1. European Banking & Financial Forum – Praha, 1st April 2008
The US subprime crisis and credit insurance Clemens von Weichs, Chairman of the Board – Euler Hermes
European Banking & Financial Forum – Praha, 1st April 2008

2. Agenda The Euler Hermes Group
The US Subprime Losses and Consequences for the World Economy
Euler Hermes’ Economic Outlook
Credit Insurance : Negative and Positive Aspects

3. To be the preferred partner for the management of trade receivables
Euler Hermes’ aim is:
To be the preferred partner
for the management of trade receivables

4. About Euler Hermes
Worldwide leader in credit insurance with 36% global market share
Other services
Bonding & guarantees
Insurance against fraud
Export guarantee on behalf of the German government
A major player in
Financing of trade receivables
Trade debt collection services
Listed in Paris and a company of Allianz

5. Key Figures 2007 Global market leader in credit insurance
2,099 million euros consolidated turnover
56,000 clients worldwide
800 billion euros of business transactions protected worldwide
40 million companies monitored in the risk databases
25,000 credit limit requests per day
83% of credit limit requests processed in less than 48h
Presence in over 50 countries
6,000 staff members
AA- financial rating by Standard & Poor’s (outlook stable)

6. Euler Hermes Global Offices Network
Présence d’Euler Hermes
Euler Hermes presence

7. Agenda The Euler Hermes Group
The US Subprime Losses and Consequences for the World Economy
Euler Hermes’ Economic Outlook
Credit Insurance : Negative and Positive Aspects

8. From a US Subprime Crisis…
22 June 2007 : two funds investing in mortgage securities announce having financial difficulties
Major financial institutions start to announce major losses, to start with Countrywide in June
Major CEOs dismissed (UBS, Merril Lynch, Citigroup…)
Mistrust within the financial sector
End of a period based on :
Easy credit, stimulated by the development of securitization
Low interest rates
Dynamic world economic growth

9. … to a Financial Crisis…
Impact on the financial institutions
Assets depreciation
Equities fall down
Liquidity harder to find / Increasing credit risk spreads
To respect the latest international regulations (ie IFRS, Basel II…), financial institutions are forced to reconsider their capacity to grant credits and loans, with a direct impact on the property sector
Impact on the US $
The US $ at its lowest since the 70’s. Its value in Euro has constantly fallen since August 2007, losing 18% of its value within a year (10% in March 2008)
Trend accelerated by the difference in interest rates between the US and the Eurozone

10. … with Economic Consequences
Beginning of a credit crunch period
Credit conditions become tighter:
Consumers, impacting consumption, one of the main growth drivers both in the USA and in Europe
Companies, impacting investments and, probably on a medium term, productivity and profits
Prices are under pressure
Commodities prices increasing, to start with oil
Consumer goods following
Pressures on European wages
Impact on Exportations from Europe

11. Agenda The Euler Hermes Group
The US Subprime Losses and Consequences for the World Economy
Euler Hermes’ Economic Outlook
Credit Insurance : Negative and Positive Aspects

12. Soft landing of Eurozone economy, back around its growth potential
A further deceleration of world economy in 2008, with a soft landing, prior to a modest upturn in 2009
Expect world GDP growth of less than 3% in 2008 (3.9% in 2007), the lowest since 2003, and 3.1% in 2009, mainly in response to a small rebound in the US
Soft landing of Eurozone economy, back around its growth potential
Sharp air pocket in the US in H1 2008, driving GDP down to 1.0% for the year despite a small and gradual recovery in H2.
Sources : National accounts, Euler Hermes

13. All zones expected to be exposed to the global slowdown in 2008; emerging markets could be better off
US economy hit by high energy prices, the lagged effects of an inverted yield curve and a burst housing market bubble, despite a reactive monetary policy and an economic stimulus package
GDP growth
Weights (%)
2005
2006
2007
2008
2009
World
100,0
3,5%
4,1%
3,9%
2,8%
3,1%
USA
29,1
2,9%
2,2%
1,0%
2,0%
Japan
10,6
1,9%
2,4%
1,3%
1,7%
EMU
23,2
2,6%
1,6%
1,8%
Central and Eastern Europe
5,0
5,9%
6,8%
7,0%
5,3%
5,4%
Asia (excluding Japan)
13,9
8,5%
9,1%
9,2%
7,7%
7,4%
Latin America
5,5
4,5%
5,5%
3,8%
3,7%
Middle East and Africa
2,0
5,2%
4,3%
4,6%
Japan slowdown to continue due to tighter fiscal policy and evolved consumption fundamentals
Eurozone growth to decline on stronger euro, lower world demand
and credit tightening
Emerging countries expected to slowdown with decelerating world trade
Sources : National accounts, Euler Hermes GDP 2005 weighting at current exchange rates

