Ladies and gentlemen, welcome to the Baloise Group Half Year Results 2023 Analyst Conference Call and live webcast. I am Alice, the conference 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 2023 results. In our call today, we have our CEO, Michael Müller, our CFO, Carsten Stolz, and our CIO, Matthias Henny. We will first give you a quick overview of our results. For this, I will hand over to Michael. Thank you, Markus. Welcome also from my side, dear ladies and gentlemen. I'm happy to welcome you together with Carsten Stolz, our CFO, and Matthias Henny, our Group CIO. I am pleased to report that we had a solid first half year, with robust growth in non-life and reliable margins and a strong capitalization. Based on the first half, we are again expecting a good cash remittance for 2023, in line with our strategic ambition to remit CHF 2 billion of cash from 2022 until 2025. The half year 2023 financial results are an interim stop on our Simply Safe: Season 2 journey. Over the last two years, macroeconomic conditions have changed, and we want to actively address the resulting challenges. To this, we will sharpen our existing strategy, Simply Safe, and focus more on our core business and operational excellence in the coming years, including customer and partner experience. This also means that we will review our target ambitions in the area of innovation for their feasibility in the current market environment and adjust them where necessary. We are also doing this in the area of asset management by aligning its focus more closely with insurance and banking products in the core business, and aiming to generate CHF 5 billion in third-party assets by 2025, with this focus. Our ambition is to improve efficiency and effectiveness, a key strength of Baloise for many decades, and a key prerequisite for our cash generation today and tomorrow. Baloise has increased its dividend 13 times in the last 20 years and never reduced it. Our financial results are for the first time under the new standard, IFRS 17 and 9. That does not affect cash, solvency, or local accounting, but it changes IFRS reporting. We would like to highlight a couple of points here. For that, I will hand over to Carsten. Thank you, Michael. When commenting on the half year result, I will make reference to the slides in the analyst presentation, and I will state the respective page numbers. Let me begin on page five, where you see that our shareholders' profit in half year 2023 amounts to CHF 206 million. Earnings in Life have been higher than in the previous year. Asset Management and Banking are slightly higher. Life profitability has been lower. When we look at page eight, our business has its foundation in our strong capitalization. Our capitalization remained very strong, with an SST ratio of more than 230%. Our rating of A+ was confirmed in August by Standard & Poor's. On page nine, IFRS equity was slightly down, mainly due to the dividend payment in the first half of the year. Comprehensive Equity, defined as the sum of equity and CSM post-tax, amounts to CHF 7.4 billion, which corresponds to CHF 161 per share. Let's now turn to our business segments. On page 12, starting with a view on the non-life business. Growth in non-life was very solid, with 4.7% in local currency, driven by both price increases and higher volumes. All our markets contributed to this growth. If we look at the profitability of the non-life business on page 13, EBIT in the non-life business increased to CHF 158 million, driven by a better combined ratio, which improved to 87.3%. This reflects the quality of our non-life business. It benefited from higher discounting effects compared to the previous year.... The better insurance service result was partially offset by a lower insurance finance result and more negative other income and expenses. The latter was driven, among others, by the inflationary environment. Turning to the life segment on page 18. Here you see that in the life segment, we achieved an EBIT of CHF 104 million. The main driver of the profit in life is the CSM release, which amounted to CHF 138 million in half year 2023. Our other income and expense was more negative, driven by higher expenses as well as one-off effects. This together explains the lower EBIT compared to the previous year. When looking at the CSM development, there are two perspectives. The first perspective is the question: How has the CSM inventory developed by existing business and new business added? The second perspective is the question: How has the CSM valuation changed due to deviations between model assumptions and reality? Regarding the first perspective, from the in-force portfolio, the CSM grows by CHF 57 million expected business contribution due to the compounding effect for half a year. From new business, CHF 87 million of new business is added to the CSM stock. The CSM released to the income statement amounted to CHF 138 million. Overall, the CSM stock developed positively by CHF 6 million in the first half of the year because the compounding of the portfolio and the new business more than compensated for the outflow to the income statement. Figuratively speaking, we were able to keep the water level in the CSM reservoir from our business. However, this increase was overshadowed by negative valuation changes, and that leads to the second perspective. Both the operating and, in particular, the economic variances weighed on the valuation of the CSM in the first half of the year. I focus on the economic variances. The interest rate declines in Switzerland against expectations, and the strength of the Swiss franc are the main reasons for the negative economic variances. Apart from the IFRS 17 new view in our life business, it is very important for us to have a look at the interest rate margin. Reference being made to page 20. The interest rate margin rose by 12 basis points to 129 basis points. The current yield improved by 10 basis points due to adjustments in the asset allocation and reinvestments at higher yields. The average guarantees decreased