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Interim report 2/2009. Report from the board of directors - Income statement & Balance sheet - Notes

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Interim report 2/2009 Report from the board of directors - Income statement & Balance sheet - Notes Content Report from the board of directors 3 - Income statement 4 - Balance sheet 4 Accounts after the
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Interim report 2/2009 Report from the board of directors - Income statement & Balance sheet - Notes Content Report from the board of directors 3 - Income statement 4 - Balance sheet 4 Accounts after the first quarter Income statement 7 - Balance sheet 8 - Notes to the accounts 11 Group accounts after the first quarter Income statement 13 - Balance sheet 14 - Notes to the Group accounts 17 Interim report second quarter 2009 A very good second quarter for KLP Developments in the financial markets produced good results for the second quarter and the first half year Return on the common portfolios for the second quarter 2.7 per cent, and 3.0 per cent for the first half year Return on the corporate portfolio for the second quarter 2.2 per cent, and 2.8 per cent for the first half year Value-adjusted profit of NOK 3,216 million and interest profit of NOK 2,701 million as at 30 June Acquisition of Kommunekreditt Norge AS completed 24 June Second quarter 2009 After last year's extremely negative development in the financial markets, KLP entered 2009 with a satisfactory solvency. This provided a freedom of action in financial management that generated good results during the second quarter. Acquisition of Kommunekreditt completed The purchase of Kommunekreditt Norge AS was completed on 24 June upon satisfaction of the conditions in the acquisition agreement and when the relevant official permits had been obtained. Over the second quarter we saw the outline of normalisation of important financial markets. KLP was well positioned for this development. Due to risk considerations, the equity proportion in the common portfolio was reduced during 2008, but remaining equity holdings largely consisted of liquid stock exchange listed shares that participated in the general stock market upswing during the second quarter. In accordance with the Company's c.p.p.i. strategy, there has also been share acquisitions in the quarter. KLP's international bond portfolio is largely invested in bonds issued by credit companies and companies with very solid creditworthiness. Through the emerging normalisation of the credit markets these investments have had very favourable development in value and returns so far during These factors contributed markedly to KLP's good value-adjusted return of 2.7 per cent on the common portfolio during the second quarter, and 3.0 per cent for the half year. Through this acquisition KLP has strengthened its position as a service provider to the public sector with greater and better potential to contribute to financing public sector activity. KLP Banken will be operational in the second half year and is a key element in the Company's investment in continuing development of good products and services for our customers' employees and pensioners. On the takeover of Kommunekreditt Norge AS, KLP's 20 per cent holding in Kommunalbanken AS was simultaneously sold to the state. The sale sum of NOK million including interest contributed in large measure to financing the purchase of Kommunekreditt for NOK million including interest. For accounting purposes both transactions occurred with effect from 1 April Kommunekreditt's total assets of NOK million as at 30 June are thus included in KLP's Group accounts. Kommunekreditt Norge AS has been incorporated into the Group as a subsidiary of KLP Banken. It is also satisfying to note that at the end of the first half year the Company had interest profit to customers of NOK 2,701 million. Of the profit for the first half year of NOK 3,216 million, a total of NOK 2,880 million has been credited to customers and NOK 336 million to the Company. 3 Profit/loss as at 30 June Premium income for the first half year was NOK 5,886 million (NOK 5,553 million 1 ), representing an increase of 6.0 per cent. In addition transfer reserves of NOK 262 million have been received. KLP's administration result for the first half year was NOK 85 million. The risk result amounted to NOK 77 million. Net income from investments in the corporate portfolio was NOK 349 million. The total profit for customers and the company for the first half year of NOK 3,216 million is divided into NOK 2,880 million to customers and NOK 336 million to the Company. Profit allocation Custormers Company Total Interest profit/loss Risk profit/loss Administration profit/loss Interest guarantee premium Net income corporate portfolio Return from corporate portfolio credited to customers Profit/loss before supplementary reserves Cover from supplementary 0 reserves Distributable profit Profit/loss from the second quarter Premium income for the quarter was NOK 3002 million (NOK 2872 million), representing an increase of 5.2 per cent. In addition NOK 53 million in transfer reserves accrued to income during the second quarter. KLP's administration result for the second quarter was NOK 62 million. The risk result amounted to NOK 39 million. Net income from investments in the corporate portfolio was NOK 268 million. The total profit for customers and the company during the second quarter of NOK 3942 million is divided into NOK 3,698 million to customers and NOK 244 million to the Company. 