Good afternoon, ladies and gentlemen, and welcome to the Storebrand Q4 Conference Call. My name is Anna, and I will be your coordinator for today's conference. For the duration of this call, you will be on listening only. However, at the end of the presentation, you will have opportunity to ask questions. If anytime you need assistance, please press star zero on your telephone keypad, and you will be connected to an operator. I will now hand you over to Kjetil Krøkje to begin today's conference. Thank you.
Yes. Good afternoon, ladies and gentlemen.
I am so sorry for that. Please keep on going.
All right, thank you. Good afternoon, ladies and gentlemen. Welcome to Storebrand's Q4 2017 Conference Call. My name is Kjetil Ramberg Krøkje. I'm Head of Investor Relations at Storebrand. Together with me, I have Group CEO Odd Arild Grefstad, CFO Lars Aasulv Løddesøl, and Head of Economic Capital Trond Finn Eriksen. In the presentation today, Odd Arild Grefstad will give an update on the development in the year and introduce the new dividend policy. CFO Lars Aasulv Løddesøl will give an overall view of the financial development in the quarter and dig into some of the more technical elements in the quarter. The slides will be similar to the analyst presentation released this morning and are available on our webpage. After the presentation, the operator will open up for questions. To be able to ask questions, you will need to dial into the conference call.
I will now leave the word to Storebrand's CEO, Odd Arild Grefstad, who will start the presentation on slide two.
Thanks, Kjetil. I'm pleased to present the group results before amortization and write-downs of NOK 2.940 billion for the full year of 2017, and a quarterly result of NOK 618 million. The Q4 result is, however, negatively impacted by more than NOK 300 million, which will strengthen future earnings, capital buffers, and also our solvency position. Lars will revert to that later on. The underlying solvency position is, has improved to 165% in 2017 before transitionals, and 172%, including transitionals. The board proposes a dividend of NOK 2.50 per share, and we are introducing a more explicit dividend policy for 2018. It is also pleasing to report strong growth in the non-guaranteed savings segment.
2017 saw 20% growth in unit linked and 25% growth in assets under management, resulting from good sales, good market returns, and acquisition of Skagen. Assets acquired from Silver will be reported from the Q1 of 2018. Let's turn to slide three. This is a very familiar slide illustrating our twofold strategy, which we have been implemented consistently through the past five years. It is pleasing to see that we are really delivering on both sides of the strategy in the Q4 , with both solvency improvements and increased dividends on the one side, combined with strong growth in assets, as well as earnings within the savings segment in the other side. If we then turn to slide five, and let me start with managing the balance sheet. Storebrand ends 2017 in a robust capital position.
The solvency ratio increased 15 percentage points before dividends. The strong solvency improvements are mainly attributed to capital creation and buffer capital increases in the life insurance division. The solvency improvement in 2017 is greater than we normally can expect, but indicates that we are well positioned for further increases in the solvency ratio, combined with growing dividends. If we then turn to slide number five. The board proposes a dividend of NOK 2.50 per share, comprising of an ordinary dividend of NOK 2.10 per share and a special dividend of NOK 0.40 per share. This comes as a result of strong financial returns and a very positive return after tax. This is cash dividend of 40% of profit after tax, adjusted for amortization.
For the first time in many years, a dividend of NOK 1.3 billion will be paid from the life insurance business to the holding company. This will strengthen the group liquidity and dividend paying capacity, while also contributing to reach our goal of a net debt ratio of zero in the holding company. If we move to slide number six, the new dividend policy. Storebrand's objective is to create attractive and competitive returns for shareholders through dividends and value creation in the business. The board is therefore introducing dividend policy. The goal is to pay out more than 50% of earnings after tax. The ambition is to pay ordinary dividends of at least the same nominal level as previous years. If the solvency margin is above 180%, the board intends to propose special dividends or share buybacks.
