GMHBA Mission Supporting the health of our communities for generations. Content

Transcription

1 Annual Report

2 GMHBA Limited Annual Report GMHBA Limited Annual Report GMHBA Mission Supporting the health of our communities for generations. Our Fundamental Belief Consistent with a notforprofit ethos we believe our primary obligation is to the wellbeing of our members and their communities. Only if we do well by them is our business sustainable. Content GMHBA PERFORMANCE SNAPSHOT 4 HIGHLIGHTS 5 CHAIRMAN S REPORT 6 CHIEF EXECUTIVE S REPORT 7 BOARD OF DIRECTORS 8 9 EXECUTIVE MANAGEMENT TEAM STRATEGIC INTENTS FINANCIAL REPORT 17 49

3 GMHBA Limited Annual Report GMHBA Limited Annual Report 4 Strong financial position Highlights 5 More for members annual benefits paid $217m For every dollar GMHBA received in premiums, 87 cents was paid back to members in benefits. Contribution income () 14.2% increase Benefits Paid () 10.7% increase ,724 new members 708 newborns million ancillary claims paid 520 contracted hospitals $13.4 million surplus 210,101 Australians covered $134,299 $148,709 $164,530 $191,355 $216,867 $247,747 $116,692 $128,685 $144,923 $168,220 $195,749 $216, ,852 phone calls to GMHBA $ million increase in benefits paid 55,782 hospital admissions Memberships 7.4% increase , , , ,093 91,468 98,192 Total Assets () 8.8% increase 2006 $111, $133, $139, $152,693 $164,752 $179,193 Membership growth: GMHBA exceeds industry average 2.3% % 4.3% % Membership Growth: National annual growth 5.9% % 10.9% % How GMHBA Compares 6.2% 3.0% 7.4% 3.4% Membership benefits: GMHBA returns more benefits to members than the industry average 87% 85% 87% 84% 88% 85% Member Benefits: Based on percentage of contributions 88% 87% 90% 86% 87% GMHBA Industry GMHBA Industry

4 GMHBA Limited Annual Report GMHBA Limited Annual Report 6 Chairman s Report Chief Executive s Report 7 It gives me great pleasure to present this report for the financial year. GMHBA Limited had an excellent year, achieving a surplus of $13.4m, an increase of 129% on the prior year and as a result has achieved a new milestone in net assets which now sits at $110m. Total contribution revenue for the year was $248m up 14.2% year on year. The most pleasing part of this result is that the business as measured by underwriting surplus performed at its best level in the organisation s history while still achieving outstanding membership growth of 7.4%. It should also be noted that this result was reached at a time when the organisation was forced to fight an unwelcome and aggressive takeover bid, and while GMHBA was also consolidating the new Frank Health Insurance brand and launching a new sports and fitness brand FIT Health Insurance. During this coming year GMHBA s contribution revenue is expected to exceed a quarter of a billion dollars. With its strong capital base and its position as Australia s eighth largest health insurer, fund members can be assured that their health insurance is securely placed with a well managed and financially strong health fund. The strength and appeal of our fund to new members is clearly demonstrated by the continued above industry membership growth rates achieved, while our current members continue to give GMHBA very high satisfaction ratings in all of our member surveys. A prime example was the overwhelming member support shown during the hostile takeover challenge that occurred earlier this year. The board was clearly told by members that we were to continue to do what GMHBA has done well for over 75 years; that is to continue to provide friendly and efficient service, and value for money health insurance. This year s financial outcome has been achieved in a challenging economic period within our main market of Victoria and in a period of increased general competitiveness in the industry. We are proud that GMHBA can support those Australian families who see the value in protecting their future health needs, by using the private health insurance system and so helping the community generally by taking the strain off our good, but pressured public health system. I would also like to pass on my thanks to all those health professionals who have done a magnificent job in helping our members in their times of need. This year s positive result has not happened by chance. GMHBA has an experienced board that has provided excellent leadership to the organisation. It would be remiss of me in my first report as chairman, not to mention that the capability the board has shown this year was in no small measure due to the work of Mr Michael Dowling who as my immediate predecessor had worked hard for many years to ensure that the organisation was in a strong position on all measures. The board welcomed a new director this year in Mr Brian Benger, who has extensive insurance and investment experience and who has further strengthened an already strong board. I would like to thank all the GMHBA directors for the support they have given me in the challenging early days of my chairmanship and to also thank them for their hard work and service in the other challenges we have faced this year. The performance of the board has been matched by the commitment and performance of the management team led by Chief Executive Mr Mark Valena who have performed at an exemplary level throughout this exciting year. GMHBA s aim of being one of the most respected health funds while maintaining great service and value for members, was clearly achieved this year and I would especially like to pass on my thanks to our dedicated staff who have done a magnificent job in ensuring we continue to meet this aim. Economic conditions have been challenging for government, businesses, investors and individuals. Consumer confidence is low. People appear uncertain about their future as indicated by the high levels of personal saving and reduction in credit card debt. Yet businesses that focus on providing their customers the products they need, at prices they can afford and with quality personalised service, can still do well. GMHBA is one such business. We are proud of what we have achieved this year on our members behalf. At GMHBA we believe that our primary obligation is to the wellbeing of our members and their communities. We deliver on this obligation through our enduring track record of providing affordable and useful health insurance. Without our products we know that many of our members would either not have seen themselves as able to afford health insurance nor would they have been able to access timely and quality private medical care. We also demonstrate this member focus every day. In the financial year we: Kept our premiums competitive with an average premium rate increase in line with the industry average; Delivered valueformoney returns to members through benefit payments as evidenced by achieving more best buys than all major competitors from Australia s leading consumer magazine (three years out of four); Are again a finalist in the BRW/ANZ Private Enterprise Customer Service awards; and Began providing health information education forums in our local community. We know that our members recognise and value our focus. In a recent survey in our home market of Geelong, GMHBA was most strongly differentiated (from our competitors) as being notforprofit, caring, contributing to the local community and focusing on member interests. In line with this member focus is good financial management. As overviewed in the Chairman s Report, we have had an excellent year with strong growth, a good but not excessive surplus from our health insurance business and stable investment results. Good financial management over many years has delivered the strong capital position that we now enjoy. This capital provides the financial security that gives members confidence we will be here in the future, and allows us to invest in new initiatives that enhance value to our membership. Currently we are planning to greatly increase the level of support we provide to members around management of chronic conditions, to help them stay well. We look forward to the rollout of these programs and further contributing to the well being of our members. Lastly, I thank our staff, directors and all our business partners for the continuing efforts that collectively ensure we remain a very good health insurer. Kenneth E. Jarvis Chairman Mark Valena Chief Executive

