NTUC Income AR 2018

Notes to the Financial Statements For the Financial Year Ended 31 December 2018 2. Summary of significant accounting policies (continued) (c) Insurance contracts (continued) (i) Recognition and measurement (continued) Life Insurance Contracts (continued) Claims (continued) If the insurance benefit arising from a death claim exceeds the surrender value of an investment-linked policy, the additional benefit exceeding the surrender value is paid out of the Life Insurance Par Fund for products introduced prior to 2009 and paid out of the Investment-Linked Fund for products introduced from 2009. Bonuses to policyholders All participating life insurance contracts have discretionary participating features. These features entitle the policyholders to receive, as a supplement to guaranteed benefits, additional benefits or bonuses. Reversionary bonuses and cash dividends declared are based on the results of annual actuarial valuations in accordance with Insurance Regulations as advised by the Appointed Actuary. The amount or timing of the bonus declaration is not guaranteed, and is at the sole discretion of the Group. The Board of Directors approves the amount of bonus declared to policyholders of participating plans every year. Insurance contract provisions The valuation of insurance contract liabilities is determined according to the Insurance Act and Insurance (Valuation and Capital) Regulations 2004 for life insurance funds. The measurement bases for investment- linked insurance contracts and contracts with discretionary participation features issued by the Group all reflect changes in the fair value of the investments backing the contracts. Changes in the value of all insurance contract liabilities are included in profit or loss. (i) Life Insurance Par Fund Provision for future participating and certain non-participating benefits in the Life Insurance Par Fund are established using a discounted prospective cash-flow method. It includes the current best estimate of future contractual premiums, expected claims, provisions for adverse deviation and the costs of maintaining the contracts and future renewal expenses. The liability in respect of the Life Insurance Par Fund is the highest of the gross premium valuation method, the minimum condition liability or the value of policy assets of the fund. (ii) Life Insurance Non-Par Fund Insurance contract provisions in the Life Insurance Non-Par Fund include provisions for future non- participating benefits, claims and loss adjustment expenses, provisions for adverse deviation and unexpired risks. Provision for future non-participating benefits is established using a discounted prospective cash-flowmethod. It includes the current best estimate of future contractual premiums, expected claims, provisions for adverse deviation and the costs of maintaining the contracts and future renewal expenses. Provisions for claims and loss adjustment expenses and unexpired risks are established based on the same approach used in the General Insurance Fund. (iii) Investment-Linked Fund Provision for investment-linked insurance contracts is based on the carrying amount of the net assets of the Investment-Linked Fund at the reporting date. Provisions for future non unit liabilities are based on the same approach used in the Life Insurance Non-Par Fund. 52 HAND IN HAND