© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to the Swiss Life Presentation of the Full Year Results 2021 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. [Operator Instructions] The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Patrick Frost, Group CEO of Swiss Life. Please go ahead, sir.
So, good morning. Dear analysts and investors, welcome to our call on Swiss Life's Annual Results. As usual, I will start by taking you through some key figures, and our CFO, Matthias Aellig, sitting next to me will then take over and comment on our performance in more detail. And at the end, we'll have time for your questions.
Obviously, the invasion that is happening in the Ukraine right now is putting our today's statements in a difficult context. It's not that easy just to talk business right now. Still, of course, it's our duty to report on our accomplishments in a proper way. And as you've probably seen by now, 2021 was an eventful year for Swiss Life in many ways. Firstly, it saw the conclusion of our Swiss Life 2021 corporate program, and we also presented our new three-year Swiss Life 2024 program and new goals last November.
Employees continued to focus on customers' needs. They worked on these and for Swiss Life with great engagement, and this helped us to achieve the best operating result in the history of Swiss Life. We were able to conclude our Swiss Life's 2021 program with a very strong year and achieve all our financial goals and better still even exceed them in the vast majority of cases. I can say with pride that we have successfully implemented our fourth three-year program in a row on this successfully.
Now to the key financials on our full-year 2021. We increased net profit by 20% over the previous year to CHF 1.2 billion and grew the fee result by 16% to CHF 699 million. Both figures are also higher than in 2019, i.e., before the pandemic. Net profit was around CHF 50 million higher than two years ago and allowing for a one-off positive tax effect even CHF 100 million higher. The fee result is around CHF 150 million higher than in 2019.
Going back now to the comparison of 2021 to 2020, we increased the risk result slightly by 2% and the same goes for the value of new business, which grew by 4% to CHF 482 million. The new business margin accordingly rose from 2.6% to 2.9%. These strong figures are supported by the development of our other group financial targets.
Slide 4. We succeeded in keeping our SST ratio above our target range of 140% to 190%. And as regards the cash remittance for the holding company, we achieved CHF 2.37 billion cumulatively over the three years. Here again, we markedly exceeded our ambition of CHF 2 billion to CHF 2.25 billion. As a result, we can report a pleasing development for our shareholders. We've continuously increased the dividend. We are now proposing to increase the dividend to CHF 25 per share which corresponds to a payout ratio of 61%. Here too, we exceeded the target of 50% to 60%.
Finally, we also delivered in terms of efficiency. The figures on page 4 show that we achieved or exceeded our goals in the three dimensions relevant to us. Ladies and gentlemen, we have good reason to approach the new corporate program with confidence.
I'll now hand over to Matthias, who will take us through our financial statement in more detail.
Thank you, Patrick. Good morning, ladies and gentlemen. I will start with selected P&L figures on slide 7. Gross written premiums, fees and deposits received were stable in local currency at CHF 20.2 billion. Fee and commission income was up by 16% in local currency to CHF 2.3 billion. All sources contributed positively. The net investment result of insurance portfolio for own risk increased to CHF 4.9 billion. Net insurance benefits and claims were down to CHF 14.3 billion. This item includes reserve strengthening of about CHF 300 million.
Policyholder participation increased by CHF 1.1 billion to CHF 2.0 billion, driven by high net capital gains. Operating expenses were up by 10% to CHF 3.8 billion due to higher commission expenses, business growth and investments in growth initiatives. Profit from operations increased to CHF 1.78 billion. This is mainly due to high savings and fee results. Moreover, 2020 was impacted besides COVID-19 by a negative CHF 70 million effect in the context of the DoJ settlement. Borrowing costs were stable at CHF 121 million. Income tax expense was CHF 406 million. The effective tax rate based on the geographic profit distribution was 24%, which is in line with our expectation for 2022.
Net profit increased by 20% to CHF 1.26 billion. Negative effect from the mentioned DoJ settlement was CHF 55 million in 2020. We adjusted the profit from operations as usual to reflect finance transformation expenses. The adjusted profit from operations increased by 15% to $1.81 billion.
Moving now to the segment results starting with Switzerland, premiums decreased by 11% to CHF 9.9 billion due to the Group Life business. So, life insurance market was down by 6%. Market figures include all competitors. Premiums in Individual Life were up by 7% to $1.6 billion, as the market increased by 5%. Periodic premiums grew by 2%, but single premiums were up by 20%.
Premiums in Group Life were down by 13% to CHF 8.3 billion as the market decreased by 11%. Periodic premiums fell by 1%. Single premiums decreased by 22%. The three quarters of this decline in Group Life single premiums can be attributed to lower volumes with new accounts. The remaining quarter relates to low premiums from employees entering existing schemes. Continued to focus on disciplined underwriting to protect and improve the quality of our full insurance book. In line with our full-range provider strategy, assets under management in our semiautonomous foundations increased to CHF 5.6 billion compared to CHF 4.8 billion at year-end 2020.
The shift to growth in semi-autonomous solutions results in lower reported premiums. Only risk and cost premiums are recorded, while the savings components are recorded off balance sheet as asset inflows in the respective foundations.
