Kommunal Landspensjonskasse (KLP), Norway’s main provider of municipal pensions, reported a 3.7% investment loss in the first quarter of this year – a period when the country’s domestic stock market tumbled by 24% – saying its buffers had equipped it for the COVID-19 pandemic’s effect on financial markets.
The NOK765bn (€68.9bn) Oslo-based institution also said it had expanded its capacity to lend to the local authorities and enterprises which owned it during the quarter.
In its interim report, KLP posted a value-adjusted return on customers’ funds of -3.7% for January to March, and book returns – the return distributed to insurance customers each year – of 0.6%.
Sverre Thornes, KLP’s chief executive officer, said: “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 were now happening, he said KLP was still very solid and well positioned to meet further disturbances over time, without causing clients worry.
“The strategy is firmly aimed at delivering a good and predictable return over time,” Thornes said.
KLP said its unit KLP Bank wanted to help the pension provider’s members “at a very challenging time”, so had made two significant cuts in floating mortgage rates, as well as allowing clients who were struggling to postpone repayment instalments.
Municipalities and public enterprises found it harder to get loans during March’s financial turmoil, the pension fund said.
“KLP, therefore, increased lending capacity to its owners by NOK5bn, and has granted NOK3.5bn in loans to municipalities and public enterprises since the middle of March,” it said. Before this increase, the amount earmarked for such lending was NOK1.5bn, the pension fund said.
KLP reported that its within its NOK570.6bn common portfolio, equities fell by 15.6% in the quarter.
However, that investment loss is shallower than the fall suffered by the Oslo Børs Benchmark Index, which lost 24.1% of its value in the quarter, according to information from the exchange.
Among its other asset classes, KLP said short-term bonds lost 1.1%; long-term/hold-to-maturity bonds made a positive return of 1%, and property generated a 0.9% return.
Total group assets grew slightly to NOK765bn from NOK763bn at the end of 2019.
KLP’s capital adequacy under Solvency II – not including the transitional regulatory measures – declined to 234% from 342% at the same point last year, according to the Q1 report.