16 Fair Value of Financial Instruments


For reporting purposes, a fair value hierarchy is established that categorises the inputs to valuation techniques used to measure fair value into level 1, 2 or 3. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs).

The fair value of assets or liabilities included in level 1 is based on unadjusted quoted prices in active markets for identical assets or liabilities. The fair value of assets or liabilities 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 assets or liabilities are included in level 2.

If one or more significant inputs to these valuation techniques are not observable in the market, the assets or liabilities 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.
Financial instruments measured at fair value on a recurring basis
As a general rule, fair values of financial instruments are based on quoted prices sourced from well-known independent price providers such as Bloomberg. Model-based level 2 and level 3 valuations of financial instruments are applied to a minority of the assets.

Fair value hierarchy
In CHF million  
 
Quoted prices
(level 1)
Valuation technique –
observable inputs
(level 2)
Valuation technique –
unobservable inputs
(level 3)


Total
  30.06.2015 31.12.2014 30.06.2015 31.12.2014 30.06.2015 31.12.2014 30.06.2015 31.12.2014
 
Financial assets
 
Derivatives
 
Currency
  0 1 502 64 502 66
Interest rate
  0 1 880 1 880 1 880 1 880
Equity
  615 408 5 4 620 412
Other
  0 1 2
Total derivatives
  616 409 2 388 1 949 3 003 2 358
Debt instruments
 
Government/Supranational
  43 642 44 115 313 419 43 955 44 534
Corporate
  41 428 45 045 737 836 40 79 42 205 45 960
Other
  109 123 10 15 119 139
Total debt instruments
  85 180 89 283 1 059 1 270 40 79 86 279 90 633
Equity instruments
 
Equity securities
  2 476 1 616 22 67 273 229 2 771 1 912
Investment funds
  5 810 4 368 809 845 487 568 7 107 5 781
Alternative investments
  57 57 64 63 982 1 042 1 103 1 162
Total equity instruments
  8 343 6 041 895 975 1 742 1 838 10 980 8 854
Financial assets pledged as collateral
  2 413 2 763 2 413 2 763
Assets attributable to non-controlling interests of investment funds
  552 364 381 299 393 427 1 326 1 090
Assets for the account and risk of the Swiss Life Group's customers
  23 313 24 369 935 857 3 049 3 750 27 297 28 975
Total financial assets
  120 417 123 230 5 657 5 349 5 224 6 094 131 298 134 673
 
Investments in associates
 
Associates at fair value through profit or loss
  4 212 5 7 9 219
 
Financial liabilities
 
Derivatives
 
Currency
  1 2 587 1 185 588 1 187
Interest rate
  0 561 868 561 868
Equity
  197 82 1 1 198 83
Other
  39 27 39 27
Total derivatives
  198 85 1 188 2 080 1 386 2 165
Investment contracts without discretionary participation
  310 262 310 262
Unit-linked contracts
  22 836 24 212 112 113 22 948 24 325
Share of net assets of investment funds attributable to non-controlling interests
  933 663 393 427 1 326 1 090
Total financial liabilities
  198 85 25 266 27 217 505 540 25 969 27 842


The fair value hierarchy of assets for the account and risk of the Swiss Life Group’s customers is consistent with the categorisation of assets for the account and risk of the Swiss Life Group.

For a detailed description of the valuation techniques and significant inputs used in the fair value measurement of financial instruments, refer to the Consolidated Financial Statements 2014, Note 30 Fair Value Measurements.

Reconciliation of fair value measurements categorised within level 3
The following tables show a reconciliation from the opening balances to the closing balances for fair value measurements categorised within level 3 of the fair value hierarchy:

Financial assets measured at fair value based on level 3 for the 6 months ended 30 June 2015
In CHF million  
 







Derivatives








Debt instruments








Equity instruments
Financial
assets
for the
account
and risk
of the
Swiss Life
Group's
customers



