UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 28, 2008
Enstar Group Limited
(Exact name of registrant as specified in its charter)
 	 	 	 	 	
Bermuda	 	001-33289	 	N/A	
 	 	 	 	 	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	

P.O. Box HM 2267, Windsor Place, 3rd Floor
18 Queen Street, Hamilton HM JX Bermuda	 	
N/A	
 	 	 	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (441) 292-3645
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o	 	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 	 	 	
o	 	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 	 	 	
o	 	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 	 	 	
o	 	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

 
     We are amending the Current Report on Form 8-K that we filed on March 5, 2008 to include the Financial Statements of Business Acquired and Pro Forma Financial Information set forth below under Item 9.01 Financial Statements and Exhibits.
Item 9.01. Financial Statements and Exhibits.
 	 	 	
(a)	 	Financial Statements of Business Acquired.	
 	 	 	
 	 	The required financial statements are attached hereto as Exhibits 99.1 through 99.5 and are incorporated in their entirety herein by reference.	
 	 	 	
(b)	 	Pro Forma Combined Financial Information.	
 	 	 	
 	 	The required pro forma combined financial information is attached hereto as Exhibit 99.6 and is incorporated in its entirety herein by reference.	
 	 	 	
(d)	 	Exhibits.	
 	 	 	
23.1	 	Consent of Ernst & Young for Church Bay Limited (formerly AMPG (1992) Limited).	
 	 	 	
23.2	 	Consent of Ernst & Young for Gordian Runoff Limited.	
 	 	 	
23.3	 	Consent of Ernst & Young for TGI Australia Limited.	
 	 	 	
23.4	 	Consent of Ernst & Young for Enstar Australia Limited (formerly Cobalt Solutions Australia Limited).	
 	 	 	
23.5	 	Consent of Ernst & Young for Harrington Sound Limited (formerly AMP General Insurance Limited).	
 	 	 	
99.1	 	Audited financial statements for Church Bay Limited (formerly AMPG (1992) Limited).	
 	 	 	
99.2	 	Audited financial statements for Gordian Runoff Limited.	
 	 	 	
99.3	 	Audited financial statements for TGI Australia Limited.	
 	 	 	
99.4	 	Audited financial statements for Enstar Australia Limited (formerly Cobalt Solutions Australia Limited).	
 	 	 	
99.5	 	Audited Financial Statements for Harrington Sound Limited (formerly AMP General Insurance Limited).	
 	 	 	
99.6	 	Pro Forma Condensed Combined Consolidated Financial Statements of Enstar Group Limited as of December 31, 2007 (Unaudited).	

 
SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 	 	 	 	 	
 	 	ENSTAR GROUP LIMITED	 	 	
 	 	 	 	 	
Date: May 21, 2008	 	By: /s/ Richard J. Harris
  Richard J. Harris	 	 	
 	 	Chief Financial Officer	 	 	

 
EXHIBIT INDEX
23.1	 	Consent of Ernst & Young for Church Bay Limited (formerly AMPG (1992) Limited).	
 	 	 	
23.2	 	Consent of Ernst & Young for Gordian Runoff Limited.	
 	 	 	
23.3	 	Consent of Ernst & Young for TGI Australia Limited.	
 	 	 	
23.4	 	Consent of Ernst & Young for Enstar Australia Limited (formerly Cobalt Solutions Australia Limited).	
 	 	 	
23.5	 	Consent of Ernst & Young for Harrington Sound Limited (formerly AMP General Insurance Limited).	
 	 	 	
99.1	 	Audited financial statements for Church Bay Limited (formerly AMPG (1992) Limited).	
 	 	 	
99.2	 	Audited financial statements for Gordian Runoff Limited.	
 	 	 	
99.3	 	Audited financial statements for TGI Australia Limited.	
 	 	 	
99.4	 	Audited financial statements for Enstar Australia Limited (formerly Cobalt Solutions Australia Limited).	
 	 	 	
99.5	 	Audited Financial Statements for Harrington Sound Limited (formerly AMP General Insurance Limited).	
 	 	 	
99.6	 	Pro Forma Condensed Combined Consolidated Financial Statements of Enstar Group Limited as of December 31, 2007 (Unaudited).	

Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements No. 333-149551, No. 333-148863, No. 333-148862, and No. 333-141793 on Form S-8, pertaining to the Enstar Group Limited Employee Share Purchase Plan, Enstar Group Limited Deferred Compensation and Ordinary Share Plan for Non-Employee Directors, The Enstar Group, Inc. 1997 Omnibus Incentive Plan and The Enstar Group, Inc. 2001 Outside Directors Stock Option Plan, and Enstar Group Limited 2006 Equity Incentive Plan, our reports dated May 15, 2008, with respect to the financial statements of Church Bay Limited (formerly AMPG (1992) Limited) as of and for the years ended December 31, 2007, 2006 and 2005 included in the Current Report on Form 8-K/A of Enstar Group Limited dated May 19, 2008 filed with the Securities and Exchange Commission.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008

Exhibit 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements No. 333-149551, No. 333-148863, No. 333-148862, and No. 333-141793 on Form S-8, pertaining to the Enstar Group Limited Employee Share Purchase Plan, Enstar Group Limited Deferred Compensation and Ordinary Share Plan for Non-Employee Directors, The Enstar Group, Inc. 1997 Omnibus Incentive Plan and The Enstar Group, Inc. 2001 Outside Directors Stock Option Plan, and Enstar Group Limited 2006 Equity Incentive Plan, our reports dated May 15, 2008, with respect to the financial statements of Gordian Runoff Limited as of and for the years ended December 31, 2007, 2006 and 2005 included in the Current Report on Form 8-K/A of Enstar Group Limited dated May 19, 2008 filed with the Securities and Exchange Commission.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008

Exhibit 23.3
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements No. 333-149551, No. 333-148863, No. 333-148862, and No. 333-141793 on Form S-8, pertaining to the Enstar Group Limited Employee Share Purchase Plan, Enstar Group Limited Deferred Compensation and Ordinary Share Plan for Non-Employee Directors, The Enstar Group, Inc. 1997 Omnibus Incentive Plan and The Enstar Group, Inc. 2001 Outside Directors Stock Option Plan, and Enstar Group Limited 2006 Equity Incentive Plan, our reports dated May 15, 2008, with respect to the financial statements of TGI Australia Limited as of and for the years ended December 31, 2007, 2006 and 2005 included in the Current Report on Form 8-K/A of Enstar Group Limited dated May 19, 2008 filed with the Securities and Exchange Commission.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008

Exhibit 23.4
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements No. 333-149551, No. 333-148863, No. 333-148862, and No. 333-141793 on Form S-8, pertaining to the Enstar Group Limited Employee Share Purchase Plan, Enstar Group Limited Deferred Compensation and Ordinary Share Plan for Non-Employee Directors, The Enstar Group, Inc. 1997 Omnibus Incentive Plan and The Enstar Group, Inc. 2001 Outside Directors Stock Option Plan, and Enstar Group Limited 2006 Equity Incentive Plan, our reports dated May 15, 2008, with respect to the financial statements of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited) as of and for the years ended December 31, 2007, 2006 and 2005 included in the Current Report on Form 8-K/A of Enstar Group Limited dated May 19, 2008 filed with the Securities and Exchange Commission.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008

Exhibit 23.5
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements No. 333-149551, No. 333-148863, No. 333-148862, and No. 333-141793 on Form S-8, pertaining to the Enstar Group Limited Employee Share Purchase Plan, Enstar Group Limited Deferred Compensation and Ordinary Share Plan for Non-Employee Directors, The Enstar Group, Inc. 1997 Omnibus Incentive Plan and The Enstar Group, Inc. 2001 Outside Directors Stock Option Plan, and Enstar Group Limited 2006 Equity Incentive Plan, our reports dated May 15, 2008, with respect to the financial statements of Harrington Sound Limited (formerly AMP General Insurance Limited) as of and for the years ended December 31, 2007, 2006 and 2005 included in the Current Report on Form 8-K/A of Enstar Group Limited dated May 19, 2008 filed with the Securities and Exchange Commission.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008

Exhibit 99.1
CHURCH BAY LIMITED
(formerly AMPG (1992) LIMITED)
ABN 42 000 488 362
FINANCIAL REPORT
31 DECEMBER 2007
Contents:
 	 	 	 	 	
 	 	Page	
Financial Report	 	 	 	 	
Financial Statements	 	 	 	 	
- Income Statement	 	 	1	 	
- Balance Sheet	 	 	2	 	
- Statement of Changes in Equity	 	 	3	 	
- Cash Flow Statement	 	 	4	 	
Notes to the Financial Statements	 	 	5	 	
Report of Independent Auditors	 	 	32	 	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Income Statement
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Notes	 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct premium revenue	 	 	 	 	 	 	5,327	 	 	 	7,064	 	
Outwards reinsurance premium expense	 	 	 	 	 	 	533	 	 	 	1,078	 	
 	 	 	 	 	 	 	
Net premium revenue	 	 	4	 	 	 	4,794	 	 	 	5,986	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct claims benefit	 	 	 	 	 	 	(51,042	)	 	 	(67,239	)	
Reinsurance and other recoveries (expense)	 	 	 	 	 	 	(17,623	)	 	 	(13,017	)	
 	 	 	 	 	 	 	
Net claims incurred	 	 	5	 	 	 	(33,419	)	 	 	(54,222	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other underwriting Income	 	 	 	 	 	 	8,695	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Underwriting result	 	 	 	 	 	 	46,908	 	 	 	60,208	 	
Net investment revenue	 	 	6	 	 	 	445,035	 	 	 	494,893	 	
General administration expenses	 	 	7	 	 	 	135,067	 	 	 	131,995	 	

Net profit before tax	 	 	 	 	 	 	356,876	 	 	 	423,106	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense attributable to operating profit	 	 	8	 	 	 	125,684	 	 	 	111,429	 	

Net profit attributable to members of Church Bay Limited (formerly AMPG(1992) Limited)	 	 	 	 	231,192	 	 	 	311,677	 	
 	 	 	 	 	 	 	
The above Income Statement should be read in conjunction with the accompanying notes.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	1 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Balance Sheet
As at 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Notes	 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	22	 	 	 	6,878,030	 	 	 	6,854,659	 	
Receivables	 	 	9	 	 	 	74,202	 	 	 	39,955	 	
Reinsurance & other recoveries receivable	 	 	10	 	 	 	14,706	 	 	 	24,613	 	
Other Financial assets	 	 	11	 	 	 	446,009	 	 	 	466,353	 	
Other	 	 	12	 	 	 	2,592	 	 	 	533	 	
 	 	 	 	 	 	 	
Total Current Assets	 	 	 	 	 	 	7,415,539	 	 	 	7,386,113	 	

Non-Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance & other recoveries receivable	 	 	10	 	 	 	10,789	 	 	 	18,505	 	
Deferred tax assets	 	 	8	 	 	 	21,894	 	 	 	22,208	 	
 	 	 	 	 	 	 	
Total Non-Current Assets	 	 	 	 	 	 	32,683	 	 	 	40,713	 	
 	 	 	 	 	 	 	
Total Assets	 	 	 	 	 	 	7,448,222	 	 	 	7,426,826	 	

Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Unearned premium liability	 	 	13	 	 	 	—	 	 	 	2,523	 	
Outstanding claims liability	 	 	14	 	 	 	31,958	 	 	 	53,216	 	
Payables	 	 	15	 	 	 	10,000	 	 	 	11,892	 	
Current tax liability	 	 	 	 	 	 	122,397	 	 	 	276,904	 	
 	 	 	 	 	 	 	
Total Current Liabilities	 	 	 	 	 	 	164,355	 	 	 	344,535	 	

Non-Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Unearned premium liability	 	 	13	 	 	 	—	 	 	 	2,805	 	
Outstanding claims liability	 	 	14	 	 	 	10,789	 	 	 	40,573	 	
Deferred tax liabilities	 	 	8	 	 	 	15,734	 	 	 	12,761	 	
 	 	 	 	 	 	 	
Total Non-Current Liabilities	 	 	 	 	 	 	26,523	 	 	 	56,139	 	
 	 	 	 	 	 	 	
Total Liabilities	 	 	 	 	 	 	190,878	 	 	 	400,674	 	
 	 	 	 	 	 	 	
Net Assets	 	 	 	 	 	 	7,257,344	 	 	 	7,026,152	 	

Shareholders’ Equity	 	 	 	 	 	 	 	 	 	 	 	 	
Issued Capital	 	 	16	 	 	 	41,784,468	 	 	 	41,784,468	 	
Accumulated losses	 	 	 	 	 	 	(34,527,124	)	 	 	(34,758,316	)	
 	 	 	 	 	 	 	
Total Shareholders’ Equity	 	 	 	 	 	 	7,257,344	 	 	 	7,026,152	 	
 	 	 	 	 	 	 	
The above Balance Sheet should be read in conjunction with the accompanying notes.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	2 of 32 	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Statement of Changes in Equity
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Issued Capital	 	 	Accumulated	 	 	Total	 	
 	 	 	 	 	Losses	 	 	 	 	
 	 	$	 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as at 1 January 2007	 	 	41,784,468	 	 	 	(34,758,316	)	 	 	7,026,152	 	
Net Profit after income tax	 	 	—	 	 	 	231,192	 	 	 	231,192	 	
 	 	 	
Balance as at 31 December 2007	 	 	41,784,468	 	 	 	(34,527,124	)	 	 	7,257,344	 	

Balance as at 1 January 2006	 	 	62,526,468	 	 	 	(35,069,992	)	 	 	27,456,476	 	
Net Profit after income tax	 	 	—	 	 	 	311,676	 	 	 	311,676	 	
Other changes in equity	 	 	(20,742,000	)	 	 	—	 	 	 	(20,742,000	)	
 	 	 	
Balance as at 31 December 2006	 	 	41,784,468	 	 	 	(34,758,316	)	 	 	7,026,152	 	
 	 	 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	3 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Cash Flow Statement
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Notes	 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	
Receipts from customers and reinsurers	 	 	 	 	 	 	2,010	 	 	 	411,364	 	
Claims paid	 	 	 	 	 	 	(1	)	 	 	—	 	
Payments to customers, suppliers and employees	 	 	 	 	 	 	(116,300	)	 	 	(116,478	)	
Interest received	 	 	 	 	 	 	414,567	 	 	 	371,319	 	
Income tax paid	 	 	 	 	 	 	(276,905	)	 	 	(1,208,351	)	
 	 	 	 	 	 	 	
 	 	 	22	 	 	 	23,371	 	 	 	(542,146	)	

Cash flows from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Repayment of loan from related party	 	 	 	 	 	 	—	 	 	 	20,742,000	 	
Payment for capital reduction	 	 	 	 	 	 	—	 	 	 	(20,742,000	)	
 	 	 	 	 	 	 	
 	 	 	 	 	 	 	—	 	 	 	—	 	

Net increase in cash held	 	 	22	 	 	 	23,371	 	 	 	(542,146	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash at the beginning of the year	 	 	 	 	 	 	6,854,659	 	 	 	7,396,805	 	

Cash at the end of the year	 	 	 	 	 	 	6,878,030	 	 	 	6,854,659	 	
 	 	 	 	 	 	 	
The above Cash Flow Statement should be read in conjunction with the accompanying notes.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	4 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value.
Accounting judgements and estimates
In the course of its operations the company applies judgements and makes estimates that affect the amounts recognised in the financial report. Estimates are based on a combination of historical experience and expectations of future events that are believed to be reasonable at the time.
Accounting Standards issued but not yet effective
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2007, except IFRS8 Operating Segments. The adoption of IFRS8 has removed the requirement for Operating Segment disclosures in this Financial Report.
When applied in future periods, all other recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
Changes in accounting policy
Since 1 January 2007, the company has adopted a number of Accounting Standards and Interpretations which were mandatory for annual periods beginning on or after 1 January 2007. Adoption of these Standards and Interpretations has not had any effect on the financial position or performance of the Company.
Operating revenue
Operating revenue comprises general insurance earned premiums, recoveries, interest income and investment income. Investment income is brought to account on an accrual basis.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	5 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Premium revenue and unearned premium
(i) Premium revenue
Premium revenue comprises premium from direct business.
Premium revenue comprises amounts charged to the policyholder or other insurers, excluding stamp duties, GST and other amounts collected on behalf of third parties. The earned portion of premiums received and receivable is recognised as operating revenue.
Premium revenue is recognised in the income statement when it has been earned. Premium revenue is recognised in the income statement from the attachment date over the period of the contract. Where time does not approximate the pattern of risk, previous claims experience is used to derive the incidence of risk.
The proportion of premium received or receivable not earned in the income statement at the reporting date is recognised in the balance sheet as an unearned premium liability. Actuarial techniques are used to estimate the ultimate premium and are based on historical premium booking patterns.
(ii) Unearned premiums
Unearned premiums represent premium revenue attributable to future accounting periods. Unearned premium is determined by apportioning the premiums written in the year over the period of insurance cover, reflecting the pattern in which risk emerges under these policies.
Outward reinsurance premium expense and deferred reinsurance premium
Premiums ceded to reinsurers are recognised as an expense over the period of cover using the methods applicable to premium revenue as set out above.
Outstanding claims
The liability for outstanding claims is measured as the best estimate of the present value of expected future payments against claims incurred at the reporting date under general insurance contracts issued by the Company, with an additional risk margin to allow for the inherent uncertainty in the best estimate.
The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs.
Claims handling costs include costs that can be associated directly with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as claims administration costs.
The expected future payments are discounted to present value using a risk free rate.
A risk margin is applied to the outstanding claims liability, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the central estimate. This risk margin increases the probability that the net liability is adequately provided for to a 75% confidence level.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	6 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reinsurance and other recoveries
Reinsurance and other recoveries consist of receivables on paid claims and outstanding claims, and are recognised as revenue when claims are paid or the outstanding claim is raised. Reinsurance receivables are discounted to present value consistent with the discounting of outstanding claims set out above.
Investment income
Interest income is recognised in the income statement on an effective interest method when the entity obtains control of the right to receive the revenue.
Realised gains and losses represent the change in value between the previously reported value and the amount received on sale of the asset. Unrealised gains and losses represent changes in the fair value of financial assets recognised in the period.
Assets backing general insurance liabilities
The Company has determined that all assets are held to back general insurance liabilities on the basis that all assets of the Company are available for the settlement of claims if required.
The following policies apply:
Financial assets
Financial assets are designated at fair value through profit or loss. Initial recognition is at cost in the balance sheet and subsequent measurement is at fair value with any resultant unrealised gains or losses recognised in the income statement. Details of fair value for the different types of financial assets are listed below:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount. For the purposes of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value.
Debt securities
Debt securities are initially recognised at fair value, representing the purchase cost of the asset exclusive of any transaction costs. Debt securities are subsequently measured at fair value, with any realised and unrealised gains or losses arising from changes in the fair value being recognised in the income statement for the period in which they arise. The fair value of a traded interest bearing security reflects the bid price at balance date. Interest bearing securities that are not frequently traded are valued by discounting the estimated recoverable amounts, using prevailing interest rates.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	7 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxes
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to: (i) temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and (ii) unused tax losses.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. The tax impact on income and expense items recognised directly in equity is also recognised directly in equity.
Tax Consolidation
AMP Limited, Church Bay Limited (formerly AMPG(1992) Limited) and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
(i) Current tax balances arising from external transactions recognised by entities in the tax-consolidated group occurring after the implementation date, and;
(ii) Deferred tax assets arising from unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement.
Assets and liabilities which arise as a result of differences between the periods in which the underlying transactions occur, and the period in which the funding payments under the tax funding agreement are made, are recognised as intercompany balances receivable and payable in the balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.
The entity will be required to make a payment to terminate its liability under the tax funding agreement if it leaves the tax consolidation group.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	8 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Goods and services tax
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.
Foreign currency transactions and translation
Functional and Presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The presentation currency of this financial report, and the functional currency of the parent entity, is Australian dollars.
Transactions and balances
Income and expense items denominated in a currency other than the functional currency are translated at the spot exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at balance sheet date, with exchange gains and losses recognised in the income statement. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Receivables
Receivables are financial assets and are measured at fair value. Given the short-term nature of most receivables, the recoverable amount approximates fair value.
Payables
Creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Amounts Due To or From Related Parties
Amounts are carried at fair value being nominal amounts due and payable. Interest is taken up as income on an accrual basis. A provision for impairment is recognised when there is objective evidence that the related party will not be able to pay its debt.
Issued Capital
Issued and paid up capital is recognised at the fair value of the consideration received by the company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	9 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Company makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas in which critical estimates and judgements are applied are described below.
(a) The ultimate liability arising from claims made under insurance contracts
Provision is made at the year end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Company.
The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, where more information about the claim event is generally available. IBNR claims may often not be reported to the insurer until many years after the events giving rise to the claims has happened. In calculating the estimated cost of unpaid claims the Company uses a variety of estimation techniques, generally based upon statistical analyses of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
 	•	 	changes in the legal environment	
 	 	 	 	
 	•	 	changes in the economic environment	
 	 	 	 	
 	•	 	the impact of large losses	
 	 	 	 	
 	•	 	movements in industry benchmarks	
A component of these estimation techniques is usually the estimation of the cost of notified but not paid claims. In estimating the cost of these the Company has regard to the claim circumstance as reported, any information available from loss adjusters and information on the cost of settling claims with similar characteristics in previous period.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions.
Details of specific assumptions used in deriving the outstanding claims liability at year-end are detailed below.
(b) Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also calculated using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Company may not receive amounts due to it and these amounts can be reliably measured.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	10 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)
(c) Process used to determine assumptions
The company wrote one class of business: lenders mortgage insurance. Lenders mortgage insurance is short tail in nature, meaning that claims are typically settled within one year of being reported. Claims estimates are derived from analysis of the results of several different actuarial models. These models take past defaults and claim payments into account and assume that reported claims will develop steadily from period to period. Other models apply a loss ratio to each loan that reflects loan data, past claims experience and industry benchmarks.
A description of the processes used to determine these assumptions is provided below:
Average weighted term to settlement
The average weighted term to settlement is calculated separately by class of business based on historic settlement patterns.
Reinsurance percentage
The reinsurance percentage is calculated based on past reinsurance recovery rates and the structure of the reinsurance arrangements in place.
Discount rate
Discount rates derived from market yields on Commonwealth Government securities as at the balance date have been adopted.
Expense rate
Claims handling expenses are calculated based on projected costs of administering the remaining claims until expiry.
Average claim amount
The average claim amount is estimated by considering historical settlement amounts, industry benchmarks and sensitivity testing.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	11 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)
(d) Sensitivity analysis — insurance contracts
Summary
The Company conducts sensitivity analyses to quantify the exposure to risk of changes in the key underlying variables. The valuations included in the reported results are calculated using certain assumptions about these variables as disclosed above. The movement in any key variable will impact the performance and equity of the Company. The tables below describe how a change in each assumption will affect the insurance liabilities and show an analysis of the sensitivity of the profit/(loss) to changes in these assumptions both gross and net of reinsurance.
 	 	 	
Variable	 	Impact of movement in variable	
Average weighted term to settlement	 	Expected payment patterns are used in determining the outstanding claims liability. A decrease in the average term to settlement rates would lead to claims being paid sooner than anticipated (increase in outstanding claims liability).	
 	 	 	
Reinsurance percentage	 	The company assumes money will be recoverable from reinsurers on future claims paid. A decrease in the reinsurance percentage would lead to a reduction in expected recoveries and an increase outstanding claims liability. Similarly, an increase in the reinsurance percentage would result in a reduction in the outstanding claims liability.	
 	 	 	
Discount rate	 	The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money. An increase or decrease in the assumed discount rate will have an opposing impact on outstanding claims liability.	
 	 	 	
Expense rate	 	An estimate for the internal costs of administering claims is included in the outstanding claims liability. An increase or decrease in the expense rate assumption would have a corresponding impact on claims expense and outstanding claims liability.	
 	 	 	
Average claim amount	 	Average claim size is used in determining the outstanding claim liability. An increase or decrease in the average claim amount assumption would have a corresponding impact on the outstanding claims liability.	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	12 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)
The company successfully commuted its portfolio with AMP Bank Ltd. As a result the only remaining risk is 100% reinsured. There is no impact to profit or loss from changes in variables and therefore no impact to the financial statements.
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Variable	 	Change in	 	Assumption at 12/06	 	Change in Shareholder	
 	 	Variable	 	 	 	 	 	Profit/(loss) (after tax)	
 	 	 	 	Gross	 	Net	 	Gross $	 	Net $	
Average weighted term to settlement	 	+0.5yr	 	1.06yr	 	1.02yr	 	 	—	 	 	—	
 	 	-0.5yr	 	 	 	 	 	 	 	 	 	 	—	 	 	—	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reins % (as % of Gross Outstanding Claims)	 	+1%	 	 	n/a	 	 	 	99.8	%	 	 	—	 	 	—	
 	 	-1%	 	 	 	 	 	 	 	 	 	 	—	 	 	—	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate	 	+1%	 	 	5.9	%	 	 	5.9	%	 	 	—	 	 	—	
 	 	-1%	 	 	 	 	 	 	 	 	 	 	—	 	 	—	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate (as % of Outstanding Claims)	 	+1%	 	 	97	%	 	 	83	%	 	 	(305	)	 	—	
 	 	-1%	 	 	 	 	 	 	 	 	 	 	305	 	 	—	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Claim Amount	 	+10%	 	 	20,216	 	 	 	n/a	 	 	 	(3,194	)	 	 	(35	)	
 	 	-10%	 	 	 	 	 	 	 	 	 	 	3,194	 	 	 	35	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	13 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
3. EVENTS OCCURRING AFTER THE REPORTING DATE
On 11 December 2007 a Sale and Purchase Agreement was entered into by the ultimate parent AMP Limited and Enstar Australia Holdings Pty Ltd for the sale of the entity.
The sale was subject to a number of conditions including regulatory approval by the Australian Prudential Regulatory Authority (APRA) who subsequently approved the Sale Agreement on 22 February 2008. The sale was then completed on 5 March 2008. Enstar Australia Holdings Pty Ltd assumed ownership of the company at this point.
4. NET PREMIUM REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Movement in unearned premiums	 	 	5,327	 	 	 	7,064	 	
 	 	 	
Premium revenue	 	 	5,327	 	 	 	7,064	 	
Outwards reinsurance premiums	 	 	533	 	 	 	1,078	 	

Net premium revenue	 	 	4,794	 	 	 	5,986	 	
 	 	 	
5. NET CLAIMS INCURRED
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	Current	 	 	Prior years	 	 	Total	 	 	Current	 	 	Prior	 	 	Total	 	
 	 	year	 	 	 	 	 	 	 	 	year	 	 	years	 	 	 	 	
 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	
Gross claims expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross claims incurred — undiscounted	 	 	—	 	 	 	(51,042	)	 	 	(51,042	)	 	 	—	 	 	 	(67,239	)	 	 	(67,239	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount movement	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	
 	 	 	—	 	 	 	(51,042	)	 	 	(51,042	)	 	 	—	 	 	 	(67,239	)	 	 	(67,239	)	

Reinsurance and other recoveries revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries — undiscounted	 	 	—	 	 	 	17,623	 	 	 	17,623	 	 	 	—	 	 	 	13,017	 	 	 	13,017	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount movement	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	
 	 	 	—	 	 	 	17,623	 	 	 	17,623	 	 	 	—	 	 	 	13,017	 	 	 	13,017	 	
 	 	 	
Net claims incurred	 	 	—	 	 	 	(33,419	)	 	 	(33,419	)	 	 	—	 	 	 	(54,222	)	 	 	(54,222	)	
 	 	 	
Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the risks borne in all previous financial years.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	14 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
6. NET INVESTMENT REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
Investment income	 	 	 	 	 	 	 	 	
Interest	 	 	455,898	 	 	 	415,805	 	
Interest from related parties	 	 	 	 	 	 	 	 	
— other related parties	 	 	—	 	 	 	84,224	 	
Changes in fair value of investments	 	 	 	 	 	 	 	 	
Unrealised	 	 	(10,863	)	 	 	(5,136	)	
 	 	 	
Total net investment revenue	 	 	445,035	 	 	 	494,893	 	
 	 	 	
7. General Administration Expenses
 	 	 	 	 	 	 	 	 	
Expenses by Nature	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Net gain on foreign currency	 	 	9,567	 	 	 	15,849	 	
Other management fees	 	 	100,000	 	 	 	100,000	 	
External consultant costs	 	 	20,000	 	 	 	10,000	 	
Other expenses	 	 	5,500	 	 	 	6,146	 	
 	 	 	
Total Expenses	 	 	135,067	 	 	 	131,995	 	

 	 	 	

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	15 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
8. INCOME TAX
(a) Analysis of income tax expense
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Current tax	 	 	101,822	 	 	 	267,409	 	
Decrease in deferred tax assets	 	 	314	 	 	 	9,270	 	
Increase/(Decrease) in deferred tax liabilities	 	 	2,974	 	 	 	(165,250	)	
Under provided in previous years	 	 	20,574	 	 	 	—	 	

Income tax expense	 	 	125,684	 	 	 	111,429	 	
 	 	 	
(b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period.
In respect of income tax expense attributable to shareholders, the tax rate which applies in both 2007 and 2006 is 30% for Australia.
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Operating profit before income tax	 	 	356,876	 	 	 	423,106	 	
 	 	 	 	 	 	 	 	 	
Prima facie income tax at the rate of 30%	 	 	107,063	 	 	 	126,932	 	
 	 	 	 	 	 	 	 	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Non assessable income	 	 	—	 	 	 	(6,717	)	
Under provided in prior years — deferred tax balances	 	 	20,574	 	 	 	—	 	
All other items	 	 	(1,953	)	 	 	(8,786	)	
 	 	 	
Income tax expense per income statement	 	 	125,684	 	 	 	111,429	 	

(c) Analysis of deferred tax asset	 	 	 	 	 	 	 	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Indirect Claims Costs Adjustments	 	 	5,176	 	 	 	14,618	 	
- Accrued Expenses	 	 	3,000	 	 	 	—	 	
- Unrealised gains/losses	 	 	13,718	 	 	 	7,590	 	
 	 	 	
Total deferred tax assets	 	 	21,894	 	 	 	22,208	 	

(d) Analysis of deferred tax liability	 	 	 	 	 	 	 	 	
Amounts recognised in income	 	 	 	 	 	 	 	 	
- Accrued Interest Receivable	 	 	15,734	 	 	 	12,761	 	
 	 	 	
Total deferred tax liability	 	 	15,734	 	 	 	12,761	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	16 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
9. RECEIVABLES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Interest free advance	 	 	 	 	 	 	 	 	
- Other related parties	 	 	—	 	 	 	1,000	 	
Receivable from related parties	 	 	 	 	 	 	 	 	
- Other related parties	 	 	21,754	 	 	 	—	 	
Other	 	 	52,448	 	 	 	38,955	 	
 	 	 	
Total receivables	 	 	74,202	 	 	 	39,955	 	
 	 	 	
10. REINSURANCE AND OTHER RECOVERIES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
Expected future reinsurance recoveries undiscounted	 	 	 	 	 	 	 	 	
- on outstanding claims	 	 	25,495	 	 	 	45,548	 	
- Discount to present value	 	 	—	 	 	 	(2,431	)	

Reinsurance and other recoveries receivable	 	 	25,495	 	 	 	43,118	 	

Reinsurance recoveries receivable-current	 	 	14,706	 	 	 	24,613	 	
Reinsurance recoveries receivable- non current	 	 	10,789	 	 	 	18,505	 	
 	 	 	
 	 	 	25,495	 	 	 	43,118	 	
 	 	 	
11. OTHER FINANCIAL ASSETS
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Quoted Investments- at fair value:	 	 	 	 	 	 	 	 	
Government bonds	 	 	446,009	 	 	 	466,353	 	
Total current investments	 	 	446,009	 	 	 	466,353	 	
 	 	 	
Total other financial assets	 	 	446,009	 	 	 	466,353	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	17 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
12. OTHER ASSETS
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Current deferred reinsurance premiums	 	 	—	 	 	 	533	 	
Prepayments	 	 	2,592	 	 	 	—	 	
 	 	 	
Total current other assets	 	 	2,592	 	 	 	533	 	

Deferred reinsurance premiums as at 1 January	 	 	533	 	 	 	1,611	 	
Earning of reinsurance premiums	 	 	(533	)	 	 	(1,078	)	
 	 	 	
Deferred reinsurance premiums as at 31 December	 	 	—	 	 	 	533	 	
 	 	 	
13. UNEARNED PREMIUM LIABILITY
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Current unearned premium	 	 	—	 	 	 	2,523	 	
Non-current unearned premium	 	 	—	 	 	 	2,804	 	
 	 	 	
Total unearned premium	 	 	—	 	 	 	5,327	 	

Unearned premium liability as at 1 January	 	 	5,327	 	 	 	12,391	 	
Earning of premiums written in previous periods	 	 	(5,327	)	 	 	(7,064	)	
 	 	 	
Unearned premium liability as at 31 December	 	 	—	 	 	 	5,327	 	
 	 	 	
The unearned premium liability was found to be sufficient for the current and prior periods, as a result no unexpired risk liability has been raised.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	18 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
14. OUTSTANDING CLAIMS
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Central estimate	 	 	44,463	 	 	 	95,234	 	
Risk margin	 	 	—	 	 	 	1,555	 	
 	 	 	
 	 	 	44,463	 	 	 	96,789	 	
Discount to present value	 	 	(1,716	)	 	 	(3,000	)	
 	 	 	
Gross outstanding claims liability	 	 	42,747	 	 	 	93,789	 	

Current	 	 	31,958	 	 	 	53,216	 	
Non-current	 	 	10,789	 	 	 	40,573	 	
 	 	 	
Total outstanding claims	 	 	42,747	 	 	 	93,789	 	
 	 	 	
Process for determining risk margin
The risk margin was determined, allowing for the uncertainty of the outstanding claims estimate for each portfolio. As the remaining policies are 100% reinsured, with no net exposure, and the claim administration fee is fixed, no risk margin is held for Church Bay Limited (formerly AMPG(1992) Limited).
 	 	 	 	 	 	 	 	 	
Risk margins applied	 	2007	 	 	2006	 	
 	 	 	 	 	 	 	 	 	
Mortgage insurance	 	 	0	%	 	 	16	%	
Reconciliation of movement in discounted outstanding claims liability
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2007	 	
 	 	Gross	 	 	Reins	 	 	Net	 	
 	 	$	 	 	$	 	 	$	 	
Amount outstanding brought forward	 	 	93,789	 	 	 	44,118	 	 	 	49,671	 	
less Claim payments/recoveries received in the period	 	 	(1	)	 	 	—	 	 	 	(1	)	
Effect of change in discounting	 	 	4,464	 	 	 	2,402	 	 	 	2,062	 	
Effect of change in assumptions	 	 	(55,505	)	 	 	(21,025	)	 	 	(34,480	)	
 	 	 	
Outstanding amount carried forward	 	 	42,747	 	 	 	25,495	 	 	 	17,252	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2006	 	
 	 	Gross	 	 	Reins	 	 	Net	 	
 	 	$	 	 	$	 	 	$	 	
Amount outstanding brought forward	 	 	161,028	 	 	 	57,127	 	 	 	103,901	 	
less Claim payments/recoveries received in the period	 	 	—	 	 	 	—	 	 	 	—	 	
Effect of change in discounting	 	 	4,384	 	 	 	2,215	 	 	 	2,169	 	
Effect of change in assumptions	 	 	(71,623	)	 	 	(15,224	)	 	 	(56,399	)	
 	 	 	
Outstanding amount carried forward	 	 	93,789	 	 	 	44,118	 	 	 	49,671	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	19 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
Claims Development Table
Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the risks borne in all previous financial years.
The Company is closed to new business and there have been no new mortgage insurance contracts issued in the six years prior and to and including this report.
As described in Note 1, the outstanding claims liability is the best estimate of the present value of the expected future payments, after the inclusion of a risk margin. At each balance date, the amount of the liability is reassessed and it is likely that changes will arise in the estimates of liabilities. The table under shows the estimates of total ultimate claims at successive year ends.
 	 	 	 	 	 	 	 	 	
 	 	Net	 	 	Gross	 	
 	 	$	 	 	$	 	
31 December 2001	 	 	170,132	 	 	 	31,568,123	 	
31 December 2002	 	 	165,072	 	 	 	31,207,548	 	
31 December 2003	 	 	155,042	 	 	 	31,150,804	 	
31 December 2004	 	 	151,690	 	 	 	31,109,688	 	
31 December 2005	 	 	149,957	 	 	 	31,115,553	 	
31 December 2006	 	 	149,411	 	 	 	31,120,753	 	
31 December 2007	 	 	148,999	 	 	 	31,096,197	 	
Current estimate of cumulative claims	 	 	148,999	 	 	 	31,096,197	 	
Cumulative payments	 	 	148,999	 	 	 	31,068,987	 	
 	 	 	
Undiscounted central estimate	 	 	—	 	 	 	27,210	 	
 	 	 	 	 	 	 	 	 	
Effect of discounting	 	 	—	 	 	 	1,716	 	
 	 	 	
Discounted central estimate	 	 	—	 	 	 	25,494	 	

Risk margin	 	 	 	 	 	 	0	 	
Claims handling provision	 	 	 	 	 	 	17,253	 	
 	 	 	 	 	 	 	 	
Outstanding Claims as per the balance sheet	 	 	 	 	 	 	42,747	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	20 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
15. PAYABLES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Other creditors	 	 	10,000	 	 	 	8,686	 	
Other borrowings from related parties	 	 	 	 	 	 	 	 	
— other related parties	 	 	—	 	 	 	3,206	 	

 	 	 	10,000	 	 	 	11,892	 	
 	 	 	
16. ISSUED CAPITAL
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Paid up capital	 	 	 	 	 	 	 	 	
 	 	 	
62,526,468 ordinary shares at $0.67 each (2006:62,526,468 ordinary shares at $0.67 each)	 	 	41,784,468	 	 	 	41,784,468	 	

Movement in share capital	 	 	 	 	 	 	 	 	
Balance beginning of the year	 	 	41,784,468	 	 	 	62,526,468	 	
Capital return 62,526,468 shares at $0.33 each	 	 	—	 	 	 	(20,742,000	)	
 	 	 	
 	 	 	41,784,468	 	 	 	41,784,468	 	
 	 	 	
Rights attaching to Ordinary Shares
Ordinary shares attract the following rights:
 	(a)	 	to receive notice of and to attend and vote at all general meetings of the Company;

 	(b)	 	to receive dividends; and	
 	 	 	 	
 	(c)	 	in a winding up, to participate equally in the distribution of the assets of the Company (both capital and surplus), subject only to any amounts unpaid on the Share.	
17. FRANKING ACCOUNT
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies were transferred to the Head Entity, AMP Limited.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	21 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
18. KEY MANAGEMENT PERSONNEL
The following individuals were the key management personnel of Church Bay Limited (formerly AMPG(1992) Limited) , for the current and prior reporting periods (unless stated otherwise):
 	 	 	
Peter Clarke	 	 	
Richard Grellman	 	 	
Paul Leaming	 	31-12-2007, Appointed	
William Roberts	 	 	
Felix Zaccar	 	 	
Peter Hodgett	 	31-12-2007, Resigned	
Andrew Mohl	 	31-12-2007, Resigned	
The following table provides aggregate details of the compensation of key management personnel of Church Bay Limited (formerly AMPG(1992) Limited).
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term	 	Post-	 	Other	 	 	 	 	 	 	
 	 	employee	 	employment	 	long-term	 	Termination	 	Share-based	 	 	
 	 	benefits	 	benefits	 	benefits	 	benefits	 	payments	 	Total	
Year	 	$	 	$	 	$	 	$	 	$	 	$	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2007	 	 	6,396,418	 	 	 	204,889	 	 	 	—	 	 	 	7,667,817	 	 	 	2,837,771	 	 	 	17,106,895	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2006	 	 	6,306,101	 	 	 	205,061	 	 	 	—	 	 	 	—	 	 	 	2,318,215	 	 	 	8,829,377	 	
Key management personnel disclosed above, also provided services to other related entities during the year. The above remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to Church Bay Limited (formerly AMPG(1992) Limited).
19. AUDITOR’S FEES
Auditors’ remuneration for the year ended 31 December 2007 is paid on the Company’s behalf by a controlled entity within the AMP Limited Group.
20. CONTINGENT LIABILITIES
There are no contingent liabilities as at 31 December 2007 (2006: Nil).
21. RELATED PARTIES
Transactions between Church Bay Limited (formerly AMPG(1992) Limited) and other related parties during the financial year consisted of:
 	•	 	Interest receivable on loans to related parties	
 	 	 	 	
 	•	 	Payment of management fees for services provided	
Controlling Entity
The immediate parent entity as at 31 December 2007 is Shelly Bay Holdings Limited (formerly AMP General Insurance Holdings Limited). AMP Limited is the ultimate parent entity at 31 December 2007.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	22 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
21. RELATED PARTIES (continued)
Directors
The directors of the Company during the financial year, and the dates of appointments and resignations during the year are:
 	 	 	
Peter Clarke	 	 	
Richard Grellman	 	 	
Paul Leaming	 	31-12-07, Appointed	
William Roberts	 	 	
Felix Zaccar	 	 	
Peter Hodgett	 	 	
Andrew Mohl	 	31-12-07, Resigned	
Other Transactions
The directors and their director related entities receive normal dividends on their ordinary share holdings in AMP Limited.
Other transactions with directors of the Company and their director-related entities.
During the year, transactions were entered into between Directors or their Director related entities and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and include:
•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	
•	 	the purchase of AMP superannuation and related products;	
 	 	 	
•	 	Financial investment services;	
 	 	 	
•	 	Other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of AMP’s financial statements, or discharge of accountability by the Directors. The transactions are considered to be trivial or domestic in nature.
Transactions within the wholly owned group
The aggregate amounts brought to account in respect of the following types of transactions and each class of related party involved were:
AMP Services Limited and Enstar Australia Ltd (formerly Cobalt Solutions Australia Limited), both related entities within the wholly owned group, provide operational and administrative (including employee related) services to the entity. The services provided are in the normal course of the business and are on normal commercial terms and conditions.
The Company settled an interest-bearing loan to AMP Finance Services Limited, a related entity within the wholly owned group. This transaction was made under normal terms and conditions.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	23 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
21. RELATED PARTIES (continued)
Amounts attributable to transactions with entities in the wholly-owned group
Operating profit before income tax for the financial year includes aggregate amounts attributable to transactions in respect of:
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Interest Revenue — other related parties	 	 	—	 	 	 	84,224	 	
Management Expense — other related parties	 	 	100,000	 	 	 	100,000	 	

Amounts receivable from and payable to entities in the wholly-owned group	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Aggregate amounts receivable at balance date from:	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Interest receivable — other related parties	 	 	—	 	 	 	1,000	 	
Loan — other related parties	 	 	—	 	 	 	—	 	
 	 	 	
Aggregate amounts payable at balance date from:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Payables — other related parties	 	 	—	 	 	 	3,000	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	24 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
22. CASH FLOW RECONCILIATION
(i) Reconciliation of cash
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Cash balance comprises:	 	 	 	 	 	 	 	 	
Cash at call	 	 	751,954	 	 	 	728,583	 	
Cash on deposit	 	 	6,126,076	 	 	 	6,126,076	 	
 	 	 	
 	 	 	6,878,030	 	 	 	6,854,659	 	

(ii) Reconciliation of net cash flows from operating activities to operating profit after income tax	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Operating profit after income tax	 	 	231,192	 	 	 	311,676	 	
 	 	 	 	 	 	 	 	 	
Changes in net market value of investments	 	 	10,863	 	 	 	4,524	 	
FX Gains & Losses	 	 	9,567	 	 	 	15,849	 	
Changes in assets and liabilities net of the effects of acquisitions:	 	 	 	 	 	 	 	 	
(Increase)/ decrease in receivables and other assets	 	 	(36,391	)	 	 	276,522	 	
(Increase)/ decrease in reinsurance and other recoveries receivable	 	 	17,623	 	 	 	16,302	 	
Increase/(decrease) in payables	 	 	(1,892	)	 	 	3,206	 	
Increase/(decrease) in current tax liabilities	 	 	(154,508	)	 	 	(940,941	)	
(Decrease)/ increase in unearned premiums	 	 	(5,327	)	 	 	(7,064	)	
(Decrease)/ increase in outstanding claims	 	 	(51,042	)	 	 	(67,239	)	
(Decrease)/ increase in deferred tax liabilities net of future tax benefit	 	 	3,286	 	 	 	(155,981	)	

Net cash inflows / (outflows) from operating activities	 	 	23,371	 	 	 	(543,146	)	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	25 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
23. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS
The company’s policies and procedures in respect of managing risks are set out in this note below.
The Board has ultimate responsibility for risk management and governance, including ensuring an appropriate risk framework is in place and is operating effectively. There are, however, other bodies and individuals associated with the Company that manage and monitor financial risk.
The Board
The Board is responsible for the approval of policy regarding shareholder capital investment strategy, policyholder asset and liability strategy and setting the financial risk appetite.
The Audit Committee
The Audit Committee is responsible for ensuring the existence of effective financial risk management policies and procedures.
The RMS and REMS identify the Company’s policies and procedures, processes and controls that comprise its risk management and control systems. These systems address all material risks, financial and non-financial, likely to be faced by the Company. Annually, the Board certifies to APRA that adequate strategies have been put in place to monitor those risks, that the Company has systems in place to ensure compliance with legislative and prudential requirements and that the Board has satisfied itself as to the compliance with the RMS and REMS. The RMS and REMS have been approved by both the Board and APRA.
Key aspects of the processes established in the RMS to mitigate risks include:
 	•	 	A formal regular process of risk identification and evaluation, supplemented by a documented control assessment process, is completed by management and communicated to the Board in line with the Board approved Risk Management Strategy.	
 	 	 	 	
 	•	 	Actuarial models, using information from management information systems, to monitor claims patterns and other relevant statistics. Past experience and statistical methods are used as part of the process.	
 	 	 	 	
 	•	 	The maintenance and use of various specialist information systems, which provide up to date and reliable data on claims liabilities.	
 	 	 	 	
 	•	 	Documented procedures that are followed by claims staff that are experienced in the various classes of business previously written.	

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	26 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
23. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (continued)
Risk and Mitigation
The Company’s activities expose it to a variety of risks.
The major risks associated with insurance contracts include:
a)	 	Development of claims	
 	 	 	
 	 	There is a possibility that changes may occur in the estimate of our obligations at the end of a contract period. The tables in note 14 show the estimates of total ultimate claims at successive year-ends.	
 	 	 	
b)	 	Terms and conditions of direct and inwards reinsurance business	
 	 	 	
 	 	There is limited scope to improve the existing terms and conditions. The company has been in orderly run off since 2000, and no new contracts have been entered into since that time.	
 	 	 	
c)	 	Concentration of insurance risk	
 	 	 	
 	 	The exposure to concentrations of insurance risk has been mitigated with the purchase of reinsurance where management believes that the price /risk transfer is suitable.	
Financial risks include:
Market risk
a)	 	Interest rate risk	
 	 	 	
 	 	Interest rate risk arises to the extent that there is a mismatch between the fixed-interest portfolios used to back the outstanding claims liability and those outstanding claims. The interest rate risk is managed by matching the duration profiles of the investments assets and the outstanding claims liability.	
 	 	 	
 	 	The accounting policy notes describe the policies used to measure and report the assets and liabilities of the Company. Where the applicable market value is determined by discounting future cash flows, movements in interest rates will result in a reported unrealised gain or loss in the profit and loss account.	
 	 	 	
 	 	The Company is well capitalized and funds are held in liquid fixed interest term deposits.	
 	 	 	
 	 	Interest rate sensitivity analysis	
 	 	 	
 	 	The following table demonstrates the impact of a 100 basis point change in Australian interest rates, with all other variables held constant, on the company’s shareholder profit after tax. It is assumed that the change occurs as at the reporting date (31 December) and there are concurrent movements in interest rates and parallel shifts in yield curves.	

 	 	31 Dec 07	 	31 Dec 06	
 	 	Impact on	 	Impact on	
 	 	Profit after tax	 	Profit after tax	
Change in Variable	 	$	 	$	
+100 basis points	 	 	(7,900	)	 	 	(8,300	)	
- 100 basis points	 	 	8,000	 	 	 	8,400	 	

b)	 	Foreign Currency risk analysis	
 	 	 	
 	 	The Company’s financial assets are primarily dominated in Australian dollar with a small exposure in New Zealand Dollars via its branch operations in New Zealand.	

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	27 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
23. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (continued)
Liquidity risk
Liquidity risk is the risk that the Company will not be able to met its debt obligations or other cash outflows as they fall due because of lack of liquid assets. The Company manages liquidity risk by maintaining adequate reserves in short term cash. As required by APRA prudential Standard GPS 220, the Company has developed and implemented a risk management strategy which is described earlier in this note to control this risk.
The table below summaries the maturity profile of the company’s financial liabilities at 31 December based on contractual undiscounted obligations.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	
 	 	Up to 1	 	 	More than 1	 	 	 	 	
 	 	year	 	 	year	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	10,000	 	 	 	—	 	 	 	10,000	 	
 	 	 	
Total	 	 	10,000	 	 	 	—	 	 	 	10,000	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	
 	 	Up to 1	 	 	More than 1	 	 	 	 	
 	 	year	 	 	year	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	11,892	 	 	 	—	 	 	 	11,892	 	
 	 	 	
Total	 	 	11,892	 	 	 	—	 	 	 	11,892	 	
 	 	 	
Credit risk
Credit risk is the risk of loss that arises from a counterparty failing to meet their contractual commitments in full and on time, or from losses arising from the change in value of traded financial instruments as a result of changes in credit risk on that instrument.
The Company has exposure to the significant counterparty PMI Mortgage Insurance Limited for its reinsurance and ANZ for its investment. Both of these are regularly reviewed and maintained for changes.
Credit exposure by credit rating
The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the Company’s credit rating of counter parties:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	Reinsurance &	 	 	Financial	 	 	Reinsurance &	 	 	Financial	 	
 	 	Other Recoveries	 	 	Instruments	 	 	Other Recoveries	 	 	Instruments	 	
 	 	$	 	 	$	 	 	$	 	 	$	 	
AAA	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
AA	 	 	25,495	 	 	 	6,930,478	 	 	 	43,118	 	 	 	6,893,614	 	
A	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
BBB	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Below BBB	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Not rated	 	 	—	 	 	 	21,754	 	 	 	—	 	 	 	1,000	 	

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	28 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
23. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (continued)
The following table provides an aged analysis of financial assets neither past due or impaired, past due and not impaired and impaired assets. Impairment is calculated in accordance with note 1.
31 Dec 07
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Neither	 	 	 	 	 	 	
 	 	past due	 	 	 	 	 	 	
 	 	nor	 	Past due but not impaired	 	 	 	 	
 	 	impaired	 	<365 days	 	>365 days	 	Impaired	 	Total	
Receivables	 	 	74,202	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	74,202	 	
Reinsurance and other recoveries receivable	 	 	25,495	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	25,495	 	
31 Dec 06
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Neither	 	 	 	 	 	 	
 	 	past due	 	 	 	 	 	 	
 	 	nor	 	Past due but not impaired	 	 	 	 	
 	 	impaired	 	<365 days	 	>365 days	 	Impaired	 	Total	
Receivables	 	 	39,955	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	39,955	 	
Reinsurance and other recoveries receivable	 	 	43,118	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	43,118	 	
Fair Value
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenue and expenses are recognised, in respect of each class of financial asset, financial liability and other investments are under and in Note 1.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	29 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
23. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (continued)
Categories of financial instruments
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial assets	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value through the profit and loss:	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables	 	 	10	 	 	 	74,202	 	 	 	39,955	 	
Cash & cash equivalents	 	 	23	 	 	 	6,878,030	 	 	 	6,854,659	 	
The recorded bid price equates to net fair value for listed debt and equity securities. For derivative contracts, fair value equates to the unrealised gain/loss on the outstanding contract. For the following financial instruments, the cost carrying amount is considered to equate to their fair value:
•	 	cash deposits	

•	 	receivables	

•	 	payables.	
CAPITAL MANAGEMENT
The Company is subject to externally imposed capital management requirements. The Company must comply with Capital requirements as specified under APRA General Insurance Prudential Standards.
The primary capital management objective is to ensure the company will be able to continue as a going concern while minimising excess capital through capital initiatives where appropriate.
The Company’s capital position is monitored by the Company’s Board. There have been no changes in the capital management objectives, policies and processes from the previous period.
The company has at all times during the current and prior financial year complied with the externally imposed capital requirements imposed by Prudential Standard GPS110 and the requirements set out in its insurance license.
The Minimum Capital Requirement (MCR) as a ratio of the Company’s capital base is shown in the table under.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	30 of 32	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2007
23. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (continued)
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	
Tier 1 Capital	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Paid up ordinary shares	 	 	41,784,468	 	 	 	41,784,468	 	
 	 	 	 	 	 	 	 	 	
Retained earnings	 	 	(34,758,316	)	 	 	(35,069,992	)	
Current year earnings	 	 	231,193	 	 	 	311,676	 	
Less: Deductions	 	 	(6,160	)	 	 	(9,447	)	
 	 	 	
Net tier 1 capital	 	 	7,251,185	 	 	 	7,016,705	 	

Net tier 2 capital	 	 	—	 	 	 	—	 	

Total capital base	 	 	7,251,185	 	 	 	7,016,705	 	

Minimum capital requirement	 	 	5,000,000	 	 	 	5,000,000	 	
 	 	 	 	 	 	 	 	 	
Capital adequacy multiple	 	 	1.45	 	 	 	1.40	 	

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	31 of 32	

 

Report of Independent Auditors
The Board of Directors of Church Bay Limited (formerly AMPG (1992) Limited)
We have audited the accompanying balance sheets of Church Bay Limited (formerly AMPG (1992) Limited) as of December 31, 2007 and 2006, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Church Bay Limited (formerly AMPG (1992) Limited) at December 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008
Liability limited by a scheme
approved under Professional
Standards Legislation

 
CHURCH BAY LIMITED
(formerly AMPG (1992) LIMITED)
ABN 42 000 488 362
FINANCIAL REPORT
31 DECEMBER 2006
Contents:
 	 	 	 	 	
 	 	Page	 	
Financial Report	 	 	 	 	
Financial Statements	 	 	 	 	
- Income Statement	 	 	1	 	
- Balance Sheet	 	 	2	 	
- Statement of Changes in Equity	 	 	3	 	
- Cash Flow Statement	 	 	4	 	
Notes to the Financial Statements	 	 	5	 	
Report of Independent Auditors	 	 	30	 	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Income Statement
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Notes	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct premium revenue	 	 	 	 	 	 	7	 	 	 	22	 	
Outwards reinsurance premium expense	 	 	 	 	 	 	1	 	 	 	3	 	
 	 	 	 	 	 	 	
Net premium revenue	 	 	4	 	 	 	6	 	 	 	19	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct claims benefit	 	 	 	 	 	 	(67	)	 	 	(250	)	
Reinsurance and other recoveries (expense)/ revenue	 	 	 	 	 	 	(13	)	 	 	9	 	
 	 	 	 	 	 	 	
Net claims incurred	 	 	5	 	 	 	(54	)	 	 	(259	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Underwriting result	 	 	 	 	 	 	60	 	 	 	278	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment revenue	 	 	6	 	 	 	495	 	 	 	1,497	 	
General administration expenses	 	 	7	 	 	 	132	 	 	 	180	 	

Net profit before tax	 	 	 	 	 	 	423	 	 	 	1,595	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense attributable to operating profit	 	 	8	 	 	 	111	 	 	 	482	 	

Net profit attributable to members of Church Bay Limited (formerly AMPG(1992) Limited)	 	 	 	 	 	 	312	 	 	 	1,113	 	
 	 	 	 	 	 	 	
The above Income Statement should be read in conjunction with the accompanying notes.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	1 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Balance Sheet
As at 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Notes	 	 	$’000	 	 	$’000	 	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	23	 	 	 	6,855	 	 	 	7,397	 	
Receivables	 	 	10	 	 	 	40	 	 	 	4,282	 	
Reinsurance & other recoveries receivable	 	 	11	 	 	 	25	 	 	 	33	 	
Financial Assets at Fair Value	 	 	12	 	 	 	466	 	 	 	474	 	
Other	 	 	13	 	 	 	1	 	 	 	1	 	
 	 	 	 	 	 	 	
Total Current Assets	 	 	 	 	 	 	7,387	 	 	 	12,187	 	

Non-Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance & other recoveries receivable	 	 	11	 	 	 	19	 	 	 	24	 	
Financial Assets at Fair Value	 	 	12	 	 	 	—	 	 	 	16,791	 	
Deferred tax assets	 	 	8	 	 	 	22	 	 	 	31	 	
Other	 	 	13	 	 	 	—	 	 	 	1	 	
 	 	 	 	 	 	 	
Total Non-Current Assets	 	 	 	 	 	 	41	 	 	 	16,847	 	

Total Assets	 	 	 	 	 	 	7,428	 	 	 	29,034	 	

Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Unearned premium liability	 	 	14	 	 	 	3	 	 	 	7	 	
Outstanding claims liability	 	 	15	 	 	 	53	 	 	 	93	 	
Payables	 	 	16	 	 	 	12	 	 	 	9	 	
Current tax liabilities	 	 	 	 	 	 	277	 	 	 	1,218	 	
 	 	 	 	 	 	 	
Total Current Liabilities	 	 	 	 	 	 	345	 	 	 	1,327	 	

Non-Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Unearned premium liability	 	 	14	 	 	 	3	 	 	 	5	 	
Outstanding claims liability	 	 	15	 	 	 	41	 	 	 	68	 	
Deferred tax liabilities	 	 	8	 	 	 	13	 	 	 	178	 	
 	 	 	 	 	 	 	
Total Non-Current Liabilities	 	 	 	 	 	 	57	 	 	 	251	 	

Total Liabilities	 	 	 	 	 	 	402	 	 	 	1,578	 	

Net Assets	 	 	 	 	 	 	7,026	 	 	 	27,456	 	

Shareholders’ Equity	 	 	 	 	 	 	 	 	 	 	 	 	
Issued Capital	 	 	17	 	 	 	41,784	 	 	 	62,526	 	
Accumulated losses	 	 	 	 	 	 	(34,758	)	 	 	(35,070	)	
 	 	 	 	 	 	 	
Total Shareholders’ Equity	 	 	 	 	 	 	7,026	 	 	 	27,456	 	
 	 	 	 	 	 	 	
The above Balance Sheet should be read in conjunction with the accompanying notes.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	2 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Statement of Changes in Equity
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Issued Capital	 	 	Accumulated	 	 	Total	 	
 	 	 	 	 	Losses	 	 	 	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as at 1 January 2006	 	 	62,526	 	 	 	(35,070	)	 	 	27,456	 	
Net Profit after income tax	 	 	—	 	 	 	312	 	 	 	312	 	
Other changes in equity	 	 	(20,742	)	 	 	—	 	 	 	(20,742	)	
 	 	 	
Balance as at 31 December 2006	 	 	41,784	 	 	 	(34,758	)	 	 	7,026	 	

Balance as at 1 January 2005	 	 	62,526	 	 	 	(36,183	)	 	 	26,343	 	
Net Profit after income tax	 	 	—	 	 	 	1,113	 	 	 	1,113	 	
 	 	 	
Balance as at 31 December 2005	 	 	62,526	 	 	 	(35,070	)	 	 	27,456	 	
 	 	 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	3 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Cash Flow Statement
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Notes	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	
Receipts from customers and reinsurers	 	 	 	 	 	 	412	 	 	 	37	 	
Payments to customers, suppliers and employees	 	 	 	 	 	 	(117	)	 	 	(178	)	
Interest received	 	 	 	 	 	 	371	 	 	 	373	 	
Income tax refund/(paid)	 	 	 	 	 	 	(1,208	)	 	 	272	 	
Goods and Services tax paid	 	 	 	 	 	 	—	 	 	 	3	 	
 	 	 	 	 	 	 	
 	 	 	23	 	 	 	(542	)	 	 	507	 	

Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Purchase of investments	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	
 	 	 	 	 	 	 	—	 	 	 	—	 	

Cash flows from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Repayment of loan from related party	 	 	 	 	 	 	20,742	 	 	 	—	 	
Payment for capital reduction	 	 	 	 	 	 	(20,742	)	 	 	—	 	
 	 	 	 	 	 	 	
 	 	 	 	 	 	 	—	 	 	 	—	 	

Net increase in cash held	 	 	 	 	 	 	(542	)	 	 	507	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash at the beginning of the year	 	 	 	 	 	 	7,397	 	 	 	6,890	 	

Cash at the end of the year	 	 	 	 	 	 	6,855	 	 	 	7,397	 	
 	 	 	 	 	 	 	
The above Cash Flow Statement should be read in conjunction with the accompanying notes.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	4 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value, and insurance liabilities, which have been discounted to present value.
The principal accounting policies adopted in the preparation of the Financial Report are set out below. These policies have been consistently applied to the current year and comparative period, unless otherwise stated. The same accounting policies and methods of computation are followed by this Financial Report as compared with the 31 December 2005 annual Financial Report. Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2006. When applied in future periods, these recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
Operating revenue
Operating revenue comprises general insurance earned premiums, recoveries, interest income and investment income. Investment income is brought to account on an accrual basis.
Premium revenue and unearned premium
(i) Premium revenue
Premium revenue comprises premium from direct business.
Premium revenue comprises amounts charged to the policyholder or other insurers, excluding stamp duties, GST and other amounts collected on behalf of third parties. The earned portion of premiums received and receivable is recognised as operating revenue.
Premium revenue is recognised in the income statement when it has been earned. Premium revenue is recognised in the income statement from the attachment date over the period of the contract. Where time does not approximate the pattern of risk, previous claims experience is used to derive the incidence of risk.
The proportion of premium received or receivable not earned in the income statement at the reporting date is recognised in the balance sheet as an unearned premium liability. Actuarial techniques are used to estimate the ultimate premium and are based on historical premium booking patterns.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	5 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)
(ii) Unearned premiums
Unearned premiums represent premium revenue attributable to future accounting periods. Unearned premium is determined by apportioning the premiums written in the year over the period of insurance cover, reflecting the pattern in which risk emerges under these policies.
Outward reinsurance premium expense and deferred reinsurance premium
Premiums ceded to reinsurers are recognised as an expense over the period of cover using the methods applicable to premium revenue as set out above.
Outstanding claims
The liability for outstanding claims is measured as the best estimate of the present value of expected future payments against claims incurred at the reporting date under general insurance contracts issued by the Company, with an additional risk margin to allow for the inherent uncertainty in the best estimate.
The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs.
Claims handling costs include costs that can be associated directly with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as claims administration costs.
The expected future payments are discounted to present value using a risk free rate.
A risk margin is applied to the outstanding claims liability, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the central estimate. This risk margin increases the probability that the net liability is adequately provided for to a 75% confidence level.
Reinsurance and other recoveries
Reinsurance and other recoveries consist of receivables on paid claims and outstanding claims, and are recognised as revenue when claims are paid or the outstanding claim is raised. Reinsurance receivables are discounted to present value consistent with the discounting of outstanding claims set out above.
Investment income
Interest income is recognised in the income statement on an effective interest method when the entity obtains control of the right to receive the revenue.
Realised gains and losses represent the change in value between the previously reported value and the amount received on sale of the asset. Unrealised gains and losses represent changes in the fair value of financial assets recognised in the period.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	6 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)
Assets backing general insurance liabilities
The Company has determined that all assets are held to back general insurance liabilities on the basis that all assets of the Company are available for the settlement of claims if required.
The following policies apply:
Financial assets
Financial assets are designated at fair value through profit or loss. Initial recognition is at cost in the balance sheet and subsequent measurement is at fair value with any resultant unrealised gains or losses recognised in the income statement. Details of fair value for the different types of financial assets are listed below:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount. For the purposes of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value.
Debt securities
Debt securities are initially recognised at fair value, representing the purchase cost of the asset exclusive of any transaction costs. Debt securities are subsequently measured at fair value, with any realised and unrealised gains or losses arising from changes in the fair value being recognised in the income statement for the period in which they arise. The fair value of a traded interest bearing security reflects the bid price at balance date. Interest bearing securities that are not frequently traded are valued by discounting the estimated recoverable amounts, using prevailing interest rates.
Taxes
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to: (i) temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and (ii) unused tax losses.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	7 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxes (continued)
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
The tax impact on income and expense items recognised directly in equity is also recognised directly in equity.
Tax Consolidation
AMP Limited, Church Bay Limited (formerly AMPG(1992) Limited) and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
(i) Current tax balances arising from external transactions recognised by entities in the tax-consolidated group occurring after the implementation date, and;
(ii) Deferred tax assets arising from unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement.
Assets and liabilities which arise as a result of differences between the periods in which the underlying transactions occur, and the period in which the funding payments under the tax funding agreement are made, are recognised as intercompany balances receivable and payable in the balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.
Goods and services tax
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	8 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currency transactions and translation
Functional and Presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The presentation currency of this financial report, and the functional currency of the parent entity, is Australian dollars.
Transactions and balances
Income and expense items denominated in a currency other than the functional currency are translated at the spot exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at balance sheet date, with exchange gains and losses recognised in the income statement. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Receivables
Receivables are financial assets and are measured at fair value. Given the short-term nature of most receivables, the recoverable amount approximates fair value.
Payables
Creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Amounts Due To or From Related Parties
Amounts are carried at fair value being nominal amounts due and payable. Interest is taken up as income on an accrual basis. A provision for impairment is recognised when there is objective evidence that the related party will not be able to pay its debt.
Issued Capital
Issued and paid up capital is recognised at the fair value of the consideration received by the company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	9 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Company makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas in which critical estimates and judgements are applied are described below.
(a) The ultimate liability arising from claims made under insurance contracts
Provision is made at the year end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Company.
The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, where more information about the claim event is generally available. IBNR claims may often not be reported to the insurer until many years after the events giving rise to the claims has happened. In calculating the estimated cost of unpaid claims the Company uses a variety of estimation techniques, generally based upon statistical analyses of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
 	•	 	changes in the legal environment	
 	 	 	 	
 	•	 	changes in the economic environment	
 	 	 	 	
 	•	 	the impact of large losses	
 	 	 	 	
 	•	 	movements in industry benchmarks	
A component of these estimation techniques is usually the estimation of the cost of notified but not paid claims. In estimating the cost of these the Company has regard to the claim circumstance as reported, any information available from loss adjusters and information on the cost of settling claims with similar characteristics in previous period.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions.
Details of specific assumptions used in deriving the outstanding claims liability at year-end are detailed below.
(b) Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also calculated using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Company may not receive amounts due to it and these amounts can be reliably measured.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	10 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
(c) Process used to determine assumptions
The company wrote one class of business: lenders mortgage insurance. Lenders mortgage insurance is short tail in nature, meaning that claims are typically settled within one year of being reported. Claims estimates are derived from analysis of the results of several different actuarial models. These models take past defaults and claim payments into account and assume that reported claims will develop steadily from period to period. Other models apply a loss ratio to each loan that reflects loan data, past claims experience and industry benchmarks.
A description of the processes used to determine these assumptions is provided below:
Average weighted term to settlement
The average weighted term to settlement is calculated separately by class of business based on historic settlement patterns.
Reinsurance percentage
The reinsurance percentage is calculated based on past reinsurance recovery rates and the structure of the reinsurance arrangements in place.
Discount rate
Discount rates derived from market yields on Commonwealth Government securities as at the balance date have been adopted.
Expense rate
Claims handling expenses are calculated based on projected costs of administering the remaining claims until expiry.
Average claim amount
The average claim amount is estimated by considering historical settlement amounts, industry benchmarks and sensitivity testing.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	11 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
(d) Sensitivity analysis — insurance contracts
Summary
The Company conducts sensitivity analyses to quantify the exposure to risk of changes in the key underlying variables. The valuations included in the reported results are calculated using certain assumptions about these variables as disclosed above. The movement in any key variable will impact the performance and equity of the Company. The tables below describe how a change in each assumption will affect the insurance liabilities and show an analysis of the sensitivity of the profit/(loss) to changes in these assumptions both gross and net of reinsurance.
 	 	 	
