Helvetia Baloise Holding AG (HBAN) Earnings Call Transcript

Ladies and gentlemen, welcome to the Helvetia Full Year Results 2024 Conference Call and Live Webcast. I am Maria, 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 Peter Eliot, Head of Investor Relations. Please go ahead, sir.

Thank you very much, indeed, and good morning, and welcome, everybody, to Helvetia's conference call on our results for 2024. On the call today, we have our group CEO, Fabian Rupprecht, and our CFO, Annelis Luscher Hammerli. Fabian will start by going through the development of the business before Annelis takes us through the financials in more detail. As usual, there will then be the opportunity for Q&A afterwards. So with that, let me hand over to Fabian.

Thank you, Peter, and welcome, everyone, from my side. We're pleased to present our 2024 results to you today. Let me start on Slide 5 with the highlights of 2024. We're delighted to report a 42% increase in our underlying earnings to CHF 529 million. This is in line with or even slightly ahead of the guidance we gave to you at our Capital Market Day. Improvement has come from a lower nat cat charge and from our technical profitability measures, which I will come back to. We think there is much more to come but this is already a good start. The results make us very comfortable in continuing to increase the dividend in regular steps and the Board of Directors proposes a dividend increase of 6% to CHF 6.70 to the Annual General Meeting. The dividend remains supported by our free deployable funds so that you can have confidence in our ability to keep paying dividends even in very adverse years. We stressed the benefits of our diversification when we presented in December and this is again evident in these results. A more difficult year for Switzerland and Austria, mainly due to the flooding and severe weather events experienced at the end of June and September, was more than offset by a better year for our other segments. The growing earning contribution from our businesses outside of Switzerland and from our fee business is also helpful for capitalization and our SST ratio remains at an excellent level, we estimate at about 290% at the start of the year. We continue to seize attractive growth opportunities. Our top line was driven by Non-Life this year, which I will touch on shortly and we grew strongly in most markets. However, we will remain disciplined and manage the cycle. The volume growth has therefore been lower in Specialty Markets this year. The segment again posted excellent underlying earnings, up 21% on an already strong 2023. We continue to make good progress in our fee business with 7% growth, in Smile with 12% growth and embedded insurance products with 11%. Annelis will discuss this later. Now I move to Slide 6. We set new targets at our recent Capital Market Day, which will apply for the period 2025 to 2027. This is, therefore, the last time we will report our 2025 targets. From 2025 onwards, we will focus more on underlying return on equity. However, for 2025, our IFRS return on equity improved significantly and was in the upper half of our target range. Our business volume grew by 3.1% currency adjusted. 2023 offered a difficult comparative of our Life business with a strong performance of investment-linked premiums and deposits in the prior year period in Switzerland and a single large one-off contract in Spain. With this in mind, the Life business volume was very respectable and an excellent performance by Non-Life has more than offset the small decline in Life. In Non-Life, our volume grew 5.7% currency adjusted. Our revenue grew more than 8%. Our growth was above the market in Switzerland and in Austria. This volume growth was supported by rate increases. In 2024, we continuously adjusted our rates across all segments and lines of business. The lines of business typically exposed to inflation, our rates developed strongly above inflation. For example, we achieved high single-digit increases in motor. Even for portfolios linked to automatic indexation, we have been able to make additional increases. All segments recorded a strong positive effective rate changes with a small exception of Specialty Markets, which was only very marginally negative, and which enjoys strong margin. However, even here, the strong competition and pressure in engineering lines was balanced out by our aviation and Arc portfolios in specialty lines and France. Favorable rate change development is a proof of our strong customer base, a result of our strong underwriting discipline, and it is in combination with the continuous effort to develop our pricing capabilities further. The success of the adjustments has been combined by very strong retention levels. Overall, our lapse rates remain stable. On the right, you can see that our strong performance and increased dividend brings us to CHF 1.3 billion cumulative payout since 2021. We have one more year to go for the old target we set, which was for a cumulative dividend distribution of over CHF 1.65 billion. We already revised this target upward once, and we are fully on track to meet that revised target. However, we are now focused on our new more ambitious targets. On Slide 7, we show our margin. I will start with the combined ratio that has reduced from 97.7% to 95% and is in the middle of the guidance we gave to you at our Capital Market Day. While we're still above our target range, we're moving quickly in the right direction, and we