Fee and commission income was up by 11% to CHF 330 million, primarily due to Swiss Life Select, our businesses with unit-linked and investment solutions for private clients, as well as real estate brokerage. Operating expenses increased by 23% to CHF 444 million. Please remember that in 2020, we reported exceptionally low operating expenses due to a planned amendment in the own pension scheme, with a positive impact of around CHF 60 million.
In addition to this, operating expenses also increased due to the insourcing of mortgage administration and investments in growth projects as mentioned at the recent Investor Day. The segment result increased by 8% to CHF 897 million, primarily due to a higher savings result, supported by a higher net investment result.
Fee result increased by 11% to CHF 28 million, in line with income development, despite investments in growth projects. As mentioned at the Investor Day, we expect a rather flattish development of the fee result until 2024, while we continue to invest in expanding into new customer segments. For 2022 in particular, we expect a further increase in growth investments.
The risk result grew by 2% to CHF 273 million due to the group life business. Value of new business is essentially at the prior year level and amounts to CHF 189 million. Yes, new business management led to get reduced guarantees, higher volumes of capitalized products, and given the very low interest rates to lower volumes of full insurance business. As a consequence of the improved business mix, the new business margin increased considerably to 3.9%.
Turning now to France. Please note that all figures quoted are in euros for our French, German, and international segments. In France, premiums increased by 21% to €7.1 billion, the market grew by 19%. In our life business, premiums were up by 26% due to continued demand for our pension and savings products following strong growth in the prior year. Market was up by 30%, which compares to a heavily depressed 2020. To illustrate this point, since 2019, our premiums were up by 47%, but the market was up by 5%.
The unit-linked share in our life premiums was 58% compared to the market average of 39%. Life net inflows were €2.7 billion versus overall market net inflows of about €24 billion. Health and protection premiums increased by 9%, mainly driven by the group business. The market was up by 4%. P&C premiums were up by 8%, primarily due to fleet and home insurance products. Market growth was 4%.
Fee and commission income rose by 21% to €383 million. Unit-linked fee income increased as a result of higher unit-linked reserves, which grew due to high net inflows and the favorable financial market environment. In this context, we also had a strong contribution from the banking business, driven by exceptionally high revenues from structured products. Operating expenses increased by 3% to €367 million due to business growth and investments in growth projects such as the international health initiative.
Segment result increased by 31% to €265 million. Savings result developed positively based on the high net investment result. The cost result declined due to higher acquisition costs related to the strong new business growth in life. The risk result was up slightly by 1% to €89 million due to lower claims in the P&C business. However, this was almost fully offset by the higher coverage in health. As explained at the half year disclosure, the higher health coverage is based on a governmental prescription affecting the entire French health insurance sector. Fee result was up by 35% to €103 million. We saw a clearly higher fee result in the unit-linked business, while the banking business benefited from exceptionally high revenues from structured products.
Value of new business increased by 6% to €160 million, driven by higher volumes in both life and health. The new business margin decreased to 1.9% due to changes in the operating environment, such as mentioned, higher health coverage.
Moving on to Germany. Premiums were up by 4% to €1.3 billion due to modern, modern-traditional, and disability products. The market was down by 1%. Fee and commission income grew by 25% to €645 million, due to a strong contribution from our owned IFAs with the number of financial advisors increased by 20% to 5,573. This top line development included, as mentioned throughout 2021, an extraordinary benefit of around €15 million from a successful campaign-based on the solidarity surcharge. This surcharge was discontinued for the majority of the German population at the beginning of 2021. A similar amount of income development relates to the lowering of the minimum guaranteed interest rate in life effective 2022, which led to additional activity of owned IFAs.
Operating expenses were up by 4% to €245 million because of business growth, as well as ongoing investment in growth initiatives such as the further digitalization of the advisory platform, including an upgrade of the back office infrastructure. The segment result was up by 36% to €228 million. All profit sources contributed to the positive development, primarily the savings and fee results. High level of the savings result is supported by an exceptionally high net investment result based on positive fair value changes on investments. Moreover, it again included realization of fixed income instruments in the context of ZZR financing.
Fee result was up by 21% to €104 million, driven by strong business development at our owned IFAs. As mentioned last year, the fee result in 2020 included a small one-off. Excluding this, operating leverage would have improved. The risk result increased by 19% to €33 million in the disability business after administration backlogs in 2020. The value of new business increased by 21% to €87 million, mainly due to increased volumes in modern products, as well as lower average policyholder benefits. As a result, the new business margin improved to 3.9%.
Turning now to the International segment. Premiums decreased by 12% to €1.1 billion due to lower premiums with private clients that were partly offset by higher premiums with corporate clients in the global employee benefits business. Fee and commission income was up by 20% to €312 million, primarily driven by higher contributions from our owned IFAs, both in the UK and CEE. Income with private and corporate clients was also slightly higher. Operating expenses increased by 9% to €106 million, following a 5% decrease in 2020. The increase is due to regained business activity, combined with investments in process optimization and digitalization.
The segment result was up by 18% to €87 million. Fee result increased by 36% to €65 million. This is primarily due to our owned IFAs achieving higher revenues and productivity gains, resulting as an example from virtual advice.
