MLP SE (MLP) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon from MLP headquarter in Wiesloch, and welcome to our analyst conference. I also welcome our CEO, Dr. Uwe Schroeder-Wildberg; and our CFO, Reinhard Loose. Before we move into our presentation, I will give you some information on today's setup. After our presentation, we are happy to answer your questions. [Operator Instructions] And now I hand over to Uwe Schroeder-Wildberg. Please go ahead.

Thank you. Good afternoon, ladies and gentlemen. Please also allow me to welcome you to our online annual analyst conference. Let's start with the most important aspect. MLP Group looks back on a highly successful financial year 2024. Indeed, we were able to increase all relevant key figures, in some cases, significantly. For the first time, the MLP Group generated more than EUR 1 billion in total revenue, and we also reached the upper end of our forecast range for earnings before interest and taxes, the EBIT. The successful financial year 2024 also represents an excellent milestone on our sustainable growth path. Please now allow me to briefly analyze the development of MLP over the past 12 months using the key figures that are most important to us. Firstly, we were able to increase total revenue to a new record high of EUR 1.067 billion. Growth was very broad-based, which is very important for us, as you know, and recorded for the 11th time in succession. The Wealth competence field made a significant contribution to this, particularly in wealth management and the interest rate business. In terms of recurring revenue, we are at almost 70%. As you may already know, we receive fees for ongoing client support. This represents an important part of our business and make a major contribution to MLP's high stability as well as our continuous growth. Secondly, at EUR 95 million, our EBIT was significantly higher than the 2 previous years despite making major investments. Accordingly, we are also right on track in terms of earnings performance. And thirdly, we are now an even more attractive stock title for our shareholders, not only offering potential for further share price growth, but also paying an attractive dividend. For financial year 2024, the Executive Board is proposing a dividend of EUR 0.36 per share to the Supervisory Board at the Annual General Meeting. This equates to an increase of 20% over the previous year's dividend of EUR 0.30. What has driven our group success? Our many years of strategic development have helped establish us as highly relevant for our clients. This is also impressively demonstrated by other key figures, in particular, the assets under management, our group and the non-life insurance portfolio volume, both of which reached new record levels. This success also highlights the significant further potential of MLP Group's unique positioning. I'll expand on this in greater detail later on when I present our new midterm planning and the path to increasing EBIT to between EUR 140 million and EUR 150 million by the end of 2028. The decisive factor will be how successfully we continue to provide our discerning clients with a high-quality service offering, a service offering that seamlessly blends personal and digital consulting. This naturally applies to family, corporate and institutional clients throughout the group. The consistent and responsible use of artificial intelligence further supports our service offering. We have made significant progress in implementing our underlying digital strategy, and we will further intensify our efforts. Regarding the MLP Group, I would like to emphasize the results of the past year once again underline the strategic strength we have developed in our business. We are increasingly able to translate this strength into rising revenues and earnings. This means that our group stays firmly on its course for continued growth. Before I now hand over to Reinhard Loose, who will go into greater detail regarding the 2024 business figures, I would like to take this opportunity to express my sincere thanks to all MLP consultants as well as all employees in the group. We have delivered again a great service for our clients.

