Ladies and gentlemen, good morning. Welcome to the Swiss Life presentation of the full year results 2017 conference call and live webcast. I'm Shari, the current call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. After the presentation, there will be 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. Should you need assistance, please press star and zero to call an operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Patrick Frost, Group CEO of Swiss Life. Please go ahead, sir.
Ladies and gentlemen, welcome to the presentation of our 2017 results. We appreciate your taking time for Swiss Life. Who would have thought three years ago, after the Swiss National Bank's decision, that we could navigate such a successful course through the challenging market conditions? The low interest rates were, indeed still are, a challenge for a Swiss financial services provider. Nonetheless, the figures we present to you today send a clear message. Swiss Life is making excellent progress, is implementing its strategy with discipline, and has thus identified the right answers to the supervisory, regulatory, and economic challenges. Allow me to highlight some key figures before I hand over to our CFO, Thomas Buess, who will take you through the details. Let's start on page three. Swiss Life increased net profit by 9% to over CHF 1 billion.
Our fee result is the key driver of this positive development, as it rose by 11% to CHF 442 million. We kept our risk result at a stable level. We defended our risk rate margin in spite of higher currency hedging costs and low interest rates. Our stable direct investment income and our reserve strengthening helped us in this regard. That brings me to page four. I'm very pleased with our 18% increase in the value of new business. It rose to CHF 351 million, mainly due to an improvement of our new business margin from 2.1% to 2.5%. This is a result of our disciplined pricing and underwriting, as well as the improved business mix. Our cost discipline remains part of our success. In spite of a higher business volume, we maintained a stable cost base in our insurance segments.
We displayed the same level of discipline in implementing our group-wide program. Our fee result is on target one year earlier than scheduled. We're also ahead of plan with our value of new business and cash remittance to the holding company. We estimate our SST ratio to be above 170%. For Solvency II, we expect a figure of above 200%. The board of directors will propose a dividend increase to the AGM from CHF 11 to CHF 13.50. As you can hear, I'm very happy with what we have achieved. I'm especially pleased that all units contributed to this positive development in our group. I now hand over to our CFO. After he has spoken, we will be happy to answer your questions. Thomas.
Thank you, Patrick. Good morning, ladies and gentlemen. Thank you for listening in. I'll now give you more detailed information on our financial performance in 2017. Please note that all figures quoted are in Swiss francs unless I state otherwise. Let me start with an overview of our P&L figures on page seven of the investors presentation. Gross written premiums, fees, and deposits increased by 6% in local currency to CHF 18.6 billion.
This growth was driven by our French life business and our international market unit. Fee and commission income increased by 8% in local currency to CHF 1.5 billion due to strong contributions from our own and third-party products and services, asset managers, as well as our own IFAs. The net investment result of the insurance portfolio for own risk decreased to CHF 3.8 billion as a result of substantially lower net capital gains, including higher FX hedging costs.
Net insurance benefits and claims decreased to CHF 13.2 billion, mainly due to Switzerland. Insurance benefits include further reserve strengthening of almost CHF 0.3 billion in Switzerland. This, amongst other factors, led to a lower average technical interest rate that preserves our interest rate margin. Policyholder participation decreased to CHF 949 million, mainly due to France and Switzerland. In 2016, deferred policyholder participation was exceptionally high in France but was fully offset by a decrease in net insurance benefits and claims.
Operating expenses were up by 3% to CHF 2.8 billion. Both asset managers business growth and higher commission expenses contributed to this. Profit from operations increased to CHF 1.5 billion. The major driver of this increase was the substantially improved fee result. Borrowing costs decreased to CHF 156 million. Let me remind you that the 2016 number was exceptionally high as we had an overlapping effect from our hybrid debt transactions.
In November 2017, we informed you about an extraordinary negative tax impact of around EUR 14 million in France. Resulting from a reclaimable tax amount on dividends paid and a much higher exceptional tax charge for large companies, which was introduced by the French government in order to comply with the Maastricht criteria. This was almost fully compensated by exceptional tax benefits in France and Germany. Overall, our income tax expense increased in line with our profit to CHF 308 million. This corresponds to an effective tax rate of 23%, which is in line with our expected tax rate. Finally, our net profit was up by 9% to CHF 1,013 million. Please note that we currently have 34.22 million of shares outstanding. This is the new amount of Swiss Life Holding shares after the conversion of the CHF 500 million convertible bonds to equity in 2017.
Slide eight shows the one-offs in our profit from operations. On the left-hand side, you can see the structuring charges and the currency translation effect in 2016 to obtain a comparable basis. On the right-hand side, we adjusted the 2017 profit from operations for restructuring charges of CHF 18 million. This was fully compensated by a positive one-off as a result of the release of the policyholder terminal dividend reserve into the ZZR in Germany. Adjusted for these one-offs, the profit from operations increased by 5% to CHF 1.5 billion.
Moving now to the segment results. Let me start with Switzerland on slide nine. Premiums were down by 6% to CHF 9.3 billion. We continued to focus on profitability and capital efficiency. The overall market decreased by 4%. In individual Life, premiums declined by 1% while the market was down by 2%. Single premiums decreased by 6%. Periodic premiums grew by 1%.
Premiums in Group Life were down by 7%, while the market was down by 4%. Single premiums here declined by 11% due to lower new business for full insurance solutions, while periodic premiums remained stable. The share of semi-autonomous and risk solutions in our new business production increased to 36% compared to 26% in 2016. Overall, assets under management in our investment foundation grew to CHF 7.5 billion, compared to CHF 6.3 billion at the year-end 2016. Fee and commission income was down by 1% to CHF 230 million. Revenues increased in our pension consulting business with investment solutions for private clients and real estate brokerage. This could not compensate for the lower contribution from non-life products sold for our partners. On a standalone basis, before intercompany eliminations, Swiss Life Select reported stable revenue. Operating expenses decreased by 1% to CHF 397 million.
We continued to focus on fixed cost management and decreased external IT expenses as well as marketing and advertising costs. The segment result improved by 2% to CHF 829 million. All profit sources, except the risk result, contributed to this. The cost result increased due to higher cost premiums and further efficiency gains. The savings result improved as the lower net investment income was more than offset by lower guaranteed interest expenses and a decreased policyholder participation. The fee result increased by 17% to CHF 14 million, with a higher contribution from our own IFA, due to an improved gross margin as well as from our pension consulting business. The risk result declined slightly by 1% to CHF 251 million in both Group Life and Individual Life. In Group Life, the growth in our semi-autonomous business did not fully compensate for the decrease in the full insurance business.
