Annual Report 2015
Purpose built for our time
Contents
2
3
4
6
9
Financial Highlights
Our Values
Chairman’s Letter
Managing Director’s Report
Directors’ Report
17 Operating and Financial Review
42
Remuneration Report
Financial Calendar
Annual General Meeting
11 November 2015
Half Year End
31 December 2015
Half Year Result Announcement
February 2016
Year End
30 June 2016
Annual Report
August 2016
58 Auditor’s Independence Declaration
Dates are subject to change.
59
Financial Report
143 Directors’ Declaration
144 Independent Auditor’s Report
146 Shareholders’ Information
150 Directory
1 ClearView Annual Report 2015
ClearView Wealth Limited 2015 Financial Highlights
After Tax Profit by Segment, $m
Life Insurance
Wealth Management
Financial Advice
Business Unit Operating Earnings (after tax)
Listed Entity and Other
Total Operating Earnings (after tax)1
Interest expense on corporate debt (after tax)
Underlying NPAT2
Other Adjustments
NPATA3
Amortisation
Reported NPAT
Underlying diluted EPS (cps)
Reported diluted EPS (cps)
Dividend per share (dps)
FY15
15.3
1.8
4.4
21.5
(0.6)
20.9
(0.4)
20.5
1.0
21.5
(9.0)
12.5
3.85
2.36
2.10
FY14
% Change
10.8
5.9
3.5
20.2
(0.5)
19.7
0.0
19.7
1.6
21.3
(7.4)
13.9
4.41
3.10
2.00
41%
(70%)
27%
6%
(34%)
6%
Large
4%
(35%)
1%
21%
(10%)
(13%)
(24%)
5%
1
2
3
Total Operating Earnings NPAT represents the Underlying NPAT2 of each of the operating business units before taking into account the interest costs associated
with corporate debt.
Underlying net profit after tax is the Board’s key measure of group profitability and the basis on which dividend payments are determined. It consists of con-
solidated profit after tax adjusted for amortisation (not including capitalised software), the effect of changing discount rates on insurance policy liabilities and
costs considered unusual to the Group’s ordinary activities.
NPATA is reported net profit after tax adjusted to exclude the non-cash amortisation of acquired intangibles (not including capitalised software).
Life Insurance
Wealth Management
Financial Advice
In-force Premium
Funds Under Management
Financial Advisers
115.7
87.5
62.1
41.0
41.0
44.1
2010
2011
2012
2013
2014
2015
2.0
1.5
$B
1.0
0.5
0.0
1.90
1.57
1.52
1.38
1.66
1.53
2010
2011
2012
2013
2014
2015
250
200
150
100
50
0
221
82
127
117
98
19
2014
12
2015
55
27
28
70
42
28
102
81
21
2011
2012
2013
Old Book
Non-Advice
LifeSolutions
WealthFoundations
WealthSolutions
Master Trust
Self Employed (Matrix)
Self Employed (CVW)
Employed (CVW)
2.0
1.5
1.0
0.5
0.0
250
200
ClearView Annual Report 2015 2
150
100
50
0
55
27
28
70
42
28
221
82
127
117
98
102
81
21
19
2014
12
2015
Old Book
Non-Advice
LifeSolutions
WealthFoundations
WealthSolutions
Master Trust
Self Employed (Matrix)
Self Employed (CVW)
Employed (CVW)
2010
2011
2012
2013
2014
2015
2011
2012
2013
120
100
80
$M
60
40
20
0
120
100
80
60
40
20
0
ClearView Wealth Limited Our Values
At ClearView we respond quicker, we care more and we try harder. Why?
Because we focus only on building and protecting the financial futures of our
customers and their families, which means we won’t be distracted from this
mission. So every time our exceptional people decide on something,
it gets done really, really well.
We’re never satisfied when it comes to doing better
and we never give up on our people, our customers, our
partners and the moments that matter. Nothing really
good has ever come about because someone gave up.
So if there’s a better way to do it, we’ll find it.
‘ Ambition is the path to success, PERSISTENCE is the
vehicle you arrive in.’
We believe that working together benefits the customer
and that two heads are better than one, and a lot more
fun. Three are better still. We want more perspectives not
less. We are a group of like-minded passionate people
who turn up every day to share, help and be better than
yesterday... together.
‘ As you navigate through the rest of your life, be open to
COLLABORATION. Find a group of people who challenge
and inspire you, spend a lot of time with them, and it will
change your life.’
A handshake... giving your word... committing...
promising... and then actually delivering! If these things
come in shades of grey to you we’re not going to get
along very well. Only 3 colours matter here -
right, wrong and the vibrant pink on our logo.
‘ If you have INTEGRITY, nothing else matters. If you
don’t have INTEGRITY, nothing else matters.’
We’re also proud to never compromise when selecting
our people and there’s nothing we hate more than fake.
Only positive, genuine people need apply. Honest people.
Open. Able to say sorry and admit they were wrong. Tell it
like it is. Argue their case but accept a decision. What you
see is what you get.
‘The AUTHENTIC self is the soul made visible.’
3 ClearView Annual Report 2015
ClearView Wealth Limited Chairman’s Letter
Dear Shareholders
We are pleased to report that the investments made over the past three years are starting to flow
through from operational results with material earnings growth expected to emerge in FY16.
This is the third Chairman’s letter that I have drafted for
ClearView and represents a point of inflection for the
business. Over the past two Chairman’s letters, I have focused
on the strategy that the Board has put in place for your
business, setting out that ClearView was on a three year
process of investing first in building out its life advice offering
in FY13, then investing in direct life in FY14 and in the past
year investing in wealth management. As I noted in previous
letters, each of these investments involved a substantial
investment which preceded revenue and profit growth (often
called a "J Curve" investment), with the expenses associated
in building out the businesses acting as a drag on earnings.
In this third letter, I can now report that the initial phases
of the platform that ClearView has been building are
substantially complete. ClearView now has competitive
offerings in both the life insurance and the wealth
management markets. This included the launch of a new
LifeSolutions product upgrade and the WealthFoundations
mid market product offering over the past 12 months. This
is not to say that significant work is not still required, but
the initial platforms have now been established and going
forward, the Board believes that the business is through the
bottom of the "J Curves" of each of its underlying business
units. In addition, we are aiming to build a high quality advice
capability which has been enhanced with the merger with
Matrix.
The early investments that ClearView made in FY13 and FY14
are now translating into strong earnings momentum with
life insurance underlying profit increasing by 41% in FY15.
The overall Underlying Net Profit after Tax (UNPAT) growth in
FY15 remains modest at 4%, however, this was driven by the
decision, which was clearly communicated to the market,
that FY15 remained an investment year, in particular in our
wealth management business. Overall, ClearView met our
expectations.
The challenge for ClearView is to now translate the past three
years of investment into substantial earnings momentum
going forward. Early indications are positive, and given the
compounding nature of both life insurance and wealth
management this should start to flow through into material
profit growth in FY16.
Operating and Financial Results
ClearView again achieved strong positive momentum in its
key operating metrics in FY15:
•
•
•
Life Insurance: in-force premium is up 32% to $115.7
million with new business written up 26% to $34.5 million;
Wealth Management: Funds Under Management (FUM) is
up 15% to $1.9 billion; net inflows achieved in FY15 were
a positive $112 million which reflects the launch of our
new product, WealthFoundations (net flows were broadly
neutral in FY14); and
Financial Advice: The Matrix merger provides a stepped
change with adviser numbers up 89% to 221; Premiums
Under Advice is up 99% to $187 million and Funds Under
Management and Advice (FUMA) is up 92% to $7.9 billion.
These operational metrics generally lead to solid growth in
financial metrics over time given the compound nature of the
underlying businesses in which we operate:
•
•
•
•
UNPAT is up 4% to $20.5 million and consistent with
expectations;
UNPAT from life insurance is up 41% to $15.3 million
which is reflective of the business starting to gain
additional scale and the emergence of profits from the
growing in-force portfolios;
Embedded value is up 9% to $389 million (at a 4%
discount rate margin) and the Value of New Business
up 66% to $15.8 million. The growth in Embedded
Value and the Value of New Business was constrained
by expense overruns which are reflective of ClearView
having built an operating structure suitable for the
scale it aspires to. These expense overruns will likely be
absorbed in the medium term and will be reflected in an
increasing Embedded Value and profit realisation as they
progressively reduce;
These results were achieved while maintaining a capital
position that requires capital to be set aside for future
growth (and is effectively a drag on earnings). The net
cash in the business was $135.6 million, a working capital
reserve to fund future growth of $48 million is held with a
net capital position of $32.7 million after amounts drawn
down under the $50 million debt facility that was put in
place in December 2014. The debt facility has been drawn
ClearView Annual Report 2015 4
ClearView Wealth Limited Chairman’s Letter
Continued
to $45.5 million. The Board intends to replace this debt
facility with one or more longer term capital solutions (for
example, Tier 2 debt) as the need for, and quantum of,
longer term capital funding emerges.
The Directors have declared a FY15 fully franked dividend of
$12.3 million, equating to 2.1 cents per share (up 5% on the
prior year final dividend). This represents approximately 60%
of the 2015 UNPAT, which itself was suppressed in FY15 given
the material investments made in wealth management.
The FY15 Final Dividend will operate in accordance with our
dividend reinvestment plan.
The Board of ClearView continues to operate a share buy
back in circumstances where the share price is below the
Company’s view of intrinsic value. No shares have been
bought back in the past 12 months.
Strategy and Outlook
ClearView’s strategy continues to be refined but remains
focused on being:
•
•
a highly focused challenger brand operating in profitable
segments of life insurance, wealth management and
financial advice; and
a differentiated integrated life insurance and wealth
management provider; well positioned for structural
growth with the dual convergence of superannuation and
life insurance products, and the advice and non-advice
markets.
ClearView continues to focus on the profitable market
segments and not being “all things to all people”. FY15
concludes a successful three year strategy focused on
building ClearView’s market position in the life insurance,
wealth management and financial advice markets.
Implementing a high growth strategy has to date required
an investment in a cost structure prior to the realisation
of revenue benefits with the initial phases of “J Curve”
investment now complete. Expense overruns depress initial
reported profits but should eliminate as scale is achieved,
thereby increasing underlying profits realised on the growing
in-force portfolio. We remain focused on this with expense
overruns expected to unwind over the medium term.
ClearView has now established a strong platform to drive
momentum and convert its strategic positioning into material
earnings growth. Material earnings growth is expected to
emerge in FY16 given the growth profile of the underlying
businesses and the compound nature of life insurance and
wealth management businesses. ClearView is well positioned
to gain from market disruption around life insurance reforms
with a potential stepped change in distribution profile if the
proposed reforms are implemented.
Over the past three years ClearView’s management has
developed a reputation for delivering on operational metrics
and driving growth. They have built a solid platform from
which ClearView can target 5% of the long term life insurance
profit pool , build a material wealth management business
and a high quality financial advice business providing
strategic advice to its clients.
I thank our customers, partners and shareholders for their
continued support for ClearView. I would also, of course, like
to thank all the employees and management at ClearView on
whom we depend on for our success.
The Board and management look forward to continuing to
deliver results on your behalf.
Dr Gary Weiss
Chairman
25 August 2015
5 ClearView Annual Report 2015
ClearView Wealth Limited
ClearView Wealth Limited
ClearView Annual Report 2015 6
Managing Director's Report
In 2012 ClearView outlined that it was focused on a phased
build out of its underlying businesses over a three year period.
At that time I explained that the focus was on building
ClearView into a strong challenger in the life insurance and
wealth management industries with a strategy focused on:
•
•
•
•
•
•
Targeting profitable niches. In particular, I highlighted
that ClearView was not focused on Group Life but focused
on quality adviser-led advice;
Winning clients and advisers through the quality of our
offering, not through ownership of practices. Our strategy
was based on “being a home for independent advisers”
and not trying to replicate the bancassurance model,
which I believe is fundamentally flawed due to the
inherent conflicts of interests;
Building intuitive simple platforms that suit both the
advisers and their clients; and
Working towards the convergence of superannuation and
life insurance solutions along with the convergence of
personal and general advice, otherwise known as scaled
advice.
