Swiss Life Holding AG (SLHN.SW), a leading provider of life insurance and pension solutions, has reported its 2024 half-year results, demonstrating a robust financial performance with fee results and cash remittance both seeing significant increases. The company's annualized return on equity outperformed its target range, and net profit remained stable.
Swiss Life is on track to achieve or surpass all its financial goals under the Swiss Life 2024 program, signaling confidence in its business strategy and operations.
Key Takeaways
- Fee results increased by 17% to CHF 395 million.
- Cash remittance grew by 19% to over CHF 1.2 billion.
- Annualized return on equity reached 17.8%, exceeding the target of 10-12%.
- Stable net profit at CHF 632 million; adjusted net profit rose by 7%.
- Total income and segment results both saw double-digit percentage growth.
- Assets under management in TPAM business grew, with net new assets of CHF 1.2 billion.
- Operating expenses increased by 8%; direct investment income rose to CHF 2.1 billion.
- Shareholders' equity decreased by 7%; SST ratio was around 205%.
- Fee and commission income rose by 7% to CHF 1.3 billion.
Company Outlook
- Swiss Life expects to meet or exceed all group financial targets for the Swiss Life 2024 program.
- The company remains confident in reaching the fee result target range of CHF 850 million to CHF 900 million.
- Positive impact from policyholder asset transfer to TPAM and real estate assets offered to third-party clients.
- Growth in France driven by private insurer model and unit-linked business.
Bearish Highlights
- Shareholders' equity saw a 7% decrease.
- The company is not planning further capital distributions or buybacks at this time.
- There are no specific guidance provided for future cash remittances or net income from PAM business.
Bullish Highlights
- Swiss Life's net profit remains stable with an upward trend in adjusted net profit.
- The company's fee and commission income and cash remittance to the holding company have both increased.
- The Swiss business exhibited decent growth in new business sales.
- TPAM expects to double its net new assets by year-end.
Misses
- The company did not disclose the vacancy rate for TPAM.
- No specific answers were provided regarding the sustainability of the 15% growth in net income from PAM or the expected level for the next half year.
Q&A Highlights
- Marco Gerussi confirmed that half of PAM's growth is recurring, with the other half being nonrecurring project development.
- Matthias Aellig clarified that there were one-off effects in this year's cash remittance and that reserve releases are of a different nature going forward.
Swiss Life's half-year report demonstrates the company's financial resilience and strategic progress. With fee results and cash remittance showing healthy increases, the company's financial performance signals a strong outlook for the remainder of the year. Swiss Life's commitment to its 2024 financial targets suggests a confident approach to its business operations and growth potential in the markets it serves.
Full transcript - None (SWSDF) Q2 2024:
Matthias Aellig: Good morning. Thank you for taking the time to join us today, and welcome to our conference call on the 2024 half year results. Let me start with a quick overview on Slide 3. Our CFO, Marco Gerussi, will then comment on our performance in more detail. I'm very pleased with the development of Swiss Life in the first 6 months of 2024. First, fee result increased by 17% to CHF 395 million, driven by higher contributions from asset managers and France. Second, cash remittance grew by 19% to well over CHF 1.2 billion. This is a very pleasing figure. The fact that the full year 2023 call did include 2 positive one-off effects of about CHF 0.12 billion. Taking the past 2.5 years of cash remittances together, we arrive at a cumulative remittance of CHF 3.4 billion. We have thus already exceeded our cumulative target of CHF 2.8 billion to CHF 3 billion. This is a strong achievement. Our business divisions have done a great job navigating the changes in the interest rate environment. Third, the annualized return on equity was at 17.8%, and therefore, well above our target range of 10% to 12%. The increase was driven by the development of shareholders' equity. Net profit for the half year was stable at CHF 632 million. On an adjusted basis, net profit increased by 7% year-on-year. In addition, the half-year SST ratio of around 205% remained well above the ambition range. This is a strong set of figures and I want to thank our customers for their trust, and our employees and advisers for their continued engagement. To wrap up, we are well on track with our Swiss Life 2024 programme to achieve or exceed all our group financial targets. We have already exceeded our cash remittance and share buyback targets, and we expect to exceed the return on equity and dividend payout ratio targets. As a reminder, we have the ambition to increase dividends per share. Regarding the fee result. We continue to expect to reach the lower end of our ambitious target range of CHF 850 million to CHF 900 million. The results of Asset Managers over the first 6 months of 2024 give us confidence in this respect. Still, the target achievement remains reliant on the further normalization of the real estate markets in Germany and France. With that, I hand over to Marco, who will take you through half year 2024 financial results in more detail.
