Credit Insurance: A Business Solution 1 Credit Insurance: A Business Solution Pat Hudson Coface North America

Credit Insurance: A Business Solution Increasing sales and profits The primary focus of business strategy Getting Paid The most difficult function in business today Credit Insurance A solution for increasing sales and getting paid 2

Credit Insurance: A Business Solution “Getting Paid” Is the most difficult function in business today Virtually every aspect of a business is insured except the most important – the accounts receivable A large insolvency is more likely than a fire or theft or other major P&C loss Yet less than 25% of all companies insure their accounts receivable 3

Credit Insurance: A Business Solution What is Credit Insurance? A Credit Insurance policy guarantees policyholder will be paid for goods or services sold to its customers The policy insures commercial accounts receivables against non-payment. 4

Credit Insurance: A Business Solution Policy Benefits Protection against bad debt loss Increased sales Better borrowing position with insured receivables Credit information resource Collection services 5

Credit Insurance: A Business Solution Effective Utilization of Policy - Benefits Protection Against Bad Debt Loss Maintain internal credit review Credit insurance information resources Fast moving business Uses “Blanket Coverage” Uses “Online Automatic Approval System” Uses “Online Coverage Request System” to reach underwriters for immediate review 6

Credit Insurance: A Business Solution Credit Insurance as a Profit Center Credit insurance is the only insurance product that can MAKE money for its purchaser: Increased Sales Lower borrowing costs Replace costly letters of credit 7

Credit Insurance: A Business Solution Increased Sales Volume – Existing Customer Allowing for higher credit lines Example- Without Credit Insurance With Credit Insurance Credit Limit: $50,000 $100,000 6 turns per year: $300,000 $600,000 Margin on sale: 10% 10% Risk Potential: $50,000 $60,000 Gross Income: $30,000 $60,000 Full coverage: $50,000 Policy co-insurance: $10,000 Insurance cost (0.1% of sales): $6,000 Net “income” (with insurance) =$54,000 (gross income less insurance cost) Differential income ($54,000 - $30,000)= $24,000 8

Credit Insurance: A Business Solution Better Borrowing Position Credit insurance is major component of banking agreement – keeps rates down and borrowing line up Replace costly LC’s Credit Information Resource Worldwide information database Faster insurance decisions Collection Services Outsourcing – More cost effective Worldwide collection network 9

Credit Insurance: A Business Solution Key to Growth Ability to compete with larger companies for larger sales On export sales, ability to compete by offering open account terms Quick responses to orders Cost control Reduction in loss reserves Reduced borrowing costs Outsourcing collection services 10

Thank you 11