CEO’s review Q1/2023
We promoted our strategy focusing on renewable energy, real estate and bioindustry as planned during the first quarter of 2023. Our private equity funds focused on sustainable development respond to many current societal challenges, such as mitigating climate change and strengthening self-sufficiency. This also supports new openings, such as the expansion of business to energy storage systems, which took place during the review period.
Both the private asset management business and Garantia’s guaranty insurance operations developed well during the first quarter, and the Group’s continuing earnings increased by 24%. The Group’s income grew to EUR 9.3 million and operating profit to EUR 1.6 million. Garantia’s net income from investment operations was profitable, but Group’s other unrealised changes in fair value weighed on the income and operating profit.
The continuing earnings of the Private Asset Management segment grew by 14% to EUR 5.6 million, but operating profit decreased due to investments in business growth, and the fact that no performance fees were recognised in the review period.
The renewable energy business continued to raise funds for its sixth fund, Taaleri SolarWind III. The first closing is expected to take place in the second quarter. The fund will be based on a project development portfolio that already included the targeted 35 projects at the end of the first quarter. We aim to reach a size of EUR 700 million with the Taaleri SolarWind III fund, which is double compared to the previous fund.
During the first quarter, the real estate business focused on the active development of new investment products. In addition, preparations for the exit of old funds and the identification of potential new acquisition targets continued during the review period.
During the review period, the bioindustry business prepared the next fund, the strategy of which would be to invest in start-up companies in the bioindustry sector. With the venture capital fund, our goal is to offer early-stage companies the opportunity to grow into the next, scalable phase. At the end of the review period, the Taaleri Bioindustry Fund I made its third investment in the Nordic Bioproducts Group, a company producing cellulose-based materials with a high processing value.
In the Strategic Investments segment, Garantia continued its strong performance. Garantia’s insurance service result increased by 44% to EUR 3.8 million during the review period, and the combined ratio strengthened further, being an excellent 24.3%. Garantia’s net investment income increased to EUR 0.9 million as the investment market recovered in the first quarter, but investment returns remained moderate.
In March, Taaleri published adjusted financial comparative information in accordance with IFRS 17 Insurance Contracts, applicable from the beginning of the year. In addition to changes in the valuation principles of insurance operations, one of the biggest changes is that, in the future, Garantia’s income will include not only insurance revenue and net income from investment operations, but also insurance service costs, such as claims incurred, operating expenses of insurance operations and losses arising from onerous insurance contracts. Thus, reported income will decrease, but the impact of the adoption of the standard on reported operating profit will be minor.