Mandatum Oyj

Good morning and a warm welcome to Mandatum's Q4 result audio cast. My name is Lotta Burström. I am head of investor relations here at Mandatum and I am pleased to be joined today by our CEO Petri Niemisvirta and our CFO Matti Ahokas. During this audio cast, Petri Niemi-Svirta and Matti Ahokas will initially walk you through the highlights and key developments on Magnatum's last quarter and full year 2024, after which we'll take the Q&A where you have the possibility to dial in for any questions you might have. Also, please don't hesitate to contact us at Investor Relations should you have any further questions. With these remarks, I will hand over to Petri, please go ahead.

Thank you Lotta, and now let's move on to the figures. All in all, I'm very pleased with Mandattum's performance during the past year. In the fourth quarter, we experienced a steady 39% increase in the fee result, reaching 18.6 million euros. Client assets under management rose by 5% quarter over quarter to 14 billion euros, driven by strong net flows and positive asset returns across all client segments. Net flow increased to 392 million euros, reflecting an 86% year-over-year increase. It is worth noting that the level is unusually high due to some larger client tickets, but our net flow development in general, considering the current market situation, has been very good throughout the year. Our net finance result decreased by 5%, totaling 23.7 million euros, with a quarterly investment return of 0.3%, impacted by weaker financial market returns. Profit before taxes fell by 24% year over year to 35.1 million euros, due to the negative impact of 6 million euros from updated long-term actuarial assumptions. Earnings per share EBS stood at 0.07 euros and organic capital generation per share was 0.10 euros. For the full year of 2024, our fee result increased by 27% to 67 million euros. The main reasons for the positive development were growth in client assets under management and improved cost efficiency, which I'm very happy about. As we have stated before, Our business is scalable, and we can now clearly see that in the figures. Client assets under management grew by 17% year-over-year to 14 billion euros. Net flow reached 983 million euros, up 30% year-over-year, absenting 8% of client assets under management, which is well above our target of 5%. The net finance result declined by 9% to 136 million euros, with a year-to-date investment return of 4.3%. Profit before taxes for the year was 203 million euros, down 4% year over year. Organic capital generation per share at 0.44 euros was clearly above the EPS at 0.33 euros. The solvency too raises to that 210% as of December 31st, 2024, compared to 221% at the end of 2023. The level is well above our midterm target and Mandatum continues to be a very well capitalized company. Our aim is to be an attractive dividend payer to our approximately 213,000 shareholders. As our dividend capacity developed better than we expected last year, Mandatum's board of directors has decided to propose to the annual general meeting an ordinary dividend of 0.33 euros plus an extra dividend of 0.33 euros, totaling 0.66 euros per share. The core of our strategy is growth in our institutional wealth management business. Accordingly, the highest growth in assets under management as well as in the net flow came once again from institutional and private wealth customers. However, also the corporate and retail businesses contributed with double digit growth to the hefty increase of 17% year on year in assets under management. Roughly half of the increase came from net flows and the other half from positive market movements. In the retail business area, 2024 was a clear game changer. The cooperation with Danske Bank took off and both investment and loan insurance sales continued to outperform the previous year, which can be seen in the improving net flow development. It is worth pointing out that the following year's pension payments are booked in the last quarter of the year, now decreasing the net flow. The full-year net flow development in corporate business was fairly stable, and the net flow increased mainly in personal funds. 50 new personal funds were established during the year. We still have a very dominant market position in both the unit-linked pension business and personal funds, and our continuous efforts ensure that our market share will remain high. Demand for risk-life insurance products continued to grow, and the premiums increased roughly by 3% last year. The largest increase, 14%, in net flow was once again in institutional wealth management, amounting to 912 million euros. I'm very happy with that outcome. In general, we have been able to deliver a good performance in both net flow and asset management during the recent years. One of our most important financial targets is the annual net flow proportion to assets under management, as it shows how much new money we succeed to get in. Excellent sales activity contributed to the inflow and the client outflow has remained low, partly due to the consistently high level of customer satisfaction. Also, Mandatum's assets under management have grown steadily during recent years, reaching new levels almost every quarter. The fee income was up by 14%, supported by increase in assets under management and stable fee margin levels. Even though most of our sales were related to credit and fixed income types of products, our fee income margin remained at the same level at 1.2%. This means that we have good discipline in our pricing during the quarter and the whole year, which is also one of our financial targets. When it comes to operational efficiency, I'm really pleased with our improving cost income ratio. As we have stated before, our business is scalable and we can now clearly see that in early yearly development. In terms of assets and management, the largest growth came from international institutional clients, 67%. This is a sign of huge market potential, but also the appeal of our investment products abroad. Our award-winning credit products, such as the Nordic High Yield Fund, are good examples of leading industry expertise. Also, we succeeded in acquiring the first clients outside the Nordics in Central Europe. Majority of net flow went to the credit and allocation products, followed closely by external products. The returns on our credit and fixed income products are still at attractive levels, and the good performance gave additional support to our sales. I would also like to remind you that Mandatum's real estate exposure is very low. Mandatum was ranked as top institutional asset manager within large companies' SFR research survey in November. Mandatum reserved top scores in its category for long-term investment returns, market insights and the clarity of its investment process. In addition to customer service, we were praised for our product range and reporting services. During the past five years, Manatom has succeeded in clipping to the absolute top of its industry, which is a great achievement. Strong investment expertise and proven track record have contributed to the success. Not only do institutions seem content with Mandatum's performance, but customer satisfaction is high even among the private customers. The NPS score measuring customer satisfaction and loyalty was 83.2 in private wealth management and 76.4 in all customer segments. Mandatum continues to perform clearly above industry average. Mandatum was included to OMX Helsinki 25 ESG responsible index last week. The fulfillment of the index criteria is based on the Sustainability X rating, among others. We are positioned among the best in our field in the Sustainability X ESG risk rating, updated in December 2024, ranking in the low ESG risk category 13.6. Among our peers, the result was in the top 2%. The results have been good also in the sustainability assessments. We have recently put extra emphasis on our sustainability efforts, which are now reflected in our ESG ratings. And now over to you, Matti.

