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

Ladies and gentlemen, thank you for joining us today. I am delighted to welcome you all for this special event. We will present our half year results, but also looking forward, our updated strategy. My colleagues from the group management and I are excited to share with you the outcome of the intense work of the last month. Let me say a few words about the half year results before I hand over to the CFO, Carsten Stolz, for a brief deep dive into the figures. The sound set of numbers demonstrate the stable foundation Baloise stands on, thanks to its broad diversification across various geographic markets and lines of businesses. We are able to significantly mitigate the high claims expenses resulting from the weather events in Switzerland. As we have once again grown out in our target segments in Non-Life, and we see a good development of the CSM contractual service margin as well of the significant increase in EBIT in the Life business. Our balance sheet is stable. It is as stable as at the beginning of the year. Equity and comprehensive equity have increased. Overall, we delivered a sound result with the shareholders profit of CHF 220 million, 7% higher than in the previous half year, and we are well on track to achieve our cash remittance targets. As you can see, our latest results provide a good foundation for the improvements. We are aiming with our refocusing strategy. In a few moments, we will delve into this refocusing strategy. But first, the CFO, Carsten Stolz, will walk you through the financial highlights of our half year result. Carsten, the floor is yours.

Thank you, Michael. I am happy to present to you today a sound set of results with a good volume growth in Non-life and growth of CSM and EBIT in Life. Shareholder profits amounted to CHF 220 million. This is 7% higher than in the previous half year. The increase is driven by an improved result from our Life business, which more than compensated for a lower contribution from Non-life, while the result of our Swiss business was lower due to a larger storm event. Belgium and Germany were able to significantly increase their contributions to earnings. Economic capitalization remains strong. Comprehensive equity increased by 8.5% to CHF 7.8 billion. Our SST ratio is at roughly 210% and hence, at a similar level as at the end of the year. In Non-Life, we delivered good growth by 4.6% in local currency. The combined ratio amounted to 90.4% and the EBIT in Non-Life to CHF 123 million. In Life, the new business margin came in at 5.7%. The EBIT in Life is higher than in the previous half year. In Asset Management and Banking, we acquired more than CHF 700 million of further net new third-party assets. The segment contributed overall a reliable EBIT of CHF 42 million. Let's look one level deeper. Starting with Non-life. As said, growth equals to 4.6% in local currency. The growth reflects both pricing and volume effects and thus continues to factor in the effects of inflation. All markets contributed to this growth. Switching from top line to bottom line. EBIT was CHF 123 million as well as our combined ratio of 90.4% stand at a solid level. Considering the less favorable claims environment, including 30 million higher large claims than in the previous half year. The high load of large claims, mainly stems from the Swiss entity, where a major storm event occurred at the end of June. The markets outside Switzerland performed well. The geographic diversification of our Non-Life book worked. Discounting effects amount to 4 percentage points. Finance result is higher compared to half year 2023, reflecting good capital markets in the first half of 2024. Continuing with Life business. EBIT of CHF 145 million is 39% higher than in half year 2023. CSM increases from CHF 4.9 billion to CHF 5.3 billion. This is mainly driven by economic variances. That is a result of a higher illiquidity premium and more favorable environment reflected in lower spreads. The CSM release ratio is 2.7%, not annualized, a bit higher than in the previous half year. The finance result increases to CHF 49 million. Our income and expenses are less negative than in the half year 2023 and total minus CHF 44 million. The interest rate margin remains comfortable and well protected. It improves to 141 basis points. This is a result of the consistent asset and liability management since many years. The average guarantees decreased by 4 basis points and are now below 1%. The current yield is stable. Asset Management and Banking delivers an EBIT of CHF 42 million. EBIT from asset management is higher. The interest rate margin in banking business compresses in the context of lower interest rates in the first half. Third-party assets grew by more than CHF 700 million, as already mentioned. Looking at the 4 markets, Switzerland is lower because of the severe storm event in June. This is more than compensated by increased contributions from Germany and Belgium. Sources of earnings are diversified. Equity increases to CHF 3.5 billion. CSM increases, as already mentioned. Comprehensive equity amounts to CHF 7.8 billion. That corresponds to CHF 170 per share. Capitalization remains very strong. The rating of A+ has been confirmed by S&P. As of June 30, the SST ratio is at a similar level as in full year 2023 around 210%. In summary, let me reiterate 5 points. First, good growth in Non-Life of 4.6%. Second, higher contributions from Belgium and Germany more than compensate the lower result in Switzerland. Earnings are diversified. Third, the slightly lower result in Non-Life is more than offset by the strong result in Life business. Fourth, balance sheet remains very strong. And fifth, well on track to achieve our strategic ambition of CHF 2 billion cash remittance until 2025. Back to Michael.

