MLP SE (MLPKF) Q2 FY2025 Earnings Call Transcript & Summary

Hello, and good afternoon, ladies and gentlemen, and welcome to the MLP SE conference call regarding the publication of the results for the second quarter 2025 and the first half year 2025. [Operator Instructions] The floor will be opened for questions following the presentation. Let me now turn the floor over to Pascal Locher.

Thank you very much, and welcome to MLP's conference call to our results for the second quarter and the first half year of 2025. With me today is our CFO, Reinhard Loose. He will guide you through the presentation. And of course, we are happy to take your questions after the presentation. So please go ahead, Reinhard.

Thank you, Pascal, and good afternoon, ladies and gentlemen. First of all, allow me to present the key message from the first 6 months of the financial year 2025. We are making further progress on our strategic growth path. MLP achieved new record levels of revenue in the first half of the year. And at the same time, we confirmed again our annual forecast for earnings before interest and taxes. This positive development is attributable to revenue growth in all 3 of our group's competence fields: Wealth, Life & Health and Property & Casualty. We are on track even though the environment has been more challenging, especially in the second quarter. One thing in particular has yet again proved its worth for MLP, our broad and strategically interlinked positioning, which we have shaped and further developed in recent years. This is the primary reason for the stability of our planned sustainable growth, which is particularly evident when we do not have a tailwind in parts of our markets. With drastic tariff demands, U.S. President's so-called Liberation Day, not only shook the capital markets in April, but also hit the economy and the unsettled consumers once again. Despite operating in such a difficult environment, we still succeeded in setting new highs in our key figures for future business development. This applies to both the assets under management and the managed non-life insurance premium volume. We are consistently following our proven path to success. This applies equally to our planning for 2028 and our annual forecast for 2025. Some of the recorded costs for our IT infrastructure are onetime expenses and were incurred primarily in the recent second quarter. Among other things, we have prioritized investments in artificial intelligence, which will quickly have a further positive impact. Not least, as a result of these decisions, we have once again significantly improved our strategic and operational positioning, and we will consistently press ahead with further development of the still huge potential within the entire MLP Group. This also involves further strengthening of our position in the corporate client business, among other things, through innovative and digital companies that we have recently established within the MLP Group and whose development we are actively advancing. More on this later. You can find an overview of revenue development on Slide 4 of the presentation. The first 6 months of '25, MLP increased total revenue by 3% to a new high of around EUR 529 million. The share of recurring revenue was almost 70% at the end of 2024, highlighting the excellent and sustainable stability of our business model. Of course, we have also benefited from this in the current financial year. This important revenue base will continue to have a positive effect in the coming months up to the end of the year. We earn recurring revenue from the continuous service provided to our existing clients throughout the MLP Group, thus all in the Property & Casualty and Wealth competence fields. The remaining share of sales revenue is generated from our new business, particularly in the Life & Health competence field. In the first half of 2025, the group grew particularly strong in the Property & Casualty competence field with an increase of 6%. This was due to the significant year-on-year increase in the managed non-life insurance premium volume. MLP also achieved similarly high growth in the Life & Health competence field with an increase of 5%, largely driven by the Health Insurance business included in this figure and to a lesser extent, by the Old-age provision business. Growth in the Wealth competence field was slightly weaker in the first half of the year with an increase of 2% primarily due to the significantly lower performance-based compensation owing to capital market developments and lower interest income in light of a fall in interest rates. In contrast, within the Wealth competence field, the wealth management revenue increased further, primarily due to the significant year-on-year increase in assets under management in the MLP Group. In real estate brokerage and loans and mortgages we even achieved double-digit growth rates in the first half of the year. Finally, a brief look to the other competence field in MLP Group. As expected, revenue was significantly lower due to the active reduction of market and business-related risks. The growing and continuing trust by our clients in our consulting services is also reflected in the key figures. These are of great importance for future revenue development. It is, therefore, all the more pleasing that we were able to increase assets under management to a new high of EUR 63.9 billion. Let's take a