Swiss Life Holding AG (SLHN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Swiss Life's Q1 2023 Trading Update Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Matthias Aellig, Group CFO of Swiss Life. Please go ahead, sir.

Good morning, ladies and gentlemen. Thank you for dialing in and for your interest in Swiss Life. Today, we are reporting on selected top line figures for the first quarter of 2023, and we will focus, as usual, on fee income, premiums and direct investment income. Those are essentially unaffected by the transition to IFRS 17 and 9. Please note that all group figures are in Swiss francs. That figures for each business division are in local currency. Also note that all figures are unaudited and growth rates are mentioned in local currency. Let me start with today's key messages. Fee and commission income was up by 7% to CHF 595 million driven by own and third-party products and services that outweighed a lower fee income from asset managers, but owned IFAs provided a stable contribution. Growth rate in premiums, fees and deposits received increased by 11% to CHF 7.5 billion. Direct investment yield was stable at 0.6% on a nonannualized basis. Direct investment income decreased from CHF 0.97 billion to CHF 0.94 billion. Swiss Life Asset Managers recorded net new assets of CHF 2.5 billion in third-party asset management compared to CHF 1.2 billion in the prior year period. The SST ratio on the first of January 2023, as disclosed and filed with FINMA, was 215%. As of today, we estimate our SST ratio to be at around the same level. I will now move on to our segment reporting, starting with Switzerland. Premiums increased by 2% to CHF 4.4 billion. Life insurance market was flat. Premiums in individual life grew by 24%, while the market was up by 8%. Periodic premiums were up 3%. Single premiums more than doubled driven by new modern traditional products. Premiums in group life stable at CHF 4.0 billion, but the market decreased by 1%. Single premiums increased by 8%, primarily due to higher new business. Periodic group life premiums declined by 5%. Assets under management in our semi-autonomous foundations increased to CHF 6.8 million compared to CHF 6.2 billion at year-end 2022. Fee and commission income decreased by 6% to CHF 78 million, driven by Swiss Life Select. Turning to our French, German and international business divisions, and all reported in euro. I will start with France. Premiums decreased by 6% to EUR 1.7 billion. In our life business, premiums were down by 9%. The overall market, including bank assurance grew by 3%. This follows strong growth in prior years. Since 2019, we have clearly outperformed the market. Our premiums increased at a CAGR of 11% compared to 3% for the market. The unit-linked share in our life premiums was 65% compared to the market average of 40%. Life net inflows were EUR 0.4 billion versus overall market net inflows of EUR 2.6 million. Health and protection premiums grew by 4%, driven by the group and the individual businesses. P&C premiums were down by 3% due to motor and home insurance products. Fee and commission income rose by 14% to EUR 122 million. We continued to see a strong contribution from the banking business, given the exceptionally high revenues from structured products. Also, unit-linked fee income increased higher average unit-linked reserves compared to the prior year period. I will continue with Germany. Premiums grew by 3% to EUR 386 million due to modern, modern traditional and disability products. The market decreased by 9%. Fee and commission income rose by 17% to EUR 180 million, primarily due to our owned IFAs, while the insurance business also contributed positively. The number of financial advisors increased by 4% year-on-year to 5,973. Moving on to our international unit that includes effects from the acquisition of elipsLife consolidated beginning of July 2022. Premiums increased to EUR 1.06 billion due to higher premiums with corporate clients. About 95% of the increase was due to elipsLife. Fee and commission income was up by 19% to EUR 100 million. The increase was due to the corporate business including elipsLife that outweighed a lower contribution from owned IFAs and private clients. Let's continue with the Asset Managers business division that reports in Swiss francs. Asset Managers commission income declined by 12% to CHF 212 million. About half of the decline is due to Livit Facility Management Services, which was sold in Q4 2022 and therefore, no longer contributed to commission income in 2023. The remainder is due to FX translation effect and headwinds from lower volumes in the real estate transaction market. As usual, the update on asset managers in Q1 and Q3 focuses on commission income and