The ATP Group Annual Report 2014
Management’s review
Value creation
Risk
Pension and investment activities
Administration activities
Responsibility
Consolidated financial statements
Contents Introduction 3 4
28
The annual report at a glance In brief
Management’s review 5
Management’s review
Value creation 13
Value creation in ATP
Positive returns in three out of five risk classes 31 Interest Rates 32 Credit 33 Equities 34 Inflation 36 Commodities
54 Internal auditors’ report 55 Independent auditors’ report 56 Income statement 58 Statement of comprehensive income 59 Statement of financial position 61 Cash flow statement 62 Notes
Hedging
Specifications
38
113 Specifications
Pension 15 16 17 20
Pension activity results Adjustment of the ATP pension product Predictable pension – for life Pension scheme for disability pensioners
Expenses 22
The ATP management Administration activities 42
114 Supervisory Board 115 Board of Representatives 116 Executive Committee, Audit Committee, Executive Board and Appeals Board 117 Other directorships held by members of the Supervisory Board 118 General Management
Administration activities
Risk 46
Low expenses
Strong protection against decline in interest rates
Risk and risk management
Responsibility
Hedging and investment
49
25 26
Financial statements
Further information
52 53
119 Overview of further information for the ATP Group’s annual report at www.atp.dk
Performance target The Danish Financial Supervisory Authority’s return ratios
Investment
ATP’s organisation
Social responsibility in investments
Overview of the ATP Group Statement by the Supervisory and Executive Boards
ATP’s activities are divided into pension and investment activities and administration acATP
tivities. ATP Livslang Pension (Lifelong Pension) is managed under pension and administration activities, while other
Pension and investment activities
Administration activities
schemes on behalf of the social partners, the Danish state and the municipalities are administered under administrati-
Pension
Hedging
Investment
Managed schemes
on activities.
The ATP Group Annual Report 2014
2
THE ANNUAL REPORT AT A GLANCE
Contributions This year, ATP received member contributions totalling DKK 9.0bn. Each year, an ATP contribution of DKK 3,240 is paid on behalf of the average wage earner, two-thirds of which is paid by the employer. At ATP The lion’s share of the contributions received – 80 percent – equivalent to DKK 7.2bn are guaranteed and hedged to ensure that ATP will always be able to deliver on the guarantees made. This year, the value creation from the total guarantees was 3.9 percent. The remainder – 20 percent – equivalent to DKK 1.8bn of the contribution is invested broadly in equities, properties etc., this year generating a return of 6.5 percent. Less expenses and tax, ATP made a profit of DKK 5.3bn this year, DKK 2.8bn of which will be earmarked to increase pensions for current pensioners. The profit after allocation of bonus is DKK 2.5bn, which increases the bonus potential (the reserves). When the bonus potential is sufficiently high, it will be possible to further increase the guaranteed ATP pensions. Pension benefits When the wage earner starts receiving state-funded old-age pension, ATP Livslang Pension (Lifelong Pension) is disbursed. This year, pensioners received a total of DKK 13.7bn. The payment comprises the originally guaranteed pensions and any bonus added. The full annual ATP pension for a 65-year-old who has contributed to ATP throughout his or her working life is DKK 24,000.
Highlights of the Year
DKK
5.3bn
DKK
96bn
DKK
704bn
profit for the year before bonus
bonus potential
net assets
6.5
3.8
9.7
percent
percent
return on investment
total value creation
943,500
DKK
pensioners
24,000
full ATP pension for a 65-year-old pensioner
percent
average annual return for the past 20 years ‘N1’
4.9
million
members
The ATP Group Annual Report 2013
MANAGEMENT’S REVIEW
“
2014 was a year of plunging interest rates. We protected our guarantees; achieved a return of DKK 6.1bn on our investments; cut our administration expenses by 5 percent; and increased the ATP pension for all current pensioners.
Carsten Stendevad ATP CEO
ATP was established in 1964 and, through its 50 years in exi-
most of ATP’s investments performing well. Exceptions
stence, it has evolved into one of Europe’s largest pension
were oil investments and the long-term hedging strategy
funds. ATP now has 4.9 million members and net assets of
against rising inflation, which produced negative returns.
DKK 704bn. Low expenses translate into higher pensions, and, accorATP’s task is to create good, stable pensions to enable ATP,
dingly, ATP focuses on keeping expenses as low as possi-
along with the state-funded old-age pension system, to pro-
ble. For the second consecutive year, ATP reduced admi-
vide basic pensions for danish public. To that end, ATP has
nistration expenses by 5 percent, to DKK 62 per member.
always been operating with pension guarantees. The guarantees have continuously been adjusted to reflect econo-
The return for the year resulted in tax on pension savings
mic circumstances. This also occured in 2014, where the
returns of DKK 21bn – the highest tax payment in ATP’s hi-
ATP Supervisory Board decided to change the guaranteed
story. Total results before bonus for 2014 were DKK 5.3bn.
return on future pensions. The purpose was to better safe-
For the second year running, the Supervisory Board deci-
guard the purchasing power of pensions, while at the same
ded to increase pension payouts by 1.5 percent for the cur-
time taking the lower liquidity in parts of the financial markets
rent 943,500 pensioners.
into account. All existing guarantees remain unchanged. 2014 was a good year for ATP’s administration activities, i.e. In 2014, the financial markets were marked by a massive
administration and disbursement of benefits under a number
decline in interest rates, which caused ATP’s guarantees to
of large welfare schemes. The expansion of Udbetaling Dan-
become DKK 109bn more expensive. However, thanks to a
mark progressed satisfactorily, and the target of providing
hedging return of DKK 132bn, all of ATP’s guarantees re-
33 percent savings over a two-year period is expected to be
main fully protected.
achieved. As far as other administration tasks are concerned, we also met our target of delivering competitive operations.
Investment activities generated a return of DKK 6.1bn, with
Carsten Stendevad Chief Executive Officer The ATP Group Annual Report 2014
Five-year summary for the ATP Group
DKKm
2014
2013
2012
2011
2010
Pension and investment activities: Investment activities Return on investment Investment activity expenses Tax on pension savings returns and income tax Other items Investment activity results
6,078 (720) (579) 0 4,779
15,106 (668) (2,249) (13) 12,176
12,544 (598) (1,752) (132) 10,062
16,782 (527) (2,185) (17) 14,053
23,791 (548) (3,275) (127) 19,841
(112,743) 132,221 (20,230) (752)
42,012 (49,975) 7,646 (317)
(37,018) 45,417 (6,949) 1,450
103,203 107,889 (16,183) (11,497)
(39,920) 50,419 (7,564) 2,935
4,027
11,859
11,512
2,556
22,776
9,049 (13,661) 6,149 (300) 1,237
11,587 (12,741) 1,210 (310) (254)
8,554 (11,903) 2,258 (351) (1,442)
8,602 (11,080) 4,253 (336) 1,439
8,293 (10,170) 2,906 (380) 649
Pension and investment activity results
5,264
11,605
10,070
3,995
23,425
Administration activity results: Administration activity income, external parties Administration activity expenses, external parties Income tax Administration activity results
1,469 (1,426) 8 51
1,546 (1,508) (3) 35
807 (780) (3) 24
647 (637) (2) 8
627 (635) 3 (5)
Results before bonus Change in guaranteed benefits due to change in estimated life expectancy Bonus addition for the year Net profit for the year
5,315 (2,772) 2,543
11,640 (2,472) 9,168
10,094 10,094
4,003 4,003
23,420 (18,324) 5,096
608,309 95,831 704,140
498,951 93,344 592,295
539,691 84,154 623,845
504,925 74,133 579,058
405,953 70,005 475,958
Expense ratios Administration activity expenses, ATP Pension, DKK per member Investment activity expenses, DKK per member
62 264
65 250
68 247
68 261
68 243
Bonus rate
Hedging activities Change in guaranteed benefits due to discount rate and maturity reduction Return on hedging portfolio etc. Tax on pension savings returns Hedging activity results Investment and hedging activity results Pension activities Contributions Pension benefits Change in guaranteed benefits due to contributions, payouts, life expectancy etc. Administration activity expenses, ATP Pension Pension activity results
Guaranteed benefits Bonus potential Net assets
Ratios for the ATP Group
15.8
18.7
15.6
14.7
17.2
Return ratios Return on investment relative to bonus potential (before expenses and tax), per cent Return on investment relative to bonus potential (after expenses and tax), per cent
6.5 5.1
17.9 14.5
16.7 13.6
23.9 20.1
36.5 30.6
Value creation ratios for members, per cent Value creation from guaranteed pension Value creation from bonus potential Total value creation
3.9 3.6 3.8
3.9 14.2 5.9
4.0 14.2 5.8
4.0 3.7 4.0
4.1 34.5 9.4
The ATP Group Annual Report 2014
6
Hedging of pension provisions safeguards reserves DKKbn 120 100 80 60 40 20 0 -20 -40 -60
Return on hedging portfolio after tax Change in guaranteed benefits
2010
2011
2012
2013
“ATP’s guarantees are well protected against interest rate fluctuations.
2014
HIGHLIGHTS OF THE YEAR
portfolio of DKK 132.2bn before tax (DKK 112.0bn after tax).
The ATP Group recorded a profit of DKK 5.3bn in 2014 before allocation of bonus.
Hedging activity results, after substantial gross movements, were a loss of DKK 0.8bn, equivalent to less than a quarter
The bonus potential was sufficient to increase pensions for
of one percent of ATP’s guaranteed benefits.
all current pensioners by 1.5 percent at the beginning of 2015. After allocation of bonus, the profit was DKK 2.5bn,
The bonus potential is managed as part of ATP’s investment
and the bonus rate was 15.8 percent.
activities. The Group’s investment activity results were DKK 4.8bn. Before expenses and tax, the return totalled DKK
ATP’s reserves – its bonus potential – increased to DKK
6.1bn, equivalent to a return of 6.5 percent on the bonus po-
95.8bn. The value of pension liabilities rose by DKK 109.4bn
tential. Three out of five risk classes generated positive retur-
in 2014, to DKK 608.3bn at year-end, taking net assets to
ns, and returns were boosted, in particular by equity invest-
DKK 704.1bn.
ments, contributing a return of DKK 8.5bn to the profit for the year. Non-liquid investments in properties, infrastructure and
PENSION AND INVESTMENT ACTIVITIES
credit-related investments also contributed positive returns.
Investment and Hedging
Oil investments and the long-term hedging strategy against
Total investment and hedging activity results were a profit
rising inflation were the largest detractors from returns.
of DKK 4.0bn. The Supervisory Board’s target for hedging activities is that ATP’s overall objective is to provide the best possible pen-
ATP at any time should be able to fulfill the guarantees. In
sions to its members in the form of a lifelong guarantee.
2014 the market value of the hedging portfolio increased to
ATP has organised its hedging activities to ensure that
the same extent as the pension guarantees, og the target
ATP will, at all times, be able to deliver on the guarantees
was therefore met. Furthermore The Supervisory Board has
made. Hedging is planned with a view to ensuring that the
set the long-term target that, over time, investment and hed-
market value of the hedging portfolio fluctuates in line with
ging activity results must be sufficient to ensure that pensi-
pension liabilities when interest rates go up or down. Follo-
ons are revalued in line with the Retail Price Index (RPI). The
wing the plunge in interest rates during the year, along with
performance target is based on the expected rate of infla-
the maturity reduction, the market value of lifelong pensi-
tion and a premium of one percent. For 2014, seen in isola-
ons increased by DKK 112.7bn in 2014. The decline in inte-
tion, the target was DKK 6.5bn. With a profit of DKK 4.0bn,
rest rates also produced a positive return on the hedging
the target was not met.
The ATP Group Annual Report 2014
7
Equity price developments in 2014
50 years of ATP Pension
Index
DKKbn
125
Denmark
120
USA
115 110
Emerging Markets
105
Europe
100 95 90 85 Q1
Q2
Q3
Q4
Contributions
16 14 12 10 8 6 4 2 0
Payouts
1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2014
Note: Calculated as a five-day moving average
In 2014, tax on pension returns for ATP was DKK 20.8bn. For
Allocation of bonus
the latest five-year period, tax on pension returns for ATP
Because ATP’s bonus policy, it is possible to increase pensi-
totals DKK 53.3bn.
ons for all current pensioners if reserves exceed 10 percent
Pension activities
cutive year, the ATP Supervisory Board has decided to in-
At the end of 2014, 943,500 pensioners were receiving ATP
crease pension payouts for the current 943,500 pensioners
Pension, and pension payouts totalled DKK 13.7bn. For
by 1.5 percent per year, effective from 1 January 2015. This
more than 50 percent of Denmark’s one million old-age pen-
increase has a profit impact of DKK 2.8bn. After allocation
sioners, ATP is their only pension income besides the sta-
of bonus, the bonus rate is 15.8 percent.
of the value of guaranteed benefits. For the second conse-
te old-age pension. The full annual ATP Pension for 65-year-old pensioners who have contributed to ATP throughout
Adjustment of ATP’s pension product
their working lives, was DKK 24,000 in 2014, equivalent to 34
In August 2014, the Supervisory Board decided to change
percent of the basic amount of the state old-age pension.
the method for calculating the return on new contributions, effective from 1 January 2015. The purpose is to safeguard
ATP’s members earn guaranteed lifelong pension rights by
the purchasing power of pensions; moreover, the change
contributing to the scheme. There is a clear link between
took into account the decrease in liquid funds in parts of the
the contributions paid to the scheme and the pension rights
financial markets. All existing guarantees remain unchan-
earned by the individual member. Contribution payments for
ged.
the year amounted to DKK 9.0bn. During the previsous guarantees, the return was fixed up to Pension activity results were a profit of DKK 1.2bn.
80 years. Resulting in young members, in particular, being highly dependent on the interest rate level at the time of ma-
ATP performs an annual update of its life expectancy model.
king their payment. In future, the return on ATP contribution
This year’s update had no significant impact on results, re-
payments will be fixed for 15-year periods for members un-
flecting that the observed increase in Danish life expectancy
der the age of 50.
was in line with the model projections. For Denmark – viewed isolated – female life expectancy was up by 2.5 months,
The new pension guarantees will still be fully hedged, but
while male life expectancy improved by 2 months in 2014.
subject to considerably lower interest rate sensitivity compared with the existing guarantees. This adjustment regar-
The ATP Group Annual Report 2014
8
ATP pension liabilities DKKbn 650
Difference between ATP’s and the Danish FSA’s life expectancy calculations
600 550
Difference between ATP’s and the Danish FSA’s yield curves
500
“ATP maintains conservative approach to valuation of pension liabilities.
450 400 0
ATP’s method of calculation
The Danish FSA’s method of calculation
ding future pension guarantees is in keeping with ATP’s me-
tential available from one extra DKK of cost. ATP’s overall
asures in 2013 in connection with the introduction of the new
direct and indirect investment expenses amounted to DKK
discounting curve, which reduced the interest rate sensitivi-
1,284m, equivalent to 0.18 percent of the average assets
ty of existing guarantees by 25 percent.
managed by ATP in 2014, or DKK 264 per member.
Low expenses benefit the embers
Total investment expenses increased by just under 7 per-
Low expenses provide a significant contribution to higher
cent relative to 2013, attributable mainly to an increase in
pensions.
the number of due diligence processes ahead of major investments and fortifying liquid funds in active investment stra-
Administration expenses
tegies. The increase in expenses is expected to generate an
At ATP, the focus is on minimising administration expenses.
additional return relative to the expenses incurred.
In 2014, administration expenses for ATP Pension were DKK 300m – equivalent to DKK 62 per member. Once again, ATP
A recent international comparison of expenses in the invest-
reduced administration expenses by DKK 3 per member re-
ment area (CEM Benchmarking) shows that ATP’s total inve-
lative to the previous year. This is the second year running
stment expenses are lower than those of any of its peers of
that the expense ratio for ATP Pension is reduced by 5 per-
a similar size in the global pension community, and 17 per-
cent.
cent lower than the average.
ATP is now reaping the benefits of its structured and effi-
Conservative determination of pension liabilities
cient IT support, streamlining and increased digitisation and
ATP relies on its own custom yield curve for valuation of
service optimisation for customers.
pension liabilities, which is more conservative than that of the Danish FSA. ATP also uses its own custom life expec-
The international comparison of expenses in the pensions
tancy model, which projects higher increases in life expec-
area (CEM Benchmarking) shows that ATP Pension’s admi-
tancy than the Danish FSA’s model.
nistration expenses are one-eighth of the average for global peer pension funds.
ATP’s pension liabilities would have been DKK 55.1bn lower and its bonus potential would have been correspondingly
Investment expenses
higher if the Danish FSA’s life expectancy model and yield
ATP also focuses on keeping investment expenses low, whi-
curve were both used.
le at the same time having its eye on capturing the return poThe ATP Group Annual Report 2014
9
Administration expenses for ATP Pension Index 120
“ATP
reaps efficiency gains, reducing administration expenses from DKK 65 in 2013 to DKK 62 per member.
ATP
100 80
Average of peer pension funds
60 40 20 0
Note: CEM Benchmarking
VALUE CREATION
Administration activity results were DKK 51m.
In 2014, the overall value creation for ATP’s members was 3.8 percent, reflecting the value creation from guarantees
The focus on Udbetaling Danmark remains steadfast. As
and ATP’s profit during the year. The value creation from
from March 2015, the annual expenses associated with the
the guarantees promised to ATP’s members was 3.9 per-
services initially assigned must be reduced by close to DKK
cent, while the value creation from ATP’s bonus potential,
300m, equivalent to savings of 33 percent, achieved over a
which will enable an increase in pensions over time, was
two-year period. This target is still expected to be met.
3.6 percent. New benefit disbursement services will be assigned to UdThe ratio is driven primarily by investment returns, but is im-
betaling Danmark on 1 May 2015 in the form of international
pacted also by ATP’s ability to hedge pension liabilities and
health insurance services, funeral benefits, benefits regar-
predict life expectancy.
ding the flexible job scheme (benefits paid for less demanding, publicly supported jobs), survivor lump-sum benefits
ADMINISTRATION ACTIVITIES
and partial pensions. The potential expense reduction is ex-
In addition to the administration of ATP Pension, the ATP
pected to be 45 percent after nine months of operations.
Group performs administration tasks on behalf of the social
On 1 May 2015, Udbetaling Danmark will launch a new joint
partners, the Danish government and local authorities. The-
data unit to ensure a better basis for and binding coopera-
se tasks, which are performed as part of ATP’s administra-
tion on the control of municipal social benefits.
tion activities, are assigned to ATP on a cost-recovery basis – i.e. without profit to ATP and without any risk of expense.
RISKS
Operating expenses are managed based on ambitious ob-
ATP is committed to identifying and managing the most sig-
jectives of ensuring efficient and competitive operations. Di-
nificant risks relating to ATP Pension and the Group’s other
gitisation, optimisation, structured work processes and effi-
activities.
cient operations management once again ensured low operating expenses in 2014.
Responsibility for including the most significant risks and
Administration activities incurred expenses of DKK 1.4bn,
with the ATP Supervisory Board. The Supervisory Board be-
which were re-invoiced primarily on a cost-recovery basis.
stows particular importance to ensuring that ATP’s financi-
weighing the various risks in relation to each other rests
The ATP Group Annual Report 2014
10
ATP member assets 2010-2014 DKKbn 800
Bonus potential – reserves
700 600
Pension liabilities
500 400 300 200 100 0 2010
2011
2012
2013
2014
al flexibility remains intact – even in very difficult situations.
where ATP is represented, may affect ATP.
ATP disburses a monthly life-long pension to its members. Consequently, the increase in life expectancy is the grea-
SOCIAL RESPONSIBILITY
test pension risk facing ATP. ATP relies on a custom life ex-
ATP practises business-driven social responsibility in inve-
pectancy model, based on comparable data from 18 OECD
stment decisions to achieve the optimum risk-adjusted re-
countries, for managing the longevity risk. In addition to fac-
turn for the benefit of members. This is reflected in the Su-
toring in already observed increases in life expectancy, the
pervisory Board’s Policies of Social Responsibility in Invest-
model allows for expected future increases.
ments and Corporate Governance. ATP supports the UN-supported Principles for Responsi-
Investment risks are primarily market risks assumed by ATP
ble Investment (PRI), which, in terms of procedure, under-
in relation to investment and hedging activities. The market
pin ATP’s work on business-driven social responsibility in
risks assumed by ATP are closely aligned with its investment
investment.
strategy, consisting of four main components: Hedging of the interest rate risk of pension liabilities, appropriate risk
ATP is a signatory of the United Nations Global Compact.
levels, risk diversification and hedging arrangements to pro-
As a signatory, ATP prepares an annual Communication on
tect against significant decline in value.
Progress, for further Information go to www.atp.dk.
ATP is not covered by the Solvency II Directive, but has cho-
CORPORATE GOVERNANCE
sen to follow the rules of the Directive as this will enhance
ATP’s corporate governance framework is stipulated in the
risk management, among other things. ATP applies an inter-
Danish ATP Act. For further information on ATP’s corpo-
nal model to calculate reserve requirements, and this model
rate governance, including ATP’s compliance with the Re-
is used in the overall risk management.
commendations on Corporate Governance and ATP’s salary policy, go to www.atp.dk.
ATP is dependent on efficient financial markets, and any changes that result in a decrease of liquid funds in markets
The ATP Group Annual Report 2014
11
OUTLOOK FOR 2015 ATP’s investment strategy is to ensure that ATP attains a
9 percent before tax and expenses. In 2014 the previous tar-
fair share of the continued increase in the financial markets,
get was to net DKK 6.5bn. With the new methode of setting
while, at all times, being able to meet the guarantees issued
targets, the performance target for 2015 will be DKK 6.7bn,
to members.
and therefore largely unchanged compared to 2014.
The ATP Supervisory Board has set the long-term target
Had the new target been applied in 2014, it would have re-
that, over time, hedging and investment activity results must
sulted in the same absolute target as the old performance
be sufficient to ensure that pensions are revalued in line with
target.
the Retail Price Index (RPI). So far, the performance target has been based on the expected rate of inflation and a pre-
Based on ATP’s bonus policy, the current bonus rate and the
mium of one percent.
outlook for 2015, the ATP Supervisory and Executive Boards currently expect that it will be possible, yet again, to incre-
The ATP Supervisory Board has decided to apply a new
ase pensions for existing pensioners next year.
long-term target as from 2015. This target will be based on the ambitious principles underlying the old target, while at
The ATP Supervisory and Executive Boards also expect ATP
the same time remaining resilient to changes in interest ra-
Pension administration expenses to be maintained at the
tes and inflation. In order to achieve the desired long-term
2014 level in 2015. Moreover, a small increase in investment
value creation, the future performance target after tax and
expenses is expected in connection with activity expansi-
expenses has been set at 7 percent of the bonus potential at
ons.
the beginning of the year, equivalent to just over
Jørgen JørgenSøndergaard Søndergaard formand Chairman
Lars Rohde Carsten Stendevad direktør Chief Executive Officer
The ATP Group Annual Report 2014
12
VALUE CREATION
…ATP has slipped quietly into the capital market. ATP Annual Report 1964
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Value creation in ATP
Value creation from guarantees and bonus potential (after tax).
Value creation, percent
2014
2013
2012
2011
2010
Value creation from guarantees
3.9
3.9
4.0
4.0
4.1
Value creation from bonus potential
3.6
14.2
14.2
3.7
34.5
Total value creation
3.8
5.9
5.8
4.0
9.4
The financial statements reflect the annual results of ATP’s
return on the promises acquired over time – across age
business and describe how the profit for the year is trans-
groups. This ratio is calculated based on historical con-
ferred to the bonus potential. Hedging of the guarantees is
tributions and the associated guarantees. In 2014, the va-
also described in the financial statements, but the return
lue creation from guarantees was 3.9 percent. In the pe-
implied by the guarantees is not directly accounted for1.
riod 2010-2014, the average value creation was approx.
The return is a crucial element of the value creation from
4 percent. This figure has been stable in recent years, al-
the perspective of the individual member.
beit with a slightly decreasing trend, reflecting the decline in interest rates. In a declining interest rate environment,
In order to improve the description of ATP’s overall value
this ratio will fall as new guarantees are more expensive
creation, ATP has been calculating a further three ratios
to make. Conversely, in a rising interest rate environment,
since 2013. These three ratios give a more complete pictu-
the ratio will increase, as ATP will be able to make better
re of ATP’s value creation from its members’ point of view
new guarantees.
than the Danish FSA’s ratios (‘N1’), especially in relation to guarantees.
Value creation from the bonus potential illustrates the return on the bonus potential. In 2014, this value creation
The three ATP ratios
was 3.6 percent. Value creation was positive throughout
ATP’s guaranteed pension product is a promise of certain
the period 2010-2014. This ratio is driven primarily by the
lifelong benefits – an income stream. Quite literally, the
return on investment, but in 2014 the ratio was affected
pension is made up of the sum of the promises acquired
also by matters relating to hedging and pension.
year by year during a wage earner’s working life. Total value creation shows ATP’s ability to generate overThe contributions to ATP are divided in two. The members’
all value creation. This ratio is the weighted average of the
pension accounts for 80 percent, while the remaining 20
two ratios above. For 2014, total value creation was 3.8
percent is transferred to the bonus potential – ATP’s unal-
percent, and it has been positive throughout the five-year
located reserves. This means that the total value creation
period.
for ATP’s members comes from both sources: the guarantees and the bonus potential.
For more information about the definition of ATP’s value creation ratios, see ‘Further Information’ at
Value creation from guarantees illustrates the average
www.atp.dk.
1 The return on the guarantees for the year is expressed by the item ‘Change in guaranteed benefits due to maturity reduction’.
The ATP Group Annual Report 2014
14
PENSION
“...At the end of 1983, ATP began sending account statements to all ATP members. For practical reasons, only about 100,000 account statements are sent each month. Thus, all of ATP’s 3.1 million members will have received an account statement within a three-year period.” ATP Annual Report 1984
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Pension activity results The observed increase in life expectancy was in line with that predicted by ATP’s life expectancy model
Pension activity results DKKm Current contributions Contributions resulting from conversion of SUPP savings Total contributions Pension benefits Change in guaranteed benefits due to ATP contributions and pension benefits Change in guaranteed benefits due to conversion of SUPP savings Total change in guaranteed benefits Expenses Other items Results before change in life expectancy Change in guaranteed benefits due to change in life expectancy Pension activity results
Additional provisions due to increases in life expectancy DKK billion
85
50
84
40
83
30 82
20 10
81
0
80
2013 8,832
0
2,755
9,049
11,587
(13,661)
(12,741)
6,061
6,009
0
(2,344)
6,061
3,665
(300)
(310)
(8)
10
1,141
2,211
96
(2,465)
1,237
(254)
Increased expenses due to increases in life expectancy 1970-2050 Index 100 = year of 1970
Years
60
2014 9,049
Life expectancies for 65-year-olds (avg. both genders)
150
Accumulated provisions since the millennium change to cover increases in life expectancy
120
01 02 03 04 05 06 07 08 09 10 11 12 13 14
Pension activities generated a profit of DKK 1.2bn.
> Projection
140 130
110 100 90 1970
1990
2010
2030
2050
on which the life expectancy model is based. For Denmark – viewed in isolation – female life expectancy was up by 2.5
ATP performed the annual update of its life expectancy mo-
months, while male life expectancy improved by 2 months
del in connection with the preparation of the interim report
in 2014.
for H1. This year’s update resulted in a DKK 0.1bn reduction in guaranteed benefits.The marginal reduction in provisions
Since the year 2000, ATP has made total provisions of DKK
for guaranteed benefits primarily reflects the fact that the
50bn to cover increases in life expectancy. As a result of
observed increase in Danish life expectancy corresponds
these provisions, ATP’s bonus potential has been reduced
to the model projections, and that new life expectancy data
similarly.
has not been available from all of the other OECD countries Historically, average life expectancy in Denmark has increased significantly – and it is set to continue increasing. Today 65-year-old men and women can expect – on average – to live until the age of 84 and 87, respectively. This is a full three years longer than in 1990, but three or four years less than is projected for 2050. Life expectancy is a key issue in a pension context. The longer the life expectancy, the more pension must be paid out. The ATP Group Annual Report 2014
16
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Adjustment of the ATP pension product Lifelong pension guarantees are maintained, but the method of calculating the return is changed
Illustration of the accrual of pension rights for a 20-year-old Pension rights accrued Final revaluation
“The purpose of the current adjustment is to better safeguard the purchasing power of pensions, while taking the lower liquidity in parts of the financial markets into account”
Second revaluation First revaluation Pension rights awarded
2015 Current product
2015
2030
2045
2060
Adjusted product
In August 2014, the ATP Supervisory Board decided that in
ting increase in pension are fixed – this time for the rest of
future the guaranteed return on new ATP contributions will
the member’s life. The same procedure applies to the mem-
be fixed for 15 years at a time. So far, the return has been
ber’s contributions for all subsequent years until he or she
fixed for life at the time of the contribution payment. ATP’s
has less than 15 years to retirement.
pension guarantees still mean that guaranteed ATP pensions can only increase, never decrease.
Thus, in future, the individual member’s ATP pension will depend less on interest rates in the year of the contributi-
The adjustment becomes effective on 1 January 2015 and
on payment and reflect interest rates over the course of the
applies to new contribution payments. The adjustment ap-
member’s lifetime to a higher degree. The objective is to bet-
plies to members born in 1964 or later. This means members
ter safeguard the purchasing power of pensions.
with more than 15 years to retirement age. ATP’s existing pension guarantees are not affected.
This adjustment takes lower liquidity into account After the financial crisis, liquidity has diminished in the lon-
The purpose is to better safeguard purchasing power
gest segment of the yield markets, while liquidity is good in
Under the current guarantees, the return is locked for up to
the yield market segments where future (shorter) guarantees
80 years. This makes the level of interest rates at the time of
are to be hedged. This adjustment means that ATP adapts
the contribution payment a decisive factor for the individual
to the conditions in the financial markets.
member. In future, the return on ATP contributions will be fixed for 15 years at a time.
Lower interest rate sensitivity The new pension guarantees will still be fully hedged, but
For example, the guaranteed pension of a 20-year-old mem-
subject to considerably lower interest rate sensitivity com-
ber’s contributions will be raised several times before retire-
pared with the existing guarantees.
ment age. At the time of the contribution payment, ATP guarantees a return, based on the market rate, and the resul-
This adjustment regarding future pension guarantees is in
ting lifelong pension for the next 15 years. At the end of the
keeping with ATP’s introduction of a new discount rate curve
15-year period, when the member has turned 35, ATP fixes
in the autumn of 2013, which reduced the interest rate sen-
a guaranteed return for the next 15 years and the resulting
sitivity of existing guarantees by 25 percent.Both measures
increase in the guaranteed lifelong pension. This process
reduce ATP’s interest rate sensitivity and increase its invest-
continues until the member has less than 15 years to retire-
ment flexibility for the benefit of members.
ment at which time a final guaranteed return and the resul-
The ATP Group Annual Report 2014
17
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Predictable pension – for life Pensioners’ payouts to be increased
The pension pyramid
ATP members at year-end 2014 Total number of members
4,900,600
Number of members above pensionable age
1,075,400
Personal pensions Labour-market pensions State old-age pension and ATP Lifelong Pension
ATP was established and set up by statute in 1964 as a
- of whom receiving a current pension
943,500
- of whom paying contributions in 2014
95,200
Number of members below pensionable age
3,825,200
- of whom paying contributions in 2014
3,004,300
2014, 56,400 people paid voluntary ATP contributions. Re-
supplement to the state-funded old-age pension, and to-
cipients of voluntary early retirement benefits were the lar-
day, it is an integral part of the basic Danish pension cover.
gest group.
