Ladies and gentlemen, welcome to the Swiss Life presentation of the Q1 Results 2022 conference call and live webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing via the relative field. Kindly note that webcast questions will be answered after the call. 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 Matthias Aellig, Group CFO of Swiss Life. Please go ahead, sir.
Good morning, ladies and gentlemen. Thank you for dialing in and for your interest in Swiss Life. Today we are reporting on selected top-line figures for the first quarter of 2022. Please note that all figures quoted are in CHF and are unaudited. All growth rates mentioned are in local currency. Let me start with today's key messages. Fee and commission income was up by 14% to CHF 579 million. Asset managers grew by 20%, owned IFAs by 2% and owned and third-party products and services by 12%. Gross written premiums, fees and deposits received increased by 3% to CHF 6.9 billion. All business divisions contributed positively. Insurance reserves, excluding policyholder participation liabilities, declined by 1% to CHF 173 billion compared to year-end 2021, mainly driven by capital market developments.
Swiss Life asset managers recorded net new assets of CHF 1.2 billion in third party asset management or CHF 1.9 billion excluding money market funds. Direct investment income increased to CHF 0.97 billion. The non-annualized direct investment yield was 0.6%. The non-annualized net investment yield stood at 0.9%. The SST ratio on January 1, 2022, as disclosed and filed with FINMA, was 223%. As of today, we estimate our SST ratio to be at around the same level. I will now move on to our segment reporting, starting with Switzerland. Premiums increased by 1% to CHF 4.3 billion. The life insurance market was down by 2%. Premiums in individual life were down by 3%, while the market increased by 1%.
Periodic premiums grew by 2%, while single premiums were down by 19%. Premiums in group life grew by 1% to CHF 4.0 billion, while the market decreased by 2%. Single premiums increased by 6%, primarily due to higher premiums from employees entering existing full insurance schemes. Periodic group life premiums declined by 2%. This reflects the growth of the semi-autonomous business, which results in lower reported premiums. In that business, only risk and cost premiums are recorded, while the savings components are recorded off balance sheet as asset inflows in the respective foundations. Assets under management in our semi-autonomous foundations increased to CHF 6.3 billion compared to CHF 5.6 billion at year-end 2021. As previously mentioned, the reported premium development demonstrates our continued focus on disciplined underwriting.
Fee and commission income slightly increased to CHF 83 million, driven by Swiss Life Select. Turning to France. Premiums increased by 8% to CHF 1.9 billion. The market grew by 3%. Life business premiums were up by 9% due to continued demand for our pension and savings products. The market was up by 7%. The unit link share in our life premiums was 61% compared to the market average of 40%. Life net inflows were CHF 0.6 billion versus overall market net inflows of about CHF 8.7 billion. Health and protection premiums grew by 7%, mainly driven by the group business. P&C premiums were down by 3%, primarily due to fleet and home insurance products. Fee and commission income rose by 25% to CHF 111 million.
Unit-linked fee income increased based on higher average unit-linked reserves compared to the prior year period. We also had a strong contribution from the banking business, driven by exceptionally high revenues from structured products in a volatile equity market environment. I will continue with Germany. Premiums grew by 5% to CHF 390 million due to modern traditional and disability products. The market increased by 4%. Fee and commission income rose by 3% to CHF 160 million. The number of financial advisors increased by 18% year-on-year to 5,733. This top-line development needs to be put in the context of an extraordinary benefit in the prior- year- period of around CHF 15 million from a successful campaign based on the solidarity surcharge, as mentioned throughout 2021.
Excluding this prior year benefit, income growth would have been 14% in Q1 2022. Moving on to our international unit. Premiums increased by 2% to CHF 272 million, due to higher premiums with corporate clients in the global employee benefits business, while premiums with private clients slightly decreased. Fee and commission income was up by 12% to CHF 87 million, primarily driven by high contributions from our own IFAs, both in the U.K. and CEE. Let's continue with asset managers. Asset managers commission income rose by 20% to CHF 241 million. This included the first time consolidation of the Nordic company NRP acquired end of 2021. On a like-for-like comparison, income growth would have been 15%.
