Ladies and gentlemen, welcome to the Healthier Results 2020 Conference Call and Live Webcast. I am Sandra, 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 and A session. The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Mr. Felix Knuehl, Group CEO. Please go ahead, sir.
Thank you. Ladies and gentlemen, welcome to our analyst conference call on the results of the first half of the twenty twenty financial year. Within the next 30 minutes, we would like to give you detailed information on our business development and the key financials of the reporting period. Following my introduction, our CFO, Paul Norton, will go through the financial figures. Then I would like to give you an update on the implementation of our strategy Helvetia 2020.
After my presentation, Paul Norton and I, as well as our Chief Investment Officer, Andre Keller, will be pleased to answer your questions as always. On Slide 3, I would like to share with you a brief overview of the main performance indicators. Paul will give you detailed information on the developments of these figures later on. The first half of twenty twenty was marked by the COVID-nineteen pandemic. Once again, we were able to demonstrate the stability of the business model and the solid capitalization of Helvetia in a difficult environment.
Despite the pandemic, the business volume in the Non Life business showed a significant increase of 9% in original currency. This is a pleasingly strong premium growth driven mainly by specialty markets and property insurance in Switzerland and Europe. In the Life business, investment linked products in Europe developed very positively with a currency adjusted increase of almost 27%. Nevertheless, as expected, the total volume in the Life segment declined by 14.5% in original currency due to the planned introduction of a new tariff in Swiss Group Life, as already communicated. This led to a 3.2% in original currency decline in total business volume to roughly CHF5,600,000,000 On the earnings side, as already communicated on August 25, Helvetia has experienced 3 key effects that are extraordinary in this form.
The pandemic left a clear mark on the IFRS result after tax, which amounted to a minus of CHF 17,000,000 in the first half of twenty twenty. First, COVID-nineteen resulted in a major distortions on the capital markets, which considerably on the underwriting result in Non Life business. In addition, a special effect, a one off write down to the realignment of a project to renew the system landscape in Swiss Non Life was booked. Compared to the previous year, there was also no one off positive tax effect in Switzerland. The net combined ratio in the Non Life business was 95.9%, excuse me, which is a very good level considering COVID-nineteen.
The losses due to the pandemic affected the combined ratio by 4.4 percentage points. Without these burdens, the ratio clearly met the strategic target, which shows the good quality of the portfolio. Paul will give you some more details later on. The Life business also proved to be robust. The new business margin of 2.8% was well above the strategic target.
In addition to lower discount rates, and improved business mix as well as product and tariff adjustments contributed to this development. Alvetia continues to have a strong capital position. The SST ratio was 2 35% as of January 1, 2020. According to estimates, the SST ratio at the end of June and thus the acquisition of Gasser and its financing continues to meet the strategic target of 180% to 240%. The implementation of the Helvetia 2020 strategy is proceeding successfully, and Helvetia is well underway to achieving its strategic goals.
At the
end of June 2020, Helvetia successfully completed the transaction to acquire the Spanish insurance company, Gasser, and its financing. The acquisition only affects the balance sheet and not the income statement of the half year financial statements. Gafser developed positively in the first half of the year in a difficult environment in the insurance business. Above all, we are also on the home stretch on reaching our financial targets 2020. I will come back to this later in the second part of my presentation.
With that, I would like to hand over to our CFO, Paul Norton, who will now provide you with the most important information about the financial figures.
Thank you, Philip. Good morning, ladies and gentlemen. I'd also like to welcome you to our conference call today. Within the next approximately 25 minutes, I'll give you more detailed information on our financial performance in the first half of the twenty twenty financial year. For this conference, we have simplified the slide deck.
The full presentation in the form we normally use and with additional information is on our website available for download. I'd like to start with Slide 5, where we have summarized the main impacts of the COVID-nineteen crisis on the first half of twenty twenty. As Silden was already mentioned, the pandemic led to clear traces on the IFRS earnings after taxes. On the one hand, the pandemic had an impact on the underwriting result in the Non Life business. The net claims burden from COVID-nineteen due to regular claims of policyholders and from settlements of issuance offered by Nordectia, especially in the Swiss epidemic insurance, amounted to €89,400,000 before taxes and mainly affected the Swiss business.
Most of the claims payment Nordeckxia incurred due to COVID-nineteen have been in connection with business interruption cover and travel and assistance insurance for Manulife in Switzerland. The claims figure also include the settlement solutions for system gastronomy companies with a pandemic extension in epidemic insurance announced by Novetta in many. This settlement solution is very well received with over 95% of the affected companies agreeing to date. The successful implementation of the settlement solution provided security for customers and Telvexya. In Germany, there is a similar solution, which has also been well received.
