Mandatum Oyj

Good afternoon and welcome to Mandatum's Q1 audio cast. My name is Lotta Burström. I am in charge of investor relations at Mandatum and I am pleased to be joined by our CEO Petri Niemisvirta, our new CFO Matti Ahokas, as well as the CEO for Mandatum Life Insurance Company, also the former CFO Jukka Kurki. During this audio cast, Petri Niemisvirta and Matti Ahokas will initially walk you through the highlights and key developments of today's report, after which we'll take the Q&A, where you have the possibility to dial in for any questions. Also, please don't hesitate to contact us at Investor Relations should you have any further questions. With these remarks, I hand over to you, Petri. Please go ahead.

Thank you, Lotta, and welcome everyone to Mandatum's Q1 result presentation. Let me start with our Q1 numbers, after which I will dive deeper into our business. Matti will continue more closely with the result in his presentation. Mandatum's first quarter was good in many ways. The profit before taxes increased by almost 50%, mostly due to increase in net finance result. Also, the fee result increased by 9%, mainly as a result of the increase in client asset assets and indicating steady performance in our capital-like business areas, such as institutional wealth management. The net flow during the quarter amounted to 246 million euros and contributed to the client's assets under management that increased by 16% to 12.5 billion euros. All this being as events, I'm very pleased with. Mandatum solvency position continued to be solid. The solvency ratio was 216.5%, adjusted for dividend accrual. Also, we succeeded in the organic capital generation during the quarter. Client assets under management increased by 5% during the first quarter, reaching 12.5 billion euros. The growth rates in all segments were even and showed steady growth, even if the client and asset mix varied a lot between the segments. One of our most important financial targets is the annual net flow. In medium term, Mandatum aims for a net flow of 5% of the client assets under management. The net flow of almost 250 million euros during the quarter equals annualized more than 8% of our assets under management, which is well above the target. I'm also content with the fact that all our segments reach positive net flow during the first quarter, lead by our fastest growing area, institutional and wealth management, with a 13.2% growth. A really good sales activity contributed to the strong inflow and the client outflow remained low, partly due to the consistently high level of customer satisfaction. The positive market movements contribution to the increase of in client assets under management was 369 million euros. All in all, we haven't seen any softening in the market and product mix, and our product offerings are working very well in the current market environment. The growth engine in our strategy is the institutional wealth management business. The highest growth in assets under management, as well as in the net flow, came from the institutional wealth management business. Within that business area, all client segments grew. The biggest growth in assets under management came from the sub-segment international institutions. The modest growth in the sub-segment private wealth management is explained by some large accounts being transferred to the sub-segment ultra-high net worth. Then over to different product areas. Mandatum's core competence is within credit products, where the growth was strongest, 11%. The mark-to-market yields in in our credit and fixed income products were still at a high level, and the good performance gave additional support to our sales. I'm also happy that the positive trend within our allocation products continued with strong growth numbers during the Q1. The fee income was up 10 percent supported by increase in assets under management and stable fee margin levels. Despite the fact that most of our sales was related to credit and fixed income type of products, our fee income margin remained at the same level, meaning that we have had a good discipline in our pricing, which is also one of our financial targets. And now over to you, Matti.

Thank you very much, Petri. Good afternoon. Let me touch a bit on the financial highlights of the quarter. Our profit before tax has increased by 47% to 47 million euros, and earnings per share increased by 60% to 8 euro cents. Our cost-income ratio improved slightly to 65%, and our return on equity to 9.3% in the quarter. So let's look at some of the result components. Firstly, our fee result. increased by 9% to 15 million euros compared to the first quarter of 2023. The main reason for this was a 16% year-on-year growth in asset center management and a clearly positive net flow, and Petri already explained some of the key drivers behind this. It's worth noting that the comparison figure for the fee resulting in Q123 included a one-off gain actually a CSM loss component recovery of 1.2 million euros. And adjusting for this, the fee result would have increased by 18%, so more in line with the assets under management growth. Actually, our asset management fee result increased by 22% year on year. Our net finance result more than doubled to 30 million euros compared to the first quarter of 2013. I'll come back to the details of this a bit later. And then the result related to risk policies was slightly down to a lower CSM release, but this is a small item and can vary between quarters. So going over to the net finance result. As you know, this includes mainly the net investment results for the with-profit business. In the first quarter, the net finance results stood at 29.9 million euros. This translates to an investment return of 0.9% compared to 1.8% in the first quarter of 23. Note that the first quarter last year was affected by the very positive equity market returns, but also very good fixed income returns. Our fixed income asset return was 1.1% in the quarter, This is actually slightly below the expected return of the portfolio. And the main reasons for this was mainly the higher share of cash in the portfolio, as well as some negative mark-to-market changes from higher rates. Our listed equities returned 2.6% in the quarter, and other investments 0.2% to 0.5%. I think it's worth noting that we have continued to decrease the equity weight in the with-profit portfolio also during this quarter, and this has also had an impact on the returns. In addition, changes in the value of our stake in Enento had a €4 million negative impact in the quarter. This was actually positive in the fourth quarter. And finally also our private equity investment returns were very low in the quarter. If we then turn to the cost of liabilities, they decreased to 6 million euros compared to 58 million euros in the comparison quarter. The main reason for this was the around 10 basis point higher discount rate that decreased finance costs of insurance liabilities by a total of 13 million euros. During the same period last year, the decreased discount rate had actually a negative effect of 41 million euros on the finance costs. Unwinding costs were 19 million, so roughly at the same level as the previous year. If we then look at our solvency ratio, our solvency to ratio was 221% of minimum in the first quarter, and at 216% when you adjust for the dividend accrual, which is the new thing we show on this slide. Note that the regulatory symmetrical adjustment for equities was increased by four percentage points, so the SCR for listed equities increased to 44% in Q1. And this actually had a negative impact of five percentage points on the solvency ratio. So, adjusted for that, it was unchanged quarter on quarter. All in all, the solvency ratio remains comfortably above the 170 to 200 percent long-term target range. Our organic capital generation, which we use as a KPI, was 69 million during the quarter. supported by a continued reduction in the SCR and a capital release in the With Profit book. Back to you, Petri, for some closing remarks.