So ladies and gentlemen, it's my pleasure to welcome you to our Investors Day here at our headquarters in Zurich, but also on the web. Today, we will present our new strategic and financial targets under our new 3 year program, Swiss Life 2021, which will start next year. We will have 2 presentation blocks today. Before lunch, you will hear my presentation and then the presentation of Thomas Boers, Matthias Ehrlich and Stefan Mechsler, I. E, our CFO, CRO and CIO.
We will then hold a first Q and A session. And after lunch, we will continue with deep dives into the plans of our insurance market units. Switzerland, France, Germany and International, I. E. Monsieur's Leiponcourt, Rellecom, Arnold and Fowhwein.
And to conclude the event, we will then hold a second Q and A session. Under our Swiss Life 2018 program, which we presented 3 years ago, we've considerably improved the profitability and the quality of our earnings. We've strengthened our solvency under the Swiss solvency test. Moreover, we have significantly increased our dividends to shareholders based on a strong cash remittance from our units to the holding companies. Our Swiss Life 2018 program will run until the end of this year.
As mentioned before, I'm confident that we will reach or even exceed all of our Swiss Life 2018 targets. With our new program, Swiss Life 2021, we will build upon our strengths such as our local execution power, our discipline in delivering, our ability to pursue market opportunities based on customers' needs and last but not least, our purpose, helping people lead a self determined life. Our strategic thrusts will help us to deliver on our financial goals. 1, we will significantly increase the quality of earnings and grow our earnings. This includes a clearly higher target for the fee results by 2021, I.
E. 50% higher than the target for Swiss Life 2018 and an increase of 60% for the value of new business compared to the previous program. 2, we'll improve operational efficiency. And 3, we will strive to reward shareholders again. This means increasing our dividend payout ratio to 50% to 60% in the next 3 year period.
This fits well with our strong track record of increasing our dividend. We have tripled the dividend in Swiss francs since 2012 and more than doubled the payout ratio since then. Now in addition, we'll start a share buyback of CHF1 1,000,000,000 next week, and this is all based on a solid solvency and on a higher target for cash remittance compared to the previous program. But let me first look back on the achievements of Swiss Life 2018 and then look at a few key points that set the scene for our future development. We've already exceeded 2 of our Swiss Life 2018 targets a few months ahead of schedule.
All figures are in Swiss francs if not stated otherwise.
At the end of
June, our cumulative cash remittance was at €1,900,000,000 and thus well ahead of plan. And we implemented the planned cost savings beforehand as well. Moreover, we're ahead of our plans with respect to, a, our fee results, which is the driver of our improvements in terms of quality of earnings. Here, we expect to over deliver. And B, the same holds true for the value of new business.
With respect to the remaining four targets, risk result, operating expense, payout ratio and ROE, we're comfortably on track to achieve our stated goals. Of course, I say this with the usual disclaimer of any unforeseen developments. Thomas Puis will provide more details later on. I'm pleased with these results, and they put us in a strong starting position today. Swiss Life provides life, pensions, financial solutions and advice for the long run.
We have a unique position. We're large enough to matter and small enough for everyone who works here to really make a difference. Our unique life insurance footprint and our advisory power differentiate us from other players. We are the leader in the Swiss life insurance market and have good positions in our other markets. We are also a growing asset manager with unique strengths such as in real estate.
Moreover, we have broad distribution networks. Our large proprietary distribution in Switzerland is complemented by an integrated multi distribution model in France and owned IFAs in Germany and at our international division. And we have several sources of profit, and roughly 30% come from our fee businesses. What are some of the key trends and opportunities in the years ahead? 1, the economy.
In our view, we continue to be in an era of financial repression with only very slowly rising rates. 2, digitalization brings change to the customer interface and possibilities for efficiency gains. 3, customers. Pension and protection gaps create opportunities for us as a life insurance company. I'll come back to the implications of these trends in a minute.
Further trends we see, our people are the key to success. 5, we face varied levels of competitive pressure. There's still a lot of competitive pressure for big ticket items such as in the area of biometric risks. And why? Well, because solvency requirements under the SST and Solvency II are benign.
The same holds true. There's a lot of competition for securities related asset management. But apart from these areas, our competitive position is quite unique. In Switzerland, we're by far the largest player in the life insurance business, especially after our biggest competitor pulled out of the market for full insurance coverage in group life. And the SSD calibration keeps away new entrants.
In France, we have a strong niche position with our offering for high net worth customers. And in Germany, we own the 2nd largest IFA network. And as an asset manager, we have a unique offering in real estate. 6th and last point, regulation. We finally have more clarity in terms of solvency requirements.
We're now comfortable to disclose an SST ambition range. Matias Erik, our CRO and Designated CFO as of the beginning of March, will deep dive into this topic later on. I will now explore the 3 trends on the left hand side of the slide. Let's start with the economy. In our base case, we expect 10 year government Swiss yields to be at 50 basis points by the end of 2021.
And its German counterpart, the bund, the 10 year bund yields, are most will probably be at around 100 basis points. Or put differently, we expect only slightly higher rates. And we're well positioned to navigate through this continuously low interest rate environment. Why? A, we've proven that we can keep our investment yields resilient due to our long asset duration.
B, our ALM and past reserve strengthening have protected our interest rate margin C, we've improved our product and margin management as well as, D, the quality of earnings by growing our various fee businesses. In recent years, I've often been asked, well, what would happen if rates rose much more than what we were expecting? Now we said the same thing and have now put it down on this slide. If rates rose substantially, for example, back to pre crisis levels, it's possible that we would suffer negative valuation impacts on our real estate portfolio. However, rising rates are beneficial for our insurance business.
That's what we call a natural hedge between the 2, a natural hedge between our life insurance business and our real estate offering. The overall impact of a strong rate rise on profit and cash generation would be broadly neutral. Let me explain. 1st on profit. Under the current IFRS framework, the natural hedge will not work in each and every period as the positive impact of the on the insurance side would kick in with a certain delay.
But economically, this should work well as both the VNB and SSD benefit from rising rates. 2nd on cash. Cash remittance is driven by statutory results. And these are well protected against rate rises as our real estate portfolio is basically held at cost under statutory accounting. To sum up, strongly rising rates would be broadly, I.
E, over the midterm, neutral for profit and cash, but positive for VNB and SST. Now let me tell you a little bit about digitalization. We regard digitalization as an opportunity to improve not only our business processes, but also our service to customers. We will develop our distribution model into a phygital or phygital 1. With phygital or phygital, we mean a combination of digital tools with our customer centric personal, I.
E, physical advice. In other words, we'll use technology to improve our strengths in the area of personal financial advice and to support our 10,000 salespeople and advisors by doing so. For us, digitalization has 4 dimensions. The first 2 are the more important ones. 1, customer interface.
This is where our phygital approach makes the difference vis a vis pure digital offerings. 2, operations. Digitalization will continue to automate processes, for example, in underwriting or in claims management. 3, we will use our data analytics and machine learning to improve our customer access and relationships. And 4, of course, we will work with partners to drive innovation.
Later in the day, you will hear more details on how we plan to capitalize on digitalization in our business divisions much more concretely. Let's move to the 3rd trend now, customers. The impact of rapidly aging populations on pensions is generally underestimated. If people continue to live longer, then every one of us will be increasingly called upon to take on more responsibility for providing for our own pensions. Against this backdrop, our work at Swiss Life will become even more relevant.
Pension solutions and advice are a growth market. People want to determine their financial futures. Given our focus on helping customers lead a self determined life, we're in a good position to harness the potential of this trend and will step up our engagement between now and 2021. The result of our market research support this decision. Our studies show that people find pension planning stressful.
They worry about having insufficient financial resources in old age. Many are concerned that they will be unable to maintain their standard of living. Most of them are aware that the financial security, their financial security is largely up to them. So they are willing to save and to improve their pension contributions. But particularly younger people are unsure how to do that.
This means that we as private pension providers and advisors are called upon to address these concerns. Enabling people to determine their financial futures is central to our strategy. We enable people to lead a self determined life. What we do at Swiss Life revolves around that. And combined with our well developed product offering and advice, we stand out.
And this allows us to seize market opportunities. Let me now present our new Swiss Life 2021 program. We have 4 strategic thrusts. 1, our focus on preferred customer segments 2, offering more attractive solutions and advice to those customers 3, we'll make customer relationships more rewarding and 4, we'll improve our productivity. On the financial side, we will increase the quality of earnings and grow earnings.
We will improve operational efficiency, and we will enhance shareholder returns. Each division will explicitly highlight their contribution to the strategic and financial thrusts mentioned on this slide. You will get more insight from every business division on their current position, so where we are today 2, on how we will capitalize on market opportunities and thus support our 4 strategic thrusts, what we will do and 3, on their specific contribution to our group financial targets, what we will achieve with Swiss Life 2021. I will now provide more details on our strategic and financial thrusts. With our 4 strategic thrusts, our insurance market units will address industry trends and opportunities I mentioned and support our key financial targets as highlighted on the right hand side of the slide.
Thrust 1, with our focus on preferred segments, we want to refine our customer segmentation in order, well, to promote attractive propositions. This represents Thrust 2. These propositions are a combination of products, Swiss Life or others, and advice and services. From a customer point of view, that must cover their needs. And from our point of view, the products have to be capital efficient.
Thrust 3, make customer relationships more rewarding. It's meant to be rewarding for both sides, so for customers and for us as a company. Cost discipline, combined with growth and efficiency initiatives, remain key to improve our productivity, and that's our 4th thrust. Now this brings me to the financial contribution I expect from each business division by 2021. The graph shows that the share the graph on the left hand side shows the share of fee and risk result for each division plotted against their cash remittance.
Cash remittance is the basis for improving payouts to our shareholders. Over the cycle, we expect cash remittance to grow in line with earnings, which in turn are driven by the development of the fee and risk results. The bubble sizes represent the contributions to our profit from operations from each division. And the arrows indicate the aspiration of each division until 2021. As you can see, I've set different priorities for each division according to local economic, legal and regulatory conditions, and this fits well with our multi distribute.
This fits well with our way of approaching the markets, which is multi local. Switzerland is our biggest business division. It's our key cash contributor. Its segment result is driven by a large and resilient savings results. An important goal for Switzerland is to ensure further growth and the sustainability of our cash remittance over the next 3 years with the additional goal of doubling the fee results and increasing the risk results.
In our plans, Switzerland will contribute most to the growth of our risk result. France will further leverage its private insurer and multi distribution model, which will contribute to growing the fee result, but I also expect a growing risk result in the health and protection business. Germany has delivered a successful turnaround at Swiss Life Select and will focus on growing the fee results from owned IFAs even further by increasing the number of advisers, but also their productivity. They will also increase the risk results by capitalizing on their specialized position. International will focus on doubling the fee results supported by all lines of business, while improving the risk result from corporate customers.
And asset managers have the goal to further increase the fee result mainly from the business with 3rd party clients, with real estate playing an important role. All of this will result in increased cash remittance and an improvement of our quality of earnings. Let's now turn to Page 16. That's probably the one you turned to first this morning. With Swiss Life 20 to 21, we have significantly raised our ambitions.
Again, we've refrained from publishing any top line growth ambitions at group level. We will continue to focus on bottom line growth and will pursue our increased focus on the capital light fee results. We will significantly grow this fee results to €600,000,000 to €650,000,000 by 2021. We also want to increase the risk results, and the cumulative value of new business is expected to exceed €1,200,000,000 euros Operational efficiency remains important, and we've decided to introduce new metrics to measure efficiency improvements in the various areas of our business. These KPIs best reflect our continuous cost discipline in the context of growing our earnings.
By 2021, we want to improve the life efficiency ratio, the operating expense ratio of our IFAs and the cost income ratio at our TPAM business. Capital, cash and payout will remain paramount in our new program. We newly disclosed our SST ambition range. We'll strive to remit more cash to the holding company. We'll ensure attractive shareholder returns by increasing the dividend payout ratio for the period 2019 to 2021 and by introducing a share buyback of €1,000,000,000 over the next 13 months.
This will all lead to a return on equity in the range of 8% to 10%. Of course, each division has targets to ensure that we will reach our objectives at group level. We have a strong track record of increasing our dividends. Since 2012, we've tripled our dividend per share and more than doubled dividend payout ratio. This is a major achievement and proof of our success in managing the underlying solvency, earnings growth and cash remittance that all contributed to an increased dividend.
And here, a small personal anecdote. Several years ago, before I became CEO, I had a chat with an analyst during one of our full year presentations. I asked him why our stock was losing value that day despite, so I believe, the very strong set of earnings. And he told me, well, that he missed disclosure with regard to cash generation and the underlying mechanics. Over the following years, which entailed buffer building at the operating companies and then buffer building at the holding company, I never lost sight of the importance of cash for shareholders.
Step by step, we've increased transparency and introduced metrics to enhance cash returns, which has led to the results you see on this slide. And now, the journey of increasing cash remittance to the holding and enhancing shareholder returns will continue. We will substantially increase the cumulative cash remittance from our subsidiaries to the holding companies to a range of 2 to 2.25 billion by 2021, up from the previous range of more than 1,500,000,000. And this will be an important basis for increasing the dividend payout ratio. So let me now wrap up.
From 2015 until now, we've not only improved our profitability and quality of earnings, we've also increased our efficiency and dividends to our shareholders. Our Swiss Life 2018 program is a success and the basis for our new program. And our new Swiss Life 2021 program is our roadmap going forward. We will again deliver more earnings quality and earnings growth. We will become even more efficient, and we will return more to shareholders.
That's what my team and I will be doing. I can assure you that we are fully committed to achieving our Swiss Life 2021 goals that entails our strategic and financial ambitions. And now, Thomas, I hand over to you to outline the financial aspects of our program in more detail.
Thank you, Patrick. Good morning, ladies and gentlemen. In the next 30 minutes, I will first give you a quick overview of how we have been delivering on the Swiss Life 2018 program, explain where we will go from here and outline how our new Swiss Life 2021 targets look like and show how we plan to deliver on these targets. Let's first have a quick look at back on the Swiss Life 2018 program. Almost exactly 3 years ago, in this room, actually in another room, we explained the Swiss Life 2018 program.
This followed the successful completion of 2 other programs. Some of you remember Milestone and Swiss Life 2015. Our goal was to grow and increase the quality of our earnings, further improve our operational efficiency in order to increase cash remittance and the dividends to our shareholders. As Patrick has already shown, with Swiss Life 2021, we will continue to drive these key financial thrusts. We will further strengthen our earnings quality and grow our earnings, particularly by increasing the fee and risk result.
We will continue to improve operational efficiency through keeping our cost discipline, further process automation and digitalization initiatives, and we will be even more attractive for our shareholders with higher shareholder dividends based on our solid capital management and increased cash remittance to the holding company. The next two slides will show how we have led the basis for our new and higher ambitions by the successful execution of the Swiss Life 2018 program. Since 2014, we have grown our earnings by 24% to more than CHF 1,000,000,000 and kept the return on equity in the upper part of our target range. Our earnings growth was largely driven by the strong performance of our fee businesses, asset managers, owned IFAs and the successful unit linked business. These were the major drivers of a 64% increase of our fee result.
We have reached the upper part of the target range here 1 year ahead of schedule. In addition, we have achieved the goal to keep the risk result stable in the range of €350,000,000 to €400,000,000 despite margin and competitive pressure. We were also successful in generating more than €859,000,000 of cumulative new business value over the last 2.5 years, again exceeding the announced target ahead of schedule. Besides reducing the dependency on the savings result, we were also successful in protecting it. Our disciplined asset and liability management has stabilized.
Our interest rate margin, you can see this on the slide, at an attractive level despite the lower reinvestment rates in this low interest rate environment. In addition, we have further improved our operational efficiency by saving EUR 100,000,000 of running costs since 2014, which we have invested in digitalization and in growth initiatives. This enabled us to keep operating expenses stable and at the same time, improved the efficiency ratio to 56 basis points at the end of 2017. All these improvements gave room to our operating companies to remit more cash to our holding company. The SEK 1,500,000,000 cumulative target was already exceeded at the half year of this year.
