Helvetia Baloise Holding AG (HBAN) Earnings Call Transcript

Ladies and gentlemen, welcome to the full year results 2022 conference call and live webcast. I am Alice, 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's my pleasure to hand over to Mr. Philipp Gmür, Group CEO. Please go ahead, sir.

Thank you, madam. Ladies and gentlemen, welcome to our analyst conference call on the full year results 2022. Within the next 30 to 40 minutes, we would like to go through the detailed information on our business development and the key financials of the reporting period. Let me first give you a short introduction and overview. Then afterwards, I will hand over to our Group CFO, Annelis Lüscher Hammerli, who will go through the financial figures. Then I would like to give you an update on the implementation of our strategy, helvetia 20.25. After my presentation, Annelis Lüscher Hammerli and I will be pleased to answer your questions, as always. Now I ask you to turn to Slide #4 with the title, Highlights at a glance. Helvetia looks back on a successful 2022 financial year. I would like to highlight 3 aspects of the past year in particular: first, our strong core business; second, our resilience of the balance sheet and the business model; and third, to talk about our growth opportunities. Let me start with our strong core business, which backs the sustainable dividend. Helvetia's business volume grew by 2.6% at constant foreign exchange rates. The main growth driver was the nonlife business, broadly supported across all segments and all lines of business. We are also very satisfied with the development of the technical results, IFRS results of CHF 614 million, highest net income ever recorded by Helvetia. What are the reasons for that? First, the technical performance. And second, of course, we also benefited from the sale of Sa Nostra Vida. On this basis, we are proposing to the AGM a dividend increase by CHF 0.40 per share to CHF 5.90. At the same time, we are increasing our cumulative dividend ambition until the end of the strategy period by 10% from CHF 1.5 billion to CHF 1.65 billion. Second, our reinforced resilience through financial strength and diversification has improved once again. As of the beginning of January, the estimated SST ratio remained at a high level of over 300%. At the same time, we could improve our business mix through the sale of Sa Nostra Vida. In the meantime, our nonlife is even more important than it used to be before. All that confirms the resilience of the business model and of the balance sheet. Thirdly, we are seizing growth opportunities as part of the helvetia 20.25 strategy. One of the highlights is that the fee business is performing strongly. The strong growth is a real pleasure. And at the same time, the fee business already contributes almost 5% to the group's net income, more on this later from Annelis Lüscher Hammerli. As I said before, we also increased the share in Caser. This allows us to benefit even more from the profitable development of Caser in Spain. At the same time, the nonlife business is gaining more importance within the whole group. Furthermore, we made selective acquisitions in growth areas. This includes, for example, the expansion of the health and care ecosystem in Spain. Let me conclude. We successfully grow within the last few years, and this successful growth goes on and will be continued. More on the strategy implementation at the end of the presentation. For now, I would like to hand over to our CFO, Annelis Lüscher Hammerli, who will present the key financial figures. Please go ahead.

