NORWAY - Kommunal Landspensjonskasse (KLP), the insurer that covers 95% of municipal and county pension provision in Norway, will stay a mutual after a proposed move to demutualise failed by one vote in its general assembly.
Yesterday’s vote, which would have converted the KLP to a limited liability company, received only 89 votes, one shy of the 90 it required to meet the two thirds majority of 136 general assembly representatives, said Ole Jacob Frich, executive vice president at KLP. The KLP’s board favoured converting the mutual into an LLC.
“About one third of the people that were against it wanted to keep KLP as a company that is governed by the customers,” he said. “They still wanted it as a mutual company.”
After the first vote on demutualisation failed, the assembly then voted on proposal that would have an alternative that would have turned KLP members’ equity into primary capital certificates (PCC), a Norwegian hybrid instrument in which certificate holders are paid dividends rather than coupon payments. The vote to convert the equity into PCCs only garnered around one third of the vote, Frich said.
The failure to demutualise will not affect the insurer’s financial situation, which is currently in surplus, Frich said. KLP’s board will discuss the failed vote at its next board meeting in May.
Frich attributed some of the vote’s failure to politics. While the centre-right government’s health minister responsible for hospitals instructed the hospital representatives to the general assembly to support the demutualisation vote, the Labour Party, which held its own general assembly in April, came out against the proposal, Frich said. Local politicians make up 55 of the KLP’s general assembly, he added.
Had the demutualisation vote passed, shares would have been distributed to the owners based on paid up equity and earned equity, which was NOK3.4bn (e417m) at the end of 2004. Had they converted to a PCC, the paid up equity would have been converted to equity, which was NOK2bn (e245m) at the end of 2004, according to the KLP.
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