Ladies and gentlemen, welcome to the Helvetia Baloise half year results 2026 conference call and live webcast. I am Valentina, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Peter Eliot, Head of Investor Relations. Please go ahead.
Thank you very much. Good morning, everybody, and welcome to Helvetia Baloise's conference call on our 2026 half-year results. On today's call, we have our Group CEO, Fabian Rupprecht, and our Group CFO, Matthias Henny. Fabian will start by giving you an update on our strategy and progress since the Capital Markets Day, before Matthias will then take you through the numbers of the half-year results in more detail. There will then be an opportunity for Q&A. With that, let me hand over to Fabian.
Thank you, Peter, and good morning, ladies and gentlemen. Thank you for joining us today for our first half-year results presentation as Helvetia Baloise. Five months ago at our Capital Markets Day, we presented our strategy, our financial ambitions, and our priorities for the integration period. Today, I am pleased to report that we have made a very strong start. The half-year results reflect high profitability, excellent margins, and continued strong capitalization. Our integration is progressing rapidly ahead of plan. Benefits are becoming visible, and we remain fully on track to achieve all strategic targets we announced in April. Let me begin with the key messages from the first half of 2026 on slide five. We achieved a high level of profitability, generating underlying earnings of CHF 632 million, which translates into underlying earnings of CHF 6.2 per share.
The annualized underlying return on adjusted equity is 18.7%, which is above the communicated range of 16%-18%. We can show excellent technical margins across our businesses with a combined ratio of 92% in non-life and a new business margin of 4.1% in life. This demonstrates our disciplined underwriting approach and focus on technical excellence that we set as one of our strategic priorities. At the same time, our balance sheet remains exceptionally strong, as reflected in our indicative pro forma SST ratio estimate and our strong credit ratings. As you might be aware, there was a severe hail storm event in Switzerland on 28th of August, causing damages beyond CHF 1 billion for the industry. We expect claims of CHF 120 million-CHF 140 million net of reinsurance.
While this means that we will likely not be able to repeat such a strong result in the second half, nevertheless, technical excellence, fast progress on integration, and financial investment performance allows us to confirm our guidance set in the Capital Markets Day in terms of underlying earning growth and cash in the absence of further significant nat cat events. These results demonstrate the strength of our business model, and importantly, they were achieved at the same time as executing one of the largest insurance integrations in Europe. This gives us confidence that the combination of Helvetia and Baloise is delivering as we expected, not only today, but also in the future. Before discussing the integration in more detail, let me briefly remind you on slide six of the priorities and targets we set out at the Capital Markets Day. Our strategy is built around three priorities.
First, delivering the merger synergies. Second, achieving efficiency gains, increasingly supported by AI. Third, continuing to strengthen technical excellence. Together, these priorities support our financial ambitions of double-digit underlying earnings CAGR, attractive returns on equity, and strong dividend growth. We will pay out more than CHF 2.8 billion in dividends in 2026 to 2028, and the 2029 dividend will be at least 50% higher than it was in 2025. Today, only five months after CMD, I am pleased to report that substantial progress has already been achieved.
On slide seven, you can see that since April, we have put the entire organization in place, completed the legal mergers of our Swiss insurance activities and our asset management entities, defined the operating model, harmonized employment contracts in Switzerland, launched our rebranding activities, and successfully started sales under the new organization in Switzerland and in Germany to name just some of the achievements. This early decision-making is helping us move with speed while maintaining operational stability and keeping the integration fully under control. Customers continue to be served without disruption, employee engagement remains high, and the organization remains focused on execution. You can see in the slides that most of the transversal tasks of the integration have been accomplished. The next phase is about IT implementation and continuous value capturing. Responsibilities here need to be with the line managers. A separate integration office is not required anymore.
Therefore, we will shift the integration responsibilities to the CFO and CTO. The role of the Deputy CEO and Chief Integration Officer will be discontinued. We continue to believe that AI is a great opportunity. However, it requires the right organizational setup to ensure a holistic view, and it requires a strong push for execution. This role, therefore, will be combined with the CTO role, creating a single Chief Technology and Transformation Officer role. This new role will have end-to-end responsibility for integration delivery, system migration, and transformation initiatives. Sandra Hürlimann, a proven leader who has already been instrumental in the integration and transformation, will take on this role. We believe this is the right setup for the next phase of the integration and that it is the right setup for advancing fast, but in a controlled way on AI. Turning now to slide nine.
