135
FINANCIAL STATEMENTS
16 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 2019 (2018: nil). (b) Analysis of assets and liabilities held at fair value according to fair value hierarchy 2019 2018 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 1,378.0 6.0 – 1,384.0 877.7 4.8 – 882.5 Investment funds – 25.5 111.8 137.3 – 112.2 69.8 182.0 Debt securities and other fixed income securities 984.5 8,674.1 729.2 10,387.8 918.0 7,984.3 616.0 9,518.3 Deposits with credit institutions 103.1 1.5 – 104.6 152.6 0.8 – 153.4 Derivative financial assets – 233.0 4.0 237.0 1.8 79.4 – 81.2 Loans secured by residential mortgages – – 7,980.5 7,980.5 – – 7,191.5 7,191.5 Loans secured by commercial mortgages – – 494.5 494.5 – – 392.3 392.3 Other loans 4.1 40.3 835.9 880.3 – 25.9 723.2 749.1 Recoveries from reinsurers on investment contracts – – – – – – 102.2 102.2 Total 2,469.7 8,980.4 10,155.9 21,606.0 1,950.1 8,207.4 9,095.0 19,252.5
Liabilities held at fair value Investment contract liabilities Derivative financial liabilities
– –
–
54.0
54.0
– –
–
197.8
197.8 178.3
248.4
– –
248.4
178.3
– –
62.8
–
62.8
Obligations for repayment of cash collateral received
3.2
0.2
3.4
–
– 2,417.7 2,417.7
Deposits received from reinsurers
–
– 2,443.5 2,443.5
Other financial liabilities
62.8 248.4 2,471.7 2,782.9
–
998.2
–
998.2
Loans and borrowings at amortised cost
–
618.1
–
618.1
Total
62.8 1,246.6 2,471.7 3,781.1
3.2
796.6 2,641.3 3,441.1
(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 transfers from Level 2 to Level 1 were £570.7m (2018: £485.7m). Transfers from Level 2 to Level 3 include debt securities for which there is no longer observable prices and derivative financial assets for which current market values after the initial trade are not available. The transfer from Level 3 to Level 2 in the year ended 31 December 2018 followed a change in the availability of market prices for specific bonds. (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.
Recoveries from reinsurers on investment contracts £m
Debt securities and other fixed income securities £m
Deposits received from reinsurers £m
Loans secured by commercial mortgages £m
Loans secured by residential mortgages £m
Investment contract liabilities £m
Derivative financial assets £m
Other loans £m
Investment funds £m
Year ended 31 December 2019
69.8 616.0
– 7,191.5 392.3 723.2 102.2 (197.8) (2,443.5)
At 1 January 2019
68.2
72.7 50.4
–
415.8
97.7
76.7
51.3
(26.7)
(1.5)
Purchases/advances/deposits
–
3.3
–
–
–
–
–
–
Transfers from Level 2
(26.0)
(4.3)
–
(337.9)
(5.8)
(11.0)
(160.4)
78.3 221.1
Sales/redemptions/payments
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 income1
0.1
0.3
–
102.1
–
–
–
–
–
(0.3)
(1.4) (4.5)
0.7 338.1
9.8 0.5
47.0
6.9
– –
(107.3) (86.5)
–
–
270.9
–
–
Interest accrued
Change in fair value of liabilities recognised in profit or loss
–
–
–
–
–
–
– –
92.2
–
At 31 December 2019
111.8 729.2
4.0 7,980.5 494.5 835.9
(54.0) (2,417.7)
1 Includes the impact of property growth experience changes, a charge of £33m.
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