The strategy that ClearView presented to the investment
community and our shareholders focused on how we
would execute the building out of ClearView’s advice-led life
insurance offering in FY13, ClearView’s direct life insurance
offering in FY14 and ClearView’s wealth management
offering in FY15. I highlighted that there would be significant
investment required with this building process and that it was
necessary to have patient shareholders who understood the
compounding nature of the businesses that we are building.
Now that ClearView is three years into the execution of this
strategy process, it is worth reflecting on the current position
of ClearView against its strategy and the next steps that we
will take.
Life Advice
Over the past three years, ClearView has grown from having
effectively no new business (in FY12, ClearView wrote $3.6
million of new business) to writing $34.5 million of new
life advice business in the past 12 months. ClearView has
grown its share of new business from circa 0.5% to 3.1%1
in the year ending 31 March 2015. ClearView has achieved
this impressive position in a short period of time through a
number of significant initiatives. These include:
•
Our LifeSolutions product suite has delivered innovation
and simplicity of design;
1
Source: Plan for Life (March 2015); ClearView Management Information
The product suite is supported by market-leading
underwriting and claims management support; and
ClearView has established strong relationship
management as indicated by the fact that we are equal
first amongst life insurers in 2014/15 NMG IFA Channel Life
Risk ‘Top 250 Advisers and AFSLs Programme’ for business
capability.
This process is never complete – and for a successful
challenger brand such as ClearView it is necessary to
continually adapt and change. In the past 12 months,
ClearView has continued this process through:
•
•
•
Introduction of parent cover, life cover conversion
benefits, protected commission and innovative buyback
cover features;
Continue to expand our distribution footprint inasmuch as
ClearView is on the approved product lists (APLs) of over
200 dealer groups - a clear endorsement of our strategy;
and
We continue to develop our platform to make ClearView
easy to do business with.
As I set out three years ago, there is a compounding impact
of the investments that ClearView has made over the past
three years. Shareholders are now starting to see the benefits
of this, with life insurance profit increasing by 41% over the
past 12 months. In addition, the Value of New Business
increased by 66%. This strong earnings growth reflects a
continued focus on the profitable segments of the market.
The new business sales result from Life Advice at 16% was
a step down in growth rates from prior years. However,
this growth needs to be viewed in the context of a very
difficult year for the industry – where advice-based new
sales decreased for the first time in a very long time. In
effect, ClearView maintained its significant outperformance
of growth to the market, and as the regulatory uncertainty
decreases and growth returns to the industry, ClearView
expects that absolute growth will again step up.
Our focus in the near term is to continue incremental
investment in our products and services to ensure we keep
our market leading position and growth momentum.
Direct Life
In the last year we have continued to make good progress in
our Direct life business with new business up 84% over the
last year. The business successfully launched a partnership
with Your Insure in August 2014 which is already starting
5 ClearView Annual Report 2015
ClearView Wealth Limited
ClearView Wealth Limited
ClearView Annual Report 2015 6
ClearView Annual Report 2015 6
ClearView Wealth Limited Managing Director's Report
Continued
to bear fruit. ClearView has successfully augmented our
relationship with Bupa Australia, which continues to deliver a
steady stream of good quality business.
We have also entered into a number of lead generation
arrangements which are assisting our new business growth.
In the future we will continue to evolve our Direct business
towards a scaled advice model where we can expand the
segments where we compete.
Wealth Management
In October 2014 we successfully launched our own
investment management platform. This was a huge
achievement inasmuch as it was launched for $5.4 million
(capitalised costs) in nine months. To be net flow positive
$112 million across our wealth business is indicative of its
success.
The platform is comprehensive and our WealthFoundations
product suite has a number of industry leading innovations
including the Foundation Assurance Benefit and model
portfolios using the fund of fund structure.
The model portfolios assist financial advisers by ensuring
the changes in both asset allocation and asset manager
are simultaneously managed from a client perspective.
The advantage of this approach is the client is not “out
of the market” or holding inappropriate asset allocation.
Furthermore, there is a distinct advantage for the financial
adviser as the “efficiency” of any changes to asset allocations
and/or asset managers provide substantial administrative
savings for the financial adviser when compared to traditional
methods of managing these issues. The profit of the wealth
management business fell from $5.9 million to $1.8 million
due primarily to $3.2million (after tax) investment made in
our new wealth platform and related costs.
The new wealth platform provides a very sound base for
further innovations in the segments of superannuation,
investment and retirement incomes. The next upgrade is
expected to be delivered by the end of this calendar year.
Our investment performance, both short term and long term,
on behalf of our clients, continues to be in the first or second
quartile and provides our clients, be they superannuation
members, life investment policyholders or direct investors,
security and confidence that their long term investment
needs will be met.
Regulation
As I set out above, FY15 was a difficult year for life insurance.
This was driven by a year of regulatory uncertainty. In
October 2014 ASIC released their Report 413 Review of Retail
Life Insurance Advice. This report pointed out the correlation
between high up front commissions (being greater than 100%
of the first year premiums) and poor advice as well as poor
documentation of advice. In response to this, the Financial
Services Council (FSC) and the Association of Financial
Advisers (AFA) jointly appointed a former member for APRA,
John Trowbridge, to provide an independent report on the
potential restructure of the industry.
Unfortunately this led to an environment of negative publicity
for the life insurance industry, where most of the discussion
has been on adviser remuneration and other conflicted
remuneration to both advisers and dealer groups. Advisers
as a general rule are not overpaid, as their commissions
reflect the costs of providing complex and detailed advice.
Regulating remuneration for advice risks decreasing the time
taken to provide advice and has the potential to affect the
quality of this advice.
ClearView’s general approach is that no amount of regulation
will alone drive good quality strategic advice. First and
foremost, providing good quality strategic advice starts with
the adviser mind-set, where both the dealer groups’ and
advisers’ attitude is about the welfare of the customer, and
in particular having a well articulated financial plan for the
customer. ClearView has focused on selecting advisers that
genuinely care about the best interests of their clients and are
known for their integrity. We believe that this cultural focus
is key.
A significant number of the issues in life insurance advice
that led to this regulation review have occurred within
tied distribution networks. In effect, where a bank owns
an adviser network and insists that that adviser network
only sells bank manufactured product there is inherently
conflicts of interest. It is not surprising there have been a
number of probity issues. ClearView believes that requiring
open APLs, with a requirement that advisers consider clients’
best interests would lead to a higher quality of advice and
is more important than directly regulating the pricing of
advice. Unfortunately, this has not yet been one of the
recommendations coming from the reforms.
7 ClearView Annual Report 2015
ClearView Wealth Limited Managing Director's Report
Continued
Overall, ClearView believes that the discussions around
regulatory change are generally positive but focus too much
on adviser remuneration and not enough on client choice and
client best interest. However, ClearView is supportive of:
•
•
•
•
Changes as recommended by the PJC Inquiry, headed
by Senator David Fawcett, on adviser education,
development and standards (subject to appropriate
grandfathering);
Sound commission bases need to be available to support
financial advisers’ businesses. Australian consumers
are not (yet) ready for a pure fee–for-service model for
insurance;
Except for adviser commission, the FoFA reforms should
otherwise be implemented for life insurance, for example,
the payment of volume bonuses and self space fees
should be prohibited. This would address a number of the
actual conflicted remuneration issues;
That vertically integrated companies are required to
ensure that their dealer groups have fully open APLs.
There are only 11 life insurers offering life insurance
advice-based products which is easy for a dealer group
to manage. We note that there can be more than
200 investment managers on a typical APL or on an
investment platform. So 11 life insurers should be easy!
• We support a sensible industry Code of Conduct; and
•
We broadly support the reduction in upfront commissions
as proposed by the industry and wish to also see a level
commission system that is set by the market. However,
our view is that a three year clawback of commission
liability is a step too far; a two year clawback is sufficient
and would achieve the key objectives, and is more
appropriate in our view. When all is considered, the almost
halving of upfront commissions and the doubling of the
responsibility period to two years seems a measured and
appropriate response.
The Coming Year
We are very excited by the prospects of 2016.
After a number of years of significant investment, both
financially and intellectually, ClearView is now focused on
leveraging that investment and aiming to become Australia's
best life insurance, wealth management and financial advice
business. This will, of course, require incremental investment
but we will do so from solid foundations with both a culture
and a team focused on great outcomes for our customers
and partners. For shareholders, their patience will be
rewarded with what we expect to be a material increase in
earnings in FY16.
It is an exciting time!....it is a time ClearView is purpose
built for!
ClearView continues to execute our strategy by:
•
•
•
Leveraging our position as a integrated life insurance and
wealth management company to take advantage of the
obvious convergence opportunities available from both life
insurance and superannuation;
Continuing to develop our processes and systems for
delivering high quality strategic advice to our customers
through our financial advice network;
Continuing to improve the service that we deliver to both
advisers and customers; and
• Continuing to invest in, and develop, our people.
Achievement of our objectives will be supported by the
ClearView culture and values which guide and influence
everything we do. I am proud of the ClearView team and
what we have been able to accomplish in such a short
space of time. We are well positioned for the future and I
am encouraged and excited by the opportunities to increase
shareholder value.
Simon Swanson
Managing Director
25 August 2015
ClearView Annual Report 2015 8
ClearView Wealth Limited Directors’ Report
The Directors of ClearView Wealth Limited (ClearView or the
Company) submit their report, together with the financial
report of the consolidated entity (the Group) for the year
ended 30 June 2015 (the financial year):
Gary is a member of the Audit Committee, Risk and
Compliance Committee and the Nomination and
Remuneration Committee. He was appointed to the Board on
22 October 2012 and appointed Chairman on 1 July 2013.
Directors
The following persons were Directors of ClearView during the
whole financial year and since the end of the financial year
unless otherwise noted:
• Dr Gary Weiss (Chairman)
• Andrew Sneddon
• Bruce Edwards
• David Brown
• Gary Burg
•
Jennifer Newmarch
• Michael Alscher
• Michael Lukin (Alternate to Mrs Newmarch)
• Nathanial Thomson
• Simon Swanson (Managing Director)
The biographies for the Directors of ClearView are detailed
below:
Current Directors
Andrew Sneddon BEC, CA
Independent Non-executive Director
Andrew was a Partner with PricewaterhouseCoopers for 18
years before retiring in 2008. He has worked across a broad
range of industries and has extensive experience in mergers
and acquisitions, business and strategic planning, audit,
valuation and capital raising, with particular focus on fast
growth and emerging technology companies. Andrew is the
Chairman of Fusion Payments Limited, ServiceRocket Inc,
ServiceRocket International Pty Limited, TGR BioSciences Pty
Limited, Elastagen Pty Limited and Traditional Therapy Clinics
Limited. Andrew is also a Non-Executive Director of Innate
Immunotherapeutics Limited and a member of the Audit and
Compliance Committees of the Crescent Capital Private Equity
Funds.
Andrew is a member of the Audit Committee, Risk
and Compliance Committee and the Nomination and
Remuneration Committee. Andrew was appointed an
Alternate Director on 26 March 2013. His appointment as
Alternate was revoked and he was appointed as a Director on
3 December 2013.
Dr Gary Weiss LLB (Hons), LLM and JSD
Bruce Edwards BSc, MA, FIAA
Independent Non-executive Chairman
Independent Non-executive Director
Gary has extensive international business experience and
has been involved in numerous cross-border mergers and
acquisitions. This includes an established track record in
life insurance and wealth management businesses. He is
Chairman of Ridley Corporation Limited, Executive Director
of Ariadne Australia Limited, a Director of The Straits
Trading Company Limited, Premier Investments Limited,
Pro-Pac Packaging Limited, Tag Pacific Limited and Thorney
Opportunities Limited, and an Alternate Director of Mercantile
Investment Company Limited. Gary’s previous directorships
include Guinness Peat Group plc, Westfield Group, Coats
plc (Chairman), Tower Australia Limited, Australian Wealth
Management Limited, Tyndall Australia Limited (Deputy
Chairman), Joe White Maltings Limited (Chairman), CIC
Limited, Whitlam Turnbull & Co Limited and Industrial Equity
Limited.
