There are a lot of things we don’t do. rt health fund 2009 annual report
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2009 annual report
Contact details Tel 1300 886 123 Fax 1300 887 123 help @ rthealthfund.com.au www.rthealthfund.com.au Mail po box 1100 burwood north nsw 2134
We believe the reason for our outstanding success can be found as much in the things that we don’t do, as it is in the things that we do.
head office 46 burwood rd burwood nsw 2134 sydney central 14-18 lee st railway square chippendale nsw 2008 (within encompass credit union branch) wollongong 139 keira st wollongong nsw 2500 newcastle 2/28 donald st hamilton nsw 2303 brisbane 1/59a melbourne st south brisbane qld 4101
02 Chairperson’s report 04 CEO’s report 10 Highlights 15 Management team
|01
18 Corporate governance 22 Directors’ report 28 Auditor’s independence declaration 30 50-year member honour roll 34 Income statement 35 Balance sheet 36 Statement of changes in equity 37 Cash flow statement 38 Notes to the financial statements 74 Directors’ declaration 75 Independent auditor’s report
railway & transport health fund ltd (abn 93 087 648 744)
Chairperson’s report In this, the 120th year of rt health fund’s operations, I am pleased to present to you the fund’s annual report. 02|
Over the past 120 years the board and management have faced many significant challenges and celebrated many major achievements; and the year in review is no different. Once again, this organisation has seen both outstanding achievements and substantial challenges.
railway & transport health fund ltd (abn 93 087 648 744)
In the period since the last annual general meeting the global economic environment has rapidly deteriorated, with the near collapse of the world banking system and a significant decline in consumer sentiment across all major economies. Despite this very challenging environment, I am pleased to advise that the fund has continued to grow at an extraordinary rate, and in the past 12 months has exceeded the growth of any other health fund in Australia. In 2008/09 rt grew by more than 20%, which is some five times the industry average. The retention rate for our current membership has also continued to increase, demonstrating that our members clearly see the importance of retaining their health insurance in times of economic uncertainty. rt has continued to focus on delivering excellent benefits to our members and once again was recognised by the Australian Financial Review Smart Investor magazine as being one of the ‘nation’s best-value health funds’. In mid 2010, the organisation will move to new headquarters close to Sydney’s Central Station, with the purchase of a building and its refurbishment well underway. This move will herald a new era for rt with the introduction of fund-owned and operated dental and optical services for our members.
The senior executive team, under the management of Glenn Campbell, has dealt with extraordinary challenges during the financial year. Glenn has continued to lead with a vision, insight and energy that has been integral to the organisation’s achievements over the past three years. In a year of unprecedented growth and industry volatility, it is a testament to the management team and their strong capabilities that they have effectively managed and developed all aspects of the business, while also progressing important issues such as human resource development, business improvement initiatives and establishing the growth platform for the years ahead. The board and I continue to be impressed by the quality and attitude of the fund’s senior executive and management team. I would like to thank the staff who have played an essential role in the achievement of the business objectives for this financial year. rt is a home for staff with the capacity and the desire to deliver excellence, and the results for the year demonstrate that everyone in the team has contributed to making the ideal of excellence a daily reality at rt health fund. My appreciation also goes to my fellow directors for their work on the board and its various committees, and for their contribution to the development of rt health fund.
Victoria Reynolds Chairperson railway & transport health fund ltd (abn 93 087 648 744)
|03
CEO’s report 04|
The 2008/09 financial year marked the culmination of our first three-year strategic plan for rt health fund. The focus throughout this period has been on laying strong foundations across all areas of the business, to ensure that we can continue to offer exceptional health cover and service while achieving essential growth. One of the keys to our ongoing success over the past three years has been a powerful commitment to the things that we don’t do. And while reporting on these might seem a little contrary, we believe the reason for our outstanding success can be found as much in the things that we don’t do, as it is in the things that we do.
railway & transport health fund ltd (abn 93 087 648 744)
We don’t profit from our members By the end of this year, almost three-quarters of all Australians with private health insurance will be covered by ‘for profit’ funds. This is a significant change in the health insurance landscape, which up until the last couple of years was almost entirely not-for-profit. These funds face increased pressure to deliver profits and dividends, together with the constantly escalating costs of healthcare. There is little doubt that it will be their members who will foot the bill. We are staunchly committed to maintaining our not-for-profit and mutual status, and to the principles that underpin not-for-profit organisations: we exist to serve our members, not to profit from them. This focus makes it possible for us to deliver member value above everything else. It is a simple proposition and it is driving phenomenal levels of growth. In the 2008/09 financial year, we achieved record growth of 20.08%, against an industry average of around 4%. We welcomed 3,499 new members, for a total of 20,925 members. When we embarked on our three-year strategic plan we began with 15,564 members, and were losing members year-on-year. Much of this growth is now coming from outside of our traditional rail and bus industry relationships, as we continue to expand awareness of rt health fund throughout the broader transport and electricity industry sectors. The rt marketing team has been involved in raising awareness at a vast array of industry events, exhibitions, conferences, seminars and training programs right across the country. Coupled with this, we have expanded our team to make it possible for prospective members to have one-on-one consultations with people who are focused on helping them, rather than rushing them through what can be a complicated process.
Over the past 12 months we have significantly increased our presence and membership in every corner of the country, and we are now a truly national health fund with members in every state and territory. A sizeable proportion of our new members are from Victoria, where we previously had very limited market presence and which is rapidly becoming one of our key membership strongholds. Hand-in-hand with the need to grow has been the need to attract younger members to the fund. As Australia’s first registered health fund, rt is a very old organisation which has had an increasingly ageing membership and we have sought to reduce the risks associated with this through our marketing efforts. In the past 12 months we’ve succeeded in attracting younger members and we are seeing very positive results in the reduction of our membership age profile. We don’t think we can’t continue to improve This year we were very proud to have achieved a significant increase in overall member satisfaction, and we saw a substantial increase in the number of people moving from ‘somewhat satisfied’ to ‘very satisfied’. Seventy-one per cent told us they are ‘very satisfied’ – up from a strong 64% last year. One-third of members felt that we had improved this year, while only 5% felt that we had declined, and just three people told us that they were ‘very dissatisfied’. This was a very pleasing result given the rapid growth the organisation is experiencing. Balancing the need to deliver high levels of service with strong growth is a challenge for any organisation. Coupled with member satisfaction, we are also achieving very high levels of member retention with 94.6% of members remaining with the fund, against an industry average of 90.2%. These results give us a very clear indication that we are continuing to meet members’ expectations and that our focus on constantly enhancing member services is having an impact. railway & transport health fund ltd (abn 93 087 648 744)
|05
CEO’s report continued Our transactions team has performed extremely well, delivering almost all claims payments within KPI timeframes for the year. Performance averages for the year were: – 2.2 days for extras claims (KPI: 3 days) – 3.53 days for access gap claims (KPI: 10 days) – 1.42 days for medical gap claims (KPI: 10 days) – 5.08 days for hospital claims (KPI: 14 days)
06|
During the year we also introduced a number of new services and system improvements, among them: – Electronic claiming with iSOFT. Members now have the choice of claiming electronically with both HICAPS and iSOFT, which means more options for on-the-spot claiming with more practitioners. – Hospital claiming technology. We’ve introduced improved facilities to make it possible for hospitals to interact with us directly for fast verification of rt members’ details (making hospital admissions for members seamless) and payment of claims. – Scanning technology. Significant progress has been made on the introduction of scanning technology which will reduce the paper handling and processing time of members’ claims and other correspondence. – Online joining. New members can now complete their application form online and submit all their details to us electronically, making the process of joining faster and easier for both members and our processing teams. In all cases where we introduce new technologies, our desire is to provide efficiency in our operations and choices to our members, rather than to replace human interactions with computerised ones. We view technology enhancements as a positive way to free our team up from dealing with paperwork so they can spend more time helping people.
railway & transport health fund ltd (abn 93 087 648 744)
We don’t limit ourselves to paying the bills when our members are unwell This year we introduced two additional health management programs, dedicated to helping members improve their health and wellbeing. Health4life (chronic disease prevention and management program). Chronic diseases are set to bring the health industry and economy into a state of crisis within the next generation. People are suffering with a variety of chronic diseases at unprecedented rates, to the extent that, for perhaps the first time ever, the government is putting a significant focus on understanding how the healthcare system can be engaged to help people stay well, rather than just providing care after the fact. Our health4life program is targeted at reducing the prevalence and severity of chronic disease among our members by supporting people over a six to 12-month period as they make the changes necessary to reduce their risk factors or better manage their existing condition. Pregnancy, birth + beyond (pregnancy support program). This program offers parents-to-be access to personalised support provided by professional midwives and a range of information and literature about healthy pregnancies from the time of conception until the baby’s first birthday. It also comprises elements of our existing hospital at home (hospital substitution) program, enabling new mothers, with the consent of their doctor and hospital, to be discharged early following their baby’s birth with follow-up care provided by home-based care professionals.
Hospital at home (hospital substitution treatment program). This program, introduced in the 07/08 financial year, is designed to enable people to avoid hospitalisation where it is not strictly necessary, or to receive post-procedure care and support in their own home. The benefits of this program are twofold: first, it makes it possible for members to recuperate at home, in comfortable and familiar surroundings with family and friends nearby; and second, it helps to reduce costs by having care provided to people outside of the hospital environment. In addition to helping members return home sooner, the savings achieved through this program in the past 12 months have totalled $70,000. We don’t take our staff for granted We recognise that delivering great service and high performance results takes an experienced, qualified and motivated team. Being able to attract and retain people of the right calibre is an essential component of our success. This year we undertook a review and re-statement of our internal ‘brand’, resulting in the development of a set of values and behaviours that the organisation recognises as key to our becoming a health fund with a significant role to play in our members’ lives, and the industry in which we operate. We also implemented an ‘employer of choice’ program, aimed at encouraging staff to improve their health and wellbeing through making healthy lifestyle choices. This saw our team participating in a number of individual and group health-related activities, including events such as the BRW Corporate Triathlon, Sydney’s City2Surf and Brisbane’s Bridge to Brisbane.
We don’t believe that we should ever stop building a better health fund A new head office location has been procured in Sydney’s CBD, close to Central Station and a number of major transport industry organisations. This new premises will provide easier access for members than our current location, and makes it possible for us to introduce on-site optical and dental services that will offer significant value to members. The building requires a substantial fitout which will be completed during 2010. We don’t let anything stop us from helping families in our community The rt Families Foundation has continued in its fundraising activities with a focus over the last 12 months on developing more efficient and effective fundraising methods. One new initiative was the introduction of automatic donation deductions from staff salaries – an option that was taken up enthusiastically by a number of staff and represents our new commitment to establishing long-term fundraising approaches as well as running short-term campaigns and events. We don’t shy away from self-regulation The Compliance Committee assessed and approved rt’s self-audit against the Private Health Insurance Code of Conduct during the year. We will continue to be a signatory to this voluntary code for a further 12 months.
railway & transport health fund ltd (abn 93 087 648 744)
|07
CEO’s report continued We don’t believe that our age should make us ‘old fashioned’ Vision 2012 is rt’s strategic plan for the next three years, and commits the organisation to a series of goals framed around an overriding annual theme: year one – going from good to great; year two – becoming a ‘next generation’ health fund; and year three – becoming a health fund that matters. The organisation’s business and individual performance planning all derives from the strategic plan and these three yearly themes.