quick look at our other key figures. We are also able to increase the managed non-life insurance premium volume to another record high. At EUR 785 million, this corresponds to the volume of medium-sized non-life insurer in Germany. As of the 30th of June, the MLP Group's consultants served 594,300 family clients. The gross number of newly acquired family clients was 10,300. We also supported 28,000 corporate and institutional clients in the MLP Group. The number of consultants rose to 2,144 primarily as a result of our successful trainee program. This program, which is very attractive for young professionals, equips junior consultants at MLP with the skills they need to succeed as self-employed consultants. By the end of June '25, 426 trainees had already joined the program since its launch in mid-'23. You can find an extract of the current income statement on Slide 8. In the first 6 months of '25, the MLP Group recorded EBIT of EUR 42.7 million, which as already communicated, was below the exceptional strong figure from the same period last year but above the average in the past 5 years. This average figure amounts to EUR 36.1 million. If you now take a brief look at the right-hand section of the slide, you will see the performance indicators that underpin our strong balance sheet. Our shareholders' equity amounts to EUR 561 million. The regulatory core capital ratio was at 18.1% as of the 30th of June which remains significantly above the requirements of the regulatory authorities. The liquidity coverage ratio or LCR, for short, serves as a benchmark for short-term liquidity in stress scenarios and is therefore an indicator of resilience. And 1,093% is also well above the 100% minimum required by the regulatory authorities. After looking back on the first half of the year, I would now like to look ahead and give you insights into our strategic development of the MLP Group. As part of our digitalization strategy, we are actively advancing the use of artificial intelligence throughout the group in targeted but always responsible manner. I've already mentioned the corresponding investments, some of which have been brought forward in order to implement state-of-the-art AI tools. Slide 10 illustrates our fundamental approach using AI to maximize client benefit and optimize the efficiency of our processes. The main development steps on the path to an AI service agent are shown on the left. At the final stage, we will offer clients 24/7 availability and complete processing of simple matters. Within the MLP Group, we already have a first AI agent in place, which can handle the complete processing of claims, including image recognition at our insurance specialist DOMCURA. You can see this here on the right-hand side of the slide. In case minor claims, the only thing DOMCURA'S claim specialists have to do is to authorize the payouts and can thus dedicate more time and expertise to managing complex claims. The significant potential of this technology for client service is evident and we already have created plans to extend it to other areas of application within the MLP Group. For example, DOMCURA'S AI-based claims process will soon be implemented in the vehicle insurance segment at our industrial broker [ FRM ]. Obviously, this will enable us to optimize costs and help address the problem of a shortage of skilled workers. But first and foremost are always the benefits for our clients. The ability of this approach is reflected in our ongoing dialogue with insurance. We're highly interested in deploying our AI claim settlement agent within their own companies. I would now like to turn to another strategic focus for the MLP Group in the coming years. The expansion of our corporate client business with around 28,000 corporate and institutional clients, this is already of great importance for the MLP Group. Today, I'd like to highlight 2 aspects of our corporate client business and its additional sources of growth, starting with :pxtra. Not long after it was founded as a start-up within the MLP Group in 2022, it is clear that this innovative company has already gained significant momentum. As a digital platform, the corporate benefits market, :pxtra needs a large and growing demand from companies and their employees alike. Selected examples of these additional employer benefits can be found on Slide 11 including subsidized local public transport ticket or a job bike. More than ever, employers in Germany are faced with a shortage of labor and skilled workers with the aim to counter by investing in their own employer attractiveness. Corporate benefits are playing an increasingly important role here. :pxtra, this extensive benefits offering budget-oriented model and cutting-edge technology, strong competitive advantages. With :pxtra within the MLP Group, we also have an additional significant advantage as Germany's largest broker for occupational pension schemes, we can seamlessly include this particularly relevant benefit for many employees as part of our corporate benefit offering. To this end, :pxtra involves the specialists from the MLP Group, from our TPC business unit and the client relationships with their respective company. And also from the perspective of the MLP consultants, there is another significant advantage. With :pxtra, our consultants gain an additional strong lever to further expand into the corporate client business building on their own