Swiss Life Holding AG (SLHN) Earnings Call Transcript

Ladies and gentlemen, welcome to the Swiss Life Q3 2026 Trading Update Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is 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 2026. I will start with an overview and our group CFO, Marco Gerussi, will give you more details. Swiss Life had a strong development in the first 9 months of the year. I'm particularly satisfied with the growth in our fee income across all divisions and businesses, meaning asset managers, owned IFAs and owned and third-party products and services. Fee income -- fee and commission income increased by 8% in local currency to more than CHF 2 billion. Gross written premiums increased by 8% in local currency to CHF 17.4 billion, driven by an exceptional contribution from Switzerland. Swiss Life Asset Managers reported net new assets of CHF 8.5 billion in third-party asset management compared to CHF 15 billion in the particularly strong prior year period. The SST ratio was estimated to be around 205% at the end of September 2026. In the first 9 months, we continued on our growth path, and we are well on track with our Swiss Life 2027 program. With that, I hand over to Marco.

Thank you, Matthias, and good morning. I'm pleased to take you through our strong performance for the first 9 months of the year. As usual, all figures are unaudited. Numbers for the group are reported in Swiss francs, whereas for each business division and growth rates, these are stated in local currency. Let me start with our business division, Switzerland. Premiums increased by 15% to CHF 9.4 billion compared with 4% growth for the market. Premiums in group life grew by 17% to CHF 8 billion, while the market increased by 4%. Single premiums increased by 33%, with approximately half of it due to higher premiums from existing and new clients and the other half from an exceptional single premium contribution from a pension foundation. Periodic premiums were at the prior year level. Assets under management in our semiautonomous foundations increased to CHF 8.7 billion from CHF 8.6 billion at half year 2026. Premiums in Individual Life grew by 4%, in line with the market. Single premiums grew by 13%, driven by the unit-linked business. Periodic premiums declined by 1% Fee and commission income was up by 9% to CHF 289 million, mainly due to higher income from unit-linked and investment solutions for private clients. Turning to our French, German and International business divisions, which all report in euros. Let me start with France. Premiums were up by 4% to CHF 6.1 billion. The market grew by 6%. In our Life business, premiums were up by 6%. The market grew by 7%. The unit-linked share in our life premiums increased to 72% compared to 66% in the prior year period and the market average of 39%, reflecting our unchanged focus on unit-linked solutions. Overall, we generated Life net inflows of CHF 1.9 billion. Total market net inflows amounted to CHF 47.6 billion. In Health and Protection, premiums were 4% lower, reflecting our continued focus on profitability. Market growth was at 6%. P&C premiums grew by 1%. Fee and commission income rose by 12% to CHF 493 million, driven by higher unit-linked fee income resulting from higher average unit-linked reserves due to net inflows and financial market performance. Structured products contributed further to the increase. I continue with Germany. Premiums were up by 2% to CHF 1.1 billion, driven by higher periodic and single premiums. The market declined by 3% due to lower single premiums. Fee and commission income rose by 17% to CHF 744 million. The acquisition of Telis Group was completed on July 1, 2026. Fee income includes Telis for the first time with a contribution of CHF 45 millionfrom July to September. Adjusting for TELIS growth was 10%. Looking at the financial advisers and excluding TELIS, the number increased by 7% to 6,385 million. The onboarding of TELIS is progressing well and including the 1,862 advisers from TELIS, the total number of financial advisers was around 8,250. Turning now to international. Premiums decreased by 7% to CHF 1.5 billion due to lower premiums with private clients only partially offset by higher premiums with corporate clients. Fee and commission income