KLP delivers good results for the first half of 2023
KLP achieved a value-adjusted return on the pension assets in the common portfolio of 4.2 per cent so far this year.
The total profit on the customer portfolio was NOK 21.3 billion.
Good growth from external customers choosing KLP's fund products.
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 second quarter of 2023, the Group had total assets of NOK 956.3 billion, an increase of NOK 56.2 billion in the year to date.
Results for the second quarter of 2023
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 788.7 billion, NOK 715.2 billion is linked to insurance obligations within public-sector occupational pensions.
Corporate result
Investment result
KLP achieved an investment result (returns in excess of the guaranteed average rate of return) of NOK 21.2 (-20.4) billion in the second quarter. The return on the common portfolio was 4.2 per cent for the year to date.
Risk result
The risk events in the stock have been within expectations throughout the year and will vary from quarter to quarter. The risk result totalled NOK 199 (445) million in the second quarter, and NOK 270 (550) million so far this year.
Administration result
The Company’s administration result shows a surplus of NOK 62 (-22) million so far this year, of which NOK 8 million fell in the second quarter. Insurance-related operating costs came to NOK 761 (748) million so far this year.
Total profit/loss
Total profit/loss to the Company stands at NOK 892 (283) million for the year to date. The customer result is NOK 21.3 (-19.7) billion so far this year.
NOK millions
Customers
Company
Total
Investment result
21 049
195
21 243
Risk result
270
270
Interest guarantee premium
144
144
Administration result
62
62
Net income from investments in the corporate portfolio and other income/expenses in non-technical accounts
374
374
Tax
-172
-172
Other profit/loss elements
290
290
Profit/loss after Q2 2023
21 318
892
22 210
Profit/loss after Q2 2023
-19 721
283
-19 439
Financial strength and capital-related matters
KLP’s total assets have increased by NOK 78.4 billion in the year to date and amount to NOK 788.7 billion. The premium reserve increased by NOK 41.4 billion to NOK 559.9 billion in the same period.
The buffer fund amounts to NOK 101.9 billion after the second quarter. There is also a positive interim profit of NOK 21.3 billion in the customer result.
Without applying transitional rules, the Company’s solvency capital requirement (SCR) is 330 per cent.
KLP’s target is a capital adequacy of at least 150 per cent. Solvency is well above this target and is an important prerequisite for sound capital management over time.
Key figures
Per cent
At 30.06.2023
At 30.06.2022
Return
4,2
-2,1
Return including added value in assets measured at amortised cost
3,3
-4,8
The returns figures apply to the common portfolio
Capital adequacy, Solvency II
330
340
Capital adequacy, Solvency II, with transitional measures
330
340
Premium income
Premium income excluding premium reserves received on transfers in amounts to NOK 51.0 (32.7) billion at the end of the second quarter.
Claims/benefits
Pensions paid and other claims, excluding ceded premium reserves, amounted to NOK 12.7 (11.7) billion at the end of the second quarter.
Management of the common portfolio
The assets in the common portfolio totalled NOK 701.9 (660.8) billion and were invested as shown below:
Assets
At 30.06.2023
At 30.06.2022
All figures in per cent
Proportion
Return
Proportion
Return
Equities
32,4 %
11,7 %
28,9 %
-10,0 %
Bonds measured at fair value
11,0 %
1,3 %
12,6 %
-8,3 %
Bonds measured at amortised cost
28,8 %
1,6 %
29,2 %
1,7 %
Lending
11,7 %
1,7 %
12,3 %
1,0 %
Property
14,6 %
-0,8 %
15,4 %
7,8 %
Other financial assets
1,4 %
1,8 %
1,6 %
0,1 %
Equities
Total exposure in shares and alternative investments, including equity derivatives, was 32.4 per cent at the end of the second quarter. The total return on shares and alternative investments was 4.8 per cent in the quarter. The return on KLP’s global equities was 6.3 per cent, while KLP’s Norwegian equity portfolio returned 1.6 per cent in the second 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. For the second quarter, the Norwegian krone depreciated against the US dollar and the euro, among other currencies. The depreciation of the krone had a positive impact on the return on shares in the unsecured portfolios.
Current bonds and money market instruments measured at fair value
Short-term bonds accounted for 11.0 per cent and money-market instruments 1.4 per cent of the assets in the common portfolio at the end of the quarter. Norwegian, Eurozone and US government interest rates all rose during the second quarter. KLP’s global government bond index achieved a currency-hedged return of minus 1.5 per cent in the quarter, while the return on the Norwegian government bond index was minus 2.7 per cent. Global credit margins fell slightly through the quarter. The quarterly return on KLP's global credit bond index was minus 0.6 percent, while the return on the Norwegian bond index was minus 2.2 percent. Short-term bonds produced a total return of minus 1.0 per cent in the second quarter. The money market return was 1.0 per cent for the quarter.
Bonds measured at amortised cost
Investments in bonds recognised at amortised cost made up around 28.8 per cent of the common portfolio at the end of the quarter. Unrecognised decreases in value in the portfolio amounted to NOK 16.5 billion at the end of the second quarter. The portfolio is well diversified and consists of securities issued by creditworthy borrowers. The return measured at amortised cost in the second quarter was 0.8 per cent.
Property
Property investments, including Norwegian and international property funds, made up 14.6 per cent of the common portfolio. Property values in the common portfolio were adjusted downwards by NOK 2.6 billion in the first half-year. The write-downs are based on higher required rates of return due to higher interest rates. Property investments in the common portfolio achieved a return of minus 0.8 per cent in the first half-year. 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 79.7 billion. This is split between NOK 68.4 billion in loans to the public sector, NOK 0.8 billion in loans with government guarantees and NOK 2.9 billion in secured mortgage loans, with the remaining NOK 7.7 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 2.0 billion at the end of the quarter. Returns so far this year are 1.7 per cent
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 returned 0.6 percent in the second quarter, and 1.5 percent so far this year, pulled down by higher required rates of return due to higher interest rates which resulted in real estate write-downs.
Other matters
At KLP, one of the industry's most comprehensive technology initiatives is under way, where we are establishing a new digital solution for retirement that provides new and better services to employers and their employees. In order to succeed, significant changes are being made in technology, business processes and organisation. We are establishing new concepts for retirement on a platform with a focus on automation, self-service and efficient case management. KLP is also adopting new cloud-based services, and through a new data platform, we are increasingly utilising our unique insight into public-sector occupational pensions in our corporate governance and service development.
As from the first half of 2023, all old-age pensions in KLP are being handled through the new digital solution. Employees who are to receive an old-age pension now receive an answer in seconds, and more than 70 per cent of all old-age pension applications are processed completely automatically. The vast majority of employees can also simulate their expected retirement pension on KLP's secure web pages. In this way, it will be easy for the employee to see how much more pension they will receive by working a little longer and/or working in a 100 per cent position. Contributing to a better understanding of people's own pension finances and making well-informed choices through guidance is an important contribution to KLP's work on corporate social responsibility. In the second quarter, we introduced the AFP benefit, which is now also handled automatically, and work is ongoing on the latest payments of disability and survivors' pensions, as well as a new old-age pension for those born after 1963.
The need for skilled professionals in the local government and healthcare sector is only expected to increase as the population steadily ages, and it is difficult to recruit and retain staff. So it is more important than ever for employees in the local government and healthcare sector to be enabled to work as much as possible for as many years as possible while they are of working age. KLP shares knowledge and experience of working life in order to contribute to health-promoting workplaces and a positive social development among our owners.
