Good afternoon, everyone, and a warm welcome to Mandatum's Capital Markets Day 2025. Whether you're joining us here at our headquarters in Helsinki or are following along remotely, we're pleased to have you with us. My name is Lotta Borgström, and I lead investor relations here at Mandatum. It's a pleasure to host you today and to open what we hope will be an insightful afternoon. Today is an opportunity for us to share where we are, where we're heading, and how we plan to get there. It's been less than two years since our listing—still early days in some respects—but we've already covered a lot of ground and built momentum for the next phase of our journey. You'll first hear from our CEO, Petri Niemisvirta, who will outline our strategic direction until 2028. Then our CFO, Matti Ahokas, will walk you through our financial targets.
Later in the afternoon, we'll take a closer look at our Institutional and Wealth Management strategy, our corporate client approach, and the evolution of our With-Profit Business. We'll have two dedicated Q&A sessions: one after the strategy and the financial section, and another at the end of the day. If you're attending in person, you'll be able to submit your questions during those sessions. For those of you joining online, feel free to send in your questions at any time throughout the event. Yes, a well-deserved break is scheduled in approximately at 2:00 P.M. Finnish time at the latest. Now, to officially open today, it is my pleasure to invite to the stage the Chair of Mandatum's Board of Directors, Patrick Lapveteläinen.
Thank you, Lotta. Welcome also on my behalf to Mandatum's First Capital Markets Day. We thought that this would be a good timing for us to have our first Capital Markets Day, as we now have operated as an independent listed company for over one and a half years. We have also reached all our financial targets that we set by the time of the listing, and we are getting a lot of questions, especially on our capital position. The targets that we set in the fall of 2023 were conservative, and we were also vocal back then on that point. Now we think that we are in the position that we can be more specific on our capital position, as we are very comfortable with de-risking our With-Profit Portfolio, the excellent positive net flow in assets under management, and the sale of Saxo Bank shares.
I hope that we can demonstrate today a clear path how we will meet our new financial targets that we announced this morning, and I will not go into the figures and rather let our management team present them. I hope you will enjoy the afternoon. Thank you. Petri, the floor is yours.
Thank you, Patrick, and welcome. It's a pleasure to see you. So many of you have come here to see Mandatum's first-ever Capital Markets Day since listing. I will, in my presentation, elaborate on what Mandatum stands for now, what we have achieved in the last 18 months, what are those areas we are seeking growth going forward, and why we think we will reach those targets we have set today. Of course, later, the latter part of my presentation, I will go to those financial targets that you have already seen today. Let me start with what Mandatum is today. You know the numbers very well. Mandatum is the company which is the leading Wealth Management Asset Management company in Finland. We have ranked the number one Institutional Asset Manager in Finland.
Our customers are really pleased, both here in Finland as well as in Sweden, Denmark, and in growing numbers also outside of the Nordics. We are definitely one of those players who can increase its business, grow its assets under management, not only in Finland, also outside of Finland. The reasoning for that is, of course, our core competence in certain asset classes like credit and fixed income. In Finland, we see that we have a lot of things to do in Corporate Business, where we are by far the largest player. About 50% of the market share is in Group Pension Business, a very big player in Group Risk-L ife, and also in Personnel Funds, we are a leading player. That also helps us to grow our Wealth Management Business in Finland going forward.
We have seen also very high customer NPS numbers, both in Corporate Wealth Management and Asset Management, all segments where we are doing our business. Of course, we need very good people in order to achieve all our demanding targets. All our employees are incentivized by variable compensation, STIs, and some of them also with LTIs. We believe that the right incentivized system, which, by the way, we are selling to other corporates as well, is the right way to achieve the target and to be in line with our shareholders. Our ambitious target will be part of our people's incentivized program going forward as well. I believe that more than 600 people will work for those financial targets we have set today. As you might know, Mandatum has changed itself a lot during the last 20 years.
We stopped our With-Profit Business more than 20 years ago, and With-Profit liability was many, many years around EUR 5 billion. It started to melt very fast around five years ago, and now we are close to EUR 2 billion with our With-Profit liability. We are forecasting, and we have been quite good on that, that our liability after six years will be around EUR 1 billion anymore. That means capital releases, and of course, with the investment knowledge we have, doing investments in our own balance sheet assets also will generate a lot of profit during that path. Our With-Profit is melting, and at the same time, through our three divisions in our Capital-Light Businesses, we have managed to increase our business when it comes to client assets up to EUR 14 billion.
Our Capital-Light Business, Institutional Wealth Management, Corporate Clients, Retail Clients, all are very profitable, growing businesses, scalable businesses, and at the same time, we have a lot of capital releases and profit generation from our old With-Profit book. Profitable growth will come from our Capital-Light Businesses. What we have achieved during the last 18 months, like we have already heard today, we have reached all our targets well ahead of schedule. That has happened without sacrificing our pricing, our margins. We have been in discipline in pricing, and at the same time, we have managed to improve our cost income ratio a lot. Since listing, we have decreased our cost income ratio from 67% to 55%, which was the last number of the Q1. That means also that we have been very disciplined on our cost side, not only in the pricing.
At the same time, our sales have worked extremely good, and we have been very good at serving our customers. Very high NPS has also meant that our outflow has been very low level. The most predictable part of our business, With-Profit book melting, has went as we have forecasted 18 months ago. Of course, it is the right time, as we have heard, to set the new targets going forward. Target markets where we are planning to grow. Nordic Asset Management market is a EUR 1 trillion market, and we believe, and we have forecasted and we have seen in the past that it will grow around 8% per annum. That means that our business will be in a market which is growing, which is always helping your business once you are in the market which is growing itself.
Mandatum has less than 1% market share of that market. We do believe that there is a lot of room for us to grow in that market, which is at the same time growing 8% per year. We believe that the Nordic economies are growing in the next three years, and that helps our businesses grow in that market. In wealth management markets, what we are doing in Finland, we see a similar type of growth numbers, 6%, that is what it has been, and that is our forecast going forward. A little bit less than the Asset Management market, but still 6%. Of course, what is driving the growth here is money comes to money. There will be more wealthy people. Finnish wealth management market is still very young. We do not have a long tradition in wealth management and generations after generations of cumulative wealth.
That will increase the number of wealthy people, and that's what we have seen lately, the last 10-20 years, happening in Finland. We are forecasting 6% growth in that market. Finally, the third market, corporate and life and unit-linked pension market, around the same time in wealth management market in Finland, 5% growth. That has been the last two years, and that's our forecast going forward. We see the weakening of pension and social security. People like to have more individual pensions, individual risky insurance life. In Finland, it goes mainly through companies and corporates. The best way, because of taxation and other legislative issues, the best way to do those things is through corporate plans.
That is why we believe, having in mind that Mandatum has a very strong position on that corporate side, we believe that we will be the one who will make most of that growth in coming years. Even though we have very high market share in the corporate side, as I mentioned, we still believe there is a lot of room to grow, maybe not in market share-wise, but the market underneath is growing, and we can do better. Also, we can be more effective. We can improve our processes and make more money out of our market share and our business. History drives strategy, and Mandatum and its predecessor companies have always been in investments. We are now in a building which was established in 1870, and this is the oldest industrial building in Helsinki.
At the same time, we started our path in investments when Kaleva Mutual, our mutual company, was established. Since then, Mandatum and those other companies in this group have been in investment business. We have had different ways to gather assets. First, With-Profit pensions, a lot of balance sheet investments. Unit-linked came after 1995. We spread our business to asset and wealth management. Of course, Nordic Asset Management Fund Company in Luxembourg. We have just increased the number of ways to gather assets in order to do better investments to us and our customers. There are especially two things which we have caught from our history. The one is, of course, the obvious one, as I already said, is investment heritage. With that huge own balance sheet, we have learned how to invest our own money and later also our customers' money.
We have learned, and we have core competencies, international competencies, what we have now proven in Sweden and Denmark, also outside of Nordics, that we can be a very competitive player in certain asset classes, mainly credit and fixed income. That balance sheet investing and investment heritage has created a position to be now in positions that we have award-winning products to serve our customers, and our sales are going very well. Another thing is our With-Profit Portfolio and the position what we have gained during the decades is the leading corporate market position. We do have a very large and tight customer network in Finland. We know most of the best companies in Finland. We know their owners. We know their leaders. We know their board members. Finland is a little bit like a club.
Once you know the right people, you are close to money and wealth. Of course, the wealth is created in the companies, and it is created in industries. That is the position to be in once you want to increase your position in wealth management as well. We have done that cross-selling thing very well. The thing that many companies try to do, we have been extremely successful on that. We have used this corporate network in order to enhance our wealth management business very well. 65% of our new wealth management customers last year came through our connections to the corporate side. That is the very, very core thing to us. One core thing to us is own distribution.
We believe own distribution gives us a more tight relation with our customer, and it's more predictable, it's more stable assets what we can achieve once we have own distribution, and we can really guide our own sales forces. Of course, like I mentioned, high competence and satisfied personnel, which is incentivized, who are incentivized the way to the company strategies. For us, it's not just what we are doing and where we are doing, to whom we are selling important. It's also very crucial for us how we are doing things. ESG is very important to us. We started to invest in ESG more than 10 years ago. Of course, the responsible investment side, because we are a big investor, that's really the area we can make the difference. We have embedded ESG in all our work and processes, not just investments, also the insurance side.
We have sustainable insurance processes as well. Of course, the rating from outsider companies is very good for us. We are low-risk companies when it comes to ESG. I'm really pleased with these ratings, what we have achieved in a short period of time when we have been a listed company in the Helsinki Stock Exchange. We see growth opportunities in all our Capital-Light Business areas. With-Profit is not an area which is growing. We see it's decreasing, and it's going another way, as I explained, and that's the way it should be. Of course, the return on equity on that side is the key word why we are putting it down. The return on equity is not just high enough in order to that we are not pleased with that.
When we look at the higher return on equity businesses, we are coming to our Capital-Light Businesses. Let me start with our life and pension retail. That is really stable, predictable, but not that fast-growing businesses for us. We see it is very profitable. It gives us a reasonably high return on equity, and it is very stable, and it is a very operationally efficient way to do things. I am very pleased that we have a cooperation with Danske Bank, which is the third-largest bank in Finland, holding 10% market share in banking. We have exclusivity to use their distribution to our life insurance product. That is a clear advantage to us as a standalone life insurance company, to have also the third-largest bank only distributing our products to the Retail segment.
Lately, the last two years, we have seen a nice process on Danske's businesses as well and cooperation on that side. Optimized growth, our Corporate Business, Corporate Pension, and Corporate Risk. As I mentioned, we have very high market share already on that side. 45% in group pension plan, 70% in new personnel funds, close to 30% market share in corporate risk- life. We do see that there is a lot of room to do better. We see that our processes are not yet where we want them to be. We see that the market underneath, as I mentioned, 6% growth is giving us a good boost to increase our business on that side. We see there is a momentum on that side as well. We have seen more and more corporates buying risk life policies, all the employees, the whole company is buying all employees.
