Let's start with the first speaker, and let me welcome our Group CEO, Fabian Rupprecht. Before joining Helvetia, Fabian came from NN Group, and he previously held various leadership positions at AXA around the world. At both these companies, he was responsible for significant M&A transactions. These included the PMIs of AXA Life in Switzerland, Delta Lloyd in Belgium, Aegon in the Czech Republic and Slovakia, and MetLife in Poland and Greece. Fabian was CEO of Helvetia before the merger, and he will now share his strategy for the new Helvetia Baloise Group. Fabian.
Thank you, Peter. Good afternoon, ladies and gentlemen. Thank you all for joining us today. It's a great honor to welcome you to our 2026 Capital Markets Day, the first one as the newly combined Helvetia Baloise Group, a leading European multi-line insurer with Swiss roots. While the last 12 months have been very busy for us as management, we're more than ever convinced about the merits of the merger. It's a great opportunity in so many ways. I hope that in today's CMD, we will be able to transmit our enthusiasm to you too. To start with, let me please summarize my key messages for you on slide five. First, building on strong results in 2025, the new company is already fully operational and advancing fast with the integration.
Second, we are a rock-solid company pursuing a highly disciplined financial approach with a clear focus on maximizing shareholder value. Third, over the next three years, our priorities are clear, delivering the announced synergies through a clear and well-controlled integration, completing our combined efficiency program, leveraging AI, and further advancing on technical excellence. These are the key levers to reach our announced targets, and they are in our hands. Finally, this is more than a synergy story. As a combined group, we offer sustainable, long-term, profitable growth beyond the integration phase. Helvetia Baloise will leverage its closeness to customers and partners, build on its expertise and specialties, and strive for excellence in its capabilities. Let's start on slide six. The new Helvetia Baloise Group has a strong base in Switzerland, a market that is known for its stability and its profitability.
At the same time, we have a balanced multi-line insurance portfolio with more than half of our profits and 60% of our business volume coming from our international markets and activities. Our focus strategies allow us to reach top positions in the targeted activities. In addition to our number one position as a multi-line in Switzerland, we're, for example, number two in [bancas surance] in Spain, and we rank well in the broker markets in Germany and Belgium, as you can see. The diversification is not only driven by the geographical footprint, but also by our business mix with strong positions both in life and in non-life. Finally, the new company benefits from a strong capital base with an estimated pro forma combined SST ratio of around 260%. Our portfolio is reviewed on a regular basis with regards to capital efficiency and strategic fit. Let's go to page seven.
2025 was a strong year for both companies, and they were able to deliver on all the strategic targets set for the last year. These targets were defined as part of the individual company strategies and were therefore fully relevant for 2025. To give you concrete examples, the underlying EPS growth of Helvetia was 20% and well above the range of 9%-11%. The return on equity of Baloise ended at over 15%, also above the target range. We're proud that these targets were achieved in parallel to the preparation efforts for the merger. Thanks to the intense preparation up to day one, we kept the timelines. We moved immediately to a joint organization with clear targets and fast decision-making. At the same time, we established a strong new brand with international reach.
This allowed us to keep employee engagement high and to minimize disruption for our customers. Let's continue with slide eight. Helvetia Baloise starts in a new setup, but there are defined strengths that we will keep and even grow, and which will form the bedrock of our company in the future. As a strong base for our value creation, we will continue to leverage our powerful position in Switzerland and our specialty know-how, which we consider as a driver of future growth. The focus on disciplined performance steering will remain. Technical excellence as a central initiative will continue to raise the bar in our insurance operations going forward. We will keep the IFRS-based financial steering and reporting that you know from Helvetia, applied rigorously in the new company, and complement it with the cash focus you know from Baloise.
As part of the shareholder value maximization, we commit to an active portfolio steering based on return on equity and strategic fit, and we will, of course, continue to deliver a stable dividend growth in the future as we did in the past. As you can see on page nine, for the next three years, we have set three clear priorities and all focused on execution. First, an obvious one and at the center of our efforts, to deliver on the merger and realize the synergies. This will be our full focus throughout the integration period until 2028. As a result, we have been very selective about adding further priorities. Second, as we believe that the evolution of AI gives many opportunities going forward, we want to stay at the forefront and use AI to deliver on our efficiency targets.
Third, we are convinced that continuing our progress in technical excellence is essential to combine competitiveness and margin improvement. All three priorities have been decided based on their direct contribution to our bottom line in the coming years. They are the three dominant levers in achieving our underlying earnings growth and thus an obvious choice to maximize shareholder value. Now the good news is these levers are largely within our control, which gives us a high level of confidence that we can deliver on them even in more challenging market environments. Focusing on our priorities allows us to present to you an ambitious and attractive plan as outlined on page 10. We expect to grow our underlying earnings per share at a CAGR of 10%-12%, even though we are starting already from a very high base.
We aim to achieve underlying return on adjusted equity in the range of 16%-18%. Attractive payouts are a core part of the plan. We are committed to delivering dividends of more than CHF 2.8 billion over the next three years, from 2025-2028. In 2029, most of our integration work will be completed, allowing for a sustainable dividend that is more than 50% higher than the one we propose in respect of 2025. The financial objectives show why this merger makes economic sense. We are creating a group here that can grow faster, operate more efficiently, and return more cash to shareholders than either company could have achieved alone. Our CFO, Matthias Henny, will give you more details about the financial objectives.
On the next couple of slides, I want to give you some more detail on the three short-term priorities, which I just mentioned. As I shared with you before, the execution of the merger is our number one priority. On page 11, I show you that from day one, we put a disciplined integration approach in place with clear governance, fast decisions, and full accountability. It's working. Synergy progress is on track, and initiatives are being tightly managed and monitored. We've already realized 21% of our synergies and efficiency benefits by 2025. 100% of all the initiatives are underway with detailed implementation plans. We've also made bold, decisive choices, such as selecting one existing IT target system per domain to avoid unnecessary complexity. Of course, a merger of this scale comes with risk.
We have identified them early from IT, cultural integration to synergy realization, and we have put mitigation measures in place from the start. We will come back to these topics in more detail shortly. Our Chief Integration Officer, Michael Müller, will walk you through our integration roadmap and risk management. Our Chief Human Resources Officer, Esther Roman, will share how we're building a strong, unified culture. Our Market Unit CEOs, Martin Jara and Jürg Schiltknecht, will give you a closer look at how we are preparing for the joint merger launch in Switzerland and Germany. Because integration is not just about internal alignment, it is about getting ready to go to market as one. Finally, a great example of our ability to execute complex integrations is Spain.
In Spain, we're currently bringing together two former Helvetia companies, Caser and Helvetia Seguros, to create operational synergies, as we had already announced in Helvetia CMD in 2024. This integration is not part of the Helvetia Baloise merger, but it's a powerful proof point of our integration capabilities. In Spain, we are already ahead of plan, and we have delivered tangible financial results. By the end of 2025, we had already initiated around 60% of the measures required to deliver the targeted CHF 50 million in cost synergies by 2027 on a run rate basis. In P&L term, this corresponds to roughly 1/3 of the synergies already realized. We will realize some capital synergies in addition. We are managing this integration with discipline, speed, and transparency, and we are confident we are on the right track.
Next to our integration efforts, we are committed to delivering on our combined efficiency target of CHF 300 billion. AI will be an important lever to achieve them going forward. Moreover, leveraging AI will allow us to accelerate the integration while at the same time reducing integration costs. Let me now share with you our approach as outlined on page 12. Helvetia has been an early adopter of AI. There is a proven scaling track record. AI had already been stated as a key lever in Helvetia CMD in 2024 to achieve its efficiencies. The basis of our AI strategy is our operating model. We develop reusable AI capabilities centrally and scale them group-wide through local business and IT use cases. This hub and spoke model allows us to reuse and scale solutions efficiently rather than reinventing them market by market.
This approach ensures a strong sense of governance and regulatory compliance, while at the same time enabling market-driven development and efficient usage. We deliberately focus on specific high-impact areas selected for their high transaction volumes, complex decision-making requirements, diverse data needs, and clearly addressable efficiency potential. With this, we have a scalable and value-driven approach for AI. While I am convinced that there is a very dynamic future ahead of us with many opportunities, I would like to give you tangible examples of impact already now. For example, in France and Italy, AI automates the intake of incoming documents and emails. In Spain, AI-based self-assessment for motor claims estimates repair costs directly from uploaded images, increasing straight-through processing rates. Across specialty markets and active reinsurance, AI helps us to automate the extraction and analysis of complex unstructured data across claims, underwriting, and reinsurance accounting.
The result is less manual work, faster turnaround times, and seamless straight-through processing into our core systems. Later, Martin Jara will walk you through our Swiss business and share further examples of AI use cases in Switzerland, showing how the scalable approach is applied in one of our core markets. As mentioned earlier, I'm convinced that improvements in technical excellence must continue going forward. This is necessary to stay attractive for our customers, to remain competitive in the market while we ensure attractive returns for our shareholders. In concrete terms, the 2025 loss ratio of former Helvetia improved by 1.5 percentage points, meaning Helvetia already achieved its 2027 ambition two years earlier than planned. This progress is the result of a few clear and scalable levers. Portfolio management, underwriting and pricing discipline, med tech risk management, and claims excellence.
Across all four, we have implemented concrete actions, and we are seeing a measurable impact. In 2025, this translated into fewer unprofitable portfolios. A 5% average effective rate change across our retail markets while maintaining our respective retention levels, robust Nat Cat budgeting, and a clear uplift from AI-detected claims fraud cases. Building on this proven delivery, scale now becomes an additional key enabler. As a company double the size, we simply have access to more data and increase our negotiation power with claims works thanks to more volume. In addition, we can better leverage necessary investments. This gives us the confidence that we can further strengthen our pricing adequacy, compensate for adverse impacts, and actively manage the customer retention in our core retail markets. At the same time, this setup ensures that we are well prepared for more challenging market conditions.
To fully realize this potential, we continue to invest, combining short-term improvements with long-term capability building. We systematically benchmark performance, ensure structured know-how transfer, and build expertise where it creates the highest impact, both locally and centrally. Of course, here again, AI will further accelerate that journey. With these levers in mind, we decided to increase our ambition and to go for at least another 1% reduction of our current year loss ratio, excluding Nat Cat and discounting. In this context, I want to highlight Specialty Markets as we observe a softening of the cycle in some of the business lines written in the segment. We steer this business through the cycle with a clear margin focus, as we show on page 14, and our results have demonstrated that in the past.
While we grew our business with a 13% CAGR over the last 10 years, our combined ratio never exceeded 100%, despite a soft cycle between 2015 and 2019, despite severe Nat Cat events and COVID. To further maintain this proven underwriting discipline, we need to act selectively and be ready to reduce exposures in lines where we consider prices insufficient and grow in lines where we see opportunities. For example, in 2025, we grew in aviation while we reduced our exposure in property or U.S. liability. We're therefore pursuing the rigorous portfolio management. It goes without saying that this is fully aligned with increasing sophistication in our technical management. Specialty Markets participate in the Technical Excellence initiative, has made progress over the last years, and will seize further opportunities to raise the bar going forward.
