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Good day, and welcome to the conference call on the Publication MLP Results Q3 2020. Today's conference is being recorded.At this time, I would like to turn the call over to Mr. Andreas Herzog. Please go ahead, sir.
Thank you, operator. Good afternoon, ladies and gentlemen, and a warm welcome to the presentation of our financial results for the first 9 months of 2020. All documents, including today's presentation, are available on our website. Here with me is our Chief Financial Officer, Reinhard Loose, who will first comment on the business development in the first 9 months. And afterwards, we will be happy to answer your questions.So let's get started. Reinhard, the floor is yours.
Thank you, Andreas. Good afternoon, ladies and gentlemen. MLP has been performing well in 2020 and was also able to continue this positive development in the third quarter. A key fact in this regard is our diversification strategy, which has significantly strengthened our resilience that the last few months have clearly underlined. As such, MLP was able to increase total revenue after 9 months to a new record level since the sale of the company's own insurance subsidiaries in 2005.These fields of consulting and business areas that we have been working hard to expand in the last 3 years were once again the main drivers. These are primarily real estate brokerage, yet also wealth management and non-life insurance. At EUR 26.8 million after 9 months, EBIT was slightly significant -- or sorry, it was significantly above the comparative figure from the same period in the previous year. We also made further progress in recruiting new consultants, being a key pillar of our growth strategy.Having already passed the landmark of 2,000 MLP consultants after the first 6 months of the year, we observed even greater impetus in the third quarter. As of 30th of September, we had 121 more consultants onboard than 1 year ago.Slide 5 of the presentation shows our revenue development. As you can see, total revenue increased by 8% to EUR 525.4 million, which represents a new all-time high. The third quarter alone, total revenue rose by 5% to EUR 166.3 million.Slide 6 shows the breakdown by consulting field. Looking at the figures, we can see that real estate brokerage enjoyed by far the strongest growth rate after 9 months. Following the first-time consolidation of DEUTSCHLAND.Immobilien in the third quarter of 2019, we were able to increase revenue by 82% in this consulting field.In wealth management, we were able to record the second-highest growth rate from January to September with an increase of 16% of the same period in the previous year. This can be attributed as part of the successful development of new business at both in MLP's private client business at MLP Banking and our group subsidiary, FERI.In addition, the MLP Group has also collected significantly higher performance fees in the third quarter than the same period of previous year. These are accrued for the performance of investment concepts and are largely recognized in the income statement. The successful strategic further development over the last 3 years can be seen once again here, both in the further development of our group subsidiary, FERI, and the strengthened offer for MLP private clients.We have been offering our clients a fuel-like model via MLP Banking AG for some-8 years. Unlike most institutes of the market, we passed on all retro sessions that are made available by product providers to our clients. This model has been very well received among our customers.In non-life insurance, the MLP Group recorded an increase of 7%. This positive development can be attributed both to our group subsidiary, DOMCURA, and to MLP's private client business. The premium volume in the non-life sector rose to EUR 433.2 million, which corresponds to the scale of a midsized insurer in the German market. EUR 37.1 million revenue from health insurance after 9 months was slightly above the comparative figure from the previous year, while loans and mortgages remained at the same level of EUR 13.6 million.The consequences of the coronavirus pandemic could be felt especially throughout the market at old-age provision. Not only are companies holding back on signing up to new occupational pension provision concepts, the current framework conditions are also making new client acquisition more difficult. This adversely affects new business in the field of private old-age provision. This development was already discernable in the second quarter and has now, as anticipated, also negatively impacted revenue in the third quarter. The situation is being compounded even further by perceived economic risk in the general population, which are leading to reservations among clients when it comes to signing long-term contracts. Total old-age provision revenue after 9 months was EUR 124.5 million.Assets under management represent a key figure for the MLP Group. At EUR 40.8 billion after 9 months, we reached a new record level. The second key figure, our non-life insurance premium volume, as already mentioned, also continued to grow.Let me now move on to our income statement. As you can see on Slide 8, with an EBIT of EUR 26.8 million after 9 months, MLP