Hypoport SE (HYQ) Earnings Call Transcript

Dear ladies and gentlemen, welcome to the webcast results Q2 2023 of Hypoport SE. On our customers' request this conference will be recorded. [Operator Instructions]. I'll now hand you over to Ronald Slabke, who will lead you through this conference. Please go ahead.

Yes, welcome from my side as well to the Q2 -- to the presentation of the Q2 numbers of 2023. As you are aware, we are digitalizing 3 industries, the credit, real estate and insurance in Germany. Our routes are the German mortgage business. And with the current circumstances, we are in a special market environment. We were talking about it a lot but be aware, there are other business models other -- I'll talk about the market development there when I present the numbers of these businesses, but let's start to understand what's happening in general. When you look on our Group, 4 segments. The largest one is credit industry, it's core in the mortgage business, private clients as well are mortgage-linked. Insurance industry is something else and so stable market environment. Real estate is growing, but as well linked to the housing market and the digital mortgages. Overall, our Group is growing. All business models are gaining market share in their markets, but the markets are pretty different right now. So when we look on the numbers of the different units, you can see that credit is performing pretty well in the second quarter, plus 2% in revenue. Private client, together with the mortgage market lost some revenue. Real estate was a negative surprise this quarter, and we'll talk about this in more detail. And insurance here we see a seasonal effect overall, it performed pretty well in the second quarter. In total, it mean for the Group, a decline in revenue, more or less a stable gross profit, but we lost EUR 2 million in gross profit and this you see in our profitability levels. So we kept our cost base firm and we managed our cost base pretty well. But the special circumstances led to a decline in profitability. So there's a negative EBITDA of EUR 2.5 million, unfortunately, after a solid black number in the first quarter. So how it happened? We will talk about it. Okay. Let's start with our -- the core topic for Hypoport, the mortgage market and what's going on there. In general, this is already good news. We see a recovery of the underlying market dynamics. So everything indicates that we saw the bottoming in the fourth quarter last year and the recovery of the first quarter continues, if not something especially what has happened. So long-term [indiscernible] the German population is growing. In the last 10 years, it was growing from 80 million to 84 million. This year, we see already a net migration, again, of a couple of hundred thousand people, roughly 200,000 in the first half of the year. At the end of the year, we may end up again with close to 0.5 million net migration and then increased population again. This increases demand for housing. And thanks to German housing construction regulation, we don't build enough. We were up building 300,000 units per year from a depressing 150,000 units 10 years ago. And right now, everything slows down again and the new construction volume is declining. And it's predictable for the next 3 years already that we will see a decline in finished housing -- finished construction here in Germany. So the opposite happens to the interest of the people. 74% of the whole population of all households would prefer to be property owner. And this compared to just 42% which owns actually their property. So there is a 30% uplift, but in current situation and let's call it wishful thinking of the population. The reason for this is as well linked to the renting market. We see that the regulation of the last 10 years, the interest change and the core direction of regulation squeezes the renting market and there is more or less no supply to the renting market anymore. Even an active migration from renting to home ownership, we currently see as a starting effect. Rents increased sharply in the last 2 years by 90% as an average in the metropolitan areas even more. In Munich or Berlin, we see double-digit rent basis within 12 months now because of lack of supply and this squeezed market. The overall supply side is down by 30%, but it wasn't already a lot of supply there in 2020. So you can really be sure it's more or less impossible for an average or even high-income household to find an appropriate renting apartment for their needs. On the other side, to acquire home ownership, we have a stable environment recently. Since September last year, the interest rates for 10 years fixed mortgage is stable, around 3% to 4%. And since January this year, real estate prices in German average is stable. So in general, the core situation should lead to more and more people acquiring home ownership because of the general environment. It doesn't happen, and we will come to this why. Okay, first of all, the 74% interest in home ownership is still under the presentation because 12% say, they didn't decide. Only 14% of Germans say renting is my long-term choice and they do this because they are not aware of the risk of renting in the current market environment. The risk of increasing rents is high, the risk of losing your home because of privatization is high. And if you signed a new