Our objective is to keep volumes overall stable in the short term and to return to significant growth as soon as we experience a hardening of the markets throughout most business lines in line with our long-term ambition. However, our primary goal is to keep our margins throughout the cycle with the normal volatility coming from Nat Cats and large losses. I've shared with you our priorities, which will receive the full focus of management to deliver on our vision's targets over the next three years. Let me now look beyond the integration phase and turn to the longer-term perspective for Helvetia Baloise on slide 15. Helvetia Baloise will be more than a synergy case, a company with potential to grow sustainably and profitably. Let me share with you our ambition here that is structured under close, f ocused, and excellent.
Close means we have direct access to more than 5 million retail customers who we serve through our direct businesses and through our more than 6,000 agents. Additional 5 million customers are served through around 4,000 brokers with whom we have relevant, sizable relationships across different markets. We will maintain the close relationship with customer and brokers that we have built over many years. By increasing our share of wallet and raising productivity through targeted investments in digital enablement and AI, we will be able to outperform market growth in our retail markets. Focused means our specialty know-how offers the opportunity for growth in this focused segment in and beyond Europe. The enlarged footprint also adds some revenue synergies. Altogether, we expect a growth with a CAGR of 5%-10% in this segment through the cycle, of which 1 percentage - 2 percentage points come from revenue synergies.
Finally, excellent means delivering profitable growth. Maintaining our margin and ensuring high capital efficiency requires striving for superior capabilities in technical excellence, efficiency, AI, and financial steering with the ambition to be top quartile among our peers. We need to be excellent in these specific areas. Our performance and trust culture will support this, striving for excellence in what we do. Esther Roman will give you more insights here. Let me now close by bringing it all together. As Helvetia Baloise, we are fully operational and well on track with integration. We're financially disciplined, and we're fully committed to maximize shareholder value. We have set clear priorities fully in our hands, and they will allow us to achieve our ambitious financial targets. We have a vision beyond the integration phase.
This merger will allow us to grow even stronger going forward with our strategy, building on close, focused, and excellent. The confidence that we can reach our goals comes not only from the strategic logic of the merger and the disciplined approach. It comes from the strength of our newly joined teams, of our people who put all their enthusiasm and commitment every day into their work to serve our customers better and to build a successful and profitable company. The merit goes to them. With that, I will hand back to Peter.
Thank you, Fabian. Next, we move on to financials with our Group CFO, Matthias Henny. Matthias was Chief Investment Officer of Baloise before the merger. Indeed, after an initial stint at McKinsey, Matthias has spent most of his career leading either asset management or finance functions at [Winterthur], AXA, and at Baloise. In his own words, he's therefore been dealing with insurance balance sheet his whole career. He's been CFO of the merged group from December. Matthias, please tell us how the new strategy fits into numbers.
Ladies and gentlemen, good afternoon also from my side. Fabian has outlined where Helvetia Baloise is heading strategically. I would now like to focus on how this strategy translates into sustainable long-term financial value for the group. My four main messages for today are, first, we start from a position of strength that is reflected by the high-quality earnings shown in our 2025 results. Second, we steer shareholder value creation across three new targets and aim for sustainable earnings growth, capital efficiency, and a sustainably growing dividend. Third, we have a clear plan and levers to deliver on our promises. Fourth, we remain focused and disciplined. That will be reflected in attractive and reliable payouts to shareholders. Let me begin with our starting position on page 19. The financial results for 2025 for both Helvetia and Baloise clearly demonstrate the high quality of our businesses.
Helvetia, as well as Baloise, showed strong results across the board. Helvetia's underlying earnings are 20% higher compared to previous year. Baloise standalone results based on Baloise's previous accounting assumptions showed a similar increase of 20% on a like-for-like basis. This comparison takes into account that the 2025 profit of Baloise was affected by significant merger-related costs, and that 2024 included a significant negative one-off related to the write-down of ecosystems. On a pro forma combined basis, the group achieved strong underlying earnings of more than CHF 1 billion. The pro forma combined figure results by assuming the merger had happened one year earlier and by carrying the Baloise result over to underlying earnings according to Helvetia accounting principles and assumptions. In addition, the merger-related accounting effects that affect underlying earnings are considered.
For these reasons, the pro forma combined result is not just the sum of both individual results. We outlined this already in December after the legal closing of the merger, and we have more information on this in our Full Year 2025 Results presentation. The combined balance sheet is very strong, with an excellent solvency ratio of about 260%. That is about 20 percentage points better than the pro forma value we mentioned at the merger announcement. The combined cash remittances amounted to almost CHF 1 billion. As promised, we will continue the strong track record of dividend increases of both companies in the last years and propose a dividend of CHF 7.70 per share for our shareholders for the financial year 2025. This corresponds to a total dividend payout that is 5.4% higher than the combined payout of both companies in the previous year.
Looking ahead, we are introducing new financial headline targets for the group for the integration phase from 2026-2028. They are shown on page 20 and are targeting disciplined shareholder value creation. Our ambition is to, first, deliver underlying earnings growth of 10%-12% per annum to 2028, underpinned by cost savings, technical excellence and disciplined growth. Second, achieve an underlying return on adjusted equity of 16%-18% in each year from 2026-2028, supported by an efficient capital allocation and a continued commitment to disciplined portfolio steering. Third, payout of a cumulative dividend amount of more than CHF 2.8 billion for the financial years 2026-2028, founded on a sustainably increasing cash generation. In addition, we confirm the 20% dividend uplift from cost synergies of the merger by the financial year 2029.
That translates into our intention to pay a 2029 DPS, which is at least 50% higher than the dividend proposed for financial year 2025. Let me continue on page 21 with the underlying earnings growth ambition of 10%-12% and explain where the growth will come from. The growth is driven by three main levers and underpinned by three priorities that Fabian outlined at the beginning. First, disciplined growth of our core business. This will contribute about 2%. Second, margin improvements in our underlying business. This will come from technical excellence, in particular, the cost efficiency program of CHF 200 million that Helvetia launched in 2024, and the cost efficiency program of CHF 100 million that Baloise launched also in 2024. Together, the margin improvement will contribute about 4% to the growth. Third, the CHF 350 million gross cost synergies from the merger.
These are the largest driver in the period to 2028 and will add about 5%. Note that the growth ambition applies to a tough starting point since 2025, benefited from a very benign Nat Cat environment. Of course, there are other effects. We showed this morning that the starting point is also made lower thanks to merger-related effects, but higher due to accounting effects. It is important to bear in mind that the definition of underlying earnings is different to the one Helvetia previously used. The new measure is more conservative as it includes items such as the cost of external debt. Let's look more closely on the cost-efficiency programs and cost synergies on page 22. We combined the existing Helvetia efficiency program, the existing Baloise efficiency program, and the cost synergies from the merger to one joint cost program.
The total gross run-rate savings amount to CHF 650 million. We are slightly ahead of track with this ambition. By the end of 2025, we have already captured 21% of the targeted amount that corresponds to run-rate savings of about CHF 139 million. We are convinced that we will have achieved about 90% of the target CHF 650 million by 2028. That translates bottom line after policyholder and tax into a net benefit on underlying earnings of about CHF 290 million for the financial year 2028. Michael will cover the post-merger integration in more detail, but it is important to me to underline that these cost savings are clearly defined, are tracked centrally, and we will report progress on synergies and efficiencies as well as on integration costs on a half-yearly basis.
We come next to our two main business segments that drives our earnings growth. Non-life, as shown on page 23, remains the primary driver of volume and earnings growth. The key measure for technical profitability in Non-life is the combined ratio. Both companies have strong combined ratio track records with limited volatility, even in adverse claim scenarios. Pro forma combined, the combined ratio for 2025 stands at a strong level of 92.8 percentage points. Technical excellence remains a key priority for us as Fabian has outlined. The priorities are clear. We will focus on technical excellence. That means pricing adequacy and claims excellence, and on active portfolio management and disciplined underwriting to support the cycle management and to protect the combined ratio from volatility.
Based on these levers, we anticipate a further improvement of the current year loss ratio, excluding Nat Cat and discounting effect by at least 1 percentage point compared to the already very strong 2025 starting point. In Life, the focus is on capital efficiency and reliable contributions to underlying earnings and cash. We are steering new business according to new business value, and this is closely linked to the CSM contribution of the Life segment. At the same time, we are improving the return on the in-force book through active portfolio management, in particular cost reductions and a continued shift towards capital-efficient products. In Life, individual business made up 78% of the group's 2025 total new business volume. More than 85% of this is capital-light business.
Including Swiss Group Life and active reinsurance, we guide to a growth rate of at least 8% in our life new business value from 2025-2028. Swiss Group Life makes up about 50% with the largest part coming from Switzerland. Here we expect further decrease in volumes due to the ongoing market trend towards semi-autonomous solutions. However, we are well-positioned with our semi-autonomous offerings that have significantly grown in the last years and can now benefit from the scale advantage of the merger. Since earnings growth alone is not sufficient, I now turn to capital efficiency on page 25. We aim to deliver an underlying return of 16%-18% in each of the years 2026-2028. We expect it to rise over time and reach about 18% in 2028.
The return is calculated based on the underlying earnings, adjusted for non-controlling interests and interest on preferred securities and on an adjusted average shareholder equity. We adjust equity for goodwill and for the intangible assets from the merger to avoid a purely accounting-driven tailwind in the coming years from the amortization of the intangible assets. The return will benefit in the coming years from underlying earnings growth via volume margins and cost synergies. These positive impacts are expected to more than offset the expected growth in equity from retained earnings. We continue the disciplined capital efficiency steering framework and are in the process of harmonizing the steering concept across the group. Our objective is that all business units meet the internal capital efficiency hurdle rate by the end of the strategic phase. The expected cost synergies will provide some tailwinds here.
Where businesses cannot realistically reach these hurdle rates within the planning horizon, we will actively consider portfolio measures. Today, most of our capital is already allocated to businesses that exceed the hurdle rate, and we see encouraging progress compared to the previous year. However, we are very transparent that some capital is still tied up in areas where we consider that returns are too low. Addressing this is an explicit management priority for the next strategic phase. Turning to capital synergies, as we have stated at and since the merger announcement, capital synergies are not the primary value driver in the merger. That is the cost synergies. The reason is that both groups were already well diversified. In addition, the capital requirements of the groups are driven primarily by the same market risk drivers. Therefore, no material additional diversification benefits should be expected.
For the local entity mergers, it is too early to be more precise, and we will come back as soon as the solvency models are combined. Be assured that we will look closely into the topic. A good example that Fabian already mentioned is the merger in Spain of Caser and Helvetia. We are expecting capital synergies from this merger that will contribute to cash remittance with a high double-digit million Swiss franc amount that will be spread over the next three years. Let me briefly turn from capital synergies to our balance sheet on page 27. You can see that our starting point for the next strategic phase benefits from a high-quality balance sheet and strong solvency position. I would like to mention four points. First, in asset management, we are building a unified investment and asset management platform with enhanced scale.