ATP helps to provide basic financial security for virtually all
As the ATP scheme has reached a mature stage, pay-
Danish pensioners. With this, ATP contributes to ensuring
outs from ATP have in recent years exceeded contributi-
a high minimum pension in Denmark and is also a part of
ons. ATP will only be fully mature when all pensioners have
the foundation upon which other pensions rest.
been able to pay contributions to the scheme during their entire working lives. The maturing process will continue
With 4.9 million members, ATP is Denmark’s biggest sup-
over the coming decades, and the gap between contribu-
plementary pension scheme.
tions and payouts will gradually widen.
Nine out of ten old-age pensioners – 943,500 persons – re-
DKK 12.7bn paid out in current pension benefits
ceived lifelong pension from ATP at the end of 2014, and
Out of the total payouts in 2014 of DKK 13.7bn, DKK 12.7bn
for 50 percent of Danish old-age pensioners, the ATP pen-
went to current pensions and the rest to lump-sum pay-
sion is their only source of supplementary pension income
outs.
besides the state-funded old-age pension. In 2014, the full annual payout for a 65-year-old pensioNinety-one percent of the Danish population aged 25-
ner was DKK 24,000, equivalent to 34 percent of the basic
60 years paid ATP contributions in 2014, thereby accru-
amount of the state old-age pension. This amount was
ing ATP pension rights. ATP is a mandatory scheme for all
paid to members who had paid the full ATP contribution
wage earners and the vast majority of recipients of trans-
from the age of 18 until retirement.
fer income. The amount of the pension payout depends on the indiviA few groups – including the self-employed, recipients of
dual pensioners’ contributions to ATP during their working
voluntary early retirement benefits and recipients of be-
lives, and their individual contributions are independent of
nefits under the Danish flexi job scheme (benefits paid for
income, but vary according to employment rates.
less demanding, publicly supported jobs) – are not members of ATP, but can opt to pay voluntary contributions. In
There is a fairly significant variance in the benefits paid out
The ATP Group Annual Report 2014
18
Management’s review
Value creation
Pension and investment activities
Administration activities
Pension payouts in 2014
Risk
Responsibility
Average annual ATP Lifelong Pension for 65-year-olds Number
DKKm
Current old-age pensions
974,200
12,733
Annual pension, DKK '000
- personal pensions
967,400
12,711
25
6,800
22
20
- spouse pensions
Consolidated financial statements
15
Lump-sum benefits
24,900
928
10
- personal pensions
3,400
73
5
17,800
698
0
- child benefits
2,600
130
- estate benefits
1,100
27
- spouse/common-law partner benefits
Women (avg.)
Men (avg.)
Full pension
to members. Younger pensioners, in general, receive more
Members who also pay SUPP contributions have supple-
than older pensioners because they have contributed to
mentary cover on death, which will be paid to their estate.
ATP over a longer period of their working lives. ATP was set up in 1964, and at that time many of the older current pen-
ATP contributions
sioners had already been working for several years. On ave-
More than 3.1 million members paid a total of DKK 9.0bn
rage, men receive more than women because their employ-
in ATP contributions in 2014, thus accruing lifelong pensi-
ment rate is usually higher.
on rights. 23 percent of the contributions were paid by re-
In 2014, the ATP pension averaged DKK 13,900 annually.
cipients of transfer income. The ATP contribution is a fixed
For pensioners who retired at 65 in 2014, the annual pay-
amount set by the social partners. The contribution is adju-
out from ATP Livslang Pension (Lifelong Pension) averaged
sted as and when agreed by the social partners. The stan-
DKK 15,600.
dard ATP contribution is DKK 3,240 a year.
Survivor benefits
The Danish Confederation of Trade Unions (LO) and the
If a member dies before retirement age, his or her spouse or
Confederation of Danish Employers (DA) have decided to re-
common-law partner and children under the age of 21 will
commend to the ATP Board of Representatives that the an-
generally receive lump-sum survivor benefits of DKK 50,000.
nual ATP contribution be increased from DKK 3,240 to DKK 3,408, effective from 1 January 2016. While the adjustment
In 2014, 17,800 spouses and common-law partners and
of the contribution rate has little effect on ATP pensions in
2,600 children under 21 received a lump sum from ATP. This
the short term, continuous adjustment is essential for pen-
number has stayed fairly constant for a number of years.
sions in the long term. In a mature pension scheme such as
Between them, spouses and common-law partners recei-
ATP, failure to adjust contributions will translate into a redu-
ved DKK 698m, while children received DKK 130m.In 2014,
ction in the purchasing power of future pensioners.
the survivor benefit payment amounted to DKK 61 per member.
A number of public sector collective agreements have provided for particularly low ATP contributions. However, in 2008,
The ATP Group Annual Report 2014
19
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
ATP contributions in 2014 DKKm Total contributions
9,049
Of which in respect of: - people in employment
6,971
- recipients of unemployment, sickness or maternity/paternity benefits
1,062
- recipients of disability pension
547
- recipients of early retirement pension
122
- recipients of other transfer income
347
Number of contributing employers
152,700
it was decided to ensure that public sector employees will in
ATP’s bonus policy is indicative. Decisions on whether to in-
time receive the same ATP Livslang Pension (Lifelong Pensi-
crease pensions are made by the ATP Supervisory Board for
on) as employees in the private labour market. The process,
one year at a time.
which is due to conclude over the coming years, means that the affected groups switched to a higher contribution rate at
At the end of Q3 2014, ATP’s reserves amounted to 17.9 per-
the start of 2014.
cent, entailing that no general bonus will be paid in 2015. The Supervisory Board has decided to increase pension
Bonus
payouts for current pensioners by 1.5 percent as at 1 Ja-
At ATP, bonus represents an increase in ATP members’ pen-
nuary 2015.
sion beyond that provided by guaranteed savings. Under ATP’s bonus policy, it is possible to increase pensi-
Viewed in isolation, the cost of this increase is DKK 211m for
ons for all members if reserves exceed 20 percent of the va-
2015, or a total increase of the value of the guaranteed be-
lue of guaranteed benefits – the pensions promised to mem-
nefits of DKK 2.8bn.
bers. If reserves exceed 10 percent, pensions may be increased for all current pensioners.
The ATP Group Annual Report 2014
20
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Pension scheme for disability pensioners Four out of ten disability pensioners pay voluntary SUPP contributions
SUPP members at year-end 2014
Total number of members
Pension payouts and contributions in 2014
119,900
Payouts Current pensions
Members below the retirement age for the statefunded old-age pension - of which members who paid contributions in 2014 Members over the retirement age for the statefunded old-age pension New SUPP members in 2014
98,000
number
DKKm
21,300
43
Lump-sum benefits Survivor benefits
50
1
1,100
27
95,500
21,900
Contributions SUPP contributions after social security contributions
520
2,200
SUPP is a voluntary scheme, giving disability pensio-
SUPP members was DKK 1,929. For SUPP members retiring
ners an attractive opportunity to save for lifelong pension.
at age 65 in 2014, the average annual lifelong pension was
When disability pensioners contributed DKK 163 per month
DKK 2,109. Lump sum payments totalled DKK 1m.
to SUPP in 2014, the Danish government topped up this amount by a further DKK 326. The Danish government thus
If a SUPP member dies before retirement age, the estate will
contributes twice the amount of the disability pensioner.
receive an amount corresponding to 50 percent of the contributions paid and the added return. This amount will be
More than four out of 10 disability pensioners pay contribu-
gradually scaled down after retirement age. In 2014, DKK
tions to SUPP, and this figure is on the rise.
27m was disbursed from SUPP on the death of SUPP members – an average amount of DKK 25,000 per deceased
Since 2013, SUPP has been part of ATP. SUPP contributions
person. Survivor benefit payments amount to 10 percent of
are managed together with ATP contributions. SUPP mem-
contributions on average.
bers accrue current guaranteed lifelong pension in the same way as ATP members. SUPP members also contribute to
In 2014, the full annual contribution to SUPP was DKK 5,868,
the bonus potential in the same manner and are included in
and SUPP members paid total contributions of DKK 520m.
ATP’s bonus policy.
The SUPP contribution is adjusted annually by the rate adjustment percentage.
Pension payouts and contributions In 2014, total payouts for current old-age pensions amounted to DKK 43m. In 2014, the average annual lifelong pension to
The ATP Group Annual Report 2014
21
Expenses
…guidelines...members are able to calculate the amount of supplementary pension they may be eligible for. The booklet is available in bookshops at the price of DKK 2. ATP Annual Report 1965
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Low expenses ATP’s low expenses translate into higher pension payouts for members
ATP expenses
2014
2013 Per member
DKKm
Administration expenses Investment expenses
4
300 1,284
percent
1
0.05 0.18
2. 3
Per member percent
1
DKK
DKK
DKKm
62
310
0.05
65
264
1,203
0.20
250
Expenses have been calculated relative to average assets (guaranteed benefits plus bonus potential). Expense ratio excluding commitments. Including commitments, the ratio is 0.17 percent. In addition, performance fees of just under DKK 1.2bn were incurred. 4 This ratio has been calculated excluding administration expenses to NOW:Pensions (DKK 189m in 2014) as these expenses do not relate to ATP’s regular asset management. 1 2 3
Expense levels have a significant impact on future pension
nificant that ATP is a mandatory scheme with a simple pro-
payouts. With a long savings period, small differences in
duct. Finally, because of the number of members, it is pos-
expenses can make significant differences in pension pay-
sible to achieve economies of scale.
outs. For this reason, ATP aims to keep administration and investment expenses down.
The international comparison of expenses in the pensions area (CEM Benchmarking) shows that ATP Pension’s admi-
Administration expenses
nistration expenses are one-eighth of the average for glo-
At ATP, the focus is on minimising administration expenses.
bal peer pension funds. The other pension funds in the sur-
In 2014, administration expenses for ATP Pension were DKK
vey are from Scandinavia, the Netherlands, Canada and
300m – equivalent to DKK 62 per member. Once again, ATP
the USA. Compared with Danish life insurance companies
reduced administration expenses by DKK 3 per member re-
and industry-wide pension funds, ATP’s administration ex-
lative to the previous year. This is the second year running
penses per member are the lowest of all in Denmark.
that the expense ratio is reduced by 5 percent. Investment expenses For a number of years, the focus has been on the imple-
ATP aims to keep investment expenses low, while at the
mentation and maturing of ATP’s operational platform. Now
same time having its eye on capturing the return potential
ATP is reaping the benefits of its structured and efficient IT
available from one extra DKK of cost. The focus is on en-
support, streamlining and increased digitisation and service
suring that investments are made in the most expedient
optimisation for customers.
and cost-effective manner. For instance, it is regularly assessed whether a given return potential should be achie-
Administration expenses for ATP Pension primarily compri-
ved by purchasing the assets in question through financial
se payroll and employee-related expenses and IT expenses.
contracts or by use of external managers. Expenses must necessarily be seen in terms of the return they will help to
ATP has always been focusing on keeping expenses low.
generate.
Another focus area has been to digitise much of the commu-
ATP’s overall direct and indirect investment expenses
nication with members. In an expense context, it is also sig-
amounted to DKK 1,284m in 2014, equivalent to 0.18 per-
The ATP Group Annual Report 2014
23
Management’s review
Value creation
Pension and investment activities
Administration activities
Administration expenses
Responsibility
Consolidated financial statements
Investment expenses
Index
Index
120
120
ATP
100 80
Risk
ATP
100 Average, comparable pension funds
60
40
40
20
20
0
0
Note: CEM Benchmarking
Average, comparable pension funds
80
60
Note: CEM Benchmarking
cent of the average assets managed by ATP, or DKK 264 per member.
A recent international comparison of expenses in the inve-
Total investment expenses increased by just under 7 per-
vestment expenses are lower than those of any of its peers
cent relative to 2013. The rise was attributable mainly to an
in the global pension community, and 17 percent lower than
increase in the number of due diligence processes ahead of
the average. The group of comparable global peers com-
major investments and the strengthening of liquid active in-
prises companies with roughly the same asset size as ATP.
vestment strategies. The increase in expenses is expected
This group includes 14 pension funds from Sweden, the
to generate an additional return relative to the expenses in-
Netherlands, Canada and the USA.
stment area (CEM Benchmarking) shows that ATP’s total in-
curred.
The ATP Group Annual Report 2014
24
INVESTMENT AND HEDGING
…investment policy is planned with a view to ensuring steady development in the capital market. ATP Annual Report 1984
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
The Supervisory Board’s target The Hedging portfolio protected the pension guarantees and ATP’s investment and hedging activities generated a total profit of DKK 4.0bn.
Investment and hedging activity results relative to the performance target
Hedging and investment activity results relative to the performance target in the 2006-2014 period
DKKbn
DKKbn
8
Total investment and hedging activity results
6
Performance target, premium
4
Performance target, inflation
2 0
2014
25 20 15 10 5 0 -5 -10 -15 -20
Total investment and hedging activity results Performance target
2006 2007 2008
2009 2010 2011 2012
2013 2014
Investment and hedging activities generated a total profit of
The performance target for investment and hedging activi
DKK 4.0bn in 2014. Results were driven, in particular, by a
ties for 2014, when viewed in isolation, had been set at DKK
DKK 4.8bn profit on ATP’s investment activities, while hed-
6.5bn. The actual rate of inflation resulted in a performance re-
ging activities recorded a loss of DKK 0.8bn.
quirement of DKK 1.5bn, while the premium resulted in a performance requirement of DKK 5.0bn.With overall investment
Investment and hedging activities
and hedging activity results totalling DKK 4.0bn, the perfor-
ATP’s overall objective is to provide the best possible pensi-
mance target for 2014 was not achieved.
ons to its members in the form of a lifelong guarantee. Performance target from 2015 To safeguard its guarantees, ATP has organised its hed-
The ATP Supervisory Board has set a new method for calcu-
ging activities to ensure that ATP will, at all times, be
lating the performance target, that apply from 2015. The aim
able to deliver on the guarantees made. Investments that
is to achieve a more resilient target, which is still based on
are not included in hedging activities are included in in-
the principles underlying the old target of safeguarding mem-
vestment activities. The aim of ATP’s investment ac-
bers’ interests; preserving the purchasing power of pensions;
tivities is to generate a return that is sufficient to pre-
and providing an ambitious target. Moreover, the principle of
serve the long-term purchasing power of pensions.
an absolute target has been retained.
Performance target
The old method for calculating the target has been applied sin-
The Supervisory Board’s target for hedging activities is that
ce 2006. The performance requirement has fluctuated consi-
ATP at any time should be able to fulfill the guarantees. In
derably, driven by changes in the rate of inflation, the bonus
2014 the market value of the hedging portfolio increased
rate and, not least, guaranteed benefits.
to the same extent as the pension guarantees, og the target was therefore met. Furthermore The ATP Supervisory
The new long-term target has been set at 7 percent of the bo-
Board has set the long-term target that, over time, hedging
nus potential after tax and expenses, equivalent to 9 percent
and investment activity results must be sufficient to ensure
before tax and expenses. The resilience of the new target to
that pensions are revalued in line with the Retail Price Index
changes in interest rates and inflation rates has been strengt-
(RPI). So far, ATP has sets its performance target based on
hened. The target has been designed to be realistic given the
inflation and a premium of one percent. The target is thus
size of the bonus potential and the risk budget, as well as the
independent of financial market conditions. This is an abso-
long-term risk-adjusted return expectations. Finally, it is in kee-
lute target – an ambitious target, which is to be achieved in
ping with the desired long-term value creation.Had the new
the long term, but not necessarily each year.
target been applied in 2014, it would have resulted in the same absolute target of DKK 6.5bn as the old performance target. The ATP Group Annual Report 2014
26
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
The Danish Financial Supervisory Authority’s return ratios ATP does not apply the Danish FSA’s one-year return ratio
ATP’s returns over 1-year, 10-year and 20-year horizons Percent 28 24
23.3
20 16 12
10.5
9.7
Average 2005-2014
Average 1995-2014
8 4 0
2014
Note: Calculated in accordance with the Danish FSA’s definition.
Each year, the Danish Financial Supervisory Authority (FSA)
tios. As the Danish FSA’s return ratios tend to reflect mar-
publishes return ratios for life insurance companies and in-
ket value changes on ATP’s hedging portfolio that will not
dustry-wide pension funds. The ratios applied by the Da-
notably affect the pension commitments made, and as the
nish FSA measure only returns on assets, including the as-
return ratio does not allow for the variance in value creation
sets of ATP’s hedging portfolio, while no allowance is made
for guaranteed products, the ratio fails to provide a com-
for changes in the market value of ATP’s pension liabilities.
prehensive view of the value creation for ATP’s members for the individual year. Conversely, in the very long term, the ra-
The guarantee element and the hedging of guarantees
tio rather reflects value creation, as described in the article
against interest rate changes mean that short-term interest
‘Value creation in ATP’.
rate changes do not affect future pension payouts, but may significantly impact the size of ATP’s return ratio.
For this reason, ATP does not apply this ratio in the short term. Using the Danish FSA’s return ratio, ATP achieved a
For instance, if interest rates of the assets included in ATP’s
return of 23.3 percent in 2014. The high percentage return
hedging portfolio go down, the hedging portfolio will gene-
is, to a great extent, attributable to a substantial positive re-
rate a significant positive return – a return that is included in
turn on the hedging portfolio driven by the decline in interest
the Danish FSA’s return ratios. However, this decline in inte-
rates in 2014.
rest rates will also cause the market value of ATP’s pension liabilities to go up, the reason being that ATP needs to set
ATP’s return outperforms the industry over the long-
aside more funds to be able to meet future pension liabili-
term horizon
ties. Consequently, the decline in interest rates does not no-
2013 is the most recent year for which the Danish FSA has
tably affect future pension payouts in the short term.
published return data for the entire industry.
Moreover, the Danish FSA’s return ratios do not allow for the
Over both 10-year and 20-year horizons, ATP’s return out-
variance in value creation for guaranteed products across
performs the industry average. ATP’s average additional
companies. The return ratio of the individual year is focused
market return relative to the industry over 10-year and 20-
exclusively on the return on total assets – not on the increase
year horizons is 3.7 percentage points per year and 1.7 per-
in the guaranteed pension actually obtained by members. In
centage points per year, respectively.
other words, the return achieved by ATP’s members in the individual year is not reflected by the Danish FSA’s return raThe ATP Group Annual Report 2014
27
INVESTMENT
…ATP’s equity portfolio reflects extensive risk diversification across the industries and companies listed on the Copenhagen Stock Exchange. ATP Annual Report 1990
Management’s review
Value creation
Pension and investment activities
Administration activities Risk Responsibility
Consolidated financial statements
Positive returns in three out of five risk classes DKK 5.6bn return on the ATP investment portfolio is driven especially by Equities
Investment activity results
DKKm
ATP
Group
5,596
6,078
Expenses
(264)
(720)
Tax on pension savings returns
(579)
(579)
4,753
4,779
Return on investment
Investment activity results
Note: The difference between ATP’s and the Group’s return on investment is attributable to the treatment of expenses in subsidiaries. In ATP, the return on investment is calculated after payment of subsidiaries’ expenses, while this is not the case for the Group.
In 2014, ATP’s investment activity results after expenses
turn that is sufficient to raise guaranteed pensions and thus
and tax totalled DKK 4.8bn. The results are carried to ATP’s
preserve the long-term purchasing power of pensions as
reserves – the bonus potential which is the basis for ATP’s
best as possible. To maintain a robust investment portfolio
taking on investment risk.
with a stable return and the greatest possible independence from cyclical variations, investment decisions are informed
The ATP investment portfolio
by a strategy of risk diversification. The investment portfolio
In 2014, the investment portfolio generated a return of DKK
is invested in five risk classes with very different risk profiles:
5.6bn before expenses and tax. • Interest Rates – focus on interest rate-sensitive issuanThroughout the year, ATP pursued a patient and flexible investment strategy, in view of historically low and falling interest rates and uncertainty in the financial markets.
ces • Credit – focus on the ability of issuers to repay debt • Equities – focus on corporate earnings
Three out of five risk classes posted positive returns Equities were the top performers, contributing a positive return of DKK 8.5bn, but Interest Rates and Credit also made posi-
• Inflation – focus on general price developments • Commodities – focus on oil prices.
tive contributions. The Inflation and Commodities risk classes contributed negatively to the return. In the Inflation risk
Moreover, the focus is on investing in the most expedient
class, real estate and infrastructure investments, in parti-
and cost-effective manner. It is thus regularly assessed
cular, made positive contributions, while hedging against
whether a given investment should be achieved by purcha-
rising inflation detracted the most from the return.
sing an asset through a financial contract or by use of external managers.
The objective of the investment portfolio is to generate a re-
The ATP Group Annual Report 2014
29
Management’s review
Value creation
Pension and investment activities
Administration activities Risk Responsibility
Consolidated financial statements
Return on the investment portfolio
Return DKK 5.6bn 1
Return 1
Interest Rates
Credit
Equities
Inflation
Commodities
DKK 2.5bn
DKK 0.8bn
DKK 8.5bn
DKK (2.8)bn
DKK (2.0)bn
The sum of the return for the five risk classes is DKK 7.0bn, deviating from the total investment return of DKK 5.6bn. The difference mainly comprises interest payments between investment activities and hedging activities and differences in the treatment of transaction costs etc.
A special feature of ATP’s investment strategy is that risk,
quantitative easing programme in response to sustained
and not capital, is allocated to the risk classes. The share
low inflation and low growth in Europe, putting a downward
of the
pressure on interest rates.
overall risk allocated to a particular risk class – such as Equities – may differ considerably from
Bond markets
that risk class’s share of the total assets. This is because
Very expansionary monetary policy and a weak Europe-
the different types of assets do not entail the same risk. For
an growth outlook sent European government bond yields
example, investing DKK 1 in listed equities carries more risk
tumbling to an all-time low in Europe. In the US, uncertainty
than investing DKK 1 in very short-dated government bonds.
about the strength of the upswing caused US government bond yields to fall. Corporate bond yields remained largely
A year of diverse economic development in Europe and
unchanged over the year, while emerging market govern-
the USA
ment bond yields dropped slightly.
2014 was a year of low inflation in the financial markets and diverse economic development in the USA and Europe. With
Equity markets
a continued recovery in the labour market, moderate growth
In Q1-Q3 2014, the US and domestic equity markets, in par-
and expectations of higher consumer spending, the USA
ticular, were on a positive streak, while Q4 was marked by
moved closer to leaving the crisis behind during the year,
wide fluctuations. Over the year as a whole, the US bench-
although the strength of the recovery remains uncertain.
mark equity index gained just under 15 percent, while the
Europe, on the other hand, was still faced with high sovere-
European benchmark equity index dropped more than 6
ign debt and low growth.
percent. The domestic equity market surged by more than 20 percent in 2014. Emerging equity markets fell by about 5
Interest rates declined in both the USA and Europe, and ri-
percent.
sky assets performed reasonably well despite underlying nervousness in the financial markets caused by potential
Currency markets
geopolitical risks from the crises in Ukraine and the Midd-
In the currency markets, the euro depreciated by more than
le East. The US Federal Reserve (Fed) ended its substan-
10 percent against the US dollar in 2014, reflecting weaker
tial bond purchase programme and began to prepare the
economic growth in Europe than in the US.
market for a possible increase in interest rates in 2015. The European Central Bank (ECB), for its part, introduced a new
The ATP Group Annual Report 2014
30
Management’s review
Value creation
Pension and investment activities
Administration activities Risk Responsibility
Consolidated financial statements
Average risk allocation for the investment portfolio in 2014
8
7 8
Interest Rates Credit
21
Equities Inflation Commodities
56
The risk of each risk class is calculated daily based on 10,000 market scenarios as the average loss in the one percent worst cases. Such loss is thus a relatively rare occurrence. The risk allocation represents the average percentage allocation of risk among the five risk classes during the year.
Risk allocation of the investment portfolio in 2014
bonds can contribute to efficient risk diversification. Conse-
The ATP Supervisory Board has set a target for the long-
quently, instead of maintaining its long-term strategic port-
term allocation of investment risks between the five risk
folio of nominal bonds in Interest Rates, ATP invested in tac-
classes.
tical short-term positions. As a case in point, the portfolio was increased at the beginning of the year when interest
In 2014, like in 2013, ATP had a somewhat lower risk in Inte-
rates were at their highest, while it was reduced as interest
rest Rates and Inflation, in particular, than the Supervisory
rates fell.
Board’s long-term target, while the risk in Equities significantly exceeded the long-term target.
In view of the strong price increases in the domestic equity market, the relatively high risk allocation to Equities contri-
The relatively low risk in Interest Rates and Inflation should
buted to optimising returns.
be viewed in light of the central banks’ very expansionary monetary policy, which,
The relatively high risk in Equities could be maintained wit-
again in 2014, kept yields on safe haven government bonds
hout significantly increasing the risk of high losses because,
at very low levels. This means that both the current return
in overall terms, ATP
and potential capital gains from bond investments are highly
had a low investmentrisk within the scope of the potential
limited, and it is uncertain whether safe haven government
risk exposure.
The ATP Group Annual Report 2014
31
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Interest Rates Positive return of almost DKK 2.5bn
Investment portfolio return on Interest Rates
Return
Asset type
Yield development for 10-year government bonds in 2014
Portfolio1 End Beginning of year of year
2014
2014
2014
DKKm
DKKbn
DKKbn
Percent 2.1
Denmark
1.9
Germany
1.7 1.5 1.3
Global bonds and
1.1
domestic mortgage bonds
2,508.2
3.9
28.0
Total
2,508.2
3.9
28.0
0.9 0.7 0.5 Q1
The Interest Rates portfolio expressed in terms of risk converted to a portfolio of 10-year German government bonds. For more information, see the breakdown on page 112.
1
Q2
Q3
Q4
Note: Calculated as a five-day rolling average.
Interest Rates posted a return of DKK 2.5bn.
reduced in step with the decline in interest rates.
The portfolio of global bonds, consisting, especially in H1,
The portfolio of domestic mortgage bonds yielded a return
primarily of German government bonds with a term to ma-
of DKK 0.1bn.
turity of approx. 10 years, yielded a return of DKK 2.4bn.The positive return was driven primarily by interest rate develop-
The risk in Interest Rates is expressed in terms of the risk
ments, as yields on German government bonds with a term
on German government bonds with a term to maturity of 10
to maturity of 10 years ended the year lower than they be-
years. At year-end 2014, the Interest Rates portfolio was
gan. An increase in the portfolio at the beginning of the year,
equivalent to a portfolio of 10-year German government
when interest rates were at their highest, made a positive
bonds totalling DKK 3.9bn relative to DKK 28.0bn at year-
contribution to the return. Subsequently, the portfolio was
end 2013.
The ATP Group Annual Report 2014 2011
32
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Credit Both loans to credit institutions and funds and high-yield bonds boosted the return
Yield development for bonds issued by emerging markets and companies with low credit ratings in 2014
Investment portfolio return on Credit Return
Asset type
Portfolio1 End Beginning of year of year
Percent 6.5
2014
2014
2014
6.0
DKKm
DKKbn
DKKbn
5.0
5.5
High-yield bonds etc.
192.3
12.5
27.3
4.5
Loans
583.4
10.5
19.1
3.5
Total
775.8
23.0
46.4
1) Reflects the portfolio in terms of exposure.
Emerging markets (JP Morgan Emerging Markets Bond Index) Companies with low credit ratings (Merrill Lynch High-Yield Master Index)
4.0 3.0 2.5 Q1
Q2
Q3
Q4
Note: Calculated as a five-day rolling average.
Credit, consisting of high-yield bonds etc. and loans to credit
corporate loans, produced a return of DKK 0.6bn.These
institutions and funds, produced a return of DKK 0.8bn.
loans are extended indirectly via ATP Alternative Investments K/S or directly by ATP. The positive return primarily
High-yield bonds etc., consisting primarily of bonds issued
comes from current interest income on corporate loans is-
by companies
sued in 2009 and 2010. In 2014, investments in this asset
with low credit ratings or by emerging markets, generated a
class were reduced, given that loans that were repaid on
return of DKK 0.2bn. The positive return was mainly attribu-
maturity more than offset new investments.
table to a decline in yields on emerging market bonds. Most of ATP’s investment in Nets is included in the portfoLoans to credit institutions and funds that invest, among
lio of loans.
other things, in bank loans, real estate-related loans and
The ATP Group Annual Report 2014 2011
33
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Equities All three equity portfolios contributed positively to the return
Investment portfolio return on Equities Return
Equity price developments in 2014 Portfolio 1 End Beginning of year of year
2014
2014
2014
Asset type
DKKm
DKKbn
DKKbn
Listed domestic equities
3,341.8
17.5
15.9
Listed foreign equities
1,485.2
8.0
5.5
Private equities
3,682.4
32.1
31.1
Total
8,509.4
57.5
52.5
Index 125
Denmark
120
USA
115 110
Emerging Markets
105
Europe
100 95 90 85 Q1
Q2
Q3
Q4
Note: Calculated as a five-day rolling average.
1) Reflects the portfolio in terms of exposure.
Equities generated a return of DKK 8.5bn, with all three
The portfolio of private equities, consisting mainly of
equity portfolios contributing positively to the return.
foreign equities, generated a return of DKK 3.7bn. Investments in ATP Private Equity Partners, investing principal-
The portfolio of listed domestic equities generated a return
ly in private equity funds, account for most of the portfo-
of DKK 3.3bn.The return was achieved broadly across the
lio. These investments posted a return of DKK 3.6bn, which
portfolio, but was driven, in particular, by holdings in Gen-
was achieved broadly across the portfolio due to a positive
mab A/S and Novo Nordisk A/S.
development in the underlying portfolio companies’ earnings and debt repayment.
In the portfolio of listed foreign equities, consisting of European and US equities, active trading strategies generated
The portfolio of private equities also comprises ATP’s inve-
a positive return of DKK 1.5bn.
stments in NOW:Pensions, FIH and DONG.
The ATP Group Annual Report 2014 2011
34
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Inflation Real estate and infrastructure investments were positive contributors to performance, while hedging against inflation detracted
Investment portfolio return on Inflation Return
Portfolio1 End of year
Beginning of year
2014
2014
2014
Asset type
DKKm
DKKbn
DKKbn
Real estate
1,885.5
31.3
26.8
Infrastructure etc.
1,716.3
13.8
10.9
76.8
1.1
1.6
(595.3)
8.7
6.1
Hedging strategies
(5,900.9)
45.3
51.1
Total
(2,817.6)
100.2
96.4
Index-linked bonds Other inflation exposure
1
Reflects the portfolio in terms of exposure.
Inflation, consisting of a wide range of asset types, posted a
stments with stable cash flows, in particular, continued to
negative return of DKK 2.8bn.
attract interest.
Real estate investments generated a return of DKK 1.9bn.
In 2014, seven new real estate investments were made,
These investments are made, in part, through direct ow-
including a direct investment in a large office property in
nership of properties and, in part, indirectly through invest-
Brussels, while two directly owned properties in Denmark
ments in unlisted real estate funds and joint ventures. Direct
were divested. At year-end 2014, the value of the portfolio
as well as indirect investments are made both in Denmark
of directly owned properties was DKK 20.5bn, while the va-
and abroad.
lue of the portfolio of indirect investments amounted to DKK 10.8bn.