Thank you, Carsten. That summarize our half year results. If you have any questions, I kindly ask you to post them at the end of the presentation in the Q&A session. So we will now change perspective from looking back to looking forward. We refocus Baloise. Ladies and gentlemen, in my first year as a group CEO, I conducted an in-depth analysis of our business along with the management and also the Board of Directors. Based on this extensive strategic review, we decided to shift gears. We will accelerate our operations to better leverage our core business and our core strength. Our new strategic direction is built on 3 guiding principles: refocus, value creation and accountability. Refocus, we no longer experiment outside of the core business, such as with ecosystems. Instead, we are concentrating 100% on the core operations. Value creation, we are committed to keeping our promises to our stakeholders, our employees, our customers, our partners and our investors by generating value for them. In doing so, we leverage our cultural strength being hands-on, pragmatic and also implementation-oriented. We have impressively proven over the past years that we are a reliable partner who supports our stakeholders in managing financial risks. I'd like to really to thank our employees for the relentless efforts during these times when our customers depended on us the most. Thank you very much for this work. And accountability, we have defined clear financial targets. We are regularly measuring our progress and taking further action if necessary. These 3 guiding principles will lead us on a journey to be positioned among the most and best in the insurance and the financial service sector in attractive markets in Europe. Our aim is to maintain this position by refocusing on our core business, ensuring we deliver our promises to create value for all our stakeholders and we are taking responsibility for our ambitions, financial targets. The main takeaways of today's presentation are, therefore, the following: we evaluated if our strategy still meets the demands of a profoundly changed environment and we came to the conclusion that the macroeconomics have changed significantly over the last years. That's why we are stopping Simply Safe and introducing the refocusing strategy. The refocusing strategy will strengthen our core business, improve profitability and lead to further gain in market shares in our target segments. We will act in defined strategic focus fields and create value for all our stakeholders. We will ensure our strong technical profitability by striving for an excellent combined ratio of about 90% and an EBIT contribution in our Life segment of over CHF 200 million. We aim for a better cost efficiency by reducing the expense ratio in our Non-Life business by 2 to 3 percentage points. We're relentlessly executing our refocusing strategy. We will achieve the following ambitious financial targets. So let's zoom into these financial targets. We want to be more profitable, maintain our strong capabilities of generating cash and increase our attractivity to shareholders with a higher capital discipline. We are going to increase our capital productivity with return on equity target of 12% to 15%. We'll continue our strong cash generation and remit over CHF 2 billion of cash from 2024 to 2027. We will also continue our attractive dividend policy and increase the total payout to 80% or more. The payout ratio is well supported by our reliable and attractive dividend policy and a newly introduced framework for share buybacks. Carsten will come back to that and explain it. So in the next hour, my colleagues and I will explain how Baloise plans to achieve our new financial targets, focusing noncash remittance, capital discipline and shareholder returns. We will provide an in-depth insight into our refocusing strategy, covering the following areas: business portfolio, operational profitability, capital productivity and both cash and capital discipline. So as you can see, we have quite a few plans to present today. And then therefore, pleased to start elaborating on how we will succeed by switching to our strategy road map. I'd like to kick off our explanation with an overview of our strategic road map and a deep dive to the triad refocus value creation, accountability, which guided us through this process. We singled out 2 strategic zones, which we are going to refine in the upcoming years, operational profitability and a focused business portfolio. Within these zones, we laid eyes on focus -- 4 focus fields that are key enablers for us and for our successful future and on which we will refocus. The 4 fields aim for underwriting excellence and it's including also the efficient claims handling, continuous cost management, accelerated profitable growth and adaptability to the changing environment. In all fields, we first evaluated our potential for improvement. Then we took action and defined clear measures to address what we have learned during that process. We are now channeling our energy fully on our core business, and therefore, on our core strength and value creation. And we will deliver on the 4 focus fields, which are the basics to us achieve also our financial targets. As we will explain in more details throughout this presentation, we will first discuss our business portfolio, the focus on sharpening the target segments and winding down our existence. Then we will outline how we maintain our technical profitability as best in class, including also cost savings initiatives and our cost ambitions for the combined ratio. Finally, we will demonstrate how these measures enhance our return on equity and drive higher capital productivity. As you can see, we relentlessly streamline, further improve and grow our core business to deliver an improved technical profitability, higher operational efficiency, growth in the target segments and increased capital productivity. To wrap up this introduction, I'd like to emphasize the following: in the course of the last months, we conducted the holistic analysis to identify and also leverage Baloise's strength. The fundamentals are solid, and I'm convinced that our refocusing strategy will enable us to maintain our status as one of the most profitable Non-Life portfolios in Europe. Noticeably, reduce cost, significantly increase the return on equity and increase the overall return to shareholders. This confirms Baloise's long-term attractiveness as a reliable investment and is also the basis to be a reliable and stable partner for all our stakeholders. So let's talk about the business portfolio. The cornerstone to achieve these ambitious goals of our refocusing strategy is the robust health of our business portfolio. Baloise has been successfully pursuing the target customer strategy for a long time. The result of this approach is one of the most profitable Non-Life portfolios in Europe. And since 2012, so I repeat, since 2012, our combined ratio has always been below 95%. By continuing to optimize our portfolio, we ensure sustainable success for Baloise and value creation for all our stakeholders. Baloise has a clearly defined business portfolio and is active in 4 core markets. Thanks to this focus, we can be very close to our customers and rapidly adapt to market needs and also specifically. But it also needs to be carefully balanced with the benefits of diversification. Our commitment to beneficial diversification in premiums and revenue across the segments and geographic is a critical element for success. This approach allows us to mitigate risk and capitalize on opportunities in different markets, and it led to the business portfolio we have today. We are convinced that we are well positioned for profitable growth in our target segments in all our markets. We regularly evaluate our strategy and our portfolios to ensure they're aligned with our strategic goals of profitable growth, cost efficiency and also value creation. We did this in past, we are doing it today, and we will do it also in the future. We, therefore, double down on the markets that we are currently operating in since we see promising future and also potential for all regions, but have set clear growth and return ambitious with regard to earnings, which Carsten will explain later. And we will monitor progress, take further action or adjust them on an ongoing basis, if necessary, to ensure operational efficiency and also the sustainable returns of capital. So I'd like to share 2 recent examples of our efforts to actively optimize our portfolio with the goal of reducing risk exposure and becoming more capital efficient. One reason notable achievement is the improvement of our Belgium Life runoff portfolio in this year, which led to a capital release of CHF 62 million. This capital release is nonrecurring, but it significantly contributes to our cash remittance for 2024. Because of this, we expect a cash remittance to be over CHF 500 million in this year. As part of our ongoing strategy review, we also have made the decision to discontinue our ecosystem strategy. It is a necessary step to ensure that we remain agile and focused on our core strength. Let me shortly outline the current status of the wind down of our ecosystems and go back to the beginning of the last strategic phase. During the last strategic phase, we significantly raised our financial ambitions. And we worked on our reputation as one of the best employers and most innovative companies in the industry. It was a phase of exploring diversification, innovation and transformation. But as time changes, so must I, must we. After a comprehensive portfolio analysis, we stopped our ecosystem strategy. As part of dissolving our ecosystem strategy, we have taken several key actions. We closed our mobility unit and are in the process of divesting the majority of nonstrategic assets within our mobility and home ecosystems. Approximately 1/4 of our innovation participation are already in liquidation or undergoing orderly exits. We are very selectively supporting promising ventures, so like go more to increase their well and capitalize on exit opportunities. We expect further investment required from cash remittance to be less than CHF 30 million from now on until '27. We have decided that no new investments will be made unless they have a direct link to our core business and the improvement of the core business. We will closely follow the value of the portfolio with continuous valuation assessment. As announced in March '24, we will no longer pursue our previous innovation targets. Instead, we are focusing on innovation in our core business. In conclusion, our strategic review and portfolio optimization efforts are positioning us for a stronger, more focused future. We are committed to decisions that enhance our core business, reduce risks and drive a sustainable growth. And talking about growth, in my opinion, customer proximity remains one of the key prerequisites for growth. We continue to focus on making it easier to do business with us, particularly for our SME and private clients. Our commitment to deliver a compelling experience to our customers and partners is unwavering. And it is built on our DNA of strong technical and commercial capabilities. Let's look at a few examples. We are proud to report that our digital claims management tool, EasyAsk has achieved an impressive 89% of customer satisfaction rate, and it was also honored with the Swiss Innovation Award. This tool exemplifies our commitment to innovation and customer satisfaction in our core business. Our broker satisfaction rating in Germany has also been significantly improved with our company now ranked at #2 in Non-Life and #6 in Life segment. This achievement underpins our dedication to building strong relationships with our brokers and distribution partners. We maintain excellent broker relationship in Belgium characterized by above average values for satisfaction, loyalty, added value and competitiveness. This relationship are a testament to our ongoing efforts to provide exceptional support and value to our partners. And as you can see, we understand the importance of maintaining personal contact with our customers. At the same time, we are investing more into digitalization, to simplify interaction for both our customers and partners as well as for the support of our employees. This approach ensures that we remain close to our customers while leveraging technology to enhance their experience. Next, we will provide some more details on what we are working on in our core units. We will focus today on Switzerland and Germany. For this, I will hand over to our CEO Switzerland, Clemens Markstein and to our CEO Germany, Juerg Schiltknecht. Afterwards, we will deep dive into our asset management with our CIO, Matthias Henny as a presenter. We start with Switzerland, and I hand over for this part to Clemens.