does not include other net income from real estate project development. In our PAM business, commission income decreased by 14% to CHF 79 million, driven by lower average assets under management, lower transaction fee income, and by the sale of Livit Facility Management services, where about half of the commission income was reported in PAM. In our TPAM business, commission income declined by 11% to CHF 133 million. Higher income from higher average assets under management was outweighed by lower transaction fee income and the impact from the mentioned sale. To make figures comparable to full and half year disclosures, the share of total nonrecurring income for TPAM, meaning commission income as well as other net income, e.g. from project development was 7% of our TPAM income compared to 19% in the prior year period. For the full financial year 2023, we expect the share of nonrecurring income to be in line with our 2024 indication. Net new assets in our TPAM business amounted to CHF 2.5 billion compared to CHF 1.2 billion in the first quarter of 2022. We achieved inflows in real estate -- sorry, in real assets of CHF 0.9 billion, thereof CHF 0.7 billion in real estate. Inflows in other asset classes amounted to CHF 0.9 billion in bonds, CHF 0.2 billion in balanced mandates, CHF 0.2 billion in equities, and CHF 0.3 billion in money market funds. Excluding money market funds, net new assets amounted to CHF 2.2 billion compared to CHF 1.9 billion in the prior year period. Overall, assets under management in our TPAM business were at CHF 107.9 billion compared to CHF 105.4 billion at the year-end 2022. Increase is driven by net new assets, while FX translation was offset by valuation effects. Turning to our investment results. Our direct investment yield was stable at 0.6% on a nonannualized basis. Direct investment income decreased to CHF 0.94 billion compared to the prior year level of CHF 0.97 billion. Bonds and real estate contributed more than in Q1 2022. It was more than offset by lower distributions from investment funds within our insurance portfolio and by the swing in repo contribution. With respect to the real estate portfolio, real estate fair value changes were around 0 compared to 0.6% in the prior year period on a nonannualized basis. Real estate continues to be an attractive and important asset class to back our long-dated liabilities in the context of our disciplined ALM. I mentioned many times before, we hold real estate because of the regular rental income it provides and not because of appreciation. About 3/4 of that rental income is indexed to inflation or interest rates. Moreover, economic fundamentals in Switzerland remained strong, which is the basis for the resilience of our real estate portfolio. Vacancy rates overall, for example, decreased to 3.5% from 4.0% at year-end 2022. Moving to solvency, cash and payout. Our SST ratio was 215% on the 1st of January 2023. As of today, we estimate our SST ratio to be at around the same level and therefore, well above our ambition range of 140% to 190%. Liquidity at holding today amounts to around CHF 0.8 billion. This takes recent cash remittances to the holding company into consideration as well as outflows related to the dividend payment and the ongoing CHF 1 billion share buyback, which will be completed by the end of May 2023. Let me sum up. We're pleased with the first 3 months of 2023, especially with the increase in the fee income. This was achieved despite headwinds from the subdued real estate transaction market, given our business model that combines several sources for fee business. Our owned IFAs in Germany and the fee businesses in France, again delivered double-digit fee income growth and the international segment benefited from the acquisition of elipsLife. Let me remind you that higher interest rates are economically beneficial for our life insurance business and the savings result. Some effects are immediately positive like reserve releases. Other effects materialize over time, like higher reinvestment rates and the increase of rental income due to the indexation to interest rates or inflation. As mentioned at the full year disclosure, we confirm all our Swiss Life 2024 group financial targets and expect to either achieve or exceed them. On the last note, we will host another IFRS 17 conference call on the 28th of June 2023. We will then publish the IFRS 17 P&L for half year and full year 2022. We will also publish the IFRS 17 balance sheet for the 31st of December 2022 and '21. We hope that this additional disclosure will provide you with the necessary information to prepare for our half disclosure that will take place on the 6th of September 2023. Thank you for listening. I'm now ready to take your questions.

