Ladies and gentlemen, welcome to the 3 slides presentation of the Q3 Results 2020 Conference Call. I am Sandra, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Matthias Ehlich, Group CFO of Swiss Life. Please go ahead, sir.
Good morning, ladies and gentlemen. Thank you for dialing in and for your interest in Swiss Life. Today, we are reporting on selected top line figures for the 1st 9 months of 2020. Please note that all figures quoted are in Swiss francs and are unaudited. All growth rates mentioned are in local currency.
Let me start with today's key messages. Afterwards, I will provide more details on our segments. Fee and commission income was up by 10% to EUR 1,400,000,000. All sources contributed positively. Asset managers grew by 12%, our owned IFAs by 8% and our own and third party products and services by 5%.
Growth rate and premiums, fees and deposits received decreased by 13% to €15,400,000,000 This defined anticipated end, as previously mentioned, is due to the exceptional demand in 2019 in our Swiss group buying business. Touring reserves, excluding polyethyl participation liabilities, grew by 1% to €168,000,000,000 Freez Life Asset Managers recorded net new assets of €3,800,000,000 in third party asset management. Total assets under management in our GTAM business amount €86,700,000,000 dollars Direct and investment income was at EUR 3,000,000,000. Non annualized direct yield was 1.8% compared to 2.0% in the prior year period. The net investment yield stood at 1.4%, down from 1.9% in Q3 2019, also on a non annualized basis.
Our ROCE ratio as of 30th September 2020 was around 190% and therefore at the upper end of our ambition range. Our EUR 400,000,000 share buyback program will restart on the 4th January 20 21. Total amount and end date are unchanged. I will now move on to our segment reporting starting with Switzerland. Premiums decreased by 22 percent to €9,100,000,000 The overall market was down by 21%.
Premiums in Individual Life were down by 8%, while the market was down by 3%. Periodic premiums grew by 2%, single premiums decreased by 29%. Premiums in Group Life grew down by 23% to €8,100,000,000 while the market decreased by 25%. Periodic premiums grew by 1%. Single premiums decreased by 35%.
As mentioned on numerous occasions, we reported an exceptional increase in premiums in 2019. Overall, premiums in Switzerland in the 1st 9 months of 2020, excluding this exceptional increase, were stable. The share of Senjard Holdings Solutions in our group life new business production was 46% compared to 15% in the prior year period. Capital Management in our Investment Foundation grew by 8% to €11,900,000,000 compared to €11,000,000,000 at year end 2019. Fee and commission income increased by 8% to €215,000,000 primarily due to our mortgage business, investment solutions for private clients and Swiss Select.
Turning to France. Premiums increased by 9% to €4,400,000,000 In our Life business, premiums were up by 11%, while the market was down by 25%. This is a very pleasing achievement, which is supported by new pension products. The unit linked share in our life premiums was 57% compared to the market average of 34%. In Health and Protection, premiums grew by 5%.
P and C premiums were up by 3%, driven by motor products. Fee and commission income rose by 7% to EUR 243,000,000. Unit linked fees increased due to positive net inflows that more than offset the negative financial market effect on Asset Load Management. Unit linked reserves were, on average, higher in the 1st 9 months of the year compared to the prior year period. Moreover, brokerage fees and revenues from structured products also increased.
I continue with Germany. Premiums grew by 5% to €982,000,000 due to higher premiums with modern, modern traditional and disability products. The market increased by 1% driven by single premiums. Fee and commission income was up by 14% to €390,000,000 driven by strong contribution from our owned IFAs due to an increased number of financial advisers and productivity gains, supported by our digital platform with features such as video advice. The number of financial advisers increased by 9% year on year to 4,407.
Moving on to our international unit. Premiums decreased by 22% to €953,000,000 due to lower single premiums with private clients in Asia as a result of the early and lasting COVID-nineteen measures. This was partly offset by higher premiums with private clients in Europe and with corporate clients. Assets under control for private clients declined by 7% to EUR 19,600,000,000 compared to year end 2019 as negative financial market performance and surrenders more than offset new deposits. Fee and commission income was down by 10% to EUR 207,000,000 This is due to COVID-nineteen impact on the business with private claims given low risk under control as well as due to fewer client interactions at the owned IFA.
