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

Ladies and gentlemen, welcome to the full year 2023 results conference call and live webcast. 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.

Thank you. Good morning, and welcome to Baloise's Q&A call on our annual results 2023. On our call today, we have our CEO, Michael Müller; our CFO, Carsten Stolz; and our CIO, Matthias Henny. We will start with a quick overview of our results. For this, I hand over to Michael.

Thank you, Markus. Ladies and gentlemen, I am happy to welcome you together with Carsten Stolz, our Group CFO; and Matthias Henny, our Group CIO. Past financial year was characterized by extraordinary large losses in our Swiss Non-Life business, as we already communicated in November. And the transition to the new accounting standard, IFRS 17, 9 as well outlined in our update in June. Nevertheless, we were able to increase our cash remittance to CHF 493 million, in line with our strategic ambition to remit CHF 2 billion of cash from '22 until '25. Based on that, our Board of Directors decided to propose a dividend increase of CHF 0.3 to CHF 7.7 and to continue our attractive and reliable dividend path. With that, we have maintained our only dividend policy since more than 20 years. Over the last years, macroeconomic conditions have changed, and we are actively addressing the resulting challenges. With our half year result '23, we had announced that we will sharpen our existing strategy simply safe. Since 2017, we started to build up an ecosystem approach around our innovation portfolios, home and mobility. Following our review, we have now decided to stop new investments in our ecosystems. We will also no longer pursue our innovation targets. We continuously review our business portfolio to reduce risks, become more capital efficient and to improve diversification. One example is Belgium, where we optimized a life runoff portfolio that includes reserves of about EUR 900 million last year -- this year, sorry. As a result, we expect to release a mid-double-digit amount of capital in Belgium. The benefits of diversification are reflected in our 2023 results. While the result of our Swiss business was low due to the extraordinary large claims, Belgium and Germany could significantly increase their contribution to earnings and have also positive impact on cash. However, I am not satisfied with our earning level in '23. And we will, therefore, continue to work on improving our core business. It is important for me that we are increasing our strategic focus on our strong core business and keep operational excellence at the forefront of what we do. In this context, I'm happy to announce our next investor update, which will take place on September 12, '24, together with the publication of our half year results. On this investor update, we will also focus on growth, on operational excellence and efficiency. Carsten will now guide you in detail through our financial results for '23.

