The Wüstenrot & Württembergische Group (W&W) has posted a successful first half-year 2017 and was clearly able to increase the dynamism of its business. Despite an unchanged ambitious market environment, the financial planning group increased its consolidated net profit after taxes in the first six months by 28 per cent to EUR 154.9 million (prior year period: EUR 121.0 million). In its divisions W&W achieved robust positive results. The W&W Group is expecting further spurts of growth in new business for the entire year 2017. On the basis of this development, the Executive Board, as was already announced on 30 June 2017, revised its expectations for the current year upwards and now expects to significantly exceed its prior year's net income of EUR 235 million.
“We are improving our business in nearly all areas at the moment. This development in the first half of the year is anything but a matter of course. On the one hand, it was hard work, on the other it is the first results of our measures to align our Group more clearly in a customer-oriented way. These first effects show what the W&W Group is capable of. However, it's too early to describe this as a stable trend already. We still have a long road ahead of us. What's clear is that The W&W Group has all the best prerequisites for becoming one of the winners of the recognisable industry upheaval in the coming years”, commented Jürgen A. Junker, Chairman of the Executive Board of W&W AG. “We can make good use of this tail wind when it comes to income. Not least, it will ensure that we have the leeway for carrying out the high investments required from our own resources in the course of digitisation.”
The W&W Group has begun to make far-reaching investments to improve ways to both approach and support customers in addition to digitisation. At the same time it has initiated further development in the structures and workflows within the company.
Key indicators of the Group for the first half-year 2017
- Consolidated net profit after taxes amounted to EUR 154.9 million. It was thus just shy of EUR 34 million (plus 28 per cent) over the prior-year value.
- The highest income contribution again came from property/casualty insurance. The segment increased the net income by 71 per cent to EUR 96.1 million (prior year period: EUR 56.3 million). The sustainable and risk-conscious underwriting policy pursued in this segment for years, as well as the favourable development of the damage from natural disasters led to an even more improved combined ratio (gross) of 86.2 per cent (prior-year period: 90.0 per cent).
- Compared to 2016, the profit contributions of the Home Loan and Savings Bank and Life and Health Insurance segments were slightly lower, against the backdrop of the on-going low-interest environment.
- Despite collectively bargained salary increases, the general administrative expenses were stable at EUR 534.3 million (prior-year period: EUR 533.0 million).
Performance of the divisions
Home Loan and Savings Bank
In net new business (paid-in business) with EUR 5.76 billion contract volume, Wüstenrot Home Loan and Savings was able to closely approach (-4.8 per cent) the prior-year level (prior-year period: EUR 6.05 billion). It thus clearly developed better than the market as a whole. With a market share of just under 14 per cent, Wüstenrot has been able to further consolidate its position as Germany's second-biggest building society. Gross new business according to contract volume with EUR 7.01 billion was below the very high prior-year value (EUR 7.64 billion), which had been positively influenced by the special effects of a change in rates. In construction financing, the new business in loans arranged throughout the Group increased by 8.2 per cent to EUR 2.76 billion from EUR 2.56 billion in the prior-year period.
The measures to improve the structure of the segment had a positive impact in the first half-year: The transfer of the construction financing and bond business of Wüstenrot Bank to the Wüstenrot building society – which occurred in the spring of 2017 – as well as the transfer of the savings and investment products, increased the internal efficiency by making processes, systems and products uniform. In addition, the building society now has clearly broader refinancing options. Both effects are having a positive impact on the building society's earnings situation and are also opening up prospects for growth in the area of homes and housing.
Gross premiums written in property and casualty insurance increased by another 4.6 per cent to EUR 1.122 billion (prior year: EUR 1.073 billion). New business increased by 17 per cent to EUR 140.5 million (prior-year period: EUR 120.1 million). All business segments contributed to this encouraging growth, while the corporate customer segment especially grew. The risk-conscious underwriting policy and the positive development with damages from natural disasters contributed to further improvement of the gross combined ratio – which has been in decline in recent years – by almost four percentage points to 86.2 per cent (prior-year period: 90.0 per cent).
Gross premiums written in life insurance dropped 12.3 per cent to about EUR 951 million (prior-year period: EUR 1.085 billion), due to the clear reduction in the single premium business. This is also reflected in new business, where the single premium life fell 38.2 per cent to EUR 199.3 million (prior-year period: EUR 322.5 million). In contrast, the regular premium rose by 2.8 per cent to EUR 44.0 million (prior-year period: EUR 42.8 million).
Gross premiums written in health insurance increased more than 8.1 per cent to EUR 114.9 million in the first half-year 2017 (prior-year period: EUR 106.3 million). The annual new premium grew by 61.1 per cent to EUR 5.8 million (prior-year period: EUR 3.6 million). This encouraging development was still due to the good market success of the supplementary health and long-term care rates of the Württembergische Krankenversicherung.
High financial solidity
In July 2017, the rating agency Standard & Poor's (S&P) again confirmed all ratings of the W&W Group with a stable outlook. The core companies of the W&W Group thus continue to have a rating of A-, while the holding company Wüstenrot & Württembergische AG has a BBB+ rating. Furthermore, the short-term rating of the Wüstenrot building society, which evaluates the short-term solvency of a company, was raised from “A-2” to “A-1”. The risk management of the W&W Group will continue to be classified in the “strong” category. These classifications substantiate the high financial stability of the Group.
Digital strategy headed for further implementation steps
The W&W Group continues to drive digitisation forward. W&W Digital GmbH, a joint venture between W&W AG and etventure GmbH launched in 2015, will bring its developments and its expertise into the operative areas of the financial planning group in the coming weeks. The goal now is to feed the experiences gained from the development of digital business models and digital processes to the operative business of the W&W Group. Strategic key projects such as the digital financial assistant treefin, the digital third mark launching in the second half of 2017 and the “Housing Platform” should benefit from this.
Outlook for the entire year of 2017
In view of the ongoing real estate boom in Germany, the W&W Group expects to see spurts of growth in the fields of home loan and savings and construction financing. The financial planning group also remains optimistic as to the further development of the insurance business, in particular in the property/casualty line. High investment in digitisation as part of the “W&W@2020” programme, but also in classic on-site sales, will continue. They form the foundation stone for future growth.
Although the very positive earnings performance in the first half-year 2017 does not necessarily mean that income will continue to develop through the rest of the year, the Executive Board is confident for the entire year of 2017 and confirms its statements to date. It proceeds on the assumption of a recognisable rise in net income for the Group compared to the prior-year value of EUR 235 million. In addition to the growth in new business and the favourable development in the property/casualty insurance segment, a one-time effect from a portfolio sale will also have an impact.