SZLMY (SZLMY) Q2 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the Swiss Life Presentation of the Half Year Results 2026 Conference Call and Live Webcast. I am Myra, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not been recorded for publication or broadcast. At this time, it's my pleasure to hand over to Matthias Aellig, Group CEO of Swiss Life. Please go ahead, sir.

Dear analysts and investors, good morning. Thank you for joining us, and welcome to our half year 2026 conference call. I will give you a brief overview before handing over to our CFO, Marco Gerussi. I'm pleased with the operational performance and with what we have achieved in the first half of the year. We grew the fee income and the fee result across all businesses, meaning asset managers, IFAs and the unit-linked business. We grew the insurance business, its operating result and the contractual service margin. Our strong results show the great commitment of our employees and advisers. I would like to thank all of them for their strong engagement and our customers for the continued trust and loyalty. Let me provide some more color on our performance in the first half of 2026. The fee result amounted to CHF 430 million, 11% above the prior year period. The growth is broad-based and includes a gain from the transfer of the international network to a partner earlier this year. Profit from operations increased by 8% in local currency to CHF 967 million. Net profit was also up 8% to CHF 649 million despite high tax rate. Return on equity was at 20.2%. Cash remittance to the holding company was CHF 1.2 billion, up 5% year-on-year. As previously announced, the acquisition of the TELIS Group was successfully completed on first of July 2026. This means that TELIS will be reflected in the figures starting in the second half of the year. Let me move on to Swiss Life 2027. We are in the middle of our 3-year strategic program and are highly committed to executed with discipline. We are well on track to deliver all our strategic actions and achieve all our financial ambitions. In May 2026, we completed our CHF 750 million share buyback. And we are pleased to announce today a new buyback of CHF 250 million which runs from October 2026 to March 27. Looking beyond our 2027 program. We aim to further expand our business profitably. Exploit market opportunities and increase operational efficiency, among others, by leveraging the advancing digitalization, this also includes a reduction of around 600 positions by the end of 2028, largely through natural attrition. Roughly half of the positions are at Swiss Life in Switzerland and half at Swiss Life Asset Managers mainly abroad. This measure is expected to generate annual cost savings of around CHF 150 million in 2029 and beyond. With that, I hand over to Marco, who will provide more details on the half financial results in Swiss Life 2027 progress reporting.