intend to continue this trend. We aim to be in the lower end of the 92% to 94% target range by 2027. I remind you that we have a wide range of measures in place to achieve this. I just mentioned our rate increases, and we have significant initiatives in areas such as efficiency, underwriting and in particular, claims management. The nat cats in 2023 helped the prior year comparative. We showed a significant underlying improvement even if we exclude nat cats discounting and prior year development from the claims ratio. Underlying ratio on this basis fell from 70.7% to 68.8%. In Life, our margins remain in the middle of our target range as we balance profitability and volume. However, we continue to focus on capital-light products. The fee business again performed strongly in 2024. Fee income was up 7.2% on a currency-adjusted basis, mainly thanks to the expansion of the noninsurance business around health and care services of Caser in Spain. Margin improvement means that the fee result is up by more. We had targeted more than 5% of the group's IFRS net income. And in 2024, already achieved over 7%. Slide 8 is my summary of last year. An important step last year was the enhancement of our corporate structure and governance. Last summer, we adjusted our corporate structure and the group Executive Board to foster closer cooperation and create values as an integrated international insurance group. Our adjusted structure is now allowing us to improve the conditions for leveraging our know-how across the group regarding, for example, future-oriented topics such as AI. Last December, we unveiled our new strategy and set ambition targets for the first 3-year strategy cycle. I will say more about the focus of the strategy and the financial targets on the next slide. We have emphasized in the past technical excellence and operational efficiency are key to us. We've been working on these topics for about a year now. Today, we can see that the actions we have taken are starting to deliver results. Our current year loss ratio, excluding nat cat and discounting has improved by 1.9 percentage points. While we expect this rate to improve further in the years to come in line with our efforts on technical excellence, please keep in mind that there is some volatility in this number. The Non-Life administrative expense ratio has improved by 0.2 percentage points. Operational efficiency is also a key element of the new strategy and on the next slide, I will give an indication of how we expect technical excellence and efficiency to develop. Finally, selective growth. Helvetia wants to grow with a clear focus on profitability and capital efficiency. While we grew the business in most lines last year, we were selective in underwriting where we faced difficult market conditions, such as liability in Active Reinsurance. To conclude I will say a few words on Slide 9 about where we are now and where our near-term focus lies. Firstly, I can say that Helvetia is in a strong position. We have proven in recent years that we can grow profitably on a sustainable basis. We've also further enhanced our diversification, which makes us more resilient. Helvetia's excellent capitalization and high liquidity also contributes to our resilience. Finally, the 2024 financial figures presented today show that Helvetia is moving in the right direction. My second point is our new strategy, which I have already mentioned on the slide before. The aim of the new strategy is to unleash Helvetia's potential. Strategy, therefore, builds on our strength, such as direct access to customers in the retail business, and our expertise in the global specialty business, positioning ourselves as a local customer champion in our retail markets of Switzerland, Spain, Germany, Austria and Italy. This means that we will accompany our customers throughout their lives as a preferred provider with the ambition of increasing the services per customer. The Global Specialties business forms the second pillar of our new strategy. In this area, we aim to establish a leading role in Specialty business in our existing European markets and develop additional international specialty lines in a targeted manner with a smart follower approach. As mentioned earlier, technical excellence and operational efficiency are key elements of our strategy. I would like to reiterate our plans for these two areas. We set ourselves the target of improving operational efficiency by more than CHF 200 million by the end of 2027. Part of these efficiency gains will offset anticipated inflation. At the same time, we expect the cost ratio to improve by around 0.5 percentage point. Overall, we expect the combined ratio to improve by around 2 percentage points, which would bring it within the previous guidance range of 92% to 94%. Third, we have set ambitious targets across our next strategic plan period. The starting point for our underlying earnings per share target is CHF 9.48 per share. This level is even slightly ahead of the guidance we gave you at our CMD, meaning that our 2027 targets are now even more ambitious. However, we reiterate the target, including the 9% to 11% underlying earnings per share CAGR. As a reminder, our other targets include underlying return on equity of 13% to 16%, which is higher than 2024, and a cumulative dividend payout of CHF 1.2 billion over three years. Finally, we aim to achieve a credit rating of at least A. With this, I hand over to Annelis, who will present the financials in more detail.