Many thanks, Philipp. Also from my side, I would like to welcome all of you to our conference call today. Within the next 25 minutes, I will give you more detailed information on our financial performance in 2022. We will use the short version of the presentation for this conference. The full slide deck, as always, with additional information is available on our website. Let's start with an overview of the key figures of Helvetia's performance in 2022 on the next 2 slides. Let's start with Slide 6 -- no, sorry, Slide 5 (sic) [ Slide 6 ]. The full year '22 results demonstrate that Helvetia is well on track to achieve its strategic financial targets. In a challenging environment, this once again proved the strength and resilience of our business model. Helvetia generated a strong IFRS result after tax of CHF 614 million. This corresponds to a return on equity of 11%. This is at the upper end of our target range. That success was based on a persistent robust technical performance in both nonlife and life and supported by a one-off gain from the sale of Sa Nostra Vida. In line with our strategic ambition, fee business continued to grow significantly. Fee and commission income increased by 12.4% at constant exchange rates to CHF 377 million, meaning that we have achieved our target of generating fee income of more than CHF 350 million. Fee business contributed roughly 5% to the group's net income, if we exclude the one-off gains from Sa Nostra Vida. At 94.7%, our combined ratio is on a good level, in view of rising inflation and the number of NatCat events in the past year. This reflects the good quality and beneficial diversification of our portfolio in nonlife. We are working hard to achieve our target. Increasing profitability is key to us. Our progress is reflected, for example, in the improved cost ratio. The new business margin in life amounted to 3.3% and thus exceeded our target range, a fact that demonstrates our good positioning and successful focus on profitable growth in life business. The business volume was at CHF 11.1 billion. On a currency adjusted basis, this is an increase of 2.6%. Growth was driven by the nonlife business, which showed a strong organic increase of 9.4% at constant exchange rates. In the large majority of our country markets, the growth rate of our nonlife business was above market. We are thus further strengthening market positions in our profitable core businesses. I will give you more details on all these key performance indicators later. As you can see on the next slide, we are also well on track with regards to our financial targets on cost efficiencies and capitalization. And our strong results in 2022 are reinforcing our payout policy of increasing dividends. We made further strong progress on raising cost efficiencies last year. With cost efficiencies of CHF 91 million, we have almost reached our target of CHF 100 million. Nevertheless, we are continuing to implement several measures to increase efficiency in our operations in 2023 and ongoing. Helvetia's capitalization remains on an excellent level. This is demonstrated by the financial strength rating of A+ assigned by Standard & Poor's. Furthermore, our regulatory solvency measured by the Swiss solvency test continues to stay on an outstanding level. We estimate our Swiss solvency test ratio to be above 300% as of 1st of January 2023 and to have slightly increased since the end of June 2022. The strong development of our core business and our outstanding financial strength from the solid basis -- formed a solid basis for our payout policy of sustainable increasing dividends. We are also increasing the focus on optimizing the use of capital, which is continuously strengthening our long-term dividend capacity. And we have made a one-off gain of CHF 102 million from the sale of Sa Nostra Vida last year. Our shareholders should benefit from these successes. Therefore, Helvetia is aiming for an even more attractive dividend policy. For that reason, we are increasing our ambition for the strategy period until 2025 and now aim for a dividend distribution over 5 years of more than CHF 1.65 billion instead of CHF 1.5 billion. As a first step towards this, we propose an increase of the dividend by CHF 0.40 to CHF 5.90 per share for 2022. I will further elaborate on this later. Now let's go into the details. The next slide provides you with an overview of the net income after tax of the individual segments and business areas as well as its main drivers. Helvetia generated a strong IFRS net income after tax of CHF 614 million in 2022. With macroeconomic and geopolitical uncertainties, the market environment has been challenging. All the more the 2022 result demonstrates the stability and resilience of our broadly diversified business model. The strong result was based on very robust technical results in both nonlife and life and the one-off gain of CHF 102 million from the sale of Spanish life insurance company, Sa Nostra Vida. In nonlife business, the technical result increased compared to the previous year, proving the portfolio's earnings power. In a challenging environment, the nonlife business benefited from the high quality and strong diversification of the book, which is reinforcing its resilience. In the life business area, the margin after cost showed a remarkable increase. In particular, the savings and risk results were higher compared to the prior year. Thus in both business areas, nonlife and life, our core business proved to be profitable and resilient. The volatile financial market conditions in 2022 were reflected in the investment results. Therein, current income and the development of real estate were solid, real estate benefiting from further reduced vacancy rates, especially in Switzerland. Let's now have a look at the individual segments. In Switzerland, Helvetia recorded a solid result of CHF 420 million. Technical results in both nonlife and life increased compared to the prior year. In Swiss nonlife, a substantial increase of the technical result was based on 2 main factors. First, the claims environment was more stable compared to the previous year, which means we recorded a lower claims burden from natural events. And second, ongoing efficiency measures and scale effects due to the profitable growth had a positive impact on the cost side. In the life business in Switzerland, the margin after costs increased against the prior year. This was mainly driven by a stronger savings result, which benefited from a further decrease of technical rates. Net income of the Europe segment amounted to a strong CHF 269 million. The result in Europe was underpinned by a solid technical development in both nonlife and life business and benefited from the one-off gain of CHF 102 million from the sale of Sa Nostra Vida. Notably, Caser contributed a high CHF 176 million to the segment's net income, which includes the one-off gain from Sa Nostra Vida of CHF 102 million. In the segment's nonlife business, the