The value of new business decreased slightly by 4% to CHF 148 million. Our active new business steering across all lines of business led to a further improved business mix, and consequently, the margin increased substantially from 2.3% to 3%, while the focus on capital efficiency led to lower volumes in Group Life. In Individual Life, the successful launch of new unit-linked products, repricings, and product discontinuations led to higher volumes at increased margins. Turning now to France. Please note that for the insurance segments France, Germany, and International, all figures quoted are in euros. In France, premiums increased by 15% to EUR 4.8 billion in a market that was flat. In our Life business, premiums were up by 25%.
We benefited from our strong positioning in the high net worth individual and affluent client segments, our attractive unit-linked product offering, as well as the high quality of our distribution network. The overall market for both traditional and bank insurers was down by 2%, as many life insurers and banks stopped selling euro fund products. The unit-linked share in our life premiums increased to 52%, which is again substantially above the market average of 28%. Net inflows grew by 43% to EUR 1.5 billion, with a unit-linked share of 88%. Total market net inflows amounted to EUR 7.2 billion. Our market share in terms of net inflows was 21%. Again, substantially higher than our market share in terms of premiums. In health and protection, premiums increased by 1%, while the market was up by 5%. Growth in our individual protection business was 6%.
Our individual health business was down by 3% due to the ANI Health reform. Although, with a lower lapse rate than expected. We partly compensated for this decline through a shift to group health and protection contracts, which grew by 4%. Our P&C premiums increased by 1% in a market that was up by 2%. Fee and commission income increased by 23% to EUR 272 million as a result of higher unit-linked and banking fees due to strong net inflows and the favorable market environment. Operating expenses remained stable at EUR 298 million. We saw further efficiency gains and strict cost discipline on recurring costs, despite strong business growth and investments in digitalization. The segment result was up by 5% to EUR 235 million, with a positive contribution primarily from the fee and savings result. The savings result benefited from a higher health and non-life financial result.
The cost result decreased due to the strong new business production. The fee result was up by 55% to EUR 60 million, primarily due to a higher contribution from the unit-linked and banking business. The risk result increased by 1% to EUR 91 million, supported by a higher risk result in Life that was partly offset by a lower contribution from health and non-life due to increased loss ratios. Health and non-life loss ratios returned to a more normal level. In 2016, they were exceptionally low. The value of new business increased by 29% to EUR 114 million. The volumes in our life business increased substantially, outperforming, as mentioned, the French Life market and offsetting the lower volumes in health and protection. Strong share of unit-linked products and improved capital market environment increased the margin to 2.6%. Moving now on to Germany on slide 11.
Premiums here were stable at EUR 1.2 billion, in line with the market that was flat. Higher premiums with disability and modern traditional products offset the decline in pure traditional business. Fee and commission income increased by 4% to EUR 359 million due to a positive contribution from our own IFAs and higher policy fees. Our own IFAs grew their revenues by 4% on a standalone basis.
The number of financial advisors increased by 8%. Operating expenses were flat at EUR 197 million. Lower expenses were offset by increased staff costs related to the strong new business growth. The segment result increased by 19% to EUR 137 million, predominantly due to the already mentioned one-off from the release of the policyholder terminal dividend reserve into the ZZR. The cost result improved due to higher cost premiums. The savings result adjusted for the one-off declines due to the lower net investment income.
The fee result was up by 1% to EUR 57 million. The higher fee income was almost fully offset by a higher commission expense ratio. The risk result was stable at EUR 28 million, as the rising disability result was offset by a lower mortality result in the traditional businesses. This is due to the fact that in 2016, a significant number of traditional policies matured. Those were sold in 2004 prior to the termination of the tax privilege.
The value of new business increased by 37% to EUR 38 million. This was due to higher volumes and the continued shift to modern traditional and risk products. Moreover, lowered guarantees in the products and an improved capital market environment further contributed to the margin increase to 3.1%. Turning now to the international segment. Premiums were up by 53% to EUR 2.4 billion, mainly due to higher single premiums with private clients.
Please note that this significant increase is also due to a basis effect given a rather weak, difficult financial year 2016. Assets under control with private clients increased by 5% to EUR 17.5 billion as new deposits and the asset performance outweighed surrenders. Fee and commission income was up by 3% to EUR 202 million.
Commission income from our own IFAs increased by 3%, despite an adverse currency effect at Chase de Vere. Net earned policy fees increased by 2%. Operating expenses were stable at EUR 91 million. The segment result increased by 12% to EUR 46 million, primarily due to the positive development of the fee result. The savings result benefited from a higher net investment income and the cost result from slightly higher cost premiums. The fee result grew by 5% to EUR 32 million, driven by a higher gross margin with our own IFAs. The risk results was stable at EUR 6 million.
The value of the new business improved by 27% to EUR 22 million as a result of the increased new business production with private clients. The new business margin decreased from 1.2% to 1% in the context of the opening of a new channel and a lower contribution from the risk business. Let's move to our asset management segment, which reports in Swiss francs. Asset management income was up by 11% to CHF 689 million, primarily due to our third-party asset management, TPAM, with strong net new assets and higher net income from real estate project development. In our PAM business that manages our insurance assets, income growth is the result of increased real estate assets and the related property and portfolio management fees.
Non-recurring income, meaning mainly transaction fees and net income from real estate project development, accounted for 22% of total commission and other net income, up from 19% in the previous year. Operating expenses increased by 11% to CHF 353 million due to business growth and higher real estate assets in both PAM and TPAM. The segment result increased by 6% to CHF 258 million. PAM contributed CHF 182 million, up 5%. TPAM reported an increase of its segment result of 8% to CHF 76 million. Operating margin, however, has decreased. We had a higher cost income ratio due to current investments in future growth and our growing labor-intensive real estate business. Net new assets in our TPAM business amounted to CHF 7.1 billion. We saw strong inflows in both Switzerland and France, mainly in fixed income, real estate, and balanced mandates that outweighed money market outflows.