The new dividend policy intends to reflect the strong growth in fee-based earnings, the more volatile financial markets related earnings, and the future capital release from the guaranteed book. Slide number seven. The strong growth within savings continues, and it's worth noting that assets under management have increased by 25% and is now NOK 721 billion. There's also a strong growth in unit linked, with 17% growth in Sweden and 23% growth in Norway, and the regional bank has grown by 19% in 2017. And as previously communicated, the reduced growth within insurance in 2017 is due to changes in distribution, as well as a new disability product with regulatory lower premiums and coverage. Slide number eight. With the acquisition of Skagen, the group is in excellent positions for the strong growth in the Norwegian individual savings markets.
If you look at the market for long term savings, Storebrand has a strong position in the pension related parts on the left-hand side of the slide in gray, which represent the value chain of pensions, but we have had a modest position within pure mutual funds. With the purchase of Skagen, this is really changed, and we expect to have doubled our collective market share to about 20% in these combined markets. Slide number nine. In the H2 of 2017, two new private savings products was introduced to the market. For the individual pension savings product, IPS, that is a pillar three pension savings product with real tax incentives, and the equity savings account, ASK, a tax wrapper for equity mutual funds and equities. Preliminary reports show that Storebrand Group has taken a leading position within the IPS market.
Storebrand with a market share of 20% and Skagen with a market share of 4%, and that, of course, combines to a market share of 24% altogether. In the ASK market, Skagen's strong position within mutual funds savings is clearly visible. Combined, the Storebrand Group achieved a market share of roughly 22% with the brand names Storebrand, Delphi, and Skagen, and ranks as a runner-up in this important product. Storebrand's strength within pension savings and Skagen's strength in the savings and investment segment is a further indication of how our businesses complement each other and strengthens our positions in the growing savings segment. Then I give the words to Lars.
Thank you, Larry. Let me start on page 10 with the heading Key Figures. The numbers we publish today are distorted by the onboarding of Skagen and a few special items that I will revert to. Seeing through that, the quarter is quite normal, with continued growth in non-guaranteed savings and with the transition towards capitalized products. Let's start in the upper left-hand corner. The quarterly results came to NOK 618 million. The operating result includes NOK 590 million from Storebrand and NOK 202 million from Skagen. The Skagen numbers in this overview are adjusted downwards to reflect the Q4 results from Skagen. The operating result in Storebrand is strengthened by performance fees from Delphi, but are negatively affected by weak insurance results and a higher operating cost in the quarter.
The weaker insurance results in the quarter stem from seasonal factors, as well as a certain large disability payment. The full year results, however, are satisfactory, and the development in the Q4 does not change our view on future profitability. When it comes to operating costs, the Q4 was impacted by a number of special issues. These include an extraordinary effort to develop and send the new ASK and IPS products, as described by Mr. Grefstad a moment ago. An internal refurbishing project, which will reduce our office rent going forward, and also a number of smaller expenses, which are not expected to be repeated in 2018. Our objective of reducing costs in nominal terms from 2015 to 2018 stands firm, adjusted for the Skagen acquisition.
The Skagen results are largely a consequence of performance fees booked at the end of the year. This means that the result impact from Skagen will be limited in the first three quarters every year. The performance fees should lift the Q4 results. Financial return in the quarter has been weak, first and foremost, as a consequence of buffer building, which has reduced booked return in portfolios co-invested with the collective portfolio in the background. Special items consist primarily of an accounting charge of NOK 200 million for a reduced discount rate in Sweden. EIOPA, the insurance regulator in Europe, has proposed to the EU Commission to reduce the UFR, the ultimate forward rate, from 4.2%-3.65% over the next three years. In Sweden, we use the Solvency II discount rate for accounting purposes.
By reserving NOK 200 million now, we have taken a one-off charge that addresses the change in the next three years. It is important to note that this also reduces the hurdle rate for future returns, which means that the result will improve by the same amount over time. Other special items include NOK 10 million in severance pay in Sweden due to a new core IT system and NOK 30 million in transaction costs related to the acquisitions of Skagen and Silver. On the positive side, we have included the Skagen results, attributable to the Q 4 approximately NOK 50 million. I have mentioned how management decisions in the quarter have significantly strengthened buffers and solidity. This can be seen in the two lower graphs on the page.
