Return on the common portfolio of 1.5 per cent in the second quarter and 4.6 per cent in the year to date.
Moderate risk result due to increase in disability payments
Premium income used to finance adjustments to pension obligations in line with wage growth and changes in the basic amount (G) came to NOK 21.7 billion in the second quarter, compared to NOK 36.0 billion for the same period last year
The accrued pension rights that KLP manages on behalf of its customers exceeded NOK 600 billion in the second quarter
The solvency margin for the Group is 283 per cent.
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 second quarter of 2024, the Group had total assets of NOK 1,079 billion.
Public-sector occupational pensions
NOK MILLIONS
Customers
Company
Total
Investment result
26 383
169
26 553
Risk result
81
81
Interest guarantee premium
7
7
Administration result
65
65
Net income from investments in the corporate portfolio and other income/expenses in non-technical accounts
609
609
Tax
-172
-172
Other profit/loss elements
247
247
Profit/loss after Q2 2024
26 464
926
27 390
Profit/loss after Q2 2023
21 318
892
22 210
Investment result
KLP has guaranteed to provide customers on public-sector occupational pensions with financial income equivalent to NOK 6.6 billion after the first half-year. Actual financial income amounted to NOK 33.6 billion, a return of 4.6 per cent, so the investment result was NOK 26.4 (21.2) billion. Customers’ assets are mainly managed in the common portfolio.
Management of the common portfolio
The assets in the common portfolio totalled NOK 761.8 (709.1) billion:
Per cent
30.06.2024
30.06.2023
Return on the common portfolio
4,6
4,2
Return incl. value changes in hold-to-maturity bonds and lending
4,4
3,3
The returns figures apply to the common portfolio
Capital adequacy, Solvency II
344
330
Capital adequacy, Solvency II, with transitional measures
344
330
Equities
Total exposure in shares and alternative investments, including equity derivatives, was 34.0 per cent at the end of the second quarter. The total return on shares and alternative investments was 2.3 per cent in the quarter. The return on KLP’s global listed equities was 1.9 per cent, while its Norwegian equity portfolio returned 7.2 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 40 and 60 per cent. In the second quarter, the Norwegian krone strengthened against the US dollar and the euro, among other currencies. Currency hedging had a positive impact on the return on shares this quarter.
Short-term bonds and money market instruments measured at fair value
Short-term bonds accounted for 10.8 per cent and money-market instruments 2.8 per cent of the assets in the common portfolio at the end of the quarter. In Norway, the US and Europe, long-term government rates rose in the second quarter. KLP’s global government bond index achieved a currency-hedged return of minus 0.9 per cent in the quarter, while the return on the Norwegian government bond index was plus 0.5 per cent. Global credit margins increased slightly during the quarter. The quarterly return on KLP's global credit bond index was minus 0.2 per cent, while the return on the Norwegian bond index was plus 1.2 per cent. Short-term bonds produced a total return of 1.1 per cent in the second 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 28.0 per cent of the common portfolio at the end of the quarter. Unrecognised decreases in value in the portfolio amounted to NOK 9.8 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 this quarter was 0.9 per cent.
Property
Property investments, including Norwegian and international real estate funds, made up 13.2 per cent of the common portfolio.
Property investments in the common portfolio achieved a return of 1.1 per cent so far this year. The returns include currency hedging and property funds.
Lending
Lending in the common portfolio totals NOK 84.7 billion. This is split between NOK 72.7 billion in loans to the public sector, NOK 2.7 billion in secured mortgage loans and NOK 1.3 billion in loans with government guarantees, with the remaining NOK 7.6 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 1.5 billion at the end of the quarter. Returns so far this year are 2.2 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 1.4 per cent in the second quarter. Returns so far this year are 1.9 per cent
Risk result
The risk result is an indication of whether disability and mortality in the insured population are developing as expected.
During the first six months, there have been slightly higher disability payments than KLP had assumed. The result so far this year related to disability amounts to NOK -493 (-313) million. In handling settlement cases for disability pensions, KLP has seen many applications coming in long after the applicants could have been granted a disability pension. KLP wants, and has a responsibility, for ensuring that members receive the compensation they are entitled to as quickly as possible. KLP therefore took an initiative against NAV to get an overview over which members who had received payments from NAV but had not applied for the same from KLP. This led us to contact these members and urge them to apply for a disability pension with KLP. This resulted in a backlog of cases which affected the disability payments in the first half of the year. In the future, similar actions with members will become an annual routine
So far this year, the result related to mortality amounts to NOK 574 (582) million. The overall risk result is NOK 81 (270) million after the first six months.
In the second quarter, the disability result was NOK -190 (+67) million, while the results related to life expectancy and survivor’s pensions show a surplus of NOK 189 (131) million.
The overall risk result in the second quarter shows a deficit of NOK 1 (199) million.
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 profit of NOK 65 (62) million for the year to date. Insurance-related operating costs came to NOK 793.2 (761) million so far this year.
Financial strength and capital-related matters
KLP’s total assets have increased by NOK 49.3 billion in the year to date and amount to NOK 836.4 billion. The premium reserve increased by NOK 27.2 billion to NOK 600.1 billion in the same period.
The buffer fund amounts to NOK 109.1 billion after the second quarter. The fund can be used to cover any shortfall in returns from the management of customer funds and is thus a financial buffer. A positive interim result to customers of NOK 26.5 billion also constitutes a buffer.
Without applying transitional rules, the Company’s solvency capital requirement (SCR) is 344 per cent. This is a reduction of 7 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
30.06.2024
30.06.2023
All figures in per cent
Proportion
Return
Proportion
Return
Equities
34,0 %
10,5 %
32,4 %
11,7 %
Short-term bonds
28,0 %
1,8 %
28,8 %
1,6 %
Long-term/HTM bonds
13,2 %
1,1 %
14,6 %
-0,8 %
Lending
11,2 %
2,2 %
11,7 %
1,7 %
Property
10,8 %
1,6 %
11,0 %
1,3 %
Other financial assets
2,8 %
2,7 %
1,4 %
1,8 %
Premium income
Premium income excluding premium reserves received on transfers in amounts to NOK 37.3 (51.0) billion at the end of the second quarter. Of this, premiums related to the regulation of accrued rights amount to NOK 22 (36.6) billion.
Claims/benefits
Pensions paid and other claims, excluding ceded premium reserves, amounted to NOK 13.7 (12.7) billion at the end of the second quarter.
