Good morning, and thank you for joining this call. Today we publish our financial results for 2023. It's the first full-year reporting under the new IFRS 17 and 9 accounting standards. It's my last presentation of results to you before I hand over to Matthias Aellig after the AGM in May. Let me start with a quick overview of the 2023 results on slide three. Swiss Life achieved 8% growth in net profit and increased the return on equity to 13.7%. This is on a comparable basis, which means both years under the IFRS 17 and nine standards. I'm very proud of our teams across the group, as this growth was achieved despite a lower fee result, which fell by 13% to CHF 664 million due to subdued real estate markets and the resulting drag on project development gains and transaction fee income.
Cash remittance increased by 14% to CHF 1.15 billion. Cash remittance is the key driver of dividends, and we propose to increase the dividend by 10% to 33 CHF per share, leading to a payout ratio of 86%. To wrap it up, we're well on track with our Swiss Life 2024 program to achieve or exceed all our group financial targets. We expect to exceed the return on equity, cash remittance, and dividend payout ratio targets. In addition to that, we've already exceeded our share buyback target. We completed the CHF 1 billion program announced in November 2021 and are close to completing the more recent additional CHF 300 million program. Achieving the fee result target will be more challenging. We expect to reach the lower end of our ambitious target range of CHF 850 million-CHF 900 million. This is reliant on the expected normalization of the real estate markets in Germany and France.
Let's take a few minutes to look back over the last decade. Firstly, the fee result has grown substantially. When I was announced the CEO in 2013, the fee result amounted to less than CHF 200 million. Since then, we've established ourselves as a leading European asset manager that is well positioned in terms of real assets, and we complemented our strong life insurance companies with steadily growing financial advisory organizations. Today, more than 17,000 advisors work for Swiss Life who help our customers to lead a financially self-determined life. The shift to more fee business has improved the resilience of our business model and has supported the drive for higher cash remittances to our holding company. Furthermore, we have achieved this while substantially increasing the solvency ratio. Striving for and achieving higher cash returns to shareholders has always been important when delivering on our strategic plans.
Over the past decade, we have continuously increased dividends and returned close to CHF 9 billion to shareholders, about CHF 6 billion of which as dividends and close to CHF 3 billion through the implementation of four share buyback programs. This is quite remarkable in light of our market cap at the end of 2013, which was around CHF 6 billion back then. I expect that U.S. investors have put that cash to work for new investments and endeavors with benefits for the real economy. Looking at the right-hand chart on slide 4, in terms of shareholder return, Swiss Life has substantially outperformed both the relevant SMI and European insurance indices. The development of our share price is obviously up to our investors.
In my view, we got there thanks to the skills and hard work of our people, our strongly improved solvency position, the aforementioned massive increase in our fee result, and the growth of our profits and cash contributions from our life insurance operations, all of which being the basis of higher cash returns for shareholders. Of course, without our unique and strong position towards our customers in providing life, pensions, financial solutions, and advice for the long run, none of this would have been possible. I'm very proud of Swiss Life's development and want to thank our customers, employees, and advisors for the continued support and trust. With that, I hand over to Matthias.
Thank you, Patrick. Good morning, ladies and gentlemen. I will start with some introductory comments on slide six, which we already mentioned at our half-year call. We have applied the IFRS 17 accounting standard retrospectively from the 1st of January 2022. The IFRS 9 accounting standard for financial assets has been applied from the 1st of January 2023 without restating the comparative period in the financial report. This was disclosed under IAS 39, which was replaced by IFRS 9 starting in 2023. Within this presentation, we will also show the comparable full-year 2022 profit from operations, segment results, and net profit under IFRS 17 and 9 to allow for a like-for-like comparison. Let me now deep dive into selected P&L and other figures. Insurance revenue increased by 10% to CHF 8.8 billion. More than half of the increase is due to the acquisition of elipsLife.
The remainder stems mainly from additional PIA revenues and from a higher CSM release. Insurance service expenses increased in line with insurance revenue to CHF 7.4 billion. The net investment result was CHF 103 million. Please note that this is not comparable to the net investment result definition of prior years, as it includes IFRS 17-related insurance finance expenses and VFA experience adjustments. Moreover, the CHF 103 million pertained to the result under IFRS 17 and nine, while the prior year is reported under IFRS 17 and IAS 39.
Profit from operations amounted to CHF 1.5 billion. In the prior year, it was at CHF 1.7 billion under IAS 39 or, on a like-for-like basis, at CHF 1.5 billion. Borrowing costs increased to CHF 132 million, mainly driven by higher interest rates and overlap effects due to the early refinancing of maturing bonds in 2023. Income tax expense fell to CHF 254 million.
The reduction is driven by lower profits compared to IAS 39, by an extraordinary tax provision release of CHF 33 million in the context of final tax assessment, and by a change in geographic profit emergence. Net profit amounted to CHF 1.1 billion. This compares to a prior year number of CHF 1.2 billion under IAS 39 or, on a like-for-like basis, to CHF 1.0 billion. We continue to disclose premiums, fee and commission income, net investment income, and operating expenses as we did in prior reporting. Gross written premiums, fees, and deposits received increased by 3% in local currency to CHF 19.8 billion. The increase was driven by international, in particular by elipsLife. Fee and commission income was up by 3% in local currency to CHF 2.4 billion, primarily due to high contributions from France and Germany that outweighed lower income from asset managers.
The net investment income of the insurance portfolio for own risk was CHF 2.6 billion. Operating expenses, excluding variable costs, were stable in local currency at CHF 1.96 billion. On slide eight, we showed adjusted profit from operations, taking into consideration the negative FX translation effect and the adjustment of the net gain on the sale of a subsidiary at asset managers in 2022. Moving to the segment starting with Switzerland. Premiums were stable at CHF 9.9 billion. The life insurance market was down by 1%. Premiums in individual life were up by 19%, while the market increased by 6%. Periodic premiums grew by 2%.
Single premiums were up by 72%, driven by a new modern traditional product. Premiums in group life decreased by 3%, while the market was down by 4%. Single premiums decreased by 5%, primarily due to fewer employees entering existing full insurance schemes. Periodic premiums fell by 1%.
