Return of 3.0 per cent on the pension assets in the common portfolio in the first quarter.
Total profit on the customer portfolio amounts to NOK 18.7 billion after the first quarter.
Satisfactory volume growth in banking and asset management
Increased claims payments in non-life insurance
KLP – a customer-owned group with a 75-year history
15 February this year marks 75 years since the directors of the Union of Norwegian Cities (Norges Byforbund) and the Norwegian Association of Rural Municipalities (Norges Herredsforbund) decided to establish a joint local government pension fund, KLP. The aim was to establish a pension scheme for small municipalities with few employees. KLP has gradually expanded its offering in response to its owners’ wishes, and now provides services in the areas of non-life insurance, banking and asset management in addition to public-sector occupational pensions. We are now Norway’s largest pension company.
At the end of the first quarter of 2024, the Group had total assets of NOK 1,066 billion.
Public-sector occupational pensions
NOK MILLIONS
Customers
Company
Total
Investment result
18 617
112
18 729
Risk result
82
82
Interest guarantee premium
3
3
Administration result
-8
-8
Net income from investments in the corporate portfolio and other income/expenses in non-technical accounts
76
76
Tax
-83
-83
Other profit/loss elements
149
149
Profit/loss after Q1 2024
18 700
249
18 948
Profit/loss after Q1 2023
13 188
454
13 642
Investment result
KLP has guaranteed to provide customers on public-sector occupational pensions with financial income equivalent to NOK 3.3 billion in the first quarter. Actual financial income amounted to NOK 22.0 billion, a return of 3.0 per cent, so the investment result was NOK 18.7 (13.2) billion. Customers’ funds are mainly managed in the common portfolio.
Management of the common portfolio
The assets in the common portfolio totaled NOK 751.5 (690.9) billion:
Per cent
31.03.2024
31.03.2023
Return on the common portfolio
3,0
2,5
Return incl. value changes in hold-to-maturity bonds and lending
2,7
2,6
The returns figures apply to the common portfolio
Capital adequacy, Solvency II
351
316
Capital adequacy, Solvency II, with transitional measures
351
316
Equities
Total exposure in shares and alternative investments, including equity derivatives, was 33.5 per cent at the end of the first quarter. The total return on shares and alternative investments was 8.0 per cent in the quarter. The return on KLP’s global equities was 11.0 per cent, while KLP’s Norwegian equity portfolio returned 2.6 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 40 and 60 per cent. In the first quarter, the Norwegian krone depreciated against the US dollar and the euro, among other currencies. Currency hedging had a negative impact on the return on shares this quarter.
Short-term bonds and money market instruments measured at fair value
Short-term bonds accounted for 11.0 per cent and money-market instruments 3.0 per cent of the assets in the common portfolio at the end of the quarter. Both Norwegian and US government interest rates rose during the first quarter. KLP’s global government bond index achieved a currency-hedged return of minus 0.8 per cent in the quarter, while the return on the Norwegian government bond index was minus 0.1 per cent. Global credit margins fell through the quarter. The quarterly return on KLP’s global credit bond index was minus 0.3 per cent, while the return on the Norwegian credit bond index was minus 0.1 per cent. Short-term bonds produced a total return of 0.5 per cent in the first quarter. The money market return was 1.3 per cent for the quarter.
Bonds measured at amortised cost
Investments in bonds measured at amortised cost made up around 28.1 per cent of the common portfolio at the end of the quarter. Unrecognised decreases in value in the common portfolio amounted to NOK 10.9 billion at the end of the first quarter. The portfolio is well diversified and consists of securities issued by creditworthy borrowers. The return measured at amortised cost in this quarter was 0.8 per cent.
Property
Property investments, including Norwegian and international real estate funds, made up 13.3 per cent of the common portfolio.
Property investments in the common portfolio achieved a return of minus 0.4 per cent in the year to date. The returns include currency hedging and property funds. There is still uncertainty associated with the effects of the various factors that influence the property market, including interest rates, required rate of return, inflation and costs.
Lending
Lending in the common portfolio totals NOK 83.7 billion. This is split between NOK 72.9 billion in loans to the public sector, NOK 2.7 billion in secured mortgage loans and NOK 0.2 billion in loans with government guarantees, with the remaining NOK 7.9 billion made up of direct lending. 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. Returns so far this year are 4.5 per cent.
Returns on the corporate portfolio
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 0.5 per cent in the first quarter. Write-downs on property and a weak result in non-life insurance pulled returns down in the quarter.
Risk result
The risk result is an indication of whether disability and mortality in the insured population are developing as expected.
Disability figures are still higher than pre-pandemic levels, and produced a deficit of NOK 303 (-380) million in the first quarter.
The risk result related to longevity and survivor’s pensions shows a total surplus of NOK 385 (451) million, and the overall risk result contributed a surplus of NOK 82 (71) million in the first quarter.
Administration result
The difference between the cost elements within premium income, withdrawals from management reserves and insurance-related operating expenses constitutes the administration result. This shows a deficit of NOK -8 (+54) million so far this year. Insurance-related operating costs came to NOK 432 (377) million so far this year.
Financial strength and capital-related matters
KLP’s total assets have increased by NOK 17.5 billion in the year to date and amount to NOK 804.6 billion. The premium reserve increased by NOK 1.4 billion to NOK 574.9 billion in the same period.
The buffer fund amounts to NOK 109.3 billion after the first quarter. The fund can be used to cover the lack of returns from the management of customer funds and is thus a financial buffer. A positive interim result to customers of NOK 18.7 billion also constitutes a buffer.
Without applying transitional rules, the Company’s solvency capital requirement (SCR) is 351 per cent. This is an increase of 5 percentage points in the quarter.
KLP’s target is for capital adequacy to exceed 150 per cent. Solvency is well above this target and thus enables sound and stable management of customer funds in a multi-year perspective.
Key figures
Assets
31.03.2024
31.03.2023
All figures in per cent
Proportion
Return
Proportion
Return
Equities
33,5 %
8,0 %
31,5 %
6,7 %
Short-term bonds
28,1 %
0,8 %
28,7 %
0,8 %
Long-term/HTM bonds
13,3 %
-0,4 %
14,7 %
-0,2 %
Lending
11,2 %
1,1 %
11,8 %
0,8 %
Property
11,0 %
0,5 %
11,6 %
1,7 %
Other financial assets
3,0 %
1,3 %
1,6 %
0,8 %
Premium income
Premium income excluding premium reserves received on transfers in amounts to NOK 7.8 (7.6) billion at the end of the first quarter. Of this, premiums related to adjustment of accrued rights amount to NOK 360 (535) million.
Claims/benefits
Pensions paid and other claims, excluding ceded premium reserves, amounted to NOK 6.8 (6.2) billion at the end of the first quarter.
Other matters
The market situation for public-sector occupational pensions is stable, and customers with premium reserves totaling around NOK 2.1 billion decided to move their schemes out of KLP with effect from 1 January 2024. KLP places great emphasis on close consultation with its customers to further develop service concepts and online solutions with good pension guidance. Efforts have been made in recent years to renew and further develop our pension systems. All benefits now fall within the new system, which enhances the customer experience and provides valuable guidance to the individual employee, as well as immediate responses to most pension applications.
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 rejected both complaints. KLP has provided relevant information to shed light on the complaint cases when this has been requested. The complaints are still being processed by the ESA, and no formal action has been initiated on either of them. In both cases, as part of its information gathering, the ESA has made its preliminary assessments and asked for the government’s comments on these.
Non-life insurance
The first quarter of 2024 shows a profit/loss before tax and other provisions of NOK -117.7 (+99.3) million. The insurance result is weaker than expected, which is largely down to an increase in property claims within all segments. A rise in natural perils claims also affects the accounts. On the other hand, financial income is higher than expected.
Volume growth so far this year is NOK 146 million, and premium volume was NOK 2,731 (2,456) million at the end of the first quarter of 2024. The increase is primarily due to increased premiums, both generally and in particular segments. Premium income increased by 12.2 per cent, or NOK 77 million, compared with the same time in 2023. For the public-sector and corporate markets, premiums increased by 11.1 per cent, while the corresponding increase for the retail market was 14.1 per cent.