Patrick has mentioned it. We already have remitted SEK1.9 billion of cash to the holding company. This enabled us to more than double our dividend since 2014 from CHF 6.5 to CHF 13.5 a share and move to a payout ratio of 46% for the year 2017. This is already at the upper end of the target range. I'm also very pleased to report that all market units have either already reached or are expected to reach or exceed their contribution to the announced Swiss Life 2018 group targets.
We have shown exactly this slide 3 years ago with the respective targets for each market unit. And you can see Switzerland, as the main contributor to cash, has more than doubled its remittance to CHF 343,000,000 Asset Manager, as the main contributor to the fee result, has managed to grow its fee income since 2014 by 50%, already exceeding the target range 1 year ahead of time. And France has doubled the fee result to EUR 60,000,000 and has reached the target range already at the end of 2017. Our German market units, thanks to the strong performance of the own Dia phase, have reached the upper part of the target range 1 year early. And international has grown with the same 80% and is expected to be within the announced target range by the end of this year.
Overall, this demonstrates the disciplined execution of Swiss Life 2018 in all our business units. This now leads us to the question, where do we go from here and what is new in our Swiss Life 2021 program. I'll reiterate 3 focus points that will remain key also for the next program. 1st, we will keep the focus on our disciplined asset and liability management in order to protect or even increase the savings result that still accounts for more than 50% of our earnings. 2nd, we will maintain our strict cost discipline and keep investing into process automation.
And third, we will ensure solid capital management and further increase cash generation. In addition, we will substantially increase our ambition for the fee and risk result as well as for the value of new business. We will not only keep a strong eye on cost discipline, but leverage digitalization in order to further increase operational efficiency. We also believe in the scalability of our business model and will realize operational leverage in both our owned IFAs as well as in our asset management unit. Given the solid capitalization and the strong solvency, we will manage capital within a newly disclosed We will increase the dividend payout based on the strong cash remittance to our operating from our operating companies.
And we will keep our promise and address the 6.7% dilution of our share capital by the conversion of the convertible bond at the end of 2017. We will even go beyond that with a share buyback program of SEK 1,000,000,000 over the next 13 months. Based on these focus points, we are committed to reach the following financial targets until the end of 2021. As Patrick has already shown, most of our earnings growth over the next 3 years should come from an increased fee result. We plan to deliver between €600,000,000 €650,000,000 by the end of 2021.
Major contributors here will be asset managers, the unit linked businesses in France and our owned IFAs in Germany and in the International Market Unit. We will grow our risk result to €400,000,000 to €450,000,000 by the end of 2021, driven mainly by the Swiss Group Life and the French Health Business. We will also increase our target for the cumulative new business value to more than SEK 1,200,000,000 over the next 3 years. As already mentioned, improved efficiency will be an important ingredient also in our new program. Taking into account the diversity of our businesses, we are addressing this now with 3 key performance indicators.
1st, in the life insurance, we will further decrease our efficiency ratio to below 40 basis points. 2nd, in our distribution units, our goal is to achieve an expense ratio of below 25%. And in our TPAM business, we want to lower the costincome ratio to about 75%. Moving on to capital cash and solvency. You can see that we will maintain a very strong SSD solvency.
We plan to do this in the range of 140 percent to 190 percent and will, at the same time, increase the cumulative cash remittance to the holding company to SEK 2,000,000,000 to SEK 2,250,000,000 over the next 3 years. This will enable us to move to a higher payout ratio of 50% to 60% for the period. Based on the strong solvency and cash position, we will use CHF 1,000,000,000 to buy back shares within the next 13 months. Before I explain how we are going to deliver on these targets, let me again show why our first financial thrust, earnings quality, matters. We have already shown a similar slide in the past.
It shows the contribution of our 4 profit sources to our earnings, their relative capital intensity, their capital market dependency and if they are subject to policyholder participation. As you can see, in 2017, 53% or more than half of our earnings came from the savings result. This is capital intense. It depends on capital markets and is subject to policyholder participation. Our goal is to protect the savings result, which does not mean that it cannot grow.
Please bear in mind that, as for example, in the Swiss Group Life business, the savings result is often bundled with attractive risk businesses. Compared to the savings result, the risk result has 2 advantages. First, under the economic solvency regime, it creates its own capital. 2nd, there is no capital market dependency. However, as the savings result, there is policyholder sharing.
In 2017, you can see the risk result accounted for 25% of our earnings. The area where we have put the most focus on is the fee result, which accounted for almost 30% of our earnings. This source is very capital light with only some dependency on the capital markets. Another advantage is that there is no policyholder participation. The exhibit shows the rationale of our Swiss Life 2021 strategy.
We will pursue a higher quality of earnings. We will grow our earnings by increasing fee and risk results. Over time, this will lead to a less capital intense business with less dependency on capital market movements. And this is exactly the same strategy that has served us so well in this low interest rate environment. Please allow me some additional remarks on the savings result.
The savings result will continue to be an important profit contributor. You've seen it accounts for CHF 817,000,000 last year, 53% of our earnings. Switzerland has contributed about 2 thirds, followed by France that delivered about one fourth to the savings result. The other market units are stronger in the fee, risk or cost results. We have managed to protect the savings result, thanks to the resilient investment yields.
This was due to the very long asset duration, to a high share of real estate and to continuous optimization of our asset portfolio. We have, for instance, invested more into protected equity as this asset class became more capital efficient over time. On the liability side, we have strengthened the reserves in order to decrease the average technical interest rate. In addition, we have 2 modern products. Both our work on assets as well as on the liability side will continue.
Even if we use lower than today's reinvestment rates and the actual portfolio structure to project our interest rate margin into the future, we expect it to be resilient for more than 3 decades. You can see this on the next slide. Please note that our current reinvestment rates are higher than the ones assumed for this calculation. Our Chief Risk Officer, Matias Elig, later on will give you a deeper insight into our asset and liability management in his presentation. The message is that the savings result continues to be an important contributor to our earnings despite the low interest rate environment and that disciplined ALM will safeguard our savings result going forward.
Now I'll show you how we are going to deliver the 'twenty one targets and the strategy. Patrick has already shown how every business division will play its part in the Swiss Life 2021 program. I now give you the respective figures by the end of 2021. Switzerland will further increase cash remittance to more than EUR 400,000,000 France will increase the fee plus risk result to EUR 180,000,000 to EUR 200,000,000. Germany will substantially grow the risk plus fee result to EUR 100,000,000 to EUR 110,000,000 International will deliver a combined fee and risk result of EUR 73,000,000 to EUR 82,000,000 by the end of 2021.
And finally, asset managers will continue to grow its 3rd party business with an increase of the fee result to €340,000,000 to €360,000,000 by the end of 2021. My colleagues will provide more details in their respective presentations later on. Turning now to our major source of profit growth, the fee result. Our plan is to significantly grow the fee result from CHF442,000,000 in 2017 to €600,000,000 to €650,000,000 by the end of 'twenty one. This is an increase of 50% compared to the Swiss Life 2018 target.
Their main contribution will come from asset management, where the growth is driven by increasing distribution capacities and by providing extended access to real estate to our clients, also addressing a more international client base. Our international business division will increase its contribution by broadening the cross border wealth transfer solutions and by strengthening its market position of owned IFS in Central Eastern Europe and the UK through affinity groups. France will further grow its unit linked business. Here, we are already very successful, and they will leverage the private insurer positioning that is unique. In Germany, we will grow the fee result by increasing the number of advisers and by making them at the same time more productive, supported by our digitalized and scalable platform.
And finally, the Swiss market unit will double the fee result by further developing investment solutions and pension consulting. Let's have a look at the risk result. In our Swiss Life 2018 program, we have set the targets to keep the risk result stable despite the expected competitive pressure. We believe that we can do better than that. In our new program, we will increase the risk result to €400,000,000 to €450,000,000 by the end of 2021.
The lion's share of the risk result is coming from Switzerland. We are convinced that we are in a very good position to benefit from the market opportunities in the Swiss Group Life business to grow the risk result. In France, we will enhance our strong positioning in health and protection and further develop our offerings in credit life and in P and C. In Germany, we will intensify our solutions for specific industry sectors and further grow the biometric risk business where we have successful and unique position. And Swiss Life International will offer new solutions, such as large case underwriting for high net worth individuals and increased risk plan offerings for multinationals.
Moving on with our new business value. As mentioned in prior presentations, our new business value generation is key for future earnings. That's why we will put an even stronger focus on it and will increase our cumulative target by about 60% from SEK 750,000,000 to SEK 1,200,000,000 of new business value over the next 3 years. The main contributor is France, where we maintain the very attractive business mix of unit linked and risk while significantly growing. In Germany, we will leverage our strong distribution to further grow our biometric risk modern savings businesses.
Our international market unit will leverage its cross border wealth transfer solutions and further develop tailored and modular solutions for corporates. And finally, Switzerland is expected to benefit from the recent market opportunities in group life for both full insurance as well as semi autonomous solutions. We are the only full range insurance provider in the Swiss PPG market. Our focus on efficiency as a major theme in all three prior programs, milestones, Swiss Life 2015 and Swiss Life 2018 will continue. So we will continue to work on it with our second financial thrust.
Please note that we have adapted the definition of our efficiency ratio. It is now focused on our life business, and it excludes all non life and distribution businesses. Our life efficiency ratio was 41 basis points at the end of 2017, and we plan to further improve it in our insurance units and put it substantially below 40 basis points by automating processes and leveraging digitalization. In Switzerland, we will further digitalize customer processes to enhance the administration and self-service platforms. In France, we will continue to promote the portals and self care platforms, foster digital transformation and further drive process automation.
In Germany, we still see opportunities to automate processes, especially in underwriting and enhance also the digital interfaces. This will mainly benefit in Germany the admin cost result. The positive effect on the efficiency ratio will be more than counteracted by the changed product mix with risk products contributing almost no reserves. And in international, we will optimize the target operating model as well as introduce the digital distribution, this in line with the initiatives in all market units. In the past, our main focus on efficiency was in the insurance industry.
Now in our Swiss Life 21 program, we will also put an increased focus on productivity and scalability of our distribution business and asset management. This is shown on the next slide. By the end of 2021, our distribution operating expense ratio should be improved by at least 2 percentage points. This as a result of the improved self-service functionalities and leveraging the scalable platform in Germany and in Swiss Life International. Here, we are realizing operational synergies also in Central and Eastern Europe and will leverage our digital portals in the UK.
For asset managers, our cost income ratio of TPAM will be improved by more than 10 percentage points by the end of 2021. I will now turn to the 3rd financial trust, capital cash and solvency by reiterating some of our solid starting points. With Swiss Life 21, we will strive for a more attractive shareholder return. We have a solid capital base with an A rating from Standard and Poor's, including AAA Capitalization. We have and will further improve the quality of our earnings by moving more and more to capital efficient sources of profit.
We have an attractive new business mix with less than 7% of traditional business in the new business production, And we have now, as Patrick has mentioned, more clarity on the SST capital requirements. And based on the new standard model, we expect the SST ratio to be above 190%. And we have strong liquidity at the holding company with about SEK 1,700,000,000 of cash. Based on this, we will manage our capital within the disclosed SSD ambition range, further enhance our cash remittance to the holding and increase our payout ratio. Let's have a quick look at the SST ambition range.
As a result of the joint efforts of the insurance supervisor and the insurance industry to develop a new standard model for the Swiss solvency test, we finally have more clarity on our Swiss solvency test capital requirements. That's why we now feel comfortable to introduce this ambition range, and we have set our ambition range to between 140% 190%. We believe that for the new standard model, this is a sensible range with enough buffer, but without holding excess capital. Within the 140% to 190%, we plan to keep the payout ratio at our Swiss Life 'twenty one target. Below this range, we would implement ALM measures like derisking before reaching the 120% level.
Above the 190% and below the 120% SST ratio, capital management actions will be considered. Swiss Life will apply the new standard model for the first time at the 1st January 2019. For your information, this exhibit shows the result of our pro form a SSD calculation as of the end of June 2018. Based on the new standard model, the SSD ratio at the end of June would have been 190% to 195%. Mattias will go into more details in his presentation later on.
Moving on to our cash remittance. In Swiss Life 2018, our cash remittance was more than SEK 1,500,000,000 of cash to the holding company. We plan to increase this target, as already mentioned, by 50% to SEK 2.5 1,000,000,000 cumulative over the period. As you can see, we expect Switzerland to be the main contributor, followed by asset managers and friends. The pie chart to the right shows the business mix and is reflecting the growing importance of the fee businesses where cash can be returned much faster and easier to shareholders.
By increasing our earnings in our Swiss Life 2021 program, mainly thanks to the increase of the fee result, we will grow our cash remittance more or less in line with our earnings. This increase of the cash remittance coming from the fee business and the fact that our solvency ratio in the market units are solid supports the increase of our dividend payout to full 50% to 60% for the period 2019 to 2021. The waterfall slide shows that the majority of our IFRS profits are turned into dividends to our shareholders. Approximately 20%, you see, is noncash items, such as real estate revaluations or different reserving levels in local statutory accounting. About 10% are retained at the business divisions for statutory requirements in order to finance the growth.
Another 10% to 20% will be kept in the holding company to ensure capital management flexibility and financing for potential bolt on acquisitions. If the cash that is retained in the holding company is not needed for the before mentioned reasons And if our solvency exceeds the upper part of the ambition range, then excess capital will be returned to shareholders. As we currently are in this position, we have today announced the share buyback program. Due to our strong capital position and based on the development of our shareholders' equity, we plan this CHF 1,000,000,000 buyback. Since 2015, you can see this on the slide, our shareholders' equity has grown by CHF 2,000,000,000, the lion's share coming from retained earnings and to a lower extent from our from the conversion of our convertible bond.
The planned share buyback is expected to more than offset the dilution effect from this convertible bond and will ensure going forward an increased return to our shareholders. The impact of the share buyback on our Swiss solvency test ratio is expected to be about 7 percentage points. The planned share buyback will start on the third of December 2018, which is next Monday, and will be completed by the end of next year. We will purchase these shares on the 2nd trading line at market price, which currently corresponds to approximately 2,600,000 shares or 8% of our share capital. The execution will be delegated to a partner bank, and repurchased shares will be canceled.
Ladies and gentlemen, with Swiss Life 2021, we will substantially raise our ambitions. We will grow our earnings mainly through our fee result from CHF 400,000,000 to CHF 450,000,000 in our previous plan to CHF 600,000,000 to CHF 650 1,000,000 by 2021. This is a 50% increase of our ambition. We will increase our cumulative cash remittance to CHF 2,000,000,000 to CHF 2,250,000,000, which is an increase of again 50% compared to our previous target. As for capital management, we introduced the new SST ambition range of 140% to 190%.
Within this range, we commit to provide attractive returns for our shareholders by increasing the dividend payout to 50% to 60% for the next 3 years and executing a EUR 1,000,000,000 share buyback program. We at Swiss Life have run 3 successful programs over the last 9 years. We achieved substantial earnings growth and repositioned our company by changing the sources of profit to make us less dependent on capital markets. Besides this, the prior programs have one thing in common that will also serve us very well in the next 3 years. This is the success was only possible due to our commitment to the disciplined execution of the planned initiatives and the ambitious target setting for clearly communicated key performance indicators, What gets measured gets done.
With Swiss Life 2021, we will continue this successful path by further enhancing our earnings quality and growth and by striving for an attractive shareholder return. I truly believe that our disciplined execution will again enable us to deliver on this program. With this, I hand over to my designated successor and Chief Risk Officer, Mathias Ellik, who will give you more details on solvency, ALM and capital efficiency.
Thank you, Thomas. Ladies and gentlemen, capital efficient value creation is a cornerstone of how we do business. With Swiss Life 2018, we expect to exceed our cumulative VNB target of CHF 750,000,000. We also strengthened technical reserves by around CHF 7,000,000,000 since 2012 to safeguard the interest rate margin. At Q3 2018, our SSD ratio was above 175% and our Solvency II ratio above 200%.