Excluding money market outflows, we generated a net new asset result of CHF 7.4 billion in 2017, up from CHF 6.2 billion in the previous year. We are pleased with our net new inflows in Q4 that amounted to CHF 1.2 billion excluding money market funds. Overall, assets under management in our TPAM business now amount to CHF 61.4 billion. Please refer to page 54 in the appendix of the investors booklet for further details on TPAM's net new assets and assets under management. Total assets under management were up by 10% to CHF 223.6 billion, mainly due to dimensions, net inflows in TPAM, and supported by the overall positive asset performance and the favorable FX translation effect. Let's move back to the group and have a look at our operating expenses on slide 14 of the presentation.
Our overall cost base increased by 3% to CHF 2.8 billion due to the growth of asset managers and higher commission expenses. Operating expenses adjusted for restructuring charges and scope changes increased by 2% to CHF 1.5 billion. We are pleased with the expense development in our insurance segments that reported stable operating expenses of EUR 1.1 billion. Turning now to the investment result on slide 15. Supported by our strategic asset allocation with our long asset durations, we were again able to achieve a good investment result. Our direct investment income was almost stable at CHF 4.3 billion, with a small decrease of CHF 22 million. Our direct investment yield decreased from 3% to 2.8%, mainly due to the higher asset base. The net investment result decreased to CHF 3.8 billion, which led to a net investment yield of 2.5%.
This is 78 basis points below the prior year level, given lower realized gains, negative effects from our equity hedges, higher FX hedging costs, and increased average assets. Please note that the negative effects from our equity hedging activities need to be seen in combination with substantially higher unrealized gains on our equity investments that do not flow through the income statement and are therefore not visible in the net investment result. These unrealized gains amounted to CHF 1.9 billion compared to CHF 1 billion in 2016. Our FX hedging costs increased by CHF 84 million to CHF 632 million. Our total investment result, including changes in unrealized gains and losses on investments, decreased to 3.1%, mainly due to slightly higher interest rates. Slide 16 shows the structure of our investment portfolio. The share of bonds decreased to 61.6% as a result of the increasing overall asset base.
The absolute amount of bonds in our investment portfolio was basically unchanged. The share of real estate increased to 18%. We saw real estate revaluations of CHF 0.7 billion, further net acquisitions of CHF 1.6 billion, as well as a positive FX translation effect. Real estate continues to be a particularly capital-efficient asset class under our solvency regime. Moreover, investment risk premium on real estate continues to be very attractive. We increased our gross equity quota to 6.7% in order to benefit from attractive dividend yields. Our net equity exposure was 3.1%, one percentage point up year on year. We kept our duration gap below one, and our foreign currency exposure on the insurance portfolio continues to be hedged. Let's have a look at our insurance reserves on slide 17.
Our insurance reserves, excluding policyholder participation liabilities, were up by 4% in local currency to CHF 158.6 billion due to net inflows of CHF 2.9 billion, accrued interest, and market movement. In Switzerland, insurance reserves grew by 2%, while they were up by 6% in local currency in our French business. Our German and international businesses reported increases in local currency of 1% and 7% respectively. Turning now to our shareholders' equity on slide 18. Shareholders' equity increased by 13% to CHF 15.5 billion.
The main positive drivers were the net profit attributable to shareholders, the conversion into equity of the convertible bond, further unrealized gains on our equity portfolio, as well as a positive currency translation effect. Let me give you an update on the progress of our Swiss Life 2018 program. As Patrick has already mentioned, we are well on track to achieve or even exceed our Swiss Life 2018 targets.
Let's first have a look at the development of our sources of profit on slide 20. Our savings result was strong at CHF 817 million due to our disciplined asset and liability management and the successful protection of our interest rate margin. Increased contributions came from Switzerland, France, and International, more than offsetting the decline in Germany. The risk result marginally decreased to CHF 389 million, mainly due to Switzerland. However, we remain in the upper end of the announced target range of CHF 350 million-CHF 400 million. We are particularly pleased with the development of the fee result that increased by 11% to CHF 442 million. We have reached the upper end of our Swiss Life 2018 target range one year in advance. Major contributions came from France and asset management. The cost result also developed favorably.
Our next chart, 21, shows how we continue to benefit from our disciplined asset and liabilities management. The dark red line demonstrates that our long asset duration leads to a resilient direct yield despite the still low interest rates. Only about 3%-4% of our bonds on average need to be reinvested every year. Our reinvestment return in 2017 was 2.3%. Moving on to the average technical interest rate. In 2017, we further strengthened the technical reserves, which led to a decrease of the average technical interest rate of three basis points. In addition, the shift to a more favorable business mix led to a further reduction of three basis points, while the appreciation of the euro had an impact of two basis points on the average technical rate.
In autumn 2017, the Swiss Federal Council announced that it would keep the minimum interest rate for the mandatory group life business unchanged at 1% as of the 1st of January 2018. At the same time, we announced that we would keep our guaranteed rate for the non-mandatory group life businesses unchanged at 0.25%. Overall, our average technical interest rate for the Swiss Life group decreased by four basis points to 1.37% as of the 1st of January 2018. This corresponds to a blended technical interest rate of 1.03% for our group life and individual life business in Switzerland. Slide 23 shows that we were able to preserve our interest rate margin in this low interest rate environment. This is the result of our continued disciplined asset and liability management.
Please note that the initially mentioned reserve strengthening will have a positive effect on our 2018 technical guarantees and is thus not yet reflected in your interest rate margin of 2017. Let me now briefly comment on the development of the fees and commission income. Commission income at Swiss Life Asset Managers was up by 8% in local currency. Our owned IFAs increased their commission income by 4% in local currency, supported by both higher productivity and an increased number of advisors. The business with owned and third-party products and services increased substantially by 12% in local currency, primarily due to higher banking and unit-linked fees in France. Overall, our fee and commission income increased by 8% in local currency to CHF 1.5 billion. Turning to the value of new business and the new business margin on slide 25.
Our ongoing margin management efforts and the product shift have paid off. Overall, our valued new business increased strongly to CHF 351 million from CHF 296 million in the prior year period. This is mainly due to our active new business steering with a continued focus on capital efficiency and our pricing discipline. As a result, the new business mix was improved and the margin increased, supported by the slightly higher interest rates. We are very pleased with our new business margin of 2.5%, which is considerably above our ambition levels of 1.5%. Let me now move on to our next financial thrust being operational efficiency. At the end of 2016, we had already implemented CHF 86 million of our Swiss Life 2018 cost-saving initiatives. All units contributed to this. Our next slide shows our efficiency ratios.