portfolio remained very resilient in view of increasing inflation and the further normalization of claims frequencies after the pandemic. The profitable growth of the business was also reflected in scale effects on the cost side. In European life business, the margin after costs increased compared to the prior year. In particular, this was driven by a strong risk result due to a better technical development. Net income of Specialty Markets amounted to CHF 24 million. The claims development of the segment was characterized by a number of NatCats such as Hurricane Ian or floods in South Africa. In addition, temporary inflation effects had an influence. Based on its high diversification, the segment was able to absorb this effect and generated a positive technical result. Further, the technical results benefited from scale effects on the cost side due to the focused growth in an attractive hard market environment. The Corporate segment considerably improved its result to minus CHF 98 million. One of the main drivers was a strong technical result of the internal group reinsurance. It increased substantially after the group reinsurance have been impacted by elevated NatCat claims due to large storms in Central Europe in the prior year. Additionally, positive effects related to our own investment funds influenced the result including nonrecurrence of a one-off effect from the liquidation of a fund in 2021. Let me continue with the growth in business volume on the next slide. In 2022, Helvetia successfully continued to grow its profitable core business. We achieved a total business volume of CHF 11.1 billion. This equates to a currency-adjusted increase of 2.6% over the previous year. The growth was driven by a remarkable organic increase in the nonlife business of 9.4% at constant exchange rates. We were able to increase premiums across all market units and lines of business. Growth in nonlife was above market in almost all country markets. Helvetia was thus able to further expand its market shares in this business area. In Switzerland, broad-based growth across lines of business led to an increase in nonlife business volume of 3.3%. The main driver was traditional nonlife business, which was growing stronger than the market average, with a growth rate of almost 3.5%. Thus, Helvetia further strengthened its market position in its high-margin risk core business. In addition, our online insurer Smile also made a notable contribution, with a growth rate of 7.8%. In the life business in Switzerland, Helvetia continued to focus on capital-light products. We recorded a very successful development of investment-linked products in individual life. The growth in this line of business was over 18%. Business volume in Swiss group life was influenced by an ongoing market-wide trend of a shift from full insurance to semi-autonomous solutions. As expected, this effect resulted in a lower business volume compared to the prior year in the life business in Switzerland overall. Helvetia is well positioned in this environment with its semi-autonomous products and flat-rate risk solutions. As a result, the number of actively insured persons in Swiss group life increased in total compared to the end of 2021, despite the shift away from full insurance. In the Europe segment, Helvetia increased its currency-adjusted business volume in nonlife in all country markets and all lines of business. The nonlife business grew by 7% at constant exchange rates. With growth rates between 5% and 10%, the increase in nonlife business volume was above market level in most countries. This is demonstrating Helvetia's strong position in its core insurance business. In life insurance in Europe, Helvetia was cautious in underwriting traditional business in all country markets. Investment-linked business in Austria grew very successfully. Growth in Italy and Spain was influenced by nonrecurrence of high single premiums in the prior year. At the same time, the volume of periodic premiums showed significant growth in these markets. Despite this, total life business volume in Europe was lower compared to the previous year because of the effects I just mentioned. The business volume of the Specialty Markets segment, again, developed very positively. It grew by 20.2% at constant exchange rates. Growth in this segment was due to increasing new business, driven by our focused growth strategy in all 3 market units. In Specialty Lines and France, the international engineering business and marine were strong growth drivers. In active reinsurance, premium volume benefited from new property contracts, growth in new business lines, such as life or credit and surety reinsurance and favorable price effect. Increasing prices positively influenced the growth in Specialty Markets overall, [indiscernible] accounted for almost 40% of the segment's growth. Now let's turn to the next slide. Helvetia has not only profitably grown its core insurance business in 2022. This slide shows that we have also achieved a strong development of fee business, in line with our strategic ambitions to grow these types of income streams. The group fee and commission income rose by 12.4% at constant exchange rates to CHF 377 million. This was mainly driven by 2 factors: first, Caser has further expanded its health and care ecosystem in Spain. Growth in this field was driven by further targeted acquisitions and the rebound of demand after the pandemic. The second main driver was third-party asset management. The successful capital increase in our Swiss Property Fund provided the basis for additional fee income. For the first time, we are also disclosing a profitability figure for the fee business. The fee margin on the right side of the slide shows fee income after deducting the related costs. It amounted to CHF 31 million before tax in 2022. This demonstrates the attractiveness and profitability of our fee business. With this, we are moving to the net combined ratio in nonlife. At 94.7%, the net combined ratio was on a good level, slightly better than in the prior year. In a challenging environment of rising inflation, a number of NatCat events and the further normalization of claims frequencies after the pandemic, this proves the high quality and resilience of the portfolio. In particular, the stable earnings power of the portfolio is reinforced by its broad diversification and profitable growth. The resilience of our nonlife business is demonstrated by the solid current year claims ratio, which only slightly increased despite rising inflation and claims frequencies after the pandemic. Helvetia is closely monitoring inflationary trends and continuously reviewing and adapting the pricing of its nonlife policy. Although claims from NatCat reduced considerably in Switzerland, the NatCat ratio was higher than in the prior year because of an offsetting effect from NatCat events in Specialty Markets. Specialty Markets was impacted by a number of NatCat events such as Hurricane