Thanks, Fabian, and welcome also from me to our conference call today. Over the next 15 minutes, I will explain our financial performance in 2024, starting on Slide 11. Before I do that, just to remind you that the 2023 numbers have been restated as we communicated at the Capital Markets Day. GRI, our group reinsurance has been reallocated to Non-Life and Life from the other businesses, which we now call noninsurance. Europe has also been split into Spain and GIAM. We gave you the full year '23 restated numbers at our Capital Markets Day. And today, we are also giving you the half year '24 restated numbers. Our 2024 results again demonstrate the benefit of our diversified business model, as Fabian mentioned. Helvetia generated underlying earnings of CHF 529 million compared to CHF 372 million in the prior year, a 42% increase. As a reminder, our underlying earnings metric excludes the volatility from capital market developments and other nonoperating effects, meaning that the main driver is the technical result of our insurance businesses. The main reason for the increase was a better Non-Life result. We improved our underlying combined ratio and 2024 also benefited from fewer exceptional nat cat events than 2023. We did still had to navigate some major events, especially over the summer months, and our home market of Switzerland was hit here. It also received late reporting of 2023 nat cat claims. It therefore came in slightly lower than the previous year. However, this was more than offset by a very strong performance from our other markets. In the case of our second market of Spain, that is, of course, before the benefits of the planned integration we referenced at our Capital Markets Day. GIAM was the biggest driver of the improvement after 2024 did not suffer a severe weather events as in 2023. and after we benefited from some reserve releases. Meanwhile, Specialty Markets continues to go from strength to strength and recorded an even better year than last year. Life produced a solid result against the tough prior year comparative, which included some nonrecurring elements. In the noninsurance business area, we have reduced our corporate cost significantly including from lower project costs. Overall, the underlying return on equity was 12.3%. Fabian has just reminded you of our targets to increase these over the next 3 years to which we remain committed. Our IFRS net income was up even more by 67% to CHF 502 million. Besides development of underlying earnings, the increase was also due to a better performance of non participating as in Switzerland, especially from a property fund and property revaluations and the non-repeat of an impairment. Turning to volume, on Slide 13, this is up 3% constant exchange rates to CHF 11.6 billion. The growth was again driven by Non-life, which showed a strong organic increase of 6% currency adjusted. We grew above the market in Switzerland, which was up 8% and in Austria. Pricing has been a major driver, and we will continue adapting our pricing to inflation and other market developments. Life volume was down 1%, mainly due to the non-repeat of a large group contract in Spain in the prior year. However, Helvetia continues to grow its core business, focusing on profitable and capital-efficient products. The business line continues to be influenced by the ongoing market wide trend in Switzerland of a shift from full insurance to semi-autonomous solutions, where we are well positioned. The Fee business on the next slide also grew significantly in line with our strategic ambition to diversify income streams. The fee and commission income increased by 7% at constant exchange rates to CHF 413 million. This comes despite very limited inorganic growth in Spain and despite a small headwind in asset management. Asset Management provides a stable income stream, but one-off performance fees come on top. And in 2024, there was no real estate capital raising. Growth was mainly driven by the health and elderly care business as well as our assistance business. Profitability improved further in 2024 due to a combination of growth in income, business mix and margin improvement. Switzerland and specifically MoneyPark was the main contributor to the very strong increase in the fee result which increased by 36% to CHF 45 million before tax. With this, the fee business contributed 7% of the group's IFRS net income, so above the 5% level we originally set as a 2025 target. Now let's take a bit deeper into Non-Life on Slide 16, starting with the combined ratio. I remind you that this has been restated for the new segmentation of group reinsurance, and we have given you the restatement on the half year numbers in Slide 29 of the appendix. Overall, the 95% combined ratio was in the midpoint of our recent 2024 guidance. We are very pleased with the improvement we are seeing. It came despite some significant events such as the floods in Valais in Switzerland and in Central and Eastern Europe, and riots in New Caledonia. If you exclude nat cat's discounting impact, then the 2024 claims ratio showed a strong improvement in every business area. In reality, even this ex-nat cat and ex-discounting ratio tends to exhibit some volatility and we do not think we have quite achieved 2 percentage points of improvement in just one year. That number may therefore be a little flattering, but we see room for improvement, and we are working hard on that. Germany was one example, which we do not expect to repeat. There, we think a sustainable overall combined ratio is in the range of 93% to 94%. Indeed, every segment and counting market was below 100% combined ratio, including group reinsurance. We believe this supports our strategy of internal reinsurance. However, we see several significant levers to strengthen technical profitability in Non-Life further, as we outlined at our Capital Markets Day, and we remain fully committed bringing the combined ratio down into our target 92% to 94% range. The cost ratio, where I remind you, we include nonfulfillment