Thank you, Matthias, and good morning, ladies and gentlemen. Let me continue today's presentation by taking a closer look at our 2026 half year results. We begin with the selected P&L figures shown on Slide 6. Insurance revenue was stable at CHF 4.5 billion higher CSM release of CHF 617 million and high revenue contributions from Switzerland and Germany were largely offset by FX translation effects. Insurance service expenses were stable at CHF 3.8 billion. Higher expenses in line with business growth were offset by favorable FX effects. The net investment result increased to CHF 290 million. As a reminder, this is an IFRS 17 accounting figure, which includes various items. In view of our investment performance, we continue to focus on the net investment income, which we will discuss later. Profit from operations increased by 8% in local currency to CHF 967 million, driven by both a higher fee result and a higher operating result from insurance business. Borrowing costs decreased to CHF 75 million, primarily due to some double carrier expenses in the prior year period. Income tax expense increased to CHF 243 million, mainly due to the step-up in the corporate tax rate for large corporates in France and a higher taxable profit base. Net profit increased to CHF 649 million up 9% in local currency despite the higher tax rate. As shown on the slide, profit from operations and net profit include a gain from the transfer of the network business in International to a partner earlier this year, amounting to CHF 29 million and CHF 23 million, respectively. Turning now to further selected figures. Gross written premiums, fees and deposits received increased by 3% in local currency to CHF 12.3 billion, supported by strong growth in Switzerland. Fee and commission income increased by 7% in local currency to CHF 1.3 billion. Growth was achieved across all businesses, meaning asset managers, owned IFAs and own and third-party products and services. Net investment income of the insurance portfolio for own risk strongly increased from CHF 1.6 billion to CHF 2.4 billion, driven by equities, infrastructure and FX hedging effects. Operating expenses, excluding variable expenses slightly increased to CHF 1 billion, including investments in growing fee businesses and expenses related to efficiency measures. I will now move on to our segment reporting, starting with Switzerland. Premiums increased by 7% to CHF 6.8 billion, whereas the life insurance market was flat. Premiums in group life increased by 7%, while the market was down by 2%. Single premiums grew by 16%, driven by higher premiums from existing clients and new business. Periodic premiums decreased by 1%. Assets under management in our semiautonomous foundations increased to CHF 8.6 billion from CHF 8.4 billion at year-end 2025 million. Premiums in individual life increased by 7%. The market increased by 5%, our growth is the result of higher unit-linked single premiums up 20% year-on-year, while periodic premiums were down 1%. Fee and commission income was up by 11% to CHF 196 million, mainly due to higher income from unit-linked business and from investment solutions for private clients. The segment result increased by 2% to CHF 469 million due to a higher operating result from Insurance business. A higher CSM release in the Individual Life business is partly offset by lower income from assets not backing insurance liabilities. The fee result was flat at CHF 27 million. Higher income was offset by investments in continued growth initiatives such as investment solutions for private clients, which we mentioned in previous disclosures. Cash remittance was slightly lower at CHF 602 million, in line with the statutory profit in 2025. Turning now to France. Please note that all figures quoted are in euros for our French, German and international segments. France premiums were flat at EUR 4 billion, while the total market was up by 9%. In our Life business, premiums grew by 2%, driven by the pension and production business. The overall market grew by 10%. The unit-linked share in our life premiums increased to 73% compared to the market average of 39%, reflecting our focus on unit-linked solutions. Overall, we generated Life net inflows of EUR 1.2 billion. Total market net inflows were EUR 36.5 billion. In health and protection, our focus on profitability before growth resulted in a 5% decline in premiums. The market was up by 6%. P&C premiums were flat. Fee and commission income rose significantly by 14% to EUR 336 million due to higher unit-linked fee income based on higher average unit-linked reserves. The contribution from structured products also increased. The segment result grew by 9% to EUR 228 million. Fee result was up by 10% to EUR 117 million due to the unit-linked business. As mentioned in previous disclosures, the segment result contribution from structured products continues to be largely reflected in our operating results in Insurance business, were it emerges over time. The operating result from Insurance business was up by 8% to EUR 111 million, supported by the contribution from the health and protection business. Cash remittance decreased by 12% to EUR 160 million due to the step-up in the corporate tax rate in France impacting the 2025 statutory profit. Moving on to Germany. Premiums were up by 3% to EUR 777 million driven by higher periodic and single premiums. The market was down by 4% due to lower single premiums. Fee and commission income increased by 10% to EUR 465 million, driven by our own IFAs. The number of financial advisers increased to around 6,300, 5% higher compared to the prior year period. Our insurance business also contributed positively. The segment result was up by 4% to EUR 125 million, fee result increased by 6% to EUR 85 million, driven by owned IFAs despite an increase of the commission ratio and continued investments in the back office digitalization. Operating results from insurance business was stable. Cash remittance increased to EUR 166 million and includes a special dividend of EUR 60 million, resulting from a legal structure optimization. As previously announced, the closing of the acquisition of the TELIS Group was successfully completed on first of July 2026, and TELIS is therefore not reflected in the 26 half year figures. Turning now to the International segment. Premiums decreased by 8% to EUR 1.3 billion. Premiums from corporate clients increased by 3%, more than offset by lower premiums from the Private Clients business. Fee and commission income was stable at EUR 190 million. Higher income from owned IFAs, mainly in the U.K. was offset by the network business transferred to Generali earlier the year. The segment result rose by 43% to EUR 92 million. This is largely due to a gain of EUR 32 million in the fee result from the management transfer. Please note that the gain is a noncash item related cash proceeds are expected over the coming years, starting from 2027. The operating result in insurance business increased by 11% to EUR 20 million driven by corporate clients. Cash remittance was up by 16% to EUR 70 million due to the 2025 statutory profit. Let's move on now to our asset managers, which reports in Swiss francs. Asset managers total income increased by 5% to CHF 519 million, driven by both PAM and TPAM. In PAM, total income grew by 5%, mainly reflecting higher nonrecurring income from real estate transactions. In the TPAM business, total income increased by 4% to CHF 339 million. Recurring income across all asset classes grew strongly by 7%. Nonrecurring commission income also increased. This is partly offset by lower other net income from real estate project developments. The total nonrecurring income had essentially 0 noncash