We have about CHF 120 billion in assets under management and progress to the top five position in institutional Swiss real estate management. The largest part of our assets stem from the insurance investment management. More than CHF 20 billion result from our third-party asset management, and this is enabling capital-light fee growth with investment solutions embedded across life, pension, and banking businesses, complemented by focused institutional real estate funds and mandates. Our asset allocation is high quality, well-diversified, risk-optimized, and with a focus on reliable recurring income. Second, the capital structure is well-balanced. Combined, our leverage ratio amounts to 27.5%. We calculate the leverage consistently to our underlying return on adjusted equity definition. That means we adjust for intangible assets and goodwill from the merger to avoid accounting distortions.
Third, the capital strength is also reflected in the Swiss Solvency Test. Pro forma combined SST ratio stands at about 260%, reflecting improvements at both groups in 2025. Basis points, the SST ratio remains comfortably above 200%. Fourth, this conservative balance sheet underpins our strong credit ratings with both S&P and AM Best confirming A+ ratings with a stable outlook. Looking ahead, our clear ambition is to maintain at least an A+ rating across our core entities. This shows we remain fully committed to a strong capitalization, and the balance sheet resilience will remain a key strength of the group. In times which are characterized by high volatility, this and the strong market position in the highly profitable Swiss P&C market makes us a particularly reliable investment. Given the ongoing conflict in the Middle East, it is perhaps worth a comment on that.
I can confirm that we do not currently expect any significant claims as a result of this conflict. We have war exclusions in place on our active reinsurance and specialty lines business, and we have not been materially impacted in respect of the damage so far. Via our French business, we insure vessels, cargo, and crude oil, but we have a net retention in the single-digit million Swiss franc amount. Thus, even in the event of a prolonged closure of the Strait of Hormuz, we do not expect significant direct claims. On the asset side, about 0.1% of our shareholder-exposed assets relate to the Middle East, including Israel. We see some second-order risks, both from lower asset values, including wider spreads, and via higher financing costs. However, here we clearly benefit on a relative basis from our high solvency ratio, high-quality asset portfolio, and Swiss domicile.
I next turn to cash on page 28. Cash is the foundation of our capital management and dividend payment. The chart shows the phasing of the expected cash impact of cost synergies, efficiencies, and integration cost. I first compared the integration cost from the merger with the cost synergies from the merger. During the integration phase, integration costs temporarily outweigh cost savings. This is fully planned and financed, including through the retention of Baloise's share buyback that was suspended last year. Because with the lower than expected integration costs, partly financed by capital synergies in Spain, this could open the door to a first dividend uplift already in 2027. From 2028 onwards, cost synergies are expected to more than offset the integration costs and translate into high cash generation.
By 2029, exactly as announced in April 2025, we will have achieved a sustainable additional net dividend capacity uplift of CHF 220 million. Note that this comes on top of the benefits of the efficiencies. We quantify the cash impact of the efficiencies to be about CHF 130 million. In total, our operating net cash remittance, that means the net remittance after holding, financing, and integration costs, will more than cover our dividend target. This leads me to our dividend policy. Our commitments are clear and shown on page 29. Dividends will be at least equal to the prior year. We aim to distribute more than CHF 2.8 billion in dividends in respect of the financial years 2026-2028. We target a 2029 DPS more than 50% higher than the one we are proposing for 2025, given the benefits we will get from synergies.
That exactly translates to the 20% dividend uplift we promised with the merger announcement. Share buybacks can complement our payouts, but our focus in the next years is the dividend and the financing of the integration cost. Share buybacks are considered on a case-by-case basis. We would take them into consideration if a strategic event, for example, from portfolio management, would release excess capital. Our dividend policy builds on a long and credible track record. Over the last 22 years, the dividend has never been lowered and has steadily increased.
Let me conclude. First, we start from a position of strength as reflected by the 2025 results. Second, we see a shareholder value creation across three new targets and aim for sustainable earnings growth, capital efficiency, and a growing dividend. Third, we have a clear plan and levers to deliver on our promises. Its execution will continuously be measured and shared with you with the regular financial results reportings. Fourth, we remain disciplined and shareholder-focused. That will be reflected in reliable and attractive payouts. Thank you for your attention, and I will now hand back to Peter.
Thank you, Matthias. You explained that a large part of the financial benefit comes from cost synergies. Let's look into those in more detail and into the wider integration with Chief Integration Officer and Deputy CEO, Michael Müller. Michael was CEO of Baloise before the merger, and before that, CEO of Switzerland. He therefore brings with him significant experience of the relevant markets and the integration demands. Please, Michael.
Thank you for the introduction, Peter. Ladies and gentlemen, in a few days, it will be one year since we announced the merger of Helvetia and Baloise. Even before we formally closed the transaction, we formed small teams that could work together within legal constraints to pave the way for the actual post-merger integration. Finally, on December 5th, we successfully completed the deal and built a top 10 European insurance company. Since then, we have continued to work hard on integrating both companies, their structure, and bringing together people and culture. At the end of 2028, we will thus have completed the bulk of the integration of one of the most promising deals in recent European insurance history. At Helvetia Baloise, we put the highest priority on a successful post-merger integration. We have set ourselves ambitious synergy and efficiency goals.
Delivering such ambitious goals require that we follow a disciplined integration process, which we have established. We focus on tight control of implementation expenses, a close tracking of the synergies, and a reduced complexity in the IT landscape over time. I'm proud to say that first key integration milestones have already been achieved. To ensure the success of the post-merger integration, we established a dedicated organizational structure centrally and in the integrating units to manage all critical tasks. This allows us to ensure clear governance, accountability, and disciplined risk management for the delivery of the cost savings and to control the integration costs. Therefore, we are confident of achieving synergies and efficiencies in scope, in time, and in budget, and we are looking forward to making this merger a success. Let me focus on how we deliver on integration savings while also reducing complexity.
Matthias already pointed out that we will report on one joint cost program going forward. We choose to combine the efficiency programs that Baloise and Helvetia each announced independently at their [2024] Capital Markets Day with the synergy program announced with our intent to merge in late April 2025. We indicated that we would realize CHF 350 million of benefits through merging the companies. This benefit translates to an additional recurring cash generation of about CHF 220 million per year just from the synergies alone post-merger. Today, we confirm this target and feel comfortable in achieving it. Combined with the two efficiency programs, the combined program sums up to CHF 650 million run rate synergy and efficiency gains before tax and before policyholder participation in total.
Baloise efficiency initiatives aim at improving the cost ratio by 2 percentage -3 percentage points by the end of 2027. It translates to improving the earnings by about CHF 100 million gross before tax. Similarly, Helvetia aims to reduce its cost run rate by CHF 200 million with initiatives like merging Helvetia Seguros and Caser, or nearshoring to the Spanish hub. We can already show the first success of our initiatives. By the end of 2025, we had already realized CHF 139 million in savings from the efficiency and synergy programs. This means that we had already achieved 21% of the overall run rate savings by the end of 2025. We are currently implementing our planned workforce reduction programs.
Based on the defined synergy targets and existing efficiency initiatives, we expect a reduction of about 2,000 to 2,600 FT by [2028]. By the end of the first quarter of [2026], the cases in which employees have left the organization or notice has been received or given corresponds to slightly more than 1,100 FTs. Based on this FT development alone, we estimate the achieved run rate by end of March [2026] to be slightly above 30%. This FT reduction has been achieved through a combination of measures, including early retirement programs, natural attrition, and where unavoidable, dismissals. Overall workforce reductions are being managed responsibly and with care, balancing the achievement of our synergy and efficiency targets with fairness, transparency, and support for the employees. We will have achieved around 90% of the saving benefits by the end of this strategy period, [2028].
It is important to note that the benefits will materialize gradually over time, with 50% already achieved at a run rate by end of this year. As already mentioned, we will report on the progress of synergies and efficiencies, as well as on the integration cost of the merger at every result release going forward. To build a disciplined integration process, including progress tracking, our units and group functions were given top-down savings targets, and then had to develop initiatives or not. This iterative process redefines the target benefits by unit, which you can see on the right-hand side of the slide. Martin will provide you with more information on how Switzerland will contribute to the overall target, and Jürg will give you more insight into Germany's plans. You see that a large part of the savings will also come from the unit corporate.
This includes shared functions such as IT, finance, asset management, just to name a few. We track and control the various initiatives step by step in a separate tool. On the next slide, I would like to put the focus on our ambitious cost-saving targets. We conducted benchmarking analysis across the integrating units. This way, we identified the areas in which we could optimize the most. It is important to note that our identified cost base does not take commissions into account. This is because Baloise and Helvetia have always exceptional strength in their strong distribution networks. We are focused on upholding our high standards of customer service and will not compromise our distribution channels. This results in an addressable cost base of roughly CHF 3.2 billion, on which the efficiency measures will have an effect.
Achieving CHF 300 million in efficiency gains will equal about 9% reduction on the respective cost base. When we look now at the benefits of the merger, the saving targets are even more ambitious. As you can see, the addressable cost base for the merger synergies does not include any of the non-integrating units. That is Spain, Belgium, Vietnam, and our Specialty Markets. They are not directly affected by savings related to the merger. The targeted benefits of CHF 350 million equal a reduction of the cost base by an impressive 21%. In some areas, costs will even be reduced by 40%. Having in mind that the efficiency programs and the synergies are adding up demonstrates how ambitious these goals are.
Martin has already pointed out that the cost synergies are expected to outweigh integration costs and have a positive impact on cash from 2028 onwards. Integration costs are classified as non-operating items and excluded from underlying earnings, as they are considered one-off and exceptional related to the merger. We manage the integration cost with discipline to ensure that we deliver cash benefits as early as possible. When we announced the merger, we said that we expected merger-related costs to amount to CHF 500 million-CHF 600 million. Since then, we have conducted in-depth planning of the initiatives and made fast and far-reaching decisions while always keeping costs in mind. Thanks to this, we now estimate total merger-related integration costs to be in the lower half of the initially announced range.
On the left-hand side of the slide, you can see the expected phasing of the costs before tax and any other effects. A large part of the integration cost has already been incurred by 2025. This is especially because of provisions we had to book under IFRS to account for social plans. This FTE-related provisions makes up around CHF 150 out of the CHF 189 million total cost incurred in 2025. In future periods, we expect a curtailment from pension plans, which will be partly offset the social plan cost, and with that, also integration costs. In 2028, 2026, and 2027, much of the outstanding expected integration costs will be incurred. These costs will mostly cover IT and other non-FTE-related areas. Further, the non-personal costs partly relate to IT expenses.
I have a dedicated slide later to explain the details to the IT integration. Lastly, most of the integration costs are borne by the segment corporate and Switzerland, which reflects the amount of expected benefits I showed you two slides earlier. Let me talk now about our key decisions we already have taken and our integration roadmap. Even though the legal merger took place barely four months ago, we are already proud of several achievements. Our new purpose and values are in place since day one and give us clear guidance. Esther will come back on this topic. We have already nominated all five management levels, meaning 700 leaders. Thanks to the work of many employees, we successfully unveiled our new brand in February.
