Baloise Holding AG (HBAN.SW) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Bâloise Group Annual Results 2019 Analyst Conference Call. I am Sandra, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Markus Holtz, Head of Investor Relations. Please go ahead, sir.

Good morning, and welcome to Bâloise Q&A call on our annual results 2019. In our call today, we have our CEO, Gert Winter; our CFO, Carsten Stolz; and our CIO, Matthias Henny. So now I hand over to Gert, who will give you a quick overview of our results before we start the Q&A.

Many thanks, Markus, and everybody also, a very good morning from my side and from our side. Let me start by saying that despite the hectic that is going on, we are extremely proud to present our 2019 results, very strong annual results. We have been accelerating the initiatives we've been doing in terms of innovation, in terms of a very strong core business and 2 strategic acquisitions in Belgium. If you take our Simply Safe's 3 strategic targets, we are extremely well on track to reach them by the end of 2021. We have moved into our top 15% position as Best Employer in the financial industry in Europe. We have won over 200,000 net new customers, which is 12% higher than 2018, and we, again, generated over CHF 450 million of operational cash, which is also more than 2018. We're focusing on 2 strategic pillars: on one side, to strengthen, optimize and diversify our core business; and on the other side, to continue to innovate in our digital initiatives. If you take a number of milestones in 2019, of course, the acquisition of the Fidea and Athora, the former Generali portfolio in Belgium, has been a milestone. If you look at Germany where we have communicated our strategy at the Investor Day 2016, we are well on our way to execute them. And you can see that in the quality of the nonlife portfolio with an excellent combined ratio. And in Switzerland, again, Switzerland plays again the part of a very strong contributor to the earnings and to the cash, both in life and nonlife business. So overall, in terms of growth, we have grown about 10%. You have seen the combined ratio of the group, 90.4%, which is absolutely excellent and we have generated earnings of close to CHF 700 million. So we are very proud and really delighted to present these results despite, as I said, the bit of hectical times we're in. Given the success, we are proposing an increase of our dividend of CHF 0.40 to our Annual Shareholders' Meeting end of April, so increasing to CHF 6.40. And we are planning our next Investor Day at the end of October this year to look back on how we have delivered on Simply Safe as a strategy and foremost, to look forward on how we will continue the successful journey. Having said that, I think it's time to open up for questions. We will be pleased to answer them.

[Operator Instructions] The first question comes from Peter Eliot from Kepler Cheuvreux.

I had 3 questions, please. The first one is, I mean I guess, we've seen a bit of movement in your guidance but the life earnings recently have been up and down. I'm just wondering if you can update us on what we should expect going forward. I mean I presume, given the low interest rate environment that we can expect another sort of period of reserve strengthening this year. But any guidance that you can give us on this year or future years would be very helpful. The second question would be on the solvency ratio. And I was just wondering if you can give us a rough idea of the movements that we saw. I mean it may be optimistic to give any indication of what it might be now, but I mean I'm assuming part of the reduction was due to the equity markets rise at the year-end and they've come back. So just -- I mean I presume that, that will be a little bit of a tailwind amongst all of the headwinds that we're seeing at the moment. I wonder if you could comment. And then finally, on the nonlife loss ratio. I mean a great combined ratio for the group. I guess, if I look at Switzerland individually, the loss ratio seemed to be quite a lot higher in the second half of 2019 than the second half of 2018 by sort of 7 percentage points, it looks like. I was just wondering if you could explain that movement. And if it's not too cheeky, wondering also on the expense ratio, which was up a little bit, just wondering.