Bruce is a qualified actuary with over 25 years in actuarial
consulting, including five years as Managing Director of
KPMG Actuaries. In recent years, he has held directorships
with a number of life and general insurance companies, life
insurance distribution companies and superannuation fund
trustees, as well as lecturing in actuarial science at Macquarie
University. He is a director of Munich Re in Australia (life and
general reinsurance business and a direct general insurance
company). He is a Past President and active member of the
Rotary Club of Sydney.
Bruce is the Chairman of the Audit Committee, Risk
and Compliance Committee and the Nomination and
Remuneration Committee. He was appointed to the Board on
22 October 2012.
9 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
David Brown BCom, MSc, Dip Inv, Dip Mktg, ASIP, MAICD,
F Fin
Jenny also worked for Watson Wyatt Worldwide in Madrid
and Manchester.
Independent Non-executive Director
David has significant experience in investment management
and asset allocation of superannuation and insurance funds.
He is the Chief Investment Officer of PacWealth Capital Pty
Ltd, the former Head of Private Markets for Victorian Funds
Management Corporation and former Senior Funds Manager
for Queensland Investment Corporation. David is a former
director of LifeHealthcare Pty Limited and a former Council
Member of the Australian Private Equity and Venture Capital
Association Pty Limited.
David is a member of the Audit Committee and the Risk and
Compliance Committee. He was appointed to the Board on 22
October 2012.
Gary Burg BACC (Wits), MBA (Wits)
Independent Non-executive Director
Gary has significant experience in building life insurance
businesses in South Africa and in Australia. Gary is a director
of Your Insure Pty Limited and Global Capital Holdings
(Australia) Pty Limited, a company which manages Principal
Investments on behalf of various investors. He is a former
director of (and investor in) 3Q Holdings Limited and South
African listed Capital Alliance Holdings Limited (which
owned Capital Alliance Life Limited and Capital Alliance
Bank Limited). Gary is also a former director and investor in
a number of Australian based financial services businesses,
including Prefsure Life Limited and Insurance Line Holdings
Pty Limited.
Gary was appointed to the Board on 22 October 2012.
Jennifer Newmarch BSc (Maths) (Hons), FIA
Non-executive Director
Jenny is an Investment Director with ROC Partners Pty
Limited. Previously, Jenny was a Senior Vice President based
in Macquarie Funds Group’s Private Markets team, responsible
for managing Australian private equity programs on behalf
of institutional investors. Prior to this, she spent two years
as an Investment Analyst at Mercer Consulting in the UK
where she completed her actuarial qualification and focussed
on providing advice in asset liability modelling, investment
strategy and manager selection to UK pension funds.
Jenny received a Bachelor of Science majoring in
mathematics with Honours from Imperial College London and
is a Fellow of the UK Institute of Actuaries.
Jenny was appointed to the Board on 1 July 2013.
Michael Alscher BCom
Non-executive Director
Michael is the Managing Partner and founder of Crescent
Capital Partners Management Pty Ltd (Crescent).
Prior to founding Crescent, Michael was a consultant at
Bain International and the LEK Partnership where he spent
considerable time working across banking and insurance
clients. After leaving consulting, Michael was the Chief
Operating Officer and a Director of Gowings Bros Limited.
Michael is a Director of Metro Performance Glass Limited,
National Dental Care Pty Limited, Crumpler Pty Limited
and GroundProbe HoldCo. Pty Limited. He is also a former
Chairman and Director of Cover-More Group Limited, and a
former Director of LifeHealthCare Group Limited.
Michael was appointed Alternate Director to Nathanial
Thomson on 22 October 2012. His appointment as
Alternate was revoked and he was appointed as a Director
on 1 July 2013.
Michael Lukin BSc (AppMaths) (Hons), CFA, AIAA
Alternate Non-executive Director
Michael is a Partner and Director of ROC Partners Pty
Limited. Prior to this Michael was the Managing Director
of the Macquarie Investment Management Private Market
business in Sydney. Michael has 18 years of private equities
investment experience and serves on the advisory boards
of five Australian private equity fund managers, and is a
current AVCAL Council member. He is a Chartered Financial
Analyst (CFA) and an Associate of the Institute of Actuaries
of Australia. Before joining Macquarie, Michael was an asset
consultant with Towers Perrin, providing advice on investment
matters and manager selection to superannuation funds
and master trust clients. Michael is also a Director of Baycorp
Holdings Pty Limited, National Dental Care Pty Limited and
Space-Time Research Pty Limited.
Michael was appointed Alternate Director to Jennifer
Newmarch on 1 July 2013.
ClearView Annual Report 2015 10
ClearView Wealth Limited Directors’ Report
Continued
Nathanial Thomson BCom (Hons), LLB (Hons)
Non-executive Director
Nathanial is a Partner of Crescent Capital Partners
Management Pty Limited. Nathanial has significant consulting
experience for financial institutions at McKinsey & Co.
He is the former deputy Chairman of Cover-More Group
Limited prior to its listing on the ASX, a leading broker of
travel insurance in Australia and former director of Metro
Performance Glass Limited prior to its listing on the ASX.
Nathanial is a member of the Nomination and Remuneration
Committee and was a member of the Audit, Risk and
Compliance Committee up until 30 June 2014. He was
appointed to the Board on 22 October 2012.
Simon Swanson BEC, BBus, ANZIIF (Fellow), CIP, CPA
Managing Director
Simon is an internationally experienced financial services
executive having worked for over 35 years across life
insurance, funds management, general insurance and health
insurance. He has successfully led the largest life insurer
(CommInsure, Sovereign and Colonial) in three countries and
spent half of his career in the Asia Pacific region.
Simon is a former Chairman of ANZIIF’s Life, Health and
Retirement Income Faculty Advisory Board and former
director of the Australian Literacy and Numeracy Foundation.
Simon was effectively the founder of ClearView in its current
form and was appointed as Managing Director on 26 March
2010.
11 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
Directorships of other Listed Companies
Directorships of other listed companies held by Directors in the three years preceding the end of the financial year are as
follows:
Name
Company
Period of Directorship
Dr Gary Weiss
Ariadne Australia Limited
Mercantile Investment Company Limited
Premier Investments Limited
Pro-Pac Packaging Limited
Ridley Corporation Limited
Tag Pacific Limited
Thorney Opportunities Limited
The Straits Trading Company (Listed on the Singapore
Exchange)
28 November 1989 – ongoing
Non-executive Director 6 March 2012 - 25
February 2015
Alternate Director 25 February 2015 - ongoing
11 March 1994 – ongoing
28 May 2012 – ongoing
21 June 2010 – ongoing
1 October 1988 – ongoing
21 November 2013 – ongoing
1 June 2014 – ongoing
Andrew Sneddon
Innate Immunotherapeutics Limited
19 September 2013 - Ongoing
Gary Burg
3Q Holdings Limited (delisted 12/2/2013)
29 March 2012 – 11 September 2013
Michael Alscher
Cover-More Group Limited
LifeHealthCare Group Limited
Metro Performance Glass Limited
14 November 2013 - 30 April 2015
8 November 2013 - 25 February 2015
31 March 2015 - Ongoing
Company Secretaries
Chris Robson BA, LLB (Hons), LLM was appointed Company
Secretary on 4 April 2011. He is also General Counsel at
ClearView. Chris has over 20 years’ experience in the financial
services industry. Prior to joining ClearView, Chris was General
Counsel and Group Company Secretary for Challenger Limited.
Chris previously held legal roles in the financial services
industry, as well as in the public sector and private practice.
He is a member of the Law Society of NSW and the Society of
Notaries of NSW.
Athol Chiert, BCOM, BACC, CA was appointed Company
Secretary on 4 November 2008. He is also the Chief Financial
Officer at ClearView. Athol has a life insurance and private
equity background. He was previously the CFO of PrefSure
Holdings Limited and PrefSure Life Limited and also served
as a director and executive of the Global Capital Group
both in Australia and South Africa. Athol has over 15
years’ experience in the finance industry including holding
directorships on investee and subsidiary entities. Athol
commenced his professional career as an accountant with
Arthur Andersen.
Appointed Actuary of ClearView Life
Assurance Limited
Ashutosh Bhalerao B.Ec, FIAA is the Appointed Actuary of
ClearView Life Assurance Limited (ClearView Life). Ash joined
ClearView as Deputy Appointed Actuary in January 2014
and was appointed to his current role on 5 June 2014. Ash
has 20 years’ experience in the financial services industry,
specialising in life insurance. In the five years prior to joining
ClearView, Ash was the Appointed Actuary for Swiss Re
Life & Health Australia Limited. Ash has also held other
senior actuarial roles with TAL Limited, Challenger Limited
and AMP Limited and has a wide range of experience in,
financial management and reporting, product pricing, capital
management, asset-liability management, risk management
and reinsurance.
Chief Risk Officer
Greg Martin B.A, FIAA, FFIN, FAICD, CERA Greg is the Chief
Actuary and Chief Risk Officer of ClearView. He was the
Appointed Actuary of ClearView Life from 1 March 2011 until
his resignation from the role on 5 June 2014. Greg has over
25 years’ experience specialising in life insurance and funds
management and has held a number of other Appointed
Actuary roles during his career. Greg has fellowships with
the Institute of Actuaries of Australia, FINSIA and the AICD,
ClearView Annual Report 2015 12
ClearView Wealth Limited Directors’ Report
Continued
and is a Chartered Enterprise Risk Actuary. He was a member of the Life Insurance Actuarial Standards Board, a member of
two advisory panels to the Australian Accounting Standards Board and a member of multiple committees of the Institute of
Actuaries of Australia. Greg has a wealth of experience in the areas of risk and capital management, financial management
and reporting, and product pricing and management
Meetings of Directors
The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30
June 2015, and the numbers of meetings attended by each Director were as follows:
Board
Audit, Risk and
Compliance
Committee1 Audit Committee2
Risk and
Compliance
Committee3
Nomination and
Remuneration
Committee
Eligible
Eligible
Eligible
Eligible
Eligible
to Attend
Attended
to Attend
Attended
to Attend
Attended
to Attend
Attended
to Attend
Attended
Dr Gary Weiss
Andrew Sneddon
Bruce Edwards
David Brown
Gary Burg
Jennifer Newmarch4
Michael Alscher
Nathanial Thomson
Simon Swanson
10
10
10
10
10
10
10
10
10
9
9
9
9
10
10
6
9
10
3
3
3
3
-
-
-
-
-
3
3
3
3
-
-
-
-
-
3
3
3
3
-
-
-
-
-
3
2
3
3
-
-
-
-
-
3
3
3
3
-
-
-
-
-
3
2
3
3
-
-
-
-
-
5
5
5
-
-
-
-
5
-
5
4
5
-
-
-
-
5
-
1
2
3
4
From 1 July 2014 to 31 December 2014.
From 1 January 2015 to 30 June 2015.
From 1 January 2015 to 30 June 2015.
Mrs Newmarch appointed Mr Michael Lukin as her alternate director on 1 July 2013. Mr Lukin attended 3 Board meetings on behalf of Mrs Newmarch and his
attendance is included in the table above.
13 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
Directors’ Shareholdings
The following table sets out each Director’s relevant interest in shares and rights or options in shares of the Company or a
related body corporate as at the date of this report.
Director
Dr Gary Weiss2
Andrew Sneddon
Bruce Edwards
David Brown
Gary Burg
Jennifer Newmarch3
Michael Alscher1
Michael Lukin3
Nathanial Thomson1
Simon Swanson
Fully paid ordinary shares
Executive share plan shares
-
111,041
524,151
-
9,943,259
-
-
-
-
-
-
-
-
-
-
-
-
-
3,186,043
10,000,000
1 Mr Alscher and Mr Thomson represent the interests of CCP Bidco Pty Limited and its Associates that non-beneficially hold 310,076,859 shares.
