1^st December, 2001

Mr N.W.S. Smith
ABC Legal
Barristers and Solicitors
33 Salamanca Place
HOBART  TAS  7000

Dear Mr Smith,

RE: ECONOMIC LOSS CALCULATION - MR A. STUTE

I refer to your request to calculate the potential economic loss for Mr A. Stute.

Methodology

The present value of earnings is going to be determined by salary levels; assumptions about inflation and discount rates; retirement age; taxation levels and contingencies such as mortality and employment participation rates.

The level of gross salary adopted for this calculation is as advised and shown in the data section below. This gross value has been reduced by the level of tax impost that would be incurred. No allowance has been made for tax efficiencies such as taking some of the salary package in superannuation or fringe benefit forms. The level of taxation in the future has assumed to be that currently applying i.e.:

Income Band	Tax rate	Medicare Rate
$0 - $6,000	0%	1.5%
$6,001 to $20,000	17%	1.5%
$20,001 to $50,000	30%	1.5%
$50,001 to $60,000	42%	1.5%
Over $60,000	47%	1.5%

The level of salary inflation for the future has assumed to be nil and the level of discount 7% p.a. This is a harsh basis and a real rate of return that is difficult to achieve. A real rate of return in the order of 3 or 4% p.a. (e.g. inflation at 3% p.a. and discount/interest at 7%) would be more realistic. Both the basis in accordance with the Common Law (Miscellaneous Actions) Act 1986 approach and a more realistic rate of return are shown below.

The value at 60 and 65 retirement ages has been shown. The values both allowing for and ignoring the probability of dying before then has been provided. The final assumption is that there will be no breaks from employment over those years.

The Australian Government Actuary periodically publishes a life table. The latest table is called the Australian Life Table 1995-97 and is based on the mortality of Australians over the three year period centred on the 1996 Census. The mortality experience in this table is a snapshot. It understates the life expectancy of a person currently alive since there is no allowance made for likely mortality improvements. This report has enhanced this aspect and projected mortality experience using the past 25 year trend in improvement rates.

Data

The calculations below are based on the following data items:

Name:	Mr. Andrew Stute
Date of Birth:	30th September 1964
Date of Accident:	2nd April 1993
Loss From:	1st July 2001
Retirement Age:	60 or 65
Discounted To:	1st December 2001
Salary:	Year Gross Net Year 1 $95,540 $61,823 Year 2 $102,572 $65,445 Year 3 $109,324 $68,922 Year 4 $118,097 $73,440 Year 5 $123,315 $76,127 Year 6 $128,532 $78,814 Balance $137,185 $83,270

Results

Based on the above information and assumptions, I calculate the economic loss at 1st December 2001 to be:

Item	Value
Past Loss:
Future Loss:
With Mortality Allowance	Scenario A
Retirement Age 60	$910,461
Retirement Age 65	$981,565
No Mortality Allowance
Retirement Age 60	$918,094
Retirement Age 65	$992,021

Medical and Other Costs

We have also calculated for factors that can be multiplied by a weekly cost to determine the present value of medical and other costs payable to age 60, 65 or for life. These factors (with mortality allowance) are:

To Age 60	610.9
To Age 65	655.5
For Life	741.6

Realistic Assumptions

The present value of any economic loss is significantly dependant on the real rate of return assumed. The basis below is one that is lined up with current economic and financial conditions. The assumed salary is $95,540 gross i.e. $61,823 net with increase in subsequent years of 3% p.a.

	Basis 7% / 3%
With Mortality Allowance
To Age 60	$942,028
To Age 65	$1,051,319
No Mortality Allowance
To Age 60	$950,690
To Age 65	$1,064,431

Please do not hesitate to contact me should you wish to discuss any aspect of the above.

Yours sincerely,

BRIAN BENDZULLA, B.Sc., UED
Fellow of the Institute of Actuaries of Australia
Director

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