Wüstenrot & Württembergische AG

Quarterly Report • Nov 14, 2022

Quarterly Statement as at 30 September 2022

Wüstenrot & Württembergische AG

This is a convenient translation of the German Report. In case of any divergences, the German original is legally binding.

Wüstenrot & Württembergische AG

W&W Group (according to IFRS)

Consolidated balance sheet		30/9/2022	31/12/2021
Total assets	€ bn	66.1	75.2
Capital investments	€ bn	37.6	48.8
Senior fixed income securities	€ bn	5.4	9.0
Senior debenture bonds	€ bn	18.1	24.9
Building loans	€ bn	25.1	23.8
Liabilities to customers	€ bn	22.9	22.6
Technical provisions	€ bn	31.4	38.4
Equity	€ bn	3.6	4.9
Equity per share	€	38.42	51.72
Consolidated profit and loss statement		1/1/2022 to 30/9/2022	1/1/2021 to 30/9/2021
Net financial result (after credit risk adjustments)	€ mn	–151.7	1,732.5
Premiums/contributions earned (net)	€ mn	3,280.8	3,476.6
Insurance benefits (net)	€ mn	–1,894.3	–3,731.8
Earnings before income taxes from continued operations	€ mn	206.9	346.3
Consolidated net profit	€ mn	160.2	236.9
Total comprehensive income	€ mn	–1,221.1	–163.5
Earnings per share	€	1.72	2.51
Other information		30/9/2022	31/12/2021

Employees (full-time equivalent head count)	6,259	6,307
Employees (number of employment contracts)	7,369	7,458

Key sales figures	1/1/2022 to 30/9/2022	1/1/2021 to 30/9/2021
Group
Gross premiums written € mn	3,582.7	3,724.7
New construction financing business (including brokering for third parties) € mn	5,279.6	4,936.2
Sales of own and third-party investment funds € mn	402.8	465.2
Housing Segment
New home loan savings business (gross) € mn	13,826.6	8,608.6
New home loan savings business (net) € mn	9,192.7	7,276.5
Life and Health Insurance Segment
Gross premiums written € mn	1,620.7	1,891.7
New premiums € mn	442.3	714.4
Property/Casualty Insurance Segment
Gross premiums written € mn	1,970.0	1,844.9
New premiums (measured in terms of annual contributions to the portfolio) € mn	280.6	290.4

This Quarterly Statement has been prepared in accordance with IFRS principles as at 30 September 2021. It does not constitute a Quarterly Financial Report in accordance with IAS 34 or Financial Statements in accordance with IAS 1.

Wüstenrot & Württembergische AG Group Interim Management Report

Economic report

Group key figures

Development of business and Group position

Development of business

The W&W Group maintained the successful operating business trajectory seen in previous years in the first nine months of this year and increased its market share, despite high levels of uncertainty continuing to strain the economic environment. . The impact of the war in Ukraine, in particular the escalating energy crisis and ongoing disruptions to global supply chains caused by the coronavirus pandemic and geopolitical tensions pushed up inflation. While this resulted in considerable interest rate rises on bond markets, equities markets saw substantial price drops.

Despite these challenges, the W&W Group reported its highest quarterly net quarterly profit for 2022 in the third quarter at 64.2 million. The W&W Group thus generated good, if far lower than the above-average previous year, net profit of 160.2 million (previous year: 236.9 million) as at 30 September 2022.

Composition of consolidated net profit

Housing segment
Life and Health Insurance segment
Property/Casualty Insurance segment
All other segments
Consolidation/reconciliation
C o n s o l i d a t e d n e t p r o f i t a f t e r t a x e s

Sales-related key figures were shaped by significant growth, both in the lending and the new home loan saving business (gross) in the Housing segment, as well as a very gratifying increase in premiums written in the Property/Casualty Insurance segment. Premiums in health insurance also increased in the Life and Health Insurance segment. Premiums written in life insurance declined, primarily due to lower new single-premium business compared to the previous year.

		Change
		in %
New business total Housing (new lending & new home loan savings business (gross))
Gross premiums written (property/casualty insurance)
Gross premiums written (life and health insurance)

Supervisory Board

Ms Marika Lulay left the W&W AG Supervisory Board with effect from 9 August 2022. Effective 1 September 2022, Dr Reiner Hagemann was appointed a member of the Supervisory Board as a shareholder representative.

W&W Besser!