Other matters
The market situation for public-sector occupational pensions is stable. 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 second quarter of 2024 shows a profit/loss before tax and other provisions of NOK 181.3 (90.2). million The insurance result was good in the second quarter, with no large natural perils claims.No other major claim events were reported in the period. Dissolution of previous years’ reserves also had a positive effect. Financial income amounted to NOK 74.8 (47.2) in the quarter, representing a return of 1.2 per cent.
The profit for the year to date before tax and other provisions amounts to NOK 63.7 (189.5) million as of 30.06.24. This is less than expected and is due to the weak first quarter results.
Volume growth so far this year is NOK 165 million, and premium volume was NOK 2,750 (2,534) million at the end of the second quarter of 2024. The increase is primarily due to increased premiums. Premium income increased by 11.0 per cent, or NOK 135 million, compared with the same time in 2023. For the public-sector and corporate markets, premiums increased by 9.3 per cent, while the corresponding increase for the retail market was 13.6 per cent.
No claims over NOK 20 million were reported in the second quarter, but three such claims have been filed so far this year, with a total provision of NOK 163 million. There were also 30 claims in the NOK 2-20 million range, with total payments of NOK 152 million; 16 of these claims were filed in the first quarter. The result as at 30.06 is also affected by a major natural event in the first quarter, storm Ingunn, where the Company’s costs came to NOK 28 million after an upwards adjustment of NOK 3 million during the second quarter.
Reversals of previous years’ claims are positive, and NOK 62 million have been recognised so far this year, equivalent to 2.6 per cent of the reserves at the beginning of the year.
Key figures
30.06.2024
30.06.2023
2023
Claims ratio
81,4
82,6
83,5
Reinsurance percentage
9,7
5
2,8
Cost ratio
13,6
13,9
14
Combined ratio
104,8
101,5
100,4
Net financial income as of 30.06.24 was NOK 171.5 (197.0) million, equivalent to 2.9 (3.6) per cent.
The solvency margin (SCR) increased from 210 per cent in the first quarter to 223 per cent at the end of the second quarter of 2024. The equivalent SCR at the end of 2023 was 227 percent. The decrease in the year to date is due to the weak first quarter performance.
Asset and fund management
KLP Kapitalforvaltning AS provides securities management in the KLP Group. It had a total of NOK 818 billion under management at the end of the first half-year, of which NOK 214 billion came from external customers. The majority of the assets are managed on behalf of KLP and its subsidiaries.
Net new subscriptions to KLP funds came to NOK 6.8 billion in the second quarter, and NOK 11.6 billion for the year to date. External customers had positive net new subscriptions of NOK 7 billion in the quarter, and NOK 12.7 billion in the year to date.
KLP Kapitalforvaltning achieved a profit before tax of NOK 53.1 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.
The KLP Banken Group had a pre-tax operating profit of NOK 166.9 (121.5) million in the second quarter. The change is mainly related to increased net interest income and gains on financial instruments.
Broken down by area, profits were NOK 121.9 (87.4) million in the retail market and NOK 45.0 (34.1) 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 254.6 (220.8) million in the second quarter. At the end of the quarter, the income statement includes a net gain on changes in the value of financial instruments of NOK 5.9 (-9.3) million. This profit/loss effect is mainly related to changes in the market value of the bank’s liquidity investments. Realised income makes up a negligible proportion of this.
Operating expenses and depreciation amounted to NOK -140 (-133.4) million in the second quarter.
Losses and loss provisions taken to profit/loss total NOK 0.0 (-0.4) 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.
The KLP Banken Group's lending balance as of 30 June 2024 was NOK 42.6 (42.9) billion. The split between the retail and public-sector markets was NOK 24.4 (23.4) billion and 18.2 (19.4) billion respectively.
The Bank’s mortgage products are aimed at the target group of members of the KLP pension schemes. Net mortgage growth in the second quarter was NOK 536 million, which is significantly higher than at the same time last year (NOK 168 million).
Lending volume to the public-sector market on KLP Banken’s balance sheet has decreased in 2024 by NOK 0.7 (increase of 0.3) billion. Loans to public-sector borrowers managed on behalf of KLP increased by NOK 1.8 (1.0) billion in the same period.
KLP Banken manages NOK 2.7 (2.9) billion in mortgage loans and NOK 79.7 (74.7) billion in loans to public-sector borrowers and other businesses on behalf of KLP.
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. Changes in measurement difference amounted to NOK 953 million in the second quarter, NOK 179 million so far this year. Equity totals NOK -2,556 million, which corresponds to unrecognised increases in the value of the Group’s assets of NOK 2,556 million.
In the second quarter, the Group achieved a profit reserved for policyholders of NOK 12.3 billion, and the figure for the year to date is NOK 32.1 billion. This is mainly due to an appreciation of the assets.
The best estimate of the insurance liability associated with public-sector occupational pensions was increased from NOK 366.0 to 367.2 billion in the quarter.
Liabilities to policyholders in public-sector occupational pension schemes, by virtue of their ownership role (residual value), grew from NOK 387.5 to 397.9 billion in the quarter.
Sustainability
Updated climate targets and transition plan
Along with many other Norwegian financial institutions, KLP has committed to complying with the Paris Agreement. If we are to achieve the climate targets and stop global warming, the whole of the global economy has to move towards zero emissions. In this perspective, all actors are small with limited individual influence. Through proposed updates to climate targets and initiatives, KLP will help to accelerate the pace of change within realistic limits, but we depend on everyone moving in the same direction to achieve our goals.
In light of this, KLP decided in May to update the climate strategy for the investment portfolio with quantitative targets for the short, medium and long term, along with measures that make it realistic to achieve the targets. To achieve the 2030 targets, we are putting forward an overall package of actions:
Influencing work: Bilaterally and as a contributor to broad investor cooperation
Long-term bonds: Companies with science-based transition plans aligned with to 1.5°C emissions paths will be prioritised for new investments
Equities and short-term bonds: Risk-based divestment from companies that are poorly adapted to the climate transition in selected high-emission sectors
Direct investments in climate and nature solutions
It is proposed to implement these measures in stages through to 2030, with a flexibility to cater for KLP's financial objectives and management practice. The four measures together are considered both necessary and sufficient for us realistically to achieve the proposed climate targets in the short and long term. The proposed allocation measures are judged to be both efficient and cost effective, viewed against KLP’s climate targets and management of climate risk, while contributing to the transition in the real economy.
Responsible ownership
In the second quarter, KLP focused on voting at general meetings and scrutinising companies for any involvement in rights violations in war and conflict situations.