The risk result declined by 19% to €12 million. It continues to be at an attractive level after having seen exceptionally low claims in 2020. The other profit sources, namely savings and cost results, were essentially stable. The value of new business increased by 18% to CHF 35 million, mainly driven by higher volumes and profitable risk business. The new business margin increased significantly to 3.7%.
Let's move now to our Asset Managers segment that reports in Swiss francs. Asset Managers total income was up by 9% to CHF 1.23 billion. The increase was driven by higher recurring income. In our PAM business, total income was up by 4% to CHF 392 million due to higher recurring income based on asset mix effects and additional services such as management fees from senior secured loans and infrastructure debt. Real estate transaction income was stable.
Now, TPAM business total income was up by 13% to CHF 631 million. Recurring income increased by 17% given a higher average asset base. Net income from gains on ongoing and completed real estate development projects was up to CHF 79 million compared to CHF 50 million in 2020. This more than offset low non-recurring commission income from transaction and performance fees. The share of total non-recurring income for TPAM was 27% of total income compared to 30% in 2020.
Operating expenses increased by 10% to CHF 570 million due to further business growth as well as investments, example for the latter are building platforms, harmonizing processes and food digitalization. In 2020, operating expenses included one-offs of about the same amount to adjust the recognition of a brand asset and expenses concerning customer relationships.
Segment result increased by 9% to CHF 374 million. The contribution of PAM was up 4% to CHF 215 million in line with the income development. TPAM increased its segment result contribution by 16% to CHF 159 million despite the mentioned ongoing investments thanks to strong top line development. Net new assets in our TPAM business amounted to CHF 9.4 billion compared to CHF 7.5 billion in 2020, which we achieved strong inflows in real assets of CHF 5.8 billion, they were CHF 5.1 billion from real estate and CHF 0.6 billion from infrastructure.
Inflows in other asset classes amounted to CHF 2 billion in money market funds, CHF 2 billion in balance mandates and CHF 0.3 billion in equities more than compensating for outflows of CHF 0.5 billion in bond mandates. Excluding money market funds, net new assets amounted to CHF 7.5 billion compared to CHF 7.6 billion in 2020.
Overall, assets under management in our TPAM business were at CHF 102.8 billion compared to CHF 91.6 billion at year-end 2020. The drivers were strong net new assets and higher asset valuations that outweighed negative FX translation effects. Total assets under management came to CHF 276 billion.
Let's move back to the group. Total operating expenses increased by 10% to CHF 3.8 billion, also due to high commission expenses. Operating expenses adjusted increased by 6% to CHF 1.8 billion. Direct investment income decreased by CHF 24 million to CHF 4.02 billion. Our direct investment yield was 2.3%.
Income on bonds was down due to past bond realizations and lower reinvestment yields. Common equities was also slightly lower due to our dividend yields compared to 2020, primarily in the US. This was partly offset by higher income from alternative investments, given increased distributions from infrastructure funds, as well as the higher rental income, which was up by CHF 82 million. About half of the increase in rental income was related to new fund consolidations, in line with the PAM/TPAM co-investment strategy. The other half was due to higher rental income on the growing, directly held real estate asset base and higher dividend income from non-consolidated funds.
In 2020, effective rent losses amounted to less than CHF 10 million in the context of COVID-19. The net investment result increased to CHF 4.9 billion, the net investment yield was 2.9% compared to 2.2% in 2020. Net capital gains amounted to CHF 1.3 billion. The increase compared to 2020 is due to higher fair value changes for real estate, as well as net capital gains on loans and alternative investments. We also had substantially improved FX hedging effects, including decreased hedging costs of CHF 345 million, down from CHF 547 million in 2020.
Moreover, the contribution of the hedged equity portfolio was less negative than in 2020. Those positive effects were partly offset by substantially lower gains in bonds. Unrealized net gains and equities were CHF 3.3 billion compared to CHF 1.6 billion at year-end 2020. Unrealized net gains and bonds amounted to CHF 12.1 billion compared to CHF 18.2 billion at the year-end 2020. Our total investment result, including changes in unrealized gains and losses and investments, fell to 0.3% primarily as a result of higher interest rates.
Slide 16 shows the structure of our investment portfolio. The share of bonds declined primarily due to over valuations resulting from higher interest rates. The real estate exposure increased to 23.6% and includes further net additions of CHF 1 billion and positive real estate fair value changes of CHF 1.6 billion. Fair value changes thus amounted to 4.0% compared to 2.3% in 2020. All sectors contributed positively, most of all, the residential sector. The share of equities increased to 8.7% in line with favorable financial markets. Our net equity exposure after hedging amounted to 4.3%.
Let me give some additional color on the real estate portfolio. Our vacancy rate increased slightly to 4.0% compared to 3.9% at the end of 2020. Rent collections amounted to around 98% of rental income due compared to 96% in 2020. This means that we are essentially back to normal in terms of rent collections. The majority of uncollected rents in the context of COVID-19 is due to rent deferrals as rent losses amounted to less than CHF 10 million.
Insurance reserves, excluding policyholder participation liabilities, increased by 4% in local currency to CHF 175 billion, primarily due to France, International and Germany. Shareholders' equity decreased by 6% to CHF 15.7 billion. This is driven by lower net unrealized gains and bonds, share buybacks and dividend paid, which was partly offset by the net profit attributable to shareholders.