1 Figures in brackets refer to figures from the second quarter of 2008 Financial solidity and capital-related matters Key figures - the common portfolio Per cent Return on capital I 3,0 1,8 1,0 Return on capital II 3,0-2,2-3,0 Return on capital III 3,0-3,2-1,7 Capital adequacy 12,6 11,8 14,6 Solvency margin adequacy Administration costs in % of average customer funds 0,16 0,16 0,36 The rules for return calculation have been changed from 2009 and corresponding figures from previous years are not directly comparable. Premium income for the quarter was NOK 3,002 million (NOK 2,872 million), representing an increase of 5.2 per cent. In addition NOK 53 million in transfer reserves accrued to income during the second quarter. KLP's administration result for the second quarter was NOK 62 million. The risk result amounted to NOK 39 million. Net income from investments in the corporate portfolio was NOK 268 million. The total profit for customers and the company during the second quarter of NOK 3,942 million is divided into NOK 3,698 million to customers and NOK 244 million to the Company. Management of the common portfolio Asset Proportion Return Shares 1) 6,9 % 4,3 % Interest - instruments 22,0 % 5,4 % Bonds, hold-to-maturity 36,4 % 2,7 % Lending 13,4 % 2,3 % Property 11,2 % 0,6 % Other financial assets 10,0 % 2,1 % Total 100 % 1) Equity exposure including derivatives. The equity markets developed very positively during the second quarter albeit from a low starting point. KLP's equity portfolio produced a return of 11.0 per cent over the quarter. Equities amounted to 6.9 per cent of the investments in the common portfolio at the end of the first half year. In line with the Company's c.p.p.i. strategy the equity proportion has 4 increased somewhat since the end of the quarter. During the second quarter the common portfolio s investments in short-term bonds produced a return of 4.4 per cent, which can largely be attributed to increasing values of corporate bonds. Investments in money market instruments produced a return of 1.0 per cent during the same period. The portfolio of longterm bonds produced a return of 1.3 per cent. The return on the lending portfolio was 1.1 per cent during the second quarter, whilst the property portfolio produced returns of 0.5 per cent. During the second quarter KLP wrote down the property portfolio by a total of NOK 167 million. The write-down was based on a thorough examination and assessment of the Norwegian and Scandinavian property portfolio. Of the total write-down, NOK 87 million represents holdings in international property funds. In total, property has been written down by NOK 580 million during the first half year. In May KLP Eiendom bought the Radisson SAS Royal Viking Hotell in Stockholm. Until then KLP owned seven hotels, six in Norway and one in Sweden (Malmö). The aim is to build up a Swedish portfolio through further purchases of attractive, fully developed and centrally located city properties. In total during 2009, property investments with a gross value of NOK 1,881 million have been made in KLP's portfolios. The pension market KLP is maintaining its solid market position in public sector occupational pensions and only a few of its own customers wish to evaluate other suppliers. Three out of the nine municipalities/county authorities that have so far decided to put their pension schemes out to competition and conduct tender processes this year are KLP customers. companies were readmitted to the portfolio. Read more about KLP's environmental policy and ethical investments at Fund management Net new subscriptions from customers outside the Group amounted to NOK 961 million during the second quarter. During the first half year net new subscriptions from customers outside the Group were NOK 1264 million. At the end of the first half year total assets under management from this group of customers were NOK 9.2 billion. Over the last 12 months total assets managed for customers outside the Group have increased by NOK 2.2 billion. This represents growth of 31 per cent compared to the same time in Non-life insurance The operating profit before tax and allocations for KLP Skadeforsikring AS for the second quarter was NOK 78.6 million against NOK 40.3 million for the same period last year. The result is marked by a good technical result as a result of run-off of previous year's reserving. Three major fire damage claims were notified to the company, which means that the claim costs for the year's operations are somewhat higher than expected. Financial income was 2.7 per cent for the period, corresponding to NOK 84.2 