Thank you, Michael. I start on Page 5. Our shareholders' profit in full year 2023 amounts to CHF 240 million. We delivered growth of 5.4% in Non-Life. The combined ratio amounted to 92% and the Non-Life EBIT to CHF 134 million. This result comprises the extraordinary large claims, which had a negative impact of around CHF 200 million. In Life, we grew our investment-type premium business and achieved a new business margin of 6.5%. The EBIT in life is lower than in the previous year, mainly driven by economic impacts. In Asset Management and Banking, we acquired CHF 1.2 billion of further net new third-party assets and delivered a higher EBIT. Let me highlight a couple of further points in the presentation. First, on Page 11, you see that higher cash remittance from our Life business more than compensated lower contributions from Non-Life. All business units contributed to the cash remittance also Germany, which is still on a comparably low level, but higher than in previous years. Based on the 4.7% higher cash remittance, we propose a dividend increase of CHF 0.3 to CHF 7.7, which Michael already mentioned. With that, we continue our reliable track record of dividend increases. Next, on Page 12, our capitalization remained very strong. We expect a SST ratio of around 210% despite the payback of a subordinated loan, adverse foreign exchange as well as interest rate effects. Our rating of A+ was confirmed in August by Standard & Poor's. On Page 13, equity stands at CHF 3.3 billion. Comprehensive equity, that means the sum of IFRS equity plus CSM post tax amounts to CHF 7.2 billion, which corresponds to CHF 157 per share. Moreover, you see on Page 16 that our growth in Non-Life was 5.4% in local currencies. All our markets contributed to this growth stemming from pricing as well as volume increases. On Page 17, both our EBIT with CHF 134 million, as well as our combined ratio with 92%, stand at a solid level considering the extraordinary large claims of around CHF 200 million. Releases from the inflation reserves, which we had built up in the year before, partially mitigated this effect. While interest rate developments led to a higher discounting effects in the insurance service results, they were partially offset by a lower insurance finance results. On Page 22, you see that in the Life segment, we achieved an EBIT of CHF 179 million. The drivers are similar to what we already showed at the half year results. The main driver of the profit in Life is the CSM release, which amounted to CHF 252 million for the full year 2023. The insurance service result was CHF 272 million. Finance result in Life was roughly stable with CHF 32 million. Other income and expenses was CHF 33 million, more negative. This negative impact was already visible in the half year results. It mainly results from higher expenses. On Page 23, we have more details on the CSM development. Excluding the operating and economic variances, the CSM grew by 0.5%, i.e., the sum of expected business contribution and new business was higher than the CSM release. The CSM absorbed economic and operating variances. In line with the market, we increased our guarantees for some of our Belgium Life products. This is reflected in the operating variances. Similar to half year '23, the economic variances were negative. This is due to adverse spread movements, including the impact of a lower illiquidity premium, negative currency effects and lower valuations of investment properties. The profitability of our new business in Life is shown on Page 24. Our new business margin stands at 6.5%, and is on a similar level as last year. Life business volume is reduced. The investment type premiums grew, but this could not compensate lower volumes mainly in Swiss Group Life business. Here, we see a clear and continuous trend towards semi-autonomous solutions. Our semi-autonomous solution, Perspectiva, benefited as well where we show again good growth. On Page 25, you can see that our interest rate margin improved to 137 basis points. This is a result of our active asset and liability management. The average guarantees remained on a stable level compared to the previous years while we could improve our current yields. Finally, the segment Asset Management & Banking, we can see on Page 28, delivered an increased EBIT of CHF 82 million. We actively managed the interest spread business of our banking business in light of the higher interest rate environment. Further, we grew our third-party assets. In total, we gained more than CHF 2.1 billion of net new assets since 2022. In summary, let me reiterate 5 key points. 2023 was characterized by extraordinary large claims in Non-Life, which mainly affected Switzerland. We were able to mitigate these effects through higher contributions from Belgium and Germany. Our balance sheet remains strong with an SST ratio of around 210%. With our cash remittance of CHF 493 million, we are well on track to achieve our strategic ambition of CHF 2 billion cash remittance until 2025. And last, but not least, we continue our reliable and attractive dividend policy. With that, I hand back to Michael.

Thank you, Carsten, for this overview. Let's open directly the Q&A. And as already mentioned, besides Carsten and myself, is also Matthias Henny, our CIO here for the Q&A.

[Operator Instructions] The first question will come from Ahmed, Nasib, UBS.

So 3 questions from me if that's okay. First one on distributable earnings and reserves within the entities that you have. What level do you think you're at, at the moment? When I was looking at the individual subsidiary accounts, it seems like it's mostly in Switzerland, and it got to around CHF 1 billion within Life and Non-Life in Switzerland. So that's the first question. Secondly, you're reducing the spend on innovation. Would we expect the percentage of the dividend to be at the top end of the range, i.e., 80% of the remittances going forward given you're reducing the spend here? And then finally, the Belgium back book transaction, I think you only reinsured 12% of reserves. Is there more to go here in terms of further releases of reserves to reinsurance?

Okay. Thank you very much. So I will start with the Belgian back book, first, then we come to the other points. I think to look at the capital efficiency is an ongoing work always. So the transaction we have done with Belgium is something, I think, we always have to look. That is also a question of the environment, how it's evolving the environment. And it's something we are looking constantly in our books, whether we are best owner or not and what's the situation overall. So we have done some transactions in the past like that in Germany in Life business and now also in Belgium, but I think it's a constant work we have to do, and we will also do in the future. The first question from your side was about the distributable earnings on the level of the statutory accounts and I think for that, I hand over to our CFO, Carsten.