The biggest case we have done lately, 6,000 employees, the whole company is insured by us. We see that there's a lot of growth possibilities in the corporate segment, even though that's already one of the most profitable businesses we have. Our real growth engine is, of course, our Asset Management and Wealth Management Businesses. Scalable growth is what we see on that side. Nordic Asset Management, Q1, the highest growth came from Sweden, Denmark, from our international institutional side. We see very good growth also outside of Nordic. Nordic Asset Management in Finland, we have reached the position, which is number one position, and we are keen on to keep that position as well. In all countries in Nordics, we are seeking scalable growth, and we have seen that lately very well.
Finnish Wealth Management is something we are still very small, even though the Mandatum brand is very strong, very appreciated among wealthy people in Finland. We still have, in my opinion, quite small market share in Finland. Even though market shares are not driving our business, the profitability is driving our business. We see that we are still too small in Finnish Wealth Management, and there is a lot of room to grow. Of course, the whole market is growing, and we as a new kid in town, in a certain way, we can still reach a bigger number when it comes to market share and in that way grow our business in Finland as well. Non-Nordic Asset Management, even though the pool is very small yet, is of course one thing we are also putting resources and investments into going forward.
Our strategy priorities to 2025-2028 is to expand the Nordic foothold in Asset Management. Now the question, of course, is how we will do that. What is the reasoning behind that we believe that we can reach the targets and why we believe that we will be the bigger in this business, why we can do better return on equity, better profit going forward. The Nordic foothold in Asset Management, of course, we will invest more to that business. We will put resources to salespeople, especially the front line. We will invest in customer service, asset gathering in those markets we want to grow, meaning especially Nordics. Accelerate the growth of Finnish Wealth Management, the same thing. We will invest more to people, salespeople. Of course, there's a lot of other things, processes. We will use a lot of things to tempt the right people, services.
Of course, we will look at also the new products, new services in order to be a bigger player in this market. Even though it's not our numbers, we will, of course, use all possible ways to enhance our business and growth in Wealth Management and Asset Management. It also includes the whole toolbox, unorganic growth and organic growth. If there is a possibility to M&A, which will enhance our business, we will look at those as well. Leverage the leading corporate market position. Even though it's an upper to grow in wealth management, we see there's a lot of room to grow also in the corporate market. Tarja will tell more about the Corporate Business, how we will grow on that side, what are our plans. Janne will tell more about Asset Management and Wealth Management Business together with Juhani.
They will go to details how we will, what are our plans to grow, why we believe we will be the winners in the market. The fourth one is very crucial for us as well, cost income ratio. Focus on operational efficiency. Traditionally, that has not been the biggest thing to look at in the past. Since 2023, after listing, we have concentrated a lot of our processes, efficiency, and we have seen already results on that side. Like I mentioned, from 67% cost income ratio to 55% after Q1. There is still a lot of room to improve our business. We are not ready yet on that side. Of course, once we are planning to grow more in the future and fast, there will be some investments, but they are not sacrificing our cost income ratio.
We mentioned a year and a half ago when Mandatum went public that our business is really scalable. We have done big investments already. We have proven that in the last year and a half that our cost income ratio will go down. We have not done, and there is no need to do very big investments to our infrastructure or products and so on. We will see improving cost income ratio in the future as well. That is our target as well. Our vision is to be the fastest growing Nordic asset and wealth manager with optimized growth in Finnish life and pension. To be the fastest growing means that we have to have the best salespeople, best portfolio managers, and attitude to really grow and win the game. That is what all our employees are tied to and incentivized. And new financial targets.
You have already seen those in the morning. Return on equity above 20% and more than 10% annual growth in Capital-Light Profit before taxes. The last one, solvency margin between 160%-180% with cumulative shareholder payouts exceeding EUR 1 billion. These all are tied to each other, as you know. In order to achieve any of these, we need all others working well as well. We are committed to this, and we have done a lot of homework, a lot of strategic thinking, calculating, and believe that we can reach these targets at the end of 2028. Thank you very much. Now it is time for Matti, our CFO, to go deeper to our financial targets and outlook for the strategy period. Thank you very much.
Thank you, Petri. My name is Matti Ahokas, and I will go through the numbers behind our new financial targets.
Before that, let's take a step back and look at what's been the delivery so far. For those wondering why we've only chosen this period, 2022 to 2024, the answer is that we report according to IFRS only during that period. That is not chosen intentionally to show very good figures. During this period, as Petri mentioned, we've consistently been able to grow our assets under management by 16% a year during the last three years. If we take a slightly longer step back, it's been around 10% for the last 10 years. We can truly say that the client AUM growth has been consistent. At the same time, we've been able to keep disciplined margins. We've been able to grow our costs less than income, and that, of course, shows as an improving cost income ratio.
Actually, at this time as well, we've been able to do a lot of investments. As Petri mentioned, we've done a significant ramp-up of our IT. Basically, our platform is ready for further growth in the years to come. The outcome has been that our Capital-Light PBT, or profit before taxes, has almost doubled during this period. Also, looking at an important profit contributor during this period has been the net finance result. Here as well, we've achieved more stable profits, reported profits since 2022. An important factor here has also been the fact that we've been de-risking our own investment assets. We've had more focus on reducing the asset liability mismatch. We basically increased our interest rate hedging from around 30% in 2022 to around 80% at the end of last year.
Those who follow us more closely know that this figure was 88% in Q1, probably a bit higher than the normal level. In any case, this means that the hedging level is actually quite high. At the same time, we've also lowered the share of listed equity in our own balance sheet investments. This also means that the volatility should be lower going forward. At some stage, the share of listed equities was over 30% in our own balance sheet investments. At the end of Q1, this stood at only 5%. All in all, this means a lower sensitivity to financial market fluctuations. The new financial targets for 2028. Our Board this morning has approved three financial targets, two new ones and one revised.
What I think is super important to keep in mind is that these targets are organic, but they have a firm timeline. These are not midterm or long-term targets. These are 2028 targets. The key target is to basically double our return on equity compared to 2024, which was around 10%. Now we expect to reach over 20% by 2028. The key component here is basically the Capital-Light growth. We target a growth of above 10% annually. We basically expect that our client AUM growth is roughly in line with the 10% historical average I mentioned. Our net flow should also be roughly in line with the 5% target that we've had previously. It is more a question on continuing the growth path on income, but focusing more on the cost side, costs growing clearly less than income.
We expect around 1% annual cost growth during the strategy period. Another important component is the release of excess capital. Capital Management is a key priority for us. Lowering the excess capital is one factor to improve the return on equity. As you know, our With-Profit Business is releasing capital, and capital does have a cost. We believe it is in the interest of our shareholders to continue to use capital more efficiently. This will be actually done through, firstly, the kind of natural runoff of our With-Profit liabilities, which we expect to be around 10% a year. Also, an important factor is to continue the path of de-risking the assets. All in all, this means that our business is requiring a lot less capital to grow. We expect to pay out in shareholder payouts more than EUR 1 billion during the strategy period.
The probably most important operational financial target is the growth in Capital-Light Profits. By Capital-Light, we mean the combined segment profit of the Institutional Wealth Management Business, the Corporate Business, and the Retail Business. This is according to our segment reporting overall. The baseline here is 2024. For those who are wondering what the number is and do not remember our last year's figures, it is EUR 88 million as the baseline for the Capital-Light Profit before taxes. Obviously, it is fairly easy to do the math above 10% growth where we expect to roughly land at the end of 2028. The main driver here will be the Institutional and Wealth Management Business, which is expected to show the highest growth, but also the Corporate Business, which is also an important growth driver where we are expecting further accelerating growth.
The Retail Business is more stable, and there are some structural outflows expected over the next 10 years in this business because of payouts. The contribution from the Retail Segment is expected to be slightly lower. My colleagues, Tarja, Janne, and Juhani, will go to the operational drivers of these businesses in their presentations. I could say that overall, the guiding principle of the growth in the Capital-Light Business is scalable growth over the period. Cost growth is expected to be lower than revenue growth, as I mentioned, resulting in an improving cost-to-income ratio. This is mainly due to kind of more efficient operations, but very importantly, also lower legacy IT costs. As I mentioned, we've invested in IT with a fairly low capitalization level over the years, so that cost impact will be lower.
Actually, this is probably a good segue to the cost side, which, as Petri mentioned, is an ever more important factor in reaching our profit goals. We will maintain a strict cost control over the strategy period and expect roughly 1% cost growth over the strategy period. Make no mistake, we will continue and even accelerate investments in our Capital-Light Businesses. The number here shown, obviously, probably does not ring too much of a bell. This is more of our management accounting factors and not visible in our operational P&L, but it does give you an indication of the direction of travel we forecast in the cost side. A couple of highlights here regarding the cost drivers. Firstly, as I mentioned, we will continue to invest in Capital-Light, both capabilities, new product capabilities, FTEs, both in the Nordics and non-Nordic.
We will continue to improve on our digital processes. Our FTE count is already down by 8% from the peak, and this will have a full P&L impact only in 2026. As you may have seen, we have actually simplified our organization. We've trimmed our support functions, and we've also established a new chief operating office structure within the company focusing on the production of things. Finally, the most important factor on the cost development is reducing structural costs. This means decommissioning legacy systems and legacy applications, but also streamlining the product portfolio in the business. As an example here, only in probably the next couple of weeks, we will go live with our new group pension policy management system, which will enable us to decommission some of the legacy systems here, and that is a major factor here behind this.
Even though our strategy lies heavily on growing the Capital-Light Business, the With-Profit Business has been and will continue to be an important profit contributor for the group in the strategy period. It is also important to remember that this is a long-tail business. Like Petri mentioned, the liabilities are decreasing, but they will continue to provide profit support and capital release in the business. We expect roughly 10% decrease in liabilities over the strategy period, like we previously mentioned. We plan to maintain, and we will maintain, a roughly 2% spread over the cost of policyholder funds. Here, of course, the hedging profile mentioned earlier plays an important role. The investment asset de-risking will continue, resulting in lower earnings volatility and a lower solvency capital requirement. The business, the portfolio will be largely fixed income at the end of this period.
This will mean, in our opinion, that the With-Profit Business will be, the earnings from that part of the business will be more fee-like than previously and clearly of less risk. Capital Efficiency and Capital Management, like our Chair mentioned, is an important factor of the strategy period and a key component of our financial plan. The group Solvency Capital Requirement is expected to decrease by around EUR 250 million over the period. Two important factors here. Firstly, as I mentioned, the With-Profit Solvency Capital Requirement is decreasing according to plan because the book is decreasing in the runoff. Also, another factor is the partial exit of our PLC's non-core holdings. This actually is not as dramatic as the graph here shows. As you know, we've already announced our planned sale of the shares in Saxo Bank, which has been a major contributor here.
The other two holdings, Enento and Terrafame , are significantly smaller and play a much smaller role altogether. Even though the Capital-Light SCR is increasing following the growth prospects, remember that this business is also generating own funds. I think it's important to focus on the graph here on the right side that we will and we are continuously generating capital in our business. We're generating profits, we're generating capital. In order, obviously, to reach the target, it's important to optimize the capital towards our solvency capital target. This means, obviously, a significant amount of dividends. As our business is shifting towards Capital-Light, we require less and less capital overall also on the group. We plan to distribute more than EUR 1 billion of dividends or share buybacks during this period.
