Ladies and gentlemen, good morning. Welcome to the Swiss Life Presentation of the Q1 Results twenty seventeen Conference Call and Life Webcast. I'm sorry, 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. After the presentation, there will be a Q and A session.
The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Thomas Booth, Group CFO of Swiss Life. Please go ahead, sir.
Thank you very much. Good morning, ladies and gentlemen. Thank you for dialing in and for your interest in Swiss Life. Today, we are reporting on selected figures for the first three months of 2017. Please note that all figures quoted in this call are in Swiss francs and are unaudited.
Let me start with today's key messages. Afterwards, I'll provide some details on our segments. First, our fee and commission income was up by 5% in local currencies to CHF $340,000,000. Swiss Life Asset Management, the owned IFAs and owned and third party products and services all contributed positively. Second, our premiums in local currencies decreased by 1% to €6,500,000,000 as we continued to focus on profitability and capital efficiency in this low interest rate environment.
Third, Fleet Life Asset Management acquired net new assets of EUR 2,700,000,000.0 in our third party Asset Management. Total assets under management in our TPAM business are now at €52,700,000,000 Fourth, our direct investment income remained almost unchanged at €1,000,000,000 which results in a stable non annualized direct yield of 0.7%. Our net investment yield stood at 0.5% on the nonanalyzed base. Fifth, our SST solvency ratio as filed with FINMA was 161% at 01/01/2017. And finally, our Swiss Life 2018 program is well underway.
We are on track or slightly ahead of most of our targets and therefore, confident to deliver on our 2017 financial results. Let's have a look at more details on the premium and fee income development. As already mentioned, total premium decreased by 1% in local currencies to €6,500,000,000 This decline was intended in Switzerland to protect our profitability in the low or even negative interest rate environment. Overall, we continued to report positive net inflows. Our insurance reserves, excluding policyholder participation liabilities, were at EUR 150,000,000,000.
This is an increase of 2% in local currencies. We continue to focus on capital efficient products. The share of nontraditional products in our new business grew to 93%. Our fee income increased by 5% in local currencies to CHF $340,000,000. Swiss Life Asset Managers grew by 1%, the owned IFAs by 3% and the owned and third party products and services by 14%.
Moving on to our market segments, I will start with Switzerland. Premiums were down by 7% to EUR 4,600,000,000.0, driven by the group Life business. The overall markets decreased by 2%. In Individual Life, premiums increased by 8%, while the market was unchanged. Single premiums increased by 30% due to a strong development of our capital light real estate and funds products.
Periodic premiums grew by 1%. Premiums in Group Life were down by 7% due to lower single premiums. Periodic premiums were flat. The market decreased by 3%. We continued to successfully offer semi autonomous and pure risk solutions.
The share of semi autonomous solutions in our new business production was 18% compared to 8% in the first three months of the prior year. Moreover, assets under management in our investment foundation grew by 7% to CHF 6,800,000,000.0. Fee and commission income in Switzerland was up by 2% to EUR 62,000,000, primarily due to a strong contribution from our real estate brokerage, pension consulting business and our funds business for retail customers. Turning now to France. Premiums increased by 6% in local currency to EUR 1,100,000,000.0 in a market that was down by 4%.
We are pleased with the premium development in our Life business. Here, premiums were up by 8%, while the market declined by 7%. We benefited from our market positioning in the high net worth individual and affluent client segments. This is visible in our higher unit share. Our unit linked share of our Life premiums was particularly high with 49%.
This is substantially above the market average of 27%. In our new business, the unit linked share accounted for a record high of 66%. In Health and Protection, premiums increased by 4%, while the market grew by 2%. Premiums in Individual Protection were up by 3%. Premiums in Group Health and Protection Solutions increased by 12%.
Our P and C premiums were unchanged, while the market grew by 2%. Fee income increased by 19% to EUR 69,000,000 as a result of higher banking fees, primarily due to a more favorable environment as well as a higher unit linked share. Turning now to Germany. Year premiums were up by 2% in local currency to EUR $345,000,000, predominantly due to our group life business and increased volumes with modern traditional pension products. We are pleased that our disability insurance offering meets the demand of our customers.
The market increased by 3%. Our fee income development was flat in local currency at 92,000,000. However, on a stand alone basis, our owned IFAs grew their revenues by 6%. The number of financial advisers increased by 5% year over year. Moving on to International.
Premiums were up by 38% in local currency to EUR493 million as we saw higher single premiums with private clients. Please note that this substantial increase is also the result of a basis effect as last year's first quarter was modest. Assets under control for high net worth individual clients were flat at €17,900,000,000 compared to the year end 2016. Fee income was up by 6% in local currencies to €55,000,000 due to higher policy fees and an increased contribution from our owned IFAs. Let's move on to Swiss Life Asset Management.
In our Asset Management business, commission income was up by 1% in local currency to €133,000,000 The growth was moderate. In contrast to the prior year first quarter, we did not account for any transaction fees in our real estate business. TPAM contributed EUR 65,000,000 and PEM EUR 68,000,000. In TPAM, we generated net new assets of EUR 2,700,000,000.0. Assets under management for TPAM increased, therefore, to €52,700,000,000 compared to €49,600,000,000 at the year end 2016.
