Results of operations
Nine months: Economic and financial crisis burdens earnings development
On a nine-month basis, total revenues fell by 15 % to € 345.3 million (€ 406.1 million) – the same period in the previous year having benefited from the final rise in the subsidised premiums for the “Riester” pension scheme which accounted for around € 40 million. Due to the effects of the economic and financial crisis earnings before interest and taxes (EBIT) fell from € 39.2 million to € 12.9 million. This figure includes exceptional and one-off expenses for capital market-relevant consulting services amounting to € 2.9 million in consequence of Swiss Life’s stake in MLP. In addition, there was a one-off charge amounting to around € 1.7 million on account of restructuring measures at subsidiaries. Net profit from continuing operations amounted to € 5.0 million (€ 18.8 million).
Total revenues (in € million)
MLP’s business in the third quarter picked up despite the continuingly difficult framework conditions. Total revenues rose by 8 % compared to the second quarter, climbing to € 113.9 million. (Q2 2009: € 105.9 million). As anticipated, total revenues fell slightly compared to the corresponding quarter of the previous year (Q3 2008: € 123.8 million), which was significantly less influenced by the far-reaching economic and financial crisis. At the same time, MLP considerably improved its profit situation: EBIT for the period July to September amounted to € 7.1 million and thus more than doubled compared to the previous quarter as well as to the corresponding figure of the previous year. Net profit from continuing operations also rose by over 100 %.
Earnings before interest and taxes (EBIT, in € million)
Rising revenues in non-life segments
The analysis of revenues in the third quarter shows growth in the areas of health insurance, non-life insurance as well as loans and mortgages. The continuing focus by many clients on increasing their risk protection led to an increase in revenues in non-life insurance of 25 % compared to the previous year to € 3.5 million (Q3 2008: € 2.8 million). In health insurance, revenues rose to € 10.4 million (Q3 2008: € 10.2 million). In the loans and mortgages business, revenues from commissions and fees increased by 40 %, climbing to € 3.5 million (Q3 2008: € 2.5 million). In this respect, MLP benefited from a heightened level of interest in property acquisition.
The restraint on the part of many clients with respect to medium and long-term investments continues to be reflected in the development of the old-age pension provision business as well as in wealth management – although both areas are showing a rising trend. In old-age pension provision, revenues rose to € 65.1 million compared to € 60.1 million in the second quarter. (Q3 2008: € 70.8 million). In wealth management, revenues increased from € 15.9 million between April and June to € 18.7 million in the third quarter (Q3 2008: € 19.4 million).
Development of expenses
In the first nine months of the current financial year the commission expenses fell largely in line with revenues from commissions and fees, decreasing by 15.7 % to € 109.9 million.
Due to the generally lower level of interest rates, both the interest income as well as interest expenses fell significantly from € 30.1 million to € 24.8 million and from € -15.9 million to € -9.9 million. MLP also improved the interest result which amounted to € 14.9 million (€ 14.2 million).
Thanks to the cost reduction programme that was initiated in the first quarter 2009 we were already able to reduce the fixed costs by the end of the third quarter which fell from € 221.2 million to € 212.9 million. Personnel expenses rose by 4.1 % to € 83.0 million due to acquisitions, general salary increases and one-off restructuring expenses (€ 1.5 million). In this respect, the quarters showed different developments. Whereas personnel expenses rose by 6.9 % in the first half year, we were able to reduce these by 1.5 % in the third quarter (see also section on “Personnel”). Scheduled depreciation and amortisation fell significantly, decreasing by 11.6 % to € 13.0 million. Other operating expenses also fell considerably. In the first nine months of 2008 they amounted to € 126.8 million but reduced to just € 116.8 million in the period under review, corresponding to a decrease of 7.9 %.
Cost reduction programme producing results
After adjustment of the fixed costs to take account of one-off restructuring expenses at subsidiaries amounting to € 1.7 million as well as acquisition-related cost increases (€ 4.2 million), the achieved cost reductions amounted to € 17.1 million or 7.7 %. We are thus on schedule with respect to our planned cost reductions. By the end of 2010 we intend to reduce the fixed cost base by € 34 million, of which € 24 million are to be achieved in the current financial year. In the first nine months we have achieved cost savings in almost all areas, particularly in training and seminar expenses, consulting and auditing costs and expenses for representation purposes.
