2015 new business presentation

Presented by: Janelle Foy – Senior Agent

(404) [email protected]

Accounts Receivable Management Solutions from

Euler Hermes

Euler Hermes Trade Credit Insurance Program

AGENDA:1. Your Business2. Who Is Euler Hermes?3. Why Credit Insurance?4. Credit Insurance Overview5. Credit Insurance Value

Proposition6. Case Studies

3Date | © Copyright Euler Hermes Presentation titleEuler Hermes North America Insurance Company | 400 Perimeter Center Terrace, Suite 150 Atlanta, GA 30346

CONFIDENTIAL

A Few Things I Would Like to Know about You…

Tell me about your business- Projected Sales- Margins- Bad Debt Write Off / Allowance for Bad Debt- Normal Terms / Number of Active Customers

Plans for growth- One year / Five years- How will you achieve that growth (organic/new business)

Explain your credit process- Size of Department- New Client Approval process- Turnaround time

Concentration Accounts? Financing? Credit Pains?

4Date | © Copyright Euler Hermes Presentation title

Who is Euler Hermes?


CONFIDENTIAL

Who Is Euler Hermes?

Largest Credit Insurance provider in the world, oldest in North America.- 120 years of experience- 34% Worldwide Market Share- >6,000 Employees – International network of Analysts, Underwriters and Risk Associates- 57,000 Policyholders worldwide- Subsidiary of Allianz Group

Global Presence- 6 Continents- 50 Countries- Serving over 200 Markets

Account Monitoring- 40,000,000 companies monitored in our risk database- 25,000 credit limits processed daily- 200,000 debt collections handled in 130 countries

Rated Standard & Poor AA-, AM Best A+ (superior) Explicit “Limits-Underwriter” Mono-Line Carrier


CONFIDENTIAL

Euler Hermes2014 Financial Highlights

2014 Financial Results2014 Revenue $2,713,000,000

Claims Paid 115,000$1,510,000,000

Loss Ratio 48.8%

Client Retention 90%

Total Global Exposure $1,000,000,000,000

*Results converted from Euro to Dollars


CONFIDENTIAL

Our Global NetworkPresence in over 50 countries across five continentsArgentina Germany Morocco SlovakiaAustralia Greece Netherlands South AfricaAustria Hungary New Zealand South KoreaBahrain India Norway SpainBelgium Indonesia Oman SwedenBrazil Ireland Philippines SwitzerlandCanada Israel Poland TaiwanChina Italy Portugal ThailandChile Japan Qatar TunisiaColombia Kuwait Romania TurkeyCzech Republic Luxembourg Russia UAEDenmark Malaysia Saudi Arabia United KingdomFinland Mexico Singapore United StatesFrance VietnamYour trade receivables management partner, where ever you do business.


Why Credit Insurance?

What do you really know about your clients?

9Date | © Copyright Euler Hermes Presentation title Euler Hermes North America Insurance Company | 400 Perimeter Center Terrace, Suite 150 Atlanta, GA 30346

CONFIDENTIAL

Accounts Receivable: The Only Major Asset Left Uninsured

What assets are insurable? What assets are insured?

• There is a greater chance that a business will experience a loss within their accounts receivable than any other asset.

Where does the A/R fall on a client’s Balance Sheet?

• Typically represents 40% to 70% of a company’s assets

• Most vulnerable to unexpected losses• Highly likely to be affected by business cycles• Provides cash flow for the business• Only under-leveraged asset• Few companies can effectively compete without

extending credit to their buyers

What amount of loss would seriously impact a company’s financial stability or annual profit? How many accounts have credit extended over that limit?


Bankruptcy Data“My customers aren’t in trouble ”

Bankruptcies are inevitable …regardless of business size

Failures come from increasingly unpredictable sources

Large bankruptcies can cause a “domino effect” with suppliers

http://www.brandsoftheworld.com/download/brand/18736.html

http://www.armstrong.com/

http://www.ual.com/homepage/0,1382,,00.html

http://www.fao.com/

http://www.kmart.com/home/index.jsp

http://www.polaroid.com/us/index.jsp?PRDREG=POL

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CONFIDENTIAL

Surprise Bankruptcies“I’ve worked with my customer’s for years”K-MartDate: January 2002 Assets: $17 BillionEH Exposure: >$90MM Co Age: 40 years

Target Canada (subsidiary of Target Corp.)Date: January 2015 Corp. sales: $73 BillionEH Exposure: >$35MM Canada Losses: $5 Billion

Once the largest retailer in the US, Kmart failed to invest in their stores and upgrade their supply chain management. An aggressive pricing strategy to compete against the now largest retailer, Walmart, created a liquity crisis. Kmart was the largest retail bankruptcy at the time.

