Taaleri Q3'24 flash comment: Stronger than expected result

Translation: Original published in Finnish on 11/5/2024 at 9:14 am EET.

Taaleri's Q3 results, announced this morning, exceeded our expectations as each segment performed better than we had forecast. The biggest beat was seen in Garantia, whose investment portfolio return exceeded our forecasts by a very wide margin.

Quarterly development exceeded our expectations on all fronts

Taaleri's Q3 EBIT was 14.7 MEUR, well above our forecast of 12.9 MEUR. The beat is mainly explained by the returns on Garantia's investment portfolio. Otherwise, the results in the report were broadly in line with our expectations, although the performance across the Group was slightly stronger than we had forecast. EPS exceeded our forecast by an even higher margin than EBIT, as the tax rate remained quite low in Q3. This is probably due to the fact that the investment income of Garantia is not taxed until the investments are realized.

Energy profitability has clearly increased

Renewable Energy's Q3 result was roughly in line with expectations (9.7 MEUR vs. 9.5 MEUR forecast). There were no surprises in continuing earnings or investment income, but the segment's expense level was slightly lower than expected. The main part of the result consisted of a one-time gain from the sale of the project development portfolio (8.3 MEUR). Even after adjusting for this, Renewable Energy's profitability was strong. Indeed, the launch of the latest SolarWind 3 fund has significantly increased the segment's continuing earnings-driven profitability, which is one of the key drivers of Taaleri's value.

For the SolarWind 3 fund, Taaleri reported an increase in commitments of only around 10 MEUR to 440 MEUR compared to the previous quarter. However, several due diligence studies are ongoing and Taaleri expects the number of commitments to increase during the remainder of the year. Based on initial comments, the next closing of the fund still seems likely later this year.

The result of Other Private Asset Management was less negative than expected (-0.5 MEUR vs. -1.7 MEUR forecast). The difference came on the expense side, as the segment's revenue was in line with forecasts. The better-than-expected result in Other (-0.9 MEUR vs. -1.2 MEUR forecast) was also due to lower expenses.

Garantia's investment returns were at a strong level

Garantia’s insurance revenue remained at the level of the comparison period and was therefore fairly in line with our forecast. As expected, with sluggish demand for mortgage loans continuing to dampen business growth, guaranty insurance portfolio remained at the same level as the previous quarter.

However, the return on the investment portfolio exceeded our forecasts by a wide margin, so Garantia's EBIT in Q3 was much stronger than we expected (6.3 MEUR vs. 5.3 MEUR forecast). Claims increased slightly in the first half of the year, but this was due to a single corporate liability.