Yes. Thank you, Michael. With regard to distributable earnings, it's particularly important to look at the Baloise Holding balance sheet. And if you look at the Baloise Holding balance sheet, what we are suggesting at this year's AGM translates into more or less a payout ratio of 80% from the Baloise Holdings statutory accounts. The cash remittance as such is well supported by the balance sheet of the operating units.

Then about the innovation spend, we already have this bank like in early years between 10% and 30% from the innovation spend. We lowered it already before to go more on the lower end. So it was closer to the 10%. And yes, for the future, it will be lower payments also in the future because we are stopping this ecosystem as a new investment in ecosystems. So I think we have a reliable track record on dividends, and we will continue on that.

The next question comes from Peter Eliot from Kepler Cheuvreux.

If I could do 3 questions as well, please. The first one is on the CSM. Just wondering if you could help me understand how we should expect both the CSM and the CSM release to develop from here? I appreciate the full year results are probably a better guide than the second half. But if I look at the second half, then the CSM release was only about 2%. But despite the low release, I guess -- I mean, Carsten, you mentioned normalized CSM growth of 0.5%. I'm just wondering how we should think about both of those items going forward. That will be the first one. Secondly, on innovations. I mean, I guess the majority of this spend to date has been on FRIDAY. So I'm just wondering how much money you expect to carry on investing in FRIDAY going forward and what the trajectory is there? And could you just comment -- should we expect any -- or might we get any impairments in your innovations as a result of the strategy change? And then the third one was reserve releases. Are you able to quantify the releases that you had this year, I guess, both from Germany and Switzerland? And I guess -- I mean, we've heard from one of your Swiss peers that the releases there are driven both directly by interest rates and indirectly by reinvestment rates and running yields. And I'm just wondering if you can share what scope you have for releasing each of those sources.

Thank you, Mr. Eliot. So we will start with the question of the CSM. So overall, CSM and also on the release of the CSM, the development, which is not an easy question with this new part of CSM we have from the IFRS 17. But I hand over for that to walk -- to this walk -- to this task for Carsten.

Thank you for your questions. I make reference to the CSM walk in the analyst presentation. And first, with regard to the CSM release, the CSM release is dependent on interest rate levels. But I agree with you that looking at it from a full year basis is a better view than half year. So it's fair to say that an expectation of around 5% release Ceteris paribus is probably a good ballpark figure. And then to your second leg of your question with regard to CSM growth. When we look at CSM growth, we look at the expected business contribution, the new business CSM, and compare this to the CSM release. It's been this 0.5% positive that I mentioned. And we would expect this also to be positive in the future. It's quite interesting for us to see also that we could cover around 2/3 of the new business -- of the CSM release with new business and not coming from the back book but that's a side note. So CSM growth is expected to be positive, and that's what we manage the portfolio towards and the release as such is interest rate sensitive, but the 5% probably is in our case not such a bad assumption. I hope I addressed the 2 legs of your CSM question.

Yes, that's great.

So the second question was about FRIDAY, and then the third one about the impairments, the question mark of impairments overall on the ecosystem. So about FRIDAY, FRIDAY is underway to breakeven. You know we already addressed that in last year that FRIDAY, which was explicit, the growth story, a digital insurer, as we said, looking at the whole environment where we are in and also FRIDAY's in with the motor business in Germany also, that we have to look on the breakeven path, which means also not having the growth as it was foreseen in earlier years, which means they have more to look on the breakeven part. So they need some financing part on the way to breakeven, which was already planned. So it's not at the end but that's where we are at the moment. And about the impairments of the ecosystem. So obviously, we do not have an impairment at the moment. Otherwise, we would have communicated it. But what we have to do it, we have to look at case by case. So it means that we are now bringing these ecosystems closer to the core business where it makes sense. So that's where it is already, a close relationship to the core business. It means also that at the end, we have to look on the whole portfolio on each of these investments on an economic view. And yes, for sure, it's also -- a potential write-down is always possible. It depends also on how the evolution of these companies are in the future. So it is a possible part also in future, not at the moment. For the reserve releases, I hand over to the CFO, I think.

Yes. Thanks, Michael. With regard to reserve releases, and it's my understanding, Peter, that you were referring to the Life business, the last year...