Marco Gerussi: Thank you, Matthias. Good morning, ladies and gentlemen. I'm pleased to walk you through our 2024 half year results, and I will start with selected P&L figures on Slide 5. Half year 2024 figures and the comparative periods are both based on the IFRS 17 and 9 accounting standards. Insurance revenue increased by 1% to CHF 4.5 billion. Higher DIA revenues from France and International were partly offset by a lower CSM release. Insurance service expenses increased in line with insurance revenue to CHF 3.8 billion. Net investment result amounted to CHF 491 million. It includes IFRS 17 related insurance finance expenses and VFA experience adjustments, and is therefore not comparable to the net investment result under the former accounting. Profit from operations increased to CHF 883 million. Borrowing costs were essentially stable at CHF 66 million. The income tax expense increased to CHF 184 million, mainly due to the impact of CHF 32 million from an extraordinary tax provision release in the prior year period and the higher operating profit. Net profit was at CHF 632 million. The prior year included the just mentioned extraordinary tax provision release. Adjusted for this and for negative FX translation effects, net profit increased by 7%. Let me comment on some additional figures. Gross written premiums, fees and deposits received increased by 3% in local currency to CHF 11.7 billion, mainly driven by France. Fee and commission income was up by 7% in local currency to CHF 1.3 billion, primarily due to higher contributions from France and Asset Managers. The net investment income of the insurance portfolio for own risk increased to CHF 1.9 billion. Operating expenses increased to CHF 1 billion. On Slide 6, we show the adjusted profit from operations. It increased by 7% year-on-year, taking the negative FX translation effect into consideration. We are now moving to our segments, starting with Switzerland. Premiums increased by 1% to CHF 6.1 billion. The life insurance market was up by 1%. Premiums in individual life were up by 10%, while the market increased by 3%. Periodic premiums grew by 1%. Single premiums increased by 27%, driven by a modern traditional product. Premiums in group life decreased by 1%. The market was flat. Single premiums increased by 2%, primarily due to higher new business. Periodic premiums fell by 3%. Assets under management in our semi-autonomous foundations increased to CHF 7.6 billion compared to CHF 7.1 billion at year-end 2023. Fee and commission income was up by 7% to CHF 167 million due to higher income in Swiss Life Select, the unit-linked business. The segment result decreased by 2% to CHF 439 million due to a lower operating result from insurance business. The CSM release in the VFA business came down from a very high prior year level, but assets not backing life insurance liabilities contributed more. The fee result slightly decreased to CHF 26 million. Higher income was more than offset by investments in growth initiatives. The value of new business decreased by 5% to CHF 190 million, mainly due to the business mix and pricing effects as well as lower interest rates. Cash remittance was up by 31% to CHF 699 million, driven by a higher 2023 statutory profit by the non-remitted part of the 2022 statutory profit. Turning to France. Please note that all figures quoted are in euros for our French, German and International segments. In France, premiums increased by 11% to EUR 3.8 billion. The total market was up by 12%. In our life business, premiums were up by 12%, market was up by 13%. Unit-linked share in our life premiums was 66%, but the market was at 38%. Life net inflows were at EUR 1 billion versus total market net inflows of EUR 16 billion. Health and protection premiums grew by 6%, driven by price increases. The market was up by 9%. P&C premiums were up 7%, mainly due to motor products. Fee and commission income rose by 29% to EUR 295 million. About 2/3 of the increase was due to higher unit-linked fee income based on higher average unit-linked reserves. Reminder, it was due to banking business with continued high revenues from structured products. The segment results grew by 18% to EUR 192 million. The operating result from insurance business increased due to health & protection, partly offset by P&C. The fee result was up by 28% to EUR 102 million, driven by both the unit-linked and banking business. The value of new business increased by 15% to EUR 98 million. Higher volumes in the life business as a higher unit-linked share were partly offset by lower volumes in health & protection. Cash remittance increased by 15% to EUR 178 million due to a higher 2023 statutory contribution. Moving on to Germany. Premiums were up by 3% to EUR 739 million, driven by modern, modern-traditional, and disability products. The market was down by 3%, driven by lower single premiums. Fee and commission income grew by 5% to EUR 400 million, mainly due to owned IFAs. The number of financial advisers was stable at 6,020 year-on-year. The segment result was down by 2% to EUR 113 million. Fee results slightly increased to EUR 77 million following strong growth in the prior year period. This was outweighed by a slightly lower operating result from insurance business. The value of new business decreased by 31% to EUR 26 million, driven by a lower unit-linked contribution and interest rate effects. Cash remittance increased by 7% to EUR 101 million due to the 2023 fee result development. Turning now to the International segment. Premiums decreased by 6% to EUR 1.3 billion. Higher premiums from business with corporate clients, in particular from elipsLife, were