Company Reports

We believe Swiss Life has reported mixed indicators for the first three months of 2024.

Swiss Life has reported earnings for 2023 that are a slight miss versus AWP Finanznachrichten-collected consensus. Earnings are ahead of our estimates as the company reported net income of CHF 1.11 billion, but a touch behind the CHF 1.12 billion expectation from consensus. Our forecasts were for net income of CHF 949 million. The miss for the firm is its fee result, which was CHF 664 million. This is versus an expectation from consensus of CHF 754 million. Swiss Life's target for its 2024 fee result was CHF 850 million-CHF 900 million and it is now guiding to the bottom end of this. The lower fee result for 2023 is predominantly the result of lower real estate fees, though these are expected to start normalizing in the next year or two. In light of these earnings, management is proposing a CHF 33.0 dividend, a CHF 3 per-share increase. The proposal will be made at the company’s May 5 annual general meeting and on May 17 Swiss Life shares will trade without this dividend. It should be paid around May 22. The dividend is more than covered by the CHF 1.15 billion remittance. A further CHF 300 million buyback, planned for completion by the end of March, is almost done. Swiss Life operated with a 220% solvency ratio at the end of the year and generated a 13.4% return on equity. While this is enhanced by a fall in equity as a result of lower real estate fair values, guidance for this is still a 10%-12% return on equity. We maintain our fair value estimate and no moat rating.

The development of Swiss Life has been hampered over the years due to the structure of the Swiss long-term savings market being overshadowed by a business that offers guaranteed mandatory minimum returns and the declining yields of Swiss government bonds. However, we believe Swiss Life is an evolving business that is increasingly orienting to deriving earnings from fees. Of its three sources of income—savings, risk, and fees—income from fees has grown to over a third. The source of these fees stretches across advice and asset management and Swiss Life is a slightly different business here than most. We think Swiss Life's advisory business is one of the strongest within our European Insurance coverage as it provides high-quality advice to more discerning clients and takes a long-term approach. Advisors tend to take their time and focus on the characteristics and circumstances of each client and hammer out specific goals and products. We think Swiss Life has extended this line to most core markets beyond its domestic one, focusing on key wealth transfer markets and Germany, where the business is number two in the market for advice. The emphasis is on helping customers build enough wealth to lead a self-determined life and we think Swiss Life’s dedication to providing advice is further highlighted by its domestic residential real estate broking service Immopulse. The business has also built on its core and market-leading domestic BVG autonomous and semiautonomous solutions business by acquiring ElipsLife.

Swiss Life has reported fairly decent key indicators for the first 9 months of 2023. Generation of the all-important fee income has come in at CHF 1.79 billion, which is ahead of the CHF 1.72 billion we had forecast for the full year. We think some of this growth has come from sales of unit-linked products in France, but more importantly, the advisory business is doing well in Germany. There has also been a decrease in fee income within the asset management business and this has likely alarmed markets due to Swiss Life’s steady real estate asset management business. However, much of this asset management fee income decline is due to the sale of Livit FM Services in Switzerland during fourth-quarter 2022.

Swiss Life has reported a net profit of CHF 630 million for the first half of 2023. That is versus our CHF 1.0 billion full-year forecast and the CHF 1.3 billion consensus forecast. With the business holding around CHF 8.5 billion in shareholders' equity, it looks like Swiss Life may earn a return on equity above 12% for the full year, well above the 10% cost of capital that we apply. We maintain our CHF 630 per-share fair value estimate and no moat rating.

Swiss Life is a pure-play life insurer and doesn’t have the benefits of diversification that come to a multiline. Unlike France, Switzerland is predominantly a pension-driven life insurance market. This is largely from occupational pension schemes that have been growing over the past 10 years as Swiss insurers moved away from private pensions in the hope of achieving better economies of scale. Variable costs have remained high, though.

Swiss Life has reported a good fee income and commission income result for the first quarter of 2023. We raise our fair value estimate to CHF 630 per share and maintain our no moat rating.

When looking at the exposure of insurers to the unfolding banking crisis, we believe this is limited. The main impact of the crisis currently seems to be contagion, so investors are selling shares cheaply. However, exposure to United States bonds is either in government bond securities, or exposure to Credit Suisse, Silicon Valley Bank, and other U.S. regional banks is immaterial, which is 50 basis points or less of their investment portfolio. Some do hold larger bank debt holdings of up to 5.5% of shareholder investments, but nearly all that debt ranks as senior. AT1 debt tends to be very minimal or there is no exposure as a policy with board-level approval. The vast majority of corporate debt held is investment-grade. We maintain our fair value estimates and moat ratings across our European insurance coverage. Allianz remains our Best Idea. Admiral is one of our top picks.

Swiss Life has reported strong figures for full-year 2022. We maintain our CHF 610 fair value estimate and no moat rating.

Swiss Life is a pure-play life insurer and doesn’t have the benefits of diversification that come to a multiline. Unlike France, Switzerland is predominantly a pension-driven life insurance market. This is largely from occupational pension schemes that have been growing over the past 10 years as Swiss insurers moved away from private pensions in the hope of achieving better economies of scale. Variable costs have remained high, though.

We think Swiss Life’s results for the fist nine months of this year look decent. For example, fee income is up 13% to CHF 1,745 million, so that continues to be the driver of Swiss Life’s performance. Vacancy rates have improved from 4.5% to 4.2% within the real estate part of this source of earnings. Real estate valuations are also improving. Gross written premiums look like they are ahead of our full-year estimates. We maintain our no moat rating and CHF 610 fair value estimate.