In the first quarter, three claims over NOK 20 million were reported, all within the company's retention amount. Together, these claims reduce net profits by NOK 132 million. There were also 16 claims in the NOK 2-20 million range, with total payments of NOK 96 million. The results are also affected by a major weather event, storm Ingunn, where the costs to the company run to NOK 25 million.
Reversals of previous years’ claims are still slightly negative, and NOK 4.4 million have been recognised so far this year, equivalent to 0.2 per cent of the reserves at the beginning of the year.
Key figures
31.03.2024
31.03.2023
2023
Claims ratio
98,2
93,2
83,5
Reinsurance percentage
15
-2,2
2,8
Cost ratio
14,6
13,9
14
Combined ratio
127,7
104,9
100,4
Net financial income in the first quarter of 2024 was NOK 96.7 (149.8) million, equivalent to 1.7 (2.7) per cent.
The solvency margin (SCR) decreased from 227 per cent at the end of 2023 to 210 per cent at the end of the first quarter of 2024. This is due to the weak quarterly results.
Asset and fund management
KLP Kapitalforvaltning AS provides securities management in the KLP Group. It had a total of NOK 799 billion under management at the end of the first quarter, of which NOK 203 billion was for external customers.
Net new subscriptions to the KLP funds were NOK 4.7 billion in the first quarter. External customers had positive net new subscriptions of NOK 5.7 billion in the quarter.
The company achieved a result before tax of NOK 11.9 million in the first quarter.
Bank
KLP Banken finances mortgages and other credit to private customers (retail market) as well as loans to municipalities, county authorities 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.
The company achieved a pre-tax operating profit of NOK 75.1 (53.1) million in the first quarter. The change is mainly related to increased net interest income and gains on financial instruments.
Broken down by area, profits were NOK 51.1 (35.4) million in the retail market and NOK 24.0 (17.7) million in the public-sector market.
Persistent high interest rates contributed to increased earnings on the Bank’s lending, which is financed with equity. The Bank’s operating income, in the form of net interest income, was NOK 126.6 (110.2) million in the first quarter.
Losses and loss provisions taken to profit/loss total NOK -1.1 (0.3) million so far in 2024. . The rise in interest rates has so far not resulted in a significant increase in mortgage losses. Nor have we experienced any losses related to public-sector lending in 2024.
KLP Banken had loans to customers of NOK 42.8 (42.7) billion at 31 March 2024. The split between the retail and public-sector markets was NOK 24.1 (23.3) billion and 18.7 (19.4) billion respectively.
KLP Banken manages a mortgage portfolio worth NOK 2.7 (2.9) billion and NOK 78.6 (74.1) billion in loans to public-sector borrowers and other businesses financed with pension assets placed in public-sector occupational pension funds.
The Bank’s mortgage products are aimed at members of the KLP pension schemes. Net mortgage growth in the first quarter was NOK 209 (71) million, which is significantly higher than at the same time last year.
Lending volume to the public-sector market on KLP Banken’s balance sheet has decreased in 2024 by NOK 0.3 (increase of 0.2) billion. Loans to public-sector borrowers financed with pension assets placed in public-sector occupational pension funds increased by NOK 1.5 (0.5) billion in the same period.
Group
KLP is a mutual insurance company which produces consolidated financial statements in accordance with IFRS Accounting Standards®. These accounting rules reflect the fact that KLP is a mutual insurance company where all value creation accrues to policyholders. This means that the Group generally sets aside all of the profit as a liability to policyholders, and its equity is normally zero. However, some technical equity may still arise if assets or liabilities have been measured at anything other than fair value in the balance sheet, as the liability to policyholders is based on the fair value of net assets. The equity will then represent the difference between book value and fair value, and the change in the measurement difference will be posted as a net gain/loss.
In the first quarter, the Group generated a net profit to policyholders of NOK 19.8 billion. This is mainly due to a significant appreciation of the assets.
The best estimate of the insurance liability associated with public-sector occupational pensions was reduced from NOK 377.7 to 366.0 billion in the quarter. This is mainly due to increased interest rates, as well as a change in estimates of future cash flows.
Liabilities to policyholders in public-sector occupational pension schemes, by virtue of their ownership role (residual value), grew from NOK 355.9 to 387.5 billion. The main reason for the increase is good returns and a change in the best estimate as described above.
Sustainability
KLP aims to be the partner to the Norwegian local government and healthcare sector for a sustainable transition, and the strategy comprises two strategic focus areas:
Promoting a sustainable working environment in the Norwegian local government and healthcare sector.
Driving a green transition
See KLP’s Annual Report for 2023 for more details of the sustainability strategy. This is a summary of key activities during the quarter:
Requirements relating to climate and environment in public procurement procedures
KLP sent out consultation notes on the proposal for a new Public Procurement Act concerning our roles as a provider of public-sector occupational pensions and non-life insurance to the public sector. Our response to consultation dealt with the rules for weighting climate and environment in public procurement procedures. For public-sector occupational pensions, we commented on the committee’s proposal to withdraw the requirement for a 30 per cent weighting of climate and environment as an award criterion. We believe that for public-sector occupational pensions, it will be complicated for individual purchasers to set appropriate requirements in the award criteria, and we are therefore pleased to find that climate and the environment can be addressed by way of guiding criteria drawn up by the Norwegian Agency for Public and Financial Management (DFØ). KLP commented that the purchasing rules relating to climate and the environment should have a wider focus than simply cutting emissions, such as measures to adapt to climate change.
KLP has responded to the consultation from the Pension Office on how the new rules relating to climate and the environment should be applied in practice in tendering procedures for public-sector occupational pensions. KLP believes there will be a greater impact if measures addressing climate and the environment are included as minimum requirements in the tender specifications for bidders in the competitive procedure, rather than the general rule of at least a 30 per cent weighting in the award criteria. We are concerned at the lack of standardisation which would allow providers to be compared in a uniform way, and a lack of individual indicators to capture the need for change that the pension capital can help to address, and feel that qualification requirements for a transition strategy and measures will produce a greater climate and environmental impact.
Guide to a sustainable transition
Under the auspices of UN Global Compact Network Norway, KLP has contributed to an expert group which has produced a guide to a sustainable transition for Norwegian businesses. The aim of the guide is to help Norwegian companies to make a start on the transition work to achieve their sustainability goals and maintain a competitive and profitable business. The guide was launched in March 2024 and can be accessed here (in Norwegian).
Sustainable working conditions
KLP has started to explore the role the company can play in promoting sustainable working conditions. In the first quarter, we partnered with “Fremtidens helsetjenester” (Health services of the future), which is a collaborative project involving several municipalities. KLP hosted the Public Health Forum in February, and has run workshops on working conditions in various counties, as well as two webinars with over 1,000 participants from municipalities across Norway.
Responsible ownership
Ahead of the general meeting season, KLP has updated the list of companies where it intends to vote against resolutions from the board of directors. This includes the companies in the portfolios that produce the biggest emissions without having a credible transition plan, and companies that pose a high risk of contributing to tropical deforestation, but lack basic risk management procedures.
During the year, KLP has followed up on all the companies where it voted against the board of directors in 2023. Out of 46 companies where we voted against the board because of inadequate transition plans, 15 have improved these plans and their boards will have the support of KLP going forward. The corresponding figures for improvements in the management of deforestation risk are four out of 22.
By the end of the first quarter, KLP had initiated 74 company dialogues and voted at almost 1,200 general meetings both in Norway and abroad. The substance of the company dialogues in the first quarter included the management and reporting of deforestation risk, follow-up of companies with high emissions that lack climate transition plans, and responsible tax practice. During the first quarter, KLP excluded two companies for breaches of its exclusion criteria related to coal. One company was reinstated as it no longer breaches our criteria for coal. At the end of the quarter, a total of 796 companies were excluded.
Q1/2024
31.03.2024
31.12.2023
Number of company dialogues
74
74
243
Number of general meetings of Norwegian companies at which KLP voted
21
21
132
Percentage of general meetings of Norwegian companies at which KLP voted
100 %
100 %
99 %
Number of general meetings of foreign companies at which KLP voted
1 178
1 178
8 472
Percentage of general meetings of foreign companies at which KLP voted
99 %
99 %
100 %
Number of companies excluded from the investments
2
796
799
KLP wants to ensure that good ideas can be pursued locally and to create jobs in Norway. By investing in innovation liked to Norwegian research institutions, we aim to contribute to local value creation and the green transition in Norway. In the first quarter, KLP increased its investments in an early-stage growth fund which focuses on companies that make a positive contribution to sustainable development.
