KLP Group
Report for the fourth quarter of 2022
Strong financial strength and a good quarter for KLP and its subsidiaries, but weak financial markets have marked the year as a whole.
- The return in the fourth quarter of 2022 was 1.5 per cent; for the whole year it was minus 1.1 per cent.
- Risk result of NOK 558 million for the year.
- NOK 3.2 billion is transferred to the premium fund.
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 fourth quarter of 2022, the Group had total assets of NOK 901.6 billion, an increase of NOK 0.4 billion for the year.
The Group’s total comprehensive income was NOK 913 (490) million in 2022.
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 710.3 billion, NOK 654.3 billion is linked to insurance obligations within public-sector occupational pensions.
Results for the fourth quarter of 2022
Investment result
KLP achieved an investment result – the return in excess of that guaranteed by the company to its customers – totalling NOK -20.0 (14.9) billion for the year. The return on the common portfolio was 1.5 per cent for the fourth quarter and minus 1.1 per cent for the year.
Risk result
The risk events in the stock have been within expectations throughout the year and will vary from quarter to quarter. Net income was NOK -405 million in the fourth quarter and NOK 558 million for the year. The risk result was sharply reduced in the fourth quarter. This development is particularly related to disability, where a significant increase in provisions was observed from 2021 to 2022. The increase in provisions for disability must be seen in the context of changes in the regulations for work assessment allowances in 2021 and 2022. There are also accrual effects through the year which normally result in large provisions for disability in the fourth quarter.
Administration result
The Company’s administration result shows a loss of NOK 17 (35) million in 2022. Insurance-related operating costs came to NOK 1.5 (1.4) billion for the year.
Total profit/loss
Total profit/loss to the Company stands at NOK 897 (469) million for the year. The customer result is NOK -19.3 (15.5) billion for the year.
NOK millions | Customers | Company | Total |
---|---|---|---|
Investment result | -19 957 | -50 | -20 007 |
Risk result | 651 | -93 | 558 |
Interest guarantee premium | 266 | 266 | |
Administration result | -17 | -17 | |
Net income from investments in the corporate portfolio and other income/expenses in non-technical accounts | 811 | 811 | |
Tax | -115 | -115 | |
Other profit/loss elements | 94 | 94 | |
Profit/loss after Q4 2022 | -19 306 | 897 | -18 409 |
Profit/loss after Q4 2021 | 15 446 | 469 | 15 915 |
Financial strength and capital-related matters
KLP’s total assets increased by NOK 3.5 billion in the year, but decreased by NOK 10.5 billion in the fourth quarter in isolation, and now amount to NOK 710.3 billion. The premium reserve increased by NOK 31.8 billion to NOK 516.5 billion at year-end.
The Board of Directors will propose to the general meeting a transfer of NOK 2.6 billion from the buffer fund to the premium fund, in addition to the risk result. The buffer fund will decrease by NOK 22.6 billion through the year, ending on NOK 102.2 billion at year-end. KLP has solid financial buffers which allow it to achieve good long-term returns.
Without applying transitional rules, the Company’s capital adequacy is 337 per cent. KLP’s target is a capital adequacy of at least 150 per cent without applying transitional rules. Capital adequacy is well over this target and reflects the Company’s good financial strength.
Key figures
Per cent | At 31.12.2022 | At 31.12.2021 |
---|---|---|
Return on the common portfolio | -1,1 | 8,4 |
Return incl. value changes in hold-to-maturity bonds and lending | -3,9 | 6,7 |
The returns figures apply to the common portfolio | ||
Capital adequacy, Solvency II | 337 | 316 |
Capital adequacy, Solvency II, with transitional measures | 337 | 345 |
Premium income
Premium income excluding premium reserves received on transfers in amounted to NOK 50.1 (50.2) billion at the end of the fourth quarter.
Claims/benefits
Pensions paid and other claims, excluding ceded premium reserves, amounted to NOK 23.9 (22.1) billion at the end of the fourth quarter.
Management of the common portfolio
The assets in the common portfolio totalled NOK 660.4 (659.3) billion and were invested as shown below. The return is given for the year as a whole.
Assets | At 31.12.2022 | At 31.12.2021 | ||
---|---|---|---|---|
All figures in per cent | Proportion | Return | Proportion | Return |
Equities | 30,2 % | -8,0 % | 30,9 % | 22,8 % |
Short-term bonds | 12,2 % | -9,9 % | 13,8 % | -0,7 % |
Long-term/HTM bonds | 29,0 % | 3,3 % | 27,7 % | 3,5 % |
Lending | 12,0 % | 2,5 % | 11,9 % | 1,7 % |
Property | 14,7 % | 7,1 % | 13,8 % | 10,2 % |
Other financial assets | 1,9 % | 1,6 % | 1,9 % | 0,7 % |
Equities
Total exposure in shares and alternative investments, including equity derivatives, was 30.2 per cent at the end of the fourth quarter. The total return on shares and alternative investments was 4.1 per cent in the fourth quarter. KLP’s global exchange-listed equity portfolio produced a return of 5.3 per cent in the quarter, while the Norwegian equity portfolio had a return of 8.6 per cent.
The currency hedging ratio for equities in developed markets and the most liquid currencies in emerging markets was between 50 and 70 per cent in the fourth quarter. During this period, the Norwegian krone has appreciated against the US dollar, and currency hedging had a positive effect on the return on shares this quarter. For the year as a whole, the Norwegian krone depreciated against the US dollar and the euro, among other currencies. In 2022, currency hedging made a negative contribution to the return on shares.
Short-term bonds and the money market
Short-term bonds accounted for 12.2 per cent and money-market instruments 1.9 per cent of the assets in the common portfolio as at 31 December. KLP’s global government bond index achieved a currency-hedged return of minus 1.2 per cent in the fourth quarter, while the return on the Norwegian government bond index was 1.0 per cent. Lower global credit margins contributed to a quarterly return of 2.7 per cent on KLP’s global credit bond index. In total, short-term bonds achieved returns of 1.1 per cent in the fourth quarter. The money market return was also 1.1 per cent for this quarter.
Held-to-maturity bonds
Investment in long-term bonds and bonds held to maturity made up 29.0 per cent of the common portfolio at 31 December. Unrecognised decreases in value in the portfolio rose in the first quarter and amounted to NOK 10.9 billion at the end of the fourth quarter. The portfolio is well diversified and consists of securities issued by creditworthy borrowers. The return measured at amortised cost was 0.8 per cent in the fourth quarter and 3.3 per cent for the year.
Property
Property investments, including Norwegian and international property funds, accounted for 14.7 per cent of the common portfolio. Property values in the common portfolio were adjusted upwards by NOK 2.2 billion in the fourth quarter. The total write-up so far this year is NOK 3.2 billion, partly due to the fact that shopping centres and hotels are seeing a high level of activity after two years of pandemic and that rental prices for offices remain good. Property investments in the common portfolio achieved a return of 7.1 per cent in 2022.
Lending
Lending in the common portfolio totals NOK 78.5 billion. This is split between NOK 67.5 billion in loans to the public sector, NOK 0.7 billion in loans with government guarantees and NOK 2.9 billion in secured mortgage loans, with the remaining NOK 7.4 billion made up of other secured loans. The lending portfolio is of high quality, with no losses on municipal loans and very modest provisions for losses on mortgage loans. Unrecognised decreases in value in the lending portfolio (fixed-interest loans) totalled NOK 1.3 billion after the fourth quarter. The return for the year was 2.5 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 achieved a return of 1.4 per cent in the fourth quarter, and 2.8 per cent for the year.
Business areas of the subsidiaries
Non-life insurance
The results at 31 December show a pre-tax operating profit of NOK 9.8 (397.7) million. Profit growth in the fourth quarter was positive, mainly due to an improved financial result and a positive insurance result. Operating costs are lower than expected and the Company has continued to reverse previous years’ reserves, although the Company increased its reserves in the third quarter to cover delayed effects of Covid-19. For the fourth quarter in isolation, the profit was NOK 59.6 (53.8) million.
Premium volume stood at NOK 2 294 million at the end of the fourth quarter, an increase of NOK 273 million from the position at 31.12.2021. Premiums due have increased by 14.5 per cent, or NOK 292 million, compared with 2021. There is solid growth in all segments.
The insurance result was NOK 444 (426) million at 31 December. No major claims were reported during the fourth quarter. Reversal of previous years’ claims is still positive, and NOK 104 (109) million has been taken to income this year, equivalent to 5.4 (5.5) per cent of the reserves at the beginning of the year.
Key figures for the Company
At 31.12 2022 | At 31.12 2021 | |
---|---|---|
Claims ratio | 80,8 | 76,4 |
Cost ratio | 14,5 | 15,8 |
Combined ratio | 95,4 | 92,1 |
Waste disposal is an important social responsibility for the municipalities. So it is a priority for KLP Skadeforsikring to support this by offering the necessary insurance. Despite longstanding efforts to prevent fires, there is still a level of insurance risk that could be unacceptable in the long term. The Company has initiated discussions with key stakeholders in this area, and will continue this dialogue in the future.
Net financial income at year-end was NOK -97.6 (254.8) million, representing a return of minus 1.7 (5.0) per cent. Returns for the fourth quarter in isolation were NOK 40.6 (80.9) million, or 0.8 (1.6) per cent. This year, the equity portfolio has returned minus 12.6 (24.6) per cent. At the end of the year, the Company’s investments in interest-bearing funds had a return of minus 5.7 (0.0) per cent, while long-term bonds returned 3.3 (3.2) per cent. The return on real estate investments was 5.2 (10.5) per cent, after a write-up of NOK 7.3 million. The fourth quarter in isolation saw a return of 4.3 per cent on equities, 2.0 per cent on interest-bearing investments, and a 0.8 per cent on long-term bonds.
