2008 annual report
this year has been...
101
CONTENTS chairperson’s report 2 ceo’s report 3 highlights 6 meet our management team 8 corporate governance 10 directors’ report 11 auditor’s independence declaration 14 50-year member honour roll 19 income statement 20 balance sheet 21 statement of changes in equity 22 cash flow statement 22 notes to the financial statements 23 directors’ declaration 32 independent audit report 33
It has been a year of growth for rt health fund. We’ve grown the number of members in the fund. We’ve grown our geographic reach and become a national fund. We’ve grown the services and facilities we offer to members. And we’ve grown the strength, capability and expertise of our team. But most of all, we’ve grown in our ability to serve you.
1
chairperson’s report During the year in review rt health fund has advanced many of its major strategic initiatives, including introducing enhanced member services (in person, by phone and online), continuing to establish and rebuild significant transport industry partnerships, and achieving industry-leading levels of growth. Beyond this, rt has also played a key role in influencing regulatory outcomes to the benefit of the organisation and our members.
As it has in the past year, rt will continue to face major challenges in the private health insurance industry in the year ahead. In the past six months we have seen industry consolidation occur at a rate greater than at any time in recent history, and we are subject to the changing regulatory framework set down by a new government. Amidst this environment of uncertainty and change, your board and senior management team remain focused on the task of delivering exceptional value to members; to strengthening the fund through growth; to seeking to continually deliver improvements in services, facilities and processes; and to always adding value to members through every interaction. The board has continued to demonstrate its commitment to ongoing good governance by working within a best practice framework based on the recommendations of the Australian Stock Exchange, using a set of practices that are appropriate for the size, complexity and operations of the organisation. The ongoing relevance and effectiveness of this framework is regularly reviewed to reflect changing circumstances and improvements to the board’s practices are regularly adopted. Two significant improvements in the board’s operations over the past 12 months have been the development of a new board charter, which has been adopted by all board members, and the re-establishment of a board code of conduct. Along with all other health funds, rt was required during the year to apply for re-registration following changes to the National Health Act. This process required a significant amount of work by the management team and liaison at the most senior levels of government. I am pleased to report that rt was successful in its re-registration. The fund was also subject to a comprehensive review of operations conducted by the industry regulator, PHIAC. This is part of a program of ongoing and routine reviews conducted within all health funds. When the regulator last met with rt some three years ago, the fund was subject to very serious findings about its operations and management practices. I am delighted to report to you that following this year’s review, the regulator found no area of the business requiring improvement. This outcome represents the culmination of three years of effort to rebuild the management and governance of the fund and it is pleasing to now see rt becoming an industry-leading organisation that represents best practice in its management, governance, operations, policies and procedures. rt was represented at all of the major private health industry forums throughout the year by various senior managers and board members and has once again achieved a position of high regard and respect within the industry for its significant input into initiatives and changes.
“ ...customer service, quality and honesty remain our highest priorities.”
Importantly, rt has also continued to deliver excellent benefits to members and was recently recognised by the Australian Financial Review Smart Investor magazine as being one of the ‘nation’s best-value health funds’. I would like to thank my fellow directors for their professionalism, commitment and support throughout the year. On behalf of the board I thank the staff for their diligence and passion in achieving this year’s outstanding results. Finally, I would like to thank our CEO, Glenn Campbell, for his leadership and commitment. Our strong and dedicated senior management team have enabled the fund to grow nationally this year – a significant achievement, especially in an environment of constant change within the industry. Glenn and his team lead the way in ensuring that customer service, quality and honesty remain our highest priorities and that our ‘we are here to help’ pioneering spirit is embedded in all that we do. rt health fund is an inspiring organisation and I consider it an honour and a privilege as one of its present custodians to assist in guiding its future. The outlook is positive, founded on a strong balance sheet and excellent growth prospects for the coming year, and many years to come.
VICTORIA REYNOLDS Chairperson
ceo’s report Two years ago I presented a strategic plan on behalf of the management of the organisation that was focused on ‘laying the foundations’ for building a strong business into the future. The second stage of that plan was about leveraging these foundations for significant growth – not only in terms of new memberships, but growth in the services and facilities we provide for members, and in the capability and skills of the staff and management team. It is a privilege to report on behalf of my team that we have achieved great success and amazing growth in the past 12 months. ‘Growing’ forward
We’ve continued to grow our relationships and involvement in community events with key transport industry groups through our alliance with Encompass Credit Union and the NSW Railways Institute and participation in ongoing activities with the State Transit Bus Institute (STBI) and State Transit Authority (STA) who we were proud to support as they celebrated 75 years of Sydney Buses last November. We’re working more closely with Queensland Rail (QR) and the Queensland Railways Institute (QRI) sharing in many of their special events and family days, including the 50th anniversary of the Redbank workshops just a couple of months ago. In addition, we’ve entered into new partnerships with the RTBU (Rail, Tram and Bus Union) nationally and the ETU (Electrical Trades Union) in Victoria. We’ve also begun to broaden our focus beyond our traditional markets to the wider ‘transport and electricity’ sector, which is the full mandate of our membership eligibility.
It is a well-accepted business maxim that ‘if you are not growing you are going backwards’ and that has never been as true as it is for rt health fund and the private health insurance industry as a whole today. The industry is experiencing phenomenal change. In the past 12 months, the UK-owned BUPA has acquired Australia’s second largest health fund, MBF; Australia’s largest fund, Medibank Private, has increased its share of the market through the acquisition of Australian Health Management Group (AHM); and NIB undertook a public float on the Australian Stock Exchange, a first for an Australian health insurer. It’s not just the larger funds that are setting the agenda for change though. Smaller insurer Druids Friendly Society health fund was acquired by Victorianbased GMHBA, and Illawarra-based PeopleCare moved away from its restricted membership status. What all this industry activity means for rt health fund is clear: if we don’t continue to grow and perform strongly we may be targeted for acquisition by a larger, more aggressive fund. And there are a number of other reasons why growth is not just desirable, but critical to the future of this organisation.
Our new partnership with industry comparator iSelect has proven a stunning success, with our products regularly rating among the top recommendations for iSelect shoppers. This is a partnership that has resulted in many new members joining the fund and in rt confidently standing among the largest funds in the country, often as the better alternative.
rt faces a particular challenge among health funds that exacerbates the need for membership growth. Our membership age profile is the second highest in the industry, which translates into a higher volume and higher cost of claims as older members typically have more hospital stays, at a higher cost than younger members. It is crucial that we continue to recruit younger members and move toward a membership age profile that is closer to the rest of the industry.
Through increased marketing activity and involvement in industry events and activities we have continued to grow awareness and recognition of the rt health fund name and brand, which is another step toward ensuring that transport and electricity industry employees around the country know and support their industry health fund.
In addition, the cost and resources required to comply with corporations law, contemporary corporate governance practices and private health insurance legislation mean it is increasingly difficult for smaller funds to continue to meet the burden. As we grow, we are able to achieve economies of scale and become more efficient, which keeps the cost of operating the fund to an absolute minimum. As a not-for-profit fund owned by our members, our primary financial objective is to run the fund as efficiently as possible, ensuring that we maintain the highest possible benefits for members at the lowest possible price. Growth enables us to continue to achieve this outcome.
Improved services and easier access Our capability in service delivery has also continued to grow, both in response to member feedback and requests, and as part of taking a proactive approach to growing and improving the services we provide to members. We’ve increased the number of member care staff available by phone, in person and online to assist members. And we are now turning the majority of claims around within two days from receipt to payment. Just some of the other new service initiatives we have implemented this year include: online cover checking for hospitals, allowing them to access the information they need for admissions faster; the ability for doctors to lodge claims directly with the fund electronically, reducing the cost and administrative burden; a new online member service centre through which members can access and make changes to their health cover, view correspondence, access and download documents such as tax statements, and elect to receive correspondence from us via email rather than by post, which increases the speed with which we can communicate while reducing the cost; and a new online contribution calculator making it easy for members and prospective members to make cost comparisons on our different covers. And we’re not done yet … we’ve just launched a new payment option, Post billpay, which makes it possible for members who choose to pay on account notice to make their payments at any post office in Australia. We’re also working on a new online joining process that will enable people to complete their application form online. These new online services are intended to offer members more
Increasing our potential to grow We have seen strong and sustainable growth in our membership over the past year, a result of the hard work and commitment of our very capable new sales and marketing team. With a net membership growth of 11.3 per cent we have significantly outstripped the industry average of 4.2 per cent, and gone from a position of long-term decline in membership to become one of the fastestgrowing funds in the country. We have also grown our geographic reach and now have members in every Australian state and territory. We’ve opened a new member service centre in Railway Square in the centre of Sydney to provide services to our large concentration of transport industry members located there; launched our new member service centre in Newcastle; and opened a small office in Victoria to service our growing client base in that state.
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The good news is spreading. rt has grown 11.3% this year
“ We have gone from a position of long-term decline in membership to become one of the fastest-growing funds in the country.�
17,000
16,500
16,000
15,500
NUMBER OF MEMBERSHIPS
15,000
14,500
14,000
13,500
13,000 5
0 4-
0
0
0
0 6-
10
90
8
80
70
6
60
50
40
30
20
10
0
4
2
0
4
8
7
6
0 5-
100
MEMBERSHIP AGE PROFILE (%)
RESULTS FROM OUR 2008 ANNUAL ONLINE MEMBER SATISFACTION SURVEY
17,500
Our marketing strategies of the past two years are starting to pay off – we’re attracting a new generation of younger members and keeping them happy
0-
0 7-
0
SATISFIED (96%) DISSATISFIED (4%)
9
-1
15
4
-3
30
9
-4
45
4
-6
60
9
-7
75
4
-9
90
RT DEC ‘08 RT DEC ‘05 ALL FUNDS DEC ‘07
More options, better quality care
choice and greater convenience in how they interact with us, and are designed to complement our member care team, not to replace it. By increasing the number of member care staff available, we can spend as much time with our members as they need.
