Munkaþverárkirkja í Eyjafirði
STAPI PENSION FUND FINANCIAL STATEMENTS
F I N A N C I A L S TAT E M E N T S 2 0 1 7
Independent auditorsreport report Independent auditors To the Board of Directors and members of Stapi Pension Fund Opinion We have audited the enclosed annual accounts of Stapi Pension Fund for the year 2017. The annual accounts contain an overview of developments in net assets regarding pension payments, a balance sheet, a cash flow statement, a statement of actuarial position, information on main accounting policies and other explanatory notes. In our opinion, the accompanying financial statements give a true and fair view of the financial position of Stapi Pension Fund as at 31 December 2017, and its financial performance and its cash flows for the year then ended in accordance with the Icelandic Financial Statement Act and the Regulation on the Annual Financial Statements of Pension Funds. Basis for the opinion The audit was carried out in accordance with international auditing standards. Our responsibilities according to those standards are outlined in further detail in the section below on auditors’ responsibilities. We are independent of Stapi Pension Fund as stipulated by the code of practice applicable to auditors in Iceland and we have complied with the provisions of the code. We feel that we have, during the auditing process, acquired sufficient and relevant documentation on which to base our opinion. Other sources of information The fund’s Board of Directors and Managing Director are responsible for other sources of information which include the Report by the Board of Directors and Declaration on Management Practices. Our opinion with regard to the annual accounts does not extend to other sources of information and we neither draw conclusions nor provide confirmation as to the content of these, with the exception of the confirmation presented below, regarding the Board of Directors’ Report. In relation to our auditing, we are responsible for the reading of other sources of information indicated above and examining whether these significantly disagree with the annual accounts or the knowledge we have acquired during the auditing process or contain significant errors in other respects. If we conclude, on the basis of work we have carried out, that other sources of information contain significant errors, we are obliged to report such knowledge. In this respect, we have nothing to report. In accordance with the provisions of Paragraph 2, Article 104 of Act No. 3/2006 on Annual Accounts we confirm that, to the best of our knowledge, the Report by the Board of Directors enclosed with these annual accounts provides the information required according to the Act on Annual Accounts, in addition to explanations presented in the notes section of the accounts. Responsibilities of the Board of Directors and MD regarding annual accounts The Board of Directors and Managing Director are responsible for the implementation and presentation of the annual accounts in accordance with the Act on Annual Accounts. Furthermore, the Board of Directors and MD assume responsibility for the necessary internal controls in relation to the implementation and presentation of the annual accounts, in such a manner that they contain no significant flaws, whether through fraud or error. During the compilation of the annual accounts, the Board of Directors and MD are responsible for assessing the situation of Stapi Pension Fund as a going concern. If applicable, the Board of Directors and MD shall present relevant comments as to operational feasibility and as to why the decision was taken to apply the criterion of operational feasibility in the compilation and presentation of the annual accounts, unless the Board of Directors and MD have decided to dissolve the fund and wind up its operation or have no other realistic options.
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Auditor’s Responsibilities for the Audit of the Financial Statements Our objective is to give reasonable assurance that the annual accounts are free of significant flaws, whether due to fraud or error and to issue an endorsement comprising our opinion. Reasonable assurance, however, is no guarantee that an audit carried out in accordance with international auditing standards will reveal all significant errors which may exist. Flaws or errors may be caused inadvertently or through fraudulence and are regarded as significant if they can, separately or collectively, influence the financial decision-making of the users of the annual accounts, Our auditing complies with international auditing standards and is based on professional judgment and an approach of professional scepticism in the auditing process. In addition, we carry out the following operations: •
We analyse and assess the risk of a significant flaw in the annual accounts, whether this be by mistake or fraud; we design and implement auditing measures to respond to such risks and acquire sufficient and relevant auditing evidence on which to base our opinion. The risk of failing to spot a significant flaw due to fraud is greater than that of not spotting an error by mistake, since fraud may involve conspiracy, forgery, obfuscated presentation of annual accounts, items being deliberately omitted or internal controls bypassed.