The Company’s financial position is satisfactory, with a solvency capital requirement (SCR) of 204 per cent at the end of the year, compared to 224 per cent at the end of 2021 and 219 per cent after the third quarter of this year. The reduction is due to increased deductibles and reinsurance premiums for 2023.
Asset and fund management
KLP Kapitalforvaltning provides securities management in the KLP Group. It had a total of NOK 640 billion under management at the end of the year, of which NOK 134 billion was for external customers. The majority of the assets are managed on behalf of KLP and its subsidiaries.
Net new subscriptions to the KLP funds were NOK 900 million 2022. External customers had net new subscriptions of NOK 13 billion in 2022.
KLP Kapitalforvaltning had pre-tax income of NOK 24 million in the fourth quarter and NOK 5 million for the 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’s total lending as of 31 December amounted to NOK 42.4 (39.9) billion. The split between the retail market and the public sector was NOK 23.3 (22.1) billion and 19.1 (17.8) billion respectively.
KLP Banken manages NOK 2.9 (3.0) billion in mortgage loans and NOK 73.4 (72.7) billion in loans to public-sector borrowers and other businesses on behalf of KLP.
The Bank’s mortgage products are aimed at the target group of members of the KLP pension schemes. KLP Banken had a mortgage growth of NOK 1.2 (1.5) billion through the year. Disbursements of new loans show a lower volume than at the same time last year, but the proportion of redemptions has also decreased. The public-sector market has experienced somewhat higher overall lending growth than last year.
The KLP Banken Group had a pre-tax operating profit of NOK 180.5 (116.1) million at the end of the fourth quarter. Operating revenues as a whole were strengthened in 2022 compared to 2021, especially in the public-sector market. Costs and impairments of financial instruments also affected this year’s accounts less than last year’s, and commission income from banking services increased. Broken down by area, profits were NOK 107.7 (87.6) million in the retail market and NOK 72.8 (28.5) million in the public-sector market. After tax and estimate deviations, the KLP Banken Group’s total profit at the end of the fourth quarter was NOK 174.3 (121.0) million.
Corporate social responsibility
More sustainable and renewable energy is crucial to addressing both the climate crisis and the nature crisis. KLP contributes to this through its investments. In the fourth quarter, for example, KLP invested in a Norwegian fund which aims to install solar panels on Norwegian roofs, and in a new investment partnership with Norfund to construct more power lines in India. KLP placed a total of NOK 805 million in climate-friendly investments in the quarter. In the year as a whole, KLP placed NOK 8.6 billion in such investments. The total market value of climate-friendly investments has now risen to more than NOK 61 billion. KLP’s investments have helped to finance renewable energy projects worldwide, and by the end of the year KLP had helped finance the construction of more than 50 renewable energy power plants.
In the last quarter of the year, there were two major events with a bearing on international cooperation on climate and nature. The climate summit highlighted the role of the financial markets and the importance of increasing climate finance and contributing to a restructuring of the global economy. During the climate summit, the UN launched a report with ten recommendations that companies should follow when designing their climate strategies and targets. KLP supports the 1.5-degree target, and was present at the climate negotiations. The UN Nature Summit was held in Canada in December. A new global nature framework for managing nature was agreed, containing specific goals for the protection of land and sea, and sustainable management of nature. Companies were also required to monitor and report publicly on their impact on nature and biodiversity. The finance industry is again highlighted as an important part of the solution for redirecting flows of money where they make a positive contribution to nature. KLP supports the new nature agreement, and places expectations on companies we invest in related to nature and biodiversity. KLP is participating in a project which started in the fourth quarter with Sabima and PwC, concerned with nature risk and mapping of environmental impact for Norwegian companies.
Future prospects and events after the end of the quarter
The year 2022 was marked by the war in Ukraine, along with rising inflation, interest rates and energy prices. This resulted in substantial movements in the financial markets. KLP has solid financial buffers which safeguard customers’ pension capital in periods of negative market movements. High interest rates are good for the management of pension capital in the period ahead.
Income statement KLP Group
NOTE | NOK MILLIONS | Q4 2022 | Q4 2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 |
---|---|---|---|---|---|
3 | Premium income for own account | 10 436 | 9 478 | 52 601 | 52 001 |
Current return on financial assets | 4 603 | 3 639 | 18 128 | 14 813 | |
Net interest income banking | 111 | 76 | 371 | 309 | |
Net value changes on financial instruments | 13 384 | 18 187 | -47 383 | 48 365 | |
8 | Net income from investment properties | -1 876 | 3 673 | 6 282 | 8 543 |
4 | Other income | 367 | 345 | 1 684 | 1 547 |
Total net income | 27 025 | 35 398 | 31 682 | 125 577 | |
Claims for own account | -5 660 | -6 170 | -29 348 | -31 855 | |
Change in technical provisions | -34 154 | -6 354 | -32 223 | -31 253 | |
Net costs subordinated loan and hybrid Tier 1 securities | 201 | 28 | -169 | 103 | |
6 | Operating expenses | -692 | -767 | -2 476 | -2 278 |
7 | Other expenses | -349 | -335 | -1 377 | -1 292 |
Unit holder's value change in consolidated security funds | -4 604 | -7 805 | 15 001 | -19 802 | |
Total expenses | -45 259 | -21 403 | -50 591 | -86 377 | |
Operating profit/loss | -18 234 | 13 995 | -18 910 | 39 200 | |
To/from securities adjustment fund – life insurance | 0 | -8 623 | 0 | -21 646 | |
To supplementary reserves – life insurance | 21 828 | -6 031 | 24 063 | -5 420 | |
Assets allocated to insurance customers - life insurance | -2 915 | -505 | -3 501 | -11 107 | |
Pre-tax income | 679 | -1 165 | 1 652 | 1 027 | |
Cost of taxes 1 | -135 | 108 | -801 | -748 | |
Income | 544 | -1 056 | 851 | 279 | |
19 | Actuarial loss and profit on post employment benefit obligations | 57 | 350 | 132 | 84 |
Adjustments of the insurance obligations | -13 | -46 | -21 | -16 | |
Tax on items that will not be reclassified to profit or loss | -5 | -54 | -17 | -12 | |
Items that will not be reclassified to profit or loss | 40 | 250 | 94 | 56 | |
Revaluation real property for use in own operation | -207 | 68 | -43 | 206 | |
8 | Currency translation foreign properites | -561 | -531 | 148 | -1 314 |
Adjustments of the insurance obligations | 561 | 531 | -148 | 1 314 | |
Tax on items that will be reclassified to profit or loss | 52 | -17 | 11 | -52 | |
Items that will be reclassified to income particular specific conditions are met | -156 | 51 | -32 | 155 | |
Total other comprehensive income | -116 | 301 | 62 | 211 | |
Total comprehensive income | 427 | -755 | 913 | 490 | |
1 Unit holders share of taxes in consolidated security funds | -71 | -75 | -359 | -296 |
Financial position statement KLP Group
NOTE | NOK MILLIONS | 31.12.2022 | 31.12.2021 |
---|---|---|---|
Deferred tax assets | 48 | 52 | |
Other intangible assets | 1 049 | 797 | |
Tangible fixed assets | 2 633 | 2 714 | |
Investments in associated companies and joint venture | 5 456 | 4 934 | |
8,11 | Investment property | 93 992 | 89 535 |
9,14 | Debt instruments held to maturity | 24 225 | 25 985 |
9,14 | Debt instruments classified as loans and receivables | 174 530 | 164 484 |
9,11,14 | Lending local government, enterprises & retail customers at fair value through profit / loss | 0 | 79 |
9,14 | Lending local government, enterprises and retail customers | 121 360 | 118 024 |
9,11,14 | Debt instruments at fair value through profit or loss | 181 815 | 188 172 |
9,11 | Equity capital instruments at fair value through profit/loss | 282 399 | 294 476 |
9,11,14 | Financial derivatives | 6 820 | 3 253 |
9 | Receivables | 3 989 | 5 377 |
14 | Cash and bank deposits | 3 321 | 3 388 |
TOTAL ASSETS | 901 636 | 901 270 | |
Owners’ equity contributed | 21 388 | 19 831 | |
Retained earnings | 21 482 | 20 901 | |
TOTAL OWNERS’ EQUITY | 42 870 | 40 732 | |
9,10 | Hybrid Tier 1 securities | 1 428 | 1 604 |
9,10 | Subordinated loan capital | 3 147 | 3 000 |
19 | Pension obligations | 815 | 870 |
15 | Technical provisions - life insurance | 652 618 | 653 551 |
Premiums, claims and contingency fund provisions - non-life insurance | 3 782 | 3 023 | |
9,10 | Covered bonds issued | 32 430 | 31 015 |
9,10 | Debt to credit institutions | 6 683 | 4 199 |
9,10 | Liabilities to and deposits from customers | 13 779 | 12 901 |
9,11 | Financial derivatives | 3 158 | 4 740 |
Deferred tax | 1 143 | 1 387 | |
16 | Other current liabilities | 4 951 | 6 808 |
Unit holders`s interest in consolidated securites funds | 134 831 | 137 440 | |
TOTAL LIABILITIES | 858 766 | 860 538 | |
TOTAL EQUITY AND LIABILITIES | 901 636 | 901 270 | |
Contingent liabilities | 31 083 | 28 754 |
Changes in owners’ equity KLP Group
2022 NOK MILLIONS | Owners' equity contributed | Retained earnings | Total equity contributed |
---|---|---|---|
Owners’ equity 31 December 2021 | 19 831 | 20 901 | 40 732 |
Change recognized directly in equity | 243 | 243 | |
Owners’ equity 1 January 2022 | 19 831 | 21 144 | 40 975 |
Income | 576 | 275 | 851 |
Items that will not be reclassified to income | 94 | 94 | |
Items that will be reclassified to income later when particular conditions are met | - 32 | - 32 | |
Total other comprehensive income | 62 | 62 | |
Total comprehensive income | 576 | 338 | 913 |
Owners' equity contribution received (net) | 982 | 982 | |
Total transactions with the owners | 982 | 982 | |
Owners’ equity 31 December 2022 | 21 388 | 21 482 | 42 870 |
2021 NOK MILLIONS | Owners' equity contributed | Retained earnings | Total equity contributed |
---|---|---|---|
Owners’ equity 1 January 2021 | 18 194 | 21 222 | 39 416 |
Income | 811 | - 532 | 279 |
Items that will not be reclassified to income | 56 | 56 | |
Items that will be reclassified to income later when particular conditions are met | 155 | 155 | |
Total other comprehensive income | 211 | 211 | |
Total comprehensive income | 811 | - 321 | 490 |
Owners' equity contribution received (net) | 826 | 826 | |
Total transactions with the owners | 826 | 826 | |
Owners’ equity 31 December 2021 | 19 831 | 20 901 | 40 732 |
Statement of cashflowKLP Group
NOK MILLIONS | 01.01.2022 -31.12.2022 | 01.01.2022 -30.09.2022 | 01.01.2022 -30.06.2022 | 01.01.2022 -31.03.2022 | 01.01.2021 -31.12.2021 |
---|---|---|---|---|---|
Net cash flow from operational activities | 36 211 | 42 855 | 40 710 | -1 917 | -24 289 |
Net cash flow from investment activities 1 | -346 | -250 | -173 | -82 | -278 |
Net cash flow from financing activities 2 | -35 932 | -42 493 | -40 153 | 1 583 | 25 182 |
Net changes in cash and bank deposits | -66 | 113 | 385 | -417 | 616 |
Holdings of cash and bank deposits at start of period | 3 388 | 3 388 | 3 388 | 3 388 | 2 772 |
Holdings of cash and bank deposits at end of period | 3 321 | 3 500 | 3 773 | 2 971 | 3 388 |
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 01.01.2022 – 31.12.2022. 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. The same accounting principles and calculation methods have been used in the interim financial statements as in the last annual financial statements, unless stated otherwise.
