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

Ladies and gentlemen, welcome to the Swiss Life Q3 2025 Trading Update Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions]. At this time, it's my pleasure to hand over to Matthias Aellig, Group CEO 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 9 months of 2025. I will provide an overview of today's key messages; and our group CFO, Marco Gerussi, will give you more details. The first 9 months of 2025, Swiss Life increased its fee and commission income by 3% in local currency to CHF 1.9 billion. Gross written premiums, fees and deposits received increased by 3% in local currency to CHF 16.3 billion. Direct investment income grew to CHF 3.1 billion, which corresponds to a non-annualized direct investment yield of 2.2%. Swiss Life Asset Managers reported very strong net new asset inflows of CHF 15 billion in the third-party asset management compared to CHF 3.4 billion in the prior year period. The SST ratio was estimated to be around 205% at the end of September 2025. I am pleased with the business development in the 9 months of 2025, which reflects the continuation of our operational performance in the first half of the year. We grew both the insurance and the fee businesses with asset managers posting a strong growth of recurring fee income in TPAM, next to strong net new assets. With that, I hand over to Marco.

Thank you, Matthias. Good morning, ladies and gentlemen. I'm pleased to walk you through our 9 months 2025 trading update. As usual, all figures are unaudited. Figures for the group are reported in Swiss francs and for each business division in local currency. Growth rates are also stated in local currency. Let me start with our segment, Switzerland. Premiums increased by 2% to CHF 8.2 billion. The life insurance market was flat. Premiums in Group Life grew by 2% to CHF 6.8 billion, while the market decreased by 2%. Periodic premiums declined by 2%. Single premiums increased by 6%, driven by higher premiums from existing clients and new business. Assets under management in our semiautonomous foundations were at CHF 8.1 billion compared to CHF 7.8 billion at year-end 2024. Premiums in Individual Life grew by 2%. The overall market was up by 4%. Periodic premiums increased by 1%. Single premiums grew by 4%. Fee and commission income was up by 5% to CHF 265 million, mainly due to higher income from unit-linked and mortgage businesses as well as investment solutions for private clients. Turning to our French, German and International segments that all report in euro. Let me begin with France. Premiums grew by 4% to EUR 5.9 billion. In our Life business, premiums increased by 6%. The overall market rose by 9%. Unit-linked share in our life premiums remained at a high level of 66% compared to the market average of 38%. We generated Life net inflows of EUR 1.9 billion. Total market net inflows were at EUR 39.4 billion. Health and protection premiums grew by 1%, driven by price increases. The market increased by 5%. P&C premiums declined by 1%. Fee and commission income rose by 5% to EUR 439 million. Unit-linked fee income grew based on higher average unit-linked reserves. Income contribution from structured products remained at a pleasing but somehow lower level compared to the very strong prior years. I continue with Germany. Premiums grew by 2% to EUR 1.1 billion, driven by modern, modern traditional and disability products. The market increased by 9%, driven by higher single premiums. Fee and commission income rose by 5% to EUR 634 million, driven by both a higher productivity at owned IFAs with a marginally lower number of financial advisers and by a higher contribution from the insurance business. As a reminder, the prior year fee income included benefits from a specific market opportunity in the context of governmental inflation compensation amounting to around CHF 25 million. Turning now to International. Premiums increased by 8% to EUR 1.6 billion due to higher premiums with private clients. Premiums from corporate clients slightly decreased. Fee and commission income declined by 1% to EUR 282 million. Higher income from owned IFAs was more than offset by lower income with corporate clients, in particular, from elipsLife. Let's move on to Asset Managers, which reports in Swiss francs. As usual, in Q1 and Q3, we report on commission income, which does not include other net income from real estate project development. Asset Managers commission income rose by 3% to CHF 719 million. In our PAM business, commission income increased by 1% to CHF 264 million. Higher recurring income was partly offset by lower nonrecurring income. In our TPAM business, commission income grew by 4% to CHF 455 million. This was driven by a strong increase of 6% in recurring income due to a higher average asset base. Nonrecurring commission income was below the prior year period. To make figures comparable to half and full year disclosures, the share of total nonrecurring income for TPAM, meaning commission income and other net income from real estate project development was 11% of total TPAM income. This compares to a very high share of 31% in the prior year period. As mentioned at the 2024 Investor Day, we expect to achieve a share of nonrecurring TPAM income of on average around 25% over the period from 2025 to 2027. For the full year 2025, we confirm to expect this share to be also around 25%, and this expectation is based on progress we have achieved in our project development pipeline. Net new assets in our TPAM business increased to CHF 15 billion compared to CHF 3.4 billion in the first 9 months of 2024. We saw continued strong inflows with a share of about 60%, driven by our equity and bond-related index business, similar to what we have seen at half year. Inflows in real assets grew to CHF 1.3 billion. The remainder came from active mandates in bonds, money market and multi-assets. Assets under management in our TPAM business were at CHF 142 billion compared to CHF 125 billion at year-end of 2024, driven by the positive net inflows and performance. Turning to our investment result. Direct investment income increased by CHF 49 million to CHF 3.13 billion compared to CHF 3.08 billion in the prior year period, driven by higher income from infrastructure, real estate and equity investments, which was partly offset by lower income on bonds, including negative FX translation effects. The non-annualized direct investment yield was stable at 2.2%. And as you know, real estate continues to be an attractive and important asset class for backing our long-dated liabilities. We hold real estate because of the regular rental income it provides and not because of appreciation. Real estate fair value changes were positive at 1.0%. This is a non-annualized figure. For the full year 2025, we expect further positive real estate fair value changes driven by our Swiss real estate portfolio. Vacancy rates remained unchanged at 3.1% compared to year-end 2024. Moving to solvency, capital and cash. At the end of the third quarter of 2025, the SST ratio was estimated to be around 205% and therefore, at June 2025 level. In Q3, we had positive contributions from equity and real estate market developments and the issuance of CHF 250 million of hybrid debt. This was largely offset by lower interest rates in Switzerland and the widening of interest rate differentials at longer maturities. With a ratio of around 205%, we are well above our ambition range of 140% to 190%. Liquidity at holding at the end of September 2025 amounted to around CHF 0.85 billion. Our CHF 750 million share buyback is well on track. We repurchased shares worth CHF 466 million as of the 7th of November 2025. The program will run until May 2026. Let me sum up. We are pleased with the performance of Swiss Life in the first 9 months of 2025. We expanded both our insurance and fee businesses. Moreover, net new assets in our third-party asset management business were very strong. And finally, our SST ratio also remained at a strong level. With regard to our Swiss Life 2027 program, we continue to see ourselves to be on track to achieve all of our group financial targets. With this, I hand back to you, Matthias.