more than offset by lower premiums with private clients. Fee and commission income was down by 3% to EUR 192 million. Income from private clients and owned IFAs increased. This was more than offset by lower income from corporate clients, in particular from elipsLife. As mentioned in the Q1 call, the acquired business from elipsLife was fully reinsured. The renewed and the new business is partially reinsured and therefore, we see a shift from fee income to risk premiums as expected. The segment result was up by 15% to EUR 63 million, mainly driven by higher operating results from insurance business. Fee result decreased by 2% to EUR 44 million due to a lower contribution from the business' corporate clients, which was partly offset by owned IFAs. The value of new business decreased by 15% to EUR 28 million due to business mix and volume effects. Cash remittance was up by 3% to EUR 56 million, driven by the business with corporate clients. Let's move now to our Asset Managers segment, which reports in Swiss francs. Asset Managers total income was up by 15% to CHF 506 million. In our PAM business, total income was up by 15% to CHF 177 million. About half of the increase is due to higher recurring income and the other half is due to higher nonrecurring income. In our TPAM business, total income increased by 14% to CHF 329 million, mainly driven by higher other net income from real estate projects developed. 3/4 of the increase relates to revaluation gains return on cash. Recurring income was up even a higher average asset base and was offset by lower nonrecurring income from real estate transactions and negative FX translation effects. The share of total nonrecurring income for TPAM, meaning commission income as well as other net income, was 20% of total income and therefore, above prior year half year level of 11%. For the full financial year 2024, we expect the share of total nonrecurring income to be around 30% given our pipeline. The segment results increased by 30% to CHF 154 million. The contribution of PAM was up by 11% to CHF 93 million, driven by top line development. The TPAM contribution increased by 73% to CHF 61 million driven by higher other net income, which was partly offset by investments in growth initiatives. The cost income ratio was 90%, largely due to lower net commission income and investments in growth initiatives. Cash remittance increased by 9% to CHF 239 million. Despite a lower 2023 annual net profit, this increase is driven by time lags between recognition of net income from project development and the distributable cash. As a result of different lags from several projects over time, there is some averaging in their contributions to the overall cash remittance, which supported cash remittance in 2024, as outlined during our full year 2023 call. Assets under management in our TPAM business were at CHF 117 billion, compared to CHF 112 billion at year-end 2023, driven by positive performance and FX translation. Net new assets in our TPAM business amounted to CHF 1.2 billion compared to CHF 6.9 billion in the prior year period. Inflows in real assets were at CHF 0.9 billion. Over the summer, we attracted additional mandates. As of end of August 2024, total net new assets amounted to CHF 3.5 billion, of which half was in real assets. For the full year 2024, we expect NNAs to be around double the August figure. Let's move back to the group. Operating expenses increased by 8% in local currency to CHF 1 billion. Those include effects from investments in business growth such as the new index-based investment offering from asset managers. Coming to the investment income. Direct investment income on Slide 14 increased to CHF 2.1 billion. Bonds, equities and real estate contributed more, but this was partly offset by lower income from alternative investments and negative FX translation effects. The non-annualized direct investment yield increased to 1.5% compared to 1.4% in the prior year period. The net investment income was up to CHF 1.9 billion, driven by the direct investment income and supported by the development of net capital gains and losses. Nonannualized net investment yield was 1.3% compared to 1.2%. Net capital gains and losses amounted to minus CHF 46 million compared to minus CHF 96 million in the prior year period. This improvement was due to real estate and infrastructure investments while the equity contribution declined. Slide 15 shows the structure of our investment portfolio. The share of equities and equity funds increased mainly due to higher valuations. Our net equity exposure after hedging amounted to 4.2%. With respect to real estate, our value changes were negative at CHF 280 million or minus 0.7%, while in the prior year period, we had negative fair value changes of CHF 426 million or minus 1%. For the full year 2024, we expect real estate fair value changes to remain in the range of minus 0.5% to minus 1 percentage point. Real estate continues to be an attractive and important asset class for backing our long-dated liabilities in the context of higher disciplines, asset and liability management. As you know, we hold real estate because of the regular rental income it provides and not because of appreciation. Vacancy rates were essentially stable at 3.1%. For the full year 2024, we expect vacancy rates to remain at around this level. Moving on to insurance reserves on Slide 16. Insurance reserves were stable at CHF 180 billion in local currency. On a statutory basis, we released about CHF 0.15 billion of statutory reserves in half year 2024 in the Swiss Group and individual life businesses. Pretax CSM at the end of June 2024 amounted to CHF 15.3 