2 Dr Weiss is an Executive Director of Ariadne Australia Limited which holds 25,450,635 shares.
3 Mrs Newmarch (alternate Mr Lukin) represents the interests of Macquarie Investment Management Limited that non-beneficially holds 62,447,883 shares.
Shares Issued Under the Executive Share Plan (ESP)
As at the date of this report, ClearView has a total of 61,158,120 ESP shares on issue of which 32,854,246 have been issued
to select financial advisers. As outlined in the Operating and Financial Review, recruitment of financial advisers represents a
significant growth opportunity for ClearView in both the life insurance and wealth management segments. In addition to being
one of the few non-bank aligned participants in the market, the Group has to date been able to offer such financial advisers the
opportunity to participate in the overall performance of ClearView through share ownership in the Company.
In November 2011, the ESP Rules were extended to allow financial advisers to participate in the Plan (as Contractor
Participants). From February 2013, the Board removed the previously stated cap on the issue of shares under the ESP. While
there is now not a set limit on the number of shares that may be issued under the ESP, the Board or Board Authorised
Delegates approve the issue of new ESP shares and monitors the overall quantum of ESP shares on issue, relative to the
interests of existing shareholders and the overall objectives of the business.
In accordance with the provisions of the ESP, during the financial year 9,493,682 shares were granted to senior management
and financial advisers with the grant dates set out below. Allowing for the exercise and reallocation of forfeited ESP shares, the
net increase in ESP shares issued were 8,989,682.
ClearView Annual Report 2015 14
ClearView Wealth Limited Directors’ Report
Continued
Series
Opening Balance (1 July 2014)
Series 43
Series 44
Series 45
Series 46
Series 47
Series 48
Participant
Grant Date
No. of Shares
Issued
No. of Shares
Reallocated
No. of Shares
Total
Senior Management
26-Nov-14
Senior Management
26-Nov-14
Senior Management
26-Nov-14
Senior Management
30-Mar-15
Senior Management
30-Mar-15
Senior Management
30-Mar-15
81,518
81,518
81,518
107,001
107,000
107,000
100,000
100,000
100,000
34,666
34,667
34,667
49,381,666
181,518
181,518
181,518
141,667
141,667
141,667
Total (Senior Management)
565,555
404,000
969,555
Series 42
Series 44
Series 47
Contractor Participant
9-Jul-14
4,560,760
Contractor Participant
26-Nov-14
2,413,367
Contractor Participant
30-Mar-15
1,550,000
Total (Contractor Participant)
8,524,127
-
-
-
-
4,560,760
2,413,367
1,550,000
8,524,127
Forfeited
Reallocated
Exercised
-
-
-
(104,000)
(104,000)
(300,000)
(300,000)
(100,000)
(100,000)
Closing Balance (30 June 2015)
9,089,682
-
58,371,348
Series 49
Series 50
Reallocated
Contractor Participant
30-Jul-15
2,709,452
300,000
3,009,452
Senior Management
30-Jul-15
77,320
-
77,320
-
(300,000)
(300,000)
11,876,454
-
61,158,120
Closing Balance (25 August 2015)
For details of the Plan see Note 29 of the notes to the financial statements.
Indemnification of Directors and Officers
During the period, the Company purchased Directors and Officers Liability Insurance to provide cover in respect of claims made
against the Directors’ and Officers’ in office during the financial period and as at the date of this report, as far as is allowable by
the Corporations Act 2001.
The total amount of insurance premium paid and the nature of the liability cover provided are not disclosed due to a
confidentiality clause within the contract.
As at the date of this report, no amounts have been claimed or paid in respect of this indemnity and insurance, other than
the premium referred to above. Directors’ and Officers’ Liability Insurance contributed a proportion of the total professional
indemnity insurance premium.
The Company has not, during or since the financial period, indemnified or agreed to indemnify the auditor of the Company
against a liability incurred as an auditor.
Rounding of amounts
The Company is of a kind referred to in ASIC Class Order 98/0100 dated 10 July 1998 and in accordance with that Class Order
amounts in this report, and the financial report, have been rounded off to the nearest thousand dollars.
Auditor independence and non-audit services
The Directors have received an independence declaration from the auditors, a copy of which is on page 58.
15 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in
Note 10 to the financial statements.
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm
on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act
2001.
The Directors are of the opinion that the services as disclosed in Note 10 to the financial statements do not compromise the
external auditor’s independence, based on advice received from the Audit Committee, for the following reasons:
•
•
All non-audit services comply with the ClearView audit independence policy and have been reviewed and approved to
ensure that they do not impact the integrity and objectivity of the auditor; and
None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct
APES 110 “Code of Ethics for Professional Accountants” issued by the Accounting Professional & Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the
Company, acting as advocate for the Company or jointly sharing economic risks and reward.
Annual Corporate Governance Statement
ClearView is committed to achieving high corporate governance standards. As provided for in the ASX Corporate Governance
Council’s Principles and Recommendations, ClearView will now publish its Board approved Corporate Governance Statement on
its website rather than in its Annual Report. The ClearView 2015 Corporate Governance Statement may be viewed at
www.clearview.com.au/page/shareholders/corporate-governance.
ClearView Annual Report 2015 16
ClearView Wealth Limited Directors’ Report
Continued
Operating and Financial Review
Principal activities
ClearView is an Australian financial services company
with businesses that specialise in life insurance, wealth
management and financial advice solutions.
Operating and Financial Review
This operating and financial review report, which forms part of
the Directors’ Report, sets out information about the Group for
the financial year ended 30 June 2015.
ClearView Business
ClearView in its current form was created in June 2010 and
has subsequent to its formation, launched new modern,
customer focused and market leading products into the
advised life insurance and wealth management markets since
late 2011. These new products have experienced substantial
growth in sales both through the ClearView dealer group
but also, and significantly, via the third party independent
financial adviser market.
FY15 concludes a successful three year strategy focused on
building ClearView's positioning in the life insurance, wealth
management and financial advice markets.
ClearView continues to position itself as a highly focused
challenger brand operating in specific profitable segments.
ClearView is implementing a high growth strategy with the
goal of attaining 3%-5% of the long term life insurance profit
pool, building a material wealth management business and a
high quality financial advice business.
ClearView generates its revenue through the provision and
distribution of life insurance, superannuation and investment
products, and through the provisions of financial advice and
support services to financial advisers. The markets in which
ClearView competes are highly regulated. ClearView holds, via
its operating subsidiaries, an APRA life insurance licence, an
APRA registrable superannuation entity licence, an ASIC funds
manager responsible entity licence and two ASIC financial
adviser licences. In addition, the Company is regulated by
APRA as a Non Operating Holding Company (NOHC) under the
Life Insurance Act 1995.
The Group operates three business segments: Life Insurance,
Wealth Management and Financial Advice.
1
Source: Plan for Life (March 2015); ClearView Management Information
17 ClearView Annual Report 2015
Life Insurance
ClearView creates products that compete in both the Advised
and Non-Advice (Direct) segments of the $14.3 billion
Australian life (risk) insurance market1. ClearView competes
in a subset of this broader market and in particular in the
individual risk market (excluding group life) that is $8.6 billion1
or approximately 60%1 of the total market.
The Australian life (risk) insurance market is arguably
“over-consolidated” with significant positions from larger
institutions (particularly bank owned). The top five insurers
control approximately 67% of the individual life insurance
market1. These larger institutions often have legacy issues
including multiple administration platforms and older, higher
margin in-force portfolios (partly driven by acquisitions). This
creates opportunities for a challenger such as ClearView
which is positioning itself as a disruptor in the retail life
insurance market.
While life insurance risk in-force premiums have grown at
around 10% for a sustained period of time, growth in the
individual market has slowed in more recent times, with the
March 2015 industry statistics1 reflecting reduced growth
rates, below the 10 year industry average. These growth
fundamentals across the broader market appear to be
challenging the industry as structural changes to adviser
remuneration and the related life insurance reforms are
gradually embraced. The more recent premium growth in the
group life market is reflective of the corrective price action
taken by industry participants. In the individual market, there
have also been some increased pricing on income protection
products to better align back book and front book prices at
the potential expense of lower growth for some players. This
will be positive for the long term sustainability of the industry.
Price increases are having an impact on in-force retail
premiums. However, the underlying industry profitability
growth has remained subdued, in particular with losses being
reported in the income protection market and from recent
lapse experience. ClearView, as a focused challenger, with no
back book, has outperformed the market and avoided these
issues to date.
As at 30 June 2015, ClearView has total in-force life insurance
premium of $115.7 million (+32%) and during the FY15
financial year generated new business premium of $34.5
million (+26%). These represent significant increases over the
prior year. ClearView currently has a circa 1.3%1 market share
of in-force premium but a 3.1%1 share of new business in
the individual life insurance market and is therefore growing
substantially faster than system.
ClearView Wealth Limited Directors’ Report
Continued
The following graphs reflect the step change in the growth
profile of ClearView’s life insurance business:
The following graph reflects the movement in in-force
premium from $87.5 million to $115.7 million over the
financial year:
New Business Written
YTD In-force Movement
$m
40
35
30
25
20
15
10
5
0
Reinvestment in Direct Life
34.5
27.5
8 8 % pa
3 yr C A G R
19.4
Launch of
LifeSolutions
5.2
2.0
1.7
2010 2011 2012 2013 2014 2015
$m
140
120
100
80
60
40
20
0
34.5
115.7
15.1
8.8
87.5
Opening
CPI/Age
New Business
Lapses
Closing
115.7
The growth of in-force premium has been driven by the strong
new business growth (as noted earlier), with lapses partially
offset by age based premium increases and inflation (“CPI”)
increases on insurance benefits.
87.5
(a) Advised Life Insurance
In-force Premium
%
p a
G R
3 8
3 yr C A
62.1
41.0
41.0 44.1
$m
120
100
80
60
40
20
0
2010 2011 2012 2013 2014 2015
The Advised Life market has been challenged in more recent
times given the proposed structural changes to commission
models and the related implications on adviser remuneration.
The Australian Securities and Investments Commission
(ASIC) issued Report 413 Review of Retail Life Insurance
Advice (2014) that identified unacceptable levels of poor
quality advice, and a strong correlation between high upfront
commissions and poor consumer outcomes. This solicited an
industry response that led to announcement by the Assistant
Treasurer in June 2015, supporting the industry proposals.
As outlined in the announcement these proposals are
intended to improve the quality of advice as a result of a
better alignment of interests, more product choice and
enhanced competition. The proposals have the potential to be
the most significant reforms to the retail life insurance sector
since the Wallis Inquiry recommendations were implemented
in 2001.
ClearView Annual Report 2015 18
ClearView Wealth Limited Directors’ Report
Continued
The following table outlines the proposed reforms, observations and potential impacts if these are implemented as proposed:
Retail Life Industry Proposal
Observations
Adviser remuneration arrangements
•
Limits on upfront remuneration arrangements
from 1 January 2016 with transitional
arrangements;
•
•
•
Maximum upfront commission of 80% from
1 January 2016, reducing to 60% by 1 July
2018;
Maximum ongoing commission of 20% in all
subsequent years from 1 January 2016;
Three year clawback of commissions; 100% in
Yr 1, 60% in Yr 2 and 30% in Yr 3;
•
Reviewed by government by end of 2018.
Quality of advice and insurer practices
•
•
•
‘Open architecture’ approach to APLs; shelf
space payments to AFSLs to get products on
APL also needs consideration/ removal;
Government to consider measures to widen
APLs by 1 July 2016;
Life Insurance Code of Conduct to be
developed by 1 July 2016; best practice
standards for insurers.
•
•
•
•
•
•
•
•
Impacts on funding of adviser
businesses and potentially practice
values in near term;
Need to support advisers that have an
unaffordable capital strain;
Improves upfront capital strain to life
insurer, increased return on equity
(albeit potentially lower profit margins);
Unlikely to result in reduced premiums
to consumer;
Impacts on direct life insurance
unclear.
