KLP GroupQ3 2021
Report for the third quarter of 2021
Good results for customers and owners after three quarters in 2021
• The value-adjusted return was 1.1 per cent in the third quarter and 5.6 per cent for the year to date, while the book return was 0.9 per cent in the quarter and 3.5 per cent to the end of the quarter.
• The results in the last quarter have been affected by higher interest rates and weak growth in the equity markets.
• The subsidiaries are delivering good profit contributions.
KLP – a customer-owned groupKLP Group
The KLP Group is made up of the following companies: Kommunal Landspensjonskasse (KLP) and its subsidiaries KLP Banken, KLP Skadeforsikring, KLP Kapitalforvaltning, KLP Forsikringsservice and KLP Eiendom.
At the end of the third quarter, the Group had total assets of NOK 872.5 billion, an increase of NOK 1.9 billion in the third quarter and NOK 65.3 billion so far this year.
The Group’s total comprehensive income was NOK 1.2 (0.9) billion after the third quarter.
Kommunal Landspensjonskasse
Pension schemes within the public sector are offered and administered by the Group’s parent company, Kommunal Landspensjonskasse. Out of KLP’s total assets of NOK 694.5 billion, NOK 634.1 billion is linked to insurance obligations within public-sector occupational pensions.
Results for the third quarter of 2021
Investment result
KLP achieved an investment result - the return in excess of that guaranteed by the Company to its customers - totalling NOK 9.3 (6.8) billion after the third quarter. The value-adjusted return on the common portfolio was 1.1 per cent in the third quarter and 5.6 per cent for the year to date, while the book return was 0.9 per cent in the third quarter and 3.5 per cent in the year to date.
Risk result
The risk events in the stock have been within expectations throughout the year but will vary from quarter to quarter. Net income was NOK 332 million in the quarter and NOK 625 million so far this year.
Administration result
The Company’s administration result shows a surplus of NOK 159 million so far this year, of which NOK 98 million fell in the quarter. Insurance-related operating costs came to NOK 891 (825) million so far this year.
Total profit/loss
Total profit/loss to the Company stands at NOK 1.2 (0.9) billion for the year to date. The customer result is NOK 9.5 (7.0) billion so far this year.
NOK millions | Customers | Company | Total |
---|---|---|---|
Investment result | 9152 | 196 | 9 348 |
Risk result | 313 | 313 | 625 |
Interest guarantee premium | 188 | 188 | |
Administration result | 159 | 159 | |
Other income from technical accounts | 6 | 6 | |
Net income from investments in the corporate portfolio and other income/expenses in non-technical accounts | 838 | 838 | |
Tax | .276 | -276 | |
Other profit/loss elements | -194 | -194 | |
Profit after Q3 2021 | 9 464 | 1229 | 10 693 |
Profit after Q3 2020 | 7007 | 906 | 7913 |
Financial strength and capital-related matters
KLP’s total assets increased by NOK 1.7 billion in the third quarter and amount to NOK 694.5 billion. The premium reserve increased by NOK 4.7 billion to NOK 482.4 billion in the same period.
The securities adjustment fund increased by NOK 0.9 billion in the quarter, to NOK 68,6 billion after the third quarter.
Without applying transitional rules, the Company’s solvency capital requirement (SCR) is 289 per cent. Taking account of the transitional arrangement for technical provisions, capital adequacy was 326 per cent. KLP’s target is capital adequacy of at least 150 per cent without applying transitional rules. Capital adequacy is well over this target and reflects the Company’s good financial strength.
Key figures
Per cent | At 30.09.2021 | At 30.09.2020 |
---|---|---|
Book return | 3,5 | 3,2 |
Value-adjusted return | 5,6 | 1,4 |
Value-adjusted incl. added value in hold-to-maturity bonds and lending | 4,4 | 3,1 |
The returns figures apply to the common portfolio | ||
Capital adequacy, Solvency II | 289 | 264 |
Capital adequacy, Solvency II, with transitional measures | 326 | 353 |
Premium income
Premium income excluding premium reserves received on transfers in amounts to NOK 41.2 (26.2) billion at the end of the quarter.
Claims/benefits
Pensions paid and other claims, excluding ceded premium reserves, amounted to NOK 16.3 (15.3) billion for the year to date.
Management of the common portfolio
The assets in the common portfolio totalled NOK 644.2 (582.1) billion and were invested as shown below:
Assets | At 30.09.2021 | At 30.09.2020 | ||
---|---|---|---|---|
All figures in per cent | Proportion | Return | Proportion | Return |
Equities | 27,9 % | 15,2 % | 21,7 % | -1,7 % |
Short-term bonds | 14,5 % | -0,9 % | 17,4 % | 5,3 % |
Long-term/HTM bonds | 28,3 % | 2,6 % | 30,0 % | 2,7 % |
Lending | 12,2 % | 1,2 % | 13,3 % | 1,7 % |
Property | 13,0 % | 6,0 % | 12,9 % | 2,6 % |
Other financial assets | 4,1 % | 0,7 % | 5,0 % | 1,3 % |
Equities
Total exposure in shares and alternative investments, including equity derivatives, was 27.9 per cent at the end of the third quarter. The total return on shares and alternative investments was 2.1 per cent in the quarter. The return on KLP’s global equities was 0 per cent, while KLP’s Norwegian equity portfolio returned 4.3 per cent in the quarter.
Short-term bonds and the money market
Short-term bonds made up 14.5 per cent and money-market instruments 4.1 per cent of the assets in the common portfolio at the end of the third quarter. Norwegian and US interest rates rose slightly during the quarter, while European rates were more or less unchanged. KLP’s global government bond index achieved a currency-hedged return of 0 per cent in the quarter, while the return on the Norwegian government bond index was minus 0.8 per cent.
The quarterly return for KLP’s global credit bond index was 0 per cent. In total, short-term bonds achieved returns of 0 per cent in the third quarter. The money market return was 0.1 per cent for the quarter.
Long-term bonds
Investment in long-term bonds and bonds held to maturity made up 28.3 per cent of the common portfolio at 30 September. Unrecognised added values in the common portfolio amounted to NOK 7.8 billion at 30 September. The portfolio is well diversified and consists of securities issued by creditworthy borrowers. The return measured at amortised cost in the third quarter was 0.8 per cent.
Property
Property investments, including Norwegian and international real estate funds, made up 13.0 per cent of the common portfolio. Property values in the common portfolio have been adjusted upwards by NOK 731 million in this quarter and NOK 2.7 billion so far this year. Property investments in the common portfolio achieved a return of 6.0 per cent in the year to date.
Lending
Lending in the common portfolio totals NOK 77.7 billion. This is split between NOK 64.9 billion in loans to the public sector, NOK 2.2 billion in loans with government guarantees and NOK 3.0 billion in secured mortgage loans, with the remaining NOK 7.5 billion used for other purposes. The lending portfolio is of high quality, with no losses on municipal loans and very modest provisions for losses on mortgage loans. Unrecognised added values in the lending portfolio (fixed-interest loans) totalled NOK 459 million at 30 September. Returns were 1.2 per cent so far this year.
Returns on the corporate portfolio
The corporate portfolio covers the placement of owners’ equity and subordinated loans/hybrid Tier 1 and Tier 2 securities.
The corporate portfolio is managed with a moderate-risk long-term investment horizon, with the object of stable returns. Investments in the corporate portfolio achieved a return of 2.5 per cent in the year to date.
Other matters
Several of the Company’s customers have considered putting their pension schemes out to tender this year. Good and close customer follow-up which emphasises competence, quality and the benefit of being an owner in your own company has been a big reason why few customers have chosen to put their pensions provision out to tender.
KLP is in the middle of a major IT development programme which will also improve the way the Company works. The programme spans 5 years and, among other things, it will modernise the Company’s systems for pension processing, improve usability for customers and pensioners, and increase efficiency and reduce costs over time.
It is too early to say how Covid-19 and the pandemic situation will affect the drawing of disability pensions in KLP’s membership base over time. Historical figures up to 2019 indicate that the Company has adequate margins built into the calculation basis for disability. Because of the uncertainty surrounding disability going forward, most of these margins will be retained until further notice.
Business areas of the subsidiaries
Non-life insurance
The third quarter produced a pre-tax operating profit of NOK 343.9 (97.2) million. After a good first half, net income improved further and the result for the third quarter was NOK 118.0 (79.1) million. The change is mainly due to a good insurance result and a satisfactory financial return through the period. Operating expenses were lower than expected and the Company has continued to reverse previous years’ reserves.
Premium volume stood at NOK 1,984 million at the end of the third quarter, an increase of NOK 182 million from the position at 31.12.2020. The overall premium level is still rising, which is expected to continue in the upcoming tendering season. Premiums due have increased by 12.9 per cent, or NOK 193 million, compared with the same time in 2020. Growth is good in all of the Company’s segments.
The insurance result was NOK 446 (296) million. One major claim was reported during the third quarter. NOK 75 million has been set aside for this so far, with NOK 39 million covered by reinsurance. Reversal of previous years’ claims is still positive, and this year NOK 101 million has so far been taken to income, equivalent to 5.5 per cent of the reserves at the beginning of the year.
Key figures for the Company
At. 30.09 2021 | At 30.09 2020 | Whole of 2020 | |
---|---|---|---|
Claims ratio | 73,6 | 83,1 | 83,0 |
Cost ratio | 14,8 | 17,5 | 17,6 |
Total cost ratio | 88,4 | 100,7 | 100,6 |
Net financial income after the third quarter was NOK 173.9 (103.4) million, representing a return of 3.4 (2.3) per cent. Returns for the third quarter in isolation were NOK 45.2 (71.5) million, or 0.9 (1.5) per cent. So far this year, the equity portfolio has returned 15.8 per cent. As of the third quarter, the Company’s investments in interest-bearing funds had a return of 0 per cent, while fixed income bonds returned 2.5 per cent. The return on real estate investments was 6.9 per cent, after a write-up of NOK 26 million.
The third quarter in isolation saw a return of 0.4 per cent on equities, 0 per cent on interest-bearing instruments, 0.8 per cent on long-term bonds and 3.0 per cent on property investments.
The Company’s financial position is good, with a solvency capital requirement (SCR) of 267 per cent at the end of the third quarter, compared to 237 per cent at the end of 2020 and 252 per cent after the second quarter.
Asset and fund management
KLP Kapitalforvaltning provides securities management in the KLP Group. It had a total of NOK 648 billion under management at the end of the third quarter, of which NOK 124 billion came from external customers. The majority of the assets are managed on behalf of KLP and its subsidiaries. Net subscription in the KLP funds was NOK 8.9 billion in the first three quarters of the year, most of which, NOK 8.3 billion, came from external customers.
The Company achieved a pre-tax profit of NOK 53 million at the end of the third quarter.
Bank
The KLP Banken Group finances mortgages and other credit to individual customers (retail market) as well as loans to municipalities, county municipalities and companies that provide public services (public-sector market). The lending business is financed by way of deposits from private customers and companies, loans from the securities market and owners’ equity. The Bank also manages lending financed through pension assets held by KLP.
As of 30 September, the KLP Banken Group had loans to customers totalling NOK 38.2 (37.5) billion. Mortgage loans in the retail market and public-sector loans totalled NOK 21.4 (20.6) billion and 16.8 (16.9) billion respectively.
KLP Banken manages NOK 3.0 (3.3) billion in mortgage loans and NOK 74.6 (73.2) billion in loans to public-sector borrowers and other businesses.
In 2021, the retail market in KLP Banken has seen weaker growth in mortgages compared to last year’s strong performance, increasing by NOK 0.7 (2.3) billion. Total new payments are at the same level as last year, but redemptions have increased. The Bank’s mortgage products are aimed at members of the KLP pension schemes.
Lending volume to the public-sector market on KLP Banken’s balance sheet decreased by NOK 0.7 (0.2) billion, while loans to public-sector borrowers managed on behalf of KLP increased by NOK 2.6 (6.2) billion in the same period. Managed loans to foreign debtors, mainly in other currencies, decreased by NOK 1.9 (0.6) billion so far this year, to NOK 8.0 billion.
The Bank’s lending margins have been relatively stable so far this year despite low interest rates and increasing competition in both lending areas. The Bank’s operating income, in the form of net interest income, was NOK 232.8 (229.3) million at the end of the third quarter.
KLP Banken’s liquidity is invested in other banks and in interest-bearing securities. The portfolio of interest-bearing securities amounts to NOK 5.3 (4.8) billion.
The Bank’s net gain/loss on financial instruments mainly includes the effects of loan buybacks and changes in the value of its securities holdings. In all, financial instruments produced total expenses of NOK -23.5 (-21.7) million to the end of the quarter.
The KLP Banken Group’s external financing consists mainly of deposits and bonds. Deposit growth so far this year is NOK 0.8 (0.6) billion. On the reporting date, deposits from individuals and companies amounted to NOK 12.8 (12.0) billion and debt from securities issues came to NOK 29.5 (26.2) billion. The securities debt is mainly covered bonds issued by KLP Kommunekreditt AS and KLP Boligkreditt AS.
In 2020, KLP Banken AS used the extended right to take out emergency ‘F-loans’ from Norges Bank. This scheme is now closed, and KLP Banken has no outstanding F-loans at the end of the third quarter.
Operating expenses and depreciation amounted to NOK 172.8 (160.4) million as of the third quarter.
Losses and loss provisions in the retail market amount to NOK 1.3 (4.2) million so far in 2021. These are mainly losses on credit cards. The pandemic has not led to increased losses on mortgages. Nor have we experienced any losses related to public-sector lending.
The KLP Banken Group had a pre-tax operating profit of NOK 93.8 (101.8) million at the end of the third quarter. Broken down by area, profits were NOK 76.9 (71.2) million in the retail market and NOK 16.9 (30.5) million in the public-sector market.
Corporate social responsibility
KLP has long expressed support for the Paris Agreement and the 1.5 degree target. In September, we launched KLP’s roadmap to net zero emissions in 2050. KLP has developed its own framework based on internationally established standards and best practice. The roadmap describes how KLP will work towards and measure the company’s contribution to achieving the targets set out in the Paris Agreement, and how KLP will assess every investment against an emission path that is compatible with the 1.5 degree target. This means that KLP will set specific climate targets for the portfolio, as well as applying best practice in terms of assessment methods and the use of climate data for different types of investments. Transparency about companies’ net zero targets is important, and the whole KLP roadmap can be accessed at www.klp.no/klima.