One major factor here is that actually of this more than EUR 1 billion, quite a significant amount comes from higher profits. It's not raiding the piggy bank, so we are more optimizing the capital position of the group. This is not only paying out excess capital, this is actually also paying out a significant part of the profits we're generating. Actually, if you look at the over EUR 1 billion, the majority of that comes from earnings, so not from releasing the excess capital altogether. Some of you may have wondered that why has not Mandatum introduced a payout ratio target or we talked a lot about OCG.
The main reason that we thought that the absolute amount makes more sense is that this is a period of significant balance sheet transformation and our dividends are more tied to the cash flows and the liquidity in the holding company, which is more driven by factors such as the cash from Saxo Bank and especially the internal dividends of Mandatum Life, which in turn is more driven by the exit of the de-risking and the cash flows from that side. It is not dependent on earnings during the strategy period, more actually afterwards. Mandatum is transforming into a high return on equity fee-generating group. We expect the growing share of the Capital-Light Profit to offset significantly the decline in the With-Profit Business in the strategy period.
In 2024, the share was around 40% and this should increase, as shown here, to somewhere around 70% by the end of the period. Our business is profitable on the Capital-Light side and we can reinvest in the business with a very high marginal return. The return on equity of the Capital-Light Business is roughly 35% on average, depending a bit on the business. Even though our With-Profit Business has a return on equity above cost of capital, it is still significantly lower at around 10%. The key takeaways, Mandatum is transforming into a high return on equity fee-generating group towards 2028. Even though the contribution from our With-Profit Business is lower, it will be less volatile and the earnings will be more fee-like. Finally, you should expect significant shareholder payouts during this period. With that, I think it's time for our first Q&A.
Thank you all for your attention so far. I just got the information that it's almost 300 of you following us via the live webcast, which is obviously very nice to hear. We'll now begin the first Q&A. Please feel free to raise any questions you might have, both here at the venue and online. I'd also like to note that the Chair of Mandatum's Board of Directors, Patrick Lapveteläinen, will only be present for this session, so if you have questions specifically for him, now is the time. Let's get started. Do we have any questions here at the venue?
Thanks for taking my question, Hans Rettedal Christiansen in Danske Bank Markets. I was just wanting to start off with the sort of the two overarching targets on the ROE and the excess capital distribution or the total distribution.
Specifically, I was wondering if you sort of distribute EUR 1 billion over the next four years, will you then, is the minimum then you expect to reach on the ROE 20% or is 20% assuming sort of above EUR 1 billion?
I think it's a good question. I think you should probably do the math yourself and see where you end up, but I think those are the kind of building blocks that are clearly there. We actually say above EUR 1 billion and then thinking that this is a period of four years, so it's a fairly long period of time. I think we need some flexibility there as well. If you do the math and calculate over 10% growth in the Capital-Light Profits and then look at how much is needed to get to over 20%, I think that is the way we are thinking about it.
I think I would look at it from that perspective.
Thank you. The second part is, sorry, second question is perhaps a bit more strategic on your, you've obviously been very successful in sort of selling in-house on the corporate, using the corporate segment. Now that you are expanding into the Nordics, how specifically do you expect sort of to use your own distribution network and how kind of scalable is the Mandatum brand outside of Finland moving forwards?
Yes, thank you for your question. Yeah, it's, of course, we don't have corporate life supporting our businesses outside of Finland, but we don't do at this point any wealth management outside of Finland. It is Asset Management and we are only concentrating selling to very large institutions, professional buyers, which are more easy to reach. It is quite a low number any country still, especially in the Nordics.
It's not thousands, it's more like a hundred of possible potential customers. In Sweden, we are just starting marketing to both institutional investors and we are planning to do that in other markets as well in order to increase our brand awareness. We see that we now have three salespeople in Sweden and we have managed to already increase our position and our sales a lot in Sweden. We see that our products together with our salespeople and how we incentivize them, what kind of people we have and how we combine portfolio managers and our salespeople competencies together, we have achieved very good results with that combination. In Sweden, in Stockholm, we have one portfolio manager which is supporting our sales there as well. We believe our own distribution when it comes to not that large number of buyers is really working well.
We do want us to invest more to brand awareness also in other countries than in Finland.
My last question perhaps to the Chair is regarding this question, what is your sort of M&A appetite going forwards?
Yeah, I've answered this question many times and we always have an M&A appetite and that is in our DNA and we are always looking at everything. Of course, it's not so easy to find because it takes two to tango. Of course, it's very often that on both sides you have very strong opinions of your own valuation. Of course, we are looking at every situation and everything that we can see that it could enhance, especially our distribution capacity. Then of course, also on the product side, it has to complement with Mandatum's offering and our distribution.
But definitely we'll look into everything.
If I may just also mention, like I showed, we can reinvest in our own business at a very, very high marginal return. Of course, doing kind of potential acquisitions where you would have to probably pay above book value, it is difficult to find, as Patrick mentioned, targets that actually make more sense than reinvesting in the business that we can do and grow by ourselves at the moment. That, of course, is one factor that we weigh against this.
Yeah, if I may add, we are not asset gatherers or market share empire builders. It always has to make sense economically for the shareholders.
Thank you very much.
Thank you, Hans. We have the following question, for instance, here.
Good afternoon, Sauli Vilén from Inderes.
About the distribution, you better mention that you, I think the word was like, that you own the distribution, so to speak. Is this also true when you expand internationally or are you also exploring, for example, using the so-called agent model, which some of your peers have been using with fairly good success?
Yeah, of course, we are looking at the platforms as well. What we have noticed, the platforms are also, the money comes easily or fast, but it also goes away very because you do not have certain tightness to your customers and you do not have any relations to your customers. You are just a product provider. It is a little bit different valuation on that money. We do believe as long as we are concentrating mainly to institutional investors, we can do that through our own distribution.
You do not need that huge amount of salespeople in order to cover quite substantial amount of customers in any country in Europe. Of course, the big thing is to find the right people. We are selling quite, let's say, a little bit more difficult products like senior loans and that type of things, which need those people who are in wealth in selling those in our distribution. They have to be quite competent and work like in credit desk and so on in order to be able to do that without needing so much portfolio management support. The further we go and the more we grow, of course, we are looking at all the possible ways to distribute our products. At this point, we mostly rely on our own distribution.
Okay, thanks.
I guess this might come up after the break, but I can try to ask about the product range. You have been fairly, you could say, focused historically that you want to be focused on the areas where you are good, actually. Now your market share has been growing, obviously, and now you are stating out that you plan to expand your product offering. How do you, like you could say, balance between these staying excellent and expanding your product range?
I think it is in our DNA. We have decided so that we are selling only good things to our customers no matter what. Once we are doing our allocation products, for example, in Finland in our wealth management, if we do not see that we are capable to do very well something which is part of the mix, we use external products for that.
If someone is much better than us in order to give the best service and best product, like in allocation to our customers, not sacrificing customers' feeling and performance because of our own product range. Allocation products, I have been very glad that that business is really growing fast in Finland. Those are combined of external and our own competence. Of course, still we are quite reasonable, big company. We can always, and we are all the time looking at other areas. We can also be where we are not good enough or at all. Going forward, of course, we are doing our homework in order to enhance our product range all the time.
Okay. Then finally for me about the possible funding of the possible M&A.
In previous targets, you have the EUR 500 million dividend target, and you stated that it's kind of a, you could say, sacred, that that's not a piggy bank you can go to if you find the M&A of a lifetime. How about this EUR 1 billion? Is it also that it's sacred? You cannot touch it even though the M&A of the century would walk through the door. Do you have to find the money somewhere else?
Of course, it's sacred. It's our target. If you have a deal of a lifetime, then you never know. Of course, here we are stating very clearly it's EUR 1 billion in the next four years. I can't predict what happens during these four years because if you have a turmoil, a financial crisis, etc., that's the environment that we have then operated in.
Okay, thank you very much.
Thank you, Sauli. Actually, let's take two questions from our viewers via the live webcast at this stage. The first one is from Andrew Baker at Goldman Sachs. Thank you for taking my questions. How do you see financial leverage developing over your planning period on both an IFRS or Solvency II leverage, and what levels of financial leverage are you comfortable with going forward?
Actually, if you look at the leverage as such in terms of financial leverage, it is expected to slightly go down. You should not see this financial plan that we are increased. We are taking debt to finance dividends. That is not the plan, definitely. Our financial leverage is very low, basically, especially once the exit from Saxo Bank has been finalized, it will go down.
We basically have only roughly EUR 100 million of our kind of legacy debt from Sampo, which is gradually maturing over this period. Actually, the financial leverage will go down slightly during this period when you look at it. That is actually a relevant point in a sense because Mandatum has the capacity to increase the leverage quite a lot if needed. There is no kind of limit as with maybe a normal company. Since our business is generating good capital, it is generating good profits, there is absolutely no need to increase the leverage because of these factors.
The next one comes from Jan Erik Gjerland at ABG. About capital distribution, you said cash flow to PLC is crucial for the future DPS payment. How do you expect this flow of cash to be back and loaded front end or evenly distributed?
Which companies will be the main contributor, life or your new earnings from Capital-Light products?
Yeah, as I mentioned, you shouldn't expect that the EUR 1 billion will be exactly evenly distributed over the strategy period. It's probably going to be a bit more front end loaded, but as mentioned, there's especially the kind of exits from our private equity holdings, for example, the timing is a bit uncertain. We don't know ourselves either exactly how that's going to be. Life is definitely going to be the most important contributor here over the period, like it has been over this time as well. That contribution is decreasing or expected to decrease basically in line with the liabilities runoff, but will continue to be significant. I think it's worth noting here as well that there will be no cliff edge effect in terms of the dividends after 2028 either.
We will continue to be a good dividend payer over that period. That is when the Capital-Light Business is compensating for the decline in the With-Profit Business altogether. Probably a good thing to also remind that even though we have two operating or two legal companies, Mandatum Life and Mandatum Asset Management, most of the operations are actually under the life company, for example, the Corporate Business and the Retail Business. The Asset Management is more of a product legal structure here. Life is the core of Mandatum's operation and cash flow.
Right. Do we have any other questions here at the venue? Jaakko.
Good afternoon, Jaakko Tyrväinen from SEB. Could continue on the capital and solvency where you are targeting now, 160%-170%.
Could you open up a bit on the internal thinking on the sufficient solvency level between the segments, meaning what is the kind of a comfortable solvency level that you are seeing for With- Profit, which is now largely de-risked the portfolio and interest rate hedging at close to 90%? The follow-up here is that what is the kind of a required IFRS equity that you need to kind of allocate for the Capital-Light Business, given that it's kind of contributing the large majority of your CSM?
Yeah, sorry, Jaakko, what was the first question? I already forgot it.
Sorry, long one. The first one, what is the kind of a...
Oh yeah, now I remember. Yeah, yeah, sorry.