APLs can be limited to a small number
of products;
Opening of APLs and removal of shelf
space fees maximises choice available
to clients; best interest duty;
Vertically integrated providers should
be required to have 100% open APLs to
remove potential conflicts of interests.
ClearView
Impact
Industry
Impact
✔
✔
BUT
considering
how best
to support
advisers with
unaffordable
capital strain
✔ ✔ ✔
+/_
Licensee (AFSLs) remuneration arrangements
•
•
•
Volume based payments/ rebates (also linked
to lapse/ persistency bonuses) to be banned
from 1 July 2016;
Appropriate grandfathering to be consistent
with FOFA laws.
Enforcement, Monitoring and Efficiency
•
•
•
Ongoing reporting of policy replacement data
to ASIC from 1 January 2016;
ASIC review of SOAs to make disclosure
simpler and more effective;
Rationalisation of legacy products consistent
with FSI recommendation.
Removal of these payments coupled
with the adverse impacts on dealer
splits from reduction in upfront
commissions impacts on the financial
viability of dealer groups and ability to
provide support service
•
•
Complexity in simplifying SOAs given
increased compliance obligations (best
interests duty etc);
Legacy products can include complex
guarantees; historical product designs
did not allow flexibility in products.
✔
+/_
✔
✔
Industry has proposed to work with the Government to
implement these reforms. The Government has stated that
it will consider the industry’s proposals in the context of
its response to the Financial System Inquiry. Should these
reforms proceed, the Government will ensure that there is
appropriate monitoring of consumer outcomes – including
the impact of the reforms on the cost of premiums. Whilst
the regulatory uncertainty is creating short term challenges,
ClearView with its unique positioning has continued to grow
and remains well placed to benefit longer term.
The Advised Life market segment comprises life insurance
products placed by financial advisers. The ClearView product
suite, branded LifeSolutions, was launched in December 2011
and is a high quality advice based product suite, providing
top quartile benefits and terms at market competitive prices.
LifeSolutions includes term life, permanent disability, trauma
19 ClearView Annual Report 2015
ClearView Wealth Limited
Directors’ Report
Continued
and critical illness benefits, child cover, parent cover, income
protection and business expense cover. Policies can be issued
directly from ClearView Life or via the ClearView Retirement
Plan (the ClearView superannuation fund).
In the first half of FY15, ClearView implemented a
LifeSolutions product upgrade to further improve the product
features and offering. The near term strategy is to build on
this success by continuing to invest in technology to support
the portfolio’s growth and drive back office efficiencies,
upgrade adviser interaction and to introduce further product
improvements and innovations over time.
The following graphs reflect the step change in the growth
profile of LifeSolutions since launch in December 2011:
New Business Written
$m
30
25
20
15
10
5
0
27.5
23.6
16.9
3.7
-
-
2010 2011 2012 2013 2014 2015
In-force Premium
$m
100
80
60
40
20
0
71.0
45.2
21.0
3.8
2010 2011 2012 2013 2014 2015
LifeSolutions has continued to strongly outperform the
market with new business increasing to $27.5 million for
the year ended 30 June 2015 (+16% over the prior year).
LifeSolutions in-force premium is $71 million as at 30 June
2015 (+57% over the prior year), and now represents 61% of
ClearView’s total life insurance in-force book.
ClearView has 221 financial advisers (including 82 Matrix
advisers) many of whom provide life insurance products
to their clients (including LifeSolutions). ClearView’s life
insurance products are also placed across Australia through
third party dealer groups (providing ClearView access to a
broad base of financial advisers), with LifeSolutions products
being included on 206 Approved Product Lists as at 30 June
2015. ClearView’s appeal to the independent adviser market
is summarised as follows:
•
•
•
Compelling product offer (top quartile rated by research
houses);
Non-institutionally owned, leading advocate for the
independent financial adviser;
Stability of pricing, single pricing series (lack of legacy
issues);
• Protected income on commissions;
• Agile - ability to respond quickly to change; and
• Accessible Senior Management Team and Board.
ClearView's opportunities for further growth in the Advised
Life market include the following:
•
•
Potential open architecture of Life APL’s for all licensees
(potential life insurance industry reforms). Regulatory
changes can create a stepped change in distribution
profile if certain changes are implemented – the final
position on some of these are yet to be resolved; and
Opportunity to become a preferred retail life manufacturer
by focusing on innovation and adaptation in light of the
potential industry changes.
(b) Non-Advice (Direct) Life Insurance
The Non-Advice (Direct) Life market segment encompasses
products that are purchased directly by consumers. This can
include life insurance products sold through direct marketing,
telemarketing, call centre referrals or online.
ClearView has an exclusive distribution agreement with Bupa
Australia, Australia’s second largest private health insurer.
This allows ClearView to distribute Non-Advice (Direct) Life
products to the Bupa Australia customer base and remains
a core component of the Non-Advice strategy. ClearView
ClearView Annual Report 2015 20
ClearView Wealth Limited Directors’ Report
Continued
also has distribution agreements with a number of credit
unions, as well as third party distribution partners under an
outsourced model (lead generation sources).
noting that it takes time to run off given age based and CPI
premium increases. The following graphs reflect the change
in the growth profile of the Non-Advice product suite:
ClearView intends focusing more, in the medium term,
on the mid market segment of the Non-Advice (Direct)
Life market given the potential dual convergence of
superannuation and life insurance products coupled with
the potential convergence of the advised and non advised
markets over time. This is being driven by:
•
•
tax efficiency, regulatory reforms and more common
capital/governance requirements; and
consumer driven forces that are re-shaping the industry,
for example, digitisation and the rise of self-directed
consumers.
ClearView has the ability to use its market positioning,
challenger brand and the regulatory licences to take
advantage of the dual convergence.
ClearView commenced investing in revitalising its Non-Advice
insurance business in FY14 with a longer term view aligned
to the strategic outcomes outlined above. This investment
included recruiting a new direct team and a refocused direct
distribution approach. A new call centre was established in
Parramatta, and capacity has been expanded in line with the
growth in volumes. This has resulted in some short term cost
base impacts, which are being incurred with the objective of
creating shareholder value in the medium term.
Non-Advice life insurance new business increased to $7
million (+84% yoy) for the year ended 30 June 2015, albeit
with an intentional slow down in growth in 2H FY15 given
certain retention initiatives that are underway. In-force
premium in the new Non-Advice book increased to $9.6
million as at 30 June 2015, reflecting year on year growth
of 73%.
ClearView acquired a profitable in-force Non-Advice portfolio
(circa $41 million) in June 2010 with strong cash flow
generation (from its predecessors of NRMA Life and MBF
Life). The in-force portfolio had no intermediated business
or exposure to group life or pre global financial crisis income
protection policies. ClearView refers to this block of business
as the “Old Book". The Old Book is largely closed to new
business (minor sales and policy increases only) and its
strong cash flow generation (including the recovery of prior
acquisition costs incurred to acquire the in-force book) is
being invested in growth by partly funding the strong growth
in the new products’ life insurance new business premium
being written. As at 30 June 2015, the Old Book’s in-force
premium was $35.1 million. This is a 4% decline year on year;
21 ClearView Annual Report 2015
New Business Written
8
7
6
5
4
3
2
1
0
7.0
3.8
2.5
1.6
0.4
-
2010 2011 2012 2013 2014 2015
In-force Premium
41.0
41.0
41.3
2.2
41.0
2.9
42.3
5.6
44.8
9.6
41.0
41.0
39.1
38.2
36.8
35.1
50
40
30
20
10
0
$m
2010
2011
2012
2013
2014
2015
Old Book
Non-Advice
The near term strategy is to consolidate the Non-Advice
business (and the investment made to date) with a focus
on retention coupled with servicing and accessing its key
strategic partners to increase customer penetration.
The strong growth in new business volumes in FY15 was
offset by lapse losses incurred on new direct business written
ClearView Wealth Limited Directors’ Report
Continued
via the warm lead referral channel resulting in adverse
lapse experience in these channels. Therefore, there was
an intentional slow down in new business volume growth
in 2H FY15 to align with retention strategies and system
enhancements. These initiatives are expected to be fully
implemented in 1H FY16.
ClearView entered into a new partnership and funding
arrangement with Your Insure Pty Limited (Your Insure)
with a total funding commitment of $3.3 million by way of
a Convertible Note (CN) on a draw down basis (based on
the achievement of predetermined KPIs) to fund the Your
Insure business that is start up in nature. ClearView has an
option to convert the CN into 50% equity (by 30 June 2019)
once the Your Insure business has become self funding. Your
Insure commenced operations in August 2014, with $1.7
million being drawn down as at 30 June 2015. In the year to
30 June 2015, Your Insure achieved new business volumes
of $1.7 million. ClearView continues to closely monitor
its progress including retention given the current lower
socio demographics of its customer base. From a strategic
perspective, Your Insure expands ClearView’s market reach by
its participation in the lower market demographic segment of
the Non-Advice market.
Key priorities for FY16 include the following:
•
•
•
•
Focus on retention in the warm lead referral channels
with the further build out of the retention team and
implementation of system enhancements;
Gain further traction with strategic partners to increase
customer penetration;
Product enhancements and development with related
investment in systems; and
Increased focus on scaled advice opportunities
including the convergence of life insurance and wealth
management products.
Wealth Management
Total industry retail funds under management (FUM)
increased to circa $736 billion1 as at 31 March 2015, up 14%
over the prior year, driven primarily by improved market
conditions. Retail FUM has grown at an average rate of circa
10%1 per annum over the past six years since the March
2009 trough (global financial crisis). Following a period of
consolidation, there is market concentration in that a small
number of key participants control the majority of retail FUM,
with the top five players (the four major banks and AMP)
controlling around 73%1 of the retail market.
1
Source: Plan for Life (March 2015); ClearView Management Information
There has also been a shift in the market dynamics over time
with the bundled fee product arrangements changing to open
architecture fee structures offered by wrap platforms and
the like. The unbundling of fee structures has predominantly
related to the choice of investment manager, outsourcing
of administrative functions (including white labelling) and
distribution. This, together with the cost spotlight on the
industry (including significant regulatory reforms), has
resulted in margin pressure across the wealth value chain.
Fee and margin pressure is likely to continue across the
industry given the following:
•
•
•
•
•
•
Heightened consumer awareness of the costs inherent in
historic fee structures;
Price competition across the whole wealth management
sector;
Regulatory changes including the introduction of MySuper
products for all default balances and potential responses
to the Financial Services Inquiry;
Potential emergence of lower cost providers going direct
to market;
Lower margins associated with the search for yield and
capital preservation by investors (cash and fixed interest
securities); and
Super account consolidation that will lead to the
elimination of per account fees on multiple accounts and
lower fee rates on the primary account.
ClearView provides wealth management products via four
primary avenues:
•
•
Master Trust - Life investment contracts issued by
ClearView Life. Products include ordinary savings,
superannuation and allocated pension products, with the
latter two provided via the ClearView Retirement Plan.
These continue to operate under a bundled fee structure;
WealthSolutions - A superannuation and retirement
income wrap (issued via the ClearView Retirement Plan)
and an Investor Directed Portfolio Service (IDPS). This
is offered via the WealthSolutions platform which was
launched in December 2011. WealthSolutions includes a
menu of approximately 250 investment funds, ASX listed
shares, term deposits and seven ClearView managed
funds. It also provides a number of model portfolios
managed by ClearView for superannuation investors;
•
WealthFoundations - Life investment contracts issued
by ClearView Life. Products include superannuation and
allocated pension products, issued via the ClearView
ClearView Annual Report 2015 22
ClearView Wealth Limited Directors’ Report
Continued
Retirement Plan. This is offered via the WealthFoundations
platform which was launched in October 2014.
WealthFoundations includes a menu of 16 investment
options with transparency provided to the customer who
can see through to the underlying fund managers; and
•
Managed Investment Schemes (MIS) - Products are
issued via ClearView Financial Management Limited
(CFML) as the ASIC licensed Responsible Entity and include
MIS products available on ClearView’s WealthSolutions
platform.