I am very pleased to report that the progress on synergies and efficiencies is ahead of plan, and that we have greater visibility and stronger evidence of these benefits. We previously reported that 21% of the targeted run rate benefits of CHF 650 million had already been secured by the end of 2025. By June 30th, that figure stood at 49%. Almost half of the total synergies and efficiency program had already been locked in. This is ahead of our original expectation, and we now expect to have locked in approximately 60% by the end of 2026, up from our previous estimate of 50%. We now also expect the 2026 P&L to benefit by an additional CHF 20 million, bringing the cumulative underlying earnings benefit from synergies and efficiency gains to CHF 170 million. This, of course, will help us deliver attractive dividends.
You should not expect, though, it to affect the 2026 dividend, where we will still be financing the integration costs. But it will be helpful when it comes to determining a potential first merger related dividend uplift for 2027. This progress is broad based and reflects execution across all business units and group functions. However, especially fast progress in Switzerland is the biggest contributor. Our overall ambition remains unchanged. We continue to target CHF 650 million of gross run rate benefits and CHF 350 million net contribution to underlying earnings. Execution discipline is not limited to synergy delivery. We are also carefully managing integration costs as we show on slide 10. We confirm that total integration costs are developing as expected and are currently projected to remain in the lower half of the previously announced range. To date, most of these are due to social plan provisions.
Integration costs in 2026 are weighted more towards the second half of the year. Even those which we incurred in the first half have been partly offset by a curtailment of pension plans. That is a non-cash item that results from FTE reductions. Our second strategic priority relates to efficiencies. These are supported by artificial intelligence, and we provide an update on some of our initiatives on slide 11. As a reminder, we do not invest in isolated pilots. Instead, we are building reusable, scalable capabilities. Let me give you a practical example of how AI is already creating tangible value for both our customers and shareholders. Clara, our AI-powered voice and chatbot, handles more than 250,000 customers interactions each year and achieves a self-service automation rate of 95%.
Its scalability was put to the test during the severe hailstorms that hit Switzerland in August. Within just three days, more than 4,000 claims were reported, with Clara processing up to three messages per second at the peak. This enabled us to support customers quickly and reliably during a period of exceptionally high demand. We estimate that claims handled through Clara are processed around nine times faster than through traditional manual processes. And claims can be submitted and processed around the clock, including weekends, eliminating unnecessary waiting times. Even during this extreme event, around 80% of claims were registered correctly without human intervention. Importantly, this rate remained stable despite the surge in claims volumes, demonstrating the robustness and scalability of our AI capabilities. This is a great example of technology helping us improve efficiency, manage peak volumes, and deliver an improved customer experience.
On slide 12, we turn to our third strategic priority of technical excellence. The first half-year results clearly demonstrate our underwriting discipline and successful cycle management. Across all business areas, profitability remains excellent. The development of business volumes reflects our targeted and selective approach. In non-life, we have been cautious, in particular in Germany and Belgium, and continued our efforts on portfolio optimization. In specialty markets, we continue to manage the insurance cycle with discipline and clear focus on returns. In active reinsurance in particular, part of the volume trend can be explained by us not accepting declined prices. More broadly, we are very happy that the merger has not resulted in any noticeable pick-up in churn. As a larger group, we also look forward to further leveraging our scale, data, and expertise to strengthen underwriting discipline, pricing capabilities, and portfolio steering.
Technical excellence will therefore remain a key driver of shareholder value creation for us. Let me now conclude on slide 13. Five months after our Capital Markets Day, we can report that Helvetia Baloise has made a very strong start as a combined company as demonstrated by our first half-year results. Our integration is processing faster than planned. We have already secured almost half of the targeted run rate synergies and efficiencies and have increased our expectations for 2026 accordingly. The synergies and efficiencies are fully in our hands and continue to support our ambitious financial objectives. Helvetia Baloise is thus fully operational, and we remain fully on track to achieve all our strategic and financial targets. Our employees are the reason why we have been able to move so quickly while continuing to serve our customers and partners successfully.
I would like to thank them for their dedication, their professionalism, and their commitment. Many thanks for your interest. I will now hand over to Matthias Henny, who will walk you through the financial results in more detail.