•
We familiarise ourselves with internal controls relating to auditing, for the purpose of designing suitable auditing methods, but not for the purpose of presenting an opinion on the effectiveness of internal controls.
•
We assess whether the accounting methods used, and related notes, are appropriate and whether management’s assessment of accounting practices is realistic.
•
We draw conclusions regarding management’s use of the criterion of “going concern” and we assess, on the basis of our auditing, whether there is any significant doubt as to operational feasibility and whether conditions exist which could cause serious reservations with regard to the fund’s ability to continue as a going concern. If we feel there is serious uncertainty as to operational feasibility it is our duty to draw special attention to relevant notes in our endorsement of the annual accounts. Should such notes be unsatisfactory, we must withhold unreserved endorsement. Nevertheless, future events or circumstances may cause uncertainty as to the fund’s situation as a going concern.
•
We assess whether the annual accounts provide a clear picture of underlying business transactions and events; we assess the presentation, structure and content of the annual accounts, including attached notes, with regard to clarity and coherence.
We are obliged to inform the Board of Directors and the auditing committee on the estimated scope and timing of the audit, among other things, as well as important points brought up during the auditing process, including serious shortcomings with regard to internal controls revealed by the audit, if applicable. We have, furthermore, declared to the Board of Directors and the auditing committee that we have complied with the code of practice regarding independence and we have provided them with information on connections or other matters which could possibly affect our independence and, where applicable, what precautions we have taken to ensure our independence. Akureyri, 26 March 2018 Deloitte ehf. Aðalsteinn Sigurðsson State Authorized Public Accountant
Hólmgrímur Bjarnason State Authorized Public Accountant
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Report by the Board of Directors
Report by the Board of Directors
Stapi Pension Fund operates in accordance with the Pension Act, No. 129/1997, on mandatory insurance of pension rights and on activities of pension funds. The fund’s operation is authorised by the Ministry of Finance in compliance with Article 52 of the aforementioned Act. The objective of the fund is to guarantee its members, as well as their surviving spouses and children, a pension according to the fund’s Articles of Association. The fund comprises three separate sections, a mandatory division and voluntary division and a specially designated voluntary division. Below are some main items of information relating to operating year, anticipated evolution of the fund and a declaration on management practice The year 2017 was a reasonably favourable operational year for Stapi Pension Fund. Return on the fund’s assets was above target performance, mainly thanks to the positive performance of the fund’s assets in Icelandic and foreign bonds – approximately 26% of the fund’s assets are in foreign currencies. The fund’s actuarial position was slightly strengthened during the year; it is negative by 0.9%, whereas this had been negative by 1.5% at the end of 2016. In collective bargaining agreements between the Icelandic Confederation of Labour and the Confederation of Icelandic Employers certain measures are stipulated to co-ordinate entitlements between the state and general labour market. In part, those measures comprised a stepwise increase in employers’ matching contributions during the contractual period, which involved an authorisation to transfer the matching contributions to a specially designated voluntary division. According to this arrangement, pension funds were required to establish a new division, a specially designated voluntary division, with which Stapi complied by altering its Articles of Association at an extraordinary Annual Meeting in June 2017. The Board of Directors expects the fund’s operation to remain stable during the next few years. It is anticipated that return on investments will be match growing future liabilities and that the fund’s system of entitlements will ensure a balance between the two. The Board of Directors has passed a special statement on administrative practices which is enclosed with this annual account. In accordance with amendments to the Act on Annual Accounts in June 2016 entities relevant to public interest shall provide the necessary information to assess their development, scope, status and impact on the environment, social and human resource issues, human rights policies, measures to prevent bribery and corruption, as well as presenting a brief résumé of the company’s business model etc. The fund’s strategies and achievements in those matters are outlined in Appendix I with the annual accounts. Fund membership and contributions In the year 2017 a total of 21,356 fund members working for 3,135 employers paid contributions to the fund’s mandatory division. The year’s total contributions amounted to ISK 9,777 million. Contributions to the mandatory division were ISK 9,509 million, increasing by 14.3% from the previous year and contributions to the voluntary division grew by 6.6% compared to the previous year, totalling ISK 251 million. The number of active members who generally make regular monthly contributions to the fund was 14,486 in the mandatory division, 728 in the voluntary division and 265 in the specially designated voluntary division. Pension disbursements The mandatory division’s total pension disbursements during the year amounted to ISK 5,156 million, rising by 7.8% from the previous year. Individual retirement pension plans were ISK 3,555 million, disability benefits amounted to ISK 1,323 million, spouse pensions were ISK 235 million and child benefits were ISK 43 million. Disbursements from the voluntary division amounted to a total of ISK 120 million. The total number of pensioners at end of year was 9,059.