Thank you, Michael. Our group CEO has highlighted a key strength of Baloise in Switzerland, our exceptional customer satisfaction. We achieved a high and stable Net Promoter Score of plus 62% with 72% of our surveyed customers rating us a 9 or a 10 out of 10. This fosters long-lasting relationships with customers staying with us for over more than 10 years. In the next few minutes, I will outline our plans to expand our customer base and render even more domestic Baloise customers satisfied with our products and services. Our strategic goal in the Swiss market is to sustainably grow our position as a leading financial partner in pensions, financing and wealth management. We will focus in the coming years on growth and enhancing cash generations by strengthening our core competencies. We have identified over 50 measures in the non-life portfolio to ensure profitable growth. Most of them are already implemented while others will follow as part of our refocusing strategy. These measures include product, tariff and portfolio adjustments, reduced claims exposure as well as cost reduction and efficiency improvements. We aim to increase gross written premiums from today 1.5 billion to over 1.6 billion by 2027, representing an annual growth rate of more than 2%. In the Life business, we are focusing on 2 key areas: first, we are enhancing our dual product range and occupational pensions, supported by our strong balance sheet. We aim to grow our semiautonomous pension solution, Perspectiva, which has doubled its assets under management in the last 5 years. Our goal is to increase these assets from CHF 1.6 billion to over CHF 2.5 billion in 2027. And second, in the Individual Life business, we are focusing on capital-efficient new businesses such as unit-linked and risk products with a target of over 30% annual growth on that premium. In the banking business, our focus is on national growth and streamlining our core banking offerings. We aim to improve the cost/income ratio from over 60% today to below 55% by end of 2027, while strengthening our unique insurer banking model. Overall, we aim to increase cash contribution from non-life and life, and banking businesses. For Non-life and Life, we target a range of CHF 320 million to CHF 350 million by 2027. And for the bank, we aim to increase dividend contribution from CHF 8 million to over CHF 25 million by 2027, representing an annual growth rate of over 50%. Now I would like to delve into the aforementioned unique insurance and banking model in Switzerland and its significant contribution to our growth. I would like to address 3 key points: first, there is an untapped market need for holistic financial advice in Switzerland. Baloise has around 240,000 affluent customers who can benefit from targeted banking, the offerings with financial planning as the ideal entry point. Second, our bank allows us to fully capture the potential of our affluent client base and directly sell mortgages. By the end of 2023, we managed over 20,000 mortgages with a total asset value exceeding CHF 11 billion. The bank also drives Baloise above market reinvestment rate with a customer reinvestment rate of expiring life insurance policies at about 30%, which is 10% higher than our competitors. This demonstrates the value of our comprehensive banking and insurance services. And third, the effectiveness of our insurer banking sales continues to go. In the last 3 years, insurance sales have brokered over CHF 500 million in investments and over CHF 500 million in mortgages. In the Individual Life business, we secured over 12,000 new contracts last year and currently, we have managed over 5,000 wealth management mandates, with assets under management exceeding CHF 3 billion. We are enhancing sales efficiency and effectiveness with targeted measures across all channels, including our new sales agency model that combines insurance and banking at our 29 branch offices. We are on path of accelerated growth from a strong base, as evidenced by the 64% increase in production in the first half of 2024, compared to the same period last year. As you can see, our insurance and banking model presents a robust business case and we are committed to fully realizing its potential. With that, I gladly hand over to our CEO in Germany, Juerg Schiltknecht.

Thank you, Clemens, and a very warm welcome to all of you also from my side. I am quite pleased that I have the opportunity today to present to you our focus strategy that we have in Germany. The German market is huge. It has a premium volume of around [ CHF 225 billion ]. The German market is also fragmented and quite competitive. And exactly, therefore, we had a very close look at the German market. And we decided that we will only play in those areas where we know that we have an opportunity to win and where we know that we can achieve profitable growth. And as a result of that analysis, we decided, as you can see here on the slide, on 6 target segments in Non-Life and on 2 target segments in Life. With that, we are covering [CHF 91 billion ] of the German market. And if we look at non-life, we are active in the following segment in liability, motor, accident, marine property and engineering lines. And once more in these segments, we are only active in certain product areas. And with that, we're only covering 50% of the German non-life market. And in life, we are active in the biometric product segment in the capital-efficient products segment. And once more. Also there, we are only focusing on certain product areas. And as a result of that, we are covering 15% of the life new business market. And let's have a look at these segments a little bit more closely. Let's look at non-life, maybe at the motor segment. The motor business in Germany is highly competitive, especially in the fleet segment. Prior to corona, there was always a combined ratio above 100%. And last year, 2023, the fleet business had a combined ratio of 112%. So there's no point for us to go into this segment. However, we are active in the individual motor business. It's also not easy to be in this segment, but we are able to achieve profitable growth because we have attractive products, we have a strict pricing discipline and we have very efficient processes especially since we have introduced our new IT non-life core system, which is Guidewire. And as a result of that, over the last 5 years, we were able to grow the motor business by 1% year-on-year, but with an average combined ratio of 93.5%. Or if you look at the accident business, our clear focus is the individual accident business. This is a very attractive segment, and we are focusing less on the group accident business. And in the accident business, we have a portfolio of CHF 100 million. And over the last few years, we were able to grow that business, that accident portfolio despite the market is shrinking. So over the last 5 years, we grew the accident business by 2.6% year-on-year, and that with a combined ratio of 85%. Or if you look at the life side at the biometric products segment, our clear focus is the disability insurance product. And actually, over the last 8 to 9 years, we developed ourselves to a market-leading position. In fact, we are in the broker market, the second most important disability insurance provider in Germany. And if we look at the capital efficient products segment, our focus is the unit-linked product. We have redeveloped our product last year, and we see a significant increase in production this year. And we are quite convinced end of this year, in the broker market, we will be among the top 10 most important unit-linked insurance provider in Germany. But obviously, the question remains, are we successful in Germany? And the clear answer is yes, we are very successful in Germany. If we look at the growth situation, since 2019, we have clearly outgrown the German market. We have grown by 3.8% year-on-year, and the German market in the same time has grown by 0.8% year-on-year. If I look at the combined ratio, I see a very attractive combined ratio of 88% end of 2023. And in the half year of this year, we had again a combined ratio of 88%. As that demonstrates to me that the quality of our non-life book is excellent. If you look at the profit situation, 2019, we had a profit of CHF 20 million, now we had in end of 2023, we had almost a profit of CHF 100 million. And in the half year of this year, we had again a profit of CHF 46 million. So we have made significant progress with regard to our profit. And the outlook, if I look at the cash generation is also positive. By 2027, we will contribute CHF 50 million cash to the group. So if I have to sum up, yes, our focus strategy is successful. We are contributing in all dimension to the group. And yes, with our focus strategy, we have every right to play in the German market. Thank you for your attention. And I'm handing over to Matthias Henny, our Chief Investment Officer.

Thank you, Juerg. I'm happy to give an update on asset management, and I will start with the insurance assets, so the assets which are directly on our balance sheet. We stick to our high-quality and capital-efficient asset allocation. Our investment strategy has a conservative tilt and is directed to deliver a high and stable current income. In the past, we have shifted towards asset classes that provide exactly this high and stable current yield, such as corporate bonds, high-yield bonds, real estate and private debt. We steer our asset allocation based on return on capital employed to ensure an efficient use of the available cash and capital. Now this leads to the following strategy: in fixed income, we will continue to shift to corporate bonds and high-yield bonds if the credit spreads are high enough to justify the additional risk. We have especially added exposure in 2020 and 2022 when credit spreads were above long-term averages. In the current spread environment, we are more on the prudent side. But in real estate, we stick to the residential real estate business in Switzerland. We believe that fundamentals are very strong despite the higher interest rate environment. And real estate is especially for insurance balance sheet, a very capital-efficient asset class. We will also increase our exposure towards private debt, namely to infrastructure debt and corporate direct lending, where we can benefit from credit spreads between 250 and 500 basis points. We stick to a low equity quota given the high impairment risk under statutory accounting rules which are the basis for the cash generation. Now this leads to an approach with a stable investment income. And as you can see on the chart, at the right-hand side, over the last 10 years, although interest rates, risk-free interest rates were at or even below 0 for most of the time, we were able to provide a current yield above 2%. Now let me switch to the third-party asset management. So the business which is not on the balance sheet, but where we provide an asset management service. We focus on 2 areas. The one is we provide investment solutions which are distributed over the bank and insurance channels. These are broad scope of products from investment funds for unit-linked business, wealth management mandates, the asset management function of Perspectiva and other savings products. Mostly multi-asset products, where we have a competitive offering with 2/3 of our product in the first or second quartile in their respective peer group. In this area, we have grown in the last 3 years from CHF 4 billion to CHF 6.8 billion asset under management and we plan to further grow above CHF 9 billion by 2027. Now the second area where we focus on is real estate in Switzerland. We have almost CHF 10 billion of assets under management, if we combine the insurance assets and the third-party assets. So we are among the larger players in this area, in the real estate in Switzerland covering the entire value chain across Switzerland. We have increased our assets from 0 to CHF 2 billion, so the third-party assets from CHF 0 to CHF 2 billion, and we will further increase above CHF 3 billion by 2027. Both areas are closely linked to the insurance and bank business. So we benefit from a joint investment platform and from cost synergies. And with the planned growth, we will increase the fee income and the cash contribution to the group from CHF 30 million to above CHF 40 million by 2027. And with this, I hand over back to Michael.

