• The global economic climate remains challenging for exporters: 2017 saw 24 country risk rating downgrades, compared with just 18 upgrades.
  • Consolidated net profit jumped from €20.5 million to €185.9 million.
  • The value of insured transactions rose by 6.5%, despite a 7% fall in premium volume.
  • There has been a steady increase in the number of transactions for SMEs following the launch of new products.
  • Credendo has responded to the growing global demand for geopolitical risk coverage by increasing the capital of its subsidiary Credendo – Single Risk.

Country risk: upgrades and downgrades

Despite a broadly positive global economic environment, the number of downgrades of short-term political risk rating exceeded the number of upgrades in 2017. Most of the downgrades were announced during the first quarter of 2017, particularly for Sub-Saharan Africa, where 14 countries were downgraded. This was chiefly due to problems in the CFA franc zone, where liquidity and the economic situation have declined sharply in recent years owing to the collapse in commodity prices. However, in spite of this there were three upgrades in this region. Asia saw the highest number of upgrades, with six upgrades versus three downgrades. Latin America was given five downgrades and three upgrades, while the Commonwealth of Independent States received four upgrades and one downgrade. There were few changes for the Middle East and North Africa, with just two upgrades and one downgrade.

Nevertheless, there are various uncertainties that could compromise the current positive climate, such as a slowdown in Chinese growth, volatile commodity prices, a shift in investor risk perception, geopolitical developments and mounting trade protectionism.

The Middle East region is at the forefront of geopolitical developments. This region has seen the United States withdraw from the Iran nuclear deal and growing political tensions between Iran and Saudi Arabia which led to the blockade of Qatar by Saudi Arabia and its allies. Meanwhile, tensions surrounding North Korea eased somewhat following the summit between US President Donald Trump and North Korean leader Kim Jong Un.

The consequences of President Trump’s protectionist policy are now beginning to be felt, with an increase in tariffs on imports of steel and aluminium. Continued escalation could lead to a trade war and another collapse in international trade, despite the fact that last year, for the first time in six years, growth in world trade outstripped growth in the global economy.

Another major risk factor is the sharp increase in public debt in all regions of the world since 2014, particularly in Sub-Saharan Africa (debt had risen from 32.2% to around 45% of GDP at the end of 2017), the Middle East and North Africa (up from 26.6% to 42.3%).

Credendo’s results

“Credendo benefited from several positive trends in 2017. First there was an improvement in the group’s net loss ratio, which stood at 25% in 2017. We also saw a sharp rise in the number of SMEs among our Belgian export customers. This is an established trend which has been growing steadily since 2015”, said Dirk Terweduwe, Group Chief Executive Officer. “We also saw 4% growth in revenue from comprehensive short-term policies, even though the insurance market remains
challenging”, he continued. This translated as a solid net profit.

Key figures for 2017:

  • Consolidated net profit jumped from €20.5 million to €185.9 million.
  • The group has insured transactions totalling €85 billion EUR, an increase of €5 billion on 2016.
  • Last year, Credendo earned €342 million in premiums.
  • Equity increased from €177 million to €2.57 billion, and there is no debt.
  • The geographic distribution of outstanding risks between the different continents is as follows: European Union: 31%; Asia: 23%; Africa: 16%; other European countries: 15%; Central and Latin America: 10%; North America: 4%; Oceania: 1%.

Credendo continues to focus on customer relations

The risk analysis has been refined by adopting a new system which takes more account of sector risk in the debtor risk assessment process. This enhances the quality of publications intended for Credendo’s customers (Risk Monthly, Risk Insight, Country Risk Update and Sector Risk Report).

Credendo has been supporting SMEs for years by providing them with financing solutions for their international transactions. Credendo’s forfaiting product and buyer credit are ideal solutions for Belgian exporters looking to do business in emerging economies, enabling them to offer payment terms to their overseas customers.

Credendo has also launched a new surety bond product, the Credendo Surety Booster. This online platform makes it easier for brokers and customers to apply for surety bonds and ensures that they receive a quick answer. The portal was recently launched in Germany and is due to be rolled out in other countries, starting with Belgium.

Lastly, Credendo arranged a €40 million capital increase for its subsidiary Credendo – Single Risk. “The aim of the capital increase is to seize business opportunities arising from the single-risk insurance segment and respond to growing global demand for protection against geopolitical risks”, explained Dirk Terweduwe. It also allows Credendo to expand its European network.

Press contact

Nabil Jijakli
Group Deputy CEO
rue Montoyerstraat 3
1000 Brussels
Belgium
E n.jijakli@credendo.com
M +32 2 788 11 33