173 / 203
PPS
INTEGRATED REPORT 2018
172
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
(continued)
for the year ended 31 December 2018
The nature of the Group’s exposures to equity risk and its objectives, policies and processes
for managing equity risk have not changed significantly from the prior period. The assets have
performed well compared to the benchmark. This coupled with the long-term view that PPS
takes towards its investments, means that the long-term asset strategy and asset allocations have
remained unchanged.
The Equity price risk sensitivity on profit before movement in insurance liabilities is shown below:
2018
2017
Group
R'000
R'000
Equity Price risk
Price decrease: 1%
(270 477)
(277 241)
Price increase: 1%
270 477
277 241
Market risk sensitivity analysis
The table below shows the results of sensitivity testing on the Group’s profit or loss (before tax) and
equity for reasonable possible changes in the risk variables. The sensitivity analysis indicates the effect
of changes in market risk factors arising from the impact of the changes in these factors on the Group’s
financial assets and liabilities and its insurance assets and liabilities.
For the DPF insurance liabilities and investment contracts the assets and liabilities are matched.
The market risk is thus carried by policyholders. The impact of any change in the market risk will be
in the movement to/from insurance policy liabilities on the Statement of Profit or Loss and Other
Comprehensive Income.
The only other impact is the change in the investment management fees, which will fluctuate as a
percentage of the movement in the assets.
This is also disclosed within the movement in policy liabilities on the Statement of Profit or Loss and
Other Comprehensive Income. Therefore a market risk sensitivity analysis has not been included for
this component of the business.
The market risk sensitivity is shown below:
Contracts with non-DPF
Impact on profit/(loss)
before movement
in insurance
policy holder liability
2018
2017
Group
R'000
R'000
Interest rate risk
Decrease of 1% in Yield Curve
(1 814 064)
(1 482 318)
Increase of 1% in Yield Curve
1 365 076
1 106 453
The effect of changes in the net capital value of non-DPF contracts due to market movements are
fully absorbed by adjusting the net capital value of DPF contracts resulting in a zero impact on total
net capital of the Group.
35. MANAGEMENT OF RISKS
(continued)
35.3
Financial risk management
(continued)