HSBC 2011 Annual Report Download - page 189

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
62 The total VAR is non-additive across risk types due to diversification effects.
63 Investments in private equity are primarily made through managed funds that are subject to limits on the amount of investment. Potential
new commitments are subject to risk appraisal to ensure that industry and geographical concentrations remain within acceptable levels for
the portfolio as a whole. Regular reviews are performed to substantiate the valuation of the investments within the portfolio.
64 Investments held to facilitate ongoing business include holdings in government-sponsored enterprises and local stock exchanges.
65 Instead of assuming that all interest rates move together, we group our interest rate exposures into currency blocs whose rates are
considered likely to move together.
Risk management of insurance operations
66 HSBC has no insurance manufacturing subsidiaries in the Middle East and North Africa.
67 Insurance contracts and investment contracts with discretionary participation features (‘DPF’) can give policyholders the contractual
right to receive, as a supplement to their guaranteed benefits, additional benefits that may be a significant portion of the total
contractual benefits, but whose amount and timing are determined by HSBC. These additional benefits are contractually based on the
performance of a specified pool of contracts or assets, or the profit of the company issuing the contracts.
68 Although investment contracts with DPF are financial investments, HSBC continues to account for them as insurance contracts as
permitted by IFRS 4.
69 Net written insurance premiums represent gross written premiums less gross written premiums ceded to reinsurers.
70 Term assurance includes credit life insurance.
71 Other assets comprise shareholder assets and assets and liabilities classified as ‘held for sale’.
72 Present value of in-force long-term insurance contracts and investment contracts with DPF.
73 Does not include associated insurance companies, Ping An, SABB Takaful Company and Bao Viet, or joint venture insurance
companies, Hana Life and Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited.
74 Comprise life linked insurance contracts and linked long-term investment contracts.
75 Comprise life non-linked insurance contracts and non-linked long-term investment contracts.
76 Comprises non-life insurance contracts.
77 Comprise mainly loans and advances to banks, cash and intercompany balances with other non-insurance legal entities.
78 The table excludes contracts where the risk is 100% reinsured.
79 Shareholders’ funds comprise solvency and unencumbered assets.
80 In most cases, policyholders have the option to terminate their contracts at any time and receive the surrender values of their policies.
These may be significantly lower than the amounts shown.
81 Value of net new business during the year is the present value of the projected stream of profits from the business.
82 Experience variances include the effect of the difference between demographic, expense and persistency assumptions used in the
previous PVIF calculation and actual experience observed during the year to the extent this impacts profits on future business.
Pension risk
83 In 2010 and 2011, alternative assets included ABSs, MBSs and infrastructure assets. In 2006, alternative assets included loans and
infrastructure assets.