ECONOMIC REPORT
Results of operations
Development of total revenue
Total revenue increased
In the past financial year, MLP was able to increase total revenue by 2.9% to € 628.2 million (€ 610.4 million) – the highest level since the outbreak of the global financial crisis in 2008. MLP benefited from the significant diversification of its revenue basis over the course of the past few years and recorded gains in all consulting areas with the exception of old-age provision. This growth was primarily driven by the increase in commission income from € 570.1 million to € 589.9 million. As a result of the ongoing low interest rate environment, revenue from the interest rate business remained below the previous year's figure at € 18.9 million (€ 20.5 million).
Old-age provision below the previous year due to market conditions
Due to market conditions, the old-age provision area remained below the previous year at € 208.1 million (€ 221.5 million). The premium sum of new business declined to € 3,408.8 million (€ 3,688.6 million). However, occupational pension provision enjoyed positive development and represented 15.0% of the premium sum at the end of the year, compared with 13.1% in the previous year. MLP is continuing to play a pioneering role in the transition to new guarantees. While life and pension insurance policies with classic guaranteed interest rate continue to account for a large proportion of all policies in the market, currently around 40%, only around 5% of newly brokered contracts at MLP are in this field. The proportion of new guarantees was 76%, while purely unit-linked contracts represented 19%.
Wealth management at new record level
The MLP Group recorded significant gains in the wealth management area with revenue rising by 14.5% to € 190.6 million (€ 166.4 million). Assets under management rose to € 33.9 billion (September 30, 2017: € 32.7 billion). This reflects significant gains both at our subsidiary FERI and in MLP's private client business.
Non-life insurance enjoys continued growth
The non-life insurance area was once again able to record growth in 2017. At the end of the year, revenue was € 109.9 million (€ 105.6 million). The portfolio of non-life insurance policies also enjoyed positive development. The premium volume received through the MLP Group rose to € 360.1 million (€ 350.2 million).
Health insurance at the previous year's level
At € 45.9 million (€ 45.8 million), revenue in the health insurance area remained at the same level as the previous year. MLP therefore recorded stable development, despite the reservations displayed by many citizens in terms of signing up for comprehensive private health insurance policies.
Real estate brokerage displaying the strongest growth
In the loans and mortgages area, revenue increased by 10.4% to € 17.0 million (€ 15.4 million) and thereby surpassed the record level of € 16.2 million recorded in 2015.
The real estate brokerage area, which has been developed since 2014, recorded the highest growth rates. This is included under Other commission and fees, which increased by 19.5% to € 18.4 million (€ 15.4 million).
Further optimisation of corporate structure successfully completed
In the past financial year, MLP completed the announced optimisation of its corporate structure. This led to one-off expenses of € 9.1 million. Administration costs (defined as the sum of personnel expenses, amortisation expenses and impairments, as well as other operating expenses) which also comprise the above one-off expenses this year, were € 282.1 million (€ 290.9 million).
Operating EBIT (before one-off expenses) increased by 33.0% to € 46.7 million (€ 35.1 million). Set against the background of one-off expenses, EBIT was € 37.6 million (€ 19.7 million). One-off expenses also had an effect on Group net profit, which was € 27.8 million (€ 14.7 million). The operating net profit, on the basis of which the Executive Board and Supervisory Board will submit their dividend proposal to the Annual General Meeting, was € 36.9 million.
Analysis of the revenue performance
Revenue increased to € 608.7 million in the reporting year (€ 590.6 million), mainly due to the increase in commission income from € 570.1 million to € 589.9 million which was substantially influenced by the rise in revenue in the wealth management area. Other revenue was € 19.4 million (€ 19.8 million). Following € 610.4 million in the previous year, total revenue rose to € 628.2 million.
Wealth management enjoys significant growth
At € 18.9 million, interest income remained slightly below the previous year (€ 20.5 million). This was due to the ongoing period of low interest rates. The old-age provision area continued to make the greatest contribution in terms of commission income with a share of 35.3% (38.9%), followed by the wealth management with 32.3% (29.2%) and non-life insurance with 18.6% (18.5%). The following table provides a detailed overview of this:
Distribution of revenue
| All figures in € million | Share in % | 2017 | Share in % | 2016 | Change in % |
| Old-age provision | 35% | 208.1 | 39% | 221.5 | -6.0% |
| Wealth management | 32% | 190.6 | 29% | 166.4 | 14.5% |
| Non-life insurance | 19% | 109.9 | 19% | 105.6 | 4.1% |
| Health insurance | 8% | 45.9 | 8% | 45.8 | 0.2% |
| Loans and mortgages | 3% | 17.0 | 3% | 15.4 | 10.4% |
| Other commission and fees | 3% | 18.4 | 3% | 15.4 | 19.5% |
| Total commission income | 589.9 | 570.1 | 3.5% | ||
| Interest income | 18.9 | 20.5 | -7.8% | ||
| Total | 608.7 | 590.6 | 3.1% | ||
Analysis of expenses
Commission income above the previous year
Commission expenses primarily comprise performance-linked commission payments to our consultants. They represent the largest item under expenses. This item also includes the commissions paid in the DOMCURA segment. The variable expenses result from the remuneration of brokerage services in the non-life insurance business. Added to these are the commissions paid in the FERI segment, which result from the activities in the field of fund administration in particular. In this business field, they are primarily accrued due to remuneration of the depository bank and fund sales. Against a backdrop of increased commission income, commissions paid were slightly above the previous year at € 309.3 million (€ 298.5 million). Net commission income therefore rose to € 280.6 million (€ 271.6 million).