Thank you, Peter. Gert here. Let me try to give some guidance on question 1 and 3, and I think then, Carsten, and potentially, Matthias, will jump in on question 2. In terms of life earnings, I'm going back to the Investor Day 2016 where we said, well, we have a bottom -- we have a certain result of CHF 200 million in life EBIT. And that is a sort of stop-loss, if you want. So that's really the bottom line. Of course, if you look at the evolution over 2017 and '18 where interest rates have been stabilizing and increasing a bit and that's why we came -- actually, it would be more in the area -- and that's mid-2018, I think, in the area of CHF 300 million of the life EBIT guidance. Of course, if you look out to the summer of last year, with the drop in interest rates, we have taken a careful position. And that's why we have to reiterate the guidance on CHF 200 million to CHF 300 million of EBIT. And at the end of last year, of course, we had a bit of a relief, I would say, on the financial markets on the interest rate environment, that's why our EBIT is in the area of CHF 275 million. Going forward -- and of course, especially with what is happening today -- today, over the last couple of weeks, if we can say so, in the interest rate environment, we have again a careful position where we say guidance going forward is CHF 200 million to CHF 300 million EBIT. That's guidance on life earnings. On nonlife in Switzerland, we don't steer by semester. Normally, the second semester is always, in terms of claims intensity, higher than the first semester, which was also the case in the second semester in Switzerland with a couple of storms and so forth, so that's pretty normal, and we don't steer it by time period. What certainly in the case is that if you look at Switzerland and combined ratio, I think it's the eighth or the ninth time in a row that we have a combined ratio of below 90%. So that's excellent quality of the portfolio and excellent management of the portfolio. Expense ratio, you mentioned, it is in detail that the expenses have increased slightly. This is the fact across the whole group, by the way, not only in Switzerland where we are clearly investing in our core IT systems and in innovation and growth in the different distribution channels. So that's a conscious investment in IT, in innovation and in growth in the different distribution channels. In terms of solvency and SST ratio, Carsten, up to you.

Sure. Thank you for your questions. I'm happy to shed some light on SST. We expect the SST to come in around 200%. So we had a couple of effects explaining the movement in the SST ratio. One was certainly the acquisition of Fidea that we did last year. If you recall, we financed it with nonrisk-bearing capital because we could take advantage of the strength of the group and the financing environment by issuing senior bonds with negative yield, and that certainly explains part of the movement. You already talked about the market risk movement, and you're absolutely right. The market risk movements, due to the performance of markets last year, have risen our market risk exposure and have contributed also to a slight decrease in the SST ratio. And beyond that, the model changes have also contributed a little bit, but that's more or less normal business. By and large, with SST at 200%, we are -- we remain to be safely in the blue zone, as you've seen on Slide 12 of the presentation, even if we would [ shock ] the markets much beyond the current environment. So I feel very safe with regard to the SST ratio and the SST ratio remains not a boundary condition, especially when we talk about remitting cash to the holding. So I hope that sheds some light on the SST ratio and its movements.

Yes. That's great. Could I just come back very quickly on the nonlife expense ratio? I'm just -- should we think about that as a level also going forward? Are those sort of investments going to continue?

I think costs and cost containment is always high on the agenda, Peter. So we're continuously looking for efficiency gains and cost reductions, and I would say that it will balance out. So we're not expecting increasing expense ratios given the investments we are doing. We are, at the same time, working on efficiency. So that should level out going forward.

The next question comes from Jon Urwin from UBS.

Just 2 for me, please. So firstly, on the German combined ratios, obviously, running at a pretty good level now. I mean where do you see a normalized level for the -- for the combined? And I guess, what I'm really asking is where do you think you are on that turnaround plan? And are you declaring victory yet? And then secondly, on the -- just on the SST, there's a bit of negative model change again. I mean I can't remember a year when we haven't really seen the SST changing for a long time, but I had sort of thought we'd reach a bit more of a kind of stable backdrop now. So I mean, are we there yet? Is there more change to come? What's your expectation there?

Thank you, Mr. Urwin. Let me tackle the first question about Germany and then Carsten will take over on the model changes on the SST. Three years ago, we explained at the Investor Day our strategy moving forward in Germany, so that's end of 2016. In life, it was clearly on capital-light solutions, and 95% of our new business is really fund-driven or a biometric solution. So that's really working. On the nonlife side, we have said, well, we are in an unbalanced nonlife portfolio where we have -- we are overexposed on industrial risks, and we're going to decrease that and we're going to increase the part of the retail and the SME business, which is profitably going forward. If you look at where we stand end of 2019, we have reduced our industrial risk with about 60% compared to 2016. So we have actually done what we have promised and we have increased our private lines, our retail lines and SME business with about 20%. So we have really shifted the nonlife portfolio completely. And what we've seen in 2019 is that it actually has reached a very good quality. The claims ratio in retail, for example, is 53%. Of course, we must say that 2019 in Germany will be benefited from a very good -- or a very benign claims year. And going forward, we, therefore, actually apply the same guidance that we have given in 2016 that we want to reach a combined ratio -- a stable combined ratio moving forward in the area of 96% to 98%. Having said that, your question about do we declare a victory. No, but we are close to the finish line so in terms of turnaround, I think we need another -- we need to work hard to continue this quality -- to keep up this quality of our nonlife portfolio but we have proven in 2019 that we are extremely well on track to really achieve the turnaround.

