Mandatum Oyj

Good morning and welcome to Mandantum's Q3 Audiocast. I am Lotta Burström from Investor Relations and it is my pleasure to introduce you our CEO Petri Niemi-Svirta and our CFO Matti Ahokas who will guide you through today's presentation. During this audio cast, we will begin by presenting the highlights and key developments of Mandantum's third quarter of 2025. Following this, we will proceed to the Q&A session, where you will have the opportunity to dial in with any questions you may have. As a new feature, participants can also submit questions through the chat, which we will review after the dial-in Q&A. With these remarks, I will hand over to Petri, please go ahead.

Thank you Lotta. And now let me give you an overview of Mandatum's third quarter of 2025. In Q3, we saw another period of solid growth, which reflects our strong momentum. Our profit before taxes increased by 23% compared to the same time last year. The good earnings growth was supported by the fee result, which increased by 20% from the last year, in line with our guidance. On top of that, our net finance result increased significantly from last year due to the favorable interest rate movements. The capital light result before taxes, including institutional wealth management, corporate and retail businesses, was roughly at last year's level. However, the comparison period included a profit of 3.3 million euros related to portfolio transfer to IF in 2024. Since becoming a listed company, we have made operational efficiency a top priority. One clear sign of this is our cost-income ratio, which has improved to 50%, a 13 percentage point improvement from a year ago. This shows that our scalable business model is working. We are able to grow our income without a large increase in costs, which put us in a good position for continued growth. Our financial strength remains solid. In the third quarter, our solvency stayed at a high level and we have generated €0.48 per share in organic capital since the start of the year. It's worth noting that this organic capital generation is a more reliable indicator of our ability to pay dividends than just looking at earnings per share. Looking at the client activity, we achieved a net flow of 163 million euros, which is especially good given the usual slowdown during the summer holidays. Client assets under management reached a new record of 14.9 billion euros. This was driven by both strong net inflows and a favorable investment market, where the overall market development was much steadier than earlier in the year. Optimism about earnings growth helped support global stock markets and the bond market was stable. We also saw good sales activity across all our business areas. Our retail business developed as expected, helped by the successful launch of our partnership with Pohjan Tahti Insurance Company, selling our personal risk insurances. Loan insurance sales to the Danske Bank channel were active and the average coverage amount of granted loan insurances continued to increase. Turning to our corporate client business, sales of pension insurance and personal funds remained strong. Even though the Finnish economy has faced challenges, our clients have generally performed well in their businesses. Net flow from the corporate clients increased significantly year-to-date, the growth coming mainly from personal funds. The strong corporate net flow shows also the diversification of our capital-light business, highlighting the importance of corporate business to our growth story. Net flow from the institutional wealth management business year-to-date was lower than last year, the growth still being clearly above the historical average of 5% of assets under management. Also, institutional wealth management net flow in the quarter was 51% higher than last year. In our institutional wealth management segment, we focus on growing our international presence and private wealth management in line with our strategy. Our efforts are paying off. Sales in Sweden were particularly strong, supporting international institutional sales and assets from international clients grew by 45% year on year. We also made process in Central Europe with our first team members starting at the new Luxembourg sales office, bringing us closer to the European customer base. Private wealth management asset increased by 17%, mainly thanks to the clients using full mandate solutions. The largest increase in asset management was once again in credit and allocation products. Product development continues to be a cornerstone in our business. In May, we introduced the European High Yield Total Return Fund, which focuses on European high yield bonds and has been well received. It has been now already attracted over 100 million euros in investments. Our Mandat to Manage Futures Fund, which uses systematic investment strategies, also attracted significant new investment this quarter. Operational efficiency continued to improve significantly, with the cost-to-income ratio dropping by 13% to 50% over the trailing 12 months. The improved operational leverage demonstrates that the determined focus on cost efficiency is paying off, supporting sustainable profitability. Having said that, we have not sacrificed our investments to the future. During the quarter, we recruited new salespeople in order to speed up our growth in the institutional and wealth management and corporate segments. While the fee margin decreased slightly to 1.13% due to the growth in lower-margin institutional wealth management business, standalone product margins remained stable. And now let's move over to Matti and the figures.