08|
In conjunction with the new strategic plan, the organisation has also committed to a new vision: ‘To be Australia’s next generation health fund, recognised as the industry innovator in technology, customer service, product development and health management, with a national presence and ranking among the largest funds in Australia; a case study in excellence, with a strong connection with members and a preferred employer in the sector. Wellness drives everything.’
We don’t take our history for granted This year marks the 120th birthday of rt health fund – an extraordinary milestone that is both humbling and inspiring. To have the opportunity to be one of the custodians of an organisation that has been in existence since before the federation of this nation is an enormous honour. The board, management and staff are constantly aware of the incredible history that we have the privilege of presiding over, and of our responsibility to ensure that we position the fund to continue, grow and thrive. We believe that the results achieved within the past 12 months and the plans laid down for the next three years will ensure that we do. On behalf of the rt team I would like to thank each and every one of our members for your ongoing membership, and I would like to particularly acknowledge the 50-year members of the fund; our heartfelt thanks and appreciation goes to each of you. I would like to thank the amazing team behind the scenes who give so much and make this organisation the remarkable place that it is, and our industry partners for their continued association and friendship. Finally, my thanks to the rt board for their ongoing guidance and support.
Glenn Campbell Chief Executive Officer railway & transport health fund ltd (abn 93 087 648 744)
We don’t profit from our members.
|09
By the end of this year, almost three-quarters of all Australians with private health insurance will be covered by ‘for profit’ funds. This is a significant change in the health insurance landscape, which up until the last couple of years was almost entirely not-forprofit. These funds face increased pressure to deliver profits and dividends, together with the constantly escalating costs of healthcare. There is little doubt that it will be their members who will foot the bill. We exist to serve our members, not to profit from them.
railway & transport health fund ltd (abn 93 087 648 744)
Highlights
20.08
%
Membership growth
97
%
Total member satisfaction
10|
94.6
%
Member retention
43.4
Average age of members
railway & transport health fund ltd (abn 93 087 648 744)
1295.96 $ 55 805 000 % 91 $
Average hospital benefit per person
Total benefits paid
|11
Contributions returned to members
Top 10 most expensive hospital claims # Gender Age Medical Condition
1 2 3 4 5 6 7 8 9 10
M M F F M M F F F M
77 57 79 63 60 80 38 71 65 76
Cardiothoracic: coronary artery bypass Cardiothoracic: coronary artery bypass Respiratory failure Dilated cardiomyopathy Coronary angiography Cardiomegaly Hypertrophic cardiomyopathy Ventricular tachycardia Renal failure Atherosclerotic heart disease
Number of Bed Days
Benefit Paid ($)
40 48 36 7 16 23 7 11 46 9
108,768.05 108,159.06 89,201.76 69,738.59 72,143.44 70,136.65 65,358.00 67,188.05 73,674.17 64,732.88
railway & transport health fund ltd (abn 93 087 648 744)
Highlights continued
100
20
80
15
60
We exist to serve our members, not to profit from them. Ninety-one per cent of our members’ contributions are returned in benefit payments.
railway & transport health fund ltd (abn 93 087 648 744)
07/08
06/07
05/06
04/05
03/04
0
RT HEALTH FUND ALL FUNDS
RT HEALTH FUND ALL FUNDS
The word about rt health fund is spreading fast. Our rate of growth is far outstripping the rest of the industry.
20
00/01
08/09
07/08
06/07
0
40
02/03
5
05/06
12|
Membership growth (%)
10
01/02
Benefits as % of contributions
25
35,000
60,000
100
30,000
50,000
80 25,000 40,000 60
20,000 30,000 15,000
40
|13 Member RETENTION (%)
5,000
2009
2008
2007
2006
0 2005
07/08
08/09
05/06
06/07
0
10,000
2004
Members’ funds ($’000)
10,000
04/05
Benefits paid ($’000)
20,000
20
0 SOURCE: PHIO ANNUAL REPORT RT HEALTH FUND ALL FUNDS SMALLER FUNDS
Members are receiving more value than ever. The value of benefits paid to members has increased significantly over the past three years.
Prudent management has protected members’ funds. Despite the global financial crisis, careful financial management has sustained members’ funds.
rt members are more likely than others to stay with their fund. Our very high level of member retention is clear indication that we are continuing to meet members’ expectations.
railway & transport health fund ltd (abn 93 087 648 744)
We don’t force people to talk to machines.
14|
01001000 01000101 01101100 01101100 01101111
A lot of people get a real shock when they call us. We’ve all become so used to having our calls answered by machines, and having to jump through hoops pressing ‘1’ for this, ‘3’ for that, and ‘9’ to hear the options all over again. Is it any wonder that we’re frustrated before we even get to talk to a human being? When you call us, we’ll answer the phone. And the same person who answers the phone is the person who can help you with your call. Real people delivering real service – do you think it’ll ever catch on?
railway & transport health fund ltd (abn 93 087 648 744)
Management team Glenn Campbell
Glenn Campbell Chief Executive Officer BBus, MBA, ASA, GAICD Glenn is a highly qualified and experienced chief executive officer with more than 25 years’ experience in financial services, health, defence, construction and transport. He has a degree in accounting and an MBA from the Macquarie Graduate School of Management, is a member of the Australian Society of CPAs and a graduate of 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 and AWA, Glenn’s experience in business development, corporate governance and strategy is one of rt’s most valuable assets. His vision is to continue guiding rt as it becomes a ‘next generation’ health fund, using innovation and a highly focused internal culture to drive phenomenal service for members. His goal is to ensure that the fund remains strong and sustainable well into the future. Matthew Moore General Manager Strategy, Policy and Innovation Matthew has lived and breathed private health insurance for more than 20 years. He spent his first decade in a range of analytical, marketing and planning roles with Medibank Private before ultimately becoming head of strategy. He then made the move to MBF where he established and implemented fraud and risk analysis systems. Matthew went on to hold various project management roles, ultimately leading him to the position of CEO of an innovative organisation that provided outsourced ‘back office’ and IT services to small and medium-sized health funds in Australia
Matthew Moore
Scott Dickson
and overseas. Following the organisation’s sale, Matthew worked in the IT&T sector before joining the rt team as our operations manager. His move to the new role of general manager strategy, policy and innovation will provide rt with a sound platform for future growth. 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 health fund that assists members to maintain health over their lifetime, and to create a sustainable future for the fund by introducing new health management services for members. Scott Dickson Financial Controller and Company Secretary BCom, BA(Hons) Scott is responsible for ensuring the fund’s sound financial management and good corporate governance. He supports the board through secretariat services as well as developing and implementing policies and procedures which promote the objectives of the fund. Scott also reports to the board and the audit and risk committee on rt’s finance and investments, and provides analysis and recommendations for the fund’s strategic objectives and key business decisions. With degrees in commerce and humanities, Scott worked for a number of employers before joining rt, including holding senior management positions with Medibank Private, Grand United (Health Source) and a number of federal government agencies where his career spanned finance, health and industrial relations. Having worked for large organisations Scott appreciates his ‘hands on’ role with rt, and the support of great staff at a time when the fund is experiencing rapid growth and the health system is on the threshold of far-reaching reform. railway & transport health fund ltd (abn 93 087 648 744)
|15
Management team continued Scott also values rt’s not-for-profit status in an industry that is increasingly for profit. He is also public officer of the rt Families Foundation which is staffed by volunteers.
16|
Simone Tregeagle Manager Sales, Service and Marketing Starting out in customer service management in the general insurance industry, Simone moved to Medibank Private after completing her degrees in communications and marketing, where she was responsible for marketing, promotions and member communications across more than 300 branches. 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 is proud to work for a fund that genuinely cares about the wellbeing and satisfaction of its members, and 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 Manager Member Operations Tony and his team are responsible for all rt member transactions: every claim, every payment received and benefit paid, and every change that 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 railway & transport health fund ltd (abn 93 087 648 744)
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 us. 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 to introduce improvements in services that have a genuine impact by making members’ lives that little bit easier. Patricia Kennedy Manager Member Services Patricia has ten 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 member-focused health fund, so she joined the team at rt. Trish has certificates in business management and contact centre management, and 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.
Simone Tregeagle
Tony Delahaye
Patricia Kennedy
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 sees rt and why she loves being a part of it. Sam has eight years’ experience in health insurance, gaining invaluable knowledge and expertise in the customer service and transactions departments of various health funds, and a certificate iv in frontline management. And while they operate ‘behind the scenes’, Sam and her team are responsible for 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, while making sure the fund keeps true to its ‘heart and soul’ as it grows into the future. David Dunger Manager Technical Services The unstated requirements of any IT department are to keep the technological advancements in line with the vision of the business; to maximise results and benefits while keeping costs to a minimum; to provide uninterrupted support and service to staff, members and health providers; and to ensure that all staff have the tools they need to deliver effective and efficient service to members. Our new technical services manager has 25 years’ experience in diverse IT environments – from multinationals, including Philips and CSC, to national companies such as SMS, smaller state-based half-governments including TAB and not-for-profit organisations such as USU.
Samantha Ames
David Dunger
Jorge Ferreira
His IT expertise gives us the opportunity to further develop our systems, and his commitment is to use his skills to take rt into the future as we strive to become a ‘next generation’ health fund. Jorge Ferreira Internal Auditor Jorge is responsible for evaluating the effectiveness of rt’s internal control, risk management and governance processes in assisting the fund to achieve its objectives. He assesses risks; controls policies, systems and procedures; and reports on whether these are being managed effectively across all functions of the organisation. Jorge has degrees in accounting and economics, and before joining the rt team he 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.
David is not only great at what he does – he ‘warranties’ his work, demonstrating just how much he cares about making sure that we’re online 24 hours a day, seven days a week. He also has strong customer relations skills and an in-depth understanding of members’ needs, making him an invaluable addition to the rt team. railway & transport health fund ltd (abn 93 087 648 744)
|17
Corporate governance Role of the board 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.
18|
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.
railway & transport health fund ltd (abn 93 087 648 744)
The board delegates responsibility for the day-today 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 2008/09 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’s charter outlines the fund’s approach to such issues as: – corporate culture – code of conduct – 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 – capital management The directors recognise that adherence to the 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 an annual major compliance review to ensure that the fund has documented its compliance with all relevant legislation and regulations, and the processes that are in place to ensure ongoing compliance. Changes to election to the board The board has adopted a ‘fit and proper’ policy for nominees wishing to be elected to the board. The policy is compliant with APRA regulations and consistent with the ASX guidelines. In 2010, PHIAC will introduce requirements for ‘fit and proper’ for all private health funds. Conflicts of interest Directors are required to disclose on an ongoing basis any interests 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 it 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. 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. 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 – managing the ‘fit and proper’ policy and procedures for board appointees.
railway & transport health fund ltd (abn 93 087 648 744)
|19
Corporate governance continued
20|
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 skills-gap analysis of the board members was undertaken in May 2009 and a training program developed based on individual needs. An in-house training day was conducted in August 2009. Directors continued in 2009 to attend industry forums and also met with directors of other private health funds to discuss common issues and industry trends.
railway & transport health fund ltd (abn 93 087 648 744)
We don’t confuse people with complicated products and ‘fine print’.