Ian or floods in South Africa. The development of reserves for claims from prior year is primarily attributable to the active reinsurance. It relates to an accounting shift because of the underwriting year logic the active reinsurance is using. This effect is largely compensated by a counter effect on the current year ratio. Excluding active reinsurance, the prior year development remained stable. The cost ratio improved considerably, mainly driven by the administration of cost ratio. This is attributable to the ongoing successful implementation of our efficiency measures. In addition, scale effects based on the growth in our profitable core nonlife business benefited the ratio. On the next slide, we will look at the new business margin in life. New business in the life business area developed very well in 2022. This demonstrates Helvetia's good positioning and successful focus on profitable capital-light business in life insurance. Helvetia has generated a new business volume measured by the present value of new business premiums of CHF 2.2 billion. In Switzerland, Helvetia increased the new business volume, both in individual life and in group life. Overall, the volume was below the prior year figure driven by the Europe segment. Here, the decrease was mainly due to nonrecurrence of high single premiums in the previous year. The main contributor to the volume of new business were investment-linked products. In individual life, the share of these capital-light products on new business further increased both in Switzerland and in Europe. New business generated in 2022 was very profitable, with the value of new business increasing by 17% despite the lower volume. Accordingly, the new business margin increased to 3.3% and thus exceeded our target range of 2% to 3%. The increase was driven by a more favorable business mix and higher interest rates. Let me now move to cost efficiencies on the next slide. We have again worked hard and made very good progress on cost efficiencies in 2022. We have realized an additional CHF 52 million cost efficiencies in the past year. Total cost efficiencies have reached CHF 91 million since the start of the strategy period. We have, therefore, almost achieved our target of raising cost efficiencies in the amount of CHF 100 million, but we are still continuing to implement several measures to increase efficiency in our operations. Notably, all segments contributed to this success. There have been 2 main drivers of efficiencies. First, we successfully implemented measures as part of the ongoing efficiency program, for example, in procurement or internal collaboration and organization. Second, the profitable growth we achieved in our core business resulted in efficiency gains. Both effects are also visible in the favorable development of our nonlife cost ratio. On the next slide, let me add a few remarks on our capitalization. Helvetia's financial strength remains outstanding. This is demonstrated by both our regulatory solvency measured by the Swiss solvency test and the financial strength rating assigned by Standard & Poor's. We estimate our Swiss solvency test ratio to be above 300% as of 1st of January 2023. More precisely, we expect the ratio to have slightly increase since June 30, 2022, when it was at 310%. This figure remains on an excellent level considerably above the minimum of 130% we have set ourselves. Our financial strength rating of A+ has been confirmed by Standard & Poor's in July last year. The target of A rating is therefore met. Our strong capitalization and the broad diversification of our business built a key asset of Helvetia. It reinforces our resilience, enables us to seize attractive growth opportunities and support a sustainable dividend payout. Let's have a look at the dividend development and proposal on the next slide. Helvetia pursues a payout policy of sustainably increasing dividends. The dividend per share is to increase steadily each year or, in exceptional years, remain at least at the previous year's level. In line with this policy, Helvetia has set itself the target at the beginning of the strategy period of distributing more than CHF 1.5 billion in dividends over the 5 years. In 2022, Helvetia made a one-off gain of CHF 102 million with the sale of Sa Nostra Vida. Helvetia intends to use this gain in a way that creates the greatest possible sustainable value. For this reason, part of it will be distributed to shareholders in the form of a higher dividend for the 2022 financial year. The rest will be invested in attractive growth opportunities along our strategy of profitable growth. Helvetia is also increasing the focus on efficient capital management. With the sale of Sa Nostra Vida and our targeted growth in less capital-intensive areas such as nonlife, investment-linked life and fee business, we are reducing the capital required to run our businesses. When investing in growth opportunities, we strive to deploy capital in areas with even more attractive risk-return profiles. And we are increasingly aligning the capital structure, capitalization and financial steering of our local business units according to economic considerations. All this continuously strengthen Helvetia's long-term dividend capacity. On that basis, Helvetia is thus aiming for an even more attractive dividend policy. We are, therefore, increasing our ambition for the strategy period until 2025 and setting a new target of distributing cumulative dividends of more than CHF 1.65 billion to shareholders. For 2022, Helvetia's Board of Directors will, therefore, propose a regular increase of the dividend to CHF 5.90 per share. This leads to a very attractive dividend yield of 5.5% as of end of December 2022. Now I will finish my part of the presentation with a wrap-up of the financial highlights of the reporting year on the next slide. The financial figures of 2022 once again proved Helvetia's stability and growth potential. This is underlined by 3 aspects. First, we have a strong, profitably growing core insurance business. Our nonlife business showed broad-based growth in 2022, which was above market in most countries. Both the nonlife and life business increased their technical results and proved to be very resilient in a challenging environment. Second, Helvetia's capitalization remains on an outstanding level, and we further diversify our business by region, business field, customer segment and income stream. This reinforces Helvetia's resilience and solidity. And third, we are continuously seizing attractive growth opportunities, for example, in capital-light fee business or in Specialty Markets, which currently experiences a very favorable market environment. All these positive developments encouraged us to increase our dividend ambition for our shareholders to benefit from the success of Helvetia. We now target the dividend distribution of more than CHF 1.65 billion over the strategy period. With that, I will now hand over to Philipp Gmür, again.