items compared to a share of 3 noncash components in the prior year. The share of total nonrecurring income for TPAM, meaning commission income and net income from real estate project development was 11% compared to 14% in the prior year period. As mentioned at our full year results disclosure for each year 2026 and 2027, we expect to achieve a share of around 25%, which is in line with our Swiss Life 2027 targets. The segment result increased by 4% to CHF 152 million. The contribution from PAM increased by 6% to CHF 101 million driven by the higher income. The TPAM contribution increased by 2% to CHF 51 million. Higher commission income was partly offset by lower income from real estate project development and expenses related to efficiency measures. The TPAM cost-income ratio stands at 72% compared to 82% in the prior year period, driven by a higher commission income. Cash remittance decreased by 3% to CHF 232 million, in line with the lower 2025 statutory profit. New assets in our TPAM business amounted to CHF 7.2 billion in the first half of 2026 compared to CHF 13.2 billion in the prior year period. We saw continued strong inflows with real assets contributing CHF 1.4 billion. The rest of inflows are mainly driven by equity and money markets. Assets under management in our TPAM business increased from CHF 146 billion at year-end 2025 CHF 158 billion, driven by positive net inflows and performance. Let's move back to the group. Operating expenses increased by 2% in local currency to CHF 1 billion, reflecting growth, continued investments in business growth and expenses related to efficiency measures. As I outlined at our Investor Day 2024, we aim to keep life absolute costs stable by 2027 at CHF 750 million. For the half year 2026, Life absolute costs amounted to CHF 355 million and were slightly below the prior year level. With that, we are well on track with our 2027 target. Coming to the investment income. Direct investment income was at CHF 2 billion. The reduction was due to lower income from infrastructure and FX rate movements. And real estate income was down primarily due to a lower asset base. non-annualized direct investment yield was at 1.4% compared to 1.5% in the prior year period. The net investment income strongly increased to CHF 2.4 billion due to net capital gains driven by equities, infrastructure and FX hedging effects. The net investment yield was up 1.7% compared to 1.2% in the prior year period. Let us continue with our insurance investment portfolio on Slide 15. Assets under management remained stable at CHF 143 billion compared to year-end 2025. Real estate fair value changes were positive at around 0.4%, driven by our Swiss real estate portfolio, partly offset by lower fair values outside of Switzerland. For the full year, we expect overall positive fair value changes to double compared to the current level. Real estate continues to be an attractive and important asset class for backing our long-dated liabilities in the context of our disciplined asset and liability management. We hold real estate because of the regular rental income it provides and not because of appreciation. Vacancy rates were lower at 2.8% compared to 3.1% at year-end 2025. Moving on to Insurance reserves on Slide 16. Insurance reserves increased 1% in local currency to CHF 183 billion compared to year-end 2025. On a statutory basis, in total, we released about CHF 0.15 billion of statutory reserves in the Swiss group life and the individual Life businesses as we did in the previous years. Moving on to the CSM development. As outlined at our Investor Day 2024, our ambition is to increase the CSM through operating growth. In the first half of 2026, this growth amounted to CHF 0.2 billion. expected business contribution and new business together amounted to CHF 0.7 billion. We generated another CHF 0.1 billion in experience adjustments, mainly from work on our portfolio. CSM release increased to CHF 0.1 billion. Pretax CSM release ratio was at 7.6% and therefore, slightly lower than in the prior year period. In total, the CSM after release representing future shareholder profit contribution grew from CHF 15.3 billion at year-end 2025 to CHF 15.6 billion at half year 2026. Shareholders equity decreased to CHF 6.3 billion, largely due to the dividend payment and to complete the share buyback, partly offset by the profit for the first half of the year. Our total outstanding financing instruments amounted to CHF 6.2 billion. The Average ratio stood at 25% for the half year 2026 at the midpoint of our revenue level of 20% to 30%. The SST ratio is estimated to be around 215% at the end of June 2026. And with that, well above the ambition range of 140% to 190%. Compared with the SST ratio at 213% at the end of 2025, the ratio increased, reflecting the positive performance of equity and real estate markets partly offset by the widening of the interest rate differential between Swiss franc and the U.S. dollar. That brings me to our Swiss Life 2027 program and the progress reporting. As mentioned by Matthias, we are well on track to achieve all our 2027 financial targets. Let's go through the details, and I will start with the fee income on Slide 22. I Fee and commission income increased by 7% in local currency to CHF 1.3 billion. owned and third-party products and services were up 9% and both our owned IFAs as well as asset managers grew by 8%. Profit from operations was up by 8% in local currency to CHF 967 million as a result of growth in both the fee result and operating results insurance business. Fee result includes the gain from the transfer network business in our International division. The operating results from insurance business increased by 4% in local currency to CHF 600 million. Main drivers were the higher CSM release as well as higher additional contributions, primarily driven by the French Health and Protection business. The return on equity was at 20.2% on an annualized basis compared to 17.6% in the prior year period. Turning to capital and cash. Cash remittance to the holding company increased by 5% to CHF 1.2 billion, which includes the mentioned special dividend in Germany. At the end of June 2026, liquidity at holding amounted to around CHF 1.1 billion. Today, liquidity at holding stands at around CHF 0.65 billion, reflecting the EUR 500 million senior bond issued for the TELIS purchase price payment and business growth. Our share buyback, which we started in December 2024 was completed in May 2026. We repurchased shares were CHF 750 million. And we are pleased to announce today a new share buyback program of CHF 250 million. We will start repurchasing shares on first of October 2026 and expect to complete the share buyback by the end of March 2027. The buyback will be executed by a partner bank through a second trading line over the course of 6 months. Shares repurchased under this program will be proposed for cancellation to the upcoming AGM. After the financing, more than half of the share buyback will be financed from cash at holding, the remaining part is financed from repatriations. Let me summarize. In the first half of 2026, we achieved strong growth in premiums as well as in fee and commission income. Fee result operating profits from insurance and our net profit all increased significantly. Return on equity is at a high level. Cash remittance is on track, and our SST ratio is well above our ambition level. Looking at our Swiss Life 2027 program, all our financial targets are well on track. And today, we announced a new share buyback. We are convinced that with our determination, our diligence and our discipline we will achieve all our group financial targets. And with that, I'm handing back to you, Matthias.

