Ladies and gentlemen, welcome to the Half Year Results 2018 conference call and live webcast. I'm Andre, 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's my pleasure to hand over to Mr Philipp Gmür, Group CEO. Please go ahead, sir.
Thank you, sir. Ladies and gentlemen, welcome to our analyst conference call on the results of the first half of the 2019 financial year. Within the next 45 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. I would like to give you an update on the implementation of our strategy, Helvetia 2020. After my presentation, Paul and I, as well as our new Chief Investment Officer, André Keller, will be pleased to answer your questions as always. André took up his position as CIO and successor to Ralf Honegger on April 1st. Today, he is present for the first time at the analyst conference call. On slide four, 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. In the first half of the 2019 financial year, Helvetia achieved a pleasing growth in business volume, good underwriting results in both life and non-life, and benefited from tailwinds. In the first half, we achieved the business volume at group level of roughly CHF 6 billion. On a currency-adjusted basis, this represents an increase of 3.3%. The main growth driver was non-life business, which achieved 6.4% higher premiums compared to the first six months of 2018. From a regional perspective, the European units, as well as the specialty markets, were the main growth drivers. Switzerland also contributed to the growth, but with a lower growth rate. With regard to the lines of business, the increase in premiums was driven by property business in all segments and supported by engineering and active reinsurance.
In life business, the business volume increased by 0.6% in original currency. Particularly noteworthy are the higher volumes in investment-linked products in individual life in Switzerland and Germany, as well as in group life business in Switzerland. Here, a significantly large number of customers chose the so-called semi-autonomous solution from Swisscanto. Those products might give the customers more upside potential regarding the interest yield on their savings. The savings part is covered by Swisscanto, while Helvetia assumes the risks of death and disability. Thus, those products are much more capital efficient for Helvetia. In the first half of 2019, premiums for Swisscanto rose by almost 50%. The main reason for this strong growth was the withdrawal of a competitor from the Swiss group life business. At CHF 290 million, the IFRS result after tax was significantly above the prior year result.
Aside from better technical results, the non-life business benefited from the better performance of the capital markets, which is reflected in a significantly improved investment result. In non-life, the quality of the portfolio is very good overall, as reflected by the solid net combined ratio of 92.5%. The life business also improved compared to the prior year. This was due to an increase in the margin after costs due to a better performance of all profit sources, as well as significantly higher gains on investments following the good equity market development. Both the non-life and the life business additionally benefited from a positive tax effect as a result of the Federal Tax Reform and associated cantonal tax reductions in Switzerland. Worth mentioning is the development of new business in life. The new business margin increased by 1.8 percentage points to 3.1%.
The positive development was due to lower capital needs resulting from model changes and a more favorable new business mix. Both in terms of combined ratio and in terms of new business margin, we continue to meet our targets for the current strategy period. Above all, we are also making good progress in implementing our strategy. 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, Philipp. Ladies and gentlemen, I'd also like to welcome you to our conference today, and within the next 25 minutes, I will give you more detailed information on our financial performance in the first half of 2019. If we can start with slide six. We achieved a solid IFRS result of CHF 290 million against CHF 224 million in the first half of 2018. The good result was driven by strong investment results following the favorable development of the stock markets. The technical development, especially in life business, also contributed to the profit increase. Finally, Helvetia benefited from a one-off positive tax effect in the amount of more than CHF 63 million. This resulted mainly from the reduction of deferred tax provisions as a result of the Federal Tax Reform and associated cantonal tax reductions in Switzerland.
In terms of business areas, both life and non-life business increased their earnings compared to the first half of 2018. In the non-life business, IFRS earnings amounted to CHF 199 million against CHF 147 million in the first half of 2018. The non-life technical result increased slightly, partly due to volume, and as a good attritional claims development and a lower burden of major claims from nat cats were partly offset by higher acquisition costs. In the life business, IFRS earnings stood at CHF 109 million. The margin after costs increased significantly thanks to improvements in all profit sources. Both life and non-life businesses also benefited from gains on investments. In the life business, this was offset by significantly higher expenses with policyholder participation and additional interest related reserve strengthening, and the aforementioned positive tax effect. Earnings in the other activities area fell year-on-year due to consolidation effects.