Assets under management in our semi-autonomous foundations increased to CHF 7.1 billion compared to CHF 6.4 billion at year-end 2022. Fee and commission income was up by 1% to CHF 326 million. Higher income from unit-linked business was partly offset by lower revenues from Swiss Life Select. On a standalone basis, before intercompany eliminations, Swiss Life Select increased their revenues by 3%. The segment result grew by 8% to CHF 839 million, driven by a higher operating result from the insurance business. Fee result increased by 5% to CHF 55 million, driven by high contribution from unit-linked and investment solutions for private clients. Value of new business increased by 15% to CHF 234 million, mainly due to higher volumes in individual life. Cash remittance was up by 25% to CHF 565 million. This was due to the higher 2022 net profit in the context of increasing interest rates.
As mentioned at the half-year call, in 2023, we remitted the vast majority, but not the entire 2022 statutory profit, to holding. Turning now to France. Please note that all figures quoted are in euros for our French, German, and international segments. In France, premiums increased by 1% to EUR 7.0 billion, while the market was up by 6%. In our life business, premiums were down by 1% following strong growth in prior years. The market was up by 5%. The unit-linked share in our life premiums was 63% compared to the market average of 41%. We generated life net inflows of EUR 2.0 billion.
T otal market net inflows were EUR 2.4 billion. Health and protection premiums increased by 9%, while the market was up by 7%. Fee and commission income rose by 15% to EUR 485 million. We had a strong contribution from the banking business, given continued high revenues from structured products.
Unit-linked fee income also increased due to higher average unit-linked reserves compared to the prior year. The segment result grew by 2% to CHF 205 million, driven by a higher fee result. The overall non-life operating result from health and protection, as well as P&C, was negative, as shown on slide 27. This was driven by a considerably lower technical result in the health and protection business. Financial result slightly increased as the negative impact from real estate fair value changes was outweighed by positive fair value changes on equities. For 2024, we expect the operating result contribution from our French non-life businesses to improve significantly and clearly turn into positive territory. The fee result was up by 19% to CHF 161 million, driven by both the banking and unit-linked businesses. The prior year included a positive gain on sale of a small broker.
The value of new business increased by 2% to CHF 185 million. The positive contribution from the improved business mix in life and higher volumes in health and protection was partly offset by the negative lapse and claims experience. Cash remittance increased by 19% to CHF 161 million due to the prior year fee result development. Premiums were up by 3% to CHF 1.5 billion. The market was down by 5%, driven by lower single premiums. Fee and commission income grew by 10% to CHF 733 million, primarily due to our own IFAs. The number of financial advisors slightly increased by 1% to 5,985. The segment result was up by 4% to CHF 192 million due to a higher fee result. The value of new business decreased by 17% to CHF 61 million. The focus on capital light business continued with an increased volume of modern traditional products.
This was offset by a lower contribution from unit-linked business. Cash remittance doubled to CHF 148 million. 2/3 of the increase came from a special dividend from owned IFAs. The remainder stems from the German insurance business, for which ZZR-related constraints regarding dividend upstreaming no longer apply in the current interest rate environment. Turning now to the international segment, which includes effects from the acquisition of elipsLife consolidated at the beginning of July 2022. Premiums increased to CHF 1.8 billion due to higher premiums with corporate clients, mostly from elipsLife. This was partly offset by lower premiums with private clients. Fee and commission income was up by 4% to CHF 386 million. Higher income from corporate clients, in particular due to elipsLife, was partly offset by lower income from owned IFAs and private clients.
The segment result was down to CHF 100 million, with a higher operating result from insurance, driven by the corporate business. The fee result decreased by 14% to CHF 72 million, mainly due to a lower contribution from the business with private clients. Owned IFAs also reported a decrease in fee result. This was partly offset by a higher contribution from the corporate business. The value of new business increased to CHF 57 million, driven by higher volumes in the group risk business supported by elipsLife. This was partly offset by lower volumes from business with private clients. Cash remittance was stable at CHF 64 million, despite a higher full-year 2022 segment result. This is due to acquisition-related effects and a slightly higher tax rate. Let's move now to our asset managers segment, which reports in Swiss francs. Asset managers total income was down by 17% to CHF 948 million.
About half of the reduction is explained by the sale of Livit facility management services in Q4 2022 and the write-down of a Proptech investment in Germany in 2023. Both effects impact PAM and TPAM. Slightly more than 10% of the decline is due to negative FX translation effects, especially at TPAM. In our PAM business, total income was down by 14% to CHF 327 million. About 90% is due to the mentioned sale and the write-down. The remainder is due to the lower average assets under management and lower real estate transaction income. In our TPAM business, total income declined by 19% to CHF 621 million. Excluding the mentioned sale, recurring income was slightly higher. This was more than offset by the net gain on sale and the write-down, as well as negative FX translation effects.
Other net income from real estate project development and income from real estate transactions were also substantially lower. As a result, the share of total non-recurring income for TPAM dropped from 31%- 16% in 2023. This is below the 2023 indication of around 20% given at the last Q3 disclosure. Drivers for this deviation were lower revenues from real estate project developments and fewer transactions than expected at the time, as well as a further strengthening of the Swiss franc compared to the euro. For 2024, we expect the share of total non-recurring income to be around 30% and therefore above the indication of around 25% we gave at the investor day in 2021. This is in view of our project development pipeline and is reliant on the expected normalization of real estate markets in Germany and France. Segment result decreased by 37% to CHF 272 million.
The contribution of PAM was down by 17% to CHF 166 million, driven by the top-line development. The TPAM segment result contribution fell by 55% to CHF 106 million, mainly due to the significantly lower contribution from the non-recurring income and the negative FX translation effects. The TPAM cost-income ratio was 83%, largely due to lower non-recurring net commission income. Cash remittance declined to CHF 229 million. 2022 cash remittance included a special dividend of about CHF 25 million and was thus exceptionally high. In 2023, cash remittance was strongly impacted by a time lag between the recognition of net income from project development and the distributable cash.
