Kommunal Landspensjonskasse (KLP), the dominant provider in Norway’s municipal pensions market, reported it lost NOK3.9bn (€388m) of pensions business in 2019 as a result of the Scandinavian country’s local government reform.

The countrywide redrawing of Norway’s administrative regions, which has been underway for the last few years, has seen the number of municipalities reduced to 356 from 428.

In some cases where KLP clients have merged with municipalities that run their own pension scheme, smaller local authorities have opted to join a new wider self-administered scheme rather than remain with KLP.

In its annual results announcement, the Oslo-based company said: “The municipal and regional reform has so far had only a moderate effect on KLP’s customer base.

“At 1 January 2020, KLP had an inflow of NOK3.5bn and an outflow of NOK7.4bn,” it said, but also mentioned the fact it had recently won the contract for the New Øygarden municipality.

The pension provider reported an 8.5% return on capital in value-adjusted terms, and a book return on capital of 4.5%. These figures compare to 1.5% and 3.5% in 2018.

Value-adjusted returns, according to KLP’s definition, include unrealised gains or losses from equities and bond investments whereas book returns do not take these changes into account.

KLP’s group total assets grew to NOK763bn from NOK676bn at the end of 2018.

The company posted a profit of NOK10.9bn for 2019, up from NOK5.7bn in 2018, with NOK10.8bn of this being transferred to the customers’ premium fund – the contents of which can be used for future premium payments.

Investments in equities and a rise in the value of bonds and real estate had contributed to the result, KLP said.

Chief executive officer Sverre Thornes said the “historically good result” meant KLP could pass on over NOK10bn to the companies, municipalities, counties and health enterprises that were its members.

“The result also allows for further strengthening of our financial position,” he said, adding: “We are thus well equipped to operate in turbulent financial markets without our customers noticing it.”

This was fighting talk from a company whose near monopoly of the municipal pensions market is also being threatened by the likes of Storebrand and DNB Liv, which have returned to the sector to compete for business after years of absence.

On the topic of the new hybrid public sector pension scheme, which has come into effect this year, KLP said this new arrangement was technically demanding to put in place and increased the complexity for its customers and members.

“KLP is continuing to invest heavily in solutions to guide both employers and their employees, making it as easy as possible for them to handle their pensions,” it said, adding that advanced systems also provided a foundation for the further streamlining of its own operations.