As usual, the update on asset managers in Q1 and Q3 focuses on commission income and does not include other net income from real estate project development. In our PAM business, commission income increased by 4% to CHF 93 million due to high transaction fee income. In our TPAM business, commission income grew to CHF 149 million. Recurring income increased by 30% or by 23% on a like-for-like basis, excluding the mentioned consolidation of the acquired company in the Nordics. Non-recurring commission income, such as transaction and performance fees, increased by CHF 6 million year-on-year. To make figures comparable to full- and half-year disclosures, the share of total non-recurring income for TPAM, meaning commission income as well as other net income, e.g., from project development, was 19% of total TPAM income, compared to 14% in the prior- year- period.
Net new assets in our TPAM business amounted to CHF 1.2 billion, compared to CHF 2.9 billion in the first quarter of 2021. We achieved good inflows in real assets of CHF 0.6 billion. Inflows in other asset classes amounted to CHF 0.4 billion in bonds, CHF 0.7 billion in balanced mandates, and CHF 0.2 billion in equities, while money market funds reported an outflow of CHF 0.6 billion. Excluding money market funds, net new assets amounted to CHF 1.9 billion, compared to CHF 2.0 billion in the prior year period. Overall, assets under management in our TPAM business were at CHF 102.3 billion, compared to CHF 103 billion at the year-end 2021. The reduction, despite net new inflows, was due to less favorable capital markets and a negative FX translation.
Turning to our investment result. Our direct investment income increased to CHF 0.97 billion compared to the prior year level of CHF 0.95 billion. Equity and real estate contributed positively while income on bonds decreased. Non-annualized direct yield was stable at 0.6%. The non-annualized net investment yield was 0.9% compared to 0.7% in the prior- year- period. The increase is due to a positive P&L contribution from equity hedging and other derivatives. We also had positive changes in real estate fair values. Hedging costs were still at prior year level. Those positive effects more than compensated for the lower investment result from bonds. Unrealized net gains on equities amounted to CHF 2.4 billion, compared to CHF 3.3 billion at year-end 2021.
Unrealized net gains on bonds amounted to CHF 4.7 billion, compared to CHF 12.1 billion at year-end 2021. With respect to the real estate portfolio, changes in real estate fair values amounted to 0.6%, compared to 0.5% in the prior- year- period, both on a non-annualized basis. Vacancy rates increased slightly to 4.2% from 4.0% at year-end 2021. In the context of the recent increase in inflation and interest rates, our real estate portfolio continues to be attractive with about three-quarters of total rental income indexed to inflation or higher rates. Moving to solvency, cash, and payout. Our SST ratio was 223% on January 1, 2022.
As of today, the SST ratio is at around the same level and therefore well above our ambition range of 140%-190%. Liquidity at holding today amounts to around CHF 0.9 billion. This takes recent cash remittances to the holding company into consideration, as well as outflows related to the dividend payment and the ongoing share buyback. Our CHF 1 billion share buyback is on track with more than a quarter completed as of today. As announced, it runs until the end of May 2023. Let me sum up. We are very pleased with the first three months of 2022 that also mark the start of our Swiss Life 2024 program. 2022 so far has come with clearly higher interest and inflation rates.
Also, in such an environment, we confirm all our Swiss Life 2024 financial targets. We will start with our progress reporting within our half-year 2022 investor presentation. Thank you for listening. I am now ready to take your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to only answer while asking a question. Webcast viewers may submit their questions in writing via the relative field. Anyone with a question may press star and one at this time. The first question comes from Andrew Sinclair from Bank of America. Please go ahead, sir.
First it was just on reinvestment rates. Just really wondered if you can give us some context on what sort of reinvestment rates you're getting today with rates going a bit higher and how that compares to your earned rates. Secondly, was on asset management net inflows. Just if you can give us a bit of an idea of phasing through the quarter for different asset classes. Was there a big change in March? Or was it just a quieter quarter overall? Thirdly was just on the competitive environment for Switzerland. Has there been any change? I know you won't want to talk about specific competitors by name, but AXA did comment that they've been able to write quite a lot more business in Switzerland in Q1.