Twelve new projects have been launched in KLP’s working environment network in 2023. The intention is to apply good project processes, share experience within the network, and make gains in the form of reduced sickness absence, stable staffing and better services.
Business areas of the subsidiaries
Non-life insurance
The first half of 2023 produced a pre-tax operating profit of NOK 189.5 (88.2) million. The second quarter also yielded a good result, with a profit of NOK 90.2 (31.3) million . The growth in profits is mainly due to solid financial returns and the reversal of previous years' reserves. Operating costs are also lower than expected.
Premium volume stood at NOK 2,534 million at the end of the second quarter, an increase of NOK 242 million from the position at 31.12.2022. Premium income increased by NOK 159 million, or 14.8 per cent, to reach NOK 1,230 million. The retail market shows growth of NOK 45 million, or 9.7 per cent, while the public-sector and corporate market shows growth of NOK 115 million, or 18.5 per cent. The solid growth in the public-sector and corporate market is due to substantial premium increases in some high-risk segments.
Insurance income less claims expenseswas NOK 183 (332) million at 30 June. Both the property and motor insurance sectors produced weak results. Increased material costs resulting from higher inflation are a factor in this trend. Over time, the Company's premiums will be adjusted upwards to reflect the increased costs.
Reversals of previous years’ claims are still positive, and this year NOK 51 million has so far been taken to income, equivalent to 2.4 per cent of the reserves at the beginning of the year.
There was a major natural disaster in the first half-year, with a gross claim against the Natural Perils Pool of NOK 900 million. The Company's share of this claim is NOK 45 million.
Key figures for the Company
At 30.06 2023
At 30.06 2022
Whole of 2022
Claims ratio
82,6
71,4
98,3
Cost ratio
13,9
14,4
13,8
Total cost ratio
101,5
85,9
93,2
Net financial income in the first half-year was NOK 197.0 (-112.7) million, representing a return of 3.6 (minus 2.1) per cent. Returns for the second quarter in isolation were NOK 47.2 (-63.5) million, or 0.9 (minus 1.1) per cent. So far this year, the equity portfolio has returned 16.5 (minus 14.1) per cent. As of the first half-year, the Company’s investments in interest-bearing funds had a return of minus 1.6 (minus 5.8) per cent, while fixed income bonds returned 1.7 (1.7) per cent in the same period. The return on real estate investments was 3.6 per cent, after a write-down of NOK 22 million in the quarter. The company's real estate investments have nevertheless been written up by NOK 10 million so far this year. The second quarter in isolation saw a return of 6.6 per cent on equities, minus 0.1 per cent on interest-bearing investments, and a 0.9 per cent on long-term bonds.
The Company’s financial position is good, with a solvency capital requirement (SCR) of 222 per cent at the end of the second quarter, compared to 222 per cent at the end of 2022 and 215 per cent after the first quarter of 2023.
KLP Kapitalforvaltning AS provides securities management in the KLP Group. It had a total of NOK 688 billion under management at the end of the first half-year, of which NOK 163 billion came from 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 6.3 billion in the first half. External customers had positive net new subscriptions of NOK 8.1 billion in the first half.
The Company achieved a result before tax of NOK 3.5 million in the first half-year.
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.
At the end of the second quarter, the KLP Banken Group achieved an operating profit before tax of NOK 121.5 (42.5) million, of which the second quarter in isolation accounted for NOK 68.3 (24.2) million. The change is mainly related to increased net interest income in both business areas and reduced losses on financial instruments. Broken down by area, profits for the second quarter were NOK 87.5 (21.8) million in the retail market and NOK 34.0 (20.7) million in the public-sector market.
The KLP Banken Group's lending balance as of 30 June 2023 was NOK 42.9 (41.4) billion. The split between the retail and public-sector markets was NOK 23.5 (23.1) billion and 19.4 (18.3) billion respectively.
KLP Banken manages NOK 2.9 (3.1) billion in mortgage loans and NOK 74.7 (73.1) billion in loans to public-sector borrowers and other businesses on behalf of KLP.
Group
The KLP Group is owned by policy-holders drawing public-sector occupational pensions. All value creation therefore accrues to current or future policy-holders drawing to public-sector occupational pensions. That means that these policy-holders are entitled to the residual interest consisting of the net assets of the business. The residual interest due to policy-holders is shown as a debt to the insured and not as equity. This is as specified in the IFRS 17 accounting standard, which KLP is applying in its consolidated financial statements from 2023 onwards.
Of the Group's insurance liabilities related to public-sector occupational pensions of NOK 707 billion as at 30.06.2023, NOK 343 billion is made up of residual interest belonging to the policy-holders. The remainder of the insurance liability consists of the best estimate of discounted future receipts and payments related to the insurance contracts plus risk adjustment.
Refer also to Note 37 to the 2022 financial statements for a further description of the transition to IFRS 17.
Corporate social responsibility
Voting at general meetings is one of the important tools KLP uses in exercising its ownership, and the second quarter of the year is known as the high season for general meetings. As well as following the Company's usual voting policies, KLP has chosen to vote against the boards of 68 companies with high greenhouse gas emissions or a high risk of contributing to deforestation, where the companies do not demonstrate sufficient willingness or ability to manage risk and the negative impacts of their activities.
KLP has also raised shareholder motions together with several other investors on better tax reporting for three oil and gas companies. The results show that a number of investors are keen to contribute to improvements in this area. In Norway, we have observed a clear effect from the discussions we had with selected companies earlier this year, where almost 50 per cent of these companies have improved the documentation for general meetings and adapted to our expectations.
The transition to a more eco-friendly economy is crucial if we are to halt and reverse the loss of nature and biodiversity. Many companies, including KLP, are working to understand how they can implement and help to achieve the aims of the UN Biodiversity Agreement. KLP has participated in a project on nature risk in Norwegian industry. The work resulted in a guide to the work on nature risk, to serve as an aid to companies that want to make a start on the eco-friendly transition, and makes suggestions for sources for analysis and the steps that need to be taken to get there.
Green ports can play an important role in the transition to an emission-free society. Together with others, KLP has prepared a proposal for what the criteria for accelerating the green transition in the port sector might be. The report was launched in April.
The non-life company has been working on studies of how sustainability can be strengthened in the insurance products, initially for real estate, and how these products can be adapted to the EU’s taxonomy criteria. There is also a focus on repairs and reuse to contribute to the transition to a more circular economy. Among other things, a pilot has been started on the reuse and repair of home electronics. KLP has also held a seminar for insurance brokers focusing on sustainability.
Future prospects and events after the end of the quarter
The world is still marked by heightened geopolitical tension and war in Ukraine. Higher inflation and interest rates may pose challenges to the global economy, but they could also provide good opportunities for generating surplus returns in excess of the surplus beyond the annual interest guarantee for KLP.