Thank you, Fabian, and good morning, everybody, from me. As Fabian mentioned, we are extremely pleased with the progress we have made. We are reporting a very strong result for the first combined half year as a new company, as we show on slide 15. You will be aware that true prior year P&L numbers for the combined group do not exist. This makes it difficult for us to provide you with comparative figures. We have tried to be as helpful as possible in this presentation, and we will add further disclosure as soon as we are able to do so. Thus, we provide some illustrative half-year 2025 numbers in this presentation where we think these may be helpful. However, these should be treated with appropriate caution. We have calculated them by taking the Helvetia half-year 2025 results and adding half of the full year 2025 illustrative results for Baloise.
This means that no seasonality is reflected for Baloise. I also remind you that the full year 2025 illustrative results were calculated at a high level of materiality. In addition, 2025 represented a very good year, which we warned you should not expect to repeat. Nevertheless, the result for the first half of 2026 has again been very good. We have benefited from strong progress on technical excellence and from very speedy efficiency and synergy realization. However, we do not consider the results fully sustainable. Without some small positive one-off elements and some timing effects, underlying earnings would likely have been close to CHF 600 million, maybe a touch under.
We expect the second half of the year to be below this normalized half year run rate. We should see more benefit from synergies and efficiencies, but the recent hailstorm that Fabian mentioned will cost us between CHF 120 million and CHF 140 million pre-tax net of reinsurance, and we also expect to incur the delayed project costs. Thus, when we look at the full year, assuming no further heavy nat cat losses, we expect to be within our UEPS growth target range in the first year of the plan. This is despite the very high full year 2025 starting point. On an underlying earnings per share basis, we have reported CHF 6.2 for the half year. Here I would like to point out that we have adjusted the definition slightly.
At the Capital Markets Day, we opted for a simple definition of this metric, which did not exclude the impact of minorities and interest on preferred securities. We have now taken on board feedback and adapted this slightly to more accurately reflect the earnings attributable to shareholders. This results in the 10.4% in respect of full year 2025 becoming 10.2%. There is no change in our ambition to grow this at 10%-12% over the plan. We remain confident of achieving this target. Looking at the individual business areas and segments, these have all performed well. Each reports underlying earnings above the illustrative figures of the previous half year. IFRS profit after tax is of course impacted by the significant amortization of intangibles this year. This amortization amounted to CHF 672 million, which is fully in line with the schedule we previously gave you.
It is, of course, a non-cash item. Turning to slide 17, we look at business volume. Fabian has already described our selective approach and our focus on underwriting discipline and cycle management, so I will not spend long on this slide. Overall, we report 0.4% higher volumes in non-life, adjusted for scope changes and FX. Despite the headwinds you are aware of in the reinsurance markets in particular. In active reinsurance, we also do not fully adjust for the currency exposure. In life insurance, the Swiss background trends are unchanged. This is the ongoing shift of demand for full insurance solutions towards semi-autonomous solutions. We also saw lower demand for index-linked products. We continue to remain disciplined, focusing on capital-light products. The earnings detail of non-life on slide 19 shows a strong operating insurance service result driven by the combined ratio, which we will look at on the next slide.
It is not significantly impacted by CSM movements this period. It does benefit from a release of the non-life CSM, as you will have expected. However, this effect is broadly offset by some profit buffering in the CSM, without which the operating insurance service result would have been higher. The finance result benefits from strong current investment income. However, the combination of the finance result and the operating other result is a single-digit million Swiss franc amount higher than we consider a sustainable run rate. This positive one-off stems from many small items. Let's look in more detail at the combined ratio on slide 21. Here we strip out all merger-related accounting impacts. In particular, this means adjusting for the non-life CSM movements, including the CSM release.
This is a good example of where we would like to be more helpful in terms of comparative numbers, but where we think the prior year illustrative numbers add little value. Nevertheless, we can say that we can see underlying improvements in the first six months of the year, and we aim to continue improving over the coming years. The expense ratio benefits from the synergy and efficiency gains we have recorded. These translate into a 0.4 percentage point benefit compared to the prior year. The improvement in the overall combined ratio comes despite us being careful in reserving this year, as you can see from the lower PYD number. Turning now to life on slide 23. The CSM release ratio was 7.8% annualized, being a mixture of the ex Helvetia business and ex Baloise.
The ex Baloise release ratio is higher than it was following the accounting alignments, but still below the ex Helvetia business. Overall, life underlying earnings were a bit more positive than we expect on a recurring basis due to several smaller one-off effects across different line items. Looking at the stock of CSM on slide 24, the starting value has been restated due to some liabilities being shifted from IFRS 17 to IFRS 9 as part of accounting alignments. The normalized growth is close to stable. We aim to grow the new business contribution in future so that together with expected in-force return, we aim to offset the CSM release. However, we continue to see value creation opportunity outside the CSM, particularly in fee-generating businesses. As one example of this, you can see the strong growth in our semi-autonomous business of +16% on slide 34 in the appendix.
