Dan North and Chris Baker will dive into the current and future state of the North American economy, how to protect your business from nonpayment, and talk about the latest industry trends in our upcoming webinar.

1. September 22, 2020
A Webinar presented by Euler Hermes
ECONOMIC TRENDS:
NAVIGATE THE
INSOLVENCY
STORM

2. INTRODUCTIONS
2
Navigate the Insolvency Storm
Dan North
Chief Economist,
Euler Hermes North America
Chris Baker
Regional Vice President
Euler Hermes North America

3. EULER HERMES: GLOBAL LEADER
IN TRADE CREDIT INSURANCE
3
Navigate the
Insolvency
Storm
Credit Insurance: Protection against
bankruptcy and slow payment losses
Ø Safer sales growth in the US or overseas
Ø Knowledge to better manage risk
Ø Improved borrowing options
Ø Credit function support
Ø Reduce bad debt reserves
Ø Get paid for what you sell
Ø Founded in 1893
Ø AA S&P Rating and A+ AM Best Rating
Ø Global leader in credit insurance with 34% market share
Ø Offices in 52 countries providing coverage in over 200 foreign markets
Ø Backed by blue-chip ownership of the Allianz Group
Ø 6,000 employees and 52,000 clients worldwide
Ø Insure over $150 Billion in US sales and over $1 Trillion globally.
Ø Pay 85,000 claims per year
Ø International Risk Database monitors over 85 million companies worldwide
cvd

4. Navigate the Insolvency Storm
THE U.S. OUTLOOK:
SHUTDOWN AND
RECOVERY
01
cvd

5. COVID-19 (LOG SCALE)
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Insolvency
Storm
frgSource: ourworldindata.com

6. EVEN BEFORE THE SHUTDOWN,
THE ECONOMY WAS FRAGILE
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Navigate the
Insolvency
Storm
Plus a trade war (remember?) which is still going on!
-16%
-12%
-8%
-4%
0%
4%
8%
12%
35
40
45
50
55
60
65
2015 2016 2017 2018 2019 2020
Durable Goods Orders (DGO), y/y and
ISM Manufacturing Index (<50 is
contraction)
DGO (R)
ISM (L)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
-100
-75
-50
-25
0
25
50
75
100
1980 1990 2000 2010 2020
Consumer Confidence survey:
future expectations - present situation
shaded areas
are recessions
wkly
-20%
-15%
-10%
-5%
0%
5%
10%
2006 2008 2010 2012 2014 2016 2018 2020
Index of Leading Economic Indicators, y/y
before March, lowest
since recession
Sources: IHS Global Insight. Conference Board, Fed, ISM, Census, Allianz Research

7. 7
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Insolvency
Storm
cumlSources: IHS, BLS, Allianz Research
UNEMPLOYMENT – NOT JUST
UNPRECEDENTED, IT’S
COMPLETELY DIFFERENT…

8. UNEMPLOYMENT – NOT JUST
UNPRECEDENTED, IT’S
COMPLETELY DIFFERENT…
8
Navigate the
Insolvency
Storm
Sources: IHS, BLS, Allianz Research bck

9. HOW LONG TO GET JOBS BACK?
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Insolvency
Storm
pceSources: IHS, BLS, Allianz Research

10. CONSUMPTION (70% OF ECONOMY)
AND INCOME BOTH SLOWING – INCOME
FALLEN OFF A CLIFF
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Insolvency
Storm
clfSources: IHS, BEA, Allianz Research

11. BUT THAT INCOME HAS FALLEN OFF A
CLIFF, PUTTING PEOPLE AND
BUSINESSES AT RISK.
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Insolvency
Storm
Source: WSJ, Nomura Securities Committee for a Responsible Budget, Census, Citylab
frgle

12. 12
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Insolvency
Storm
Sources: WSJ, Morning Consult
sme
THE CONSUMER IS STILL
FRAGILE

13. 13
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Insolvency
Storm
LOSSES IN SMALL BUSINESSES,
AND SMALL BUSINESSES CAN’T
LAST LONG
corpSources: WSJ, Womply, JP Morgan, Allianz Research

14. BIG BUSINESS:CORPORATE PROFITS
COLLAPSED, COULD FALL MORE, DEBT
IS ALARMING
14
Navigate the
Insolvency
Storm
Sources: IHS, Census, Bloomberg, IIF, Deutsche Bank Datastream, Worldscope, Allianz Research brpt

15. DELINQUENCIES,
BANKRUPTCIES, ON THE RISE
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Insolvency
Storm
Sources: IHS, Fed, US Courts, Alianz Research
rcp

16. RECAP
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Insolvency
Storm
• Even before Covid-19, economy was fragile.
• Response devastated economy
• Massive job losses
• Massive drops in consumption
• Now income has dried up
• Trouble making rent, mortgages? Hunger?
• Personal delinquencies and bankruptcies to rise
• But it’s not hopeless…
hpls