Let's continue with asset managers. Asset managers commission income was up by 12% to EUR 630,000,000. As usual, the update on assets managed in Q1 and Q3 focuses on commission income and does not include other net income from real estate project development. In our PAM business, commission income increased by 3% to EUR 274,000,000. This is primarily due to a higher average asset base.
In our key plant business, commission income was up by 20% to $357,000,000 Recurring fees increased by 19% based on higher average assets under management. Nonrecurring commission income, such as transaction and performance fees, increased by 23%. The share of total nonrecurring income for TFAM, meaning commission income as well as other net income, for example, from project development, was 28% of total income. Other net income includes gains on ongoing and completed real estate development projects. So far, we have not seen material delays in our real estate development projects.
Net new assets in our Deepgram business amounted to SEK 3,800,000,000 compared to SEK 6,500,000,000 in the 1st 9 months of 2019. We achieved inflows of $2,200,000,000 in real estate, dollars 700,000,000 in bonds, dollars 500,000,000 in balance mandate, dollars 400,000,000 in infrastructure and dollars 0.3 billion in money market funds. The inflow in real estate and infrastructure were thus as prior year metal. Excluding money market funds, net new assets amounted to SEK 3,500,000,000 in the 1st 9 months 2020 compared to SEK 5,800,000,000 in the prior year period. Overall, assets under management in our TPM business were up to EUR 86,700,000,000 compared to EUR 83,000,000,000 at year end 20 19.
Turning to our investment results. Our direct investment income decreased by around €300,000,000 to €3,000,000,000 We had lower income on bonds due to past bond realizations and lower reinvestment deals as well as negative FX impacts both on translation and coupons. We also had lower income on equities due to a reduced exposure and due to lower dividend payments in the COVID-nineteen environment. Income from real estate declined year on year primarily due to the movements in our real estate funds in the 1st 6 months of 2020, which we discussed in August in our half year disclosure. The non annualized tax rate yields decreased to 1.8% compared to 2.0% in the prior year period.
Coming to the net investment yield. Our non annualized net investment yield decreased 1.4% from 1.9%. It includes net capital losses composed of COVID-nineteen related realized losses on equities, revaluation losses on derivatives of our equity hedging strategy as well as impairments on equities and bonds. Those were partly offset by realized gains in bonds and positive real estate revaluations. Moreover, it also includes FX hedging effects, including losses resulting from the hedging costs as interest rate differentials narrowed this year in Q1 2020.
This narrowing led to a decrease of hedging costs by around EUR 140,000,000 to EUR 440,000,000 and will lead to substantially lower hedging costs going forward. At the end of September 2020, unrealized net gains on equities amounted to SEK 1,100,000,000 compared to EUR 1,600,000,000 at year end 2019. Unrealized net gains in bonds amounted to SEK 17,500,000,000 compared to SEK 15,100,000,000 at year end 2019. Please note that there are legal quote mechanisms in most of our insurance businesses. This means that the investment gains and losses are subject to sharing with the policyholder.
Now let me conclude the yield discussion with a forward looking statement. For the 12 months of 2020, we expect to achieve a net investment yield of slightly below 2%. I'm saying this with a usual disclaimer of any unforeseen developments in financial markets for the rest of the year. Gas mix remained in line with the year 2020. The real estate exposure amounts to 21.1%.
Let me give some additional color on the real estate portfolio. We had real estate revaluation gains of 1.3% compared to 1.8% a year ago, both on a non annualized basis. Given our high quality portfolio in attractive locations, our vacancy rate continues to be very low at 3.9% compared to 3.7% at year end 2019. Moreover, in the 1st 9 months of 2020, rent collections amounted to around 96% of rental income due. The majority is due to rent deferrals as rent losses amounted to less than EUR 10,000,000 Please note that the rent collection differs from the P and L and accounting view.