The interim financial statements do not contain all the information required of complete financial statements, and this interim financial report should be read in the context of the annual financial statements for 2021. The annual financial statements are available at KLP’s website klp.no.
Accounting estimates
In preparing the interim financial statements, management has exercised discretion and used estimates and assumptions that affect the accounting figures. Actual figures may deviate from estimates used.
Note 2 Segment information
NOK MILLIONS | Group pensions pub. sect. & group life | Non-life insurance | Banking | Asset management | Other | Eliminations | Total | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 | |
Premium income for own account from external customers 1 | 50 523 | 50 161 | 2 105 | 1 865 | 0 | 0 | 0 | 0 | 0 | 0 | -27 | -25 | 52 601 | 52 001 |
Net financial income from investments | -7 013 | 50 228 | -91 | 259 | 345 | 277 | 0 | 2 | 0 | 0 | -15 844 | 21 263 | -22 602 | 72 029 |
Other income | 1 784 | 1 999 | 7 | 2 | 84 | 78 | 607 | 608 | 12 | 12 | -811 | -1 151 | 1 684 | 1 547 |
Total income | 45 294 | 102 388 | 2 021 | 2 125 | 429 | 355 | 607 | 610 | 12 | 12 | -16 682 | 20 086 | 31 682 | 125 577 |
Claims for own account | -27 663 | -30 438 | -1 685 | -1 417 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -29 348 | -31 855 |
Insurance provisions for own account | -32 207 | -31 246 | -16 | -7 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -32 223 | -31 253 |
Costs borrowing | -169 | 103 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -169 | 103 |
Operating costs excluding depreciation | -1 329 | -1 147 | -305 | -298 | -241 | -229 | -595 | -548 | -11 | -10 | 107 | 182 | -2 373 | -2 050 |
Depreciation | -81 | -162 | -5 | -5 | -2 | -5 | -7 | -6 | 0 | 0 | -8 | -50 | -103 | -228 |
Other expenses | -1 507 | -1 425 | 0 | 0 | -6 | -5 | 0 | 0 | 0 | 0 | 136 | 138 | -1 377 | -1 292 |
Unit holder's value change in consolidated security funds | 15 001 | -19 802 | 15 001 | -19 802 | ||||||||||
Total expenses | -62 956 | -64 315 | -2 011 | -1 728 | -249 | -239 | -602 | -554 | -11 | -10 | 15 237 | -19 531 | -50 591 | -86 377 |
Operating profit/loss | -17 662 | 38 074 | 10 | 398 | 180 | 116 | 5 | 56 | 2 | 2 | -1 445 | 555 | -18 910 | 39 200 |
Funds credited to insurance customers 2 | 18 580 | -37 786 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 982 | -388 | 20 562 | -38 173 |
Pre-tax income | 918 | 288 | 10 | 398 | 180 | 116 | 5 | 56 | 2 | 2 | 537 | 167 | 1 652 | 1 027 |
Cost of taxes | -115 | 125 | -22 | -68 | -14 | 0 | -2 | -13 | 0 | 0 | -647 | -791 | -801 | -748 |
Income | 803 | 413 | -13 | 329 | 166 | 116 | 3 | 43 | 1 | 1 | -109 | -624 | 851 | 279 |
Change in other comprehensive income | 94 | 56 | 14 | 8 | 8 | 5 | 11 | 2 | 0 | 0 | -65 | 140 | 62 | 211 |
Total comprehensive income | 897 | 469 | 1 | 337 | 174 | 121 | 14 | 45 | 2 | 2 | -175 | -484 | 913 | 490 |
Assets | 710 268 | 706 748 | 6 571 | 5 976 | 50 511 | 47 482 | 635 | 636 | 11 | 9 | 133 641 | 140 419 | 901 636 | 901 270 |
Liabilities | 667 468 | 666 070 | 4 302 | 3 710 | 47 544 | 44 961 | 241 | 256 | 3 | 3 | 139 206 | 145 537 | 858 766 | 860 538 |
¹ Premium income covers premiums earned for own account including savings premium and transferred premium reserves from other companies. | ||||||||||||||
² Funds transferred to the insurance customers include transfers to the premium fund, provisions to the securities adjustment fund, provisions to supplementary reserves and other provisions of surplus funds to the insurance customers. |
The KLP Group’s business is divided into the six areas: public sector occupational pension/group life, enterprise (defined benefit) and defined contribution pension, 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 offer 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 Premium income for own account
NOK MILLIONS | Q4 2022 | Q4 2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 |
---|---|---|---|---|
Contribution service pension | 10 460 | 9 497 | 52 312 | 52 075 |
Reinsurance premiums ceeded | -24 | -19 | -97 | -75 |
Transfer of premium reserves from others | 0 | 0 | 386 | 0 |
Total premium income | 10 436 | 9 478 | 52 601 | 52 001 |
Note 4 Other income
NOK MILLIONS | Q4 2022 | Q4 2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 |
---|---|---|---|---|
Supplement contractual early retirement scheme (ERS) | 345 | 331 | 1 354 | 1 265 |
Other income 1 | 21 | 14 | 330 | 282 |
Total other income | 367 | 345 | 1 684 | 1 547 |
1 Other income includes investment from associated and joint ventures companies, so the results can be both negative and positive. |
Note 5 Subordinated loans and perpetual hybrid tier 1 securities
NOK MILLIONS | Q4 2022 | Q4 2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 |
---|---|---|---|---|
SUBORDINATED LOANS | ||||
Interest costs ¹ | -32 | -31 | -131 | -124 |
Value changes | 48 | 26 | -143 | 132 |
Net costs subordinated loans | 15 | -5 | -274 | 8 |
PERPETUAL HYBRID TIER 1 SECURITIES | ||||
Interest costs | -16 | -16 | -72 | -64 |
Value changes | 201 | 49 | 176 | 159 |
Net costs perpetual hybrid tier 1 securities | 186 | 33 | 104 | 96 |
Net costs subordinated loan and hybrid Tier 1 securities | 201 | 28 | -169 | 103 |
¹ Besides pure interest costs, this includes recognition through profit/loss of a discount on one subordinated loan. | ||||
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 6 Operating expenses
NOK MILLIONS | Q4 2022 | Q4 2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 |
---|---|---|---|---|
Personnel costs | 400 | 364 | 1 401 | 1 248 |
Depreciation and writedowns | 39 | 112 | 149 | 228 |
Other operating expenses | 254 | 291 | 926 | 802 |
Total operating expenses | 692 | 767 | 2 476 | 2 278 |
Note 7 Other expenses
NOK MILLIONS | Q4 2022 | Q4 2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 |
---|---|---|---|---|
Supplement contractual early retirement scheme (ERS) | 345 | 331 | 1 354 | 1 265 |
Other expenses | 4 | 4 | 23 | 27 |
Total other expenses | 349 | 335 | 1 377 | 1 292 |
Note 8 Investment property
NOK MILLIONS | Q4 2022 | Q4 2021 | 01.01.2022 -31.12.2022 | 01.01.2021 -31.12.2021 |
---|---|---|---|---|
Net rental income | 736 | 785 | 2 944 | 3 040 |
Net value adjustment | -2 613 | 2 829 | 3 338 | 5 444 |
Realised gains | 0 | 59 | 0 | 59 |
Net income from investment properties | -1 876 | 3 673 | 6 282 | 8 543 |
Currency translate foreign subsidiaries (taken to other comprehensive income) | -561 | -531 | 148 | -1 314 |
Net income from investment properties included currency translate | - 2 437 | 3 142 | 6 430 | 7 229 |
NOK MILLIONS | 31.12.2022 | 31.12.2021 |
---|---|---|
Investment property 01.01. | 89 535 | 81 485 |
Value adjustment, including currency translation | 3 486 | 4 130 |
Net additions | 991 | 3 913 |
Other changes | - 20 | 7 |
Investment property | 93 992 | 89 535 |
Note 9 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.
