HSBC 2009 Annual Report Download - page 273

271
Insurance contracts Investment contracts
With
DPF
Unit-
linked
Annu-
ities
Term
assur-
ance53
Non-life
With
DPF51
Unit-
linked
Other
Other
assets52 Total
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
At 31 December 2008
Financial assets .................. 12,336 5,141 2,378 2,209 2,053 17,312 6,138 3,739 6,684 57,990
– trading assets ................ – – – – 35 – – – 4 39
– financial assets
designated at fair value 959 4,738 457 496 52 4,597 5,525 1,481 1,970 20,275
– derivatives .................... 27 3 – 26 – 60 170 91 24 401
– financial investments ... 9,383 – 1,282 399 860 12,482 – 1,482 2,576 28,464
– other financial assets .... 1,967 400 639 1,288 1,106 173 443 685 2,110 8,811
Reinsurance assets ............. 6 956 311 320 430 – – – 60 2,083
PVIF55 ................................ – – – – – – – – 2,033 2,033
Other assets and
investment properties ...... 121 3 32 71 257 459 55 54 935 1,987
Total assets ......................... 12,463 6,100 2,721 2,600 2,740 17,771 6,193 3,793 9,712 64,093
Liabilities under investment
contracts:
– designated at fair value – – – – – – 6,012 3,271 – 9,283
– carried at amortised cost – – – – – – – 284 – 284
Liabilities under
insurance contracts .......... 12,444 6,067 2,575 2,351 2,480 17,766 – – – 43,683
Deferred tax ....................... 8 7 22 30 1 1 – 3 515 587
Other liabilities .................. – – – – – – – – 2,679 2,679
Total liabilities ................... 12,452 6,074 2,597 2,381 2,481 17,767 6,012 3,558 3,194 56,516
Total equity ........................ – – – – – – – – 7,577 7,577
Total equity and liabilities56 12,452 6,074 2,597 2,381 2,481 17,767 6,012 3,558 10,771 64,093
For footnotes, see page 291.
It may not always be possible to achieve a
complete matching of asset and liability durations,
partly because there is uncertainty over policyholder
behaviour, which introduces uncertainty over the
receipt of all future premiums and the timing of
claims, and partly because the duration of liabilities
may exceed the duration of the longest available
dated fixed interest investments. In an environment
where interest rates and yield curves are falling,
insurance operations are exposed to re-investment
risk as higher yielding assets held in the portfolio
mature and are replaced with lower yielding assets.
Given the objective to hold rather than trade
investments, the current portfolio of assets includes
debt securities issued at a time when yields were
higher than those observed in the current market. As
a result, the current yield of the debt securities
exceeds that which may be obtained on current
issues. Management action was taken in relation to
certain participating contracts to reduce short-term
bonus rates paid to policyholders to manage the
immediate strain on the business. Should interest
rates and yield curves return to lower levels for
prolonged periods, further management actions may
be needed.
The table below shows the composition of assets
and liabilities by region and demonstrates that there
were sufficient assets to cover the liabilities to
policyholders for each region at the end of 2009.