We are ahead of plan to achieve our Swiss Life 2018 targets. Turning now to our investment results. Our direct investment income of €1,000,000,000 was stable, supported by our long asset duration and slightly higher investments in equities with attractive dividend yield. The nonannualized direct yield was flat at 0.7%. Our net investment result was down to 0.5% on a nonannualized basis.
This is about 12 basis points below the prior year number due to lower net gains as a result of the negative development of equity derivatives used to hedge our equity exposure. The positive gains of the underlying equities do not flow through the income statement and are therefore not visible in the net investment results. The asset mix remained more or less in line with our full year disclosure with slightly higher gross equity investments. We continue to focus on capital efficient asset classes. The duration gap remained below one.
Moving on to our solvency ratio. On 01/01/2017, our Swiss Solvency test ratio was 161% as filed with FINMA based on our internal model approved with condition. As of today, we expect the ratio to be pretty resilient. We will provide SST sensitivities for 01/01/2017, in our half year 2017 booklet. On May 1937, European based insurance companies are required by EIOPA's Solvency II regulation to disclose their solvency and financial conditions report to their local legal entities sorry, for their local legal entities.
Since Life's local insurance entities in Europe will thus disclose their report on their respective local websites, I can confirm that our group Solvency II ratio was above 200% as of the 01/01/2017 based on a standard model with volatility adjustment but without taking credit for any transitional measures. I'm also pleased to report that our Swiss Life 2018 program is well underway. We continue to improve our quality of earnings by growing the fee business due to the positive development of our own and third party products and services, strong contributions from our own IR base and further progress of our asset management business. We are particularly pleased with the development of our TPAN units and its generation of net new assets. All our market units kept their focus on profitable and capital efficient growth.
This should enable us to achieve our value of new business aspiration. And we have already implemented about 64% of our 1,000,000,000 cost savings initiatives, which allows us to invest in growth and digitalization despite keeping our operational expense base flat. Let me close by reiterating today's key message. Overall, we are pleased with the course of the business in the first three months, particularly with our growth of the fee and commission income and the development of our direct investment results. It is also pleasing to see the continuous progress of our third party asset management unit.
I can therefore confirm that we are well on track to achieve our 2017 financial targets. I'm now ready to take your questions.
We will now begin the question and answer session. The first question is from Johnny Arwin from UBS. Please go ahead.
Hi there. Thanks for taking my question. Actually, just have one, which is the fee income continues to grow very, very nicely at 5% growth in local currency. I just wondered if you could give us some color as to your expectations of how that drops through to the fee results. I know there's been some cost cutting measures going through as well, which we should see come through at half year.
And then I guess the fee income might also increase under sort of five asset managers as the transaction fees come back in. So any color there would
be much appreciated. Thank you. Thank you. As mentioned, we are very pleased with the top line development on the fee side. As we do not give a bottom line number in Q1, I cannot give a number there.
But I can assure you that, obviously, we are well on track to achieve our Swiss Life 2018 aspiration, which is increasing the share of our fee result in the total earnings.
All right. And just perhaps just another quick one. Could you update us on the standardization of the group life module? Has there been any more discussion with Cinema? And also is the conversation constructive for you guys at the moment, do you think?
Yes, indeed. This is a very intense process and discussion. There is a working group, a joint working group between the Swiss Insurance Association and FINMA in place. And actually, the working group is chaired on the Swiss Insurance Association side by our chief factory, Matjalf Velik our chief risk officer, Matjalf Velik. And we are so far, we are on track to develop the standard model.
Having said that, there is still a lot of bridges to cross, and there are obviously some discussions on certain calibrations and on certain parameters. It's too soon to tell where and how it still ends. But as mentioned before, FINMA has assured the industry that the standard model should not lead to additional capital requirements.
Okay. Thank you very much.
The next question is from Stefan Schurman, Bank of October. Please go ahead.
Yes. Good morning. I have two questions. First one on technical reserves being up at 2%. So we assume that your lapse rates are low across the board.
Can you confirm that for your Swiss, French and German units? Second question on the net new money in TPAM. The asset split maybe of the €2,700,000,000 I mean, how much is coming from real estate, fixed income and other mandates here?
Okay. First, on lapse rates. Lapse rates were pretty resilient across the board, I can say. So overall, yes, your assumption is right that we did not see substantial changes in the lapses. We even saw some positive development in the French market.
Then on the split of our net new assets, it's about onethree of money market, onethree of bonds bond mandates, 14% was bonds sorry, was 12 sorry, I have read it quickly. Okay. Onethree was money market, onethree was bonds, 12% was real estate, and 14% is balance. So that's that's it.
Okay. That helps. Thank you so much.
The next question is from Peter Elliott, Kepler Cheuvreux. Please go ahead.