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■

With W&W Besser!, the W&W Group is continuing its digital transformation process, with the focus remaining on innovation and close personal service. The strategic projects were successfully advanced in the third quarter of 2022:

In the Housing division, Wüstenrot Immobilien GmbH (WI) founded its own web portal together with other property providers, which can be accessed at www.immobilie1.de. This was launched in mid-July and simplifies the often complex process of finding a property. Immobilie1 is available to sector professionals as a real estate marketplace for properties for sale or to let. At launch, more than 5,000 property brokers entered over 60,000 buildings for sale or to let on the portal.

In the Insurance division, Württembergische Lebensversicherung AG transferred the entire portfolio from the old VW/VT portfolio management system to the target system msg.Life Factory. This marked a further key step towards introducing a centralised, modern portfolio management system.

The digitalisation of Württembergische Versicherung AG sales is also continuing to make progress. The longstanding Mobile Sales Force Workplace (AAP) is successively being replaced by the modern Sales Workplace (VAP) and the new application processes for pricing, quotations and application (TAA). For example, the new dental supplementary insurance is now available to the Württembergische tied organisations and brokers only in the VAP and the TAA via parametrised links. The TAA online processes can help sales partners respond to customer requests more quickly, flexibly and efficiently.

Sustainability

Responsible action and social commitment have a long tradition in the W&W Group and are an integral part of our strategic orientation. It is based on an understanding of long-term, stability-focused corporate governance that in turn has its roots in the foundation ideals of W&W AG's main shareholder.

As part of an active approach to reduce harmful emissions in investment portfolios, carbon neutral capital investments are gradually being made, primarily in the areas of shares and corporate bonds.

The requirements outlined in the Insurance Distribution Directive (IDD) from August 2022 on incorporating sustainability criteria into customer consultations on insurance investment products were met. In the consultation, we determine whether and to what extent our customers want to take sustainability into consideration.

Financial performance

Group comprehensive income

Consolidated income statement

As at 30 September 2022, the consolidated net profit after taxes was 160.2 million (previous year: 236.9 million). The fall was largely attributable to changes in the net financial result.

The net financial result decreased significantly, coming in at – 151.7 million (previous year: 732.5 million). This is primarily the result of valuation effects. The significant rise in interest rates in the current financial year and falling equities markets led to substantial measurement losses, especially for equities, fund units and fixed-income securities. As a result, impairments also emerged in the valuation of capital investments for the account and risk of policyholders (unit-linked life insurance policies). These also reduced benefits congruently. In contrast, current net income rose gratifyingly by just under 3% to 841.6 million (previous year: 820.1 million).

All in all, net premiums earned declined to 3,280.8 (previous year: 3,476.6) million. In property/casualty insurance, rates of increase were again significant. In life and health insurance, on the other hand, premiums declined due to fewer new single-premium insurance policies.

Insurance benefits (net) came to 894.3 million (previous year: 3,731.8 million). This decrease was essentially the result of life and health insurance, as policyholders share in the declining net financial result through technical provisions. In property/casualty insurance, benefits declined despite portfolio growth. When compared over several years, the claims experience was still gratifying by and large.

Net commission income amounted to – 406.7 million (previous year: – 387.5 million). Here, higher service commissions resulting from the gratifying, all things considered, increase in the property insurance portfolio had an impact, in particular.

General administrative expenses rose only moderately compared to general price trends, increasing by 2.0% to 772.5 (previous year: 757.7) million. This upturn was primarily attributable to material costs, which increased in part due to external claims settlement costs as a result of more natural disasters in the previous year and increased investment in IT as part of our digitalisation strategy. Marketing activities also rose, whereas personnel expenses remained on par with the previous year.

Net other operating income picked up substantially to 151.3 (previous year: 14.3) million. As well as income from the disposal of a property in the Housing division, this was the result of income from settlement transactions in connection with home loan savings deposits for the first time. In addition, the far higher contribution to net income by Wüstenrot Haus- und Städtebau GmbH, had a positive impact in 2022.

Consolidated statement of comprehensive income As at 30 September 2022, total comprehensive income stood at – 221.1 million (previous year: – 163.5 million). It consists of consolidated net profit and other comprehensive income (OCI).

As at 30 September 2022, OCI stood at – 381.3 million (previous year: – 400.4 million). The rapid rise in interest rates over the course of 2022 worked to lower the market values of fixed-income securities and registered securities. Their unrealised losses amounted to – 717.9 million (previous year: – 515.9 million). On the other hand, the rise in interest rates had a positive effect on pension provisions. By contrast, actuarial gains from defined benefit plans amounted to 336.6 million (previous year: 115.5 million).

