Annual Report 2011 - Skanska

NotePension obligations2011 2010January 1 11,961 12,381Pensions earned during the year 518 511Interest on obligations 563 526Benefits paid by employers –218 –204Benefits paid from plan assets –205 –209Reclassifications 14Actuarial gains (–), losses (+) during the year 2,006 –367Curtailments and settlements –116Exchange rate differences 64 –575Pension obligations, present value 14,689 11,961Plan assets28Continued2011 2010January 1 10,809 10,163Expected return on plan assets 620 585Funds contributed by employers 383 402Funds contributed by employees 8 12Benefits paid –205 –209Reclassifications 14Actuarial gains (+), losses (–) during the year –587 393Exchange rate differences 56 –551Plan assets, fair value 11,084 10,809Amounts contributed are expected to total about SEK 400 M during 2012 throughpayments to funds in Norway and the United Kingdom.Reconciliation of interest-bearing pension liability2011 2010Pension liabilities, January 1 1,152 2,218Pension expenses 453 440Benefits paid by employers –218 –204Funds contributed by employers –383 –402Actuarial gains (–) , losses (+) during the year 2,593 –760Curtailments and settlements –116Exchange rate differences 8 –24Net liability according to statement of financial position 3,605 1,152Actuarial assumptionsSweden NorwayUnitedKingdom2011Discount rate, January 1 4.75% 4.00% 5.25%Discount rate, December 31 3.50% 4.25% 4.75%Expected return on plan assets forthe year 5.25% 5.75% 6.00%- of which equities 6.50% 7.25% 7.25%- of which interest-bearing securities 3.00% 4.00% 4.75%Expected pay increase, December 31 3.75% 3.75% 3.75%Expected inflation, December 31 2.00% 2.25% 3.00%2010Discount rate, January 1 3.75% 4.25% 5.25%Discount rate, December 31 4.75% 4.00% 5.25%Expected return on plan assets forthe year 5.25% 6.00% 6.00%- of which equities 6.75% 7.50% 7.25%- of which interest-bearing securities 3.25% 5.00% 4.75%Expected pay increase, December 31 3.75% 3.75% 3.75%Expected inflation, December 31 2.00% 2.25% 3.00%Life expectancy after age 65, men 23 18 years 22 yearsLife expectancy after age 65, women 25 21 years 25 yearsLife expectancy table 1 PRI K2005 PA921 Life expectancy is based on local life expectancy tables in each respective country. If life expectancyincreases by one year, pension obligation is expected to increase by about 4 percentEffective from 2011, defined-benefit plans in Sweden are calculated according tothe PRI life expectancy table. In the preceding year, the DUS06 table was used. Thismeans that life expectancy for men in Sweden increased by about 3 years and forwomen by about 2 years.All three countries where Skanska has defined-benefit plans have an extensivemarket for high-grade long-term corporate bonds, including mortgage bonds. Thediscount rate is established on the basis of the market yield for these bonds on theclosing day.Expected return on interest-bearing securities is established on the basis of marketyields on the closing day for long-term government bonds in each respective country.For current holdings of high-grade corporate bonds, a risk premium of about 1.75 percentis added. For the equities market as a whole, a risk premium of 3 percent is added.This premium is adjusted to the risk profile of each respective equities market.Sensitivity of pension obligation to change in discount rateSweden NorwayUnitedKingdom TotalPension obligations, December 31, 2011 6,916 2,594 5,179 14,689Discount rate increase of 0.25% 1 –300 –125 –250 –675Discount rate decrease of 0.25% 1 300 125 250 6751 Estimated change in pension obligation/liability if the discount rate changes. If pension liabilityincreases, the Group’s equity is reduced by about 75 percent of the increase in pension liability,after taking into account deferred tax and social insurance contributions.Sensitivity of plan assets to changed returnSweden NorwayUnitedKingdom TotalPlan assets, December 31, 2011 3,545 2,746 4,793 11,084Return increase of 5% 1 175 125 250 550Return decrease of 5% 1 –175 –125 –250 –5501 If actual return increases by 5 percent in relation to expected return, the actuarial gain isestimated at about SEK 550 M. If actual return decreases by 5 percent in relation to expectedreturn, the actuarial loss is estimated at about SEK 550 M.148 Notes, including accounting and valuation principles Skanska Annual Report 2011