Variable	 	Impact of movement in variable	
Average weighted term to settlement	 	Expected payment patterns are used in determining the outstanding claims liability. A decrease in the average term to settlement rates would lead to claims being paid sooner than anticipated (increase in outstanding claims liability).	
 	 	 	
Reinsurance percentage	 	The company assumes money will be recoverable from reinsurers on future claims paid. A decrease in the reinsurance percentage would lead to a reduction in expected recoveries and an increase outstanding claims liability. Similarly, an increase in the reinsurance percentage would result in a reduction in the outstanding claims liability.	
 	 	 	
Discount rate	 	The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money. An increase or decrease in the assumed discount rate will have an opposing impact on outstanding claims liability.	
 	 	 	
Expense rate	 	An estimate for the internal costs of administering claims is included in the outstanding claims liability. An increase or decrease in the expense rate assumption would have a corresponding impact on claims expense and outstanding claims liability.	
 	 	 	
Average claim amount	 	Average claim size is used in determining the outstanding claim liability. An increase or decrease in the average claim amount assumption would have a corresponding impact on the outstanding claims liability.	

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	12 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Change in Shareholder	 	
 	 	Change in	 	 	Assumption at 12/06	 	 	Profit/(loss) (after tax)	 	
Variable	 	Variable	 	 	Gross	 	 	Net	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	+0.5yr	 	1.06yr	 	1.02yr	 	 	—	 	 	 	—	 	
 	 	-0.5yr	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reins % (as % of Gross Outstanding	 	+1%	 	n/a	 	99.8%	 	 	—	 	 	 	—	 	
Claims)	 	-1%	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate	 	+1%	 	5.9%	 	5.9%	 	 	—	 	 	 	—	 	
 	 	-1%	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate (as % of Outstanding	 	+1%	 	97%	 	83%	 	 	—	 	 	 	—	 	
Claims)	 	-1%	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Claim Amount	 	+10%	 	 	20,216	 	 	 	n/a	 	 	 	(3	)	 	 	—	 	
 	 	-10%	 	 	 	 	 	 	 	 	 	 	3	 	 	 	—	 	
2005
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	Change in Shareholder	 	
 	 	Change in	 	 	Assumption at 12/05	 	 	Profit/(loss) (after tax)	 	
Variable	 	Variable	 	 	Gross/Net	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	+0.5yr	 	1.06yr	 	 	1	 	 	 	—	 	
 	 	-0.5yr	 	 	 	 	 	 	(1	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reins % (as % of Gross Outstanding Claims)	 	+1%	 	91.98%	 	 	—	 	 	 	—	 	
 	 	-1%	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate	 	+1%	 	5.19%	 	 	—	 	 	 	—	 	
 	 	-1%	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate (as % of Outstanding Claims)	 	+1%	 	163.9%	 	 	—	 	 	 	—	 	
 	 	-1%	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Claim Amount	 	+10%	 	 	20,907	 	 	 	(4	)	 	 	—	 	
 	 	-10%	 	 	 	 	 	 	4	 	 	 	—	 	

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	13 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 200 6
3. INSURANCE CONTRACTS- RISK MANAGEMENT POLICIES AND PROCEDURES
The Company has an objective to control insurance risk thus reducing volatility. The company’s policies and procedures in respect of managing risks are set out in this note below.
a)	 	Objective in managing risks arising from insurance contracts and policies for mitigating those risks.	
In accordance with Prudential Standards GPS 220 Risk Management and GPS 230 Reinsurance issued by the Australian Prudential Regulation Authority (APRA), the Boards and senior management have developed, implemented and maintain a sound and prudent Risk Management Strategy (RMS) and a Reinsurance Management Strategy (REMS).
The RMS and REMS identify the Company’s policies and procedures, processes and controls that comprise its risk management and control systems. These systems address all material risks, financial and non-financial, likely to be faced by the Company. Annually, the Board certifies to APRA that adequate strategies have been put in place to monitor those risks, that the Company has systems in place to ensure compliance with legislative and prudential requirements and that the Board has satisfied itself as to the compliance with the RMS and REMS. The RMS and REMS have been approved by the Board and APRA.
Key aspects of the processes established in the RMS to mitigate risks include:
•	 	A formal regular process of risk identification and evaluation, supplemented by a documented control assessment process, is completed by management and communicated to the Board in line with the Board approved Risk Management Strategy.	
 	 	 	
•	 	Actuarial models monitor claims patterns and other relevant statistics. Past experience and statistical methods are used as part of the process.	
 	 	 	
•	 	Reinsurance has been used to limit the Company’s exposure to large single sums. The REMS provides that exposures continue to be monitored and where feasible reinsurance be purchased as means of limiting risk.	
 	 	 	
•	 	The mix of investment assets is driven by the nature and term of the insurance liabilities.	
b) Development of claims
There is a possibility that changes may occur in the estimate of our obligations at the end of a contract period. The tables in Note 15 show our estimates of total ultimate claims at successive year-ends.
c) Terms and conditions of insurance contracts
There is limited scope to improve the existing terms and conditions. The company is in orderly run off, and no new contracts are been entered into.
d) Concentration of insurance risk
The exposure to concentrations of insurance risk is able to be mitigated with the purchase of reinsurance where management believes that the price /risk transfer is suitable.
e) Interest rate risk
Interest rate risk arises to the extent that there is a mismatch between the fixed-interest portfolios used to back the outstanding claims liability and those outstanding claims. This is not considered to be significant.
f) Credit risk
There are no significant concentrations of credit risk.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	14 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
4. NET PREMIUM REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Movement in unearned premiums	 	 	7	 	 	 	22	 	
 	 	 	
Premium revenue	 	 	7	 	 	 	22	 	
Outwards reinsurance premiums	 	 	1	 	 	 	3	 	

Net premium revenue	 	 	6	 	 	 	19	 	
 	 	 	
5. NET CLAIMS INCURRED
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	 	 	 	 	2005	 	 	 	 	
 	 	Current	 	 	Prior	 	 	 	 	 	 	Current	 	 	Prior	 	 	 	 	
 	 	year	 	 	years	 	 	Total	 	 	year	 	 	years	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
Gross claims expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross claims incurred — undiscounted	 	 	—	 	 	 	(67	)	 	 	(67	)	 	 	—	 	 	 	(250	)	 	 	(250	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount movement	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	
 	 	 	—	 	 	 	(67	)	 	 	(67	)	 	 	—	 	 	 	(250	)	 	 	(250	)	

Reinsurance and other recoveries revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries — undiscounted	 	 	—	 	 	 	13	 	 	 	13	 	 	 	—	 	 	 	(9	)	 	 	(9	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount movement	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	
 	 	 	—	 	 	 	13	 	 	 	13	 	 	 	—	 	 	 	(9	)	 	 	(9	)	
 	 	 	
Net claims incurred	 	 	—	 	 	 	(54	)	 	 	(54	)	 	 	—	 	 	 	(259	)	 	 	(259	)	
 	 	 	
Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the risks borne in all previous financial years.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	15 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
6. NET INVESTMENT REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Investment income	 	 	 	 	 	 	 	 	
Interest	 	 	416	 	 	 	384	 	
Interest from related parties	 	 	 	 	 	 	 	 	
— other related parties	 	 	84	 	 	 	1,122	 	
Changes in fair value of investments	 	 	 	 	 	 	 	 	
Unrealised	 	 	(5	)	 	 	(9	)	
 	 	 	
Total net investment revenue	 	 	495	 	 	 	1,497	 	
 	 	 	
7. OPERATING EXPENSES
Expenses by Nature
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Net gain on foreign currency	 	 	16	 	 	 	(4	)	
Other management fees	 	 	100	 	 	 	150	 	
External consultant costs	 	 	10	 	 	 	34	 	
Other expenses	 	 	6	 	 	 	—	 	
 	 	 	
Total Expenses	 	 	132	 	 	 	180	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	16 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
8. INCOME TAX
(a) Analysis of income tax expense
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current tax	 	 	267	 	 	 	1,218	 	
Decrease in deferred tax assets	 	 	9	 	 	 	24	 	
Decrease in deferred tax liabilities	 	 	(165	)	 	 	(765	)	
Over provided in previous years	 	 	—	 	 	 	5	 	
 	 	 	
Income tax expense	 	 	111	 	 	 	482	 	
 	 	 	
(b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period.
In respect of income tax expense attributable to shareholders, the tax rate which applies in both
2006 and 2005 is 30% for Australia.
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Operating profit before income tax	 	 	423	 	 	 	1,595	 	
 	 	 	 	 	 	 	 	 	
Prima facie income tax at the rate of 30%	 	 	127	 	 	 	479	 	
 	 	 	 	 	 	 	 	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Non assessable income	 	 	(6	)	 	 	(2	)	
Over provided in prior years — deferred tax balances	 	 	—	 	 	 	5	 	
All Other items	 	 	(10	)	 	 	—	 	
 	 	 	
Income tax expense per income statement	 	 	111	 	 	 	482	 	

(c) Analysis of deferred tax asset	 	 	 	 	 	 	 	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Indirect Claims Costs Adjustments	 	 	15	 	 	 	29	 	
- Unrealised gains/losses	 	 	7	 	 	 	2	 	
 	 	 	
Total deferred tax assets	 	 	22	 	 	 	31	 	

(d) Analysis of deferred tax liability	 	 	 	 	 	 	 	 	
Amounts recognised in income	 	 	 	 	 	 	 	 	
- Accrued Interest Receivable	 	 	13	 	 	 	178	 	
 	 	 	
Total deferred tax liability	 	 	13	 	 	 	178	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	17 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
9. SEGMENT REPORTING
Primary Segment
The Company operates predominantly in one geographical segment being Australia and one business segment, which is the provision of lenders mortgage insurance.
10. RECEIVABLES
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Interest free advance	 	 	 	 	 	 	 	 	
- Other related parties	 	 	1	 	 	 	3,689	 	
Interest receivable from related parties	 	 	 	 	 	 	 	 	
- Other related parties	 	 	—	 	 	 	574	 	
Other	 	 	39	 	 	 	19	 	
 	 	 	
Total receivables	 	 	40	 	 	 	4,282	 	
 	 	 	
11. REINSURANCE AND OTHER RECOVERIES
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Expected future reinsurance recoveries undiscounted	 	 	 	 	 	 	 	 	
- on outstanding claims	 	 	45	 	 	 	59	 	
- Discount to present value	 	 	(1	)	 	 	(2	)	

Reinsurance and other recoveries receivable	 	 	44	 	 	 	57	 	

Reinsurance recoveries receivable-current	 	 	25	 	 	 	33	 	
Reinsurance recoveries receivable- non current	 	 	19	 	 	 	24	 	
 	 	 	
 	 	 	44	 	 	 	57	 	

 	 	 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	18 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
12. FINANCIAL ASSETS AT FAIR VALUE
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Quoted Investments- at fair value:	 	 	 	 	 	 	 	 	
Government bonds	 	 	466	 	 	 	474	 	
 	 	 	
Total current investments	 	 	466	 	 	 	474	 	

Non- Current	 	 	 	 	 	 	 	 	
Unquoted Investments- at fair value:	 	 	 	 	 	 	 	 	
Loans to related party	 	 	—	 	 	 	16,791	 	
 	 	 	
Total non-current investments	 	 	—	 	 	 	16,791	 	
 	 	 	
Total investments	 	 	466	 	 	 	17,265	 	
 	 	 	
13. OTHER ASSETS
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current deferred reinsurance premiums	 	 	1	 	 	 	1	 	
Non-current deferred reinsurance premiums	 	 	—	 	 	 	1	 	
 	 	 	
Total current other assets	 	 	1	 	 	 	2	 	

Deferred reinsurance premiums as at 1 January	 	 	2	 	 	 	5	 	
Earning of reinsurance premiums	 	 	(1	)	 	 	(3	)	
 	 	 	
Deferred reinsurance premiums as at 31 December	 	 	1	 	 	 	2	 	
 	 	 	
14. UNEARNED PREMIUM LIABILITY
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current unearned premium	 	 	3	 	 	 	7	 	
Non-current unearned premium	 	 	3	 	 	 	5	 	
 	 	 	
Total unearned premium	 	 	6	 	 	 	12	 	

Unearned premium liability as at 1 January	 	 	12	 	 	 	34	 	
Earning of premiums written in previous periods	 	 	(6	)	 	 	(22	)	
 	 	 	
Unearned premium liability as at 31 December	 	 	6	 	 	 	12	 	
 	 	 	
The unearned premium liability was found to be sufficient for the current and prior periods, as a result no unexpired risk liability has been raised.
 	 	 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	19 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
15. OUTSTANDING CLAIMS
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Central estimate	 	 	95	 	 	 	146	 	
Risk margin	 	 	2	 	 	 	17	 	
 	 	 	
 	 	 	97	 	 	 	163	 	
Discount to present value	 	 	(3	)	 	 	(2	)	
 	 	 	
Gross outstanding claims liability	 	 	94	 	 	 	161	 	

Current	 	 	53	 	 	 	93	 	
Non-current	 	 	41	 	 	 	68	 	
 	 	 	
Total outstanding claims	 	 	94	 	 	 	161	 	
 	 	 	
Process for determining risk margin
The risk margin was determined for each portfolio, allowing for the uncertainty of the outstanding claims estimate for each portfolio. A risk margin of 16% of net central estimate was applied, based on industry benchmarks for a portfolio of this size. Given the similar nature of business in the remaining portfolios no risk margin diversification has been allowed for.
Risk margins applied
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
Direct insurance	 	 	16	%	 	 	30	%	
Reconciliation of movement in discounted outstanding claims liability
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2006	 	
 	 	Gross	 	 	Reins	 	 	Net	 	
 	 	$000	 	 	$000	 	 	$000	 	
Amount outstanding brought forward	 	 	161	 	 	 	57	 	 	 	104	 	
less Claim payments/recoveries received in the period	 	 	—	 	 	 	—	 	 	 	—	 	
Effect of change in discounting	 	 	4	 	 	 	2	 	 	 	2	 	
Effect of change in assumptions	 	 	(71	)	 	 	(15	)	 	 	(56	)	
 	 	 	
Outstanding amount carried forward	 	 	94	 	 	 	44	 	 	 	50	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2005	 	
 	 	Gross	 	 	Reins	 	 	Net	 	
 	 	$000	 	 	$000	 	 	$000	 	
Amount outstanding brought forward	 	 	411	 	 	 	47	 	 	 	364	 	
less Claim payments/recoveries received in the period	 	 	(140	)	 	 	—	 	 	 	(140	)	
Effect of change in discounting	 	 	4	 	 	 	1	 	 	 	3	 	
Effect of change in assumptions	 	 	(114	)	 	 	9	 	 	 	(123	)	
 	 	 	
Outstanding amount carried forward	 	 	161	 	 	 	57	 	 	 	104	 	

 	 	 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	20 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
Claims Development Table
Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the risks borne in all previous financial years.
The Company is closed to new business and there have been no new mortgage insurance contracts issued in the five years prior and to and including this report.
As described in Note 1, the outstanding claims liability is the best estimate of the present value of the expected future payments, after the inclusion of a risk margin. At each balance date, the amount of the liability is reassessed and it is likely that changes will arise in the estimates of liabilities. The table under shows the estimates of total ultimate claims at successive year ends.
 	 	 	 	 	 	 	 	 	
 	 	Net	 	 	Gross	 	
 	 	$000	 	 	$000	 	
31 December 2001	 	 	170	 	 	 	31,568	 	
31 December 2002	 	 	165	 	 	 	31,208	 	
31 December 2003	 	 	155	 	 	 	31,151	 	
31 December 2004	 	 	152	 	 	 	31,110	 	
31 December 2005	 	 	150	 	 	 	31,116	 	
31 December 2006	 	 	150	 	 	 	31,121	 	
Current estimate of cumulative claims	 	 	150	 	 	 	31,121	 	
Cumulative payments	 	 	149	 	 	 	31,075	 	
 	 	 	
Undiscounted central estimate	 	 	1	 	 	 	46	 	
 	 	 	 	 	 	 	 	 	
Effect of discounting	 	 	1	 	 	 	3	 	
 	 	 	
Discounted central estimate	 	 	—	 	 	 	43	 	

Risk margin	 	 	 	 	 	 	2	 	
Claims handling provision	 	 	 	 	 	 	49	 	
 	 	 	 	 	 	 	 	
Outstanding Claims as per the balance sheet	 	 	 	 	 	 	94	 	

 	 	 	

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	21 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
16. PAYABLES
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Other creditors	 	 	9	 	 	 	9	 	
Other borrowings from related parties - other related parties	 	 	3	 	 	 	—	 	

 	 	 	12	 	 	 	9	 	
 	 	 	
17. ISSUED CAPITAL
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Paid up capital	 	 	 	 	 	 	 	 	

62,526,468 ordinary shares at $0.67 each (2005:62,526,468 ordinary shares at $1 each)	 	 	41,784	 	 	 	62,526	 	

Movement in share capital	 	 	 	 	 	 	 	 	
Balance beginning of the year	 	 	62,526	 	 	 	62,526	 	
Capital return 62,526,468 shares at $0.33 each	 	 	(20,742	)	 	 	—	 	
 	 	 	
 	 	 	41,784	 	 	 	62,526	 	
 	 	 	
Rights attaching to Ordinary Shares
Ordinary shares attract the following rights:
 	(a)	 	to receive notice of and to attend and vote at all general meetings of the Company;

 	(b)	 	to receive dividends; and	
 	 	 	 	
 	(c)	 	in a winding up, to participate equally in the distribution of the assets of the Company (both capital and surplus), subject only to any amounts unpaid on the Share.	
18. FRANKING ACCOUNT
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies were transferred to the Head Entity, AMP Limited.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	22 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
19. KEY MANAGEMENT PERSONNEL
The following individuals were the key management personnel of Church Bay Limited (formerly AMPG(1992) Limited), for the current and prior reporting periods (unless stated otherwise):
 	 	 	
Peter Clarke	 	 	
Richard Grellman	 	 	
Peter Hodgett (Alternate for Andrew Mohl)	 	 	
Andrew Mohl	 	 	
William Roberts	 	 	
Bruce Robertson	 	Resigned 09 May 2005	
Felix Zaccar	 	 	
The following table provides aggregate details of the compensation of key management personnel of Church Bay Limited (formerly AMPG(1992) Limited).
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term	 	 	Post-	 	 	Other long-	 	 	 	 	 	 	Share-	 	 	 	 	
 	 	employee	 	 	employment	 	 	term	 	 	Termination	 	 	based	 	 	 	 	
Year	 	benefits	 	 	benefits	 	 	benefits	 	 	benefits	 	 	payments	 	 	Total	 	
 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	
2006	 	 	6,306,101	 	 	 	205,061	 	 	 	—	 	 	 	—	 	 	 	2,318,215	 	 	 	8,829,377	 	
2005	 	 	5,737,253	 	 	 	254,791	 	 	 	—	 	 	 	—	 	 	 	2,079,046	 	 	 	8,071,090	 	
Key management personnel disclosed above, also provided services to other related entities during the year. The above remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to Church Bay Limited (formerly AMPG(1992) Limited).
20. AUDITOR’S FEES
Auditors’ remuneration for the year ended 31 December 2006 is paid on the Company’s behalf by a controlled entity within the AMP Limited Group.
21. CONTINGENT LIABILITIES
There are no contingent liabilities as at 31 December 2006 (2005: Nil).
22. RELATED PARTIES
Transactions between Church Bay Limited (formerly AMPG(1992) Limited) and other related parties during the financial year consisted of:
 	•	 	Interest receivable on loans to related parties	
 	 	 	 	
 	•	 	Payment of management fees for services provided	
Controlling Entity
The immediate parent entity is Shelly Bay Holdings Ltd (formerly AMP General Insurance Holdings Limited). AMP Limited is the ultimate parent entity.

 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	23 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
22. RELATED PARTIES (continued)
Directors
The directors of the Company during the financial year, and the dates of appointments and resignations during the year are:
P W Clarke
R J Grellman
P M Hodgett (Alternate for A M Mohl)
A M Mohl
W K Roberts
F Zaccar
Other Transactions
The directors and their director related entities receive normal dividends on their ordinary share holdings in AMP Limited.
Other transactions with directors of the Company and their director-related entities.
During the year, transactions were entered into between Directors or their Director related entities and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and include:
•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	
•	 	the purchase of AMP superannuation and related products;	
 	 	 	
•	 	Financial investment services;	
 	 	 	
•	 	Other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of AMP’s financial statements, or discharge of accountability by the Directors. The transactions are considered to be trivial or domestic in nature.
Transactions within the wholly owned group
The aggregate amounts brought to account in respect of the following types of transactions and each class of related party involved were:
AMP Services Limited and Enstar Australia Limited (formerly Cobalt Solutions Australia Limited), both related entities within the wholly owned group, provide operational and administrative (including employee related) services to the entity. The services provided are in the normal course of the business and are on normal commercial terms and conditions.
The Company settled an interest-bearing loan to AMP Finance Services Limited, a related entity within the wholly owned group. This transaction was made under normal terms and conditions.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	24 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
22. RELATED PARTIES (continued)
Amounts attributable to transactions with entities in the wholly-owned group
Operating profit before income tax for the financial year includes aggregate amounts attributable to transactions in respect of:
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$	 	 	$	 	
Interest Revenue — other related parties	 	 	84,224	 	 	 	1,121,723	 	
Management Expense — other related parties	 	 	100,000	 	 	 	150,000	 	

Amounts receivable from and payable to entities in the wholly-owned group	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Aggregate amounts receivable at balance date from:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Interest receivable — other related parties	 	 	1,000	 	 	 	574,455	 	
Loan — other related parties	 	 	—	 	 	 	3,689,810	 	

Non Current	 	 	 	 	 	 	 	 	
Loan — other related parties	 	 	—	 	 	 	16,791,000	 	

Aggregate amounts payable at balance date from:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Payables — other related parties	 	 	3,000	 	 	 	—	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	25 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
23. CASH FLOW RECONCILIATION
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
(i) Reconciliation of cash	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Cash balance comprises:	 	 	 	 	 	 	 	 	
Cash at call	 	 	729	 	 	 	3,108	 	
Cash on deposit	 	 	6,126	 	 	 	4,289	 	
 	 	 	
 	 	 	6,855	 	 	 	7,397	 	

(ii) Reconciliation of net cash flows from operating activities to operating profit after income tax	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Operating profit after income tax	 	 	312	 	 	 	1,113	 	
 	 	 	 	 	 	 	 	 	
Changes in net market value of investments	 	 	5	 	 	 	9	 	
FX Gains & Losses	 	 	16	 	 	 	(4	)	
Changes in assets and liabilities net of the effects of acquisitions:	 	 	 	 	 	 	 	 	
(Increase)/ decrease in receivables and other assets	 	 	277	 	 	 	(1,090	)	
(Increase)/ decrease in reinsurance and other recoveries receivable	 	 	16	 	 	 	(6	)	
Increase/(decrease) in payables	 	 	3	 	 	 	9	 	
Increase/(decrease) in current tax liabilities	 	 	(941	)	 	 	1,218	 	
(Decrease)/ increase in unearned premiums	 	 	(7	)	 	 	(22	)	
(Decrease)/ increase in outstanding claims	 	 	(67	)	 	 	(250	)	
(Decrease)/ increase in deferred tax liabilities net of future tax benefit	 	 	(156	)	 	 	(470	)	

Net cash inflows / (outflows) from operating activities	 	 	(542	)	 	 	507	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	26 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
24. FINANCIAL INSTRUMENTS
(a) Net fair values
The recorded net market value equates to net fair value for listed and unlisted debt and equity securities. For the following financial instruments, the cost carrying amount is considered to equate to their net fair value:
•	 	Cash	
 	 	 	
•	 	Cash on deposit — short term	
 	 	 	
•	 	Investment income accrued	
 	 	 	
•	 	Reinsurance & other recoveries	
 	 	 	
•	 	Government security	
 	 	 	
•	 	Loans to related company	
 	 	 	
•	 	Other creditors and accruals	
(b) Special terms and conditions
All financial investments of the Company are held or issued on normal commercial terms at market rates of interest. There are no special terms or conditions affecting the nature and timing of the financial instruments not otherwise disclosed in these accounts. An interest-free advance has been made to the immediate parent entity. All other loans have been issued on normal commercial terms.
(c) Credit risk
Trading investments are recorded in the accounts at net market value, which represents the Company’s exposure to credit risk in relation to these instruments.
Credit risk in trade receivables is managed by analysing the credit ratings of the underlying debts.
(d) Interest rate risk on financial instruments
The accounting policy notes describe the policies used to measure and report the assets and liabilities of the Company. Where the applicable market value is determined by discounting future cash flows, movements in interest rates will result in a reported unrealised gain or loss in the profit and loss account.
The Company seeks to reduce its interest rate risk through the use of investment portfolios as a hedge against the insurance liabilities of the Company. To the extent that these assets and liabilities can be matched, unrealised gains or losses on revaluation of liabilities resulting from interest rate movements will be offset by unrealised losses or gains on revaluation of investment assets.
The Company’s exposure to interest rate risks and the effective interest rates of financial assets and liabilities at the reporting date, are as follows:

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	27 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
For the year ended 2006	 	 	 	 	 	Fixed interest rate	 	 	 	 	 	 	
 	 	 	 	 	 	Maturing in	 	 	 	 	 	 	
 	 	Floating	 	0-1	 	1 - 5	 	Non	 	Total	 	Weighted	
 	 	Interest	 	year	 	years	 	Interest	 	 	 	 	 	Average	
 	 	Rate	 	 	 	 	 	 	 	 	 	Bearing	 	 	 	 	 	Interest	
 	 	$’000	 	$’000	 	$’000	 	$’000	 	$’000	 	rate	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash	 	 	729	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	729	 	 	 	3.90	%	
Cash on deposit — short term	 	 	—	 	 	 	6,126	 	 	 	—	 	 	 	—	 	 	 	6,126	 	 	 	6.27	%	
Receivables — related parties	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1	 	 	 	1	 	 	 	 	 	
Investment income accrued	 	 	—	 	 	 	—	 	 	 	—	 	 	 	39	 	 	 	39	 	 	 	 	 	
Reinsurance & other recoveries	 	 	—	 	 	 	—	 	 	 	—	 	 	 	44	 	 	 	44	 	 	 	 	 	
Government security	 	 	—	 	 	 	466	 	 	 	—	 	 	 	—	 	 	 	466	 	 	 	6.35	%	

Total Financial Assets	 	 	729	 	 	 	6,592	 	 	 	—	 	 	 	84	 	 	 	7,405	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other creditors	 	 	—	 	 	 	—	 	 	 	—	 	 	 	12	 	 	 	12	 	 	 	 	 	
 	 	 	 	 	
Total Financial Liabilities	 	 	—	 	 	 	—	 	 	 	—	 	 	 	12	 	 	 	12	 	 	 	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
For the year ended 2005	 	 	 	 	 	Fixed interest rate	 	 	 	 	 	 	
 	 	 	 	 	 	Maturing in	 	 	 	 	 	 	
 	 	Floating	 	0-1	 	1 - 5	 	Non	 	Total	 	Weighted	
 	 	Interest	 	year	 	years	 	Interest	 	 	 	 	 	Average	
 	 	Rate	 	 	 	 	 	 	 	 	 	Bearing	 	 	 	 	 	Interest	
 	 	$’000	 	$’000	 	$’000	 	$’000	 	$’000	 	rate	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash	 	 	3,108	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	3,108	 	 	 	3.73	%	
Cash on deposit — short term	 	 	—	 	 	 	4,289	 	 	 	—	 	 	 	—	 	 	 	4,289	 	 	 	5.26	%	
Investment income accrued	 	 	—	 	 	 	—	 	 	 	—	 	 	 	593	 	 	 	593	 	 	 	 	 	
Reinsurance & other recoveries	 	 	—	 	 	 	—	 	 	 	—	 	 	 	57	 	 	 	57	 	 	 	 	 	
Government security	 	 	—	 	 	 	474	 	 	 	—	 	 	 	—	 	 	 	474	 	 	 	6.62	%	
Loans to Related Company	 	 	—	 	 	 	—	 	 	 	16,791	 	 	 	3,689	 	 	 	20,480	 	 	 	6.79	%	

Total Financial Assets	 	 	3,108	 	 	 	4,763	 	 	 	16,791	 	 	 	4,339	 	 	 	29,001	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other creditors	 	 	—	 	 	 	—	 	 	 	—	 	 	 	9	 	 	 	9	 	 	 	 	 	
 	 	 	 	 	
Total Financial Liabilities	 	 	—	 	 	 	—	 	 	 	—	 	 	 	9	 	 	 	9	 	 	 	 	 	

 	 	 	
 	
Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	28 of 30	

 
Church Bay Limited (formerly AMPG(1992) Limited)
Notes to the financial statements for the year ended 31 December 2006
25. CAPITAL ADEQUACY
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Tier 1 Capital	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Paid up ordinary shares	 	 	41,784	 	 	 	62,526	 	
Retained earnings	 	 	(35,069	)	 	 	(36,183	)	
Current year earnings	 	 	312	 	 	 	1,113	 	
Less: Deductions	 	 	9	 	 	 	—	 	
 	 	 	
Net tier 1 capital	 	 	7,018	 	 	 	27,456	 	

Net tier 2 capital	 	 	—	 	 	 	—	 	

Total capital base	 	 	7,018	 	 	 	27,456	 	

Minimum capital requirement	 	 	5,000	 	 	 	8,247	 	
 	 	 	 	 	 	 	 	 	
Capital adequacy multiple	 	 	1.40	 	 	 	3.33	 	
The entity complies with Prudential Standard GPS110 and the requirements set out in its insurance license.

Church Bay Limited (formerly AMPG(1992) Limited) ABN 42 000 488 362	 	29 of 30	

 

Report of Independent Auditors
The Board of Directors of Church Bay Limited (formerly AMPG (1992) Limited)
We have audited the accompanying balance sheets of Church Bay Limited (formerly AMPG (1992) Limited) as of December 31, 2006 and 2005, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Church Bay Limited (formerly AMPG (1992) Limited) at December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008
Liability limited by a scheme
approved under Professional
Standards Legislation

Exhibit 99.2
GORDIAN RUNOFF LIMITED
ABN 11 052 179 647
FINANCIAL REPORT
31 DECEMBER 2007
Contents:
 	 	 	 	 	
 	 	Page	 	
 	 	 	 	 	
Financial Report	 	 	 	 	
Financial Statements	 	 	 	 	
— Income Statement	 	 	2	 	
— Balance Sheet	 	 	3	 	
— Statement of Changes in Equity	 	 	4	 	
— Cash Flow Statement	 	 	5	 	
Notes to the Financial Statements	 	 	6	 	
Report of Independent Auditors	 	 	38	 	

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Gordian Runoff Limited ABN 11 052 179 647	 	1 of 38	

 
Gordian RunOff Limited
Income Statement
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct premium revenue	 	 	 	 	 	 	4	 	 	 	28	 	
Inwards reinsurance premium revenue/(expense)	 	 	 	 	 	 	4,689	 	 	 	(1,168	)	
Outwards reinsurance premium expense	 	 	 	 	 	 	(280	)	 	 	(323	)	
 	 	 	 	 	 	 	
Net premium (expense)/revenue	 	 	5	 	 	 	4,413	 	 	 	(1,463	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct claims (benefit)/expense	 	 	 	 	 	 	(88,929	)	 	 	(34,739	)	
Inwards Reinsurance claims benefit	 	 	 	 	 	 	(29,975	)	 	 	(36,523	)	
Reinsurance & other recoveries (expense)/revenue	 	 	 	 	 	 	(6,502	)	 	 	(2,888	)	
 	 	 	 	 	 	 	
Net claims incurred	 	 	6	 	 	 	(112,402	)	 	 	(68,374	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other underwriting income	 	 	 	 	 	 	26	 	 	 	1,040	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition benefit	 	 	 	 	 	 	(114	)	 	 	(1,618	)	
Other underwriting expenses	 	 	 	 	 	 	231	 	 	 	1,043	 	
 	 	 	 	 	 	 	
Underwriting expense/(benefit)	 	 	7	 	 	 	117	 	 	 	(575	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Underwriting result	 	 	 	 	 	 	116,724	 	 	 	68,526	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment revenue	 	 	8	 	 	 	43,345	 	 	 	45,960	 	
General administration expenses	 	 	7	 	 	 	6,857	 	 	 	10,537	 	
Finance costs	 	 	7	 	 	 	1,061	 	 	 	—	 	

Net profit before tax	 	 	 	 	 	 	152,151	 	 	 	103,949	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense/(benefit) attributable to operating profit	 	 	9	 	 	 	45,672	 	 	 	29,476	 	

Net profit attributable to members of Gordian RunOff Limited	 	 	 	 	 	 	106,479	 	 	 	74,473	 	
 	 	 	 	 	 	 	
The above Income Statement should be read in conjunction with the accompanying notes.
 	 	 	
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Gordian Runoff Limited ABN 11 052 179 647	 	2 of 38	

 
Gordian RunOff Limited
Balance Sheet
As at 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	24	 	 	 	13,857	 	 	 	42,291	 	
Receivables	 	 	10	 	 	 	10,046	 	 	 	11,169	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	13,703	 	 	 	19,090	 	
Other financial assets	 	 	12	 	 	 	590,748	 	 	 	549,602	 	
Other assets	 	 	13	 	 	 	164	 	 	 	240	 	

Total current assets	 	 	 	 	 	 	628,518	 	 	 	622,392	 	

Non-current assets	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables	 	 	10	 	 	 	1,796	 	 	 	3,134	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	15,798	 	 	 	29,757	 	
Other financial assets	 	 	12	 	 	 	427,621	 	 	 	726,542	 	
Deferred tax assets	 	 	9	 	 	 	32,679	 	 	 	44,573	 	

Total non-current assets	 	 	 	 	 	 	477,894	 	 	 	804,006	 	

Total assets	 	 	 	 	 	 	1,106,412	 	 	 	1,426,398	 	

Current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding claims liability	 	 	15	 	 	 	90,891	 	 	 	112,751	 	
Payables	 	 	16	 	 	 	9,547	 	 	 	8,431	 	
Interest Bearing Loan	 	 	17	 	 	 	25,723	 	 	 	—	 	
Current Tax Liabilities	 	 	 	 	 	 	26,227	 	 	 	24,649	 	

Total current liabilities	 	 	 	 	 	 	152,388	 	 	 	145,831	 	

Non-current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding claims liability	 	 	15	 	 	 	356,065	 	 	 	584,453	 	
Payables	 	 	16	 	 	 	288	 	 	 	422	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total non-current liabilities	 	 	 	 	 	 	356,353	 	 	 	584,875	 	

Total liabilities	 	 	 	 	 	 	508,741	 	 	 	730,706	 	

Net assets	 	 	 	 	 	 	597,671	 	 	 	695,692	 	

Shareholders’ equity	 	 	 	 	 	 	 	 	 	 	 	 	
Issued Capital	 	 	18	 	 	 	1,610,100	 	 	 	1,814,600	 	
Accumulated losses	 	 	 	 	 	 	(1,012,429	)	 	 	(1,118,908	)	

Total shareholders’ equity	 	 	 	 	 	 	597,671	 	 	 	695,692	 	
 	 	 	 	 	 	 	
The above Balance Sheet should be read in conjunction with the accompanying notes.
 	 	 	
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Gordian Runoff Limited ABN 11 052 179 647	 	3 of 38	

 
Gordian RunOff Limited
Statement of Changes in Equity
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Accumulated	 	 	 	 	
 	 	Issued Capital	 	 	Losses	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Balance as at 1 January 2007	 	 	1,814,600	 	 	 	(1,118,908	)	 	 	695,692	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	106,479	 	 	 	106,479	 	
Change in Equity — Capital reduction	 	 	(204,500	)	 	 	—	 	 	 	(204,500	)	
 	 	 	
Balance as at 31 December 2007	 	 	1,610,100	 	 	 	(1,012,429	)	 	 	597,671	 	

Balance as at 1 January 2006	 	 	1,978,600	 	 	 	(1,193,381	)	 	 	785,219	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	74,473	 	 	 	74,473	 	
Change in Equity — Capital reduction	 	 	(164,000	)	 	 	—	 	 	 	(164,000	)	
 	 	 	
Balance as at 31 December 2006	 	 	1,814,600	 	 	 	(1,118,908	)	 	 	695,692	 	
 	 	 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Gordian Runoff Limited ABN 11 052 179 647	 	4 of 38	

 
Gordian RunOff Limited
Cash Flow Statement
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	
Premiums received	 	 	 	 	 	 	5,929	 	 	 	16,828	 	
Reinsurance and other recoveries	 	 	 	 	 	 	11,520	 	 	 	25,237	 	
Dividends received	 	 	 	 	 	 	3,580	 	 	 	2,833	 	
Interest received	 	 	 	 	 	 	66,509	 	 	 	80,902	 	
Other sundry receipts	 	 	 	 	 	 	529	 	 	 	7,082	 	
(Payments)/refunds of outward reinsurance	 	 	 	 	 	 	(354	)	 	 	(774	)	
Claims paid	 	 	 	 	 	 	(112,791	)	 	 	(149,686	)	
Other underwriting (costs)/benefits	 	 	 	 	 	 	(252	)	 	 	(1,362	)	
Payments to suppliers and employees	 	 	 	 	 	 	(34,470	)	 	 	(43,116	)	
Income taxes (paid)/received	 	 	 	 	 	 	(32,198	)	 	 	2,020	 	
 	 	 	 	 	 	 	
Cash flows from/(used in) operating activities	 	 	24	 	 	 	(91,998	)	 	 	(60,036	)	

Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from sale of investments	 	 	 	 	 	 	808,708	 	 	 	807,810	 	
Payments for investments	 	 	 	 	 	 	(555,036	)	 	 	(613,805	)	
Proceeds from share cancellation — related party	 	 	 	 	 	 	 	 	 	 	—	 	
Loans received from subsidiary	 	 	 	 	 	 	25,723	 	 	 	40,000	 	
Loans from related party	 	 	 	 	 	 	6,760	 	 	 	—	 	
 	 	 	 	 	 	 	
Cash flows from/(used in) investing activities	 	 	 	 	 	 	286,155	 	 	 	234,005	 	

Cash flows from/(used in) financing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Payment for capital reduction	 	 	 	 	 	 	(204,500	)	 	 	(164,000	)	
 	 	 	 	 	 	 	
Cash flows from/(used in) financing activities	 	 	 	 	 	 	(204,500	)	 	 	(164,000	)	

Net decrease in cash held	 	 	 	 	 	 	(10,343	)	 	 	9,969	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at the beginning of the year	 	 	 	 	 	 	42,291	 	 	 	32,322	 	
Reclass of cash to Investments	 	 	 	 	 	 	(18,091	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at the end of the year	 	 	24	 	 	 	13,857	 	 	 	42,291	 	
 	 	 	 	 	 	 	
The above Cash Flow Statement should be read in conjunction with the accompanying notes.

Gordian Runoff Limited ABN 11 052 179 647	 	5 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The financial statements are separate financial statements as the exemption from preparing consolidated financial statements has been used. The entity and its subsidiaries have been consolidated into the financial statements of AMP Limited, of  33 Alfred St Sydney NSW Australia, an entity incorporated in Australia. Copies of these accounts can be requested from AMP Limited at this address.  
The entity’s significant investments in subsidiaries, including the name, country of incorporation or residence, proportion of ownership interest and can found in Note 12 to these accounts. A description of the method used to account for these investments is described under Investment in controlled entities later in this note.
Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value.
Accounting judgements and estimates
In the course of its operations the company applies judgements and makes estimates that affect the amounts recognised in the financial report. Estimates are based on a combination of historical experience and expectations of future events that are believed to be reasonable at the time.
Accounting Standards issued but not yet effective
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2007, except IFRS8 Operating Segments. The adoption of IFRS8 has removed the requirement for Operating Segment disclosures in this Financial Report.
When applied in future periods, all other recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
Changes in accounting policy
Since 1 January 2007, the company has adopted a number of Accounting Standards and Interpretations which were mandatory for annual periods beginning on or after 1 January 2007. Adoption of these Standards and Interpretations has not had any effect on the financial position or performance of the Company.
Operating revenue
Operating revenue comprises reinsurance and general insurance earned premiums, recoveries, interest income and investment income. Investment income is brought to account on an accrual basis. Other underwriting income comprises sundry receipts.

Gordian Runoff Limited ABN 11 052 179 647	 	6 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
Premium revenue and unearned premiums
Premium revenue
Premium revenue comprises premiums from direct business and from reinsurance business.
Premium revenue includes amounts charged to the policyholders or other insurers, including fire service levies but excluding stamp duties, GST and other amounts collected on behalf of third parties.
Premium revenue, including that on unclosed business, is recognised in the income statement when it has been earned. Premium revenue is recognised in the income statement from the attachment date over the period of the contract for direct business and over the period of indemnity for reinsurance business. Where time does not approximate the pattern of risk, previous claims experience is used to derive the incidence of risk.
The proportion of premium received or receivable not earned in the income statement at the reporting date is recognised in the balance sheet as an unearned premium liability.
Premiums on unclosed business are calculated as the difference between an estimate of the ultimate and booked premiums. Actuarial techniques are used to estimate the ultimate premium and are based on historical premium booking patterns.
Unearned premiums
Unearned premiums represent premium revenue attributable to future accounting periods. For direct insurances and certain inwards reinsurance classes of business, unearned premium is determined by apportioning the premiums written in the year over the period of insurance cover, reflecting the pattern in which risk emerges under these policies.
In respect of inwards reinsurance space business, premiums are unearned until the satellite launch date, and thereafter are recognised as earned according to the risks associated with the launch, post launch and in-orbit periods.
Outward reinsurance premium expense and deferred reinsurance premium
Premiums ceded to reinsurers are recognised as an expense over the period of cover using the methods applicable to premium revenue as set out above.
Outstanding claims
The liability for outstanding claims is measured as the best estimate of the present value of expected future payments against claims incurred at the reporting date under general insurance contracts issued by the Company, with an additional risk margin to allow for the inherent uncertainty in the best estimate.
The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs.
Claims handling costs include costs that can be associated directly with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as claims administration costs.
The liability for direct insurance includes an allowance for inflation and superimposed inflation and is measured as the present value of the expected future ultimate cost of settling claims. The expected future payments are discounted to present value using a risk free rate.
A risk margin is applied to the outstanding claims liability, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the best estimate. This risk margin increases the probability that the net liability is adequately provided for to a 75% confidence level.

Gordian Runoff Limited ABN 11 052 179 647	 	7 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
Reinsurance and other recoveries
Reinsurance and other recoveries consist of receivables on paid claims and outstanding claims, and are recognised as revenue when claims are paid or the outstanding claim is raised. Reinsurance receivables are discounted to present value consistent with the discounting of outstanding claims set out above. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Fire brigade levies and other statutory charges
A liability for fire brigade levies and other statutory charges is recognised on business written to the balance date. Levies and charges payable are expensed on the same basis as the recognition of the related premium revenue, with the portion relating to unearned premiums being reported as deferred statutory charges in Note 13.
Investment income
Dividend and interest income is recognised in the income statement on an effective interest method when the entity obtains control of the right to receive the revenue.
Realised gains and losses represent the change in value between the previously reported value and the amount received on sale of the asset. Unrealised gains and losses represent changes in the fair value of financial assets recognised in the period.
Assets backing general insurance liabilities
As part of its investment strategy, the Company actively manages its investment portfolio to ensure that investments mature in accordance with the expected pattern of future cash flows arising from general insurance liabilities.
The Company has determined that all assets are held to back general insurance liabilities on the basis that all assets are available for the settlement of claims if required.
The following policies apply to assets held to back general insurance liabilities.
Financial assets
Financial assets are designated at fair value through profit or loss. Initial recognition is at cost in the balance sheet and subsequent measurement is at fair value with any resultant unrealised gains or losses recognised in the income statement. Details of fair value for the different types of financial assets are listed below:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount. For the purposes of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value.
Cash trusts
The fair value of units in a listed cash trust reflects the quoted bid price at balance date. There is no reduction for realisation costs in the value of units in a cash trust. Unlisted unit trusts are recorded at fund managers valuations.

Gordian Runoff Limited ABN 11 052 179 647	 	8 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
Debt securities
Debt securities are initially recognised at fair value, representing the purchase cost of the asset exclusive of any transaction costs. Debt securities are subsequently measured at fair value, with any realised and unrealised gains or losses arising from changes in the fair value being recognised in the income statement for the period in which they arise. The fair value of a traded interest bearing security reflects the bid price at balance date. Interest bearing securities that are not frequently traded are valued by discounting the estimated recoverable amounts, using prevailing interest rates. Debt securities are accounted for on a trade date basis.
Derivatives
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at their fair value. All derivatives are carried as assets when their fair value is positive, and as liabilities when their fair value is negative. Derivatives are exchange traded and are fair valued using their publicly quoted bid price on the date of valuation.
Equity securities
Equity securities are initially recognised at fair value, representing the purchase cost of the asset exclusive of any transaction costs. Equity securities are subsequently measured at fair value, with any realised and unrealised gains or losses arising from changes in the fair value being recognised in the income statement. The fair value of a quoted equity security reflects the quoted bid price at balance date. Equity securities not traded in an organised financial market are valued at estimated fair value based on future cash flows discounted at appropriate interest rates.
Investments in controlled entities
Investments in controlled entities are valued at net assets which is an appropriate proxy for fair value. Any write down in value to recoverable amount is reported in the Income Statement.
Taxes
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to: (i) temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and (ii) unused tax losses.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
The tax impact on income and expense items recognised directly in equity is also recognised directly in equity.

Gordian Runoff Limited ABN 11 052 179 647	 	9 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
Tax Consolidation
AMP Limited, Gordian Runoff Limited and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
(i)	 	Current tax balances arising from external transactions recognised by entities in the tax-consolidated group occurring after the implementation date, and;	
 	 	 	
(ii)	 	Deferred tax assets arising from unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.	
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement.
Assets and liabilities which arise as a result of differences between the periods in which the underlying transactions occur, and the period in which the funding payments under the tax funding agreement are made, are recognised as intercompany balances receivable and payable in the balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.
The entity will be required to make a payment to terminate its liability under the tax funding agreement if it leaves the tax consolidation group.
Goods and services tax
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.
Foreign currency transactions and translation
Functional and presentation currency
Items included in the financial statements in each of the Gordian group entities are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The presentation currency of this financial report, and the functional currency of the parent entity, is Australian dollars.
Transactions and balances
Income and expense items denominated in a currency other than the functional currency are translated at the spot exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at balance sheet date, with exchange gains and losses recognised in the income statement. The corresponding foreign currency translations of foreign currency denominated outstanding claims liabilities and receivables are reported as a component of claims expense and premium revenue, respectively. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Gordian Runoff Limited ABN 11 052 179 647	 	10 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
Receivables
Receivables are financial assets and are measured at fair value. Given the short-term nature of most receivables, the recoverable amount approximates fair value. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Payables
Trade creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Amounts Due To or From Related Parties
Amounts are carried at fair value being nominal amounts due and payable. Interest is taken up as income on an accrual basis. A provision for impairment is recognised when there is objective evidence that the related party will not be able to pay its debts.
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Company makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas in which critical estimates and judgments are applied are described below.
(a) The ultimate liability arising from claims made under insurance contracts
Provision is made at year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Company.
The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, where more information about the claim event is generally available. IBNR claims may often not be reported to the insurer until many years after the events giving rise to the claims has happened. The liability class of business will typically display greater variations between initial estimates and final outcomes because there is a greater degree of difficulty in estimating IBNR reserves. For the short tail class, claims are typically reported soon after the claim event, and hence tend to display lower levels of volatility. In calculating the estimated cost of unpaid claims the Company uses a variety of estimation techniques, generally based upon analysis of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
 	•	 	changes in Company processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with the statistics from previous periods;	
 	 	 	 	
 	•	 	changes in the legal environment;	
 	 	 	 	
 	•	 	the effects of inflation;	
 	 	 	 	
 	•	 	the impact of large losses;	
 	 	 	 	
 	•	 	movements in industry benchmarks.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	11 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (Continued)
Large claims impacting each relevant business class are generally assessed separately, being measured on a case by case basis or projected separately in order to allow for the possible distortive effect of the development and incidence of these large claims.
Where possible the Company adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions. Details of specific assumptions used in deriving the outstanding claims liability at year-end are detailed in note 3.
(b) Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also computed using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Company may not receive amounts due to it and these amounts can be reliably measured.
3. ACTUARIAL METHODS AND ASSUMPTIONS
The entity ceased writing new business and renewals in late 1999 for both its direct insurance and inwards reinsurance business and has run an orderly runoff since. The process for determining the value of outstanding claims liabilities is generally consistent between these two portfolios. This process is described below.
Claims estimates are derived from analysis of the results of several different actuarial models. These models take case estimates as well as payments into account and assume that reported incurred amounts or reported payment amounts will develop steadily from period to period. Other models adopt an ultimate loss ratio for each year that reflects both the long term expected level, as well as incorporating recent experience. The analysis is performed by underwriting year for the inwards reinsurance class and by accident year for the direct insurance class.
Claims are first estimated on an undiscounted basis and are then discounted to allow for the time value of money. The valuation methods adopted include an implicit allowance for future inflation but do not identify the explicit rate. This allows for both general economic inflation as well as any superimposed inflation detected in the modelling of payments experience. Superimposed inflation arises from non-economic factors such as developments of legal precedent.
The liability class of business may be subject to the emergence of new types of latent claims, but no specific allowance is included for this as at the balance sheet date. Such uncertainties are considered when setting the risk margin appropriate for this class.
A description of the processes used to determine the key assumptions is provided below:
The average weighted term to settlement is calculated separately by class of business, based on historical settlement patterns.
The reinsurance percentage for the direct insurance business is calculated based on past reinsurance recovery rates and the structure of the reinsurance arrangements in place.

Gordian Runoff Limited ABN 11 052 179 647	 	12 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
3. ACTUARIAL METHODS AND ASSUMPTIONS (Continued)
The discount rates are derived from market yields on Government securities as at the balance date, in the currency of the expected claim payments.
Expense rate Claim handling expenses are calculated based on the projected costs of administering the remaining claims until expiry.
The ultimate to incurred claims ratio is derived by accident or underwriting year based on historical development of claims from period to period.
The effect of changes in the assumptions have been shown in the reconciliations of general insurance assets and liabilities in note 15 below.
Process for determining risk margin
The risk margin was determined initially for each portfolio, allowing for the uncertainty of the outstanding claims estimate for each portfolio. Uncertainty was analysed for each portfolio taking into account past volatility in general insurance claims, potential uncertainties relating to the actuarial models and assumptions, the quality of the underlying data used in the models, and the general insurance environment. The estimate of uncertainty is generally greater for long tailed classes when compared to short tail classes due to the longer time until settlement of outstanding claims.
The overall risk margin was determined allowing for diversification between the different portfolios and the relative uncertainty of each portfolio. The assumptions regarding uncertainty for each class were applied to the net central estimates, and the results were aggregated, allowing for diversification in order to arrive at an overall provision that is intended to have a 75% probability of adequacy.
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
Risk Margins applied	 	%	 	 	%	 	
 	 	 	 	 	 	 	 	 	
Direct insurance	 	 	18.8	 	 	 	23.6	 	
Inwards reinsurance	 	 	17.6	 	 	 	15.8	 	
Sensitivity analysis — general insurance contracts
There are a number of variables which impact the amounts recognised in the financial statements arising from insurance contracts.
The profit or loss and equity of the company are sensitive to movements in a number of key variables as described below.
 	 	 	
Variable	 	Description of variable	
 	
Direct and reinsurance	 	 	
Average weighted term to settlement	 	Expected payment patterns are used in determining the outstanding claims liability. A decrease in the average term to settlement would lead to claims being paid sooner than anticipated.	
 	 	 	
Discount rate	 	The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money.	
 	 	 	
Expense rate	 	An estimate for the internal costs of administering claims is included in the outstanding claims liability.	
 	 	 	
Ultimate to incurred claims ratio	 	The estimated ultimate claims cost is generally greater than the claims reported as incurred to date, due to claims that are incurred but not reported (IBNR) or due to future developments on existing claims.	
 	 	 	
Direct only	 	 	
Reinsurance percentage	 	The direct class assumes money will be recoverable from reinsurers on future claims paid.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	13 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
3. ACTUARIAL METHODS AND ASSUMPTIONS (Continued)
The following table provides an analysis of the sensitivity of the profit after income tax and total equity to changes in these assumptions both gross and net of reinsurance.
2007
Direct Insurance
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Assumption at 12/07	 	 	Profit/(Loss) (after tax)	 	
 	 	Change	 	 	 	 	 	 	 	 	 	 	Gross of	 	 	Net of	 	
 	 	in	 	 	 	 	 	Reinsurance	 	 	Reinsurance	 	
Variable	 	variable	 	 	Gross	 	 	Net	 	 	$’000	 	 	$’000	 	

Average weighted term to settlement	 	+0.5 year	 	4.6 years	 	4.7 years	 	 	2,945	 	 	 	2,468	 	
 	 	-0.5 year	 	 	 	 	 	 	 	 	 	 	(4,134	)	 	 	(3,491	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	12.0	%	 	 	—	 	 	 	212	 	
(as % of gross IBNR)	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	—	 	 	 	196	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	6.4	%	 	 	6.4	%	 	 	4,596	 	 	 	3,886	 	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	(4,842	)	 	 	(4,197	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	15.0	%	 	 	15.0	%	 	 	(1,086	)	 	 	(1,086	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	1,086	 	 	 	1,086	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	105.0	%	 	 	106.0	%	 	 	(5,965	)	 	 	(2,797	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	4,478	 	 	 	3,841	 	
Inwards Reinsurance
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Assumption at 12/07	 	 	Profit/(Loss) (after tax)	 	
 	 	Change	 	 	 	 	 	 	 	 	 	 	Gross of	 	 	Net of	 	
 	 	in	 	 	 	 	 	Reinsurance	 	 	Reinsurance	 	
Variable	 	variable	 	 	Gross	 	 	Net	 	 	$’000	 	 	$’000	 	

Average weighted term to settlement	 	+0.5 year	 	5.7 years	 	5.7 years	 	 	2,606	 	 	 	2,584	 	
 	 	-0.5 year	 	 	 	 	 	 	 	 	 	 	(4,394	)	 	 	(4,411	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	n/a	 	 	 	—	 	 	 	—	 	
(as % of gross IBNR)	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	4.2	%	 	 	4.2	%	 	 	8,171	 	 	 	8,146	 	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	(10,484	)	 	 	(10,498	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	18.0	%	 	 	18.0	%	 	 	(1,446	)	 	 	(1,445	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	1,446	 	 	 	1,445	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	103.0	%	 	 	103.0	%	 	 	(11,890	)	 	 	(11,890	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	7,772	 	 	 	7,772	 	

1 —	 	This sensitivity reflects the liability movements only. As assets are invested to match the term of liabilities there is little overall profit impact from a change to interest rates.	
 	 	 	
2 —	 	This ratio has only been adjusted for years that are not considered to be fully developed.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	14 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
3. ACTUARIAL METHODS AND ASSUMPTIONS (Continued)
2006
Direct Insurance
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Assumption at 12/06	 	 	Profit/(Loss) (after tax)	 	
 	 	Change	 	 	 	 	 	 	 	 	 	 	Gross of	 	 	Net of	 	
 	 	in	 	 	 	 	 	Reinsurance	 	 	Reinsurance	 	
Variable	 	variable	 	 	Gross	 	 	Net	 	 	$’000	 	 	$’000	 	

Average weighted term to settlement	 	+0.5 year	 	4.5 years	 	4.6 years	 	 	3,949	 	 	 	3,379	 	
 	 	-0.5 year	 	 	 	 	 	 	 	 	 	 	(5,202	)	 	 	(4,248	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	10.3	%	 	 	—	 	 	 	149	 	
(as % of gross IBNR)	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	—	 	 	 	(295	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	6.0	%	 	 	6.0	%	 	 	5,603	 	 	 	5,133	 	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	(7,011	)	 	 	(5,557	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	8.8	%	 	 	8.8	%	 	 	(2,176	)	 	 	(2,176	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	2,176	 	 	 	2,176	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	107.9	%	 	 	108.9	%	 	 	(6,862	)	 	 	(4,383	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	4,392	 	 	 	3,626	 	
Inwards Reinsurance
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Assumption at 12/06	 	 	Profit/(Loss) (after tax)	 	
 	 	Change	 	 	 	 	 	 	 	 	 	 	Gross of	 	 	Net of	 	
 	 	in	 	 	 	 	 	Reinsurance	 	 	Reinsurance	 	
Variable	 	variable	 	 	Gross	 	 	Net	 	 	$’000	 	 	$’000	 	

Average weighted term to settlement	 	+0.5 year	 	 	4.4	 	 	 	4.4	 	 	 	5,615	 	 	 	5,582	 	
 	 	-0.5 year	 	 	 	 	 	 	 	 	 	 	(5,755	)	 	 	(5,775	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	n/a	 	 	 	n/a	 	 	 	n/a	 	
(as % of gross IBNR)	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	n/a	 	 	 	n/a	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	5.0	%	 	 	5.0	%	 	 	9,420	 	 	 	9,384	 	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	(9,917	)	 	 	(9,933	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	15.8	%	 	 	15.8	%	 	 	(1,997	)	 	 	(1,994	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	1,997	 	 	 	1,994	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	102.9	%	 	 	103.0	%	 	 	(13,739	)	 	 	(13,739	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	7,727	 	 	 	7,727	 	

1 —	 	This sensitivity reflects the liability movements only. As assets are invested to match the term of liabilities there is little overall profit impact from a change to interest rates.	
 	 	 	
2 —	 	This ratio has only been adjusted for years that are not considered to be fully developed.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	15 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS
The company’s policies and procedures in respect of managing risks are set out in this note below.
The Board has ultimate responsibility for risk management and governance, including ensuring an appropriate risk framework is in place and is operating effectively. There are, however, other bodies and individuals associated with the Company that manage and monitor financial risk.
The Board
The Board is responsible for the approval of policy regarding shareholder capital investment strategy, policyholder asset and liability strategy and setting the financial risk appetite.
The Audit Committee
The Audit Committee is responsible for ensuring the existence of effective financial risk management policies and procedures.
The Approved Actuary
The Approved Actuary is responsible for reporting on solvency and capital adequacy. A Financial Condition report (FCR) and an Insurance Liability Valuation report (ILVR) must be provided to the Board and the Australian Prudential Regulatory Authority (APRA) at least annually, the ILVR must be peer reviewed annually by an external independent actuary. The Insurance Act also imposers obligations on the Approved Actuary to bring to the attention of the company or in certain circumstances APRA any matter that the Approved Actuary thinks requires action to be taken to avoid prejudice in the interests of the policy holders.
As part of the overall governance framework the and in accordance with Prudential Standards GPS 220 Risk Management and GPS 230 Reinsurance Management issued APRA, the Board and senior management have developed, implemented and maintain a sound and prudent Risk Management Strategy (RMS) and a Reinsurance Management Strategy (REMS).
The RMS and REMS identify the Company’s policies and procedures, processes and controls that comprise its risk management and control systems. These systems address all material risks, financial and non-financial, likely to be faced by the Company. Annually, the Board certifies to APRA that adequate strategies have been put in place to monitor those risks, that the Company has systems in place to ensure compliance with legislative and prudential requirements and that the Board has satisfied itself as to the compliance with the RMS and REMS. The RMS and REMS have been approved by both the Board and APRA.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	16 of 38	

 
Gordian RunOff Limite
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Key aspects of the processes established in the RMS to mitigate risks include:
 	•	 	A formal regular process of risk identification and evaluation, supplemented by a documented control assessment process, is completed by management and communicated to the Board in line with the Board approved Risk Management Strategy.	
 	 	 	 	
 	•	 	Actuarial models, using information from management information systems, to monitor claims patterns and other relevant statistics. Past experience and statistical methods are used as part of the process.	
 	 	 	 	
 	•	 	The maintenance and use of various specialist information systems, which provide up to date and reliable data on claims liabilities.	
 	 	 	 	
 	•	 	Documented procedures that are followed by claims staff that are experienced in the various classes of business previously written.	
 	 	 	 	
 	•	 	Reinsurance has been used, particularly in the early period of the run-off to limit the Company’s exposure to large single claims. The REMS provides that exposures continue to be monitored and where feasible reinsurance be purchased as means of limiting risk.	
 	 	 	 	