is 41% above the previous year. The second and the third quarter were the main contributors to this. Alongside the successful operating development, which I have already touched on, a positive one-off effect of EUR 3.4 million was recorded in the second quarter, as I also explained at that time.The next slide shows you our balance sheet. As at the balance sheet date, shareholders' equity declined to EUR 429.8 million. This can be attributed to the fact that we distributed around EUR 23 million in dividends to our shareholders at the end of June.The core capital ratio was 18.6% on the reporting date, meaning that we remain very well-positioned. As it stands today, we are also anticipating a similar level at the end of the year. As you can see, at the end of September, the MLP Group had access to net liquidity of around EUR 160 million. However, it is important to note here that we reserve around EUR 100 million of liquidity to our operating business.Please allow me now to move on to our consultant numbers. Development after 9 months served to underline the stability of the turnaround we completed in 2018 in terms of increasing consulting numbers. With a net increase of 71 consultants as of 30th of September, we are already significantly above the good gains made in the entire previous year. MLP is, therefore, impressively backing the overall trend of the market in which the number of intermediaries is in constant decline.Above all, our success in recruiting can be attributed to excellent development in the so-called young segment at MLP, in which we have made comprehensive investments. MLP is anticipating this positive trend in new consultant acquisitions to continue in the closing quarter. We are also planning further increases in the midterm. In this respect, we continue to pay attention to the quality of our new hirings and then invest a lot in their qualification.As of 30th of September, our consultants were serving 551,900 family clients. The gross number of newly acquired family clients after 9 months was 30,100. This is below the figure for the same period in the previous year, overall slightly.As already mentioned, the effects of the coronavirus pandemic are increasingly being felt here. Slightly more than 22% of our new family clients were initiated online in the first 9 months. The number of corporate and institutional clients served in the MLP group also rose to the 22,400.I will now move on to our outlook. In keeping with the goal we had set ourselves, we were also able to successfully deal with the loads associated with COVID-19 in the third quarter and record better business development than previously planned. However, the latest significant tightening of the measures to combat the coronavirus pandemic will present an increased risk in the closing quarter.In MLP's business model, this final quarter is traditionally very important for overall success in any given year. Old-age provision is very important for fourth quarter earnings. It has been hardest hit by the effects of the pandemic. Accordingly, we have revised our qualitative assessment for revenue development in this year to a slight decline. At the same time, we are now anticipating slightly increasing revenue for the year in wealth management, having enjoyed 3 successful quarters in succession.As a result of the risk associated with the coronavirus pandemic, MLP is anticipating Q4 EBIT to be significantly below the EBIT recorded in the closing quarter of 2019. We have, therefore, decided not to revise our annual forecast upwards despite actually being ahead of the planned figures after 9 months.We continue to anticipate EBIT at the upper end of the communicated range of EUR 34 million to EUR 42 million. Our good starting situation also means that we have the chance to secure better development than currently forecasted. You can assure that we will make the most of any opportunity presented in these rather special markets.We are still planning to record EBIT of EUR 75 million to EUR 85 million for the year 2022 and are, therefore, seeking to take MLP to the next level in terms of earnings in this time period. The key growth drivers for this are continuing to develop as planned.Ladies and gentlemen, please now allow me to move on to the summary. MLP has handled the coronavirus pandemic really well to date. Indeed, we recorded significant growth in terms of revenue and, in particular, in earnings in the period from January to September. Our strategy of the last few years paid off more than ever year. And it will continue to do so, even if the fourth quarter is likely to be significantly more challenging for MLP than in the previous year due to the effects of the coronavirus pandemic. This is particularly true for old-age provision. However, we will take every opportunity that the market presents to us.Development of our earning drivers above all new consultant acquisition is proceeding accordingly to plan. At the same time, we are benefiting from continuous growth across the various fields of consulting. As such, we are once again happy to confirm our midterm planning.Many thanks for your time. I'm now happy to take any questions.
[Operator Instructions] We can now take our first question from Christian Salis with Hauck & Aufhäuser.