If we hadn't included the overvalues in the bonds paid at amortized cost, the customer buffers in Norway would actually exceed 12%. This allows us to manage booked return with a lot of buffers in the years ahead. Earnings per share, adjusted for amortization of intangible items, came to NOK 1.56 for the quarter and NOK 6.47 for the full year. In summary, we have made allocations that have weakened results by more than NOK 300 million in the quarter in order to strengthen future profitability and reduce risk. Moving over to page 11. Storebrand solvency position has been strengthened by 5 percentage points in the quarter from 150% to 155%. Including transitionals, the improvement is 12 percentage points, from 160% to 172%.
Let's look at movements in the quarter, starting from the right-hand side. In November, we issued a subordinated loan of SEK 1 billion. This strengthened the solvency by 3.7 percentage points. The acquisition of Skagen weakened the solvency by just short of 2 percentage points, as previously announced. Net +2. We have good returns, have built buffers, and made changes in our product portfolio and asset allocation that in total strengthen the solvency by an additional 2 percentage points. The accounting results in for the group after tax of approximately NOK 500 million contributes an additional 2 percentage points, and while reduced rates and a lower volatility adjustment contributes to -2 percentage points. We continue to refine our modeling and our model assumptions, and this has lifted the solvency by 2 percentage points in the quarter.
Also, the transitionals grew significantly in the quarter. This is largely explained by the same factors I've already mentioned. Reduced rates and VA, or volatility adjustment, increases the value of our liabilities. Furthermore, more precise lapse assumptions also increase liabilities and the Solvency II. As the transitionals exist to bridge the difference in liabilities under Solvency I and Solvency II, they increase with higher Solvency II liabilities. Moving over to the following, page 12. This picture shows the movement from the Q3 to the Q4 and the sensitivities to market movements going forward. The sensitivities increased somewhat compared to in the Q3 . Interest-sensitive lapse assumptions increased the sensitivity as profitable policies move away if interest rates increase, and they stay unprofitable if rates fall. Moving over to page 13.
Fee and administration income is significantly up in the quarter, including NOK 294 million from Skagen. Adjusted for this, the growth is 5% year-on-year, which is a combination of 13% growth in the front book and the actively sold products, and a 5% decline in the guarantee. The insurance result is in line with last year. The operational cost line is up, but this includes both the operational costs in Skagen, as well as the transaction costs from the acquisition of Skagen and Silver. In addition, remaining costs were high, as explained a few minutes ago. Going forward, the total quarterly cost level of Storebrand, including Skagen, should be just below NOK 1 billion. I repeat that our cost ambition for 2018 is that costs will be nominally lower than 2015, excluding Skagen.
For those of you who follow us closely, you will have detected that historical figures have increased a little. This is caused by a coordinated use of elimination principles across the group and increase both cost and income by NOK 14 million for the quarter and NOK 58 million for the full year 2017. The change does not impact the results. This change is also fully explained on our IR web pages. Financial items are negatively impacted by the NOK 200 million effect from the discount curve change in Sweden and the NOK 51 million earn out from Skagen. The fact that the Q4 results in Skagen initiated an earn out is very positive. It means that customers, employees, and owners made a good return last year. Amortization increased to NOK 237 million in the quarter.
The primary reason is that we have, that we had to calculate an estimated result for Skagen as of the acquisition date, third of November. This has now been amortized in the accounts. Going forward, amortizations in Storebrand will at approximately NOK 100 million per quarter, including both remaining amortizations on intangibles from the acquisition of SPP in 2007 and the Skagen acquisition. The negative tax charge or tax income, if you want, in the quarter, is a result of the sale of two large properties, as well as a reduction in the general corporate tax level in Norway. On the negative side, we have reserved for a possible additional tax charge for the year 2015, and further explanation are in the notes.
