Ladies and gentlemen, good morning. Welcome to the Swiss Life's Presentation of the Q3 Results 2016. I'm Selena, 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 Buas, 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 figures for the first nine months of 2016. Please note that all figures quoted in this call are in Swiss francs and are unaudited. Let me summarize today's key messages.
Afterwards, I'll provide more details on our segments. First, our premiums in local currencies decreased by 9% to €13,400,000,000 This development is a result of our strategy to focus on profitability and capital efficiency in this low interest rate environment. Second, our fee and commission income was up by 2% in local currencies to CHF $974,000,000. Swiss Life Asset Management and the owned IFAS contributed positively. Third, Swiss Life Asset Management generated net new assets of €5,900,000,000 in our third party Asset Management.
Total assets under management in our TPAM business amounted to €46,200,000,000 Fourth, our direct investment income remained stable at 3,300,000,000.0 which results in a non annualized direct yield of 2.2%. Our net investment yield stood at 2.3% on a non annualized basis. We expect a net investment yield of around 3% for the full year 2016. And finally, our Swiss Life 2018 program is well underway. We are on track or slightly ahead with most of our targets.
We are therefore confident to deliver on our 2016 financial targets. Let me continue with more details on the premium and fee income development. Our premiums decreased by 9% in local currencies to €13,400,000,000 This decline was deliberate in Switzerland and Germany to protect our profitability in the low and even negative interest rate environment. However, net inflows remained positive. Our insurance reserves, excluding policyholder participation liabilities, were up by 2% in local currencies to €149,000,000,000 compared to year end 2015.
We redirected growth to capital efficient products. The share of nontraditional products in our new business grew to 90%. Our fee income increased by 2% in local currencies to DKK $974,000,000. Swiss Life Asset Management grew by 8%, the owned IFAs by 3%, while the owned and third party products and services decreased by 1%. Please note that we did not adjust for the negative translation effect of the British pound, which would have resulted in a higher total fee income growth of 3%.
Let's now have a quick look at our market segments. I'll start with Switzerland. Premiums were down by 6% to €8,200,000,000 in line with the market that also decreased by 6%. We continued to focus on profitability and deemphasize capital intensive single premium products. In Individual Life, premiums declined by 10% while the market was down by 8%.
Single premium business decreased by 37%, while our periodic premiums grew by 7%. Premiums in group life were down by 5% due to lower single premium. Periodic premiums were flat. The overall market also decreased by 5%. We continue to successfully offer semi autonomous and pure risk solutions.
The share of semi autonomous solutions in our new business production increased to 25% compared to 11% in the first nine months of twenty fifteen. Moreover, assets under management in our investment foundation grew to €6,200,000,000 compared to €5,500,000,000 at year end 2015. Please note that the Swiss Federal Council has lowered the minimum interest rate for the mandatory group life business by 25 basis points to 1% as of 01/01/2017. In addition, Swiss Life will lower the guaranteed rate for the nonmassive joint group life business by 50 basis points to 0.25. Taken together, this will reduce the average technical interest rate for the Swiss Life Group by about 11 basis points from the level of 1.58% reported at the half year 2016.
Fee and commission income in Switzerland was up by 23 to €177,000,000 primarily due to a strong contribution from Swiss Life Select and our real estate brokerage. On a standalone basis, Swiss Life Select increased its revenues by 8%. Turning now to France. Premiums decreased by 6% in local currency to €3,300,000,000 in a market that was up by 1%. We cannot be pleased with the premium development in our Life business.
Here premiums were down by 8%. As previously mentioned, we experienced a certain reticence from our clients during the first six months of the year due to the challenging equity market. The overall market was stable due to a strong contribution from Bancassurance. The unit linked share in our life premiums was 39%, which is still substantially above the market average of 19%. In our new business, the unit linked share accounted for 55%.
In Health and Protection, premiums declined by 1% mainly as a result of lower individual health premiums due to the annual reform. The market was up by 4%. Our premiums in Group Health and Protection Solutions were up by 14%, while the market was up by 10%. Our P and C premiums were down by 3%, while the market was up by 1%. Fee income decreased by 7% to €175,000,000 as a result of lower banking fees primarily due to lower asset valuation.