Climate change and weather events are becoming increasingly important from an insurance perspective. Over the summer, KLP Skadeforsikring ran a pre-project focusing on mapping the Company’s own climate risk, looking at this in relation to the non-life company’s positioning with the municipalities, assessing future reporting requirements, and clarifying responsibilities within the organisation and possible changes as a result. Among other things, the pre-project recommends that the Company should analyse the identified climate risks in more depth, and that this should be included together with weather and climate forecasts in strategy work, product development, risk management, internal control and customer relations. In positioning itself with the municipalities, the Company should further develop its work on systematic safety management.
Together with DNB, KLP has carried out an analysis of climate risk in the shipping sector. Work on the report started through the Green Shipping Programme, which KLP is part of. The climate risk analysis has been developed from the perspective of banking and investment management. The report looks at how climate policy and energy prices will impact profitability in the maritime sector in the future.
In July, KLP decided to exclude 16 companies with links to Israeli settlements on the West Bank. KLP has reconsidered its position since the UN High Commissioner for Human Rights published a list of companies with activities linked to the Israeli settlements in the occupied Palestinian territories. These settlements are seen as a breach of international law, and KLP’s assessment is that there is an unacceptable risk that the excluded companies could be contributing to violations of human rights in war and conflict situations through their affiliation with the Israeli settlements in the occupied West Bank. KLP has clear expectations of companies that it invests in, and these exclusions are based on due diligence. KLP held investments totalling NOK 275 million in the companies at the time of the decision.
Andøy municipality is an example of a client that has participated in KLP’s working environment network since 2019 with a project to reduce sickness absence in the municipality. The aim of the project has been to increase the quality of services offered by the municipalities, including reducing sickness absence by 20 per cent and saving temporary staffing costs as a result. The municipality can point to good results, and since the project was completed, some departments have reduced sickness absence by 30 per cent over one year, with an overall decrease of 15 per cent for all departments. KLP sees this as an important contribution to establish these networks, which increases competence and insight that can improve working conditions, reduce sick leave and prevent disability.
Future prospects and events after the end of the quarter
A joint effort among the Norwegian finance industry is working to change the regulation for guaranteed products. There are several changes, but most important for public-sector occupational pensions is the proposition to establish a common buffer fund, that replaces todays supplementary reserves and securities adjustment fund. The buffer fund will be distributed by agreement and will be transferred in full if the pension scheme should move. This change is welcomed by many and is essential for putting an end to unreasonable transfer of value between clients and freeing of buffers - compared to today’s regulation for transfer. A final decision on a common buffer fund is expected before the New Year.
In Norway, a large proportion of the population is now fully vaccinated and society is largely open after a long period characterised by strict infection control measures in connection with Covid-19. Many of KLP’s employees are now back in the office, but working from home will also be part of life for KLP going forward. We are constantly reviewing how this solution affects day-to-day operations and KLP’s employees.
The global economy has also been affected by the pandemic, and is expected to produce good growth as more countries return to normal. The financial markets have largely priced this into their expectations, so they could quickly react negatively to bad news related to the pandemic. KLP has a high level of preparedness and good financial strength to enable it to handle such fluctuations.
Income statement KLP Group
NOTE | NOK MILLIONS | Q3 2021 | Q3 2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 |
---|---|---|---|---|---|---|
3 | Premium income for own account | 8 003 | 12 119 | 42 523 | 30 602 | 39 049 |
Current return on financial assets | 3 588 | 3 385 | 11 173 | 11 385 | 14 793 | |
Net interest income banking | 80 | 94 | 233 | 230 | 318 | |
Net value changes on financial instruments | 2 576 | 11 419 | 30 178 | -3 417 | 15 331 | |
8 | Net income from investment properties | 1 367 | 713 | 4 870 | 1 615 | 5 080 |
4 | Other income | 439 | 312 | 1 202 | 976 | 1 136 |
Total net income | 16 051 | 28 042 | 90 179 | 41 391 | 75 707 | |
Claims for own account | -5 932 | -5 498 | -25 686 | -24 073 | -29 780 | |
Change in technical provisions | -4 674 | -8 074 | -24 899 | -13 326 | -19 000 | |
5 | Net costs subordinated loan and hybrid Tier 1 securities | -41 | -45 | 76 | -787 | -478 |
6 | Operating expenses | -446 | -368 | -1 510 | -1 407 | -1 971 |
Sale of business | 0 | -28 | 0 | -180 | -183 | |
7 | Other expenses | -328 | -300 | -957 | -922 | -1 258 |
Unit holder's value change in consolidated securites funds | -677 | -5 218 | -11 998 | -3 031 | -11 074 | |
Total expenses | -12 097 | -19 531 | -64 974 | -43 725 | -63 744 | |
Operating profit/loss | 3 954 | 8 510 | 25 205 | -2 334 | 11 963 | |
To/from securities adjustment fund – life insurance | -622 | -4 369 | -13 023 | 7 986 | 245 | |
To supplementary reserves – life insurance | 0 | 0 | 611 | 490 | -7 749 | |
Assets allocated to insurance customers - life insurance | -2 465 | -3 172 | -10 602 | -4 460 | -2 803 | |
Pre-tax income | 867 | 969 | 2 192 | 1 682 | 1 657 | |
Cost of taxes 1 | -356 | -280 | -856 | -681 | -860 | |
Income | 510 | 689 | 1 335 | 1 001 | 797 | |
19 | Actuarial loss and profit on post employment benefit obligations | -451 | 100 | -266 | -305 | -88 |
Adjustments of the insurance obligations | 51 | -11 | 30 | 33 | 12 | |
Tax on items that will not be reclassified to profit or loss | 72 | 12 | 42 | 76 | 19 | |
Items that will not be reclassified to profit or loss | -328 | 101 | -194 | -195 | -57 | |
Revaluation real property for use in own operation | 91 | 13 | 138 | 143 | 392 | |
8 | Currency translation foreign subsidiaries | -95 | 360 | -784 | 2 596 | 1 778 |
Adjustments of the insurance obligations | 95 | -360 | 784 | -2 596 | -1 778 | |
Tax on items that will be reclassified to profit or loss | -23 | -3 | -34 | -36 | -98 | |
Items that will be reclassified to income particular specific conditions are met | 68 | 10 | 103 | 107 | 294 | |
Total other comprehensive income | -260 | 111 | -90 | -88 | 238 | |
Total comprehensive income | 250 | 800 | 1 245 | 913 | 1 034 | |
1 Unit holders share of taxes in consolidated securities fund | -72 | -61 | -220 | -194 | -255 |
Financial position statement KLP Group
NOTE | NOK MILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 |
---|---|---|---|---|
Deferred tax assets | 43 | 56 | 61 | |
Other intangible assets | 825 | 619 | 684 | |
Tangible fixed assets | 2 672 | 2 270 | 2 557 | |
Investments in associated companies and joint venture | 4 900 | 4 554 | 4 240 | |
8,11 | Investment property | 84 367 | 77 855 | 81 485 |
9,14 | Debt instruments held to maturity | 28 806 | 30 870 | 28 986 |
9,14 | Debt instruments classified as loans and receivables | 159 944 | 153 670 | 154 180 |
9,11,14 | Lending local government, enterprises & retail customers at fair value through profit / loss | 481 | 672 | 589 |
9,14 | Lending local government, enterprises and retail customers | 115 720 | 113 699 | 115 071 |
9,11,14 | Debt instruments at fair value through profit or loss | 193 054 | 188 008 | 193 814 |
9,11 | Equity capital instruments at fair value through profit/loss | 264 899 | 197 632 | 204 982 |
9,11,14 | Financial derivatives | 4 163 | 1 525 | 11 561 |
9 | Receivables | 9 542 | 15 848 | 6 179 |
14 | Cash and bank deposits | 3 050 | 2 703 | 2 772 |
TOTAL ASSETS | 872 465 | 789 981 | 807 161 | |
Owners’ equity contributed | 18 971 | 17 531 | 18 194 | |
Retained earnings | 22 467 | 21 712 | 21 222 | |
TOTAL OWNERS’ EQUITY | 41 439 | 39 243 | 39 416 | |
9,10 | Hybrid Tier 1 securities | 1 670 | 1 989 | 1 764 |
9,10 | Subordinated loan capital | 2 995 | 3 250 | 3 135 |
19 | Pension obligations | 1 194 | 1 143 | 934 |
15 | Technical provisions - life insurance | 634 052 | 576 200 | 595 068 |
Premiums, claims and contingency fund provisions - non-life insurance | 3 281 | 2 888 | 2 729 | |
9,10 | Covered bonds issued | 28 633 | 25 311 | 24 997 |
9,10 | Debt to credit institutions | 5 774 | 6 014 | 14 216 |
9,10 | Liabilities to and deposits from customers | 12 774 | 11 993 | 11 781 |
9,11 | Financial derivatives | 2 455 | 8 244 | 789 |
Deferred tax | 1 712 | 1 457 | 1 425 | |
16 | Other current liabilities | 12 203 | 11 726 | 6 859 |
Unit holders`s interest in consolidated securites funds | 124 285 | 100 522 | 104 050 | |
TOTAL LIABILITIES | 831 027 | 750 738 | 767 745 | |
TOTAL EQUITY AND LIABILITIES | 872 465 | 789 981 | 807 161 | |
Contingent liabilities | 29 869 | 25 249 | 27 659 |
Changes in Owners’ equityKLP Group
2021 NOK MILLIONS | Owners' equity contributed | Retained earnings | Total equity contributed |
---|---|---|---|
Owners’ equity 1 January 2021 | 18 194 | 21 222 | 39 416 |
Income | 1 335 | 1 335 | |
Items that will not be reclassified to income | - 194 | - 194 | |
Items that will be reclassified to income later when particular conditions are met | 103 | 103 | |
Total other comprehensive income | - 90 | - 90 | |
Total comprehensive income | 1 245 | 1 245 | |
Owners' equity contribution received (net) | 777 | 777 | |
Total transactions with the owners | 777 | 777 | |
Owners’ equity 30 September 2021 | 18 971 | 22 467 | 41 439 |
2020 NOK MILLIONS | Owners' equity contributed | Retained earnings | Total equity contributed |
---|---|---|---|
Owners’ equity 1 January 2020 | 16 540 | 20 799 | 37 339 |
Income | 1 001 | 1 001 | |
Items that will not be reclassified to income | - 195 | - 195 | |
Items that will be reclassified to income later when particular conditions are met | 107 | 107 | |
Total other comprehensive income | - 88 | - 88 | |
Total comprehensive income | 913 | 913 | |
Owners' equity contribution received (net) | 991 | 991 | |
Total transactions with the owners | 991 | 991 | |
Owners’ equity 30 September 2020 | 17 531 | 21 712 | 39 243 |
2020 NOK MILLIONS | Owners' equity contributed | Retained earnings | Total equity contributed |
---|---|---|---|
Owners’ equity 1 January 2020 | 16 540 | 20 799 | 37 339 |
Income | 611 | 186 | 797 |
Items that will not be reclassified to income | - 57 | - 57 | |
Items that will be reclassified to income later when particular conditions are met | 294 | 294 | |
Total other comprehensive income | 238 | 238 | |
Total comprehensive income | 611 | 423 | 1 034 |
Owners' equity contribution received (net) | 1 043 | 1 043 | |
Total transactions with the owners | 1 043 | 1 043 | |
Owners’ equity 31 December 2020 | 18 194 | 21 222 | 39 416 |
Statement of cash flowsKLP Group
NOK MILLIONS | 01.01.2021 -30.09.2021 | 01.01.2021 -30.06.2021 | 01.01.2021 -31.03.2021 | 01.01.2020 -31.12.2020 | 01.01.2020 -30.09.2020 |
---|---|---|---|---|---|
Net cash flow from operational activities | -17 004 | -21 644 | -13 315 | 13 405 | 2 399 |
Net cash flow from investment activities 1 | -215 | -146 | -69 | -331 | -231 |
Net cash flow from financing activities 2 | 17 496 | 22 640 | 15 833 | -13 495 | -2 658 |
Net changes in cash and bank deposits | 278 | 850 | 2 449 | -422 | -490 |
Holdings of cash and bank deposits at start of period | 2 772 | 2 772 | 2 772 | 3 194 | 3 194 |
Holdings of cash and bank deposits at end of period | 3 050 | 3 622 | 5 221 | 2 772 | 2 703 |
1 Payments on the purchase of tangible fixed assets. | |||||
2 Net receipts of owners’ equity contribution, rising of new loans and repayment of debt. And also payments from unit holders in consolidated securities funds. |
Notes to the financial statement
Note 1 Accounting principles –and estimates
Accounting principles
The financial statements in this interim report show the Kommunal Landspensjonskasse (KLP) group financial statements and parent company financial statements for the period 1 January 2021 – 30 September 2021. The accounts have not been audited.
That part of the interim report that relates to the Group financial statements has been prepared in accordance with IAS 34 Interim financial Reporting.
The same accounting principles and calculation methods have been used in the interim financial statements as in the last annual financial statements, unless stated otherwise.
The interim financial statements do not contain all the information required of complete financial statements, and this interim financial report should be read in the context of the annual financial statements for 2020. The annual financial statements are available at KLP’s website klp.no.
Accounting estimates
In preparing the interim financial statements, management has exercised discretion and used estimates and assumptions that affect the accounting figures. Actual figures may deviate from estimates used.
The life insurance business continuously follows up the risks related to disability and whether the disability provisions need to be strengthened. When determining conditions for disability, experience data up to and including 2020 is used, including margins that take into account the uncertainty related to covid-19. No disability provisions have been made related to covid-19 beyond this.
A possible effect of covid-19 is lower employment rates, recession and increasing disability in society as a result of this. The Group consider this risk to be lower for the public sector.
There is also increased uncertainty associated with the pandemic in the occupational injury industry, but no extraordinary provisions have been made here either.
In September, the Norwegian Accounting Standards Board published updated guiding assumptions for pension liabilities. In relation to the assumptions used as at 31.12.2020, the discount rate for corporate bonds was changed from 1.7% to 1.9%. At the same time, wage growth was changed from 2.25% to 2.50%, the National Insurance Scheme's basic amount (G) was changed from 2.0% to 2.25% and pension adjustment was changed from 1.24% to 1.50%. In total, these changes result in a NOK 266 million increase in recognised pension liabilities for the Group as at 30.09.2021.