I just really wondered if you can give us any thoughts on the Swiss environment. Thanks.
Okay, thanks a lot. For the first question in terms of reinvestment rates. Indeed, we have seen higher rates. If we look at the first quarter of 2022, our reinvestment rate is maybe 2.3% as we speak. This is clearly above last year's reinvestment rate. Back then it was 1.4%, 1.5% the like. For the full year, we clearly also expect somewhat higher reinvestment rates than the 2.3 that we have seen in the first quarter. However, please keep in mind that there's only a relatively small share of our investments that come due every year. Maybe that's on the first question.
On the second, the phasing within the first three months, I think there's nothing particular to note. It's by the nature of the business we have, kind of, I wouldn't call it erratic, but you know, deals come in. They do not come. It's nothing special to note here, compared to prior years. This is a business where we have quite some big tickets and the timing is by the nature, not very predictable. Nothing specific to note there. In terms of the competitive environment, you know, as we reported, we have seen increased, let's say activity, in the TI-DAS, in the semi-autonomous business. As mentioned, we, on various occasions, this does not fully translate into the premium development.
The reason being that we have most of the semi-autonomous, let's say, inflows, the savings part, not recorded as premiums in the P&L. But also, let's say, the group life business overall, I would say, is it's okay. Nothing particular to note there as well.
Super helpful. Thank you very much.
You're welcome.
The next question comes from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thank you very much. I had three questions, please. The first one I guess is similar, very similar to Andy's. Apologies for going back on that. It seems to me that the semi-autonomous market has been sort of strong, you know, very strong overall in Switzerland. Yeah, I'm sorry if we're going over the same ground, but I'm just struggling to understand, you know, what might be driving that. Yeah, I mean, I'm just wondering if you can give any comments on the market or the demand overall rather than the competition from suppliers. The second question was just on France.
Thank you very much for the additional detail about the structured products success. Just, are you able to give us any sort of numbers on that? Just to sort of understand the weight of that versus the unit-linked momentum. I'm possibly being greedy. Just on the asset management, you know, sometimes just wondering what insights you can give us in terms of the outlook post Q1 for the rest of the year. I mean, I guess you've sometimes sort of given us insights into what non-recurring proportion, you know, you might expect for the year. I guess you've had a little bit more experience on flows since the end of the quarter.
Just wondering if you can add anything sort of post the Q1 cutoff. Thank you very much.
Okay, thanks for the question. Maybe first on the semi-autonomous part of the business. Let me first talk about the second pillar market in Switzerland at large. Both semi-autonomous, autonomous and the full insurance market. I mean, this market is growing essentially as GDP. I mean, Switzerland has a growing workforce, which is at about a multi-year low of unemployment rate in Switzerland. There is structurally a growth of that second pillar market overall. We are aware there is, let's say, a lack of, let's say, public figures on, for example, the semi-autonomous part. We know what the full insurance market is.
If you now think back and I talk about Swiss Life, we have been clearly tightening the underwriting in the full insurance solution, which just makes that part a bit small. There's intrinsically an increased focus on the semi-autonomous and the autonomous part. I think that's what has been, let's say, happening in the market. In addition to that, you know that's something that has been observed in the past as well. After a couple of, let's say, strong equity market years, there is increased interest in semi-autonomous, let's say, solutions anyway. Irrespective, let's say, of the effect of the underwriting that has been tightened in full insurance market anyway. That's couple of thoughts on the semi-autonomous market.
Now in terms of the structured products in France, you know, they have really contributed quite a significant share of the growth in Q1 of the fee top line. It's only more than half. This was driven by the volatility in the equity markets that was particularly high in the first three months. We do not expect this extraordinary benefit from the bank to repeat for the second, third and fourth quarter. The bank is well underway overall. Maybe that's a bit on the French question. Now in terms of the asset managers, the outlook, as you say, we typically indicate also a bit the total share of non-recurring income.
Again, that's both fee income, but also this other net income from project development. We have had 27%. In the full year 2021, we expect a bit lower share this year. Having said that, it's by definition a bit difficult to predict. We are, as said, see a bit lower share of that for the full year in asset managers fee paying business.