I couldn't agree more, and please also allow me to wish everyone a very good afternoon. In the financial year 2024, MLP increased its total revenue by 10% and to a new record high. I would like to emphasize the share of recurring revenue, which at 68% is a sign of great stability in our business model. Recurring revenue results from the continuous high-quality service provided to our existing clients throughout MLP Group, above all in the Property & Casualty and Wealth competence fields. Accordingly, the remaining share of revenue is generated from business, particularly in the Life & Health competence field. In terms of the competence fields, the MLP Group achieved particularly strong revenue growth of 27% in the Wealth competence field. In wealth management, MLP's private client business as well as the support provided to our institutional and high-net-worth clients by the MLP subsidiary, FERI, contributed to the growth in revenue. Performance-based compensation at FERI also increased significantly. They are the consequence of positive performance of investment concepts and are largely recognized in the results. We are also pleased that the real estate brokerage has increased significantly again, a trend we anticipate will continue. At EUR 206 million, the MLP Group recorded consistently high revenue in the Property & Casualty competence field, which compromises the non-life insurance business with both corporate and private clients. The Life & Health competence field, which includes audit provision and health insurance, displayed similar development. MLP generated revenue of EUR 298 million here. Revenue from the Others competence field totaled EUR 13 million. These include the so-called other income and as well the real estate development business, which was recently deliberately reduced. The key figures that are important for our future growth also displayed successful development. As of the reporting date of December 31, we were able to increase assets under management to EUR 63.1 billion and the managed non-life insurance premium volume to EUR 751 million. With investment assets entrusted to us by our clients, we are on par with known private banks and are one of the leading independent asset managers in Germany. Moreover, with more than EUR 18 billion in alternative assets managed by our multi-asset investment firm, FERI, we are one of the key players in this important growth market. Here too, we have gained our clients' lasting trust. Throughout the entire MLP Group, the number of family clients rose to 590,700 as of the 31st of December '24. The gross number of newly acquired family clients was 20,500. The clients are supported by 2,110 consultants. The increase of this number is also a result of our ongoing successful trainee program, which plays a key part in the recruitment of junior consultants. We are also making further progress in our business with corporate and institutional clients. We supported 28,000 such clients. Please now allow me to move on to our EBIT. The MLP Group was able to increase EBIT to EUR 95 million in the financial year '24 and therefore, significantly exceed the previous 2 years. As already mentioned, the main reasons for this were the strong revenue development observed in the Wealth competence field as well as the consistently high revenue level in the Property & Casualty and Life & Health competence fields. EBIT was, therefore, at the upper end of our forecast range for '24. Group net profit was EUR 69.3 million. Shareholders' equity rose to EUR 570 million as of the 31st of December '24. The core capital ratio for the financial holding group was a solid 19.2%. The liquidity coverage ratio, or LCR for short, service as a benchmark for short-term liquidity in stress scenarios and is therefore, an indicator of resilience. At 1,843%, it is well above the 100% minimum required by the supervisory authorities. I will now hand over to Uwe Schroeder-Wildberg, who will offer you an up-to-date insight into our digital strategy.

Thank you very much, Reinhard. More than ever, the intelligent and of personal support by our consultants, coupled with the digital services that our clients wish for sits at the heart of our digitalization strategy we are consistently pursuing and expediting. Set against this background, we have developed our client portal in a real genuine Financial Home. On the portal, our clients can keep an eye on all of their finances in convenient digital environment around the clock. The key benefit here, they not only have their banking transactions and assets available, but also all insurance contracts from the various providers, all in one single application. This puts us in an outstanding position compared to other providers in the banking, insurance and fintech sectors. However, we have gone one step further for our clients. They can track their personal finance needs and progress toward their goals in their own Financial Home. As soon as MLP consultants have assessed their clients' financial situation and documented their goals, they can seamlessly transfer this target actual comparison to the Financial Home with a single click. This is done directly from the Consultant Portal, which essentially serves as a kind of cockpit for our highly qualified consultants. This makes it even easier for them to embed digital options in their consultations. Clients then gain a complete overview of their finances, allowing them to better understand the reciprocal effects of their decisions. As part of our digitalization strategy, we are also actively advancing the use of artificial intelligence throughout the group. While doing so, an AI task force ensures that this new technology is used in a very targeted and always responsible manner, the key result in an even better client experience. At the same time, AI also increases the efficiency of employees and consultants, thereby securing value creation throughout the entire MLP Group. Particularly in the back office, repetitive standard processes at MLP are carried out faster and more efficiently with the help of AI. For example, the correspondence assistant supports our employees and consultants in email communication, for instance, by summarizing messages. On the telephone, AI also forward client calls to the right contact via voice recognition and automated phone routing. Assistance is also provided for specialized topics and AI assistant is available for research purposes. In the background, it is connected to the entire structures and internal databases and also linked to genuine client experience. In addition, an AI service agent is available to both consultants and clients in order to assist with administrative matters. For example, contract and address data can be adjusted around the clock. Our clients also have access to an [ i-claim suite ] with fully comprehensive case processing. The digital assistant based on ChatGPT technology was developed by our group company, DOMCURA. It can settle small- and medium-sized claims independently in just a few minutes. For minor losses, the damage specialist only release a payment and focus on the service of more complex claims. Please allow me again to once emphasize something at this point. I believe that we often express fear that AI could make consultants completely superfluous in the coming years is totally unjustified. Even if the tools I've just managed -- I just mentioned as examples are extremely powerful and versatile, they are still just instruments. After all, AI has no consciousness on its own. It's not capable of empathy. This means the special consultant role that our clients demand can only be fulfilled by a very well-trained and heartful human.