We'll have a more detailed look on the profit sources of the non-life, life, and other activities in a moment. I'd like to turn to slide seven with the earnings by segments. Helvetia improved its results in all segments with exception of corporate. In Switzerland, the results in life and non-life business were significantly higher than in the first half of 2018. The increase is mainly due to better investment performance, good technical results, and the positive tax effect of CHF 63 million. In Europe, Helvetia generated a higher result in non-life business, which was due to more favorable claims environment on the one hand and capital gains on the other. Despite higher capital gains, lower interest related additional reserving, and a stronger margin after costs, the life results in Europe remained at the previous year's level as these effects were offset by higher expenses for policyholder participation.
The specialty markets segment was able to increase its result thanks to higher investment income. The corporate result was below the previous year's figure due to the usual consolidation effect from funds allocated to this segment. I would like to continue with the growth on slide eight. In the first half of 2019, Helvetia Group achieved a business volume of roughly CHF 6 billion. This equates to a currency adjusted increase of 3.3% over the previous year. In the non-life business, we achieved an increase in premium volume of 6.4% in original currency. The growth was mainly driven by Europe and specialty markets, where premiums increased by 5.9% and 17.5% respectively. Here, growth was particularly supported by the property, engineering, and active reinsurance business. In our Swiss home market, we were able to increase premiums by 0.8%.
Property business, which benefited from the expansion of partner business, so-called B2B2C, showed 4.4% higher premiums. This growth was partly offset by decline in the liability business. In the life business volume rose by 0.6% in original currency. I would like to particularly emphasize the very good development of investment-linked products in individual life in Switzerland and Germany, and in the group life business in Switzerland. Here, Swisscanto achieved almost 50% higher premiums compared to the first half of 2018. The extraordinary growth was mainly driven by the withdrawal of a competitor from the full insurance business last year. Despite the growth opportunities, Helvetia has pursued a conservative underwriting in the full insurance business in view of the low interest rate environment. Business volume for traditional life products decreased in line with our strategy.
I'd like to now look at the profits by source of the non-life business on page nine. In the first half of 2019, IFRS earnings in the non-life segment increased by 35% to CHF 199 million. The main driver was the investment result, thanks to the favorable performance of the capital markets, particularly equity markets. The technical result also improved slightly over the previous year, thanks to good attritional claims development and a lower burden of major claims from nat cats. The non-life business benefited from the already mentioned one time positive effect from the reduction of deferred tax provisions. I would now like to move to the net combined ratio on slide 10.
The group net combined ratio was 92.5% in the first half of 2019 against 92.7% in the first half one year ago, which is a very good level and once again underpins the good quality of our portfolio. The claims ratio improved by 0.6% to 63.3%. The main reason was a better nat cat ratio, as well as a better attritional claims development. Looking at the cost ratio, the admin cost ratio was stable year-over-year, while the acquisition cost ratio increased. The reasons were shifts in the distribution channel and product mix in Switzerland and in Europe, and an adjustment to the reinsurance structure, which led to lower commissions from reinsurers. On a segment level, Switzerland showed a stable net combined ratio of 86.5%. The claims ratio improved thanks to a better attritional claims development and a lower nat cat burden.
The cost ratio increased, however, due to an adjustment of the reinsurance structure and because we expanded out the higher commission partner business. With 94.5%, Europe recorded a better net combined ratio compared to the first half of 2018. The improvement was mainly attributable to a more favorable claims environment in Germany. All European market units achieved combined ratios below 100%. In the specialty market segment, the net combined ratio increased to 97.4%, while the cost ratio improved due to growth-related economies of scale. Specialty markets recorded a higher claims ratio, mainly resulting from the commutation of a retrocession agreement in the active reinsurance business and an unfavorable development of the two major claims from previous years. The current year claims ratio, however, improved. On slide 11, we'll have a closer look at the life business.
