Ladies and gentlemen, welcome to the Baloise Group Half Year Results 2022 analyst conference call and live webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Markus Holtz, Head of Investor Relations, please go ahead sir. Good morning, and welcome to Baloise Q&A call on our half-year results 2022. On our call today we have our CEO, Gert De Winter, our CFO, Carsten Stolz, and our CIO, Matthias Henny. Now I would like to hand over to Gert. He will give you a quick summary of our results before we open the Q&A. Thank you, Markus. Very good morning from my side, from our side, and a very warm welcome to all of you. Let me start by saying that I'm very, very glad to be back. The last six, seven months have not been that easy given my cancer therapy, but I've got well through it. What is more importantly, the treatment has worked. Since the beginning of August, as planned, I'm fully back at work, and that's why I'm very pleased to present the half year's results today. In summary, if you look at our half year results, we have a very solid result. We have a very strong balance sheet, and we have started very dynamically into our new strategic phase, Simply Safe: Season 2. That's the reason why we are satisfied and we are confident looking into the future and to the future course of season two. Now if you look at some of the key numbers, the shareholder profit lies at CHF 287 million. It is well diversified across geographies and business lines. This result shows the stability and the reliability of Baloise in a challenging macroeconomic environment. With an EBIT of CHF 178 million in life, we achieved a very strong result. Also thanks to the higher interest rates, but despite the headwinds on the capital markets. We show a very good growth of 2.3% in non-life and a robust combined ratio of 91.9%, despite a major winter storm in February that particularly affected our Belgian operations. In asset management, we have achieved an investment return of almost 1% and have won over CHF 700 million of net new assets from third-party clients. This is 41% more than the last or the previous half year, so we are executing against our third-party asset management strategy. Our balance sheet is strong. Of course, equity has declined as expected, given the higher interest rates, but the economic capital strength has increased. We expect the SST ratio to be in the area of 230%, which is higher than at the beginning of the year. We have also made further progress in expanding our home and mobility ecosystems, and we continue to develop our core business in all areas. That also includes simplification. Let me give you two examples. In Germany, we have sold the entire portfolio of our hospital liability business, a portfolio that in the past has generated unwanted volatility in our figures. Another example of simplification is our rebranding project. As of the end of October, all our entities will operate solely under one brand, the Baloise brand. In addition, the brand identity is being completely revised in order to make unique Baloise culture even more tangible. I am convinced that our Baloise culture is unique. It makes me proud to be part of this company and our Baloise culture, our corporate culture, is the basis for our ongoing success. With that, I would like to open the question and answer session. We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only the handset if you're asking a question and to turn off the volume of the webcast. Anyone who has a question may press star and one at this time. The first question comes from Thomas Bateman from Berenberg, please go ahead. Hi. Good morning, everybody. Very good to hear you're back as well, and I'm glad everything's gone well. Three questions from me, please. Just on your innovation spending, I think you said again today that you're still guiding towards CHF 50 million for 2022. Is that correct, and kind of what are you thinking for the later years in the strategic period as well? Just on the growth outlook for Belgium in particular, clearly there's been a bit of pressure in motor, but what are the trends in other lines of business? Finally, just on inflation, you seem to be mitigating any inflationary pressures pretty well at the moment, but could you just give us a bit of an update on where you do see inflation in your claims estimates? Thank you. Thank you. Let me try to kick it off on those three questions, and of course, Carsten and Matthias can join me in adding points. On the innovation side, what we have said at the investor day, October 2020, is that from the cash generated, we will actually or use it for innovation in the area of 10%-30%. What we see today is that for 2022 and also moving forward, that we're rather at the lower end of this number, so 10%. So we're actually around this CHF 50 million that you mentioned there, Mr. Bateman. So that's one. Growth in Belgium, if you look at the local currency, we have a growth of 0.6% in non-life. The main reason of this slowdown, if you look at it compared to other years, is that the dynamics in the car market and the car portfolio is the biggest chunk of our business in Belgium. The dynamics in the car market, given logistical problems, is much lower. We see a decline of the sales of new cars and of used cars of over 10%. This of course had also an impact on the insurance contracts in car business being closed. On the other lines of business, we see normal evolution, so nothing spectacular to mention there. On the inflation side, a couple of thoughts. If you look at the inflation in Europe and Switzerland, it is of course different. We're talking about 8%-9% in Europe and only 3% in Switzerland. Non-life is of course more sensitive to inflation