 	•	 	The mix of investment assets is driven by the nature and term of the insurance liabilities. The management of assets and liabilities is closely monitored in an attempt to match the maturity dates of assets with the expected pattern of claim payments.	
Risk and Mitigation
The Company’s activities expose it to a variety of risks. The major risks associated with insurance contracts include:
a)	 	Development of claims	
 	 	 	
 	 	There is a possibility that changes may occur in the estimate of our obligations at the end of a contract period. The tables in note 15 show the estimates of total ultimate claims at successive year-ends.	
 	 	 	
b)	 	Terms and conditions of direct and inwards reinsurance business	
 	 	 	
 	 	There is limited scope to improve the existing terms and conditions. The company has been in orderly run off since 1999, and no new contracts have been entered into since that time.	
 	 	 	
c)	 	Concentration of insurance risk	
 	 	 	
 	 	The exposure to concentrations of insurance risk can be mitigated with the purchase of reinsurance where management believes that the price /risk transfer is suitable.	
Financial risks include:
 	 	Market risk	
 	 	 	
a)	 	Interest rate risk	
 	 	 	
 	 	Interest rate risk arises to the extent that there is a mismatch between the fixed-interest portfolios used to back the outstanding claims liability and those outstanding claims. The interest rate risk is managed by matching the duration profiles of the investments assets and the outstanding claims liability.	
 	 	 	
 	 	The accounting policy notes describe the policies used to measure and report the assets and liabilities of the Company. Where the applicable market value is determined by discounting future cash flows, movements in interest rates will result in a reported unrealised gain or loss in the profit and loss account.	
 	 	 	
 	 	AMP Capital Investors Limited manages the investment portfolios on behalf of the Company. The Company seeks to reduce its interest rate risk through the use of investment portfolios as a hedge against its insurance liabilities. To the extent that these assets and liabilities can be matched, unrealised gains or losses on revaluation of liabilities resulting from interest rate movements will be offset by unrealised losses or gains on revaluation of investment assets.	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	17 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Interest rate sensitivity analysis
The following table demonstrates the impact of a 100 basis point change in Australian interest rates, with all other variables held constant, on the company’s shareholder profit after tax. It is assumed that the change occurs as at the reporting date (31 December) and there are concurrent movements in interest rates and parallel shifts in yield curves.
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
Change in Variable	 	Impact on	 	 	Impact on	 	
 	 	Profit after tax	 	 	Profit after tax	 	
 	 	$’000	 	 	$’000	 	
+100 basis points	 	 	(2,797	)	 	 	(6,000	)	
- 100 basis points	 	 	2,797	 	 	 	6,000	 	

b)	 	Foreign Currency risk analysis	
 	 	 	
 	 	Currency risk is the risk that the fair value of future cash flows of a financial instrument will            fluctuate because of changes in exchange rates.	
 	 	 	
 	 	The Company’s financial assets are primarily dominated in the same currencies as its insurance contract liabilities, being United States dollar (USD), Great Britain pounds (GBP) and the European Union Currency (EURO). Where insurance contract liabilities are payable in a foreign currency other than the three mentioned above, the assets backing these liabilities are held in one of the three currencies (or Australian dollars) which best resembles an appropriate proxy.	
 	 	 	
 	 	Other exposures to foreign currency are immaterial.	
 	 	 	
 	 	The following table demonstrates the impact of a 10% increase or decrease in the relevant proxy currencies if the underlying liability currency moved 10% . It is assumed that the relevant change occurs at reporting date.	

 	 	31 Dec 07	 	 	31 Dec 06	 	
Change in Variable	 	Impact on	 	 	Impact on	 	
 	 	Profit after tax	 	 	Profit after tax	 	
 	 	$’000	 	 	$’000	 	
+10%	 	 	(1,055	)	 	 	(1,354	)	
- 10%	 	 	1,055	 	 	 	1,354	 	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	18 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Liquidity risk
Liquidity risk is the risk that the Company will not be able to met its debt obligations or other cash outflows as they fall due because of lack of liquid assets. The Company manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching the maturiy profiles of assets and liabilities. As required by APRA prudential Standard GPS 220, the Company has developed and implemented a risk management strategy which is described earlier in this note to control this risk.
The table below summaries the maturity profile of the company’s financial liabilities at 31 December based on contractual undiscounted obligations.
31 Dec 07
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	Up to 1	 	 	2 to 3	 	 	4 to 5	 	 	Over 5	 	 	Total	 	
 	 	year	 	 	years	 	 	years	 	 	years	 	 	 	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	9,835	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	9,835	 	
Derivatives	 	 	—	 	 	 	535	 	 	 	—	 	 	 	443	 	 	 	978	 	
 	 	 	
Total	 	 	9.835	 	 	 	535	 	 	 	—	 	 	 	443	 	 	 	10,813	 	
 	 	 	
31 Dec 06
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	Up to 1	 	 	2 to 3	 	 	4 to 5	 	 	Over 5	 	 	Total	 	
 	 	year	 	 	years	 	 	years	 	 	years	 	 	 	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	8,853	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	8,853	 	
Derivatives	 	 	—	 	 	 	308	 	 	 	—	 	 	 	753	 	 	 	1,061	 	
 	 	 	
Total	 	 	8,853	 	 	 	308	 	 	 	—	 	 	 	753	 	 	 	9,914	 	
 	 	 	
Credit risk
Credit risk is the risk of loss that arises from a counterparty failing to meet their contractual commitments in full and on time, or from losses arising from the change in value of traded financial instruments as a result of changes in credit risk on that instrument.
Credit risk arising from exposure to individual counter parties in the investment portfolios is managed by the investment manager, AMP Capital Investors’ Compliance and Business Risk team, according to a separate investment mandate approved by the Board which aims to duration band match the insurance liability profile within specified credit criteria constraints. Compliance with the mandate is reported to the Board of Directors.
Credit risk in trade receivables in managed by analysing the credit ratings of the underlying debts.
Other than loans to related parties, there are no significant concentrations of credit risk.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	19 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Credit exposure by credit rating
The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the Company’s credit rating of counter parties:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	Reinsurance &	 	 	Other Financial	 	 	Reinsurance &	 	 	Other Financial	 	
 	 	Other Recoveries	 	 	Instruments	 	 	Other Recoveries	 	 	Instruments	 	
 	 	$ 000	 	 	$ 000	 	 	$ 000	 	 	$ 000	 	
AAA	 	 	1,168	 	 	 	363,098	 	 	 	4,309	 	 	 	610,982	 	
AA	 	 	8,883	 	 	 	535,309	 	 	 	13,661	 	 	 	561,868	 	
A	 	 	7,417	 	 	 	49,239	 	 	 	11,721	 	 	 	42,806	 	
BBB	 	 	1,272	 	 	 	—	 	 	 	1,410	 	 	 	—	 	
Below BBB	 	 	64	 	 	 	—	 	 	 	109	 	 	 	—	 	
Not rated	 	 	10,696	 	 	 	70,723	 	 	 	17,637	 	 	 	60,488	 	
 	 	 	
Total	 	 	29,501	 	 	 	1,018,369	 	 	 	48,847	 	 	 	1,276,144	 	
 	 	 	
The following table provides an aged analysis of financial assets neither past due or impaired, past due and not impaired and impaired assets. Impairment is calculated in accordance with note 1.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
31 Dec 07	 	Neither past	 	 	Past due but not impaired	 	 	 	 	 	 	 	
 	 	due nor	 	 	Under	 	 	More than	 	 	Impaired	 	 	TOTAL	 	
 	 	impaired	 	 	90 days	 	 	91 days	 	 	 	 	 	 	 	
 	 	$000	 	 	$000	 	 	$000	 	 	$000	 	 	$000	 	
Receivables	 	 	6,626	 	 	 	(107	)	 	 	5,276	 	 	 	47	 	 	 	11,842	 	
Reinsurance and Other recoveries	 	 	12,164	 	 	 	12	 	 	 	1,361	 	 	 	15,964	 	 	 	29,501	 	

31 Dec 06	 	Neither past	 	 	Past due but not impaired	 	 	 	 	 	 	 	
 	 	due nor	 	 	Less than	 	 	More than	 	 	 	 	 	 	 	
 	 	impaired	 	 	90 days	 	 	91 days	 	 	Impaired	 	 	TOTAL	 	
 	 	$000	 	 	$000	 	 	$000	 	 	$000	 	 	$000	 	
Receivables	 	 	8,898	 	 	 	(14	)	 	 	5,419	 	 	 	—	 	 	 	14,303	 	
Reinsurance and Other recoveries	 	 	5,060	 	 	 	15,800	 	 	 	205	 	 	 	27,782	 	 	 	48,847	 	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	20 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Fair Value
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenue and expenses are recognised, in respect of each class of financial asset, financial liability and other investments are under and in Note 1.
Categories of financial instruments
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries	 	 	11	 	 	 	29,501	 	 	 	48,847	 	
Financial assets	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value through the profit and loss:	 	 	 	 	 	 	 	 	 	 	 	 	
Cash & cash equivalents	 	 	24	 	 	 	13,857	 	 	 	42,291	 	
Receivables	 	 	10	 	 	 	11,842	 	 	 	14,303	 	
Other financial assets	 	 	12	 	 	 	1,018,369	 	 	 	1,276,144	 	
Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	16	 	 	 	9,835	 	 	 	8,853	 	
Income tax payable	 	 	 	 	 	 	26,227	 	 	 	24,649	 	
The recorded bid price equates to net fair value for listed debt and equity securities. For derivative contracts, fair value equates to the unrealised gain/loss on the outstanding contract. For the following financial instruments, the cost carrying amount is considered to equate to their fair value:
•	 	cash deposits	

•	 	loans to related parties	

•	 	receivables	

•	 	payables.	
Derivative transactions
The Company uses derivatives in the following way:
Investment management operations
Authority has been given to the investment managers to use derivatives in managing the investment portfolios. There may be various reasons why investment in derivatives is more appropriate than investment in the underlying physical asset including hedging, liquidity and pricing.
The types of derivatives, which the investment manager can use include, interest rate swaps and futures, share price index futures and forward currency agreements.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	21 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Extent of derivative transactions
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Notional	 	 	Fair	 	 	Notional	 	 	Fair	 	
 	 	value	 	 	value	 	 	value	 	 	value	 	
 	 	2007	 	 	2007	 	 	2006	 	 	2006	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
Investment management operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest Rate Swap Contracts	 	 	—	 	 	 	—	 	 	 	10,500	 	 	 	(235	)	
Interest Rate Futures Contracts	 	 	75,006	 	 	 	27	 	 	 	104,668	 	 	 	(480	)	
Equity Futures & Options Contracts	 	 	7,170	 	 	 	(220	)	 	 	16,762	 	 	 	1,133	 	
The notional value refers to the value of the underlying assets of the derivatives contract. The fair value is the unrealised gain/(loss) on the outstanding contracts.
Capital Management
The Company is subject to externally imposed capital management requirements. The Company must comply with Capital requirements as specified under APRA General Insurance Prudential Standards.
The primary capital management objective is to ensure the company will be able to continue as a going concern while minimising excess capital; through capital initiatives, where appropriate.
The Company’s capital position is monitored by the Company’s Board. There have been no changes in the capital management objectives, policies and processes from the previous period.
The company has at all times during the current and prior financial year complied with the externally imposed capital requirements imposed by Prudential Standard GPS110 and the requirements set out in its insurance license.
The Minimum Capital Requirement (MCR) as a ratio of the Company’s capital base is shown in the table under.
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Tier 1 Capital	 	 	 	 	 	 	 	 	
Paid-up ordinary shares	 	 	1,610,100	 	 	 	1,814,600	 	
General reserves	 	 	—	 	 	 	—	 	
Retained earnings	 	 	(1,118,908	)	 	 	(1,193,381	)	
Current year earnings	 	 	106,479	 	 	 	74,473	 	
Excess technical provisions (net of tax)	 	 	 	 	 	 	 	 	
Less : deductions	 	 	32,679	 	 	 	44,573	 	
 	 	 	
Net Tier 1 Capital	 	 	564,992	 	 	 	651,119	 	

Net Tier 2 Capital	 	 	—	 	 	 	—	 	

Total Capital Base	 	 	564,992	 	 	 	651,119	 	

 	 	 	
Minimum Capital Requirement	 	 	91,649	 	 	 	133,113	 	

Capital Adequacy Multiple	 	 	6.16	 	 	 	4.89	 	
The entity complies with Prudential Standard GPS110 and the requirements set out in its insurance license.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	22 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
5. NET PREMIUM REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Gross written premium — direct	 	 	4	 	 	 	8	 	
Movement in unearned premium — direct	 	 	—	 	 	 	20	 	
 	 	 	
Direct premium revenue	 	 	4	 	 	 	28	 	
 	 	 	 	 	 	 	 	 	
Gross written premium (expense)/benefit — inwards	 	 	4,689	 	 	 	(1,168	)	
Movement in unearned premium — inwards	 	 	—	 	 	 	—	 	
 	 	 	
Inwards reinsurance premium (expense)/revenue	 	 	4,689	 	 	 	(1,168	)	
 	 	 	 	 	 	 	 	 	
Premium (expense)/revenue	 	 	4,693	 	 	 	(1,140	)	

Outwards reinsurance premium (expense)/revenue	 	 	(280	)	 	 	(323	)	

Net Premium Revenue /(Expense)	 	 	4,413	 	 	 	(1,463	)	
 	 	 	
6. NET CLAIMS INCURRED
2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Current year	 	 	Prior years	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Gross claims expense	 	 	 	 	 	 	 	 	 	 	 	 	
Direct	 	 	—	 	 	 	(101,038	)	 	 	(101,038	)	
Inwards reinsurance	 	 	—	 	 	 	(43,307	)	 	 	(43,307	)	
 	 	 	
Gross claims incurred — undiscounted	 	 	—	 	 	 	(144,345	)	 	 	(144,345	)	
Discount movement	 	 	—	 	 	 	25,441	 	 	 	25,441	 	
 	 	 	
Total gross claims expense	 	 	—	 	 	 	(118,904	)	 	 	(118,904	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries revenue	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries — undiscounted	 	 	—	 	 	 	10,018	 	 	 	10,018	 	
Discount movement	 	 	—	 	 	 	(3,516	)	 	 	(3,516	)	
 	 	 	
Total reinsurance and other recoveries revenue	 	 	—	 	 	 	6,502	 	 	 	6,502	 	

Net claims incurred	 	 	—	 	 	 	(112,402	)	 	 	(112,402	)	
 	 	 	
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Current year	 	 	Prior years	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Gross claims expense	 	 	 	 	 	 	 	 	 	 	 	 	
Direct	 	 	—	 	 	 	(25,847	)	 	 	(25,847	)	
Inwards reinsurance	 	 	—	 	 	 	(59,464	)	 	 	(59,464	)	
 	 	 	
Gross claims incurred — undiscounted	 	 	—	 	 	 	(85,311	)	 	 	(85,311	)	
Discount movement	 	 	—	 	 	 	14,049	 	 	 	14,049	 	
 	 	 	
Total gross claims expense	 	 	—	 	 	 	(71,262	)	 	 	(71,262	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries revenue	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries — undiscounted	 	 	—	 	 	 	3,444	 	 	 	3,444	 	
Discount movement	 	 	—	 	 	 	(556	)	 	 	(556	)	
 	 	 	
Total reinsurance and other recoveries revenue	 	 	—	 	 	 	2,888	 	 	 	2,888	 	

Net claims incurred	 	 	—	 	 	 	(68,374	)	 	 	(68,374	)	
 	 	 	
Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the risks borne in all previous financial years.
As the company stopped writing new business in late 1999, all claims development relates to prior years.

Gordian Runoff Limited ABN 11 052 179 647	 	23 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
7. OPERATING EXPENSES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Expenses by Nature	 	 	 	 	 	 	 	 	
Commission expenses	 	 	142	 	 	 	959	 	
Write-off of Bad Debt	 	 	6	 	 	 	2,634	 	
Impairment expense — premium receivables	 	 	(396	)	 	 	304	 	
Impairment expense — reinsurance receivables	 	 	(1,151	)	 	 	(3,331	)	
Net gain on foreign currency	 	 	(2,588	)	 	 	(1,059	)	
Investment management fees	 	 	1,279	 	 	 	2,142	 	
Other management fees	 	 	23,892	 	 	 	25,652	 	
External consultant costs	 	 	971	 	 	 	1,245	 	
Interest on loan — subsidiary	 	 	1,061	 	 	 	—	 	
Other expenses	 	 	3,372	 	 	 	(972	)	
 	 	 	
Total Expenses	 	 	26,588	 	 	 	27,574	 	

represented by:	 	 	 	 	 	 	 	 	
General administration expenses included in net claims incurred	 	 	18,553	 	 	 	17,612	 	
Acquisition benefit	 	 	(114	)	 	 	(1,618	)	
Other underwriting expenses	 	 	231	 	 	 	1,043	 	
General administration expenses	 	 	6,857	 	 	 	10,537	 	
Finance costs	 	 	1,061	 	 	 	—	 	
 	 	 	
Total expenses	 	 	26,588	 	 	 	27,574	 	
 	 	 	
8. NET INVESTMENT REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Investment income	 	 	 	 	 	 	 	 	
Interest	 	 	37,568	 	 	 	49,005	 	
Interest from/(to) related parties:	 	 	 	 	 	 	 	 	
- other related parties	 	 	28,941	 	 	 	31,912	 	
Dividends and other distributions received	 	 	3,580	 	 	 	2,187	 	
Dividends from related parties:	 	 	 	 	 	 	 	 	
- subsidiaries	 	 	—	 	 	 	645	 	
Changes in fair value of investments:	 	 	 	 	 	 	 	 	
Realised	 	 	(29,919	)	 	 	(21,115	)	
Unrealised	 	 	3,175	 	 	 	(16,674	)	
 	 	 	
Total net investment revenue	 	 	43,345	 	 	 	45,960	 	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	24 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
9. INCOME TAX
a) Analysis of income tax expense
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Current tax	 	 	37,049	 	 	 	24,055	 	
Decrease in deferred tax assets	 	 	7,539	 	 	 	7,209	 	
Decrease in deferred tax liabilities	 	 	—	 	 	 	(3	)	
Under provided in previous years	 	 	1,584	 	 	 	(1,785	)	
Other adjustments	 	 	(500	)	 	 	—	 	
Prior year tax losses not recognised now recouped	 	 	—	 	 	 	—	 	
 	 	 	
Income tax expense	 	 	45,672	 	 	 	29,476	 	
 	 	 	
b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period
In respect of income tax expense attributable to shareholders, the tax rate which applies in both 2007 and 2006 is 30% for Australia and 33% for New Zealand.
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Operating profit before income tax	 	 	152,151	 	 	 	103,948	 	
 	 	 	 	 	 	 	 	 	
Prima facie income tax at the rate of 30%	 	 	45,645	 	 	 	31,184	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Non assessable income	 	 	—	 	 	 	3	 	
Unrealised revaluation of controlled entity	 	 	233	 	 	 	—	 	
Capital Loss on subsidiary	 	 	(1,181	)	 	 	—	 	
Other	 	 	(609	)	 	 	74	 	
Over/(Under) provided in prior years	 	 	1,584	 	 	 	(1,785	)	
 	 	 	
Income tax expense per income statement	 	 	45,672	 	 	 	29,476	 	
 	 	 	
c) Analysis of deferred tax asset
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Provision for doubtful debts	 	 	8,510	 	 	 	14,713	 	
- Accruals	 	 	60	 	 	 	239	 	
- Indirect Claims Costs Adjustments	 	 	16,726	 	 	 	20,070	 	
- Unrealised gains/losses	 	 	6,202	 	 	 	9,561	 	
- Other	 	 	—	 	 	 	6	 	
- Current year’s tax losses	 	 	1,181	 	 	 	—	 	
 	 	 	
Total deferred tax assets	 	 	32,679	 	 	 	44,589	 	
 	 	 	
d) Analysis of deferred tax liability
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Other	 	 	—	 	 	 	16	 	
 	 	 	
Total deferred tax liability	 	 	—	 	 	 	16	 	

 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Deferred tax asset	 	 	32,679	 	 	 	44,589	 	
Deferred tax liability	 	 	—	 	 	 	(16	)	
 	 	 	
Net deferred tax asset	 	 	32,679	 	 	 	44,573	 	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	25 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
10. RECEIVABLES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Premiums receivable — direct insurance	 	 	9	 	 	 	13	 	
less: provision for impairment of premium receivable	 	 	(9	)	 	 	(13	)	
 	 	 	
 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	
Premiums receivable — inwards reinsurance	 	 	9,518	 	 	 	9,411	 	
less: provision for impairment of premium receivable	 	 	(2,201	)	 	 	(2,594	)	
 	 	 	
 	 	 	7,317	 	 	 	6,817	 	

Premium receivables — direct & inwards reinsurance	 	 	7,317	 	 	 	6,817	 	

Other receivables	 	 	235	 	 	 	529	 	
Other receivables from related parties	 	 	 	 	 	 	 	 	
-other related parties	 	 	—	 	 	 	1,325	 	
Interest receivable from related parties	 	 	 	 	 	 	 	 	
-other related parties	 	 	2,494	 	 	 	2,498	 	
 	 	 	
Total current receivables	 	 	10,046	 	 	 	11,169	 	

Non-current	 	 	 	 	 	 	 	 	
Premiums receivable — inwards reinsurance	 	 	1,796	 	 	 	3,134	 	
 	 	 	
Total non-current receivables	 	 	1,796	 	 	 	3,134	 	
 	 	 	
11. REINSURANCE AND OTHER RECOVERIES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Expected future reinsurance recoveries undiscounted	 	 	 	 	 	 	 	 	
- on claims paid	 	 	23,191	 	 	 	25,988	 	
- on outstanding claims	 	 	41,173	 	 	 	62,389	 	
 	 	 	
 	 	 	64,364	 	 	 	88,377	 	
 	 	 	 	 	 	 	 	 	
Discount to present value	 	 	(8,706	)	 	 	(12,222	)	
less: provision for impairment of reinsurance assets	 	 	(26,157	)	 	 	(27,308	)	
 	 	 	
Reinsurance and other recoveries receivable	 	 	29,501	 	 	 	48,847	 	

Current	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries receivable	 	 	31,448	 	 	 	39,701	 	
less: provision for impairment of reinsurance assets	 	 	(17,745	)	 	 	(20,611	)	
 	 	 	
 	 	 	13,703	 	 	 	19,090	 	

Non-current	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries receivable	 	 	24,211	 	 	 	36,454	 	
less: provision for impairment of reinsurance assets	 	 	(8,413	)	 	 	(6,697	)	
 	 	 	
 	 	 	15,798	 	 	 	29,757	 	
 	 	 	
Refer to note 15 for a reconciliation of the movement in reinsurance and other recoveries on incurred claims over the year.

Gordian Runoff Limited ABN 11 052 179 647	 	26 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
12. OTHER FINANCIAL ASSETS
 	 	 	 	 	 	 	 	 	
 	 	Company	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Quoted investments — at fair value	 	 	 	 	 	 	 	 	
Government and semi-government bonds*	 	 	63,208	 	 	 	31,147	 	
Corporate bonds	 	 	44,563	 	 	 	79,335	 	
Derivatives	 	 	1,818	 	 	 	1,875	 	
 	 	 	
 	 	 	109,589	 	 	 	112,357	 	

Unquoted investments — at fair value value	 	 	 	 	 	 	 	 	
Units held in cash management trusts	 	 	 	 	 	 	 	 	
- Other related parties	 	 	4,193	 	 	 	—	 	
Units held in other unit trusts	 	 	 	 	 	 	 	 	
- Other related parties	 	 	34,847	 	 	 	15,151	 	
Loan to related party in the wholly owned group	 	 	442,119	 	 	 	422,094	 	
 	 	 	
 	 	 	481,159	 	 	 	437,245	 	
 	 	 	
Total current financial assets	 	 	590,748	 	 	 	549,602	 	

Non-current	 	 	 	 	 	 	 	 	
Quoted investments — at fair value	 	 	 	 	 	 	 	 	
Government and semi-government bonds*	 	 	223,969	 	 	 	400,150	 	
Corporate bonds	 	 	171,969	 	 	 	293,922	 	
Shares in other corporations	 	 	926	 	 	 	935	 	
 	 	 	
 	 	 	396,864	 	 	 	695,007	 	

Unquoted investments — at fair value	 	 	 	 	 	 	 	 	
Shares in controlled entities	 	 	30,689	 	 	 	31,467	 	
Shares in associated entities	 	 	68	 	 	 	68	 	
 	 	 	
 	 	 	30,757	 	 	 	31,535	 	
 	 	 	
Total non-current financial assets	 	 	427,621	 	 	 	726,542	 	
 	 	 	
Total financial assets	 	 	1,018,369	 	 	 	1,276,144	 	

 	 	 	
*	 	The Company has given security over government and semi-government bonds against letters of credit of $28.3m (31 December 2006: $44.9m). These assets provide security to the extent of 105% to 110% of the outstanding letters of credit. The security agreements do not restrict the investments from being traded.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	27 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
12. OTHER FINANCIAL ASSETS (continued)
Investments in controlled entities
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2007	 	 	2006	 	 	2006	 	
Name of entity	 	%	 	 	$’000	 	 	%	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gordian RunOff (UK) Limited	 	 	100	 	 	 	30,689	 	 	 	100	 	 	 	31,467	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	30,689	 	 	 	 	 	 	 	31,467	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gordian RunOff (UK) Limited is incorporated in the United Kingdom and is audited by Ernst & Young UK.
13. OTHER ASSETS
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Deferred acquisition costs	 	 	—	 	 	 	—	 	
Prepayments	 	 	164	 	 	 	240	 	
 	 	 	
Total current other assets	 	 	164	 	 	 	240	 	

 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Deferred acquisition costs as at 1 January	 	 	—	 	 	 	3	 	
Amortisation charged to income	 	 	—	 	 	 	(3	)	
 	 	 	
Deferred acquisition costs as at 31 December	 	 	—	 	 	 	—	 	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	28 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
14. UNEARNED PREMIUM
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Unearned premium liability as at 1 January	 	 	—	 	 	 	20	 	
 	 	 	 	 	 	 	 	 	
Earning of premiums written in previous periods	 	 	—	 	 	 	(20	)	
 	 	 	
Unearned premium liability as at 31 December	 	 	—	 	 	 	—	 	
 	 	 	
15. OUTSTANDING CLAIMS
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Central estimate	 	 	467,488	 	 	 	703,638	 	
Risk margin	 	 	64,931	 	 	 	103,293	 	
 	 	 	
 	 	 	532,419	 	 	 	806,931	 	
Discount to present value	 	 	(85,463	)	 	 	(109,727	)	
 	 	 	
Gross outstanding claims liability	 	 	446,956	 	 	 	697,204	 	

Current	 	 	90,891	 	 	 	112,751	 	
Non-current	 	 	356,065	 	 	 	584,453	 	
 	 	 	
Total outstanding claims	 	 	446,956	 	 	 	697,204	 	
 	 	 	
Investment assets in the form of debt securities are held to back the liability for outstanding claims and are realised on a regular basis to meet claims. The amount of claims likely to be settled within 12 months of the reporting date is classified as current.
The Company has been closed to new business since 1999 and there have been no new direct or inwards reinsurance contracts issued in the five years prior to and including this report.
As described in note 1, the outstanding claims liability is the best estimate of the present value of the expected future payments, after the inclusion of a risk margin. At each balance date, the amount of the liability is reassessed and it is likely that changes will arise in the estimates of liabilities. The tables in the following pages show the estimates of total ultimate claims at successive year ends.

Gordian Runoff Limited ABN 11 052 179 647	 	29 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
15. OUTSTANDING CLAIMS (continued)
Reconciliation of movement in discounted outstanding claims liability
2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Gross	 	 	Reinsurance	 	 	Net	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Amount outstanding brought forward	 	 	697,204	 	 	 	48,847	 	 	 	648,357	 	

Claim payments/ recoveries during the period	 	 	(112,791	)	 	 	(11,520	)	 	 	(101,271	)	
Effect of changes in assumptions	 	 	(118,509	)	 	 	(7,853	)	 	 	(110,656	)	
Effect of changes in exchange rates	 	 	(18,948	)	 	 	27	 	 	 	(18,975	)	
 	 	 	
Amount outstanding carried forward	 	 	446,956	 	 	 	29,501	 	 	 	417,455	 	
 	 	 	
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Gross	 	 	Reinsurance	 	 	Net	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Amount outstanding brought forward	 	 	918,152	 	 	 	71,196	 	 	 	846,956	 	

Claim payments/ recoveries during the period	 	 	(149,686	)	 	 	(25,237	)	 	 	(124,449	)	
Effect of changes in assumptions	 	 	(57,129	)	 	 	2,857	 	 	 	(59,986	)	
Effect of changes in exchange rates	 	 	(14,133	)	 	 	31	 	 	 	(14,164	)	
 	 	 	
Amount outstanding carried forward	 	 	697,204	 	 	 	48,847	 	 	 	648,357	 	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	30 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
15. OUTSTANDING CLAIMS (continued)
Claims Development Table
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Inwards Reinsurance	 	 	Direct Insurance	 	 	Total	 	
 	 	Net	 	 	Gross	 	 	Net	 	 	Gross	 	 	Net	 	 	Gross	 	
Estimate of Cumulative claims	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	
31 December 2001	 	 	5,064,881	 	 	 	5,402,510	 	 	 	1,384,633	 	 	 	1,857,817	 	 	 	6,449,514	 	 	 	7,260,327	 	
31 December 2002	 	 	5,026,838	 	 	 	5,389,980	 	 	 	1,415,333	 	 	 	1,920,262	 	 	 	6,442,171	 	 	 	7,310,242	 	
31 December 2003	 	 	5,044,587	 	 	 	5,439,170	 	 	 	1,462,533	 	 	 	1,952,003	 	 	 	6,507,120	 	 	 	7,391,173	 	
31 December 2004	 	 	4,990,587	 	 	 	5,379,685	 	 	 	1,432,295	 	 	 	1,882,078	 	 	 	6,422,882	 	 	 	7,261,763	 	
31 December 2005	 	 	4,966,996	 	 	 	5,344,998	 	 	 	1,491,990	 	 	 	1,933,978	 	 	 	6,458,986	 	 	 	7,278,976	 	
31 December 2006	 	 	4,938,503	 	 	 	5,313,834	 	 	 	1,463,731	 	 	 	1,901,401	 	 	 	6,402,234	 	 	 	7,215,235	 	
31 December 2007	 	 	4,930,513	 	 	 	5,305,046	 	 	 	1,393,892	 	 	 	1,822,020	 	 	 	6,324,405	 	 	 	7,127,066	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Estimate of Cumulative Claims at 31 December 2007	 	 	4,930,513	 	 	 	5,305,046	 	 	 	1,393,892	 	 	 	1,822,020	 	 	 	6,324,405	 	 	 	7,127,066	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cumulative Payments	 	 	4,691,017	 	 	 	5,064,768	 	 	 	1,259,843	 	 	 	1,650,593	 	 	 	5,950,860	 	 	 	6,715,361	 	

Undiscounted central estimate	 	 	239,496	 	 	 	240,278	 	 	 	134,049	 	 	 	171,427	 	 	 	373,545	 	 	 	411,705	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of Discounting	 	 	43,160	 	 	 	43,160	 	 	 	33,614	 	 	 	42,303	 	 	 	76,774	 	 	 	85,463	 	

Discounted Central Estimate	 	 	196,336	 	 	 	197,118	 	 	 	100,435	 	 	 	129,124	 	 	 	296,771	 	 	 	326,242	 	

Risk Margin	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	64,931	 	
Claims Handling Provision	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	55,783	 	
 	
Gross Outstanding Claims as per the Balance Sheet	 	 	 	 	 	 	 	 	 	 	 	 	 	 	446,956	 	
 	
16. PAYABLES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Trade & other creditors	 	 	1,996	 	 	 	3,303	 	
Other borrowings from related parties	 	 	 	 	 	 	 	 	
- subsidiaries	 	 	 	 	 	 	—	 	
- other related parties	 	 	7,551	 	 	 	5,128	 	
 	 	 	
Total current payables	 	 	9,547	 	 	 	8,431	 	

Non-current	 	 	 	 	 	 	 	 	
Trade & other creditors	 	 	288	 	 	 	422	 	
 	 	 	
Total non-current payables	 	 	288	 	 	 	422	 	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	31 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
17. INTEREST BEARING LOAN
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Loan	 	 	 	 	 	 	 	 	
— subsidiaries	 	 	25,723	 	 	 	—	 	
 	 	 	
Total current payables	 	 	25,723	 	 	 	—	 	
 	 	 	
18. ISSUED CAPITAL
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Paid up capital	 	 	 	 	 	 	 	 	
1,840,000,005 fully paid ordinary shares at $0.88 per share (2006: 1,840,000,005) at $0.99 per share	 	 	1,610,100	 	 	 	1,814,600	 	
 	 	 	
Total paid up capital	 	 	1,610,100	 	 	 	1,814,600	 	

Movement in ordinary share capital	 	 	 	 	 	 	 	 	
Balance beginning of the year	 	 	1,814,600	 	 	 	1,978,600	 	
Movement for the year — Capital reduction 18 August 06	 	 	—	 	 	 	(164,000	)	
Movement for the year — Capital reduction 27 June 07	 	 	(113,000	)	 	 	—	 	
Movement for the year — Capital reduction 28 May 07	 	 	(91,500	)	 	 	—	 	
 	 	 	
Balance at the end of the period	 	 	1,610,100	 	 	 	1,814,600	 	
 	 	 	
Rights attaching to Ordinary Shares
Ordinary shares attract the following rights:
 	(a)	 	to receive notice of and to attend and vote at all general meetings of the Company;

 	(b)	 	to receive dividends; and	
 	 	 	 	
 	(c)	 	in a winding up, to participate equally in the distribution of the assets of the Company (both capital and surplus), subject only to any amounts unpaid on the Share.	
19. FRANKING ACCOUNT
No dividends were paid or proposed during the year.
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies were transferred to the Head Entity, AMP Limited.
The entity will be required to make a payment to terminate its liability under the tax funding agreement if it leaves the tax consolidation group.

Gordian Runoff Limited ABN 11 052 179 647	 	32 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
20. KEY MANAGEMENT PERSONNEL COMPENSATION
The following individuals were the key management personnel of Gordian RunOff Limited for the current and prior reporting periods (unless stated otherwise):
 	 	 	
 	 	Date of Appointment/Resignation during the	
Name	 	current or prior reporting period	

Peter Clarke	 	 	
Richard Grellman	 	 	
Paul Leaming	 	31-12-2007, Appointed	
William Roberts	 	 	
Felix Zaccar	 	 	
Peter Hodgett	 	31-12-2007, Resigned	
Andrew Mohl	 	31-12-2007, Resigned	
The following table provides aggregate details of the compensation of key management personnel of Gordian RunOff Limited.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term employee	 	Post-employment	 	Other long-term	 	Termination	 	Share-based	 	 	
 	 	benefits	 	benefits	 	benefits	 	benefits	 	payments	 	Total	
Year	 	$	 	$	 	$	 	$	 	$	 	$	
2007	 	 	6,396,418	 	 	 	204,889	 	 	 	—	 	 	 	7,667,817	 	 	 	2,837,771	 	 	 	17,106,895	 	
2006	 	 	6,306,101	 	 	 	205,061	 	 	 	—	 	 	 	—	 	 	 	2,318,215	 	 	 	8,829,377	 	
Key management personnel disclosed above, also provided services to other related entities during the year. The above remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to Gordian RunOff Limited.
21. AUDITORS’ REMUNERATION
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Amounts received, or due and receivable, by Ernst & Young for:	 	 	 	 	 	 	 	 	
— other services	 	 	237	 	 	 	129	 	
 	 	 	
Auditors’ remuneration for the year ended 31 December 2007 is paid on the entity’s behalf by a controlled entity within the AMP Limited Group.
22. CONTINGENT LIABILITIES
Legal disputes
The nature of the insurance reinsurance business from time to time gives rise to disputes. Several claims have been denied or recoveries disputed, giving rise to legal actions over coverage issues. Any resulting litigation/arbitration will be vigorously defended or pursued. In assessing claim liabilities or reinsurance recoveries, management has reserved based on its best estimate of the likely outcomes. The nature of these disputes are such that the quantum and timing of the outcome are uncertain.

Gordian Runoff Limited ABN 11 052 179 647	 	33 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
23. RELATED PARTIES
Controlling Entity
The immediate parent entity at 31 December 2007 is AG Australia Holdings Ltd. AMP Limited at 31 December 2007 is the ultimate parent entity.
Controlled Entities
Information relating to controlled entities is included at Note 12.
Directors
The directors of the Company during the financial year, and the dates of appointments and resignations during the year are:
 	 	 	
Peter Clarke	 	 	
Richard Grellman	 	 	
Paul Leaming	 	31-12-07, Appointed	
William Roberts	 	 	
Felix Zaccar	 	 	
Peter Hodgett	 	 	
Andrew Mohl	 	31-12-07, Resigned	
Other transactions with key management personnel of the Company
During the year, transactions may have been entered into between key management personnel and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and may include:
 	•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	 	
 	•	 	the purchase of AMP superannuation and related products;	
 	 	 	 	
 	•	 	financial investment services;	
 	 	 	 	
 	•	 	other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of the consolidated entity’s financial statements, or discharge of accountability by key management personnel. The transactions are considered to be trivial or domestic in nature.
Transactions within the wholly owned group
Transactions between Gordian RunOff Limited and its controlled entities, and other related parties for the financial year consisted of:
•	 	Payment of management fees for services provided;	

•	 	Provision of intercompany loan;	

•	 	Interest on intercompany loan;	

•	 	Receipt of dividend; and	

•	 	Provision of share capital.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	34 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
The aggregate amounts brought to account in respect of the following types of transactions and each class of related party involved were:
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
Amounts attributable to transactions with related parties	 	 	 	 	 	 	 	 	
Operating profit before income tax includes aggregate amounts attributable to transactions in respect of:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Investment Expenses — other related parties	 	 	997,909	 	 	 	2,053,027	 	
Interest Revenue — other related parties	 	 	28,941,231	 	 	 	31,911,761	 	
Dividend Revenue — subsidiaries	 	 	—	 	 	 	645,161	 	
Management Expenses — other related parties	 	 	23,891,864	 	 	 	25,652,346	 	

 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
Amounts receivable from and payable to related parties	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Aggregate amounts receivable at balance date from:	 	 	 	 	 	 	 	 	
Interest receivable — other related parties	 	 	2,493,927	 	 	 	2,498,449	 	
Intercompany receivables — other related parties	 	 	—	 	 	 	1,325,723	 	
Loans — other related parties	 	 	442,118,711	 	 	 	422,093,922	 	

Aggregate amounts payable at balance date to:	 	 	 	 	 	 	 	 	
Payables — other related parties	 	 	26,036,115	 	 	 	5,128,164	 	
 	 	 	
AMP Capital Investors Limited, a related entity within the wholly owned group, manages the majority of the investments of the consolidated entity under a management contract, which follows the normal terms and conditions for such contracts. Fees are paid or are due and payable for the management of investment portfolios under normal terms and conditions.
AMP Services Limited and Enstar Australia Limited (formerly Cobalt Solutions Australia Limited), fellow wholly owned controlled entities, provide operational and administrative (including employee related) services to the consolidated entity. The services provided are in the normal course of the business and are on normal commercial terms and conditions.
The Company advanced additional loans to AMP Life Limited. These transactions were made under normal market terms and conditions.

Gordian Runoff Limited ABN 11 052 179 647	 	35 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
24. CASH FLOW RECONCILIATIONS
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
(i) Reconciliation of cash	 	 	 	 	 	 	 	 	
Cash balance comprises:	 	 	 	 	 	 	 	 	
Cash on hand	 	 	13,457	 	 	 	10,141	 	
Short term money market deposits	 	 	400	 	 	 	32,150	 	
 	 	 	
 	 	 	13,857	 	 	 	42,291	 	

 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
(ii) Reconciliation of net cash flows from operating activities to operating profit after income tax	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Operating profit after income tax	 	 	106,479	 	 	 	74,474	 	
 	 	 	 	 	 	 	 	 	
Changes in net market value of investments	 	 	23,327	 	 	 	16,674	 	
Net loss/(gain) on sale of investments	 	 	29,919	 	 	 	21,115	 	
Net (gain)/loss on foreign currency transactions	 	 	(15,307	)	 	 	(4,618	)	
Changes in assets and liabilities	 	 	 	 	 	 	 	 	
— Increase in accrued interest	 	 	(5	)	 	 	(11,466	)	
— Decrease in receivables	 	 	(18,649	)	 	 	35,446	 	
— Decrease in reinsurance and other recoveries receivable	 	 	16,872	 	 	 	26,216	 	
— Decrease in other assets	 	 	(166	)	 	 	3	 	
— Decrease in unearned premiums	 	 	—	 	 	 	(20	)	
— Decrease in outstanding claims	 	 	(250,248	)	 	 	(220,948	)	
— Decrease in accounts payable & borrowings	 	 	2,307	 	 	 	(28,409	)	
— Decrease in income taxes payable	 	 	1,578	 	 	 	7,206	 	
— Decrease in deferred taxes payable, net of future tax benefit	 	 	11,895	 	 	 	24,291	 	
 	 	 	
Net cash flows used in operating activities	 	 	(91,998	)	 	 	(60,036	)	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	36 of 38	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2007
25. FINANCIAL SUPPORT
The Company has the benefit of the support of the immediate parent AG Australia Holdings Limited, by virtue of a guarantee dated 16 June 1992 whereby the parent has guaranteed payments under policies of insurance issued by the Company. This applies to claims made and arising prior to the date of revocation of this guarantee being 30 June 2002.
26. EVENTS OCCURRING AFTER THE REPORTING DATE
On 11 December 2007 a Sale and Purchase Agreement was entered into by the ultimate parent AMP Limited and Enstar Australia Holdings Pty Ltd for the sale of the entity.
The sale was subject to a number of conditions including regulatory approval by the Australian Prudential Regulatory Authority (APRA) who subsequently approved the Sale Agreement on 22 February 2008. The sale was then completed on 5 March 2008. Enstar Australia Holdings Pty Ltd assumed ownership of the company at this point.
The Australian Prudential Regulation Authority has approved a further reduction in capital of up to $147,000,000. Capital was subsequently reduced on 14 February 2008 for this amount via the reduction in loans to its parent entity.
In March 2008 the loan receivable from a related party was fully repaid to the Company and invested in cash.

Gordian Runoff Limited ABN 11 052 179 647	 	37 of 38	

 

Report of Independent Auditors
The Board of Directors of Gordian Runoff Limited
We have audited the accompanying balance sheets of Gordian Runoff Limited as of December 31, 2007 and 2006, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Gordian Runoff Limited at December 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008
 	 	 	
 	 	Liability limited by a scheme
approved under Professional
Standards Legislation	

 
GORDIAN RUNOFF LIMITED
ABN 11 052 179 647
FINANCIAL REPORT
31 DECEMBER 2006
Contents:
 	 	 	 	 	
 	 	Page	 	
Financial Report	 	 	 	 	
Financial Statements	 	 	 	 	
— Income Statement	 	 	2	 	
— Balance Sheet	 	 	3	 	
— Statement of Changes in Equity	 	 	4	 	
— Cash Flow Statement	 	 	5	 	
Notes to the Financial Statements	 	 	6	 	
Report of Independent Auditors	 	 	39	 	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	1 of 39	

 
Gordian RunOff Limited
Income Statement
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct premium revenue	 	 	 	 	 	 	28	 	 	 	273	 	
Inwards reinsurance premium (expense)/revenue	 	 	 	 	 	 	(1,168	)	 	 	3,539	 	
Outwards reinsurance premium (expense)/revenue	 	 	 	 	 	 	(323	)	 	 	1,670	 	
 	 	 	 	 	 	 	
Net premium (expense)/revenue	 	 	5	 	 	 	(1,463	)	 	 	5,482	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct claims (benefit)/expense	 	 	 	 	 	 	(34,739	)	 	 	75,805	 	
Inwards Reinsurance claims benefit	 	 	 	 	 	 	(36,523	)	 	 	(31,047	)	
Reinsurance & other recoveries (expense)/revenue	 	 	 	 	 	 	(2,888	)	 	 	736	 	
 	 	 	 	 	 	 	
Net claims incurred	 	 	6	 	 	 	(68,374	)	 	 	44,022	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net movement in unexpired risk liability	 	 	 	 	 	 	—	 	 	 	(485	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other underwriting income	 	 	 	 	 	 	1,040	 	 	 	896	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition benefit	 	 	 	 	 	 	(1,618	)	 	 	(807	)	
Other underwriting expenses	 	 	 	 	 	 	1,043	 	 	 	1,753	 	
 	 	 	 	 	 	 	
Underwriting (benefit)/expense	 	 	7	 	 	 	(575	)	 	 	946	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Underwriting result	 	 	 	 	 	 	68,526	 	 	 	(38,105	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment revenue	 	 	8	 	 	 	45,960	 	 	 	101,706	 	
General administration expenses	 	 	7	 	 	 	10,537	 	 	 	(3,391	)	

Net profit before tax	 	 	 	 	 	 	103,949	 	 	 	66,992	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense/(benefit) attributable to operating profit	 	 	9	 	 	 	29,476	 	 	 	17,052	 	

Net profit attributable to members of Gordian RunOff Limited	 	 	 	 	 	 	74,473	 	 	 	49,940	 	
 	 	 	 	 	 	 	
The above Income Statement should be read in conjunction with the accompanying notes.

Gordian Runoff Limited ABN 11 052 179 647	 	2 of 39	

 
Gordian RunOff Limited
Balance Sheet
As at 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	23	 	 	 	42,291	 	 	 	11,913	 	
Receivables	 	 	10	 	 	 	11,169	 	 	 	39,884	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	19,090	 	 	 	30,915	 	
Other financial assets	 	 	12	 	 	 	549,602	 	 	 	663,048	 	
Other assets	 	 	13	 	 	 	240	 	 	 	3	 	

Total current assets	 	 	 	 	 	 	622,392	 	 	 	745,763	 	

Non-current assets	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables	 	 	10	 	 	 	3,134	 	 	 	8,961	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	29,757	 	 	 	40,281	 	
Other financial assets	 	 	12	 	 	 	726,542	 	 	 	937,068	 	
Deferred tax assets	 	 	9	 	 	 	44,573	 	 	 	51,779	 	

Total non-current assets	 	 	 	 	 	 	804,006	 	 	 	1,038,089	 	

Total assets	 	 	 	 	 	 	1,426,398	 	 	 	1,783,852	 	

Current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Unearned premium liability	 	 	14	 	 	 	—	 	 	 	20	 	
Outstanding claims liability	 	 	15	 	 	 	112,751	 	 	 	159,202	 	
Payables	 	 	16	 	 	 	8,431	 	 	 	78,718	 	
Current Tax Liabilities	 	 	 	 	 	 	24,649	 	 	 	358	 	

Total current liabilities	 	 	 	 	 	 	145,831	 	 	 	238,298	 	

Non-current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding claims liability	 	 	15	 	 	 	584,453	 	 	 	758,950	 	
Payables	 	 	16	 	 	 	422	 	 	 	1,385	 	

Total non-current liabilities	 	 	 	 	 	 	584,875	 	 	 	760,335	 	

Total liabilities	 	 	 	 	 	 	730,706	 	 	 	998,633	 	

Net assets	 	 	 	 	 	 	695,692	 	 	 	785,219	 	

Shareholders’ equity	 	 	 	 	 	 	 	 	 	 	 	 	
Issued Capital	 	 	17	 	 	 	1,814,600	 	 	 	1,978,600	 	
Accumulated losses	 	 	 	 	 	 	(1,118,908	)	 	 	(1,193,381	)	

Total shareholders’ equity	 	 	 	 	 	 	695,692	 	 	 	785,219	 	
 	 	 	 	 	 	 	
The above Balance Sheet should be read in conjunction with the accompanying notes.

Gordian Runoff Limited ABN 11 052 179 647	 	3 of 39	

 
Gordian RunOff Limited
Statement of Changes in Equity
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Accumulated	 	 	 	 	
 	 	Issued Capital	 	 	Losses	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Balance as at 1 January 2006	 	 	1,978,600	 	 	 	(1,193,381	)	 	 	785,219	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	74,473	 	 	 	74,473	 	
Change in Equity — Capital reduction	 	 	(164,000	)	 	 	—	 	 	 	(164,000	)	
 	 	 	
Balance as at 31 December 2006	 	 	1,814,600	 	 	 	(1,118,908	)	 	 	695,692	 	

Balance as at 1 January 2005	 	 	1,978,600	 	 	 	(1,243,321	)	 	 	735,279	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	49,940	 	 	 	49,940	 	
 	 	 	
Balance as at 31 December 2005	 	 	1,978,600	 	 	 	(1,193,381	)	 	 	785,219	 	
 	 	 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Gordian Runoff Limited ABN 11 052 179 647	 	4 of 39	

 
Gordian RunOff Limited
Cash Flow Statement
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	
Premiums received	 	 	 	 	 	 	16,828	 	 	 	4,908	 	
Reinsurance and other recoveries	 	 	 	 	 	 	25,237	 	 	 	63,543	 	
Dividends received	 	 	 	 	 	 	2,833	 	 	 	2,178	 	
Interest received	 	 	 	 	 	 	80,902	 	 	 	100,996	 	
Other sundry receipts	 	 	 	 	 	 	7,082	 	 	 	(4,595	)	
(Payments)/refunds of outward reinsurance	 	 	 	 	 	 	(774	)	 	 	1,599	 	
Claims paid	 	 	 	 	 	 	(149,686	)	 	 	(194,638	)	
Other underwriting (costs)/benefits	 	 	 	 	 	 	(1,362	)	 	 	(1,339	)	
Payments to suppliers and employees	 	 	 	 	 	 	(43,116	)	 	 	(29,669	)	
Income taxes (paid)/received	 	 	 	 	 	 	2,020	 	 	 	20,291	 	
 	 	 	 	 	 	 	
Cash flows from/(used in) operating activities	 	 	23	 	 	 	(60,036	)	 	 	(36,726	)	

Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from sale of investments	 	 	 	 	 	 	807,810	 	 	 	1,595,254	 	
Payments for investments	 	 	 	 	 	 	(613,805	)	 	 	(1,352,631	)	
Proceeds from share cancellation — related party	 	 	 	 	 	 	—	 	 	 	2,000	 	
Loans received from related parties	 	 	 	 	 	 	40,000	 	 	 	3,123	 	
Loans advanced to related party	 	 	 	 	 	 	—	 	 	 	(235,628	)	
 	 	 	 	 	 	 	
Cash flows from/(used in) investing activities	 	 	 	 	 	 	234,005	 	 	 	12,118	 	

Cash flows from/(used in) financing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Payment for capital reduction	 	 	 	 	 	 	(164,000	)	 	 	—	 	
 	 	 	 	 	 	 	
Cash flows from/(used in) financing activities	 	 	 	 	 	 	(164,000	)	 	 	—	 	

Net decrease in cash held	 	 	 	 	 	 	9,969	 	 	 	(24,608	)	
Effect of exchange rate changes on the balances of cash held in foreign currencies	 	 	 	 	 	 	—	 	 	 	608	 	
Balance at the beginning of the year	 	 	 	 	 	 	32,322	 	 	 	56,322	 	
 	 	 	 	 	 	 	
Balance at the end of the year	 	 	23	 	 	 	42,291	 	 	 	32,322	 	
 	 	 	 	 	 	 	
The above Cash Flow Statement should be read in conjunction with the accompanying notes.

Gordian Runoff Limited ABN 11 052 179 647	 	5 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The financial statements are separate financial statements as the exemption from preparing consolidated financial statements has been used. The entity and its subsidiaries have been consolidated into the financial statements of AMP Limited, of  33 Alfred St Sydney NSW Australia, an entity incorporated in Australia. Copies of these accounts can be requested from AMP Limited at this address.  
The entity’s significant investments in subsidiaries, including the name, country of incorporation or residence, proportion of ownership interest and can found in Note 12 to these accounts. A description of the method used to account for these investments is described under Investment in controlled entities later in this note.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value, and insurance liabilities, which have been discounted to present value.
The principal accounting policies adopted in the preparation of the Financial Report are set out below. These policies have been consistently applied to the current year and comparative period, unless otherwise stated. The same accounting policies and methods of computation are followed by this Financial Report as compared with the 31 December 2005 Financial Report. Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2006. When applied in future periods, these recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
Operating revenue
Operating revenue comprises reinsurance and general insurance earned premiums, recoveries, interest income and investment income. Investment income is brought to account on an accrual basis. Other underwriting income comprises sundry receipts.

Gordian Runoff Limited ABN 11 052 179 647	 	6 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
Premium revenue and unearned premiums
Premium revenue
Premium revenue comprises premiums from direct business and from reinsurance business.
Premium revenue includes amounts charged to the policyholders or other insurers, including fire service levies but excluding stamp duties, GST and other amounts collected on behalf of third parties.
Premium revenue, including that on unclosed business, is recognised in the income statement when it has been earned. Premium revenue is recognised in the income statement from the attachment date over the period of the contract for direct business and over the period of indemnity for reinsurance business. Where time does not approximate the pattern of risk, previous claims experience is used to derive the incidence of risk.
The proportion of premium received or receivable not earned in the income statement at the reporting date is recognised in the balance sheet as an unearned premium liability.
Premiums on unclosed business are calculated as the difference between an estimate of the ultimate and booked premiums. Actuarial techniques are used to estimate the ultimate premium and are based on historical premium booking patterns.
Unearned premiums
Unearned premiums represent premium revenue attributable to future accounting periods. For direct insurances and certain inwards reinsurance classes of business, unearned premium is determined by apportioning the premiums written in the year over the period of insurance cover, reflecting the pattern in which risk emerges under these policies.
In respect of inwards reinsurance space business, premiums are unearned until the satellite launch date, and thereafter are recognised as earned according to the risks associated with the launch, post launch and in-orbit periods.
Unexpired risk liability
The adequacy of the unearned premium liability in respect of each class of business is assessed by considering current estimates of all expected future cash flows relating to future claims covered by current insurance contracts.
If the present value of the expected future cash flows relating to future claims exceeds the unearned premium liability less related intangible assets and related deferred acquisition costs then the unearned premium liability is deemed to be deficient.
The entire deficiency is recognised immediately in the income statement. The deficiency is recognised first by writing down any related intangible assets and then related deferred acquisition costs, with any excess being recorded in the balance sheet as an unexpired risk liability.
Outward reinsurance premium expense and deferred reinsurance premium
Premiums ceded to reinsurers are recognised as an expense over the period of cover using the methods applicable to premium revenue as set out above.

Gordian Runoff Limited ABN 11 052 179 647	 	7 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
Outstanding claims
The liability for outstanding claims is measured as the best estimate of the present value of expected future payments against claims incurred at the reporting date under general insurance contracts issued by the Company, with an additional risk margin to allow for the inherent uncertainty in the best estimate.
The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs.
Claims handling costs include costs that can be associated directly with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as claims administration costs.
The liability for direct insurance includes an allowance for inflation and superimposed inflation and is measured as the present value of the expected future ultimate cost of settling claims. The expected future payments are discounted to present value using a risk free rate.
A risk margin is applied to the outstanding claims liability, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the best estimate. This risk margin increases the probability that the net liability is adequately provided for to a 75% confidence level.
Reinsurance and other recoveries
Reinsurance and other recoveries consist of receivables on paid claims and outstanding claims, and are recognised as revenue when claims are paid or the outstanding claim is raised. Reinsurance receivables are discounted to present value consistent with the discounting of outstanding claims set out above. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Fire brigade levies and other statutory charges
A liability for fire brigade levies and other statutory charges is recognised on business written to the balance date. Levies and charges payable are expensed on the same basis as the recognition of the related premium revenue, with the portion relating to unearned premiums being reported as deferred statutory charges in Note 13.
Investment income
Dividend and interest income is recognised in the income statement on an effective interest method when the entity obtains control of the right to receive the revenue.
Realised gains and losses represent the change in value between the previously reported value and the amount received on sale of the asset. Unrealised gains and losses represent changes in the fair value of financial assets recognised in the period.

Gordian Runoff Limited ABN 11 052 179 647	 	8 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
Assets backing general insurance liabilities
As part of its investment strategy, the Company actively manages its investment portfolio to ensure that investments mature in accordance with the expected pattern of future cash flows arising from general insurance liabilities.
The Company has determined that all assets are held to back general insurance liabilities on the basis that all assets are available for the settlement of claims if required.
The following policies apply to assets held to back general insurance liabilities.
Financial assets
Financial assets are designated at fair value through profit or loss. Initial recognition is at cost in the balance sheet and subsequent measurement is at fair value with any resultant unrealised gains or losses recognised in the income statement. Details of fair value for the different types of financial assets are listed below:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount. For the purposes of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value.
Cash trusts
The fair value of units in a listed cash trust reflects the quoted bid price at balance date. There is no reduction for realisation costs in the value of units in a cash trust. Unlisted unit trusts are recorded at fund managers valuations.
Debt securities
Debt securities are initially recognised at fair value, representing the purchase cost of the asset exclusive of any transaction costs. Debt securities are subsequently measured at fair value, with any realised and unrealised gains or losses arising from changes in the fair value being recognised in the income statement for the period in which they arise. The fair value of a traded interest bearing security reflects the bid price at balance date. Interest bearing securities that are not frequently traded are valued by discounting the estimated recoverable amounts, using prevailing interest rates. Debt securities are accounted for on a trade date basis.
Derivatives
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at their fair value. All derivatives are carried as assets when their fair value is positive, and as liabilities when their fair value is negative. Derivatives are exchange traded and are fair valued using their publicly quoted bid price on the date of valuation.
Equity securities
Equity securities are initially recognised at fair value, representing the purchase cost of the asset exclusive of any transaction costs. Equity securities are subsequently measured at fair value, with any realised and unrealised gains or losses arising from changes in the fair value being recognised in the income statement. The fair value of a quoted equity security reflects the quoted bid price at balance date. Equity securities not traded in an organised financial market are valued at estimated fair value based on future cash flows discounted at appropriate interest rates.
Investments in controlled entities
Investments in controlled entities are valued at the lower of net assets and recoverable amount which have been adopted as a proxy for fair value. Any write down in value to recoverable amount is reported in the Income Statement.

Gordian Runoff Limited ABN 11 052 179 647	 	9 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
Taxes
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to: (i) temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and (ii) unused tax losses.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
The tax impact on income and expense items recognised directly in equity is also recognised directly in equity.
Tax Consolidation
AMP Limited, Gordian Runoff Limited and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
(i)	 	Current tax balances arising from external transactions recognised by entities in the tax-consolidated group occurring after the implementation date, and;	
 	 	 	
(ii)	 	Deferred tax assets arising from unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.	
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement.
Assets and liabilities which arise as a result of differences between the periods in which the underlying transactions occur, and the period in which the funding payments under the tax funding agreement are made, are recognised as intercompany balances receivable and payable in the balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.

Gordian Runoff Limited ABN 11 052 179 647	 	10 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
Goods and services tax
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.
Foreign currency transactions and translation
Functional and presentation currency
Items included in the financial statements in each of the Gordian group entities are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The presentation currency of this financial report, and the functional currency of the parent entity, is Australian dollars.
Transactions and balances
Income and expense items denominated in a currency other than the functional currency are translated at the spot exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at balance sheet date, with exchange gains and losses recognised in the income statement. The corresponding foreign currency translations of foreign currency denominated outstanding claims liabilities and receivables are reported as a component of claims expense and premium revenue, respectively. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Receivables
Receivables are financial assets and are measured at fair value. Given the short-term nature of most receivables, the recoverable amount approximates fair value. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Payables
Trade creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Amounts Due To or From Related Parties
Amounts are carried at fair value being nominal amounts due and payable. Interest is taken up as income on an accrual basis. A provision for impairment is recognised when there is objective evidence that the related party will not be able to pay its debts.

Gordian Runoff Limited ABN 11 052 179 647	 	11 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Company makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas in which critical estimates and judgments are applied are described below.
(a) The ultimate liability arising from claims made under insurance contracts
Provision is made at year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Company.
The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, where more information about the claim event is generally available. IBNR claims may often not be reported to the insurer until many years after the events giving rise to the claims has happened. The liability class of business will typically display greater variations between initial estimates and final outcomes because there is a greater degree of difficulty in estimating IBNR reserves. For the short tail class, claims are typically reported soon after the claim event, and hence tend to display lower levels of volatility. In calculating the estimated cost of unpaid claims the Company uses a variety of estimation techniques, generally based upon analysis of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
 	•	 	changes in Company processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with the statistics from previous periods;	
 	 	 	 	
 	•	 	changes in the legal environment;	
 	 	 	 	
 	•	 	the effects of inflation;	
 	 	 	 	
 	•	 	the impact of large losses;	
 	 	 	 	
 	•	 	movements in industry benchmarks.	
Large claims impacting each relevant business class are generally assessed separately, being measured on a case by case basis or projected separately in order to allow for the possible distortive effect of the development and incidence of these large claims.
Where possible the Company adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions.
Details of specific assumptions used in deriving the outstanding claims liability at year-end are detailed in note 3.

Gordian Runoff Limited ABN 11 052 179 647	 	12 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (Continued)
(b) Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also computed using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Company may not receive amounts due to it and these amounts can be reliably measured.
3. ACTUARIAL METHODS AND ASSUMPTIONS
The entity ceased writing new business and renewals in late 1999 for both its direct insurance and inwards reinsurance business and has run an orderly runoff since. The process for determining the value of outstanding claims liabilities is generally consistent between these two portfolios. This process is described below.
Claims estimates are derived from analysis of the results of several different actuarial models. These models take case estimates as well as payments into account and assume that reported incurred amounts or reported payment amounts will develop steadily from period to period. Other models adopt an ultimate loss ratio for each year that reflects both the long term expected level, as well as incorporating recent experience. The analysis is performed by underwriting year for the inwards reinsurance class and by accident year for the direct insurance class.
Claims are first estimated on an undiscounted basis and are then discounted to allow for the time value of money. The valuation methods adopted include an implicit allowance for future inflation but do not identify the explicit rate. This allows for both general economic inflation as well as any superimposed inflation detected in the modelling of payments experience. Superimposed inflation arises from non-economic factors such as developments of legal precedent.
The liability class of business may be subject to the emergence of new types of latent claims, but no specific allowance is included for this as at the balance sheet date. Such uncertainties are considered when setting the risk margin appropriate for this class.
A description of the processes used to determine the key assumptions is provided below:
The average weighted term to settlement is calculated separately by class of business, based on historical settlement patterns.
The reinsurance percentage for the direct insurance business is calculated based on past reinsurance recovery rates and the structure of the reinsurance arrangements in place.
The discount rates are derived from market yields on Government securities as at the balance date, in the currency of the expected claim payments.
Expense rate Claim handling expenses are calculated based on the projected costs of administering the remaining claims until expiry.
The ultimate to incurred claims ratio is derived by accident or underwriting year based on historical development of claims from period to period.
The effect of changes in the assumptions have been shown in the reconciliations of general insurance assets and liabilities in note 15 below.

Gordian Runoff Limited ABN 11 052 179 647	 	13 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
3. ACTUARIAL METHODS AND ASSUMPTIONS (Continued)
Process for determining risk margin
The risk margin was determined initially for each portfolio, allowing for the uncertainty of the outstanding claims estimate for each portfolio. Uncertainty was analysed for each portfolio taking into account past volatility in general insurance claims, potential uncertainties relating to the actuarial models and assumptions, the quality of the underlying data used in the models, and the general insurance environment. The estimate of uncertainty is generally greater for long tailed classes when compared to short tail classes due to the longer time until settlement of outstanding claims.
The overall risk margin was determined allowing for diversification between the different portfolios and the relative uncertainty of each portfolio. The assumptions regarding uncertainty for each class were applied to the net central estimates, and the results were aggregated, allowing for diversification in order to arrive at an overall provision that is intended to have a 75% probability of adequacy.
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	%	 	 	%	 	
 	 	 	 	 	 	 	 	 	
Risk Margins applied	 	 	 	 	 	 	 	 	
Direct insurance	 	 	23.6	 	 	 	15.1	 	
Inwards reinsurance	 	 	15.8	 	 	 	14.8	 	
Sensitivity analysis — general insurance contracts
There are a number of variables which impact the amounts recognised in the financial statements arising from insurance contracts.
The profit or loss and equity of the company are sensitive to movements in a number of key variables as described below.
 	 	 	