Thank you, Marco. We will now open the Q&A session. Who would like to start?

[Operator Instructions] Our first question comes from David Barma from Bank of America.

Firstly, on TPAM, please. The fee margin came down a little bit in the third quarter. Can you talk about that, please, and also about your confidence in achieving 25% of nonrecurring income for the year? It would be very helpful if you could share some color on the mix between transactions, project development, revaluations, et cetera, within that 25%. And then secondly, on solvency, it would seem the interest rate differential had a negative impact in Q3, and I think it widened again in Q4 so far. Are you able to give us a rough sensitivity for the impact of that on your SST ratio, so that we can better prepare for it, please? And then lastly, on France, the fees were really strong in the quarter. Could you please come back on the comments you made in the opening remarks, Marco, on the sales trend there and how both the structured products and unit-linked sales are faring?

Okay. I think Marco will give the answer on the SST and on France, and I will then, in the end, say a couple of words on TPAM.

David, let's start with the question on the French business. And as you know, also from earlier reporting, we had very strong inflows in structured products, in particular, in the prior year period, and we also flagged that to be expected on a still high and pleasing but rather slower growing level in the current year, and now in this year's year-to-date development and also in the first 9 months. Unit-linked was the main contributor to the increase, to the very positive increase in the fee income in France because of new business and also performance on the underlying reserves, and structured products still at, as I said, pleasing level, but rather stable, not growing that much as we have expected. In terms of the SST, I think here it's important year-to-date, the interest rate differential, and I'm now particularly speaking about the differential between the Swiss franc and the U.S. dollar, has positively tightened and positively impacted our ratio. But from half year to Q3, this interest differential widened a bit. So that was a one of the more negative contributors to our ratio. We do not disclose a very detailed or a detailed sensitivity on that. But if you get the sensitivity we disclosed and then the remainder, you might have an idea of those movements also on the ratio. But overall, as I said, market developments in real estate and equities were positive. Also the hybrid debt helped a bit. And on the other side, the Swiss interest rates -- the level of the Swiss interest rates and the differential I just mentioned on the more negative side, leading then to a stable ratio of around 205%.