5 GMHBA Limited Annual Report GMHBA Limited Annual Report 04 Professor John C. Catford 05 Russell H. Elliott 07 Brian G. Benger 8 Board of Directors 9 MA, MSc, MB, BChir, DM, DCH, B.Sc., M. Ed., MAICD. B.Ec (Hons), AdvDip Fin Services 01 Kenneth E. Jarvis OAM, KSJ, B App. Sc (Hons), Dip OR. Director since 2004 Chairman Chairman Nomination & Remuneration Committee Member Audit & Compliance Committee Member Strategy Committee Executive Chairman Aerolite Quarries Pty Ltd Executive Chairman Jakape Pty Ltd Chairman Victorian Regional Channels Authority Director Gordon TAFE Ltd Director Aviation Australia Development Ltd 02 James E. Walsh B.Com, MBA, FCA, MAICD. Director since 2005 Deputy Chairman Chairman Strategy Committee (since July ) Member Audit & Compliance Committee Member Nomination & Remuneration Committee (until July ) Chartered Accountant Director Godfrey Hirst Australia Pty Ltd President The Geelong Chamber of Commerce 03 Sue Renkin RN, MBA, MAICD, FCDA. Director since 2009 Chair Health Services Committee Member Nomination & Remuneration Committee Member Investment Committee (since July ) Chief Executive Open Family Australia (until October ) Managing Director intuitively focussed p/l Chairman Monash Centre for Green Chemicals Future Chairman Clayton Bio Medical Imaging Laboratories Chairman Southern Metropolitan Cemeteries Trust Director General Practice (VIC) Director Northern Health FFPH, FRCP, FAFPHM, FIPAA, FAICD. Director since 2009 Member Health Services Committee Member Nomination and Remuneration Committee (since July ) Dean of the Faculty of Health, Medicine, Nursing and Behavioural Sciences and Professor of Health Development, Deakin University Chair Postgraduate Medical Council of Victoria EditorinChief, Journal Health Promotion International Oxford University Press Adjunct Professor in the Faculty of Medicine, Nursing and Health Sciences at Monash University Chair Youth Substance Abuse Service Chair Kinect Australia (incorporating VicFit in Victoria) Director Diabetes Australia (Victoria) Director Research Australia Governor Windermere Foundation Governor Epworth Foundation Director since 2001 Chairman Investment Committee Member Strategy Committee (since July ) Associate Vice President (Administration) Monash University Executive Director Russell Elliott and Associates Pty Ltd 06 Gerald Miller BA, LLB. GAICD. Director since 2007 Chair Audit & Compliance Committee Member Investment Committee (until July ) Member Strategy Committee (Sep July ) Member Health Services Committee (since July ) Lawyer Director The Geelong College Ltd Consultant Browne & Co Solicitors and Consultants (Superannuation) FAICD Appointed Director February Member Strategy Committee Member Investment Committee Chairman FABAL Group Member Future Fund Advisory Board, The Oaktree Foundation Director The Victorian Managed Insurance Authority Director Mercer Investment Nominees Ltd. Michael J. Dowling KSJ, B.Ec., FCA, SFCDA, Dip CD. Retired September Chairman Nomination & Remuneration Committee Member Strategy Committee Chartered Accountant Director Dowling Corporate Consulting Pty Ltd Heather L. Wellington MBBS, B. Med. Sci., BHA, FRACMA, LLB, FAICD. Resigned July Member Health Services Committee Lawyer Medical Practitioner Director HPA Consulting Pty Ltd Chairman IPG Ltd Consultant DLA Phillips Fox Lawyers

6 GMHBA Limited Annual Report GMHBA Limited Annual Report 10 GMHBA Executive Team Mark Valena Chief Executive Mark is an experienced Business Executive. He came to the helm at GMHBA in early 2008 following seven years as the CEO of Medical Defence Association Victoria. MDAV was Victoria s largest medical professional indemnity insurer (with an 18% national market share) and as a notfor profit organisation, in a highly regulated insurance market operating in the health sector, provided a sound experience base for his current role at GMHBA. Mark has significant experience in the negotiation and implementation of mergers and business transitions at MDAV, NRMA and Fortis Insurance. Through these transitions Mark was able to create an environment of goodwill and navigate through many complex agendas leading to retention of members and employees. Mark is an Australian Chartered Accountant who has a Bachelor of Business and a Graduate Certificate in Innovation & Service Management. 02 Michael Carroll Company Secretary & Compliance Michael is a Business Executive with over 26 years experience. He is responsible for the Company Secretariat, with Compliance as another major responsibility. Michael is accredited with a Bachelor of Business (Accounting) from Swinburne University, he is a Certified Practicing Accountant, has completed his MBA at Deakin University in 2004 and in 2007 completed a Graduate Diploma in Applied Corporate Governance with Chartered Secretaries Australia. 03 Jacqueline Armitage Marketing & Member Services Jacqueline is a professional Sales and Service Executive with over 30 years Australian and Asian experience and a proven track record in managing multisite operations for blue chip organisations; with 5 years experience at GMHBA. Jacqueline s success in her field is attributed to her ability to develop both strategic and tactical solutions to achieve sales targets as well as improve quality, productivity and customer satisfaction. This ensures customers expectations are consistently met and often exceeded. 04 James Arnott FIT Health Insurance General Manager James is a Business Executive with over 20 years experience. James is responsible for providing strategic and operational leadership to the FIT Team ensuring successful operations across all aspects of the FIT business unit. Prior to heading up FIT Health Insurance, James was responsible for a range of GMHBA services including Health Services, Claims Audit, Product Development and Marketing. James previously worked with Caulfield General Medical Centre and The Alfred Hospital for over 13 years where he was responsible for a diverse group of services. James has a Diploma of Applied Science from Lincoln Institute of Health Sciences, a Bachelor of Prosthetics and Orthotics from LaTrobe University, and an MBA from the University of NSW. James is also a member of the Executive Committee of the G21 Health and Wellbeing Pillar. 05 Tim Boyd Human Resources Tim is a Human Resource practitioner with over 16 years experience in HR generalist roles and has specialist skills in Learning and Development and Organisational Development functions. Tim has had a long career in Automotive Development with a large multi national manufacturer in roles ranging from HR consultancy, Learning and Organisational Development and international experience in the Asia Pacific region. Tim s experience in Asia Pacific has developed an ability to understand organisational cultures and build relationships based on trust and respect. Tim currently manages the Human Resources team at GMHBA providing a comprehensive range of HR services to the organisation. 06 Tim Gove Finance Tim is responsible for leading GMHBA s Finance function. Having recently joined GMHBA, Tim joins us with both a professional services and corporate experience, bringing to our team, a strong financial and analytical focus. Tim is an experienced finance professional and has over 20 years experience in financial services, working in Melbourne, Sydney and London. Tim has significant experience working with complex financial institutions, focusing on improving financial and operational performance and governance in highly regulated environments. He holds a Bachelor of Commerce and is a Chartered Accountant

