My first Publication ocbc_ar17_fullreport_english | Page 175

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.16 INSURANCE CONTRACTS (continued)
The table below provides the key underlying assumptions used for valuation of life insurance contract liabilities.
Valuation method
(1)
Singapore Malaysia
Gross premium valuation Gross premium valuation
For Participating Fund, the method that produces
the higher reserves of: For Participating Fund, the method that produces
the higher reserves of:
(i) Total assets backing policy benefits; (i) Guaranteed and non-guaranteed cash flows
discounted at the appropriate rate of return
reflecting the strategic asset allocation; and
(ii) Guaranteed and non-guaranteed cash flows
discounted at the appropriate rate of return
reflecting the strategic asset allocation; and
(iii) Guaranteed cash flows discounted using the
interest rate outlined under (i) below.
Interest rate (1)
(i) Singapore Government Securities (“SGS”) zero
coupon spot yields for cash flows up to year
15, an interpolation of the 15-year Singapore
Government Securities zero coupon spot yield
and the Long Term Risk Free Discount Rate
(“LTRFDR”) for cash flows between 15 and
20 years, and the LTRFDR for cash flows year
20 and after.
(ii) For Universal Life policies denominated in
US Dollar:
a) Observable market yields of US Treasury Yield
Curve Rates for cash flows up to year 30;
b) U
 ltimate forward rate (“UFR”) of 3.5%
applicable for cash flows beyond
60 years; and
c) E
 xtrapolated yields in between.
(ii) Guaranteed cash flows discounted using Malaysia
Government Securities (“MGS”) zero coupon spot
yields (as outlined below).
Malaysia Government Securities yields determined
based on the following:
(i) For cash flows with duration less than 15 years,
Malaysia Government Securities zero coupon spot
yields of matching duration.
(ii) For cash flows with duration 15 years or more,
Malaysia Government Securities zero coupon spot
yields of 15 years to maturity.
Data source: Bond Pricing Agency Malaysia
Data source: MAS website and Bloomberg
Mortality, Disability,
Dread disease, Expenses,
Lapse and surrenders (1)
(1)

Participating Fund: Participating Fund:
(i) Best estimates for Gross Premium Valuation
method (ii); (i) Best estimates for Gross Premium Valuation
method (i);
(ii) Best estimates plus provision for adverse
deviation (“PAD”) for Gross Premium Valuation
method (iii). (ii) Best estimates plus provision for risk of adverse
deviation (“PRAD”) for Gross Premium Valuation
method (ii).
Non-Participating and Non-Unit reserves of
Investment-linked Fund: Non-participating and Non-unit reserves of
Investment-linked Fund:
Best estimates plus provision for adverse deviation
(“PAD”). Best estimates plus provision for risk of adverse
deviation (“PRAD”).
Data source: Internal experience studies Data source: Internal experience studies
Refer to Note 2.24 on Critical accounting estimates and judgements.
BUILDING ON OUR CORPORATE STRATEGY FOR SUSTAINABLE GROWTH
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