NOK MILLIONS
Q1/2024
31.03.2024
31.12.2023
Amount invested
Fair value
Seedcorn investments
8
575
575
Investments in banking and finance in developing countries
0
935
921
Climate-friendly investments
An important part of KLP’s climate goal of net zero emissions is to increase our climate-friendly investments. Climate-friendly investments are investments that contribute directly to emission reductions or otherwise contribute to the green transition in Norway and around the world. KLP aims to increase its climate-friendly investments by a further NOK 6 billion each year
KLP’s climate-friendly investments have accumulated over time, and accounted for 11.4 per cent of its financial assets at the end of the first quarter of 2024. This includes investments in renewable energy and infrastructure investments needed for the green transition. We also invest in technological solutions such as zero-emission ferries, and particularly in energy-efficient green buildings in KLP’s large portfolio of commercial buildings in Norway, Sweden and Denmark.
In the first quarter, these investments increased by around NOK 2.4 billion. The increase comes mainly from KLP’s investment in the green transition within express boats and ferries, which make a significant contribution to reducing greenhouse gas emissions from the transport sector. We have also increased our investments in several mutual funds that invest in renewable energy around the world. See Appendix A at the back of the quarterly report for a definition of the sustainability indicators.
NOK MILLIONS
Q1/2024
31.03.2024
31.12.2023
Amount invested
Fair value
Zero-emission investments
447
42 300
44 174
As a share of KLP’s investments
5,3 %
5,6 %
Renewable energy
447
39 694
41 594
As a share of KLP’s investments
5,0 %
5,3 %
of which: renewable energy in Norway
-174
20 006
22 458
of which: renewable energy abroad
571
17 320
16 789
of which: renewable energy in developing countries
49
2 367
2 348
Sustainable forests
0
2 606
2 580
Transitional financing
1 974
49 214
46 932
As a share of KLP’s investments
6,2 %
6,0 %
Green buildings in the property portfolio
0
25 329
25 420
Green buildings via mutual funds and bonds
0
2 499
2 502
Green loans
48
3 785
3 737
Green bonds
79
12 344
12 121
Sustainable infrastructure
1 847
5 256
3 152
Total climate-friendly investments
2 421
91 514
91 106
As a share of KLP’s investments
11,4 %
11,6 %
Fossil energy
15 505
15 020
As a share of KLP’s investments
1,9 %
1,9 %
Future prospects
KLP achieved very good results in 2023 and this is continuing into 2024. These are uncertain times, and KLP’s owners have chosen to build up financial buffers so the pension funds can be managed effectively even through financially troubled times.
The disability figures increased during the pandemic, and it is unclear whether this will persist or fall back to pre-2020 levels. KLP will monitor developments in case there is a need to strengthen the disability tariff.
We may expect an increase in public-sector occupational pensions put out to tender. We will maintain our efforts to be the best provider to the Norwegian local government and healthcare sector. We will continue to focus on delivering great services to our customers and being a responsible and sustainable player in the market.
Oslo, 15 May 2024
The Board of Directors of Kommunal Landspensjonskasse gjensidig forsikringsselskap
TINE SUNDTOFT
Chair
Terje Rootwelt
Deputy Chair
Egil Matsen
Kjerstin Fyllingen
Rune Simensen
Odd Haldgeir Larsen
Vibeke Heldal
Elected by and from among the employees
Erling Bendiksen
Elected by and from among the employees
Sverre Thornes
CEO
The Board of Directors uses digital signature
Income statement KLP Group
NOTE
NOK MILLIONS
Q1 2024
Q1 2023
01.01.2023 -31.12.2023
Insurance service result
- 7
90
- 1 925
Net income from investments measured at fair value with changes in P/L
37 753
27 736
76 263
Net income from investments not measured at fair value with changes in P/L
19
18
78
4
Fair value adjustment investment properties and rental income
29
496
-2 547
Net income from associated companies and joint ventures
-549
75
504
Net interest income banking
127
110
468
Unit holder's value change in consolidated securites funds
-17 322
-12 135
-27 286
Total net income
20 057
16 300
47 480
Policyholder's share of changes in fair value of underlying items
-19 837
-17 624
-44 179
Other insurance related financial cost
-19
-20
-42
Net insurance related financial cost
-19 856
-17 644
-44 221
Net insurance services and financial result
194
-1 254
1 334
Net costs subordinated loan and hybrid Tier 1 securities
-261
-467
-463
Operating expenses
-327
-267
-1 124
Other income
10
8
77
Other expenses
-72
-73
-77
Pre-tax income
-456
-2 054
-253
Cost of taxes 1
-318
-330
-1 031
Income
-774
-2 384
-1 284
12
Actuarial loss and profit on post employment benefit obligations
199
31
-146
Tax on items that will not be reclassified to profit or loss
-26
-5
22
Items that will not be reclassified to profit or loss
172
26
-125
4
Revaluation real property for use in own operation
1
-8
-308
4
Currency translation foreign properites
651
2 315
2 139
Tax on items that will be reclassified to profit or loss
0
2
77
Items that will be reclassified to income particular specific conditions are met
652
2 309
1 908
Total other comprehensive income
824
2 336
1 784
Total comprehensive income 2
50
-48
499
1 Unit holders share of taxes in consolidated security funds
-111
-87
-375
2 From and including 2023, the KLP group will submit accounts according to the new accounting standard IFRS 17 Insurance contracts. The new standard takes into account the fact that KLP is mutually owned, and the policyholders on public occupational pensions are entitled to all value creation in the group. This means that according to IFRS 17 the group has no equity and that the result will be zero.
However, the group has reported an equity as of 31.03.2024 of minus NOK 3,090 million. This equity arises as a result of the fact that the policyholders are entitled to the fair value of all assets and liabilities in the business, but certain asset and liability items are not accounted for at fair value. This creates a valuation difference that constitutes equity in a mutual insurance company. The period's change in valuation difference NOK 50 million, will thus appear as a result.
Financial position statement KLP Group
NOTE
NOK MILLIONS
31.03.2024
31.03.2023
31.12.2023
Deferred tax assets
43
46
48
Other intangible assets
1 430
1 135
1 379
Tangible fixed assets
2 277
2 617
2 277
Investments in associated companies and joint venture
5 959
5 779
6 620
4, 9
Investment property
95 431
96 333
92 322
5
Reinsurance contract assets
680
820
728
7, 9
Fixed income securitites and other debt instruments at fair value
405 776
375 173
410 569
7
Fixed income securitites and other debt instruments at amortized costs
2 253
2 193
2 254
7, 9
Lending local government, enterprises & retail customers at fair value through profit / loss
82 932
77 635
81 136
7
Lending local government, enterprises & retail customers at amortized costs
42 837
42 717
42 856
7, 9
Equity capital instruments at fair value through profit/loss
406 457
315 118
354 757
7, 9
Financial derivatives
1 280
1 442
15 587
7
Receivables
15 178
24 199
2 678
Cash and bank deposits
3 008
2 978
3 509
TOTAL ASSETS
1 065 541
948 185
1 016 721
7, 8
Hybrid Tier 1 securities
1 489
1 644
1 434
7, 8
Subordinated loan capital
3 533
3 345
3 327
12
Pension obligations
744
812
913
5
Insurance obligations with the right to residual value
780 742
702 791
762 789
5
Other insurance liabilities
4 007
3 965
3 392
7, 8
Covered bonds issued
30 448
30 945
30 504
7, 8
Debt to credit institutions
2 828
3 949
13 041
7, 8
Liabilities to and deposits from customers
14 157
14 136
14 060
7
Financial derivatives
9 342
11 561
3 249
Deferred tax
1 179
1 148
1 187
13
Other current liabilities
17 245
25 598
6 036
Equity
-3 090
-3 687
-3 140
Unit holders`s interest in consolidated securites funds
202 916
151 979
179 929
TOTAL EQUITY AND LIABILITIES
1 065 541
948 185
1 016 721
Contingent liabilities
36 029
32 833
31 409
Changes in owners’ equity KLP Group
2024 NOK MILLIONS
Equity
Owners’ equity 31 December 2023
- 3 140
Income
- 774
Items that will not be reclassified to income
172
Items that will be reclassified to income later when particular conditions are met
652
Total other comprehensive income
824
Total comprehensive income
50
Owners’ equity 31 March 2024
- 3 090
2023 NOK MILLIONS
Equity
Owners’ equity 31 December 2022
8 396
Change of principle 01.01.2023, IFRS 9 1
- 12 035
Owners’ equity 1 January 2023
- 3 639
Income
- 2 383
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
- 48
Owners’ equity 31 March 2023
- 3 687
2023 NOK MILLIONS
Equity
Owners’ equity 31 December 2022
8 396
Change of principle 01.01.2023, IFRS 9 1
- 12 035
Owners’ equity 1 January 2023
- 3 639
Income
- 1 284
Items that will not be reclassified to income
- 125
Items that will be reclassified to income later when particular conditions are met
1 908
Total other comprehensive income
1 784
Total comprehensive income
499
Owners’ equity 31 December 2023
- 3 140
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
01.01.2024 -31.03.2024
01.01.2023 -31.12.2023
01.01.2023 -30.09.2023
01.01.2023 -30.06.2023
01.01.2023 -31.03.2023
Net cash flow from operational activities
-6 299
-19 180
-14 051
-3 581
116
Net cash flow from investment activities 1
-87
-470
-351
-252
-113
Net cash flow from financing activities 2
5 884
19 838
14 149
3 812
-347
Net changes in cash and bank deposits
-502
188
-254
-21
-344
Holdings of cash and bank deposits at start of period
3 509
3 321
3 321
3 321
3 321
Holdings of cash and bank deposits at end of period
3 008
3 509
3 068
3 301
2 978
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 01.01.2024 – 31.03.2024. The accounts have not been audited.