Thank you, Matthias. As you can see, we thoroughly manage our high quality and also capital-efficient asset allocation. In addition, we strive for further growth of fee income and cost synergies for our insurance assets. I'd like now to wrap up this chapter by focusing on some of the business portfolio parts where you can also expect in our business lines, our actions in future. In Switzerland, we will sharpen our technical profitability. We already have one of the finest non-life portfolios and are a leading partner in the life insurance sector. Our unique and fully integrated insurance and banking business model sets us apart in the Swiss market. This differentiating position enables us to pursue profitable growth that outplaces the market. Since 2019, Baloise in Germany has been experiencing profitable growth, gaining market shares. This success is driven by a focused target segment strategy, customer proximity and our award-winning products. Moving forward, this will translate in an improved return on capital and higher cash remittance. In Belgium, we focus on accelerated targeted growth. Our strong technical foundation and strategic emphasis on brokers as a key partner, have been the driving force behind the success. By leveraging transformative technology and also nurturing an entrepreneurial culture, we will continue to deliver exceptional experience for our brokers, partners and clients. In Luxembourg, we will bring our operational efficiency to a new level. We proudly already stand as the #3 in the local market and are one of the top players in the international freedom of service business. By focusing on operational efficiency, we will better meet the needs of our customers and partners while also enhancing our profitability. Ladies and gentlemen, as you have seen, we are excellent positioned in some of the most attractive markets in Europe with a strong business portfolio. I now gladly hand over to my colleague, Carsten Stolz, who will explain to you how we are transforming our position in the market into value for our shareholders. Carsten, the floor is yours.

I will shed light on what this means in terms of operational profitability, capital productivity as well as cash and capital discipline. Operational profitability is the foundation of sustainable economic success. The non-life book is one of the most profitable portfolios in Europe, focusing on target customers since 2 decades, lies at the heart of lower loss frequencies, lower loss ratios and strong combined ratios. The combined ratio was always below 95% since 2012, despite pandemic despite inflation, despite extraordinarily large claims. Outperformance for more than 10 years is the result. Assessing technical performance on the basis of combined ratio has changed under IFRS 17 and 9. I go into disclosure technicalities for a moment. The combined ratio definitions that we see in the markets differ pretty widely. This limits market comparability. We align our combined ratio definition by including operating nonattributable costs from full year 2024 onwards. This alignment in definition has an impact on the full year 2023 expense ratio of 2.6 percentage points. The aligned combined ratio of full year 2023 stands at 94.6%. Very important. This has no impact on the P&L. This has no impact on EBIT. We confirm our guidance of around 90% combined ratio based on the aligned definition and assuming a normal large claims and stable interest rate environment. So far, so good for disclosure technicalities. Taking into account the new definition as well as the claims and interest rate environment in the first 8 months of 2024, we expect a combined ratio in the range of 91% to 94% for the full year. Let us move back to what we actually do to ensure a best-in-class level of the non-life portfolio. In order to sustain best-in-class loss ratios, the whole keyboard is played, tariffs, pricing, customer segmentation, claims, leakage management and so on. As an example, motor business, price increases and target customer management in Switzerland, price increases and target broker management in Belgium, underweight in the motor business in Germany. These measures ensure that the loss ratio remains at least at today's strong levels. Operational profitability is about loss ratio and cost ratio. So let's move to the second part of the equation. Improving the cost base is one of the main priorities. Measures for cost savings are underway. Group-wide cost measures affect all segments. Higher labor productivity is an overarching ambition. We will reduce 250 FTEs across all businesses and all business lines. Digitalization and automation makes business processes more efficient and effective. For non-life, as a result, we expect a 2 to 3 percentage point sustainable expense ratio improvement to be achieved by 2027. This translates into CHF 80 million to CHF 120 million cost efficiencies. We also aim to reduce the other expenses outside of the combined ratio. Now shifting perspective to life. Active in-force and new business management continues. Portfolio optimizations as recently in Belgium, capital-light new business, selective growth in Swiss Group Life and strong growth in the semiautonomous solution, Perspectiva. Over nearly a decade, we consistently improved our business mix and managed assets and liabilities, resulting in a high and well-protected interest rate margin. New business value in general is on the rise, yet Swiss Group Life depends on regulatory and economic parameters as well as market dynamics. The semiautonomous solution Perspectiva more than doubled between 2019 and 2023. Further growth is expected. Now what do we expect from the Life segment when looking ahead? The answer is strong cash contributions and EBIT of at least CHF 200 million. Thus, and despite the accounting convergence currently happening under IFRS 17 and 9, we reiterate the existing guidance in terms of EBIT and cash. Operational profitability is not only the foundation of sustainable economic success. It is also the alpha and the omega of capital productivity. And this brings us to the next perspective. Capital productivity is key to create sustainable value for our shareholders. Our balance sheet is strong. And we have a resilient capital position, which is also demonstrated by the SST sensitivities. The facts on this slide speak for themselves. We introduced a return on equity target of 12% to 15% from 2024 onwards. This compares to an average return on equity of 8.5% in the last years. This target is based on IFRS earnings and capital as reported. We only allow ourselves to make adjustments to the ROE calculation in case of exceptional events. All business units contribute to the improvement of capital productivity. Strong and rising capital returns beyond cost of capital creates sustainable shareholder value. Figuratively speaking, moving Northeast, i.e., higher capital returns over time and growing the bubble, i.e., cash remittance is the direction of travel in this coordinated system. Switzerland remains strong, moved further Northeast and grows the bubble. Germany follows this direction with strong dynamics. Belgium shows strong momentum. Luxembourg improves, asset management and banking remains stable and grow the bubble. Therefore, let's move to cash and capital discipline. Managing cash generation, remittance and deployment are very deeply embedded in the financial steering of Baloise Group. The increase in return on equity underpins the strong cash generation. In the period from 2024 to 2027, we will generate more than CHF 2 billion cumulative cash. We are also on track to reach CHF 2 billion for the period 2022 to 2025, as committed. Two points I want to stress. We remitted well over CHF 2 billion cash in the strategic phase 2017 to 2021. Number two, we rose the ambition level thereafter by plus 25%. In 2024, we expect an extraordinarily high cash remittance of well above CHF 500 million. Due to the nonrecurring contribution of CHF 62 million stemming from the Belgium Life back-book transaction. Let's shed some light on the sources of cash. Switzerland contributes substantially from Life. Non-Life returns back to higher levels based on the best-in-class operational profitability. In numbers, CHF 320 million to CHF 350 million from Switzerland. Above-market growth in the SME segment as well as improved profitability are the key drivers for higher cash remittance from Belgium. In numbers, CHF 90 to CHF 110 million. Germany remits significantly more cash driven by profitable above-market growth, continuous improvement of technical profitability and disciplined cost management, in number CHF 50 million. Luxembourg contributes reliably around CHF 10 million. Asset management and banking, cash remittance is supported by fee income from third-party assets and an increased contribution from Baloise bank, in numbers, CHF 60 million to CHF 70 million. Now from cash remittance to cash deployment in other words, payout. First question, what is unchanged? The answer is attractive and reliable dividends complemented by share buybacks. We never lowered the dividend in the past 20 years. Again, 2 points on top. We weathered all major crisis without need to externally recapitalize the firm and dilute earnings. Number two, we fully executed 4 share buyback programs contributing to total shareholder returns and earnings accretion. Second question, what changes? The answer is we introduced a total cash payout target of at least 80%. This target is based on cash remittance and delivered via dividends and/or share buybacks. Dividends shall stay at least equal to prior year. Share buybacks are launched. If the accumulated cash for buybacks is at least CHF 100 million. Let's illustrate. Assuming in year 1 that the dividend payout is smaller than 80% total cash payout, the GAAP, CHF 70 million in this illustration is put into a pot that over time fills up to the CHF 100 million threshold. So in year 1, the threshold is not reached. Therefore, no buyback. In year 2, the same mechanism plays. Now the pot contribution is CHF 40 million accumulated. This means that the buyback threshold of CHF 100 million is reached. Therefore, a share buyback program starts subsequently. I hear you think illustration is nice, but life happens in reality. Therefore, back from illustration to reality. As mentioned before, the life portfolio optimization in the Belgium Life business will result in a one-off cash flow of CHF 62 million in 2024. Together with the operating cash generation, Baloise expects an exceptionally high cash remittance of well over CHF 500 million in 2024. Depending on the actual cash remittance at the end of the financial year, and subject to the dividend decision at the next Annual General Meeting, Baloise will consider a share buyback of at least CHF 100 million in 2025. Three points to conclude: the shareholder-oriented capital discipline, the dividend policy that is attractive since over 20 years and the complementary share buybacks make Baloise one of the most reliable stocks in the European insurance universe. Back to Michael.