Turning now to Germany, Premiums were down by 5% in local currency to $9.00 €5,000,000 while the market decreased by 3%. We continue to deemphasize traditional products. We partly compensated for this decline by increased volumes of our modern traditional pension products and our offering for disability insurance. We have substantially increased the share of risk products, which have lower premiums but higher margins. Our fee income was down by 2% to €259,000,000 due to our insurance business.
This was only partly compensated by our own IFAs that grew their revenues by 5%. The number of financial advisers increased by 4% year over year. Moving to international, premiums were down by 40% in local currency to 1,000,000,000 We continued to see significantly lower single premiums with private clients. Assets under control for high net worth individual clients were flat at €18,500,000,000 against the year end 2015. Fee income was down by 5% in local currencies to €161,000,000 due to lower policy fees and a lower contribution from our owned IFS.
Please note that we did not adjust for the negative currency translation effect of the British pound at Genese De Weir, which would have resulted in a decline of the fee income by only 1% instead of 5%. Let's move on to Swiss Life Asset Management. In our Asset Management business, commission income was up by 8% in local currency to €422,000,000 TPAM contributed €216,000,000 and PAM $2.00 6,000,000 Strong net new assets from TPAM and a higher average asset base in PAM were important drivers. In TPAM, we generated net new assets of 5,900,000,000.0 Assets under management for TPAN increased thereby to €46,200,000,000 compared to €44,400,000,000 at the half year 2016 or €38,800,000,000 at the year end 2015. We are ahead of plan to achieve our Swiss Life 2018 target.
Turning now to our investment results. Our direct investment income of €3,300,000,000 came in €13,000,000 higher. This is supported by our long asset duration. Our non annualized direct yield was 2.2 as a result of the lower rates and the higher average net asset base. Our net investment result was 2.3% on a non annualized basis.
This is about 30 basis points below the prior year number due to lower net capital gains. We expect a net investment yield of around 3% for the full year twenty eighteen-sixteen. I'm saying this with the usual disclaimer of any unforeseen developments in the financial markets. The asset mix remained more or less in line with our half year disclosure. The duration gap remained below one.
Moving on to our group solvency. Our SST ratio was about 140 sorry, was above 140 on September 3036, based on our approved internal model with conditions. The development was positively influenced by credit spreads tightening. As of today, the ratio has slightly improved due to higher interest rates. The existing SEC framework regarding the market value margin is expected to change at the 2017.
This will have a positive impact on the SST ratio as the market value margin is no longer added to the required capital but deducted from the available capital. Turning now to our Swiss Life 2018 program. As mentioned earlier, I'm pleased to report that our Swiss Life 2018 program is well underway. We continued to improve our quality of earnings by growing the fee business due to the positive development of our asset management unit and the strong contribution from our own diaspora. We are particularly pleased with the development of our TPAM unit and its generation of net new assets.
All our market units kept their focus on profitable and capital efficient growth. This means we do not jeopardize our value of new business aspiration. However, this target remains challenging. And we have already implemented about half of our €100,000,000 cost savings initiative and thus further improved our operational efficiency. Let me close by reiterating today's key messages.
Overall, we are satisfied with the course of the business in the first nine months, particularly with our growth, the fee and commission income and the development of our direct investment results. Premium development was modest, but as said before, it was mostly deliberately steered to protect our profitability and capital efficiency. I can confirm that we are well on track to achieve our 2016 financial targets. I'm now ready to take your questions.
We will now begin the question and answer session. The first question is from Mr. Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thank you very much. I have three questions, please. Thomas, you mentioned first of all, Thomas, you mentioned the low level of realized gains in Q3. I was just wondering if you could elaborate a little bit about your thinking there and what we should be thinking about your sort of positioning or thoughts going forward? Secondly, you mentioned that the new business margin target was challenging.
H1, you highlighted some pricing actions were underway. I was wondering if you could just give us an update on any impact those might have? And then thirdly, on the SST, I think in August, I think you were saying that it was sort of close to the start of the year level of €146,000,000 I was just wondering if you can give us any more sort of granularity on the movement from then to the end of the quarter. And on the value margin adjustment that you mentioned, I guess you guided at your last Investor Day to 10 to 20 points on the sort of required capital. Mathematically, I guess that translates to sort of five to 10 percentage points on your benefits on your SST ratio.