increased by 2% to CHF 286 million, driven by higher income from owned IFAs. Adjusted for the transfer of the network business to Generali earlier in the year, growth was at 5%. Let's move on to asset managers, which reports in Swiss francs. We have expanded our disclosure and as in Q1 2026, we additionally disclosed total income, which consists of commission income and other net income, including real estate project development. Asset Managers total income rose by 6% to CHF 789 million, driven by TPAM. PAM was flat. In the TPAM business, total income increased by 10% to CHF 526 million. Recurring commission income was up 9%, with nonrecurring commission income also contributing positively. This is partly offset by lower other net income from real estate project development of total nonrecurring income in TPAM, meaning commission income and other net income from real estate project development was 12% compared to 11% in the prior year period. As mentioned previously, for each year 2026 and 2027, we expect to achieve a share of around 25%. We have a strong visibility on our project development pipeline and projects are progressing well, and we are reaching relevant milestones. Net new assets in our TPAM business amounted to CHF 8.5 billion compared to exceptionally high net new assets of CHF 15 billion in the prior year period. We saw continued strong inflows in with real assets contributing EUR 2.2 billion. Further inflows were driven by equity and money markets. Assets under management in our TPAM business increased from CHF 146 billion at year-end to CHF 161 million due to the mentioned inflows and performance. Turning to our investment results. Direct investment income was $3 billion CHF 0.7 billion lower than in the prior year period. The non-annualized direct investment yield was 2.1% compared to 2.2% in the prior year period. Net investment income increased to CHF 3.4 billion due to the net capital gains driven by equities, infrastructure and FX hedging effects. The net investment yield was 2.5% compared to 2% in the prior year period. Real estate continues to be an attractive and important asset class for backing our long-dated liabilities in the context of our disciplined ALM. 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 around 0.5% compared to 0.4% at the half year. This is driven by our Swiss real estate portfolio and partly offset by negative fair value changes outside of Switzerland. For the full year 2026 and the entire real estate portfolio, we expect fair values to be at the prior year level. The continued positive contribution from the Swiss real estate portfolio is expected to be offset by negative fair value changes outside of Switzerland, particularly in France. Fair values in France are under pressure due to higher French interest rates, various good tenant demand support rent levels. Across our total real estate portfolio, vacancy rates improved by 0.2% to 2.9%. Moving to solvency, liquidity and payout. At the end of the third quarter of 2026, the SST ratio was estimated at around 205%. And with this approximately 10 percentage points below the June 2026 level. Almost half of the decrease was driven by the full deduction of the CHF 250 million share buyback and by the goodwill recorded for the acquisition of TELIS. About 1/3 was due to the adverse market development, reflecting the widening of the interest rate differential between the Swiss franc and the U.S. dollar and higher French government bond spreads. The remainder mainly relates to the worst labs experience and the lowering of the UFR. At the end of the third quarter, holding liquidity is at $650 million. Our ongoing share buyback of CHF 250 million is well on track and will run until the end of March 2027. As of November 9, '26, we had repurchased shares worth CHF 54 million. With that, let me sum up. We are pleased with the strong performance of Swiss Life in the first 9 months of 2026. We grew both our fee and our insurance businesses and our continued strong inflows in our third-party asset management business. Our SST ratio continues to be at the high level. We are well on track to achieve all of our group financial targets for Swiss Life 2027. And with that, 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 Michael Huttner from Berenberg.

