STRATEGIC REPORT
GOVERNANCE
financial statements
17 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE continued (d) Level 3 assets and liabilities measured at fair value Reconciliation of the opening and closing balances of Level 3 financial assets and liabilities.
Debt securities and other fixed income securities £m
Deposits received from reinsurers £m
Loans secured by ground rents £m
Loans secured by commercial mortgages £m
Loans secured by residential mortgages £m
Derivative financial liabilities £m
Investment contract liabilities £m
Derivative financial assets £m
Infra- structure loans £m
Other loans £m
Investment funds £m
Year ended 31 December 2022
233.3 1,449.5 7,422.8 677.8 189.7 993.1 89.7
8.5
(33.6) (14.0)
(8.6) (2,144.7)
At 1 January 2022
106.6 716.0 538.3
91.5 217.6 369.4
– –
– – – –
– –
(0.9)
Purchases/advances/deposits
– (122.9)
–
–
–
–
–
–
Transfers to Level 2
(17.7) (101.1)
(542.7)
(134.4)
(11.2)
(21.6)
(14.3)
11.4
– 192.9
Sales/redemptions/payments Disposal of a portfolio of LTMs 1 Recognised in profit or loss in net investment income Realised gains and losses Unrealised gains and losses
–
–
(750.8)
–
–
–
–
–
–
–
–
–
(87.0)
(2.2)
–
–
–
–
– – –
–
–
16.2 (303.3) (1,433.9)
(49.1) (149.2) (286.1)
36.5 (8.5)
(10.5)
423.5 (74.7)
– (15.4)
159.2
0.1
–
1.6
–
–
–
Interest accrued
Change in fair value of liabilities recognised in profit or loss
–
–
–
–
–
–
–
– –
3.7
–
–
At 31 December 2022
338.4 1,622.8 5,305.9 583.7 246.9 1,056.4 111.9
(32.5)
(19.1) (1,603.9)
1 In February 2022 the Group disposed of a portfolio of loans secured by residential mortgages with a fair value of £750.8m. 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.
Debt securities and other fixed income securities £m
Deposits received from reinsurers £m
Loans secured by ground rents £m
Loans secured by commercial mortgages £m
Loans secured by residential mortgages £m
Derivative financial liabilities £m
Investment contract liabilities £m
Derivative financial assets £m
Infra- structure loans £m
Other loans £m
Investment funds £m
Year ended 31 December 2021
At 1 January 2021
139.0 1,256.8 8,261.1
592.1 114.9 945.0 66.1 169.0 72.4 79.1 46.1
3.6
(42.8)
(3.3) (2,415.0)
Purchases/advances/deposits
84.9 281.4
528.2
– – – –
(1.1)
– – – –
(1.2)
Transfers from Level 2
–
49.9
–
–
–
–
– – –
–
–
Sales/redemptions/payments Disposal of a portfolio of LTMs 1 Recognised in profit or loss in net investment income Realised gains and losses Unrealised gains and losses
– (87.9)
(508.9) (508.8)
(49.4)
– (17.7)
11.1
202.9
–
–
–
–
–
–
–
–
–
169.1
–
–
–
–
–
– – –
–
–
9.4 (37.6) – (13.1)
(722.8)
(34.6)
2.4 (13.4)
(22.5)
4.9
(5.3)
147.3 (78.7)
Interest accrued
204.9
0.7
–
0.1
–
–
–
Change in fair value of liabilities recognised in profit or loss
–
–
–
–
–
–
–
–
(0.8)
–
–
At 31 December 2021
233.3 1,449.5 7,422.8
677.8 189.7 993.1 89.7
8.5
(33.6)
(8.6) (2,144.7)
1 In August 2021 the Group disposed of a portfolio of loans secured by residential mortgages with a fair value of £508.8m.
Investment funds Investment funds classified as Level 3 are structured entities that operate under contractual arrangements which allow a group of investors to invest in a pool of corporate loans without any one investor having overall control of the entity. There have not been any significant impacts to these investments in relation to COVID-19, global, political and other economic factors. Principal assumptions underlying the calculation of investment funds classified as Level 3 Discount rate Discount rates are the most significant assumption applied in calculating the fair value of investment funds. The average discount rate used is 7.0% (2021: 7.0%).
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