And to come back on the question on TPAM, maybe first on the flows on the NNA, I mean, we confirm what we said in the previous disclosures that for the full year 2025, we expect NNAs in the upper teens. So this is quite an uptick from the mid-teens that we now have reported. And as usual, we say that in view of the pipeline of the business that we have, and in terms of, let's say, the composition, I think that's what you were referring to in the numbers that we've reported in the CHF 15 billion year-to-date, around 60% of that relates to index business. This is essentially in equities and bonds. And yes, this has a lower margin than the rest, but we are very happy that we have entered that business. We're pricing that business at market levels. And for us, it's kind of on top business that allows us also to see clients we haven't had an offer for previously. You can also see that, by the way, if you compare that with our prior year figures. Now in terms of the nonrecurring income for the full year 2025, I think Marco was very clear. We expect around 25% also for the current year. We also again confirm previously mentioned expectation that we will be there. We do that, again, looking at the pipeline, the progress we have achieved. And in terms of, you know, the rough shift, I mean, we will clearly see quite an increase of the other net income that relates to project development. This, as we also said at half year, will most likely be noncash. So those will be revaluation gains. And what is also important now we always talk quite a lot about those nonrecurring things, and those are important elements. But as we've also mentioned, I mean, the recurring income in TPAM was also increasing by at least 6 percentage points. I hope this has clarified a bit of your questions.

It has. Yes.

The next question comes from Michael Huttner from Berenberg.

I had 3 questions. One is just a clarification. You mentioned on NNA flows, high teens versus mid-teens. I wonder -- I don't know what that means. Is it percentage? Or is it billions or something? I didn't understand that, I'm sorry. And then on the cash, can you give us a feel for where we might land at the year-end? Because you've got a little bit still of -- I mean, the buyback is continuing, so it's clearly -- but just to get a feel for -- because I seem to remember your target range was to be above CHF 700 million, but this is really old memory. So any help on this would be fantastic. And then the other question is on the real estate revaluation. So clearly, you're optimistic for the full year. I was actually hoping -- I was a bit greedy, I'm afraid, 1.1% at 9 months and 1 is a nice figure. But I just wondered whether you can give us a feel for where you think we might land at the full year?

Thank you, Michael. I'll clarify on the NNA, the cash goes to Marco, and I can say a word on the real estate at the end. The NNAs, I was referring to billions. So we had this CHF 15 billion at Q3. And for the full year, we expect a high teen number in billions.

On the cash, I mean, as of today, it's CHF 0.85 billion at the holding. Our comfort range, and we talked about that at the Investor Day, is between CHF 0.5 billion and CHF 0.7 billion. We have now, for the remainder of the year, I mean, the ongoing share buyback, a number between CHF 40 million and CHF 45 million each month. There is some fees upstreams coming in. And with that, I think you have an idea where we might land at the end of the year, which is obviously above our comfort range.

And in terms of the fair value change of real estate, I mean, as you said, we had this 1 percentage point that we reported year-to-date with the clear drivers of positive contribution from Switzerland. You may recall, we had 0.6%, I think, in the half year overall. And we also report stable valuations for the non-Swiss real estate. And what we have seen until now, I think it's fair to say, we expect that to continue for the full year.

So if I do the math, so 0.6% to 1%, would it be stretching it a little bit to hope for 1.5% or...

I wouldn't go into the details of the numbers, but the trend is what we expect to continue.

The next question comes from Farooq Hanif from JPMorgan.

I really only have one question, which is, could you just talk about the low interest rate environment that we're seeing in Switzerland in particular and how this may impact reserving and cash flow going forward, or if it has any impact at all?

Yes. That's for Marco.