To briefly sum up our key messages for today's investor update. I'd like to reiterate the main takeaways. We are shifting gears decisively and will refocus on improving and streamlining our core business. This enables us to significantly increase our reliable toward -- to our reliability towards all of our stakeholders in the long run. We are taking action and implement significant measures to create value. We defend our strong technical profitability with a targeted combined ratio of about 90% and an EBIT in the Life segment of over CHF 200 million. We will improve the cost efficiency significantly. This will lower the cost ratio by 2 to 3 percentage points. We'll achieve this through a mix of measures including the reduction of the workforce by 250 FTEs while continuing to grow in our target segments. We raised our capital productivity with a return on equity of 12% to 15%. We continue our strong cash generation. We delivered over CHF 2 billion from '24 to '27. And we will increase our ambition for the cash payout to 80% or more. The payout will be composed of reliable and attractive dividends and also the newly introduced share buyback framework. Ladies and gentlemen, I am convinced to create an attractive outlook for our stakeholders with the refocusing strategy. With that said, we now start the Q&A session, and I'm looking forward to your questions.

The questions here in the room. [Operator Instructions] And having said that, we are very much looking forward to your question. Maybe we can start with you, Simon Fössmeier.

Simon from Vontobel. My first question is on life insurance. If I understand correctly, you have an uplift of let's say, CHF 500 million due to assumption changes. And with that, technically, you have a higher release in the future. If I take CHF 500 million as a round number and a 5% release, that's 25% more release every year. But still, you have an EBIT target of CHF 200 million, which is unchanged. And now there's been an accounting change. But it feels like the CHF 200 million has been floating around maybe for a decade, I don't know. Would that number be CHF 175 million without the CSM change? That's my first question. And the second question is a shorter one. In non-life, I think, 2 years ago, you increased inflation reserves. And with inflation coming down, I thought you would be able to release the inflation reserve. How much is in the H1 number from release of inflation?

Thank you very much for the questions. Two questions more on the technical side of the life. EBIT, there has been a complex shift coming to the new area of IFRS, so not easy to calculate or to do the comparison to the world before. But I think to explain a little bit more what -- from where it comes, I hand over to Carsten for that.

Yes. Thank you, Simon, for the question. the uplift in CSM that we had in the first half of the year is due to the adjustment in the liquidity premium and to lower spreads. So that lifts up the CSM -- the CSM [ lake ], if you want, it only over time translates into contributions to the P&L. So the contribution to the P&L is, by definition, way smaller than the uplift in the CSM lake. And as you rightfully say, we are in the convergence phase of IFRS 17 and 9. I think it's fair to say that not everything is fully settled in the market. We keep the combined -- the EBIT guidance unchanged with at least CHF 200 million EBIT. And with regard to the non-life inflation reserves, the -- you're right, we did inflation reserve strengthening in prior periods. A lot of these claims are also settled. Not all of these claims are long-tail business, but it's also short tail. So most of it is settled and the remainder is very insignificant given the overall book. So no significant impact from inflation reserves anymore.

Michael Huttner from Berenberg. I had 3 questions. The first one, can you say what happened to FRIDAY, a, where is it in the numbers? I can't see it. And b, it's a big loss item. So I couldn't see it mentioned that I was -- I don't know, maybe me. The second is on the BVG. So the -- I see a phrase this is in your German press release [indiscernible]. Is this new? Or it sounds like if you've decided no, this is like how would you say in English? It's one of those -- you can't touch it. It's like an alter symbol and that's it, you can never touch it. And my guess is the ROE on this business is really, really low. So the question is, why -- what are you going to do about it? And why didn't you do more because there could be more uplift coming through? And then the last question is on the CSM. Just like you mentioned, the 5% or 4.6% whatever annualized release is incredibly low compared to peers. Can you give us a feeling of where it comes from the peers I look at are all around 9%, 10%.

Okay. Thank you very much for these 3 questions. First about the FRIDAY question. So also for FRIDAY, there is a clear direction to go to profitable growth, which also means in this market they are in, with a lot of motor business also, that they have look on the prices, go up with the prices, which also means there is not a big growth coming out of that. So that's where we stand with FRIDAY. It's the clear direction also to operational excellence as for the rest of the business. For sure, we have to look what is the future then and there for a smaller business as it is, we always are looking on all the options also for the future about FRIDAY. For the selective group life business, a big topic, and also we will have a voting here in Switzerland just in 2 weeks. So there was a lot of a big topic. At the end, I think there are some -- it's a framework, which is also given in some parts by law, what we have to fulfill. And the selective part that you are looking at, which was written also in the German words there, it comes from the question, which companies are we ensuring if we have new business? The topic is that you have a conversion rate, which is too high on an economic view, but we cannot change it for the mandatory part of the business, which means you have to have a very close look whether you are doing an offering or not. And that's then also a selective growth that you have in the future because otherwise, you have a problem in your books in the longer future. That's why it is written like that, which also means, in some areas, not to do the growth because it wouldn't be profitable growth. And for the CSM, perhaps, Carsten, you can explain?

Yes. So the CSM not annualized release and half year was 2.7%. So that's directionally a little bit higher than 5%. It's one of the areas where I think accounting convergence is still happening. It also depends on the business mix that is backing the books up, the duration of the business and the assumptions. We do have a pretty large lake of CSM or number of CSM overall and -- which is good to have. The release, as such, I think, has to be read in conjunction with other elements of the CSM walk in particular, with the expected business return and the new business contribution. In light of this, the release has to be read. But I think it's one of the areas where convergence of accounting wise is still not finished.

