HSBC 2010 Annual Report Download - page 161

159
Overview Operating & Financial Review Governance Financial Statements Shareholder Information
(Audited)
Our motor business is written predominantly in
Latin America. The run-off of the UK motor book
continued in 2010. Accident and health is written in
all regions but mainly in Hong Kong. We write fire
and other damage to property contracts in all major
markets, most significantly in Europe. Credit non-
life insurance, which is originated in conjunction
with the provision of loans, is concentrated in the
US and Europe.
The main risks associated with non-life business
are:
• underwriting: the risk that premiums are not
appropriate for the cover provided; and
• claims experience: the risk that claims exceed
expectations.
We manage these risks through pricing (for
example, imposing restrictions and deductibles in the
policy terms and conditions), product design, risk
selection, claims handling, investment strategy and
reinsurance policy. The majority of our non-life
insurance contracts are renewable annually,
providing added flexibility to the underwriting
terms and conditions.
Balance sheet of insurance manufacturing
subsidiaries
(Audited)
A principal tool we use to manage our exposure to
insurance risk, in particular for life insurance
contracts, is asset and liability matching.
The tables below show the composition of assets
and liabilities by contract and by geographical region
and demonstrate that there were sufficient assets to
cover the liabilities to policyholders in each case at
the end of 2010.
Balance sheet of insurance manufacturing subsidiaries by type of contract
(Audited)
Insurance contracts Investment contracts
With
DPF
Unit-
linked
Annu-
ities
Term
assur-
ance78
Non-life
With
DPF72
Unit-
linked Other
Other
assets79 Total
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
At 31 December 2010
Financial assets ................... 17,665 9,763 2,615 2,671 2,231 21,511 8,338 3,927 7,157 75,878
– trading assets ................ – – –– 11 – – – – 11
– financial assets
designated at fair value 1,206 9,499 413 523 180 5,961 7,624 1,486 1,452 28,344
– derivatives .................... 53 – 1 6 –229 7 1 4 301
– financial investments ... 14,068 – 1,847 1,661 692 14,465 – 1,804 4,495 39,032
– other financial assets .... 2,338 264 354 481 1,348 856 707 636 1,206 8,190
Reinsurance assets ............. 10 760 400 263 432 – – – 79 1,944
PVIF80 ................................ – – – – – – – – 3,440 3,440
Other assets and
investment properties ...... 189 6 21 398 213 565 14 56 712 2,174
Total assets ......................... 17,864 10,529 3,036 3,332 2,876 22,076 8,352 3,983 11,388 83,436
Liabilities under investment
contracts:
– designated at fair value – – – – – – 8,321 3,379 – 11,700
– carried at amortised cost – – – – – – – 439 – 439
Liabilities under
insurance contracts .......... 17,808 10,496 2,884 2,891 2,456 22,074 – – – 58,609
Deferred tax ....................... 11 – 20 4 6 – – 1 793 835
Other liabilities .................. – – – – – – – – 2,075 2,075
Total liabilities ................... 17,819 10,496 2,904 2,895 2,462 22,074 8,321 3,819 2,868 73,658
Total equity ........................ – – – – – – – – 9,778 9,778
Total equity and
liabilities81 ...................... 17,819 10,496 2,904 2,895 2,462 22,074 8,321 3,819 12,646 83,436