Translation: Original comment published in Finnish on 08/20/2024 at 7:14 am EEST

Mandatum announced that it had informed the bondholders that it would redeem the 250 MEUR Tier 2 subordinated loan on the first possible redemption date of October 4, 2024. This was not surprising, as management has previously indicated that it is considering refinancing the loan in question this year. However, the final decision on this has not been communicated to the market. Mandatum’s solvency position does not require any refinancing either, but we still expect this to happen this year.

The fixed interest rate on the subordinated loan issued in 2019 was 1.9%. If Mandatum had not redeemed the loan in October, its interest rate would have risen to approximately 5.8% (Euribor 3 months + 2.3% margin). This would have meant a difference of about one percentage point more compared to the risk-free interest rate, which we do not consider justified, as we believe there has been no change in the company’s risk position, at least in the negative direction. This is also supported by the credit rating agencies' assessments. Therefore, the refinancing of the loan is likely to lead to more favorable conditions. According to our preliminary estimate, the interest rate on a similar instrument could be around 4.5–5.0%. In any case, if realized, the arrangement would raise the Group’s interest expenses.

Mandatum also announced that it will sell its pension fund services business

Mandatum also announced that it will sell its pension fund services business to Porasto. Mandatum’s pension fund services cover various expert services for pension funds and foundations. These services became part of Mandatum's portfolio in 2011 when the company acquired the pension and personnel fund services of Silta Oy. Mandatum employees providing the pension fund services will transfer to Porasto and according to the company, there will be no service change implications for customers. The estimated closing date of the transaction is December 31, 2024.

At present, the business is quite small on Mandatum's scale and the transaction has no significant impact on the company’s earnings. The purchase price is also likely to be relatively insignificant in the overall picture. Therefore, the news does not warrant any estimate changes, nor does it affect our view of Mandatum as an investment.