This note contains information on the three different categories of financial instruments: balance sheet classification, accounts classification and type of instrument. For the latter information is also provided on how fair value is derived.
FINANCIAL INSTRUMENTS MEASURED AT AMORTISED COST
This category includes:
- Investments held to maturity
- Bonds classified as loans and receivables
- Other loans and receivables
- Liabilites to and deposits from customers (liabilities)
- Subordinated loan capital (liabilities)
- 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
- Debt instruments at fair value
- Derivatives (assets and liabilites)
- Debt to credit institutions (liabilites)
Below is a list of which types of financial instrument come under the various accounts categories, and how fair value is calculated.
- INVESTMENTS HELD TO MATURITY
- BONDS CLASSIFIED AS LOANS AND RECEIVABLES
- 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 based 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 into account 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.
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. In addition 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 based 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 priced based on swap curves.
SUBORDINATED LOAN CAPITAL, OTHER DEBT ISSUED, AND DEPOSITS FROM CUSTOMERS
p) Fair value of subordinated loans
The observable price is used as the fair value of loans listed on an active stock exchange. In the case of other loans that are not part of an active market the fair value is based on an internal valuation model based on observable data.
q) Fair value of subordinated bond/perpetual bond issued
Fair value in this category is determined on the basis of internal valuation models based on external observable data.
r) Covered bonds issued
Fair value in this category is determined on the basis of internal valuation models based on observable data.
s) Deposits from customers
All deposits are without fixed-rate interest. The fair value of these is considered as approximately equal to book value since the contractual terms are continually revised in accordance with the market rate.
The tables below give a more detailed specification of the content of the different classes of assets and financial liabilities.
NOK MILLIONS | 31.12.2022 | 31.12.2021 | ||
---|---|---|---|---|
Book value | Fair value | Book value | Fair value | |
DEBT INSTRUMENTS HELD TO MATURITY - AT AMORTIZED COST | ||||
Norwegian hold-to-maturity bonds | 3 180 | 3 199 | 4 071 | 4 477 |
Foreign hold-to-maturity bonds | 21 045 | 20 376 | 21 915 | 23 289 |
Total debt instruments held to maturity | 24 225 | 23 575 | 25 985 | 27 766 |
DEBT INSTRUMENTS CLASSIFIED AS LOANS AND RECEIVABLES– AT AMORTIZED COST | ||||
Norwegian bonds | 62 681 | 59 555 | 53 339 | 54 373 |
Foreign bonds | 111 841 | 104 898 | 111 136 | 115 067 |
Other receivables | 8 | 8 | 9 | 9 |
Total debt instruments classified as loans and receivables | 174 530 | 164 461 | 164 484 | 169 448 |
LENDING LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS AT FAIR VALUE THROUGH PROFIT/LOSS | ||||
Loans to local government sector or enterprises with local government guarantee | 0 | 0 | 79 | 79 |
Total loans to local government, enterprises & retail customers | 0 | 0 | 79 | 79 |
LENDING TO LOCAL GOVERNMENT, ENTERPRISES & RETAIL CUSTOMERS – AT AMORTIZED COST | ||||
Loans secured by mortgage | 26 107 | 24 701 | 25 078 | 25 085 |
Loans to local government sector or enterprises with local government guarantee | 89 743 | 88 342 | 86 486 | 86 629 |
Loans abroad secured by mortage and local government guarantee | 5 352 | 5 352 | 6 413 | 6 413 |
Loans creditcard | 44 | 44 | 44 | 44 |
Other loans | 115 | 115 | 3 | 3 |
Total loans to local government, enterprises & retail customers | 121 360 | 118 553 | 118 024 | 118 174 |
DEBT INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS | ||||
Norwegian bonds | 58 922 | 58 922 | 56 354 | 56 354 |
Norwegian certificates | 7 648 | 7 648 | 7 805 | 7 805 |
Foreign bonds | 72 565 | 72 565 | 87 026 | 87 026 |
Foreign certificates | 420 | 420 | 405 | 405 |
Investments with credit institutions | 42 259 | 42 259 | 36 582 | 36 582 |
Total debt instruments | 181 815 | 181 815 | 188 172 | 188 172 |
EQUITY CAPITAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS | ||||
Shares | 238 730 | 238 730 | 260 001 | 260 001 |
Equity funds | 37 155 | 37 155 | 30 328 | 30 328 |
Property funds | 6 514 | 6 514 | 4 147 | 4 147 |
Total equity capital instruments | 282 399 | 282 399 | 294 476 | 294 476 |
RECEIVABLES | ||||
Receivables related to direct business | 1 908 | 1 908 | 1 725 | 1 725 |
Receivables related to reinsurance agreements | 704 | 704 | 304 | 304 |
Receivables related to securites | 900 | 900 | 2 727 | 2 727 |
Prepaid rent related to real estate activites | 55 | 55 | 245 | 245 |
Other receivables | 422 | 422 | 374 | 374 |
Total other loans and receivables including receivables from policyholders | 3 989 | 3 989 | 5 377 | 5 377 |
FINANCIAL LIABILITIES - AT AMORTIZED COST | ||||
Hybrid Tier 1 securities | 1 428 | 1 428 | 1 604 | 1 586 |
Subordinated loan capital | 3 147 | 3 093 | 3 000 | 3 310 |
Debt to credit institutions | 1 055 | 1 055 | 897 | 897 |
Covered bonds issued | 32 430 | 32 402 | 31 015 | 31 088 |
Liabilities and deposits from customers | 13 779 | 13 779 | 12 901 | 12 901 |
Total financial liabilities | 51 839 | 51 757 | 49 417 | 49 781 |
FINANCIAL LIABILITIES - AT FAIR VALUE THROUGH PROFIT OR LOSS | ||||
Debt to credit institutions | 5 628 | 5 628 | 3 302 | 3 302 |
Total financial liabilities | 5 628 | 5 628 | 3 302 | 3 302 |
NOK MILLIONS | 31.12.2022 | 31.12.2021 | ||
---|---|---|---|---|
Assets | Liabilities | Assets | Liabilities | |
FINANCIAL DERIVATIVES - AT FAIR VALUE THROUGH PROFIT OR LOSS | ||||
Forward exchange contracts | 5 024 | 1 570 | 2 019 | 3 077 |
Interest rate swaps | 1 077 | 194 | 223 | 1 664 |
Interest rate and currency swaps | 583 | 1 393 | 732 | 0 |
Share option | 135 | 0 | 279 | 0 |
Total financial derivatives | 6 820 | 3 158 | 3 253 | 4 740 |
Note 10 Borrowing
NOK MILLIONS | Nominal in NOK | Currency | Interest | Due date | Book value 31.12.2022 | Book value 31.12.2021 |
---|---|---|---|---|---|---|
FIXED - TERM SUBORDINATED LOAN | ||||||
Kommunal Landspensjonskasse | 2 530 | EUR | Fixed ¹ | 2045 | 3 147 | 3 000 |
Total subordinated loan capital | 2 530 | - | - | - | 3 147 | 3 000 |
HYBRID TIER 1 SECURITIES | ||||||
Kommunal Landspensjonskasse | 984 | JPY | Fixed ² | 2034 | 1 428 | 1 604 |
Total hybrid Tier 1 securities | 984 | - | - | - | 1 428 | 1 604 |
COVERED BONDS | ||||||
KLP Kommunekreditt AS | 0 | NOK | Floating | 2022 | 0 | 1 999 |
KLP Kommunekreditt AS | 2 968 | NOK | Floating | 2023 | 2 985 | 5 009 |
KLP Kommunekreditt AS | 5 000 | NOK | Floating | 2024 | 5 021 | 5 006 |
KLP Kommunekreditt AS | 5 000 | NOK | Floating | 2025 | 5 010 | 5 003 |
KLP Kommunekreditt AS | 5 000 | NOK | Floating | 2026 | 5 036 | 1 002 |
KLP Kommunekreditt AS | 1 000 | NOK | Fixed | 2027 | 1 012 | 508 |
KLP Kommunekreditt AS | 700 | NOK | Fixed | 2029 | 706 | 0 |
KLP Boligkreditt AS | 0 | NOK | Floating | 2022 | 0 | 1 904 |
KLP Boligkreditt AS | 1 600 | NOK | Floating | 2023 | 1 603 | 2 501 |
KLP Boligkreditt AS | 2 500 | NOK | Floating | 2024 | 2 501 | 2 500 |
KLP Boligkreditt AS | 2 500 | NOK | Floating | 2025 | 2 501 | 2 500 |
KLP Boligkreditt AS | 3 500 | NOK | Floating | 2026 | 3 521 | 2 504 |
KLP Boligkreditt AS | 2 500 | NOK | Floating | 2027 | 2 512 | 501 |
Other | 22 | 78 | ||||
Total covered bonds | 32 268 | - | - | - | 32 430 | 31 015 |
DEBT TO CREDIT INSTITUTIONS | ||||||
KLP Banken AS | 0 | NOK | Floating | 2022 | 0 | 300 |
KLP Banken AS | 300 | NOK | Floating | 2023 | 300 | 300 |
KLP Banken AS | 450 | NOK | Floating | 2024 | 450 | 300 |
KLP Banken AS | 300 | NOK | Floating | 2025 | 303 | 0 |