The sufficient solvency for it.
As you remember, back in the days, there was a kind of thinking that 100% is the kind of, of course, the legal limit, but if you go over 50%, it typically would be the S&P A rating. I think that would be more thinking of the Capital-Light, so probably Capital-Light closer to 150 and then With- Profit still above that. That, of course, is decreasing, and Jukka in his presentation will kind of show you a bit more on the details of the development of that business going forward. I forgot your second question already.
The kind of required IFRS equity for the Capital-Light Business, given that it holds pretty strong CSM?
That's actually a very good question. We internally, we calculate different kinds of things about this because it's not an easy factor.
The legal requirement for the Asset Management Business, for example, is minimal. Of course, there's the operational side of things as well. We believe what we've shown here with the 30%-40% return on equity is a good description of the business. Like we've shown how much that generates, that probably gives you a bit of an indication where the IFRS equity would be. Overall, our solvency is very, very simple in a sense. We have our equity and we have the tier two capital loan, and then we have some CSM, and that's basically it. That's a smaller amount altogether. It is very low, but it's not a simple question to answer. We've kind of decided that this 30%-40% is probably a good way to look at how much the capital is required here.
Good, that's helpful.
My last one, I could continue on the international expansion. You are taking some steps and continue investing in Sweden. You have some top line from there already, whereas the other countries like Norway or elsewhere in Europe, the top line is rather small still. Are you willing already to kind of invest in those countries where you do not have kind of a sufficient top line yet? Before the top line comes in, are you ready to make losses?
I guess in every business, when you start from scratch, you have to be ready in asset gathering type of business to really... It cannot be profitable in the first day and first year. We do have quite substantial assets under management over in Denmark, but still we do not have yet office there. We have covered that from Helsinki.
Let's see if this is going to be the way going forward. In Norway, at this moment, we are servicing Norway and getting new customers, trying to get new customers from Norway, from Stockholm. We have one person who is really concentrating on the Norwegian market. Going forward, I guess once the business spreads, we will have more people in those countries.
Okay, thank you very much.
Any other questions here at the venue? Yes, Antti.
Hi, Antti Saari from OP Group. I would like to continue regarding the potential M&A. Is there some geographic focus area that you're looking for? Something in Finland, something in Nordics, or maybe something international?
As I said, we are looking at everything. Of course, Finland is, everybody knows each other. Everybody has discussed each other at least for 10 or 15 years. Still, it's very fragmented.
It's interesting, of course, that everybody is listed. That's a little bit different than in the other countries. Definitely Finland would be easy, but as I said, it takes two to tango. Looking at international, it's the Nordics. I have a hard time to see that we would look for something outside of the Nordics. Of course, I think Sweden, Norway, Denmark, as I said, with the distribution spearhead. Also, if we can find some interesting products. Maybe to add on that, that Petri said that we have allocation products. We are doing already all the asset classes. We have done that on our With-Profit B usiness for 25 years already. We've been in all the alternatives. We have all the equities globally.
But we have then chosen every now and then to take some other asset managers, like the U.S. equities, where we do not see that we definitively will never have an edge on that one.
Okay, thanks.
Thank you. Anything else here at the venue? If not, let's go for the questions from the webcast again. Regarding the cost income ratio, what are the main areas and actions you have taken to achieve that significant decrease?
I think Petri already alluded to in his presentation that it is about the income growth and growing income faster than costs. I think also in my presentation, I showed you the different building blocks.
Important factor here is that Mandatum, obviously back in the days when the investment result was almost 100% of the profits, then of course the costs were in a different position as in a business, which is more based on fees. Of course our costs are basically coming from two sources. One is staff costs and the other one is IT. IT is probably the one where we see the kind of potential to still improve because we've taken a lot of these investments already, like I mentioned, this group pension policy management system as well. There's a number of things that one can do. We've streamlined different processes across the organization. When you're moving into a fee-generating company, then the cost can play a bigger role than previously. Our plan is to grow income faster than costs.
That of course cannot go to eternity because that will result in a zero cost income ratio. In any case, it's probably the route that we focus on the cost side. Even though we don't have the official cost income ratio as a financial target, it is very, very much internally. We will continue to report just like before. Don't worry about that. You will be able to track our performance just like before with the same metrics, whether that's cost income ratio, whether that's net flow, or any other metric.
Let's jump back to the dividends. With the projected growth of Capital-Light Business combined with With- Profit decline of 10% per annum, do you see the dividend level remaining at current levels past 2028 until With-P rofit has diminished by around 2032-2034?
Yeah, I think the fact is we do not obviously guide on that, but as I mentioned, there will be no cliff edge effect in terms of that dividends would disappear after 2028. That is not the plan at all. It will become much more kind of based on the actual earning streams. We have given you that we expect that the Capital-Light Business will grow by 10% in this period. It will not kind of go to zero after that either. A significant part of that earning stream can be paid out. Of course, as well, the With-Profit is not ending after 2028 either. It will continue to generate profits and release capital as well, but less than during this strategy period. Like also Petri mentioned, the liabilities runoff is the number, it is gradually kind of slowing and the amount is slowing.
I think those are the two building blocks I would look at. As I said, there will be no cliff edge effect in my opinion. Anything to add?
To add that this is now the four-year period. Let's see then. Of course, we have the ambition level is very high. If we succeed in the Capital-Light Business, I definitively do not see any cliffhanger.
Any more questions here on site? Hans, yes. Just wait for the microphone.
Thank you. You had an interesting graph on the SCR development that you're expecting where you're at EUR 950 million now. Then you have Saxo Bank going out, which I guess is EUR 150 million. Then the With-Profit decline of EUR 250 million. Then you have a capital built from the fee-generating or the Capital-Light Business.
Why is that when it has not built any capital over the past two years?
Actually, the SCR has increased in that business over the period. This is the kind of problem with the Capital-Light B usiness that is missing the other component, which is the own funds generation. The actual net capital requirement is extremely low. That only shows you the other part, the SCR part. It does not show the own funds generation. In a sense, it is a bit misleading. This is the way to show how we get to the 160%-180% development. The Capital-Light, net capital cost, capital requirement is very, very, very low.
Thank you.
Do we have any more questions here? If not, looks like there are no more questions. Let's take a short break. Please be back at your seats in 20 minutes.
That would be five past two as we continue with our program. Thank you.
Welcome back, everyone. I hope you had a refreshing break. Let's continue with our program. This afternoon, we'll delve deeper into our Institutional and Wealth Management strategy, our corporate client approach, and the evolution of our With-Profit Business. We'll have another Q& A session at the end of the day, so please hold your questions until then if you're here in person. For those of you joining online, please keep sending your questions at any time. Let's continue with the next part of the agenda. I am pleased to introduce you, Janne Sarvikivi, the brand new head of our Institutional and Wealth Management segment, and Juhani Lehtonen, Mandatum's Chief Investment Officer. Gentlemen, please go ahead.
Hello, everyone, and I hope you had a refreshing break and you feel energized to take in some of the very exciting stuff we have for you this afternoon. My name is Janne Sarvikivi, and I'm Head of Institutional and Wealth Management at Mandatum. With me, I have Ju hani Lehtonen, our Chief Investment Officer.
Good afternoon, everybody.
As you've heard now from Petri and Matti already earlier, the Institutional and Wealth Management segment is the growth engine of Mandatum in the future. It is the underpinning of the Capital-Light Profit growth that you've been hearing about. It's, of course, my great pleasure to be tasked with realizing that growth over the next couple of years together with my colleagues. What is Mandatum currently? It is the leading Nordic credit and alternative assets and wealth manager. We all know the product heritage that Mandatum has.
We have a wide variety of products, but our expertise is especially acknowledged in the credit and alternatives business. We have many award-winning products in the credit space, but also in equities. We've received awards recently also in that space, for example, in the managed futures part. Crucially, we have our own distribution, which, as you've been told already earlier, is the fact that will enable us to get a better grip on our customers, where we feel that we get a real connection to the clients and we can serve them better once we have that own distribution. That is key to our strategy. We have a wealth management business in Finland where we cater towards ultra-high net worth individuals and high net worth individuals, family offices all across Finland in different parts of the country.
We have an Asset Management Business in Finland and the Nordics where we cater to institutional investors, professional buyers, and we have also started dipping our toes already outside of the Nordics, as Petri told you, in continental Europe. Our product offering consists of credit products, leveraged finance, private debt, fixed income products. We have an alternatives offering with private equity, real estate that we do directly and through funds of funds. We have an equity and allocation product group. All of these products form the basis of our discretionary mandates that we offer to our clients. Our assets under management are currently EUR 8 billion almost, and our profit before taxes was EUR 27 million in 2024, and it has grown really nicely during the past couple of years, as you can see on the graph.
I'll now hand over to Juhani to talk a bit about our heritage and our history before I tell you more about what we're going to do in the future. Juhani, please go ahead.
Yeah, thanks, Janne. As Petri and Patrick already mentioned, we have a strong heritage on portfolio management. We've started investing in our Life portfolio 40+ years ago. Since we started in offering Asset Management services for Finnish clients back in 2008, we started with fixed income, equity, and allocation products, discretionary mandates. We were front runners in Nordic High Yield, for example, in the Nordic space. We started to offer private debt, private credit solutions to our institutional clients based on our own heritage, investing in our own balance sheet, like in each of these asset classes.
We built a team on leveraged finance to start offering loans, senior loans to our customers, and there we are also front runners in Finland. Private equity, we've done for a long time for our own balance sheet. We invested in teams and have now an offering also for Capital- Light side, likewise real estate. We are 45+ professionals here in this building, Helsinki, and also in Stockholm. I need to say that each and every asset class, our teams work both for own balance sheet and client assets. The deal flow goes through the same teams, and that's very important, I would say. This is an example of one of our core areas, our credit platform, as we call it. We've built this to own our strengths in credit. We start with the investment grade.
We manage money market, of course, and then an investment grade fund for Capital- Light. It is a daily liquid UCITS fund, being our largest actually at the moment, EUR 1.5 billion. On the high yield side, our Nordic High Yield, the award-winning fund, now around EUR 800 million. Just recently, we started a new fund called European High Yield Fund. I am going to touch that a little bit later in this presentation. Leveraged loans, as I mentioned, is a unique asset class that we are building and leaning towards our heritage. There we have two strategies, one in our investment wrapper and one in our Luxembourg RAIF format. In opportunistic credit and private debt, we work on the closed-end side, and in private debt, actually, we are market leaders in Finland when it comes to the uses of Asset Manager in the Institutional side.
We are rigorous bottom-up credit screeners, so it's the credit process that goes through the investment committee workflow. I'm heading these committees, and the committee members are in every asset class built on other asset class seniors and also team leads. The bottom-up credit work is actually supported also from the top down. In different market environments, it's also important to implement top-down strategies if needed. Here's one example, a recent example where we have really gained performance. From the COVID times where actually inflation started to creep heavily higher, followed by rates soon after, it was a really turbulent environment for credit in overall markets. Even if I say to myself, we handled this environment very well. We were heavily hedged on the interest rate sensitivity side in those products where we had fixed coupons.