Anne-Chantal from Octavian. Also a question mostly on life. We have seen that your transaction in Belgium has been a very capital release with CHF 62 million. So how much -- is the potential for further transaction in life? Do you see anything also in Belgium or maybe in some other markets like Switzerland? It's for one? The second, we touch upon the CSM release. And we have seen you have been converting on the non-life side, how you calculate your combined ratio? And now you just mentioned -- and this is a question that has been recurrent ever and ever with your lower CSM release ratio. So time was, how do you -- how much -- or how long do you expect this kind of accounting transition and possibly, maybe a revision of your assumption, how long do you think that could need to get to maybe something more comparable with peers? And maybe on the life or so, you just mentioned the coming up Switzerland reform of the pension. So if -- let's assume a case that this pension would not pass, how much would that affect at all your life business, your group life business profitability in Switzerland?

Yes. Thank you very much for these 3 questions. So we will start with the life back-book transaction, then come to the CSM there and gladly hand over to you, Carsten, to the technical part. And Clemens, I will then give you the word for the pension fund question, and votings we will have in 2 weeks. So about the life back-book, I think it's a daily business that we have to look on our portfolios on our existing portfolios and also on the changing environment we are in. There are opportunities to do then a transaction as we have done in Belgium. It is a transaction of about CHF 1 billion book, a closed book that we have there, and it is a reinsurance transaction that we have done. As you see, it's a real transaction to do it on a focus on capital efficiency. The business to do and to look always on the portfolio is something we will also do in the future. That's something which has to be done systematically. Not only in life, I think it's also always also a topic for non-life, also in future. We also had some other traction in past, also in other directions. And we also had the first transaction in life years ago in Germany, where we have sold a part of the business. So it was not a reinsurance part. So for me, it's a daily point to do. Looking at our portfolios that we have closed books, which are able to do it, then it's -- but it's also a question of opportunities, where are the interest rates where the price is also to do such a point and to find somebody who is better owner because he has perhaps other parameters to do it. So that's for the life transaction. for the CSM, Carsten?

yes. So it doesn't come as a surprise that translating a principal-based accounting framework into actuals brings divergence in the market. And therefore, I assume that this will need a couple of more closing cycles with actuals to finish off with regard to this convergence. And difficult to predict, Anne-Chantal, how many, but I think it's not yet final. The direction is clear. Our release ratio is comparatively low. There is no doubt about it.

Thank you. And then we go to the question of the pension fund and votings we will have.

Yes. I think the vote on the pension fund system in 2 weeks' time, I think it's a necessity to have that vote. First of all, it will aim to lower the conversion rate of the occupational assets. which do currently not reflect the markets and the technical interest there. And then the second area, it also opens the market for part-time employees and also for female employees, I think, which is a necessity in the Swiss market. So we fully support that. And your question was what happens if the vote declines that request. From a balance sheet perspective, we will not see an impact in the short-term perspective on the balance sheet because, first of all, we do have not a high share of occupational assets on the balance sheet, that's the first one. The second one is reflected to the selective growth, which Michael already mentioned. We are very, very cautious when it comes to underwriting business with regard to the structure of the assets, with regard to the age of the employed person. So we are not underwriting business where people are going into the pension very early. So we are fostering on long, let's say, saving periods, and that enables us not to have a high turnover on that asset side. And thirdly, there's also then the opportunity to request a premium in order to compensate for that not adequate conversion rate. And we are also prepared to request that premium from the customer. And also the legal structures and the legal regulations to request that, that is in place that is possible. So if the vote goes into a no, which we do not support, then we will have the opportunity to do so. And finally, if you have a look at our semiautonomous solution, that's a solution where we currently have no annuities at all. So that's something where we really focus on no annuities. So we have a very, very sound and stable balance sheet also there. I hope that answers the question.

[indiscernible] Asset management. A few questions on capital allocation, and thanks for new development on this point. Maybe on dividends, you could -- it would be interesting to understand your thoughts based also on the experience of the past, what are the metrics to look to say that the dividend is, let's say, flat versus prior year? It could be like maybe an exceptionally high nat cat activity, for example, or maybe an adverse development in the financial markets? Maybe I give you all my questions. The second would be whether you see any link between the solvency and your buyback ambitions? The third question would be what are your consideration in terms of raising the payout above the 80%? What do you see that is necessary to happen, maybe exceptionally high remittance year? And finally, what time frame you see for the buyback, regulatories maximum 3 years? Is that 1 or 2, I would say, with this amount that we have to look once you launch it -- in what time frame you see?

Thank you very much. So the first one is about the dividend. We do have our dividend policy as we already had in the past. This dividend policy never lower or -- up only. I think to have it flat or going up, there are different points which are important. At the end, it's the decision in the annual meeting. But I think a very important part is on that level are we with the cash remittance and what's our outlook also for the cash remittance in the future? It's -- I think it's not an opportunity to do it in one time because of a higher one-time effect in the cash remittance. That's not how we are thinking. It's about going up with the whole part, also for future and then also go up with the dividend policy to reach it also in future. So it's not about based on onetime effects. The second one is about the link between solvency and buyback. We have a buyback politic with the framework, which is not directly linked with solvency. So perhaps, Carsten, you can say something about that.

Yes, sure, I can. Solvency obviously, is an important precondition meeting solvency requirements on individual entity level as well as on group level. And that has to be taken into consideration, and we must be able to be profitable enough to also sustain solvency levels while remitting cash. That's absolutely clear. We meet all solvency requirements for the entities also on the levels that we consider to be necessary and solvency is not a restriction as we speak for pursuing the capital allocation framework as presented. So, so far for this solvency aspect.

Thank you. The third question was about the 80% or more of the payout ratio. So at the end, it can be also more. That's why we are saying it like that. It's also a question of the cash remittance we have in these years. I think it's there, it's also a question of the possible cash remittance that we have. We are committing from 2024 to 2027, a cash remittance of over CHF 2 billion, which means if it's higher, then there is also some potential for doing more. And the question about the time frame, Carsten, of the buyback?

Yes. So in case of a buyback, and we alluded to this CHF 100 million tranche structure, we expect that this can be executed within a year.

It's Rene Locher with KBW. So just playing around with the numbers on dividend and the buyback, we're targeting like above CHF 500 million cash remittance times 80% payout per share or that I end up at CHF 400 million divided by 45.8 million shares, then I end up at CHF 8.70 per share. So quite a substantial increase. And given that the EPS should be at least equal to the prior year, I was just wondering, if I do a mistake in thinking and also on the buyback, when you keep then 20% of the CHF 500 million. So you would end up at CHF 100 million. So that means the share buyback will start next year. So that's the first one. And I have to come back again to this release ratio. It's I guess you're really punished by the market, right? As my colleagues highlighted 5%, 6% release ratio. The other guys are at 8%, 10%. If I take a look at the release pattern in your annual report, you're releasing like 19% of your CSM in the first 5 years, whereas your competitors are releasing 30% to 35%. So I mean, looking at your EBIT in life, if we would compare apple with apple, I mean EBIT life could be like CHF 100 million, CHF 150 million higher.

So let's start with your positive part of the second question -- the CSM release. I think at the end, as Carsten also mentioned, it is a newly introduced model and -- to have how long is really the duration of the business makes a difference how long you have what release ratio you also have. So I think there can be differences between businesses. Overall, what we see in the market, the differences are quite high. That's what we also see. And I think, we have to look at that and also to have this transition part, the question, are the models really the same or not. It could also be that the business is different because there are different countries also involved. But at the end, I think it's something we really have to look at to understand why it is at the end, different. But you want to add perhaps?

I just complement IFRS is one view. And it's an important view fully acknowledged yet. There is -- particularly for the life business, there is other perspectives that we consider to be very important. One is statutory accounting -- statutory profitability. And when we look at statutory profitability, then the consideration and the sustainability of the interest rate margin plays a pretty important role so that the life business can contribute sustainably from a statutory profitability basis because that is ultimately the basis for cash remittance. And beyond the IFRS mechanics, and I don't want to play them down, but I just want to complement the picture when looking at cash generation, cash deployment from the life business, the statutory perspective and cash generation perspective plays a pretty important role. So, so far for this.

