Head of OVB: ‘I consider this to be one of the biggest challenges for the industry’

The financial services provider OVB successfully increased sales and the number of customers last year. We spoke to CEO Mario Freis and IT Director Heinrich Fritzlar about various subjects including the development of the Cologne-based company, the declining level of business in Germany, new business models and prospects in the brokerage market.

Sales increased by 6.7% on the previous year. How sustainable do you think this growth is, especially in light of the current economic challenges and the high inflation rate?

Mario Freis: I’d first like to say that we are delighted to have significantly increased our brokerage income in the past financial year. We also consider this growth to be sustainable because we achieved record sales for the fourth time in a row.

Against a backdrop of inflation-related cost increases, we are seeing noticeable restraint in individual customer segments. At the same time, we have also noticed an increased need for advice among our customers – after all, rarely have they been faced with so many challenges simultaneously. In this environment, we see ourselves as a trustworthy partner at our customers’ side. We expect the positive trend in sales to continue. We expect our growth momentum to increase further in the 2024 financial year.

EBIT fell by 19.0% on the previous year. What were the main factors behind this decline, and what measures are you taking to increase profitability in the coming years?

Mario Freis: OVB successfully completed its »OVB Evolution 2022« strategy period in 2022.

During this five-year period, OVB made considerable progress and increased its EBIT by almost 38% to €22.0 million. In 2023, our EBIT was on target at €17.8 million. The reason for the lower planning figure was the foreseeable inflation-related cost increases, in particular for increasing training and sales events, personnel costs and consultancy services. In the Germany segment, we significantly increased expenditure on digitalisation and training, which had an impact on earnings performance. In the Southern and Western Europe region, this was due to not only investments in sales expansion but also higher personnel expenses. Price increases meant that we had higher costs in Central and Eastern Europe, but we more than compensated for these through above-average high sales growth.

It goes without saying that we are aiming to further increase our profitability. As inflation rates are falling across Europe and our growth momentum continues to increase, we are optimistic that we will increase our operating result over the coming years, including against the backdrop of further targeted investments in the current corporate strategy »OVB Excellence 2027«.

Consolidated net income after minority interests decreased by 2.7%.
How does this affect your dividend policy and, above all, your investment plans?

Mario Freis: Based on our share price of €18.80 at the end of the 2023 financial year and our dividend proposal to the Annual General Meeting of €0.90 per share, this gives an attractive dividend yield of 4.8%. We therefore remain reliable and offer a high payout ratio – including compared with the market – and are characterised by dividend continuity.

Our financial stability is the foundation for necessary investments in OVB’s further development and, in turn, for our company’s ability to act and its future viability. Our balance sheet structure is extremely solid. We have a good equity base and high liquidity, which enables us to make increasing investments.

The number of customers in the Group grew by 5.4%. In Germany, however, the figure fell. How do you assess this development?

Mario Freis: We have been continuously increasing the number of customers at Group level for more than a decade and are satisfied with the growth rates in this area. We now serve 4.50 million customers across the Group, which marks a new record. We recorded an increase of 5.5% in Southern and Western Europe, and even expanded our customer base in Central and Eastern Europe by as much as 6.7%. At -0.5%, the decline in Germany was slight and due mainly to demographic effects. The almost 55-year history of OVB Germany means that numerous contracts are about to expire, allowing many of our customers to finally enjoy the benefits they have saved. In addition, the significant decline in the financing business last year led to lower new customer growth in the portfolio. Of course, our aim is to increase the number of customers we serve in our home market as well. At the same time, however, we are also increasingly utilising the potential from cross-selling and upselling in our customer base.

Business in Germany declined slightly overall. What are the reasons for this?

Mario Freis: The rise in interest rates has led to a significant decline in financing business across the sector. Despite double-digit growth in the product areas of private pension provision, health insurance and property insurance, we were unable to fully compensate for this.