The Board of Directors uses digital signature
Income statement KLP Group
NOTE
NOK MILLIONS
Q2 2023
Q2 2022
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
3, 5
Insurance service result
- 72
154
66
398
2 022
Net income from investments measured at fair value with changes in P/L
13 760
4 121
41 590
5 324
8 748
Net income from investments not measured at fair value with changes in P/L
21
-31 656
39
-45 255
-37 425
4
Fair value adjustment investment properties and rental income
-559
5 782
-63
7 043
6 558
Net credit loss from financial assets not measured at fair value
0
0
0
0
0
Net interest income banking
112
87
222
160
371
Unit holder's value change in consolidated securites funds
-8 405
12 039
-20 540
19 276
15 966
Total net income
4 929
-9 628
21 248
-13 452
-5 783
Policyholder's share of changes in fair value of underlying items
-4 326
16 465
-21 946
31 343
21 992
Other insurance related financial cost
26
13
6
49
49
5
Net insurance related financial cost
-4 300
16 478
-21 939
31 392
22 040
Net insurance services and financial result
557
7 004
-625
18 338
18 279
6
Net costs subordinated loan and hybrid Tier 1 securities
-84
-294
-551
-134
-169
Operating expenses
-306
-254
-621
-564
-1 159
Other income
9
224
17
260
305
Other expenses
-123
-38
-214
-39
-25
Pre-tax income
53
6 643
-1 995
17 861
17 232
Cost of taxes 1
-431
-200
-761
-384
-826
Income
-377
6 443
-2 756
17 478
16 405
12
Actuarial loss and profit on post employment benefit obligations
365
-361
396
65
132
Tax on items that will not be reclassified to profit or loss
-57
57
-62
-10
-17
Items that will not be reclassified to profit or loss
308
-303
334
55
115
Revaluation real property for use in own operation
-113
146
-121
189
-43
4
Currency translation foreign properites
155
1 257
2 470
312
148
Tax on items that will be reclassified to profit or loss
28
-37
30
-47
11
Items that will be reclassified to income particular specific conditions are met
70
1 367
2 379
453
116
Total other comprehensive income
378
1 063
2 713
508
231
Total comprehensive income
0
7 506
-43
17 986
16 637
1 Unit holders share of taxes in consolidated security funds
-117
-103
-204
-183
-359
Financial position statement KLP Group
NOTE
NOK MILLIONS
30.06.2023
30.06.2022
31.12.2022
Deferred tax assets
35
57
48
Other intangible assets
1 234
926
1 049
Tangible fixed assets
2 485
2 888
2 633
Investments in associated companies and joint venture
5 745
5 594
5 456
4, 9
Investment property
96 070
95 851
93 992
5
Reinsurance contract assets
728
314
736
7, 9
Fixed income securitites and other debt instruments at fair value
362 781
170 920
181 802
7
Fixed income securitites and other debt instruments at amortized costs
2 217
196 621
198 752
7, 9
Lending local government, enterprises & retail customers at fair value through profit / loss
77 618
28
0
7
Lending local government, enterprises & retail customers at amortized costs
44 288
120 141
121 360
7, 9
Equity capital instruments at fair value through profit/loss
336 111
275 423
282 399
7, 9
Financial derivatives
3 868
1 560
6 820
7
Receivables
19 829
26 104
1 700
Cash and bank deposits
3 301
3 773
3 321
TOTAL ASSETS
956 311
900 199
900 068
7, 8
Hybrid Tier 1 securities
1 540
1 550
1 428
7, 8
Subordinated loan capital
3 346
3 026
3 147
12
Pension obligations
469
860
815
5
Insurance obligations with the right to residual value
707 059
666 354
686 780
5
Other insurance liabilities
3 776
3 006
3 181
7, 8
Covered bonds issued
30 606
31 441
32 430
7, 8
Debt to credit institutions
4 368
5 916
6 683
7, 8
Liabilities to and deposits from customers
14 524
13 465
13 779
7
Financial derivatives
4 853
9 998
3 158
Deferred tax
1 144
1 461
1 153
14
Other current liabilities
24 250
26 665
4 233
Equity
-3 684
9 800
8 450
Unit holders`s interest in consolidated securites funds
164 060
126 656
134 831
TOTAL EQUITY AND LIABILITIES
956 311
900 199
900 068
Contingent liabilities
33 096
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
- 2 756
Items that will not be reclassified to income
334
Items that will be reclassified to income later when particular conditions are met
2 379
Total other comprehensive income
2 713
Total comprehensive income
- 43
Other Changes
- 55
Owners’ equity 30 June 2023
- 3 684
2022 NOK MILLIONS
Equity
Owners’ equity 31 December 2021
40 732
Change of principle 01.01.2022, IFRS 17 1
- 48 918
Owners’ equity 1 January 2022
- 8 186
Income
17 478
Items that will not be reclassified to income
55
Items that will be reclassified to income later when particular conditions are met
453
Total other comprehensive income
508
Total comprehensive income
17 986
Owners’ equity 30 June 2022
9 800
2022 NOK MILLIONS
Equity
Owners’ equity 31 December 2021
40 732
Change of principle 01.01.2022, IFRS 17 1
- 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 -30.06.2023
01.01.2023 -31.03.2023
01.01.2022 -31.12.2022
01.01.2022 -30.09.2022
01.01.2022 -30.06.2022
Net cash flow from operational activities
-3 581
116
36 130
42 855
40 710
Net cash flow from investment activities 1
-252
-113
-346
-250
-173
Net cash flow from financing activities 2
3 812
-347
-35 851
-42 493
-40 153
Net changes in cash and bank deposits
-21
-344
-66
113
385
Holdings of cash and bank deposits at start of period
3 321
3 321
3 388
3 388
3 388
Holdings of cash and bank deposits at end of period
3 301
2 978
3 321
3 500
3 773
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 – 30.06.2023. 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 30.06.2023. 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 in 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
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
Result from insurance services
-182
32
1 374
152
305
457
0
0
0
0
0
0
Net financial income from investments
22 419
-13 649
-7 050
200
-111
-91
212
125
345
7
-3
0
Policyholder's share of changes in fair value of underlying items
-21 946
33 029
23 494
0
49
0
0
0
0
0
0
0
Other insurance related financial cost
0
0
0
6
0
49
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
291
19 412
17 818
358
244
414
212
125
345
7
-3
0
Net costs subordinated loan and hybrid Tier 1 securities
-551
-134
-169
0
0
0
0
0
0
0
0
0
Operating expenses
0
0
-1
-174
-156
-310
-132
-123
-245
-285
-336
-602
Other income
-4
241
482
5
1
7
45
42
84
282
310
607
Other expenses
60
71
-8
0
0
0
-3
-2
-4
0
0
0
Pre-tax income
-205
19 590
18 122
189
88
111
121
42
180
4
-30
5
Cost of taxes
-172
19
-115
-58
-24
-53
16
18
-17
-1
7
-2
Income
-377
19 609
18 007
131
65
59
138
60
163
3
-22
3
Total other comprehensive income
334
55
115
42
7
19
17
3
11
33
6
11
Total comprehensive income
-43
19 664
18 122
174
71
77
155
63
174
36
-17
14
Assets
732 932
710 649
709 219
6 868
5 884
5 869
49 557
48 704
50 511
609
605
635
Liabilities
736 614
699 004
699 115
4 325
3 516
3 675
46 485
46 149
47 544
180
243
241
NOK MILLIONS
Other
Eliminations
Total
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
Result from insurance services
0
0
0
96
61
191
66
398
2 022
Net financial income from investments
0
0
0
18 951
-19 090
-14 953
41 788
-32 728
-21 749
Policyholder's share of changes in fair value of underlying items
0
0
0
0
-1 735
-1 502
-21 946
31 343
21 992
Other insurance related financial cost
0
0
0
0
49
0
6
49
49
Unit holder's value change in consolidated security funds
0
0
0
-20 540
19 276
15 966
-20 540
19 276
15 966
Total income
0
0
0
-1 492
-1 440
-298
-625
18 338
18 279
Net costs subordinated loan and hybrid Tier 1 securities
0
0
0
0
0
0
-551
-134
-169
Operating expenses
-6
-6
-11
-25
57
9
-621
-564
-1 159
Other income
6
7
12
-317
-340
-887
17
260
305
Other expenses
0
0
0
-271
-108
-13
-214
-39
-25
Pre-tax income
0
1
2
-2 105
-1 831
-1 189
-1 995
17 861
17 232
Cost of taxes
0
0
0
-546
-404
-639
-761
-384
-826
Income
0
1
1
-2 651
-2 234
-1 828
-2 756
17 478
16 405
Total other comprehensive income
1
0
0
2 286
438
76
2 713
508
231
Total comprehensive income
1
1
2
-365
-1 796
-1 753
-43
17 986
16 637
Assets
11
10
11
166 335
134 347
133 825
956 311
900 199
900 068
Liabilities
2
3
3
172 390
141 484
141 039
959 995
890 399
891 618
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
Q2 2023
Q2 2022
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -30.06.2022
Insurance income
776
891
1 823
1 864
8 333
Insurance service expenses
-773
-754
-1 695
-1 465
-6 729
Reinsurance income (+)/ cost (-)
-76
17
-62
-1
418
Insurance service result
-72
154
66
398
2 022
Note 4 Investment property
NOK MILLIONS
Q2 2023
Q2 2022
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
Net rental income
880
756
1 809
1 546
3 219
Net value adjustment
-1 439
5 026
-1 871
5 497
3 338
Net income from investment properties
-559
5 782
-63
7 043
6 558
Currency translate foreign properites (taken to other comprehensive income)
155
1 257
2 470
312
148
Net income from investment properties included currency translate
- 404
7 039
2 407
7 355
6 706
NOK MILLIONS
30.06.2023
30.06.2022
31.12.2022
Investment property 01.01.