Then finally, I'm going to touch on page 14, as it may not be intuitive how the Skagen acquisition affects the accounts in the quarter. This we try to explain here. Fee and administration income increased by NOK 294 million. The amount is largely caused by performance fees booked at the end of the year. The operating cost from Skagen is NOK 41 million and reflects the cost only since the acquisition. The financial result is -NOK 45 million, including a positive contribution from Skagen of NOK 6 million and an earn out cost of NOK 51 million. The amortization charge is, as explained, related to the purchase price analysis and reflects estimated results as per the date of acquisition. Finally, we do tax the minorities and end up with a contribution to Storebrand of NOK 33 million, more than enough to pay transaction expenses.
The lower half table shows Skagen results per quarter in 2017. It documents my previous comments about limited results in the first three quarters, and then the full effect of performance fees in the Q4 . The table also shows that there is some volatility in the numbers. The quarterly cost is driven by estimated bonuses on performance fees, where the actual performance fees can only be booked in the official accounts at the end of the year. We will, of course, disclose both. And this concludes my comments, and we are, we're open up for questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We already have two questions coming through. The first one is from Jonny Urwin, from UBS. Please go ahead, your line is now open.
Hi, guys. Thanks for taking my questions. Just two for me, please. So firstly, the new dividend policy looks to be calibrated on the Solvency II ratio with transitional measures. However, I just note from the presentation, you also mentioned that ordinary dividends are subject to a sustainable solvency margin of above 150%. Now, when we think of a sustainable basis, I would imagine that's sort of based on the ex-transitional ratio to be prudent. But if you could get some detail on what sustainably above 150 means, is that based on the ex-transitional or the with transitional, please?
Secondly, I mean, the ordinary dividend, so there's obviously a beat on the total dividends, including the special, but the ordinary component's a bit lower. I just wondered, does that signal a bit of caution from you guys around the outlook, given you've introduced the ratchets on the ordinary dividend? Is there just a bit of prudence there? Any comments, much appreciated. Thanks.
I can comment on the first one. When we are looking at solvency ratios, we are talking about the solvency ratios including transitionals. But we also expect, of course, that the transitionals will be reduced over time. So our internal managing is very much without the transitionals. But the numbers you could look at when you are looking at the dividend policy is including transitionals. On the second question with special dividends and ordinary dividends, as it states in the dividend policy, in our ambitions that Mr. Grefstad mentioned earlier, the ordinary dividends reflects the capital-light growth and results from the front book.
While we this year had very good financial results due to good financial markets, as well as a very low tax charge, which made the results this year good. We have therefore decided to pay out an additional dividend reflecting the additional value creation after tax that was created in 2018.
Okay, thank you.
The next question comes from Peter Eliot, from Kepler Cheuvreux. Please go ahead. Your line is now open.
Thank you very much. Yeah, I guess the first one was a bit of an expansion on Jonny's question there. I mean, when I'm looking at the dividend that you've declared or you're proposing, it's... I'm just trying to square it with both the policies. I guess if you look back on the existing policy, then it seems to be, on my numbers, quite a bit less than 35%. So I'm just, yeah, I guess you're really looking forward a little bit. But on the new policy, you talked about specials and buybacks applying, you know, when the solvency ratio is over 180. I guess now you've paid a special when it's not there, but to reflect the strong financial results.
So I guess my question is, you know, should we also expect sort of specials in the future when we have strong one-off results, even though we're below 180? And could you give us a little bit of thinking as in terms of what you're thinking of specials? I mean, you know, if the solvency ratio did develop very strongly over the coming quarters, and you are up to 190%, you know, would that signal a very large buyback? Or would you? I mean, yeah, I can't really get a feel for the magnitude, perhaps, of any specials we might expect. Sorry, that was rather a long question. And then the second one was on the tax one-offs, which I guess are becoming quite a regular occurrence.
Can you give us any guidance as to whether we should expect these on an ongoing basis? Do you know whether, you know, you've got more potential properties, sources, you know, just any sort of guidance on an underlying tax rate that you might expect would be very helpful. Thank you.