Yes, that's right.

Yes. For the last couple of years, we talked about interest rate-driven reserve additions in the Life business in order to also bring the average guarantees and the back book down. And this particularly also affected the statutory base -- statutory accounts of the Life entities. Now since we are operating in a different interest rate environment, now we are doing -- we see a reversal of this, particularly supporting the statutory accounting in the Life entities. And that's exactly what also affected the full year 2023. So in contrast to IFRS view on the Life segment, the statutory accounts were supported by the environment we are operating in, and we are also expecting that all other things being equal, that this will sustain into the future and leads to further statutory reserve releases. By the way, that's also one of the elements that was supportive with regard to the cash remittance contribution from the Life segment. It's not a linear development as it's not been a linear development in reserve additions in the last few years, but the environment overall is supportive for Life statutory accounts.

Just to quickly clarify that last point. I mean if interest rates stay at the sort of the current level or as projected by the forward curve, should we -- do I sort of understand correctly that we should probably expect a similar sort of rate of release in future years as we saw this year? I mean it sounds like you can't promise it's going to be precisely the same level, but we should -- yes, should we expect, yes, sort of a similar sort of movement?

Yes. So in the past, we talked about this in-built inertia effect on the way down, if you want. And there's also an in-built inertia effect on the way up. And therefore, the conclusion that you draw is right. So even if interest rates go sideways due to this inertia averaging down, averaging up effect, the effect overall is positive -- supportive.

The next question comes from Farquhar Murray for Autonomous.

Just 3 questions on my side. Firstly, on the inflation reserves, could you just outline how much of the 1.9 percentage points for full year '23 came through in the second half? And just is there any more of that inflation reserve outstanding that might actually be in scope for release? Or is it all kind of folded into the normal reserving for the year? Then just on the Life side, in terms of the kind of new business side of things, is there much you can do just to try and enhance the new business volume that you're coming -- that you've got coming through the CSM? I just wondered what scope there might be around that. And then finally, just more generally for Michael. You've had several quarters in the kind of CEO chair now. I just wondered if you could give us a sense of when you talked about diversification earlier, what did you mean by that? And what would be the most likely means of achieving that in terms of improving kind of diversification across the group?

Okay. Thank you for these questions. So we will start with the question of the inflation reserve, especially with the, I think for you, the question was what's coming from the second half year and what's -- how much of that inflation reserve we discussed that on the restatement also during that call, is there now. And I think for this one, I hand over to Carsten.

Thank you for your question. I make reference to Slide 17 in the analyst presentation. I assume that's the slide you are alluding to. So the inflation reserve impact of 1.9% release in full year 2023, as we've disclosed was as majority happened in the second half when we revalued our reserves for the full year closing. We've also disclosed that we had added CHF 120 million in inflation reserves in the prior year and that we have released CHF 76 million this year. You have to bear in mind that reserve is one thing. There's also claims paid, and some of the claims of underlying have also been paid out. So by and large, there is some inflation reserve left, but not a big part. And since we saw maybe a more -- a faster landing on the inflation side or coming back from the spike in 2022, maybe the necessity to accommodate inflation has also gone down a little bit. So long story short, inflation reserve release has -- as a majority happened in the second half. And that's not such a big part left.

Just to help us, I presume by majority, we mean probably a significant majority, i.e., not near half-half?

Yes, yes, absolutely. Yes, yes. That's in -- that's due to the fact on how the actuarial evaluation processes run and they are, in particular, running for the full year.