As a result of different lags from several projects over time, there is some averaging in their contributions to the overall cash remittance. In this context, we expect asset managers cash remittance to increase by about CHF 15 million-CHF 20 million in 2024.
Net new assets in our TPAM business amounted to CHF 9.8 billion and were stable. We achieved inflows in real assets of CHF 3.4 billion. Next to real assets, we also had very strong inflows in bonds. Excluding money market funds, net new assets amounted to CHF 9.4 billion compared to CHF 8.8 billion in the prior- year. Overall, assets under management in our TPAM business were at CHF 112 billion compared to CHF 105 billion at year-end 2022. Let's move back to the group. Operating expenses were stable in local currency at CHF 1.96 billion. Those are unadjusted figures and include effects from acquisitions and disposals, as well as from business growth. Coming to the investment income slide that we disclosed as we did in prior year reporting. Direct investment income increased to CHF 4.0 billion. Bonds and alternatives contributed more.
This was partly offset by lower distributions from investment funds within our insurance portfolio, by the swing in repo contribution, and by negative FX translation effects. Real estate was stable as higher rental income and reduced maintenance costs were offset by effects from net property disposals. The direct investment yield was 2.8% compared to 2.5% in the prior year. The net investment income was down to CHF 2.6 billion due to the negative net capital gains and losses. The net investment yield was 1.8% compared to 2.7%. As initially mentioned, this is not a like-for-like comparison as the prior year is shown under IFRS 17 and IAS 39. The largest accounting difference stems from equity instruments that are largely accounted for as fair value through P&L under the new IFRS 9 standard. Net capital gains and losses amounted to -CHF 938 million.
This is primarily due to negative fair value changes on real estate of -CHF 1 billion. Hedging costs more than doubled to CHF 1.1 billion. Equities and fixed income contributed positively. Slide 17 shows the structure of our investment portfolio. Our gross equity exposure slightly declined due to some divestments. With respect to real estate, fair value changes were negative at CHF 991 million or -2.5%, with almost half of the amount due to French real estate. In the prior year, we had positive fair value changes of CHF 824 million or +2%. Real estate continues to be an attractive and important asset class for backing our long-dated liabilities. We hold real estate because of the regular rental income it provides and not because of appreciation. Vacancy rates decreased by one percentage point to 3.0% in 2023. Regarding 2024, we expect real estate markets to normalize.
However, some weakness of 2023 will leak into 2024. We expect negative real estate fair value changes to be in the range of -0.5 and -1 percentage point for the entire year 2024. In the VFA business, this will be absorbed by the BEL via policyholder sharing and also by the CSM and therefore affect the P&L over time as part of the CSM release. Outside the VFA business, there is no policyholder sharing and the negative fair value changes directly impact the P&L. Moving on to insurance reserves on slide 18. Insurance reserves increased by 5% in local currency to CHF 178 billion, mainly driven by Switzerland and France. We continue to report the average technical interest rate in the appendix. We released about CHF 0.3 billion of statutory reserves in full year 2023 in the Swiss group and individual life businesses.
Pre-tax CSM at year-end amounted to CHF 15.4 billion and relates primarily to our VFA business. During 2023, the sum of the expected business contribution and new business resulted in an increase of CHF 1.4 billion. The expected business contribution mainly refers to the unwinding of the discount rate plus effects from expected real-world excess returns of assets on top of discount rates. The impact from economic variances was minus CHF 1.2 billion. 2/3 are due to the interest rate development, which includes a noticeable effect from the change in interest rate differentials. One-third is due to the negative real estate fair value changes, while negative FX translation effects were essentially offset by the positive equity market developments. The CSM release of CHF 1.3 billion reflects the pre-tax profit that is recognized in the P&L. The group CSM release rate was slightly above 7.5%.
The value of new business increased to CHF 515 million, driven by business mix effects and the favorable interest rate development that outweigh negative persistency and actuarial effects. The new business margin increased to 4.0%. Compared to the new business CSM, this is after tax and includes non-allocated expenses. The value of new business also reflects a more comprehensive scope of the insurance business. The bridge from VNB to new business CSM is shown in the appendix. Shareholders' equity decreased by 11% to CHF 7.5 billion, largely driven by the dividend payment and the share buybacks, as well as by negative FX translation effects. Our total outstanding financing instruments amounted to CHF 4.9 billion. In terms of capital structure, we consider the post-tax CSM along shareholders' equity. The share of senior and hybrid bonds within the capital structure was 20% at year-end 2023.
Our Swiss Solvency Test ratio was estimated to be around 210% as of 1st of January 2024. It is well above the ambition range of 140%-190%. That brings me to our Swiss Life 2024 program and the progress reporting. I will start with the fee income development on slide 25. Fee and commission income increased by 3% in local currency to CHF 2.4 billion. The decline in commission income at Swiss Life Asset Managers and owned IFAs was more than compensated for by higher income from owned and third-party products and services. Operating profit was up by 1% to CHF 1.5 billion. The fee result decreased by 13% to CHF 664 million. The main driver was the lower other net income from real estate project developments.
As mentioned, we also had a positive one-off in 2022 due to a gain on sale of a small French broker, which impacted the fee result from owned IFAs as seen on the right-hand side of this slide. The segment other also contributed positively to profit from operations. It was exceptionally low in 2022 given a low investment income, and it was rather high in 2023 mainly due to lower project-related expenses and a higher investment income. Operating result from insurance business increased by 4% to CHF 929 million. The main driver was the higher CSM release, from which we deduct, as usual, the portion of the release pertaining to the intergroup margin, non-allocated insurance operating expenses, and the contribution from the unit-linked business within the scope of IFRS 17 as this is mapped to the fee result.
The additional contribution as part of the operating result from insurance business stems from a positive risk adjustment release of CHF 20 million, which was stable compared to the prior year. It also includes the operating result of the French non-life businesses of minus CHF 34 million. As said, we expect a clear improvement of the operating result in our French non-life businesses in 2024. The remainder stems from contributions from other PIA profits and assets not backing life insurance liabilities. This total contribution was about stable compared to the prior year. The return on equity, which is one of our Swiss Life 2024 group financial targets, increased 13.7% up from 12.1% in the prior year on a comparable basis. Turning to capital, cash, and payout. Cash remittance to the holding company increased by 14% to CHF 1.2 billion.