Rent collections simply reflect the cash collected compared to the rent due. Rent deferrals and rent not yet collected are recognized as income in the P and L with the respective account receivable on the balance sheet. I can confirm that we had no impairments on rent receivables apart from the just mentioned rent losses of less than €10,000,000 Moving to solvency, cash and payout. Our SSE ratio was around 190% by the end of September 2020. As of today, SST ratio is at the same level and therefore at the upper end of our ambition range of 140 percent to 190%.
Cash at holding amounts to EUR 1,000,000,000 as of today compared to EUR 0.9 Both our solvency and cash position continue to remain strong. As communicated in March, we temporarily suspended our share buyback in line with all other major listed banks and insurance companies in Switzerland. We now reassessed the situation as we communicated in August and decided to resume the €400,000,000 share buyback program on 4th January 2021. Total amount and end date are unchanged. In other words, we will repurchase shares for the remaining amount of EUR 371,000,000 by the end of May 2021.
Let me sum up. Our business model proved resilient and sustainable in this challenging environment. Overall, we report solid results for the 9 months of 2020 despite COVID-nineteen headwinds. Especially, our fee income developed strongly despite financial market developments and lockdowns. As mentioned on several occasions, the main effects from COVID-nineteen for us arise from negative financial market developments and the related impact on our savings result.
We expect the savings result to be below the 2019 level in the anticipated U shaped economic recovery. We continue to be on track with our Swiss Life 2021 program despite headwinds from COVID-nineteen, and I can confirm Swiss Life 2021 targets. This also pertains to those targets like the return on equity of 8% to 10% that are valid for each and every year, including 2020. This brings me to the end of my speech with a Save the Day for 2021. SwissBrid will host an Investor Day next year to disclose a new strategic and financial program.
The Investor Day is planned to be held on November 25, 2021. Thank you for listening. I am now ready to take your questions.
The first question comes from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thank you very much and great results and very good news on the share buyback. I'm going to sound greedy with my first question, but I guess given that you've decided to launch the share buyback, I'm just wondering what whether you can shed any light on the thinking of the timing of the start date. I mean, was there any reason for not doing it immediately if you've got the cash and you've decided to do it? That was the first question. Second question was on asset management.
I was just wondering if you can give us the split of recurring, nonrecurring fee income and any insights into the outlook there? And final question, very strong results from the sort of financial advisor channel in Germany. Just wondering if you can talk about your sort of current recruitment and whether that drive can continue? I guess it comes from efficiency and high number of advisers. And yes, just wondering about the sort of the outlook over the coming year given both of those trends currently?
Thank you very much.
Thanks, Peter, for the question. I'll start with the question on the timing on the thoughts behind that. As mentioned, thinking back to March, we said then that we suspended the buyback temporarily in line with other major Swiss banks and insurance companies. That was the reason that was driving the consideration back then. And now we assess the situation, as mentioned, and we decided to restart the share buyback on the 4th January.
And this is also in line with the major banks in Switzerland. And besides that, I think what we also said is the timing in terms of end date and the volume remains unchanged compared to the original plan. So that's about the thinking about the timing of the resumption of the share buyback. In terms of the split of the income of the commission fee income as well as the other net income, we have had 28% in Q3. We also say this is typically a bit back end loaded within the year.
The nonrecurring business, there are always a bit uncertainties when and how much it will come. But I think it's fair to assume that we are for the year end on a similar level. The 28 percent is that important. On a year to date basis, this compares to 23% at half year and there. You already see a bit this typically occurring fact that is back end loaded within the year.
In terms of the IFAs, yes, we continue to see growth in the number of financials in Germany. We have there 9% year on year. But we also have realized efficiency gains, both of which contributed to the growth of fee and commission income of 14% in the German business unit. With this, I think worthwhile to mention is that we were able in the first 3 quarters of this year not only to continue to serve our customers during these difficult times, some of which were really lockdown periods also in Germany. But we also could continue to recruit additional advisers, which will now undergo in certification.
And this is really a proof that our, let's say, business model in Germany, the platform we have built is attractive.