We also defined our IT target landscape and set up IT systems for collaboration between our employees. We had a successful start, and we are looking into the future with clear integration targets. I will restrict myself to mentioning only a few of them. We are looking forward to the sales start in Switzerland and Germany, which are key milestones in the whole integration process. Starting from the 1st of January 2027, we will also have harmonized working contracts for all our employees in Switzerland. Looking further ahead into 2028, we will be a fully integrated organization, and the consolidation of all group platforms will be done with further decommissioning work afterwards. In essence, we laid out the integration roadmap early on and took the most important and decisive actions fast.
This helps us to reduce complexity over time and brings more clarity to all of our stakeholders, including our valued employees. The IT integration is one of the more complex challenges we face for this merger. We aim to avoid the complexity of a best-of-breed approach by selecting and reusing just one IT landscape per domain. The goal is to have a unified IT backbone across core insurance and group functions. For example, in our group functions, we reuse the Baloise ERP in finance, and we implement the front office and joint real estate solution from Helvetia in asset management. In Switzerland, we integrate Helvetia systems, and in Germany, Baloise systems for the sales force ahead. This ensures we work effectively and efficiently towards these two very important milestones in the market units. We also have ambitious goals for our IT landscape.
The most important changes for the organization will be made by the end of 2028. The IT integration will last longer, especially for the decommissioning of the different IT systems. This will take time then also after 2028. The main value drivers for IT are, first, a reduced IT footprint and costs with around 67 core group systems and core systems in integrating units remaining post-integration compared to 125 systems before the integration. Second, developing and relying on robust and scalable IT platforms. Third, a focused AI strategy with shared data on AI platforms. Our AI strategy is based on our capabilities, which were elaborated by Fabian, and leads to impactful use cases in all business focus areas, which will be further elaborated by Martin later. Therefore, IT is, and becomes even more, a structural enabler for long-term synergy and efficiency delivery.
A merger of this scale naturally brings several risks with it. Being aware of them and implementing mitigation measures early on is a key factor for a successful integration. With a thorough and effective bottom-up as well as top-down risk assessment, we identified and assessed key risks and implemented mitigation measures. The risk of not realizing synergies is managed and mitigated by clear governance and accountability. Our post-merger integration team works closely with the decentralized teams while being in control of steering the integration costs and synergy capture. As mentioned before, by using already existing systems per domain and having IT and security controls in place, we mitigate the risk of implementing new IT systems. Esther will further elaborate on people and culture risks, which will also be reduced by a clear and transparent communication.
With our disciplined integration process, we are confident that we reach our ambitious goals, and the post-merger integration teams work hand in hand with the business units and group function to ensure a successful integration through clear governance and accountability. With this said, I'm proud of what we have achieved so far, and we are fully committed to delivering on the targeted savings. We are well-equipped for this challenge. Thank you very much, and I hand back to Peter.
Thank you, Michael. As well as bringing together two cost bases, the merger also unites two cultures. Our Chief Human Resources Officer, Esther Roman, will now address the people, leadership, and culture related risks and opportunities. She brings over two decades of international HR leadership experiences across regional and global roles. This includes executive committee responsibility in multinational organizations prior to joining Helvetia in 2024. Esther, please.
Thank you, Peter. Good afternoon. Let me start with a simple fact. M&A success is not just about strategy. Value is realized when people and culture execute with certainty. That execution certainty comes from clarity and direction, aligned leadership, and trust across the organization. Integration gives us a rare opportunity to do things differently, to introduce new systems, challenge legacy ways of working, and accelerate change. My message today is we have built the organizational stability, leadership capacity, and cultural operating system that gives us exactly that. I'll take you through three things, stability built at speed, how we mitigated the top PMI risks, and why our performance and trust culture gives you scalable, repeatable value creation. Let me start with what we have achieved so far. In any merger, speed matters, and we moved decisively.
As Michael mentioned before, we nominated over 700 leadership roles and finalized the definition of the whole organization across the five levels by the end of Q1. That is a full organizational backbone defined within a few months, not years. We established a clear communication change framework with frequent candid updates across all countries and units, as well as group-wide change support. We are seeing early signals that this integration moment is enabling change in how we challenge, decide, and execute. At the same time, we are very conscious that this pace of change creates pressure, new roles, new processes, high workload, which is why we complemented speed with targeted change support and manager enablement across the group. Culturally, bringing together two strong cultures creates momentum for faster and more intentional culture change. We start with a strong high-trust foundation.
Out of the culture analysis that we did last year, we saw that 2/3 of attributes of the perceived current culture across Helvetia and Baloise were already aligned, and 90% of the future desired attributes are identical. This gives us confidence in our chances to manage a successful culture integration. We also provided clarity early on by launching a new purpose and new values on day one. Importantly, engagement scores increased by 6 percentage points after the merger announcement, which is a strong sign of trust and confidence. This early clarity and stability mean we are not losing time, leaders, or know-how, the three biggest reasons why integrations slip. In a context like ours, we need to be mindful, not only of the risk of split organizations, but also of integration fatigue, uncertainty, and operational overload. We address this head-on.
Our structure is designed for execution efficiency and customer closeness. Decision rights are clear, spans of control are streamlined, and we see high leadership cohesion. This approach has mitigated the three main integration risks. Uncertainty and dissatisfaction addressed through transparency and fast clarity. Second, unwanted departures controlled through targeted retention and strong engagement. Cultural misalignment neutralized through aligned values and a common operating system. Because we moved fast, communicated transparently, and provided clarity early, we have not seen an increase in unwanted attrition in Switzerland, including talents. Absenteeism remains stable and sick leave hours per employee decrease compared to previous years. Because leadership alignment was established rapidly, decision-making latency is low, enabling faster synergy execution. We see encouraging signals that execution discipline and alignment are taking hold across the organization. In other words, we have created a stable, trusted organization that can now focus fully on value creation.
Now let me turn to the future. Our performance and trust culture is the operating system that ensures sustainable value creation. Why does this matter? Because it increases predictability in delivery and reduces execution variability, two drivers of synergy certainty and cash conversion. We focus on five levers, each with a tangible business outcome. Clarity, producing faster decisions. Leadership and collaboration, ensuring more leadership bandwidth and cross-border teaming. Talent mobility, bringing the right people in the right roles faster. Reward alignment, that is, incentives tied to strategic impact. Our long-term incentives balance shareholder returns and operational profitability, each weighted at 50%. Our short-term incentives is tied to annual group and market performance, combining collective results with individual accountability to ensure pay reflects delivery against financial and strategic priorities. Finally, a leader with focus on continuous improvement and entrepreneurship, allowing for efficiency and productivity gains over time.
This culture is already visible in how the organization works. We see shared behaviors, cross-functional collaboration, a fast operating rhythm, and leaders who drive clarity and accountability. We will see the impact of this, not only in synergy capture, but in the long-term scalability of the group. Now, let me close with a few key messages. We have built a stable organization at speed, 700 leaders nominated quickly, an aligned culture, high engagement, and talent secured. We have mitigated the most common integration risks. Clarity, trust, and retention are high. Cultural integration is ahead of expectations. We have an operating system that increases execution certainty. Our performance and trust culture drive faster decisions, disciplined performance, and leadership capacity across the merged group. This is why we are confident about delivering the merger value reliably, predictably, and at pace. Thank you very much.
Thank you, Esther. Now we come to our first Q&A session, and I'd like to invite all four speakers onto the stage, who we've just heard from. As a reminder, please could we focus this afternoon on the content that we've presented here? If there are any follow-ups from this morning, then Investor Relations will be very happy to take those afterwards. We'll start with questions in the room. Anybody? Please, Farooq. Sorry, mic is coming to you.
Get your mic.
Thank you so much. Thanks for the presentations. Farooq Hanif from JP Morgan. You mentioned looking at return on capital as a guide to keeping portfolios, and obviously, over time, that ROC profile might change as you deliver. Are you also looking at size and scale? When we take a market like Italy, you may have niche businesses, but you're never gonna be really big without M&A. Would you also consider size as a criteria for looking at portfolios? That's my first question.
My second question is, when you look at your earnings growth profile, you have 2% CAGR from business volume growth, and then you've got integration and efficiencies. When you think about some of these additional synergies beyond the first goals, including revenue synergies, what do you see as a sustainable run rate? What kind of qualitative things can we keep in mind that will help us think about long-term earnings growth? Thank you.
Thanks a lot, Farooq. The first question was on how do we manage our portfolio, and do we consider size and scale for [Fabian]?
Yeah. Thank you. First of all, we look at our portfolio as key criteria, return on equity against the hurdle rates and strategic fit. That will be always the first criteria. Now the question is, can you do that in various markets even if you're not number one? The answer is, we're able to focus our strategy where we're in a focused segment and we are there playing at the top. We can do that, and we're confident to do that. Again, the proof is in eating the pudding, so we will always look at the return on equity at the end, so we can do it. We have in all of our markets, basically, very strong positions, be it overall or be it in the respective niches.
Thank you. The sustainable synergy run rate realization from Matthias. Thanks.
Yes. You mentioned that 2% CAGR is coming from volume growth. 4% is coming from margin improvement, including efficiencies. It's not only efficiencies, it's also technical excellence. Both components, so volume growth and margin improvement, we consider to be sustainable even beyond 2028. Whereas the synergies, the 5%, that is limited to 2026 through 2028.
Okay. Yes. Tom?
Hi. Good morning, all. Thomas Bateman from Mediobanca. Thanks very much for the really great presentation and all the detail. Just on the combined ratio, I know that you haven't given a kind of a total core guidance there, but one point in loss ratio improvement, I've got about one point from cost synergies. That kind of gets you into the low 90s. Is that the right kind of guidance you're giving on combined ratio? The second question is just on capital synergies. I was surprised and happy to hear you identify the [capital] s ynergies in Spain since about CHF 80 million or so .
You alluded to the other local entities being a bit too early, but what could we get from that, basically? I think you're probably talking about Germany and the Swiss life entities, but what are you waiting for there? What might come out? The final question is just on holding company cash and the outlook there. It feels like you've got more confidence in the outlook for cash. I think that's probably because the integration costs have come down a little bit. What's the kind of outlook there? Maybe what's the cover above the dividend at the moment? Gross cash remittances offset by holding company costs. How much of that is above the dividend? Thank you.
Thanks, Tom. The first one, can we say anything more about the combined ratio going forward?
Actually, we give two guidances. One is on the loss ratio current year, excluding Nat Cat and discounting, and the second one on the absolute cost savings through synergies and efficiencies, simply because we believe these two measures are the most efficient way to capture what we're going to do over the next three years. Now, obviously, these translate into combined ratio. Loss ratio of 1 percentage point improvement including Nat Cat, yes, that will translate into combined ratio. Also, the cost savings will translate into expense rate reduction. However, have in mind that the cost savings do not only relate to P&C. We also have Life business. We have non-insurance business. We have the group. This needs just to be taken into consideration. Overall, something in the low 90s is not completely wrong. I would put it like that.