17. BUT IT’S NOT HOPELESS: WE HAVE
PROBABLY BOTTOMED. WE EXPECT
+3.7% GDP IN 2021, BUT…
17
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Insolvency
Storm
Sources: IHS Global Insight. NAR, Census, Conference Board, Allianz Research cvd

18. Navigate the Insolvency Storm
ONE MORE LOOK
AT COVID
02
bfr

19. THERE IS ALREADY AN ALARMING
RESURGENCE IN EUROPE AND CANADA
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Insolvency
Storm
vcn

20. A VACCINE IS THE KEY FOR ECONOMIC
RECOVERY, BUT IT’S PROBABLY A WAYS OFF
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Insolvency
Storm
Sources: NY Times, Pew trg

21. COVID IS HIGHLY CONCENTRATED IN SOME
GROUPS; THE OLD, ALREADY SICK, NURSING
HOMES (45% OF DEATHS)… WOULDN’T TARGETING
MAKE SENSE?
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Insolvency
Storm
Sources: NBF Economics and Strategy, WSJ, CDC, Census, Euler Hermes, Allianz Research cncl

22. Navigate the Insolvency Storm
CONCLUSIONS
03
bfr

23. CONCLUSIONS
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Insolvency
Storm
• Even before Covid-19, economy was fragile.
• Response devastated economy.
• Massive job losses which will take years to recover.
• Massive drops in consumption.
• Now income has dried up.
• Trouble making rent, mortgages. Hunger?
• Personal delinquencies and bankruptcies to rise.
• But it’s not hopeless: housing market, yield curve, leading indicators,
business confidence, retail sales all indicating a bottom.
• That’s positive but it does not mean the economy has recovered, it just
means it’s stopped getting worse.
• A long way to go to recover GDP.
• Biggest risk is more COVID, which has already permanently destroyed jobs
and businesses. Another shutdown could do more damage. Targeted
shutdowns would be best.

24. Navigate the Insolvency Storm
Q&AWITH DAN NORTH

25. Navigate the Insolvency Storm
CHRIS BAKER,
REGIONAL VICE
PRESIDENT
04

26. INDUSTRY RISK ASSESSMENT
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Storm
CATEGORY RISK LEVEL DEFINITION
1 Low Sound fundamentals. Very favorable or fairly good outlook
2 Medium Signs of weaknesses. Possible slowdown
3 Sensitive Structural weaknesses. Unfavorable or fairly bad outlook
4 High Imminent or recognized crisis
NA NA Information not available mainly because the industry barely exists in the country
low
medium
sensitive
high
Software&ITServices
Chemicals
Commodities
Computers&Telecom
Electronics
Automotive
Manufacturers
Agrifood
Paper
AutomotiveSuppliers
Pharmaceuticals
Construction
Machinery
Energy
HouseholdEquipment
Textiles
Retail
Services
Transport
Metals
TransportEquipment

27. PAST DUE REPORT (PDR)
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Insolvency
Storm
TOP 5 SECTOR INCREASES IN $
March 2020 vs. July 2020
TOP 5 SECTOR INCREASES IN #
March 2020 vs. July 2020

28. CLAIM ANALYSIS
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Insolvency
Storm
TOP 5 CLAIM SECTORS IN #
August 2019 vs. August 2020
TOP 5 CLAIM SECTORS IN $
August 2019 vs. August 2020

29. BANKRUPTCY CASE STUDY
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Insolvency
Storm
RED FLAGS: RISK RATING PROGRESSION:
Reduced demand
and backlog
High cost
structure
Weak commodity
prices
Heavy debt
obligation
SECTOR: ENERGY – OIL & GAS
Downgraded to
risk grade 6
June 2019Downgraded
to risk grade 8
Sept 2019 Filed for
bankruptcy
April 2020

30. BANKRUPTCY CASE STUDY
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Insolvency
Storm
WITH TRADE
CREDIT INSURANCE
WITHOUT TRADE
CREDIT INSURANCE
Get What
You’re Owed
Get Paid Fast
Reduce Cash Flow
Disruption
Assistance Through
Bankruptcy Process
WITH TCI VS. WITHOUT TCI

31. PROTECT FROM NONPAYMENT
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Insolvency
Storm
CFOs at least
moderately
concerned with
experiencing
nonpayment
CFOs reported
they had
experienced
nonpayment
Insolvencies
increase in US
Average
nonpayment
events over the
last 3 years

32. PROTECT FROM NONPAYMENT
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Navigate the
Insolvency
Storm
TRADE CREDIT INSURANCE
Protects against unexpected
bad-debt loss
Improves Working Capital
Strengthens the Balance
Sheet
Complements your existing
credit processes
(information)
Safely expand sales

33. Navigate the Insolvency Storm
Q&AWITH CHRIS BAKER