That's very helpful. Thanks very much indeed.
The next question comes from Pauline Liang from Morgan Stanley. Please go ahead.
Hello, good morning. Thank you. I just have two questions, broad one. The first one is just want to confirm that you mentioned that your investment, net investment results was helped by the hedging you put in place, which more than compensates the bond market movement. Does that mean that if interest rates, assuming they're going up when you say the bond, that the interest rate related? If interest rates goes down from here, would that actually reverse? I guess that's the first question. The second one is also I wanted to understand a bit more about the broader kind of business outlook if the volatility of the market, especially equity market, remain very high.
When I say kind of your expectation on the business, I specifically like for example your impact to your unit-linked business, impact to your structured product selling, and as well as the impact to the you know the remaining like the other third-party IFA sales, which will fit into your fee income. Thank you.
Thanks for the question. Maybe in terms of, let's say, the hedging point, let me make first the same, you know, the bonds we have on our balance sheet, they do not flow to the P&L because we carry them at what we call available for sale, and they only go to the P&L if we realize gains or losses on bonds. There's no mark to market in the P&L for bond investments. What we have observed, and we have, I think we have been talking about that effect for many years, you know. For many years now, the reinvestment rates on bonds have been below the coupons that were maturing, and that's, let's say, a secular trend of the current income on bonds that we reported over the years.
The point I've made on the derivatives was the following: You know, we hedge our equity portfolio, and when markets decrease, clearly the hedging derivatives appreciate in value, and that goes to the P&L. Whereas the change of the underlying equity does not go through the P&L. We have reported a decrease of the unrealized gains. On equities, they have come down by about CHF 0.8 billion or so year to date. The other hedging I was referring to was the foreign exchange hedging, the FX hedging. You know, we hedge both the FX bonds, the U.S. dollar, the euro bonds, for example, we hold on the Swiss balance sheet. We hedge there the underlying, and we also hedge the hedging costs of those for those bonds. These fair value changes have also gone to the P&L.
Given the rate differentials and the movements, this has had a positive impact. Looking forward, the increasing interest rate differential will mean we will incur higher hedging costs now going forward. Maybe that's a bit more detailed story about the hedging. Now, needless to say that we have on that also the policyholder sharing. All those movements we just explained are clearly pre-policyholder sharing, which pick up the large part of the movements anyway. Now in terms of what happens if the volatility in the equity market stays high? I think the simple answer is, the very large part of our business does not, let's say, depend on the equity volatility. We picked out this positive effect from the bank because there we offer structured products.
These structured products, they play the volatility in the equity markets, and they have met large demand in the first quarter of the year. This may be a pocket of our business where we have, let's say, or where we could take advantage of such volatility. The other business overall, I would say, is nothing particular to mention. The only point I'd like to make, and that's an observation we have seen, for example, already two years ago in the COVID context, you know, our unit-linked customers, for example, in France, they do not get nervous once equity markets get a bit shaky.
You know, maybe 10 years ago this pattern has been different, but two years ago we have seen that, even if markets tanked, they have more seen it as an opportunity than a threat.
Okay. That's really helpful. Thank you.
The next question comes from Thomas Bateman from Berenberg. Please go ahead.
Hi. Good morning. Thank you for taking my questions. Three questions from me. I just wanna touch on real estate valuations and yields and the reported revaluation gains again. Can you split out how much of this is attributable to refurbishments, and how much is just general real estate increases in your core markets? Secondly, you noted that 75% of the real estate assets are linked to inflation or interest rates. Can you talk about the affordability of tenants in your core markets and consequently your ability to pass on rent increases to those tenants? Finally, just in France, clearly things are still very, very good here and kind of above your 6%-8% guidance for the strategic period.
I guess I'm asking is there any upside to this guidance, or is the shape of the transition maybe to unit links you'd expect to be faster in the early part and maybe slower in the later part of the plan. Yeah, any color on the France guidance, fee guidance would be helpful. Thank you.