Yeah.
The second.
On capital synergies, if there's anything more that we can say on that.
Yeah. We identified the capital synergies in Spain. There we are further ahead in the integration. For Switzerland, we will combine the models during this year, but we explicitly want to manage expectations. I mean, the biggest drivers for target capital is market risk. These are the same levers that we have both on Helvetia and Baloise Group. The business profiles are very similar in Switzerland. That's why we don't see a significant capital synergies for Switzerland.
Great. Thank you. The third one was on the holding cash and the buffer we have for the dividend.
First of all, our plan foresees enough operational cash generation, only operational, no capital synergies, enough operational cash generation to finance both dividends and integration costs. We take the dividend targets very seriously. They're one of the three top targets. That we have built the plans with enough safety margin to deliver the dividend path, although under adverse scenarios. That likelihood we need to touch to liquidity reserves, like the free deployable funds, that its likelihood is small.
Thank you. I think Iain has had his hand up next.
Hi, Iain Pearce, BNP Paribas. Just one on the cash remittance. You haven't given an explicit cash remittance target, which you had at Baloise definitely before. Just wondering if you could give us some guidance on what you view as the sort of run rate cash remittance level post-integration and sort of what headroom you have versus that dividend cover. Second one, slightly linked to that is on additional capital returns. You mentioned you might look at share buybacks mainly in the event of a portfolio event where there might be a disposal. With the SST where it is and potentially sizable headroom on the cash remittance versus dividend, what might the level be where you begin to look at additional capital returns on a more ordinary basis?
Thank you, Iain . Probably both for Matthias. The first one on the cash run rate, what should we expect?
We have given transparency about how the cash remittance will improve through the synergies and efficiency over time. We will enhance disclosure on a net and gross basis. I would like to reiterate once more that with the operating cash that we produce, and which we upstream to the holding level, that's sufficient to finance the dividend path, including the integration cost.
Thank you. The second one, does the high SST ratio influence our share buyback ambitions?
The high SST ratio, that's a sign of a strong balance sheet that we have. It's also reflected by the A+ rating of the two rating agencies. We, however, don't see the group SST ratio as a binding constraint for capital upstream. It's more the local solvency or regulatory constraints that are in place. Our focus is on generating synergies and efficiencies over the plan period, to finance the dividend uplift over time. A potential share buyback, as mentioned, could be taken into consideration in case of a strategic event.
Thank you. I think Nasib, you have your hand up.
Thank you. Nasib Ahmed from UBS. Firstly, just following up on the cash. You haven't given the Baloise-style split, but can you give some kind of percentages on where is the cash, where it is coming from, or some guidance around how to track that? Is underlying earnings the right metric? I kind of went through the pack and you're giving some numbers for Switzerland and Germany later on. Is that the level that we're expecting from Switzerland, Germany? If you can give more color on the remittances from each of the subsidiaries that would be great. Second one on capital efficiency, I'm coming back on your framework. I believe it looks at portfolio, and you're giving the businesses until 2028. If the businesses aren't performing today, would you still look at actions?
Particularly I'm interested in Swiss Group Life and Germany, how those businesses are performing in that framework. Just finally on integration, what would it take for you to complete the integration quicker? It seems like IT is the blocker. When I look at the slides, 2028 is the IT infrastructure. Is there any way or what would need to happen for you guys to complete the IT integration six months earlier, three months earlier? Thank you.
Thank you. The first one was, again, on cash [Matthias] . How do we think about cash by country, actually?
You asked about the underlying earnings? We consider the underlying earnings as the main financial steering metric to follow on as it strips out the one-off effects. That's the first point. Obviously, cash follows underlying earnings. Payout ratio is below 100%, obviously from a cumulative viewpoint. Looking at the cash remittance, we got this overview of cash, which is coming from which market unit. You can see what is coming from former Baloise and former Helvetia.
Okay. The second one was on portfolio management. Fabian, what if we just look at the position today? How do we think about that portfolio?
What we look at is the plan towards 2028 because you have seen that some of the businesses do not fulfill the hurdle rates. We give them until 2028 to achieve the hurdle rates. Now, when we see on the way that there's no way that this plan is realistic, of course, we will not wait until 2028 to decide. We'll do that earlier. That is what you can expect. Now, you mentioned two businesses, perhaps just to say a few words to them. We have Group Life, where full insurance is now a very consolidated and concentrated market. We're one of the top two players. We can use economies of scale in that market, and Martin will speak about that later, so I will not be too extensive on that.
I can tell you that it's very attractive, as well, to be able to offer the full range and to accompany our customers in that market trend, which happens currently from full insurance to semi-autonomous foundations, which are highly attractive from a return on capital point of view. On Germany, Jürg will speak on Germany, so I don't want to take away his story, but he will tell you that since 2023, in the last years, we have significantly improved our profitability in our German businesses. Now going forward, we have CHF 70 million of additional synergies of which we want to achieve 90% by 2028. That will add on the result in Germany. Those businesses are really overall attractive businesses in the way they are run.
Okay. The third one was to Michael on integration. What's the main variable that affecting the speed of that integration?
First of all, we have the CHF 650 million. We are committed, and we are also comfortable to reach that in the three years, 90% of that, which is already an ambitious goal overall. Also the ramp-up, if you're looking at the ramp-up already having a run rate at the end of this year of 50% of that is quite a fast ramp-up that we are guiding there. You're absolutely right about IT takes longer in some areas, but we are fully focused on realizing as fast as possible. That's also why we are starting like that and also having sales start, for example, already in this year, which means, at the moment really we have this ramp-up, which is quite fast, and we are very comfortable also to reach that.
Okay. Thank you very much. Any more from the room? Yeah ? Yeah. Please.
Just on the loss ratio improvement, if you could give some guidance on what you're assuming in relation to pricing in that 1 percentage point loss ratio improvement, or is that purely internal metrics and anything from pricing will be additional to that?
On pricing assumptions, Fabian, would you like to answer that?
Yeah. The assumption is in pricing that expected inflation over the next years will be fully compensated by price increases. We want to position technical excellence. That's not just price increase. It's really many of the things which we explained in the presentation. It is pricing sophistication, micro-pricing, pricing more often, managing and handling our claims networks, using our purchasing power and steering our customers into repair shops that give better service to them and lower the claims cost. There's a lot of things happening behind that, and that will allow us to stay competitive and not only to have to go through price increases going forward.
Okay. Farooq?
Hi. Thanks again. On the Specialty growth, these are very ambitious targets. I think a lot of us might be healthily skeptical that growing in a weak pricing environment to get that level of growth that you want to achieve is challenging. Can you tell us what it is about, for example, synergies where you're trying to grow in a new market, where you think you have an advantage? Is it just the presence of the local business? How confident can we be that you do this in a disciplined way?
Yeah. Let me first start to say that we are currently experiencing a softening cycle, not surprise to anyone here, in a few business lines in Specialty Markets. In that period, we shared with you that our focus will be on margin and not on growth. We manage your expectation that during a softening cycle, we are not the ones who grow at the cost of profitability. The other way around, we'll make sure that we keep our volume stable and we keep margins. Yeah. Through the cycle, we see the growth which we put into our ambition. Why are we convinced of that? First, specialty is not a new business for Helvetia, and we have identified quite a few interesting, attractive pockets of specialty business on the Baloise side.
Of course, we can combine our market presence, which we now have in Germany and in Benelux, with the know-how we have in Specialty Markets. We had that as a strategy already in the 2024 CMD on the Helvetia side. Of course, we did not have access to those markets. That's why we're confident that from that we can generate some additional revenue synergies, which were not part of the package in the past. There is strong know-how. There is, as well, a clear focus on what we know and what we don't know. We will keep that focus because we go there through our know-how, and are convinced that this is a base for a future constant growth. Let's not forget, we have a good track record. We have a stated 13% CAGR over the last 10 years in that business through the cycles. Of course, the growth was not always the same, but we were smartly riding along the cycle. I think that's important to take away as well.
Okay. Yeah. Tom, please.
Hi. Thank you. Just on revenue synergies, is there anything to mention in asset management or private banking, given the, I guess, the broader life insurance customer base you have? The second question is also on Life. The 8% new business value CAGR is fantastic, but I noted there were some exclusions there. I don't know, maybe you could simplify that for me and just tell me what the CSM growth might be. Finally, I was interested in your comment, Esther, on talent, sick leave, and absenteeism. Is there any financial impact you could help us quantify? Maybe just qualitatively, what has your experience of this merger been in comparison to other mergers that you've gone through?
Okay. Thanks, Tom. Just to clarify your second question, you're after the CSM normalized growth, essentially.
Yeah, something like that, because the 8% new business value growth is fantastic, but I feel like that's not what I'm going to see in the numbers in the CSM growth. Yeah.
Do you want to start?
I can quickly explain to you that. Why did we exclude active reinsurance and Group Life business Switzerland? Group Life business in Switzerland is in a market situation where the full insurance business, traditional business, is decreasing. Customers are switching to semi-autonomous solutions. We offer both. The additional revenues that we create through semi-autonomous solutions are not captured on the new business value. Therefore, it doesn't really make sense to capture this in the value of new business CAGR target. Active reinsurance is a separate business anyway. We thought it's sensible to use individual life as such. Even if we would include the other two business, we would still have positive growth over the planning period.
Okay. Thank you. Fabian, do you want to comment on revenue synergies more generally and also on the merger experience?
Yeah. Of course you have André Keller here amongst us, so please use as well the break to discuss that with him on asset management. Given that we have both a strong presence in Switzerland, now the combined company is, for example, in real estate, one of the top five players in Switzerland. It's hard to quantify, but of course, that is a much stronger position. Martin and I will not talk about that, but Martin will as well talk about how we combine the product offers of the two companies, and of course that will make us more attractive for the customers. Again here, quantification, we have been more careful on doing that, but it will all contribute to our ambition to, at the end, grow the business overall. That is the answer to that question.
Sorry, the third one was on the merger experience more generally. Do you want, Michael, to take that?
The question was whether it's on cost base of [Alexa], if that was to cost, and then I think it was also about the question of absenteeism and the question of this part of the talent view we have. About the ambitious goals we have, I mentioned this 21% that we have. You always have to keep in mind that it is calculated on both sides of the cost base. It is calculated as a merge from two companies, so it's on both sides. Normally, if you're looking at similar transactions, you take one part of the company, so the smaller or the lower cost base normally, which then means also it would double this part, which is also quite ambitious.
My question was more actually, the way that you described it was that you kept your talent, less people were going off sick, and I just wondered how we could quantify that. Actually, I'm not going to say that. It sounded like the quality of the business has improved, and I was just wanting to understand that a bit better.
Yes. One of the critical focus points of the merger is to not lose capability and talent. It's not just absenteeism, which is important, it's also staff turnover, so attrition, but also presenteeism, so which we are combining with the measurements through an employee listening strategy of our engagement across the organization. Throughout the pre-day one planning phase and also now going forward, we're putting a strong focus on retaining critical capabilities and roles in the organization. We have targeted retention programs, so the financial impact will definitely be associated directly to the business continuity and also the scalability and the intellectual capability that we need to retain going forward, which is one of the greatest risks of a merger.