Overall, the CSM has slightly increased thanks to small positive economic variances driven by higher than expected investment returns from direct income, equity funds, and real estate. Our life new business value on slide 25 has been broadly maintained with higher margin offsetting lower volumes. This was supported by improvements in Spain, Belgium, LIAM, and specialty markets. Volume growth was lower than expected, but we are working on this. You will be aware of the successful joint sales start in Switzerland and Germany a couple of months ago, and we expect new product launches to result in stronger growth in future. On slide 26, we cover the non-insurance business. This includes the asset manager, bank, and various other fee-based revenues, as well as external finance costs and corporate costs. Our external financing costs are now also included in underlying earnings here.
The asset manager and bank, as well as the overall segment, have performed very well even if this is not immediately obvious due to the change in scope, accounting, and earnings definition. For example, the strong asset management result does not yet include the insurance-related activities currently managed within Helvetia Insurance, which will only be transferred to Baloise Asset Management in late 2026. The bank reports higher net fee and commission income at the same time as roughly one percentage point reduction in the cost-income ratio. However, we have a mid-single digit headwind from acquisition accounting effects. The bridge from underlying earnings to IFRS net income on slide 27 is unsurprisingly dominated by the accelerated amortization of merger-related intangibles. This accounting-only headwind will be much smaller after 2026, when we expect an amortization of about CHF 200 million per year post-tax in the years to 2030.
Otherwise, the main points to note on this slide are supportive capital markets, leading to some positive market fluctuations, the positive impact of some pension plan amendments, which are included in the other one-offs, and an impairment in relation to our office spaces. Integration costs were relatively low this period, as Fabian explained. The last slide, 29, covers the balance sheet, and this remains very strong. The pro forma SST ratio is estimated to be broadly in line with or slightly above our previous full year 2025 estimate. S&P has confirmed our rating of A+ with a stable outlook. The small increase in reported leverage you see is mainly a timing effect. In the first half of the year, we pre-financed CHF 275 million, which matures later in the year. Adjusted for this, the leverage would be 27%, similar to the year-end 2025 level.
We restated this year-end figure due to the CSM restatement I mentioned earlier, and because we observed merger-related tax rate distortions in the full year 2025 net CSM calculation. We have now corrected this using undistorted tax rates. Finally, we note that the combined company enjoys a regular profile of maturing debt over the coming years. In conclusion, we are pleased to have reported a strong first set of results as a combined company. While it is early days, we are fully on track to achieve our ambitious targets, and we remain committed to these. The results are supported by strong performance from all areas of the business, but they are anchored on excellent technical profitability. Our balance sheet also remains rock solid. With that, we are happy to take your questions.
We will now begin the question and answer session. You can register for questions at any time by clicking on the Q&A button in the webcast and then pressing star one on the virtual keypad. If you are joining by phone, just press star one. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Farooq Hanif from JP Morgan. Please go ahead.
Hi, thank you so much, and congratulations on your first set of consolidated quarter results. Firstly, on just understanding what you were saying about the combined ratio. My understanding from what you said is that the CSM release and movement is not in the combined ratio, but some of the negative variances that offset that release are. I am just wondering if you could quantify the benefit you would get if those variances disappeared going forward and the benefit from the CSM release that would therefore come through. My second question, also on the combined ratio is, I have noted that you have had slightly higher nat cat in the first half than maybe guidance, but PYD and reserve releases are lower. I am wondering to what extent you will use PYD as a tool going forward to manage volatility, for example, with the hailstorm that you have experienced in August.
My last question actually is around your intentions on debt leverage. If you could just clarify again what you said towards the end of your speech on upcoming maturities. Are you saying that you will use your very strong solvency position to maybe control leverage going forward? Thank you.
Thanks very much, Farooq. I think those are probably all for Matthias. The first two were basically on the combined ratio. First of all, to what extent is it affected by CSM movements and how should we think about the combined ratio going forward? The second one was that nat cats look high, PYD a bit lower. Do we use PYD to manage that ratio, especially in regard to the hailstorm recently? Matthias, do you want to take those first?