Okay. Maybe first the question on the real estate. You know, refurbishment, that's part of normal business. If we invest in, let's say, a certain amount, this amount typically increases the value of the property, but that's not per se a P&L effect. To cut it simple, the very large part of that CHF 0.6 billion is not, let's say, refurbishment, but that's, let's say, what is going on in the market, because, as you know, we do calibrate, or rather, our external valuation agent makes the assessment of the portfolio, and that's essentially what's going on in the transaction market, the 0.6% that I have mentioned.
The second question, you know, the inflation protection, the three quarters that I gave is essentially something that is anchored in the contract, you know, on the commercial part, it's simply part of a contract where you say what share of inflation is passed on, and in the residential area, it is a level or a link to the average interest rate of the mortgages outstanding. That's the way this transmission works from higher inflation or rates to the rental cost for the tenants. That's in that sense, a contractual thing that is at work. Now in terms of the French question, I'm not fully sure whether I fully got it.
What I can say in terms of general outlook, you know, we have still very high interest in our pension solutions. We are growing strongly, not at the same pace maybe as last year, but we continue to see high demand for the pension solution. We have also now a bit more than in the past also focused on the savings part, both of which have very high unit-linked share. The pension block of business, the periodic premium longer-term part of the business, the pension part has typically a higher unit-linked share than the savings part. As said, we are above the market in both cases. We continue to offer attractive proposition there to our clients.
I think that's what I can give in terms of outlook, even though I have to admit that's things that we have mentioned in the past so.
I guess where I was coming with you on France was, I think you're giving guidance for the key year of about 6%-8%. I appreciate there's a bit of a tailwind from the bank channel this year, but you're 25% up in local currency, which seems quite a long way ahead. That's why. Then, sorry, just coming back on the real estate. I think I was going more towards, like, do your tenants have the ability to pay these higher rents, or do you see any pressure, you know, the increased vacancies or defaults there?
Yes. I wouldn't see any point why tenants could not afford it. I mean, the business in Switzerland is going well. I mean, we have, as I mentioned, a very low unemployment rate. Business activity is strong. I wouldn't see any point why these payments could not be, let's say, afforded by the tenants. I think at that point in time, it's important to note, you know, when we talk, for example, inflation in Switzerland, we have had 2.5%, let's say, I think in March. This is far below what the figures you may hear from the U.S. or from Europe. The related, let's say, also increases in rents are obviously much smaller.
What also may help, as also an indication for the business activity in Switzerland, we keep seeing increased migration into Switzerland. We have a positive momentum here. No concerns that these rents could not be afforded by tenants, be it on the commercial or the residential side. Coming back to your question about France. Yes, indeed, the 25% are higher than the indication we gave at the Investor Day. That said, we have one quarter, and this quarter that we now have been reporting has this very strong extraordinary benefit from the bank due to the special quarter that we had. We do not expect that to repeat for the following quarters.
That's great. Thank you very much.
As a reminder, if you wish to register for a question, please press star and one. The next question comes from Jimmy Fan from UBS. Please go ahead.
Hi. Thank you for taking my questions. I have three questions, please. The first one is about interest rates. Given it's moved materially year- to- date, how will it impact your reserving assumptions and profitability models, presuming you can use a higher assumption in terms of long-term investment return and maybe more also in terms of your discounting rate? Can you give a bit more color on the mechanism here? That'll be super helpful. I guess also on that, what will be kind of the
The impact on your kind of local statutory earnings and solvency as a result. I mean, these are key to your cash upstream. My second question is on real estate. I think, given you know, the interest rate has a direct impact on mortgage and the cost of borrowing and loans are kind of two of the factors influencing the real estate price. Could you give a more kind of comprehensive view in terms of the key demand and supply drivers in the Swiss real estate market currently? My last question, did you say. Sorry, I didn't catch it quite clearly. Did you say the cash position, cash on hand at 1Q was CHF 1.9 billion? Thank you.
Okay, thanks for the question. I start with the one of interest rates and the reserving positions. Yes, indeed. I mean, given that the rates have increased more than probably all of us have expected, let's say, a couple of months ago, there's clearly less pressure on the reserving side. There may be allowances, there may be pockets where there are releases. I think the key point to keep in mind here, what has been working when we had lower rates, namely that the policyholder sharing was in place, is also working when it goes the other way. There may be less pressure on the reserving, but there's also policyholder sharing of that when rates go up.