7 GMHBA Limited Annual Report GMHBA Limited Annual Report 12 Financially Strong Community Connected 13 To provide valueformoney products and services to our members To develop mutually beneficial relationships with communities GMHBA has performed well and continued to build and maintain a sustainable business over the last financial year. Growth GMHBA again enjoyed strong growth in new members above the industry average as one of the fastest growing health funds in Australia. In the financial year, the fund s membership increased by 7.4% compared to the industry average of 3.4%. This positive outcome is a result of strong customer retention, advocacy and varied distribution channels. This is supported by GMHBA endeavouring to better understand our members and match the right people to the right products. Managing benefit payments The fund has also enjoyed a favourable year in terms of our overall experience with claiming outcomes. Our team of claims analysts closely monitor payments made to hospitals, medical and ancillary providers to ensure that only correct benefits are paid. During the financial year, more than $2m of members money was saved. This in turn has a direct impact on GMHBA s ability to keep premiums affordable. Operating surplus This year s surplus of $13.4m was achieved through a whole of business approach, primarily attributed to new sales growth, favourable claims experience, closely managed resources and prudent investment management. Investments & capital management We have continued with a conservative investment strategy with our investment income of $8.4m representing an average return of 6.16% on funds invested. Our investment strategy supports our capital needs in regard to prudential and regulatory requirements, adverse risk situations and future strategic initiatives. GMHBA is committed to sustainable investment in the health and wellbeing of the community. Employee contribution Key to our community strategy is employee involvement through volunteering and salary donations. GMHBA employees provide tangible assistance to the community through volunteering programs that help empower and connect people. In /11, GMHBA employees contributed more than 100 volunteer hours to community organisations and projects, via a community partnership with BacLinks. Our staff also provided skilled expertise to organisations such as Give Where You Live and the Geelong Chamber of Commerce. GMHBA s Workplace Giving program experienced a 22% increase in the financial year. This increase is attributed to GMHBA employees working as ambassadors for the Workplace Giving program. Member wellness This year, GMHBA introduced free member information sessions on a variety of health related topics. The aim of these sessions is to improve community health outcomes through knowledge and education. This initiative will be further developed in the coming year. GMHBA s promotion of a bowel cancer screening program to members, has resulted in over 4,800 members being tested, an additional 1,400 members in the last 12 months. This testing resulted in 6% of members tested receiving confirmation that further investigation was warranted. Also introduced in /11 were free inbranch health checks open to members and the public by an experienced exercise physiologist and nutritionist, specifically promoting men s health. Community partners Over the years, GMHBA has developed a number of strong relationships with community partners. In /11, GMHBA made a significant contribution to Geelong notforprofit organisation, Give Where You Live. GMHBA s CEO has been the ambassador for the organisation s fundraising appeal. GMHBA also provided funding to Give Where You Live for their marketing and promotional materials. This enabled Give Where you Live to maximise the distribution of funds raised to over 70 community organisations across the Geelong region. For the third consecutive year, GMHBA employees participated in the annual charity cycling event through Regional Victoria, the Murray to Moyne. Through staff fundraising and donations of GMHBA s Corporate Partners, GMHBA was able to raise $30,000, a threefold increase on previous fundraising efforts. As a result, GMHBA was able to donate $30,000 to the Ballarat Cancer Research Centre. Highlights: Highlights: Strong membership growth of 7.4%. Net asset growth of 13%. Successful transition to new bank. Exceeding growth and profitability targets for Frank Health Insurance in its second full year of operation. Claims analysts recovered $2.06m for the year. GMHBA employees contributed more than 100 volunteer hours to community organisations and projects. Donations were provided to 12 charities as a result of staff casual dress days. GMHBA employees increased their charity salary contributions by 22%. $30,000 raised by GMHBA staff participating in the annual Murray to Moyne charity cycling event. The introduction of member health information sessions. More than 4,800 members have participated in a Bowel Cancer screening program.

8 GMHBA Limited Annual Report GMHBA Limited Annual Report 14 Trusted Partner Success through Innovation 15 A better way of service that is noticeably different. To innovate for differentiation and growth A major feature of GMHBA s strategy is to become a trusted partner within the communities in which we operate. Our intention is to provide the best service possible and to offer members more in the role we play in improving core health through wellness programs and initiatives. Transparency GMHBA staff work hard to maintain transparency and trust in all that we do and we are able to achieve this in three key areas by: simplifying processes keeping members informed giving members choices that are in the best interest of the member. Member satisfaction Throughout the year, GMHBA member satisfaction is researched and monitored through surveys. On a scale where 7 is the maximum, GMHBA averages between 6.3 and 6.6 which continues to demonstrate that member advocacy is high. Positive word of mouth from members is a key driver of GMHBA s ongoing success, an element which we are proud to report. Employee satisfaction Our level of service begins with our employees and it is our belief that highly satisfied members are only possible when employees are committed to the company. In, GMHBA was a finalist in the BRW/ANZ Awards recognising excellence in customer service. We believe it is only possible to receive recognition such as this when employees are dedicated to the cause. GMHBA continues to invest in its people to ensure that overall employee satisfaction is maintained. GMHBA is continuously seeking new and innovative ways to create and capture value for members in order to remain competitive. FIT Health Insurance Designed for active Australians and those who want access to increased benefits and specialised services, FIT Health Insurance was successfully launched in November. FIT Health Insurance has been developed in conjunction with the help of some of Australia s most respected sports medical associations and leading sporting and fitness bodies including the AFL, Netball Australia, Kinect Australia and the AFL Medical Officers Association. FIT s objective is to give members more for keeping fit, playing sport and staying active by offering a unique health insurance product and service. Frank Health Insurance Since inception in October 2009, Frank Health Insurance has continued to enjoy strong growth. In the past year, we have improved Frank s products and launched a TV advertising campaign with industry first promotional offers designed to stand out from the pack. Frank continues to simplify the health insurance message and that s why it s growing... fast. RACT Health Insurance In June, GMHBA launched a new product range in partnership with RACT Limited exclusively available to RACT members in Tasmania. The tailored new offering enables GMHBA to further extend our reach with a recognised insurance provider in a new market. Online access In GMHBA introduced a new quote tool enabling prospective members to mix and match covers quickly and easily in order to get a comprehensive quote and join online. A new online joining process and member area were also implemented across all brands to provide new and existing members with a better online experience. External recognition Highlights: GMHBA voted the most bestbuys of any health fund by leading Australian consumer magazine in, 2008 & Canstar Cannex awarded GMHBA Best Value for a number of products in Victoria, Queensland and Western Australia. Finalist in BRW/ANZ Awards recognising excellence in customer service. Introduction of FIT Health Insurance. Launch of RACT Health Insurance. New GMHBA Corporate product range. Significant growth in Frank Health Insurance surpassing targeted sales. Improved web facilities.