Variable	 	Description of variable	
 	
Direct and reinsurance	 	 	
Average weighted term to settlement	 	Expected payment patterns are used in determining the outstanding claims liability. A decrease in the average term to settlement would lead to claims being paid sooner than anticipated.	
 	 	 	
Discount rate	 	The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money.	
 	 	 	
Expense rate	 	An estimate for the internal costs of administering claims is included in the outstanding claims liability.	
 	 	 	
Ultimate to incurred claims ratio	 	The estimated ultimate claims cost is generally greater than the claims reported as incurred to date, due to claims that are incurred but not reported (IBNR) or due to future developments on existing claims.	
Direct only	 	 	
Reinsurance percentage	 	The direct class assumes money will be recoverable from reinsurers on future claims paid.	
 	
The following table provides an analysis of the sensitivity of the profit after income tax and total equity to changes in these assumptions both gross and net of reinsurance.

Gordian Runoff Limited ABN 11 052 179 647	 	14 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
3. ACTUARIAL METHODS AND ASSUMPTIONS (Continued)
2006
Direct Insurance
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Assumption at 12/06	 	 	Profit/(Loss) (after tax)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Gross of	 	 	Net of	 	
 	 	Change in	 	 	 	 	 	 	 	 	 	 	Reinsurance	 	 	Reinsurance	 	
Variable	 	variable	 	 	Gross	 	 	Net	 	 	$’000	 	 	$’000	 	

Average weighted term to settlement	 	+0.5 year	 	4.5 years	 	4.6 years	 	 	3,949	 	 	 	3,379	 	
 	 	-0.5 year	 	 	 	 	 	 	 	 	 	 	(5,202	)	 	 	(4,248	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	10.3	%	 	 	—	 	 	 	149	 	
(as % of gross IBNR)	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	—	 	 	 	(295	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	6.0	%	 	 	6.0	%	 	 	5,603	 	 	 	5,133	 	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	(7,011	)	 	 	(5,557	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	8.8	%	 	 	8.8	%	 	 	(2,176	)	 	 	(2,176	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	2,176	 	 	 	2,176	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	107.9	%	 	 	108.9	%	 	 	(6,862	)	 	 	(4,383	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	4,392	 	 	 	3,626	 	
Inwards Reinsurance
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Assumption at 12/06	 	 	Profit/(Loss) (after tax)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Gross of	 	 	Net of	 	
 	 	Change in	 	 	 	 	 	 	 	 	 	 	Reinsurance	 	 	Reinsurance	 	
Variable	 	variable	 	 	Gross	 	 	Net	 	 	$’000	 	 	$’000	 	

Average weighted term to settlement	 	+0.5 year	 	 	4.4	 	 	 	4.4	 	 	 	5,615	 	 	 	5,582	 	
 	 	-0.5 year	 	 	 	 	 	 	 	 	 	 	(5,755	)	 	 	(5,775	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	n/a	 	 	 	n/a	 	 	 	n/a	 	
(as % of gross IBNR)	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	n/a	 	 	 	n/a	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	5.0	%	 	 	5.0	%	 	 	9,420	 	 	 	9,384	 	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	(9,917	)	 	 	(9,933	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	15.8	%	 	 	15.8	%	 	 	(1,997	)	 	 	(1,994	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	1,997	 	 	 	1,994	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	102.9	%	 	 	103.0	%	 	 	(13,739	)	 	 	(13,739	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	7,727	 	 	 	7,727	 	

1	—   	This sensitivity reflects the liability movements only. As assets are invested to match the term of liabilities there is little overall profit impact from a change to interest rates.	
 	 	 	
2	—   	This ratio has only been adjusted for years that are not considered to be fully developed.

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	15 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
3. ACTUARIAL METHODS AND ASSUMPTIONS (Continued)
2005
Direct Insurance
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Assumption at 12/05	 	 	Profit/(Loss) (after tax)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Gross of	 	 	Net of	 	
 	 	Change in	 	 	 	 	 	 	 	 	 	 	Reinsurance	 	 	Reinsurance	 	
Variable	 	variable	 	 	Gross	 	 	Net	 	 	$’000	 	 	$’000	 	

Average weighted term to settlement	 	+0.5 year	 	4.4 years	 	4.4 years	 	 	3,168	 	 	 	2,609	 	
 	 	-0.5 year	 	 	 	 	 	 	 	 	 	 	(5,767	)	 	 	(4,956	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	11	%	 	 	—	 	 	 	349	 	
(as % of gross IBNR)	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	—	 	 	 	(387	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	5.3	%	 	 	5.3	%	 	 	6,820	 	 	 	5,762	 	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	(7,603	)	 	 	(7,271	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	10	%	 	 	10	%	 	 	(2,508	)	 	 	(2,508	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	2,508	 	 	 	2,508	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	109	%	 	 	111	%	 	 	(6,940	)	 	 	(5,682	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	4,285	 	 	 	3,564	 	
Inwards Reinsurance
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Assumption at 12/05	 	 	Profit/(Loss) (after tax)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Gross of	 	 	Net of	 	
 	 	Change in	 	 	 	 	 	 	 	 	 	 	Reinsurance	 	 	Reinsurance	 	
Variable	 	variable	 	 	Gross	 	 	Net	 	 	$’000	 	 	$’000	 	

Average weighted term to settlement	 	+0.5 year	 	 	4.5	 	 	 	4.5	 	 	 	7,372	 	 	 	7,321	 	
 	 	-0.5 year	 	 	 	 	 	 	 	 	 	 	(7,534	)	 	 	(7,564	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	n/a	 	 	 	n/a	 	 	 	n/a	 	
(as % of gross IBNR)	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	n/a	 	 	 	n/a	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	4.5	%	 	 	4.5	%	 	 	14,304	 	 	 	14,243	 	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	(15,074	)	 	 	(15,094	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	14	%	 	 	14	%	 	 	(2,992	)	 	 	(2,987	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	2,992	 	 	 	2,987	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	104	%	 	 	104	%	 	 	(17,775	)	 	 	(17,775	)	
 	 	 	-1	%	 	 	 	 	 	 	 	 	 	 	12,007	 	 	 	12,007	 	

1 —	  	This sensitivity reflects the liability movements only. As assets are invested to match the term of liabilities, there is little overall profit impact from a change to interest rates.	
 	 	 	
2 —	  	This ratio has only been adjusted for years that are not considered to be fully developed.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	16 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
4. INSURANCE CONTRACTS — RISK MANAGEMENT POLICIES AND PROCEDURES
The Company has an objective to control insurance risk thus reducing volatility. The company’s policies and procedures in respect of managing risks are set out in this note below.
a)	 	Objective in managing risks arising from insurance contracts and policies for mitigating those risks.	
 	 	 	
 	 	In accordance with Prudential Standards GPS 220 Risk Management and GPS 230 Reinsurance Management issued by the Australian Prudential Regulation Authority (APRA), the Board and senior management have developed, implemented and maintain a sound and prudent Risk Management Strategy (RMS) and a Reinsurance Management Strategy (REMS).	
 	 	 	
 	 	The RMS and REMS identify the Company’s policies and procedures, processes and controls that comprise its risk management and control systems. These systems address all material risks, financial and non-financial, likely to be faced by the Company. Annually, the Board certifies to APRA that adequate strategies have been put in place to monitor those risks, that the Company has systems in place to ensure compliance with legislative and prudential requirements and that the Board has satisfied itself as to the compliance with the RMS and REMS. The RMS and REMS have been approved by both the Board and APRA.	
 	 	 	
 	 	Key aspects of the processes established in the RMS to mitigate risks include:	

 	•	 	A formal regular process of risk identification and evaluation, supplemented by a documented control assessment process, is completed by management and communicated to the Board in line with the Board approved Risk Management Strategy.	
 	 	 	 	
 	•	 	Actuarial models, using information from management information systems, to monitor claims patterns and other relevant statistics. Past experience and statistical methods are used as part of the process.	
 	 	 	 	
 	•	 	The maintenance and use of various specialist information systems, which provide up to date and reliable data on claims liabilities.	
 	 	 	 	
 	•	 	Documented procedures that are followed by claims staff that are experienced in the various classes of business previously written.	
 	 	 	 	
 	•	 	Reinsurance has been used, particularly in the early period of the run-off to limit the Company’s exposure to large single claims. The REMS provides that exposures continue to be monitored and where feasible reinsurance be purchased as means of limiting risk.	
 	 	 	 	
 	•	 	The mix of investment assets is driven by the nature and term of the insurance liabilities. The management of assets and liabilities is closely monitored in an attempt to match the maturity dates of assets with the expected pattern of claim payments.	

b)	 	Development of claims	
 	 	 	
 	 	There is a possibility that changes may occur in the estimate of our obligations at the end of a contract period. The tables in note 15 show the estimates of total ultimate claims at successive year-ends.	
 	 	 	
c)	 	Terms and conditions of direct and inwards reinsurance business	
 	 	 	
 	 	There is limited scope to improve the existing terms and conditions. The company has been in orderly run off since 1999, and no new contracts have been entered into since that time.	
 	 	 	
d)	 	Concentration of insurance risk	
 	 	 	
 	 	The exposure to concentrations of insurance risk is able to be mitigated with the purchase of reinsurance where management believes that the price /risk transfer is suitable.	
 	 	 	
e)	 	Interest rate risk	
 	 	 	
 	 	Interest rate risk arises to the extent that there is a mismatch between the fixed-interest portfolios used to back the outstanding claims liability and those outstanding claims. The interest rate risk is managed by matching the duration profiles of the investments assets and the outstanding claims liability.	
 	 	 	
f)	 	Credit risk	
 	 	 	
 	 	Other than loans to related parties, there are no significant concentrations of credit risk.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	17 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
5. NET PREMIUM REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Gross written premium — direct	 	 	8	 	 	 	204	 	
Movement in unearned premium — direct	 	 	20	 	 	 	69	 	
 	 	 	
Direct premium revenue	 	 	28	 	 	 	273	 	
Gross written premium (expense)/benefit — inwards	 	 	(1,168	)	 	 	3,305	 	
Movement in unearned premium — inwards	 	 	—	 	 	 	234	 	
 	 	 	
Inwards reinsurance premium (expense)/revenue	 	 	(1,168	)	 	 	3,539	 	
 	 	 	
Premium (expense)/revenue	 	 	(1,140	)	 	 	3,812	 	

Outwards reinsurance premium (expense)/revenue	 	 	(323	)	 	 	1,670	 	

Net Premium (Expense)/Revenue	 	 	(1,463	)	 	 	5,482	 	
 	 	 	
6. NET CLAIMS INCURRED
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Current year	 	 	Prior years	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Gross claims expense	 	 	 	 	 	 	 	 	 	 	 	 	
Direct	 	 	—	 	 	 	(25,847	)	 	 	(25,847	)	
Inwards reinsurance	 	 	—	 	 	 	(59,464	)	 	 	(59,464	)	
 	 	 	
Gross claims incurred — undiscounted	 	 	—	 	 	 	(85,311	)	 	 	(85,311	)	
Discount movement	 	 	—	 	 	 	14,049	 	 	 	14,049	 	
 	 	 	
Total gross claims expense	 	 	—	 	 	 	(71,262	)	 	 	(71,262	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries revenue	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries — undiscounted	 	 	—	 	 	 	3,444	 	 	 	3,444	 	
Discount movement	 	 	—	 	 	 	(556	)	 	 	(556	)	
 	 	 	
Total reinsurance and other recoveries revenue	 	 	—	 	 	 	2,888	 	 	 	2,888	 	

Net claims incurred	 	 	—	 	 	 	(68,374	)	 	 	(68,374	)	
 	 	 	
2005
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Current year	 	 	Prior years	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Gross claims expense	 	 	 	 	 	 	 	 	 	 	 	 	
Direct	 	 	—	 	 	 	51,635	 	 	 	51,635	 	
Inwards reinsurance	 	 	—	 	 	 	(46,468	)	 	 	(46,468	)	
 	 	 	
Gross claims incurred — undiscounted	 	 	—	 	 	 	5,167	 	 	 	5,167	 	
Discount movement	 	 	—	 	 	 	39,591	 	 	 	39,591	 	
 	 	 	
Total gross claims expense	 	 	—	 	 	 	44,758	 	 	 	44,758	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries revenue	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries — undiscounted	 	 	—	 	 	 	7,852	 	 	 	7,852	 	
Discount movement	 	 	—	 	 	 	(8,588	)	 	 	(8,588	)	
 	 	 	
Total reinsurance and other recoveries revenue	 	 	—	 	 	 	(736	)	 	 	(736	)	
 	 	 	
Net claims incurred	 	 	—	 	 	 	44,022	 	 	 	44,022	 	
 	 	 	
Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the risks borne in all previous financial years.
As the company stopped writing new business in late 1999, all claims development relates to prior years.

Gordian Runoff Limited ABN 11 052 179 647	 	18 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
7. OPERATING EXPENSES
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Expenses by Nature	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Commission expenses	 	 	959	 	 	 	1,263	 	
Write-off of Bad Debt	 	 	2,634	 	 	 	—	 	
Impairment expense — premium receivables	 	 	304	 	 	 	(919	)	
Impairment expense — reinsurance receivables	 	 	(3,331	)	 	 	(16,877	)	
Net gain on foreign currency	 	 	(1,059	)	 	 	283	 	
Investment management fees	 	 	2,142	 	 	 	2,320	 	
Other management fees	 	 	25,652	 	 	 	26,518	 	
External consultant costs	 	 	1,245	 	 	 	789	 	
Other expenses	 	 	(972	)	 	 	1,078	 	
 	 	 	
Total Expenses	 	 	27,574	 	 	 	14,455	 	

represented by:	 	 	 	 	 	 	 	 	
General administration expenses included in net claims incurred	 	 	17,612	 	 	 	16,900	 	
Acquisition benefit	 	 	(1,618	)	 	 	(807	)	
Other underwriting expenses	 	 	1,043	 	 	 	1,753	 	
General administration expenses	 	 	10,537	 	 	 	(3,391	)	
 	 	 	
Total expenses	 	 	27,574	 	 	 	14,455	 	
 	 	 	
8. NET INVESTMENT REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Investment income	 	 	 	 	 	 	 	 	
Interest	 	 	49,005	 	 	 	68,368	 	
Interest from related parties:	 	 	 	 	 	 	 	 	
- other related parties	 	 	31,912	 	 	 	24,690	 	
Dividends and other distributions received	 	 	2,187	 	 	 	1,030	 	
Dividends from related parties:	 	 	 	 	 	 	 	 	
- subsidiaries	 	 	645	 	 	 	1,148	 	
Changes in fair value of investments:	 	 	 	 	 	 	 	 	
Realised	 	 	(21,115	)	 	 	(49,960	)	
Unrealised	 	 	(16,674	)	 	 	56,430	 	
 	 	 	
Total net investment revenue	 	 	45,960	 	 	 	101,706	 	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	19 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
9) INCOME TAX
b) Analysis of income tax expense
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current tax	 	 	24,055	 	 	 	20,187	 	
Decrease/(increase) in deferred tax assets	 	 	7,209	 	 	 	(2,720	)	
Decrease in deferred tax liabilities	 	 	(3	)	 	 	—	 	
Under provided in previous years	 	 	(1,785	)	 	 	(145	)	
Other adjustments	 	 	—	 	 	 	688	 	
Prior year tax losses not recognised now recouped	 	 	—	 	 	 	(958	)	
 	 	 	
Income tax expense	 	 	29,476	 	 	 	17,052	 	
 	 	 	
b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period
In respect of income tax expense attributable to shareholders, the tax rate which applies in both 2006 and 2005 is 30% for Australia and 33% for New Zealand.
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Operating profit before income tax	 	 	103,948	 	 	 	66,992	 	
 	 	 	 	 	 	 	 	 	
Primia facia income tax at the rate of 30%	 	 	31,184	 	 	 	20,097	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Non assessable income	 	 	3	 	 	 	(309	)	
Other	 	 	74	 	 	 	(1,633	)	
Under provided in prior years	 	 	(1,785	)	 	 	(145	)	
Previously unrecognised tax losses reducing current tax expense	 	 	—	 	 	 	(958	)	
 	 	 	
Income tax expense per income statement	 	 	29,476	 	 	 	17,052	 	
 	 	 	
c) Analysis of deferred tax asset
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Provision for doubtful debts	 	 	14,713	 	 	 	17,734	 	
- Accruals	 	 	239	 	 	 	95	 	
- Indirect Claims Costs Adjustments	 	 	20,070	 	 	 	27,707	 	
- Unrealised gains/losses	 	 	9,561	 	 	 	2,055	 	
- Other	 	 	6	 	 	 	1,714	 	
- Current year’s tax losses	 	 	—	 	 	 	2,493	 	
 	 	 	
Total deferred tax assets	 	 	44,589	 	 	 	51,798	 	
 	 	 	
d) Analysis of deferred tax liability
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Other	 	 	16	 	 	 	19	 	
 	 	 	
Total deferred tax liability	 	 	16	 	 	 	19	 	

 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Deferred tax asset	 	 	44,589	 	 	 	51,798	 	
Deferred tax liability	 	 	(16	)	 	 	(19	)	
 	 	 	
Net deferred tax asset	 	 	44,573	 	 	 	51,779	 	

 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	20 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
10. RECEIVABLES
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Premiums receivable — direct insurance	 	 	13	 	 	 	18	 	
less: provision for impairment of premium receivable	 	 	(13	)	 	 	—	 	
 	 	 	
 	 	 	—	 	 	 	18	 	
 	 	 	 	 	 	 	 	 	
Premiums receivable — inwards reinsurance	 	 	9,411	 	 	 	21,567	 	
less: provision for impairment of premium receivable	 	 	(2,594	)	 	 	(2,333	)	
 	 	 	
 	 	 	6,817	 	 	 	19,234	 	

Premium receivables — direct & inwards reinsurance	 	 	6,817	 	 	 	19,252	 	

Other receivables	 	 	529	 	 	 	6,501	 	
Other receivables from related parties -other related parties	 	 	1,325	 	 	 	181	 	
Interest receivable from related parties -other related parties	 	 	2,498	 	 	 	13,950	 	
 	 	 	
Total current receivables	 	 	11,169	 	 	 	39,884	 	

Non-current	 	 	 	 	 	 	 	 	
Premiums receivable — inwards reinsurance	 	 	3,134	 	 	 	8,961	 	
 	 	 	
Total non-current receivables	 	 	3,134	 	 	 	8,961	 	
 	 	 	
11. REINSURANCE AND OTHER RECOVERIES
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Expected future reinsurance recoveries undiscounted	 	 	 	 	 	 	 	 	
— on claims paid	 	 	25,988	 	 	 	43,324	 	
— on outstanding claims	 	 	62,389	 	 	 	71,262	 	
 	 	 	
 	 	 	88,377	 	 	 	114,586	 	
 	 	 	 	 	 	 	 	 	
Discount to present value	 	 	(12,222	)	 	 	(12,780	)	
less: provision for impairment of reinsurance assets	 	 	(27,308	)	 	 	(30,610	)	
 	 	 	
Reinsurance and other recoveries receivable	 	 	48,847	 	 	 	71,196	 	

Current	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries receivable	 	 	39,701	 	 	 	51,704	 	
less: provision for impairment of reinsurance assets	 	 	(20,611	)	 	 	(20,789	)	
 	 	 	
 	 	 	19,090	 	 	 	30,915	 	

Non-current	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries receivable	 	 	36,454	 	 	 	50,102	 	
less: provision for impairment of reinsurance assets	 	 	(6,697	)	 	 	(9,821	)	
 	 	 	
 	 	 	29,757	 	 	 	40,281	 	
 	 	 	
Refer to note 15 for a reconciliation of the movement in reinsurance and other recoveries on incurred claims over the year.

Gordian Runoff Limited ABN 11 052 179 647	 	21 of 39	 	 	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
12. OTHER FINANCIAL ASSETS
 	 	 	 	 	 	 	 	 	
 	 	Company	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Quoted investments — at fair value	 	 	 	 	 	 	 	 	
Government and semi-government bonds*	 	 	31,147	 	 	 	86,237	 	
Corporate bonds	 	 	79,335	 	 	 	94,227	 	
Shares in other corporations	 	 	—	 	 	 	806	 	
Derivatives	 	 	1,875	 	 	 	1,295	 	
 	 	 	
 	 	 	112,357	 	 	 	182,565	 	

Unquoted investments — at fair value value	 	 	 	 	 	 	 	 	
Units held in cash management trusts	 	 	 	 	 	 	 	 	
— Other related parties	 	 	—	 	 	 	20,409	 	
Units held in other unit trusts	 	 	 	 	 	 	 	 	
— Other related parties	 	 	15,151	 	 	 	9,446	 	
Loan to related party in the wholly owned group	 	 	422,094	 	 	 	450,628	 	
 	 	 	
 	 	 	437,245	 	 	 	480,483	 	
 	 	 	
Total current financial assets	 	 	549,602	 	 	 	663,048	 	

Non-current	 	 	 	 	 	 	 	 	
Quoted investments — at fair value	 	 	 	 	 	 	 	 	
Government and semi-government bonds*	 	 	400,150	 	 	 	658,807	 	
Corporate bonds	 	 	293,922	 	 	 	206,090	 	
Shares in other corporations	 	 	935	 	 	 	—	 	
 	 	 	
 	 	 	695,007	 	 	 	864,897	 	

Unquoted investments — at fair value	 	 	 	 	 	 	 	 	
Other	 	 	—	 	 	 	2,328	 	
Shares in controlled entities	 	 	31,467	 	 	 	69,775	 	
Shares in associated entities	 	 	68	 	 	 	68	 	
 	 	 	
 	 	 	31,535	 	 	 	72,171	 	
 	 	 	
Total non-current financial assets	 	 	726,542	 	 	 	937,068	 	
 	 	 	
Total financial assets	 	 	1,276,144	 	 	 	937,068	 	

 	 	 	
*	 	The Company has given security over government and semi-government bonds against letters of credit of $44.9m (31 December 2005: $104.2m). These assets provide security to the extent of 105% to 110% of the outstanding letters of credit. The security agreements do not restrict the investments from being traded.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	22 of 39	 	 	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
12. OTHER FINANCIAL ASSETS (continued)
Investments in controlled entities
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2006	 	 	2005	 	 	2005	 	
Name of entity	 	%	 	 	$’000	 	 	%	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gordian RunOff (UK) Limited	 	 	100	 	 	 	31,467	 	 	 	100	 	 	 	25,790	 	
South Pacific Agricultural Company Pty Limited	 	 	—	 	 	 	—	 	 	 	100	 	 	 	—	 	
Gordian Mortgage Insurance Limited	 	 	—	 	 	 	—	 	 	 	100	 	 	 	—	 	
Quay Rural Trust	 	 	—	 	 	 	—	 	 	 	100	 	 	 	43,985	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	31,467	 	 	 	 	 	 	 	69,775	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gordian RunOff (UK) Limited is incorporated in the United Kingdom and is audited by Ernst & Young.
During the year South Pacific Agricultural Company Pty Ltd and Gordian Mortgage Insurance Limited were deregistered, and Quay Rural Trust was dissolved. These entities were incorporated in Australia. South Pacific Agricultural Company Pty Ltd and Quay Rural Trust were audited by PKF, formerly known as Pannell Kerr Forster and Ernst & Young audited Gordian Mortgage Insurance Limited.
13. OTHER ASSETS
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Deferred acquisition costs	 	 	—	 	 	 	3	 	
Prepayments	 	 	240	 	 	 	—	 	
 	 	 	
Total current other assets	 	 	240	 	 	 	3	 	

 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Deferred acquisition costs as at 1 January	 	 	3	 	 	 	10	 	
Amortisation charged to income	 	 	(3	)	 	 	(7	)	
 	 	 	
Deferred acquisition costs as at 31 December	 	 	—	 	 	 	3	 	

 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Deferred reinsurance premiums as at 1 January	 	 	—	 	 	 	540	 	
Earning of reinsurance premiums	 	 	—	 	 	 	540	 	
 	 	 	
Deferred reinsurance premiums as at 31 December	 	 	—	 	 	 	—	 	

 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Deferred statutory charges as at 1 January	 	 	—	 	 	 	17	 	
Amortisation charged to income	 	 	—	 	 	 	(17	)	
 	 	 	
Deferred statutory charges as at 31 December	 	 	—	 	 	 	—	 	

 	 	 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	23 of 39	 	 	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
14. UNEARNED PREMIUM
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current unearned premium	 	 	—	 	 	 	20	 	
 	 	 	
Total unearned premium	 	 	—	 	 	 	20	 	

 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Unearned premium liability as at 1 January	 	 	20	 	 	 	322	 	
Earning of premiums written in previous periods	 	 	(20	)	 	 	(302	)	
 	 	 	
Unearned premium liability as at 31 December	 	 	—	 	 	 	20	 	
 	 	 	
15. OUTSTANDING CLAIMS
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Central estimate	 	 	703,638	 	 	 	941,105	 	
Risk margin	 	 	103,293	 	 	 	119,530	 	
 	 	 	
 	 	 	806,931	 	 	 	1,060,635	 	
Discount to present value	 	 	(109,727	)	 	 	(142,483	)	
 	 	 	
Gross outstanding claims liability	 	 	697,204	 	 	 	918,152	 	

Current	 	 	112,751	 	 	 	159,202	 	
Non-current	 	 	584,453	 	 	 	758,950	 	
 	 	 	
Total outstanding claims	 	 	697,204	 	 	 	918,152	 	
 	 	 	
Investment assets in the form of debt securities are held to back the liability for outstanding claims and are realised on a regular basis to meet claims. The amount of claims likely to be settled within 12 months of the reporting date is classified as current.
The Company has been closed to new business since 1999 and there have been no new direct or inwards reinsurance contracts issued in the five years prior to and including this report.
As described in note 1, the outstanding claims liability is the best estimate of the present value of the expected future payments, after the inclusion of a risk margin. At each balance date, the amount of the liability is reassessed and it is likely that changes will arise in the estimates of liabilities. The tables in the following pages show the estimates of total ultimate claims at successive year ends.

Gordian Runoff Limited ABN 11 052 179 647	 	24 of 39	 	 	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
15. OUTSTANDING CLAIMS (continued)
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Gross	 	 	Reinsurance	 	 	Net	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Amount outstanding brought forward	 	 	918,152	 	 	 	71,196	 	 	 	846,956	 	

Claim payments/ recoveries during the period	 	 	(149,686	)	 	 	(25,237	)	 	 	(124,449	)	
Effect of changes in assumptions	 	 	(57,129	)	 	 	2,857	 	 	 	(59,986	)	
Effect of changes in exchange rates	 	 	(14,133	)	 	 	31	 	 	 	(14,164	)	
 	 	 	
Amount outstanding carried forward	 	 	697,204	 	 	 	48,847	 	 	 	648,357	 	
 	 	 	
2005
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Gross	 	 	Reinsurance	 	 	Net	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Amount outstanding brought forward	 	 	1,054,932	 	 	 	117,130	 	 	 	937,802	 	

Claim payments/ recoveries during the period	 	 	(194,638	)	 	 	(63,543	)	 	 	(131,095	)	
Effect of changes in assumptions	 	 	37,963	 	 	 	14,558	 	 	 	23,405	 	
Effect of changes in exchange rates	 	 	19,895	 	 	 	3,051	 	 	 	16,844	 	
 	 	 	
Amount outstanding carried forward	 	 	918,152	 	 	 	71,196	 	 	 	846,956	 	
 	 	 	
Claims Development Table
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Inwards Reinsurance	 	 	Direct Insurance	 	 	Total	 	
 	 	Net	 	 	Gross	 	 	Net	 	 	Gross	 	 	Net	 	 	Gross	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	
Estimate of Cumulative claims	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
31 December 2001	 	 	5,546,741	 	 	 	5,969,117	 	 	 	1,384,633	 	 	 	1,857,817	 	 	 	6,931,374	 	 	 	7,826,934	 	
31 December 2002	 	 	5,501,089	 	 	 	5,958,853	 	 	 	1,415,333	 	 	 	1,920,262	 	 	 	6,916,422	 	 	 	7,879,115	 	
31 December 2003	 	 	5,505,440	 	 	 	5,962,356	 	 	 	1,462,533	 	 	 	1,952,003	 	 	 	6,967,973	 	 	 	7,914,359	 	
31 December 2004	 	 	5,450,936	 	 	 	5,901,231	 	 	 	1,432,295	 	 	 	1,882,078	 	 	 	6,883,231	 	 	 	7,783,309	 	
31 December 2005	 	 	5,423,564	 	 	 	5,861,248	 	 	 	1,491,990	 	 	 	1,933,978	 	 	 	6,915,554	 	 	 	7,795,226	 	
31 December 2006	 	 	5,400,793	 	 	 	5,835,799	 	 	 	1,443,852	 	 	 	1,901,401	 	 	 	6,844,645	 	 	 	7,737,200	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Estimate of Cumulative Claims at 31 December 2006	 	 	5,400,793	 	 	 	5,835,799	 	 	 	1,443,852	 	 	 	1,901,401	 	 	 	6,844,645	 	 	 	7,737,200	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cumulative Payments	 	 	5,069,792	 	 	 	5,500,299	 	 	 	1,219,629	 	 	 	1,600,155	 	 	 	6,289,421	 	 	 	7,100,454	 	

Undiscounted central estimate	 	 	331,001	 	 	 	335,500	 	 	 	224,223	 	 	 	301,246	 	 	 	555,224	 	 	 	636,746	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of Discounting	 	 	55,511	 	 	 	55,564	 	 	 	41,995	 	 	 	54,163	 	 	 	97,506	 	 	 	109,727	 	

Discounted Central Estimate	 	 	275,490	 	 	 	279,936	 	 	 	182,228	 	 	 	247,083	 	 	 	457,718	 	 	 	527,019	 	
 	
Risk Margin	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	103,293	 	
Claims Handling Provision	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	66,892	 	
 	
Gross Outstanding Claims as per the Balance Sheet	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	697,204	 	

 	 	 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	25 of 39	 	 	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
15. OUTSTANDING CLAIMS (continued)
The risk margin is intended to achieve a 75% probability of adequacy. The risk margin has been determined consistent with the calculation of the outstanding claims liability as disclosed in note 3.
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Unexpired Risk Liability	 	 	 	 	 	 	 	 	
Central estimate	 	 	—	 	 	 	—	 	
 	 	 	
Net unexpired risk liability	 	 	—	 	 	 	—	 	
 	 	 	
a) Movement in unexpired risk liability
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Unexpired risk liability as at 1 January	 	 	—	 	 	 	485	 	
Recognition of additional unexpired risk liability in the period	 	 	—	 	 	 	—	 	
Release of unexpired risk liability recorded in previous periods	 	 	—	 	 	 	(485	)	
 	 	 	
Unexpired risk liability as at 31 December	 	 	—	 	 	 	—	 	
 	 	 	
b) Deficiency recognised in the income statement
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Gross movement in unexpired risk liability	 	 	—	 	 	 	(485	)	
Reinsurance on unexpired risk liability	 	 	—	 	 	 	—	 	
 	 	 	
Net movement in unexpired risk liability	 	 	—	 	 	 	(485	)	
 	 	 	
Total deficiency recognised in income statement	 	 	—	 	 	 	(485	)	

 	 	 	 	 	
 	
Gordian Runoff Limited ABN 11 052 179 647	 	26 of 39	 	 	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
16. PAYABLES
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Trade & other creditors	 	 	3,303	 	 	 	34,284	 	
Other borrowings from related parties	 	 	 	 	 	 	 	 	
- subsidiaries	 	 	—	 	 	 	43,985	 	
- other related parties	 	 	5,128	 	 	 	449	 	
 	 	 	
Total current payables	 	 	8,431	 	 	 	78,718	 	

Non-current	 	 	 	 	 	 	 	 	
Trade & other creditors	 	 	422	 	 	 	1,385	 	
 	 	 	
Total non-current payables	 	 	422	 	 	 	1,385	 	
 	 	 	
17. ISSUED CAPITAL
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Paid up capital	 	 	 	 	 	 	 	 	
1,840,000,005 fully paid ordinary shares at $0.99 per share (2004: 1,840,000,005) at $1.08 per share	 	 	1,814,600	 	 	 	1,978,600	 	
 	 	 	
Total paid up capital	 	 	1,814,600	 	 	 	1,978,600	 	

Movement in ordinary share capital	 	 	 	 	 	 	 	 	
Balance beginning of the year	 	 	1,978,600	 	 	 	1,978,600	 	
Movement for the year — Capital reduction 18 August 06	 	 	(164,000	)	 	 	—	 	
 	 	 	
Balance at the end of the period	 	 	1,814,600	 	 	 	1,978,600	 	
 	 	 	
Rights attaching to Ordinary Shares
Ordinary shares attract the following rights:
 	(a)	 	to receive notice of and to attend and vote at all general meetings of the Company;

 	(b)	 	to receive dividends; and	
 	 	 	 	
 	(c)	 	in a winding up, to participate equally in the distribution of the assets of the Company (both capital and surplus), subject only to any amounts unpaid on the Share.	
18. FRANKING ACCOUNT
No dividends were paid or proposed during the year.
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies were transferred to the Head Entity, AMP Limited.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	27 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
19. KEY MANAGEMENT PERSONNEL COMPENSATION
The following individuals were the key management personnel of Gordian RunOff Limited for the current and prior reporting periods (unless stated otherwise):
 	 	 	
 	 	Date of Appointment/Resignation during the	
Name	 	current or prior reporting period	

Peter Clarke	 	 	
Richard Grellman	 	 	
Peter Hodgett	 	 	
Andrew Mohl	 	 	
William Roberts	 	 	
Felix Zaccar	 	 	
Bruce Robertson	 	09-05-2005, Resigned	
The following table provides aggregate details of the compensation of key management personnel of Gordian RunOff Limited.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term	 	 	Post-	 	 	Other long	 	 	 	 	 	 	 	 	 	 	
 	 	employee	 	 	employment	 	 	-term	 	 	Termination	 	 	Share-based	 	 	 	 	
Year	 	benefits	 	 	benefits	 	 	benefits	 	 	benefits	 	 	payments	 	 	Total	 	
 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	
2006	 	 	6,306,101	 	 	 	205,061	 	 	 	—	 	 	 	—	 	 	 	2,318,215	 	 	 	8,829,377	 	
2005	 	 	5,737,253	 	 	 	254,791	 	 	 	—	 	 	 	—	 	 	 	2,079,046	 	 	 	8,071,090	 	
 	
Key management personnel disclosed above, also provided services to other related entities during the year. The above remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to Gordian Runoff Ltd.
20. AUDITORS’ REMUNERATION
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Amounts received, or due and receivable, by Ernst & Young for:	 	 	 	 	 	 	 	 	
- other services	 	 	129	 	 	 	92	 	
 	 	 	
Auditors’ remuneration for the year ended 31 December 2006 is paid on the entity’s behalf by a controlled entity within The AMP Limited Group.
21. CONTINGENT LIABILITIES
Legal disputes
The nature of the reinsurance business from time to time gives rise to disputes. Several claims have been denied or recoveries disputed, giving rise to legal actions over coverage issues. Any resulting litigation will be vigorously defended. In assessing claim liabilities or reinsurance recoveries, management has reserved based on its best estimate of the likely outcomes. The nature of these disputes are such that the quantum and timing of the outcome are uncertain.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	28 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
22. RELATED PARTIES
Controlling Entity
The immediate parent entity is AG Australia Holdings Ltd. AMP Limited is the ultimate parent entity.
Controlled Entities
Information relating to controlled entities is included at Note 12.
Directors
The directors of the Company during the financial year, and the dates of appointments and resignations during the year are:
 	 	 	
Peter Clarke	 	 	
Richard Grellman	 	 	
Peter Hodgett	 	 	
Andrew Mohl	 	 	
William Roberts	 	 	
Felix Zaccar	 	 	
Bruce Robertson	 	09-05-2005, Resigned	
Other transactions with key management personnel of the Company
During the year, transactions may have been entered into between key management personnel and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and may include:
 	•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	 	
 	•	 	the purchase of AMP superannuation and related products;	
 	 	 	 	
 	•	 	financial investment services;	
 	 	 	 	
 	•	 	other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of the consolidated entity’s financial statements, or discharge of accountability by key management personnel. The transactions are considered to be trivial or domestic in nature.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	29 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
22. RELATED PARTIES (Continued)
Transactions within the wholly owned group
Transactions between Gordian RunOff Limited and its controlled entities, and other related parties for the financial year consisted of:
•	 	Payment of management fees for services provided;	

•	 	Provision of intercompany loan;	

•	 	Interest on intercompany loan;	

•	 	Receipt of dividend; and	

•	 	Provision of share capital.	
The aggregate amounts brought to account in respect of the following types of transactions and each class of related party involved were:
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$	 	 	$	 	
Amounts attributable to transactions with related parties	 	 	 	 	 	 	 	 	
Operating profit before income tax includes aggregate amounts attributable to transactions in respect of:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Investment Expenses — other related parties	 	 	2,053,027	 	 	 	2,319,674	 	
Interest Revenue — other related parties	 	 	31,911,761	 	 	 	24,690,451	 	
Dividend Revenue — subsidiaries	 	 	645,161	 	 	 	1,148,199	 	
Management Expenses — other related parties	 	 	25,652,346	 	 	 	26,517,726	 	

 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$	 	 	$	 	
Amounts receivable from and payable to related parties	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Aggregate amounts receivable at balance date from:	 	 	 	 	 	 	 	 	
Interest receivable — other related parties	 	 	2,498,449	 	 	 	13,950,313	 	
Intercompany receivables — other related parties	 	 	1,325,723	 	 	 	180,514	 	
Loans — other related parties	 	 	422,093,922	 	 	 	450,628,452	 	

Aggregate amounts payable at balance date to:	 	 	 	 	 	 	 	 	
Payables — subsidiaries	 	 	—	 	 	 	43,984,858	 	
Payables — other related parties	 	 	5,128,164	 	 	 	448,549	 	
 	 	 	
AMP Capital Investors Limited, a related entity within the wholly owned group, manages the majority of the investments of the consolidated entity under a management contract, which follows the normal terms and conditions for such contracts. Fees are paid or are due and payable for the management of investment portfolios under normal terms and conditions.
AMP Services Limited and Enstar Australia Ltd (formerly Cobalt Solutions Australia Limited), fellow wholly owned controlled entities, provide operational and administrative (including employee related) services to the consolidated entity. The services provided are in the normal course of the business and are on normal commercial terms and conditions.
The Company advanced additional loans to AMP Life Limited. These transactions were made under normal market terms and conditions.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	30 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
23. CASH FLOW RECONCILIATIONS
(i) Reconciliation of cash
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Cash balance comprises:	 	 	 	 	 	 	 	 	
Cash on hand	 	 	10,141	 	 	 	10,010	 	
Short term money market deposits	 	 	32,150	 	 	 	1,903	 	
 	 	 	
 	 	 	42,291	 	 	 	11,913	 	
 	 	 	
Units in cash managed trusts	 	 	—	 	 	 	20,409	 	
 	 	 	
 	 	 	42,291	 	 	 	32,322	 	
 	 	 	
(ii) Reconciliation of net cash flows from operating activities to operating profit after income tax
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Operating profit after income tax	 	 	74,474	 	 	 	64,940	 	
 	 	 	 	 	 	 	 	 	
Changes in net market value of investments	 	 	16,674	 	 	 	(56,430	)	
Net loss/(gain) on sale of investments	 	 	21,115	 	 	 	49,960	 	
Net (gain)/loss on foreign currency transactions	 	 	(4,618	)	 	 	283	 	
Changes in assets and liabilities	 	 	 	 	 	 	 	 	
- Increase in receivables	 	 	(11,466	)	 	 	—	 	
- Decrease in receivables	 	 	35,446	 	 	 	2,923	 	
- Decrease in reinsurance and other recoveries receivable	 	 	26,216	 	 	 	45,933	 	
- Decrease in other assets	 	 	3	 	 	 	601	 	
- Decrease in unearned premiums	 	 	(20	)	 	 	(302	)	
- Decrease in outstanding claims	 	 	(220,948	)	 	 	(137,265	)	
- Decrease in accounts payable & borrowings	 	 	(28,409	)	 	 	(29,712	)	
- Decrease in income taxes payable	 	 	7,206	 	 	 	358	 	
- Decrease in deferred taxes payable, net of future tax benefit	 	 	24,291	 	 	 	21,985	 	
 	 	 	
Net cash flows used in operating activities	 	 	(60,036	)	 	 	(36,726	)	

 	 	 	

Gordian Runoff Limited ABN 11 052 179 647	 	31 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
24. SEGMENT REPORTING
(a) Primary reporting format — business segment
Business Segment Information
Direct Insurance
Comprises corporate insurance operations in run-off.
Inwards Reinsurance
Comprises inwards reinsurance operations in run-off.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Direct	 	 	Inwards	 	 	 	 	 	 	 	
2006	 	Insurance	 	 	Reinsurance	 	 	Unallocated	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net premium revenue	 	 	28	 	 	 	(1,491	)	 	 	—	 	 	 	(1,463	)	
Net claims incurred	 	 	(33,114	)	 	 	(35,260	)	 	 	—	 	 	 	(68,374	)	
Other underwriting income	 	 	(3	)	 	 	2,661	 	 	 	—	 	 	 	2,658	 	
Underwriting expenses	 	 	15	 	 	 	1,028	 	 	 	—	 	 	 	1,043	 	
 	 	 	
Underwriting result	 	 	33,124	 	 	 	35,402	 	 	 	—	 	 	 	68,526	 	
Net investment revenue/(expense)	 	 	11,232	 	 	 	(7,769	)	 	 	42,497	 	 	 	45,960	 	
General administration expenses/(benefit)	 	 	—	 	 	 	—	 	 	 	10,537	 	 	 	10,537	 	
 	 	 	
Net profit before tax	 	 	44,356	 	 	 	27,633	 	 	 	31,960	 	 	 	103,949	 	
Income tax expense	 	 	—	 	 	 	—	 	 	 	29,476	 	 	 	29,476	 	
 	 	 	
Net profit after tax attributable to members of Gordian Runoff Limited	 	 	44,356	 	 	 	27,633	 	 	 	2,484	 	 	 	74,473	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Direct	 	 	Inwards	 	 	 	 	 	 	 	
 	 	Insurance	 	 	Reinsurance	 	 	Unallocated	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
Total Revenues	 	 	44,374	 	 	 	26,000	 	 	 	42,497	 	 	 	112,871	 	
Total Expenses	 	 	18	 	 	 	(1,633	)	 	 	10,537	 	 	 	8,922	 	
 	 	 	
Net profit before tax	 	 	44,356	 	 	 	27,633	 	 	 	31,960	 	 	 	103,949	 	

Other segment items included in the income statement are as follows:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Impairment of premium receivables	 	 	13	 	 	 	291	 	 	 	—	 	 	 	304	 	
Impairment of reinsurance receivables	 	 	(1,265	)	 	 	(2,066	)	 	 	—	 	 	 	(3,331	)	

The segment assets and liabilities are as follows :	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Assets	 	 	355,419	 	 	 	419,860	 	 	 	651,119	 	 	 	1,426,398	 	
Liabilities	 	 	407,159	 	 	 	323,547	 	 	 	—	 	 	 	730,706	 	
 	 	 	
Segment assets include investments, premium receivables, and reinsurance and other recoveries receivable Segment liabilities include outstanding claims liabilities & other payables.
The entity has not incurred capital expenditure in the reporting periods.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	32 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
24. SEGMENT REPORTING (Continued)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Direct	 	 	Inwards	 	 	 	 	 	 	 	
2005	 	Insurance	 	 	Reinsurance	 	 	Unallocated	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net premium revenue	 	 	770	 	 	 	4,712	 	 	 	—	 	 	 	5,482	 	
Net claims incurred	 	 	77,977	 	 	 	(33,955	)	 	 	—	 	 	 	44,022	 	
Movement in unexpired risk liability	 	 	—	 	 	 	(485	)	 	 	—	 	 	 	(485	)	
Other underwriting income	 	 	771	 	 	 	125	 	 	 	—	 	 	 	896	 	
Underwriting expenses	 	 	279	 	 	 	667	 	 	 	—	 	 	 	946	 	
 	 	 	
Underwriting result	 	 	(76,715	)	 	 	38,610	 	 	 	—	 	 	 	(38,105	)	
Net investment revenue/(expense)	 	 	18,189	 	 	 	48,036	 	 	 	35,481	 	 	 	101,706	 	
General administration expenses/(benefit)	 	 	—	 	 	 	—	 	 	 	(3,391	)	 	 	(3,391	)	
 	 	 	
Net profit before tax	 	 	(58,526	)	 	 	86,646	 	 	 	38,872	 	 	 	66,992	 	
Income tax expense	 	 	—	 	 	 	—	 	 	 	17,052	 	 	 	17,052	 	
 	 	 	
Net profit after tax attributable to members of Gordian Runoff Limited	 	 	(58,526	)	 	 	86,646	 	 	 	21,820	 	 	 	49,940	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Direct	 	 	Inwards	 	 	 	 	 	 	 	
 	 	Insurance	 	 	Reinsurance	 	 	Unallocated	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
Total Revenues	 	 	17,061	 	 	 	87,188	 	 	 	35,481	 	 	 	139,730	 	
Total Expenses	 	 	75,587	 	 	 	542	 	 	 	(3,391	)	 	 	72,738	 	
 	 	 	
Net profit before tax	 	 	(58,526	)	 	 	86,646	 	 	 	38,872	 	 	 	66,992	 	

Other segment items included in the income statement are as follows:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Impairment of premium receivables	 	 	(18	)	 	 	(901	)	 	 	—	 	 	 	(919	)	
Impairment of reinsurance receivables	 	 	(1,950	)	 	 	(14,927	)	 	 	—	 	 	 	(16,877	)	
 	 	 	
The segment assets and liabilities are as follows :	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Assets	 	 	393,586	 	 	 	656,825	 	 	 	733,440	 	 	 	1,783,851	 	
Liabilities	 	 	381,209	 	 	 	617,423	 	 	 	—	 	 	 	998,632	 	
 	 	 	
Segment assets include investments, premium receivables, and reinsurance and other recoveries receivable Segment liabilities include outstanding claims liabilities & other payables.
The entity has not incurred capital expenditure in the reporting periods.

 	
Gordian Runoff Limited ABN 11 052 179 647	 	33 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
(b) Secondary Reporting Format
The international segment relates to the inwards reinsurance business. Reinsurance cover is non-country specific. Gordian RunOff Limited ceased writing new business and renewals in late 1999.and has operated an orderly runoff since that time.
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Revenue	 	 	 	 	 	 	 	 	
Australia	 	 	81,194	 	 	 	53,050	 	
International	 	 	31,677	 	 	 	86,680	 	
 	 	 	
Total Revenue	 	 	112,871	 	 	 	139,730	 	

Assets	 	 	 	 	 	 	 	 	
Australia	 	 	975,071	 	 	 	1,101,236	 	
International	 	 	451,327	 	 	 	682,615	 	
 	 	 	
Total Assets	 	 	1,426,398	 	 	 	1,783,851	 	
 	 	 	
25. FINANCIAL INSTRUMENTS AND DERIVATIVES
(a) Fair values
The recorded bid price equates to net fair value for listed debt and equity securities. For derivative contracts, fair value equates to the unrealised gain/loss on the outstanding contract. For the following financial instruments, the cost carrying amount is considered to equate to their fair value:
•	 	cash deposits	

•	 	loans to related parties	

•	 	receivables	

•	 	payables.	
(b) Special terms and conditions
All financial investments of the Company are held or issued on normal commercial terms at market rates of interest. There are no special terms or conditions affecting the nature and timing of the financial instruments not otherwise disclosed in these accounts. The accounting policies and terms and conditions for each class of financial asset or liability at the balance date are detailed in Note 1 and throughout the other notes to these financial statements.

Gordian Runoff Limited ABN 11 052 179 647	 	34 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
25. FINANCIAL INSTRUMENTS AND DERIVATIVES (continued)
(c) Credit risk
Trading investments are recorded in the accounts at fair value, which represents the Group’s exposure to credit risk in relation to these instruments. The Company’s credit risk exposure to derivatives is the fair value as recorded above.
The credit risk of the Company arising from exposure to individual entities in investment portfolios is monitored and controlled by AMP Capital Investors Limited in accordance with Group Credit Policy guidelines.
Credit risk in trade receivables in managed by analysing the credit ratings of the underlying debts.
(d) Currency Exposure
In addition to functional currency, the consolidated group has exposure to investments and investment cashflows denominated in US dollars, pounds sterling, and euro.
(e) Interest rate risk on financial instruments
The accounting policy notes describe the policies used to measure and report the assets and liabilities of the Group. Where the applicable market value is determined by discounting future cash flows, movements in interest rates will result in a reported unrealised gain or loss in the profit and loss account.
AMP Capital Investors Limited manages investment portfolios on behalf of the Company. The Company seeks to reduce its interest rate risk through the use of investment portfolios as a hedge against the insurance liabilities of the Group. To the extent that these assets and liabilities can be matched, unrealised gains or losses on revaluation of liabilities resulting from interest rate movements will be offset by unrealised losses or gains on revaluation of investment assets.
The Company’s exposure to interest rate risks and the effective interest rates of financial assets and liabilities at the reporting date, are as follows:

Gordian Runoff Limited ABN 11 052 179 647	 	35 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
25. FINANCIAL INSTRUMENTS AND DERIVATIVES (Continued)
(f) Interest rate risk on financial instruments
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Fixed interest rate	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Floating	 	 	 	 	 	 	 	 	 	Maturing in	 	 	 	 	 	 	 	 	 	Non	 	 	 	 	 	Weighted	
 	 	Interest	 	0-1	 	1-2	 	2-3	 	3-4	 	4-5	 	> 5	 	Interest	 	 	 	 	 	Average	
 	 	Rate	 	year	 	years	 	years	 	years	 	years	 	years	 	Bearing	 	Total	 	Interest	
For the year ended 2006	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	rate	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash deposits	 	 	42,291	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	42,291	 	 	 	5.57	%	
Cash trusts and short term money markets*	 	 	—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	N/A	 	
Other Unit trusts*	 	 	15,151	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	15,151	 	 	 	N/A	 	
Debt securities*	 	 	 	 	 	 	110,482	 	 	 	187,311	 	 	 	106,463	 	 	 	76,631	 	 	 	58,204	 	 	 	265,463	 	 	 	 	 	 	 	804,554	 	 	 	5.72	%	
Derivatives*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,875	 	 	 	1,875	 	 	 	N/A	 	
Shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	32,470	 	 	 	32,470	 	 	 	N/A	 	
Related Party Loan	 	 	422,094	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	422,094	 	 	 	7.06	%	
Receivables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	14,303	 	 	 	14,303	 	 	 	N/A	 	
 	 	 	 	 	
Total Financial Assets	 	 	479,536	 	 	 	110,482	 	 	 	187,311	 	 	 	106,463	 	 	 	76,631	 	 	 	58,204	 	 	 	265,463	 	 	 	48,648	 	 	 	1,332,738	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	8,853	 	 	 	8,853	 	 	 	N/A	 	
 	 	 	 	 	
Total Financial Liabilities	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	8,853	 	 	 	8,853	 	 	 	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Fixed interest rate	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Floating	 	 	 	 	 	 	 	 	 	Maturing in	 	 	 	 	 	 	 	 	 	Non	 	 	 	 	 	Weighted	
 	 	Interest	 	0-1	 	1-2	 	2-3	 	3-4	 	4-5	 	> 5	 	Interest	 	 	 	 	 	Average	
 	 	Rate	 	year	 	years	 	years	 	years	 	years	 	years	 	Bearing	 	Total	 	Interest	
For the year ended 2005	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	rate	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash deposits	 	 	11,913	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	11,913	 	 	 	4.30	%	
Cash trusts and short term money markets*	 	 	20,409	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	20,409	 	 	 	N/A	 	
Other Unit trusts*	 	 	9,446	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	9,446	 	 	 	N/A	 	
Debt securities*	 	 	 	 	 	 	180,464	 	 	 	109,200	 	 	 	193,104	 	 	 	140,798	 	 	 	76,491	 	 	 	347,632	 	 	 	 	 	 	 	1,047,689	 	 	 	4.83	%	
Derivatives*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,295	 	 	 	1,295	 	 	 	N/A	 	
Shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	70,649	 	 	 	70,649	 	 	 	N/A	 	
Related Party Loan	 	 	450,628	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	450,628	 	 	 	6.79	%	
Receivables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	48,845	 	 	 	48,845	 	 	 	N/A	 	
 	 	 	 	 	
Total Financial Assets	 	 	492,396	 	 	 	180,464	 	 	 	109,200	 	 	 	193,104	 	 	 	140,798	 	 	 	76,491	 	 	 	347,632	 	 	 	120,789	 	 	 	1,660,874	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	80,103	 	 	 	80,103	 	 	 	N/A	 	
 	 	 	 	 	
Total Financial Liabilities	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	80,103	 	 	 	80,103	 	 	 	 	 	

*	 	These balances include investments held in technical reserves which are used to meet insurance liabilities. The company seeks to match the duration of these assets to the corresponding insurance liability to reduce the exposure of the company to interest rate movement.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	36 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
25. FINANCIAL INSTRUMENTS AND DERIVATIVES (continued)
(g) Specific purposes for which derivative transactions are undertaken
The Group uses derivatives in the following way:
Investment management operations
Group entities have given authority to AMP Capital Investors Limited (the investment manager) to use derivatives in managing investment portfolios. There may be various reasons why investment in derivatives is more appropriate than investment in the underlying physical asset including hedging, liquidity and pricing.
The types of derivatives, which the investment manager can use include, interest rate swaps and futures, share price index futures and forward currency agreements.
Extent of derivative transactions
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Notional	 	Fair	 	Notional	 	Fair	
 	 	value	 	value	 	value	 	value	
 	 	2006	 	2006	 	2005	 	2005	
 	 	$’000	 	$’000	 	$’000	 	$’000	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment management operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest Rate Swap Contracts	 	 	10,500	 	 	 	(235	)	 	 	46,500	 	 	 	180	 	
Interest Rate Futures Contracts	 	 	104,668	 	 	 	(480	)	 	 	32,356	 	 	 	134	 	
Equity Futures & Options Contracts	 	 	16,762	 	 	 	1,133	 	 	 	23,944	 	 	 	724	 	
The notional value refers to the value of the underlying assets of the derivatives contract. The fair value is the unrealised gain/(loss) on the outstanding contracts.

Gordian Runoff Limited ABN 11 052 179 647	 	37 of 39	

 
Gordian RunOff Limited
Notes to the financial statements for the year ended 31 December 2006
26. CAPITAL ADEQUACY
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Tier 1 Capital	 	 	 	 	 	 	 	 	
Paid-up ordinary shares	 	 	1,814,600	 	 	 	1,978,600	 	
General reserves	 	 	—	 	 	 	—	 	
Retained earnings	 	 	(1,193,381	)	 	 	(1,243,321	)	
Current year earnings	 	 	74,473	 	 	 	49,940	 	
Excess technical provisions (net of tax)	 	 	 	 	 	 	—	 	
Less : deductions	 	 	44,573	 	 	 	51,779	 	
 	 	 	
Net Tier 1 Capital	 	 	651,119	 	 	 	733,440	 	

Net Tier 2 Capital	 	 	—	 	 	 	—	 	
 	 	 	
Total Capital Base	 	 	651,119	 	 	 	733,440	 	

Minimum Capital Requirement	 	 	133,113	 	 	 	172,298	 	

Capital Adequacy Multiple	 	 	4.89	 	 	 	4.25	 	
The entity complies with Prudential Standard GPS110 and the requirements set out in its insurance license.
27. FINANCIAL SUPPORT
The Company has the benefit of the support of the immediate parent AG Australia Holdings Limited, by virtue of a guarantee dated 16 June 1992 whereby it has guaranteed payments under policies of insurance issued by the Company. This applies to claims made and arising prior to the date of revocation of this guarantee being 30 June 2002.
28. EVENTS OCCURRING AFTER THE REPORTING DATE
The Australian Prudential Regulation Authority has approved a further reduction in capital of up to $91,500,000.
With the exception of the above, no other matter or circumstance has arisen since the end of the financial year that has significantly affected or may significantly affect:
i)	 	the entity’s operations in future financial years; or	
 	 	 	
ii)	 	the results of those operations in future financial years; or	
 	 	 	
iii)	 	the entity’s state of affairs in future financial years.	

 	
Gordian Runoff Limited ABN 11 052 179 647	 	38 of 39	

 

Report of Independent Auditors
The Board of Directors of Gordian Runoff Limited
We have audited the accompanying balance sheets of Gordian Runoff Limited as of December 31, 2006 and 2005, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Gordian Runoff Limited at December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008
Liability limited by a scheme
approved under Professional
Standards Legislation

Exhibit 99.3
TGI AUSTRALIA LIMITED
ABN 12 000 041 458
FINANCIAL REPORT
31 DECEMBER 2007
Contents:
 	 	 	 	 	
 	 	Page	
Financial Report	 	 	 	 	
Financial Statements	 	 	 	 	
- Income Statement	 	 	1	 	
- Balance Sheet	 	 	2	 	
- Statement of Changes in Equity	 	 	3	 	
- Cash Flow Statement	 	 	4	 	
Notes to the Financial Statements	 	 	5	 	
Report of Independent Auditors	 	 	32	 	

 
TGI Australia Ltd
Income Statement
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct Premium Revenue	 	 	 	 	 	 	1,739	 	 	 	1,622	 	
Outwards reinsurance expense	 	 	 	 	 	 	257	 	 	 	722	 	
 	 	 	 	 	 	 	
Net premium revenue	 	 	5	 	 	 	1,482	 	 	 	900	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct claims expense/(benefit)	 	 	 	 	 	 	(10,538	)	 	 	21,335	 	
Reinsurance and other recoveries revenue	 	 	 	 	 	 	995	 	 	 	23,863	 	
 	 	 	 	 	 	 	
Net claims incurred	 	 	6	 	 	 	(11,533	)	 	 	(2,528	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other underwriting income	 	 	 	 	 	 	223	 	 	 	548	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other underwriting expenses	 	 	 	 	 	 	43	 	 	 	61	 	
 	 	 	 	 	 	 	
Underwriting expenses	 	 	7	 	 	 	43	 	 	 	61	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Underwriting result	 	 	 	 	 	 	13,195	 	 	 	3,915	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net investment revenue	 	 	8	 	 	 	8,435	 	 	 	6,386	 	
General and administration expenses	 	 	7	 	 	 	3,218	 	 	 	2,240	 	

Net profit before tax	 	 	 	 	 	 	18,412	 	 	 	8,061	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	9	 	 	 	6,262	 	 	 	2,610	 	

Net profit attributable to members of TGI Australia Ltd	 	 	 	 	 	 	12,150	 	 	 	5,451	 	
 	 	 	 	 	 	 	
The above Income Statement should be read in conjunction with the accompanying notes.

TGI Australia ABN 12 000 041 458	 	1 of 32	

 
TGI Australia Ltd
Balance Sheet
As at 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	24	 	 	 	1,596	 	 	 	971	 	
Receivables	 	 	10	 	 	 	1,210	 	 	 	7,458	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	12,711	 	 	 	14,566	 	
Other financial assets	 	 	12	 	 	 	93,882	 	 	 	80,320	 	
Other	 	 	13	 	 	 	356	 	 	 	364	 	

Total Current Assets	 	 	 	 	 	 	109,755	 	 	 	103,679	 	

Non — Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	23,595	 	 	 	27,778	 	
Other financial assets	 	 	12	 	 	 	51,906	 	 	 	63,686	 	
Deferred tax assets	 	 	9	 	 	 	4,099	 	 	 	5,708	 	

Total Non — Current Assets	 	 	 	 	 	 	79,600	 	 	 	97,172	 	

Total Assets	 	 	 	 	 	 	189,355	 	 	 	200,851	 	

Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Unearned premiums	 	 	14	 	 	 	834	 	 	 	750	 	
Outstanding claims liability	 	 	15	 	 	 	19,161	 	 	 	24,868	 	
Payables	 	 	16	 	 	 	904	 	 	 	1,490	 	
Current tax liability	 	 	 	 	 	 	2,751	 	 	 	—	 	

Total Current Liabilities	 	 	 	 	 	 	23,650	 	 	 	27,108	 	

Non — Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding claims liability	 	 	15	 	 	 	61,623	 	 	 	81,815	 	
Deferred tax liability	 	 	9	 	 	 	29	 	 	 	25	 	

Total Non — Current Liabilities	 	 	 	 	 	 	61,652	 	 	 	81,840	 	

Total Liabilities	 	 	 	 	 	 	85,302	 	 	 	108,948	 	
 	 	 	 	 	 	 	
Net Assets	 	 	 	 	 	 	104,053	 	 	 	91,903	 	

Shareholder’s Equity	 	 	 	 	 	 	 	 	 	 	 	 	
Issued Capital	 	 	17	 	 	 	30,000	 	 	 	30,000	 	
Retained profits	 	 	18	 	 	 	74,053	 	 	 	61,903	 	

Total Shareholder’s Equity	 	 	 	 	 	 	104,053	 	 	 	91,903	 	
 	 	 	 	 	 	 	
The above Balance Sheet should be read in conjunction with the accompanying notes.

TGI Australia ABN 12 000 041 458	 	2 of 32	

 
TGI Australia Ltd
Statement of Changes in Equity
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Retained	 	 	 	 	
 	 	Issued Capital	 	 	Earnings	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as at 1 January 2007	 	 	30,000	 	 	 	61,903	 	 	 	91,903	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	12,150	 	 	 	12,150	 	
Other changes in equity- Dividends paid	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	
Balance as at 31 December 2007	 	 	30,000	 	 	 	74,053	 	 	 	104,053	 	

Balance as at 1 January 2006	 	 	30,000	 	 	 	76,452	 	 	 	106,452	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	5,451	 	 	 	5,451	 	
Other changes in equity- Dividends paid	 	 	—	 	 	 	(20,000	)	 	 	(20,000	)	
 	 	 	
Balance as at 31 December 2006	 	 	30,000	 	 	 	61,903	 	 	 	91,903	 	
 	 	 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

TGI Australia ABN 12 000 041 458	 	3 of 32	

 
TGI Australia Ltd
Cashflow Statement
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Premium received	 	 	 	 	 	 	1,150	 	 	 	818	 	
Reinsurance recoveries received	 	 	 	 	 	 	6,419	 	 	 	23,557	 	
Other sundry receipts	 	 	 	 	 	 	15	 	 	 	52	 	
Outward reinsurance paid	 	 	 	 	 	 	(249	)	 	 	(121	)	
Claims paid	 	 	 	 	 	 	(12,450	)	 	 	(28,382	)	
Distributions received	 	 	 	 	 	 	372	 	 	 	1,459	 	
Interest received	 	 	 	 	 	 	3,700	 	 	 	6,599	 	
Investment expenses	 	 	 	 	 	 	(139	)	 	 	(253	)	
Other underwriting expenses	 	 	 	 	 	 	(2,346	)	 	 	(4,839	)	
Income taxes paid	 	 	 	 	 	 	1,726	 	 	 	(5,324	)	
 	 	 	 	 	 	 	
Net cash flows from operating activities	 	 	24	 	 	 	(1,802	)	 	 	(6,434	)	

Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Loans advanced to related parties	 	 	 	 	 	 	(10,000	)	 	 	(10,000	)	
Purchase of investments	 	 	 	 	 	 	(82,064	)	 	 	(70,637	)	
Sale of investments	 	 	 	 	 	 	92,870	 	 	 	108,035	 	
 	 	 	 	 	 	 	
Net cash flows from investing activities	 	 	 	 	 	 	806	 	 	 	27,398	 	

Cash flows from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends paid	 	 	 	 	 	 	—	 	 	 	(20,000	)	
 	 	 	 	 	 	 	
Net cash flows from financing activities	 	 	 	 	 	 	—	 	 	 	(20,000	)	

Net (decrease)/increase in cash	 	 	 	 	 	 	(996	)	 	 	964	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash at the beginning of the year	 	 	 	 	 	 	2,592	 	 	 	1,628	 	

Cash at the end of the year	 	 	24	 	 	 	1,596	 	 	 	2,592	 	
 	 	 	 	 	 	 	
The above Cash Flow Statement should be read in conjunction with the accompanying notes.

