A pillar supporting future growth in Nordic Leasing

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1 E u l er H e r m e s A pillar supporting future growth in Nordic Leasing Ma y A company of Allianz

2 A pillar supporting future growth in Nordic leasing Euler Hermes, the world s leading trade credit insurance company, now launches Cover Lease, a product specifically aimed at the leasing industry, in the Nordics. It is the first product of its kind in the region and several indicators for the leasing industry seem to support the company s decision. A wide variety of factors continue to support growth in the leasing industry. Ranging from trends concerning the changing concept of ownership to the increasing importance of frequent upgrades in digital technology, these factors are even likely to strengthen rather than weaken in the years to come. This development leads to new questions being asked in and around the industry. For one thing, as the appetite for leasing continues to grow and while leasing as a concept branches out and becomes relevant for more and more sectors, the financial issues are moving towards centre stage. This is hardly surprising as the numbers go up but it does call for innovative thinking on how to handle related risks and concerns. Euler Hermes, a member of the Allianz Group, is the global leader in trade credit insurance with more than 100 years of experience and a global presence insuring global business transactions for 883 billion in exposure at the end of Based on recent experiences on the French market, where Euler Hermes is headquartered, the company has recently decided to launch a new insurance product Cover Lease aimed at the leasing industry in the Nordics. Cover Lease offers customers with big leasing operations a solution to insure cash flows from leasing incomes. If a company is insured with Cover Lease it means that if a lessee is unable to pay the leasing installments, the company will continue to receive payment, thus enabling a stronger focus on growth and lesser financial constraints. Matthew Wells, Euler Hermes Commercial Director in the Nordics, explains that the Nordic countries have been selected as only the second region after France and Germany for the launch of Cover Lease for a number of reasons: Lately we have received a significant number of requests from various leasing and financial organisations and feel confident that Cover Lease will meet the needs of potential clients in the Nordics. The product performs very well in France and the market indications here in the Nordics are positive so we look forward to establish Nordic countries: Equipment leasing NBV, excluding real estate ( mil.) Source: Carn, N. (2016): Leasing in the Nordic Countries based on National Associations & Leaseuropew Denmark Finland Norway Sweden

3 new partnerships in a new market. As risk experts, it is our job to help our customers achieve their business goals by putting our expertise and balance sheet at their disposal and we have great expectations for Cover Lease in the Nordics, says Matthew Wells while emphasising that it is quite possible that Cover Lease will be made available in other regions once the experiences from the Nordic launch have been analysed. New territory Industry reports testify to the strong growth in leasing. According to Leaseurope, an organisation representing member associations from the leasing industry in 34 European countries, overall new leasing businesses in Europe expanded by 11,2 pct. in This is significantly higher than the impressive 9 pct. growth in 2015 and the highest annual growth rate since An increasing number of companies in an increasing number of industries simply seem to prefer to lease rather than to own. As more companies gain valuable experiences with leasing, the initial insecurity connected with a novel concept tend to decrease but new causes for concern are uncovered. Euler Hermes believe, that while a lot of companies are reporting strong growth, a higher rate of non-paying or defaulting clients will emerge. This is in itself not surprising. With growth always comes an increase in risk as new territory is charted. In many industries, leasing still has not been properly put to the test and as that happens, difficulties for some lessees will materialize. And some of this territory is indeed new. The list of assets which are available on a lease basis is very long and continues to grow. Of course, there are some limits based on the value of the asset and how quickly its value decreases but as long as it is unique and easily identifiable it can at least theoretically be considered for leasing and this understanding is dawning on more and more companies. 80 % of leasing companies in Europe expect growth to continue. For the coming 6 months, based on december 2016 figures. Source: Leaseurope/Invigors Business Confidence Survey, December The importance of the latest model Denmark has recently experienced the highest growth rates in leasing of all European markets. In accordance with the global trend, several factors contribute to this development and it looks strong. Kent Dupont Walhøj, Vice President and Increasing Loan Loss Provisions across Europe Source: Leaseurope Index Q ,803 mil ,249 mil Director of Equipment and Real Estate in Nordania Leasing, one of Denmark s largest leasing companies, expects the growth to continue as he looks towards He emphasizes that the level of activity immediately before the financial crisis has been surpassed, and as capital remains cheap he sees strong, positive indications for the future of leasing in Denmark. It seems that it is becoming less important for a wide range of companies to actually own a given asset. As long as it is available when you need it, you would rather tie less money into its availability, he says. Leasing also seems to move higher up on the agenda for banks. Banks are by far the primary leasing agents on the Danish market and the banking industry is facing disruption to an even larger extent than many other sectors. As the future of the more traditional banking business looks somewhat uncertain, it becomes more attractive to offer leasing to clients to strengthen and deepen the relation. Most banks are finding this area interesting as a means to put a fence around their clients, stay relevant and add more depth to the relationship, says Kent Dupont Walhøj. 1,784 mil. He points to another essential trend when trying to grasp the changes in the leasing industry. As the pace of change in digital technology continues to quicken, it becomes far more important for companies to be able to change their equipment often. The latest versions of almost any kind of machinery performs better and has new functionalities 3