As a complement to the consolidated income statement, OCI serves to depict profit and loss that is recognised directly in equity and that results from accounting under IFRS 9. It essentially reflects the sensitivity that the assets side of our balance sheet has to interest rates, but not yet, for example, the interest rate sensitivity that underwriting has on the liabilities side. Here, the application of the new standard to account for insurance contracts, IFRS 17, is expected to reduce measurement discrepancies from 2023 onwards. Because comprehensive income is highly dependent on changes in interest rates, OCI therefore has only very limited suitability as a performance indicator for our Group at present.

Housing segment

New business

Total new business for housing purposes for urgent financing, modernisation and the accumulation of equity (total from new business (gross) and the new lending business total incl. brokering for third parties) increased sharply by 41.1% to 19.1 billion (previous year: 13.5 billion). New construction financing business was also up on the previous year at 5.3 (previous year: 4.9) billion, again representing a substantial increase in market share.

Gross new business in terms of total home loan savings contracts also achieved the best nine-month result in the company's history at 13,827 (previous year: 8,609) million.

Net new business in terms of total home loan savings contracts also increased by 26.3% to 9,193 (previous year: 7,277) million.

Wüstenrot Bausparkasse AG rigorously continued its growth course and easily outperformed the market.

New business key figures

		Change
		in %
New business total
New lending business (incl. brokering for third parties)
Gross new business home loan and savings

Financial performance

Net income in the Housing segment increased to 56.8 million (previous year: 44.0 million).

The net financial result decreased to 198.4 million (previous year: 294.9 million). This was largely attributable to falling income from disposals and lower net measurement income resulting from higher interest rates. Risk provision in customer lending business remained low.

Net commission income increased to 8.0 million (previous year: net commission expense of 4.3 million). Higher commission income from the growth in the new home loan savings business contributed to this development.

General administrative expenses came to 242.0 (previous year: 247.0) million, down on the previous year's figure. Materials costs decreased, essentially due to lower contributions for the deposit guarantee. Personnel expenses also declined.

Net other operating income climbed significantly to 117.0 (previous year: 12.7) million. This is the result of income from settlement transactions in connection with home loan savings deposits for the first time.

Life and Health Insurance segment

New business/premium development

Total premiums for new life insurance business fell to 2,376.6 (previous year: 2,721.6) million. This decline is due primarily to lower single premiums, which had risen considerably in the previous year. Total premiums for our new unit-linked insurance policies business (including Genius) increased by 6.5% to 1,095.9 (previous year: 1,029.3) million.

New business key figures

Change

in %

New premiums

Single premiums, life

Regular premiums

Net premiums in the Life and Health Insurance segment stood at 442.3 million (previous year: 714.4 million). Single-premium income decreased to 373.0 (previous year: 639.5) million. Regular premiums came to 69.3 (previous year: 74.9) million.

Gross premiums written

		Change
		in %
Segment total
Life
Health

Gross premiums written decreased to 1,620.7 million (previous year: 1,891.7 million), mainly as a result of lower single-premiums. In contrast, gross premiums written in health insurance increased.

Financial performance

Segment net income stood at – 22.5 million (previous year: 41.2 million).

The net financial result in the Life and Health Insurance segment fell to – 368.1 million (previous year: 322.0 million). This was mainly driven by the measurement result. The significant rise in interest rates in the current financial year and falling equities markets led to substantial measurement losses, especially for fixed-income securities, fund units and equities. The distortions on the capital markets also led to losses on the capital investments for unit-linked life insurance policies. These were offset by the effects on net insurance benefits.

Net premiums earned decreased to 1,695.9 million (previous year: 1,976.8 million), mainly as a result of falling single-premiums in new business.

Net insurance benefits stood at 1,096.5 million (previous year: 2,919.4 million). The fall in security prices triggered by higher interest rates and falling share prices led to lower additions to the provision for premium refunds and the provision for unit-linked life insurance policies. Through the additional interest reserve (including interest rate reinforcement), we safeguard benefits to our customers. While 329.6 million was transferred in the previous year, the rise in interest rates freed up 43.2 million in the financial year. The additional interest reserve as a whole stood at 3,204.6 million (end of the previous year: 3,247.8 million), still a very high level.

General administrative expenses fell to 177.3 million (previous year: 184.4 million). Both personnel expenses and materials costs were reduced.