Yes, sure. The CSM that you mentioned, we excluded the CSM in non-life from the calculations of all the ratios. There is no impact of CSM in these ratios, simply because they are quite unnatural to have these non-life CSM out of the acquisition accountings. On the second question, the nat cat loading that we had in the first half is broadly normal for a first half year. We had some winter storms in Spain. We had some hailstorms in Belgium. That is broadly in line. Regarding to PYD development, this is a case-by-case assessment. Currently, we are at the lower range of the 2%-3% guidance that we gave. Everything handled in the normal way.
Thank you very much. The last question was on debt leverage, and should we expect that to change with upcoming maturities?
No. Our strategy is to remain roughly at the leverage ratio where we currently are. We are happy with our capitalization level as we see it today. The group SST ratio of 270% that we report is not really the binding constraint. It is more the SST ratio that we have on an OpCo level.
Okay. Thank you. Farooq, I appreciate the-
Can I-
Yeah. Sorry, I was just going to say, Farooq.
I was wondering if I could follow up on the CSM point.
Yeah, sorry. Do go ahead.
Yeah. The CSM is not included in the combined ratio, but you mentioned some negative variances that offset the CSM release in the P&L. How much were they, and will that be a benefit to the combined ratio? That was really my question.
Yeah. I think the non-life CSM movements are quite technical, and we would be obviously always delighted to follow up with investor relations on the detail. I do not know if, Matthias, you want to add a little bit on that?
No. I think we take them offline. Yeah.
Okay. We will follow up, Farooq.
Yeah.
Essentially, you can see the CSM release and the buffering that Matthias mentioned was roughly equal in magnitude. We can talk through the detail offline.
Thank you.
The next question comes from Iain Pearce from BNP Paribas. Please go ahead.
Hi. Morning. Thanks for taking my questions. The first one is just on the business volume growth in non-life. It sort of looks like X price. There has been some declines in volume. I am just thinking what has happened in pricing in Switzerland and in Germany. You sort of said you have not seen an increase in churn rates. So I am just wondering, is this part of a re-underwriting strategy, sort of evaluating the different books in a new context, or are you seeing any impact on sort of NPS scores or decreased customer satisfaction leading to some customer losses? The second one was just on the normalized CSM growth. Just trying to sort of clarify the guidance really here. Is the expectation that the normalized CSM growth is basically flat and that the live business growth is going to come from fee earnings going forward?
Just any further comments you could give around normalized CSM growth expectations would be great. Thank you.
Thanks very much, Iain. The first one was on portfolio pruning and whether that's had any impact on satisfaction or NPS scores, et cetera. Do you want to take that one, Fabian?
I can give a straight answer. We observe our NPS during the period of a merger because it's, for us, a very critical indicator, and we have the positive news that NPS remains at the same level as we knew it from before the merger. There is really no impact. You should consider that indeed some of the growth is impacted by a review of some of the portfolios. That's as well part of the exercise we do in a merger. You have new management looking over the portfolio and making their judgment about where we need to prune or where we need to adjust. That's happening, but you should see that as a temporary effect, and then over time, growth rates should further increase beyond the level where they are today. That is what I can tell.
Then on churn, I can confirm that we don't see increased churn. I think that question was as well asked in connection with the NPS. We're very happy, because that was one of our focus point that we don't lose customer in that merger, and there is nothing which goes beyond the normal fluctuation which you have. With that, I think I answered your question, and then the normalized CSM growth trajectory. Matthias, do you want to do it? Happy to do it.
Okay. Thanks for the question. The CSM growth that you can expect is flat, slightly positive. I think that's a fair assumption going forward. I just have to remind you that some of the business that we write is outside CSM. Whatever goes into semi-autonomous solutions or whatever goes into wealth management of the bank is obviously outside the CSM.
Thank you.
The next question comes from Murray Farquhar from Autonomous Research. Please go ahead.
Hi, all. Just two questions if I may. Firstly, just coming back a little bit to Farooq's question on the PYD. Could we just get to the bottom of whether there was a particular reason why it was kind of the lower half and perhaps below the long-term average? I am just wondering whether there might be some seasonality there or maybe a particular book movement that was a bit more material than some other parts. Secondly, on the SST ratio, could you possibly decompose the improvement over the first half? In particular, how significant was the model harmonization component there? Thanks.