On the Life side, we've not seen any significant effects of COVID-nineteen on the margin at the cost. On the other hand, the Corona one relates to major distortions on the capital markets. This was simply weakened investment results in both the Life and Non Life business. There were two main reasons for this. Firstly, how Vectrus classifieds the significant part of its equity portfolio as held for trading and comes from the gains and losses flowing directly into the income statement, not as in many other companies through OCI in equity.
Economics, the volatility in the same and the coming from choice does not reflect the P and M impact. On the right side of the slide, you can see how the investment losses are debounded between the P and L and OCI. Of the minus €365,000,000 losses booked through P and L, some 2 thirds related to equity and ASEAN instruments. As part of the Helvetius Group Risk Management, a loss term concept has been used for many years to limit extraordinary losses within balance sheet year. The implementation of the loss limit concept includes a dynamic adjustment of the hedging instruments to limit losses and protect the balance sheet against further downturns.
This adjustment of the hedging instruments meant that Helveci only pharmacy participated in a subsequent recovery in the stock markets. Our prime aim was to protect the balance sheet insolvency, not the profit and loss account. I'd also like to emphasize that we have not significantly realized investment gains, I. E, sell them in order to compensate for book losses. The vast majority of our unrealized gains are in our bond portfolio.
It's the KRW 100 kruppens they own for pending current market yields. We did not believe it was sensible to 700 year in bonds, which resulted in having to reinvest in the future at lower yields, just to make gains to compensate the short term valuation fluctuations, which affected the vast majority of the market. Turning to investment income was also impacted by COVID-nineteen, which allowed dividends from equities and funds. Various companies were in part of their dividend payments in response to pressure from regulators and politicians. Additionally, interest income was lower because of the ongoing low interest rate environment.
On the volume side, the measures to contain COVID-nineteen led to a temporary fall in new business during the lockdown period as well as a reduction in outflows. Nevertheless, we managed to achieve very pleasing growth in Europe and specialty markets in non white business. The value distribution channels in Italy and Spain were less affected by the reduction in new business and proved to be stable, particularly in the Life business with excellent growth in investment linked products. However, the impact of the pandemic on economic development will most probably lead to lower business volumes in certain lines of business in the future, e. G.
The Transport business. Let's turn to results for business areas on Slide 6. Slide 6 gives you an overview of the IFRS results after tax of the individual business units. In terms of business areas, the COVID-nineteen pandemic affected both the Life and Non Life businesses. Both businesses experienced significantly weaker investment results due to the collapse of the equity markets and limited participation in the subsequent recovery as the hedging instruments were adjusted consistent with the aim of protecting the balance sheet.
The non life underwriting result was impacted by COVID-nineteen claims and higher costs due to projects and shifts in the business mix. Nevertheless, the combined ratio remains on a good level, which underpins the sand quality of our portfolio. The nontechnical result was burdened by a special effect, a one off write down due to the realignment of a project to renew the system landscape in the Swiss Non Life sector. In the Life business, the decline of the investment result was partially offset by a slightly higher margin after costs, driven by improved risk result and lower expenses for policyholder participation and for interest rate related reserve strengthening. The new business also proved to be robust.
The new business margin stands at 2.8% thus remains well above the 2020 strategic target. The interest margin remains solid as well and only slightly decreased by 5 basis points compared to the previous year. The reason for this was a stronger decline of the direct yields compared to average technical rates. Decline in yields was due to the low interest environment and lower dividend income in the course of the pandemic. The successful implementation of the settlement solution in the Non Life business offered to customers with a pandemic exclusion in Swiss epidemic insurance create security for customers and for Helvetia.
In Life Insurance, Helvetia has also improved its risk position, strengthened future profitability, introducing a new tariff in the Swiss Group Life business. The result in other activities also Spanish insurance company, Carcer, as well as higher project costs. With regard to reporting segments, the effects of the pandemic was strongest in This is mainly due to weaker investment results in both business segments and in Non Life to COVID-nineteen claims as well as a special effect due to one off write down. The losses in the stock markets also significantly reduced the investment results in the Non Life and Life areas of the Europe segment. This was partly offset by a much stronger underwriting result in Non Life business.