We understand how important it is that our members have access to high quality hospital and day hospital facilities through their private hospital cover. We have continued to participate with the Australian Health Services Alliance (AHSA) together with a number of other funds, to ensure our members receive high quality care, at an agreed contract rate, in a wide choice of hospitals. As a result of our involvement with the AHSA, we are able to offer our members access to 476 hospitals around Australia, all of which have met acceptable quality standards, representing 85 per cent of all private hospitals and day facilities in the country. This level of access is greater than that available to members of any of the four largest funds in Australia.
More than a just a health fund, we’re your health partner The cost of doctors’ fees, medical technology and hospital stays are on an accelerating and never-ending upward spiral. While the rest of the healthcare industry actually derives a profit from people being unwell and needing care, our not-for-profit status means that the interests of rt health fund are perfectly aligned with those of our members. It’s in our best interests to help our members to stay healthier, because the healthier we can help our members to be, the less expensive it is to operate the fund, and the lower members’ contributions can stay. So we have a vested interest in helping our members to be well, get well and stay well.
Governance and management The last 12 months has seen the culmination of much of the hard work undertaken to improve the governance and management of the fund, the details of which are reported in this year’s chairperson’s report.
As we undertook to do in last year’s annual report, we have recruited a health services manager to develop and implement a number of programs designed to assist members as they navigate their way through the healthcare system, as well as to help members improve their overall health and avoid preventable health issues through a number of preventative programs and communications.
Our commitment to helping the community The rt Families Foundation is a completely separate entity from the health fund which is run by staff on a voluntary basis and uses no health fund monies or resources. It exists to provide assistance to families in our industries – whether they are members of the fund or not – who need a helping hand in times of hardship. Over the past 12 months it has made four grants to families, ranging from assistance in purchasing equipment to help make life a little more comfortable for people living with chronic health problems, to providing funding for school supplies and equipment for children in families where mum or dad has become ill and unable to work.
We’ve recently launched our hospital substitution program, which is designed to help members receive professional nursing care in their own homes rather than having to go to hospital, provided that their doctor, the hospital and the member all agree that is the best treatment option. We’ve also launched a number of chronic disease management programs that are aimed at helping people manage and improve their health through assistance in making lifestyle changes. You may have read some information about different aspects of health management on our website and in recent newsletters, particularly our ‘arts and hearts’ issue and the recent ‘bloke’s issue’ focusing on men’s health. Health management is an important part of our future goals and is where we see the future of the industry heading.
Thanks for being with us On behalf of the rt team I would like to thank each one of our members for your ongoing membership of the fund. As a not-for-profit mutual fund, you are quite literally our only reason for being and our goal is to continue to be of service to you for many years to come. I would especially like to acknowledge the many members of the fund with more than 50 years of membership. On behalf of the current and all the previous management of the fund, I thank you. I would also like to thank my amazing team, many of whom you will meet later in this report, for their commitment, professionalism and relentless enthusiasm for the work we do. Finally, I would like to thank the board for their guidance and support, and our industry partners for their continued association and friendship.
Leading industry change to benefit our members We have continued to grow our influence in the industry and to take a strong industry leadership position within the HIRMAA group (the representative body for restricted membership health funds). This is important as it affords rt the opportunity to contribute to the discussion and direction of the industry at the highest levels of government. During the year rt has made submissions to the ACCC on industry consolidation, to the industry regulator (PHIAC) on prudential standards, and has continued to consult and negotiate with government on legislative and industry changes.
Glenn Campbell Chief Executive Officer
5
95
94
860
93
840
HOSPITAL – AVERAGE BENEFIT PER PERSON COVERED ($)
90
91
85
MEMBER RETENTION %
88
87
86
BENEFITS AS % OF CONTRIBUTIONS
90
45,000
80
75
40,000 820
35,000
800
780
760
740
720
700
30,000
TOTAL BENEFITS PAID ($‘000)
92
89
50,000
880
25,000
20,000
15,000 5
/0
04
RT HEALTH FUND ALL FUNDS RESTRICTED FUNDS
Satisfied Members rt’s member retention far outstrips the industry average
RT HEALTH FUND ALL FUNDS RESTRICTED FUNDS
6
/0
05
7
/0
06
RT HEALTH FUND ALL FUNDS RESTRICTED FUNDS
Fantastic Value for Money rt’s benefits as a percentage of contributions are the best in the industry
GREAT HOSPITAL BENEFITS rt’s hospital benefits are, on average, the best in the industry
Giving more back to our members benefits paid to members have grown significantly in the past year
dental and optical claims continue to be the largest ancillary benefits paid
PROVIDERS ARE USING OUR ONLINE SERVICES FOR: MEDICARE NUMBER VERIFICATION (70%) HOSPITAL ELIGIBILITY CHECKING (12%) ONLINE PATIENT VERIFICATION (11%) INPATIENT MEDICAL CLAIM (7%)
8
/0
07
new online services members and providers alike are benefitting from the convenience of new, easy access, online facilities
MEMBERS ARE USING OUR ONLINE SERVICES FOR: UPDATING PHONE NUMBER (40%) CHANGING CONTACT DETAILS (25%) UPDATING EMAIL ADDRESS (24%) UPDATING ADDRESS (5%) CHANGING ADDRESS (3%) CHANGING CREDIT ACCOUNT DETAILS (2%) CHANGING DEBIT ACCOUNT DETAILS (1%)
6
9,000
7
8,000
50,000
6
40,000
7,000 5
STATEMENT OF FINANCIAL PERFORMANCE ($’000)
30,000 4
5,000
4,000
SOLVENCY CAPITAL RISK MULTIPLE
GENERAL TREATMENT BENEFITS PAID ($’000)
6,000
3,000
2,000
1,000
0 5
0 4/
0
0
0 6/
0
2
1
0
8
7
6
0 5/
3
5
0 7/
0 4/
0
0
0 6/
0
0
0
-10,000
0 7/
05
N’
0
JU
RT HEALTH FUND ALL FUNDS
Great ancillary benefits rt members are getting more value from their ancillary cover than ever before
10,000
8
7
6
0 5/
20,000
06
N’
JU
07
N’
JU
08
N’
JU
CONTRIBUTIONS INVESTMENTS INCOME CLAIMS MANAGEMENT EXPENSES
Never More Financially Sound rt has the highest solvency reserves in the industry
STRONG financial management rt’s revenue growth and financial performance are sound
Top 10 Hospital Claims 2007/8 rt provides great peace of mind in a time of soaring medical costs.
ANCILLARY CLAIMS PAID BY TYPE: DENTAL (51%) $4,292,417 OPTICAL (17%) $1,464,410 CHIROPRACTIC (9%) $734,355 PHYSIOTHERAPY (7%) $580,779 NATURAL THERAPIES (6%) $505,831 PHARMACEUTICAL (3%) $278,466 ARTIFICIAL AIDS (3%) $246,221 PODIATRY AND CHIROPODY (3%) $239,704 HEALTHCARE APPLIANCES (1%) $45,926
#
Gender
Age
Medical Condition
1 2 3 4 5 6 7 8 9 10
M M M F F F M M M M
81 44 70 58 75 70 72 85 57 71
Cardiac – Bypass Endoscopy Retrograde – Cholangiopancreatography Cranionomy Cardiac – Defibrillator Cardiac – Defibrillator Cardiac – Defibrillator Cardiac – Defibrillator Neurosurgical – Intracerebral Haematoma Cardiac – Defibrillator Spinal – Vetebral
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Cost
Benefit Paid ($)
86,992.74 70,363.09 70,111.00 69,248.00 69,007.48 68,217.77 68,086.12 67,664.58 66,518.00 64,228.65
83,548.74 70,363.09 70,111.00 69,248.00 69,007.48 68,217.77 68,086.12 67,664.58 66,517.00 64,228.65
1 Matthew Moore 2 Simone Tregeagle 3 Tony Delahaye 4 Leah Thompson 5 Corinne McConnell 6 Jorge Ferreira 7 Dwight Wood Patricia Kennedy (pictured on page 15) Samantha Ames (pictured on page 16)
meet our management team We’d like to introduce you to some of the very capable men and women who contribute so much to improving and growing the capabilities of your health fund every day. Matthew Moore operations manager Matthew has lived and breathed private health insurance for more than 20 years. He spent his first decade in the industry with Medibank Private in a range of analytical, marketing and planning roles before ultimately becoming head of strategy. He then made the move to MBF where, as risk manager, he established and implemented fraud and risk analysis for the fund. Matthew went on to consult for various health industry organisations before accepting the position of CEO of an innovative organisation that provided outsourced ‘back office’ and IT services to small and mediumsized health funds both in Australia and overseas. He returned to consulting before joining the rt team as our operations manager. Matthew has a degree in administration and information systems and brings a lifetime of experience in all aspects of health fund management to his role. His vision is to create a sustainable future for rt by constantly growing and improving the fund’s operational processes and services to members. Simone Tregeagle sales and marketing manager Starting out in customer service management in the general insurance industry, Simone moved to Medibank Private where she was responsible for marketing, promotions and member communications in more than 300 branches across the country. She stepped out of the insurance industry to gain valuable insights from other sectors, working for a not-for-profit organisation and later lecturing in sales and marketing. From there, Simone became a communications strategist
working on the agency side of brand development before making the move back into health insurance as brand and communications manager with Grand United and GU Corporate. She met rt health fund while working in a brand development consultancy and couldn’t pass up the opportunity to take on the challenge of rebranding the fund and working with the team responsible for growing awareness and membership. Simone has degrees in communications and marketing. Her goal is to help the fund do justice to the vision of the men who first created it and to ensure that it is valued by members for another 120 years … and beyond. Tony Delahaye member transactions manager Tony and his team are responsible for all rt member transactions: every claim, every payment received and benefit paid, and every change members make to their cover. Over the past couple of years the team has worked hard to introduce improvements that grow rt’s ability to provide services to members faster, more efficiently and in ways that suit different people by providing a range of options for how members can interact with the fund. Tony has a degree in business and worked with Suncorp and Shell Chemicals in the UK before joining MBF where he managed a team of 70 staff. He made the switch to rt after six years with MBF, and while he brings the experience gained in one of the country’s biggest health funds, he doesn’t bring the same ‘big business’ approach to the way he works with his team or our members. In fact, one of the things he loves most about rt is being part of a small, supportive team that really gets to know and care about members, and to be able
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to introduce improvements in services that have a genuine impact by making members lives that little bit easier. Leah Thompson business services manager There’s not much about the operations of a health fund that Leah hasn’t been involved in over the past decade. She began her career with a restricted membership fund in Melbourne as a claims assessor and quickly worked her way into a supervisory role. Looking for new challenges, she moved to Australian Unity, where she held a variety of positions over the next four-and-a-half years, including special project officer, analysis coordinator and customer relations manager. Keen to move back into a more member-focused environment after a move to Sydney, Leah joined the rt team as our transactions team leader where she took on the challenge of streamlining systems to improve claims turnaround times. She then transitioned into the role of member services manager, where she worked tirelessly to improve member services procedures, and now as our business support manager Leah is focused on analysing and improving the efficiencies of the behind-the-scenes systems that keep rt up and running on a daily basis. Leah’s vision is to ensure that the business works smoothly every day, making improvements as required to cater for changing member needs as the fund grows. Corinne McConnell health services manager Corinne joined rt in this newly-created position at the beginning of 2008 with the goal of establishing