Yeah. On the PYD, as I mentioned, it is on a case-by-case basis. We do this assessment. There is no structural change to how we do it, and it is just in the lower end of our 2%-3% bandwidth. So, I would say this is in the normal volatility that you can expect in a half year. On the SST, there has been a slight improvement from 260% to 270%. These are small effects from financial markets, investment performance, also from model harmonization. I would just like to remind you that the model that we use, that is not a harmonized joint SST model. It has also not been approved by FINMA yet. So we are still working with two separate models. Therefore, the improvement from 260% to 270% is just a smaller deviation, which I would not put too much weight on it.
Thank you.
Okay. Do you have a follow-up? Could we have the next question, operator?
The next question comes from Michael Huttner from Berenberg. Please go ahead.
Yeah. Apologies. I am on holiday. It is a bit noisy. Sorry about that. I have three questions. The first one is on the bank. The second is on the solvency. The third is on DPS, because you said something and I completely missed it, and I am sorry for that. On the bank, I spoke to Peter, who was really helpful and said, "Well, we haven't made a decision yet." I imagine the market would love it if you sold the bank. I am sure it is a fantastic asset, et cetera. It is just how markets behave. I just wondered if you could maybe give us a few hints of your thinking, either how the bank is now relative to its hurdle rate or how far it is or how much time it will have, et cetera. That is the first, it is not a question really, it is an essay.
But the second on solvency, I wondered, A, if you could give us a rough idea of what the numbers behind the ratio are. I am assuming the earned funds is CHF 18 billion, but I am not sure. And then on solvency, it is a bit of a cheeky question, but do you remember Zurich when their solvency was about this level, 270%? They decided that they should make a large acquisition, which they have. I just wondered whether you are already ready to think about an extra acquisition because your growth was kind of weak and maybe bolstering would be nice. Then the third one is on dividend. You said something about 50% higher, and I completely missed it, sorry.
Cool. Thanks very much, Michael. I think those are possibly all for Fabian in terms of what is our view on the Well, should we start with the first one? What is-
Yeah.
What is the view on the bank?
Okay. So look, we are now a few months into the integration, and we understand as well better what the bank can offer us. I must say that the wealth management product, which we get from the bank into our distribution, is an asset. We consider it as an asset because you know that we have a 50% + strategy. So focus on our customers who have maturing life policies, and the wealth management offer is a perfect way to give them an offer after their life insurance contracts matured. When we talked about volumes purely in life, wealth management is one of the examples where we build something for our customers, which is not anymore part of the pure life numbers but creates significant value for us. So that is what I can say to the bank, and I think that gives you a direction.
Yeah. Thanks, Fabian. The second question was on solvency, so in theory for Matthias. The acquisition was mentioned. We already for another one. I do not know if you want to take that at the same time.
No. Just start with him.
Okay. Matthias, in that case, the second one for you on the solvency. Can we give any more details on the numerator and denominator? I think given what you said on it being an estimate, et cetera, at this stage, we do not get further information at this stage.
Yeah.
Yeah. We can discuss that.
Sorry, now I get your point on acquisition. If you want, I can just say. Overall, look, our focus now is on getting the merger done, getting the integration, not the merger, the integration done. We are very disciplined in the way we execute the integration, and we allow ourselves little time for distraction on that one, and that's how you should look at us. This is our focus. Our focus is on our growth with our existing footprint and the execution of the merger. Of course, that will not hold forever, but this is what is now our priority, and you should consider it this way.
Perfect.
Then on the third question regarding the dividend expectations. I basically repeat what we communicated at the Capital Markets Day. We have said for 2029, we expect to have a dividend which is 50% higher than the last dividend. This is a 20% uplift, compared to a normal 6% growth trajectory that we usually had. Given the good progress we are making in the integration and the good development in the business, we are very confident to reach that goal.
Brilliant. Thank you very much.
The next question comes from Nasib Ahmed from UBS. Please go ahead.
Thanks. Firstly, just to follow up to what Iain was asking around the retail, non-specialty business on slide 12. It feels like pricing in most of these markets is much higher than what you have shown in business growth. I get the pruning in Germany and Belgium, but what about Spain, which is not an integration market? The LIAM market as well. What is going on there? Just related to that, is the pruning done? Should we expect growth at least in line with pricing trends from here? I guess second question is taking on the 1 point technical excellence benefit on the attritional combined ratio. How much of that have you achieved already in the first half? Then moving to non-life, you talk about new products to improve the new business CSM.
Can you talk us a little bit about what are the life insurance products that are going to add to the CSM? Finally, if I can ask a quick one as well, it feels like the second half underlying earnings guidance is about CHF 500 million. The way I get to that is, Matthias, you were saying CHF 600 million is the underlying for the first half. Take off maybe CHF 120 million for the nat cats and then add CHF 20 million for integration takes you to CHF 500 million. Is my math correct? Thank you.