That's great. Could I follow-up very quickly on that? Sorry, Matthijs. I didn't quite catch your comment on the sort of nonrecurring. I heard that you said it was typically back end loaded.
I think you made some specific comments about the sort of the outlook for this year and whether it might be more or less than usual. I didn't quite catch that. And then on the adviser growth, I mean, that's great news that you were sort of still able to recruit during this period. Those comments sound to me
a bit
more bullish than I guess I've heard from elsewhere in the industry. So I'm just wondering, do you think you're attracting more people than elsewhere? Do you feel you're taking market share there? Thank you.
Coming back first to the question of the recruiters. We have, on average, a substantially younger advisory force in Germany compared to the market. So the our average is maybe 37 years. That's what we also disclosed at the Investor Day 2018. I think the overall market has an average age of slightly above 50.
So we have a younger base force, which is growing while the overall trend in improving in the advisory and financial basic force is shrinking. And yes, one of the key points we have to offer to young people who want to pursue a career in that businesses that we have, a platform that supports them in being efficient and really to build their own kind of little businesses division that makes us so successful in Germany. It's really this combination of fact that makes us to grow continuously at that rate of, as I mentioned, 9% year on year. In terms of the real estate project development, what I mentioned is we had 23% at half year. That is the share of nonrecurring income in the total income, including other net income.
That was 23% at half year. 2020. We now have 28 at Q3. And that shows, as I said, the fact that the nonrecurring business is typically back end loaded within the year. Now if you look back on what we have shown for the full year 2019, we were there at 27%.
And if we go back 1 year more, we were in full year 2018 at 33%. And we always said going back into 2018, we knew that 2019 was going to be a weak year because there was this historic project development pipeline for business acquired in Germany in 2014 that would come to an end in 2019. So to cut the long story short, we expect for the full year 2020 something which is at the Q3 level or a bit
higher. That's great. Very clear. Thank you very much.
The next question comes from Michael Huttner from Berenberg. Please go ahead, sir.
Perfect. Thank you so much.
And I guess as Peter said, well done on the buyback and I don't know the overall stuff. And just two questions. One is on the granularity of the development. And the other one is a more general question, how you see competition from your peers in real estate asset management? And yes, and then the last question because I couldn't work it out.
I got very confused. From the granularity of the development, I think you have a development called Circle in Niergepur in Zurich. I just wondered if you could update us a little bit on the progress there in terms of lettings and whatever, I don't know, any indications. I think it's quite a large development. The second is on the competition from peers.
So Balmoral said at the Investor Day last week, they want to grow more real estate asset management. They mentioned some figures, which are still very small, not they're clearly not but I just wondered if you see any signs of dilution of any kind from competition from them, from how they see from some others. And then the last one is on the buyback. I was trying to work out in the, I guess, 5 months that you will have to complete it to May, what kind of percentage of average daily volume it could be? But I got so confused.
I worked out 2% which seemed very low, but anyway.
Okay. Thank you, Michael. I didn't understand the first question on granularity. The very first statement, what was that?
I beg your pardon. Yes. Thank you. Sorry about that. Can you hear me better now?
Yes. It was
just the
granularity of what?
Yes. So the I think you
have a development near Zurich Airport called The Circle. Is that right? And I just wondered if you can update us or whatever it's called, a big thing, which will have a hospital and hotels and things. And I just wondered if you can update on progress on this and how much is pre let and whatever?
Well, good. Thanks. I start with that one. The ZURCO, I should say, is a large development at Zurich Airport. There is as you said, there is a hospital which is already in operation.
That's University Hospital of Zurich. We have there big companies that are moving in. We have now restaurants, shops that are opening. The official opening will be in, I think, tomorrow. So that is quite imminent.
The quota of leaded space is at 83%. And what is important to understand in context here is that while it is at the airport, there is also a large traffic, say, connection of beer, which is not dependent on air traffic. So there is lots of commuter traffic that is going to serve as well. So this is really going well. And I said that you're hoping to tomorrow.