private client base, which often includes managing directors and company owners, another prime example of strategic integration within our group. A quick look at 2 key figures shows how dynamically we have started at :pxtra. The Digital Corporate Benefits platform already serves more than 200 corporate clients and already has more than 10,000 users as employees registered on the platform. Naturally, further scaling in the back office will be driven by artificial intelligence. With our new commercial broker, RVM SmartProtect, we have systemized a young field in our corporate client business, also applying a highly digitized approach. This digital platform draws on the expertise and the specialists of the RVM group. But unlike the industrial broker, this aimed at commercial clients that is small and medium-sized enterprises usually abbreviated as SMEs. The new RVM SmartProtect thereby act as a digital end-to-end platform for insurance cover for such SMEs. MLP consultants who also want to become active in the corporate client business based on the same logic as with :pxtra. We'll soon be able to target this very especially in the commercial insurance field. Doing so, they are assisted by virtual experts. Looking ahead, we will benefit from the digital operating process just as much as the client. In addition, RVM SmartProtect is developing it's own concepts for very specific client requirements. We have already been able to recruit a proven industry and digital expert who was already very familiar with MLP to manage the new commercial broker. This paves the way for tapping into the high potential MLP target groups in the SME market segment. The strategic integration within our group also offers a clear competitive advantage here. In addition, RVM SmartProtect offers digital scalability. The use of these new technologies and this applies not only to the areas of application outline today is carried out throughout the whole MLP Group in a very targeted and responsible manner. The key result is an even better client experience. At the same time, AI also increases the efficiency of employees and consultants thereby boosting productivity throughout the entire MLP Group. As such, it is true more than ever. The special consultant role that our clients expect can only be delivered by a human, namely highly trained professional. I now come to our EBIT forecast of EUR 100 million to EUR 110 million for the year as a whole, which we confirm again today. We are convinced that we will continue successfully on our sustainable growth path. In particular, rising sales revenue in the Life & Health and Property & Casualty competence fields are expected to continue to this. In the Wealth competence field, we continue anticipating revenues in 2025 to remain at the previous year's high level. Though we remain cautious in view of the volatility seen on the capital markets. Of course, it also cannot be ruled out that there may be positive capital market developments from which we benefit directly in the wealth competence field. Irrespective of this, we are keeping a very close eye on our costs. Our midterm planning for the end of '28, which we also reaffirmed today also remains unchanged. Our planning still foresees EBIT in the range of EUR 140 million to EUR 150 million and total revenue between EUR 1.3 billion and EUR 1.4 billion. Performance-based compensation at FERI, which, as already mentioned, is significantly influenced by external factors is considered only to a limited extent. In contrast, a substantial increase is planned for the key figures, namely the managed non-life insurance premium volume and the assets under management. In expanding assets under management, FERI has on the basis of highly professional and modern investment research, significant further potential as an asset manager. FERI will focus on this area and continue to strengthen it. In the area of alternative assets with more than EUR 80 billion under management, FERI already maintains one of the largest expert teams in Germany. The strategic development of our potential in consulting family clients, the targeted expansion of the corporate client business with the multi-asset approach for institutional clients should lead to growth in all competence fields. The planned significant increase in earnings is also supported by our digitalization strategy with a particular focus on AI applications, which are expected to generate continuous efficiency gains and lead to improvements in client support. Alongside this cost management also remains strict. Ladies and gentlemen, allow me now to move on to the summary. Firstly, we have already made significant progress within the first 6 months and we confirm our earnings forecast for the financial year 2025. Our strategic positioning is proving its worth, especially in phases without tailwinds. Secondly, artificial intelligence as part of our digitization strategy and the strategic expansion of our corporate client business are already important growth drivers today and will be so well into the future. Thirdly, we have a very stable business model for sustainable growth of the MLP Group. At the same time, we are characterized by a strong spirit of innovation and a rapid pace of implementation. Our midterm planning for the end of 2028, which we reaffirm today underpins this. Many thanks for your time and your interest. I'm now happy to take any questions.