by 2 basis points due to consistently active in-force management. The resilient and rising interest margin makes us confident that the life segment continues to contribute to our cash remittance target. Finally, the segment asset management and banking on page 23, contributed an EBIT of CHF 43 million to the group and could increase third-party assets. The net new third-party assets amounted to CHF 617 million in half year, 2023. In summary, we achieved a solid half year result in 2023. Organic growth of 4.7% and a combined ratio of 87.3% in non-life. Reliable margins in life, with an interest rate margin of 129 basis points. Very strong economic capitalization with an SST ratio beyond 230%, a confirmed A+ rating, and a comprehensive equity of CHF 7.4 billion, and expected strong cash remittance in 2023, in line with our cash remittance target of CHF 2 billion until 2025. With that, I hand back to Michael. Thank you very much, Carsten, also for leading us through the slides. With that, let's open the Q&A session. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone, I request that you use only handsets and eventually turn off the volume from the webcast. Anyone who has a question may press star and one at this time. Our first question comes from the line of Luke Young with UBS. Please go ahead. Hi, morning, everyone. This is Kian from UBS. Thank you for taking my question. Two questions for me, please. The first one is on your group life business mix. I can see that you continue the shift towards semi-autonomous over the course of one page. I'm just wondering, what's the rationale for still writing full coverage in foreign? Are you planning on, like, a full complete shift from full coverage to semi-autonomous? If yes, over what time frame? Secondly, on your life reserve release, can we expect more reserve release on your life business? Any colors on this will be really helpful. Finally, it's on your non-life business. The combined ratio improved year on year, but I think that's mainly driven by high discounting and lower net cat. Are you seeing any deterioration in your underlying? If yes, what's driving that? Thank you. Okay, thank you very much for the questions. So three, three questions overall. First, about group life business, then at the reserving life, and then, about the non-life part. I think I will start the group life business and the mix to give a little bit more in there. So it's about the group life business we do have in Switzerland. We do offer there all the possible solutions, so the full insurance part, but also the semi-autonomous part. In the last year, what we have seen is that it was more, more requested, the semi-autonomous part. That has had also a little bit to do with the environment we are in. That's also where we had quite a strong growth in our semi-autonomous part in the group life business, and less new business coming from the full part, Full Insurance part. So I think at the end it's more a question also, what's the requests from the market and from the customers. And it's also a question on the environment we are in. For us, it's clear, we want to have all the possible solutions also in future, because I think it's also a question of giving all the possible solution to our customers. But we do have our clear underwriting guidance for the Full Insurance part, also because the economic environment and also the, the legal requirement is as, as it is at the moment, and that needs also that we have to look on the, on the operational excellence there, and we have quite strict rules, what are we underwriting and what not. And that's overall what it had to go in that direction, that we have, less business coming in the Full Insurance and more in the, in the semi-autonomous solution. So that's about the group life business mix, and, for the second one, I think I hand over to Carsten about the reserve releases in the life and the interest margins. Yeah. So, yeah, thank you for your question on reserve releases in life. We have to distinguish here the perspectives under IFRS 17. We are looking at best estimate reserving and changes there, and particularly go through the CSM process. But what is true is that on a local level, we do have very different reserving regulations in the different markets, and that has an impact on statutory accounting. We had some reserve releases in H1, but as I said, you don't see this in IFRS anymore, but in local GAAP. We expect further releases if interest rates remain where they are, because the reserving mechanisms usually take averages, and therefore it takes a while until the higher interest rate level is reflected, then also in the average reference rates. It helps, therefore, the statutory balance sheets, and in turn, further strengthens the capacity of the life business to pay dividends and therefore remit cash. Thank you, Carsten, for this reserve part in life. The third question was about the net cat, lower net cat underlying of non-life business. So, it's true, we had not a lot of net cat events in the first half year, as we already said, so there have been some ones in the second half. But overall, if you're looking at the underlying, I think it's more or less in a situation as it was also before in the previous period that we had. What we see is on a par, on inflation, inflation effects also, but overall, I think the book, if you're looking on large claims, except of the net cat part, it's more or less on a similar level as before. Thank you. And so- Yeah. Sorry? You want to- Sorry. I think, thank you. That's very helpful. Okay, thank you. It's also clear that, for the, for the part, therefore, inflation, it's also some kind, we're also reacting, as I said, also question of the price increases. Okay? Thank you. Yeah, got it. As a reminder, if you wish to register for a question, please press star and one on your telephone. Star followed by one. We have a question coming from the line of René Locher with KBW. Please go ahead. Okay. Good morning, all. Yeah, I just would like to follow up on the statutory