Returning Confidence FINANCE 4 GROWTH

Returning Confidence FINANCE 4 GROWTH

Who we are Allianz Group Global leader in insurance and financial services Leading Property and Casualty insurer globally 110,8 billion total revenues (2013) / 10,1 billion operating profit (2013) 83 million customers worldwide, products and solutions in insurance and asset management 1.361 billion third party assets under management (end 2013) 182% solvency ratio (2013) Present in in over 70 countries 148.000 employees worldwide Euler Hermes Global leader in credit insurance with 34% market share #1 Credit Insurer 2.5 billion consolidated turnover (+3.7% vs. 2012) 52,000+ clients worldwide Tracks companies active in markets representing 92% of global GDP 789 billion of business transactions covered globally Present in over 50 countries 6,000+ employees worldwide, incl. 1,500 risk experts Standard & Poor s AA- Standard & Poor s AA / Very strong Department / author 2

Benefits of Credit Insurance Allows you grow safely 1. Access to greater / improved lending facilities 2. Inclusion of export sales to a domestic facility with insurance 3. Ability to find new sales on competitive trading terms in export markets 4. Access to largest global network of proprietary risk intelligence in the Credit Insurance market Enhanced three way relationship with insurance providing an opportunity and the security to grow exports Allows you to grow your lending book securely 1. Ability to increase lending 2. Increase customer requirements through export capabilities 3. Security taken from EH s AA- S&P rating 4. Option to have assignment to the claims Department / author 3

Euler Hermes Simplicity focus on the Basics Basics Cover by default at 60% No credit limit requests No turnover declaration No requirement for historical loss details Fixed premium based on Turnover Band Minimal Administration Cover Optional grade requests Depending on Grade: o 0%, 60% or 90% o Basic ML or Enhanced ML Standard 60% indemnity for blind cover No need to apply for credit limits (innovative in the Credit Insurance world!) No requirement for previous bad debts to be supplied Department / author 4

Euler Hermes Simplicity focus on Pricing & Cover Pricing Turnover Band 1 Select estimated turnover band for the next 12 months Annual Policy ML Basic Buyer ML 60% Indemnity Enhanced Buyer ML 90% Indemnity Premium 100,000 to 500,000 50,000 5,000 20,000 4,310 500,001 to 1,000,000 75,000 7,500 30,000 5,050 1,000,001 to 1,500,000 100,000 10,000 40,000 6,620 1,500,001 to 2,000,000 125,000 12,500 50,000 8,100 2,000,001 to 2,500,000 150,000 15,000 60,000 9,770 2500,001 to 3,000,000 175,000 17,500 70,000 10,610 3,000,001 to 3,500,000 200,000 20,000 80,000 11,450 3,500,001 to 4,000,000 225,000 25,000 100,000 12,400 4,000,001 to 5,000,000 250,000 30,000 120,000 13,970 2 This provides the premium figure to pay 3 Ability to upgrade to a higher policy liability (and premium) as required 4 Maximum liability per individual buyer Department / author 5

Euler Hermes Simplicity focus on Export Markets All markets endorsed as standard Open account terms No prior export experience required Common payment length allowed for all markets Commercial risks covered Insured Export Markets Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Italy, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Kingdom, United States Department / author 6

Bad Debt and Insolvency Matters... 40% of a Company s assets are typically in the form of its outstanding sales ledger 7

Case Study - An Irish SME founded in 1982 Kildare-based Com-Plas packaging supplies plastics pots, punnets, buckets and bulk products, including a range of environmentally friendly biodegradable packaging, to the food, pharmaceutical and chemical industries. - Simplicity has given us the confidence to seek new customers and quote for new business that we might not have done in the past (Financial Director Lorraine Ledingham) - When Simplicity came along we were able to get up to 25,000 cover per customer with no questions asked, and up to 100,000 for our larger customers. (Financial Director Lorraine Ledingham) - In the past year we have already made a couple of claims as a result of customers going into liquidation. The claims process was all conducted via email and it all went very smoothly. (Financial Director Lorraine Ledingham) - Simplicity has given them the confidence to export their products in support of their growth plans. Department / author 8

Insolvencies could decrease by 2% worldwide but remain 10% above their pre-crisis levels Global business insolvencies: -2% in 2016 but still 10% above pre-crisis levels. DSOs increasingly used as a financing tool. Business insolvencies, annual growth in 2014 and 2015 Business insolvencies, 2015 vs 2003-2007 average Days Sales Outstanding Source: Euler Hermes Source: Euler Hermes Sources: Bloomberg, Euler Hermes Data takes into account listed companies only. 9