Note 2 Segment information
NOK MILLIONS | Group pensions pub. sect. & group life | Group pensions private | Non-life insurance | Banking | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 | |
Premium income for own account from external customers 1 | 41 163 | 29 081 | 37 102 | sold | 313 | 313 | 1 381 | 1 228 | 1 658 | 0 | 0 | 0 |
Net financial income from investments | 33 267 | 8 731 | 25 351 | sold | -604 | -604 | 174 | 104 | 229 | 211 | 216 | 304 |
Other income | 1 592 | 1 152 | 1 429 | sold | 2 | 2 | 1 | 1 | 2 | 58 | 58 | 77 |
Total income | 76 022 | 38 964 | 63 881 | - | -288 | -288 | 1 556 | 1 333 | 1 889 | 269 | 274 | 381 |
Claims for own account | -24 690 | -23 013 | -28 360 | sold | -45 | -45 | -996 | -1 015 | -1 375 | 0 | 0 | 0 |
Insurance provisions for own account | -24 893 | -13 651 | -19 329 | sold | 331 | 331 | -6 | -6 | -2 | 0 | 0 | 0 |
Costs borrowing | 76 | -787 | -478 | sold | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Operating costs excluding depreciation | -779 | -724 | -1 030 | sold | -19 | -19 | -206 | -211 | -287 | -167 | -164 | -233 |
Depreciation | -66 | -53 | -74 | sold | 0 | 0 | -4 | -4 | -5 | -4 | -3 | -4 |
Sale of business | 0 | 0 | 0 | sold | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Other expenses | -1 056 | -1 006 | -1 377 | sold | 0 | 0 | 0 | 0 | 0 | -4 | -5 | -7 |
Return to financial intruments attributable | ||||||||||||
to minority interests | ||||||||||||
Total expenses | -51 409 | -39 233 | -50 649 | - | 267 | 267 | -1 212 | -1 235 | -1 668 | -175 | -173 | -244 |
Operating profit/loss | 24 614 | -269 | 13 233 | - | -22 | -22 | 344 | 97 | 220 | 94 | 102 | 137 |
Funds credited to insurance customers 2 | -22 914 | 1 572 | -11 944 | sold | 8 | 8 | 0 | 0 | 0 | 0 | 0 | 0 |
Pre-tax income | 1 699 | 1 303 | 1 289 | - | -14 | -14 | 344 | 97 | 220 | 94 | 102 | 137 |
Cost of taxes | -276 | -174 | -204 | sold | 0 | 0 | -86 | -24 | -42 | 5 | 4 | -4 |
Income | 1 423 | 1 129 | 1 085 | - | -14 | -14 | 258 | 73 | 178 | 99 | 105 | 133 |
Change in other comprehensive income | -194 | -223 | -63 | sold | -4 | -4 | -20 | -23 | -7 | -9 | -9 | -3 |
Total comprehensive income | 1 229 | 906 | 1 021 | - | -18 | -18 | 237 | 50 | 170 | 90 | 96 | 130 |
Assets | 694 522 | 635 878 | 652 277 | sold | sold | sold | 6 081 | 5 269 | 5 270 | 44 980 | 43 442 | 42 688 |
Liabilities | 653 133 | 596 663 | 612 894 | sold | sold | sold | 3 733 | 3 279 | 3 160 | 42 491 | 41 049 | 40 261 |
NOK MILLIONS | Asset management | Other | Eliminations | Total | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 | |
Premium income for own account from external customers 1 | 0 | 0 | 0 | 0 | 0 | 0 | -21 | -20 | -24 | 42 523 | 30 602 | 39 049 |
Net financial income from investments | 2 | 6 | 6 | 0 | 0 | 0 | 12 800 | 1 359 | 10 236 | 46 454 | 9 813 | 35 522 |
Other income | 452 | 408 | 547 | 8 | 9 | 12 | -910 | -654 | -932 | 1 202 | 976 | 1 136 |
Total income | 454 | 415 | 554 | 8 | 9 | 12 | 11 868 | 685 | 9 280 | 90 179 | 41 391 | 75 708 |
Claims for own account | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -25 686 | -24 073 | -29 780 |
Insurance provisions for own account | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -24 899 | -13 326 | -19 000 |
Costs borrowing | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 76 | -787 | -478 |
Operating costs excluding depreciation | -397 | -384 | -517 | -7 | -9 | -12 | 126 | 168 | 216 | -1 432 | -1 343 | -1 881 |
Depreciation | -4 | -4 | -6 | 0 | 0 | 0 | 0 | 0 | 0 | -78 | -64 | -90 |
Sale of business | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -180 | -183 | 0 | -180 | -183 |
Other expenses | 0 | 0 | 0 | 0 | 0 | 0 | 103 | 90 | 125 | -957 | -922 | -1 258 |
Return to financial intruments attributable | ||||||||||||
to minority interests | -11 998 | -3 031 | -11 074 | -11 998 | -3 031 | -11 074 | ||||||
Total expenses | -401 | -389 | -523 | -7 | -9 | -12 | -11 769 | -2 953 | -10 916 | -64 974 | -43 725 | -63 744 |
Operating profit/loss | 53 | 26 | 31 | 1 | -1 | 0 | 100 | -2 268 | -1 636 | 25 205 | -2 334 | 11 963 |
Funds credited to insurance customers 2 | 0 | 0 | 0 | 0 | 0 | 0 | -99 | 2 437 | 1 630 | -23 013 | 4 016 | -10 306 |
Pre-tax income | 53 | 26 | 31 | 1 | -1 | 0 | 1 | 169 | -6 | 2 192 | 1 682 | 1 657 |
Cost of taxes | -13 | -6 | -7 | 0 | 0 | 0 | -485 | -480 | -602 | -856 | -681 | -860 |
Income | 40 | 19 | 23 | 1 | -1 | 0 | -485 | -311 | -608 | 1 335 | 1 001 | 797 |
Change in other comprehensive income | -21 | -23 | -7 | 0 | -1 | 0 | 154 | 194 | 322 | -90 | -88 | 238 |
Total comprehensive income | 19 | -4 | 16 | 0 | -1 | -1 | -331 | -117 | -286 | 1 245 | 913 | 1 034 |
Assets | 623 | 554 | 583 | 8 | 7 | 8 | 126 251 | 104 824 | 106 336 | 872 465 | 789 981 | 807 161 |
Liabilities | 269 | 240 | 248 | 3 | 3 | 3 | 131 397 | 109 497 | 111 179 | 831 027 | 750 738 | 767 745 |
¹ Premium income covers premiums earned for own account including savings premium and transferred premium reserves from other companies. | ||||||||||||
² Funds transferred to the insurance customers include transfers to the premium fund, provisions to the securities adjustment fund, provisions to supplementary reserves and other provisions of surplus funds to the insurance customers. |
The KLP Group’s business is divided into the six areas: public sector occupational pension/group life, enterprise (defined benefit) and defined contribution pension, non-life insurance, banking, asset management and other. All business is directed towards customers in Norway.
PUBLIC SECTOR OCCUPATIONAL PENSION AND GROUP LIFE
Kommunal Landspensjonskasse offers group public sector occupational pensions.
ENTERPRISE (DEFINED BENEFIT) AND DEFINED CONTRIBUTION PENSION
KLP Bedriftspensjon AS offers products to enterprises within both the public and private sectors. The business was sold in 2020.
NON-LIFE INSURANCE
KLP Skadeforsikring AS offers property and personal injury products to employers within the public and private sectors. In addition a broad specter of standard insurance products is offered to the the retail market.
BANKING
KLP’s banking business embraces the companies KLP Banken AS and its wholly-owned subsidiaries: KLP Kommunekreditt AS and KLP Boligkreditt AS. The banking business covers services such as deposits and lending to the retail market, credit cards, as well as lending with public sector guarantee.
ASSET MANAGEMENT
Asset management is offered from the company KLP Kapitalforvaltning AS. The company offer a broad selection of securities mutual funds both to retail customers and to institutional customers. The securities management has a socially responsible profile.
OTHER
Other segments comprises KLP Forsikringsservice AS which offers a broad specter of services to local authority pension funds.
Note 3 Premium income for own account
NOK MILLIONS | Q3 2021 | Q3 2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 |
---|---|---|---|---|---|
Contribution service pension | 8 021 | 12 119 | 42 578 | 27 563 | 36 270 |
Reinsurance premiums ceeded | -18 | 0 | -55 | -36 | -71 |
Transfer of premium reserves from others | 0 | 0 | 0 | 3 075 | 2 850 |
Total premium income | 8 003 | 12 119 | 42 523 | 30 602 | 39 049 |
Note 4 Other income
NOK MILLIONS | Q3 2021 | Q3 2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 |
---|---|---|---|---|---|
Supplement contractual early retirement scheme (ERS) | 327 | 303 | 934 | 884 | 1 189 |
Other income 1 | 112 | 8 | 268 | 92 | -52 |
Total other income | 439 | 312 | 1 202 | 976 | 1 136 |
1 Other income includes investment from associated and joint ventures companies, so the results can be both negative and positive. |
Note 5 Suboriented loans and perpetual hybrid tier 1 securities
NOK MILLIONS | Q3 2021 | Q3 2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 |
---|---|---|---|---|---|
SUBORDINATED LOANS | |||||
Interest costs ¹ | -32 | -36 | -93 | -524 | -555 |
Value changes | 26 | -40 | 106 | 23 | 169 |
Net costs subordinated loans | -6 | -76 | 13 | -501 | -386 |
PERPETUAL HYBRID TIER 1 SECURITIES | |||||
Interest costs | -16 | -17 | -47 | -52 | -67 |
Value changes | -19 | 48 | 110 | -233 | -25 |
Net costs perpetual hybrid tier 1 securities | -35 | 31 | 63 | -285 | -92 |
Net costs subordinated loan and hybrid Tier 1 securities | -41 | -45 | 76 | -787 | -478 |
¹ Besides pure interest costs, this includes recognition through profit/loss of a discount on one subordinated loan. |
This note gives a specification of the line "Net costs subordinated loan and hybrid Tier 1 securities" in the income statement.
The fluctuations in value change are predominantly due to the loans being denominated in foreign currency. The subordinated loan is issued in euros and the perpetual hybrid Tier 1 security are issued in Japanese yen.
Note 6 Operating expenses
NOK MILLIONS | Q3 2021 | Q3 2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 |
---|---|---|---|---|---|
Personnel costs | 253 | 217 | 885 | 820 | 1 131 |
Depreciation and writedowns | 38 | 30 | 115 | 95 | 132 |
Other operating expenses | 155 | 121 | 511 | 493 | 708 |
Total operating expenses | 446 | 368 | 1 510 | 1 407 | 1 971 |
Note 7 Other expenses
NOK MILLIONS | Q3 2021 | Q3 2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 |
---|---|---|---|---|---|
Supplement contractual early retirement scheme (ERS) | 327 | 303 | 934 | 884 | 1 189 |
Other expenses | 1 | - 3 | 23 | 38 | 70 |
Total other expenses | 328 | 300 | 957 | 922 | 1 258 |
Note 8 Investment property
NOK MILLIONS | Q3 2021 | Q3 2020 | 01.01.2021 -30.09.2021 | 01.01.2020 -30.09.2020 | 01.01.2020 -31.12.2020 |
---|---|---|---|---|---|
Net rental income | 744 | 746 | 2 255 | 2 141 | 2 893 |
Net value adjustment | 622 | -42 | 2 615 | -534 | 2 177 |
Realised gains | 0 | 9 | 0 | 9 | 9 |
Net income from investment properties | 1 367 | 713 | 4 870 | 1 615 | 5 080 |
Currency translate foreign subsidiaries (taken to other comprehensive income) | -95 | 360 | -784 | 2 596 | 1 778 |
Net income from investment properties included currency translate | 1 272 | 1 072 | 4 086 | 4 211 | 6 858 |
NOK MILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 |
---|---|---|---|
Investment property 01.01. | 81 485 | 74 545 | 74 545 |
Value adjustment, including currency translation | 1 831 | 2 062 | 3 956 |
Net additions | 1 111 | 1 319 | 3 083 |
Reclassified property for own use | 0 | - 102 | - 102 |
Other changes | - 60 | 30 | 2 |
Investment property 30.09/31.12 | 84 367 | 77 855 | 81 485 |
Note 9 Fair value of financial assets and liabilities
Fair value is to be a representative price based on what the equivalent asset or liabilites would be sold for under normal market terms and conditions. A financial instrument is considered as being listed in an active market if listed prices are easily and regularly accessible from a stock exchange, dealer, broker, commercial group, pricing service or regulatory authority, and such prices represent actual transactions that occur regularly at arm’s length. If the market for the security is not active, or the security is not listed on a stock exchange or similar, the Group uses valuation techniques to determine fair value. These are based on information on transactions recently carried out on business conditions, reference to the purchase and sale of similar instruments and pricing by means of externally obtained interest-rate curves and interest-rate differential curves. Estimates are based to the greatest possible extent on external observable market data, and to a small degree on company-specific information.
In the case of this note, there are three different categories of financial instruments: balance sheet classification, accounts classification, and type of instrument. It is for this last category that information is provided about how fair value is derived.
FINANCIAL INSTRUMENTS MEASURED AT AMORTISED COST
This category includes:
- Investments held to maturity
- Bonds classified as loans and receivables
- Other loans and receivables
- Liabilies to and deposits to customers
- Subordinated loan capital (liabilities)
- Other debt issued (liabilities)
Financial instruments not measured at fair value are measured at amortised cost by using the effective interest rate method. The internal rate of exchange is determined by discounting contractual cash flows over their expected term. The cash flows include arrangement/up-front fees and direct transaction costs as well as any residual value on the expiry of the expected term. Amortised cost is the present value of these cash flows discounted by the internal rate of interest. This note contains information about the fair value of the financial instruments that are measured at amortised cost.
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
This category includes:
- Equity instruments
- Debt instruments at fair value
- Derivatives (assets and liabilites)
- Debt to credit institutions (liabilites)
Below is a list of which types of financial instrument come under the various accounts categories, and how fair value is calculated.
- INVESTMENTS HELD TO MATURITY
- BONDS CLASSIFIED AS LOANS AND RECEIVABLES
- DEBT INSTRUMENTS MEASURED AT FAIR VALUE
a) Foreign fixed-income securities
Foreign fixed-income securities are generally priced based on prices obtained from an index provider. At the same time, prices are compared between several different sources to spot any errors.