In the first half of 2019, net income for the life business was 39.6% above the prior year's figure. Looking at the profit by sources, the margin after costs increased significantly, thanks to improvement in all profit sources. The increased savings result can be attributed to higher asset returns in Switzerland on the one hand. On the other hand, technical interest rates decreased in both Switzerland and Europe, resulting from the replacement of old contracts with high guarantees, with new contracts with low guarantees, as well as from reserve strengthening. The higher risk result also mainly resulting from Swiss group life business as a consequence of a better mortality result in the first half of the year. The other result was positively impacted by fluctuations in the valuation of options for investment in products.
Finally, the cost result improved, thanks to reduced costs and a higher income from cost premiums. Gains and losses on investments significantly increased due to the good equity market performance. The extraordinary result was stable compared to the previous year. A high interest-related reserve strengthening in Switzerland was largely compensated by lower reserves for future conversion rate losses resulting from the new tariff in the Swiss group life business, it's a one-off effect, and lower interest-related reserve strengthening in Europe, predominantly the Zinszusatzreserve in Germany. Expenses for policyholder participation significantly increased as clients benefited from high capital gains, a better margin after costs, and a contribution to earnings from tax reductions in Switzerland. This has an adverse effect on the net income before tax. Finally, as already mentioned, we benefited from a one-time positive tax effect.
I would now like to switch to new business, which has developed very positively, as you can see from slide 12. The new business also developed positively in the first half of 2019. The new business margin rose by 1.8 percentage points year-over-year to 3.1%. Half year 2018 was 1.4%. This improvement was driven by the Swiss group life business. On the one hand, model changes that led to lower capital requirements had a positive effect. On the other hand, the new business margin also benefited from a more advantageous business mix in Swiss group life due to higher new business growth with more profitable capital-efficient insurance solutions. It's predominantly the Swisscanto. I would now like to continue with the development of the interest margin on slide 13. The direct yield increase in Switzerland and decline of the EU countries compared to last year.
In Switzerland, the interest margin went up when comparing the first half of 2019 against the previous year. This was attributable to the following reasons. Firstly, the direct yield increased due to higher income from real estate, increased income from equities and funds, and also because of negative one-off effects in the previous year. The average technical rate, i.e. the rate that we need to earn, also declined. The main drivers here were the successful revision of our traditional product portfolio and the focused sales of modern capital-light products, replacing maturing insurance contracts with high guaranteed rates and additional reserve strengthening. In Europe, the interest margin remained stable compared to the first half of 2018.
Here we see a drop in the average interest rate Helvetia has to generate in order to meet its obligations due to additional reserve strengthening and new contracts with lower guarantees, replacing old ones with higher guarantees. Yields were also declining due to the low interest rate environment, and therefore the margin remained at the previous half year's level. In total, the interest margin for the group as a whole increased. On the following slide 14, I want to provide you with details on the profit for other activities. Looking at the profit by sources of activities, the net technical result in group reinsurance decreased slightly, resulting from a few large loss events in Europe ceded to group reinsurance. The investment FX result was lower year-on-year due to the usual consolidation effect from our own investment funds.
Here, the positive impact of capital market development shown in the individual markets units is balanced out in the other activities business area. The cost/other result, however, declined. This can be attributed to higher project costs. Financing costs remain on the prior year level. The next slide shows development of our investment result on slide 15. The current investment income of CHF 511 million slightly exceeded the previous year's level of CHF 506 million due to higher dividend income. Annualized, the direct yield remained at 2.1%. Thanks to positive performance of the equity markets, Helvetia generated capital gains on investments of CHF 144 million. Investment result recognized in profit and loss amounted to CHF 656 million, giving Helvetia a return of 1.4%, which is not annualized.
