INVESTMENT: Credit Guarantee Weathers The Storm
Recent Western Cape Business News
“The past eighteen months have been the most volatile period in the fifty-four year history of Credit Guarantee,” comments Managing Director, Mike Truter.
Commercial claims soared from R182 million in 2008 to over R532 million in 2009, the majority of which were in respect of defaulting South African debtor companies. The largest of these was the amount of R60 million on the failure of a buying group in the household-goods sector. Substantial export claims were also paid on defaulting importers elsewhere in the world – the biggest being in respect of a transaction with a steel importer in the USA which resulted in Credit Guarantee paying an indemnity of over R40 million.
“It is clear that many of our clients would not have survived the recession had they not insured their trade debt risk against non-payment,” continues Truter. “But, despite the prevailing economic cycle, we still paid ‘no-claim’ bonuses exceeding R55,1 million to clients on the domestic front and R13,5 million to export clients, indicating that it was not all ‘Armageddon’.”
According to Truter, Credit Guarantee has weathered the storm particularly well and ended the year with an underwriting deficit of only R23,76 million, significantly lower than had been anticipated.
“We have emerged with a very sound balance sheet – our solvency margin standing at 63.7% at year end which is well in excess of the statutory minimum of 15% and significantly higher than the 48.9% it stood at in 2008. Our international solvency margin is also very healthy at 79.7% (70.8% in 2008).”
“Indications are that the worst of the economic downturn may be behind us, both locally and internationally but we are still expecting to entertain high numbers of claims arising from business transactions entered into in 2009,” concludes Truter.
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