The following sources are used:
- Barclays Capital Indices
- Bloomberg
Barclays Capital Indices have first priority (they cover foreign government and foreign credit respecitvely). Then comes Bloomberg based on Bloomberg’s pricing service Business Valuator Accredited in Litigation (BVAL). BVAL has verified prices from Bloomberg.
b) Norwegian fixed-income securities – government
Bloomberg is used as the source for pricing Norwegian Government Bonds. It is Oslo Børs, the Oslo Stock Exchange, that provides the price (via Bloomberg). Prices are compared with prices from Reuters in order to uncover any errors.
c) Norwegian fixed-income securities – other than government ones
Norwegian fixed-income securities except government are mainly priced directly on prices from Nordic Bond Pricing. Securities that are not covered by Nordic Bond Pricing are priced theoretically. The theoretical price is based on the assumed present value on the sale of the position. A zero-coupon curve is used for discounting. The zero-coupon curve is adjusted upwards by means of a credit spread, which is to take account of the risk the bond entails. The credit spread is calculated on the basis of a spread curve taking account of the duration of the bond. Nordic Bond Pricing is the main source of spread curves. They provide company-specific curves and curves for Norwegian savings banks, municipalities and energy. Savings banks have various spread curves based on total assets. For companies where Nordic Bond Pricing do not deliver spread curves, the Group use spread curves from three Norwegian banks. When spread curves are available from more than one of these banks, an equal-weighted average is used. If a bond lacks an appropriate spread curve, spread from a comparable bond from the same issuer is used.
d) Fixed-income securities issued by foreign enterprises but denominated in NOK
Fair value is calculated on the same general principles as those applying for Norwegian fixed-income securities described above.
e) Receivables on credit institutions
The fair value of these is considered as being approximately the same as the book value since the terms and conditions of the contract are continually revised in accordance with changes in the market rates.
f) Loans to municipalities and enterprises with municipal guarantee
Receivables are valued by means of a valuation model using relevant credit premium adjustments obtained in the market. For guaranteed loans fair value is calculated as discounted cash flow based on the same interest-rate curves as direct loans, but the credit margin is adjusted to market values for the appropriate combination of guarantee category and type of guarantee. The guarantor is either a state, municipality or a bank.
g) Loans secured by mortgage
The principles for calculating fair value are subject to the loans having fixed-interest rates or not. Fair value of fixed-rate loans is calculated by discounting contractual cash flows by the market rate including a relevant risk margin on the reporting date. The fair value of loans with no fixed rate is approximately equal to book value since the terms and conditions of the contract are continually revised in accordance with changes in the market rates
- EQUITY INSTRUMENTS
h) Shares (listed)
Liquid shares are generally valued on the basis of prices from an index provider. At the same time, prices are compared between different sources in order to spot any errors.
The following sources are used for Norwegian shares:
- Oslo Børs/Oslo Stock Exchange (primary source)
- Morgan Stanley Capital International (MSCI)
- Bloomberg
The following sources are used for foreign shares:
- Morgan Stanley Capital International (MSCI) (primary source)
- Bloomberg
i) Shares (unlisted)
As far as possible, The Group uses the Norwegian Mutual Funds Association’s industry recommendations. This basically means the following:
The last price traded has key priority. If the last price traded is outside of the bid/offer price in the market, the price is adjusted accordingly. This means that if the last price traded is below the offer price, the price is adjusted upward to the offer price. If it is above the bid price, it is adjusted downward to the bid price.
In cases where there is very little information about the shares, a discretionary assessment is carried out, such as a fundamental analysis of the company, or a broker assessment.
j) Private Equity
Most of the investment in Private Equity goes through funds. The funds’ fair value is to be based on reported market values that follow from the International Private Equity and Venture Capital Valuation Guidelines (’IPEV Guidelines). These guidelines are established by the European Venture Capital Association (EVCA) and are based on the principle of approximate market assessment of the companies. Fair value is calculated on the basis of the funds’ reported market value adjusted for payments in and out during the period between the fund’s last reported market value and the period being reported on for the Group. Direct investments in Private Equity are treated in the same way as with current stocks, but valuation can be daily, quarterly or yearly. In cases where it's possible to obtain information on what co-investments are priced within the funds, it will be considered in the valuation process. Other direct investments are valued based on either cost prices, reported market values from companies or available trading prices.
DERIVATIVES
k) Futures/FRA/IRF
All futures contracts for KLP are traded on the stock exchange. Bloomberg is used as a prices source. Prices are also obtained from another source in order to check that Bloombergs’ prices are correct. Reuters acts as a secondary source.
l) Options
Bloomberg is used as a source for pricing options traded on the stockmarket. Reuters is a secondary source.
m) Interest-rate swaps
Interest-rate swaps are valued in a model that takes observable market data such as interest-rate curves and relevant credit premiums into account .
n) FX-swaps
FX-swaps with a one-year maturity or less are priced on curves that are built up from FX swap-points obtained from Reuters. The market is not considered particularly liquid for FX-swaps with a maturity of more than one year and basis-adjusted swap curves are used for pricing purposes.
- DEBT TO CREDIT INSTITUTIONS
o) Placements with credit institutions and deposits
Placements with credit institutions are made as short-term deposits. Fair value is calculated by discounting contractual cash flows by market rate including a relevant risk margin on the reporting date. Deposits are prices on swap curves.
SUBORDINATED LOAN CAPITAL, OTHER DEBT ISSUED, AND DEPOSITS FROM CUSTOMERS
p) Fair value of subordinated loans
The observable price is used as the fair value of loans listed on an active stock exchange. In the case of other loans that are not part of an active market the fair value is based on an internal valuation model based on observable data.
q) Fair value of subordinated bond/perpetual bond issued
Fair value in this category is determined on the basis of internal valuation models based on external observable data.
r) Covered bonds issued
Fair value in this category is determined on the basis of internal valuation models based on observable data.
s) Deposits from customers
All deposits are without fixed-rate interest. The fair value of these is considered as approximately equal to book value since the contractual terms are continually revised in accordance with the market rate.
The tables below give a more detailed specification of the content of the different classes of assets and financial liabilities.
NOK MILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 | |||
---|---|---|---|---|---|---|
Book value | Fair value | Book value | Fair value | Book value | Fair value | |
DEBT INSTRUMENTS HELD TO MATURITY - AT AMORTIZED COST | ||||||
Norwegian hold-to-maturity bonds | 5 625 | 6 078 | 5 154 | 6 027 | 5 130 | 5 786 |
Foreign hold-to-maturity bonds | 23 181 | 24 820 | 25 716 | 28 252 | 23 856 | 26 163 |
Total debt instruments held to maturity | 28 806 | 30 898 | 30 870 | 34 279 | 28 986 | 31 950 |
DEBT INSTRUMENTS CLASSIFIED AS LOANS AND RECEIVABLES– AT AMORTIZED COST | ||||||
Norwegian bonds | 51 822 | 53 420 | 48 181 | 53 078 | 51 396 | 54 735 |
Foreign bonds | 108 078 | 112 944 | 105 446 | 116 779 | 102 738 | 111 115 |
Other receivables | 44 | 44 | 42 | 42 | 47 | 47 |
Total debt instruments classified as loans and receivables | 159 945 | 166 407 | 153 670 | 169 900 | 154 180 | 165 897 |
LENDING LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS AT FAIR VALUE THROUGH PROFIT/LOSS | ||||||
Loans to local government sector or enterprises with local government guarantee | 481 | 481 | 672 | 672 | 589 | 589 |
Total loans to local government, enterprises & retail customers | 481 | 481 | 672 | 672 | 589 | 589 |
LENDING TO LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS – AT AMORTIZED COST | ||||||
Loans secured by mortgage | 24 411 | 24 425 | 23 858 | 23 917 | 23 763 | 23 816 |
Loans to local government sector or enterprises with local government guarantee | 83 226 | 83 697 | 79 629 | 81 333 | 81 335 | 82 668 |
Loans abroad secured by mortage and local government guarantee | 8 037 | 8 037 | 10 158 | 10 158 | 9 923 | 9 923 |
Loans creditcard | 46 | 46 | 54 | 54 | 50 | 50 |
Total loans to local government, enterprises & retail customers | 115 720 | 116 205 | 113 699 | 115 461 | 115 071 | 116 458 |
DEBT INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS | ||||||
Norwegian bonds | 55 591 | 55 591 | 56 632 | 56 632 | 51 841 | 51 841 |
Norwegian certificates | 9 626 | 9 626 | 6 764 | 6 764 | 6 094 | 6 094 |
Foreign bonds | 90 953 | 90 953 | 98 389 | 98 389 | 92 025 | 92 025 |
Foreign certificates | 953 | 953 | 50 | 50 | 549 | 549 |
Investments with credit institutions | 35 930 | 35 930 | 26 173 | 26 173 | 43 305 | 43 305 |
Total debt instruments | 193 054 | 193 054 | 188 008 | 188 008 | 193 814 | 193 814 |
EQUITY CAPITAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS | ||||||
Shares | 236 549 | 236 549 | 176 375 | 176 375 | 185 112 | 185 112 |
Equity funds | 26 214 | 26 214 | 17 806 | 17 806 | 18 488 | 18 488 |
Property funds | 2 137 | 2 137 | 15 | 15 | 1 382 | 1 382 |
Alternative investments | 0 | 0 | 3 437 | 3 437 | 0 | 0 |
Total equity capital instruments | 264 899 | 264 899 | 197 632 | 197 632 | 204 982 | 204 982 |
RECEIVABLES | ||||||
Receivables related to direct business | 1 635 | 1 635 | 5 360 | 5 360 | 1 433 | 1 433 |
Receivables related to reinsurance agreements | 407 | 407 | 163 | 163 | 176 | 176 |
Reinsurance share of gross claims reserve | 18 | 18 | 17 | 17 | 0 | 0 |
Receivables related to securites | 6 605 | 6 605 | 9 410 | 9 410 | 3 111 | 3 111 |
Prepaid rent related to real estate activites | 245 | 245 | 212 | 212 | 212 | 212 |
Other receivables | 631 | 631 | 685 | 685 | 1 246 | 1 246 |
Total other loans and receivables including receivables from policyholders | 9 542 | 9 542 | 15 848 | 15 848 | 6 179 | 6 179 |
FINANCIAL LIABILITIES - AT AMORTIZED COST | ||||||
Hybrid Tier 1 securities | 1 670 | 1 639 | 1 989 | 1 750 | 1 764 | 1 592 |
Subordinated loan capital | 2 995 | 3 353 | 3 250 | 3 654 | 3 135 | 3 561 |
Debt to credit institutions | 902 | 902 | 3 495 | 3 495 | 3 304 | 3 304 |
Covered bonds issued | 28 633 | 30 040 | 25 311 | 25 403 | 24 997 | 25 105 |
Liabilities and deposits from customers | 12 774 | 12 774 | 11 993 | 11 993 | 11 781 | 11 781 |
Total financial liabilities | 46 974 | 48 708 | 46 038 | 46 295 | 44 980 | 45 342 |
FINANCIAL LIABILITIES - AT FAIR VALUE THROUGH PROFIT OR LOSS | ||||||
Debt to credit institutions | 4 871 | 4 871 | 2 519 | 2 519 | 10 913 | 10 913 |
Total financial liabilities | 4 871 | 4 871 | 2 519 | 2 519 | 10 913 | 10 913 |
NOK MILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 | |||
---|---|---|---|---|---|---|
Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | |
FINANCIAL DERIVATIVES - AT FAIR VALUE THROUGH PROFIT OR LOSS | ||||||
Forward exchange contracts | 2 807 | 1 189 | 297 | 6 885 | 9 140 | 384 |
Interest rate swaps | 407 | 1 266 | 228 | 1 359 | 1 144 | 405 |
Interest rate and currency swaps | 806 | 0 | 1 000 | 0 | 1 058 | 0 |
Share option | 143 | 0 | 0 | 0 | 219 | 0 |
Total financial derivatives | 4 163 | 2 455 | 1 525 | 8 244 | 11 561 | 789 |
Note 10 Borrowing
NOK MILLIONS | Nominal in NOK | Currency | Interest | Due date | Book value 30.09.2021 | Book value 30.09.2020 | Book value 31.12.2020 |
---|---|---|---|---|---|---|---|
FIXED - TERM SUBORDINATED LOAN | |||||||
Kommunal Landspensjonskasse | 2 530 | EUR | Fixed ¹ | 2045 | 2 995 | 3 250 | 3 135 |
Total subordinated loan capital | 2 530 | - | - | - | 2 995 | 3 250 | 3 135 |
HYBRID TIER 1 SECURITIES | |||||||
Kommunal Landspensjonskasse | 984 | JPY | Fixed ² | 2034 | 1 670 | 1 989 | 1 764 |
Total hybrid Tier 1 securities | 984 | - | - | - | 1 670 | 1 989 | 1 764 |
COVERED BONDS | |||||||
KLP Kommunekreditt AS | 0 | NOK | Fixed | 2020 | 0 | 705 | 0 |
KLP Kommunekreditt AS | 0 | NOK | Floating | 2021 | 0 | 496 | 260 |
KLP Kommunekreditt AS | 461 | NOK | Fixed | 2021 | 469 | 610 | 8 |
KLP Kommunekreditt AS | 2 008 | NOK | Floating | 2022 | 2 010 | 5 003 | 5 004 |
KLP Kommunekreditt AS | 5 000 | NOK | Floating | 2023 | 5 005 | 5 005 | 5 006 |
KLP Kommunekreditt AS | 5 000 | NOK | Floating | 2024 | 5 004 | 1 908 | 2 502 |
KLP Kommunekreditt AS | 4 000 | NOK | Floating | 2025 | 4 002 | 1 604 | 2 053 |
KLP Kommunekreditt AS | 500 | NOK | Fixed | 2027 | 505 | 505 | 508 |
KLP Boligkreditt AS | 0 | NOK | Floating | 2020 | 0 | 120 | 0 |
KLP Boligkreditt AS | 302 | NOK | Floating | 2021 | 302 | 769 | 585 |
KLP Boligkreditt AS | 1 904 | NOK | Floating | 2022 | 1 904 | 2 500 | 2 500 |
KLP Boligkreditt AS | 2 500 | NOK | Floating | 2023 | 2 501 | 2 501 | 2 501 |
KLP Boligkreditt AS | 2 500 | NOK | Floating | 2024 | 2 500 | 2 500 | 2 500 |
KLP Boligkreditt AS | 2 500 | NOK | Floating | 2025 | 2 500 | 997 | 1 497 |
KLP Boligkreditt AS | 1 850 | NOK | Floating | 2026 | 1 852 | 0 | 0 |
Other | - | - | - | 80 | 89 | 73 | |
Total covered bonds | 28 525 | - | - | - | 28 633 | 25 311 | 24 997 |
DEBT TO CREDIT INSTITUTIONS | |||||||
KLP Banken AS | 0 | NOK | Floating | 2020 | 0 | 690 | 0 |
KLP Banken AS | 0 | NOK | Floating | 2021 | 0 | 2 203 | 2 704 |
KLP Banken AS | 300 | NOK | Floating | 2022 | 300 | 300 | 300 |
KLP Banken AS | 300 | NOK | Floating | 2023 | 300 | 0 | 0 |
KLP Banken AS | 300 | NOK | Floating | 2024 | 300 | 300 | 300 |
KLP Fond | 0 | NOK | Floating | 2020 | 0 | 1 437 | 0 |
KLP Fond | 632 | NOK/EUR/USD | Floating | 2021 | 632 | 0 | 4 140 |
KLP Fond | 1 956 | NOK/EUR/USD | Fixed | 2021 | 1 956 | 0 | 914 |
Kommunal Landspensjonskasse | 0 | NOK/EUR/USD | Floating | 2020 | 0 | 1 086 | 0 |
Kommunal Landspensjonskasse | 2 262 | NOK/EUR/USD | Floating | 2021 | 2 262 | 0 | 5 859 |
Other | - | - | - | 23 | -2 | -1 | |
Total liabilities to credit institutions | 5 750 | - | - | - | 5 774 | 6 014 | 14 216 |
LIABILITIES AND DEPOSITS FROM CUSTOMERS ³ | |||||||
Retail | 11 274 | NOK | - | - | 11 274 | 10 517 | 10 311 |
Business | 1 465 | NOK | - | - | 1 465 | 1 446 | 1 441 |
Foreign | 35 | NOK | - | - | 35 | 30 | 30 |
Liabilities to and deposits from customers | 12 774 | - | - | - | 12 774 | 11 993 | 11 781 |
Total financial liabilities | 50 562 | 51 845 | 48 557 | 55 893 | |||
1 The loan has an interest change date in 2025. | |||||||
2 The loan has an interest change date in 2034. | |||||||
3 There is no contractual maturity date on deposits. |
The note shows financial liabilities the Group had at the end of the reporting period; where the majority is funding for KLP Bank Group.