Many of our underlying credit products have a floating rate nature, like loans and also partly our Nordic High Yield. Heavy top-down layer with a rigorous bottom-up credit screening have resulted today, for example, in our flexible IG, a 13% plus outperformance versus the relevant market. Going further north, Nordic High Yield beating another 14% of the underlying European high yield market. I think this just showcases one of our strengths when we truly care about our clients' assets. Opportunistic credit currently is our performance-wise leader from the COVID era. This is the team, our credit team. Of course, we ran our equity teams and private equity and real estate teams and so forth. We've won now three times the Best European High Yield Fund award for Nordic High Yield, two times in the five-year category and three times the three-year.
I need to say that I'm very confident that with this team, we are able to deliver the growth that our colleagues are leaning. Thank you.
Thanks, Juhani. Juhani just gave you a great example of our deep product knowledge within a certain asset class and a segment, and that's just an example of how we do things rigorously together with our clients and in conjunction with our clients. We invest alongside our clients, and that's an important thing to remember. It's also important to remember that credit is not the only asset class Mandatum is good at. Like the Chair just said, we've done equity investing for 25 years on our own balance sheet. We have exceptional knowledge in real estate and alternative assets, private equity. We have a broad knowledge across asset classes.
It's very important to have great products, to have portfolio managers who do their work diligently, but it's equally important for a wealth management business to be close to your clients and highly regarded by your clients. I'm proud to say that if you look at the rankings made by SFR, we have been recognized as the Top Institutional Asset Manager in Finland, which is an achievement that we are really proud of, and especially the journey from 2020 has been quite remarkable. This tells us that the institutional most demanding professional customers appreciate our service very much. Not only that, because we have an important segment in the Private Wealth Management Business in Finland, those customers are very happy with our service.
If you look at the net promoter scores depicted on the graph, they are at 83, which, as you know, is a very high number in terms of client satisfaction because that number can go from +100 to -100. It really shows you that the clients appreciate our services. We have the products and we have the service-mindedness, and those are the building blocks of any great asset and wealth management business. The growth ambitions set by the board are very ambitious. You have seen the numbers. They are high. The growth numbers are high, and the pressure is high. We have shown that we have been able to do that historically. We have grown by 19% CAGR since 2017 across asset classes, across different client segments, which is clearly faster than the market.
This gives me confidence in our ability to grow in the future to meet the ambitious targets that we've been handed. You can see that the growth has been very nice in all of the different asset classes and customer segments. Also in equities, even though the equities part is rather small, it's worth bearing in mind that our allocation products include a significant portion of equity investments, and that has grown extremely nicely over the years. That shows you that it's not just one asset class or one customer segment. We've been able to show growth in all of those different asset classes and segments. Petri already earlier discussed the growth in the market and how that underpins our growth. It's nicer to operate in an environment where the market is growing rather than shrinking.
We, of course, need to do better than the market, but it's always nice to have a tailwind instead of a headwind from the market conditions. We expect that the Nordic Asset Management market will continue growing by about 8% CAGR in the future during the strategy period, and the Finnish Private Wealth Management market to grow by about 6% CAGR during the strategy period. These are, of course, driven by the factors that Petri already mentioned: economic growth, increasing wealth, and so forth. This is something where we feel that we can certainly outgrow the market. I'll now outline the strategic priorities for the Institutional and Wealth Management segment. Firstly, we are going to accelerate the international growth in Asset Management. We've already heard that we've been successful in doing that earlier on a smaller scale.
We will do that in the future as well, expanding into new markets while we do it. Secondly, we intend to enhance the product offering to support growth. In particular, in the Private Wealth segment, equities, for example, is an important product segment because people tend to think about equities when they think about investing and wealth management. We are going to enhance our product offerings both in terms of new products as well as improving on the products we already have. Thirdly, we intend to double our market share in Private Wealth Management. That might sound ambitious, but I'll show you later why I'm confident that we can reach this goal as well. First, international growth. You've heard a lot about it today already.
You asked some questions from the CEO already earlier during the Q&A session, but I'll try to tell you a bit more about how we intend to go about it. The important thing to understand is we've done this already for a couple of years. This is not something new that we invented. We've done this already, and we've been quite successful at it. We have our roots in Finland. We're building on those roots and the experience we have from Finland. We have 10 sales locations here all across the country in different locations. We have a sales location in Stockholm, and we have already done nice business in both Stockholm and Denmark. We have started dipping our toes into the continental European markets, such as Germany, for example. Our track record in Finland is extremely strong.
We have seen 14% AUM growth since 2018 per annum. Our growth in Sweden and Denmark has been even more impressive than that, 35%, of course, from a lower level, but it really shows that we've done the right things in our expansion strategy so far. We intend to continue this. The way to grow, of course, in wealth management is based on great products. You need to have salespeople. We are going to invest in more salespeople going forward. We're going to make sure that we are able to serve a growing number of clients in these different geographies. We will go about it in a measured, stepwise way. We are not going to do something stupid with shareholders' money, but we are building on the building blocks and the learnings we've had from Finland and Sweden and Denmark so far.
I am very confident we will succeed in that. In essence, it will mean investing in people, hiring more salespeople, more capable salespeople with the right connections, because as you have heard, we are keen on owning the distribution channels ourselves. You can see on the graph on the right that we expect the fastest growth to come from Asset Management International, of course, partly because it is the smallest area now, but also because we intend to invest in that. In terms of margin levels, it is quite natural that it is going to be somewhat lower than our average margin given the nature of the buyers, the professional nature of the buyers, but it is also going to grow fast. It is going to be a nice addition to the bottom line. The Wealth Management Business, as you can see, is much higher margin, and I will talk about that in a second.
Our second strategic objective here and priority is to enhance our product offering to support growth. Some of you asked about the products already earlier, and I'm quite happy to tell you that we are expecting significant growth in our equity category. As I said already earlier, in Private Wealth Management, our allocation products contain a large part of equities already. The growth comes from those two areas in terms of the product categories. We have a very strong heritage in product development in all of these products, in all asset classes, and we've proven to be quite resilient in different market environments. We've had an extremely strong track record in credit products in the recent couple of years. I'll just hand over to Juhani for a minute to talk about our most recent new product in the credit space, which is the European High Yield Fund.
Thanks, Janne. Yeah, so we launched just recently our new missing part of our platform so far, so European High Yield Total Return Fund. We target the size of the fund being a UCITS from our UCITS Luxembourg UCITS platform to be EUR 500 million to EUR 1 billion around. As we are not index followers or index hugger, it will be a concentrated portfolio of 50-100 positions, also capable of the toolbox so that we are targeting to beat the relevant markets by 2.5% gross. We'll include hedging possibilities and also CLOs, for example, as an underlying. Funny coincidence is that it's actually the launching date is my 50th birthday, so I'm really excited about this product. Back to you, Janne.
Thanks, Juhani.
This is just an example of when we see a market opportunity, when we see client demand, we use our existing knowledge, for example, in this case, the Nordic High Yield expertise, to build a new product that will then provide value to us and the clients. A similar approach will be used when we launch new products in other asset classes. We've been successful in launching the managed futures product recently, which has had an extremely good performance lately. It's a product that we're very proud of and that we expect to sell quite well in the future. This is just an example of how we are able to launch new products in the right environment. Our third strategic priority is to double our market share in Private Wealth Management. As you know, this is a business we do in Finland.
Like I said earlier, it might sound ambitious that we're about to double our market share in this business. However, one of the reasons why we are very confident that we can do this is our current market share is very low. It's around 2% of the market. That might sound surprising given the name recognition and the high value of the Mandatum brand. People tend to know who we are. The Finnish market is quite oligopolistic in that sense. It's dominated by two large players, two large banks, and the rest of the market is fairly fragmented. We feel that there's ample room for growing our market share in this business. The way we intend to do it is, first of all, I've already talked about enhancing our product offering. Private Wealth Management is much about managing our clients' total wealth, total portfolio.
When we do that, we need to be good in all different asset classes. We are that, but we have to make sure that we have a product for each asset class that fits our clients. Equities, for example, is an asset class that many private individuals think about when they think about saving for their retirement, as I said earlier. This is part of the building blocks that we intend to use. A second building block is by increasing customer activity. Again, if you want to grow in wealth management, you need to have more people. Our clear advantage when compared to competitors is the fact that we are close to our customers. Our customers feel that we are very close to them. We are active. We contact them. We speak to them.
In order to do that, we need to hire more people and, of course, increase the current customer activity because one of the things we intend to do here is, of course, also increase the share of wallet from existing customers. Increasing activity and enhancing our product offering will do just that. Thirdly, and very importantly, we intend to utilize our network from the corporate segment. Petri already mentioned that the cross-selling we've been able to do between these two segments has been extremely successful in the past, but I expect it to be even more successful in the future because we intend to enhance the way we do it. We intend to make people even more aware of all the possibilities that we have for this cross-selling in different locations all across the country.
Finally, we will use our strong brand name recognition and the high customer satisfaction that we have to gain more market share, to gain a larger share of the wallet, and, of course, to gain new customers. That is basically the path we intend to take to double our market share by the end of the strategy period. This part of our business is, of course, the highest margin business within our Institutional and Wealth Management segment. It will most certainly be good for the bottom line. All of this will be based on the concept of scalable growth that you have heard both Petri and Matti describe earlier. We have done key IT investments. We are decommissioning legacy IT systems. We will be able to invest in IT in the segments that we expect to grow, but without any major investments.
We have efficient processes in place, and we have the product knowledge and the product structures in place. Of course, the talented individuals and the motivated people we have who are incentivized in the right way are the foundation of all of this, and we intend to invest into these people even more and hire more people. There you can see on the right-hand side an illustrative graph of the profit before taxes of the business and the cost-income ratio, which show a similar kind of trajectory than the group's trajectory as well. What do I want you to remember when you step out of this room later in the afternoon? This business is the underpinning of the growth in Capital-Light P rofits. This is the growth engine of the group. I have told you about the different initiatives we have to reach those targets.
Secondly, there's plenty of room for growth in the market. Even though we are a big player, a recognized player, a known player, our market share is still very small. It's small in Finland. It's really small in the Nordics and Europe. There is plenty of market share to take. The foundation for all this, in addition to the great customer experience we provide, are the excellent products we already have and that we've been able to show. Because especially when you sell outside of Finland, it's a lot about track record, of course, about client activity as well. We need to have the track record and get that in front of the client, and then we are able to sell our products very effectively. Thank you very much. I'll now hand over to Tarja, who will talk about the corporate segment. Thanks a lot.
Thank you, Janne.
Good afternoon, ladies and gentlemen. My name is Tarja Tyni. I'm happy to go somewhat deeper into how we leverage the leading corporate market position. Let's start with the overview on the current status of the business and what the Mandatum Corporate Business actually includes. Once again, how we leverage the excellent customer relations into profitable growth, be it corporate products or leading into Wealth Management. Let's start from our products on the bottom left of the page. Our biggest product in corporate is the complimentary pension. Then we have risk-life products, risk insurance, personnel funds, and as a differentiating service, we have the advisory for incentives and remuneration. We have the same products throughout our customer segments, but the use cases and sales models are somewhat different.
