Jean-Daniel Laffely, director of Vaudoise Assurances, does not fear the impact of teleworking on office property either.
In a context marked by the health crisis, Vaudoise Assurances achieved a consolidated profit of 122.8 million francs in 2020, against 134 million in 2019. The turnover of the Vaud insurer increased by 3.2% for amount to 1.18 billion francs. In non-life insurance, gross written premiums increased by 1.8% to 945.2 million francs, thanks to a contribution from all business segments. For the most important of them, that of motor vehicles, growth was limited to 0.5%, a proportion which was nevertheless higher than that of the Swiss market, notes the insurer.
In life insurance, gross premiums collected jumped 10.8% to 208.6 million francs, an increase coupled with a decline in paid benefits of 14% to 268.1 million. The net return on investments reached 2.4% in 2020, almost as much as the previous year (2.5%). The volume of investments increased by 152.8 million francs to reach 7.6 billion. On the basis of these results, the insurer based in Lausanne will propose during the general meeting the payment of a dividend of 16 francs per registered B share, ie 1 franc more than last year. Interview with Jean-Daniel Laffely, CEO and Managing Director of Groupe Vaudoise Assurances.
“Renting vehicles will not necessarily be cheaper than buying.”
You took up your duties as CEO of Vaudoise Assurances in May 2020, in the midst of the turmoil of the coronavirus crisis. In the end, the group nevertheless published a series of solid results for the whole of 2020. Between May and December, what went better than expected a year ago like this? time?
To be precise, I started working towards my future role in November 2019 already, as I was going to have to be responsible for the results for the whole of the 2020 financial year. Nevertheless, I officially took my duties in May 2020, while still in the eye of the pandemic storm. Then, several factors enabled the situation to turn around fairly quickly. First, there was the strong recovery in financial markets from late spring and into the summer. Second, if the containment caused a marked slowdown in activities and a reduction in the volume of contracting in April and May, there was then a strong recovery as early as June. Third aspect: if we were a little more optimistic in April about the evolution of claims, things then returned to normal during the year. Overall, business has recovered much faster than one might have feared a year ago at the same time.
For the current financial year, you mention a positive trend from January until the end of February in practically all your branches of activity, with an increase in premiums estimated at 2.5% for the non-life sector. However, this is not the case in life insurance (-0.3%). Is there a specific reason for it?
The reason is above all technical. In non-life insurance, the figures are often more complete at the start of the year because it is during this period that premiums are paid and contracts are renewed. In life insurance, the reverse is generally true. The evolution generally becomes more positive as we advance in the year. Premiums are collected more in the second half of the year in life insurance. Growth in life insurance premiums is also largely dependent on the commercialization of a slice of our Trendvalor product.
“As we started from a lower level in German-speaking Switzerland,
this made it possible to achieve higher growth rates. ”
Among the various branches of activity, the “health” segment is showing strong growth (+ 6.3%) after two months. How to explain it?
There has been a lot of restructuring of portfolios in this area in Switzerland. This also explains our growth in health loss insurance. There have been two portfolio sales made by companies that have since gone out of business in this area. Given that there was a reduction in the supply of certain providers in this area, we were able to obtain more contract renewals in this sector of activity at the start of the year.
There are currently many scenarios about changing mobility habits. Rather than owning a vehicle, we can already rent vehicles in the form of subscriptions or resort to car sharing or “car sharing”. What will be the impact of these changes in the field of motor vehicle insurance?
We are attentive to this development, but rather from a long-term perspective. For now, these changes in habit are still just a drop in the sky in the universe. There is, of course, a tendency to increase “all inclusive” type offers which include vehicle rental, leasing or other forms of access to mobility. Now, for the consumer, such offers are often less transparent than when the user subscribes to each service separately. But, on the other hand, there may also be synergy effects. All in all, we expect a fairly neutral impact on our motor vehicle activities over the next few years.
