Significant events that affect business
Effects of the financial and economic crisis
The global financial and economic crisis left its mark on our business in 2008, in particular in the second half of the year. The turbulence in the capital markets and the uncertainty among clients regarding future economic development caused many investors and corporate clients to think twice before making long-term investment decisions. At MLP this led to significant drops in revenues and thereby also earnings, in particular in the areas of old-age provision, wealth management and financing. In these areas, our revenues dropped by a total of € 30.8 million, which had a negative influence on earnings (EBIT) of approximately € 19 million. In the field of occupational pension provision, we also had to absorb an unexpected loss of € 3.3 million at our subsidiary TPC-Group. This was due to corporate clients unexpectedly postponing occupational pension provision projects on account of the financial and economic crisis.
The financial and economic crisis, which became more acute quite dramatically in the third quarter of 2008, was the main reason for the fact that we had to revise the forecast made at the start of 2008 after the third quarter. We had originally assumed that we would be able to increase total revenues moderately and at least achieve an EBIT margin of 16 %.
Changes in the legal framework conditions
Alongside this dramatic change in the economic framework conditions, the regulatory environment in our sector also saw significant change in the last financial year. One aspect of the changes to the German Insurance Contract Law which came into effect in 2008 was improved client rights, which we, of course, welcome. However, the increased requirements for disclosing information and the additional transparency requirements led to one-off conversion costs and required us to make investments, particularly in our IT infrastructure. One-off expenses to implement the new rules were around € 6 million.
Special factors impair earnings
Two further special factors had a significant influence on our earnings last year. Due to the poor situation in the commercial property market, we had to record an impairment loss of € 2.5 million on a let office and administration building. We also had to form a liability for potential back taxes of € 3.8 million, as the legal situation changed to our disadvantage.
Special factors impair EBIT
Due to the fourth and final phase of the tax-privileged increase in premiums of the “Riester” pension, our business saw an extraordinary seasonal upturn in 2008. The increase in premiums was set up by clients in the first quarter of 2008, which had a positive effect on our old-age provision business.
At the end of 2007, one of our competitors was taken over by an insurance group. As such, MLP is now the only remaining independent financial adviser with a nationwide presence in Germany. This USP strengthens our competitive position.