Annual Report 2023KLP Group, Sustainability Report and KLP

In 2023, KLP achieved an investment result to customers of NOK 29.2 (-20) billion. This represents a return of 6.4 per cent. Actual financial income was NOK 42.7 (-7.6) billion in 2023.

KLP aims to deliver long-term, competitive returns in the customer portfolios, and stable returns in the corporate portfolio. This is achieved by spreading the management across different investment types and geographical areas.

The investments in the common portfolio are distributed between the different categories of financial assets as shown in the table below:

* The figures presented in the table show net exposure, whereas the official figures from the statement of financial position are presented gross. Differences may therefore arise between the figures in this table and the financial statements.

The risk result is an expression of how mortality and disability have developed in the insured population in relation to the assumptions used in the annual setting of premiums.

The risk result for 2023 totalled NOK 648 million. Of this, the risk result linked to longevity showed a surplus of NOK 843 million. In 2023, as in 2022, mortality was higher than normal, so the result is better than expected. This must be viewed alongside 2020 and 2021 when mortality was low, probably because of the coronavirus pandemic. The measures to limit infection contributed to lower rates of illness and death, but when society opened up again, mortality also increased.

The risk result for survivors shows a surplus of NOK 85 million, while the result from disability cover showed a deficit of NOK 280 million. The results for disability pensions indicates that the level of disability has been higher in recent years than before the pandemic.

From 31 December 2023, calculation assumptions in the pension scheme for hospital doctors have been increased by NOK 2,528 million. The increase is mainly down to longer life expectancy in this scheme. The overall risk result including this increase is NOK -1,880 million.

The costs for the payment of pensions are covered from the administration reserve, while other expenses are covered from separate cost elements in the pension premium. KLP achieved a surplus of NOK 144 (-17) million on the administration result in 2023. Insurance-related operating costs amounted to NOK 1,512 (1,487) million in 2023. KLP’s cost growth is lower than wage and price growth would indicate, which reflects active efforts to keep rising costs under control. KLP enjoys economies of scale from its high market share, and can therefore provide good service at competitive prices.

The corporate portfolio covers assets financed by 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 objective of stable returns. Investments in the corporate portfolio achieved a return of 3 per cent in 2023. The return is affected by write-downs on property.

This year’s allocation shows that customers have been awarded NOK 29.8 billion. Of the customers’ investment result, NOK 20 billion has been transferred to the customers’ premium fund, NOK 8.4 billion has been allocated to the customers’ buffer fund and NOK 759 million has been used to strengthen the premium reserve in the pension scheme for hospital doctors. Of the risk result of NOK 648 million, NOK 594 million has been allocated to the customers’ premium fund.

Over and above the year’s profits to customers, NOK 0.8 billion has been allocated from the buffer fund to the premium fund.

The year’s total comprehensive loss of NOK 231 million is allocated as follows: NOK 428 million go to equity contributions and NOK 329 million to other retained earnings, while the risk equalisation fund will be decreased by NOK 969 million.

The Board of KLP considers that the income statement and the statement of financial position for 2023 with notes, statements of cash flows and of changes in owners’ equity, provide good information on the operation through the year and the financial position at the end of the year. The accounts have been drawn up on the assumption of a going concern and the Board confirms that the conditions for this are in place. The Board of Directors considers the risk to the company’s business to be reasonable. The company financial statements for KLP are presented in accordance with the Norwegian Annual Accounts Regulation for life insurance companies. The consolidated financial statements have been presented in accordance with IFRS Accounting Standards, as approved for use in the EU/EEA.

Public-sector occupational pensions are the Group’s core product and are provided by the parent company, KLP. The company has maintained its leading position in this market through 2023. Of the Group’s total assets of NOK 1,017 billion, customers’ pension savings account for NOK 737 billion.

Competition in the market for public-sector occupational pensions is stable. Customers can continue with an insured scheme in KLP, choose another provider, or establish their own pension fund. In 2023, customers with premium reserves totalling NOK 2.1 billion chose to move away from KLP and settle their accounts in 2024. Some of these had closed their contracts and established a private-sector occupational pension scheme with another provider. No customers moved to KLP in 2023.

Good financial strength, solid results, low costs over time and high customer satisfaction put KLP in a good position to face competition in the public-sector occupational pensions market going forward.

KLP carried out a reorganisation in 2023. The new organisation has been chosen to underline the great importance of the operations area for the KLP’s competitiveness going forward. KLP delivers and will continue to deliver industry-leading services to employers, members and retirees. We are working systematically to deliver high quality legal management of contracts and good communication with employers and other pension providers. It is important to maintain good procedures and correct payment of pensions.

At the end of 2023, there were around 1.6 million people with accrued pension rights in KLP. Every month in 2023, KLP paid out NOK 2 billion in total pensions to over 300,000 people. Substantial growth in the retired population is expected in the coming years. This is partly due to large post-war cohorts and increased longevity, but also to a growth in employment in the public sector.

Since 2019, KLP has been working to put in place a new, updated system platform for pensions processing. In 2023, operations were partly transferred to a new system platform for pensions processing. This change will continue into 2024. This has been resource-intensive, and has led to somewhat longer queues. However, the focus is on the correct capacity and stable production, and the degree of automation is increasing.

The non-life insurance business is divided into the public sector, corporate and retail markets.

On the insurance side, 2023 was marked by ‘extreme weather Hans’, which affected large areas in southern Norway. Continued high inflation affected claims costs in the motor and property sectors. In 2023, the company maintained growth in all segments and has kept its position as market leader in the public sector. The departure rate was generally low in all segments.

Profit before tax was NOK 272.7 (111.5) million in 2023. The insurance result (premiums minus claims paid) for events occurring in 2023 was NOK 350 million, down NOK 92 million on 2022.

Both the property and motor insurance sectors within the retail market produced weak results. Increased material costs resulting from higher inflation have contributed to this trend, but the company is also seeing an increased claims rate in the motor segment. Over time, the company’s premiums will be adjusted upwards to reflect the increased costs. The storms in August also led to higher than normal claims rates in these sectors.

Payments for claims filed earlier decreased by NOK 79 million for all segments combined, corresponding to 3.6 per cent of the provisions at the beginning of 2023. The settlements are largely related to occupational injury products.