Fr o
E x tr
nt-e
as wit
|21 nd d
ed u
ctib
h life st yle
le
add-o
ns
Research shows that people find health insurance really confusing. No kidding. Pat ien
tm oie ty Su pe + d r to ou pb l le v e p el lu ho se s xt pita ra s l
It’s confusing enough with all the rules, regulations, government programs, incentives and penalties. Then most health funds like to roll out dozens of different health covers – each one making it sound like you have the top level of cover available – wrapped in a mountain of fine print. We prefer to keep it simple with a small range of easy-to-understand covers, and no itty-bitty fine print to confuse you. It seems to be an approach that works, too. The Australian Financial Review’s Smart Investor magazine has named our covers among the best value in the country for two years running (2008 + 2009).
railway & transport health fund ltd (abn 93 087 648 744)
Directors’ report For the year ended 30 June 2009 Your directors present their report on the company for the financial year ended 30 June 2009. Directors The names of the directors in office at any time during or since the end of the year are: Name Position Held
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Date first Appointed
Date re-elected /re-appointed
V Reynolds Chairperson 21/09/2005 20/09/2006 B Scheuber Deputy Chair 24/10/2007 – R Ledger Director 21/09/2005 24/10/2007 M Prior Director 25/05/2006 25/04/2009 B Dredge Director 21/09/2005 24/10/2007 J Blake Director 21/09/2005 24/10/2008 D Ellis Director 21/09/2005 24/10/2008 R Glover Director 22/09/2004 22/11/2006
Special Responsibilities
Chair, Remuneration and Nominations Committee Audit and Risk Committee Audit and Risk Committee Chair, Audit and Risk Committee Remuneration and Nominations Committee Remuneration and Nominations Committee
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
railway & transport health fund ltd (abn 93 087 648 744)
Victoria Reynolds
Bob Scheuber AM
Michael Prior
Victoria Reynolds Chairperson Dip HR Mgt, GAICD, MAHRI, MWOB Chair, Remuneration and Nominations Committee Victoria was employed with NSW rail for 22 years, retiring as general manager, human resources for Rail Infrastructure Corporation. In 2007, Victoria and her HR team were awarded the prestigious Premier’s Silver Award for Excellence in service delivery. Victoria now consults in HR and IR. Since joining the rt board in 2005, Victoria has worked to develop and implement initiatives that continue to improve the governance of the fund. Victoria conducted the board evaluation process and reviewed the performance of each director, and has bolstered the independence of the board through constitutional change. As chair of the board’s remuneration and nominations committee she developed the ‘fit and proper’ process for board member selection. She has also guided the team in the development of new charters for the board and the remuneration and nominations committee, as well as an induction program for new board members.
Rail. In January 2008, Bob was honoured as 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’. Bob holds degrees in business from the now Central Queensland University, and economics from the University of Queensland. He is a FCPA and 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. Following the 2008 AGM Bob became deputy chair and joined the audit and risk committee. Bob has been involved in improving board processes, in the development of the capital management policy and plan, in business cases for significant expenditure, as well as providing oversight through the audit and risk committee of investments, and assisting in facilitating key industry relationships for the fund.
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.
Michael Prior MCom, Grad Dip Applied Finance (SIA), CPA, FTIA, FINSIA, MAICD Chair, Audit and Risk Committee Michael 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 a number of senior executive positions, including chief financial officer at CMC Markets Asia Pacific, general manager operational risk and compliance with the Commonwealth Bank, and various senior
Bob Scheuber AM Deputy Chair BEc, BBus, FCPA, FAIM, MAICD Member, Audit and Risk Committee Before semi-retiring in mid-2007, Bob served as chief executive officer of 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: trustee of the QSuper Board of Trustees and director of CRC
Bob’s objective is to contribute his skills and experience as a senior executive manager in the rail industry to help the fund grow through delivering products and services that help members manage their health.
railway & transport health fund ltd (abn 93 087 648 744)
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Directors’ report continued finance executive positions 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 is also an independent member of the board finance and investment committee for the Grain Growers Association of Australia.
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Robert Ledger BElec, Grad Dip Eng Sys, GAICD Member, Audit and Risk Committee Robert began his career as an electrical fitter with the NSW Government Railways in 1965. After 40 years in engineering and engineering management, Robert retired in 2006 as the fleet engineer in the passenger fleet maintenance section of State Rail. Robert has been a member of rt health fund since 1965 and a member of the board since 2005. As a member of the board’s audit and risk committee, Robert was instrumental in redrafting the constitution in 2007 to protect members from unwelcome takeover, and has played a key role in the current review of the constitution, board charter and the fund’s response to the PHIAC discussion paper, Governance Standard for Private Health Insurers. 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 and become the premiere 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. Barry Dredge MAICD Member, Remuneration and Nominations Committee Barry began his career with Queensland Rail in 1964 and retired from his position as maintenance planner in Redbank in 2005. He became a railway & transport health fund ltd (abn 93 087 648 744)
member of rt health fund in 1992, shortly after it began operating in Queensland. Barry has been a member of the board since 2005 and is a member of the board’s remuneration and nominations committee. He has been involved with amendments to the fund’s constitution, the ongoing review of the board charter, and the development of the ‘fit and proper’ policy and procedures, all of which contribute to ensuring that the operations, management and governance of the fund represent best practice in the industry. In addition, Barry developed a new policy for nomination and voting procedures for elected board positions (chair, deputy chair and committees). 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. Judith Blake JP, MAICD Judith Blake is 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. Previously, as a member of the audit and risk committee Judith contributed to the introduction of procedures that ensure compliance with the requirements of the Private Health Insurance 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 is particularly committed to ensuring that members remain the central focus for the fund. Her 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.
Robert Ledger
Barry Dredge
Dennis Ellis MAICD Member, Remuneration and Nominations Committee Dennis has worked with Queensland Rail for 33 years, currently in the position of pollution operator. Throughout his career he 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. He 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’ policy 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, which has become the model for other key relationships. Dennis is committed to ensuring that the board continues to operate under its 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. Robert Glover MAICD Robert worked with State Rail for 30 years, starting as a 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, has been a member of the board since 2004 and was a member of the audit and risk committee until 2008. Robert’s strong grassroots relationships in the industry ensure that the voice of members is heard, and he is particularly interested in ensuring staff welfare so that they are better able to meet the
Judith Blake
Dennis Ellis
Robert Glover
needs of members. Robert 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 valuable benefits that not only help members to stay well, but also reward them for their years of membership. Scott Dickson Financial Controller and Company Secretary BCom, BA(Hons) Scott’s career spans more than 15 years in commercial finance, federal government and private health insurance roles, including holding senior management positions with Medibank Private, Grand United (Health Source) and a range of government agencies (see full profile on pages 15-16). Principal activities The principal activity of the company during the financial year was the provision of private health insurance. There were no significant changes in the nature of the company’s principal activities during the financial year. Operating results The surplus of the company for the financial year after providing for income tax amounted to $299,549. Review of operations Membership of products providing hospital cover increased by 20.7% over the twelve months to 30 June 2009 while membership of products providing cover for general treatment increased by 28.1% over the same period. Total net contributor growth for the year was 3,499.
railway & transport health fund ltd (abn 93 087 648 744)
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Directors’ report continued The Fund reported a surplus before unexpired risk adjustment of $729,000 (2008: $1,045,000) and a surplus after unexpired risk adjustment of $299,549 (2008: $1,146,000). A gross margin of 10.7% generated during the year is higher than in 2008; being 9.2%. This is due to strong increase in new memberships taken out by younger members during the year, who tend to make fewer claims. While the average contribution rate increase at 1 April 2009 was 6.9%, hospital, medical and general treatment drawing rate inflation increased by 6.5% in the twelve months to 30 June 2009.
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Management expenses remained relatively consistent to prior years in respect of contribution income, being 11.6% (2008: 9.5%), and have thus remained significantly lower than the industry average. Investment income was slightly lower than in the prior year, due primarily to lower interest rates being earned during the year as well as investments being realised for the purchase of the new office in Surry Hills during the year. Significant changes in state of affairs No significant changes in the company’s state of affairs occurred during the financial year. After balance date events No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years. Future development, prospects and business strategies The company will continue to pursue the business activities as a registered health benefits organisation.
railway & transport health fund ltd (abn 93 087 648 744)
Environmental issues The company’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory. Dividends paid or recommended As the company is a company limited by guarantee and a not-for-profit organisation, no dividends have been paid, declared or recorded. Options As the company is limited by guarantee and not shares, no options over issued shares or interests in the company were granted during or since the end of the financial year and there were no options outstanding at the date of this report. Indemnifying officers or auditor During or since the end of the financial year, the company has paid insurance premiums to insure all directors and officers of the company against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of director or officer of the company, other than conduct involving a wilful breach of duty in relation to the company. The premiums paid amounted to $12,715. No indemnities have been given or insurance premiums paid during or since the end of the financial year for any person who is or has been an auditor of the company. Proceedings on behalf of company No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year.
Rounding of amounts The entity has applied relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report and directors’ report have been rounded off to the nearest $1,000. Meetings of directors During the financial year, 15 meetings of directors (including committees of directors) were held. Attendances by each director during the year were as follows:
Director Meeting
Committee Meetings
Remuneration and Audit and Risk Committee
Nominations Committee
Name
E
A
E
A
E
A
V Reynolds R Ledger M Prior B Scheuber B Dredge J Blake D Ellis R Glover
9 9 9 9 9 9 9 9
9 9 8 8 9 9 9 8
– 4 4 2 – 2 – 2
– 4 4 2 – 2 – 2
2 – – – 2 – 2 –
2 – – – 2 – 2 –
Table Key: E Number of meetings eligible to attend. A Number of meetings attended.
Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 28 and forms part of this report. Signed in accordance with a resolution of the Board of Directors:
V REYNOLDS Director Dated this 28th day of September 2009 Sydney, NSW
railway & transport health fund ltd (abn 93 087 648 744)
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Auditor’s independence declaration
28|
railway & transport health fund ltd (abn 93 087 648 744)
We don’t pay celebrities to say good things about us.
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We don’t need to pay people to say good things about us. Our members give us honest, unrehearsed feedback all year round. In the 2008/09 financial year, we achieved record growth of 20.08%, against an industry average of around 4%. That’s the kind of result you get from having a great value product and members who want to do their workmates and family a favour by telling them about it.
railway & transport health fund ltd (abn 93 087 648 744)
50-year member honour roll We don’t underestimate the contribution made by our long-term members.