Thank you, Petri. Let's now take a closer look at the third quarter result components. As mentioned, our fee result was up 20% year-on-year with assets under management up by 12%. And if we compare to Q2, our AUM was up by some 3% or around 500 million euros to 14.9 billion, just shy of the 15 billion mark. The client fee margins were largely unchanged in the quarter when looking on a 12-month rolling basis. We saw similar trends as before, a gradual mixed change from the growing international institutional business and a lower share of alternative assets compared to 2024. And as Petri mentioned, the product-specific margins were largely unchanged during the quarter. The cost to income ratio of our client AUM continued to decrease according to plan and was 50%. The main driver for this was a 4% higher average AUM versus Q2, which supported income and then a smaller impact from seasonally lower costs. Our net finance result came in at 39 million euros. Financial market returns were pretty close to normal during the quarter. In addition, we had some tailwind from the long IFRS discounting rates during the quarter. And I'll talk a bit more about this later on. Result related to risk policies in Q3 was down compared to 2024 and you all know that the comparison figure included around 3 million euros of one-off income from the portfolio transfer to IF. Also, the cost CSM release was a bit lower in the quarter due to timing effects, but the new business CSM continued to grow. Capital generation is a key success factor for any financial company and we still continue to consistently generate capital. Organic capital generation was 70 million euros in the third quarter. This translates to 0.14 euros per share. The main positive driver here was the increase in own funds. And one of our financial targets, return on equity, it stood at 13.6% in the quarter. One of our financial targets is to grow the capital light profit before taxes by more than 10% annually by 2028 compared to 2024. And if we look at the first nine months of 2025, the reported profit before taxes was 65 million euros or 3% below the level of 2024. And as you remember, in the first six months of the year, the result was impacted by the turbulent financial markets, FX headwinds from the weaker US dollar and lower sales altogether. But it's encouraging to see that Q3 saw a step change in quarterly profitability. All segments increased their profits sequentially. The quarter level of 25 million euros suggests a run rate in line with our financial targets. Also worth noting here again is that the comparison figure in 24 included a €11 one-off gain from the portfolio transfer to IF. Adjusted for this, the profit before tax growth in Capital Light was 16% year-on-year. Then the group net finance result up to €39 million in Q3. The with-profit investment return in the quarter at 0.9% was below last year and slightly below the expected run rate. Our fixed income portfolio had a negative impact, negative mark-to-market impact from higher rates, but this was also partly offset by positive spread movements in the quarter. The mark-to-market yield was down slightly, ever so slightly, you could say, to 4.2% due to tightening spreads, and we also did some portfolio adjustments here. But it's important to stress that this is still well above the cost of liabilities. Equities contribute positively this quarter, but as you know, our exposure here is very low. The listed equity exposure was unchanged at 4% of total during the quarter. On the alternative side, private credit had a fairly normal quarterly return again, but we had a small negative value change in our own real estate portfolio during the quarter. Private equity returns were positive, but slightly below the normal rate in the quarter. If you then look at the long swap rates, they were up by 5 to 10 basis points in the quarter. And the IFRS rates that we use for discounting in the long end of the yield curve increased in the quarter by around 15 basis points, lowering the cost of liabilities by 12 million euros. The illiquidity premium contributed positively to the IFRS discount rates by around eight basis points. And as you probably remember, in Q2, the impact was negative in the second quarter. With profit portfolio, interest rate hedging ratio increased further and was unusually high, one could say at 109 at the end of Q3. This was mainly due to technical factors as the fixed income exposure increased and mainly in the 20 plus year bucket. And as we show in our presentation, although the average hedging ratio is high, there are big differences in the different maturities. And in the third quarter, the hedging ratio was also impacted by tactical bond investments. And finally, worth noting again that the IFRS discount rate mark-to-mark changes have no impact on the actual contract cash flows, nor our dividend paying capacity. We continue to consistently generate capital. Organic capital generation, as Petri mentioned, was 70 million euros in Q3, and again, significantly higher than the reported IFRS result. In the first nine months of 25, we've generated capital organically by 242 million net of taxes, or 48 cents per share. And looking at 2024, for the first nine months, the figure was 34 euro cents. As pointed out before, we think the OCG is a more relevant measure than the reported IFRS result when assessing our performance and capital generation in particular. Own funds generation increased the solvency margin by nine percentage points in the quarter. The group solvency margin increased by four percentage points in the quarter compared to Q2, but decreased by 16 percentage points to 206 when taking into account the larger dividend deduction compared to last year. And maybe worth noting still is that the announced sale of the Saxo Bank shares is expected to increase the solvency margin quite significantly around 35 percentage points once the transaction is finalized. And now back to you, Lotta.

