KLP annual report 2014 Responsible Elisabeth Kristina Mahle CRM consultant, Marketing In 2014 KLP hosted an internal photo contest where the staff were to visualize one of KLP’s values: Open, Clear, Responsible and Committed, or «For the days to come». Olav Storm, photographer, was head of the jury. We present some of the contributions in this annual report. Contents annual report 2014 Group Chief Executive Officer’s preface 5 Growth and profitability in unsettled times 8 Group Accounts Development the last five years 9 Income statement 75 Important events in i 2014 11 Financial position statement 76 The pension system 12 Schedule of changes in owners equity 78 Statement of cash flows 79 History 1949-2014 13 Notes Group 80-133 KLP’s business 14 This is KLP 18 Non-financial Accounts Group senior management 32 Non-financial Accounts at year-end 31 December 136 Pensions and life insurance 37 Notes 137-139 Non-life insuranse 40 Audit report 140 Asset and Fund management 42 Accounts KLP Property 44 Income statement 144 Banking and municipal lending 46 Financial position statement 146 Schedule of changes in owners equity 148 Employee accounting 51 Statement of cash flows 149 Notes KLP 150-219 Annual report of the Audit report 220 Board of Directors for 2014 54 Declarations 222 The Board of Directors in KLP 68 KLP Boards of Directors 229 Elected representatives 230 4 ANNUAL REPORT 2014 NOTER TIL REGNSKAPETFOREWORD 5 Good results and inflow of customers KLP’s financial strength provides security and 2014 was a historically good year for KLP: good returns, growth in all business areas and opportunities« in demanding times. This is reassuring large inflow of new customers. At the same time we managed to hold down cost growth. since the Norwegian economy faces greater challenges than it has had for many years. A long-term low interest rate scenario is challenging for everyone conducting asset management, including KLP. 2014 was without doubt a challenging year with a historically Large inflow of customers » SVERRE THORNES GROUP CEO low interest rate level. Therefore it is good to note that despite During 2014 the market for public sector occupational pen- this KLP is delivering good results in every area. The value- sions was marked by the other providers of insured schemes adjusted and book returns for 2014 ended at 6.9 per cent and withdrawing from the market. In total 58 local authorities and 4.3 per cent respectively. Shares, short-term bonds and prop- 203 public sector enterprises have transferred to KLP during erty were the most important contributors to the good returns. 2014. The inflow means an increase of NOK 30 billion in the premium reserves and 156,000 additional KLP members with We live longer pension rights. A further 15 local authorities have transferred KLP signed the UN Global Compact in 2003 and we continue For the days to come ... At the end of 2014 the KLP Group had total assets of NOK 491 to KLP so far in 2015. KLP now has 418 of 446 municipali- to work to safeguard human rights, workers’ rights, the envi- Times change - so must we. There are many challenges to billion, whilst the life company ended at NOK 415 billion. The ties and county administrations as public sector occupational ronment and in the fight against corruption. face in the years to come: Regulatory frameworks are chang- life company’s assets are almost entirely assets accumulated pension customers. ing; work is being carried out on local government reform; we for current and future pensions of KLP’s owners’ employees. Development and improvement have entered a long-term low interest rate scenario; and the The massive inflow has put great pressure on information sys- The needs of our owners is always central in KLP. We shall pension schemes in the public and private sectors are under- The expected longevity of the population is increasing. This tems and staff, but I am glad to be able to report that we have endeavour to be perceived as our owners’ best partner for the going change. means that pensions will be paid out over longer periods and been well prepared and that the growth has not had negative days to come. Our business aims to strengthen their finances, entails a need to strengthen the premium reserve. KLP com- consequences either for KLP’s systems or the service to exist- to ease their daily life and to strengthen them as employers. KLP has customers and owners that prioritize solvency and a pleted this strengthening of reserves during 2013, principally ing and new customers. Surveys show that the customers are Therefore we work systematically to develop services and long-term approach to asset management, and we work con- using returns surplus on the customer’s pension funds. The satisfied with KLP and we shall continue to