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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 with rt health fund.
railway & transport health fund ltd (abn 93 087 648 744)
Alan Duncan Alexander and Fiona Parsons Alexander and Judith Pirie Alfred Hancox Allan and Gwen Marks Allan Norris Allen and Denise Everett Angela Boskovic Anthony and Audrey Faint Anthony and Susan Allan Anthony Oister Antonino and Assunta Ingegneri Arthur Scott Beatrice Morrison Brian Blume Brian McFarlane Bruce and Lorraine Gallagher Catherine McMahon Charles and Ann James Charles and Merle Burns Clarice Dickson Colin and Aileen Cavanagh Colin and Shirley Philpott David and Hope Fairweather David and Susan Harrigan Donald and Florence Sanderson Doris Hambly Enid Larter Frederick and Maureen Wills Frederick Mowlds Geoffrey and Norma Armstrong Gerard and Mary Williams Gloria O’Neill Graham and Mary Weir Hilton Harvey Irene Algar James and Helen Dean James and Yvonne Hayward
James Obrien Janette Baillie Joan Hofland Joan Mullin John and Diane Ellis John Eunson John Minks Joseph Roveto Judith Hall Kenneth and Helen Pedron Kerry and Margaret Malone Kevin and Jill Ryan Kevin and Leigh Hill Kevin and Pauline Morrissey Lawrence and Joan Wilson Leonard O’Sullivan Leopold and Edda Siutz Lesley Caslick Lloyd and Valerie Tweedie Lorna Morris Lorna Shadbolt Lorraine Scott Magdolna Hegyeshalmy Malcolm and Janice Daly Maria Dziewa Marie Byers Mary Botterill Mary Burgess Maxwell and Carol Holmes Maxwell and Elsie Bartlett Mervyn and Rosalind Constable Michael and Jeanette Alcock Neil and Judith Dixon Nick and Lucy Mally Nola Featherstone Norma Doran Patrick and Lynette Barrett Peter and Elaine Coleman
Peter and Noela Dolheguy Petroula Trapalis Raymond and Lorraine Schipp Raymond and Margo Cluff Richard and Robyn Collier Richard and Sandra Harvey Robert and Barbara Glew Robert and Elaine Smith Robert and Heather Brown Robert and Jeanette McManus Robert and Kay Brankstone Robert and Patricia Kemsley Robert and Rosemary Clague Robert Fitzsimons Roger and Roma McAlister Roland and Dorothy Braunisch Ronald and Janet Harding Ronald and Margaret Snelling Roy and Gloria Gould Samuel Lind Sandor Bauer Steven and Margit Kalaszi Sydney and Yvonne Hawkins Terence Croker Terence Griffiths Terry and Chris Kyriacou Thomas Killen Trevor and Betty Webster Victor and Judith Willott Wallace and Rosemary King Warwick and Adele Jackson Wendy Mortlock William and Colleen Woods William and Elvie Ledger William and Joan Greenaway William East William Egan Yvonne Clarke railway & transport health fund ltd (abn 93 087 648 744)
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railway & transport health fund ltd (abn 93 087 648 744)
We don’t waste money on a lot of branches for our members to line up in.
All that big city real estate that a lot of funds have is expensive stuff ... and guess who ends up footing the bill through increased contributions?
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Our branch network is deliberately small. In fact, our focus has been on continuing to support the communities we’ve been in for a few years by maintaining our five small offices rather than building a big and expensive network of branches. We prefer to invest in making sure that we have exceptional phone and online service, so we can help you with whatever you need without making you spend your lunchtime lining up in an office to talk to us. head office
46 burwood rd burwood nsw 2134 sydney central
14-18 lee st railway square chippendale nsw 2008 wollongong
139 keira st wollongong nsw 2500 newcastle
2/28 donald st hamilton nsw 2303 brisbane
1/59a melbourne st south brisbane qld 4101
railway & transport health fund ltd (abn 93 087 648 744)
Income statement for the year ended 30 june 2009 Note
2009 $’000
2008 $’000
3
55,155
44,406
Claims expense Risk Equalisation Trust Fund receipt Access GAP refund State levies
(62,472) 7,342 6,667 (795)
(53,321) 8,060 5,644 (719)
Net claims incurred
(49,258)
(40,336)
15 4 4
(429) (2,904) (3,978)
101 (2,830) (2,172)
Underwriting expenses
(7,311)
(4,901)
Underwriting result
(1,414)
(831)
Investment revenue Other revenue
3 3
1,291 423
1,831 146
Surplus attributable to members before tax
300
1,146
Premium revenue
Unexpired risk liability (increase)/decrease Claims handling expenses Other underwriting expenses
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1A
–
–
Surplus attributable to members after tax
Income tax expense
300
1,146
These financial statements should be read in conjunction with the accompanying notes.
railway & transport health fund ltd (abn 93 087 648 744)
Balance sheet as at 30 june 2009 Note
2009 $’000
2008 $’000
7 8 9 10
6,339 5,675 13,570 135
5,450 5,127 16,414 –
Total current assets
25,719
26,991
Non-current assets Financial assets Intangible assets Property, plant and equipment Investment property
3,899 2,664 10,747 3,354
7,994 912 3,232 3,387
Total non-current assets
20,664
15,525
Total assets
46,383
42,516
Current liabilities Trade and other payables 14 1,206 Short-term provisions 15 9,917 Other current liabilities 16 4,435
1,100 7,099 3,704
15,558
11,903
Non-current liabilities Long-term provisions 15 10
84
Current assets Cash and cash equivalents Trade and other receivables Financial assets Other current assets
9 11 12 13
Total current liabilities
Total non-current liabilities
10
84
Total liabilities
15,568
11,987
Net assets
30,815
30,529
Equity Reserves 18 Retained earnings
1,455 29,360
1,469 29,060
Total equity
30,815
30,529
These financial statements should be read in conjunction with the accompanying notes.
railway & transport health fund ltd (abn 93 087 648 744)
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Statement of changes in equity for the year ended 30 june 2009
Balance at 1 July 2007 Revaluation of land and buildings Net income recognised directly in equity Surplus for the year Total recognised income and expense for the period Balance at 30 June 2008 Net income recognised directly in equity Surplus for the year Total recognised income and expense for the period
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Balance at 30 June 2009
Retained earnings $’000
Asset revaluation reserve $’000
Total $’000
27,914 – – 1,146
1,469 – – –
29,383 – – 1,146
1,146
–
1,146
29,060
1,469
30,529
– 300
(14) –
(14) 300
300
(14)
286
29,360
1,455
30,815
These financial statements should be read in conjunction with the accompanying notes.
railway & transport health fund ltd (abn 93 087 648 744)
Cash flow statement as at 30 june 2009 Note
2009 $’000
2008 $’000
Cash flow from operating activities Receipts from members’ premiums Benefits paid to members Receipts from customers Payments to suppliers and employees Interest received
55,564 (47,980) 379 (5,070) 1,593
44,499 (41,614) 112 (3,799) 1,495
23
4,486
693
Cash flows from investing activities Proceeds from disposal of investments Payment for purchase of investments Payment for property, plant and equipment Payment for intangibles
12,097 (5,158) (7,654) (2,882)
5,995 (16,209) (242) (920)
Net cash provided by operating activities
Net cash used in investing activities
(3,597)
(11,376)
Cash flows from financing activities Net cash provided by financing activities Net increase/(decrease) in cash held Cash at beginning of year
– – 889 5,450
– – (10,683) 16,133
7
6,339
5,450
Cash at end of year
These financial statements should be read in conjunction with the accompanying notes.
railway & transport health fund ltd (abn 93 087 648 744)
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Notes to the financial statements for the year ended 30 june 2009
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Note 1: Statement of significant accounting policies The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
Accounting Policies A. Income tax
The financial report covers Railway & Transport Health Fund Limited as an individual company. Railway & Transport Health Fund Limited is a company limited by guarantee, incorporated and domiciled in Australia.
Premium revenue is recorded on an accruals basis, reflecting contributions received adjusted for the opening and closing contributions in advance and in arrears. Contributions received in advance are recorded as a liability and contributions in arrears (to the extent recoverable) are recorded as an asset.
The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). A statement of compliance with International Financial Reporting Standards cannot be made due to the company applying the not-forprofit sector specific requirements contained in the AIFRS. All amounts presented within the financial report are in Australian dollars unless otherwise stated. The following is a summary of the material accounting policies adopted by the company in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. Basis of Preparation The accounting policies set out below have been consistently applied to all years presented unless otherwise stated. Reporting Basis and Conventions The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.
railway & transport health fund ltd (abn 93 087 648 744)
The company is a private insurer within the meaning of the Private Health Insurance Act 2007 and is exempt from income tax assessment under section 50-30 of the Income Tax Assessment Act 1997. B. Revenue
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Revenue from the rendering of a service is recognised upon the delivery of the service to the customers. Lease income from operating leases where the company is the lessor is recognised in the income statement on a straight-line basis over the lease term. All revenue is stated net of the amount of goods and services tax (GST). C. Claims Claims are recorded as an expense in the period in which the service has been provided to the member. The cost of claims therefore represents the claims paid during the period adjusted for the opening and closing provision for unpresented and outstanding claims. The provision for unpresented and outstanding claims provides for claims received but not assessed and claims incurred but not received. The provision is based on an actuarial assessment taking into account historical patterns of claim incidence and processing. No discounting is applied to the provision due to the generally short period between claim incidence
and settlement. The provision also provides for the expected payment to or receipt from the Risk Equalisation Trust Fund (“RETF”) in relation to the amount provided for unpresented and outstanding claims. The provision also allows for an estimate of operating expenses to cover the cost of processing the claims. In addition to the provision for unpresented and outstanding claims, an unearned premium liability is also provided for to meet the costs, including claims handling costs, that will arise under current insurance contracts. The unearned premium liability is calculated by considering current estimates of the present value of expected future cashflows arising from the rights and obligations under current insurance contracts. D. Risk equalisation Amounts receivable from the RETF are recorded in the statement of financial performance in the period for which the receipts relate. Any amounts due at the balance date in relation to the period are brought to account as assets. E. Outstanding claims liability Provision is made at the year end for the liability for outstanding claims which is measured as the central estimate of the expected payments against claims incurred but not settled at the reporting date under insurance contract issued by the company. The expected future payments include those in relation to claims reported but not yet paid and claims incurred but not yet reported. This ‘central estimate’ of outstanding claims is an estimate which is intended to contain no intentional over or under estimation. For this reason the inherent uncertainty in the central estimate must also be considered and a risk margin is added. Actual results could differ from the estimate. The expected future payments include those in relation to claims reported but not yet paid and claims incurred but not yet reported, together with
allowances for Health Benefit Trust Fund/Risk Equalisation consequences and claims handling expenses. F. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. G. Unexpired risk liability At each reporting date, the adequacy of the unearned premium liability is assessed by considering the current estimate of all expected future cash flows relating to future claims against current private health insurance contracts. If the present value of the expected future cashflows relating to future claims plus the additional risk margin to reflect the inherent uncertainty in the central estimate exceeds the unearned premium liability then the premium is deemed to be deficient. The company applies a risk margin to achieve the same probability of sufficiency for future claims as achieved by the estimate of the outstanding claims liability. H. Assets backing private health insurance liabilities As part of the investment strategy, the company actively manages its investment portfolio to ensure that a portion of its investments mature in accordance with the expected pattern of future cash flows arising from private health insurance liabilities. The Board has adopted a conservative approach to maintain its investment portfolio in Cash and Interest Rate Securities except for a maximum of 5% in Australian Equities. With the exception of property, plant and equipment, the company has determined that all assets are held to back private health insurance liabilities and their accounting treatment is as follows.
railway & transport health fund ltd (abn 93 087 648 744)
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Notes to the financial statements continued Note 1: Statement of significant continued I. Financial assets Recognition – Financial assets are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.