Within two years of entering the Canadian market, Target Corp. decide to exit Canada by allowing the subsidiary to file bankruptcy. With no indication of an exit, the company was ordering goods and paying suppliers until the day of filing.

AFA Foods Inc.Date: April 2012 Revenue: $958 MillionTotal Employees: 850 Co Age: over 80 years

In March ‘12, ABC News reported on “Pink Slime”, a FDA approved beef additive used in 70% of US ground beef. This caused a public outcry making restaurants and grocery stores to pull the product from the shelves. Overall lack of demand for beef forced the largest beef producer into bankruptcy within 30 days. Another large processor is currently suing ABC for defamatory statements.

OW BunkerDate: November 2014 Revenue: $17 BillionEH Exposure: >$40MM Co Age: 35 years

In March 2014, the third largest company in Denmark filed for IPO with a $1B evaluation. Eight months later they filed bankruptcy, citing employee fraud and bad risk management.


CONFIDENTIAL

Top 10 largest U.S. Bankruptcies“ I only work with large companies ”

Rank Company Dated Filed

Total Assets Reason

1 Lehman Brothers Holdings 9/15/2008 $691 Billion Credit Crisis, not bailed out by Federal Government

2 Washington Mutual (WaMu) 9/26/2008 $327.9 Billion “Domino Effect” of Lehman Brothers, client panic

3 WorldCom 7/21/2002 $103.9 Billion Considered the largest case of corporate fraud in US History

4 General Motors 6/1/2009 $91 Billion Once the largest company in the US

5 CIT 11/1/2009 $71Billion Concentrated in high risk industry and risky expansion

6 Enron 12/02/2001 $65.5 Billion Internal fraudulent accounting

7 Conseco 12/17/2002 $61 Billion Aggressive acquisition

8 MF Global 10/31/2011 $41 Million Victim of the European Debt Crisis

9 Chrysler 4/30/2009 $39 Billion Ordered into bankruptcy by the Federal Government

10 Thornburg Mortgage 5/01/2009 $36.5 Billion Jumbo Loan Provider - Housing Crash and Credit Crunch

Seven of the ten largest bankruptcies in our country’s history occurred since 2008.


CONFIDENTIAL

Effect of a Bad Debt Loss

The table shows the amount of sales required to recover from a bad debt loss.

A $50,000 loss @ 8% profit margin requires you to generate an additional $625,000 to just to BREAK EVEN.

BAD DEBT AMOUNTProfit Margin

$10,000

$50,000 $100,000

$250,000

$1,000,000

2% $500,000 $2,500,000 $5,000,000 $12,500,000

$50,000,000

4% $250,000 $1,250,000 $2,500,000 $6,250,000 $25,000,000

6% $166,667 $833,333 $1,666,667 $4,166,667 $16,666,667

8% $125,000 $625,000 $1,250,000 $3,125,000 $12,500,000

10% $100,000 $500,000 $1,000,000 $2,500,000 $10,000,000

15% $66,667 $333,333 $666,667 $1,666,667 $6,666,667


How Do You Protect Yourself?


CONFIDENTIAL

Trade Credit Insurance

Protection against unexpected bad debt loss on domestic and foreign receivables due to insolvency, slow pay or political risk.

Insolvency - Ch. 7, 11, 13, bulk sale, receivership, general meeting of creditors, etc.

• Claims are filed within 10 days of receiving notice of insolvency from customer• Claims are paid within 30 days of the release of the ‘Schedule F’ of the bankruptcy

Protracted Default – i.e. Slow Pay• Slow pay claims must be filed within 90 days from the due date or 180 days from the

ship date, whichever is longer.• We act as collection company with a guarantee....if we don’t collect, we pay.• If we collect, than a collection fee is assessed, deductible or coinsurance do not apply.

Political Risk• For countries outside of United States, Canada and Puerto Rico• Coverage for non-payment due to currency issues, political unrest, expropriation, etc.


CONFIDENTIAL

Trade Credit Insurance - ExportExport Credit Insurance can provide your organization with increased sales, cost savings and protection from unexpected losses

Eliminates… Need for Letters of Credit• Significant savings over Letters of Credit• Covers shipments for the year• Open terms allows your buyer to keep their working capital line of credit available for other uses.

Borrow… • Export Receivables are no longer non-performing assets, but may become recognized collateral that can open up opportunities for better financing

Competitive Edge … • Offering open terms compared to your competition may be the difference

Political Risk… Export protection against:• Inability to obtain hard currency• Changes in Import/Export regulations• Contract frustrations due to Act of War• Foreign government non-payment

LETTERS OF CREDIT VS. INSURED TERMS

Annual Export Sales $10,000,000Gross Profit 10%Annual Gross Profit $1,000,000LOC Cost (1 – 3%) $200,000Adjusted Gross Profit $800,000Policy Cost $25,000Increased Gross Profit $175,000


Credit Insurance Value Proposition


CONFIDENTIAL

Why Trade Credit Insurance?

