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) (f) Fair value measurements (continued) Valuation techniques and inputs used in Level 3 fair value measurements The following table presents the valuation techniques and key inputs that were used to determine the fair value of investments categorised under Level 3 of the fair value hierarchy which involves significant unobservable inputs. 2017 Fair value $’000 Classification Valuation technique Unobservable Input Assets Debt securities 902 FVPL (a) Dealers’ Quotes Default / recovery / prepay / liquidity assumptions Unquoted funds 1,746,242 AFS (b) Net Asset Value Net asset value of investment vehicles Unquoted equities 41,538 AFS (b) Net Asset Value Net asset value of investment entities Total 1,788,682 2016 Fair value $’000 Classification Valuation technique Unobservable Input Assets Debt securities 1,117 FVPL (a) Dealers’ Quotes Default / recovery / prepay / liquidity assumptions Unquoted funds 1,516,449 AFS (b) Net Asset Value Net asset value of investment vehicles Unquoted equities 42,548 AFS (b) Net Asset Value Net asset value of investment entities Total 1,560,114 (a) FVPL denotes financial instruments classified as fair value through profit or loss (b) AFS denotes financial instruments classified as available-for-sale Valuation processes of the Group Valuation of unquoted funds were based on net asset value reports as at 30 September 2017, adjusted for the net cash flows movement from 1 October 2017 until 31 December 2017. If a premium of 2.2% (2016: 2.2%) had been applied, the impact on the valuation would have been $38.41 million (2016: $33.36 million). Valuation of debt securities classified as Level 3 assets is determined based on quotes from dealers, adjusted for liquidity provision. These securities are currently in the process of being wound down. Valuation of unquoted equities that are co-operatives were valued at cost based on their realisable values as set out in the by-laws. Other unquoted equities were valued based on net tangible assets of their latest management accounts. If a premium of 3.0% (2016: 2.0%) has been applied, the impact on the valuation would have been $1.16 million (2016: $0.79 million). The carrying value less impairment provision of insurance receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated based on quoted market prices or dealer quotes for similar instruments by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. ANNUAL REPORT 2017 NTUC INCOME INSURANCE CO-OPERATIVE LIMITED 86