contract in the last years, the probability that you have an indexed rent and with the current inflation outlook, the fast growth of your current rent is high as well. You can say, if you want to have a nice home in Germany in the 5 to 10 years, you need to acquire it. You will not be able to rent it anymore. This is -- this was a great time in the past in the 2010 that you could rent nice places. In the future, you can only rent if it's fine for you that you just sleep there. That it's just a roof, you can sleep there. If you want a nice home, you will have to buy it. Because nobody is going to rent this anymore because it's just not -- it doesn't make sense from a financial perspective for the landlord because of the regulation. So in general, Germans buy because of trigger event. The typical trigger event is the expectation of children or actually the birth of children followed by things like divorce, change of your job in a completely different metropolitan area. But these are overly minor events. Core events are children and when you look on the current development and what's going on in the market, it's relevant to notice that the birth rate is on a higher level than 10 years ago, stayed in Germany. Thanks to the net migration and the migration of especially young people to Germany, we see more births in Germany and with this more trigger events for families to consider buying something. What is relevant for this market as well is that the boomer generation, so highly skilled workers today 60-plus are systematically leaving the workforce market and enabling additional migration, but as salary increases for the younger generations. And -- so we have a pretty low unemployment rate and especially under-skilled workers, it's challenging to be unemployed in Germany and even to get unemployed because of a pretty stable economy and a very attractive labor market. So you have a trigger event, you have a stable income. You see that the renting market is closed so that there is no supply side on the renting market anymore. And for the existing ones, the quality goes down and the prices goes up. Your choice is to consider buying, especially when you feel more and more secure. Last year, we had a situation where a lots of crisis are occurred parallel. So the Russian aggression against Ukraine, problems with the energy prices, sharp increase there. Inflation is coming up, interest rates going up so there was a high level of uncertainty for families. This changed now. So there's -- more and more of them start to -- and checking out what they actually are able to afford. And this is something which is normalizing right now. Everything is increasing, income level is decreasing, rents as a -- what is it in alternative, it takes for housing, it gets more and more expensive to buy in a stable price market with stable interest rates. Even then it's got more expensive than it was a couple of years ago. So talking about affordability in the German housing market. The -- behind lays a period of extremely high affordability. So housing in Germany was cheap, it was for a long time, cheap from the price tag for properties. And it was additionally cheap from mortgage rates. So we saw mortgage rates of just 1% and still pretty normal price tax around 2015, 2016. After this, the prices start to rise. And for now -- or roughly a 1.5 year ago, we saw a sharp jump in interest rates to the current level of 3% to 4%. And with this affordability changed dramatically in the market, you see the direct graph here. So what is important to note is and what just has to sync in with everyone in this market that the current level of affordability is not super artificial or impossible to achieve anymore. We had the same level 20 years ago. It was just super attractive in the time in between, and it gets more attractive every month. And yes, let's say, housing was always cheap in Germany and not always as you see in the '80s and '90s it wasn't so cheap. But from the feeling of the current generation, it was super cheap earlier. The truth is we have an artificial low interest rate environment and at this time, who didn't make the decision to acquire something made a mistake pretty simple. Today, it's again a necessary complex decision moving out of your renting space, which is too small for your family and accept that the new space you acquire has more rooms, but it's not super large, like it would have been 2 or 3 years ago. It's not as central as it could have been 2 or 3 years ago. But it houses your whole family, every child has a room and you don't have huge stress because you live in an apartment that just doesn't fit the number of people in the house anymore. So this adoption is happening, every trigger year event every month, roughly 50,000 just trigger events from the birth, another 50,000 from other events. And this proved market environment, which we saw, especially in the fourth quarter and now slowly recovering in the first and second quarter. There is still a huge backlog of families, which are in this phase of adjusting their wishes to their affordability. And it is just everything. So, what can in between in the second quarter, to see a stronger recovery already was a very heated up discussions in the political environment about a new law restricting the heating with gas and oil in Germany and forcing people to acquire heat