93 992
89 535
89 535
Value adjustment, including currency translation
598
5 809
3 486
Net additions
1 501
518
991
Other changes
- 22
- 11
- 20
Investment property
96 070
95 851
93 992
Note 5 Technical provisions
From and including 2023, the group reports insurance liabilities according to IFRS 17. The standard requires comparison figures one year back, so that the opening balance according to the new standard will be 01.01.2022.
The transition from the insurance liabilities according to previous rules to new rules is shown below:
NOK MILLIONS
Insurance liabilites linked to insurance contracts with the right to residual value
Earned pension benefits with the agreement's calculation basis and basic interest (gross premium reserve) 31/12/2021
486 277
Administration reserve and reserve related to incurreed,but not reported claims and reserves related to reported, but not setteled claims
-18 737
Net premium reserve 31.12.2021
467 540
Net move of earned premiereserves 01.01.2022
-3 318
Earned pension benefits with the insurance contracts calculation basis and base rate (net premium reserve)
464 222
Earned pension benefits with best estimate calculation basis and discount curve for IFRS 17
403 400
Cash flows related to future premiums and associated accrual of pension benefits and other cash flows within the boundary of the contracts with best estimate calculation basis, salary growth curve and cash discount curve for IFRS 17*
-30 089
Premiumfund balance
41 006
Best estimate pension liabilities 01.01.2022 before risk adjustment
414 317
Risk adjustment
35 107
Best estimate pension liabilites 01.01.2022 including risk adjustment
449 424
Residual value
248 260
Insurance liablities
697 684
* Other cash flows consist of cost premiums, costs, interest guarantee premiums, equity grants and contributions to premium funds
NOK MILLIONS
Other insurance liabilities
LRC*
LIC*
LIC Reinsurance
Provision 31.12.2021/01.01.2022
236
2 382
335
Effect of seasonal variation
9
0
0
Discounting
0
-134
-7
Provision 01.01.2022 before risk adjustment
245
2 248
328
Risik adjustment
0
95
13
Provision 01.01.2022 including risk adjustment
245
2 343
341
LRC = Liability for remaining coverage
LIC = Liability for incurred claims
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
337 250
686 780
Changes that realte to current services
Change in risk adjustment for non-financial risk for risk expired
158
158
Experience adjustment not related to future service
24
24
Insurance service result
24
158
182
Change in risk adjustment for non-financial risk at the start of the period
-2 257
2 257
0
Accured interest
6 745
524
-7 269
0
Released cash flows
3 923
3 923
Changes in estimates related to future service
12 451
968
-13 419
0
Change due to changes in discount curve
-5 596
-435
6 031
0
Result addes to policyholders' residual value
18 022
18 022
Insurance related financial cost
17 524
-1 200
5 622
21 946
Premium
659
0
0
659
Claims and other insurance service expenses (incl. Investmentcomponents)
-2 569
0
0
-2 569
Total cash flows
-1 910
0
0
-1 910
Other changes
0
0
61
61
Insurance obligations with the right to residual value 30 June 2023
337 863
26 262
342 933
707 059
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
-1 230
-1 230
Claims
1 013
41
0
1 054
Expenses
77
3
0
80
Other movements realted to current service
-14
0
-14
Changes that relate to past service
-78
-26
0
-104
Insurance service expenses
1 012
4
0
1 016
Insurance service result
1 012
4
-1 230
-214
Insurance related financial cost
5
3
0
8
Premium
-985
0
-985
Claims and other insurance service expenses
0
0
1 828
1 828
Total cash flows
-985
0
1 828
843
Other changes
-4
0
-38
-41
Other insurance liabilities 30 June 2023
2 817
122
837
3 776
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
-80
-80
Recoveries of incurred claims and other insurance service expenses
55
3
0
58
Reinsurance expenses -related to past service
-36
-4
0
-40
Insurance service expenses
19
-1
0
18
Insurance service result
19
-1
-80
-62
Insurance related financial cost
6
8
0
14
Premium
-50
0
82
32
Total cash flows
-50
0
82
32
Other changes
7
0
0
7
Reinsurance contracts assets 30 June 2023
688
38
3
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 Q2 2023
Insurance service result
-182
214
-62
96
66
Insurance related financial cost
-21 946
-8
14
0
-21 939
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 2022
414 317
35 107
248 260
697 685
Changes that realte to current services
0
0
0
0
Change in risk adjustment for non-financial risk for risk expired
0
30
0
30
Experience adjustment not related to future service
-61
0
0
-61
Insurance service result
-61
30
0
-32
Change in risk adjustment for non-financial risk at the start of the period
0
0
0
0
Accured interest
3 479
295
-3 774
0
Released cash flows
-1 319
0
0
-1 319
Changes in estimates related to future service
2 068
175
-2 243
0
Change due to changes in discount curve
-98 213
-8 322
106 535
0
Result addes to policyholders' residual value
0
0
-31 710
-31 710
Insurance related financial cost
-93 985
-7 852
68 807
-33 029
Premium
14 968
0
0
14 968
Claims and other insurance service expenses (incl. Investmentcomponents)
-13 238
0
0
-13 238
Total cash flows
1 730
0
0
1 730
Insurance obligations with the right to residual value 30 June 2022
322 001
27 285
317 068
666 354
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 2022
2 266
95
225
2 586
Insurance income
0
0
-1 071
-1 071
Claims
781
30
0
812
Expenses
66
2
0
69
Other movements realted to current service
0
-12
0
-12
Changes that relate to past service
-82
-22
0
-104
Insurance service expenses
766
-1
0
765
Insurance service result
766
-1
-1 071
-307
Insurance related financial cost
-47
-4
0
-51
Premium
-823
0
0
-823
Claims and other insurance service expenses
0
0
1 629
1 629
Total cash flows
-823
0
1 629
806
Other changes