That's the point on the reserving. The same clearly holds true for the solvency. You know, we have indicated the sensitivity of the SST ratio to rate movements. I think the most recent one is what we have disclosed at the half year 2021. We will provide an update at the half year for the first of January this year. Generally speaking, that's a small percentage point number for a 50 basis point shift. There's nothing particular to note there. In terms of local statutory accounts, clearly, there is a benefit similar to what we have discussed for IFRS. Lower pressure on the reserving, but also the policyholder sharing, which is at work there as well.
Over time, that's what we have mentioned before, we will benefit from the higher reinvestment rate, but also this one is, let's say, subject to the policyholder sharing. Now, coming to the question of the interest rates on the real estate market, you know, the dynamics and the demand. You mentioned the link to mortgages. You know, we have seen clearly this further positive change of fair values in real estate, in the segments we are in. That's, let's say, showing the underlying demand for these kind of assets. You know, they offer, as we said, quite some good inflation protection, and we see continued demand for that asset class.
For us, like many other institutional investors, we do not finance this kind of investment with mortgages. We have, let's say, the policy, all the funds we invest for that. We have there a probably different dynamic than what you may read from what individuals face in terms of financing costs when they have their mortgage rates going up. That's maybe the question on the real estate. The third question was on the real estate valuations, maybe. As said, we continue to have a positive outlook for 2021. We have said that we continue to expect positive fair value changes, maybe a bit less than in the past, but that's I think what we can say across all the markets we are operating in.
Hi. I think just on my third question was about the cash liquidity number.
Oh, sorry. The cash.
Yeah.
The cash that we reported was, now let me check whether I find the number. It was CHF 0.9 billion as of today. This includes, let's say, all the movements that we have had since the year-end. That's namely the movements relating to dividends, share buyback and the like. It's not CHF 1.9, it's CHF 0.9 billion. Yeah, got it. Thank you.
The last question for today comes from René Locher from Stifel. Please go ahead.
Yes. Good morning, all. Three questions, if I may. First of all, just out of curiosity, these inflation-linked rent increases, I have learned from. Okay. Thank you for the question. You know, to be frank, I cannot comment whether we use November or December, whatever kind of date for setting inflation. It's right, there is some lag between, let's say, the reading of the inflation and let's say, the rent becoming effective. I don't know whether that's one month, two months, or, to be frank, there is a lag, but it's not something that, let's say, worries me, to be frank. I think it's a key that we have the ability, unlike for a bond, to have this transmission of higher rates and inflation to the cash flows.
I think that's for me, the key point, whether that's one month or two months, I think that's less of a concern for us. On the second point, yes, we have, as you said, seen this growth in the German advisor base and also in the fee income. I said we have had this prior year benefit. We have heard that BaFin is looking into that. We do not expect their follow-up on that would lead to a cap of distribution costs or anything like that. I think that's the comment I could make here. In terms of rising interest rates, you know, we have a business where we have quite some assets, fixed income assets.
This is something that people talk about, but from an economic perspective, you know, for a life insurance company, we see clearly benefits. I mean, overall, that's a positive. I will not go into great detail and make boring, long, lengthy statements about this. Overall, I said it's beneficial. You know, some of the benefits as referred to may take a bit longer to materialize, such as the investment rates. We may see in the very short run some other effects. We talked about the reserve releases or the law strengthening. You know, there are many things at work. On the life insurance, I think that's the statement. It's beneficial, but there's the policyholder sharing on it. In the other businesses, you know, in terms of the IFA business, yes, there is.
Whenever something changes, there is a need for additional advice. I think there we have also a good thing. On the asset management part, you know, clearly there is, don't need to tell you that, AUM go down. Fixed income valuations come down. To raise that point, there is maybe here and there a couple of some less millions in terms of fee income. Overall, as said, we see that as a positive development. Okay. Thank you.
Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Matthias Aellig for any closing remarks.
They're very short. Thanks for your interest in Swiss Life and for your questions. I wish you a nice day. See you at half year. Bye-bye.
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