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AWD reorganises business in the UK

12.11.2008

- Revenue of German AWD-companies slightly higher - Decision on reorganization of UK business segment - Stable performance in Switzerland, Austria affected by real estate crisis - CEE strongest growth region of the AWD group - Advisers gain 133,100 new customers during reporting period - Recruiting campaign successful

The Board of Management of AWD Holding AG has decided to reorganize the business segment AWD UK. The wide-ranging measures to be taken include the concentration of business in the UK on the areas of Wealth Management and Corporate Pensions Consulting. In the context of the refocus, Home Finance – specialized on mortgage consulting - and other marginal activities are to be discontinued or sold. Home Finance has suffered in particular from the consequences of the international property and financial crisis. Minor business activities could be merged with other operating units.

In the core market United Kingdom AWD reached in the first nine month 2008 revenues of € 70.1 million compared with € 111.2 million in the comparable previous year period. Therefore AWD decided – following further revenue declines and operating losses in the third quarter in UK – to pursue the hard way of discontinuing and closing of some activities of AWD UK which investors demanded. For the remaining business activities Wealth Management and Corporate Pensions Consulting AWD aims for positive result already in 2009 following the introduced restructuring measures.

The expected restructuring expenditures of AWD UK will burden the earnings of the AWD Group in full-year 2008 in the one-off amount of around € 27 million. The restructuring expenditures as well as this year’s operating losses of AWD UK will burden AWD group earnings with approximately € 40 million. Due to the high one-off costs of the restructuring of AWD UK the total group net profit for the AWD Group for the full year 2008 will be only slightly positive – from today’s point of view. Due to the necessary measures the AWD Holding AG most likely will not pay a dividend to its shareholders for the year 2008.

“This is a hard step which has been demanded by the market. Therefore we focus also in the United Kingdom on our core business of independent financial advice,” stated Carsten Maschmeyer, founder and Co-CEO of the AWD Group.

The enormous losses at the capital markets and current fears of recession are still causing private customers to adopt a changed saving and investment behaviour: they prefer very security-focused and liquidity-oriented financial products. In total the AWD Group’s revenue amounted to €493.0 million, compared with €563.3 million in the first three quarters of 2007. The share of up-front commission accounted for by pension-planning and risk-protection products, the advisory focus of the AWD Group, increased to 79.1%, which is 4.4 percentage points more than in the prior-year period. Despite the high investments into the recruiting program as well as the operating losses of AWD UK, the AWD Group’s operating profit (EBIT) amounted to €31.2 million for the first nine months 2008, compared with €62.2 million in the prior-year period.

Despite the wide spread reluctant of customers in the current global financial crisis, revenues of the AWD Group declined solely from €175.1 million to €157.2 million (-10.2%) in the third quarter 2008. Q3 2008 operating profit (EBIT) of €7.1 million was significant below last year’s level of €19.2 million but slightly higher than in Q2 2008 (€6.3 million). Thereby, AWD achieved a positive result in times when other financial groups had to make use of guaranties from government or posted billions of depreciations.

The revenue trend in the Germany region was positive. In contrast to the market, AWD increased its revenues in its most important and largest market by 1.9% to €280.0 million in the first nine months 2008. In the core region Switzerland revenues of €51.1 million € were very much at last year’s level (€51.9 million). The region Austria & CEE achieved revenues of €91.9 million (9 M 2007: € 125.5 million €). The development in the region differs by country. The development in Austria was dominated by the sharp price decline of share prices and the value of real estate shares. In contrast, AWD achieved a double digit revenue growth in the CEE countries.

In a challenging market, the AWD Group’s most important value driver, the number of advisers, developed satisfactorily. Together with Deutsche Proventus AG, AWD had a total of 6,304 advisers at 30 September 2008. The success of the recruitment offensive can be seen from the Group-wide addition of approximately 1,000 future advisers in the third quarter of 2008; about 600 of that total were gained in the Germany region. At the end of the reporting period, the Group had a total of 2,700 trainee advisers, which is 1,200 more than a year earlier. “From today’s point of view we are confident that the AWD Group will have all together 8.000 advisers and active consultants by the end of 2008”, stated Carsten Maschmeyer.

The advisers of the AWD Group gained 133,100 new customers during the reporting period and thus further strengthened the Group’s market presence. This is particularly pleasing because many private customers have lost confidence in banking and insurance products due to the international financial crisis. Approximately 50% of the new customers are in the domestic German market, but the other regions of the AWD Group also contributed towards this considerable growth of the customer base.

In total, AWD’s advisers’ assisted 332,000 customers with the optimisation of their finances from January to September 2008 – a clear sign of the success of AWD’s holistic and needs-oriented advice. This is also demonstrated by the number of 198,900 core customers who repeatedly sought AWD’s advice during that period. “The growth shows that the need for individual financial planning is by no means exhausted,” explained Manfred Behrens, Co-CEO of the AWD Group.
The dramatic worsening of the global financial market crisis in recent weeks, increasing regulatory requirements and the rising demands placed upon advisory quality are leading to continuing consolidation in the financial services sector.

In Germany AWD continued - as announced - the market consolidation in the third Quarter 2008. Only a few months after announcing its intention to acquire, AWD successfully completed the full takeover of the country’s tenth-largest financial sales company, Deutsche Proventus AG. After at first acquiring an equity interest of 50.6% in spring, AWD secured the remaining 49.4% of AXA Insurance in recent weeks.

“We will use the current consolidation to strengthen and expand our market position as the leading independent financial adviser.” stated Carsten Maschmeyer.

A presentation and the Interim Report 9M 2008 can be downloaded at www.AWD-Gruppe.de

Contact

Béla Anda
Public Relations

Phone +49 511 90 20 53 87
Fax +49 511 9020 5330
presse@awd.de

Hartmuth Höhn
Investor Relations

Phone +49 551 90 20 56 60
Fax +49 511 90 20 51 21
investor.relations@awd.de

Key figures for the AWD Group 9M 2008

If this publication contains any forecasts or expectations or if our statements refer to the future, such statements can involve risks and uncertainties. We therefore cannot guarantee that the expectations will prove to be correct. Actual events and developments can differ significantly from the expectations and assumptions expressed herein. The factors that can cause such deviations include changes in the general economic situation and the competitive situation, particularly in the core business areas and markets, exchange-rate and interest-rate fluctuations, changes in national and international legislation, especially pertaining to tax regulations, and changes in investment or business strategy. The company does not assume any obligations to update the statements made in this publication.
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