ClearView’s products have historically competed in the
master trust and wrap segments of the retail market. A
master trust is an administrative service that typically enables
customers to hold a portfolio of different investments that
the customer selects from the master trust menu. A wrap is
similar to a master trust, but it typically allows the customer
to hold a broader variety of investments, such as listed shares
and term deposits, and operates through a “cash hub”.
Given the potential margin compression and bundled
fee structure, the ClearView Master Trust product fee
arrangements are not considered sustainable on new flows in
the future. These accounts are gradually rolling off given that
the product is not actively marketed to new members and
that there is a large component of the book in the pension
phase. The WealthSolutions product is aimed at higher
end wrap clients (>$250K investable funds) and therefore
addresses the higher end, wrap segment of the retail market.
The recently launched WealthFoundations product is aimed
at smaller account balances integrated with a life insurance
cross sell opportunity. Key principles of the product design
and launch of WealthFoundations have been the following:
•
•
Manager branded, but non-complex, investment option
building blocks;
Some innovation and differentiation: positioning, pricing
and adviser supporting features;
• Straightforward, easy to understand in-built fee structure;
• Competitive pricing;
•
Leverage the LifeSolutions product (life insurance cross
sell) and ClearView and Matrix dealer group distribution;
and
• Speed to market.
It is important to note that WealthFoundations leverages
off both the life insurance cross sell opportunity as well
as the regulatory structure within ClearView. This allows
the new wealth product to include some innovation and
differentiation. WealthSolutions will undergo a product
23 ClearView Annual Report 2015
upgrade and enhancement in FY16 to further support the
adviser base. The following diagram reflects the market
positioning of WealthSolutions and WealthFoundations:
Wealth Products:
WealthSolutions and WealthFoundations
WealthSolutions
Extensive investment options
including direct shares
Tax parcelling
Wholesale funds
l
e
c
n
a
a
b
t
n
u
o
c
c
A
WealthFoundations
Easy Choice investments
Actively managed by Trustee
Bundled Fees
Investor sophistication/adviser active management
Implementing a new compliant and functional wealth
platform (to host both WealthFoundations and once
migrated, the Master Trust and MIS products) has been a
key strategic priority and required material investment in the
wealth management business in FY15. There has historically
been significant investment made in life insurance with the
related growth that has followed, but given the potential
convergence of life insurance and wealth management, and
in line with its integrated strategy, ClearView has launched
its new platform and WealthFoundations in FY15. Capitalised
costs associated with the launch of both the new platform
and WealthFoundations are $5.4 million as at 30 June 2015,
with the write off of the amortised software over four years
having commenced in October 2014.
The new platform will also administer the Master Trust
and MIS products after their migration (over time) that
is anticipated to create operational efficiencies once
implemented. The project to migrate the administration
of the Master Trust and MIS products was deferred in
FY15 in order to both reprioritise and bring forward some
other development projects, as well as to reduce the
overall expected costs and impacts of the migration when
implemented.
The nature of a wealth management business is such that
any upfront investments is made ahead of earnings and given
that these costs are “non-deferrable” under the accounting
standards this had a material adverse impact of $3.2 million
on UNPAT in FY15. This effectively reflects the third phase
of “J Curve” investment and includes the build out of a new
ClearView Wealth Limited
Directors’ Report
Continued
contemporary platform (including software amortisation
costs), the incremental growth and development costs
related to the launch of the WealthFoundations and the
costs incurred/provisioned for the subsequent migration
of the Master Trust and MIS products onto the new platform
over time.
ClearView has in-force FUM of $1.9bn as at 30 June 2015
(+15%), with $0.72bn on new products launched. ClearView
is $112 million net flow positive in FY15; representing a
significant improvement in net flows over prior periods (was
in net outflow of circa $150 million in FY11 and FY12 post the
acquisition of the businesses). Overall this reflects:
The overall FUM and net flows are reflected in the
graphs below, including the performance of the new
WealthFoundations product since its launch in October 2014:
Net Flows
2011
2012
2013
2014
2015
200
150
100
50
0
-50
$m
-100
-150
-200
FUM
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
$b
112
-16
-8
-147
-152
1.90
1.66
1.57
1.52
1.53
2.2
1.38
2010
2011
2012
2013
2014
2015
•
•
•
WealthSolutions net inflows of $163 million (+7%);
in-force FUM of $0.61 billion (+50%);
WealthFoundations net inflows of $112 million (launched
October 2014); in-force FUM of $0.11 billion; and
Master Trust net outflows of $164 million (-2%); in-force
FUM, including closed MISs, of $1.18 billion (-6%); net
outflows are partially offset by the positive performance
of investment markets in FY15. The performance of
investment markets plays a key part in “holding up”
the Master Trust FUM, given that this is effectively a
closed book with a portion of the FUM in the pension
phase. The Master Trust FUM is being replaced by lower
margin new business written in the WealthSolutions and
WealthFoundations products due to the more competitive
pricing of the new contemporary products.
ClearView’s wealth management products are currently
distributed primarily by ClearView Financial Advice and Matrix
Planning Solutions. ClearView has further strengthened its
adviser support through the merger with Matrix that has
the ability to deliver significant revenue synergies given
ClearView’s market proven products. ClearView and Matrix
dealer groups have 221 financial advisers most of whom
recommend wealth management products and services to
their clients. Following the launch of WealthFoundations,
ClearView is expected to expand its distribution reach by
achieving recognition of the newly launched product on third
party APLs (that is, expand the wealth distribution outside of
the ClearView and Matrix dealer groups). ClearView’s appeal
to the independent adviser market includes the following:
•
•
In-house competitively priced product;
Experienced in house research team providing unbiased
implemented models and research;
• Non-institutionally owned;
•
In-house business implementation, support and training;
• Agile - ability to respond quickly to change; and
Master Trust
WealthSolutions
• Accessible Senior Management Team and Board.
WealthFoundations
ClearView Annual Report 2015 24
ClearView Wealth Limited Directors’ Report
Continued
Opportunities for growth in the independent adviser market
include the following:
•
•
•
Convergence of life insurance and superannuation
has opened new distribution opportunities with
WealthFoundations;
Leverage off current LifeSolutions distribution agreements/
relationships; and
Wealth product design that provides efficiency and
profitability for the adviser.
Key priorities for FY16 include the following:
•
•
Broadening the distribution of the recently launched
WealthFoundations product to further improve net flows;
leverage off existing LifeSolutions distribution agreements;
and
Implement WealthSolutions product upgrades and
enhancements to further support adviser base.
Financial Advice
Overall the financial advice industry has faced significant
challenges over the past year, particularly in light of the
regulatory uncertainty, the proposed life insurance reforms
(and related impacts on adviser remuneration) coupled with
a heightened media focus that has had an impact on the
confidence of advisers, their businesses and consumers.
Furthermore, the FoFA reforms continue to be implemented
(with changes still occurring in 2H FY15) with the more
recent introduction of the best interests duty documentation
requirements, financial adviser register and implementation
of the opt in legislation.
In the vast majority of cases, if the proposed life insurance
reforms are implemented, the cost of providing policyholder
advice, in the first year of a policy, is likely to exceed the
remuneration (commission) received by the adviser (unless
an appropriate “fee for service” can be agreed between the
adviser and the customer). Effectively, this potentially puts
a significant upfront capital strain on the financial adviser,
especially for those businesses that do not have large in-force
books. Furthermore, the proposed claw back arrangements
are obviously a significant risk management issue for an
adviser (which could be compared to a warranty period
in other industries). It is therefore inevitable, that some
financial advisers will elect to withdraw from the industry.
The impacts of these changes on the financial viability of non
vertically integrated dealer groups also requires consideration.
The removal of shelf space fees, volume bonuses and the
like coupled with the reduction in upfront commissions and
the consequential impact on dealer group “splits” will have a
detrimental impact on the financial viability of many dealer
groups and the ability of the dealer group to provide quality
support services to financial advisers and their practices.
The proposed reforms are underpinned by an assumption that
there will be an efficiency gain and productivity improvement
in the adviser's business. This includes the proposed review
of the Statements of Advice (SOAs) by ASIC to make the
disclosure requirements simpler and more effective. Given the
regulatory changes and best interest duty requirements, there
is substantial complexity in simplifying SOAs and it is as yet
unclear whether these efficiencies through the simplification
of the SOA process can actually be achieved.
The focus on quality of advice remains key to the long
term success (client retention and compliance) of advice
businesses. The regulatory framework has to date supported
vertically integrated players with the tightening regulatory
environment creating barriers to entry. ClearView is
positioning itself as a fast moving disruptor, that given its
vertically integrated model and market construct (non bank
aligned), has the ability to reposition itself including how best
to support its advisers within these regulatory changes.
ClearView provides financial advice services through its wholly
owned subsidiaries, CFA and Matrix Planning Solutions (MPS or
Matrix). ClearView completed the acquisition of Matrix on 10
October 2014. The strategic rationale for the acquisition was
as follows:
•
•
•
•
•
Matrix has a very strong brand in the independent advice
market; this provides an enhanced ability to attract and
recruit financial advisers by leveraging off the non-bank
aligned model and brand;
There is a very strong cultural alignment with ClearView
financial advisers; high quality independently minded
advisers that are culturally aligned with ClearView’s values
and processes;
The merger provided ClearView with enhanced and
strengthened distribution opportunities;
Matrix was (at the time of acquisition) 78% owned by
advisers; post transaction the issue of performance based
shares means a significant component of the purchase
price is aligned to ClearView Group outcomes; and
The merger should assist ClearView in achieving operating
leverage by scaling faster through an expanded supportive
adviser base.
25 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
The integration of Matrix has achieved the following
operational highlights to date:
•
•
•
•
•
•
Strong cultural alignment and integration between
ClearView and Matrix advisers;
Relocation of the Matrix business and staff to the
Sydney head office location of ClearView;
Completion of hosted desktop integration with
ClearView systems;
Integration of general ledger platforms and payroll onto
the ClearView systems;
Integration of the Matrix business into the ClearView
corporate governance frameworks; and
Commencement of the migration of Matrix adviser
practices onto the ClearView adviser software system
(CWT system).
The focus in FY16 will be on the continued development and
roll out of best of breed quality advice processes, completion
of the migration of adviser practices onto the CWT system,
commencement of branding initiatives and the achievement
of performance based targets over time.
3.1
8
6
4
$b
4.8
The number of financial advisers in CFA has increased to 139
as at 30 June 2015 representing an increase of 19% over the
prior year. In addition, Matrix has a total of 82 advisers as at
30 June 2015, raising the total for the Group to 221. CFA and
Matrix have approved product lists (APLs) that include third
party product providers, LifeSolutions, WealthSolutions and
WealthFoundations. CFA’s APL also includes the Master Trust
product.
ClearView
Matrix
0
2
As at 30 June 2015, the financial advice segment (CFA and
Matrix) has funds under management and advice (FUMA)
of $7.9 billion and life insurance in-force premiums under
advice (PUA) of $187 million. The growth in FUMA and PUA is
driven by the merger with Matrix and the further recruitment
of self employed advisers in CFA. This is reflected in the key
performance metrics outlined in the following graphs,
as at 30 June 2015.
7.9
3.1
200
240
82
160
4.8
139
8
6
$b
4
2
0
120
80
40
0
ClearView
Matrix
Total
ClearView
Matrix
Total
Funds Under Management and Advice (FUMA)
8
6
$b
4
2
0
3.1
7.9
4.8
ClearView
Matrix
Total
Financial Advisers
7.9
Total
240
200
160
120
80
40
0
82
221
139
ClearView
Matrix
Total
Premiums Under Advice (PUA)
240
200
160
120
80
40
0
200
180
160
140
120
$m
100
80
60
40
20
0
82
221
51
187
139
ClearView
Matrix
Total
ClearView
Matrix
Total
136
$m
100
200
180
160
140
120
80
60
40
20
0
51
187
136
ClearView
Matrix
Total
221
200
180
160
140
120
$m
100
80
60
40
20
0
51
187
136
ClearView
Matrix
Total
ClearView Annual Report 2015 26
ClearView Wealth Limited Directors’ Report
Continued
Of the $7.9 billion FUMA in-force as at 30 June 2015, $0.6
billion is in WealthSolutions, $0.1 billion in WealthFoundations
and $1.2 billion is in the Master Trust and old MIS products. Of
the $187 million PUA in-force as at 30 June 2015, $44 million
is in LifeSolutions.