Okay. And second one was about the Life side and the question of enhancing new business volume. So overall, as we mentioned just before the volume in Switzerland was lower there, especially because of this trend to semi-autonomous solutions also in the Group Life Business where we have. So overall, it's clear, higher interest rate environment is supporting for Group Life Business overall, which then also gives the chance to have more business with valuing, also on the Group Life part. So also going up there again. And will also help CSM and then also the new business contribution overall. To write more business also in the unit-linked part, that is also part to be have a higher part. Overall, I think we have also to look what is the release we have coming from the CSM and it's more than compensated at the moment from the new business and the roll forward of the existing business, which means it's without the rest of all the economic variances in operating it's going in the right direction. So I think there, that's the overall situation we do have. But clear, a little bit higher interest rates is helping in that journey. And then we have this question of the diversification, which was especially also mentioned from my side what it means. Overall, I think the most important part from the diversification from my side is, especially the more contribution we do have on the earnings from -- coming from Belgium and from Germany. Looking to our overall result, we have this impact on the claims side, especially in Switzerland, and we have quite substantial higher part now coming from Germany and Belgium, which is overall a good situation. That's the diversification, which was especially from my side in this quote. Overall, we are always looking also to the rest of the diversification. It's also a topic, but it was a minor point. But if you are looking, for example, in Swiss business, also the bank had quite a higher part in it. So also a question of diversification in the countries.

[Operator Instructions] The next question comes from Bhavin Rathod from HSBC.

I have 3 on my side, 2 on P&C and 1 on CSM. So on the P&C side, the first would be if you could update us what kind of reinsurance strategic change you have made in the recent renewal ground? I believe previously, your reinsurance protection was more towards protecting the tail risk. So have you made any change to your reinsurance strategy considering the higher weather losses we've seen last year? So that would be my first question. Second one would be on the German and Belgium P&C business. If you could give some color as in what kind of pricing dynamics you are seeing in this region, vis-à-vis, the claim inflation, if you see the scenario improving in these 2 markets? And the third one would be on this CSM walk. I'm specifically looking at the economic variances. It would be helpful if you could just provide any breakdown of that economic variances between spread movement, FX and real estate, potentially just trying to understand how we should be thinking about the sensitivity of those dynamics with respect to CSM?

Thank you very much for these questions. So we will start with the question of the reinsurance, which was a big topic in the last call already, so on structural changes in the reinsurance strategy that we do have, and Carsten will go into that detail.

Yes. So Bhavin, thank you for your questions. We have not structurally changed the reinsurance program. We still focus on reinsuring tail risk in our books, in particular, with regard to nat cat. The reinsurance programs are more expensive as we also talked about it already last year. And on some layers, we have higher retentions. But by and large, the reinsurance program structurally has not shifted.

Thank you, Carsten. Then the question about inflation, P&C business, especially in Germany and Belgium. Overall, you see that we do have growth in these markets. On group level, it's 5.4% in the markets, in the euro. For Germany and Belgium, it's between 6% and 7%. So you'll see that we already have some significant price increases in these markets. To offer a more detailed picture, it's always not easy because it is also depending on what market is doing overall. But I think we have the chance to go up with the prices. We already have done quite a substantial part and I think also that it will not be the last one. So we also have to do in future. We have to work on that side also in future. But a big part also of the growth is also coming from this. And you see it also that in our Europe countries, we do have significant higher growth rates than in the Swiss francs. And the last one is about the CSM walk and the drivers. So this new item on IFRS 17, we come back to that, and I think Carsten will walk to the CSM.

Yes. So your question on the economic variances and what contributed to the economic variances to what extent. So first and foremost, spread and interest rate movements have impacted the economic variances, and we expect around half of the variances that you see in the CSM walk are attributable to these effects. Then second, since we are -- our reporting currency is Swiss franc, and given the fact what happens to the Swiss franc in particular, in relationship to the euro with the Swiss franc-euro relationship below parity at the end of December, around 1/4 of the economic variances are attributable to the ForEx effects. And then remains 1 quarter. And with regard to this 1 quarter in their valuation effects stemming from real estate play a role. Our real estate portfolio we have adjusted by around 1% in valuation overall, and that is reflected also then in the economic variances in the CSM walk. So in summary, half of it's spread interest rate, a quarter, FX effects, and then the last quarter where real estate value developments play a role.

Right. Can I just quickly follow up on that half of the impact coming from interest rate and spreads. So when I get the sensitivity on Slide #22, the impact of 50 basis point decline is somewhat limited at CHF 28 million. So within that half, would it be fair to presume that the bulk of that is rather coming from the spread movement than the interest rate impact?