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Financial assets at fair value through profit and loss – A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139: Financial Instruments: Recognition and Measurement. All financial assets backing insurance liabilities that would otherwise be classified as available for sale (see below) are designated as “at fair value through profit and loss” in accordance with the requirements of AASB 1023: General Insurance Contracts. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise. Loans and receivables – Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Held-to-maturity investments – These investments have fixed maturities, and it is the company’s intention to hold these investments to maturity. Any held-to-maturity (HTM) investments held by the company are stated at amortised cost using the effective interest rate method. Available-for-sale financial assets – Available-forsale financial assets include any financial assets not included in the above categories. Available-for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.
railway & transport health fund ltd (abn 93 087 648 744)
J. Property, plant and equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Property – Strata title property is shown at fair value (being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction), based on periodic, but at least triennial, valuations by external independent valuers, less any subsequent depreciation. The residual amount of the property is reviewed at least annually to determine whether there is any depreciable amount on which depreciation is then charged. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Plant and equipment – Plant and equipment are measured on the cost basis less depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation – The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight line basis over their useful lives to the company commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset
Buildings Computer equipment Motor vehicles Plant & 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. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.
K. Investment property Investment property, comprising freehold office complexes, is held to generate long-term rental yields. All tenant leases are on an arm’s length basis. Investment property is carried at fair value, determined by independent valuers and adjusted to reflect the current market value of the property. L. Impairment of assets At each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. M. Intangible assets Deferred member acquisition costs – Deferred member acquisition costs are recognised on commissions paid to iSelect with respect to new members signed through the agency and are measured at cost of acquisition. Deferred member acquisition costs have a finite life and are carried at cost less any accumulated amortisation and impairment losses. Deferred member acquisition costs are amortised over their useful life of 4 years. Computer software – Computer software has a finite useful life and is carried at cost less any accumulated amortisation and impairment losses. Amortisation is calculated on a straight-line basis to allocate the cost of the software over their useful lives being three years. N. Financial liabilities Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.
railway & transport health fund ltd (abn 93 087 648 744)
|41
Notes to the financial statements continued Note 1: Statement of significant continued Fair value – Fair value is determined based on current bid prices for all quoted investments. Impairment – At each reporting date, the company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement. O. Leases
42|
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to the company are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.
railway & transport health fund ltd (abn 93 087 648 744)
P. Provisions Provisions are recognised when the company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Q. Employee benefits Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. R. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. S. Comparative figures When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Refer to Note 26 for details of comparative figures restated in the current financial reporting period.
T. Rounding of amounts The entity has applied relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report and directors’ report have been rounded off to the nearest $1,000. U. New Accounting Standards and Interpretations There have been new Australian Accounting Standards and Interpretations issued or amended and are applicable to the company but are not yet effective. The directors’ assessment of the impact of these new standards and interpretations have been completed with no material effect on the financial report. They have not been adopted in the preparation of the financial report at reporting date. AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 [AASB 5, AASB 6, AASB 102, AASB 107, AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023 and AASB 1038]
Effective for annual reporting periods beginning on or after 1 January 2009
AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 and AASB 138 and Interpretations 1 and 12]
Effective for annual reporting periods beginning on or after 1 January 2009
AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101
Effective for annual reporting periods beginning on or after 1 January 2009
AASB 2008-2 Amendments to Australian Accounting Standards – Puttable Financial Instruments and Obligations arising on Liquidation
Effective for annual reporting periods beginning on or after 1 January 2009
AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127
Effective for annual reporting periods beginning on or after 1 July 2009
railway & transport health fund ltd (abn 93 087 648 744)
|43
Notes to the financial statements continued Note 1: Statement of significant continued V. Critical accounting estimates and judgments
44|
The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the company. The key areas in which critical estimates are applied are as described below: Outstanding claims provision – Provision is made at the year end for the liability for outstanding claims which is measured as the central estimate of the expected payments against claims incurred but not settled at the reporting date under insurance contract issued by the company. The expected future payments include those in relation to claims reported but not yet paid and claims incurred but not yet reported. This ‘central estimate’ of outstanding claims is an estimate which is intended to contain no intentional over or under estimation. For this reason the inherent uncertainty in the central estimate must also be considered and a risk margin is added. The estimated cost of claims includes allowances for the Risk Equalisation Trust Fund (“RETF”) consequences and claims handling expense. Given the inherent uncertainty in establishing claims provisions, it is likely that actual results will differ from the original estimate. In calculating the estimated cost of unpaid claims the company uses estimation techniques based upon statistical analysis of historical data. Allowance is made, however for changes or uncertainties which may distort the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims, including changes to the company’s processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with statistics from previous periods. railway & transport health fund ltd (abn 93 087 648 744)
The calculation was determined as at 30 June 2009 taking into account two months post balance date claims received. The risk margin has been based on an analysis of the past experience of the company. The analysis examined the volatility of the past payments that has not been explained by the model adopted to determine the central estimate. This past volatility has been assumed to be indicative of the future volatility. The central estimates are calculated gross of any risk equalisation recoveries. A separate estimate is made of the amounts that will be recoverable from the RETF based upon the gross provision. Details of specific key estimates and judgements used in deriving the outstanding claims liability at year end are detailed in Notes 2 and 15. Unexpired risk liability – The provision for unexpired risk liability is determined as the excess of benefits, risk equalisation, state levies, claims related expenses plus a risk margin over the premiums for the relevant period. Projected benefits, risk equalisation, state levies and claims related expenses were determined from projections adjusted for recent experience compared to projected and based on no membership growth. Details of specific key estimates and judgements used in deriving the unexpired risk liability at year end are detailed in Note 15d. W. Change in accounting policy The company changed its accounting policy relating to the recognition of commissions paid to iSelect for new members signed up to the health fund through the iSelect agency for the current period. Commissions were previously recognised in the period in which they were incurred. The company has now elected to capitalise commissions paid over the average life of membership for new members in accordance with AASB 138; Intangible Assets.
On review of the calculation for the provision of commissions in the prior year, it was also noted that incorrect figures were used for the calculation for the months of May and June 2008. The total commission payable was understated by $313,000. The aggregate effect of the change in accounting policy and the prior year error on the comparative financial information is as follows:
Income statement Other underwriting expenses Balance sheet Deferred member acquisition costs (DMAC) DMAC – accumulated amortisation Provision for commission
Per 2008 annual report Adjustment $’000 $’000
2008 comparatives per 2009 annual report $’000
(2,721)
549
(2,172)
– – (536)
920 (58) (313)
920 (58) (849)
|45
X. Adoption of the financial report The financial report was authorised for issue on 28 September 2009 by the board of directors.
railway & transport health fund ltd (abn 93 087 648 744)
Notes to the financial statements continued Note 2: Actuarial assumptions and methods Actuarial methods The outstanding claims estimate is derived based on three valuation classes, namely Hospital, Medical and General Treatment services. In calculating the estimated cost of unpaid claims a chain ladder method is used, this assumes that the development pattern of the current claims will be consistent with historical experience. Where deemed necessary, manual adjustments were made to the outstanding claims by service month to produce an appropriate estimate of incurred claims for the service month. Actuarial assumptions On the advice of the appointed actuary, the following assumptions have been made in determining the outstanding claims liability. Variables
46|
Assumed portion paid to date Expense rate Risk equalisation rate Risk margin
2009
Hospital %
97.9 9.9 (15.2) 2.4
Medical %
97.6 9.9 (15.2) 2.4
Ancillary %
95.9 9.9 – 2.4
2008 Hospital %
90.0 7.4 (18.7) 10.1
Medical %
86.4 7.4 (18.7) 10.1
The risk margin of 2.4% (2008: 10.1%) of the underlying liability has been estimated to equate to a probability of adequacy of approximately 80% (2008: 85%).
railway & transport health fund ltd (abn 93 087 648 744)
Ancillary %
94.5 7.4 – 10.1
Process used to determine assumptions A description of the processes used to determine these assumptions is provided below: i. Assumed proportion paid to date The assumed proportion paid to date summarises the application of the chain ladder method described above to determine the total expected incurred in each service month. Manual adjustments are then made for reasonableness, (where necessary), to the Current month and Current month less 1 results. These adjustments are made by calculating the average incurred benefit per Single Equivalent Unit, (SEU), per working day for each month and graphing the results for the past four years. The seasonality exhibited by the service type is reasonably consistent from year to year, with each year’s service type showing an increase in incurred benefits from the previous year. Based on these graphs, manual adjustments were made to the chain ladder results to derive the total monthly incurred benefits and hence the outstanding claims provision. ii. Discount rate As claims for health funds are generally settled within in one year, no discounting of claims is usually applied as the difference between the undiscounted value of claims payments and the present value of claims payments is not likely to be material. An increase in the proportion assumed paid to date, would lead to more claims being paid earlier and therefore a decrease in the liability. iii. Expense rate Claims handling expenses were calculated by reference to past experience of total claims handling costs as a percentage of total past payments. An increase or decrease in this expense would have a corresponding effect on the claims expense.
iv. Risk equalisation allowance In simplified terms, each registered health benefits organisation is required to contribute to the risk equalisation pool or is paid from the pool to equalise their hospital claims exposure to members aged over 55 years of age and in respect of high cost claims. This is an allowance made in respect of the claims incurred but not yet paid. An increase or decrease in this expense would have a corresponding effect on the claims expense. v. Risk margin The risk margin has been based on an analysis of the past experience of the company. This analysis examined the volatility of past payments that has not been explained by the model adopted to determine the central estimate. This past volatility has been assumed to be indicative of the future volatility and has been set at a level estimated to equate to a probability of adequacy of 80% (2008: 85%). An increase or decrease in this expense would have a corresponding effect on the claims expense. The risk margin for 2009 (2.4%) is based on 2 months of paid claims in hindsight whereas the risk margin for 2008 (10.1%) does not include any paid claims in hindsight. Sensitivity analysis – insurance contracts Summary The company conducts sensitivity analysis to quantify the exposure to risk of changes in the key underlying variables. The valuations included in the reported results are calculated using certain assumptions about these variables as disclosed above. The movement in any key variable will impact the performance and equity of the company.