Avexia benefited from the good portfolio quality with low exposure to COVID-nineteen claims and the lower claims frequency during the lockdown period. Specialty Markets segment also posted lower investment income and a slightly lower technical result due to COVID-nineteen losses in Active Reinsurance. I'll continue with our growth in business volume on Slide 7. In the first half of twenty twenty, Hovetsia Group achieved a business volume of roughly €5,700,000,000 This equates to a currency adjusted decrease of 3.2% over the previous year. Despite the COVID-nineteen crisis, we achieved a pleasing increase in premium volume in the Non Life business of 9% in original currency.
The growth was mainly driven by Europe and specialty markets, where premiums increased by 1.8% and 33%, respectively. The significant increase in the Specialty Markets segment can be attributed to a strong growth in all three market units, driven by both positive volume and price effects. In particular, I'd like to emphasize that Specialty Markets business has substantial rate increases as markets have hardened. Viewed by line of business, growth was particularly supported by the Property business, engineering, transport and art and active reinsurance. Motor business, by contrast, is under pressure in most European countries due to the lockdown restrictions.
In our Swiss home market, we are able to increase premiums by 1.3%. Property business which benefited from the expansion of partner business, so called B2B2C business, had 4.7% higher premiums. This growth was partially offset by lower volume in the liability business. In the Life business, business volume on group level declined by 14.5% in original currency. The decrease is due to a strategic decision in the Swiss Group Life business.
The introduction of a new tariff on 1st January 2020, Alvexio strengthened the future profitability of the Group Life Business. As expected, this led to a significant premium decline of 20.5% in this line of business in the first half of twenty twenty. A strong development of the business volume with capital light investment linked products in Individual Life in all country markets of the Europe segment, plus 26.8 percent in original currency, had a partially compensating effect. The Helvetia model of an agile and service oriented organization providing strong support for different sales channels and private customers were key in this development. I'd now like to move to the net combined ratio on Slide 8.
The net combined ratio amounted to 95 0.9% and thus increased compared to the previous year. Thanks to good quality of the portfolio, the ratio proved to be very robust despite high COVID-nineteen losses. The net claims burden from COVID-nineteen due to regular claims from policyholders from settlement solutions offered by Helvetia, particularly in Swiss epidemic insurance, amounted to €89,400,000 before taxes and affected the combined ratio by 4.4 percentage points. One point I'd like to make here is there's still uncertainty in the market regarding the treatment of reinsurance recoveries, and this may take time to resolve and could lead to different results. We are nevertheless very confident that our insurance recoveries estimate at the present is robust.
The relatively low impact is proving the resilience of the portfolio. Additionally, Helvetica benefited from a lower burden of major losses from natural events and lower loss frequency in individual lines of business as a result of the lockdown to combat the pandemic. Cost ratio increased 30.6%. The reasons were a higher administrative cost ratio, mainly driven by higher project costs as well as a slightly higher acquisition cost ratio due to shifts in the business mix. The 1 up write down of the IT project in Switzerland is not included in the combined ratio.
On a segment level in Switzerland, the net combined ratio was higher than in the previous year, mainly resulting from a higher loss ratio due to COVID-nineteen related losses. At 91.2%, Europe recorded a better net combined ratio compared to the first half of twenty twenty. While the claims ratio improved, thanks to a good portfolio quality, with a low exposure to COVID-nineteen losses and a lower claims frequency during the lockdown period, the cost ratio remained more or less at the previous year's level. All European markets units achieved combined ratios below 100%. In the Specialty Markets segment, the net combined ratio increased slightly to 98.1%.
Claims ratios slightly increased predominantly due to COVID-nineteen losses. In active reinsurance. Cost ratio was also slightly higher, mainly resulting from shifts in the business mix in active reinsurance. Slide 9 shows the development of our investment result. With CHF 457 1,000,000, current income was below the prior year level.
The reasons for this are the ongoing low interest environment and lower dividends from equities and funds during the COVID-nineteen pandemic. Realized and book gains and losses amounted to EUR 365,000,000 minus, a substantial decrease compared to the first half of 2019, which resulted from the equity market crash triggered by the COVID-nineteen pandemic. Ovetsia only partially participated in the subsequent recovery in stock markets as our priority was to protect the balance sheet, and we adjusted our hedges accordingly. Remaining book losses were mainly due to FX movements on fixed income instruments, which are always booked through the P and L, since currency is situated against the Swiss francs. Unrealized gains and losses recorded in equity remained almost unchanged with a slight increase of CHF24 1,000,000.
As a result of the capital markets, investments in the market with polysilis increased by CHF121 1,000,000,000. By On Slide 10, I'll provide you with some details with regard to the impact of Carcera on the half year results. At the end of June 2020, Helvexa successfully completed the transaction to acquire the Spanish insurance company, Carcev, and its financing. The acquisition only affects the balance sheet and not the income statement of the half year financial statements. As you can see in the left part of the slide, the purchase price plus minority interests corresponds almost exactly to the net assets of the company.