Key Drivers for purchasing Trade Credit Insurance:Catastrophic Risk Protection:•Prevents disruption to cash flow and protects one of the company’s largest assets•Cap exposure to bad debt loss•Reduction of risk to key account’s concentration levelsSales Expansion•Expand sales into riskier or new markets•Enhance a customer relationship by offering more favorable terms without additional risk•Grow with existing accounts, offer open terms to new accountsCredit Function•Provides a structure and discipline for credit decision making•FAST fact-based credit decisions of customers, prospects, industries and countries.•Consistent monitoring of credit risk allowing for up-to-date credit management decisions.

Export Sales Protection:•Offer for open terms for entire year and eliminate the need for letters of credit.•Political risk protection (currency, import/export changes, foreign government.•Borrow against you export AR with your bank line of credit.Bank Financing•Enhance lending relationship•Eliminate concern on high concentration with key accounts.•More capital at reduced rates, taking full advantage of A/RReduction of Bad Debt Reserves•Frees up working capital•Converts non-taxable deductible provisions into fully tax deductible insurance premium.


CONFIDENTIAL

Credit Management

Indemnifies policyholder against unforeseen bad debt losses due to commercial and/or political risks.

Integrates into your current credit practice, utilizing the power of a worldwide network of risk underwriters.

Part of Sound Risk Management Strategy

Manage Expected Risk“GOOD DECISIONS”

InformationYour Credit Expertise

Manage Unexpected Risk“PROTECTION”

InsuranceSelf-Insurance


CONFIDENTIAL

Customize Policy Structure

- Coverage – entire portfolio or logical segmentation- Named Accounts- EZ Cover- Discretionary Credit Limit (DCL)

Premium – 1 years- Industry, Buyers, Annual Sales- Rate is quoted as percentage of Annual Sales

Risk Sharing- Coinsurance – 90% Idemnity- Aggregate first loss (deductible)- Non-Qualifying loss

Past Due Reporting- 60 days past due – over $10,000

EOLIS On-Line Database- Proprietary financial information on 48+ million companies- Turnaround times:

− 1 day domestic (95%)− 4-7 days export (95%)

Policy is Dynamic – make it work for you!


Case Studies


CONFIDENTIAL

Sales Expansion – Policy pays for itself!(increase existing credit limit)

Operating FactsCompany: $40 Million in Sales Average A/R: $6 Million Gross Margin: 10% Account Turns Per Year: 8

ObjectiveCompany has a few large/new accounts that offer additional selling opportunities but reached their “comfort” exposure level. Interested in a credit risk protection program that would allow to safely increase sales.

$500,000$750,000$250,00010.00%

8$2,000,000$200,000

Gross ProfitA/R Turns

Increased RevenueIncreased Gross Profit

"Comfort" ExposureApproved Coverage

Additional Sales Opportunity

One Account Can Make A Difference


CONFIDENTIAL

Financing Export Growth

The benefit of credit insurance isn’t measured solely against the claims we pay, it’s measured in the goals we help our clients achieve.

Euler Hermes helps you make the right decisions based on the best available information. We help stimulate safe sales expansion, strengthen the balance sheet, protect & grow profits.

$10,000,00010.00%

$1,000,000$200,000$800,000$40,000$960,000

Export Sales & Letter Of CreditAnnual Export Sales

Gross ProfitAnnual Gross ProfitLOC Cost (1-3%)

Adjusted Gross ProfitPolicy Cost

Readjusted Gross Profit

Monthly A/R

Advance Rate

W/O Credit Insurance

Advance Rate

With Credit Insurance

Domestic $6,000,000

80% $4,800,000 85% $5,100,000

Foreign $2,400,000

0% $0 85% $2,040,000

$4,800,000 $7,140,000Additional Working Capital $2,340,000/mo


CONFIDENTIAL

Service Company First, Insurance Company Second

Protects against large credit losses. Provides increasing borrowing and purchasing power. Reduce your bad debt reserve. Credit Management Tool – Provides key account monitoring, and back-up support and assistance to your existing credit function. Allows for safe sales expansion into new and existing markets. Accommodates profitable cooperation between your sales and credit functions. Provides effective collection and account resolution assistance. EOLIS

Industry leading web based policy management tool 45 million companies monitored and risk graded 17,000 coverage limit requests processed each day


CONFIDENTIAL

We thank you for the opportunity to present our company and our services.

We look forward to becoming a trusted and important resource to your company.

2015 new business presentation

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