The companies above are the issuers of the financial debt. Deposits belongs to KLP Banken AS.
Note 11 Fair value hierarchy
30.09.2021 NOK MILLIONS | Level 1 | Level 2 | Level 3 | Total |
---|---|---|---|---|
ASSETS BOOKED AT FAIR VALUE | ||||
Land/plots | 0 | 0 | 973 | 973 |
Real estate fund | 0 | 0 | 3 395 | 3 395 |
Buildings | 0 | 0 | 80 000 | 80 000 |
Investment property | 0 | 0 | 84 368 | 84 368 |
Lending at fair value | 0 | 481 | 0 | 481 |
Certificates | 3 349 | 7 230 | 0 | 10 579 |
Bonds | 21 642 | 107 697 | 0 | 129 339 |
Fixed-income funds | 17 202 | 7 258 | 5 923 | 30 382 |
Bonds and other fixed-income securities | 42 193 | 122 185 | 5 923 | 170 301 |
Loans and receivables | 21 372 | 1 381 | 0 | 22 753 |
Shares | 230 315 | 3 415 | 2 818 | 236 549 |
Equity funds | 2 325 | 0 | 49 | 2 374 |
Property funds | 0 | 1 125 | 1 012 | 2 137 |
Special funds | 0 | 0 | 0 | 0 |
Private Equity | 0 | 0 | 23 839 | 23 839 |
Shares and units | 232 640 | 4 541 | 27 718 | 264 899 |
Financial derivatives | 0 | 4 163 | 0 | 4 163 |
Andre finansielle eiendeler ¹ | 0 | 4 223 | 0 | 4 223 |
Total assets at fair value | 296 205 | 132 751 | 118 009 | 546 964 |
LIABILITIES BOOKED AT FAIR VALUE | ||||
Financial derivatives | 0 | 2 455 | 0 | 2 455 |
Debt to credit institutions ¹ | 2 915 | 1 956 | 0 | 4 871 |
Total financial liabilities at fair value | 2 915 | 4 411 | 0 | 7 326 |
30.09.2020 NOK MILLIONS | Level 1 | Level 2 | Level 3 | Total |
---|---|---|---|---|
ASSETS BOOKED AT FAIR VALUE | ||||
Land/plots | 0 | 0 | 941 | 941 |
Real estate fund | 0 | 0 | 3 169 | 3 169 |
Buildings | 0 | 0 | 73 744 | 73 744 |
Investment property | 0 | 0 | 77 855 | 77 855 |
Lending at fair value | 0 | 672 | 0 | 672 |
Certificates | 2 783 | 4 275 | 0 | 7 058 |
Bonds | 25 370 | 112 508 | 0 | 137 878 |
Fixed-income funds | 16 908 | 3 963 | 0 | 20 871 |
Bonds and other fixed-income securities | 45 062 | 120 745 | 0 | 165 807 |
Loans and receivables | 20 606 | 1 595 | 0 | 22 201 |
Shares | 171 041 | 2 915 | 2 304 | 176 260 |
Equity funds | 2 193 | 0 | 55 | 2 247 |
Property funds | 0 | 15 | 0 | 15 |
Special funds | 0 | 2 | 3 435 | 3 437 |
Private Equity | 0 | 0 | 15 673 | 15 673 |
Shares and units | 173 234 | 2 931 | 21 466 | 197 632 |
Financial derivatives | 0 | 1 525 | 0 | 1 525 |
Total assets at fair value | 238 902 | 127 468 | 99 321 | 465 691 |
LIABILITIES BOOKED AT FAIR VALUE | ||||
Financial derivatives | 0 | 8 244 | 0 | 2 315 |
Debt to credit institutions ¹ | 1 513 | 1 006 | 0 | 8 217 |
Total financial liabilities at fair value | 1 513 | 9 250 | 0 | 10 532 |
31.12.2020 NOK MILLIONS | Level 1 | Level 2 | Level 3 | Total |
---|---|---|---|---|
ASSETS BOOKED AT FAIR VALUE | ||||
Land/plots | 0 | 0 | 996 | 996 |
Real estate fund | 0 | 0 | 3 354 | 3 354 |
Buildings | 0 | 0 | 77 136 | 77 136 |
Investment property | 0 | 0 | 81 485 | 81 485 |
Lending at fair value | 0 | 589 | 589 | |
Certificates | 1 058 | 5 585 | 0 | 6 643 |
Bonds | 16 125 | 110 382 | 0 | 126 506 |
Fixed-income funds | 17 437 | 7 141 | 4 250 | 28 828 |
Bonds and other fixed-income securities | 34 621 | 123 108 | 4 250 | 161 978 |
Loans and receivables | 31 106 | 730 | 0 | 31 836 |
Shares | 179 469 | 2 939 | 2 704 | 185 112 |
Equity funds | 2 245 | 0 | 55 | 2 300 |
Property funds | 0 | 1 157 | 224 | 1 382 |
Special funds | 0 | 0 | ||
Private Equity | 0 | 0 | 16 188 | 16 188 |
Shares and units | 181 714 | 4 097 | 19 171 | 204 982 |
Financial derivatives | 0 | 11 561 | 0 | 11 561 |
Total assets at fair value | 247 440 | 140 085 | 104 905 | 492 431 |
LIABILITIES BOOKED AT FAIR VALUE | ||||
Financial derivatives | 0 | 789 | 0 | 789 |
Debt to credit institutions ¹ | 9 999 | 914 | 0 | 10 913 |
Total financial liabilities at fair value | 9 999 | 1 702 | 0 | 11 701 |
¹ The line «Debt to credit institutions» includes liabilities measured at fair value and amortized cost. This line is therefore not reconcilable against the Balance sheet. The liabilities measured at amortized cost amounted to NOK 902 million per 30.09.2021. |
Changes in Level 3, Investment Property | Book value 30.09.2021 | Book value 30.09.2020 | Book value 31.12.2020 |
---|---|---|---|
Opening balance 1 January | 81 485 | 74 545 | 74 545 |
Sold | 0 | -63 | -83 |
Bought | 1 111 | 1 382 | 3 166 |
Unrealised changes | 1 831 | 2 062 | 3 956 |
Other changes | -60 | -71 | -99 |
Closing balance 30.09./31.12. | 84 367 | 77 855 | 81 485 |
Realised gains/losses | 0 | 0 | 0 |
Changes in Level 3, Financial Assets | Book value 30.09.2021 | Book value 30.09.2020 | Book value 31.12.2020 |
---|---|---|---|
Opening balance 1 January | 23 420 | 14 660 | 14 660 |
Sold | -3 050 | -1 162 | -1 765 |
Bought | 7 605 | 4 215 | 8 828 |
Unrealised changes | 5 665 | 3 753 | 1 697 |
Closing balance 30.09./31.12. | 33 641 | 21 466 | 23 420 |
Realised gains/losses | 1 561 | 425 | 644 |
Closing balance 30.09./31.12. | 118 009 | 99 321 | 104 905 |
Unrealised changes and realized gains / losses are reflected on the line "Net value changes on financial instruments" in the consolidated income statement.
The tables "Changes in level 3" shows changes in level 3 classified instruments in the period indicated.
Fair value shall be a representative price based on what a corresponding asset or liability would have been traded for on normal market terms and conditions. Highest quality in regard to fair value is based on listed prices in an active market. A financial instrument is considered as noted in an active market if noted prices are simply and regularly available from a stock market, dealer, broker, industry grouping, price setting service or regulatory authority, and these prices represent actual and regularly occurring transactions at arm’s length.
Level 1:
Instruments at this level obtain fair value from listed prices in an active market for identical assets or liabilities that the entity has access to at the reporting date. Examples of instruments at Level 1 are stock market listed securities.
Level 2:
Instruments at this level obtain fair value from observable market data. This includes prices based on identical instruments, but where the instrument does not maintain a high enough trading frequency and is corresponding therefore not considered to be traded in an active market, as well as prices based on assets and price-leading indicators that can be confirmed from market information. Example instruments at Level 2 are fixed income securities priced on the basis of interest rate paths.
Level 3:
Instruments at Level 3 contain no observable market data or are traded in markets considered to be inactive. The price is based generally on discrete calculations where the actual fair value may deviate if the instrument were to be traded. The instruments covered at Level 3 in the Group include unlisted shares and Private Equity.
Valuations related to items in the various levels are described in Note 9. For description of the pricing of investment property, please see the annual financial statements.
No sensitivity analysis has been carried out on securities included in Level 3. A sensitivity analysis for investment property is available in the annual report. A change in the variables of the pricing is considered of little significance. On a general basis, a 5 percent change in the pricing would produce a change of NOK 5 900 million as of 30.09.2021.
With regard to transferring securities between the levels, a limit is set for the number of trading days and the amount of trading for shares by separating Level 1 and Level 2. The general principles related to the distribution between levels basically concern whether the asset or liability is listed or not and whether the listing can be stated to be in an active market. As regards shares, there is a further distinction between trading days and amount of trading which separates out listed securities that do not form part of an active market. The values at the end of the reporting period provide the basis for any movement between the levels.
In the 3rd quarter, NOK 546 million in stocks moved from Level 1 to Level 2, NOK 34 million moved from Level 1 to Level 3, NOK 1 963 million moved from level 2 to level 1 and NOK 1 million moved from level 2 to level 3. This is due to changes in liquidity.
Note 12 Liquidity risk
The table below specify the company’s financial obligations ranked by maturity. The amounts given are non-discounted contractual flows of cash.
30.09.2021 NOK MILLIONS | Within 1 month | 1-12 months | 1-5 years | 5-10 years | Over 10 years | Total |
---|---|---|---|---|---|---|
Subordinated loan ¹ | 0 | 126 | 578 | 664 | 4 767 | 6 135 |
Perpetual hybrid Tier 1 securities ¹ | 0 | 95 | 254 | 318 | 1 322 | 1 989 |
Debt to and deposits from customers (without defined maturity) | 12 774 | 0 | 0 | 0 | 0 | 12 774 |
Covered bonds issued | 462 | 4 227 | 23 893 | 577 | 0 | 29 159 |
Payables to credit institutions | 2 308 | 9 | 907 | 0 | 0 | 3 224 |
Financial derivatives | 1 444 | 2 137 | 234 | 263 | 142 | 4 220 |
Accounts payable | 61 | 0 | 0 | 0 | 0 | 61 |
Contingent liabilities (without defined maturity) | 29 869 | 0 | 0 | 0 | 0 | 29 869 |
Total | 46 918 | 6 595 | 25 867 | 1 821 | 6 231 | 87 431 |
If the minority interests are taken out of account, derivatives maturing within one month are reduced with NOK 113 million, payables to credit institutions maturing within one month are reduced with NOK 32 million and derivatives maturing between 1 to 12 months are reduced with NOK 167 million. Total amount of the financial liabilities for the Group are after these adjustments NOK 87 120 million. |
30.09.2020 NOK MILLIONS | Within 1 month | 1-12 months | 1-5 years | 5-10 years | Over 10 years | Total |
---|---|---|---|---|---|---|
Subordinated loan ¹ | 137 | 3 774 | 0 | 0 | 0 | 3 911 |
Perpetual hybrid Tier 1 securities ¹ | 102 | 273 | 341 | 1 557 | 0 | 2 273 |
Debt to and deposits from customers (without defined maturity) | 11 993 | 0 | 0 | 0 | 0 | 11 993 |
Covered bonds issued | 120 | 1 173 | 26 992 | 591 | 0 | 28 876 |
Payables to credit institutions | 190 | 2 710 | 610 | 0 | 0 | 3 511 |
Financial derivatives | 7 077 | -6 | 8 | -321 | 0 | 6 759 |
Accounts payable | 171 | 0 | 0 | 0 | 0 | 171 |
Contingent liabilities (without defined maturity) | 25 249 | 0 | 0 | 0 | 0 | 25 249 |
Total | 45 040 | 7 924 | 27 950 | 1 827 | 0 | 82 742 |
If the minority interests are taken out of account, derivatives maturing within one month are reduced with NOK 925 million. Total amount of the financial liabilities for the Group are after these adjustments NOK 81 816 million. |
31.12.2020 NOK MILLIONS | Within 1 month | 1-12 months | 1-5 years | 5-10 years | Over 10 years | Total |
---|---|---|---|---|---|---|
Subordinated loan ¹ | 0 | 131 | 592 | 687 | 5 073 | 6 484 |
Perpetual hybrid Tier 1 securities ¹ | 0 | 62 | 249 | 312 | 1 452 | 2 075 |
Debt to and deposits from customers (without defined maturity) | 11 781 | 0 | 0 | 0 | 0 | 11 781 |
Covered bonds issued | 18 | 1 423 | 26 618 | 587 | 0 | 28 646 |
Payables to credit institutions | 1 351 | 2 410 | 610 | 0 | 0 | 4 370 |
Financial derivatives | 2 396 | 2 381 | 116 | -266 | -294 | 4 333 |
Accounts payable | 123 | 0 | 0 | 0 | 0 | 123 |
Contingent liabilities (without defined maturity) | 27 659 | 0 | 0 | 0 | 0 | 27 659 |
Total | 43 328 | 6 407 | 28 186 | 1 320 | 6 231 | 85 472 |
If the minority interests are taken out of account, derivatives maturing within one month are reduced with NOK 29 million, payables to credit institutions maturing within one month are reduced with NOK 140 million, derivatives maturing between 1 to 12 months are reduced with NOK 1 million. Derivatives maturing between 1 to 5 years and 5 to 10 years, increased by NOK 2 million in both periods. Total amount of the financial liabilities for the Group are after these adjustments NOK 85 306 million. | ||||||
1 Some of the hybrid capital are perpetual. Estimated cash flows are based on expected maturity at the interest adjustment date. |
The table above shows financial liabilities the Group has grouped by interest payments and repayment of principal, based on the date payment is due. Banking contains the largest proportion of the financial liabilities in the Group.