The first question comes from Andrew Sinclair from Bank of America.

And before my questions, I just want to say thank you very much for giving the IFRS 17 figures in June. That makes a huge difference to us in terms of building models and getting prepped for half year or so, thank you very much for that. Three questions for me. First is on asset management flows. Just wondered are you seeing a benefit so far, do you expect anything either one-off or ongoing from the UBS Credit Suisse merger for asset management flows, perhaps clients wanting to avoid concentration risk on the enlarged banking entity? Second was on real estate. I totally understand rental income is going to be increased as is indexed. You made that really, really clear and the valuations don't economically matter. But I am keen to understand what discount rates are being used in terms of valuations for real estate and with interest rates having moved up, how should we think about the valuation discount rate that's being used today and what your expectations are for how that might evolve? That's question two. And third was just on the investment income. I probably expected a lot of improvement year-to-date. Just to understand the headwind a little bit more from the lower investment fund contributions. Can you talk a little bit more about what's led to those lower investment fund contributions and what you expect going forward?

Thank you, Andy, for your questions. Let me start first with the AUM flows and there, let's say link to UBS and Credit Suisse. Now what we clearly can say in the Q1 figures that we reported, there is no effect from that included. And in terms of our outlook, I mean those are institutional clients. They have their processes. And given what you just said, there may be some movement in the market. Clearly, we try to benefit if there's something, but this is typically -- those are typical processes with RFPs and the like that take some time. But the message is certainly nothing included in the Q1 figures, and we will work on seizing opportunities if there are any. On the second point, on the real estate valuation, the way those valuations work that's essentially in a way that the transaction market is observed and then valuation kind of trends further from what is observed in the market to our portfolio so there's no discount rate that somebody assumes and then this is driving the valuation. It's really what is observed in the market, it's then calibrated to the models and using these calibration parameters, 1 of them really is the -- is a discount rate, which depends on many things, is then applied to our portfolio. I think what is important when it comes to the valuations, I mean, buyers, they don't look into the valuation -- discount rates. I mean they take into consideration what are the future rental income streams. And I mean there, it is relevant, as you said, that they can be indexed to inflation. What is also relevant is clearly the fact that vacancy rates play a role. I mean if you have a view on vacancy rate, if there is clearly a demand and that's what we observed. I mean, there's a huge demand for real estate that is relevant that ends devaluation as well. So the view on vacancy rates on the ability to increase rates, those are important parameters that are also, let's say, relevant in those projections. And then that's kind of 1 element. And clearly, the interest rate environment also plays a role. And as we said in previous date, it is clearly from the rate environment, we expected a pressure on the real estate valuation and now there is a positive from this demand driven and also, let's say, interest rate linkage of rental income, which is a positive for Q1. It turned out to -- net out to 0, as mentioned. And this is also essentially our expectation for the full year that we will see broadly stable valuations for the full year 2023. Sorry for the lengthy answer, but I think it's important to understand devaluation -- mechanics of devaluation. As usual, is done by an independent third-party recent partner. On the third point, on the direct investment income, I think there are elements I've mentioned. Your rental income, higher bond income that has been moving up, let's say, yield 1%, as we call the direct yield. We clearly had a headwind from the FX. Euro, Swiss franc on average, was probably 4% lower than in the prior year, so that there are translation effects there. And we have now a drag from repo. In the last -- in Q1 2022, we had clearly benefits from repos. There was a positive contribution with a higher interest rate that has now turned. And coming to your point about the funds, I think that's important. This is essentially an accounting feature. What do I mean with that? In the prior year period there were distribution from funds, which we recorded back then as direct investment income. In Q1 2023, there were realization of gains, which economically have the same benefit, but accounting-wise, they do not show up in the direct yield. And that's why we have had this reduction. I mean, that's essentially, I would say, more than a reported decline that was driven by this accounting feature. I hope this gives -- shed some light on the question of the investment income.

Yes, that's helpful. Just to follow up on that. I mean, how should we expect that for the course of the year, should we expect some realizations to come through or for that to return to a more normalized level in terms of investment fund distributions?

There are many considerations that drive that. I would assume that we will not observe such relevant impact in this accounting view, as we now have seen in the Q1. But again, I think it's important to mention, economically, it is not relevant whether this shows up in yield 1 or in the direct yield or whether it's in the realized gains and losses.

The next question comes from Peter Eliot from Kepler Cheuvreux.

And yes, I echo the thank you on IFRS 17. Three questions from me, if I may. First one on France and we've seen another very strong performance from the private bank. I'm just wondering if you can comment on how sustainable that is? I mean I'm guessing by now, most customers must have bought structured products. So I'm just wondering what the outlook there is and how long it can continue? Second one, I guess a bit of a similar question on Germany, but obviously, the growth was much stronger than the number of advisers. So I'm just wondering if you can add a bit of color there and whether that momentum can continue. And then thirdly, real estate transactions being depressed in Q1. I'm just wondering if you can sort of add any color on the outlook there? Any signs that, that might pick up or any thoughts you got there?