In August, parts of southern Norway were hit by heavy rain followed by flooding and water penetration, known as “extreme weather Hans”. The total gross claim amount reported to the Norwegian Natural Perils Pool came to NOK 1.7 billion. Other damage was covered by the individual companies directly. The company’s share of the natural perils is estimated at NOK 114 million. Reinsurance covers NOK 56 million of these costs. In March 2023, there was a major rockslide in Halden and an industrial building was hit. The damage is defined as a natural disaster and the company’s share of this claim is NOK 61 million, of which reinsurance covers NOK 10 million.

The company had 5 individual claims and 3 natural disaster events exceeding NOK 10 million reported in 2023. The total accounting effect for the company from these 8 claims is NOK 270 million.

The number of claims arising from Covid-19 related occupational illness was down from previous years. In 2023, 74 claims were submitted, compared to 279 in 2022 and 352 the year before. The claims are mainly related to long-term effects of the disease. This may result in increased future payments. The company has so far paid a total of NOK 27 million in compensation.

The company’s total claims ratio after reinsurance increased slightly on negative developments in the motor and property sectors, as well as a number of natural perils during the year, reaching 86.3 per cent overall. If we disregard reserve adjustments of claims received before 2023, the claims ratio was 89.7.

The financial result for 2023 was good. The equity markets performed well during the year, and expectations of falling inflation, and hence interest rates, also produced good returns for the company’s bond portfolio. The credit margin was also reduced during the year. Net financial income was NOK 313.3 (-97.6) million, representing a return of 5.5 (minus 1.7) per cent. The equity portfolio returned 22.8 (minus 12.6) per cent in 2023. The company’s investments in interest-bearing funds had a return of 6.0 (minus 5.7) per cent, while long-term bonds returned 5.2 (3.3) per cent. The return on the property investments was minus 3.0 (plus 5.2) per cent, following a write-down of property values by NOK 56 million this year.

In 2023, the company’s cost ratio was 14.0 (13.9) per cent. The ratio has been falling for several years, and now seems to have stabilised at the level of the market in general. The decrease in recent years is mainly due to the growth in insurance income.

The company meets all regulatory requirements by a good margin. The solvency margin was 227 (222) per cent at the end of 2023. The increase is mainly due to the good accounting result. The company has defined a long-term target for its solvency margin of at least 200 percent.

KLP’s banking business is handled by the KLP Banken Group, which comprises KLP Banken AS, KLP Kommunekreditt AS and KLP Boligkreditt AS, with KLP Banken AS as the Group parent. KLP offers home mortgages and other banking services to private individuals, and loans to municipalities, county authorities and enterprises performing public services. 2023 was a very good year for the KLP Banken Group with a profit before tax of NOK 285 million.

The KLP Banken Group offers simple and competitive banking products and services accompanied by good digital solutions to establish and manage them. In this way, the bank aims to reinforce the perception that businesses which have chosen KLP as a pension provider are attractive employers.

KLP Banken’s presence in the market for loans to the public sector encourages competition and benefits the target group of municipal and county authorities and enterprises affiliated to the public sector by providing access to favourable long-term financing. The bank provides guidance to customers in financing and municipal funding. The bank also manages lending financed from KLP’s common portfolio.

At the end of 2023, the banking group’s total lending amounted to NOK 122.4 billion, an increase of NOK 3.4 billion for the year. Of the outstanding loans, NOK 42.7 billion was financed by the banking group and the remainder by KLP. The lending was split between NOK 26.6 billion in mortgages to private individuals and NOK 95.9 billion in loans to public-sector enterprises.

The banking group manages mortgages on its own account in KLP Banken AS and through KLP Boligkreditt AS. It also manages mortgages for KLP. In 2023, the bank paid out NOK 7.7 (8.7) billion in new mortgage loans. In line with the owners’ wishes, the company offers particularly favourable terms to young members in the municipalities. The mortgage portfolios taken together had a growth of NOK 0.4 (1.1)) billion in 2023. The reduced growth is mainly due to a sharp fall in overall credit growth in the residential mortgage market.

The KLP Banken Group wants to help customers make sustainable choices. That is why the bank also offers ‘green mortgages’ to members of KLP who have energy-friendly homes, or who choose to take steps to make their homes more energy-friendly. At the end of 2023, green loans amounted to NOK 1.6 billion, corresponding to 6 per cent of the bank’s total retail lending portfolio.

House prices have remained relatively stable in recent years with high inflation felt in people’s private finances. However, house prices adjusted for wage growth have fallen. For KLP Banken, there is an increased risk of loss if the value of the property falls below the collateral. At the end of 2023, the mortgage portfolios in the KLP Banken Group had an average loan-to-value ratio (LTV - debt as a percentage of the estimated value of the property) of 57 (54) per cent.

The Bank’s total deposits from retail customers increased in 2023 from NOK 12.1 billion to NOK 12.5 billion. Deposit growth is therefore lower than in previous years, which is clearly related to inflation and higher interest rates for most people. However, the number of active deposit customers in the retail market showed strong growth through 2023. In 2023, the target was a growth of 2,500 new active customers, and the result was 3,700. 69 per cent of deposit customers have a public-sector occupational pension with KLP and this level has remained stable for several years.

KLP Banken AS also offers deposit products to municipalities and businesses. At the end of 2023, deposits from these customers came to NOK 1.6 (1.7) billion, which is 11 (12) per cent of total deposits. The bank’s total deposits increased from NOK 13.8 billion to NOK 14.1 billion in 2023.

The KLP Group’s lending to the public sector is managed by KLP Banken AS. On the banking group’s own account, loans to public borrowers are registered in the subsidiary KLP Kommunekreditt AS. KLP Banken AS also enters into loan agreements for the public sector on behalf of KLP. Total loans to public-sector borrowers and enterprises stood at NOK 90.3 (87.1) billion at the end of 2023, an annual growth of NOK 3.1 (3.0) billion. Of this, lending for own account amounted to NOK 18.9 (19.1) billion. New loans amounting to NOK 7.1 (8.6) billion were paid out to the public sector in 2023 by companies within the KLP Group.

The KLP Banken Group aims to be a driver and sparring partner in the transition to a more sustainable society, and to help municipalities to make sustainable choices in public administration. The bank offers green loans to municipalities, county authorities and enterprises associated with local government for projects that have a clear positive environmental and climate impact. For green loans to the public sector, there was a net increase of just under NOK 1 billion in 2023. The interest in green loans in the public sector is clearly increasing.

Individual losses and loan loss provisions are all associated with investments in the retail market. The public-sector market did not incur any individual loan losses in 2023 either. Losses recognised through profit/loss and loan loss provisions amounted to NOK 0.9 (0.3) million in the financial year. The rise in interest rates has so far not resulted in a significant increase in mortgage losses compared to the previous year, but persistent high inflation and interest rates could lead to a reduction in borrowers’ ability to repay their loans in the longer term .

