2012 Financial Statements - Workers' Compensation Board

Fair value classification hierarchy
The fair value of WCB’s investments recorded on the Statement of Financial Position was determined using
one of the following valuation techniques:
Level 1
Level 2
Level 3
The fair value is based on quoted prices in active markets for identical assets or liabilities. This level
includes equity securities and derivative contracts that are traded in an active exchange market.
The fair value is based on inputs, other than Level 1 prices, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs based on observable
market data. Includes pooled funds invested in traded securities, as well as derivative contracts
whose value is determined using a pricing model with inputs that are observable in the market or
can be derived principally from or corroborated by observable market data.
The fair value is based on unobservable inputs that are significant to the fair value of the assets or
liabilities and have little or no market activity. This level includes financial instruments whose value
is determined using pricing models, discounted cash flow methodologies or similar techniques,
as well as instruments for which the determination of fair value requires significant management
judgment or estimation. This category includes pooled funds invested in debt securities, private
equity, real estate and infrastructure.
The table below summarizes the basis of fair value measurements for financial assets held in WCB’s
investment portfolio:
($ thousands)
Fair value through income
Level 1 Level 2 Level 3
Fair Value
Amortized
Cost 5
2012
2011
Fixed income
Nominal bonds
Mortgages 1
Equities
Domestic
Foreign 2
Inflation-sensitive
Real estate 3
Infrastructure 4
Real-return bonds
Derivatives
$ 1,976
-
1,976
539,327
1,376,933
1,916,260
187,594
321,651
-
509,245
2,427,481
-
$ 2,427,481
$ 1,977,500
-
1,977,500
262,573
889,358
1,151,931
3,955
-
569,837
573,792
3,703,223
(15,118)
$ 3,688,105
$ 147,622
484,776
632,398
-
-
-
961,059
370,124
-
1,331,183
1,963,581
-
$ 1,963,581
$ 2,127,098
484,776
2,611,874
801,900
2,266,291
3,068,191
1,152,608
691,775
569,837
2,414,220
8,094,285
(15,118)
$ 8,079,167
$ 27,138
-
27,138
3,193
55,935
59,128
649
7,692
1,174
9,515
95,781
-
$ 95,781
$ 2,154,236
484,776
2,639,012
805,093
2,322,226
3,127,319
1,153,257
699,467
571,011
2,423,735
8,190,066
(15,118)
$ 8,174,948
$ 1,843,154
424,294
2,267,448
658,783
1,957,472
2,616,255
1,023,708
533,299
547,318
2,104,325
6,988,028
29,763
$ 7,017,791
1
Mortgages include commercial mortgages and multi-unit mortgages, but do not include single-dwelling residential mortgages.
2
Foreign equities comprise U.S., EAFE (Europe, Australasia and Far East), and Emerging Market mandates.
3
Real estate investments include pooled funds invested in commercial properties.
4
Infrastructure consists of a pooled fund invested in infrastructure projects.
5
Includes portfolio cash, receivables and payables whose cost approximates fair value.
Transfers between Levels 1 and 2
There were no material transfers between Level 1 and Level 2 during 2012.
2012 FINANCIAL STATEMENTS and notes 53