Prolonged period of uncertainty ahead, bouts of nervousness expected in H2 2017 Recession risk has been delayed, but growth remains depressed by uncertainty Economic forecasts UK United Kingdom Weight 2014 2015 2016 2017 GDP 100% 3.1 2.2 1.6 0.7 Consumer Spending 65% 2.2 2.5 2.5 1.0 Public Spending 20% 2.3 1.4 0.9 0.3 Investment 21% 5.9 3.5-0.6-2.3 Construction 9% 8.1 3.6 0.0-1.6 Business investment 10% 3.9 5.0-1.9-3.9 Stocks * -3% 0.4 0.1 0.3-0.1 Exports 30% 1.5 4.8 2.1 3.3 Imports 33% 2.5 5.8 3.2 1.3 Net exports * -3% -0.4-0.5-0.4 0.6 Current account ** -85-100 -107-114 Current account (% of GDP) -4.7-5.4-5.6-5.8 Employment 2.4 1.3 1.7 1.8 Unemployment rate 5.7 5.1 5.1 5.2 Wages 2.3 3.3 3.2 2.0 Inflation 1.3 0.0 0.7 2.5 General government balance ** -102-79 -81-80 General government balance (% of GDP) -5.6-4.2-4.2-4.1 Public debt (% of GDP) 88.2 89.2 88.0 88.0 Nominal GDP ** 1 822 1 870 1 920 1 953 Change over the period, unless otherwise indicated: * contribution to GDP growth ** GBP bn Sources: ONS, Eurostat, Euler Hermes forecasts Business nervousness has increased since Art. 50 was triggered (in March 2017?) Trickle down of Brexit vote impact Higher volatility Fragile business confidence Strong GBP depreciation Demand shock (slowing imports, consumption) Contraction of domestic investment Contraction of incoming Foreign Direct Investment Source: Euler Hermes 10

Firms payment behavior is expected to deteriorate Reversing decreasing trend in business insolvencies: expect +8.5% in 2017 Business insolvencies by sector as of Q1 2016, last 4Q y/y Several sectors are already suffering from deteriorating payment behavior Past dues as of Q2 2016(severity rates, 4Q/4Q y-1) Sources: ONS, Euler Hermes Sources: Euler Hermes proprietary data 11

Expect future headwinds for sectors Three main channels of impact for businesses: GBP depreciation (import cost), less investments (domestic and foreign) and the domestic demand slowdown Main channels of impact for sectors by the official EU exit (2019?) GBP Depreciation Automotive; Chemicals; Paper Aeronautics; Machinery and equipment; Agri-food; Retail; Textile; Pharma; Metals Construction; Utilities; Transport; IT services; Energy Less investments Energy; Chemicals; Textile; Retail; Automotive; Machinery and equipment; Metals Agri-food; Construction; Machinery and equipment; Aeronautics; IT services Transport; Metal; Pharma; Paper Domestic demand Slowdown Textile; Agri-food; Automotive; Construction Retail; Chemicals; Pharma; Household equipment; Metals; Machinery and equipment; Transport; IT services; Energy; Paper Aeronautics Sources: ITC, OECD, Euler Hermes Economic Research 12

The worst is yet to come in 2019 The economy is expected to remain relatively resilient by 2019, the year when a formal EU exit is expected Stay Leave Stay Leave Stay Soft Leave - exit with a FTA Hard Leave - exit w.o. a FTA Real GDP growth 1.8% 0.7% 1.7% 1.0% 1.7% 0.2% -1.3% Nominal GDP growth 3.3% 3.2% 3.3% 3.0% 3.2% 2.5% 1.2% Goods export gains (GBPbn) Services export gains (GBPbn) GBP trend Net investment from abroad (GBPbn) Firms' turnover (annual growth) 35 30 25 18 20-9 -30 10 6 12 3 14-5 -11 Stable Impact of a Brexit on the United Kingdom (2017-2019) 2017 2018 2019 ~5% depreciation > 5% appreciation ~2% depreciation > 5% appreciation > 10% depreciation > 20% depreciation > 50 < 10 > 50 < 10 > 50-60 -210 3.5% 2.0% 4.0% 1.0% 4.0% 1.2% -1.0% Firms' margins (pp) 0.5-1.0 1.0-1.5 1.0-1.0-2.0 Business insolvencies 3.0% 8.5% 1.0% 6.0% 0.0% 9.0% 15.0% Sources: ONS, Eurostat, Euler Hermes forecasts 13

Brexit checklist for Irish companies Does Brexit have an impact on your business with or in the UK? GBP depreciation Lower GDP growth in the UK (lower turnover growth and lower margins) Rising insolvencies in the UK Lower RoW investment in the UK EU tariffs on imports from the UK UK tariffs on imports from the EU Changes in regulation and additional administrative costs Restrictions on movement of people Restrictions on capital flows Restrictions on services exporting to the UK European companies importing from the UK having a branch/ subsidiary in the UK Impact Ongoing Ongoing Q4 2016 Q4 2016 Early 2019 with the EU exit Early 2019 Early 2019 Early 2019 Early 2019 Early 2019 Source: Euler Hermes 14

Country Risk Map at end of 2015 The balance of risk has shifted towards higher level due to severe hot spots 15

Europe will be go to region for Irish export growth Eurozone will perform above global average in 2016-2017 underpinned by improvements in private consumption and investment Large countries like US and China will see mixed performance with sizeable gains but below trend for import growth 16

Corporate risk Assessment The EH Grading system 1 2 3 4 5 6 7 8 9 10 Exceptional Very strong Strong Good Average Watch Weak Distressed Uninsurable Failures Virtually no risk of loss Minimal risk of loss Low risk of loss Below average risk of loss Average risk of loss Above average risk of loss Increased risk of loss High risk of loss Very high risk of loss Good credit grading of a company and/or sector low default probability Bad credit grading of a company and/or sector high default probability Copyright Euler Hermes 16/06/2017 17

Thank you for your attention www.eulerhermes.com michael.murtagh@eulerhermes.com