expenses, improved by 20 basis points. This is broadly in line with the 30 basis points improvement we reported at half year after restating for GRI. You can see this restatement in the appendix. It is helped by efficiency gains from scale effects on the back of our profitable growth. Consensus was expecting a better improvement but we think consensus did not factor in the effect of recycling for GRI for the order -- second -- first half year -- second half year seasonality that we also saw last year. We will remain very focused on cost discipline and the implementation of our efficiency program for '25 to 2027. The acquisition cost ratio has increased by 10 basis points due mainly to business mix. In particular, we grew the embedded insurance business, which has higher acquisition costs but the lower claims ratio. We also benefited from very strong investment income. The Non-Life current investment income was up 22% year-on-year with some significant reinvestments made at the end of 2023 and start of 2024 turning in and with an enlarged asset base. Outside of underlying earnings, positive market performance was offset by adverse FX movements, and we have the normal intergroup corporate support charges in the work to net income. In the Life business, on Slide 18, our stock of CSM is up 8% compared to the end of 2023, thanks to positive operating and economic variances. Economic variances of CHF 211 million were mainly driven by interest rate effects and equity markets. Operating variance of CHF 120 million was driven mainly by better cost assumption updates. This is less positive than we reported at the half year, but the half year calculation is never as precise as the full year calculation and always subject to some volatility. We have not changed our view of the annual CSM release we expect quarter level of underlying earnings. Indeed, this is confirmed by the underlying earnings we reported for 2024. We gave our review of the 2023 recurring level at our Capital Markets Day and 2024 has come in 3% above that level. We don't consider there to be any particular one-offs in 2024 numbers, so you can consider that a good base going forward. This will, of course, keep working to improve it. The normalized CSM growth has been flat as profitable new business and the expected in-force return has offset the CSM release. We indicated at the Capital Markets Day that we did not expect significant normalized growth and there will always be some volatility around this. Instead, we focus on creating value outside the CSM. We also indicated that we believe we can realize the value inside the CSM more quickly in future than in the past. We generated a new business volume measured by the present value of new business premiums of CHF 2.8 billion, up 4% on the prior year as we show on Slide 19. The main contributor to this growth was individual life products, where we saw growth across the board, but especially in protection products. The share of capitalized product of new business was 87%, as you can see in the appendix. We continue our focus on growth in profitable lines of business and the new business margin in Life remains well within our target range at 4.7%. A small drop relative to the prior year can largely be explained by active reinsurance, which benefited from some exceptionally high margins in the prior year and some very profitable contracts in the post-COVID era. Turning now to our capitalization on Slide 21. This remains at an excellent level. The S&P rating remains at single A+ comfortably meeting our target of a single A rating and AM Best takes a similar view. Our regulatory solvency measured by the Swiss Solvency Test continues to stay at an outstanding level. We estimate our SST ratio to be about 290% and as of 1st of January 2025. Compared to the level at the end of June 2024 of about 300%, it has slightly decreased mainly due to the fall in Swiss risk-free rates. Our financial leverage fell across 2024. You will have seen that we took advantage this January of the supportive market conditions and issued 2 new bonds of CHF 250 million combined with coupons of 0.8% and 1.1%, respectively. But even with these and the temporary increase in leverage, the leverage remains below our 30% target. Now let me give you an update on cash on Slide 22. Cash remittance increased by 27% in 2024 with a strong contribution from Switzerland Life and Active Reinsurance while the Non-life business was already on a very good level in the previous year. Besides remitting the regular dividend, we continue to hold a buffer at the holding level. Our free deployable funds stand at CHF 378 million after benefiting from some interest over the year. We will keep increasing this to maintain roughly 1 year's worth of dividend, but there is no need to do so at this stage. This concept, which we introduced a year ago, gives us a buffer of unencumbered liquid asset at holding level, which will increase the fungibility of free capital for the group and our financial flexibility. This adds resilience and visibility on our dividend capacity to always pay at least the same dividend per share as in the previous year. So that brings me to the dividend on Slide 23. Here, we stick to our communicated policy of sustainably increasing dividends. Our core business is growing profitably. It is well diversified and resilient, and our financial strength is excellent. For 2024, Helvetia's Board of Directors is therefore proposing a further increase in the dividend to CHF 6.70 per share. This represents a payout ratio of 78% on underlying earnings or 75% on net income. It represents a dividend yield of 4.5% based on the 2024 closing share price of CHF 149.40. This brings the cumulative dividend distribution since 2021 to CHF 1.3 billion. Helvetia is, therefore, well on track to reach the revised target we set of paying out more than CHF 1.65 billion in dividends over 5 years to 2025. As Fabian said, we are, however, now focused on our new, more ambitious targets. With that, I hand back to Peter.

