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Dear ladies and gentlemen, welcome to the publication MLP results Q3 2018 telephone conference. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Mr. Berg, who will lead you through this conference.
Yes, thank you very much, and good afternoon, ladies and gentlemen. A warm welcome to our 9-month financial results conference call. We very much appreciate you taking the time to join our call. With me this afternoon is our CFO, Reinhard Loose. Before starting the Q&A session, Reinhard will comment on our business development in Q3 and in the first 9 months. Reinhard's comments will be based on the presentation we published this morning and which is available on our website. Now I would like to hand over to Reinhard.
Thank you, Jan. Good afternoon, ladies and gentlemen. Allow me to personally welcome you to the presentation of our results after the first 9 months. The result shows the following. 2018 has been recognizable positive to date and we are very satisfied, in particular, with the third quarter. We are continuing our growth course. In the first 9 months, total revenue rose to a new record level. Revenue development from July to September proved particularly dynamic.We achieved gains in all fields of consulting, both in this third quarter and the first 9 months overall, above all in those areas which we have strategically developed and expanded over the last few years. After 9 months, we are also above the figure from the same period in the previous year in terms of our earnings, largely thanks to the third quarter, in which we virtually doubled our operating EBIT. We are, therefore, happy to reaffirm our ambitious outlook for 2018. Despite continued higher investments in the future, EBIT is expected to reach the 2017 operating EBIT level. Total revenue has increased by 5% to EUR 462.5 million in the first 9 months compared to the same period of the previous year. At the same time, commission income rose to EUR 438.1 million.At EUR 12.9 million, interest income is slightly below the previous year. On a quarterly basis, total revenue increased to EUR 151.9 million. This not only represents a rise of 8% when compared to the same period of the previous, but also stronger growth than in previous quarters. Please refer to Page 6 of the presentation for a long-term comparison of revenue development. Based on this, we have recorded the strongest 9-month period in terms of revenue since operating in the current group structure following disposal of our old MLP insurance. This highly pleasing revenue development once again reflects our success in strategically further optimizing the company over the last few years and systematically expanding the offer of our clients. This already led to a significant diversification of revenue streams in previous years.Indeed, while in 2005 approximately around 80% of our commission income came from the old-age provision, today, all other consulting areas together represent more than 70% of our commission income. Excluding old-age provision, we have grown by an average of 9.6% per year over the last 10 years. In the current year, we are reaping the special benefits from our hard work with broad growth across all consulting fields. The growth drivers of the last few quarters have been those areas that we have established and strategically expanded. Due to a high level of client demand, the real estate brokerage displayed the strongest growth in the first 9 months at 32%. However, it is obviously important to consider that this is still a comparably young consulting field for MLP. Loans and mortgages area was 15% above the previous year's figure. Wealth management also enjoyed very positive development with an increase of 9%. Both MLP's private client business and our subsidiary, FERI, contributed to the success. Growth was particularly strong in the third quarter. Alongside successful new business, we also recorded higher performance-based remuneration for the positive performance of investment concepts at FERI. We are also enjoying continuous growth in the non-life insurance area, which was 7% up on the previous year after 9 months.Assets under management rose to a new record level of EUR 36.1 billion. This means that we have long been at eye-level with other private banks when it comes to wealth management. Accordingly, our clients widely recognize that our comprehensive consulting services also cover this field professionally. MLP consultants are no longer seen simply as insurance brokers but rather as a real dialogue partner for all financial questions. In the old-age provision area, the brokered premium sum of new business increased by 7% to around EUR 2.1 billion in the first 9 months of the year. At nearly 12%, the growth recorded in the occupational pension provision was particularly pronounced compared to the same period in 2017. Legislation to strengthen occupational pension provision in Germany, which came into force at the start of the year and primarily offers potential due to the extended subsidy framework, is still having a supporting effect here. At the same time, there is an increasing need for advisory services at many companies in light of the new legislation.Despite the increased premium sum, our revenue in the old-age provision area was only slightly above the figure from the same period in the previous year at EUR 122.6 million. The main factor for this continues to be the effects resulting from adopting the new IFRS 15 accounting standard, which has been in force since January. As already reported, the effects were most pronounced in the first and second quarters and, to a lesser extent, in the third quarter. The decreasing implications of these effects are also reflected in the 4% increase in revenue in the old-age provision area recorded in the third quarter. We were able to record a slight gain in