Key priorities for FY16 include the following:
•
•
•
The continued integration of the Matrix advisers, in
particular with a focus on the development and roll
out of best of breed quality advice processes, the
continued migration of adviser practices onto the CWT
system, commencement of branding initiatives and the
achievement of performance based targets over time;
Continue to expand the adviser base through recruitment
of self employed advisers. This includes focusing on the
recruitment of high quality advisers who have the right
cultural fit for ClearView and Matrix; and
Compliant culture and focus with implementation of best
of breed advice processes.
Risks
The Group’s activities expose it to a variety of risks, both
financial and non-financial. Risk management is an integral
part of the Group’s management process. For details on Risk
Management please refer to Note 5 of the Annual Financial
Statements on page 89.
Strategy
ClearView’s strategy continues to be focused on being:
•
•
a highly focused challenger brand operating in specific
profitable segments; and
an integrated life and wealth provider; well positioned
for structural growth with the dual convergence of
superannuation and life insurance products and the
advice and non-advice markets.
ClearView has developed and launched new modern,
customer focused and market leading products into the
Advised Life insurance and wealth management markets
since late 2011. ClearView’s key competitive strengths
remains the integrated nature of its businesses coupled
with no material legacy (pricing, back books and systems).
The market is arguably “over-consolidated” and with
significant positions from larger institutions (particularly bank
owned) that often have legacy issues including multiple
administration platforms and older, higher margin in-
force portfolios (partly driven by acquisitions). This creates
opportunities for a challenger such as ClearView which is a
differentiated business with limited legacy issues.
ClearView is implementing a high growth strategy with the
goal of achieving 3%-5% of the long term life insurance
profit pool, building a material wealth management business
and a high quality financial advice business. Underlying
and supporting these objectives, and to build profitability,
ClearView’s key execution focuses are:
1.
To expand its distribution presence across the
independent financial adviser and direct channels:
•
•
•
Support a high quality support network with real
responsiveness;
Produce flexible products that meet consumer and
adviser needs; and
To provide a “home” for genuinely independent
financial advisers.
2.
Target profitable markets with new innovative product
offerings:
•
•
Operate as a nimble player enabling speed to market;
and
Operate an engaged and proactive culture focused on
meeting customer and adviser needs.
3.
Improve the efficiency and reach of our operations to
expand margins over time:
•
Investment in automation and efficiency continues.
Ongoing investment in technology should allow
ClearView to become more efficient in the near term;
and
• An intense focus on key service elements.
Implementing a high growth strategy has to date required
an investment in a cost structure prior to the realisation
of revenue benefits with the initial phases of “J Curve”
investment now complete. Expense overruns depress initial
reported profits but should eliminate as scale is achieved,
thereby increasing underlying profits realised on the growing
in-force portfolio.
FY15 concluded a successful three year strategy focused on
building ClearView's market position in the life insurance,
wealth management and financial advice markets. ClearView
remains in a strong position to continue growth through
structural market trends, continuing to aim to provide best
of breed advice and customer service, and innovation in the
medium term, with a particular focus on:
•
Gaining from market disruption around life insurance
reforms with a potential stepped change in distribution
profile, especially if certain parts of the proposed reforms
are implemented;
27 ClearView Annual Report 2015
ClearView Wealth Limited
Directors’ Report
Continued
•
•
Benefiting from the increasing convergence of the advice
and non-advice markets, and life insurance and wealth
management products, by providing differentiation given
its ability to use the market positioning, challenger brand
and the regulatory licences of ClearView; and
Increase scale over time thereby progressively reducing
the expenses overruns. These will be absorbed as the
business grows to scale over the medium term.
ClearView has now established a strong platform to drive
momentum and convert its strategic positioning into material
earnings growth. Material earnings growth is expected to
emerge in FY16 given the growth profile of the underlying
businesses and the compound nature of life insurance and
wealth management businesses.
ClearView is well positioned to gain from market disruption
around life insurance reforms with a potential stepped
change in distribution profile if the proposed reforms are
implemented.
While ClearView remains a high growth company (relative to
the in-force portfolio) it will likely require net capital funding;
the $50 million Debt Funding Facility will be replaced with one
or more longer term capital solutions as the need for, and
quantum of, longer term capital funding emerges.
ClearView's overall strategy is supported by an experienced
management team in the life insurance and wealth
management markets. Furthermore, members of the
ClearView Board have significant experience in investing and
directing growing life insurance, wealth management and
other financial services businesses.
Financial Results
Overview of Result
The Group has achieved the following results for the year ended 30 June 2015:
After Tax Profit by Segment, $m
Life Insurance
Wealth Management
Financial Advice
Business Unit Operating Earnings (after tax)
Listed Entity and Other
Total Operating Earnings (after tax)1
Interest expense on corporate debt (after tax)
Underlying NPAT2
Other Adjustments
NPATA3
Amortisation
Reported NPAT
Underlying diluted EPS (cps)
Reported diluted EPS (cps)
Dividend per share (dps)
FY15
15.3
1.8
4.4
21.5
(0.6)
20.9
(0.4)
20.5
1.0
21.5
(9.0)
12.5
3.85
2.36
2.10
FY14
% Change
10.8
5.9
3.5
20.2
(0.5)
19.7
0.0
19.7
1.6
21.3
(7.4)
13.9
4.41
3.10
2.00
41%
(70%)
27%
6%
(34%)
6%
Large
4%
(35%)
1%
21%
(10%)
(13%)
(24%)
5%
1
2
Total Operating Earnings NPAT represents the Underlying NPAT2 of each of the operating business units before taking into account the interest costs associated
with corporate debt.
Underlying net profit after tax is the Board’s key measure of group profitability and the basis on which dividend payments are determined. It consists of con-
solidated profit after tax adjusted for amortisation (not including capitalised software), the effect of changing discount rates on insurance policy liabilities and
costs considered unusual to the Group’s ordinary activities.
3 NPATA is reported net profit after tax adjusted to exclude the non-cash amortisation of acquired intangibles (not including capitalised software).
ClearView Annual Report 2015 28
ClearView Wealth Limited
Directors’ Report
Continued
UNPAT is the Board’s key measure of profitability and the basis
on which dividends are determined. This measure consists
of reported net profit after tax, adjusted for the amortisation
of intangibles (not including capitalised software), the effect
of changing discount rates on the insurance policy liabilities
and any costs considered unusual to the Group’s ordinary
activities (for example, the Matrix deal and integration costs
incurred in FY15).
Total Operating Earnings after Tax (Operating NPAT)
represents the UNPAT of each of the operating business units
before taking into account the interest costs associated with
corporate debt. The Debt Funding Facility was implemented
in December 2014, with $45.5 million drawn down as at
30 June 2015. The UNPAT in FY15 therefore includes the
after tax interest expense of $0.4 million, being the costs
associated with the capital funding structure of ClearView
and have been separated out within underlying earnings.
Operating NPAT has increased by $1.2 million (+6%)
compared with that for the year ended 30 June 2014. UNPAT
has increased by $0.8 million (+4%) compared with that for
the year ended 30 June 2014. When the reported UNPAT is
adjusted for the investment in Wealth Management in FY15
and the Matrix acquisition, UNPAT increases to $22.9 million,
up 17% on FY14. This is analysed by operating segment in
further detail below:
•
•
•
Life Insurance Operating NPAT of $15.3 million, is up 41%;
reflective of the emergence of profit from the growth
in the underlying in-force portfolios given initial “deep”
investment in the business in FY12-FY14 financial years;
Wealth Management Operating NPAT of $1.8 million,
down 70%; reflective of the third phase of the “J Curve”
investment in FY15 with the build out of a new wealth
platform and the development of the WealthFoundations
product that had an adverse $3.2 million NPAT impact in
FY15;
Financial Advice Operating NPAT of $4.4 million, up 27%;
reflective of the consolidation of the Matrix dealer group
for the first time that had a positive impact of $0.8 million
in FY15. The improvement in operating expenses is driven
by the transition of the employed planners into the self
employed model and some back office scale efficiencies
achieved post the integration of Matrix but partially offset
by the further investment in adviser support services
(across the broader group) to support a larger adviser base
in the merged businesses; and
•
Listed Operating NPAT of -$0.6 million , down 34% or
$0.1 million and reflects the interest income on the cash
equivalents held in the listed and central services entities
and in the shareholders fund of ClearView Life Assurance
Limited, the Group’s life insurance subsidiary, less the
costs associated with maintaining a listed entity.
Reported diluted earnings per share for the year reduced from
3.10 cents per share to 2.36 cents per share (-24%) and fully
diluted underlying earnings per share for the year reduced
from 4.41 cents per share to 3.85 cents per share (-13%).
The underlying EPS calculations when compared period
to period have been adversely impacted by the 70 million
shares issued in the $45 million capital raising in 2H FY14
(this represents capital that is set aside for growth in future
periods) and the impacts of the 15.4 million shares issued for
the Matrix acquisition (the vesting of these shares is subject
to performance conditions that is aligned to ClearView
outcomes).
Overall the result reflects:
•
Strong growth in life insurance - the growth of
LifeSolutions has continued in FY15, with new
business premium growing at 16% over the prior year.
LifeSolutions in-force premium is $71.0 million as at 30
June 2015 (+57%), representing 61% of the total life
insurance in-force book. The Non-Advice life insurance
business has shown strong volume growth with life
sales increasing by 84% over the past 12 months, albeit
there was an intentional slow down in volume growth
in 2H FY15 to align with retention strategies and system
enhancements. The new Non-Advice in-force book is $9.7
million (+73%); with the old book in-force premium of
$35.1 million (-4%) as at 30 June 2015;
•
Key experience items on the life insurance result are as
follows:
•
•
An adverse impact of a claims experience loss of $0.1
million (after tax) relative to the expected claims cost.
This adverse claims experience variation follows the
positive claims experience in FY14 of $1.1 million;
The positive impact of life insurance lapses being
lower than the rate assumed in the life insurance
policy liability (determined as at 30 June 2014) with
an experience profit of $0.1million (after tax) (lapse
experience loss of $0.9 million in FY14); and
29 ClearView Annual Report 2015
ClearView Wealth Limited
Directors’ Report
Continued
•
The negative impact of non-deferred expense
experience being the investment ahead of earnings
(expense overruns) with an experience loss of $4.5
million (after tax) (compared to expense experience
loss of $4.5 million in FY14).
Overall claims and lapse experience offset each other.
Further details on these experience items (including
expenses) are provided in the analysis below.
•
FUM has been positively impacted by favourable
investment markets and positive net flows of $112 million
(FUM is up 15%). Funds management fees, however,
increased by 3% which reflects the run off of the higher
margin Master Trust product. WealthSolutions continues
to build to scale coupled the successful launch of
WealthFoundations in FY15;
•
FUMA of $7.9 billion across the Group has been positively
impacted by the Matrix merger and favourable investment
markets (FUMA is up 92%). Premiums Under Advice
($187 million as at 30 June 2015) similarly has been
positively impacted by the Matrix merger. Net financial
planning fees are up 21% driven by the Matrix merger. The
recruitment of self employed advisers into ClearView has
had limited impact on margin to date due to the adviser
split arrangements (number of advisers excluding Matrix is
up 19%).
•
Increases in the operating cost base over the year (+27%).