However, we gained significant momentum in the second half of 2023 and have already recorded growth on the same period in the previous year. We now want to use this momentum. We are highly confident that we will achieve slight sales growth in Germany over the course of the year. In the Germany segment, the development of the operating result in 2024 will continue to be influenced by the sharp increase in expenditure on digitalisation and the systematic training and development of our next generation of managers.

What specific measures are you taking to improve performance in regions that are falling short of expectations?

Mario Freis: In the second half of 2023, we already managed to achieve an increase in sales in all three segments. This is another reason why we anticipate growth in all regional segments on the earnings side in 2024. Our corporate strategy »OVB Excellence 2027« and the national strategies derived from it focus on further growth and efficiency improvements and the associated increase in profitability.

Given the importance of digitalisation for future viability, how much are you investing in technological innovations and digital platforms to increase efficiency and tap into new customer segments?

Heinrich Fritzlar: OVB has been making significant investments in its digital solutions and platforms for many years in order to optimally support the daily work of our financial advisors with powerful, state-of-the-art applications.

First and foremost is the central digital workplace, where all important information and functions – from task and appointment planning to CRM functionalities for optimal customer advice and support, along with a wide range of other useful information and topics – are clearly summarised.

Accurate and up-to-date reports are extremely important in sales. We rely on our European Business Intelligence platform, which is regularly accessed by many thousands of users.

An extremely important solution for our sales team is our state-of-the-art training and further education platform, which offers a range of e-learning courses. From the onboarding process and professional induction to the provision of learning content for training and further education, this provides optimum support for the personal development processes of our financial advisors. These and all other applications are of course multilingual and so can be used internationally.

All our applications can be used securely and efficiently in different countries because we of course also continuously invest in cyber security. Hosting a private cloud allows us to optimally address important topics such as cyber security. So in addition to the efficiency of the platforms, we are setting important Group standards that not only ensure the security of our data but also give our customers the confidence that their personal data is protected in the best possible way.

What technological innovations can help OVB to further improve its services and develop new business models in the future?

Heinrich Fritzlar: As IT Director, I think artificial intelligence and large language models will be the driving forces behind modern IT strategies. What we have seen here in just the last year and a half is very impressive. At OVB, for example, we already use AI for portfolio management at selected national subsidiaries to calculate the probability of closing.

In my opinion, a company's technological agility forms the foundation for the rapid integration of innovative technologies.

This means that data storage, systems and applications are structured such that they can flexibly accommodate new technologies.

Our approach here at OVB to the European data centre is comparable to that of leading financial institutions, which operate in a dynamic regulatory environment and so have to manage existing systems and adapt new technologies in a timely manner.

In the future, I see the potential in large action models, which will build on the understanding of large language models and be capable of performing intelligent actions. This will revolutionise interaction with software, redefine the user experience and better represent the customer journey.

A range of sustainability initiatives were presented in the reporting year. Please could you explain how these initiatives specifically contribute to value creation and how they are in line with the company's financial targets?

Mario Freis: Sustainability is an integral part of our »OVB Excellence 2027« corporate strategy. Business as a whole has a duty to take responsibility, and every stakeholder must play their part in the transition to a low-emission and resource-efficient economy. Looking specifically at the financial sector, the aim is to reorient financial flows and increasingly redirect them towards climate- and transformation-friendly economic activities. We must and want to make our contribution in this regard.

One of our main objectives in the short to medium term is to further expand our product portfolio to include ESG-compliant offerings. Our customers – especially the younger generations – want sustainable product solutions. By consistently focussing on these needs of the younger generations, our main target group, we also want to exploit the growth potential of our sustainability strategy.

In view of the intense competition in the financial brokerage market, how does OVB differentiate itself from other providers and what measures are you planning to secure its competitiveness?

Mario Freis: We provide advice according to the bancassurance model in 16 European countries – a clear USP in the industry. This offers our financial brokers the opportunity to pursue an international career and benefit from a cross-border exchange of experience. We are continuing to push our international expansion within Europe.

