Mandatum Q2'24 preview: Continued wealth management AUM growth expected

Translation: Original comment published in Finnish on 8/8/2024 at 7:05 am EEST.

Mandatum will report its Q2 results on Wednesday at 10.30-11.00 am EEST. We expect the sales of investment products to continue at a good level and positive value changes to have increased AUM. Overall, we expect Q2 to be good like the previous quarter. In our forecasts, the investment performance of the with-profit portfolio again accounts for the majority of the group's earnings, but also represents the most significant forecast risk.

Small forecast changes in investment income

We have made some small revisions to our forecasts ahead of the Q2 report. The changes concerned the with-profit portfolio, for which we have slightly decreased our investment income forecasts in light of capital market developments in the last quarter. As a result of these revisions, our pre-tax income forecast for the full year was reduced by approximately 3%.

We expect client AUM to continue to grow

Mandatum’s fee result consists of the insurance service result for unit-linked pension insurance and the fee result for asset management and other investment solutions (e.g. unit-linked investment contracts). Our forecast for Mandatum’s Q2 fee result is 13.6 MEUR. We expect fee and commission income to rise to around 38 MEUR. Fee income growth will be supported by rising AUM, which we expect to increase by around 3% from the previous quarter to 12.9 BNEUR. In particular, fixed income products should still look attractive in today’s market.

In addition to the results, our attention will be focused on the development of new sales of wealth management solutions and management's comments on the outlook for demand for investment products, which, as in the first half of the year, should be generally positive. AUM development plays a key role in the value of Mandatum, as the income from these assets is the main source of growth for the group's operational business.

Investment performance is still the most important component of the result

The result of term life insurance mainly consists of the contractual service margin (CSM). The CSM amount to be earned is affected by actual claims experience, which varies somewhat from quarter to quarter. We expect the result of term life insurance to be around 3.4 MEUR in Q2.

From investment activities (mainly investment income from the with-profit portfolio), we expect a pre-tax result of around 34 MEUR. This represents a return of approximately 1.2% on the portfolio at fair value. The slight increase in market interest rates in the second quarter will have a positive impact on the result of the with-profit portfolio through the change in the insurance liability, but the impact is expected to be moderate due to the company's hedging measures.

Solvency remains above target

Mandatum's current forecast is for fee income to increase from 2023. After a strong start to the year, we do not expect this to change with the Q2 report, as we expect the client AUM on which fee income is based to have continued to grow.

We do not expect a significant change in solvency either. The increase in market risk is expected to have a moderate negative impact on solvency, but we still expect the Solvency 2 ratio to be above the company's target level. As a result, the company currently has excess capital on its balance sheet, which will increase in the future as the with-profit portfolio is reduced.