My first Publication ocbc_ar17_fullreport_english | Page 246
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2017
39. RISK MANAGEMENT (continued)
39.5 INSURANCE-RELATED RISK MANAGEMENT (continued)
Market and credit risk (continued)
(b) Foreign currency risk (continued)
$ million
2016
Available-for-sale securities
Equity securities
Debt securities
Other investments
Securities at fair value through profit or loss
Equity securities
Debt securities
Other investments
Financial instruments held-for-trading
Equity securities
Debt securities
Derivative financial assets
Loans
Insurance receivables
Other debtors and interfund balances
Cash and cash equivalents
Financial and insurance-related assets
Other creditors and interfund balances
Insurance payables
Derivative financial payables
Provision for agents’ retirement benefits
Debt issued
General insurance fund contract liabilities
Life assurance fund contract liabilities
Financial and insurance-related liabilities
(1)
Not subject
to foreign
Others currency risk
SGD MYR USD
Total
2,859
13,651
2,108 3,544
12,164
182 469
9,528
1,812 4,212
591
1,089 –
–
– 11,084
35,934
5,191
104
14
1,397 1,103
555
46 250
238
278 578
249
271 –
–
– 2,035
1,056
1,992
–
485
27
531
1,013
680
2,120
24,989 7
599
–
1,065
1,560
452
875
22,152 –
#
56
13
9
99
288
13,040 –
1
2
#
23
24
244
7,284 –
–
–
–
–
1,386
–
1,386 7
1,085
85
1,609
2,605
2,641
3,527
68,851
830
942
79
–
400
93
33,384
35,728 253
2,711
–
263
–
128
17,783
21,138 99
5
613
–
–
–
1,314
2,031 59
13
45
–
–
–
431
548 1,386
–
–
–
–
–
–
1,386 2,627
3,671
737
263
400
221
52,912
60,831
# represents amounts less than $0.5 million.
GEH Group has no significant concentration of foreign currency risk.
(c) Equity price risk
Exposure to equity price risk exists in both assets and liabilities. Asset exposure exists through direct equity investment, where
GEH Group, through investments in both Shareholders’ Fund and Insurance Funds, bears all or most of the volatility in returns and
investment performance risk. Equity price risk also exists in investment-linked products where the revenues of the insurance operations
are linked to the value of the underlying equity funds since this has an impact on the level of fees earned. Limits are set for single
security holdings as a percentage of equity holdings.
(d) Credit spread risk
Exposure to credit spread risk exists in GEH Group’s investments in bonds. Credit spread is the difference between the quoted rates
of return of two different investments of different credit quality. When spreads widen between bonds with different quality ratings,
it implies that the market is factoring more risk of default on lower grade bonds. A widening in credit spreads will result in a fall in the
values of GEH Group’s bond portfolio.
(e) Alternative investment risk
GEH Group is exposed to alternative investment risk through investments in direct real estate that it owns in Singapore and Malaysia
and through real estate, private equity, infrastructure and hedge funds for exposures in other countries. A monitoring process is
in place to manage foreign exchange, country and manager concentration risks. This process and the acquisition or divestment of
alternative investments are reviewed and approved by RMC and GEH Group ALC.
244
OCBC ANNUAL REPORT 2017