TGI Australia ABN 12 000 041 458	 	4 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value.
Accounting judgements and estimates
In the course of its operations the company applies judgements and makes estimates that affect the amounts recognised in the financial report. Estimates are based on a combination of historical experience and expectations of future events that are believed to be reasonable at the time.
Accounting Standards issued but not yet effective
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2007, except IFRS8 Operating Segments. The adoption of IFRS8 has removed the requirement for Operating Segment disclosures in this Financial Report.
When applied in future periods, all other recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
Changes in accounting policy
Since 1 January 2007, the company has adopted a number of Accounting Standards and Interpretations which were mandatory for annual periods beginning on or after 1 January 2007. Adoption of these Standards and Interpretations has not had any effect on the financial position or performance of the Company.
Operating revenue
Operating revenue comprises general insurance earned premiums, recoveries, investment income and interest income. Investment income is brought to account on an accrual basis. Other underwriting income comprises of sundry receipts.
Premium Revenue and Unearned premiums
(i) Premium revenue
General insurance premiums comprise amounts charged to policyholders or other insurers, including fire service levies, but excluding stamp duties and GST collected on behalf of third parties. The earned portion of premiums received and receivable, including unclosed business, is recognised as operating revenue. Movements in the provisions for impairment of premium receivables have been included in premium revenue.
(ii) Unearned premiums
Unearned premiums represent premium revenue attributable to future accounting periods. Unearned premium is determined by apportioning the premiums written in the year evenly over the period of insurance cover, reflecting the pattern in which risk emerges under these policies.

TGI Australia ABN 12 000 041 458	 	5 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF ACCOUNTING POLICIES (continued)
Unexpired risk liability
The adequacy of the unearned premium liability in respect of each class of business is assessed by considering current estimates of all expected future cash flows relating to future claims covered by current insurance contracts.
If the present value of the expected future cash flows relating to future claims exceeds the unearned premium liability less related intangible assets and related deferred acquisition costs then the unearned premium liability is deemed to be deficient.
The entire deficiency is recognised immediately in the income statement. The deficiency is recognised first by writing down any related intangible assets and then related deferred acquisition costs, with any excess being recorded in the balance sheet as an unexpired risk liability.
Outstanding Claims
The liability for outstanding claims is measured as the best estimate of the present value of expected future payments against claims incurred at the reporting date under general insurance contracts issued by the Company, with an additional risk margin to allow for the inherent uncertainty in the best estimate.
The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs.
Claims handling costs include costs that can be associated directly with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as claims administration costs.
The liability includes an allowance for inflation and superimposed inflation and is measured as the present value of the expected future ultimate cost of settling claims. The expected future payments are discounted to present value using a risk free rate.
A risk margin is applied to the outstanding claims liability, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the best estimate. This risk margin increases the probability that the net liability is adequately provided for to a 75% confidence level.
Outwards reinsurance premium expense and deferred reinsurance premium
Premiums ceded to reinsurers are recognised as an expense over the period of cover using the methods applicable to premium revenue as set out in the premium revenue note above.
Reinsurance and other recoveries
Reinsurance and other recoveries consist of receivables on paid claims and outstanding claims and are recognised as revenue when claims are paid or the outstanding claim is raised. Reinsurance receivables are discounted to present value consistent with the discounting of outstanding claims. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all the amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Fire brigade levies and other statutory charges
A liability for fire brigade levies and other statutory charges is recognised on business written to the balance date. Levies and charges payable are expensed on the same basis as the recognition of the related premium revenue, with the portion relating to unearned premiums being reported as deferred statutory charges.

TGI Australia ABN 12 000 041 458	 	6 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF ACCOUNTING POLICIES (continued)
Investment Income
Dividend and interest income is recognised in the income statement on an effective interest method when the entity obtains control of the right to receive the revenue.
Realised gains and losses represent the change in value between the previously reported value and the amount received on sale of the asset. Unrealised gains and losses represent changes in the fair value of financial assets recognised in the period.
Assets backing general insurance liabilities
As part of its investment strategy, the Company actively manages its investment portfolio to ensure that investments mature in accordance with the expected pattern of future cash flows arising from general insurance liabilities.
The Company has determined that all assets are held to back general insurance liabilities on the basis that all assets of the Company are available for the settlement of claims if required. The following policies apply to assets held to back general insurance liabilities.
Financial assets
Financial assets are designated at fair value through profit or loss. Initial recognition is at cost in the balance sheet and subsequent measurement is at fair value with any resultant unrealised gains or losses recognised in the income statement. Details of fair value for the different types of financial assets are listed below:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount. For the purposes of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value.
Cash trusts
The fair value of units in a listed cash trust reflects the quoted bid price at balance date. There is no reduction for realisation costs in the value of units in a cash trust. Unlisted unit trusts are recorded at fund managers valuations.
Debt securities
Debt securities are initially recognised at fair value, representing the purchase cost of the asset exclusive of any transaction costs. Debt securities are subsequently measured at fair value, with any realised and unrealised gains or losses arising from changes in the fair value being recognised in the income statement for the period in which they arise. The fair value of a traded interest bearing security reflects the bid price at balance date. Interest bearing securities that are not frequently traded are valued by discounting the estimated recoverable amounts, using prevailing interest rates. Debt securities are accounted for on a trade date basis.
Derivatives
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at their fair value. All derivatives are carried as assets when their fair value is positive, and as liabilities when their fair value is negative. Derivatives are exchange traded and are fair valued using their publicly quoted bid price on the date of valuation.

TGI Australia ABN 12 000 041 458	 	7 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF ACCOUNTING POLICIES (continued)
Income Tax
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to: (i) temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and (ii) unused tax losses.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Tax Consolidation
AMP Limited, TGI Australia Ltd and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
(i) Current tax balances arising from external transactions recognised by entities in the tax-consolidated group occurring after the implementation date, and;
(ii) Deferred tax assets arising from unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement.
Assets and liabilities which arise as a result of differences between the periods in which the underlying transactions occur, and the period in which the funding payments under the tax funding agreement are made, are recognised as intercompany balances receivable and payable in the balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.
The entity will be required to make a payment to terminate its liability under the tax funding agreement if it leaves the tax consolidation group.

TGI Australia ABN 12 000 041 458	 	8 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF ACCOUNTING POLICIES (continued)
Goods and Services Tax (GST)
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.
Foreign currency transactions and translation
Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The presentation currency of this financial report, and the functional currency, is Australian dollars.
Transactions and balances
Income and expense items denominated in a currency other than the functional currency are translated at the spot exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at balance sheet date, with exchange gains and losses recognised in the income statement. The corresponding foreign currency translations of overseas outstanding claims liabilities and receivables are reported as a component of claims expense and premium revenue, respectively. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Receivables
Receivables are financial assets and are measured at fair value. Given the short-term nature of most receivables, the recoverable amount approximates fair value. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Payables
Trade creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Amounts Due To or From Related Parties
Amounts are carried at fair value being nominal amounts due and payable. Interest is taken up as income on an accrual basis. A provision for impairment is recognised when there is objective evidence that the related party will not be able to pay its debt.

TGI Australia ABN 12 000 041 458	 	9 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Company makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas in which critical estimates and judgements are applied are described below.
(a) The ultimate liability arising from claims made under insurance contracts
Provision is made at year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Company.
The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, where more information about the claim event is generally available. IBNR claims may often not be reported to the insurer until many years after the events giving rise to the claims has happened. The liability class of business will typically display greater variations between initial estimates and final outcomes because there is a greater degree of difficulty in estimating IBNR reserves. For the short tail class, claims are typically reported soon after the claim event, and hence tend to display lower levels of volatility. In calculating the estimated cost of unpaid claims the Company uses a variety of estimation techniques, generally based upon analysis of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
 	•	 	changes in Company processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with the statistics from previous periods;	
 	 	 	 	
 	•	 	changes in the legal environment;	
 	 	 	 	
 	•	 	the effects of inflation;	
 	 	 	 	
 	•	 	the impact of large losses;	
 	 	 	 	
 	•	 	movements in industry benchmarks.	
Where possible the Company adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions.
Details of specific assumptions used in deriving the outstanding claims liability at year-end are detailed in note 3.
(b) Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also computed using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Company may not receive amounts due to it and these amounts can be reliably measured.

TGI Australia ABN 12 000 041 458	 	10 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
3. ACTUARIAL METHODS AND ASSUMPTIONS
Claims estimates are derived from analysis of the results of several different actuarial models. These models take case estimates as well as payments into account and assume that reported incurred amounts or reported payment amounts will develop steadily from period to period. Other models adopt an ultimate loss ratio for each year that reflects both the long term expected level, as well as incorporating recent experience. The analysis is performed by accident year for the direct insurance class.
Claims are first estimated on an undiscounted basis and are then discounted to allow for the time value of money. The valuation methods adopted include an implicit allowance for future inflation but do not identify the explicit rate. This allows for both general economic inflation as well as any superimposed inflation detected in the modelling of payments experience. Superimposed inflation arises from non-economic factors such as developments of legal precedent.
The liability class of business may be subject to the emergence of new types of latent claims, but no specific allowance is included for this as at the balance sheet date. Such uncertainties are considered when setting the risk margin appropriate for this class.
A description of the processes used to determine the key assumptions is provided below:
The average weighted term to settlement is calculated separately by class of business, based on historical settlement patterns.
The reinsurance percentage is calculated based on past reinsurance recovery rates and the structure of the reinsurance arrangements in place.
The discount rates are derived from market yields on Government securities as at the balance date, in the currency of the expected claim payments.
Expense rate. Claim handling expenses are calculated based on the projected costs of administering the remaining claims until expiry.
The ultimate to incurred claims ratio is derived by accident or underwriting year based on historical development of claims from period to period.
The effect of changes in the assumptions have been shown in the reconciliations of general insurance assets and liabilities in Note 15.
Process for determining risk margin
The risk margin was determined initially for each portfolio, allowing for the uncertainty of the outstanding claims estimate for each portfolio. Uncertainty was analysed for each portfolio taking into account past volatility in general insurance claims, potential uncertainties relating to the actuarial models and assumptions, the quality of the underlying data used in the models, and the general insurance environment. The estimate of uncertainty is generally greater for long tailed classes when compared to short tail classes due to the longer time until settlement of outstanding claims.
The overall risk margin was determined allowing for diversification between the different portfolios and the relative uncertainty of each portfolio. The assumptions regarding uncertainty for each class were applied to the net central estimates, and the results were aggregated, allowing for diversification in order to arrive at an overall provision that is intended to have a 75% probability of adequacy.
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	%	 	 	%	 	
 	 	 	 	 	 	 	 	 	
Risk Margins applied	 	 	18.8	 	 	 	29.0	 	

 	
TGI Australia ABN 12 000 041 458	 	11 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
3. ACTUARIAL METHODS AND ASSUMPTIONS (continued)
Sensitivity analysis — general insurance contracts
There are a number of variables which impact the amounts recognised in the financial statements arising from insurance contracts.
The profit or loss and equity of the Company are sensitive to movements in a number of key variables as described below.
 	 	 	
Variable	 	Description of variable	
 	
Average weighted term to settlement	 	Expected payment patterns are used in determining the outstanding claims liability. A decrease in the average term to settlement would lead to claims being paid sooner than anticipated.	
 	 	 	
Discount rate	 	The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money.	
 	 	 	
Expense rate	 	An estimate for the internal costs of administering claims is included in the outstanding claims liability.	
 	 	 	
Ultimate to incurred claims ratio	 	The estimated ultimate claims cost is generally greater than the claims reported as incurred to date, due to claims that are incurred but not reported (IBNR) or due to future developments on existing claims.	
 	 	 	
Reinsurance percentage	 	Assumes money will be recoverable from reinsurers on future claims paid.	
The following table provides an analysis of the sensitivity of the profit after income tax and total equity to changes in these assumptions both gross and net of reinsurance.
2007
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Change in	 	Assumption at 12/07	 	 	Profit/(Loss) (after tax)	 	
Variable	 	variable	 	Gross %	 	 	Net %	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	+0.5	 year	 	 	3.3	 	 	 	3.7	 	 	 	1,671	 	 	 	984	 	
 	 	-0.5	 year	 	 	3.3	 	 	 	3.7	 	 	 	(1,767	)	 	 	(1,015	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	8.0	 	 	 	—	 	 	 	52	 	
(as % of gross IBNR)	 	 	-1	%	 	 	n/a	 	 	 	8.0	 	 	 	—	 	 	 	(52	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	6.4	 	 	 	6.2	 	 	 	1,522	 	 	 	1016	 	
 	 	 	-1	%	 	 	6.4	 	 	 	6.2	 	 	 	(1,629	)	 	 	(1,095	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	17.0	 	 	 	n/a	 	 	 	(474	)	 	 	(474	)	
 	 	 	-1	%	 	 	17.0	 	 	 	n/a	 	 	 	474	 	 	 	474	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	101.7	 	 	 	n/a	 	 	 	(3,310	)	 	 	(1,966	)	
 	 	 	-1	%	 	 	101.7	 	 	 	n/a	 	 	 	1,497	 	 	 	810	 	

1 —	 	This sensitivity reflects the liability movements only. As assets are invested to match the term of liabilities, there is little overall profit impact from a change to interest rates.	
 	 	 	
2 —	 	This ratio has only been adjusted for years that are not considered to be fully developed.	

 	
TGI Australia ABN 12 000 041 458	 	12 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
3. ACTUARIAL METHODS AND ASSUMPTIONS (continued)
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Change in	 	Assumption at 12/06	 	 	Profit/(Loss) (after tax)	 	
Variable	 	variable	 	Gross %	 	 	Net %	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	+0.5	 year	 	 	3.3	 	 	 	3.6	 	 	 	2,010	 	 	 	1,347	 	
 	 	-0.5	 year	 	 	3.3	 	 	 	3.6	 	 	 	(2,214	)	 	 	(1,387	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	 	+1	%	 	 	n/a	 	 	 	9.0	 	 	 	—	 	 	 	97	 	
(as % of gross IBNR)	 	 	-1	%	 	 	n/a	 	 	 	9.0	 	 	 	—	 	 	 	(97	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	5.9	 	 	 	5.9	 	 	 	2,058	 	 	 	1,437	 	
 	 	 	-1	%	 	 	5.9	 	 	 	5.9	 	 	 	(2,201	)	 	 	(1,543	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	17.3	 	 	 	17.3	 	 	 	(623	)	 	 	(623	)	
 	 	 	-1	%	 	 	17.3	 	 	 	17.3	 	 	 	623	 	 	 	623	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	102.5	 	 	 	102.5	 	 	 	(3,732	)	 	 	(2,355	)	
 	 	 	-1	%	 	 	102.5	 	 	 	102.5	 	 	 	2,066	 	 	 	1,392	 	

1 —	 	This sensitivity reflects the liability movements only. As assets are invested to match the term of liabilities, there is little overall profit impact from a change to interest rates.	
 	 	 	
2 —	 	This ratio has only been adjusted for years that are not considered to be fully developed.	
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS
The company’s policies and procedures in respect of managing risks are set out in this note below.
The Board has ultimate responsibility for risk management and governance, including ensuring an appropriate risk framework is in place and is operating effectively. There are, however, other bodies and individuals associated with the Company that manage and monitor financial risk.
The Board
The Board is responsible for the approval of policy regarding shareholder capital investment strategy, policyholder asset and liability strategy and setting the financial risk appetite.
The Audit Committee
The Audit Committee is responsible for ensuring the existence of effective financial risk management policies and procedures.
The Approved Actuary
The Approved Actuary is responsible for reporting on solvency and capital adequacy. A Financial Condition report (FCR) and an Insurance Liability Valuation report (ILVR) must be provided to the Board and the Australian Prudential Regulatory Authority (APRA) at least annually, the ILVR must be peer reviewed annually by an external independent actuary. The Insurance Act also imposers obligations on the Approved Actuary to bring to the attention of the company or in certain circumstances APRA any matter that the Approved Actuary thinks requires action to be taken to avoid prejudice in the interests of the policy holders.

TGI Australia ABN 12 000 041 458	 	13 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
As part of the overall governance framework the and in accordance with Prudential Standards GPS 220 Risk Management and GPS 230 Reinsurance Management issued APRA, the Board and senior management have developed, implemented and maintain a sound and prudent Risk Management Strategy (RMS) and a Reinsurance Management Strategy (REMS).
The RMS and REMS identify the Company’s policies and procedures, processes and controls that comprise its risk management and control systems. These systems address all material risks, financial and non-financial, likely to be faced by the Company. Annually, the Board certifies to APRA that adequate strategies have been put in place to monitor those risks, that the Company has systems in place to ensure compliance with legislative and prudential requirements and that the Board has satisfied itself as to the compliance with the RMS and REMS. The RMS and REMS have been approved by both the Board and APRA.
Key aspects of the processes established in the RMS to mitigate risks include:
 	•	 	A formal regular process of risk identification and evaluation, supplemented by a documented control assessment process, is completed by management and communicated to the Board in line with the Board approved Risk Management Strategy.	
 	 	 	 	
 	•	 	Actuarial models, using information from management information systems, to monitor claims patterns and other relevant statistics. Past experience and statistical methods are used as part of the process.	
 	 	 	 	
 	•	 	The maintenance and use of various specialist information systems, which provide up to date and reliable data on claims liabilities.	
 	 	 	 	
 	•	 	Documented procedures that are followed by claims staff that are experienced in the various classes of business previously written.	
 	 	 	 	
 	•	 	Reinsurance has been used, particularly in the early period of the run-off to limit the Company’s exposure to large single claims. The REMS provides that exposures continue to be monitored and where feasible reinsurance be purchased as means of limiting risk.	
 	 	 	 	
 	•	 	The mix of investment assets is driven by the nature and term of the insurance liabilities. The management of assets and liabilities is closely monitored in an attempt to match the maturity dates of assets with the expected pattern of claim payments.	
Risk and Mitigation
The Company’s activities expose it to a variety of risks.
The major risks associated with insurance contracts include:
a)	 	Development of claims	
 	 	 	
 	 	There is a possibility that changes may occur in the estimate of our obligations at the end of a contract period. The tables in note 15 show the estimates of total ultimate claims at successive year-ends.	
 	 	 	
b)	 	Terms and conditions of direct and inwards reinsurance business	
 	 	 	
 	 	There is limited scope to improve the existing terms and conditions. The company has been in orderly run off since 1999, and no new contracts have been entered into since that time with the exception of riskcap.	
 	 	 	
c)	 	Concentration of insurance risk	
 	 	 	
 	 	The exposure to concentrations of insurance risk can be mitigated with the purchase of reinsurance where management believes that the price /risk transfer is suitable.	

 	
TGI Australia ABN 12 000 041 458	 	14 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Financial risks include:
 	 	Market risk	
 	 	 	
a)	 	Interest rate risk	
 	 	 	
 	 	Interest rate risk arises to the extent that there is a mismatch between the fixed-interest portfolios used to back the outstanding claims liability and those outstanding claims. The interest rate risk is managed by matching the duration profiles of the investments assets and the outstanding claims liability.	
 	 	 	
 	 	The accounting policy notes describe the policies used to measure and report the assets and liabilities of the Company. Where the applicable market value is determined by discounting future cash flows, movements in interest rates will result in a reported unrealised gain or loss in the profit and loss account.	
 	 	 	
 	 	AMP Capital Investors Limited manages the investment portfolios on behalf of the Company. The Company seeks to reduce its interest rate risk through the use of investment portfolios as a hedge against its insurance liabilities. To the extent that these assets and liabilities can be matched, unrealised gains or losses on revaluation of liabilities resulting from interest rate movements will be offset by unrealised losses or gains on revaluation of investment assets.	
 	 	 	
 	 	Interest rate sensitivity analysis

The following table demonstrates the impact of a 100 basis point change in Australian interest rates, with all other variables held constant, on the company’s shareholder profit after tax. It is assumed that the change occurs as at the reporting date (31 December) and there are concurrent movements in interest rates and parallel shifts in yield curves.	

 	 	31 Dec 07	 	31 Dec 06	
 	 	Impact on Profit	 	Impact on Profit	
Change in Variable	 	after tax $’000	 	after tax $’000	
+100 basis points	 	 	(697	)	 	 	(1,000	)	
- 100 basis points	 	 	697	 	 	 	1,000	 	

b)	 	Foreign Currency risk analysis	
 	 	 	
 	 	Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in exchange rates.	
 	 	 	
 	 	The Company’s financial assets are all held in Australian dollars. This matches the currency profile of the liabilities with the exception of some policies written in USD. As a result the entity is exposed to some currency mismatch.	
 	 	 	
 	 	Other exposures to foreign currency are immaterial.	
 	 	 	
 	 	Foreign Currency sensitivity analysis

The following table demonstrates the impact of a 10% increase or decrease in the Australian dollar against the USD, where the USD is seen as the relevant proxy of liabilities. It is assumed that the relevant change occurs at reporting date.	

 	 	31 Dec 07	 	31 Dec 06	
 	 	Impact on Profit	 	Impact on Profit	
Change in Variable	 	after tax $’000	 	after tax $’000	
+10%	 	 	(710	)	 	 	(1,033	)	
– 10%	 	 	710	 	 	 	1,033	 	

 	
TGI Australia ABN 12 000 041 458	 	15 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
4.	 	RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)	
 	 	 	
 	 	Liquidity risk	
 	 	 	
 	 	Liquidity risk is the risk that the Company will not be able to met its debt obligations or other cash outflows as they fall due because of lack of liquid assets. The Company manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of assets and liabilities. As required by APRA prudential Standard GPS 220, the Company has developed and implemented a risk management strategy which is described earlier in this note to control this risk.	
 	 	 	
 	 	The table below summaries the maturity profile of the company’s financial liabilities at 31 December based on contractual undiscounted obligations.	
31 Dec 07
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	Up to 1 year	 	 	2 to 3 years	 	 	4 to 5 years	 	 	Over 5 years	 	 	Total	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	904	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	904	 	
Deferred Tax Liability	 	 	—	 	 	 	10	 	 	 	7	 	 	 	12	 	 	 	29	 	
Derivatives	 	 	—	 	 	 	136	 	 	 	—	 	 	 	62	 	 	 	198	 	
 	 	 	
Total	 	 	904	 	 	 	146	 	 	 	7	 	 	 	74	 	 	 	1,131	 	
 	 	 	
31 Dec 06
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	Up to 1 year	 	 	2 to 3 years	 	 	4 to 5 years	 	 	Over 5 years	 	 	Total	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	1,490	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,490	 	
Deferred tax liability	 	 	—	 	 	 	9	 	 	 	6	 	 	 	10	 	 	 	25	 	
Derivatives	 	 	—	 	 	 	177	 	 	 	—	 	 	 	16	 	 	 	193	 	
 	 	 	
Total	 	 	1,490	 	 	 	186	 	 	 	6	 	 	 	26	 	 	 	1,708	 	
 	 	 	
Credit risk
Credit risk is the risk of loss that arises from a counterparty failing to meet their contractual commitments in full and on time, or from losses arising from the change in value of traded financial instruments as a result of changes in credit risk on that instrument.
Credit risk arising from exposure to individual counter parties in the investment portfolios is managed by the investment manager, AMP Capital Investors’ Compliance and Business Risk team, according to a separate investment mandate approved by the Board which aims to duration band match the insurance liability profile within specified credit criteria constraints. Compliance with the mandate is reported to the Board of Directors.
Credit risk in trade receivables in managed by analysing the credit ratings of the underlying debts.
Other than loans to related parties, there are no significant concentrations of credit risk.

TGI Australia ABN 12 000 041 458	 	16 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Credit exposure by credit rating
The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the Company’s credit rating of counter parties:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	Reinsurance & Other	 	 	Other Financial	 	 	Reinsurance & Other	 	 	Other Financial	 	
 	 	Recoveries	 	 	Instruments	 	 	Recoveries	 	 	Instruments	 	
 	 	$000	 	 	$000	 	 	$000	 	 	$000	 	
AAA	 	 	7,652	 	 	 	47,849	 	 	 	9780	 	 	 	60,345	 	
AA	 	 	9,692	 	 	 	85,460	 	 	 	11,707	 	 	 	70,581	 	
A	 	 	15,437	 	 	 	4,765	 	 	 	18,736	 	 	 	5,843	 	
BBB	 	 	 	 	 	 	 	 	 	 	14	 	 	 	 	 	
Below BBB	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Not rated	 	 	6,197	 	 	 	7,714	 	 	 	4,555	 	 	 	7,237	 	
 	 	 	
Total	 	 	38,978	 	 	 	145,788	 	 	 	44,292	 	 	 	144,006	 	
 	 	 	
The following table provides an aged analysis of financial assets neither past due or impaired, past due and not impaired and impaired assets. Impairment is calculated in accordance with note 1.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Neither past	 	Past due but not impaired	 	 	 	 	
 	 	due nor	 	Under	 	More than	 	 	 	 	
 	 	impaired	 	90 days	 	91 days	 	Impaired	 	TOTAL	
31 Dec 07	 	$000	 	$000	 	$000	 	$000	 	$000	
Receivables	 	 	1,167	 	 	 	43	 	 	 	 	 	 	 	 	 	 	 	1,210	 	
Reinsurance and Other recoveries	 	 	30,578	 	 	 	362	 	 	 	824	 	 	 	7,214	 	 	 	38,978	 	
Other Financial Instruments	 	 	145,788	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	145,788	 	

 	 	Neither past	 	Past due but not impaired	 	 	 	 	
 	 	due nor	 	Less than	 	More than	 	 	 	 	
 	 	impaired	 	90 days	 	91 days	 	Impaired	 	TOTAL	
31 Dec 06	 	$000	 	$000	 	$000	 	$000	 	$000	
Receivables	 	 	7,450	 	 	 	8	 	 	 	 	 	 	 	 	 	 	 	7,458	 	
Reinsurance and Other recoveries	 	 	35,824	 	 	 	218	 	 	 	5,413	 	 	 	2,837	 	 	 	44,292	 	
Other Financial Instruments	 	 	144,006	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	144,006	 	

 	
TGI Australia ABN 12 000 041 458	 	17 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Fair Value
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenue and expenses are recognised, in respect of each class of financial asset, financial liability and other investments are under and in Note 1.
Categories of financial instruments
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
Financial assets	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries	 	 	11	 	 	 	36,306	 	 	 	42,344	 	
Fair value through the profit and loss:	 	 	 	 	 	 	 	 	 	 	 	 	
Loans to related parties	 	 	23	 	 	 	73,070	 	 	 	58,715	 	
Receivables	 	 	10	 	 	 	1,210	 	 	 	7,458	 	
Cash & cash equivalents	 	 	24	 	 	 	1,596	 	 	 	971	 	
Other financial assets	 	 	12	 	 	 	145,788	 	 	 	144,006	 	
Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	16	 	 	 	904	 	 	 	1,490	 	
Income tax payable	 	 	 	 	 	 	2,751	 	 	 	—	 	
Deferred Tax Liability	 	 	9	 	 	 	29	 	 	 	25	 	
The recorded bid price equates to net fair value for listed debt and equity securities. For derivative contracts, fair value equates to the unrealised gain/loss on the outstanding contract. For the following financial instruments, the cost carrying amount is considered to equate to their fair value:
•	 	cash deposits	

•	 	loans to related parties	

•	 	receivables	

•	 	payables.	
Derivative transactions
The Company uses derivatives in the following way:
Investment management operations
Authority has been given to the investment managers to use derivatives in managing the investment portfolios. There may be various reasons why investment in derivatives is more appropriate than investment in the underlying physical asset including hedging, liquidity and pricing.
The types of derivatives, which the investment manager can use include, interest rate swaps and futures, share price index futures and forward currency agreements.

TGI Australia ABN 12 000 041 458	 	18 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Extent of derivative transactions
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Notional	 	 	Fair	 	 	Notional	 	 	Fair	 	
 	 	value	 	 	value	 	 	value	 	 	value	 	
 	 	2007	 	 	2007	 	 	2006	 	 	2006	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
Investment management operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest Rate Swap Contracts	 	 	—	 	 	 	—	 	 	 	1,800	 	 	 	(40	)	
Interest Rate Futures Contracts	 	 	19,366	 	 	 	(111	)	 	 	19,286	 	 	 	(74	)	
Equity Futures & Options Contracts	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
The notional value refers to the value of the underlying assets of the derivatives contract. The fair value is the unrealised gain/(loss) on the outstanding contracts.
Capital Management
The Company is subject to externally imposed capital management requirements. The Company must comply with Capital requirements as specified under APRA General Insurance Prudential Standards.
The primary capital management objective is to ensure the company will be able to continue as a going concern while minimising excess capital; through capital initiatives, where appropriate.
The Company’s capital position is monitored by the Company’s Board. There have been no changes in the capital management objectives, policies and processes from the previous period.
The company has at all times during the current and prior financial year complied with the externally imposed capital requirements imposed by Prudential Standard GPS110 and the requirements set out in its insurance license.
The Minimum Capital Requirement (MCR) as a ratio of the Company’s capital base is shown in the table under.
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
Tier 1 Capital	 	 	 	 	 	 	 	 	
Paid-up ordinary shares	 	 	30,000	 	 	 	30,000	 	
General reserves	 	 	—	 	 	 	—	 	
Retained earnings	 	 	61,782	 	 	 	56,452	 	
Current year earnings	 	 	12,144	 	 	 	5,330	 	
Excess technical provisions (net of tax)	 	 	 	 	 	 	—	 	
Less : deductions	 	 	(4,070	)	 	 	(5,683	)	
 	 	 	
Net Tier 1 Capital	 	 	99,856	 	 	 	86,099	 	
 	 	 	 	 	 	 	 	 	
Net Tier 2 Capital	 	 	—	 	 	 	—	 	

Total Capital Base	 	 	99,856	 	 	 	86,099	 	

 	
Minimum Capital Requirement	 	 	15,880	 	 	 	19,769	 	

Capital adequacy multiple	 	 	6.29	 	 	 	4.36	 	
The entity complies with Prudential Standard GPS110 and the requirements set out in its insurance licence.

TGI Australia ABN 12 000 041 458	 	19 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
5. NET PREMIUM REVENUE
 	 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	 	
 	 	$’000	 	 	$’000	 	 	
Gross written premium	 	 	1,823	 	 	 	1,681	 	 	
Movement in unearned premium	 	 	(84	)	 	 	(59	)	 	
 	 	 	 	
Premium revenue	 	 	1,739	 	 	 	1,622	 	 	
Outwards reinsurance expense	 	 	257	 	 	 	722	 	 	
 	 	 	 	
Net Premium Revenue	 	 	1,482	 	 	 	900	 	 	
 	 	 	 	
6. NET CLAIMS INCURRED
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31-Dec-07	 	31-Dec-06	
 	 	Current	 	Prior	 	 	 	 	 	Current	 	Prior	 	 	
 	 	year	 	years	 	Total	 	year	 	years	 	Total	
 	 	$’000	 	$’000	 	$’000	 	$’000	 	$’000	 	$’000	
Gross claims expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross claims incurred — undiscounted	 	 	741	 	 	 	(14,240	)	 	 	(13,499	)	 	 	2,202	 	 	 	15,435	 	 	 	17,637	 	
Discount movement	 	 	(241	)	 	 	3,202	 	 	 	2,961	 	 	 	(705	)	 	 	4,403	 	 	 	3,698	 	
 	 	 	
Claims incurred — discounted	 	 	500	 	 	 	(11,038	)	 	 	(10,538	)	 	 	1,497	 	 	 	19,838	 	 	 	21,335	 	

Reinsurance and other recoveries revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries — undiscounted	 	 	(19	)	 	 	(246	)	 	 	(265	)	 	 	—	 	 	 	(25,650	)	 	 	(25,650	)	
Discount movement	 	 	6	 	 	 	(736	)	 	 	(730	)	 	 	—	 	 	 	1,787	 	 	 	1,787	 	
 	 	 	
Reinsurance and other recoveries — discounted	 	 	(13	)	 	 	(982	)	 	 	(995	)	 	 	—	 	 	 	(23,863	)	 	 	(23,863	)	
 	 	 	
Net claims incurred — discounted	 	 	487	 	 	 	(12,020	)	 	 	(11,533	)	 	 	1,497	 	 	 	(4,025	)	 	 	(2,528	)	
 	 	 	
Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the risks borne in all previous financial years.

TGI Australia ABN 12 000 041 458	 	20 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
7. OPERATING EXPENSES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
Expenses by Nature	 	$’000	 	 	$’000	 	
Commission expense/(benefit)	 	 	—	 	 	 	61	 	
Write-off of Bad Debt	 	 	—	 	 	 	4,212	 	
Impairment expense — premium receivables	 	 	—	 	 	 	44	 	
Impairment expense/(benefit) — reinsurance receivables	 	 	918	 	 	 	(3,977	)	
Investment management fees	 	 	162	 	 	 	278	 	
Other management fees	 	 	4,847	 	 	 	1,562	 	
External consultant costs	 	 	135	 	 	 	58	 	
Other expenses	 	 	109	 	 	 	3,209	 	
 	 	 	
Total Expenses	 	 	6,171	 	 	 	5,447	 	

represented by:	 	 	 	 	 	 	 	 	
General administration expenses included in net claims incurred	 	 	2,910	 	 	 	3,146	 	
Other underwriting expenses	 	 	43	 	 	 	61	 	
General administration expenses	 	 	3,218	 	 	 	2,240	 	
 	 	 	
Total expenses	 	 	6,171	 	 	 	5,447	 	
 	 	 	
8. NET INVESTMENT REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Interest	 	 	4,575	 	 	 	6,551	 	
Interest from related parties:	 	 	 	 	 	 	 	 	
- other related parties	 	 	4,501	 	 	 	2,564	 	
Distributions received	 	 	372	 	 	 	1,459	 	
Changes in fair value of investments:	 	 	 	 	 	 	 	 	
Realised (loss)/gain	 	 	(2,268	)	 	 	(1,879	)	
Unrealised loss	 	 	1,255	 	 	 	(2,309	)	
 	 	 	
Total Net Investment Revenue	 	 	8,435	 	 	 	6,386	 	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	21 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
9. INCOME TAX
(a) Analysis of income tax expense
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Current tax	 	 	4,538	 	 	 	591	 	
Decrease in deferred tax assets	 	 	1,005	 	 	 	3,819	 	
Increase in deferred tax liabilities	 	 	4	 	 	 	(1,777	)	
(Under)/over provided in previous years	 	 	715	 	 	 	(23	)	
 	
Income tax expense	 	 	6,262	 	 	 	2,610	 	
 	
(b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period.
In respect of income tax expense attributable to shareholders, the tax rate which applies in both
2007 and 2006 is 30%.
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Operating profit before income tax	 	 	18,412	 	 	 	8,061	 	
Prima facie income tax at the rate of 30%	 	 	5,524	 	 	 	2,418	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Non assessable income	 	 	 	 	 	 	(281	)	
Other	 	 	24	 	 	 	473	 	
Under provided in prior years — deferred tax balances	 	 	714	 	 	 	—	 	
 	
Income tax expense per income statement	 	 	6,261	 	 	 	2,610	 	
 	
(c) Analysis of deferred tax asset
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Provision for doubtful debts	 	 	861	 	 	 	586	 	
- Accruals	 	 	20	 	 	 	4	 	
- Indirect Claims Costs Adjustments	 	 	3,019	 	 	 	4,092	 	
- Other	 	 	199	 	 	 	1,026	 	
 	
Total deferred tax assets	 	 	4,099	 	 	 	5,708	 	
 	
(d) Analysis of deferred tax liability
 	 	 	 	 	 	 	 	 	
Amounts recognised in income	 	 	 	 	 	 	 	 	
- Unrealised gains/losses	 	 	29	 	 	 	25	 	
 	
Total deferred tax liability	 	 	29	 	 	 	25	 	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	22 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
10. RECEIVABLES
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Premiums receivable — direct insurance	 	 	671	 	 	 	—	 	
less provision for impairment of premium receivable	 	 	—	 	 	 	—	 	
 	 	 	
 	 	 	671	 	 	 	—	 	

Other receivables	 	 	120	 	 	 	4,172	 	
less provision for impairment of other receivables	 	 	—	 	 	 	—	 	
 	 	 	
 	 	 	120	 	 	 	4,172	 	
 	 	 	
Other receivables from related parties	 	 	 	 	 	 	 	 	
- other related parties	 	 	—	 	 	 	3,013	 	
 	 	 	 	 	 	 	 	 	
Interest receivable from related parties	 	 	 	 	 	 	 	 	
- other related parties	 	 	419	 	 	 	273	 	
 	 	 	
Total current receivables	 	 	1,210	 	 	 	7,458	 	
 	 	 	
11. REINSURANCE AND OTHER RECOVERIES
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
Expected future reinsurance and other recoveries undiscounted	 	 	 	 	 	 	 	 	
- on claims paid	 	 	5,627	 	 	 	6,138	 	
- on outstanding claims	 	 	39,712	 	 	 	45,252	 	
 	 	 	 	 	 	 	 	 	
Discount to present value	 	 	(6,361	)	 	 	(7,092	)	
less provision for impairment of reinsurance and other recoveries	 	 	(2,672	)	 	 	(1,954	)	
 	 	 	
Reinsurance and other recoveries receivable	 	 	36,306	 	 	 	42,344	 	

Reinsurance and other recoveries receivable — current	 	 	15,103	 	 	 	16,234	 	
less provision for impairment of reinsurance and other recoveries	 	 	(2,392	)	 	 	(1,668	)	
 	 	 	
Reinsurance and other recoveries receivable — Current	 	 	12,711	 	 	 	14,566	 	

Reinsurance and other recoveries receivable — non current	 	 	23,876	 	 	 	28,063	 	
less provision for impairment of reinsurance and other recoveries	 	 	(281	)	 	 	(285	)	
 	 	 	
Reinsurance and other recoveries receivable — Non current	 	 	23,595	 	 	 	27,778	 	
 	 	 	
Refer to Note 15 for a reconciliation of the movement in reinsurance and other recoveries on incurred claims over the year.

TGI Australia ABN 12 000 041 458	 	23 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
12. OTHER FINANCIAL ASSETS
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Quoted investments — at fair value:	 	 	 	 	 	 	 	 	
Government and semi-government bonds	 	 	4,080	 	 	 	1,364	 	
Corporate bonds	 	 	8,789	 	 	 	11,093	 	
Deposit on futures	 	 	339	 	 	 	287	 	
Derivatives	 	 	(111	)	 	 	 	 	
 	 	 	
 	 	 	13,097	 	 	 	12,744	 	

Unquoted investments — at fair value:	 	 	 	 	 	 	 	 	
Units held in cash managed trust	 	 	 	 	 	 	 	 	
- Other related parties	 	 	1,238	 	 	 	1,621	 	
Units held in other unit trusts	 	 	6,477	 	 	 	7,240	 	
Loan — Other related parties	 	 	73,070	 	 	 	58,715	 	
 	 	 	
 	 	 	80,785	 	 	 	67,576	 	
 	 	 	
Total current financial assets	 	 	93,882	 	 	 	80,320	 	

Non-Current	 	 	 	 	 	 	 	 	
Quoted investments — at fair value:	 	 	 	 	 	 	 	 	
Government and semi-government bonds	 	 	30,275	 	 	 	32,236	 	
Corporate bonds	 	 	21,631	 	 	 	31,564	 	
Derivatives	 	 	—	 	 	 	(114	)	

Total non current financial assets	 	 	51,906	 	 	 	63,686	 	
 	 	 	
Total other financial assets	 	 	145,788	 	 	 	144,006	 	
 	 	 	
13. OTHER ASSETS
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Deferred reinsurance expense	 	 	331	 	 	 	332	 	
Other- prepayments	 	 	25	 	 	 	32	 	
 	 	 	
Total other assets	 	 	356	 	 	 	364	 	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	24 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
14. UNEARNED PREMIUM
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Current unearned premium	 	 	834	 	 	 	750	 	
Non-current unearned premium	 	 	—	 	 	 	—	 	
 	 	 	
Total unearned premium	 	 	834	 	 	 	750	 	

Unearned premium liability as at 1 January	 	 	750	 	 	 	809	 	
Deferral of premiums on contracts written in the period	 	 	834	 	 	 	750	 	
Earning of premiums written in previous periods	 	 	(750	)	 	 	(809	)	
 	 	 	
Unearned premium liability as at 31 December	 	 	834	 	 	 	750	 	
 	 	 	
During the year the unearned premium liability in respect of TGI was found to be sufficient. As a result no unexpired risk reserve was required.
15. OUTSTANDING CLAIMS
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Central estimate	 	 	89,414	 	 	 	106,797	 	
Risk margin	 	 	7,516	 	 	 	15,444	 	
Discount to present value	 	 	(16,146	)	 	 	(15,558	)	
 	 	 	
Total Outstanding Claims	 	 	80,784	 	 	 	106,683	 	

Current	 	 	19,161	 	 	 	24,868	 	
Non-Current	 	 	61,623	 	 	 	81,815	 	
 	 	 	
 	 	 	80,784	 	 	 	106,683	 	
 	 	 	
Investment assets in the form of debt securities are held to back the liability for outstanding claims and are realised on a regular basis to meet claims. The amount of claims likely to be settled within 12 months of the reporting date is classified as current.

TGI Australia ABN 12 000 041 458	 	25 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
15. OUTSTANDING CLAIMS (continued)
Reconciliation of movement in discounted outstanding claims liability
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Gross	 	 	Reinsurance	 	 	Net	 	
2007	 	$’000	 	 	$’000	 	 	$’000	 	
Amount outstanding carried forward	 	 	106,683	 	 	 	42,186	 	 	 	64,497	 	
less Claim payments/recoveries received in the period	 	 	(12,450	)	 	 	(6,419	)	 	 	(6,031	)	
Effect of change in assumptions	 	 	(12,480	)	 	 	729	 	 	 	(13,209	)	
Effect of change in exchange rates	 	 	(969	)	 	 	(390	)	 	 	(579	)	
 	 	 	
Outstanding amount carried forward	 	 	80,784	 	 	 	36,106	 	 	 	44,678	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Gross	 	 	Reinsurance	 	 	Net	 	
2006	 	$’000	 	 	$’000	 	 	$’000	 	
Amount outstanding carried forward	 	 	113,730	 	 	 	41,880	 	 	 	71,850	 	
less Claim payments/recoveries received in the period	 	 	(28,382	)	 	 	(23,557	)	 	 	(4,825	)	
Effect of change in assumptions	 	 	21,922	 	 	 	24,068	 	 	 	(2,146	)	
Effect of change in exchange rates	 	 	(587	)	 	 	(205	)	 	 	(382	)	
 	 	 	
Outstanding amount carried forward	 	 	106,683	 	 	 	42,186	 	 	 	64,497	 	
 	 	 	
As described in note 1, the outstanding claims liability is the best estimate of the present value of the expected future payments, after the inclusion of a risk margin. At each balance date, the amount of the liability is reassessed and it is likely that changes will arise in the estimates of liabilities. The table under show the estimates of total ultimate claims at successive year ends.
 	 	 	 	 	 	 	 	 	
Estimate of Cumulative claims	 	Net	 	 	Gross	 	
 	 	$’000	 	 	$’000	 	
31 December 2001	 	 	652,869	 	 	 	959,696	 	
31 December 2002	 	 	645,066	 	 	 	988,296	 	
31 December 2003	 	 	632,396	 	 	 	970,761	 	
31 December 2004	 	 	610,081	 	 	 	960,133	 	
31 December 2005	 	 	596,238	 	 	 	956,555	 	
31 December 2006	 	 	596,961	 	 	 	982,344	 	
32 December 2007	 	 	592,266	 	 	 	976,769	 	
 	 	 	 	 	 	 	 	 	
Estimate of Cumulative Claims at 31 December 2007	 	 	592,266	 	 	 	976,769	 	
 	 	 	 	 	 	 	 	 	
Cumulative Payments	 	 	555,708	 	 	 	900,498	 	
 	
Undiscounted central estimate	 	 	36,558	 	 	 	76,271	 	
 	 	 	 	 	 	 	 	 	
Effect of Discounting	 	 	6,703	 	 	 	13,065	 	
 	
Discounted Central Estimate	 	 	29,855	 	 	 	63,206	 	

Risk Margin	 	 	 	 	 	 	7,516	 	
Claims Administration Expense Provision	 	 	 	 	 	 	10,062	 	
 	
Gross Outstanding Claims as per the Balance Sheet	 	 	 	 	 	 	80,784	 	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	26 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
16. PAYABLES
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Trade creditors and other creditors	 	 	265	 	 	 	1,413	 	
Other borrowings from related parties	 	 	 	 	 	 	 	 	
- other related parties	 	 	639	 	 	 	77	 	
 	 	 	
 	 	 	904	 	 	 	1,490	 	
 	 	 	
17. ISSUED CAPITAL
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
Paid up capital:	 	 	 	 	 	 	 	 	
15,000,000 Ordinary Shares at $2 per share	 	 	30,000	 	 	 	30,000	 	
(2006: 15,000,000 Ordinary Sharesat $2 per share)	 	 	 	 	 	 	 	 	
 	 	 	
Total	 	 	30,000	 	 	 	30,000	 	

Movement in share capital	 	 	 	 	 	 	 	 	
Balance beginning of year	 	 	30,000	 	 	 	30,000	 	
 	 	 	
Balance end of year	 	 	30,000	 	 	 	30,000	 	
 	 	 	
Rights attaching to Ordinary Shares
Ordinary shares attract the following rights:
 	(a)	 	to receive notice of and to attend and vote at all general meetings of the Company;	
 	 	 	 	
 	(b)	 	to receive dividends; and	
 	 	 	 	
 	(c)	 	in a winding up, to participate equally in the distribution of the assets of the Company (both capital and surplus), subject only to any amounts unpaid on the share.	
18. RETAINED PROFITS
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
Retained profits at beginning of the financial year	 	 	61,903	 	 	 	76,452	 	
Operating profit/(loss) after Income Tax	 	 	12,150	 	 	 	5,451	 	
Dividend Paid	 	 	—	 	 	 	(20,000	)	
 	 	 	
Retained Profits at the end of the financial year	 	 	74,053	 	 	 	61,903	 	

 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
Dividends paid on ordinary shares	 	 	 	 	 	 	 	 	
- Dividend paid on 12 April 2006	 	 	 	 	 	 	20,000	 	
Unfranked dividend of $1.33 per share	 	 	 	 	 	 	 	 	
 	 	 	
Dividends paid during the year	 	 	—	 	 	 	20,000	 	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	27 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
19. FRANKING ACCOUNT
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies were transferred to the Head Entity, AMP Limited.
20. KEY MANAGEMENT PERSONNEL COMPENSATION
The following individuals were the key management personnel of TGI Australia Limited for the current and prior reporting periods (unless stated otherwise):
 	 	 	
Name	 	Date of Appointment/Resignation during the current or prior reporting period	
 	
Peter Clarke	 	 	
Richard Grellman	 	 	
Paul Leaming	 	31-12-2007, Appointed	
William Roberts	 	 	
Felix Zaccar	 	 	
Peter Hodgett	 	31-12-2007, Resigned	
Andrew Mohl	 	31-12-2007, Resigned	
The following table provides aggregate details of the compensation of key management personnel of TGI Australia Limited.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term	 	 	Post-	 	 	Other long-	 	 	 	 	 	 	 	 	 	 	
 	 	employee	 	 	employment	 	 	term	 	 	Termination	 	 	Share-based	 	 	 	 	
Year	 	benefits	 	 	benefits	 	 	benefits	 	 	benefits	 	 	payments	 	 	Total	 	
 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2007	 	 	6,396,418	 	 	 	204,889	 	 	 	—	 	 	 	7,667,817	 	 	 	2,837,771	 	 	 	17,106,895	 	
2006	 	 	6,306,101	 	 	 	205,061	 	 	 	—	 	 	 	—	 	 	 	2,318,215	 	 	 	8,829,377	 	
Key management personnel disclosed above, also provided services to other related entities during the year. The above remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to TGI Australia Limited.
21. AUDITORS’ REMUNERATION
Auditors’ remuneration for the year ended 31 December 2007 is paid on the Company’s behalf by a controlled entity within the AMP Limited Group.
22. CONTINGENT LIABILITIES
There are no contingent liabilities as at 31 December 2007 (2006: Nil).

TGI Australia ABN 12 000 041 458	 	28 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
23. RELATED PARTIES
Controlling Entity
The immediate parent entity at December 2007 is AMP General Insurance Limited. AMP Limited is the ultimate parent entity at 31 December 2007.
Directors
The directors of the company during the financial year and the dates of appointments and resignations during the year are:
 	 	 	
Name	 	Date of Appointment/Resignation during the current or prior reporting period	
 	
Peter Clarke	 	 	
Richard Grellman	 	 	
Paul Leaming	 	31-12-07, Appointed	
William Roberts	 	 	
Felix Zaccar	 	 	
Peter Hodgett	 	 	
Andrew Mohl	 	31-12-07, Resigned	
Other Transactions
The directors and their director related entities receive normal dividends on their ordinary share holdings in AMP Limited.
Other transactions with key management personnel of the Company
During the year, transactions were entered into between Directors or their Director related entities and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and include:
•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	
•	 	the purchase of AMP superannuation and related products;	

•	 	financial investment services;	

•	 	other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of the entity’s financial statements, or discharge of accountability by key management personnel. The transactions are considered to be trivial or domestic in nature.

TGI Australia ABN 12 000 041 458	 	29 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
23. RELATED PARTIES (continued)
Transactions with Related Parties
Transactions between TGI Australia Limited and other related parties for the financial year consisted of:
 	•	 	Payment of management fees for services provided	
 	 	 	 	
 	•	 	Provision of share capital	
 	 	 	 	
 	•	 	Provision of intercompany loans	
 	 	 	 	
 	•	 	Underwriting the self insurance program of the AMP group	
The aggregate amounts brought to account in respect of the following types of transactions and each class of related party involved were:
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	31 Dec 06	
 	 	$	 	$	
Amounts attributable to transactions with related parties	 	 	 	 	 	 	 	 	
Operating profit/(loss) before income tax for the financial year includes aggregate amounts attributable to transactions in respect of:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Gross Written Premium — other related parties	 	 	1,260,000	 	 	 	1,081,000	 	
Investment Expenses — other related parties	 	 	87,267	 	 	 	226,061	 	
Management Expense — other related parties	 	 	4,872,077	 	 	 	4,857,230	 	
Units held in cash managed trust	 	 	1,238,000	 	 	 	1,621,000	 	
Interest Received — other related parties	 	 	4,500,837	 	 	 	2,564,102	 	

Aggregate amounts receivable at balance date from:	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Receivable — other related parties	 	 	—	 	 	 	3,013,123	 	
Interest receivable — other related parties	 	 	418,899	 	 	 	272,567	 	
Interest Bearing Loans — other related parties	 	 	73,069,595	 	 	 	58,715,091	 	

Aggregate amounts payable at balance date to:	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Payables — other related parties	 	 	638,604	 	 	 	77,302	 	
 	 	 	
AMP Capital Investors Limited, a related entity within the wholly owned group, manages the majority of the investments of the company under a management contract which follows the normal terms and conditions for such contracts. Fees are paid or are due and payable for the management of investment portfolios under normal terms and conditions.
AMP Services Limited and Enstar Australia Limited (formerly Cobalt Solutions Australia Limited ), fellow wholly controlled entities, provide operational and administrative (including employee related) services to the company with the exception of certain financing arrangements, finance leasing and agent related services. The services provided are in the normal course of the business and are on normal commercial terms and conditions.
TGI Australia Limited continues to administer the self insurance program of the AMP Group for underwriting years 2001/2002 and 2002/2003 as well as providing certain AMP Life subsidiaries with professional indemnity cover via the reactivated RiskCap program.

TGI Australia ABN 12 000 041 458	 	30 of 32	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2007
24. CASH FLOW RECONCILIATION
(i) Reconciliation of cash
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Cash on Trust	 	 	—	 	 	 	1,622	 	
Cash at call	 	 	1,596	 	 	 	971	 	
 	 	 	
 	 	 	1,596	 	 	 	2,592	 	
 	 	 	
(ii) Reconciliation of net cash flows from operating activities to operating profit after income tax:
 	 	 	 	 	 	 	 	 	
Operating profit / (loss) after income tax	 	 	12,150	 	 	 	5,452	 	
 	 	 	 	 	 	 	 	 	
Changes in net market value of investments	 	 	(2,269	)	 	 	1,879	 	
Net (gain)/loss on sale of investments	 	 	1,255	 	 	 	2,309	 	
Bad debts written off	 	 	—	 	 	 	4,212	 	
Changes in assets and liabilities	 	 	 	 	 	 	 	 	
(Increase) / decrease in accrued interest	 	 	(4,501	)	 	 	(2,564	)	
(Increase) / decrease in premium debtors	 	 	—	 	 	 	44	 	
Increase / (decrease) in doubtful debts provision	 	 	718	 	 	 	(3,934	)	
Decrease / (increase) in receivables	 	 	7,561	 	 	 	(5,958	)	
Increase / (decrease) in unearned premium provision	 	 	84	 	 	 	(58	)	
Decrease / (increase) in reinsurance recoveries	 	 	5,319	 	 	 	(586	)	
Increase / (decrease) in accounts payable	 	 	(586	)	 	 	(734	)	
Increase / (decrease) in claims outstanding	 	 	(25,898	)	 	 	(7,048	)	
Increase / (decrease) in tax provisions	 	 	4,365	 	 	 	552	 	
 	 	 	
Net cash outflow from operating activities	 	 	(1,802	)	 	 	(6,434	)	
 	 	 	
25. EVENTS OCCURRING AFTER THE REPORTING DATE
On 11 December 2007 a Sale and Purchase Agreement was entered into by the ultimate parent AMP Limited and Enstar Australia Holdings Pty Ltd for the sale of the entity. The sale was subject to multiple conditions including regulatory approval by the Australian Prudential Regulatory Authority (APRA) and was completed on 05/03/08.
A dividend of $36.9m was paid on 18 February 2008
In March 2008 the loan receivable from a related party was fully repaid to the Company and invested in cash.

TGI Australia ABN 12 000 041 458	 	31 of 32	

 

Report of Independent Auditors
The Board of Directors of TGI Australia Limited
We have audited the accompanying balance sheets of TGI Australia Limited as of December 31, 2007 and 2006, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TGI Australia Limited at December 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
 	 	 	 	 	
/s/ Ernst & Young 	 	 	
Sydney, Australia
May 15, 2008 	 	 	
 	
Liability limited by a scheme approved under
Professional Standards Legislation

 
TGI AUSTRALIA LIMITED
ABN 12 000 041 458
FINANCIAL REPORT
31 DECEMBER 2006
Contents:
 	 	 	 	 	
 	 	Page	 	
Financial Report	 	 	 	 	
Financial Statements	 	 	 	 	
- Income Statement	 	 	1	 	
- Balance Sheet	 	 	2	 	
- Statement of Changes in Equity	 	 	3	 	
- Cash Flow Statement	 	 	4	 	
Notes to the Financial Statements	 	 	5	 	
Report of Independent Auditors	 	 	31	 	

 
TGI Australia Ltd
Income Statement
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	31 Dec 06	 	31 Dec 05	
 	 	Note	 	$’000	 	$’000	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct Premium Revenue	 	 	 	 	 	 	1,622	 	 	 	1,211	 	
Outwards reinsurance expense	 	 	 	 	 	 	722	 	 	 	592	 	
 	 	 	 	 	 	 	
Net premium revenue	 	 	5	 	 	 	900	 	 	 	619	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct claims expense/(benefit)	 	 	 	 	 	 	21,335	 	 	 	(7,167	)	
Reinsurance and other recoveries revenue	 	 	 	 	 	 	23,863	 	 	 	13,142	 	
 	 	 	 	 	 	 	
Net Claims Incurred	 	 	6	 	 	 	(2,528	)	 	 	(20,309	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Underwriting Income	 	 	 	 	 	 	548	 	 	 	766	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Acquisition benefit	 	 	 	 	 	 	—	 	 	 	(7	)	
Other underwriting expenses	 	 	 	 	 	 	61	 	 	 	207	 	
 	 	 	 	 	 	 	
Underwriting expenses	 	 	7	 	 	 	61	 	 	 	200	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Underwriting result	 	 	 	 	 	 	3,915	 	 	 	21,494	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Investment Revenue	 	 	8	 	 	 	6,386	 	 	 	10,728	 	
General and administration expenses	 	 	7	 	 	 	2,240	 	 	 	2,600	 	

Net profit before tax	 	 	 	 	 	 	8,061	 	 	 	29,622	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	9	 	 	 	2,610	 	 	 	8,723	 	
 	 	 	 	 	 	 	
Net profit attributable to members of TGI Australia Ltd	 	 	 	 	 	 	5,451	 	 	 	20,899	 	
 	 	 	 	 	 	 	
The above Income Statement should be read in conjunction with the accompanying notes.

TGI Australia ABN 12 000 041 458	 	1 of 31	

 
TGI Australia Ltd
Balance Sheet
As at 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	31 Dec 06	 	31 Dec 05	
 	 	Note	 	$’000	 	$’000	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	25	 	 	 	971	 	 	 	437	 	
Receivables	 	 	10	 	 	 	7,458	 	 	 	2,920	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	14,566	 	 	 	17,363	 	
Other financial assets	 	 	12	 	 	 	80,320	 	 	 	78,635	 	
Other	 	 	13	 	 	 	364	 	 	 	237	 	

Total Current Assets	 	 	 	 	 	 	103,679	 	 	 	99,592	 	

Non — Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	27,778	 	 	 	24,517	 	
Other financial assets	 	 	12	 	 	 	63,686	 	 	 	92,871	 	
Deferred tax assets	 	 	9	 	 	 	5,708	 	 	 	9,602	 	

Total Non — Current Assets	 	 	 	 	 	 	97,172	 	 	 	126,990	 	
 	 	 	 	 	 	 	
Total Assets	 	 	 	 	 	 	200,851	 	 	 	226,582	 	

Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Unearned premiums	 	 	14	 	 	 	750	 	 	 	809	 	
Outstanding claims liability	 	 	15	 	 	 	24,868	 	 	 	29,904	 	
Payables	 	 	16	 	 	 	1,490	 	 	 	2,224	 	
Current tax liability	 	 	 	 	 	 	—	 	 	 	1,564	 	

Total Current Liabilities	 	 	 	 	 	 	27,108	 	 	 	34,501	 	

Non — Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding claims liability	 	 	15	 	 	 	81,815	 	 	 	83,826	 	
Deferred tax liability	 	 	9	 	 	 	25	 	 	 	1,803	 	
 	 	 	 	 	 	 	
Total Non — Current Liabilities	 	 	 	 	 	 	81,840	 	 	 	85,629	 	
 	 	 	 	 	 	 	
Total Liabilities	 	 	 	 	 	 	108,948	 	 	 	120,130	 	
 	 	 	 	 	 	 	
Net Assets	 	 	 	 	 	 	91,903	 	 	 	106,452	 	

Shareholder’s Equity	 	 	 	 	 	 	 	 	 	 	 	 	
Issued Capital	 	 	17	 	 	 	30,000	 	 	 	30,000	 	
Retained profits	 	 	18	 	 	 	61,903	 	 	 	76,452	 	

Total Shareholder’s Equity	 	 	 	 	 	 	91,903	 	 	 	106,452	 	
 	 	 	 	 	 	 	
The above Balance Sheet should be read in conjunction with the accompanying notes.

TGI Australia ABN 12 000 041 458	 	2 of 31	

 
TGI Australia Ltd
Statement of Changes in Equity
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Retained	 	 	 	 	
 	 	Issued Capital	 	 	Earnings	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as at 1 January 2006	 	 	30,000	 	 	 	76,452	 	 	 	106,452	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	5,451	 	 	 	5,451	 	
Other changes in equity- Dividends paid	 	 	—	 	 	 	(20,000	)	 	 	(20,000	)	
 	 	 	
Balance as at 31 December 2006	 	 	30,000	 	 	 	61,903	 	 	 	91,903	 	

Balance as at 1 January 2005	 	 	30,000	 	 	 	55,553	 	 	 	85,553	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	20,899	 	 	 	20,899	 	
 	 	 	
Balance as at 31 December 2005	 	 	30,000	 	 	 	76,452	 	 	 	106,452	 	
 	 	 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

TGI Australia ABN 12 000 041 458	 	3 of 31	

 
TGI Australia Ltd
Cashflow Statement
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	31 Dec 06	 	31 Dec 05	
 	 	Note	 	$’000	 	$’000	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash Flows from Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Premium Received	 	 	 	 	 	 	818	 	 	 	1,723	 	
Reinsurance recoveries received	 	 	 	 	 	 	23,557	 	 	 	26,042	 	
Other sundry receipts	 	 	 	 	 	 	52	 	 	 	750	 	
Outward reinsurance paid	 	 	 	 	 	 	(121	)	 	 	(579	)	
Claims paid	 	 	 	 	 	 	(28,382	)	 	 	(41,836	)	
Distributions received	 	 	 	 	 	 	1,459	 	 	 	550	 	
Interest received	 	 	 	 	 	 	6,599	 	 	 	9,183	 	
Investment expenses	 	 	 	 	 	 	(253	)	 	 	(392	)	
Other underwriting expenses	 	 	 	 	 	 	(4,839	)	 	 	(8,313	)	
Income taxes paid	 	 	 	 	 	 	(5,324	)	 	 	(10,970	)	
 	 	 	 	 	 	 	
 	 	 	 	 	 	 	(6,434	)	 	 	(23,838	)	

Cash Flows from Investing Activities	 	 	 	 	 	 	 	 	 	 	 	 	
Loans advanced to related parties	 	 	 	 	 	 	(10,000	)	 	 	(45,000	)	
Purchase of investments	 	 	 	 	 	 	(70,637	)	 	 	(181,743	)	
Sale of investments	 	 	 	 	 	 	108,035	 	 	 	243,841	 	
 	 	 	 	 	 	 	
 	 	 	 	 	 	 	27,398	 	 	 	17,098	 	

Cash Flows from Financing Activities	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends paid	 	 	 	 	 	 	(20,000	)	 	 	—	 	
 	 	 	 	 	 	 	
 	 	 	 	 	 	 	(20,000	)	 	 	—	 	

Net (decrease)/increase in cash	 	 	 	 	 	 	964	 	 	 	(6,740	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash at the beginning of the year	 	 	 	 	 	 	1,628	 	 	 	8,368	 	
 	 	 	 	 	 	 	
Cash at the end of the year	 	 	25	 	 	 	2,592	 	 	 	1,628	 	
 	 	 	 	 	 	 	
The above Cash Flow Statement should be read in conjunction with the accompanying notes.

TGI Australia ABN 12 000 041 458	 	4 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
1. SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value, and insurance liabilities, which have been discounted to present value.
The principal accounting policies adopted in the preparation of the Financial Report are set out below. These policies have been consistently applied to the current year and comparative period, unless otherwise stated. The same accounting policies and methods of computation are followed by this Financial Report as compared with the 31 December 2005 Financial Report. Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2006. When applied in future periods, these recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
Operating revenue
Operating revenue comprises general insurance earned premiums, recoveries, investment income and interest income. Investment income is brought to account on an accrual basis. Other underwriting income comprises of sundry receipts.
Premium Revenue and Unearned premiums
(i) Premium revenue
General insurance premiums comprise amounts charged to policyholders or other insurers, including fire service levies, but excluding stamp duties and GST collected on behalf of third parties. The earned portion of premiums received and receivable, including unclosed business, is recognised as operating revenue. Movements in the provisions for impairment of premium receivables have been included in premium revenue.
(ii) Unearned premiums
Unearned premiums represent premium revenue attributable to future accounting periods. Unearned premium is determined by apportioning the premiums written in the year evenly over the period of insurance cover, reflecting the pattern in which risk emerges under these policies.
Unexpired risk liability
The adequacy of the unearned premium liability in respect of each class of business is assessed by considering current estimates of all expected future cash flows relating to future claims covered by current insurance contracts.
If the present value of the expected future cash flows relating to future claims exceeds the unearned premium liability less related intangible assets and related deferred acquisition costs then the unearned premium liability is deemed to be deficient.