Yes. So the sensitivity is not on spreads. The sensitivity is on interest rates and therefore, is not considered, not looking at the full picture because we need to look at both the asset side and the liability side if we come to the CSM perspective and therefore, the sensitivity is not an illiquidity premium consideration, but really an interest rate sensitivity only. And therefore, you cannot, from the disclosure on Slide 22, conclude on the CSM economic variances with regard to interest rates.

The next question comes from René Locher from KBW.

A couple of follow-up questions, please. So first of all, from my understanding, I'm not sure if I'm mixing up something here. On the hybrid, you have free pay. The hybrid you announced of CHF 300 million, you announced on 20th of April 2023. And if this is the case, I am wondering why we have seen a decrease in the SST ratio only in Q4? So it might be that I'm mixing up something, but that would be my first question. And then the second one is on Slide 11. I do know I should not compare IFRS and cash. But I mean, looking at the Belgium and the German EBIT, of course, Belgium is still a little bit ahead, but you did very well in Germany. So very happy with that, plus 27%. So I'm wondering a bit what are the reasons why Belgium contributes 23% to cash remittance and Germany only 4%? And then just one question for the CIO. Curious on Page 28, the net new third-party assets of more than CHF 1.1 billion. So I was wondering where the net new third-party assets are coming from? And then if I may, this is a big picture question. Slide 16, and I saw a report from Deloitte in Switzerland, and it was referring to mobility of the future. There, it was said that private ownership of the cars will decrease by 50% in the next 10 years in Switzerland. And given that you have a 31% motor stake in [indiscernible], I was just wondering if you -- yes, just can share your thinking with us about where the motor business will head into?

Thank you very much for these questions. I think we start with the third one, so that our CIO can answer your question. So I hand over for this question of the third-party money, which is flowing into Matthias.

Yes. Thank you for the question. So the main country futures for the net new assets were, first of all, capital increase in the real estate fund. Then the second one is the growing wealth management business by the bank. And the third one is the semi-autonomous pension fund, Perspectiva, plus some other net new assets, which are distributed across different SBUs. But the 3 main contributors were real estate funds, wealth management and Perspectiva, which fits well into our strategy, which focuses on real estate and private assets for institutional business and on funds business across the various distribution channels together with insurance and bank.

Thank you, Matthias, for this part. Is it okay?

Yes.

Okay. Good. Thank you. Then we come to the question of hybrid and also the question after that from the EBIT, so Germany, Belgium, so this cash versus earnings. And for these 2 parts on the financial part, I hand over to Carsten.

Yes. The repayment of the CHF 300 million hybrid has occurred in the first half of the year. So the SST development towards the back end of the year is attributable to interest rate movements and FX movements. Again, here, also translation effects coming from FX are included in here. And given what both interest rates and FX has done, in particular in the last quarter of the year, the reduction in SST to a still very good level of 210%, but the reduction is attributable to interest rates and FX. So with regard -- with regard to your first question on SST development and the context with the repayment of the hybrid. We refinanced the hybrid with the senior and therefore, we did not have eligible capital for SST calculations coming from this shift in the refinancing structure. And then with regards to your second question, referring Slide 11, EBIT Germany, Belgium versus cash contribution. We cannot compare directly the IFRS perspective on EBIT and cash. It's more attributable to the statutory accounts backing this. And be sure, and I say this with a twinkle in my eye, that the German number is heavily invited also to grow. But we are happy that Germany is both contributing from an earnings perspective and also starts to contribute from a cash perspective.