“The office share represents only 5% of the allocation
of the total assets of Vaudoise Assurances. ”
Overall, I also feel that renting is not necessarily going to be cheaper than buying. Indeed, by purchasing a package including a set of services, we have less transparency on the prices of these. It’s a bit like renting a vehicle on vacation, you don’t always know what the exact costs are for accident insurance, assistance, etc.
In the medium term, will this not nevertheless reduce the volume of premiums collected by insurers in motor vehicles?
It depends on the time horizon that we take into consideration. In a horizon of 3 to 5 years, this will not have a great impact. If you look at 10, 15 or 20, then yes, a lot will change. For example, what impact will autonomous vehicles have on reducing the number of accidents? What will be the driver’s responsibility with this type of driving? Real reflections will have to be made in the medium term around these questions.
For all of your activities, Vaudoise Assurances once again saw its premiums grow faster in German-speaking Switzerland (+ 3.4% to 335 million francs) than in French-speaking Switzerland (+ 0.9% to 559 million francs). ) in 2020. Is this because of a base effect or because of a different mix of services in German-speaking Switzerland?
Our range of services is relatively similar in German-speaking Switzerland and in French-speaking Switzerland. As we started from a lower level in German-speaking Switzerland, this made it possible to achieve higher growth rates. Growth also depends a lot on the work of our agencies. From a regional point of view, overall we have stronger growth in regions outside the big cities. It was strong in cantons like Lucerne and Bern for example. We are now making good progress in Zurich as well.
Regarding the structure of the group’s investments, bonds and other fixed income securities still represent a significant portion of your capital investments, ie 44%. If interest rates continue to rise as they do in the United States, under the effect of expectations of rising inflation, what will be the impact on your bond investment portfolio?
Even though the rise in interest rates has been significant in the United States since last summer, I remain cautious about such scenarios. In 2008 and 2009, some were already talking about a future return of hyper-inflation! We prefer scenario management by adapting to each change in the situation. Of course, in the short term, a rapid rise in inflation would cause bonds already issued to lose value. In the longer term, it should not be forgotten that an increase in rates is generally positive for the life insurance sector.
“We have already reduced the number of kilos of CO by 25%2 issued
per square meter and we expect a reduction of at least 30% by 2025. ”
Real estate represents 21% of your capital investments. Of this share, commercial real estate represents a share of 30%, of which 23% is for offices alone. What are you waiting for regarding the evolution of office space prices?
The share of offices represents only 5% of the total asset allocation of Vaudoise Assurances. So even if the demand for office space were to weaken, the impact would remain fairly limited for our overall portfolio. In addition, inside the offices, we must also count the premises that house our own branches. For all these reasons, we do not fear excessively high vacancy rates for our office space. As to what the impact of the adoption of telework will be on the demand for offices in the long term, it is difficult to predict. While many people have found telecommuting as a solution for two or three months, it is not sure that it will work for all people and businesses in the long run.
What about rent reductions for restaurants and businesses?
La Vaudoise has followed here the recommendations and supports of the various cantons and in particular those of the canton of Vaud concerning rent reductions. We have granted rent reductions and deferrals to our commercial tenants, particularly small and medium-sized businesses.
La Vaudoise will publish a sustainability report from 2022. In terms of investment policy, you point out that 80% of your financial investments are made in accordance with the principles of responsible investment (PRI), as defined by the United Nations. If it is possible to quickly adapt a portfolio of stocks or bonds according to ESG criteria, how do you implement these principles in real estate?
They are indeed very different processes. With stocks or bonds, you can sell securities that do not meet the defined criteria and replace them with others. In real estate, taking sustainability criteria into account is a much longer process. In 2014, we started implementing energy renovation programs for the buildings we own. Since then, we have already reduced the number of kilos of CO by 25%2 emitted per square meter and we expect a reduction of at least 30% by 2025. Reducing the energy consumption of buildings is really a long-term job. In addition, our real estate will very soon integrate the Swiss Sustainable Real Estate Index (SSREI) which allows transparency and comparability of real estate portfolios with a view to sustainability.
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