Thank you, Marco. We will now open a Q&A session. Who would like to start?

[Operator Instructions] The first question comes from the line of Michael Huttner from Berenberg.

I spoke to some investors and I was thinking, okay, solid plus results. I was always hoping for more. And 2 questions. On TELIS one on the 600 and together one on the fee and commission results? On TELIS, could you remind us what the contribution will be in terms of revenues, in terms of operating profit? And how do we factor in that in the earnings because you're also paying more interest on that? The second question is on the 600 FTE or position reduction. Can you give us a little bit of a background on this? To me, it feels like you grew impatient, and I'm laughing -- this is not funny. I mean these are real people with the progress of the nonrecurring outside of Switzerland and you kind of said, well. If that's all you can do -- a few of you can do it, but I don't know. It feels -- but also the more precise question is have you already booked the restructuring costs. And then final, on the fee result, CHF 430 million, you're doing lots of math and it's complete -- probably completely wrong. I get to a run rate of CHF 1.2 billion that you're going to say about this. This is nice. So what I've done is I've taken the 11% off then double that and then added 25%. Obviously, I'm very optimistic. But I just wondered whether you can give us a feel for the math compared to your over CHF 1 billion target.

Thank you, Michael. I hand over to Marco for the TELIS question, and I will take the other pools.

On the TELIS acquisition overall, more from a top line view. That's what we said in the last call, we will add 1,800 advisers to our operating unit. I think that's one part of the answer. And from a result point of view. So the operating result, we said that it will be somewhere between CHF 25 million and CHF 30 million for an entire year. So if we now account for that in the second half of the year, obviously, it's not the full number is more half of it.

And maybe adding on that, that's clearly the positive, as we mentioned in the Q1, we said that the purchase of TELIS was financed largely by the CHF 500 million bond that we issued and there are obviously some financing costs to be on taken against that the result contribution that Marco just mentioned, and the coupon was somewhere around 3.5% or something like that to help you a bit on that. Now on the 600 positions to give some background. And I think I mentioned it in my speech in the beginning. I mean, you've heard it from me, you have heard it from Marco. We are well underway with the current program, Swiss Life 2027. But we look today already beyond 2027, and we want to continue our success beyond 2027. And that's why we want to continue to pursue growth opportunities, profitable growth opportunities. We want to increase our efficiency, and that's why we have now undertaken this cut most of that, and I think that's also important of that reduction will be achieved by natural attrition. And out of those 600 we have until today already reduced 100 by using this natural attrition by selective refilling of positions, and there will be another 100 positions that will be reduced until the end of 2026 and those that are affected by that, we will support on an individual basis to help them in new positions. So I think that's the background of it in terms of restructuring costs, I think Marco mentioned that in the half year, we have incurred some efficiency-related expenses. I would say that's a high single-digit amount that we have incurred so far for the full year, we expect probably a bit more than doubling this amount. And clearly, there will be more to come relating to those efficiency gains in '27 and 2028. maybe to already give some indication here. If we look now at '27 and '28 in aggregate, say, in aggregate, the ramp-up of the cost savings will essentially be, as I said, in aggregate, be offset by expenses that are related to achieving those efficiencies. So expect this amount that I've also mentioned in the CHF 150 million to be incurred as cost savings in 2029 and beyond on a recurring basis. And to also expand on that, if we think about those on 50 maybe a bit less than half of that will be incurred in Switzerland, subject to the policyholder sharing and a bit more than half will be in the Asset Management division. Maybe that's kind of a lengthy answer of the background of the 600 and the financial impact on that. And the question on the fee result that you mentioned, I'm not sure whether I fully understood the math you have done, but I may offer kind of an alternative approach to think about it. Marco said that we have had an 11% share in the half year of nonrecurring income for the full year 2026. So we confirm the guidance of a nonrecurring income of around 25%. So that means for the full year, Asset Managers segment result will obviously more than double, and that's something we have observed in prior years. TELIS, we talked about it, we also contribute in the second half of the year. And we also talked about international. This will obviously not double. We have had this one-off that is in there. And as you know, in the other divisions, we have some seasonality. So we would not expect full doubling, for example, in France or Germany. This may help you going through the numbers for 2026.