-6
0
-22
-29
Other insurance liabilities 30 June 2022
2 156
90
760
3 006
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 2022
328
13
-1
340
Premium paid - reinsurance
0
0
-48
-48
Recoveries of incurred claims and other insurance service expenses
40
2
0
42
Reinsurance expenses -related to past service
8
-3
0
5
Insurance service expenses
49
-1
0
47
Insurance service result
49
-1
-48
-1
Insurance related financial cost
-2
0
0
-2
Premium
0
0
53
53
Repayents
-85
0
0
-85
Total cash flows
-85
0
53
-33
Other changes
9
0
0
9
Reinsurance contracts assets 30 June 2022
298
12
4
313
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 Q2 2022
Insurance service result
32
307
-1
61
398
Insurance related financial cost
33 029
51
-2
-1 686
31 392
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 2022
414 317
35 107
248 260
697 685
Changes that realte to current services
0
0
0
0
Change in risk adjustment for non-financial risk for risk expired
-1 541
167
0
-1 374
Experience adjustment not related to future service
0
0
0
0
Insurance service result
-1 541
167
0
-1 374
Change in risk adjustment for non-financial risk at the start of the period
0
0
0
0
Accured interest
7 055
598
-7 653
0
Released cash flows
-10 456
0
0
-10 456
Changes in estimates related to future service
2 689
228
-2 917
0
Change due to changes in discount curve
-103 802
-8 796
112 597
0
Result addes to policyholders' residual value
0
0
-13 038
-13 038
Insurance related financial cost
-104 513
-7 970
88 990
-23 494
Premium
53 502
0
0
53 502
Claims and other insurance service expenses (incl. Investmentcomponents)
-39 539
0
0
-39 539
Total cash flows
13 963
0
0
13 963
Insurance obligations with the right to residual value 31 December 2022
322 226
27 304
337 250
686 780
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 2022
2 266
95
225
2 586
Insurance income
0
0
-2 200
-2 200
Claims
2 068
80
0
2 148
Expenses
153
5
0
159
Other movements realted to current service
0
-31
0
-31
Changes that relate to past service
-84
-30
0
-113
Insurance service expenses
2 138
25
0
2 162
Insurance service result
2 138
25
-2 200
-38
Insurance related financial cost
-44
-5
0
-48
Premium
0
0
0
0
Claims and other insurance service expenses
-1 570
0
2 265
694
Total cash flows
-1 570
0
2 265
694
Other changes
-1
0
-13
-13
Other insurance liabilities 31 December 2022
2 790
115
276
3 181
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 2022
328
13
-1
340
Premium paid - reinsurance
0
0
-97
-97
Recoveries of incurred claims and other insurance service expenses
475
21
0
497
Reinsurance expenses -related to past service
23
-4
0
19
Insurance service expenses
498
17
0
515
Insurance service result
498
17
-97
418
Insurance related financial cost
0
0
0
0,1
Premium
0
0
98
98
Repayments
-122
0
0
-122
Total cash flows
-122
0
98
-24
Other changes
1
0
0
1
Reinsurance contracts assets 31 Decemeber 2022
705
30
0
736
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 Q4 2022
Insurance service result
1 374
-1 091
418
191
893
Insurance related financial cost
23 494
48
0
-1 502
22 040
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
30.06.2023
30.06.2022
31.12.2022
1
5,453 %
3,649 %
4,226 %
2
5,099 %
3,474 %
4,040 %
3
4,663 %
3,712 %
3,891 %
4
4,342 %
3,971 %
3,843 %
5
4,174 %
4,108 %
3,901 %
10
4,033 %
4,090 %
4,260 %
15
3,867 %
3,904 %
4,012 %
25
3,670 %
3,683 %
3,722 %
50
3,524 %
3,524 %
3,526 %
75
3,503 %
3,503 %
3,503 %
100
3,500 %
3,500 %
3,500 %
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
30.06.2023
30.06.2022
31.12.2022
1
5,3 %
3,7 %
4,5 %
5
4,0 %
5,1 %
4,3 %
10
3,3 %
4,1 %
3,8 %
15
2,9 %
3,6 %
3,3 %
25
3,3 %
3,4 %
3,4 %
50
3,5 %
3,4 %
3,4 %
80
3,5 %
3,4 %
3,4 %
Sensitivity - the discount curve according to IFRS 17
For insurance contracts with a right to residual value, interest rate changes will have a major impact on the best estimate of the pension liabilites
NOK MILLIONS
Best estimate pension liability
Calculated with the interest rate curve as of 30.06
337 863
All interest rates in the discount rate curve are increased by 0.5% points
234 169
All interest rates in the discount rate curve are reduced by 0.5% points
498 544
Note 6 Subordinated loans and perpetual hybrid tier 1 securities
NOK MILLIONS
Q2 2023
Q2 2022
01.01.2023 -30.06.2023
01.01.2022 -30.06.2022
01.01.2022 -31.12.2022
SUBORDINATED LOANS
Interest costs
-41
-36
-82
-64
-131
Value changes
-108
-176
-319
-88
-143
Net costs subordinated loans
-149
-213
-401
-152
-274
PERPETUAL HYBRID TIER 1 SECURITIES
Interest costs
-19
-20
-38
-36
-72
Value changes
85
-61
-112
54
176
Net costs perpetual hybrid tier 1 securities
66
-81
-150
19
104
Net costs subordinated loan and hybrid Tier 1 securities
-84
-294
-551
-134
-169
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
30.06.2023
30.06.2022
31.12.2022
Book value
Fair value
Book value
Fair value
Book value
Fair value
FIXED-INCOME SECURITIES AND OTHER DEBT INSTRUMENTS AT AMORTIZED COST
Norwegian bonds
1 001
941
63 183
59 746
65 861
62 754
Foreign bonds
1 216
1 100
133 437
126 759
132 892
125 280
Fixed-income securities and other debt instruments at amortized cost
2 217
2 041
196 621
186 505
198 752
188 034
LENDING LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS AT FAIR VALUE THROUGH PROFIT/LOSS
Loans secured by mortgage
2 854
2 854
0
0
0
0
Loans to local government sector or enterprises with local government guarantee
68 866
68 866
28
28
0
0
Loans abroad secured by mortage and local government guarantee
5 311
5 311
0
0
0
0
Other lending
588
588
0
0
0
0
Total loans to local government, enterprises & retail customers
77 618
77 618
28
28
0
0
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
42 930
42 937
26 079
25 978
26 107
24 701
Loans to and receivables from central banks
74
74
0
0
0
0
Loans to local government sector or enterprises with local government guarantee
