Review of 2012 – EUR - Skanska

28NoteContinuedPension obligations2012 2011January 1 1,647.3 1,327.1Pensions earned during the year 71.5 57.4Interest on obligations 68.4 62.4Benefits paid by employers –26.9 –24.1Benefits paid from plan assets –34.1 –22.7Actuarial gains (–), losses (+) during the year 40.4 222.2Curtailments and settlements –3.3Exchange-rate differences 60.6 25.2Pension obligations, present value 1,823.8 1,647.3Plan assets2012 2011January 1 1,243.0 1,199.3Expected return on plan assets 60.5 68.7Funds contributed by employers 50.7 42.4Funds contributed by employees 0.8 0.9Benefits paid –34.1 –22.7Actuarial gains (+), losses (–) during the year 34.0 –65.0Exchange-rate differences 45.3 19.5Plan assets, fair value 1,400.3 1,243.0Amounts contributed are expected to total about EUR 93.2 M in 2013.Reconciliation of interest-bearing pension liability2012 2011Pension liabilities, January 1 404.3 127.8Pension expenses 78.5 50.2Benefits paid by employers –26.9 –24.1Funds contributed by employers –50.7 –42.4Actuarial gains (–), losses (+) during the year 6.4 287.2Curtailments and settlements –3.3Exchange-rate differences 15.2 5.7Net pension liability according to the statement offinancial position423.5 404.3Actuarial assumptionsSweden NorwayUnitedKingdom2012Financial assumptionsDiscount rate, January 1 3.50% 4.25% 4.75%Discount rate, December 31 3.00% 4.00% 4.50%Expected return on plan assets forthe year 4.00% 4.50% 5.00%of which equities 5.00% 6.00% 6.00%of which interest-bearing securities 1.50% 3.00% 4.00%Expected pay increase, December 31 3.50% 3.50% 3.50%Expected inflation, December 31 1.75% 2.00% 2.75%2011Financial assumptionsDiscount 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%Demographic assumptionsLife expectancy after age 65, men 23 years 18 years 22 yearsLife expectancy after age 65, women 25 years 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 percent.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 was fixed up to and including 2012on the basis of market yields on the closing day for long-term government bondsin each respective country. For current holdings of high-grade corporate bonds, arisk premium of about 1.75 percent is added. For the equities market as a whole, aswell as alternative investments, a risk premium of 3 percent is added. This premium isadjusted to the risk profile of each respective equities market.The rules and regulations for IAS 19 were changed with effect as of January 1,2013. This means that as of 2013, the expected percentage yield will correspond tothe discount rate, which will be lower than that of the current calculation methoddue to the expected yield. The effect of this change also impacts actuarial gains/losses to a corresponding degree, since the difference between expected gain andactual gain is changed.Sensitivity of pension obligation to change in discount rateSweden NorwayUnitedKingdom TotalPension obligations, December 31, 2012 878.5 331.4 613.8 1,823.8Discount rate increase of 0.25% 1 –35 –15 –30 –80Discount rate decrease of 0.25% 1 35 15 30 801 Estimated change in pension obligation/pension liability in the event of a change in the discountrate. If pension liability increases, the Group’s equity is reduced by about 85 percent of theincrease in pension liability, after taking into account deferred tax and social insurancecontributions.Sensitivity of plan assets to changed returnSweden NorwayUnitedKingdom TotalPlan assets, December 31, 2012 419.4 384.5 596.4 1,400.3Return increase of 5% 1 20 20 30 70Return decrease of 5% 1 –20 –20 –30 –701 If actual return increases by 5 percent in relation to expected return, the actuarial gain is estimatedat about EUR 70 M. If actual return decreases by 5 percent in relation to expected return,the actuarial loss is estimated at about EUR 70 M.Demographic assumptionsLife expectancy after age 65, men 23 years 18 years 22 yearsLife expectancy after age 65, women 25 years 21 years 25 yearsLife expectancy table 1 PRI K2005 PA92Skanska Review of 2012 – EUR version Notes, including accounting and valuation principles 145