a range of services and facilities for members that assist them to take care of their health through preventative and remedial programs, and to find their way through the health industry maze when they are undergoing long or complex treatments. It’s the perfect role for someone with a passion for helping people take control of their health and fulfil their potential for leading healthy, balanced lives. Corinne has a degree in human movement and exercise science, and before joining the rt team created and implemented chronic disease screening and intervention programs for the WA Water Corporation. Corinne is thrilled to be working for a health fund that is not-for-profit as she believes this allows the fund to focus on the health, wellbeing and happiness of members and staff alike without being compromised by pressures to increase profits for shareholders. She looks forward to helping rt forge new paths in health insurance, implementing new initiatives that can grow as the fund grows, continually increasing benefits to members. Jorge Ferreira internal audit, fraud and business analyst Jorge is responsible for reviewing the accuracy and effectiveness of rt’s systems of internal control. He appraises the relevance, reliability and integrity of management, financial and operating data, and analyses the efficiency with which resources are employed within the organisation. Jorge reports audit findings and recommendations to management and to the board’s Audit and Risk Committee. He is currently in the process of analysing our fraud prevention and protection policies and procedures. Jorge has degrees in accounting and economics, and before joining
the rt team worked with Ernst and Young, Westpac and the South Eastern Sydney and Illawarra Health Service. Jorge believes that the benefits of working with rt are clear – as a small team it offers everyone the chance to really make a difference and from his point of view, the better the fund is run, the more benefits it can offer to members. Dwight Wood technology services manager Dwight describes himself as ‘the rt systems guy’. He makes sure that all the computer and telecommunications systems work to their full potential, 24 hours a day. Under Dwight’s leadership, rt has developed a world-class disaster recovery system – all information across the fund is updated every ten minutes, 24 hours a day, seven days a week and replicated in a disaster recovery system which is located offsite. This level of protection is virtually unprecedented (in any industry) and translates into uninterrupted services for members, no matter what happens behind the scenes. Dwight has a diploma in network engineering, certificate in advanced applications (HTML scripting), certificate III in network administration, certificate IV in network engineering and an advanced diploma in systems engineering. Before joining the rt team he worked as a systems engineer with Alcatel and then in an IT consultancy, ultimately moving into the health insurance industry. Dwight’s goal is to ensure that the IT systems we have in place today will take rt into the future, enabling all members to enjoy the benefits of a robust, tightly controlled and effective information system.
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Patricia Kennedy member services manager Patricia has nine years’ experience in the health insurance industry. She spent eight years at Grand United and GU Corporate where she worked her way up to become customer service manager for the corporate health division. After a stint as a member care centre team leader with MBF, it became clear to Trish that she wanted to work with a truly memberfocused health fund, so she joined the team at rt as our member services manager. Trish has certificates in business management and contact centre management. Her goal is for her team to ‘knock our members socks off’ by delivering exceptional customer service every time they call, send an email or walk into one of our member care centres. Samantha Ames member transactions team leader How many health fund claims supervisors would describe their employer as a ‘fund with a very big heart’? That’s exactly how transactions team leader Samantha Ames has come to see rt after her first year with the fund. Sam has seven years’ experience in health insurance, gaining invaluable knowledge and expertise in the customer service and transactions departments of various organisations, and a certificate iv in frontline management. And, while they operate ‘behind the scenes’, Sam and her team are responsible for so many of the day-to-day interactions members have with the fund through claims and contribution payments. Her goal is to help her team constantly improve the service they provide to members, while making sure the fund keeps true to its ‘heart and soul’ as it grows into the future.
corporate governance Role of the board
Conflicts of interest
The board is responsible for the overall corporate governance of the fund, including determining its strategic direction and financial wellbeing, and guiding and monitoring its business and affairs on behalf of the members by whom it is elected, and to whom it is accountable.
Directors are required to disclose, on an ongoing basis, any interest that could potentially conflict with those of the fund or its members. In accordance with the Corporations Act 2001, your board ensures that any director with a material personal interest in a matter being considered by the board must not be present when the matter is under discussion and may not vote on the matter. New processes have also been implemented this year to ensure we identify any breaches of compliance, regulations or code of conduct by board members.
In summary, the board’s accountabilities and responsibilities include: • contributing to the development of, approving, and monitoring the implementation of strategy • monitoring the financial state and performance of the fund • approving the fund’s financial reporting, including annual reports • delegating clear responsibility and authority to the committees of the board and the CEO, and monitoring and regularly reviewing the performance of those who hold delegated powers • ensuring that the fund has effective processes and systems in place to enable the board to monitor its performance and capabilities • promoting and maintaining organisational values and a culture where transparent and timely information is shared between management and the board • overseeing the fund’s corporate governance framework and ensuring effective communication with members and stakeholders • setting the overall direction, financial objectives and operational goals for the fund • reviewing and approving the annual budget and business plan • ensuring effective systems of internal control and internal audit • identifying and mitigating any risks that may harm the fund • reviewing the performance of and mentoring the CEO The board delegates responsibility for the day-to-day management of the fund to the CEO and senior managers, but remains responsible for overseeing the performance of the management team. To ensure that responsibility is clearly defined, the board has delegated a range of authorities to management through formal delegations. These include limited expenditure authority, and the authority to enter into certain contracts and to engage staff.
Board charter The board has continued in 2007/08 to undertake key activities which will ensure all of its policies, practices and procedures reflect good governance and current corporate practice. In line with current best practice, the board has undertaken the significant exercise of developing a new board charter that outlines the fund’s approach to such issues as: • corporate culture • risk management • audit • polices and procedures • ethical standards and values • board agenda • meeting procedures • directors’ induction and training • board and directors’ evaluation and remuneration • chief executive officer’s evaluation and remuneration The directors recognise that adherence to the new charter is fundamental in demonstrating that they are accountable to members and stakeholders, and that they are appropriately overseeing the future direction of the fund and managing its business risks. The board has further undertaken a major compliance review to ensure that rt has documented its compliance with all relevant legislation and regulations, and the processes that are in place to ensure ongoing compliance.
Changes to constitution With the introduction of new legislation on 1 April 2007 and the need for rt to undertake re-registration, a significant review of the constitution has been undertaken. A revised constitution will be presented to members for approval at the 2008 annual general meeting. The changes to the constitution will ensure that rt complies with the revised legislative requirements.
Board committees In line with best practice corporate governance, the board has established standing committees as an efficient mechanism for considering detailed issues and making recommendations for consideration by the entire board. These committees adopt charters setting out the matters relevant to the composition, responsibilities and administration of each committee. Current committees of the board are: Audit and Risk The Audit and Risk Committee is responsible for: • facilitating the independence of the external audit process and addressing issues arising from the external audit process • ensuring the fund meets its obligations to regulatory agencies • directing the internal audit function, ensuring maximum value to the fund • ensuring the quality and accuracy of published financial reports so they present a true and fair view of the fund’s financial position and comply with relevant statutory and regulatory requirements • ensuring the fund adopts, maintains and applies appropriate accounting and business policies and procedures • ensuring the fund maintains effective internal control and risk management systems in order to safeguard its financial, physical and intellectual resources In line with the accepted good practice of rotating long-serving external auditors, the fund’s current auditors, BDO, will resign at the annual general meeting. An evaluation of alternative auditors with expertise in private health insurance has been undertaken and new auditors are to be put to members at the 2008 annual general meeting. Remuneration and Nominations The Remuneration and Nominations Committee is responsible for: • assisting the board to achieve its objectives of ensuring that rt has a board of effective composition, size and commitment to adequately discharge its responsibilities and duties • establishing policies and procedures for the annual performance evaluation of the board, each director and management, and recommending performance and salary reviews for the CEO • reviewing and planning professional development and succession with the board and senior management • annual education programs for board members
Board performance A performance evaluation process has been established for the board, individual directors and key executives. A comprehensive board performance appraisal was again conducted by independent external consultant Jane Walton, of the Walton Group, after the end of the last reporting period. This focused on board and individual director effectiveness and included a top-to-bottom review of board reporting and processes. As a result of the review a number of recommendations were made to ensure that board performance continued to build on capability and improvement. One of the major recommendations was that directors undertake formal training through the Australian Institute of Company Directors (AICD) and Chartered Secretaries Australia (CSA). All directors have attended training during the year and participated in PHIAC (Private Health Insurance Administration Council) and HIRMAA (Health Insurance Restricted Membership Association of Australia) director education forums. A further review of the board will take place in late September 2008.
1 Victoria Reynolds 2 Robert Ledger 3 Michael Prior 4 Bob Scheuber AM 5 Barry Dredge 6 Judith Blake 7 Dennis Ellis 8 Robert Glover
directors’ report The Directors present their report together with the Financial Statements of the Railway & Transport Health Fund Limited for the year ended 30 June 2008 and the Auditors Report thereon.