Thank you, Peter. Let me start with the real estate transaction market first. As you said, we pointed out to the lower volumes in the transaction market in Q1 that also affected us. If we now first look a bit at the entire transaction market not about what it means for us, but about the entire transaction market. We think that there will be a pickup in activity let's say, in the second half of '23, beginning of '24, a bit depending on which segment, which particular custom segment, which type of real estate. So we clearly see there a pickup in activities. Now what is more relevant, what does it mean for us? How do we assess our, let's say, outlook? And as I said, we have reported this share of 7% of the nonrecurring income for Q1 for the TPAM. And for the full year, we clearly expect here a catch-up. As I said, we expect something in line with the share we disclosed at the Investor's Day for the nonrecurring income for the full year and that indication is around 25%. So you see we have a pipeline where we have visibility, and that's why we gave this guidance or this indication, if I may say so that we clearly expect a positive second half of the year. Now moving on to France. As you said, the banking business has been continuing to do well. We were mentioning that I'm aware of that last year that we do not expect a high level to be sustained. I mean we had another very strong Q1 with the structure product, given the market circumstances, I mean, we could offer very attractive products to our customers, and there is maybe 1/3 of the client base in the bank that currently has structured product, so that is kind of the indication that I would like to give there. Now in Germany, we now have seen a stronger income growth and advisory growth. Last year, we have seen a bit of the opposite. I think we see really good business dynamics in the German market. They are going after opportunities that we see and we have a particular promotional campaign that aims at really targeting clients, those are mostly existing clients with some of the government actions that aim to a different means compensate the citizens for inflation. I will not go into the details, but the German government has enacted a couple of measures that at the end of the day, will lead to a higher, let's say, net share in people's [ options ]. Our advisers, they really pursued those opportunities. And here, we see this higher entrepreneurial spirit of our German financial advisers. But also, the insurance business is doing well. We have big contributions from our growing unit-linked proposition. So -- but I think what I can mention in terms of German, let's say, market dynamics.

That's really helpful. I was wondering if I could be cheeky and just add in 1 other question. I appreciate what you were saying that this is about direct investment income and I note your comments just now about realization. I'm just wondering if there's anything else you can add about how we should think about net investment income at this stage? You might not be able to add a thing, but just give you the opportunity.

Okay. I can try to do so, but keep in mind, I mean, we have a fundamental, let's say, change of the accounting standard. That's, by the way, the reason why we have not disclosed a net investment deal. But coming back to, let's say, the old way of thinking about net investment income, there is, besides everything that happens in the direct yield, a couple of note worthy points to make on the, let's say, pure realized gains element. On real estate, we have had significant fair value changes. You may recall in 2022, we see here the outlook, as mentioned before, is broadly stable in terms of valuations. And also, as mentioned on previous calls, we see an increase in the foreign exchange hedging costs. We discussed that, I think, in half year, last in Q3, in the full year disclosures because the differentials on the short rates have increased, we clearly see as a transient headwind to yield -- to the net investment yield increase hedging costs as said, this is something transient and then taken together, we expect, let's say, a lower level than in 2022, driven by those 2 elements that we have or that I just have explained. Do not forget, however, that this happens in the policyholder sharing space. So we have policyholder picking up most of that as a lower, let's say, dividend potential to the policyholder. So lower bonus allocations, if you wish.

The next question comes from Thomas Bateman from Berenberg.

Can you just remind us what percentage of your annual remittances that you've received year-to-date? And what are the other core missions maybe the holdco you could expect to receive throughout the course of 2023? The second question, net new assets still look really, really strong. Can you just give us a bit of a flavor for where your clients are still or where you're still seeing demand from your clients, particularly talking about real estate and infrastructure? And finally, elipsLife is obviously constituting quite strongly to go over the international, but it's difficult to get a feel for what the gross elipsLife is like, adding a lot to the headline on it seems international. But can you just give us a feel for -- is that business growing sort of level?

