Consolidation in the market
For many years, the financial services market in Germany has been characterised by a high degree of heterogeneity and strong competition. In addition to this, several diverse new legislative regulatory requirements had to be overcome last year. The EU Insurance Mediation Directive, the Markets in Financial Instruments Directive (MiFID) and the new German Insurance Contract Law have required the sector to make significant investments and meet new requirements in terms of training. As a result of this, we saw the first signs of market consolidation among finance brokers in 2008. It is above all small and medium-sized insurance offices that will struggle to meet the new demands in terms of professionalism and financial strength in the long term and are looking for solutions. At the same time, however, new financial service providers also entered the market in 2008. And one finance broker was taken over by a foreign insurance group to strengthen its sales force in Germany.
The German financial services market is marked by cut-throat competition between the sales channels of banks, independent financial consultants, tied representatives, pyramid sales organisations and direct sales. Only the banks and independent financial service providers have been able to win additional market shares in the last few years. Indeed, sales of life insurance policies by independent financial consultants increased from 23% in 1999 to 29 % in 2007. Based on our own research, we believe that MLP is the largest independent financial adviser in the German market.
Market shares of the different sales channels for life insurance products in Germany
General statement on the competition and industry situation
MLP was able to further strengthen its market position in 2008, despite the fact that large investments had to be made to meet the new legal requirements on consumer protection. As underlined by studies, alongside the banks only independent financial consultants such as MLP still have good prerequisites to win future market shares in the severe cut-throat competition of the German financial services landscape. MLP, as the leading financial and investment adviser, is consistently aligned to the growth areas of the financial sector and is actively involved in market consolidation. A good example of this in the occupational pension provision segment in 2008 was the acquisition of TPC-Group GmbH, specialists in occupational pension provision concepts in Germany. And we have further expanded our sales force in our core market of Germany with the acquisition of the independent finance broker ZSH announced in October 2008 and completed at the start of 2009. ZSH has around 80 consultants who look after some 50,000 wealthy private clients as well as physicians and dentists in all questions of old-age provision and financial planning (see also events subsequent to the reporting date). As such, MLP is very well positioned against both the competition and the industry in general, laying the foundations for further growth.
Industry-specific factors impacting on MLP’s business development
in the industry
development in 2008
|Regulatory framework for old-age provision||+||+|
|Regulatory framework for health insurance||–||–|
|Trends towards saving old-age provision||+||+|
|Introduction of withholding tax as of January 1, 2009||0||+|
|Increased intensity of competition between sales channel for financial services||0||+|
|Changes in regulatory framework conditions (VVR, MiFID, VVG)||– –||–|