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Operating expenses The fund’s operating expenses in 2017 amounted to ISK 392 million. Operating expenses as a proportion of assets came to 0.19%. Full-time equivalent units were 15 during the year, and total payroll expenses were ISK 192 million.
Assets and return on investments The mandatory division’s net assets available for benefits were ISK 199,419 million and increased by 9.7% compared to the previous year. The division’s nominal return on investments was positive by 7.0% and real return amounted to 5.2%. The net assets of the voluntary division amounted to ISK 5,416 million, increasing by 9.4% from the previous year. The voluntary division offers three investment options: the deposit portfolio, the conservative portfolio and the dynamic portfolio; the net real return of those portfolios, respectively, totalled 2.4%, 6.2% and 5.3% during the year. The net assets of the specially designated voluntary division were ISK 16 million at the end of year. Actuarial position An actuarial audit has been carried out with respect to the fund’s mandatory division at end of year 2017. The year’s actuarial performance was positive by ISK 1,672 million, and the fund’s actuarial position at end of year was negative by ISK 3,021 million, or 0.9% of the fund’s liabilities. The Board of Directors and the CEO of Stapi Pension Fund hereby ratify and endorse with their signatures the fund’s annual accounts for the year 2017.
Board of Directors: Akureyri, 26 March 2018
Members of Board of Directors Huld Aðalbjarnardóttir
Erla Jónsdóttir
Sverrir Mar Albertsson
Ágúst Torfi Hauksson
Tryggvi Jóhannsson
Kristín Halldórsdóttir
Þórarinn Sverrisson
Valdimar Halldórsson
Managing Director Jóhann Steinar Jóhannsson
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Statement of changes changesininnet netassets assets pension payments in 2017 Statement of forfor pension payments in 2017 Expl.
2017
2016
2,972,109 6,805,249 (28,588) 9,748,770 442,080
2,769,374 5,786,133 (92,189) 8,463,319 378,335
10,190,850
8,841,654
5,276,120 68,070 7,217 (1,418)
4,930,325 65,669 5,274 (1,813)
5,349,989
4,999,455
4,575,613 9,105,099 (19,992) 55,953 (15,573) 37,150 151 (66,325)
(1,435,959) 5,288,928 0 82,573 2,666 32,495 2,662 (49,126)
13,672,076
3,924,239
Contributions Fund members' contributions ........................................................ Employers' contributions ............................................................... Transfer of entitlements and repayments ..................................... Special additional contributions ....................................................
3
Pensions Total pensions ................................................................................ Contribution to vocational rehabilitation fund .............................. Direct costs relating to disability pensions .................................... Retirement pensions from Institute of Social Security ..................
4 5
Net investment income Net income from holdings in companies and funds ...................... Net income from bonds ................................................................. Net income from investments in residental housing ..................... Interest income from tied bank deposits ....................................... Interest income from cash in hand ................................................ Interest income from contributions and other claims ................... Other investment income .............................................................. Cost of investments .......................................................................
6 7
8
Operating expenses Office and administration expenses ..............................................
9
392,937
327,358
Other income (expenses) ...........................................................
12
37,640
(17,882)
Change in net assets for pension payments Net assets from previous year .......................................................
18,157,640 186,692,846
7,421,196 179,271,650
Net assets for pension payments at end of year
204,850,486
186,692,846
Amounts are in thousands of ISK 90
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Balance sheet Balance sheet31 31December December2017 2017 Expl.