9 GMHBA Limited Annual Report GMHBA Limited ABN Enabling Capability To align capability so as to effectively execute strategy Enabling the capability of our employees, systems and processes is critical for us to be successful in future endeavours. A number of key projects have been accomplished over the last 12 months in order to better equip employees with a range of specialised skills and capabilities. Head office consolidation The last financial year saw the unveiling of GMHBA s new head office in the heart of Geelong s CBD. The project brought over 100 employees to one central location and ended the need to lease separate external office space for administration. Employee communication forum A quarterly employee communication forum where the Chief Executive provides an update on the strategy and key issues has proved key for good internal communication. These forums are designed to encourage employees at all levels to share ideas and discuss a range of different issues. The forums are essential to allow open communication of the strategy across the organisation allowing all employees a chance to talk to the Chief Executive in an informal setting. Employee survey Throughout, we have made significant progress to align our culture in order to be able to deliver our strategy. The results from our most recent Organisational Alignment Survey conducted by an external survey organisation showed great improvement in employment alignment, engagement and commitment to GMHBA s mission, vision and strategy. GMHBA has seen an average 78% improvement in scores on the three key areas of Clarity, Consistency and Commitment compared to the previous survey. Values & Behaviours Our organisation and employees are guided by six values and behaviours we believe are instrumental to help guide us in effectively executing our strategy and provide a service that is noticeably different. GMHBA Values & Behaviours Trust Build credibility through actions and demonstrate confidence in others intentions and competencies. Contribute Collaborate and get involved. Make a difference. Enjoy Enjoy work. Take pride in success. Succeed Be resourceful, adaptable and achieve quality results. Improve Be curious and look for innovation. Have the courage to try something new. Serve Aim to make every customer experience memorable. Make every effort to deliver excellence. Highlights: Newly opened head office. An average 78% improvement in employee satisfaction scores on three key areas of Clarity, Consistency and Commitment. Financial Report For the year ended 30 June

10 GMHBA Limited Financial Report GMHBA Limited Financial Report Contents Members of the Board of Directors Page The directors of the Company at any time during or since the end of the financial year were: Members of the Board of Directors 19 Directors report Lead auditor s independence declaration 22 Corporate governance statement for the year ended 30 June Statement of comprehensive income for the year ended 30 June 25 Statement of financial position as at 30 June 26 Statement of changes in equity fo r the year ended 30 June 27 Statement of cash flows for the year ended 30 June 28 Notes to the financial statements for the year ended 30 June Directors declaration for the year ended 30 June 46 Independent auditor s report Corporate directory 49 Kenneth E. Jarvis, OAM, KSJ, B App. Sc (Hons), Dip OR. Director since 2004 Chairman Chairman Nomination & Remuneration Committee Member Audit & Compliance Committee Member Strategy Committee Executive Chairman Aerolite Quarries Pty Ltd Executive Chairman Jakape Pty Ltd Chairman Victorian Regional Channels Authority Director Gordon TAFE Ltd Director Aviation Australia Development Ltd James E. Walsh, B.Com, MBA, FCA, MAICD. Director since 2005 Deputy Chairman Chairman Strategy Committee (since July ) Member Audit & Compliance Committee Member Nomination & Remuneration Committee (until July ) Chartered Accountant Director Godfrey Hirst Australia Pty Ltd President The Geelong Chamber of Commerce Sue Renkin, RN, MBA, MAICD, FCDA. Director since 2009 Chair Health Services Committee Member Nomination & Remuneration Committee Member Investment Committee (since July ) Chief Executive Open Family Australia (until October ) Managing Director Intuitively Focussed Pty Ltd Chairman Monash Centre for Green Chemicals Future Chairman Clayton Bio Medical Imaging Laboratories Chairman Southern Metropolitan Cemeteries Trust Director General Practice (VIC) Director Northern Health Professor John C. Catford, MA, MSc, MB, BChir, DM, DCH, FFPH, FRCP, FAFPHM, FIPAA, FAICD. Director since 2009 Member Health Services Committee Member Nomination & Remuneration Committee (since July ) Dean of the Faculty of Health, Medicine, Nursing and Behavioural Sciences and Professor of Health Development, Deakin University Chair Postgraduate Medical Council of Victoria EditorinChief, Journal Health Promotion International Oxford University Press Adjunct Professor in the Faculty of Medicine, Nursing and Health Sciences at Monash University Chair Youth Substance Abuse Service Chair Kinect Australia (incorporating VicFit in Victoria) Director Diabetes Australia (Victoria) Director Research Australia Governor Windermere Foundation Governor Epworth Foundation Russell H. Elliott, B.Sc., M. Ed., MAICD. Director since 2001 Chairman Investment Committee Member Strategy Committee (since July ) Associate Vice President (Administration) Monash University Executive Director Russell Elliott and Associates Pty Ltd Gerald Miller, BA, LLB. GAICD. Director since 2007 Chair Audit & Compliance Committee Member Investment Committee (until July ) Member Strategy Committee (Sep July ) Member Health Services Committee (since July ) Lawyer Director The Geelong College Ltd Consultant Browne & Co Solicitors and Consultants Brian G. Benger, B.Ec (Hons), AdvDip Fin Services (Superannuation) FAICD Appointed Director February Member Strategy Committee Member Investment Committee Chairman FABAL Group Member Future Fund Advisory Board, The Oaktree Foundation Director Victorian Managed Insurance Authority Director Mercer Investment Nominees Ltd. Michael J. Dowling, KSJ, B.Ec., FCA, SFCDA, Dip CD. Retired September Chairman Nomination & Remuneration Committee Member Strategy Committee Chartered Accountant Director Dowling Corporate Consulting Pty Ltd Heather L. Wellington, MBBS, B. Med. Sci., BHA, FRACMA, LLB, FAICD. Resigned July Member Health Services Committee Lawyer Medical Practitioner Director HPA Consulting Pty Ltd Chairman IPG Ltd Consultant DLA Phillips Fox Lawyers CHIEF EXECUTIVE: Mark Valena, BBus (Acc), CA, MAICD. COMPANY SECRETARY: Michael Carroll, BBus (Acc), CPA, MBA, FCIS, MAICD. AUDITORS: KPMG 147 Collins Street Melbourne Victoria 3000 BANKERS: National Australia Bank Limited (commenced September ) APPOINTED ACTUARY: Deloitte Actuaries & Consultants Limited 18 19