The consolidated financial statements for KLP have been prepared in accordance with IFRS® accounting standards, as approved by the EU, with additions set out in the Norwegian Regulations on annual accounts for insurance companies. The part of the interim report that relates to the Group financial statements has been prepared in accordance with IAS 34 Interim financial Reporting.
All amounts are presented in NOK millions without decimals unless indicated otherwise.
No other changes have been made to the accounting principles that affect the interim financial statements as of 31.03.2024. Refer to the Group’s annual report for 2023 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 2023. 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 98 % confidence level and amounts to 8.4 % of the insurance liability in 2024.
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.
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 4.1 % of the insurance liability in 2024.
Note 2 Segment information
NOK MILLIONS
Group pensions pub. sect. & group life
Non-life insurance
Banking
Asset management
01.01.2024 -31.03.2024
01.01.2023 -31.03.2023
01.01.2023 -31.12.2023
01.01.2024 -31.03.2024
01.01.2023 -31.03.2023
01.01.2023 -31.12.2023
01.01.2024 -31.03.2024
01.01.2023 -31.03.2023
01.01.2023 -31.12.2023
01.01.2024 -31.03.2024
01.01.2023 -31.03.2023
01.01.2023 -31.12.2023
Result from insurance services
0
0
0
-92
57
342
0
0
0
0
0
0
Premium income for own account
7 842
7 663
70 326
0
0
0
0
0
0
0
0
0
Net financial income from investments
22 199
16 363
42 712
98
151
319
133
103
468
9
6
23
Claims for own account
-9 265
-8 331
-28 261
0
0
0
0
0
0
0
0
0
Insurance provisions for own account
-20 239
-15 081
-84 315
0
0
0
0
0
0
0
0
0
Policyholder's share of changes in fair value of underlying items
0
0
0
0
0
0
0
0
0
0
0
0
Other insurance related financial cost
0
0
0
-19
-20
-42
0
0
0
0
0
0
Unit holder's value change in consolidated security funds
0
0
0
0
0
0
0
0
0
0
0
0
Total income
537
614
462
-13
188
619
133
103
468
9
6
23
Net financial income from investments in companys portefolio
328
823
1 494
0
0
0
0
0
0
0
0
0
Net costs subordinated loan and hybrid Tier 1 securities
-243
-513
-443
0
0
0
0
0
0
0
0
0
Operating expenses
-432
-377
-1 512
-104
-89
-356
-79
-70
-268
-147
-138
-528
Other income
369
350
1 463
0
0
10
23
21
92
150
144
560
Other expenses
-376
-359
-1 484
0
0
0
-2
-1
-7
0
0
0
Pre-tax income
183
539
-20
-117
99
273
75
53
285
12
12
55
Cost of taxes
-83
-108
-82
18
-25
-37
-1
37
-19
-2
-3
-12
Income
99
431
-101
-99
75
235
74
90
267
10
9
42
Total other comprehensive income
149
23
-111
28
3
-10
8
1
-10
17
2
-14
Total comprehensive income
249
454
-213
-71
77
225
82
91
257
27
11
29
Lending
306 644
284 758
22 026
0
0
0
43 817
43 435
44 434
0
0
0
Other assets
498 001
457 323
765 141
7 006
6 948
6 559
5 040
5 938
4 494
675
631
682
Total assets
804 645
742 081
787 167
7 006
6 948
6 559
48 857
49 373
48 928
675
631
682
Insurance liabilites
745 385
668 235
725 781
4 007
3 965
3 392
0
0
0
0
0
0
Other liabilities
15 166
30 496
17 541
477
536
573
45 668
46 365
45 754
227
227
260
Total liabilities
760 551
698 731
743 322
4 484
4 501
3 965
45 668
46 365
45 754
227
227
260
NOK MILLIONS
Other
Eliminations
Total
01.01.2024 -31.03.2024
01.01.2023 -31.03.2023
01.01.2023 -31.12.2023
01.01.2024 -31.03.2024
01.01.2023 -31.03.2023
01.01.2023 -31.12.2023
01.01.2024 -31.03.2024
01.01.2023 -31.03.2023
01.01.2023 -31.12.2023
Result from insurance services
0
0
0
85
34
-2 268
-7
90
-1 925
Premium income for own account
0
0
0
-7 842
-7 663
-70 326
0
0
0
Net financial income from investments
0
0
0
14 939
11 813
31 245
37 379
28 435
74 766
Claims for own account
0
0
0
9 265
8 331
28 261
0
0
0
Insurance provisions for own account
0
0
0
20 239
15 081
84 315
0
0
0
Policyholder's share of changes in fair value of underlying items
0
0
0
-19 837
-17 624
-44 179
-19 837
-17 624
-44 179
Other insurance related financial cost
0
0
0
0
0
-70
-19
-20
-42
Unit holder's value change in consolidated security funds
0
0
0
-17 322
-12 135
-27 286
-17 322
-12 135
-27 286
Total income
0
0
0
-472
-2 164
-308
194
-1 254
1 334
Net financial income from investments in companys portefolio
0
0
0
-328
-823
-1 282
0
0
0
Net costs subordinated loan and hybrid Tier 1 securities
0
0
0
-18
45
-20
-261
-467
-463
Operating expenses
-3
-3
-12
438
411
1 553
-327
-267
-1 124
Other income
3
3
13
-535
-511
-2 062
10
8
77
Other expenses
0
0
0
306
287
1 201
-72
-73
-77
Pre-tax income
1
0
1
-610
-2 756
-917
-456
-2 053
-253
Cost of taxes
0
0
0
-249
-231
-881
-318
-330
-1 031
Income
1
-1
1
-859
-2 987
-1 799
-774
-2 383
-1 284
Total other comprehensive income
0
0
0
622
2 307
1 930
824
2 336
1 784
Total comprehensive income
1
0
0
-237
-680
131
50
-48
499
Lending
0
0
0
-224 687
-207 050
57 536
125 773
121 143
123 996
Other assets
11
11
11
429 034
356 191
115 837
939 768
827 042
892 725
Total assets
11
11
11
204 347
149 142
173 373
1 065 541
948 185
1 016 721
Insurance liabilites
0
0
0
35 357
34 556
37 009
784 749
706 757
766 181
Other liabilities
2
3
4
222 341
167 489
189 547
283 882
245 116
253 680
Total liabilities
2
3
4
257 698
202 045
226 556
1 068 631
951 872
1 019 861
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. This segment is followed up according to NGAAP, which deviates from the IFRS Accounting Standards used in the group. Adjustments have therefore been entered in the elimination column to make the total reconcileable to the consolidated accounts.