Directors The following persons were directors during the whole of the financial year and up to the date of this report, unless otherwise stated: Position Held
V Reynolds R Ledger R Glover J Blake B Dredge D Ellis M Prior R Scheuber
Chair Vice Chair * Director Director ** Director Director Director Director
Date First Appointed
21/09/2005 21/09/2005 22/09/2004 21/09/2005 21/09/2005 21/09/2005 25/05/2006 24/10/2007
Date Re-elected
24/10/2007 22/11/2006
The Fund’s hospital membership has increased from 15,390 to 16,728 an increase of 1,338 or 8.7%. Ancillary membership has increased from 10,371 to 11,820 an increase of 1,449 or 14.0%. Total number of persons covered in 2008 were 37,834 an increase of 2,911 or 8.3% from 2007.
24/10/2007
Membership Statistics
* Appointed Vice Chair 21 November 2007. ** Concluded term as Vice Chair 21 November 2007.
Principal Activities The principal activity of the Fund during the course of the financial year was the provision of Private Health Insurance. There were no significant changes in the activities of the Fund during the year.
Results
The operating profit amounted to
Membership
Year 2008
Year 2007
$1,427,000
$275,000
2008
2007
Gain / (Loss)
NSW: Hospital Ancillary
11,342 7,198
10,675 6,379
667 819
QLD: Hospital Ancillary
5,386 4,622
4,715 3,992
671 630
Finances Total income for the year was $45,655,000 (an increase of $3,491,000 or 8.3% from 2007) including $1,977,000 from invested funds. Expenditure for the year totalled $44,228,000 resulting in a net profit of $1,427,000. Management expenses for the year were $6,169,000 (net of Ambulance Levy) or 14.1% of the total operating revenue. As the Fund is a not for profit organisation, we continually monitor members funds. This year, total equity increased from $29,383,000 to $30,810,000.
Review Of Operations The financial year ending 30 June 2008 resulted in a profit for the Fund of $1,427,000. The Fund has continued to pay 100% for accommodation, theatre fee and approved pharmaceutical items used. Hospital benefits paid went from $27,435,000 to $29,024,000, an increase of benefits by $1,589,000 or 5.8%. Ancillary claims have increased from $7,651,000 to $8,417,000 an increase of $766,000 or 10%.
11
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
Name
A total of $719,000 was paid to the State Government during the year for ambulance levy.
Qualifications of the Current Board of Directors as at 30 June 2008 Victoria Reynolds Chairperson Dip HR Mgt, GAICD, MAHRI, MWOB Chair, Remuneration and Nominations Committee Since joining the rt board in 2005, Victoria Reynolds has worked tirelessly to develop and implement initiatives that continue to improve the governance of the fund. As chair of the board’s Remuneration and Nominations Committee she developed the ‘fit and proper’ process for board member selection. She has skillfully guided the team in the development of a new board charter and a new charter for the Remuneration and Nominations Committee. She was also involved in the redevelopment of rt’s constitution and has developed an induction program for new board members.
ROBERT LEDGER Deputy Chairperson B Elec, Grad Dip Eng Sys, GAICD Audit and Risk Committee Robert Ledger began his career as an electrical fitter with the NSW Government Railways in 1965. Following 40 years’ experience in engineering and engineering management, Robert retired in 2006 as the fleet engineer in the passenger fleet maintenance section of State Rail.
DENNIS ELLIS MAICD Remuneration and Nominations Committee Dennis Ellis has worked with Queensland Rail for 31 years, currently in the position of pollution operator. Throughout his career Dennis has been active in the transport industry and was senior vice president of the RTBU. Dennis has been with rt health fund since 1997 and a member of the board since 2005. He is a member of the board’s Remuneration and Nominations Committee.
Robert has been a member of rt health fund since 1965 and a member of the board since 2005. He is a member of the board’s Audit and Risk Committee and was instrumental in redrafting the constitution in 2007, and has played a key role in the current review of the constitution and board charter.
Dennis has played an active role in the revision of the organisation’s constitution and has also been involved in the development of the ‘fit and proper’ policies and procedures. He has contributed to the development of the board charter and other corporate governance improvements. In 2007, Dennis was integral in brokering a major business initiative with the RTBU, leading to the introduction of the RTBU health plan nationally.
Robert’s vision for rt is to see it become the health fund of choice for all transport and electricity industry employees, and to continue to expand to become the premier industry health fund in Australia. Robert’s expectation is for rt to maintain its high standard of corporate governance while continuing to serve the needs of its members.
Dennis is committed to ensuring that the board continues to operate under its new best practice standards of governance and that it provides support to the CEO, management and staff in helping the fund to achieve its strategic plan goals.
MICHAEL PRIOR M Com, Grad Dip Applied Finance (SIA), CPA, FTIA, FINSIA, MAICD Chair, Audit and Risk Committee Michael Prior was appointed to the board as an independent director in 2006 and is the current chair of the Audit and Risk Committee. Michael has drawn on his wealth of risk and financial management experience within the financial services sector to ensure the fund’s corporate governance and risk management frameworks allow it to mange its business risks effectively. Michael has over 30 years’ experience within the financial services industry and has held senior executive positions including two years as chief financial officer at CMC Markets Asia Pacific Pty Ltd, two years as general manager operational risk and compliance with the Commonwealth Bank, and 23 years as a senior finance executive with Westpac. He was self-employed as a risk management consultant for four years, providing consulting services to major Australian companies and was a project director for two years with Accenture Singapore. Michael’s objectives are to ensure that the fund’s standards of corporate governance are continually improved so that its business risks are managed effectively and that it realises the maximum return on its investments. BOB SCHEUBER AM FCPA, FAIM, MAICD, B Ec, B Bus Before retiring in mid-2007, Bob held the position of chief executive officer with Queensland Rail for six years. Since then, he has gone on to establish his own consulting business and to serve as a director on two other boards. In January 2008, he was awarded a Member of the Order of Australia (AM) for his ‘service to the rail sector in Queensland, particularly through contributions to regulatory and operational reforms’.
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
Bob’s objective is to contribute his skills and experience in the rail industry and as a senior executive manager to help the fund grow through delivering products and services that help members manage their health. BARRY DREDGE MAICD Remuneration and Nominations Committee Barry Dredge began his career with Queensland Rail in 1964 and retired from his position as maintenance planner in Redbank in 2005. He became a member of rt health fund in 1992, shortly after it began operating in Queensland. He has been a member of the board since 2005 and is a member of the board’s Remuneration and Nominations Committee.
JUDITH BLAKE JP, MAICD Audit and Risk Committee Judith Blake is currently a passenger information officer with the NSW State Transit Authority, where she has been employed since 1994. She has been an rt health fund member since 1996 and a board member since 2005. Judith is a member of the board’s Audit and Risk Committee. As a member of the Audit and Risk Committee Judith has contributed to the introduction of procedures to ensure compliance with the requirements of the Private Health Industry Administration Council (PHIAC) as well as disaster recovery procedures for the fund. She has also been involved with the continued development and implementation of strong corporate governance policies. Judith’s vision for rt is to see it continue to grow, becoming the premier industry health fund in Australia, while maintaining compliance with the relevant health and government regulations and remaining at the forefront of the industry.
Victoria’s objectives are to ensure that rt continues to deliver the best outcomes for members, while continually improving its services. Her goal is to lead the board in strengthening its corporate governance and building on the fund’s proud history to ensure that it is recognised as a leader among private health funds.
Bob holds degrees in business from the now Central Queensland University and economics from the University of Queensland. He is a FCPA and is a Fellow of the Australian Institute of Management. He has been a member of rt health fund since it established operations in Queensland in 1991.
Barry has been involved with amendments to the fund’s constitution, the ongoing review of the board charter, and the development of ‘fit and proper’ policies and procedures, all of which contribute to ensuring that the operations, management and governance of the fund represent best practice in the industry. Barry’s goal is to ensure that rt continues to grow, delivering value to members through excellent products and generous rebates, while maintaining competitive contributions.
ROBERT GLOVER MAICD Audit and Risk Committee Robert Glover worked with State Rail for 30 years, starting as fitter/machinist and progressing through the ranks to become a production unit manager with the State Rail Authority. Robert has been a member of rt health fund since 1976, including ten years as a workshop representative for the fund, and has been a member of the board since 2004. He is a member of the board’s Audit and Risk Committee. He has been involved in a number of projects dedicated to pursuing further improvements in the fund’s governance and operations, including the review of the fund’s constitution. Robert’s objective is to see rt continue to develop innovative and value-filled benefits that not only help members to stay well, but also rewards them for their years of membership.
chief executive officer Glenn Campbell B Bus, MBA, ASA, GAICD Glenn is a highly qualified and experienced chief executive officer who brings more than 25 years’ experience in the financial services, health, defence, construction and transport sectors. Glenn has a degree in accounting and an MBA from the Macquarie Graduate School of Management, and is a member of the Australian Society of CPAs and the Australian Institute of Company Directors. With a range of management and executive positions under his belt, including CEO and director of Hopewell Hospice Services; national transactions manager and state senior manager with MBF; general manager of business services with Mayne Nickless; and project management roles with British Aerospace, Glenn’s experience in business development, corporate governance and strategy is second to none. His vision for rt is to continue to drive the growth of the fund into the future, while protecting the organisation’s valuable history and legacy and without compromising on the quality of benefits and services provided to members. His goal is to guide rt to the position of premier industry health fund in Australia by establishing a solid foundation for sustainability and future growth.
12
Company Secretary
LIKELY DEVELOPMENTS
M Macfarlane B Com, CA Experience and expertise • Currently the Financial Controller and Secretary of the Fund • Twenty years commercial accounting experience, the last eight In Private Hospital Health Care
There are no likely developments that will significantly affect the operations of the Fund.
Special Responsibilities • Company Secretary of the Board • Secretary of the Audit and Risk Committee • Secretary of the Remuneration and Nominations Committee
DIRECTORS’ BENEFITS
ENVIRONMENTAL REGULATIONS There are no environmental regulations that impact on the Fund.
