9 Derivatives

In CHF million  
  Fair value assets Fair value liabilities Contract/notional amount
  31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010
 
Currency derivatives
 
Forward contracts
  400 2 354 689 47 36 506 34 573
Swaps
  3 939
Futures
  2 25
Options (over-the-counter)
  42 25 6 826
Options (exchange-traded)
  51 83 5 478
Total currency derivatives
  442 2 407 717 130 44 271 40 076
 
Interest rate derivatives
 
Swaps
  517 195 386 209 17 766 15 647
Futures
  26 1 1 1 256 249
Options (over-the-counter)
  105 47 15 1 947 1 061
Other
  0 9 454 6
Total interest rate derivatives
  648 243 411 210 20 423 16 963
 
Equity/index derivatives
 
Forward contracts
  32 34 544
Futures
  0 3 7 3 147 287
Options (over-the-counter)
  51 15 884
Options (exchange-traded)
  228 222 51 105 2 962 7 257
Other
  7 1 120
Total equity/index derivatives
  228 315 58 158 3 109 9 092
 
Other derivatives
 
Derivatives embedded in insurance contracts
  0 0 6 6
Total other derivatives
  0 0 6 6
 
Total derivatives
  1 318 2 965 1 186 498 67 809 66 137
of which derivatives designated and accounted for as hedging instruments
 
Derivatives designated as fair value hedges
  0 11 2 3 117 822
Derivatives designated as cash flow hedges
  239 2 63 6 497 25
Derivatives designated as net investment hedges
  6 29 365 374


Derivatives held for Risk Management

Derivatives held for risk management primarily comprise derivatives that share a risk with other financial instruments and give rise to opposite changes in fair value that tend to offset each other (“economic hedges”).

To manage the risks associated with derivative activity, the Group establishes risk levels and monitors these exposures. Exposure to price risk on both derivatives and their underlyings is managed in accordance with risk limits set by management for buying or selling instruments or closing out positions. The risks arise from open positions in interest rates, currencies and equity instruments, all of which are exposed to general and specific market movements.

Derivatives designated and accounted for as hedging instruments

Derivatives designated and accounted for as hedging instruments comprise derivatives associated with fair value hedges, cash flow hedges and net investment hedges that qualify for hedge accounting.

Derivatives designated as fair value hedges
In CHF million  
  Fair value assets Fair value liabilities Gains/losses on hedging instruments Gains/losses on hedged items Contract/notional amount
  31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010
Interest rate risk
 
Interest rate swaps to hedge available-for-sale bond portfolios
  –154 –17 154 16
Interest rate swaps to hedge note loans
  3 –42 –3 40 4 518
Foreign currency risk
 
Currency forwards to hedge investments in hedge funds
  0 11 2 –4 33 4 –35 117 304
Total derivatives designated as fair value hedges
  0 11 2 3 –200 13 198 –15 117 822


In 2011 and 2010, the Group entered into interest rate swaps to hedge euro-denominated fixed-rate note loans carried at amortised cost against changes in the fair value attributable to interest rate risk. The fair value of the hedged assets was EUR 442 million as at 31 December 2010. In 2011 hedge accounting was discontinued with regard to the interest rate risk of fixed-rate loans.

Forward contracts are used as hedging instruments to protect investments in hedge funds against adverse movements in euro and US dollar exchange rates.

Derivatives designated as Cash Flow hedges
In CHF million  
 


Fair value
assets



Fair value
liabilities


Amounts
recognised
in equity

Ineffective-
ness
recognised in
profit or loss
Amounts
transferred
to the
income
statement


Contract/
notional
amount

Cash flows
expected
to occur
(year)
Cash flows
expected
to affect
profit or loss
(year)
 
31 December 2011
 
Interest rate risk
 
Forward starting swaps/bonds
  239 63 175 6 497 2014-2016 2015-2045
Foreign currency risk
 
Currency futures
  0 0 –2 2011 2011
Total derivatives designated as cash flow hedges
  239 63 175 0 –2 6 497 n/a n/a


31 December 2010
 
Foreign currency risk
 
Currency futures
  2 2 25 2011 2011
Total derivatives designated as cash flow hedges
  2 2 25 n/a n/a


In 2011, the Group entered into forward starting swaps and forward starting bonds to hedge the exposure to variability in interest cash flows arising on the highly probable purchase of bonds in order to achieve an adequate yield level for reinvestments.

In 2011 and 2010, the Group entered into futures to hedge the cash flows in euro arising from policy fees earned on investment and unit-linked contracts against foreign currency movements. In 2011, CHF 2 million was transferred to the income statement and was included in policy fees earned on investment and unit-linked contracts.

Derivatives designated as Net Investment Hedges
In CHF million  
  Fair value assets Fair value liabilities Amounts recognised in equity Ineffectiveness recognised in profit or loss Notional amount
  31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010
Currency forwards
  6 29 9 44 0 365 374
Currency options
 
Total derivatives designated as net investment hedges
  6 29 9 44 0 365 374


In 2011 and 2010, the Group entered into a forward contract to hedge EUR 300 million of the investment in AWD Holding.

 

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