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 2024
Q1 2023
01.01.2023 -31.12.2023
Insurance income
1 234
1 046
1 780
Insurance service expenses
-1 136
-970
-3 635
Reinsurance income (+)/ cost (-)
-106
14
-71
Insurance service result
-7
90
-1 925
Note 4 Investment property
NOK MILLIONS
01.01.2024 -31.03.2024
01.01.2023 -31.03.2023
01.01.2023 -31.12.2023
Net rental income
1 027
929
3 873
Net value adjustment
-998
-433
-6 420
Net income from investment properties
29
496
-2 547
Currency translate foreign properites (taken to other comprehensive income)
651
2 315
2 139
Net income from investment properties included currency translate
680
2 811
-407
NOK MILLIONS
31.03.2024
31.03.2023
31.12.2023
Investment property 01.01.
92 322
93 992
93 992
Value adjustment, including currency translation
- 347
1 882
- 4 280
Net additions
3 459
431
2 653
Other changes
- 3
27
- 42
Investment property
95 431
96 333
92 322
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 2024
377 742
29 068
355 979
762 789
Changes that realte to current services
Change in risk adjustment for non-financial risk for risk expired
-105
-105
Experience adjustment not related to future service
19
19
Insurance service result
19
-105
-85
Change in risk adjustment for non-financial risk at the start of the period
-924
924
0
Accured interest
3 983
335
-4 318
0
Released cash flows
-123
-123
Changes in estimates related to future service
-7 358
-618
7 976
0
Change due to changes in discount curve
-6 675
-561
7 236
0
Result addes to policyholders
213
19 747
19 960
Insurance related financial cost
-9 960
-1 768
31 565
19 837
Premium
7 551
0
0
7 551
Claims and other insurance service expenses (incl. Investmentcomponents)
-9 350
0
0
-9 350
Total cash flows
-1 799
0
0
-1 799
Insurance obligations with the right to residual value 31 March 2024
366 002
27 195
387 545
780 742
Liability for incurred claims (LIC)
NOK MILLIONS
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
Liabilities for remaining coverage
Total
Other insurance liabilities 1 January 2024
2 944
128
320
3 392
Insurance income
0
0
-707
-707
Claims
699
27
0
726
Expenses
52
2
0
54
Other movements realted to current service
-6
0
-6
Changes that relate to past service
-59
-21
0
-80
Insurance service expenses
692
2
0
694
Insurance service result
692
2
-707
-13
Insurance related financial cost
29
-7
0
23
Premium
0
0
1 354
Claims and other insurance service expenses
-682
0
0
-682
Total cash flows
-682
0
1 354
672
Other changes
2
0
-68
-65
Other insurance liabilities 31 March 2024
2 986
123
898
4 007
Liability for incurred claims (LIC)
NOK MILLIONS
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
Liabilities for remaining coverage
Total
Reinsurance contracts assets 1 January 2024
699
39
-10
728
Premium paid - reinsurance
0
0
-34
-34
Recoveries of incurred claims and other insurance service expenses
0
0
0
0
Reinsurance expenses -related to past service
-61
-10
0
-72
Insurance service expenses
-61
-10
0
-72
Insurance service result
-61
-10
-34
-106
Insurance related financial cost
5
-1
0
4
Premium
-131
0
80
-51
Total cash flows
-131
0
80
-51
Other changes
105
0
0
105
Reinsurance contracts assets 31 March 2024
617
27
35
680
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 2024
Insurance service result
85
13
-106
0
-7
Net insurance related financial cost
-19 837
-23
4
0
-19 856
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
337 305
686 834
Changes that realte to current services
16
-50
0
-34
Change in risk adjustment for non-financial risk for risk expired
0
-50
0
-50
Experience adjustment not related to future service
16
0
0
16
Insurance service result
16
-50
0
-34
Change in risk adjustment for non-financial risk at the start of the period
0
-2 257
2 257
0
Accured interest
3 351
261
-3 612
0
Released cash flows
1 055
0
0
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
0
0
16 569
16 569
Insurance related financial cost
34 977
380
-17 732
17 624
Premium
6 662
0
0
6 662
Claims and other insurance service expenses (incl. Investmentcomponents)
-8 376
0
0
-8 376
Total cash flows
-1 714
0
0
-1 714
Total other changes
0
0
80
80
Insurance obligations with the right to residual value 31 March 2023
355 505
27 633
319 652
702 791
Liability for incurred claims (LIC)
NOK MILLIONS
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
Liabilities for remaining coverage
Total
Other insurance liabilities 1 January 2023
2 790
115
276
3 181
Insurance income
0
0
-630
-630
Claims
550
22
0
572
Expenses
42
2
0
44
Other movements realted to current service
0
-4
0
-4
Changes that relate to past service
-12
-13
0
-24
Insurance service expenses
581
7
0
587
Insurance service result
581
7
-630
-43
Insurance related financial cost
29
6
0
35
Premium
0
0
1 249
1 249
Claims and other insurance service expenses
-446
0
0
-446
Total cash flows
-446
0
1 249
803
Other changes
-4
0
-7
-11
Other insurance liabilities 31 March 2023
2 950
127
888
3 965
Liability for incurred claims (LIC)
NOK MILLIONS
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
Liabilities for remaining coverage
Total
Reinsurance contracts assets 1 January 2023
705
30
0
735
Premium paid - reinsurance
0
0
-40
-40
Recoveries of incurred claims and other insurance service expenses
55
3
0
58
Reinsurance expenses -related to past service
-4
0
0
-4
Insurance service expenses
51
3
0
54
Insurance service result
51
3
-40
14
Insurance related financial cost
7
9
0
15
Premium
-10
0
82
72
Total cash flows
-10
0
82
72
Other changes
-16
0
0
-16
Reinsurance contracts assets 31 March 2023
736
42
42
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
0
90
Insurance related financial cost
-17 624
-35
15
0
-17 644
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
337 305
686 834
Changes that realte to current services
0
0
0
0
Change in risk adjustment for non-financial risk for risk expired
0
2 321
0
2 321
Experience adjustment not related to future service
-53
0
0
-53
Insurance service result
-53
2 321
0
2 268
Change in risk adjustment for non-financial risk at the start of the period
0
-2 257
2 257
0
Accured interest
12 553
1 089
-13 643
0
Released cash flows
-15 978
0
0
-15 978
Changes in estimates related to future service
-2 558
-222
2 780
0
Change due to changes in discount curve
9 599
833
-10 432
0
Result addes to policyholders' residual value
22 526
0
37 631
60 158
Insurance related financial cost
26 143
-557
18 594
44 179
Premium
57 921
0
0
57 921
Claims and other insurance service expenses (incl. Investmentcomponents)
-28 494
0
0
-28 494
Total cash flows
29 426
0
0
29 426
Total other changes
0
0
81
81
Insurance obligations with the right to residual value 31 December 2023
377 742
29 068
355 979
762 789
Liability for incurred claims (LIC)
NOK MILLIONS
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
Liabilities for remaining coverage
Total
Other insurance liabilities 1 January 2023
2 790
115
276
3 181
Insurance income
0
0
-2 505
-2 505
Claims
2 043
83
0
2 126
Expenses
158
6
0
164
Other movements realted to current service
0
-40
0
-40
Changes that relate to past service
-118
-41
0
-158
Insurance service expenses
2 084
9
0
2 092
Insurance service result
2 084
9
-2 505
-413
Insurance related financial cost
62
5
0
66
Premium
0
0
2 551
2 551
Claims and other insurance service expenses
-1 983
0
0
-1 983
Total cash flows
-1 983
0
2 551
568
Other changes
-8
0
-2
-10
Other insurance liabilities 31 December 2023
2 944
128
320
3 392
Liability for incurred claims (LIC)
NOK MILLIONS
Estimates of present value of future cash flows
Risk adjustment for non-financial risk
Liabilities for remaining coverage
Total
Reinsurance contracts assets 1 January 2023
705
30
0
736
Premium paid - reinsurance
0
0
-164
-164
Recoveries of incurred claims and other insurance service expenses
137
8
0
145
Reinsurance expenses -related to past service
-44
-8
0
-52
Insurance service expenses
93
0
0
93
Insurance service result
93
0
-164
-71
Insurance related financial cost
16
9
0
25
Premium
-108
0
154
45
Total cash flows
-108
0
154
45
Other changes
-7
0
0
-7
Reinsurance contracts assets 31 December 2023
699
39
-10
728
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 01.01.2023 - 31.12.2023
Insurance service result
-2 268
413
-71
0
-1 925
Insurance related financial cost
-44 179
-66
25
0
-44 221
IMPORTANT ASSUMPTIONS
Discount curve for IFRS 17
Expected cash flows from the insurance contracts will mature at various times in the future. The future cash flows are therefore discounted to the value on the balance sheet date with an interest rate curve that is determined on the balance sheet date. The discount curve for IFRS 17 is generally determined according to the same principles as the curve EIOPA calculates for Solvency II purposes. The main difference is that EIOPA's estimate for volatility adjustment is replaced with an estimate for the illiquidity spread in the bond market, and this is calibrated to the illiquidity degree of the KLP's obligation. Selected values of discounting curves for IFRS 17 are listed below:
Year
31.03.2024
31.03.2023
31.12.2023
1
5,0 %
4,1 %
4,8 %
2
4,8 %
4,2 %
4,5 %
3
4,4 %
3,8 %
4,0 %
4
4,1 %
3,5 %
3,6 %
5
3,9 %
3,4 %
3,5 %
10
3,9 %
3,7 %
4,0 %
15
3,8 %
3,7 %
3,9 %
25
3,7 %
3,6 %
3,7 %
50
3,5 %
3,5 %
3,5 %
75
3,5 %
3,5 %
3,5 %
100
3,5 %
3,5 %
3,5 %
Salary growth curve
Future cash flows within the contract boundary are calculated with assumptions about annual future salary growth/regulation as stated in the table below. The salary growth curve is projected by the NAM model (Norwegian aggregate model), which makes a macro projection of key economic figures (salary growth, inflation, etc.) year by year.
