Value-adjusted return amounts to minus 3.7 per cent.
Book returns amount to 0.6 per cent.
Increasing efforts for clients and their employees.
First quarter has been overshadowed by global efforts to limit the spread of the corona virus. Close down of economic activity has resulted in strong fall in financial markets. KLP achieved a value adjusted return on customers’ funds of minus 3.7 per cent and book returns at 0.6 per cent. The quarter has been characterised by very weak financial markets, with the equity portfolio falling by 15.6 per cent. KLP achieved a first quarter result of NOK -271 million.
“The world’s financial markets remain challenging, but we have been building up buffer capital over many years to be equipped for these types of market disruptions. Despite the big falls in the financial markets that we are currently experiencing, KLP still is very solid and is well positioned to meet further disturbances over time, without giving reason for our clients being worried. The strategy is firmly aimed at delivering a good and predictable return over time,” says CEO Sverre Thornes.
Market situation in the pensions sector
So far, the local government reform in Norway has had only a moderate effect on KLP’s customer base. At the end of the year, KLP had an inflow of NOK 2.5 billion and an outflow of NOK 6.4 billion. The movement in our client base at year end was due to the merger of municipalities between municipalities with and without their own pension fund, where some chose to conclude their pension fund and go ahead with KLP as their new pension provider for the new municipality.
Specific issues related to the Corona virus pandemic
Pension payments to KLP’s pensioners are proceeding as normal. Other parts of the operations have also worked well, despite organizing work from home. After a very hectic period for our asset management operations in March, mainly due to severe weakening of the Norwegian krone, the situation is now normalized.
The situation arising from the spread of Covid-19 affected the business of KLP Skadeforsikring in March. The number of travel claims submitted in March was more than five times the normal level for the corresponding month. Customers have been dealt with in turn and the company has succeeded in maintaining its good service level.
KLP Banken wants to help our members at a very challenging time and has therefore made two significant cuts in floating mortgage rates and has granted postponement of instalments for clients that are struggling. Municipalities and public enterprises found it harder to obtain loans in the financial turmoil that arose in March. KLP therefore increased lending to its owner by NOK 5 billion, and has granted NOK 3.5 billion has to be paid out in loans to municipalities and public enterprises since the middle of March.
Investments in renewable energy
In February KLP and DNB agreed to invest NOK 12 billion in renewable energy projects, of which KLP will contribute at least half. The money will go to wind farms, hydropower plants and solar power. Renewable energy and infrastructure are priority areas for both KLP and DNB, both in Norway and internationally. The production of renewable energy is essential if greenhouse emissions are to be reduced and society moved over to a low-carbon model.
KLP has increased its investment in the Swedish fund Silvestica Green Forest AB to approximately NOK 1.5 billion in the first quarter. The fund has forest properties in Sweden, Finland, Estonia, Latvia and Lithuania. Investments in forests are very long-term and fit well with KLP’s need for investments with good, stable long-term returns. The investment is also part in KLPs ambition to increase climate-friendly investments.
Refer also to KLP’s interim report for the first quarter at klp.no
Key figures after the first quarter of 2020
Value-adjusted return on capital minus 3.7 per cent
Book return on capital 0.6 per cent
Premium income (excluding transferred reserves) NOK 7.1 billion
Pensions paid and other claims (excluding ceded reserves) NOK 5.1 billion
Total assets in the KLP Group NOK 765 billion
Return on the customer assets distributed to insurance customers each year. Made up of financial income from the management of customer funds in life insurance minus the change in net unrealised added value on equity and bond investments.
All returns that have been achieved from the management of customer assets, including unrealised gains.
Return on customer assets in excess of the return the insurer has guaranteed to its customers.