Property/Casualty Insurance segment

New business/premium development

New business in terms of the annual contribution to the portfolio amounted to 280.6 million (previous year: 290.4 million). While brand new business trended downwards slightly compared with the very strong previous year, replacement business rose. Business with corporate customers grew significantly whereas business with retail customers fell compared with the previous year, which was characterised by factors including new cooperation agreements with brokers. Our digital brand Adam Riese remained successful in terms of sales.

New business key figures

		Change
		in %
Annual contribution to the portfolio
(new and replacement business)
Motor
Corporate customers
Retail customers

Gross premiums written again experienced above-market growth, increasing by 125.1 million (6.8%) to 1,970.0 million (previous year: 1,844.9 million). An increase was posted in all business segments. Especially in business with corporate customers, Württembergische's position as an SME partner was further expanded to above the market average.

Net insurance benefits increased by 23.6 million to 670.7 million (previous year: 694.3 million) despite the larger insurance portfolio. The loss ratio (gross) declined to 58.3% (previous year: 82.1%). In the previous year, storms in Germany in June and July resulted in high expenses for natural disasters in the mid nine-figure range. The loss ratio (net) went down to 58.9% (previous year: 63.0%). The expense ratio (net) also improved slightly to 25.5% (previous year: 25.8%). The combined ratio (net) was therefore a very positive 84.4% (previous year: 88.8%).

The net commission expense stood at – 230.2 million (previous year: – 216.2 million). The growth of the insurance portfolio as well as an increase in service commissions led to higher commission expenses.

General administrative expenses amounted to 286.5 million (previous year: 274.5 million). Both personnel expenses and materials costs increased. This primarily reflected advertising expenses and increased external settlement costs in connection with more natural disasters in the previous year.

Gross premiums written

		Change
		in %
Segment total
Motor
Corporate customers
Retail customers

Financial performance

Net segment income decreased slightly to 132.5 million (previous year: 133.6 million).

The net financial result stood at – 3.9 million (previous year: 91.0 million). While current net income rose, measurement income declined and so played a significant role in the lower net financial result. The significant rise in interest rates in the current financial year and falling equities markets led to substantial measurement losses, especially for equities and investment funds.

Net premiums earned continued to trend positively. They rose by 73.1 million to 1,360.2 million (previous year: 1,287.1 million). All business segments made a contribution to this development.

All other segments

"All other segments" covers the divisions that cannot be allocated to any other segment. This mainly includes W&W AG – together with its participations in Wüstenrot Immobilien GmbH, W&W Asset Management GmbH, Wüstenrot Haus- und Städtebau GmbH, and W&W brandpool GmbH – and the Group's internal service providers.

Net segment expense after taxes amounted to – 32.3 million (previous year: net segment income of 22.3 million).

The net financial result amounted to – 13.8 million (previous year: 35.7 million). A fall in net measurement income from shares and investment funds was primarily responsible for this. In contrast, current net income rose as a consequence of higher distributions.

Earned premiums rose to 237.5 million (previous year: 225.8 million). The volume ceded by Württembergische Versicherung AG to W&W AG for reinsurance within the Group increased as a result of positive premium development.

Net insurance benefits rose to 138.4 (previous year: 130.4) million as a result of extraordinary income in the previous year.

Net commission income deteriorated to – 66.7 million (previous year: – 54.9 million). This was mainly due to higher commission expenses of W&W AG for property and casualty insurance, which were incurred by reinsurance within the Group in connection with higher volumes ceded.

General administrative expenses came to 66.9 million (previous year: 55.2 million). This rise was prompted by higher materials costs. Personnel expenses, on the other hand, matched the level of the previous year.

Net other operating income rose to 41.0 (previous year: 9.2) million. Construction projects by Wüstenrot Hausund Städtebau played a significant role in this increase.

Outlook

Current environmental conditions are prompting highly volatile measurement gains and losses in the W&W Group's IFRS income statement. Nonetheless, we stick to our net profit forecast.

However, this guidance is subject to high levels of uncertainty, stemming primarily from current developments on capital and financial markets and potential economic slumps. Unforeseen, major loss events would have a negative impact on the guidance.