Thank you very much, Annelis. So now we'll go to the Q&A. And if I could ask you to limit yourself to 3 questions in the first instance that would be appreciated. So operator, please start the Q&A.

[Operator Instructions] Our first question comes from Hanif, Farooq, JPMorgan.

And I'd like to actually congratulate you on your disclosure this morning, I thought it was very helpful that we got the more detailed consensus and also Peter, thank you for sending the variance. That was really helpful. I've got 2 questions as promised. So on the fee result, you can see that the costs have grown lower than the fee and commission income, and you talked and Annelis about the higher margin. Should we expect this margin expansion generally to continue to the cost base rising more slowly than the fee and commission income? And what are the lines that will drive that? So that's question one. And then question two, if you could talk about the jump in Life cash remittance and how to think about that as well going forward?

Thank you very much, Farooq. And thank you for comments. We're always keen to know how we can do better as well as -- and not just the IR team, but I think the wider internal stakeholders are putting a lot of work also to bring the closing forward a month. On the -- so 2 questions there. One on the fee result and the margin expansion we've seen continue, number one. And secondly, on the Life cash remittance, I think probably both for, Annelis.

Yes. Thanks, Peter, and thanks, Farooq, for the question. So on the fee result, our fee result is really a collection of many different businesses. On the one hand, health and elderly care, mainly from Spain and our asset -- third-party asset management business from Switzerland and many other fee businesses from Switzerland, which are smaller and are contributing also MoneyPark. So the distribution of mortgages goes in there. So it's a mix of many different things. And therefore, the driver of the profitability is also a mix of different things. Generally, of course, in all our businesses, we try to maximize profitability, not on the short term, but really sustainably and try to expand the margins. What we can say is definitely that the margin within the MoneyPark business, so the mortgages business, has increased, and we strive, of course, to keep that margin to keep that sustainably. But to be honest, I would not expect such an expansion in margin now every year. But generally, I'm quite optimistic that we can keep the margin we have seen now and continue to work on that. Now on the second question on Life, the contribution of Life in 2024, so the contribution of Life is mainly driven from the Swiss Life balance sheet and is mainly driven by the result we can achieve in the Swiss Life balance sheet and the results, so the statutory result in Life in 2023. So what we pay in 2024 has been very good and therefore, more cash put fee remitted to the group, to the mother company in '24 than in '23.