Yeah.
If that answers your question.
I have one proof point to add because we are combining both distribution forces in Switzerland and in Germany, and Martin can later on confirm that we're not losing any critical talent in the distribution force. Even though we know that competitors were very eager to get some of them, we see that distribution force fully continuing with the same talent going forward. I think that is a very strong proof point which shows how we can deal with that in this situation.
Right. Thank you very much. I think we better leave it there. Give you a chance to have a bit of a break, and we'll reconvene here in 20 minutes at 3:35 P.M. U.K. time. Thank you very much.
Thank you.
Thank you.
Perhaps if everybody could take their seats again to restart. Okay, welcome back everybody. Now we'll hear about two of our most significant markets, starting with Switzerland. We think our home market is a very attractive one, and it's one where we enjoy a leading position as the largest multi-line insurer. Let me welcome CEO Martin Jara, previously also CEO of Helvetia Switzerland, to tell you about our plans there. Martin brings with him over 30 years of insurance experience, in particular at Winterthur and Allianz, with over half of these being at board level. Martin, please update us on what is happening in our home market.
Thank you, Peter, and good afternoon, everyone. Our home market has always been the backbone of both former entities. With the merger, our strong base in Switzerland becomes a unique strength of Helvetia Baloise Group. Together, we have a leading position in one of Europe's most profitable markets, and we profit in that market from broader customer access and from scale to leverage our capabilities. This creates reliable underlying earnings and positions Switzerland as a stable value anchor for the group. Let me start by outlining the fundamentals. Thanks to the merger, we strengthened our market position and now hold the leading position as the number one multi-line insurer in Switzerland. We serve over 2 million customers and more than 200,000 small and mid-sized enterprises. A strong trusted reputation in the market helps us to further develop the exceptional customer proximity of the two former companies.
Brand awareness for each company was above 93%, which means more than nine out of 10 people in Switzerland are familiar with Helvetia and Baloise. This closeness enables us to monetize the direct access to every third household and every third SME in the Swiss market. We do this by focusing at one hand on our strong tied agent channel. With more than 1,700 agents at roughly 150 regional agency locations across Switzerland. At the other hand, we build on our broad and successful partnerships with more than 800 brokers and long-term partners, like the Swiss Touring Club . In addition, we leverage our powerful digital presence, including Smile, Switzerland's leading digital insurer, with more than 220,000 customers. When it comes to technical excellence, both companies have already demonstrated outstanding performance.
Both have reported highly attractive loss ratios over the last 10 years, thereby outperforming the market. Together, we will now amplify that strength. It is important to understand that for our Swiss business, scale is not only a matter of size, it is a strategic advantage. It allows us to leverage our capabilities while keeping our closeness to customers by our now much broader customer access. This combination of size and customer closeness is exactly the strategic sweet spot we are aiming to position us in our attractive home market. Combining the assets of former Helvetia and Baloise enables new horizons for our value propositions in the Swiss market. To illustrate this, let me elaborate a bit further on the example of our future comprehensive value proposition for financial advisory.
With the merger, we integrate a broad range of services and products in the areas of life, of wealth management, and as well as in real estate and in mortgages. That combination supports our customers across their entire life cycle, from building assets, securing their families, taking property-related decisions, to preparing and navigating retirement. This integrated one-stop offering for financial advisory is truly unique in the Swiss retail market. To deliver it, we build on our broad distribution network with over 150 locations in Switzerland. Our new scale enables us to operate at least 14 financial expert hubs where specialists from individual life, real estate, mortgages, and banking work closely together to provide tailored, multidisciplinary solutions for our local customers across Switzerland. Our most recent figures clearly reflect our strengths and the future market potential.
In individual life insurance, we increased our new business volume of recurring premium last year by around 6%. We also made good progress in wealth management with a robust increase of 8% to around 6,000 wealth management mandates, with over CHF 6 billion assets under management. The strategic focus of Baloise Bank is thereby shifting towards capital-light and interest-rate-indifferent growth. The volume of signed mortgages via our mortgage brokerage increased to around CHF 2 billion last year. As Fabian already explained, besides our market opportunities, the execution of the merger is our first priority. Since December, we achieved significant progress in Switzerland. Already prior to the official date of the merger, we appointed the management teams at the first three organization levels. This gave our employees clarity and orientation.
We unleashed the new brand shortly after the merger, and we aligned numerous processes in our joint customer service entities. As a result, we see in the early phase of the integration very similar customer attrition rates as last year, despite the premium increases we executed. We also see positive effects on employee engagement with 83% compared to 78% last year. We see stable attrition and strong commitment in the paid agent channel, with already almost 100% of the new working contracts signed. We are fully prepared for the next major steps. On 1st of July 2026, we will be present in the Swiss market with one joint sales force.
This comprises a joint market presence under the new brand, a unified offering, a joint physical agency network across Switzerland, and a simplified legal structure due to the local merger of our Life and Non-Life entities. Our sales force, and it brings the potential of the merger to life in our home market. A crucial part of our integration is the rigorous realization of efficiencies and synergies. This slide shows that we are firmly on track to achieve our ambitious cost-saving plan. In 2025 and 2026, efficiencies and synergies are mainly driven by reductions of the workforce based on the elimination of overlapping functions, the optimization of our target operating model, and process automation, including the adoption of artificial intelligence.
In 2027 and 2028, value contribution increasingly shifts towards the consolidation of locations and facilities, towards shoring and nearshoring, IT harmonization and system decommissioning, and the broad realization of AI-driven process solutions in our core business. Our synergy plan is very front-loaded, which results in cost savings ramping up significantly over the next years. Almost the entire value of CHF 250 million will be captured by 2028. A core element of our group strategy and in our Swiss business is the use of artificial intelligence. What sets us apart from competition is our capability-based approach, as explained by Fabian. Instead of just implementing single use cases, this approach enables us to exploit the full potential of AI across geographies and across functions.
A very valuable asset are our deployed and validated solutions from both former companies that are already generating measurable impact and will do so at scale in the future. I would like to mention a few examples. First, the AI concierge. The solution analyzes competitor contracts in real time and automatically generates personalized, ready-to-sign counter-offers. We will use this capability in the future at scale in our partner business and in our own distribution network. Second, AI for underwriting. The use of AI for the complex preparation of complex underwriting offerings significantly reduces manual workload by up to two hours per case, and it shortens the response time towards brokers and distribution partners. Third, voice and chatbot Clara. Our 24/7 digital assistant, Clara, is available in four languages. It automates inquiries.
It improves response times and frees up capacity in customer service. In self-service interactions, the automation rate for Clara Chat has already reached 95%. Clara handles more than 250,000 chat conversations in 2025. Fourth, AI for coding is a highly effective tool within our IT organization. It supports every step from code translation to code completion. The figures speak for themselves. A productivity increase between 11% and 25%, and a 6% rise in user satisfaction. These examples for capabilities and use cases show that the adoption of AI does more than just enhance efficiency. It reinforces qualities that are crucial to strengthen our competitiveness in today's market environment. Technical excellence is and remains fundamental to the Swiss business. We have one of the strongest non-life portfolios in the market. Also, the latest figures speak for themselves. Our Swiss business is highly profitable.
Now through the merger, we have at our hand a unified toolbox for all areas of technical excellence. Our focus areas are, as Fabian already mentioned, portfolio management, which means disciplined, profitability-driven portfolio steering to secure enhanced risk-return profiles, and active reinsurance management to limit technical volatility, pricing excellence that is supported by the large combined data foundation of the merged companies, Nat Cat risk management, and fourth, claims excellence, which includes especially AI and data-supported claims steering, advanced fraud detection, and disciplined claims procurement, for example, in our network of car repair shops. The impact is visible. We have a proven track record over the past few years, as you can see in the chart on the left-hand side. Please keep in mind that the Nat Cat burden was exceptionally high in 2023.
Adjusting for Nat Cat losses above our Nat Cat budget, this would imply a combined ratio of around 95% for 2023. By contrast, as Matthias already mentioned, 2025 benefited from a benign claims environment with low Nat Cat load. Taking this into account, we see an improvement of between 2 and 3 percentage points from 2023 to 2025. Our task is now to build on this outstanding performance. Based on the normalized combined ratio, we plan to realize an additional improvement of 2 percentage- 3 percentage points by 2028. We anticipate to achieve a sustainable combined ratio of roughly 90% by then. Our measures from technical excellence will contribute by 1/3 to this improvement. Everything we do ultimately will secure that we deliver on our financial targets. In Switzerland, we are targeting CHF 250 million in synergies and cost efficiencies.
We see our combined ratio at around 90% by 2028, and in combination with our unique value proposition in the Swiss market, this will result in sustainable underlying earnings of more than CHF 700 million by 2028. We are building a Swiss business that is larger, more efficient, more digital, and more resilient than ever before, while preserving our core strength, being close to our customers. Let me close with four key messages. Switzerland is one of Europe's most profitable markets. We have a leading position in it, and we leverage our combined strength in this attractive market. We will leverage our combined strengths by creating unique integrated value propositions that are delivered by an exceptionally strong distribution network. Our Swiss business is a key contributor to synergies and efficiency gains.
We are fully on track to deliver with the support of AI and a strong focus on technical excellence. Fourth, in the early stage of integration, we have seen neutral to positive effects on customer retention and on sales and employee engagement. This is very positive. Switzerland is the main engine and a stable value anchor for the group. We will reinforce this role during the integration phase and deliver strong, reliable, and sustainable results. Thank you for your attention. I hand over to Peter again.
Thank you, Martin. Now we move on to Germany, the other country with significant synergy potential from the merger. Jürg Schiltknecht was CEO of Germany at Baloise following a career of various management positions at Zurich Financial Services as it was then, and then Baloise. While primarily focused on Germany, he has also been responsible for other European countries. He's been a member of the Group Strategy Board at Baloise since 2014. Please, Jürg, tell us about Germany.
Good afternoon to everyone. We have one more presentation, and we will now turn to Helvetia Germany. This merger is a great opportunity for us and has a lot of potential. We have changed our strategic position. We are now a top 10 broker insurer in the German market, and we have a solid foundation. Over the last few years, we have strongly improved our financial performance with a disciplined focus on technical excellence. As a result of this merger, we will realize significant synergies and become an even more attractive value contributor to the group. Let's start by taking a look at Helvetia Germany. Two companies of similar size came together. We have roughly doubled our size and have our premium volume of around CHF 2.5 billion, and we serve around 3 million customers in the German market.
As you all know, size is not everything. Portfolio quality is also crucial, and both companies have significantly improved their financial performance. For the last three years, Helvetia and Baloise combined had, on average, a loss ratio of below 62% and a combined ratio of around 93%. Both companies had a focus strategy in place. This means we both made decisions in which target segments we want to be active. Interestingly enough, and as we will see later in the presentation, we both came to very similar conclusions. Both companies have a very strong focus on the broker market with around 80%-85% of all business coming from this distribution channel. Helvetia and Baloise both achieved very high broker satisfaction.