It's Christian from Hauck. I've got a couple of questions. First of all, on profitability, so I think the profitability was clearly better than expected in Q3, partially probably driven by the strong performance fees. So could you maybe clarify and give us a split how much of the strong profitability is driven by performance fees? What is driven by cost savings? And on the cost savings side, which cost savings are related to COVID and which ones are more sustainable?And then second question, could you please specify the impact of DEUTSCHLAND.Immobilien on the top line in Q3?And third question, I'm talking about Q4. So have you seen any negative impacts from the second wave so far in October or in November? And what's your expectations going into the most important month of your old-age provision business, i.e., November and December? Yes, given that, obviously, this is the most important time of the year. So what do you expect? And what are the implications for the full year guidance?And then finally, looking into 2021, basically, a similar question. So assuming a normalization in terms of COVID-19, et cetera, so what do we expect in 2021? And what are the implications on your midterm targets?
Mr. Salis, thank you for your questions. Starting with profit, yes, performance fees, I think, was a major driver there for growth. Overall, in this 9-month performance fees carries together, we generated a gross performance fees of EUR 19.9 million and with the significantly more than in the year before, therefore, this is the main driver.On the costs side, you are asking for, I think there is a biased situation. Yes, we have -- as you know, we are also -- always working on cost savings. And -- but on the other side, we are also investing a lot into digitalization and also into the training and the acquisition of new consultants. And therefore, overall, I think the cost situation is okay, but there were no significant savings. We had, obviously, less travel cost, less cost for food and things like this; on the other side, as mentioned, some more investment. Therefore, I would say, overall, this is neutral. Coming back to this, the main profit driver. Next to the overall good business, and you see the numbers in revenues with revenue increase in the majority of our consulting fees. And with a onetime effect, the [ text good ] effect, which we had in Q2, the main driver of performance fees.The DEUTSCHLAND.Immobilien overall was supporting us in increasing the revenue side. On the other side, also, DEUTSCHLAND.Immobilien is a business field where we continue to invest on one side. On the other side, it was, especially in the area of project development, also hit by the coronavirus. All the legal framework there when we can start building was extremely delayed. And therefore, overall, the profitability of DEUTSCHLAND.Immobilien or the part of DEUTSCHLAND.Immobilien on the overall profitability was more or less neutral.The third question went to the negative impact in our -- of the second wave and especially on old-age provision. I would, in general, say, obviously, it's very early now after more or less 1.5 weeks of the second lockdown. But as you know, in general, with the existing customers, we have a very good communication path. You know that the digital way of online consulting, of consulting via video of electronic signature works quite well. And therefore, for the existing customers, in general, for the business, not old-age provision, but in general, I think that we won't see an impact.We will, again, see an impact for generating new customers. You saw the overall figure. It's much more difficult to generate new customers, if you can work more or less only online. And in the old-age provision area, we will continue with the difficulties we see, especially in the field of occupational pension. And we will continue that we have less new customers there. Therefore, overall, we would expect -- and that's the reason why we are very cautious for Q4, we expect that, obviously, the old-age provision impact in Q4 will be quite significant. And therefore, we will generate less profit, significantly less profit than 1 year ago.And this taking, let's say, a little bit to '21. Obviously, we are not here now for having an outlook for '21. But in our plans and despite the positive messages we've seen in the last days, especially concerning biotech and other messages, we internally don't believe that we will see a normalization before Q3. And therefore, we still expect effects, especially in Q1 and also a little bit in Q2. And that's at least, at the moment, our expectation for '21 concerning the coronavirus.With this, Mr. Salis, I hope all I have answered your questions.
Yes. This was very helpful. Maybe on the last question again. So -- but -- so you said you're not expecting a normalization before Q3 '21. But I mean, your -- you have clearly confirmed your 2022 targets, right, of EUR 75 million to EUR 85 million EBIT. So you're clearly confirming this, despite the fact that you are still expecting a negative COVID impact in H1 '21. Is this correct?
Yes. We expect the COVID impact. Let's say, you see the overall figures, we have, at the moment, with a heavy lockdown in the first half of the year a more -- a little bit lighter lockdown now. That means, obviously, we have negative impacts, but we have also positive impacts. Obviously, if we say, we continue with our plans for 2022, we expect that 2021 will be a step towards '22. And therefore, despite the negative surrounding, we expect that our business will continue to grow in 2021.