The transaction, therefore, resulted in virtually no goodwill, only CHF 2,000,000, which means that the purchase price was reasonable and reflects the book value of the company. Financing the transaction was completed at the end of 2000 of June 2020. OVERTI successfully placed 3,300,000 new shares at a price of CHF 91 per share in a private placement via way of an accelerated bookbuilding process, or ABB, generating gross proceeds of CHF 300,000,000. The ABB was very successful with strong demand leading to an oversubscription and a very low discount of 2.3% for the last closing price. We also issued a hybrid bond of €600,000,000 which is eligible as equity for SSP and S and P as a very favorable coupon of 2.75 percent per annum, which was also heavily oversubscribed.
We believe that this shows the strength and support in both equity and credit markets for the Helvetica story. After the financing Carcer, the leverage ratio now stands at 28% in line with our targets. I'd also like to repeat the information that we gave at the time of announcing the Qatar acquisition that we believe that the transaction is accretive to EPS in the 1st year. We move to Slide 11. A first look on Carter's half year results on a Spanish account basis showed that Carta has developed positive in the 1st 6 months of the year in a difficult environment in the insurance business.
Risk premiums in the Non Life and Life business increased year on year. The growth rate is above the market. Underwriting also developed favorably in the Life and Non Life segments. Net income in the first half of the twenty twenty financial year amounted 2,000,000. I'd like to emphasize that due to the fact that CASA only reports on local GAAP and the results also include certain one off gains, its figures are only comparable to Helvetia's numbers to a very limited extent.
They can give a broad indication of results on the Helvetia IFRS accounting policies, however. However, IFRS acquisition accounting will reduce profits in the following years. It's a bit similar to what we had under National Suites. Therefore, these figures should not be taken as guidance of future performance. CASA's half year 2020 results have no impact on the Helvetia Group results because of the date of initial consolidation, and the acquisition only affects the balance sheet.
And on that note, I'll now hand over to Filip Gammerer again.
Thank you, Paul, for the details of our financial performance in the 1st 6 months of 2020. It is by the way the last time you present the Helvetia results. I come back to this later on. In the last part of the presentation, I would like to briefly show you an update on strategy implementation. The implementation of our strategy Helvetia 2020 is proceeding successfully.
Slide 13 gives you the usual fleet overview where we stand in terms of implementation. I would like to go into more detail on 2 items. So let's move to Slide 14. One milestone we achieved in the 1st 6 months this year is the acquisition of a majority stake in the Spanish insurer, Caser, announced in January. Helvetia is thus strengthening its core business, a key objective of our strategy.
The takeover was successfully completed at the end of the first half of the year after refinancing with equity and hybrid capital in a challenging environment. It should be particularly emphasized that the new shares created by way of the capital increase could be placed on the market only at a small discount, thanks to the high demand. LVTIA's anchor shareholder, Patriak in Offenschaft, supported the acquisition and has purchased new shares at the issue price in proportion to its current shareholding of 34.0 9% in Helvetia. The acquisition represents a strategic milestone in the development of Helvetia. Gasser will further expand the European business as the 2nd pillar of the group and increase the importance of the attractive non life business.
Helvetia is also opening up valuable new sales channels in the area of bank distribution. As Paul has already mentioned, Gaffer developed positively in the first half of the year in a difficult environment. Another important thrust of the current strategy period is the development of new business models. LVTIA has taken an important step in this direction with the launch of its own asset management products. LVTIA Asset Management launched its first real estate fund in June.
The initial issue met with widespread interest and generated proceeds of CHF450 1,000,000. With the launch of the real estate fund, Helvetia is broadening its product range and opening up new sources of income in the form of stable fee income. Finally, Slide 15 shows that we are well on track to reach our financial targets. We are pleased with the development of the individual financial figures so far. The acquisition of that together with Qatar, Helvetia will reach its volume ambition of CHF 10,000,000,000 by 2020, but without jeopardizing profitability.
To the contrary, the transaction supports our strategy of profitable growth. Almitia's operating business has proved to be robust and resilient despite the consequences of COVID-nineteen. In this respect, our geographical and business diversification was a major contributory factor. Of course, one off special efforts effects burdened our half year results. However, if there are no more adverse developments in the second half of the year, we are confident to finally achieve the goals set forth in the framework of Helvetia 2020.