Wüstenrot & Württembergische AG Condensed consolidated half-year financial statements

Consolidated statement of financial position

Assets

Cash reserve
Non-current assets held for sale and discontinued operations
Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive income
of which: sold under repurchase agreements or lent under securities lending transactions
Financial assets at amortised cost
Subordinated securities and receivables
Senior debenture bonds and registered bonds
Senior fixed-income securities	–
Building loans
Other receivables
Active portfolio hedge adjustment
Positive market values from hedges
Financial assets accounted for under the equity method
Investment property
Reinsurers' portion of technical provisions
Other assets
Intangible assets
Property, plant and equipment
Inventories
Current tax assets
Deferred tax assets
Other assets
T o t a l a s s e t s

Equity and liabilities

Financial liabilities at fair value through profit or loss
Liabilities
Liabilities evidenced by certificates
Liabilities to credit institutions
Liabilities to customers
Lease liabilities
Miscellaneous liabilities
Passive portfolio hedge adjustment
Negative market values from hedges	–
Technical provisions
Other provisions
Other liabilities
Current tax liabilities
Deferred tax liabilities
Other liabilities
Subordinated capital
Equity
Share in paid-in capital attributable to shareholders of W&W AG
Share in retained earnings attributable to shareholders of W&W AG
Retained earnings
Other reserves (OCI)
Non-controlling interests in equity
T o t a l e q u i t y a n d l i a b i l i t i e s

Consolidated income statement

Current net income
Net interest income
Interest income
of which: calculated using the effective interest method
Interest expenses
Dividend income
Other current net income
Net income/expense from risk provision
Income from credit risk adjustments
Expenses for credit risk adjustments
Net measurement gain/loss
Measurement gains
Measurement losses
Net income from disposals
Income from disposals
Expenses from disposals
of which: gains/losses from financial assets at amortised cost
N e t f i n a n c i a l r e s u l t
of which: net income/expense from financial assets accounted for under the equity method
Earned premiums (net)
Earned premiums (gross)
Premiums ceded to reinsurers
Insurance benefits (net)
Insurance benefits (gross)
Received insurance premiums
Net commission income
Commission income
Commission expenses
C a r r y o v e r / t r a n s f e r

C a r r y o v e r / t r a n s f e r
General administrative expenses
Personnel expenses
Materials costs
Depreciation/amortisation
Net other operating income/expense
Income from disposals from inventories (property development business)
Other taxes
E a r n i n g s b e f o r e i n c o m e t a x e s f r o m c o n t i n u e d o p e r a t i o n s
Of which sales revenues
Income taxes
C o n s o l i d a t e d n e t p r o f i t
Result attributable to shareholders of W&W AG
Result attributable to non-controlling interests

Consolidated statement of comprehensive income

Consolidated net profit
Other comprehensive income (OCI)
Elements not reclassified to the consolidated income statement:
Actuarial gains/losses (–) from pension commitments (gross)
Provision for deferred premium refunds
Deferred taxes
Actuarial gains/losses (–) from pension commitments (net)
Elements subsequently reclassified to the consolidated income statement:
Unrealised gains/losses (–) from financial assets at fair value through other comprehensive income (OCI; gross)
Provision for deferred premium refunds
Deferred taxes
Unrealised gains/losses (–) from financial assets at fair value through other comprehensive income (OCI;
net)
Total other comprehensive income (OCI; gross)
Total provision for deferred premium refunds
Total deferred taxes
Total other comprehensive income (OCI; net)
T o t a l c o m p r e h e n s i v e i n c o m e f o r t h e p e r i o d
Result attributable to shareholders of W&W AG
Result attributable to non-controlling interests

Wüstenrot & Württembergische AG

Segment income statement

		Housing	Life and Health Insurance
Current net income
Net income/expense from risk provision
Net measurement gain/loss
Net income from disposals
Net financial result
of which: net income/expense from financial assets accounted for under the equity method	–	–
Earned premiums (net)	–	–
Insurance benefits (net)	–	–
Net commission income
General administrative expenses
Net other operating income/expense
Segment net income before income taxes from continued operations
Income taxes
S e g m e n t n e t i n c o m e a f t e r t a x e s
The column "Consolidation/reconciliation" includes the effects of consolidation between the segments and the reconciliation of segment-internal valuations with the Group valuation.

Casualty insurance	Property/	Total for reportable segments	All other segments		Consolidation/ reconciliation	Group
				–

Wüstenrot & Württembergische AG Imprint and contact

Publisher

Wüstenrot & Württembergische AG 70163 Stuttgart Germany phone + 49 711 662-0 www.ww-ag.com

Production

W&W Service GmbH, Stuttgart

Investor Relations

The financial reports of the W&W Group are available at www.ww-ag.com/reports. In case of any divergences, the German original is legally binding.

E-mail: ir@ww-ag.com

Investor relations hotline: + 49 711 662-725252

W&W AG is member of W&W AG is listed in

W&WQ3E2022