0
0
88 067
86 684
89 743
88 342
Loans abroad secured by mortage and local government guarantee
0
0
5 950
5 950
5 352
5 352
Loans to and receivables from credit institutions
1 284
1 284
0
0
0
0
Other lending
0
0
45
45
158
158
Total loans to local government, enterprises & retail customers
44 288
44 295
120 141
118 656
121 360
118 553
DEBT INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Norwegian bonds
117 941
117 941
55 204
55 204
58 922
58 922
Norwegian certificates
9 341
9 341
4 591
4 591
7 648
7 648
Foreign bonds
198 491
198 491
77 440
77 440
72 565
72 565
Foreign certificates
468
468
417
417
420
420
Investments with credit institutions
36 540
36 540
33 267
33 267
42 246
42 246
Total debt instruments
362 781
362 781
170 920
170 920
181 802
181 802
EQUITY CAPITAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Shares
284 032
284 032
233 482
233 482
238 730
238 730
Equity funds
44 877
44 877
35 557
35 557
37 155
37 155
Property funds
7 202
7 202
6 385
6 385
6 514
6 514
Total equity capital instruments
336 111
336 111
275 423
275 423
282 399
282 399
RECEIVABLES
Receivables related to direct business
642
642
1 510
1 510
379
379
Receivables related to securites
18 516
18 516
23 519
23 519
912
912
Prepaid rent related to real estate activites
148
148
211
211
0
0
Other receivables
523
523
864
864
408
408
Total other loans and receivables including receivables from policyholders
19 829
19 829
26 104
26 104
1 700
1 700
FINANCIAL LIABILITIES - AT AMORTIZED COST
Debt to credit institutions
1 055
1 055
1 003
1 003
1 055
1 055
Covered bonds issued
30 606
30 541
31 441
31 406
32 430
32 402
Liabilities and deposits from customers
14 524
14 524
13 465
13 465
13 779
13 779
Hybrid Tier 1 securities
0
0
1 550
1 345
1 428
1 428
Subordinated loan capital
0
0
3 026
3 314
3 147
3 093
Total financial liabilities
46 185
46 120
50 484
50 533
51 839
51 757
FINANCIAL LIABILITIES - AT FAIR VALUE THROUGH PROFIT OR LOSS
Debt to credit institutions
3 313
3 313
4 914
4 914
5 628
5 628
Hybrid Tier 1 securities
1 540
1 540
0
0
0
0
Subordinated loan capital
3 346
3 346
0
0
0
0
Total financial liabilities
8 199
8 199
4 914
4 914
5 628
5 628
NOK MILLIONS
30.06.2023
30.06.2022
31.12.2022
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
FINANCIAL DERIVATIVES - AT FAIR VALUE THROUGH PROFIT OR LOSS
Forward exchange contracts
2 802
1 641
596
7 016
5 024
1 570
Interest rate swaps
500
3 212
377
1 011
1 077
194
Interest rate and currency swaps
566
0
587
1 971
583
1 393
Share option
0
0
0
0
135
0
Total financial derivatives
3 868
4 853
1 560
9 998
6 820
3 158
Note 8 Borrowing
NOK MILLIONS
Nominal in NOK
Currency
Interest
Due date
Book value 30.06.2023
Book value 30.06.2022
Book value 31.12.2022
FIXED - TERM SUBORDINATED LOAN
Kommunal Landspensjonskasse
2 530
EUR
Fixed ¹
2045
3 346
3 026
3 147
Total subordinated loan capital
2 530
-
-
-
3 346
3 026
3 147
HYBRID TIER 1 SECURITIES
Kommunal Landspensjonskasse
984
JPY
Fixed ²
2034
1 540
1 550
1 428
Total hybrid Tier 1 securities
984
-
-
-
1 540
1 550
1 428
COVERED BONDS
KLP Kommunekreditt AS
0
NOK
Floating
2023
0
3 704
2 985
KLP Kommunekreditt AS
2 785
NOK
Floating
2024
2 798
5 009
5 021
KLP Kommunekreditt AS
5 000
NOK
Floating
2025
5 012
5 004
5 010
KLP Kommunekreditt AS
5 000
NOK
Floating
2026
5 040
5 015
5 036
KLP Kommunekreditt AS
1 000
NOK
Fixed
2027
1 017
502
1 012
KLP Kommunekreditt AS
4 000
NOK
Floating
2027
4 028
0
0
KLP Kommunekreditt AS
700
NOK
Fixed
2029
722
0
706
KLP Boligkreditt AS
0
NOK
Floating
2023
0
1 601
1 603
KLP Boligkreditt AS
2 500
NOK
Floating
2024
2 502
2 501
2 501
KLP Boligkreditt AS
2 500
NOK
Floating
2025
2 500
2 500
2 501
KLP Boligkreditt AS
4 500
NOK
Floating
2026
4 528
3 107
3 521
KLP Boligkreditt AS
2 500
NOK
Floating
2027
2 513
2 505
2 512
Other
-54
-7
22
Total covered bonds
30 485
-
-
-
30 606
31 441
32 430
DEBT TO CREDIT INSTITUTIONS
KLP Banken AS
0
NOK
Floating
2022
0
250
0
KLP Banken AS
300
NOK
Floating
2023
301
301
300
KLP Banken AS
450
NOK
Floating
2024
452
451
450
KLP Banken AS
300
NOK
Floating
2025
301
0
303
KLP Fond
0
NOK
Floating
2022
0
205
0
KLP Fond
0
NOK
Fixed
2022
0
1 283
0
KLP Fond
0
NOK
Floating
2023
955
0
1 302
KLP Fond
1 039
NOK
Fixed
2023
1 039
0
1 540
Kommunal Landspensjonskasse
0
NOK
Floating
2022
0
2 048
0
Kommunal Landspensjonskasse
0
NOK
Floating
2022
0
1 300
0
Kommunal Landspensjonskasse
716
NOK
Floating
2023
716
0
0
Kommunal Landspensjonskasse
502
NOK
Fixed
2023
502
0
2 678
Other
102
78
110
Total liabilities to credit institutions
3 306
-
-
-
4 368
5 916
6 683
LIABILITIES AND DEPOSITS FROM CUSTOMERS ³
Retail
12 107
NOK
12 107
11 753
11 722
Business
2 378
NOK
2 378
1 685
2 021
Foreign
39
NOK
39
27
37
Liabilities to and deposits from customers
14 524
-
14 524
13 465
13 779
Total financial liabilities
51 828
54 383
55 398
57 467
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
30.06.2023 NOK MILLIONS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Land/plots
0
0
1 370
1 370
Buildings
0
0
94 700
94 700
Investment property
0
0
96 070
96 070
Lending at fair value
0
77 618
0
77 618
Certificates
2 274
7 536
0
9 809
Bonds
25 465
290 994
0
316 459
Fixed-income funds
0
9 744
12 523
22 267
Bonds and other fixed-income securities
27 739
308 274
12 523
348 536
Loans and receivables
13 024
1 222
0
14 246
Shares
273 631
7 100
3 301
284 032
Equity funds
2 378
0
57
2 435
Property funds
0
2 242
4 960
7 202
Special funds
0
0
0
0
Private Equity
0
0
42 442
42 442
Shares and units
276 008
9 342
50 761
336 111
Financial derivatives
0
3 868
0
3 868
Total assets at fair value
316 771
400 324
159 353
876 448
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives
0
4 853
0
4 853
Debt to credit institutions ¹
1 772
1 541
0
3 313
Total financial liabilities at fair value
1 772
6 394
0
8 166
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 30.06.2023.