In 2023, we remitted the vast majority but not the entire 2022 statutory profit from Swiss Life AG to the holding. The remainder will be remitted in 2024 together with the AG's 2023 statutory profit as shown on slide 44. The higher Swiss Life AG profit in 2023 compared to 2022 was supported by the release of the tax provision mentioned earlier. As a result, Swiss Life AG will be paying a dividend in 2024 for the financial year 2023 that is about CHF 190 million above the prior- year dividend. We are very well on track in terms of cash emittance, and we confirm our expectation to structurally exceed the group's cumulative cash emittance target of the Swiss Life 2024 program. Liquidity at holding amounted to CHF 0.85 billion at the end of 2023. Our CHF 300 million share buyback is on track with around 90% completed as of today.
As said in previous calls, we have the ambition to increase the dividend per share, and for 2023 and for the 2023 financial year, the board of directors will propose a dividend of CHF 33 to the AGM up from CHF 30 in the previous year. The dividend will be paid upon approval from the AGM on the 22nd of May 2024. The payout ratio is 86%. Let me sum up. In 2023, we managed to substantially grow the cash remittance, the return on equity, and the dividend per share, plus we are close to completing the additional 300 million share buyback. Our net profit increased on a like-for-like basis despite the subdued real estate market, which put a drag on the fee result. Let's look forward to 2024.
Achieving the fee result target will be more challenging than the other group financial targets of the Swiss Life 2024 program. We expect to reach the lower end of our ambitious target range of CHF 850 million-CHF 900 million. This is reliant on the expected normalization of the real estate markets in Germany and France. Regarding the other financial targets, we are confident that we will exceed the return on equity, cash remittance, and dividend payout ratio targets. In addition to that, we have already exceeded our share buyback target. Overall, we are well on track with our Swiss Life 2024 program to achieve or exceed all group financial targets. Dear investors and analysts, before I hand back to Patrick, let me say a couple of words in view of my transition.
I very much look forward to continue to shape the future of Swiss Life from mid-May on as the new CEO. I want Swiss Life to continue to be reliable and attractive for investors, customers, and employees. Together with my entire management team and everyone at Swiss Life, we will do the utmost to continue on this successful path. We are currently working on our next corporate program, which we will present to you on our investor day on December the 3rd. I look forward to the ongoing discussions with you. With this, I hand back to you, Patrick. Thank you.
Okay. Thanks, Matthias. So it's time for our Q&A session.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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. Questions on the phone are requested to use only handsets. Webcast viewers may submit their questions in writing via the relevant field. Kindly note that webcast questions will be answered after the call. Anyone with a question may press star and one at this time. The first question comes from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thank you very much. And first of all, yes, I'm sorry to see you go, Patrick, after such a successful time at Swiss Life, but I guess we've got a couple more months left before then. I had three questions, please. The first one was, would you be able to give us any detail on the reserve releases?
I'm thinking sort of how much in type one and type two, how much an individual, and maybe just some comments around what you're thinking. At current interest rate levels, is there any reason we shouldn't expect the sort of type two reserve release to continue at the current level? So any detail and thoughts on that would be very helpful. The second one was just around your comments on the real estate market and the targets' dependence on that. Just wondering if you could give us any help in how much you're reliant on that and what needs to happen by when. Because I think your guidance for a 30% non-recurring based on the pipeline seems very strong. And that leaves me wondering how much is sort of already known, if you like.
Yeah, I just wonder if the real estate market is in the same position in a couple of months' time, does that make the target much more difficult to achieve? And the third one, I'd be interested in any comments you can give us on how you decided on the dividend. Just wondering if you could run through your thoughts on how you got to CHF 33. Just wondering if we should read into the same payout ratio as last year? How much should we read into that as a factor? Thank you very much.
Okay. Thanks, Peter, for the questions. Let me start with the one on the reserve releases. As said, we had CHF 0.3 billion, and they relate to the type two. So the large part, it's about the usual one-third split in individual life and about 2/3 in the group life business.
Now, we also had some movements on the type one reserve. So the one, which is closely linked to the current interest rate there, we had a small strengthening. If we include that, we still have a net release, if you wish, of CHF 0.3 billion to be reported for 2023. Now, as to what the outlook is, if we now move back only to the type one release of the CHF 0.3 billion, that's about the run rate, I think, that we expect in the current interest rate environment given the reinvestment rate and the sets that relate to the type two reserves. We expect those releases to come for several years. Maybe that's the color on the reserve releases.
On the real estate market, as said, we clearly have this reliance on the normalization of the French and especially also the German real estate market that we expect to happen this year. And we clearly need that to get to around 30% for the non-recurring income for TPAM. I mean, that's what we can say. And if there is, let's say, no improvement to the market, that will be certainly much more difficult to reach. Now, how do we think about, let's say, this normalization of real estate markets? And what is relevant, let's say, for us in considering these effects? I mean, we have a certain number of factors that are more relevant, let's say, on the macro level. We have the interest rate cycle that is expected to come to an end and even to revert with, let's say, cuts to be expected.
We clearly observe, probably as most of us, that there is continued strong demand for real estate. I mean, and there is not, let's say, enough supply. There are construction shortages. We see other things like in the real estate funds that there is the yields that have been picking up and trending upwards already during 2023. So there are many clear indications, let's say, on the macro level that this normalization is really expected to reoccur in the year 2023. And clearly, there are also, let's say, anecdotal pieces of evidence from those that are very close to the transaction markets. I think we include stuff like units in Germany that we are now selling off. In 2023, there was essentially no demand.