The level of unrealized gains and losses in equity increased by CHF 1.4 billion both on the AFS classified shares and due to the lower interest rates on the bonds, resulting in an overall performance of 4.2%, again, not annualized. On slide 16, you can see the investment result broken down by asset class. The first table shows performance of total investment portfolio. About 60% of the current income of CHF 511 million came from bonds and mortgages, which contributed CHF 256 million and CHF 42 million respectively. In absolute terms Sorry. Dividends accounted for CHF 63 million and investment property for CHF 132 million. Realized and book gains on investments amounted to CHF 144 million, reflecting the strong equity markets. As I mentioned already, unrealized gains and losses increased by CHF 1.4 billion. The lower half of the slide shows return on new and reinvestments.
In the first half of 2019, the total new or reinvestments amounted to CHF 1.8 billion. 74% of the funds were allocated in EUR, CHF, fixed income securities that remained in mortgages, equities, and real estate. Short-term money market investments were reduced in favor of real estate and alternative investments. Due to the interest rate-induced rise in hedging costs for the US dollar, the portfolio was partly restructured in order to reduce the weight of the American currency. The new investments achieved an average return of 1.6% overall. On that note, I will hand over to Philipp Gmür again.
Thank you, Paul, for the details of our financial performance in the first half of the 2019 financial year. In the last part of the presentation, I would like to briefly show you the progress we have made in implementing our strategies. I will start on slide 18. The implementation of our strategy, Helvetia 2020, is proceeding successfully. If you have followed us through the last periods, you might know that our strategy is built on three pillars. We aim, first, to strengthen our core business. Second, to explore new business models. Third, to promote targeted innovations. With our strategy, we are able to create added value for our key stakeholder groups, such as customers, employees, and shareholders. In the first half of the 2019 financial year, we can look back on an exciting and favorable progress both in Switzerland and in Europe.
We have once again intensified our efforts to transform and therefore strengthen our core business to reflect the new reality of our business environment and the changing needs of our customers. Among other things, we have further expanded the B2B2C channel. The B2B2C business contributes to the expansion of sales capacities. It enables customers to purchase insurance covers directly at the point of sale, thus taking into account the need to insure specific items individually. We pursue this approach for electrical and electronic products, as well as the automotive sector. Against this backdrop, Helvetia acquired Helvetic Warranty GmbH as of July 1st, 2019. Helvetic Warranty acts as an intermediary between distribution partners and insurance carriers and provides comprehensive services from distribution to claims settlement. Helvetic Warranty has extensive know-how in efficient claims handling.
In the first half of 2019, we have also made good progress with regard to the automation of the claims process in general, which not only brings us more efficiency, but strives to achieve much more convenience for customers and partners. We progressed with our platform for Swiss tradesmen that has been launched with Yarowa last year. The idea of the platform is to provide our customers with a network of available and reliable tradesmen in case of a building damage and digitalize their relationship. The customer simply has to agree on an appointment with the tradesman. There is no need for him or her to get a quote or clarify which repairs are covered. Since March 2019, damages can be reported electronically.
This enables us to increase efficiency as well as to provide transparency for customers who can access the damage reports. Within one year, over 4,000 claims were handled via the platform. Thereof, 2,300 damages were reported electronically. We have always known that strengthening the core will not be sufficient to meet the challenges that the future brings. Thus, we are also making efforts to expand our business and explore new business models. For example, with our subsidiary Smile, we are opening up new business models in the mobile world. I will come back to this in more detail later on. Innovative business models are also accessed with investments into startups of our venture fund. Just recently, we invested in an Italian company called MyPass.