For instance, former Baloise constantly ranked among the top three non-life insurance companies in terms of broker satisfaction over the last few years. Former Helvetia received the Silver Prize award as a Broker Champion. This clearly demonstrates our ability to convince brokers with both our product solutions and our service offerings. Thanks to this merger, two companies came together in Germany of similar size, similar portfolio quality, similar target segments, similar distribution mix, and similar distribution partner satisfaction. Exactly this similarity is a very good starting position to leverage the merger-related potential. The only question now is how will we unlock this potential? Our answer is straightforward. We will exploit this potential with two strategic priorities. First, a clear focus strategy, strong positions in the broker market, and a disciplined execution of technical excellence.
Second, an ambitious integration plan and a fast realization of the synergies. Let's start with our strategic priorities, our focus strategy, and our strong positions in the broker market. For us, it is clear that we actively steer our portfolio and that we're focusing only on those market segments that we consider attractive and where we have the ability to win. The attractiveness of a segment depends on several factors, including growth potential, capital intensity, profitability, and also competition intensity. When you look now at the overview, you can see that we consider seven target segments in Non-Life and two target segments in Life to be attractive. With this strategy, we are focusing with our target segments on only around 30% of the total German insurance market.
You can also clearly see on the overview that both companies pursued very similar focus strategies prior to the merger. The dark shaded bars indicate the business volume that former Baloise had prior to the merger, and the light shaded bars show the business volume that former Helvetia had prior to the merger in each target segment. As a result of this similar focus strategy, we have roughly doubled our premium volume in almost all target segments, and we have now even stronger positions in the broker market. For example, in Non-Life retail, we have a number three position, or in the capital-efficient retirement book business, we are number seven. Overall, we are a number 10 broker insurer in the German market.
We can say, thanks to the merger, we now have highly relevant positions with brokers in our target segments and a very strong foundation to further develop our business successfully into the future. However, to maintain our strong foundation, and as Fabian has already outlined before, technical excellence will continue to be of utmost importance. Baloise and especially Helvetia have undergone major restructurings of their portfolios over the last few years, and the results speak for themselves. The graphic on the bottom left-hand side on the slide illustrates the significant improvement in our combined ratio by around 5 percentage points from 2023-2025. To maintain the strong level of technical excellence, we will focus on four decisive levers, portfolio management, underwriting and pricing discipline, Nat Cat risk management, and claims excellence.
Let's have a look at underwriting and pricing discipline, as well as claims excellence in a little bit more detail. In underwriting and pricing discipline, repricing and re-underwriting are constantly executed, resulting, for example, in an average price increase of more than 7% in our target segment in 2025. In claims excellence, through AI-supported fraud detection, we could improve fraud recognition and acceptance rate by around 15%-20%, confident that we can achieve a combined ratio of around 90% by 2028. Moving on to our second strategic priority for unlocking our merger-related potential, we will now look at our integration plan and our fast synergy realization. As you can see on the integration overview, we have a very ambitious integration plan in place and are working at full speed to implement all important milestones.
When you look at people and organization, you can see target operating model. We have our target operating model in place since closing. That means we have our entire new management structure from the executive team to team leader level, including all nominations, and we have over 80 nomination processes to go through. We have this entire new management structure in place from day one of the merger, and that provided a lot of clarity and orientation within the organization. You also see our Employee Voluntary Program. This Employee Voluntary Program, by end of January 2026, we have already had enough volunteers that have signed a termination contract so that we can achieve our FTE reduction target. In these contracts, we have agreed with each volunteer a clear termination date, somewhere between 2026 and 2028.
Therefore, we have certainty that we will achieve our FTE reduction targets by 2028. This obviously reduces a lot of uncertainty within the organization and allows us to focus on what matters most, the market and profitable growth. Still on the people and organization, by end of 2026, we will have completed our relocation. We have already started right now in April with the relocation from Frankfurt, the headquarter of former Helvetia in Germany, to Bad Homburg, the headquarter of former Baloise and the future headquarter of Helvetia Germany. Thanks to our agile workspaces that we have in Bad Homburg and our modern ways of working, we can accommodate all former Helvetia staff in Bad Homburg without renting any additional space, which results in significant cost savings.
Under products and services, you see that we will have a joint sales force with our harmonized product offering in the broker market in May for both Non-life and Life. In Non-life, for example, that means that we will reduce our Non-Life product portfolio from over 200 products to around 100 products, a significant reduction in complexity going forward. Under entity and systems, you see portfolio transfer and legal entity simplification. Already this year, we worked to complete the portfolio transfer of the former Helvetia branch into Baloise. We will continue simplifying our legal structure in 2027 onwards, again, with the goal to reduce complexity. It will also come as no surprise that our IT synergies will follow later in the years. IT migrations and IT simplifications take time. Nevertheless, we are already preparing intensively to migrate the portfolios as quickly as possible.
Thanks to the merger, we can now leverage our investment in Guidewire, our modern and new IT non-life system, much more effectively by almost doubling the volume on this platform. You can see that we have an ambitious integration plan in place. We are on track, and we are moving forward at full speed. Even the best integration plan creates little value unless the synergies are actually realized. As you can see on the slide, we aim to achieve our synergies by 2028. As Michael already mentioned, we have defined many measures within the group to realize these synergies. In Germany alone, we have identified close to 100 measures to realize our synergies. When you now look at the right-hand side of the slide, you see the breakdown of our synergies.
You will notice that around 45% of all synergies result from our FTE reduction program. As already mentioned, thanks to our employee voluntary program that we have completed, we have certainty that these synergies will be realized. Within the remaining 55% of the synergies, a few initiatives are expected to contribute significantly to the overall synergy target. One of these is the relocation synergy.
As mentioned before, we have already started the relocation, and hence, we also have certainty that we will realize these synergies by end of 2026. Another one is our efficiency synergy. Thanks to the strong growth in 2024 and 2025, we have also already locked the growth-related efficiency synergies in. In total, around 70% of synergies are already secured today, and we are confident that the remaining 30% will be delivered by 2028 at the latest. We are very well on track to achieve our synergies, and these synergies will have a material impact on our financial results. When we look now at these financial results, we see that this merger has a positive impact on Helvetia Germany. We are confident that we will deliver, in total, CHF 70 million of synergies. More than 90% will already be achieved by the end of 2028.
We are also confident that we will further improve our combined ratio to an excellent 90% by 2028. We are also confident that we will improve our underlying earnings to around CHF 180 million by 2028. With these financials, we are a sustainable and attractive value contributor to the group. To conclude, I would like to summarize the four most important key takeaways. First, the merger has changed our strategic position, and we are now a top 10 broker insurer in the German market.
Second, we have a solid foundation. Over the last few years, we have materially improved our financial performance, thanks to our disciplined focus on technical excellence. Third, we are well on track to realize our synergies and efficiencies. Fourth, with this performance, we are a sustainable and attractive value contributor to the group. Thank you very much for your attention, and I hand back to Peter for the Q&A session.
Thank you, Jürg. As you say, now we move on to our second Q&A session. They're already coming up, but Fabian, Matthias, and Martin, please join us back on stage. Thank you very much. Who would like to ask the first question? Farooq?
Hi. Thank you very much. Farooq Hanif from JP Morgan again. Just on the full value insurance in Switzerland, obviously coming from Winterthur Group, they moved very radically to change how they approach to the autonomous, semi-autonomous structure. I gather that Helvetia Baloise is not going to do the same. What can you do to accelerate the shift to semi-autonomous? Are there actions you can take simply because of your scale and your brand? Just wanted to understand that. The second question is on, and I don't know if it will be covered in this session. Could you talk about the ROE of Baloise Bank and where that is and the strategic importance of that in individual life?
I know that Baloise Group emerged from the bank. How much of a sacred cow, in a sense, is that? My last question is actually more of a probably a risk management question, but just I thought about your very high solvency ratio versus the restrictions on cash remittances for your 60% on Non-Life business. I was wondering, when it comes to cash pooling, internal reinsurance structures, is there an ability to improve remittances that way? Is that something we can look forward to? Thank you.
Okay. Thank you very much, Farooq. The first one on the semi-autonomous shift, Martin, do you want to comment on that?
It is not our target to accelerate this shift, but there's a clear market tendency towards semi-autonomous schemes. I'm really convinced it is much better to accompany our customers on their way and to have the full range of offering for our customers. Because there's also a certain segment, they don't want to bear the risk, and we want to give them solutions, that we can do a 360-degree in the SME. It is clear that as the number two in the life market, we also have our footprint in the semi-autonomous. If I give you two figures, we are above CHF 4 billion assets under management together with [Perspectiva] and BVG Invest. We have more than 40,000 insured now. We are well prepared to shift our customers towards our own solutions.
I would like to elaborate a bit more on it because it is not only B2C. It is also B2B. We are in a good position to also take our part of the market in the B2B segment, which means reinsurance for other semi-autonomous in the biometric, in the risk part of the market. We have asset management offerings. André can also say more to it, where we support semi-autonomous and autonomous foundations in their asset management.
We have the ability to do mortgage servicing, where we can give semi-autonomous and autonomous foundations the ability to also invest in mortgages because we take the whole servicing. We have a full range of services and products in the second pillar, and we shouldn't look just at the full insurance as a single question. It is clear that this is not our segment of the market where we want to grow. That's also clear.
Yeah. Thank you very much.
You're welcome.
The second one was, yeah, how does the bank fit into the strategy?
If I go to the bank, I mean, I just elaborated on the really huge strategic possibility we have in the market with the 360-degree financial advisory for our retail customers, including wealth management. From a strategic point of view, we have a huge opportunity that we have a small-to-mid-size bank with a huge, very efficient distribution power across the Switzerland. We should use this to increase the part and the earnings from wealth management in the bank. With this, we also increase the ability of the bank to increase their cash remittance to the group, because this is very capital-light growth. This is the strategic background of the bank. Apart from this strategic background, the bank is still working on getting their targets done, which is also the reduction of the cost income ratio as you know it from the former capital market side.
Yeah.
Because you ask, there are no sacred cows, so bank, as any other activities, is part of our portfolio management and will be looked at with the criteria as we said before.
Thank you. The third one was on cash and what levers do we have available to us to improve that? Matthias?
Yeah. We look into all levers. That's quite natural. As we are in the process of merging the solvency models, that will take place this year. We're also looking into reinsurance, both external and internal. External reinsurance, last year when we did the renewal season for 2026, obviously we had to do it on a separate basis because we were still competitors at the time. Nevertheless, we could exploit the benign environment for a reinsurance buyer. This year we're going to combine the reinsurance programs, define a new reinsurance strategy, and obviously, we'll benefit from the larger scale that we have by buying reinsurance.
We will use internal reinsurance even more than in the past, to further optimize the structure. I think this is still at a very early point. We will look into this during 2026. Currently, as mentioned in the first Q&A, the cash is not the limiting factor. Given our plan, including the safety margins, there is enough operating cash remittance without such optimization structures to achieve the dividend path and integration cost.