[Operator Instructions] And the first question now comes from Henry Wendisch, NuWays.

Congrats on the strong topline. But yes, on the EBIT side, we've seen the ad hoc 2 weeks ago. So it should be no surprise here. I have a couple of questions. First two, you might have guessed them already, the same one I always ask. Do you have the specific number of the performance fees recorded in the second quarter? And also, please, the capital inflows that went into the assets under management. Second question is maybe loss looking ahead already at Q3. We've seen last year in Q3, this sort of large performance fee contribution from, I think, private equity solutions that you offer also at FERI. Do you have maybe any visibility or any indication already if -- because those are like, I think, less dependent on the overall market development in my view. If there's anything that we could expect for the next quarter for Q3 2025 and if not, I'd like to know how you'd like to compensate the absence in terms of profitability should this stem from the ongoing recovery and that we see in the real estate segment so 2 questions in one, sorry. And I think then I have 3 more -- 2 more questions. The next one is the use of AI at DOMCURA, it looks very promising. And I would expect from this better utilization and better efficiency, but I don't see anything in the margin yet, but there might be something still to come. So maybe you could comment and give you a little bit of a forecast or your view on how margins are going to develop at DOMCURA with the use of AI and also sort of what costs have been incurred prior -- from the implementation of the AI. And then the last question is maybe touching upon my second, what is, in your view, maybe the largest risk to the guidance at the current stage? And maybe also what we should look out for in the second half of the year.

Henry, thank you for your questions. And thank you for your comments on the top line and the EBIT. Definitely, we always know that Q2 is always the weakest quarter in MLP in the MLP year. And therefore, we always know and we've seen this many years that the -- especially relative variation is relatively high. At this time, definitely it was not on the positive side, the variation. But as said before, we are convinced to nevertheless reach our targets for the whole year and how we will explain later. But first of all, let's answer your question concerning, let's say, the typical questions, performance fee. And there you will see one of the reasons why we lack a little bit the EBIT in comparison to the last year and the first half of the year we have EUR 2 million performance fee, including carries. Last year, just to keep it in mind, and you have it obviously in your numbers. We had EUR 9.2 million performance fee and carries in the first 2 quarters. Definitely, I don't, let's say, there and we will not do an outlook for performance fees in Q3. Only let's say more generally, yes, we expect some inflows also again from private equity. But the overall amount obviously is not clear. And therefore, we're definitely looking forward to receive more performance fee in the second quarter -- second half of the year than we saw in the first half of the year. You mix this question a little bit with real estate because this is also something where we are still -- where we are -- let's say it this way, we are better than last year, but nevertheless, this is definitely a sector where we would like to see more positive inflow, especially the real estate development. We described that we are cautious there to start new projects. Our intention is to start projects during the course of the year, especially, I think in the -- our plans at the moment are that we'll see inflows in the last quarter. But again, this is depending on some facts and our final decision on which risk we would like to take there. And therefore, also jumping to your last question from my side, the biggest risk, obviously, is the real estate segment for the whole course of the year. The variation also like in the first half of the year will be -- can be high in the segment of the overall performance fee. But the biggest risk continues to stay in the real estate sector. Now after talking about risks and let's say, some cautious outlook, let's go to the definitely very positive and very promising field of AI, which I not only would like to comment on DOMCURA, but obviously, we start with DOMCURA. It's very promising. What we saw there is that very, very interesting. If you now, let's say, call them, if you have problems with DOMCURA, it's not so on the fact that the margin keeps is low because, obviously, we are investing in it. We are, let's say, don't have to invest that much in people, which is extremely difficult, but we are investing in IT. Therefore, let's say, the overall margin at the moment is not so much different than it was in the year before, but extremely important is it different in quality because at the moment, you have no waiting times, you receive, let's say, the money for smaller damages in extremely short time. And therefore, this makes it interesting at the moment for the whole industry. And therefore, we are not only internally in discussions where else we can implement this technology, but also in discussions with other market participants, and there might be some, let's say, also fantasy for the future in this. But overall, I think the more important thing is, as I said before, its quality. And finally, then it will lead perhaps from next year and also to a little bit better margin, but it's -- it depends a little bit on how much we continue to invest in AI just perhaps as a short addition also on this. Just in the first quarter, our AI investments are almost EUR 1 million higher than we originally planned, but I think it's worth investing even more in this sector. I hope now I touched all your points. No, I didn't. The inflows, thanks. I was so motivated to answer your AI question that I skipped the inflow section. The the net inflow in the first half of the year were EUR 1.3 billion. The performance in the first half of the year was negative with EUR 0.4 billion. I hope I answered everything.