Our total outstanding financing instruments amounted to CHF 4.8 billion, resulting in a capital structure of 70% shareholders' equity, excluding unrealized gains and losses. Reference level is 65% to 75% as announced at the Investor Day in November. That brings me to Swiss Life 2021. I will report on the target achievement on the following pages.
The fee result increased by 16% to CHF 699 million. This is very pleasing and we see the 2021 target range of CHF 600 million to CHF 650 million. France, International, and TPAM reported improvement in operating leverage when operating leverage with PAM, Switzerland and Germany remained essentially stable. The savings result increased to CHF 905 million and this essentially backs to the 2019 level. This is due to high net investment result that was, however, partly offset by higher policyholder participation. That's the majority of capital gains accrued in business lines, with a relatively high policyholder sharing, such as the group life business in Switzerland.
Risk result increased by 2% to CHF 419 million. It is slightly above the 2019 level and within the 2021 target range of CHF 400 million to CHF 450 million. Cost result was CHF 115 million and improved to around the 2019 level. Fee and commission income increased by 16% in local currency to CHF 2.3 billion. Commission income at Swiss Life Asset Managers was up by 6% in local currency. This was primarily due to TPAM. As usual, commission income on this slide excludes all the net income, such as income from real estate project development. Commission income from owned IFAs increased by 18% in local currency, while commission income from owned and third-party products and services was up by 19%.
Slide 23 shows our direct and net investment yield. This compares to a renaissance rate of around 1.5%. Our average technical interest rate decreased by 5 basis points to 1.0%, driven by business mix effects and further reserve strengthening. We slightly increased guarantees in the non-mandatory BVG business to 0.25%.
With our disciplined ALM, we continue to successfully protect our interest rate margin. The interest rate margin remains secured for more than three decades. The increase in the value of new business to CHF 482 million is mainly driven [indiscernible] (00:30:26) new business management, including pricing and continued reduction of guarantees. As a consequence, the new business margin increased to 2.9%. Cumulative value of new business over the last three years exceeds CHF 1.5 billion and is, therefore, well above the Swiss Life 2021 target of more than CHF 1.2 billion.
Let me now move on to operational efficiency. In life insurance, the efficiency ratio increased to 39 basis points, while the prior year benefited from a positive one-off in the context of the pension plan amendment in Switzerland. Nevertheless, we achieved our target of less than 40 basis points by 2021. At our owned IFAs, distribution operating expense ratio improved to 22%, primarily due to Germany as well as International. This means we exceeded our target of less than 25% by 2021. In our TPAM business, the cost income ratio was 82% or 76% excluding one-off. We, therefore, achieved the targeted level of around 75% by 2021.
Turning to capital, cash and payout. By the 1st of January 2022, our Swiss Solvency Test ratio was estimated to be around 220%. It is well above the ambition range of 140% to 190%. About 10 percentage points of the improvement can be attributed to the new credit risk module now mandatory in the SST standard model. Please also note the mentioned SST figure is fully deducting the CHF 1 billion share buyback that started on December 6, 2021. As of today, the SST ratio is at about the same level.
Cash remittance to the holding company increased by 6% to CHF 834 million. This corresponds to a cash remittance ratio of 80% based on prior year IFRS net profit, which included a negative effect from the mentioned DOJ settlement with impact on cash at holding but not on cash remittance to the holding. As explained at Investor Day, cash remittance is driven by local statutory accounts of Swiss Life Holding subsidiaries.
For the three-year period, 2019 to 2021, we remitted CHF 2.37 billion of cash to the holding company and therefore exceeded the cumulative target of CHF 2 billion to CHF 2.5 billion. Cash at holding as of today amounts to around CHF 1 billion. The current cash level includes the cash remittance to the holding company just mentioned, as well as the repatriation of a CHF 200 million hybrid loan granted to Swiss Life AG mentioned at the Investor Day.
In addition, under our current CHF 1 billion share buyback program, we have repurchased shares worth around CHF 150 million since last December. Moreover, for the 2021 financial year, the board of directors will propose a dividend of CHF 25 to the AGM, up from CHF 21 in the previous year. The payout ratio is 61% and thus above the targeted level of 50% to 60%.
Let me sum up. I'm very pleased with the strong performance in 2021 and the very successful completion of the Swiss Life 2021 program. We exceeded the vast majority of its financial targets and achieved the remaining ones. With Swiss Life 2024, we plan to continue on our successful path a further strengthening earnings quality and by further striving for high cash returns to shareholders. We will start with our Swiss Life 2024 progress reporting in the half year 2022 investor presentation.
Thank you for listening and back to you, Patrick.
Thank you, Matthias. Ladies and gentlemen, it's now time for your questions. Who would like to go first?
We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Andrew Sinclair from Bank of America. Please go ahead.
Thank you. Good morning and well done guys, good numbers again. Three from me, if that's okay. Firstly, I just wanted to dig into the solvency number a bit more. The around 220% seems a really good number even allowing for the 10 points benefit from the credit risk model. I mean, when I look at it, I think it was around 210% at Q3 and that was before you announced the CHF 1 billion buyback. Just really wondered if you can give us kind of the building blocks, whether it be Q3 or whether it be full year [ph] 2021 year – sorry, for your 20 years (00:36:16) starting point, just to get the building blocks of capital, if that's possible to evolve from start period to end period.