We are also ready for the new Solvency Standard Model from 1st January 2019. Based on this, we set for Swiss Life 2021 an ambition range of 140% to 190%. Within this range, we will manage the company based on the internal economic model and the underlying principles. They have served us well in the past. Disciplined ALM and capital efficient investment will protect our interest rate margin for more than 3 decades.
Also in new business, capital efficiency remains a cornerstone. We aim to write new business with a cumulative value of more than CHF 1,200,000,000. This will enable us to pursue an attractive dividend policy. In this presentation, I will show how we integrate capital efficiency into the management of back book and new business. I will start by outlining the features of the new solvency model.
Then I'll present the ambition range and how we use the solvency model and the internal economic model. After that, I'll give some examples before concluding with our V and V ambition for Swiss Life 2021. What are the key aspects of the new solvency model effective from 1st January 2019? On the valuation side, there is a short projection of the active insured persons in the BVG for only 2 years. Future policyholder bonuses are recognized as capital as in the old solvency model.
The required capital is derived from general, sometimes factory based models and there's no recognition of diversification between market and credit risk. The new solvency model is relatively simple as it's based on guaranteed benefits and is focused on 1 year solvency monitoring. It does not capture all economic features of the long term life business. The regulator does not expect us to use this model for business steering. In other words, there's no use test requirement.
For business steering, we rely, therefore, on our internal economic model. First, I'll now describe the new solvency model and then move to the internal economic model. As disclosed before, we filed to FINMA for 1st January 2018 an SSD ratio of 170% based on the old solvency model that will expire in 2018. The effect of the introduction of the new standard model with a new valuation module and new modules for market, credit and insurance risk has a slightly negative impact on the ratio. On the other hand, the use of the Solvency II valuation basis for insurance units in the EU, possible since 1st January 2018, has a positive impact of around 20 percentage points.
We'll move to that basis the pro form a value of 185% to 190% for January 1, 2018. Given overall positive capital market developments in the first half of twenty eighteen, we estimate the half year pro form a to be above 190%. The new solvency model, however, is more sensitive to capital market movements than the old solvency model. With respect to credit spreads, the sensitivity doubled for 1st January 2018, and most other sensitivities increased, too. While there are various technical reasons for asset class, there's one common driver.
The short projection in the BBG business reduces the available capital as biometric and other profits are projected over a much shorter period. Since the required capital and the market value margin are also reduced, the SSD ratio is only slightly reduced by the standard model introduction. The monetary impact of asset valuation sensitivities is still the same. That means the numerator is reduced by the same amount, while the denominator is smaller in the new solvency model. Therefore, sensitivities expressed in SSD points increase.
As mentioned before, we took advantage of the tight credit spreads in the first half of twenty eighteen and shifted long dated corporate bonds into equity and COVID. As a result, the credit spread sensitivity was reduced as of 30th June 2018. The interest rate sensitivity decreases in the new solvency model since the liabilities are much shorter than in the old solvency model. The further reduction of the UFR as of 1st January 20 19 will reduce the SST by about 2 percentage points and the share buyback by another 7 points. In parallel to the new solvency model, we operate our internal economic model for business steering.
Its key features include the following. On the valuation side, we project the BBG business based on experienced surrenders to reflect risk sharing by the policyholders, their future bonuses recognized as a liability, mitigate adverse developments. On the required capital side, a more granular approach, especially for spread and credit, is recognized on an economic basis. As a result, our internal model captures the economic features of Life Business. This allows an effective management of duration gap and capital efficiency considerations in the back book and for new business.
Let me now show you how we use the 2 models. Monitoring of both the regulatory solvency and the economic capitalization are a must given the sensitivities regarding capital market movements. Continuous ALM rebalancing and business steering are performed according to a clear priority. With the solvency model, we strive to stay in the ambition range of 140% to 190% given its sensitivities. While we are within or above that range, our focus is on the internal economic model to steer the business.
Insights it provides have served us well. Should the solvency position nevertheless deteriorate, we would gradually deemphasize the economic view and put more and more weight on the solvency model when managing the business. As you can see on the slide, we adhere to our payout ratio according to plan over a large SSD range. If we find ourselves around or above the upper end of the Envision range, we will consider capital management actions such as a share buyback as is the case now. Should capital market movements reduce the SSD ratio towards 120%, comprehensive ALM measures would be considered.
Below that level, capital management actions would also be considered. This is a policy, not a rule book, allowing us, in any case, to assess carefully the circumstances. On the next slide, I'll illustrate what taking an economic view entails. Taking an economic view pays off. We avoid interest rate risk, for which the duration gap is a proxy.
There's no systematic compensation for running interest rate risk. With our dynamic duration management, we keep a narrow duration gap as shown on the upper panel. As shown in the lower panel, we achieved a resilient direct yield in the persistent low interest rate environment. It is noteworthy that we have also a narrow duration gap in the new solvency model. ALM, however, is not just about duration.
Once the asset duration is properly set, there are some asset classes for which the risks are adequately compensated, and those are the ones we take to earn an excess return. We regularly assess the capital efficiency since both capital markets and the balance sheet evolve over time. On this chart, we assess different classes expected yield on the vertical axis and by the incremental required economic capital on the horizontal axis. The example shows the Swiss portfolio mid-twenty 18. Asset classes above the efficiency line are favored when it comes to investing new money, be it from premium inflows, coupons or redemptions.
These risk return analysis underlying the capital efficiency are important in the asset allocation. Other considerations, such as local statutory and IFRS accounting as well as the new solvency model are also relevant. When it comes to investing new money, we favor real estate, mortgages, hedge equity and infrastructure equity. These asset classes are also attractive reinvestments in the new solvency model. On the next slide, we see the prospective benefits of ALM and capital efficiency.
In a projection of asset yields and the average technical guarantees of the in force business, we demonstrate the continued resilience of the interest rate margin. The main assumptions are: 1st, no profits from fee or risk business are included 2nd, no new business is included. 3rd, we include substantial annuity conversion losses in the BBG business as we assume the mandatory conversion rate to remain at its current level. The BVG minimum interest rate is projected to drop only after 2,030. 4th, we have not assumed any realization on fixed income instruments other than for building up the ZZR in Germany.
We include the realization of today's existing unrealized statutory gains on real estate and equity starting in 2020. This amounts to about 25 basis points per annum until 2,040. And last, we project asset returns based on forward rates. If we use reinvestment rates based on current pickups, the interest rate margin in 2,050 will be higher by around 50 basis points. Let me now show you a breakdown of the statutory reserves underlying this analysis.
The BVG reserves depicted in red are more persistent than those of the other businesses. Actually, they will even increase by SEK 2,000,000,000 by 2025. Besides the low surrenders, one reason is that new employees are entering into the schemes to replace the retiring employees. On the other hand, non BVG reserves will decrease by SEK 13,000,000,000 by 2025. Net, the back book will decrease by SEK 11,000,000,000 by 2025 or less than 10% of today's reserves.
As a result, there will be merely a moderate capital relief from the back book in the years to come. When we include new business, projected reserves remain flat or increase slightly. This is mainly due to France, where the unit linked products come with a low share of guaranteed reserves and the Swiss BVG business. I'll now illustrate how we manage back book new business for value. It's probably no surprise that our focus on BVG.
Given our focus on ALM and the capital efficient approach to investment, we have achieved in the BVG higher investment yields over the long run than our peers. We exceeded on average for direct and net investment yield to peers per annum by around 60 basis points and 50 basis points, respectively. For total investment yield, the historical outperformance amounts even to 100 basis points per annum. At the end of 2017, unrealized statutory gains amounted to around 14% of net investments, which compares favorably to our peers' 11%. Moving now to Swiss Life's reserving position in the BVG business.
Let me repeat. We have strengthened our technical reserves substantially. This is visible for future annuity conversion where our reserves are well above our peers. On additional reserves for annuities and payment, we see ourselves in the middle of the pack. Considering all additional reserves, we have an above average reserving situation.
These analyses show that we are in a more favorable position than our peers in the BVG business. We're also well positioned to write attractive new business. In the BBG new business, Swisslife is pursuing a strategy with a comprehensive offering shown in the middle. It includes full insurance and semiautonomous business. We compare this with an alternative with semiautonomous business only.
This strategy is shown at the left side. Comprehensive offering obviously caters to additional customer needs and therefore generates, besides the savings premiums, substantially higher risk and cost premiums. Both strategies are capital efficient. Both earn the cost of capital on the incremental economic capital required. In isolation, both are valuable approaches to new business.
Even though the semi autonomous alternative comes with a higher capital efficiency because it requires less economic capital, we pursue the comprehensive offering. 1st, it is also capital efficient. 2nd, it creates around 3x as much incremental IFRS profit and hence also more cash. 3rd, it also creates more VNB. It's not our goal to maximize capital efficiency or new business margins.
For us, those are very relevant constraints. Once these constraints are fulfilled, we rather optimize profit and VNB. How have we done overall in terms of margin and value management and what's ahead? Swiss Life has increased new business margin since 2014 by 80 basis points. We have more than offset the negative capital market developments with margin management and a focus on capital efficiency.
The new business written, among other effects, created in that period, economic and solvency capital. While capital generation is not cash generation, it is a key prerequisite for our dividend policy. To that end, we have the ambition to generate a cumulative value of new business in excess of CHF 1,200,000,000 in a low interest rate environment. For the margin, the hurdle rate of 1% and the ambition level of 1.5% remain in place. To conclude, capital efficient value creation is a cornerstone of how we manage the business to support our attractive dividend policy.
We will pursue disciplined ALM and capital efficient investment to protect our interest rate margin. We will strive to stay in the SST ambition range of 140% to 190%. And we have the ambition to write new business with a cumulative value of more than CHF 1,200,000,000. With that, I hand over to Stefan Mehrd, our group CIO.
Thank you, Matthias. Ladies and gentlemen, today, I would like to talk about how we at Swiss Life Asset Managers aim to further leverage our strengths to continue our success story. We are a credible, reliable and successful European asset manager. IP, a leading industry magazine, has named us the 3rd largest institutional asset manager in Switzerland. And Property EU, a leading real estate industry magazine, named us the number 1 institutional real estate asset manager in Europe for 3 consecutive years.
We increased the number of employees from 1,000 back in 2013 to almost 1800 as of today, and more of 80% more than 80% of them are working in real estate. Our strong position allows us to consistently service and deliver on our promises both for our captive as well as our 3rd party clients. Will further develop our 3rd party asset management business by expanding our distribution capacities and strengthening our proven real estate and securities platform by the end of 2021. This will be reflected in continued ambitious market beating financial targets. AUM growth is likely to exceed the expected market development.
Before going into detail, I would like to look back at the Swiss Life 2018 program. With an excellent starting point, we were able to keep up momentum at a high level and therefore expect to successfully complete the Swiss Life 2018 program. We achieved in our 3rd party business, or TPM, as we call it, above market asset growth. We are well ahead of our own growth ambitions. By the end of Q3 2018, we managed assets for 3rd party clients in excess of CHF 66,000,000,000, which is double the size than we had in the year 2014 and onethree ahead of our own expectations in Swiss Life 2018 program.
The existing business setup also allowed us to leverage acquisitions such as MAPFRE Capital or recently Beos. I'm glad to say that our TPM business has become a grown up. What makes me particularly proud is the fact that we are able to increase the share of wallet with existing clients. For example, in our Swiss institutional mandates business, over the last 2 years, more than 80% of net new assets came from existing clients. This exemplifies the fact that we enjoy a high degree of trust from our clients, which is key to our business success.
Our proprietary insurance asset management business, PAM, as we call it, is the backbone of our business and serves as our credible and stable foundation. This with respect to the ALM expertise as well as to its highest capability due to the size of more than SEK 100,000,000,000 of assets. All that paves the way for our new goals in Swiss Life 2021. I'm confident that we will be able to reach our ambitious goals. Now let's have a look at the industry analysis in terms of expected market growth and profitability.
Why do we do what we do? Asset Management is an attractive industry. It's capital light, it's profitable and it's a growing industry. Our market is Europe. Despite the fact that this region is expected to grow only by 6% every year until 2025, we continue to see significant potential due to the sheer size of the market.
Europe is at our doorstep. Swiss Life Asset Managers expects to grow at the compound annual growth rate, or CAGR, of 13% in our 3rd party business, which is more than twice expected growth rate in Europe. Let us now focus on our 4 growth on our further growth ambitions. We consider the following 4 key costs as essential for the success of an asset manager: its performance, products and services, distribution and ultimately, an efficient platform. At the core of our accomplishment is the fact that for modern our insurance business, we were able to credibly offer insurance based investment knowledge to our 3rd party clients.
We do speak the same language as most of our clients. We broadened our investment services based on concrete needs from our clients. We were able to meet customer needs in a persistently low interest rate environment. Our PAM European Real Estate business became even more visible due to the fact that we are able to transact large scale transactions in Europe, exceeding the SEK 500,000,000 or even the SEK 1,000,000,000 mark, as evidenced in France, with the acquisition of the Vesta portfolio or in Germany, with the Leticia portfolio or in Switzerland, with the Circle, just to name a few. We are also at the forefront of product innovation, such as the securitization of real estate in Switzerland, a concept which by now has been and is going to be copied by our competitors.
Clients entrust us their funds for the sole purpose of performance. This combined with the advice, which is mostly ALN driven. Roughly 80% of our institutional mandates, 70% of our mutual funds and 75% of our real estate offerings are above the 3 year benchmark. The close proximity to our clients and the intense exchange allows us to better understand client needs. As a result, more than 80% of institution mandates net new assets in Switzerland came from existing clients.
We have grown from a predominantly Swiss asset manager to a recognized European asset manager. Our increased visibility of our real estate business enabled us to attract both clients and parents. We will now aim to replicate this success story by improving our visibility in the securities area, too. We have and will continue to invest in an integrated security IT platform across location. This makes us efficient and effective.
We will, however, continue to simplify our operating structure to foster cross border collaboration with a sole aim to gain operational efficiency. This led, as you can see on the upper right graph, to a direct net investment income yield, which has been resilient despite the persistently low interest rates. This is, among others, due to the long asset duration with a small duration gap on the one hand and the robust reinvestment rate on the other hand. In the lower left graph, you see that over the past years, we continued to switch into capital efficient, less volatile investments while protecting our investment yields. From 2008 to 2017, we therefore increased our allocation in real estate and equity.
While we initially increased our exposure to corporates before reducing it again. Additionally, we can build on the following strengths. We have low cash holdings due to efficient cash management. A large real estate business has competent access to the European real estate market at competitive prices. We experienced negligible impairments or defaults in fixed income.
And as a bridge to our T Pain business, our SSD expertise helps us for additional third party asset management business. Our TPAM showcase is a tribute to our 3rd party Asset Management business and exemplifies the winning know how transfer of our PAM to our TPM business. We took the outsourced CIO concept to the next level by combining the outsourced investment function with ALM advisory and services as well as investment and risk monitoring. We are like a total contractor offering turnkey solutions. We do the same for managing assets and liabilities under full compliance with regulatory requirements.
That's why we call this offering Total Contracting Services. After 2 years of preparation, we are proud to serve now a major Swiss health insurance company as a total contracting services partner. We are convinced that our modular offering, as shown on this graph, offers our clients and enables our clients to best meet their individual needs. Now let's turn to real estate. The project development business has become a strategic pillar of our business portfolio.
We develop real estate projects either for the purpose to sell the finished projects into the market or some of our funds, as the case may be, or to hold them on our insurance balance sheets. I brought a few examples, all of them in Germany, concretely. In Berlin, Altershoof. This is a €300,000,000 project, which was developed with funds from Swiss Life's Swiss balance sheet. The project has been sold as a whole even during the construction period.
Swiss Life AG made on a gross basis a project development profit of around €20,000,000 And Swiss Life Asset Managers generated fees in the amount of around EUR 18,000,000 The Reiterschaften Cologne is a EUR 150,000,000 project, which was developed with funds from Swiss Life Asset Managers. The apartments were sold off individually. This resulted in a profit of around €20,000,000 from sale and fees of around €4,000,000 both for Swiss Life Asset Managers. Dock 100 in Berlin is a €60,000,000 project by Beos. In this case, the funds came from a Beos investment fund delivered around €40,000,000 profit development profit for the fund and approximately €3,000,000 fees for BEOS.