The company creates apps such as myPass Venezia or myPass Ski, which enables consumers to stay in the same app ecosystem to organize their trips and buy tickets, ski passes, or parking cards. This corresponds perfectly with our intent to make the life of our customer more convenient and enable Helvetia to be closer to the customer. It also offers us the opportunity to sell, for instance, ski insurance solutions through myPass apps. As just mentioned, on the following charts, I want to deepen the recent developments of our subsidiary Smile. Let's move on to slide 19. With Smile, the leading Swiss online insurer, Helvetia is opening up new business models in the mobile world. Smile wants to offer its customers a unique digital customer experience and is the first Swiss provider to focus on mobile first.
Although reaching the age of 25 years, Smile is regarding its culture and structures more comparable to a startup than to an incumbent. By the start of July this year, Smile completely renewed its brand identity to position itself more as an insurtech and to differentiate itself even better from the incumbent insurance companies on the market. Smile strives for a cooperative partnership with customers and is the first insurer in Switzerland to address customers on their first name. Helvetia expands with Smile its target market and reaches an increasing complementary customer segment, which demands for convenient and flexible solutions. With Smile, we offer a unique digital customer experience in the Swiss market and strive for growth in a promising segment. Smile offers, turning to slide 20. Smile offers customers a unique digital customer experience, which will be permanently improved based on a consumer data.
Smile will also launch a consumer app by September this year, which serves as a hub for all customer interaction. This makes Smile the first insurer in Switzerland to pursue a mobile-first strategy. We believe that mobile devices are increasingly used by customers to organize their entire lives. By the new mobile solution, we are even closer to the customers and are able to meet customer needs right where they arise. The so-called point of sale transforms to the point of need. The promising future of our strategy with Smile has been once again verified at the leading conference on insurtech and insurance innovation worldwide, the Digital Insurance Agenda or DIA. Smile and the Helvetia spin-off Mitipi won the Diamond Award by combining smart home technology and insurance to create digital solutions making life safer. Finally, slide 21 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. With regard to the business volume of CHF 10 billion, I would like to reiterate that this is not a fixed goal but an ambition. Our organic growth is proceeding according to plan. In order to achieve the CHF 10 billion ambition, we would also have to grow through M&A, which is difficult to plan in advance and depends on targets being available in the market. Overall, we are happy with what we have achieved so far, and we are confident that we are well prepared to remain fit for the future. This brings us to the end of the presentation. My colleagues and I would now be pleased to answer your questions. Thank you for your attention.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thanks very much. I have three initial questions, please. The first one was on the tax reform. I was just wondering if you are able to give us any guidance on what tax rate you expect on an ongoing basis in future and how much sort of certainty you can place on that, or how much it might depend on the further decisions of cantons. Also what sort of one-offs we might expect beyond the H1 one-off that you've shown this time. The second question was on the prior year developments in the non-life. If I look over the last four years' half-year results, they've been sort of consistently falling, and it's 3.8 percentage points, I think, in total lower than three years ago.
I was just wondering if you could sort of give us any color on the trend and how you expect that to continue. Obviously, Swiss whiplash has been a big factor, but just to maybe understand how you see that progressing. The final question was on the live new business. Just wondering if you could comment on perhaps the reasons that you didn't see the same AXA effect as others. I've had some conversations with IR and appreciate that you've been disciplined, I was just wondering if you could give us a bit more color, whether you sort of just deemed the business not to be profitable or whether there are other factors there. Thanks very much.
Thank you, Peter, for those three questions. I suggest that Paul is going to answer the first two questions, and then I'm going to explore a little bit on your third question with regard to the group life business in Switzerland. Paul?
Okay. First question regarding tax. There are still several cantons to vote. At the moment, we have an effective tax rate of about 18% across the whole group. Last year it was 22%. Obviously, it's been colored by the one-offs that have an impact on that. Our underlying assumption is somewhere around about 18% plus maybe 18.5%, I don't know, going forward, compared with, say, roughly 21%, 22% in the prior years. We expect a 2%-3% benefit going forward, which equates to about CHF 10 million-CHF 15 million off the pre-tax profit. Improvement in the bottom line each year. If that helps you. It's difficult to say exactly.