Second question, which is on leverage, just creeping up a little bit, I realize you increased your target range, but I guess it will increase further the leverage number when you've completed the CHF 1 billion buyback. Just really if you can give us an idea of where you expect leverage to peak.
And thirdly, was just if you can give us an updated holdco cash balance. Thanks.
Let me start with the SST number, indeed, we have seen quite an uplift since the beginning of 2021 and when we had around a bit less than 200%, namely 197%. And looking back of what was happening since then, we had essentially the positive real estate and fair value changes, and the equity market performance during the period 2021. I mean, that was maybe contributing around 15 percentage points, then also the other things developed well, credit spreads tightened a bit, the interest rates moved in the right direction. So that's about what we had from the pure market performance. Then we had this additional 10 percentage point due to the credit risk module. Just to put that a bit into context, that's a module that is prescribed by FINMA, that is now mandatory for all users of the standard model. The module has been developed jointly with the insurance association, and so it has brought 10 percentage points. And against that, we have this share buyback that is a negative 6 percentage point of SST and that's in essence [ph] was the build (00:38:34), the roll forward of the SST looks like.
Okay. And what was the organic build in the period?
Well, that's about the same as if you look back into the solvency financial condition report and that's maybe CHF 1 billion gross of dividends roundabout. I mean, those are the numbers that we typically show. Maybe at this point in time, because we get lots of questions there, please keep in mind that the capital generation under SST and the cash generation that we deliver to the holding are separate things that's discussion we every now and then have.
Okay. Then maybe to the leverage figures, yes. So the – we increased the range which we communicated back at the Investors Day, but please bear in mind that when calculating the equity here, we deduct unrealized gains and losses. So, if you'd adjust it for that, then it wouldn't be – the midpoint wouldn't be at around 30, but at around 23, if I recall correctly. So, if we do peer comparisons, we'd be at 23. And including the share buyback no, we don't expect the leverage to increase over the period because of the share buyback, because remember, it'll run till May 2023. So that will include two full years' earnings basically to finance the share buyback. And I think the last question was around cash. And there, today, we're at around CHF 1 billion of holding cash. That compares to CHF 0.7 billion to CHF 0.9 billion of our range that we communicated.
Very helpful. Thank you very much.
The next question comes from Peter Eliot from Kepler Cheuvreux. Please go ahead.
Thank you very much. And yes, congratulations also from me the results. Three questions as well, please. The first one, if I focus on the fee results and Germany in particular, I mean, a really impressive, up sort of 25% year-on-year. Just wondering if you could sort of comment on the momentum for the fee income there and also for the fee results, because, I mean, even though expenses have fairly increased, that the top line momentum hasn't maybe fully made it through to the fee results in Germany, so just perhaps it'd be really helpful if you could perhaps just talk about the dynamics there.
The second question on cash again, a very strong number for cash remittance and if I look at the contribution by division, then the life division is sort of slightly maybe in line or slightly down on last year. I'm wondering if that's just sort of due to France or if there's anything in particular you can say there.
And then thirdly on the real estate revaluation, obviously, a very high number, higher than usual, just wondering if you can add any comments about the timing of that, why we saw such a high increase this year. And I think you're probably still increasing your exposure to real estate but perhaps you could confirm that as well. Thank you very much.
Okay. So, I'll start with real estate. Yes, we're still looking to slightly increase our exposure here in line what we said over the last few quarters, but we're unlikely to increase real estate as we did, let's say, three or four years ago. With respect to valuations here, we might have had some catch-up effects which are external. All of these valuations are done by external parties, so they basically look at what is happening in the market and then they calculate the implied discount rates. They've come down slightly. And this just reflects what is happening in the markets, right? And of course, most of this increase in valuations of real estate is driven by Switzerland, which we have most of our exposure. And there also in Switzerland, we saw the strongest increase, especially in the residential area.
But we've had, I guess, some uncertainties going away around the pandemic. So we also saw increases in the office – in the values of offices. And then, it's of course also a bit of a payoff with all the refurbishments we do with the active positioning, with the high rent collections we have, the low losses. And of course, I mean just primarily Switzerland and Germany but now also France just have strong real estate markets and this is now reflected in our accounting figures.
Let's move over to Matthias of the other two questions.
Okay. Starting with the cash, indeed, as you said, it is the French contribution that was down. So that's a quite short answer. Now moving to determine, let's say, dynamics if you wish around the fee top line and the fee result. So I think the underlying driver for the top line development is clearly the growing base of financial advisors that was up by around 20%. But we also had in 2021 two specific market opportunities that will not occur in the future. One was at the beginning of the year that was this [ph] abolition (00:45:38) of the solidarity surcharge, which led to additional IFA activity, which contributed around CHF 15 million of top line.
And we had another specific market opportunity more versus the end of the year. That was the lowering of the minimum guaranteed rate [indiscernible] (00:45:59), as the Germans say. And there, this will also lead to additional activity because clients wanted to secure life insurance policies at still a high minimum guaranteed rate. And this is, let's say, also around the same order of magnitude of around CHF 15 million. So out of the CHF 645 million, around CHF 30 million top line relate to those specific opportunities that we do not expect clearly to recur.