Thank you, Annelis, for presenting the financial figures of the year 2022. 2 years of our strategy implementation are completed. The halftime of the strategy period 2025 takes place in summer. However, we can already say that we are well underway to achieving our strategic goals. On the next slides, I will give you an overview of the most important milestones of the past year. Let's start at Slide #18. With the Helvetia 2025 strategy, we are pursuing the ambition to be the best partner for financial security and to set standards in customer convenience and accessibility. In order to achieve this ambition, we have defined 4 strategic priorities. This slide provides an overview of the most important achievements for each strategic priority. The first one, customer convenience. It is important to further simplify and automatize our customer convenience, our customer interfaces. Thus, we are focusing on front end and automation. An example of this is our chatbot Clara in Switzerland. We are concentrating on self-service services that are used regularly, for instance, change of address, proof of insurance for motor vehicles, notification of claims and general questions. We are very satisfied with the number of users. But of course, this number cannot be directly compared with other chatbot services. At the same time, it is important to enhance the customer experience. One example for this is the simplified registration for Helvetia Seguros customer portal. Artificial intelligence makes a comparison between the identification document and the face. Already around 1 in 10 clients is already using this new option. Apart from the customer convenience, we are focusing on the right offerings. We want to launch new attractive investment solutions. Thus, we integrated our real estate funds into a tranche product in Switzerland. There was a great demand for exclusive access to an institutional, however, unlisted real estate funds. Helvetia Property Invest and the regular tranche products Helvetia Value Trend generated a total premium of more than CHF 190 million last year. Furthermore, we are enhancing sustainable products. In engineering, we have established an underwriting team with a focus on solutions for renewable energies and environmental technologies. Thus, we are responding to the increased demand for such type of coverage. A specialized team is the basis to keep up with the advancing technical development. The third initiative and the third priority, of course, is to profitably grow our business. We were successful in strengthening our market positions. As Annelis pointed out, the driver was the nonlife business. Currency adjusted, we grew our portfolio in nonlife by more than 9%. Growth was above the market in almost all our country markets. Helvetia, therefore, was able to expand its market share successfully. Furthermore, we improved our business mix. We shifted even more to nonlife business by selling our share of the Sa Nostra Vida and by our increase of our stake in Caser, which accounts in the -- amounts, in the meantime, to 80%. The fourth strategic element is seizing growth opportunities. Let me give you 2 examples. We are going further with the internationalization of our online insurance company, Smile. Smile has been very successful in Switzerland, and therefore, we launched Smile in Austria. Last autumn, we started with household insurance products at the end of October. The operating business is going well, and our people in Austria are very enthusiastic about this initiative. The next step in Austria will follow by the end of 2023 by launching our so-called freemium model, which was a successful initiative in Switzerland. In addition, we are preparing our launch of Smile in Spain. A second example is our fee business expansion. Annelis already explained the impressive growth of over 12%. Our fee business contributes almost 5% to the group's net income. This shows the attractiveness and the profitability of this business segment. Finally, of course, I would like to mention that we have also made progress in sustainability. This is also recognized by the independent rating agency, MSCI. They raised our ESG rating from AAA to -- from -- sorry, from BBB to A last summer. Let me wrap up and give you a short outlook. Helvetia achieved a strong performance in the past financial year. For us, 3 aspects are key. First, we want to sustainably grow our dividend. Second, we want to prove also in the future that we have a resilient business model, a financial strength and a good diversification, which helps us develop our insurance group. And three, we are seizing different growth opportunities, and we want to do so also in the future. The year 2022 shows that we are well on track with regard to all those 3 aspects. On this basis, we want to create added value for all our stakeholders. This brings us to the end of the presentation. Annelis and I would now be pleased to answer your questions. Thank you for your attention.