accounts. I was wondering, when you have set the CHF 2 billion target, have you already included some reserve releases, or is this just from the operating business, you know, with hardly any one-offs? So that's the first question. And the second one is, well, I guess, I don't know if you're aware of, but the market is not really happy with your life business. And, well, first of all, you're struggling a bit to understand why the release ratio is so low at all. I mean, the big four in Europe, I have an annual release ratio of close to 10%, so all is at 2.6. If I annualize that, I end up at 5.2. And, well, perhaps some a little bit more insight here. You just mentioned cost, and in other income and expenses, there we have seen quite a strong swing. I was wondering, what are the one-off effects included in other income and expenses? Any chance to get kind of a half-year run rate for this item? Last question on investment in innovation. It's very interesting. I mean, very good to see that you have high transparency. Last year, revenues were at CHF 82.5 million. You invested some CHF 250 million in innovation in the period 2017 to 2022, and now it looks as you will... How can I say? Just take a closer look, you know, at where do you invest money and how much money do you invest. So perhaps give a little bit more insight from the so-called new CEO. Thank you very much. Thank you very much, Mr. Locher, for these four questions that we have. I think we go in that direction, as you already asked all the questions. So we will start with the statutory accounts about the question about the CHF 2 billion target we have and about the reserve releases, and I hand over for this first question to Carsten. Yeah, thank you, René, for your questions. So, I mean, we, we do projections on the statutory accounts. And, as always, there are pluses and minuses. Sometimes some, some elements move up, some elements move down. So, the CHF 2 billion target, when we set it in October 2020, has been based on the then prevailing view on the statutory accounts. But statutory accounts are relatively stable overall, and therefore, we have a sound basis for the CHF 2 billion target achievement. Okay. Thank you, Carsten. Yeah. Thank you. Second one is about the life business and the release. It's always difficult to do a comparison to other companies. Mm-hmm. But it's also depending on geography. So where in which markets we are also in the business mix, I think at the end. And I think there it's always also the question in which markets we are in. There are differences in how big the release is. So we do have quite a big CSM overall, so a big lake of CSM. And the release was quite stable now on if you take the percentage if you're looking on that. So that's where we are in. So but overall, I have also to say that at the end, it's how we understand it is and how we modeled it, huh? I think there will also be, in future, some kind of perhaps standards then, because we do not know how others are modeling it. That's where we stand at the moment. As far as we see, it's the business as we are doing it, and that's why we are standing there at the moment. Mm-hmm. Yes. Uh. If I may, very quick. I mean, it's just very quick. It's interesting to see, I mean, the market, I guess, so in general, it's just looking at the CSM release, you know, what you show then as EBIT, but the market is not looking at the size of the CSM. This is interesting. I so fully believe, you know, you have, I do believe, compared to, yeah, main competitor here in Switzerland, quite a strong CSM. But, it's interesting to see that the market is really focusing on the CSM release, in my view. Yeah, it's a lot. It's what we see at the moment. I I completely agree. Mm-hmm. If you're looking at- Yeah ... how to model it, it's more coming from the balance sheet, and there it's more- Yeah ... on the life part, but I absolutely agree. Mm-hmm. Okay? Okay, then about the life and other income, there, I hand over to Carsten. Yeah, thank you, Michael. So, you're making reference to the development of other income and expenses in the life segment, that deteriorated from -34 to -66, in the first half, 2023. That's a reference point, René, right? Yes, yes. Okay, good. Mm-hmm. So, about half of this development is stemming from one of effects that I, that I have been mentioning. And those effects are depreciations on investments and associates, participations. So about half of it is, is one-off. We expect this position to be a little bit higher in by the end of 2023, because as a tendency, we have higher inflationary effects in there. So the movement on a year-on-year comparison is about half is a one-off effect. Mm-hmm. Thank you. Okay, and then the fourth one was about the investments in innovation. For perhaps first, I think innovation is something which is very important for a company which has 160 years. Innovation also in the core business is very important to be also ready for the future. So that's an important part for us. I think you were discussing or asking about this part of innovation also. We also communicated, we have this CHF 2 billion target about the cash remittance, which is our overall goal we do have, and we are committed to that. We see there for dividends, which is our dividend policy to the shareholder. This is also a very important part, 60%-80% for that. And we do have a part for the innovation, which is 10%-30%, which is what's also the figure in our strategy we gave. We are going there more to the lower end, and that's also the direction we are going in future. That's also bringing it, the innovation part, closer to the core business, means also to be faster in having breakeven for a startup. It means also to be closer to the business or having better customer experience. So it goes more to the lower part of our goal we have. Overall, you also have to take into account that from the CHF 2 billion own part, we do also have a rest for the holding cost and things like that. Mm-hmm. Yeah, yeah. No, that's fine. And here again, if I can make a remark, I