HSBC 2009 Annual Report Download - page 272

HSBC HOLDINGS PLC
Report of the Directors: Risk (continued)
Insurance operations > Insurance risk
270
Balance sheet of insurance manufacturing
subsidiaries by type of contract
(Audited)
A principal tool used by HSBC to manage its
exposure to insurance risk, in particular for
life insurance contracts, is asset and liability
matching.
Models are used to assess the effect of a range of
future scenarios on the values of financial assets
and associated liabilities, and ALCOs employ
the outcomes in determining how the assets and
liabilities should be matched. The scenarios include
stresses applied to factors which affect insurance
risk such as mortality and lapse rates. In addition to
assessing the actual cash inflow required to meet
cash outflows, of particular importance is the need to
match the expected pattern of cash inflows with the
benefits payable on the underlying contracts, which
can extend for many years. The table below shows
the composition of assets and liabilities and
demonstrates that there were sufficient assets to
cover the liabilities to policyholders at the end of
2009.
Balance sheet of insurance manufacturing subsidiaries by type of contract
(Audited)
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 2009
Financial assets ................... 15,322 8,204 2,567 2,053 2,290 20,501 7,366 4,008 7,252 69,563
– trading assets ................ – – – – 10 – – – – 10
– financial assets
designated at fair value 599 7,837 446 482 63 5,498 6,572 1,582 2,085 25,164
– derivatives .................... 16 1 – 3 – 144 299 2 3 468
– financial investments ... 13,013 – 1,511 1,033 742 13,948 – 1,701 3,901 35,849
– other financial assets .... 1,694 366 610 535 1,475 911 495 723 1,263 8,072
Reinsurance assets ............. 6 831 376 389 467 – – – 60 2,129
PVIF55 ................................ – – – – – – – – 2,780 2,780
Other assets and
investment properties ...... 165 5 25 634 242 516 13 56 601 2,257
Total assets ......................... 15,493 9,040 2,968 3,076 2,999 21,017 7,379 4,064 10,693 76,729
Liabilities under investment
contracts:
– designated at fair value . – – – – – – 7,347 3,518 – 10,865
– carried at amortised cost – – – – – – – 417 – 417
Liabilities under
insurance contracts .......... 15,450 8,986 2,811 2,718 2,728 21,014 – – – 53,707
Deferred tax ....................... 6 – 22 1 7 1 – 2 750 789
Other liabilities .................. – – – – – – – – 2,371 2,371
Total liabilities ................... 15,456 8,986 2,833 2,719 2,735 21,015 7,347 3,937 3,121 68,149
Total equity ........................ – – – – – – – – 8,580 8,580
Total equity and liabilities53 15,456 8,986 2,833 2,719 2,735 21,015 7,347 3,937 11,701 76,729