Thank you, Matti. And now let's move on to the Q&A. Please dial in or submit your questions through the chat.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from 358415289122. Please go ahead.

Hi, it's Antti from OP.

Two questions from my side. Firstly, regarding risk policies, you have guided us that 10% of CSM is a pretty good estimate results from risk policies but now it has been four quarters in a row quite significantly below that level so so should we do any conclusion about this and do you still believe that that you're going to reach the 10 percent level this year meaning about 13.5 million euros

Yeah. Hi, Antti. It's Matti here. A valid question, and your observation is exactly correct. The CSM release has been lower than one should expect. However, I think it's very important to note here that we've actually been generating the CSM, so it's not a question that we won't be kind of having the kind of potential release, it just has been slower due to the modeling we use. We are looking into this so that it would not kind of be pushing the CSM too much forward and it would be a more stable release. And you should still expect the 13 to 14 million euros as the annual run rate. Of course, in 2025, it's slower, but from the following quarters, I think it should be should be roughly the same. But a valid point, and we're definitely looking into that. But, of course, the main thing is that the CSM is still there. The release has just been slower.

Okay, thanks. And then another question regarding your very strong fee result. It stated in the report that, yes, costs are seasonally lower in Q3, but were there anything exceptional, or do you think that the cost base was lower? normal for Q3, so to say.

Yeah, I think the cost base was pretty normal for Q3. But the main reason for the improvement in the cost income ratio now in the third quarter was actually the fact that we've been able to grow our AUM. And by AUM, we talk about the average AUM, because in the beginning of the year, there was a lot of volatility in the market. So even though the end of period AUM grew the average AUM growth was significantly lower. So I would actually say that the bigger impact in Q3 was growth in the income side. Costs were maybe a million lower than normal. So that was probably the impact in the quarter. So a combination of both, but definitely more impact from the income side because of higher average AUM.

Okay, thanks. This is all from my side.

The next question comes from Emil Imonen from DNB Carnegie. Please go ahead.

Hi, Petri and Matti.

Thanks for taking my questions. Maybe to continue on the cost-income ratio, so if I understood correctly, it's a lot now scale benefits that you're seeing, but has there been any cost-cutting that you're doing that also is showing an effect because I think the jump Q on Q in the cost income ratio was quite big.

Yeah. Hi Emil. As I mentioned previously in this quarter, the impact from higher income was more significant, but as we pointed out several times that operational efficiency is one of our key strategic priorities. And this means then obviously that it has had an impact. But now in the third quarter isolated, it was more driven by income, which we are very happy about altogether.

That is good to hear. Maybe then touching on the net flow, I saw it was negative in both corporate and retail. Could you maybe elaborate on how that should be analyzed?