Year
31.03.2024
31.03.2023
31.12.2023
1
4,8 %
5,0 %
5,3 %
5
4,4 %
3,6 %
4,9 %
10
3,1 %
3,5 %
3,7 %
15
3,1 %
3,2 %
3,2 %
25
3,5 %
3,6 %
3,3 %
50
3,4 %
3,4 %
3,5 %
80
3,4 %
3,4 %
3,5 %
SENSITIVITY
For insurance contracts with a right to residual value, interest rate changes will have a major impact on the best estimate of the pension liabilities.
NOK MILLIONER
Change
31.03.2024
31.03.2023
31.12.2023
Reduced mortality
-5 %
-4 356
-4 756
-4 519
Increased mortality
5 %
4 172
4 556
4 329
Increased disability
5 %
-387
-422
-401
Reduced disability
-5 %
389
425
404
Increased costs
5 %
-1 256
-1 371
-1 303
Reduced costs
-5 %
1 255
1 371
1 303
Increased yield curve
*)
33 594
34 850
33 594
Reduced yield curve
**)
-42 074
-48 190
-42 074
All changes to assumptions are in % change of the standard assumption applied as of 31/03/2024( 31/03/2023/31/12/2023).
*) Increased interest rate curve by 50 basis points for the liquid part of the discount rate curve, 1:10 years. Then extrapolated to an estimate for long-term interest based on the sum of long-term real GDP growth and Norges Bank's inflation target.
**) Reduced by 50 basis points for the liquid part of the discount rate curve, 1:10 years. Then extrapolated to an estimate for long-term interest based on the sum of long-term real GDP growth and Norges Bank's inflation target.
Note 6 Subordinated loans and perpetual hybrid tier 1 securities
NOK MILLIONS
Q1 2024
Q1 2023
01.01.2023 -31.12.2023
SUBORDINATED LOANS
Interest costs
-40
-41
-153
Value changes
-166
-211
-229
Net costs subordinated loans
-206
-252
-382
PERPETUAL HYBRID TIER 1 SECURITIES
Interest costs
-20
-19
-75
Value changes
-36
-197
-6
Net costs perpetual hybrid tier 1 securities
-56
-216
-81
Net costs subordinated loan and hybrid Tier 1 securities
-261
-467
-463
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.
c) Norwegian fixed-income securities – other than government ones
Norwegian fixed-income securities – other than government ones Norwegian fixed-income securities (denominated in NOK) are generally priced based on rates from Nordic Bond Pricing. Securities not covered by Nordic Bond Pricing are priced theoretically. The theoretical price should be based on the discounted value of the security's future cash flows. Discounting is performed using a swap curve adjusted for credit spread and liquidity spread. The credit spread should, to the extent possible, be based on a comparable bond from the same issuer. The liquidity spread is determined at the discretion of the evaluator.
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:
This means that the last traded price is used as long as it is considered representative. If the price information is deemed outdated, a derived valuation is performed in relation to a relevant proxy (such as a stock index or one or more companies). If this is not possible, a discretionary assessment is made, which may be based on fundamental analysis, broker evaluations, or risk and liquidity adjustments to the price.
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
31.03.2024
31.03.2023
31.12.2023
Book value
Fair value
Book value
Fair value
Book value
Fair value
FIXED-INCOME SECURITIES AND OTHER DEBT INSTRUMENTS AT AMORTIZED COST
Norwegian bonds
983
941
993
964
1 017
935
Foreign bonds
1 271
1 192
1 201
1 125
1 237
1 108
Fixed-income securities and other debt instruments at amortized cost
2 253
2 134
2 193
2 089
2 254
2 043
LENDING LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS AT FAIR VALUE THROUGH PROFIT/LOSS
Loans secured by mortgage
2 528
2 528
2 848
2 848
2 564
2 564
Loans to local government sector or enterprises with local government guarantee
73 918
73 918
68 986
68 986
71 056
71 056
Loans abroad secured by mortage and local government guarantee
5 491
5 491
5 230
5 230
5 245
5 245
Other lending
995
995
571
571
2 271
2 271
Total loans to local government, enterprises & retail customers
82 932
82 932
77 635
77 635
81 136
81 136
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
42 837
42 847
42 717
42 724
42 856
42 850
Total loans to local government, enterprises & retail customers
42 837
42 847
42 717
42 724
42 856
42 850
DEBT INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Norwegian bonds
127 108
127 108
123 002
123 002
133 716
133 716
Norwegian certificates
12 805
12 805
6 816
6 816
8 189
8 189
Foreign bonds
215 067
215 067
201 670
201 670
209 125
209 125
Foreign certificates
707
707
456
456
898
898
Investments with credit institutions
50 089
50 089
43 228
43 228
58 641
58 641
Total debt instruments
405 776
405 776
375 173
375 173
410 569
410 569
EQUITY CAPITAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Shares
350 855
350 855
265 829
265 829
302 882
302 882
Equity funds
47 846
47 846
42 176
42 176
44 885
44 885
Property funds
7 756
7 756
7 113
7 113
6 990
6 990
Total equity capital instruments
406 457
406 457
315 118
315 118
354 757
354 757
RECEIVABLES
Receivables related to direct business
1 213
1 213
459
459
750
750
Receivables related to securites
13 565
13 565
22 231
22 231
1 309
1 309
Prepaid rent related to real estate activites
148
148
148
148
148
148
Other receivables
253
253
1 361
1 361
470
466
Total other loans and receivables including receivables from policyholders
15 178
15 178
24 199
24 199
2 678
2 674
FINANCIAL LIABILITIES - AT AMORTIZED COST
Debt to credit institutions
805
805
1 054
1 054
905
905
Covered bonds issued
30 448
30 516
30 945
30 945
30 504
30 526
Liabilities and deposits from customers
14 157
14 157
14 136
14 136
14 060
14 060
Total financial liabilities
45 410
45 478
46 135
46 135
45 469
45 492
FINANCIAL LIABILITIES - AT FAIR VALUE THROUGH PROFIT OR LOSS
Debt to credit institutions
2 023
2 023
2 894
2 894
12 137
12 137
Hybrid Tier 1 securities
1 489
1 489
1 644
1 644
1 434
1 434
Subordinated loan capital
3 533
3 533
3 345
3 345
3 327
3 327
Total financial liabilities
7 046
7 046
7 883
7 883
16 897
16 897
NOK MILLIONS
31.03.2024
31.03.2023
31.12.2023
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
FINANCIAL DERIVATIVES - AT FAIR VALUE THROUGH PROFIT OR LOSS