pumps. Very -- let's say, a very tragic way to communicate the new law a lot of changes in the short period about what is required by whom, for what property and how much subsidies, actually the government wants to spend on motivating people. The whole second quarter, we had this discussion. It was, let's say, articles about this topic at the highest click rate here in Germany on all new sites, and we saw a really divided population on this. The law didn't get effective. It was postponed after the summer. Just it was already quite disarmed from its strength. And when it will get effective it will happen a period of 5 years until it really hits the market. So really unnecessary uncertainty for the decision makers in this market here. Within -- unnecessary downturn of the overall market for building or reconstructing houses here. So this delayed the recovery of the market. We lost minimum this second quarter. In the summertime, we see a pretty solid market environment, so not the usual holiday season with a sharp drop in volume. For now, let's say, maybe people recovered already from all the stress and all this uncertainty and do their decisions because they understood that the law will not be as tough as it sounded in the beginning. Okay. And then we are back to this what are the other macroeconomic key components happens. So you see the interest rate adjustment on the current level, no hope that we will see soon and sharp decline again. So this -- we found the new normal is our 3% to 4%. We see that properties come to the market. We compare this with an extremely low level in 2020, 2021, let's say, everything what came to the market was fast sold. So from there, we are up 50% roughly. This is still not -- not available. But if you search a long enough, you will find something that fits your need. And it's good that this recovered and it's necessary for an increasing protection volume in this market that there are properties for sale and they are there. Yes, prices are more or less stable since the beginning of this year after a 10% drop in the autumn and early winter last year. So it's a sub level of normalization, but sellers are not going to reduce their ask prices a lot anymore because they see that the squeeze for the buyer side is huge. That there's nothing which comes to the market that the new construction is slowing down, migration is high. So the seller side can just wait and they are sitting on a huge unrealized profits, which they can just realize as well in a half year or a year in the moment when someone comes who really wants to buy this, because yet for every property you just need one to buy. Yes, and on the rental side, as I said, there is no relief if you are triggered and need a new apartment, the amount of properties there declined this sharp increase in rents. Okay. How about the different segments perform in this market environment? We start with the credit platform in the center there, the Europace system in the center of the Europace system, the mortgage production. But -- will talk as well about personal loan and corporate finance in a moment and say something about this market when I talk about the product on the platform. Okay. So mortgage business in Europace. The credit side, minus 3%, more or less stable to the last year -- last quarter, sorry, and the new Bausparen is a savings product for our long-term. Interest rate savings down 9% quarter-to-quarter, it just doesn't make so much sense anymore in the current interest environment to secure your -- this interest rate level with additional savings plans for long term. Just to give you a feeling, this Bundesbank reported volume of plus 1% and Europace minus 3% looks like we did actually have the market share gain this quarter. I doubt this. Whomever we talk to them in any of the sales segments of Europace, tells us that we are outperforming the rest. We see this in the mortgage broker market, which has the major share here. We see that the core competitor, the largest German mortgage broker struggles with this environment is not outperforming us. From all what we know and the last numbers they reported was unfortunately last year, they were declining more than we did. And we don't see this dynamic changed within the sector of the independent brokers and the underserved market square areas, we see that there is a certain path to scaling to realize buying synergies by teaming up emerging or giving up and that there is -- we see the advantage to Europace. So we don't feel any loss in volume to all processes or other options what we see is a positive trend to Europace in this stress environment on the broker side. In the Corporate Banking and Bundesbank world, the branch networks face a tough challenge to acquire new clients, especially because a lot's of clients are early online, have touched on this progress there so end up in this first segment of our platform, bank branches profited from faster execution in the past on more trust now for consumers the best rate and comparing the best rate and doing this online got more important. So they struggled and with our plus 5% in the corporate banking sector and plus 2% in the service banking sector, we are the growth in the sectors and compensating part of their losses which they see in new business volume. So we are absolutely certain in these sectors, we are -- as in the broker