This brings us to the end of the presentation. My colleagues and I would now be pleased to answer your
The first question comes from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thanks very much. My first question was on the non nice walk, actually on Slide 29 from your extended slide pack. I'm just wondering if you can provide us with a little bit of help in understanding the moving parts. I mean, in particular, you show a 6.2 percentage points decline in the current year claims ratio. I mean, I think that comes from 3 things: shift in the accounting, which shifts things into PYD, probably some good claims from people driving less and things like that in the COVID environment and maybe also an underlying improvement.
So I'm just wondering if you can help us understand, maybe quantify what those three things are and in particular if you're able to split out the PYD that would be very helpful. The second area I wanted to focus on was on the investment portfolio. I guess the credit ratings have seen a decline just naturally from the from Bill's bringing Casa's assets in and obviously Casa's assets were basically rated BBB and below. I'm just wondering if you can say what your plans are going forward with that, whether there have been any sort of ratings migration that you've experienced to date and how you see that portfolio, what your appetite is for rerisking going forward? And maybe on that side, I mean, you mentioned your net exposure at the end of June.
I was wondering if you could give us an update and also say what your view on real estate is in the current environment? Thank you very much.
Thank you, Peter. I would ask Paul to answer your first question regarding the non life walk and then Andre to answer the question with regard to the investment portfolio. Paul, go ahead.
Peter, we don't give a great deal of detail out of the half year. I mean, a large part of the current year claims ratio improvement has been due to the fact that people simply are not driving and that we've had lower claims in those areas which have been affected by lockdowns. That's the major element of That's the most important thing I can say. You can see then the COVID losses are pretty clear. And that cat ratio has barely moved.
And prior year claims development, there have been 1 or 2 larger claims. That's also due to the accounting element as well from the Specialty Markets business, which is growing, and that's based on an underwriting year basis, not on an accounting year basis. So that's why. But it was not a shift. It's the growth in the prior year development.
But the reduction is mainly due to a underlying, you said, and above all, due to the impact of less activity due to COVID.
Great. Thank you very much, Paul, and enjoy your retirement and very well deserved.
Andre? Okay, Peter. This is Sandro speaking. So the first part is about the credit portfolio. As you saw on the extended slide deck, which I would guide you to on the pages in like 49 and so on, you see that the acquisition of the Casa business brought government bonds, especially in Spain and Italy with it, which mostly explains the credit rating.
So there was no general credit migration or negative credit migration in the overall book, so to say. Then as regards to the outlook of that, as normal course of business and portfolio construction, we will also review this portfolio. And given all the insurance specific constraints like capital efficiency and others, we will also set how to evolve that portfolio. Then the equity is the second. We included a slide in the extended slide pack, which is Slide 45.
And there you see the evolution of the equity exposure on the one hand, total equity exposure and then including the hedges on a delta adjusted basis. And as part of executing on the loss limit concept, we are now gradually restoring our equity exposure back to the strategic asset allocation. So that's and you'll see the exact numbers on that slide on a quarterly increment. 3rd, real estate. I would say the real estate market outlook is dominated by the interest rate environment as this is a cash flow producing asset.
It's definitely, I would say, well positioned in comparison to other notional assets because it's a real asset. I would then differentiate whether it's residential and commercial and then refer to our own portfolio, which differs from the general market in 2 ways. First, it's a predominantly residential portfolio in Switzerland. So it has very little commercial exposure, and this is also in COVID times, I would say, a good feature. And the second piece is that we do not actually acquire a lot of real estate in general because we have actually a quite huge pipeline of own development which we can do above market rates from our real estate portfolio.
That's something to consider. And this is also explains a bit the strategy with the real estate fund, which enables us to kind of nurture that ecosystem within the company.
Okay. Are there more questions?
The next question comes from Simon Forsmeyer from Brubel. Please go ahead.
Thank you. Hello, everyone. First question is on the acquisition of Kazaire. I'm still positive a little bit on the accretion. From what I see is you paid a little bit more than you initially planned.
And obviously, you had to issue more shares than initially planned, but it's still EPS and ROE accretive. And I just wonder if you could shed a little bit more light if anything else changes changed. Also on the appendix, I see that you acquired 71% versus 70%. Is this just a rounding error? And finally, in the annual report on Page 34, you're saying that the Kaseya would have accounted for roughly EUR 50,000,000 in profits, and that includes some special effects.
If you could give us some idea of a potential run rate in the future, that would be great. And then just some minor questions. I saw that you had a change in the actuarial reserve in Life, pretty high, EUR 2,200,000,000. Is this because of the reduction of the BVG business? And finally, on solvency, I know you don't give an exact number, but $180,000,000 to $240,000,000 is a pretty wide range.