than the life business. What we see in the data in Switzerland is that we don't see any claims inflation yet. That's an interesting, I think, data point. No claims inflation in Switzerland, which might also be due to the fact of course, that the new cars are safer, which means less bodily injuries, and that's why also less higher claims. That's certainly one reason. I think what is very important to mention is that part of our business lines are automatically linked in non-life to inflation, so they adjust, the premiums adjust automatically to inflation as we speak. On the other side, every year of course, we have the opportunity to increase the premiums according to the inflation. Taking just an example of Germany in terms of expectation in property, we expect there an increase of the premiums from 5%-20% in 2023. In liability, even after a substantial increase last year, it's the expectation also that there will be an increase of 10%. Just as two examples where we of course can react rapidly and adequately to the rising inflation. Don't know, colleagues, any other thoughts? Apparently not. According to my colleagues, I've been quite extensive and complete. Thank you very much. Very good. The next question comes from Peter Eliot from Kepler Cheuvreux, please go ahead. Thank you very much. Likewise, very pleased to have you back, Gert. Yeah, three questions from me as well, please, if that's okay. First of all, I was just wondering if you could sort of update us on your non-life targets in particular and you know, whether they're sort of still appropriate in this environment. I mean, I'm just thinking, you know, combined ratio with rising interest rates. I mean, you've commented on no impact from inflation as yet, but I guess there's a number of other considerations. Just wondering if you still think that's any reason to sort of review that target. I noticed on the expenses as well. I noticed that your expenses are up, I think sort of 6% year-on-year, despite slightly lower premiums. Again, I'm just wondering if there's any sort of more pressure there perhaps than you're expecting at all. Then on the underlying loss ratio, the increase of two percentage points, would you be able to split that out in terms of the drivers of that? I mean, I understand that the reinsurance reinstatement premium has had an effect, but it'd be good to know how much that was and what the other factors were. Then finally on the life risk result, I mean, even without the longevity update, it seems a little bit lower than normal. I was just wondering if you could sort of update us on what you expect there, on average going forward. Thank you very much. Thank you, Peter, and nice to be back. Let me also try to kick it off. If you look at the targets of Simply Safe: Season 2, including the non-life target, they're all intact. They are all in place. Also, the 90% combined ratio, we're working on it every day as we speak on both the loss ratio side and the cost ratio side. They're all intact. Nothing has changed there. The 90% combined ratio target for Season 2 is absolutely standing. I think you mentioned a couple of points, and I think they are important, and they're related to each other also. We had the winter storm event in February, which affected mostly our Belgian operations. There's not only that on the loss ratio side, but there also has been a reinstatement premium from reinsurance, and that has an impact on the cost ratio side. If you would take off that one-off, then we would also be in terms of the underlying loss ratio in the area of 2021, which is around 60%. If you take out the winter storm and the reinstatement premium reinsurance out of the equation, we actually have a similar, very similar, underlying loss ratio. That's related. The expenses are also driven by this one-off cost of the reinstatement premium. If you would take that one too out, actually the cost ratio, despite Bigger projects, IFRS 17, and a lot of IT investments, the cost ratio would be stable in Belgium and on the group level. That's also the reinsurance team that has a point there or that has an impact there. In the life risk result, I think you mentioned the most important reason, which is indeed the impact of the adaptation of the longevity assumptions. That's actually I think the biggest reason why you see there a difference compared to half year 2021. Overall, of course, half year 2021 or 2022 is of course also driven to some volatility given the fact that it's half year results, be it in non-life or in life. Okay. Thank you very much. Welcome. The last question comes from Jimmy Fan from UBS. Please go ahead. Hi. It's great to hear you back, and I have three questions, please. First one on the life earnings. We see there's a release of reserves because of higher interest rate. I think that number is CHF 30 million. If we compare that to some of the reserve strengthenings that happened in the past, that's the scale of the release is actually relatively small. Could you give us an idea what to expect in the next few half years on this result given the higher interest rate environment? Do you consider to revise that target on the life side, on the life EBIT, which is greater than CHF 300 million, because it seems like you can comfortably exceed that. My second question is around the hedging. I see there's a -CHF 73 million impact like on the fixed income hedging side that came through the PNL, and I presume that flows through to the savings result also. You had the notes on the side which suggests it's offsets somewhere else in the results. Could you give us an overview of how that hedging has worked on an economic basis for you? My last question is on Belgium non-life. I presume there's