Okay. Let me first start with elipsLife. I mean what we have seen in Q1, clearly is a very significant contribution to the top line, be it in the premiums, but also in the fee income. We have acquired elipsLife not just to manage that and to operate that efficiently. We clearly see, let's say, also potential, for example, in markets like the Dutch market where we want to tap into, let's say, more than in the past into the corporate pension business, risk coverage, visibility and debt. I think we bring important, let's say, capabilities to the table that elipsLife now, the way we operate it really can contribute also to the bottom line of international. And I would say, we have acquired elipsLife not because of top line contribution, we also expect a noticeable bottom line contribution to the international segment. In terms of NNA, as mentioned, we have seen positive NNAs, across asset classes. We continue to see significant inflows in real assets, that's what we can confirm. What we see, and I think that it's probably not a surprise, a fixed income is back. I mean if we look at client activities, requests for proposals, I mean there are more and more also RFPs or fixed income mandates. That's what we can really say. In terms of -- and let me really come back to that again, the real assets. We talked about both real assets since, let's say, many quarters. And if I talk to our colleagues in asset management, the sense I'm getting is that really prospective clients that fully, let's say, appreciate that these asset classes, for example, infrastructure today specifically offer also inflation protection as, let's say, real estate. And in real estate, there are different subsegments, what we specifically see right now that like industrial, logistics, that's a very attractive asset class or sub-asset class within real estate, our demand this year. And yes, we have a relevant proposition to meet those demands. Now in terms -- if that's fine, we would switch over to the dividends, to the cash remittance to the holding. The largest part of the cash remittance to the holding is composed of dividends that normally are remitted in the first half of the year. There is a kind of fees and interest and the like that are more let's say equally spread over the course of the year. So a largest part of the annual cash remittance, if you wish, will be performed by half year and then we will also report about the figures. I think what is important to mention what we said at the full year closing, even, let's say, a significant change of interest rate environment during 2022 and which is essentially still in place. I mean rates have come down a bit, but fundamentally, rates -- interest rates are much high than they were. For example, when we were disclosing the Investor Day targets back in November 2021, we have now the expectation that we have a growing cash remittance in 2023 and thereafter. Why is that? Given what we said and full these changes in the interest rate environment, the reserving mechanics, which we elaborated on in great detail, they will lead to this structural enhanced cash remittance, which therefore leads to the fact that we foresee to exceed Investor Day target by 2024.

The next question comes from Nasib Ahmed from UBS.

Just a follow-up on your answer on elipsLife and the Dutch market. Are you looking to take advantage of the pension reforms happening there? And what are your expectations of taking the share of the market and the new pension schemes that are coming to the market over the next 5 years? And I assume most of this business will be fee based. And the second question is on TPAM real estate funds. What mechanism do you have in place in to stop large redemptions in a higher interest rate environment where clients may want to invest more in fixed income type assets? So just 2 questions for me.

I may not have fully acoustically understood the question on elipsLife in the Dutch market. If you could repeat that again?

It was around the Dutch pension reform. So I believe it's the reform that are within the Dutch Senate at the moment. And over the next 5 years, corporate pension schemes need to change the structure of their pensions. I was wondering if you -- if elipsLife is going to participate in those corporate pension schemes as well?

Okay. To be frank, I'm probably a bit remote to that Dutch pension reform. Particularly those reforms focus on the savings of, let's say, pensions. elipsLife provides risk coverage, disability and that's where we earn a margin on the risk premium, and that's where we see our potential to grow combining, let's say, elipsLife and let's say, our presence out of the Luxembourg where we see clear potential. And let me get back to, let's say, the structure of the elipsLife acquisition. It's a partnership with Swiss 3, where the existing book is essentially reinsured, fully reinsured with Swiss 3. That's kind of thinking about, let's say, a fee business for international for us at this point in time. And as time progresses, we will, let's say, with new business work on the market and this kind of new business that we will bring in over time, this will also affect renewals. We will see a gradual shift in terms of income source, let's say, or from fee-based to risk profit-based contributions from elipsLife assets. There are, for us, clear opportunities in that market by having, let's say, elipsLife now integrated within the Swiss Life International business where we -- and let me reiterate that where we also had the corporate pension business before. I mean, we have also existing capabilities that we can bring to the table. We have had many year successful corporate risk business in our International division. Now in terms of the real estate funds and the question about let's say, redemptions. I would say, without, let's say, quoting the individual, let's say, features of every fund, I would say, what we typically have is the usual notice is periods and the like in place. And our clients, I think that's important. Those are institutional clients pension funds, which typically have long-term view on, let's say, real estate. They are aware that timing the real estate market is something that typically does not work.

The next question comes from Daniel Regli from Credit Suisse.

First, quickly on the real estate exposure again. And can you just remind me of your share in kind of commercial real estate versus residential real estate? And are there any kind of discrepancies in terms of expectations for valuations for the rest of the year? And then the second question would be, you alluded to the demand for modern traditional products. Can I please ask you to repeat your comment about this? And can you kind of talk whether you said something that this has doubled in Q1. Is this something we should expect to continue on these levels given the changed environment for rate, et cetera? Or was this some kind of one-off in there?