Swiss Life has reported a nice set of results for the first half of 2022, and there are a number of metrics that show the business to be in good health. One of the most important for Swiss Life is its fee and commission income, due to the makeup of its business operations. This has risen by 12.6% over the same period last year. For 2024, Swiss Life has a fee result target of CHF 850 million to CHF 900 million. The higher fee and commission income during this half was driven by a combination of factors across Swiss Life’s five businesses. In its home market, the business benefited from higher revenues from its owned independent financial advisors, or IFAs, and unit linked solutions. High unit-linked reserves and net flows also helped the fee and commission income in France, and there was a strong contribution from that business’ banking. Strong financial adviser numbers helped support a fee and commission income rise in Germany and better revenue from the owned IFAs business also aided the international division. The real estate business helped both the proprietary and third-party asset management businesses. Alongside the strong fee and commission growth, the business has exercised good expense discipline. We raise our fair value estimate to CHF 610 per share from CHF 585, and we maintain our no-moat rating.

Swiss Life Holding is a pure-play life insurer and doesn’t have the benefits of diversification that come to a multiline. Unlike France, Switzerland is predominantly a pension-driven life insurance market. This is largely from occupational pension schemes that have been growing over the past 10 years as Swiss insurers moved away from private pensions in the hope of achieving better economies of scale. Variable costs have remained high, though.

Swiss Life Holding is a pure-play life insurer and doesn’t have the benefits of diversification that come to a multiline. Unlike France, Switzerland is predominantly a pension-driven life insurance market. This is largely from occupational pension schemes that have been growing over the past 10 years.

In first-quarter 2022, Swiss Life continued to report strong growth in fee income with this now rising to CHF 579 million. This is a 10% rise on the same period a year ago. This growth in fees is being driven by Swiss Life’s third-party asset management division where net inflows of CHF 1.2 billion have continued to help push higher total third-party assets under management up to CHF 102.3 billion. Swiss Life asset managers account for CHF 241 million of this fee income with the remaining fee result arriving from own- and third-party product sales as well as advice provided to customers through Swiss Life’s owned network of independent financial advisers. We maintain our fair value estimate and our no-moat rating.

The war between Russia and Ukraine is a terrible thing and something that has been brewing for close to 20 years. The effects on the citizens of Ukraine are devastating. Insurance touches so many areas within people's lives that in this scenario makes it hard to accurately predict the effects on sales and claims. And because most businesses are diversified it is difficult to find the data to do so in isolated events. While most insurers are playing down the impact of this war, playing down is nothing new. We think there are several easy-to-place risk principles that include lowering motor accident frequency as a result of the rise in oil prices, that is likely to be more than offset by rising severity via the higher price of aluminium. However, this latter dynamic is likely to take longer to feed through. Furthermore, travel insurance will be affected along with business interruption and trade and credit insurance. While we hold our fair value estimates steady as well as our moat ratings we think it is probably better to avoid investing in Allianz at the moment. For those who want European insurance exposure and to position themselves as defensively as possible against this war we recommend Swiss Life, which carries a 4.55% dividend yield.

Swiss Life has reported net profit of CHF 1,257 million for the full year 2021. The results have mainly been driven by a higher fee result across all divisions but in particular within France and Swiss Life’s third-party asset management division. The business continues to orientate toward semi-autonomous group life solutions within its home market, and contribution from its owned network of independent financial advisors, or IFAs, continues to help drive fees and commission. Unit-linked and real estate brokerage have also performed well. Within its second largest market of France the business is taking its foot off the gas in life insurance sales, but driving unit-linked sales through its higher quality distribution network. There is also a strong emphasis on the sale of health and protection. Germany is the second market where the fee result dominates the risk result, again as a result of the owned IFA network. There has been further digitalization of this offering. Within its third party asset management offering the business is growing in real estate and infrastructure and paring back in equity and bonds. We maintain our fair value estimate of CHF 585 and our no-moat rating.

Swiss Life has reported indicators for the first nine months of 2021. We increase our fair value estimate to CHF 585 per share to account for the time value of money. We maintain our no-moat rating. The business has reported 15% growth in fee income for the first nine months of 2021, which is clearly a nice result. This has primarily been driven by own and third-party products and advice as opposed to growth in this line item more typically coming from asset management.

Swiss Life Holding is a pure-play life insurer and doesn’t have the benefits of diversification that come to a multiline. Unlike France, Switzerland is predominantly a pension-driven life insurance market. This is largely from occupational pension schemes that have been growing over the past 10 years as Swiss insurers moved away from private pensions in the hope of achieving better economies of scale. Though variable costs have remained high.

We are maintaining our Standard capital allocation rating for Swiss Life as we transition to a new methodology. We also maintain our fair value estimate and no-moat rating. Swiss Life has a pretty conservative balance sheet, and we can see that across investments, leverage, and solvency. However, the business seems to be a little heavy with its shareholder distributions. We anticipate that Swiss Life’s balance sheet is likely highly capital-consumptive in a falling interest-rate environment because of the high orientation of its insurance liabilities toward guaranteed rates. This would explain the poor conversion rate between capital generation and earnings. In this scenario, it becomes difficult for Swiss Life to find profitable investment opportunities. However, the business seems to have a nice unit-linked business in France serving high-end clients, so this would perhaps make better sense than continued buybacks, though these should be value-accretive. At the moment, we do not feel Swiss Life is growing its business.