The return on direct real estate investments was DKK 1.0bn, while the return on indirect real estate investments stood at
The portfolio of infrastructure investments etc. posted a re-
DKK 0.9bn, value adjustments accounting for DKK 0.5bn.
turn of DKK 1.7bn.The portfolio of infrastructure investments also includes forestry investments in North America and
European real estate markets were still recovering from the
Australia, as well as investments in alternative energy sour-
economic downturn, which affected the return. US real esta-
ces. The return was achieved broadly across the portfolio,
te markets, on the other hand, saw strong investment ap-
but investments in road and port infrastructure made parti-
petite and more liquidity. Less risk-prone real estate inve-
cularly positive contributions to performance.
The ATP Group Annual Report 2014 2011
35
Management’s review
Value creation
Pension and investment activities
Administration activities
Expected inflation development in 2014
Risk
Responsibility
Largest real estate investments in 2014
Percent
Type
Size
ATP’s ownership interest
Boulevard du Roi Albert II 33, Brussels. Leased to the Belgian government.
Offices
151,000 m2
90%
Portfolio of 11 properties, TDC being the main tenant.
Offices
52,000 m2
50%
Borups Allé 177, Copenhagen. Leased to the City of Copenhagen and the Danish government.
Offices
26,000 m2
100%
Axel Torv 2, Copenhagen. Leased to a law firm, among others.
Offices
42,000 m2
33%
Göteborg Plads 1, Nordhavn. Leased to Danish Standards.
Offices
13,000 m2
33%
Address
2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6
USA Europe
Q1
Q2
Q3
Consolidated financial statements
Q4
Expected inflation is calculated as the difference between the yield on a nominal government bond and the real yield on an inflation-indexed government bond expiring in 2023 (Europe) and 2024 (USA).
Other Inflation exposure recorded a negative return of DKK
Note: The total amount invested for the five largest real estate investments was DKK 4.7bn in 2014.
simple and effective basis.
0.6bn.The portfolio consists of inflation swaps, as well as an externally managed portfolio, invested in a large
The value of these hedges increases when inflation rises
number of different assets. The portfolio of inflation
and declines when inflation falls. Consequently, the plunge
swaps detracted from the return, while the externally
in inflation and the yield on long-dated bonds in 2014 sub-
managed portfolio made a positive contribution.
stantially detracted from the value. Thus, hedging strategies produced a negative return of DKK 5.9bn.
A sudden spike in inflation, diluting the purchasing power of pensions, constitutes a significant risk for ATP’s pensioners.
ATP’s hedging against rising inflation is a long-term strate-
This has prompted ATP, since 2009, to buy hedging against
gy. During the year, the portfolio was reallocated, and parts
rising inflation.
of the hedging now run for up to 20 years. This has reduced the potential future loss of value in case of further declines
Hedging strategies have consisted of inflation caps and
in inflation.
swaptions to hedge against rising inflation on a relatively Inflation caps and swaptions
When entering into agreements on inflation caps, ATP pays a fixed premium. At the same time, ATP’s counterparty undertakes to pay the difference between an agreed rate of inflation and the actual rate of inflation, if this difference is to ATP’s advantage. Over the life of the inflation cap, ATP cannot lose more than the premium paid – regardless of inflation developments. When entering into swaption agreements, ATP also pays a fixed premium. At the same time, ATP’s counterparty undertakes to pay the difference between an agreed 30-year nominal interest rate and the actual nominal interest rate, if this difference is to ATP’s advantage. Over the life of the swaption, ATP cannot lose more than the premium paid – regardless of interest rate developments.
The ATP Group Annual Report 2014 2011
36
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Commodities Commodities produced a negative return of DKK 2.0bn.
Investment portfolio return on Commodities Return
Asset type
Oil price developments in 2014
Portfolio1 End Beginning of year of year
Dollars per barrel (WTI) 110
2014
2014
2014
100
DKKm
DKKbn
DKKbn
90 80 70
Oil bonds and oil-related financial contracts
(2,015.2)
4.4
7.7
60
Total
(2,015.2)
4.4
7.7
50 Q1
1) Reflects the portfolio in terms of exposure.
Q2
Q3
Q4
Note: Calculated as a five-day rolling average.
Commodities, consisting of oil-indexed bonds and oil-re-
ATP reduced the portfolio on several occasions during the
lated financial contracts, produced a negative return of DKK
autumn in step with the falling oil prices. In early October,
2.0bn, reflecting the plunge in
the portfolio was reduced when the oil price exceeded USD
oil prices in H2 2014.
90 per barrel, followed by another reduction in mid-October when the oil price was just under USD 85 per barrel and, fi-
For a number of years, ATP has had commodity exposure in
nally, in mid-November when the oil price stood at just under
its portfolio due to the portfolio qualities of this risk class, for
USD 80 per barrel.
instance as part of risk diversification. These qualities did not play out well in 2014.
The ATP Group Annual Report 2014 2011
37
HEDGING
…in light of the globalisation of the corporate sector and the capital markets, ATP in 1990 began investing in foreign bonds and equities. ATP Annual Report 1990
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Strong protection against decline in interest rates Hedging of the interest rate risk of pension liabilities once again proved its strength
ATP’s hedging activity results DKKbn Change in guaranteed benefits due to change in discount rate
Hedging of pension provisions safeguards reserves 2014
2013
(102.3)
53.2
(10.4)
(11.2)
(112.7)
42.0
Return on the hedging portfolio
132.2
(50.0)
Tax on pension savings returns
(20.2)
7.6
Return on hedging portfolio after tax
112.0
(42.3)
(0.8)
(0.3)
Change in guaranteed benefits due to maturity reduction Change in guaranteed benefits
Hedging activity results
DKKbn 120 100 80 60 40 20 0 (20) (40) (60)
Return on hedging portfolio after tax Change in guaranteed benefits
2010
2011
2012
2013
2014
ATP Pension is a guarantee-based product, where the gu-
market rate. When interest rates decline, the value of gua-
arantee represents considerable value to members, as
ranteed benefits up to 40 years goes up. Without hedging,
it holds a promise of a lifelong return on the contributions
an increase in guarantees is reflected in a corresponding
made. For further information, please refer to the article ‘Va-
decrease in the bonus potential (and vice versa when inte-
lue creation in ATP’.
rest rates increase). Thus, hedging ensures that ATP’s bonus potential remains intact regardless of changes in inte-
To safeguard guarantees, ATP has organised its hedging
rest rates. Since liabilities more than 40 years into the futu-
activities to ensure that changes in interest rates do not af-
re are discounted by a fixed rate rather than a market rate,
fect ATP’s ability to deliver on its pension commitments.
they do not contribute to ATP’s interest rate sensitivity.
Hedging ensures that ATP’s bonus potential remains intact regardless of changes in interest rates.
ATP’s hedging portfolio The hedging portfolio consists of bonds and interest rate
ATP’s yield curve for valuation of pension liabilities
swaps to hedge the interest rate risk on guarantees up to 40
In October 2013, the ATP Supervisory Board set a new yield
years and a fixed return of 3 percent on the value of guaran-
curve for valuation of pension liabilities. This yield curve
tees beyond 40 years.
comprises a market-based segment and a fixed-rate segment. A characteristic of the market-based segment is that
The fixed return of 3 percent on guarantees beyond 40 ye-
it is hedgeable. The fixed-rate segment for valuation of lia-
ars is transferred from the investment portfolio, which has
bilities 40 years or more into the future reflects a conserva-
assets to offset this effect. This applies, for instance, to real
tive projection of the long-term return. Guarantees between
estate investments leased under very long leases with a di-
0 and 30 years are measured on the basis of a market yield
rect return exceeding 3 percent. If the return on these assets
curve consisting of yields on domestic and German govern-
is higher than 3 percent, the bonus potential is increased
ment bonds and interest rate swaps denominated in Danish
through investment activity results, and if the return is lower
kroner and euros. For the valuation of guarantees between
than 3 percent, the bonus potential is reduced.
30 and 40 years, the 30-year market rate is used, while the interest rate beyond 40 years has been fixed at 3 percent. The value of guaranteed benefits fluctuates in line with the
The ATP Group Annual Report 2014
39
Management’s review
Value creation
Pension and investment activities
Administration activities
Consolidated financial statements
Percent
Percent 3.5
Fixed rate
3.0
Market rate 2013
2.5
Market rate 2014
2.0 1.5 1.0 0.5 0
Responsibility
Yield developments in 2014
ATP yield curve at year-end
0.0
Risk
10
20
30
40
50
Term
3.1 2.9 2.7 2.5 2.3 2.1 1.9 1.7 1.5 1.3
30-year domestic swap rate 30-year European swap rate Yield on 30-year German government bond Yield on 30-year domestic government bond Q1
Q2
Q3
Q4
Note: Calculated as a five-day rolling average
Funds that as a result of the use of financial instruments are
Similarly, the hedging portfolio generated a positive market
not tied up in the hedging portfolio are available for inve-
return of DKK 132.2bn, driven mainly by falling
stment in the investment portfolio within a pre-defined risk
yields on both government bonds and interest rate swaps
budget. A market rate is paid to hedging activities on the
during the year. The return on the hedging portfolio resulted
funds used by the investment portfolio.
in tax on pension savings returns of DKK 20.2bn. Thus, the after-tax return on the hedging portfolio was DKK 112.0bn.
Hedging activity results Hedging activity results were negative by DKK 0.8bn.
The negative hedging activity results in 2014 were due primarily to the widening of the break in the yield curve around
Again in 2014, these results reflect large gross movements,
the 40-year mark, as the market rate fell significantly below
mainly as a result of the decline in interest rates and the sig-
3 percent.
nificant interest rate sensitivity of both guaranteed benefits and the hedging portfolio.
The break in the yield curve at 40 years means that hedging activities will incur a loss or gain from liabilities changing
Guaranteed benefits reflect the value of ATP’s lifelong pen-
valuation during the year from a rate of interest of 3 percent
sion commitments to members. In 2014, the value of gua-
to a market rate, depending on whether the market rate is
ranteed benefits increased by a total of DKK 112.7bn.
higher or lower than 3 percent. In 2014, the market-based
With the decline in interest rates in 2014, guaranteed bene-
As a result, hedging activities incurred a loss of just over
segment of the yield curve fell significantly below 3 percent. fits increased by DKK 102.3bn. In addition, guaranteed be-
DKK 1.1bn, but thanks to good execution and portfolio ma-
nefits increased by DKK 10.4bn, because the benefits gua-
nagement, among other factors, this loss was reduced to
ranteed to members at the beginning of the year had moved
DKK 0.8bn.
one year closer to payout.
The ATP Group Annual Report 2014
40
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Yield curve for valuation of pension liabilities and actual hedging at year-end 2014
• Interest rate swaps denominated in Danish kroner • Interest rate swaps denominated in euros • Domestic government bonds • German government bonds
Yield curve
Hedging
percent
percent
15 35 25 25
15 34 25 26
The curve is extrapolated after the 30-year mark and has been fixed at 3 percent after the 40-year mark.
Had ATP used the Danish FSA’s general yield curve for the
The bonus potential would thus have been DKK 44.2bn hig-
valuation of pension liabilities of insurance companies and
her.
industry-wide pension funds, the pension liabilities would have amounted to DKK 564.1bn at year-end 2014.
The ATP Group Annual Report 2014
41
ADMINISTRATION ACTIVITIES
…terminals are used in the day-to-day case processing, for example for instant responses to telephone inquiries. ATP Annual Report 1977
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Administration activities
Administration activities
Administration activities
Udbetaling Danmark
LG
AUB
AES
(The Employees’ Guarantee Fund)
(The Employers’ Reimbursement System)
(The Labour Market Occupational Diseases Fund)
FerieKonto
FIB (Financing contributions)
Barsel.dk
SFS (Tax Reductions for Senior Citizens)
Labour market pensions etc.
The core of the ATP Group’s administration activities is the
ternity benefits and family benefits totalling around DKK
disbursement of benefits, collection of contributions and
200bn to two million citizens. In 2014, Udbetaling Danmark
membership and client administration. The tasks are admi-
retained its focus on streamlining operations and realising
nistered on a cost-recovery basis, and therefore ambitious
planned cost savings. The objective is to reduce Udbetaling
targets have been defined for efficient and competitive ope-
Danmark’s operating expenses by almost DKK 300m an-
rations with falling operation ratios for the development of
nually from March 2015 for the services initially transferred
expenses. ATP also offers a small range of administration
from the local authorities, equivalent to savings of 33 per-
services on an arm’s length basis (i.e. on market terms).
cent over a two-year period. Subsequently, ongoing streamlining of operating expenses is expected.
Digitisation, optimisation, structured work processes and efficient operations management once again ensured low
In parallel with this, a comprehensive range of IT soluti-
operating expenses in 2014. In 2014, administration activi-
ons will be developed to streamline and modernise busi-
ties incurred expenses of DKK 1.4bn, which were re-invoiced
ness processes and citizen service over the coming years.
to the schemes managed on a cost-recovery basis. Opera-
This is expected to contribute significant efficiency gains
ting expenses accounted for DKK 1.2bn, which – despite ac-
and savings to the local authorities’ IT operating expenses.
tivity expansions in 2014 – was in line with 2013. In 2014, productivity was improved by more than 20 percent over-
2014 saw the completion of an external evaluation of Ud-
all, mainly due to the realisation of the Udbetaling Danmark
betaling Danmark, carried out by agreement between the
business case. Efficiency increases were also achieved for
Danish government and Local Government Denmark. The
the other schemes managed, depending on the streamlining
conclusion of the report is that the commissioning has
and digitisation wishes of the individual schemes.
been successful and that the ambitious financial gains from establishing Udbetaling Danmark will be realised.
For most of the schemes, the financial targets of operating expense savings of 10 percent in the period 2010-2015 were
New benefit disbursement services are expected to be as-
achieved in 2014.
signed to Udbetaling Danmark on 1 May 2015 in the form of international health insurance services, funeral benefits,
STATUTORY SERVICES PROVIDED ON A COST-RECO-
benefits under the Danish flexi-job scheme (benefits paid for
VERY BASIS
less demanding, publicly supported jobs), survivor lump-
Udbetaling Danmark
sum benefits and partial pensions. The potential expense
Udbetaling Danmark disburses state-funded old-age pen-
reduction is expected to be 45 percent after nine months of
sion, disability benefits, housing benefits, maternity/pa-
operations. As at 1 May 2015, Udbetaling Danmark is also The ATP Group Annual Report 2014
43
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Expenses of ATP’s administration activities
DKKm
2014
2013
Udbetaling Danmark
885
987
LG (the Employees’ Guarantee Fund) AUB (the Employers’ Reimbursement System) AES (the Labour Market Occupational Diseases Fund)
106
75
63
75
58
67
FerieKonto
77
78
Barsel.dk
36
38
FIB (Financing contributions)
15
17
SFS (Tax Reductions for Senior Citizens)
11
13
Labour market pension schemes etc. Total
174
158
1,426
1,508
expected to launch a new joint data unit to expand the basis for and cooperation on the control of municipal social
AES (the Labour Market Occupational Diseases Fund)
benefits.
AES, which is funded by contributions from public and private sector employers, provides compensation to wage ear-
LG (the Employees’ Guarantee Fund)
ners suffering from recognised occupational diseases. AES
LG, which is funded by contributions from private sector
pays lump-sum amounts and current benefits based on the
employers, ensures that wage earners will be able to reco-
assessments of the Danish National Board of Industrial Inju-
ver pay arrears etc. from companies being declared bank-
ries of the specific claims filed. In addition, AES charges an
rupt or otherwise going out of business. LG also assists
industrial injury tax on behalf of SKAT (the Danish Customs
wage earners if companies are subject to financial recon-
and Tax Administration). In 2014, AES disbursed a total of
struction. In 2014, LG processed almost 13,000 claims from
DKK 1,016m and collected DKK 1,480m in contributions.
wage earners and disbursed DKK 587m in pay, compensa-
Administration expenses totalled DKK 58m, equivalent to
tion and holiday allowance. Administration expenses total-
an average of DKK 27 per wage earner covered by the
led DKK 106m.Activity-defined expenses amounted to DKK
scheme.
1,225 per wage earner claim processed. FerieKonto AUB (the Employers’ Reimbursement System)
FerieKonto administers holiday allowance for wage ear-
AUB, which is funded by contributions from public and pri-
ners not covered by collective schemes. Employers pay
vate sector employers, provides financial support to emplo-
holiday allowance into accounts with FerieKonto, and the
yers, apprentices, trainees, schools and committees in re-
scheme subsequently pays the allowance to wage ear-
lation to training and education of apprentices and trainees
ners based on holidays reported. 967,626 wage earners
in vocational training – among other things to provide more
are covered by FerieKonto. ATP provides administra-
vocational apprenticeships. Disbursements under AUB are
tive and technical assistance in connection with the ad-
digital. In 2014, AUB disbursed a total of DKK 5,249m, in-
ministration of FerieKonto on behalf of the Danish Agen-
cluding DKK 2,813m in wage reimbursement and DKK 727m
cy for Labour Market and Recruitment. A one-stop digi-
under the premium and bonus scheme. The administration
tal FerieKonto solution has been developed. Here, wage
expenses of AUB totalled DKK 63m, equivalent to DKK 465
earners will be able to check and apply for their ho-
per student/apprentice.
liday allowance. The new digital solution, Feriepenge The ATP Group Annual Report 2014
44
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
info, will come on stream in 2015. In 2014, FerieKonto dis-
In 2014, ATP collected FIB contributions totalling DKK
bursed holiday allowance totalling DKK 8.9bn to wage ear-
1,180m from about 140,000 employers. The annual FIB rate
ners and collected DKK 9.3bn from employers. Administra-
per full-time employee was DKK 862 in 2014. Administration
tion expenses totalled DKK 77m, equivalent to DKK 80 per
expenses totalled DKK 15m.
wage earner. SFS (Tax reductions for senior citizens) Barsel.dk
ATP administers SFS in cooperation with SKAT. The sche-
Barsel.dk is a mandatory maternity/paternity compensati-
me has been set up to encourage wage earners and self-
on scheme. Barsel.dk covers the part of the private sector
employed people to remain in the labour market after age
labour market that is not covered by other approved ma-
60. ATP’s role is to calculate the employment rate of emplo-
ternity/paternity compensation schemes. Barsel.dk collects
yees aged 60 to 64 and notify them of their employment rate,
contributions for maternity/paternity compensation and
which is calculated based on data from ATP’s collections.
reimburses employers who pay wages to employees on ma-
In order to qualify for a tax reduction of up to DKK 100,000,
ternity/paternity leave. In 2014, DKK 471m was received in
the employment rate for the five years must be at least 90
contributions from employers, and DKK 417m was reimbur-
percent.Data from ATP collections are used to calculate the
sed. Administration expenses totalled DKK 36m, equivalent
employment rate. In 2014, ATP sent almost 245,000 state-
to DKK 1,440 per maternity/patentity leave.
ments to people born in the years from 1949 to 1952. Administration expenses amounted to DKK 11m.
BUS (Maternity/Paternity Compensation Scheme for Self-employed Persons)
SERVICES PROVIDED ON AN ARM’S LENGTH BASIS (ON
As from 2015, ATP will be managing a new scheme: BUS
MARKET TERMS)
(Maternity/Paternity Compensation Scheme for Self-emplo-
The administration services sold by ATP on an arm’s length
yed Persons), which is a mandatory scheme provided by
basis are administered via the subsidiary ATP PensionSer-
the Danish Act on Maternity and Paternity Compensation
vice A/S.
for Self-Employed Persons (Lov om barselsudligning for selvstændigt erhvervsdrivende). The establishment and de-
Labour market pension schemes etc.
velopment of the setup is ongoing, and will, as far as possi-
PensionDanmark
ble, correspond to that of barsel.dk. The scheme will come
Until October 2014, the ATP Group acted as a subcontractor
on stream with collections from August 2015 and disburse-
for services involving the collection of contributions, mem-
ments from October 2015. Development and operations will
bership administration and disbursements on behalf of Pen-
be paid for by the self-employed through contributions to
sionDanmark. This cooperation agreement was terminated
the scheme and will be factored into the contribution.
in 2014. The ATP Group stands to lose economies of scale as a result of the termination. These losses are expected to
FIB (Financing contributions)
be eliminated by savings in 2015.
Private sector employers pay FIB contributions to finance ATP contributions for employees during spells of absence
DA-Barsel
from the labour market due to unemployment, sickness or
The ATP Group manages the maternity/paternity scheme
maternity/paternity leave. ATP collects FIB contributions
DA-Barsel on behalf of the Confederation of Danish Emplo-
with LG contributions. The collection of the contributions is
yers (DA). The administration involves the collection of con-
a statutory collection service performed by the ATP Group
tributions from employers and reimbursements to compa-
on behalf of the Danish Government and LG under the name
nies with employees on maternity/paternity leave.
FIB (‘Financing contributions’).
The ATP Group Annual Report 2014
45
RISK
“...As regards ATP’s pension liabilities, the risk is that, over time, the underlying assumptions could prove be to unsustainable. Even minor deviations could have fatal implications” ATP Annual Report 2000
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Risk and risk management Risk management on difficult markets
Capital requirement – year-end
Observed life expectancy of 65-year-olds
DKKbn
Years
100 90 80 70 60 50 40 30 20 10 0
88
ATP 2013
86
Danish FSA 2013
84
Statistics Denmark 2012/2013
82 External requirement
Internal requirement
Bonus potential
OVERALL RISK MANAGEMENT
80 Women
Men
Average
sion risk facing ATP. ATP relies on a custom life expectancy model for managing the longevity risk. In addition to facto-
ATP is committed to identifying and managing the most sig-
ring in already observed increases in life expectancy, the
nificant risks relating to ATP Pension and the Group’s other
model allows for expected future increases.
activities. Other Danish pension companies must use a life expectanResponsibility for including the most significant risks and
cy model developed by the Danish FSA. The Danish FSA’s
weighing the various risks in relation to each other rests with
model is based on data from a number of Danish life insu-
the ATP Supervisory Board. The Supervisory Board atta-
rance companies and industry-wide pension funds with a
ches particular importance to ensuring that ATP’s financial
total membership of 2.3 million customers. ATP’s model is
flexibility remains intact – even in very difficult situations.
based partly on information about its 4.9 million members and partly on information about approx. 500 million inhabi-
Individual reserve requirement and solvency
tants in 18 OECD countries.
ATP calculates a daily individual reserve requirement based on the upcoming European Solvency II rules for insurance
If ATP had used the Danish FSA’s model, the value of ATP’s
companies. At year-end, the individual reserve requirement
liabilities, the guaranteed benefits, would have been DKK
was DKK 31.6bn.ATP reports the individual reserve require-
596.0bn at year-end. Using ATP’s life expectancy model, the
ment to the Danish Financial Supervisory Authority (FSA).
guaranteed benefits are calculated at DKK 608.3bn. In other words, ATP’s bonus potential would have been DKK 12.3bn
For the purpose of internal risk management, the ATP Su-
higher if ATP had used the Danish FSA’s model.
pervisory Board has defined a higher capital requirement than the requirements stipulated in the upcoming Solven-
Investment risks
cy II rules. At year-end, the Supervisory Board’s capital re-
Investment risks are primarily market risks assumed by ATP
quirement was DKK 49.1bn.
in relation to investment and hedging activities. The market
ATP’s actual capital, the bonus potential, totalled DKK
ment strategy, consisting of four main components:
risks assumed by ATP are closely aligned with the invest95.8bn at year-end, corresponding to three times the individual reserve requirement and double the Supervisory
Hedging of the interest rate risk of pension liabilities
Board’s internal capital requirement.
ATP has significant interest rate risk when it comes to the value of its pension liabilities and seeks to hedge this risk
HOW ATP MANAGES ITS MOST SIGNIFICANT RISKS
through its hedging portfolio. Members can therefore be
Longevity risks
confident that ATP will be able to pay their pensions – regar-
ATP disburses a monthly lifelong pension to its members.
dless of interest rate changes over the coming years.
Accordingly, increasing life expectancy is the greatest pen-
The ATP Group Annual Report 2014
47
Management’s review
Value creation
Pension and investment activities
Administration activities
Expected future increases in life expectancy
Risk
Responsibility
Consolidated financial statements
Risk allocation target for the investment portfolio
Years
Percent
94
ATP women
40
92
ATP men
90
Danish FSA women
88
Danish FSA men
86
35 30 25 20 15 10
84
5
82
0
2013 2038 2063 2088 Note: Projected life expectancy (65-year-olds) in ATP’s life expectancy model and FSA benchmark.
Interest Rates
Credit Equities Inflation Commodities
Appropriate risk level
and documentation of financial transactions through a cen-
The overall investment risk is continuously adjusted to ATP’s
tral counterparty – will provide better opportunities for ATP
actual capital in order to protect ATP’s bonus potential –
to manage its counterparty risk.
and thus ATP’s financial flexibility. Liquidity management Risk diversification
ATP’s liquidity management ensures that ATP will, at all ti-
The assets of ATP’s investment portfolio are invested in five
mes, be able to meet any requirement for provision of liqui-
risk classes with very different risk profiles. The diversifica-
dity or pledging of collateral. This applies both in the short
tion of market risk reduces ATP’s overall exposure to events
term (five banking days) and in the longer term (one year).
in individual markets. Currency risks Purchase of hedging to protect against sharp drops in va-
ATP’s investments are hedged against currency fluctuations
lues
in Danish kroner and euros. At year-end 2014, the exposure
Risk diversification in itself is not always sufficient to avoid
to Danish kroner and euros was 99.9 percent.
excessive losses. There is, for example, a risk that ATP suffers losses in all risk classes at the same time.
Operational risks ATP’s operational risks relate particularly to bulk disbur-
To protect its reserves against sharp drops in value, ATP
sements under administration activities and processing of
uses various hedging instruments in some periods. These
trades and transactions in connection with investment and
instruments hedge the portfolio return against very negative
hedging.
events; at the same time, the opportunity to realise positive returns if the markets recover is preserved.
Regulatory risks Changes in international or Danish regulation affecting li-
Counterparty risk
quidity in the financial markets represent a risk to ATP. For
The use of financial instruments, especially for hedging, re-
instance, the introduction of financial transaction tax would
presents a separate risk to ATP. Changes in the value of the-
affect liquidity in the financial markets negatively and pose
se instruments will generate a liability or a receivable bet-
a risk to ATP.
ween ATP and its counterparties. Consequently, ATP may suffer a loss if a counterparty defaults. In order to reduce
ATP’s operations are largely governed by statute or through
counterparty risk, both ATP and its counterparties require
collective bargaining agreements. The conditions under
that an agreement be concluded on collateral for mutual re-
which these activities are carried out may therefore be
ceivables. New central counterparty clearing – i.e. clearing
changed at relatively short notice. The ATP Group Annual Report 2014
48
SOCIAL RESPONSIBILTY IN INVESTMENTS
“… the Supervisory Board has decided to register its equity holdings. This has made atp more visible as an investor. ATP Annual Report 1989
Management’s review
Value creation
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
Social responsibility in investments ATP practises business-driven social responsibility in investments in order to safeguard and increase the return for the benefit of ATP’s members.
ATP’s framework for practising responsibility
Policy of Social Responsibility in Investments
Policy of Corporate Governance
Principles for Responsible Investment
The framework for ATP’s work with responsibility is set out
benefit of all shareholders and the company’s other stake-
in the Policies on Social Responsibility in Investments and
holders.
Corporate Governance adopted by the Supervisory Board. ATP and the UN Principles for Responsible Investment The policies provide a basis for taking into account, in inve-
The UN-supported Principles for Responsible Investment
stment analyses and investment decisions, a wide range of
(PRI) comprise six principles for how to work with respon-
environmental, social and governance (so-called ESG) is-
sible investment. These principles naturally co-exist with
sues of relevance to society.
ATP’s Policies on Social Responsibility in Investments and Corporate Governance. The six principles provide ATP with
Policy of Social Responsibility in Investments
inspiration on possible actions for supporting and commu-
ATP’s Policy of Social Responsibility in Investments is based
nicating the work on the Supervisory Board’s policies.
on the rules and regulations laid down by national authorities and international organisations endorsed by Denmark;
For a number of years, ATP has sought a dialogue with other
however, ATP believes that compliance with the policy will
investors that have also adopted the six Principles for Re-
also protect and increase the return on ATP’s investments.
sponsible Investment in order to develop and improve ATP’s
If a company does not act responsibly, it may cause the risk
practice in this field. These efforts continued in 2014.
to increase significantly for the company, which will affect its value. Conversely, a clear focus on responsibility may
In December 2013, ATP was forced to leave the private or-
enable the company to realise its business potential and
ganisation supporting the six Principles for Responsible In-
thus increase the value of ATP’s ownership interest.
vestment. ATP still supports the six principles.
Policy of Corporate Governance
SPECIAL MEASURES IN 2014
The purpose of ATP’s Policy of Corporate Governance is to protect and increase the return on ATP’s investments. A
Corporate governance
valuable spin-off effect of the efforts to promote corporate
ATP has a long-standing tradition for corporate governance
governance is that they may contribute to achieving mini-
in equity investments.
mum cost of capital and maximum competitiveness for the
The ATP Group Annual Report 2014
50
Management's review
Business model
Pension and investment activities
Administration activities
Risk
Responsibility
Consolidated financial statements
The purpose of the targeted dialogue is exclusively to make
compliance with the policies, a new screening model was
companies change their position or conduct in relation to
developed in 2014.
a specific instance of breach of ATP’s Policy of Social Responsibility in Investments, while ATP’s other corporate
Collaboration with other investors
governance activities are of a more holistic nature and in-
Collaboration with other investors is a source of greater
clude issues concerning development, improvements and
knowledge and influence. To enhance effectiveness, ATP is
hedging. In 2014, to support this work further, ATP initiated
consistently seeking to strengthen collaboration and dia-
a structured ESG dialogue with the companies in which ATP
logue and is a member of a number of organisations and
has a significant ownership interest.
networks, both in Denmark and abroad.
ATP believes that it has benefited considerably from the
In 2014, ATP joined two global initiatives:
ESC dialogue,
• A network forum (BSR), which allows ATP access to a
having gained both in-depth knowledge and a better under-
large knowledge network and gives ATP the opportunity
standing of the companies’ challenges and opportunities.
to meet a broad range of international CSR experts and representatives from major international companies.
In 2007/2008, ATP made its most far-reaching exclusion de-
• An initiative ‘Financing Capital on the Long-Term (FCLT)’,
cision so far based on a group of oil companies’ oil extrac-
where ATP is teaming up with a group of leading global
tion activities in Burma/Myanmar. Following a dialogue with
investors and international companies to put particular
the Ministry of Foreign Affairs of Denmark, ATP’s Social Re-
focus on what investors can do to ensure that compa-
sponsibility Committee decided to reintroduce the compa-
nies strike a sustainable balance between short-term
nies in 2014, as the issues justifying exclusion were no lon-
and long-term considerations for the benefit of both
ger relevant. At year-end 2014, ATP did not have any invest-
shareholders and the companies’ other stakeholders.
ments in these companies. More information Information from companies
More information on ATP’s responsibility work is availa-
To guarantee effective screening of ATP’s investments, ATP
ble in ATP’s Communication on Progress to the UN Global
is constantly looking for the best partners and the best pos-
Compact at ATP’s website (www.atp.dk/About ATP/Results
sible model. To ensure that ATP focuses its efforts on what
and Reports/Responsibility Reports/2014).
seem to be the most valid and serious allegations of non-
The ATP Group Annual Report 2014
51
Management’s review
Business model
Risk
Pension and investment activities
Administration activities
Responsibility
Consolidated financial statements
Statement by the Supervisory and Executive Boards The Supervisory and Executive Boards have today conside-
parent company financial statements give a true and fair
red and adopted the annual report of ATP for the financial
view of the Group’s and ATP’s assets, liabilities and finan-
year 1 January to 31 December 2014.
cial position as at 31 December 2014 and of the financial performance and cash flows of the Group and ATP for the
The annual report has been prepared in accordance with
financial year 1 January to 31 December 2014.
the International Financial Reporting Standards (IFRS) as adopted by the EU and in accordance with additional Da-
In our opinion, the management’s review also provides a true
nish disclosure requirements as set out in the ‘Executive
and fair description of the development in the Group’s and
Order on Financial Reporting by the Danish Labour Mar-
the Parent Company’s operations and financial conditions,
ket Supplementary Pension Scheme’ (Bekendtgørelse om fi-
and a description of the most significant risks and uncer-
nansielle rapporter for Arbejdsmarkedets Tillægspension –
tainties that may affect the Group and the Parent Company.
available in Danish only). We recommend that the annual report be adopted by the In our opinion, the consolidated financial statements and
Board of Representatives.