First, on the real estate portfolio on our own balance sheet. We have about 45 -- actually, it's 43% residential, about 29% is office, retail is 15%, and the remaining 13% have, let's say, different contributions. There's land to be developed. There are, let's say, health care, there is industrial or light industrial space as we call it. So that's essentially the breakdown of our real estate that we carry on balance sheet. And on the type of, let's say, the difference between valuation going forward, it's for me a bit difficult. I would expect probably that residential is currently, the most sought after, office is probably a bit less. As mentioned before, we see, for example, in logistics, high demand. So it's not uniform that there are really, let's say, differences between those subsegments. But also keep in mind, I mean, it's also about location, about location and location. I mean that's what keeps driving let's say, the valuations to make it an office at an excellent location. They have a completely different valuation outlook than an office in a bad location. And we focus for many, many years now really on prime locations. That's as mentioned before 1 of the reasons why we expect for 2023, broadly stable valuations in our portfolio. Now to the question of the traditional product that I've mentioned. That specific comment referred to a single premium product in the Swiss market. I wouldn't call it a traditional product. We call that a modern-traditional product. Why is that? Because it has a guarantee, which is much lower than what, let's say, a maximum technical guarantees. To put it simply, the technical guarantee that we could offer in Switzerland is about 5 basis points. That's the maximum we could do from a supervisory perspective. In that particular product, we have a negative guarantee of maybe negative 2%. And that's why we can also provide an upside to the client. And this is what clients appreciate these days, and we expect more accurate at least a match, let's put it like that. The demand for products which have more and more of, let's say, a guarantee element could increase our time. Why is that? Because they are also economically now much more attractive for us than in the past. When the rates were low, this was not attractive for us. But I would not imagine here a huge kind of a land slide, but the gradual increase is probably what can be imagined.

The next question comes from Bhavin Rathod from HSBC.

I have 3. The first 1 will be again sorry to come back on the real estate topic. Could you just comment a bit around the commercial real estate dynamics. So in particular, how are you seeing the vacancy rates? Appreciate that you have your portfolio located in the key districts, but any colors around how are you seeing vacancy rates evolving in your key markets? That would be the first question. The second 1 would be on your investment strategy. Last year, you did some re-risking investing away from real estate into corporate debt. So should we -- how should we think about your investment strategy this year as well? Should we expect a continuation of similar strategy this year as well? And finally would be on the lapse risk given the interest rate hikes that we have seen. Have you seen any shift in consumer behavior or any risk in terms of lapse risk you are seeing this year? Those are the 3 questions that I had.

Thank you. Let me start with the last question on lapse. As you say, last year, we have seen kind of unprecedented rate increased 200 basis points or even more. Now if we look at our portfolio, I can say, look, overall, we have not seen significant changes in the lapse rates. There are pluses and minuses. There is things that drive those lapse rates that are kind of outside the interest rate environment. Why is that? Because in many cases or in most cases, those are not investment-type products. Those are savings and pension products. You most -- many times have attached risk protection, disability debt protection to such products, old age annuities, you cannot surrender at all. I mean just to put that a bit into context. There are a few, let's say, pockets of business where we have seen a somewhat high lapse rates because they have specific features but where we have seen that, that has been absolutely in line with the corresponding market. So overall, to put it again short, have nothing that's equal to report other than, let's say, specific pockets where there may have been an uptick in rates -- in lapse rates. Maybe on the second question, the investment strategy. As you said, last year, we increased the corporate credit exposure in the third and the fourth quarter a bit. But that was more from government bonds rather than real estate that we use to finance those corporate credit exposures. Corporate credit has now turned back into, let's say, what we call capital efficiency. It's now attractive again, and that's the reason why we having that acting increased exposure now. I think spreads have come down a bit. And I would not expect, let's say, huge changes this year. Clearly, if there are opportunities, we look at them. I mean, it's a buy and manage approach, we pursue there and that's probably how to think best about this. In terms of the commercial, the demand for commercial we see here, let's say, vacancy rates of about 5%, 5.5%, so a bit higher than the average I gave before. It's a bit lower in Switzerland than the 5%. If we look into specifically in the Swiss market, I think we can -- when it comes to new lettings, I think we can rerent that at a good rate. So we are, as I mentioned before, comfortable with that real estate exposure, also in the office and the retail space.

Great. Just very quickly on the interest rates. Can you remind us what was the reinvestment yield for first quarter of 2023?