railway & transport health fund ltd (abn 93 087 648 744)
|47
Notes to the financial statements continued Note 2: Actuarial assumptions and methods continued
Movement Adjustments in variable on Surplus Variables % $‘000
48|
Adjusted amount included in Income Adjustments Statement on Equity $‘000 $‘000
Adjusted amount included in Balance Sheet $‘000
Impact on key variables: Assumed portion paid to date
+10 -10
1,264 (1,264)
1,264 (1,264)
1,264 (1,264)
1,264 (1,264)
Expense rate
+10 -10
(178) 178
(178) 178
(178) 178
(178) 178
Risk equalisation rate
+10 -10
333 (333)
333 (333)
333 (333)
333 (333)
Risk margin
+10 -10
(158) 158
(158) 158
(158) 158
(158) 158
Surplus 2009 $’000
Equity 2009 $’000
Recognised amounts in the financial statements
300
30,815
2009 $’000
2008 $’000
Note 3: Revenue Premium revenue
55,155
44,406
Investment income
1,291
1,831
Other income Rental income Other income
417 6
146 –
Total other income
423
146
railway & transport health fund ltd (abn 93 087 648 744)
2009 $’000
2008 $’000
Expenses by function Claims handling expenses Other underwriting expenses
2,904 3,978
2,830 2,172
Total expenses (excluding direct claims expenses)
6,882
5,002
Expenses by nature Employee benefits Depreciation and amortisation Other expenses
2,904 835 3,143
2,830 217 1,955
Total expenses (excluding direct claims expenses)
6,882
5,002
Short-term employee benefits Salary and fees Non-cash benefits
675 13
551 7
688
558
Post-employment benefits Superannuation
61
52
61
52
Total key management personnel compensation
749
610
Remuneration of the auditor for: – Audit services – Non audit services
60 –
103 –
Total auditor’s remuneration
60
103
Note 4: Expenses
Note 5: Key management personnel compensation
Note 6: Auditors’ remuneration
Auditors’ remuneration from 2008 relates to the company’s previous auditor, BDO. The remuneration for 2009 relates to the company’s current auditor, Grant Thornton.
railway & transport health fund ltd (abn 93 087 648 744)
|49
Notes to the financial statements continued
2009 $’000
2008 $’000
Cash on hand Cash at bank
2 6,337
2 5,448
6,339
5,450
Current Premiums in arrears Medicare rebate Risk equalisation trust fund quarterly receivable Investment income receivable Other receivables
838 1,418 3,307 34 78
862 1,072 2,823 336 34
5,675
5,127
Note 7: Cash and cash equivalents
Note 8: Trade and other receivables
50|
All amounts of trade receivables are deemed short term. The carrying value of short term receivables is considered a reasonable approximation to fair value. All of the trade and other receivables have been reviewed for indicators of impairment, some of the unimpaired trade receivables are past due as at the reporting date. The age of financial assets past due but not impaired are as follows:
Within trade terms
Past due but not impaired (days overdue) < 30 31-60 > 60
Past due and impaired
Gross amount $’000
Premiums in arrears 2009
–
553
95
190
–
838
2008
–
479
156
227
–
862
railway & transport health fund ltd (abn 93 087 648 744)
2009 $’000
2008 $’000
Current Term deposits Fixed interest rate securities Floating rate notes
9,570 2,000 2,000
12,900 2,514 1,000
13,570
16,414
Non Current Term deposits Fixed interest rate securities Floating rate notes
– – 3,899
2,000 1,000 4,994
3,899
7,994
Note 9: Financial assets
|51
Note 10: Other current assets Current Prepayments
135
–
135
–
Computer software At cost Accumulated amortisation
212 (58)
75 (25)
Total computer software
154
50
Deferred member acquisition costs At cost Accumulated amortisation Movement in unexpired risk liability
3,607 (688) (409)
920 (58) –
Total deferred member acquisition costs
2,510
862
Total intangible assets
2,664
912
Note 11: Intangible assets
railway & transport health fund ltd (abn 93 087 648 744)
Notes to the financial statements continued Note 11: Intangible assets continued
Computer software $’000
52|
Deferred member acquisition costs $’000
Balance at 1 July 2007 Additions Amortisation charge
75 – (25)
– 920 (58)
Balance at 30 June 2008
50
862
Additions Amortisation charge Amounts written off from unexpired risk liability
137 (33) –
2,745 (688) (409)
Carrying amount at 30 June 2009
154
2,510
2009 $’000
2008 $’000
Land At fair value (a) Accumulated depreciation
5,882 –
1,483 –
Land
5,882
1,483
Buildings At cost Accumulated depreciation
4,371 (76)
1,519 (54)
Total buildings
4,295
1,465
Motor vehicles At cost Accumulated depreciation
20 (9)
20 (8)
Total Motor Vehicles
11
12
Plant & equipment At cost Accumulated depreciation
793 (234)
390 (118)
Total office furniture and equipment
559
272
Total property, plant and equipment
10,747
3,232
Note 12: Property, plant and equipment
(a) The fair value of the property was independently valued by Christopher Makomaski (Registered valuer #1941) as at 23 July 2008. The directors have reviewed this valuation, and have concluded that this valuation, less accumulated depreciation as a result of the recent economic downturn approximated the fair value as at 30 June 2009.
railway & transport health fund ltd (abn 93 087 648 744)
Land $’000
Buildings $’000
Motor Vehicle Plant & equipment $’000 $’000
Total $’000
Balance at 1 July 2007 Additions Depreciation expense
1,483 – –
1,510 – (45)
14 – (2)
118 242 (88)
3,125 242 (135)
Balance at 30 June 2008
1,483
1,465
12
272
3,232
Additions Depreciation expense
4,399 –
2,852 (22)
– (1)
403 (116)
7,654 (139)
Carrying amount at 30 June 2009
5,882
4,295
11
559
10,747
2009 $’000
2008 $’000
Balance at beginning of year Fair value adjustments
3,387 (33)
3,421 (34)
Balance at end of year
3,354
3,387
Current Sundry payables and accrued expenses
1,206
1,100
1,206
1,100
Note 13: Investment property
Note 14: Trade and other payables
railway & transport health fund ltd (abn 93 087 648 744)
|53
Notes to the financial statements continued Note
2009 $’000
2008 $’000
(a) (b) (c) (d)
289 1,326 7,161 1,141
151 849 4,978 1,121
9,917
7,099
Note 15: Provisions Current Employee benefits Commissions Outstanding claims Unexpired risk liability Non-Current Employee benefits
54|
(a)
10
84
10
84
Unexpired risk liability $’000
Total $’000
Employee Benefits Commissions $’000 $’000
Movements in provisions Balance at 1 July 2008 Amounts used during the year Amounts raised during the year Amounts written off from intangible during the year Balance at 30 June 2009
Outstanding claims $’000
235 (34) 98
849 (2,210) 2,687
4,978 (4,978) 7,161
1,121 – 429
7,183 (7,222) 10,375
–
–
–
(409)
(409)
299
1,326
7,161
1,141
9,927
(a) Provision for employee benefits A provision has been recognised for employee entitlements relating to annual and long service leave for employees. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based upon historical data. The measurement and recognition criteria for employee benefits have been included in Note 1. (b) Provision for commissions A provision has been recognised for commissions payable to iSelect for new members who sign up to the fund through the iSelect website. (c) Provision for outstanding claims
2009 $’000
2008 $’000
Outstanding claims – central estimate of the expected future payment for claims incurred Claims handling expense
6,459 554
4,323 265
Gross outstanding claims liability
7,013
4,588
Risk margin (i)
148
390
Net outstanding claims liability
7,161
4,978
railway & transport health fund ltd (abn 93 087 648 744)
(i) Risk margin The risk margin of 2.4% (2008: 10.1%) of the underlying liability has been estimated to equate to a probability of adequacy of approximately 80% (2008: 85%). The central estimate of outstanding claims (including those that have been reported but not yet settled and which have been incurred but not yet reported) is an estimate which is intended to contain no intentional over or under estimation. For this reason the inherent uncertainty in the central estimate must also be considered. The risk margin has been based on an analysis of the past experience of the company. This analysis examined the volatility of past payments that has not been explained by the model adopted to determine the central estimate. This past volatility has been assumed to be indicative of the future volatility. The outstanding claims estimate is derived based on three valuation classes, namely Hospital, Medical and General Treatment services. Diversification benefits within a valuation class are implicitly allowed for through the model adopted. The determination of the risk margin has also implicitly allowed for diversification between valuation classes based on an analysis of past correlations in deviations from the adopted model. The outstanding claims provision has been estimated using a chain ladder method, based on historical experience and future expectations as to claims. The calculation was determined taking into account two months of actual post balance date claims. As claims for health funds are generally settled within in one year, no discounting of claims is usually applied as the difference between the undiscounted value of claims payments and the present value of claims payments is not likely to be material. Accordingly, reasonable changes in assumptions would not have a material impact on the outstanding claims balance. Changes in the gross outstanding claims can be analysed as follows:
2009 $â&#x20AC;&#x2122;000
2008 $â&#x20AC;&#x2122;000
Gross outstanding claims at beginning of period Administration component
4,588 (265)
5,747 (215)
Central estimate at beginning of period
4,323
5,532
Change in claims incurred for the prior year Claims paid in respect of the prior year Claims incurred during the year (expected) Claims paid during the year (expected)
(134) (4,189) 60,386 (53,927)
663 (6,195) 44,732 (40,409)
Central estimate at end of period
6,459
4,323
Administration component
554
265
Gross outstanding claims at end of period
7,013
4,588
railway & transport health fund ltd (abn 93 087 648 744)
|55
Notes to the financial statements continued Note 15: Provisions continued (d) Provision for unexpired risk liability Unearned premium $’000
56|
Unearned unclosed Constructive business obligation $’000 $’000
Total $’000
2009 Hospital Premium (1) Related deferred member acquisition costs
3,570 (42)
323 (4)
31,098 (363)
34,991 (409)
Premium less related DMAC (2)
3,528
319
30,735
34,582
Outflows Central estimate of future benefits Central estimate of future management expenses Risk margin
(3,291) (229) (176)
(298) (21) (16)
(28,582) (1,990) (1,529)
(32,171) (2,240) (1,721)
Total outflows (3)
(3,696)
(335)
(32,101)
(36,132)
Total hospital deficiency (2) – (3)
168
16
1,366
1,550
Total hospital unexpired risk liability (1) – (3)
126
12
1,003
1,141
General treatment Premium (1) Related deferred member acquisition costs
864 (10)
98 (1)
10,908 (127)
11,870 (138)
Premium less related DMAC (2)
854
97
10,781
11,732
Outflows Central estimate of future benefits Central estimate of future management expenses Risk margin
(632) (117) (37)
(71) (13) (4)
(8,033) (1,494) (476)
(8,736) (1,624) (517)
Total outflows (3)
(786)
(88)
(10,003)
(10,877)
Total general treatment deficiency (2) – (3)
(68)
(9)
(778)
(855)
–
–
–
–
126
12
1,003
1,141
Total general treatment unexpired risk liability (1) – (3) 1
Total unexpired risk liability 1
As the general treatment is not deficient no unexpired risk liability is needed for this component.