To your question on SST and modeling, I deliberately mentioned the model developments as a last point in answering the prior question. It's not a major impact this year but models keep evolving. And to shed a little bit more granularity on that, we are basically living in a hybrid world because we have standard models for some components, but we also have individual models for others. So as probably most of the others do as well, so these models keep evolving. And I think they will never be completely unchanged year-on-year also in the future. So model adjustments will be normal business, both in the SST world and by the way also in the Solvency II environment where things are moving also driven by EIOPA. So I think we will continue to have model evolvements. And in the areas that things are being looked at, as for example, modeling of natural catastrophes, that is being looked at. In some areas, people look at tax modeling and others. So just to give a little bit of a feeling, models will keep evolving. It's right that on the standard model components, we have achieved more stability. That is what I was expecting also from the regulatory perspective. So that came true. And -- but I think as we had in other frameworks, model changes will be part of normal. But again, having said that, I deliberately mentioned them last, in comparison to the other effect, the integration of Fidea and the higher market risk, due to markets on investments, the effect was way smaller than the first 2.

And could I just follow up on Germany quickly, please? So just -- I mean once we're there, once you're over the finish line, what are your thoughts on M&A on that book? Because I guess, when we look across the group now, there's very little that you could do in Switzerland. Belgium, you've already scaled up, and Luxembourg is obviously very, very small anyway, and there's not much for sale there. So Germany is kind of the obvious country where you could do something. So any comments there would be great.

Let me pick up that one. I think if you look at our strategy, we always have been focusing on organic growth. So given partnerships, organic growth and smaller participation or acquisitions, of course, in our 4 markets, we have always looked at opportunities if they, from a strategic point of view, from a cultural fit point of view and from a business gain point of view, they were actually attractive. So we will continue to do that. You're right. If you look at the Swiss, the Luxembourg and also partly the Belgian market, the market is pretty consolidated. Over the last couple of years, we deliberately and consciously did not seek for M&A opportunities in Germany given the fact that we have to make the turnaround. We have to stabilize the business. We have to prove that we were, on our own, successful. Of course, given the stabilization and the turnaround we have achieved in Germany, M&A opportunities will also be looked at if they come along in Germany. But always, from a strategic point of view, from a cultural point of view, from a business case point of view. But the M&A window for Germany will reopen given the turnaround we have achieved.

The next question comes from Fulin Liang from Morgan Stanley.

I have 2 questions, if I may. So the first one is, if I look at the cash, so obviously, you have about CHF 450 million cash remittance. Your cost of dividend is about less than CHF 300 million with a bit of central cost. And it seems like you have about CHF 100 million excess cash remained. So what's the planned use of the cash? Is it like going to be used for reinvestment? Or is it going to be like reserved for M&A or any other areas? So that's the first question. And the second question is if I look at how you dispose your new money, kind of the issue in 2019, you significantly increased your allocation to fixed income, which is generally relatively low kind of yield than some other kind of asset classes like property. I think with your current solvency situation, is there actually -- and also consistent with what you kind of intend to do before, is it actually the plan, to be to kind of invest more into property so you can kind of increase your investment yield? Because if I look at the reinvestment yield now, it's like -- it's actually kind of lower than your average guarantee of the life book. It sounds a bit of a stretch from my -- if I look at it that way. So is there any thoughts on the rerisking to increase your investment return? That would be great.

Thank you for your questions. I will happily address the cash remittance question, and I think Matthias will then take up the asset allocation and investment question, if that is fine for you. So first of all -- and let me share this joy with you. I'm very happy that we could have another -- third year in a row of strong cash remittance with all the business segments contributing. I think that is a success that we can look back at and which means that overall, since we started focusing on cash, we have remitted CHF 1.3 billion from the operations to the holding company. So give me that little moment of joy in sharing it with you. Now in the -- addressing your question, the remitted cash is deployed in different ways. And one of the ways of deploying cash is obviously by reinvesting it into either our core business or innovation. Another way -- that's the organic route. Another way of redeploying cash is using it fully or partially in inorganic moves, that's the inorganic way. And then obviously, there is the third road, which is buying and using it for dynamics on dividend side and/or share buybacks. And we currently still have to execute a share buyback which, by the way, we promised to fully complete by the beginning of April, and we will fully complete by the beginning of April, if you look at our 96% completion ratio. Just to complete the picture, yes, there is some cost on holding level to be covered out of that and we also have to serve our debt that we have outstanding. So those are the routes of redeploying the cash. And currently, you're right that the dividend sum is around CHF 300 million based on current dividend levels, but we also have all the other routes in running especially the share buyback that we are finishing, as we speak. So I hope that sheds some light on how we deploy or the different routes of potential deployment of the remitted cash.