Liquidity risk is the risk that the Group will not be able to meet the financial obligations that it has. The risk that the Group would not have adequate liquidity to meet its current liabilities and current operations is very small since a major part of the Group’s assets is liquid. The Group has significant funds invested in the money market, bonds and shares that can be sold in the event of a liquidity requirement. The Group’s liquidity strategy involves the Group always having adequate liquid assets to meet the Group’s liabilities as they fall due without accruing significant costs associated with releasing assets.
Asset composition in the Group’s portfolios should be adequately liquid to be able to cover other liquidity needs that may arise. KLP Kapitalforvaltning manages the Group’s liquidity. Internal parameters have been established for the size of the liquidity holding. The Group’s risk management unit monitors and reports developments in the liquidity holding continuously. The Group Board determines an asset management and liquidity strategy annually. The liquidity strategy includes parameters, responsibilities, risk measurement and an emergency plan for liquidity management.
The major liabilities in the Group are insurance related and are mostly linked to pension obligations. These liabilities are fully funded and liquidity management are handled in the same manner as other liabilities.
Note 13 Interest rate risk
30.09.2021 NOK MILLIONS | ||||||||
---|---|---|---|---|---|---|---|---|
Up to 3 months | From 3 months to 12 months | From 1 year to 5 years | From 5 years to 10 years | Over 10 years | Changes in cash flow 01.01.2021 -30.09.2021 | Total | Adjusted for the unit holders' interests in consolidated securities funds | |
ASSETS | ||||||||
Financial derivatives classified as assets | 19 | -8 | 20 | 49 | -181 | 2 | -98 | -90 |
Debt instruments classified as loans and receivables – at amortised cost | 0 | 0 | 0 | 0 | 0 | 13 | 13 | 13 |
Bonds and other fixed-return securities | -50 | -59 | -1 113 | -1 653 | -2 104 | 220 | -4 759 | -3 781 |
Fixed income fund holdings | -1 230 | 0 | 0 | 0 | 0 | 0 | -1 230 | -1 230 |
Lending and receivables | -1 | 0 | 0 | 0 | 0 | 177 | 177 | 149 |
Lending | 0 | 0 | 0 | 0 | 0 | 603 | 603 | 603 |
Cash and bank deposits | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Contingent liabilities ¹ | 0 | 0 | 0 | 0 | 0 | 31 | 31 | 31 |
Total assets | -1 262 | -66 | -1 093 | -1 604 | -2 285 | 1 046 | -5 264 | -4 305 |
LIABILITIES | ||||||||
Deposit | 0 | 0 | 0 | 0 | 0 | -97 | -97 | -97 |
Liabilities created on issue of securities | 0 | 0 | 0 | 0 | 0 | -221 | -221 | -221 |
Financial derivatives classified as liabilities | 1 | 0 | 29 | 1 | 0 | 12 | 43 | 43 |
Hybrid capital, subordinated loans | 0 | 0 | 0 | 44 | 83 | 0 | 127 | 127 |
Debt to credit institutions | 0 | 0 | 0 | 0 | 0 | -41 | -41 | -41 |
Total liabilities | 1 | 0 | 29 | 45 | 83 | -347 | -189 | -189 |
Total before tax | -1 261 | -66 | -1 065 | -1 558 | -2 202 | 700 | -5 453 | -4 494 |
Total after tax | -945 | -50 | -799 | -1 169 | -1 652 | 525 | -4 089 | -3 370 |
30.09.2020 NOK MILLIONS | ||||||||
---|---|---|---|---|---|---|---|---|
Up to 3 months | From 3 months to 12 months | From 1 year to 5 years | From 5 years to 10 years | Over 10 years | Changes in cash flow 01.01.2020 -30.09.2020 | Total | Adjusted for the unit holders' interests in consolidated securities funds | |
ASSETS | ||||||||
Financial derivatives classified as assets | 11 | -2 | -55 | -94 | -202 | -18 | -359 | -316 |
Debt instruments classified as loans and receivables – at amortised cost | 0 | 0 | 0 | 0 | 0 | 4 | 4 | 0 |
Bonds and other fixed-return securities | -49 | -58 | -1 229 | -2 103 | -2 560 | 243 | -5 756 | -2 092 |
Fixed income fund holdings | -1 212 | 0 | 0 | 0 | 0 | 0 | -1 212 | -3 838 |
Lending and receivables | -1 | 0 | 0 | 0 | 0 | 200 | 200 | 132 |
Lending | 0 | 0 | 0 | 0 | 0 | 587 | 587 | 587 |
Cash and bank deposits | 0 | 0 | 0 | 0 | 0 | 20 | 20 | 20 |
Contingent liabilities ¹ | 0 | 0 | 0 | 0 | 0 | 49 | 49 | 49 |
Total assets | -1 250 | -61 | -1 284 | -2 196 | -2 762 | 1 086 | -6 468 | -5 457 |
LIABILITIES | ||||||||
Deposit | 0 | 0 | 0 | 0 | 0 | -91 | -91 | -91 |
Liabilities created on issue of securities | 0 | 0 | 0 | 0 | 0 | -219 | -219 | -219 |
Financial derivatives classified as liabilities | 1 | 0 | 72 | 98 | 0 | 13 | 185 | 105 |
Hybrid capital, subordinated loans | 0 | 0 | 0 | 58 | 108 | 0 | 167 | 167 |
Debt to credit institutions | 0 | 0 | 0 | 0 | 0 | -41 | -41 | -41 |
Total liabilities | 1 | 0 | 72 | 157 | 108 | -338 | 0 | -79 |
Total before tax | -1 249 | -61 | -1 212 | -2 040 | -2 654 | 748 | -6 467 | -5 536 |
Total after tax | -937 | -46 | -909 | -1 530 | -1 990 | 561 | -4 850 | -4 152 |
31.12.2020 NOK MILLIONS | ||||||||
---|---|---|---|---|---|---|---|---|
Up to 3 months | From 3 months to 12 months | From 1 year to 5 years | From 5 years to 10 years | Over 10 years | Changes in cash flow 01.01.2020 -31.12.2020 | Total | Adjusted for the unit holders' interests in consolidated securities funds | |
ASSETS | ||||||||
Financial derivatives classified as assets | 12 | -4 | -86 | -59 | -245 | -22 | -405 | -353 |
Debt instruments classified as loans and receivables – at amortised cost | 0 | 0 | 0 | 0 | 0 | 6 | 6 | 0 |
Bonds and other fixed-return securities | -44 | -48 | -1 153 | -1 914 | -2 460 | 320 | -5 299 | -4 336 |
Fixed income fund holdings | -1 329 | 0 | 0 | 0 | 0 | 0 | -1 329 | -1 329 |
Lending and receivables | 0 | -1 | 0 | 0 | 0 | 273 | 272 | 218 |
Lending | 0 | 0 | 0 | 0 | 0 | 797 | 797 | 797 |
Cash and bank deposits | 0 | 0 | 0 | 0 | 0 | 28 | 28 | 28 |
Contingent liabilities ¹ | 0 | 0 | 0 | 0 | 0 | 52 | 52 | 52 |
Total assets | -1 362 | -53 | -1 239 | -1 974 | -2 705 | 1 453 | -5 879 | -4 925 |
LIABILITIES | ||||||||
Deposit | 0 | 0 | 0 | 0 | 0 | -120 | -120 | -120 |
Liabilities created on issue of securities | 0 | 0 | 0 | 0 | 0 | -288 | -288 | -288 |
Financial derivatives classified as liabilities | 6 | 11 | 84 | 53 | 0 | 18 | 171 | 167 |
Hybrid capital, subordinated loans | 0 | 0 | 0 | 51 | 93 | 0 | 143 | 143 |
Debt to credit institutions | 0 | 0 | 0 | 0 | 0 | -72 | -72 | -72 |
Total liabilities | 6 | 11 | 84 | 103 | 93 | -461 | -165 | -169 |
Total before tax | -1 356 | -42 | -1 155 | -1 870 | -2 612 | 992 | -6 043 | -5 094 |
Total after tax | -1 017 | -32 | -866 | -1 403 | -1 959 | 744 | -4 533 | -3 820 |
¹ Contingent liabilities are lending agreements that are not yet materialized. |
The note shows the effect on profits if market interest rates were to increase by one percent, for fair value risk and variable interest risk.
Change in fair value (fair value risk) is shown in the first five columns and is calculated by the change in fair value of interest bearing instruments if interest rates had been one percent higher at the end of the period. The column change in cash flow shows the change in cash flows if the interest had been one percent higher over the year being reported on. The sum of these results reflects the overall effect that the scenario had given the group during the period being reported on.
The fair value risk applies to fixed interest securities were the market value of the securities is affected by market interest rates. Floating rate risk applies to securities with floating interest rates, where a change in market interest rates affects the cash-flow from the interest bearing securities.
The following securities are included in the note; securities measured at fair value through profit or loss (floating and fixed interest rates), investments held to maturity (only those with floating interest rates) and loans and receivables (only those with floating interest rates). The group has no securities classified as available for sale.
The Groups total interest rate risk is limited as a significant portion of the investments are bonds with fixed interest rates that are classified as held to maturity and loans and receivables, or fixed rate lending, measured at amortized cost. A change in market interest rate does not affect profit or loss for these assets.
Insurance contracts with guaranteed return does not change the accounting value even if interest rates change. Changes in interest rates also has no impact on the guaranteed return , but will have an impact on the achieved return to cover the guaranteed return . This is because that insurance funds partly invested in debt instruments whose cash flows should help to meet the guaranteed return.