We can confirm what we have said at the Investor Day and also at the reporting in between. I mean, for us, important is the yield on our portfolio and also the reinvestment. Reinvestment rate, we see both well above the levels we would consider to be comfortable for that. So we confirm levels and also the numbers of release. We have mentioned that the CHF 0.3 billion, 2/3 of it referring to the Group Life business where we have the policyholder share, just to keep that in mind. And the reminder, the CHF 0.1 billion is in Individual Life. There is also a smaller policyholder share and it's pretax, and that's something we also see to be continued.

The next question comes from Thomas Bateman from Mediobanca.

Could you just comment on -- thank you for the guidance on the 25% nonrecurring. How much of that was cash this year? I think you might have given the number, but I missed it. And if it is a little bit low on the cash side this year, what does that mean for cash remittance next year from Asset Managers or maybe even the year after? And then the second question is just really a follow-up on, I guess, the low interest rate reserve releases. The direct investment income yield is flattening, I would say. I guess we've had 2 periods of basically flat at 1.5% and 2.2% year-on-year. How would you expect this to develop going forward, I guess, especially given that the mortgage reference rate was cut at the end of last quarter?

I will start with the direct investment income, and Marco may take the other question on the project development. Now we have seen and we rather think about the direct yield in terms of millions. And as Marco said, we have seen it increase year-over-year by CHF 50 million. So I think that's something that we are really enjoying to see that the direct yield has, in millions, the investment income has come up. That's really positive. Going forward, with the prospect of this reference rate that now has been lowered twice in Switzerland, we expect a marginal impact from that, because there are a couple of things that entered the equation there. But for the full year '26, we expect, from this lowering of the reference rate, maybe CHF 10 million net effect of lower rental income. And please keep in mind, I mean, this effect is then subject to policyholder shareholder sharing as well. So we're not overly concerned about -- or we're not concerned at all with this lowering of the reference rate.

And on the 25% nonrecurring and the project development, I mean, basically, we see over time -- and these projects develop and they take many, many years, there is fair value changes underway. And once we exit, we sell, then there is the cash flowing in. We, let's say, estimate, a rough estimate is 3/4 being noncash this year. And in terms of the cash, I think that's important in the Investor Day and not in our plan for Swiss Life 2027 and the target for Asset Managers, we took that into consideration. And what we've set as a target and what we said there, I mean, that already incorporated that. So we are still well on the way to achieve those goals. So there's no direct link in between.

Just -- I think you said there was 3 quarters noncash last year as well and then 3 quarters noncash this year. To me, that feels like you're trending a little bit below kind of the normal run rate. I guess I'm looking at the conversion of cash remittances for Asset Managers. When do you expect that to kind of inflect? Because as you say, over time, they should trend to the same number, right? So have you got any kind of maybe key projects in mind or time lines in mind when those cash remittances will step up again?

Yes. I mean, it's fair that in prior years, there were higher shares of cash, maybe it's a bit lower compared to those years. We always have the overall portfolio in mind. There is quite a number of projects, larger projects, smaller projects. And with that in mind, we see over time, there is quite, let's say, an averaging of that, but there is always higher numbers, lower numbers, because it depends on the individual project. And when we exit and there's even situations when we believe it's not the right moment in time to exit, so we take that and, let's say, take the rental income before we exit them at the price we believe it's the best offer. So there is ups and downs or plus and minuses. I think that's better averaging over time depending on the individual project. That's why the pipeline and the portfolio behind it that gives us visibility on that.

The next question comes from Michael Huttner from Berenberg.

I was curious on Germany. The adviser numbers are a little bit lower. Can you tell us a little bit more what's happening there? I think I seem to remember there are 2 kind of sets of advisers. There's a kind of big pool and then there's those which are actually converted. And so it gives you -- I think it allows you to see a little bit forward what may be happening. And then the other question is -- you're being so helpful, so I'm kind of pushing my luck a little bit here. On the fees, so it was nice. For me, it was a beat 9 months, even though the project development. Well, they excluded anyway in at 9 months. But it feels like the unit-linked portion or the kind of Asset Management portion of it is doing a little bit better than I had hoped. How do you see that developing over the rest of the year? Can we still be hoping for a fee number of, I think, it was 5% or something at the 9 months?

I think Marco will take the first question on Germany, and I'd say a couple of words on the fee income afterwards.