Even though we didn't cut prices for those condominium types of objects that we sell, we now see here and there demand picking up for that. The interest is coming back. There is some effect from the lower rates. We also see that we can relet objects at attractive prices. The economy is doing well in our core markets. I think that's a good sign as well. We have here and there also, again, interest from institutional clients to invest in real estate funds. Those are things that were missing, let's say, in 2023. When talking to investors, our real estate guys tell us there are still plays in the market that are underinvested in real estate. There we see, again, many signs that this expected normalization is underway.
So it was now a very lengthy answer, but I think it helps to get some color on our thinking in relation to that.
And maybe on the dividends, I mean, I wouldn't read too much into the payout ratio simply because under IFRS 17 and 9, right, in contrast to the old standards, there are not a lot of links to the statutory results, which then drive the cash remittance to the holding company. So it's much more important what happens on the statutory accounts we gave you, or Matthias just gave you some color about that a few minutes ago. And in addition to that, we have the ambition to continue to increase the DPS.
Great. Thank you very much. Very helpful.
The next question comes from David Barma from Bank of America. Please go ahead.
Good morning. Thank you for taking my questions.
The first one is just to make sure I understood correctly your answer just now, Matthias, on the fee guidance. So basically, to get in your CHF 850-900 million fee target, this was based on pretty much the 25% of non-recurring income. So now you're saying 30%, but downgrading slightly your guidance to the lower end of the range. Do I understand correctly from your answer that the 30%, you're seeing clear evidence today already that these are going to come through? And so why the link to a potential recovery of the market? Are you just being prudent here in saying that if the market deteriorates from here, this will be challenging and that under the current market conditions, you are pretty much there already? That's my first question.
And then secondly, on flows into TPAM, so can you give us a bit of color on how these are behaving so far this year and if you're expecting as much into your real estate funds as in 2023? And then thirdly, on solvency, could you just help us bridge the SST ratio in the fourth quarter from the 205 you had disclosed then? Thank you.
Okay. Let me start with the fee guidance. And as said there, we expect this year for asset managers to achieve a share of non-recurring income in TPAM of around 30%. And this is a doubling compared to what we have achieved in 2023. It is essentially in line with what we have achieved in, let's say, 2022 and in earlier years. I think the first point to make, the second one is for the 2024, we gave once the guidance.
So three years ago at the investor day or 2.5 years ago at the investor day, that we expect something of around 25%. That is, as I said, what we said 2.5 years ago. But now, as we speak for 2024, we expect this 30% share to happen. And this is, as I said, made the statement in view of our pipeline that we have in terms of project developments. But clearly, the materialization of this pipeline in 2024 depends on the mentioned, let's say, normalization of the real estate markets in Germany and France. So I think that's, let's say, how to think about, let's say, this guidance for 2024. So it is challenging and, as I said, reliant on this recovery or the normalization of the markets in Germany and France.
Now, in terms of TPAM flows, you have seen what we have reported in 2023. There was still strong inflow in real assets. I mentioned the CHF 3.5 billion. We had also strong contribution from fixed income. And now, if we look at how the year has started, we clearly see inflows in the real estate space. And I think we expect for the full year 2024, real estate inflows, let's say, on a comparable level than in 2023. So the momentum is good. And we have also, now looking forward, clearly new offers that we include in our offering. We have plans to launch passive investments in the fixed income space. And this will also clearly help the inflows going forward.
Now, in terms of the bridge from the SST that we reported in Q3, that was, I believe, around 205% to the current level of around 210%, we clearly had significant contribution from the positive equity market developments and the further narrowing of the credit spreads in the fourth quarter, which in aggregate led to this improvement of about 5 percentage points.
Thank you.
The next question comes from Thomas Bateman from Berenberg. Please go ahead. Hi. Good morning.
Thanks again, Patrick, for your help. You and Matthias have been a great partnership, one of the best management teams in the sector. But I know you're leaving the company in very safe hands. So thank you to you both. In terms of questions, could you just give us an outlook for, I guess, premiums in the insurance business, but also fee income for the IFA business given the macro outlook?
So here, I'm thinking in the international business, we had a bit of some headwinds last year because of low mortgage sales. But now, markets are looking a little bit better. There's probably slightly less cash alternatives as well. So maybe just an outlook on the IFA and premiums would be good. On interest rates, I think some people are talking about potential cuts, the SNB rate. What impact do you think that has on Swiss Life? And I guess more broadly, what level does kind of the Swiss 10-year need to fall to to stop the type two interest rate reserve releases? And then finally, just on the cash outlook, I think you talked about a reserve release from Germany coming through from ZZR. Could you just give us a little bit more color on that and if that's likely to repeat? Thank you.
Let me start with the cash topic from Germany, as said. About half of the cash remittance was kind of due to special effects. There was the CHF 150 million that we mentioned that came from the IFA that is to be considered a one-off. And the second one you mentioned that comes from the insurance. So that's about one-third of those additional CHF 75 million. And that's something that has to do with the ZZR. Up to 2030, we had, in the low interest rate environment, a regime from BaFin that led to a situation that we could not dividend out profits from our German insurance business. And now, with the higher interest rates, this so-called Ausschüttungssperre, the ban on dividend, has been lifted. And that's, therefore, a contribution we expect to recur for the part from the insurance business.
So I think that's the point to be made there on the German situation. Now, on the interest rate outlook, I mean, as we said, the market clearly expects rates to come down. And when this will happen, to what degree, we have to see. I think there is a lot of that already included in the long rate, so in the 10-year rate. So I think that has been, to a large degree, or if not fully, been reflected in the long-term rates. And it's the long-term rates that are relevant for the reinvestment rates and what have you. And those are indeed relevant for the reserve release. Now, there would be a much, much lower rate level that would need to occur before we had, let's say, questions about the reserve releases.
So if there is a small change of the long-term rates, 10-year yield, there's nothing that changes from our guidance we gave. And the last question on the outlook, for the IFAs, you refer to the pressure that we have experienced in terms of, let's say, interest-rate-sensitive products, specifically in the CEE. There was some pressure. Clearly, we tried to reorient the product offering there. So we clearly see there clearly also a rebound from the current levels. And I think if we look to especially Germany and Switzerland, we expect further growth to happen. We had really the ambition there to further grow the advisory base and clearly also as a result, the fee result. And to give some, let's say, indications, we really had a good start in the IFAs and CEE. So we will see how this will continue. But as said, the start has been good.