Thank you. I'll start with the dividend. I think, first of all, it's a very clear statement from the board that they will give additional capital back to the shareholders. So that is the really clear statement here. Then, if you look at 2017, we used this year to both reach a strong increase in dividend, but also to meet the long-term target of a net debt ratio of zero in the holding company. And that is both now accomplished with the dividend that it is here. That is also well above the dividend policy we had for 2017. Looking forward, of course, it's the new dividend policy that comes into action.
Yes, you should expect, if there is a special good financial results in the markets or other positive special elements, that we will give a special dividend. Again, the board will return additional capital to the shareholders going forward. But what we try to do here is to show that there is one capital stream from the fee-based business. There is one possible capital stream from financial elements and other elements that is more volatile in the balance sheet. Of course, over time, there will be an important capital stream from the release of the capital from the guaranteed back book. So in that way, you can say it's more or less two elements in the extra dividends going forward.
Yeah, on the tax side, Peter, we have said that we expect a tax rate of 19%-23% for 2018, as we did for 2017. As you know, if we sell properties, that releases tax increasing temporary differences from our balance sheet, that is, becomes a tax income on our PNL. And if that happens, that will reduce the tax cost. But there's no planned sales for properties or anything like that in the pipeline. But if that occurs, that will lower the expected tax cost. And you should also bear in mind, of course, that this is all just it's not a very limited payable tax in in our accounts, so to speak.
Okay. Thank you.
The next question comes from Blair Stewart, from Bank of America. Please go ahead, your line is now open.
Thank you very much. Good afternoon. I've got a few questions. Firstly, just looking at operational factors, the performance of Skagen funds themselves, could you maybe comment on how that has progressed? And whether the degree of performance fees coming through in Q4 is something you would expect on a normalized basis. Also, just on a dividend policy, just intrigued slightly as to why you chose the earnings definition after the amortization, which is clearly a non-cash item. It seemed rather odd to me. And finally, just on the solvency, the effective solvency range that you seem to have hemmed in, which I'd say was between 150 and 180, just given some of the comments you've made.
It doesn't seem a particularly wide range, given some of the volatility that we've seen in the, in the past. I wonder if you could just comment on that. Thank you.
Thank you, Blair. Starting with Skagen. Of course, we have been seeing a development in Skagen, where you have had some outflow in the past. That is also the case in 2017, and that is very much on the institutional side of the Skagen business. When you look at the retail markets, especially in Norway, there's been a strong development during 2017 and inflow in Skagen. When you look at, it's a mixed picture when you look at performance fees in the different mutual funds in 2017, and I will say that we, we expect and, of course, plan for having even stronger performance fees going forward.
But altogether, I think, the results we have seen in Skagen this year is quite strong result, and a result that we are satisfied with. And also, is the indications that Lars gave for going forward, where you will see, well, quite low result effects in the first three quarter, but then a positive effect, ex, effect from performance fees in the Q4 .
Can I just ask on that, Odd Arild? What's your expectation for net flows for Skagen over the next year or two? Do you expect them to remain negative?
No, the ambition is to have a positive net flow for Skagen going forward. There is quite a limited level of institutional money left in Skagen as we speak. It's mostly on retail money, but we also have, of course, ambitions international both with Skagen and with Storebrand. And there is a very strong synergy here coming from Skagen's setup internationally, well, while our own setup for asset management is only in Norway and Sweden. And of course, we are planning to leverage on that for a lot of also Storebrand and DNB funds going forward. Should we then move to the dividend? I think it's just a way of making this easier to just look at the bottom line, the result of the tax.
We know that the amortization is around NOK 400 million a year and will be that going forward. So that is taking into account to give a clear number, an easy number, and give a dividend payout ratio based on that. Solvency between 150 and 180, this was very much the heat map we gave in our Capital Markets Day back in 2015. We of course have moved quite significant when it comes to solvency position from that level. And when we look at our stresses and so on, we feel that this is a comfortable level to communicate through and also to communicate the dividends based on.