11 GMHBA Limited Financial Report GMHBA Limited Financial Report Directors report The Directors submit their report on the financial statements of GMHBA Limited (Company) for the year ended 30 June, made out in accordance with a resolution of the Directors. Directors The Directors of the Company at the date of this report are: Kenneth Edward Jarvis James Edmund Walsh John Charles Catford Russell Henry Elliott Gerald Miller Sue Renkin Brian Garfield Benger The qualifications, expertise and special responsibilities of Directors are set out on page 19 of the financial report. Principal activities The principal activity of the Company for the financial year ended 30 June was the provision of benefits against claims by Fund members relating to hospital, dental and paramedical services. The Company, being not for profit, does not earn taxable income and is therefore not subject to income taxation. Refer Note 1(u). The profit for the year was $13.40 million (: $5.85 million). Review of operations A review of the operations and results of the Company during the financial year are set out in the Chairman s report on page 6. Significant changes in the state of affairs There were no significant changes in the state of affairs of the Company. Matters subsequent to the end of the financial year There were no postbalance date events of any significance affecting or which may affect: (a) the operations of the Company; (b) the results of these operations; or (c) the state affairs of the Company in financial years subsequent to this financial year. Environmental regulations The Company is not subject to any significant environmental regulation. Information on Directors All Directors are members of the Company. No Director has received any benefit since the end of the previous financial year, by reason of any contract with the Company or with a firm of which he or she is a member or with a company in which the Director has a substantial interest, with the exception of the Director benefits that may be deemed to have arisen in relation to the following transactions entered into in the ordinary course of business: Directors report (continued) Meetings of Directors The following table sets out the number of meetings of the Company s Directors (including meetings of Committees of Directors) held during the year ended 30 June and the number of meetings attended by each Director. It should be noted that not all Directors are members of all Committees. Number of meetings of Directors held Number of meetings of Directors attended Number of relevant Committee meetings held Number of relevant Committee meetings attended Michael Joseph Dowling* John Charles Catford Russell Henry Elliott Kenneth Edward Jarvis Gerald Miller Sue Renkin James Edmund Walsh Brian Garfield Benger** Heather Louise Wellington*** * Michael Joseph Dowling retired as Director in September. ** Brian Garfield Benger was appointed to the Board in February. *** Heather Louise Wellington resigned as Director in July. Insurance of Officers During the financial year, the Company paid to insure the Directors and Officers of the Company for any liability that may be brought against them while acting in their respective capacities for the Company. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors and Officers liability insurance contract, as such disclosure is prohibited under the terms of the contract. Rounding of amounts The Company is an entity to which Australian Securities and Investment Commission Class Order 98/100 applies and amounts have been rounded off in accordance with that Class Order. All amounts shown in the financial statements are expressed to the nearest $1,000, unless otherwise stated. Auditor s Independence Declaration The lead auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 22. For and on behalf of the Board of Directors, As Fund members of the health fund conducted by the Company. Kenneth E Jarvis Chairman Gerald Miller Director Geelong, 30 August 20 21

12 GMHBA Limited Financial Report Corporate governance statement for the year ended 30 June The Board of GMHBA Limited has a governance framework to ensure that the Board complies with the relevant requirements of the Corporations Act 2001, the Company s Constitution, the Private Health Insurance Act 2007 and Associated Rules and embodies relevant corporate governance leading practice. The Company is committed to achieving the highest practicable standards of corporate governance. This statement provides an overview of the main corporate governance practices that were in place throughout the financial year. Code of conduct The Board Governance Framework contains GMHBA s code of conduct and has been established as the basis for ethical and professional conduct necessary to meet the expectation of Fund members and other stakeholders. As these expectations will change over time, the code is subject to regular review. The main purpose of a code of conduct is to provide a common understanding of the Company s expectations in regard to ethical and professional conduct and to assist Directors in discharging their obligations. Achieving this objective will also deliver other benefits to the Company. Conflict of interest Subject to the provisions of the Corporations Act and the Company s Constitution, the Board is empowered to regulate its meetings and proceedings, including the processes it will apply in instances of a declared, actual or perceived conflict of interest. Board Committees The Board Committees in operation throughout the year were: Audit & Compliance Committee The role of the Committee is to oversee the establishment and maintenance of a framework of internal control, to monitor the audit and actuarial function ensuring regulatory compliance and advise on appropriate ethical standards for the management of the Company. This enables the committee to give the Board additional assurance regarding the quality and reliability of financial information prepared for use by the Board in determining policies or for inclusion in financial reports. Nomination & Remuneration Committee The role of the Committee is to assist the Board of Directors in fulfilling its responsibilities for determining and reviewing compensation arrangements for Directors and senior management, succession planning and the appointment and removal of Directors. Investment Committee The role of the Committee is to advise on the Company s total investment portfolio. Strategy Committee The role of the Committee is to assist the Board of Directors in identifying and establishing GMHBA s future strategic direction in line with the Company s mission and vision statements. Health Services Committee The role of the Committee is to assist the Board of Directors in fulfilling their responsibilities in relation to ensuring that all health services initiatives comply with the Company s mission, specifically working as a trusted partner to improve Fund members health. Internal control framework The Board acknowledges that it is responsible for the overall internal control framework, but recognises that no cost effective internal control system will preclude all errors and irregularities. To assist in discharging this responsibility, the Board has instigated an internal control framework that can be described under four headings: Effectiveness and efficiency of operations Reliability of reporting Compliance with applicable laws & regulations Code of conduct 22 23

13 GMHBA Limited Financial Report GMHBA Limited Financial Report Corporate governance statement for the year ended 30 June (continued) Statement of comprehensive income for the year ended 30 June Internal audit function The internal audit function assists the Board in ensuring compliance with these internal controls. The Audit & Compliance Committee is responsible for approving the program of internal audit to be conducted each financial year and for the scope of the work to be performed. The internal audit function, while operationally reporting to the Chief Executive, also reports to the Audit & Compliance Committee. The Committee meets with the internal auditor on a regular basis. R evenue from operating activities Note Business risk management The Audit & Compliance Committee provides advice to the Board and reports on the status of business risks to the Company through an integrated risk management plan aimed at ensuring risks are identified, assessed and appropriately managed. The risk management process involves ensuring: Strategic, operational and financial risks are identified Systems are in place to monitor and manage the risks Reporting systems are in place Risk management systems are operating effectively Compliance with relevant legislation Compliance with the code of ethical conduct A comprehensive insurance program provides protection against major risk exposures that cannot be eliminated by appropriate risk management practices. Premium income 247, ,897 Total revenue from operating activities 247, ,897 E xpenses from operating activities Benefits paid to fund memb ers 9 (208,030) (188,487) Payments to Health Benefits Reinsurance Trust Fund (8,663) (7,262) Total cost of fund benefits (216,693) (195,749) Gross underwriting result 31,054 21,148 Management expenses Employee benefits expenses (10,228) (9,471) Depreciation (718) (577) Other management expenses (14,272) (11,784) Total management expenses (25,218) (21,832) Net underwriting result 5,836 (684) Revenue from outside the operating activities Investment income 8,889 6,550 Unrealised investment losses (470) (82) Other (expenses)/income (859) 66 Total revenue from outside the operating activities 7,560 6,534 Profit for the year Other comprehensive income R evaluation of property, plant and equipment 1(i), 7 (850) Total comprehensive income for the year 12,546 5,850 Profit attributable to: The Company 13,396 5,850 Profit for the year 13,396 5,850 Total comprehensive income attributable to: The Company (850) Total comprehensive income for the year 12,546 5,850 The above statement of comprehensive income should be read in conjunction with the accompanying notes