million, against NOK 15.0 million during the second quarter of The operating profit for the first half of 2009 was NOK 95.5 million, compared to NOK 28.3 million for the same period in Financial income was NOK million, corresponding to a return of 3.3 per cent. Accrued premium income for own account increased by 13.7 per cent compared to the same period last year. The sale of private insurance policies is increasing steadily and at the end of the quarter, after 13 months of sales, the Company had received total premiums of about NOK 25 million, distributed over 2800 customers. Social responsibility As one of the first of the major financial institutions in the country, KLP was Eco-Lighthouse certified at the end of June. This is a certification that confirms KLP's active efforts to ensure environmentally friendly operation of its own business. In June KLP conducted its biannual review of which investments accord with the Company's ethical criteria. Two new companies were excluded from KLP's investment portfolio from the start of June. At the same time a total of seven Organisation Stig Helberg has been appointed managing director of KLP Banken since 20 May. He has 15 years of banking experience from BNbank, including as deputy managing director. On 1 April, Toril Bariusdotter Ressem started as the new director for group services in KLP. She took over from Roy Halvorsen who acted in the position for a period. 5 Håvard Gulbrandsen has been appointed the new managing director of KLP Kapitalforvaltning from 1 September. He takes over from Morten Hvistendahl who since the summer of 2008 has been acting managing director of KLP Kapitalforvaltning at the same time as he has led the Index Tracking Section fund management. Future prospects The good profit development over the second quarter has continued into the third quarter. Besides continuing focus on stable and good returns, lower administration costs and further development of our service concepts for public sector occupational pensions, an important area of focus for the rest of 2009 will be implementation of the reorganisation of the lending operation through the new subsidiaries, and establishing banking operations with good saving and lending offerings oriented towards the individual market. Through KLP Kommunekreditt, KLP strengthens its position as service provider to the public sector with a broader range of improved solutions for financing public sector activities. The positive development in the credit markets will provide the basis for more advantageous lending conditions and will make a positive contribution to ensuring improved returns for our pension customers. Oslo, 19th of August 2009 The Board of Directors of Kommunal Landspensjonskasse Arne Øren Finn Jebsen Gunn Marit Helgesen Chair Deputy chair Ann Inger Døhl Herlof Nilssen Anne Grethe Skårdal Kari Bakken Freddy Larsen 6 Accounts after the second quarter 2009 Kommunal Landspensjonskasse Notes Income statement Q Q Premium income Income from investments in subsidiaries, associated enterprises and djointly controlled enterprises Interest income/dividends on financial assets Value changes on investments Gains and losses realised on investments Net income from investments in the common portfolio Net income from unit-linked portfolio Other insurance-related income Claims Changes in insurance liabilities taken to profit/loss - contractual liabilities Changes in insurance liabilities taken to profit/loss - investment option portfolio separately Funds assigned to insurance contracts - contractual liabilities , 5 Insurance-related operating expenses Other insurance-related costs Technical profit/loss Net income from investments in the corporate portfolio Other income Administration costs and other costs associated with the corporate portfolio Non-technical profit/loss TOTAL PROFIT/LOSS Accounts after the second quarter 2009 Kommunal Landspensjonskasse Notes Balance sheet ASSETS ASSETS IN THE CORPORATE PORTFOLIO Intangible assets Investments Receivables Other assets Prepayments and accrued interest Total assets in the corporate portfolio ASSETS IN THE CUSTOMER PORTFOLIOS Investments in the common portfolio Shares and holdings in property subsidiaries Receivables from and securities issued by subsidiaries, associated enterprises and jointly controlled enterprises Financial assets valued at amortised cost Financial assets valued at fair value Total assets in the customer portfolios ASSETS IN THE INVESTMENT OPTION PORTFOLIO Investments in property subsidiaries Financial assets at fair value Total assets in unit-linked portfolio ASSETS OWNERS' EQUITY AND LIABILITIES Owners equity contributed Retained earnings Subordinated loan capital etc Insurance obligations in life insurance - contractual liabilities Insurance liabilities unit-linked portfolio Provision for liabilities Liabilities Accrued costs and prepaid income OWNERS' EQUITY AND LIABILITIES Accounts after the second quarter 2009 Kommunal Landspensjonskasse Cash flow analysis Net cashflow from operational activities Net cashflow from investment activities Net cashflow from