NTUC Income AR 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 4. MANAGEMENT OF INSURANCE AND FINANCIAL RISKS (CONTINUED) (c) Financial risk (continued) (i) Market risk (continued) (b) Interest-rate risk (continued) A study of fixed income securities’ yield movement during the previous periods has been undertaken and a 100bps change in yield across the different curves is considered to be a reasonable basis for interest rate sensitivity analysis. The table below summarises the impact on net operating surplus and equity based on a 100bps parallel shift in the yield curves: 2017 Impact on net operating surplus $’000 Impact on equity $’000 Parallel shift in yield curves +100 bps (1,321,101) (36,955) -100 bps 1,514,248 39,742 2016 Impact on net operating surplus $’000 Impact on equity $’000 Parallel shift in yield curves +100 bps (1,205,958) (32,699) -100 bps 1,379,414 36,222 (c) Foreign currency risk The Group operates mainly in Singapore, with over 99% (2016: 99%) of its insurance liabilities denominated in Singapore Dollars. The Group mitigates the potential foreign currency risks arising from its investment in financial assets through hedging. The potential foreign currency risks arising from the investment in foreign currency denominated bonds are hedged back into Singapore Dollars using foreign exchange forward contracts and currency swaps. ANNUAL REPORT 2017 EVERY DAY MADE DIFFERENT 75