Release Date: September 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Baloise Holding AG (BLHEF, Financial) reported a 7% increase in shareholder profits, amounting to CHF220 million.
- The company achieved a significant increase in EBIT in the Life business, with a 39% rise compared to the previous half year.
- Economic capitalization remains strong, with comprehensive equity increasing by 8.5% to CHF7.8 billion.
- The company acquired more than CHF700 million of net new third-party assets in Asset Management and Banking.
- Baloise Holding AG (BLHEF) maintained a stable balance sheet and is on track to achieve its cash remittance targets.
Negative Points
- The Swiss business experienced a lower result due to a major storm event, impacting overall performance.
- The combined ratio in Non-Life was affected by a high load of large claims, particularly from the Swiss entity.
- The company is discontinuing its ecosystem strategy, which may involve further investment write-downs.
- The SST ratio remains at roughly 210%, indicating no significant improvement from the previous year.
- The company plans to reduce its workforce by 250 FTEs, which may impact employee morale and operational efficiency in the short term.
Q & A Highlights
Highlights of Baloise Holding AG (BLHEF) Earnings Call Transcript
Q: Can you explain the impact of the uplift in CSM on your EBIT target for the Life business?
A: The uplift in CSM is due to adjustments in the liquidity premium and lower spreads, translating into a higher CSM lake. This uplift will contribute to the P&L over time, but the EBIT target remains at least CHF200 million. The convergence phase of IFRS 17 and 9 is ongoing, and we keep our guidance unchanged.
Q: What is the status of FRIDAY, and how does it impact your numbers?
A: FRIDAY is focused on achieving profitable growth, which includes price adjustments. It is on the path to breakeven, and we are exploring all future options for the business. The CHF30 million cumulative spend on ecosystems includes FRIDAY, and we expect it to contribute positively by 2027.
Q: How do you plan to achieve the 2% to 3% cost ratio improvement in Non-Life?
A: We are implementing group-wide cost measures, including reducing 250 FTEs and enhancing digitalization and automation. These measures are expected to yield CHF80 million to CHF120 million in cost efficiencies by 2027, translating into a 2% to 3% improvement in the expense ratio.
Q: What are your plans for the Swiss pension fund system if the upcoming vote does not pass?
A: If the vote does not pass, we will continue to manage our occupational assets selectively, focusing on long saving periods and requesting premiums to compensate for the inadequate conversion rate. Our semiautonomous solution, Perspectiva, which has no annuities, will also help maintain a stable balance sheet.
Q: Can you elaborate on your capital allocation strategy, particularly regarding dividends and share buybacks?
A: Our dividend policy remains to never lower the dividend, and we aim for a total cash payout of at least 80%, including dividends and share buybacks. We expect an exceptionally high cash remittance of well over CHF500 million in 2024, and depending on the actual cash remittance, we may consider a share buyback of at least CHF100 million in 2025.
Q: How do you justify maintaining your banking and asset management businesses?
A: Our banking and asset management businesses are closely integrated with our insurance operations, providing economies of scale and comprehensive solutions for our clients. The bank focuses on investment products and mortgages, while asset management leverages our insurance expertise to offer competitive investment solutions.
Q: What is your approach to managing solvency and cash remittance?
A: We aim to maintain a strong solvency position, with a target SST ratio above 140% even in extreme scenarios. Our cash remittance target is at least CHF2 billion from 2024 to 2027, and we are committed to delivering this through sustainable operational profitability and capital productivity.
Q: How do you plan to achieve your return on equity (ROE) target of 12% to 15%?
A: Our ROE target is based on IFRS earnings and capital as reported. We aim to improve capital productivity through strong operational profitability, cost efficiencies, and disciplined cash management. All business units are expected to contribute to this improvement, creating sustainable shareholder value.
Q: What are your plans for growth in the Swiss market?
A: We aim to grow our position as a leading financial partner in pensions, financing, and wealth management. Our focus is on profitable growth through product, tariff, and portfolio adjustments, reduced claims exposure, and efficiency improvements. We target an annual growth rate of more than 2% in gross written premiums by 2027.
Q: How do you plan to manage your Luxembourg Life business given its low solvency ratio?
A: We expect the solvency ratio to improve due to changes in calculation methods. We are also focusing on operational efficiency and profitable growth in the Luxembourg local market. Our lapse rates remain stable, and we continue to see good growth in the life business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