And in terms of the bottom line, in the bottom line dynamics, we have to keep in mind that in the prior year, we had a one-off. And if we excluded that one-off in the prior year, we would have a situation where the bottom line would grow more strongly than the top line, so if we excluded that. So we would have achieved operating leverage in 2021 if we considered it that way.
That's great. Thank you very much.
The next question comes from Thomas Bateman from Berenberg. Please go ahead.
Hi. Good morning, and thanks very much for taking my questions. Three for me please. Just on the IFA growth, really strong continued in Germany and in the International division. Maybe you can just give that color kind of what the restrictions in these markets, is it cost, competition, talent, etcetera? Secondly, on the dividend growth, really nice announcement today, which is very welcome. And I guess the one thing I'm thinking about longer term is how sustainable growth is, and it leads me to think there's probably more buybacks coming in the future.
So could you highlight kind of any areas of opportunity where you see – that there's opportunities for cash or capital optimization? And finally, just on interest rates and real estate and I appreciate you just said that a lower interest rates were a reason for the higher real estate valuation gains. So just how would you think about that going in the opposite direction, if interest rates [indiscernible] are to rise, is that a risk to your (00:48:18) valuations and what can you do to mitigate it, etcetera? Thanks very much.
Okay. I did not say that lower interest rates were the reason for the real estate valuations. I said the implicit discount rates, which were calculated by the market values – so by real transactions happening in our markets have decreased. And theoretically, I mean, these – even though rates, government rates go up, these discount rates could keep going down very significantly. Really, depending on where the market sees rental income going, for example or other reasons why Swiss real estate might keep increasing. Of course, we don't want Swiss real estate to increase, keep increasing in value but we do see a continued strong demand for real estate in Switzerland especially on the residential side. But now with the uncertainties around COVID going away also for well CBD located office buildings. And vacancies, you can also see this in public figures are – have not crept up. The economy is going strong. Bankruptcies are low. There are a lot of new businesses being founded in Switzerland.
So there are a lot of reasons why real estate prices continue to be very well supported, especially in Switzerland but also in Germany and France, for that matter. But yes, you're right. I mean, there might be the day where we do see a real estate market correction, what many people have been expecting for a decade now because of higher rates but here, there are several things to keep in mind.
First of all cash is unlikely, cash generation is unlikely to be impacted because that is driven by statutory accounting, and then of course our IFRS earnings in the present context that would be hit. Of course, if we see negative developments on the real estate market but also under our SST, you see that we have – we do have some sensitivity. I think it was – we published that at the half year, if real estate prices go down by 10%, I think Solvency goes down by 13 percentage points or something like that – sorry, by 18 percentage points. So yes, we do have an exposure to real estate. That's clear. It shouldn't impact the cash flow, statutory results and so on. And of course, it's a natural hedge to our life business, which of course, should improve as interest rates go up.
So, sorry for this long explanation, the repetition why we have such a high real estate exposure. I hand over [ph] for further (00:52:01) answers by our CFO.
[ph] It's very comprehensive and (00:52:05) I apologize for the confusion.
Let me first go to the question on the IFAs in Germany and about the restrictions. There are essentially no relevant restrictions that are around. I mean, clearly, we need to find people who are willing to go on such a career path and then they undergo a formation. They have to take a certification. Clearly, they have to do that. But this is not a restriction. That is just a career path they need to follow. As mentioned, we were in a position to add around 20 percentage points of growth to the certified advisor base, which is now at around 5,600. And clearly, we have the benefit in Germany that we have an attractive modern platform, which also serves as a magnet to attract new financial advisors. This – or the absence of such a thing might be a restriction. And we see that actually in the market that others have this challenge. So there, I think, we have clearly a point. Sorry, I was also getting a bit long.
Let me move to the cash question you asked and the long-term view. I mean, we have laid out at the Investor Day what the basis is for our program. I mean, we have a growing cash remittance through to the holding company. We have increased the level there to CHF 2.8 billion to CHF 3 billion. And we also have given the guidance that we want to have a payout ratio of more than 60%. And clearly, the drivers for the higher cash remittance are the increased earnings quality, namely the growing fee result, but also further, let's say, contributions from the other savings, risks, and cost processes where we also expect improvement. And so that's really the basis on which we see here clearly a higher cash remittance to the holding company, which is the basis for, at the end, the dividend.
That's excellent. Thank you, guys.
The next question comes from Fulin Liang from Morgan Stanley. Please go ahead.
Hello. Thank you. Good morning. Very good results. Congratulations. I've just got two questions. The first one is from the dividend. If I project forward, I think it's clear that you probably have to rely on some I think repatriation from the local operating entities for cash going forward. I just wonder actually what's the guideline you use to decide, okay, we're going to do repatriate a bit more from kind of operating entity. Are there any specific and local solvency target you are aiming at? That's my first one.
And then secondly is I was − I'm looking at your − that's a very impressive fee and commission income growth at the front line and – but I was trying to time to get what exact – what's the driver actually underlying this high growth because I was trying to compare it to the GWP growth and new business growth, as well as the reserve basically liability growth? And I think your fee income seems to be better than all the kind of growth in the flow − in the premium flow or asset flow part. So, I wonder what are the other drivers which are driving this excellent fee income. Are you pushing for higher – are there business mix there? And what would be the contribution from that business mix? Will that continue as well? Thank you. I mean, apart from your kind of one-off impact in Germany.