The second quarter of the year is known as the high season for general meetings, and voting at these meetings is one of the key tools KLP uses in exercising its ownership. In the second quarter, we voted for 5,324 general meetings in Norway and around the world. We have supported a number of shareholder proposals related to topics such as climate lobbying, due diligence on human rights and climate transition plans. KLP has also promoted shareholder proposals together with other institutional investors for better tax reporting and reporting of compliance with employee rights, particularly the right to unionise.
Q2/2024
30.06.2024
31.12.2023
Number of company dialogues
46
120
243
Number of general meetings of Norwegian companies at which KLP voted
85
106
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
5 239
6 417
8 472
Percentage of general meetings of foreign companies at which KLP voted
99 %
100 %
100 %
Number of companies excluded from the investments
25
819
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 second quarter, KLP increased its investments in several of the seed funds in which we are already invested.
NOK MILLIONS
Q2/2024
30.06.2024
31.12.2023
Amount invested
Fair value
Seedcorn investments
159
625
575
Investments in banking and finance in developing countries
0
897
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 11.9 per cent of its financial assets at the end of the second 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 second quarter, these investments increased by around NOK 6.8 billion. The increase comes mainly from KLP’s investment in long-term bonds in the renewable energy sector as well as green bonds in Norway. 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
Q2/2024
30.06.2024
31.12.2023
Amount invested
Fair value
Zero-emission investments
5 447
47 523
44 174
As a share of KLP’s investments
5,9 %
5,6 %
Renewable energy
5 447
44 756
41 594
As a share of KLP’s investments
5,5 %
5,3 %
of which: renewable energy in Norway
5 363
25 278
22 458
of which: renewable energy abroad
85
17 522
16 789
of which: renewable energy in developing countries
0
1 956
2 348
Sustainable forests
0
2 766
2 580
Transitional financing
1 388
48 941
46 932
As a share of KLP’s investments
6,0 %
6,0 %
Green buildings in the property portfolio
0
25 299
25 420
Green buildings via mutual funds and bonds
0
2 503
2 502
Green loans
341
3 938
3 737
Green bonds
1 047
11 871
12 121
Sustainable infrastructure
0
5 329
3 152
Total climate-friendly investments
6 836
96 463
91 106
As a share of KLP’s investments
11,9 %
11,6 %
Fossil energy
16 029
15 020
As a share of KLP’s investments
2,0 %
1,9 %
Future leaders in the Norwegian local government and healthcare sector
For the fourth year running, KLP and AFF (the Administrative Research Institute at the Norwegian School of Economics) celebrated “Future leaders in the Norwegian local government and healthcare sector”. This year saw 90 leaders nominated, all young people at the start of their management careers. Of these, three were selected as winners, based on the way they stood out from the crowd in their style of leadership and the feedback they get from their colleagues.
With this award, KLP and AFF promote leaders in the public sector – a group that is in great demand in today’s labour market. As the pension company for the Norwegian local government and healthcare sector, we believe it is important for us to support the work of developing good managers, so the prize is a chance to take part in AFF’s renowned Solstrand management programme, Accelerate.
Changes in the Board of Directors
Eli Arnstad was elected to the Board at the Corporate Assembly in April. She replaces Ingunn Trosholmen, who stepped down from the Board in October 2023.
Future prospects
KLP has achieved good results so far in 2024. However, 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.
KLP is prepared for increasing tendering activity. 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 in the next 75 years too.
Oslo, 23 August 2024
The Board of Directors of Kommunal Landspensjonskasse gjensidig forsikringsselskap
TINE SUNDTOFT
Chair
Terje Rootwelt
Deputy Chair
Egil Matsen
Kjerstin Fyllingen
Eli Arnstad
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
Q2 2024
Q2 2023
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
3, 5
Insurance service result
191
- 120
184
- 30
- 1 925
Net income from investments measured at fair value with changes in P/L
16 445
13 702
54 198
41 437
76 263
Net income from investments not measured at fair value with changes in P/L
20
21
39
39
78
4
Fair value adjustment investment properties and rental income
1 446
-559
1 475
-63
-2 547
Net income from associated companies and joint ventures
64
-44
-486
31
504
Net interest income banking
129
112
256
222
468
Unit holder's value change in consolidated securites funds
-4 463
-8 405
-21 785
-20 540
-27 286
Total net income
13 641
4 826
33 698
21 127
47 480
Policyholder's share of changes in fair value of underlying items
-12 307
-4 321
-32 144
-21 946
-44 179
Other insurance related financial cost
-24
26
-43
6
-42
5
Net insurance related financial cost
-12 331
-4 295
-32 187
-21 939
-44 221
Net insurance services and financial result
1 501
411
1 695
-842
1 334
6
Net costs subordinated loan and hybrid Tier 1 securities
128
-84
-133
-551
-463
Operating expenses
-250
-258
-577
-525
-1 124
Other income
15
9
25
17
77
Other expenses
4
-20
-68
-93
-77
Pre-tax income
1 398
58
942
-1 995
-253
Cost of taxes 1
-445
-431
-763
-761
-1 031
Income
953
-373
179
-2 756
-1 284
12
Actuarial loss and profit on post employment benefit obligations
134
365
332
396
-146
Tax on items that will not be reclassified to profit or loss
-26
-57
-53
-62
22
Items that will not be reclassified to profit or loss
107
308
280
334
-125
4
Revaluation real property for use in own operation
13
-113
14
-121
-308
4
Currency translation foreign properites
-537
155
115
2 470
2 139
Tax on items that will be reclassified to profit or loss
-3
28
-4
30
77
Items that will be reclassified to income particular specific conditions are met
-527
70
125
2 379
1 908
Total other comprehensive income
-419
378
405
2 713
1 784
Total comprehensive income 2
534
5
584
-42
499
1 Unit holders share of taxes in consolidated security funds
-124
-117
-234
-204
-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 30.06.2024 of minus NOK 2,556 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 584 million, will thus appear as a result.