The KLP Banken Group result before tax and other comprehensive income was NOK 285.4 (180.5) million. Of this, NOK 199.4 (107.7) million came from the retail market and NOK 86.0 (72.8) million from the public sector. The return on the bank’s equity was 9.6 (7.2) per cent before tax and 8.7 (6.7) per cent after tax.

The rise in profits is primarily related to increasing interest rates and slightly higher lending margins in the retail market. Money market rates also rose in 2023 and the KLP Banken Group has increased its lending rates in line with market developments to compensate for rising borrowing costs. On average, the bank increased its lending rates less than Norges Bank’s key rate in 2023.

The banking group’s current capital requirements including capital buffers are 19.0 per cent capital adequacy. The requirement includes a Pillar 2 supplement of 1.5 per cent. We also maintain a buffer of at least 0.5 per cent over the actual capital requirement for Pillar 1 and Pillar 2 risks, so the bank’s capital target is 19.5 per cent. At the end of 2023, capital adequacy was 22.0 (20.7) per cent.

KLP Kapitalforvaltning AS is the Group’s asset management arm within securities and fund management. It had a total of NOK 761 billion under management at the end of 2023. The majority of the assets are managed on behalf of KLP and the subsidiaries in the KLP Group. KLP Kapitalforvaltning AS also offers fund products to members and other external investors.

Assets under management increased by NOK 120 billion in 2023 because of the positive trend in market values. Net new subscriptions to KLP’s securities funds from investors external to the Group and retail customers amounted to NOK 17 billion. KLP Kapitalforvaltning AS manages a total of NOK 179 billion for customers outside KLP.

During 2023, the fund structure was extended to include several new share classes, increasing the number from 127 to 222. The introduction of new share classes leaves the company better placed to compete for big deposits in the fund market.

Of all Norwegian fund managers, KLP funds had the second highest net new subscriptions in the retail market for funds in 2023. KLP is very pleased with the amount of new business and the growing numbers of people finding KLP’s management services attractive.

KLP Kapitalforvaltning AS made a profit before tax of NOK 55 (5) million in 2023.

KLP Eiendom AS acquires, develops and manages KLP’s property investments. The company is one of Scandinavia’s largest property managers, and has operations in Norway, Sweden, Denmark, Luxembourg and the United Kingdom. The KLP Group’s properties have good locations, a high standard of building, and efficient space utilisation. The property company prizes sustainability, and is environmentally certified in accordance with ISO 14001 in Norway, Sweden and Denmark.

The property portfolio (properties owned directly and others owned by external property funds) has grown considerably in recent years, accounting for 13.3 per cent of KLP.s common portfolio. Investments in property have contributed good returns over time. However, impairments of property values resulted in a negative overall return on the property portfolio in 2023.

During the coronavirus pandemic, the values of hotels and shopping malls were written down because of the great uncertainty that arose with regard to immediate challenges and long-term developments. Since the pandemic, the property years of 2022 and especially 2023 have been good for hotels and also for retail. This has slowed the rate of impairments in the portfolio resulting from increased return requirements. Large rent adjustments related to high consumer price movements have also had a dampening effect for the same reason. Some development gains have also mitigated the fall in value. The office rental market, in all regions where the company has investments, showed satisfactory growth through the year. Return requirements for property generally increased throughout 2023.

Property management is undertaken only on behalf of the companies within the Group, so it has mainly contributed to returns on invested capital for the life insurance customers. Operating profit from property, including shares in external real estate funds, for the common portfolio of public-sector occupational pensions was minus 3.2 per cent.

Much of 2023 was marked by high energy prices and uncertainty in the energy markets. In response to this, the property company has implemented a number of energy-saving measures in the property portfolio to reduce tenants’ energy costs and environmental impact. The property portfolio was enlarged with the purchase of a property in Oslo with energy class A and BREEAM NOR certification, while a new building is under construction in Trondheim which will be the first in the property portfolio to be certified according to the health and environmental standard Well.

KLP Forsikringsservice provides insurance-related services to municipal and county authority pension funds, including actuarial services. These services are based on the expertise and systems developed for KLP’s pension business. In 2023, KLP Forsikringsservice entered into agreements with pension funds that only buy actuarial services, and these agreements will expire in mid-2024. The company will be considering a greater presence in this market.

The KLP Group submits financial statements in accordance with IFRS® accounting standards. IFRS 17 Insurance Contracts came into effect in 2023. This standard states that insurance companies owned by their customers do not have any equity as all capital is owned by current or future customers. All value creation falls to the customers, and the profit of a mutual insurance company is always zero.

The Group’s income statement reflects the fact that, in a mutual insurance company, the added value to customers consists of the return on net assets in the form of investment income. Lower operating costs than expected and reduced uncertainty in estimates of our insurance obligations will also contribute to a positive result from the provision of insurance services. This income is allocated as debt to customers and has to finance changes in the present value of future liabilities under the insurance contracts.

In the balance sheet, debt to insurance customers is presented as Insurance liabilities with a right to residual value. This can be split into the present value of the best estimate of future receipts and payments under the insurance contracts, an adjustment for non-financial risk, and other debt to customers in the form of the residual value of the business.

In 2023, the Group achieved a profit/loss from insurance services of NOK -1,925 (485) million. The change is mainly due to an increase in the risk adjustment for non-financial risk to reflect higher estimated insurance obligations.

Net investment income amounted to NOK 47,480 (-6,985) million in 2023. Good growth in the equity market contributed most to the improved performance, but higher interest rates also helped to increase the revenue. However, increased interest rates reduced the value of office and commercial property through 2023.

The Group’s best estimate of its insurance obligations increased by NOK 55,516 million in 2023, to NOK 377,742 million. The main reason for the increase was net receipts in 2023 of NOK 29,426 million. Increased obligations financed by adjustment premiums are the main reason for the growth. Transfers to the premium fund contributed a further NOK 22,526 million, while other changes amounted to NOK 3,563 million.

The risk adjustment for non-financial risk increased by NOK 1,764 million to NOK 29,068 million.

The residual value increased by NOK 18,675 million to NOK 355,979 million. Profit/loss from the year’s business contributed NOK 37,631 million, while accrued interest and the effect of changing the discount curve reduced the residual value by a total of NOK 24,075 million. Other changes amount to NOK 5,119 million.

The Group’s insurance liabilities with a right to residual value consist of the sum of the best estimate of insurance obligations, a risk adjustment for non-financial risk, and the residual value. This gives a total of NOK 762,789 million at 31 December 2023, an increase of NOK 75,955 million. The increase is mainly due to good results in 2023, as well as increased payments to finance this year’s pension adjustment.

Although the Group is mutually owned, and its equity and profit are expected to be zero, the income statement shows a total profit/loss for 2023 of NOK 499 (16,621) million. Equity totalled NOK -3,140 (8,396) million at 31 December 2023. This is because net assets in the Group that accrue to customers have to be measured at fair value. However, some assets and debt items are recognised at something other than fair value. A measurement difference then arises which must be reported as accounting equity even though this is not capital in the regulatory sense. Changes in measurement differences constitute total comprehensive income for the period.

The Group’s solvency margin has been strengthened from 288 per cent to 314 per cent. This exceeds the internally determined minimum requirement of 150 per cent and is an important prerequisite for good long-term management of the assets.

Under the Norwegian Financial Institutions Act, KLP is subject to the Solvency II regulations. The rules specify a solvency capital requirement to be calculated from the total risk exposure the company has within insurance risk, market risk, operational risk, etc. All of the solvency capital requirement must be covered by regulatory capital. The buffer fund, which comprises previously earned investment results, will reduce the solvency capital requirement from market risk.

Solvency II divides the regulatory capital into three tiers according to loss-absorbing capacity. Regulatory capital in tier 1 is not subject to any restrictions when it comes to covering any losses in the business. The difference between the fair value of the company’s assets and liabilities is classified as regulatory capital in tier 1. For assets that are recognised at a different value in the accounts, the value is adjusted to represent fair value in the Solvency II balance sheet. For KLP’s insurance obligations, there are no observable market values. These are calculated using a best estimate based on actuarial assumptions. There is also a risk margin to reflect the capital costs that would be incurred by a third party in assuming the obligations.

Over the year, the buffer fund increased from NOK 102.2 billion to NOK 109.5 billion.

The solvency capital was increased by NOK 1.2 billion with the payment of the planned and advertised annual owners’ equity contributions. Of the loss for the year to the company of NOK 213 million, NOK 428 million goes to owners’ equity contributions and NOK 329 million to other retained earnings. The risk equalisation fund decreased by the return on the fund of NOK 969 million, to NOK 3,7 billion.

KLP’s mutual status and creditworthy owners provide assurance that the company can meet its future obligations. The Financial Supervisory Authority of Norway has agreed that KLP’s recall rights established in its Articles of Association can be classified as supplementary capital in an amount equal to 2.5 per cent of the company’s premium reserve. The current approval was renewed for four new years in 2023, and now runs to 31 December 2027. Because the capital is not paid-up, it ranks as tier 2 or supplementary capital. As KLP’s premium reserve grew throughout the year, the supplementary capital increased by NOK 1.3 billion to NOK 14.5 billion. However, eligible capital in capital group 2 will be limited to a maximum of 50 per cent of the capital requirement, equivalent to NOK 7.2 billion at the end of 2023.

The solvency capital requirement for KLP amounted to NOK 14.3 (14.5) billion at 31 December 2023. The eligible solvency capital increased by NOK 3.0 billion to NOK 49.3 billion. Without applying transitional rules, the company’s capital adequacy is 346 (318) per cent. Taking account of the transitional arrangement for technical provisions, capital adequacy is 346 (318) per cent. Capital adequacy is thus well above the internal target of at least 150 per cent and the regulatory requirement of 100 per cent. The solvency margin for the Group is 314 (288) per cent, which allows KLP to plan its asset management around a long-term horizon.

KLP’s financial strength is rated at A2 by Moody’s Investor Service, with supplementary information on expected stable ratings.

Monitoring and management of risk is a prerequisite for good wealth creation and security for pension assets. Identification, assessment and management of the risk factors, both to insurance and financial management and to the general operational management of the company, are therefore key aspects of KLP’s business. The risk profile is monitored within the individual operational entities and is assessed both by company and combined at Group level.

KLP carries out an annual ‘Own Risk and Solvency Assessment’ (ORSA). The self-assessment carried out in 2023 concluded that the capitalisation and risk management in the company and the group are appropriate to the company’s business.

KLP’s principal activity is public-sector occupational pension provision. This industry is characterised by predictability and, to a limited degree, by individual events that may affect results significantly. Developments in the incidence of disability and life expectancy affect the risk profile.

KLP uses the K2013 mortality assumptions (tariffs). These were in line with observed mortality rates in the insured population up to and including 2009, as well as the expected future increase in longevity based on Statistics Norway’s projections. In recent years, Statistics Norway has updated its expectations for life expectancy. From 2021, KLP has strengthened its assumptions about longevity for men.

KLP uses even stronger assumptions on longevity in the pension scheme for nurses and the pension scheme for hospital doctors because the people insured in these schemes have greater observed longevity than other groups. Longevity assumptions in the pension scheme for hospital doctors were further strengthened from 31 December 2023. The margins in the longevity assumptions are considered to be satisfactory.

New disability tariffs were introduced from 1 January 2021, in line with updated risk history. In recent years, we have observed high levels of disability, which we take to be a consequence of the pandemic, among other things. We are constantly monitoring this to assess whether there is a need to raise the disability tariff.

In the field of non-life insurance, the pricing of insurance risks is based on historical claims information, the risk of major claims and reinsurance costs. The company has a large proportion of long-tail business, a factor which, together with a large proportion of business exposed to large claims, contributes to a higher insurance risk than the market generally. This is reflected in a high solvency capital requirement. In order to mitigate this risk, further growth is sought within the retail market and the small-and medium-sized business market. Over time, this will have a stabilising effect on risk and results.

The reinsurance programme limits the company’s own expense per claim event.

KLP invests its pension assets in the securities market and other financial assets in order to obtain returns that can help finance the pension obligations. KLP has issued a guarantee on the minimum return on the pension assets that must be delivered each year. KLP is therefore exposed to financial market risk.

To cover the annual return guarantee, KLP collects an interest guarantee premium. The interest guarantee premium is priced on the basis of KLP’s solvency, the market risk that KLP assumes, and the general trend in interest rates. The interest guarantee premium is priced anew each year, which helps to limit the risk associated with the return guarantee.

Each year KLP works out a strategy for how the pension assets are to be invested. The investment strategy emphasises exploitation of the company’s risk-bearing ability within a framework that dictates stability and the long-term view in asset management. Limits are defined for market risk, credit risk, counterparty exposure, foreign exchange risk, use of derivatives and liquidity risk. A credit policy is also laid down for the Group, and credit limits for total exposure to individual counterparties are set by the Group’s Credit Committee. As KLP has guaranteed an annual minimum return, fixed-income investments make up a large part of the asset allocation. These investments are acquired with a view to maintaining a predictable cash flow in the form of interest and repayments in order to meet the return guarantee. These investments are measured at amortised cost so any changes in interest rates do not affect the accounting value. Pension assets are also placed in the equity and property markets to increase the expected returns, and in a portfolio that reflects ongoing returns from the fixed income market.

The market risk is continuously monitored to ensure the risk is matched to the risk capability within the limits set in the investment strategy. A major goal and priority in the management of the fund is to maintain the company’s capacity to take financial risks over time.

The responsibility for risk management and asset allocation rests with two different operating units (1st line functions). One unit draws up the strategy and bears the overall responsibility for administration and risk management. The unit also directs KLP’s management strategy through mandates and ensures that asset management stays within limits set by the Board of Directors. The other unit implements the strategy and bears the operational responsibility, including liquidity management and allocations within specified limits. An independent control unit (2nd line function) headed by the CRO (Chief Risk Officer) is responsible for monitoring and reporting whether the management of the assets is being conducted within the limits, applicable mandates and guidelines provided by the Board.

All of the companies in the KLP Group draw up an annual liquidity strategy in line with the applicable regulations for each entity. The strategy is prepared and followed up by the senior management of the individual company and adopted by their board of directors.

KLP has good liquidity, with substantial holdings of liquid securities that can be realised at short notice. There are also high net cash flows into the company in the form of quarterly payments from customers. These payments are intended to cover commitments that only fall due several years into the future. The true liquidity position thus amounts to more than the balance on the current account, which is the definition of cash and cash equivalents in the cash flow statement. In situations with extraordinary liquidity needs, stress tests have been carried out that show that large divestments can be made while maintaining a competitive allocation.

KLP’s operational risk is associated with adverse events resulting from failures in internal working processes, employee error, dishonest acts and criminality or external events. All processes throughout the value chain are exposed to various types of operational risk. KLP has developed procedures for identifying, monitoring and taking the necessary measures to reduce the risk of undesirable events. It is a general management responsibility at all levels to identify and follow up those deviations that occur.

Group management conducts a quarterly review of significant operational risks to the business. The Board of Directors conducts an annual review of the risk assessments and documentation on management and control measures established together with a total risk overview. Procedures have been established for independent controls and reporting at various levels. Tasks and functions are distributed so that conflicts of interest are avoided and responsibilities made clear.

Internal Audit makes an independent assessment of governance, risk management and internal control. Following consultation with the Board and Group senior management, assessments and testing are conducted in areas that are material and exposed to risk, in the interests of satisfactory management and control. The result, with any recommendations on necessary measures to be taken, is presented to Group senior management and the Board and is followed up.

The Compliance function in KLP assists Group senior management, the Board and the company’s employees in ensuring compliance with regulations and ethical standards. The head of the Compliance function reports to the CEO and its reports are discussed by the Board. The function takes a preventive approach through advice, implementation and culture-building, and carries out control activities to maintain a good compliance culture. A more detailed description of the company’s adherence to good corporate governance is given in the annual report, in the section on NUES and in the description of risk management and internal control in KLP.

KLP’s work on compliance with laws and regulations is closely linked to its work on ethics and corporate social responsibility. The principles of behaviour in KLP’s ethical guidelines are rooted in KLP’s values and support a culture of compliance characterised by accountability, openness, clarity and engagement.

The EU has passed several laws on sustainability, and two Regulations have been implemented in Norwegian law through the “Act on Sustainability in Finance”, which entered into force on 1 January 2023. The Act implements the EU’s Taxonomy Regulation and Disclosure Regulation. The Act lays down requirements for eligible companies on comprehensive reporting in the area of sustainability.

The Group has implemented IFRS 17 Insurance Contracts from the 2023 financial statements onwards. Comparative figures from 2022 have been reworked. This affects how the insurance contracts are measured and presented in the financial statements. The standard entered into force from 1 January 2023, and will be implemented in KLP’s consolidated accounts and in the company accounts for KLP Skadeforsikring. The new rules have a big impact on the presentation of the consolidated financial statements, reflecting the fact that, as a mutual enterprise, KLP does not have any equity or profits because the insurance customers are entitled to the net assets in the Group.

The KLP Group implemented IFRS 9 Financial Instruments in its banking operations in 2018. In the insurance business and the consolidated financial statements, KLP decided to postpone the implementation of this standard pending the entry into force of IFRS 17. This is because the measurement of insurance liabilities will have an impact on the way in which financial instruments are managed in the insurance business. As IFRS 17 entered into force from 1 January 2023, IFRS 9 will also have to be fully implemented in the Group. The purpose of IFRS 9 Financial Instruments is to allow these to be classified in line with the characteristics of the cash flows from the various instruments and the way in which they are managed. A forward-looking model for provisions for expected losses is also being introduced. The standard also contains an improved model which brings the financial statements more into line with the risk management.

KLP submits company accounts in accordance with the Norwegian ‘Annual accounts regulations for life insurance undertakings’. The regulations have been amended as IFRS 9 can no longer be deferred.

Comparative figures from 2022 have not been reworked to reflect the changes brought in by IFRS 9 as there is no need for this.

KLP achieved a solid tenth place in Apeland’s annual reputation survey of Norwegian companies, and came top out of all banks and financial service companies. KLP’s annual customer satisfaction rating among its customers is consistently high – especially for customers with public-sector occupational pensions. Quality of contact and personal treatment are the two areas where KLP scores best in all business areas. Klp.no saw a 13 per cent growth in visitor numbers compared to the previous year. The pension calculator is one of the most used services, with almost 400,000 visits in 2023. KLP is constantly developing the range of courses and seminars on pensions and working life for different groups of members and for employers. We are in contact with many of our members and owners – whether electronically, in physical meetings across the country, or through our advice and guidance centre in Bergen. We provide information and assistance to make it easier for individuals to make good choices. We also released KLP’s Working Life Report 2023, which highlighted major issues in the workplace and in retirement patterns.

The 22nd Local Government Conference was held in March 2023 in Trondheim, and was attended by over 200 council leaders. The theme was democracy and dialogue. The conference received a very good reception - 91% of delegates gave it the top score in the evaluation. During the year, KLP also ran four other live-streamed local government conferences, which highlighted several of the major challenges facing the municipalities where KLP can assist.

For many years, part of KLP’s communication strategy has been to publicise the kinds of jobs that exist in the local government and healthcare sector. In 2023, KLP initiated a joint campaign with the Norwegian Association of Local and Regional Authorities (KS), the Norwegian Union of Municipal and General Employees (Fagforbundet) and the Centre for Senior Policy (NSF), with the aim of boosting recruitment to these professions. The campaign included wide exposure on TV and radio and in cinemas, and a separate stand for Norwegian local government and healthcare at the four largest educational fairs in the country.

KLP’s strategic goal of being the best for public-sector occupational pensions calls for aggressive commercial and technological development. KLP is using new and existing technology to streamline the business and to provide market-leading digital services for employers and members.

All in all, KLP is now implementing one of the largest digitalisation upgrades in our industry. The biggest initiatives relate to the creation of a new and forward-looking digital pension concept, the renewal of platforms for data and information, and the introduction of new tools and infrastructure based on cloud technology.

KLP’s digital pension concept is the most important single initiative in realising the Group’s strategic ambitions. It is about automating and streamlining pensions administration so customers and pensioners get a prompt reply to their pension application and KLP’s operations become more efficient. In 2023, the project provided a number of new and improved services that benefit employees with pension rights in KLP, and also their employers.

In early 2023, the project successfully converted around 150,000 old-age pensioners from the old to the new Pensions system. This means that all old-age pensioners now have their pensions handled in the new solution, which was a major milestone in the work of modernising the accounting procedures in KLP.

The new self-service functions for old-age pensioners, with fully automated case-handling for around 70 per cent of all new applications, have helped to make new retirees more satisfied with the service from KLP.

During the summer, a contractual early retirement pension (AFP) was also introduced into the Pensions system. This means that all new recipients of AFP are now being handled with new technology.

Large parts of 2023 were also spend in preparing to transfer disability and survivors’ pensions to the new solution. This development work laid the foundations for new cases around these two benefits to be processed from the winter of 2024.

In 2023, work also started on a completely new refund solution, together with the parties to the Transfer Agreement (OFA). Preparations also started to address the extensive changes to be made to old-age pensions for members born after 1963 with effect from 1 January 2025. Here, KLP aims to keep its place as the market leader in the simulation of public-sector occupational pensions, and is building a completely new solution on a new technological platform.

The threats that we face are changing all the time, and information security is an increasingly challenging area to deal with. Systematic efforts are therefore being made to raise security levels in solutions and infrastructure. There is a big emphasis on organisations’ awareness of external and internal threats, while processes are also being strengthened. KLP has a strong internal security environment and collaborates with leading centres of expertise in the area. We also share the skills we build up with our owners.

In 2023, KLP joined with the Norwegian Climate Foundation to produce the report “Enough people?”. This emphasises that a manpower and skills shortage could hinder Norway’s green transition. There will be a great need for manpower to meet the climate targets, even with moderate growth estimates in key industries. Together with the need for more workers in healthcare and other sectors, this means that Norway needs to prioritise resources carefully and ensure that enough people are trained in the necessary skills.

Adequate and appropriate staffing is a challenge for KLP’s owners, and will become increasingly urgent towards 2040, in both the local government and the healthcare sectors.

For the world to reach the 1.5-degree target, global emissions must be reduced quickly to reach net zero by 2050. The Board of KLP has therefore set a goal to align our investments with this target. KLP has prepared a separate roadmap describing how we plan to work towards and measure our contribution to the goals in the Paris Agreement. KLP continuously assesses measures to help tackle the climate challenge while also reducing our customer-owners’ pension costs. KLP is now working on updating its short-term objectives on the way to a net zero investment portfolio in 2050, as well as assessing which further adjustments will be most effective towards 2030.

KLP’s overall goal is for investments to be 100 per cent Paris-aligned (Paris alignment percentage) over time, and for investments to reach net zero emissions by 2050. More short-term goals are to increase the share of companies with science-based climate targets and reduce financed emissions.

KLP has developed an indicator for the Paris alignment percentage which expresses how far away each individual investment is from a emissions path consistent with 1.5 degrees of warming. In 2023, the Paris alignment of KLP’s investments stood at 55 per cent, 9 percentage points higher than the first measurement in 2020, and one percentage point higher than the measurement in 2022. Part of the increase comes from more companies reducing their emissions in line with the 1.5-degree target and the fact that KLP has increased its investments in renewable energy and other zero-emission investments. Large parts of the change are also due to increased data coverage.

KLP has been working for many years to persuade companies we invest in to develop in a sustainable direction. In 2023, a risk assessment was carried out relating to the risk of human rights violations in companies in the Gulf States. This risk assessment led to the exclusion of 11 companies because of high risk, especially in building and construction, property and telecommunications.

At the end of 2023, green loans amounted to NOK 1.6 billion. KLP has provided loans for many projects throughout the year, which cover different needs for the municipalities. Among other things, KLP gave green loans for the construction of a velodrome in one municipality,  green loans for a new nursing home in another, and loans for the construction of housing for people with disabilities in a third.

In non-life insurance, KLP has been concerned to be there for the municipalities when a changing climate brings dramatic events and large claims. There were several examples of such events in 2023. ‘Extreme weather Hans’ and the subsequent heavy rainfall in eastern Norway are among the most expensive events ever for the Norwegian insurance industry, and also placed great demands on the affected municipalities. In 2023, KLP entered into a collaboration with the Norwegian Municipal Technical Association (NKF) to develop a tool to provide municipalities with an overview of the state of their own building stock, including their climate risk.

In response to this, the property company has implemented a number of energy-saving measures in its portfolio to reduce tenants’ energy costs and environmental impact. The property portfolio was enlarged with the purchase of a property in Oslo with energy class A and BREEAM NOR certification, while a new building is under construction in Trondheim which will be the first in the property portfolio to be certified according to the health and environmental standard Well.

KLP has been reporting on sustainability for many years. The introduction of the CSRD places stricter demands on the quality and control of the reported figures, and also widens the scope significantly. This year’s sustainability report is a test report according to the CSRD and the associated requirements in the European Standards for Sustainability Reporting (ESRSs) before they enter into force for the 2024 financial year.

For detailed reporting on KLP’s sustainability work, please refer to KLP’s sustainability accounts, and the section on Responsible investments.

KLP fulfils its responsibility to promote fundamental human rights and labour rights as a responsible investor and in its work on sustainable procurement. The Board confirms that due diligence assessments have been carried out in accordance with the Transparency Act. A more detailed account of KLP’s due diligence work can be found in the company’s report in accordance with the Transparency Act in the section on “Human and labour rights” in the sustainability accounts in the Annual Report.

It is in the interests of both KLP and society that a prudent and appropriate approach should be adopted to prevent, detect and handle financial crime. Fighting financial crime is one of the goals in KLP’s sustainability strategy. At KLP, efforts to combat financial crime are prioritised through a zero tolerance policy and appropriate action. These issues are also addressed in KLP’s work under the Transparency Act.

KLP’s measures against financial crime are closely monitored and will be included in half-yearly (or ad hoc) reporting to Group management and Board of Directors in 2024. KLP has established an internal and external whistleblowing channel that can be used to report financial crime.

Through industry partnerships, we play an active role on committees within Finance Norway with the aim of strengthening efforts to combat financial crime.

In 2023, KLP’s systematic countermeasures prevented any financial losses and were followed up with reports to the police. No reports of financial crime were received or processed over the year.

In 2023, systematic and comprehensive efforts were made to develop measures to be included in KLP’s anti-corruption programme. These set the minimum standards expected of employees, suppliers and business associates. The programme focuses on anti-corruption through culture, predictability and transparency. In 2024, the programme will be completed and integrated into established business processes, along with other aspects of financial crime. These will also state that the functions responsible for preventive and detective measures against corruption should not be involved in handling any allegations of corruption.  

No significant risks of corruption associated with the business were identified in 2023. Sensitive roles and functions within procurement and allocation are given specific anti-corruption training. In 2023, no cases of corruption related to KLP’s employees or business were uncovered. 

Corruption and other types of financial crime are important issues that we follow up on with companies as a responsible investor and purchaser. No cases of corruption related to our suppliers or business relationships were found in 2023. 

KLP has chosen a transparent approach to lobbying to avoid getting into unwanted situations. This means, for example, that KLP does not make financial contributions to political parties or politicians. We are also open about our input to public consultations and publish our responses on klp.no.  

Funds that KLP has invested in have been informed that ownership details will be made available and may be shared with anyone who might be interested. KLP believes this is an important contribution to pushing industry practice towards greater transparency about ownership in funds. 

In 2023, priority was given to the development of the anti-money laundering solution, actions to address the issue, and a training programme. KLP’s companies reported 72 suspicious matters to the National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim) in 2023 and suspended transactions related to tax evasion, racketeering, fraud and misappropriation of funds.  

In recent times, a complex global situation has increased the risk of actors wishing to evade sanctions imposed by the UN and the EU which Norway has endorsed, along with sanctions imposed by countries outside the EU.

The applicable sanctions rules place an obligation on KLP to ensure compliance with the prohibition against making money and assets directly or indirectly available to listed persons or companies.

KLP has taken appropriate and reasonable measures to halt, avert or limit the risk of breaches of the sanctions rules.

KLP aims to be an attractive and flexible employer which provides good development opportunities in an inclusive working environment KLP therefore strives to provide a good physical and psychosocial working environment which promotes job satisfaction, with flexible working arrangements wherever possible and effective involvement of the health and safety function and the employee representatives in the development work. These are important prerequisites for good quality work, better results for the business, greater competitiveness, customer confidence and individual motivation.

KLP maintains a fully compliant working environment through systematic HSE work, with good processes and appropriate measures. There are regular risk assessments of various areas to prevent injuries, health problems or illness, and to ensure that we comply with laws and regulations related to health and safety.

KLP has a target of less than 4 per cent sickness absence. In 2023, the total sickness absence was 4.5 per cent, which is a little higher than we hoped, but still lower than in 2022. The results show a slight fall in short-term absence and a slight increase in long-term absence. Absence due to illness typically increases through the autumn and winter seasons and follows the general trends both in society and in the industry.

No serious injuries to staff or other major incidents were reported in the company in 2023.

Work is being done to develop the appropriate skills and attitudes in the HSE area. In 2023, AKAN courses were conducted for managers, elected representatives, the safety officers and HR. The topic was how to recognise the signs of substance abuse and how to approach a conversation where there is a concern. There is also a strong focus on mental health, and KLP marked World Mental Health Day with talks and webinars. A safety inspection has been carried out for all employees, to look into the physical conditions in the workplace and follow up accordingly.

The psychosocial working environment is monitored through employee surveys. In 2023, one large and two shorter surveys were conducted. The results show high job satisfaction and loyalty in the organisation. For younger employees, we are seeing improved job satisfaction after targeted measures were taken. The survey results are followed up by management, and presented and discussed with the employee representatives and safety officers, who also have the opportunity to propose measures. Overall, this provides good insight and is an important process for continuous development of a good working environment.

7 per cent of the workforce left the company in 2023, an increase of 0.3 percentage points from 2022 and 1.1 percentage points above the average for the last five years.

KLP has been working on gender equality and diversity for many years, to strengthen value creation, increase employee satisfaction and help make KLP an attractive employer. KLP aims to achieve a gender and pay balance in executive positions and higher paid roles, to increase efforts for employees with disabilities, to be an inclusive workplace where all employees feel respected for who they are, and to provide good follow-up and training for older workers.

In 2023, women’s earnings averaged 85 per cent of men’s across the whole of KLP. This is an increase of two percentage points from last year. The main reason for the difference is that KLP has a preponderance of men in the highest paid positions, and higher salary levels in general in the professions where this is most apparent.

There are 40 per cent women and 60 per cent men on average across all management levels. In higher-paid positions there are now 30 per cent women, which is an increase of two percentage points from 2022. KLP has launched a number of measures to increase the proportion of women in the highest paid positions. These relate to things like recruitment processes, branding and leadership development. KLP is also a sponsor of the “Women in Finance” charter, in support of efforts to increase the proportion of women in executive positions in the finance industry.

Through the year, there were several activities designed to ensure that employees feel respected for who they are, and the employee survey has returned high scores in this area. KLP works with FRI (the National Association for Lesbians, Gays, Bisexuals and Transgender People), and we run the course on “Pink Competence” each year. The aim is to give staff and managers good advice and ideas on how to talk confidently about sexual orientation and gender expression in the workplace. KLP is also a member of the network for “LGBT in the workplace”, which consists of employers working together for an inclusive work environment.