Okay. So on page 22, you basically see the different sources of our fee and commission income growth. There you see that, okay, at asset management, it's grown by 6% which is of course not directly dependent on insurance reserves because we have transaction fees in there. And so it depends a bit on how many real estate transactions or refurbishment services and so on are included. Then, of course, the main contributor to our fee and commission income are our owned IFA channels. And here, of course, this growth is primarily driven by fee and commission income from non-Swiss Life-related products, also insurance products. So that is not linked to what is happening on our premium side or on our balance sheet.
And the last one, it's our own and third-party products and services, which was up by 19%. Yes, this, to some extent, especially in France and also a little bit in International, is linked to premiums. But more importantly, of course, last year was a very good development of financial markets, right? So the stock of our unit-linked fund product increased in value, and this, of course, increased our fee income from our own and third-party products and services. And there was another support in France where we own a very small bank, which also had a very good year last year related to strong equity markets.
[indiscernible] (00:58:46)
Please go ahead.
Yeah, yeah. I just wanted – okay. So thank you very much. So, okay. So I just wonder then if some of the driver cannot link back to the rest of your financial statement to what we should, like, looking forward, how we can actually see what's the outlook like in the next year or so?
I think really a good proxy for the outlook is to look at our targets, which we published in November, so at our Investors Day. And there, you're really seeing great granularity where we expect and how we expect to increase the fee income by division. So, AUM growth at asset managers, it's IFA advisor growth for our IFA businesses. And then, of course, the quality of our business for sort of the French – for example, the French or also International unit-linked growth. I think you really get a good overview there. Of course, now, with the correction in the equity markets, it'll be a little bit more difficult to achieve these figures. But, on the other hand, real estate is still doing fine. And of course, we still have two and three quarters, years ahead of us to reach those goals. But I think that really gives you a very granular and good overview of where we expect to go.
Okay. Thank you very much. That's helpful.
Maybe on your question in view of the repatriation of funds, and I assume it goes back to the topic that we covered at the Investor Day, how we do the financing of the CHF 1 billion buyback. As mentioned, we said there's excess cash at holding [ph] CHF 150 million (01:00:56). Then we talked about the two net annual cash build-ups and we gave one example, the CHF 200 million buyback – the CHF 200 million repatriation of a hybrid loan and this was from Swiss Life AG to the holding company, which we repaid on the basis that Swiss Life AG has a very strong solvency of clearly also more than 200%. So that was the driver for such a repatriation, and clearly, we also intend that's part of those annual net cash build-ups, which I mentioned before, there are also repatriations from our foreign insurance subsidiaries, but also from the fee businesses.
There, we clearly have also a policy that we want to have a certain share of the profit repatriated as cash. This is really in a situation where we want to have a reasonable solvency in our local markets. But at the end of the day, we are aware of the fact that cash at the holding gives us the highest flexibility. So there is a balance between how much cash we want to retain at the business level. We have also indicated that the part of that net profit, we want to retain at [indiscernible] (01:02:26) level just for growth initiatives. I refer to the presentation at the Investor Day.
Okay. So there is no kind of hard or kind of soft aim at when you say reasonable solvency, there is not like CHF 180 million is reasonable, like, something like that?
No, we have – the ambition range for the SST is something we do for the group. Clearly, I said, we have low solvency situation that we monitor. We want to be around the market. There are different starting positions, for example, our German branch hence a very, very high solvency and the French solvency is also very good. So that's I think what I can say in view of that.
Okay. Thank you.
[Operator Instructions] The next question comes from Jimmy Fan from UBS. Please go ahead.
Hi. Hello. Thanks for taking my questions. I have two, please. So first on large cash and holding again, could you remind me what's the level at yearend last year? And also [indiscernible] (01:03:54) as a percentage of earnings it was 80% last year and for this year like for 2022, should we expect a similar percentage for cash remittance or I should kind of normalize to a lower ratio? And on that topic around the Germany and the French entities, they are at very high solvency level. Is there any kind of [indiscernible] (01:04:27) in terms of cash upstream that we should expect going forward?
And my second question is around SST. So that's 30 percentage point ahead of your target range and what [indiscernible] (01:04:44) the strategic priorities for you in terms of utilizing that excess capital? Is there an opportunity to think about risk/reward balance for your investment strategy and reduce balance sheet volatility, and also thinking the [indiscernible] (01:05:05) we have seen this year?
Okay. Thanks for the questions, Jimmy. Maybe to the last point around the solvency, yes, we're indeed above the ambition range, but we don't feel under pressure to take actions to reduce that to – for example, by taking undue risks. So we feel comfortable with the current asset allocation and the gradual buildup of the real estate, as we mentioned. So, nothing particular to note there.