Okay, thank you.
Ladies and gentlemen, if you would like to ask a question in this meeting, please press star one on your telephone keypad. The next question come from Michele Ballatore from KBW. Please go ahead, your line is now open.
Yes, good afternoon. I have a question going back to the capital generation. So at your Capital Markets Day in 2016, you showed this slide with the expected capital generation. You expect between 5% and 10% of solvency, in terms of capital generation, and then dividends and other minus 1-3%, and a net capital generation of 6%. And then you mentioned also that the runoff of guarantee can increase this capital generation up to more than 10 percentage points. So in the context of 2017, did you have any impact from the runoff of guarantees? I mean, what is the capital generation? How can we split the capital generation between earnings and the runoff of the guarantees? Thank you.
Yes. If I may start on that, on that question. I think that the capital generation that Odd Arild showed on page four is a simplification of the capital generation in 2017. As you can see there from assets return, business mix, and operating earnings, that consists of 18 percentage points altogether. It was very strong financial markets in 2017, contributing positively on that. And it's actually more return above what you could expect than a change in the business mix, because the change in the business mix is still kind of developing in the wrong direction. We have reached the peak capital when it comes to capital requirement from backbook CCR.
But any substantial relief from that book is still some time ahead, a short time ahead. And we will revert on to that on the capital market day with more precise information.
So I think on the, when you look at the fraction, Michele, it's more about creating own funds, and SCR is quite stable in 2017 compared to 2016. I think it's fair to say also that the capital generation and the solvency generation at least is in the upper scale of what we gave in our capital markets day and with the development we have seen in the business from that time on.
Okay, thank you.
The next question comes from Paul De'Ath from RBC. Please go ahead, the line is now open.
Yeah. Hi there. A couple of questions, please. Firstly, just following up on the answer to that last question, on this issue of peak capital and when the major capital releases start coming through. Did I hear you correctly saying that you're not at peak capital just yet? I thought we'd already got to that point. And is there any change to the expected timing of the capital releases? That's the first question. And then just the second question, just looking again, sorry, going back to the dividend, and the special or the potential for specials over 180 percentage points on the solvency ratio.
Is there any element within your decision-making process as to how you get above 180? I was looking at the sensitivities on page 12, and, you know, interest rates going down increases the solvency ratio. So if we had rates going down significantly, and then that pushed the ratio above 180, then presumably that, although you're above 180, it's not a great result for the long-term business. So, does that influence you at all, or is it a pure if you're above 180, then you give some money back? Thanks.
Yep. Hi, Paul. I'll try to answer the first one. There's no change in the communication around peak capital. We're at that level now, I would say, at that level throughout the end of 2017. And as we said, it will remain at that level for the back book for some time and then start to trail off and release capital. We'll try to spend some time now going through our projections and offer a as clear as view as we can on the capital market today, on the potential for capital release, and also be more clear on the estimated timing of that.
It's also, of course, clear that it's somewhat sensitive to a lot of elements, but especially, the interest rate level. Such increased interest rate levels will lead to a situation where the capital release from the back book will, well, come early. Then, on the estimated future position, I'm not sure that I completely.
Yeah. So in a situation where you have interest rates decline and you can't go through, in theory, a situation where you will have more transitional, so they approach the 180 level, which is the top threshold in the policy. And in that situation, it would be natural to take all factors into account, as the board always needs to do. And I think in general, lower interest rates is worse for our type of business model, and higher interest rates in general are better.
Also, some of the transitional rules will already decline in the Q1 , so some of this will decline according to the rules and the run up one sixteenth every year.
But then I think also it's fair to say that, of course, the NOK 150 and the NOK 180 is guidance. But of course, the board needs to take a thorough view on an annual basis, on the real economics of the business. But this is a good guidance on how we like to, in normal situations, to perform based on our new policy.
Excellent. Thank you.