billion and relates to a large extent to our VFA business. During the first half of 2024, the sum of expected business contribution and new business increased CSM by CHF 0.7 billion. Experience adjustments and actuarial assumptions were at plus CHF 0.1 billion, but the impact from economic variances was minus CHF 0.3 billion. The latter was mainly due to the widening of interest rate differentials and lower Swiss interest rates. This is partially offset by the positive equity market performance and positive FX translation effects. The CSM release reflecting the pretax profit that is recognized in the P&L was at CHF 0.6 billion. The annualized pretax CSM release ratio was around the full year 2023 level. The new business margin was at 3.8% compared to 4% due to lower interest rates, volume and business mix effects. The value of new business decreased by 4% to CHF 266 million. Shareholders' equity decreased by 7% to CHF 7 billion compared to year-end 2023, largely driven by the dividend payment and the completed share buyback in March 2024. Our total outstanding financing instruments amounted to CHF 5.6 billion, of which CHF 425 million pertained to hybrid bonds that will be redeemed end of September. The SST ratio was estimated to be around 205% at the end of June 2024. It decreased compared to January 2024, mainly due to the widening of interest rate differentials and the reduction of the mentioned CHF 425 million hybrid bond, which will be repaid end of September 2024. The SST ratio remains well above the ambition range of 140% to 190%. That brings me to our Swiss Life 2024 programme and the progress reporting. I will start with the fee income on Slide 23. Fee and commission income increased by 7% in local currency to CHF 1.3 billion. Income from owned and third-party products and services was up by 16%, primarily to France. Income from Swiss Life Asset Managers increased by 4% and from owned IFAs by 2%. Profit from operations was up by 7% to CHF 883 million. Fee results increased by 17% to CHF 395 million. 2/3 of the increase was driven by Asset Managers and 1/3 by France. The operating result from insurance business increased by 1% to CHF 553 million. The lower CSM release was offset by higher additional contributions, about half of them pertaining to assets not backing life insurance liabilities. The other half of the increase came from the French non-life business. This is in line with our statement earlier this year that we expect a significant improvement compared to full year 2023. The return on equity increased to 17.8% on an annualized basis compared to 15.8% in the prior year period. Turning to capital, cash and payout. Cash remittance to the holding company increased by 19% to CHF 1.3 billion. This includes the mentioned positive one-off effects of about CHF 0.12 billion pertaining to the tax provision release in 2023, and to the upstreaming of the non-remitted part of the 2022 local statutory profit from Swiss Life AG. Let me also remind you that the cash remittance of asset managers included FX from the outlined time lags leading to a CHF 20 million increase of the cash remittance in 2024, despite a lower 2023 net profit. On the right-hand side of the slide, we present the cumulative cash remittance since 2022. This amounts to CHF 3.4 billion, exceeding the group's cumulative cash remittance target of the Swiss Life 2024 programme. Liquidity at holding amounted to CHF 1 billion at the end of June 2024, after we completed the CHF 300 million share buyback by the end of March 2024. To conclude, we are very pleased with our half year 2024 results, as we grew the fee result and the operating profit as well as cash remittance to holding and the return on equity. In terms of the Swiss Life 2024 programme, we continue to expect to reach the lower end of our ambitious fee result target range of CHF 850 million to CHF 900 million. The results of Asset Managers over the first 6 months of 2024 gives us confidence in this respect, while the target achievement remains reliant on the further normalization of the real estate market in Germany and France. Regarding our other financial targets, we expect to exceed the return on equity and dividend payout ratio targets. And as a reminder, we have the ambition to continue to increase dividends per share. In addition to that, we have already exceeded our cash remittance and share buyback targets. Overall, we are well on track with our Swiss Life 2024 programme to achieve or exceed all our group financial targets. With this, I hand back to you, Matthias. Thanks for listening.
Matthias Aellig: Thank you, Marco. We are now ready for the Q&A session. Who would like to start?
Operator: [Operator Instructions] Our first question comes from Peter Eliot from Kepler Cheuvreux.
Peter Eliot: I have 3 questions, please. The first one, just on the reserve releases. Would you be able to say what these were in individual life? Apologies if you have and I missed it. I don't think it is. And would you be able to update us just on the outlook given the current interest rate level? The second one was, obviously, you transferred some real estate assets from policyholder monitor TPAM at the start of July. And I'm just wondering if you could give us sort of the cash implications of that deal? And also whether you consider this sort of one-off or whether there's potential to do more of that going forward? And the third one, I was wondering if you could just split out the economic variances in the CSM walk. I guess I'm aware that the interest rate differentials seemed to move sort of further against you in H1. And I'm wondering what impact that had in particular?