Thank you. Michele?
Michele Ballatore from KBW. I'm afraid I'm going to insist on cash. Cash remittance in particular. Specifically on Germany, I mean, cash remittance in the previous years has been quite low. If we look at the solvency report of both Helvetia and Baloise in Germany, I think there is a pretty sizable chunk of capital there. You would expect a much bigger contribution in terms of cash remittance, a multiple of what has been in the past. I guess my question is there upside there in terms of all this capital that you are holding? Is there a reason? There are worries. What can you tell us about this dynamic, which has been quite weak? Thanks.
Okay. Jürg, you want to answer that, the German cash position?
Sure. I think we don't disclose really on an entity level, the cash situation. Certainly this year, the cash situation was affected by merger-related impacts quite significantly. Going forward, we can certainly see a different one than the synergies which will come, which also will have a material impact, will also be cash, which can be dividend out. From that point of view, we're quite confident that cash contribution, going forward, will significantly increase from the one, for instance, for 2025. From the capital position, I think one has to pay a bit attention in the Life business.
There's a lot of policyholder capital in it. If you take it away, then in Life the situation might not look as much capital as maybe you have thought. Also in Non-Life, I think the capital situation is you have on the local GAAP, you have the equalization reserve, which you have to have, which is quite substantial. As Fabian mentioned, in our calculation for the hurdle rate, the capital will be taken into consideration and Germany has to deliver on it.
Thank you. Tom?
Thank you very much. Thomas Bateman from Mediobanca. It sounds like you're ahead of plan in Germany with the cost synergies, the fact that you've already secured the number of FTEs. How can I get excited? How much bigger can these cost synergies get? Second is, I get that you're the number 10 insurer in Germany in the broker division, but you're still not a big insurer there. There's more competition in that space. It feels like we've had a really good year anyway, and you're expecting to improve your combined ratio another 2 points.
I guess I'm struggling to marry a modest-sized player in Germany getting to a combined ratio of 90% in Germany, which is 10 points better than the market almost, and with more competition. Some of your peers are looking to expand in Germany because it has become a much better market. Maybe you can give some color on why I'm being too pessimistic here on maybe your ability to meet those targets?
Thank you. Both of those for you, Jürg. The first one, given our strong progress to date, what's the position on synergies?
Yeah, I would like to dampen your excitement level a little bit. I think we have made really good progress. We're very focused in the implementation of the synergies. It's not that everything is already implemented, but we have certainty that we will implement it by 2028. We have very good collaboration with the unions, which is important for the FTE reduction and also for all the other changes which will happen in Germany. I think we're really targeting the 70, and we feel very confident that we will achieve it by 2028. The second question you have was about our size. At the end of the day, in the German market, there are 300 insurance companies, and we are now a top 20 insurance company. Yeah, we are a top 20 insurance company.
I think we have a 5% market share at the broker channel, for instance, in Non-Life, which is a decent market share. I think also now with the synergies, we will even become more efficient. Actually, the synergies are mostly the reason why we can further reduce the combined ratio by 2 percentage points. We assume that our claims ratio remains stable, and we have proven it over the last few years that this is a reasonable assumption. It's not a one-off. We can manage our portfolio with our target segments on that claims ratio level. If we get a bit more efficient in the cost ratio, I think 90%, I totally agree. It's ambitious, but it's something which is feasible.
If I can just.
Maybe one last point. Yeah, sorry. For the market at the moment is at 96%-97%. Yeah, it's not 100%. It's a slight difference also.
If I can complement on what you've said, when you're very selective and very focused, you can as well allow to not be present in businesses which traditionally have very low profitability. When you're broader in the market, you have to be everywhere. Just as a broker insurer, that is exactly where you can more smartly choose your niches. That is what Jürg is doing going forward. There's never a guarantee for what we want to achieve. I think there is a logic behind that, which we presented to you today.
Thank you. Nasib? At the back.
Thank you. Firstly, on revenue dis-synergies, we talk about revenue synergies, but have you thought about any revenue dis-synergies, particularly in Germany, given the broker-led distribution that wouldn't have both products on the panel? I know you're kind of halving the product. Also in Switzerland, have you thought about any revenue dis-synergies or are they baked into the plan? Second question, AI, disintermediation of the broker, again, you talk a lot about brokers in Germany. Do you see over time that distribution channel being disrupted, moving towards more direct or AI-enabled distribution? Finally, on the rate increases in both geographies, 3% in Switzerland, 7% in Germany, what's the outlook looking for those, in 2026?
Okay. Thank you, Nasib. The first one on revenue dis-synergies, what we think about [crosstalk].
Maybe I start with this. In Switzerland, we are very based on retail business and SME, with a huge part also in the paid agent channel. The dis-synergies would come in Switzerland from our increased fluctuation in the paid agent channel. As Fabian already explained at the beginning, we don't see this at the moment, which is a very positive signal that we have a very stable sales force, which means we have stable customer service, and we don't see any dis-synergies on this level. I think that's a very positive development because also as Fabian said, there were lots of attempts to get our sales force because we have very strong, s trong agencies and strong agents, and there's a lot of activity in the market. This is, I think, very positive.
Germany?
In Germany, we also don't see massive revenue synergies. We are taking, at the moment, the portfolios, and we see maybe in property, we have some concentration risk, which we need to handle. It's not a big issue in Germany.
The second question was on what disruption we're seeing in AI. Would you like to comment again on each individual market? Jürg, first?
When you also look a little bit back at direct channel, maybe 10 years ago, everybody was totally excited. CHECK24, this is the new channel to come. Reality is, it's still a very small niche, the direct channel. In the motor business, it's growing a little bit, but in the other business, it's not of much relevance. Nevertheless, I think artificial intelligence is moving so fast, you really have to observe it. I see it more as a lead generation and supporting the distribution channel. Going forward, we don't have any signals at the moment that the physical distribution channel will reduce. In Germany, over the years, tied agency channel, even though the numbers are going slightly down or going down, the volume remains relatively stable. The broker channel is slowly growing. At the moment, we don't see anything happening, but obviously, we have to observe it.
Yeah. We really focus on using AI where it really helps now, which is GenAI and which is agentic, for example, in claims, where it is important for the notification, for the coverage, examination, and also for the steering to the repair shop. There we use it now. On the broker channel, I think, yes, there will be also a certain part of the work that will be done also by AI, because comparing the different coverages, the different prices and so on, I think it's a typical field for AI. That's why it is important that we already have in place, and we work on to improve it, these capabilities like the concierge, which does the automatic counteroffers.
Because you can use this now in partnerships, you can use it in your own sales force, but you can also use it to answer to broker requests in the retail business. We have to be very attentive there, that we monitor and address the trends in a proper way and then be ready when something really turns in the market.
Yeah.
To complement on those two descriptions of what's happening, when we say that we are at the forefront of AI, that means as well that we understand how customers now will use AI in the way they approach insurance products, and that we prepare for that. The best example is that traditionally, there was a keyword search on Google, and based on that keyword search, you would get to certain web pages. Now, you would ask, when you use AI, there will be very different criteria being used to get to the right offer. You need to understand that, you need to anticipate that, and then use it how you position yourself. That is, of course, part of the things we observe and react to. There will be changes as Martin and Jürg said, and we will, of course, use that going forward to position ourselves in the right way.
Great. Thank you. The third question was on, what are our expectations for rate changes or outlook? Again, Jürg, do you want to start with Germany?
Yeah. At the moment, we see more a sideways movement. We don't expect really the significant increases you have seen maybe in the past because of also inflation in Germany. In the motor business, it will slow down. In the commercial line of business, we're probably at the top of the cycle at the moment, and we see first ones who are softening a little bit, the markets or the rate reduction. We cannot say across the whole market, so we more stable, slightly increase the price. That's our expectation at the moment for the market going forward. Depends also what happens with the interest rate and the inflation, obviously, now with the whole geopolitical situation. At the moment, that's the situation for Germany.
Except some lines of business in retail where we have monthly expiries, and we monitor the situation constantly and do adaptations. For example, in the online business also. The Swiss market is very focused on the 1st of January. We now did the sanitizations, and we did the rate increases. We see the result, and we assess this to decide before, in May, June, to go to the renewal round, with the SME and then to the tariff adaptations for the 1st of January next year. I can't give you an expectation to see the results and the inflation effect they have in the portfolio. That's a regular process we are going through now.
Okay. Yeah, please.
[Cedric Kaneko]. Just a question on Smile. Could you maybe give us a bit more color on how that plays into the AI strategy that you've outlined? Especially, I think you slightly touched upon it in terms of search. As the world changes and customers change behavior, is that something where once you've incorporated the new tools, if we can put it like that it will also potentially be an opportunity for other countries?
For other countries, I would then ask Fabian to give a bit of insight. In Switzerland, it's very complementary to the online presence of Helvetia. The online presence of Helvetia is meant to be a part and an integral part of the interplay between online tied agents and then telephony. We play in this triangle. This is the Helvetia. The other side is for the more digital customer segment, it is Smile. That's the beauty of Smile in Switzerland. Smile is really a digital brand, so we have a very low part of business that comes via aggregators, which is very unusual in the online business in Switzerland. Because normally you have a high share of aggregator business where you pay quite high distribution cost on it.
In Smile, we really managed to have a digital brand where we are not dependent on aggregators. That's the complementarity of Smile with Helvetia. We also use Smile to do some experiments. We can have a look how we can adjust prices, how we can address customers, because it's more limited than if we do it on the whole customer base or portfolio of Helvetia. For the international part, I would ask you to comment on it.
Yeah, I think I would build on what you said is that the strategy of Smile is a very, very excellent and particular strategy in the way that we focus on building a brand and that we have a strategy where we're not dependent on aggregator business in a large scale. Looking at that, we had identified Austria as another market in which we're building that, and we would look into markets where we can build something similar and be open to that. What we don't want is to go into a market where we're purely me-too, where is most of the direct business coming through aggregators. We don't see there a big profit pool. That's why I would exclude those markets, some of the markets you know.
Perfect. Good.
We've got time for one last question if there is any. Otherwise, thank you. Last chance. Thank you, everybody, very much. For those in the room, obviously, there is an opportunity to discuss topics further outside over a Apéro Riche, as we say in Switzerland. For those of you online, hope to meet you soon. Before we wrap up, I think, Fabian, just hand over to you for some closing remarks.
Yeah. First of all, you saw today that as a management team, and I think I can speak here as well of our board of directors, we are fully convinced of the merits of this merger. We are well on track with the integration. We showed that to you today and demonstrated that to you today. We have an attractive financial plan. A 10%-12% CAGR in underlying earnings. A 50% uplift of our dividend is an attractive plan on which we are confident, highly confident, that we can achieve that. Because the levers are clearly identified, and they are in our hands, and it's now time to deliver and make it happen.
With that, I hope I can bring across some of the enthusiasm we have here at Helvetia Baloise for our new setup, for our new company going forward, and looking forward to that journey, which we have ahead of us. Thank you very much for your attendance. It was a pleasure to have you here. Thank you for these many and really, really good questions. Thank you.