Fantastic. A very clear presentation and good outlook. But I have 2 negatives and 1 positive question. First one is the holdco liquidity to me sounds low. I had a memory but probably wrong at the half year, you'd worth 1,100 maybe, but probably completely wrong. So 650, I just can't maybe explain the moving parts would be really helpful. The second 1 is on the SST ratio. So I was actually really disappointed to think that's not good, but it's not that it's you're well above. But what's -- if real estate drops so from whatever, 0.5% now to 0 at the end of the year. Does that mean that the SST will drop further? And what does the outlook look like here? And then the positive is the really bigger, much more important. You said, I think, I noted reaching relevant milestones in project development. I just wondered if you can expand on that because that sounds really exciting.

Thank you, Michael. I think Marco can take the holdco cash question. I will go with the SST and milestones. .

So the number you have in mind, that was the number, the EUR 1.1 billion we've reported by half year. But I also said during the presentation, and I think it was on the first of September, that as of today, at the first of September, it was at EUR 650 million. That is because we have issued a new bond. We used part of it's for the acquisition of the TELIS Group and the remainder we used within our divisions for financing future growth. So the number already in the last presentation was and now at the same level. So that's the missing part in between.

Then let me move to the SST ratio. As Marco said, I mean, almost half of the reduction that we have now reported between half year and Q3 relates to 2 big, let's say, business decisions that we communicated, the buyback that we've announced and the acquisition of TELIS, the goodwill of which is not eligible under SST have made up almost half of this reduction and the other things I think Marco elaborated in great detail. Now the reduction of the 0.5% fair value changes that we had until Q3, if that turns, as Marco said, in our expectation to 0 at the year-end. And if we also include, let's say, the effect of the BVG minimum rates that was communicated a couple of weeks or a couple of days ago, we have to say that the SST is slightly below the Q3 number, but as I said, slightly below. And given the tile market, we do not know what happens until year-end, obviously. But if we include those 2 effects mentioned, this has a slight reduction as a result. And the milestone in the project development, we have a pipeline which is really diversified across usage is different sizes and what have you. And depending on, let's say, the progress of each and every individual project, there are some milestones that are relevant. And if we look now at the entire pipeline we have and Marco said it, we are progressing really well and reaching those milestones, then lead here and there to revaluation. So to additional fair value changes. And I think we mentioned that half year already with that, we are clearly of the opinion to go for 25% of nonrecurring income in the TPAM. So we really have good visibility there.

Is there -- I know you don't talk about it, is there a particularly large project where we can say, oh, this is really good or is it not suit ones?

Look, I mean, we have in our pipeline, large projects and smaller projects. There is one we have talked about at the last Investor Day. And I think even at the one before that, this Frankfurt West side. This is clearly one of the bigger projects, but we also have many relatively small and some even small projects. So that's, I think, the important part. We do not rely on one single thing, but we have a pipeline that is nicely diversified.

The next question comes from Farooq Hanif from JPMorgan.

My first question is really around digging into the SST movement. So you mentioned several things, some of which are forecastable, some of which are not. So if we look at, for example, lapse rate and UFR and interest rate differential, I mean, can you give us some sort of guide to how material these things were so that we can get a sense going forward about how to model this. And on the interest rate differential, has anything material also happened between now -- well, sorry, between 30th September and now that we should take into account when we're making our forecast? My second question is understanding your buyback policy. So I think in the past, we were used to -- if your SST ratio is above your strategic ambition range, then that really is a good place for buybacks continuing but then you've introduced also this holdco constraint. And as in the previous question, that constraint seems to be quite a large 1 at the moment compared to your target levels. So I'm just kind of wondering are you happy for the market to consider buybacks to be really kind of an exceptional thing that you consider? Or do you think, given your solvency position, you're in a really good position to continue buybacks while once remains above 190? And really sorry for the easy questions, but on the mix of net new assets, my third question in TPAM. Can you give us an idea of that mix? So it sounds like it's slightly higher margin. than previous quarters, but if you could tell us a little bit about the mix in 3Q, that would be helpful.

Okay. Let me start with the capital management question. Marco will then go to the A mix and also give some more details on the SST. Now in terms of the buyback policy, I think we have establish the current framework, which we have put on paper, I think at the last Investor Day, many, many years ago, when it really, as you say, consists of 2 important elements. One is the SST being above the ambition range and also the holdco cash. This is nothing new. And this comes on top of, let's say, the attractive distribution in terms of dividend where we also have our policy put down at the -- late down at the Investors Day. So there's actually nothing new that we can talk about and just confirm what we said at the Investor Day last time and reiterated a couple of times since then. So nothing new. Nothing has changed in terms of the buyback policy. And by the way, we have on ongoing now since the beginning of October.