The next question comes from the line of Farooq Hanif from JPMorgan.

I just want to clarify for us my questions. Did you say your cash at holding now post June was CHF 0.65 billion or CHF 1.65 billion. I just wanted to check if I heard correctly. And then my question. So can you tell us a little bit more about the timing and phasing of buyback? Because normally, in the past, you've given us a longer period with a bigger buyback program and you spread it over a longer period of time. This is like obviously a 6-month period. that you're targeting for a CHF 250 million buyback. What's your expectation that you will come at full year with a new proposal and then at half year? Is that going to be the new model for talking about the buyback? My second question is the really, really large jump in French non-life profit. I mean I think it's a record profit in 1H '26 compared to its history. So I just wanted to understand what's going on there and whether there are any one-offs or whether we're just seeing really good profit measures that you've put into place, which has obviously hit your premium? And then my last question is, if we look at the nonrecurring element of TPAM commission in 2H, how much of this is likely to be cash?

Thank you, Farooq. I think Marco goes with the question. I will go for the buyback, and Marco will have then the other 2 questions?

So the first one, cash at holding level, I said CHF 1.1 billion was at half year and as of today, CHF 0.65 billion after consideration of the EUR 500 million bond we issued CHF 0.65 billion in cash at holding. Then on the French non-life business, I think here is important to consider where we come from. So this is -- I would even call it now a turnaround situation we were in. So having really, let's say, weak results some years ago and putting a plan in place to get a recovery out of that. So there's a lot of different measures on profitability to work on that. And over time, we're getting now the better technical profitability, which now shows up in the result. I mean that a steep and a significant increase, which will be positive answer for the way forward, but not to be expected just to continue like that. But this is basically the outcome of working on the profitability, technical profitability coming from a rather low level towards some years ago.

We also won for the...

Again, on the forecast, the nonrecurring income now in half year. So this was full cash, so to say, comparing to 3/4 noncash in the full year 2025 and for the let's say, the remaining part of the year, we expect that to be, let's say, more balanced, more balance between cash and noncash components should give you some of guidance.

Can I ask 1 question on the French non-life, is there a premium associated with this? I mean is there a combined ratio or some metric that we can think about in terms of the margin that you're making there?

Yes. I mean, we have 2 businesses there, right? So the P&C business there, we got a bit of, let's say, increase of the ratio, it's slightly above 100 because of some claims. So there's more volatility in that part of business. And the P&C business, by the way, is a smaller part of our Non-life business in France. And in the health and protection area, we increased the ratio by around 2 percentage points from 94% to 92%, somewhat around those numbers.

And if I may come to your second question on the buyback. I mean, you may recall at Investors Day, we put our, let's say, thinking around the framework on paper we applied at framework is well established and has already been used in the past. We continue to apply that. So there's no change in policy or thinking about the buybacks. So it means that we have, in addition to the payout ratio goal and ambition to increase this perspective and buyback that we consider and stress that we consider additional capital management actions on top of those 2 things mentioned, if the SST is above the ambition range and if we have a comfortable cash situation at holding, there is no automatism you know that. And we communicate such things generally at half year, full year, for example, at Investors Day. So this is the framework that has been in place that is apply that continues to be applied to no change in policy, and that would will guide us forward. And just as a reminder, for example, in the last program, we had one large buyback that we announced with the Investors Day, and there was an additional, I think, CHF 0.3 billion that ran from '23 -- from October 2023 to March 2024. So you see also from looking back that this is nothing new that we have done here. Hope this gives you some answers to the questions.