Matthias Aellig: Okay. Thank you, Peter. I will take the first 2 questions. Marco will then come back to the third question. Now in terms of the reserve releases, let me put what we just said in the bigger context. We said, for the first half of 2024, we have reserve releases of about CHF 0.15 billion, and this CHF 0.15 billion is consistent with what we reported for 2023. For the full year, that was then CHF 0.3 billion, which like then we said is the run rate, and which we say for the full year that CHF 0.3 billion is also the run rate that we see in the current interest rate environment. And in terms of the share of individual life in that, that's what we also said earlier, it's about 1/3 of those reserve releases that relate to individual life. So that's essentially the confirmation what we told 6 months ago in the full year disclosure. Now in terms of the second question, this policyholder asset transfer to TPAM, we do not disclose, let's say, cash impact on that, but you can assume that given we have significant unrealized capital gains on a local statutory basis, that there was a positive contribution to that. In terms of, let's say, the outlook on that, this is a kind of transaction, let's say, to offer this kind of balance sheet real estate afterwards to third-party clients. That's something we have done over the past, and I think it's fair to assume that this was not a special transaction, if you wish. What was special, it was one of the largest, let's say, transactions -- a large transaction securitization of real estate, and we can confirm that this has been absorbed well in the market. And this shows, by the way, also what we mentioned in Q1 and full year, there's renewed interest from institutional investors in real estate. So I think that was it on the second question. With that, I hand over to Marco for the economic variance.
Marco Gerussi: Back for the third question in terms of the economic variances in the CSM, I mean there is overall some positive and negative effect. Overall, the negative effect of CHF 0.3 billion we just mentioned and you see on the slide of the economic variances, they are mainly driven by the interest rate development. And saying that, it's particularly the interest rate differential between the Swiss franc and the U.S. dollar, and the lower Swiss franc interest rates is a negative effect. And there is some offsetting position. So it's mainly the positive equity market performance and somatic translation effects, netting that to the minus CHF 0.3 billion we see in the economic variances. So that's mainly the interest rate environment.
Operator: The next question comes from Farooq Hanif from JPMorgan.
Farooq Hanif: I've got 3 questions as well actually. So first question on the French non-life results. So you said it would improve, but it's really improved with a bang. I mean, it's been very strong. Can you talk about the sustainability of that number, I think, roughly CHF 58 million? How we should think about modeling that going forward? Secondly, also, I guess, related to France, your growth in owned and third-party product fee income was also exceptionally strong. What's going on there? And again, what's the outlook, I guess, for that business? And then finally, in your Swiss business, I mean your new business sales in the first half grew by a decent amount. I'm guessing that's kind of individual life related. Is there any seasonality that we should be aware of between 1H and 2H. I mean, are you expecting this kind of level of growth in the second half as well? If you could comment on that?
Matthias Aellig: Okay. Let me, again, take the first 2 questions. Marco will come to the third one. In terms of the French non-life, I think I'd go back to what we reported. And at the full year, there was clearly -- full year 2023, we clearly had a significantly negative contribution from the French non-life businesses. In fact, then we said that we are working on, let's say, turning that business around and turning that business significantly into the positive territory. I think in H1, we now have seen that we are here on track and we confirm essentially what we said in the full year disclosure. I think what is important, and I may have not fully understood your question about CHF 58 million there, there's nothing from the bank that is included there. Coming now to the fee result, I think that was your second question, the growth of owned and third-party products. There is what we call this private insurer model that is essentially at the heart of the success there. And one element clearly is the growth of the unit-linked business that was essentially contributing 2/3 of the growth. I mean, we have been working there now for many, many years in the unit-linked business. The French business has been positioning itself in the higher segment there. And it's now, for many, many years, outperforming the market, be it in terms of share of unit-linked client access and the like. Second element is the Banque, Swiss Life Banque that offers a range of products and what has been now very successful over the past years is in addition to normal offering, the structured products. And there, we have clearly had a very strong run again in the first half of 2024. Those are structured products that have an auto-call feature in it, and with, let's say, the strong performance of the stock market, notably also the French and the European stock market. There, we really have structured products being auto-called and then offering our advisers to see the clients again. So we see very strong appetite in the market. And we clearly are enjoying, let's say, this good development. As it is kind of, as I said, also influenced by the stock market, we feel a bit kind of challenge to make a forecast, but I think we're well positioned there.
