Hermes
Insolvency Outlook in November 2008). The trend of acceleration in
insolvencies began in 2007 (+4%), due to a growing number of countries already
hit by an increase in business bankruptcies: the US (+44%), Japan (+6%),
France (+6%), Spain (+3%), Ireland (+3%) and Denmark (+21%). The slowing in
the world economy in the first half of 2008 (in a difficult environment of
exploding commodity prices), and then its abrupt and violent collapse in the
second half of the year, brought a rapid deterioration in business finances,
an acceleration in payment defaults and in the end a surge in insolvencies,
especially in the last quarter. While the scenario was almost the same in all
the major countries, except Germany, it took an exceptional turn in a number
of countries, such as Spain, where insolvencies rose by 187%, Portugal (+67%),
Ireland (+113%), the UK (+31%), Italy (+45%, Denmark (+67%) and in the United
States (+45%).

    A record year for insolvencies in 2009

    After a very depressed first quarter of 2009, in line with the end of
2008, the major global recession taking shape for the whole of 2009 - the
biggest ever seen since the end of the Second World War - is forcing
businesses into a long and painful process of adjustment. By prolonging its
duration and spreading progressively to most sectors of activity, the
contraction of the economies of the developed countries and at best the sharp
deceleration in the emerging economies threatens to accentuate the rise in
insolvencies. This has already been confirmed over Q1 2009, with yr/yr
increased in excess of 15% in France, Austria and Switzerland, 20% in Belgium,
30% in Portugal, 40% in the UK, and even worse situations yet, with a doubling
of insolvencies in Ireland and Denmark, and even a tripling in Spain. With
some countries are moving towards new insolvency records, the Euler Hermes
Global Insolvency Index should rise very significantly in 2009, increasing by
35% on annual average.
    "For numbers of businesses that have drawn heavily on available cash in
order to outlast the shock of the last three quarters, it only needs a few
more months of empty order books or failing sales to send them on their way to
insolvency, said Karine Berger. On this point, we have seen a genuine change
at work in the recent months: whereas, in our last survey of global
insolvencies, in autumn 2008, we could state that the two major sectors hit by
the shock were finance and construction, we now see the main part of business
insolvencies in industrial sectors: automotive, chemicals, intermediate goods
and telecommunications. Retailing, wholesaling and transport are also feeling
the full brunt of the crisis. Alongside this, the average turnover per
business insolvency has risen greatly."

    Further explanations

    In many countries, there is a close correlation between the business
cycle and insolvency figures. Generally, it takes GDP growth of 2% to 3% to
stem the rise in insolvencies, and there is a very high elasticity of
insolvencies to growth. A GDP growth reduction of 1 percentage point implies a
5% to 10% increase in insolvencies. In fact, the slowdown in growth posted in
2008, below the level generally needed to keep the number of insolvencies just
stable, was accompanied by a fairly widespread, and upwards, trend reversal in
the number of business insolvencies. Over the long term, different countries
have enjoyed very different average rates of growth, and this is reflected in
diverging long-term insolvency trends. Thus, from 1991 to 2005, insolvencies
fell by half in the US and the UK, but remained fairly steady in France and
rose by a factor of 4.5 in Germany. Over the same period, growth averaged 3.3%
in the US and 2.8% in the UK, compared to 1.9% in France and 1.3% in Germany.
    Besides being affected by cyclical fluctuations, business insolvency
figures can experience large variations due to changes in the provisions
governing new business creations (because of the higher insolvency risk for
start-ups) and even more changes in laws governing insolvency procedures. As
in Slovakia in 2005, the change in the US bankruptcy legislation in October
2005 triggered a wave of anticipatory insolvencies in that country followed by
a sharp fall in insolvencies in the first quarter of 2006, resulting in marked
volatility in the annual US figures for 2005, 2006 and 2007.