If you could maybe narrow that range a little bit for us where it stands at half year? And finally then, Paul, just wanted to point out that Bankfront Tubal has great retirement products. So maybe we should talk. Best of luck to you.
Okay. Thanks for those three questions. First, the acquisition of Gasa, then the actuarial reserves and the solvency topic, I think I hand over to Paul. Okay.
I can do them almost in reverse order actually. The you're right. The reduction in the reserves is due to the Carte Francis, the new tariff led to a large outflow of life reserves there. The solvency is at the lower end of the range. We don't want to give any more details at the moment.
As you know, SST is quite volatile, shifts up and down all over the place. Yes, the acquisition of 70%, 71%, it's roughly rounding differences. There were some light adjustments at the very end. And the price we paid was only slightly above what we had originally said. The original calculations we gave you, the original estimate was it is price accretive sorry, EPS accretive.
In from year 1, from the full year 1. The changes that have been made since the slight adjustment in acquisition price and so on make no difference whatsoever really to that estimate.
And any guidance on the €50,000,000 profit contribution? Is that what we should expect going forward? That would be relatively high. If I just take the €49,000,000 multiplied by 2, that would be substantial?
Yes. I'd rather not because it's all based on a local GAAP basis. And there's also net of acquisition costs we have. We have obviously, as you all know, investment banks don't come cheap. Plus, we had the integration costs for the IFRS.
And the gap is quite different. There's some one off effects in there, both positive and negative. So I don't really want to give any guidance, but it's to give you a kind of rough indication. We're not talking about going down to €20,000,000 anything like that. So but it's not going to be €100,000,000 either.
So it gives you some kind of rough indications. But unfortunately, we can't give more, and I think it'd be dangerous to do so. All right. Thank you.
The next question is a follow-up question from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thanks a lot for letting me come back. So 3 first questions, if I may. First one, on the COVID claims, the net claims of 4.4 points, I think translates to €90,000,000 of claims. I mean, you mentioned that sort of reinsurance discussions were ongoing. Are you able to tell us what the gross claims are related to those €90,000,000 That would be
the first
one. The second one, the non life administration ratio, I mean, you mentioned the project costs there that inflated it. Should we expect that level going forward? Or is that an elevated sort of temporary one off as it were? And then third one on Casa, I mean, I appreciate it's difficult to give a forecast for earnings or underlying earnings.
At the end of the day, it's different accounting frameworks. But I mean, probably what the most important thing is at the end of the day is what the sort of cash flows or cash implications might be. I'm just wondering if you can say anything on that. And I appreciate the short term is going to be some volatility, but do you have any feel for what it might be able to contribute on a long term basis? Thank you very much.
Again, Paul, may I
ask you? We have not we don't want to give out the net and the gross because it also shows what the net is and position vis a vis reinsurers and so on. So we're leaving it at the moment deliberately at the net level. You understand with in the situation we are in with discussing reinsurance, we just want to keep it relatively close to the chest. The non live admin cost, I mean, we say predominantly I mean, there were several factors impacting the admin cost.
Probably the largest single one was project cost. It doesn't mean it's overall, there are other impacts. I mean, the lower interest rates meant that the pension costs in IFRS 19 increased. We also had a change in the commission cost ratio due to more B2B2C business and broker business in Germany. And there were the projects are also not just IT type costs, but they're also growth projects, particularly in the Specialty Markets business in France and Specialty Markets, Switzerland International, with new business lines being introduced.
So it's a mix of things, of which happens to be the one single element was project cost. At the moment, short term, yes. Midterm, we have started a project improve the efficiency of our organization starting in Switzerland and in the group functions, which will be one of the platforms for the 2025 strategy, which aims to improve efficiency and thus reduce costs overall. In terms of the cash implications for Casa, as you say, it's difficult to estimate. But what I can say is that the banks of previous owned Casa wanted a dividend out of the company, and they got a dividend out of the company.
And it was a regular dividend. Furthermore, they placed a hybrid in the market, which is forced due for repayment next year in the spring. And we will renew that probably, very probably, and we will probably renew that internally. I think some of it is held by the existing banks and some of it was placed with external investors. And at the moment, our thought is, and it's not setting concrete, but that we can renew that internally and that would be another cash stream to us.
The
next question comes from Rene Laucher from MainFirst.
