F.3. Investments
Carrying values of investment:
| In CZK million, for the year ended 31 December | Investment properties | Loans | Available- for-sale | Fair value through profit or loss | Other investments |
|---|---|---|---|---|---|
| Balance as at 1 January 2015 | 63 | 6,252 | 64,969 | 14,612 | 2 |
| Purchases | – | 41,672 | 12,151 | 1,613 | – |
| Disposals | – | (43,919) | (16,259) | (5,133) | – |
| Fair value gains/losses recorded in the income statements | – | – | (31) | 233 | – |
| Fair value gains/losses recorded in other comprehensive income | – | – | 1,165 | – | – |
| Movement in impairment allowance | (11) | 98 | – | – | – |
| Accrued interest | – | 20 | (260) | (15) | – |
| Foreign exchange adjustments | – | (10) | 297 | – | – |
| Other movements | 6 | 2 | – | 39 | (2) |
| Balance as at 31 December 2015 | 58 | 4,115 | 62,032 | 11,349 | – |
| Purchases | – | 91,467 | 11,635 | 1,577 | – |
| Disposals | (52) | (87,065) | (14,688) | (2,593) | – |
| Fair value gains/losses recorded in the income statements | – | – | 39 | 153 | – |
| Fair value gains/losses recorded in other comprehensive income | – | – | 1,644 | – | – |
| Movement in impairment allowance | – | 4 | – | – | – |
| Accrued interest | – | 19 | (280) | 29 | – |
| Foreign exchange adjustments | – | – | 230 | – | – |
| Balance as at 31 December 2016 | 6 | 8,540 | 60,612 | 10,515 | – |
F.3.1. Investment properties
The fair value of investment property is based on the valuation of an independent valuator who holds recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. Based on the analysis of inputs used for valuation, considering the limited cases where the inputs would be observable in active markets, the Company proceeded to classify the whole category at level 3.
| In CZK million, as at 31 December | 2016 | 2015 |
|---|---|---|
| Carrying amount as at the beginning of the year | 58 | 63 |
Reclassification to/from assets held for sale | 6 | |
Decreases | (52) | – |
Revaluation | – | (11) |
| Carrying amount as at the end of the year | 6 | 58 |
The decrease in investment properties in amount of CZK 52 million is a result of the sale of one investment property, Barrandov building. A profit of CZK 2.7 million has been realised from the sale.
F.3.2. Loans
| In CZK million, as at 31 December | 2016 | 2015 |
|---|---|---|
| Loans | ||
Bonds | 927 | 905 |
Loans to subsidiaries | 975 | 875 |
Other loans | 6,638 | 2,335 |
| Total | 8,540 | 4,115 |
| Current portion | 6,638 | 2,334 |
| Non-current portion | 1,902 | 1,781 |
Increase of other loans is caused by increase of reverse REPO operations.
The fair value of loans:
| In CZK million,as at 31 December | 2016 | 2015 |
|---|---|---|
| Loans | 8,710 | 4,311 |
Bonds | 1,098 | 1,101 |
Loans to subsidiaries | 975 | 875 |
Other loans | 6,637 | 2,335 |
| Total | 8,710 | 4,311 |
| In CZK million, as at 31 December 2016 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Loans | ||||
Bonds | – | 1,098 | – | 1,098 |
Loans to subsidiaries | – | 975 | – | 975 |
Other loans | – | 6,637 | – | 6,637 |
| Total | – | 8,710 | – | 8,710 |
| In CZK million, as at 31 December 2015 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Loans | ||||
Bonds | – | 1,101 | – | 1,101 |
Loans to subsidiaries | – | 875 | – | 875 |
Other loans | – | 2,335 | – | 2,335 |
| Total | – | 4,311 | – | 4,311 |
F.3.3. Available-for-sale financial assets
| In CZK million, as at 31 December | 2016 | 2015 |
|---|---|---|
| Unquoted equities at cost | 4 | 4 |
| Equities at fair value | 1,476 | 2,061 |
Quoted | 1,476 | 2,061 |
| Bonds | 53,360 | 53,427 |
Quoted | 53,360 | 53,427 |
| Investment fund units | 5,772 | 6,540 |
| Total | 60,612 | 62,032 |
| Current portion | 6,517 | 5,828 |
| Non-current portion | 54,095 | 56,204 |
Fair value measurement as at the end of the reporting period:
| In CZK million, as at 31 December 2016 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Unquoted equities at cost | 1,476 | – | 4 | 4 |
| Equities at fair value | 1,476 | – | – | 1,476 |
Quoted | – | – | – | 1,476 |
| Bonds | 41,521 | 9,579 | 2,260 | 53,360 |
Quoted | 41,521 | 9,579 | 2,260 | 53,360 |
| Investment fund units | 5,562 | 210 | – | 5,772 |
| Total | 48,559 | 9,789 | 2,264 | 60,612 |
| In CZK million, as at 31 December 2015 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Unquoted equities at cost | – | – | 4 | 4 |
| Equities at fair value | 2,061 | – | – | 2,061 |
Quoted | 2,061 | – | – | 2,061 |
| Bonds | 39,546 | 11,856 | 2,025 | 53,427 |
Quoted | 39,546 | 11,856 | 2,025 | 53,427 |
| Investment fund units | 6,324 | 216 | – | 6,540 |
| Total | 47,931 | 12,072 | 2,029 | 62,032 |
The following table presents the changes in Level 3 instruments for the year ended 31 December.