In terms of the run-up result we had in the prior years, yes, the Swiss whiplash reserves have been running off. We expect them to decrease the run-off there. That won't be as positive in the following years. The one big change we had, well, two changes we had this year. One was a change in the reinsurance structure. We increased the deductibles and changed the risk profile slightly, which meant there was much less ceding commission coming to the companies. Also, we had a commutation of one of the big policies in the specialty markets area. There were two effects there. One was on the acquisition cost ratio, and the other one was actually on the run-off. The run-off was affected by the commutation of this coverage we had in the specialty markets area.
We had two individual claims from prior years, which we had to additionally reserve. One was a recycling plant in the U.S., the other was a transport claim. It's a huge fraud in China, in one of the ports where large amounts of cargo was stolen, there were some further investigations, we had to re-reserve for that. The ongoing trend, difficult to say. I would suggest that certainly in Switzerland, the effect of the whiplash claims will reduce over time.
Okay. Could I just follow up very quickly on that? It sounds like the reinsurance effects and the two large claims were kind of one-off, if you like.
Yep
This period, you'd expect those to reverse out in future periods.
There can be, particularly in the specialty markets area where you have very individual claims, certain circumstances can arise where you need to re-reserve. Generally, on the day-to-day business, the normal attritional business, we would not expect that. Yeah.
I'm probably pushing my luck, Paul, but you're not able to sort of quantify those impacts, are you?
We certainly wouldn't give you the details, no. We can quantify them, whether we disclose them is another matter.
Turning to your third question, Peter, with regard to the group life business. It's true, AXA had a major impact on our second pillar business, of course. We were pretty restrictive and, as you said, disciplined with regard to underwriting new business in our so-called full insurance model. Why that? First, we think that the political environment and all the numbers influencing the second pillar business is still very difficult, so to say. The second point is we want to steer our balance sheet on a group basis in a way not to be too much being dependent on the second pillar business. That's why we are pretty disciplined. Now, what's the impact of the AXA business in the first half of 2019 in our business volume? Roughly 90% of the new business we were underwriting in the second pillar, full insurance coverage solution, came from AXA.
More or less 60% of the new business we were doing with Swiss Re came from AXA. In a nutshell, we were pretty much strengthening our second pillar business in the capital efficient sector we do with Swiss Re, which has not as much premium volume as the other business, of course, but we think it's more attractive.
That's great. Thank you very much.
The next question comes from the line of Kevin Ryan from Bloomberg Intelligence. Please go ahead.
Thanks very much. I just had one question regarding the model change, which produced a good jump in new business profit assumptions. Could you just give us a little more background on that? Whether you can say whether your re-examining of your life model in this area has now been completed, or whether we can expect some more tweaks going forward. Thank you.
Paul, please answer this question.
About two-thirds of the increase in the new business margin were due to the model changes. The reason we did this was because we had a very simplistic capital allocation, just based on the percentage of overall, for every line of business, percentage allocation of solvency capital, and it was the old solvency capital, the old Solvency I. Which was clearly inadequate in the days of SST and Solvency II. We're introducing at the moment, a whole new risk-based capital allocation methodology across the group internally. That was part of that change. I expect that predominantly those changes have been done. There may be some tweaks as experience shows that it's not appropriate or need improvement or something. I don't expect to see any huge changes as a result of further tweaks to the model.
Thank you.
More questions? As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from the line of Simon Fössmeier from Bank Vontobel. Please go ahead.
Good morning, everyone. It's Simon. Just one question on the BVG business as well. I understand that you're planning a change on a conversion rate and that lowered the reserve for future conversion rate losses. Do you think this will have any impact on the new business? Secondly, I was under the impression that you cannot change the conversion rate in a mandatory part of the business. Can you help me out there if I'm totally wrong there?