Thank you very much, Uwe. Before I move on to our forecast, I would like to take a look back to our planning for 2025, which we communicated at the start of 2022. At that time, we had once again set ourselves strong growth rate targets for revenue and EBIT as well as for our key portfolio figures. We wanted to increase revenue by more than 6% annually and EBIT by as much as 10% to 13% per year on average. As things stand today and the 2024 annual figures that have just been published confirm this, we are fully on track here and have established substantial sustainable growth in our group. A look at our key figures also confirms this. Our planning for 2025 was based on annual growth rates of 5% to 8% in assets under management and 5% to 9% in the non-life insurance portfolio volume. We have also achieved these growth rates today. And since the growth rates recorded were actually at the upper end of the forecast, we are already within the planning range of EUR 62 billion to EUR 68 billion for assets under management and EUR 730 million to EUR 810 million for the non-life insurance portfolio volume that were communicated at that time. In short, we are delivering what we have planned. This brings me to our forecast for the current financial year, which continues seamlessly along the significant growth path. We traditionally focus on EBIT in our annual forecast, which we were keen to increase to between EUR 100 million and EUR 110 million in 2025 according to our planning at the time, a range we now also confirm in our forecast. From '25 onwards, we also expect our real estate business to make a positive contribution to earnings again. In particular, increasing sales revenues in the Life & Health and Property & Casualty competence fields are expected to contribute to earnings growth in 2025. Among other things, this is based on the ever-growing segment of our young consultants and our industrial insurance business. In the Wealth competence field, we are anticipating revenue in 2025 to remain at the previous year's high level. This is due to the fact that we traditionally consider the performance-based compensation cautiously and therefore, only to a limited extent. Yet, we were able to record very high performance-based compensations in the financial year '24. In the midterm, wealth management at FERI and MLP will once again increasingly represent a substantial success factor. Uwe Schroeder-Wildberg, who I now hand back to, will elaborate on this later in greater detail.