12/31/2017
12/31/2016
89,695,253 108,270,166 1,145,300 1,032,866
81,550,857 97,621,585 1,389,578 0
200,143,584
180,562,021
1,183,071 38,549 1,221,620
1,058,174 34,815 1,092,989
185,156
57,600
3,360,549
5,414,284
204,910,908
187,126,894
Trade payables Other liabilities ...............................................................................
60,422
434,048
Total liabilities
60,422
434,048
204,850,486
186,692,846
Assets Investments Holdings in companies and funds .................................................. Bonds ............................................................................................. Tied bank deposits ......................................................................... Investments in residential housing ................................................
10 11
Claims Claims against employers .............................................................. Other claims ...................................................................................
Various assets Property, plant and equipment
14
Cash in hand .............................................................................. Total assets Liabilities
Net assets for pension payments Off-balance sheet liabilities
16
Amounts are in thousands of ISK F I N A N C I A L R E PO RT
2017
91
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Cash flow 2017 Cash flow 2017 2017
2016
9,623,873 213,015 442,080
8,201,104 482,701 378,335
10,278,968
9,062,140
Payouts Pensions .........................................................................................
5,276,120
4,930,325
Operating expenses ....................................................................... Investment Ă tangible assets .......................................................... Other payouts ................................................................................
388,701 131,792 134,257
325,508 0 42,028
5,930,870
5,297,862
Increase in disposable cash for investment ...............................
4,348,097
3,764,278
Investing activities Proceeds from holdings in companies and funds .......................... Purchased holdings in companies and funds ................................. Proceeds from sold holdings in companies and funds ................... Principal and interest instalments on bonds ................................. Purchased bonds ............................................................................ Proceeds from sale of bonds ......................................................... Reimbursed tied deposits .............................................................. Purchased residental housing ........................................................ Cost of residental housing .............................................................
895,586 (28,566,039) 24,097,203 8,176,486 (22,743,451) 12,679,181 303,495 (1,032,866) (19,992)
2,049,673 (29,813,929) 24,141,974 7,341,284 (32,847,546) 20,186,874 857,723 0 0
(6,210,396)
(8,083,948)
Increase (decrease) of cash and cash equivalents ......................
(1,862,298)
(4,319,671)
Exchange difference of cash and cash equivalents .....................
(191,437)
(447,540)
Cash in hand at beginning of year ..............................................
5,414,284
10,181,495
Cash in hand at end of year ........................................................
3,360,549
5,414,284
Incoming payments Contributions ................................................................................. Paid-in interest on cash in hand and claims .................................. Other pay-ins .................................................................................
Amounts are in thousands of ISK 92
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Financial ratios Financial ratios 2017
2016
2015
2014
2013
Mandatory division: Net assets in excess of liabilities ........................................................... Net assets in excess of accruing liabilities ............................................. Net real return *)....................................................................................
-0.92% -1.05% 5.21%
-1.54% -3.18% -0.13%
0.42% -0.62% 9.18%
-3.83% -7.07% 5.18%
-4.66% -8.06% 0.80%
Average of net real return during the past 5 years *).............................. Average of net real return during the past 10 years *)............................
3.99% 1.22%
3.76% 0.62%
4.00% 1.35%
3.24% 1.71%
1.35% 2.38%
Proportional allocation of investments: Listed ownership interests in companies and funds ............................... Listed bonds ........................................................................................... Listed ownership interests in companies and funds ............................... Unlisted bonds ....................................................................................... Tied bank deposits ................................................................................. Investments in residential housing .........................................................
34.2% 50.5% 10.7% 3.6% 0.6% 0.5%
34.8% 51.1% 10.3% 3.0% 0.8% 0.0%
35.1% 49.4% 12.1% 2.1% 1.3% 0.0%
30.6% 52.6% 13.2% 2.0% 1.6% 0.0%
23.0% 60.4% 12.4% 2.2% 1.9% 0.0%
Proportional division of investments according to currencies Assets in Icelandic kronur ISK ................................................................ Assets in foreign currencies ....................................................................
74% 26%
76% 24%
75% 25%
73% 27%
75% 25%
Number of active fund members: .......................................................... Number of fund members at end of year: ............................................. Number of pensioners: ..........................................................................
