Balance as of period end –60 –35 –95 1 Reclassification adjustment included in net income is presented in “Net realised investment gains/losses”. 2 Impact of ASU 2018-02 and ASU 2016-01. Please refer to Note 1 for more details.
Real estate for own use and equipment are carried at depreciated cost. Depreciation on buildings is recognised over the estimated useful life. Land is recognised at cost and not depreciated.
Liabilities for life and health policy benefits Liabilities for life and health policy benefits from insurance business are generally calculated using the net level premium method, based on assumptions as to investment yields, mortality, withdrawals, lapses and policyholder dividends. Assumptions are set at the time the contract is issued or, in the case of contracts acquired by purchase, at the purchase date. The assumptions are based on projections from past experience, making allowance for possible adverse deviation. Interest rate assumptions for life and health insurance benefit liabilities are based on estimates of expected investment yields. Assumed mortality rates are generally based on experience multiples applied to the actuarial select and ultimate tables based on industry experience. Liabilities for life and health policy benefits are increased with a charge to earnings if it is determined that future cash flows, including investment income, are insufficient to cover future benefits and expenses.
Incurred related to: Paid related to: Current year −521 –469 Prior year −1 681 –2 028
Other liability business may have a significant reporting lag between the accident date and the date reported to the Group. The reported claim counts have trended up from 2012 to 2014, which is similar to the incurred losses. The increase in both claims counts and incurred losses are due to volume as well as the increase in large losses. For all recent years, there will be significant increases in reported claim counts over time, which will narrow the gap of claim counts.
Total fixed income securities available-for-sale 6 647 6 663 6 314 6 264
Certain financial instruments are classified within level 3 of the fair value hierarchy, because they trade infrequently and therefore have little or no price transparency. Such instruments include private equity, less liquid corporate debt securities and certain assetbacked securities (ABS). Certain over-the-counter (OTC) derivatives trade in less liquid markets with limited pricing information, and the determination of fair value for these derivatives is inherently more difficult. Such instruments are classified within level 3 of the fair value hierarchy. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used.
Debt securities issued by US government and government agencies 3 054 422 3 476 US Agency securitised products 81 81 Debt securities issued by non-US governments and government agencies 897 897 Corporate debt securities 1 883 1 883 Mortgage- and asset-backed securities 326 326
Total assets at fair value 3 556 3 841 16 8 7 421
Weather contracts –35 –77 Proprietary option model Risk margin 5−11% (9.3%) Correlation −71−56% (−0.5%) Volatility (power/gas) 28−117% (57.3%) Volatility (temperature) 96−775 (268) HDD/CAT1 Index value (temperature) 800−4366 (2451)
14 Variable interest entities The Group enters into arrangements with variable interest entities (VIEs) in the normal course of business. The involvement ranges from being a passive investor to designing, structuring and managing the VIEs. The variable interests held by the Group arise primarily as a result of the Group’s involvement in certain investment vehicles, which meet the definition of a VIE.
Based on the work performed, we consider the methodology and assumptions used by management in determining the valuation to be appropriate.
Performing sensitivity tests to determine the impact of selected key assumptions.
Investments Investments in subsidiaries and affiliated companies are carried at cost, less necessary and legally permissible depreciation. The group valuation method is applied for the investments in subsidiaries and affiliated companies, which are economically linked to each other.
Further adverse developments or the continuation of adverse trends that, in turn, have a negative impact on financial markets and economic conditions could limit the Group’s ability to access the capital markets and bank funding markets, could adversely affect the ability of counterparties to meet their obligations to the Group and could adversely affect the confidence of the ultimate buyers of insurance.
Risks related to the Swiss Re corporate structure Swiss Re is a wholly owned subsidiary of SRL, and the Group represents only one of the four principal operating segments of the Swiss Re Group.