The next question then comes from Dieter Hein, Fairesearch.

I have some questions as well. Firstly, coming back to your EBIT target for the full year. For the first half year, the EBIT decreased by 12% to close to EUR 43 million. And this means that you have to deliver around EUR 60 million in the second half 2025. How will you achieve this increase? Is it only a higher performance fees and AI contribution or some other items left? And second question is regarding Deutschland.Immobilien. And I read that you expect for the full year 2025 a positive profit contribution from Deutschland.Immobilien. If I look to the half year figures, there's still a loss contribution. Do you still expect a positive profit contribution from this segment? And what will be changed compared -- in the second half compared to the first half year? And last question, it's regarding the core capital ratio, which declined from 19.2% end of last year to 18.1% for end of June this year. And can you a little bit elaborate this development? And have you a target for the core capital ratio overall? That's currently all from my side.

Thank you, Mr. Hein. Thank you for your questions. I'll start with the last one. Core capital ratio. Since the beginning of this year, the credit companies, the banks in Germany have to apply new regulations called CRR III. And the change in this regulation, the methodology change in this regulation decreased our capital ratio by around 2 percent points, meaning we are now by 18%. And in the old calculation, we would be a little bit more -- would have a little bit more than 20%. The target, nevertheless, and therefore, this is positive, the target we have internally, but it's not a secret, is 15% and would like to be at least 15% as the lowest. And therefore, we are quite happy with this 18% even under the new rules and regulations. Then I go to the question, the Deutschland.Immobilien. Yes, we expected a more positive development in the real estate development. What we see right now that we are not only on track but a little bit better in the real estate brokerage and we expect to see even higher volumes and, by the way, also higher margins in the second half of the year for the real estate brokerage. The real estate development, as I just also described definitely will stay at, let's say, the risky part of this. And also to be open there, I'm not quite sure if we will see overall a positive contribution in the segment at the end of the year. Nevertheless, and this fits good to your first question. We still stick and believe that we'll reach the target of more than EUR 100 million due to I would say, more or less 3 different reasons were belonging together. First of all, in the history, we have a strong first quarter and a very strong last quarter. And therefore, like always, it's important for us to see the income in the last quarter. In the last quarter, we will exceed very high, again, like in every year, very high income in the Life & Health segment. And also, we believe that the positive contribution in the Property & Casualty segment will continue. And therefore, our plans are -- also our internal plans see the inflows there in the last quarter, and this will be enough to reach more than EUR 100 million [ EBIT ].

Next question comes from Jochen Schmitt, Metzler.

I have 4 questions, please. Firstly, on the extra cost, which you mentioned in your ad hoc release, which were booked in Q2. Was there any cost overrun compared to your annual cost budget? That's my first question. Secondly, again, on extra cost, can you provide a bit more details here, which segments we are talking about? Is it FERI, for example? Thirdly, on the Financial Consulting segment, Q2 is seasonally weak. Nonetheless, the Q2 EBIT is worse than the corresponding figure in recent years. Any comment on that would be helpful. And my fourth and and last question, it's again on performance fees from alternative investments. May we assume that in your plans, you have a low to mid-single-digit euro million amount from performance fees from alternative investments for financial year '25. That's my question. These are my questions.

Mr. Schmitt, can you please repeat the last question? I'm quite sure if I...