So I would like to start with this €40,000,000 one off in the Non Life business. I mean perhaps a little bit insight, what exactly happened and what your plans are going forward in IT, non life? So that's the first one. And then on in this context on Slide 20, you showed the investments of your Health Asia Venture Fund. I'm just out of curiosity, I'm wondering how do you kind of control your investments?
What the returns are? Because I can see there are quite an impressive list. And then the second one is on Slide 21. Just for my understanding, on the C and T, the Swiss Real Estate Fund, you have now proceeds of around €450,000,000 And I'm just wondering where the real estate is coming from. Is that kind of carving or carved out of your balance sheet and then you pack it into a fund?
Just that I get a better understanding here. And on Slide 4, I guess you have explained to me several times, but still struggling a bit constant. Why do we have these €4,200,000,000 classified as available for sale as trading? And so would it be easier to just reclassify it to available for sale? I mean, then if it's just accounting, gaming, but it would lower a bit volatility in your results.
And last but not least, as a follow-up question on what Peter asked before on Page 46, these bond credit ratings. So for example, what is the reason for this increase in lower BBB and not rated? I guess this is all the subject to do with the Casa. If you could shed a little bit more light here. Thank you very much.
Thank you, Ronny. Five questions. Let me answer question 12 and then ask Andre to answer questions number 35 regarding the Swiss Real Estate Fund and the bond credit ratings. And Paul will finally answer question number 4 regarding the investment portfolio classification. Okay.
Question number one. Our EUR 40,000,000 one off writing down due to IT project in Switzerland. What are our plans? What we want to pursue is like a consolidation of our different back end IT systems in Switzerland. We have, of course, quite a lot of IT projects going on, be it with regard to front end applications to back end applications to enterprise content management topics?
And why did we now write off this €40,000,000 We have a periodic review of our different projects. And we came to the conclusion that the risks to fulfill the targets we were setting forth for this project are too high. And we came to the conclusion to better stop now than to try to work hard and to maybe to come to a better solution within 1 or 2 years' time. And it was for risk reasons that we came to the conclusion to stop this project. However, it's not a stop of the digitalization initiatives we have in Helvetia, but we just want to choose another way to get there.
Question number 2, our investments in our venture fund, as you probably know, we have like CHF 55,000,000 for this investment portfolio. We are of course regularly tracking the funds and its investments and of course the valuation of different investments. And as we said, when we were launching this fund, we have different goals with this fund. The first goal is to find investment opportunities which help us to like to bridge a modern world with the old traditional insurance world. A second goal might be to make an investment and after a couple of years to divest it again.
We want to finally, we want to earn money also. It's not that that's only money to play with, if you will. And the 3rd goal is to by investing in new ventures to get access to new business ideas as well. And so far, we are pretty happy with the development of the fund and the development of our investments.
Now, Andre? Yes, on the real estate fund. So let me give you a couple of details here. So there was, as you said, a carve out from the life insurance portfolios in the amount of a bit more than CHF 530,000,000. This is what's then appraised by independent appraiser, both actually FEMA like collective investment scheme act and the insurance authority were involved.
So they had to independently assess that this appraisal and the portfolio which was carved out is representative of a general insurance real estate portfolio that we have in these 2 legal entities. So these are kind of mandatory criteria, which we you need to fulfill or others as well. And then it was kind of sold to the investment fund and the investment fund then took €450,000,000 from unitholders and took €80,000,000 of leverage or mortgage financing. So this explains the €450,000,000 which was the unitholders. So €530,000,000 broadly held portfolios were carved out from the insurance, life insurance legal entity in Switzerland, appraised by independent appraiser and sold to the real estate fund.
So representative
in terms of residential, commercial use, in terms of geographic footprint, so broadly representative of our portfolio.
And that's okay if I quickly may. I mean, I see the result of the companies. My question is, if I would be a life policyholder, Helvetia, I'm not sure if I would like the company to sell real estate to an investment fund. So this is just my general remark. So this is a little bit but then I think it's this is how it's done in Switzerland.
One of the reasons why we carved it out was because we had an overhang in the real estate. As I'm sure you're aware, the maximum you're allowed of real estate related investments is 35% in Lund and the Permian rules. And because of the outflow of assets for the Cartej Santo Transfanti, we had to reduce that anyway.
And finally, it remains in the Helvetia universe, if you will, because the fund is managed and will pay back the fees. Okay. The other question is the credit rating. Which one?
You were referring to Slide 46 in the extended slide deck. I would also add then Slide 49. And as
I
alluded to before to Peter, this is really related to the Cauzera acquisition with acquiring Spanish insurance legal entity. You always have a lot of local bonds. In this case, it's portfolio of Spanish, but also other sovereign bonds like Italy or France, Belgium and other securities in these areas. So the BBB and not rated or below BBB and not rated, these are not BBB or below BBB like high yield. These are not rated.