Although fees can vary, to simplify, we receive typically a 1% transaction fee plus asset management fees, plus construction fees and depending on the contract terms, a performance fee between 20% 25% of an agreed IRR. As you can see, this business line helps us, on the one hand, to fill the investment pipeline at an early stage for our various stakeholders. On the other hand, it allows us to generate fees and investment profits. Now I'd like to give you some more flavor from the Swiss Life asset manager's income characteristics here shown for the TPM business. We distinguish between recurring and nonrecurring income.
Within nonrecurring income, we distinguish between nonrecurring income or fees from our traditional asset management business and nonrecurring income from Real Estate Project Development, where Swiss Life Asset Manager takes the investment risk. In 2017, 68% of the TPAM gross income we consider as recurring, 22% is nonrecurring, while 10% is nonrecurring income from investments where Swiss Life Asset Management is bearing the investment risk. These 10% are sales profits. The details of the various fees and income sources are mentioned
on the
chart. By 2021, we expect the nonrecurring income from real estate project development can vary depending on the quality of the pipeline and the number of projects being transacted in a given fiscal year. As it may take several years to complete such a project, we will see a lower contribution in 2019. This is due to the fact that Corpus Aureus' historic project development pipeline is being completed, while we expect our new projects to reach in 2020 a contribution in the range of the past years. On another note, we often are asked whether we experience margin pressure on our 3rd party business.
We can confirm that we cannot fully withstand from margin pressures in some of our offerings. However, we are able to overcompensate such pressure by higher volumes and higher margin businesses such as real estate and in the area of wealth protection, for example, equity protect products. This leads to higher growth in assets under management and hence, in total income. Additionally, clients are willing to pay for excellent service. Overall, and this is important, we also benefit from an excellent client loyalty.
How do we want to leverage our strengths? Swiss Life Asset Managers has developed into a strong pillar of the Swiss Life Group business portfolio. In line with the group's strategic thrust, you can see that with regard to our focus on preferred segments, we clearly want to increase our distribution power. To make customer relationships more rewarding, we will actively seek international clients to invest alongside Swiss Life into the European real estate market. We also will further enhance our responsible investing activities.
As I already mentioned, we do have attractive propositions, which are well perceived as our USPs in the market. In terms of efficiency, we certainly have room for improvement, but we will continue to invest, for example, in our real estate IT platforms. We will sharpen our organization for efficiency in the light of a fast growing pan European asset manager. As in the previous Swiss Life 2018 programs, our AUM growths are ambitious. We assume a stagnating asset basis for PAM.
Hence, all the growth shall come from the TPAM business. TPAM's asset base shall grow to CHF 100,000,000,000 by the end of 2021, means a CAGR of 13%. The main drivers shall come from real estate, infrastructure equity and fixed income, complemented by multi assets and equity strategies supported by our ALM expertise of our financial engineering team. The envisaged AUM growth will translate into total income in the area of €950,000,000 to 970,000,000 and the segment result of €340,000,000 to €360,000,000 both at a CAGR of 9% versus an overall AUM growth of 4%, which shows our expectations to place higher margin products accompanied by higher transaction fees. At our DPN business, we aim, due to size effects, an improved costincome ratio in the area of around 75% by the end of 2021.
Coming to the end of my presentation. Swiss Life Asset Managers is well positioned to deliver on its Swiss Life 2018 targets. We do enjoy good momentum, which we intend to bring into the Swiss Life 2021 program. The targets are ambitious, be it on the TPAM asset base, the total income, the segment result or the targeted TPAM costincome ratio by the end of 2021. We have and we will continue to invest in our capabilities and capacities.
We have an excellent brand, high visibility and credibility in the market. We have highly motivated workforce, which fully understands the benefit from a fully integrated insurance based asset manager. Taking all that into account, I fully trust in my colleagues and my team that we will be able to achieve our plans together. Ladies and gentlemen, this is Swiss Life Asset Management's plan for 2021. And now I give back to Patrick.
So thank you, Stefan. We'll now have our first Q and A session. Here with me are Thomas Boas, Matthias Erik and Stefan Mayslow. And we're ready to take your question. Who has the first one?
Peter?
Peter Eliot from Kepler Cheuvreux. First, if I have three questions, please. First one is on the solvency. I think I understood correctly that around the 190 level, it's the internal model that's most important. But I don't think we heard exactly what you think your current position is on the internal model.
I don't know if we can have any information on that, but just assuming it's sort of roughly a similar level, then rolling forward to the end of next year, your operational capital generation should offset the impact of the buyback and you should still be at sort of the top end of the range. So I guess we might be hopeful for more, but I don't know if you can talk about what other sort of binding constraints might kick in. The second one was on your targets, very strong targets across the board. If I just focus on 2 where the improvement you're targeting is a bit lower. In terms of the cash, I think the 2018 run rate was around €700,000,000 or we're expecting around that.
So that's sort of the middle of the range that you're targeting. I'm just wondering if there's any sort of one offs in the 700 or whether we can expect that to grow a little bit. And the life efficiency ratio was like 1 basis point below the 2017 level. I wonder if we're sort of cut quite close to the bone there. And then sorry, if I can have a final third question.
On the cash remittance, asset management was showing on your graph as below the Swiss business and also increasing less going forward. I guess that's a little bit contrary to sort of what we'd normally expect. So I'm just wondering, again, if you can explain that apparent discrepancy.
Sorry to say anything. I'll take your last question. That's the easiest one, and then I'll hand it over to the experts. The reason here is that, so the question was why will asset management not increase its cash remittance more than probably many expect and given the ambitious increase in the fee result. And the reason here are the project developments.
They need cash and, of course, are activated then on the balance sheet and through the P and L. That's why we will not have this amount of cash remittance from AAN. It's really the division where we have a subpar or sub average cash contribution, which is very counterintuitive.
And that's, by the way, also one of the major reasons why this run rate of 700 that you mentioned will not grow substantially. It will grow, yes. We have seen that the new target is SEK 2,250,000,000 over 3 years. But as we will be financing some development projects, we will not see the this and there is no one off in the 700. The 700 is organically, and it is about 70% of our 2017 earnings.
So it's more or less what we expect. And on the
And in terms of the SEC, you're right. When we are in the current levels and the ambition range for the solvency model, for the regulatory model, we indeed focus on the internal economic model. This has many things in common with the regulatory model, risk measure and the like, but it also is different in many aspects as outlined. Net net, indeed, we have in the internal economic model a higher coverage ratio than in the solvency model. And as far as capital generation is concerned, we have obviously based the plans for Swiss Life 2020.
One based on the prospective ability to generate also capital.
That's clear enough? Sorry to hog the mic. Can I just the second part of that question, I guess, was that what you've just said leads me to think that the internal model should probably still be above 190% in a year's time? And I just wonder
No, it is higher. It's higher.
As said, we don't include these conservative assumptions of FINMA that we deny diversification between market and credit risk, and this is quite an effect.
It's Andy Sinclair from BofA Merrill Lynch. Firstly, possibly as much of a clarification as anything, just on the Swiss Life Asset Managers targets, just to confirm that they still allow for no market growth FX movements? And just is there anything for M and A activity in those targets? Secondly, just on the on SST again, just under the new model, can you give us any color on what the annual organic capital generation would be under the new SSD model? And thirdly, just with Swiss Life having evolved, become less reliant in capital markets, a bit steadier over the last few years, does that make any change on what you feel is the appropriate debt leverage for Swiss Life to have?
Okay. So I'll take the
first question, Matthias, the second and the third one on for Thomas for the debt leverage. So these plans are based on organic growth as we've always done. However, of course, companies that have already been acquired, such as Beos, of course, count to the new plan, right? I mean, so part of the growth of the fee business comes from the newly acquired Beos, which we acquired which we closed a few weeks ago. But other than that, there is no inorganic plans in there for newly acquired companies.
We have a very similar effect then, for example, for international, which we will see later in the day. And there is no FX movement here implied in these rates. And as far as I remember, no market growth or only very limited market growth for the assets under management, maybe a 1% or so, I'm not sure. But that's for sure not the main driver.
Then Thomas On the debt leverage, we currently have about SEK 3,800,000,000 of external debt. Out of this, SEK 400,000,000 or SEK 400,000,000 is senior and CHF 3,400,000,000 is hybrid, which accounts for approximately 25% of debt leverage. And we have in this plan that we have presented today, we have not increased that leverage. Having said that, I do not exclude that we could do this, especially if we could talk about, say, bolt on acquisitions because we still have a little bit of room to increase the debt leverage, but it will not go beyond 30%.
And thirdly, just on organic capital generation. Is there any
Maybe a word on capital generation. I mean, we have, for the first time, disclosed based on the old model in 2017, the capital generation. This very same model is still in place, 1st January 2018, and it expires only at year end '18. And prospectively, obviously, we have a new model, this new solvency model. It has somewhat different characteristics.
But let me tell you, I mean, capital generation is, as we said, not cash generation, but it is one of the key prerequisites. And when it comes to cash remittance to shareholders, you have seen that we have increased today the outlook.
Hi there. Jonny Owen, UBS. 3 relatively quick ones, please. So firstly, how do you think about the conservatism of this
show, but
this one feels a little less so in places, but maybe pretty conservative in some. Secondly, ROE, you've obviously left the target unchanged. What's the thinking behind that? Were you tempted to increase it? And finally, just on real estate.
I guess that's always one of the main bare points on the stock. You obviously got a lot of real estate exposure on the balance sheet, and then asset managers brings you its own form of real estate exposure. Is there any desire to diversify that real estate that asset management mix away from real estate somewhat? Thanks. Okay.
I think you answered the first question yourself. And for the real estate exposure, I hand over to Stefan.
Well, first of all, we often hear the story about a bubbling market, late cycle investments and so forth. And we are aware that the market is late cycle. On the other hand, what is so attractive for us is spread over risk free. And in our economic scenario, as Patrick mentioned in his initial speech, is we are in a financial depression. That means for a long time of period, we expect, if at all, slightly increasing interest rates.
Taking that all into account and our capacities, our capabilities in this market, we consider real estate to be a prudent investment proposition, both for the balance sheet as well as for our third party clients. Secondly, due to the size we have, we are in an area where competition is not that fierce than if you were on an average, Grace. That's why I mentioned large size transactions. To give you an idea, when we acquired the Vesta portfolio together with a joint venture partner in France, That's the SNCF Residential Portfolio. At the end, we ended up having holding a very small portion of the portfolio, but we have a huge lever on the overall business.
So that makes it so attractive. And that's why international clients come to us, would like to invest alongside with us into such propositions. That's why we believe it is a good proposition.
But of course, I mean, we also want to develop our other asset management propositions. That's part of the ambition, but that's not so easy to steer, of course, because it depends a lot on market conditions. Then on the ROE, yes, sure, I mean, of course, we discuss ROE targets. The reason why we decided not to change it is simply because in our view, we're well above earning our cost of capital, our cost of equity on the one hand, and we believe with the present calibration of the SST, it's just not in the best interest of shareholders to deviate from this range. But of course, we have the ambition to be in the upper half, let's say, of it.
And of course, it was part of the discussions we had around the share buyback.
Farke from Autonomous Research here. Just two questions, if I may. Firstly, just dealing with the strategy side of things. I mean, you've mentioned kind of changing the kind of refining the customer segmentation and also kind of improving the attractiveness of the kind of customer propositions. Can I just get a sense of what the trade offs are going to be there, particularly with regards to new business profitability?
And in particular, I was wondering if you could give a sense of where IRRs are at the moment and how you expect those to develop in the future? And then secondly, just coming back to capital generation. On the slide, on the pro form a model, you show kind of 5 percentage points of increase on a pro form a basis in the first half. You've also suggested that there was perhaps some positive market effects in there. Should I assume that the operational ratio is kind of developing at less than 5% per first half?
And is that a fair trend rate going forward?
That's for you, Matias. Okay. So I think the 5% that we mentioned, they typically include many things. So I think it's probably premature just to try to extract what is an operational part. I mean, we have disclosed that, I said, last year.
And I said we will give more guidance in the next Okay. And when it comes to the IRRs and the product dimensions, actually, we don't determine or we don't evaluate the businesses based on IRR. For us, it's really the value of new business and the capital efficiency overall of a product strategy that matters. And there, we have, as I said, the ambition that we earn because of capital overall and the new business.
But we still have the minimum hurdle rate of the new business in place, the 1%. And we have the ambition range of 1.5%. And so we would be disappointed to fall below the 1.5%. We really manage our product areas very tightly towards capital efficiency, not just on the asset side, but also on the product side. And the
increase of the new business production is probably the more important driver than margin expansions.
And how do you see the client segmentation kind of changes feeding into that? Because obviously, the ambition there is obviously quite significant.
Well, I think we can really better come back to that question than the afternoon after having gone through the presentations of the market units, of the insurance market units.
It's Frank Kopfinger from Deutsche Bank. I also would like to come back to the buyback. First of all, what was the could you shed some light behind the background of the time line of your buyback. So why did you do do you want to do it in 12 months and you didn't put it within this 3 years time frame of your plan? And secondly, coming back to Peter's question on
how should
we think about your willingness and ability to do something more in terms of capital management whenever you are above the 190% solvency level. Because obviously, at some point, as it looks as of now, within the time frame, due to organic capital generation, you might be above that range. And then thirdly, on IFRS 17, my understanding is that you are not yet decided on whether you will implement it. You might have there's some postponement now, but maybe you can comment on where your thinking is in this respect.
Okay. First on the buyback. I mean, the reason why we're doing that on an accelerated basis is really because the first rationale was the the no, not the
no, to remove dilution
from the convertible. That was the first point. That's why we said that's as we saw the majority of the share buyback, depending how you look at it, between 50% and a little bit more percent, and that's why we really have accelerated that.
And maybe I can add that we have the cash in the holding company. And that's when you have the cash, why wait? You can reduce dilution substantially within a short period, which adds a lot of value to the existing shareholders. And therefore, we thought, why not do it immediately?
And that comes to the second point. Then, of course, if capital generation, everything goes according to plan, it's quite conceivable that we march back towards that upper end of the range or above it. I mean, it's at least in the range of possibilities. And then, of course, we'd need the cash as well, right? I mean, you need both for some possible future share buyback.
And then on IFRS 17, we're doing everything to ensure that we can switch to IFRS 17, so to stay within the IFRS framework. So we have a full fledged project team on the ground. And especially with now the postponement, there shouldn't be a problem with implementing it.
And we have actually disclosed that we will spend about CHF 90,000,000 to CHF 100,000,000 in order to be compliant. Of course, this also includes what we call finance transformation, meaning that we are using this new accounting standard requirement also to modernize our entire finance platforms and processes.
It's Rene Loghol, MainFirst. So perhaps on Slide 6, in a quick word on the saving result because in the last strategic period, you mentioned on the saving results, you said you want to defend it. It's 800,000,000, 8.50 million shares. So how should we think about the saving result? And then the growth in the risk result, I mean, it's mainly driven by Switzerland.
And I'm just wondering from which product is the growth coming? Is it 2nd pillar, 3rd pillar? Or is it pure risk results? Because you'll have a little bit of an idea if you are looking for growth in the Group Life business, yes. And then the third question, again, on this ROE, this was really a big issue.
This is more after my old crude bomb, 8% to 10% ROE. So you're growing the fee business. You're growing the capital light risk business. You're decreasing shareholders' equity via the share buyback. So it's a little bit parceling that you're still sticking to the 8% to 10%.
So I'll take the last question. Well, one of the reasons is because we've accumulated quite a lot of capital this year, right? I mean, we have the biggest part of the convertible conversion this year, plus we have more retained earnings this year, and this is what comes out. If we reach the plans, we do the capital management actions we just alluded to, that's what spat out basically in terms of ROE targets. And that's why despite this increase of the fee result, we will not change the ROE target.