And we can now take our next question from Philipp Häßler of Pareto.
Philipp Häßler from Pareto. I have 3 questions, please. Firstly, on the net flows, could you please give us the figures for Q3, both for MLP and FERI? Secondly, on the occupational pension business, which you said not only this quarter but in the previous quarter as well, was relatively weak. Could you perhaps give us the figure for the 9 months 2020? How big were the revenues generated from the occupational pension business?And last but not least, on dividend policy, if I look at consensus estimates, forecasts are that net income will decline by 20% this year compared to 2019. How important is for you to stick to your payout ratio? I.e., are you willing to keep the dividend stable in absolute terms and at the same time, having a somewhat higher payout ratio?
Mr. Häßler, thank you for your questions. Concerning the inflows, our -- we'd like to continue to give you the 9-month figures. And as I know yet, you have the 6-month figures in front of you. I think you will be able to see this. Overall, we have inflows of EUR 4 billion in the first 9 months in MLP overall, thereof, EUR 3.1 billion in FERI. We have outflows of EUR 2.2 billion in the first 9 months, thereof FERI, EUR 1.8 billion. This, I think, should hopefully answer your question. If not, please ask again.Occupational pension, I would like to answer this with the relative figures. We have seen a decrease in occupational pension business in the first 9 months by 40%. And this is thereof the majority of the reduction -- or this is the basis or the reason for the reduction. Obviously, there are also slighter -- some slight reasons due to less new customers and also the -- a little bit hesitated -- we see more hesitating customers saying, okay, "Is it the right time now to sign a long-term old-age provision?" We see more customers, and that's a positive point. We see more positive customers who are willing to sign monthly payments, for example, into saving plans for investment funds. But obviously, they're final -- there's no direct link. But obviously, there is a correlation between old-age provision saving plans and fund saving plans. And as you can see in our figures, the increase in wealth management and, therefore, also the increase in this fund savings plans is quite significantly that, I think, has to be kept in mind.With the dividend policies, I think you're touching a figure, which we would like to answer in detail next year. In general, as you mentioned, we have our dividend policy and real state or dividend policy in general, and we are working on, let's say, to be perhaps a little bit more better in year-end results than we have planned. And when we finally have seen the year end result, we will then discuss the question you're mentioning, the question how strictly we will stick to our dividend policy. But as mentioned before, I think with the payout ratio, I think we -- in general, we have quite -- I think, quite a generous policy there. I hope it answers your questions.
Yes. Just a follow-up on the occupational pension business, the decline was 40%, 4-0.
4-0, 40%. Yes. Correct.
For the first 9 months. And for the -- just following up on this, for the occupational pension business, is it also true that Q4 is by far the most important quarter within the year? Or are the revenues more evenly spread over the year?
This is the most important quarter of the year as well, yes. It's not as important as in the private, but nevertheless, in relative terms, it still is, for the occupational pension business, the most important quarter of the year.
Okay. So this explains also why you are so cautious for Q4, I understand.
We can now take our next question from Andreas Schäfer, Bankhaus Lampe.
So that first from my side. First question, could -- as far as I remember, the acquisition of DEUTSCHLAND.Immobilien will also have a positive impact on your net interest income. So far, I guess, there's nothing to be seen in the first 3 quarters. And could you give us some sort of potential impact for 2021 and 2022? And I think the second quarter is -- you have built up some risk provisions for securities in your portfolio in Q1. And I guess, to some extent, you have released these provisions in the second and third quarter. Would you give us a net figure what kind of reserves you still have on these securities?