Yes, thank you, Emil Petri here. So, yes, it's let's say so if I first answer to the retail segment, the retail segment has been quite a much flat or a little bit negative over the years already. quite long period of time. So we have very old cooperation with Danske Bank and a large portfolio which was mainly sold before 2010 when the Sampo Bank was still part of the Sampo Group. And since then, the sale has been, let's say, more modest than especially the savings side, not especially in loan insurance side. So there's nothing special on that compared to other years before and other quarters. So of course, we try to enhance and put some speed to Danske Bank sales, but it's it's quite difficult to really increase a lot that sales on that side. So nothing special on that. About corporate side, there was some seasonal withdrawals from personal funds. So it varies a little bit from quarter to quarter. So when the companies are paying variable compensation payments in spring. So then we will see a lot of inflow in personal funds, which is the largest part of the inflow nowadays. And during the summer time, that's the time when the personal fund Numbers are ready and that's the time when the people have a chance to withdraw their money. So some employees wanted to have their money and use those. So that's a little bit seasonal issues and nothing special in business and business-wise.

Okay, that is clear. That's all from me. Thank you. Thank you.

The next question comes from Jocko Tervenen from SEB. Please go ahead.

Good morning and thanks for having my questions.

Regarding the wheat profit, asset allocation and the continuing de-risking process there. Could you remind us how fast you should be able to rotate the capital from the illiquid asset classes to credit and perhaps listed equities?

Yeah, hi, Jaakko. It's a good question. And unfortunately, we don't really have a good answer to that. What we've seen, obviously, in the market, as you know, private credit has been returning capital quite nicely. So that is functioning normally. The private equity side has been clearly slower. Some signs of positive developments there and also some capital payouts already. But of course, the most important factor is how that side will develop. all together and we still feel comfortable about the guidance that during the strategy period, we will be able to release the capital from those investments and take the de-risking as we pointed out. Important to note out that during Q3, we didn't really have a lot of de-risking going on altogether. So this was more of a kind of pause in that direction, but the trajectory is quite clear. We aim to continue there and we see no real changes to that side and hopefully the private equity market recovers faster than expected.

Good, thank you. Then on the solvency, and without transition rules, it was 191%. When thinking your capital guidance and planning and the capital payouts throughout the strategy period, could you remind us which solvency we should be looking at? With or without the transition rule?

It's the one without transition rules, so the 191, and there with the target is 160 to 180. There is a bit of confusion obviously there because we report several solvency margin figures altogether and remember that the transition rules, they expire in 2031, so that's still quite a long time ago until then. But in our strategy, that is the figure you should be looking at.

Excellent. Thank you. Then on the net flows, did you see during the strong Q3, did you see some pent-up demand coming from the perhaps moderate Q2 and looking a bit toward the ongoing quarter? Last year, you had exceptionally or very strong quarter in Q4. Was it very exceptional last year? And how should we think about the inflows towards the year end?

Thank you, Jaakko. It's Petri here. So I wouldn't say that there was any pending cases from Q2. It was like Q2 was really difficult because of the especially April. And we all know that is a very volatile market, especially in April and beginning of the Q2. But no pending cases. Let's say it was like, there's a few things why the Q3 we managed to increase our net flow compared to other Q3s in previous years. I think the one is in wealth management here in Finland, we were more active, we had a full calendars when we came back from the holidays in the beginning of August. So really, really high activity to watch customers and a lot of meetings and that's something we can now see in the figures. And I guess When we are growing our business outside of Finland, we have to remember that July is not a holiday season yet in Central Europe and it looks like it's not that much in Scandinavia than it's in Finland. So it also helped us. July was really strong with us. Normally it has been quite weak. on those time we had only business in Finland. So international business growth is helping us in Q3 especially. And another question. Q4 last year yes you are right it was especially really really high level I can't comment Q4 which is already going on but it's last Q4 we were very very successful in getting some very large tickets and institutional tickets from Sweden and international side. So let's see.

Okay, thank you very much. That's helpful. And finally, perhaps a few words, if you may, an update on the international expansion. You just launched the new sales office. What are your own expectations when that to start to bear some kind of material.