Then on Group Life, we'll hear a lot more details later on, but already saying that, yes, a lot of that increase in the risk result in Switzerland will come from Group Life, and Markus Leifengut will give you the rationale and the thinking for that later in the afternoon. But of course, the other business units will contribute as well. As you've seen on the slide from Thomas, it's also France, Germany and international who will contribute to risk for the risk result. And for the savings result, I'll hand over to Thomas.
Yes. We do not disclose numbers for the savings result going forward. But as I mentioned, when you look back on the Swiss Life 2018 program, at the starting point, we said we will keep the savings result more or less stable, maybe slight growth. And when you look back, despite this, we were able despite the lower interest rates that we have expected at the beginning of Swiss Life 2018, we were able to increase the savings result. And given the current situation, you have seen that we still expect for the next few years to keep this savings result stable.
Overall, I mentioned it still can grow. And of course, we try to grow the savings result. It also depends, by the way, on how the volumes are developing. So for example, the Swiss Group Life business, if this grows faster than expected, then obviously, this is positive for the savings result. So that's what we expect from the savings result.
So we expect it at least to keep it stable, but there is some upside I mentioned.
And I mean, there is some good news. You might remember that we used to have quite a substantial dilution of our direct investment income on the one hand, simply because our reinvestment rate was so much below our recurring rates. This is now slowly coming to an end because our reinvestment rates are now very close to our direct yield, so dividends, coupons and rental income. On the other hand, there are still headwinds. And one is the capital efficiency that we mentioned.
I mean, there we don't grow the savings result for the sake of it because that would come at a high cost in terms of capital efficiency. And that's why we don't have an explicit target for that because we don't want to sacrifice capital for reaching that type of goal because else we'd have conflicts in our goals. That's another reason why we don't have that. And there is a second headwind and that's actually from our group life business. As you know, there's a difference whether it's a gross or a net legal quote.
So for most of our for the larger part of our savings result contribution, that is really that depends on the interest rate margin, which is exemplified by Individual Life in Switzerland. And on the other hand, you have the smaller contribution for group life, which is driven not by the margin, but by the overall top line. And there, of course, because of the lower reinvestment rates, we still have some headwinds. That's why we don't have an explicit target. But as Thomas said, just because we say we want to defend it doesn't mean it can't grow.
Diplomatic.
More question? No more questions.
So any other questions? Peter, another question. We already
have 4. Two quick ones. You highlighted that hedged equity exposure was one of the most efficient asset classes. I'm just wondering if you could remind us what your net equity exposure is. And I guess especially in current markets, what your thinking is going forward about that might vary?
3.6, yes. 3.6, yes.
3.6, yes. 3.6, okay. And secondly, I mean, this isn't relevant for you at all, really, given how high your solvency ratio is. But the levels at which the regulator will And is it going to be the same under the new model as it was under the old?
Yes.
It's explicitly 100%, actually clearly stated by the regulator. It's 100%. It's not 120 or 140. These are our internal and now communicated ranges. So it has nothing to do with regulatory requirements.
But there were like 80% bans as well before?
Yes. The other ones are the same, yes, of course. They're still on the web page of FINMA. You can see them.
Okay. So there is another one. Okay.
Stefan Wiesech from Schroders. I have a question regarding the comparison of the ambition in asset management that you had for 2018, which implied a much higher margin for a targeted asset base of SEK 50,000,000,000. Now on the SEK 100,000,000,000 assets under management, you have a substantially lower margin embedded in that ambition. And I was wondering how much of that is due to the asset mix shift and how much might be due to some margin erosion that obviously is there in Asset Management?
Well, we do not give the details to be concrete. We have 2 components. 1 is that there is margin pressure on Plano and Ino products, such as fixed income. There we have and as I mentioned, 80% of net new assets came from existing clients in Switzerland. That shows that we have actually a huge growth
on the
assets under management but at a low relative return. But overall, still a very profitable business and more income to be generated for us. What we branch out is real estate, which is really profitable, is infrastructure equity. It's equity type like equity protect, as we mentioned, that we do on the balance sheet. The senior secured loans, which are going to offer to external clients.
This helps us this mix helps us in elevating the overall level. Secondly, the you see that top line is growing faster than sorry, bottom line is growing faster. So top line is growing faster than the cost base. And overall assets increased by 4% on the CAGR, while segment result and total income increased by 9%. So I think that's fairly okay.
And going forward, of course, one of the other reasons might be that there is a higher quality in terms of nonrecurring to recurring in the new plan than was in the base. That's what Thomas just whispered into my ear.
To be concrete, we had 32% in team plan business was nonrecurring, and we intend to have that in 25%. So actually, the solidity of the plan should be higher.
Okay. So there appear to be no more questions. So I'll invite you for lunch, and we'll be back here at 1:50, so 10 minutes to 2 o'clock for the 2nd presentation block. Thank you. And lunch is at the back.
So good afternoon, ladies and gentlemen. I hope you enjoyed your lunch. And for the next 20 minutes, I will now speak about Switzerland. Let us start with a brief overview of our 2021 strategy. As the market leader in Switzerland, we are proud to provide our customers with a comprehensive offering that helps them lead a self determined life.
And our strong positioning and large market share from the basis for profitable growth, including in the years ahead. We have set ourselves ambitious financial goals for the next 3 years. In Switzerland, by 2021, we aim to double our fee result, enhance our risk result, increase our cumulative E and B, improve our already good efficiency ratio and increase cash remittance to more than CHF 400,000,000 thereby making a significant contribution to the achievement of our group objectives. Let me elaborate on our strong market position in Switzerland because our strategy builds on this strong market position. Switzerland, with its 8,000,000 inhabitants, is a saturated market.
We see growth opportunities mainly by making more out of our portfolio. We already have many strengths that will support our growth. First, our stable and very large market share and our market leadership in the areas of comprehensive pension and financial solutions. Second, access to our roughly 1,400,000 insured persons and around 40,000 corporate customers And third, our excellent distribution network consisting of our own sales operations and those of our partners. Over the past 3 years, we have continually strengthened our core business.
We have selectively expanded the business model through an omnichannel approach, and we have also kept our costs under control. That has been the catalyst for our expectation that we will achieve our Swiss Life 2018 financial targets and generate further profitable growth. Let me show you what we have set out to do. Swiss Life 2021 leverages the key strengths I just described. Patrick Frost already introduced the 4 strategic thrusts on the left hand side of the charts: focus on preferred segments, promote attractive propositions, make customer relationships more rewarding and improve productivity.
I will now focus on how Swisslife Switzerland will contribute to these thus for private and corporate customers. We are already firmly established in some very attractive private customer segments. To achieve our 2021 targets, we will gear our offering and services more systematically to these segments. The best agers among our private customers, for example, offer very attractive opportunities. People in the age between 5060 do experience important live events that ask for tailored solutions.
The segment is already big and still growing, including with our existing customer base. And in addition, compared to others, this segment is relatively wealthy. Young families, on the other hand, are different in a different phase of their lives, leading to different needs. Covering these specific needs is economically attractive in itself. And over time, young families become the next best agers.
So early winning young families as customers and following them along their lives makes a lot of sense. Looking at our corporate customers, one of the core segments are the SMEs. We can offer them both full insurance and semi autonomous solutions from a single source, and we can still do so with attractive margins. What will it take to harness the potential in our target segments even more effectively in the future? 2 things.
Number 1, we believe the key lies in a digitally supported and systematically applied end to end customer process. Number 2, it requires even more focus on understanding target segments and developing tailored solutions, products, packages and advisory services. Let me put the potential of the Swiss market into context. The average Swiss citizen signs no fewer than 70 financial contracts over a lifetime, and that includes, of course, our customers. And we are poised to seize that market potential because we focus on offering our customers the right solutions at the right time in their lives.
That's why we need to invest and improve advice and customer service to accompany our customers along their life journeys. One thing is beyond dispute, The time to talk about pension planning may be more or less acute depending on the individual stage of life, but the discussion is generally becoming more and more important. In a survey, we found that 91% of Swiss citizens see independence and self determination as fundamental requirement for their longer lives. Moreover, 86% of our customers currently see themselves as responsible for providing for their old age. With our comprehensive product range and with individual advice, we can help give our customers financial confidence, and in doing so, we support them in their desire for self determination.
So knowing all this, how can we write more business? As I explained already, advice and support are vital to generate profitable growth from existing and new customers. Our advisory model makes relationships more rewarding and increases our share of wallet. This traffic shows how we are professionalizing and institutionalizing support and advice. As their major live events unfold, existing and new customers alike will benefit from our digitally supported customer process, a process that makes things simpler and more convenient for them.
We also adhere to the idea of digital, as already introduced by Patrick, as an approach. Where it makes sense, we provide advice in person, while offering customers and advisers targeted digital support in all relevant processes. Through a coordinated market management, we ensure that our offerings make sense both economically and from the customer's perspective. We provide packaged offerings that provide convenience for customers and good margins for us. Examples include the established Sortgloss pocket, a property insurance solution that we offer with our product partner HealthAsia via Swiss Life Select.
Another example is the Simplicare healthcare package solution offered together with our product partner, Salitas. This also illustrates how we decide on a case by case basis whether we make or buy packages and offerings. I will now speak about our focus on capital efficiency in our private customer offering. On the individual life side, we have been operating for some years already now as a full range provider. We continuously expand our capital light range, but we'll still offer guarantees, and we do this very rationally.
We manage our new business based on the premise of achieving our VNB and profit goals, while optimally balancing our capital, a methodology that Matias Hellik already explained in his presentation. And the chart on the right shows the trend of new business broken down into periodic and single premium business between now and 2021. We increased the capital light share from 19% to 30% to 50% for periodic premiums and from 50% to 60% to 70% for single premiums. Swiss Life Dynamic Elements is an example of a recently launched capital light product. The high flexibility of the product allows ongoing adaptations to meet changing customer needs.
Hence, the product is ideal for young families and couples. Next to our capital efficient life production, as I already mentioned, we expand our packaged partner products, and this will contribute towards increasing the fee result in the private customer segment. Let's dive into our private wealth offering for retail and affluent customers. Our successful investment solutions for private customers have become an important driver of our fee growth. We are very proud of these solutions.
For the past 2 years, working together with our colleagues from asset managers, we have succeeded in offering some highly competitive investment packages. These packages are very popular with customers, especially in the already mentioned best ager segment. These solutions are a real alternative to expiring insurance contracts and thus retain customers for Swiss Life even after their life insurance contracts terminate. Our confidence in this class is also reflected in our financial ambitions. By 2021, we wish to expand our assets under management by roughly CHF 0.5 billion to CHF 3,700,000,000 thus lifting the contribution to the fee business even more.
And we are convinced that we can achieve these goals. Turning now to the corporate customer segments. Swiss Life is seizing its opportunity to grow in the 2nd pillar market. I would like to take a few minutes to give you our perspective on the changes that have taken place in the market over the past few months. I will also explain why we will continue to pack our full range of products for corporate customers, which we do for a very rational economic reason.
The most important message here is that the Swiss market for occupational provisions is already huge, CHF 1,000,000,000,000 total assets in 2017. Since 2,009, it has grown by 48% and will continue to grow in the future. Firstly, because solution providers are benefiting from the intrinsic growth underway ever since the introduction of the mandatory BBG cover in 1985. And this intrinsic growth will continue well into the next decade. Secondly, because savings contributions are linked to salaries and thus economic and population growth that will further drive the growth in the second pillar, savings, capital.
And the recently published statistic shows that employment has never been as high in Switzerland as now with more than 5,000,000 people employed. We at Swiss Life believe that the decision taken by our hitherto most important competitor in this business to withdraw from full insurance creates additional opportunities for us. Let me now explain you why we believe in our potential in this market, and thereafter, I'll explain to you why we stick to the full insurance solution. We believe in our potential because we are the market leader with a decade long outperformance of our peers. And we have good reasons to be confident when it comes to highlighting the advantages for our corporate customers.
We are and will remain an attractive, reliable partner for companies because as Malte Jassalig already has shown, over the past 10 years, we have significantly outperformed our peers in terms of investment results, including in 2,008, which as we all know was a very challenging year. As the clear market leader, we currently provide and will continue to provide in the future the full range of offerings for companies, which means that we offer real freedom of choice, including the full insurance solution. With our Sanyo Autonondo solutions based on our own resources, we are offering a meaningful addition to our range, which is finding considerable resonance in the market. And we also offer expertise and services for large pension funds and beneficiaries and are therefore steadily increasing our fee business. The growth rates both for assets under management and insured persons that we are being show that we are being very well received in the market and are conducting our business in a focused and successful way.
At this point, I'd like to return to the question of whether full insurance is still worthwhile. For Swiss Life, the rational answer and very economical answer is, yes, it is worthwhile because the BBG business is a key and stable contributor to Swiss Life as a whole. As you can see on the top right corner of the slide, it contributes roughly a quarter of the group's risk result and asset management income each. It carries about 1 5th of the total cost and is a dependable premium generator. The main reasons for the stability of the Swiss Life BVG business are our optimized new business production.
It is the mix of guaranteed and semi autonomous new business that makes the difference. We always keep an eye on net profit, VNB, capital efficiency and the quality of expected profits and engage in a continuous balancing. The price per insured person that a corporate customer is willing to pay is also a decisive factor. This price is higher with full insurance. This makes sense because the customer and the insured employee receive something in return in form of greater security.
And full insurance is a business in which the parameters can also be adjusted in the back book. This is something we address very seriously on an ongoing basis. We also write new business selectively and cautiously. This way, we can ensure that the business remains healthy for decades to come as it also reflected in the development of our interest rate margin. Therefore, Swiss Life deepens its 2nd pillar coverage.
Here you see a direct comparison of our offering with those of our competitors based on the service catalog shown. Swisslife is the only true full range provider in the 2nd pillar business. No other provider offers such a broad portfolio of products and services. We do not offer this full range of 2nd pillar solution as an end in itself. Each of the components has its justifications, both from a customer's perspective, but also in terms of its strategic and economic importance for Swiss Life.
In addition, new offerings such as our own 1E solution, allowing individual investments in the semi autonomous range for higher income categories enable us to advance into new and promising segments, while at the same time strengthening our fee business. Additional services such as expert reports and IT consultancy work for autonomous pension funds also contribute to our fee business. And by providing administrative support for large pension funds, we leverage our existing infrastructure while earning fees. This brings me now to the overview of the financial ambitions that we have set ourselves for the upcoming strategy period. By 2021, the measures referred to will enable us to double the fee result from CHF14 to CHF 25,000,000 to CHF 30,000,000 mainly driven by growth in private wealth solutions, our own IFAs and pension consulting.
To enhance the risk result through our corporate customers and reinsurance businesses to improve our already strong efficiency ratio to increase the value of new business on a sustainable basis, and as already mentioned, we will increase our cash remittance to above CHF400 1,000,000 by 2021. And I'm convinced that we are well positioned to achieve our financial targets. Thereby, we shall make a key contribution to our ambitious group goals, fulfilling our role as a strong home market to generate cash and significantly contribute to the group results. The profit by source view shows a solid savings result with more growth in fee and risk results by 2021. The savings result remains the most important profit driver for Swiss Life Switzerland in the future too.
It will remain very robust and of high quality through our systematic approach to ALM. Nevertheless, with many of our individual initiatives, we are clearly pursuing a sustainable increase in the risk and fee result, and we shall continue to improve our already positive cost result. Together, all this leads to an increase in our segment result by 2021. To wrap it up, our new advisory model, building on digital technologies, will enhance customer experience and advisory effectiveness, leading to more business. We will increase our market share with a full range offering while focusing on margin management and capital efficiency.
And we have set ourselves ambitious financial goals and will contribute significantly to group objectives. Thank you very much for listening, and I'd like now to hand over to my colleague, Arlo Roednekomm, who will speak about France.
So thank you, Mathias. Let me also start by wishing you all a great afternoon. I'm here to tell you a story of continuity over the last decade and through 2021: continuity in pursuing profitable growth for Swiss Life in France continuity in offering excellence to our customers, but also continuity by introducing timely and tested innovation. In this digital age, a key element of our 2021 strategy is to empower our own people and our partners so they can improve the customer journey. With all the right physical and digital touch points, we call it going phygital.