[Operator Instructions] The first question comes from the line of Thomas Bateman with Berenberg.

Congratulations on some fantastic results, so you say record numbers. Three questions for me, please. Just on the dividend. Clearly, you seem pretty confident, and in particular, you're talking about improved efficiencies on capital management. Could you give me -- us a little bit more color on where you see those synergies coming from? So I think the subsidiary ratios were really high -- the solvency subsidiary ratios were really high last year and expect it to be even higher. So maybe just a little bit more clarity on which geographies you see those capital management actions coming through. On the extraordinary results in life, I think on Slide 30, could you split out for us maybe how much reserve releases and how much of that is related to the Swiss BVG business and how much is individual business? And the final question is just on the combined ratio. I guess H2 combined ratio is a bit above your target, about 96%. How do you see that combined ratio improving to get back into your target for 2023?

Okay. Thanks for those 3 questions. I'm answering the third question, and then I would like Annelis to answer the first 2 questions. With regard to the combined ratio, we are pretty confident to very soon come into our target range. Why is that? First, we are making progress in our cost ratio, which you've seen already during the last 2 years. And second, our business mix is still pretty well focusing also on retail and SME. And third, within the last few years, we've been hit quite a bit by, first, the COVID; second, the NatCats in Switzerland; and third, last year, NatCat events, which were pretty specific in the Specialty Markets segment. So we are pretty confident that we are, so to say, getting back to normal pretty soon.

If I could just come back really quickly. Just, I guess, the NatCat events, how big were they? How big was Hurricane Ian and South Africa floods because Specialty Markets still holds a quite strong combined ratio and then like Italy and Spain were the areas that were probably the weakest performance?

Let me come back to this question in a minute. And now first, I would like Annelis to answer the other 2 questions regarding the dividend and the extraordinary results and then get back to the combined ratio in a minute.

Yes. So thank you, Tom, for the question. I will start with the question on dividend. And why we think or why we are convinced to provide an even more attractive dividend policy going further. So we have always produced the net economic dividend capacity, so how much capacity is in all the Helvetia units. And we will now focus on bringing more of this capacity to the group and, therefore, available for direct dividend distribution. That's one point. And the other point is that as always, with excess cash production, it's always a question which interest group gets how much. So how much do we invest in organic growth? How much do we invest in -- or how much do we distribute on shareholders? And how much do we need for smaller inorganic purchases? So also these questions were discussed in detail, and we decided that Helvetia is on a good position to create even more attractive dividend policy or dividend goals. And you also -- we always also [ provide ] the operating cash production where you see that the dividend is covered well with operating cash production. Then on your question regarding the life profit on Slide 30 of the long -- so I mean, I think I don't have the same page numbers. There is a slight confusion, but what I will comment is the slide, Life: earnings by sources, where you first have savings result, fee result, risk result, margin after costs, extraordinary result and so on. And the savings result was slightly better than in 2021. Why is that? Due to further reserve strengthening, which created a higher savings result. Then notable as well is the higher risk result, which stems mainly from, let's say, volatility in -- or, let's say, normal volatility in mortality on the Swiss balance sheet as well as in cost there -- at the cost in the balance sheet. So this led to an increase in margin after costs. And in the extraordinary result, there was a strong increase compared to last year. And you may remember, we did quite a large reserve strengthening last year. In German, it's called the so-called change to [Foreign Language]. I'm looking to Philipp Schupbach for the English name. So it was a requirement in 2021 to change the reserving of -- yes, of this -- of the mortality tables. And regulatory, we would have been allowed to do that over several years, but we decided to do this at once in year 2021. And this effect did not repeat, of course, in 2022 because this additional reserving has now been done, and we can, in that sense, forget about it. The rest -- and this was in group life, by the way, because you asked from group life and individual life, and the individual life strengthened a little bit the reserve further. So we reduced the technical rate a little bit further in Switzerland. And there are other smaller effects or like the roll-forward effect, but that are the main drivers in the result. Then, of course, also is the extraordinary sale of -- or gain of CHF 102 million from the sale of Sa Nostra, which shows up also in the extraordinary results. So that would be my comment to the life results.

