Annual Report 2020 Table of contents Group CEO's introduction .................................................................................................................................................. 6 Emerging from the crisis stronger ......................................................................................................................... 6 This is KLP ................................................................................................................................................................................. 9 Management ...................................................................................................................................................... 10 Group board of directors...............................................................................................................................17 KLP’s history........................................................................................................................................................ 20 Public-sector occupational pensions ...........................................................................................................................21 Milestones in KLP 2020...................................................................................................................................................... 22 Pension assets makes a difference ..............................................................................................................................24 We are working to reduce climate risk........................................................................................................................35 Our climate risk reporting .............................................................................................................................36 Risk management and internal control in KLP ........................................................................................................40 Norwegian Code of Practice for Corporate Governance (NUES)......................................................................43 Annual Report 2020............................................................................................................................................................ 51 The Group’s income......................................................................................................................................... 51 The parent company’s results ......................................................................................................................52 The business areas............................................................................................................................................ 56 Corporate social responsibility ....................................................................................................................73 Employees and health, safety and the environment (HSE)...............................................................77 Regulatory framework ....................................................................................................................................79 Other matters ..................................................................................................................................................... 79 KLP Group............................................................................................................................................................................... 83 Income statement............................................................................................................................................. 83 Financial position statement ........................................................................................................................84 Changes in Owners’ equity ...........................................................................................................................86 Statement of cash flows.................................................................................................................................87 Notes............................................................................................................................................................................... 88 Note 1 General information.........................................................................................................................88 Note 2 Summary of the most important accounting principles ...................................................89 Note 3 Important accounting estimates and valuations............................................................... 115 Note 4 Segment information ................................................................................................................... 120 Note 5 Net income from financial instruments ................................................................................ 123 Note 6 Fair value of financial assets and liabilities .......................................................................... 124 Note 7 Fair value hierarchy ....................................................................................................................... 132 Note 8 Assets in defined-contribution-based life insurance....................................................... 136 Note 9 Risk management.......................................................................................................................... 139 Note 10 Liquidity risk .................................................................................................................................. 145 Note 11 Interest rate risk........................................................................................................................... 150 Note 12 Currency risk.................................................................................................................................. 153 Note 13 Credit risk ....................................................................................................................................... 158 Note 14 Presentation of assets and liabilities that are subject to net settlement............... 165 Note 15 Mortgage loans and other lending...................................................................................... 168 2 Note 16 Investment property .................................................................................................................. 170 Note 17 Investments in associated companies and joint ventures........................................... 171 Note 18 Subordinated loan capital and hybrid Tier 1 securities................................................ 173 Note 19 Hedge accounting ...................................................................................................................... 175 Note 20 Borrowing....................................................................................................................................... 178 Note 21 Technical matters ........................................................................................................................ 181 Note 22 Tangible fixed assets.................................................................................................................. 200 Note 23 Tax..................................................................................................................................................... 201 Note 24 Transferred assets with restrictions...................................................................................... 203 Note 25 Intangible assets.......................................................................................................................... 206 Note 26 SCR ratio ......................................................................................................................................... 207 Note 27 Return on capital for life insurance companies............................................................... 209 Note 28 Pensions obligations, own employees................................................................................ 210 Note 29 Number of employees .............................................................................................................. 220 Note 30 Salary and obligations towards senior management etc. ........................................... 220 Note 31 Auditor`s fee.................................................................................................................................. 226 Note 32 Operating expenses ................................................................................................................... 226 Note 33 Other income and -expenses ................................................................................................. 226 Note 34 Other current liabilities ............................................................................................................. 227 Note 35 Contingent liabilities .................................................................................................................. 227 Note 36 Retained earnings ....................................................................................................................... 227 Note 37 Sale of business ........................................................................................................................... 228 Note 38 Change