And then the first question was about the payout ratio. With the calculation, I will hand over then to Carsten. He has also done the illustrative calculation. So -- but just to be clear on the point of 80% and more payout ratio, it's the total payout ratio, so it's including also possible share buybacks. So it's not only a dividend figure, but...

Yes. That's absolutely the case and -- in addition, the cash remittance that is coming to the holding, we also need to cover some holding costs, in particular, the financing costs for the outstanding senior debt. And therefore, there are some holding costs included before we can then distribute dividends and consider share buybacks.

Nasib Ahmed from UBS. First question on the ecosystems, 2 subparts to it. Are you expecting any more impairments to come on the ecosystems that you still have? And then on the CHF 30 million cumulative spend on the ecosystems, do you expect FRIDAY to breakeven or even contribute positively? Because like you said, it's still a negative contribution. So how do you get to the CHF 30 million? Second question on Switzerland, greater than 2% growth. How much of that is rate versus volume? It seems like you get to 2% with just rate increases. So are you actually growing in that business? And then finally, on Luxembourg, the solvency in the Life company is pretty low, about 120%. Where is it now? That was at full year '23? And how is the lapse experience been in Luxembourg Life with high rates?

Thank you very much. First, about the question of ecosystem. So we have to do the valuation always that's also done ongoing, so in the past, and also will be done in the future. So that's an ongoing system and also we have to do the value assessment in future, which means it's always possible also to have a write-down also in the future. So second one is about FRIDAY. FRIDAY is on way to breakeven, the CHF 30 million, which we said overall, till end of 2027 would include everything from cash remittance. So everything that we would have to spend, and it's a maximum amount. So not more than that. On the growth in Switzerland, I hand over to Carsten.

Yes. So your question was with regard to what is price volume effect? About 2/3 is pricing effect.

And about solvency ratio, yes, it is low. We also had -- there are changes also on how to calculate it. So we will have a higher solvency ratio than also in the future. We also have the full freedom of service business in the Luxembourg market which also means it's quite a high volume, which is coming there and also this is a growing part. And the lapse rates. So we do not have any special indication about lapse rates at the moment. And I think your question wasn't about Luxembourg. You mean the Luxembourg local market or we do not have any bigger points there. On the other hand, we have quite a good growth in the Luxembourg local market in the life business.

Farquhar Murray, Autonomous Research. Just 3 questions, if I may, actually. Firstly, you're very much sticking with the existing footprint and committing to that. So I just wondered if you could elaborate on why Baloise is the best owner, particularly of the bank and the asset management business? Obviously, we've seen a couple of insurers take a different path on that. . And just digging a little bit more into details around that -- on the bank. Could you indicate how many bank customers actually have at least 1 Baloise product and then maybe what the average number of Baloise insurance products they would have would be? And with regards to the quite interesting 30% reinvestment ratio you highlighted. What's the line of expiring life policies that you're under bating in terms of volumes to come? And how much visibility and actually ability to tackle that do you have? And then just a kind of targets question. Could you walk me through how the 2% to 3% loss ratio target that you've now got compared to the previous CHF 200 million cost saving target under the old kind of strategy phase? If I think -- recall, I think you had about CHF 60 million in full year '23 million of the CHF 200 million. And so I think the CHF 180 million to CHF 120 million maybe doesn't quite take us to that CHF 200 million, but there's obviously potentially a lot going on there.

Thank you. I think we start with the question of bank and asset management. The strategy we follow there is a very focused strategy for asset management as Matthias Henny, explained in his part. It's really the focus on the business where we have economies of scale coming from the insurance business where we have the capabilities already and also a big booking. So we are using there also the know-how we have and having a clear -- also a clear product and solution for our clients in that area. So it's very focused and not a broad approach to go into that business, which is a difference to other players. Second one is about the bank. The bank is fully included in the Swiss business in the market, in the Swiss business, which means it's really also in all of our agencies, there is this know-how of the bank. And we have then the possibility also to give solutions to our clients, not only a life contract, but also other solutions for retirement products and for the full service in that area. It's not for all clients because it's also for the needs of them. So you need also to have these needs and the pension part. So it's more for the more wealthy clients, but I think there is quite a big potential in doing that. The reinvestment rate is coming from the life part. So we do have a big life book, especially in individual life book, which means there are a lot of contracts coming to an end every year, which is normal. And then the question is what are the clients doing with the money in some areas, they needed that have done this contract some years ago for a reason, to pay out the mortgages or whatever. But often, they use it also for the future or for their retirement and in future. And that's where it comes in play that we have a quite high retention rate there. So our reinvestment quota of 30%, which means we already know the next contracts which come to an end. So we can go early to these clients, discuss what the needs are and then also have the full solution for their -- that they are -- with this money with this business also in Baloise in the future. That's why it is higher. And I think there's quite a high potential also to do it even more because it's a growing business in 2 directions. The insurance business is by far bigger in numbers of clients than the banking business at Baloise. First one. Second one, it's also a market which is growing because of the needs of the different customers, also for future for retirement products. So it's in both direction also quite a big pipeline also for the future. And then the loss ratio, Carsten, can I hand over to you about this efficiency -- sorry, cost ratio, about this 2% to 3%?

So the previous target that you alluded to was for 2019 to 2025. So the new target is for '24 to '27. So different time reference. We play both on the variable costs as well as on the fixed costs. That's why it's a cost efficiency target. And what we haven't done in the past is we haven't linked it directly to one of the key KPIs that we are pursuing, i.e., the combined ratio. So we have established this link now so that we can also better report on it. So there is no one-on-one link between "the old target" and the new one. For us, it's important that we play this operational efficiency lever that Michael alluded to in order to sustain also the 90% combined ratio guidance.

Just on that CHF 200 million then, were you falling short of that CHF 200 million so the same? It takes CHF 60 million, I think, at full year '23 plus CHF 80 million to CHF 120 million. I'd actually be falling short of CHF 200 million.

Sorry, can you say again?

I think what I'd like to ask is, were you falling short of the original CHF 200 million cost saving target?

Well, the CHF 80 million to CHF 120 million that we are mentioning here is the effect on the non-life business. Obviously, we have a cost base that is also a cost base in the life business. That is mainly seen in the CSM mechanisms. And that's why we spell out the non-life portion here explicitly. So the 80 million to CHF 120 million is non-life business effect only.

And then just coming back on the reinvestment rate. I mean, do you then have a volume number that you can give us in terms of what that volume of expiring policies is that you might achieve 30% against in, say, the next 1 or 3 years?

So you mean about the individual life policy, how much the volume per year is? So I do not know it by heart, but perhaps do you know it or not -- okay. So we can -- the patterns, but we have not prepared a number for that.

And then just on the Baloise bank customers, how many of them, on average, have at least 1 insurance policy, just out of interest? Is it going to be all of them, I presume or...

Yes. With regard to the banking customers, I would say roughly 50% of the banking customers do have also insurance contracts, and that stems from the perspective where the bank has started. The bank has started in one quantum. And there in that quantum, it also offered normal bank offerings like cash like cards and just the accounts. And when it comes to the link with the insurance business, it goes into the investment part. So -- and that's where 30% comes from. So we have some customers in that area where it has started and grown. And now we are expanding to Switzerland with focus on that investment part. We are not going into Switzerland with the whole banking offerings like cash and accounts. So that's not the idea behind that. So it's a real focus on the investment part on mortgages, on mandates with regard to wealth and asset management.

Okay. So that is my question is unfair because actually, the bank business splits between the regional part, which will be much lower than, as you say, the 30% and then presumably outside that region, I presume we're looking much near 100%. Is that fair?

