Page 159 - Suncorp_Review

Suncorp Group Limited Annual Report 2010/11 157

The Life companies invest a portion of investment assets in global equities with foreign currency exposure managed by entering into forward foreign exchange and futures contracts. The Life companies also invest in several Suncorp Group related Trusts who enter into forward foreign contracts to aim to provide capital appreciation.

LIFE

2011 2010

Exposure Change in Proft (loss) Equity Exposure Change in Proft (loss) Equity at 30 June FX rate after tax reserves at 30 June FX rate after tax reserves $m % $m $m $m % $m $m

USD 129 +15 12 – 126 +10 7 – –15 (16) – –10 (10) – Other 1 102 +15 9 – 112 +10 7 – –15 (13) – –10 (10) –

Note

1 Include EUR, GBP and JPY.

(b) Interest rate risk

For Life, interest rate risk exposure arises mainly from investment in interest-bearing securities. Interest rate risk arises in respect of fnancial assets held in the shareholders’ funds and the Life Statutory Funds over liabilities. This is combined with an economic mismatch between the timing of payments to life insurance and life investment contract holders and the duration of the assets held in the Statutory Funds to back these liabilities. Where the liability to the investment contract holder is directly linked to the value of assets held to back that liability there is no residual interest rate exposure to the shareholder. Accordingly, investment-linked business is excluded from the analysis below.

The sensitivity of proft and loss after tax and equity reserves to movements in interest rates in relation to interest-bearing fnancial assets held at the balance date is shown in the table below. It is assumed that all residual exposures for the shareholder after tax are included in the sensitivity analysis, that the percentage point change occurs at the reporting date and that there are concurrent movements in interest rates and parallel shifts in the yield curves. The movements in interest rate used in the sensitivity analysis for 2011 have been revised to refect updated assessment of the reasonable possible changes in interest rate over the next 12 months given renewed observations and experience in the investment markets during the fnancial year.

LIFE

2011 2010

Exposure Change in Proft (loss) Equity Exposure Change in Proft (loss) Equity at 30 June interest rate after tax reserves at 30 June interest rate after tax reserves $m % $m $m $m % $m $m

Interest-bearing investment securities (including derivative

fnancial instruments) 1 2,590 +1.5 (60) – 1,959 +2.0 (75) – –0.6 25 – –2.0 77 – Other receivables 103 +1.5 – – 143 +2.0 2 – –0.6 – – –2.0 (2) – Other fnancial liabilities (46) +1.5 – – (72) +2.0 (1) – –0.6 – – –2.0 1 –

Note

1 Excludes interest-bearing investment securities held for investment-linked business as the shareholder has no direct interest rate risk exposure from these investment securities.