TGI Australia ABN 12 000 041 458	 	5 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
The entire deficiency is recognised immediately in the income statement. The deficiency is recognised first by writing down any related intangible assets and then related deferred acquisition costs, with any excess being recorded in the balance sheet as an unexpired risk liability.
Outstanding Claims
The liability for outstanding claims is measured as the best estimate of the present value of expected future payments against claims incurred at the reporting date under general insurance contracts issued by the Company, with an additional risk margin to allow for the inherent uncertainty in the best estimate.
The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs.
Claims handling costs include costs that can be associated directly with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as claims administration costs.
The liability includes an allowance for inflation and superimposed inflation and is measured as the present value of the expected future ultimate cost of settling claims. The expected future payments are discounted to present value using a risk free rate.
A risk margin is applied to the outstanding claims liability, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the best estimate. This risk margin increases the probability that the net liability is adequately provided for to a 75% confidence level.
Outwards reinsurance premium expense and deferred reinsurance premium
Premiums ceded to reinsurers are recognised as an expense over the period of cover using the methods applicable to premium revenue as set out in the premium revenue note above.
Reinsurance and other recoveries
Reinsurance and other recoveries consist of receivables on paid claims and outstanding claims and are recognised as revenue when claims are paid or the outstanding claim is raised. Reinsurance receivables are discounted to present value consistent with the discounting of outstanding claims. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all the amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Fire brigade levies and other statutory charges
A liability for fire brigade levies and other statutory charges is recognised on business written to the balance date. Levies and charges payable are expensed on the same basis as the recognition of the related premium revenue, with the portion relating to unearned premiums being reported as deferred statutory charges.
Investment Income
Dividend and interest income is recognised in the income statement on an effective interest method when the entity obtains control of the right to receive the revenue.
Realised gains and losses represent the change in value between the previously reported value and the amount received on sale of the asset. Unrealised gains and losses represent changes in the fair value of financial assets recognised in the period.

TGI Australia ABN 12 000 041 458	 	6 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
Assets backing general insurance liabilities
As part of its investment strategy, the Company actively manages its investment portfolio to ensure that investments mature in accordance with the expected pattern of future cash flows arising from general insurance liabilities.
The Company has determined that all assets are held to back general insurance liabilities on the basis that all assets of the Company are available for the settlement of claims if required. The following policies apply to assets held to back general insurance liabilities.
Financial assets
Financial assets are designated at fair value through profit or loss. Initial recognition is at cost in the balance sheet and subsequent measurement is at fair value with any resultant unrealised gains or losses recognised in the income statement. Details of fair value for the different types of financial assets are listed below:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount. For the purposes of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value.
Cash trusts
The fair value of units in a listed cash trust reflects the quoted bid price at balance date. There is no reduction for realisation costs in the value of units in a cash trust. Unlisted unit trusts are recorded at fund managers valuations.
Debt securities
Debt securities are initially recognised at fair value, representing the purchase cost of the asset exclusive of any transaction costs. Debt securities are subsequently measured at fair value, with any realised and unrealised gains or losses arising from changes in the fair value being recognised in the income statement for the period in which they arise. The fair value of a traded interest bearing security reflects the bid price at balance date. Interest bearing securities that are not frequently traded are valued by discounting the estimated recoverable amounts, using prevailing interest rates. Debt securities are accounted for on a trade date basis.
Derivatives
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at their fair value. All derivatives are carried as assets when their fair value is positive, and as liabilities when their fair value is negative. Derivatives are exchange traded and are fair valued using their publicly quoted bid price on the date of valuation.
Income Tax
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to: (i) temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and (ii) unused tax losses.

TGI Australia ABN 12 000 041 458	 	7 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Tax Consolidation
AMP Limited, TGI Australia Ltd and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
(i) Current tax balances arising from external transactions recognised by entities in the tax-consolidated group occurring after the implementation date, and;
(ii) Deferred tax assets arising from unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement.
Assets and liabilities which arise as a result of differences between the periods in which the underlying transactions occur, and the period in which the funding payments under the tax funding agreement are made, are recognised as intercompany balances receivable and payable in the balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.

TGI Australia ABN 12 000 041 458	 	8 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
Goods and Services Tax (GST)
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.
Foreign currency transactions and translation
Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The presentation currency of this financial report, and the functional currency, is Australian dollars.
Transactions and balances
Income and expense items denominated in a currency other than the functional currency are translated at the spot exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at balance sheet date, with exchange gains and losses recognised in the income statement. The corresponding foreign currency translations of overseas outstanding claims liabilities and receivables are reported as a component of claims expense and premium revenue, respectively. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Receivables
Receivables are financial assets and are measured at fair value. Given the short-term nature of most receivables, the recoverable amount approximates fair value. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Payables
Trade creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Amounts Due To or From Related Parties
Amounts are carried at fair value being nominal amounts due and payable. Interest is taken up as income on an accrual basis. A provision for impairment is recognised when there is objective evidence that the related party will not be able to pay its debt.

TGI Australia ABN 12 000 041 458	 	9 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Company makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas in which critical estimates and judgements are applied are described below.
(a) The ultimate liability arising from claims made under insurance contracts
Provision is made at year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Company.
The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, where more information about the claim event is generally available. IBNR claims may often not be reported to the insurer until many years after the events giving rise to the claims has happened. The liability class of business will typically display greater variations between initial estimates and final outcomes because there is a greater degree of difficulty in estimating IBNR reserves. For the short tail class, claims are typically reported soon after the claim event, and hence tend to display lower levels of volatility. In calculating the estimated cost of unpaid claims the Company uses a variety of estimation techniques, generally based upon analysis of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
 	•	 	changes in Company processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with the statistics from previous periods;	
 	 	 	 	
 	•	 	changes in the legal environment;	
 	 	 	 	
 	•	 	the effects of inflation;	
 	 	 	 	
 	•	 	the impact of large losses;	
 	 	 	 	
 	•	 	movements in industry benchmarks.	
Where possible the Company adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions.
Details of specific assumptions used in deriving the outstanding claims liability at year-end are detailed in note 3.
(b) Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also computed using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Company may not receive amounts due to it and these amounts can be reliably measured.

TGI Australia ABN 12 000 041 458	 	10 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
3. ACTUARIAL METHODS AND ASSUMPTIONS
Claims estimates are derived from analysis of the results of several different actuarial models. These models take case estimates as well as payments into account and assume that reported incurred amounts or reported payment amounts will develop steadily from period to period. Other models adopt an ultimate loss ratio for each year that reflects both the long term expected level, as well as incorporating recent experience. The analysis is performed by accident year for the direct insurance class.
Claims are first estimated on an undiscounted basis and are then discounted to allow for the time value of money. The valuation methods adopted include an implicit allowance for future inflation but do not identify the explicit rate. This allows for both general economic inflation as well as any superimposed inflation detected in the modelling of payments experience. Superimposed inflation arises from non-economic factors such as developments of legal precedent.
The liability class of business may be subject to the emergence of new types of latent claims, but no specific allowance is included for this as at the balance sheet date. Such uncertainties are considered when setting the risk margin appropriate for this class.
A description of the processes used to determine the key assumptions is provided below:
The average weighted term to settlement is calculated separately by class of business, based on historical settlement patterns.
The reinsurance percentage is calculated based on past reinsurance recovery rates and the structure of the reinsurance arrangements in place.
The discount rates are derived from market yields on Government securities as at the balance date, in the currency of the expected claim payments.
Expense rate. Claim handling expenses are calculated based on the projected costs of administering the remaining claims until expiry.
The ultimate to incurred claims ratio is derived by accident or underwriting year based on historical development of claims from period to period.
The effect of changes in the assumptions have been shown in the reconciliations of general insurance assets and liabilities in Note 15.
Process for determining risk margin
The risk margin was determined initially for each portfolio, allowing for the uncertainty of the outstanding claims estimate for each portfolio. Uncertainty was analysed for each portfolio taking into account past volatility in general insurance claims, potential uncertainties relating to the actuarial models and assumptions, the quality of the underlying data used in the models, and the general insurance environment. The estimate of uncertainty is generally greater for long tailed classes when compared to short tail classes due to the longer time until settlement of outstanding claims.
The overall risk margin was determined allowing for diversification between the different portfolios and the relative uncertainty of each portfolio. The assumptions regarding uncertainty for each class were applied to the net central estimates, and the results were aggregated, allowing for diversification in order to arrive at an overall provision that is intended to have a 75% probability of adequacy.
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	%	 	 	%	 	
 	 	 	 	 	 	 	 	 	
Risk Margins applied	 	 	29.0	 	 	 	19.5	 	

 	
TGI Australia ABN 12 000 041 458	 	11 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
Sensitivity analysis – general insurance contracts
There are a number of variables which impact the amounts recognised in the financial statements arising from insurance contracts.
The profit or loss and equity of the Company are sensitive to movements in a number of key variables as described below.
 	 	 	
Variable	 	Description of variable	
Average weighted term to settlement	 	Expected payment patterns are used in determining the outstanding claims liability. A decrease in the average term to settlement would lead to claims being paid sooner than anticipated.	
Discount rate	 	The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money.	
Expense rate	 	An estimate for the internal costs of administering claims is included in the outstanding claims liability.	
Ultimate to incurred claims ratio	 	The estimated ultimate claims cost is generally greater than the claims reported as incurred to date, due to claims that are incurred but not reported (IBNR) or due to future developments on existing claims.	
Reinsurance percentage	 	Assumes money will be recoverable from reinsurers on future claims paid.	
The following table provides an analysis of the sensitivity of the profit after income tax and total equity to changes in these assumptions both gross and net of reinsurance.
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Change in	 	Assumption at 12/06	 	 	Profit/(Loss) (after tax)	 	
Variable	 	variable	 	Gross %	 	 	Net %	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	+0.5 year	 	 	3.3	 	 	 	3.6	 	 	 	2,010	 	 	 	1,347	 	
 	 	-0.5 year	 	 	3.3	 	 	 	3.6	 	 	 	(2,214	)	 	 	(1,387	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	+1%	 	 	n/a	 	 	 	9.0	 	 	 	—	 	 	 	97	 	
(as % of gross IBNR)	 	-1%	 	 	n/a	 	 	 	9.0	 	 	 	—	 	 	 	(97	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	+1%	 	 	5.9	 	 	 	5.9	 	 	 	2,058	 	 	 	1,437	 	
 	 	-1%	 	 	5.9	 	 	 	5.9	 	 	 	(2,201	)	 	 	(1,543	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	+1%	 	 	17.3	 	 	 	17.3	 	 	 	(623	)	 	 	(623	)	
 	 	-1%	 	 	17.3	 	 	 	17.3	 	 	 	623	 	 	 	623	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	+1%	 	 	102.5	 	 	 	102.5	 	 	 	(3,732	)	 	 	(2,355	)	
 	 	-1%	 	 	102.5	 	 	 	102.5	 	 	 	2,066	 	 	 	1,392	 	

1 —  	 	This sensitivity reflects the liability movements only. As assets are invested to match the term of liabilities, there is little overall profit impact from a change to interest rates.	
 	 	 	
2 — 	 	This ratio has only been adjusted for years that are not considered to be fully developed.	

 	
TGI Australia ABN 12 000 041 458	 	12 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
2005
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Change in	 	Assumption at 12/05	 	 	Profit/(Loss) (after tax)	 	
Variable	 	variable	 	Gross %	 	 	Net %	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	+0.5 year	 	 	3.5	 	 	 	3.6	 	 	 	2,008	 	 	 	1,386	 	
 	 	-0.5 year	 	 	3.5	 	 	 	3.6	 	 	 	(2,163	)	 	 	(1,525	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance percentage	 	+1%	 	 	n/a	 	 	 	18.0	 	 	 	—	 	 	 	161	 	
(as % of gross IBNR)	 	-1%	 	 	n/a	 	 	 	18.0	 	 	 	—	 	 	 	(161	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	+1%	 	 	5.2	 	 	 	5.2	 	 	 	2,014	 	 	 	1,385	 	
 	 	-1%	 	 	5.2	 	 	 	5.2	 	 	 	(2,148	)	 	 	(1,488	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	+1%	 	 	21.9	 	 	 	21.9	 	 	 	(669	)	 	 	(669	)	
 	 	-1%	 	 	21.9	 	 	 	21.9	 	 	 	669	 	 	 	669	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	+1%	 	 	103.3	 	 	 	103.3	 	 	 	(4,901	)	 	 	(3,268	)	
 	 	-1%	 	 	103.3	 	 	 	103.3	 	 	 	2,940	 	 	 	1,994	 	

1 — 	 	This sensitivity reflects the liability movements only. As assets are invested to match the term of liabilities, there is little overall profit impact from a change to interest rates.	
 	 	 	
2 — 	 	This ratio has only been adjusted for years that are not considered to be fully developed.	

 	
TGI Australia ABN 12 000 041 458	 	13 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
4. INSURANCE CONTRACTS – RISK MANAGEMENT POLICIES AND PROCEDURES.
The Company has an objective to control insurance risk thus reducing volatility. The company’s policies and procedures in respect of managing risks are set out in this note below.
a)	 	Objective in managing risks arising from insurance contracts and policies for mitigating those risks.	
 	 	 	
 	 	In accordance with Prudential Standards GPS 220 Risk Management and GPS 230 Reinsurance Management issued by the Australian Prudential Regulation Authority (APRA), the Board and senior management have developed, implemented and maintain a sound and prudent Risk Management Strategy (RMS) and a Reinsurance Management Strategy (REMS).	
 	 	 	
 	 	The RMS and REMS identify the Company’s policies and procedures, processes and controls that comprise its risk management and control systems. These systems address all material risks, financial and non-financial, likely to be faced by the Company. Annually, the Board certifies to APRA that adequate strategies have been put in place to monitor those risks, that the Company has systems in place to ensure compliance with legislative and prudential requirements and that the Board has satisfied itself as to the compliance with the RMS and REMS. The RMS and REMS have been approved by both the Board and APRA.	
 	 	 	
 	 	Key aspects of the processes established in the RMS to mitigate risks include:	

 	•	 	A formal regular process of risk identification and evaluation, supplemented by a documented control assessment process, is completed by management and communicated to the Board in line with the Board approved Risk Management Strategy.	
 	 	 	 	
 	•	 	Actuarial models, using information from management information systems, to monitor claims patterns and other relevant statistics. Past experience and statistical methods are used as part of the process.	
 	 	 	 	
 	•	 	The maintenance and use of various specialist information systems, which provide up to date and reliable data on claims liabilities.	
 	 	 	 	
 	•	 	Documented procedures that are followed by claims staff that are experienced in the various classes of business previously written.	
 	 	 	 	
 	•	 	Reinsurance has been used, to limit the Company’s exposure to large single claims. The REMS provides that exposures continue to be monitored and where feasible reinsurance be purchased as means of limiting risk.	
 	 	 	 	
 	•	 	The mix of investment assets is driven by the nature and term of the insurance liabilities. The management of assets and liabilities is closely monitored in an attempt to match the maturity dates of assets with the expected pattern of claim payments.	

b)	 	Development of claims	
 	 	 	
 	 	There is a possibility that changes may occur in the estimate of our obligations at the end of a contract period. The tables in note 15 show our estimates of total ultimate claims at successive year-ends.	
 	 	 	
c)	 	Terms and conditions of direct and inwards reinsurance business	
 	 	 	
 	 	There is limited scope to improve the existing terms and conditions. The company is been in orderly run off since 1999, and no new contracts have been entered into since that time with the exception of the Riskcap self insurance program.	
 	 	 	
d)	 	Concentration of insurance risk	
 	 	 	
 	 	The exposure to concentrations of insurance risk is able to be mitigated with the purchase of reinsurance where management believes that the price /risk transfer is suitable.	
 	 	 	
e)	 	Interest rate risk	
 	 	 	
 	 	Interest rate risk arises to the extent that there is a mismatch between the fixed-interest portfolios used to back the outstanding claims liability and those outstanding claims. The interest rate risk is managed by matching the duration profiles of the investments assets and the outstanding claims liability.	
 	 	 	
f)	 	Credit risk	
 	 	 	
 	 	Other than loans to related parties, there are no significant concentrations of credit risk.	

 	
TGI Australia ABN 12 000 041 458	 	14 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
5. NET PREMIUM REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Gross written premium	 	 	1,681	 	 	 	1,760	 	
Movement in unearned premium	 	 	(59	)	 	 	(549	)	
 	 	 	
Premium revenue	 	 	1,622	 	 	 	1,211	 	
Outwards reinsurance expense	 	 	722	 	 	 	592	 	
 	 	 	
Net Premium Revenue	 	 	900	 	 	 	619	 	
 	 	 	
6. NET CLAIMS INCURRED
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31-Dec-06	 	31-Dec-05	
 	 	Current	 	Prior	 	 	 	 	 	Current	 	Prior	 	 	
 	 	year	 	years	 	Total	 	year	 	years	 	Total	
 	 	$’000	 	$’000	 	$’000	 	$’000	 	$’000	 	$’000	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross claims expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross claims incurred — undiscounted	 	 	2,202	 	 	 	15,435	 	 	 	17,637	 	 	 	—	 	 	 	(16,528	)	 	 	(16,528	)	
Discount movement	 	 	(705	)	 	 	4,403	 	 	 	3,698	 	 	 	—	 	 	 	9,361	 	 	 	9,361	 	
 	 	 	
Claims incurred — discounted	 	 	1,497	 	 	 	19,838	 	 	 	21,335	 	 	 	—	 	 	 	(7,167	)	 	 	(7,167	)	

Reinsurance and other recoveries revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries — undiscounted	 	 	—	 	 	 	(25,650	)	 	 	(25,650	)	 	 	—	 	 	 	(10,265	)	 	 	(10,265	)	
Discount movement	 	 	—	 	 	 	1,787	 	 	 	1,787	 	 	 	—	 	 	 	(2,877	)	 	 	(2,877	)	
 	 	 	
Reinsurance and other recoveries — discounted	 	 	—	 	 	 	(23,863	)	 	 	(23,863	)	 	 	—	 	 	 	(13,142	)	 	 	(13,142	)	
 	 	 	
Net claims incurred — discounted	 	 	1,497	 	 	 	(4,025	)	 	 	(2,528	)	 	 	—	 	 	 	(20,309	)	 	 	(20,309	)	
 	 	 	
Current year claims relate to risks borne in the current financial year. Prior year claims relate to a reassessment of the risks borne in all previous financial years.

TGI Australia ABN 12 000 041 458	 	15 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
7. OPERATING EXPENSES
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
Expenses by Nature	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Commission expense/(benefit)	 	 	61	 	 	 	(7	)	
Write-off of Bad Debt	 	 	4,212	 	 	 	42	 	
Impairment expense — premium receivables	 	 	44	 	 	 	37	 	
Impairment expense/(benefit) — reinsurance receivables	 	 	(3,977	)	 	 	(211	)	
Investment management fees	 	 	278	 	 	 	370	 	
Other management fees	 	 	1,562	 	 	 	2,226	 	
External consultant costs	 	 	58	 	 	 	(48	)	
Other expenses	 	 	63	 	 	 	392	 	
 	 	 	
Total Expenses	 	 	2,301	 	 	 	2,800	 	

represented by:	 	 	 	 	 	 	 	 	
General administration expenses included in net claims incurred	 	 	(3,146	)	 	 	(4,157	)	
Acquisition benefit	 	 	—	 	 	 	(7	)	
Other underwriting expenses	 	 	61	 	 	 	207	 	
General administration expenses	 	 	5,386	 	 	 	6,757	 	
 	 	 	
Total expenses	 	 	2,301	 	 	 	2,800	 	
 	 	 	
8. NET INVESTMENT REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Interest	 	 	6,551	 	 	 	9,215	 	
Interest from related parties:	 	 	 	 	 	 	 	 	
- other related parties	 	 	2,564	 	 	 	1,424	 	
Distributions received	 	 	1,459	 	 	 	550	 	
Changes in fair value of investments:	 	 	 	 	 	 	 	 	
Realised (loss)/gain	 	 	(1,879	)	 	 	2,332	 	
Unrealised loss	 	 	(2,309	)	 	 	(2,793	)	
 	 	 	
Total Net Investment Revenue	 	 	6,386	 	 	 	10,728	 	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	16 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
9. INCOME TAX
(a) Analysis of income tax expense
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current tax	 	 	591	 	 	 	5,199	 	
Decrease in deferred tax assets	 	 	3,819	 	 	 	2,986	 	
Increase in deferred tax liabilities	 	 	(1,777	)	 	 	112	 	
(Under)/over provided in previous years	 	 	(23	)	 	 	426	 	
 	
Income tax expense	 	 	2,610	 	 	 	8,723	 	
 	
(b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period.
In respect of income tax expense attributable to shareholders, the tax rate which applies in both 2006 and 2005 is 30%.
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Operating profit before income tax	 	 	8,061	 	 	 	29,622	 	
 	
Prima facie income tax at the rate of 30%	 	 	2,418	 	 	 	8,886	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Non assessable income	 	 	(281	)	 	 	—	 	
Other	 	 	473	 	 	 	(589	)	
Under provided in prior years — deferred tax balances	 	 	—	 	 	 	426	 	
 	
Income tax expense per income statement	 	 	2,610	 	 	 	8,723	 	
 	
(c) Analysis of deferred tax asset
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Provision for doubtful debts	 	 	586	 	 	 	1,766	 	
- Accruals	 	 	4	 	 	 	108	 	
- Indirect Claims Costs Adjustments	 	 	4,092	 	 	 	5,459	 	
- Unrealised gains/losses	 	 	—	 	 	 	12	 	
- Other	 	 	1,026	 	 	 	 	 	
 	
Total deferred tax assets	 	 	4,682	 	 	 	9,602	 	
 	
(d) Analysis of deferred tax liability
 	 	 	 	 	 	 	 	 	
Amounts recognised in income	 	 	 	 	 	 	 	 	
- Unrealised gains/losses	 	 	25	 	 	 	225	 	
- Other	 	 	—	 	 	 	1,578	 	
 	
Total deferred tax liability	 	 	25	 	 	 	1,803	 	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	17 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
10. RECEIVABLES
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	 	31 Dec 05	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Premiums receivable — direct insurance	 	 	—	 	 	 	44	 	
less provision for impairment of premium receivable	 	 	—	 	 	 	(44	)	
 	 	 	
 	 	 	—	 	 	 	—	 	

Other receivables	 	 	4,172	 	 	 	4,734	 	
less provision for impairment of other receivables	 	 	—	 	 	 	(4,014	)	
 	 	 	
 	 	 	4,172	 	 	 	720	 	

Other receivables from related parties	 	 	 	 	 	 	 	 	
- other related parties	 	 	3,013	 	 	 	789	 	
 	 	 	 	 	 	 	 	 	
Interest receivable from related parties	 	 	 	 	 	 	 	 	
- other related parties	 	 	273	 	 	 	1,411	 	
 	 	 	
Total current receivables	 	 	7,458	 	 	 	2,920	 	
 	 	 	
In 2006, other receivables include income tax recoverable under the tax sharing agreement of $3,415,000 as PAYG installments made throughout the year exceed the current tax payable.
The provision for impairment in 2005 of $4,014,000 was written off as a bad debt in 2006
11. REINSURANCE AND OTHER RECOVERIES
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	 	31 Dec 05	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Expected future reinsurance and other recoveries undiscounted	 	 	 	 	 	 	 	 	
- on claims paid	 	 	6,138	 	 	 	11,309	 	
- on outstanding claims	 	 	45,252	 	 	 	38,118	 	
 	 	 	 	 	 	 	 	 	
Discount to present value	 	 	(7,092	)	 	 	(5,716	)	
less provision for impairment of reinsurance and other recoveries	 	 	(1,954	)	 	 	(1,831	)	
 	 	 	
Reinsurance and other recoveries receivable	 	 	42,344	 	 	 	41,880	 	

Reinsurance and other recoveries receivable — current	 	 	16,234	 	 	 	18,849	 	
less provision for impairment of reinsurance and other recoveries	 	 	(1,668	)	 	 	(1,486	)	
 	 	 	
Reinsurance and other recoveries receivable — Current	 	 	14,566	 	 	 	17,363	 	

Reinsurance and other recoveries receivable — non current	 	 	28,063	 	 	 	24,862	 	
less provision for impairment of reinsurance and other recoveries	 	 	(285	)	 	 	(345	)	
Refer to Note 15 for a reconciliation of the movement in reinsurance and other recoveries on incurred claims over the year.

TGI Australia ABN 12 000 041 458	 	18 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
12. OTHER FINANCIAL ASSETS
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	 	31 Dec 05	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Quoted investments — at fair value:	 	 	 	 	 	 	 	 	
Government and semi-government bonds	 	 	1,364	 	 	 	12,128	 	
Corporate bonds	 	 	11,093	 	 	 	8,662	 	
Deposit on futures	 	 	287	 	 	 	106	 	
 	 	 	
 	 	 	12,744	 	 	 	20,896	 	

Unquoted investments — at fair value:	 	 	 	 	 	 	 	 	
Units held in cash managed trust	 	 	 	 	 	 	 	 	
- Other related parties	 	 	1,621	 	 	 	1,191	 	
Units held in other unit trusts	 	 	7,240	 	 	 	11,535	 	
Loan — Other related parties	 	 	58,715	 	 	 	45,013	 	
 	 	 	
 	 	 	67,576	 	 	 	57,739	 	
 	 	 	
Total current financial assets	 	 	80,320	 	 	 	78,635	 	

Non-Current	 	 	 	 	 	 	 	 	
Quoted investments — at fair value:	 	 	 	 	 	 	 	 	
Government and semi-government bonds	 	 	32,236	 	 	 	46,472	 	
Corporate bonds	 	 	31,564	 	 	 	46,111	 	
Derivatives	 	 	(114	)	 	 	288	 	
 	 	 	
Total non current financial assets	 	 	63,686	 	 	 	92,871	 	
 	 	 	
Total other financial asstes	 	 	144,006	 	 	 	171,506	 	
 	 	 	
13. OTHER ASSETS
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	 	31 Dec 05	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Deferred reinsurance expense	 	 	332	 	 	 	237	 	
Other — Prepayments	 	 	32	 	 	 	—	 	
 	 	 	
 	 	 	364	 	 	 	237	 	

Other Assets — Current	 	 	364	 	 	 	237	 	
 	 	 	
 	 	 	364	 	 	 	237	 	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	19 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
14. UNEARNED PREMIUM
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current unearned premium	 	 	750	 	 	 	809	 	
Non-current unearned premium	 	 	—	 	 	 	—	 	
 	 	 	
Total unearned premium	 	 	750	 	 	 	809	 	

Unearned premium liability as at 1 January	 	 	809	 	 	 	260	 	
Deferral of premiums on contracts written in the period	 	 	750	 	 	 	574	 	
Earning of premiums written in previous periods	 	 	(809	)	 	 	(25	)	
 	 	 	
Unearned premium liability as at 31 December	 	 	750	 	 	 	809	 	
 	 	 	
During the year the unearned premium liability in respect of TGI was found to be sufficient. As a result no unexpired risk reserve was required.
15. OUTSTANDING CLAIMS
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	 	31 Dec 05	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Central estimate	 	 	106,797	 	 	 	117,974	 	
Risk margin	 	 	15,444	 	 	 	18,560	 	
Discount to present value	 	 	(15,558	)	 	 	(22,804	)	
 	 	 	
Total Outstanding Claims	 	 	106,683	 	 	 	113,730	 	

Current	 	 	24,868	 	 	 	29,904	 	
Non-Current	 	 	81,815	 	 	 	83,826	 	
 	 	 	
 	 	 	106,683	 	 	 	113,730	 	
 	 	 	
Investment assets in the form of debt securities are held to back the liability for outstanding claims and are realised on a regular basis to meet claims. The amount of claims likely to be settled within 12 months of the reporting date is classified as current.

 	
TGI Australia ABN 12 000 041 458	 	20 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
15. OUTSTANDING CLAIMS (continued)
Reconciliation of movement in discounted outstanding claims liability
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Gross	 	 	Reinsurance	 	 	Net	 	
2006	 	$’000	 	 	$’000	 	 	$’000	 	
Amount outstanding brought forward	 	 	113,730	 	 	 	41,880	 	 	 	71,850	 	
less Claim payments/recoveries received in the period	 	 	(28,382	)	 	 	(23,557	)	 	 	(4,825	)	
Effect of change in assumptions	 	 	21,922	 	 	 	24,068	 	 	 	(2,146	)	
Effect of change in exchange rates	 	 	(587	)	 	 	(205	)	 	 	(382	)	
 	 	 	
Outstanding amount brought forward	 	 	106,683	 	 	 	42,186	 	 	 	64,497	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Gross	 	 	Reinsurance	 	 	Net	 	
2005	 	$’000	 	 	$’000	 	 	$’000	 	
Amount outstanding brought forward	 	 	167,349	 	 	 	54,840	 	 	 	112,509	 	
less Claim payments/recoveries received in the period	 	 	(41,836	)	 	 	(26,042	)	 	 	(15,794	)	
Effect of change in assumptions	 	 	(11,072	)	 	 	13,307	 	 	 	(24,379	)	
Effect of change in exchange rates	 	 	(711	)	 	 	(225	)	 	 	(486	)	
 	 	 	
Outstanding amount brought forward	 	 	113,730	 	 	 	41,880	 	 	 	71,850	 	
 	 	 	
As described in note 1, the outstanding claims liability is the best estimate of the present value of the expected future payments, after the inclusion of a risk margin. At each balance date, the amount of the liability is reassessed and it is likely that changes will arise in the estimates of liabilities. The table under show the estimates of total ultimate claims at successive year ends.
Estimate of Cumulative claims
 	 	 	 	 	 	 	 	 	
 	 	Net	 	 	Gross	 	
 	 	$’000	 	 	$’000	 	
31 December 2001	 	 	652,869	 	 	 	959,696	 	
31 December 2002	 	 	645,066	 	 	 	988,296	 	
31 December 2003	 	 	632,396	 	 	 	970,761	 	
31 December 2004	 	 	610,081	 	 	 	960,133	 	
31 December 2005	 	 	596,238	 	 	 	956,555	 	
31 December 2006	 	 	596,961	 	 	 	982,344	 	
 	 	 	 	 	 	 	 	 	
Estimate of Cumulative Claims at 31 December 2006	 	 	596,961	 	 	 	982,344	 	
 	 	 	 	 	 	 	 	 	
Cumulative Payments	 	 	549,057	 	 	 	889,187	 	
 	
Undiscounted central estimate	 	 	47,904	 	 	 	93,157	 	
 	 	 	 	 	 	 	 	 	
Effect of Discounting	 	 	8,466	 	 	 	15,558	 	
 	
Discounted Central Estimate	 	 	39,438	 	 	 	77,599	 	

Risk Margin	 	 	 	 	 	 	15,444	 	
Claims Administration Expense Provision	 	 	 	 	 	 	13,640	 	
 	
Gross Outstanding Claims as per the Balance Sheet	 	 	 	 	 	 	106,683	 	

 	 	 	

TGI Australia ABN 12 000 041 458	 	21 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006

16. PAYABLES
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	 	31 Dec 05	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Trade creditors and other creditors	 	 	1,413	 	 	 	1,394	 	
Other creditors	 	 	—	 	 	 	774	 	
Other borrowings from related parties — other related parties	 	 	77	 	 	 	56	 	
 	 	 	
 	 	 	1,490	 	 	 	2,224	 	
 	 	 	
17. ISSUED CAPITAL
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	 	31 Dec 05	 	
 	 	$’000	 	 	$’000	 	
Paid up capital:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
15,000,000 Ordinary Shares at $2 per share	 	 	30,000	 	 	 	30,000	 	
(2005: 15,000,000 Ordinary Sharesat $2 per share)	 	 	 	 	 	 	 	 	
 	 	 	
Total	 	 	30,000	 	 	 	30,000	 	

Movement in share capital	 	 	 	 	 	 	 	 	
Balance beginning of year	 	 	30,000	 	 	 	30,000	 	
 	 	 	
Balance end of year	 	 	30,000	 	 	 	30,000	 	
 	 	 	
Rights attaching to Ordinary Shares
Ordinary shares attract the following rights:
 	(a)	 	to receive notice of and to attend and vote at all general meetings of the Company;

 	(b)	 	to receive dividends; and	
 	 	 	 	
 	(c)	 	in a winding up, to participate equally in the distribution of the assets of the Company (both capital and surplus), subject only to any amounts unpaid on the share.	
18. RETAINED PROFITS
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	 	31 Dec 05	 	
 	 	$’000	 	 	$’000	 	
Retained profits at beginning of the financial year	 	 	76,452	 	 	 	55,553	 	
Operating profit/(loss) after Income Tax	 	 	5,451	 	 	 	20,899	 	
Dividend Paid	 	 	(20,000	)	 	 	—	 	
 	 	 	
Retained Profits at the end of the financial year	 	 	61,903	 	 	 	76,452	 	

 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	 	31 Dec 05	 	
 	 	$’000	 	 	$’000	 	
Dividends paid on ordinary shares	 	 	 	 	 	 	 	 	
- Dividend paid on 12 April 2006	 	 	20,000	 	 	 	—	 	
Unfranked dividend of $1.33 per share	 	 	 	 	 	 	 	 	
 	 	 	
Dividends paid during the year	 	 	20,000	 	 	 	—	 	

 	 	 	

TGI Australia ABN 12 000 041 458	 	22 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
19. FRANKING ACCOUNT
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies were transferred to the Head Entity, AMP Limited.
20. SEGMENT REPORTING
The company operated in one industry, being direct insurance, underwritten in Australia.
21. KEY MANAGEMENT PERSONNEL COMPENSATION
The following individuals were the key management personnel of TGI Australia Limited for the current and prior reporting periods (unless stated otherwise):
 	 	 	
 	 	Date of Appointment/Resignation during the current or	
Name	 	prior reporting period	
 	
Peter Clarke	 	 	
Richard Grellman	 	 	
Peter Hodgett	 	 	
Andrew Mohl	 	 	
William Roberts	 	 	
Bruce Robertson	 	09-05-2005, Resigned	
Felix Zaccar	 	 	
The following table provides aggregate details of the compensation of key management personnel of TGI Australia Limited.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term	 	 	Post-	 	 	Other long	 	 	 	 	 	 	 	 	 	 	
 	 	employee	 	 	employment	 	 	-term	 	 	Termination	 	 	Share-based	 	 	 	 	
Year	 	benefits	 	 	benefits	 	 	benefits	 	 	benefits	 	 	payments	 	 	Total	 	
 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	
2006	 	 	6,306,101	 	 	 	205,061	 	 	 	—	 	 	 	—	 	 	 	2,318,215	 	 	 	8,829,377	 	
2005	 	 	5,737,253	 	 	 	254,791	 	 	 	—	 	 	 	—	 	 	 	2,079,046	 	 	 	8,071,090	 	
Key management personnel disclosed above, also provided services to other related entities during the year. The above remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to TGI Australia Limited.
22. AUDITORS’ REMUNERATION
Auditors’ remuneration for the year ended 31 December 2006 is paid on the Company’s behalf by a controlled entity within the AMP Limited Group.
23. CONTINGENT LIABILITIES
There are no contingent liabilities as at 31 December 2006 (2005: Nil).

 	
TGI Australia ABN 12 000 041 458	 	23 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
24. RELATED PARTIES
Controlling Entity
The immediate parent entity is AMP General Insurance Limited. AMP Limited is the ultimate parent entity.
Directors
The directors of the company during the financial year and the dates of appointments and resignations during the year are:
 	 	 	
 	 	Date of Appointment/Resignation	
 	 	during the current or prior	
Name	 	reporting period	
 	
Peter Clarke	 	 	
Richard Grellman	 	 	
Peter Hodgett (alternate for Andrew Mohl)	 	 	
Andrew Mohl	 	 	
William Roberts	 	 	
Bruce Robertson	 	09-05-2005, Resigned	
Felix Zaccar	 	 	
Other Transactions
The directors and their director related entities receive normal dividends on their ordinary share holdings in AMP Limited.
Other transactions with key management personnel of the Company
During the year, transactions were entered into between Directors or their Director related entities and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and include:
•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	
•	 	the purchase of AMP superannuation and related products;	
 	 	 	
•	 	financial investment services;	
 	 	 	
•	 	other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of the entity’s financial statements, or discharge of accountability by key management personnel. The transactions are considered to be trivial or domestic in nature.

TGI Australia ABN 12 000 041 458	 	24 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
24. RELATED PARTIES (continued)
Transactions with Related Parties
Transactions between TGI Australia Limited and other related parties for the financial year consisted of:
 	•	 	Payment of management fees for services provided	
 	 	 	 	
 	•	 	Provision of share capital	
 	 	 	 	
 	•	 	Provision of intercompany loans	
 	 	 	 	
 	•	 	Underwriting the self insurance program of the AMP group	
The aggregate amounts brought to account in respect of the following types of transactions and each class of related party involved were:
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	31 Dec 05	
 	 	$	 	$	
Amounts attributable to transactions with related parties	 	 	 	 	 	 	 	 	
Operating profit/(loss) before income tax for the financial year includes aggregate amounts attributable to transactions in respect of:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Gross Written Premium — other related parties	 	 	1,081,000	 	 	 	1,153,000	 	
Investment Expenses — other related parties	 	 	226,061	 	 	 	369,933	 	
Management Expense — other related parties	 	 	4,857,230	 	 	 	6,402,314	 	
Interest Received — other related parties	 	 	2,564,102	 	 	 	1,423,555	 	

Aggregate amounts receivable at balance date from:	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Receivable — other related parties	 	 	3,013,123	 	 	 	789,266	 	
Interest receivable — other related parties	 	 	272,567	 	 	 	1,410,533	 	
Interest Bearing Loans — other related parties	 	 	58,715,091	 	 	 	45,013,022	 	

Aggregate amounts payable at balance date to:	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Payables — other related parties	 	 	77,302	 	 	 	56,000	 	
 	 	 	
AMP Capital Investors Limited, a related entity within the wholly owned group, manages the majority of the investments of the company under a management contract which follows the normal terms and conditions for such contracts. Fees are paid or are due and payable for the management of investment portfolios under normal terms and conditions.
AMP Services Limited and Enstar Australia Limited (formerly Cobalt Solutions Australia Limited), fellow wholly controlled entities, provide operational and administrative (including employee related) services to the company with the exception of certain financing arrangements, finance leasing and agent related services. The services provided are in the normal course of the business and are on normal commercial terms and conditions.
TGI Australia Limited continues to administer the self insurance program of the AMP Group for underwriting years 2001/2002 and 2002/2003 as well as providing certain AMP Life subsidiaries with professional indemnity cover via the reactivated RiskCap program.

TGI Australia ABN 12 000 041 458	 	25 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
25. CASH FLOW RECONCILIATION
(i) Reconciliation of cash
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Cash on Trust	 	 	1,622	 	 	 	1,191	 	
Cash at call	 	 	971	 	 	 	437	 	
 	 	 	
 	 	 	2,592	 	 	 	1,628	 	

(ii) Reconciliation of net cash flows from operating activities to operating profit after income tax:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Operating profit / (loss) after income tax	 	 	5,452	 	 	 	20,899	 	
 	 	 	 	 	 	 	 	 	
Changes in net market value of investments	 	 	1,879	 	 	 	(2,332	)	
Net (gain)/loss on sale of investments	 	 	2,309	 	 	 	2,793	 	
Bad debts written off	 	 	4,212	 	 	 	—	 	
Changes in assets and liabilities	 	 	 	 	 	 	 	 	
(Increase) / decrease in accrued interest	 	 	(2,564	)	 	 	—	 	
(Increase) / decrease in premium debtors	 	 	44	 	 	 	6	 	
Increase / (decrease) in doubtful debts provision	 	 	(3,934	)	 	 	(175	)	
Decrease / (increase) in receivables	 	 	(5,958	)	 	 	1,446	 	
Increase / (decrease) in unearned premium provision	 	 	(58	)	 	 	549	 	
Decrease / (increase) in reinsurance recoveries	 	 	(586	)	 	 	13,139	 	
Increase / (decrease) in accounts payable	 	 	(734	)	 	 	(574	)	
Increase / (decrease) in claims outstanding	 	 	(7,048	)	 	 	(53,619	)	
Increase / (decrease) in tax provisions	 	 	552	 	 	 	(5,969	)	
 	 	 	
Net cash outflow from operating activities	 	 	(6,434	)	 	 	(23,838	)	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	26 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
26. FINANCIAL INSTRUMENTS AND DERIVATIVES
(a) Specific purposes for which derivative transactions are undertaken
The Company uses derivatives in the following way:
Investment management operations
The Company has given authority to AMP Capital Investors Limited (the investment manager) to use derivatives in managing investment portfolios. There may be various reasons why investment in derivatives is more appropriate than investment in the underlying physical asset including hedging, liquidity and pricing.
The types of derivatives which the investment manager uses are interest rate swaps and futures.
(b) Extent of derivative transactions
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Notional	 	Net market	 	Notional	 	Net market	
 	 	value	 	value	 	value	 	value	
 	 	31 Dec 2006	 	31 Dec 2006	 	31 Dec 2005	 	31 Dec 2005	
 	 	$’000	 	$’000	 	$’000	 	$’000	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment management operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Commercial Bond contract	 	 	19,286	 	 	 	213	 	 	 	25,560	 	 	 	288	 	
The notional value refers to the value of the underlying assets of the derivatives contract. The fair value is the unrealised gain/(loss) on the outstanding contracts.
The interest rate contracts used by the Company are for hedging purposes.
(c) Fair Values
The recorded bid price equates to net fair value for listed debt and equity securities. For derivative contracts, fair value equates to the unrealised gain/loss on the outstanding contract. For the following financial instruments, the cost carrying amount is considered to equate to their fair value:
•	 	cash deposits	

•	 	loans to related parties	

•	 	receivables	

•	 	payables.	
(d) Special terms and conditions
All financial instruments of the Company are held or issued on normal commercial terms at market rates of interest. There are no special terms or conditions affecting the nature and timing of the financial instruments not otherwise disclosed in these accounts. The accounting policies and terms and conditions for each class of financial asset or liability at the balance date are detailed in Note 1 and throughout the other notes to these financial statements.

TGI Australia ABN 12 000 041 458	 	27 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
26. FINANCIAL INSTRUMENTS AND DERIVATIVES (continued)
(e) Credit risk
Trading investments are recorded in the accounts at fair value which represents the Company’s exposure to credit risk in relation to these instruments. The Company’s credit risk exposure to derivatives is the fair value as recorded above.
The credit risk of the Company arising from exposure to individual entities in investment portfolios is monitored and controlled by AMP Capital Investors Limited in accordance with Credit Policy guidelines.
Credit risk in trade receivables in managed by analysing the credit ratings of the underlying debts.
(f) Interest rate risk on financial instruments
The accounting policy notes describe the policies used to measure and report the assets and liabilities of the Company. Where the applicable market value is determined by discounting future cash flows, movements in interest rates will result in a reported unrealised gain or loss in the profit and loss account.
AMP Capital Investors Limited manages investment portfolios on behalf of the Company. The Company seeks to reduce its interest rate risk through the use of investment portfolios as a hedge against the insurance liabilities of the Company. To the extent that these assets and liabilities can be matched, unrealised gains or losses on revaluation of liabilities resulting from interest rate movements will be offset by unrealised losses or gains on revaluation of investment assets.
The Company uses derivatives to manage the interest rate risk on its other interest sensitive assets and liabilities set out in Note 25(a).
The Company’s exposure to interest rate risks and the effective interest rates of financial assets and liabilities at the reporting date, are as follows:

TGI Australia ABN 12 000 041 458	 	28 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
26. FINANCIAL INSTRUMENTS AND DERIVATIVES (continued)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Fixed interest rate	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Floating	 	 	 	 	 	 	 	 	 	Maturing in	 	 	 	 	 	 	 	 	 	Non	 	 	 	 	 	Weighted	
 	 	Interest	 	0-1	 	1-2	 	2-3	 	3-4	 	4-5	 	> 5	 	Interest	 	 	 	 	 	Average	
 	 	Rate	 	year	 	years	 	years	 	years	 	years	 	years	 	Bearing	 	Total	 	Interest	
For the year ended 2006	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	rate	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	7,458	 	 	 	7,458	 	 	 	 	 	
Debtors and Reinsurance	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	44,388	 	 	 	44,388	 	 	 	 	 	
Cash at bank	 	 	971	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	971	 	 	 	4.90	%	
Cash Trusts	 	 	1,621	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,621	 	 	 	6.00	%	
Other Trusts	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	7,240	 	 	 	7,240	 	 	 	 	 	
Government and Semi- government stocks and bonds	 	 	 	 	 	 	1,364	 	 	 	13,502	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	18,737	 	 	 	 	 	 	 	33,603	 	 	 	5.79	%	
Corporate bonds	 	 	 	 	 	 	11,093	 	 	 	7,498	 	 	 	9,110	 	 	 	3,949	 	 	 	3,232	 	 	 	7,777	 	 	 	 	 	 	 	42,659	 	 	 	6.64	%	
Deposits on Futures	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	287	 	 	 	287	 	 	 	 	 	
Derivatives	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(114	)	 	 	(114	)	 	 	 	 	
Related Party Loan	 	 	 	 	 	 	58,715	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	58,715	 	 	 	7.06	%	
 	 	 	 	 	
Total Financial Assets	 	 	2,592	 	 	 	71,172	 	 	 	21,000	 	 	 	9,110	 	 	 	3,949	 	 	 	3,232	 	 	 	26,514	 	 	 	59,259	 	 	 	196,828	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,490	 	 	 	1,490	 	 	 	 	 	
 	 	 	 	 	
Total Financial Liabilities	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,490	 	 	 	1,490	 	 	 	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Fixed interest rate	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Floating	 	 	 	 	 	 	 	 	 	Maturing in	 	 	 	 	 	 	 	 	 	Non	 	 	 	 	 	Weighted	
 	 	Interest	 	0-1	 	1-2	 	2-3	 	3-4	 	4-5	 	> 5	 	Interest	 	 	 	 	 	Average	
 	 	Rate	 	year	 	years	 	years	 	years	 	years	 	years	 	Bearing	 	Total	 	Interest	
For the year ended 2005	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	$000’s	 	rate	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6,978	 	 	 	6,978	 	 	 	 	 	
Debtors and Reinsurance	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	43,711	 	 	 	43,711	 	 	 	 	 	
Cash at bank	 	 	437	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	437	 	 	 	4.48	%	
Cash Trusts	 	 	1,191	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,191	 	 	 	5.44	%	
Other Trusts	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	11,535	 	 	 	11,535	 	 	 	 	 	
Government and Semi- government stocks and bonds	 	 	 	 	 	 	12,128	 	 	 	3,084	 	 	 	10,568	 	 	 	3,732	 	 	 	653	 	 	 	28,435	 	 	 	 	 	 	 	58,600	 	 	 	5.12	%	
Corporate bonds	 	 	 	 	 	 	8,662	 	 	 	12,744	 	 	 	12,121	 	 	 	6,901	 	 	 	5,644	 	 	 	8,701	 	 	 	 	 	 	 	54,773	 	 	 	5.81	%	
Deposits on Futures	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	106	 	 	 	106	 	 	 	 	 	
Derivatives	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	288	 	 	 	288	 	 	 	 	 	
Related Party Loan	 	 	 	 	 	 	45,013	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	45,013	 	 	 	6.79	%	
 	 	 	 	 	
Total Financial Assets	 	 	1,628	 	 	 	20,790	 	 	 	15,828	 	 	 	22,689	 	 	 	10,633	 	 	 	6,297	 	 	 	37,136	 	 	 	62,618	 	 	 	222,632	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,224	 	 	 	2,224	 	 	 	 	 	
 	 	 	 	 	
Total Financial Liabilities	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2,224	 	 	 	2,224	 	 	 	 	 	

 	 	 	
 	
TGI Australia ABN 12 000 041 458	 	29 of 31	

 
TGI Australia Ltd
Notes to the financial statements for the year ended 31 December 2006
27. CAPITAL ADEQUACY
 	 	 	 	 	 	 	 	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Tier 1 Capital	 	 	 	 	 	 	 	 	
Paid-up ordinary shares	 	 	30,000	 	 	 	30,000	 	
General reserves	 	 	—	 	 	 	—	 	
Retained earnings	 	 	56,452	 	 	 	55,553	 	
Current year earnings	 	 	5,330	 	 	 	20,899	 	
Excess technical provisions (net of tax)	 	 	—	 	 	 	—	 	
Less : deductions	 	 	(5,683	)	 	 	(27,799	)	
 	 	 	
Net Tier 1 Capital	 	 	86,099	 	 	 	78,653	 	
 	 	 	 	 	 	 	 	 	
Net Tier 2 Capital	 	 	—	 	 	 	—	 	

Total Capital Base	 	 	86,099	 	 	 	78,653	 	
 	
Minimum Capital Requirement	 	 	19,769	 	 	 	43,829	 	
 	
Capital adequacy multiple	 	 	4.36	 	 	 	1.79	 	
The entity complies with Prudential Standard GPS110 and the requirements set out in its insurance licence.

TGI Australia ABN 12 000 041 458	 	30 of 31	

 

Report of Independent Auditors
The Board of Directors of TGI Australia Limited
We have audited the accompanying balance sheets of TGI Australia Limited as of December 31, 2006 and 2005, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TGI Australia Limited at December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008
Liability limited by a scheme
approved under Professional
Standards Legislation

Exhibit 99.4
ENSTAR AUSTRALIA LIMITED
(Formerly COBALT SOLUTIONS AUSTRALIA LIMITED)
ABN 99 096 363 923
FINANCIAL REPORT
31 DECEMBER 2007
Contents:
 	 	 	 	 	
 	 	Page	
 	 	 	 	 	
Financial Report	 	 	 	 	
- Income Statement	 	 	2	 	
- Balance Sheet	 	 	3	 	
- Statement of Cash Flows	 	 	4	 	
- Statement of Changes in Equity	 	 	5	 	
Notes to the Financial Statements	 	 	6	 	
Report of Independent Auditors	 	 	20	 	

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Income Statement
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	

Revenues	 	 	2	 	 	 	28,948	 	 	 	30,020	 	
Expenses	 	 	3	 	 	 	(21,165	)	 	 	(23,748	)	
 	
Profit before income tax expense	 	 	 	 	 	 	7,783	 	 	 	6,272	 	
Income tax expense	 	 	4	 	 	 	(1,840	)	 	 	(2,459	)	
 	
Net profit after income tax expense, attributable to members of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)	 	 	 	 	 	 	5,943	 	 	 	3,813	 	
 	
The above Income Statement should be read in conjunction with the accompanying notes.
Page 2 of 19

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Balance Sheet
As at 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash & Cash equivalents	 	 	12	 	 	 	8,032	 	 	 	8,990	 	
Receivables	 	 	5	 	 	 	7,910	 	 	 	6,291	 	
 	
Total current assets	 	 	 	 	 	 	15,942	 	 	 	15,281	 	
 	
Non-current assets	 	 	 	 	 	 	 	 	 	 	 	 	
Plant & Equipment	 	 	6	 	 	 	14	 	 	 	34	 	
Deferred tax assets	 	 	4	 	 	 	988	 	 	 	717	 	
 	
Total non-current assets	 	 	 	 	 	 	1,002	 	 	 	751	 	
 	
Total assets	 	 	 	 	 	 	16,944	 	 	 	16,032	 	
 	
Current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	7	 	 	 	3,942	 	 	 	4,815	 	
Deferred Income	 	 	8	 	 	 	37	 	 	 	—	 	
Current tax liabilities	 	 	 	 	 	 	102	 	 	 	—	 	
 	
Total current liabilities	 	 	 	 	 	 	4,081	 	 	 	4,815	 	
 	
Non-current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	7	 	 	 	703	 	 	 	—	 	
 	
Total non-current liabilities	 	 	 	 	 	 	703	 	 	 	—	 	
 	
Total liabilities	 	 	 	 	 	 	4,784	 	 	 	4,815	 	
 	
Net assets	 	 	 	 	 	 	12,160	 	 	 	11,217	 	
 	
Equity	 	 	11	 	 	 	—	 	 	 	—	 	
Retained profits	 	 	 	 	 	 	12,160	 	 	 	11,217	 	
 	
Total equity	 	 	 	 	 	 	12,160	 	 	 	11,217	 	
 	
The above Balance Sheet should be read in conjunction with the accompanying notes.
Page 3 of 19

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Statement of Cash Flows
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	
Cash receipts in the course of operations	 	 	 	 	 	 	63,074	 	 	 	72,560	 	
Cash payments in the course of operations	 	 	 	 	 	 	(56,062	)	 	 	(69,967	)	
Investment income received	 	 	 	 	 	 	522	 	 	 	940	 	
Income tax paid	 	 	 	 	 	 	(3,487	)	 	 	(5,672	)	
 	
Cash flows from operating activities	 	 	12	 	 	 	4,047	 	 	 	(2,139	)	
 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Payments for plant and equipment	 	 	 	 	 	 	(5	)	 	 	(29	)	
 	
Cash flows used in investing activities	 	 	 	 	 	 	(5	)	 	 	(29	)	
 	
Cash flows from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Dividend Paid	 	 	 	 	 	 	(5,000	)	 	 	(18,000	)	
 	
Cash flows used in financing activities	 	 	 	 	 	 	(5,000	)	 	 	(18,000	)	
 	
Net increase/(decrease) in cash held	 	 	 	 	 	 	(958	)	 	 	(20,168	)	
Balance at the beginning of the year	 	 	 	 	 	 	8,990	 	 	 	29,158	 	
 	
Balance at the end of the year	 	 	12	 	 	 	8,032	 	 	 	8,990	 	
 	
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
Page 4 of 19

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Statement Of Changes in Equity
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Issued	 	 	Accumulated	 	 	 	 	
 	 	 	 	 	 	Capital	 	 	Profit	 	 	Total	 	
 	 	Note	 	 	$’000	 	 	$’000	 	 	$’000	 	

Balance as at 1 January 2007	 	 	 	 	 	 	—	 	 	 	11,217	 	 	 	11,217	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Profit after income tax	 	 	 	 	 	 	 	 	 	 	5,943	 	 	 	5,943	 	
 	
Total Recognised income and expense	 	 	 	 	 	 	 	 	 	 	5,943	 	 	 	5,943	 	
Dividends paid & payable	 	 	10	 	 	 	 	 	 	 	(5,000	)	 	 	(5,000	)	
 	
Balance as at 31 December 2007	 	 	 	 	 	 	—	 	 	 	12,160	 	 	 	12,160	 	

Balance as at 1 January 2006	 	 	 	 	 	 	—	 	 	 	17,404	 	 	 	17,404	 	
Net Profit after income tax	 	 	 	 	 	 	 	 	 	 	3,813	 	 	 	3,813	 	
 	
Total Recognised income and expense	 	 	 	 	 	 	 	 	 	 	3,813	 	 	 	3,813	 	
Dividends paid & payable	 	 	10	 	 	 	 	 	 	 	(10,000	)	 	 	(10,000	)	
 	
Balance as at 31 December 2006	 	 	 	 	 	 	—	 	 	 	11,217	 	 	 	11,217	 	
 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Page 5 of 19

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Preparation
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value.
Accounting judgements and estimates
In the course of its operations the company applies judgements and makes estimates that affect the amounts recognised in the financial report. Estimates are based on a combination of historical experience and expectations of future events that are believed to be reasonable at the time.
Accounting Standards issued but not yet effective
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2007, except IFRS8 Operating Segments. The adoption of IFRS8 has removed the requirement for Operating Segment disclosures in this Financial Report.
When applied in future periods, all other recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
Changes in accounting policy
Since 1 January 2007, the company has adopted a number of Accounting Standards and Interpretations which were mandatory for annual periods beginning on or after 1 January 2007. Adoption of these Standards and Interpretations has not had any effect on the financial position or performance of the Company.
b) Revenue Recognition
Rendering of Services
Revenue from the rendering of services is recognised in the period in which the service is provided, having regard to the stage of completion of the contract.
In certain circumstances revenue may be received in advance of the period to which it relates. In these instances, the revenue is deferred to future periods as disclosed in Deferred Income, Note 8 to the accounts.
Interest Income
Interest income is recognised when the right to receive interest has been established.
Page 6 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Taxes
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to:
 	(i)	 	temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and	
 	 	 	 	
 	(ii)	 	unused tax losses.	
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
The tax impact on income and expense items recognised directly in equity is also recognised directly in equity.
Deferred tax is not discounted to present value.
Tax Consolidation
AMP Limited, Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd), and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
i)	 	Current tax balances arising from external transactions recognised by entities in the tax- consolidated group occurring after the implementation date, and;	
 	 	 	
ii)	 	Deferred tax assets arising from unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.	
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement. .
Page 7 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The entity will be required to make a payment to terminate its liability under the tax funding agreement if it leaves the tax consolidation group.
The contributions are payable as set out in the agreement and reflect the timing of AMP Limited’s obligations to make payments to the relevant tax authorities.
Assets and liabilities which arise as a result of balances transferred from entities within the tax consolidated group to the head entity, are recognised as related party balances receivable and payable in the Balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.
Cobalt UK Branch
Tax losses arising in the UK branch will be recognised as a deferred tax asset to the extent it is considered probable that they will be available to be offset against assessable income available in a related party in the UK
Goods and Services Tax
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable
from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.
d) Foreign Currencies
Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which that entity operates (the functional currency).
The presentation currency of this Financial Report, and the functional currency of the parent entity, is Australian dollars.
Transactions and balances
Revenue and expenditure items denominated in a currency other than the functional currency are translated at the spot exchange rate at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date, with exchange gains and losses being recognised in the income statement.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Page 8 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e) Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits that are held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount.
For the purpose of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value, with short periods to maturity net of outstanding bank overdrafts.
f) Receivables
Receivables are carried at nominal amounts due less any provision for impairment. A provision for impairment is recognised when collection of the full nominal amount is no longer probable. Impairment of an asset is reviewed each balance date. Any applicable terms or conditions are set out in Note 5.
g) Plant & Equipment
Cost
Plant & equipment is carried at historical cost less accumulated depreciation and any accumulated impairment losses.
Depreciation
Items of plant and equipment are depreciated over their estimated useful lives.
The assets residual lives, useful lives and amortisation methods are reviewed, and adjusted for if appropriate, at each financial year end.
The depreciation rates and method used for each class, for the current year, is:
 	 	 	 	 	 	 	 	 	
 	 	Depreciation rate	 	Depreciation method	
Computer racks	 	 	10	%	 	Straight line	
Computer hardware(pre Oct 06)	 	 	25	%	 	Straight line	
Computer hardware(post Oct06)	 	 	20	%	 	Straight line	
Computer peripherals	 	 	40	%	 	Straight line	
Computers	 	 	50	%	 	Straight line	
h) Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.
Operating leases
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis.
Contingent rentals are recognised as an expense in the financial year in which they are incurred.
Finance leases
There are no leases that have been classified as finance leases.
Page 9 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
i) Payables
Trade Creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Terms and conditions are set out in Note 7.
j) Issued Capital
Issued and paid up capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
2. REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	

Revenue from operating activities:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Management fees	 	 	28,458	 	 	 	29,083	 	
 	
Total Revenue from operating activities	 	 	28,458	 	 	 	29,083	 	
 	
Revenue from non-operating activities	 	 	 	 	 	 	 	 	
Investment income	 	 	490	 	 	 	937	 	
 	
Total Revenue from non-operating activities	 	 	490	 	 	 	937	 	
 	
Total Revenues	 	 	28,948	 	 	 	30,020	 	
 	
3. EXPENSES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	

Profit before income tax is arrived after charging the following items:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Personnel Costs	 	 	15,153	 	 	 	16,206	 	
 	 	 	 	 	 	 	 	 	
Occupancy and Related property expenses	 	 	2,904	 	 	 	3,440	 	
 	 	 	 	 	 	 	 	 	
IT & Communication	 	 	1,227	 	 	 	1,623	 	
 	 	 	 	 	 	 	 	 	
Advertising & Promotions	 	 	425	 	 	 	484	 	
 	 	 	 	 	 	 	 	 	
Other expenses	 	 	1,456	 	 	 	1,995	 	

Total expenses	 	 	21,165	 	 	 	23,748	 	
 	
The majority of the costs above are incurred by way of management fee paid to AMP Services Ltd.

Page 10 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
4. INCOME TAX
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	
a) Analysis of income tax expense	 	 	 	 	 	 	 	 	
Current tax	 	 	2,125	 	 	 	1,663	 	
Decrease in deferred tax assets	 	 	96	 	 	 	458	 	
Write off of prior year losses	 	 	—	 	 	 	338	 	
Over provided in previous years	 	 	(381	)	 	 	—	 	
 	
Income tax expense	 	 	1,840	 	 	 	2,459	 	
 	
b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period.
In respect of income tax expense, the tax rate which applies in both 2007 and 2006 is 30% for Australia and UK.
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Operating profit before income tax	 	 	7,783	 	 	 	6,272	 	
 	 	 	 	 	 	 	 	 	
Prima facie income tax calculated at 30% (2006: 30 %)	 	 	2,335	 	 	 	1,882	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Other	 	 	(495	)	 	 	577	 	
 	 	 	 	 	 	 	 	 	
Income tax expense per income statement	 	 	1,840	 	 	 	2,459	 	
 	
c) Analysis of deferred tax asset
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Accruals	 	 	288	 	 	 	308	 	
 	 	 	 	 	 	 	 	 	
Other	 	 	149	 	 	 	409	 	
 	 	 	 	 	 	 	 	 	
Current year’s tax losses	 	 	368	 	 	 	—	 	
Prior year’s tax losses	 	 	183	 	 	 	—	 	
 	
Total deferred tax assets	 	 	988	 	 	 	717	 	
 	
Page 11 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
5. RECEIVABLES (CURRENT)
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	

Trade debtors	 	 	94	 	 	 	88	 	
Amounts receivable from related parties	 	 	7,506	 	 	 	2,680	 	
Other debtors	 	 	310	 	 	 	3,523	 	
 	
Total receivables (current)	 	 	7,910	 	 	 	6,291	 	
 	
Amounts receivable from related parties are settled pursuant to client management agreements.
Other receivables are non-interest bearing and are normally settled on 30-day terms.
6. PLANT AND EQUIPMENT
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	
Gross carrying amount	 	 	89	 	 	 	83	 	
Less accumulated depreciation and impairment loss	 	 	75	 	 	 	49	 	
 	
Total Plant & Equipment	 	 	14	 	 	 	34	 	

Carrying amount at beginning of the year	 	 	34	 	 	 	37	 	
 	 	 	 	 	 	 	 	 	
Additions	 	 	5	 	 	 	29	 	
 	 	 	 	 	 	 	 	 	
Recoverable amount write-down	 	 	—	 	 	 	(5	)	
 	 	 	 	 	 	 	 	 	
Depreciation expense	 	 	(25	)	 	 	(27	)	
 	
Total Plant & Equipment	 	 	14	 	 	 	34	 	
 	
7. PAYABLES
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	

Amount due to other related parties	 	 	1,599	 	 	 	2,331	 	
 	 	 	 	 	 	 	 	 	
Sundry Payables	 	 	146	 	 	 	146	 	
 	 	 	 	 	 	 	 	 	
Trade creditors and accruals	 	 	2,197	 	 	 	2,338	 	

Payables (current)	 	 	3,942	 	 	 	4,815	 	

Other Payables	 	 	703	 	 	 	—	 	

Payables (non-current)	 	 	703	 	 	 	—	 	

Total Payables	 	 	4,645	 	 	 	—	 	
 	
Sundry payables are non-interest bearing balances due to third parties pursuant to client management agreements. Trade creditors are non-interest bearing and are normally settled on less than 30 day terms.
Page 12 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
8. DEFERRED INCOME (CURRENT)
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	
Deferred Income	 	 	37	 	 	 	—	 	
 	
Total Deferred Income (current)	 	 	37	 	 	 	—	 	
 	
9. PROVISIONS (CURRENT)
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	
Provision for dividend payable	 	 	—	 	 	 	—	 	
 	
Total Provisions	 	 	—	 	 	 	—	 	
 	
Movements in Provisions	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Balance at the beginning of the year	 	 	—	 	 	 	8,000	 	
Additional provisions recognised (dividend Payable )	 	 	5,000	 	 	 	—	 	
Amount paid during the period	 	 	(5,000	)	 	 	(8,000	)	
Unused amounts reversed during the period	 	 	—	 	 	 	—	 	
 	
Balance at the end of the year	 	 	—	 	 	 	—	 	
 	
10. DIVIDENDS PAID
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	 	 	 	 	$’000	 	 	$’000	 	
 	
(a) Dividends paid on ordinary shares during the year	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	-	 	 	Dividend paid on 27 June 2007	 	 	5,000	 	 	 	—	 	
 	 	 	 	Unfranked Dividend of $2.5m per Ordinary Share	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	-	 	 	Dividend paid on 9 February 2006	 	 	—	 	 	 	8,000	 	
 	 	 	 	Unfranked Dividend of $4m per Ordinary Share	 	 	 	 	 	 	 	 	
 	-	 	 	Dividend paid on 27 June 2006	 	 	—	 	 	 	10,000	 	
 	 	 	 	Unfranked Dividend of $5m per Ordinary Share	 	 	 	 	 	 	 	 	
 	
Dividends paid during year	 	 	5,000	 	 	 	18,000	 	
 	
11. CONTRIBUTED EQUITY
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	

Issued & Paid up capital	 	 	 	 	 	 	 	 	
Two fully paid ordinary shares at $1 each	 	 	2	 	 	 	2	 	
 	
Ordinary shares attract the following rights:
(a)	 	to receive notice of and to attend and vote at all general meetings of the Company;	
 	 	 	
(b)	 	to receive dividends; and in a winding up, to participate equally in the distribution of the assets of;	
 	 	 	
(c)	 	the Company (both capital and surplus), subject only to any amounts unpaid on the share.	
Page 13 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
12. STATEMENT OF CASH FLOWS
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	

(a) Reconciliation of the profit after tax to the net cash flows from operating activities	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Net Profit after tax	 	 	5,943	 	 	 	3,813	 	
Non-Cash Items:	 	 	 	 	 	 	 	 	
Depreciation and impairment of plant & equipment	 	 	25	 	 	 	32	 	
Changes in assets/liabilities:	 	 	 	 	 	 	 	 	
(Increase)/decrease in receivables/other assets	 	 	(1,619	)	 	 	(4,508	)	
Decrease/(Increase) in current year tax losses	 	 	(338	)	 	 	338	 	
(Increase)/decrease in prior year tax overprovision	 	 	(381	)	 	 	—	 	
(Increase)/decrease in deferred tax assets	 	 	67	 	 	 	287	 	
Increase/(decrease) in current Tax liabilities	 	 	484	 	 	 	(2,153	)	
Increase/(decrease) in payables/ deferred income/provisions	 	 	(133	)	 	 	52	 	

Net cash flows from/(used in) operating activities	 	 	4,047	 	 	 	(2,139	)	

(b) Reconciliation of cash	 	 	 	 	 	 	 	 	
Cash balance comprises:	 	 	 	 	 	 	 	 	
- cash at bank	 	 	8,032	 	 	 	8,990	 	

Closing cash balance	 	 	8,032	 	 	 	8,990	 	
 	
13. FRANKING ACCOUNT
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies are transferred to the Head Entity, AMP Limited.
14. LEASE EXPENDITURE COMMITMENTS
Operating leases
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	
Minimum lease payments	 	 	 	 	 	 	 	 	
- not later than one year	 	 	412	 	 	 	407	 	
- later than one year and not later than five years	 	 	192	 	 	 	566	 	
 	
Aggregate leases expenditure contracted for at balance date	 	 	604	 	 	 	973	 	

Aggregate expenditure commitments comprise:	 	 	 	 	 	 	 	 	
Amounts not provided for :	 	 	 	 	 	 	 	 	
rental commitments	 	 	604	 	 	 	973	 	
 	
Aggregate leases expenditure contracted for at balance date	 	 	604	 	 	 	973	 	
 	
Page 14 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
15. AUDITORS’ REMUNERATION
Auditors’ remuneration for the year ended 31 December 2007 is paid on the Company’s behalf by a controlled entity within the AMP Limited Group.
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
 	
Amounts paid or payable to auditors of the company for:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
- Other services	 	 	35,155	 	 	 	10,047	 	
 	
Total Auditors’ Remuneration	 	 	35,155	 	 	 	10,047	 	
 	
16. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS
The company’s policies and procedures in respect of managing risks are set out in this note below.
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited) has an established risk management framework that meets the needs of its operations.
There are a number of interlinked risk management processes operating to ensure identification, assessment, treatment and monitoring of the risk environment. The main components, in summary, are:
•	 	Development of the risk management culture.