The growth comes out of the all the other regions.

[indiscernible] Capital. A couple of questions on Germany. I mean despite the refocusing strategy, you remain fully committed to Germany. So a couple of questions here. First, but even within Germany, I don't see a lot of refocusing. You seem to stick to all the lines of businesses here, even where you elaborate it is profitable, but it's a very challenging business. Is that process still ongoing? Or can we expect some changes here? Then you set ambitious targets for all regions, including Germany. And then you mentioned that you review the progress and take action if necessary. Can you specify that process a bit? And in particular, I was wondering what action could be triggered by certain events? And third, on Germany, would you see yourself in the position to acquire other insurance businesses in Germany?

Yes. Perhaps first question about the different segments. I think we have clear focus on which segments we want to be in. It's right that we also have the motor business, only a part of the motor business, which is very important. And if we are looking at the volumes overall, our part in the motor business is a little bit higher than 10% of our overall business we have in Germany in the non-life sector. And if you're looking to the market, this is by far, not what the market is doing, is closer to 40% or something like that in the German market, which means we are really in that area underrepresented. That means we are really focusing on some parts of it. And if the prices go not in the right direction, then it's not so difficult for us also to react. We also had quite high prices up in the past also, which also means then in some areas you lose also some part of the business, perhaps in some other parts, if others go also up, then it goes to the other direction. But I think you have the chance then also to use this flexibility. It's not the most important part of our business. Second one is about the ambitious targets. Yes, it's for all of them. And for Germany, what we have seen and also on the slides that on the question of the target growth, I think they really are better than the market is. We also have seen it's not only the last year. I think the growth was always starting at 2019. Second one is about the profitable -- the profitable part. And also there, I think we are on a way also to be better positioned than the markets. That's also what Juerg showed with the combined ratio, and we have an ambition on the cash part because we also want to have the cash coming out of that, which is crystal clear. I think we have to monitor it. And what it means is always we have to look at what's coming then. It can also be that we have then even higher price going up or that we are looking at portfolios, whether we are best owner or not. So I think at the end, it's always the whole possibilities if we are not reaching the goals. Was there another one review? No, I think. the question of acquisitions. So at the end, we are always looking in all our markets, whether they are possible acquisitions, but they have to fit also always our conditions, which are cultural fit, which is the fit to our portfolio, perhaps not the easiest one in the German market then because we have a clear view of which portfolio are fitting and also the question of the price at the end. So that's how we are acting in all the points. But our strategy of refocusing, I think its strategy of the organic growth. If there are opportunities, we are looking at it, but it's organic growth in our segments with our way.

You had a question earlier, which was basically, you asked us to ask you to make us dream a little bit. So I'll ask the 2 of them. On the ROE, could you give us a feeling, so my guess is you're around 12% now, which is a great number. That's my calculation may be wrong. I would say 15%. But it sounds like with all the measures you outlined today with, I think, FRIDAY, and I think the cost reductions and maybe the life business getting a little bit better on the CSM side that we could see well over 15%. Maybe you could make us dream here a little bit. And then just a similar question on the cash, so over CHF 2 billion in the -- in this current period, 2022 to '25. And then I think you said we'd have at least CHF 1 billion for the next 2 years. I don't want to be critical because it's -- you've done a huge amount of work, but it doesn't feel like there's a huge uplift. But my guess is you've kept a lot in reserves. So again, maybe you could kind of make us dream a little bit here.

So first, I will try to do it about the return on equity, perhaps for the cash cost and I will hand over then to you about the return on equity. I think it's a target that we have from 12% to 15%. You have seen in past, we were not on that level. So it is an ambitious target for the future. Yes, with all the parts, we are always aiming to be on the top, and that's what we are aiming. But I think it's also a question how the -- at the end, the equities going into the evolution, we have seen a quite good evolution in equity also this year, which is also 1 part of this quota. So that's very standard. And for sure, we are always also looking on that. And -- but at the moment, it's this 12% to 15%.

Yes. So with regard to the dreams on cash remittance. So recall, when we started with cash remittance as a focus point, we set a target of CHF 2 billion conditions and the environment allowed us to deliver nearly CHF 2.2 billion. So in that sense, I think we didn't hold back. When this period was over, we came up with a new target where we shortened the time horizon to deliver by 1 year, that's the implicit rise of 25%. So I think we didn't hold back. We are now formulating a new target with at least CHF 2 billion cash remittance and that's what we are aiming for.

And combining with 80% or more in the payout.

So we got no questions from the telephone audience, but I think -- do you have another question, Farquhar.

If I can, that would be great -- just coming back to the old targets versus the new one. As you say, IFRS 17 is absolutely not been the nirvana of consistency and stuff that some sell-side has suggested it might be. So I just want, but obviously, you kind of know what you've done. So I just wondered if you could walk us from the old around 90% combined ratio to the new around 90% combined ratio. And could you tell me whether that's tougher or on a like-for-like basis or not versus where we were previously? That might help me and what reason things would be around that. And then coming back to maybe solvency and cash. As you say, the slide on solvency speaks for itself, 210% within one of the world's most strictest solvency regime is an extremely strong capital position. Is there any scope to work that downwards? Or what's the thinking around the level of solvency SST that you want to manage yourself at? And then more broadly on cash, I mean, the old framework wasn't based on the current rate environment, the rate environment, I'd assume this somewhat more friendly. But should I be seeing slightly more improvement in terms of remittance of that backdrop? Or what am I missing?

Thank you. So your first question was about the 90% combined ratio. Was it about the old the new or -- yes. So perhaps Carsten, you can give there, no. It's always difficult because it's a new world also. It's not only the question of the 90%. It's a question also on the IFRS change between, which is not as difficult as in life because there is even more a new game, but it's also here quite a lot of changes. But Carsten, perhaps you can...

Yes. So economically, we keep the ambition stable as we did in the past. That's why 90% remains 90%. And now with regard to the moving parts and old versus new, the new target is certainly loaded with more costs. That's 1 element. On the other hand, we have discounting effects. But on the other hand, you have a much more strict notion of best estimate than in the past. So by and large, we keep the ambition on the same level because we don't see any signs of deteriorating leading indicators of the quality of the book. But I would suggest for more technicalities that we can also follow up with you on the IR level.

And about the cash ambition. So that's the question of this CHF 2 billion. It's always difficult to say whether the environment is more favorable or not because I think there are a lot of changes. You also mentioned the question of interest rate. The inflation is there -- now the inflation better or worse than in future? I think there have been inflation, which were higher 1 or 2 years ago, which come down, but it's still there. So that's always difficult to say. I think overall, we have this goal to deliver till end of '27 over CHF 2 billion of cash, and that's where we are in today and where we are committed to do so. On solvency, again, cash -- versus cash, Carsten?

Yes. So happy. We are not having an explicit range of target solvency and deliberately so -- solvency should never be a restriction for payout, which is not. And we assess the solvency positions for the individual entities and for the group. We always disclose sensitivities also in extreme scenarios where even in this extreme event that we disclosed with regard to equity market drops and interest rate movements, we always want to be above 140%, which is based on our notion of risk appetite.

Are there any follow-up questions. I think then we can close the Q&A session. Thank you.

So ladies and gentlemen, we are striving -- we are shifting gears decisively, and we will refocus Baloise. We have and will implement significant measures to improve technical profitability, operational efficiency, growth in target segments and capital productivity. I'd like to conclude our investor update at this point and invite you to further discussions also with the management team during our lunch that will be served here in this room in a second. And I'm happy also to see you in person in -- at least a lot of you also in the next weeks with our road show starting on Monday. So thank you very much for participating and a warm goodbye.