I was wondering if you could just sort of comment on that the way we should be thinking and whether there's also any update on the scenario interaction, which is also being I understand being debased by FINMA? Thanks. Sorry for the number.
Okay. Thank you very much. First, on the realized gains, we have we see the same trends that we already saw at the half year. So I can confirm more or less what you have seen at the half year. And I can also confirm that we would use additional gains for reserve strengthening.
Then on the new business margin, I can say that, the pricing action are successful in so far that we really are protecting our margin on the one hand. On the other hand, obviously, you have seen that this has also put pressure on our volumes, which for me, it is, a, not a surprise and b, not a bad thing because as we mentioned many, many times, we are putting profitability before growth. And I think we are quite successful in doing that. On the SST, yes, I mentioned that we would be close to the beginning of the year. And I can say that today, as of today, actually before or even after the Trump effect, we are again up and closer again to the beginning of the year.
But let me give you a little bit of sensitivities. If you would take the sensitivities that we have published, you could actually see that you had a positive effect on the new business on the SST ratio due to the real estate, the increase of the value of real estate. You had a negative effect due to lower interest rates because interest rates average were 65 bps down as of yesterday compared to the beginning of the year. So you have, on the other hand, a positive effect because of some spread tightening since the beginning of the year. And you have probably a little bit of a negative effect, but it's minor because of the movement of the equity markets.
So that's the movements that you would have to observe in order to do your own calculation. And we have published the sensitivities. You may remember at the half year in the half year booklet, you can see all these sensitivities. And so I end up in the ballpark that we have mentioned. At the end of Q3, which means September 30, we were above 140,000,000 and above doesn't mean 141,000,000 We were above.
And nowadays, as of yesterday, we were closer again to the beginning of the year numbers. So that's the SST. Now on the market value margin, I can confirm that this has a positive effect. And I cannot give any numbers, but I can tell you that if you look at the booklet that we have published at the Investors Day, you can find an approximation of the effect that this would have on the SST ratio. On the scenarios, it's too soon to tell.
FINMA has written that they still want us to calculate certain scenarios, and we do not yet know how this will impact the SST ratio. Of course, we expect that a drop going away from 11 scenarios to four scenarios will have a positive effect, but it's too soon to tell. So I'm not I don't want to give guidance here because I wouldn't be cautious if I would do that at this point.
Perfect. Thank you very much.
The next question comes from Mr. Daniel Bishop from Baader Helvea.
Two questions from my side. The first one is on the Mayfair acquisition. Could you talk a bit more about Slam's regional ambitions generally and also how integrated these acquisitions will be? I understand that the brand remains unchanged as with Corpus Christi. So how centralized or decentralized will you manage these businesses?
And what does it mean in terms of synergies? And the second one, just quickly also on the new business on the Life side. I mean, what do you expect for the remainder of the second half and also into 2017? Or would you expect any changes of the volume trends that we have observed year to date?
Thank you for the question. First, for us, the acquisition of Mayfair is mainly broadening our geographic footprint on the one hand and getting access to additional real estate markets. And we may well continue this, say, in the Northern Part Of Europe, maybe. It's a small acquisition. It's an acquisition that fits our culture, which is also very important.
And it's something we can really leverage by our still strong distribution power. So we see within our distribution channels, we see a lot of demand for that type of products that Mayfair, for example, can give us access to. So that's the strategy behind Mayfair. I think, yes, it is small. It's about GBP 1,000,000,000 assets under management.
But again, it's something we will leverage over time as we have already started to substantially leverage, by the way, Corpus Dereo. On the volumes, I expect that the trend will continue that we will see on the single premium side lower volumes because it is extremely difficult to educate the market in the single premium area and to produce products that give us margin and still add value to the client. So we expect there that the trend is continuing. On the other hand, I also expect that our books will start growing. We will see net inflows.
We see very low lapse rates on the books. And we see substantial growth still on the periodic premium area. So from this perspective, I can say that I'm not concerned that this negative premium development will affect our profitability. I'm actually quite pleased to see that we keep the margin discipline in all countries, in all geographies.