KLP Fond | 0 | NOK | Floating | 2022 | 0 | 385 |
KLP Fond | 0 | NOK | Fixed | 2022 | 0 | 1 241 |
KLP Fond | 1 302 | NOK | Floating | 2023 | 1 302 | 0 |
KLP Fond | 1 540 | NOK | Fixed | 2023 | 1 540 | 0 |
Kommunal Landspensjonskasse | 0 | NOK | Floating | 2022 | 0 | 1 651 |
Kommunal Landspensjonskasse | 2 678 | NOK | Floating | 2023 | 2 678 | 0 |
Other | NOK | Floating | 110 | 21 | ||
Total liabilities to credit institutions | 6 570 | - | - | - | 6 683 | 4 199 |
LIABILITIES AND DEPOSITS FROM CUSTOMERS ³ | ||||||
Retail | 11 722 | NOK | - | - | 11 722 | 11 212 |
Business | 2 021 | NOK | - | - | 2 021 | 1 650 |
Foreign | 37 | NOK | - | - | 37 | 39 |
Liabilities to and deposits from customers | 13 779 | - | - | - | 13 779 | 12 901 |
Total financial liabilities | 56 130 | - | - | - | 57 467 | 52 719 |
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 11 Fair value hierarchy
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 | 23 459 | 835 | 0 | 24 294 |
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 | 278 342 | 139 285 | 147 399 | 565 026 |
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 |
¹ The line «Debt to credit institutions» includes liabilities measured at fair value and amortized cost. This line is therefore not reconcilable against the Balance sheet. The liabilities measured at amortized cost amounted to NOK 1 055 million per 31.12.2022. |
31.12.2021 NOK MILLIONS | Level 1 | Level 2 | Level 3 | Total |
---|---|---|---|---|
ASSETS BOOKED AT FAIR VALUE | ||||
Land/plots | 0 | 0 | 983 | 983 |
Buildings | 0 | 0 | 88 552 | 88 552 |
Investment property | 0 | 0 | 89 535 | 89 535 |
Lending at fair value | 0 | 79 | 0 | 79 |
Certificates | 2 046 | 6 164 | 0 | 8 210 |
Bonds | 24 164 | 102 021 | 0 | 126 186 |
Fixed-income funds | 17 199 | 7 431 | 6 227 | 30 858 |
Bonds and other fixed-income securities | 43 410 | 115 616 | 6 227 | 165 253 |
Loans and receivables | 21 472 | 1 447 | 0 | 22 919 |
Shares | 246 170 | 10 962 | 2 869 | 260 001 |
Equity funds | 2 316 | 0 | 50 | 2 366 |
Property funds | 0 | 1 133 | 3 013 | 4 147 |
Special funds | 0 | 0 | 0 | 0 |
Private Equity | 0 | 0 | 27 962 | 27 962 |
Shares and units | 248 486 | 12 096 | 33 895 | 294 476 |
Financial derivatives | 0 | 3 253 | 0 | 3 253 |
Total assets at fair value | 313 367 | 132 491 | 129 657 | 575 515 |
LIABILITIES BOOKED AT FAIR VALUE | ||||
Financial derivatives | 0 | 4 740 | 0 | 4 740 |
Debt to credit institutions ¹ | 2 061 | 1 241 | 0 | 3 302 |
Total financial liabilities at fair value | 2 061 | 5 981 | 0 | 8 042 |
Changes in Level 3, Investment Property | Book value 31.12.2022 | Book value 31.12.2021 |
---|---|---|
Opening balance 1 January | 89 535 | 81 485 |
Sold | -148 | -723 |
Bought | 1 139 | 4 636 |
Unrealised changes | 3 486 | 4 130 |
Other changes | -20 | 7 |
Closing balance 31.12. | 93 992 | 89 535 |
Realised gains/losses | 0 | 59 |
Changes in Level 3, Financial Assets | Book value 31.12.2022 | Book value 31.12.2021 |
---|---|---|
Opening balance 1 January | 40 122 | 23 420 |
Sold | -5 749 | -4 627 |
Bought | 14 524 | 13 867 |
Unrealised changes | 4 510 | 7 463 |
Closing balance 31.12. | 53 407 | 40 122 |
Realised gains/losses | 2 322 | 2 242 |
Closing balance 31.12. | 147 399 | 129 657 |
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 7 370 million as of 31.12.2022.
With regard to transferring securities between the levels, a limit is set for the number of trading days and the amount of trading for shares by separating Level 1 and Level 2. The general principles related to the distribution between levels basically concern whether the asset or liability is listed or not and whether the listing can be stated to be in an active market. As regards shares, there is a further distinction between trading days and amount of trading which separates out listed securities that do not form part of an active market. The values at the end of the reporting period provide the basis for any movement between the levels.
In the 4th quarter, NOK 442 million in stocks moved from Level 1 to Level 2, NOK 23 million moved from Level 1 to Level 3, NOK 921 million moved from level 2 to level 1, NOK 27 million moved from level 3 to level 2 and NOK 1 million moved from level 2 to level 3 This is due to changes in liquidity.
Note 12 Liquidity risk
The table below specifies the company’s financial obligations ranked by maturity. The amounts given are non-discounted contractual flows of cash.
31.12.2022 NOK MILLIONS | Within 1 month | 1-12 months | 1-5 years | 5-10 years | Over 10 years | Total |
---|---|---|---|---|---|---|
Subordinated loan ¹ | 0 | 131 | 608 | 690 | 4 815 | 6 245 |
Perpetual hybrid Tier 1 securities ¹ | 0 | 72 | 287 | 359 | 1 215 | 1 933 |
Debt to and deposits from customers (without defined maturity) | 13 779 | 0 | 0 | 0 | 0 | 13 779 |
Covered bonds issued | 0 | 5 542 | 28 862 | 940 | 0 | 35 343 |
Payables to credit institutions | 1 499 | 339 | 778 | 0 | 0 | 2 616 |
Financial derivatives | 3 370 | 2 085 | 670 | 751 | 612 | 7 488 |
Accounts payable | 36 | 0 | 0 | 0 | 0 | 36 |
Contingent liabilities (without defined maturity) | 31 083 | 0 | 0 | 0 | 0 | 31 083 |
Total | 49 766 | 8 170 | 31 204 | 2 740 | 6 642 | 98 523 |
If the minority interests are taken out of account, derivatives maturing within one month are reduced with NOK 72 million and derivatives maturing between 1 to 12 months are reduced with NOK 140 million. In addition, payables to credit institutions maturing within one month are reduced with NOK 23 million. Derivatives maturing within between 1 to 5 years increase by NOK 12 million. Total amount of the financial liabilities for the Group are after these adjustments NOK 98 299 million. |
31.12.2021 NOK MILLIONS | Within 1 month | 1-12 months | 1-5 years | 5-10 years | Over 10 years | Total |
---|---|---|---|---|---|---|
Subordinated loan ¹ | 0 | 125 | 573 | 658 | 4 725 | 6 082 |
Perpetual hybrid Tier 1 securities ¹ | 0 | 64 | 257 | 321 | 1 298 | 1 941 |
Debt to and deposits from customers (without defined maturity) | 12 901 | 0 | 0 | 0 | 0 | 12 901 |
Covered bonds issued | 0 | 3 921 | 26 930 | 1 003 | 0 | 31 855 |
Payables to credit institutions | 1 685 | 312 | 608 | 0 | 0 | 2 605 |
Financial derivatives | 3 739 | 3 366 | 248 | 295 | 216 | 7 864 |
Accounts payable | 42 | 0 | 0 | 0 | 0 | 42 |
Contingent liabilities (without defined maturity) | 28 754 | 0 | 0 | 0 | 0 | 28 754 |
Total | 47 121 | 7 788 | 28 616 | 2 277 | 6 240 | 92 043 |
If the minority interests are taken out of account, derivatives maturing within one month are reduced with NOK 754 million, payables to credit institutions maturing within one month are reduced with NOK 335 million and derivatives maturing between 1 to 12 months are reduced with NOK 237 million. Total amount of the financial liabilities for the Group are after these adjustments NOK 90 716 million. | ||||||
¹ Some of the hybrid capital are perpetual. Estimated cash flows are based on expected maturity at the interest adjustment date. |
The table above shows financial liabilities the Group has grouped by interest payments and repayment of principal, based on the date payment is due. Banking contains the largest proportion of the financial liabilities in the Group.
Liquidity risk is the risk that the Group will not be able to meet the financial obligations that it has. The risk that the Group would not have adequate liquidity to meet its current liabilities and current operations is very small since a major part of the Group’s assets is liquid. The Group has significant funds invested in the money market, bonds and shares that can be sold in the event of a liquidity requirement. The Group’s liquidity strategy involves the Group always having adequate liquid assets to meet the Group’s liabilities as they fall due without accruing significant costs associated with releasing assets.
