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Notes to the consolidated fnancial statements (continued)

for the year ended 30 June 2011

34. Group risk management (continued)

34.5 Life risk management for fnancial instruments (continued)

34.5.3 Market risk (continued)

Life has exposure to equity risk from equity investments in its investment portfolios. Equity risk is managed by incorporating a diverse holding of Australian and overseas equities (whether direct or through unitised vehicles) and through the controlled use of derivative fnancial instruments. The table below presents a sensitivity analysis showing the impact on proft or loss and equity reserves for listed equity price movements as at the balance date with all other variables remaining constant. The price risk in relation to unlisted securities is immaterial in terms of the possible impact on proft or loss and equity reserves and has not been included in the sensitivity analysis. After tax impact on proft (loss) uses corporate tax rate of 30%. Actual after tax impact for Life business may differ. The equity price movements used in the sensitivity analysis for 2011 have been revised to refect updated assessment of the reasonable possible movements over the next 12 months given renewed observations and experience in the investment markets during the fnancial year.

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

Listed Australian equities

and unit trusts 720 +20 139 – 754 +25 160 – –20 (139) – –25 (160) – Listed international equities

and unit trusts 371 +20 57 – 322 +25 87 – –20 (57) – –25 (87) –

34.6 Corporate risk management for fnancial instruments

34.6.1 Credit risk

Corporate is exposed to credit risk primary through its investment in fnancial instruments. To mitigate this risk, fnancial instruments are only dealt on recognised exchanges and over-the-counter contracts. The counterparties to over-the-counter contracts are limited to companies with primarily investment grade credit ratings from a recognised credit rating agency and are normally banks operating in Australia. Credit management (credit rating and credit limit controls) and counterparty diversifcation policies are in place to limit exposure to any one counterparty as a proportion of the investment portfolio. The carrying amount of the relevant asset classes in the statement of fnancial position represents the maximum amount of credit exposures.

The following table provides information regarding credit risk exposure of Corporate fnancial assets, classifed according to Standard & Poor’s counterparty credit ratings. AAA is the highest possible rating. Rated assets falling outside the range of AAA to BBB are classifed as non-investment grade.

Credit Rating

Non-investment Not

AAA AA A BBB grade rated Total $m $m $m $m $m $m $m

Cash and cash equivalents – 54 18 – – – 72 Investment securities 121 334 114 2 – – 571 Accrued interest 1 3 2 – – – 6 122 391 134 2 – – 649

Cash and cash equivalents – – 42 – – – 42 – – 42 – – – 42

All Corporate fnancial assets are neither past due nor impaired as at 30 June 2011 (2010: nil).

Page 160 - Suncorp_Review

Page 160 - Suncorp_Review