Significant events that affect business
Financial and economic crisis has a negative impact on revenue
We have identified three factors that had a significant effect on our total revenue in the last financial year. The first was the financial and economic crisis (see also the section entitled “Overall economic situation”), which made many of our clients extremely reluctant to sign oldage provision contracts and make longer-term investment decisions in the area of wealth management. Revenue in these two areas fell by € 44.3 million, explaining as much as 70 % of the € 63.1 million decline in total revenue. The positive trend in health insurance, loans and mortgages, and non-life insurance was not enough to offset the decline. Due to the general drop in interest rates and the fall in client deposits, we also suffered a € 9.4 million decline in interest income. A further factor to bear in mind is that the final increase in subsidised contributions to the Riester pension had a positive impact on prior-year revenue from old-age provision.
Successful costcutting programme*
Fixed costs (all figures in € million)
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Total revenues in continuing operations (all figures in € million)
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Successful cost-cutting programme limits the decline in earnings
In order to protect our earnings from the anticipated negative impacts on revenue, a cost-cutting programme was launched at the beginning of 2009 and implemented successfully during the course of the year. Our aim here was to reduce our fixed cost base (personnel expenses, depreciation, amortisation and impairment, and other operating expenses excluding both one-off items and acquisition-related cost increases) by € 34 million to approximately € 280 million by the end of 2010. In the past financial year, we planned to cut costs to approximately € 290 million, an interim target that we met and exceeded. Excluding one-off items and acquisition-related cost increases, we achieved cost savings of € 28,7 million in 2009.
In financial year 2009, one-off items included the costs we incurred in connection with Swiss Life’s acquisition of an equity stake (€ 3.0 million) and one-off restructuring expenses at subsidiaries (€ 2.0 million).
Finance cost shows a significant improvement
Another factor helping to stabilise our results of operations was the significant improvement in our finance cost. This fell from the € – 9.5 million reported in 2008 to € – 2.5 million in the reporting period. In 2007, our subsidiary Feri Finance AG sold one of its second tier subsidiaries. For this reason, in the previous year, the dividend payment to the remaining minority shareholders in Feri Finance AG reached € 7.8 million. In the reporting period, a dividend of just € 2.4 million was distributed for financial year 2008.
Breakdown of revenue (continuing operations)
| All figures in € million | 2009 | 2008 | Change |
|---|---|---|---|
| Old-age provision | 311.1 | 344.8 | – 9.8 % |
| Wealth management | 71.6 | 82.2 | – 12.9 % |
| Health insurance | 46.5 | 45.9 | 1.3 % |
| Non-life insurance | 26.5 | 23.1 | 14.7 % |
| Loans and mortgages | 12.6 | 11.6 | 8.6 % |
| Other commissions and fees | 4.1 | 4.0 | 2.5 % |
| Commission and fees | 472.4 | 511.5 | – 7.6 % |
| Interest income | 31.4 | 40.8 | – 23.0 % |
| Total | 503.8 | 552.3 | – 8.8 % |
The improvement in earnings from discontinued operations also helped to stabilise our results of operations. Mainly as a result of the successful sale of our subsidiary in Austria and the reversal of unnecessary provisions relating to the sale of MLP Lebensversicherung AG in 2005, we were able to raise earnings from discontinued operations by € 3.1 million to € – 3.0 million.