1 June 2020
The health and well-being of our employees, customers and partners is our main concern.
We have been mostly working remotely since March and only some employees in our critical functions have been at the office. This way, we have sought to minimize the risks of infection. We have been able to adapt to the new situation relatively well, and all our units are operating normally.
We also want to support our customers in this difficult market situation and have continued to be at our customers´ disposal by telephone, email and using remote connections. As our meeting premises have not been in use and all physical customer events have been canceled, we have organized virtual events, the first of which was attended by more than 500 customers.
Taaleri's business was twofold at the beginning of the year.
Despite the challenging market situation, Taaleri's operational development has been positive and in line with the company’s expectations. Garantia’s and Other business investment operations have, however, suffered due to changes in the stock and money market investment caused by the COVID-19 pandemic, resulting in fair value changes.
Taaleri’s liquidity position is strong. The Group’s cash and cash equivalents totalled EUR 42 million at 31.3.2020 and interest-bearing liabilities EUR 83 million, of which EUR 18 million are payable during 2020.
The ultimate impact of the COVID-19 pandemic on Taaleri’s business depends on its development, duration and impact on the global economy, investment markets and the functioning of society among other things.
25 MArch 2020
For now, we are primarily working remotely, and the office is only staffed by some of the employees who are critical for operations. This is how we are aiming to minimize the risks of simultaneous illnesses. Those who have returned from international travel have been in quarantine, and business travel has been cancelled. We have been able to adjust to the new situation relatively well, and all our units are functioning normally for now.
We want to support our clients in the difficult market situation. We can be reached in the same way as before. We are handling all client communication by phone, email, or remote connection applications. As a rule, our client spaces are not being used, nor do they have any staff on duty. Client events planned for spring have been cancelled.
Financial impact of the coronavirus pandemic on Taaleri and its profitability outlook
The ultimate impact of the coronavirus pandemic on Taaleri’s business depends on the development and duration of the pandemic; it is still too early to say what that will be. Taaleri Group’s capital adequacy is strong. The conglomerate’s capital adequacy at the end of 2019 was EUR 64.8 million, and the capital adequacy ratio 207.4%, the minimum requirement being 100%.
Taaleri’s cash assets totalled EUR 29 million on 31.12.2019, and the equity ratio was 47 percent.
THE WEALTH MANAGEMENT SEGMENT’S result is influenced by the development of assets under management, which, in addition to the success of acquiring new clients, depends on the progress of the private equity funds’ projects and the development of the capital markets. The profit development is also influenced by the realization of performance fee and commission income tied to the success of investment operations.
Assets under management are only partially susceptible to market changes, and fund management fees are, for the most part, based on long-term contracts that bring in a steady cash flow. Of the total amount of assets under management, equity and equity-based products account for 1/3, alternatives for 1/3, and interest instruments and others for 1/3.
THE ENERGIA SEGMENT’S result is influenced by the development of assets under management, which depends on fund raising, the progress of the private equity funds’ projects and the development of the capital markets. The management fees paid by alternative investment funds are based on long-term contracts, and management fees from existing funds and projects can be forecasted for the next 12 months with relative reliability.
In early March, Taaleri Energia announced a successful second close for its Taaleri SolarWind II fund with EUR 275 million in commitments. The fund has a target size of EUR 300 million and an agreed hard cap of EUR 400 million.
The Energia segment’s earnings are also affected by the success of its own investments in energy projects, and they are advancing mainly as planned.
THE INSURANCE SEGMENT’S guaranty insurance business and investment activities have a major impact on Taaleri’s operational income and capital adequacy. During times of economic uncertainty, Finnish companies are always interested in the utilization of pension loans as a stable financing source. Companies have the right to borrow the funds accumulated in the pension company for their own use, against collateral, which can be, e.g., guaranty insurance granted by Garantia.
The segment’s guaranty insurance operations are based on an extensive collaboration and partnership network, dispersed client risk, and strong solvency (the solvency ratio at the end of the 2019 financial period was 232%). The key risks of the business operations are credit risks arising from guaranty insurance operations and market risks regarding investments assets. The guaranty insurance portfolio consists of highly diversified consumer exposure and corporate exposure.
Risk has been kept at a moderate level in the guaranty insurance company’s investment activities; the share of equity investments (including private equity investments) was 14%, fixed income investments 85%, and real-estate investments 1% at the end of 2019. Investment activity is not immune to big fluctuations in market prices, but capital adequacy has continued to remain strong, and the diversification benefits between the different assets groups are reflected in the valuations with a delay.
Other Operations returns consist of the market value changes in investments and of sales profits/losses gained as well as returns of loans granted. The earnings and results of Other Operations may thus vary significantly between periods under review.
Taaleri’s Annual General Meeting had to be postponed
Taaleri postponed its Annual General Meeting to a later date yet to be announced. The Annual General Meeting had originally been scheduled for 18.3.2020. In principle, the Annual General Meeting must be held by the end of June 2020.
What impact will the coronavirus pandemic have on raising capital for new funds?
The situation may lead to delays in raising capital for new funds. It is still too early to say what the impact will be. So far, the impact of the pandemic has been relatively short in terms of time, and therefore its impact on raising capital has so far been minor. Demand for unlisted investments is generally at a high level, and, taking asset class characteristics into account, investment decisions are often strategic with an emphasis on the portfolio’s diversification benefits.