At group level, we improved our efficiency ratio by another two basis points to 56 basis points. All insurance segments, with the exception of international, contributed to this positive development. Turning to the next financial thrust, capital, cash and dividends. Our total debt outstanding amounts to CHF 3.6 billion. Our total hybrid debt decreased from CHF 3.6 billion to CHF 3.2 billion as we redeemed our EUR 590 million hybrid bond in April 2017.
Our share of equity within our capital structure has increased to 77%, following, amongst others, the conversion to equity of our convertible bond at the end of 2017. The capital structure and maturity profile continue to be well-balanced with a diversified denomination of debt in Swiss franc and euro. Please note that we have a call date for our Swiss franc-denominated CHF 300 million hybrid bond in August 2018. We plan to refinance this bond until then.
Let me now move on to cash remittance. In 2017, we remitted CHF 625 million of cash to the holding company. This corresponds to 68% of the 2016 net profit. 57% of the cash came from our life businesses and 43% from asset management, our owned IFAs and the health and P&C business. For the 2017 financial year, the board of directors will propose to the AGM an increase of the dividend to CHF 13.5, up from CHF 11 in the previous year. This corresponds to a payout ratio of 46%, which is close to the upper end of our target range of 30%-50%. The dividend will be paid in the form of a withholding tax-free distribution from the capital contribution reserve.
With respect to the Swiss Solvency Test, we expect the ratio to be above 170% as of the 1st of January 2018, based on our internal model-approved risk conditions. Please note that this estimate already includes the negative effect of the decrease of the ultimate forward rate from 2.7%-2.55%. As of today, the ratio has slightly improved, mainly due to the higher interest rates and further credit spread tightening. We will communicate the results of our full calculation in our financial condition report that will be published for the first time at the end of April 2018. Our Solvency II ratio was above 200% as of the 1st of January 2018. Based on the standard model, excluding any transitional measures. Let me sum up. We have again reported a strong set of results in a challenging environment.
Two years into our Swiss Life 2018 program, we are well on track to achieve or exceed our announced financial targets. We have again substantially improved the quality of our earnings by an increased fee result. We have successfully defended our risk result. We are very pleased with our value of new business, although the interest rate environment remains challenging. We have continued our strict cost discipline and have already implemented about 86% of the planned cost savings. Moreover, we have kept the expense base in our insurance units stable. We have increased our cash remittance to the holding company through disciplined capital management. Finally, our return on equity was 9.3%, and thus, within our target range. We will continue throughout 2018 with our disciplined execution of the Swiss Life 2018 program. We will remain on our successful path to further enhance the resilience of our business model.
This should enable us to deliver sustainable earnings and an attractive payout to our shareholders. Please note that Swiss Life will be hosting an Investor Day on the 29th of November 2018. We will then disclose our new strategic program and our new financial targets. I'm very much looking forward to this. Thank you, and back to you, Patrick.
Thank you, Thomas. Dear analysts and investors, the ball is now in your court. Who has the first question?
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only hands up to asking a question. Anyone who has a question may press star and one at this time. The first question is from Peter Eliot, Kepler Cheuvreux. Please go ahead.
Thank you very much. I have three questions, please. The first one is, I guess, on flows. If I look at 2017, I think, I'd say the French business was particularly impressive as was the third-party asset under management across the whole year. I was just wondering if you could comment on perhaps the sustainability that you see of those, and maybe also comment on how sort of 2018 has started in that respect. Secondly, the dividend, I'm sure, will be a topic for the Investor Day. I was just wondering if you could just sort of remind us what the limiting constraints were in your thinking. Obviously, this year you were constrained by your policy to an extent. If you look beyond that, I'm just wondering if you can give any comments on what the limiting constraints are.
Thirdly, I noticed the announcement from ERGO last week that it was sort of partnering with IBM to act as an outsourcer in Germany. I know you've made some good cost savings there. I was just wondering if you could just update us on your optionality or any sort of strategic thinking there, or developments that you see in the German market overall. Thank you very much.
Okay. Thanks. There's some static on the line now. Okay, that's better. Let me start with France. Yes, we've had a very good set of numbers here. We do expect a sustainability in the savings fee and risk result. Of course, the fee result depends on the development of financial markets. On the cost result, together with the continuation of strong sales in Life, we expect a further slight deterioration of the cost result. For asset management, we've had a good start into the year, and of course, we have the ambition to further grow here and to see an improvement in the cost-income ratio. Implicitly, yes, we do expect a further good growth, good quality growth, going forward. Yes, those results are sustainable.
On the dividend question, let me remind you that when we look at our payout ratio, we have to consider that about 20% of our IFRS earnings are non-cash. We expect to keep about 15% at the operational company level for growth, in certain cases, a little bit of more buffering. We will keep another around 15% at the holding company for financial flexibility. We have mentioned that we are looking also into some, maybe smaller bolt-on acquisitions, we want to have some flexibility at the holding company. This then leads us to the payout ratio of about 50%. We will, again, reconsider the entire payout ratio for our Investor Day in November. We'll give more details on our future payout policy then. On the expenses, I can say that, of course, we have again demonstrated that we can keep expenses under control.
Actually, all our insurance market units have either flat or even negative expense growth, which was a very good year from an expense discipline point of view. Of course, we are also looking from time to time into options to outsource our operations in certain areas to somebody who may bring a little bit more scale to it. Having said that, so far, we have not seen any value added for us doing that. Therefore, there's nothing to communicate, and I don't want to comment on some moves of our competitors.
Sure. No, of course. Thanks very much. Could I just quickly come back on France? Because it was mainly some of the market share gains rather than the segment results on France. It sounds as though you thought that's sustainable, but I'm not sure if there's anything you can add there.
Yeah, sure. That was great. What was it? The 82% of market share of net inflows. Of course, that's not what I expect going forward. Of course, the share of net business production in terms of unit-linked, yes, I very much hope to see that again this year, which was in the mid-60s.
The start was, new production was pretty good.
Mm-hmm. Yeah.
few weeks of this year.
In the life business.
In the life business. Yeah.
In the French life business.
Yep.
Great. Thank you very much.
Next question is from Jonny Urwin from UBS. Please go ahead.
