Taaleri Q1 morning result: Investment income pushed earnings to brisk growth

Translation: Original comment published in Finnish on 05/07/2024 at 9:16 am EEST

 

Taaleri’s result published this morning exceeded our expectations clearly, driven by stronger investment income than expected. Garantia’s operational development was also strong. No new information was given on the sale of the spearhead product, but the new biotech fund seemed to have taken a step forward. Taaleri’s earnings call can be viewed on InderesTV starting at 1.00 pm EEST.

Investment income brought an earnings outperformance

Taaleri's EBIT was 9.6 MEUR, fiercely exceeding our 3.3 MEUR estimate. The forecast overshoot is mainly explained with investment income, which was clearly better than we expected both in insurance operations and in own balance sheet investments. Garantia’s EBIT was also a positive surprise. As expected, the performance of private equity funds was rather modest. Naturally, EPS also clearly exceeded our expectations, just like EBIT.

No major surprises in Private Asset Management

In Renewable Energy, recurring fees grew less than we expected while investment income was higher than we expected. The majority of the overshoot is explained by invoicing related to renewable energy projects, which is a pass-through invoicing item (an equal sum is recognized in costs). However, the operating cost level was slightly lower than we expected, so due to the revenue overshoot the segment’s EBIT exceeded our forecast (1.4 vs. 1.0 MEUR estimate).

As expected, the revenue of other private equity funds was subdued and EBIT was clearly in the red. The decrease in recurring fees was affected by the drop in fees from the real estate business. The company should therefore find ways to increase the capital in real estate funds, as with the current volumes, the business is loss-making. Surprisingly, however, the growth of real estate funds was highlighted as an integral part of Taaleri’s updated growth strategy during the CMD last fall, so we would not be surprised if acquisitions were used as a remedy for the lack in the size class. Preparation for the new VC fund in the biotech industry continued in Q1.

Garantia’s operational performance was excellent

Garantia’s insurance revenue grew clearly from the previous quarter and was almost at the level of the comparison period. This surprised us, as we expected weak demand and the modest development in the guarantee portfolio to also hit profit lines.

Claims costs were lower than we expected and investment income higher than our forecasts, so as a whole Garantia’s quarter was very strong. The loss ratio was supported by the estimated compensation for damages suffered in previous periods, which now was canceled retroactively. Investment income, in turn, benefited from the strong development on the stock market.