sector, we are gaining market share. So it's the last sector of private banks. Let's say, most of them don't disclose their quarterly volume by now. So we can't be certain if there is someone outgrowing us right now. But there were 2 on the platform who are in talks and negotiations that asked about pricing models or migration indicates us that we are performing better than themselves. Good deals for us to sell on organic growth, you can call it, the Deutsche Bank. Finally, after years of negotiation and more than 1.5 years of a project -- a huge IT project. There's a lot of additional interfaces harmonized their mortgage business based on Europace technology and started on 1st of July migration of the Deutsche Bank branch network after all other sales channels, we are already operating on Europace. So this -- so our market share in the private commercial bank segment is going to grow, thanks to the addition of Deutsche Bank branches. And so looking forward, Commerce Banks needs to make a decision at some point and UniCredit, it needs to make a decision at one point. This is the major shares of the rest. So all this said. So we see positive traction in all 4 segments, and we see an outperformance in the second quarter of the rest of the market. So how can it be that Bundesbank is reporting a different perspective. And beyond the explanation that we found by now is that Bundesbank includes in their number of new business origination as well paid out the payment of so-called [ Bausparen ]. So this saving product where you secure long-term interest rate, which we have closed 7 to 10 years ago and which are now paid out to the consumer because they are, let's say they are available, they are included in the new business model. And German [ Bausparen ] together are a high double-digit creditor -- so they represent something around EUR 50 billion in mortgage volume per year. So on such a single quarter, in the current market environment, where the whole market is only EUR 40 million. Suddenly, the EUR 5 million to EUR 10 million per quarter of the [ Bausparen ] is relevant to the market changes. So saying this, we think that in this current market environment, people use their old contracts and use this money for modernization or paying back of mortgages. This is not a new generated mortgage volume, which is in the market right now. And so with this, let's say, it's the best explanation that we have why Bundesbank numbers are, let's say, doesn't show that we are gaining traction in all segments. Okay. So our next area of product, personal loans, minus 3% quarter-on-quarter. Usually, the first quarter is seasonally stronger in personal loans. There are no monthly numbers for this market. So we expect that more or less, we are well positioned right now in this market. Our offering is third-party personal loan aggregation, especially for banks, which have their own product, but their own product, not always use the client demand from a risk or price perspective. So using us, they are able to fulfill needs of clients which they can't serve by themselves. This is a growing market, especially in an environment where everyone is rethinking its position. And with this, we could go over the last 5 years, and the current dynamic in private banks, in corporate banks and savings banks shows us that we are on a growth track and keep growing. Especially positive our joint venture with TeamBank in the corporate banking sector, GENOFLEX, after a long period of piloting it last year, we are now in a field rollout and signing up and teaching and training dozens of cooperative banks and bring them on the system so that they are able to not just provide TeamBank loans, but as well third-party loans to fill the -- fulfill the needs of the client. So last product segment, the corporate business growth here in Germany. So in general, you can say since last year, the sentiment in this area is as well weak. German Mittelstand faces a lot of challenges. We had the sky-rocketing energy prices. We have disrupted value chains or delivery chains. We see in a certain way, a credit crunch or sharp rises in short-term credit rates by ECB plus banks who hesitate to provide new loans for corporates. This altogether is a challenging environment for an advisory broker service like capital and finally for the digital version of it. The good news is our sales force is well connected to this German Mittelstand. And especially because of the connection to the subsidized loan and subsidy programs of the government, which [indiscernible] is advising on. There is always a talking point with Mittelstand. And if they plan to do something and there are a lot of challenges that they would have to invest money, they are talking with us. So their new project volume was up in the second quarter. As you see in the chart to EUR 0.5 billion. And this is already a good recovery from the weak first quarter and the weak fourth quarter last year. The problem is that especially on the subsidy side, the current German government still didn't decide on valid solutions for the German industry. So it's -- they discuss multiple options and how to enable the transformation energy sector and the heating sector and how to support the German industry in the current tough situation, but they didn't come up with their program for this. So we enable our clients to be well prepared