Thank you, Carsten. Then about this question on the market and especially on motor and in Switzerland, so we have mentioned also this report, the study from Deloitte. Something I think we really do always also in our strategic view is how is business evolving? What could be possible scenarios? So what we see at the moment, especially in Switzerland at '23, premium volumes in motor business increased for our site. So it was not going in the direction, as you mentioned, which is also a future picture that is in this report. Also, driven by new car registration, which was going up by about 10%, I think, which means there are more cars in Switzerland. So at the moment, at least, we do not see especially effects like that, but doesn't mean that it couldn't come. I think something which is really important also for futures is having the skills also to do different ways of business in that area, which means having also the skills to partner with others. You know also in earlier times, it was more paid directly. Today, there are also quite a lot of leasing contracts, which is also another part. I think there are also smaller fleets, which are coming more and more. Also, the question of sharing some mobility parts. And overall, I think you need -- we need also the skills in that area, which is something we are always looking at and also investing. We do have quite a lot of partners here in Switzerland and in Belgium, that are the 2 markets where we do have substantial motor business. And I think for the future, it's important to have there all the opportunities also to do the business. I think there will also be quite an important part in motor or in mobility in doing insurance business. The question is who is owning it from a property way. And something perhaps, which is in some areas, that's my personal opinion, not always look very clear, it's a question how fast is it coming. And if you're looking at the motor business, it's not only a market with new cars. It's heavily and really heavily a market of used cars. And there, it's not changing so fast because you do not have new model stand in this used cars often. And that means it's often coming slower than we are thinking about.

The next question is a follow-up from Peter Eliot from Kepler Cheuvreux.

Firstly, we've talked about the inflation reserve release, but I was wondering if you could just tell us what the prior year development was otherwise in the Non-Life business? The first one. Second question, are you able to give us any guidance on what you expect the discount benefit and not unwind to be for 2024? I mean I guess the unwind should be pretty much locked in by now. And the third one was just a bit of a follow-up on René's question just now actually. But I mean if I look at Germany, then -- I mean, you guess -- you had the benefit of these at ZZR release, but obviously, the total cash was about CHF 20 million. And it sounds like the ZZR release was I mean, most if not all of that. So I'm just wondering whether anything is coming from Germany at all at the moment? Or I don't know if you can add anything on that?

Thank you for the questions. I think we start with the first one about the inflation reserve, not easy about the prior year development, but perhaps Carsten can say something about that or...

Yes. Thank you, Peter, for the follow-up. Under IFRS 17, 9, we do not, as in the past, have the same disclosure on prior year loss development. And therefore, I cannot directly answer the question as you pose it. But the important thing I think it's more coming from the new interest rate sensitivities that IFRS 17, 9 produces and particular reserve positions as we alluded to when it comes to inflation reserves that we have released. With regard to discounting benefits and the unwind, it's correct. As you say, the unwind is locked in because that's accounted for at locked in rates. So we would expect going forward then that the unwind is at least as negative as in this year, which you will then see in the insurance finance income and expense results in the P&L. But we also would expect that given that we will have new claims years every year that we will also get positive discounting effects from the claims side depending on how the claims look into the future. So we will have both elements. We will have the positive contributions on discounting coming from the current year, discounting of the current year claims. And we will have the negative discounting effects coming from the unwind mechanism with a locked-in interest rates in the insurance finance income and expenses. And those mechanics will continue to play now under IFRS 17, 9. And with regard to -- has Germany contributed to cash, if I understood your question correctly, Germany has contributed 4% to the total cash remittance of CHF 493 million, which is disclosed in Page 11 of the analyst presentation.

Yes. On that last point, I guess my point was that I'm guessing most of that is coming from the ZZR release or is at least helped by that. So I was just wondering, yes, I mean, if we hadn't had that, would we have seen anything from Germany? I'm just wondering if you get a feel for what the underlying is. But hopefully that has improved.

Sorry. So you're right, the release mechanisms that I was alluding to earlier in Germany are linked to ZZR. So that was certainly supportive for the Life business in Germany, absolutely. Yes. But we would also expect this to continue because that's exactly -- in particular the ZZR mechanism has this inertia built in. And that's why we would expect also this to be supportive going forward. And we also expect Germany as overall to contribute to cash remittance and earnings.

We have a follow-up question from Farquhar Murray from Autonomous.

Just 2 short and specific questions from me. When you talk about increased operational focus, could you give us a sense of which businesses need the most work there and what that will entail in terms of practical work streams? And then just secondly, you've given us the tariff increases on the Non-Life side by market. I just wondered if you could give us a sense of how that compares to claims inflation? And perhaps a little bit more into that, are there any markets where pricing and inflation is proving a bit more difficult than others?