•	 	Assessment and monitoring of risks facing the business	
There were two main mechanisms addressing risks :
 	1)	 	Risk registers.	
 	 	 	 	
 	2)	 	Control self assessment process.	
Reporting of risk information
Information reported and reviewed by the Operational Risk Committee is then reported to the Audit Committee.
The Board has ultimate responsibility for risk management and governance, including ensuring an appropriate risk framework is in place and is operating effectively.
Risk and Mitigation
The Company’s activities expose it to a variety of risks.
Financial risks include:
Market risk
Foreign Currency risk analysis
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in exchange rates.
The Company’s financial assets are primarily dominated in Australian dollar with a small exposure in Great Britain Pounds (GBP) via its branch operations in the United Kingdom.
The carrying amount of the Company’s foreign currency dominated monetary assets and liabilities are:
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	$’000	 	 	$’000	 	
Assets	 	 	925	 	 	 	406	 	
Liabilities	 	 	—	 	 	 	—	 	
Page 15 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
16. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL NSTRUMENTS (continued)
The following table demonstrates the impact of a 5% increase or decrease in GBP rate against the AUD. It is assumed that the relevant change occurs at reporting date.
 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	Impact on
Profit after	 	 	Impact on
Profit after	 	
Change in Variable	 	tax and equity
$’000	 	 	tax and equity
$’000	 	
+5%	 	 	46	 	 	 	20	 	
- 5%	 	 	(46	)	 	 	(20	)	
Liquidity risk
Liquidity risk is the risk that the Company will not be able to met its debt obligations or other cash outflows as they fall due because of lack of liquid assets. The Company manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of assets and liabilities.
The table below summaries the maturity profile of the company’s financial liabilities at 31 December based on contractual obligations.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	
 	 	Up to 1 year	 	 	More than 1 year	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	3,942	 	 	 	703	 	 	 	4,645	 	
 	 	 	
Total	 	 	3,942	 	 	 	703	 	 	 	4,645	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31 Dec 06	 	
 	 	Up to 1 year	 	 	More than 1 year	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	4,815	 	 	 	—	 	 	 	4,815	 	
 	 	 	
Total	 	 	4,815	 	 	 	—	 	 	 	4,815	 	
 	 	 	
Page 16 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
16. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL NSTRUMENTS (continued)
Credit risk
Credit risk is the risk of loss that arises from a counterparty failing to meet their contractual commitments in full and on time, or from losses arising from the change in value of traded financial instruments as a result of changes in credit risk on that instrument.
Credit risk in trade receivables in managed by analysing the terms of trade against outstanding debtors
Other than intercompany receivables, there are no significant concentrations of credit risk.
The following table provides an aged analysis of financial assets neither past due or impaired, past due and not impaired and impaired assets. Impairment is assessed in accordance with note 1(f).
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Neither past due	 	 	 	 	 	 	Past due but not impaired	 	 	 	 	 	 	 	 	 	 	
 	 	nor impaired	 	 	<30 days	 	 	31 to 60 days	 	 	61 to 90 days	 	 	More than 91 days	 	 	Impaired	 	 	Total	 	
31 Dec 07	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
Receivables	 	 	7,757	 	 	 	122	 	 	 	11	 	 	 	10	 	 	 	10	 	 	 	—	 	 	 	7,910	 	

 	 	Neither past due	 	 	Past due but not impaired	 	 	 	 	 	 	 	 	 	 	 	
 	 	nor impaired	 	 	<30 days	 	 	31 to 60 days	 	 	61 to 90 days	 	 	More than 91 days	 	 	Impaired	 	 	Total	 	
31 Dec 06	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
Receivables	 	 	648	 	 	 	5,591	 	 	 	28	 	 	 	 	 	 	 	24	 	 	 	—	 	 	 	6,291	 	
Fair Value
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenue and expenses are recognised, in respect of each class of financial asset, financial liability and other investments are under and in Note 1.
Categories of financial instruments
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
Financial assets	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables	 	 	5	 	 	 	7,910	 	 	 	6,291	 	
Cash & cash equivalents	 	 	12	 	 	 	8,032	 	 	 	8,990	 	
Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	7	 	 	 	4,645	 	 	 	4,815	 	
For the following financial instruments, the cost carrying amount is considered to equate to their fair value:
 	•	 	cash deposits	
 	 	 	 	
 	•	 	receivables	
 	 	 	 	
 	•	 	payables.	
Page 17 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
17. CAPITAL MANAGEMENT
The primary capital management objective is to ensure the company will be able to continue as a going concern while minimising excess capital through capital initiatives, such as dividends, where appropriate.
The company’s capital position is monitored by the Company’s Board. As the Company forms part of the AMP Group, the company’s capital management policies and processes are determined in line with AMP Group’s capital management strategy.
There have been no changes in the capital management objectives, policies and processes from the previous period.
The company’s capital comprises contributed equity, reserves and retained earnings. These balances and the movements in these balances are disclosed in the Statement of Changes in Equity.
18. RELATED PARTY DISCLOSURES
(a) The parent of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited) at 31 December 2007 is AMP Group Services Limited. The ultimate controlling entity is AMP Limited.
Key management personnel compensation
The following individuals were the key management personnel of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited) for the current and prior reporting periods (unless stated otherwise):
 	 	 	
Name	 	Date of Appointment/Resignation of directors during the current or prior reporting period	

Simon J Hoole	 	 	
Peter W Clarke	 	 	
Peter M Hodgett	 	Resigned 31 December 2007	
Paul D Leaming	 	Appointed 31 December 2007	
The following table provides aggregate details of the compensation of key management personnel of The Company.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term employee	 	Post-employment	 	Other long-term	 	Termination	 	Share-based	 	 	
 	 	benefits	 	benefits	 	benefits	 	benefits	 	payments	 	Total	
Year	 	$	 	$	 	$	 	$	 	$	 	$	
2007	 	 	2,309,865	 	 	 	242,536	 	 	 	—	 	 	 	2,335,571	 	 	 	633,581	 	 	 	5,521,553	 	
2006	 	 	2,256,909	 	 	 	236,871	 	 	 	—	 	 	 	—	 	 	 	633,268	 	 	 	3,127,048	 	
Key management personnel disclosed above, also provided services to other related entities during the year. The above remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to Enstar Australia Limited (formerly Cobalt Solutions Australia Limited).
Directors were in office for the entire period unless otherwise stated.
The directors and their director related entities receive normal dividends on their ordinary share holdings in AMP Limited.
Page 18 of 20

 
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
Notes to the Financial Statements for the year ended 31 December 2007
18. RELATED PARTY DISCLOSURES (continued)
Other transactions with key management personnel of the Company
During the year, transactions may have been entered into between key management personnel and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and may include:
 	•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	 	
 	•	 	the purchase of AMP superannuation and related products;	
 	 	 	 	
 	•	 	financial investment services;	
 	 	 	 	
 	•	 	other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of the entity’s financial statements, or discharge of accountability by key management personnel. The transactions are considered to be trivial or domestic in nature.
Transactions with other related parties
The following related party transactions occurred during the financial year:
Enstar Australia Limited (formerly Cobalt Solutions Australia Limited) is a company in the wholly owned group comprising AMP Limited (the ultimate parent entity) and its wholly owned controlled entities.
Services provided to the entity are in the normal course of business and on normal commercial terms and conditions. Management fee expenses of $19,500,000 (2006:$18,900,000) were charged during the year from a related party. At reporting date, $1,600,000 (2006: $1,400,000) remained outstanding, forming part of the balance payable to related parties.
Management services were provided by the entity to related parties pursuant to management agreements. Fee revenue totalled $27,000,000 (2006:$27,800,000). At reporting date, there were no outstanding amounts remaining from related parties (2006: $700,000).
19. ECONOMIC DEPENDENCY
A substantial part of the company’s Revenue and Profit before Income Tax, is and will likely continue to be derived from the provision of management services to a related entity.
20. EVENTS OCCURRING AFTER THE REPORTING DATE
On 11 December 2007 a Sale and Purchase Agreement was entered into by the ultimate parent AMP Limited and Enstar Australia Holdings Pty Ltd for the sale of the entity.
The sale was subject to a number of conditions including regulatory approval by the Australian Prudential Regulatory Authority (APRA) and was expected to be completed in quarter one 2008.
APRA subsequently approved the Sale Agreement on 22 February 2008. The sale was then completed on 5 March 2008. Enstar Australia Holdings Pty Ltd assumed ownership of the company at this point.
Effective from March 2008 the company changed its name to Enstar Australia Limited.
Page 19 of 20

 

Report of Independent Auditors
The Board of Directors of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
We have audited the accompanying balance sheets of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited) as of December 31, 2007 and 2006, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited) at December 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008
Liability limited by a scheme
approved under Professional
Standards Legislation

 
ENSTAR AUSTRALIA LIMITED (Formerly
COBALT SOLUTIONS AUSTRALIA LIMITED)
ABN 99 096 363 923
FINANCIAL REPORT
31 DECEMBER 2006
Contents:
 	 	 	 	 	
 	 	Page	 	
 	 	 	 	 	
Financial Report	 	 	 	 	
- Income Statement	 	 	2	 	
- Balance Sheet	 	 	3	 	
- Statement of Cash Flows	 	 	4	 	
- Statement of Changes in Equity	 	 	5	 	
Notes to the Financial Statements	 	 	6	 	
Report of Independent Auditors	 	 	19	 	

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
Income Statement
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Note	 	 	$’000	 	 	$’000	 	

Revenues	 	 	2	 	 	 	30,020	 	 	 	38,935	 	
Expenses	 	 	3	 	 	 	(23,748	)	 	 	(23,095	)	
 	
Profit before income tax expense	 	 	 	 	 	 	6,272	 	 	 	15,840	 	
Income tax expense	 	 	4	 	 	 	(2,459	)	 	 	(4,829	)	
 	
Net profit after income tax expense, attributable to members of Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)	 	 	 	 	 	 	3,813	 	 	 	11,011	 	
 	
The above Income Statement should be read in conjunction with the accompanying notes.
Page 2 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
Balance Sheet
As at 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash & Cash equivalents	 	 	11	 	 	 	8,990	 	 	 	29,158	 	
Receivables	 	 	5	 	 	 	6,291	 	 	 	1,783	 	
 	
Total current assets	 	 	 	 	 	 	15,281	 	 	 	30,941	 	
 	
Non-current assets	 	 	 	 	 	 	 	 	 	 	 	 	
Plant & Equipment	 	 	6	 	 	 	34	 	 	 	37	 	
Deferred tax assets	 	 	4	 	 	 	717	 	 	 	1,342	 	
 	
Total non-current assets	 	 	 	 	 	 	751	 	 	 	1,379	 	
 	
Total assets	 	 	 	 	 	 	16,032	 	 	 	32,320	 	
 	
Current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	7	 	 	 	4,815	 	 	 	4,713	 	
Deferred Income	 	 	7	 	 	 	—	 	 	 	50	 	
Current tax liabilities	 	 	 	 	 	 	—	 	 	 	2,153	 	
Provisions	 	 	8	 	 	 	—	 	 	 	8,000	 	
 	
Total current liabilities	 	 	 	 	 	 	4,815	 	 	 	14,916	 	
 	
Total liabilities	 	 	 	 	 	 	4,815	 	 	 	14,916	 	
 	
Net assets	 	 	 	 	 	 	11,217	 	 	 	17,404	 	
 	
Equity	 	 	10	 	 	 	—	 	 	 	—	 	
Retained profits	 	 	 	 	 	 	11,217	 	 	 	17,404	 	
 	
Total equity	 	 	 	 	 	 	11,217	 	 	 	17,404	 	
 	
     The above Balance Sheet should be read in conjunction with the accompanying notes.
Page 3 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
Statement of Cash Flows
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Note	 	 	$ 000	 	 	$ 000	 	
 	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	
Cash receipts in the course of operations	 	 	 	 	 	 	72,560	 	 	 	87,407	 	
Cash payments in the course of operations	 	 	 	 	 	 	(69,967	)	 	 	(73,134	)	
Investment income received	 	 	 	 	 	 	940	 	 	 	1,347	 	
Income tax paid	 	 	 	 	 	 	(5,672	)	 	 	(5,657	)	
 	
Cash flows from operating activities	 	 	11	 	 	 	(2,139	)	 	 	9,963	 	
 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Payments for plant and equipment	 	 	 	 	 	 	(29	)	 	 	(29	)	
 	
Cash flows used in investing activities	 	 	 	 	 	 	(29	)	 	 	(29	)	
 	
Cash flows from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	
Dividend Paid	 	 	 	 	 	 	(18,000	)	 	 	(10,000	)	
 	
Cash flows used in financing activities	 	 	 	 	 	 	(18,000	)	 	 	(10,000	)	
 	
Net increase/(decrease) in cash held	 	 	 	 	 	 	(20,168	)	 	 	(66	)	
Balance at the beginning of the year	 	 	 	 	 	 	29,158	 	 	 	29,224	 	
 	
Balance at the end of the year	 	 	11	 	 	 	8,990	 	 	 	29,158	 	
 	
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
Page 4 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
Statement Of Changes in Equity
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Issued	 	 	Accumulated	 	 	 	 	
 	 	 	 	 	 	Capital	 	 	Profit	 	 	Total	 	
 	 	Note	 	 	$000	 	 	$000	 	 	$000	 	

Balance as at 1 January 2006	 	 	 	 	 	 	—	 	 	 	17,404	 	 	 	17,404	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Profit after income tax	 	 	 	 	 	 	 	 	 	 	3,813	 	 	 	3,813	 	
 	
Total Recognised income and expense	 	 	 	 	 	 	 	 	 	 	3,813	 	 	 	3,813	 	
Other changes in equity	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	
Dividends paid & payable	 	 	9	 	 	 	 	 	 	 	(10,000	)	 	 	(10,000	)	
 	
Balance as at 31 December 2006	 	 	 	 	 	 	—	 	 	 	11,217	 	 	 	11,217	 	

Balance as at 1 January 2005	 	 	 	 	 	 	—	 	 	 	24,393	 	 	 	24,393	 	
Net Profit after income tax	 	 	 	 	 	 	 	 	 	 	11,011	 	 	 	11,011	 	
 	
Total Recognised income and expense	 	 	 	 	 	 	 	 	 	 	11,011	 	 	 	11,011	 	
Other changes in equity	 	 	 	 	 	 	 	 	 	 	—	 	 	 	—	 	
Dividends paid & payable	 	 	9	 	 	 	 	 	 	 	(18,000	)	 	 	(18,000	)	
 	
Balance as at 31 December 2005	 	 	 	 	 	 	—	 	 	 	17,404	 	 	 	17,404	 	
 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Page 5 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Preparation
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value.
The principal accounting policies adopted in the preparation of the Financial Report are set out below. These policies have been consistently applied to the current year and comparative period, unless otherwise stated. The same accounting policies and methods of computation are followed by this Financial Report as compared with the 31 December 2005 Financial Report. Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2006. When applied in future periods, these recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
b) Revenue Recognition
Rendering of Services
Revenue from the rendering of services is recognised in the period in which the service is provided, having regard to the stage of completion of the contract.
In certain circumstances revenue may be received in advance of the period to which it relates. In these instances, the revenue is deferred to future periods as disclosed in Deferred Income, Note 7 to the accounts.
Interest Income
Interest income is recognised when the right to receive interest has been established.
c) Taxes
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to:
 	(i)	 	temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and	
 	 	 	 	
 	(ii)	 	unused tax losses.	
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
Page 6 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Taxes (continued)
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
The tax impact on income and expense items recognised directly in equity is also recognised directly in equity.
Deferred tax is not discounted to present value.
Tax Consolidation
AMP Limited, Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd), and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
i)	 	Current tax balances arising from external transactions recognised by entities in the tax- consolidated group occurring after the implementation date, and;	
 	 	 	
ii)	 	Deferred tax assets arising from unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.	
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement. . The contributions are payable as set out in the agreement and reflect the timing of AMP Limited’s obligations to make payments to the relevant tax authorities.
Assets and liabilities which arise as a result of balances transferred from entities within the tax consolidated group to the head entity, are recognised as related party balances receivable and payable in the Balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.
Page 7 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Taxes (continued)
Goods and Services Tax
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable
from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.
d) Foreign Currencies
Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which that entity operates (the functional currency).
The presentation currency of this Financial Report, and the functional currency of the parent entity, is Australian dollars.
Transactions and balances
Revenue and expenditure items denominated in a currency other than the functional currency are translated at the spot exchange rate at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date, with exchange gains and losses being recognised in the income statement.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
e) Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits that are held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount.
For the purpose of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value, with short periods to maturity net of outstanding bank overdrafts.
f) Receivables
Receivables are carried at nominal amounts due less any provision for impairment. A provision for impairment is recognised when collection of the full nominal amount is no longer probable. Impairment of an asset is reviewed each balance date. Any applicable terms or conditions are set out in Note 5.
Page 8 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Plant & Equipment
Cost
Plant & equipment is carried at historical cost less accumulated depreciation and any accumulated impairment losses.
Depreciation

Items of plant and equipment are depreciated over their estimated useful lives.
The assets residual lives, useful lives and amortisation methods are reviewed, and adjusted for if appropriate, at each financial year end.
The depreciation rates and method used for each class, for the current year, is:
 	 	 	 	 	 	 	
 	 	Depreciation rate	 	Depreciation method	
Computer racks	 	 	10	%	 	Straight line	
Computer hardware	 	 	25	%	 	Straight line	
Computer peripherals	 	 	40	%	 	Straight line	
Computers	 	 	50	%	 	Straight line	
 	 	 	 	 	 	 	
Previous years,	 	 	 	 	
 	 	Depreciation rate	 	Depreciation method	
Computers	 	 	40	%	 	Prime cost	
h) Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.
Operating leases
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis.
Contingent rentals are recognised as an expense in the financial year in which they are incurred.
Finance leases
There are no leases that have been classified as finance leases.
i) Payables
Trade Creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Terms and conditions are set out in Note 7.
j) Provisions
     Provisions are recognised when:
 	•	 	There is a present obligation (legal or constructive) as a result of a past event.	
 	 	 	 	
 	•	 	It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.	
 	 	 	 	
 	•	 	A reliable estimate can be made of the amount of the obligation.	
Page 9 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
k) Issued Capital
Issued and paid up capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.
2. REVENUE
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	

Revenue from operating activities	 	 	 	 	 	 	 	 	
Management fees	 	 	29,083	 	 	 	32,588	 	
Other Revenue	 	 	—	 	 	 	5,000	 	
 	
Total Revenue from operating activities	 	 	29,083	 	 	 	37,588	 	
 	
Revenue from non-operating activities	 	 	 	 	 	 	 	 	
Investment income	 	 	937	 	 	 	1,347	 	
 	
Total Revenue from non-operating activities	 	 	937	 	 	 	1,347	 	
 	
Total Revenues	 	 	30,020	 	 	 	38,935	 	
 	
3. EXPENSES
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	

Profit before income tax is arrived after charging the following items:	 	 	 	 	 	 	 	 	
Personnel Costs	 	 	16,206	 	 	 	16,941	 	
Occupancy and Related property expenses	 	 	3,440	 	 	 	3,346	 	
IT & Communication	 	 	1,623	 	 	 	1,722	 	
Advertising & Promotions	 	 	484	 	 	 	219	 	
Other expenses	 	 	1,995	 	 	 	867	 	
 	
Total expenses	 	 	23,748	 	 	 	23,095	 	
 	
The majority of the costs above are incurred by way of management fee paid to AMP Services Ltd.
Page 10 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
4. INCOME TAX
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	
a) Analysis of income tax expense Current tax	 	 	1,663	 	 	 	4,121	 	
Decrease in deferred tax assets	 	 	458	 	 	 	646	 	
Write off of prior year losses	 	 	338	 	 	 	62	 	
 	
Income tax expense	 	 	2,459	 	 	 	4,829	 	
 	
b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period.
In respect of income tax expense, the tax rate which applies in both 2006 and 2005 is 30% for Australia and UK.
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	

Operating profit before income tax	 	 	6,272	 	 	 	15,840	 	
 	 	 	 	 	 	 	 	 	
Prima facie income tax calculated at 30% (2005: 30 %)	 	 	1,882	 	 	 	4,752	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Other	 	 	577	 	 	 	77	 	
 	 	 	 	 	 	 	 	 	
Income tax expense per income statement	 	 	2,459	 	 	 	4,829	 	
 	
c) Analysis of deferred tax asset
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
Accruals	 	 	308	 	 	 	413	 	
Unrealised gains/losses	 	 	—	 	 	 	2	 	
Other	 	 	409	 	 	 	589	 	
Current year’s tax losses	 	 	—	 	 	 	338	 	
 	
Total deferred tax assets	 	 	717	 	 	 	1,342	 	
 	
Page 11 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
5. RECEIVABLES (CURRENT)
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	

Trade debtors	 	 	88	 	 	 	121	 	
Amounts receivable from related parties	 	 	2,680	 	 	 	1,363	 	
Other debtors	 	 	3,523	 	 	 	299	 	
 	
Total receivables (current)	 	 	6,291	 	 	 	1,783	 	

 	
Receivables are non-interest bearing and are normally settled on 30-day terms. In 2006, other debtors include income tax recoverable under the tax sharing agreement of $1,701k as PAYG instalments made throughout the year exceed the current tax payable.	
6. PLANT AND EQUIPMENT
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	
Gross carrying amount	 	 	83	 	 	 	59	 	
Less accumulated depreciation and impairment loss	 	 	49	 	 	 	22	 	
 	
Total Plant & Equipment	 	 	34	 	 	 	37	 	

Carrying amount at beginning of the year	 	 	37	 	 	 	94	 	
Additions	 	 	29	 	 	 	29	 	
Recoverable amount write-down	 	 	(5	)	 	 	(42	)	
Depreciation expense	 	 	(27	)	 	 	(44	)	
 	
Total Plant & Equipment	 	 	34	 	 	 	37	 	
 	
7. PAYABLES AND DEFERRED INCOME (CURRENT)
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	

Amount due to other related parties	 	 	2,331	 	 	 	2,617	 	
Sundry Payables	 	 	146	 	 	 	658	 	
Trade creditors and accruals	 	 	2,338	 	 	 	1,438	 	
 	
Total Payables (current)	 	 	4,815	 	 	 	4,713	 	
 	
Deferred Income	 	 	—	 	 	 	50	 	
 	
Total Deferred Income (current)	 	 	—	 	 	 	50	 	
 	
Sundry payables are non-interest bearing balances due to third parties pursuant to client management agreements. Trade creditors are non-interest bearing and are normally settled on less than 30 day terms.
Page 12 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
8. PROVISIONS (CURRENT)
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	

Provision for dividend payable	 	 	—	 	 	 	8,000	 	
 	
Total Provisions	 	 	—	 	 	 	8,000	 	
 	
Movements in Provisions	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Balance at the beginning of the year	 	 	8,000	 	 	 	1,490	 	
Additional provisions recognised (dividend Payable )	 	 	—	 	 	 	18,000	 	
Amount paid during the period	 	 	(8,000	)	 	 	(10,000	)	
Unused amounts reversed during the period	 	 	—	 	 	 	(1,490	)	

Balance at the end of the year	 	 	—	 	 	 	8,000	 	
 	
9. DIVIDENDS PAID
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	
(a) Dividends paid on ordinary shares during the year	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
-Dividend paid on 9 February 2006	 	 	8,000	 	 	 	 	 	
Unfranked Dividend of $4m per Ordinary Share	 	 	 	 	 	 	 	 	
-Dividend paid on 27 June 2006	 	 	10,000	 	 	 	 	 	
Unfranked Dividend of $5m per Ordinary Share	 	 	 	 	 	 	 	 	
-Dividend paid on 10 June 2005	 	 	 	 	 	 	10,000	 	
Unfranked Dividend of $5m per Ordinary Share	 	 	 	 	 	 	 	 	

Dividends paid during year	 	 	18,000	 	 	 	10,000	 	

(b) Dividends proposed but not recognised at 31 December	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
- Dividends on ordinary shares:	 	 	—	 	 	 	—	 	
Unfranked Dividend of $4m per Ordinary Share	 	 	 	 	 	 	 	 	
 	
10. CONTRIBUTED EQUITY
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$	 	 	$	 	

Issued & Paid up capital	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Two fully paid ordinary shares at $1 each	 	 	—	 	 	 	—	 	
 	
Ordinary shares attract the following rights:
(a) to receive notice of and to attend and vote at all general meetings of the Company;
(b) to receive dividends; and in a winding up, to participate equally in the distribution of the assets of;
(c) the Company (both capital and surplus), subject only to any amounts unpaid on the share.
Page 13 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
11. STATEMENT OF CASH FLOWS
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	

(a) Reconciliation of the profit after tax to the net cash flows from operating activities	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Net Profit after tax	 	 	3,813	 	 	 	11,011	 	
Non-Cash Items:	 	 	 	 	 	 	 	 	
Depreciation and impairment of plant & equipment	 	 	32	 	 	 	85	 	
Changes in assets/liabilities:	 	 	 	 	 	 	 	 	
(Increase)/decrease in receivables/other assets	 	 	(4,508	)	 	 	(300	)	
Decrease/(Increrase) in current year tax losses	 	 	338	 	 	 	—	 	
(Increase)/decrease in deferred tax assets	 	 	287	 	 	 	308	 	
Increase/(decrease) in current Tax liabilities	 	 	(2,153	)	 	 	(1,283	)	
Increase/(decrease) in payables/ deferred income/provisions	 	 	52	 	 	 	142	 	

Net cash flows from/(used in) operating activities	 	 	(2,139	)	 	 	9,963	 	

(b) Reconciliation of cash	 	 	 	 	 	 	 	 	
Cash balance comprises:	 	 	 	 	 	 	 	 	
- cash at bank	 	 	8,990	 	 	 	29,158	 	

Closing cash balance	 	 	8,990	 	 	 	29,158	 	
 	
12. FRANKING ACCOUNT
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies are transferred to the Head Entity, AMP Limited.
Page 14 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
13. SEGMENT INFORMATION
Primary Segment
The company operates predominantly in one business segment, which is the provision of professional run-off and management services to insurance and reinsurance companies.
Secondary Segment
There are two geographical segments, UK and Australia.
The company generally accounts for inter-segment sales and transfers as if the sales and transfers were to third parties at current market prices. Revenues are attributed to geographic areas based on the location of the assets producing the revenues.
Segment accounting policies are the same as the company’s policies described in Note 1.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	UK	 	 	Aust	 	 	Consolidated	 	
 	 	2006	 	 	2005	 	 	2006	 	 	2005	 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	

Segment Revenue	 	 	150	 	 	 	134	 	 	 	29,870	 	 	 	38,801	 	 	 	30,020	 	 	 	38,935	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment Assets	 	 	406	 	 	 	420	 	 	 	15,626	 	 	 	31,900	 	 	 	16,032	 	 	 	32,320	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment liabilities	 	 	1,763	 	 	 	712	 	 	 	3,052	 	 	 	14,204	 	 	 	4,815	 	 	 	14,916	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation	 	 	—	 	 	 	—	 	 	 	27	 	 	 	44	 	 	 	27	 	 	 	44	 	
 	
14. LEASE EXPENDITURE COMMITMENTS
Operating leases
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
Minimum lease payments	 	$’000	 	 	$’000	 	
 	
- not later than one year	 	 	407	 	 	 	107	 	
- later than one year and not later than five years	 	 	566	 	 	 	64	 	
 	
Aggregate leases expenditure contracted for at balance date	 	 	973	 	 	 	171	 	

Aggregate expenditure commitments comprise:	 	 	 	 	 	 	 	 	
Amounts not provided for :	 	 	 	 	 	 	 	 	
rental commitments	 	 	973	 	 	 	171	 	
 	
Aggregate leases expenditure contracted for at balance date	 	 	973	 	 	 	171	 	
 	
Page 15 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
15. AUDITORS’ REMUNERATION
Auditors’ remuneration for the year ended 31 December 2006 is paid on the Company’s behalf by a controlled entity within the AMP Limited Group.
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$	 	 	$	 	
 	
Amounts paid or payable to auditors of the company for:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
— Other services	 	 	10,047	 	 	 	15,193	 	
 	
Total Auditors’ Remuneration	 	 	10,047	 	 	 	15,193	 	
 	
16. FINANCIAL INSTRUMENTS
(a) Terms, Conditions and Accounting Policies
The accounting policies and terms and conditions for each class of financial asset and financial liability at the balance date are detailed in Note 1 and throughout other notes to the financial statements.
(b) Interest Rate Risk
The following tables provide information about certain financial assets and financial liabilities showing the interest rate categories for each class and the weighted average interest rate for each class.
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Floating	 	 	Non-	 	 	Total	 	 	Weighted	 	
 	 	Interest Rate	 	 	Interest- Bearing	 	 	$	 	 	Average	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	Interest rate %	 	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash	 	 	8,990	 	 	 	—	 	 	 	8,990	 	 	 	5.15	 	
Trade and other receivables	 	 	—	 	 	 	3,611	 	 	 	3,611	 	 	 	 	 	
Receivables— other related parties	 	 	—	 	 	 	2,680	 	 	 	2,680	 	 	 	 	 	

Total Financial Assets	 	 	8,990	 	 	 	6,291	 	 	 	15,281	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables & Provision	 	 	—	 	 	 	4,815	 	 	 	4,815	 	 	 	 	 	

Total Financial Liabilities	 	 	—	 	 	 	4,815	 	 	 	4,815	 	 	 	 	 	
 	 	 	 	 	
Page 16 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
16. FINANCIAL INSTRUMENTS (continued)
2005
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Floating	 	 	Non-Interest-	 	 	Total	 	 	Weighted	 	
 	 	Interest Rate	 	 	Bearing	 	 	$	 	 	Average	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	Interest rate %	 	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash	 	 	29,158	 	 	 	—	 	 	 	29,158	 	 	 	4.69	 	
Trade and other receivables	 	 	—	 	 	 	420	 	 	 	420	 	 	 	 	 	
Receivables— other related parties	 	 	—	 	 	 	1,363	 	 	 	1,363	 	 	 	 	 	

Total Financial Assets	 	 	29,158	 	 	 	1,783	 	 	 	30,941	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables & Provision	 	 	—	 	 	 	14,916	 	 	 	14,916	 	 	 	 	 	

Total Financial Liabilities	 	 	 	 	 	 	14,916	 	 	 	14,916	 	 	 	 	 	
 	 	 	 	 	
(c) Net Fair Values
All financial assets and liabilities are recorded at the cost carrying amounts, which approximates net fair values, except as described elsewhere in the notes.
(d) Credit Risk Exposure
The economic entity’s maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of these assets as indicated in the balance sheet.
17. RELATED PARTY DISCLOSURES
(a) The parent of Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd) is AMP Group Services Limited. The ultimate controlling entity is AMP Limited.
Key management personnel compensation
The following individuals were the key management personnel of Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd) for the current and prior reporting periods (unless stated otherwise):
 	 	 	
 	 	Date of Appointment/Resignation of directors	
Name	 	during the current or prior reporting period	

Simon J Hoole	 	Appointed 13 November 2002	
Peter W Clarke	 	Appointed 12 February 2003	
Peter M Hodgett	 	Appointed 20 November 2003	
Key management personnel disclosed above, also provided services to other related entities during the year. The below remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd).
Page 17 of 19

 
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd)
Notes to the Financial Statements for the year ended 31 December 2006
17. RELATED PARTY DISCLOSURES (continued)
The following table provides aggregate details of the compensation of key management personnel of Cobalt Solutions Services Limited.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term	 	Post-	 	Other	 	 	 	 	 	 	
 	 	employee	 	employment	 	long-term	 	Termination	 	Share-based	 	 	
 	 	benefits	 	benefits	 	benefits	 	benefits	 	payments	 	Total	
Year	 	$	 	$	 	$	 	$	 	$	 	$	
 	
2006	 	 	2,256,909	 	 	 	236,871	 	 	 	—	 	 	 	—	 	 	 	633,268	 	 	 	3,127,048	 	
2005	 	 	2,134,756	 	 	 	297,035	 	 	 	—	 	 	 	—	 	 	 	544,202	 	 	 	2,975,993	 	
 	
Directors were in office for the entire period unless otherwise stated.
The directors and their director related entities receive normal dividends on their ordinary share holdings in AMP Limited.
Other transactions with key management personnel of the Company
During the year, transactions were entered into between Directors or their Director related entities and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and include:
•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	
•	 	the purchase of AMP superannuation and related products;	
 	 	 	
•	 	financial investment services;	
 	 	 	
•	 	other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of the entity’s financial statements, or discharge of accountability by key management personnel. The transactions are considered to be trivial or domestic in nature.
Transactions with other related parties
The following related party transactions occurred during the financial year:
Enstar Australia Ltd (formerly Cobalt Solutions Australia Ltd) is a company in the wholly owned group comprising AMP Limited (the ultimate parent entity) and its wholly owned controlled entities.
Services provided to the entity are in the normal course of business and on normal commercial terms and conditions. Management fee expenses of $18,900,000 (2005:$15,200,000) were charged during the year from a related party. At reporting date, $1,400,000 (2005: $2,600,000) remained outstanding, forming part of the balance payable to related parties.
Management services were provided by the entity to related parties pursuant to management agreements. Fee revenue totalled $27,800,000 (2005:$30,000,000). At reporting date, $700,000 remained outstanding, (2005: $1,400,000) and is included in the receivables balance from related parties.
18. ECONOMIC DEPENDENCY
A substantial part of the company’s Revenue and Profit before Income Tax, is and will likely continue to be derived from the provision of management services to a related entity.

Page 18 of 19

 

Report of Independent Auditors
The Board of Directors of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited)
We have audited the accompanying balance sheets of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited) as of December 31, 2006 and 2005, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Enstar Australia Limited (formerly Cobalt Solutions Australia Limited) at December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008
Liability limited by a scheme
approved under Professional
Standards Legislation

Exhibit 99.5
HARRINGTON SOUND LIMITED
( formerly  AMP GENERAL INSURANCE LIMITED)
ABN 30 008 405 632
FINANCIAL REPORT
31 DECEMBER 2007
Contents:
 	 	 	 	 	
 	 	Page	 	
Financial Report	 	 	 	 	
Financial Statements	 	 	 	 	
- Income Statement	 	 	1	 	
- Balance Sheet	 	 	2	 	
- Statement of Changes in Equity	 	 	3	 	
- Cash Flow Statement	 	 	4	 	
Notes to the Financial Statements	 	 	5	 	
Report of Independent Auditors	 	 	25	 	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Income Statement
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	31 Dec 07	 	31 Dec 06	
 	 	Note	 	$’000	 	$’000	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct Premium Revenue	 	 	 	 	 	 	—	 	 	 	—	 	
Outwards reinsurance expense	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	
Net premium revenue	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct claims benefit	 	 	 	 	 	 	30,939	 	 	 	19,985	 	
Reinsurance and other recoveries expense	 	 	 	 	 	 	(30,556	)	 	 	(19,982	)	
 	 	 	 	 	 	 	
Net Claims Benefit	 	 	 	 	 	 	383	 	 	 	3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other underwriting expenses	 	 	7	 	 	 	—	 	 	 	(1	)	
 	 	 	 	 	 	 	
Underwriting result	 	 	 	 	 	 	383	 	 	 	4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Income	 	 	6	 	 	 	203	 	 	 	124	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Investment Revenue	 	 	5	 	 	 	151	 	 	 	20,314	 	
General and administration expenses/(revenue)	 	 	7	 	 	 	57	 	 	 	(52	)	
 	 	 	 	 	 	 	
Net profit before tax	 	 	 	 	 	 	680	 	 	 	20,494	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	8	 	 	 	196	 	 	 	112	 	
 	 	 	 	 	 	 	
Net profit attributable to members of Harrington Sound Ltd	 	 	 	 	 	 	484	 	 	 	20,382	 	
 	 	 	 	 	 	 	
The above Income Statement should be read in conjunction with the accompanying notes.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	1 of 25	 	 	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Balance Sheet
As at 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	21	 	 	 	599	 	 	 	145	 	
Receivables	 	 	9	 	 	 	—	 	 	 	112,836	 	
Reinsurance and other recoveries receivable	 	 	10	 	 	 	17,817	 	 	 	25,252	 	
Other financial assets	 	 	11	 	 	 	—	 	 	 	4,154	 	
 	 	 	 	 	 	 	
Total Current Assets	 	 	 	 	 	 	18,416	 	 	 	142,387	 	

Non — Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries receivable	 	 	10	 	 	 	43,057	 	 	 	66,576	 	
Other financial assets	 	 	11	 	 	 	30,000	 	 	 	30,167	 	
Deferred tax assets	 	 	8	 	 	 	3	 	 	 	16	 	
 	 	 	 	 	 	 	
Total Non — Current Assets	 	 	 	 	 	 	73,060	 	 	 	96,759	 	

Total Assets	 	 	 	 	 	 	91,476	 	 	 	239,146	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding Claims liability	 	 	12	 	 	 	17,570	 	 	 	24,990	 	
Payables	 	 	13	 	 	 	256	 	 	 	1,101	 	
Current tax liabilities	 	 	 	 	 	 	203	 	 	 	125	 	
 	 	 	 	 	 	 	
Total Current Liabilities	 	 	 	 	 	 	18,029	 	 	 	26,216	 	

Non — Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding Claims liability	 	 	12	 	 	 	43,057	 	 	 	66,576	 	
 	 	 	 	 	 	 	
Total Non — Current Liabilities	 	 	 	 	 	 	43,057	 	 	 	66,576	 	
 	 	 	 	 	 	 	
Total Liabilities	 	 	 	 	 	 	61,086	 	 	 	92,792	 	
 	 	 	 	 	 	 	
Net Assets	 	 	 	 	 	 	30,390	 	 	 	146,354	 	

Shareholder’s Equity	 	 	 	 	 	 	 	 	 	 	 	 	
Contributed equity	 	 	14	 	 	 	210,552	 	 	 	327,000	 	
Retained profits	 	 	15	 	 	 	(180,162	)	 	 	(180,646	)	

Total Shareholders’ Equity	 	 	 	 	 	 	30,390	 	 	 	146,354	 	
 	 	 	 	 	 	 	
The above Balance Sheet should be read in conjunction with the accompanying notes.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	2 of 25	 	 	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Statement of Changes in Equity
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Issued	 	 	Retained	 	 	 	 	
 	 	Capital	 	 	Earnings	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
Balance as at 1 January 2007	 	 	327,000	 	 	 	(180,646	)	 	 	146,354	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	484	 	 	 	484	 	
Other changes in equity — capital returns	 	 	(116,448	)	 	 	—	 	 	 	(116,448	)	
 	 	 	
Balance as at 31 December 2007	 	 	210,552	 	 	 	(180,162	)	 	 	30,390	 	

Balance as at 1 January 2006	 	 	327,000	 	 	 	(181,028	)	 	 	145,972	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	20,382	 	 	 	20,382	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other changes in equity — Dividends paid	 	 	—	 	 	 	(20,000	)	 	 	(20,000	)	
 	 	 	
Balance as at 31 December 2006	 	 	327,000	 	 	 	(180,646	)	 	 	146,354	 	
 	 	 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	3 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Cash Flow Statement
For the year ended 31 December 2007
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
Cash Flows from Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends Received	 	 	 	 	 	 	10	 	 	 	20,020	 	
Reinsurance recoveries received	 	 	 	 	 	 	399	 	 	 	9	 	
Levies and charges received/(paid)	 	 	 	 	 	 	—	 	 	 	1	 	
Other underwriting and administration income/(expenses)	 	 	 	 	 	 	(902	)	 	 	(2,182	)	
Investment expenses	 	 	 	 	 	 	(2	)	 	 	(8	)	
Interest received	 	 	 	 	 	 	44	 	 	 	17	 	
Other income received	 	 	 	 	 	 	270	 	 	 	397	 	
Income taxes (paid) / received	 	 	 	 	 	 	(104	)	 	 	(398	)	
 	 	 	 	 	 	 	
Total Cash Flows from Operating Activities	 	 	21	 	 	 	(285	)	 	 	17,856	 	

Cash Flows from Investing Activities	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from sale of investments	 	 	 	 	 	 	197	 	 	 	—	 	
 	 	 	 	 	 	 	
Total Cash Flows from Investing Activities	 	 	 	 	 	 	197	 	 	 	—	 	

Cash Flows from Financing Activities	 	 	 	 	 	 	 	 	 	 	 	 	
Loans repaid from related entities	 	 	 	 	 	 	112,836	 	 	 	 	 	
Dividends Paid	 	 	 	 	 	 	—	 	 	 	(20,000	)	
Payment for capital reduction	 	 	 	 	 	 	(116,448	)	 	 	—	 	
 	 	 	 	 	 	 	
Total Cash Flows from Financing Activities	 	 	 	 	 	 	(3,612	)	 	 	(20,000	)	

Net (decrease) / increase in cash	 	 	 	 	 	 	(3,700	)	 	 	(2,144	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash at the beginning of the financial year	 	 	 	 	 	 	4,299	 	 	 	6,443	 	

Cash at the end of the financial year	 	 	21	 	 	 	599	 	 	 	4,299	 	
 	 	 	 	 	 	 	
The above Statement of Cash Flow should be read in conjunction with the accompanying notes.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	4 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The financial statements are separate financial statements as the exemption from preparing consolidated financial statements has been used. The entity and its subsidiaries have been consolidated into the financial statements of AMP Limited, of 33 Alfred St Sydney NSW Australia, an entity incorporated in Australia. Copies of these accounts can be requested from AMP Limited at this address.
The entity’s significant investments in subsidiaries, including the name, country of incorporation or residence, proportion of ownership interest and can found in Note 11 to these accounts. A description of the method used to account for these investments is described under Shares in subsidiaries later in this note.
Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value.
Accounting judgements and estimates
In the course of its operations the company applies judgements and makes estimates that affect the amounts recognised in the financial report. Estimates are based on a combination of historical experience and expectations of future events that are believed to be reasonable at the time.
Accounting Standards issued but not yet effective
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2007, except IFRS8 Operating Segments. The adoption of IFRS8 has removed the requirement for Operating Segment disclosures in this Financial Report.
When applied in future periods, all other recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
Changes in accounting policy
Since 1 January 2007, the company has adopted a number of Accounting Standards and Interpretations which were mandatory for annual periods beginning on or after 1 January 2007. Adoption of these Standards and Interpretations has not had any effect on the financial position or performance of the Company.
Operating revenue
Operating revenue comprises general insurance earned premiums, recoveries and investment income. Investment income is brought to account on an accrual basis.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	5 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Outstanding Claims
The liability for outstanding claims is measured as the best estimate of the present value of expected future payments against claims incurred at the reporting date under general insurance contracts issued by the Company, with an additional risk margin to allow for the inherent uncertainty in the best estimate.
The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs.
Claims handling costs include costs that can be associated directly with individual claims, such as legal and other professional fees, and costs that can only be indirectly associated with individual claims, such as claims administration costs.
The liability includes an allowance for inflation and superimposed inflation and is measured as the present value of the expected future ultimate cost of settling claims. The expected future payments are discounted to present value using a risk free rate.
A risk margin is applied to the outstanding claims liability, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the best estimate. This risk margin increases the probability that the net liability is adequately provided for to a 75% confidence level.
Reinsurance and other recoveries
Reinsurance and other recoveries or receivables on paid claims and outstanding claims are recognised as revenue when claims are paid or the outstanding claim is raised. Reinsurance receivables are discounted to present value consistent with the discounting of outstanding claims.
Investment gains and losses
Dividend and interest income is recognised in the income statement on an effective interest method when the entity obtains control of the right to receive the revenue.
Realised gains and losses represent the change in value between the previously reported value and the amount received on sale of the asset. Unrealised gains and losses represent changes in the fair value of financial assets recognised in the period.
Financial assets
Financial assets, except for shares in subsidiaries, are designated at fair value through profit or loss. Initial recognition is at cost in the balance sheet and subsequent measurement is at fair value with any resultant unrealised gains or losses recognised in the income statement. Details of fair value for the different types of financial assets are listed below:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount. For the purposes of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	6 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash trusts
The fair value of units in a listed cash trust reflects the quoted bid price at balance date. There is no reduction for realisation costs in the value of units in a cash trust. Unlisted unit trusts are recorded at fund managers valuations.
Shares in subsidiaries
Investments in subsidiaries are valued at original cost.
Income Tax
Taxes
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to: (i) temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and (ii) unused tax losses.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
The tax impact on income and expense items recognised directly in equity is also recognised directly in equity.
Tax Consolidation
AMP Limited, Gordian Runoff Limited and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
The entity will be required to make a payment to terminate its liability under the tax funding agreement if it leaves the tax consolidation group.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	7 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
(i)	 	Current tax balances arising from external transactions recognised by entities in the tax-consolidated group occurring after the implementation date, and;	
 	 	 	
(ii)	 	Deferred tax assets arising form unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.	
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement.
Assets and liabilities which arise as a result of differences between the periods in which the underlying transactions occur, and the period in which the funding payments under the tax funding agreement are made, are recognised as intercompany balances receivable and payable in the balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.
Goods and Services Tax (GST)
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.
Receivables
Receivables are financial assets and are measured at fair value. Given the short-term nature of most receivables, the recoverable amount approximates fair value. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Payables
Trade creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Amounts Due To or From Related Parties
Amounts are carried at fair value being nominal amounts due and payable. Interest is taken up as income on an accrual basis. A provision for impairment is recognised when there is objective evidence that the related party will not be able to pay its debt.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	8 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Company makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas in which critical estimates and judgements are applied are described below.
(a) The ultimate liability arising from claims made under insurance contracts
Provision is made at year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Company.
The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, where more information about the claim event is generally available. IBNR claims may often not be reported to the insurer until many years after the events giving rise to the claims has happened. The liability class of business will typically display greater variations between initial estimates and final outcomes because there is a greater degree of difficulty in estimating IBNR reserves. For the short tail class, claims are typically reported soon after the claim event, and hence tend to display lower levels of volatility. In calculating the estimated cost of unpaid claims the Company uses a variety of estimation techniques, generally based upon analysis of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
 	•	 	changes in Company processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with the statistics from previous periods;	
 	 	 	 	
 	•	 	changes in the legal environment;	
 	 	 	 	
 	•	 	the effects of inflation;	
 	 	 	 	
 	•	 	the impact of large losses;	
 	 	 	 	
 	•	 	movements in industry benchmarks.	
Where possible the Company adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions.
Details of specific assumptions used in deriving the outstanding claims liability at year-end are detailed in note 3.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	9 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)
(b) Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also computed using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Company may not receive amounts due to it and these amounts can be reliably measured.
3. ACTUARIAL METHODS AND ASSUMPTIONS
Claims estimates are derived from analysis of the results of several different actuarial models. These models take case estimates as well as payments into account and assume that reported incurred amounts or reported payment amounts will develop steadily from period to period. Other models adopt an ultimate loss ratio for each year that reflects both the long term expected level, as well as incorporating recent experience. The analysis is performed by accident year for the direct insurance class.
Claims are first estimated on an undiscounted basis and are then discounted to allow for the time value of money. The valuation methods adopted include an implicit allowance for future inflation.
The liability class of business may be subject to the emergence of new types of latent claims, but no specific allowance is included for this as at the balance sheet date. Such uncertainties are considered when setting the risk margin appropriate for this class.
A description of the processes used to determine the key assumptions is provided below:
The average weighted term to settlement is calculated separately by class of business, based on historical settlement patterns.
The discount rates are derived from market yields on Government securities as at the balance date, in the currency of the expected claim payments.
Expense rate. Claim handling expenses are calculated based on the projected costs of administering the remaining claims until expiry.
The ultimate to incurred claims ratio is derived by accident or underwriting year based on historical development of claims from period to period.
The effect of changes in the assumptions have been shown in the reconciliations of general insurance assets and liabilities in Note 12.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	10 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
3. ACTUARIAL METHODS AND ASSUMPTIONS (continued)
Process for determining risk margin
The risk margin was determined initially for each portfolio, allowing for the uncertainty of the outstanding claims estimate for each portfolio. Uncertainty was analysed for each portfolio taking into account past volatility in general insurance claims, potential uncertainties relating to the actuarial models and assumptions, the quality of the underlying data used in the models, and the general insurance environment. The estimate of uncertainty is generally greater for long tailed classes when compared to short tail classes due to the longer time until settlement of outstanding claims.
The overall risk margin was determined allowing for diversification between the different portfolios and the relative uncertainty of each portfolio. The assumptions regarding uncertainty for each class were applied to the net central estimates, and the results were aggregated, allowing for diversification in order to arrive at an overall provision.
Sensitivity analysis — general insurance contracts
There are a number of variables which impact the amounts recognised in the financial statements arising from insurance contracts.
The profit or loss and equity of the Company are sensitive to movements in a number of key variables as described below.
 	 	 	
Variable	 	Description of variable	
 	
Average weighted term to settlement	 	Expected payment patterns are used in determining the outstanding claims liability. A decrease in the average term to settlement would lead to claims being paid sooner than anticipated.	
 	 	 	
Discount rate	 	The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money.	
 	 	 	
Expense rate	 	An estimate for the internal costs of administering claims is included in the outstanding claims liability.	
 	 	 	
Ultimate to incurred claims ratio	 	The estimated ultimate claims cost is generally greater than the claims reported as incurred to date, due to claims that are incurred but not reported (IBNR) or due to future developments on existing claims.	
The following table provides and analysis of the sensitivity of the profit after income tax and total equity to changes in these assumptions both gross and net of reinsurance for the non-core business that was transferred to TGI. It is not practical to assess the impact on the indemnification of the residual risks arising from the sale of core business to GIO General Ltd.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	11 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
3. ACTUARIAL METHODS AND ASSUMPTIONS (continued)
2007
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Change in	 	 	Assumption at 12/07	 	 	Profit/Loss (after tax)	 	
Variable	 	variable	 	 	Gross %	 	 	Net %	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	 	+0.5 year	 	 	 	3.3	 	 	 	3.7	 	 	 	1,671	 	 	 	—	 	
 	 	 	-0.5 year	 	 	 	3.3	 	 	 	3.7	 	 	 	(1,767	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	6.4	 	 	 	6.2	 	 	 	1,522	 	 	 	—	 	
 	 	 	-1	%	 	 	6.4	 	 	 	6.2	 	 	 	(1,629	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	17.0	 	 	 	17.0	 	 	 	(474	)	 	 	—	 	
 	 	 	-1	%	 	 	17.0	 	 	 	17.0	 	 	 	474	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio 2	 	 	+1	%	 	 	101.7	 	 	 	101.7	 	 	 	(3,310	)	 	 	—	 	
 	 	 	-1	%	 	 	101.7	 	 	 	101.7	 	 	 	1,497	 	 	 	—	 	
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Change in	 	 	Assumption at 12/06	 	 	Profit/Loss (after tax)	 	
Variable	 	variable	 	 	Gross %	 	 	Net %	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	 	+0.5 year	 	 	 	3.3	 	 	 	3.6	 	 	 	2,010	 	 	 	—	 	
 	 	 	-0.5 year	 	 	 	3.3	 	 	 	3.6	 	 	 	(2,214	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	5.9	 	 	 	5.9	 	 	 	2,058	 	 	 	—	 	
 	 	 	-1	%	 	 	5.9	 	 	 	5.9	 	 	 	(2,201	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	17.3	 	 	 	17.3	 	 	 	(623	)	 	 	—	 	
 	 	 	-1	%	 	 	17.3	 	 	 	17.3	 	 	 	623	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio 2	 	 	+1	%	 	 	102.5	 	 	 	102.5	 	 	 	(3,732	)	 	 	—	 	
 	 	 	-1	%	 	 	102.5	 	 	 	102.5	 	 	 	2,066	 	 	 	—	 	

1	 	— This sensitivity reflects the liability movements only. As assets are invested to match the term of abilities, there is little overall profit impact from a change to interest rates.	
 	 	 	
2	 	— This ratio has only been adjusted for years that are not considered to be fully developed.	

 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	12 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS
During 2001 the company sold its core insurance business to GIO General Ltd. This was undertaken via a portfolio transfer supported by actuarial valuation and approved by the Australian Prudential Regulatory Authority. The remaining non-core portfolio was transferred to its subsidiary TGI Australia Ltd. These entities managed risks associated with these portfolios.
The Board has ultimate responsibility for risk management and governance, including ensuring an appropriate risk framework is in place and is operating effectively.
Financial risks include:
     Liquidity risk
Liquidity risk is the risk that the Company will not be able to met its debt obligations or other cash outflows as they fall due because of lack of liquid assets. The Company manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows and matching the maturity profiles of assets and liabilities.
The table below summaries the maturity profile of the company’s financial liabilities at 31 December based on contractual discounted obligations.
31 Dec 07
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	Up to 1 year	 	 	2 to 3 years	 	 	4 to 5 years	 	 	Over 5 years	 	 	Total	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	256	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	256	 	
 	 	 	
Total	 	 	256	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	256	 	
 	 	 	
31 Dec 06
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	Up to 1 year	 	 	2 to 3 years	 	 	4 to 5 years	 	 	Over 5 years	 	 	Total	 	
Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	1,101	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,101	 	
 	 	 	
Total	 	 	1,101	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,101	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	13 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Credit exposure by credit rating
The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the Company’s credit rating of counter parties:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31 Dec 07	 	 	31 Dec 06	 	
 	 	Reinsurance &	 	 	Financial	 	 	Reinsurance &	 	 	Financial	 	
 	 	Other Recoveries	 	 	Instruments	 	 	Other Recoveries	 	 	Instruments	 	
 	 	$	000	 	 	$	000	 	 	$	000	 	 	$	000	 	
AAA	 	 	54	 	 	 	—	 	 	 	54	 	 	 	—	 	
AA	 	 	77	 	 	 	599	 	 	 	77	 	 	 	145	 	
A	 	 	18,157	 	 	 	—	 	 	 	25,545	 	 	 	—	 	
BBB	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Below BBB	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Not rated	 	 	42,586	 	 	 	—	 	 	 	66,164	 	 	 	117,158	 	
 	 	 	
Total	 	 	60,874	 	 	 	599	 	 	 	91,840	 	 	 	117,303	 	
 	 	 	
Note that the above table is gross of provision for impairment of asset.
The following table provides an aged analysis of financial assets neither past due or impaired, past due and not impaired and impaired assets. Impairment is calculated in accordance with note 1.
Credit risk in trade receivables in managed by analysing the credit ratings of the underlying debts.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Neither past	 	 	 	 	 	 	
 	 	due nor	 	Past due but not impaired	 	 	 	 	
 	 	impaired	 	Up to 1 year	 	More than 1 year	 	Impaired	 	TOTAL	
31 Dec 07	 	$000	 	$000	 	$000	 	$000	 	$000	
Receivables	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Reinsurance and other recoveries	 	 	 	 	 	 	 	 	 	 	60,627	 	 	 	247	 	 	 	60,874	 	
Total	 	 	 	 	 	 	—	 	 	 	60,627	 	 	 	247	 	 	 	60,874	 	

 	 	Neither past	 	 	 	 	 	 	
 	 	due nor	 	Past due but not impaired	 	 	 	 	
 	 	impaired	 	Up to 1 year	 	More than 1 year	 	Impaired	 	TOTAL	
31 Dec 06	 	$000	 	$000	 	$000	 	$000	 	$000	
Receivables	 	 	112,836	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	112,836	 	
Reinsurance and other recoveries	 	 	—	 	 	 	—	 	 	 	91,578	 	 	 	262	 	 	 	91,840	 	
Total	 	 	112,836	 	 	 	—	 	 	 	91,578	 	 	 	262	 	 	 	204,676	 	

 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	14 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
4. RISK MANAGEMENT POLICIES AND PROCEDURES & FINANCIAL INSTRUMENTS (Continued)
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenue and expenses are recognised, in respect of each class of financial asset, financial liability and other are under and in Note 1.
Categories of financial instruments
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2007	 	 	2006	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial assets	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables	 	 	9	 	 	 	—	 	 	 	112,836	 	
Reinsurance Recoveries	 	 	10	 	 	 	60,874	 	 	 	91,828	 	
Cash & cash equivalents	 	 	21	 	 	 	599	 	 	 	145	 	
Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	13	 	 	 	256	 	 	 	1,101	 	
Income tax payable	 	 	 	 	 	 	203	 	 	 	125	 	
For the following financial instruments, the cost carrying amount is considered to equate to their fair value:
•	 	cash deposits	
 	 	 	
•	 	loans to related parties	
 	 	 	
•	 	receivables	
 	 	 	
•	 	payables.	
5. Net Investment Revenue
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Interest	 	 	44	 	 	 	17	 	
Distributions received	 	 	68	 	 	 	308	 	
Dividends	 	 	10	 	 	 	20,020	 	
Changes in fair value of investments:	 	 	 	 	 	 	 	 	
Realised	 	 	(14	)	 	 	(35	)	
Unrealised	 	 	43	 	 	 	4	 	
 	 	 	
Total Net investment revenue	 	 	151	 	 	 	20,314	 	
 	 	 	
6. Other income
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Fire Services Levy fund	 	 	—	 	 	 	124	 	
Other	 	 	203	 	 	 	—	 	
 	 	 	
Total other income	 	 	203	 	 	 	124	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	15 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
7. Operating Expenses
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Expense by nature	 	 	 	 	 	 	 	 	
Reversal of prior Impairment — reinsurance recoverable	 	 	(2	)	 	 	(111	)	
Investment management fee	 	 	2	 	 	 	8	 	
Other Management fees	 	 	50	 	 	 	50	 	
Legal fees	 	 	5	 	 	 	—	 	
Other expenses	 	 	2	 	 	 	—	 	
 	 	 	
Total Expenses	 	 	57	 	 	 	(53	)	

Represented by:	 	 	 	 	 	 	 	 	
Other underwriting (benefit)/expense	 	 	—	 	 	 	(1	)	
General administration expenses/(benefit)	 	 	57	 	 	 	(52	)	
 	 	 	
 	 	 	57	 	 	 	(53	)	
 	 	 	
8. Income Tax
(a) Analysis of income tax expense
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Current tax	 	 	203	 	 	 	123	 	
(Decrease) increase in deferred tax assets	 	 	(1	)	 	 	(10	)	
Over provided in previous years	 	 	(6	)	 	 	(1	)	
 	
Income tax expense	 	 	196	 	 	 	112	 	
 	
(b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period.
In respect of income tax expense attributable to shareholders, the tax rate which applies in both 2007 and 2006 is 30%.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	16 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
8. Income Tax (continued)
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	
Operating profit before income tax	 	 	680	 	 	 	20,494	 	
Prima facie income tax at the rate of 30%	 	 	204	 	 	 	6,148	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Other	 	 	(2	)	 	 	(6,035	)	
Over provided in prior years — deferred tax balances	 	 	(6	)	 	 	(1	)	
 	
Income tax expense per income statement	 	 	196	 	 	 	112	 	

c) Analysis of deferred tax asset	 	 	 	 	 	 	 	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Provision for doubtful debts	 	 	3	 	 	 	3	 	
- Unrealised gains/losses	 	 	—	 	 	 	13	 	
 	
Total deferred tax assets	 	 	3	 	 	 	16	 	
 	
9. Receivables
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Other receivables from related parties	 	 	 	 	 	 	 	 	
- Other related parties	 	 	—	 	 	 	112,836	 	
 	 	 	
Total Current Receivables	 	 	—	 	 	 	112,836	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	17 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
10. Reinsurance and Other Recoveries Receivable
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Reinsurance and other recoveries receivable undiscounted	 	 	 	 	 	 	 	 	
- on claims paid	 	 	257	 	 	 	273	 	
- on outstanding claims	 	 	73,446	 	 	 	110,654	 	
 	 	 	 	 	 	 	 	 	
Discount to present value	 	 	(12,820	)	 	 	(19,088	)	
less: provision for impairement of reinsurance assets	 	 	(9	)	 	 	(11	)	
 	 	 	
Total Reinsurance and other Recoveries	 	 	60,874	 	 	 	91,828	 	

Reinsurance and other recoveries receivable- current	 	 	17,826	 	 	 	25,263	 	
less: provision for impairement of reinsurance assets	 	 	(9	)	 	 	(11	)	
 	 	 	
 	 	 	17,817	 	 	 	25,252	 	

Reinsurance and other recoveries receivable- non current	 	 	43,057	 	 	 	66,576	 	
less: provision for impairement of reinsurance assets	 	 	—	 	 	 	—	 	
 	 	 	
 	 	 	43,057	 	 	 	66,576	 	
 	 	 	
11. Other financial assets
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Unquoted investments — at fair value:	 	 	 	 	 	 	 	 	
Units held in cash managed trust — other related parties	 	 	—	 	 	 	4,154	 	
 	 	 	
Total current financial assets	 	 	—	 	 	 	4,154	 	

Non-Current	 	 	 	 	 	 	 	 	
Unquoted investments — at fair value:	 	 	 	 	 	 	 	 	
Preference shares	 	 	—	 	 	 	167	 	
Unquoted investments — at cost:	 	 	 	 	 	 	 	 	
Ordinary shares — subsidiaries	 	 	30,000	 	 	 	30,000	 	
 	 	 	
Total non-current financial assets	 	 	30,000	 	 	 	30,167	 	

Total other financial assets	 	 	30,000	 	 	 	34,321	 	
 	 	 	
Investment in controlled entities
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Percentage of equity Interest	 	 	Dollar Amount held	 	
 	 	2007	 	 	2006	 	 	2007	 	 	2006	 	
Name of Entity	 	%	 	 	%	 	 	$’000	 	 	$’000	 	
TGI Australia Ltd	 	 	100	 	 	 	100	 	 	 	30,000	 	 	 	30,000	 	
 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	30,000	 	 	 	30,000	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	18 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
12. Outstanding Claims
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Expected future claims payments (undiscounted)	 	 	73,446	 	 	 	110,654	 	
Discount to present value	 	 	(12,819	)	 	 	(19,088	)	
 	 	 	
Total Outstanding Claims	 	 	60,627	 	 	 	91,566	 	

Current	 	 	17,570	 	 	 	24,990	 	
Non Current	 	 	43,057	 	 	 	66,576	 	
 	 	 	
Total Outstanding Claims	 	 	60,627	 	 	 	91,566	 	
 	 	 	
Outstanding claims details
The weighted average expected term to settlement of the outstanding claims from the balance date is estimated to be 3.68 years (06:3.94 years).
The Company has effectively portfolio transferred its insurance contracts to GIO General Ltd and TGI Australia Ltd in 2001. No new contracts have been issued from the entity. The production of a claims development table prior to 2004 is impracticable as the information required to complete this for the business transferred to GIO General Ltd is not available to the Company.
 	 	 	 	 	 	 	 	 	