Now in terms of share buyback that you mentioned, if you look at the numbers, the average volumes at the 5 months and the remaining SEK 371,000,000 turns out to be around SEK 75,000,000 or something like that a month. And this is essentially the same level of volume that we have done in share buyback that we announced in 2018, the SEK 1,000,000,000 that lasted for 13 months. So that's absolutely comparable to the previous buyback. Now in terms of competition in the real estate area here in Switzerland, We still see this as an attractive place. We have long standing experience.
We have been entering the business of 3rd party asset management in the real estate area many years ago, and we have built up the EuroTeQ record and a reputation. We now have in the PPAM area essentially the same amount of real estate as on the balance sheet, which is essentially €35,000,000,000 or a bit more €1,000,000,000 So we are well positioned there, and we have track record in the experience. And given the local nature of that real estate business, we still see that margins are attractive.
Thank you.
Our next question comes from Farooq Hanif from Credit Suisse. Please go ahead.
Hi, everybody. Good morning. And like everybody else, congratulations on some very solid results. Just three areas, if I may. Firstly, can you talk a little bit about the correlation between the fee income and your fee result in the Life business, especially I can see the link in asset management, but just whether we should expect a similar level of growth in the fee result.
Secondly, I believe you made an increase in cash remittance in the first half, I think CHF748 1,000,000. But there is always some residual in the second half, I think. And I was just wondering if you can comment on what kind of level compared to last year you may expect we may expect? And the last question is on second lockdowns in the markets that you're having that you have that you're in, sorry. Just what impact is this having on kind of year to date sorry, I mean, Q4 to date, net flows, real estate as well.
So just the impact on your asset management business, if could comment on
that. Maybe starting with the question of the lockdowns. And I will focus a bit on the probably first on the Swiss situation. If we look measures that have been imposed by the Swiss government, they are far they are less far reaching than those in the first wave, which is in March April. So in Switzerland, we will not talk about the lockdown.
There are clearly measures in place. But in Switzerland, we do not have a lockdown. There are home office recommendations by the government and what have you, but we don't have a lockdown in Switzerland. So the activities here are much less affected as we speak compared to first half downs in March in April. I think that's from the first important statement.
The second important statement, I think, is to make that while we have been in a position to really stay out into the business, to maintain business activity in the first half of the year as we have shown in Q2 and also in now. It still took some time to get used to just the processes, and I think we're now much better prepared So that's what is ahead of us. And I think we have here shown to be resilient. Even though I have to be transparent, we don't know how this will turn out. Now in terms of the fee income, let me point probably a bit to the half year results.
Back then, we had a growth of the top line of 10%. The result has increased by 6%. As we have mentioned in the half year, we have undertaken investments into digitalization given the COVID-nineteen situation, which were a drag on the result in the half year. But this should give you at least some indication on how things have developed. We expect to see some operational leverage come internally.
That's probably also a thing we can make. And what is important, and this is sometimes forgotten, if we look specifically at the insurance part of the business, there is a lot of unit linked business unit linked amounts, particularly France. And there, the amount or the underlying in the unit linked business is more geared towards the Kirk Garland rather than an MSCI world. So we have there some effect also in the French business because the clients do have a home bias. Now in terms of cash remittance, as you said, most of the cash remittance takes place in first half of the year.
We have seen this uplift versus prior year. I think it's safe to assume that the pattern will not be that different from what it has been in prior years.
Okay. That's correct. If I may just come back on one question that I forgot to add. Are you seeing you've seen a really good pickup in net flows in 3Q versus 2Q? Are you seeing similar pickup perhaps in October?
Well, I'd say in Q3 standalone, we had in asset managers in TPM business really a strong quarter. But on the other hand, we also have to say some of that business is relatively big. And a couple of deals can make a big difference, but we have seen a very strong Q3.
Okay. Thank you very, very much.
The next question comes from Kim Shapiro from Morgan Stanley. Please go ahead. Thanks very much. Just a follow-up question on if there were to be a second lockdown in Switzerland, would you have to offer rent concession?