and as soon as the government funding for certain programs is there, we will be able to fast act. And because of this, we expect a recovery in the second half of 2023, just the government has to act up until then to realize all these projects that we are preparing here right now. For now -- had a weaker quarter 2. But it's not unusual that we have a seasonal business here. And typically, the projects are finished in the fourth quarter of the year. All this said about mortgages, personal loans and corporate loans, the segment overall performed pretty well given the circumstances, up in revenue, even slightly stronger in gross profit and the positive EBITDA contribution to the group. And this all before some additional price changes, especially on the Europace system for the mortgage world. So brokered mortgages got roughly 20% more expenses in our fee model starting on 1st of July. And with this, we will see additional revenue growth even if there is a stable transaction volume side. So be aware in this EUR 4.3 million EBIT contribution, there is still a lot of investment ongoing. In the whole credit segment, we did not shut down a major project during our restructuring end of the last year. So we keep investing here because we see that the current market environment is a huge change and not a long-term issue for us and for you in the end. Okay. Next segment, private client. This will be faster. As usual, Dr. Klein franchise network, 200 franchisees lot of branches, we generate online leads of consumers who are interested in the mortgage advice. The franchisee is advising them with their people and broker mortgages during the Europace system. Dr. Klein had a small decline in production volume by roughly 9% because we don't see any reason why Dr. Klein should underperform the market right now, we are pretty certain that Europace business had a 3% decline was gaining massive market share. Because Dr. Klein performed pretty well as well in the second quarter. Consumers tend to search for mortgage products online, for mortgage advice online because they -- let's say, the high cost and the lower affordability right now leads them to mortgage brokers online. And Dr. Klein is very well positioned and outperforming the only real competitor here in the market, which is an [indiscernible] subsidiary. So -- and so with this in mind that even Dr. Klein saw a substantial decline. You understand better why we are confident that your business starts gaining market share in reality. Yes, a small negative notice here, minus 12% on the side of loan advisors. In the -- in our franchise network. So still franchisees feel the pressure that, let's say, the amount of lease is increasing, but the people don't decide fast. So this is really costly to -- and it take them long to advise them. And this is putting a lot of pressure on their P&L. And so they are still laying off weaker adviors and keep trusting the best adviors in this area and the success rate of converting this online lease business. And so they are optimizing themselves, which is again good shows the stronghold of this business model. On the other side, when markets recover, it will take us some time to take the franchisees some time to have enough advisers ready for the increasing number of loan applications. Yes, this said, Dr. Klein had a slightly weaker number for the second quarter, but still stayed profitable and from all what we know from the market, it's the only larger mortgage advice organization out there right now, which is profitable in this market environment. You see really the strong efficiency in the franchise system that everybody is able to optimize on its own and altogether, performing them pretty well. Okay. Let's come to the real estate platform. As you are aware, we are serving 2/3 of the markets, the homeowner market that's a sales platform and the property valuation platform and the social housing companies, which provide roughly 1/6 of all housing, especially in the lower end of the market with the financing platform and property management platform here. Both markets changed in second quarter or in both the segments, they have changed in the second quarter, which were, in a certain way, surprising and affected our short and mid-term outlook here. Let's start with the ones we stayed or performed pretty well. The sales platform of FIO saw an increase in production volume of 5%. So these are especially mortgage real estate agents linked to banks, which started to see growth in their volume again, which is good, still had a decline in Q1, where we saw them losing market share. Now I'm not sure if they gained market share, but even they keep growing with our assistance in the digital world and let's say -- they found the bottom in the first quarter, slightly later than everyone else, but it's going up. And this is good for FIO because there are solutions that to increase their market share and their revenue share, there we need healthy clients as well. So good that they managed to turn us around. Something you can't see still in numbers, but it's getting more and more important. It's a pretty successful development in the property management platform area. So here we provide an ERP system for housing associations, especially in the social housing environment. And we saw in the both quarters and especially in the second quarter, a pretty good