ECONOMIC REPORT
Results of operations
Development of total revenue
Total revenue increased
Despite the fact that the market environment remains difficult, particularly in the field of old-age provision, MLP was able to increase total revenue to € 557.2 million (€ 531.1 million). This growth was primarily driven by the increase in commission income from € 486.9 million to € 514.3 million. It is important to note here that the € 20.0 million in revenue generated by the DOMCURA Group also contributed to this development. At € 21.4 million (€ 22.9 million), revenue from the interest rate business was slightly below the previous year. This was due to the low interest rate. Other revenue of € 21.5 million (€ 21.4 million) was also slightly below the previous year’s level.
New business in the old-age provision segment well below the previous year
German citizens continue to display reservations when it comes signing long-term contracts. This is primarily due to the ongoing low interest rate environment, as well as negative press regarding life insurers and their products. As a result of this, new business in the field of old-age provision declined to a brokered premium sum of € 3.5 billion (€ 4.1 billion). Occupational pension provision contributed 12% (12%) towards this. Revenue in the field of old-age provision declined to € 215.7 million (€ 239.7 million). This was largely as a result of the reduced level of new business.
Health insurance slightly above the previous year
Following declines in the last few years, we were able to record an increase over the previous year in the field of health insurance. Despite the reservations being displayed by many clients due to the ongoing negative press regarding private health insurance in the media, the revenue of € 45.9 million (€ 43.5 million) was 5.5% higher than in the same period of the previous year.
Non-life insurance and loans and mortgages performed distinctly positively
The non-life insurance segment displayed considerably positive development. Supported by the revenue contribution of the DOMCURA Group, whose revenues and earnings have been included in the scope of consolidation of the Group since the end of July, revenue in the field of non-life insurance increased to € 54.9 million (€ 34.6 million).
The volume of brokered loans and mortgages increased significantly to € 1.8 billion (€ 1.4 billion) and thereby reached a new record high. Revenue in this business segment displayed correspondingly positive development. At € 16.2 million (€ 13.6 million), it was significantly above the previous year’s level.
Wealth management continued to grow
Having already set a new record in the previous year, revenue in the field of wealth management increased again in the last financial year to € 166.0 million (€ 147.0 million). This increase can be attributed both to the positive development of our subsidiary FERI and to the good development of the division at MLP Finanzdienstleistungen AG. The Group’s assets under management were € 29.0 billion (€ 27.5 billion) on the balance sheet date.
Successful cost management
MLP successfully continued its cost management programme in the financial year. Without taking into account the additional expenses of the DOMCURA Group over the previous year, administrative expenses in the MLP Group (defined as the sum of personnel expenses, amortisation expenses and impairments, as well as other operating expenses) were € 262.3 million (€ 256.8 million). Alongside our expenses in connection with investments in the future, administrative expenses also include transaction costs for the acquisition of the DOMCURA Group. Including the DOMCURA Group, administrative expenses were € 272.8 million.
Pro forma EBIT (prior to acquisitions) was € 32.5 million (€ 39.0 million). EBIT including the DOMCURA acquisition was € 30.7 million. This is due to the seasonal nature of the DOMCURA business model, whereby the subsidiary generally records high revenues and earnings in the first quarter of each year and then records a loss from Q2 to Q4. As expected, however, overall earnings of the DOMCURA Group will be significantly positive. On a pro forma basis (prior to acquisitions), the EBIT margin of the MLP Group was 5.8% (7.3%). Productivity (defined as revenue per consultant in the financial services segment) was € 204,400 (€ 206,800).
Analysis of the change in revenue
Revenue increased to € 535.7 million (€ 509.7 million) in the reporting period, largely due to the € 20.0 million share of revenue of the DOMCURA Group. At € 21.5 million (€ 21.4 million), other revenue remained at the same level as the previous year. Total revenue rose to € 557.2 million (€ 531.1 million).