Thank you for the question. So about the question of the increase of operational focus, it's clear at the moment with the inflation environment, that's a little bit going down, but it's not the way. There is quite a lot of work to do in the Non-Life business. There, it's especially nearly on all branches we have to do our work. And it's not only on the claims part, which is one, but it's also on the cost part. And what the instruments we do have, it's clear, it's about the price we already mentioned that. But it's also about the cost part going down, the cost internally, which is also a part of doing the operational focus for the future. That's not only about the prices. I think it's the whole instruments we do have, which is also cost, which is also fraud in the claims. So overall, I think it's the whole part where we have to focus on for the future on this business. And the inflation part is only 1 component which is there in it. And inflation -- about the claims inflation. So it's clear about the market. It's higher than in the Swiss market. That's also why you see this 5.4% overall in the original currencies, which is lower in Switzerland. It's a little bit higher than 2% with the growth in the Non-Life part and in Belgium. And in Germany, it's between 6% and 7%, as I already said, about the growth, which means there is also a bigger part coming from these prices and increased pricing there. This gives a little bit an overview where it comes from.

Also, the next question is a follow-up from Ahmed, Nasib from UBS.

Just 1 follow-up for me on my earlier question on the distributable reserves in the business. I was looking at the annual report and the holding company had CHF 644 million is that -- of free assets. Is that the correct number to look at in terms of what can be accessible, let's say, if you wanted some cash tomorrow? Or are there other reserves elsewhere in the business that aren't included in that number?

Perhaps you can repeat it. I didn't get the question right. It's about the holding balance sheet you were referring?

Yes. In the holding, you've got free assets of CHF 644 million as of full year '23. Is that essentially the distributable cash that you have on the balance sheet as of full year '23? Or is there anything else somewhere else that's not included?

Okay. Thank you very much. So I hand over to Carsten.

Yes. So it's in the statutory balance sheet of the holding, it's in particular, the free reserves stemming out of retained earnings in the past. And that's the number that you're alluding to.

Yes. Yes. Sorry, is that the cash that's available? You can take it out tomorrow if you need? Or is there more cash somewhere else? That's the question.

Well, cash in the holding depends on dividend payments coming to the holding and interest rate payments coming to the holding. So if you look into the holding P&L, you do see the CHF 493 million of cash remittance in the P&L of the holding, and that is flowing to the holding as from the cash remittance and out of this cash, all other things being equal, the holding is also paying the annual dividend.

Yes. Sorry, I see that. Maybe my question isn't clear. I was wondering how much there is in the group in terms of cash within the subsidiaries, right? So after they paid the remittance to the holding, is there any free assets left within the Swiss entities, German entities, Belgium entities as well that's accessible across the group?

Okay. So yes, on a -- how do you say, on a single entity basis, on a business unit basis, they run balance sheets as well. Those are regulated balance sheets where we have assets locked in, in the strategic and tactical asset allocation for these entities. And these entities run their solo solvency quotas and do their business and make the profits and out of which then we take out dividends for streaming this up to the holding. So it depends on these cornerstones with regard to the individual business units. We are certainly soundly capitalized, and with the underlying operating earnings power, adding a tranche of substance year-by-year and then taking out cash remittance to upstream it into the holding. At the moment, we are managing towards the CHF 2 billion target. And this CHF 2 billion target, we are fully on track and therefore, I'm quite happy with the situation we are overall in.

Gentlemen, so far there are no more questions from the phone. Back over to you for closing comments.

So ladies and gentlemen, thank you very much. In summary, despite the extraordinary large claims in '23, we were able to deliver again a higher cash remittance, we are on track to achieve our main strategic target, so the most important one, the CHF 2 billion cash, and continue our attractive and reliable dividend path. We have a strong basis and will increase the focus on our core business. I look forward to providing a detailed update on our strategic and operational costs with our next investor update on September 12. I hereby close the call, thank you for joining, and have a great day.

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