Swiss Life Increases Its Earning Power in 1H 2016
In the first half of 2016, Swiss Life generated direct investment income of CHF 2.2 billion in spite of persistently low interest rates, which was slightly higher than the prior-year level (plus CHF 56 million). That corresponds to a non-annualised direct investment yield of 1.5% (2015: 1.5%). Net investment income fell due to lower net capital gains to CHF 2.3 billion (2015: CHF 2.8 billion), resulting in a net investment yield of 1.6% (2015: 2.0 %).This investment return allowed a further strengthening of the insurance reserves to the benefit of the company’s insured parties by CHF 0.5 billion. The average technical interest rate decreased to 1.58% (against 1.64% as at 1 January 2016) due to the strengthening of the technical reserves and improved business mix.
Swiss Life Switzerland grew its operating profit to CHF 420 million (plus 2%) against the prior-year period. The fee result increased to CHF 11 million (prior year: CHF 2 million) – primarily from the increased contribution by Swiss Life Select Switzerland. In France, Swiss Life stayed close to its prior year result with EUR 125 million (2015: EUR 126 million). The fee result decreased to EUR 16 million due to reduced business at Swiss Life Banque Priv?e (prior year: EUR 20 million). Germany posted a 13% increase in its result to EUR 57 million, driven mainly by a higher fee result of EUR 29 million (2015: EUR 21 million) stemming from an increased contribution by our owned IFAs. Swiss Life International improved its result from EUR 20 million to EUR 22 million (plus 11%) with disciplined cost management. The fee result increased to EUR 17 million (prior year: EUR 16 million). Swiss Life Asset Managers posted a strong segment result of CHF 115 million, up 13%, which notably included an 84% increase in third-party business to CHF 27 million.
Profitability and capital efficiency take priority
Premium income in local currency was down 9% year-on-year in local currency to CHF 10.1 billion. This is primarily due to the Group's focus on profitability and capital efficiency in a challenging market environment. The Group grew its fee income in local currency by 3% to CHF 656 million.
Premium volume in the home market of Switzerland came to CHF 6.6 billion, down 6% against the prior-year period due to selective underwriting, particularly in single premium business. In group life business, premium income fell by 5% to CHF 5.9 billion. Premiums in individual life business fell by 17% to CHF 0.7 billion. In addition, Swiss Life Switzerland successfully pursued its full-range provider strategy for group life clients, more than doubling the share of new business production with semi-autonomous insurance solutions to 23% (2015: 9%). Premiums fell by 2% in France to EUR 2.0 billion, mainly as a result of a reduction in the life insurance business. Swiss Life in Germany achieved EUR 576 million in premium volume (2015: EUR 604 million), down 5%. The planned reduction in traditional business was partially offset by the increase in modern-traditional pension products as well as disability insurance. Swiss Life International experienced a 42% fall in premium income to EUR 651 million, mainly stemming from its business with private clients.
Swiss Life Asset Managers attracted CHF 4.9 billion in net new assets for its third-party business in the first half of 2016, which brought total assets under management for third parties to CHF 44.4 billion (plus 14% relative to the end of 2015). Together with insurance mandates (CHF 157.8 billion), total assets under management at Swiss Life Asset Managers stood at CHF 202.2 billion as at 30 June 2016 (up 9% from the end of the prior year). Income at Swiss Life Asset Managers increased by 9% to CHF 288 million (2015: CHF 263 million), over 50% of which came from external customer business at CHF 153 million (plus 17%).
Improved efficiency – solid solvency
Efficiency ratios improved Group-wide by 2 basis points over the corresponding period in 2015 to 0.28% (non-annualised). This was due to a reduction in operating costs for insurance segments and an increase in the insurance reserves. In spite of interest rates falling again, the new business margin remained at the ambition level of 1.5% (2015: 1.7%). The value of new business fell from CHF 145 million in the first half of 2015 to CHF 113 million. Swiss Life generated an adjusted return on equity of 11.1% during the period under review, relative to 11.6% in the prior year. Shareholders' equity increased 18% to CHF 14.3 billion – mainly due to higher unrealised gains on bonds. The cash remittance to Swiss Life Holding Ltd increased to CHF 557 million in the first half of 2016 (2015: CHF 369 million). Swiss Life had an SST ratio of 146% as at 1 January 2016 (as filed with FINMA based on the internal model approved with conditions). Solvency as per the European standard "Solvency II" was over 200% as at 1 January 2016.
Patrick Frost: "The macroeconomic conditions applying to our business will continue to test us. Nonetheless, the results from the first half of 2016 show that we can respond quickly to challenges. Our consistent focus on the customer allows us to ensure that Swiss Life remains innovative and close to the market."
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