In large and mid-sized corporates, we help the customers to motivate their management and personnel to reach the company's targets through effective incentives. Whereas with entrepreneurs and smaller companies, we solve the entrepreneurs' issues and challenges first and then continue to the remuneration of the personnel, if that is applicable. The fee income can be split about evenly between the large and mid-sized corporates and then the smaller two subsegments. When it comes to financials, our share of the AUM, assets under management, has been increasing steadily in recent years, being EUR 2.6 billion in 2024. Pension is the biggest contributor to the AUM and to our revenues. Personnel Fund is growing fast and taking its share of the AUM. In profit terms, both Pension and Risk Insurance play a big role. As you have heard, Personnel Fund is kind of a startup business, but growing fast.
Let's look at the market. Our products have been growing, and we expect them to grow quite nicely also in the future. Let's start from the pension, looking into the group pension, which is the far biggest corporate product overall in the market. We have seen some 15% growth in assets under management. That has been split about evenly in asset yield and increase of premiums. Our market share, as mentioned, is very high in this area. If we talk about the AUM, the assets, it is over 60%. In premiums, it is 45%. Clearly, you can see that this is something we have done for a long period of time very successfully. Also, the market for the risk insurance has grown nicely. Considering the premiums, the growth has been about 7%. We are one of the biggest players with 26% market share.
The demand for both pension and risk insurance is healthy. As Petri mentioned earlier, Finland is clearly underinsured if we compare to any Western countries. The background is that our trust in obligatory pension and social security has been very high, but it is diminishing fast, which causes new demand for complimentary arrangements. The most effective way to take those is through employee benefits. However, the market potential in risk and pension is somewhat different. You can sell the risk insurance to all company sizes, from the smallest to the largest one, and to all personal groups, from entrepreneur and top management to whole personnel. Whereas group pension is more of a product to top management, key employees, partners, and entrepreneurs. Also, Personnel funds have been growing very fast in recent years, and there's still plenty of room to grow further.
Our market share in new funds is very high, over 70%, but looking into the AUM, it is a bit over 30%. The reason is that we have some very old, very large funds that take still a big share of the AUM in personnel funds. Looking a bit deeper in Mandatum's role in these businesses, we have grown quite nicely in all areas, and we want to at least keep our market share in all products that we have. In group pension, our AUM growth has been about 13%, so a bit lower than the market. A very good growth, but a bit lower than the market. The reason for lacking a bit on the market is very positive. Also, the other players have started to make the market. All our products are push products where you really need to have market makers.
They are not selling by themselves. We are currently very alerted for the competition, and we want to, as mentioned, continue keeping at least our market share. In risk, our growth has also been a bit lower than the market, but we have caught up lately, and the aim is really to continue on that path. We have very high growth potential, as mentioned, and we have invested a lot in new products and tailor-made the stories for different customer needs. Looking into pension and risk insurance, they are both very long-term. The average lifetime of pension in our portfolio is about 20 years, actually over 20 years. Also, in risk, it is 15 years. Like mentioned, the pension assets are very sticky. It's not just the nature of the assets, but also in Finland, you cannot transfer the funds from one player to another.
Looking into the growth in Personnel Fund, we have outperformed the market clearly. Our AUM growth has been almost 40%. Also, the Personnel Fund assets are sticky, but not as long-term as in pension. Besides the growing market, one important factor in our success in the Corporate Business is targeted market reach and efficient customer-centric sales. We have segmented the Finnish corporates for quite some time based on many different factors, the key factor being profitability. We selected a group of some 40,000 corporates as our focus group, and we have really concentrated our sales and service efforts on that group. About 18% of that group are Mandatum clients currently. We also have a very successful and efficient sales network throughout Finland. We have specialized teams in Helsinki that are responsible for the subsegments, for the concepts, for the sales models, developing them further step by step.
We have just started a new remote team to sell for the profitable small companies. In the rest of Finland, we have offices in nine locations. The people there are generalists. They are selling to all local companies together with the wealth managers. In each office, we have at least one corporate account officer and one wealth manager. We have totally about 50 salespersons in Corporate Business. Thus, we are truly local with well-optimized, excellent people. Our sales model relies on solving the customer's challenges and following up regularly. The outcome is seen on the Net Promoter Score, which has been well over 80% for quite many years in a row. Let's move to strategic priorities. The first one is to utilize the full potential of a growing market in all corporate products, but especially focusing on risk sales.
Also leverage the unique network of customers, especially the individuals making the decisions and being the beneficiaries to support both corporate and wealth management growth. Thirdly, to increase the sales capacity and productivity. Let's take a closer look on all of these three. Starting with the market. As mentioned, the key in our sales model is to leverage the excellent relationships with the corporates to safeguard payments on the old policies, sell new products, and widen the current ones. Obviously, we want to be hungry also for the new customers, be it competitors' customers or non-penetrated companies. On the left side of this page, you see our penetration in our focus group, target group, in different products. We have the biggest coverage currently in Pension, about 15%, the lowest in Personnel Fund.
We expect to see a step change within the strategy period, but we do not expect to get 100%, not in the strategy period, perhaps never, because, as mentioned, all our products are still push products where you need to be able to tell the benefits to the customers and repeat them regularly. The new customers are important, but in EUR and profitability terms, the most important factor is to take care of the old customers. As mentioned, our products have a very long lifetime, and it is very essential to take care of the annual premiums. They have a huge role in shareholder value. It is also easier to sell more to old customers than get totally new ones. To safeguard also the long-term growth, we need to also build on new customers.
As mentioned, we see the biggest potential in risk insurance, as our coverage is already lower than in other products, and it is a very effective employee benefit. Most importantly, as mentioned, there is very natural demand for that product. As you see, there is a lot of potential also for new personnel funds, but that you can only sell once. There can be only one personnel fund per a corporate. Overall, in all these areas, there is a very good growth potential. As you know, we never meet companies, and the companies are never the decision makers. We always meet the decision makers within the companies. It is not just the corporates that we have analyzed and segmented well. We want to understand who are the people, who are the right people behind the companies, and meet them regularly.
As you know, the beneficiaries of our products are also the key decision makers within the companies, be it the top management or key employees. As it happens, these decision makers and beneficiaries are also among the wealthiest people in Finland or on their way to become wealthy. Like Petri was saying earlier, also new wealth in Finland is born within corporates, be it M&A, be it dividends or management incentives. This unique combination of our unique network has already resulted in a very high number of our new wealth management clients being from the corporate segment, having a corporate connection. Also, in accordance to our analysis, about 30% of the wealthiest people in Finland, they are already Mandatum clients with a product or another. I have praised a lot of the excellency of our people to get very good customer satisfaction.
We obviously need to expose more customers to that for the benefit of the customers and Mandatum. We have a lot of means to increase our productivity. We want to meet the right customers at the right time with the right message and have as many meetings as possible. All productivity improvements should result in better results. We have a lot of issues like everybody else in the toolbox and want to use the different tools wisely, be it, for example, advanced analytics, process developments, digital service, or obviously the newest one, AI agents running there on the right places. We are also investing in some additional salespeople. The aim is to increase our customer meetings by 50% until the end of the strategy period.
Our current sales conversion is already quite high, 20% of the unique customers met, but we want to and we can increase also that through all these productivity improvements. Obviously, all that should result in higher sales and higher premiums and obviously more happy customers. Like in other areas as well, this additional growth will increase in additional profit. Also, our business in corporate is quite profitable already. With optimized investments and good cost control, we can have a step change in profits as well. Finally, key takeaways from the Corporate Business. First, there is significant room for growth in Corporate Business itself. Second, we want to continue to be the key source for doubling the market share in wealth management. Thirdly, we are targeting for a significant increase in sales activity and productivity. Thank you. Now I welcome Jukka Kurki to the stage.
Welcome, Jukka.
Thank you, Tarja. So one more to go before we have our second Q&A. My name is Jukka Kurki, and I'm responsible for this With- Profit Business. Today, in this presentation, I'll focus on strategy and also dividend capacity related to this area. Before that, short introduction to this With- Profit Business. This business has been in run-off status now more than 20 years, and the majority of policies come from the pension policies sold in the 1980s and 1990s. The majority of insured persons are retired, which together with our active liability management means that liabilities are decreasing quite fast. Liabilities are also sticky and well predictable. Average guaranteed rate is 3.1%, and the highest ones being 4.5% and 3.5%. When it comes to profit sharing between policy and shareholder, that is based on risk-return type of thinking.
Policyholder benefits are well secured, for example, due to Solvency II regulation. Because of that limited risk, fair benchmark for policyholders' return is low-risk government bond yield. In latest years, these guarantees, especially these highest ones, have already exceeded this benchmark, which means that bonuses have been zero or low. That is also what we expect to continue in coming years. In IFRS liability, best estimate bonuses and guarantees are already included into those liabilities. Liabilities are discounted with market-consistent yield curve, which means that the expected excess return over discounting that goes to net finance result and no more profit sharing anymore at that point. Last year, result was 100 and result related to this area was EUR 116 million. That is still a material part of Mandatum's result, but the proportion is decreasing as Capital-Light area is increasing.
We also expect that this With-Profit area result will decrease at least in the longer term in line with the liabilities. It is important to notice that this With-Profit Business is a profitable business. Because of these long-term guarantees, this requires quite a lot of capital. Due to that, even though our net finance result has been good, expected return on equity is below our company target. That is the reason why this is in run-off, this business, not the profitability as such. In September 2023, we had our first investor day. That was before we were listed. There we disclosed also strategy related to this area and four key elements behind that. We said that we will continue de-risking of assets. Since listing, net sale of listed equities and alternative has been EUR 230 million.
Due to that, listed equity allocation has decreased to 5%. We have also continued liability hedging, and today hedging ratio is close to 90%. Also, we have continued active liability management, which we actually started 15 years ago roughly. Since listing, liabilities have decreased according to our expectation. Thirdly, the plan was also to generate more stable and predictable net finance result, which key driver would be excess return from fixed income assets over cost of liabilities. Since listing, six quarters cumulative net finance result has been around EUR 160 million. Also, the spread between fixed income assets, marked market yield, and unwinding rate of liabilities has been stable. The last one, which is more consequence of these previous ones, was to release capital. Since listing, capital requirement has decreased.
Assuming 200% solvency ratio, capital release has been around EUR 100 million. Putting together capital release and net finance result, we have generated quite a meaningful amount of capital since listing. Strategy going forward, actually no material changes in that. Our clear priority is to enable dividend capacity. Main tools for that are net finance result, de-risking, and capital release. We take a more close look on each of these, but less targeted net finance result. Last year, net finance result was EUR 100 million, and first quarter this year was EUR 37 million. We started this de-risking in the second half of year 2022. Since that, net finance result has stabilized a lot. There is still some volatility, but all in all, now much more stable and also much more predictable net finance result as it was before de-risking.
