The Wüstenrot & Württembergische Group (W&W) can look back on a successful 2017 financial year. With consolidated net profit after taxes coming in at EUR 258 million, the Group surpassed the figure for the previous year by 9.6%, despite having planned for earnings at the level of the previous year. As a result, the Executive Board and the Supervisory Board are proposing to the Annual General Meeting that the dividend for the 2017 financial year be increased to EUR 0.65 per share (previous year: EUR 0.60).
In terms of strategy, the financial planning specialist successfully launched a number of measures relating to the digital transformation of the Group. Between 2018 and 2020, the W&W Group is planning to invest approximately EUR 820 million in digital products and processes, but also in the further development of the skills of its employees. This is the largest investment programme in the company's history.
“The business success that we enjoyed last year, which was by no means a certainty in view of tough competition and the market environment, is proof of the Group’s solid foundation and at the same time the result of changes that we've implemented,” said Jürgen A. Junker, Chairman of the Executive Board of W&W AG. “In 2017 we substantially strengthened our brick-and-mortar presence and digital services, successfully introduced new products and streamlined our structures and processes. With everything we do, we pursue a single objective: keeping pace with the changing requirements of our customers and continuously increasing the benefits for them.”
Key indicators of the Group for 2017
The largest contributor to consolidated net profit, which totalled EUR 258 million, was once again the property/casualty insurance segment, which posted very good net underwriting income of EUR 125.8 million (previous year: EUR 108.3 million). At 90.7%, the segment's combined ratio remained at a good level (2016: 90.1%).
Consolidated net financial income increased slightly to EUR 1.83 billion (2016: EUR 1.82 billion). In this regard, while net income did not grow robustly due to the environment of low interest rates, impairments of financial instruments declined, and the performance of capital investments for unit-linked life insurance policies improved.
Benefits paid under insurance contracts fell slightly to EUR 4.03 billion (2016: EUR 4.08 billion).
General administrative expenses rose moderately by 2.2% to EUR 1.10 billion (previous year: EUR 1.08 billion). In this regard, investments in future-oriented projects, like the digital brand “Adam Riese”, resulted in only a minor increase in personnel costs. In 2017 the Group met its target of increasing productivity by 5% annually.
Performance of the operational divisions in 2017
Home Loan and Savings Bank
At Wüstenrot Bausparkasse AG new home loan savings business (gross) came in at EUR 13.6 billion, essentially the same level as the previous year, which was positively influenced by the “Wüstenrot Bausparen” plan introduced that year. Net new business stood at EUR 11.5 billion, and while this was slightly below the previous year, the result outperformed the market. Thus, on whole, Wüstenrot Bausparkasse AG again gained market shares and solidified its position as the number two in the industry in Germany.
New business in construction financing increased Group-wide by 2.4% to EUR 5.5 billion, thus outperforming the market as it did the previous year.
In property/casualty insurance, Württembergische Versicherung AG was able to increase new business by 11.6% to EUR 232 million, with all segments – motor, corporate customers, retail customers – posting growth. Gross premiums written rose further by 4.3% to EUR 1.75 billion (2016: EUR 1.68 billion). The new digital brand “Adam Riese” had a successful launch.
In life insurance new business declined, primarily as a result of a significant fall in single-premium business. Also having an effect was the legally mandated lowering of the maximum interest rate that life insurers may apply when calculating provisions for future policy benefits, which went into effect on 1 January 2017. As a result, gross premiums written dropped by 9.8% to EUR 1.9 billion (2016: EUR 2.1 billion).
By contrast, health insurance continued its growth from the previous year and increased gross premiums written by 7.5% to EUR 232 million. This encouraging development was again the result of the sustained good market successes of the supplementary health and long-term care plans.
Digital transformation picks up pace
In addition to measures to strengthen the two mobile sales force organisations and sales collaborations, the W&W Group successfully implemented numerous initiatives in 2017 and in the first months of this year designed to bring about the digital transformation of the Group, such as:
- In October 2017, the new digital brand “Adam Riese” launched on the insurance market. This platform enables customers to obtain basic products simply and conveniently. They are sold digitally to customers directly or through agents and comparison sites. “Adam Riese” is thus directly aimed at an internet-savvy target group that does not necessarily require personal assistance at a branch. The feedback from agents and aggregators concerning the quality of the product and the website has been very positive with respect to clarity and understandability.
- The financial assistant “FinanzGuide” launched early this year. This app enables customers to view, manage and optimise their personal insurance, home loan savings and banking portfolio with their smartphone, make bank transfers and request products.
- Also in early 2018, the new Web-based residential platform “Wüstenrot Wohnwelt” went live. It provides all important information on the topics of “building or buying”, “renting”, “selling or renting out”, “renovating” and “senior-friendly living”. Wohnwelt thus constitutes an additional digital service for all questions relating to real estate, one that goes beyond the actual financial products and services.
- W&W will soon be introducing ”NIST”, a digital financial assistant for property purchases. It is designed to be the customer’s digital companion, offering assistance from the start of a property search to the conclusion of sale. Upon request, potential buyers can also get assistance from a personal advisor with years of industry expertise.
In 2017 the W&W Group strengthened not only its digital sales and communication channels but also its brick-and-mortar presence. This is because the company believes that the centrepiece of its business is and remains high-performance customer assistance, i.e. expert service and advice at retail locations. For instance, the sales format “Tandem” was significantly expanded. It pools our home loan savings and insurance expertise under one roof at a customer advisory centre. More than 500 mobile sales force partners are now working on this basis.
Chairman of the Executive Board Jürgen A. Junker: “Financial services providers will be forced to deal with a massive upheaval over the next several years. Competition will intensify still further, new players will enter the market and customer behaviour will continue to change. We have the strategic advantage of being able to meet these challenges from a position of strength. Our explicit goal is to have the W&W Group emerge as one of the winners from the upheaval in the financial industry. In this regard, it is essential that we be faster, more creative, more courageous and more focused on our customers than our competitors are – simply, a little bit better each day.”
Outlook for the 2018 financial year
In view of the positive macroeconomic conditions and the advances made in the W&W Group, the Executive Board is in principle confident that in 2018 the company will be able to build on the good operational performance achieved in 2017. But because of the high additional investments, primarily in digital transformation, the Group will not be able to attain the very good net profit generated in 2017. W&W nevertheless expects that net profit will come in about EUR 200 million and thus remain on a solid level. The W&W Group continues to adhere to its long-term goal of sustainably achievable net profit in the range of EUR 220-250 million.