AVBOB Financial Statements 2018

91 NOTES TO THE REPORT OF THE INDEPENDENT ACTUARY FOR THE YEAR ENDED 30 JUNE 2018 (continued) 5. STATUTORY CAPITAL ADEQUACY REQUIREMENTS Credit risk has been allowed for this year as well as operational risk at one times the updated standard formula. 6. ALTERATIONS, NOTES AND QUALIFICATIONS The actuarial assumptions will be reviewed from time to time to reflect changes in experience and/or expectations. The off-setting management actions assumed above have been approved by specific resolution by the Board of Directors, and I am satisfied that these actions would be taken if the corresponding risks were to materialise. When calculating the OCAR, allowance may be made for the impact of authorised management action. The management action assumed in the Society is that after a material fall in asset values, the Society will remove 50% of declared non-vesting claim bonuses and will suspend future bonus declarations for a period of three years or will reduce future bonus declarations. This assumed action reduces the OCAR by R1 396,0 million. In deriving the investment resilience requirement in the ordinary capital adequacy requirement (OCAR) it was assumed that a decline of 30% in equity asset values, 15% in property values, and a 30% increase in fixed-interest asset values (as a result of a 25% reduction in fixed-interest yields) will occur, in accordance with SAP 104. The statutory capital adequacy requirement is calculated to determine whether the excess of assets over liabilities is sufficient to provide for the possibility of a significant negative departure of actual future experience from the assumptions made in calculating actuarial liabilities and for significant fluctuations in the value of assets. The capital adequacy requirement has been calculated in accordance with SAP 104. At the previous year end the Termination Capital Adequacy Requirement applied. This year the Termination Capital Adequacy Requirement again applies. The excess of the assets over the liabilities is 5.1 times (2017: 4.8 times) the capital adequacy requirement. The Capital Adequacy Requirement is assumed to be backed by a combination of equity, property, bonds and cash investments. 91