The next question comes from Matti Ahokas from Danske Bank. Please go ahead. Line is now open.
Yes, good afternoon. A couple of questions from me, please. Firstly, if you could elaborate a bit more on the disability payments, the large one-offs you mentioned in insurance, what exactly were they? And then regarding Skagen, if you look at the full year profit before amortization, the illustrative IFRS figures you present 274. Is the comparison figure the 204 that you presented for 2016? So was the profit actually up by 30-something% in 2017 pro forma?
Yes, on the latter, you are completely right. It's a much stronger result and performance in 2017 compared to 2016. Very, very glad to see that, of course.
On the disability payment, we had, we have one corporation with a quite large coverage, and we had a couple of people being sick and reserving for disability for those people in the quarter. It's not something we see as a trend shift, but it does impact the core period as such.
How much was this large altogether in the Q4 ?
I don't have an exact number.
Okay. Yeah, great. Thanks a lot.
The next question comes from Peter Eliot from Kepler Cheuvreux. Please go ahead. Line is now open.
Thank you. Yeah, just a couple of follow-ups. I think first of all, on the sort of high capital requirements from the paid-up policies, I noticed that the paid-up policies declined by just over NOK 1 billion in the course of this time. Seemingly driven by the other, which the note says is transfers between DB and paid-up. I was just wondering if you could elaborate on what caused that and, you know, whether that is a sort of reduction that might be repeated. Second question was on the health insurance. I guess we had significant runoff gains in Q3, and then, you know, followed by a slightly worse combined ratio in Q4.
Would you say sort of Q4 is a new normal, or do you think there were, you know, some one-off in there? And then finally, just on the solvency sensitivities, I assume it's a typo on the right actually, where it says that there's a 13-point gain from the transitionals. I assume that should be 16, so 172. Could you clarify the timing of the UFR impact that we're gonna see come through? Thank you.
Yeah. I can start on the first one, on the paid up policies. If you look at the development in the quarter, it's settled a little bit down. This is reflected by the fact that there's more payouts and some conversions to paid up policies with investment choice versus the actual guaranteed return in the portfolio. So, in that sense, it's good to see that the current book is starting to trade off. But of course, we still have some funds left in the defined benefit, which over time will transfer to the paid up policy. With respect to your second question on health insurance, you will see that this is classified health insurance and group life together.
The health insurance is growing fast, it's profitable, and it's good, and there is no significant volatility between the quarters. However, in group life, we had a very strong quarter in the Q3 , and we had a weak quarter in the Q2, in the Q4 . If you take the group life, and for that matter, health insurance, as they're boxed together, look at the full year result and divide that in four, that's the best estimate I can give on future performance in these products.
When it comes to your third question, Peter, regarding the sensitivity from solvency, yes, you're correct. It's a typo, yeah, in that graph. And then the second part of that question, I missed it, sorry. Could you repeat please?
Just wanted to clarify how the UFR, the timing of, you know, how we would see the UFR impact in the solvency ratio.
Yeah, yeah. I will actually release the new interest rate curves two days ago, which included on the UFR down to 4.05%. So we will include that from Q1 2018, and then, I guess, the next step down will be from Q1 2019.
Okay. So on the with transitionals, that's a minus 1 percentage point impact that we'll see at Q1?
Yes. And actually, including the internal transitional, a lot of this amount will actually be coming back in the transitional.
Yeah.
Because a lower UFR will increase the technical program.
Yeah, yeah. Yeah, yeah.
As well, yeah.
Yeah, of course. Yeah. Thank you.
Ladies and gentlemen, we would have one more reminder. If you would like to ask a question, please press star one on your telephone keypad. There are no questions coming through, so I will hand the call back to you again. Thank you.
All right. Thank you all for joining the call. I would like to remind those of you in London that we are present at the Great St. Paul's Hotel at 2:00 P.M. GMT tomorrow. We would like to take the opportunity to wish you all a good afternoon.
Thank you for joining today's conference. You may now replace your handset to end this call. Thank you.