Coming to your question on the asset allocation, it's right that the quote on fixed income has actually increased. However, this is not due to allocation shifts but due to market performance. Given the drop in interest rates and the tightening of credit spreads, bonds have significantly increased in market value, such that the allocation to bonds has increased during 2019. So that's the explanation for the increase. We have somehow -- somewhat shifted towards more property and other asset classes that deliver higher, stable returns. We have invested CHF 300 million in real estate. We are somewhat cautious here because also we buy only selectively properties since the prices have also increased in this market and yields have come down also in real estate quite significantly over the last few years. But still looking at the relative level of real estate yield versus bond yields, we consider real estate as an attractive asset class. To your question regarding rerisking. Of course, we have to consider the constraints that we have from SST and Solvency II. And so therefore, it's always a balance to be taken between taking investment risks and generating higher yield on the one hand side and also respecting the capital constraints given by SST and Solvency II.

Okay. So is there any specifically -- is there the target like allocation to property? Because right now, it's only like 3%, 4% of your new money allocation.

We have a target to increase property over the next few years but it will be in the low single-digit percentage point range.

Low single digits.

[Operator Instructions] The next question comes from Thomas Fossard from HSBC.

A couple of questions for me. The first one would be on the P&C side. Can you tell us how you see your book currently recession-proof or going into 2020 and maybe into 2021? I mean now are you seeing the U.S. being exposed to lines of business where, in the past, you had, I would say, negative correlation or positive correlation with more difficult business climate? The second question would be related to your life business, and actually, we had some moving parts especially in terms of business mix in 2019 for obvious reasons. Maybe you could shed some light about where you expect this mix and maybe also the growth rate to trend into 2020. And also, maybe I would like to come back on the cash remittance for the CHF 455 million. Clearly, I mean '19 results have been positively impacted by very strong delivery on the German combined ratio side, also on one-off tax effect. So how should we read the cash remittance for 2020, if we were to normalize some of this item and also, obviously, take that the interest rates environment maybe slightly less favorable. And maybe the last one would be, could you remind us your impairment, equity impairment rules?

Good. Thank you, Mr. Fossard. Let me tackle at least the first 2 questions, and then hand over to Carsten and Matthias for question 3 and 4. On the question on P&C business, and whether or not recession-proof, if you look at our track record in nonlife, so P&C over the last 10, 15 years, it is really part of our DNA in order to actively manage the portfolio, the quality of the portfolio, the underwriting of the risk, the pricing of the risk, the reunderwriting of the risks, and we're also very much focused on private lines and on SME lines. So look -- outlook of our nonlife P&C business is clearly stable and as good as it was over the last years given the fact that this is really core, the core business, what we do. In the life business, you're right, in 2019, there has been a one-off effect of the -- of AXA in Switzerland, leaving the second pillar, the life insurance part. So that's certainly a one-off in terms of volume. It will normalize back to the same kind of levels as we have the years before. If you look at nonlife and life in 2019, taking away Fidea and the AXA effect, for example, the growth in nonlife is 3%. The growth in life is approximately 4% to 5%. So very solid, healthy growth in -- also in life. The strategy in life is clear. It is capital-light solutions. It is no guarantees or it is very limited in time guarantees. It's biometric solutions. It's risk solutions. So that's the overall strategy in life, but the one-off effect of 2019 needs to be taken out. That will not reoccur in this year. So that's about P&C outlook and life outlook. On the cash remittance part, Carsten, over to you.

