Swiss Life Earnings: Hit by Real Estate Revaluations and Lower Fees; Shares Undervalued

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.