OWINGS MILLS, Md., Aug. 21 /PRNewswire/ -- The number of U.S. business bankruptcies continues to rise in 2007, as the second quarter filings showed yet another dramatic increase in the number of businesses seeking protection from creditors. The increase continues to reflect the business insolvency forecast produced by leading accounts receivable insurer Euler Hermes ACI earlier this year.
According to the U.S. Bankruptcy Courts, 6,705 businesses declared bankruptcy in the second quarter of 2007. This number shows a series of upward trends, including:
-- A 7% increase over the first quarter of 2007
-- A 38% year-over-year increase from the second quarter of 2006
-- A 45% increase for the first half of 2007 in comparison to the first
half of 2006
"Businesses today are facing serious headwinds, including a slowing economy and an increase in the cost of doing business," said Euler Hermes ACI Chief Economist Daniel C. North, who earlier this year forecasted a 51% increase in business bankruptcies for 2007. North has said that the three most serious issues remain the effects of increased energy, raw material, and labor costs; the effects of monetary policy tightening by the Federal Reserve in 2004-2006; and the "decimated" housing market and its effects on consumers and businesses.
The housing market's recent effects on the financial markets have brought the seriousness of the situation to light, but North has been tracking -- and predicting -- the economic impact for nearly a year. "What first tipped me off was when median prices on existing homes fell for 10 consecutive months on a year-over-year basis, which is an unprecedented event since house prices almost never fall; they have never fallen for more than two months in a row in the 38 years that records have been kept," he said. "This is an obvious sign of a rapidly deflating asset bubble, the effects of which will continue to be felt for some time to come."
According to the Euler Hermes business failures forecast, a return to 30,000 business bankruptcies is expected in 2007. This follows a spectacular, but one-off, reduction in business failures in 2006, when the number of corporate insolvencies dropped by 50% due to a 2005 change in U.S. bankruptcy legislation. North said the disappearance of the impact of the change in legislation, coupled with the slowing economy and reduced profits, will bring the bankruptcy numbers to "more normal levels."
With business bankruptcy levels increasing, business leaders will need to be more vigilant regarding their B-to-B accounts receivable by utilizing accounts receivable management products and services, such as trade credit insurance and third-party commercial collections. For more information regarding Euler Hermes ACI products and services, visit http://www.eulerhermes.com/usa.
Euler Hermes ACI is North America's oldest and largest provider of trade credit insurance and accounts receivable management solutions and is the US subsidiary of the Euler Hermes Group. Headquartered in Owings Mills, MD, the company protects and insures more than $150 billion in US trade transactions annually. Additionally, Euler Hermes ACI provides a suite of receivables management services that includes commercial third party collections, receivables management outsourcing, and international collections. For more information, visit http://www.eulerhermes.com/usa.
Euler Hermes is the worldwide leader in credit insurance and one of the leaders in bonding and guarantees. With 5,500 employees in 49 countries, Euler Hermes offers a complete range of services for the management of customer receivables and posted a consolidated turnover of 2.01 billion euros in 2006.
Euler Hermes, a subsidiary of AGF and a member of Allianz, is listed on Euronext Paris. Standard & Poor's rates the group and its principal credit insurance subsidiaries AA-.
Press Contact:
Rick Ostopowicz
Euler Hermes ACI Public Relations and Communications Specialist
Phone: (410) 753-0652
Email: rick.ostopowicz@eulerhermes.com
These assessments are, as always, subject to the disclaimer provided below.
Cautionary Note Regarding Forward-Looking Statements: Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words 'may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue' and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz SE's core business and core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) the extent of credit defaults (vii) interest rate levels, (viii) currency exchange rates including the Euro-U.S. Dollar exchange rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and the European Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact of acquisitions, including related integration issues, (xiii) reorganization measures and (xiv) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences. The matters discussed herein may also involve risks and uncertainties described from time to time in Allianz SE's filings with the U.S. Securities and Exchange Commission. The Group assumes no obligation to update any forward-looking information contained herein.
Euler Hermes ACI
