Page 71 - Suncorp_Review

Suncorp Group Limited Annual Report 2010/11 69

Claims handling expense ratio – The future claims handling ratio is calculated with reference to past experience of claims handling costs as a percentage of past payments.

Risk margin – A risk margin is added to allow for the uncertainty relating to the actuarial models and assumptions used, the quality of the underlying data used in the models, the general insurance environment and the impact of legislation reform. The overall risk margin is determined after analysing the relative uncertainty of the outstanding claims estimate for each class of business and the diversifcation between classes and geographical locations.

The assumptions regarding uncertainty for each class are applied to the net central estimates, and the results are aggregated, allowing for diversifcation, in order to arrive at an overall position which is intended to have approximately a 90% probability of suffciency (2010: 90% probability of suffciency). (e) Impact of changes in key variables

The Suncorp Group conducts sensitivity analyses to quantify the exposure to the risk of changes in the key underlying assumptions. A sensitivity analysis is conducted on each variable while holding all other variables constant. The tables below describe how a change in each assumption will affect the proft after tax and equity reserves.

Proft (loss) Equity Proft (loss) Equity after tax reserves after tax reserves Movement 2011 2011 2010 2010 in variable $m $m $m $m

Weighted average term

to settlement (years) + 0.5 (52) – (65) – – 0.5 52 – 65 – Infation rate + 1% (191) – (198) – – 1% 181 – 183 – Discount rate + 1% 178 – 186 – – 1% (195) – (205) – Claims handling expense ratio + 1% (47) – (48) – – 1% 47 – 48 – Risk margin + 1% (50) – (51) – – 1% 50 – 51 –

6.7 General Insurance – Subordinated notes

GENERAL INSURANCE

2011 2010 Due date First call $m $m

Unsecured

Financial liabilities at amortised cost

Fixed rate notes September 2024 September 2014 130 131 September 2025 September 2015 118 118 October 2026 October 2016 99 99 June 2027 June 2017 202 213 Floating rate notes September 2024 September 2014 52 52 September 2025 September 2015 77 77 Total subordinated notes – non-current 678 690

The above subordinated notes are issued by Suncorp Metway Insurance Limited, Vero Insurance Limited and Suncorp Insurance Funding 2007 Limited. Payments of principal and interest on the notes have priority over the issuing entity’s dividend payments only. In the event of the winding-up of the issuing entity, the rights of the note holders will rank in preference only to the rights of its ordinary shareholders.