terms of revenue in the health insurance area, both from a quarterly and 9-month perspective, and thereby make up for the slow start of 2018. Slide 10 shows you our income statement. Earnings before interest and taxes were EUR 22.9 million in first 9 months. This represents an increase of 7% over operating EBIT from the same period in previous year, just before one-off expenses. Compared with the real EBIT, it increased 57%. Group net profit was EUR 17.4 million at end of September and was, therefore, significantly above the previous year's level of EUR 11.1 million. Examining just the third quarter, EBIT virtually doubled over the operating EBIT of the same period in the previous year at EUR 10.8 million. We are therefore very satisfied with third quarter as well as with the starting position we have established for the last few weeks of the year.The next slide offers you an overview of our balance sheet. As end of September, shareholders' equity amounted to EUR 408 million. Alongside the effects resulting from the initial adoption of the new IFRS 9 and 15 accounting standards, which had a positive overall impact on shareholders' equity, the group net profit recorded in the first 9 months also contributed to the increase. However, this was offset by the dividend payments to our shareholders, which led to a slight reduction in shareholders' equity overall. The equity ratio was 17.7%. The core capital ratio of 16.7% reflects the significantly strengthened equity base resulting from the separation of banking and brokerage business concluded last year.As shown on Slide 12, net liquidity continued to be an extremely solid pillar of our balance sheet in the first 9 months as well as solid foundation of our company value. At the end of the first 9 months, MLP group had access to net liquidity of around EUR 199 million. The slight decrease can be mainly attributed to small increase in short-term liabilities and other liabilities. However, it is important to note here the result of around EUR 100 million of liquidity for our operating business. As of September 30, MLP group served 538,100 family clients and 20,600 corporate and institutional clients. The gross number of newly acquired family clients was 13,200 in the first 9 months. Around 26% of these were initiated online.At the same time, we have seen a slight increase in consultants. On September 30, some 1,888 client consultants were working for us. So we are above the previous quarter and also, above the same quarter in the previous year. This slight increase -- the slight increase reflects the first successes of our activities to strengthen the university segment that go hand-in-hand with the new concept for acquiring consultants. We expect this development to further gain momentum in the closing quarter.Before I move on to the outlook, allow me to once again briefly touch on the discussion we already reported on after the first 6 months of the year: the potential capping of acquisition commission in the life insurance. We have made it clear several times that there is a real risk of a politically unjustifiable intervention into the financial consulting market here. In addition to this, the legislature would actually score an own-goal with a flat rate cap. This is because such a cap would primarily hit brokers who, in contrast with tied agents, are by law on the side of the clients and seek to find the optimum solution from a market-wide range of products with their consulting and brokering activities. This also requires brokers to provide comprehensive upstream and downstream services, which for brokers, unlike insurers, can only be financed via acquisition commissions.However, I remain optimistic that the legislature will take this into account in the current deliberations. Added to this is the fact that Berlin is unlikely to rush the job in this regard. In fact, the Ministry of Finance is only likely to present its draft bill to Parliament in early 2019, after which, the matter will be thoroughly addressed by Parliament. Conversely this means, so even if changes are approved, nothing is likely to happen before 2020. By that time, we will be actively engaged with all involved parties to discuss ways of finding competitive solutions. Ladies and gentlemen, allow me to now move on to the outlook for the current year. Overall, we are sticking to our forecast. On the revenue side of the wealth management, we are somewhat more optimistic after the first 9 months than at the start of the year and are now anticipating slight growth. After the first 6 months of the year, we had already updated our outlook for 2018 upwards for the real estate brokerage. We -- as also communicated after the first 6 months of the year, growth in the old-age provision, however, could be lower than what was expected at the start of the year. All in all, we are reaffirming our existing earnings forecast.Despite substantial investments in the new university segment, the aim is to achieve an EBIT at the level of previous year's operating EBIT of EUR 46.7 million. Since there will be no one-off expense in 2018, EBIT is expected to be significantly above the EBIT of EUR 37.6 million recorded in 2017. We are optimistic, but also fully understand that we still have quite a bit of work ahead of us. After all, the fourth quarter continues to play a key part in our business model and we enjoyed a good closing quarter in the previous year.Ladies and gentlemen, allow me to briefly summarize. After 9 months, we are well on target and are benefiting from the course we have taken over the last few years. We therefore approach the last few weeks of the year with confidence while maintaining respect for the risks in our market. I'm now happy to take any questions you may have. Thank you. Operator, would you open up the…
[Operator Instructions] We received our first question from Mr. Philipp Hässler.