Sure. Thank you for your question. Basically, and since the last 3 years, we are aiming at a higher cash quality of the IFRS earnings overall. So the "cash content" is in focus, and we are trying to rise the cash remittable part of IFRS earnings over time, and you see that we have been successful in doing that in the last 3 years. Now with regard to the effect that you have mentioned. The tax effect, especially is a noncash effect and noncash event. So that is not an impact if it doesn't reoccur, and it will not reoccur in the same order of magnitude this year, so that will not negatively impact the capability to remit cash. Also, obviously, due to the nature of our business, there's further noncash earnings elements that will always be noncash but nothing has fundamentally changed there. So I think we have reached, and we are going to continue to rise or try to rise the cash content of our IFRS earnings. What is in our attention moving forward? That was part of your question as well. It's, for me, relatively straightforward. We have committed to CHF 2 billion cash until and including 2021. We have done CHF 1.3 billion. So the rest remains to be delivered and will be delivered. Now on your question with regard to equity impairment rules, if we are -- Matthias?

Yes. I mean it's a standard impairment rules. It's either, if the equity has lost more than 20% or if an equity is below book value for more than 12 months, then we make an impairment.

The next question comes from Rene Locher from MainFirst.

Yes. Can you hear me?

Yes, Rene.

Okay. So I would like to start with Slide 28. 20% growth in third-party assets. And just wondering a little bit where the growth coming from, which [ asset play ]. And that you can also remind me what's this part of this whole for third-party asset management growth? And then since we have -- we've taken quite a lot of question on the asset side of the balance sheet, it reminds me a little bit like 2008. So on Slide 38, the small amount is the senior secured loans, perhaps [ much less ], if you could give us little bit more insight how they behave in the current market environment. And then also on the asset side, another question I got from clients is exposure to energy. And perhaps a quick one on credit spread widening. What's the impact on the SST? And then the next question is on Slide 9, [ here, you gave us ] on your cash radar, so the left side is free reserves, attributable free reserves in holding. Another question I got from clients, how safe is the dividend going forward? I remember that the many, many years, borrowers were always very, very cautious and have a little bit of extra cash at the holding level to tie a dividend even in bumpy times, so perhaps you can give a bit more insights here. And last but not least, on the buyback. You -- it should be ended in April. And then I think you're going to cancel the number -- the shares at the AGM or after the AGM, which is set for 24th of April.

Good. So a bunch of questions. Many thanks for those questions. We try to answer them. So the first question was about the third-party asset management business. Here, we had a growth of 20% of total assets in the last year from CHF 9 billion to CHF 10.7 billion. About half of it is net new assets, and about half of it is market performance. The net new assets you see on the bottom part of Page 28, accumulated over the last 3 years, is now at CHF 2 billion and while the ambitious -- the ambition is CHF 5 billion for the period until 2021. So we are very happy that we can accelerate this business and grow it further. The new -- second question on SSL and your referenced to the year 2008. I think we cannot really compare the situation back then. At the time of the financial crisis, the issue for SSL, for senior loans, was that most of them were packaged in CLOs and those CLOs were forced to sell to liquidate, which led to an entire market crash. This is not the kind of investment that we do. We do direct investments in senior loans. So there is no packaging around it and it is part of our diversified asset allocation. We hold something around 3% or almost 3% of senior loans as part of the total asset allocation, and this adds to the overall diversification of our asset portfolio. And it contributes to the current income and helps to offset the negative impact of the low interest rate environment. Now coming to the loans that's part of our credit portfolio. First of all, as we say, we have a rather conservative credit portfolio. More than 70% of our bonds is still in the AAA/AA area, and this allows us, to a certain extent, also to add some risk in areas where we think risk returns is well rewarded. Now coming to the components of the senior loans portfolio. We have a well-diversified portfolio. The weighted average rating factor is lower although the credit rating is better than the average market. So it's -- again, here, it's a more conservative portfolio. And the amount to -- or the exposure to energy in the senior loan part is somewhere around 3%. And if we look at the BBB part of the portfolio, they are also -- the exposure to oil and gas is 1.3%, and to transportation, it's also 1.3%. So that's BBB part of our portfolio. So you can see it's quite a small exposure that we have in our credit portfolio towards those sectors, which have come under pressure in recent days.