success rate in signing new large housing -- up for our platform. They are up for migration. This takes a couple of quarters. Usually, they start at the full year. So most of them will start on the 1st of January next year. And with this, the payment starts, so it's not relevant for the current numbers, but the sale success here makes a more and more valid investment case where, for a long time, we invested money. And there we see an upcoming opportunity. I told you already we had unexpected developments in this segment. The first one is the valuation platform. So first of all, after a couple of quarters, the declining numbers of new mortgages comes here, and we have a sharp decline in numbers of new appraisals that need to be done for banks. In the same moment, the regulator changed let's say, a major product decision in the market, how you have to do the appraisal. They increased the threshold for a lean process from EUR 400,000 to EUR 600,000. With the decline in prices, the decline in numbers, this massively changed the number of products of appraisals done above EUR 600,000. While it stabilized or even increased the number of appraisals below this benchmark. And so now below EUR 600,000. So while in one product area we are lacking the appraisals to be done -- sorry, above EUR 600,000. And the other one, we can't keep track with the service level equipment that we have because of this. So it's the mass and that this allocation of -- and something which heavily burned money in the second quarter because of this mismatch. Yes, what can I say? We are working on this second time that the regulator didn't help us here. To be fair, we could have been better prepared as an organization as well. We are not good in handling these changes in the last already 18 months here. And this is, let's say, it's fair to see unnecessary losses here in the period where we turn around every dime in every other business a lot. So up for restructuring, again, we see potential on the sales side, activating our strong relations to banks. We see a lot of potential in optimizing the match of resources to products. And we just need to take all people with us on the way here. And this is a challenge as well. Okay. Third product area, Financing of social housing here in Germany. Another decline from the already weak numbers of the first quarter. So we are down to EUR 0.1 billion per quarter. Our usual run rate is EUR 0.5 billion. So you'll see how weak this product segment is this year right now. The core reasons as well, the intensive discussion about the German energy efficiency of buildings and how certain buildings should be heated and for this industry, very important who's going to pay for it and these changes. So how much is -- are they allowed to increase the rent? How much subsidies are provided and in this whole discussion in the second quarter, this industry stopped executing any project in optimizing and building efficiency because there was so much uncertainty about what is allowed, what they need to do, who is going to pay for -- that they simply stopped acting and the volume even compared to an already weak first quarter declined further. We are pretty certain that we saw the bottom here now. We see that the industry is aware of the huge responsibility it has to increase the energy efficiency and get to net neutral until 2024 -- sorry, 2045. And the estimated cost for this industry alone is EUR 500 billion, and they are not rich in capital, and they can't fund different than borrowing money from lenders. And with this in mind, there's a lot of mortgages to be transacted, and we keep investing here in our sales force. We are digitalizing the process within the housing associations, how they actually plan their future financing with the portfolio management solution, and we develop and roll out a marketplace for the mortgage business with the lenders. This all happens parallel, more or less the -- from your side. And this unit is going to recover short term and long term has an attractive outlook. For the second quarter, the drop in profits from this unit and the losses in valuation and heavy investments in the property management platform makes this our worst quarter for a long time in -- for this segment. So we are actively monitoring here right now what we can do to get out of this pretty negative results of the second quarter. And here, we have to climb up here again from a pretty negative performance here and do better in the next quarters. So last platform, insurance. Finally not so much about housing or credit. The insurance market is stable here in Germany. Everything is pretty fixed, which is, let's say, lead us to struggle to bring this industry to some dynamic in the migration path. We changed our strategy multiple times and ended up with 3 -- in the insurance industry. In each of the segments that we control and marketplace, the digital integrated platform solution and add additional services around this to enable partners to interact with our platform. In all 3 product areas, we saw a good level of success in the second quarter. So in private insurance, we saw in 3 months increase in migrated volume by 4%, which is an increase in speed compared to the last quarter and when you see that we heavily restructured these units here in the end of 2022 this is a pretty positive surprise that migration path