Financial position statement KLP Group
NOTE
NOK MILLIONS
30.06.2024
30.06.2023
31.12.2023
Deferred tax assets
25
35
48
Other intangible assets
1 517
1 234
1 379
Tangible fixed assets
2 299
2 485
2 277
Investments in associated companies and joint venture
6 017
5 745
6 620
4, 9
Investment property
95 529
96 070
92 322
5
Reinsurance contract assets
538
728
728
7, 9
Fixed income securitites and other debt instruments at fair value
403 953
362 781
410 569
7
Fixed income securitites and other debt instruments at amortized costs
2 294
2 217
2 254
7, 9
Lending local government, enterprises & retail customers at fair value through profit / loss
84 057
78 975
81 136
7
Lending local government, enterprises & retail customers at amortized costs
42 804
42 930
42 856
7, 9
Equity capital instruments at fair value through profit/loss
421 518
336 111
354 757
7, 9
Financial derivatives
3 766
3 868
15 587
7
Receivables
10 221
19 831
2 678
Cash and bank deposits
4 743
3 301
3 509
TOTAL ASSETS
1 079 281
956 311
1 016 721
7, 8
Hybrid Tier 1 securities
1 356
1 540
1 434
7, 8
Subordinated loan capital
3 358
3 346
3 327
12
Pension obligations
640
469
913
5
Insurance obligations with the right to residual value
792 460
707 059
762 789
5
Other insurance liabilities
3 941
3 776
3 392
7, 8
Covered bonds issued
29 986
30 606
30 504
7, 8
Debt to credit institutions
3 286
4 368
13 041
7, 8
Liabilities to and deposits from customers
15 629
14 524
14 060
7
Financial derivatives
3 218
4 853
3 249
Deferred tax
1 179
1 129
1 187
13
Other current liabilities
12 145
24 265
6 036
Equity
-2 556
-3 684
-3 140
Unit holders`s interest in consolidated securites funds
214 640
164 060
179 929
TOTAL EQUITY AND LIABILITIES
1 079 281
956 311
1 016 721
Contingent liabilities
37 355
33 096
31 409
Changes in owners’ equity KLP Group
2024 NOK MILLIONS
Equity
Owners’ equity 31 December 2023
- 3 140
Income
179
Items that will not be reclassified to income
280
Items that will be reclassified to income later when particular conditions are met
125
Total other comprehensive income
405
Total comprehensive income
584
Owners’ equity 30 June 2024
- 2 556
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
- 2 756
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
- 2
Owners’ equity 30 June 2023
- 3 684
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 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
Net cash flow from operational activities
-13 757
-3 581
-17 076
Net cash flow from investment activities 1
-213
-252
-470
Net cash flow from financing activities 2
15 203
3 812
17 734
Net changes in cash and bank deposits
1 234
-21
188
Holdings of cash and bank deposits at start of period
3 509
3 321
3 321
Holdings of cash and bank deposits at end of period
4 743
3 301
3 509
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 – 30.06.2024. 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 30.06.2024. 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.
Changes in IFRS® Accounting Standards
A new accounting standard for presentation and disclosures in financial statements, IFRS 18, has been published by the IASB in April 2024. This new standard will replace IAS 1 Presentation of Financial Statements. If endorsed by the EU, the standard will be effective for annual reporting periods beginning on or after 1 January 2027. IFRS 18 is not expected to have a significant impact on the group's financial reporting. KLP does not plan to early implement the standard.
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 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
Result from insurance services
0
0
0
121
152
342
0
0
0
0
0
0
Premium income for own account
37 257
51 102
70 326
0
0
0
0
0
0
0
0
0
Net financial income from investments
33 573
27 556
42 712
174
200
319
261
212
468
16
7
23
Claims for own account
-16 132
-14 840
-28 261
0
0
0
0
0
0
0
0
0
Insurance provisions for own account
-53 661
-62 655
-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
-43
6
-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
1 038
1 164
462
253
358
619
261
212
468
16
7
23
Net financial income from investments in companys portefolio
713
972
1 494
0
0
0
0
0
0
0
0
0
Net costs subordinated loan and hybrid Tier 1 securities
-90
-580
-443
0
0
0
0
0
0
0
0
0
Operating expenses
-793
-761
-1 512
-189
-174
-356
-139
-132
-268
-260
-285
-528
Other income
748
703
1 463
0
5
10
48
45
92
298
282
560
Other expenses
-766
-724
-1 484
0
0
0
-3
-3
-7
0
0
0
Pre-tax income
850
774
-20
64
189
273
167
121
285
53
4
55
Cost of taxes
-172
-172
-82
-16
-47
-37
-6
21
-19
-13
-1
-12
Income
678
602
-101
48
142
235
161
142
267
40
3
42
Total other comprehensive income
247
290
-111
27
32
-10
12
13
-10
27
33
-14
Total comprehensive income
926
892
-213
75
174
225
173
155
257
67
36
29
Lending
309 773
290 270
301 887
0
0
0
44 646
44 214
44 434
0
0
0
Other assets
526 653
498 530
485 280
7 111
6 868
6 559
5 326
5 343
4 494
683
609
682
Total assets
836 426
788 800
787 167
7 111
6 868
6 559
49 973
49 557
48 928
683
609
682
Insurance liabilites
778 458
715 239
725 781
3 941
3 776
3 392
0
0
0
0
0
0
Other liabilities
13 220
29 756
17 541
501
548
573
46 693
46 485
45 754
195
180
260
Total liabilities
791 678
744 996
743 322
4 441
4 325
3 965
46 693
46 485
45 754
195
180
260
NOK MILLIONS
Other
Eliminations
Total
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
Result from insurance services
0
0
0
63
-182
-2 268
184
-30
-1 925
Premium income for own account
0
0
0
-37 257
-51 102
-70 326
0
0
0
Net financial income from investments
0
0
0
21 458
13 692
31 245
55 482
41 667
74 766
Claims for own account
0
0
0
16 132
14 840
28 261
0
0
0
Insurance provisions for own account
0
0
0
53 661
62 655
84 315
0
0
0
Policyholder's share of changes in fair value of underlying items
0
0
0
-32 144
-21 946
-44 179
-32 144
-21 946
-44 179
Other insurance related financial cost
0
0
0
0
0
0
-43
6
-42
Unit holder's value change in consolidated security funds
0
0
0
-21 785
-20 540
-27 286
-21 785
-20 540
-27 286
Total income
0
0
0
128
-2 582
-238
1 695
-842
1 334
Net financial income from investments in companys portefolio
0
0
0
-713
-973
-1 494
0
0
0
Net costs subordinated loan and hybrid Tier 1 securities
0
0
0
-44
29
-20
-133
-551
-463
Operating expenses
-5
-6
-12
810
832
1 553
-577
-525
-1 124
Other income
6
6
13
-1 076
-1 025
-2 062
25
17
77
Other expenses
0
0
0
701
635
1 414
-68
-93
-77
Pre-tax income
1
0
1
-194
-3 084
-847
942
-1 995
-253
Cost of taxes
0
0
0
-555
-561
-881
-763
-761
-1 031
Income
1
0
1
-749
-3 645
-1 728
179
-2 756
-1 284
Total other comprehensive income
1
1
0
90
2 345
1 930
405
2 713
1 784
Total comprehensive income
2
1
0
-659
-1 300
201
584
-43
499
Lending
0
0
0
-227 558
-212 580
-222 329
126 861
121 905
123 992
Other assets
12
11
11
412 635
323 046
395 702
952 420
834 406
892 729
Total assets
12
11
11
185 077
110 466
173 373
1 079 281
956 311
1 016 721
Insurance liabilites
0
0
0
14 002
-8 180
37 009
796 401
710 835
766 181
Other liabilities
2
2
4
224 826
172 188
189 547
285 436
249 160
253 680
Total liabilities
2
2
4
238 828
164 008
226 556
1 081 837
959 995
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
Q2 2024
Q2 2023
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
Insurance income
1 009
776
2 243
1 823
1 780
Insurance service expenses
-790
-821
-1 926
-1 791
-3 635
Reinsurance income (+)/ cost (-)
-27
-76
-133
-62
-71
Insurance service result
191
-120
184
-30
-1 925
Note 4 Investment property
NOK MILLIONS
Q2 2024
Q2 2023
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
Net rental income
1 072
880
2 099
1 809
3 873
Net value adjustment
374
-1 439
-624
-1 871
-6 420
Net income from investment properties
1 446
-559
1 475
-63
-2 547
Currency translate foreign properites (taken to other comprehensive income)
-537
155
115
2 470
2 139
Net income from investment properties included currency translate
910
-404
1 590
2 407
-407
NOK MILLIONS
30.06.2024
30.06.2023
31.12.2023
Investment property 01.01.