Since the end of the previous financial year, no Director of the Fund has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by Directors shown in Note 20 of the financial statements) by reason of a contract made by the Fund with a Director or with a firm of which a Director is a member, or with an entity in which a Director has a substantial interest.
S Saffo B Com CA ACIS Experience and expertise • Finance Manager currently on maternity leave • Senior Auditor at BDO for three years
INDEMNIFYING OFFICERS AND AUDITOR The Company has not during or since the end of the financial year in respect of any person who is or has been an officer or auditor of the Company: i) indemnified or made any relevant agreement for indemnifying against a liability incurred as an officer, including costs and expenses in successfully defending legal proceedings; or ii) paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as an officer for the costs or expenses to defend legal proceedings.
Special Responsibilities • Company Secretary of the Board • Secretary of the Audit and Risk Committee • Secretary of the Remuneration and Nominations Committee
board MEETINGS During the year a total of 10 Board meetings were convened. The number of meetings attended by each Director and Company Secretary is listed below. Non-attendance was due to illness, annual leave or employment responsibilities.
V Reynolds R Ledger J Blake R Glover B Dredge D Ellis M Prior R Scheuber G Campbell S Saffo M Macfarlane
No. Eligible to Attend
No. Attended
10 10 10 10 10 10 10 7 10 6 2
10 10 9 10 9 9 9 7 9 6 2
Chair Director/Vice Chair Vice Chair/Director Director Director Director Director Director * CEO Company Secretary Company Secretary
with the exception of the following matter: during or since the end of the financial year, the company has paid or agreed to pay a premium insuring it’s directors and officers against liability, for which cover includes the current financial year. In accordance with normal commercial practice, disclosure of the amount of premium payable under, and the nature of liabilities covered by, the insurance contract is prohibited by a confidentiality clause in the contract.
AUDITORS INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307c of the Corporation Act 2001 is included on page 14. This statement is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors.
* Elected 24 October 2007.
During the year a total of 2 Remuneration and Nominations Committee meetings was convened. The number of meetings attended by each Director is listed below.
V Reynolds D Ellis B Dredge S Saffo
No. Eligible to Attend
No. Attended
2 2 2 2
2 2 2 1
Chair Director Director Company Secretary
During the year a total of 4 Audit & Risk Management Committee meetings were convened. The number of meetings attended by each Director and Manager is listed below. Non-attendance was due to illness, annual leave or employment responsibilities.
M Prior J Blake R Ledger R Glover S Saffo M Macfarlane
R LEDGER Vice Chair Dated at Sydney 20th day of August, 2008
No. Eligible to Attend
No. Attended
4 4 4 4 2 1
4 3 3 4 2 1
Chair Director Director Director Company Secretary Company Secretary
V REYNOLDS Chair
In the opinion of the Directors, there were no significant changes in the affairs of the Fund that occurred during the financial year under review not otherwise disclosed in this report or the financial statement.
EVENTS SUBSEQUENT TO BALANCE DATE There has not arisen in the interval between the end of the financial year and date of this report any item, transaction or event of a material unusual nature likely in the opinion of the Directors, to affect significantly the operations of the Fund, the results of those operations, or the state of affairs of the Fund in subsequent financial years.
13
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
STATE OF AFFAIRS
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
auditor’s independence declaration
14
“ In some ways, we’re a little old-fashioned. We still like our members to speak to a real person, not to a machine, when they call us. And we like to give our staff all the time they need to help. After all, that’s what we’re here to do – to help.” Patricia Kennedy, member services manager
“ My team and I spend our days dealing with pieces of paper, but we never lose sight of the fact that every claim that comes across our desk is important to the member who made it. Our goal is to get the money back into our members’ pockets as fast as we can.” Samantha Ames, member transactions team leader
17
“ We’re part of the team that’s out there spreading the word about rt heath fund. And the biggest complaint we get from people is ‘why didn’t I know about you sooner?’ We’re working on changing that.” from left, Rebecca Delahaye and Karen Kelly, relationship managers
50-year member honour roll Few organisations today would have the honour of acknowledging so many people who have contributed for so long. We celebrate the contribution that each one of our long-standing members has made to rt health fund. The role that each and every one of you has played in helping this organisation to grow and continue far beyond what its forefathers surely could have ever imagined is invaluable. Our heartfelt thanks to those of you who in 2008 celebrate an extraordinary 50 years of membership. Alan and Rosemary Sinclair Hislop
Irena Gregier
Raymond Glossop
Alexander and Marie Dougall
James and Evelyn Cooper
Raymond and Dianne Hancock
Alfred and Heather Erickson
James Daryl (deceased) and Margaret Richardson
Raymond and Ruby Ormsby
Anne Lynch
Jean Macpherson
Reginald and Beverly Lloyd
Anthony and Maureen Boland
Jill O’Keefe
Reinhold Nawer
Arthur Small
John Donoghue
Rex and Valerie Hewison
Barbara Ann Angel
John and Ivy Ference
Rex and Dawn Sorby
Barrie and Elsie Kingsford
John and Betty Garrett
Richard Craig Withers
Barry and Rae Clarke
John and Josephine Lee
Richard and Vickie Wilson
Barry and Elaine Johnson
John and Dell Mehaffy
Robert and Dorothy Aldred
Barry and Adele Smith
John Mitchell
Robert and Lynette Booth
Barry and Marilyn Turton
John and Joan Thomas
Robert and Janelle Gaylard
Brian and Valma Bush
John and Lynette Weston
Robert and Christina Lowe
Brian and Joan McMahon
John and Kathleen Wright
Robert Matthew and Jeanette Tait
Bruce Meller
Joseph and Kathleen Williams
Robert and Fay McMah
Catherine Noud
Joy Armstrong
Robert and Lynette Pankhurst
Clarice Kable
Joyce Absolom
Robert and Denise Parkinson
Cornelia Noort
June Tilden
Ronald Aubrey Clee
Daisy Doyle
Kay Batger
Ronald and Jeanette Griffith
Desmond and Rhonda Smith
Keith and Noeline Wheatley
Ronald and Betty Heathcote
Doreen Hogden
Kelvin and Judith Hyde
Ronald and Beverley Logan
Douglas and Gwendolene Hope
Kenneth and Joan Compagnoni
Roy and Venese Adams
Douglas and Elaine Keyte
Kerrie and Margaret Le Cerf
Roy and Corina Gatto
Douglas and Arlette Sole
Kevin David and Beverley Ann Tracey
Roy and Epifania Lawler
Dulcie and Lawrence Lill
Kevin and Valda Rossington
Shirley Mills
Duncan and Cynthia McCowan
Lawrence Kay
Terry Hanks
Dusan and Phyllis Vujkovic
Lyall Burtenshaw and Judith Edwards
Thomas and Imelda Bensley
Edward and Helen Ritchie
Margaret Hardy
Thomas and Lilia Fox
Eileen Davis
Margaret Hobday
Thomas and Shirley Harris
Elaine Wigger
Marjorie Burns
Thomas and Mary O’Donnell
Elizabeth McPhee
Maxwell Mundy
Thomas and Yvonne Toohey
Elma Woolfe
Mervyn and Marjorie Kingsley
Veronica Mitchell
Eric Knox
Michael and Robyn Forster
Vincent and Ailsa O’Rourke
Eric Rook
Michael and Edna Green
William and Sylvia Holmes
Evelyn Northcott
Michael Neal
William and Patricia Hucker
Francesco and Silvia Mercia
Michele and Maria Iannantuoni
William and Patricia Nolan
Francis and Beatrice Doughty
Mona Schwede
Winifred Myles
Gary Marsh
Nell Player
Gary and Barbara Stevens
Nelson and Nellie Rochefort
Giuseppe and Ivana Delcarlo
Nico and Carol Berserik
Giuseppe and Janis Palamara
Nita Cachia
Gordon and Margaret Halls
Nola and Don Crompton
Gregory Grieve
Nola Unterrheiner
Harry Austin
Norman and Elaine Prestwidge
Should your name be on this list? While we do our best to ensure that all of our 50-year members are celebrated as part of our honour roll, records of membership held for over half a century can sometimes be wrong. We’d love to hear from you if you believe that you should have been included in this list so that we can set the record straight. Call us on 1300 886 123 or email help@rthealthfund.com.au.
Hedvika Porvaznik
Pat Lynch
Herbert Simpson
Patricia Benoit
Ian Campbell
Patricia Gibbons
Ian and Melva Hay
Paul and Susan Treble
Ian and Jill McLellan
Peter Walton
19
income statement for the year ended 30 june 2008
Note
Revenue from continuing operations 4 Hospital benefit expenses Ancillary benefit expenses State levies Movement in unexpired risk liability 14 Audit and accounting expenses Commission expenses Computer expenses Depreciation and amortisation expense 5 Employee benefits expense 5 Financial charges and taxes Fixed Assets writedown Legal and professional expenses Marketing Membership expenses Postage and telephone expenses Printing and stationery expenses Property expenses Other expenses Profit before income tax Income tax expense Profit attributable to members of the Fund
17
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
The above income statement should be read in conjunction with the accompanying notes.
20
2008 $’000
2007 $’000
45,655 (29,024) (8,417) (719) 101 (199) (803) (389) (142) (2,830) (121) – (210) (521) (182) (213) (295) (181) (83) 1,427 –
42,164 (27,435) (7,651) (690) (1,222) (182) (213) (416) (70) (2,301) (116) (274) (51) (499) (198) (159) (160) (172) (80) 275 –
1,427
275
balance sheet Note
2008 $’000
2007 $’000
ASSETS Current assets Cash and cash equivalents 7, 18 10,581 Trade and other receivables 8, 18 4,400 Held-to-maturity investments 9, 18 11,283
21,264 3,181 4,995
Total current assets
26,264
29,440
Non-current assets Held-to-maturity investments 9, 18 Property, plant and equipment 10 Investment property 11 Total non-current assets
7,994 5,298 1,371 14,663
4,068 5,198 1,386 10,652
Total assets
40,927
40,092
LIABILITIES Current liabilities Trade and other payables 12, 18 270 Outstanding claims liability 13 4,251 Unexpired risk liabilities 14 1,121 Other liabilities 15, 18 3,855 Provisions 16 536
290 5,352 1,222 3,769 –
Total current liabilities
10,033
10,633
Non-current liabilities Provisions 16 Total non-current liabilities Total liabilities
84 84 10,117
76 76 10,709
Net assets
30,810
29,383
EQUITY Reserves 17 1,469 Retained earnings 17 29,341
1,469 27,914
Total equity
29,383
The above balance sheet should be read in conjunction with the accompanying notes.