Asset composition in the Group’s portfolios should be adequately liquid to be able to cover other liquidity needs that may arise. KLP Kapitalforvaltning manages the Group’s liquidity. Internal parameters have been established for the size of the liquidity holding. The Group’s risk management unit monitors and reports developments in the liquidity holding continuously. The Group Board determines an asset management and liquidity strategy annually. The liquidity strategy includes parameters, responsibilities, risk measurement and an emergency plan for liquidity management.
The major liabilities in the Group are insurance related and are mostly linked to pension obligations. These liabilities are fully funded and liquidity management are handled in the same manner as other liabilities.
Note 13 Interest rate risk
31.12.2022 NOK MILLIONS | ||||||||
---|---|---|---|---|---|---|---|---|
Up to 3 months | From 3 months to 12 months | From 1 year to 5 years | From 5 years to 10 years | Over 10 years | Changes in cash flow 01.01.2022 -31.12.2022 | Total | Adjusted for the unit holders' interests in consolidated securities funds | |
ASSETS | ||||||||
Financial derivatives classified as assets | 29 | -1 | 8 | 63 | -153 | 5 | -48 | -32 |
Debt instruments classified as loans and receivables – at amortised cost | 0 | 0 | 0 | 0 | 0 | 13 | 13 | 13 |
Bonds and other fixed-return securities | -44 | -76 | -1 223 | -1 578 | -1 339 | 282 | -3 979 | -3 101 |
Fixed income fund holdings | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Lending and receivables | 0 | 0 | 0 | 0 | 0 | 197 | 197 | 178 |
Lending | 0 | 0 | 0 | 0 | 0 | 884 | 884 | 884 |
Cash and bank deposits | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Contingent liabilities ¹ | 0 | 0 | 0 | 0 | 0 | 37 | 37 | 37 |
Total assets | -15 | -77 | -1 215 | -1 516 | -1 492 | 1 418 | -2 897 | -2 022 |
LIABILITIES | ||||||||
Deposit | 0 | 0 | 0 | 0 | 0 | -142 | -142 | -142 |
Liabilities created on issue of securities | 0 | 0 | 0 | 0 | 0 | -335 | -335 | -335 |
Financial derivatives classified as liabilities | -3 | 0 | -15 | 1 | 0 | -8 | -25 | -24 |
Hybrid capital, subordinated loans | 0 | 0 | 0 | 34 | 57 | 0 | 91 | 91 |
Debt to credit institutions | 0 | 0 | 0 | 0 | 0 | -52 | -52 | -52 |
Total liabilities | -3 | 0 | -15 | 35 | 57 | -536 | -463 | -462 |
Total before tax | -18 | -77 | -1 230 | -1 481 | -1 435 | 882 | -3 359 | -2 484 |
Total after tax | -14 | -58 | -922 | -1 111 | -1 076 | 661 | -2 520 | -1 863 |
31.12.2021 NOK MILLIONS | ||||||||
---|---|---|---|---|---|---|---|---|
Up to 3 months | From 3 months to 12 months | From 1 year to 5 years | From 5 years to 10 years | Over 10 years | Changes in cash flow 01.01.2021 -31.12.2021 | Total | Adjusted for the unit holders' interests in consolidated securities funds | |
ASSETS | ||||||||
Financial derivatives classified as assets | 33 | -1 | -1 | 53 | -209 | 2 | -122 | -99 |
Debt instruments classified as loans and receivables – at amortised cost | 0 | 0 | 0 | 0 | 0 | 16 | 16 | 0 |
Bonds and other fixed-return securities | -46 | -55 | -1 128 | -1 553 | -2 018 | 293 | -4 508 | -3 780 |
Fixed income fund holdings | -1 321 | 0 | 0 | 0 | 0 | 0 | -1 321 | -1 321 |
Lending and receivables | 0 | -1 | 0 | 0 | 0 | 85 | 84 | 187 |
Lending | 0 | 0 | 0 | 0 | 0 | 819 | 819 | 819 |
Cash and bank deposits | 0 | 0 | 0 | 0 | 0 | 34 | 34 | 34 |
Contingent liabilities ¹ | 0 | 0 | 0 | 0 | 0 | 41 | 41 | 41 |
Total assets | -1 334 | -57 | -1 129 | -1 501 | -2 227 | 1 290 | -4 957 | -4 119 |
LIABILITIES | ||||||||
Deposit | 0 | 0 | 0 | 0 | 0 | -133 | -133 | -133 |
Liabilities created on issue of securities | 0 | 0 | 0 | 0 | 0 | -318 | -318 | -318 |
Financial derivatives classified as liabilities | 1 | 1 | 20 | 26 | 0 | 14 | 62 | 48 |
Hybrid capital, subordinated loans | 0 | 0 | 0 | 43 | 77 | 0 | 119 | 119 |
Debt to credit institutions | 0 | 0 | 0 | 0 | 0 | -41 | -41 | -41 |
Total liabilities | 1 | 1 | 20 | 69 | 77 | -479 | -311 | -325 |
Total before tax | -1 334 | -55 | -1 109 | -1 432 | -2 150 | 811 | -5 268 | -4 444 |
Total after tax | -1 000 | -41 | -831 | -1 074 | -1 612 | 609 | -3 951 | -3 333 |
¹ Contingent liabilities are lending agreements that are not yet materialized. |
The note shows the effect on profits if market interest rates were to increase by one percent, for fair value risk and variable interest risk.
Change in fair value (fair value risk) is shown in the first five columns and is calculated by the change in fair value of interest bearing instruments if interest rates had been one percent higher at the end of the period. The column change in cash flow shows the change in cash flows if the interest had been one percent higher over the year being reported on. The sum of these results reflects the overall effect that the scenario had given the group during the period being reported on.
The fair value risk applies to fixed interest securities were the market value of the securities is affected by market interest rates. Floating rate risk applies to securities with floating interest rates, where a change in market interest rates affects the cash-flow from the interest bearing securities.
The following securities are included in the note; securities measured at fair value through profit or loss (floating and fixed interest rates), investments held to maturity (only those with floating interest rates) and loans and receivables (only those with floating interest rates). The group has no securities classified as available for sale.
The Groups total interest rate risk is limited as a significant portion of the investments are bonds with fixed interest rates that are classified as held to maturity and loans and receivables, or fixed rate lending, measured at amortized cost. A change in market interest rate does not affect profit or loss for these assets.
Insurance contracts with guaranteed return does not change the accounting value even if interest rates change. Changes in interest rates also has no impact on the guaranteed return, but will have an impact on the achieved return to cover the guaranteed return. This is because the insurance funds are partly invested in debt instruments whose cash flows should help to meet the guaranteed return.
