Situation within the industry and the competitive environment
Old-age pension provision and health insurance
In the first quarter of the current financial year the development in the market for old-age pension provision was negative. Following the positive effect in the first quarter of 2008 due to the final stage of the state-subsidized premiums for Riester pensions (“Riester step”), this development did not really come as a surprise. Yet according to information released by the German Insurance Association (GDV) there was still a decline of around 10% in new business even after taking the effect of the Riester step into account.
At the beginning of the year considerable interest was shown in the topic of “Home ownership Riester pensions” which since being introduced in 2008 have provided savers with the opportunity to use the state Riester subsidies to, for example, build or purchase a residential property for their own personal use as part of their old-age pension provision. According to the Federal Ministry of Labor and Social Affairs, over 40,000 people took up this state subsidy in the first two months after introduction of the scheme.
The market for private health insurance showed positive development in the first quarter. The rising number of treatment and care restrictions in the state insurance schemes has led to a notable increased level of interest on the part of consumers in switching to private health insurance. In addition, the strong public discussion surrounding the central health fund introduced on January 1, 2009 as well as the level of contributions to the state health insurance scheme are also contributing to a greater level of awareness by consumers of the requirement for better private health care provision.
The financial and economic crisis has also significantly affected the market for wealth management. During the first quarter of 2009, German investors continued to withdraw cash from investment funds. Fixed income and money market funds were particularly heavily affected, witnessing an outflow of funds of € 1.8 billion and € 1.6 billion respectively. Share-based investment funds recorded a net outflow of funds amounting to € 0.5 billion.
Inflow in /outflow from different types of funds in Germany in Q1 2009 (in € billion)
According to information issued by the German Association of Investment and Asset Management (BVI), investors had invested € 565 billion in retail funds at the end of the first quarter of 2009. At the same time last year this figure amounted to € 713 billion.
Since last year there have been increasing signs of a market consolidation within the German financial services sector. For years the market for the sale of financial services has been characterized by strong competition, yet also by great heterogeneity, and is in a state of fundamental change. This change was triggered by the wide range of regulatory amendments during the last two years, such as the EU brokerage guideline, the Markets in Financial Instruments Directive (MiFID) and the new Insurance Contract Law. These new framework conditions necessitated a high level of investment as well as creating new requirements with respect to training and further training within the industry. Competition for securing the services of well-trained and qualified financial consultants has also intensified.
MLP is actively participating in the market consolidation. We have further improved our sales strength in the German market through the acquisition of the independent financial broker ZSH which we first announced in October 2008 and completed at the beginning of 2009.