Are you able to give a little bit more detail if we think about the macro, the equity world environment and other factors, whether the 2023 uplift was kind of one-off in nature? Are there kind of effects that we should normalize for?

So it's basically also mainly a change on how we do capital management. So starting in the year mid '23 and '24, you know that in '24, we introduced a concept of free redeployable funds. With that, we introduced the concept that we want to have all excess cash and capital to repatriate it to the mother company, where all the other companies are daughters or branches. So we want to hold the excess cash in the mother company with the free deployable funds in the holding just above. So that means that we also now have a strong focus on collecting all the access cash in all the companies and bring it to the mother company. That is also one of the main differences from '23 to '24 in Life. So it's not really -- it didn't have a lot to do with the financial markets or anything. But with the changed concept to bring all excess cash to the mother company in order to be able to reallocate it to organic growth areas.

Next question comes from Amalie Zdravkovic from Deutsche Bank.

It's Amalie from Deutsche Bank. I'll stick to two as well then. You had a very positive investment performance in Non-Life in particular. And I was just wondering how much of this is sort of sustainable going forward? If you can add a bit of color on that, that would be great. And then just secondly, there's been quite a lot of sort of news flow recently around potential disposals in Europe. And I was just wondering if you have anything new on sort of, if such a disposal were to happen, what would you do with proceeds? Are you keeping it for organic growth? Or how would you deploy such?

So two questions. First one on the Non-Life investment performance and the outlook, for that, Annelis will answer. Then secondly, on the disposals in Europe, I'll hand over to Fabian. Fabian, do you want to take the disposals one first?

Yes, yes. Okay. Okay. That's what I -- I think -- so please understand we will not comment on rumors. So you will not hear anything from us about that. But then you asked that question as a hypothetical situation. And I can say, if ever we did any disposals in the future, we have set ourselves a per share target. And I hope that makes it clear that we are committed or would be committed in any such situation to this metric. And we would try always to avoid anything that would dilute the EPS. So that's just a general remark, what we would do in any hypothetical case.

Yes. And I'm happy to take the question on investment performance in Non-Life. So there were two effects in there. So what I have stated first, very important, there is no change in strategic asset allocation. So the reason behind it has nothing to do with rerisking, but it's the growth in our liabilities in U.S. dollars, especially out of active reinsurance led to investments in U.S. dollar and as the risk-free rates and therefore, also the corporate bonds, for example, are very high-yielding currently. This led to a higher investment income. Will it continue in the future? So it depends, of course, on the volume growth on this U.S. dollar business, so the business in U.S. dollars if the volume or if the investment income is growing, yes or no. And of course, it depends on the interest rates that can be gained in these markets. So it's -- the explanation is actually simple. It's the matching of the assets in the currency of the liabilities.

Next question comes from Iain Pearce from Exane BNP Paribas.

They're both just around cash, and I think it's just a bit of sort of adaptation on some of the moving parts. And on the first one, you sort of a bit of -- I'm a bit confused. It sounds like there was some excess cash coming from Switzerland and the remittances were very strong because of the sort of change in cash management philosophy, but also the statutory result and the benefits of markets driving a better statutory result helping that remittance. So any ideas on sort of how much of the cash remittance was sort of part of that cash cleanup and change in cash philosophy in 2024? And whether the 2024 level of remittance is sustainable going forward? It would be really useful. And then the second one, which I guess is sort of linked. You said the sort of free deployable cash, you want roughly to be in line with dividend costs, which are sort of that already. So if remittances are sustainable at that level, you would be continuing to build that number. Just trying to sort of square that circle really about how you're thinking about the free deployable cash development if remittances are going to be sustainable at current levels versus dividend costs?