The increase in commission income from € 486.9 million to € 514.3 million had a positive effect on revenue development. At € 21.4 million (€ 22.9 million), interest income was slightly below the previous year. This was due to the low interest rate. The old-age provision segment continues to contribute the lion’s share of commission income, followed by wealth management. With an increase of 85.7%, other consulting services (which primarily reflect revenue from the extended real estate portfolio) recorded the strongest growth. At 58.7%, revenue in the field of non-life insurance also improved considerably. The following table provides a detailed overview of this:
Breakdown of revenue
| All figures in € million | 2015 | 2014 | Change in % |
| Old-age provision | 215.7 | 239.7 | -10.0% |
| Wealth management | 166.0 | 147.0 | 12.9% |
| Health insurance | 45.9 | 43.5 | 5.5% |
| Non-life insurance | 54.9 | 34.6 | 58.7% |
| Loans and mortgages | 16.2 | 13.6 | 19.1% |
| Other commission and fees | 15.6 | 8.4 | 85.7% |
| Total commission income | 514.3 | 486.9 | 5.6% |
| Interest income | 21.4 | 22.9 | -6.6% |
| Total | 535.7 | 509.7 | 5.1% |
Analysis of expenses
Commission expenses primarily comprise performance-linked commission payments to our consultants. They represent the largest single item under expenses. This item also includes the commissions paid in the DOMCURA segment. These variable expenses occur due to the remuneration of brokerage services in the non-life insurance business. Added to these are the commissions paid in the FERI segment, which in particular result from the activities in the field of fund administration. Variable expenses are, for example, accrued in this business segment due to remuneration of the depository bank and fund sales. Commissions paid increased to € 253.6 million (€ 233.6 million). This was largely due to the incorporation of the DOMCURA Group, as well as expansion of the fund administration segment at FERI and the greater revenue associated with this. The commission result was therefore € 260.7 million, following € 253.3 million in the previous year.
Interest expenses fell to € 1.9 million (€ 2.8 million) due to the ongoing downward trend in interest rates. Net interest was € 19.5 million in total, following € 20.1 million in the previous year.
Gross profit increased to € 301.7 million (€ 294.6 million) in the past year.
Slight increase in administrative expenses
Without taking into account DOMCURA and despite our investments in the future, administrative expenses in the reporting period increased only slightly to € 262.3 million (€ 256.8 million). These include expenses associated with the acquisition of the DOMCURA Group of around € 1.2 million, as well as higher other operating expenses due to the successful development of fund administration in the FERI segment. Including the DOMCURA Group, administrative expenses for the year increased to € 272.8 million.
Despite additional expenses in the DOMCURA segment, personnel expenses were only slightly above the previous year. Alongside this acquisition effect, the slight increase can be attributed to general salary increases. Total personnel expenses were € 113.5 million (€ 106.0 million). Among other things, these include € 98.1 million (€ 91.6 million) for salaries and wages, € 12.9 million (€ 12.0 million) for social security contributions and employer-based old-age provision allowances of € 2.4 million (€ 2.4 million). Depreciation/amortisation and impairments increased to € 15.1 million (€ 13.4 million). This increase can be attributed to an impairment on software, as well as a write-down on an investment property. Other operating expenses increased slightly to € 144.2 million (€ 137.4 million). Among other things, this was due to incorporation of the DOMCURA Group, including associated acquisition costs, as well as the higher expenses mentioned for fund administration in the FERI segment.
Breakdown of expenses
| All figures in € million | 2015 | In % of total expenses | 2014 | In % of total expenses | Change in % |
| Commission expenses | 253.6 | 48.0% | 233.6 | 47.4% | 8.6% |
| Interest expenses | 1.9 | 0.4% | 2.8 | 0.6% | -32.1% |
| Personnel expenses | 113.5 | 21.5% | 106.0 | 21.5% | 7.1% |
| Depreciation and amortisation | 15.1 | 2.9% | 13.4 | 2.7% | 12.7% |
| Other operating expenses | 144.2 | 27.3% | 137.4 | 27.9% | 4.9% |
| Total | 528.3 | 100.0% | 493.2 | 100.0% | 7.1% |
MLP Hyp once again displayed very encouraging business development in the last financial year. We hold a 49.8% stake in this company, which is operated as a joint venture together with the mortgage broker Interhyp. As a result of the excellent business development, our allotted earnings from the company increased to € 1.8 million (€ 1.1 million), thereby considerably exceeding the previous year’s earnings. This is reflected in the income statement under the item “Earnings from investments accounted for using the equity method”.