The next question comes from the line of Iain Pearce from BNP Paribas.

First 1 was just a couple on cash. So CHF 0.65 billion post the TELIS acquisition. You guided obviously, the CHF 250 million share buyback to be completed by the end of March and then half of that coming from remittances. So is the sort of guidance that you expect to be at CHF 500 million sort of post the completion of the buyback for cash at holding and are you happy running at that level? I think that's sort of at the bottom end of your target range. And then the second part, I think you said half of the CHF 250 million share buyback to be funded from remittances in H2. That looks like quite a high remittance number for the second half versus what we've had in previous years. Is there anything one-off in the H2 remittance number that you wanted to flag. And my second one was just on the operating expenses. So just looking at the operating expense growth over the last few years, it's only been about CHF 100 million over the last 3 years. So just trying to sort of think about the operating expenses ex variable with this CHF 150 million of cost savings, are you expecting that number to be sort of flat or even slightly down by 2029? Is that sort of what you're targeting with the CHF 150 million cost saving guide.

Marco, I think will take the 3 questions. And I may jump in them.

I think the first one on the cash at holding, we've always said and also elaborated on that at Investor Day, we have comfort level or comfort range at holding level being CHF 0.5 billion to CHF 0.7 billion. So this gives you a bit of guidance, but this is not a regulatory requirement. So something like this is an internal, let's say, an internal range. We take for some guidance. And as ever possible, we try to put our money, our cash at work. So that's basically the role of the holding company. So we are here to give money to our opcos to work. I think that's what we can say in terms of cash remittance in the second half of the year in earlier years, the number in the second half was always around on average between CHF 60 million and CHF 70 million, and there is nothing in view of any one-offs as the names say, to be flagged on that? And the third question on the operating expenses and the growth, I think, here basically, that's part of our strategy. We aim on improving scalability and efficiency, operating efficiency. That's one part of our goal. And we have a clear goal on scaling the fee business. That's part of our strategy, and we have a clear goal and the related to that in the speech on the life absolute cost. So in the life insurance business keeping cost flat. So that's basically how we think about cost and being efficient and scaling. And now having this CHF 150 million, Matthias alluded to it and with less than half coming from Switzerland, going through the legal quote and the policyholder sharing and the remaining part, a bit more of it being within asset management, starting from '29 is an effect we will see in the operating expense. But from a result point of view, because of the sharing with the policyholder only 1 part of it mainly will show up in the results. And I think that's how to think about it.

If I may add on the remittances question. I think that's an important, I mean, as Marcos said, more than half is funded from cash at holding, and it's less than half that relates to repatriation. I think it's important also to understand cash remittance and repatriations are not the same. So when we talk about repatriations, this can be maturing internal loans that are not used anymore for, let's say, the internal purposes in the opcos. And this is the kind of things that we talk about when referring to repatriation. And as I said, there will be additional cash remittances. But that said, this is not the same thing as the repatriation.

The next question comes from the line of Ahmed Nasib from UBS.

So first question on the network business. What's the cash component? And when are you expecting to -- for it to come through? I think you mentioned '27 is similar to the IFRS result. Secondly, on the French Health tax, I think you said you're going to manage that. Is that done? Is that within the first half results already, we shouldn't expect anything more from that component? And then finally, Vita foundations from Zurich Insurance is going independent. Is there any sort of your foundation also running independently? And what's the earnings contribution from that business?

I think Marco can start with the first question. I will take the second and the third.

The network business and the transfer to a partner, this is IFRS accounting. So that again, we are already account -- we have to account for it in our books and the cash let's assume it's the similar amount for that gain coming in over the next few years starting in '27 to '27, '28, '29, -- let's put it like that.