Good. And to the SST, I mean, as we said during the presentation, and Matthias also mentioned, almost half of it is due to the 2 effects of the share buyback and the goodwill and then we said indeed that around 1/3 is coming from market movements, which mainly relates to the interest rate differential, the Swiss franc to the U.S. dollar and to some extent also on the higher and French government spreads. So that was the main part of it. And the other elements we've mentioned, that's a smaller part of the movement. So the adjustment of the ultimate forward rate the UFR and some labs experiences, which we, by the way, already considered in the models under the IFRS regime. So in the CSM. So some of them are already considered. So that's an update on that. As of today, these movements, in particular, the rate differentials has no impact on the numbers. So that's something we can also say in addition to what we already said during the presentation.

And maybe to add on that, we appreciate the fact that there is some questions every now and then around the impact of those interest rate differentials, and we're considering to introduce, let's say, a meaningful sensitivity around interest rate differential for the full year disclosure. And as you know, and I think that's important here, it's about the differential at long maturity, so let's say, at 10 years or something like that. That's what is driving this sensitivity. But as said, we're considering to expand the disclosure here.

And on the M&As and the split of NNAs. So it's EUR 6.2 billion in securities, mainly equities that were a large part of the inflows. But on the other side, billion real assets is CHF 2.1 billion is in real estate and CHF 0.1 billion is infrastructure. So you're absolutely right. the share of the real assets increased compared to the half year, half year reporting. And I think I allow myself answer to say that we are positive on the outlook on the NNAs and the realist something we also see in the overall number of assets under management. So the CHF 11 billion, I think that's quite a good progress given the NNA as well as the good performance.

[Operator Instructions] Our next question comes from Kaya Batikan from Kepler Cheuvreux.

I have one question related to the German fee income. The German fee income grew excluding TELIS. Can you give us some feel for what is driving the growth?

Yes. The fee income in Germany, so it's mainly the larger part of it, let's say, around 3/4, I would say, is that driven by the own is, so the distribution entity where TELIS now in addition comes into play, giving them the overall number of the 17% growth. And the remainder is coming from the insurance business. This is mainly unit-linked business in the insurance, but the main driver are the owned IFAs of the growth. year.

We have a follow-up question from Michael Huttner from Berenberg. .

Fantastic, I have 3, and being very ticky. So the BVG rate, could you -- I completely missed that. I mean I know you said it, but I missed the change if you could talk about that. The second tells CHF 45 million number. Can you give us a feel for what you expect? And it felt a little bit low to me, not very low but a touch low, but maybe they were kind of disrupted due to the ownership change or whatever. But any feel for how TELIS is expected to grow? And then the final, given I mean these are actually good numbers, right? The fees of spectacular and you've got lovely premiums and these are good. And as you say, the real estate valuation is actually the rental income, which goes into profit. Does this mean we should be thinking that profit is better than you had previously thought?

Let me start with the BVG. Marco can say a couple of words on TELIS and on the profit, by the way, which we don't guide anyway. The BVG rate, this is set by the Federal Council once a year. It was increased from 125% to 2%. And Clearly, this is what we, as an insurance association we, as part of this insurance association do not think is the right way to go because the high the guarantees conceptually the lower, let's say, than expected long-term returns. I think that's basic economics. On the other hand, we also have to notice that it affects only a relatively small portion of our entire business. We have essentially CHF 16.5 billion worth of technical reserves that are subject to that minimum interest rate. So in practice, if I look into the day-to-day management of the business, we do not expect that to be a relevant, let's say, restriction. However, in the SST, it has a certain impact, and this is the one that we have already taken into account when we talked about the SST as of today. With that, I hand over to Marco for the remaining 2 questions.

For TELIS, if you recall what we have said during the, let's say, presentation of the acquisition is that it's around EUR 200 million of fee income coming now into the German business, making this up together in EUR 1 billion overall. If you split that by 4, I think there's 45. -- this is fully in line with the presentation and information we gave. I think important to us is that the onboarding is progressing pretty well. We are quite satisfied, and I don't repeat all the good reasons culture fit, the strategic fit, the financial fit I think is really a good very good acquisition, which is, as I said, progressing well. And also the 1,800 advisers I've mentioned during the presentation, which are now onboarded and contributing together with the already existing more than 3,000 advisers to the result in Germany think that's proof of itself. So it's progressing according to plan. I would not worry about that.