So Mr. Schäfer, yes, 2 detailed questions. DEUTSCHLAND.Immobilien, you're totally right. At the moment, there's no positive impact overall revenues. And also, in net interest income, we will see a slight positive impact for the full year. And definitely, without concrete figures, definitely even or a much or significantly higher impact in 2021. But I think, as mentioned before, at the moment, in the first 3 quarters, the impact is more or less neutral.On the risk provision side, in general, we have more or less 2 -- obviously, 2 positions there. The question on the -- let's say, in the securities and in the bonds, whatsoever, we have in our books. And the second, for the loans we have on our books. In the security side, yes, obviously, due to the market development, we had to release some provisions there, which I don't have the precise figure in front of me, but it's something which is about a little bit below EUR 1 million, therefore, not as significantly as for the whole figure.The majority of our provisions, obviously, is on our loan books with a relatively low number due to the fact that, in general, we -- until now, at least for the last 20 years, we were quite happy that we have not seen too many insolvencies or too many problems on our loan books. But in general, we have something like a little bit more than EUR 10 million provisions there on our loan book. And I hope with this, I could answer your questions.
[Operator Instructions] We can take our next question now from Michael Haid of Commerzbank.
Three questions. First, on FERI. After EUR 19 million performance fees in the 9-month period, what is a level, a normal level for performance fees going forward? Second question, real estate brokerage, if I understand this business line correctly, despite the strong growth, there was some headwind from COVID-19, which slowed down some transactions, i.e., I think notary appointments being postponed. Is it a fair assumption that the pipeline for this business line is full and may even accelerate in the fourth quarter?And last question, the largest insurance company in Germany announced it removes the 100% guarantee of patent premiums for all products, except restart -- no resize its own problems. But what are your expectations about how your customers will react to that in the end? The removal of the guarantee may be beneficial to policyholders as it allows to invest life insurers more in riskier assets. But ultimately, the client will decide. I mean in Germany, we like guarantees. So what is your expectation there or experience with clients?
Yes. I would recommend [indiscernible]. Mr. Haid, thank you for your questions. Fairly normal level of performance fees. I think this is a little bit more like playing a lottery at -- on Saturday night. Yes. And we all know the market, and we all know that in the last years, we had very positive tailwind from the market. And therefore, yes, we have seen interesting performance fees for the last year. But obviously, on the other side, as we all know, this is the reason why it's called performance fees. If we have a year where the markets go down, then it will be extremely difficult to receive or to perform positive. Obviously, it can be, but due to the fact that the majority of the performance fees in FERI have high watermarks, this is difficult.In the area of [ carries ], which is a smaller part in this year, where we have more than EUR 8 billion in alternative assets, it's obviously in adverse markets, a little bit more easy to receive [ carries ]. But bringing both together, and you see me hesitating there, we -- even our plans internally always have the discussion, what is the normal level. And there is no clear number where we can see this as a normal level. Therefore, you see me hesitating there. I think this year number is something which is extremely positive. We don't plan to see this number in the next year also in plural. Also, we don't see -- expect to see these numbers in the next years. But to give a precise number there, it's impossible for us.And I would be happy to have a concrete number, would make planning for me much easier. In the real estate broker, which is there, the answer is a little bit more easy for me. We have had a positive year in the broker business, and that's the reason why we have increased the number by 82%. But as you said, we have with DEUTSCHLAND.Immobilien 2 arms, the brokerage business and the project development. And in the project development, we have had a negative surrounding, a negative environment. Many projects are delayed because, as you said, lotteries also for the projects are closed. The -- we didn't receive admissions in the expected time. And therefore, especially in the project area, we have the pipeline extremely well filled. And this is one reason why we also expect to see quite good numbers there next year and the following years.And your question about insurance. We all read the information that Allianz is going to leave the product from -- with 100% guarantee. For us or I think for our customers, it's nothing which, in general, will change their attitude towards old-age provision. One very simple reason at the moment of this year, we have seen almost -- more than 3/4 of our new business is in policy and product is so-called with new guarantee, which still -- although they have a guarantee in it, but there is no 100% guarantee of their products binded to the capital markets. And we have a single-digit number of contracts which have a full guarantee. And therefore, for us, it has no impact.
[Operator Instructions] We have no further questions over the phone.
So well, thank you, operator, and thank you online for your participation. If there still be some questions left or might arise later, please do not hesitate to contact our IR team. We appreciate you attending our call today, and wish you a pleasant remaining day. Thank you, and take care. Goodbye.
Thank you. Bye-bye.
This concludes today's call. Thank you for your participation. You may now disconnect.