30.06.2022 NOK MILLIONS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Land/plots
0
0
983
983
Buildings
0
0
94 868
94 868
Investment property
0
0
95 851
95 851
Lending at fair value
0
28
0
28
Certificates
867
4 141
0
5 008
Bonds
23 306
94 655
0
117 961
Fixed-income funds
14 710
8 110
7 750
30 570
Bonds and other fixed-income securities
38 883
106 906
7 750
153 538
Loans and receivables
16 096
1 286
0
17 381
Shares
225 307
5 032
3 143
233 482
Equity funds
2 151
0
51
2 202
Property funds
0
2 269
4 115
6 385
Special funds
0
0
0
Private Equity
0
0
33 355
33 355
Shares and units
227 458
7 302
40 663
275 423
Financial derivatives
0
1 560
0
1 560
Total assets at fair value
282 437
117 081
144 264
543 781
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives
0
9 998
0
9 998
Debt to credit institutions ¹
2 331
2 583
0
4 914
Total financial liabilities at fair value
2 331
12 581
0
14 912
31.12.2022 NOK MILLIONS
Level 1
Level 2
Level 3
Total
ASSETS BOOKED AT FAIR VALUE
Land/plots
0
0
1 377
1 377
Buildings
0
0
92 615
92 615
Investment property
0
0
93 992
93 992
Lending at fair value
0
0
0
0
Certificates
2 254
5 815
0
8 069
Bonds
21 099
110 390
0
131 489
Fixed-income funds
0
8 129
9 835
17 964
Bonds and other fixed-income securities
23 353
124 333
9 835
157 521
Loans and receivables
23 447
835
0
24 281
Shares
229 463
5 131
3 378
237 972
Equity funds
2 067
0
60
2 127
Property funds
0
2 165
4 349
6 514
Special funds
0
0
0
0
Private Equity
0
0
35 785
35 785
Shares and units
231 530
7 297
43 572
282 399
Financial derivatives
0
6 820
0
6 820
Total assets at fair value
278 330
139 285
147 399
565 014
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives
0
3 158
0
3 158
Debt to credit institutions ¹
4 326
1 302
0
5 628
Total financial liabilities at fair value
4 326
4 460
0
8 786
Changes in Level 3, Investment Property
Book value 30.06.2023
Book value 30.06.2022
Book value 31.12.2022
Opening balance 1 January
93 992
89 535
89 535
Sold
0
-71
-148
Bought
1 501
589
1 139
Unrealised changes
598
5 809
3 486
Other changes
-22
-11
-20
Closing balance 30.06./31.12.
96 070
95 851
93 992
Realised gains/losses
0
0
0
Changes in Level 3, Financial Assets
Book value 30.06.2023
Book value 30.06.2022
Book value 31.12.2022
Opening balance 1 January
53 407
40 122
40 122
Sold
-1 563
-2 478
-5 749
Bought
6 911
6 095
14 524
Unrealised changes
4 528
4 674
4 510
Closing balance 30.06./31.12.
63 284
48 412
53 407
Realised gains/losses
565
950
2 322
Closing balance 30.06./31.12.
159 353
144 264
147 399
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 7 968 million as of 30.06.2023.
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.
During the 2nd quarter, NOK 1 367 million in stocks moved from Level 1 to Level 2, NOK 11 million moved from Level 1 to Level 3, NOK 643 million moved from level 2 to level 1 and NOK 2 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
30.06.2023 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
3 868
0
3 868
-1 932
-1 254
-2 408
649
625
Repos
0
0
0
0
0
0
0
0
Total
3 868
0
3 868
-1 932
-1 254
-2 408
649
625
LIABILITIES
Financial derivatives
4 853
0
4 853
-1 932
-344
-1 186
2 742
2 742
Repos
1 541
0
1 541
0
0
0
1 541
1 541
Total
6 395
0
6 395
-1 932
-344
-1 186
4 284
4 284
30.06.2022 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
1 560
0
1 560
-902
-831
-1 255
63
63
Repos
0
0
0
0
0
0
0
0
Total
1 560
0
1 560
-902
-831
-1 255
63
63
LIABILITIES
Financial derivatives
9 998
0
9 998
-902
-1 317
-7 366
1 818
1 825
Repos
2 583
0
2 583
0
0
0
2 583
2 583
Total
12 582
0
12 582
-902
-1 317
-7 366
4 401
4 408
31.12.2022 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
6 820
0
6 820
-1 861
-3 879
-1 796
470
437
Repos
0
0
0
0
0
0
0
0
Total
6 820
0
6 820
-1 861
-3 879
-1 796
470
437
LIABILITIES
Financial derivatives
3 158
0
3 158
-1 861
-63
-235
1 256
1 256
Repos
1 304
0
1 304
0
0
0
1 304
1 304
Total
4 462
0
4 462
-1 861
-63
-235
2 560
2 560
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 297 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 297 per cent.
30.06.2023
30.06.2022
31.12.2022
Solvency II - SCR ratio
297 %
304 %
288 %
NOK BILLIONS
30.06.2023
30.06.2022
31.12.2022
Simplified Solvency II Financial Position Statement
Assets, book value
792
731
713
Added values - hold-to-maturity portfolio/loans and receivables
-19
-12
-13
Added values - other lending
-2
-1
-2
Other added/lesser values
0
0
0
Deferred tax asset
0
0
0
Total assets - solvency II
771
717
699
NOK BILLIONS
30.06.2023
30.06.2022
31.12.2022
Simplified Solvency II Financial Position Statement
Best estimate
687
632
632
Risk margin
11
11
12
Hybrid Tier 1 securities/Subordinated loan capital
5
5
5
Other liabilities
25
32
9
Deferred tax liabilities
0
0
0
Total liabilities - solvency II
728
680
657
Excess of assets over liabilities
43
37
42
- Deferred tax asset
0
0
0
- Risk equalization fund (tier 2 own funds starting 30.09.2022)
-5
0
-5
+ Hybrid Tier 1 securities
2
2
1
Tier 1 basic own funds
40
38
38
Total eligible tier 1 own funds
40
38
38
Subordinated loans
3
3
3
Risk equalization fund (tier 2 own funds starting 30.09.2022)
5
0
5
Tier 2 basic own funds
8
3
8
Ancillary own funds
14
13
13
Tier 2 ancillary own funds
14
13
13
Deduction for max. eligible tier 2 own funds
-15
-9
-14
Total eligible tier 2 own funds
7
7
7
Deferred tax asset
0
0
0
Total eligible tier 3 own funds
0
0
0
Solvency II total eligible own funds
47
45
46
Solvency capital requirement (SCR)
16
15
16
Solvency II- SCR ratio
297 %
304 %
288 %
Note 12 Pension obligations
NOK MILLIONS
30.06.2023
30.06.2022
31.12.2022
Capitalized net liability 01.01.
815
870
870
Capitalized pension costs
97
103
215
Capitalized financial costs
14
10
19
Actuarial gains and losses
-396
-65
-132
Premiums / contributions received
-60
-57
-157
Capitalized net liability 30.06/31.12.
469
860
815
Assumptions
30.06.2023
30.06.2022
31.12.2022
Discount rate
3.00%
2.70%
3.00%
Salary growth
3.50%
2.75%
3.50%
The National Insurance basic amount (G)
3.25%
2.50%
3.25%
Pension increases
2.60%
1.75%
2.60%
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 31 million as of 30.06.2023. 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.