Okay. Simon, let me answer this question in this way. First, of course, we are lowering the conversion rate on the extra mandatory part of our business. It might be a question of timing. We think that going forward, those conversion rates will be lowered everywhere. It's rather a question of timing. The second question with regards to whether we are allowed to do so or not, we are overlooking both parts, the mandatory part and the extra mandatory part as a whole part of the insured person. If we are lowering the conversion rate to a level which is below the mandatory, let's say, 6.4 or six or whatever percentage, then we have to make sure that on a holistic view, we still are meeting the mandatory and the legally foreseen conversion rate, of course.
We are looking at it on a rather holistic basis from the point of view of the client. Finally, it's the market who will decide what's going forward, the real and the finally right conversion rate.
Okay, understood. Very helpful. Thank you.
The next question comes from the line of René Locher from MainFirst. Please go ahead.
Yes, good morning. It's René from MainFirst. I wanted to start with slide 11, which is profit by sources in the life business. I was very much surprised to see the very strong result here. When I was listening to Paul, I got a little bit of feeling that we have not that much one-offs in the first two lines, like the saving results or also the risk results. If you just can confirm that, these two sources are sustainable. On slide 19, this is more like a big picture question. I do know that, or I guess I know that Smile has a cost ratio of some 20%. I've just checked Non-Life Switzerland runs at a 26%. I do believe that when I buy insurance via Smile, then I should get a better price.
Perhaps you can quickly explain again, how can I say, how is your own sales force happy with the push you are giving Smile? Perhaps what is also interesting on slide 19, I can see you have different offers here. I was wondering, is there a kind of cross-selling? That means there's a guy who is buying car insurance, and he's then also buying some home insurance via Smile. Then I would like to welcome Mr. Keller on the investment income. If I go to slide 16, I'm happy to see that the reinvestment yield in equities increased from 1.7% H1 2018 to 2.6%. I have also seen on slide 24 that you have slightly increased your equity exposure by some, from 4.7 to 5.4% in H1 2010. I'm wondering if we should expect further shifts in the asset allocation. Last question, if I may.
How have you achieved the partnership with Tesla? I mean, [Micap] Swiss Insurance Company now in an exclusive partnership with Tesla in 16 European countries. Was this a beauty parade or do you have special relationship to Elon Musk? Thank you very much.
Thank you, René. Four questions. Let's get started with Paul on the life results. I will explain pretty quickly some Smile issues. I will ask André to comment on the investment income. We're going to finalize this questionnaire with Tesla. Paul?
Yep. Okay. Savings results to start with on page 11. In 2018, we actually had a bit of a reduction because we have one large investment package we have, which is actually in Allreal, where the dividend normally comes in the first half of the year, and last year it came in the second half the year, that reduced it slightly. That was lower down. We had a one-off impairment, which was put through the savings result in the first half of 2018. The savings result in 2018 was a bit too low. Obviously this year, in this half year, we've had a very good equity market performance. Whether that continues, questionable, I would say it's closer to the sustainable level than it was last year.
On the other results, the risk result we've had for a couple of years, some poor results in the risk side, particularly, well, both mortality and invalidity results to a large extent in the Swiss, in the. Our chief actuary was telling people, saying, "Look, this is just its usual volatility." I think we've got out of that and it's more on a sustainable level, one hopes. Particularly with the new tariffs that we're having. The other result is volatile because it has the valuation of the index options in there. The cost, yes, we've reduced the costs in the life business. Above the line and the margins above after cost, I think, which should be reasonably sustainable. The extraordinary result is a factor of reserving and you can see it's roughly on the same level.
It all depends on the impact of this new changes in the base charge tariffs and what that does to customer behavior and so on. The gains and losses investments are totally dependent on the capital markets and obviously the policyholder participation to a large extent is dependent on those other factors. I would say the margins after cost, the operating margin is on a pretty good level. Fees and [miner] should hopefully stay there. The others are very much dependent on factors outside our control, but also are balanced out by the policyholder participation.
Then on-
Okay. Smile?
Yeah, thank you very much. Mm-hmm.