    Statistics per country
                     % of     % of Euler
                     World      Hermes
                    GDP (*)     Global
                               Index (*)        2008             Forecasts
                                           Number    Change   2009      2010
    USA               26.2       31.7      43,546       54%     45%      -4%
    Canada             2.7        3.3       6,164       -2%     10%       5%
    Japan              8.4       10.2      15,646       11%     15%       5%
    Germany            6.4        7.7      29,291        0%     19%      11%
    France             5.0        6.0      57,650       15%     30%      10%
    Italy              4.0        4.9       8,800       45%     31%      15%
    Spain              2.8        3.3       2,528      187%     58%      -3%
    Netherlands        1.5        1.8       4,635        1%     75%      10%
    Belgium            0.9        1.1       8,472       10%     18%       5%
    Austria            0.7        0.9       6,315        0%     15%       7%
    Portugal           0.4        0.5       3,344       67%     30%      20%
    Finland            0.5        0.6       2,919       14%     32%       4%
    Greece             0.6        0.7         563       10%     15%      11%
    Luxembourg         0.1        0.1         583      -12%     15%       4%
    Ireland            0.5        0.6         773      113%     55%      -8%
    UK                 5.2        6.3      29,994       31%     56%      11%
    Denmark            0.6        0.7       3,709       54%     40%      -9%
    Sweden             0.9        1.1       6,298        9%     35%       5%
    Norway             0.8        0.9       3,637       28%     66%      -5%
    Switzerland        0.8        1.0       4,221       -2%     16%       4%
    Poland             0.8        1.0         430      -10%     26%      13%
    Hungary            0.3        0.3      11,181       15%     30%      15%
    Czech Republic     0.3        0.4       1,110       -3%     28%       5%
    Slovak Republic    0.1        0.2         582      -27%     55%     -11%
    Lithuania          0.1        0.1         928       53%     40%      -5%
    Latvia             0.1        0.1       1,226       21%     50%     -10%
    Estonia            0.0        0.0         429      112%     40%      -5%
    Brazil             2.5        3.1       2,243      -18%     -8%     -10%
    China              6.2        7.5       4,555        5%     10%       5%
    Taiwan             0.7        0.9         805      -23%     18%      -5%
    Korea (South)      1.8        2.2       2,735       19%     25%      -5%
    Hong Kong          0.4        0.5         468        3%     71%       6%
    Singapore          0.3        0.4         132       25%     37%       4%
    Sources :
    national figures, Euler Hermes forecasts

    Our methodology

    To overcome the heterogeneous nature of national statistics and
circumstances, we employ the change in insolvencies over time rather than
their absolute numbers. For each country, we have calculated an insolvency
index, using a basis of 1997=100. We have then constructed our Global
Insolvency Index (GII), which is the weighted sum of the national indices.
Each country is weighted according to its share of the total GDP (at current
exchange rates) of the countries included in our study, which accounts for
more than 80% of world GDP at current exchange rates for 2007.
    The detailed, country by country analysis of the insolvencies is
featuring in the International Insolvencies Outlook No. 1 2009, available on
request at Euler Hermes.

    Euler Hermes is the worldwide leader in credit insurance and one of the
    leaders in the areas of bonding, guarantees and collections. With 6,200
    employees in over 50 countries, Euler Hermes offers a complete range of
    services for the management of B-to-B trade receivables and posted a
    consolidated turnover of (euro)2.2 billion in 2008.

    Euler Hermes has developed a credit intelligence network that enables it
    to analyse the financial stability of 40 million businesses across the
    globe. The group protects worldwide business transactions totalling
    (euro)800 billion.

    Euler Hermes, subsidiary of AGF and a member of the Allianz group, is
    listed on Euronext Paris. The group and its principal credit insurance
    subsidiaries are rated AA- by Standard & Poor's.

    These assessments are, as always, subject to the disclaimer provided

    Cautionary Note Regarding Forward-Looking Statements: Certain of the
statements contained herein may be statements of future expectations and other
forward-looking statements that are based on management's current views and
assumptions and involve known and unknown risks and uncertainties that could
cause actual results, performance or events to differ materially from those
expressed or implied in such statements. In addition to statements which are
forward-looking by reason of context, the words 'may, will, should, expects,
plans, intends, anticipates, believes, estimates, predicts, potential, or
continue' and similar expressions identify forward-looking statements. Actual
results, performance or events may differ materially from those in such
statements due to, without limitation, (i) general economic conditions,
including in particular economic conditions in the Allianz SE's core business
and core markets, (ii) performance of financial markets, including emerging
markets, (iii) the frequency and severity of insured loss events, (iv)
mortality and morbidity levels and trends, (v) persistency levels, (vi) the
extent of credit defaults (vii) interest rate levels, (viii) currency exchange
rates including the Euro-U.S. Dollar exchange rate, (ix) changing levels of
competition, (*) changes in laws and regulations, including monetary convergence
and the European Monetary Union, (xi) changes in the policies of central banks
and/or foreign governments, (xii) the impact of acquisitions, including
related integration issues, (xiii) reorganization measures and (xiv) general
competitive factors, in each case on a local, regional, national and/or global
basis. Many of these factors may be more likely to occur, or more pronounced,
as a result of terrorist activities and their consequences. The matters
discussed herein may also involve risks and uncertainties described from time
to time in Allianz SE's filings with the U.S. Securities and Exchange
Commission. The Group assumes no obligation to update any forward-looking
information contained herein.

For further information:

For further information: Raphaele Hamel, Press relations, Euler Hermes
group, +33 (0)1 40 70 81 33,

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