131
FINANCIAL STATEMENTS
17 FAIR VALUE continued The Group’s assets and liabilities held at fair value which are valued using valuation techniques for which significant observable market data is not available and classified as Level 3 include loans secured by mortgages, asset-backed securities, investment contract liabilities, and deposits received from reinsurers. There are no non-recurring fair value measurements as at 31 December 2020 (2019: nil). (b) Analysis of assets and liabilities held at fair value according to fair value hierarchy 2020 2019 Level 1 £m Level 2 £m Level 3 £m Total £m Level 1 £m Level 2 £m Level 3 £m Total £m Assets held at fair value Units in liquidity funds 1,123.2 5.3 – 1,128.5 1,378.0 6.0 – 1,384.0 Investment funds – 37.1 139.0 176.1 – 25.5 111.8 137.3 Debt securities and other fixed income securities 809.3 8,995.3 1,256.8 11,061.4 984.5 8,674.1 729.2 10,387.8 Deposits with credit institutions 97.7 2.0 – 99.7 103.1 1.5 – 104.6 Derivative financial assets – 796.4 3.6 800.0 – 233.0 4.0 237.0 Loans secured by residential mortgages – – 8,261.1 8,261.1 – – 7,980.5 7,980.5 Loans secured by commercial mortgages – – 707.0 707.0 – – 494.5 494.5 Other loans 13.1 11.8 1,011.1 1,036.0 4.1 40.3 835.9 880.3 Total 2,043.3 9,847.9 11,378.6 23,269.8 2,469.7 8,980.4 10,155.9 21,606.0
Liabilities held at fair value Investment contract liabilities Derivative financial liabilities
– –
–
42.8
42.8
– –
–
54.0
54.0
509.4
3.3 512.7
248.4
– –
248.4
351.3
26.1
–
377.4
Obligations for repayment of cash collateral received
62.8
–
62.8
–
– 2,415.0 2,415.0
Deposits received from reinsurers
–
– 2,417.7 2,417.7
Other financial liabilities Loans and borrowings at amortised cost
–
802.0
–
802.0
–
690.2
–
690.2
Total
351.3 1,337.5 2,461.1 4,149.9
62.8
938.6 2,471.7 3,473.1
(c) Transfers between levels The Group’s policy is to assess pricing source changes and determine transfers between levels as of the end of each half-yearly reporting period. During the year there were no transfers from Level 2 to Level 1 (2019: £570.7m). Transfers from Level 2 to Level 3 include debt securities for which there are no longer observable prices and, in 2019, derivative financial assets for which current market values after the initial trade were not available. (d) Level 3 assets and liabilities measured at fair value Reconciliation of the opening and closing recorded amount of Level 3 assets and liabilities held at fair value.
Debt securities and other fixed income securities £m
Loans secured by residential mortgages £m
Loans secured by commercial mortgages £m
Deposits received from reinsurers £m
Derivative financial assets £m
Investment contract liabilities £m
Derivative financial liabilities £m
Investment funds £m
Other loans 2 £m
Year ended 31 December 2020
111.8 729.2 27.1 418.9
4.0 7,980.5 494.5 835.9
(54.0)
– (2,417.7)
At 1 January 2020
– – – –
511.7 211.1 173.0
(1.0)
5.0
(1.4)
Purchases/advances/deposits
– – –
62.2
–
–
–
–
– – –
–
Transfers from Level 2
(29.4)
(380.9) (600.8)
(8.7)
(68.2)
14.0
212.2
Sales/redemptions/payments Disposal of a portfolio of LTMs1
–
–
–
–
–
Realised gains and losses recognised in profit or loss within net investment income Unrealised gains and losses recognised in profit or loss within net investment income
(0.2)
(0.2)
–
111.6
–
–
–
–
–
0.3
80.6
(0.4)
356.3 282.7
9.3 0.8
69.1
– –
(8.3)
(125.3)
–
(4.5)
–
1.3
–
(82.8)
Interest accrued
Change in fair value of liabilities recognised in profit or loss
–
–
–
–
–
–
(1.8)
–
–
At 31 December 2020
139.0 1,256.8
3.6 8,261.1
707.0 1,011.1
(42.8)
(3.3) (2,415.0)
1 In December 2020 the Group disposed of a portfolio of loans secured by residential mortgages with a fair value of £600.8m. The transaction is part of the Group’s strategy to reduce exposure and sensitivity of the balance sheet to the UK property market following changes in the regulatory environment in 2018. 2 Includes £945.0m of infrastructure loans (2019: £787.3m)
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