Marco Gerussi: Okay. Taking the third question in terms of our individualized business in Switzerland, where we have a very pleasing growth with 10% premium increase of aftermarket. So very pleasing. I mean, overall, there is no seasonality in these products. So first and second half of the year, on average, we expect similar levels on averaging. I mean, around that interest rates, to some extent, might help some plus and minuses. That's normal seasonality in this area of business in individual life.
Farooq Hanif: If I may just quickly return on what I meant by the question on French non-life. I mean, I just wondered whether if we take this 1H result that you've got, if that's a sustainable level? That's really what I was trying to get behind.
Matthias Aellig: Look, I think it's just a bit too early to tell. I think we just referred to the full year guidance, what we said full year. And full year because we clearly have been working hard on the health and protection business. I mean, to reprice that, as Marco has said, but the P&C business, there is always some volatility in there. So we confirm what we said in the full year '23, in view of full year '24.
Operator: [Operator Instructions] The next question comes from Ahmed Nasib from UBS.
Ahmed Nasib: First one is a clarification of what Marco said on the net new assets in TPAM. Is it right that he was saying that you've done CHF 3.5 billion year-to-date, and for full year, you'd expect twice that number, i.e., around CHF 7 billion. Because I think the prior guidance was, you're going to exceed the full year '23 number, which was CHF 9.8 billion. So just a clarification on that. And then related to TPAM as well, the cost income ratio was 90%, and you indicated some investments going on there. Can you clarify what these investments are and if they're expected to continue? And then finally, on the direct investment yield, which was 1.5%. Last year, it was 1.2%. I know a lot of the investment income on VFA business is in the CSM, but on the statutory Swiss basis, do you expect an uplift in your investment income and earnings from that direct investment yield as well in addition to the reserve releases that you've already talked about?
Matthias Aellig: Okay. Thanks. I think Marco takes the first 2 questions, and I will come to the third one.
Marco Gerussi: Okay. Then in regard to your first question, in view of the NNAs, you're right, we said and gave an update on the end of August figure, which is CHF 3.5 billion, which half of it is real assets. And given that development, we see a number at the year-end 2024, around double this number, which is, as you said, a bit below the 9.8 we've mentioned earlier.
Matthias Aellig: Okay. Then I come to the direct investment income question. I think also going back, what we said 2, 3, 4 quarters and half year ago, yes, the higher interest rates that we see now will, over time, feed through the investment income, both on IFRS, where you say both of it is offset by the, let's say, CSM, but also on a statutory basis, I mean, we see higher income from bonds. We see higher income from real estate. I think that's what we have seen. There are some lag effects because there is indexation, there is averaging, the reinvestment of maturing bonds takes time to go through. But yes, this is also clearly expected on a statutory basis. Here, as you know, there is also the policyholder sharing, as it has been in the past, but those effects are, let's say, feeding through. And to illustrate that a bit, the reinvestment rates that we have in 2024 are around 4%. So we are significantly higher than the numbers we see here for the portfolio.
Marco Gerussi: Regarding the TPAM cost income ratio and investments for that. I mean, overall, there are several investments in growth. We see there one to be particularly mentioned is the new offering in the index business by our Asset Managers that we have recently launched and that is now starting to develop, but mainly these investments that is to be mentioned here.
Ahmed Nasib: And are these investments expected to continue over the next few quarters?
Marco Gerussi: Yes. I mean, overall, yes, it's a new initiative, business area we've just started. There are investments over a certain period of time. And along this time then we will see also then some returns, and that's a long-term investment in the new area.
Operator: The next question comes from Henry Heathfield from Morningstar.
Henry Heathfield: Just 2, please. Slide 41. Could you just talk a little bit about the 20 -- or the money, the real estate assets under management that aren't classified under the Swiss Life classification? And then the second question, on Slide 50, I was just wondering, do you track the vacancy rate in the TPAM real estate business? And if so, could you tell us what it is?
Matthias Aellig: Okay. Let me start with the first question. I was assuming that you referred to the CHF 20.8 billion real estate under administration. That's, for example, in Switzerland, our manager, Livit, that is essentially doing stuff like rent collection, re-renting things. It's not management, but it's really the administration of property. That's the kind of things that we have there.
Henry Heathfield: It's not assets under management, it's more administration. Is that correct?
Matthias Aellig: Yes. And we do that also for third parties notably. And the second question goes to Marco.
Marco Gerussi: So the vacancy rates you have in the area of TPAM. Let me just quickly check.
Matthias Aellig: I think on the TPAM, we do not give, let's say, vacancy rate, but we give it for our own portfolio. That's the 3% you see on Page 50, 3.8% for the half year '24.