Note 14 Credit risk
31.12.2022 NOK MILLIONS | |||||||||
---|---|---|---|---|---|---|---|---|---|
Investment grade AAA to BBB | Lower rating | Public sector guarantee | Bank and finance | Mortgage < 80% ¹ | Mortgage > 80% ¹ | Other | Total | Adjusted for the unit holders' interest in consolidated securites funds | |
Debt instruments held to maturity at amortized cost | 22 828 | 0 | 0 | 0 | 0 | 0 | 1 396 | 24 225 | 24 225 |
Debt instruments classified as loans and receivables at amortized cost | 159 435 | 0 | 551 | 2 784 | 0 | 0 | 11 761 | 174 530 | 174 530 |
Debt instruments at fair value - fixed-return securities | 124 085 | 2 688 | 6 755 | 4 813 | 0 | 0 | 9 346 | 147 686 | 122 448 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 | 0 | 9 835 | 9 835 | 9 835 |
Loans and receivables | 22 971 | 0 | 0 | 1 323 | 0 | 0 | 0 | 24 294 | 20 582 |
Financial derivatives classified as assets | 6 820 | 0 | 0 | 0 | 0 | 0 | 0 | 6 820 | 5 501 |
Cash and bank deposits | 3 248 | 0 | 0 | 73 | 0 | 0 | 0 | 3 321 | 3 321 |
Lending | 0 | 0 | 92 617 | 0 | 25 055 | 1 623 | 2 066 | 121 360 | 121 360 |
Total | 339 388 | 2 688 | 99 923 | 8 992 | 25 055 | 1 623 | 34 403 | 512 071 | 481 801 |
SPECIFICATION OF INVESTMENT GRADE NOK MILLIONS | AAA | AA | A | BBB | Total Investment grade |
---|---|---|---|---|---|
Debt instruments held to maturity at amortized cost | 10 600 | 2 843 | 6 352 | 3 033 | 22 828 |
Debt instruments classified as loans and receivables at amortized cost | 29 894 | 22 160 | 62 752 | 44 628 | 159 435 |
Debt instruments at fair value - fixed-return securities | 31 336 | 13 962 | 38 088 | 40 699 | 124 085 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 |
Loans and receivables | 0 | 13 269 | 8 216 | 1 486 | 22 971 |
Financial derivatives classified as assets | 0 | 3 541 | 3 266 | 13 | 6 820 |
Cash and bank deposits | 0 | 2 802 | 446 | 0 | 3 248 |
Lending | 0 | 0 | 0 | 0 | 0 |
Total | 71 830 | 58 577 | 119 121 | 89 860 | 339 388 |
31.12.2021 NOK MILLIONS | |||||||||
---|---|---|---|---|---|---|---|---|---|
Investment grade AAA to BBB | Lower rating | Public sector guarantee | Bank and finance | Mortgage < 80% ¹ | Mortgage > 80% ¹ | Other | Total | Adjusted for the unit holders' interest in consolidated securites funds | |
Debt instruments held to maturity at amortized cost | 24 553 | 36 | 0 | 0 | 0 | 0 | 1 396 | 25 985 | 25 985 |
Debt instruments classified as loans and receivables at amortized cost | 142 017 | 0 | 377 | 1 683 | 0 | 0 | 20 406 | 164 484 | 164 484 |
Debt instruments at fair value - fixed-return securities | 117 047 | 1 454 | 5 295 | 3 835 | 0 | 0 | 14 196 | 141 827 | 116 454 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 | 0 | 23 426 | 23 426 | 23 426 |
Loans and receivables | 21 934 | 0 | 0 | 985 | 0 | 0 | 0 | 22 919 | 15 955 |
Financial derivatives classified as assets | 3 253 | 0 | 0 | 0 | 0 | 0 | 0 | 3 253 | 2 908 |
Cash and bank deposits | 3 320 | 0 | 0 | 67 | 0 | 0 | 0 | 3 388 | 3 388 |
Lending | - | 0 | 90 582 | 0 | 23 025 | 2 329 | 2 167 | 118 103 | 118 103 |
Total | 312 124 | 1 490 | 96 253 | 6 570 | 23 025 | 2 329 | 61 592 | 503 384 | 470 702 |
¹ These two columns provide information on the proportion of loans with mortgage security within 80% of base value and loans that exceed 80% mortgage of base value. |
SPECIFICATION OF INVESTMENT GRADE NOK MILLIONS | AAA | AA | A | BBB | Total Investment grade |
---|---|---|---|---|---|
Debt instruments held to maturity at amortized cost | 11 168 | 2 797 | 6 989 | 3 598 | 24 553 |
Debt instruments classified as loans and receivables at amortized cost | 20 632 | 25 034 | 60 915 | 35 437 | 142 017 |
Debt instruments at fair value - fixed-return securities | 33 523 | 14 839 | 34 861 | 33 823 | 117 047 |
Fixed-income funds | 0 | 0 | 0 | 0 | 0 |
Loans and receivables | 0 | 9 433 | 11 881 | 621 | 21 934 |
Financial derivatives classified as assets | 0 | 706 | 2 545 | 2 | 3 253 |
Cash and bank deposits | 0 | 2 672 | 648 | 0 | 3 320 |
Lending | 0 | 0 | 0 | 0 | 0 |
Total | 65 323 | 55 481 | 117 840 | 73 480 | 312 124 |
Credit risk is the risk of financial loss due to the Group's counterparties not being able to meet their obligations. The table above displays the credit risk based on rating agencies estimates of the creditworthiness of the various counterparties. Non-rated assets are placed in the category that best reflects the credit risk based on sector, guarantees etc.
Emphasis is placed on diversification of credit exposure to avoid concentration of credit risk against individual debtors. To monitor credit risk in lending and investments a special credit committee has been established, meeting regularly. The limits for credit risk against the individual debtor are set by the committee. Changes in debtors’ credit assessments are monitored and followed up by KLP Kapitalforvaltning AS.
The Group has good balance between Norwegian bonds and international bonds and has a portfolio of exclusively good credit notes. The Group can be said to have a high concentration of debt instruments directed at the Norwegian public sector, however this does not imply concentration risk in the ordinary meaning since the counterparty risk is considered to be minimal.
The rating above are gathered from Standard & Poor's, Moody's, Fitch, Scope Ratings and Nordic Credit Rating. The rating is converted to S&P's rating table, where AAA is linked to securities with the highest creditworthiness. The lowest rating of the five is used and all five rating agencies are equal as the basis for investments in fixed income securities. "Other" is mainly securities issued by power companies and other corporate bonds. KLP Group has strict guidelines for investments in fixed-income securities, which also apply to investments falling into the "Other" category.
The lines in the note coincide with the financial position statement layout. The exceptions are debt instruments at fair value, which are divided into three categories in the note and lending which is shown combined in the note, but is shown in two lines in the financial position statement (fair value and amortized cost).
The consolidated accounts includes all the units that KLP Group is considered to have control over. This gives an impression of a higher risk than the actual one, since the risk that the Group does not actually carry appears in the accounts. The outer column includes actual ownership and credit risk of the Group companies and investment funds held by KLP Group at the end of the period.
NOK MILLIONS | 31.12.2022 | 31.12.2021 | ||
---|---|---|---|---|
Consolidated | Adjusted for the unit holders' in consolidated securites funds | Consolidated | Adjusted for the unit holders' in consolidated securites funds | |
10 LARGEST COUNTERPARTIES | ||||
Counterparty 1 | 14 317 | 12 155 | 15 032 | 11 995 |
Counterparty 2 | 13 605 | 11 215 | 14 514 | 11 891 |
Counterparty 3 | 9 332 | 9 007 | 10 578 | 7 482 |
Counterparty 4 | 8 095 | 8 296 | 8 586 | 6 660 |
Counterparty 5 | 7 689 | 6 734 | 7 828 | 6 377 |
Counterparty 6 | 6 844 | 6 061 | 7 706 | 5 830 |
Counterparty 7 | 6 764 | 5 549 | 6 377 | 5 548 |
Counterparty 8 | 6 461 | 4 698 | 5 878 | 4 928 |
Counterparty 9 | 6 061 | 4 403 | 5 548 | 4 698 |
Counterparty 10 | 5 549 | 4 361 | 4 698 | 4 506 |
Total | 84 718 | 72 480 | 86 745 | 69 916 |
The table above shows the 10 largest counterparties to which the KLP Group has exposure. The amounts stated are book value. "Adjusted for the minority holding" includes only that which is in the Group’s ownership and where the Group retains actual credit risk. The majority of the 10 largest counterparties are either finance institutions or counterparties covered by a public sector guarantee (central or local government guarantee).
Note 15 Technical provisions in life insurance
NOK MILLIONS | 31.12.2022 | 31.12.2021 |
---|---|---|
Premium reserves - ordinary tarif | 521 773 | 486 276 |
Premium funds, buffer funds and pensioners’ surplus funds | 130 845 | 41 268 |
Supplementary reserves | 0 | 48 812 |
Securities adjustment fund | 0 | 77 194 |
Other provisions | 0 | 1 |
Technical provisions in life insurance | 652 618 | 653 551 |
Note 16 Other current liabilites
NOK MILLIONS | 31/12/2022 | 31/12/2021 |
---|---|---|
Short-term payables trade in securities | 1 699 | 3 645 |
Incurred not assessed taxes | 727 | 560 |
Advance tax-deduction pension scheme | 522 | 491 |
Accounts payable | 240 | 226 |
Pre-called contribution to insurance | 516 | 699 |
Other current liabilities | 1 248 | 1 187 |
Total other current liabilities | 4 951 | 6 808 |
Note 17 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 304 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 304 per cent.