We also significantly improved our financial result in the period under review. Following a figure of € –9.0 million in the same period last year, the financial result in the period under review came in at € –1.1 million. This improvement was mainly due to a dividend payment to the minority shareholders of Feri Finance AG that was lower than in the previous year (€ +5.5 million), higher interest income due to higher liquidity (€ +0.8 million) and lower interest expenses (€ +5.0 million).
Taxes on earnings in the period under review amounted to € 6.9 million (€ 11.3 million). The tax ratio increased from 37.6 % to 58.1 % and was mainly due to two special effects. The dividend payment to the minority shareholders of Feri Finance AG is not valued as a tax-recognised expense. In addition, in the second quarter 2009 we booked a liability for tax back-payments amounting to € 1.4 million following the completion of a tax audit for the years 2002 to 2006.
Apart from the already mentioned exceptions, the development of expenses in the third quarter was similar to the overall period under review.
In the first nine months MLP generated net profit from continuing operations amounting to € 5.0 million (€ 18.8 million).
In the period under review, after-tax earnings from discontinued operations (further explanations are provided in the notes) amounted to € –6.4 million (€ –4.1 million). This resulted in a Group loss of € 1.4 million (Group profit € 14.8 million). The basic and diluted earnings per share amounted to € –0.01 (€ 0.15).
Q3: Significant increase in earnings
The initiated cost reduction measures enabled MLP to significantly improve the result in the third quarter despite falling total revenues. In the continuing operations earnings amounted to € 5.1 million (€ 1.4 million). Earnings from discontinued operations also improved, coming in at € –0.4 million (€ –0.9 million). This, in turn, led to a significantly improved net profit figure in the third quarter which rose from € 0.5 million to € 4.7 million.
Earnings development of continuing operations
| All figures in € million | 9 months 2009 | 9 months 2008 | Change | ||
|---|---|---|---|---|---|
| Total revenues | 345.3 | 406.1 | –15.0 % | ||
| EBIT | 12.9 | 39.2 | –67.1 % | ||
| EBIT margin | 3.7 % | 9.7 % | – | ||
| Finance cost | –1.1 | –9.0 | 87.8 % | ||
| EBT | 11.9 | 30.2 | –60.6 % | ||
| EBT margin | 3.4 % | 7.4 % | – | ||
| Income taxes | –6.9 | –11.3 | –38.9 % | ||
| Net profit (continuing operations) | 5.0 | 18.8 | –73.4 % | ||
| Net margin | 1.4 % | 4.6 % | – | ||
Comparison of the actual and forecast business development
As we did not provide a quantitative forecast at the beginning of the year for the development of our total revenues and the result due to the financial and economic crisis, it is only possible to make a qualitative comparison of the actual and forecast business development. Our reserved assumptions concerning revenue development in MLP’s core areas of old-age pension provision and wealth management proved to be correct. In the first nine months of the current financial year our clients were very hesitant with respect to the conclusion of longer-term provision contracts and to investments in wealth management concepts. Our cost reduction programme is running precisely to schedule (see section on “Development of expenses”).
Assets under management at a new record high
Positive development in the capital market and light inflows lifted assets under management in the third quarter to € 12.5 billion (June 30, 2009: € 11.7 billion) – representing the highest figure achieved so far in the history of MLP. New business in old-age pension provision is also showing signs of a pick-up. Following € 0.9 billion and € 1.0 billion in the first and second quarters of 2009 respectively, the premium sum in the third quarter amounted to € 1.1 billion. On a nine-month basis this results in a new business figure of € 3.0 billion (9M 2008: € 4.2 billion), whereby the corresponding period in the previous year was significantly influenced by the so-called “Riester” step. The occupational pensions business area once again accounted for a larger portion of new business, contributing 9 % (full year 2008: 8 %).
24,000 new clients
In terms of new clients, the third quarter proved to be the strongest quarter so far of the current financial year – in which MLP welcomed 9,200 new clients. Overall, in the period from January to September MLP was able to gain more than 24,000 new clients, thus taking the total number of clients to 781,000. The number of consultants stood at 2,360 (June 30, 2009: 2,405).