Assets and liabilities underthe insurance business

The breakdown of the balances linked to the insurance business is as follows:

• 17.1

  Available-for-sale financial assets

• The breakdown of the balances of this section is as follows:

  Breakdown of available-for-sale financial assets (Millions of euros)

  		31/12/2020	31/12/2019	31/12/2018
  Equity instruments		0	0	0
  Debt securities **		61,643	58,763	51,345
  	Spanish government debt securities	51,613	49,977	44,262
  	Foreign government debt securities	6,708	5,732	4,043
  	Issued by credit institutions	2,917	2,629	2,411
  	Other foreign issuers	405	425	629
  TOTAL		61,643	58,763	51,345
  Debt securities
  	Of which: gross unrealised gains *	15,769	13,362	8,069
  	Of which: gross unrealised losses

  (*) Revaluation at market value of the corresponding portfolio, as a result of the application of the accounting option provided for in IFRS4 named “shadow accounting” (see Note 2.21).

  The breakdown of the changes under this section is as follows:

  Changes in debt securities (Millions of euros)

  	2020		2019		2018
  Opening balance	58,763		51,345		49,394
  Plus:
  Additions due to business combinations					17
  Acquisitions	5,894		15,388		16,678
  Gains/(losses) recognised with adjustments to equity (Note 24.2)	1,709		3,710		28
  Less:
  Sales * and redemptions (*)	(4,461)		(11,383)		(14,117)
  Implicit accrued interest	(262)		(297)		(655)
  CLOSING BALANCE	61,643		58,763		51,345

  (*) In 2019 there were fixed income portfolio sales with a nominal amount of EUR 656 million and a profit of EUR 56 million.

• 17.2

  Assets under insurance and reinsurance contracts

• The breakdown of the changes under this section is as follows:

  This balance sheet heading mainly covers mathematical provisions relating to Berkshire Hathaway Life Insurance Company of Nebraska, assumed as a result of the reinsurance agreement signed in 2012 by VidaCaixa to mitigate longevity risk associated with its life annuities savings portfolio.

  Changes in assets under insurance or reinsurance contracts (Millions of euros)

  	2020	2019	2018
  Opening balance	174	225	276
  Provision	130	174	225
  Amounts used	(174)	(225)	(276)
  FINAL BALANCE	130	174	225

• 17.3

  Liabilities under insurance business

• The breakdown of the changes under this section is as follows:

  Changes in liabilities under insurance contracts (Millions of euros)

  		2020	2019	2018
  Opening balance		70,807	61,519	50,998
  1st application of IFRS 9 (Note 1)				8,241
  Adjusted opening balance		70,807	61,519	59,239
  Additions due to business combinations
  Provision		75,129	70,807	61,519
  Amounts used		(70,807)	(61,519)	(59,239)
  FINAL BALANCE		75,129	70,807	61,519
  Of which: Unearned premiums and unexpired risks		2	4	4
  Of which: Life insurance – risk		487	506	525
  Of which: Life insurance – saving		59,047	57,324	51,247
  Of which: Life insurance – other		14,607	12,248	9,053
  Of which: Claims		899	687	668
  Of which: Provisions for bonuses and rebates		87	38	22
  Of which: Technical provisions		0	0	0

  As a result of the analysis on the sufficiency of liabilities, the following amounts corresponding to unrealised gains of the financial assets under the insurance business are reclassified from "Equity – Accumulated other comprehensive income" to "Liabilities under the insurance business":

  Tacit accounting adjustment (Millions of euros)

  	31/12/2020	31/12/2019	31/12/2018
  Gains/(losses) reclassified as "Liabilities under the insurance business"	3,862	3,263	2,056

  The following table shows the key cases at the close of the financial year for calculating the mathematical provisions of insurance in Spain and Portugal:

