HSBC 2005 Annual Report Download - page 168

HSBC HOLDINGS PLC
Financial Review (continued)
166
A key aspect of the risk management for
insurance business, and life insurance in particular,
is the need actively to manage the assets in relation
to the liabilities. Of particular importance for a
number of lines of business is the need to match the
expected pattern of cash flow, which in some cases
(such as annuities) can run for many years. The
following table shows the overall disposition of
assets and liabilities and demonstrates that there is an
appropriate level of matching. It is generally not
possible to achieve a complete matching of asset and
liability duration. This is partly because with annual
premium contracts there are uncertain future cash
flows yet to be received from policyholders and
partly because the duration of some liability cash
flows exceeds the duration of the longest available
dated fixed interest investments.
Insurance contracts
Investment
contracts
Contracts
with
DPF1
Unit-
linked Annuities
Term
assurance
and other
long-term
contracts2Non-life
Unit-
linked Other
Other
Assets3Total
US$m US$m US$m US$m US$m US$m US$m US$m US$m
Financial assets:
– trading assets ............ – – – 49 58 – – 170 277
– financial assets
designated at fair
value ......................... 1,005 2,132 52 947 14 6,995 1,415 1,488 14,048
– derivatives ................ 57426–––14–488
– financial investments 2,581 – 1,272 339 1,230 – 1,527 1,896 8,845
– other assets ............... 635 268 828 182 619 174 376 1,098 4,180
Total financial assets ......... 4,278 2,826 2,152 1,517 1,921 7,170 3,322 4,652 27,838
Reinsurance assets............. 2 69 193 612 669 – – 40 1,585
PVIF ................................. –––––––1,4001,400
Other assets ...................... 18 94533329 1 –7601,195
Total assets ....................... 4,298 2,904 2,390 2,162 2,919 7,171 3,322 6,852 32,018
Financial liabilities
designated at fair value . –––––7,1563,289–10,445
Liabilities under insurance
contracts issued ............ 4,193 2,895 2,390 1,786 2,871 – 9 – 14,144
Deferred tax ...................... –––––––322322
Other liabilities ................. –––––––2,1252,125
Total liabilities .................. 4,193 2,895 2,390 1,786 2,871 7,156 3,298 2,447 27,036
Shareholders’ equity ......... –––––––4,9824,982
Total liabilities and
shareholders’ equity4 .... 4,193 2,895 2,390 1,786 2,871 7,156 3,298 7,429 32,018
1 Discretionary participation features.
2Includes credit life insurance.
3Other assets comprise solvency and unencumbered assets.
4Excludes assets, liabilities and shareholders’ funds of associate insurance companies Erisa S.A. and Ping An Insurance.