92 322
93 992
93 992
Value adjustment, including currency translation
- 509
598
- 4 280
Net additions
3 726
1 501
2 653
Other changes
- 4
- 22
- 42
Book value
95 529
96 070
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
0
0
0
0
Change in risk adjustment for non-financial risk for risk expired
0
-20
0
-20
Experience adjustment not related to future service
-43
0
0
-43
Insurance service result
-43
-20
0
-63
Change in risk adjustment for non-financial risk at the start of the period
0
-924
924
0
Accured interest
7 999
672
-8 671
0
Released cash flows
21
0
0
21
Changes in estimates related to future service
-4 240
-356
4 596
0
Change due to changes in discount curve
-13 404
-1 126
14 531
0
Result addes to policyholders
1 564
0
30 560
32 124
Insurance related financial cost
-8 061
-1 734
41 940
32 144
Premium
13 952
0
0
13 952
Claims and other insurance service expenses (incl. Investmentcomponents)
-16 361
0
0
-16 361
Total cash flows
-2 410
0
0
-2 410
Insurance obligations with the right to residual value 30 June 2024
367 228
27 313
397 919
792 460
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
-1 365
-1 365
Claims
1 155
47
0
1 202
Expenses
87
3
0
91
Other movements realted to current service
0
-17
0
-17
Changes that relate to past service
-131
-32
0
-163
Insurance service expenses
1 111
1
0
1 112
Insurance service result
1 111
1
-1 365
-254
Insurance related financial cost
53
-2
0
52
Premium
0
0
1 966
1 966
Claims and other insurance service expenses
-1 173
0
0
-1 173
Total cash flows
-1 173
0
1 966
793
Other changes
0
0
-42
-42
Other insurance liabilities 30 June 2024
2 936
127
878
3 941
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
-67
-67
Recoveries of incurred claims and other insurance service expenses
Reinsurance expenses -related to past service
-55
-11
0
-66
Insurance service expenses
-55
-11
0
-66
Insurance service result
-55
-11
-67
-133
Insurance related financial cost
10
-2
0
9
Premium
-154
0
80
-74
Total cash flows
-154
0
80
-74
Other changes
9
0
0
9
Reinsurance contracts assets 30 June 2024
508
27
3
538
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 1 half year 2024
Insurance service result
63
254
-133
0
184
Net insurance related financial cost
-32 144
-52
9
0
-32 187
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
158
0
158
Experience adjustment not related to future service
24
0
0
24
Insurance service result
24
158
0
182
Change in risk adjustment for non-financial risk at the start of the period
0
-2 257
2 257
0
Accured interest
6 745
524
-7 269
0
Released cash flows
3 923
0
0
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
0
0
18 022
18 022
Insurance related financial cost
17 524
-1 200
5 622
21 946
Premium
13 093
0
0
13 093
Claims and other insurance service expenses (incl. Investmentcomponents)
-15 003
0
0
-15 003
Total cash flows
-1 910
0
0
-1 910
Total other changes
0
0
6
6
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
0
-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
0
0
1 828
1 828
Claims and other insurance service expenses
-985
0
0
-985
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 1. half year 2023
Insurance service result
-182
214
-62
0
-30
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 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
Other changes
0
0
81
81
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
30.06.2024
30.06.2023
31.12.2023
1
5,1 %
5,5 %
4,8 %
2
5,0 %
5,3 %
4,7 %
3
4,8 %
5,1 %
4,4 %
4
4,6 %
4,9 %
4,2 %
5
4,5 %
4,7 %
4,1 %
10
4,3 %
4,4 %
4,0 %
15
4,2 %
4,3 %
4,0 %
25
4,0 %
4,1 %
3,9 %
50
3,8 %
3,8 %
3,7 %
75
3,7 %
3,7 %
3,7 %
100
3,6 %
3,7 %
3,6 %
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
30.06.2024
30.06.2023
31.12.2023
1
5,2 %
5,3 %
5,3 %
5
4,4 %
4,0 %
4,9 %
10
3,3 %
3,3 %
3,7 %
15
3,2 %
2,9 %
3,2 %
25
3,5 %
3,3 %
3,3 %
50
3,5 %
3,5 %
3,5 %
80
3,5 %
3,5 %
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
30.06.2024
30.06.2023
31.12.2023
Reduced mortality
-5 %
-4 375
-4 520
-4 519
Increased mortality
5 %
4 191
4 329
4 329
Increased disability
5 %
-388
-401
-401
Reduced disability
-5 %
391
404
404
Increased costs
5 %
-1 261
-1 303
-1 303
Reduced costs
-5 %
1 261
1 303
1 303
Increased yield curve
*)
32 536
31 810
33 594
Reduced yield curve
**)
-39 298
-38 858
-42 074
All changes to assumptions are in % change of the standard assumption applied as of 30/06/2024( 30/06/2023/31/12/2023).