Henry Heathfield: Would it be fair to assume it's kind of broadly in line with the PAM? Just curious really that it was disclosed for PAM and not TPAM. Not that you ever have done it for the TPAM, but would it be fair to assume that they're broadly similar?
Matthias Aellig: Yes. Look, I mean, the vacancy rate depends really on the type of, let's say, asset. I mean we have, let's say, somewhat, and I'm now talking about the PAM business. We have, on the PAM, clearly lower vacancy rate on the residential compared to the office and the retail. I think that's what is more driving the vacancy rate. And depending on, let's say, what is in a TPAM fund, the vacancy rate will also depend on the portfolio profile change.
Operator: The next question comes from Farquhar Murray from Autonomous.
Farquhar Murray: Just 2 questions from me. Firstly, please, could you just get a sense of how your confidence level has developed over the year on reaching the fee result target range? I ask because at one level, you're trimming the net new assets for the year, and on the other hand, you mentioned improved institutional appetite and actually real estate revaluations have tipped positively. And then just secondly, in terms of the German IFA business, the number of financial advisers being stable, is that pulling below target in terms of development there in terms of the adviser number of 6,000?
Matthias Aellig: Let me take the first question on the comp reaching the CHF 850 million to CHF 900 million. Yes, as I said, we continue to be confident that we reach the lower end of the CHF 850 million to CHF 900 million. We have said that full year and Q1, and we confirm that here in H1, we continue to have the caveat and the development of the real estate markets in Germany and France. But I think this expected normalization we have been talking about essentially since 12 months. I mean, we see that now happening I think going back now 6 months. I mean we talked about macro, let's say, considerations, rates that were expected to be lowered by the central banks. This has happened, albeit not maybe at the pace that many thought back then. We were hoping back then about the continued interest of, let's say, investors in real estate. I mean, we have talked about and we have seen the proof points here in Switzerland. I mentioned our capital increase in this fund. So I think that the many points that on the macro level we mentioned 6 months ago, we see ourselves on track. Also on the more anecdotal pieces of evidence we gave I think in Q1, you saw the sale of condominiums in Germany. We see here much better development than last year. So this is also kind of on a good track. And last but not least, I mean, result development at Asset Managers gives us the confidence. As Marco already mentioned, we confirm our expectation for the full year that we'll have a nonrecurring share of 30% in TPAM. So I think that's what we can say here. The last element that you referred was also the fair value changes in real estate, where we confirm the expectations that we gave on previous disclosures. But still, as I said, the caveat is that we remain reliant on this further normalization of the real estate market in Germany and France.
Marco Gerussi: And in view of the financial advisers, I mean we just said that the number is stable compared to the prior year period following strong growth in earlier years. We have also sales representatives growing. They're growing currently at a rate of 3%. Nevertheless, I mean, we invest in recruiting. We see some onboarding. We see also some levers overall. There is some growth in terms of the target by the end of the year, and this is quite challenging, and we expect some numbers somewhat below the target.
Operator: The next question comes from Bhavin Rathod from HSBC.
Bhavin Rathod: I have 3 on my side. The first one would be on the real estate market dynamics in Germany and France. Can you provide some color as to how the market evolved versus your expectations in the second quarter of 2024? The reason I'm asking is because in the first quarter, you had quite strong nonrecurring fee generation of around 31%, whereas in the first half 2024, it was at around 20%. So just trying to get an understanding how the market evolved and what is your expectation? The second one would be on the cash at holding level at 1H '24. Since you are already at the upper end of your target range of CHF 0.7 billion to CHF 0.9 billion, just trying to understand how are you thinking about that cash position? Or how you're thinking about the excess cash at the holding level? The third and the last one would be, on Slide 25, particularly relating to the assets not backing life insurance liabilities of around CHF 90 million, the results seem to be quite strong compared to the full year '23 results. So assuming the real estate fair value losses for full year '24 remains in the guidance range that you stated of minus 0.2% to minus 1%. How should we expect these figures to evolve for the rest of the year?
Matthias Aellig: Okay. Thanks for the 3 questions. I will take the first one. Marco will start answering the third.
Marco Gerussi: In terms of the assets not backing life insurance liabilities and the growth and the additional contribution we see during half year, that was supported by the lower negative fair value changes. We also have some other positive market performances in it. And with this market and the further, let's say, normalization and development in that area, we see that number climb and developing in a good direction.