Okay. Thank you very much. If we start with the first one, on how do we reconcile basically the pricing developments we have seen with volume growth. Fabian, do you want to comment on that one?
Yeah. I think the first one is, so you see in the integrating markets, you see a positive growth. Part of that growth, of course, comes from price increases. That is part of our way to manage the business. So we always ensure that rate increases or effective rate changes outweigh inflation, and that is how we improve technical excellence. You ask as well, what is our expected growth in the markets where we do pruning or where we have done pruning? By the way, we have as well done some pruning in Spain, just did not mention it because it was not as important as in the other markets.
What I can tell you is that I am happy to confirm what we said in the Capital Markets Day, and that is that in our retail market, over time, we expect to grow at least at the level of the market with our strategy around customer champion and best broker partner. This is the outlook going forward. Just accept as well, we are half year into an integration, so it is very early days. You will see some fluctuation. That is part of the biggest merger in Switzerland, that you have some of those fluctuations, and you hear me, and you hear me not at all concerned. Then your question was on the loss ratio target of 1%, to which point I hand that over to Matthias.
Yes. So you refer to this 1% improvement of the loss ratio current year net ex nat cat, ex discounting. So for the first half year 2026, this shows clear improvement in underwriting. However, we are still in a transition phase, so we should not over interpret the direct comparison of full year 2025 pro forma with half year 2026 actuals. In the pro forma baseline, we have some approximations. We have some simplified Baloise figures, and we have, for instance, cost allocations which still need to be harmonized, and that will affect the split between expense and loss ratio. Therefore, the attritional loss ratio is to be seen as a directional indicator, not an exact number. But it is clear we made a clearer progress in the underwriting in the first half year.
Great. Thank you very much. Then the third question was on life insurance products.
Yes. I understood this was more like a definition question. So what is not covered in CSM? It is basically the fee business. It is also the IFRS 9 business. So for instance, in Luxembourg, we got the freedom of service business. Then everything around semi-autonomous business, the bank wealth management and asset management activities as such. So typical fee business, which is not covered.
Thank you very much. Then the last question was on the guidance. His maths got him to around about CHF 500 million. Is that the right answer?
Well, we don't give guidance for the full year. But you can assume the 10%-12% underlying earnings per share growth target that we have. If we're not seeing another severe event like the hailstorm that we had in August, then you can assume that we will reach this 10%-12% growth rate this year, which translates in a bit more than the CHF 500 million in the second half.
Sorry. Just on the question on the 1 point combined ratio, are you able to give the improvement in the first half? Then on the CSM growth, it wasn't a definition question, it was more about what are you doing to improve the new business CSM contribution? I think you said you're launching some new products. So just what is the strategy there?
Perhaps I take the one on the CSM.
Yeah.
What do we do on the new business contribution? That goes in line with our ambition as well on the value of new business, where we said that over time we want to increase it by 8%. There are a few immediate product launches in some of those markets together with the sales start. The most important is the one in Switzerland. We have as well some product launches as well in the other markets like Germany. This is where we expect to see improvements over the time. Value of new business is as well a new way of steering. To be very clear, our teams are as well getting used to that steering, and typically what you measure, you can improve. There will be as well a dynamic that will unfold itself over the months and years to come.
On the question on the attritional loss ratio, we see an improvement, but we are careful with prior year comparison. We do not quantify at this stage, but I would say it's less than 1%, so there's more to come.
Perfect. Thank you, guys. Really helpful.
The next question comes from Kaya Batıkan from Kepler Cheuvreux . Please go ahead.
Thank you for the opportunity and congrats on the strong results. I have two questions. First one is related to dividend. In the initial merger assumptions, the first dividend uplift was expected in 2028, but looking at your cumulative dividend target, it seems there needs to be some additional uplift already in 2027. Earlier synergy delivery from today should also support this. Can you give us some indication of how much additional dividend growth we might see in 2027 on top of the 6%? Second, as a follow-up on CSM, can we use the H1 CSM release ratio as a reasonable run rate? Thank you.
Thanks a lot, Batıkan. I think both of those are probably for Matthias. The first one, can we be more specific on the 2027 likely dividend uplift?