4 which can increase productivity and reduce waste. This development means that it becomes far more attractive to lease your equipment. The new machines typically deliver higher productivity and will for instance provide you with more and better data than the older models. When the economic outlook is encouraging and you have faith in the future of your business the case for leasing the latest model is very convincing, says Kent Dupont Walhøj. Diversified financing At SG Finans, a key player on the Nordic leasing market with Norwegian roots and dating back more than 50 years, Danish CEO Lars Rasmussen gives his perspectives on the Nordic leasing scene. With a growth of 13% in equipment leasing last year in Norway and Denmark, he echoes the point about growth in the market but also the importance of the latest edition of equipment when companies lease. Especially in agriculture, the technological development is happening so fast. Your economic success can depend on your access to the latest equipment, he says. He also testifies to the attractiveness of the Nordics from a leasing perspective as he emphasizes the importance of a high quality technological infrastructure. It is no coincidence that leasing plays such a key role in the Nordics. Our infrastructure continues to amaze other leasing professionals from around the globe. They are always impressed with how much we are able to offer our clients on a digital platform, Lars Rasmussen says. He sees the Nordic market as very mature. For SG Finans, Sweden has the biggest potential in the immediate future. The estimated share of total industrial investments in the region which are currently leased is pct. and Lars Rasmussen expects that number to grow in the years to Key features of Cover Lease: Non-cancellable cover available up to 60 months (five years) Indemnification of unpaid rents in case of non-payment % of the loss insured (excluding taxes) The insured risk has an Euler Hermes risk grade minimum of six (on a risk scale of 1-10 where 1 = lowest risk) Premium payable dependent on duration, rental repayment schedule and the type of lease come. Especially in the areas, which he bundles and labels high tech: If we look at server parks, medical scanners or even dentists chairs anything with a substantial price tag and a lot of digital technology the demand is already very strong and we are quite certain that this development will continue. The financial crisis also taught people a lesson and they are looking for ways to diversify their financing which makes leasing a very attractive option, he says. Euler Hermes monitors changes in the business world very closely. Their decision to launch a new financial services product aimed at the leasing industry in the Nordics is of course in itself an indication of the potential for future growth. The rapid take up of Cover Lease by Nordic lessors remains to be seen but it certainly seems that the stars are aligned. In the future we might begin to lease: FITNESS EQUIPMENT FARM ANIMALS OFFICE PLANTS SERVER PARKS WATER TREATMENT PLANTS ENTIRE FACTORIES 4

5 Denmark Sweden Norway Finland Euler Hermes Danmark Amerika Plads 19 DK-2100 København Ø Phone: Euler Hermes Sverige Döbelnsgatan 24 Plan 4 Box 729 SE Stockholm Phone: Euler Hermes Norge Holbergsgate 21 Postboks 6875 St. Olavs Plass NO-0130 Oslo Phone: Euler Hermes Suomi Mannerheimintie 105, 3rd floor FI Helsinki Phone: