Q1 2023 Interim report

KLP Group

Report for the first quarter of 2023

Good financial returns had a positive impact on KLP’s results in the first quarter

KLP achieved a return of 2.5 per cent on the pension assets in the common portfolio in the first quarter.
A sound equity market and interest rates above the guaranteed interest rate have contributed positively to the financial returns in the first quarter.
Strong capital adequacy at 316 per cent.

KLP – a customer-owned 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 first quarter of 2023, the Group had total assets of NOK 948.1 billion, an increase of NOK 47.9 billion in the 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 742.1 billion, NOK 668.2 billion is linked to insurance liabilities within public-sector occupational pensions.

All retirement pension cases were converted to a new pension system during the first quarter and will be processed there. This is an important step in the extensive change programme underway in KLP.

There has been a consultation on the regulations for a new public-sector early retirement pension (AFP). The new public-sector AFP is designed as a lifetime benefit and will start with the 1963 cohort when they turn 62 in 2025. KLP has submitted a detailed response. A legislative process is expected in the autumn.

Implementation of new accounting rules

Financial instruments

New rules for the measurement and valuation of financial instruments were implemented in the first quarter. These will be treated from 1 January 2023 in accordance with the rules in the international financial reporting standard IFRS 9 Financial Instruments.

The purpose of the new rules is to simplify the accounting treatment of financial instruments. There are now two factors that determine this; the characteristics of the instrument and the company’s business model. Another purpose is to make provision for expected losses on financial instruments measured at amortised cost. Previous rules had no requirement for provisions for expected credit losses.

Comparative figures from previous periods have not been restated as there is no requirement for this.

The transitional effect in the company accounts as of 01.01.2023 amounts to minus NOK 2 million on equity and minus NOK 13 million on the buffer fund. The change is related to provisions for expected losses on investments measured at amortised cost.

For the Group, the transitional effect on equity amounts to minus NOK 12.0 billion after tax. The transitional effect is mainly due to the fact that financial instruments previously measured at amortised cost are now measured at fair value with changes in value through profit/loss. From 1 January 2022, unrecognised changes in the value of these instruments will therefore be included in the financial statements. The reason for the increased measurement of financial instruments at fair value with changes in value through profit/loss in the consolidated accounts is that insurance liabilities are discounted using a market-based interest-rate curve. This means that changes in the recognised value of insurance liabilities related to changes in interest rates will be partly offset by changes in the recognised value of income from interest on the associated financial instruments.

Refer to KLP’s annual report for 2022, Note 37 (to the company accounts) and Note 37 (to the consolidated accounts), for further discussion of the transition to new accounting policies for financial assets.

Insurance contracts

The international accounting standard for recognition and measurement of insurance contracts, IFRS 17, entered into force from 1 January 2023. It is not permitted to use the standard in the company accounts of life insurance companies, but it must be implemented in the consolidated accounts of groups reporting under IFRS.

One purpose of the new standard is to provide for better valuation and performance measurement of insurance contracts, along with increased transparency over the business and greater comparability.

IFRS 17 recognises that the purpose of mutual insurance companies is not to generate profits for external owners, but to provide insurance cover to members. Value creation for a mutual enterprise cannot therefore be measured in the same way as for a private limited company, for example. Profits or losses from the business will be distributed among current or future members of the mutual insurance company. Profits to members in excess of those deriving from the obligations attached to the insurance contracts are set aside as a debt to current and future members. This acts as a buffer against future losses. As a general rule, mutual enterprises have neither profit nor equity. Equity may nevertheless arise because the standard requires net assets in the business set aside for members to be always measured at market value, whereas some assets and liabilities are not measured at market value, either because this is not permitted under other accounting rules or because the Group has chosen another valuation method where this was possible. This then produces a measurement difference related to certain assets and liabilities. This measurement difference will constitute equity in the mutual enterprise. The change in measurement difference is a profit to the enterprise. KLP has identified surplus assets set aside as debt to current or future members for the residual value of the business, and any changes in this, together with monies paid into the members’ premium fund, will give a picture of KLP’s value creation.

The insurance liabilities are measured by estimating future cash flows related to the insurance contract and discounting them using a market-based interest rate curve that takes account of the liquidity in KLP’s insurance contracts. A risk adjustment is then applied for non-financial risk.

Comparable figures have been prepared for 2022. The equity effect of implementing the standard amounted to minus NOK 48.9 billion on 01.01.2022. Refer to Note 37 to the consolidated accounts in the annual report for 2022 for further details of the transition to IFRS 17.

Implementation of IFRS 17 will have no impact on capital adequacy ratio.

Results for the first quarter of 2023

Group

The best estimate of liabilities related to insurance contracts entitling the policyholder to the residual value of the business increased by NOK 33.6 (-65.4) billion in the quarter and amounts to NOK 383.1 (384.0) billion. NOK 31.3 (-67.7) billion of the increase is related to discount effects from falling long-term interest rates throughout the quarter. Despite an increase of NOK 17.6 billion in the value of underlying net assets, the residual value to policyholders fell from NOK 337.3 billion to NOK 319.6 billion in the quarter. The total liability to policy-holders entitled to residual value thus amounts to NOK 702.7 (686.9) billion as of 31.03.2023.

The Group has also issued ordinary insurance contracts within non-life insurance. Liabilities related to this business increased from NOK 3.2 billion to NOK 4.0 billion through the first quarter.

The consolidated profit/loss amounted to NOK -43 (10,480) million, and was due to differences in recognised value changes and changes in the market value of net assets. Cumulatively, this valuation difference amounts to NOK -3,630 (2,293) million, and corresponds to the Group’s equity. The big change from the first quarter of last year to the first quarter of this year is partly due to the fact that, in implementing IFRS 9 from 1 January 2023, the Group has changed the measurement of a significant proportion of financial instruments from amortised cost to market value.

Company result

Investment result

KLP achieved an investment result (returns in excess of the average guaranteed rate of return) of NOK 13.2 (-7.9) billion in the first quarter. The return on the common portfolio was 2.5 per cent.

Risk result

There was a negative trend in disability in the quarter which had a negative effect on the risk result. On the other hand, excess mortality had a positive effect on the result. In total, the risk result amounts to NOK 71 (105) million in the first quarter. The risk events in the stock have been within expectations throughout the year and will vary from quarter to quarter.

Administration result

The company’s administration result shows a surplus of NOK 54 (-9) million in the first quarter. Insurance-related operating costs came to NOK 377 (368) million in the first quarter.

Total profit/loss

Total profit/loss to the company stands at NOK 454 (388) million for the first quarter. The customer result is NOK 13.2 (-7.8) billion for the year.

NOK millions	Customers	Company	Total
Investment result	13 117	116	13 233
Risk result	71		71
Interest guarantee premium		68	68
Administration result		54	54
Net income from investments in the corporate portfolio and other income/expenses in non-technical accounts		302	302
Tax		-108	-108
Other profit/loss elements		23	23
Profit/loss after Q1 2023	13 188	454	13 642
Profit/loss after Q1 2022	-7 752	388	-7 365

Financial strength and capital-related matters

KLP’s total assets increased by NOK 31.8 billion in the first quarter and amount to NOK 742.1 billion. The premium reserve increased by NOK 1.7 billion to NOK 520.3 billion in the same period.

The buffer fund amounts to NOK 102.2 billion after the first quarter. There is also a positive interim result of NOK 13.2 billion in the customer result.

Without applying transitional rules, the company’s capital adequacy ratio is 316 per cent. Taking account of the transitional arrangement for technical provisions, capital adequacy was 316 per cent.

KLP’s target is a 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 31.03.2023	At 31.03.2022
Return on the common portfolio	2,5	-0,8
Return incl. value changes in hold-to-maturity bonds and lending	2,6	-2,3
The returns figures apply to the common portfolio
Capital adequacy, Solvency II	316	332
Capital adequacy, Solvency II, with transitional measures	316	332

Premium income

Premium income excluding premium reserves received on transfers in amounts to NOK 7.6 (7.1) billion at the end of the first quarter.

Claims/benefits

Pensions paid and other claims, excluding ceded premium reserves, amounted to NOK 6.2 (5.8) billion for the first quarter.

Management of the common portfolio

The assets in the common portfolio totalled NOK 690.9 (662.5) billion and were invested as shown below:

Assets	At 31.03.2023		At 31.03.2022
All figures in per cent	Proportion	Return	Proportion	Return
Equities	31,5 %	6,7 %	30,1 %	-3,2 %
Short-term bonds	11,6 %	1,7 %	13,1 %	-4,6 %
Long-term/HTM bonds	28,7 %	0,8 %	28,4 %	0,8 %
Lending	11,8 %	0,8 %	12,1 %	0,5 %
Property	14,7 %	-0,2 %	14,0 %	1,4 %
Other financial assets	1,6 %	0,8 %	2,3 %	0,1 %

Equities

Total exposure in shares and alternative investments, including equity derivatives, was 31.5 per cent at the end of the first quarter. The total return on shares and alternative investments was 6.7 per cent in the quarter. The return on KLP’s global equities was 8.4 per cent, while KLP’s Norwegian equity portfolio returned 1.6 per cent in the first quarter.

The currency hedging ratio for equities in developed markets and the most liquid currencies in emerging markets was between 50 and 70 per cent. In the first quarter, the Norwegian krone depreciated against the US dollar and the euro, among other currencies. Currency hedging made a negative contribution to the return on equity in this quarter.

Short-term bonds and money market instruments measured at fair value

Short-term bonds accounted for 11.6 per cent and money-market instruments 1.6 per cent of the assets in the common portfolio at the end of the quarter. There was some movement in Norwegian, European and US long-term government bond yields through the quarter, but these ended down in the first quarter, while short-term yields rose. KLP’s global government bond index achieved a currency-hedged return of 2.7 per cent in the quarter, while the return on the Norwegian government bond index was 1.7 per cent. Increased global credit margins contributed to a quarterly return of 2.7 per cent on KLP’s global corporate bond index, while the return on the Norwegian corporate bond index was 0.9 per cent. Short-term bonds produced a total return of 1.7 per cent in the first quarter. The money market return was 0.8 per cent for the quarter.

Bonds measured at amortised cost

Investment in bonds measured at amortised cost made up 28.7 per cent of the common portfolio at the end of the quarter. Unrecognised decreases in value in the portfolio rose in the first quarter and amounted to NOK 10.4 billion at the end of the quarter. The portfolio is well diversified and consists of securities issued by creditworthy borrowers. The return measured at amortised cost in the first quarter was 0.8 per cent.

Property

Property investments, including Norwegian and international property funds, accounted for 14.7 per cent of the common portfolio. Property values in the common portfolio were adjusted downwards by NOK 980.3 million in the quarter. Property investments in the common portfolio achieved a return of minus 0.2 per cent in the first quarter. The returns include currency hedging and property funds.

Lending

Lending in the common portfolio totals NOK 79.2 billion. This is split between NOK 68.0 billion in loans to the public sector, NOK 0.7 billion in loans with government guarantees and NOK 2.9 billion in secured mortgage loans, with the remaining NOK 7.6 billion made up of other secured loans. The lending portfolio is of high quality, with no losses on municipal loans and very modest provisions for losses on mortgage loans. Unrecognised decreases in value in the lending portfolio (fixed-interest loans) totalled NOK 1.4 billion at the end of the quarter. The return for the first quarter was 0.8 percent.

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 objective of stable returns. Investments in the corporate portfolio achieved a return of 0.9 per cent in the first quarter.

Business areas of the subsidiaries

Non-life insurance

The first quarter of 2023 is the first time KLP Skadeforsikring AS has presented its accounts with the insurance contracts reported in accordance with IFRS 17. This means that some key figures will not be directly comparable with previous years’ reporting. With the introduction of the new standard, the comparative figures have been reworked.

The first quarter shows a profit before tax and other provisions of NOK 99.3 (56.9) million. Financial income is higher than expected and accounts for some of the good result. Because of one large claim, the underwriting result is weaker than expected. Previous years’ reserves were liquidated in the quarter.

Volume growth so far this year is NOK 263 million, and premium volume was NOK 2,456 (2,105) million at the end of the first quarter. The increase is primarily due to increased premiums, both generally and within specific segments. Insurance income increased by 15.4 per cent, or NOK 84 million, compared with the same time in 2022. For the public-sector and corporate markets, income increased by 19.8 per cent, while the corresponding increase for the retail market was 9.8 per cent.

One large claim was reported in the first quarter, of which the company covered NOK 76 million. Any excess is covered by the company’s reinsurers.

In recent years, KLP Skadeforsikring AS has seen several fire claims from the waste industry, some of them very large. The company’s reinsurers are therefore restrictive in their offering within this customer group, and the company plans to reduce its exposure to this industry. This has led to stricter conditions for the industry.

Reversals of previous years’ claims are still positive, and gains of NOK 11 million have been taken to income so far this year, equivalent to 0.5 per cent of the reserves at the beginning of the year.

Key figures for the company

	At 31.03.2023	At 31.03.2022	At 31.12.2022
Claims ratio	93,8	64,9	75,8
Cost ratio	14,9	14,6	14,5
Combined ratio	108,6	79,5	90,4

Net financial income in the first quarter was NOK 148.7 (-49.3) million, equivalent to 2.7 (-0.9) per cent. The quarter has been characterised by large movements in the international financial markets. Overall, the equity portfolio had a quarterly return of 9.3 per cent. The company’s investments in fixed income funds also had a positive return of 1.6 per cent, as a result of a reduction in interest rates and reduced credit premiums. The company’s long-term bonds had a yield of 0.8 per cent. The return on property investments was 5.5 per cent, after a write-up of NOK 32 million on real estate assets.

The capital adequacy ratio was slightly reduced from 222 per cent at the end of 2022 to 218 per cent at the end of the first quarter.

Asset and fund management

KLP Kapitalforvaltning AS provides securities management in the KLP Group. It had a total of NOK 671 billion under management at the end of the first quarter, of which NOK 151 billion was for external customers. The majority of the assets are managed on behalf of KLP and its subsidiaries.

Net new subscriptions to the KLP funds were NOK 3.7 billion in the first quarter. External customers had positive net new subscriptions of NOK 5 billion in the quarter.

The company achieved a profit before tax of NOK 11.3 million in the first 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 Bank’s lending business is financed by deposits from private customers and companies, loans from the securities market and owners’ equity. The Bank also manages a substantial volume of lending financed by pension assets in KLP.

As of 31 March, the KLP Banken Group had loans to customers totalling NOK 42.7 (40.6) billion. Mortgage loans in the retail market and public-sector loans totalled NOK 23.3 (22.6) billion and 19.4 (18.0) billion respectively.

The KLP Banken Group manages NOK 2.9 (3.0) billion in mortgage loans and NOK 74.1 (72.6) billion in loans to public-sector borrowers and other businesses on behalf of KLP.

The Bank’s mortgage products are aimed at the target group of members of the KLP pension schemes. Net mortgage growth in the first quarter was NOK 75 million, which is considerably lower than at the same time last year.

Lending volume to the public-sector market on KLP Banken Group’s balance sheet increased by NOK 0.2 (0.2) billion through the quarter. Loans to public-sector borrowers managed on behalf of KLP increased by NOK 0.5 (0.1) billion in the same period.

The bank’s lending margins have continued from autumn 2022 at a somewhat higher level than in the first quarter of 2022. Higher interest rates have also contributed to higher earnings on the Bank’s loans financed by equity. The Bank’s operating income, in the form of net interest income, was NOK 110.2 (72.1) million at the end of the first quarter.

The KLP Banken Group’s external financing consists mainly of deposits and bonds. Deposit growth so far this year is NOK 0.4 (0.5) billion. At the reporting date, deposits from individuals and enterprises amounted to NOK 14.1 (13.4) billion. Liabilities created on issuance of securities totalled NOK 32.0 (31.9) billion. The securities debt is mainly covered bonds issued by KLP Kommunekreditt AS and KLP Boligkreditt AS.

Operating expenses and depreciation amounted to NOK 71.4 (64.0) million in the first quarter.

In the year to date, losses and loss provisions on loans in the retail market amounted to NOK 0.3 (0.1) million. Nor have we experienced any losses related to public-sector lending in this quarter.

The KLP Banken Group had a pre-tax operating profit of NOK 53.1 million (18.3) in the first quarter. Broken down by area, profits were NOK 35.4 (8.3) million in the retail market and NOK 17.7 (10.0) million in the public-sector market.

Corporate social responsibility

A pilot study was recently completed to examine financing solutions for green maritime infrastructure. Institutional investors are among the players who could take on a greater role and provide capital to finance the major upgrade that is needed in the maritime sector. KLP is one of the institutional investors leading the way in this work.

KLP also actively contributes to achieving the global climate goals and nature targets. The issue of seabed mining is one of many examples where the objectives could conflict with each other, and where difficult trade-offs have to be made. In a consultation response to the Ministry of Petroleum and Energy, KLP stresses that the precautionary principle dictates that, until we have a better knowledge base, we should hold off on commercially oriented exploration and mining on the seabed. KLP also supports an international proposal for a temporary suspension of offshore mining.

KLP considers climate change and nature loss to be both a direct financial risk and an indirect systemic risk for our global society. KLP has published a new expectation document that sets out KLP’s expectations for how companies should manage climate and nature risk. The aim is to minimise KLP’s exposure to natural and climate-related risks, and to ensure that our financial goals are achieved in a way that supports social and economic development within the Earth’s tolerance limits. KLP has also introduced stricter guidelines for voting and will vote against board resolutions in companies that produce the largest emissions without having a credible transition plan.

During the first quarter, KLP received approval for its Nordic Swan eco-labelled funds according to new criteria. The new criteria have a greater focus on climate and biodiversity, set higher standards for the exercise of active ownership, and implement EU rules on sustainable finance.

In the first quarter of the year, just under NOK 40 million was lent to new projects that met the requirements for green loans in KLP Banken.

A study is underway to look at the possibility of establishing a web-based system to help municipal councils and government to gain a better insight into the overall status of the building stock for customers with non-life insurance in KLP.

Future prospects and events after the end of the quarter

The world is still marked by heightened geopolitical tension and the war in Ukraine. Higher inflation and interest rates may raise challenges to the global economy, but could also provide good opportunities for generating surplus returns over and beyond the interest rate guarantee for KLP.

Last year, Storebrand 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 Norwegian government, represented by the Ministry of Local Government and Rural Affairs, has responded to the Authority in a letter rejecting the complaints. The case is now with the ESA, and it could turn into a long drawn-out process.

Income statement KLP Group

NOTE	NOK MILLIONS	Q1 2023	Q1 2022	01.01.2022 -31.12.2022
3, 5	Insurance service result	139	244	2 022
	Net income from investments measured at fair value with changes in P/L	27 830	1 203	8 748
	Net income from investments not measured at fair value with changes in P/L	18	-13 598	-37 425
4	Fair value adjustment investment properties and rental income	496	1 261	6 558
	Net credit loss from financial assets not measured at fair value	0	1	0
	Net interest income banking	110	72	371
	Unit holder's value change in consolidated securites funds	-12 135	7 237	15 966
	Total net income	16 319	-3 824	-5 783
	Policyholder's share of changes in fair value of underlying items	-17 620	14 878	21 992
	Other insurance related financial cost	-20	36	49
5	Net insurance related financial cost	-17 640	14 914	22 040
	Net insurance services and financial result	-1 182	11 334	18 279
6	Net costs subordinated loan and hybrid Tier 1 securities	-467	160	-169
	Operating expenses	-315	-309	-1 159
	Other income	8	36	305
	Other expenses	-92	-2	-25
	Pre-tax income	-2 049	11 219	17 232
	Cost of taxes ¹	-330	-184	-826
	Income	-2 379	11 035	16 405
12	Actuarial loss and profit on post employment benefit obligations	31	426	132
	Tax on items that will not be reclassified to profit or loss	-5	-67	-17
	Items that will not be reclassified to profit or loss	26	358	115
	Revaluation real property for use in own operation	-8	43	-43
4	Currency translation foreign properites	2 315	-945	148
	Tax on items that will be reclassified to profit or loss	2	-11	11
	Items that will be reclassified to income particular specific conditions are met	2 309	-913	116
	Total other comprehensive income	2 336	-555	231
	Total comprehensive income	-43	10 480	16 637
	¹ Unit holders share of taxes in consolidated security funds	-87	-80	-359

Financial position statement KLP Group

NOTE	NOK MILLIONS	31/03/2023	31/03/2022	31/12/2022
	Deferred tax assets	46	51	48
	Other intangible assets	1 135	854	1 049
	Tangible fixed assets	2 617	2 741	2 633
	Investments in associated companies and joint venture	5 779	5 221	5 456
4, 9	Investment property	96 333	89 280	93 992
5	Reinsurance contract assets	820	341	736
7, 9	Fixed income securitites and other debt instruments at fair value	375 173	184 010	181 802
7	Fixed income securitites and other debt instruments at amortized costs	2 193	191 811	198 752
7, 9	Lending local government, enterprises & retail customers at fair value through profit / loss	77 635	56	0
7	Lending local government, enterprises & retail customers at amortized costs	43 509	118 828	121 360
7, 9	Equity capital instruments at fair value through profit/loss	315 118	287 036	282 399
7, 9	Financial derivatives	1 442	6 578	6 820
7	Receivables	23 283	12 635	1 700
	Cash and bank deposits	2 978	2 971	3 321
	TOTAL ASSETS	948 061	902 413	900 068
7, 8	Hybrid Tier 1 securities	1 644	1 505	1 428
7, 8	Subordinated loan capital	3 345	2 939	3 147
12	Pension obligations	812	474	815
5	Insurance obligations with the right to residual value	702 733	682 100	686 861
5	Other insurance liabilities	3 965	3 012	3 181
7, 8	Covered bonds issued	30 945	30 960	32 430
7, 8	Debt to credit institutions	3 949	12 933	6 683
7, 8	Liabilities to and deposits from customers	14 136	13 372	13 779
7	Financial derivatives	11 561	1 409	3 158
	Deferred tax	1 163	1 427	1 153
14	Other current liabilities	25 459	15 061	4 152
	Equity	-3 630	2 293	8 450
	Unit holders`s interest in consolidated securites funds	151 979	134 927	134 831
	TOTAL EQUITY AND LIABILITIES	948 061	902 413	900 068
	Contingent liabilities	32 833	27 001	31 083

Changes in owners’ equity KLP Group

2023 NOK MILLIONS	Equity
Owners’ equity 31 December 2022	8 450
Change of principle 01.01.2023, IFRS 9 ¹	- 12 037
Owners’ equity 1 January 2023	- 3 587
Income	- 2 379
Items that will not be reclassified to income	26
Items that will be reclassified to income later when particular conditions are met	2 309
Total other comprehensive income	2 336
Total comprehensive income	- 43
Owners’ equity 31 March 2023	- 3 630

2022 NOK MILLIONS	Equity
Owners’ equity 31 December 2021	40 732
Change of principle 01.01.2022, IFRS 17¹	- 48 918
Owners’ equity 1 January 2022	- 8 186
Income	11 035
Items that will not be reclassified to income	358
Items that will be reclassified to income later when particular conditions are met	- 913
Total other comprehensive income	- 555
Total comprehensive income	10 480
Owners’ equity 31 March 2022	2 293

2022 NOK MILLIONS	Equity
Owners’ equity 31 December 2021	40 732
Change of principle 01.01.2022, IFRS 17¹	- 48 918
Owners’ equity 1 January 2022	- 8 186
Income	16 405
Items that will not be reclassified to income	115
Items that will be reclassified to income later when particular conditions are met	116
Total other comprehensive income	231
Total comprehensive income	16 637
Owners’ equity 31 December 2022	8 450
¹ For more information see the annual report 2022, note 37, points 37.1.11 and 37.2.5 Transitional effects.

Statement of cashflowKLP Group

NOK MILLIONS	01.01.2023 -31.03.2023	01.01.2022 -31.12.2022	01.01.2022 -30.09.2022	01.01.2022 -30.06.2022	01.01.2022 -31.03.2022
Net cash flow from operational activities	116	36 130	42 855	40 710	-1 917
Net cash flow from investment activities¹	-113	-346	-250	-173	-82
Net cash flow from financing activities ²	-347	-35 851	-42 493	-40 153	1 583
Net changes in cash and bank deposits	-344	-66	113	385	-417
Holdings of cash and bank deposits at start of period	3 321	3 388	3 388	3 388	3 388
Holdings of cash and bank deposits at end of period	2 978	3 321	3 500	3 773	2 971
¹ Payments on the purchase of tangible fixed assets.
² Net receipts of owners’ equity contribution, rising of new loans and repayment of debt, in addition to payments from unit holders in consolidated security funds.

Notes to the financial statementKLP Group

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 01.01.2023 – 31.03.2023. 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.

Two new accounting standards came into force for the financial year starting 01.01.2023 and have been adopted by the Group. They are IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments. IFRS 17 requires comparative figures for 2022, so the implementation effect of this standard, minus NOK 48.9 billion after tax, was posted to Group equity from 01.01.2022. IFRS 9 does not require comparative figures, so the implementation effect of this standard of minus NOK 12.0 billion was posted to Group equity from 01.01.2023. Final figures for the implementation effect for IFRS 9 have been reduced by NOK 1.6 billion from our preliminary estimates given in the annual report for 2022. The change reflects a change in measurement method. For more information on the accounting principles associated with these standards, and the transitional effects, refer to the Group’s annual report for 2022, Note 37.

No other changes have been made to the accounting principles that affect the interim financial statements as of 31.03.2023. Refer to the Group’s annual report for 2022 for a more detailed description of accounting principles.

The interim financial statements do not contain all the information required for complete annual financial statements, and this interim report should be read in conjunction with the annual financial statements for 2022. The annual report can be retrieved from www.klp.no.

Accounting estimates

In preparing the interim financial statements, we have exercised discretion and used estimates and assumptions that affect the accounting figures. Actual figures may differ from the estimates used.

The measurement of insurance contracts under IFRS 17 uses a number of new parameters that are fraught with considerable uncertainty. The most important for the various business areas are:

Life insurance activities

All cash flows arising from the insurance contracts that are within the contract limit are included in the measurement of the insurance contract. Future cash flows are calculated using assumptions of future annual wage growth/adjustment derived from a projection of the NAM (Norwegian Aggregate Model). The model produces a macro projection of key economic variables year by year based on the economic situation at the measurement date.
The cash flow calculations use best estimates of mortality and disability.
The cash flows are discounted with an interest rate curve that takes account of the time value of money and any financial risk that is not included in the estimated cash flows. The interest rate curve is based on the EIOPA interest rate curve with an illiquidity mark-up.
The risk adjustment for non-financial risk is based on the risk appetite in the life insurance business and a 95% confidence level, and amounts to 7.77% of the insurance liability in 2023.

Non-life insurance activities

The claims provisions are estimated from the company’s historical payment patterns.
The claims provisions are discounted with an interest rate curve that takes account of the time value of money and any financial risk that is not included in the estimated payments. The interest rate curve is based on the EIOPA interest rate curve with an illiquidity mark-up.

Insurance income under IFRS 17 corresponds to pro-rata premiums earned, adjusted for seasonal variations.

Seasonal variations are estimated from the historical variation in the company’s history of claims received through the year.

Risk adjustment has also been introduced.

The risk adjustment is derived from the company’s risk appetite.
The risk adjustment represents an addition to technical provisions so there is a 75% probability that they will be sufficient to cover all insurance obligations.
The risk adjustment for non-financial risk is based on the risk appetite in the non-life insurance business and a 75% confidence level, and amounts to 4.3 % of the insurance liability at 31.03.2023.

For more information, refer to the Group’s annual financial statements for 2022, Note 37.

Note 2 Segment information

NOK MILLIONS	Group pensions pub. sect. & group life	Non-life insurance	Banking	Asset management	Other	Eliminations	Total
	Q1 2023	Q1 2023	Q1 2023	Q1 2023	Q1 2023	Q1 2023	Q1 2023
Result from insurance services	34	57	0	0	0	48	139
Net financial income from investments	18 007	151	103	6	0	10 187	28 454
Policyholder's share of changes in fair value of underlying items	-17 620	0	0	0	0	0	-17 620
Other insurance related financial cost	0	-20	0	0	0	0	-20
Unit holder's value change in consolidated security funds	0	0	0	0	0	-12 135	-12 135
Total income	421	188	103	6	0	-1 900	-1 182
Net costs subordinated loan and hybrid Tier 1 securities	-467	0	0	0	0	0	-467
Operating expenses	0	-89	-70	-138	-3	-14	-315
Other income	0	0	21	144	3	-161	8
Other expenses	80	0	-1	0	0	-171	-92
Pre-tax income	34	99	53	11	0	-2 246	-2 049
Cost of taxes	-108	-25	37	-3	0	-232	-330
Income	-74	75	90	8	0	-2 477	-2 379
Total other comprehensive income	26	3	1	2	0	2 303	2 336
Total comprehensive income	-48	77	91	11	0	-174	-43
Assets	728 102	6 948	49 373	631	11	162 996	948 061
Liabilities	731 790	4 501	46 365	227	3	168 804	951 691

The KLP Group’s business is divided into the five areas: Group pensions public sector & group life, 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.

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 offers 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 Insurance service result

NOK MILLIONS	Q1 2023
Insurance income	1 046
Insurance service expenses	-922
Reinsurance income	14
Insurance service result	139

Note 4 Investment property

NOK MILLIONS	Q1 2023
Net rental income	929
Net value adjustment	-433
Net income from investment properties	496
Currency translate foreign properites (taken to other comprehensive income)	2 315
Net income from investment properties included currency translate	2 811

NOK MILLIONS	31.03.2023
Investment property 01.01.	93 992
Value adjustment, including currency translation	1 882
Net additions	431
Other changes	27
Investment property	96 333

Note 5 Technical provisions

NOK MILLIONS	Estimates of present value of future cash flows	Risk adjustment for non financial risk	Residual value	Total
Insurance obligations with the right to residual value 1 January 2023	322 226	27 304	337 331	686 861
Changes that realte to current services	16	-50	0	-34
Change in risk adjustment for non-financial risk and for risk expired		-50		-50
Experience adjustment not related to future service	16			16
Insurance service result	16	-50	0	-34
Change in risk adjustment for non-financial risk at the start of the period		-2 257	2 257	0
Accured interest	3 351	261	-3 612	0
Released cash flows	1 055			1 055
Changes in estimates related to future service	1 518	118	-1 636	0
Change due to changes in discount curve	29 052	2 258	-31 310	0
Result addes to policyholders' residual value			16 564	16 564
Insurance related financial cost	34 977	380	-17 737	17 620
Premium	332			332
Claims and other insurance service expenses	-2 046			-2 046
Total cash flows	-1 714			-1 714
Insurance obligations with the right to residual value 31 March 2023	355 505	27 633	319 594	702 733

NOK MILLIONS	Estimates of present value of future cash flows	Risk adjustment for non-financial risk	Liabilities for remaining coverage	Receivables offset in liabilities	Total
	Liability for incurred claims (LIC)
Other insurance liabilities 1 January 2023	2 808	115	309	-52	3 181
Insurance income			-630		-630
Claims	550	22			572
Expenses	42	2			44
Other movements realted to current service		-4			-4
Changes that relate to past service	-12	-13			-24
Insurance service expenses	581	7			587
Insurance service result	581	7	-630		-43
Insurance related financial cost	29	6			35
Premium	-446				-446
Claims and other insurance service expenses			1 249		1 249
Total cash flows	-446		1 249		803
Total cash flows				-11	-11
Other insurance liabilities 31 March 2023	2 972		928	-63	3 965

NOK MILLIONS	Estimates of present value of future cash flows	Risk adjustment for non-financial risk	Liabilities for remaining coverage	Receivables offset in liabilities	Total
	Liability for incurred claims (LIC)
Reinsurance contracts assets 1 January 2023	673	30	0	32	736
Premium paid - reinsurance			-40		-40
Recoveries of incurred claims and other insurance service expenses	55	3			0
Reinsurance expenses -related to past service	-4	0			0
Insurance service expenses	51	3			54
Insurance service result	51	3	-40		14
Insurance related financial cost	7	9			15
Premium	-10		82		72
Repayments					0
Total cash flows	-10		82		72
Other changes				-16	-16
Reinsurance contracts assets 31 March 2023	720	42	42	16	820

NOK MILLIONS	Insurance obligation with the right to residual value	Other insurance liabilities	Reinsurance	Intercompany eliminations	Total
Specification of P/L items per product group Q1 2023
Insurance service result	34	43	14	48	139
Insurance related financial cost	-17 620	-35	15	0	-17 640

Note 6 Subordinated loans and perpetual hybrid tier 1 securities

NOK MILLIONS	Q1 2023
SUBORDINATED LOANS
Interest costs	-41
Value changes	-211
Net costs subordinated loans	-252
PERPETUAL HYBRID TIER 1 SECURITIES
Interest costs	-19
Value changes	-197
Net costs perpetual hybrid tier 1 securities	-216
Net costs subordinated loan and hybrid Tier 1 securities	-467

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 7 Fair value of financial assets and liabilites

Fair value is to be a representative price based on what the equivalent assets 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:

Fixed-income securities and other debt instruments measured at amortised cost
Lending to local government, enterprises & retail customers measured at amortised cost
Liabilites to and deposits from customers
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
Fixed-income securities and other debt instruments measured at fair value
Lending local government, enterprises & retail customers at fair value through profit/loss
Derivatives (assets and liabilites)
Debt to credit institutions (liabilites)
Subordinated loan capital (liabilities)

Below is a list of which types of financial instrument come under the various accounts categories, and how fair value is calculated.

FIXED-INCOME SECURITIES AND OTHER 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

Nordic Bond Pricing is used as the primary source for pricing Norwegian Government Bonds. Prices are compared with prices from Bloomberg 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 applied on Norwegian fixed-income securities described above.

e) Receivables on credit institutions

The fair value of these are 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 price 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	31/03/2023
	Book value	Fair value
FIXED-INCOME SECURITIES AND OTHER DEBT INSTRUMENTS AT AMORTIZED COST
Norwegian bonds	993	964
Foreign bonds	1 201	1 125
Fixed-income securities and other debt instruments at amortized cost	2 193	2 089
LENDING LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS AT FAIR VALUE THROUGH PROFIT/LOSS
Loans secured by mortgage	2 848	2 848
Loans to local government sector or enterprises with local government guarantee	68 986	68 986
Loans abroad secured by mortage and local government guarantee	5 230	5 230
Other lending	571	571
Total loans to local government, enterprises & retail customers	77 635	77 635
lending to local government, enterprises & retail customers – at amortized cost
LENDING TO LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS – AT AMORTIZED COST
Loans to and receivables from customers	42 717	42 724
Loans to and receivables from central banks	73	73
Loans to and receivables from credit institutions	718	718
Total loans to local government, enterprises & retail customers	43 509	43 516
DEBT INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Norwegian bonds	123 002	123 002
Norwegian certificates	6 816	6 816
Foreign bonds	201 670	201 670
Foreign certificates	456	456
Investments with credit institutions	43 228	43 228
Total debt instruments	375 173	375 173
EQUITY CAPITAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Shares	265 829	265 829
Equity funds	42 176	42 176
Property funds	7 113	7 113
Total equity capital instruments	315 118	315 118
RECEIVABLES
Receivables related to direct business	459	459
Receivables related to securites	22 231	22 231
Prepaid rent related to real estate activites	148	148
Other receivables	445	445
Total other loans and receivables including receivables from policyholders	23 283	23 283
FINANCIAL LIABILITIES - AT AMORTIZED COST
Debt to credit institutions	1 054	1 054
Covered bonds issued	30 945	30 945
Liabilities and deposits from customers	14 136	14 136
Total financial liabilities	46 135	46 135
FINANCIAL LIABILITIES - AT FAIR VALUE THROUGH PROFIT OR LOSS
Debt to credit institutions	2 894	2 894
Hybrid Tier 1 securities	1 644	1 644
Subordinated loan capital	3 345	3 345
Total financial liabilities	7 883	7 883

NOK MILLIONS	31/03/2023
	Assets	Liabilities
FINANCIAL DERIVATIVES - AT FAIR VALUE THROUGH PROFIT OR LOSS
Forward exchange contracts	218	8 783
Interest rate swaps	451	2 778
Interest rate and currency swaps	640	0
Share option	133	0
Total financial derivatives	1 442	11 561

Note 8 Borrowing

NOK MILLIONS	Nominal in NOK	Currency	Interest	Due date	Book value 31.03.2023
FIXED - TERM SUBORDINATED LOAN
Kommunal Landspensjonskasse	2 530	EUR	Fixed ¹	2045	3 345
Total subordinated loan capital	2 530	-	-	-	3 345
HYBRID TIER 1 SECURITIES
Kommunal Landspensjonskasse	984	JPY	Fixed ²	2034	1 644
Total hybrid Tier 1 securities	984	-	-	-	1 644
COVERED BONDS
KLP Kommunekreditt AS	1 652	NOK	Floating	2023	1 660
KLP Kommunekreditt AS	5 000	NOK	Floating	2024	5 019
KLP Kommunekreditt AS	5 000	NOK	Floating	2025	5 010
KLP Kommunekreditt AS	5 000	NOK	Floating	2026	5 036
KLP Kommunekreditt AS	1 000	NOK	Fixed	2027	1 021
KLP Kommunekreditt AS	700	NOK	Fixed	2029	714
KLP Boligkreditt AS	423	NOK	Floating	2023	424
KLP Boligkreditt AS	2 500	NOK	Floating	2024	2 501
KLP Boligkreditt AS	2 500	NOK	Floating	2025	2 501
KLP Boligkreditt AS	4 500	NOK	Floating	2026	4 524
KLP Boligkreditt AS	2 500	NOK	Floating	2027	2 511
Other					23
Total covered bonds	30 775	-	-	-	30 945
DEBT TO CREDIT INSTITUTIONS
KLP Banken AS	300	NOK	Floating	2023	301
KLP Banken AS	450	NOK	Floating	2024	452
KLP Banken AS	300	NOK	Floating	2025	301
KLP Fond	813	NOK	Floating	2023	813
KLP Fond	1 117	NOK	Fixed	2023	1 117
Kommunal Landspensjonskasse	851	NOK	Floating	2023	851
Other		NOK	Floating		113
Total liabilities to credit institutions	3 832	-	-	-	3 949
LIABILITIES AND DEPOSITS FROM CUSTOMERS ³
Retail	11 876	NOK			11 876
Business	2 221	NOK			2 221
Foreign	39	NOK			39
Liabilities to and deposits from customers	14 136	-			14 136
Total financial liabilities	52 256				54 018
¹The loan has an interest change date in 2025.
²The loan has an interest change date in 2034.
³ There is no contractual maturity date on deposits.

This note shows the financial liabilities that the Group had at the end of the reporting period; where the majority is funding for KLP Bank Group.

The companies listed above are the issuers of the financial debt. Deposits belongs to KLP Banken AS.

Note 9 Fair value hierarchy

31.03.2023 NOK MILLIONS	Level 1	Level 2	Level 3	Total
ASSETS BOOKED AT FAIR VALUE
Land/plots	0	0	1 368	1 368
Buildings	0	0	94 965	94 965
Investment property	0	0	96 333	96 333
Lending at fair value	0	77 635	0	77 635
Certificates	1 465	5 808	0	7 273
Bonds	24 002	300 705	0	324 707
Fixed-income funds	0	9 217	11 149	20 365
Bonds and other fixed-income securities	25 466	315 729	11 149	352 344
Loans and receivables	21 770	1 058	0	22 829
Shares	257 029	5 448	3 352	265 829
Equity funds	2 268	0	54	2 322
Property funds	0	2 242	4 871	7 113
Special funds	0	0	0	0
Private Equity	0	0	39 853	39 853
Shares and units	259 298	7 690	48 130	315 118
Financial derivatives	0	1 442	0	1 442
Total assets at fair value	306 534	403 555	155 611	865 701
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives	0	11 561	0	11 561
Debt to credit institutions ¹	1 777	1 117	0	2 894
Total financial liabilities at fair value	1 777	12 678	0	14 455
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 1 055 million per 31.03.2023.

Changes in Level 3, Investment Property	Book value 31.03.2023
Opening balance 1 January	93 992
Sold	0
Bought	431
Unrealised changes	1 882
Other changes	27
Closing balance 31.03.	96 333
Realised gains/losses	0

Changes in Level 3, Financial Assets	Book value 31.03.2023
Opening balance 1 January	53 407
Sold	-556
Bought	2 981
Unrealised changes	3 447
Closing balance 31.03.	59 279
Realised gains/losses	315
Closing balance 31.03.	155 611

Unrealised changes and realized gains / losses are reflected on the line "Net value changes on financial instruments" in the consolidated income statement.

The table "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 easily 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 7 781 million as of 31.03.2023.

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 1st quarter, NOK 446 million in stocks moved from Level 1 to Level 2, NOK 93 million moved from Level 1 to Level 3, NOK 793 million moved from level 2 to level 1 and NOK 4 million moved from level 2 to level 3 This is due to changes in liquidity.

Note 10 Presentation of assets and liabilities that are subject to net settlement

31.03.2023 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	1 442	0	1 442	-523	-1 007	-1 769	260	260
Repos	1 003	0	1 003	-1 003	0	0	0	0
Total	2 445	0	2 445	-1 527	-1 007	-1 769	260	260
LIABILITIES
Financial derivatives	11 561	0	11 561	-523	-888	-6 831	3 330	3 274
Repos	1 118	0	1 118	0	0	0	1 118	115
Total	12 679	0	12 679	-523	-888	-6 831	4 448	3 389

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 include all entities 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 entities, where the Group carries the risk.

Note 11 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. Starting 30.09.2022 the risk equalization fund will also be considered tier 2 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 282 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 282 per cent.

NOK BILLIONS	31.03.2023
	31.03.2023
Solvency II - SCR ratio	282%
Simplified Solvency II Financial Position Statement
Assets, book value	746
Added values - hold-to-maturity portfolio/loans and receivables	-12
Added values - other lending	-1
Other added/lesser values	0
Deferred tax asset	0
Total assets - solvency II	733

NOK BILLIONS	31.03.2023
Simplified Solvency II Financial Position Statement
Best estimate	647
Risk margin	13
Hybrid Tier 1 securities/Subordinated loan capital	5
Other liabilities	26
Deferred tax liabilities	0
Total liabilities - solvency II	690
Excess of assets over liabilities	42
- Deferred tax asset	0
- Risk equalization fund (tier 2 own funds starting 30.09.2022)	-5
+ Hybrid Tier 1 securities	2
Tier 1 basic own funds	39
Total eligible tier 1 own funds	39
Subordinated loans	3
Risk equalization fund (tier 2 own funds starting 30.09.2022)	5
Tier 2 basic own funds	8
Ancillary own funds	13
Tier 2 ancillary own funds	13
Deduction for max. eligible tier 2 own funds	-13
Total eligible tier 2 own funds	8
Deferred tax asset	0
Total eligible tier 3 own funds	0
Solvency II total eligible own funds	47
Solvency capital requirement (SCR)	17
Solvency II- SCR ratio	282%

Note 12 Pension obligations

NOK MILLIONS	31.03.2023
Capitalized net liability 01.01.	815
Capitalized pension costs	48
Capitalized financial costs	7
Actuarial gains and losses	-31
Premiums / contributions received	-27
Capitalized net liability 31.03.	812

Assumptions	31.03.2023
Discount rate	3,00%
Salary growth	3,50%
The National Insurance basic amount (G)	3,25%
Pension increases	2,60%
Social security contribution rate	14,10%
Capital activity tax	5,00%

The effect of changes in pension assumptions reduces the pension liability for employees with NOK 31 million as of 31.03.2023. The change is recognized in other comprehensive income in the income statement.

Note 13 Loss provisions on fixed-income securities and loans to customers at amortised cost

This note shows expected credit loss provisions on fixed-income securities measured at amortised cost in KLP Skadeforsikring AS as well as provisions for losses on loans to customers in KLP Banken AS.

Refer to note 26 in the annual report for KLP Skadeforsikring AS and respectively note 2 and note 10 in the annual report for KLP Banken AS, for a detailed description of both models.

Expected credit loss (ECL) on fixed-income securities measured at amortised cost

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2023	261	42	0	303
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	0	0	0	0
Net changes	0	0	0	0
New losses	6	0	0	6
Write-offs	-11	-24	0	-34
Change in risk model	0	0	0	0
Closing balance ECL 31.03.2023	256	19	0	275
Changes (01.01.2023 - 31.03.2023)	-5	-23	0	-28

Expected credit loss (ECL) loans to customers – all segments

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2023	2 390	2 090	998	5 478
Transfer to stage 1	370	-309	-61	0
Transfer to stage 2	-22	27	-4	0
Transfer to stage 3	-1	-78	79	0
Net changes	-344	696	88	440
New losses	109	2	2	113
Write-offs	-90	-79	-120	-289
Change in risk model	0	0	0	0
Closing balance ECL 31.03.2023	2 413	2 349	981	5 742
Changes (01.01.2023 - 31.03.2023)	22	259	-16	264
This includes provisions for losses on loans and receivables - unused credit				2 931

Expected credit loss (ECL) loans to customers – mortgage

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2023	144	207	422	774
Transfer to stage 1	3	-3	0	0
Transfer to stage 2	-5	5	0	0
Transfer to stage 3	0	-34	34	0
Net changes	21	72	104	197
New losses	46	2	0	48
Write-offs	-15	-42	-24	-81
Change in risk model	0	0	0	0
Closing balance ECL 31.03.2023	194	208	536	939
Changes (01.01.2023 - 31.03.2023)	50	1	114	165
This includes provisions for losses on loans and receivables - unused credit on mortgages				7

Expected credit loss (ECL) – public lending

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2023	184	0	0	184
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	0	0	0	0
Net changes	-2	0	0	-2
New losses	9	0	0	9
Write-offs	-5	0	0	-5
Change in risk model	0	0	0	0
Closing balance ECL 31.03.2023	186	0	0	186
Changes (01.01.2023 - 31.03.2023)	2	0	0	2

Expected credit loss (ECL) – credit card

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2023	2 040	1 883	516	4 440
Transfer to stage 1	366	-306	-61	0
Transfer to stage 2	-17	21	-4	0
Transfer to stage 3	-1	-45	45	0
Net changes	-363	624	-17	245
New losses	53	0	0	53
Write-offs	-70	-37	-95	-202
Change in risk model	0	0	0	0
Closing balance ECL 31.03.2023	2 009	2 140	386	4 535
Changes (01.01.2023 - 31.03.2023)	-31	257	-131	96
This includes provisions for losses on loans and receivables - unused credit on credit card				2 923

Expected credit loss (ECL) loans to customers – senior loans

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2023	21	0	0	21
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	0	0	0	0
Net changes	0	0	0	0
New losses	2	0	0	2
Write-offs	-1	0	0	-1
Change in risk model	0	0	0	0
Closing balance ECL 31.03.2023	22	0	0	22
Changes (01.01.2023 - 31.03.2023)	1	0	0	1
This includes provisions for losses on loans and receivables - unused credit on senior loans				1

Expected credit loss (ECL) loans to customers – overdrafts deposit accounts

NOK THOUSANDS	12 months ECL	Lifetime ECL (not credit impaired)	Lifetime ECL (credit impaired)
	stage 1	stage 2	stage 3	Total stage 1-3
Opening balance ECL 01.01.2023	0	0	60	60
Transfer to stage 1	0	0	0	0
Transfer to stage 2	0	0	0	0
Transfer to stage 3	0	0	0	0
Net changes	0	0	0	0
New losses	0	0	2	2
Write-offs	0	0	-1	-1
Change in risk model	0	0	0	0
Closing balance ECL 31.03.2023	0	0	61	61
Changes (01.01.2023 - 31.03.2023)	0	0	1	1

Note 14 Other current liabilites

NOK MILLIONS	31.03.2023
Short-term payables trade in securities	22 881
Incurred not assessed taxes	471
Accounts payable	616
Public fees	563
Other current liabilities	928
Total other current liabilities	25 459

Key figures – Accumulated

NOK MILLIONS	Q1 2023	Q4 2022	Q3 2022	Q2 2022	Q1 2022
KLP GROUP
Total assets	948 061	900 068	913 144	900 195	902 413
Equity	-3 630	8 450	12 823	9 800	2 293
Solvency SCR ratio	282%	304%	306%	304%	299%
Number of employees in the Group	1 091	1 093	1 095	1 081	1 060
KOMMUNAL LANDSPENSJONSKASSE
Profit before tax	539	918	461	216	71
Premium income for own account	7 663	50 523	40 248	33 081	7 503
- of which inflow of premium reserve	91	386	386	386	376
Insurance customers' funds incl. acc. profit	8 331	28 517	22 453	16 367	10 642
- of which funds with guaranteed returns	2 125	4 659	4 658	4 658	4 875
Net investment common portfolio	690 902	660 381	671 095	660 834	662 500
Net investment choice portfolio	2 683	2 609	2 602	2 665	2 588
Insurance funds incl. earnings for the year	668 235	654 324	641 805	654 482	644 226
- of which funds with guaranteed interest	552 840	552 101	542 820	548 891	526 324
Solvency capital requirement (SCR)	46 768	46 158	46 307	44 901	44 809
Solvency SCR ratio	316%	318%	341%	340%	332%
Riskprofit	71	558	963	550	105
Return profits	13 232	-20 006	-27 421	-20 374	-7 894
Administration profit	54	-17	56	-22	-9
Solvency capital	151 550	140 958	129 556	138 338	151 201
Value-adjusted return on common portfolio	2,5 %	-1,1 %	-2,6 %	-2,1 %	-2,3 %
Return on unit-linked portfolio	3,4 %	-2,5 %	-4,2 %	-3,5 %	-1,2 %
Return on corporate portfolio	0,9 %	2,8 %	1,4 %	0,9 %	0,6 %
KLP SKADEFORSIKRING AS
Profit before tax	99	111	49	88	57
Insurance income	630	2 200	1 629	1 071	546
Owners' equity	2 446	2 369	2 339	2 367	2 370
Claims ratio	93,9 %	80,8 %	80,3 %	73,4 %	79,6 %
Combined-ratio	13,9 %	14,5 %	14,2 %	15,3 %	15,5 %
Return on assets under management	2,7 %	-1,7 %	-2,5 %	-2,1 %	-0,9 %
Solvency capital requirement (SCR)	2 309	2 222	2 250	2 273	2 329
Solvency SCR ratio	215%	222%	219%	225%	222%
Annual premium in force – retail market	982	954	933	918	893
Annual premium in force – public sector market	1 474	1 341	1 325	1 318	1 210
Net new subscriptions (accumulated within the year)	20	121	123	113	7
KLP BANKEN GROUP
Profit/loss before tax	53	181	98	43	18
Net interest income	110	369	258	159	72
Other operating income	21	85	63	43	20
Operating expenses and depreciation	-71	-247	-181	-123	-64
Net realized/unrealized changes in financial instruments to fair value	-7	-26	-43	-36	-10
Contributions	14 136	13 779	13 607	13 465	13 372
Housing mortgages granted	23 333	23 258	23 369	23 042	22 635
Loan(s) with public guarantee(s)	19 384	19 117	18 718	18 321	17 974
Defaulted loans	46	44	43	46	46
Borrowing on the issuance of securities	31 999	33 485	32 613	32 444	31 862
Total assets	49 373	50 511	49 370	48 704	47 954
Average total assets	49 942	48 996	48 426	48 030	47 718
Owners' equity	3 008	2 966	2 897	2 555	2 548
Net interest rate	0,22%	0,75%	0,53%	0,33%	0,15%
Profit/loss from general operations before tax	0,11%	0,90%	0,20%	0,09%	0,04%
Return on owners’ equity before tax	7,16%	7,16%	5,15%	3,37%	2,91%
Capital adequacy	20,5 %	20,7 %	19,7 %	17,7 %	18,1 %
Number of private customers	49 697	48 804	48 216	47 759	47 123
Of this members of KLP	33 512	32 988	32 681	32 226	31 973
KLP KAPITALFORVALTNING AS
Profit/loss before tax	11	5	-19	-30	-21
Total assets under management	670 937	640 183	615 589	621 080	646 213
Assets managed for external customers	151 269	134 215	126 187	126 193	134 367