| In CZK million as at 31 December | 2016 | 2015 |
|---|---|---|
| Opening balance | 2,029 | 5,741 |
| Transfers into Level 3 | – | 317 |
| Total gains or losses | 411 | 590 |
in income statement | 45 | 34 |
in other comprehensive income | 366 | 556 |
| Purchases | 18 | 178 |
| Settlements | – | (2,841) |
| Transfer out of Level 3 | (194) | (1,956) |
| Closing balance | 2,264 | 2,029 |
| Total gains/losses for the period included in profit or loss for assets held at the end of the reporting period | 235 | (4,029) |
In 2015 corporate bonds in the amount CZK 317 million were reclassified from Level 2 to Level 3 in connection with the situation when a stress in the financial markets had an impact on availability of observable market inputs, namely level of credit spreads.
In 2016 government bonds in the amount CZK194 million were reclassified out of the level 3 as a result of available market information about its future yields.
| 2016 | 2015 | |
|---|---|---|
| Transfer into Level 1 from Level 2 | – | – |
| Transfer into Level 2 from Level 3 | 194 | 1,956 |
| Transfer into Level 3 from Level 2 | – | 317 |
Maturity of available-for-sale financial assets – bonds in fair value:
| In CZK million, as at 31 December | 2016 | 2015 |
|---|---|---|
| Up to 1 year | 6,517 | 5,828 |
| Between 1 and 5 years | 18,107 | 20,113 |
| Between 5 and 10 years | 15,893 | 13,470 |
| More than 10 years | 12,843 | 14,016 |
| Total | 53,360 | 53,427 |
Realised gains and losses, and impairment losses on available-for-sale financial assets:
| In CZK million, as at 31 December 2016 | Realised gains | Realised losses | Impairment losses |
|---|---|---|---|
| Equities | 268 | (47) | (207) |
| Bonds | 914 | (53) | – |
| Investment fund units | 101 | (180) | (123) |
| Total | 1,283 | (280) | (330) |
| In CZK million, as at 31 December 2015 | Realised gains | Realised losses | Impairment losses |
|---|---|---|---|
| Equities | 23 | – | (144) |
| Bonds | 256 | (143) | – |
| Investment fund units | 363 | – | (225) |
| Total | 642 | (143) | (369) |
F.3.4. Financial assets at fair value through profit or loss
| In CZK million, as at 31 December | Financial assets held-for-trading | Financial assets designated at fair value through profit or loss | Hedging derivatives | Total financial assets at fair value through profit or loss |
||||
|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Bonds | – | – | 2,386 | 3,194 | – | – | 2,386 | 3,194 |
Quoted | – | – | 2,386 | 3,194 | – | – | 2,386 | 3,194 |
| Derivatives | 68 | 69 | – | – | 135 | 288 | 203 | 357 |
| Unit-linked investments | – | – | 7,926 | 7,798 | – | – | 7,926 | 7,798 |
Allocated to policyholders | – | – | 7,790 | 7,593 | – | – | 7,790 | 7,593 |
Not allocated to policyholders | – | – | 136 | 205 | – | – | 136 | 205 |
| Total | 68 | 69 | 10,312 | 10,992 | 135 | 288 | 10,515 | 11,349 |
| Current portion | – | – | – | – | – | – | 103 | 1,014 |
| Non-current portion | – | – | – | – | – | – | 10,412 | 10,335 |
Certain portion of unit-linked investment is not as at year end allocated to policyholders and stay available for new unit linked insurance contracts.
Fair value measurement as at the end of the reporting period:
| In CZK million, as at 31 December 2016 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Bonds | 2,386 | – | – | 2,386 |
Quoted | 2,386 | – | – | 2,386 |
| Derivatives | 2 | 201 | – | 203 |
| Unit-linked investments | 6,998 | 771 | 157 | 7,926 |
| Total | 9,386 | 972 | 157 | 10,515 |
| In CZK million, as at 31 December 2015 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Bonds | 2,443 | 751 | – | 3,194 |
Quoted | 2,443 | 751 | – | 3,194 |
| Derivatives | 2 | 355 | – | 357 |
| Unit-linked investments | 6,049 | 1,723 | 26 | 7,798 |
| Total | 8,494 | 2,829 | 26 | 11,349 |
| 2016 | 2015 | |
|---|---|---|
| Transfer into Level 2 from Level 1 | – | 1,539 |
| Transfer into Level 3 from Level 2 | 131 | 26 |
In 2016 Unit-linked corporate bonds in the amount CZK 131 million were reclassified from level 2 to level 3 as a result of improved FVH assessment. For these bonds volatility of underlying equity indices creates material non-observable market input.
In 2015 Unit-linked investment fund units in the amount CZK 1,539 million were reclassified from level 1 to level 2 and CZK 26 million were reclassified from level 2 to level 3 in relation to the frequency of an officially published valuation of the fund units.