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
-30
-5
0
-35
New losses
7
0
0
7
Write-offs
-12
-24
0
-36
Change in risk model
0
0
0
0
Closing balance ECL 30.06.2023
226
14
0
239
Changes (01.01.2023 - 30.06.2023)
-35
-29
0
-64
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
598
-501
-97
0
Transfer to stage 2
-29
61
-33
0
Transfer to stage 3
-2
-64
65
0
Net changes
-624
936
20
332
New losses
175
173
26
374
Write-offs
-135
-180
-214
-529
Change in risk model
0
0
0
0
Closing balance ECL 30.06.2023
2 375
2 515
766
5 656
Changes (01.01.2023 - 30.06.2023)
-15
424
-232
178
This includes provisions for losses on loans and receivables - unused credit
3 112
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
-6
6
0
0
Transfer to stage 3
0
-34
34
0
Net changes
-51
97
-78
-32
New losses
41
138
0
180
Write-offs
-3
-36
-24
-63
Change in risk model
0
0
0
0
Closing balance ECL 30.06.2023
128
376
353
859
Changes (01.01.2023 - 30.06.2023)
-16
169
-69
85
This includes provisions for losses on loans and receivables - unused credit on mortgages
9
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
-6
0
0
-6
New losses
17
0
0
17
Write-offs
-9
0
0
-9
Change in risk model
0
0
0
0
Closing balance ECL 30.06.2023
186
0
0
186
Changes (01.01.2023 - 30.06.2023)
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
596
-499
-97
0
Transfer to stage 2
-22
55
-33
0
Transfer to stage 3
-2
-30
32
0
Net changes
-689
695
-103
-97
New losses
114
34
0
148
Write-offs
0
0
0
0
Change in risk model
0
0
0
0
Closing balance ECL 30.06.2023
2 037
2 139
316
4 491
Changes (01.01.2023 - 30.06.2023)
-4
255
-201
51
This includes provisions for losses on loans and receivables - unused credit on credit card
3 102
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
-1
0
0
-1
New losses
3
0
0
3
Write-offs
0
0
0
0
Change in risk model
0
0
0
0
Closing balance ECL 30.06.2023
23
0
0
23
Changes (01.01.2023 - 30.06.2023)
2
0
0
2
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
12
12
New losses
0
0
26
26
Write-offs
0
0
0
0
Change in risk model
0
0
0
0
Closing balance ECL 30.06.2023
0
0
98
98
Changes (01.01.2023 - 30.06.2023)
0
0
38
38
Note 14 Other current liabilites
NOK MILLIONS
30.06.2023
30.06.2022
31.12.2022
Short-term payables trade in securities
20 392
23 380
1 699
Incurred not assessed taxes
748
169
671
Accounts payable
389
263
199
Public fees
1 031
916
609
Other current liabilities
1 689
1 937
1 055
Total other current liabilities
24 250
26 665
4 233
Note 15 Events after the reporting period
The extreme weather "Hans", which entered Norway in week 33, has caused a lot of water and flood-related damage in southern Norway.
All natural peril to property with fire insurance is covered by the Norwegian Natural Perils Pool, and the businesses are responsible for an amount corresponding to their share of domestic property insurance. For the group's non-life insurance business, this amounts to approximately 5 per cent. There are certain businesses that will cover damage costs to other assets, for example a damaged car or water intrusion, that arise as a result of the incident.
The damage is handled by the insurance company with which the customer has policies. Both joint damage costs through the Norwegian Natural Perils Pool and the business’s own replacement costs are grouped into a collective damage.
The total extent of damage for the extreme weather is still unclear, but the group's non-life insurance business has a separate reinsurance contract that covers total liability of over NOK 50 million.
Key figures – Accumulated
NOK MILLIONS
Q2 2023
Q1 2023
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Q4 2021
Q3 2021
KLP GROUP
Total assets
956 311
948 061
900 068
913 144
900 199
902 413
901 270
872 465
Equity
-3 684
-3 630
8 450
12 823
9 800
2 293
40 732
41 439
Solvency SCR ratio
297 %
282 %
304 %
306 %
304 %
299 %
287 %
264 %
Number of employees in the Group
1 099
1 091
1 093
1 095
1 081
1 060
1 048
1 032
KOMMUNAL LANDSPENSJONSKASSE
Profit before tax
774
539
918
461
216
71
288
1 699
Premium income for own account
51 102
7 663
50 523
40 248
33 081
7 503
50 161
41 163
- of which inflow of premium reserve
91
91
386
386
386
376
0
0
Insurance customers' funds incl. acc. profit
14 840
8 331
28 517
22 453
16 367
10 642
30 438
24 690
- of which funds with guaranteed returns
2 121
2 125
4 659
4 658
4 658
4 875
8 346
8 346
Net investment common portfolio
701 944
690 902
660 366
671 095
660 834
662 500
659 281
644 160
Net investment choice portfolio
2 833
2 683
2 609
2 602
2 665
2 588
2 199
2 156
Insurance funds incl. earnings for the year
715 239
668 235
654 324
641 805
654 482
644 226
652 444
634 112
- of which funds with guaranteed interest
592 053
552 840
552 101
542 820
548 891
526 324
526 235
513 186
Solvency capital requirement (SCR)
47 317
46 768
46 158
46 307
44 901
44 809
45 190
44 536
Solvency SCR ratio
330 %
316 %
318 %
341 %
340 %
332 %
316 %
289 %
Riskprofit
270
71
558
963
550
105
589
625
Return profits
21 243
13 232
-20 006
-27 421
-20 374
-7 894
15 134
9 347
Administration profit
62
54
-17
56
-22
-9
35
159
Solvency capital
151 993
151 550
140 958
129 556
138 338
151 201
196 049
176 437
Value-adjusted return on common portfolio
4,2 %
2,5 %
-1,1 %
-2,6 %
-2,1 %
-2,3 %
8,4 %
5,6 %
Return on unit-linked portfolio
5,6 %
3,4 %
-2,5 %
-4,2 %
-3,5 %
-1,2 %
8,9 %
5,8 %
Return on corporate portfolio
1,5 %
0,9 %
2,8 %
1,4 %
0,9 %
0,6 %
3,4 %
2,5 %
KLP SKADEFORSIKRING AS
Profit before tax
189
99
111
49
88
57
0
0
Insurance income
1 230
630
2 200
1 629
1 071
546
0
0
Owners' equity
2 543
2 446
2 369
2 339
2 367
2 370
0
0
Claims ratio
87,6 %
91,7 %
80,8 %
80,3 %
73,4 %
79,6 %
76,4 %
73,6 %
Combined-ratio
13,9 %
13,9 %
14,5 %
14,2 %
15,3 %
15,5 %
92,1 %
85,1 %
Return on assets under management
3,6 %
2,7 %
-1,7 %
-2,5 %
-2,1 %
-0,9 %
5,0 %
3,4 %
Solvency capital requirement (SCR)
2 377
2 309
2 222
2 250
2 273
2 329
2 278
2 290
Solvency SCR ratio
222 %
215 %
222 %
219 %
225 %
222 %
224 %
267 %
Annual premium in force – retail market
1 013
982
954
933
918
893
871
847
Annual premium in force – public sector market
1 521
1 474
1 341
1 325
1 318
1 210
1 149
1 135
Net new subscriptions (accumulated within the year)
43
20
121
123
113
7
91
76
KLP BANKEN GROUP
Profit/loss before tax
122
53
181
98
43
18
116
94
Net interest income
221
110
369
258
159
72
309
233
Other operating income
44
21
85
63
43
20
79
59
Operating expenses and depreciation
-134
-71
-247
-181
-123
-64
-239
-174
Net realized/unrealized changes in financial instruments to fair value