Note 14 Credit risk
30.09.2021 NOK MILLIONS | |||||||||
---|---|---|---|---|---|---|---|---|---|
Investment grade AAA to BBB | Lower rating | Public sector guarantee | Bank and finance | Mortgage < 80% ¹ | Mortgage > 80% ¹ | Other | Total | Adjusted for the unit holders' interest in consolidated securites funds | |
Debt instruments held to maturity at amortized cost | 27 394 | 35 | 0 | 0 | 0 | 0 | 1 377 | 28 806 | 28 806 |
Debt instruments classified as loans and receivables at amortized cost | 138 501 | 0 | 375 | 1 679 | 0 | 0 | 19 389 | 159 944 | 159 944 |
Debt instruments at fair value - fixed-return securities | 119 916 | 1 592 | 5 682 | 4 238 | 0 | 0 | 15 749 | 147 176 | 126 786 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 | 0 | 23 124 | 23 124 | 23 124 |
Loans and receivables | 21 784 | 0 | 0 | 969 | 0 | 0 | 0 | 22 753 | 19 492 |
Financial derivatives classified as assets | 4 163 | 0 | 0 | 0 | 0 | 0 | 0 | 4 163 | 3 631 |
Cash and bank deposits | 2 982 | 0 | 0 | 67 | 0 | 0 | 0 | 3 050 | 3 050 |
Lending | 0 | 0 | 88 177 | 0 | 22 311 | 2 452 | 3 261 | 116 201 | 116 201 |
Total | 314 739 | 1 628 | 94 233 | 6 953 | 22 311 | 2 452 | 62 901 | 505 217 | 481 034 |
SPECIFICATION OF INVESTMENT GRADE NOK MILLIONS | AAA | AA | A | BBB | Total Investment grade |
---|---|---|---|---|---|
Debt instruments held to maturity at amortized cost | 12 768 | 2 776 | 7 498 | 4 352 | 27 394 |
Debt instruments classified as loans and receivables at amortized cost | 19 152 | 23 572 | 58 933 | 36 843 | 138 501 |
Debt instruments at fair value - fixed-return securities | 31 894 | 15 097 | 36 487 | 36 438 | 119 916 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 |
Loans and receivables | 0 | 10 161 | 11 238 | 385 | 21 784 |
Financial derivatives classified as assets | 0 | 991 | 3 164 | 8 | 4 163 |
Cash and bank deposits | 0 | 2 563 | 419 | 0 | 2 982 |
Lending | 0 | 0 | 0 | 0 | 0 |
Total | 63 814 | 55 160 | 117 739 | 78 026 | 314 739 |
30.09.2020 NOK MILLIONS | |||||||||
---|---|---|---|---|---|---|---|---|---|
Investment grade AAA to BBB | Lower rating | Public sector guarantee | Bank and finance | Mortgage < 80% ¹ | Mortgage > 80% ¹ | Other | Total | Adjusted for the unit holders' interest in consolidated securites funds | |
Debt instruments held to maturity at amortized cost | 28 833 | 57 | 0 | 0 | 0 | 0 | 1 980 | 30 870 | 30 870 |
Debt instruments classified as loans and receivables at amortized cost | 134 312 | 0 | 848 | 0 | 0 | 0 | 18 509 | 153 670 | 153 670 |
Debt instruments at fair value - fixed-return securities ² | 118 969 | 2 056 | 5 268 | 10 473 | 0 | 0 | 12 133 | 148 899 | 130 305 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 | 0 | 18 312 | 18 312 | 16 908 |
Loans and receivables | 21 902 | 0 | 0 | 299 | 0 | 0 | 0 | 22 201 | 17 222 |
Financial derivatives classified as assets | 1 525 | 0 | 0 | 0 | 0 | 0 | 0 | 1 525 | 1 419 |
Cash and bank deposits | 2 633 | 0 | 0 | 70 | 0 | 0 | 0 | 2 703 | 2 703 |
Lending | 0 | 0 | 70 275 | 0 | 21 020 | 3 216 | 19 860 | 114 371 | 114 371 |
Total | 308 174 | 2 113 | 76 391 | 10 842 | 21 020 | 3 216 | 70 794 | 492 551 | 467 470 |
² In the column "other", we have included an additional investment that is exposed to credit risk but is not reconcilable against the line "Debt instruments at fair value through profit or loss" in the balance sheet. The value of the investment was NOK 1 404 million per 30.09.2020 |
SPECIFICATION OF INVESTMENT GRADE NOK MILLIONS | AAA | AA | A | BBB | Total Investment grade |
---|---|---|---|---|---|
Debt instruments held to maturity at amortized cost | 12 272 | 4 687 | 9 108 | 2 766 | 28 833 |
Debt instruments classified as loans and receivables at amortized cost | 24 157 | 19 903 | 54 915 | 35 338 | 134 312 |
Debt instruments at fair value - fixed-return securities | 34 785 | 11 633 | 33 414 | 39 136 | 118 969 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 |
Loans and receivables | 0 | 7 979 | 13 824 | 99 | 21 902 |
Financial derivatives classified as assets | 0 | 316 | 1 209 | 0 | 1 525 |
Cash and bank deposits | 0 | 2 475 | 158 | 0 | 2 633 |
Lending | 0 | 0 | 0 | 0 | 0 |
Total | 71 214 | 46 993 | 112 628 | 77 340 | 308 174 |
31.12.2020 NOK MILLIONS | |||||||||
---|---|---|---|---|---|---|---|---|---|
Investment grade AAA to BBB | Lower rating | Public sector guarantee | Bank and finance | Mortgage < 80% ¹ | Mortgage > 80% ¹ | Other | Total | Adjusted for the unit holders' interest in consolidated securites funds | |
Debt instruments held to maturity at amortized cost | 27 554 | 35 | 0 | 0 | 0 | 0 | 1 397 | 28 986 | 28 986 |
Debt instruments classified as loans and receivables at amortized cost | 130 769 | 0 | 377 | 0 | 0 | 0 | 23 034 | 154 180 | 154 180 |
Debt instruments at fair value - fixed-return securities | 109 855 | 1 690 | 4 208 | 8 592 | 0 | 0 | 12 745 | 137 089 | 117 540 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 | 0 | 24 889 | 24 889 | 24 889 |
Loans and receivables | 31 536 | 0 | 0 | 300 | 0 | 0 | 0 | 31 836 | 25 170 |
Financial derivatives classified as assets | 11 561 | 0 | 0 | 0 | 0 | 0 | 0 | 11 561 | 9 108 |
Cash and bank deposits | 2 703 | 0 | 0 | 69 | 0 | 0 | 0 | 2 772 | 2 772 |
Lending | - | 0 | 88 746 | 0 | 21 108 | 2 972 | 2 834 | 115 660 | 115 660 |
Total | 313 979 | 1 725 | 93 331 | 8 960 | 21 108 | 2 972 | 64 899 | 506 973 | 478 305 |
¹ These two columns provide information on the proportion of loans with mortgage security within 80% of base value and loans that exceed 80% mortgage of base value. |
SPECIFICATION OF INVESTMENT GRADE NOK MILLIONS | AAA | AA | A | BBB | Total Investment grade |
---|---|---|---|---|---|
Debt instruments held to maturity at amortized cost | 12 029 | 4 063 | 9 063 | 2 400 | 27 554 |
Debt instruments classified as loans and receivables at amortized cost | 22 528 | 19 734 | 59 503 | 29 004 | 130 769 |
Debt instruments at fair value - fixed-return securities | 31 049 | 8 886 | 36 354 | 33 566 | 109 855 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 |
Loans and receivables | 0 | 22 806 | 7 628 | 1 102 | 31 536 |
Financial derivatives classified as assets | 0 | 3 838 | 7 692 | 31 | 11 561 |
Cash and bank deposits | 0 | 2 002 | 701 | 0 | 2 703 |
Lending | 0 | 0 | 0 | 0 | 0 |
Total | 65 606 | 61 328 | 120 942 | 66 103 | 313 979 |
Credit risk means the risk of the counterparty not being able to meet its own obligations toward the KLP Group. In this table the credit risk is measured through the rating agencies’ estimates of how high the creditworthiness of the various issuers of securities is. Not rated assets that are placed in other categories that describe the credit risk, such as sector and guarantees.
Emphasis is placed on diversification of credit exposure to avoid concentration of credit risk against individual debtors. To monitor credit risk in lending and investments a special credit committee has been established, meeting regularly. The limits for credit risk against the individual debtor are set by the committee. Changes in debtors’ credit assessments are monitored and followed up by KLP Kapitalforvaltning AS.
The Group has good balance between Norwegian bonds and international bonds and has a portfolio of exclusively good credit notes. The Group can be said to have a high concentration of debt instruments directed at the Norwegian public sector, however this does not imply concentration risk in the ordinary meaning since the counterparty risk is considered to be minimal.
The rating above are gathered from Standard & Poor's, Moody's, Fitch, Scope Ratings and Nordic Credit Rating. The rating is converted to S & P 's rating table , where AAA is linked to securities with the highest creditworthiness . The lowest rating of the five is used and all five rating agencies are equal as the basis for investments in fixed income securities. ≪Other≫ is mainly securities issued by power companies and other corporate bonds. KLP Group has strict guidelines for investments in fixed-income securities, which also apply to investments falling into the ≪Other≫ category.
The lines in the note coincide with the financial position statement layout. The exceptions are debt instruments at fair value, which are divided into three categories in the note and lending which is shown combined in the note, but is shown in two lines in the financial position statement (fair value and amortized cost).
The consolidated accounts includes all the units that KLP Group is considered to have control over. This gives an impression of a higher risk than the actual one, since the risk that the Group does not actually carry appears in the accounts. The outer column includes actual ownership and credit risk of the Group companies and investment funds held by KLP Group at the end of the period.
NOK MILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 | |||
---|---|---|---|---|---|---|
Consolidated | Adjusted for the unit holders' in consolidated securites funds | Consolidated | Adjusted for the unit holders' in consolidated securites funds | Consolidated | Adjusted for the unit holders' in consolidated securites funds | |
10 LARGEST COUNTERPARTIES | ||||||
Counterparty 1 | 13 542 | 12 053 | 10 723 | 10 131 | 15 388 | 14 159 |
Counterparty 2 | 11 601 | 10 218 | 8 500 | 8 500 | 13 120 | 9 013 |
Counterparty 3 | 9 353 | 7 248 | 7 177 | 7 039 | 12 585 | 8 160 |
Counterparty 4 | 7 465 | 6 785 | 6 770 | 6 485 | 8 744 | 8 034 |
Counterparty 5 | 5 781 | 5 781 | 6 502 | 5 866 | 7 409 | 7 208 |
Counterparty 6 | 5 536 | 5 536 | 5 676 | 5 500 | 6 155 | 5 622 |
Counterparty 7 | 5 106 | 5 067 | 5 569 | 5 272 | 5 857 | 5 604 |
Counterparty 8 | 4 835 | 4 672 | 4 672 | 4 672 | 5 622 | 4 710 |
Counterparty 9 | 4 672 | 4 620 | 4 233 | 4 066 | 4 768 | 4 698 |
Counterparty 10 | 4 546 | 4 423 | 3 525 | 3 525 | 4 747 | 3 915 |
Total | 72 437 | 66 402 | 63 347 | 61 057 | 84 395 | 71 123 |
The table above shows the 10 largest counterparties to which the KLP Group has exposure. The amounts stated are book value. ≪Adjusted for the minority holding≫ includes only that which is in the Group’s ownership and where the Group retains actual credit risk. The majority of the 10 largest counterparties are either finance institutions or counterparties covered by a public sector guarantee (central or local government guarantee).
Note 15 Technical provisions in life insurance
NOK MILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 |
---|---|---|---|
Premium reserves - ordinary tarif | 482 647 | 475 572 | 457 514 |
Premium funds, buffer funds and pensioners’ surplus funds | 30 818 | 10 366 | 38 588 |
Supplementary reserves | 42 842 | 35 846 | 43 460 |
Securities adjustment fund | 68 559 | 47 666 | 55 487 |
Other provisions | 1 | 22 | 18 |
Profit/loss allocated to insurance contracts | 9 185 | 6 728 | 0 |
Technical provisions in life insurance | 634 052 | 576 200 | 595 068 |
Note 16 Other current liabilities
NOK MILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 |
---|---|---|---|
Short-term payables trade in securities | 8 901 | 8 793 | 3 029 |
Incurred not assessed taxes | 567 | 1 232 | 1 489 |
Advance tax-deduction pension scheme | 430 | 399 | 447 |
Accounts payable | 316 | 126 | 270 |
Pre-called contribution to insurance | 98 | 133 | 576 |
Other current liabilities | 1 891 | 1 043 | 1 049 |
Total other current liabilities | 12 203 | 11 726 | 6 859 |
Note 17 SCR ratio
The Solvency II balance sheet includes assets and liabilities at fair value. For assets that have a different value in the accounts change in balance value are added. There are no observable market values for KLP’s insurance liabilities, which are thus calculated by way of a best estimate based on actuarial assumptions. In addition there is a risk margin that is to reflect a third party’s capital costs by taking over these liabilities.
Tier 1 capital appears from the Solvency II balance sheet and Hybrid Tier 1 securities. Tier 2 capital consist of subordinated loans and ancillary own funds. The Financial Supervisory Authority of Norway has accepted that KLP’s right to call in further member contribution if necessary, which is laid down in the Company’s articles of association, can be counted as ancillary own funds, the amount corresponding to 2.5 per cent of the Company’s premium reserve. Capital that may be included in Tier 2 capital is limited upwards to 50 per cent of SCR.
Without the use of the transitional measure on technical provisions the Company’s SCR ratio is 264 per cent, which is well over the Company’s target of at least 150 per cent. With the transitional measure on technical provisions the SCR ratio is 298 per cent.
30.09.2021 | 30.09.2020 | 31.12.2020 | |
---|---|---|---|
Solvency II - SCR ratio | 264 % | 244 % | 261 % |
NOK BILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 |
---|---|---|---|
Simplified Solvency II Financial Position Statement | |||
Assets, book value | 697 | 639 | 655 |
Added values - hold-to-maturity portfolio/loans and receivables | 8 | 18 | 15 |
Added values - other lending | 0 | 2 | 1 |
Other added/lesser values | 0 | 0 | 0 |
Deferred tax asset | 0 | 0 | 0 |
Total assets - solvency II | 706 | 658 | 671 |
NOK BILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 |
---|---|---|---|
Simplified Solvency II Financial Position Statement | |||
Best estimate | 631 | 581 | 598 |
Risk margin | 14 | 16 | 14 |
Hybrid Tier 1 securities/Subordinated loan capital | 5 | 5 | 5 |
Other liabilities 1 | 20 | 21 | 18 |
Deferred tax liabilities | 1 | 1 | 1 |
Total liabilities - solvency II | 671 | 625 | 637 |
Excess of assets over liabilities | 35 | 32 | 34 |
- Deferred tax asset | 0 | 0 | 0 |
+ Hybrid Tier 1 securities | 2 | 2 | 2 |
Tier 1 basic own funds | 36 | 34 | 35 |
Total eligible tier 1 own funds | 36 | 34 | 35 |
Subordinated loans | 3 | 3 | 4 |
Tier 2 basic own funds | 3 | 3 | 4 |
Ancillary own funds | 12 | 12 | 11 |
Tier 2 ancillary own funds | 12 | 12 | 11 |
Deduction for max. eligible tier 2 own funds | -7 | -7 | -7 |
Total eligible tier 2 own funds | 8 | 8 | 8 |
Deferred tax asset | 0 | 0 | 0 |
Total eligible tier 3 own funds | 0 | 0 | 0 |
Solvency II total eligible own funds | 44 | 43 | 43 |
Solvency capital requirement (SCR) | 17 | 17 | 16 |
Solvency II- SCR ratio 1 | 264 % | 244 % | 261 % |
¹ Financial calculation of Solvency II-SCR ratio as of 31.12.2020 gives a Solvency II-SCR ratio of 261 %. This is a reduction of 3% compared to previously reported |
Note 18 Presentation of assets and liabilities that are subject to settlement
30.09.2021 NOK MILLIONS | Related amounts not presented net | |||||||
---|---|---|---|---|---|---|---|---|
Gross financial assets/ liabilities | Gross assets/ liabilities presented net | Book value | Financial instruments | Security in cash | Security in securities | Net amount | Adjusted for the unit holders' interest in consolidated securities funds | |
ASSETS | ||||||||
Financial derivatives | 4 163 | 0 | 4 163 | -1 536 | -2 496 | -871 | 290 | 252 |
Repos | 1 518 | 0 | 1 518 | -500 | 0 | 0 | 1 018 | 1 018 |
Total | 5 681 | 0 | 5 681 | -2 036 | -2 496 | -871 | 1 308 | 1 270 |
LIABILITIES | ||||||||
Financial derivatives | 2 455 | 0 | 2 455 | -1 536 | -139 | -15 | 919 | 919 |
Repos | 1 954 | 0 | 1 954 | 0 | 0 | 0 | 1 954 | 1 453 |
Total | 4 409 | 0 | 4 409 | -1 536 | -139 | -15 | 2 873 | 2 372 |
30.09.2020 NOK MILLIONS | Related amounts not presented net | |||||||
---|---|---|---|---|---|---|---|---|
Gross financial assets/ liabilities | Gross assets/ liabilities presented net | Book value | Financial instruments | Security in cash | Security in securities | Net amount | Adjusted for the unit holders' interest in consolidated securities funds | |
ASSETS | ||||||||
Financial derivatives | 1 525 | 0 | 1 525 | -549 | -1 002 | -584 | 0 | 0 |
Repos | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Total | 1 525 | 0 | 1 525 | -549 | -1 002 | -584 | 0 | 278 |
LIABILITIES | ||||||||
Financial derivatives | 8 244 | 0 | 8 244 | -549 | -1 572 | -8 015 | 475 | 475 |
Repos | 1 006 | 0 | 1 006 | 0 | 0 | 0 | 1 006 | 1 006 |
Total | 9 250 | 0 | 9 250 | -549 | -1 572 | -8 015 | 1 481 | 1 481 |
31.12.2020 NOK MILLIONS | Related amounts not presented net | |||||||
---|---|---|---|---|---|---|---|---|
Gross financial assets/ liabilities | Gross assets/ liabilities presented net | Book value | Financial instruments | Security in cash | Security in securities | Net amount | Adjusted for the unit holders' interest in consolidated securities funds | |
ASSETS | ||||||||
Financial derivatives | 11 561 | 0 | 11 561 | -771 | -9 516 | 0 | 1 570 | 1 276 |
Repos | 1 759 | 0 | 1 759 | -914 | 0 | 0 | 845 | 845 |
Total | 13 320 | 0 | 13 320 | -1 685 | -9 516 | 0 | 2 415 | 2 121 |
LIABILITIES | ||||||||
Financial derivatives | 789 | 0 | 789 | -771 | -72 | 0 | 18 | 18 |
Repos | 914 | 0 | 914 | 0 | 0 | 0 | 914 | 0 |
Total | 1 702 | 0 | 1 702 | -771 | -72 | 0 | 932 | 18 |
The purpose of the note is to show the potential effect of netting agreements at the KLP Group; what possibilities the KLP Group has to net bilateral agreements against other counterparties should the latter go bankrupt and the remaining amount if all such netting agreements are materialized.