Forward exchange contracts
377
6 044
218
8 783
13 525
1 152
Interest rate swaps
405
3 298
451
2 778
1 383
2 096
Interest rate and currency swaps
498
0
640
0
679
0
Share option
0
0
133
0
0
0
Total financial derivatives
1 280
9 342
1 442
11 561
15 587
3 249
Note 8 Borrowing
NOK MILLIONS
Nominal in NOK
Currency
Interest
Due date
Book value 31.03.2024
Book value 31.03.2023
Book value 31.12.2023
FIXED - TERM SUBORDINATED LOAN
Kommunal Landspensjonskasse
2 530
EUR
Fixed ¹
2045
3 533
3 345
3 327
Total subordinated loan capital
2 530
3 533
3 345
3 327
HYBRID TIER 1 SECURITIES
Kommunal Landspensjonskasse
984
JPY
Fixed ²
2034
1 489
1 644
1 434
Total hybrid Tier 1 securities
984
1 489
1 644
1 434
COVERED BONDS
KLP Kommunekreditt AS
0
NOK
Floating
2023
0
1 660
0
KLP Kommunekreditt AS
1 342
NOK
Floating
2024
1 350
5 019
1 562
KLP Kommunekreditt AS
5 000
NOK
Floating
2025
5 015
5 010
5 015
KLP Kommunekreditt AS
5 000
NOK
Floating
2026
5 053
5 036
5 053
KLP Kommunekreditt AS
1 000
NOK
Fixed
2027
1 021
1 021
1 012
KLP Kommunekreditt AS
6 000
NOK
Floating
2027
6 049
0
6 052
KLP Kommunekreditt AS
700
NOK
Fixed
2029
714
714
706
KLP Boligkreditt AS
0
NOK
Floating
2023
0
424
0
KLP Boligkreditt AS
728
NOK
Floating
2024
729
2 501
1 555
KLP Boligkreditt AS
2 500
NOK
Floating
2025
2 502
2 501
2 501
KLP Boligkreditt AS
4 500
NOK
Floating
2026
4 534
4 524
4 536
KLP Boligkreditt AS
2 500
NOK
Floating
2027
2 516
2 511
2 516
KLP Boligkreditt AS
1 000
NOK
Floating
2029
1 003
0
0
Other
-35
23
-4
Total covered bonds
29 270
30 448
30 945
30 504
DEBT TO CREDIT INSTITUTIONS
KLP Banken AS
0
NOK
Floating
2023
0
301
0
KLP Banken AS
150
NOK
Floating
2024
151
452
453
KLP Banken AS
300
NOK
Floating
2025
301
301
301
KLP Banken AS
150
NOK
Floating
2026
151
0
151
KLP Banken AS
200
NOK
Floating
2027
202
0
0
KLP Fond
0
NOK
Floating
2023
0
813
4 218
KLP Fond
0
NOK
Fixed
2023
0
1 117
1 111
KLP Fond
0
NOK
Floating
2024
291
0
0
KLP Fond
0
NOK
Fixed
2024
1 087
0
0
Kommunal Landspensjonskasse
0
NOK
Fixed
2023
0
851
6 727
Kommunal Landspensjonskasse
0
NOK
Floating
2023
0
0
0
Kommunal Landspensjonskasse
0
NOK
Fixed
2024
566
0
0
Other
79
113
80
Total liabilities to credit institutions
800
2 828
3 949
13 041
LIABILITIES AND DEPOSITS FROM CUSTOMERS ³
Retail
12 224
NOK
12 224
11 876
12 087
Business
1 882
NOK
1 882
2 221
1 924
Foreign
51
NOK
51
39
50
Liabilities to and deposits from customers
14 157
14 157
14 136
14 060
Total financial liabilities
47 741
52 456
54 018
62 366
1 The loan has an interest change date in 2025.
2 The loan has an interest change date in 2034.
3 There is no contractual maturity date on deposits.
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
31.03.2024 NOK MILLIONS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Land/plots
0
0
1 283
1 283
Buildings
0
0
94 149
94 149
Investment property
0
0
95 431
95 431
Lending at fair value
0
82 932
0
82 932
Certificates
3 573
9 940
0
13 512
Bonds
24 466
317 806
0
342 272
Fixed-income funds
0
10 220
17 954
28 173
Bonds and other fixed-income securities
28 039
337 965
17 954
383 958
Loans and receivables
20 749
1 070
0
21 818
Shares
340 347
4 863
5 645
350 855
Equity funds
2 633
0
35
2 667
Property funds
0
2 685
5 070
7 756
Special funds
0
0
0
0
Private Equity
0
0
45 178
45 178
Shares and units
342 980
7 548
55 929
406 457
Financial derivatives
0
1 280
0
1 280
Total assets at fair value
391 767
430 795
169 314
991 876
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives
0
9 342
0
9 342
Debt to credit institutions ¹
937
1 087
0
2 023
Subordinated loan capital
0
3 533
0
3 533
Hybrid Tier 1 securities
0
1 489
0
1 489
Total financial liabilities at fair value
937
15 451
0
16 387
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 805 million per 31.03.2024.
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
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
Subordinated loan capital
0
3 345
0
3 345
Hybrid Tier 1 securities
0
1 644
0
1 644
Total financial liabilities at fair value
1 777
17 667
0
19 444
31.12.2023 NOK MILLIONS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Land/plots
0
0
1 283
1 283
Buildings
0
0
91 040
91 040
Investment property
0
0
92 322
92 322
Lending at fair value
0
81 136
0
81 136
Certificates
1 578
7 508
0
9 086
Bonds
27 564
315 287
0
342 850
Fixed-income funds
0
9 591
16 041
25 632
Bonds and other fixed-income securities
29 142
332 386
16 041
377 569
Loans and receivables
32 349
651
0
33 000
Shares
293 389
5 996
3 497
302 882
Equity funds
2 378
0
37
2 415
Property funds
0
1 980
5 010
6 990
Special funds
0
0
0
0
Private Equity
0
0
42 470
42 470
Shares and units
295 767
7 976
51 014
354 757
Financial derivatives
0
15 587
0
15 587
Total assets at fair value
357 258
437 735
159 377
954 370
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives
0
3 249
0
3 249
Debt to credit institutions ¹
11 026
1 111
0
12 137
Subordinated loan capital
0
3 327
0
3 327
Hybrid Tier 1 securities
0
1 434
0
1 434
Total financial liabilities at fair value
11 026
9 120
0
20 146
Changes in Level 3, Investment Property
Book value 31.03.2024
Book value 31.03.2023
Book value 31.12.2023
Opening balance 1 January
92 322
93 992
93 992
Sold
0
0
0
Bought
3 459
431
2 653
Unrealised changes
-347
1 882
-4 280
Other changes
-3
27
-42
Closing balance 31.03./31.12.
95 431
96 333
92 322
Realised gains/losses
0
0
0
Changes in Level 3, Financial Assets
Book value 31.03.2024
Book value 31.03.2023
Book value 31.12.2023
Opening balance 1 January
67 055
53 407
53 407
Sold
-1 372
-556
-4 923
Bought
4 539
2 981
15 430
Unrealised changes
3 660
3 447
3 141
Closing balance 31.03./31.12.
73 882
59 279
67 055
Realised gains/losses
402
315
1 863
Closing balance 31.03./31.12.
169 314
155 611
159 377
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 8 466 million as of 31.03.2024.
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.
During the 1st quarter, NOK 966 million in stocks moved from Level 1 to Level 2, NOK 15 million moved from Level 1 to Level 3, NOK 2 309 million moved from level 2 to level 1. The movements is due to changes in liquidity.