Yes, it's a little bit of follow-up on Henry's question. The performance fees from alternative investments in FERI. I have the impression that in your plans for '25, you have some performance fees included from alternative investments. And would it be, let's say, a fair assumption to assume that you have an expectation of a low up to mid-single-digit euro million amount from this.

I see your questions are difficult as always. Now joking on this. Let's start with this. Obviously, we talk about the overall figures for performance fees, what we obviously are hesitating a little bit to comment on plans on different areas of performance fees. But due to the fact that we stick to our target, we nevertheless believe that we will see performance fees in the second half of the year. And as I said before, a much higher performance fees than in the first half of the year. And as we know that a part of the performance fees also will come from alternative investments. I can convince or I can comment that, yes, we also expect performance fees from alternative investments without going there into figures and details. But figures and details, I have prepared a little bit more extra costs. Especially, I think we commented that especially in the IT segment, we saw extra costs in Q2. There are two, let's say, main points is summary of many smaller inputs -- smaller events. Again, we have a quarter with relatively low -- with always relatively low profits. And therefore, let's say, relatively small items have been relatively high effect. And we have invested -- or let's say, we saw extra costs in the IT segment, especially in, as I just said, AI, but also in security, we have planned or we had planned to invest more in security and with much more secured costs in the first half or in the second quarter. Overall, it's in the Security segment, not an overrun of the planned figure in AI, it's a little bit more than we originally expected, but we believe that we'll see results there in the future. And then very Q2, special comment on the segment. I think we all know that the Q2 segment was very, let's say, lively quarter with Liberation Day with ups and downs. And definitely, we have an exposure in our customers in the U.S., which was not very positively affected by all the circumstances. We have exposure in technology and especially obviously technology in the U.S., where we saw some negative influences in the second quarter and also a mixture of all this leads to the overall results on this.

Yes, sorry. Actually, I refer to the Financial Consulting segment regarding the Q2 EBIT. FERI, I just asked FERI because here, I can, let's say, see somewhat higher other operating expenses in Q2. That was at least my impression. Therefore, I asked whether FERI was also affected by those extra costs. But I think if I got your answer right, that's probably not the case. But regarding the Q2 EBIT, I was referring to the financial consulting segment.

Yes. And I didn't answer another question that was intended to be the answer. The extra costs were recurring in the segment of DOMCURA, but especially in the Financial Consulting segment. And that was the reason why the Financial Consulting segment or the main reason why the Financial Consulting segment in Q2 is relatively weak.

Okay. Maybe just one more follow-up, if I may. Does that mean that if you had not booked those extra costs, the cost base would have actually somewhat declined in the Financial Consulting segment?

It would have been EUR 1.5 million to EUR 2 million less, yes.

The next question then comes from Olaf Hein, ConValue SE.

Two short questions, I hope. In your EBIT forecast for the end of the year, EUR 100 million -- roughly EUR 100 million to EUR 110 million. Is the potential interest income decline of the MLP Bank. You have some decent amount of money you make with the deposits in your MLP Bank, and that might be somewhat lower in the futures. Do you factor in a certain amount of lower interest income from MLP Bank's deposits is my first question. And the second is regarding to the dividend. Your dividend yield is quite nice so far and it used to be. And will you payout follow the net earning figures in the same ratio as it used to be? I don't even know what it is, maybe like 40% or 60%. Do you have any figure that tells us what kind of ratio or yield we can expect according to the outcome of the net earnings. These are my 2 questions.

Thank you for your question. I can start with the last question, dividend. Our dividend policy is to have a payout of the results between 50% to 70%. This is a number which we follow now for many, many years. Yes, this is also, let's say, the target for the next dividend we plan to pay out. And concerning your question of interest income, yes, we have planned or we expect in our plans that we see in another interest rate decrease by the ECB in the second half of the year.

So at the moment, there are no further questions. [Operator Instructions] Mr. Locher, word back to you for some closing remarks.

Okay. So thank you. And if there are no further questions, I would like to thank you for taking part in our conference call. And of course, you can reach us if any further questions arrive later. I wish you a good afternoon. Thank you, and goodbye.