14. Impact on Inflation and Unemployment Rates
Inflation Rate
Unemployment Rate
2007
2008e
2009e
Russia
9,0
10,1
8,2
Czech Rep.
5,5
6,0
3,3
India
4,8
5,2
4,5
China
Hungary
7,4
4,7
3,0
Brazil
4,2
4,4
4,0
Poland
3,8
USA
3,1
3,2
2,3
Slovak Rep.
2,5 UK
2,1
Germany
2,4
1,9
Eurozone
France
1,5
2,2
1,6
Japan
0,0
-0,2
0,4
2007
2008e
2009e
Poland
12,8
9,7
8,6
China
9,5
9,4
9,3
Brazil
Slovak Rep.
8,4
8,8
8,5
Germany
8,7
8,1
7,9
France
8,0
Eurozone
7,4
7,3
7,2
Hungary
7,1
India
7,0
Czech Rep.
6,6
6,2
5,8 UK
5,4
5,9
Russia
6,3
5,6
USA
4,6
5,5
Japan
3,9
3,8
3,7
Sources : national data, Euler Hermes

15. The major influential factors for this global scenario:
US reactive monetary and fiscal policy
Temporary pick up of inflation
Commodities prices to remain high
ECB status quo
Moderate adjustments in trade balances
A weak US dollar in H1 2008

16. Factors that could pressure this scenario:
Hard-landing scenario in the US
World credit crunch
Inflationnary pressures
Bubbles: housing market (US, UK, Ireland, Spain...) and stock markets (emerging countries)
Growing trade tensions (and influence of sovereign wealth funds)
Geopolitical events (oil and other commodities)

17. Agenda The Euler Hermes Group
The US Subprime Losses and Consequences for the World Economy
Euler Hermes’ Economic Outlook
Credit Insurance : Negative and Positive Aspects

18. Average Trade Growth in 2008 and 2009
5.0%
5.8%
11.6%
-0.3%
2.6%
4.6%
10.2%
7.4%
8.6%
6.1%
5.1%
6.4%
-2% 0% 2% 4% 6% 8%
10%
12%
14% 98 99 00 01 02 03 04 05 06 07 08 09
World trade volume (% change)
forecasts
Buoyant in (yearly average 8.1%), world trade growth should be less than 6% in 2008
But the demand from the emerging countries should remain dynamic for:
commodities
energy products
capital goods
Sources : National accounts, Euler Hermes GDP 2005 weighting at current exchange rates

19. EH Global Insolvencies Index likely to rise again in 2008
European insolvency to rebound by 5% as Eurozone’s GDP to decelerate under 2%
Global Insolvency Index foreseen up again 5% in 2008 (+5% in 2007)
Sources : national data, Euler Hermes. Note: the EH Global Insolvency Index countries account for 85% of world GDP
Strong rebound of US insolvencies expected in 2007 (+50%) because of weaker economy and mainly because of a reverse effect of the large fall seen in 2006 (due to tougher legislation introduced in October 2006)

20. 2008 Business Insolvencies Outlook per Country
2008
2007
Italy
27%
-50%
France 3% 5%
Hungary
20%
Canada 0%
Norway
19%
-1%
Finland 2%
China
15%
10%
Austria
-3% UK 8%
-15%
Sweden
Portugal 7%
11%
Singapore
-8%
Denmark
21%
Korea (South)
-11%
Greece 6%
-6%
Taiwan
13%
Belgium 1%
Germany
-14%
USA
50%
Hong Kong
-2%
-13%
Japan
Czech Republic
-10%
Global Insolvency Index
Switzerland
-4%
Western Europe
Poland
-36%
Spain 4%
Netherlands
Luxembourg
Brazil
-12%
-26%
Ireland
-5%
Slovak Republic
-37%
-54%
Turkey
Forecasts published in the EH Insolvency outlook 2007#2, based on local EH estimates with the latest official data available in November 2007
(next update May 2008)
Sources : national data, Euler Hermes

21. Credit Insurance : Negative and Positive Aspects
Credit tightening means:
Credit and loans terms will be more severe
higher credit risk spreads on top of the interest rates
 Increase default probability
 Trade credit is an interesting choice for companies
Companies do watch out for liquidity
Companies more sensitive to risk management
 Increased demand for risk management services

22. Euler Hermes Business insured. Success ensured.