HSBC 2010 Annual Report Download - page 164

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Risk management of insurance operations > Financial risks > Market risk
162
Financial assets held by insurance manufacturing subsidiaries
(Audited)
Life linked Life non-linked Non-life Other
contracts83 contracts84 insurance85 assets79 Total
US$m US$m US$m US$m US$m
At 31 December 2010
Trading assets
Debt securities ............................................ – – 11 – 11
Financial assets designated at fair value ......... 17,123 9,589 180 1,452 28,344
Treasury bills .............................................. 10 119 – 10 139
Debt securities ............................................ 6,660 3,281 180 847 10,968
Equity securities ......................................... 10,453 6,189 – 595 17,237
Financial investments
Held-to-maturity:
– debt securities .......................................... – 16,015 152 908 17,075
Available-for-sale: .......................................... – 17,830 540 3,587 21,957
– Treasury bills ........................................... – 10 – 31 41
– other eligible bills .................................... – 36 140 217 393
– debt securities .......................................... – 17,776 391 3,210 21,377
– equity securities ....................................... – 8 9 129 146
Derivatives ...................................................... 7 290 – 4 301
Other financial assets86 ................................... 971 4,665 1,348 1,206 8,190
Total financial assets81 .................................... 18,101 48,389 2,231 7,157 75,878
At 31 December 2009
Trading assets
Debt securities ............................................ – – 10 – 10
Financial assets designated at fair value ........ 14,409 8,607 63 2,085 25,164
Treasury bills .............................................. 46 174 – 3 223
Debt securities ............................................ 5,086 3,428 63 1,220 9,797
Equity securities ......................................... 9,277 5,005 – 862 15,144
Financial investments
Held-to-maturity:
– debt securities .......................................... – 13,995 186 670 14,851
Available-for-sale: .......................................... – 17,211 556 3,231 20,998
– Treasury bills ........................................... – – 211 86 297
– other eligible bills .................................... – 26 127 126 279
– debt securities .......................................... – 17,169 199 2,787 20,155
– equity securities ....................................... – 16 19 232 267
Derivatives ...................................................... 300 165 – 3 468
Other financial assets86 ................................... 861 4,473 1,475 1,263 8,072
Total financial assets82 .................................... 15,570 44,451 2,290 7,252 69,563
For footnotes, see page 174.
Approximately 65.1% of financial assets were
invested in debt securities at 31 December 2010
(2009: 64.4%) with 22.9% (2009: 22.2%) invested
in equity securities.
In life linked insurance, premium income less
charges levied is invested in a portfolio of assets. We
manage the financial risks of this product on behalf
of the policyholders by holding appropriate assets in
segregated funds or portfolios to which the liabilities
are linked. These assets represented 23.9% of the
total financial assets of our insurance manufacturing
subsidiaries at the end of 2010 (2009: 22.4%).
Market risk
(Audited)
Market risk arises when mismatches occur between
product liabilities and the investment assets which
back them. For example, mismatches between asset
and liability yields and maturities give rise to interest
rate risk.
Description of market risk
(Audited)
The main features of products manufactured by our
insurance manufacturing subsidiaries which generate
market risk, and the market risk to which these