HSBC 2012 Annual Report Download - page 240

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Risk management of insurance operations > Financial risks
238
Financial risks
(Audited)
Financial risk exposures can be categorised into:
• Market risk – risks arising from changes in the
fair values of financial assets or their future cash
flows from fluctuations in variables such as
interest rates, foreign exchange rates and equity
prices;
• Credit risk – the risk of financial loss following
the default of third parties to meet their
obligations; and
• Liquidity risk – the risk of not being able to
make payments to policyholders as they fall due
as there are insufficient assets that can be
realised as cash.
Further details on the nature of these financial
risks and how they are managed are provided in the
Appendix to Risk on page 252.
The following table analyses the assets held in
our insurance manufacturing subsidiaries at
31 December 2012 by type of contract, and provides
a view of the exposure to financial risk. For linked
contracts, which pay benefits to policyholders which
are determined by reference to the value of the
investments supporting the policies, we typically
designate assets at fair value; for non-linked
contracts, the classification of the assets is driven
by the nature of the underlying contract.
Financial assets held by insurance manufacturing subsidiaries
(Audited)
Life linked Life non-linked Non-life Other
contracts65 contracts66 insurance67 assets62 Total
US$m US$m US$m US$m US$m
At 31 December 2012
Trading assets
Debt securities ............................................ – 4 – – 4
Financial assets designated at fair value ........ 20,646 11,189 196 987 33,018
Treasury bills .............................................. – 39 – – 39
Debt securities ............................................ 8,028 3,607 196 408 12,239
Equity securities ......................................... 12,618 7,543 – 579 20,740
Financial investments
Held-to-maturity: debt securities .................... – 20,245 – 1,548 21,793
Available-for-sale: .......................................... – 20,160 73 1,380 21,613
– debt securities .......................................... – 20,160 66 1,354 21,580
– equity securities ....................................... – – 7 26 33
Derivatives ...................................................... 17 249 – 69 335
Other financial assets68 ................................... 736 6,511 87 708 8,042
Total financial assets64 .................................... 21,399 58,358 356 4,692 84,805
At 31 December 2011
Trading assets
Debt securities ............................................ – 3 – – 3
Equity securities ......................................... – – 24 – 24
Financial assets designated at fair value ........ 17,292 9,756 206 1,616 28,870
Treasury bills .............................................. 4 107 – – 111
Debt securities ............................................ 6,823 3,198 206 795 11,022
Equity securities ......................................... 10,465 6,451 – 821 17,737
Financial investments
Held-to-maturity: debt securities .................... – 17,506 175 1,300 18,981
Available-for-sale: .......................................... 1 17,980 616 2,708 21,305
– other eligible bills .................................... – – – 50 50
– debt securities .......................................... – 17,963 599 2,520 21,082
– equity securities ....................................... 1 17 17 138 173
Derivatives ...................................................... 8 343 – 7 358
Other financial assets68 ................................... 897 5,709 635 1,588 8,829
Total financial assets64 .................................... 18,198 51,297 1,656 7,219 78,370
For footnotes, see page 249.