The more we are moving towards fixed income asset allocation, the more our net finance result will rely on the spread between fixed income assets and cost of liabilities. On the right-hand side, you see that that spread between fixed income assets, marked market yield, and unwinding rate of liabilities has been stable during those years. It is good to notice that market conditions have been quite different. There have been negative rates, strongly increasing rates, stable rates, and so on, but the spread has been stable all the time. When it comes to de-risking, we are in a midway. Three years ago, we had roughly 50% in listed equities and alternative assets. Today, that allocation is roughly 25%. The main movement inside that is that listed equity allocation has decreased to 5%. Our final target is so-called strategic asset allocation.
That is 90% in fixed- income assets and 10% in liquid and transparent listed equities. This target allocation fits very well with our liability profile. Also, net finance result is expected to be more stable, more predictable, and also more transparent. We have still 10% listed equity allocation in this target allocation, even though the standalone capital charge related, standalone Solvency II capital charge related to listed equities is as high as 39%. It is good to notice that when you have this quite small proportion in listed equities, actually diversification benefits with the fixed income assets cuts roughly 50% of that c requirement. That justifies this allocation in listed equities also in coming years. On the right-hand side, you see that this will have material impact on our capital requirement.
Today, standalone capital requirement related to this business area is EUR 430 million. If we could move overnight to this target allocation, that would decrease our capital requirement by 35% to EUR 280 million. You can also see that there is no, sorry, I come back to this asset allocation. As you see, there is no alternative assets in this target allocation. It definitely does not mean that we do not believe that asset class anymore. Historical returns have been good or excellent in that area. The fact is that with this kind of liability profile we have, strongly decreasing liability profile we have, these kind of long-term illiquid assets just do not fit with that kind of liability profile, even though the expected excess return would be tempting. Also, it is good to notice that capital charges related to those areas are quite high.
Anyway, because we have this 20% share today in those alternative assets, it means that we do not expect this path towards target allocation to be linear. It can be even so that we do not reach this target allocation until year end 2028. It depends especially on the private equity exit market. As our solvency position is strong, we can and we will wait until private equity exit market will open. This de-risking has material impact on our capital requirement. Also, our liability trend is very clear. We expect that liabilities will decrease by more than 50% in the coming 10 years period. This alone would also have material impact on our capital requirement. Especially when we put this together, this liability trend and de-risking together, we expect that the capital requirement will decrease by roughly 50% until year end 2028.
There is Solvency II review on coin power regulators, which will increase capital requirement in year 2027 and 2028, but it will not change this big picture. As mentioned earlier today, we have roughly standalone capital charts for this area is a bit over EUR 400 million. So meaning that we expect that to decrease by EUR 200 million. As seen again, 200% solvency ratio, that means that we expect that roughly EUR 400 million capital will be released until year end 2028. It is important to notice that it is not only about capital release when it comes to capital generation from this area. Our net finance result has been good, earlier mentioned EUR 160 million since listing.
Even though liabilities are decreasing and we expect this net finance result to decrease in the long term in line with those liabilities, we still expect that we could generate a meaningful amount of capital from this area also in coming years. Together, net finance result and this capital release, we expect that capital generation from this area would be around EUR 700 million-EUR 800 million during that period. That, of course, depends on the financial market. Key takeaways: De-risking towards more capital efficient asset allocation is expected to enable also in the future good and more stable net finance result. De-risking and liability trend will release capital. The question is how fast, but anyway, a meaningful amount of capital will be released. Following from these two, we see substantial dividend capacity related to this business area. Thank you. Before next, we have second round of Q&As. Lotta, Petri, and others, please step over here.
It just came to my knowledge that we have some technical delays in some of the slides during the two first presentations after the break. We obviously apologize for that. We are now ready to begin our second Q&A session. This time, all of our presenters are here, so feel free to ask about the strategy, the capital growth, or any other topic we have covered or not covered. You are welcome to submit your questions, obviously, either here or online. Before we go into the questions, I would just like to ask Janne, you joined Mandatum quite recently. What have been your first observations?
I think the first observation is, of course, that the people are really great here. I mean, it's nice to join a company with an entrepreneurial culture, especially when you enter into a phase of ambitious growth targets. The fact that we have people here, not just, of course, in the management group, but also in my team, in the entire company, people are really forward-leaning and entrepreneurial. That's been great.
Okay. And then let's go for the questions. Actually, I missed one question by two seconds only in the last round, and that was for Patrick, but I'm sure my colleagues here can answer on this one as well. Since the separation from the Sampo Group, Mandatum has successfully balanced growth with margins. What is your view on competition and Mandatum's position in the market at the moment?
Thank you for the question. If I may answer, since the last 18 months, we haven't seen really big change in the market environment. Of course, there's always tough competition in Asset Management and Wealth Management, but no, let's say, softening market or trends towards the lower prices. I guess the price levels and competition is quite the same level than we saw already two years ago. It's hard, but with good salespeople, with good customer service and great products, you can survive. In many cases, you can charge a little bit more than others if you have really great service and better products than others.
Great. Do we have any questions here on site for our presenters? Yes, Sauli.
Hi, Sauli Vilén from Inderes. About your client segmentation in the Private Wealth, some of your peers have leaned more on the past years on the, let's say, private to premium banking segment, so to speak. I guess that's a tad below where you have usually, or historically at least, been. How do you see that clearly growing segment, the private/premium banking, I guess it's the right term here?
I mean, we're definitely targeting that segment as well. I think that we have a very good chance of succeeding in that segment, in particular, because that segment is, or it requires you to be close to the customers and to be able to give them personalized advice, of course, on the right scale given the customer segments. That's definitely in the cards for us as well.
On the same topic, have you done any analysis regarding that? What is the key reason why private clients switch to you? Obviously, they have the portfolio on some other place, mainly, I guess, on some bank. What are the key reasons for the change?
I think there are two reasons. Products, we have great products. The other, I do not know if it is more important, but at least equally importantly, it is the service level, because customer service is in our DNA. If you are a customer at a very large institution, you might feel overlooked in some situations. Our very strong focus is to be active towards these clients in all market conditions, in particular when it gets difficult. That is when it is possible to win clients also from competitors at times.
On the alternative side, you mentioned that you obviously want to grow there also. Do you see you still being in the space of private equity and real estate, or do you also see the possibility to expand beyond these sub-asset classes in the alternative side?
I'll start and then give over to Juhani . Like our Chair said earlier, we're looking at all things. We're definitely open to new asset classes as well. As you pointed out, there are growth opportunities outside of the alternative assets that we already offer. For sure, if the market conditions are right and the client demand is there, we will expand into new asset classes as well. But Juhani maybe will want to expand on that.
Yeah, we have a team on private equity, both internal and then fund-of-fund program that we are actually fundraising currently. And then real estate, both fund-of-fund European-wide strategy and then our own products. Then on private debt, private credit especially, where we are market leaders, that's something we are really also trying to grow even more in Finland. Yeah, many of our customer base, they do have actually quite long horizons. For example, private individuals who have their so-called third pillar pensions or voluntary pensions in our wrappers, they do have long horizons where some of that illiquidity premia suits pretty well. And also institutions, of course. Yeah, that's one of our core areas is the alternatives. Yes.
Okay, thank you.
Next one, yes, Jaakko, please go ahead.
Thank you, Jaakko Tervonen from SEB. A good follow-up on Sauli's topic and to specify a bit. You are relatively small in real estate. Given the situation that we are seeing now in the Finnish market, are you seeing opportunities in that field?
Yeah, of course, we are looking at the market all the time. Let's say that we think that this Finnish real estate market, let's say freezing or troubles, are not yet behind us. We have not seen that many distressed assets on the table, meaning that it would be a no-brainer to do some big moves on that side. There is a small decrease in pricing, but I think not enough to think about doing something big.
What if those distressed assets come on the table?
Of course, as a big player in the market and a large customer base, we will look at those opportunities on that time because we do have people to do that and knowledge and expertise. But let's see.
Good. Thank you.
We have one question here.
Emil Immonen from DMD Carnegie. Thanks for taking my questions. Maybe going to a different topic. A very good improvement on the customer satisfaction, especially in the wealth management segment in the last few years. What have you changed?
A lot of things. Let's start with the most important thing. I guess we have been extremely good in increasing our customers' wealth. This business, this is the most important. Once you can increase your customers' wealth and you're better than others on that, your customers are quite happy then. If you are even and you are not that much better, and nobody can be every month, every week, every quarter the best one, what we have also done is, of course, better reporting to our customers. We do have a lot of alternatives in our customers' portfolios. Many of you might know that it's the calls and commitments and reporting and so on. It's not that a simple thing to do.
If you're better on that, the customers understand better their assets and portfolios, how they are really going and cash flows and so on. That helps and makes customers more happy. The service, we have put a lot of effort to our customer service to serve our customers better. We tried to be more active than before, even though two years ago we thought we are really active, but there's still room to improve that. There are a lot of things we have done. It depends from customer segment to customer segment. If you look at the institutional investors, we were ranked as number one last year. There are plenty of things which we have improved. Also, name ESG reporting, reporting itself, customer service, and also, like I first mentioned, the one-year, three-year, five-year performance. Those are the things.
If I continue a bit on Private Wealth side, it's also on what are the issues that you discuss with the customer. It's not only the assets and the performance. It is also what are the targets, how is the private life, how do you achieve the different targets. So it's the way you differentiate on the overall story with the customer.
Of course, added value services like legal services and that kind of things.
I think it's fair to also point out here that our structure with the insurance wrapper is quite unique in the market. It has definitely benefits. It makes the kind of reporting easier. None of our competitors really have the same structure. There are also tax benefits for moving assets within the wrapper. I think the point that also Janne brought up earlier, and that goes for Sauli's question as well, is that the Finnish Wealth Management market is a bit strange. There are two massively big companies with a huge market share. One could almost say a naturally big market share. That means that probably the client service hasn't been at the level that it could be. I think there are a number of reasons, but I think that's also a kind of market structure thing that makes Finland a pretty strange animal compared to many other countries.
Great. Thank you. Now, switching a mindset to growth, you want to grow the pre-tax profits that require some investments into new personnel. How are you looking at the 10% cake? How much is going to come next year? How much is going to come in four years? How backloaded is that in your mind?
I think it's actually pretty straightforward. Of course, the market will have an impact. That is clear because the AUM net flows are important drivers here, especially on the institutional side. That has an impact. It's impossible to say the average return on equities over a long time, I guess, is around 7%, but I don't think it's ever been 7% in a single year. I think it can be. A lot depends on the market, but assuming kind of average returns, and as said, the plan is based on around 10% AUM growth, which I think is achievable, but the market will have an impact there. I can't really answer how back-end loaded or front-end loaded it will be. It's hopefully linear, but most likely not.
Thank you.
Let's take the next question.
Yes, Hans, Danske Bank. Just on the Corporate Pension side, you showed some interesting statistics with the 61% market share. I was thinking about the 17% market share you have on number of corporates. It was not immediately obvious to me how much of the growth is kind of coming from upselling your current customer base. How much of the growth is coming from taking a larger share of the customers that you do not have today? Why is there such a big difference? Is it more because you are kind of big within large customers today and want to take a bigger share of the smaller customers?