Thank you very much, Iain. So two questions. The first one on cash. Is there any part of -- how much of that is sort of part of any cleanup? Or is it a sustainable level going forward? And the second one, just interaction between free deployable funds, dividend increase, but free deployable funds didn't, how do we think about that, I guess, both for Annelis.

Thank you, Iain, for the question. So I will start from the outside in. So we'll start explaining the whole topic starting with the free deployable funds. So these are the funds currently CHF 378 million and they stay at holding level. These are unencumbered and in that sense, completely free. Currently, the dividend we proposed for our general assembly to CHF 6.70 corresponds to CHF 355 million. So that means that the free deployable funds currently are a bit higher than the dividend we pay out. Now when introducing and explaining at the Capital Markets Day, our capital management approach, we clearly said that our aim is to always have 1 year's worth of dividend in the free deployable funds. Now of course, we do not know exactly how our dividend will develop in the future. But what we said is that our ambition is for 3 years to pay CHF 1.2 billion in dividend. Now if you make a small Excel table and see how you could distribute this CHF 1.2 billion over 3 years and sustainably increase year-over-year, you see at some point that our external dividend will be a little bit higher than the free deployable fund, and that will be the time when we would add what is needed in order to make sure that we cover these free deployable -- cover this external dividend in free deployable funds. A small effect, of course, is also that the free deployable funds itself, they earn a bit of interest, which we can, of course, add there or which will increase the free deployable funds as well. So now if we now go one level down to the mother company, where all our other companies and businesses are either daughters or branches. Then in the mother company's place where we collect all the cash remittances from our daughters and branches. Now we said that our strategy implies the CHF 1.2 billion dividend imply an increasing -- steadily increasing dividend path. That means that our cash remittance also has to steadily increase from the daughter companies. The cash remittances from the daughter companies and branches will always be a little bit volatile, but that is the beauty of our diversified business model. In 1 year, we will have a bit more from active reinsurance, but a bit less in the past years, for example, from Germany, and it will level out. But in general, we plan with increasing cash remittances in order to be able to finance the increasing dividend over the next 3 years. This strict capital management policy has been developed in '23 and has been started to execute in '24. Now I make a quick stop and see, do you have a follow-up question? Or was I clear?

No, that's clear. I guess the follow-up is if I look at the cash remittance this year and an assumption that that's -- well, the sort of comments that you expect that to steadily increase, there's still quite a bit of headroom between the cash remittance and the dividend cost. Even with the dividend growth, you'd probably be looking at sort of depending on the rate of dividend growth, CHF 80 million to CHF 100 million. Is the assumption that -- or is the assumption that the remittances come down next year and they're more in line with the dividend cost going forward is sort of what I'm trying to get.

Yes, yes. I see. That's a small aspect that did not yet explain. So from the cash remittance, of course, we pay the dividend that goes into the holding and then to shareholders, one point. But from cash remittance, we also pay external financing costs, and we also pay group costs like salaries of Investor Relations, for example. So there are cash remittances of our businesses also have to cover group costs. And then what is left, we use to capitalize our organic growth. So that's the logic behind.

The next question comes from Nasib Ahmed from UBS.

So two for me as well. Firstly, on -- at the CMD, you gave us an indication that there's about 20% of businesses not meeting hurdle rates and it's only been 4 months or less than that. Can you give us an update on have any of those businesses moved up into kind of meeting hurdle rates? Any businesses that you're looking at? And any indication on whether those businesses are -- where are they placed, what business lines they're in? That would be super, super helpful. And then second question on the technical excellence and kind of bringing the combined ratio, the underlying combined ratio down. I saw at 180 was down 160 basis points, now it's down 190. So the run rate is improving. Is that kind of the regular improvement in the combined ratio we should expect over this plan? That's all for me.