railway & transport health fund ltd (abn 93 087 648 744)
Unearned premium $’000
Unearned unclosed Constructive business obligation $’000 $’000
Total $’000
2008 Hospital Premium (1) Related deferred member acquisition costs
2,987 –
301 –
24,226 –
27,514 –
Premium less related DMAC (2)
2,987
301
24,226
27,514
Outflows Central estimate of future benefits Central estimate of future management expenses Risk margin
(2,709) (208) (181)
(281) (22) (19)
(22,049) (1,694) (1,472)
(25,039) (1,924) (1,672)
Total outflows (3)
(3,098)
(322)
(25,215)
(28,635)
Total hospital deficiency (2) – (3)
111
21
989
1,121
Total hospital unexpired risk liability (1) – (3)
111
21
989
1,121
General treatment Premium (1) Related deferred member acquisition costs
718 –
106 –
8,513 –
9,337 –
Premium less related DMAC (2)
718
106
8,513
9,337
Outflows Central estimate of future benefits Central estimate of future management expenses Risk margin
(526) (103) (39)
(75) (15) (6)
(6,445) (1,268) (478)
(7,046) (1,386) (523)
Total outflows (3)
(668)
(96)
(8,191)
(8,955)
Total general treatment deficiency (2) – (3)
(50)
(10)
(322)
(382)
–
–
–
–
111
21
989
1,121
Total general treatment unexpired risk liability (1) – (3) 1
Total unexpired risk liability 1
As the general treatment is not deficient no unexpired risk liability is needed for this component.
railway & transport health fund ltd (abn 93 087 648 744)
|57
Notes to the financial statements continued Note 15: Provisions continued The liability adequacy test for sufficiency is determined as the excess of projected benefits, risk equalisation, state levies, claims related expenses plus a risk margin over the projected contributions less intangible assets and related deferred member acquisition costs for the relevant period.
58|
The provision for unexpired risk liability is determined as the excess of benefits, risk equalisation, state levies, claims related expenses plus a risk margin over the projected contributions for the relevant period. Projected contributions, benefits, risk equalisation, state levies and claims related expenses were determined on a best estimate basis with no membership growth. The risk margin of 5.0% for annual reporting (2008: 6.0%) is applied to the benefits, risk equalisation, state levies and claims related expenses cashflows. The risk margin is to provide an 80% level of adequacy (2008: 85%). The risk margin has been based on an analysis of the past experience of the company. This analysis examined the volatility of past loss ratios. The adopted risk margin is based on past volatility plus an additional allowance for increased uncertainty due to changes to the Private Health Insurance rebate and Medicare Surcharge Levy thresholds announced in the 2009 Federal Budget.
2009 $’000
2008 $’000
4,435
3,704
Note 16: Other liabilities Current Premium received in advance
railway & transport health fund ltd (abn 93 087 648 744)
Note 17: Members’ guarantee The company is limited by guarantee and hence has no contributed equity. If the company is wound up, the Constitution states that all funds, property and assets that remain after payment of outstanding claims, debts and liabilities shall be applied to another organisation or institution having objects similar to Railway & Transport Health Fund Limited, providing similar services which prohibits the distribution of income and assets to its members, and which is exempt from payment of income tax. If the company is wound up and cannot meet its debts, the Constitution states that each member is required to contribute a maximum of $10 each towards meeting any outstanding obligations of the company.
2009 $’000
2008 $’000
1,455
1,469
Note 18: Reserves Current Asset revaluation reserve
The asset revaluation reserve records the revaluations of non-current assets. During the year a revaluation of $14,000 was carried out on investment property.
2009 $
2008 $
Operating lease commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements Payable – minimum lease payments – not later than 12 months – later than 12 months but not later than 5 years – greater than 5 years
25 – –
34 – –
25
34
Note 19: Capital and leasing commitments
The operating lease commitments relate to non-cancellable premises leases entered for the operation of offices in Newcastle and Wollongong.
Note 20: Contingent liabilities and contingent assets The company does not have any contingent liabilities or assets at 30 June 2009. Note
2009 $’000
2008 $’000
(a) (b)
30,814 10,351
30,529 4,987
Excess assets
20,463
25,542
Note 21: Solvency reserve Health benefits fund capital Less: Solvency reserve
(a) This balance represents the capital available at year end to satisfy the solvency reserve required in accordance with the Solvency Standard as set by PHIAC. (b) The solvency reserve for the company has been calculated in accordance with the Solvency Standard as set by PHIAC and represents the minimum reserve required to be maintained by the company.
railway & transport health fund ltd (abn 93 087 648 744)
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Notes to the financial statements continued Note 22: Segment reporting The company operates predominantly in one business segment, being the provision of health benefits, and in one geographical segment, being Australia. As part of its activities as a health benefits provider, the company undertakes investments, which are not considered to be a separate operating segment.
2009 $’000
2008 $’000
Surplus after income tax
300
1,146
Non-cash flows in surplus Depreciation and amortisation Net asset revaluation
860 19
176 39
Write-off of intangible
409
–
Changes in assets and liabilities (Increase) in trade and term debtors (Increase) in other assets Increase/(decrease) in payables Increase in provisions Increase/(decrease) in other liabilities
(548) (135) 1,766 1,084 731
(1,946) – (20) 1,363 (65)
Cash flows from operations
4,486
693
Note 23: Cash flow information Reconciliation of Cash Flow from Operations with Surplus after Income Tax.
60|
Note 24: Events after the balance sheet date No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.
railway & transport health fund ltd (abn 93 087 648 744)
Note 25: Financial instruments A. Financial risk management The company’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable, loans to and from subsidiaries, bills, leases, preference shares and derivatives. The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows:
2009 $’000
2008 $’000
Financial assets Cash and cash equivalents Loans and receivables
6,339 5,675
5,450 5,127
Held-to-maturity investments – Term deposits – Fixed rate notes – Floating rate notes
9,570 2,000 5,899
14,900 3,514 5,994
29,483
34,985
Financial liabilities Financial liabilities at amortised cost – Trade and other payables – Other Liabilities
1,206 4,435
270 3,704
5,641
3,974
The company does not have any derivative instruments at 30 June 2009. The Audit and Risk Committee has been delegated responsibility by the Board of Directors for, amongst other issues, monitoring and managing financial risk exposures of the company. An investment policy has been developed in order to comply with PHIAC’s requirements. The fund’s overall investment strategy seeks to assist the fund in meeting its financial targets, while minimising potential adverse effects on financial performance. The main risks the company is exposed to through its financial instruments have been addressed below including; market risks, liquidity risks, credit risks and insurance risks.
railway & transport health fund ltd (abn 93 087 648 744)
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Notes to the financial statements continued Note 25: Financial instruments continued Market risks (i) Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The company is also exposed to earnings volatility on floating rate instruments.
Weighted Average Effective Floating Interest Rate Interest Rate Within Year % $’000 $’000
2009 Financial assets Cash and cash equivalents Term deposits Investments
62|
Fixed Interest Rate Maturing 1 to 5 years $’000
Total $’000
4.12 5.40 6.17
– – 5,899
6,339 9,570 2,000
– – –
6,339 9,570 7,899
Total financials assets
5,899
17,909
–
23,808
2008 Financial Assets Cash and cash equivalents Term deposits Investments
6.60 6.47 7.50
– – 5,994
5,450 12,900 2,514
– 2,000 1,000
5,450 14,900 9,508
Total financials assets
5,994
20,864
3,000
29,858
The following table illustrates sensitivities to the company’s exposures to changes in interest rates. The table indicates the impact on how surplus and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables.
2009
2008
$’000
$’000
$’000
$’000
Interest rate movement (%) Impact on net result for the year
+2.00 417
-2.00 (417)
+2.00 335
-2.00 (335)
Impact on equity
417
(417)
335
(335)
(ii) Foreign currency risk The fund is not exposed to any material foreign currency risk. (iii) Commodity price risk The fund is not exposed to any material commodity price risk.
railway & transport health fund ltd (abn 93 087 648 744)
Liquidity risk Liquidity risk arises from the possibility that the company might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The company manages this risk through the following mechanisms: − preparing forward looking cash flow analysis in relation to its operational, investing and financing activities − monitoring undrawn credit facilities − obtaining funding from a variety of sources − maintaining a reputable credit profile − managing credit risk related to financial assets − investing only in surplus cash with major financial institutions − comparing the maturity profile of financial liabilities with the realisation profile of financial assets
The tables over reflect an undiscounted contractual maturity analysis for financial liabilities. Financial guarantee liabilities are treated as payable on demand since the company has no control over the timing of any potential settlement of the liabilities. Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates and does not reflect management’s expectations that banking facilities will be rolled forward.
|63
railway & transport health fund ltd (abn 93 087 648 744)
Notes to the financial statements continued Note 25: Financial instruments continued Financial liability and financial asset maturity analysis
64|
Due within
< 1yr $’000
1 – 5yrs $’000
> 5yrs $’000
Total $’000
2009 Financial liabilities due for payment Trade and other payables (excluding estimated annual leave) Other Liabilities
1,206 14,375
– –
– –
1,206 14,375
Total contractual outflows
15,581
–
–
15,581
Total expected outflows
15,581
–
–
15,581
Financial assets – cash flows realisable Cash and cash equivalents Trade, term and loans receivables Held-to-maturity investments
6,339 5,675 13,570
– – 3,899
– – –
6,339 5,675 17,469
Total anticipated inflows
25,584
3,899
–
29,483
Net (outflow)/inflow on financial instruments
10,003
3,899
–
13,902
2008 Financial liabilities due for payment Trade and other payables (excluding estimated annual leave) Other Liabilities
270 11,320
– –
– –
270 11,320
Total contractual outflows
11,590
–
–
11,590
Total expected outflows
11,590
–
–
11,590
Financial assets – cash flows realisable Cash and cash equivalents Trade, term and loans receivables Held-to-maturity investments
5,450 5,127 16,414
– – 7,994
– – –
5,450 5,127 24,408
Total anticipated inflows
26,991
7,994
–
34,985
Net inflow on financial instruments
15,401
7,994
–
23,395
railway & transport health fund ltd (abn 93 087 648 744)
Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counter parties of contract obligations that could lead to a financial loss to the Fund. Management monitors credit risk by actively assessing the rating quality and liquidity of counter parties. The below table demonstrates the translation of grading used to assess the investments held by the Fund. PHIAC Grade
Standard & Poor’s
Moody’s
AM Best
1
AAA
Aaa
A++
100%
2
AA+ AA AA-
Aa1 Aa2 Aa3
A+
100%
3
A+ A A-
A1 A2 A3
A A-
80% 50%
4
BBB+ BBB BBB-
Baa1 Baa2 Baa3
B++ B+
5
BB+ or below
Ba1 or below
B or below
Unrated
–
–
–
Maximum per investment policy
0% 30%
Analysis of Standard & Poor’s Ratings: AAA to AAA- Encompasses the major Australian banks and the Australian government. A+ to A- Enables exposure to the region Australian banks that offer good risk/rewards. BBB+ to BBB- Provides for greater exposure to regional Australian banks and hybrid securities, but a maximum of 30% is set as a prudent level when combined with liquidity requirements. Unrated Enables access to a wide range of ASX Listed non-bank securities such as credit unions and building societies.