21
30,810
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
as at 30 june 2008
statement of changes in equity for the year ended 30 june 2008
Note
Retained earnings $’000
Other reserves $’000
Total equity $’000
At 30 June 2007 17 Profit for the year Total income and expense for the year
27,914 1,427 1,427
1,469 – –
29,383 1,427 1,427
At 30 June 2008
29,341
1,469
30,810
Note
2008 $’000
2007 $’000
Cash flows from operating activities Cash receipts from members Cash paid to members, suppliers and employees Interest received Rent received
43,883 (46,020) 1,818 146
40,707 (37,928) 1,772 212
19
(173)
4,763
Cash flows from investing activities Purchase of property, plant and equipment Purchase of held to maturity investments Proceeds from held to maturity investments
(242) (16,263) 5,995
(97) (2,000) 7,067
Net cash (outflow)/inflow from investing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of period
(10,510) (10,683) 21,264
4,970 9,733 11,531
Cash and cash equivalents at end of period
10,581
21,264
17
The above statement of changes in equity should be read in conjunction with the accompanying notes.
cash flow statement for the year ended 30 june 2008
Net cash (outflow)/inflow from operating activities
7
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
The above cash flow statement should be read in conjunction with the accompanying notes.
22
notes to the financial statements for the year ended 30 june 2008
Note 1 Corporate Information The financial report of Railway & Transport Health Fund Limited for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the directors on 20 August 2008 and covers Railway & Transport Health Fund Limited as an individual entity. The financial report is presented in the Australian currency. Railway & Transport Health Fund Limited is a company limited by guarantee incorporated and domiciled in Australia. The address of the registered office and principal place of business is 46 Burwood Road, Burwood NSW 2134.
Note 2 Summary of Significant Accounting Policies
(g) Property, Plant and Equipment Land and buildings are measured at fair value less accumulated depreciation. Any accumulated depreciation at revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated as the revalued amount of the asset. A revaluation surplus is credited to the asset revaluation reserve included within member’s equity unless it reverses a revaluation decrease on the same asset previously recognised in the income statement. A revaluation deficit is recognised in the income statement unless it directly offsets a previous revaluation surplus on the same asset in the asset revaluation reserve. On disposal, any revaluation reserve relating to sold assets is transferred to retained earnings. Independent valuations are performed regularly to ensure that the carrying amount of land and buildings does not differ materially from that the fair value at the balance sheet date. All other plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, less depreciation and any impairment.
(a) Basis of Preparation The financial report is a general purpose financial report which has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.
Land is not depreciated. Depreciation on other assets is calculated on straight line basis over the estimated useful life of the asset as follows: Class of Fixed Asset
The financial report has also been prepared on a historical cost basis, except for investment properties, land and buildings, that have been measured at fair value. Compliance with Australian equivalents to International Financial Reporting Standards (AIFRS) ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS), except for: • AASB 114 ‘Segment Reporting’ does not apply to not for-profit organisations. • AASB 116 ‘Property, Plant and Equipment’ accounting for net revaluation increments and decrements on a class of assets basis rather than on individual assets basis as required for For-Profit entities. • AASB 136 ‘Impairment of Assets’ value in use being determined as being the depreciated replacement cost of an asset instead of the present value of the future cash flows expected to be derived from the asset as required for For-Profit entities. (b) Income Recognition Premium Income Premiums have been calculated on an accruals basis, bringing to account premiums in arrears and in advance at year end. For those amounts in arrears, collectability has been assessed.
Buildings Computer Equipment Vehicles Plant and equipment Leasehold Improvements
Depreciation Rate %
2 25 12.5 5-20 20
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the asset’s carrying amount and are included in the income statement in the year that the item is derecognised. (h) Prior Year Change in Accounting Estimate The depreciation method has changed in 2007 from diminishing value to straight line as a result of a re-assessment of the useful economic lives of the assets.
Rental Income Rental income is accounted for on a straight-line basis over the lease term. Contingent rentals are recognised as income in the periods when they are earned. (c) Impairment of Assets At each reporting date the Fund assesses the amount of impairment of assets by determining the recoverable amount as the depreciable replacement cost. (d) Cash and Cash Equivalents For the purposes of the Cash Flow Statement, cash and cash equivalents includes cash on hand and at bank, deposits held at call with financial institutions, other short term, highly liquid investments with maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts.
The financial impact of this change on the basis of the depreciation method has not resulted in a material change to the depreciation charge / expense for the year. (i) Investment Properties Investment properties are initially measured at cost including transaction costs. Subsequent to initial recognition, investment properties are carried at fair value, representing market conditions at balance sheet date. Gains or losses arising from changes in fair values of investment properties are included in the income statement as part of other income in the year in which they arise. (j) Trade and Other Payables Trade and other payables represent liabilities for goods and services provided to the Fund prior to the year end and which are unpaid. These amounts are unsecured and have 30-60 day payment terms.
Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Fund has the positive intention and ability to hold-to-maturity and are measured at amortised cost subsequent to initial recognition using the effective interest method. (f) Fair Values Fair values may be used for financial asset and liability measurement as well as for sundry disclosures. Fair values for financial instruments traded in active markets are based on quoted market prices at balance sheet date. The quoted market price for financial assets is the current bid price and the quoted market price for financial liabilities is the current ask price.
The unearned premium represents the receipt in advance of premiums for the ensuing year. This therefore represents the balance of premium income received which has been calculated on an accrual basis. The not earned component of premiums received in the income statement at the reporting date is recognised in the balance sheet as an unearned premium liability. (l) Outstanding Claims Provisions The Fund currently assesses the amount of the outstanding claim provision on a statistical model utilising previous claims history. The statistical model used by the Fund is a chain ladder model as prescribed by PHIAC. Under Australian equivalents to IFRSs, AASB 1023 General Insurance Contracts, from 1 July 2005 the Fund is required to show that amount of the outstanding claims provision including a risk margin. The margin is to be based on some statistical level of confidence. The margin of $390,000 as calculated by the Fund’s actuary, assumes a confidence level of 85%. 75% is the minimum standard adopted by the general insurance industry in Australia.
The fair value of financial instruments that are not traded in an active market are determined using valuation techniques. Assumptions used are based on observable market prices and rates at balance date. The fair value of long-term debt instruments is determined using quoted market prices for similar instruments. Estimated discounted cash flows are used to determine fair value of the remaining financial instruments. The fair value of trade receivables and payables is their nominal value less estimated credit adjustments.
23
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
(e) Investments and Other Financial Assets All investments and other financial assets are initially stated at cost, being the fair value of consideration given plus acquisition costs. Purchases and sales of investments are recognised on trade date which is the date on which the Fund commits to purchase or sell the asset. Accounting policies for each category of investments and other financial assets subsequent to initial recognition are set out below.
(k) Other Liabilities Other liabilities comprise of the unearned premium and employee benefits provisions in respect of annual leave.
notes to the financial statements (m) Unexpired Risk Liabilities At each reporting date the fund assesses whether the unearned premium liability is sufficient to cover all expected future cash flows relating to future claims arising from rights and obligations under: • Current contracts (unearned premiums) • Contracts expected to be renewed for the period to the next expected pricing/ premium review date or change in contractual benefits (contractual obligations).
(o) Rounding of Amounts The company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities and Investments Commission relating to rounding of amounts in the financial report. Amounts have been rounded to the nearest thousand dollars ($’000) unless otherwise stated.
This assessment is referred to the liability adequacy test and is performed separately for each group of contracts subject to broadly similar risks but managed as a single entity. If the present value of the expected cash flows relating to future claims plus an additional margin to reflect the inherent uncertainty in the central estimate exceeds the unearned premiums then the unearned premiums are deemed to be deficient. The deficiency at the reporting date was $131,900 (2007: $179,000). If the present value of the expected cash flows relating to future claims plus an additional margin to reflect the inherent uncertainty in the central estimate exceeds the premiums expected to be paid then the entire deficiency is recognised in the income statement. The test at the reporting date indicated that there was a deficiency of $989,200 (2007: $1,043,000).
(q) Income tax The Fund is a health benefit organisation registered under the Private Health Insurance Act 2007 and is exempt from income tax under section 50-30 of The Australian Income Tax Assessment Act 1997.
NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Actuarial assumptions and methods The actuarial valuation model used to calculate the outstanding claims is a modified chain ladder model.
The entire gain from 2007 of $101,000 is recognised immediately in the income statement. The deficiency of $1,121,100 is recorded in the balance sheet as an unexpired risk liability. (n) Employee Benefit Provisions Wages and Salaries, Annual Leave and Sick Leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of balance sheet date are recognised in respect of employees’ services rendered up to balance sheet date and measured at amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave is recognised when leave is taken and measured at the actual rates paid or payable. Liabilities for wages and salaries and annual leave are included as part of Other Payables. Long Service Leave Liabilities for long service leave are recognised as part of the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees to the balance sheet date using the projected unit credit method. Consideration is given to expected future salaries and wages levels, experience of employee departures and periods of service. Expected future payments are discounted using national government bond rates at balance sheet date with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
(p) Comparatives Where required by Accounting Standards, comparative figures have been adjusted to conform with changes in presentation for the current financial year.
