NTUC Income AR 2018

Notes to the Financial Statements For the Financial Year Ended 31 December 2018 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: 2018 Fair value $’000 Classification Valuation technique Unobservable Input Assets Debt securities 801 FVPL (a) Dealers’ Quotes Default / recovery / prepay / liquidity assumptions Unquoted funds 1,935,472 AFS (b) Net Asset Value Net asset value of investment vehicles Unquoted equities 43,242 AFS (b) Net Asset Value Net asset value of investment entities Total 1,979,515 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 (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 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 funds were based on net asset value reports as at 30 September 2018, adjusted for the net cash flows movement from 1 October 2018 until 31 December 2018. If a discount of 0.4% (2017: premium of 2.2%) had been applied, the impact on the valuation would have been $7.74 million (2017: $38.41 million). Valuation of unquoted equities that are co-operatives were valued at cost as set out in their By-laws, subjected to impairment assessment. Other unquoted equities were valued based on net tangible assets of their latest management accounts. If a premium of 2.8% (2017: 3.0%) has been applied, the impact on the valuation would have been $1.09 million (2017: $1.16 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. 88 HAND IN HAND