In terms of the cash position at the holding level, we said we are currently at around CHF 1 billion. What has happened since the beginning of the year, we have essentially had two months' worth of share buybacks, so we were maybe CHF 100 million a bit more than that high. So, I would say around CHF 1.1 billion at the year-end 2021. In terms of the 80%, I think that you referred to as the remittance ratio for the build for the year 2020, I think this is not, as you implied, a normalized view. Why is that? We had essentially in 2020, a DoJ effect, which was a negative CHF 55 million, where we had an impact on the profit, but not on the cash remittance to the holding. Why is that? We essentially built that probation on HoldCo level, so the cash remittance from the [ph] stocks (01:07:00) to the holding was unaffected by that. And this – that's why there's 80% are not essentially we should view as, let's say, the normalized view for that, I would refer to the presentation at Investor Day, that was this page 19, where we essentially said that the remittance is 75% to maybe 80%, with about 15% to 20% of the IFRS earnings being non-cash and less than 5% of cash retained at the business division level.
And thank you. And so to my understanding, so it's going to remain at the level around 75% to 80%, but we need to normalize for like our DoJ provision. And I guess or I think also on my question, is there any step-up we should expect from any subsidiaries going forward or it's going to be in line with the earning calls from different subsidiaries?
Well, we gave the targets at the Investor Day, the CHF 2.8 billion to CHF 3 billion on a cumulative level, we essentially factored in everything that we know and there's no change until today in that respect.
Yes. Thank you so much.
The next question comes from Thomas Fossard from HSBC. Please go ahead.
Yes. Good morning, everyone. A quick question from my side. There will be only one question for me. Can you provide some color on the outlook for the need for further reserve strengthening in 2022? How should we think about this in the context of potentially writing yields? And eventually, does it mean that we could see some reserve releases starting? Thank you.
Thanks for the question. Whenever we do the reserving assessment, we just look at the situation at the closing date, so that next time it's at half-year 2020 and then at the full-year 2020. And, yes, you have seen or we have seen in the last year less of reserve strengthening which also has to be seen in the context [indiscernible] (01:10:01) of rising rates. So if rates continue to go up, there is a chance that the reserve strengthening in 2022 might be lower than last year.
I think what's important to keep in mind, as we have [ph] a legal clouds (01:10:20) in most of our businesses, lower reserve strengthening essentially increases the dividends to policyholders. I mean, that's the way it is. Either it goes to the reserve or to the policyholder bonus, I think that's what you have to keep in mind.
Okay, understood. Thank you.
The next question comes from Farquhar Murray from Autonomous. Please go ahead.
Hi, all. It's Farquhar from Autonomous. Just a quick one, actually. Just really a follow-up on that last question, actually. I mean, obviously, if we look at the investment results, we include the gains and then we strip out the reserve strengthening. The actual implicit kind of profit share to shareholders, obviously, is about just, I think, probably just a bit under 20%. That's a materially lower number than we've seen in recent years. Can you just explain the dynamics behind that? And is that just a consequence of what you alluded to earlier in terms of the profit sharing outcome and how much really discretion do you have for the management team around that figure? Thanks.
I said, I mean – oh, you're right. Yes, we have seen varying degrees of, let's say, the share of net investment income flowing into savings result and this is essentially a function of where in which business line, in which geography this net investment income actually accrues. And real estate, to give that example, is an asset class that is very useful essentially for high [ph] legal cloud (01:11:58) businesses. And here, we have seen as a result of that a relatively high share of policyholder participation of the – on the yield tree.
Now, if you look back a bit more into the past, I mean, we have added, if you do the math, around 18.5 percentage points last year to 21% of the saving of the top of the yield tree or the net investment yield that went into the savings result. But if we look back, let's say, four, five, six years, these numbers have been lower in the past. So, I think it would be wrong to take the year 2020, which was, needless to say, a very particular year as the yardstick going forward.
Okay. And just a broader question, I mean, the cost result seems to have come in pretty well this period, I mean, that's pretty much on target for full year 2024 now. Should we just assume that it's kind of going to be that level from here or should we look upside on the cost result from here?
Well, we have not given a target for the cost result in a narrow sense, we have indicated that it will go up from the 2020 level.
Okay. All right. Thanks.
Welcome.
Ladies and gentlemen, this was the last question. I would now like to hand over the conference to Patrick Frost for any closing remarks. Thank you.
So thank you. With the new Swiss Life 2024 corporate program, which we presented at the end of last year and which we mentioned a couple of times here now during the Q&A session, we really want to build on the success of recent years. Our starting position is really promising. In addition to the attractive life businesses, we've built up a very competitive asset management operation. And, of course, in the IFA business, with our more than 17,000 advisors, we have comprehensive access to our markets, which really sets us apart from competitors.
We remain ambitious with our new program and we will continue to focus on earnings growth. Specifically this means we want to increase the fee result to CHF 850 million to CHF 900 million by 2024. We want to achieve an ROE of 10% to 12% in each individual year, and we want to significantly remit more cash to the holding company, namely CHF 2.8 billion to CHF 3 billion cumulatively over the next three years. We want to generate an attractive dividend yield by consistently targeting a payout ratio of above 60%. In addition to that, in December of last year, we initiated our share buyback program of CHF 1 billion which will run into May 2023. And we look forward to embarking on this Swiss Life 2024 journey with all of our colleagues, and thank you for your attention, and I wish you all the best and look forward to seeing you in person again soon. Goodbye.
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.