And maybe on the French Health business, I'm not sure whether we fully captured your questions. But let me mention what we have been doing over the past years. We had a year, I think it was '23 or '24 where we really had significant issues. I believe the entire market had similar challenges back then. And we have been repricing, we have been doing many, many measures to restore profitability. And you may have seen that in the first half, we had a -- in the health and protection business, a lower top line. So that means we are really prioritizing as in the past, profit over growth. And this is what we have been doing for the past quarters and years almost that what I think we can say Marco also mentioned a bit and then now switch to the P&C business. Here, we had in France, as you can imagine, some large claims. So the combined ratio is above 100%. And there, we have the same thought. We want to make that business profitable, but that's a different starting position than the health and protection business that, as you have heard, has improved the profitability from a combined ratio from the mid-90s to even lower levels which I think is a pleasing level. Now on the Vita Foundation and what you could read in the newspaper, obviously, we do not comment on competitors and what their things are. But let me maybe make a couple of comments on our situation. Our approach to the Swiss BVG business is that we have a really wide range of offerings. Clearly, we have the full insurance, which is the largest part of our offering, where we have the full set of risks being covered Swiss Life, so meaning the savings, the risk and the cost part. And there, as you can imagine, if somebody wants to come to the Swiss Life full insurance, he or she wants us to provide these services. We have also the semiautonomous offer. I think Marco mentioned also the growth we achieved there, and we have additional offerings such as new risk coverage for semiautonomous foundations, I would say, let's say, our, let's say, Swiss Life offering. So that gives you a bit our position. And we are, I would say, in good shape with having this wide range of offerings to the client. So the client can choose what fits best for their risk appetite or the risk appetite of the business, if I may say so.

Next question comes from the line of Kaya Batikan from Kepler Cheuvreux.

I have one question, related to TPAM inflows. So we have seen some normalization in TPAM net new assets from the exceptionally high level last year. Could you give us some color on how flows have developed since the end of June and your expectations for the remainder of the year and going forward?

So on the NNA and the inflows in the TPAM is the CHF 7.2 billion we reported on. I think here in pleasing the real asset share, so real estate and infrastructure amounted to CHF 1.4 billion. And then the other asset classes just managed the equities and also in the money markets in view of the inflows, I mean, we don't guide on details for the second half of the year. So far, we are happy with the inflows. We have a strong pipeline. We also intend to further increase the amount of the real assets in our inflows, and we can confirm, and I think that's the most important point in view of the both assets under management, the CHF 170 billion in the target of Swiss Life 2027, but we are well underway to reach the target. And also in the area of the recurring income in TPAM based on the higher underlying the higher asset base, I think the growth of 7% of the recurring income in TPAM also gives you a bit of a view on how the development is. So we are constructive and positive in that area.

Perfect. Can I have one more question if you relate to the direct investment income, it seems like direct investment income has declined. How much of this decline reflects timing or volatility? And what would be the reasonable run rate for the second half?

Yes. I mean the decrease in the investment there is different, let's say, reasons for that one being a bit lower asset base in real estate. Impacting the investment income. We had in the infrastructure area and exit in the prior year period, which was very positive in the prior year. Numbers then there is FX effect, mainly the U.S. dollar on the coupons coming from U.S. dollar investments. So there's several reasons why the number is lower. There has been in relation relatively seen an improvement compared to the first quarter, and we are positive for the second half to get that closer back to the numbers we have seen in earlier or in prior year reporting. So it has some timing and some volatility in it and also some effect showing up in the net investment income, which is very positive, up by CHF 800 million.

Next question is a follow-up question from Michael Huttner from Berenberg.

I had 3. One maybe a little bit on the tax rate. We seem to going up due to France, and I just wondered whether you can give us a feel for what numbers we should use going forward. On the real estate, you mentioned again that the -- you've got less of it. And I just wondered, it seems to be in contrast with your remarks saying that real estate is a loved assets class, and I just wonder if you can give us a bit more color on this. And then general question on the German pension reform. With your kind of 8,000 IFAs, I guess now, how much benefit do you expect from that going forward?

Marco will give you some indications on the tax rate, and I'll talk a bit about real estate and the German reform then.

Yes. Tax rate is up. You're right, and we mentioned that in the presentation, more than 27%, a main driver, the higher profit base, but then the step-up of the tax rate in France and maybe 2 things to mention here for the second half of the year or for the full year 2026, we expect the number to be somewhere between 25% and the current rate. I think that's something we can say. And looking a bit more into the future, current discussions and also signals and information we get from all the discussions in France. It might be expected that the step-up will roll over also into the next year so that the French tax rate will remain at the level we see this year also in the next year.

