33 Fair Value of Financial Instruments

Financial instruments measured at fair value
In CHF million  
 
Quoted prices
(level 1)
Valuation technique –
observable inputs
(level 2)
Valuation technique –
unobservable inputs
(level 3)


Total
 
Fair value hierarchy as at 31 December 2011
 
Financial assets
 
Derivatives
  228 1 090 1 318
Debt securities at fair value through profit or loss
  1 450 269 187 1 906
Debt securities available for sale
  61 517 3 364 2 64 883
Equity securities at fair value through profit or loss
  2 147 139 28 2 314
Equity securities available for sale
  1 139 484 758 2 381
Financial assets pledged as collateral
  969 969
Financial assets for the account and risk of the Swiss Life Group's customers
  18 735 919 246 19 900
Total financial assets
  86 185 6 265 1 221 93 671
 
Financial liabilities
 
Derivatives
  60 1 126 1 186
Investment contracts
  237 237
Unit-linked contracts
  17 970 246 18 216
Other financial liabilities
  566 566
Total financial liabilities
  60 19 899 246 20 205


Fair value hierarchy as at 31 December 2010
 
Financial assets
 
Derivatives
  260 2 705 2 965
Debt securities at fair value through profit or loss
  245 525 194 964
Debt securities available for sale
  52 301 1 595 12 53 908
Equity securities at fair value through profit or loss
  2 943 533 13 3 489
Equity securities available for sale
  2 861 369 812 4 042
Financial assets pledged as collateral
  972 972
Financial assets for the account and risk of the Swiss Life Group's customers
  17 668 990 284 18 942
Total financial assets
  77 250 6 717 1 315 85 282
 
Financial liabilities
 
Derivatives
  109 389 498
Investment contracts
  236 236
Unit-linked contracts
  17 259 17 259
Other financial liabilities
  312 312
Total financial liabilities
  109 18 196 18 305


The fair value of financial instruments included in level 1 is based on unadjusted quoted prices in active markets for identical assets or liabilities.

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. If all significant inputs to these valuation techniques are observable (directly and indirectly) in the market, the financial instruments are included in level 2.

If one or more significant inputs to these valuation techniques are not observable in the market, the financial instruments are included in level 3. Such inputs may include information that is derived through extrapolation which is not substantiated by observable market data or that reflects own assumptions about what market participants would use in pricing the asset or liability.

For more detailed descriptions of the determination of the fair values of financial instruments refer to note 3.

No significant transfers were made between level 1 and level 2 of the fair value hierarchy.

As at 31 December 2011, financial assets of CHF 975 million were included in level 3 of the fair value hierarchy (excluding financial assets for the account and risk of the Swiss Life Group’s customers). The exposure primarily consists of alternative investments such as hedge funds, private equity, infrastructure and real estate funds. These investments are valued based on regular reports from the issuing funds. Fair values are reviewed by a team of in-house investment professionals and may be adjusted based on their understanding.

Financial assets measured at fair value based on level 3 for the year 2011
In CHF million  
  Debt securities Equity securities
 




Derivatives



At fair value
through
profit or loss




Available
for sale



At fair value
through
profit or loss




Available
for sale
Financial assets
for the account
and risk of the
Swiss Life
Group's
customers
Balance as at 1 January
  194 12 13 812 284
Total gains/losses recognised in the income statement
  –2 –1 0 49 0
Total gains/losses recognised directly in equity
  0 –1
Purchases
  18 158 0
Sales
  –9 –3 –257 –38
Foreign currency translation differences
  –5 –3
Balance as at end of period
  187 2 28 758 246
 
Total gains/losses recognised in the income statement are presented in
 
net gains/losses on financial assets
  –1 49
net gains/losses on financial instruments at fair value through profit or loss
  –2 0 0
 
Gains/losses for assets held at end of period recognised in the income statement are presented in
 
net gains/losses on financial assets
  –1 –15
net gains/losses on financial instruments at fair value through profit or loss
  –2 0 0


financial assets measured at fair value based on level 3 for the year 2010
In CHF million  
  Debt securities Equity securities
 




Derivatives



At fair value
through
profit or loss




Available
for sale



At fair value
through
profit or loss




Available
for sale
Financial assets
for the account
and risk of the
Swiss Life
Group's
customers
Balance as at 1 January
  35 226 46 1 686 300
Total gains/losses recognised in the income statement
  1 4 16 0 188 –105
Total gains/losses recognised directly in equity
  –49 –187
Purchases
  13 83 89
Sales
  –34 –1 0 –944
Foreign currency translation differences
  –2 –36 –14
Balance as at end of period
  194 12 13 812 284
 
Total gains/losses recognised in the income statement are presented in
 
net gains/losses on financial assets
  16 188
net gains/losses on financial instruments at fair value through profit or loss
  1 4 0 –105
 
Gains/losses for assets held at end of period recognised in the income statement are presented in
 
net gains/losses on financial assets
  0 –5
net gains/losses on financial instruments at fair value through profit or loss
  4 0 –105


The following table summarises the carrying amounts and fair values of those financial assets and liabilities not presented in the Group’s balance sheet at fair value:

In CHF million  
  Carrying amount Fair value
  31.12.2011 31.12.2010 31.12.2011 31.12.2010
 
Assets
 
Loans
  23 615 24 608 25 812 26 170
Receivables
  3 587 5 105 3 587 5 104
Financial assets held to maturity
  5 046 5 229 5 369 5 099
Debt securities pledged as collateral
  88 83
 
Liabilities
 
Investment contracts without discretionary participation
  53 170 53 170
Borrowings
  2 624 2 142 2 849 2 167
Other financial liabilities
  7 225 10 920 7 225 10 919


 

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