Note 10 Presentation of assets and liabilities that are subject to net settlement
31.03.2024 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
1 280
0
1 280
-682
-693
-2 708
72
72
Repos
2 264
0
2 264
0
0
0
2 265
2 265
Total
3 544
0
3 544
-682
-693
-2 708
2 336
2 336
LIABILITIES
Financial derivatives
9 342
0
9 342
-682
-738
-3 798
4 124
3 511
Repos
1 087
0
1 087
0
0
0
1 087
1 084
Total
10 429
0
10 429
-682
-738
-3 798
5 212
4 595
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
31.12.2023 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
15 587
0
15 587
-1 376
-10 882
-7 399
214
209
Repos
6 172
0
6 172
-1 113
0
0
5 058
5 058
Total
21 759
0
21 759
-2 489
-10 882
-7 399
5 272
5 267
LIABILITIES
Financial derivatives
3 249
0
3 249
-1 376
-25
-6
1 866
1 885
Repos
1 111
0
1 111
0
0
0
1 111
0
Total
4 360
0
4 360
-1 376
-25
-6
2 977
1 885
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. . 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 288 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 288 per cent.
31.03.2024
31.03.2023
31.12.2023 1
Solvency II - SCR ratio
288 %
282 %
285 %
NOK BILLIONS
31.03.2024
31.03.2023
31.12.2023 1
Simplified Solvency II Financial Position Statement
Assets, book value
808
746
790
Added values - hold-to-maturity portfolio/loans and receivables
-12
-12
-9
Added values - other lending
-1
-1
-1
Other added/lesser values
0
0
0
Deferred tax asset
0
0
0
Total assets - solvency II
795
733
779
NOK BILLIONS
31.03.2024
31.03.2023
31.12.2023 1
Simplified Solvency II Financial Position Statement
Best estimate
724
647
706
Risk margin
11
13
11
Hybrid Tier 1 securities/Subordinated loan capital
5
5
5
Other liabilities
10
26
13
Deferred tax liabilities
0
0
0
Total liabilities - solvency II
750
690
735
Excess of assets over liabilities
45
42
44
- Deferred tax asset
0
0
0
- Risk equalization fund (tier 2 own funds starting 30.09.2022)
-4
-5
-4
+ Hybrid Tier 1 securities
1
2
1
Tier 1 basic own funds
42
39
42
Total eligible tier 1 own funds
42
39
42
Subordinated loans
3
3
3
Risk equalization fund (tier 2 own funds starting 30.09.2022)
4
5
4
Tier 2 basic own funds
7
8
7
Ancillary own funds
14
13
14
Tier 2 ancillary own funds
14
13
14
Deduction for max. eligible tier 2 own funds
-14
-13
-14
Total eligible tier 2 own funds
7
8
7
Deferred tax asset
0
0
0
Total eligible tier 3 own funds
0
0
0
Solvency II total eligible own funds
49
47
49
Solvency capital requirement (SCR)
17
17
17
Solvency II- SCR ratio
288 %
282 %
285 %
1 The figures as at 31 December 2023 have been changed to reflect the new capital requirement for the bank, applicable from and including the 2023 annual calculation for the group.
Note 12 Pension obligations
NOK MILLIONS
31.03.2024
31.03.2023
31.12.2023
Capitalized net liability 01.01.
913
815
815
Capitalized pension costs
55
48
197
Capitalized financial costs
8
7
28
Actuarial gains and losses
-199
-31
146
Premiums / contributions received
-32
-27
-274
Capitalized net liability 31.03./31.12.
744
812
913
Assumptions
31.03.2024
31.03.2023
31.12.2023
Discount rate
3.45%
3.00%
3,10 %
Salary growth
3.50%
3.50%
3,50 %
The National Insurance basic amount (G)
3.25%
3.25%
3,25 %
Pension increases
2.80%
2.60%
2,80 %
Social security contribution rate
14.10%
14.10%
14,10 %
Capital activity tax
5.00%
5.00%
5,00 %
The effect of changes in pension assumptions reduces the pension liability for employees with NOK 199 million as of 31.03.2024. The change is recognized in other comprehensive income in the income statement.
Note 13 Other current liabilites
NOK MILLIONS
31.03.2024
31.03.2023
31.12.2023
Short-term payables trade in securities
14 406
22 881
3 357
Incurred not assessed taxes
289
486
572
Accounts payable
353
616
301
Public fees
770
687
806
Other current liabilities
1 427
928
999
Total other current liabilities
17 245
25 598
6 036
Key figures – Accumulated
NOK MILLIONS
Q1 2024
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2022
Q2 2022
KLP GROUP
Total assets
1 065 541
1 016 721
972 345
956 311
948 185
900 068
913 144
900 199
Equity
-3 090
-3 140
-3 555
-3 623
-3 687
8 396
12 823
9 800
Solvency SCR ratio
288 %
285 %
332 %
297 %
282 %
288 %
306 %
304 %
Number of employees in the Group
1 153
1 133
1 120
1 099
1 091
1 093
1 095
1 081
KOMMUNAL LANDSPENSJONSKASSE
Profit before tax
183
-20
1 136
774
539
918
461
216
Premium income for own account
7 842
70 326
60 032
51 102
7 663
50 523
40 248
33 081
- of which inflow of premium reserve
0
92
91
91
91
386
386
386
Insurance customers' funds incl. acc. profit
9 265
28 261
21 501
14 840
8 331
28 517
22 453
16 367
- of which funds with guaranteed returns
2 456
2 139
2 125
2 121
2 125
4 659
4 658
4 658
Net investment common portfolio
751 512
734 337
718 214
701 944
690 902
660 366
671 095
660 834
Net investment choice portfolio
2 953
2 830
2 730
2 833
2 683
2 609
2 602
2 665
Insurance funds incl. earnings for the year
745 385
725 781
704 815
715 239
668 235
654 324
641 805
654 482
- of which funds with guaranteed interest
617 219
616 315
586 941
592 053
552 840
552 101
542 820
548 891
Solvency capital requirement (SCR)
49 575
49 517
49 918
47 317
46 768
46 158
46 307
44 901
Solvency SCR ratio
351 %
346 %
368 %
330 %
316 %
318 %
341 %
340 %
Riskprofit
82
648
364
270
71
558
963
550
Return profits
18 729
29 466
15 822
21 243
13 232
-20 006
-27 421
-20 374
Administration profit
-8
144
176
62
54
-17
56
-22
Solvency capital
155 824
164 487
147 893
151 993
151 550
140 958
129 556
138 338
Value-adjusted return on common portfolio
3,0 %
6,4 %
3,9 %
4,2 %
2,5 %
-1,1 %
-2,6 %
-2,1 %
Return on unit-linked portfolio
4,0 %
8,3 %
4,8 %
5,6 %
3,4 %
-2,5 %
-4,2 %
-3,5 %
Return on corporate portfolio
0,5 %
3,0 %
2,1 %
1,5 %
0,9 %
2,8 %
1,4 %
0,9 %
KLP SKADEFORSIKRING AS
Profit before tax
-118
273
255
189
99
111
49
88
Insurance income
707
2 505
1 863
1 230
630
2 200
1 629
1 071
Owners' equity
2 523
2 594
2 589
2 543
2 446
2 369
2 339
2 367
Claims ratio
113,1 %
86,3 %
83,6 %
87,6 %
91,7 %
80,8 %
80,3 %
73,4 %
Combined-ratio
14,6 %
14,0 %
13,0 %
13,9 %
13,9 %
14,5 %
14,2 %
15,3 %
Return on assets under management
1,7 %
5,5 %
3,3 %
3,6 %
2,7 %
-1,7 %
-2,5 %
-2,1 %
Solvency capital requirement (SCR)
2 487
2 446
2 514
2 377
2 309
2 222
2 250
2 273
Solvency SCR ratio
210 %
227 %
246 %
222 %
215 %
222 %
219 %
225 %
Annual premium in force – retail market
1 107
1 068
1 042
1 013
982
954
933
918
Annual premium in force – public sector market
1 624
1 517
1 533
1 521
1 474
1 341
1 325
1 318
Net new subscriptions (accumulated within the year)
-3
72
61
43
20
121
123
113
KLP BANKEN GROUP
Profit/loss before tax
75
285
203
122
53
181
98
43
Net interest income
127
465
340
221
110
369
258
159
Other operating income
22
89
67
44
21
85
63
43
Operating expenses and depreciation
-81
-271
-201
-134
-71
-247
-181
-123
Net realized/unrealized changes in financial instruments to fair value