Thank you very much again, Reinhard. Alongside the forecast for '25 we have just announced, we are also presenting our new midterm planning today. It extends to the year 2028, starting from the financial year 2024, which Reinhard Loose and I have already presented to you today. A look at Slide 16 makes one thing very clear. MLP is decidedly continuing its successful and strategically developed growth path. As mentioned at the start of this conference, we should lead the group to an EBIT of EUR 140 million to EUR 150 million by the end of '28. Compared to the previous year, this planning represents an increase of around 50%. The basis for this is a planned growth in total revenue to EUR 1.3 billion to EUR 1.4 billion after we surpassed the EUR 1 billion mark for the first time last year. In doing so, and this is very important to us, we have recognized performance-based compensation earned by FERI cautiously and therefore, only to a limited extent. In fact, our planning is based to a large extent on the recurring revenues in our business model that are already foreseeable. And this will continue to grow with the ongoing increase in the key figures. For the MLP Group, these are primarily the assets under management and non-life insurance portfolio volume. We are planning a significant increase for both areas by the end of '28. Assets under management shall rise to between EUR 75 billion and EUR 81 billion, while the non-life insurance portfolio volume is set to reach or slightly exceed the EUR 1 billion for the first time. So how can this ambitious planning be achieved? We have strategically planned the continuation of our previous growth path to achieve this in all 3 competence fields: Wealth, Life & Health and Property & Casualty. Slide 17 offers you an overview before I go into more detail of various areas of potential and how we can develop them. In the Wealth competence field, further and extensive consultancy needs of MLP family clients can be covered. In particular, this involves a further expansion of a successful wealth management business, the high-net-worth and institutional clients served by FERI also hold potential here. There continues to be a great need for supplementary old-age provision in the Life & Health competence field, particularly in view of demographic trends. Another growth area of MLP here are corporate benefits, including occupational health insurance and occupational pension provision in the corporate client's business. The ongoing shortage of skilled specialists is further fueling demand here. The targeted expansion of the corporate client business is of particular importance in the Property & Casualty competence field alongside the ongoing organic growth at industrial insurance broker, RVM, and insurance specialist DOMCURA, MLP's broad portfolio of family clients is also playing an increasingly important part here. Consultants can meet clients' needs with suitable solutions, not only in the private realm but also at their companies. The network we have developed in our group over the past few years also draws its strength from this. Last but not least, the significant increase in earnings planned by the end of 2028 will be supported by the MLP Group's digitalization strategy, in which we use AI applications to continuously increase efficiency and improve client service. Alongside this, cost management also remains strict. The key to developing potential remains the high-quality service offering made available to our clients who place their trust in us and whom we serve very responsibly within the MLP Group. In the following, I will outline the great potential that arises from the respective needs of our clients. To this end, we'll take a look at, firstly, at MLP family clients; secondly, at corporate clients; and thirdly, at high-net-worth and institutional clients. I will start with the discerning family clients that are advised and supported by MLP consultants. When it comes to financial consulting across all phases of life, many of our family clients initially focus on insurance cover and the first building blocks for old-age provisioning. This is because compound interest is a very important factor, which has a particularly strong effect over long periods of time. We help clients achieve one key goal in particular to close the gap in provision. Among academically educated professional groups relevant to MLP, the gap in pension provision defined as the difference between the last earned income and the statutory pension is around EUR 2,300 per month or more for each individual. Demographic trends are likely to continue to have a negative impact on state-funded social security systems. Accordingly, consulting services and solutions for corporate and private pension planning are gaining significance. As our clients' professional careers progress, the topic of wealth becomes increasingly important. MLP has also established itself a competent partner here, offering a wide range of sophisticated and tested solutions as part of its holistic financial consulting. The basis for many investment consultations is the MLP wealth deposit account, which, by the way, has been used as a fee-based compensation model for more than 10 years. Our clients also have the option of receiving regular payouts from the accumulated assets that are tailored to the individual