That probably gives you some color on the fee and commission income from IFAs. Now, going to the premium outlook, for us, premium per se is not a goal. I mean, if we write profitable new business, that is clearly the goal. Then premium growth is okay. But it's not the KPI per se. And maybe just to illustrate that, we have had in 2023 a significant increase in the health and protection space. This was mostly price increases and not just additional business. It was price increases. We expect further price increases in that health and protection business to occur in 2024 because, as said, we want to bring that business back into the profitable space. Switzerland, I would say, we expect probably a stable development. Germany is probably continuing at the rate we have seen now in 2023, maybe a bit less.
In international, there is, let's say, potential that there's a further, let's say, reduction with opposite effects from the private wealth business, which we expect to come back a bit to come back, and the employee benefit business, which we expect to grow.
Thank you very much.
The next question comes from Nasib Ahmed from UBS. Please go ahead.
Hi. Thanks for taking the question. So first question on the cash remittances, slide 44. You've got CHF 1 billion coming from Swiss Life. And I think, historically, you get about CHF 300 million from the other entities. Are there any pluses and minuses in the CHF 300 million? I think you mentioned asset management would be CHF 15 million-CHF 20 million higher than 2023. And related to that, in Swiss Life AG, you've got about CHF 2 billion of retained earnings as of full year 2022. How much of that is distributable?
I know you've done CHF 929 million of profits, and you're paying out about CHF 1 billion. So that probably CHF 2 billion doesn't change much. But how much of that CHF 2 billion base case is distributable can you remit up? And then on the ROE, I think previously, you gave some ROE guidance. I know ROE is a little bit better because the denominator is lower. But what do you expect the ROE to land at for 2024, if you can give some guidance on that? And then finally, on the non-recurring income, the projects that you mentioned in Germany and France, can you give some color on how much is residential, how much is commercial? And within commercial, how much is offices, how much is other real estate? Thank you.
Okay. Thanks for the questions. Let me start first with the cash remittance.
As said, we have this AG CHF 1 billion that we will stream up as a dividend from the AG in 2024 for the financial year 2023. As mentioned, this includes, let's say, the catch-up from the 2022 statutory profit that was not fully upstreamed. If you do the math on that slide, you'll see that's about CHF 80 million or something like that. And I think what you also should keep in mind is that the AG profit, as said, in 2023 included a contribution from this release of the tax provision that I mentioned at the start of the call. Now, in terms of, let's say, what comes outside Swiss Life AG, I mean, there are clearly pluses and minuses. I mean, we highlighted CHF 50 million special dividend from the German segment, which didn't come through the AG. That was outside the AG.
We also indicated for the asset manager segment, an additional CHF 15 million-CHF 20 million of cash remittance in the year 2024. So I think that's what's to be said on the cash remittance. Now, to the free reserves, they are called free reserves. That's maybe an accounting term. But we need that statutory capital as risk capital under statutory accounting. I mean, we have a different accounting framework under statutory than under an SST or IFRS. We need a certain statutory risk capacity there. To that end, they are not free. Now, in terms of the ROE guidance, we were very explicit in 2023 and Q3 because of the very special circumstances of that year. I mean, we had, first of all, a new accounting standard that was certainly a challenge.
And we had this effect of the very strong negative real estate fair value changes that probably made it also a bit difficult to see what's going on. And therefore, we gave this detailed guidance on the ROE. I think for 2024, I would refer to the fact that we say we expect to clearly exceed the target of 10%-12%. Now, in terms of the projects that we have in mind when we talk about 2024, we have predominantly projects in Germany. And they cover, let's say, residential logistics and also what we call the light industrial space. In the more longer term, and I think we have talked about some of those developments, we have district developments or city developments. But those are typically taking much, much longer than and will not, let's say, accrue in 2024.
Thank you.
If I could come back on the stat risk capital, are you able to give us a number of what the minimum you need to hold in AG?
Look, I think we're well fine with the current level. So meaning a situation where we upstream the entire profit, I think that's what we see as the relevant level.
And maybe to add, I mean, this is the guidance we've been giving over the last decade or so to that question.
Perfect. Thank you.
Thanks, Bob.
The next question comes from Farquhar Murray from Autonomous Research. Please go ahead.
Good morning, all. And firstly, Patrick, sincere congratulations on what you've done with Swiss Life over the decade. It is a major turnaround. And from those genuinely meant compliments, perhaps some slightly more challenging questions on the half-year. Firstly, apologies to come back to the fee results.
But should I see the 30% non-recurring versus the prior indication of 25% as suggesting a stronger-than-normal year this year? And is that kind of justified by the pipeline you're seeing? And when we then think about the market conditionality around that, is that just more a matter of conversion? Is that the right way to think about what you're saying there? And then just on the tax rate, I recall there was a tax one-off in the first half of 2023. But the tax rate still looks quite low in the second half. Could I just get a bit of understanding around what might have driven that? Thanks.
Thank you, Farquhar. Now, in view of the fee result, yes, the 30% that we give for 2024 as the guidance, that's clearly in view of the pipeline that we have.
As said, the materialization of this pipeline in 2024 is reliant on the expected normalization on the German and French real estate market. Now, the guidance that we gave at Investor Day, that was something that we gave as an indication then for the midterm view. If we now look back, what we actually achieved, so in the past years, I mean, we had, for example, in 2022, this share was 31%. In 2021, it was 27%. In the year 2020, it was 30%. So looking back, we clearly have a track record of having had more than, let's say, the 25% that we indicated. So I think there is a track record on that. And again, having said that already, in view of the pipeline we have, we say, look, we expect this CHF 850-900 to be reached at the lower end of the range.
Now, on the tax rate, as you said, we have had this provision, this extraordinary release. I mean, that is essentially now for the full year, still the same amount as we had in the first half of the year. We have now 18.6%. We have clearly some, let's say, changes here and there in the tax rate from period to period. Another important driver to consider is the geographic emergence of the profit. So depending on where the profit is earned, is really driving the tax rate. Now, for 2024, we expect this reflects a bit this uncertainty depending on the business development. We expect for 2024, a tax rate in the range of 20%-25%.