Our stock market listing is also something that differentiates us from most other providers of financial services. Our company fulfils the transparency requirements of the Prime Standard of the Frankfurt Stock Exchange with the highest transparency requirements in Europe and the obligation to provide detailed explanations on corporate governance in the company. Being listed on the stock exchange with three well-positioned insurance companies as major shareholders offers our sales organisation security because we are not dependent on the decisions of a single investor or a few private individuals. This includes stability and the ability to pursue long-term goals.

What does this mean specifically for financial intermediaries?

Mario Freis: As a fair and reliable partner, we have been offering a highly competitive environment for committed and entrepreneurial managers for almost 55 years. This includes an existing infrastructure and a strong network. Our transparent contracts offer performance-related remuneration with the opportunity to earn an above-average income. A supplementary contract for managers protects our financial advisors against a wide range of risks. OVB also offers a diverse range of other services. As a quintessentially European company, OVB promotes careers across borders. There are numerous examples of internationally active sales executives who have a network in another country for a variety of reasons and use it to do business there as well.

What are the advantages of all this for your customers?

Mario Freis: The needs of our customers are at the centre of »OVB Excellence 2027«. Our financial intermediaries determine their wishes and goals, protect them against a variety of risks using the bancassurance advisory approach and help them to achieve their personal wishes and goals. OVB has a very competitive range of partners and products throughout Europe. Our Premium Select strategy sets the guidelines for selecting service-orientated and solvent product partners and ensures a systematic exchange of experience at an international level. We analyse a number of innovative approaches and best practices that will benefit us when expanding the product range in other national subsidiaries.

We consider the stock exchange listing of our shares and the associated fulfilment of the highest international transparency requirements to provide a confirmation of quality for our customers, which creates trust and puts us on a par with the largest German and international groups.

The number of financial advisors has increased by 2.1%. Do you see this as a challenge for your business model, and how do you intend to attract more financial intermediaries?

Mario Freis: I consider this to be one of the biggest challenges for the industry. Across Europe, many financial sales organisations are struggling with recruitment and ageing. However, OVB has a real strength in attracting young people to work as self-employed financial advisors and, as people from outside the industry, training them professionally, licensing them and developing them into entrepreneurial managers. Key aspects that characterise our sales teams throughout Europe include fair dealings with mutual appreciation and a strong team spirit. There is also the strong will to integrate, which connects people with very different personal and professional backgrounds, from different countries, from young to old. This results in a good mix of financial advisors with many years of experience and junior advisors who find it easy to reach out to the younger generations. OVB has no problems bringing in new talent.

We have continuously expanded our sales team across Europe since 2018. The financial brokerage profession is diverse and sustainable. Personal responsibility, flexible working hours, good career and earning opportunities and extensive further training programmes make the job highly attractive. Our financial advisors provide a valuable societal service that is becoming even more relevant in economically challenging times.

What specific initiatives and programmes does your company have in place to promote the training and further education of financial advisors and ensure the provision of high quality advice?

Mario Freis: We invest in the continuous training and further education of our financial advisors so that we can offer the best possible advice. We provide the necessary technical expertise with a systematic induction programme and our high-quality licensing options. With a special support programme, we support those with second jobs after they join us by providing a variety of measures and targeted investments and support them on their path to working in this area full-time and becoming successful young entrepreneurs. The financial advisors working for our German subsidiary OVB Vermögensberatung AG, for example, recently demonstrated their advisory quality in 2023 when they were honoured in Germany's leading competition for client orientation and service quality. This demonstrates that our offerings such as OVB TV, a wide range of online and face-to-face training courses – regularly centralised on the OVB Campus – and other special career seminars, including individual coaching for potential future managers, bring great benefits. And that's not all, because our sales managers then have the opportunity to refine their skill sets in our international training platforms.

From Björn Bergfeld