14 GMHBA Limited Financial Report GMHBA Limited Financial Report Statement of financial position as at 30 June Statement of changes in equity for the year ended 30 June Current assets Note Cash and cash equivalents 3 5,181 4,816 Trade and other receivables 4 13,048 11,245 Financial assets 5 150, ,933 Other assets 6 1, Total current assets 170, ,047 Noncurrent assets Financial assets 5 2,011 Other assets Property, plant and equipment 7 7,013 6,601 Total noncurrent assets 9,024 6,705 Total assets 179, ,752 Current liabilities Asset Retained earnings revaluation reserve Total Balance at 1 July , ,222 Total comprehensive income for the year Profit 5,850 5,850 Total comprehensive income for the year Balance at 30 June 96, ,072 Balance at 1 July 96, ,072 Total comprehensive income for the year 5,850 5,850 Trade and other payables 8 7,343 6,424 Provisions 9 29,299 30,834 Other liabilities 10 32,781 30,293 Total current liabilities 69,423 67,551 Profit Other comprehensive income: Revaluation decrement 13,396 (850) 13,396 (850) Noncurrent liabilities Total comprehensive income for the year 13,396 (850) 12,546 Provisions Total noncurrent liabilities Balance at 30 June 109, ,618 Total liabilities 69,575 67,680 Net assets 109,618 97,072 Equity Retained earnings 109,521 96,125 Asset revaluation reserve Total equity 109,618 97,072 The above statement of financial position should be read in conjunction with the accompanying notes. The above statement of changes in equity should be read in conjunction with the accompanying notes

15 GMHBA Limited Financial Report GMHBA Limited Financial Report Statement of cash flows for the year ended 30 June Notes to the financial statements for the year ended 30 June Cash flows from operating activities Note Premium receipts 249, ,257 Investment interest 8,684 5,721 Other (payments)/receipts (1,227) 145 Benefits paid (217,297) (194,024) Management expenses (25,850) (19,036) 1. Summary of significant accounting policies (a) GMHBA Limited is a not for profit company, incorporated and domiciled in Australia. Its registered office is 6068 Moorabool Street, Geelong, Victoria, Statement of compliance The Company s financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 and the Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB). Net cash provided by operating activities Cash flows from investing activities Purchase of investment securi ties Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Net cash used in investing activities Net increase/(decrease) in cash held 11(a) 13,316 (10,970) (1,981) (12,951) ,063 (11,887) (1,841) 9 (13,719) (2,656) Cash and cash equivalents at beginning of the financial year 4,816 7,472 Cash and cash equivalents at end of the financial year 11(b) 5,181 4,816 (b) (c) The Company s financial statements were authorised for issue on 30 August by the GMHBA Limited Board of Directors. Basis of measurement The accounting policies adopted in the preparation of this financial report have been applied consistently by the Company and are the same as those applied for the previous reporting period unless otherwise noted. The Company s financial statements were prepared in accordance with the historical cost convention, except for the following: Financial instruments are measured at fair value through profit or loss Land and Buildings are recorded at fair value with movements in value taken through the asset revaluation reserve Rewards benefit provision is carried at present value Long service leave provision is carried at present value The presentation currency used for the preparation of these financial statements is Australian dollars. Australian Accounting Standards issued but not yet effective The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application that are available for early adoption at 30 June, but have not been applied in preparing this financial report: AASB amendment Nature of change to accounting policy Application date of standard Application date for GMHBA AASB 4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process This Standard affects various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement purposes. The amendments are not expected to have a significant impact on the financial statements. 1 January 30 June 2012 AASB 124 Related party disclosures. Revised AASB 124 replaces the incumbent AASB 124. The main change is the amendment to the definition of a related party. The amendments are not expected to have a significant impact on the financial statements. 1 January 30 June 2012 The above cash flow statement should be read in conjunction with the accompanying notes

16 GMHBA Limited Financial Report GMHBA Limited Financial Report Notes to the financial statements for the year ended 30 June Notes to the financial statements for the year ended 30 June (continued) 1. Summary of significant accounting policies (continued) 1. Summary of significant accounting policies (continued) (c) (d) Australian Accounting Standards issued but not yet effective (continued) AASB amendment AASB 9 Financial Instruments (December ) (includes financial assets and financial liability requirements) AASB 7 Amendments to Australian Accounting Standards arising from AASB 9 (December ) AASB 9 Financial Instruments (December 2009) (Financial asset requirements only) AASB Amendments to Australian Accounting Standards arising from AASB 9 Nature of change to accounting policy In AASB 9 (December ), the AASB added requirements for the classification and measurement of financial liabilities that are generally consistent with the equivalent requirements in AASB 139 except in respect of the fair value option; and certain derivatives linked to unquoted equity instruments. The AASB also added the requirements in AASB 139 in relation to the derecognition of financial assets and financial liabilities to AASB 9. AASB 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets; amortised cost and fair value. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. The guidance in AASB 139 on impairment of financial assets and on hedge accounting continues to apply. The above amendments are not expected to have a significant impact on the financial statements. Application date of standard 1 January 2013 retrospective application For periods beginning before 1 January 2013 entities may elect whether to apply IFRS 9 () or IFRS 9 (2009) If adopted before 1 January 2012, the prior period need not be restated Application date for GMHBA 30 June 2014 Changes in accounting policies From 1 July the Company has applied AASB Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process. The change in accounting policy only relates to disclosures and had no significant impact on the financial statements. (f) (g) (h) (i) (j) Determination of fair values A number of the Group s accounting policies and disclosures require the determination of fair value, for both financial and nonfinancial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods and where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (i) (ii) Term Deposits The fair value of these investments is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a market interest rate (based on government bonds). These investments are held for a set term and rolled over at maturity. Land and buildings The Company uses Opteon (Victoria) Pty Ltd (formerly Landlink Property Group Pty Ltd), a valuations and advisory services company which employs accredited independent valuers, to determine the fair value of its land and buildings. Fair value is determined directly by reference to market based evidence, which is the amounts for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm s length transaction as at the valuation date. The effective date of the most recent valuation was 30 June. Cash and cash equivalents For the purposes of the statement of cash flows, cash includes cash on hand and bank deposits at call within 90 days. Trade and other receivables The premium receivable as at 30 June consists of: (i) Unclosed premium earned this represents premiums in arrears measured up to 30 June ; (ii) Unclosed premium unearned forecast premiums receivable from policyholders at 30 June. Property, plant and equipment Land and buildings are recorded at valuation (buildings are subsequently subject to depreciation) and plant and equipment are recorded in the financial statements at cost less accumulated depreciation and accumulated impairment losses. The Company engages an appropriately qualified person to undertake a full valuation of its land and buildings at intervals not greater than three years (see Note 1 (f)(ii)). Recoverable amount of noncurrent assets Noncurrent assets, except for investments and land and buildings are recorded in the financial statements at cost less accumulated depreciation. The carrying values of all noncurrent assets are reviewed by management at regular intervals to ensure that they are not stated at amounts in excess of their recoverable amounts. Except where stated, recoverable amounts are not determined using discounted cash flows. Management has reviewed the assets and are of the opinion that there has been no impairment of the asset s current values within the asset classes. (e) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. (k) Depreciation Property, plant and equipment, other than land, is depreciated using either the diminishing value method or the straight line method over the period during which benefits are expected to be derived from the asset. Profits and losses on disposal of property, plant and equipment are taken into account in determining the profit for the year and recorded in other income/other expenses in the statement of comprehensive income. The following rates of depreciation are applied: In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: Claims outstanding, see note 1(n) Liability adequacy test, see note 1(o) Reward benefits, see note 1(p) Deferred acquisition costs, see note 1(q) Buildings Furniture & fittings Office equipment Motor vehicles % % It is possible that outcomes within the next financial year that are different from the assumptions above could require a material adjustment to the carrying amount of the assets or liabilities affected

