NTUC Income AR 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) Insurance contract provisions for Life Insurance (continued) Valuation methodology (continued) Mortality and Morbidity A detailed review of the Group’s mortality and morbidity experience by significant risk is conducted annually. Based on the results of the review, the Group’s Appointed Actuary formed an opinion with regard to the expected future mortality and/or morbidity experience. The Group also uses industry/reinsurance mortality and/ or morbidity tables for plans that have no historical experience. A provision for adverse deviation (PAD) is also made based on the types of product. Persistency A detailed review of the Group’s persistency experience by plan types is conducted annually. The Group tries to balance past experience and future conditions by setting best-estimate assumptions in line with expected long term average persistency levels. For new plans with no historical experience, the Group uses the experience on similar plan types as a basis to set the best-estimate assumptions. Discount Rates The discount rates used in the Life Insurance Non-Par Fund are derived from the yields of Singapore Government Securities. The discount rates used in the Life Insurance Par Fund are derived based on the expected prospective long-term investment return. This is based on strategic asset allocation of the Par Fund and it is determined in conjunction with the risk and investment managers and the Investment Committee. Expenses The Group reviews and determines the management expense assumptions regularly based on past experience and future business direction of the Group. Expense inflation assumption is the weighted expected inflation rate and the inflation rates published by the Monetary Authority of Singapore (“MAS”). Assumption table The table below briefly describes the assumptions used in the valuation of provision for future participating and non-participating benefits in the Life Insurance Par Fund, Life Insurance Non-Par Fund, and Investment-Linked Fund. 2019 Assumptions Interest Rate MAS prescribed discount rate for guaranteed benefits, expected long term investment return for non-guaranteed benefits Lapse / Surrender Rate Based on internal lapse experience studies Management Expense & inflation Based on internal expense studies Mortality / Morbidity (Death, TPD, Dread Disease & Other Risk) Adjusted Mortality / Morbidity Table based on internal studies or Reinsurance rates, whichever is appropriate Mortality Rate (Annuities) Adjusted Mortality table with age reduction and mortality improvement based on internal studies Effect of changing assumptions For the valuation as at 31 December 2019, the Group has updated the liability valuation assumptions as compared to 1 January 2019. The impact of the changes to the insurance contracts provisions is listed in the following table: Fund Change in insurance contract provisions $'000 Par – Non-Par 86,067 Investment-Linked 274 70 HERE FOR SURE