Smile is one of our different sales channels. A client buying with or via Smile is buying another product than he might be buying with an agent. Why that? It's a self-service product, and that's why it might be priced in another way. Finally, our own sales network, our agents, do not have to fear Smile. Up to now, most of our private clients are looking for advice, and more than 85%-90% of our new business in the retail segment, is still coming in via our agents' networks. It's another sales channel. It's another product. It's another distribution and access to our clients.
Okay
ask André with regards to the investment income.
Yes, thank you for the question. Two parts of that question I heard. It's the driver of the change year to date, which was mainly driven by the strong rebound in global equity markets, which we participated. The second part of your question I heard was, if there are any major changes to the asset allocation planned, this is not the plan. What we will obviously do is continue to evolve our asset allocation based on relative value consideration, in order to achieve an attractive return on our risk-adjusted capital. Evolution, no major changes.
Okay, thank you.
Okay. Turning to Tesla. Unfortunately, René, Elon Musk did not show up yet in St. Gallen or Basel.
Indeed.
There was no personal relationship between us which led to this collaboration. We have, however, a broker, Marsh McLennan, which we have collaborations with in other B2B2C environments. Via this contact, we got this new collaboration.
Okay. Interesting. Thank you very much.
More questions?
The next question is a follow-up question from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thanks a lot for allowing me to come back. I'd like to ask three further questions, please. The first one, I was just wondering if you could give any comment on the press release from FINMA yesterday, which talked about leveling the playing field between banks and insurers in terms of real estate investment properties. I'm thinking there shouldn't really be any sort of impact initially, but I'm just wondering if you've had any discussions with FINMA on the subject that you can share. The second question was, just carrying on the theme, I guess, your investments in property, you talk about increasing this, but I actually noticed it slightly decreased from the year-end to the half year. My calculation is 14.2 down to 13.9. I'm just wondering if you can comment whether you are still increasing that proportion.
Then the final one was the duration gap. It's increased. I know you want to benefit from the upside in interest rates, Helvetia, when that comes, but I guess that hasn't happened so far. I'm just wondering whether it's worth commenting on that in light of the falls we've seen over the last couple of months. That'd be great. Thank you.
Peter, thanks.
Yeah.
For the time being, there is nothing to share with regard to the FINMA press release. For the other two questions, I would like to hand over to Paul.
Your question was on the property percentage. I don't think we've actively changed the property. I think it could be due to the mark to market that basically other assets have increased in value greater than the property, because we don't revalue it mark to market that much in the half year. That could be the rationale. As far as the duration gap, it's really an impact out of the change in the new SST standard models and the way they're calculated. It's not massive increase. When we look at from 31st to 12, it's 1.7-1.9. Then on a regulated basis, it's from 0-0.2. We monitor that on a regular basis.
Great. Thank you. Just quickly, if I could on the property-
Sorry, there's also a reduction in the interest rates in the half year, has also had an impact on that.
Just quickly on the property, should we expect the sort of share of investment properties within the investment portfolio to increase in future? Are you able to comment on that at all?
Peter, this is Andre speaking. As I alluded to before on relative value consideration. We look at the, let's say, the property market as a risk factor on a holistic basis, as in combination with mortgages. As you see, and I think what may be helpful for you is on page 51, which gives you more color on the details where we are on the mortgage side, more, I would say, cautious while we see still, because we own a longstanding real estate portfolio, which also has a decent pipeline where we can build and develop our own properties more value. We are not forced to buy like competitors or others on the market, we can build based on our portfolio and see still attractive relative value in properties.
We do not expect major shift, as I alluded to, but more on a relative value basis, especially versus mortgages.
Great. Thanks very much.
If there are no more questions, I would like to thank you for your attention and for your participation in this call, for your interest in Helvetia. Of course, we are always ready and happy to answer your questions. If you have any further questions, please do not hesitate to contact us, especially via our investor relations people such as Susanne Tengler. Have a good day. Thank you.
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