*) 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
Q2 2024
Q2 2023
01.01.2024 -30.06.2024
01.01.2023 -30.06.2023
01.01.2023 -31.12.2023
SUBORDINATED LOANS
Interest costs
-32
-41
-72
-82
-153
Value changes
65
-108
-101
-319
-229
Net costs subordinated loans
33
-149
-173
-401
-382
PERPETUAL HYBRID TIER 1 SECURITIES
Interest costs
-18
-19
-38
-38
-75
Value changes
113
85
78
-112
-6
Net costs perpetual hybrid tier 1 securities
95
66
39
-150
-81
Net costs subordinated loan and hybrid Tier 1 securities
128
-84
-133
-551
-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
30.06.2024
30.06.2023
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
1 058
1 018
1 001
941
1 017
935
Foreign bonds
1 236
1 166
1 216
1 100
1 237
1 108
Fixed-income securities and other debt instruments at amortized cost
2 294
2 184
2 217
2 041
2 254
2 043
LENDING LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS AT FAIR VALUE THROUGH PROFIT/LOSS
Loans secured by mortgage
2 480
2 480
2 854
2 854
2 564
2 564
Loans to local government sector or enterprises with local government guarantee
74 736
74 736
68 866
68 866
71 056
71 056
Loans abroad secured by mortage and local government guarantee
6 181
6 181
5 311
5 311
5 245
5 245
Other lending
661
661
1 944
1 944
2 271
2 271
Total loans to local government, enterprises & retail customers at fair value
84 057
84 057
78 975
78 975
81 136
81 136
LENDING TO LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS – AT AMORTIZED COST
Loans to and receivables from customers
42 804
42 817
42 930
42 937
42 856
42 850
Total loans to local government, enterprises & retail customers at amortized cost
42 804
42 817
42 930
42 937
42 856
42 850
FIXED-INCOME SECURITIES AND OTHER DEBT INSTRUMENTS AT FAIR VALUE
Norwegian bonds
129 675
129 675
117 941
117 941
133 716
133 716
Norwegian certificates
13 679
13 679
9 341
9 341
8 189
8 189
Foreign bonds
213 997
213 997
198 491
198 491
209 125
209 125
Foreign certificates
700
700
468
468
898
898
Investments with credit institutions
45 901
45 901
36 540
36 540
58 641
58 641
Fixed income securitites and other debt instruments at fair value
403 953
403 953
362 781
362 781
410 569
410 569
EQUITY CAPITAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Shares
362 801
362 801
284 032
284 032
302 882
302 882
Equity funds
48 741
48 741
44 877
44 877
44 885
44 885
Property funds
7 566
7 566
7 202
7 202
6 990
6 990
Total equity capital instruments at fair value
421 518
421 518
336 111
336 111
354 757
354 757
RECEIVABLES
Receivables related to direct business
996
996
642
642
750
750
Receivables related to securites
8 177
8 177
18 516
18 516
1 309
1 309
Prepaid rent related to real estate activites
360
360
148
148
148
148
Other receivables
688
688
525
525
470
470
Total other loans and receivables including receivables from policyholders
10 221
10 221
19 831
19 831
2 678
2 678
FINANCIAL LIABILITIES
Debt to credit institutions
3 286
3 286
4 368
4 368
13 041
13 041
Covered bonds issued
29 986
30 084
30 606
30 541
30 504
30 526
Liabilities and deposits from customers
15 629
15 629
14 524
14 524
14 060
14 060
Total financial liabilities
53 615
53 712
54 383
54 319
62 366
62 389
NOK MILLIONS
30.06.2024
30.06.2023
31.12.2023
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
FINANCIAL DERIVATIVES - AT FAIR VALUE THROUGH PROFIT OR LOSS
Forward exchange contracts
2 654
579
2 802
1 641
13 525
1 152
Interest rate swaps
620
2 639
500
3 212
1 383
2 096
Interest rate and currency swaps
491
0
566
0
679
0
Share option
0
0
0
0
0
0
Total financial derivatives
3 766
3 218
3 868
4 853
15 587
3 249
Note 8 Borrowing
NOK MILLIONS
Nominal in NOK
Currency
Interest
Due date
Book value 30.06.2024
Book value 31.12.2023
FIXED - TERM SUBORDINATED LOAN
Kommunal Landspensjonskasse
2 530
EUR
Fixed ¹
2045
3 358
3 327
Total subordinated loan capital
2 530
-
-
-
3 358
3 327
HYBRID TIER 1 SECURITIES
Kommunal Landspensjonskasse
984
JPY
Fixed ²
2034
1 356
1 434
Total hybrid Tier 1 securities
984
-
-
-
1 356
1 434
COVERED BONDS
KLP Kommunekreditt AS
0
NOK
Floating
2024
0
1 562
KLP Kommunekreditt AS
3 000
NOK
Floating
2025
3 009
5 015
KLP Kommunekreditt AS
5 000
NOK
Floating
2026
5 053
5 053
KLP Kommunekreditt AS
1 000
NOK
Fixed
2027
1 017
1 012
KLP Kommunekreditt AS
6 000
NOK
Floating
2027
6 052
6 052
KLP Kommunekreditt AS
3 000
NOK
Floating
2028
3 027
0
KLP Kommunekreditt AS
700
NOK
Fixed
2029
722
706
KLP Boligkreditt AS
599
NOK
Floating
2024
599
1 555
KLP Boligkreditt AS
2 500
NOK
Floating
2025
2 501
2 501
KLP Boligkreditt AS
4 500
NOK
Floating
2026
4 533
4 536
KLP Boligkreditt AS
2 500
NOK
Floating
2027
2 516
2 516
KLP Boligkreditt AS
1 000
NOK
Floating
2029
1 003
0
Other
-45
-4
Total covered bonds
28 799
-
-
-
29 986
30 504
DEBT TO CREDIT INSTITUTIONS
KLP Banken AS
0
NOK
Floating
2023
0
0
KLP Banken AS
126
NOK
Floating
2024
127
453
KLP Banken AS
300
NOK
Floating
2025
301
301
KLP Banken AS
150
NOK
Floating
2026
151
151
KLP Banken AS
200
NOK
Floating
2027
202
0
KLP Fond
0
NOK/EUR/USD
Floating
2023
0
4 218
KLP Fond
0
NOK/EUR/USD
Fixed
2023
0
1 111
KLP Fond
0
NOK/EUR/USD
Floating
2024
487
0
KLP Fond
0
NOK/EUR/USD
Fixed
2024
147
0
Kommunal Landspensjonskasse
0
NOK/EUR/USD
Floating
2023
0
6 727
Kommunal Landspensjonskasse
0
NOK/EUR/USD
Fixed
2023
0
0
Kommunal Landspensjonskasse
0
NOK/EUR/USD
Floating
2024
1 784
0
Other
87
80
Total liabilities to credit institutions
776
-
-
-
3 286
13 041
LIABILITIES AND DEPOSITS FROM CUSTOMERS ³
Retail
13 173
NOK
13 173
12 087
Business
2 412
NOK
2 412
1 924
Foreign
43
NOK
43
50
Liabilities to and deposits from customers
15 629
-
15 629
14 060
Total financial liabilities
48 717
53 615
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
30.06.2024 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
94 247
94 247
Investment property
0
0
95 529
95 529
Lending local government, enterprises & retail customers at fair value
0
84 057
0
84 057
Certificates
3 524
10 855
0
14 380
Bonds
23 283
320 561
0
343 845
Fixed-income funds
