NTUC Income AR 2018

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for qualified opinion section, we have determined the matters described below to be the key audit matters to be communicated in our report. Valuation of insurance contract provisions (Refer to Note 3 and 15 to the financial statements) The key audit matter The Group’s insurance business comprises life and general insurance contracts. The Group has significant insurance contract provisions representing more than 90% of its total liabilities. Valuation of insurance contract provisions is inherently judgmental and subjective. The methodologies and assumptions adopted are crucial to the valuation of the insurance contract provisions so that sufficient amounts are held to meet expected obligations. i) Life insurance contract provisions Economic assumptions such as investment return and interest rates, and non-economic assumptions such as mortality, morbidity and policyholder persistency are some of the key inputs used to estimate the Group’s life insurance contract liabilities. In addition to historical experience, management judgement is involved in the application of these assumptions. Changes in these assumptions used could result in a material impact to the valuation of the life insurance contract liabilities and the related movements in the consolidated statement of comprehensive income. How was the matter addressed in our audit We used our internal actuarial specialists to assist us in performing the following procedures: • Reviewed the reasonableness of the actuarial valuation methodologies used against regulatory requirements and industry practices, as applicable; • Reviewed the reasonableness of key assumptions with reference to historical trends and experience. Where applicable, we benchmarked the assumptions to other similar insurers; • Reviewed the relevant experience investigations to verify that the assumptions applied are consistent with the Group’s experience; • Reviewed the reasonableness of the movement analysis of provisions to explain the key drivers of the changes during the year; and • Considered the adequacy of disclosures in the financial statements. Findings Based on our above procedures, we considered the methodologies and assumptions used in the valuation of the life insurance contract provisions to be appropriate. We also conclude that the disclosures on the valuation methodologies and assumptions applied and sensitivity analysis (Note 3) and the insurance risk management note (Note 4 (a)) to be appropriate. Independent Auditors’ Report For the Financial Year Ended 31 December 2018 32 HAND IN HAND