Please join me on this fidgetal journey. In 20 minutes, I will try to give you all the relevant details because, as you know, the devil is in the detail, and we find the detail exciting. Let me share it with you and let me share it with conviction. This is the slide we want you to remember because it says it all. First, where are we today?
Most of you are familiar with our current positioning in France. We call ourselves a private finisher, offering high network and affluent customers the best in pensions, in savings, private banking and asset management. We have a strong expertise in personal protection in both the individual and the group businesses. And this has allowed us to deliver on our promises. This positioning will not change fundamentally, but we need to continue to grow profitably.
So what we will do? We will continue investing in the future to reinforce our positioning in our preferred customer segments using our multi distribution channels, enrich our product and service offering, especially through digital marketing and implement our physical approach. As I said, the idea is to combine the best of physical and digital to enhance our customers' experience. It is also about improving efficiency in the same time. More on that later.
What will we achieve with Swiss Army 2021? By 2021, our aim is to further improve our earnings growth and diversify those earnings. In essence, this means that we aim to increase our fee results by approximately 50%. We should grow the risk results to between €95,000,000 and €105,000,000 despite the very fierce competition we faced in France. We aim also to grow the value of new business to about €400,000,000 over the 3 years from 2019 to 2021.
And finally, we aim to further improve our efficiency ratio in the Life business to 40, 42 basis points. We will achieve all this through organic growth by leveraging our existing scope of business and people. Where are we starting from today? What I would like to emphasize is the quality of our diversified portfolio, the strength of our multidistribution network the high share of unit linked in our life premium the profitability of our risk business in credit life, in health and protection and our ability to deliver on financial targets. At the end of 2017, we had already met or surpassed our targets.
The fee results at €60,000,000 and the risk results at €91,000,000 Let me also say that we benefit from a very strong brand. The French love the Swissness in Swiss Life. And the unique business model we created over a decade ago is proving its worth. So we will continue to develop it into 2021. Here is an overview of our key initiative.
Our 2021 plan is built on our existing drivers, which have proven their worth. Let me just point out some areas of focus. On the private insurance side, we must keep our proposition attractive in a period of very low yields, especially for demanding high network individuals' customers. That means fostering outperformance in unit linked, promoting our in house asset management solutions and enriching our 3rd party asset management offering. On the personal protection side, we will work hard to increase our penetration rate with SMEs and independents, which offer a lot of potential.
And we will pursue or push risk strategy through group protection, credit life, non life and also the launch of our international health platform. But above all, this slide show all our two lines of business feed into each other. For us, the most perhaps the most exciting prospect there to be found in the way data science and artificial intelligence can help improve productivity. The opportunity we see are based on solid market research. The LINK Institute conducts 85 interviews on our behalf among affluent with a monthly income of over €4,000
95%
see independence and self determination as a fundamental part of their lifestyle and a critical part of leading a longer life. But only 57% feel confident about their current financial situation and 75% know they must provide for all age. So the opportunities are therefore immense in both the private insurer and the personal protection markets, especially because of growing recognition of the public funding gap for pension and medical protection, but also because regulation is evolving and become increasingly complex, placing a premier on seamless advice and support and then because globalization continue despite national rigidities. Our preferred customer segments are mobile, so they need international solutions. And finally, digital tools that make our clients' life easier offer opportunities to not only reinforce loyalty but also address new retail segments.
Patrick explained that our purpose is to help clients lead a self determinate life. Self determination is as important to individuals as it is for corporate customers. As we focus on high net worth individuals, affluent, SME owners and self employed, we are in a unique position to cover both their private and their professional needs. Thanks to our multi distribution model, we can address each customer primary perceived need and then cross sell with customized offerings. For instance, we may start the discussion with a corporate customer talking about employee pension plans and then find out that the owner of the company needs help to protect his or her family.
Or we may be exploring private banking solutions for an entrepreneur, and then the conversation moves towards managing the company's financial assets. Yes, I like this slide. It's my favorite. It sort of ties all together, doesn't it? Regarding our multi distribution model, here you can see how it will develop.
Well, yes, okay. This one is a busy slide because we are busy people. Most of you know our model. And you can see we have all types of distribution networks. We manage all of them in a coordinated way to address the French market efficiently.
By 2021, our investment will be on our proprietary channels, especially in Life business, but also in nonproprietary networks to sustain health and non Life development with brokers and partners. Additionally, we intend to develop Internet channel to address new types of customers. This diversification also allow us to adapt our sales effort quickly depending on which channels are growing at a particular moment. So what is new this day? Just an example, see that little arrow, we are starting to see more and more clients buying life insurance through our direct and Internet channels.
So let's have a closer look at our track record as a private insurer. The best proof of the health of our business is our performance compared to the market. 9% compound annual growth rate between 2011 2017 compared to just 1% for the French market overall. 52% share of unit linked in our gross written premium compared to only 28% for the French market as a whole. And here is how we see our private insurance business evolving.
I already explained our strategic initiative for 2021. The chart shows how this translates into growth in our fee results. You can see that growth in unit linked play a key role. As Thomas explained, our fee result is a key driver for Swiss Life France. Our ambition is to grow it from €60,000,000 in 2017 to €85,000,000 €95,000,000 in 2021.
And how we will sustain this growth? First of all, and in line with our growth ambition, we will pursue our unit linked strong development in premiums and reserves. Our objective here is to maintain our advance compared to the market in term of quality of business. Secondly, we intend to push our Internet insurance business. And eventually, we will enrich asset management solution so that we fulfill the needs of our preferred customer segments.
Now let's turn to our Personal Protection business. Here, we have demonstrated that we are more agile than our competitors. Over the past few years, we focused on dealing with the French health reform, called ANI, shifting our exposure from individual to group health, defending volumes, but above all, improving profitability. You need to remember that the French health insurance is incredibly competitive and fragmented, including the large international player has also the small French mutuals. As number 10 on the market with 1,500,000 clients, we are well positioned, and our expertise is well recognized by our target customer segments.
In that competition context, our ambition is profitable to grow, enlarge our footprint and improve our margins. And through 2021, we will defend our risk business, thanks to our strategic initiatives. Let me name a few. Alongside our continued growth in group health, we will redevelop the profitable individual health business with brokers, partners and digital marketing. We will also continue to develop our fully digital credit life offering with a specialized commercial organization to support it.
And we will fully leverage the Swiss Life international network for the large corporate clients. All these initiatives will take our risk result for €91,000,000 in 20.17 to 9,500 €5,000,000 in 2021. And now finally, the part we have been all waiting for, digital. As I said, the idea is to use the best proven technology to make the customer journey more rewarding and to increase operational efficiency in the same time. What I'd like to say is that we are using digital to free up valuable time for human beings to do what they can do best.
There are 2 key elements in the digital approach we are implementing. The first is to combine digital and physical interaction between our customers, our distributors and our back office teams. The second is to invest in the digital clients portal to encourage self care and to switch toward electronic signatures. Within the company, we will foster digital transformation to further increase efficiency. We will explore data management and cognitive technologies that can improve operations and enable intelligent automation.
At the same time, digital marketing will allow us to address new market segments. And finally, we will continue to invest in aggregators, robo advisors and voicebot that will enrich the user experience. If you are a Swiss Life France client, maybe you already know what we are doing. Otherwise, if you will live in France, speak to me later. And if not, I guess what you will like most about all this is how it will improve operational efficiency.
The best example in the chart you can see on the right showing the improvement of our life efficiency ratio from 48 to 4042 basis points of average reserves. Given our business model, this digital approach needs to work all along the value chain for both adviser and customer and across all the business lines. The challenge is to get it right, of course. So we proceed step by step very pragmatically and getting everyone involved. Most people focus on the tip of the iceberg.
What you can see on the website or on smartphone application. That is important, of course. And yes, we want to be ready for Atawat, too. You know Atawat. Any time, anywhere, any device.
Yes, we are learning also new language in France. But I would like to encourage you to dive below the surface of the ocean and discover the bulk of the iceberg. The power that is hidden inside the company and inside our partners' organization. It's about fighting against routine. Take underwriting, for instance.
Compliance, it has been a monstrosity. It's Sap's morale. So we are introducing fully integrated digital onboarding processes, including KYC and compliance. The same goes for CRM tools supporting presales and the same for contract management. All along the customer journey, we aim to digitalize all the tasks with limited added value to free up time for people to really take care then of the customer.
If you are interested, please come and visit us. We'll be delighted to show you how all this works. Because we are convinced that you cut through the hype and buzz around digital, you will find that Swiss Life France is probably one of the players making most progress in France. So at the end of the day, how does all this contribute to Swissair Group targets for 2021? You have seen most of these indicators in the previous slides.
I will focus on the value of new business. Obviously, we are dealing with acquisition costs here that hurt profitability in the short time because we charge the full cost, the full acquisition cost in the 1st year, so no DAC. But then because we attract high network individuals and affluent who buy our unit linked solutions, these customers are profitable and loyal. That make a big difference in the following years. By focusing on the quality of the new business, we aim to grow the VNB to more than €140,000,000 in 2021.
And this is the overall picture through 2021. As Patrick said earlier, we aim to deliver strong and diversified earnings growth, mainly driven by our fee and risk results. And overall, of course, our profit will continue to grow. With that, it's time to conclude. So let's put this slide back up.
I would just like to add one thing. We have worked hard on this plan internally during the past few months. It has been challenged top and down. And you know how well the French Esprit critic works. So I am extremely confident in our teams, in our current organization that we can deliver this ambitious plan for continued profitable growth.
I thank you for your attention, and I will hand over to Jorg Arnold, the CEO of Swisslight Germany.
Yes. Thanks, Charles, and good afternoon, ladies and gentlemen. Let me continue with the strategy of Swisslife Germany. And to describe our strategy in a nutshell, it would take 3 sentences. 1st, we want to expand our distribution power and gain market share.
2nd, we will further leverage our positioning on the life side, so our product offering on the biometric side, our ability to tailor solutions for specific industry sectors and third, our expertise in group business. So let's now look into the details, and I start with a brief description of what our two business models are about. On the one side, the IFA business. We are the 2nd largest IFA company in Germany. We are serving around 1,200,000 customers with more than 3,500 advisers.
We are doing that on the base of an award winning advisory platform in a true open architecture model. And our backbone is a strong scalable administration platform. On the insurance side, we are a specialized life insurance company. We have roughly CHF 1,200,000,000 in premiums, serving 900,000 contracts. We are well known as a specialist for biometric products and for modern to modern traditional savings plans.
Now let's look into that slide. You have already seen where you have our strategy in regards to the 4 strategic thrusts of the group. I don't go into details as I will do it on the next pages, but I want briefly to focus on our preferred customer segments. The IFA business is focused on the German Mittelschicht, so the mass to mass affluent customers. That is up to an income of roughly €100,000 The insurance business, as it is specialized on life and as we don't have a tight agent organization, works only with intermediaries, such as brokers or IFA Companies.
So our customer is not the end customer, but it's more the intermediary, which then package our offers together with other product providers to walk that to the customers. That's important to know. Then I want to raise 2 questions. And those two questions are, are we in a promising industry? And do our customers need us?
But before I do so, I go briefly back, as I have forgotten, to mention how we are doing on the financial targets, which is potentially quite important. So regards to the Swiss Life 2018 financial targets, we have 4 major KPIs. We have the risk result and the cost savings where we are on track and then the fee result and the VNB cumulative goal where we are ahead, and we are looking forward to the year end 2018 to show what we have delivered. So now let's get back to the questions but let me give you some details, and I start with industry trends. On the customer dimension, customers in Germany are aware of the low interest rates environment and that they need to save more if they want to reach their retirement goals.
And they are aware of their protection gap if it comes to health problems in regards to their income. As we are positioned as a strong provider for products in that area, as we have the ability to give advice on how to build up those financial solution it takes, we see us in a very good position, and we see that as an opportunity. If it comes to the competition on the distribution side, the sales forces in Germany are overaged. And as companies are struggling with margins under pressure, they invest less into their distribution setup. With our distribution footprint, we see us well prepared to gain market share in that situation.
The competition on the insurance side over the last years was very much around which of the life insurance companies can you trust in regard to its financial strength. And we see that our Swiss solidity with our Swiss mother and our need to cover not only Solvency II but to arrange with SST as well is increasingly appreciated and that this creates another opportunity for us for the years to come. And then technology is a lot about efficiency. And with our platform on the insurance side and with our expertise on underwriting in this biometric area, we see us well prepared to walk in scale effects and to gain efficiency. Now the customers.
We have analyzed different studies, and I just want to summarize it in 4 dimensions. First, 69% of the millennials believe that the measures they have taken so far will not lead them to sufficient finances after retirement. 2nd, 92% of young people between 60 25 don't think that they have sufficient financial skills. 3rd, when we come to the preference for personal advice, 83% of the Germans prefer a personal adviser for their pension scheme and their financial questions around retirement in comparison to deal with it on the web using digital tools. And 4th, if you ask German customers, 80% prefer an adviser who offer different product providers than one who is only talking for 1 company.
That brings us now to our IFA setups. And what is clear out of that is that there is a demand in Germany, and we organize the supply for that. And what we have achieved on that area, I'll show you with what we did on the IFA business for the last 3 years. And I just want to reflect on the right hand side of this slide for a moment. How has the headcount of financial advisers developed in Germany?
The numbers are down by 7% from 200 and 47,000 to 228,000. At the same time, our network has grown by 17% to a level of above 3,500 now. And this trend continues on both dimensions. Market is further down in 2018. We are further up in 2018.
Thomas mentioned it already this morning. What is even more important is the average age. The sales forces in Germany have an average age of 52. So they are driven by a lot of people from the baby boomer generation. Our networks have an average age of 37.
All of that has led to a growing fee income by 15% over the last 3 years. And then if you take one of the details on the left part of the slide, 70% of the new business we are doing is from millennials, so from people between 20 35 years. So we have young advisers. We serve young customers. We have strong growth momentum.
We see us well prepared to grow together with our customers when they progress on their professional career and when they start accumulate wealth. What is important for our business model, what is the backbone, is our digitalized and scalable platform. And as this is key, I want to look into it in a bit in more detail. Our IFA platform supports the full value chain, and it differentiates us from peers. That is key to realize.
Four dimensions: the customer, the adviser, the back office and our product providers. That, of course, looks quite complex, and indeed, it is complex. But the ability to manage this complexity, especially in an open architecture model, that is the differentiator. And even if one of our competitors would now invest big budgets into building such a platform. It would take them years to come up at the same level.
And at in the meantime, we are going, of course, to work on that platform further. You see here several areas where you see updates. So we are progressing this platform every day, every month. And we are introducing new features like a customer portal at the beginning of 2019, where the customer can follow everything. He has board and he has discussed with his adviser online.
We are introducing a centrally located claim service for the P and C side, and we are introducing a centrally hosted unit, which is offering video based advisory to walk in a new format into our offer. As this platform is an important ingredient of our success for the future, this brings us to our strategic initiatives. And there, you find 3 main areas. 1st, we will grow our adviser network. We will professionalize further our recruiting.
We will bring in new people to our networks. We will open new offices, especially in the areas in Germany where we are underrepresented. Then we will expand our customer touch points. It's very important to come with a hybrid, a phygital model to connect all the different customer communication channels, the customer request. We will connect that to our customer portal and, of course, to the adviser in the field.
And we will put on top customer and impulse management, which makes sure that we are with our customer when she or he needs us. This, by the way, drives productivity and will lead to higher fee income in the future as well. Last but not least, I have already talked about our platform. We are digitalizing. Out of the platform, we will gain further efficiency improvements like that was already shown in our figures this morning.
Talking about figures. The outcome of our strategy you see on the right hand side, more financial advisers, a growing fee income to a range between €530,000,000 €550,000,000 and a decreasing distribution operating expense ratio to a range of below between 22% 24%. So that is the IFA business. Now let's look into the second business, which is the life insurance business. And let's do the same.