0
9 161
16 115
25 276
Loans and receivables
19 786
667
0
20 453
Fixed income securitites and other debt instruments at fair value
46 594
341 244
16 115
403 953
Shares
350 929
6 048
5 824
362 801
Equity funds
2 707
0
39
2 745
Property funds
0
2 606
4 961
7 566
Special funds
0
759
1 651
2 410
Private Equity
0
0
45 995
45 995
Equity capital instruments at fair value
353 636
9 412
58 470
421 518
Financial derivatives
0
3 766
0
3 766
Total assets at fair value
400 229
438 478
170 114
1 008 822
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives
0
3 218
0
3 218
Debt to credit institutions ¹
2 358
147
0
2 506
Subordinated loan capital
0
3 358
0
3 358
Hybrid Tier 1 securities
0
1 356
0
1 356
Total financial liabilities at fair value
2 358
8 078
0
10 437
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 781 million per 30.06.2024.
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 local government, enterprises & retail customers at fair value
0
78 975
0
78 975
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
Loans and receivables
13 024
1 222
0
14 246
Fixed income securitites and other debt instruments at fair value
40 763
309 496
12 523
362 781
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
Equity capital instruments at fair value
276 008
9 342
50 761
336 111
Financial derivatives
0
3 868
0
3 868
Total assets at fair value
316 771
401 680
159 353
877 804
LIABILITIES BOOKED AT FAIR VALUE
Financial derivatives
0
4 853
0
4 853
Debt to credit institutions¹
1 772
1 541
0
3 313
Subordinated loan capital
0
3 346
0
3 346
Hybrid Tier 1 securities
0
1 540
0
1 540
Total financial liabilities at fair value
1 772
11 280
0
13 052
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.
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 local government, enterprises & retail customers 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
Loans and receivables
32 349
651
0
33 000
Fixed income securitites and other debt instruments at fair value
61 491
333 037
16 041
410 569
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
Equity capital instruments at fair value
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 institutions¹
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
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 905 million per 31.12.2023.
Changes in Level 3, Investment Property
Book value 30.06.2024
Book value 30.06.2023
Book value 31.12.2023
Opening balance 1 January
92 322
93 992
93 992
Sold
-104
0
0
Bought
3 831
1 501
2 653
Unrealised changes
-509
598
-4 280
Other changes
-10
-22
-42
Closing balance 30.06./31.12.
95 529
96 070
92 322
Realised gains/losses
0
0
0
Changes in Level 3, Financial Assets
Book value 30.06.2024
Book value 30.06.2023
Book value 31.12.2023
Opening balance 1 January
67 055
53 407
53 407
Sold
-2 575
-1 563
-4 923
Bought
6 630
6 911
15 430
Unrealised changes
3 475
4 528
3 141
Closing balance 30.06./31.12.
74 585
63 284
67 055
Realised gains/losses
695
565
1 863
Closing balance 30.06./31.12.
170 114
159 353
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 8 506 million as of 30.06.2024.
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 2nd quarter, NOK 1 416 million in stocks moved from Level 1 to Level 2, and NOK 723 million moved from level 2 to level 1. The movements are due to changes in liquidity.
Note 10 Presentation of assets and liabilities that are subject to net settlement
30.06.2024 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
3 766
0
3 766
-1 115
-2 246
-4 199
79
80
Repos
2 881
0
2 881
0
0
0
2 265
2 882
Total
6 646
0
6 646
-1 115
-2 246
-4 199
2 344
2 962
LIABILITIES
Financial derivatives
3 218
0
3 218
-1 115
-35
-44
2 101
2 102
Repos
147
0
147
0
0
0
147
147
Total
3 364
0
3 364
-1 115
-35
-44
2 249
2 249
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
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, the risk equalization fund, the natural perils fund 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 283 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 283 per cent.
30.06.2024
30.06.2023
31.12.2023 1
Solvency II - SCR ratio
283 %
297 %
285 %
NOK BILLIONS
30.06.2024
30.06.2023
31.12.2023 1
Simplified Solvency II Financial Position Statement
Assets, book value
839
792
790
Added values - hold-to-maturity portfolio/loans and receivables
-11
-19
-9
Added values - other lending
-1
-2
-1
Other added/lesser values
0
0
0
Deferred tax asset
0
0
0
Total assets - solvency II
827
771
779
NOK BILLIONS
30.06.2024
30.06.2023
31.12.2023 1
Simplified Solvency II Financial Position Statement
Best estimate
757
687
706
Risk margin
11
11
11
Hybrid Tier 1 securities/Subordinated loan capital
5
5
5
Other liabilities
8
25
13
Deferred tax liabilities
0
0
0
Total liabilities - solvency II
782
728
735
Excess of assets over liabilities
46
43
44
- Deferred tax asset
0
0
0
- Risk equalization fund and natural perils fund
-4
-5
-4
+ Hybrid Tier 1 securities
1
2
1
Tier 1 basic own funds
43
40
42
Total eligible tier 1 own funds
43
40
42
Subordinated loans
3
3
3
Risk equalization fund and natural perils fund
4
5
4
Tier 2 basic own funds
7
8
7
Ancillary own funds
15
14
14
Tier 2 ancillary own funds
15
14
14
Deduction for max. eligible tier 2 own funds
-15
-15
-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
50
47
49
Market risk
169
139
141
Counterparty risk
3
3
4
Life risk
126
125
113
Non-life risk
1
1
1
Health risk
0
0
0
Diversification
-63
-58
-56
Operational risk
3
3
3
Loss absorbing capacity of technical provisions
-223
-197
-190
Loss absorbing capacity deferred tax
-2
-2
-2
Capital requirement for other financial sectors
3
1
3
Solvency capital requirement (SCR)
18
16
17
Minimum consolidated group solvency capital requirement
4
4
5
Eligible own funds to meet the minimum consolidated group SCR
40
40
39
Solvency II- SCR ratio
283 %
297 %
285 %
1 Numbers per 31.12.2023 are changed to reflect a new capital requirement for the bank, taking effect by year-end 2023 for KLP group.