14,486 87,292 9,059
13,903 85,711 8,559
13,348 87,446 8,094
13,073 85,856 7,603
12,757 84,214 7,155
Proportional division of pensions: Retirement pensions .............................................................................. Disability pensions .................................................................................. Spouse pensions ..................................................................................... Child benefits .........................................................................................
68.9% 25.7% 4.6% 0.8%
67.4% 26.9% 4.7% 0.9%
65.6% 28.4% 4.9% 1.0%
65.5% 28.1% 5.3% 1.1%
65.9% 27.5% 5.6% 1.0%
Full position equivalents: ........................................................................
15.0
14.0
13.5
13.5
12.4
Total contributions (at constant prices) .................................................. Total pensions (at constant prices) ......................................................... Total net investment income (at constant prices) *) .............................. Office and administrative costs (at constant prices) ............................... Increase (decrease) of net assets (at constant prices) ...........................
9,946,157 5,230,020 13,327,525 366,845 17,676,817
8,842,481 4,934,163 3,825,783 308,451 7,425,649
8,072,778 4,722,611 18,771,704 271,667 21,850,204
7,390,752 4,397,520 9,555,589 280,708 12,268,113
7,101,603 3,997,146 6,719,575 254,199 9,710,322
Pension burden ......................................................................................
52.6%
55.8%
58.5%
59.5%
56.3%
Office and administrative costs (total) as a % of contributions ...............
3.7%
3.5%
3.4%
3.8%
3.6%
Net investment income as a % of mean asset position *) .......................
7.3%
2.1%
10.9%
6.1%
4.5%
Office and administrative costs as a % of mean asset position ...............
0.19%
0.17%
0.16%
0.18%
0.17%
*) Financial ratios, investment income and asset position have been recalculated in accordance with new auditing practice. Net real return is calculated from net investment income less operating costs and other expenses. When calculating net investment income as a percentage of mean asset position, other expenses have been subtracted from investment income. Constant prices are based on changes in the consumer price index.
Amounts are in thousands of ISK F I N A N C I A L R E PO RT
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Financial ratios Financial ratios 2017
2016
2015
2014
2013
Voluntary division: Net real return - Deposit portfolio........................................................... Net real return - Conservative portfolio.................................................. Net real return - Dynamic portfolio.........................................................
2.44% 6.15% 5.34%
2.55% 1.33% -0.20%
2.69% 7.87% 8.05%
2.84% 4.72% 6.90%
2.84% 4.29% 4.09%
Mean net real return of past 5 years - Deposit portfolio......................... Mean net real return of past 5 years - Conservative portfolio................. Mean net real return of past 5 years - Dynamic portfolio.......................
2.67% 4.85% 4.80%
2.68% 4.44% 4.95%
2.75% 5.07% 4.95%
3.43% 6.23% 5.31%
4.67% 7.46% 6.20%
Mean net real return of past 10 years - Conservative portfolio............... Mean net real return of past 10 years - Dynamic portfolio..................... Voluntary division, all portfolios: Proportional allocation of investments Listed ownership interests in companies and funds ............................... Listed bonds ........................................................................................... Tied bank deposits .................................................................................
6.56% 5.99%
6.61% 5.99%
7.71% 7.42%
8.14% 8.77%
8.73% 9.34%
48.9% 47.9% 3.2%
45.1% 51.3% 3.6%
33.2% 62.6% 4.2%
44.0% 50.4% 5.5%
39.7% 48.4% 11.9%
Proportional division of investments according to currencies Assets in Icelandic kronur (ISK) ............................................................... Assets in foreign currencies ....................................................................
73.1% 26.9%
84.2% 15.8%
78.3% 21.7%
77.6% 22.4%
74.9% 25.1%
Net investment income as a % of mean asset position ........................... Office and administrative costs as a % of mean asset position ...............
7.4% 0.5%
3.0% 0.5%
9.7% 0.5%
7.3% 0.5%
8.1% 0.5%
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STAPI lífeyrissjóður
Strandgötu 3, 600 Akureyri
Egilsbraut 25, 740 Neskaupstað
Sími 460 4500
www.stapi.is