  Actuarial assumptions for measuring provisions

  	BIOMETRIC TABLES		AVERAGE TECHNICAL INTEREST RATE
  Life annuities - PVI	According to the different types, the tables GR-80, GR-80 less two years, GR-95 and GK-95 are used. From 21/12/2012, according to the type, the tables PASEM 2010 Unisex (sector mix), GR-95 Unisex (company mix, savings portfolio), PER2000P Unisex (company mix, savings portfolio) or PER2000P Women (from 70 years) are used.		1.97%
  Life annuities - Pension 2000	According to different types, the tables GR-70, GR-80, GK-80, GR-95 and GK-95 are used. From 21/12/2012 the GR-95 Unisex (company mix, savings portfolio) tables are used.		6.82%
  GBPs/ISPs	According to different types, the tables GR-80, GR-80 less two, GR-70, GR-95 and PER2000P are used. From 21/12/2012, according to the type, the PER2000P Unisex or PASEM2010 Unisex tables are used.		0.07%
  Group insurance	Policies opened before 01/01/2009 use the GKM-80/GKF-80 tables. Policies opened between 01/01/2009 and 20/12/2012 use the INE 2004-2005 tables. Policies opened from 21/12/2012 use the PASEM 2010 Unisex (sector mix) tables.		Variable
  PPA (Insured Pension Plan)	According to the types, the tables GR-80 less two years, GR-95 and GK-95 are used. For the new production from 21/12/2012 the tables PASEM 2010 Unisex (sector mix) are used.		2.49%
  Unit Link	According to different types, the tables GK-80, GK-95 and INE 2005 are used. From 21/12/2012 the PASEM 2010 Unisex (sector mix) tables are used.		-

  On 17 December 2020, the Directorate-General for Insurance and Pension Funds published the Ruling regarding survival and mortality tables to be used by insurance and reinsurance companies, approving the technical guide in relation to monitoring criteria regarding the biometric tables. This Ruling came into force on 31 December 2020. At 31 December 2020, the Group holds sufficient technical provisions without needing to apply the transition period laid down in the Ruling.

• 17.4

  Select information on financial assets under the insurance business

• In addition to applying the temporary exemption from IFRS 9 to insurance companies controlled by the Group, the disclosure requirements of which are shown below, and in Notes 3 and 40.1, the aforementioned deferral has also been applied to SegurCaixa Adeslas (affiliated company of the Group). The impact on the value of financial instruments associated with the application of IFRS 9 in this company is not deemed significant, due to the low credit risk of the counterparties of its financial instruments.

  The following table shows the fair value at the end of the year, differentiating between assets with cash flows that would solely represent payments of principal and interest (SPPI) in accordance with IFRS 9, and those managed by their fair value (non-SPPI):

  Compliance with SPPI Test (Millions of euros)

  	SPPI*	NON-SPPI **	TOTAL
  Financial assets not held for trading and not managed by their fair value	61,642		61,642

  Amount of the change in the fair value during 2020 (Millions of euros)

  	SPPI*	NON-SPPI **	TOTAL
  Financial assets not held for trading and not managed by their fair value	2,879		2,879

  (*) The insurance companies use a combination of financial instruments in the financial immunisation strategies to cover the risks to which their activities are exposed. For these purposes, in the investment operations of the Group's insurance business, different fixed-income securities include financial swaps which, in accordance with the sector practice and the applicable monitoring criteria, are recognised jointly, whether it is in "Available-for-sale financial assets" or in the amortised cost portfolio, and the fair value is shown in the top table.

  These financial swaps individually assessed only taking into account their legal form will not pass the SPPI test considered in IFRS 9. Following on from this, within the framework of the project to implement IFRS 9 which is ongoing in the insurance companies, the Group has analysed the different accounting alternatives considered in the regulatory framework (including hedge accounting) jointly with the main changes that will be introduced by IFRS 17 Insurance Contracts in the assessment of technical provisions; the ultimate aim of all the foregoing is to avoid asymmetries in the income statement and assets of the Group.

  As regards the fixed-income instruments, the insurance companies have not estimated as 'material' the expected loss which, in the first adoption of IFRS 9, would be recorded under reserves.

  (**) The change of the balance of assets that have not passed the SPPI test is explained by maturities occurring at the end of the year, as well as the adaptation of the financial instruments portfolio to the probable flows of the liabilities.