mean, you have this CHF 350 million revenue target now for 2025, and... But I do believe it will be quite hard to achieve, you know, and if you then take a 3x revenue multiple, you end up at this CHF 1 billion value creation, you know. But, I do believe... Let's put it that way, I'm very happy to see that you review your investment in innovation. Thank you very much. Thank you for the remark, and that's also what we are doing, and we are having this ambition on the review, and that's, that's very clear. Okay. Yeah. Thank you. Thank you very much. The next question comes from Bhavin Rathod with HSBC. Please go ahead. Mr. Rathod, your line is open. You may ask a question. Hi, good morning. Thank you for taking my questions. So I have three on my side. The first one would be on the life CSM. Can you help us understand how should we think about the normalized CSM growth if interest rates were to stay at current levels, i.e., excluding the impact of all the variances? We have seen a stable growth at the first half, but any indication how should we think about this normalized growth in future would be helpful. The second one would be on the P&C combined ratio. Currently, we are seeing the impact of discounting is exceeding the impact of unwinding. Given the nature and the duration of your P&C book, can you help us understand when we should expect both to broadly offset each other? The third and the final would be on the overall pricing and claim inflation trend in your key markets. It would be helpful if you can provide some colors on what are the trends you are seeing in your major market in terms of the pricing vis-à-vis the claim inflation. Thank you. Thank you very much for the questions. So we will start with the more technical questions coming from the IFRS 17, nine parts. So the first and the second one, which are coming from the life business and the non-life business, and we start with the life business about the CSM and this question of what's a sustainable path for the future? Which is not an easy question, I hand over for that to Carsten. Yeah. Thank you. Thank you for your questions. A few reflections on normalizing a CSM, if that's possible at all. If normalizing means that the development into the future is in the real world, as we assumed in the models, then you wouldn't have economic variances. And then the only development of the CSM would stem from the unwinding or from the existing book, from the value of new business added, and from the outflow into the P&L due to the modeling. So in a quote, unquote, "normalized world," the variances would be zero, and then you would just have the underlying business effect. We all know, and history told us also that from a market consistent embedded value perspective and others, that we will always have variances in operating and economic terms. We have up to now very little data points in the new IFRS 17/9 world. I think it's fair to say that we need a couple of more iterations until we get into a, how do you say, into a smoothly running system there. While talking about interest rates and its effects on CSM, I allow myself to move on right away to the P&C question. For the near future, we expect further positive discounting effects. How long? Honestly, it's very difficult to predict because we are in a very particular interest rate situation with inverted yield curves. And that's a quite unique situation, and we'll see how this continues to develop. So in particular, how interest rates are going to move at the shorter end of the yield curve, because given the duration of the non-life book, that's where the rubber hits the road, because that affects the non-life book, in particular, the short end, and that's where we have the inversion at the moment. So difficult to predict how this is going to evolve and how persistent this situation is. And then for the pricing in the key markets, I give the word back to Michael. Thank you, Carsten. About the pricing and also inflation, I think we have to differentiate also between the different markets we are in. It's a completely different view if you are going to the EU part or to Switzerland, because also inflation was completely different in these markets. Which means, I think in the EU markets, there has been quite a big step in the inflation, which is also reflected then in our price adjustments we already have done. You see this overall growth, we said it 4.7%. If you're looking a little bit closer, you also see that in Belgium and Germany, it's higher. And also in Luxembourg, it's much higher, it's close to 10% there, which means we already have started to increase our prices and also to adopt that to this inflation part. It's not as high for Switzerland, but also because inflation is by far lower there. But overall, I can also say for the future, there is also work for the future to do, because inflation is not the way. And I think we do have to increase also in future the prices adopted, also what's possible on the market, but also what inflation is in these different parts we are in, which means that we will and have to do also more in the future. Very helpful. Thank you so much. Thank you. Once again, to ask a question, please press star and one on your telephone. Star followed by one. Gentlemen, there are no more questions at this time. Back to you for closing remarks. Okay, then I take it back to here. Thank you very much. In summary, I think we had a solid first half year with robust growth in non-life, reliable margins and strong capitalization. Based on the first half, we are again expecting a good cash remittance for 2023, in line with our strategic ambition to remit CHF 2 billion of cash from 2022 to 2025. We will increase our focus and continue to further optimize the solid basis of our insurance business in terms of efficiency and effectiveness, to build on existing strengths, as well as to ensure reliable cash generation today and in future. So, ladies and gentlemen, thank you very much. We are hereby now closing the call. Thank you for joining, and have a good day.