And coming to the real estate question, yes, absolutely. Real estate continues to be an attractive asset class. At the same time, you know and we mentioned that before, we are actively managing our portfolio, we may not be best owner for each and every single object. That we hold, some objects may be owned by TPAM clients due to size considerations and the like. As you know, we are going or preferring higher or larger objects that are easier and more efficient to maintain. So we are actually on both sides. And now I think in the first half of the year, we had a net outflow of real estate, we had years where we had net inflows. So the outflow that you have seen now means no statement about real estate as an asset class, in terms of the pension reform, I'm sure you know what's going on. I will not go into all the things that the German government is now putting forward I think what I could say is if you look at everything that the German government says, there will be the start of this new pension reform first of January '27. So that's where, if I may say so, the market is reshuffled and that's where we clearly with our now 8,000 IFAs, which I have this entrepreneurial mindset, we'll certainly have some opportunities to seize. On the other hand, the second half of 2026 will be a bit more quiet because in the area of pensions people, clients, advisers are now waiting for what's going on in 2027. Having said that, as you know, the pensions business, if you wish, in our German IFAs is only one of the product lines among many others that we advise our clients on. I think what's also important, I have now mentioned specifically IFAs in our insurance business, I would say, given the product we offer, this is a non-event anyway because we're not into Riester.

The next question is a follow-up question from Farooq Hanif from JPMorgan.

Sorry, just a bit of a clarification on Iain's question and another question of my own. So you mentioned that half of the CHF 250 million buyback will be funded by cash remittances or cash of some sort. So if we take the CHF 60 million to CHF 70 million, that means roughly a similar amount again will come from repatriation of cash, so internal loans. Can you tell us about the capacity to keep doing this? So presumably, you do have a larger balance of internal loans that you could use. So if you could talk about that, just so that -- I mean the reason I'm asking is obviously people are worrying that your cash fall to a low level as a result of this. We just need to know whether you have capacity to keep supporting from a cash point of view, that buyback going forward? And then my second question is going back to the other result in the insurance operating result. As well as a very good French non-life result, I think it was quite a good return on surplus assets as well, which I think in 1H was a similar level to 2H '25. So I just want to understand, is this actually quite a good run rate for modeling going forward in that line? Or is there some kind of one-off positive in there.

Let me try to give you the answer on the buyback. So we said there is CHF 250 million buyback. And more than half of that CHF 250 million is financed by cash we have at the holding today. So with that what we have today at the holding, CHF 0.65 billion that Marco mentioned. And the rest of it is financed by repatriations, as we said, for example, maturing loans that are upstreamed back to the holding, for example, because -- not exact because they are not used anymore at the opco for operating purposes. So that's, I think, the financing on the -- of the CHF 250 million. Now regarding the repatriation, I think we keep talking about them every now and then. I don't know the exact amount, but as you may recall, the dominant part of those internal loans are kind of permanent financing if you wish. Past acquisitions that were financed by pushing down the purchase price into -- the operating companies and these are loans that are here to stay. We earn money on them from the coupon and obviously, the acquired businesses or the businesses that we have been growing, deliver in addition to that coupon on the loan, obviously, their profits as a cash remittance. And I think the last point on cash and buyback was the cash level below falling below CHF 0.5 billion. And there, as I said, we have the CHF 0.5 billion to CHF 0.7 billion as a cash comfort range and if we want to feel comfortable we stay obviously within that range. And if I may go to the first comment I've made. We have CHF 0.65 billion. If I say more than half is financed from cash at holding, you can infer that we want to stay in that comfort range. Second and last point or last point that also keep in mind that we have a revolving credit facility of CHF 0.5 billion, which at this point in time is not drawn at all. I hope this gave some clarification, and I would hand over to Marco for the other results.

In the operating result, insurance business, this additional or further contributions Basically, it's 2 elements in it. One is the non-life business in France, which we already discussed with the health and protection business and the P&C business and the other part is assets not backing insurance liabilities. And as the name already says, the additional contribution, this is something from the accounting standard by construction doesn't go through the CSM. So there is by design a bit more of volatility in the results. So there is always various movements. What we have seen, and what I can say is in the first half of last year, 2025, the number was rather at the higher end because of some positive developments in the assets, not backing insurance liabilities. Now the number is a bit lower. And I would assume plus/minus some movements as also FX and things like that. Is this a level you could expect also going forward.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Matthias Aellig for any closing remarks.

Ladies and gentlemen, thank you for your questions and for joining us today. Before we close the call, let me recap. We continued on our growth path across all divisions, and I'm pleased with our operational performance both insurance and fee businesses. We are well on track with the implementation of our Swiss Life 2027 program. So thank you again, and we wish you a nice day. Goodbye.

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