Copenhagen, 4 February 2015 Executive Board:
Carsten Stendevad
/Bo Foged
Chief Executive Officer
Chief Financial Officer
Supervisory Board:
Jørgen Søndergaard Chairman of the Supervisory Board
Torben Dalby Larsen
Kim Graugaard
Harald Børsting
Lizette Risgaard
Member of the Supervi-
Member of the Supervi-
Member of the Supervi-
Member of the Supervisory
sory Board
sory Board
sory Board
Board
Jørn Neergaard Larsen
Martin Damm
Jan Walther Andersen
Kim Simonsen
Member of the Supervi-
Member of the Supervi-
Member of the Supervi-
Member of the Supervisory
sory Board
sory Board
sory Board
Board
Anne Broeng
Anne Jæger
Finn R. Larsen
Bente Sorgenfrey
Member of the Supervi-
Member of the Supervi-
Member of the Supervi-
Member of the Supervisory
sory Board
sory Board
sory Board
Board
Adopted by the Board of Representatives.
Copenhagen, 4 February 2015 Board of Representatives:
Jørgen Søndergaard Chairman of the Board of Representatives
The ATP Group Annual Report 2014
54
Management’s review
Business model
Risk
Pension and investment activities
Administration activities
Responsibility
Consolidated financial statements
Internal auditors’ report To the Board of Representatives Auditors’ report on the consolidated financial state-
We participated in the audit of risk and other material areas,
ments and parent company financial statements
and we believe the audit evidence
We have audited the consolidated financial statements of
we have obtained is sufficient and appropriate to provide a
the ATP Group and the financial statements of the ATP Pa-
basis for our audit opinion.
rent Company for the financial year 1 January to 31 December 2014. The consolidated financial statements and parent
Our audit did not result in any qualification.
company financial statements have been prepared in accordance with the International Financial Reporting Stan-
Opinion
dards (IFRS) as adopted by the EU and in accordance with
In our opinion, the procedures and internal controls establis-
additional Danish disclosure requirements as set out in the
hed, including the risk management organised by Manage-
‘Executive Order on Financial Reporting by the Danish La-
ment relevant to the Group’s and the Parent Company’s re-
bour Market Supplementary Pension Scheme’ (Bekendtgø-
porting processes and material business risks, are working
relse om finansielle rapporter for Arbejdsmarkedets Tillægs-
satisfactorily.
pension – available in Danish only). Furthermore, in our opinion, the consolidated financial Basis of opinion
statements and parent company financial statements give a
We conducted our audit in accordance with the Danish Fi-
true and fair view of the Group’s and the Parent Company’s
nancial Supervisory Authority’s executive order on auditing
assets, liabilities and financial position as at 31 December
of the Danish Labour Market Supplementary Pension Sche-
2014 and of the financial performance and cash flows of the
me (ATP), the Labour Market Occupational Diseases Fund
Group and the Parent Company for the financial year 1 Ja-
(AES), the Employees’ Capital Pension Fund (LD) and in ac-
nuary to 31 December 2014 in accordance with the Interna-
cordance with international auditing standards. Those stan-
tional Financial Reporting Standards (IFRS) as adopted by
dards require that we plan and perform our audit to obtain
the EU and in accordance with additional Danish disclosure
reasonable assurance that the consolidated financial state-
requirements as set out in the ‘Executive Order on Financi-
ments and parent company financial statements are free
al Reporting by the Danish Labour Market Supplementary
from material misstatement.
Pension Scheme’ (Bekendtgørelse om finansielle rapporter for Arbejdsmarkedets Tillægspension –available in Danish
The audit was performed in accordance with the division of
only).
responsibilities agreed with the external auditors and included an assessment of the procedures and internal controls
Statement on the Management’s review
established, including the risk management organised by
Pursuant to the ‘Executive Order on Financial Reporting by
the Management relevant to reporting processes and ma-
the Danish Labour Market Supplementary Pension Scheme’
terial business risks. Based on materiality and risk, we exa-
(available in Danish only), we have read the management’s
mined, on a test basis, the basis of amounts and other di-
review. We have not performed any further procedures in
sclosures in the consolidated financial statements and pa-
addition to the audit of the consolidated financial state-
rent company financial statements. Furthermore, the audit
ments and parent company financial statements.
included evaluating the appropriateness of the accounting policies applied by Management and the reasonableness
On this basis, it is our opinion that the information provided
of the accounting estimates made by Management, as well
in the management’s review is consistent with the consoli-
as evaluating the overall presentation of the consolidated
dated financial statements and parent company financial
financial statements and parent company financial state-
statements.
ments.
Copenhagen, 4 February 2015 Peter Jochimsen Chief Auditor
The ATP Group Annual Report 2014
55
Management’s review
Business model
Risk
Pension and investment activities
Administration activities
Responsibility
Consolidated financial statements
Independent auditors’ report To the Board of Representatives
financial statements and parent company financial state-
Auditors’ report on the consolidated financial statements
ments. The audit procedures selected depend on the auditors’
and parent company financial statements
judgement, including an assessment of the risks of materi-
We have audited the consolidated financial statements of the
al misstatement in the consolidated financial statements and
ATP Group and the financial statements of the ATP Parent
parent company financial statements, whether due to fraud or
Company for the financial year 1 January to 31 December
errors. In making those risk assessments, the auditors consi-
2014, comprising the income statement, comprehensive in-
der internal controls relevant to the entity’s preparation and
come statement, statement of financial position, statement of
fair presentation of the consolidated financial statements and
changes in equity, cash flow statement and notes, including
parent company financial statements. The objective is to de-
the accounting policies for the Group as well as the Parent
sign audit procedures that are appropriate in the circumstan-
Company. The consolidated financial statements and parent
ces, but not for the purpose of expressing an opinion on the
company financial statements have been prepared in accor-
effectiveness of the entity’s internal controls. An audit also in-
dance with the International Financial Reporting Standards
cludes evaluating the appropriateness of the accounting po-
(IFRS) as adopted by the EU and in accordance with additio-
licies applied by Management and the reasonableness of the
nal Danish disclosure requirements as set out in the ‘Executi-
accounting estimates made by Management, as well as eva-
ve Order on Financial Reporting by the Danish Labour Market
luating the overall presentation of the consolidated financial
Supplementary Pension Scheme’ (Bekendtgørelse om finan-
statements and parent company financial statements.
sielle rapporter for Arbejdsmarkedets Tillægspension – available in Danish only).
We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our audit opinion.
Management’s responsibility for the consolidated financial statements and parent company financial statements
Our audit did not result in any qualification.
Management is responsible for the preparation and fair presentation of the consolidated financial statements and parent
Opinion
company financial statements in accordance with the Inter-
In our opinion, the consolidated financial statements and pa-
national Financial Reporting Standards (IFRS) as adopted by
rent company financial statements give a true and fair view of
the EU and in accordance with additional Danish disclosure
the Group’s and the Parent Company’s assets, liabilities and
requirements as set out in the ‘Executive Order on Financial
financial position as at 31 December 2014 and of the finan-
Reporting by the Danish Labour Market Supplementary Pen-
cial performance and cash flows of the Group and the Pa-
sion Scheme (Bekendtgørelse om finansielle rapporter for Ar-
rent Company for the financial year 1 January to 31 December
bejdsmarkedets Tillægspension – available in Danish only).
2014 in accordance with the International Financial Reporting
Management is also responsible for the internal controls con-
Standards (IFRS) as adopted by the EU and in accordance
sidered necessary by Management to prepare consolidated
with additional Danish disclosure requirements as set out in
financial statements and parent company financial state-
the ‘Executive Order on Financial Reporting by the Danish La-
ments that are free from material misstatement, whether due
bour Market Supplementary Pension Scheme’ (Bekendtgørel-
to fraud or error.
se om finansielle rapporter for Arbejdsmarkedets Tillægspension –available in Danish only).
Auditors’ responsibility Our responsibility is to express an opinion on the consoli-
Statement on the Management’s review
dated financial statements and parent company financial
Pursuant to the ‘Executive Order on Financial Reporting by
statements based on our audit. We conducted our audit in
the Danish Labour Market Supplementary Pension Scheme’
accordance with international auditing standards and addi-
(available in Danish only), we have read the management’s re-
tional requirements in accordance with Danish auditing le-
view. We have not performed any further procedures in addi-
gislation. This requires that we comply with ethical require-
tion to the audit of the consolidated financial statements and
ments and plan and perform our audit to obtain reasonable
parent company financial statements.
assurance that the consolidated financial statements and parent company financial statements are free from material mis-
On this basis, it is our opinion that the information provided in
statement.
the management’s review is consistent with the consolidated financial statements and parent company financial state-
An audit involves performing audit procedures to obtain audit
ments.
evidence about the amounts and disclosures in consolidated Copenhagen, 4 February 2015 Deloitte, State Authorised Audit Partnercompany Kasper Bruhn Udam, State Authorised Public Accountant The ATP Group Annual Report 2014
55
Income statement Group 2014
DKKm Note
ATP 2013
2014
2013
Pension and investment activities Investment Income from subsidiaries
4
-
-
7,526
3,659
Income from associates
927
707
697
707
Income from investment properties
896
641
429
412
Consulting fee and fee income
100
32
78
28
4,269
6,625
1,662
4,631
2,301
8,416
(2,449)
6,564
(2,415)
(1,315)
(2,347)
(1,283)
5
Interest income and dividends etc. related to investment activities
5
Market value adjustments related to investment activities
5
Interest expenses related to investment activities
25
Transferred to unit-linked contracts
0
(13)
0
(13)
6
Investment activity expenses
(720)
(668)
(264)
(258)
9
Tax on pension savings returns in respect of investment activities
(579)
(2,248)
(579)
(2,248)
0
(1)
-
-
4,779
12,176
4,753
12,199
Income tax in respect of investment activities Investment activity results
Hedging 5
Interest income related to hedging activities
5
Market value adjustments related to hedging activities
5
Interest expenses related to hedging activities
(5)
(41)
(5)
(41)
9
Tax on pension savings returns in respect of hedging activities
(20,230)
7,646
(20,230)
7,646
Change in guaranteed benefits due to change in discount rate
(102,304)
53,198
(102,304)
53,198
(10,439)
(11,186)
(10,439)
(11,186)
Hedging activity results
(752)
(317)
(752)
(317)
Investment and hedging activity results
4,027
11,859
4,001
11,882
9,049
11,587
9,049
11,587
Change in guaranteed benefits due to maturity reduction
18,213
17,549
18,213
17,549
114,013
(67,483)
114,013
(67,483)
Pension 10
Contributions Fees
11
2
2
2
2
(13,661)
(12,741)
(13,661)
(12,741)
(18)
0
(18)
0
6,061
3,665
6,061
3,665
10
10
10
10
0
(1)
0
(1)
(300)
(310)
(300)
(310)
(2)
(1)
(2)
(1)
1,141
2,211
1,141
2,211
96
(2,465)
96
(2,465)
Pension activity results
1,237
(254)
1,237
(254)
Pension and investment activity results
5,264
11,605
5,238
11,628
Benefit payouts Change in provisions for claims outstanding Change in guaranteed benefits due to contributions and pension benefits
5
Interest income related to pension activities
5
Interest expenses related to pension activities
6
Pension activity expenses
9
Tax on pension savings returns in respect of pension activities Results before change in life expectancy Change in guaranteed benefits due to life expectancy update
The ATP Group Annual Report 2014
57
Income statement, continued Group 2014
DKKm Note 7 6. 8
ATP 2013
2014
2013
Administration activities Other income
1,469
1,546
1,462
1,539
(1,426)
(1,508)
(1,447)
(1,527)
8
(3)
-
-
51
35
15
12
5,315
11,640
5,253
11,640
(2,772)
(2,472)
(2,772)
(2,472)
2,543
9,168
2,481
9,168
Minority interests’ share of net results for the year
62
0
-
-
The ATP Group’s share of net results for the year
2,481
9,168
2,481
9,168
Allocated profit
2,543
9,168
2,481
9,168
Other expenses Income tax in respect of administration activities Administration activity results
Results before bonus
Bonus addition for the year Net results for the year
The ATP Group Annual Report 2014
58
Statement of comprehensive income Group
ATP
2014
2013
2014
2013
2,543
9,168
2,481
9,168
Foreign currency translation adjustments related to foreign subsidiaries
0
0
0
0
Total
0
0
0
0
DKKm
Net results for the year Other comprehensive income Items that may be reclassified to results:
Items that may not be reclassified to results: Revaluation reserve, owner-occupied properties
6
9
6
9
Other
0
13
0
0
Total
6
22
6
9
Other comprehensive income
6
22
6
9
2,549
9,190
2,487
9,177
Comprehensive income for the year
Minority interests’ share of total comprehensive income for the year
62
0
-
-
The ATP Group’s share of total comprehensive income for the year
2,487
9,190
2,487
9,177
Allocated comprehensive income
2,549
9,190
2,487
9,177
The ATP Group Annual Report 2014
59
Statement of financial position Group 2014
DKKm Note
ATP 2013
2014
2013
ASSETS
Cash and demand deposits 12
Bonds
12
Equity investments
12
Mutual fund units
12, 13 Financial derivatives 12
Other loans
12
Loans to portfolio companies
12 12
5,234
3,786
2,033
2,958
515,714
461,085
488,199
441,636
78,095
65,456
37,504
30,494
6,603
6,294
0
0
116,725
44,065
116,657
43,243
0
4
0
0
5,142
1,402
4,572
1,060
Loans to subsidiaries
-
-
2,755
0
Receivables from subsidiaries
-
-
1,037
84
12, 14 Investments in subsidiaries 12, 15 Investments in associates 26
Intangible assets
16
Investment properties
27
Owner-occupied properties Operating equipment
12
Tax receivable on pension savings returns
12
Income tax and deferred tax Deferred tax on pension savings returns
-
-
78,842
72,774
10,328
9,840
7,157
6,674
527
767
425
621
17,871
13,834
7,507
7,566
842
821
799
792
19
47
16
41
0
40
0
40
12
11
-
-
0
5,326
0
5,326 4,272
12
Interest receivable
4,633
4,554
4,208
12
Contributions receivable
2,408
2,235
2,408
2,235
12
Receivables from credit institutions
55,835
56,251
55,835
56,251
12
Other receivables
2,827
983
1,719
709
766
727
760
721
823,581
677,528
812,433
677,497
Other prepayments Total assets
The ATP Group Annual Report 2014
60
Statement of financial position Group 2014
DKKm
ATP 2013
2014
2013
Note LIABILITIES
12
Payables to subsidiaries
12, 13 Financial derivatives
-
-
114
875
69,934
38,335
68,169
38,278
15,428
0
15,428
0
73
77
-
-
18,995
35,243
18,995
35,243
12
Tax payable on pension savings returns
12
Income tax payable and deferred tax
12
Payables to credit institutions
12
Other payables
14,619
11,303
5,304
10,535
Total payables
119,049
84,958
108,010
84,931
22
Guaranteed benefits
608,309
498,951
608,309
498,951
23
Provisions for claims outstanding
109
91
109
91
24
Bonus potential
95,831
93,344
95,831
93,344
25
Provisions for unit-linked contracts Total pension provisions
Minority interests Total liabilities
17
Market risks
18
Credit and counterparty risks
19
Liquidity risk
20
Fair value disclosure
21
Disclosures about offsetting financial assets and liabilities
28
Acquisition of companies
29
Operating leases
30
Contingent liabilities and collateral
31
Related party transactions
32
Non-current and current assets and liabilities
33
Five-year summary for ATP
34
Breakdown of ATP’s assets and their returns at market value
35
ATP’s risk factors and their impact on the bonus potential (after tax)
36
ATP’s equity investments broken down by sector and region
174
180
174
180
704,423
592,566
704,423
592,566
109
4
-
-
823,581
677,528
812,433
677,497
The ATP Group Annual Report 2014
61
Statement of financial position, liabilities Group
DKKm
ATP
2014
2013
2014
2013
8,925 (13,702) (67) 10 0 0 (4,834)
8,873 (12,822) (106) 10 (1) (1) (4,047)
8,925 (13,702) (67) 10 0 0 (4,834)
11,575 (12,822) (106) 10 (1) (1) (1,345)
Interest income etc. received in respect of investment and hedging activities Interest expenses etc. paid in respect of investment and hedging activities Return received on investment properties and consulting fee Investment activity expenses paid Tax paid on pension savings returns in respect of investment and hedging activities Cash flows from investment and hedging activities
22,402 (2,420) 945 (669) (16) 20,242
25,309 (1,356) 659 (598) (8,669) 15,345
19,938 (2,352) 498 (264) (16) 17,804
23,361 (1,324) 445 (258) (8,648) 13,576
Income received in respect of administration activities Administration activity expenses paid Cash flows from administration activities
1,436 (1,426) 10
1,513 (1,516) (3)
1,432 (1,441) (9)
1,524 (1,527) (3)
16
(3)
-
-
15,434
11,292
12,961
12,228
180,421 26,977 (200,222)
389,130 18,069 (354,231)
144,696 26,916 (165,703)
364,590 18,013 (330,116)
38,986 (39,579)
19,720 (13,533)
47,104 (47,096)
22,925 (15,247)
1,575
10,843
2,510
8,862
2,561 (1,641)
78 0
0 0
0 0
459 (261)
112 (340)
0 (225)
106 (246)
(22) (3,344)
3 (8,885)
(19) (5,856)
5 (10,544)
17
(1,918)
0
0
5,927
59,048
2,327
58,348
Repayment of mortgage debt Loans etc. from minority shareholder Loans from credit institutions
(3,957) 415 (16,250)
0 0 (72,832)
0 0 (16,250)
0 0 (70,950)
Cash flows from financing activities
(19,792)
(72,832)
(16,250)
(70,950)
Change in cash and cash equivalents
1,569
(2,492)
(962)
(374)
Foreign currency translation adjustments
(121)
(35)
37
(31)
Cash and cash equivalents as at 1 January
3,786
6,313
2,958
3,363
Cash and cash equivalents as at 31 December
5,234
3,786
2,033
2,958
Note Cash flows from operating activities Contributions and fees received Pension benefit payouts Pension activity expenses paid Interest income received in respect of pension activities Interest expenses paid in respect of pension activities Tax paid on pension savings returns in respect of pension activities Cash flows from pension activities
Income tax paid Cash flows from operating activities Cash flows from investment activities Sale of bonds Bond drawings Purchase of bonds Sale of equity investments Purchase of equity investments Financial derivatives Sale of mutual fund units Purchase of mutual fund units Sale of investment properties Purchase of investment properties Sale and purchase, net, intangible assets, property, plant and equipment and owner-occupied properties Loans to credit institutions, portfolio companies and subsidiaries 28
Acquisition and sale of companies Cash flows from investment activities Cash flows from financing activities
The cash flow figures cannot be deduced directly from the figures of the consolidated financial statements.
The ATP Group Annual Report 2014
62
CONSOLIDATED FINANCIAL STATEMENTS
…The return on the fund assets has increasing weight in ATP’s total income. ATP Annual Report 1974
Management’s review
Value creation
Pension and investment
Administration
Risk
Responsibility
Consolidated financial statements
Overview of the ATP Group In legal terms, the ATP Group is divided into the ATP parent company and 31 consolidated subsidiaries, all of which are included in the consolidated financial statements.
Organisational and legal structure of the ATP Group
ATP Results: DKK 2,481m Statement of financial position: DKK 812,433m
Ejendomsselskabet Vangede A/S
ATP Ejendomme A/S
ATP Real Estate Partners I K/S
ATP Private Equity K/S
Via Venture Partners Fond I K/S
ATP TIM GP ApS
ATP Alternative Investments K/S
ATP Fondsmæglerselskab A/S
ATP Invest III
NOW: Pensions Investment A/S Fondsmæglerselskab
ATP Alternative Investment Trust
ATP PensionService A/S
Results: DKK 172m Statement of financial position: DKK 2,003m
Results: DKK 408m Statement of financial position: DKK 3,463m
Results: DKK 382m Statement of financial position: DKK 4,935m
Results: DKK 660m Statement of financial position: DKK 4,025m
Results: DKK (6)m Statement of financial position: DKK 235m
Results: DKK 0m Statement of financial position: DKK 1m
Results: DKK 270m Statement of financial position: DKK 2,770m
Results: DKK 4m Statement of financial position: DKK 62m
Results: DKK 2,946m Statement of financial position: DKK 19,198m
Results: DKK 1m Statement of financial position: DKK 45m
Results: DKK 381m Statement of financial position: DKK 1,788m
Results: DKK 8m Statement of financial position: DKK 113m
Ejendomsselskabet Borups Allé P/S
Strandgade 7 A/S
ATP Real Estate Partners II K/S
ATP Private Equity Partners I K/S
Via Venture Partners Fond II K/S
ATP Timberland Invest K/S
AlphaOne SICAV FIS
NOW: Pensions Ltd.1
Secured Multi Asset Repackaging Trust P.L.C.
Results: DKK 5m Statement of financial position: DKK 489m
Results: DKK (4)m Statement of financial position: DKK 522m
Results: DKK 88m Statement of financial position: DKK 1,108m
Results: DKK 391m Statement of financial position: DKK 1,736m
Results: DKK 51m Statement of financial position: DKK 556m
Results: DKK 120m Statement of financial position: DKK 2,177m
Results: DKK (945)m Statement of financial position: DKK 25,296m
Results: DKK (107)m Statement of financial position: DKK 183m
Results: DKK 0m Statement of financial position: DKK 1m
Galaxy Properties SA
ATP Private Equity Partners II K/S
Results: DKK 67m Statement of financial position: DKK 3,619m
Results: DKK 840m Statement of financial position: DKK 6,066m
ATP Private Equity Partners III K/S
Upper Hudson Woodlands ATP LP
Northwoods ATP LP
Wolf River ATP LP
Ouachita ATP LP
Results: DKK 1,363m Statement of financial position: DKK 8,628m
Results: DKK 107m Statement of financial position: DKK 344m
Results: DKK 18m Statement of financial position: DKK 270m
Results: DKK 57m Statement of financial position: DKK 173m
Results: DKK 34m Statement of financial position: DKK 294m
ATP Private Equity Partners IV K/S
Results: DKK 575m Statement of financial position: DKK 5,082m
ATP Private Equity Partners V K/S
Results: DKK 0m Statement of financial position: DKK 195m
Private Equity Advisors ApS
Results: DKK 1m Statement of financial position: DKK 20m
1
NOW Pensions Ltd. has five subsidiaries with no activity
The ATP Group Annual Report 2014
53
Contents of notes
General accounting policies and significant accounting estimates
Financial assets and liabilities
Other notes
72 Note 12: Financial assets and liabilities
99
63 Note 1: General accounting policies
75 Note 13: Financial derivatives
101 Note 27: Owner-occupied properties
64 Note 2: Significant accounting estimates
78 Note 14: Investments in subsidiaries
102 Note 28: Acquisition of companies
Note 26: Intangible assets
103 Note 29: Operating leases
65 Note 3: New accounting regulations 80 Note 15: Investments in associates
Net results for the year 82 Note 16: Investment properties
103 Note 30: Contingent liabilities and collateral
66 Note 4: Income from investment properties 83 Note 17: Market risks
104 Note 31: Related party transactions
66 Note 5: Investment returns broken down by asset type
84 Note 18: Credit and counterparty risks
107 Note 32: Non-current and current assets and liabilities
68 Note 6: Expenses
85 Note 19: Liquidity risk
70 Note 7: Other income
87 Note 20: Fair value disclosure
70 Note 8: Other expenses
92 Note 21: Disclosures about offsetting financial assets and liabilities
109 Note 33: Five-year summary for ATP 110 Note 34: Breakdown of ATP’s assets and their returns at market value
70 Note 9: Tax on pension savings returns
111 Note 35: ATP’s risk factors and their impact on the bonus potential (after tax)
Pension provisions 71 Note 10: Contributions 93 Note 22: Guaranteed benefits
112 Note 36: ATP’s equity investments broken down by sector and region
72 Note 11: Benefit payouts 95 Note 23: Provisions for claims outstanding 96 Note 24: Bonus potential 98 Note 25: Provisions for unit-linked contracts
The ATP Group Annual Report 2014
63
Note 1 General accounting policies The consolidated financial statements and the annual report of ATP for 2014 have been prepared in accordance with the International Financial Re-
porting Standards (IFRS) as adopted by the EU and in accordance with additional Danish disclosure requirements as set out in the ‘Executive Order on Financial Reporting by the Danish Labour Market Supplementary Pension Scheme’ (Bekendtgørelse om finansielle rapporter for Arbejdsmarkedets Tillægspension – available in Danish only). In the preparation of the annual report, the Supervisory and Executive Boards list a number of assumptions that affect the application of the accounting policies and the carrying amounts of assets and liabilities, as well as income and expenses. Note 2 specifies the accounting estimates and assessments considered to be material in the preparation of the annual report. Accounting policies and accounting estimates for specific items are set out in the individual notes.
!
§ Accounting policies Materiality in presentation In the preparation of the annual report, the Supervisory and Executive Boards assess how to present the annual report. In this context, it is taken into account that the content of the annual report must be significant to the reader. In the presentation of the Group’s and ATP’s assets, liabilities, financial position and performance, it is assessed whether less significant amounts could, with advantage, be aggregated. In the preparation of the notes, the focus is on ensuring that the content is relevant and the presentation is clear. Assessments are always carried out in relation to legislation, international financial reporting and accounting standards and to ensure that the annual report provides an overall true and fair view. Consolidation The consolidated financial statements comprise the financial statements of the ATP Parent Company and entities controlled by ATP. ATP controls an entity when ATP is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The consolidated financial statements are based on the financial statements of the Parent Company and the individual subsidiaries, prepared in accordance with the Group’s accounting policies. On consolidation, items of a uniform nature are added together and the following items are eliminated: intercompany income and expenses, equity holdings, intercompany balances and dividends, as well as realised and unrealised gains and losses on transactions between consolidated companies. Associates are entities in which the Group has a significant but not controlling interest. The Group is considered to have a significant interest when the Group has between 20 and 50 percent of the voting rights or otherwise exercises significant influence. Minority interests arise because a few investment subsidiaries have co-investment schemes in which employees participate and in the 2014 acquisition of Galaxy properties SA, see note 28. A group overview is available on page 52. Foreign currency translation: Functional currency and presentation currency The consolidated financial statements are presented in Danish kroner (DKK), the functional currency and presentation currency of the Parent Company. Translation of transactions and amounts A functional currency is determined for each of the Group’s reporting entities. The functional currency is the currency used in the primary financial environment in which the reporting entity operates. Transactions in currencies other than the functional currency are foreign currency transactions. Foreign currency transactions are translated into the functional currency at the exchange rate prevailing at the transaction date. Investment assets, receivables and payables in foreign currencies are translated into the functional currency at the exchange rate prevailing at the statement of financial position date. Realised and unrealised foreign exchange gains and losses are included in the income statement under ‘Market value adjustments related to investment activities’ and ‘Market value adjustments related to hedging activities’. All of the Group’s entities use Danish kroner (DKK) as their functional currency. Cash flow statement The Group’s cash flow statement shows the cash flows for the year, broken down by operating, investment and financing activities; changes for the year in cash and cash equivalents; and the Group’s cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities are presented directly and calculated as pension contributions received less pension benefit payouts. Moreover, management fees received, payments related to administration activities, payments to suppliers and staff, and direct and indirect taxes are included. Cash flows from investment activities include purchases and sales for the financial year of bonds, equity investments, financial derivatives, mutual fund units, loans to credit institutions, investment properties, as well as intangible assets and operating equipment. Cash flows from financing activities include the use of repo transactions, transactions with minority interests and repayment of mortgage debt in acquired companies, for the financial year. Cash and cash equivalents include cash and demand deposits, as well as time deposits with an original term to maturity of less than three months.
The ATP Group Annual Report 2014
64
Note 1 General accounting policies, continued Accounting policies for notes without a specific note attached Income tax Tax on results for the year, comprising current tax for the year, changes in deferred tax and prior year adjustments, if any, is recognised in the income statement. Tax payable and deferred tax are recognised under payables, while tax receivable and deferred tax assets are recognised under assets. Deferred tax resulting from temporary differences between the carrying amount and the tax base of assets and liabilities is measured under the statement of financial position liability method. The tax value of tax loss carryforwards is included in the calculation of deferred tax if it is likely that the tax loss carryforwards can be utilised. Deferred tax is measured in accordance with the current tax rules and at the tax rates that are expected to apply in the periods in which the temporary differences reverse. Operating equipment Operating equipment is measured at cost less accumulated depreciation and impairment losses. Cost includes the acquisition price as well as expenses directly related to the acquisition until such a time as the asset is ready for use. Expenses incurred for repair and maintenance are taken directly to the income statement. Depreciation of operating equipment is provided on a straight-line basis over the estimated useful economic lives of the assets. The depreciation periods have been determined at two to five years. Losses or gains on the sale or other disposal of property, plant and equipment are measured as the difference between the selling price and the carrying amount. The residual value and useful economic lives of the assets are reviewed and adjusted, if appropriate, at each statement of financial position date. If the residual value of the asset exceeds the carrying amount, depreciation is discontinued. In case of changes in the depreciation period or the residual value, the prospective effect of depreciation is recognised as a change in accounting estimate.
Note 2 Significant accounting estimates
! !
In the preparation of the annual report in accordance with generally accepted accounting principles, the Supervisory and Executive Boards make estimates and assumptions that affect the reported amounts of assets and liabilities. The Supervisory and Executive Boards base their estimates on historical experience and on various other factors that are believed to be reasonable and relevant under the circumstances. The Supervisory and Executive Boards of the ATP Group consider the following estimates and related assessments to be significant in the preparation of the consolidated financial statements. • • •
Estimates related to the determination of the fair value of financial instruments (note 12) The discount rate and estimates related to the valuation of pension provisions (note 22) Impairment test of intangible assets, including goodwill (note 26)
The ATP Group Annual Report 2014
65
Note 3 New accounting regulations The following new and revised standards that are effective for financial periods beginning on 1 January 2014 have been implemented in the consolidated financial statements and the parent company financial statements. The standards have been classified according to whether or not they affect the consolidated financial statements and the parent company financial statements.