17 GMHBA Limited Financial Report GMHBA Limited Financial Report Notes to the financial statements for the year ended 30 June (continued) Notes to the financial statements for the year ended 30 June (continued) 1. Summary of significant accounting policies (continued) 1. Summary of significant accounting policies (continued) (l) (m) (n) Employee benefits Salaries and wages and annual leave Liabilities for salaries and wages and annual leave are recognised and are measured as the amount unpaid at the reporting date based on remuneration rates expected to apply when the obligation is settled, including oncosts, in respect of employees services up to that date. Long service leave A liability for long service leave is recognised, and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest rates on national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash flows. Health benefits risk equalisation trust fund Under the provisions of the Private Health Insurance Risk Equalisation Policy Rules 2007, hospital benefits are submitted to the Risk Equalisation Trust Fund and shared amongst all health benefit funds in the following circumstances: Where a fund has directly paid these benefits, which are proportionally less than the average of other funds in the State, it is required to pay to the Risk Equalisation Trust Fund an amount equivalent to the shortfall. Conversely, where the direct payment is proportionally greater than the average, the difference is paid to the Company from the Risk Equalisation Trust Fund. Eligible claims are assessed on a quarterly basis. Claims outstanding Claims that have been incurred by Fund members, but not yet presented to the Company for reimbursement, are estimated based on the claims experience in previous accounting periods. Outstanding claims are not discounted as they are usually settled within six months of the reporting date. The provision is calculated in accordance with the principles of the chain ladder method which can be used under the prudential regulations of the Private Health Insurance Industry. AASB 1023 requires a risk margin be applied to allow for the inherent uncertainty in the central estimate. GMHBA adopted a risk margin of 6% giving in excess of 90% probability of adequacy. The risk margin has been based on an analysis of the past experience of the Company by our Appointed Actuary on the adequacy of the provision over prior years. The liability for outstanding claims provides for claims received but not assessed and claims incurred but not received. The liability is based on an actuarial assessment taking into account historical patterns of claim incidence and processing. Changes in claims estimates are recognised in profit or loss in the reporting period in which the estimates are changed. (o) (p) (q) Liability adequacy test Under AASB 1023 the Company is required to perform a liability adequacy test to determine whether the carrying amount of insurance liabilities is adequate based on expected future cash flows. The test is carried out with the inclusion of a risk margin and is undertaken at the level of portfolio contracts that are subject to broadly similar risks and are managed together as a single portfolio. Any deficiency arising is recognised by writing down any related intangible assets, then the related deferred acquisition costs with any remaining balance being recognised as an unexpired risk liability. The liability adequacy test is required to be performed to determine whether the unearned premium liability (premiums in advance) is adequate to cover the present value of expected cash flows relating to future claims arising from rights and obligations under current insurance coverage plus an additional risk margin to reflect the inherent uncertainty in the central estimate. The risk margin adopted is 2.5% which corresponds to a 70% probability of adequacy. The reason these percentages differ from those adopted in determining the outstanding claims liability is that the former is in effect an impairment test used only to assess the sufficiency of net premium liabilities whereas the latter is an accounting policy measurement used in determining the carrying value of the outstanding claims liability. If the present value of the expected future cash flows relating to future claims plus the additional risk margin to reflect the inherent uncertainty in the central estimate exceeds the unearned premium liability less related intangible assets and related deferred acquisition costs then the unearned premium is deemed to be deficient. The liability adequacy testing as at 30 June did not result in any adjustment, as a surplus was identified. Reward benefits The Company operates a reward benefits entitlement for certain Fund members who have at least one year of eligible combined (hospital and ancillary) membership. Fund members receive an additional annual allocation of benefits as long as their eligible cover is maintained. In addition, the Rewards product entitles eligible combined Fund members to accumulate annual allocations, which they can use to claim additional benefits. Provision is made for the future liability for claims under the Rewards entitlements. The Company has provided for the total eligible benefit to combined Fund members as at 30 June with due allowance for both expected timing of payments and foregone benefit entitlements on the basis that it is likely that not all Fund members will use their full entitlement. This allowance is reviewed periodically and the provision is currently 70% of the full Reward entitlement in respect of membership up to 30 June. Deferred acquisition costs The Company incurs costs to acquire and establish Fund members. These costs include commission paid to intermediaries. Deferred acquisition costs are capitalised and amortised in accordance with the pattern of the incident of risk. The Company capitalises these costs and amortises them on a straightline basis in the statement of comprehensive income. During the year the Company changed the period it capitalises and amortises these costs from three years to one year to better reflect the pattern of the incident of risk. The liability also allows for an estimate of claims handling costs which include internal and external costs incurred in connection with the negotiation and settlement of the claims department and any part of the general administrative costs directly attributable to the claims function. The allowance for the claims handling cost at 30 June is 5% of the claims liability. (r) Comparative information Where necessary, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Deferred acquisition costs and financial assets have been reclassified from the Company s prior year financial report to conform to the current period s presentation. (s) Unearned premium liability Premiums received or receivable up to the end of the financial year are recorded as revenue for the period from the date of the attachment of risk. Premiums received prior to 30 June relating to the period beyond 30 June are recognised as an unearned premium liability. Also, forecast premiums receivable from policyholders at 30 June are recognised as unclosed business premiums. (t) Trade and other payables Liabilities are recognised for amounts payable in the future for goods and services received at balance date, whether or not billed to the Company. The Company s payables are all considered short term. (u) Income tax The Company is exempt from income tax by virtue of Section 5030 item 6.3 of the Income Tax Assessment Act