Note 12 Pension obligations
NOK MILLIONS
30.06.2024
30.06.2023
31.12.2023
Capitalized net liability 01.01.
913
815
815
Capitalized pension costs
117
97
197
Capitalized financial costs
16
14
28
Actuarial gains and losses
-332
-396
146
Premiums / contributions received
-73
-60
-274
Capitalized net liability 30.06./31.12.
640
469
913
Assumptions
30.06.2024
30.06.2023
31.12.2023
Discount rate
3.50%
3.70%
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 332 million as of 30.06.2024. The change is recognized in other comprehensive income in the income statement.
Note 13 Other current liabilites
NOK MILLIONS
30.06.2024
30.06.2023
31.12.2023
Short-term payables trade in securities
9 024
20 392
3 357
Incurred not assessed taxes
560
763
572
Accounts payable
290
389
301
Public fees
1 233
1 031
691
Other current liabilities
1 038
1 689
1 114
Total other current liabilities
12 145
24 265
6 036
Key figures – Accumulated
NOK MILLIONS
Q2 2024
Q1 2024
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Q4 2022
Q3 2022
KLP GROUP
Total assets
1 079 281
1 065 541
1 016 721
972 345
956 311
948 185
900 068
913 144
Equity
-2 556
-3 090
-3 140
-3 555
-3 684
-3 687
8 396
12 823
Solvency SCR ratio
283 %
288 %
285 %
332 %
297 %
282 %
288 %
306 %
Number of employees in the Group
1 168
1 153
1 133
1 120
1 099
1 091
1 093
1 095
KOMMUNAL LANDSPENSJONSKASSE
Profit before tax
926
183
-20
1 136
774
539
918
461
Premium income for own account
37 257
7 842
70 326
60 032
51 102
7 663
50 523
40 248
- of which inflow of premium reserve
1
0
92
91
91
91
386
386
Insurance customers' funds incl. acc. profit
16 132
9 265
28 261
21 501
14 840
8 331
28 517
22 453
- of which funds with guaranteed returns
2 419
2 456
2 139
2 125
2 121
2 125
4 659
4 658
Net investment common portfolio
761 757
751 512
734 337
718 214
701 944
690 902
660 366
671 095
Net investment choice portfolio
3 064
2 953
2 830
2 730
2 833
2 683
2 609
2 602
Insurance funds incl. earnings for the year
778 458
745 385
725 781
704 815
715 239
668 235
654 324
641 805
- of which funds with guaranteed interest
642 860
617 219
616 315
586 941
592 053
552 840
552 101
542 820
Solvency capital requirement (SCR)
50 482
49 575
49 517
49 918
47 624
46 768
46 158
46 307
Solvency SCR ratio
344 %
351 %
346 %
368 %
329 %
316 %
318 %
341 %
Riskprofit
81
82
648
364
270
71
558
963
Return profits
26 553
18 729
29 466
15 822
21 243
13 232
-20 006
-27 421
Administration profit
65
-8
144
176
62
54
-17
56
Solvency capital
167 161
155 824
164 487
147 893
151 993
151 550
140 958
129 556
Value-adjusted return on common portfolio
4,6 %
3,0 %
6,4 %
3,9 %
4,2 %
2,5 %
-1,1 %
-2,6 %
Return on unit-linked portfolio
5,8 %
4,0 %
8,3 %
4,8 %
5,6 %
3,4 %
-2,5 %
-4,2 %
Return on corporate portfolio
1,9 %
0,5 %
3,0 %
2,1 %
1,5 %
0,9 %
2,8 %
1,4 %
KLP SKADEFORSIKRING AS
Profit before tax
64
-118
273
255
189
99
111
49
Insurance income
1 365
707
2 505
1 863
1 230
630
2 200
1 629
Owners' equity
2 669
2 523
2 594
2 589
2 543
2 446
2 369
2 339
Claims ratio, gross
81,4 %
98,2 %
83,5 %
78,9 %
82,6 %
93,9 %
98,3 %
104,4 %
Net reinsurance ratio
9,7 %
15,0 %
2,8 %
4,7 %
5,0 %
-2,2 %
-19,0 %
-25,4 %
Claims ratio, net of reinsurance
91,2 %
113,1 %
86,3 %
83,6 %
87,6 %
91,7 %
79,3 %
79,0 %
Cost ratio
13,6 %
14,6 %
14,0 %
13,0 %
13,9 %
13,9 %
13,9 %
13,6 %
Combined ratio
104,8 %
127,7 %
100,4 %
96,6 %
101,5 %
105,6 %
93,2 %
92,6 %
Return on assets under management
2,9 %
1,7 %
5,5 %
3,3 %
3,6 %
2,7 %
-1,7 %
-2,5 %
Solvency capital requirement (SCR)
2 598
2 487
2 446
2 514
2 377
2 309
2 222
2 250
Solvency SCR ratio
223 %
210 %
227 %
246 %
222 %
215 %
222 %
219 %
Annual premium in force – retail market
1 149
1 107
1 068
1 042
1 013
982
954
933
Annual premium in force – public sector market
1 601
1 624
1 517
1 533
1 521
1 474
1 341
1 325
Net new subscriptions (accumulated within the year)
-38
-3
72
61
43
20
121
123
KLP BANKEN GROUP
Profit/loss before tax
167
75
285
203
122
53
181
98
Net interest income
255
127
465
340
221
110
369
258
Other operating income
46
22
89
67
44
21
85
63
Operating expenses and depreciation
-140
-81
-271
-201
-134
-71
-247
-181
Net realized/unrealized changes in financial instruments to fair value