Standards implemented in 2014 which impact the consolidated financial statements and the parent company financial statements •
IFRS 10, Consolidated Financial Statements
As a result of the adoption of IFRS 10, the ATP Group has changed its accounting policies for determining when and how to consolidate an entity (investee) in which the Group has interests. IFRS 10 establishes a new single control model that applies to all entities in which the Group has interests by focusing on whether the Group controls an investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over an investee. In accordance with the transitional provisions of IFRS 10, as at 1 January 2014 the Group thus reassessed its investments relative to the new control model. As a result of this review, the following investments were reclassified as subsidiaries: • • •
AlphaOne SICAV_FIS Secured Multi Asset Repackaging Trust P.L.C. Signum Finance V P.L.C. (Sold in 2014)
Previously, these entities were recognised in the item ‘Bonds’. The impact of this change was recognised in accordance with the transitional provisions of IFRS in the opening statement of financial position as at 1 January 2013. As a result, the Group’s total assets as at 31 December 2013 increased by DKK 46m and the impact was thus very limited. The change did not impact the results and bonus potential of the Group or ATP. Standards and interpretations that have been implemented without an impact on the consolidated financial statements and the parent company financial statements • • • • • • • • •
IFRS 11, Joint Arrangements IFRS 12, Disclosure of Interests in Other Entities Several amendments to IFRS 10, 11, 12 and IAS 27 IAS 27 (2011), Separate Financial Statements IAS 28 (2011), Investments in Associates and Joint Ventures Amendments to IAS 32, Offsetting Financial Assets and Financial Liabilities Amendments to IAS 39, Novation of Derivatives and Continuation of Hedge Accounting IFRIC 21, Levies Annual Improvements to IFRSs Cycle 2010-2012
Standards and interpretations not yet in effect A number of new and revised standards and interpretations have been issued that are not mandatory for the Group and ATP for the preparation of the annual report for 2014. None of these standards and interpretations are expected to have a material impact on the financial reporting of the Group and ATP.
The ATP Group Annual Report 2014
66
Note 4 Income from investment properties Group
DKKm
!
ATP
2014
2013
2014
2013
Rental income from investment properties Income from forestry investment properties Operating expenses excl. maintenance in respect of investment properties Operating expenses in respect of forestry investment properties Maintenance in respect of investment properties Total income from investment properties
1,096 41 (184) (43) (14) 896
776 28 (115) (32) (16) 641
570 0 (131) 0 (10) 429
548 0 (126) 0 (10) 412
Operating expenses excl. forestry investment properties incl. repairs and maintenance in respect of: Rented floor space Non-rented floor space Total
(176) (22) (198)
(112) (19) (131)
(125) (16) (141)
(126) (10) (136)
§ Accounting policies Income from investment properties is comprised of the rental income from investment properties for the year and sale of timber from forestry properties less property management and timber expenses. Fair value adjustments of investment properties are recognised in the item ‘Market value adjustments related to investment activities’. The specification is set out in note 5 ‘Investment returns, broken down by asset type’. The determination of the fair value of investment properties is described in detail in note 16 ‘Investment properties’.
Note 5 Investment returns, broken down by asset type, Group 2014
2013
DKKm
Investment Investment properties Equity investments Mutual fund units Bonds Loans from hedging activities Receivables from and payables to credit institutions Other Financial assets and liabilities recognised at fair value in the income statement (chosen)
Interest income and dividends etc.
Market Interest value expenses adjustments
Interest income and dividends etc.
Market Interest value expenses adjustments
1
0
80
1
0
126
2,115
0
11,902
1,951
0
8,010
0
0
1,229
0
0
589
1,368
0
2,044
4,096
0
(6,206)
0
(1,294)
0
0
(486)
4
363
(364)
(2)
232
(221)
97
422
(70)
93
345
(28)
(333) 2,287
4,269
(1,728)
15,346
6,625
(735)
Financial derivatives
0
(687)
(13,045)
0
(580)
6,129
Total trading assets
0
(687)
(13,045)
0
(580)
6,129
4,269
(2,415)
2,301
6,625
(1,315)
8,416
Market Interest value expenses adjustments
Interest income etc.
Total
Hedging Bonds
Interest income etc.
Market Interest value expenses adjustments
11,940
0
57,918
10,337
(41)
(36,613)
Loans for investment activities Receivables from and payables to credit institutions
1,294
0
0
486
0
(4)
30
0
0
0
0
0
Other Financial assets and liabilities recognised at fair value in the income statement (chosen)
0
0
15
82
0
0 (36,617)
13,264
0
57,933
10,905
(41)
Financial derivatives
4,949
(5)
56,080
6,644
0
(30,866)
Total trading assets
4,949
(5)
56,080
6,644
0
(30,866)
18,213
(5)
114,013
17,549
(41)
(67,483)
Interest income etc.
Interest expenses
Interest income etc.
Interest expenses
Other
10
0
10
(1)
Financial assets and liabilities at amortised cost
10
0
10
(1)
Total
10
0
10
(1)
Total
Pension
The ATP Group Annual Report 2014
67
Note 5 Investment returns, broken down by asset type, ATP 2014
2013
DKKm
Investment
Investment properties
Interest income and dividends etc.
Market Interest value expenses adjustments
Interest income and dividends etc.
Market Interest value expenses adjustments
0
0
(284)
0
0
1
Equity investments
542
0
5,346
699
0
5,337
Bonds
165
0
407
0
(1,294)
0
3,149 0
0 (486)
(4,448) 4
363
(364)
(2)
232
(221)
97
592
(2)
2,674
551
0
(1,342)
1,662
(1,660)
8,141
4,631
(707)
(351)
0
(687)
(10,590)
0
(576)
6,915
0
(687)
(10,590)
0
(576)
6,915
1,662
(2,347)
(2,449)
4,631
(1,283)
6,564
Market Interest value expenses adjustments
Interest income etc.
Loans from hedging activities Receivables from and payables to credit institutions Other Financial assets and liabilities recognised at fair value in the income statement (chosen) Financial derivatives Total trading assets Total
Hedging Bonds
Interest income etc.
Market Interest value expenses adjustments
11,940
0
57,918
10,337
(41)
(36,613)
Loans for investment activities Receivables from and payables to credit institutions
1,294
0
0
486
0
(4)
30
0
0
0
0
0
Other Financial assets and liabilities recognised at fair value in the income statement (chosen)
0
0
15
82
0
0
13,264
0
57,933
10,905
(41)
(36,617)
Financial derivatives
4,949
(5)
56,080
6,644
0
(30,866)
Total trading assets
4,949
(5)
56,080
6,644
0
(30,866)
18,213
(5)
114,013
17,549
(41)
(67,483)
Interest income etc.
Interest expenses
Interest income etc.
Interest expenses
Other
10
0
10
(1)
Financial assets and liabilities at amortised cost
10
0
10
(1)
Total
10
0
10
(1)
Total
Pension
The ATP Group Annual Report 2014
68
Note 5 Investment returns, broken down by asset type
!
§ Accounting policies Investment Interest income and dividends etc. include interest for the year on securities and loans, forward premiums related to repo transactions and forward exchange contracts, indexation of index-linked bonds, interest payments on financial derivatives and dividends on equity investments less foreign dividend taxes.
Interest expenses comprise the interest expense for the year payable by investment activities to hedging activities for liquidity made available. The interest expense is calculated on a daily basis, using the central bank Danmarks Nationalbank’s seven-day borrowing rate and based on the value of the guaranteed benefits. The contra entry is included in interest income related to hedging activities. Also included are all expenses related to forward premiums on repo transactions and forward exchange contracts and interest payments on iinvestments and nflation swaps. Market value adjustments comprise value adjustments for the year of equity investments, bonds, mutal fund units, financial derivatives, loans to portfolio companies and investment properties, as well as realised gains and losses on the sale of equity investments, bonds, mutual fund units, financial derivatives, loans to portfolio companies and investment properties. Foreign currency translation adjustments are also included.
Hedging Interest income comprises the interest for the year on securities and loans. The interest income on loans is the income received by hedging activities from investment activities for liquidity made available. The interest income is calculated on a daily basis, using Danmarks Nationalbank’s (central bank) seven-day borrowing rate and based on the value of the guaranteed benefits. Also included are interest income on bonds and interest rate swaps and forward premiums related to repo transactions. Interest expenses comprise all expenses related to forward premiums on repo transactions, and foreward exchange contracts.
Market value adjustments related to hedging activities comprise value adjustments for the year of bonds and financial derivatives. Foreign currency translation adjustments are also included.
Pension Interest income and interest expenses comprise interest for the year which is not allocated to investment and hedging activities, respectively. Interest income relates primarily to late-payment interest in connection with the collection of ATP contributions.
Note 6 Expenses Group
ATP
2014
2013
2014
2013
Investment activity expenses
720
668
264
258
Pension activity expenses
300
310
300
310
1,426
1,508
1,447
1,527
2,446
2,486
2,011
2,095
Statutory audit
3.2
3.2
1.1
1.1
Other assurance engagements
0.3
0.1
0.0
0.1
Tax and VAT services
0.2
0.3
0.0
0.2
Other services
0.7
0.9
0.1
0.8
4.4
4.5
1.2
2.2
DKKm
Administration activity expenses
Audit fees: Total fees paid to auditors can be broken down as follows:
The ATP Group Annual Report 2014
69
Note 6 Expenses, continued Group DKKm
2014
ATP 2013
2014
2013
Depreciation, amortisation and impairment losses: Depreciation and impairment losses, property, plant and equipment
33
20
29
15
257
283
206
213
1,051
1,055
932
963
160
158
145
144
24
19
17
17
Total staff expenses
1,235
1,232
1,094
1,124
Average number of full-time staff
2,075
2,100
1,897
1,943
Remuneration paid to the CEO
-
-
6.1
5.4
Of which pension contribution
-
-
0.9
0.7
Total remuneration paid to the ATP Supervisory Board
-
-
2.2
1.7
Total remuneration paid to the ATP Board of Representatives
-
-
0.2
0.2
Total remuneration paid to the ATP Audit Committee
-
-
0.2
0.2
Chairman of the Supervisory Board (total remuneration)
-
-
715
569
Member of the Executive Committee
-
-
80
63
Member of the Supervisory Board (including remuneration for Board of Representatives)
-
-
120
95
Member of the Board of Representatives
-
-
13
11
Member of the Audit Committee (excluding the Chairman of the Supervisory Board)
-
-
60
47
Amortisation and impairment losses, intangible assets
Staff expenses: Payroll costs Pension contributions Other social security expenses
Annual remuneration in DKK thousands paid to:
For information on pay policy and practice for the Board of Representatives, the Supervisory Board, the Executive Board and other significant risk takers as required under the executive order on pay policy and the remuneration disclosure requirements for ATP (the Danish Labour Market Supplementary Pension Scheme) and LD (the Employees’ Capital Pension Fund), please visit www.atp.dk.
!
§ Accounting policies Expenses are allocated between the individual business areas either as direct expenses or as an expense allocation based on ATP’s internal model for allocation of other expenses.
Investment activity expenses comprise expenses incurred to achieve the investment return for the year. These expenses include direct and indirect expenses related, for example, to pay and remunerations, custody expenses and transaction costs related to the purchase and sale of investment assets. Expenses incurre in investment subsidiaries are also included in these expenses for the Group.
Pension activity expenses comprise expenses incurred in connection with the management of the ATP pension scheme, including SUPP. These expenses include direct and indirect expenses related, for example, to pay and remunerations, IT operations, amortisation of internal development projects and depr ment.
Administration activity expenses comprise expenses incurred in connection with the management of a number of large schemes. These expenses include direct and indirect expenses related, for example, to pay and remunerations, IT operations and amortisation of internal development projects. Also from the subsidiary PensionService A/S, which sells administration services on an arm’s length basis (i.e. on market terms).
The ATP Group Annual Report 2014
70
Note 7 Other income Group DKKm
Sale of administration services by subsidiaries
!
ATP
2014
2013
2014
2013
210
188
0
0
Sale of administration services to related parties
1,259
1,358
1,462
1,539
Total other income
1,469
1,546
1,462
1,539
§ Accounting policies Other income includes income for the year from the sale of administration services to external clients as well as related parties. Also included is other customary income for the year that cannot be attributed to pension and investment activities.
Note 8 Other expenses Group DKKm
Expenses related to the sale of administration services by subsidiaries
!
2014
ATP 2013
2014
2013
(167)
(150)
0
0
Expenses related to the sale of administration services to related parties
(1,259)
(1,358)
(1,447)
(1,527)
Total other expenses
(1,426)
(1,508)
(1,447)
(1,527)
§ Accounting policies Other expenses include expenses incurred for the sale of administration services. Also included are other customary expenses for the year that cannot be attributed to pension and investment activities under the item ‘Other expenses’.
Note 9 Tax on pension savings returns Group
ATP
2014
2013
2014
2013
(20,795)
5,327
(20,795)
5,327
0
0
0
0
(16)
70
(16)
70
Tax on pension savings returns transferred to hedging activities
20,230
(7,646)
20,230
(7,646)
Tax on pension savings returns transferred to pension activities
2
1
2
1
(579)
(2,248)
(579)
(2,248)
Tax on pension savings returns transferred from investment activities
(20,230)
7,646
(20,230)
7,646
Tax on pension savings returns in respect of hedging activities
(20,230)
7,646
(20,230)
7,646
Tax on pension savings returns transferred from investment activities
(2)
(1)
(2)
(1)
Tax on pension savings returns in respect of pension activities
(2)
(1)
(2)
(1)
DKKm Investment activities: Tax on pension savings returns Changes in deferred tax on pension savings returns Prior year adjustments
Tax on pension savings returns in respect of investment activities
Hedging activities:
Pension activities:
The ATP Group Annual Report 2014
71
Note 9 Tax on pension savings returns, continued Group DKKm Total tax on pension savings returns Investment activity results before tax on pension savings returns and transfer to unit-linked contracts Hedging activity results before tax on pension savings returns and change in guaranteed benefits Interest income and interest expenses, pension activities
Calculated 15.3% of which Tax effect of different methods of calculating accounting and tax returns on transparent entities etc. Tax effect of reduction under section 10 of the Danish Pension Savings Returns Tax Act (Pensionsafkastbeskatningsloven) (reduction regarding life and pension insurance policies, year-end 1982) Tax on pension savings returns for the year Prior year adjustments Total tax on pension savings returns Portion of tax on pension savings returns falling due after more than one year
!
ATP
2014
2013
2014
2013
(20,811)
5,397
(20,811)
5,397
5,358
14,438
5,332
14,460
132,221 10
(49,975) 9
132,221 10
(49,975) 9
137,589
(35,528)
137,563
(35,506)
(21,051)
5,436
(21,047)
5,432
(17)
(21)
(21)
(17)
273 (20,795) (16) (20,811)
(88) 5,327 70 5,397
273 (20,795) (16) (20,811)
(88) 5,327 70 5,397
0
0
0
0
§ Accounting policies Tax on pension savings returns comprises current tax on pension savings returns for the year, changes in deferred tax on pension savings returns, and prior year adjustments, if any. Tax on pension savings returns is allocated between investment, hedging and pension activities based on the return allocated to investment, hedging and pension activities, respectively. Current tax liabilities in respect of pension savings returns and current tax receivable in respect of pension savings returns are recognised in the statement of financial position as calculated tax on pension savings returns adjusted for interim payment of tax on pension savings returns. Deferred tax on pension savings returns resulting from temporary differences between the carrying amount and the tax base of assets and liabilities is measured under the statement of financial position liability method. Deferred tax assets in respect of pension savings returns, including the tax value of tax loss carryforwards, are included at the value at which the asset is expected to be realisable – either by elimination in pension savings returns tax on future earnings or by set-off against deferred tax liabilities. Deferred tax on pension savings returns is measured in accordance with current tax rules and at the tax rates that are expected to apply in the periods in which the temporary differences reverse.
Note 10 Contributions Group 2014
2013
2014
2013
ATP contributions
9,846
9,577
9,846
9,577
0
2,755
0
2,755
(797)
(745)
(797)
(745)
9,049
11,587
9,049
11,587
SUPP contributions – one-off amount on the conversion of SUPP deposits Social security contributions Total contributions
!
ATP
DKKm
§ Accounting policies Contribution income is recognised as reporting is received.
Contributions comprise ATP contributions reported and collected for the year less social security contributions. Also included is adjustment for the year of impairment losses on contributions receivable, see note 12 ‘Financial assets and liabilities’.
The ATP Group Annual Report 2014
72
Note 11 Benefit payouts Group DKKm
Personal pension (current)
2013
2014
2013
(12,711)
(11,781)
(12,711)
(11,781)
Spouse pension (current)
(22)
(25)
(22)
(25)
Personal pension (capitalised)
(73)
(68)
(73)
(68)
Spouse pension (capitalised)
(698)
(699)
(698)
(699)
Child benefits (capitalised)
(130)
(137)
(130)
(137)
(27)
(31)
(27)
(31)
(13,661)
(12,741)
(13,661)
(12,741)
SUPP estate amount (capitalised) Total benefit payouts
!
ATP
2014
§ Accounting policies
Benefit payouts comprise personal pensions, spouse pensions and capitalised benefits for the year paid. Benefits prepaid are accrued on the statement of financial positio and presented under the item ‘Other prepayments’.
Note 12 Financial assets and liabilities Group
ATP
2014
2013
2014
2013
Financial derivatives
116,725
44,065
116,657
43,243
Financial assets measured at fair value over the income statement (trading assets)
116,725
44,065
116,657
43,243
-
-
78,842
72,774
DKKm
Financial assets
Investments in subsidiaries Investments in associates
10,328
9,840
7,157
6,674
Equity investments
78,095
65,456
37,504
30,494
Mutual fund units Bonds Loans to portfolio companies Receivables from credit institutions
6,603
6,294
0
0
515,714
461,085
488,199
441,636
5,142
1,402
4,572
1,060
55,835
56,251
55,835
56,251
Financial assets measured at fair value over the income statement (chosen)
671,717
600,328
672,109
608,889
Total financial assets measured at fair value
788,442
644,393
788,766
652,132
0
4
0
0
-
-
2,755
0
2,408
2,235
2,408
2,235
Other loans Loans to subsidiaries Contributions receivable Receivables from subsidiaries Interest receivable Tax receivable on pension savings returns Income tax
-
-
1,037
84
4,633
4,554
4,208
4,272
0
40
0
40
1
5
-
-
Other receivables
2,827
983
1,719
709
Financial assets measured at amortised cost
9,869
7,821
12,127
7,340
The ATP Group Annual Report 2014
73
Note 12 Financial assets and liabilities, continued Group
ATP
2014
2013
2014
2013
Financial derivatives
69,934
38,335
68,169
38,278
Financial liabilities measured at fair value over the income statement (trading liabilities)
69,934
38,335
68,169
38,278
Payables to credit institutions
18,995
35,243
18,995
35,243
Financial liabilities measured at fair value over the income statement (chosen)
18,995
35,243
18,995
35,243
Total financial liabilities measured at fair value
88,929
73,578
87,164
73,521
DKKm Financial liabilities
Payables to subsidiaries
-
-
114
875
15,428
0
15,428
0
3
8
-
-
Other payables
14,619
11,303
5,304
10,535
Financial liabilities measured at amortised cost:
30,050
11,311
20,846
11,410
Tax payable on pension savings returns Income tax payable
!
§ Accounting policies Purchase and sale of financial assets and liabilities are recognised on the trade date. Financial assets and liabilities are recognised at fair value on the trade date. Subsequent to initial recognition, financial assets and liabilities are measured at fair value or amortised cost.
Financial assets and liabilities at fair value In accordance with the fair value option (chosen) of IAS 39, the following assets and liabilities are recognised at fair value in the income statement: - Bonds - Equity investments, including investments in subsidiaries and associates - Mutual fund units - Loans to portfolio companies - Receivables from credit institutions - Payables to credit institutions. The assets and liabilities specified above are managed and assessed based on changes in fair value in accordance with the Group’s risk management strategy, see the section ‘Risks and risk management’.
In addition, financial derivatives (trading assets and liabilities) are also recognised at fair value on the trade date. Subsequent to initial recognition, financial derivatives are also measured at fair value. Accounting policies for financial derivatives are presented in note 13.
Adjustment of the fair value of financial assets and liabilities is recognised in the income statement under ‘Market value adjustments related to investment activities’ and ‘Market value adjustments related to hedging activities’ on an ongoing basis. Determination of fair value For financial assets and liabilities that are traded in a market, the official market price is used. Bid prices are used in the measurement of financial assets, while ask prices are used in the measurement of financial liabilities. For other financial assets and liabilities, the fair value determination represents ATP’s most objective estimate of the current fair value of financial assets and liabilities, based on the most unambiguous and uniform guidelines possible and, to some extent, supported by management estimates. In the determination of these estimates, the following methods are applied:
Interest-based investment assets and liabilities For investments in bonds for which no active market exists, yield curves with the addition of yield spreads are used, so as to ensure that pricing is as fair as possible. Private equity investments. Private equity investments in real estate funds are measured based on a calculated fair value in which underlying properties and other statement of financial position items are recognised at market value. If the fair value cannot be reliably measured, cost is used.
The ATP Group Annual Report 2014
74
Note 12 Financial assets and liabilities, continued
!
§ Accounting policies, continued Private equity investments in private equity funds are measured on the basis of the latest market price – either in the form of a round of capital increases or a partial sale, based on the value of comparable companies and using traditional valuation methods. In traditional valuation methods, reporting received from the private equity funds, among other things, containing fair value disclosures from the funds, is used. Market-based multiples are also used for a few investments. Private equity investments in portfolio companies are measured on the basis of the latest market price, based on the value of comparable companies and using traditional valuation methods.In traditional valuation methods, reporting received from the portfolio companies, among other things, containing fair value disclosures from the funds, is used. The following factors are included in the determination of fair value:
1) valuation and other significant conditions related to the latest round of financing 2) significant events related to the company’s business, product launches, new clients and changes to the management team 3) compliance or non-compliance with significant predefined milestones and other conditions assessed to be capable of impacting the fair value, including general changes in market and competition conditions and new technology. Mutual fund units are measured on the basis of reporting received from mutual funds. This reporting contains information on fair values of the underlying assets and liabilities of the mutual funds. Loans to portfolio companies. Valuation of loans to portfolio companies is based on expected cash flows from these loans, adjusted for changes in credit risk. Receivables from credit institutions comprise amounts paid under repo transactions, i.e. purchase of securities where, as part of the agreement, the buyer agrees to sell back the security at some later date. Securities purchased are not included in the statement of financial position, and the amount paid is therefore included as a receivable. Payables to credit institutions comprise amounts received under repo transactions, i.e. sale of securities where, as part of the agreement, the borrower agrees to repurchase the security at some later date. Securities sold are still included in the statement of financial position and the amount received is included as a liability. Financial assets and liabilities at amortised cost Loans and receivables, with the exception of ‘Loans to portfolio companies’ and ‘Receivables from credit institutions’, are measured at amortised cost. Amortised cost is usually equivalent to nominal value. If an objective indication of impairment of a loan or receivable is believed to exist, a write-down for impairment is made to meet losses on other loans and receivables. Objective indication of impairment of a loan or receivable exists, for example, if a debtor is facing significant financial difficulties, if a debtor fails to meet its payment obligations under a contract or agreement, or if a debtor is likely to go bankrupt or be subject to other financial reconstruction.
Write-downs for impairment are made individually. Impairment losses are deducted directly from the related asset items, while the changes in impairment losses for the period under review are recognised in the income statement. Other liabilities, comprising ‘payables to subsidiaries’, ‘tax payable on pension savings returns’ and ‘other payables’, are measured at amortised cost, essentially equivalent to nominal value.
Significant accounting estimates Significant accounting estimates are associated primarily with the measurement of financial assets and liabilities at fair value where the valuation is based to a lesser extent on observable market data. This includes parts of the Group’s equity investments, mutual fund units, investment properties and loans to portfolio companies, see level 3 assets in note 20 ‘Fair value disclosure’. In the determination of the fair value of financial assets and liabilities for which no active market exists, uncertainty primarily relates to: •
Choice of discount rate (market rate)
•
Determination of expected future cash flows from financial assets
The fair value of financial assets and liabilities, including financial derivatives for which no quoted market prices exist, is based on the best information available under the circumstances. The accounting methods include discounting to net present value of future cash flows and assessment of underlying market conditions. Assumptions of interest rates, risk premiums, volatility, default, prepayments and other information are included in the use of these methods. Reference is made to note 20 ‘Fair value disclosure’, containing information on input variables etc. in relation to fair value measurement.
The ATP Group Annual Report 2014
75
Note 13 Financial derivatives Group The ATP Group uses various financial derivatives as part of its risk management such as interest rate swaps, equity futures, inflation swaps and forward exchange contracts. A characteristic of financial derivatives is that their value depends on developments in the value of an underlying instrument, index or the like. Using financial derivatives makes it possible to increase or reduce the exposure to market risks, among other things.
Interest rate contracts The ATP Group uses interest rate swaps, among other instruments, as part of the hedging of the interest rate risk of the Group’s pension liabilities. Interest rate swaps are included in the Group’s hedging portfolio. In addition to interest rate swaps, the group of interest rate contracts used by the Group in 2014 also included interest rate swaptions and interest rate futures. Below, fair values as at 31 December 2014 are listed by positive and negative values, respectively.
2014
DKKm
2013
Fair value
Interest rate swaps Interest rate swaptions Interest rate futures Total interest rate contracts
Fair value
Positive
Negative
Positive
Negative
115,213
(57,089)
38,992
(36,700)
994
(4,699)
1,934
(328)
1
(273)
378
(486)
116,208
(62,061)
41,304
(37,514)
Equity contracts In the group of equity contracts, the ATP Group used equity futures, equity-indexed options and contracts for difference (CFDs) in 2014.
2014
2013
Fair value
Equity futures Equity options
Fair value
Positive
Negative
Positive
Negative
6
(6)
236
0
0
0
16
0
Equity-indexed options
184
(197)
0
0
Contracts for difference
0
(8)
0
0
Total equity contracts
190
(211)
252
0
Inflation contracts In the group of inflation contracts, the ATP Group used inflation swaps and inflation caps in 2014. Below, fair values as at 31 December 2014 are listed by positive and negative values, respectively.
2014
2013
Fair value
Fair value
Positive
Negative
Positive
Negative
Inflation swaps
0
(1,438)
0
(598)
Inflation caps
0
0
791
0
Inflation contracts
0
(1,438)
791
(598)
The ATP Group Annual Report 2014
76
Note 13 Financial derivatives, continued DKKm Commodity contracts In the group of commodity contracts, the ATP Group used commodity futures in 2014. Below, fair values as at 31 December 2014 are listed by positive and negative values, respectively.
2014
2013
Fair value
Fair value
Positive
Negative
Positive
Negative
Total return swaps
0
0
146
0
Commodity futures
0
(1,743)
0
(46)
Total commodity contracts
0
(1,743)
146
(46)
Foreign exchange contracts In the group of foreign exchange contracts, the Group used forward exchange contracts to hedge foreign exchange risks on the Group’s foreign investments. Below, fair values for the Group’s foreign exchange contracts as at 31 December 2014 are listed by positive and negative values, respectively.
2014
2013
Fair value
Fair value
Positive
Negative
Positive
Negative
Forward exchange contracts
327
(4,481)
1,572
(177)
Foreign exchange contracts
327
(4,481)
1,572
(177)
116,725
(69,934)
44,065
(38,335)
Total financial derivatives
ATP Apart from the size of amounts, the Parent Company’s use of financial derivatives is virtually identical to that of the Group. Below, positive and negative fair values of ATP’s financial derivatives as at 31 December 2014 are listed.
Interest rate contracts 2014
DKKm
2013
Fair value
Interest rate swaps Interest rate swaptions Interest rate futures Total interest rate contracts
Fair value
Positive
Negative
Positive
Negative
115,213
(57,089)
38,992
(36,700)
994
(4,699)
1,934
(328)
1
(273)
378
(486)
116,208
(62,061)
41,304
(37,514)
Equity contracts 2014
2013
Fair value Positive Equity futures
Fair value
Negative
Positive
Negative
6
(6)
236
0
Equity-indexed options
184
(197)
0
0
Total equity contracts
190
(203)
236
0
The ATP Group Annual Report 2014
77
Note 13 Financial derivatives, continued DKKm Inflation contracts 2014
2013
Fair value
Fair value
Positive
Negative
Positive
Negative
Inflation swaps
0
(1,438)
0
(598)
Total inflation contracts
0
(1,438)
0
(598)
Commodity contracts 2014
2013
Fair value
Fair value
Positive
Negative
Positive
Negative
Total return swaps
0
0
146
0
Total commodity contracts
0
0
146
0
Foreign exchange contracts 2013 Fair value
Positive
Negative
Positive
Negative
Forward exchange contracts
259
(4,467)
1,557
(166)
Foreign exchange contracts
259
(4,467)
1,557
(166)
116,657
(68,169)
43,243
(38,278)
Total financial derivatives
!
2014 Fair value
§ Accounting policies, continued On initial recognition, i.e. the date of entering into the derivative transaction, financial derivatives are recognised at fair value. Subsequent to initial recognition, financial derivatives are also measured at fair value. For financial derivatives that are traded in a market, the official market price is used. For financial derivatives that are not traded in a market, various generally accepted valuation methods are used, depending on the type of instrument involved. For interest rate instruments, valuation is based on the market rate expressed as the zero coupon yield curve at the statement of financial position date. Bid prices are used in the measurement of financial assets, while ask prices are used in the measurement of financial liabilities. Changes in the fair value of financial derivatives are recognised in the income statement as they occur. Financial derivatives with a positive fair value are recognised in the statement of financial position as assets, while financial derivatives with a negative fair value are recognised in the statement of financial position as liabilities. Cash and cash equivalents received as part of a margin settlement are recognised in the statement of financial position, given that ATP has the right of disposal of margin account balances. Securities which, as part of collateral security, have only been formally assigned to ATP’s ownership are not recognised in the statement of financial position, given that ATP neither bears the risk nor benefits from the return on these securities. Similarly, securities which ATP only has assigned formally to counterparties as part of collateral security are still recognised in ATP’s statement of financial position. ATP enters into foreign exchange contracts with external counterparties on behalf of several of the Group’s subsidiaries. The positive or negative market values in relation to subsidiaries are not included in the above, but are presented as ‘Receivables from subsidiaries’ and ‘Payables to subsidiaries’ in ATP’s statement of financial position.
The ATP Group Annual Report 2014
78
Note 14 Investments in subsidiaries Group 2014
2013
2014
2013
Fair value as at 1 January
-
-
72,774
73,961
Additions during the year
-
-
19,188
7,209
Disposals during the year
-
-
(15,064)
(6,659)
Market value adjustment for the year
-
-
1,944
(1,737)
Fair value as at 31 December
-
-
78,842
72,774
DKKm
!
ATP
§ Accounting policies In accordance with the fair value option of IAS 39, investments in subsidiaries are measured at fair value in ATP’s financial statements, see note 12. Investments in the earnings of subsidiaries are assessed based on fair value in accordance with ATP’s and the ATP Group’s risk management and investment strategies. Reporting to the Supervisory and Executive Boards of the ATP Group is based on this. Starting in 2013, the functional currency of the ATP Group’s foreign subsidiaries was changed from local currency to Danish kroner (DKK). The activities of the foreign subsidiaries are mainly an extension of the activities already carried out by the ATP Parent Company (integrated foreign entities). Price differences previously recognised in other comprehensive income are recognised in results only if and when the foreign entities are disposed of. Financial statements of foreign subsidiaries are translated into the functional currency at the exchange rates prevailing at the statement of financial position date as far as assets and liabilities are concerned and at average exchange rates as far as income statement items are concerned.
Ownership interest percent
Share capital DKKm
Assets DKKm
Revenue DKKm
Net results DKKm
Domicile
2014 ATP Alternative Investments K/S
100.0
2,681
2,770
-
270
Denmark
ATP Ejendomme A/S
100.0
2,250
3,463
322
408
Denmark
Strandgade 7 A/S
100.0
28
28
47
0
Denmark
Ejendomsselskabet Vangede A/S
100.0
110
2,003
114
172
Denmark
90.0
501
3,619
175
67
Belgium
Ejendomsselskabet Borups Allé P/S
100.0
486
489
13
5
Denmark
ATP Fondsmæglerselskab A/S
100.0
34
62
-
4
Denmark
NOW: Pensions Investment A/S Fondsmæglerselskab
100.0
10
45
-
1
Denmark
NOW: Pensions Ltd.