Okay. Thanks very much.
The next question comes from Bhavin Rawal from HSBC. Please go ahead.
Hello. Good morning. Thank you for taking my question.
I have three on my side. The first one would be on your real estate fair value guidance for 2024 of -0.5% to -1%. Would you be able to provide some color, as in what level of fair value changes you are expecting out of your Swiss real estate portfolio? Are you expecting any material improvement in 2024 versus 2023? Or do you expect fair value changes to be broadly stable? The second one would be on your non-recurring income. Would you be able to provide more color, as in what proportion of this non-recurring income is generated out of France versus Germany versus Switzerland? And the last one would be on the fee result in France. Obviously, you have seen some strong fee results because of this strong outlook for strong demand for the structured product.
Would you be able to provide any color, as in what level of demand you are seeing going into 2024 for this banking structured product? Thank you so much.
Okay. Thanks for, let's say, your question. As said, the -0.5 to -0.1, 0.0% negative for the entire year 2024 relates to the entire group. Now, in terms of geographic allocation, we have about three-quarters of real estate in Switzerland. For the Swiss real estate, we essentially expect a flat development, so stable valuations in aggregate. That may be, let's say, composed of a positive valuation development for residential, maybe flattish for office, and maybe for retail, there may be some negative contributions. Overall, as said, Swiss real estate is expected to have stable valuations in 2024.
Now, in terms of the non-recurring income, I think we clearly made the statement that we are reliant on the German and the French markets. Now, in terms of the structured products in France, I think we have had really very strong developments over the past years. We have been doing very well over the past years. And I'm aware we always said, "Look, this will come back at one point in time." And it didn't come back. I would say I would not want to give here detailed guidance. But what we clearly can say, we have a good offer here. We meet client demands. And it is really an important offer in the bank. It's about one-third of the clients that currently have such structured products. So I think we have a really good offer there. Very helpful.
Thank you so much.
The next question comes from Singh Samant from Citi. Please go ahead.
Yeah. Hi. Thanks for taking my questions. And I will also echo I'm sorry, speakers' demand. So sort of same thing. Thanks, Patrick, for your answers.
We can't hear anything.
Sorry. Can't you hear me?
Mr. Singh?
Hello.
Your line is open. You may ask your question.
Can you hear me?
Yes. Now, yes.
Oh, thank you. Thanks for taking my questions. And thanks, Patrick, for all the contribution over the years. And also, thanks for providing the CSM sensitivity. That is quite helpful. My question is on France's P&C and health and protection business. You suggested that probably we'll see in 2024 a clear turnaround versus what we saw last year. So can you just provide more color on that? So what are the drivers and how to think about the business?
Then SST movement, you suggested that the equities and the corporate bond tightening, that favorably impacted the movement from nine months. So what was the impact from interest rates and equity? So sorry, the real estate fair value, so sort of losses. So if you can just break out those two things.
Let me first start with the French non-life businesses, which had a negative CHF 34 million operating result contribution in 2023. And that really encompasses health and protection, but also P&C businesses. And we have had, and that's what we highlighted specifically also in the health and protection space, issues with the technical profitability. As we understand, this is not a specific topic we have as a company, but it's a market-wide phenomenon. At least, that's what our understanding is. We already have undertaken significant tariff increases in health and protection for the financial year 2023.
But the development has shown that this has not been enough. For 2024, we clearly have put measures in place, including further price increases, to turn around this profitability from the negative CHF 34 million clearly into the positive territory. Positive territory meaning something like mid- to high double-digit millions of result in 2024 for the French non-life businesses. So I think there is something we are very closely watching. Now, in terms of the fair value contributions of real estate to the SST movements, now looking back more on the 12-month view, we essentially have 0% contribution year on year. Why is that? We have had a, let's say, negative fair value return on real estate of -2.5%. On the other hand, we had a +2.5 percentage point yield, running yield from real estate. So net total performance was zero.
As a result, for the 12 months, it was about zero. For the last six months, it was clearly a negative. Why is that? Because we had a higher share of the CHF -1 billion in the second half of the year than in the first half of the year. I hope that gives some color on the contribution of real estate there.
Yeah. That's quite helpful. Just on the interest rates, the movement, did it affect the SST movement anyways?
I think in Q4, that was essentially flattish because we had various contributions from the rate movements, the differentials, and the swap bond spread. So that all netted out to about zero.
If I can ask just one more question, is that on FX hedging cost, looking into 2024, do you expect same level of hedging cost?
Or I mean, should it increase slightly or decrease given the interest rates are expected to go down? So should we expect slight decrease in the FX hedging cost? Any comment on that?
Yeah. Look, if you had asked that question, let's say, six months ago or 12 months ago, we clearly would have expected hedging costs to come down in 2024. But as we now expect and look into what the forwards tell us from the current rates for interest rate levels, the forwards clearly indicate that the hedging costs remain at the same level as what we have seen in 2023. And clearly, as usual, but let me still make it the case, beyond that, we expected to come down as we expect that, let's say, narrowing of the differentials between the yield curves to materialize. So in 2025, we expect them to come down.
And also, the usual comment we make, there is clearly a policyholder sharing on that substantial cost, I think, as a reminder.
This is quite helpful. Thank you.
The next question is a follow-up from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thank you very much. Just had a question or two on the CSM. I haven't done the math yet. So apologies if this is wrong. But the sensitivities look quite resilient. And yet, obviously, you had the sort of fairly large economic CHF -1.2 billion. I'm sort of guessing if I do the math, I wouldn't come out with such a number as high as that. So I was just wondering, have the sensitivities been reduced over the year, or is there sort of something else going on there?
I'm also wondering if you can give us any guidance as to what we should expect for the CSM release going forward. Given that CSM has come down, should we still be thinking of a stable release or a stable release ratio? Or how we should think about that would be very helpful. Thank you.