Okay. Thanks, Annelis. I come back to your question regarding the combined ratio. Let's turn to Slide #13 (sic) [ Slide #14 ]. There, you see that the current year claims ratio, excluding NatCats is 58.9%, and the NatCat ratio itself increased by 0.4%. Now what are the reasons for that? The better NatCat development in Switzerland was offset by a worse NatCat development in -- specifically in the Specialty Markets segment. I'm talking about Ian. I'm talking about hailstorms in Southern France, floods in South Africa and so on. And Ian specifically was a claim in the lower 2-digit area. Okay, I hope that helps. Yes?

It did help a little bit, but if I could come back really quickly, particularly on the capital management, you've been quite clear that there is some excess capital there. How much excess capital was sitting at the subsidiaries? Because that to me it feels like that's a core driver of why you're changing the dividend distribution target.

No, I wouldn't say that, that is the core driver, I mean, the available dividend capacity you see on this slide on net economic dividend capacity. And the driver is more the decision or the -- yet a conviction of how much do we want to distribute to shareholders or reinvest in organic growth and so on. So the conviction is more, yes, how can we give back some of the gain we made from the Sa Nostra sale in a sustainable way to shareholders. And this, we want to do it, as we said, over the strategy period. That's why we increased the target on the dividends from CHF 1.5 billion to CHF 1.65 billion. So it's always a decision how much of the created cash do you keep to invest in organic and nonorganic growth and how much do you distribute to shareholders. This has nothing to do with where the cash lies.

The next question comes from the line of Jimmy Fan with UBS.

I have 2, please. And the first one related to the operating cash production. So this year and if I look at the CHF 400 million number, could you tell us how much of that CHF 400 million is from the sale of Sa Nostra Vida? And also a related question. Obviously, the gap between this cash production and the dividend payment is wider than previous years. Could you tell us what's your kind of preferred use for the excess cash you are accumulating at the holding company? And second question is on growth. So I guess could you give some color on the level of renewal pricing rate change that you have achieved at 1/1 in various parts of your nonlife portfolio? And then in Switzerland, your peers have said they have been able to put some pricing in for 1/1, and also it's been very positive on the reinsurance side as well. Could you also give a bit of color in that?

Thanks, Jimmy. I suggest that Annelis is answering the first question, and I'm turning to the second one afterwards.

Yes. So thanks for the question on operating cash production. So operating cash production is to cover the external dividend as well as the external coupons we pay on the outstanding debt we have. And additionally, there is a strong focus on cash remittance. And therefore, yes, let's say, the spread between operating cash production and the required amount for dividend payment may increase in the next years. Our clear preference is that we absolutely hold to our promise to be a reliable dividend payer. So we increased -- as we said, we increased the dividend year-on-year, except in extraordinary years, and we are very determined to continue to do that. Then the second priority or with what is left, let's say, our priority is to invest in organic growth. And as I said, this is a bit different than, let's say, 10 years ago as we are now not any more constrained through, let's say, a low SST ratio. So the high SST ratio lets us consider all business opportunities where we have the possibility and where you have an attractive risk-return profile. And third, of course, we, as always, our M&A strategy has not changed. We are continuously screening the market for attractive opportunities. So these are the -- yes, the different possibilities. And we do not comment the part of the dividend which comes out of the Sa Nostra gain in the CHF 400 million, but it's, of course, in the line Europe and in the line life.