This model, and variants of it, is used by health insurers and general insurers to calculate outstanding claims liabilities by using the relationships between the claims paid at each time interval in the past, for each past period incurred, to predict the extent of incurred claims for each recent period for which claim payments have not yet been completed. The model produces claims incurred for each month of the previous 2 years, and outstanding claims provisions (by class of claim) for the latest month and for each of the twelve previous months. As the run-off of health insurance claims is relatively rapid, the claims to be paid in the future were not discounted. That is, a discount rate of zero was assumed. The risk equalisation component is calculated as 18.7% of the total hospital and medical claims outstanding. The percentage was estimated from past experience. The risk margin was determined from the assumption that there is a normal distribution of the differences between the calculated provisions required for past periods of time greater than 1 year ago, and the finally determined actual requirements for those periods. The standard deviation of these differences lead to a risk margin of 10.1% providing for a 85% likelihood that the outstanding claims provision set at any particular date, and based on the reported claim payments made to that date, will be adequate.
2008 $’000
2007 $’000
Rendering of services Rental income Interest
43,678 146 1,831
40,109 212 1,843
45,655
42,164
Depreciation expense Buildings Plant and equipment Motor vehicles
54 86 2
24 44 2
142
70
Rental expenses in operating leases Wollongong office rental expense Newcastle office rental expense
13 24
19 22
37
41
Employee benefits expense
2,830
2,301
Defined contribution superannuation
206
203
NOTE 4 REVENUE FROM CONTINUING OPERATIONS
NOTE 5 EXPENSES
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
Profit before income tax includes the following specific expenses:
24
2008 $’000
2007 $’000
103
93
Cash at bank and on hand Deposits with banks and credit unions
2 10,579
2 21,262
10,581
21,264
NOTE 6 AUDITORS’ REMUNERATION Assurance Services Audit services Amounts paid/payable to BDO for audit or review of the financial report for the Fund
NOTE 7 CASH AND CASH EQUIVALENTS
(a) Cash on hand Cash on hand is non-interest bearing. Cash at bank bear floating interest rates between 1.25% and 4.7% (2007 – Nil). Deposits at call bear floating interest rates between 6.60% and 8.04% (2007 3.00% and 6.04%). These deposits have an average maturity of 3 months. (b) Reconciliation of Cash The above figures are reconciled to the cash at the end of the financial year as shown in the statement of cash flows as follows: Balances as above
10,581
21,264
Balances per statement of cash flows
10,581
21,264
Trade receivables Other receivables
1,934 2,466
2,092 1,089
4,400
3,181
CURRENT Term Deposits Fixed Interest Securities/Bonds Floating Rate Notes
7,769 2,514 1,000
2,000 1,995 1,000
11,283
4,995
NON CURRENT Term Deposits Fixed Interest Securities/Bonds Floating Rate Notes
2,000 1,000 4,994
– 2,056 2,012
7,994
4,068
NOTE 8 TRADE AND OTHER RECEIVABLES (CURRENT)
(a) Effective interest rate and credit risk Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in note 18.
NOTE 9 HELD-TO-MATURITY INVESTMENTS
The bonds and floating rate notes are carried at amortised cost. They are to be held until their maturity between one and three years and carry fixed interest rates between 5.00% and 7.00%. The carrying value of the bonds and floating rate notes approximate to their fair value.
Land At fair value Total land
2,340 2,340
2,340 2,340
Buildings At fair value Accumulated depreciation Total land and buildings
2,700 (78) 2,622 4,962
2,700 (24) 2,676 5,016
Plant and equipment At cost Accumulated depreciation
465 (141) 324
223 (55) 168
Motor vehicles At cost Accumulated depreciation
20 (8) 12
20 (6) 14
Total non-current property, plant and equipment
5,298
5,198
Revaluations The valuation basis of land and buildings at fair value is the amount for which the assets could be exchanged between willing parties in an arms length transaction, based on current prices in an active market for similar properties in the same location and condition. The 2008 valuations were made by the Directors and the 2007 revaluations were based on independent assessments made by a member of the Australian Property Institute as at 30 June 2007.
25
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
NOTE 10 PROPERTY, PLANT AND EQUIPMENT
notes to the financial statements
2008 $’000
2007 $’000
NOTE 10 PROPERTY, PLANT AND EQUIPMENT (continued) Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and previous financial year are set out below: Total Land Carrying amount at beginning of financial year Net revaluation
2,340 –
2,126 214
Carrying amount at end of financial year Total Buildings Carrying amount at beginning of financial year Net revaluation Depreciation
2,340
2,340
2,676 – (54)
2,658 42 (24)
Carrying amount at end of financial year
2,622
2,676
Total Leasehold Improvements Carrying amount at beginning of financial year Disposals
– –
55 (55)
Carrying amount at end of financial year
–
–
Total Plant and Equipment Carrying amount at beginning of financial year Additions Disposals Depreciation
168 242 – (86)
336 97 (219) (46)
Carrying amount at end of financial year
324
168
Total Motor Vehicles Carrying amount at beginning of financial year Depreciation
14 (2)
16 (2)
Carrying amount at end of financial year
12
14
At Fair Value Balance at beginning of year Fair value adjustments
1,386 (15)
1,400 (14)
Balance at end of year
1,371
1,386
NOTE 11 INVESTMENT PROPERTY
Land and Buildings are disclosed at fair values determined by independent valuations as at 30 June 2008. The valuation basis of land and buildings at fair value is the amount for which the assets could be exchanged between willing parties in an arms length transaction, based on current prices in an active market for similar properties in the same location and condition, and subject to similar leases. No impairment losses have incurred during the year. The following amounts have been recognised in the income statement: Rental income
–
67
Direct operating expenses arising from investment property that generated rental income during the period
–
16
Other payables
270
290
270
290
OUTSTANDING CLAIMS LIABILITY Outstanding claims-central estimate of the expected present value of future payments for claim liabilities Risk Margin
3,861 390
5,045 307
Gross outstanding claims liability
4,251
5,352
There are no restrictions on the realisability of investment property or the remittance of income and proceeds of disposal.
NOTE 12 TRADE AND OTHER PAYABLES
(a) Interest rate risk Details of Fund’s exposure to interest rates change are set out in note 18.
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
NOTE 13 CLAIM LIABILITIES
(a) Risk margin Process for determining the risk margin for outstanding claims liability The overall risk margin was determined allowing for the relative uncertainty of the outstanding claims central estimates for the three main classes of benefits; hospital, medical and general (ancillary) benefits. The benefit component of the outstanding claims central estimate for any month is the sum of the differences between the central estimate of incurred claims for each class and each month for the prior 12 months to the date of calculation and the paid claims for each of those classes and months. Uncertainty was analysed by comparing 6 most recent central estimate provisions made with revised provision based on benefits data paid to June 2008. The relative differences between the reported central estimate of the provision and the revised central estimate of the provision are assumed to be log-normally distributed. The risk margin for outstanding claims is 10.1% (6.09% in 2007) for an 85% (2007:75%) probability of adequacy.
26
2008 $’000
2007 $’000
Outstanding Claims Balance at Beginning of Year Additional provision Amount utilised during the year Increase in risk margin
5,352 – (1,184) 83
3,002 2,200 – 150
Balance at end of year
4,251
5,352
UNEXPIRED RISK LIABILITY Unearned Premiums Contractual Obligations
132 989
179 1,043
1,121
1,222
Unearned Premiums Balance at Beginning of Year: Recognition of additional unexpired risk liability in the period in relation to unearned premiums Release of unexpired risk liability recorded in previous periods in relation to unearned premiums
179 – (47)
– 179 –
Balance at end of year
132
179
Contractual Obligations Balance at Beginning of Year Recognition of additional unexpired risk liability in the period in relation to contractual obligations Release of unexpired risk liability recorded in previous periods in relation to contractual obligations
1,043 – (54)
– 1,043 –
Balance at end of year
989
1,043
(b) Deficiency recognised in the income statement Gross movement in unexpired risk liability
(101)
1,222
Total deficiency recognised in the income statement
(101)
1,222
NOTE 13 CLAIM LIABILITIES (CONTINUED) (b) Movement in Provisions
NOTE 14 UNEXPIRED RISK LIABILITIES
(a) Movement in Unexpired Risk Liability
Unearned Premium Liability Earned unclosed business contributions Unearned unclosed business contributions Future premiums receivable for contractual obligations
2,987 301 24,226
Central estimate of present value of expected future cash flows arising from future claims Earned unclosed business contributions Unearned unclosed business contributions Contractual obligations
2,917 303 23,743
Risk margin (IFRS 85% sufficiency margin at 6.2%) Earned unclosed business contributions Unearned unclosed business contributions Contractual obligations
181 19 1,472
Present value of expected future cash flows arising from future claims Earned unclosed business contributions Unearned unclosed business contributions Contractual obligations
3,098 322 25,215
Deficiency Earned unclosed business contributions Unearned unclosed business contributions Contractual obligations
111 21 989
Total
1,121
Process for determining the risk margin for liability adequacy test The method for determining the risk margin for the liability adequacy test is based on an analysis of the historical variance of projected 9-month loss ratios compared with actual loss ratios. Uncertainty was analysed by comparing the 9 recent projected central estimate loss ratios with actual loss ratios. The relative differences between the central estimate of the model and the actual unit utilisations are assumed to be log normally distributed. The risk margin for unexpired risks is 6.2% (3.83% in 2007) for a 85% (75% 2007) probability of adequacy, and is imposed on the unexpired risks component of the provision. The risk margin for contractual obligations is imposed on the total expected claims costs and the expenses in paying those claims for the contract assessment period and is 6.2%.