100.0
152
183
-
(107)
UK
ATP Invest III
100.0
19,111
19,198
-
2,946
Denmark
ATP PensionService A/S
100.0
23
113
190
8
Denmark
Private Equity Advisors ApS
100.0
3
20
-
1
Denmark
ATP Private Equity K/S
100.0
3,896
4,025
-
660
Denmark
ATP Private Equity Partners I K/S
100.0
1,677
1,736
-
391
Denmark
ATP Private Equity Partners II K/S
100.0
5,854
6,066
-
840
Denmark
ATP Private Equity Partners III K/S
100.0
8,366
8,628
-
1,363
Denmark
ATP Private Equity Partners IV K/S
100.0
4,840
5,082
-
575
Denmark
ATP Private Equity Partners V K/S
100.0
194
195
-
0
Denmark
ATP Real Estate Partners I K/S
100.0
4,855
4,935
-
382
Denmark
ATP Real Estate Partners II K/S
100.0
1,080
1,108
-
88
Denmark
ATP TIM GP ApS
100.0
0
1
-
0
Denmark
ATP Timberland Invest K/S
100.0
2,149
2,177
-
120
Denmark
Northwoods ATP LP
100.0
269
270
2
18
USA
Upper Hudson Woodlands ATP LP
100.0
338
344
23
107
USA
Wolf River ATP LP
100.0
172
173
1
57
USA
Ouachita ATP LP
100.0
292
294
15
34
USA
99.8
235
235
-
(6)
Denmark Denmark
Galaxy Properties S.A.
Via Venture Partners Fond I K/S Via Venture Partners Fond II K/S
99.8
556
556
-
51
ATP Alternative Investment Trust
100.0
1,788
1,788
-
381
Australia
AlphaOne SICAV-FIS
100.0
14,953
25,296
-
(945)
Luxembourg
Secured Multi Asset Repackaging Trust P.L.C.
100.0
1
1
-
0
Ireland
The ATP Group Annual Report 2014
79
Note 14 Investments in subsidiaries, continued Ownership interest percent
Share capital DKKm
Assets DKKm
Revenue DKKm
Net results DKKm
2013 ATP Alternative Investments K/S
100.0
4,255
4,259
-
719
Denmark
ATP Ejendomme A/S
100.0
2,250
3,621
232
222
Denmark
Strandgade 7 A/S
100.0
28
569
42
31
Denmark
Ejendomsselskabet Vangede A/S
100.0
110
1,962
1
(1)
Denmark
ATP Fondsmæglerselskab A/S
100.0
34
90
-
7
Denmark
NOW: Pensions Investment A/S Fondsmæglerselskab
100.0
10
43
-
(10)
Denmark
NOW: Pensions Ltd.
100.0
149
270
-
(29)
UK
ATP Invest III
100.0
16,165
16,558
-
(878)
Denmark
ATP PensionService A/S
100.0
23
101
170
9
Denmark
Private Equity Advisors ApS
100.0
3
17
-
2
Denmark
ATP Private Equity K/S
100.0
4,505
4,527
-
559
Denmark
ATP Private Equity Partners I K/S
100.0
2,010
2,017
-
176
Denmark
ATP Private Equity Partners II K/S
100.0
7,683
7,700
-
1,155
Denmark
ATP Private Equity Partners III K/S
100.0
8,255
8,315
-
1,363
Denmark
ATP Private Equity Partners IV K/S
100.0
2,367
2,481
-
237
Denmark
ATP Real Estate Partners I K/S
100.0
4,662
4,671
-
382
Denmark
ATP Real Estate Partners II K/S
100.0
1,005
1,008
-
113
Denmark
ATP TIM GP ApS
100.0
0
1
-
0
Denmark
ATP Timberland Invest K/S
100.0
1,955
1,976
-
121
Denmark
Northwoods ATP LP
100.0
249
251
2
26
USA
Upper Hudson Woodlands ATP LP
100.0
233
237
24
10
USA
Wolf River ATP LP
100.0
115
115
0
6
USA
Ouachita ATP LP
100.0
261
263
3
12
USA
99.8
403
403
-
(42)
Denmark Denmark
Via Venture Partners Fond I K/S Via Venture Partners Fond II K/S
99.8
259
259
-
23
ATP Alternative Investment Trust
100.0
1,482
1,482
-
(172)
Australia
AlphaOne SICAV-FIS
100.0
11,014
11,016
-
547
Luxembourg
Secured Multi Asset Repackaging Trust P.L.C.
100.0
2
2
-
0
Ireland
Signum Finance V P.L.C.
100.0
791
791
-
(775)
Ireland
The ATP Group Annual Report 2014
80
Note 15 Investments in associates Group DKKm
2014
2013
2014
2013
Fair value as at 1 January
9,840
7,889
6,674
4,888
0
20
0
0
Additions during the year
4,841
2,095
4,648
1,645
Disposals during the year
(5,014)
(840)
(4,801)
(648)
Transferred from/to equity investments
Fair value adjustment for the year Fair value as at 31 December
!
ATP
661
676
636
789
10,328
9,840
7,157
6,674
§ Accounting policies In accordance with the fair value option of IAS 39, investments in associates are measured at fair value in the Group’s and ATP’s financial statements, see note 12. Investments in the earnings of associates are assessed based on fair value in accordance with ATP’s and the ATP Group’s risk management and investment strategies. Reporting to the Supervisory and Executive Boards of the ATP Group is based on this. Associates are entities in which the Group has a significant but not controlling interest. Significant interest is typically achieved through direct or indirect ownership or right of disposal of more than 20 percent of the voting rights, but less than 50 percent. In the assessment of whether the Group has a significant interest, potential voting rights that may be exercised at the statement of financial position date are taken into account. An overview of the Group’s associates in 2014 and 2013 is listed below with relevant accounting information. Owner
Ownership interest percent
Voting rights percent
Assets DKKm
Liabilities DKKm
Revenue DKKm
Net results DKKm
181
2014 ATPPFA K/S
ATP
49.7
49.7
5,091
50
242
Ejendomsselskabet Norden I K/S
ATP
22.2
22.2
293
152
7
6
NB Public Equity K/S
ATP
99.5
0.0
164
0
0
(22)
ATPPD Lyngby A/S
ATP
50.0
50.0
689
491
37
13
ATPPD Århus A/S
ATP
50.0
50.0
803
265
43
73
ATPPD Odense A/S
ATP
50.0
50.0
345
220
19
7
ATPPD Kgs. Nytorv ApS
ATP
50.0
50.0
2,084
1,729
100
0
FIH Holding A/S
ATP
48.8
50.0
27,500
125
260
228
Harbour P/S
ATP
45.8
45.8
2,085
30
92
83
Harbour Komplementar ApS
ATP
45.8
45.8
0
0
0
0
Rosengårdscenteret
ATP
25.0
25.0
3,042
1,830
119
222
VVP A/S
ATP
0.0
0.0
0
0
0
0
Ejendomsselskabet Axeltorv 2 P/S ATP
33.3
33.3
861
603
0
(4)
Ejendomsselskabet Axeltorv 2 Komplementar ApS
ATP
33.3
33.3
0
0
0
0
Portland P/S
ATP
33.3
33.3
397
9
8
7
Portland Komplementar ApS
ATP
33.3
33.3
0
0
0
0
Polaris Private Equity II K/S
ATP Private Equity Partners I K/S
15.0
15.0
616
6
0
160
Aberdeen Real Estate Fund Finland L.P.
ATP Real Estate Partners K/S
32.8
32.8
3,274
2,084
352
77
AREIM I Fund L.P.
ATP Real Estate Partners K/S
32.8
32.8
3,456
1,924
221
49
CBRE Real Estate Iberian Value Added Fund CV
ATP Real Estate Partners K/S
20.2
20.2
1,111
762
136
(135)
Patroffice B.V.
ATP Real Estate Partners K/S
22
46.9
46.9
2,650
2,218
171
Ejendomsselskabet Norden IV K/S ATP Real Estate Partners II K/S
32.4
32.4
864
352
28
18
Viamix AB
Via Venture Partners Fond I K/S
49.9
49.9
84
376
658
658
Retail Support International ApS
Via Venture Partners Fond I K/S
43.9
43.9
56
3
3
3
Nordic International Holding A/S
Via Venture Partners Fond I K/S
46.1
46.1
79
9
8
8
Beneq Oy
Via Venture Partners Fond I K/S
30.1
30.1
133
85
79
(48)
Adform ApS
Via Venture Partners Fond I K/S
21.3
21.3
119
59
90
13
The ATP Group Annual Report 2014
81
Note 15 Investments in associates, continued Owner
Ownership interest percent
Voting rights percent
Assets DKKm
Liabilities DKKm
Revenue DKKm
Net results DKKm
2014 Frontmatec Holding A/S
Via Venture Partners Fond I K/S
44.6
44.6
123
58
10
9
Daldata Holding AS
Via Venture Partners Fond II K/S
49.9
49.9
109
66
37
34
All NRG Holding A/S
Via Venture Partners Fond II K/S
45.1
45.1
0
0
0
0
UVD Holding A/S
Via Venture Partners Fond II K/S
47.9
47.9
109
84
(3)
(3)
Conscia TopCo A/S
Via Venture Partners Fond II K/S
33.5
33.5
106
0
0
0
Mocorp Holding ApS
Via Venture Partners Fond II K/S
49.9
49.9
0
0
0
0 4
Cloud Supply Company ApS
Via Venture Partners Fond II K/S
49.9
49.9
35
15
4
Profit Holding OY
Via Venture Partners Fond II K/S
49.0
49.0
0
0
0
0
Hancock Queensland Plantations Pty Ltd.
ATP Timberland Invest K/S
31.1
31.1
4,725
4,212
411
(129)
Liabilities DKKm
Revenue DKKm
Net results DKKm
468
Owner
Ownership interest percent
Voting rights percent
Assets DKKm
2013 ATPPFA K/S
ATP
49.7
49.7
5,074
32
276
Ejendomsselskabet Norden I K/S ATP
22.2
22.2
258
122
8
11
NB Public Equity K/S
ATP
99.5
0.0
755
0
0
502
ATPPD Lyngby A/S
ATP
50.0
50.0
686
500
37
13
ATPPD Århus A/S
ATP
50.0
50.0
761
297
42
53
ATPPD Odense A/S
ATP
50.0
50.0
345
227
19
20
ATPPD Kgs. Nytorv ApS
ATP
50.0
50.0
2,086
1,727
-
-
FIH Holding A/S
ATP
48.8
50.0
28,818
23,236
511
105
Harbour P/S
ATP
45.8
45.8
2,079
9
60
302
Harbour Komplementar ApS
ATP
45.8
45.8
0
0
0
0
Rosengårdscenteret
ATP
25.0
25.0
4
-
-
-
VVP A/S
ATP
44.0
44.0
4
4
18
0
Polaris Private Equity II K/S
ATP Private Equity Partners I K/S
15.0
15.0
619
6
0
162
Aberdeen Real Estate Fund Finland L.P.
ATP Real Estate Partners K/S
32.8
32.8
3,709
2,379
349
131
AREIM I Fund L.P.
ATP Real Estate Partners K/S
32.8
32.8
3,697
2,091
246
178
CBRE Real Estate Iberian Value Added Fund CV
ATP Real Estate Partners K/S
20.2
20.2
1,942
1,470
154
(411)
Patroffice B.V.
ATP Real Estate Partners K/S
46.9
46.9
2,564
2,155
181
24
Ejendomsselskabet Norden IV K/S
ATP Real Estate Partners II K/S
32.4
32.4
758
265
14
24
ComActivity AB
Via Venture Partners Fond I K/S
49.6
49.6
27
18
22
(3)
Viamix AB
Via Venture Partners Fond I K/S
56.0
56.0
43
0
-
0
PP Utköb AB
Via Venture Partners Fond I K/S
31.7
31.7
165
28
6
9
Retail Support International ApS
Via Venture Partners Fond I K/S
43.9
43.9
56
6
3
3
Nordic International Holding A/S
Via Venture Partners Fond I K/S
46.1
46.1
85
9
9
9
Beneq Oy
Via Venture Partners Fond I K/S
30.2
30.2
139
58
113
(41)
Adform ApS
Via Venture Partners Fond I K/S
21.8
21.8
56
25
73
2
WPA Holding ApS
Via Venture Partners Fond I K/S
49.0
49.0
17
5
-
0
B.V. Electronic ApS
Via Venture Partners Fond I K/S
44.6
44.6
76
25
8
7
Dolphin Holding AS
Via Venture Partners Fond I K/S
47.1
47.1
54
26
0
0
Daldata Holding AS
Via Venture Partners Fond II K/S
49.9
49.9
97
81
0
(1)
Cloud Supply Company AS
Via Venture Partners Fond II K/S
49.9
49.9
35
22
0
(1)
UVD Holding A/S
Via Venture Partners Fond II K/S
47.9
47.9
-
-
-
-
TopCo A/S
Via Venture Partners Fond II K/S
35.0
35.0
-
-
-
-
Mocorp A/S
Via Venture Partners Fond II K/S
49.9
49.9
-
-
-
-
VBE Holding A/S
Via Venture Partners Fond II K/S
Hancock Queensland Plantations ATP Timberland Invest K/S Pty Ltd.
49.9
49.9
-
-
-
-
31.1
31.1
4,363
3,856
312
0
The ATP Group Annual Report 2014
82
Note 16 Investment properties Group 2013
2014
2013
13,834
11,587
7,566
7,421
(10)
0
0
0
Additions during the year
4,284
2,265
225
246
Disposals during the year
(183)
(59)
0
(54)
(54)
41
(284)
(47)
17,871
13,834
7,507
7,566
Fair value as at 1 January Reclassification to/from owner-occupied properties
Fair value adjustment for the year Fair value as at 31 December
!
ATP
2014
DKKm
§ Accounting policies Investment properties are properties held by the ATP Group to earn rental income and/or capital gains. Investment properties are properties which the ATP Group does not use for administration etc. as such properties are classified as owner-occupied properties, see note 27. Properties with elements of owner-occupied properties and investment properties are allocated proportionately between the two asset types. On initial recognition, investment properties are recognised at cost including transaction expenses. Subsequent to initial recognition, investment properties are measured at fair value. A return-based model is used to determine the fair value of the properties. The determination of the return on individual properties is based on expected rental income at full occupancy of the properties. Expected operating, administration and maintenance expenses are deducted. The value subsequently calculated is adjusted for recognised vacancy rent loss for a suitable period and expected expenses related to major maintenance work; deposits and prepaid rent are also added. The required rates of return are determined based on external estate agents' assessment of the market level. Expenses incurred in the form of new or improved qualities which result in an increase in the fair value determined immediately prior to the incurrence of the expenses, are added to the acquisition price as improvements. Fair value is determined based on the following rates of required return: Group
ATP
2014
2013
2014
2013
Weighted average required rate of return
5.5%
5.6%
5.6%
5.7%
Maximum required rate of return
8.5%
8.5%
8.5%
8.5%
Minimum required rate of return
5.0%
5.0%
5.0%
5.0%
The Group’s properties have not been valued by an external valuation expert. An external assessment has been obtained for the valuation of market rent and required rates of return. These valuations are segmented on the locations and qualities of the properties.
The ATP Group Annual Report 2014
83
Note 17 Market risks ATP’s risk limits are, in addition to statutory limits, based on an overall risk framework in which market risks are included as well as a number of specific limits. The overall risk framework is expressed by a risk budget, determined on the basis of the bonus potential and guaranteed benefits, while the overall risk is determined using the Value-at-Risk target with a risk tolerance of 0.5 percent and a one-year time frame. The overall risk framework and the related risk target are determined by the Supervisory Board. ATP’s risk limits – statutory limits, limits set by the Supervisory Board and internally established limits – are monitored and reported on a daily basis in relation to ATP’s actual risks, and any deviations from these limits are reported to the ATP Supervisory and Executive Boards. Market risks Market risks in the ATP investment portfolio are based on the investment portfolio’s division into the risk classes Interest Rates, Credit, Equities, Inflation and Commodities. A number of risk targets are used in the measurement of ATP’s market risks, including Expected Shortfall, which is a generally used target for risk in worst-case scenarios. In connection with the determination of risk allocation between the five risk classes, Expected Shortfall over a three-month time frame and a 1 percent quantile (ES, three months, 99 percent) is used. This risk target expresses the average of the 1 percent worst losses over a three-month time frame.
Expected Shortfall for ATP’s investment portfolio in DKKm ES 31.12.2014
ES 31.12.2013
Investment portfolio Interest Rates
390
2,761
2,996
2,740
16,106
17,092
Inflation
7,939
6,335
Commodities
1,332
2,853
Credit Equities
ATP’s risk management provides limits for the allocation of risk on the investment portfolio’s five risk classes with a view to ensuring appropriate diversification of ATP’s investments. The risk allocation has been determined as each risk class’s share of the sum of risk for the five risk classes. The ATP Supervisory Board has set a long-term target and upper and lower limits for each risk class’s share of the overall risk of the investment portfolio.
Relative risk allocation (percent) Year-end 2014
Year-end 2013
Target
1.4
8.8
20.0
Interest Rates Credit
10.4
7.8
10.0
Equities
56.0
54.2
35.0
Inflation
27.6
20.1
25.0
4.6
9.1
10.0
Commodities
Currency risks ATP’s currency risks are, as a general rule, hedged in DKK and euros. However, a limit applies for the currency exposure to other currencies. This limit allows for the fact that hedging is not completely precise and that it may therefore be inexpedient to hedge some currencies. As a general rule, emerging market currency exposure is not hedged. ATP’s currency exposure as at 31 December 2014 Incl. hedging
ATP’s currency exposure as at 31 December 2013 Currency exposure DKKbn
Percent of investment portfolio
Currency
Incl. hedging
Currency exposure DKKbn
Percent of investment portfolio
Currency
EUR
208.3
29.1
EUR
118.0
20.2
USD
0.5
0.1
USD
0.0
0.0
(0.1)
0.0
Total other currencies
0.0
0.0
Currency exposure DKKbn
Percent of investment portfolio
Currency exposure DKKbn
Percent of investment portfolio
EUR
138.4
23.7
31.8
5.5
2.8
0.5
Total other currencies
Excl. hedging Currency
Excl. hedging Currency
EUR
209.5
USD
31.3
4.4
USD
2.7
0.4
Total other currencies
Total other currencies
29.2
The ATP Group Annual Report 2014
84
Note 18 Credit and counterparty risks The Group’s credit risks are associated, in part, with investments in the Credit risk class, in part with bonds, loans, receivables and cash and cash equivalents and, in part, with financial derivatives with a positive fair value.
As part of the ATP investment strategy, ATP actively assumes credit risks by investment in emerging market government bonds, corporate bonds, mezzanine capital and payment-in-kind notes. Credit risks associated with these investments are regarded as a separate risk class, Credit, to which separate limits apply.
ATP’s portfolios of government bonds and mortgage bonds involve a credit risk which, in the case of government bonds, is assessed as being close to zero, as ATP’s portfolio of government bonds consisted exclusively of German and domestic government bonds at year-end 2014, and, in the case of mortgage bonds, is assessed as being moderate. Moreover, ATP’s cash deposits with banks are subject to credit risk, which is assessed as being moderate.
Maximum credit exposure as at 31 December 2014 DKKbn 2014
2013
The Credit risk class
42
46
Mortgage bonds
84
73
Unlisted financial derivatives (before provision of collateral)
49
2
Unlisted financial derivatives (after provision of collateral)
0
0
Cash and cash equivalents
5
4
Other receivables
3
3
As at 31 December 2014, overdue loans and receivables are included in the Group’s loans and receivables at DKK 0m (2013: DKK 1m). At year-end 2014, impairment losses on receivables for the ATP Group amounted to DKK 25m (2013: DKK 28m). For ATP, impairment losses at year-end 2014 amounted to DKK 25m (2013: DKK 26m).
The ATP Group Annual Report 2013
85
Note 19 Liquidity risk Liquidity risk is the risk that the ATP Group will not have sufficient funds available to meet its contractual obligations when they fall due. Liquidity risk is associated, in particular, with hedging activities, but also with contribution payments, pension benefit payouts and payment of tax on pension savings returns.
The Group must at all times be able to meet requirements for paying liquidity or providing collateral in the form of bonds. ATP’s management of liquidity risk is based on calculations of liquidity needs and liquidity under various scenarios with related limits for how much liquidity ATP must be able to muster in the short term (five days) and the long term (one year). In addition, current cash budgets are prepared. The net liquidity effect on contribution payments and pension payouts over the year is stable. The Group’s cash reserves are comprised of cash and cash equivalents and other financial assets and unutilised credit facilities. Maturity analysis In the table below, the Group’s and ATP’s financial liabilities are broken down by contractual maturity including interest.
Financial liabilities 2014 Group
Over 20 years
Total
18,953
20,499
253,724
41,046
40,126
360,172
(43,347)
(22,093)
(19,627)
(106,448)
81,026
179,372
99,125
460,240
834,590
87
0
0
0
109
18,995
0
0
0
0
18,995
0-1 year
1-5 years
6-15 years 16-20 years
Financial derivatives, payments made
136,773
27,809
49,690
Financial derivatives, payments received
138,985
46,978
93,037
(2,212)
(19,169)
14,827 22
DKKm Derivative financial liabilities
Total derivative financial liabilities
Other financial liabilities Guaranteed benefits Provisions for claims outstanding Payables to credit institutions Income tax payable
4
0
0
0
0
4
Tax payable on pension savings returns
15,428
0
0
0
0
15,428
Other payables
14,230
71
318
0
0
14,619
Total other financial liabilities
63,506
81,184
179,690
99,125
460,240
883,745
Total
61,294
62,015
136,343
77,032
440,613
777,297
0-1 year
1-5 years
6-15 years 16-20 years
Over 20 years
Total
Financial derivatives, payments made
150,030
36,449
62,357
25,853
30,390
305,079
Financial derivatives, payments received
156,731
56,135
111,384
50,098
54,576
428,924
(6,701)
(19,686)
(49,027)
(24,245)
(24,186)
(123,845)
13,922
76,919
173,593
96,144
462,458
823,036
18
73
0
0
0
91
35,243
0
0
0
0
35,243
2013 Group DKKm Derivative financial liabilities
Total derivative financial liabilities
Other financial liabilities Guaranteed benefits Provisions for claims outstanding Payables to credit institutions Income tax payable
8
0
0
0
0
8
Other payables
11,206
84
13
0
0
11,303
Total other financial liabilities
60,397
77,076
173,606
96,144
462,458
869,681
Total
53,696
57,390
124,579
71,899
438,272
745,836
The ATP Group Annual Report 2014
86
Note 19 Liquidity risk, continued Over 20 years
Total
18,953
20,499
249,689
41,046
40,127
357,944
(43,347)
(22,093)
(19,628)
(108,255)
81,026
179,372
99,125
460,240
834,590
87
0
0
0
109
0
0
0
0
18,995
15,428
0
0
0
0
15,428
5,269
31
4
0
0
5,304
Payables to subsidiaries, payments made
26,845
0
0
0
0
26,845
Receivables from subsidiaries, payments received
(27,725)
0
0
0
0
(27,725)
Total other financial liabilities
53,661
81,144
179,376
99,125
460,240
873,546
Total
49,643
61,975
136,029
77,032
440,612
765,291
0-1 year
1-5 years
6-15 years 16-20 years
Over 20 years
Total
Financial derivatives, payments made
147,314
36,449
62,357
25,853
30,390
302,363
Financial derivatives, payments received
153,221
56,123
111,380
50,098
54,576
425,398
(5,907)
(19,674)
(49,023)
(24,245)
(24,186)
(123,035)
13,922
76,919
173,593
96,144
462,458
823,036
18
73
0
0
0
91
2014 ATP
0-1 year
1-5 years
6-15 years 16-20 years
Financial derivatives, payments made
132,738
27,809
49,690
Financial derivatives, payments received
136,756
46,978
93,037
(4,018)
(19,169)
14,827 22
Payables to credit institutions
18,995
Tax payable on pension savings returns
DKKm Derivative financial liabilities
Total derivative financial liabilities
Other financial liabilities Guaranteed benefits Provisions for claims outstanding
Other payables
2013 ATP DKKm Derivative financial liabilities
Total derivative financial liabilities
Other financial liabilities Guaranteed benefits Provisions for claims outstanding Payables to credit institutions
35,243
0
0
0
0
35,243
Other payables
10,483
49
3
0
0
10,535
Payables to subsidiaries, payments made
30,986
0
0
0
0
30,986
(29,397)
0
0
0
0
(29,397)
Total other financial liabilities
61,255
77,041
173,596
96,144
462,458
870,494
Total
55,348
57,367
124,573
71,899
438,272
747,459
Receivables from subsidiaries, payments received
The ATP Group Annual Report 2014
87
Note 20 Fair value disclosure This note discloses how the ATP Group determines the fair value of various financial assets and liabilities. Most of the Group’s financial assets and liabilities are measured at fair value. The table below shows how the fair value of various financial assets and liabilities is determined. Disclosures are not provided specifically for the ATP Parent Company. Apart from the size of amounts, these disclosures are identical to those of the Group. All fair value measurements disclosed are recurring value measurements.
Group 2014 Fair value as at 31 December 2014
Fair value hierarchy
Valuation method used
Unobservable inputs/ranges used
Fair value sensitivity to changes in unobservable inputs
502,677
1
Closing rates of relevant stock exchange
-
-
Bonds, observable inputs
13,037
2
Discounting to net present value using a relevant yield curve with the addition of a spread
Yields curves, spreads
-
Equity investments, listed
25,854
1
Closing rates of relevant stock exchange
-
-
Equity investments, unlisted
48,143
3
Reported fair value1
-
-
Equity investments, unlisted
4,098
3
Multiple analysis
Adjustment for lack of negotiability and uncertainty about the value of the underlying assets. Multiples are in the range of 1.0 to 12.3
A higher assessment of illiquidity and uncertainty, respectively, is reflected in a lower fair value
Mutual fund units
6,603
3
Reported fair value1
-
-
Financial derivatives, listed (net)
(1,830)
1
Closing rates of relevant stock exchange
-
-
Financial derivatives, unlisted (net)
48,621
2
Linear financial instruments (e.g. interest rate swaps) are valued using inputs of relevant curves, indices, spreads for calculating future payments and discounting using the relevant yield curve. For non-linear financial instruments, volatilities and methods reflecting applicable market practice for the valuation of these instruments are also used 2
Yields curves, spreads
-
5,142
3
Assessment of underlying companies’ credit quality.
Debtors’ earnings capacity and general financial performance.
A decrease in earnings capacity is reflected in decreasing credit quality.
Investments in associates
120
2
Reported fair value1
-
-
Investments in associates
8,181
3
Reported fair value1
-
-
Investments in associates
2,027
3
Determination of book value less adjustment of underlying assets.
Adjustment of underlying assets
Decreasing expected value of underlying assets results in a lower fair value
Investment properties
17,871
3
Return-based model. Reference is made to note 16 for a further description.
Required rates of return – 5.0 percent to 5.5 percent
If the required rate of return of 5.5 percent is increased by 0.25 percent (25 bps), the fair value of the Group’s investment properties is reduced by DKK 731m.
Receivables from credit institutions
55,835
2
Discounting to net present value using relevant yield curve
Yield curves
-
Payables to credit institutions
18,995
2
Discounting to net present value using relevant yield curve
Yield curves
-
DKKm
Bonds, listed
Loans to portfolio companies
1 Reported fair value based on reporting by relevant companies in which underlying assets and liabilities are valued at fair value. If the reporting date is different from the Group’s statement of financial position date, adjustment is made for significant changes in the market’s observable inputs and the quoted prices of underlying assets. 2
Financial derivatives are presented net (asset less liability), since disclosures are identical for assets and liabilities apart from amounts.
The ATP Group Annual Report 2014
88
Note 20 Fair value disclosure, continued Group 2013 Fair value as at 31 December 2013
Fair value hierarchy
Valuation method used
Unobservable inputs/ranges used
Fair value sensitivity to changes in unobservable inputs
458,463
1
Closing rates of relevant stock exchange
-
-
Bonds, observable inputs
2,622
2
Discounting to net present value using relevant yield curve with the addition of a spread
Yield curves, spreads
-
Equity investments, listed
18,816
1
Closing rates of relevant stock exchange
-
-
Equity investments, unlisted
4,156
2
Underlying investment in credit – fair value is determined by changes in market values (index) and using an externally provided loan tracker
Index and loan tracker
-
Equity investments, unlisted
41,419
3
Reported fair value1
-
-
Equity investments, unlisted
1,065
3
Market multiples for a peer group, reduced by an estimated factor for trading in an unlisted market.
Multiples, 1.58 to 1.73
Higher expected growth in earnings in the relevant entity than in the peer group will result in a higher multiple, and thus a higher fair value.
Mutual fund units
6,294
3
Reported fair value1
-
-
98
1
Closing rates of relevant stock exchange
-
-
Financial derivatives, unlisted (net)
5,632
2
Linear financial instruments Yield curves, (e.g. interest rate swaps) are valued spreads using inputs of relevant curves, indices, spreads for calculating future payments and discounting using the relevant yield curve. For non-linear financial instruments, volatilities and methods reflecting applicable market practice for the valuation of these instruments are also used 2
-
Loans to portfolio companies
1,402
3
Assessment of underlying companies’ credit quality.
Debtors’ earnings capacity and general financial performance.
A decrease in earnings capacity is reflected in decreasing credit quality.
Investments in associates
706
2
Reported fair value1
-
-
Investments in associates
6,961
3
Reported fair value1
-
-
Investments in associates
2,173
3
Market multiples for a peer group, reduced by an estimated factor for trading in an unlisted market.
Multiples, 1.2 to 0.64
Higher expected growth in earnings in the relevant entity than in the peer group will result in a higher multiple, and thus a higher fair value.
Investment properties
13,834
3
Return-based model. Reference is made to note 16 for a further description.
Required rates of return, 5.0 percent to 5.6 percent
If the required rate of return of 5.6 percent is increased by 0.25 (25 bps), the fair value of the Group’s investment properties is reduced by DKK 559m.
Receivables from credit institutions
56,251
2
Discounting to net present value using relevant yield curve
Yield curves
-
Payables to credit institutions
35,243
2
Discounting to net present value using relevant yield curve
Yield curves
-
DKKm
Bonds, listed
Financial derivatives, listed (net)
1 Reported fair value based on reporting by relevant companies in which underlying assets and liabilities are valued at fair value. If the reporting date is different from the Group’s statement of financial position date, adjustment is made for significant changes in the market’s observable inputs and the quoted prices of underlying assets. 2
Financial derivatives are presented net (asset less liability), since disclosures are identical for assets and liabilities apart from amounts.
