37. Management of risks (continued) 37.3 b. 2023 2022 R'm R'm 123 (136) (123) 136 c. Currency risk The Group’s operations in Namibia does not result in additional sources of foreign currency risk due to the fact that there is no exchange difference between the Namibian Dollar and the South African Rand. The asset managers and multi managers actively manage the currency risk when decisions are made in regard to investing internationally. All international investment returns are shown in US Dollars and the effect of the trading in different currencies is reflected in the investment performance which is measured against an internal benchmark. In terms of legislation, up to 45% of the South African long-term insurance company’s investments may be invested in foreign currency and hence that Company has less than 45% exposure to currency risk. The limit for the Namibian long-term insurance company in terms of local legislation is 55% of assets can be invested outside of Namibia. The potential impact of currency movements on the share prices of domestic equities with significant foreign currency earnings is addressed by the asset managers and multi managers in their assessment of the appropriate equities to hold in their mandates with PPS. The Group holds a significant portfolio of equities which are subject to price movements. The majority of these assets are held to support contractual liabilities arising from unit-linked insurance contracts, contracts with DPF and investment contracts and therefore the price movements are matched with corresponding movements on contractual obligations. The exposure to equities is managed to ensure that the Group’s internal capital requirements are met at all times, as well as those mandated by the Group’s external regulators. Benchmarks and risk parameters are set against which the Group measures the asset managers and multi managers. A monthly compliance statement is provided by each asset manager and regular updates from the multi-manager are received stating their adherence to the investment mandate, and highlighting any deviations and the corrective action to be taken to rectify the deviations. The performance of the assets against benchmarks, and the adherence to mandates, are monitored monthly by management. The asset managers and multi managers present the performance against benchmarks and adherence to mandates, The Group has some exposure to the Australian Dollar due to the income from the Australian associate. The income from this territory mitigates the currency not on foreign currency denominated expenses incured by the Group and provides income in hard currency to the Group. The assets held at year-end in Australian Dollars is not material. The international assets’ currency sensitivity on profit before tax is shown below: Equity price risk Group Currency risk South African Rand exchange rate decrease: 1% South African Rand exchange rate increase: 1% 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 tax is shown below: Financial risk management (continued) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2023 223 Notes to the Consolidated Financial Statements
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