railway & transport health fund ltd (abn 93 087 648 744)
|65
Notes to the financial statements continued Note 25: Financial instruments continued The investment policy adopted by the Fund is designed to meet the standards set by PHIAC. Below is an analysis of the credit risk as it stands at year end. PHIAC Grading
1 $’000
2 $’000
3 $’000
4 $’000
5 $’000
Unrated $’000
Total $’000
2009 Cash and cash equivalents Held to maturity investments Fair value investments
6,339 – –
– 7,114 –
– 3,010 –
– 3,899 –
– – –
– 3,386 –
6,339 17,469 –
Total
6,339
7,114
3,010
3,899
–
3,386
23,808
27
30
13
16
–
14
100
100
80
50
–
30
2008 Cash and cash equivalents Held to maturity investments
5,450 –
– 17,269
– 2,014
– 994
– –
– 4,131
5,450 24,408
Total
5,450
17,269
2,014
994
–
4,131
29,858
18
58
7
3
–
14
100
100
80
50
–
30
% of total Maximum allowable per investment policy (%)
66|
% of total Maximum allowable per investment policy (%)
railway & transport health fund ltd (abn 93 087 648 744)
Insurance Risk The provision of private health insurance in Australia is governed by the Act and shaped by a number of regulatory factors. The first is the principle of community rating. This principle prevents private health insurers from discriminating between people on the basis of their health status, age, race, sex, sexuality, the frequency that a person needs treatment, or claims history. The second is risk equalisation which supports the principle of community rating. Private health insurance averages out the cost of hospital treatment across the industry. The risk equalisation scheme transfers money from private health insurers with younger healthier members with lower average claims payments to those insurers with an older and less healthy membership and which have higher average claims payments. B. Net fair values The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying values as presented in the balance sheet. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an armâ&#x20AC;&#x2122;s length transaction.
Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgment and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash flow analysis and other valuation techniques commonly used by market participants. Differences between fair values and carrying values of financial instruments with fixed interest rates are due to the change in discount rates being applied by the market since their initial recognition by the company. Most of these instruments which are carried at amortised cost (ie term receivables, heldto-maturity assets and loan liabilities) are to be held until maturity and therefore the net fair value figures calculated bear little relevance to the company.
railway & transport health fund ltd (abn 93 087 648 744)
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Notes to the financial statements continued Note 25: Financial instruments continued
2009 2008
Financial assets Cash and cash equivalents Trade and other receivables Investments: held-to-maturity
Net carrying value $’000
Net fair value $’000
(i) (i) (ii)
6,339 5,675 17,469
6,339 5,675 17,469
5,450 5,127 24,408
5,450 5,127 24,408
Total financial assets
29,483
29,483
34,985
34,985
(i) (iii)
1,206 4,435
1,206 4,435
270 3,704
270 3,704
Total financial liabilities
5,641
5,641
3,974
3,974
Financial liabilities Trade and other payables Other liabilities
68|
Net carrying value Net fair value $’000 $’000
(i) Cash and cash equivalents, trade and other receivables and trade and other payables are short-term instruments in nature whose carrying value is equivalent to fair value. (ii) Fair values of held-to-maturity investments are based on quoted market prices at reporting date. (iii) Other liabilities are comprised of contributions in advance and excludes amounts provided for relating to unexpired risk liability, outstanding claims liability and employee benefits, which are not considered to be financial instruments.
railway & transport health fund ltd (abn 93 087 648 744)
Note 26: Comparative figures A. Income statement The comparative income statement has been reclassified to meet the disclosure requirements set out by AASB 1023; General Insurance Contracts, disclosing net claims incurred as well as the underwriting result for the reporting period. A reconciliation of the comparative income statement is shown below: Per 2008 annual report
2008 $â&#x20AC;&#x2122;000
Revenue from continuing operations Hospital benefit expenses Ancillary benefit expenses State levies Movement in unexpired risk liability Audit and accounting expenses Commission expenses Computer expenses Depreciation and amortisation expense Employee benefits expense Financial charges and taxes Legal and professional expenses Marketing Membership expenses Postage and telephone expenses Printing and stationery expenses Property expenses Other expenses
45,655 (29,024) (8,417) (719) 101 (199) (803) (389) (142) (2,830) (121) (210) (521) (182) (213) (295) (181) (83)
Surplus before income tax
1,427
Income tax expense
â&#x20AC;&#x201C;
Surplus attributable to members of the Fund
1,427
railway & transport health fund ltd (abn 93 087 648 744)
|69
Notes to the financial statements continued Note 26: Comparative figures continued
Per 2008 annual report Adjustments Per 2009 annual report comparatives $’000 $’000
70|
2008 comparatives per 2009 annual report $’000
Premium revenue Claims expense Health Benefits Risk Equalisation Trust Fund refund Access GAP refund State levies
43,679 (51,764) 8,060 5,644 (719)
727 (1,557) – – –
44,406 (53,321) 8,060 5,644 (719)
Net claims incurred
(38,779)
(1,557)
(40,336)
Unexpired risk liability expense (increase)/decrease Claims handling expenses Other underwriting expenses
101 (2,830) (2,721)
– – 549
101 (2,830) (2,172)
Underwriting expenses
(5,450)
549
(4,901)
Underwriting result
(550)
(281)
(831)
Investment revenue Other revenue
1,831 146
– –
1,831 146
Surplus attributable to members before tax Income tax expense
1,427 –
(281) –
1,146 –
Surplus attributable to members after tax
1,427
(281)
1,146
B. Reclassification of property, plant & equipment In accordance with AASB 138; Intangible Assets, software carried in property, plant & equipment must be reclassified as an intangible asset. Investment property has also been reclassified in the comparative figures to comply with AASB 140; Investment Property. Comparative figures for property, plant & equipment, intangibles and investment property have therefore been restated in the balance sheet as follows:
2008 comparatives per 2009 annual report $’000
Per 2008 annual report $’000
Intangible assets Property, plant & equipment Investment property
50 3,232 3,387
– 5,298 1,371
6,669
6,669
railway & transport health fund ltd (abn 93 087 648 744)
C. Reclassification of cash and cash equivalents Under audit program guidance for PHIAC 2 returns, only cash held in trading accounts should be recorded as cash and cash equivalents. Cash held in an ADI which is not in a trading account (including term deposits) should not be classified as cash, regardless of the time to maturity. On reviewing classifications from the previous year, it was noted that two term deposit accounts were included in cash in the prior year. The comparative have therefore been restated in the balance sheet as follows:
2008 comparatives per 2009 annual report $’000
Per 2008 annual report $’000
Cash and cash equivalents Financial assets (current)
5,450 16,414
10,581 11,283
21,864
21,864
D. Prior year error It was noted during a review of benefits and contributions for the period that there was an error in the benefits paid for the months of July and August 2008. It was discovered that the error related to a carry forward error from prior years, leading to benefits being understated in the year ending 30 June 2008 by $830,000. Under AASB 108; Accounting Policies, Changes in Accounting Estimates and Errors, comparative figures must be adjusted to reflect an error which was found in a subsequent period. The following comparative figures were affected as a result of the error being corrected:
2008 comparatives per 2009 annual report $’000
Per 2008 annual report $’000
Income statement Claims expense Surplus attributable to members before tax
53,321 1,146
51,764 1,427
Balance sheet Trade and other payables Retained earnings
(1,100) (29,060)
(270) (29,341)
railway & transport health fund ltd (abn 93 087 648 744)
|71
Notes to the financial statements continued Note 26: Comparative figures continued E. Reclassification of risk equalisation component in outstanding claims On review of the actuary calculations for the outstanding claims liability, it was noted that the amount calculated included a risk equalisation component of $727,000. Under AASB 1023; General Insurance Contracts, any risk equalisation recoveries received or receivable in relation to the outstanding claims liability shall be recognised as income and not netted off against the outstanding claims expense or liability. The comparatives have therefore been restated in the financial statements as follows:
72|
2008 comparatives per 2009 annual report $â&#x20AC;&#x2122;000
Per 2008 annual report $â&#x20AC;&#x2122;000
Income statement Premium revenue Claims expense
44,406 (53,321)
43,679 (52,594)
Balance sheet Trade and other receivables Short-term provisions
5,127 7,099
4,400 6,372
Note 27: Company details The registered office and principal place of business of the company is: Railway & Transport Health Fund Limited ABN 93 087 648 744 46 Burwood Road BURWOOD NSW 2134
railway & transport health fund ltd (abn 93 087 648 744)
We don’t inconvenience our members to suit ourselves.
|73
Have you noticed how so many companies today treat their customers like a real inconvenience? Some make you pay to come in and talk to a staff member, others charge you extra if you choose to pay the way you want rather than the way that suits them, and others even make you do the work yourself! What’s happened to the idea of service? Why is it that customers today are treated like the ones who are lucky to be receiving an organisation’s service rather than the organisation behaving like it’s grateful to have you as a customer? We exist to serve our members – this focus makes it possible for us to deliver member value above everything else.
railway & transport health fund ltd (abn 93 087 648 744)
Directorsâ&#x20AC;&#x2122; declaration The directors of the company declare that: 1. the financial statements and notes, as set out on pages 34 to 73, 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 as at 30 June 2009 and of the performance for the year ended on that date of the company. 2. in the directorsâ&#x20AC;&#x2122; opinion there are reasonable grounds to believe that the company 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.
74|
V REYNOLDS Director Dated this 28th day of September 2009 Sydney, NSW
railway & transport health fund ltd (abn 93 087 648 744)
Independent auditorâ&#x20AC;&#x2122;s report
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railway & transport health fund ltd (abn 93 087 648 744)
Independent auditorâ&#x20AC;&#x2122;s report continued
76|
railway & transport health fund ltd (abn 93 087 648 744)
Contact details Tel 1300 886 123 Fax 1300 887 123 help @ rthealthfund.com.au www.rthealthfund.com.au Mail po box 1100 burwood north nsw 2134
We believe the reason for our outstanding success can be found as much in the things that we donâ&#x20AC;&#x2122;t do, as it is in the things that we do.
head office 46 burwood rd burwood nsw 2134 sydney central 14-18 lee st railway square chippendale nsw 2008 (within encompass credit union branch) wollongong 139 keira st wollongong nsw 2500 newcastle 2/28 donald st hamilton nsw 2303 brisbane 1/59a melbourne st south brisbane qld 4101
There are a lot of things we donâ&#x20AC;&#x2122;t do. rt health fund 2009 annual report
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2009 annual report