Philipp Hässler from equinet. I have a few questions around the wealth management, please. Firstly, could you give us the flows for Q3 and possibly differentiate into institution and retail flows? Then on the performance fees and wealth management, could you give us a figure for Q3 and the comparable figure for last year? And maybe you even have the assets under management as of end of October?
Okay. Hello, Mr. Hässler. Thanks for your questions. I'll start with the last question. Assets under management for end of October, we won't publish until now, but we will publish some more figures about the first 2 questions. Concerning performance fees, we have now after 9 months EUR 8 million -- or EUR 8.1 million to be more precise performance fees in FERI. And we had in the last year overall EUR 10.5 million performance fees. This was, I think, the question concerning performance fees, perhaps only the last quarter. The last quarter 2018 was, as we said, a quite good one. We had in FERI, EUR 5.8 million performance fees in the third quarter 2018; compare this to 2017, where we had EUR 2.6 million performance fees. And in case you ask me for an outlook, seeing on the market we are a little bit -- we are not too confident to get a lot of performance fees in the last quarter. Flow, assets under management or inflow. We had overall a little bit more than EUR 4.1 billion in the first 9 months of inflows and a little bit more than -- around EUR 2.4 billion of outflow. And at the moment, I can't give you this for institutional and private customers.
And for Q3?
The Q3 figures, I don't have with me the inflows.
Okay. So net inflows after 9 months, EUR 1.7 billion?
Yes.
We will give you a call regarding Q3, Mr. Hässler.
Our next question is from Mr. Michael Haid, Commerzbank.
Two questions. First on the broker. The ratio of commission expenses to commission income, i.e., the commissions ratio or [Foreign Language], this has steadily increased over the years. And it is currently -- after 9 months, it is at around 50% or even slightly above. What is the level that we should expect, first of all, for the fourth quarter? And is this 50% also a level we should expect for the next couple of years? Second question on old-age provision. Can you give us an idea how the sum of new business premiums of EUR 2.1 billion, how this goes into your IFRS commissions over time? I assume that not all of the commissions that you basically earn go directly into the P&L in the same year. And also, is there a difference between your individual private old-age pension product and the occupational pension business with respect to commissions?
Hello, Mr. Haid. Thank you for your questions. Commission ratio, which is a little bit higher than 50%, which increased. One reason for the increase is the growth of consultants, by the way, of new consultants. I think the level, you will see a little increase up to year-end and also, I think a little increase also in the next year. But overall, this ratio is something, which I think is a healthy ratio and shouldn't go up significantly over the next years. Commission income, IFRS, I start the answer from the other side. IFRS 15 effect on commissions for the full year is at the moment 5.4 in turnover. And on the result, it's EUR 2.5 million. And we expect this number to be lower at the year-end due to the seasonal effects of our business. And in general, there's no differentiation on the IFRS 15 or the commission effect between the private business and the occupational pension business. Does that answer your question?
Yes.
There are no further questions at the moment. [Operator Instructions] We received a follow-up question from Mr. Philipp Hässler, equinet Bank.
So, if I may, regarding Q4, you were mentioning that Q4 will be, like always, very important for you. Last year, you had EUR 25 million, if I'm not mistaken. This year, you have to reach more than EUR 24 million to reach your guidance. So would you contradict me if I say that it's relatively likely that you meet your guidance? Or is there anything you would like to add regarding last year? Was it a particularly strong Q4 or would you say it was a rather normal quarter?
In general, it was strong. Compared to the rest of the year, it was a strong Q4. But you have heard our outlook. We think -- we are optimistic that we will reach our target. But obviously, due to the high amount of business we have in the last quarter, obviously, it also can -- it has a positive and a negative risk of not reaching this. But in general, I think, we are -- we could make it. Therefore, I wouldn't now cite percentages of probability. There is a probability -- the high probability that we reach it. But nevertheless, it's not sure.
Okay. I'm surprised a little bit that you sound so cautious, because I would have thought it would be this year should be relatively easy to reach the guidance.
There still is risk in the market, but we are confident to reach the target.
There are no further questions. [Operator Instructions] As there are no further questions, I would hand back to the speakers.
Okay. Thank you very much. So if there are no questions left, we close this conference call. Again, thank you very much for joining us. Please don't hesitate to give us a call or send us an e-mail if you have any further questions. Again, thank you, and we wish you a nice and pleasant afternoon. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.