So what Caser has in their portfolio was like structured vehicles that include also sovereign bonds, for example, the predominant part there or Spanish sovereign bonds, Italy, France, which they have packaged in structured securities, but they are not rated. But it's not like high yield that we kind of increased investment risk in the high yield part. It's structured vehicles which contain actually sovereign bonds, Spanish, Italy and France and others.
Okay. Thanks.
Now Paul? Yes.
We organize a lot of our investment, particularly equities and funds within our own funds, so mixed funds. And these funds we set up for various operational reasons. It was much easier to handle and at the time also for tax benefits. So these funds are held centrally and then the market units participate in them. And the easiest way to do that from an accounting and operational basis was to have them as fair value, including profit and loss.
It is extremely difficult to start consolidating internally AFS funds. We realized a couple of years ago or we looked at a couple of years ago, this is advantages, disadvantages and disadvantages. And one disadvantage was the volatility. But then you see, I mean, IFRS 9 is coming in with IFRS 17. And it would have caused an awful lot of disruption just to set them up in a different way for a short time and then to reset them up again to IFRS 9.
So we said, look, we'll look at the whole thing again when IFRS 9 comes in, and we can see them more differently if necessary there.
Okay. Thank you. So all the best, Paul.
Thank you very much,
We have a follow-up question from Rene Locker from MainFirst. Please go ahead.
Yes. Just a final one. I mean, what about new financial targets and the Investor Day to Cerrieta?
Sorry, you were
I'm sorry, sorry, Phil. Yes, I mean, as data 2020 is now coming to an end. So I was wondering whether we get the new financial target matrix, when should
Yes. We are planning to hold an Investor Day in the first half of the new year,
Yes. Fine, fine. Okay. Thank you very much.
If there are no more questions, let me say a word to our CFO, Paul Norton, as long as hopefully everybody is on the phone. He was now presenting the results for the last time since he's stepping down as the CFO of Helvetia by the end of the month. Back in 2007, he was first presenting at an analyst conference our at that time half year numbers. And since then, he has been acting as CFO for more than 13 years. Holding a BA in history, Paul is more than an ordinary accountant.
He has a broad view on the developments in the world and in our industry specifically. He was modernizing our balance sheet management and strengthening the relationships with the financial analysts and the investors. At any time, Paul proved to be a reliable colleague and CFO. And I would like to thank Paul for all what he's done during the last 13 years for Helvetia, for me and I hope also for the analysts and the investors to explain our results. And I wish you all the best for the future, Paul.
Thank you, Philip. I'd also like to yes, I started off my first half year was also a crisis. As you remember, we had Hurricane Cyril, and I had to present the results with a combined ratio for the first time and only time over 100%. So I started the crisis. I finished with probably not the best results that one would expect to go out on, But I could probably joke that I'm the only CFO who actually cleans the decks for his or her successor, the other way around.
So I've had a great time for 13 years. I very much enjoyed the interaction with you. You've always been very good, very understanding. We've had some good debates and good interactions. And I also wish you all best of luck, and I hope you'll be as supportive in that way, obviously critical, but supportive, but with my successor as well.
Thank you.
Thank you, Paul. Is there any other question?
We have a follow-up question from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Sorry, I didn't mean to prolong the call. I pressed star 1 before your conclusions. But if I've got the mic, then very quickly. I was just going to ask if you had any view on the life risk results, which is obviously very good this period and just whether there's anything special there. I mean, whether it's just normal volatility, whether is there anything that should sort of change our view on that going forward?
So apologies for adding another one.
Yes, you're right. It's had a recovery. We've had over the last few years, if you follow you obviously follow us, Peter. We've had a deterioration in the risk results. We've been monitoring it and trying to manage it, particularly in the BVG business.
And as a result of that monitoring and managing and the tariff changes and so on, the results have come back again. I think, to be fair, actuaries in the past few years were also a little probably conservative in their estimates, and they're reserving for that because they weren't trying to develop. I hope it's sustainable. Obviously, you don't know in a mainly, it's invalidity business that's caused the problem. And one of the features of recession is that you tend to get more invalidity claims.
So obviously, it may deteriorate given what's happening with COVID. But it seems to be as if it's coming back to where it should be because of actions that we've taken.
Okay. So if there are no more questions, I would like to thank you very much for your attention, for your interest in Helvetia. And I hope to see or hear you again in due time. Have a good time.
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