Hi. Good morning. Thanks for taking my questions. Firstly, just digging into the sources of profit a bit more. I'd just like to find out, around the risk result, you say it's sustainable, I guess it's tracking a little better than the plan, CHF 350-CHF 400. I think you were guiding towards the lower end, it's just under CHF 390. Are conditions there just a bit better than you'd expected? I know we were expecting a bit more competition. On the savings margin, how should we think about that developing? Again, you say it's sustainable, I guess we've got slightly higher interest rates, which eases the pressure, which should help a little bit. On the fee result, there were some negatives in there in Switzerland and Germany. Whereas France was obviously very strong.
I guess, the 11% growth in the fee result, is that underlying, do you think? Or are there one-offs in there? Secondly, on M&A, again, you've stated small bolt-ons, there's no change there. I guess, do you feel the need to diversify in the asset management unit a little bit away from real estate? I guess if we do get rising interest rates, that's obviously helpful across the book, but to the extent it could lead to volatility in Swiss real estate markets, do you think you need to diversify that asset management unit a little bit? Finally, could you just update us on Swiss real estate trends? Thank you.
Okay. Maybe the remarks I made before on the sustainability of the profit by source, that was on France. Overall, on the savings results, if we look up the overall group, which is largely driven by Switzerland. Here, of course, we expect further pressure on the savings results simply because reinvestment rates still are lower than running rates. Thomas will give you some more insight into the different profit sources here.
On the savings result, what we can say also is that in 2017, we had higher investment income in areas with no legal quota. Therefore, this also supported our savings result. Because if you have higher investment income in areas with no legal quota, you don't have to share with the policyholder, and you see this also when you look at the policyholder participation benefits that have substantially declined. We also had an effect there. Having said that, we think that the savings result will stay under pressure, as Patrick has mentioned. Again, we don't just sit here and wait. We have also invested in more real estate. Real estate, again, will support our direct yields substantially. We expect that there are also some positive factors that over time will support the savings result. On the fee result, there were not really one-offs in there.
In the fee result, there was a catch-up a little bit in the French banking business, where we had a pretty low result in 2016, and there was a rebound of the banking business in France, as it has helped. On the other hand, as you have seen, all the three areas have developed favorably. On the one hand, asset management, on the other hand, obviously also the unit-linked business that contribute to the fee result, and then our own IFAs, which are growing. Therefore, I expect the fee result to be sustainable. On the cost result, I see there that we will also have a sustainable contribution from this area.
Overall, I think the profit by source development will go in the right direction, meaning that over time, the share of the savings result will be lower, and the share of the fee result will be, over time, substantially higher than what we have seen in 2016 and 2017.
Okay, moving on to M&A. Here, as Thomas has mentioned, in the past couple of years, and that will continue to be our policy, we focused on bolt-on acquisitions mainly in the area of fees. What is that? That can either be asset management, for example, CORPUS SIREO, which we acquired more than three years ago, as an example, real estate asset manager, or also in our distribution business. We had a very small acquisition in the U.K., in international, as an IFA. That really continues to be our main focus in terms of M&A strategy. Now, you also asked about TPAM, and if you turn to page 54, you'll see the composition of our assets under management.
There you see we have a bit more than a third in real estate and a third in bonds and money markets, another third in the rest. Mainly balanced mandate and equity. Of course, you're right. As we've mentioned before, the main source of profit is real estate. Of course, as in every year, as Thomas mentioned in his speech, there are, of course, some transaction fees that also drive profitability. We have about a bit more than 20% in terms of non-recurring income. As I always say, whilst being the real estate market, this non-recurring income, of course, is also recurring because inherently you always have transactions. If we look at our growth, actually, net new assets were at 31% real estate, so were below the assets under management. We're getting a bit more diversification here going forward.
The trends of real estate. Last year, you see that we've had about 2.5% in increase in value over the group. For Switzerland, it was a little bit less, as far as I recall, but we have some very good news on the vacancy rates. For the group, it went down from 5.9% to 5.2%, which is, of course, driven by Switzerland, where we've had a decrease of 5.2% to 4.3%. That is quite surprising because in the market, or at least in the newspapers, you read something different, and the even more surprising thing is that it's driven by Büro, by office space. Which is very good news for our portfolio here in Switzerland. We still see very strong demand from investors.
The Swiss real estate market, despite the spike in interest rates, is still very well supported, and I expect that to continue simply because the risk premia on real estate, so the difference between yields and real estate minus the risk-free long-dated bonds, is still very close to all-time highs.
Thank you very much.
Next question is from Daniel Bischof, Baader Helvea. Please go ahead.
Yes, good morning. Two strategic questions. The first is, there is quite a bit of activity in the runoff market, and I was wondering how you look at this. Could this be a strategic option, or is this completely out of question for you? The second one for Patrick, I think in a recent interview, you mentioned that Swiss Life was deciding against the P&C insurance market entry. Could you just elaborate a bit on the main considerations here and what's the rationale for the decision?
Well, of course. Let's start with the second question. We were attracted by the margins in that business. Switzerland has very interesting non-life margins and has had so for a very long time. If you look at how long it really takes to enter this market, that is a very, very long time as well. Of course, market entry can be done quite quickly, but to really have a substantial profit contribution here, you have to incur quite a lot of costs. Of course, that might change once we're further advanced in the digitalization age. Our last view on this, just didn't make those investments worthwhile in Switzerland. For the runoff market in Germany, of course, we've been looking at that for a very long time as well. As you know, there are several people who are interested.
We rule this out with the information that we have now and the experiences from others. I'll never rule it out for all eternity. With our present focus now on risk business, where we have very attractive margins, and the size of our portfolio, it wouldn't be economically sensible to do so.
Okay. Thank you.
Next question is from Michael Huttner, J.P. Morgan. Please go ahead.
Fantastic. Thank you so much, and well done for lovely dividend. At the nine months, I seem to remember, maybe I am wrong, that you talked about being slightly bothered by the dilution from the convertible. Can you update us on your thoughts here? There is no mention of it today. On the hedging costs, you gave some figures and I just wondered if you could repeat them because I completely missed them. I guess you mentioned both FX hedging costs and hedging costs on equities. I do not know if the U.S. fine or whatever is final or settled. I cannot remember the status of that, if you could update us. When does this lovely new business value become cash or earnings? Finally, what is the reinvestment yield? Thank you.
I will take the first three questions and then Thomas will give you the answer to the most difficult question.
Geez.