The ATP Group Annual Report 2014
89
Note 20 Fair value disclosure, continued Financial instruments are recognised in the statement of financial position at fair value or amortised cost, see accounting policies for financial instruments in note 12. In the determination of fair value, the ATP Group uses a predefined hierarchy in IFRS 7, consisting of three levels of inputs. Level 1 – quoted prices: The market price of the financial instrument is used if an active market exists. The market price can be in the form of a quoted price or price quotation. Level 2 – observable inputs. If a financial instrument is listed on a non-active market, the valuation is based on the most recent transaction price. Adjustments are made for subsequent changes in market conditions. For some financial assets and liabilities, no actual market exists. The valuation of these assets and liabilities is made using an estimated value based on recent transactions in similar instruments. For financial derivatives, valuation techniques based on market conditions, e.g. yield curves and exchange rates, are widely used. Level 3 – unobservable inputs. The valuation of certain financial assets and liabilities is based substantially on unobservable inputs. For a significant portion of the Group’s equity investments and a small portion of the Group’s bond portfolio, valuation is based on unobservable inputs. Note 12 describes the individual valuation methods used to determine the fair value of these financial assets. Transfers between levels are assessed, as a minimum, at each closing of quarterly financial statements. For individual financial assets and liabilities, it is assessed whether the most significant input variables in connection with the fair value determination have changed, for example from unobservable to observable. If this is the case, the asset or liability is transferred out of the relevant level and into the new level from the time the input variables changed.
2014 Group Quoted Observable Unobservable prices inputs inputs
DKKm
Level 1
Level 2
Level 3
Total
502,677
13,037
0
515,714
25,854
0
52,241
78,095
0
0
6,603
6,603
191
116,534
0
116,725
Assets Bonds Equity investments Mutual fund units Financial derivatives Loans to portfolio companies
0
0
5,142
5,142
Investments in associates
0
120
10,208
10,328
Investment properties
0
0
17,871
17,871
Receivables from credit institutions
0
55,835
0
55,835
528,722
185,526
92,065
806,313
0
18,995
0
18,995
Financial derivatives
2,021
67,913
0
69,934
Total
2,021
86,908
0
88,929
Statement of financial Transfer position as at out of 31 December level 3 2014
Losses/ gains on assets held
Total
Liabilities Payables to credit institutions
There were no significant transfers between levels 1 and 2 in the 2014 financial year. For financial instruments measured at fair value using unobservable data (level 3), the movements for the year are as follows:
Assets
Equity investments
Statement of financial position as at 1 January 2014
Realised/ unrealised gains or losses for the period, recognised
Purchase
Sale
Transfer into level 3
42,484
5,104
9,593
(9,096)
4,156
0
52,241
6,342
Mutual fund units
6,294
1,771
1,641
(3,103)
0
0
6,603
1,771
Loans to portfolio companies
1,402
12
4,832
(1,104)
0
0
5,142
14
Investments in associates
9,134
651
701
(278)
0
0
10,208
697
Investment properties
13,834
(62)
4,284
(185)
0
0
17,871
50
Total
73,148
7,476
21,051
(13,766)
4,156
0
92,065
8,874
Transfers for the year out of level 2 into level 3 relate primarily to parts of the Group’s equity investments in credit where the valuation in 2014 is based exclusively on reported fair value. Losses and gains related to level 3 are recognised in the income statement in the items ‘Market value adjustments related to investment activities’ and ‘Market value adjustments related to hedging activities’.
The ATP Group Annual Report 2014
90
Note 20 Fair value disclosure, continued 2013 Group
Quoted Observable prices inputs
DKKm
Level 1
Level 2
457,672 18,816
Unobservable inputs Level 3
Total
3,413
0
461,085
4,156
42,484
65,456
0
0
6,294
6,294
630
43,435
0
44,065
Assets Bonds Equity investments Mutual fund units Financial derivatives Loans to portfolio companies
0
0
1,402
1,402
Investments in associates
0
706
9,134
9,840 13,834
Investment properties
0
0
13,834
Receivables from credit institutions
0
56,251
0
56,251
477,118
107,961
73,148
658,227
Total Liabilities Payables to credit institutions
0
35,243
0
35,243
Financial derivatives
532
37,803
0
38,335
Total
532
73,046
0
73,578
There were no significant transfers between levels 1 and 2 in the 2013 financial year. For financial instruments measured at fair value using unobservable data (level 3), the movements for the year are as follows:
Assets
Bonds Equity investments Mutual fund units Loans to portfolio companies Investments in associates Investment properties Total
Statement of financial position as at 1 January 2013
Realised/ unrealised gains or losses for the period, recognised Purchase
Statement of financial position Losses/gains as at 31 Transfer into Transfer out on assets December Sale level 3 of level 3 held 2013
24,258 44,154 6,748 762 7,221 11,587
(374) (1,696) 8 6 380 75
28 4,294 0 849 1,954 2,265
(14,532) (4,217) (462) (215) (421) (93)
0 0 0 0 0 0
(9,380) (51) 0 0 0 0
0 42,484 6,294 1,402 9,134 13,834
0 3,169 (214) 4 719 75
94,730
(1,601)
9,390
(19,940)
0
(9,431)
73,148
3,753
In 2013, transfers out of level 3 into level 2 related primarily to parts of the Group’s bond holdings. During 2013, this valuation was changed to being based primarily on observable inputs. Losses and gains related to level 3 are recognised in the income statement in the items ‘Market value adjustments related to investment activities’ and ‘Market value adjustments related to hedging activities’. 2014 ATP DKKm
Quoted Observable prices inputs
Unobservable inputs
Total
Level 1
Level 2
Level 3
483,866
4,333
0
17,473
0
20,031
37,504
191
116,466
0
116,657
Assets Bonds Equity investments Financial derivatives
488,199
Loans to portfolio companies
0
0
4,572
4,572
Investments in subsidiaries
0
0
78,842
78,842
Investments in associates
0
120
7,037
7,157
Investment properties
0
0
7,507
7,507
Receivables from credit institutions Total
0
55,835
0
55,835
501,530
176,754
117,989
796,273
Liabilities 0
18,995
0
18,995
Financial derivatives
Payables to credit institutions
279
67,890
0
68,169
Total
279
86,885
0
87,164
There were no significant transfers between levels 1 and 2 in the 2014 financial year. For financial instruments measured at fair value using unobservable data (level 3), the movements for the year are as follows: The ATP Group Annual Report 2014
91
Note 20 Fair value disclosure, continued
Assets
Equity investments Loans to portfolio companies Investments in subsidiaries Investments in associates Investment properties Total
Statement of financial Realised/ position unrealised gains as at or losses for the 1 January period, 2014 recognised 14,555 1,060 72,774 5,968 7,566 101,923
2,110 2 1,944 627 (284) 4,399
Purchase 5,522 4,609 19,188 507 225 30,051
Statement of financial position as at Losses/gains Transfer Transfer 31 December on assets Sale into level 3 out of level 3 2014 held (2,156) (1,099) (15,064) (65) 0 (18,384)
0 0 0 0 0 0
0 0 0 0 0 0
20,031 4,572 78,842 7,037 7,507 117,989
2,110 2 1,980 627 (284) 4,435
Losses and gains related to level 3 are recognised in the income statement in the items ‘Market value adjustments related to investment activities’ and ‘Market value adjustments related to hedging activities’. 2013 ATP DKKm
Quoted prices
Observable Unobservable inputs inputs
Level 1
Level 2
Level 3
Total
441,378
258
0
441,636
15,939
0
14,555
30,494
614
42,629
0
43,243
Loans to portfolio companies
0
0
1,060
1,060
Investments in subsidiaries
0
0
72,774
72,774
Investments in associates
0
706
5,968
6,674
Investment properties
0
0
7,566
7,566
Receivables from credit institutions
0
56,251
0
56,251
457,931
99,844
101,923
659,698
0
35,243
0
35,243
Financial derivatives
486
37,792
0
38,278
Total
486
73,035
0
73,521
Assets Bonds Equity investments Financial derivatives
Total
Liabilities Payables to credit institutions
There were no significant transfers between levels 1 and 2 in the 2013 financial year. For financial instruments measured at fair value using unobservable data (level 3), the movements for the year are as follows:
Assets
Bonds Equity investments Loans to portfolio companies Investments in subsidiaries Investments in associates Investment properties Total
Statement Realised/ of financial position unrealised gains or losses as at for the period, 1 January recognised 2013 23,486 14,787 497 73,961 4,220 7,421 124,372
(373) (957) 3 (1,737) 492 (14) (2,586)
Purchase 0 1,095 773 7,209 1,483 246 10,806
Statement of financial position as at Losses/gains Transfer Transfer out 31 December on assets of level 3 held Sale into level 3 2013 (14,532) (370) (213) (6,659) (227) (87) (22,088)
0 0 0 0 0 0 0
(8,581) 0 0 0 0 0 (8,581)
0 14,555 1,060 72,774 5,968 7,566 101,923
0 (881) 0 3,659 785 (13) 3,550
Transfers for the year out of level 3 into level 2 relate primarily to parts of the Group’s bond holdings. During 2013, this valuation was changed to being based primarily on observable inputs. Losses and gains related to level 3 are recognised in the income statement in the items ‘Market value adjustments related to investment activities’ and ‘Market value adjustments related to hedging activities’.
The ATP Group Annual Report 2014
92
Note 21 Disclosures about offsetting financial assets and liabilities This note contains disclosures about offsetting financial assets and liabilities for the ATP Group. The ATP Group does not use offsetting in connection with the settlement of financial liabilities. Thus, there is no difference between the columns ‘Recognised assets, gross’ and ‘Net amounts of financial assets presented in the statement of financial position’. The ATP Group extensively uses collateral provided to and from counterparties when entering into financial contracts. Net amounts thus indicate the exposure after provision of collateral. Disclosures are not provided specifically for the ATP Parent Company. These disclosures are identical to those of the Group.
Financial assets 2014 Group
Financial derivatives
Financial liabilities offset in the stateRecognised ment of finanassets, gross cial position
Net amounts of financial assets presented in the statement of financial position
Related amounts not offset in the statement of financial position
Financial instruments
Financial collateral
Net amounts
116,657
0
116,657
(64,931)
(51,726)
0
55,835
0
55,835
(12,443)
(43,392)
0
172,492
0
172,492
(77,374)
(95,118)
0
Recognised assets, gross
Assets offset in the statement of financial position
Net amounts of financial liabilities presented in the statement of financial position
Financial derivatives
68,169
0
Receivables from credit institutions
18,995
0
Receivables from credit institutions Total
Financial liabilities 2014 Group
Financial assets 2013 Group Recognised assets, gross
Financial liabilities offset in the statement of financial position
Related amounts not offset in the statement of financial position
Financial instruments
Financial collateral
Net amounts
68,169
(64,931)
(2,008)
1,230
18,995
(12,443)
(6,552)
0
Net amounts of financial assets presented in the statement of financial position
Related amounts not offset in the statement of financial position
Financial instruments
Financial collateral
Net amounts
Financial derivatives
44,065
0
44,065
(34,721)
(8,502)
842
Receivables from credit institutions
56,251
0
56,251
(24,281)
(31,297)
673
100,316
0
100,316
(59,002)
(39,799)
1,515
Recognised assets, gross
Assets offset in the statement of financial position
Net amounts of financial assets presented in the statement of financial position
Total
Financial liabilities 2013 Group
Related amounts not offset in the statement of financial position
Financial instruments
Financial collateral
Net amounts
1,313
Financial derivatives
38,335
0
38,335
(34,721)
(2,301)
Receivables from credit institutions
35,243
0
35,243
(24,281)
(10,202)
760
Total
73,578
0
73,578
(59,002)
(12,503)
2,073
The ATP Group Annual Report 2014
93
Note 22 Guaranteed benefits Group DKKm
Fair value as at 1 January
ATP
2014
2013
2014
2013
498,951
539,691
498,951
539,691
11,587
Change in provisions for the year: Contributions – of which transferred to bonus potential Pension benefits
9,049
11,587
9,049
(1,810)
(2,173)
(1,810)
(2,173)
(13,661)
(12,741)
(13,661)
(12,741)
Change due to life expectancy update Change due to change in discount rate Change due to bonus Change due to maturity reduction
(96)
2,465
(96)
2,465
102,304
(53,198)
102,304
(53,198)
2,772
2,472
2,772
2,472
10,439
11,186
10,439
11,186
361
(338)
361
(338)
Total change in provisions for the year
Other changes
109,358
(40,740)
109,358
(40,740)
Fair value as at 31 December
608,309
498,951
608,309
498,951
Change in provisions for the year, broken down by the Group’s and ATP’s activities: Hedging activities: Change due to maturity reduction Change due to change in discount rate
10,439
11,186
10,439
11,186
102,304
(53,198)
102,304
(53,198)
112,743
(42,012)
112,743
(42,012)
9,049
11,587
9,049
11,587
Pension activities: Contributions – of which transferred to bonus potential Pension benefits
(1,810)
(2,173)
(1,810)
(2,173)
(13,661)
(12,741)
(13,661)
(12,741)
Other changes Change in guaranteed benefits due to contributions and pension benefits
361
(338)
361
(338)
(6,061)
(3,665)
(6,061)
(3,665)
(96)
2,465
(96)
2,465
(6,157)
(1,200)
(6,157)
(1,200)
2,772
2,472
2,772
2,472
109,358
(40,740)
109,358
(40,740)
(76,587)
(57,206)
(76,587)
(57,206)
89,587
69,496
89,587
69,496
(19,802)
(15,644)
(19,802)
(15,644)
21,902
17,310
21,902
17,310
Change due to life expectancy update
Not allocated: Change due to bonus
Total Sensitivity disclosures: Change in provisions at the following changes: Interest rate increase of 1 percentage point Interest rate fall of 1 percentage point Mortality rate increase of 10 percent Mortality rate fall of 10 percent*
* In 2014, a 10 percent fall in the mortality rate was equivalent to a 1.1 year increase in life expectancy.
The ATP Group Annual Report 2014
94
Note 22 Guaranteed benefits, continued
!
§ Accounting policies Guaranteed benefits are calculated at the fair value of the Group's pension liabilities, i.e. the value in use of guaranteed benefits and rights (the pension commitment) assessed as a function of the current discount rate at the statement of financial position date. The discount rate is calculated in accordance with the provision basis reported to the Danish Financial Supervisory Authority, based on the zero coupon yield curve at the statement of financial position date, reflecting the term of the guaranteed benefits. The rate thus calculated has been reduced by the tax rate under the Danish Pension Savings Returns Act (Pensionsafkastbeskatningsloven), currently accounting for 15.3 percent.The determination of the discount rate is described in detail in note 1 ‘Significant accounting estimates and assessments‘.
The changes for the year in guaranteed benefits are allocated between hedging and pension activities. Changes related to changes in the market rate and changes in maturity reduction are recognised in hedging activities. Changes related to contribution payments for the year and pension benefit payouts for the year are recognised in pension activities. Other minor changes are also recognised in pension activities. In addition, changes due to life expectancy update are also recognised in pension activities. The life expectancy update comprises observed and expected future increases in life expectancy. Bonus is not allocated to the Group’s business areas.
! !
Significant accounting estimates
When assessing pension provisions, these provisions are calculated on the basis of customary actuarial assumptions, with the most significant assumptions relating to the discount factor being based on the discount rate specified and on life expectancies for ATP’s, see the section ’Risks and risk management’. These assumptions are assumed to reflect current market conditions.
Discount rate The discount rate curve is comprised of a zero-coupon yield curve, estimated using a recognised method, and a long-term required rate of return of 3 percent.The assets included in the estimation basis reflect the relevant currency denomination, maturity and liquidity. The percentage breakdown of the assets included in the estimation basis is as follows:
Interest rate swaps denominated in Danish kroner – 15% Interest rate swaps denominated in euros – 35% Domestic government bonds –
25%
German government bonds – 25%
The zero-coupon yield curve is estimated on the basis of buying and selling rates on the asset side of the breakdown above and determined on the basis of a specific set of maturities up to 30 years. The four input curves, weighted using the zero-coupon yields, are used for this purpose. Other points on the yield curve are determined by linear interpolation between the estimated points. For interest rate swaps denominated in Danish kroner (DKK), Danish CIBOR fixings and Danish swap rates are used. For interest rate swaps denominated in euros, EURIBOR fixings, euro forward rate agreements and euro swap rates against EURIBOR and EONIA are used. For domestic government bonds, yields on domestic government bonds with a term to maturity of more than two months are used. For German government bonds, yields on German government bonds with a term to maturity of more than two months are used.
From 40 years onwards, the required rate of return of 3 percent is used.
The table below shows selected points on the zero-coupon yield curve in 2014 and 2013.
Yield curve points 1 year
2014
2013
0.03%
0.19%
5 years
0.18%
1.08%
10 years
0.72%
2.12%
15 years
1.10%
2.60%
20 years
1.33%
2.81%
30 years
1.51%
2.87%
Inflation
0.09%
0.43%
The ATP Group Annual Report 2014
95
Note 23 Provisions for claims outstanding Group 2013
2014
2013
Fair value as at 1 January
91
91
91
91
Change in provisions for the year
18
0
18
0
109
91
109
91
Fair value as at 31 December
!
ATP
2014
DKKm
§ Accounting policies Provisions for claims outstanding are unpaid pension benefits due in respect of events having occurred during the financial year or earlier.
The ATP Group Annual Report 2014
96
Note 24 Bonus potential 2014 Group
DKKm Bonus potential as at 1 January Net results for the year
Revaluation reserve
Other
Retained earnings
Total
35
12
93,297
93,344
-
0
2,481
2,481
Other comprehensive income: Translation adjustments related to foreign subsidiaries
-
0
-
0
Revaluation reserve in respect of owner-occupied properties
6
0
-
6
Other
0
0
0
0
Total other comprehensive income
6
0
0
6
Comprehensive income for the year
6
0
2,481
2,487
41
12
95,778
95,831
Bonus potential as at 31 December
Under the bonus allocation principles reported to the Danish Financial Supervisory Authority, the bonus potential may be divided into one portion that may be used to increase guaranteed benefits and one portion that must be retained as unallocated bonus.
Bonus potential that could be used to increase guaranteed benefits
0
Bonus potential that must be retained as unallocated bonus
95,831
Total
95,831
2013 Group
DKKm Bonus potential as at 1 January Net results for the year
Revaluation reserve
Other
Retained earnings
Total
26
(1)
84,129
84,154
-
0
9,168
9,168
Other comprehensive income: Translation adjustments related to foreign subsidiaries
-
0
-
0
Revaluation reserve in respect of owner-occupied properties
9
0
-
9
Other
0
13
0
13
Total other comprehensive income
9
13
0
22
Comprehensive income for the year
9
13
9,168
9,190
35
12
93,297
93,344
Bonus potential as at 31 December
Bonus potential that could be used to increase guaranteed benefits
0
Bonus potential that must be retained as unallocated bonus
93,344
Total
93,344
The ATP Group Annual Report 2014
97
Note 24 Bonus potential, continued 2014 ATP Revaluation reserve
Other
Retained earnings
Total
35
0
93,309
93,344
-
0
2,481
2,481
Translation adjustments related to foreign subsidiaries
-
0
-
0
Revaluation reserve in respect of owner-occupied properties
6
0
-
6
Total other comprehensive income
6
0
0
6
Comprehensive income for the year
6
0
2,481
2,487
41
0
95,790
95,831
DKKm Bonus potential as at 1 January
Net results for the year
Other comprehensive income:
Bonus potential as at 31 December
Under the bonus allocation principles reported to the Danish Financial Supervisory Authority, the bonus potential may be divided into one portion that may be used to increase guaranteed benefits and one portion that must be retained as unallocated bonus.
Bonus potential that could be used to increase guaranteed benefits
0
Bonus potential that must be retained as unallocated bonus
95,831
Total
95,831
2013 ATP Revaluation reserve
Other
Retained earnings
Total
26
0
84,141
84,167
-
0
9,168
9,168
Translation adjustments related to foreign subsidiaries
-
0
-
0
Revaluation reserve in respect of owner-occupied properties
9
0
-
9
Total other comprehensive income
9
0
0
9
Comprehensive income for the year
9
0
9,168
9,177
35
0
93,309
93,344
DKKm Bonus potential as at 1 January
Net results for the year
Other comprehensive income:
Bonus potential as at 31 December
Bonus potential that could be used to increase guaranteed benefits
0
Bonus potential that must be retained as unallocated bonus
93,344
Total
93,344
The ATP Group Annual Report 2014
98
Note 24 Bonus potential, continued
!
§ Accounting policies ATP’s and the Group’s bonus potential are reserves that are not distributed to ATP’s members. The bonus potential is calculated at the amount equivalent to the carrying amount of total assets related to ATP less guaranteed benefits, provisions for claims outstanding and the sum of the carrying amount of ATP’s other liabilities. The reserves can be distributed as bonus. Bonus additions are transferred to guaranteed benefits over results and comprehensive income. Comprehensive income for the year is transferred to the bonus potential. Revaluations and reversal of revaluations of owner-occupied properties are recognised directly in the bonus potential over other comprehensive income. The bonus potential thus rises and falls with the size of the net results for the year and other comprehensive income.
Bonus policy The framework of ATP’s bonus policy is defined in section 18(3) of the ATP Act (ATP Loven), stipulating that the aim is to pursue a long-term bonus policy to ensure that the real value of pensions is preserved. The ATP Supervisory Board decides once a year whether to add bonus. This depends, among other things, on the size of the bonus rate. The bonus rate is defined as bonus potential relative to guaranteed benefits, see note 33. In 2013, the ATP Supervisory Board resolved to expand ATP’s indicative bonus policy with an option to increase pensions for current pensioners. If the bonus rate exceeds 10 percent, pensions for current pensioners can be increased. In 2014, the bonus potential was sufficient to adjust pensions at year-end by 1.5 percent for all current pensioners.
ATP’s individual reserve requirement based on the upcoming European Solvency II regulation for insurance companies was calculated at DKK 31.6bn as at 31 December 2014, see the section ‘Risks and risk management’.
Note 25 Provisions for unit-linked contracts Group DKKm
ATP
2014
2013
2014
2013
Provisions for unit-linked contracts, ATP Balance as at 1 January
180
183
180
183
Extraordinary payouts
(4)
(1)
(4)
(1)
Fees withdrawn from account holders
(2)
(2)
(2)
(2)
174
180
174
180
Balance as at 1 January
0
2,755
-
-
Return transferred from statement of comprehensive income
0
13
-
-
Transferred to ATP
0
(13)
-
-
Conversion to ATP pension – transferred to ATP
0
(2,755)
-
-
Provisions for SUPP as at 31 December
0
0
-
-
174
180
174
180
Provisions for unit-linked contracts as at 31 December
Provisions for unit-linked contracts, SUPP
Total provisions for unit-linked contracts
!
§ Accounting policies Deposits under the remaining contracts of the SP scheme (Special Pension Savings Scheme) transferred to ATP include contributions paid into the scheme by account holders with the addition of the accrual of returns for the year and less extraordinary payouts during the year, social security contributions and administration expenses incurred.
Deposits comprise provisions for remaining SP account holders which could not be disbursed as part of the automatic disbursement of SP funds in 2010. The provisions represent 62,000 remaining account holders. In 2014, DKK 4m was disbursed.Any funds undisbursed at the end of April 2015 will, by statute, accrue to ATP’s bonus potential.
At the beginning of 2013, provisions for SUPP unit-linked contracts were transferred to ATP as part of the conversion of SUPP savings to ATP pensions.
The ATP Group Annual Report 2014
99
Note 26 Intangible assets Group DKKm
2014
ATP 2013
2014
2013
Goodwill: Cost as at 1 January
214
0
0
0
Additions
0
214
0
0
Exchange rate adjustment
7
0
0
0
Cost as at 31 December
221
214
0
0
Impairment losses as at 1 January
(70)
0
0
0
Impairment losses for the year
(50)
(70)
0
0
Impairment losses as at 31 December
(120)
(70)
0
0
Carrying amount as at 31 December
101
144
0
0
1,326
Internal development projects in progress or completed Cost as at 1 January
1,331
1,337
1,319
Additions during the year
64
67
64
66
Disposals during the year
(138)
(73)
(138)
(73)
Cost as at 31 December
1,257
1,331
1,245
1,319
Amortisation as at 1 January
(708)
(536)
(698)
(526)
Amortisation and impairment losses for the year
(207)
(213)
(206)
(213)
84
41
84
41
(831)
(708)
(820)
(698)
426
623
425
621 1,326
Disposals during the year Amortisation as at 31 December Carrying amount as at 31 December Cost as at 1 January
1,545
1,337
1,319
Additions during the year
64
281
64
66
Disposals during the year
(138)
(73)
(138)
(73)
Exchange rate adjustment
7
0
0
0
1,478
1,545
1,245
1,319
Amortisation and impairment losses as at 1 January
(778)
(536)
(698)
(526)
Amortisation and impairment losses for the year
(257)
(283)
(206)
(213)
84
41
84
41
(951)
(778)
(820)
(698)
527
767
425
621
Cost as at 31 December
Disposals during the year Amortisation and impairment losses as at 31 December Carrying amount as at 31 December
!
§ Accounting policies Goodwill On initial recognition, goodwill is recognised in the statement of financial position at cost as described under acquisition of companies, see note 28. Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised. Internal development projects Clearly defined and identifiable development projects, for which the technical rate of utilisation, sufficient resources and a potential future market or application in the company can be demonstrated, and where the intention is to produce, market or use the project, are recognised as intangible assets, provided that the cost of these assets can be measured reliably and there is a sufficient degree of certainty of the future value in use. Other development costs are recognised in the income statement as incurred. Development costs include expenses, remunerations and amortisation attributable to the Group’s development activities.
Internal development projects are measured at cost less accumulated amortisation and impairment losses. Amortisation is provided on a straight-line basis over the estimated useful economic lives of the assets, typically from three to ten years. The useful economic lives of the assets are reviewed and adjusted, if appropriate, at each statement of financial position date.
The ATP Group Annual Report 2014
100
Note 26 Intangible assets, continued
! !
Significant accounting estimates
Impairment test for goodwill Goodwill As at 31 December 2014, the Supervisory and Executive Boards tested the carrying amount of goodwill for impairment needs, based on the allocation made of the cost of goodwill on cash-generating units.
Group
Goodwill
ATP
2014
2013
2014
2013
170
170
0
0
44
44
0
0
214
214
0
0
NOW: Pension Ltd.
57
100
0
0
Ejendomsselskabet Vangede A/S
44
44
0
0
101
144
0
0
NOW: Pension Ltd. Ejendomsselskabet Vangede A/S
Recoverable amount
The recoverable amount is determined as the higher of the value in use and the fair value less selling costs. The recoverable amount is based on the value in use, determined through use of expected net cash flows based on budgets approved by the Supervisory and Executive Boards.
Impairment tests of development projects and other assets Internal development projects in progress comprise primarily the tendering of the contract for IT systems relating to Udbetaling Danmark. The carrying amount of tendering of the contract for IT systems totalled DKK 103m as at 31 December 2014.
The objective of tendering the contract is to reduce IT expenses through procurement of operationally reliable and cost-effective business solutions.
The remaining carrying amount as at 31 December 2014 relates to a few part projects that have not yet been completed for operation.
In 2014, the Supervisory and Executive Boards conducted an impairment test of the carrying amount of development projects in progress. The assessment is that the recoverable value exceeds the carrying amount. The assessment of the recoverable amount is based on value in use calculations, determined through use of expected cash flows based on budgets for the years 2015-2019 as approved by the Supervisory and Executive Boards.
For other completed development projects, the Supervisory and Executive Boards have assessed the amortisation period determined. For a few projects, the Supervisory and Executive Boards have assessed that the value in use should be reduced, and, in addition, in 2014 impairment was provided for a few completed projects.
The ATP Group Annual Report 2014
101
Note 27 Owner-occupied properties Group DKKm
Cost as at 1 January
2013
2014
2013
816
805
792
783
Reclassification from/to investment properties
9
0
0
0
Additions during the year
9
11
5
9
Cost as at 31 December
834
816
797
792
Revaluations as at 1 January
35
26
28
23
Reclassification from/to investment properties
1
0
0
0
Revaluations for the year
6
9
6
5
Reversal of revaluations due to value adjustment
0
0
0
0
42
35
34
28
(30)
(26)
(28)
(25)
(4)
(4)
(4)
(3)
Amortisation and impairment losses as at 31 December
(34)
(30)
(32)
(28)
Fair value as at 31 December
842
821
799
792
Revaluations as at 31 December Amortisation and impairment losses as at 1 January Depreciation for the year
!
ATP
2014
§ Accounting policies Owner-occupied properties are properties used by the Group for administration purposes. Properties with elements of both owner-occupied properties and investment properties are allocated proportionately between the two asset types by square metre. Owner-occupied properties are recognised at cost and subsequently measured at fair value using a revaluation model. The fair value of owner-occupied properties is assessed using the principles applied to the Group’s investment properties, see note 16. Depreciation of owner-occupied properties is provided on a straight-line basis over the estimated useful economic lives of the assets. The depreciation periods have been determined at 50 years. No depreciation is provided for land. Revaluation at the statement of financial position date of property, plant and equipment from cost to fair value is recognised under the bonus potential as a revaluation reserve. Increases in the fair value of a property are recognised directly in the item ‘Revaluation reserve’ under bonus potential, unless the increase is offset by a corresponding decrease in value previously recognised in the income statement. A decrease in the fair value of a property is recognised in the income statement, unless the decrease is offset by a corresponding increase in value previously recognised directly in the item ‘Revaluation reserve’ under the bonus potential. In that case, the decrease in value is transferred directly as a reduction in the revaluation reserve.
The ATP Group Annual Report 2014
102
Note 28 Acquisition of companies
In 2014, the ATP Group acquired two companies in Denmark and Belgium, respectively. The ATP Group acquired two companies in 2013.
On 12 May 2014, the ATP Group acquired 90 percent of the shares of the property company Galaxy Properties SA. The payment totalled DKK 43.8m. As at 12 May 2014, the net assets acquired amounted to DKK 43.8m. As at 30 September 2014, the ATP Group acquired 100 percent of the shares in Ejendomselskabet Borups Allé P/S at a total price of DKK 21.3m.The net assets acquired amounted to DKK 21.3m. These acquisitions had no significant impact on the ATP Group’s income statement or statement of financial position, either individually or collectively. Had the companies acquired been owned by the ATP Group throughout the year, the Group’s income statement and statement of financial position would not have been significantly impacted either.
!
§ Accounting policies Newly acquired or newly formed companies are recognised in the consolidated financial statements from the date of acquisition and the date of formation, respectively. The date of acquisition is the time at which control of the company is actually acquired. Companies that are sold or disposed of are recognised in the consolidated statement of comprehensive income until the date of sale and disposal, respectively. On the acquisition of new companies at which the Group achieves a controlling interest in the acquired company, the purchase method is applied under which the identifiable assets, liabilities and contingent liabilities of the newly acquired companies are measured at fair value at the date of acquisition. The acquisition payment for a company is the fair value of the payment made for the acquired company. If the determination of the payment is conditional upon one or more future events, these events are recognised at the fair value thereof at the date of acquisition. Expenses related to the acquisition are recognised in the income statement when incurred.
A positive balance (goodwill) between, on the one hand, the acquisition payment for the acquired company and the fair value of equity investments previously acquired and, on the other hand, the fair value of the assets, liabilities and contingent liabilities acquired is recognised under intangible assets and tested for impairment at least once a year. If the carrying amount of the asset exceeds its recoverable amount, it is written down to the lower recoverable amount, see note 26.