31.12.2022 | 31.12.2021 | |
---|---|---|
Solvency II - SCR ratio | 304% | 287% |
NOK BILLIONS | 31.12.2022 | 31.12.2021 |
---|---|---|
Simplified Solvency II Financial Position Statement | ||
Assets, book value | 713 | 710 |
Added values - hold-to-maturity portfolio/loans and receivables | -13 | 6 |
Added values - other lending | -2 | 0 |
Other added/lesser values | 0 | 0 |
Deferred tax asset | 0 | 0 |
Total assets - solvency II | 699 | 716 |
NOK BILLIONS | 31.12.2022 | 31.12.2021 |
---|---|---|
Simplified Solvency II Financial Position Statement | ||
Best estimate | 632 | 649 |
Risk margin | 11 | 13 |
Hybrid Tier 1 securities/Subordinated loan capital | 5 | 5 |
Other liabilities | 8 | 12 |
Deferred tax liabilities | 0 | 1 |
Total liabilities - solvency II | 656 | 679 |
Excess of assets over liabilities | 43 | 36 |
- Deferred tax asset | 0 | 0 |
- Risk equalization fund (tier 2 own funds starting 30.09.2022) | -5 | 0 |
+ Hybrid Tier 1 securities | 1 | 2 |
Tier 1 basic own funds | 39 | 38 |
Total eligible tier 1 own funds | 39 | 38 |
Subordinated loans | 3 | 3 |
Risk equalization fund (tier 2 own funds starting 30.09.2022) | 5 | 0 |
Tier 2 basic own funds | 8 | 3 |
Ancillary own funds | 13 | 12 |
Tier 2 ancillary own funds | 13 | 12 |
Deduction for max. eligible tier 2 own funds | -14 | -8 |
Total eligible tier 2 own funds | 7 | 7 |
Deferred tax asset | 0 | 0 |
Total eligible tier 3 own funds | 0 | 0 |
Solvency II total eligible own funds | 46 | 45 |
Solvency capital requirement (SCR) | 15 | 16 |
Solvency II- SCR ratio | 304% | 287% |
Note 18 Presentation of assets and liabilities that are subject to net settlement
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 |
31.12.2021 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 | 3 253 | 0 | 3 253 | -2 375 | -1 753 | -709 | 281 | 281 |
Repos | 1 200 | 0 | 1 200 | -1 200 | 0 | 0 | 0 | 0 |
Total | 4 453 | 0 | 4 453 | -3 575 | -1 753 | -709 | 281 | 281 |
LIABILITIES | ||||||||
Financial derivatives | 4 740 | 0 | 4 740 | -2 375 | -367 | -669 | 1 363 | 1 301 |
Repos | 1 241 | 0 | 1 241 | 0 | 0 | 0 | 1 241 | 41 |
Total | 5 982 | 0 | 5 982 | -2 375 | -367 | -669 | 2 605 | 1 342 |
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 19 Pension obligations
NOK MILLIONS | 31.12.2022 | 31.12.2021 |
---|---|---|
Capitalized net liability 01.01. | 870 | 934 |
Capitalized pension costs | 215 | 192 |
Capitalized financial costs | 19 | 20 |
Actuarial gains and losses | -132 | -84 |
Premiums / contributions received | -157 | -191 |
Capitalized net liability 31.12. | 815 | 870 |
Assumptions | 31.12.2022 | 31.12.2021 |
---|---|---|
Discount rate | 3.00% | 1.90% |
Salary growth | 3.50% | 2.75% |
The National Insurance basic amount (G) | 3.25% | 2.50% |
Pension increases | 2.60% | 1.73% |
Social security contribution rate | 14.10% | 14.1% |
Capital activity tax | 5.00% | 5.00% |
The effect of changes in pension assumptions reduces the pension liability for employees with NOK 132 million as of 31.12.2022. The change is recognized in other comprehensive income in the income statement. |
Key figures – Accumulated
NOK MILLIONS | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | Q4 2021 | Q3 2021 | Q2 2021 | Q1 2021 |
---|---|---|---|---|---|---|---|---|
KLP GROUP | ||||||||
Profit before tax | 1 652 | 973 | 464 | 213 | 1 027 | 2 192 | 1 325 | 693 |
Total assets | 901 636 | 913 434 | 917 593 | 902 911 | 901 270 | 872 465 | 870 548 | 813 514 |
Owners' equity | 42 870 | 42 524 | 41 217 | 41 449 | 40 732 | 41 439 | 40 154 | 39 742 |
Solvency SCR ratio | 304% | 306% | 304% | 299% | 287% | 264% | 257% | 258% |
Number of employees in the Group | 1 093 | 1 095 | 1 081 | 1 060 | 1 048 | 1 032 | 1 017 | 1 021 |
KOMMUNAL LANDSPENSJONSKASSE | ||||||||
Profit before tax | 918 | 461 | 216 | 71 | 288 | 1 699 | 965 | 566 |
Premium income for own account | 50 523 | 40 248 | 33 081 | 7 503 | 50 161 | 41 163 | 33 634 | 7 041 |
- of which inflow of premium reserve | 386 | 386 | 386 | 376 | 0 | 0 | 0 | 0 |
Insurance customers' funds incl. acc. profit | 28 517 | 22 453 | 16 367 | 10 642 | 30 438 | 24 690 | 19 100 | 13 754 |
- of which funds with guaranteed returns | 4 659 | 4 658 | 4 658 | 4 875 | 8 346 | 8 346 | 8 346 | 8 419 |
Net investment common portfolio | 660 366 | 671 095 | 660 834 | 662 500 | 659 281 | 644 160 | 626 280 | 603 076 |
Net investment choice portfolio | 2 609 | 2 602 | 2 665 | 2 588 | 2 199 | 2 156 | 2 215 | 2 081 |
Insurance funds incl. earnings for the year | 654 324 | 641 805 | 654 482 | 644 226 | 652 444 | 634 112 | 633 579 | 595 680 |
- of which funds with guaranteed interest | 552 101 | 542 820 | 548 891 | 526 324 | 526 235 | 513 186 | 515 787 | 490 936 |
Solvency capital requirement (SCR) | 46 267 | 46 307 | 44 901 | 44 809 | 45 190 | 44 536 | 43 473 | 41 580 |
Solvency SCR ratio | 337% | 341% | 340% | 332% | 316% | 289% | 282% | 287% |
Riskprofit | 558 | 963 | 550 | 105 | 589 | 625 | 293 | 191 |
Return profits | -20 006 | -27 421 | -20 374 | -7 894 | 15 134 | 9 347 | 7 232 | 4 688 |
Administration profit | -17 | 56 | -22 | -9 | 35 | 159 | 61 | 41 |
Solvency capital | 140 958 | 129 556 | 138 338 | 151 201 | 196 049 | 176 437 | 174 816 | 160 647 |
Value-adjusted return on common portfolio | -1,1 % | -2,6 % | -2,1 % | -2,3 % | 8,4 % | 5,6 % | 4,4 % | 1,5 % |
Return on unit-linked portfolio | -2,5 % | -4,2 % | -3,5 % | -1,2 % | 8,9 % | 5,8 % | 5,0 % | 1,9 % |
Return on corporate portfolio | 2,8 % | 1,4 % | 0,9 % | 0,6 % | 3,4 % | 2,5 % | 1,7 % | 0,8 % |
KLP SKADEFORSIKRING AS | ||||||||
Profit before tax | 10 | -50 | 3 | -24 | 398 | 344 | 226 | 72 |
Gross premium due | 2 201 | 1 627 | 1 061 | 516 | 1 939 | 1 436 | 941 | 460 |
Premium income for own account | 2 105 | 1 554 | 1 012 | 492 | 1 865 | 1 381 | 904 | 442 |
Owners' equity | 2 269 | 2 234 | 2 273 | 2 281 | 2 266 | 2 348 | 2 294 | 2 179 |
Claims ratio | 80,8 % | 80,3 % | 73,4 % | 79,6 % | 76,4 % | 73,6 % | 74,5 % | 72,8 % |
Combined-ratio | 95,4 % | 94,5 % | 88,7 % | 95,1 % | 92,1 % | 85,1 % | 90,3 % | 89,2 % |
Return on assets under management | -1,7 % | -2,5 % | -2,1 % | -0,9 % | 5,0 % | 3,4 % | 2,6 % | 0,6 % |
Solvency capital requirement (SCR) | 2 204 | 2 250 | 2 273 | 2 329 | 2 278 | 2 290 | 2 267 | 2 193 |
Solvency SCR ratio | 204% | 219% | 225% | 222% | 224% | 267% | 252% | 238% |
Annual premium in force – retail market | 954 | 933 | 918 | 893 | 871 | 847 | 829 | 807 |
Annual premium in force – public sector market | 1 341 | 1 325 | 1 318 | 1 210 | 1 149 | 1 135 | 1 128 | 1 080 |
Net new subscriptions (accumulated within the year) | 121 | 123 | 113 | 7 | 91 | 76 | 65 | 17 |
KLP BANKEN GROUP | ||||||||
Profit/loss before tax | 181 | 98 | 43 | 18 | 116 | 94 | 54 | 49 |
Net interest income | 369 | 258 | 159 | 72 | 309 | 233 | 153 | 76 |
Other operating income | 85 | 63 | 43 | 20 | 79 | 59 | 39 | 19 |
Operating expenses and depreciation | -247 | -181 | -123 | -64 | -239 | -174 | -119 | -61 |
Net realized/unrealized changes in financial instruments to fair value | -26 | -43 | -36 | -10 | -33 | -24 | -19 | 15 |
Contributions | 13 779 | 13 607 | 13 465 | 13 372 | 12 901 | 12 774 | 12 643 | 12 103 |
Housing mortgages granted | 23 258 | 23 369 | 23 042 | 22 635 | 22 090 | 21 365 | 21 409 | 20 894 |
Loan(s) with public guarantee(s) | 19 117 | 18 718 | 18 321 | 17 974 | 17 844 | 16 842 | 16 752 | 16 734 |
Defaulted loans | 44 | 43 | 46 | 46 | 36 | 32 | 34 | 57 |
Borrowing on the issuance of securities | 33 485 | 32 613 | 32 444 | 31 862 | 31 918 | 29 536 | 29 195 | 27 147 |
Total assets | 50 511 | 49 370 | 48 704 | 47 954 | 47 482 | 44 980 | 45 216 | 43 200 |
Average total assets | 48 996 | 48 426 | 48 030 | 47 718 | 45 085 | 43 834 | 43 952 | 42 944 |
Owners' equity | 2 966 | 2 897 | 2 555 | 2 548 | 2 521 | 2 490 | 2 474 | 2 470 |
Net interest rate | 0,75% | 0,53% | 0,33% | 0,15% | 0,68% | 0,53% | 0,35% | 0,18% |
Profit/loss from general operations before tax | 0,90% | 0,20% | 0,09% | 0,04% | 0,26% | 0,21% | 0,12% | 0,11% |
Return on owners’ equity before tax | 7,16% | 5,15% | 3,37% | 2,91% | 4,78% | 5,15% | 4,47% | 8,02% |
Capital adequacy | 20,7 % | 19,7 % | 17,7 % | 18,1 % | 18,7 % | 18,6 % | 18,4 % | 19,3 % |
Number of private customers | 48 804 | 48 216 | 47 759 | 47 123 | 46 463 | 47 750 | 46 872 | 46 116 |
Of this members of KLP | 32 988 | 32 681 | 32 226 | 31 973 | 31 587 | 32 615 | 31 664 | 32 183 |
KLP KAPITALFORVALTNING AS | ||||||||
Profit/loss before tax | 5 | -19 | -30 | -21 | 56 | 53 | 25 | 21 |
Total assets under management | 640 183 | 615 589 | 621 080 | 646 213 | 668 855 | 647 995 | 627 599 | 602 400 |
Assets managed for external customers | 134 215 | 126 187 | 126 193 | 134 367 | 136 792 | 123 811 | 121 308 | 111 821 |