Well, I think that's a rather hypothetical question because in Switzerland, there seems to be or there is a political consensus that a lockdown, as we have seen it in the first half of 2020 has to be avoided because of the economic damage, because of the social damage. And so for that then, I consider that question to be a bit hypothetical. So we have measures in place where the interaction between people is reduced, and that's what the current consensus should hopefully be enough. There is this parliamentary initiative about a 60 to 40 split of the rent for commercial tenants up to a certain amount of, I think, 20,000 monthly rent. If this would become effective, this law, we would have in expectation a loss of maybe EUR 10,000,000.
With the current approach that we have taken, it is less than €10,000,000 And this compares to a total rental income of about $1,000,000,000 just to give you a bit the order of magnitude.
That's helpful. Thank you. The next question comes from Andrew Sinclair from Bank of America. Please go ahead.
Thanks and good morning everyone. Three from me, I think, if that's okay. Firstly, just again on real estate, rental collections, 90 6%, really good number. Just really wondered if you could give us an update on differences by sector. I think you could give a bit of color on that at half year as well.
Secondly, it was just on solvency, really strong number even after allowing for the buyback top end of the range. Just really how should we think about that number being clear as we enter the final year of the current plan period? And third for me, just any updates on recommendations for mandatory rates into 2021 from the relevant bodies? Thanks.
Okay. Maybe I start with the rent collection. We gave some color on that, I think, at the half year. The rent collection was the highest in the residential era, and it was a bit, let's say, in the office space. And in the retail, it was the lowest.
And this is essentially what we continue to see there. So there's no relevant update. Now in terms of the solvency number, I'm not sure whether I got fully your question. But I think what is important to mention is that the EUR 190,000,000 that we disclosed already includes the full deduction for share buyback. So the execution of the redemption of the share buyback on 4th January will not have an additional effect on the SSD ratio because the full amount has already been deducted.
But I'm not sure whether that was your question.
Really, really just kind of point out that, that number remains very, very strong even after the buyback and how you'd think if it continues to drift up, but perhaps one of the only 2 weeks for next year's Investor Day.
The next question comes from Simon Sossmayer from Tobi. Please go ahead.
Hello, everyone. Hope everyone's fine. Two questions. One is on real estate. You mentioned the rent collection, and I appreciate that.
You also mentioned the positive revaluation gains. And I was just wondering if it's fair to assume that the revaluation gains year to date are anywhere between 0% to 1%, if you want to disclose that. And the second question is on the corporate pension business, the BBG business. If the guarantee would be lowered to, let's say, 0.75%, can you remind us of the mechanics? Does this mean that you could release reserves, which would be non cash, but still is this the only thing that would happen?
I'm just wondering if you could. Thank you.
Maybe on the revaluation gain. So year to date, they were 1.3% on a non annualized basis for the 1st 9 months. This compares to 1 point 8% in prior year year. Clearly, this 1.3 percent is not absolutely uniform across the portfolio, but there should not be any huge, huge, huge deviation from that 1.3 percent. There may be certainly a bit more in the residential area and a bit less in the other area.
But what's also important to understand, there is clearly a detailed approach due to the valuation, which is, by the way, done by an external agent. Now in terms of the BBG business, if this guarantees interest rate is set at a different level, it's always best to think about it like a bank account on which we have to pay a certain amount, be it 1%, be it 0.7%. So this is not something that releases reserve neither, let's say, to the policyholder nor to the shareholder. We just pay a bit less as guarantee and then a bit more as surplus to always hold or use it for other things like strengthening of the old age reserves in the BVG area. So to cut the short, the 0.7% or whatever it is is more like a credit to a bank account.
And the gross legal quote we have then governs the distribution of what goes in excess of that guarantee. What is important also to keep in mind is that the mandatory part, which you were referring to, is only about half of the total savings account in the Swiss BBG business. The other that half, which is also of the same order of magnitude, is non mandatory. And there, we have a lower rate of 1 of 0.125%. Both blocks are essentially each EUR 20,000,000,000 worth.
We find or you can find additional details on that on the half year focus on Page 46.
That's great. Thank you.