Yeah, of course, we are not very patient people here, so of course we are waiting every day and week. Things happen and grow, but to be realistic is many times, once you have tenders with the large institutions, it takes some time. But of course we have a very good pipeline already in Central Europe where we have been before establishing the sales office there. So this is just like a boosting the business what we have already done there before like 2024 and 2023. I would say to be realistic and a little bit optimistic I guess we will start to see some improvement and clear change in coming year so we just established that in September so I guess it's a little bit too early to wait big change in our business during this year, but next year is something we hopefully see faster growth in that area.

I understand. Let's hope so. Thank you very much.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Kasper Mellas from Indears. Please go ahead.

Hi all. My first question is about your profit distribution outlook. So if the sales of Saxo shares would happen in 2026 instead of Q4, would this have any effect on your profit distribution potential or plans for 2025?

Yeah. Hi, Kasper. As we write in the report that there is a slight chance that the transaction will not be finalized by the end of the year. We still think it's possible, but it's also possible that it might be delayed slightly. There is one regulator still investigating the thing. I think there's a total of 40 different regulatory approvals already achieved. So we don't believe this is a big thing altogether. And of course, for us, the main thing is that in May 26, when we have our AGM, then we have to have the money on our bank account. So we don't expect that... that this would have any impact on a potential distribution. That said, obviously it's all up to the board and then ultimately to the AGM to decide what to do with the money. But we don't believe that this delay will be significant. We just wanted to flag a bit that there is a possibility since we said originally that should happen by the end of the year. It still can happen, but it might be delayed, but not materially.

Okay. matter of liquidity?

Yes.

Okay, then my last question is a bit more technical related to group costs. Group costs, I calculated these as the difference between other results from items not allocated to segments and your finance expenses. And these, according to my calculations, were higher in Q3 than in Q2. So have you done some cost allocations from unit-linked to other results or whether some one-time expenses or what was behind this development, since I assume that your finance expenses were quite stable, a quarter and a quarter.

Yeah, the finance expenses are pretty stable quarter on quarter, but there is, of course, some variation from side to side. And so we haven't done any major factors. I don't think you can draw that kind of straight conclusion from our cost base by just allocating the finance costs. There was nothing clearly different or funny from that side altogether. Remember that in the with profit now, of course, we do include the with profit The tier two loan interest expenses, we started that in Q2 now. So that, of course, has an impact on if we look at the previous quarters. But apart from that, there was nothing out of the ordinary in that item.

Okay. Well, that was it from me. Thank you very much.

The next question comes from Michelle Ballator from KBW. Please go ahead.

Yes, thank you for taking my question. So my first question is about the capital generation, specifically the own fund generation. Can you help us understand to what extent, let's say, a friendly market environment helped that metric in the third quarter? Yes, it definitely did help.

Of course, if you look at the cake generation overall, that's typically the biggest driver apart from the obviously the net profit and that generated in IFRS results. But it did have an impact in the own funds generation.

So do you have like a kind of run rate for the own fund generation, like a quarterly run rate or there is, you know, seasonality also there?

No, that of course depends on the market development as well. So I don't think you can put a kind of stable run rate for that. I think the one way of looking at it, what's the difference between the reported IFRS profit and then the own funds generation. So that would give you some kind of indication where it could be. So, but of course, if the... If the market situation is favorable, then we continue to generate future profits or present value of future profits from higher fund growth than we have in our estimation. And that contributes positively to the own funds. But it's impossible to give a run rate. I think you should look at the difference in the previous quarter that gives you some kind of indication.

Yeah, fantastic. Thank you. And then the second question is about, I mean, of course, growth is driven by, you know, the institutional and wealth management kind of segment. My question, I guess, is more related to what kind of retention, I mean, based on the products that they are this segment, the product sold in this segment, what kind of retention do you expect? I mean, are these money that can easily move to other funds or Can you help us understand what kind of behavior you expect for this kind of specific segment from the client?

