Premiums alone increase by 4.5% driven by good growth in hard currency markets.
A solid new business level combined with an overall stable retention compensates the soft insured turnover evolution and declining prices in mature European markets.
France continues to suffer from low insured turnover volumes whilst Germany has begun to reverse the negative trend of previous quarters.
C. Operating income
Net combined ratio stands at 78.3% against 74.7% at the end of September last year, due to an increase in claims.
The net claims ratio stands at 51.1%, 2.9 points higher than last year. It includes a 9.7% net run-off ratio, compared to 15.6% at the end of September 2014. The lower run-off ratio is linked to a strengthening of reserves in emerging markets and a few mid-size claims in the Middle-East and Russia.
The net expense ratio stands at 27.3%, compared to 26.5% for the same period last year. The net expense ratio evolution is mainly linked to an adverse foreign exchange impact. Effectively, Euler Hermes’ cost mix is unfavourably affected by increases in US dollar linked currencies.
Net financial income reaches €79.4 million against €66 million in 2014, linked to a positive foreign exchange result of €7.2 million and higher realized gains on bonds and equity markets.
The operating income stands at €325.3 million at the end of September 2015 compared to €315.2 million for the same period last year, which was impacted by a €17.2 million impairment of the German headquarters booked during the third quarter 2014.
D. Investment portfolio
At the end of September 2015, the market value of Euler Hermes’ investment portfolio stands at €4,575.7 million. The €117.8 million increase compared to year-end 2014 is linked to positive operating cash flows partly offset by the dividend paid in June.
E. Net income
Net income is down by 2.5% compared to September 2014 and amounts to €226.8 million. This decrease is mainly due to a higher average tax rate and a €3.9 million impairment on an information company consolidated at equity method.
Our expectations for the global economy have been conservative since the beginning of the year. Since the summer, mature markets have remained reasonably stable, whereas we have seen clear signs of deterioration in emerging economies.
Adapting and adjusting to such situations is the bedrock of our profession. We have taken steps, and will continue to take them, in order to ensure greater than ever discipline on both pricing and underwriting.
Euler Hermes has proven its agility and resilience many times. We are confident that, despite temporary obstacles in some areas, our Group will continue to deliver quality to our customers and profitability for our shareholders.
II. Results for the third quarter of 2015