Okay. Maybe first, in view of the CSM sensitivities, I think what is important to keep in mind, first of all, we had quite a significant drop in the Swiss franc interest rates. And what is probably equally important is the sensitivity that we indicate in the appendix is one for a parallel shift of all interest rate curves in all currencies. And as mentioned, we have had in 2023 a, let's say, special movement on the interest rate differentials. And that contributed as well to this negative economic variance.
I indicated that about two-thirds of the CHF 1.2 billion was related to interest rate and a bit more than half only related to the parallel movement. And the rest is essentially driven, let's say, related to the rate differentials and their movement. And that may be the missing piece that you were looking for. Now, in terms of the release ratio, we talked about the special effects we had in 2023, the surrender that we talked about in half-year. Now, we have something about the 7.5% for the full year. I think we guided a bit that we would come down from the half-year release ratio. And now, versus 2024 release ratio, I think it's fair to expect that we move towards the midpoint of the 6%-8% range.
Great. Thanks very much.
The next question comes from René Locher from KBW. Please go ahead. Yes.
Good morning, all. Just a very simple question. I am on slide 26 and slide 27. So very simple math. When I'm looking on slide 26, the operating result insurance business, this CHF 929 million, this is very well bridged on slide 27. So the delta from the CSM release pre-tax to the operating result is, well, what, CHF 300 million in 2022 and CHF 354 million in 2023? So if I assume that the operating result will remain broadly unchanged and I add up CHF 850 million to the fee result and then deduct the unallocated corporate cost plus others, let's take the midpoint, CHF 137 million, then I end up at somewhere between CHF 1.6 billion and CHF 1.7 billion profit from operation. So is my math totally wrong, or can you just give some feedback, please?
Look, maybe a couple of points that we raised in our discussion.
What we said in terms of the release, just mentioned that we expect the release ratio of the group to come back a bit from the 2023 level, that it moves towards the mid-range. That's what we just discussed with Peter. There is also another point, I think, that we have to highlight here. In those additional contributions, we have this French element, the French non-life businesses. There, we clearly expect significant improvement 2024 on 2023 for the reasons we said, the repricing and what have you. What is also to be expected, and I think that relates to the guidance we gave on real estate, we have had this negative CHF 1 billion of negative real estate fair value changes in 2023. This will come down. We gave the numbers there as well.
And part of that is not absorbed by the VFA business, but a small part of that feeds through, first of all, in the non-life operating result in France, but also in what you see on the third bullet on page 27, in those assets not backing life insurance liabilities. So everywhere where the fair value returns of real estate do not go through VFA, we have an improvement from less negative fair value changes on real estate. Just as a couple of thoughts on the calculations you've just done.
Okay. Thank you very much.
The next question is a follow-up from Nasib Ahmed from UBS. Please go ahead.
Sorry. It's a quick one on the non-mandatory guaranteed rate. That's gone up 25 basis points in line with the mandatory one. I don't think there's any impact for shareholders on that.
But if you can just clarify that and just the thinking behind increasing the non-mandatory rate as well. Thank you.
Yes. The answer is there is no impact on shareholders. We have in the group life business only an impact on shareholders if we could not if, let's say, the income would be smaller than the guarantees, which is obviously not the case. So no impact from that increase. I think it is a measure that we undertake to make the full insurance business more attractive, to attract assets under management. Why is that? With the higher interest rate and the measures that we have undertaken, especially in view of the conversion rate losses, this business is now, let's say, less under, let's say, underwriting restrictions than it was when rates were at -1% on the capital market.
Thank you. Perfect.
The last question for today's call comes from Henry Heathfield from Morningstar. Please go ahead.
Good morning. Thank you very much for taking my questions. Congratulations, Patrick. Really great decade. Just a couple of clarifiers, please. You mentioned the real estate fair value moving to around negative minus 50 basis points to minus 1%. I was wondering if you might be able to give some guidance of what kind of fair value appreciation we should expect in normal markets. And then the second question around real estate, the non-recurring fees. What kind of sources of non-recurring fees are we talking about? Are we talking about kind of more on the portfolio construction side, more on actually built-in transaction side, building and selling? I was wondering if you could give some color around that, please. Okay.
Maybe, let's say, the long-term, let's say, fair value changes in real estate, it's always a bit of a difficult question. If we now look back the past probably 10 years and if we exclude the year 2023, it was probably an average 1 percentage point per annum, probably more 2 percentage points. But going forward, who knows? And I think the important point here is we hold real estate not because of that depreciation, but because of the stable rental income real estate provides to us. It is inflation-linked, and I think that's something that people have come to realize and appreciate after a decade of absent inflation. I think that's probably the best we can say. In terms of, let's say, the elements of that non-recurring, let's say, income, there are various sources.
There are, let's say, more the fee contributions from buying and selling real estate, from refurbishments, so more transaction and services-oriented. But there is clearly also contribution from project development. So the project development gains are included there as well. And then there's clearly also other elements, performance fees to some extent and construction fees and the like. So that gives you kind of a flavor of what is included there.
Is that spread across both residential and commercial, kind of all elements of real estate, or is it focused in one specific area?
No, I think it's pretty much, let's say, spread across all types of real estate.
Thank you very much.
I think something that might help is that we have a higher exposure than others to logistics, which is clearly the better asset class to be in than, let's say, normal office buildings.
Thank you.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to the management for closing remarks.
So, ladies and gentlemen, I'd like to close this on a personal note. I want to express my gratitude to our employees for their tremendous contribution. You all make me proud, and I know some are listening in to our achievements at Swiss Life. And furthermore, I would also like to thank analysts and investors for the insightful and, at times, also challenging discussions. I really enjoyed interacting with you, and I really believe that this feedback loop from all of you is very important for us as management.
By focusing our efforts now on our goals for 2024 and beyond, Matthias, our new CEO, as of mid-May, and the whole executive team will continue to make sure that Swiss Life will treat you as investors well while delivering on our promise to customers and playing our role in our society. With that, I'd like to thank you again for joining and wish you a nice day and goodbye. Thank you.