First, let's look in what have we achieved over the last 3 years. I start with the graphs on the right side as well. What is very important is that we have transformed our new business offer. Today, 56% of our new business is biometric only. 39% is savings plans, but modern to modern traditional.
And the classical business is almost playing no role any longer for Swiss Life Germany. What is very important for us, and we are very proud of that, is that we not only transformed our new business, but we have grown our new business, as you can see, if you look into our VNB figures. One figure which shows you the same coin from a different side is our growing market share disability, which is the main biometric area in Germany, which is up from 3.4% to 7 point 1%. And then, of course, being part of a Swiss group, we don't forget our back book. And of course, we have worked on the resilience of our interest rate margin, and we are well prepared to get the most out of this now very sustainable back book we have.
1 or 2 things I want to mention talking about what we are. What is important to know is that we are a specialist for offering solutions for specific industry sectors. We have, for example, a partnership with the IG Metall, one of the biggest unions or the biggest union in Germany, which is covering the whole metal and electronical industry. We are the leader of a consortium on the biometric side, and we walk in products on protection covers, which are especially recommended by the IG Metall. And alone this alone covers 13,000,000 people in Germany.
On top, we have another lead in a consortia, the Klinik Rent, which is on hospitals and care institutions in Germany, which are covering with the families another 6,000,000 people. So that is quite important in our setup. And then, of course, our Swiss solidity is key. Our Solvency II ratio is above 400%, and that is well appreciated in the German market. So what are we going to do in the future?
We will further expand our biometric portfolio and our specific Industry Sector Solutions. We will secure profitability by calibrating our product portfolio. We have some plans. We have just introduced in Q4 a pure unit linked offer, which is well appreciated by the market. We are working a Zuzjalpachner model that is an offer the government is promoting where the unions and employers are bringing up new collective plans, we will use our good partnerships and are preparing a collective offer for that.
Then we will enlarge our distribution reach. As we are good on industry sectors, we are already spotting new partnerships we will work on. And our distribution structure we have in place in Germany, we are about to streamline. We have today 8 branches. We will go down to 4, and we will centralize the services for our intermediaries in Garching and in Leipzig.
And then what is most important is to work on the connectivity to the intermediaries. As with our ISA business, we are intermediary ourselves. We know exactly what distributors need. So this knowledge, we walk in to become a very good, very easy to plug into provider of insurance solutions on the Life side. The outcome is a further development of our risk result, a growth further growth of the value of new business to a level of above €55,000,000 and raising admin cost result.
That is important to note. As biometric risks don't come with huge reserves, life efficiency ratio is not covering us or not showing our efforts in the best way, we think the admin cost result, we can walk into and yes, walk into our biometric plans and which then turn directly into profit is the better KPI for us to show our progress on the efficiency side. Now to wrap up, let's look into the figures. 3 out of 4, I have already presented. The only figures which are new are the fee result figures here, and the fee result will further grow from 2017 level to a range between €70,000,000 €75,000,000 And of course, you get here for Swiss Life Germany the same profit slide.
We will grow our earnings. We will enhance the quality of our earnings. The savings results will get down. As you know, we had to build up the ZZR that was coming out of realizing gains. That has stopped now as with the reforms of the ZZR.
The ZZR is almost financed now, and we will get back to the ordinary levels. But we will overcompensate what we lose on the savings side, on the risk side, on our cost result and especially out of our fee business. So to sum it up, the whole team of Swiss Life Germany is really excited, excited that we have the right setup, that we have the right level of energy and that at a time when the market is in transition. Happy to answer any questions later, and I pass over now to Niels.
So ladies and gentlemen, last but not least, Swiss Life International. I know I'm just in front of the upper, but please give me your undivided attention. Swiss Life International has developed tremendously in recent years. It will be able to make an important and, above all, a growing contribution, achieving the objectives of Swiss Life 2021. Our strategy is fully in line with the aspirations and targets of the Swiss Life Group of 2021.
And our targets reflect our goal of ensuring that our partners and clients can determine their future with confidence in a changing world. This purpose will ensure our business continues to develop and grow. Today, ladies and gentlemen, I will look at our current positioning, opportunities in the markets, out of which we have defined clear initiatives and measures to achieve our KPIs for 2021. When we speak of Swiss Life International today, we mean two lines of business: Global Solutions and the international life phase. Our business is clearly focused on generating fee and risk result.
By 2021, we are aiming to double the fee result again to EUR 65,000,000 to EUR 70,000,000 which accounts for more than 80% of the growing segment result. An important point in that context, ladies and gentlemen. Roughly 60% of the underlying fee income is recurring and creates stability for the years ahead. As important, this is a cash business, which will significantly improve our cash remittance by 2021. By 2021, we shall also increase the risk result to a significant level actually for the first time.
The absolute cumulative VNB target for the period by 2021 will be north of €110,000,000 Over the past few years, our business models have become scalable, and this is reflected in the ongoing positive development of our cash ratios, which we are very proud of. I would now like to explain and take the opportunity to lead you in detail through our strategic positioning and some of the key initiatives. First, some facts around Global Solutions. Global Solutions has 250 global experts. We provide solutions for more than 80 countries.
We are the number one pension provider in Luxembourg and the leading global insurance network. Today, we have also achieved strong market positions for our international IFAs. We are among the leading IFAs in the UK since over 50 years, and we are the number one IFA in Austria, number 1 IFA in Czech Republic and among the top 3 in Slovakia. To be able to assess our program for 2021, let me first take a look at our past. Not too long ago, actually, with the Swiss Life 2015 program, we managed a significant turnaround.
In the Swiss Life 18 program, we have rapidly and profitably grown as well as further sharpened our strategic agenda. Between 2014 2017, we were able to increase the fee result by around 100% with an unchanged portfolio organically. For Swiss Life 2021, we are again aiming to double the fee result. This is only possible because we have developed a clear strategic picture for the next steps of our business, let me share this with you today. Global Solutions, the leading brand and business partner for cross border insurance solutions.
We are focused, firstly, on high net worth individual clients with customized solutions for wealth transfer means the transfer of assets to future generations and secondly, on international corporates with dedicated solutions in the area of pension, risk and health for their local and mobile workforces worldwide. This is a B2B business. The most important asset in this business is our access to our partners: private banks, asset managers, family offices, multinational corporations. In addition to the pure delivery of products, these partners are primarily interested in the excellence of our services. This is what constitutes the relationship between our partners.
This is where the game is decided. Our second business line, the international IFAs, are also strongly positioned with their brands. They focus on retail and affluent clients with dedicated offerings for investment, pension, insurance and financing. We believe in face to face advice. This will be further supported by digital tools to enable our hybrid distribution.
It is designed to further deepen the relationship between customers and advisers. Strict process standardization and the common platform for Central Eastern Europe will enable us to further increase productivity among the IFAs. Let me take a closer look at the strategy for the 2 business. I will also present the key initiatives for 2021. Let me start with Global Solutions.
All insurance activities of international are today bundled under the Sabra and Global Solutions with headquarter in Luxembourg. In my view, we have achieved here a unique and an outstanding position. The value proposition for high net worth individual customers is focused on wealth transfer. Our solutions provide a simple, secure and straightforward way to transfer assets to the next generation. Here, we are able to even address complex family situation in different international jurisdictions, which is typical for these signs securely and flexibly.
Cross border expertise is also the core asset of the service proposition for our multinational corporates. Here, we develop flexible solutions for the local and mobile workforces of our international corporate clients in the areas of risk, pension and health. Ladies and gentlemen, for both high net worth individual customers and corporate clients, it is a B2B business, which is crucial for scalability. Our brand and expertise gives us excellent access to our business partners. For these customers, the product alone is not decisive, but rather the service bundle that comes with it: assistance, market intelligence, training, digital interaction, compliance and full transparency.
And here, in particular, the recently increasing regulations in our business field have strongly strengthened the proposition. Ladies and gentlemen, we do believe that we have excellent growth opportunities for Global Solutions in the coming years. Why is that? And let me just briefly mention 2 trends. First trends, it is estimated that over the next 10 years, high net worth individual customers will transfer roughly 3.9 $1,000,000,000,000 to the next generation.
It is precisely here that the focus and the needs of our customers and partners lie, and this is what our proposition is geared to. 2nd trend. Our multinational corporate clients are deploying their workforces on an increasingly mobile and international basis and at the same time, continuing to seek ways to attract best talent around the globe. So on this front, too, we are expecting growing demand for international insurance Solutions. Now let me take and give you more detail around the key initiatives that we are going for in Global within Global Solutions.
We are targeting basically 4 main strategic initiatives to drive the growth here. Now let me explicitly mention in advance for the execution of the following initiatives. We do not foresee any major capital spend because the strategic foundation has been laid already in Swiss Life 18, in particular with regard to systems and processes. 1st, leverage our existing cross border wealth transfer solution. What do we mean by this?
Grow our footprint in Asia. In 2016 2017, we managed to become the number one single premium provider in Singapore for high net worth individuals. And we are currently assessing the market opportunity in Hong Kong basically with the same product range. Also, we aim to increase the penetration in core European markets based on focused strategic partnerships with banks and brokers. This initiative goes hand in hand with the further development and innovation of our current solution offering.
We will introduce high desk cover solutions during the course of next year, also in Europe as an flexible instrument for structured wealth transfer. For Multinational Corporates, we will increase the risk plan offering out of Luxembourg and together with Market Unit France, for the first time, also international medical plans. As a major B2B player, significant opportunities are, in our view, literally around the corner by connecting our e platform with the digital platform of selected partners to leverage further distribution. Last but not least, we will drive our target operating model forward. Ladies and gentlemen, in the next 18 months, we will operate on one one platform for all carriers, Singapore, Liechtenstein, Luxembourg, with standardized and joint processes within Global Solution.
This will lead to further scalability and explains the ongoing positive development of our efficiency ratio. These initiatives will move the asset under control, and more important, Global Solution will grow the fee income and fee result together with the VNB significantly by 2021. I will come back to the financial targets in a minute in detail later. Let's now turn to the international IFAs. Our international IFAs offer comprehensive financial advice, very consistent with what you have heard from my colleagues before.
We believe in face to face advice supported by digital tools, covering investments and, in particular, pension. Our businesses are in the UK and Central Eastern Europe. In the UK, we operate very successfully under the brand of Chase de Vere, a pure fee business, no upfront commission with around 250 advisers on a national footprint. Our target groups are Affluence with focus on investment and pension. The business has grown fast in the last 2 to 3 years, also based on strong relationships with affinity groups such as the British Medical Association.
For instance, the British Medical Association contract allows or offers exclusive access to more than 150,000 doctors in the UK to advise around investment, pension and disability. In Central Eastern Europe, we are the number one IFA in Czech Republic and Austria and among the top 3 in Slovakia. The current number of financial advisers amounts to more than 1200 with a focus on retail and affluent clients. In Czech Republic and Slovakia, we operate under the brand of FinCentrum and Swiss Life Select. We acquired FinCentrum during the course of this year.
Transaction has been closed in October. This will greatly improve our position in Central Eastern Europe and opened up new opportunity. We will operate there with 1 joint digital platform to realize synergies and leverage our offering into the region. We see further growth opportunities in the UK and in the CEE markets we cover. And let me also just briefly mention, looking at the time, only two trends.
Financial assets of private households grow significantly in all our markets. On the other hand, the instability of state owned pension clearly favors private investment, private solutions. Now what are the major initiatives there to capture the growth opportunities for our international life phase? We will further strengthen our setup in Central Eastern Europe, leverage our offering in the region and realizing operational synergies in Central Eastern Unit means harmonizing IT back end system and processes in between Czech Republic, Slovakia and Austria. We will foster further our Affinity business, in particular in the UK, but also in Czech Republic with our medical offerings and solutions for accountancy practices as important target groups.
Another key initiative is to push innovative investment solutions and processes into the IFAs to strengthen the recurring fee income further. Now this goes hand in hand with the further development of our hybrid distribution capabilities. With this, we want to increase the productivity of our advisers and gain access to new clients. As in the past, all of our IFAs are constantly looking to attract new teams to strengthen our current market position. The fee and commission income of our advisers will grow to over €200,000,000 by 2021.
Let me conclude with a look at our major financial targets. Swiss Life International will double the fee result by 2021. Both lines of business will contribute strongly. Global Solutions will increase the risk result by 50% during the period. And based on our initiative, we expect to double the value of new business by 2021 and generate more than EUR 110,000,000 of value of new business.
A view on the profit by source for international shows that it is spot on with the group targets for SwissLab 2021. The fee and risk result represents already more than 80% of the overall segment result. The corresponding fee income is, to a large extent, recurring, creating stability and value. And fee and risk result will substantially grow in line with our strategy. As the business model is capital light, the growth in fee and risk result will lead to strong cash generation.
Ladies and gentlemen, our track record, the growth opportunities based on our strategic setup and the continuous hard work of an excellent team makes me confident that we will reach our ambitious targets. With Swiss Life 2021, it is our ambition to become a major contributor of fee and risk result to Swiss Life Group. Thank you very much for listening. And now it's Patrick and colleagues for Q and
So thank you, Niels. We'll now have our second Q and A session. Here with me are Marcus Lijunk Groot, Charles Rohlikhom, Jorg Baumold and Niels Frohwein and are ready for your questions. Please go ahead.
Jonny Owen, UBS. Quick one on Switzerland. So are you seeing the opportunities come through from AXA's withdrawal yet? I guess in the slides, you've alluded to opportunities arriving, but just a bit more color would be great.
Okay. Yes, of course, we see a lot of more new business already this year. We see the effect in next year's numbers because what we underwrite this year is actually starting as contracts on the 1st January, and the numbers are big. So yes, we see an effect.
How big?
Yes. Well, so the combination of full insurance and savings contributions and risk premiums, cost premiums for autonomous solutions, semi autonomous solution is going to be on a regular basis. So periodic premium sort of around CHF 250,000,000 and the single premium effect will be about CHF 2,500,000,000 combined in full insurance and semi autonomous solutions. So it's sizable. Thank you.
Let me please continue on the Group Life business. You showed a chart where the reserves for the compulsory portion are going up and the reserves for the excess is going down. Can you maybe elaborate why that is the case? Because I would expect the non compulsory business to grow faster than the compulsory business given that there is imminent salary growth? Are you offering additional products that replace these traditional BVG products, and therefore, you need to provide less reserves.
Is that the reason?
I think you were alluding to the slide that Martin Selig might have shown that was the overall BBG business. On the one hand, that was the one that was still growing, and on the other hand, the rest of our reserves, which is declining. So maybe you can say a couple of things about how you expect the mandatory and because we didn't show there was no new business in that slide in addition to that.
Does this answer the question? I think so. Yes.
Falko Murray, Autonomous Research. Actually, pretty much a similar question to a degree. I mean, you mentioned expire if I start with the Swiss business actually, sorry. You mentioned the kind of expiring maturing kind of contracts that you're seeing within the bulk, particularly within that kind of Asia category, I imagine. And that's obviously feeding the chart that we're looking at in terms of the rundown of the individual life reserve base.
Could I
just ask what if you know
what the level of retention you're achieving in terms of managing to kind of retain those assets at maturity is currently and what you're trying to do to maybe push that number higher if you have that in the background? And then secondly, just going to Germany, you mentioned kind of underrepresented areas that you're trying to increase the distribution reach that you have through your kind of slightly younger sales force. So I just wondered what those underrepresented areas might be. Thanks.
First, Switzerland, then Germany. Okay.
So I understood you were referring to the private wealth offering for private customers, right? Yes. So it's about onethree of the asset inflow that stems from terminating insurance contracts. So that's quite a big chunk.
Okay.
And how much what's that? Is there a retention of the maturing contracts?
The
reinvestment rate?
Or retention? It's around 20%.
In total, it's around 20%.
Okay. And are you expecting that to improve? Or is that something you
can Yes. It's supposed to improve, yes. Although you have to be realistic that if you look into the best age AG segment, of course, the customers already planned with parts of the money to pay back mortgages, etcetera. And then of course, you cannot reinvest it if they needed to pay back a mortgage. So it's not going to increase like forever, right?