 	 	Net	 	 	Gross	 	
Estimate of Cumulative claims	 	$’000’s	 	 	$’000’s	 	
31 December 2004	 	 	—	 	 	 	660,999	 	
31 December 2005	 	 	—	 	 	 	647,156	 	
31 December 2006	 	 	—	 	 	 	639,624	 	
32 December 2007	 	 	—	 	 	 	611,558	 	
 	 	 	 	 	 	 	 	 	
Estimate of Cumulative Claims at 31 December 2007	 	 	—	 	 	 	611,558	 	
 	 	 	 	 	 	 	 	 	
Cumulative Payments	 	 	—	 	 	 	555,708	 	

Undiscounted central estimate	 	 	—	 	 	 	55,850	 	
 	 	 	 	 	 	 	 	 	
Effect of Discounting	 	 	—	 	 	 	12,819	 	

Discounted Central Estimate	 	 	—	 	 	 	43,031	 	

Risk Margin	 	 	—	 	 	 	7,516	 	
Claims Handling Provision	 	 	—	 	 	 	10,080	 	
 	
Gross Outstanding Claims as per the Balance Sheet	 	 	—	 	 	 	60,627	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	19 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
13. Payables
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Other creditors	 	 	256	 	 	 	1,101	 	
 	 	 	
Total Payables	 	 	256	 	 	 	1,101	 	
 	 	 	
14. Contributed Equity
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
Paid up Capital	 	 	 	 	 	 	 	 	
 	 	 	
Paid up capital - 327,000 $0.64 ordinary shares	 	 	210,552	 	 	 	327,000	 	
 	 	 	
(2006: 327,000 $1 ordinary shares)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Movements in contributed equity	 	 	 	 	 	 	 	 	
Balance at the beginning of the period	 	 	327,000	 	 	 	327,000	 	
Capital return — 31 May 2007	 	 	(115,908	)	 	 	—	 	
Capital return - 19 September 2007	 	 	(540	)	 	 	—	 	
 	 	 	
Balance at the end of the period	 	 	210,552	 	 	 	327,000	 	
 	 	 	
Rights attaching to Ordinary Shares
Ordinary shares attract the following rights:
 	(a)	 	to receive notice of and to attend and vote at all general meetings of the Company;

 	(b)	 	to receive dividends; and	
 	 	 	 	
 	(c)	 	in a winding up, to participate equally in the distribution of the assets of the Company (both capital and surplus), subject only to any amounts unpaid on the Share.	
15. Retained profits
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Accumulated Losses at beginning of the financial year	 	 	(180,646	)	 	 	(181,028	)	
Operating Profit after Income Tax	 	 	484	 	 	 	20,382	 	
Dividends paid	 	 	—	 	 	 	(20,000	)	
 	 	 	
Accumulated Losses at the end of the financial year	 	 	(180,162	)	 	 	(180,646	)	

 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Dividends paid on ordinary shares	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
- Dividend paid on 12 April 2006 Unfranked dividend of $61.16 per share	 	 	—	 	 	 	20,000	 	

Dividends paid during the year	 	 	—	 	 	 	20,000	 	
 	 	 	
16. Franking account
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies are transferred to the Head Entity, AMP Limited. The entity will be required to make a payment to terminate its liability under the tax funding agreement if it leaves the tax consolidation group.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	20 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
17. Key management personnel compensation
The following individuals were the key management personnel of Harrington Sound Limited (formerly AMP General Insurance Limited) for the current and prior reporting periods (unless stated otherwise):
 	 	 	 	 	
 	 	Date of	 	 	
 	 	Appointment/Resignation	 	 	
 	 	during the current or prior	 	 	
Name	 	reporting period	 	 	
 	
Peter Hodgett	 	Resigned 31 December 2007	 	 	
Simon Hoole	 	 	 	 	
Paul Leaming	 	 	 	 	
Bryan Dean	 	Appointed 20 December 2007,	 	 	
The following table provides aggregate details of the compensation of key management personnel of Harrington Sound Ltd (formerly AMP General Insurance Limited).
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term	 	Post-	 	Other	 	 	 	 	 	Share-	 	 	
 	 	employee	 	employment	 	long-term	 	Termination	 	based	 	 	
 	 	benefits	 	benefits	 	benefits	 	benefits	 	payments	 	Total	
Year	 	$	 	$	 	$	 	$	 	$	 	$	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2007	 	 	3,562,459	 	 	 	374,053	 	 	 	—	 	 	 	2,335,571	 	 	 	1,043,535	 	 	 	7,315,618	 	
2006	 	 	3,396,808	 	 	 	355,930	 	 	 	—	 	 	 	—	 	 	 	1,019,052	 	 	 	4,771,790	 	
18. Auditors’ remuneration
Auditors’ remuneration for the year ended 31 December 2007 is paid on the Company’s behalf by a controlled entity within the AMP Limited Group.
19. Contingent Liabilities
There are no contingent liabilities as at 31 December 2007 (2006: Nil)

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	21 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
20. Related Parties
Transactions between Harrington Sound Ltd (formerly AMP General Insurance Limited) and other related parties for the financial year consisted of:
 	•	 	Payment of management fees for services provided	
 	 	 	 	
 	•	 	Provision of share capital	
 	 	 	 	
 	•	 	Provision of intercompany loans	
Controlling Entity
The immediate parent entity as at 31 December 2007 is Shelly Bay Holdings Limited (formerly AMP General Insurance Holdings Limited). AMP Limited is the ultimate parent entity as at 31 December 2007.
Directors
The directors of the company during the financial year and the dates of appointments and resignations during the year are:
 	 	 	 	 	
P D Leaming	 	 	 	 	
P M Hodgett	 	Resigned 31 December 2007	 	 	
S J Hoole	 	 	 	 	
B Dean	 	Appointed 20 December 2007	 	 	
Key management personnel disclosed above, also provided services to other related entities during the year. The above remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to Harrington Sound Ltd (formerly AMP General Insurance Limited).
Other transactions with directors of the Company and their director-related entities
The directors and their director related entities receive normal dividends on their ordinary share holdings in AMP Limited.
During the year, transactions were entered into between Directors or their Director related entities and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and include:
•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	
•	 	the purchase of AMP superannuation products;	
 	 	 	
•	 	Financial investment services;	
 	 	 	
•	 	Other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of AMP’s financial statements, or discharge of accountability by the Directors. The transactions are considered to be trivial or domestic in nature.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	22 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
20. Related Parties (continued)
Transactions with related parties
The aggregate amounts brought to account in respect of the following types of transactions and each class of related party involved were:
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$	 	 	$	 	
Amounts attributable to transactions with related parties	 	 	 	 	 	 	 	 	
Operating (loss) before income tax for the financial year includes aggregate amounts attributable to transactions in respect of:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Investment Expenses/(benefit) — other related parties	 	 	1,969	 	 	 	7,940	 	
Management Expense — other related parties	 	 	50,000	 	 	 	50,000	 	
 	 	 	 	 	 	 	 	 	
Amounts receivable from and payable to related parties	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Aggregate amounts receivable at balance date :	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Receivable — other related parties	 	 	—	 	 	 	112,836,536	 	
AMP Services Limited and Enstar Australia Holdings Pty Ltd (formerly Cobalt Solutions Australia Limited), fellow wholly controlled entities at 31 December 2007, provide operational and administrative (including employee related) services to the company with the exception of certain financing arrangements, finance leasing and agent related services. The services provided are in the normal course of the business and are on normal commercial terms and conditions.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	23 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2007
21. Cashflow Reconciliation
 	 	 	 	 	 	 	 	 	
 	 	2007	 	 	2006	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
(i) Reconciliation of cash	 	 	 	 	 	 	 	 	
Cash at call	 	 	599	 	 	 	145	 	
Cash in Trust	 	 	—	 	 	 	4,154	 	
 	 	 	
Total Cash	 	 	599	 	 	 	4,299	 	

(ii) Reconciliation of net cash flows from operating activities to operating profit after income tax:	
 	 	 	 	 	 	 	 	 	
Operating profit / (loss) after income tax	 	 	484	 	 	 	20,382	 	
 	 	 	 	 	 	 	 	 	
Change in assets and liabilities	 	 	 	 	 	 	 	 	
Unrealised profit / (loss) on investments	 	 	43	 	 	 	(4	)	
Increase in doubtful debts provision	 	 	9	 	 	 	—	 	
(Increase)/Decrease in deferred tax asset	 	 	13	 	 	 	(10	)	
(Increase) /Decrease in reinsurance recoveries	 	 	30,944	 	 	 	19,992	 	
(Decrease) in accounts payable	 	 	(845	)	 	 	(1,228	)	
(Decrease) / Increase in outstanding claims	 	 	(30,938	)	 	 	(19,985	)	
(Decrease) / Increase in provisions	 	 	78	 	 	 	(277	)	
(Increase) / decrease in other assets	 	 	(73	)	 	 	(1,014	)	
 	 	 	
Net cash inflow from operating activities	 	 	(285	)	 	 	17,856	 	
 	 	 	
22. Events Occurring After the Reporting Date
On 11 December 2007 a Sale and Purchase Agreement was entered into by the ultimate parent AMP Limited and Enstar Australia Holdings Pty Ltd for the sale of the entity.
The sale was subject to a number of conditions including regulatory approval by the Australian Prudential Regulatory Authority (APRA) and was expected to be completed in quarter one 2008.
APRA subsequently approved the Sale Agreement on 22 February 2008. The sale was then completed on 5 March 2008. Enstar Australia Holdings Pty Ltd assumed ownership of the company at this point.

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Report of Independent Auditors
The Board of Directors of Harrington Sound Limited (formerly AMP General Insurance Limited)
We have audited the accompanying balance sheets of Harrington Sound Limited (formerly AMP General Insurance Limited) as of December 31, 2007 and 2006, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Harrington Sound Limited (formerly AMP General Insurance Limited) at December 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008
 	 	 	 	 	
 	Liability limited by a scheme
approved under Professional
Standards Legislation

 
HARRINGTON SOUND LIMITED
( formerly  AMP GENERAL INSURANCE LIMITED
ABN 30 008 405 632
FINANCIAL REPORT
31 DECEMBER 2006
Contents:
 	 	 	 	 	
 	 	Page	 	
Financial Report	 	 	 	 	
Financial Statements	 	 	 	 	
— Income Statement	 	 	1	 	
— Balance Sheet	 	 	2	 	
— Statement of Changes in Equity	 	 	3	 	
— Cash Flow Statement	 	 	4	 	
Notes to the Financial Statements	 	 	5	 	
Report of Independent Auditors	 	 	25	 	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Income Statement
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	31 Dec 06	 	31 Dec 05	
 	 	Note	 	$’000	 	$’000	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct Premium Revenue	 	 	 	 	 	 	—	 	 	 	—	 	
Outwards reinsurance expense	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	
Net premium revenue	 	 	 	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct claims benefit	 	 	 	 	 	 	19,985	 	 	 	48,161	 	
Reinsurance and other recoveries expense	 	 	 	 	 	 	(19,982	)	 	 	(47,949	)	
 	 	 	 	 	 	 	
Net Claims Incurred	 	 	8	 	 	 	3	 	 	 	212	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other underwriting expenses	 	 	7	 	 	 	(1	)	 	 	7	 	
 	 	 	 	 	 	 	
Underwriting result	 	 	 	 	 	 	4	 	 	 	205	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Income	 	 	6	 	 	 	124	 	 	 	1,236	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Investment Revenue	 	 	5	 	 	 	20,314	 	 	 	697	 	
General and administration expenses revenue	 	 	7	 	 	 	(52	)	 	 	(5	)	
 	 	 	 	 	 	 	
Net profit before tax	 	 	 	 	 	 	20,494	 	 	 	2,143	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	9	 	 	 	112	 	 	 	385	 	
 	 	 	 	 	 	 	
Net profit attributable to members of AMP General Insurance Ltd	 	 	 	 	 	 	20,382	 	 	 	1,758	 	
 	 	 	 	 	 	 	
The above Income Statement should be read in conjunction with the accompanying notes.

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Harrington Sound Ltd (formerly AMP General Insurance Limited)
Balance Sheet
As at 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Note	 	$’000	 	 	$’000	 	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	23	 	 	 	145	 	 	 	600	 	
Receivables	 	 	10	 	 	 	112,836	 	 	 	111,822	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	25,252	 	 	 	29,911	 	
Other financial assets	 	 	12	 	 	 	4,154	 	 	 	5,843	 	
 	 	 	 	 	 	 	
Total Current Assets	 	 	 	 	 	 	142,387	 	 	 	148,176	 	

Non — Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries receivable	 	 	11	 	 	 	66,576	 	 	 	81,909	 	
Other financial assets	 	 	12	 	 	 	30,167	 	 	 	30,163	 	
Deferred tax assets	 	 	9	 	 	 	16	 	 	 	6	 	
 	 	 	 	 	 	 	
Total Non — Current Assets	 	 	 	 	 	 	96,759	 	 	 	112,078	 	

 	 	 	 	 	 	 	
Total Assets	 	 	 	 	 	 	239,146	 	 	 	260,254	 	

Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding Claims liability	 	 	13	 	 	 	24,990	 	 	 	29,642	 	
Payables	 	 	14	 	 	 	1,101	 	 	 	2,329	 	
Current tax liabilities	 	 	 	 	 	 	125	 	 	 	402	 	
 	 	 	 	 	 	 	
Total Current Liabilities	 	 	 	 	 	 	26,216	 	 	 	32,373	 	

Non — Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding Claims liability	 	 	13	 	 	 	66,576	 	 	 	81,909	 	
 	 	 	 	 	 	 	
Total Non — Current Liabilities	 	 	 	 	 	 	66,576	 	 	 	81,909	 	

 	 	 	 	 	 	 	
Total Liabilities	 	 	 	 	 	 	92,792	 	 	 	114,282	 	

 	 	 	 	 	 	 	
Net Assets	 	 	 	 	 	 	146,354	 	 	 	145,972	 	

Shareholder’s Equity	 	 	 	 	 	 	 	 	 	 	 	 	
Contributed equity	 	 	15	 	 	 	327,000	 	 	 	327,000	 	
Retained profits	 	 	16	 	 	 	(180,646	)	 	 	(181,028	)	

Total Shareholders’ Equity	 	 	 	 	 	 	146,354	 	 	 	145,972	 	
 	 	 	 	 	 	 	
The above Balance Sheet should be read in conjunction with the accompanying notes.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	2 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Statement of Changes in Equity
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Issued	 	 	Retained	 	 	 	 	
 	 	Capital	 	 	Earnings	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as at 1 January 2006	 	 	327,000	 	 	 	(181,028	)	 	 	145,972	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	20,382	 	 	 	20,382	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other changes in equity — Dividends paid	 	 	—	 	 	 	(20,000	)	 	 	(20,000	)	
 	 	 	
Balance as at 31 December 2006	 	 	327,000	 	 	 	(180,646	)	 	 	146,354	 	

Balance as at 1 January 2005	 	 	327,000	 	 	 	(182,786	)	 	 	144,214	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Profit/(loss) after income tax	 	 	—	 	 	 	1,758	 	 	 	1,758	 	
 	 	 	
Balance as at 31 December 2005	 	 	327,000	 	 	 	(181,028	)	 	 	145,972	 	
 	 	 	
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	3 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Cash Flow Statement
For the year ended 31 December 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	2006	 	 	2005	 	
 	 	Note	 	 	$’000	 	 	$’000	 	
Cash Flows from Operating Activities	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends Received	 	 	 	 	 	 	20,020	 	 	 	—	 	
Reinsurance recoveries received	 	 	 	 	 	 	9	 	 	 	267	 	
Levies and charges received/(paid)	 	 	 	 	 	 	1	 	 	 	209	 	
Other underwriting and administration income/(expenses)	 	 	 	 	 	 	(2,182	)	 	 	470	 	
Investment expenses	 	 	 	 	 	 	(8	)	 	 	47	 	
Interest received	 	 	 	 	 	 	17	 	 	 	—	 	
Other income received	 	 	 	 	 	 	397	 	 	 	1,951	 	
Income taxes (paid) / received	 	 	 	 	 	 	(398	)	 	 	9,065	 	
 	 	 	 	 	 	 	
Total Cash Flows from Operating Activities	 	 	23	 	 	 	17,856	 	 	 	12,009	 	

Cash Flows from Investing Activities	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Total Cash Flows from Investing Activities	 	 	 	 	 	 	—	 	 	 	—	 	

Cash Flows from Financing Activities	 	 	 	 	 	 	 	 	 	 	 	 	
Loans granted to related entities	 	 	 	 	 	 	—	 	 	 	(25,000	)	
Dividends Paid	 	 	 	 	 	 	(20,000	)	 	 	—	 	
 	 	 	 	 	 	 	
Total Cash Flows from Financing Activities	 	 	 	 	 	 	(20,000	)	 	 	(25,000	)	

Net (decrease) / increase in cash	 	 	 	 	 	 	(2,144	)	 	 	(12,991	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash at the beginning of the financial year	 	 	 	 	 	 	6,443	 	 	 	19,434	 	

Cash at the end of the financial year	 	 	23	 	 	 	4,299	 	 	 	6,443	 	
 	 	 	 	 	 	 	
The above Statement of Cash Flow should be read in conjunction with the accompanying notes.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	4 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
This Financial Report, comprising the financial statements and the notes thereto, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The financial statements are separate financial statements as the exemption from preparing consolidated financial statements has been used. The entity and its subsidiaries have been consolidated into the financial statements of AMP Limited, of 33 Alfred St Sydney NSW Australia, an entity incorporated in Australia. Copies of these accounts can be requested from AMP Limited at this address.
The entity’s significant investments in subsidiaries, including the name, country of incorporation or residence, proportion of ownership interest and can found in Note 12 to these accounts. A description of the method used to account for these investments is described under Shares in subsidiaries later in this note.
The Financial Report has been prepared in accordance with the historical cost convention except for investments, which have been measured at fair value, and insurance liabilities, which have been discounted to present value.
The principal accounting policies adopted in the preparation of the Financial Report are set out below. These policies have been consistently applied to the current year and comparative period, unless otherwise stated. The same accounting policies and methods of computation are followed by this Financial Report as compared with the 31 December 2005 Financial Report. Where necessary, comparative information has been reclassified to be consistent with current period disclosures.
Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the reporting period ending 31 December 2006. When applied in future periods, these recently issued or amended standards are not expected to have a material impact on the company’s results or financial position; however they may impact Financial Report disclosures.
Operating revenue
Operating revenue comprises general insurance earned premiums, recoveries and investment income. Investment income is brought to account on an accrual basis.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	5 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
Outstanding Claims
The liability for outstanding claims is measured as the best estimate of the present value of expected future payments against claims incurred at the reporting date under general insurance contracts issued by the Company, with an additional risk margin to allow for the inherent uncertainty in the best estimate.
The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs.
The liability includes an allowance for inflation and superimposed inflation and is measured as the present value of the expected future ultimate cost of settling claims. The expected future payments are discounted to present value using a risk free rate.
A risk margin is applied to the outstanding claims liability, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the best estimate. This risk margin increases the probability that the net liability is adequately provided for.
Reinsurance and other recoveries
Reinsurance and other recoveries or receivables on paid claims and outstanding claims are recognised as revenue when claims are paid or the outstanding claim is raised. Reinsurance receivables are discounted to present value consistent with the discounting of outstanding claims.
Investment gains and losses
Dividend, interest income and trust distributions are recognised in the income statement on an effective interest method when the entity obtains control of the right to receive the revenue.
Realised gains and losses represent the change in value between the previously reported value and the amount received on sale of the asset. Unrealised gains and losses represent changes in the fair value of financial assets recognised in the period.
Financial assets
Financial assets, except for shares in subsidiaries, are designated at fair value through profit or loss. Initial recognition is at cost in the balance sheet and subsequent measurement is at fair value with any resultant unrealised gains or losses recognised in the income statement. Details of fair value for the different types of financial assets are listed below:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand that is available on demand and deposits held at call with financial institutions. Cash and cash equivalents are carried at fair value, being the principal amount. For the purposes of the cash flow statement, cash also includes other highly liquid investments not subject to significant risk of change in value.
Cash trusts
The fair value of units in a listed cash trust reflects the quoted bid price at balance date. There is no reduction for realisation costs in the value of units in a cash trust. Unlisted unit trusts are recorded at fund managers valuations.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	6 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
Shares in subsidiaries
Investments in subsidiaries are valued at original cost, unless the net realisable value is measured to be lower than cost, in which case an impairment would be recognised.
Income Tax
Taxes
Income tax
Income tax expense is the tax payable on taxable income for the current period based on the income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to: (i) temporary differences between the tax bases of assets and liabilities and their balance sheet carrying amounts, and (ii) unused tax losses.
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
The tax impact on income and expense items recognised directly in equity is also recognised directly in equity.
Tax Consolidation
AMP Limited, Harrington Sound Ltd (formerly AMP General Insurance Limited) and certain other wholly owned controlled entities of AMP Limited comprise a tax-consolidated group of which AMP Limited is the head entity. The implementation date for the tax-consolidated group was 30 June 2003.
Under tax consolidation, AMP Limited as head entity, assumes the following balances from subsidiaries within the tax-consolidated group:
(i) Current tax balances arising from external transactions recognised by entities in the tax-consolidated group occurring after the implementation date, and;
(ii) Deferred tax assets arising form unused tax losses and unused tax credits recognised by entities in the tax-consolidated group occurring after the implementation date.
A tax funding agreement has been entered into by the head entity and the controlled entities in the tax-consolidated group. Controlled entities in the tax-consolidated group will continue to be responsible, by the operation of the tax funding agreement, for funding tax payments required to be made by the head entity arising from underlying transactions of the controlled entities. Controlled entities will make (receive) contributions to (from) the head entity for the balances recognised by the head entity described in (i) and (ii) above. The contributions will be calculated in accordance with the tax funding agreement.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	7 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
Assets and liabilities which arise as a result of differences between the periods in which the underlying transactions occur, and the period in which the funding payments under the tax funding agreement are made, are recognised as intercompany balances receivable and payable in the balance sheet. The recoverability of balances arising from the tax funding arrangements is based on the ability of the tax-consolidated group to utilise the amounts recognised by the head entity.
Goods and Services Tax (GST)
All revenues, expenses and assets are recognised net of any GST paid, except where they relate to products and services which are input taxed for GST purposes or the GST incurred is not recoverable from the relevant tax authorities. In such circumstances, the GST paid is recognised as part of the cost of acquisition of the assets or as part of the particular expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the tax authorities is included as a receivable or payable in the balance sheet.
Cash flows are reported on a gross basis reflecting any GST paid or collected. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to, local tax authorities are classified as operating cash flows.
Receivables
Receivables are financial assets and are measured at fair value. Given the short-term nature of most receivables, the recoverable amount approximates fair value. A provision for impairment is recognised when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. The impairment charge is recognised in the income statement. Bad debts are written off as incurred.
Payables
Trade creditors and accruals are recognised as liabilities for amounts to be paid in the future for goods and services received, whether or not billed to the entity.
Amounts Due To or From Related Parties
Amounts are carried at fair value being nominal amounts due and payable. Interest is taken up as income on an accrual basis. A provision for impairment is recognised when there is objective evidence that the related party will not be able to pay its debt.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	8 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The Company makes estimates and assumptions in respect of certain key assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key areas in which critical estimates and judgements are applied are described below.
(a) The ultimate liability arising from claims made under insurance contracts
Provision is made at year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred but not yet reported to the Company.
The estimated cost of claims includes direct expenses to be incurred in settling claims gross of the expected value of salvage and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established.
The estimation of claims incurred but not reported (“IBNR”) is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, where more information about the claim event is generally available. IBNR claims may often not be reported to the insurer until many years after the events giving rise to the claims has happened. The liability class of business will typically display greater variations between initial estimates and final outcomes because there is a greater degree of difficulty in estimating IBNR reserves. For the short tail class, claims are typically reported soon after the claim event, and hence tend to display lower levels of volatility. In calculating the estimated cost of unpaid claims the Company uses a variety of estimation techniques, generally based upon analysis of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience. Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
 	•	 	changes in Company processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with the statistics from previous periods;	
 	 	 	 	
 	•	 	changes in the legal environment;	
 	 	 	 	
 	•	 	the effects of inflation;	
 	 	 	 	
 	•	 	the impact of large losses;	
 	 	 	 	
 	•	 	movements in industry benchmarks.	
Where possible the Company adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based upon the gross provisions.
Details of specific assumptions used in deriving the outstanding claims liability at year-end are detailed in note 3.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	9 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
(b) Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are also computed using the above methods. In addition, the recoverability of these assets is assessed on a periodic basis to ensure that the balance is reflective of the amounts that will ultimately be received, taking into consideration factors such as counterparty and credit risk. Impairment is recognised where there is objective evidence that the Company may not receive amounts due to it and these amounts can be reliably measured.
3. ACTUARIAL METHODS AND ASSUMPTIONS
Claims estimates are derived from analysis of the results of several different actuarial models. These models take case estimates as well as payments into account and assume that reported incurred amounts or reported payment amounts will develop steadily from period to period. Other models adopt an ultimate loss ratio for each year that reflects both the long term expected level, as well as incorporating recent experience. The analysis is performed by accident year for the direct insurance class.
Claims are first estimated on an undiscounted basis and are then discounted to allow for the time value of money. The valuation methods adopted include an implicit allowance for future inflation.
The liability class of business may be subject to the emergence of new types of latent claims, but no specific allowance is included for this as at the balance sheet date. Such uncertainties are considered when setting the risk margin appropriate for this class.
A description of the processes used to determine the key assumptions is provided below:
The average weighted term to settlement is calculated separately by class of business, based on historical settlement patterns.
The discount rates are derived from market yields on Government securities as at the balance date, in the currency of the expected claim payments.
Expense rate. Claim handling expenses are calculated based on the projected costs of administering the remaining claims until expiry.
The ultimate to incurred claims ratio is derived by accident or underwriting year based on historical development of claims from period to period.
The effect of changes in the assumptions have been shown below.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	10 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
Process for determining risk margin
The risk margin has been determined having regard to the company’s net exposure after reinsurance and other recoveries. The only material risk to the portfolio on a net basis is the risk of reinsurer failure, which the Director’s believe to be remote. As such the Director’s do not believe a risk margin is required to achieve a probability of adequacy of 75%.
Sensitivity analysis — general insurance contracts
There are a number of variables which impact the amounts recognised in the financial statements arising from insurance contracts.
The profit or loss and equity of the Company are sensitive to movements in a number of key variables as described below.
 	 	 	
Variable	 	Description of variable	
 	
Average weighted term to settlement	 	Expected payment patterns are used in determining the outstanding claims liability. A decrease in the average term to settlement would lead to claims being paid sooner than anticipated.	
 	 	 	
Discount rate	 	The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money.	
 	 	 	
Expense rate	 	An estimate for the internal costs of administering claims is included in the outstanding claims liability.	
 	 	 	
Ultimate to incurred claims ratio	 	The estimated ultimate claims cost is generally greater than the claims reported as incurred to date, due to claims that are incurred but not reported (IBNR) or due to future developments on existing claims.	
The following table provides and analysis of the sensitivity of the profit after income tax and total equity to changes in these assumptions both gross and net of reinsurance for the non-core business that was transferred to TGI. It is not practical to assess the impact on the indemnification of the residual risks arising from the sale of core business to GIO General Ltd.

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	11 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Change in	 	 	Assumption at 12/06	 	 	Profit/(Loss) (after tax)	 	
Variable	 	variable	 	 	Gross %	 	 	Net %	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	+0.5 year	 	 	3.3	 	 	 	3.6	 	 	 	2,010	 	 	 	—	 	
 	 	-0.5 year	 	 	3.3	 	 	 	3.6	 	 	 	(2,214	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	5.9	 	 	 	5.9	 	 	 	2,058	 	 	 	—	 	
 	 	 	-1	%	 	 	5.9	 	 	 	5.9	 	 	 	(2,201	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	17.3	 	 	 	17.3	 	 	 	(623	)	 	 	—	 	
 	 	 	-1	%	 	 	17.3	 	 	 	17.3	 	 	 	623	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	102.5	 	 	 	102.5	 	 	 	(3,732	)	 	 	—	 	
 	 	 	-1	%	 	 	102.5	 	 	 	102.5	 	 	 	2,066	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2005
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Change in	 	 	Assumption at 12/05	 	 	Profit/(Loss) (after tax)	 	
Variable	 	variable	 	 	Gross %	 	 	Net %	 	 	Gross $’000	 	 	Net $’000	 	
Average weighted term to settlement	 	+0.5 year	 	 	3.48	 	 	 	3.59	 	 	 	2,008	 	 	 	—	 	
 	 	-0.5 year	 	 	3.48	 	 	 	3.59	 	 	 	(2,163	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount Rate1	 	 	+1	%	 	 	5.24	 	 	 	5.24	 	 	 	2,014	 	 	 	—	 	
 	 	 	-1	%	 	 	5.24	 	 	 	5.24	 	 	 	(2,148	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expense Rate	 	 	+1	%	 	 	21.90	 	 	 	21.90	 	 	 	(669	)	 	 	—	 	
 	 	 	-1	%	 	 	21.90	 	 	 	21.90	 	 	 	669	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ultimate to incurred claims ratio2	 	 	+1	%	 	 	103.34	 	 	 	103.34	 	 	 	(4,901	)	 	 	—	 	
 	 	 	-1	%	 	 	103.34	 	 	 	103.34	 	 	 	2,940	 	 	 	—	 	

 	 	 	
1	 	- This sensitivity reflects the liability movements only. As assets are invested to match the term of abilities, there is little overall profit impact from a change to interest rates.	
 	 	 	
2	 	- This ratio has only been adjusted for years that are not considered to be fully developed.	

 	

 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	12 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
4. Insurance Contracts — Risk Management policies and procedures.
During 2001 the company sold its core insurance business to GIO General Ltd. This was undertaken via a portfolio transfer supported by actuarial valuation and approved by the Australian Prudential Regulatory Authority. The remaining non-core portfolio was transferred to its subsidiary TGI Australia Ltd. These entities managed risks associated with these portfolios.
6. Net Investment Revenue
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Interest	 	 	17	 	 	 	21	 	
Trust distributions received	 	 	308	 	 	 	609	 	
Dividends	 	 	20,020	 	 	 	—	 	
Changes in fair value of investments:	 	 	 	 	 	 	 	 	
Realised	 	 	(35	)	 	 	72	 	
Unrealised	 	 	4	 	 	 	(5	)	
 	 	 	
Total Net investment revenue	 	 	20,314	 	 	 	697	 	
 	 	 	
6. Other income
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Fire Services Levy	 	 	—	 	 	 	1,124	 	
Other	 	 	124	 	 	 	112	 	
 	 	 	
Total expenses	 	 	124	 	 	 	1,236	 	
 	 	 	
7. Operating Expenses
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Expense by nature	 	 	 	 	 	 	 	 	
Reversal of prior Impairment — reinsurance recoverable	 	 	—	 	 	 	(5	)	
Bad Debts written off	 	 	(111	)	 	 	—	 	
Investment management fee	 	 	8	 	 	 	(47	)	
Other Management fees	 	 	50	 	 	 	50	 	
External consultant costs	 	 	—	 	 	 	(3	)	
Legal fees	 	 	—	 	 	 	7	 	
 	 	 	
Total Expenses	 	 	(53	)	 	 	2	 	

Represented by:	 	 	 	 	 	 	 	 	
Other underwriting (benefit)/expense	 	 	(1	)	 	 	7	 	
General administration expenses	 	 	(52	)	 	 	(5	)	
 	 	 	
 	 	 	(53	)	 	 	2	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	13 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
8. Net Claims Incurred
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	31-Dec-06	 	 	31-Dec-05	 	
 	 	Current	 	 	Prior	 	 	 	 	 	 	Current	 	 	Prior	 	 	 	 	
 	 	year	 	 	years	 	 	Total	 	 	year	 	 	years	 	 	Total	 	
 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross claims benefit	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross claims incurred — undiscounted	 	 	—	 	 	 	25,092	 	 	 	25,092	 	 	 	—	 	 	 	59,442	 	 	 	59,442	 	
Discount movement	 	 	—	 	 	 	(5,107	)	 	 	(5,107	)	 	 	—	 	 	 	(11,281	)	 	 	(11,281	)	
 	 	 	
Claims incurred — discounted	 	 	—	 	 	 	19,985	 	 	 	19,985	 	 	 	—	 	 	 	48,161	 	 	 	48,161	 	

Reinsurance and other recoveries expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries — undiscounted	 	 	—	 	 	 	25,089	 	 	 	25,089	 	 	 	—	 	 	 	59,230	 	 	 	59,230	 	
Discount movement	 	 	—	 	 	 	(5,107	)	 	 	(5,107	)	 	 	—	 	 	 	(11,281	)	 	 	(11,281	)	
 	 	 	
Reinsurance and other recoveries — discounted	 	 	—	 	 	 	19,982	 	 	 	19,982	 	 	 	—	 	 	 	47,949	 	 	 	47,949	 	
 	 	 	
Net claims incurred — discounted	 	 	—	 	 	 	3	 	 	 	3	 	 	 	—	 	 	 	212	 	 	 	212	 	
 	 	 	
9. Income Tax
(a) Analysis of income tax expense
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Current tax	 	 	123	 	 	 	401	 	
(Decrease)/ increase in deferred tax assets	 	 	(10	)	 	 	242	 	
Over provided in previous years	 	 	(1	)	 	 	(258	)	
 	
Income tax expense	 	 	112	 	 	 	385	 	
 	
(b) Relationship between income tax expense and accounting profit
The table below provides a reconciliation of differences between prima facie tax calculated as 30% of the profit before income tax for the period and the actual income tax expense recognised in the income statement for the period.
In respect of income tax expense attributable to shareholders, the tax rate which applies in both 2006 and 2005 is 30%.

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	14 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
9. Income tax (Continued)
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	
Operating profit before income tax	 	 	20,494	 	 	 	2,142	 	
Prima facie income tax at the rate of 30%	 	 	6,148	 	 	 	643	 	
 	 	 	 	 	 	 	 	 	
Tax effect of differences between amounts of income and expenses recognised for accounting and the amounts deductible/assessable in calculating taxable income:	 	 	 	 	 	 	 	 	
Dividend from subsidiary	 	 	(6,000	)	 	 	—	 	
Other	 	 	(35	)	 	 	—	 	
Over provided in prior years — deferred tax balances	 	 	(1	)	 	 	(258	)	
 	
Income tax expense per income statement	 	 	112	 	 	 	385	 	

c) Analysis of deferred tax asset	 	 	 	 	 	 	 	 	
Amounts recognised in income:	 	 	 	 	 	 	 	 	
- Provision for doubtful debts	 	 	3	 	 	 	4	 	
- Unrealised gains/losses	 	 	13	 	 	 	2	 	
 	
Total deferred tax assets	 	 	16	 	 	 	6	 	
 	
10. Receivables
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Other receivables from related parties	 	 	 	 	 	 	 	 	
- Other related parties	 	 	112,836	 	 	 	111,822	 	
 	 	 	
Total Current Receivables	 	 	112,836	 	 	 	111,822	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	15 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
11. Reinsurance and Other Recoveries Receivable
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Reinsurance and other recoveries receivable undiscounted	 	 	 	 	 	 	 	 	
- on claims paid	 	 	273	 	 	 	268	 	
- on outstanding claims	 	 	110,654	 	 	 	135,758	 	
 	 	 	 	 	 	 	 	 	
Discount to present value	 	 	(19,088	)	 	 	(24,195	)	
less: provision for impairment of reinsurance assets	 	 	(11	)	 	 	(11	)	
 	 	 	
Total Reinsurance and other Recoveries	 	 	91,828	 	 	 	111,820	 	

Reinsurance and other recoveries receivable- current	 	 	25,263	 	 	 	29,922	 	
less: provision for impairment of reinsurance assets	 	 	(11	)	 	 	(11	)	
 	 	 	
 	 	 	25,252	 	 	 	29,911	 	

Reinsurance and other recoveries receivable- non current	 	 	66,576	 	 	 	81,909	 	
less: provision for impairment of reinsurance assets	 	 	—	 	 	 	—	 	
 	 	 	
 	 	 	66,576	 	 	 	81,909	 	
 	 	 	
Notes to the financial statements for the year ended 31 December 2006
12. Other financial assets
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Current	 	 	 	 	 	 	 	 	
Unquoted investments — at fair value:	 	 	 	 	 	 	 	 	
Units held in cash managed trust	 	 	 	 	 	 	 	 	
- other related parties	 	 	4,154	 	 	 	5,843	 	
 	 	 	
Total current financial assets	 	 	4,154	 	 	 	5,843	 	

Non-Current	 	 	 	 	 	 	 	 	
Unquoted investments — at fair value:	 	 	 	 	 	 	 	 	
Preference shares	 	 	167	 	 	 	163	 	
Unquoted investments — at cost:	 	 	 	 	 	 	 	 	
Ordinary shares — subsidiaries	 	 	30,000	 	 	 	30,000	 	

Total non-current financial assets	 	 	30,167	 	 	 	30,163	 	

Total other financial assets	 	 	34,321	 	 	 	36,006	 	
 	 	 	
Investment in controlled entities
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Percentage of equity Interest	 	 	Dollar Amount held	 	
 	 	2006	 	 	2005	 	 	2006	 	 	2005	 	
Name of Entity	 	%	 	 	%	 	 	$’000	 	 	$’000	 	
TGI Australia Ltd	 	 	100	 	 	 	100	 	 	 	30,000	 	 	 	30,000	 	
Maritime Insurance Agency Pty Ltd	 	 	—	 	 	 	100	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	30,000	 	 	 	30,000	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	16 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
13. Outstanding Claims
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Expected future claims payments (undiscounted)	 	 	110,654	 	 	 	135,746	 	
Discount to present value	 	 	(19,088	)	 	 	(24,195	)	
 	 	 	
Total Outstanding Claims	 	 	91,566	 	 	 	111,551	 	

Current	 	 	24,990	 	 	 	29,642	 	
Non Current	 	 	66,576	 	 	 	81,909	 	
 	 	 	
Total Outstanding Claims	 	 	91,566	 	 	 	111,551	 	
 	 	 	
Outstanding claims details
The liability for outstanding claims is determined in accordance with Note 1.
The Company has effectively portfolio transferred its insurance contracts to GIO General Ltd and TGI Australia Ltd in 2001. No new contracts have been issued from the entity. The production of a claims development table prior to 2004 is impracticable as the information required to complete this for the business transferred to GIO General Ltd is not available to the Company.
Any movement to the gross outstanding claims provisions and reinsurance recoveries are taken directly to the income statement.
 	 	 	 	 	 	 	 	 	
 	 	Net	 	 	Gross	 	
Estimate of Cumulative claims	 	$’000’s	 	 	$’000’s	 	
31 December 2004	 	 	—	 	 	 	679,816	 	
31 December 2005	 	 	—	 	 	 	662,654	 	
31 December 2006	 	 	—	 	 	 	646,071	 	
 	 	 	 	 	 	 	 	 	
Estimate of Cumulative Claims at 31 December 2006	 	 	—	 	 	 	646,071	 	
 	 	 	 	 	 	 	 	 	
Cumulative Payments	 	 	—	 	 	 	549,057	 	

Undiscounted central estimate	 	 	—	 	 	 	97,014	 	
 	 	 	 	 	 	 	 	 	
Effect of Discounting	 	 	—	 	 	 	19,088	 	
 	
Discounted Central Estimate	 	 	—	 	 	 	77,926	 	

Claims Handling Provision	 	 	—	 	 	 	13,640	 	
 	
Gross Outstanding Claims as per the Balance Sheet	 	 	—	 	 	 	91,566	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	17 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
14. Payables
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Other creditors	 	 	1,101	 	 	 	2,173	 	
Other borrowings — related parties	 	 	—	 	 	 	156	 	
 	 	 	
Total Payables	 	 	1,101	 	 	 	2,329	 	
 	 	 	
15. Contributed Equity
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Paid up capital - 327,000,000 $1 ordinary shares	 	 	327,000	 	 	 	327,000	 	
 	 	 	
(2005: 327,000,000 $1 ordinary shares)	 	 	 	 	 	 	 	 	
Rights attaching to Ordinary Shares
Ordinary shares attract the following rights:
 	(a)	 	to receive notice of and to attend and vote at all general meetings of the Company;

 	(b)	 	to receive dividends; and	
 	 	 	 	
 	(c)	 	in a winding up, to participate equally in the distribution of the assets of the Company (both capital and surplus), subject only to any amounts unpaid on the Share.	
16. Retained profits
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Accumulated Losses at beginning of the financial year	 	 	(181,028	)	 	 	(182,786	)	
Operating Profit after Income Tax	 	 	20,382	 	 	 	1,758	 	
Dividends paid	 	 	(20,000	)	 	 	—	 	
 	 	 	
Accumulated Losses at the end of the financial year	 	 	(180,646	)	 	 	(181,028	)	

 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Dividends paid on ordinary shares	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
- Dividend paid on 12 April 2006 Unfranked dividend of $0.06 per share	 	 	20,000	 	 	 	—	 	

Dividends paid during the year	 	 	20,000	 	 	 	—	 	
 	 	 	
17. Franking account
The AMP Limited group entered into Tax Consolidation during 2003. Under Tax Consolidation, the franking account balances for group companies are transferred to the Head Entity, AMP Limited.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	18 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
18. Segment Reporting
The company operated in one industry, being direct insurance, underwritten in Australia.
19. Key management personnel compensation
The following individuals were the key management personnel of Harrington Sound Ltd (formerly AMP General Insurance Limited) for the current and prior reporting periods (unless stated otherwise):
 	 	 	
 	 	Date of	
 	 	Appointment/Resignation	
 	 	during the current or prior	
Name	 	reporting period	
 	
Peter Hodgett	 	 	
Simon Hoole	 	 	
Paul Leaming	 	 	
The following table provides aggregate details of the compensation of key management personnel of Harrington Sound Ltd (formerly AMP General Insurance Limited).
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Short-term	 	Post-	 	Other	 	 	 	 	 	Share-	 	 	
 	 	employee	 	employment	 	long-term	 	Termination	 	based	 	 	
Year	 	benefits	 	benefits	 	benefits	 	benefits	 	payments	 	Total	
 	 	$	 	$	 	$	 	$	 	$	 	$	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2006	 	 	3,396,808	 	 	 	355,930	 	 	 	—	 	 	 	—	 	 	 	1,019,052	 	 	 	4,771,790	 	
2005	 	 	3,164,278	 	 	 	389,654	 	 	 	—	 	 	 	—	 	 	 	956,156	 	 	 	4,510,088	 	
Key management personnel disclosed above, also provided services to other related entities during the year. The above remuneration amounts include all amounts paid for services rendered to related entities and those services rendered to Harrington Sound Ltd (formerly AMP General Insurance Limited).
20. Auditors’ remuneration
Auditors’ remuneration for the year ended 31 December 2006 is paid on the Company’s behalf by a controlled entity within the AMP Limited Group.
21. Contingent Liabilities
There are no contingent liabilities as at 31 December 2006 (2005: Nil)

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	19 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
22. Related Parties
Transactions between Harrington Sound Ltd (formerly AMP General Insurance Limited) and other related parties for the financial year consisted of:
 	•	 	Payment of management fees for services provided	
 	 	 	 	
 	•	 	Provision of share capital	
 	 	 	 	
 	•	 	Provision of intercompany loans	
Controlling Entity
The immediate parent entity is Shelly Bay Holdings Ltd (formerly AMP General Insurance Holdings Limited). AMP Limited is the ultimate parent entity.
Directors
The directors of the company during the financial year and the dates of appointments and resignations during the year are:
P D Leaming
P M Hodgett
S J Hoole
Other transactions with key management personnel and related entities
The directors and their director related entities receive normal dividends on their ordinary share holdings in AMP Limited.
During the year, transactions were entered into between Directors or their Director related entities and entities within the AMP Limited Group. These transactions are within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those available to other employees, customers or members (unless otherwise described below) and include:
•	 	normal personal banking with AMP Bank Limited including the provision of credit cards;	
 	 	 	
•	 	the purchase of AMP superannuation products;	
 	 	 	
•	 	Financial investment services;	
 	 	 	
•	 	Other advisory services.	
These transactions do not have the potential to adversely affect the decisions about the allocation of scarce resources made by users of AMP’s financial statements, or discharge of accountability by the Directors. The transactions are considered to be trivial or domestic in nature.

Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	20 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
22. Related Parties (continued)
Transactions with related parties
The aggregate amounts brought to account in respect of the following types of transactions and each class of related party involved were:
 	 	 	 	 	 	 	 	 	
 	 	2006	 	 	2005	 	
 	 	$	 	 	$	 	
Amounts attributable to transactions with related parties	 	 	 	 	 	 	 	 	
Operating (loss) before income tax for the financial year includes aggregate amounts attributable to transactions in respect of:	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Investment Expenses/(benefit) — other related parties	 	 	7,940	 	 	 	(46,693	)	
Management Expense — other related parties	 	 	50,000	 	 	 	50,000	 	
 	 	 	 	 	 	 	 	 	
Amounts receivable from and payable to related parties	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Aggregate amounts receivable at balance date :	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Receivable — other related parties	 	 	112,836,536	 	 	 	111,821,320	 	
 	 	 	 	 	 	 	 	 	
Aggregate amounts payable at balance date :	 	 	 	 	 	 	 	 	
Current	 	 	 	 	 	 	 	 	
Accounts Payable — other related parties	 	 	—	 	 	 	156,114	 	
AMP Capital Investors Limited, a related entity within the wholly owned group, manages the majority of the investments of the company under a management contract which follows the normal terms and conditions for such contracts. Fees are paid or are due and payable for the management of investment portfolios under normal terms and conditions.
AMP Services Limited and Enstar Australia Ltd (formerly Cobalt Solutions Australia Limited), fellow wholly controlled entities, provide operational and administrative (including employee related) services to the company with the exception of certain financing arrangements, finance leasing and agent related services. The services provided are in the normal course of the business and are on normal commercial terms and conditions.

 	 	 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	 	 	21 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
23. Cashflow Reconciliation
(i)	 	Reconciliation of cash	

 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
Cash at call	 	 	145	 	 	 	600	 	
Cash in Trust	 	 	4,154	 	 	 	5,843	 	
 	 	 	
Total Cash	 	 	4,299	 	 	 	6,443	 	

(ii)	 	Reconciliation of net cash flows from operating activities to operating profit after income tax:	

 	 	2006	 	 	2005	 	
 	 	$’000	 	 	$’000	 	
 	 	 	 	 	 	 	 	 	
Operating profit / (loss) after income tax	 	 	20,382	 	 	 	1,758	 	
 	 	 	 	 	 	 	 	 	
Unrealised profit / (loss) on investments	 	 	(4	)	 	 	27	 	
 	 	 	 	 	 	 	 	 	
Change in assets and liabilities	 	 	 	 	 	 	 	 	
(Decrease) in doubtful debts provision	 	 	—	 	 	 	(6	)	
(Increase)/Decrease in deferred tax asset	 	 	(10	)	 	 	9,055	 	
(Increase) /Decrease in reinsurance recoveries	 	 	19,992	 	 	 	48,217	 	
(Decrease) in accounts payable	 	 	(1,228	)	 	 	27	 	
(Decrease) / Increase in outstanding claims	 	 	(19,985	)	 	 	(48,162	)	
(Decrease) / Increase in current tax provision	 	 	(277	)	 	 	396	 	
(Increase) / decrease in other assets	 	 	(1,014	)	 	 	697	 	
 	 	 	
Net cash inflow from operating activities	 	 	17,856	 	 	 	12,009	 	

 	 	 	 	 	

 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	 	 	22 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
24. Financial Instruments
(a) Net Fair Values
The recorded net market value equates to net fair value for listed and unlisted debt and equity securities. For the following financial instruments, the cost carrying amount is considered to equate to their net fair value.
 	•	 	Cash	
 	 	 	 	
 	•	 	Debtors	
 	 	 	 	
 	•	 	Cash trusts and short term money market investments	
 	 	 	 	
 	•	 	Trade creditors	
(b) Special terms and conditions
All financial instruments of the Company are held or issued on normal commercial terms at market rates of interest. There are no special terms or conditions affecting the nature and timing of the financial instruments not otherwise disclosed in these accounts.
(c) Credit risk
Trading investments are recorded in the accounts at net market value which represents the Group’s exposure to credit risk in relation to these instruments.
The credit risk of the Company arising from exposure of their investment portfolio is monitored and controlled by AMP Capital Investors Limited in accordance with Credit Policy guidelines.
Credit risk in trade receivables in managed by analysing the credit ratings of the underlying debts.
(d) Interest rate risk on financial instruments
The accounting policy notes describe the policies used to measure and report the assets and liabilities of the Company. Where the applicable market value is determined by discounting future cash flows, movements in interest rates will result in a reported unrealised gain or loss in the profit and loss account.
AMP Capital Investors Limited manages investment portfolios on behalf of the Company. The Company seeks to reduce its interest rate risk through the use of investment portfolios as a hedge against the insurance liabilities of the Company. To the extent that these assets and liabilities can be matched, unrealised gains or losses on revaluation of liabilities resulting from interest rate movements will be offset by unrealised losses or gains on revaluation of investment assets.
The Company’s exposure to interest rate risks and the effective interest rates of financial assets and liabilities at the reporting date, are as follows:

 	 	 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	 	 	23 of 25	

 
Harrington Sound Ltd (formerly AMP General Insurance Limited)
Notes to the financial statements for the year ended 31 December 2006
24. Financial Instruments (Continued)
For the year ended 2006
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Floating	 	 	Non	 	 	 	 	 	 	Weighted	 	
 	 	Interest	 	 	Interest	 	 	 	 	 	 	Average	 	
 	 	Rate	 	 	Bearing	 	 	Total	 	 	Interest	 	
 	 	$000’s	 	 	$000’s	 	 	$000’s	 	 	rate	 	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables	 	 	—	 	 	 	112,836	 	 	 	112,836	 	 	 	—	 	
Debtors and reinsurance recoveries	 	 	—	 	 	 	91,828	 	 	 	91,828	 	 	 	—	 	
Cash deposits	 	 	145	 	 	 	—	 	 	 	145	 	 	 	6.00	%	
Cash Trusts	 	 	4,154	 	 	 	—	 	 	 	4,154	 	 	 	2.01	%	
Shares	 	 	—	 	 	 	30,167	 	 	 	30,167	 	 	 	—	 	
 	 	 	 	 	
Total Financial Assets	 	 	4,299	 	 	 	234,831	 	 	 	239,130	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	—	 	 	 	1,101	 	 	 	1,101	 	 	 	—	 	
 	 	 	 	 	
Total Financial Liabilities	 	 	—	 	 	 	1,101	 	 	 	1,101	 	 	 	 	 	
 	 	 	 	 	
For the year ended 2005
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Floating	 	 	Non	 	 	 	 	 	 	Weighted	 	
 	 	Interest	 	 	Interest	 	 	 	 	 	 	Average	 	
 	 	Rate	 	 	Bearing	 	 	Total	 	 	Interest	 	
 	 	$000’s	 	 	$000’s	 	 	$000’s	 	 	rate	 	
 	
Financial Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables	 	 	—	 	 	 	111,822	 	 	 	111,822	 	 	 	—	 	
Debtors and reinsurance recoveries	 	 	—	 	 	 	111,820	 	 	 	111,820	 	 	 	—	 	
Cash deposits	 	 	600	 	 	 	 	 	 	 	600	 	 	 	5.36	%	
Cash Trusts	 	 	5,843	 	 	 	—	 	 	 	—	 	 	 	4.79	%	
Shares	 	 	 	 	 	 	30,163	 	 	 	30,163	 	 	 	—	 	
 	 	 	 	 	
Total Financial Assets	 	 	6,443	 	 	 	253,805	 	 	 	254,405	 	 	 	 	 	

Financial Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Payables	 	 	—	 	 	 	2,329	 	 	 	2,329	 	 	 	—	 	
 	 	 	 	 	
Total Financial Liabilities	 	 	—	 	 	 	2,329	 	 	 	2,329	 	 	 	 	 	

 	 	 	
 	
Harrington Sound Ltd (formerly AMP General Insurance Limited) ABN 30 008 405 632	 	24 of 25	

 

Report of Independent Auditors
The Board of Directors of Harrington Sound Limited (formerly AMP General Insurance Limited)
We have audited the accompanying balance sheets of Harrington Sound Limited (formerly AMP General Insurance Limited) as of December 31, 2006 and 2005, and the related income statements, statements of changes in equity, and cash flow statements for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Harrington Sound Limited (formerly AMP General Insurance Limited) at December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young
Sydney, Australia
May 15, 2008
 	 	 	
 	 	Liability limited by a scheme
approved under Professional
Standards Legislation	

Exhibit 99.6
ENSTAR GROUP LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
     The following unaudited pro forma condensed combined financial statements are based on the historical financial statements of Enstar Group Limited (“Enstar”) and Gordian Runoff Limited, TGI Australia Limited, AG Australia Holdings Ltd., Gordian Runoff (UK) Limited, Shelly Bay Holdings Limited (formerly AMP General Insurance Holdings Limited), Enstar Australia Limited (formerly Cobalt Solutions Australia Limited), Harrington Sound Limited (formerly AMP General Insurance Limited), and Church Bay Limited (formerly AMPG (1992) Limited) (the acquired companies collectively, “Gordian”), and have been prepared to illustrate the effects of the acquisition of all of the outstanding share capital of Gordian by Enstar Australia Holdings Pty Limited (“Enstar Australia”), a wholly-owned subsidiary of Enstar, which was completed on March 5, 2008. The following data is presented as if the acquisition was completed as of December 31, 2007 for the unaudited pro forma condensed combined balance sheet and as of January 1, 2007 for the unaudited pro forma condensed combined consolidated statement of earnings. The unaudited condensed combined pro forma financial information (i) is based on the acquisition price paid by Enstar of approximately $405.4 million to the former shareholders of Gordian and (ii) reflects the purchase of Gordian under the purchase method of accounting and represents a current estimate of the financial information based on available information from Enstar and Gordian.
     The pro forma information includes adjustments to record the assets and liabilities of Gordian at their estimated fair market values and is subject to adjustment as additional information becomes available and as additional analyses are performed. To the extent there are significant changes to Gordian’s business, the assumptions and estimates herein could change significantly. The pro forma financial information is presented for illustrative purposes only under one set of assumptions and does not reflect the financial results of the combined companies had consideration been given to other assumptions or to the impact of possible operating efficiencies, asset dispositions, and other factors. Further, the pro forma financial information does not necessarily reflect the historical results of the combined company that actually would have occurred had the transaction been in effect during the period indicated or that may be obtained in the future. The unaudited pro forma condensed combined financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements, including the related notes, of Enstar covering the twelve-month period ended December 31, 2007 included in Enstar’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, which was filed with the United States Securities and Exchange Commission on February 29, 2008, as well as the historical financial statements of Gordian included elsewhere in this Current Report on Form 8-K, with the exception of historical information for AG Australia Holdings Ltd., Gordian Runoff (UK) Limited and Shelly Bay Holdings Limited (formerly AMP General Insurance Holdings Limited) as these entities were materially insignificant to the transaction as a whole.

 
ENSTAR GROUP LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
As of December 31, 2007
(Expressed in thousands of U.S dollars)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Enstar Group	 	 	Gordian	 	 	Adjustment	 	 	Combined	 	
 	 	Limited	 	 	 	 	 	Entries	 	 	 	 	
Assets

Total investments	 	$	637,196	 	 	$	393,841	 	 	 	 	 	 	$	1,031,037	 	
Cash and cash equivalents	 	 	995,237	 	 	 	633,400	 	 	 	(89,390	)(a)	 	 	1,396,999	 	
 	 	 	 	 	 	 	 	 	 	 	(142,248	)(b)	 	 	 	 	
Restricted cash and cash equivalents	 	 	168,096	 	 	 	 	 	 	 	 	 	 	 	168,096	 	
Reinsurance balances receivable	 	 	465,277	 	 	 	145,186	 	 	 	(37,630	)(c)	 	 	572,833	 	
Other assets	 	 	151,337	 	 	 	355,911	 	 	 	(18,867	)(c)	 	 	158,837	 	
 	 	 	 	 	 	 	 	 	 	 	(329,544	)(b)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Assets	 	$	2,417,143	 	 	$	1,528,338	 	 	$	(617,679	)	 	$	3,327,802	 	

Liabilities

Loss and loss adjustment expenses	 	$	1,591,449	 	 	$	578,052	 	 	$	(29,917	)(c)	 	$	2,139,584	 	
Reinsurance balances payable	 	 	189,870	 	 	 	8,214	 	 	 	(1,502	)(c)	 	 	196,582	 	
Loans payable	 	 	60,227	 	 	 	 	 	 	 	276,500	(a)	 	 	336,727	 	
Other liabilities	 	 	61,561	 	 	 	17,959	 	 	 	7,499	(c)	 	 	87,019	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	1,903,107	 	 	 	604,225	 	 	 	252,580	 	 	 	2,759,912	 	

Minority Interest	 	 	63,437	 	 	 	 	 	 	 	39,522	(a)	 	 	102,959	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shareholders’ Equity

Share capital	 	 	14,893	 	 	 	396,872	 	 	 	(396,872	)(a)	 	 	14,893	 	
Treasury stock	 	 	(421,559	)	 	 	 	 	 	 	 	 	 	 	(421,559	)	
Additional paid-in capital	 	 	590,934	 	 	 	 	 	 	 	 	 	 	 	590,934	 	
Accumulated other comprehensive income	 	 	6,035	 	 	 	 	 	 	 	4,598	(d)	 	 	10,633	 	
Retained earnings	 	 	260,296	 	 	 	527,241	 	 	 	(58,820	)(a)	 	 	270,030	 	
 	 	 	 	 	 	 	 	 	 	 	(32,576	)(c)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	(471,792	)(b)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	(4,598	)(d)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	50,280	(a)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	450,599	 	 	 	924,113	 	 	 	(909,781	)	 	 	464,931	 	

Total Liabilities & Shareholders’ Equity	 	$	2,417,143	 	 	$	1,528,338	 	 	$	(617,679	)	 	$	3,327,802	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Note a
To record the acquisition of Gordian by Enstar Group Limited using the purchase method of accounting. A summary of the adjustments is as follows:
 	 	 	 	 	 	 	 	 	
Purchase price	 	 	 	 	 	$	401,086	 	
Direct costs of acquisitions	 	 	 	 	 	 	4,326	 	
 	 	 	 	 	 	 	 	
Total purchase price   (cash of $128,912 and notes payable of $276,500)	 	 	 	 	 	 	405,412	 	
 	 	 	 	 	 	 	 	 	
Net assets acquired at fair value:	 	 	 	 	 	 	 	 	
Cash and investments	 	 	872,755	 	 	 	 	 	
Reinsurance balances receivable	 	 	99,645	 	 	 	 	 	
Other assets	 	 	31,253	 	 	 	 	 	
Losses and loss adjustment expenses	 	 	(509,638	)	 	 	 	 	
Insurance and reinsurance balances payable	 	 	(22,660	)	 	 	 	 	
Other liabilities	 	 	(15,663	)	 	 	 	 	
 	 	 	 	 	 	 	 	
Net assets acquired at fair value	 	 	 	 	 	 	455,692	 	
 	 	 	 	 	 	 	 	
Excess of net assets over purchase price (negative goodwill)	 	 	 	 	 	$	(50,280	)	
 	 	 	 	 	 	 	 	
     Cash of $39,522 to fund the acquisition was provided by a third party who retained a minority interest in the transaction
Note b
To reflect the return of capital of $471,292 paid by Gordian to its former parent prior to completion of the acquisition
Note c
To record the fair value adjustments recorded as at date of acquisition
Note d
To record the adjustment required to conform to Enstar Group Limited’s accounting policy for investments.

 
ENSTAR GROUP LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF EARNINGS
for the year ended December 31, 2007
(Expressed in thousands of U.S dollars, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Enstar Group	 	 	Gordian	 	 	Adjustment	 	 	Combined	 	
 	 	Limited	 	 	 	 	 	Entries	 	 	 	 	
INCOME	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consulting fees	 	$	31,918	 	 	$	7,499	 	 	$	 	 	 	$	39,417	 	
Net investment income and net realized gains	 	 	64,336	 	 	 	59,600	 	 	 	(4,395	)(c)	 	 	119,541	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	96,254	 	 	 	67,099	 	 	 	(4,395	)	 	 	158,958	 	

EXPENSES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net reduction in loss and loss adjustment expense liabilities	 	 	(24,482	)	 	 	(102,974	)	 	 	19,833	(a)	 	 	(107,623	)	
Salaries and benefits	 	 	46,977	 	 	 	12,708	 	 	 	 	 	 	 	59,685	 	
General and administrative expenses	 	 	31,413	 	 	 	10,717	 	 	 	 	 	 	 	42,130	 	
Interest expense	 	 	4,876	 	 	 	 	 	 	 	28,461	(b)	 	 	33,337	 	
Foreign exchange gain	 	 	(7,921	)	 	 	(4,910	)	 	 	 	 	 	 	(12,831	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	50,863	 	 	 	(84,459	)	 	 	48,294	 	 	 	14,698	 	

EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST	 	 	45,391	 	 	 	151,558	 	 	 	(52,689	)	 	 	144,260	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME TAXES	 	 	7,441	 	 	 	(40,472	)	 	 	1,319	(c)	 	 	(31,712	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
MINORITY INTEREST	 	 	(6,730	)	 	 	 	 	 	 	 	 	 	 	(6,730	)	

EARNINGS FROM CONTINUING OPERATIONS	 	$	46,102	 	 	$	111,086	 	 	$	(51,370	)	 	$	105,818	 	

Earnings per share — basic	 	$	3.93	 	 	 	 	 	 	 	 	 	 	$	9.02	 	
Earnings per share — diluted	 	$	3.84	 	 	 	 	 	 	 	 	 	 	$	8.81	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding — basic	 	 	11,731,908	 	 	 	 	 	 	 	 	 	 	 	11,731,908	 	
Weighted average shares outstanding — diluted	 	 	12,009,683	 	 	 	 	 	 	 	 	 	 	 	12,009,683	 	
Note a
Amortization of fair value adjustments
Note b
Represents the loan interest expense based on the assumption that the loan used to fund the acquisition was made on January 1, 2007
Note c
Represents the after tax impact of Gordian’s adoption of Enstar’s accounting policy for investments
Non-recurring credit
Not shown as part of the above pro-forma income statement is $50,280 of extraordinary gain relating to the negative goodwill recorded on the acquisition of Gordian