When will VNB be in cash? The third one was on DOJ. No, unfortunately, we do not have any further information. We are at very early stages in the dialogue with the DOJ. We are prepared for this to take a long time. The process is being led by the DOJ, so there is no new information here. On hedging costs, here, Thomas mentioned in his speech that they are CHF 84 million higher with respect to FX hedging costs. You find this in the booklet on page, let me see. I think on page 38. Here, it is in the CHF 632 million.
Oh, yeah. Mm-hmm.
You see it in the fine print.
You also asked about the hedging costs for the equity portfolio. We don't disclose that. You see that we've had a negative impact on the net investment result from equity. Implicitly, those hedging costs are quite substantial. As Thomas mentioned, the unrealized gains on the equity portfolio rose from CHF 1.0 billion to CHF 1.9 billion over the course of 2017. The first question was on the dilution of the convertible, here I'll just repeat what Thomas said last time. Stay tuned for our Investor Day in November.
Now the difficult question about the VNB turning into cash. You know, we are also selling a lot of very long-term policies. For example, our risk business in Germany, it takes quite some time to earn out on these businesses. It may take a while. On the other hand, we are currently generating substantial cash out of policies that we have sold years ago. It is difficult to say how this currently produced VNB will turn into cash in the future. At least what we see is that the VNB has substantially improved. We have achieved CHF 351 million, which is well ahead of our targets that we gave at the Investor Day in 2015, where there we have announced that we will generate CHF 750 million over three years. We are well ahead of this target. Therefore, this of course-
Will lead to higher cash generation, a lot of it, to be very honest, will probably be the next managers' generation's cash flow.
Of the investment side?
That was, as Thomas mentioned, 2.3% last year.
I beg your pardon. That was the figure. Yeah, I missed it. Okay, lovely. Thank you very much.
Next question is from Andrew Sinclair, Bank of America Merrill Lynch. Please go ahead.
Thanks. Good morning, everyone. Three questions from me, if that's okay. Firstly, you mentioned that Swiss Life Asset Managers' expense base was a bit higher this year due to investments in future growth. I just wondered if you could give us any guidance on expense growth in 2018 and beyond. Secondly, your SST ratio continues to build Solvency II. Very strong as well. What do you think is the appropriate level for the SST ratio for Swiss Life? Thirdly, just quickly on the capital contribution reserve, just wondered how much is left in that to be withholding tax-free for dividends. Thanks.
For the reserve, that'll be enough to pay this year's dividends and a part of next year's. On the SST, we like the ratio we now have, but it is a bit more volatile than it used to be. We're still in talks with FINMA around the implementation of the standard model, just the finalization thereof. We will give you more of an update on this subject again on the Investor Day. The expense ratio in Asset Managers here, we expect that to be lower this year and next year than it was last year. Of course, there were some special projects. For example, we closed our office in Lugano. There were some restructuring costs involved there. Of course, also for some real estate transactions.
We had looked at some deals, which in the end didn't materialize, and we expect to come back to some normal levels, as I mentioned, this year. I hope that answers your question. If not, please specify.
Yeah. No, that's very good. Appreciate it. Thanks.
Next question is from Guilhem Horvath from Exane. Please go ahead.
Yes, good morning. Thanks for taking my questions. I have a quick question on the new business mix, because it looks like if you compare with H1 2017, the proportion of traditional business has slightly picked up. I am a bit picky here, but it has come to 7% versus 6% at H1. Also, the contribution to new business margin from growth, business mix pricing, et cetera, is still very strong. I would like to have a better view on where you are planning to go in terms of new business value breakdown going forward, and what should we expect in terms of contribution from business mix evolution going forward? This is my first question. Second question is, coming back to the discussion with FINMA.
It looks like some of your competitors are starting to be a little bit more positive on what would be the outcome from these discussions regarding the standard model for group life. Even if you are going to update us on Investor Day in November, do you share this view that actually the implementation of the group life standard model is not going to be a negative for your capital consumption? If so, what would happen to the cash buffer that you built at holding? Do you still need to keep that going forward? Thank you.
On the new business mix, what I can say is that we are focusing on capital efficiency and on the value of new business generation. Of course, the business mix also depends on the market environment, on what is going on in the market. Therefore, we do not have a fixed idea where we will generate VNB in the future. Of course, we will keep to our direction that will lead us away from pure traditional products. We are already now at a very low level. Considering that we will stay in the Swiss group life business, which is a part of it, at least, the one that is full insurance solution is considered traditional business. I do not think that we will go below, say, a 3%-4% share of the traditional business in the total new business production.
Having said that, there may well be an interest rate environment where guarantees that you can price correctly may become, again, a very attractive value proposition. Therefore, you always have to adjust your product mix to what's going on in the marketplace. On the FINMA discussion of the standard model.
FINMA has promised that they will calibrate the new group life standard model, in a way that it should not lead to higher capital requirements. So far, I do not have any reason to have doubts that they will keep their promise. Therefore, yes, the relationship with FINMA, in the area of the model developing, of model calibration, has improved. Having said that, there is still a discussion about a new standard model also for the individual life business. This development has started as we speak, and we expect a field test of this individual life business standard model somewhere in spring, maybe summer this year. There is still a little bit of an unknown at this end.
Overall, when I look at our solvency ratio, when I look at the 170%-plus solvency ratio, despite the fact that the ultimate forward rate has been lowered, I think we are in a very good position. The cash to holding, your question, we will give guidance again at the Investor Day.
Maybe I was just asking myself, where did he get the 6%, traditional, versus the 7% we now have? Of course, you got it from the half year figures, you shouldn't overestimate those half year figures, simply because there is some seasonality in there. I think the more relevant comparison is from the financial year 2016 to 2017, there we had a decrease from 9% to 6%. Of course, the further trajectory depends on the level of interest rates mainly. If we are where we are now, we expect this to be very low. Outside of Swiss group life, we now only have 3%, in traditional business. That mainly is still a little bit, in Germany from some top-ups and very little bit also linked to some of our risk business we have in our MetallRente product in Germany. Okay, perfect.
Thank you, Urs.
Next question from Ralph Hebgen, KBW. Please go ahead.