Thank you.
The next question comes from Mr. Andrew Sinclair from Bank of America Merrill Lynch. Please go ahead.
Thanks and good morning everyone. Nice and clean results on a messy day. Swiss Life Asset Manager first, nice inflows on the year to date, but a little bit of a slowdown in Q3. Just wondered if you could tell us a bit about the mix, how much of that was coming from money market funds, etcetera? Secondly, on international, just I know you gave some information about what it would look like if you stripped out the FX impact from The UK, but just how much of the decline in local currency terms came from The UK?
And thirdly, you mentioned that half of your cost saves have been implemented. I just wondered if you can give any indication at this stage of how much of that will actually be hitting the bottom line? Thanks.
Okay. Let me start with the last question. There is no direct impact on the bottom line of the cost savings because we have mentioned at the Investors Day last November that we will use the €100,000,000 for digitalization and growth initiatives. And therefore, we will be able to keep the cost base for the next three years in absolute terms flat in the insurance business. So there is not a direct impact to the bottom line of the savings.
On the asset management side, I can say that 19% of the net new assets came from money market funds. And let me also, as I'm doing this anyway here, give you the other numbers. 27% of the net new assets came from bonds, bond mandate 28% from real estate 12%, which is really good, from equity mandates 7% balanced and 7% infrastructure. So that's really the split on the net new asset side, which are very encouraging. I'm very pleased that we saw quite a nice number coming in for equity mandates as well.
On Charles de Beer, on a stand alone basis, local currency, they grew their top line by 6%, which is a very nice number. So Chase De Beer is really performing well. But of course, unfortunately, after the Brexit, the pound has tanked. And therefore, in the local currency of the international business, this was a decline.
Very good. Much appreciated.
Thank you.
We have a question from Mr. Jonny Erwin from UBS. Please go ahead.
Hi, there. Good morning all. A few of mine have been answered already. I just had a couple of quick follow ups. So firstly, on the cost saves, you've obviously quite quickly got through half of that €100,000,000 I I know the business is already very lean after two big cost savings programs in the past.
But is there scope to go further just given the speed of your progress there? And secondly, I guess, obviously, we only get fee income growth at the Q3 level. But at H1, the fee result was running well ahead of the fee income growth due to efficiency measures that you're putting through. I just wondered that in Q3, have you put through more or less efficiency measures? Is it all still progressing as you would expect?
Thank you.
First, on the savings, of course, as I mentioned before, we do not change our target. So the target is still the €100,000,000 savings. Is there more to come? Over time, as we have also digitalization initiatives in place, we will have to have a fresh look at efficiency. But that's too soon to tell.
So stay tuned, but let's first deliver on the €100,000,000 Then on the fee result growth, I have to say the bottom line looks nice. We are pleased with the efficiency measures. All of them are going along to our plans. And therefore, I expect that the contribution that we have planned from the fee business will be achieved.
Thank you very much.
The next question is from Mr. Gilhelm Horvath from Exane BNP Paribas. Please go ahead.
Yes. Thanks for taking my questions. I have two. The first one is on the BVG rate, which, as you mentioned, was down to 1% versus 1.25% last year. I think you mentioned earlier this year that the insurance association was lobbying for something like 50 bps instead.
So I'd like to know your view on this cut to 1% and is this disappointment from your side as well? And the second is on France. And you mentioned the Annie reform and the individual health impact. How much of the decline in France is due to this? And what's your ambition in terms of group health in France?
Thanks very much.
Yes. First, on the BBG. Of course, we are disappointed that the Council has only lowered it to one percent. We have lowered or will lower our own guaranteed rate on the nonmandatory part to zero point two five percent, which clearly demonstrates where we would see it on the one hand. On the other hand, for us, this 1% is not a problem currently, a direct problem because you have seen our forecast of 3% net investment results.
So our interest rate margin is protected. Given also that we will lower our average technical rate from the 1.58 that we have published for the whole book, by the way, not just Switzerland at the half year by 11 basis points only through the two measures, which is the Federal Council lowering the rate to 1% and us lowering the rate on the BBG business to 0.25%. And there will be obviously additional measures that will lower it further. By the way, as always, we will see at the year end an impact of the business mix, which will lower the rate additionally. And therefore, I expect that our interest rate margin is still well protected despite this very low interest rate environment.
