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Notes to the consolidated fnancial statements (continued)

for the year ended 30 June 2011

8. Life – Specifc disclosures (continued)

8.7 Life – Net policy liabilities (continued)

8.7.2 Actuarial assumptions, judgements and estimates used in calculating policy liabilities

The following table sets out key factors affecting the determination of the policy liabilities and the critical assumptions and judgements made.

Each of the Life companies has a different mix of business, which has arisen over many years under different products, different underwriting standards and sold to different segments of the market. Experience for each of the Life companies, in relation to factors such as mortality, morbidity and lapse rates is examined in detail on at least an annual basis, with assumptions set having regard to the observed experience, the volume of internal data upon which to make inferences and other relevant factors for the Life company in question. This may lead to different assumptions for each Life company.

ASSUMPTION BASIS OF ASSUMPTION SIGNIFICANT CHANGES SINCE 2010

Investment earnings – participating business

Assumed earning rates are determined having regard to the asset mix of the investment portfolio backing the benefts, the assumed earning rates for each sector, market conditions at the valuation date and tax on investment earnings appropriate to the class of business and asset sector. See rates for each Life company in the following table.

None

Investment earnings – non-participating business

All non-participating businesses use an investment earnings and discount rate assumption of the risk-free rate. For SLSL and ALL this has been determined from the government bond curve and for ALLNZ it is derived from the swap rate curve. See rates for each Life company in the following table.

None

Maintenance expenses Per policy expense rates are based upon expected costs to service

existing contracts in the period following the reporting date. Expense rates vary by product line and class of business.

None

Infation The infation rate assumed takes into account the difference

between the long-term government bonds and indexed government bonds for Australia.

Australia 3.0% (2010: 3.0%), New Zealand 2.5% (2010: 2.5%)

None

Beneft indexation Where the increase in future benefts increases in line with infation,

the Life company has used an assumption of 2.5% (2010: 2.5%).

None

Voluntary discontinuance

Rates are based upon recent internal investigations. Rates may vary by product, class of business, policy value, age and duration in force. Allowance is also made for cash withdrawals. See rates for each Life company in the following table.

Assumed rates for ALL intermediated business have been increased.

Surrender values Surrender values are determined by applying the surrender bases

current at the reporting date.

None

Rates of taxation The rates of taxation assumed are based on current income tax

legislation applicable to the type of product.

None

Mortality – individual risk products

Mortality rates for risk products have been determined using the standard mortality table (IA95-97) which was developed by the Institute of Actuaries of Australia based on Australian insured lives experience from 1995 to 1997. See adjustment rates for each Life company in the following table.

Assumed rate of mortality for ALL intermediated lump sum business has been strengthened (although the adjusted base table is lower, underlying factors such as selection rates and smoker loadings have been increased, leading to an overall increase or strengthening); for ALLNZ intermediated lump sum business has been reduced, having regard to observed experience.