Mandatum Oyj

Good morning and welcome to Mandatum's Q1 audio cast. My name is Lotta Borström from Mandatum's Investor Relations, and I am pleased to be joined today by our CEO Petri Niemisvirta and our CFO Matti Ahokas. During the audio cast, Petri Niemisvirta and Matti Ahokas will present the highlights and key developments of Mandatum's first quarter of 2025, 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 first quarter. Mandatum's first quarter went well, despite turbulent market conditions. We achieved a 23% year-over-year increase in fee result, reaching 18.8 million euros. The increase was mainly driven by improved cost efficiency and higher client assets under management that also saw a significant rise up 12% year over year to 14 billion euros. The improved cost efficiency was also highlighted by a 10 percentage point reduction in the cost income ratio, now at 55%, which I'm very happy about. These metrics reflect our strategic focus on profitability and operational efficiency, setting a strong foundation for future growth. Net flow increased to 256 million euros during the quarter, as an indication of strong client activity despite the market uncertainty. The net finance result increased by 73%, totaling 51.8 million euros. The return on investment was 0.8% and the rise in the discount rate reduced the finance expenses on insurance contract liabilities. Also, the net finance result includes a positive fair value change of Saxo Bank shares totaling 17 million euros. Profit before taxes increased by 32% year over year to 62 million euros, whereas profit before taxes from the capital life business, our strategy growth area, including institutional wealth management, corporate client and retail client businesses, increased by 24% to 20 million euros. Earnings per share stood at 0.10 euros, and organic capital generation per share was 0.17 euros. The solvency ratio stood at 207% as of March 31st, compared to 210% at the end of 2024. The level is well above our mid-term target, and Mandatum continues to be a very well capitalized company. In terms of assets under management, the steady growth in our institutional wealth management business continues. The 18% year-over-year growth is a significant achievement driven by positive net flows and favourable market conditions. March was, however, a challenging month in the investment markets, and the total assets under management of 14 billion euros falls flat year-to-date due to the negative market movements of 177 million euros even if the net flow development was positive. Net flow from the corporate clients increased significantly during the quarter. The growth came mainly from personal funds. Four new personal funds were established during the quarter. The strong corporate net flow shows also the diversification of our capitalized business, highlighting the importance of corporate business to our growth story. Nevertheless, The market conditions were demanding for all the capital market players, and net flow from the institutional and wealth management business grew less than last year. We have been able to deliver a very good net flow and investment performance during recent years despite tough competition. The first quarter net flow of 256 million euros was well above our 5% target of client assets under management, and we continue to increase market share in our key markets. Spring has, however, been extremely volatile in the global financial markets. This rocky road has obviously had an impact on us as well, but we actively continue to support our customers in all market situations and remind them that unusual markets tend to create unusual investment opportunities. The fee income was up 10% year over year, supported by an increase in asset 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 continue to have good discipline in our pricing. Also, it goes without saying that the product mix shifting towards institutions will impact the fee income margin going forward. When it comes to operational efficiency, I'm really pleased with our improving cost income ratio, now at 55%. As we have stated before, our business is scalable, and we can now clearly see that. The steady growth in our institutional wealth management business continued in the first quarter. In terms of assets and management, the largest growth came once again from international institutional clients, 55%. Demand for our credit products, especially in Sweden, continue to be very strong. This is a strong sign of the demand for our investment products in regions where we still have a significant market potential. The Mandatum Nordic High Yield Fund was once again awarded the LIBOR Fund Award as the best high yield fund in the entire Europe over the three-year and five-year review periods. Our award-winning credit products, such as the Nordic High Yield Fund, are good examples of leading industry expertise. The largest increase in assets and management was once again in 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. In April, we announced that Janne Sarvikivi was appointed as a head of Mandatum's institutional wealth management business area. He will start in his new role on 12th of May 2025. I'm very happy that our management team will be joined by such deep management experience in the Nordic capital markets. And now let's move over to Matti and the figures.

Thank you, Petri. Let's then look closer at the first quarter result components. As Petri mentioned, our fee result was up 23 percent year on year, with assets under management up 12 percent. Year to date, our AUM was actually roughly unchanged, mainly due to negative translation effect from the weaker U.S. dollar, as roughly 20 percent of 25 percent of our client AUM is denominated in U.S. dollars. And of course, the weaker US dollar had a small negative P&L impact on the Q1 fee result itself. Client margins remained stable in the first quarter when looking at it on a 12-month rolling basis. Our income was up and costs were down year on year. This means that our cost-income ratio of the client AUM continued to decrease according to plan and was 55%. The net finance result came in at 52 million euros despite the weak investment markets in March. Q1 turned out to be an only slightly softer finance result quarter at the end. Note that the Q1 net finance result also includes a net 16 million euro revaluation of our stake in Saxo Bank. Note that we expect to book some more transaction costs related to Saxo once the transaction is finalized. probably at the end of the year. Our result related to risk policies was unchanged compared to a year ago. Note that Q1 is typically seasonally a higher cost quarter in the risk insurance business, mainly due to the booking of reinsurance costs. The return on equity stood at 12.4% in the quarter. Note that the underlying level would have been some three percentage points higher when adjusting for the proposed 2024 dividend payout in two weeks. If we then look closer at the group net finance result, it was up to 52 million euros, and in the with-profit segment, it was up to 37 million euros. The with-profit investment return in the quarter at 0.8 percent was in line with last year, but slightly below the normalized run rate, as March investment returns were negative. Our with-profit fixed income assets continue to generate stable returns with a mark-to-market yield of 4.7 percent, and this was unchanged from Q4. In the first quarter, equities contributed positively. We continued to decrease our equity exposure as planned and were net sellers of equities during the quarter. The listed equity exposure was down to 160 million euros and is now 5 percent of total assets, roughly 7 percent in the previous quarter. Private equity and private credit had a fairly normal quarter with a roughly 2% return during the quarter, but we had a €2 million negative value change in our own real estate portfolio during the quarter. As long-term interest rates increased in the quarter, the discount rate change had a €25 million positive P&L impact. And as communicated previously, The quarterly unwinding costs is now down to 13 million euros compared to 18 million euros a year ago. Worth noting is as well that the with profit portfolio interest rate hedging ratio increased and was 88% at the end of Q1. This was a result of the increase in the overall fixed income exposure in line with our strategy and also means that the net finance result should become less volatile and more fee type. At the end of Q1, a 100 basis point decrease in the market rates would have translated to a 13 million euro net decrease in the net finance result. Despite the turbulent markets, we continue to consistently generate capital. Organic capital generation was up to 88 million euros in Q1. This measure, as you know, takes into account, for example, the own funds generation from income booked in the CSM, as well as potential capital release from a lower solvency capital requirement. The main positive driver of the OCG in Q1 was the higher capital release in the with-profit business driven by asset de-risking in listed equities, as mentioned, and also a lower private credit exposure. As pointed out before, we think the OCG is a more relevant measure than the reported IFR as a result when assessing our performance and capital generation of the period. Our own funds generation increased the solvency margin by 10 percentage points in the quarter. Looking at the solvency, our group solvency margin decreased to 207 percent following the dividend deduction, but remains well above the 170-200 percent target range. In addition, the announced sales of the Saxo Bank share when executed is expected to increase the solvency margin by around 35 percentage points. And back to Julotta.