But for the BBG business, stand alone in Switzerland, obviously, obviously, this rate is too high given the current low yield environment. And I think over time, this will have to be lowered further if interest rates stay where they are. Now on the individual health and the group health in France, we are very well underway in steering our business away from the individual towards the group health business. We saw in the individual health a decline of 12%, which was expected. It's actually the decline is actually even a little bit less than planned because we see that certain small businesses don't really move to the group health schemes as expected.
On the other hand, we see about 14% growth of our group health and protection business, which is above market. The market in this area grew by 10%. So we can say that our shift from individual to group health is successful, is actually even more successful than initially expected. But the jury is still out because we expect a few years until this new split between individual and group health in the market has played out.
Thank you very much.
The next question comes from Mr. Stefan Schurman from Bankfontobil. Please go ahead.
Yes, I have two questions, add on one. One on the net new assets. Can you maybe also highlight how much of that came from Germany and obviously Switzerland and France? And the second question in terms of fee income from France as well on banking side, I mean, can you expect there going forward? Should we expect to continue that drop?
Or do you take corrective measures? Or I mean, maybe just some more maybe flavor about that going forward, please?
Yes. On the net new assets, I can say that 47% were from Switzerland, 44% from France, 8% from Germany. And as I am here, I can also give you the split of the assets under management geographically. We now have out of the €64,200,000,000 we now have 52% in Switzerland, 43% in France and 5% in Germany. On the bank, Swiss Life Bank Prepay in Paris, I can say, of course, we have and are taking a corrective action to really get them back on track.
I do not expect a similar drop in the near future. I think the corrective action is in place. You also have to see that this year was really also impacted by some of the structured products not being renewed as the equity markets have not performed as expected. And these were these are not recurring. These are nonrecurring fees that they didn't get.
And if equity markets recover, we will see there also a positive market impact over time. So that's what I can say about the bank, Pivea. Of course, we are taking corrective actions, and we expect the situation to improve next year.
Okay. Yes, that's helpful. Thank you.
The next question comes from Mr. Michael Huttner from JPMorgan. Your line is open.
Fantastic. Thank you so much. So I have lots of little questions. They're really small. What spending power do you have on deals?
I noticed that there are lots of changes in control of asset managers. And I just wondered and you mentioned Northern Europe, and I just wondered how you kind of figure that. On the 1.58%, and you said 11 bps comes lower now, thanks to the BBG and your own internal stuff. And how much could we see from the mix shift? Or how could we estimate that?
The lower growth, so that's lower commissions, I assume, also paid out. Presumably, that's helping your cash flow. I don't know, and this is why I get really confused. But I just wondered maybe you could give a feel for how much more how much how this could impact the cash flow, which is upstreamed from your main Life unit? And as an almost like philosophical question, and I think I've asked this before, but you were so helpful last time.
How come do you think you're still collecting new money in asset management in traditional, fully managed, when most of your peers and the very large groups are? For them, zero is a good result? Okay.
First, I didn't quite understand your first question. But assuming that you meant how much would we invest in M and A, I can say that we do not have spending targets because we are not on an M and A spree. Because we look at the M and A in a quite opportunistic way, meaning if it helps our overall strategy to generate more fee income and the target is in an area that we think is geographically feasible and at the same time, the culture, if there's a cultural match and we can leverage the target with our strong distribution, then we would look at it. But there is it will not be big acquisitions. We always mentioned that this will be bolt on, and it will not be huge transactions that you will see on this side.
Then on the technical interest rates, you have seen at the half year, we already had three basis points due to the mix change. I cannot give guidance, but you can expect, in general, when you go back the last few years, you can see the number that was usually in there for the mix change. And you can see the mix change was quite successful in the last few years. And therefore, it's cautious to assume a number similar to last year. Then on the asset management no, on the commission, on the cash flow impact of lower commission, there is not a direct impact because we have clearly stated how much cash we will generate out of each market unit to the holding company.