Thank you, Petri. And now let's look closer at the Q4 result components. Our fee result, as Petri mentioned, was up 39% year on year, with AUM up by 17%. Client margins remained stable in the fourth quarter and throughout the year. We've also continued to focus on the expense side, and this contributed positively in the fourth quarter. If we zoom in to the fee result a bit closer, the fees from investment and asset management services were up by around 100%, At the same time, the other part of the fee result or the insurance service result from the CSM release was slightly down due to one of a lower CSM release due to updated actuarial assumptions during the quarter. Our net finance result came in at 24 million euros, which is below the historical average. Q4 was actually a pretty difficult investment quarter with a lower than normal investment return. We had negative returns in both our equity and real estate portfolios. In addition, we had a €5 million negative value change impact from our holding in Enento this quarter. On a positive note, we actually received a €16 million dividend from Saxo Bank in December. Our result related to risk policies was lower than a year ago, and this line was also impacted by updated long-term actuarial assumptions. In addition, there were no CSM releases related to the portfolio transfer to IFPNC like we saw in the previous quarter. Then the group net finance result decreased, as I mentioned, to 24 million euros, and in the with-profit segment, it was down to 10 million euros. The with-profit investment return in the quarter was 0.3 percent, clearly lower than last year. However, if you look at the with profit fixed income assets, they continue to generate good returns with a mark to market yield of 4.7%. And as you know, this is largely unchanged compared to the previous quarters. Our equities contributed negatively this quarter, 11 million euros. But again, I think it's really important to stress that our own equity portfolio is not an index portfolio, rather reflecting the legacy of Finnish small caps. In addition, we also had a €6 million negative value change in our real estate portfolio in the fourth quarter. But overall, as Petri also mentioned, our real estate exposure is small, only around 3% of total investment assets. Private equity and private credit also had a bit of a softer quarter in the fourth quarter. As long-term rates increased towards the end of the year, the discount rate had a 15 million euro positive P&L impact. The quarterly unwinding cost was unchanged at 18 million euros, but as we mentioned before, the unwinding cost will drop to, we expect, around 12 million euros per quarter in 2025. Although market interest rates fell in the fourth quarter, especially in the short end of the yield curve, this had actually a limited impact on our result, as especially our hedging strategies continue to work well. Also worth remembering is that our future profit generation is a function of the return we can achieve above the discount rate and not the actual level of interest rate. And the spread has actually remained largely unchanged. We continue to consistently generate capital. Organic capital generation was 50 million euros in Q4 and 191 million euros for the full year. In addition to the reported profits, this measure takes into account, for example, the own funds generation from income booked in the CSM, as well as potential capital release from lower solvency capital requirement. As we pointed out several times before, we think the OCG is a more relevant measure than the reported profits when assessing our performance, especially our dividend generation. Our own funds generation increased the solvency margin by 24 percentage points in the full year of 2024. And if we look at 23 and 24 combined, we've generated a total of around 500 million euros of capital or almost one euro per share. And this is also reflected in the board's dividend proposal. Our group solvency margin decreased following the larger dividend deduction, but remains well above the 170-200% target range. And as you can see, our solvency margin is robust in different stress scenarios as well. And now I'll leave it over to Petri for some concluding remarks.