Yes, Petri here. Thank you for your question. Let's say that if I start with our corporate segment, in corporate segment we currently have assets under management and the product we are selling are more sticky because the nature of the business, like pension business, there is no transfer market in Finland. And of course the taxation, everything is like that. So corporate segment money is really sticky money and stayed longer by nature. And when it comes to institutional wealth management segment, it's more or less like any other wealth management and asset management company. So customers can withdraw their money if they are not happy with us. and we are not good in investments and so on. Having said that, especially in our wealth management side where we are selling mainly through capital redemption policies, our services and products, there's one thing which is clearly hindering that is taxation, because once you have created, for example, a taxable income, capital gain taxable income inside your portfolio, if you withdraw your money, you have to pay taxes. You can't transfer to that someone else without paying taxes. So in certain way, it's a little bit more sticky than just to sell, let's say, like direct equities. And with the funds it's the same. And another thing which I would say this is not very coming and going money is also that more or less everything we do in our sales and our distribution is in our own hands. So we own the customer relation. So we have a very tight relations to our customers, no matter are they private individuals, high net worths, ultra high net worths or institutions. We always try to create deep connection to our customers. So let's say in times that the times are difficult, we do have still relations to our customers. It's not in someone else's hands. So that helps us to keep the money, let's say, better than otherwise. But of course, ultimately, it's the question of how much wealth you can generate to your customers, how good your investments and what is your NPS, which is very high with our customers currently.

And when you mentioned the tax, the tax is on capital gains, right?

Yes.

Okay. Because I was also thinking the, correct me if I'm wrong, but if the allocation is to, let's say, not claim vanilla products, you know, normal, you know, equity, some liquid bonds, but it's in, like, let's say, private credit or... I mean, this kind of funds are probably stickier because there is a longer term view from the investor in terms of approach, right?

Yeah, you are right. And yes, we have a quite big part of our business is also alternative and commitment based. So once you have committed to something, to fund, to invest to us, you have to stay with that. So no matter what you think afterwards, you have to stick with the commitment. And especially in private equity, private debt, it's a long tail business. So it's more sticky as well.

Thank you very much. Very clear.

Thank you.

The next question comes from Emil Imonen from DNB Carnegie. Please go ahead.

Hi, thanks.

One more question related to the institutional and wealth management business. I was just wondering, I'm seeing the network is pretty good. How is the fee margin developing? Is there any pressure on that or are you getting good net flow without having to touch fees at all?

Yes, thank you for your question. As we have stated, we haven't seen any softening and huge price pressure in standalone products. why our average fee market is going just a little bit down is because we are selling more institutional wealth management products and services so and as we have said and we all know that there's a lower fee margin on that segment and has always been so more we grow on that segment of course it will come a little bit down but it's slowly going down but standalone divisions customer segments products we haven't seen any any big margin pressure and we are not sacrificing our profitability and discipline in pricing in order to get growth so this money and net flow and inflow we are getting in is right priced

So if I understand correctly, it's pretty much developing exactly as you expect.

Yeah, exactly. No changes in pricing and margins.

Great to hear. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers.

Thank you. And then let's take two questions from the chat as well. Could you please elaborate on the lack of AUM growth for Finnish institutions in institutional and wealth management business?

Yes, thank you for the question. I think the Finnish institutions as a sub-segment, which is moderate growth and or flat growth in asset management, there are few reasons for that. I guess one is the bigger thing. I guess it's some kind of mirror of the Finnish economy. So institutions underneath the assets, they are not getting that much new money and there are no new institutions established. And many of the tier two, tier three institutions of Finland, they have committed a lot to illiquid assets like private equity and private debt, also with us. And also the real estate market is quite a freeze in Finland. So that means that the investable assets are not that high at the moment. And And at the same time the picture is not that flat it looks like for us. We have also a lot of commitment based sales towards institutions in Finland, which is not shown immediately in asset management. and net flow it will come once we call and once the funds call those commitments in so the sale has been quite good on that segment but it's not shown yet in those figures

Thank you. And then there was a question regarding the transfer for the internal profit transfer of 1.2 million euros from institutional wealth management to corporate. And that was of more technical nature. That concludes today's audio cast. Please do not hesitate to contact Investor Relations should you have any further questions. Thank you for joining us. Have a good day.