18 GMHBA Limited Financial Report GMHBA Limited Financial Report Notes to the financial statements for the year ended 30 June (continued) Notes to the financial statements for the year ended 30 June (continued) 1. Summary of significant accounting policies (continued) (v) Investments Investments comprise assets held to back insurance liabilities. All investments are managed and performance evaluated on a fair value basis for both external and internal reporting purposes in accordance with a documented investment management strategy. 2. Profit Profit for the year includes the following specific expenses: (w) (x) (y) All investments are determined to be assets backing insurance liabilities and accordingly are designated as fair value through profit or loss upon initial recognition. They are initially recorded at fair value being the cost of acquisition excluding transaction costs and are subsequently remeasured to fair value at each reporting date. Changes in the fair value from the previous reporting date (or cost of acquisition excluding transaction costs if acquired during the financial period) are recognised as realised or unrealised investment gains or losses in profit or loss. Purchases and sales of investments are recognised on a trade date basis, being the date on which a commitment is made to purchase or sell the asset. Transaction costs for purchases of investments are expensed as incurred and presented in the statement of comprehensive income as investment expenses on assets backing insurance liabilities. Investments are derecognised when the rights to receive future cash flows from the assets have expired, or have been transferred, and substantially all the risks and rewards of ownership have transferred. Investment revenue, comprising interest is brought to account on an accruals basis. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the recognition can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. Premium Income Premium income comprises amounts charged to Fund members for insurance contracts. Premium income is recognised in the statement of comprehensive income from the attachment date, as soon as there is a basis on which it can be reliably measured. Revenue is recognised in accordance with the pattern of the incidence of risk expected over the term of the contract. The proportion of premium received or receivable not earned in the statement of comprehensive income at the reporting date is recognised in the statement of financial position as unearned premium liability. Asset revaluation reserve The reserve represents increments/decrements from the revaluation of the Company s land and buildings. Leases The Company has several operating leases. The lease payments are recognised as an expense in the statement of comprehensive income on a straight line basis over the term of the lease. Net (loss) on disposal of noncurrent assets (15) Rental expenses on operating leases Cash and cash equivalents Cash on hand Cash at bank 5,085 4,718 5,181 4, Trade and other receivables Unclosed premium earned 1,497 1,280 Unclosed premium unearned ,465 2,177 A ccrued investment income 2,947 2,742 Other debtors Federal government rebate receivable 7,148 6,206 13,048 11, Financial assets Current Term deposits 150, ,933 At fair value 150, ,933 Cost 150, ,015 Noncurrent Term deposits 2,011 At fair value 2,011 Cost 2,035 The Company s exposure to interest rate risk and a sensitivity analysis for financial assets are disclosed in note

19 GMHBA Limited Financial Report GMHBA Limited Financial Report Notes to the financial statements for the year ended 30 June (continued) Notes to the financial statements for the year ended 30 June (continued) 6. Other assets 7. Property, plant and equipment (continued) Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and end of the financial year are set out below: Current Prepayments 262 Deferred acquisition costs 1, ,517 Noncurrent Deferred acquisition costs Land Buildings Furniture Office Motor Capital Total & fittings equipment vehicles WIP & Development costs $ 000 Carrying amount at 1 July 1,955 1, , ,205 6, Property, plant and equipment Freehold land at valuation Land at valuation Buildings at valuation Less accumulated depreciation 1,900 1,955 1,900 1,955 2,975 1,745 (26) 2,975 1,719 Additions ,979 Reallocation 1,205 (1,205) Disposals (359) (359) Revaluations (55) (795) (850) Depreciation (47) (102) (532) (9) (27) (717) Write offs/adjustments Carrying amount at 30 June 1,900 2, , ,013 Furniture and fittings at cost 1,198 1,219 Less accumulated depreciation (718) (975) Office equipment at cost 4,457 4,086 Less accumulated depreciation (3,166) (2,633) 1,291 1,453 Motor vehicles at cost Less accumulated depreciation (15) (6) Capital work in progress & development costs 315 1,205 Less accumulated depreciation (27) 288 1,205 Total 7,013 6,601 Carrying amount at 1 July ,955 1, , ,358 Additions Additions work in progress 1,205 1,205 Work in progress reallocation 121 (121) Disposals (30) (30) D epreciation (26) (134) (411) (6) (577) Write offs/adjustments (1) Carrying amount at 30 June 1,955 1, , ,205 6, Trade and other payables Health Benefits Risk Equalisation Trust Fund 3,066 2,036 Creditors and accruals 4,277 4,388 7,343 6,

20 GMHBA Limited Financial Report GMHBA Limited Financial Report Notes to the financial statements for the year ended 30 June (continued) Notes to the financial statements for the year ended 30 June (continued) 9. Provisions Current Outstanding claims 14,400 14,177 Risk margin 2,447 2,419 16,847 16,596 Reward benefits 11,454 13,340 Employee annual leave Employee long service leave ,299 30,834 Noncurrent Employee long service leave The reconciliation of the provisions are as follows: 9. Provisions (continued) Insurance contracts (continued) The assets held to back insurance liabilities consist largely of money market securities, fixed interest investments and other highly liquid assets. Asset management is designed to ensure consistency between forecasted claims payment obligation and asset maturity profiles. Management of liquidity risk is incorporated into GMHBA s risk management strategy. Insurance Risk Management The risk management strategy offers a level of assurance that the Company s risks are administered thoroughly and astutely. The risk management plan addresses the operational risks of the Company. The strategy is inclusive of a risk management plan, which is the process of planning, organising, directing and controlling the resources and activities of an organisation in order to minimise the adverse effects of accidental losses to the organisation. It is recognised as an integral part of good management practice, which involves a process consisting of steps which when undertaken in sequence, enable continual improvement in decisionmaking. Risk management is as much about identifying opportunities as avoiding or mitigating losses. The risk management plan defines management responsibilities and the processes involved in mitigating any qualitative and quantitative risks through a set of developed guidelines. The risk management plan is subject to a formal review process to ensure continued effectiveness. Outstanding claims including risk margin B alance at beginning of year 16,596 14,921 A dd: claims incurred 203, ,423 L ess: claims paid (203,535) (181,748) Net outstanding claims liability 16,847 16,596 Benefits paid to fund members Gross Claims undiscounted C urrent 207, ,858 Prior 76 (371) Total benefits paid 208, ,487 Reward benefits Balance at beginning of year 13,340 14,351 A dd: Benefits accrued 3,723 4,649 Less: Benefits utilised (5,609) (5,660) 11,454 13,340 Annual leave Balance at beginning of year A dd: annual leave incurred Less: annual leave paid Long service Leave (653) (577) Current year benefits relate to claim events that occurred in the current financial year. Prior year benefits relate to a reassessment of the claim events that occurred in all previous financial periods. A major component of the prior year movement is the release of risk margins in respect of claims payments settled during the year. In order to maintain strong reserves, much of this release is transferred to current reserves for which the development of claims is less mature and there is much greater uncertainty attaching to the ultimate cost of claims. Balance at beginning of year A dd: long service leave incurred Less: long service leave paid (39) (74) Insurance contracts Insurance contracts are defined as those containing significant insurance risk at the inception of the contract or those where at the inception of the contract there is a scenario with commercial substance where the level of insurance risk may be significant over time. The significance of insurance risk is dependent on both the probability of an insurance event and the magnitude of its potential effect. Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during this period. The Company has determined that all current contracts with policyholders are insurance contracts. 10. Other liabilities Unearned premium liability 31,813 29,396 Unclosed business premiums , ,293 Underwriting insurance contracts expose the Company to liquidity risk through payment obligations of unknown amounts on unknown dates. Liquidity risk is the risk of having insufficient cash resources to meet payment obligations