Note 29 Operating leases Group DKKm
ATP
2014
2013
2014
2013
1,096
776
570
548
12
7
3
4
The Group as lessor: The Group acts as lessor for property leases. All leases are offered as operating leases. Assets are recognised in the Group’s and ATP’s statements of financial position under investment properties. Rental income for the year from property rental Subtenants are under contractual obligation for an average of (years) At the statement of financial position date, the Group had entered into leases under which future rental income is expected to be distributed as follows: Within 1 year
1,048
719
497
502
Between 1 and 5 years
2,805
1,647
981
1,184
After 5 years
4,645
514
269
428
Total rental income
8,498
2,880
1,747
2,114
The ATP Group Annual Report 2014
103
Note 30 Contingent liabilities and collateral Collateral The ATP Group provides and receives assets as collateral from clearing centres when entering into financial transactions. The ATP Group is entitled to sell or relend assets received. ATP’s counterparties are also entitled to sell or relend the assets received when the ATP Group provides assets as collateral. Assets provided as collateral continue to be recognised in the Group’s statement of financial position. Assets provided and received as collateral are specified in the table below: Group
ATP
2014
2013
2014
2013
Bonds
23,983
64,739
23,983
64,739
Total assets provided as collateral
23,983
64,739
23,983
64,739
Bonds
109,829
40,198
109,829
40,198
Total assets received as collateral
109,829
40,198
109,829
40,198
12,750
11,901
0
0
1,393
1,121
760
218
DKKm Assets provided as collateral:
Assets received as collateral:
Investment and loan commitments Investment commitments, equity investments and commitments made by ATP Private Equity Partners K/S Investment commitments, real estate funds Investment commitments, domestic properties
497
154
497
154
Investment commitments, infrastructure funds
2,203
2,033
2,203
2,033
Investment commitments, credit funds
2,182
1,612
645
27
Investment commitments, biotech companies
1,971
991
1,971
991
336
2,747
308
2,745
1,869
0
1,869
0
Investment commitments, unlisted equity investments Loan commitments, credit institutions
Other contingent liabilities Rental/lease obligations
422
365
415
354
Potential deferred tax related to properties1
170
123
0
0
1
Under certain conditions, the ATP Group is not subject to income tax on the activities of its subsidiaries ATP Ejendomme A/S and
Ejendomsselskabet Vangede A/S as of and including 2001. If the conditions for tax exemption are not met, provisions are made for both current and deferred tax in the company. In 2014, ATP Ejendomme A/S and Ejendomsselskabet Vangede A/S met the conditions for tax exemption. ATP has joint VAT registration with a number of subsidiaries. These subsidiaries are jointly and severally liable for the payment of VAT and payroll tax included in the joint registration for VAT.
!
§ Accounting policies Decisions regarding the accounting treatment of contingent assets and liabilities are based on an assessment of the expected outcome of the applicable contingency. If it is almost certain that a future economic benefit will flow to the ATP Group, the asset and the related income are recognised. If, on the other hand, it is probable that a future economic benefit will flow from the ATP Group when discharging the liability, the contingency is recognised as a liability. Where it is not possible to estimate an amount with sufficient certainty, or it is not possible to estimate the outcome of a given matter, information to this effect will be provided. Decisions relating to such matters may generate realised profits or losses in future accounting periods that exceed the amounts recognised in the financial statements.
The ATP Group Annual Report 2014
104
Note 31 Related party transactions The ATP Group Related parties of the ATP Group are associates and independent schemes managed by ATP. For an overview of associates, please refer to note 15. Members of the ATP Supervisory and Executive Boards and their close family members are also regarded as related parties. Enterprises in which these persons have a controlling or significant interest are also regarded as related parties. No one is considered to have a controlling or significant interest in the Group.
The Group has entered into the following related party transactions:
2014 DKKm
Associates
Sale
Purchase
Payables
Receivables/ Loans
Contingent liabilities
4,746
4,875
0
1,491
494
59
0
0
8
0
Independent schemes managed by ATP: AUB (the Employers’ Reimbursement System) (previously AER) FerieKonto
73
0
0
17
0
LG (the Employees’ Guarantee Fund)
98
0
0
44
0
AES (the Labour Market Occupational Diseases Fund)
53
0
0
8
0
Barsel.dk
31
0
0
4
0
791
0
0
124
0
SFS (Tax Reductions for Senior Citizens)
Udbetaling Danmark
10
0
0
1
0
FIB (Financing contributions)
13
0
0
1
0
5
0
0
1
0
5,879
4,875
0
1,699
494
Sale 1,730
Purchase 574
Payables 0
Receivables/ Loans 1,322
Contingent liabilities 652
71
0
0
5
0
Other Total related party transactions
2013 DKKm
Associates Independent schemes managed by ATP: AUB (the Employers’ Reimbursement System) (previously AER) FerieKonto
65
0
0
16
0
LG (the Employees’ Guarantee Fund)
66
0
0
8
0
AES (the Labour Market Occupational Diseases Fund)
62
0
0
8
0
Barsel.dk Udbetaling Danmark
34
0
0
3
0
882
0
0
123
0
SFS (Tax Reductions for Senior Citizens)
12
0
0
1
0
FIB (Financing contributions)
15
0
0
(1)
0
Other Total related party transactions
6
0
0
1
0
2,943
574
0
1,486
652
Sales to schemes comprise a number of administration functions, including accounting functions, IT operations and development and staff administration etc. These amounts are also set out in note 7. Related party transactions also comprise the statutory labour market pension for members of the ATP Supervisory and Executive Boards and their close family members, as well as enterprises in which these persons have significant interests. Overall payments to ATP in 2014 total DKK 0.0m (2013 DKK 0.0m) Transactions with associates comprise loans entered into and interest accrued which are settled on an arm’s length basis (market terms). Transactions with related parties are settled on a cost recovery basis for schemes. The transactions are subject contractual agreement with ATP. Remuneration details for the Supervisory and Executive Boards are set out in note 6.
The ATP Group Annual Report 2014
105
Note 31 Related party transactions, continued ATP Related parties of ATP are associates, subsidiaries and independent schemes managed by ATP. For an overview of associates and subsidiaries, please refer to notes 14 and 15.
Members of the ATP Supervisory and Executive Boards and their close family members are also regarded as related parties. Enterprises in which these persons have significant interests are also regarded as related parties.
ATP has entered into the following related party transactions:
2014 DKKm Sales *)
Purchases *)
Payables
Receivables/ Loans
Contingent liabilities
4,746
4,875
0
1,491
494
238,832
230,755
114
1,037
0
AUB (the Employers’ Reimbursement System) (previously AER)
59
0
0
8
0
FerieKonto
73
0
0
17
0
LG (the Employees’ Guarantee Fund)
98
0
0
44
0
AES (the Labour Market Occupational Diseases Fund)
53
0
0
8
0
Barsel.dk
31
0
0
4
0
791
0
0
124
0
SFS (Tax Reductions for Senior Citizens)
10
0
0
1
0
FIB (Financing contributions)
13
0
0
1
0
5
0
0
1
0
239,711
235,630
114
2,736
494
Sales *)
Purchases *)
Payables
Receivables/ Loans
Contingent liabilities
1,730
574
0
1,322
652
200,068
201,652
875
84
0
AUB (the Employers’ Reimbursement System) (previously AER)
71
0
0
5
0
FerieKonto
65
0
0
16
0
LG (the Employees’ Guarantee Fund)
66
0
0
8
0
AES (the Labour Market Occupational Diseases Fund)
62
0
0
8
0
Associates Subsidiaries Independent schemes managed by ATP:
Udbetaling Danmark
Other Total related party transactions
2013 DKKm
Associates Subsidiaries Independent schemes managed by ATP:
34
0
0
3
0
882
0
0
123
0
SFS (Tax Reductions for Senior Citizens)
12
0
0
1
0
FIB (Financing contributions)
15
0
0
(1)
0
6
0
0
1
0
203,011
202,226
875
1,570
652
The ATP Group Annual Report 2014
106
Barsel.dk Udbetaling Danmark
Other Total related party transactions
Note 31 Related party transactions, continued * Internal sales and purchases include administration services, interest and internal forward exchange transactions.
Sales to subsidiaries and schemes comprise a number of administration functions, including accounting functions, IT operations and development and staff administration etc. These amounts are also set out in note 7. Sales to subsidiaries also comprise hedging activities undertaken by ATP on behalf of subsidiaries.
Related party transactions also comprise the statutory labour market pension for members of the ATP Supervisory and Executive Boards and their close family members, as well as enterprises in which these persons have a controlling or significant interest.
Overall payments to ATP in 2014 total DKK 0.0m (2013 DKK 0.0m)
Transactions with associates comprise loans entered into and interest accrued which are settled on an arm’s length basis (market terms).
Related party transactions are settled on an arm’s length basis (market terms) or, in the case of subsidiaries and schemes, on a cost recovery basis. The transactions are subject contractual agreement with ATP.
Remuneration details for the Supervisory and Executive Boards are set out in note 6.
No one is considered to have a controlling interest in the Parent Company.
!
§ Accounting policies Related party transactions are settled on an arm’s length basis (market terms) or, in the case of subsidiaries and schemes, on a cost recovery basis. Transactions are subject to contractual agreement between the Group’s companies.
The ATP Group Annual Report 2014
107
Note 32 Non-current and current assets and liabilities Group
ATP
2014
2013
2014
2013
527
767
425
621
19
47
16
41
842
821
799
792
Investment properties
17,871
13,834
7,507
7,566
Investments in associates
10,328
9,840
7,157
6,674
-
-
78,842
72,774
DKKm
Non-current assets: Intangible assets Operating equipment Owner-occupied properties
Investments in subsidiaries Income tax and deferred tax Deferred tax on pension savings returns Total non-current assets
11
6
-
-
0
5,326
0
5,326
29,598
30,641
94,746
93,794
Current assets: Cash and demand deposits
5,234
3,786
2,033
2,958
515,714
461,085
488,199
441,636
78,095
65,456
37,504
30,494
6,603
6,294
0
0
116,725
44,065
116,657
43,243
Other loans
0
4
0
0
Income tax and deferred tax
1
5
-
-
Tax receivable on pension savings returns
0
40
0
40
Contributions receivable
2,408
2,235
2,408
2,235
Loans to portfolio companies
5,142
1,402
4,572
1,060
Loans to subsidiaries
-
-
2,755
0
Receivables from subsidiaries
-
-
1,037
84
55,835
56,251
55,835
56,251
2,827
983
1,719
709
766
727
760
721
4,633
4,554
4,208
4,272
Total current assets
793,983
646,887
717,687
583,703
Total assets
823,581
677,528
812,433
677,497
Bonds Equity investments Mutual fund units Financial derivatives
Receivables from credit institutions Other receivables Other prepayments Interest receivable and accrued rent
The Group’s and ATP’s assets are broken down by expected maturity.
The ATP Group Annual Report 2014
108
Note 32 Non-current and current assets and liabilities, continued Group
ATP
2014
2013
2014
2013
593,692
485,165
593,692
485,165
95,831
93,344
95,831
93,344
174
180
174
180
70
69
-
-
109
4
-
-
689,876
578,762
689,697
578,689
14,617
13,786
14,617
13,786
109
91
109
91
-
-
114
875
Financial derivatives
69,934
38,335
68,169
38,278
Tax payable on pension savings returns
15,428
0
15,428
0
3
8
-
-
18,995
35,243
18,995
35,243
DKKm
Non-current liabilities: Guaranteed benefits Bonus potential Provisions for unit-linked contracts Income tax payable and deferred tax Minority interests Total non-current pension provisions and liabilities
Current liabilities: Guaranteed benefits Provisions for claims outstanding Payables to subsidiaries
Income tax payable and deferred tax Payables to credit institutions Other payables
14,619
11,303
5,304
10,535
Total current liabilities
133,705
98,766
122,736
98,808
Total liabilities
823,581
677,528
812,433
677,497
The Group’s and ATP’s liabilities are broken down by expected maturity.
The ATP Group Annual Report 2014
109
Note 33 Five-year summary for ATP Financial highlights (DKKm) Contributions Pension benefits Return on investment Pension-related operating expenses Technical profit Net results for the year
2014
2013
2012
2011
2010
9,049
11,587
8,554
8,602
8,293
13,661
12,741
11,903
11,080
10,170
116,752
(30,109)
48,552
105,792
71,370
300
310
325
327
318
2,466
9,156
10,098
4,007
5,046
2,481
9,168
10,104
4,000
5,042
95,831
93,344
84,167
74,135
70,010
Pension provisions
704,423
592,566
624,132
579,321
476,220
Total assets
812,433
677,497
791,076
775,534
757,896
4,901
4,839
4,783
4,732
4,678
944
915
879
838
795
Return before tax on pension savings returns (percent)
23.3
(5.7)
9.9
26.2
17.2
Return after tax on pension savings returns (percent)
19.8
(4.8)
8.4
22.3
14.6
Expense ratio for contributions
3.3
2.7
3.8
3.8
3.8
Expense ratio for provisions
0.1
0.1
0.1
0.1
0.1
Expenses per member (DKK)
62
65
68
69
68
15.8
18.7
15.6
14.7
17.2
23.3
(5.7)
9.9
26.2
17.2
Bonus potential
Members (number in thousands) Pensioners (number in thousands)
Ratios
Return ratios
Expense ratios
Other ratios Bonus rate (percent) Return on pension provisions before tax on pension savings returns (percent)
Note: The five-year summary for ATP has been prepared in accordance with the format requirements of the Danish Financial Supervisory Authority in line with the methods of accounting used by other pension providers in Denmark. Consequently, the return on investment and the return ratios etc. deviate from ATP’s format, which is IFRS-compliant.
The ATP Group Annual Report 2014
110
Note 34 Breakdown of ATP’s assets and their returns at market value
Carrying amount
Net investment
Return p.a. before tax on pension savings returns
DKKm
percent
31.12.2014 DKKm Beginning of year Land and buildings directly owned
End of year
8,358
8,306
0
(0.6)
Property companies
17,112
18,527
717
9.7
Total land and buildings
25,470
26,833
717
6.3
Other subsidiaries
33,693
32,499
(450)
14.9
Listed domestic equity investments
15,425
17,110
(1,611)
23.4
Unlisted domestic equity investments
2,483
5,481
3,760
10.6
Listed foreign equity investments
3,124
2,891
(332)
13.9
Unlisted foreign equity investments
10,367
12,919
698
17.6
Total other equity investments
31,399
38,401
2,515
19.8
359,324
409,232
(9,188)
20.6
72,080
74,942
3,977
0.3
Index-linked bonds
1,545
1,109
(485)
6.7
Credit bonds, investment grade
8,581
2,644
(6,274)
10.8
Credit bonds, non-investment grade, and emerging markets bonds
16,165
19,111
0
18.2
Other bonds
11,806
14,953
4,129
(5.1)
Total bonds
469,501
521,991
(7,841)
16.6
Other financial investment assets
5,556
5,151
6,271
(5.1)
Financial derivatives entered into for the purpose of hedging the net change of assets and liabilities
3,300
52,981
729
-
568,919
677,856
1,941
23.3
Government bonds (Zone A) Mortgage bonds
Total investment assets
The breakdown includes financial derivatives at a negative market value of DKK 38,278m at year-end 2013 and DKK 68,169m at year-end 2014, respectively.
The ATP Group Annual Report 2014
111
Note 35 ATP’s risk factors and their impact on the bonus potential (after tax) Impact on assets
Impact on guaranteed benefits
Total impact on the bonus potential
DKKbn
DKKbn
DKKbn
Interest rate increase of 0.7 percentage points
(49.8)
(55.3)
5.5
Interest rate decrease of 0.7 percentage points
59.5
61.8
(2.4)
Event 2014
Equity price fall of 12 percentage points
(8.3)
-
(8.3)
Property price fall of 8 percentage points
(2.1)
-
(2.1)
Exchange rate change with 1 percent probability over 10 days
(0.1)
-
(0.1)
Counterparty loss of 8 percentage points
(3.9)
-
(3.9)
4.6
4.6
0.0
(0.7)
-
(0.7)
Country spread risk Commodity price fall of 18 percentage points Mortality rate fall of 10 percent
-
21.9
(21.9)
Mortality rate increase of 10 percent
-
(19.8)
19.8
Note: The impact on assets and the value of guaranteed benefits, as well as the overall impact on the bonus potential are calculated for each event. The impact of each event in the table is calculated based on a ceteris paribus consideration on the basis of the closing statement of financial position as specified in the financial statements. It is assumed that the individual events occur as events with immediate effect.
The ATP Group Annual Report 2014
112
Note 36 ATP’s equity investments broken down by sector and region
Denmark
Other Europe
North America
Other countries
Total
Energy
0.0
0.0
0.0
0.0
0.0
Materials
1.3
0.0
0.0
0.0
1.3
Industrials
4.4
0.0
0.0
0.0
4.4
Consumer durables
1.4
0.0
0.0
0.0
1.4
Consumer goods
1.1
0.0
0.0
0.0
1.1
Health care
5.3
0.7
0.0
0.0
6.0
Finance
2.5
0.1
0.0
0.0
2.6
IT
0.4
0.0
0.0
0.0
0.4
Telecommunications
0.1
0.0
0.0
0.0
0.1
Utilities
0.0
0.0
0.0
0.0
0.0
Not broken down
52.0
15.2
13.7
1.8
86.7
Total
68.5
16.0
13.7
1.6
100.0
2014 percent
‘Not broken down’ for Rest of Europe includes futures exposure of DKK 1,241m and options exposure of DKK 11,973m.
The ATP Group Annual Report 2014
113
Specification: Breakdown of the investment portfolio by risk class and development in the Interest Rate portfolio Breakdown of the investment portfolio by risk class, year-end 2014
DKKbn Portfolio
Interest Rates
Credit
Equities
Inflation
Commodities
3.9
23.0
57.5
100.2
4.4
Note: The portfolio of the individual risk classes is expressed in terms of exposure. Exposure is the sensitivity of the risk class to changes in asset prices relative to the primary factor of the respective asset or underlying asset. However, the Interest Rates portfolio is expressed in terms of 10-year German government bonds. If the risk in Interest Rates is expressed in terms of the risk on German government bonds with a term to maturity of 10 years, the Interest Rates portfolio is thus equivalent to a portfolio of German government bonds totalling DKK 3.9bn.
The Interest Rates portfolio expressed in terms of 10-year German government bonds during the period from 31 December 2013 to If the risk in Interest Rates is expressed in terms of the risk on German government bonds with a term to maturity of 10 years, on the date specified the Interest Rates portfolio was equivalent to a portfolio of German government bonds as specified:
DKKbn Interest Rates
31 December 2014
30 September 2014
30 June 2014
31 March 2014
31 December 2013
3.9
14.3
28.5
33.4
28.0
The ATP Group Annual Report 2014
114
Supervisory Board Chairman Chairman of the Supervisory Board Jørgen Søndergaard
Employer representatives
Employee representatives
Chairman
President
Torben Dalby Larsen
Harald Børsting
Deputy Director General
Vice President
Kim Graugaard
Lizette Risgaard
Director-General
Director
Jørn Neergaard Larsen
Jan Walther Andersen
Member of the Supervisory Board
President
Anne Broeng
Kim Simonsen
Chief Risk and Compliance Officer
President
Anne Jæger
Bente Sorgenfrey
Mayor
President
Martin Damm
Finn R. Larsen
The ATP Group Annual Report 2014
115
Board of Representatives Chairman: Jørgen Søndergaard, Chairman of the Supervisory Board Employer representatives
Employee representatives
Appointed by the Confederation of Danish Employers
Appointed by the Danish Confederation of Trade Uni-
(DA):
ons (LO):
Torben Dalby Larsen, Chairman; Kim Graugaard, Deputy Director General; Jørn Neergaard Larsen, Director-General;
Harald Børsting, President; Lizette Risgaard, Vice President;
Lise Bardenfleth, Chief Consultant; Charlotte Vester, Deputy
Jan Walther Andersen, Director; Ole Wehlast, President;
Director; Berit Vinther, Deputy Director General; Steen Müntz-
Claus Jensen, President; Per Christensen, President; Jørgen
berg, Deputy Director; Pernille Knudsen, Deputy Director;
Juul Rasmussen, President; Kim Simonsen, President, Lone
Camilla Khokhar, Deputy Director; Anne Broeng, Member of
Engberg Thomsen, President; Benny Andersen, President
the Supervisory Board Appointed by the Salaried Employees’ and Civil SerAppointed by the Danish Minister of Finance:
vants’ Confederation (FTF):
Anne Jæger, Chief Risk and Compliance Officer
Bente Sorgenfrey, President; Kent Petersen, President; Jens Kragh; Director
Appointed by Danish Regions: Bent Hansen, President of Danish Regions
Appointed by the Danish Association of Managers and Executives (LH):
Appointed by Local Government Denmark (LGDK):
Svend Askær
Hanne Bæk Olsen, Deputy Mayor; Martin Damm, Mayor
Appointed by the Danish Confederation of Professional Associations (Akademikerne):
Appointed by the Danish Employers' Association for
Finn R. Larsen, President
the Financial Sector (FA): Mariane Dissing, CEO
The ATP Group Annual Report 2014
116
Executive Committee, Audit Committee, Executive Board and Appeals Board Executive Committee Jørgen Søndergaard (Chairman) Jørn Neergaard Larsen Harald Børsting Audit Committee Jørgen Søndergaard (Chairman) Jørn Neergaard Larsen Harald Børsting Executive Board Chief Executive Officer (CEO): Carsten Stendevad Members of the Group Executive Board: Lilian Mogensen, COO, Processing Business and HR Henrik Gade Jepsen, CIO, Pensions & Investments Bo Foged, Chief Financial Officer
Appointed actuary: Chresten Dengsøe
Appeals Board The Appeals Board for ATP etc. Ved Stranden 8, DK-1061 Copenhagen K
The ATP Group Annual Report 2014
117
Other directorships held by members of the Supervisory Board Jørgen Søndergaard, Chairman of the Supervisory Board Seniority: joined the Supervisory Board in 2003 – current term expires in 2015 Other directorships: Chairman of LG (the Employees’ Guarantee Fund) Chairman of the Supervisory Board of AES (the Labour Market Occupational Disease Fund) Vice Chairman of the Supervisory Board of Psykiatrifonden Employer representatives Torben Dalby Larsen, Chairman Seniority: joined the Supervisory Board in 2011 – current term expires in 2017 Other directorships: Chairman of the Confederation of Danish Employers (DA) Managing Director of Sjællandske Medier A/S Editor-in-Chief of DAGBLADET, Frederiksborg Amts Avis, Nordvestnyt and Sjællandske. Chairman of the Supervisory Board of the wholly-owned subsidiaries of Sjællandske Medier Chairman of the news agency Dagbladenes Bureau Chairman of Vestsjællandske Distriktsblade A/S Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Member of the Supervisory Board of PFA Pension A/S Member of the Supervisory Board of the Danish Broadcasting Corporation (DR). Member of the Supervisory Board of the Danish Newspapers’ and Media Employers’ Association Member of the Supervisory Board of Roskilde Mediecenter K/S and A/S Kim Graugaard, Deputy Director General Seniority: joined the Supervisory Board in 2003 – current term expires in 2015 Other directorships: Deputy Director General of the Confederation of Danish Industries (DI) Chairman of TekSam Vice Chairman of the Supervisory Board of Industriens Pension Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Member of the Supervisory Board of the Confederation of Danish Employers (DA) Member of the Supervisory Board of ESS, European Spallation Source Judge of the Industrial Court Jørn Neergaard Larsen, Director-General Seniority: joined the Supervisory Board in 1996 – current term expires in 2017 Other directorships: Director-General of the Confederation of Danish Employers (DA) Vice Chairman of the Supervisory Board of PFA Pension A/S, independent, qualified member of the Audit Committee of PFA Pension A/S Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Anne Broeng, Member of the Supervisory Board Seniority: joined the Supervisory Board in 2014 – current term expires in 2016 Other directorships: Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Member of the Supervisory Board of VKR Holding A/S Member of the Supervisory Board and Chairman of the Audit Committee of NNIT A/S Member of the Supervisory Board of Købmand Herman Sallings Fond Member of the Supervisory Board of F. Salling Holding A/S Member of the Supervisory Board of F. Salling Invest A/S Member of the Supervisory Board of Bikubenfonden Martin Damm, Mayor Seniority: joined the Supervisory Board in 2012 – current term expires in 2016 Other directorships: Mayor of Kalundborg municipality President of Local Government Denmark (LGDK) Member of the Supervisory Board of Kalundborg Trade Council Member of the Supervisory Board of LG (the Employees’ Guarantee Fund)
Employee representatives Harald Børsting, President Seniority: joined the Supervisory Board in 2007 – current term expires in 2015 Other directorships: President of the Danish Confederation of Trade Unions (LO) Chairman of the Supervisory Board of LD (the Employees’ Capital Pension Fund) Chairman of the Supervisory Board of A/S A-Pressen Chairman of the Supervisory Board of the AKF foundation Chairman of the Supervisory Board of Højstrupgård A/S Member of the Supervisory Board of Fagbevægelsens Erhvervsinvestering A/S Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Member of the Supervisory Board of Arbejdernes Landsbank Member of the Supervisory Board of Metroselskabet Lizette Risgaard, Vice President Seniority: joined the Supervisory Board in 2007 – current term expires in 2015 Other directorships: Vice President of the Danish Confederation of Trade Unions (LO) Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Member of the Supervisory Board of LD (the Employees' Capital Pension Fund) Member of the Supervisory Board of Højstrupfonden Member of the Supervisory Board of Højstrupgård A/S Member of the Supervisory Board of ALKA Forsikring (insurance) Member of the Supervisory Board of the Economic Council of the Labour Movement (ECLM) Member of the Board of Representatives of Arbejdernes Landsbank Member of the Danish Environmental Economic Council Jan Walther Andersen, Director Seniority: joined the Supervisory Board in 2014 – current term expires in 2017 Other directorships: Vice Chairman of Forvaltningsinstituttet for Lokale Pengeinstitutter Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Member of the Supervisory Board of AL Finans A/S Member of the Supervisory Board of Bankpension (pension fund for employees in the financial sector) Member of the Supervisory Board of Bank//Pension Livs- og Pensionsforsikringsselskab A/S Member of the Supervisory Board of BI Holding A/S Kim Simonsen, President Seniority: joined the Supervisory Board in 2010 – current term expires in 2016 Other directorships: Chairman of ALKA Forsikring Chairman of Forbrugsforeningen af 1886 Chairman of Knudemosen A/S Chairman of Refshaleøens Ejendomsselskab Chairman of Fonden LO-skolen Chairman of Hotel Christiansminde a/s Chairman and Director of ASX7 Aps, Svendborg Vice Chairman of Sampension Administrationsselskab a/s Member of the Supervisory Board of AKF-Holding Member of the Supervisory Board of A-Pressen Member of the Supervisory Board of Copenhagen Business Academy Member of the Supervisory Board of Erhvervsskolen Nordsjælland Member of the Supervisory Board of Young Enterprise Danmark Member of the Supervisory Board of Nordisk Investeringsdepot Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Finn R. Larsen Seniority: joined the Supervisory Board in 2014 – current term expires in 2015 Other directorships: Chairman of the Danish Confederation of Professional Associations (Akademikerne) Vice Chairman of Lån og Spar bank Member of the Supervisory Board of LG (the Employees’ Guarantee Fund)
Anne Jæger, Chief Risk and Compliance Officer Seniority: joined the Supervisory Board in 2014 – current term expires in 2017
Bente Sorgenfrey, President Seniority: joined the Supervisory Board in 2004 – current term expires in 2017
Other directorships: Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Member of the Supervisory Board of Codan Fonden
Other directorships: President of the Salaried Employees’ and Civil Servants’ Confederation (FTF) Vice Chairman of UCSJ – University College Zealand Member of the Supervisory Board of LD (the Employees’ Capital Pension Fund) Member of the Supervisory Board of LG (the Employees’ Guarantee Fund) Member of the Board of Directors of Danmarks Nationalbank (central bank) Member of the Supervisory Board of Lån & Spar Bank A/S
The ATP Group Annual Report 2014
118
General Management
ATP is an independent, statutory institution, managing the ATP Pension Scheme.
It is the task of the Executive Committee to make decisions and to prepare and implement Supervisory Board resolutions as authorised by the procedures adopted by the Super-
ATP is managed by a Board of Representatives, a Supervi-
visory Board. The Executive Committee has the authority
sory Board and a Chief Executive Officer (CEO). The com-
to make a range of decisions, especially pertaining to in-
position of the ATP Board of Representatives and Supervi-
vestment and employment conditions. The Executive Com-
sory Board is determined by law. The CEO is appointed by
mittee convenes once a month and also handles the tasks
the Supervisory Board. The Board of Representatives com-
assigned to the Remuneration Committee. The tasks of the
prises fifteen employer representatives, fifteen employee re-
Remuneration Committee are to prepare Supervisory Board
presentatives and a Chairman appointed by the Board of
decisions on remuneration, including pay policy and other
Representatives. The Chairman may not be affiliated with
related decisions that may influence the company’s risk ma-
any employer or employee organisations. The Board of Re-
nagement.
presentatives ordinarily convenes once a year. The Supervisory Board comprises six employer representatives, six
The Supervisory Board has appointed an Audit Committee,
employee representatives and the Chairman of the Board
consisting of the Chairman of the ATP Supervisory Board
of Representatives. The Supervisory Board ordinarily con-
and two other Board members. The Chairman of the Su-
venes six times a year. The members of the Board of Repre-
pervisory Board is the Chairman of the Audit Committee.
sentatives and the Supervisory Board are appointed by the
The Audit Committee has been appointed to assist the Su-
Danish Minister for Employment – upon the recommendati-
pervisory Board in fulfilling its oversight responsibilities re-
on of the social partners. The Chairman and the other mem-
lating to the financial reporting process with a view to en-
bers of the Supervisory Board and the Board of Represen-
suring the reliability, integrity and transparency of financial
tatives are appointed for three-year terms and are eligible
reports. The ATP Audit Committee ordinarily convenes four
for reappointment. No age limit applies.
times a year. The Audit Committee’s Terms of Reference are determined by the Supervisory Board.
The ATP Supervisory Board has appointed a three-member Executive Committee – consisting of the Chairman and two Supervisory Board members, appointed by the employer and employee representatives of the Supervisory Board.
For further information on the Group’s corporate governance and incentive schemes, please visit www.atp.dk
The ATP Group Annual Report 2014
119
For further information on the ATP Group’s Annual Report, /About ATP/Reports and reports/Annual and interim reports/ATP Group/ Further information 2014
GENERAL MATTERS Risk • Corporate Governance in the ATP Group
• The traffic light system of the Danish Financial Supervisory Authority: Red-light exposures
• Recommendations on corporate governance Value creation • Terms of reference of the Audit Committee
• Definition of value creation ratios
• Procedures of the Executive Committee
Supplementary accounting specifications • Breakdown of the ATP Group’s listed domestic and
REMUNERATION
foreign equities, year-end 2014
• Pay Policy for the Supervisory and Executive Boards, significant risk takers etc. at the Danish Labour Market Supplementary Pension Fund (ATP).
• Breakdown of the ATP Group’s private domestic equities in which the ATP Group’s ownership exceeds 5 per cent • Breakdown of the ATP Group’s private foreign equities in
OTHER INFORMATION
relation to which the Group’s ownership exceeds 5 per cent
Financial calendar • Interim and annual reporting 2015
• The ATP Group’s pension provisions, calculated using the discount rates applied by ATP and the Danish Financial Supervisory Authority, at year-end 2014
Investment and hedging activities • ATP’s 10 largest listed equity investments, year-end 2014
• The ATP Group’s pension provisions, calculated using the discount rates applied by ATP and the Danish Financial Supervisory Authority, at the end of H1 2014
• ATP’s largest private equity investments, year-end 2014 Responsibility • Breakdown of the ATP Group’s portfolio of government bonds, broken down by issuer country, year-end 2014 • The 10 largest single issuers in ATP’s portfolio of credit bonds, year-end
• Report on Social Responsibility in Investments • Communication on Progress to the UN Global Compact (www.atp.dk/About ATP/Results and reports/Responsibility reports/2014).
• Financial instruments used by ATP
The ATP Group Annual Report 2014
120
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