Uh-huh. Thank you very much. And I apologize I missed the start of the call. So I apologize if I'm touching on something already covered. But I guess the the one surprise for me looking at the release was, you know, asset management is up very strongly, you know, especially third party assets up very strongly, especially year on year.
I was surprised that the fee income associated with that was only up 1%. Just wondering if you could just elaborate on that a little bit. And, yeah, mean, secondly, I know it's a boring subject, but obviously, with, I guess, maybe two years to go until the targets elaborate, just checking that we sort of can't we shouldn't expect any sort of updates until the 2018 or whether you're further down the road in thinking about what more you can do? Okay.
On the fee income, I already mentioned that we did not see the same amount of transaction fees in the real estate area, mainly in Asset Management. So we have had some seasonality. We had an extremely strong first quarter in twenty sixteen on transaction fees, mainly also in Corporis Viejo. And this year, a little bit postponed. So I still expect that we will see these transaction fees.
And therefore, I think the 1%, yes, was a little bit modest compared to the increase of the assets under management. But there, I expect to catch up. On the target front, I can only say and repeat that there is not yet everything achieved. So there's still a lot of work that we have to do in order to achieve our 2018 targets. And yes, we are currently very well on track.
And of course, we will update you as we go, but we do not have an intention to give new targets before the 2018 in an analyst and investor phase. So we will stick to let's move in the direction of the target. If we exceed them, it's great. And then we may even further exceed them once we have exceeded them. But for the time being, really, I don't think it's good to give new targets as there is still some targets that we have not yet achieved.
Thanks a lot.
The next question is from Rene Locher, MainFirst. Please go ahead.
Yes. Morning, everyone. First one on the asset of the balance sheet. This 0.5% net investment yield, I mean just to understand that and I go to Slide 15 in the FY 2016 booklet. The reason for the decrease is that you have booked hedges through the p and l, but you have not realized capital gains to offset the amount, the negative impact from the hedges.
So this is the first one. You mentioned that you have increased your equity exposure. So at the end of the year, was at 2.1. So, yeah, I'm wondering if you could give a bit more color, you know, by how much have increased your exposure. And perhaps also what is the reason because you need additional risk capital to support higher equity exposure.
That is the risk capital coming from. And then the last question, this is more general. I do know or I saw in the from the press that Swiss Life is not commenting on on the old age pension reform here in Switzerland. But perhaps you can just give your personal view what to expect here and what could be the impact on a company like Swiss Reich? Thank you very much.
Thank you, Ryan. Yes, indeed, what you mentioned at the beginning is exactly what has happened. We have indeed taken a hit on the derivatives used to hedge our equity exposure on the balance sheet. And under IFRS, you have to account for these derivatives at fair value through P and L. And therefore, we had a negative impact on our P and L, and we have not realized gains to offset the negative development of the hedges.
And therefore, if you would look at our balance sheet, because they, of course, have a margin on our equity portfolio that actually even exceeds the negative impact of the hedges through the P and L. So the net impact on the shareholders' equity was actually positive of these movements. So then on the question two, which was about equity exposure. At the year end, we had 2.1% net exposure. And we had, at the same time, a gross exposure of 5%.
Now currently, we have a gross exposure of 6.5%. So we have really have increased the gross exposure. I mentioned this also in the speech. The reason is that we think that dividend yields are attractive, and we think that equities were attractive. And so far, it was a good move.
But we, again, have hedged this down to 2.2% net exposure. And that's where these movements that I've just explained come from. You are also right that the overall change of the asset mix has, of course, taken some risk capital. And when you look at our SST ratio, 161, And when you use the sensitivities that we have published last year, then and and start at 1.16% and do your math with the sensitivities, then you would end up a little bit higher than the 161%. And the difference is actually the change in our FX.
So you can say that we have slightly re risked but slightly or slightly re risked our balance sheet. Then on the pension reform, I can only confirm that from an accountant and shareholder and CFO point of view, obviously, the changes of the pension reform, which is mainly what the effects of mainly is the six point the lowering of the conversion rate from 6.8 to 6% before the mandatory business. And this obviously has a positive impact for the overall system as this stabilizes the system. And we think that even the 6%, by the way, is still high, is too high. That's why in the nonmain story part, you will you see already and you will see lower conversion rates.
Having said that, all of the statements about the pension reform bill would be political statements with, for example, do you agree or not agree with the 70? And mixing the government pension scheme, first pillar with the second pillar, we don't think it's a good idea, etcetera, etcetera. So from a pure egoistic point of view of an insurance life insurance company, you could say it's a very good bill because there was also no change of the legal quote, which was one of the things that we feared, that we're afraid of. But from an overall Swiss economy point of view, we think it's not a good idea because of the mixing of the second pillar and the first pillar and looking at each joint. And that's why we are not actively engaging in the discussion, and we do not support any committee or political party.
That's why we take a neutral position in this discussion.
Okay. Thank you.
That was the last question.
Okay. Thank you very much for joining me this morning. And I'm looking forward to hearing you again on August 1637 to discuss our half year 2017 results. I wish you a nice day. Thanks.
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