some elements of that storm impact in February has fallen into the underlying and some of that has fallen into the large loss side. Could you give us the overall losses from the February winter storms and how much of that falls into the large part and how much that has fallen into the underlying part? Yeah. Jimmy, thank you very much. Carsten speaking. I would like to address the first question on the life earnings and the reserve release. These reserve additions and releases are dependent on the regulations in the different markets affected. Additions go quicker than releases because there is lock-in effects under IFRS. So the releases take more time in comparison to additions. Therefore, we stick to our EBIT guidance of around CHF 300 million for now. With regard to FX hedging, I would like to hand over to Matthias. Yeah. Your question on the CHF 73 million derivatives loss on fixed income securities, that's related to hedging of variable annuities product, and it's actually offset on the liability side. In the savings result, it's actually netted, and it's a hedge against lower interest rates that is put in place to ensure the guaranteed annuities in that product. Given the strong increase in interest rates, this effect has been highly negative. To your third point with regard to Belgium, the storm impact has been a medium two-digit number. I cannot provide you with the splits between large claims and frequency claims. The storm impact as such has been in a medium two-digit number. It has been to a large extent covered by reinsurance. We talked about it already. That's the guidance on the Belgium situation. Yeah. Just a quick follow-up. That mid-two digits number is your net loss, right? Sorry, say again. Can you say it again please? If the mid-two digits number in Belgium storm losses is that a net or gross loss? That's the net number. Okay. Thank you very much. That's very helpful for us. It's a small two-digit net number. Yeah. We have a follow-up question from Peter Eliot from Kepler Cheuvreux, please go ahead. Thank you very much for the opportunity to come back. I was wondering if you could also comment on the reserve releases in non-life. They were a bit higher than normal, so I'm just wondering if you could say anything in particular that's happening there and what we should expect going forward. Secondly, the life new business in Switzerland looked a little low at first sight. I'm just wondering whether there's anything you can say there. The third one, the tax rate in life was very low indeed. I mean, I assume it's sort of regional split related regional mix. I'm wondering, can you give us maybe some better guidance, sorry, some guidance on what you would expect in a normal period? Many thanks. Thank you, Peter. Let me try to kick off with question one and two. Actually, we have I think that the release or the reserve releases in non-life of slightly over 4%, they show that we are very well reserved. Because we actually re-release reserves on a case-by-case basis. I think it's a bit higher half year. It's also, of course, higher half-year volatility to some extent. The normal guidance would be a reserve release of 2%-3% per year. It's a bit higher in half year 2022. If you look at the new business in Life in Switzerland, this is of course driven by the fact that we are I would say careful in underwriting new business in especially the Group Life business in Switzerland. We're paying attention to profitable business, which is determined by the age structure in Group Life, which is determined by the mandatory and non-mandatory split. We're holding back there for some quite good reasons. What you also see, and that's an impact, is that given the higher interest rates, the semi-autonomous solutions, whereby the risk or the investment risk is carried by the client, is more attractive for today. You see a shift from Group Life or normal traditional Group Life to these semi-autonomous solutions. You don't see them in the numbers because actually they are at least partially off balance. I think it's especially we being careful in underwriting Group Life business that has lowered the numbers of new business in Life in Switzerland. With regard to your question on tax rate, in Life, we expect a run rate of slightly below 20% for the group. Half year 2022 was below that with 14.6%, as you said. That has to do with the geographic split of profit contribution as well as tax-exempt income from some investment parts. But the run rate expectation is slightly below 20%. That applies for the group overall. There is no specific difference between the Life and the non-Life book. Peter, you had a fourth question. Can you please remind me what the fourth point was that you wanted to have an answer to? No, I think you covered everything, to be honest. Okay. Thank you very much, Gert De Winter. Good. That's just to be complete. Thank you. The next question comes from René Locher from KBW. Please go ahead. Yes. Good morning. Well, first of all, good to have you back, sir. I have three questions. First of all, on page or slide 20, the life results, I was a little bit surprised that you have yet this new longevity assumption. You know, I thought in an environment with rising interest rates, I did not expect that you have to change your assumption. I'm not an actuary. Perhaps you can explain a little bit of what were the key drivers here. The second question is for Mr. Henny on the asset allocation. I was just wondering, where if you have changed your asset allocations. What we hear, for example, from other insurance companies, that they are following spread widening, that they all go a little bit more into corporate bonds, that it's tougher to invest in