strive to increase products that we perceive our owners and their employees tinually to keep our costs down through efficient operation. We Company is required to cover 20 per cent of this reserves our efficiency and ensure good service at low cost. need. shall be a stable and predictable partner - regardless. KLP’s increase, and the strong results in 2014 make it possible for owners shall feel confident that, going forward, we shall pro- KLP to transfer the entire remaining contribution of NOK 1.6 Out of coal, into renewable energy During 2014 we also started a language project that will em- vide good returns, low costs and good service. billion to its customers’ supplementary reserves. Corporate responsibility is important to KLP. We demonstrate brace the entire organization. We look now with fresh eyes responsibility by being open about how we manage our as- at how our members perceive information from KLP. This Solvency remains important sets. It is not a matter of indifference to our owners how their work will continue during the years to come and our aim is The good results also make it possible to strengthen the sup- money is invested. to become better at sending out a clear and understandable plementary reserves by NOK 3.5 billion, whilst NOK 3.4 bil- message. lion is being allocated to the customers’ premium fund. KLP KLP has always been a major lender to Norwegian hydroelec- has thus strengthened its solvency through increased customer tric power and in recent years has also provided equity capital Investing in members buffers and increased owners’ equity, and we have provided to power and grid companies. KLP is not just a pension provider. We also offer banking, our customers with a significant contribution to their premium funds and insurance products with advantageous terms to our fund. In 2014 KLP took an important step: We increased our in- members. More and more people and organizations are dis- vestments by NOK 500 million in increased capacity in re- covering this and during 2014 more than 75,000 have started KLP’s financial strength provides security and opportunities newable energy. At the same time we withdrew from compa- making use of their membership benefits. We want these ben- in demanding times. This is reassuring since the Norwegian nies that have a substantial part of their income from coal. So efits - on top of a good pension scheme - to strengthen our economy faces greater challenges than it has had for many doing, KLP hopes to contribute to an absolutely necessary shift owners’ work in recruiting and retaining competent employ- years. A long-term low interest rate scenario is challenging from fossil fuel to renewable energy in emerging markets. ees. New this year is also that customers with defined contri- for everyone conducting asset management, including KLP. At The decision started as a challenge from Eid Municipality and bution pensions with KLP Bedriftspensjon will benefit from SVERRE THORNES the end of 2014 we had solvency capital corresponding to 3.5 demonstrates exactly how important close dialogue and good KLP membership benefits. Group CEO years’ guaranteed interest rate. It is good to have that with us partnership with our owners is. as we go forward. Open Ingrid Eriksen Customer and Sales Manager, Life 8 ANNUAL REPORT 2014 DEVELOPMENT OVER THE LAST 5 YEARS 9 Growth and profitability in unsettled times Development over the last 5 years PEOPLE WITH ACCRUING PUBLIC SECTOR OCCUPATIONAL NET TRANSFERS IN TO LIFE INSURANCE NOK million NOK millions PENSIONS WITH KLP KLP Group 2014 2013 2012 2011 2010 900 000900 3030000 000 815 860 800 25 811 Pre-tax income 1 189 1 157 997 653 515 800 000 25000 707 792 25 000 490 894 399 257 331 783 291 784 271 736 700 000700 Total assets 629 000 588 000 606 000 2020000 000 600 000600 Owners' equity 17 644 15 268 13 630 12 064 10 749 500 000500 1515000 000 Capital adequacy ratio 9,2 % 10,0 % 10,3 % 10,9 % 11,5 % 400 Number of employees 899 856 808 775 762 400 000 1010000 000 300 000300 5 754 55000 000 Kommunal Landspensjonskasse 2014 2013 2012 2011 2010 200 000200 1 401 -1 335 -199 100 000100 0 Pre-tax income 959 950 772 705 563 00 -5-5000 000 Premium income (without premium reserves transferred in) 32 280 24 928 27 477 21 641 20 291 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Net transfers in/out of premium reserves and other funds 28 677 6 178 1 484 -156 -1 339 Income to customers 6 959 10 420 5 455 3 594 4 651 of which supplementary reserves 3 568 - - 2 143 2 070 ACCRUED PENSION (PREMIUM RESERVE) NOK billion PREMIUM INCOME GROUP NOK billion of which to Premium Fund 3 391 5 891 2 365 1 451 2 581 Insurance funds 378 602 312 127 275 860 243 439 227 533 350 350 Total assets 415 030 339 592 299 708 261 746 244 194 331 7070 300 Owners' equity