We have a follow-up question from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thank you very much for letting me come back. Two quick points, if I may. The first one on real estate. Again, I mean, you've said in the past that you still consider it to be a very attractive asset class and are still investing into it. Is it fair to assume that you see residential as more of an attractive asset class at this point?
I mean, it would be natural to assume that your investment focus would be on residential and maybe less on commercial and in particular office buildings. But I was just wondering if you could give any comments on how you're thinking about the sort of investment opportunity across the space. And then the second question was, again, just coming back to Germany. I guess there's a bit of a political drive there to reduce commission rates at the moment. I'm just wondering whether you think that might have any impact on you or whether there's any reason we shouldn't be worried about it.
Any comments would be great.
Maybe coming first to the real estate question. Residential is in our portfolio today about 44%, office 30%, 15% is retail. And so we have always looked that we have a good balance, that we have a high quality portfolio in strong locations that are robust. And at the end of the day, it's about risk return. I mean, clearly, residential is within the real estate stays, certainly a bit less risky, it has lower returns.
Office is a bit riskier relative to residential, has a bit higher returns. So for us, it's really important that we have excellent objects as we have in our portfolio and that this risk return trade off is good. So to that end, we really look at the individual objects and look at their potential, at their risk, at their returns because as you said, real estate continues to be a very attractive asset class for us because the high pickup it provides are risk free and the long dated cash flows we are really looking for. In terms of the German situation, this discussion every now comes out in our perception. We see that in Germany, there is also within politics now the notion or the insight that it is important that people get advice for their old age provision, that they get professional advice how to manage their financial situation, that they really do not fall to poverty once they get older.
So I think German politics had also acknowledged that if there is not a commission based model, but if it were more a fee based model like in the UK, many people in Germany would not get that device anymore. They need. So we see there a relatively remote chance that there will be a fundamental change of that model going forward. And if it were, nevertheless, to happen against the expectation, it would affect only a part of our Financial Pricing business because it's not our life that we offer, it's also mortgages, non life, health and what have you.
Great. Thanks very much.
The next question comes from Rene Laucher from MainFirst. Please go ahead.
Yes. Good morning all. And so just follow-up question again on real estate, sorry, but that's really where I get the most pushback from clients. I mean, just to split your real estate portfolio. I think with the 44% residential, especially in Switzerland, I mean, new flow is very positive, so rents are going up and also prices are going up.
So office still okay. But then you have this 15% retail and 11% other. Could you just, yes, a little bit more detail, what for example, what's in there in retail? So that's the first one. And the second one, on the 2nd pillar business, I mean, you do have a full coverage product in place.
You have a zen autonomous product in place. Now this 1e solution coming more in favor here in Switzerland. So my question is, your sales force, how are they getting paid? Is there a difference if they are selling full cover than as an autonomous pension scheme? And then the third question is €2,800,000,000 net new money in real I was just wondering if this shopping center you bought for your clients, is this already included here?
Or is this or will this be included in 2021? And the first one might be perhaps a little bit a nice question. But I was just wondering, is net investment weaker 1.4%. Can we split and so the negative impact, can we split it into cash and non cash impact. So let's say like I do believe impairments or unequities or non cash while hedging costs might be a cash item.
Just wondering if you could give your view on it. Thank you.
Okay. Thanks. I'll ask for these wells of questions. Maybe on the retail first. I mean, we have there, as mentioned before, also folks in very good locations.
We have there lots of grocery stores, so really shops that are catering to people that they really have a need. What is interesting to know in terms of the retail spaces that we have there within our portfolio, the lowest vacancy rate. So in the retail area, our vacancy rate is slightly below 2%. So that shows how diligent we are when it comes retail objects, how well positioned they are to attract interest. Now it's also worthwhile mentioning that in that area that we have only a low exposure to hotels and restaurants.
So we have less than 1% of the rental income that is from hotels and restaurants. Now in terms of this shopping center that we purchased for our 3rd party clients for the PPAM business, this will be recorded in the 4th quarter in our expectations. So it was not in the Q3 figures that we mentioned. That shopping center, by the way, is very attractive also for shops. So there's actually waiting rates for shops to enter that center.