accelerated slightly. Let's see how this comes out in the next quarter if our clients finally execute the projects faster than us would be great because there's still a lot of migration needed when you see that just close to half of our volume, which is in our systems already, it's migrated to the centralized platform. Besides this, the validation rate is something to look at. This is the other side to the insurer. So 30% of this migrated volume is already linked to a specific insurance contract on the insurer side. So we are able to have the digitalized flow of data between insurer platform and insurer and sales qualification is so that everyone profits from their added value of a platform and with all the services that we provide. So this is stable right now with 30% as well an area of intensive investments in the last years. And still, we are keeping to build interfaces and standardize their communication that we now have in the insurance. And the more volume we have, the more attractive this kinds of projects gets for the insurer. And -- the platform gets more attractive for the sales side because there is more automated data exchange with insurers when this validation ratio goes up. Second product area is industrial insurances. Where we are in the development process of a tender platform for nonstandardized industrial insurance policies here in Germany, we work together with all major brokers in this segment, and they are all pretty keen on our development here on the system that we are developing and take part in this process. It will be a very interesting second half of this year if this interest is materializing, and we see transactions on the suitable launch Corify platform. If this is happening then this is a great success and the great opportunity because it's a EUR 30 billion market in premiums and the efficiency in this market is lower the efficiency gain that we provide with this transaction-based revenue model for us is huge. So fingers crossed that the interest is converting to monetization in the second half of the year. Last segment, pension market, especially in combination with employers as well a EUR 20 billion segment of the total German insurance market and something where we are growing double digit on a quarterly basis. So pretty successful in the last quarters. And we have more and more relevant partners migrating their portfolio to our platform from the industry side, so a large groups of corporates which just use the platform to digitalize their pension let's say, their contractual database of their pensions of the employees, but as well more and more brokers who join our platform using our platform as their digital backbone. And still in this week, we will announce another large and important German player in this market to launch on the pension. So this contraction will keep going forward. This is a very nice success for this unit. Yes, all in all, with all these incremental gains here in the second quarter, the insurance segment for the first time, showed a positive EBIT is well on track to breakeven this year, this is what they provided in the second quarter. And this is a coagulation to all our employees yet. They do a good job right now. And they help, let's say, to stabilize in Generali Group. This is what they are doing because they are doing something outside of mortgages. So total numbers you are aware of this already. So especially because of the declining volumes in valuations and financing of social housing, we saw a decline in our total revenue. We lost probability because of the trouble in this unit. The good news is our core product lines, the core markets are recovering. And so on this current level we are operating with a pretty solid number and keep investing. On a long-term perspective, this is a period of growth in quality, in market share and declined market volume and important in these different markets, something that we are working on to materialize. As I indicated already, price changes is one opportunity to materialize this and be in a constant process of renegotiating our pricing components now with our partners in this market environment. Beside the revenue side, we have a strong grip on our cost side. We reduced our cost base from EUR 60 million in Q3 to EUR 50 million in Q1. It stayed more or less stable in the second quarter. There is some inflation pressure, which we have to start with, on the other side, we always find some areas where we are able to realize savings, for instance, reduce the office space that we have, by subletting so that we optimize the cash flow for us. But we keep investing in all major platforms in areas where we see positive traction. If you don't see positive traction anymore, then we will pull the track of -- projects. But for now, we see the opportunity to drive with them this market forward in the next couple of years. Talking about this market in the next couple of years. I'm sure you're already aware of this in German housing market and especially the private mortgage market is defined by trigger events. And people keep getting children, people get triggered. And since, summer last year, you can say more and more people are in a distressed situation where their current rented apartment doesn't fit their family needs anymore. And they consider more and more to buy, plus they have to adjust to the current situation. They