Now building on what Matthias just said, your question was around credit spread and SST. The credit spread is an important risk driver in the SST framework. Now if you look at the sensitivity disclosure that we've done on Slide 12, you could argue that markets rarely move only on the interest rate side, then they also move on the spread side so that we also have a little bit of a sensitivity disclosure here. We remain safely in the blue zone, even if we have a sound market crisis with high correlation. So I feel safe at the moment with regards to credit spread. Then on the next question with regards to the cash radar and the question on how safe is the dividend. I would like to remind you that our stated dividend policy means up-only. That is, if we are suggesting dividends rises, as we are doing to the AGM this year, then we are doing this on the back of the up-only dividend policy, which means that ongoing concerned environments, dividends are sustainable. And if you look at the balance sheet of Bâloise Holding overall and the Bâloise Holding balance sheet can buffer situation largely. So there is no risk from a balance sheet perspective and cash remittance likewise because we have installed the pipelines from the operating entities. So therefore, I hope that sheds some light and gives also security on that level to your customer who asked that question. And then the final one that you did ask, Rene, was on buybacks. It's true, the buyback is executed over the second line. So the final journey that these shares are taking one spot back is going through a capital reduction and therefore, ceasing to exist. The formal capital reduction will most likely not be done in this year's AGM but in next year's AGM, but I say this with a twinkle in the eye. We probably don't need a notary this year and we need a notary for doing this. So we are saving the cost. But from an economic perspective, it doesn't change anything. It's -- so they will be canceled at the AGM in 2021. So you can consider them to be off and therefore, the earnings accretion effect to be permanent.

The next question comes from Farquhar Murray from Autonomous.

Just one question, if I may. Unfortunately, it's on the topic of the coronavirus, and I do appreciate the sensitivity around that. Please, can you just outline what you see as the most likely impacts on the business? My presumption is that most of that would come through the macroeconomic stress, but I would be interested to understand whether there are other avenues of impact in particular. Could it come through your health business in a way and then what might the exposures be there?

Thank you, Mr. Murray. Let me start by saying that the first priority that we have is, of course, the health of our people, of our customers and of our partners. That's the first priority that we have. The second priority, of course, to keep the business going, so actually to safeguard the operations of our business. Having said that, we were very early in taking the necessary measures in terms of prevention for our people. So that's working out well. If you look at insurance business impact and even capital markets business impact, it's very early to come with very clear statements on what will happen, what will not happen. What is clear, of course, is that the world economy will slow down, is slowing down, has slowed down, and it will have an impact. If you look at our business across the whole group, there are a number of areas, I would say, that might be impacted. One is the event insurances on one side. The other side is travel insurance. Third one would be transport, for example. If you look at all these branches in the insurance business that might be impacted, we are -- our exposure in these lines of business is very limited, so in terms of travel, in terms of transport, in terms of event insurances and so forth. So what we are expecting today is that, of course, with all the uncertainty that we have is to have an impact in the lower second -- 2-digit side. So that's the impact we see today in our core insurance business given the fact that we have very limited exposures in the lines of business that might be exposed.

Okay. And on the life side?

Same applies for the health side. And the life side actually, also there, it's in Switzerland, for example, it depends on the waiting time that we have before we start reimbursing in health. The normal disease length is 10 days to 14 days. In most of the contracts, we have a waiting period of 30 days. So that's not impacted there. Yes. So it's also on the life side, it's limited exposure. So expectation for both P&C and life is in the lower 2-digit million side.

Yes. Maybe just to add one element to this, and I'm deliberately stating this in a technical way. Neglecting the human side, depending on where the pandemic situation goes, there could be a rise in mortality on the life side, which, from an actuarial perspective, then have to be figured in. But again, this -- I say this technically without looking at the human side of things. And then on the asset side, Matthias?

Yes. I mean on the asset investment side, we, of course, have a direct impact. I mean markets are very volatile these days, sometimes even in panic mode. So we're watching very closely what's happening. And currently, we have -- the good thing is that we have a relatively conservative credit portfolio. So the impact on the P&L, we will only see if there is really a default. So a spread widening doesn't have an impact on the P&L directly. And as just mentioned before, the exposure to the sectors that have been hit quite heavily is quite low in our portfolio. On the equity side, we have low equity exposure of 3%. And this equity exposure, it's fully hedged with put options. So there, we are relatively safe regarding further downside risks.

The next question comes from Dieter Hein from AlphaValue.

Yes. I have 2 questions. Firstly, you mentioned how proud you are on what you have achieved 2019. If I look to your pretax profit, it was down by 2%. So are you proud on this pretax profit level you achieved last year? And could you give us maybe an outlook regarding the pretax profit development for the current year? And the second question is regarding share buybacks. How likely is that we can expect -- or in after April, the next share buyback program starting in 2020? That's it.