financing activities Net changes in cash and bank deposits Holdings of cash and bank deposits at start of period Holdings of cash and bank deposits at end of period Schedule of changes in owners' equity Total profit/loss at the end of the period Changes in owners' equity resulting from change in principle Risk equalisation fund Unrealised gains financial assets corporate capital Funds in none-life insurance Reclassified surplus fund group life 0 86 Total changes in owners' equity resulting from change in principle Transactions with owners Owners' equity contribution paid in Owners' equity contribution repaid Total transactions with owners Reconciliation of capitalised value Owners' equity contributed Onwers' equity contribution 1 January Onwers' equity contribution paid in Onwers' equity contribution repaid Onwers' equity contributed at the end of the period Continued. 9 Accounts after the second quarter 2009 Kommunal Landspensjonskasse Retained earnings Funds Risk equalisation fund 1 January Risk equalisation fund converted to owners' equity 0-24 Changes during the period 0-3 Risk equalisation fund at the end of the period Reclassified funds in non-life insurance 1 January Changes during the period 5 0 Reclassified funds in non-life insurance at the end of the period Surplus fund 1 January Changes during the period -5 0 Surplus fund at the end of the period Funds totalled Funds 1 January Change for the period -1-3 Funds at the end of the period Other retained earnings Retained earnings as at 1 January Risk equalisation fund Unrealised gains financial assets corporate capital Reclassified surplus fund group life Other changes 13 0 Transferred from profit/loss for the year Retained earnings at the end of the period Retained earnings Other equity 1 January Change for the period Other owners' equity at the end of the period Owners' equity in total Owners' equity 1 January Changes during the year Owners' equity at the end of the period Notes to the accounts after the second quarter 2009 Note 1 Accounting principles The accounts in this interim report show the accounts for Kommunal Landspensjonskasse (KLP) and the Group for the period The accounts have not been audited. The interim accounts do not contain all the information required of full annual accounts. It is recommended that this interim report be read in conjunction with the annual report for 2008.This may be obtained on application to the Company's registered office, Karl Johans gate 41b, Oslo, or at These notes have been prepared for KLP's accounts whilst the notes to the Group accounts follow further on in the report. Similarly to the annual accounts 2008, the interim accounts have been submitted in accordance with Regulation 1241 of 16 December 1998: Regulations on annual accounts etc. for insurance companies (the Annual Accounts Regulations). Note 2 Pensions, own employees No new estimate of pension obligations in regard to own employees has been carried out as at The pension cost for the period therefore corresponds to pension premiums paid in and current pension payments disbursed during the period, NOK million. This cost is included in the profit and loss account item Insurance related operating expenses. Note 3 Segment information The Company's business segments have been defined in relation to business areas where risk and returns are differentiated from each other. The Company operates within the three segments: life insurance, non-life insurance and asset management. Other business has not been specified. Life insurance Non-life insurance Asset management Bank Other Eliminated Total Profit/loss Note 4 Investment property The portfolio of investment properties including investment properties owned via subsidiaries has been valued as at 30 June Result Q Q Value adjustment incl. foreign exchange Foreign exchange effect on hedging Net value adjustment incl. exchange hedging Notes to the accounts after the second quarter 2009 Note 5 Operating expenses Q Q Staff costs Depreciation Other operating expenses Insurance related expenses Other operating expenses Total insurance-related operating expenses The item Insurance-related operating expenses has been specified in its entirety. Other operating expenses are included in the item Management costs and other costs associated with the corporate portfolio . Note 6 Profit/loss allocation Result before appropriations Appropriated to insurance contracts Result to the company Note 7 Key figures ) Return on capital I (from to ) 3.0 % 1.8 % 1.0 % 1) Return on capital II (from to ) 3.0 % -2.2 % -3.0 % 1) Return on capital III (from to ) 3.0 % -3.2 % -1.7 % Capital and solvency ratios: Capital adequacy 12.6 % 11.8 % 14.6 % Solvency margin adequacy The rules for return calculation have been changes from 2009 and corresponding figures from 2008 are not directly comparable. 1) Return on capital I: Book financial income for the year after transfers for the year to/from securities adjustment fund Return on capital II: Book financial income for the year after transfers for the year to/from s
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