will do this in the next quarter. So we are absolutely certain that the transaction market for the existing household stock in apartments and homes will recover in volume. And with this, it will bring the mortgage volume up to a pre-crisis level. We see right now that new construction is still down and we don't see any recovery there. So we are roughly at just 25% of the new building permits granted to new homeowners than we have been 2 years ago. This would lead to a sharp drop in new housing constructions in Germany. More than 10 years ago, we were roughly at 159,000 permits on our finished apartments figure. This increased over a decade to 300,000 and with the current development, we will drop even below this 150,000. When you see a net migration, last year, 1.2 million this year, something around 0.5 million people. This is not sufficient. So -- there must be some relief out of this. So construction and the volume of construction needs to increase again from this extremely depressed level where we are right now still no recovery visible, but -- and maybe later than the transaction market for the existing houses, but it needs to be a recovery there. Otherwise, it's completely mismatch we are heading to. Yes. And last but not least, growth will come as well from the necessary energy efficiency increase of the fixing household stock, current expectations, we need for this EUR 20 billion per quarter to reach the 2045 goal of net utility for carbon emission. And this all sums up to a market of EUR 75 billion to EUR 100 billion in this decade. So -- and for this, we are prepared. So the -- this current market is fine for us to stay and to keep on a sustainable level, investing in our services and growing them, but we are absolutely certain we expect a doubling of this market within this decade. So a small part of this is as well a recovery in refinancing volume. For a long, long period, we said there is no link between refinancing volume and interest rates in Germany. And for a long, long period, it was true. Just the typical German mortgage fixed total sales of 10 years, climbed up slightly in the last 15 years and reached an average 14 years, a year ago. And with this sharp change in the interest rate, all mortgages, which are longer than 10 years, now suddenly stay that long, while previously, they were renewed after 10 past year, thanks to a prepayment option. So we are at now in such a valley. So we lost roughly EUR 30 billion in market volume from '21 to '23. Now because of this longer duration fixed interest rate mortgages, and they will come back suddenly in 2027 when the 2012, 15 years mortgages get due, you can say. So be aware of this, the current market volume as well of EUR 40 billion per quarter is in a certain way, affected and declined by roughly EUR 8 billion because of this change in the interest rate structure. And as long as interest rates stay on the current level, it's very predictable in which moment this recovery will happen. If interest rate for 10 years plus mortgages goes down, this may happen earlier because then your earlier refinance -- if your old mortgages has a higher interest rate. But if you stay in this 3% to 4% range, 2027 will be the next good year for refinancing. And we with the Europace technology invest heavily in automated solutions for this refinancing process of the future. So this all said, you know already that we were slightly disappointed with our Q2, especially that this was happened in a real estate platform. We have to adjust our group forecast for this year at our addition level. So we expect a significant better second half of this year than the first half was, thanks to a lot of ongoing project changes in pricing structure, new clients we gained and so on. So with this we given revised outlook for this year. What is important for you and for us is 2024 and the upcoming years, we will see double-digit growth of hard bought. Really pretty easy in the beginning because of the low baseline of 2023. But we will see that the recovery of the market has strong performance of hard bought on the top and bottom line in the next 10 years. So for now, that's it from my side, I hand back to the moderator. Let's check if someone has any questions today in English.

[Operator Instructions]. There are currently no questions from the audience for closing remarks, I give back to you.

Yes. Thank you. We can make a -- certainly here right now. Everyone who listened to us we will consider next time in November to actually do just one call for all participants in German and English. In English so it's your language. Martin will have to get up a little bit earlier because we would do this as always at 2 a.m. German time. So please give us a feedback to our Investor Relations department. If you are fine with this. And then we will have a lot of questions here because the German call is always pretty active from the analyst side by joining both calls and doing it just in one language, we may get more interaction even. So thanks for your feedback. We are now concentrating on the third quarter. I hope to provide a positive development when we publish these numbers in November and that we are able to talk here about a positive trend, which continues in this market. Thanks for your attention and see you soon. Bye-bye.

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.