Investments help lift ECIC profit 37pc

PUBLISHED : Thursday, 13 July, 2006, 12:00am
UPDATED : Thursday, 13 July, 2006, 12:00am

Government insurer also cites fall in claims and export rise for strong result

Fewer claims and a better return on its investments helped to boost net profits at government-owned Export Credit Insurance Corp (ECIC) to $117.92 million for the year to March, representing a strong 37.2 per cent annual growth on its total surplus.

'The better than expected investment income and claims expenditure were the key attributes of the satisfactory results of the ECIC,' said Cheung Kam-kay, commissioner of the ECIC.

For the financial year to March, the ECIC recorded an increase of $10.64 million in investment income, a decrease of $8.8 million in claims paid and a rise of $8.9 million in reinsurers' commissions.

'These three items together accounted for 88.6 per cent of the growth in total surplus, while the rest was contributed by the increase in premium income derived from the growth in insured business,' Mr Cheung said.

Insured business reached $35.55 billion during the year under review, up 9.8 per cent on a year earlier and premium income rose by 6.1 per cent to $156.73 million, Mr Cheung said, adding that the growth was due to an increase in exports.

Gross claims dropped by 46.8 per cent to $18.03 million, which Mr Cheung said was due to the slowdown in corporate failures in major markets.

Ranking the markets in terms of defaulters, Britain was first, accounting for 33.2 per cent of reported claims, followed by the US at 28.2 per cent and Germany at 7.3 per cent.

Greece was the standout surprise. It had few default payments previously but now ranked fourth, representing 6.7 per cent of claims, due to two payment default cases caused by the financial difficulties of a Greek-listed company.

'Despite the reduction in claims figures, exporters still have to monitor their credit risks,' Mr Cheung said.

'The claims cases in Greece highlighted that bad debt could also occur in non-mainstream markets and even large buyers,' Mr Cheung said.

Mr Cheung is positive about this year's economic outlook in the US, China, Europe and Japan.

'However, exporters are still subject to uncertainties such as high oil prices, interest rates hikes and intensified trade protectionism,' Mr Cheung said.

Established by the government in 1966, ECIC provides credit insurance cover for local small and medium-sized exporters against defaulting buyers.