NTUC Income AR 2018

Valuation of insurance contract provisions (Refer to Note 3 and 15 to the financial statements) ii) General insurance contract provisions General insurance contract provisions include the provision for claims and loss adjustment expenses and the provision for unexpired risk. These are determined based on historical claims experience, existing knowledge of events, the terms and conditions of the relevant policies and interpretation of circumstances. Estimates have to be made for both the expected ultimate cost of claims reported at the reporting date, and for the expected ultimate cost of claims incurred but not yet reported (IBNR) at the reporting date. The estimation of general insurance contract liabilities is sensitive to various assumptions applied including most significantly the assumed loss ratio. Management judgement is applied in setting these assumptions. Changes in these assumptions used could result in a material impact to the valuation of the general insurance contract liabilities and the related movements in the statement of comprehensive income. How was the matter addressed in our audit We used our internal actuarial specialists to assist us in performing the following procedures: • Reviewed the reasonableness of the actuarial valuation methodologies used against regulatory requirements and industry practices, as applicable; • Reviewed the reasonableness of key assumptions with reference to historical trends and experience. Where applicable, we benchmarked the assumptions to other similar insurers; • Reviewed the reasonableness of the movement analysis of provisions to explain the key drivers of the changes over the year; • Re-computed the insurance contract provisions for all classes of business, using management’s selected methodologies and assumptions to ascertain the accuracy of the calculation; • Analysed independently all key classes of general insurance business using our internal actuarial selected methodology and assumptions to determine a reasonable range of best estimates, and compared the Group’s calculated result against that range; and • Considered the adequacy of disclosures in the financial statements. Findings Based on our above procedures, we considered the methodologies and assumptions used in the valuation of the general insurance contract provisions to be appropriate. We also conclude that the disclosures on the valuation methodologies and assumptions applied and sensitivity analysis (Note 3) and the insurance risk management note (Note 4(b)) to be appropriate. Independent Auditors’ Report For the Financial Year Ended 31 December 2018 33 2018 ANNUAL REPORT