EBIT in decline
EBIT including the DOMCURA acquisition was € 30.7 million. Pro forma EBIT (prior to acquisitions) is € 32.5 million (€ 39.0 million). This is essentially due to the fact that despite the diversification of revenue streams the effect from the revenue decreases in the field of old-age provision has not yet been equalised by the other fields of consulting and that administrative expenses were slightly higher than in the previous year. This situation is compounded further by the seasonal nature of the DOMCURA business model, associated with incorporation of the DOMCURA Group only with effect from August in the previous year.
Finance cost impacted by one-off effects
The finance cost dropped to € -2.8 million (€ -1.3 million) in the last financial year. The increase in other interest and similar expenses to € -3.3 million (€ -2.0 million) had a significant influence on this development. This development can be attributed to interest due on a retrospective tax payment resulting from MLP’s international activities that were ceased back in 2007. At € 0.5 million (€ 0.7 million), other interest and similar income remained virtually constant. Earnings before tax (EBT) declined to € 28.0 million (€ 37.6 million) as a result of this. Income tax expenditure was € 8.2 million (€ 8.7 million). The aforementioned retrospective tax payment had a negative impact here. The tax rate increased to 29.2% (23.1%).
The following table provides an overview of the earnings structure, as well as the development of earnings and margins:
Structure and changes in earnings in the Group
| All figures in € million | 2015 | 2014 | Change in % |
| Total revenue | 557.2 | 531.1 | 4.9% |
| Gross profit ¹ | 301.7 | 294.7 | 2.4% |
| Gross profit margin (%) | 54.1% | 55.5% | |
| EBIT | 30.7 | 39.0 | -21.3% |
| EBIT margin (%) | 5.5% | 7.3% | |
| Pro forma EBIT ² | 32.5 | 39.0 | -16.7% |
| Pro forma EBIT margin (%) | 5.8% | 7.3% | |
| Finance cost | -2.8 | -1.3 | >-100% |
| EBT | 28.0 | 37.6 | -25.5% |
| EBT margin (%) | 5.0% | 7.1% | |
| Income taxes | -8.2 | -8.7 | -5.7% |
| Net profit | 19.8 | 29.0 | -31.7% |
| Net margin (%) | 3.6% | 5.5% | |
Group net profit declined to € 19.8 million (€ 29.0 million) in the financial year 2015. The diluted and basic earnings per share were € 0.18. This is based on the average number of outstanding shares for the past financial year (108,484,800 units). Relative to the 107,877,738 shares in the same period of the previous year, earnings per share are also € 0.18.
Simulating an acquisition of the new subsidiary DOMCURA with effect from January 1, 2015, Group net profit is € 23.3 million.
Group net profit
| All figures in € million | 2015 | 2014 | Change in % |
| Continuing operations | 19.8 | 29.0 | -31.7% |
| GROUP | 19.8 | 29.0 | -31.7% |
| Earnings per share in € (basic) | 0.18 | 0.27 | -33.3% |
| Earnings per share in € (diluted) | 0.18 | 0.27 | -33.3% |
| Number of shares in millions (basic) | 108,5* | 107.9 | 0.6% |
Appropriation of profits
At the start of the past financial year, we announced that we would be paying 50% to 70% of Group net profit to our shareholders in the form of dividends. We paid our shareholders € 0.17 per share in the form of a regular dividend for the financial year 2014. The total dividend paid was therefore € 18.3 million. We did not purchase any treasury stock during the reporting period.
The Executive Board and Supervisory Board will propose a dividend of € 0.12 per share to the Annual General Meeting on June 16, 2015. This corresponds to a distribution rate of 66% of net profit. The new shares issued within the scope of the capital increase in exchange for non-cash contributions carry full dividend entitlements for the financial year 2015.
