9 Derivatives

In CHF million  
  Fair value assets Fair value liabilities Contract/notional amount
  31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011
 
Currency derivatives
 
Forward contracts
  405 400 332 689 42 536 36 506
Swaps
  2 3 814 939
Futures
  1 0 66
Options (over-the-counter)
  43 42 31 25 1 372 6 826
Total currency derivatives
  449 442 365 717 44 788 44 271
 
Interest rate derivatives
 
Swaps
  152 278 378 332 28 076 11 723
Futures
  26 1 256
Options (over-the-counter)
  121 105 15 2 981 1 947
Other
  589 239 7 63 9 105 6 497
Total interest rate derivatives
  862 648 385 411 40 163 20 423
 
Equity/index derivatives
 
Futures
  3 0 0 7 250 147
Options (exchange-traded)
  322 228 88 51 8 818 2 962
Total equity/index derivatives
  325 228 89 58 9 067 3 109
 
Other derivatives
 
Derivatives embedded in insurance contracts
  0 6
Other
  0 25
Total other derivatives
  0 0 25 6
 
 
Total derivatives
  1 636 1 318 839 1 186 94 043 67 809
of which derivatives designated and accounted for as hedging instruments
 
Derivatives designated as fair value hedges
  38 0 2 1 901 117
Derivatives designated as cash flow hedges
  589 239 5 63 9 045 6 497
Derivatives designated as net investment hedges
  0 6 299 365


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”). The timing of the offset does not match in all cases.

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
  31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011
Interest rate risk
 
Interest rate swaps to hedge available-for-sale bond portfolios
  37 23 –154 –24 154 1 829
Interest rate swaps to hedge note loans
  –42 40
Foreign currency risk
 
Currency forwards to hedge investments in hedge funds
  1 0 2 1 –4 –2 4 72 117
Total derivatives designated as fair value hedges
  38 0 2 24 –200 –26 198 1 901 117


The Swiss Life Group uses interest rate swaps to hedge available-for-sale fixed-rate bonds in USD against changes in the fair value attributable to interest rate risk. The nominal amount of these bonds as at 31 December 2012 was USD 2 billion.

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 other
comprehen-
sive income
Ineffective-
ness
recognised
in
profit or loss

Amounts
transferred
to
profit or loss


Contract/
notional
amount

Cash flows
expected
to occur
(year)
Cash flows
expected
to affect
profit or loss
(year)
 
31 December 2012
 
Interest rate risk
 
Forward starting swaps/bonds
  589 5 408 9 045 2014-2022 2014-2047
Total derivatives designated as cash flow hedges
  589 5 408 9 045 n/a n/a


31 December 2011
 
Interest rate risk
 
Forward starting swaps/bonds
  239 63 175 6 497 2014–2021 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


In 2011 and 2012, the Group used 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, 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 other
comprehensive income

Ineffectiveness recognised
in profit or loss


Notional amount
  31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011
Currency forwards
  0 6 3 9 –1 0 299 365
Total derivatives designated as net investment hedges
  0 6 3 9 –1 0 299 365


In 2012 and 2011, the Group entered into forward contracts to hedge the foreign currency translation risk for a portion of its investment in AWD Holding. As at 31 December 2012, the hedged portion amounted to EUR 248 million (31.12.2011: EUR 300 million).

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