real estate. An update would be very much appreciated. Then my usual question on Germany, that's on slide 38 and 40. It's good to see it's going in the right direction. When I take a look at the EPI Germany non-Life, it's now CHF 24 million. When I take the business volume and the combined ratio of 91%, there is still a little bit of a spread here, you know. I guess question is: How do you proceed with your IT non-Life IT system Guidewire in Germany? Thank you very much. Thank you, René. Maybe overall on the Life result, you referred to slide 20. Let me give some general comments and of course, colleagues, please jump in if there are more details to be given. I think if you compare last year last half year to this half year, of course, last year it was a very strong tailwind from the capital markets, which is of course the opposite in half year 2022. On the other hand, of course, rising interest rates have allowed us to release some of the reserve, which has made a positive change. I think the specific question also linked to the risk result is the longevity assumption, where you have actually a new mortality table which takes into account that people tend to live longer. We adjusted for that, and that has an impact of a low to mid-size two-digit number on the risk result. That's on question one. Question two is for Matthias. Yes. Our overall asset allocation, our investment strategy is unchanged. We have been over the last few years, reallocating to asset classes with a high and stable current income. We have ramped up corporate bonds and real estate and doing more and more in private debt. The underlying strategy is unchanged. Now, given the market changes with higher interest rates and higher credit spreads, we have further increased the corporate bond exposure in the first half year, so taking credit off the higher spreads. On the real estate side, in the recent years, we have been very selective in adding additional real estate exposure. We have built up the real estate exposure up to two or three years ago, and so we continue to be very selective on the real estate part. What we further ramped up in private debt is infrastructure debt, which has also benefited from higher interest rates and credit spreads. Thank you. Lastly, with regards to your question on the Guidewire implementation in Germany. The Guidewire implementation is proceeding as planned. We have the first business lines of business fully migrated. We are able to write new business on the platform. The journey is not finished, so there will be still IT investments in the future, but the Guidewire implementation is proceeding as planned. Okay. Thank you very much. The next question comes from Fulin Liang from Morgan Stanley, please go ahead. Thank you very much. First of all, welcome back. I got just two simple questions. First one is the German book disposal. What is the structural impact to your combined ratio in Germany? That's the first question. The second one is because your three-year target is based on cash. I was wondering if I look at the life results. I was wondering actually whether that interest rate kind of effect, which is a reserve release of life results, essentially non-cash elements. Therefore when we consider your cash remittance position for the year 2022, actually that element should be taken out. How should we think about the 2022 kind of cash? Can you just give us some color? Thank you. Thank you. Let me take the first question. Carsten will take the second question. What we did in Germany is actually we sold our hospital liability book, which is a business line we started to write in the beginning of the 2000s, but which we have already put into run-off in 2018. The reason for that is it is a high-expertise business line of business with a very long tail and quite some uncertainty about the regulatory environment. That's why we have put it into run-off in 2018. Over the last couple of years, this portfolio has been rather stable. This means that there has not been real impact on the combined ratio. That's one point. Of course, the sale will have an effect on a better solvency of the non-life business in Germany because it consumes quite some capital. Otherwise it has also a small effect on the bottom line, positive effect on the bottom line, but not that material. Overall, a good thing. We're glad to have been able to sell this portfolio. This is an exercise we continuously do. We take a look at our business lines, our portfolios, and we always ask ourselves the question, are we the best owner? If not, then we look for alternative solutions. Question two for you, Carsten. Yes, thank you. You are absolutely right. Life EBIT contains, by nature, non-cash items, reserve adjustments being part of that. With regard to cash and cash remittance, nothing has changed. We are pursuing the CHF two billion target over the strategic horizon. We have a well-diversified basis for cash remittance, as we have proven in the last years, and structurally nothing has changed on that. We will report by the end of this year on cash remittance with regard to the financial year 2022. No changes there with regard to cash generation and its sources from the portfolio of the group. Thank you. Gentlemen, so far there are no more questions from the phone. Well, if there are Just a- Oh, sorry. Go ahead. No. I just wanted to ask you if you would like to conclude or make any closing remarks. I was just about to start to. That's okay. I would like to thank you very much also for wishing me a welcome back. That's highly appreciated. Thank you very much. Of course, hoping to see all of you once very soon. Have a nice day, and take care. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.