Matthias Aellig: Good. Then I will move to the first question. The real estate market dynamics in Germany and France. I think if, let's say, looked at from very far away, I mean, the German market is certainly a bit in better shape than France on a relative basis. And Germany, I think, we have seen the transaction marketing growing. It's a bit less so in France. But I think what is relevant in view of our expectation for the full year 2024 that we see around 30% of nonrecurring income, it's the market at large, but also our pipeline that is relevant. In terms of the second question on the cash to holding, the implications about, let's say, potential measures there. I mean, we have this framework in place, with the 2 conditions of cash and SST. And there is now automatism. There's absolutely no change to the approach that we have explained in the past or the way we apply it. So we continue to carefully assess the situation on an ongoing basis. So in a nutshell, there's nothing new to report on that.
Operator: The next question comes from Tryfonas Spyrou from Berenberg.
Tryfonas Spyrou: I just have 1 question, mainly on sort of cash returns. And I appreciate you completed a CHF 300 million buyback. It looks like the conditions you have for the buyback is sort of satisfied. So you can maybe perhaps give us an update on your thinking when it comes to further sort of capital distributions and buybacks?
Matthias Aellig: Okay. I think that's the framework, you just mentioned it, and part of the framework is also that there is no automatism. And as just said, there's no way that we change now that approach. So this approach and the way we operate it is unchanged. So we will, going forward, continue to carefully assess the situation. As said, there's no automatism. That's in a nutshell what I can say in our news here.
Operator: We have a follow-up question from Q - Farooq Hanif from JPMorgan.
Farooq Hanif: Can you remind us if you've given any sense of whether you still expect 30% nonrecurring in future years based on your pipeline and your plans in the asset management commission income?
Matthias Aellig: Look, we talk here about the last year of the program, Swiss Life 2024. Here we have the expectation of around 30%. What is beyond 2024, we will host an Investors Day on December 3, and we will there talk about, let's say, the years beyond 2024.
Operator: Also the next question is a follow-up from Q - Ahmed Nasib from UBS.
Ahmed Nasib: All right. Just one more for me. On the PAM net income, it was up 15%. Marco, you said, I think, half is recurring, half is nonrecurring project development. Is kind of half of that 7.5% sustainable? So we should expect maybe CHF 165 million of net income from PAM going forward for half year?
Marco Gerussi: Overall, thanks for the question. You're right. Half of it is recurring and half of it is not recurring. There is some swings in it, so some plus and minuses. Overall, I mean, it will be around this level also the way forward.
Ahmed Nasib: Right, half of the 15% growth?
Marco Gerussi: Didn't understand the question acoustically.
Ahmed Nasib: Okay. So it's CHF 177 million at 1H. Is that the level you expect it to be at going forward for half year?
Marco Gerussi: I mean, as I said, there's some plus and minuses on that. On the number itself, we don't give guidance in view of the year-end.
Operator: We have another question from Farooq Hanif from JPMorgan.
Farooq Hanif: Really sorry for another follow-up question, I forgot to ask. It's on cash remittances. So my understanding is you said there's CHF 0.1 billion to CHF 0.2 billion one-off in the numbers. And obviously, you've given some guidance here on reserve releases and investment income in stat. I mean, if we took the CHF 1.3 billion that you've shown, and we knock off CHF 0.1 billion to CHF 0.2 billion, is that a good base to think about future cash remittances? I mean, would we expect from general trends that, that would be something that you could grow from at that sort of level? I just wanted to understand how to think about future years basically about cash remittances? And I get that you're going to have an Investor Day, but just for those of us that sort of want to understand the dynamics of it.
Matthias Aellig: Okay. Thanks for the question. I mean, the one-off in the current year cash remittance, so the above CHF 1.2 billion, there are 2 effects we called as a one-off. There is the not remitted statutory profit of 2021. We flagged that as full year '23. And an additional, let's say, around CHF 30-odd million of tax contribution that was part of the 2023 statutory profit of Swiss Life AG. These amounts together to CHF 0.1 billion, CHF 0.2 billion, and that's what we called the one-off as we mentioned. And we also said there is this, let's say, around CHF 20 million in the cash remittance of asset management in 2024 that we achieved despite decreasing statutory profit or decreasing profit '23 compared to '22. So I think those are the facts. And I think that's a good starting point to think about future. What you also can think about is we now have the CHF 3.4 billion worth of cumulative cash remittance. Over the past 2.5 years, we also have lagged what is, let's say, one-off in terms of cash remittance. That might be an alternative way to think about what is in the thoughts. And we also said, look, the reserve releases that we had in the current, let's say, program, they were of a different nature than what we expect going forward. Namely, there was more in the middle life in the current, let's say, program than what we said is the run rate going forward.
Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Aellig for any closing remarks.
Matthias Aellig: Ladies and gentlemen, I would like to thank you for you joining us today, and goodbye.
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