Yes. We communicated at the capital market state that the fact that we are progressing faster in the integration, and today's result confirmed this, together with some capital synergies from Spain, that this would open the door for dividend uplift already 2027. I think that door got more open today for an earlier dividend uplift already in 2027. I think it is too early to say something very concretely because we will discuss dividends once the full year 2026 is complete. I take your second question, CSM release ratio. Currently, we have 7.8%, and this can be considered as a run rate for the future. Yes.
Perfect. Thank you.
The next question comes from Anne Risold from Octavian. Please go ahead.
Yeah. Good morning, everyone. Thank you for taking my question. I have some question more on Switzerland. One, yeah, you mentioned there is coming a heavy nat cat stage to this hailstorm. So do you expect to be able to recover, partly recover this at the next motor renewal? One on the group life business in Switzerland. So you mentioned you had lower demand for the full year insurance in Switzerland, while we recently have a large competitor who actually reported strong demand in this space. So could you help us understand what was the difference, where you see the key difference between your two experience? And maybe a last one on the integration in Switzerland, integration in the front office. Can you tell us how this is proceeding?
Well, thank you very much, Anne. I am not sure we quite got the first question on the nat cat being recovered.
Yeah, I think through premium increases.
Well, not recovered. But do you expect premium? Do you have already some flavor?
I want to put the nat cat event into the right context. So, we overall give you a guidance of nat cat budget, which is around 4% of our overall premium volume in the group. And when you refer that nat cat event to that larger budget, you see that it is part of that budget. By itself, these are events for which we have the budget. So let's not overestimate as well the impact of that nat cat event. This is as well the reason why Matthias said that we stick to our guidance to year-end, unless many other nat cats now happen in a severe way. And the way we do our premiums is not that there's one nat cat event and then we increase the premiums.
We rather look at nat cat events over time, and we make sure that the premiums reflect that average, and the rest is the volatility we as an insurer have and want to have in our P&L because it's part of our business. So there's not a direct connection. Having said that, in Switzerland, and that is why we're very happy to be so strong in the Swiss market. In Switzerland, there is still a hard market, and we know that if we need to increase premiums because of increased nat cats or because of inflation, the market allows us to do it. So we are very bullish and very comfortable around the level of premiums in Switzerland. And I think with that, I have answered really your question from different angles. I think-
Yeah.
I'm sure. So the question on the integration update for the front office. I'm not sure what you mean here with front office. If you mean how did the sales start go?
More agents, you know you.
Yeah.
Yeah. You also have in Switzerland. It's a lot of redundancy.
Yeah. That went really smooth. We prepared as well for different scenarios, of course. But overall, there is no hiccup. There's always a risk. Sales have started well. And we have done the trainings of the agents. There's really nothing extraordinary to say. It's really a little bit of a normal course of business that is happening here, and that's good. That's the best news you can have for an integration and the joint stage start. By the way, not only for Switzerland, as well for Germany. We have in Germany the exact same situation. Yeah. Then I think there was a question on individual life in Switzerland.
No, group life. I think it was more the group life.
It was more on group life.
Because, you mentioned here you have mostly the traditional move to semi-autonomous, low demand for or decreasing demand for full life. We just had some other experience from the large competitors. Maybe if you could just comment a bit on how is-
Yeah.
-your group life business.
For us, it's important. We are one of the very few providers of a full product range in the pension and in the group life business in Switzerland. You can really choose with us between full insurance, semi-autonomous, and other solutions. We allow our customers to decide what is the right solution for them. Our business is a consequence of that. We're not now pushing full insurance, or we are pushing semi-autonomous. It's really following our customers. I think you should always consider that the reason why semi-autonomous is attractive is because the capital return of semi-autonomous is much higher than the one on full insurance. That is the reason why that shift overall we consider as capital efficient. I think there's not more to say. There's of course always fluctuations.
Take the half year, but as well respect that those things can move up and down a little bit, in particular when you come together as a new company, because there have been different growth rates from the previous companies and they are now merged. Depending on which aspect you see, there might be more growth compared to one of the previous companies or less growth compared to the previous companies. Overall, when we look at the trend, and that is what we did, the trend, taking both together, is very stable. This is how we look as well at the volumes.
Thank you very much, Fabian. Looking at the time, we are unfortunately hitting the time limit. I am aware there are a few more questions in the queue. I think they are all follow-up questions at least, but we will be very happy to take those offline with IR afterwards or in meetings over the coming days. I think we probably need to wrap up the call there. But thank you very much, everybody, for your interest and questions. As I say, the IR team is always available. Thanks a lot.
Thank you very much.
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