27
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
(c) Calculation of Deficiency
notes to the financial statements
2008 $’000
2007 $’000
CURRENT Unearned premium liability Employee benefits
3,704 151
3,657 112
3,855
3,769
(a) Unearned premium liability Balance at the beginning of the year Deferral of premiums on contracts written on the year Earning of premiums deferred in the prior year
3,657 3,704 (3,657)
2,594 3,657 (2,594)
Balance as at the end of the year
3,704
3,657
CURRENT Commissions
536
–
NON CURRENT Employee benefits
84
76
NOTE 15 OTHER LIABILITIES
NOTE 16 PROVISIONS
(a) Commissions Provision is made for the estimated commission payable in respect of referred members under the iSelect Marketing Agreement. These commissions are expected to be settled in the next financial year. Management estimates the provision based on the number of referred members in each month adjusted for the probability of the referred members remaining in membership for 4 months and 6 months. (b) Movement in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below: Carrying amount at the start of the year Charged to the income statement – additional provision recognised
–
–
536
–
Carrying amount at the end of the year
536
–
Movements in reserves Asset Revaluation Reserve Balance at start of period Revaluation
1,469 –
1,213 256
Balance at the end of period
1,469
1,469
Movements in retained earnings Retained earnings Balance at start of period Net profit for the year
27,914 1,427
27,639 275
Balance at the end of period
29,341
27,914
FINANCIAL ASSETS Cash and Cash Equivalents Loans and receivables Held-to-maturity investments
10,581 1,197 19,277
21,264 1,152 9,063
31,055
31,479
FINANCIAL LIABILITIES Trade and other payables – accrued expenses Unearned premium liabilities
161 3,704
248 3,657
Financial liabilities at amortised cost
3,865
3,905
NOTE 17 RESERVES AND RETAINED EARNINGS
The asset revaluation reserve records increments and decrements on the revaluation of individual parcels of land and buildings.
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
NOTE 18 FINANCIAL INSTRUMENTS
28
NOTE 18 FINANCIAL INSTRUMENTS (continued) (a) General objectives, policies and processes In common with all other businesses, the Fund is exposed to risks that arise from its use of financial instruments. This note describes the Fund’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial instruments. There have been no substantive changes in the Fund’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. The principle financial instruments from which financial risks arise are: – Cash and cash equivalents – Trade and other receivables – Held-to-maturity investments – Trade and other payables – Unearned premium liabilities The Board has overall responsibility for the determination of the Fund’s risk management objectives and polices and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Fund’s finance function. The Funds risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the results of the Fund where such impacts may be material. The Board receives monthly reports from the Fund’s Financial Controller through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The Fund’s internal auditors also review the risk management policies and processes and report their findings to the Audit and Risk Committee. The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the Fund’s competitiveness and flexibility. Further details regarding these policies are set out below: (b) Credit Risk Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the Fund incurring a financial loss. This usually occurs when debtors fail to settle their obligations owing to the Fund. The maximum exposure to credit risk is the carrying amount stated in the above table. Deposits of cash and investments are held in high quality Australian financial institution. The Funds investment policy also assists in minimising risks. No more than 20% of investments can be held in any one institution. There has been no history of default and all receivables are likely to be repaid within their expected terms. Contributions in arrears are members contributions due and account for 19.6% of trade and other receivables. The account is reviewed regularly for recoverability. Past due not impaired
2008 $’000
2007 $’000
Not past due Past due 30 days Past due 30 – 60 days Past due > 60 days
– 478 156 227
– 672 110 48
Balance at the end of period
861
830
No receivables are impaired. (c) Interest Rate Risk The Funds exposed to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on those financial assets and liabilities are summarised below:
Fixed interest rate maturing
Floating Interest Rate $’000
1 year or less $’000
Over 1 to 2 years $’000
Over 2 to 5 years $’000
Non-interest Bearing $’000
Total $’000
Year ended 2008 Financial Assets Cash and cash equivalents Receivables Held-to-maturity-investments
10,579 – 5,994
– – 10,283
– – 3,000
– – –
2 1,197 –
10,581 1,197 19,277
Effective weighted average interest rate
16,573 6.6%
10,283 7.5%
3,000 – 1,199 5.7%
31,055
Financial Liabilities Unearned premium liability – – – Trade and other creditors – – – – – –
– – –
3,704 161 3,865
3,704 161 3,865
–
(2,666)
27,190
16,573
10,283
29
3,000
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
notes to the financial statements NOTE 18 FINANCIAL INSTRUMENTS (CONTINUED)
Fixed interest rate maturing
Floating Interest Rate $’000
1 year or less $’000
Over 1 to 2 years $’000
Over 2 to 5 years $’000
Non-interest Bearing $’000
Total $’000
Year ended 2007 Financial Assets Cash and cash equivalents Receivables Held-to-maturity-investments
21,262 – 3,012
– – 3,995
– – 1,017
– – 1,039
2 1,152 –
21,264 1,152 9,063
Effective weighted average interest rate
24,274 5.6%
3,995 6.1%
1,017 1,039 1,154 6.4%
31,479
– – –
– – –
– – –
– – –
3,657 248 3,905
3,657 248 3,905
24,274
3,995
1,017
1,039
(2,751)
27,574
Financial Liabilities Unearned premium liability Trade and other creditors
The Fund’s interest rate risk arises from financial assets held with fixed interest rates. To manage their fair value interest rate risk, the Fund keeps a certain portion of financial assets at fixed rates to counteract a fall in interest rates, and a certain portion of financial assets at floating rates to allow for increases in interest rates. Sensitivity Analysis Carrying Amount $’000
+0.25% Interest rate increase Profit $’000
-0.25% Interest rate decrease Profit $’000
2008 Cash and Cash equivalents Held-to-maturity investments
10,581 18,277
26 46
(26) (46)
Total
28,858
72
(72)
Carrying Amount $’000
+1% Interest rate increase Profit $’000
-0.25% Interest rate decrease Profit $’000
2007 Cash and Cash equivalents Held-to-maturity investments
21,264 7,007
213 70
(53) (18)
Total
28,271
283
(71)
The above analysis assumes all other variables remain constant. (d) Liquidity Risk Liquidity Risk is the risk that the Fund may encounter difficulties raising funds to meet commitments associated with financial instruments. The Fund is not significantly exposed to this risk as it has $10,581 of cash and cash equivalents to meet these obligations as they fall due. Liabilities as at 30 June 2008 totalled $10,117 (2007: $10,709) including financial liabilities.
NOTE 19 CASH FLOW INFORMATION
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
2008 $’000
2007 $’000
Reconciliation of profit after income tax to net cash flow from operating activities Profit for the year Depreciation Fixed asset write down Amortisation Fair value adjustment to investment property Change in operating assets: – (Increase) in trade and other receivables – (Increase) in interest receivables – (Decrease)/increase in other payables – Increase/(decrease) in employee provisions – (Decrease)/increase in provisions for outstanding claims, unexpired liability and risk margin – Increase in deferred income
1,427 142 – 54 15
275 70 276 34 14
(1,206) (13) (20) 47 (666) 47
(546) (72) 100 (23) 3,572 1,063
Net cash flow from operating activities
(173)
4,763
30
NOTE 20 KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Key management personnel The following persons were key management personnel of the Fund during the financial year: Name
Position Held
V Reynolds R Ledger R Glover J Blake B Dredge D Ellis M Prior B Scheuber G Campbell
Chair Vice Chair Director Director Director Director Director Director CEO
Date Appointed
21/09/2005 21/09/2005 22/09/2004 21/09/2005 21/09/2005 21/09/2005 25/05/2006 24/10/2007 24/04/2006
(b) Compensation Details of compensation key management personnel of Fund are set out below:
2008
2007
The key management personnel includes: Non Executive Directors and CEO 9
9
2008 $’000
2007 $’000
Short-term benefits Cash salary and fees Other short-term employee benefits
379,575 7,423
439,335 18,217
Post-Employee Benefits Pension and Superannuation
34,266
41,287
Other long-term employee benefits Long service leave
–
19,436
Total
421,264
518,276
Lease commitments Non-cancellable operating leases future minimum lease payments Within one year Later than one year but not later than 5 years
34 –
35 10
34
45
NOTE 21 CONTINGENCIES Contingent Liabilities At 30 June 2008, Railway and Transport Health Fund Ltd had no contingent liabilities.
NOTE 22 COMMITMENTS
The Fund leases various premises under non-cancellable operating leases expiring within one year. All leases have annual CPI escalation clauses. The above commitments do not include any turnover rentals which are contingent upon the Fund achieving defined sales levels. Nor do they include commitments for any renewal options on leases. Lease terms usually run for 5 years with a 5 year renewal option.
NOTE 23 PHIAC SOLVENCY AND CAPITAL ADEQUACY REQUIREMENTS In accordance with Clause 5 of Schedule 2 of the Private Health Insurance (Health Benefit Fund Administration) Rules 2008, the Railway & Transport Health Fund Limited solvency requirement for the year ended 30 June 2008 is $4,987,000 (2007: $4,669,000). The Capital Adequacy requirement for the year ended 30 June 2008 is $8,533,000 (2007: $9,025,000).
NOTE 24 SUBSEQUENT EVENTS
31
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
No material events subsequent to the reporting date.
directors’ declaration DIRECTORS’ DECLARATION The directors of the company declare that: 1. The financial statements, comprising the Income Statement, Balance Sheet, Cashflow Statement and the Statement of Changes in Equity, and accompanying notes are in accordance with the Corporations Act 2001 and: a) comply with Accounting Standards and the Corporations Regulations 2001 and b) give a true and fair view of the financial position of the Fund as at 30 June 2008 and performance for the year ended on that date of the Fund. 2. In the directors’ opinion, there are reasonable grounds to believe that the Fund will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:
V REYNOLDS Chair
R LEDGER Vice Chair
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
Dated at Sydney 20th day of August, 2008
32
33
RAILWAY & TRANSPORT HEALTH FUND LTD ABN 93 087 648 744
independent audit report
Head Office SYDNEY 46 Burwood Road Burwood NSW 2134
Member care centres SYDNEY 46 Burwood Road Burwood NSW 2134 14-18 Lee Street Chippendale NSW 2008 (railway square, co-located with Encompass Credit Union) WOLLONGONG 139 Keira Street Wollongong NSW 2500 NEWCASTLE Shop 2, 28 Donald Street Hamilton NSW 2303 BRISBANE 59A Melbourne Street South Brisbane Qld 4101
Contact Us Tel 1300 886 123 Fax 1300 887 123 help@rthealthfund.com.au www.rthealthfund.com.au
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