situation. This becomes increasingly relevant, especially in the later stage of professional life. To achieve this client objective and the ongoing support of clients, MLP consultants will prospectively have an additional tool named portfolio pension at their disposal. There is a large potential here as well as a glance at the market shows. Overall, the potential investment volumes are approximately EUR 194,000 per household is the minimum financial wealth of the top 10% of households in Germany, which includes a significant proportion of MLP clients. In fact, many in this group have considerably higher available investment capital. Moreover, given the nationwide wealth transfers here, approximately EUR 400 billion are passed from one generation to the next each year, further growth in investment assets can be expected. MLP consultants can meet their clients' needs, not only in the private realm with suitable solutions, but also for their companies. This applies in particular to industrial insurance or occupational pension schemes for employees. MLP consultants can call on the extensive expertise of the various companies within our group to support corporate clients. Our consultants can also draw on structural support in the network and call-in specialists from our multi-asset investment firm, FERI, for large asset management mandates. The past financial year 2024 offers an impression of the potential that exists here and at the same time, shows how our unique positioning already is a discernible impact. Let's start with the Property & Casualty competence field here. The new non-life insurance business brokered by MLP consultants for corporate clients has increased sixfold compared to 2021. In the Life & Health competence field, MLP consultants tripled the corresponding new business with occupational health insurance policies. And in cooperation with FERI, the asset portfolio in direct mandates that is with MLP clients who are supported by FERI in wealth management has increased by 40%. FERI itself has already taken the next steps towards further growth with a series of new appointments and client support for the institutional business. After all, this client group, just like FERI's private client business also offers a great deal of potential. A look at various studies on growth in the market for institutional clients clearly underlines this in Germany, where wealth invested by this investor group is expected to continue to grow by an average of approximately 4% annually over the course of the next few years. At the same time, global wealth invested in alternative assets is expected to grow by approximately 10% annually. As one of the leading multi-asset investment firms, FERI has the necessary expertise and the corresponding range of services for institutional investors. At the same time, the company has decades of experience in client support and is well known in this market. With individual multi-asset strategies, FERI now serves more than 200 institutional investors. FERI is also assuming a strong position in the area of alternative assets. In total, FERI invests clients' assets amounting to more than EUR 18 billion here. This is performed by one of the largest expert teams in the German market. So we also meet an important strategic prerequisite for further growth in this field. Ladies and gentlemen, before I begin my summary, I would like to take this opportunity to return to the MLP share. Slide 21 gives you an overview of a number of important parameters. We've also included the consensus estimate of our analysts on our EPS planning here. Having already seen a considerable increase of 34% over the last 2 years, our analysts are confident that our share price will continue to rise. The EPS planning shown here also illustrates the earnings per share resulting from our planning. This is based on our EBIT planning for the end of 2028. Accordingly, we are planning earnings per share of EUR 0.90 to EUR 0.95, representing an increase of around 50% over the very successful year 2024. Based on our consistent dividend policy with a distribution rate of 50% to 70%, this results in significant dividend potential. This one again underlines our ambitions for the next 3 years. Please now allow me to provide a summary. Firstly, the successful financial year 2024 represents an excellent milestone on our sustainable growth path. At the same time, the great potential we have in a further developed MLP business model is clearly evident. Secondly, our new midterm planning, which aims to record EBIT of EUR 140 million to EUR 150 million by the end of 2028 is based on strategic growth in all 3 competence fields: Wealth, Life & Health, and Property & Casualty. The expansion of corporate client business is an important factor with additional potential arising from a special role of the MLP consultants who can also offer solutions for companies in collaboration with specialists from the MLP Group. Thirdly, our successful digitalization strategy, which includes the use of artificial intelligence is having an increasingly supportive effect. It is indeed contributing to sustained efficiency increases, and we can now provide our clients with even better consulting and support. Ladies and gentlemen, thank you very much for your attention. We will be now happy to answer any questions you may have.