It's about where we said it was back at full year. So for the Q1, it was maybe 3.9%, so somewhere between 3.5% and 4%. So quite a significant number. And that, by the way, also where we expect it to be for the full year, so somewhere between 3.5% and 4%.

The next question comes from Anne-Chantal Risold from Octavian.

I have a question. Matt, as you mentioned that capital efficiency just in your last remark. What we have seen in your SST report with an increase -- a significant increase in infrastructure under SST private and alternative investment are very punitive. So is it going forward you expect to continue to increase in this asset class or there will be a way to then leverage because of the capital constraint on this type of investment?

Well, we look at capital efficiency. So looking at the expected excess return versus the capital requirements on a very, let's say, ongoing basis part of our asset liability committee discussions, which we have like business division. And we do that analysis on a recurring basis and the real infrastructure. Equity is capital efficient. And therefore, it continues to be an attractive class for us. So we would not invest there if it were not capital efficient.

And even if you have to deliver almost like 100% risk capital to beg this kind of business?

So -- I may not have understood the question.

So even if -- so at this point, even if you have to put a large amount of SST capital behind it, you still see this as a capital-efficient asset opportunity?

We take into account clearly diversification that we have and to be frank, I'm not sure whether I can fully confirm, let's say, the number or the extremely high capital charge that you attach to infrastructure. I mean there are kind of standard model elements, if I'm not mistaken, for hedge fund, private equity, which are really high, but the infrastructure at least as far as I'm aware, is treated differently in our value.

The next question comes from Rene Locher from KBW.

Just 2 follow-up questions. The first 1 is on cash from it. I was just checking my model that in H2, cash remittance in the period 2016 to 2022 was between CHF 35 million to CHF 41 million. So my question is, should we expect a bit more cash transfer to the holding level in Q2, just up a little bit the CHF 0.8 billion you reported today? That's my first question. Second one, easy one, just on the vacancy. I was just wondering the drop in the vacancy rate from 4% to 3.5%. I guess this was mainly driven by the residential market.

Thank you, Rene. First, on the -- the question on cash remittance. I mean, structurally, we indeed have the largest share of the cash remittance. In the first half of the year, you know that typically the fees and the interest on intra-group loans and the like. So it's a bit difficult for me when you say CHF 35 million to CHF 41 million. There are so many flow going back and forth in terms of cash remittance. I think it's important that there is contribution in second half of the year coming. I find it now a bit difficult to give a number to that or comment. I think it's important there is a cash remittance also clearly expected for second half of the year. And by the way, we will provide an update on the amount of cash remittance at half year. We will talk about where we have actually upstreamed, how much cash from which business division. I think it's probably a good time to talk then about the cash remittance then. Let me at this point, again, what we mentioned at full year, we expect this growing cash remittance for 2023 and thereafter for the reasons we talked about a lot at full year. In terms of the reduction from the 4% to 3.5%, which is, by the way, also our expectation for the full year. I would say, it is driven by the successful reletting of house residential and office that we have achieved. And I would actually expect it probably even more office-driven because residential is typically already substantially lower than the other segments.

The last question for today's call is from Peter Eliot and this is a follow-up, from Kepler Cheuvreux.

I had actually 2 follow-up points, please. The first one, you mentioned the topic of reserve releases. So I was just wondering if I could just clarify. I mean, obviously, interest rates are lower today than they were when you reported your full year results or at the end of the year themselves. I just wanted to confirm. It didn't sound like there was any change in your view of the future likely reserve releases. But I just wanted to confirm that, that was the case, given that we are slightly lower than we were then. That was the first one. And the second 1 was just going back to the holdco cash. Apologies, I think I missed it when you said CHF 0.8 billion. But just wanted to check that number is basically after the cash you received to date and after paying the dividend. I just wanted to check.

Absolutely the CHF 0.8 billion is a position as of today that I've mentioned. So after payment of the dividend and receiving of the intra-group dividend as you said. In terms of the reserve releases, it's no change to the mechanics, to the outlook and to what it means, to what we said that at full year. You may recall that we said the big part of reserves and the strengthening are in, what I would call, this traditional opt where driver is the outlook, let's say, that the long-term view on the reinvestment expectations. That's where the relevant drivers are coming from. So I can confirm we mentioned that full year.

There are no more questions from the phone.

Thank you very much for your interest in Swiss Life and for your questions. I wish you a nice day, and bye-bye.