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KLP returns 2.7% in first half despite 1.9% loss on equities

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Norway’s KLP reported a 2.7% return on its investments in the six months to the end of June, despite having made a 1.9% loss on its equity holdings in the period.

Sverre Thornes, the pension provider’s chief executive, said: “KLP is delivering a good return despite unsettled equity markets and low interest rates.”

He said KLP had prepared itself for these challenging markets by building up solvency during good years, and that in the first half this strategy had proved itself to be right.

The 2.7% first half return is up on the 2.3% return produced in the first half of 2015.

Equities suffered a loss of 1.6% in KLP’s collective portfolio between January and June, down from a 4.7% profit in the same period last year, while bonds made a profit of 4.9%, up from zero return in the comparable year-earlier period.

Property, which makes up 12.3% of KLP’s NOK444bn (€47.9bn) collective portfolio, returned 5.1%, only slightly below the 5.2% return the asset class produced in the first half 2015.

Premium income, excluding premium reserves that were transferred into the scheme, rose to NOK17.9bn in the second half from NOK15.9bn in the same period last year.

The local authority pension provider saw assets increase to NOK577bn by the end of June, from NOK543.2bn at the end of December, and from NOK526bn at the end of June last year.

KLP said it had experienced considerable growth in the number of new public sector occupational pension customers in recent years.

“The market situation for public sector occupational pension is now expected to be more stable,” KLP said.

The heavy influx of new customers in the last few years happened largely as a result of decisions by Storebrand and DnB Livsforsikring to exit the public sector occupational pensions market.

KLP said in its interim report that the ongoing municipal reform in Norway may affect its customer base, and added that the company was following this situation closely.

Solvency coverage increased to 189% at the end of June, up from 187% at the end of December, before using the transition rules for the period in which the new Solvency II regime beds in, KLP said.

Under the transition rules, its solvency coverage increased to 343% from 274%, it said.

 

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