Yes. Hi, guys. Ralph Hepken from KBW. Just two things. First, on slide 22, I noticed that the annual strengthening of reserves, which you've done, is quite low relative to what you've done in the past. My question is here, why is that? Do you now see a level of average in-force guarantee which you are happy with? Do you not think that further reserve strengthening to the tune of what you've done in the past is necessary? Or was the lower level of reserve strengthening informed by the fact that this year you had a negative contribution from realized gains rather than the sizable positive contribution in 2016? That is that question. I am sorry. I will stop. I will let you answer first.
Okay, sure. I'd say it is the first, but Thomas can give you maybe a little bit more details on that.
It's a little bit both, but it's mainly the first reason that we have some relaxing on the interest rate front, on the one hand. You also have to see that the reserve strengthening is determined also by your expected return on your assets. It's not just the interest rate environment that is driving this, it's a little bit more complicated. If, for example, if we would have extraordinary realized gains as we had in 2012 when we exited the European govies, for example. We would put this extraordinary realized gains into reserves because we would, of course, by realizing a lot of gains, we would lower the expected return on the asset side, and therefore we would put this part into the reserve strengthening. It's a little bit more complicated. Overall, your rationale is right.
Okay. That's lovely. Thank you. Actually leads me on to the second question I was going to ask anyway, which is, you've alluded to it, Thomas, already. You said that self-investment income, which you generated this year, was generated in areas where you have no legal quota.
Yeah.
Obviously, that gives you still the option to take some of that and allocate it to policyholders or not. If my maths is right, and may well not be, the effective policyholder share this year was sort of well below-
Yeah.
Let's say below 80%, and it used to be above 80%. My question is really, how much discretion do you have there? What are the constraints? Is your individual policy product, is that still competitive in Switzerland? Do you think that next year, if the need arose through, again, realized capital loss. Do you still have flexibility to allow that effective policyholder share to go even further down on these levels?
Well, you rightly say that the, let's say, largest driver here is individual life in Switzerland, but please don't forget, it is also in our French business that we have that flexibility. Yes, we do continue to have flexibility here. For the individual life in Switzerland, and our product is competitive. Saying that, you also saw the premium development in Switzerland, which was flat in individual life. The main determinant here, for underwriting this business is, of course, as always, next to our VNB margins are capital efficiency calculations with that respect. To make it short, yes, we continue to have flexibility in that space.
That is lovely. Thank you very much.
Next question is from Stefan Schürmann, Bank Vontobel. Please go ahead.
Yes, good morning. I have two add-on questions. First one to come back to the fee result. You state that the non-recurring part of fee result is roughly above 20%. Maybe just give a bit more color on the basically sources of that and how going forward we should look at this. The second one on German reserving ZZR. Could you maybe just give us a hint how much you basically added to these reserves over the last couple of years, maybe since 2012?
Okay. For Germany, the ZZR is, I believe, now at CHF 1.25 billion or between CHF 1.2 billion and CHF 1.3 billion. That's what we added over the last couple of years. What Thomas mentioned in his speech, I think the 22% non-recurring fee income, that was only related to asset managers' top line. If you look on page 24, here you see that only one-third of, or a bit more than one, or let's say about 40% comes from asset managers, and the rest is from our IFAs and our own and third-party products. Just to clarify there. There, as far as I recall, the non-recurring contribution to those sources is lower than the 24% that Thomas mentioned for asset managers. The main contribution or the contribution for the non-recurring part are real estate transactions and also real estate project development income.
It's driven by the real estate business.
That's basically the point. Going forward, we don't know your development or real estate transaction book. Could you give us some color, if that's been more or less sustainable the next one, two years or if there's really easy volatility to expect it there?
Well, there is some volatility. As Thomas mentioned in his speech, it went up from 19%-22%, from 16%-17%, and that's a typical range. That's very difficult to predict. We get 20%-25% would be a typical figure for asset managers non-recurring fee income. Saying that, is it really non-recurring? As we are constantly in this business and there are various income sources. There are transaction fees from different funds we run. There are transaction fees that we have from buying and selling. There are development fees from various pipelines we have all over the markets we are in. It's quite well diversified within the real estate space. As you might have seen also, for example, our residential share of real estate for our own book has increased by one percentage point.
We have commercial, we have residential, we have mixed use, office space. We also have some non-recurring income from our real estate administration part. It's very diversified.
Yeah. Okay. No, it's very helpful. Thank you.
Next question is from Anne Risold, Octavian. Please go ahead.
Yeah, good morning, everyone. I just have one quick question on the Swiss business unit. If you could give me from about the roughly CHF 830 million profit from the unit. Do you have a breakdown more on the group life versus individual life contribution? Maybe also the unit link contribution?
Well, historically, the unit-linked business in Switzerland has always been quite weak, let's say, compared to France. That is driven a lot by different incentives around tax breaks and, for example, we have no capital gains tax in Switzerland. You don't get any benefit in terms of capital gains if you have it in unit-linked products. You do have a bit of a tax shield for dividend income or for interest income. Of course, as that Our base is quite conservative. Of course, as now bond income has decreased quite a lot, you don't get a lot of tax advantages. You have a 5% stamp tax when entering these products. Actually, the main driver of our fee results in Switzerland is not the unit-linked business. It's actually our distribution margin.
From our Swiss Life Select franchise, then some of our consultancy businesses, those are the drivers of our fee result in Switzerland. Very much unlike France, where you have a lot of benefits, which you don't have in Switzerland. Those are big differences. If you look at the net profit, we disclose our statutory results for our group life business, which I think was CHF 126 million. You find that somewhere in the slides, I think in the 40s or so. The rest is mainly individual life.
About CHF 700 million would come from your individual life business?
Well, it's a mix of individual life and some of our other businesses we have.
Okay.
One is IFRS, and the other one is statutory. It's on page 37. You see the CHF 126 million. That's the statutory basis. Under IFRS, it would be a little bit higher.
The statutory result is substantially lower as we do not, for example, realize any gains on real estate, et cetera. You cannot take this number and put it in relation to the CHF 800 million.
Thank you.
Next question is from Farquhar Murray, Autonomous. Please go ahead.
Morning, gentlemen. Just two questions, if I may. Firstly, I'm a little surprised the SST ratio seems to have fallen Q-on-Q versus the nine-month IMS, given the convertible conversion, though admittedly, you've got the UFR change coming through, too. I just wondered if you could walk through and perhaps quantify some of the SST moves in the quarter. Finally, just to follow on the answer you gave to Andrew's question. You mentioned the SST is a little bit more volatile than it used to be. What precisely is driving that, and why is it a change? Thanks.
