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KLP sticks with bonds as profit slumps

NORWAY – Pension provider KLP, reporting a 62% slump in quarterly profits, says it is sticking with its substantial bond portfolio.

Kommunal Landspensjonskasse, which provides funded public pension schemes for municipalities and regional authorities in Norway, said its profit before allocations in the second quarter was 731 million crowns, compared to 1.93 billion a year ago.

“Weaker financial markets and lower interest rates compared with the same period last year affected profits for the second quarter,” the group said.

Total assets rose to 131.5 billion crowns from 117.9 billion crowns, equal to growth of 11.6% in the 12-month period.

“In the second quarter, KLP continued with its investment profile to give emphasis to a predictable and consistent return,” KLP said in its quarterly report. “The company’s substantial portfolio of bonds held to maturity means the balance sheet is less sensitive to interest rate changes.”

“This class of asset does not fluctuate with interest rates and provides a consistent, ongoing return well above the company’s guaranteed interest rate.”

KLP held 60.2 billion crowns, of 47.4% of its portfolio, in bonds held to maturity as at the end of the quarter – down from 49% at the end of 2003.

It said its 13.7 billion-crown equities portfolio has returned 8.2% so far this year, lower than the benchmark.

The company added that it has signed 82 new pension insurance contracts this year.

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