This will be, for this year, a little bit short of €600,000,000 in total towards the year end. And of course, this enables us to deliver on the targets, be it cash generation as well as cash as dividend targets that we payout ratio targets that we have disclosed last year at the Investors Day. So here, I'm very confident that we will be able to deliver. Then on the success of our asset management business, I think it's the target clients that we have on the one hand. We have target clients in the area of pension fund loans.
We are ourselves a big pension fund. We have asset liability management capabilities, so we have a lot of credibility in this field. So we get access to these guys on the one hand. On the other hand, we have very good performance. Our funds, they all have great performance.
So the track record is very good. And we have local presence. And especially for pension fund managers, local presence is extremely important. They want a person, they want an organization that is here, that will still be here in a few years. And that's why we think we are very successful in this field.
The next question comes from Mrs. Natalie Oloforth from AFP.
I was wondering, we've seen the we've got the results of the U. S. Election this morning. Without taking you into particular considerations, what I would like to know is what this means for interest rates and for generally speaking for your investment environment, a few months ago, there was a report from a major reinsurer that pointed out that all these populist choices, they tend to restrain the scope of investment for insurers. So I'd like to see if you could give us your view in from an investment side of
First of all, and I also mentioned this after the Brexit, it's very important to keep calm and not be overly excited about this unexpected outcome of the elections in The U. S. On the other hand, this will obviously lead to more volatility, at least short term. It will also have probably the fact that interest rates will stay low, but under the other government or under the lady, this would not have changed substantially. So therefore, I think we are very well positioned with our investments in our assets, our asset mix to sustain a low interest rate environment.
We are also well positioned to sustain higher volatility in the markets. So I do not expect that this will have a negative impact on Swiss Life in achieving its Swiss Life 2018 target.
Okay. And on your investment environment, generally speaking, does that put some constraints on the flows of capital?
No, it really doesn't because we do not have any subsidiary in The U. S. We do not have U. S. Clients.
We do not sell to U. S. Clients. If Mr. Trump would move away from free trade, nobody really thinks he really does, it would not have a direct impact on Swiss Life.
Indirect, you can never exclude, but then obviously, many others would also be affected.
Alright, thank you.
Perfect.
The next question comes from Brenna Nagawi from Thompson Reuters. Please go ahead.
Hi, thank you. My question has already been asked.
Very good. Thank you.
The next question is from Mr. Rene Lacher from MainFirst. Please go ahead.
Yes, thank you and good morning, everybody. So first, an easy one. These Mayfair assets on the main, I guess, mainly real estate management, this £1,000,000,000 Is this then the future included in third party? Or is it more like this Corpus C Reio real estate management? This is my first question.
On the second one is on these realized capital gains. When I'm looking at Slide 14, H1, there I can see that net capital gains, loss on investment and impairments decreased by roughly €550,000,000 And I guess this has also a little bit to do with the hedging costs. So what I want to know is, if you can tell me kind of a split, is realized capital gains and how much of this is eaten away from higher hedging costs? And then a big picture question. There was an insurance deck day, I guess, it was last week here in Zurich and Zurich Zurich Zurich, so I feel the feeling that all the traditional insurers will disappear and the entire business will be taken over by the so called disruptors.
So perhaps you can quickly give your view on this development. And then my fourth question is just on real estate. I've seen a few new reports out from, I guess, UBS, the Asian partner here in Switzerland, which became a little bit more negative on the Swiss real estate market here again? Just a quick view. Okay.
On the Mayfair, I can confirm that the €1,000,000,000 will be included in the TPAM assets under management because it's assets under management. Then on the hedging costs, what we had at the half year, we had about $263,000,000 of hedging costs at that year. I cannot disclose the hedging But cost for what I can say is that, and we gave this guidance already, that we expect the hedging cost this year to be higher than last year. And I can give you a little bit of a hint that if you go back before the drop of the euro pluck of the National Bank, Swiss National Bank, hedging costs have doubled in the last four years. But we will still, of course, achieve, as you have seen, a quite attractive net investment yield.
So from this perspective, we are not concerned. And we have also mentioned that we have hedged some of the hedging costs. This has also helped us to smoothen the impact, the negative impact on our P and L. Then the disruption sorry, the disruption or the disruptors you mentioned, this is the entire digitalization discussion that we are seeing. We expect that this disruption will take place rather in the area of P and C personal lines.