Okay. Yes. Thank you, Mr. Hein, for your question. The price remains despite the EBIT down that you mentioned because since the beginning of Simply Safe, we are less focusing on IFRS earnings only and have shed our light much more on the cash side, as I explained. And I think the business has in-built a volatility that will always be there. So despite the EBIT development that you mentioned, we are happy and remain happy with the result achieved in 2019. We have deliberately, therefore, also not had a target on EBIT overall. The target set remains unchanged with regard to the financial KPIs that we are pursuing. That is the 90% to 95% bracket for the nonlife combined ratio performance. That is the life EBIT guidance that we have given. That is the guidance on the 8% to 12% return on equity based on IFRS disclosure as well as the 3 strategic targets for the Simply Safe season, looking at customers and employees and shareholders. So that remains unchanged. Now with regard to your second question, on the share buyback, we will now finish the program. By the end of the program, we will have remitted, by and large, CHF 0.5 billion back to the shareholders since the beginning of the program 3 years ago. There will be no direct program after April and I will target you or point to the Investor Day scheduled for October 29 where we'll get to the [ intercept ] in the beginning, where we'll shed light on all strategic topics.

Maybe just one addition from my side on the EBIT question. If you look at the EBIT, nonlife, it has increased by 7% in 2019 compared to 2018, so very solid technical performance. And of course, the 2018 EBIT in life was actually positively influenced by a one-off release of reserves in Belgium that we no longer need. So that's actually why you see the CHF 275 million EBIT in life and not over CHF 300 million, which was this onetime -- one-off effect. I think if you take that into consideration, EBIT has clearly increased, especially in the very profitable nonlife business.

Yes. Would you expect or can we expect this trend to continue in 2020?

Which trends, Mr. Hein? Sorry, I did not...

So you mentioned, if you adjust this one-off effect in life 2018, then you have a positive pretax profit trend as well in 2019, and that is the basis of the question. Do you expect then, on this basis, positive development in 2020 as well?

I think it's too early to say what 2020 will bring, especially with the volatility and the uncertainty we see -- we're seeing in the market. We -- I think on the nonlife side where we have a proven track record over years, it is clear that we have a stable, very solid, high-quality portfolio, that's one. On the life side, as we said, we have the guidance, CHF 200 million to CHF 300 million, and we certainly stick to that despite the volatile times. But too early to say what 2020 will bring as we speak, mid-March.

The last question comes from Peter Eliot from Kepler Cheuvreux.

Just one final one. I just want to give you the opportunity to talk a little bit about FRIDAY or indeed some of your other initiatives. And I'm just wondering if you can sort of have any view on when this might break even, assuming it hasn't already. And I note that it's expanded into other products outside motor now. There was talk potentially of expanding into other regions. Just wondering if you could sort of update us on the strategy and where it is in its [ path ] there.

Thank you, Peter. FRIDAY is, of course, is a bit of the spearhead, I would say, of all the innovation and digital initiatives we have launched. It's certainly not the only one, and there is a full pipeline of innovation and alternative business model initiatives that we have taken and are taking. Specifically on FRIDAY. FRIDAY, in 2019, has won 50,000 new clients. That's more than 2017 and '18 together. If you look at the quality of the portfolio and the claims ratio, given the improved quality is going down and is now already below 100, so portfolio quality is improving. As we said, we have launched, beside the car insurance products, a home product, and it's -- the cross-selling is functioning very well. We have achieved in 2019 an insurance premium of EUR 17 million, so about CHF 20 million already. If you look at the investment that the 2 media companies have made in 2019, we have used that explicitly to increase the market awareness in Germany. FRIDAY, although still small as an online and direct insurer, is spontaneously recognized by 1 out of 7 German citizens. So that's a very high brand recognition. We have expanded into other products. We'll continue to do so also in 2020 and are evaluating the expansion into other geographies. If you take another example of initiatives, which is MOVU, which is the digital moving platform in Switzerland. That MOVU will break even next year. In FRIDAY, it's clearly a growth. Growth has the priority there opposed to breakeven, but we also expect, of course, FRIDAY to break even in the midterm. If there are no further questions, then I would like to thank you all for the discussion and the debate and your questions. Won't be able to see you probably over the next coming weeks given the restrictions on travel and so forth, but we'll certainly be in touch via phone, I would suppose. So thank you very much. Enjoy the rest of the day.

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