But it should go up still a little bit.
And on Germany, we are strong in the north and in the west of Germany. We are okay in the east, and we need to improve in the south.
And is it just purely geographic in terms of the underrepresentation? I don't know whether you've got any kind of
No, we are checking our market average. We are our market share in the different cities and areas. And so our market share in the South is not as high as, for example, in the West. And so we are trying to bring young people into new offices in the South. That is important to build the hubs where we then can recruit into.
And just as a question, I mean, do you have the average income of your kind of customers? Just as a question.
The average income of our customers, I cannot tell you, but the average income in Germany is, at least the figure is on my mind, €38,000
And would you put yourself as in that average then?
Maybe we are yes, more or less, we are in that average, yes.
Felix Reimers from Zek Capital. One question. To what extent is your variable compensation linked to achievement of these goals?
It is. So you can read it in our compensation report. It's
I just read it, so it wasn't I wasn't trying to read it. It wasn't completely clear to me to what extent you are incentivized to reach these goals?
Well, actually, as it is written in the compensation report, all of these goals show up as of the Swiss Life 2018 goals show up, and there are some other metrics which are also included, such as the solvency ratio and the like. So there are several there are 2 important components. So on the one hand, there's the cash compensation, and that is linked on the results we've achieved and the quality of the results we've achieved. And then there's a there's on the retention related compensation, so the deferred part. There you have several goals that we have to achieve.
One is linked to the fee and risk results. 1 is linked to the cash remittance. And the last one, I think, changes every year, and one is profit and or value of new business, depends a bit by the year.
Thanks a lot. Peter Eliot, Kepler Cheuvreux. I guess your last two plans have been very much about cost cutting. And this one seems you're looking more about growth. I mean, it's easier to go that way around than the other way around.
But just sort of philosophically, does it do you see any sort of particular risks or challenges about changing the mindset within the firm? Or is that an unfair comment about comparing the plans? That would be one question. The second question was a few comments about sort of leveraging globalization. I guess, in the current environment, there's a risk that we're going the other way.
To what extent are the sort of targets based on macro assumptions?
Well, the first one is the last the present program, Swiss Life 2018, was not really about cost cutting either. We had cost initiatives, but we initiatives, but we said that we would reinvest whatever we would save back into the business, the digitalization initiatives or the improvement of the quality of advice. Niels had mentioned it, we did quite a lot in international. But also in the other units, especially in Germany, with the platform you mentioned, In France, it was more on a continuous basis than one very big initiative. So I wouldn't say the new program is different than the last program, but it is different to the milestone program, which we communicated 9 years ago and also to the Swiss Life 2015 program, which we communicated 6 years ago.
So those 2 were more on the cost cutting side, especially the first one. And now going forward, no, I don't think there is a lot that's needed to change in terms of growth. As you know, we don't have a growth target per se, so that will not change. So my colleagues will manage their teams also along the targets that we've just mentioned, especially the value of new business is important next to the IFRS figures. So I don't expect a lot of change here.
The exception maybe being Switzerland, where the growth targets are really quite focused within some of the initiatives. I mean, we don't in France, in Germany, especially the IFAs and in the Life business and at the international, there's a lot of growth ambition in there. And with the Swiss, we have now this special AXA effect, which is which we were sort of making an exception on because there are so many high quality accounts on the market to have a growth boost there. But overall, especially for the Swiss business, for sure there is no change with managing overall growth, which as Markus has said, is very much a combination of the semi autonomous solutions and the traditional parts of the business in Group Life. And Individual Life, for sure, it's much more about new products and managing the customer segmentation than about the overall growth of the business.
But maybe, Markus, you can say a few things about that.
Yes, absolutely. So as I mentioned before, Switzerland has 8,000,000 inhabitants. And the penetration with insurance coverage is extremely high compared to other countries in Europe, particularly also with biometric coverage because in the BVT area, as soon as somebody is employed, normally all the biometric risks are somehow covered. So really, growth opportunities are to be found in adjacent areas, which means that you have to be there whenever something happens with the customers. So we grow out of the portfolio, as I mentioned before.
And this is a very different approach. It's really a question of share of wallet, of increasing adjacent coverages and areas. So that's why we came up with these packages on health care, on homeowners insurance, etcetera, that actually complement what is key in any sort of an advisory situation on your future financials and retirement, etcetera, because this all comes together in these customer segments. So the focus is really on making more out of these customer segments whenever we have an opportunity to talk to customers. And that's why we invest into this digitally supported advisory and customer service process in order to make sure we miss less of these opportunities with our customers that we have because the customer base is really big.
I'd really ask Markus because for the other gentlemen, if you look at the growth rates we have achieved over the last years, they've been, well, quite significant. I mean, the only area that wasn't where it wasn't the case was actually in Switzerland for good reasons, for capital efficiency reasons. But if you look at the international, for the German IFA or especially the French business, I mean, we've seen huge growth over the last couple of years. Now coming to the international part. I mean, the first part, of course, in Switzerland, we're very, very much tied into the international economy, but for here, for us, the European developments are much more important than, let's say, the global ones.
And of course, we depend on a growing employment base by net migration that's still coming in also for our real estate portfolio. And the other two countries represented here are actually, of course, the exports do matter quite significantly, especially for IG Metall in Germany. The union that was just alluded to, I mean, coal car industry, for sure that plays a certain role, but I guess it's most visible for Niuentes business. And maybe you can say a couple of words about what would happen if we went into reverse for your business.
Well, I do believe, as I pointed out, that in particular in the Global Solution Business, the offering and the demand for those solutions is just that strong. I do see that our business partners are looking for wealth structuring solutions. And if you look 5, 10 years back, life insurance is what is out there for wealth structuring at the end of time and what comes with private banking models, family offices and so on and so forth. On the other hand side, if you look at the IFAs and our sizable business in the UK, the average client in the UK has GBP 250,000, GBP 300,000 of free liquidity. That would be the typical affluent, affluent plus client with regard to that.
And then we are concentrated very concentrated now in Central Eastern Europe around Austria, Czech Republic and Slovakia. There's nice growth there in those geographies with regard to household income. So we expect a rather stable development.
But I mean, as always, the hardest hit would be the asset side. And what might happen there, who knows? I mean, there are several scenarios you can think about. Of course, it wouldn't be great for the stock market and probably wouldn't be that great for the bond market either. So possibly we'd see higher rates than what we believe today, which would, of course, be pretty good for us overall.
But of course, it would be a bit nasty what new business and so on is concerned. But let's say, for the overall balance sheet, maybe it wouldn't be as bad as feared. Simply because once you don't have any productivity gains anymore, which go away after globalization, you probably have a little bit more inflationary pressure. But it's up for grabs. Everybody has a bit of a different opinion on that.
It's Andy Sinclair from BofA Merrill. Just one question for me actually on U. K. Financial Advisors. The 2 biggest players in U.
K. Financial Advice, Quilter and St James's Place, both make virtually nothing actually make losses on their Financial Advice businesses. How does Chase the beer actually manage to make up a profit while also charging competitive rates when those much larger peers are actually making 0 or losses?
So I'm very happy with our development of our U. K. Operations. It took a while, but we started out that independent financial advice with 0 upfront commission, which, with all respect to colleagues, have not yet experienced how that is. We are in that business now since 10 years.
And what you can see, for example, in comparison to St. James Place, they are selling basically their own investment proposition. When you go to St. James Place, what you have is not an independent advice with regard to the investment offering that you get, but you get discretionary portfolios that are designed by St. James Space and where they try to get fees out of Asset Management.
I do believe that parts of our success story is that clients are really affluent clients who can pay for that, really do want and are looking for independent financial advice. And this advice goes also around wealth transfer. It's around estate planning. It's pension advice in the UK. It works.
It works. And actually, we are working with the big platforms there in the UK. And what we can see is that the product margin goes away out of asset management to distribution at the end of time if you do your advice good enough. And that's why we are very positive on the further development. Unfortunately, the U.
K. Pound has not developed as favorable. I would be the most happiest man if I could show them the numbers what it would mean in U. K. Pounds because the increase is very nicely during the last 3 years.
And the second point is Affinity business. We are very strong in Affinity business. So look and I was trying to introduce that BMA contract, that British Medical Association contract, where you have an exclusive access, where the BMA gets part of the commission with regard to that, but where you have access to 150,000 doctors, which you can young doctors also, which you can start to advise, give protection products, other things there. There, we are particularly strong in Affinity business.
And as far as I've understood it, we're there because we have the label independent.
That's it.
And the others don't. I don't even remember the term for the other. Or 2 regulatory Restricted. There you go. And that's, of course, helpful for the Affinity business.
But please, as my colleague said, you are very well invited. Maybe I can connect you. You will not be disappointed.
Niels Dumas Berg from Total Asset Management. I have a question with regards to the Swiss business. One more question. Maybe you can give us an idea how on the Group Life business, the environment or the competitive pricing environment has changed now since OxEx has exited. And if you have changed something to your pricing conditions looking at all those contracts who are looking now for a new supplier?
Yes. Well, thank you very much for this question, particularly also the last one because we have changed absolutely nothing. And that's very important, right? Because the way we underwrite has something to do with protecting our margins for our shareholders, but also protecting the quality of the in force book for our existing customers to whom we have promised to be still there in 30 years when they get their annuity, right? So gaining more business by reducing the entry level in underwriting is an absolute no go.
It doesn't make any sense at all for us the way we run this business. Now how did the pricing environment change? It changed actually quite a lot, also driven by our regulated by FEMA, yes? Because what happened over the last few years was, particularly with the large companies like us upfront, there were on-site reviews on how we handle our tariffs that have to be approved by FINMA. And in these reviews, FINMA started to reduce the freedom to do economic corrections on an individual contract basis.
And just 2 weeks ago or 3 weeks ago, a new what is called the Rumschreib and a new rule came out on how tariffs have to be constructed in the future, which limits any sort of adaptations of prices to that are not linked to what can be proven by actuaries to be correct or limited to a very high degree. Now this actually helps us a little bit because we are ahead in this whole thing because we have been working with FEMA first or they have been working with us first. So the pricing environment will be much more strict when it comes to the applications of the tariffs that have been approved by FINMA. And I think this will actually change the mainstream price in the market quite a lot over time. So and for us, it's actually good to have a
I mean these are really decade old mechanics. So I mean, because AXA announced their change this year, we even haven't been able to react because tariffs had to be sent to burn the year before. Sounds like mid-twenty century type of price mechanics.
I have a follow on question on the Swiss BBG business, but also one on France. I understand that, for example, Germany is being successful with the IFAs because of the efficient platform and in life insurance because of the Swissness in the label, put it simply. What is in France if you had to say this is the single success factor that you've had this constant and very solid growth in the past few years. And then on the Swiss Group Life business, when I look at the Slide number 14 that has been presented in the ALM section, then if we contrast the semi autonomous solutions and the full insurance solutions, It looks like, and Matthias made that comment, that the full insurance business is more attractive. And I was wondering if we should really take that comment at face value because if we take the capital into the equation, then maybe we come to a different conclusion and maybe it would be more attractive to go for the semi autonomous solution whenever obviously you as a service provider have the choice to direct the clients towards the one or the other solution?
Thank you.
So first Switzerland and France.
So the simple answer to that question is that the full insurance solution earns its own cost of capital on a stand alone basis, at least for Swiss Life within Swiss Life. That's very important. And then the second point is that what Matthias explained is that on the right hand side of the chart, you saw exactly one of these balanced strategies where we sell full insurance and semi autonomous. And what we claim is that it's this combination, this continued searching for the optimum economic point in this mixture that optimizes capital efficiency and balances it at the same time with the future profit expectation, the value of new business, etcetera, etcetera. And that's what we try to achieve.
And the extreme case on the left hand side, if you just go for semi autonomous, massively reduces the profit potential because the underlying on which you can earn a profit is a lot smaller, plus prices on any add on like risk and cost premiums are lower. And that's why we say if we want to achieve our net profit goals and our cash remittance goals, our VNP goals in Swiss francs and not in percentages in Swiss francs and not in percentages, then we have to go for this optimal mixture. And that's the rational reason why we say we keep the full insurance solution within our offering. So it's really the balance that makes the point.
So and as our CFO always says, we're not in the only in the margin business because if we reach the minimum hurdle rates and the business is capital efficient, then we go for maximizing the value of new business. That's the difference between the two strategies we illustrated here a little bit to bring a little bit more light into our thinking of why one player exits the business whereas the other one stays.
So does that mean if I was a former client of a competitor that went out of market and I came to you and I presented my structure of my employee base to you, then if the full insurance wouldn't meet the hurdle rate, you would suggest a semi autonomous solution to them, be it, for example, because they don't bring in enough reserves when they want to switch over.
Right. Absolutely right. And this is it's actually a very practical example that you were making because we have seen this several times in the past offering season. And what is actually very interesting, there were even customers that did not want to go into the semi autonomous solution provided by our competitor and actually came into a semi autonomous solution at Swiss Life, which is kind of counterintuitive, but still the case. But actually, that's the way we handle it.
Yes, if we don't offer because of like the structure of the employees, the age structure, there were many disabled people in the past or whatever, then we would still offer if it makes sense, a semi autonomous solution, yes.
So that's very important. There is a third possibility that we don't offer at all, right, because there is not the risk taking capacity of the client, given the people you might be thinking of.
And in terms of the hurdle rate, I was wondering, is the hurdle rate in terms of ROE the same for the Group Life business as for
the overall group? Yes. So the VLP hurdle rates are exactly the same, yes.
So as a shareholder, I shouldn't care whether we have additional income in the Swiss Group Life business or in the one of the very attractive international growth businesses. It meets the same hurdle.
Yes.
Good.
Yes. Sorry, France. For France. So the real UHP is the clear strategy that we decide 10 years ago to target high nature individuals and affluent people because we want this was the wish of the group and also my personal wish, to stop traditional business and to sell fee business. Fee is unit linked and this private bank also solution.
So those clients, they doesn't they can come to Swiss Life in order that we sell to these clients the product. They have an issue, and we have to fulfill and to find a solution for those clients. So we had to adapt the product range fully, to adapt also these multi distributions, also targeted this segment. And the difference is huge because 10 years ago, when nobody knew Swiss Life, there was people thinking that we are a flight company, Swissair or something else, but not an insurance company. Today, everyone to work with to have a partnership with Swiss Life.
And okay, that's the reason why today it's a success. And we have there is also a competitor. They try also to copy us, but we have really this full recognition of the market. We are a pure private insurer. The other one, they have retail business.
They make everything. So it's not so clear as it is for Swiss Life.
So any other questions?
Okay.
Then
go back to your seats. I just have some few closing remarks, if I find my notes, which I have somewhere in my stack, if at all. Here they are. Wow. So to conclude, our program for the next 3 years is very clear.
And with Swiss Life 2021, we will build on our strengths, I mentioned way at the beginning. Our local execution power, our discipline in delivering and our ability to pursue market opportunities based on our client needs, and as I said, last but not least, our purpose of helping people lead a self determined life. Our strategic thrust will also help us to deliver on our financial goals. I repeat those. We will increase the quality of earnings and earnings growth.
Maybe that's the reason why I was a little bit hesitant when Markus said that it didn't matter which franc comes from where because, of course, we have the ambition of improving the quality of earnings. So we prefer to get fee results, which are less capital intensive than a franc from savings result. But otherwise, of course, it's completely right what Markus said. That we will continue to improve operational efficiency, we'll enhance our shareholder returns by introducing the share buyback you've heard so much about and by increasing our dividend payout ratio. And this is all based on our solid solvency and increased cash remittance.
And by focusing our efforts on our goals, we will deliver also on our promise to serve the societies we operate in. With this, I'd like to thank you for your interest, your questions. Thank you for joining us, taking the time to come here to Zurich every 3 years. I really appreciate that, and I'd be delighted if you stay on for a few drinks later on. But for those of you who need to catch a plane or a flight, of course, I wish you a very happy Christmas season that is now quickly approaching and hope to see you soon.
Thank you.