So for example, motor insurance, home insurance, etcetera, because their disruption is more likely because people don't really need advice there. In the Life business, people don't wake up early in the morning and want to buy life insurance. And therefore, there is still a push product. It's still a lot of advice that is needed. And you see also that actually regulation has substantially increased.
So somebody, if he wants to give advice, he has to be well trained, licensed, etcetera, etcetera. So we think that a disruption will first take place, if any, in the P and C business. And then we also see that in the Life business, there is actually in digitalization is an opportunity for us. We are actually leveraging this opportunity in three ways. First of all, we initiatives in place, and some of them already contributing to the €100,000,000 cost savings that will digitalize the back office.
And there, we see still a lot of efficiency gains through digitalization that will come through over the years, over the next few years. Then we also have digitalization initiatives in place at the customer front end side. There, we see customer interaction will be more and more digitalized. However, we don't think that the agent will be completely removed in this area. We think this will be an important opportunity also for the agent if you can play on this tool digitalization customer interface and give the customer direct access, for example, through self-service opportunities, etcetera, etcetera.
So we are investing there as well. And then we have the third area, that's the small fintech type of start ups. And there, obviously, there's a lot of things going on. Let me just remind you that there is this initiative called Digital Switzerland. It used to be called Digital Zurich.
And Swiss Life is one of the founding members of this Digital Switzerland initiative where we give small start ups the opportunity to develop and also to find investors. And obviously, this means Swiss Life is at the forefront also in looking at these start ups, And we, from time to time, are also investing in these start ups. So I think we are well equipped for this so called disruption era through digitalization. On the real estate side, we are still positive. We actually expect vacancy rates to go down in the second half of this year.
We have not seen pressure on the rents so far because there is still net immigration in Switzerland. The risk premium on real estate is still very positive when you compare the average yield we make on our real estate portfolio compared to the Swiss coffee yield. You can go back, I don't think if we ever had that high of a spread between Gobi yield and the real estate yield, and therefore, we are still positive.
Thank you very much.
We have a follow-up question from Mr. Gilham Horvath. Please go ahead.
Yes, thank you. Just on accounting standards, we hear here and there that Swiss insurers might adopt a new version of the Swiss GAAP and not adopt the IFRS anymore. Is this something happening actually? Can you comment on that and what's your view on this? Yes.
There is indeed an initiative within the Swiss GAAP fair to renew the accounting standards for insurance. Swiss Life is part of this initiative. We are actually representing the IFRS users within this initiative. There are other insurance companies that are currently using Swissgap Fare, also part of this working group. We have not taken a decision yet on whether to stay with IFRS four Phase two or to move over to Swiss GAAP fair because a lot of things are still moving parts.
We still do not have the final draft of IFRS four Phase two. IFRS 17 is still unclear. We also, on the other hand, do not have the new version of the Swiss GAAP fair. And therefore, I think it's too soon to tell in which direction this thing will develop. Overall, obviously, the bigger companies will have to follow market practice.
And let's see how fast the standard boards can move with IFRS four Phase two.
We
have another follow-up question from Mr. Michael Huttner.
This is my traditional question. Do you remember the I can't remember the name, the thing you bought in was it Luxembourg, which had misselling in The U. S? Is there any update Yes, on
that's right. So yes, yes. There any update on that? Liechtenstein.
Liechtenstein. Okay. Well, you can see I'm completely out of it. But can you just give an update? Is there any extra or lower risk?
Or is it completely out of any kind of a sign or anything from The U. S?
Yes. I can tell you that we have not been contacted by anybody on this capital leben. We have, as you know, not sold on U. S. Soil.
We never have solicited U. S. Clients on U. S. Soil.
And you can also remember maybe that we have stopped selling to U. S. Persons altogether in 2012 already. So there's no news actually on this point.
Gentlemen, there are no further questions. Would you like to conclude the call?
Yes, indeed. If there are no more questions, I'd like to conclude the call. Thank you very much for joining us today. I'm looking forward to talk to you again at our full year results announcement, which will take place on 03/03/2017. Thank you very much again, and have a good day.
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