The note shows derivative positions and repo agreements in the financial position statement. Repos are a part of the line “Debt to credit institutions” in the balance sheet.
The consolidated figures includes all units the KLP Group is considered to have control over. In addition, the outer line shows which de facto net amount remains if all the groups netting agreements are set off; which only includes subsidiaries and units, where the group carries the risk.
Note 19 Pension obligations
NOK MILLIONS | 30.09.2021 | 30.09.2020 | 31.12.2020 |
---|---|---|---|
Capitalized net liability 01.01. | 934 | 790 | 790 |
Capitalized pension costs | 137 | 122 | 164 |
Capitalized financial costs | 26 | 17 | 23 |
Actuarial gains and losses | 266 | 305 | 88 |
Premiums / contributions received | -169 | -89 | -120 |
Business sold in 2020 | 0 | 0 | -11 |
Capitalized net liability 30.09./31.12. | 1 194 | 1 143 | 934 |
Assumptions | 30.09.2021 | 30.09.2020 | 31.12.2020 |
---|---|---|---|
Discount rate | 1,90 % | 1,40 % | 1,70 % |
Salary growth | 2,50 % | 2,00 % | 2,25 % |
The National Insurance basic amount (G) | 2,25 % | 1,75 % | 2,00 % |
Pension increases | 1,50 % | 0,99 % | 1,24 % |
Social security contribution rate | 14,10 % | 14,10 % | 14,10 % |
Capital activity tax | 5,00 % | 5,00 % | 5,00 % |
The effect of changes in pension assumptions increases the pension liability for employees with NOK 266 million as of 30.09.2021. The change is recognized in other comprehensive income in the income statement. |
Key figures – Accumulated
NOK MILLIONS | Q3 2021 | Q2 2021 | Q1 2021 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 |
---|---|---|---|---|---|---|---|---|
KLP GROUP | ||||||||
Profit before tax | 2 192 | 1 325 | 693 | 1 657 | 1 682 | 713 | 151 | 3 193 |
Total assets | 872 465 | 870 548 | 813 514 | 807 161 | 789 981 | 785 598 | 764 904 | 3 194 |
Owners' equity | 41 439 | 40 154 | 39 742 | 39 416 | 39 243 | 37 245 | 36 836 | 37 339 |
Solvency SCR ratio | 264 % | 257 % | 258 % | 261 % | 244 % | 230 % | 214 % | 253 % |
Number of employees in the Group | 1 032 | 1 017 | 1 021 | 1 018 | 1 016 | 1 010 | 1 008 | 1 007 |
KOMMUNAL LANDSPENSJONSKASSE | ||||||||
Profit before tax | 1 699 | 965 | 566 | 1 289 | 1 303 | 523 | 31 | 2 637 |
Premium income for own account | 41 163 | 33 634 | 7 041 | 37 102 | 29 081 | 17 124 | 9 589 | 40 234 |
- of which inflow of premium reserve | 0 | 0 | 0 | 2 850 | 2 846 | 2 865 | 2 503 | 11 |
Insurance customers' funds incl. acc. profit | 24 690 | 19 100 | 13 754 | 28 360 | 23 013 | 17 809 | 11 478 | 20 157 |
- of which funds with guaranteed returns | 8 346 | 8 346 | 8 419 | 7 656 | 7 667 | 7 655 | 6 377 | 292 |
Net investment common portfolio | 644 160 | 626 280 | 603 076 | 604 782 | 582 108 | 574 890 | 570 649 | 574 953 |
Net investment choice portfolio | 2 156 | 2 215 | 2 081 | 2 044 | 2 012 | 1 966 | 2 082 | 2 662 |
Insurance funds incl. earnings for the year | 634 112 | 633 579 | 595 680 | 594 718 | 575 915 | 633 579 | 542 408 | 566 230 |
- of which funds with guaranteed interest | 513 186 | 515 787 | 490 936 | 496 121 | 485 605 | 515 787 | 474 366 | 482 260 |
Solvency capital requirement (SCR) | 44 536 | 43 473 | 41 580 | 42 742 | 42 507 | 41 148 | 38 960 | 40 530 |
Solvency SCR ratio | 289 % | 282 % | 287 % | 282 % | 264 % | 252 % | 234 % | 278 % |
Riskprofit | 625 | 293 | 191 | -398 | 706 | 300 | 200 | 1 031 |
Return profits | 9 347 | 7 232 | 4 688 | 12 350 | 6 831 | 3 417 | -149 | 10 624 |
Administration profit | 159 | 61 | 41 | 171 | 187 | 64 | 39 | 186 |
Solvency capital | 176 437 | 174 816 | 160 647 | 172 863 | 141 563 | 143 139 | 123 211 | 150 617 |
Book return on common portfolio | 3,5 % | 2,6 % | 1,4 % | 4,8 % | 3,2 % | 1,9 % | 0,6 % | 4,5 % |
Value-adjusted return on common portfolio | 5,6 % | 4,4 % | 1,5 % | 4,2 % | 1,4 % | -0,5 % | -3,7 % | 8,5 % |
Return on unit-linked portfolio | 5,8 % | 5,0 % | 1,9 % | 4,2 % | 0,4 % | -1,8 % | -5,7 % | 9,9 % |
Return on corporate portfolio | 2,5 % | 1,7 % | 0,8 % | 3,1 % | 1,3 % | 0,4 % | -0,1 % | 4,3 % |
KLP SKADEFORSIKRING AS | ||||||||
Profit before tax | 343,9 | 225,9 | 71,6 | 220,0 | 97,2 | 18,2 | -126,1 | 165,6 |
Gross premium due | 1 436,2 | 940,6 | 460,1 | 1 728,4 | 1 280,4 | 840,4 | 415,4 | 1 529,8 |
Premium income for own account | 1 380,9 | 903,6 | 441,7 | 1 657,6 | 1 227,8 | 804,6 | 397,9 | 1 475,7 |
Owners' equity | 2 348,3 | 2 294,4 | 2 178,7 | 2 110,9 | 1 990,7 | 1 924,0 | 1 819,9 | 1 940,5 |
Claims ratio | 73,6 % | 74,5 % | 72,8 % | 83,1 % | 83,1 % | 83,3 % | 86,8 % | 90,5 % |
Combined-ratio | 85,1 % | 90,3 % | 89,2 % | 100,7 % | 100,7 % | 101,9 % | 105,7 % | 109,0 % |
Return on assets under management | 3,4 % | 2,6 % | 0,6 % | 5,0 % | 2,3 % | 0,8 % | -2,3 % | 6,7 % |
Solvency capital requirement (SCR) | 2 290 | 2 267 | 2 193 | 2 132 | 2 006 | 1 934 | 1 815 | 1 958 |
Solvency SCR ratio | 267 % | 252 % | 238 % | 239 % | 246 % | 234 % | 213 % | 240 % |
Annual premium in force – retail market | 846,7 | 828,9 | 806,8 | 786,0 | 759,8 | 734,6 | 709,3 | 683,9 |
Annual premium in force – public sector market | 1 135,0 | 1 128,0 | 1 080,4 | 1 016,4 | 1 009,9 | 999,7 | 987,5 | 925,1 |
Net new subscriptions (accumulated within the year) | 75,9 | 65,0 | 17,0 | 87,6 | 74,8 | 51,5 | 24,8 | 145,3 |
KLP BEDRIFTSPENSJON AS 1 | ||||||||
Profit before tax | sold | sold | sold | sold | sold | sold | -13,7 | -12,6 |
Premium income for own account | sold | sold | sold | sold | sold | sold | 313,5 | 1134,8 |
- of which premium reserve added | sold | sold | sold | sold | sold | sold | 133,2 | 495,7 |
Insurance customers' funds including accumulated profit | sold | sold | sold | sold | sold | sold | 6 342 | 6 649 |
- of which funds with guaranteed returns | sold | sold | sold | sold | sold | sold | 1 595 | 1 538 |
Returns profit | sold | sold | sold | sold | sold | sold | 2,1 | 13,4 |
Risk result | sold | sold | sold | sold | sold | sold | 6,3 | 7,66 |
Administration losses | sold | sold | sold | sold | sold | sold | -9,6 | -38,1 |
Solvency capital requirement (SCR) | sold | sold | sold | sold | sold | sold | 171 | 323 |
Solvency SCR ratio | sold | sold | sold | sold | sold | sold | 81 % | 204 % |
Solvency capital | sold | sold | sold | sold | sold | sold | 758,2 | 763,9 |
Book capital return on common portfolio | sold | sold | sold | sold | sold | sold | 0,8 % | 3,4 % |
Value-adjusted capital return on common portfolio | sold | sold | sold | sold | sold | sold | 0,2 % | 4,1 % |
Return on defined unit-linked contribution pensions | sold | sold | sold | sold | sold | sold | -11,9 % | 16,8 % |
Return on corporate portfolio | sold | sold | sold | sold | sold | sold | 0,1 % | 3,0 % |
KLP BANKEN GROUP | ||||||||
Profit/loss before tax | 93,8 | 54,3 | 48,6 | 136,8 | 101,7 | 39,8 | 21,6 | 102,3 |
Net interest income | 232,8 | 152,8 | 75,7 | 317,3 | 229,3 | 136,0 | 75,7 | 292,9 |
Other operating income | 58,6 | 38,6 | 19,0 | 77,7 | 58,6 | 39,0 | 19,4 | 78,1 |
Operating expenses and depreciation | -174,2 | -118,6 | -60,6 | -232,1 | -164,5 | -119,1 | -60,7 | -238,5 |
Net realized/unrealized changes in financial instruments to fair value | -23,5 | -18,6 | 14,5 | -26,1 | -21,7 | -16,1 | -19,4 | -30,2 |
Contributions | 12 774 | 12 643 | 12 103 | 11 781 | 11 993 | 12 245 | 12 034 | 11 487 |
Housing mortgages granted | 21 365 | 21 409 | 20 894 | 20 570 | 20 610 | 20 121 | 19 143 | 18 387 |
Loan(s) with public guarantee(s) | 16 842 | 16 752 | 16 734 | 17 654 | 16 933 | 17 357 | 16 823 | 16 547 |
Defaulted loans | 32 | 34 | 57 | 54 | 48 | 77 | 97 | 86 |
Borrowing on the issuance of securities | 29 536 | 29 195 | 27 147 | 25 800 | 26 203 | 25 993 | 25 899 | 25 822 |
Total assets | 44 980 | 45 216 | 43 200 | 42 688 | 43 438 | 43 855 | 42 002 | 39 699 |
Average total assets | 43 834 | 43 952 | 42 944 | 41 188 | 41 568 | 41 777 | 40 850 | 38 394 |
Owners' equity | 2 490 | 2 474 | 2 470 | 2 427 | 2 389 | 2 343 | 2 322 | 2 221 |
Net interest rate | 0,53 % | 0,35 % | 0,18 % | 0,80 % | 0,57 % | 0,33 % | 0,19 % | 0,76 % |
Profit/loss from general operations before tax | 0,21 % | 0,12 % | 0,11 % | 0,33 % | 0,24 % | 0,10 % | 0,04 % | 0,27 % |
Return on owners’ equity before tax | 5,15 % | 4,47 % | 8,02 % | 6,16 % | 6,11 % | 3,59 % | 2,69 % | 4,78 % |
Capital adequacy | 18,6 % | 18,4 % | 19,3 % | 19,5 % | 18,7 % | 18,4 % | 18,8 % | 19,1 % |
Number of private customers | 47 750 | 46 872 | 46 116 | 45 406 | 44 842 | 44 213 | 43 712 | 42 785 |
Of this members of KLP | 32 615 | 31 664 | 32 183 | 32 048 | 31 869 | 32 533 | 32 135 | 31 361 |
KLP KAPITALFORVALTNING AS | ||||||||
Profit/loss before tax | 53,0 | 24,6 | 20,7 | 30,9 | 25,6 | -1,9 | -0,3 | 44,3 |
Total assets under management | 647 995 | 627 599 | 602 400 | 596 254 | 579 129 | 563 238 | 524 877 | 563 567 |
Assets managed for external customers | 123 811 | 121 308 | 111 821 | 103 378 | 100 106 | 87 968 | 74 598 | 83 405 |
1 The business has been sold with accounting effect per. 01.04.2020 |