Seniors should have the same development opportunities as all other employees and we strive to ensure that employees stay in work for as long as possible. The average retirement age for old-age pensioners and recipients of AFP has remained stable in recent years, with an increase in 2023 from 64.8 years to 65 years.

KLP has apprenticeships and internships related to the IA (inclusive working life) agreement and arrangements are made for employees where necessary. KLP works with an agency which helps people with disabilities to enter the labour market, and KLP will be looking for ideas and partners to take this work forward.

More detailed information on Gender Equality and Diversity can be found in KLP’s Sustainability Report for 2023, in the section on “Our own workforce”. Policies for gender equality and diversity are reflected in KLP’s Articles of Association, internal guidelines and instructions to the Nomination Committee in accordance with legal requirements, including the composition of the Board, management and control bodies, and their sub-committees. These set out goals for gender equality and diversity, and describe how measures have been implemented and what effect they have had during the period.

KLP has general guidelines for salary and other benefits. A fixed base salary is the main element of the total remuneration, which also includes insurance and pension schemes and benefits in kind. The Group’s securities management environment competes for manpower in markets where it is usual for parts of the remuneration to be based on results achieved. The Group therefore offers salaries that are partly performance-based to employees in securities management with direct responsibility for results. In line with the rules, this pay is spread over several years. There is no performance-based pay in other parts of the Group or in Group management.

KLP’s impact on the external environment and climate comes directly from its own activities, indirectly through partners and suppliers, and through investments in companies and property.

In 2023, KLP worked to halve emissions by 2030 compared to 2010, set procurement targets, worked to reduce flights by 45 per cent compared to 2019, and worked to set targets for waste and increase sorting at source to 60 per cent in KLP’s offices.

The results show a 3 per cent reduction in emissions from 2022 to 2023, and a 6 per cent reduction from 2010. The reason why there has not been a bigger decrease from 2010 is that the basis for calculation has changed in that time. For comparison, the reduction would be 49 per cent according to the original calculations. As a percentage, the biggest contribution to the decrease from 2010 comes from the KLP Eiendom vehicle fleet. In tonnes, the biggest reduction relates to electricity and district heating/cooling. There is also a significant contribution from fewer flights. The results for air travel showed a 34 per cent reduction at the end of 2023 compared to 2019.

Flights are the activity with the greatest emissions, so we are working to reduce our footprint in this area. The environmental targets adopted for operations in 2024 are to extend the life of IT equipment, reduce emissions from air travel by 25 per cent, increase the waste sorting rate to 65 per cent in all office locations, and reduce emissions from paper consumption by 10 per cent compared to 2023.

The public-sector pension schemes are anchored partly in law and partly in collective agreements between the employer and employee organisations. Extensive changes were made to public-sector occupational pensions from 1 January 2020. The objective of the changes was to align public-sector occupational pensions with the pension reform by giving better support during working life and providing for greater mobility between the public and private sectors.

In 2023, the parties agreed on the pension solution for public-sector employees who have a special age limit and were born in 1963 or later. However, the rules have still to be finalised. The Ministry is working to a timetable whereby the new rules will enter into force from 2026 onwards, but with effect from 1 January 2025. Any pensions paid under the new rules to people who retire in 2025 will then be back-dated. However, transitional rules will apply so the existing regulations will be used for most people.

The AFP (contractual pension) system is also about to go onto the statute book, changing in 2025 from an early retirement scheme to a lifetime benefit, following the pattern from the private sector. There is an ongoing legislative process with a view to adoption before the summer of 2024. The new AFP will be a significant element of public-sector occupational pensions going forward, and has limited pre-funding. This will mean a significant increase in premiums from 2025. However, the increase in payments is temporary and must be seen in conjunction with monies freed up by the changes in 2020. Over time, approximately the same premium levels may be expected as before the 2010 changes.

Through to the summer of 2024, the Storting is also debating the White Paper which came out of the Pension Committee’s investigation from 2022. The report proposes several changes to the pension system that will have implications for public-sector occupational pensions too. Among other things, a gradual shift in age limits over time is proposed, starting with the cohort born in 1964 (which will turn 62 and be able to draw a retirement pension from 2026).

This White Paper, the new AFP and the solution for special age limits are all imminent. There are a number of issues arising from changes coming shortly before (and sometimes after) they enter into force. This creates challenges for system changes and communication both to members and to employer-customers.

In February 2022, the Norwegian Competition Authority made an unannounced visit to investigate whether KLP might have breached Section 11 of the Competition Act on improper exploitation of a dominant position. Since the visit, KLP has cooperated with the Competition Authority in its investigations, and has given answers to ongoing information requests. KLP is cooperating with the Competition Authority in its further handling of the case.

Storebrand has filed a complaint against Norway with the ESA, alleging that KLP is receiving unlawful state aid, and that Norwegian municipalities and health trusts have breached the rules on public procurement. The government has dismissed both complaints. KLP has provided relevant information to illuminate the complaint cases when this has been requested. The complaints are still being processed by the ESA, which will assess whether there is any basis for bringing proceedings.

In October, the Deputy Chair of the Board, Ingunn Trosholmen, was appointed State Secretary in the Prime Minister’s office. She took office on 16 October, and stepped down from the Board of KLP at the same time.

KLP sets great store by good and close dialogue with its customer-owners. This provides important input on strategic questions and useful feedback on day-to-day operations. Owner meetings were held at the county level in 2023 too, and KLP also attended executive meetings in the health trusts. Six-monthly resource group meetings were also held for local authority chief executives and municipal directors, as well as resource group meetings for politicians. KLP also had occasion to provide a status report from the company for several municipal councils and executive committees.

KLP’s articles of association and applicable legislation lay down guidelines for corporate governance, and call for a clear division of roles between governing bodies and executive management. The Board of Directors of KLP carries out an annual review of corporate governance (NUES). As KLP has not issued any equity instruments and so is not exchange-traded, there will be some differences from the Norwegian Code of Practice for Corporate Governance (NUES) as set out in a separate section of the annual report.

Election procedures for the corporate assembly are tailored to the mutual form of ownership with important stakeholder groups having assured representation on the corporate assembly, in accordance with the company’s Articles of Association.

The Board of Directors has established an Audit Committee, a Remuneration Committee and a Risk Committee. The Board undertakes an annual assessment of its own business and competence. Directors’ liability insurance has also been taken out for Board members and the general manager of KLP. The insurance covers the insured’s liability for loss of assets from claims made against them during the cover period as a result of an act or omission on the part of the insured in their capacity as general manager or board member. The insurance is taken out by an external company.