Yes, on the volatility, it's clearly the spreads that is driving volatility. When you look at the movements since the Q3, where we have announced that we were around 175. You had a negative effect from the UFR, I would say around three percentage points. You have the convertible. This gave us about two points uplift. You have some re-risking also to consider. When we, for example, change our asset mix on the balance sheet, this obviously could cost us a few points. I think it's not exact mathematics here.
On the volatility, there was also the change in the market, how the market value margin is treated, which leads to a little bit more volatility as well.
That's correct.
Remember that we now have the same treatment as under Solvency II.
Okay, brilliant. Thanks.
The next question is from René Locher, MainFirst. Please go ahead.
Yes. Good morning, all. I just want to go back to the real estate. Happy to hear your comments on Swiss real estate market. Now in my financial model, I have slightly lowered the rental income driven by the negative headlines in the Swiss press. Now, when I'm looking to the net income on investment property, that's on page 212, the count, it substantially increased from CHF 669 million to CHF 793 million. Well, I guess it can partly be explained by a lower vacancy rate.
Yeah
is the CHF 793, the 2017 number, is this kind of a sustainable level? That's my first question. Perhaps very quickly, just big picture on how do you see rising interest rates? As far as I know, you are more or less matched asset liabilities. I always got the feeling that your interest rate margin could suffer a little bit in an environment when interest rates go up. Perhaps just, again, a big picture. The third question is on slide 29. This is just an assumption I have. I tried to model the slide you showed in 2015 at the Investor Day. I got the feeling that you have still a lot of money at the holding level. Just to make it easy, I take that CHF 1,350 times 34 million shares as a dividend and about CHF 459.
You have
Cash remittent of CHF 625. That means this CHF 166 million is still somewhere in the Swiss Life balance sheet. Thank you.
Let's hope it's still there, yes. I think Thomas will comment on that. Before we come to that, just on the rental income. Here, the main driver is the additional real estate we have on our balance sheet. Thomas mentioned we bought CHF 1.6 billion additional real estate. We also have an effect of CHF 0.5 billion because of the EUR effect. Of course, you have the same effects on the rental income. If the EUR goes up, then of course, measured in CHF, you also have some increase in rental income. There was also a further important effect here, which was that we now fully consolidate some of our real estate funds, which we didn't use to consolidate. That was responsible for adding CHF 0.9 billion in real estate exposure and some additional rental income here.
Yes, of course, that is sustainable. I'd expect it. So the rental income is sustainable or I'd expect it even to go up. Why? Because some of the real estate that we bought, we didn't buy at the 1st of January, but spread throughout the year. Some of the rental income will only come through this year as one example. Then we continue to buy additional real estate, which will help rental income as well. Really the only area where we see lower rental income is in the Swiss residential market, where some of the lowering of interest rates is passed on to our tenants. Most tenants don't get a reduction in rents. Overall, to sum it up, yes, it's sustainable or even expected to increase going forward. We'll see some of the lower vacancy rates coming through as well.
Thomas will now take the tougher question again.
Which is? On the yield, huh? There was a question on the yield, there was a question on the rising interest rates, obviously. On the rising interest rates. Asset managers would, on the one hand, get some pressure, because if interest rates rise, what happens is the value of our bond portfolio would shrink. Therefore, we would generate, at least in our PAM business, less fee income. There is a potential negative effect there. However, there are also some compensating effects. If interest rates rise, obviously, we will generate higher investment income, and we would also generate, in certain areas, higher transaction fees, et cetera. Overall, we don't think that the dynamics would be negative. We actually think overall, the dynamics would be positive at this end.
In the insurance book, if rates rise as we expect them to rise, of course, at some point, we will have higher reinvestment rates, which will counteract. If you see on page 21, you see that we've had a deterioration of our interest rates top line since the end of 2009, from 3.8%-2.8%. That's 1% on our assets. Please bear in mind that 30 basis points of that come from a pure basis effect. We have a decrease of 1% of our direct income over the last, say, nine years, simply because the value of our assets has strongly increased. If rates now rise, of course, you will have that counter effect. You'll have basically a negative base effect, that you'll have some support of the yield.
The higher reinvestment rates will help, and it'll take quite some time to see a reversal of the reserve strengthening that we've done over the last couple of years. Of course, if rates really rise a lot, eventually you'll also see some higher average technical rates. It's very difficult to say going forward what will happen there. Actually, we're very proud of having been able to defend our interest rate margin over the last decade or so. Of course, it would be a huge relief for us and for our business overall if we finally saw now the trend of recent weeks to continue, i.e., to see higher rates.
On the cash at the holding company, we have about CHF 1.7 billion of cash, but about CHF 425 million is senior debt on the balance sheet. Net, it's CHF 1.3 billion.
The holding level?
Yes.
Wow. Never heard about that number. Thank you very much.
As a reminder, if you wish to register for a question, please press star and one on your telephone. We have a follow-up question from Michael Huttner. Please go ahead.
Thank you very much. Thank you. You know, Allianz, in its presentation in November, and I think of the full year results, they kind of confirmed that there's about €500 million they have flowing from maturing back book, which given the shifting business, is not reinvested in new business. Is there a figure like that that you have, which as your traditional book matures, it's releasing capital or to give a feel or I don't know.
Michael, I don't understand your question. Can you rephrase it a little bit for us?
Sure. If I think of the big picture, which is that you have a huge back book of traditional life, which is maturing, and the new business which you're investing in is more capital light, modern, traditional protection, et cetera. That means that as a character, the business changes. You're releasing a lot of capital, which used to be tied up with that old back interest rates, kind of sensitive back book. Allianz gave a figure of EUR 500 million a year from this. Do you have a figure like this?
On the other side, please bear in mind that our traditional business stays on our books. There is also, in terms of the back book, of course, the runoff is very, very slow. You see the crediting, of course, of technical rates and some bonus payments, et cetera.
We know that it takes quite some time. Yes, over time, there will be some capital free up, currently, we do not give any figure on maturing businesses.
Brilliant. Thank you.
That was the last question.
That brings us to the end of our conference. The 2017 figures provide an excellent starting position for us to pursue our development beyond 2018. We will inform you in the market of our new goals at the end of November when we'll host our Investor Day. Thank you for calling in, and I wish you a nice day. Goodbye.
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