The key is really the combination. Like I was saying, from a value perspective, it is clearly the old customers, taking care of them, making sure that they continue to pay, selling more. It has much more value currently than getting new customers. I would expect, I do not have numbers, but let's say typical 80-20 or something towards that overall, thinking about corporate premiums. We also need to take and have new customers. The key is really that, for example, with the current customers, it may well be that our market share is biggest within the largest customers. At the same time, they are quite well penetrated, but also there is a lot of potential to sell more because typically they may have just some product with the top management or some risk insurance for the whole personnel.
The deals tend to be bigger. Also, the smallest corporates, we only target the profitable ones, but we have not had too much focus there in, let's say, the last 10 years. Now, when starting with the remote team, we believe that we can also more effectively cover them. It is kind of a very synergetic play where we want to meet the same customers and be able to grow in whatever area is most suitable and needed for that special corporate and then the decision makers.
Thank you. My second question is on the Wealth Management and Asset Management side. You show these charts with the margins and growth, and you could sort of add another axis to it and say kind of value between those two. My question is really, in the discussion around products and geographies, how willing are you to sort of go towards growth on the expense of margins? How much does it kind of steer your product and geographical expansion?
We are always going to be very disciplined on margins. As I said during my presentation, it's obvious that margins will be lower in the international institutional market if you compare it to the Finnish Private Wealth Management market. We are willing to play with the rules of the markets, but that's not our competitive advantage. Our advantage are the products and then our sales capabilities.
I guess the second part of that question is, with the sort of market backdrop today, which is seemingly very good for Asset Management, why not accelerate growth even more than your sort of current targets are indicating?
I guess we could always accelerate growth more. There is no prohibition of us growing faster than what we have targeted. I think one of the key components of our strategy has always been to grow carefully in measured steps so that we do not do things that are detrimental to shareholder value. We want to test out stuff, and once we know that we are good at it, then we will expand. That is the way we have done the expansion so far. I think we will continue doing that. I do not know if you want to add something.
Yeah, yeah. What is really hindering us to growing faster outside of Finland, for example, on the Nordics, is we are extremely careful who we are hiring here. We do not want to take people in just because we just want to grow. We need five people in Denmark, five people in Sweden. All those people who are now working in Stockholm, for example, they are handpicked. They are really good ones. They have experience from the area. They know the products already before they come in. They have a proven track record. They can sell to institutional customers, which are really, really demanding customers. It is not that easy to find the right people. If there would be a bunch of people, we can immediately take them, but that is not the truth. That takes time to get the right people on board.
Once you get the right people on board, what we have also seen, they are performing very fast.
If I may add on the Portfolio Management side, for example, the credit platform of us, there are not really any capacity constraints. For us as a team, it does not really matter how big we are. There is ample room to grow from our side as well.
Thank you. Then last question on the With-P rofits. You sort of show and you have great visibility on the decline on the liability side. I was just wondering with regards to sort of operational leverage going both ways, how flexible is your cost base once your liabilities start to decline? What kind of per annum decline in net financials should we be penciling in going forwards?
Liabilities are decreasing around 8%-10% per annum. That is the best guideline for the net finance result and asset return and so on. When it comes to cost base, as Matti mentioned, we will go live in the next two weeks' period with our biggest With- Profit Portfolio that will be converted to a new and modern IT system. The next one will be converted in spring 2026. After that, all our With- Profit policies are administrated in a new and modern IT system. That gives us scalability benefits and also helps us to also manage our cost base.
That is actually a very, very good point that you need to kind of be very stringent on the cost base on businesses that are structurally declining. That is something that the whole management team is paying a lot of attention to, thinking about different ways how to kind of achieve that in an efficient manner because unfortunately, the liabilities, they decline in a fairly linear way, but the costs are not the same way linear. That is one of the key priorities for the strategy period as well, to make sure that we look at all options, how to do it as efficiently as possible.
Thank you.
Do we still have questions here? Yes, Antti, please go ahead.
Antti Saari from OP. You have ambitious yet reasonable targets now for the next four years. What you see is the biggest risk? I don't mean the full financial market meltdown, which would be a problem for all Asset Management, but something else. What would need to happen in the competitive environment or clients or anything that would cause you concern?
Yeah, I think the capital market, big problems on that side will affect, of course, but that's something which is not in our own hand. We have a limited amount of possibilities to really affect the capital market as such. I'm quite sure that our portfolio, when we are, it's quite big bodies, alternatives and credit and fixed income, it's a little bit more predictable than if you have a lot of equities and so on going forward for the different market scenarios. I would say that it's, like I say, the best thing to improve your business in this business is to be good in performance and make your customers more wealthy. If you miss that for a long period of time, so you are boring investments, so portfolio management is not doing a good job, that will affect your business.
No matter how good people you have on sales, if you don't have good enough products, that will really affect your business. Our portfolio management, they have a crucial role in our success going forward.
If I can add to that, just Petri touched upon this earlier, but hiring the right people is a key constraint. We need to be able to hire the right people in particular then in our international expansion and also the Finnish Private Wealth Management expansion. We have proven that we have been able to do that in the past, but we need to be able to do that a couple of more times in the future. That is one of the constraints, I would say.
From a Corporate Market perspective, so far, we have succeeded quite well also in the times of recession. Obviously, if the companies tend to decrease their personnel rather than increase, that has some effect, but we have survived those quite well. Looking into Finland overall, and you all know this discussion about the missing growth in our market, I think that we all share the same ambitious target of having the whole Finland growing, which only can come through the corporates growing. Obviously, the biggest threat for the Corporate Business is to have the whole country continue in the path where it is more perhaps stagnated or even decreasing volumes of the businesses rather than increasing. Overall, I think that we are in trouble. We certainly want to aim for helping for the growth rather than the vice versa.
You don't see any potential market trends that would weaken the competitiveness of your current offering? For example, I was thinking that if we would see very low interest rates again and your portfolio is quite leaning on credit products.
No, we do not really see that as a threat because we have lived that through. We were successful already on that time. We were really good in alternatives on that time when the interest rates were negative or zero. On that time, we sold a lot of private debt and so on. I think you have to be just flexible. There is a certain demand from customers. They do have their money, and they have to put it somewhere. We just have to be flexible to hear our customers and adjust our offering based on the current situation. We have lived that through.
Many of our customers, I mean, they have a fixed- income allocation, so they will be investing in fixed income no matter.
No matter what.
What the situation is. In those situations that you just described, even though that's not our main scenario, it becomes even more important that we are skillfully managing the clients' assets. I think it's reasonable to expect that we will actually gain some business there.
Yeah, maybe to add on my side as well. Looking at the past 15+ years, the team has been investing through financial crisis, then euro crisis, zero rate, negative rate environment, COVID, war erupted in Europe, and now trade wars and all that. There has been plenty of volatility in the market. I think we've handled those situations fairly good as we tend to be, as we are not index huggers. We tend to be very active when there is opportunity set. Many of our clients think alongside. They will invest in those turbulent times. That is really, really, really powerful for our performance to have fresh incoming money when there are opportunities in the market.
Okay, thanks.
Just to conclude, I guess it's like I have mentioned before, and some of you have even stated that, put it that on the paper, is that we don't give our sales forces that chance that they can somehow explain their poor performance because of the market conditions. That has really affected, we have that kind of culture so that even in bad times and in crisis situations, we have been good in sales and net flows. We don't give that explanation possibility to our sales forces.
Thank you, Petri. Take a question from the webcast viewer. Have you ever considered to divest the With-Profit Book now after the interest rates have returned higher? Is the book so linked to the same customers so it's not an option considered? Does your financial regulator do not like the idea to lose control of the old pension book? Jukka, that's perhaps for you.
Good. Yeah. We have to remember all the time that With-Profit Business is profitable business. We are not in that sense, we are not forced to do anything with that kind of things. Yes, during these years, we have investigated all options. Actually, we did one transaction 10 years ago, but then we acquired a portfolio when we see that there was a good opportunity to do that. To be honest, we have not seen great options to divest so far.
That's all clear. We were talking about the recruitments and how crucial they were. We have a question about what kind of people are you then recruiting and how risky is it to grow the headcount?
What kind of people we want to have here? It's like in my opening slides, I said we have an entrepreneurial culture here. We want to have people who are really entrepreneurial and people who believe themselves and people who believe the company. Also, they believe themselves so much they are willing to take, let's say, for example, salary decrease, meaning fixed salary, and believe the variable compensation. We really believe variable compensation. We are selling those schemes to our customers as well through our compensation business. We are very good people with experienced people, but also very attitude-wise. They really believe themselves and are willing to be in line with the shareholders' target as well and believing those.
Also ambitious team players and positive people.
Of course, with regards to the international expansion, in addition to all of these attributes, they need to have the product knowledge and client knowledge. They need to have existing networks that they can utilize. Yes.
A question about the asset classes. When it comes to products and product mix, would you like to move more into equities or stay more with your excellent alternative product range?
Like I said during my presentation, there's plenty of room to expand with our current product offering, but we also want to explore options within, for example, equities, how we can grow our business there. There, as Petri mentioned, at some stage, we also need to look at what we can do ourselves in an excellent way and where we need outside partners. We need to package a product to our customers that will provide the best possible returns. We will for sure include equities in that portfolio as well.
Back to the With-Profit Business. What is the With-Profit Business doing to maximize profits from that segment to complement the freeing up of capital?
Sorry, could you please repeat that one? Sorry.
Yeah, what is the With-Profit Business doing to maximize profits from that segment to complement the freeing up of capital?
To maximize, of course, what is Juhani doing daily, that comes from the net finance result. Of course, I see that we are now more than maximizing results, we are optimizing capital position and optimizing expected return on equity and so on. We are not in that sense maximizing the result as such. We should take different kinds of steps.
That's all clear. Thank you, Jukka. Do we still have a final question among the audience here at the venue? Anyone? If not, would you, Petri, join me for the closing remarks?
Yes. Mandatum as an investment, thank you for your attention today. It has been a long day. Some takeaways from our side. We have very ambitious targets going forward, and hopefully we have managed to explain what are the ways to really fulfill those targets. I see that we have very good momentum in the company. We have extremely happy customers. Our NPS in a wide range of all our customer segments is very high. We have very satisfied employees as well, which are incentivized in line with the shareholders' targets as well. We are very attractive when it comes to dividends. EUR 1 billion at least is a big number. We see there are a lot of ways to grow. It is a lot of ways to do better profit, not just increasing our business and growth.
Also, we see there's a lot to do in order to improve our cost income ratio still. To make this company more efficient at the same time it's growing in markets we have just shown to you. This is my conclusion.
That was a very good conclusion. Thank you.
Thank you.
Thank you, Petri, and thank you all for joining us both here at the venue and, of course, online. We hope the sessions have given you a clear view of our strategy, our performance, and the opportunities that lie ahead. We appreciate your time, your questions, and your continued interest in Mandatum. If you have any follow-up questions, we at Investor Relations are, of course, happy to continue the conversation. On behalf of the entire Mandatum team, thank you again, and we look forward to seeing you soon.
Thank you.