Thank you, Uwe and Reinhard. And now we are happy to answer your questions. [Operator Instructions] We will start with the first question. It comes from Henry Wendisch from NuWays.

Yes. First of all, congrats on crossing the EUR 1 billion mark and Godspeed with your new midterm targets. It looks quite well in my view. I have a couple of questions. Of course, the first 3 are for Reinhard. You might guess that if you have for me the numbers, net liquidity, capital inflow, performance fees, as always, would be much appreciated. And then I have 2 questions regarding your segment report. I noticed in DOMCURA that profitability went down a little. From my educated guess, I would guess that there are some upfront development costs for the AI tool that you've implemented. Is that something that has burdened the margin at DOMCURA? And then also, would you then consider that 2025 would return to the old margins we've seen in the segment? And basically, the exactly different or vice versa thing happened at industrial brokerage came at a much higher margin than I expected. You increased your sales by 10% and actually OpEx went down by 5%. You did some cost cutting and it's in the other operating expenses. So what has happened there? And then is this also a margin level that you feel comfortable with for the next years to come in the Industrial Broker segment. And yes, that's been it already from my side.

Okay. I'm not quite sure if I got all the questions, but I start, and I'm sure that you will ask again the questions I didn't get. The first question, obviously, are very clear concerning net liquidity, we have around EUR 200 million net liquidity at the year-end. That's question number one. Number two, performance fees. The overall sum is EUR 33.9 million performance fee for the whole year. And perhaps also interesting, of course, the development of the asset under management. We have net inflows of around EUR 1.4 billion asset under management, and we have performance of around EUR 4.7 billion in total there. This is perhaps question number one, then or block, question block #1, then I continue with DOMCURA and after that, I will hand over. With DOMCURA, yes, indeed, the profits went down. Yes, there are some costs for AI too included, but to be quite honest, that's not the main reason for the downturn. First of all, let's say, the overall business and the pressure on margin is quite high at the moment. But there are 2 -- next to this, 2 special effects, which are valid for the full year '24. Number one is that we will move or we just moved into a building, a new building, and we are restructuring at the moment the old building for DOMCURA, and that has some starting losses, which we booked in '24. And then we did some restructuring also on the Board level, which also added some costs for '24. And this, I think, was the first block there. And then I got a little confused with the next question. Therefore, I hope Uwe got the question.

I can also repeat it, if you like.

No, no, it's fine. I think I got it. That's always like in the Board meeting here.

The difficult questions go to him, obviously.

No, just kidding. As far as I understood it right, but please add further question if we didn't understand you. So overall, we see that the setup phase has some fundamental now in the industry broking segment. As you know, we started 2001 with the first acquisition. We had additional acquisitions in the year '23. If you compare 2004 and '23, I think that what you did in '23, we had some setup effects still bringing smaller companies together, which was our plan, as you know to have some broad fundament then to explore and extend our strategy in this for us, still new field. And what you now see is that we did not succeed in buying new companies. We discussed that ongoingly because we are not willing to pay with too high prices, which are obviously some parties are willing to pay because we strictly believe that this makes no sense in this kind of business. And we always think in sustainable horizons in decades. So we concentrated at this time more on organic growth. And here, you can see the good mixture in having a setup, having good growth, having good cost control. That means so we are coming up to quite nice margin areas, which also fit to our original plans we typically have. So this is the explanation. And that means perhaps you would ask me, do you have any idea of further acquisitions? We have the same viewpoint on that. We are clear in the market. We see what happens, but we don't want to do silly things. And it's easy for us to say that because as you can see, our growth path, the organic growth path is just beginning to demonstrate what the potential is. And that is clearly the specific character of our business that we have the best, broadest acquisition network due to our very well-developed contact to private clients who have responsible function, have own companies, which opens the door in this interesting segment. And therefore, I can tell you that also we are going ahead on this path also in the beginning of this year that the acquisition pipeline is full, and so we are in a good way. So with the way I understood your questions and hoping it was the right way and convinced you. Thank you.

Okay. Then the next questions we got via text from Jochen Schmitt from Metzler. And he's asking about the financial consulting segment, where the EBIT declined in this year? And what about the outlook for 2025, if it's again clearly above 2024 level?

I can answer very short, yes, the outlook for '25 is higher than for '24. There were some internal reasons for a little decrease in '24. But for '25, we are quite confident that the profit of this segment will be above '24.

And the next question was about the MLP Banking segment. And here regarding the commission income as well as the development in this year as well as the outlook for 2025 for the commission income.

Of course, part one of the answer is always the same. Of course, we can't give you right now precise figures for '25. But let's answer your question this way. At the moment, we don't see any reason why we shouldn't fulfill our plan for '25. This gives you, I think, a short indication for '25. And for '24, the commission income in the bank rose in comparison to '23 by a little bit more than 15%.

Thank you. So we hope that answered your questions. And otherwise, you could ask again. So just let me have a look. It seems that we have no further questions in the moment. Just wait a second if you have a further question.

This is -- was so good.

Yes. So if this is not so, I think we gave all the information that's relevant for now. And so this brings us to the end of our conference. Of course, if you have any questions later, you can come back to us. Please do not hesitate to contact us. And what I can give you as a hint, the recording of our conference will be available on our website later today. So then I can say thank you for your attention, and I wish you a good day. Thank you, and goodbye.

Thank you.

Bye.

Bye-bye.