Interest expenses fell to € 1.1 million (€ 1.7 million) due to the ongoing low interest rate environment. Net interest was € 17.8 million (€ 18.8 million) in total.
Gross profit (defined as total revenue less commission expenses and interest expenses) improved to € 317.8 million (€ 310.2 million).
Reduction in administration costs before one-off expenses
The administration costs of the MLP Group were € 282.1 million in the reporting year (€ 290.9 million). It is important to note that this figure includes one-off expenses accrued both in 2017 and in the previous year. Adjusted for these one-off expenses of € 9.1 million (€ 15.4 million), the administration costs amounted to € 273.0 million in the past financial year (€ 275.5 million). A significant percentage of the one-off expenses accrued in 2017 is recorded under the item Other operating expenses.
One-off expenses for further optimising the corporate structure by segment (all figures in € million)
| Segment | |
| Financial consulting | 0.2 |
| Banking | 5.4 |
| Holding | 3.6 |
| Total | 9.1 |
At € 123.2 million (€ 121.8 million), personnel expenses remained virtually constant. Among other things, these include € 106.7 million (€ 105.0 million) for salaries and wages, € 14.0 million (€ 14.3 million) for social security contributions and employer-based old-age provision allowances of € 2.6 million (€ 2.5 million). This item comprises a one-off expense of € 0.6 million. Scheduled depreciation and impairments fell to € 15.3 million (€ 24.0 million). The previous year's figure was largely influenced by one-off expenses. At € 143.6 million (€ 145.1 million), other operating expenses were below the previous year's level. This item includes around € 8.4 million in one-off expenses.
Breakdown of expenses
| All figures in € million | 2017 | in % of total expenses | 2016 | in % of total expenses | Change in % |
| Commission expenses | 309.3 | 52.2% | 298.5 | 50.5% | 3.6% |
| Interest expenses | 1.1 | 0.2% | 1.7 | 0.3% | -35.3% |
| Personnel expenses | 123.2 | 20.8% | 121.8 | 20.6% | 1.1% |
| Depreciation and impairment | 15.3 | 2.6% | 24.0 | 4.1% | -36.3% |
| Other operating expenses | 143.6 | 24.2% | 145.1 | 24.5% | -1.0% |
| Total | 592.5 | 100.0% | 591.1 | 100.0% | 0.2% |
MLP Hyp GmbH once again recorded a very pleasing business development in the financial year. We hold a 49.8% stake in this company, which is operated as a joint venture together with mortgage broker Interhyp. As a result of the excellent business development, our allotted earnings from this company increased to € 2.5 million (€ 2.1 million). This is reflected in the income statement under the item Earnings from investments accounted for using the equity method.
Significant increase in operating EBIT
Operating EBIT before one-off expenses increased by 33.0% to € 46.7 million (€ 35.1 million) in the financial year. This increase can be attributed to higher commission income. In addition to this, cost savings resulting from the efficiency programme initiated in 2016 had a positive influence on earnings. As announced, one-off expenses were accrued in connection with the further optimisation of the corporate structure. These were € 9.1 million, resulting in an EBIT of € 37.6 million (€ 19.7 million).
The finance cost dropped to € -1.2 million (€ -0.9 million) in the last financial year.
The following table provides an overview of the earnings structure, as well as the performance of earnings and margins:
| All figures in € million | 2017 | 2016 | Change in % |
| Total revenue | 628.2 | 610.4 | 2.9% |
| Gross profit ¹⁾ | 317.8 | 310.2 | 2.5% |
| Gross profit margin (%) | 50.6% | 50.8% | |
| EBIT | 37.6 | 19.7 | 90.9% |
| EBIT margin (%) | 6.0% | 3.2% | |
| Operating EBIT ²⁾ | 46.7 | 35.1 | 33.0% |
| Operating EBIT margin (%) | 7.4% | 5.8% | |
| Finance cost | -1.2 | -0.9 | -33.3% |
| EBT | 36.4 | 18.7 | 94.7% |
| EBT margin (%) | 5.8% | 3.1% | |
| Income taxes | -8.6 | -4.1 | >100% |
| Net profit | 27.8 | 14.7 | 89.1% |
| Net margin (%) | 4.4% | 2.4% | |
Earnings per share virtually doubled
Group net profit increased by 89.1% overall to € 27.8 million (€ 14.7 million). This was essentially due to higher commission income, as well as the positive effects of the efficiency programme initiated in 2016.
Net profit
| All figures in € million | 2017 | 2016 | Change in % |
| GROUP | 27.8 | 14.7 | 89.1% |
| Earnings per share in € (basic) | 0.25 | 0.13 | 92.3% |
| Earnings per share in € (diluted) | 0.25 | 0.13 | 92.3% |
| Number of shares in millions (basic) | 109.3 | 109.3 | |
Appropriation of profits
Our dividend policy is to pay 50% to 70% of Group net profit to our shareholders in the form of dividends. We paid our shareholders € 0.08 per share in the form of a regular dividend for the 2016 financial year. The total dividend amount paid was therefore € 8.7 million.
For the 2017 financial year we announced that we would compensate the one-off expenses accrued in connection with the optimisation of the corporate structure for our shareholders and submit our proposed dividend on the basis of operating net profit. On this basis, the Executive Board and Supervisory Board will propose a dividend of € 0.20 per share to the Annual General Meeting on June 14, 2018. This corresponds to a distribution rate of around 64% of operating net profit.