Associates
at fair
value
through
profit
or loss








Total
 



At fair
value
through
profit
or loss



Available
for sale
At fair
value
through
profit
or loss
1



Available
for sale












Balance as at 1 January
  46 33 1 182 1 083 3 750 7 6 101
Total gains/losses recognised in profit or loss
  –1 6 –6 28 –101 0 –74
Total gains/losses recognised in other comprehensive income
  0 –61 –61
Additions
  167 111 193 472
Disposals
  –155 –92 –398 –1 –646
Transfers out of level 3
  –38 –38
Foreign currency translation differences
  –6 –61 –62 –395 –524
Balance as at end of period
  39 1 1 128 1 007 3 049 5 5 229
 
Unrealised gains/losses recognised in profit or loss for assets held at the end of the period
  –1 6 –1 –6 –101 0 –104
1 including assets attributable to non-controlling interests of investment funds


Financial assets measured at fair value based on level 3 for the 6 months ended 30 June 2014
In CHF million  
 







Derivatives








Debt instruments








Equity instruments
Financial
assets
for the
account
and risk
of the
Swiss Life
Group's
customers



Associates
at fair
value
through
profit
or loss








Total
 



At fair
value
through
profit
or loss



Available
for sale
At fair
value
through
profit
or loss
1



Available
for sale












Balance as at 1 January
  139 1 665 1 103 2 924 10 4 842
Total gains/losses recognised in profit or loss
  3 0 61 26 0 0 90
Total gains/losses recognised in other comprehensive income
  –15 –15
Additions
  173 7 86 266
Disposals
  –74 –11 –75 –7 –2 –169
Foreign currency translation differences
  –1 –3 –4 –18 –25
Balance as at end of period
  67 1 886 1 042 2 985 8 4 988
 
Unrealised gains/losses recognised in profit or loss for assets held at the end of the period
  2 0 60 –2 0 0 60
1 including assets attributable to non-controlling interests of investment funds


Liabilities measured at fair value based on level 3 for the 6 months ended 30 June 2015
In CHF million  
 




Derivatives

Investment
contracts
without
discretionary
participation




Unit-linked
contracts
Share of net
assets of
investment funds
attributable to
non-controlling
interests





Total
Balance as at 1 January
  113 427 540
Total gains/losses recognised in profit or loss
  0 0 0
Issues
  50 50
Settlements
  0 –72 –72
Foreign currency translation differences
  0 –13 –13
Balance as at end of period
  112 393 505
 
Unrealised gains/losses recognised in profit or loss for liabilities held at the end of the period
  0 0 0


Liabilities measured at fair value based on level 3 for the 6 months ended 30 June 2014
In CHF million  
 




Derivatives

Investment
contracts
without
discretionary
participation




Unit-linked
contracts
Share of net
assets of
investment funds
attributable to
non-controlling
interests





Total
Balance as at 1 January
  107 280 387
Total gains/losses recognised in profit or loss
  0 0 0
Issues
  0 82 82
Foreign currency translation differences
  0 0
Balance as at end of period
  108 361 469
 
Unrealised gains/losses recognised in profit or loss for liabilities held at the end of the period
  0 0 0


Gains/losses recognised in profit or loss
Gains/losses on level 3 fair value measurements recognised in profit or loss are presented in the income statement as follows:

In CHF million  
 

Net gains/losses on financial assets
Net gains/losses on financial
instruments at fair value through
profit or loss
  2015 HY 2014 HY 2015 HY 2014 HY
 
Assets
 
Total gains/losses recognised in profit or loss
  34 26 –108 64
Unrealised gains/losses recognised in profit or loss for assets held at the end of the period
  0 –2 –103 62
 
Liabilities
 
Total gains/losses recognised in profit or loss
  0 0
Unrealised gains/losses recognised in profit or loss for liabilities held at the end of the period
  0 0


Fair value of financial instruments carried at amortised cost
The following table shows the carrying amounts and fair values of those financial assets and liabilities not measured at fair value in the Group’s balance sheet:

In CHF million  
  Carrying amount Fair value
  30.06.2015 31.12.2014 30.06.2015 31.12.2014
 
Assets
 
Loans
  20 011 23 348 22 885 27 107
Receivables 1
  5 290 4 600 5 290 4 600
 
Liabilities
 
Investment contracts without discretionary participation
  9 11 9 11
Borrowings
  4 381 3 798 4 636 4 021
Other financial liabilities 1
  11 590 12 056 11 590 12 056
1 Carrying amount approximates fair value


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