So we really take it very seriously that we have excellent locations that we go after. Now in terms of the debt investment income, we had about 1.4% at Q3. And we said for the full year, we expect something slightly below 2% given nothing unforeseen happens. Now in the 1.4%, I would consider or we would consider the real estate depreciation to be noncash. The equity impairments, the realized losses, this is typically close to cash as or also hedging costs.
So this is the running cost situation. Also, the movements on the hedge of hedging cost is cash like.
Okay. And can you just on the 2nd pillar business, so there are remuneration for the sales guys?
We have here clearly a policy in place that we look at what is so the client, which accounts we actually still want to include in the full insurance business. We have tight underwriting criteria. We look at what is the average age, how many payments do we expect over time. So I think that's clearly a key consideration when underwriting new business. And this has led to a situation that we now have more than 46% or essentially 46% of the business in the NBP.
So I think it's probably more important to think about that in terms of our underwriting criteria, which clearly exclude some accounts from getting into the full insurance space.
Okay. And finally quickly, I saw it, I guess, it was a, discussing the Sunday press, a new large real estate project in Basler, looking like 120,000 square meters. I was just wondering, do you follow there your build and rent strategy? Or what should we expect? I mean, it's perhaps still some way to build out.
I was just wondering if you could get a little bit more insight here.
Well, let's just say that a very large project that we acquired, I think, this year. Last year, this is a development that will stretch over 8 ks. But we have some existing buildings on that. It is really relatively open what we will do. This is a kind of part of the city, if you wish, that we have acquired.
And it is not the project where we clearly see today. Business and this will happen. So this will reach times. And there may be, here and there, but it offers the potential to go into many directions.
That's fine. So thank you very much.
Next question is a follow-up question from Michael Huttner from Berenberg. Please go ahead.
Thank you. Thank you very much for
the opportunity. And on the guaranteed yield, I think the figure I last saw was 1.12% for the average of the portfolio. And I just wondered if you can give a feeling for where we might land in January 2021? And the second question is, given you clearly well, you're incredibly well run and you've got Sonsea and stuff. Are you should we expect some maybe deals in Asset Management in the near future?
1 point 12% average guarantee, that's what we have disclosed in our field. That was including the reserve strengthening that we have made until half year. We do assess the reserves for half year and the full year closing. So I think that's what we can say there. There are various things that go into that decision how much to strengthen the reserves.
So that's this part that is very much dependent on things like bond realizations, the interest rate environment and what have you. There is also one thing that is driving a bit the average rate, so that's the government decision on what the mandatory rate will be. So there are a couple of variables that play a role here. I think it's too early to tell. Now given the track record, if you look back where we have been a couple of years and how this average rate has developed, it's probably not a big surprise to say that it is more likely than not that we will be lower at the end because we have this ongoing shift to products with lower guarantees, which also show up in that average technical rate.
Now in terms of deals in M and A, I think we can reiterate here what we always say, the plans that we have put forward with Swiss Life 2021 is an organic plan. If there is something where we have a strategic fit, if there is a rationale, if there's cultural fit, different ways or met, we clearly look at it, but plan is organic, and we have confirmed that plan for 2021.
We have a follow-up question from Andrew Sinclair from Bank of America.
Hi, thanks again. And so I think I cut off last time. Just wanted to follow-up on one quick thing, which is the 96% rent collection. Should we expect similar at the full year? Or do you think I know that's a half year when you did 95%, you thought that you could get some catch up over the second half of
the year. Just thoughts there?
The fact of what they are, we have a lower rent collection in the Q2. As the numbers show, we have gone up in the 3rd quarter. So we have moved the average from 95% to 96% from year to date. I think it's a bit too early to predict what the Q4 will be. In a normal year, to give you an indication, we may have a rent collection of around 99%.
But we are stating obviously not in a normal year.
Excellent. Thanks very much.
There's no further or no more questions.
So thank you for your interest in Swiss Life and for your questions. I wish you a nice day. Stay safe and healthy. Goodbye.
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