This was driven by the consolidation of Matrix for the
first time (+$1.9 million) and the material investment
in Wealth Management in FY15 (+$4.5 million). This
impacted on both the cost to income ratio and the non-
deferred expense overruns in particular in the Wealth
Management segment. The drivers of the operating
expense base increase from FY14 to FY15 is illustrated in
the graphs below:
FY14 vs FY15 Cost Base Waterfall
1.9
61.5
2.2
4.5
55.1
2.1
1.3
1.6
1.4
70.1
80
70
60
$m
50
40
30
20
FY Cost Base
Invest m ent in W ealth
M atrix D ealer Group
A djusted FY14 Cost Base
Key explanations of the movements follow:
•
80
Investment in Wealth Management (+$4.5 million) –
This relates to the investment in a new contemporary
platform, the incremental growth and development costs
2.2
related to the launch of the WealthFoundations and the
costs incurred/provisioned for the subsequent migration of
the Master Trust product onto the new platform over time;
55.1
61.4
4.5
1.9
60
70
Direct Life
Distribution/M arketing
A dviser Support Cost
Fu nctional Cost
Shared Services/Listed
FY15 Cost Base
•
•
Matrix Dealer Group (+$1.9 million) – These reflect
the costs related to the Matrix dealer group post the
acquisition on 10 October 2014;
1.6
1.3
70.1
1.4
Direct Life (+$2.2 million) – This relates to the continued
2.1
investment in the Non-Advice business including the
build out of the team and call centre capability to support
the increased volumes between periods. Life sales in
the direct business have increased by 84% over the prior
$M
50
40
30
20
FY Cost Base
Investment in Wealth
Matrix Dealer Group
Adjusted FY14 Cost Base
Direct Life
Distribution/Marketing
Adviser Support Cost
Funtional Cost
Shared Services/Listed
FY15 Cost Base
ClearView Annual Report 2015 30
ClearView Wealth Limited
Directors’ Report
Continued
•
•
•
comparable period. The build out of the retention team
and development of system enhancements remains
a key focus.
Distribution/Marketing (+$2.1 million) – The distribution/
front end costs include the option cost associated with
ESP shares issued to financial advisers and the continued
build out of the business development team (BDMs) and
national presence. The initial focus of the BDMs through
the growth phase is on broadening out the distribution
of the product, which will change the mix of adviser
support over time as further critical mass in new business
is achieved. Distribution also includes the increased
investment in the Wealth Management “front end” and
marketing to further support the growth of the business;
Adviser Support Costs (+$1.3 million) – The Group
continues to make further investment in financial advice
to support a broader base of advisers across the dealer
group partially offset by the employed planner transitions
to the self employed model (reduced costs with offsetting
reduced net fees);
Functional Areas (+$1.6 million) – These relate to
increases in the functional areas to support the growth in
the business, including administration, call centre, claims
and underwriting costs. These reflect the growth in the
underlying volumes period to period; and
Non-Deferred Expenses Overruns
•
Shared Services/Listed (+$1.4 million) - Shared services
cost increases and business support costs should reduce
“per customer” as the scale of the business increases.
This includes the “spreading” of the costs of the shared
services functions as the business grows.
The current level of costs being incurred during the business’s
current growth phase exceeds the long term expense
assumptions adopted. The business is investing in operating
costs ahead of revenue to generate this growth. This includes
an investment in incremental costs above what is required
for the current scale of ClearView (expense overruns) to build
capability for the future. Market competitive premium and
fee rates implicitly support market average participant (scale)
expense rates. Expense margins available are therefore
proportional to new business written and in-force revenues.
As ClearView grows, these expense overruns are likely to be
absorbed and ClearView should achieve operating leverage.
Expense overruns depress initial reported profits; these should
unwind as scale is achieved, thereby increasing underlying
profit realised through the in-force portfolios. In the year to
30 June 2015, the non-deferred expense overruns across
the business had a negative impact on UNPAT of $8.1 million
(FY14: $7.7 million). The movements between segments are
reflected in the graph below:
10
8
6
$m
4
2
0
-2
7.7
8.1
4.5
4.5
4.6
2.1
1.1
Life Insurance
Wealth Management
Financial Advice
Total
1.0
FY14
FY15
31 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
Overall, the increase in non-deferred expense overruns to
$8.1 million (+5%) is driven by the material investment of
$3.2 million in Wealth Management in FY15. Excluding this
investment (third phase of “J Curve”) and the related impact
on the increase to $4.6 million in Wealth Management, the
non-deferred expense overruns would have reduced. This
reflects efficiencies gained through increased scale benefits
(period to period), albeit with some movement between
segments given certain allocation of expenses. Given the
current size of the in-force business, these overruns are
predominantly driven by:
•
Life Insurance - the investment in LifeSolutions and the
Direct Life business. FY15 also includes some absorption
of the further investment in support services to support a
larger adviser base (see Financial Advice below). Shared
services cost increases and business support costs should
reduce “per customer” as the scale of the business
increases. This includes the “spreading” of the costs of the
shared services functions as the business grows;
•
•
Wealth Management - the material investment in
WealthFoundations and the new wealth platform/
migration costs in FY15 as noted above; and
Financial Advice underruns are driven by the transition
of the employed planners into the self employed model
and some back office scale efficiencies achieved post the
integration of Matrix but partially offset by the further
investment in adviser support services (across the broader
group) to support a larger adviser base in the merged
businesses.
The elimination of expense overruns, coupled with the
growth ambitions of the business, remains a key focus of
management and the Board.
The following table reconciles the operating expenses
analysed above to the Reported Operating Expenses line in
the Annual Financial Statements:
Reconciliation of Operating Expenses to Reported Operating Expenses Per Annual
Financial Statements
Operating expenses per waterfall (Page 30)
Custody and investment managment expenses
Interest expense
Reinsurance technology costs
Stamp duty
Medicals
Matrix deal and integration costs
Amortisation of software
Operating expenses per annual financial statements
The following additional items impact the statutory net profit
after tax, and comprise the reconciling items in the table on
page 28:
•
•
The amortisation of the intangibles is associated with the
acquisition of wealth and life insurance businesses from
Bupa, the ComCorp financial advice business and Matrix.
These are separately reported to remove the non-cash
effect of the write-off of these acquired intangibles.
However, amortisation associated with capitalised
software is reported as part of Operating NPAT;
The policy liability discount rates effect is the result of the
changes in long term discount rates used to determine
the insurance policy liabilities. The life insurance policy
liability (based on Australian International Financial
Reporting Standards (AIFRS)) is discounted using market
discount rates that typically vary at each reporting
FY15
$m
70.1
7.3
0.5
0.5
3.4
1.0
2.3
(3.8)
81.3
FY14
$m
55.1
6.1
-
-
2.1
0.7
-
(3.3)
60.7
date and create volatility in the policy liabilities and
consequently earnings. The change in discount rate
impact reflects the change in interest rates between
periods. ClearView separately reports this volatility which
represents a timing difference in the release of profit and
has no impact on underlying earnings. This movement in
policy liability does, however, create a cash flow tax effect;
and
•
Certain costs were recognised in the current period in
relation to the deal and integration costs associated with
the merger of Matrix. The costs incurred include onerous
lease costs, legal fees, due diligence costs, employee
termination expenses and other restructure related
costs. The costs associated with the aforementioned are
considered unusual to the ordinary activities of the Group
and are therefore not reflected as part of Operating NPAT.
ClearView Annual Report 2015 32
ClearView Wealth Limited Directors’ Report
Continued
Analysis of Result by Segment
The following waterfall reflects the result by operating segment below:
UNPAT Waterfall
4.4
19.7
0.9
20.9
0.1
0.4
20.5
0.2
4.1
3.2
22.9
20.4
0.8
30
25
20
$m
15
10
5
0
FY14 U N PAT
Life Insurance
B U O perating N PAT
W ealth M anage m ent
B U O perating N PAT
Financial A dvice
FY15 B U O perating U N PAT
B U O perating N PAT
Interest expense
Listed B U O perating N PAT
on corporate debt
Invest m ent in W ealth
FY15 U N PAT
M atrix
A djusted FY15 U N PAT
Life Insurance
Life Insurance BU Operating NPAT has increased by $4.4
million (+41%) compared with that for the year ended 30
June 2014. The experience items for FY15 are detailed in the
table below:
$m, Year Ended 20 June 2015
Actuarial planned Operating NPAT
Claims experience
Lapse experience
Expense experience
Other
Actual Operating NPAT
This result reflects:
2014
15.1
1.1
(0.9)
(4.5)
0.1
10.8
2015
19.2
(0.1)
0.1
(4.5)
0.6
15.3
•
•
Actuarial planned Operating NPAT reflects the expected
profit margins on the in-force book based on actuarial
assumptions ($19.2 million in FY15; +27%). This is
reflective of the strong growth in the business partially
offset by the run off of the higher margin old direct book
Adverse claims experience loss (after tax) of $0.1 million
compared to an experience profit in FY14 of $1.1 million
(relative to planned margins). Given the current size of
the life insurance portfolio and reinsurance arrangements
in place (arrangements vary by product) some statistical
claims volatility can be expected. Claims experience is
anticipated to average out over time at the actuarial best
estimate assumptions. As the in-force of LifeSolutions
33 ClearView Annual Report 2015
•
•
•
grows, with higher reinsurance arrangements in place, the
relative claims volatility is expected to reduce from period
to period;
Favourable lapse experience relative to the rates assumed
in the life insurance policy liability (determined at 30 June
2014) with an experience profit of $0.1 million (after tax)
in FY15 (relative to planned margins) ($0.9 million loss
in FY14). The favourable lapse experience predominantly
offset the adverse claims experience.
The LifeSolutions business continues to display positive
lapse experience relative to assumptions while the
business written pre 2011 is now broadly in line with
expectation, given the assumption changes made in
June 2014. This positive experience was partially offset
by lapse losses incurred on new direct business written
via certain channels. In particular, the distribution and
product profile of this has been highly geared to the warm
lead referral channel resulting in some adverse lapse
experience to date. Therefore, there was an intentional
slow down in new business volume growth in 2H FY15 to
align with retention strategies/system enhancements;
The growth in life insurance initial commission in the
financial year is driven by the upfront variable commission
cost related to the increased new business volumes. These
acquisition costs are deferred and amortised within the
policy liability, over the expected life of the policies, in
accordance with the accounting standards;
ClearView Wealth Limited Directors’ Report
Continued
•
An increase in acquisition expenses in life insurance
(front end costs). These are in addition to the upfront
commissions and are driven by:
•
•
•
•
Variable stamp duty and medical policy acquisition
costs related to increased new business volumes;
Increased distribution costs related to the option cost
associated with ESP shares issued to advisers and the
continued build out of the business development team
(BDMs) and national presence as noted earlier in the
report;
The increase in the functional areas to support
the growth in the business including system and
administration related costs; and
The continued investment in the Non-Advice business
including the build out of the team and call centre
capability to support the growth and run rates
achieved, as noted earlier in the report.
All these acquisition costs are deferred within the policy
liabilities in accordance with the accounting standards;
•
•
•
Maintenance expenses relate to the increased call
centre and administration costs (including claims
administration) as the in-force portfolios grow across
business lines. Furthermore, there is some absorption
of the further investment in support services to support
a larger adviser base;
Increased reinsurance expense is aligned to the growth
in the in-force portfolios given the upfront reinsurance
support is provided in the first year of a policy;
Market competitive premium rates implicitly support
market average participant (scale) expense rates.
Expense margins available are therefore proportional to
new business premium written and in-force premium
revenues. As the business gets to scale, these costs
are progressively supported by business volumes that
create operating leverage. Expense overruns depress
initial reported profits; these should eliminate as scale is
achieved, thereby increasing underlying profit realised on
the growing in-force portfolio. Given the investment phase
of the business, this resulted in a maintenance expense
experience loss of $4.5 million for the year ($4.5 million
in FY14); and
•
Increase in investment earnings given the reallocation
of shareholder cash to the life insurance segment
(given the growth in the business and its related capital
requirements).
Wealth Management
Wealth Management Operating NPAT has decreased by
$4.1 million (-70%) compared with that for the year ended
30 June 2014. This result reflects the following:
•
•
•
•
•
•
The profitability of Wealth Management is driven by the
fees earned off FUM in ClearView product less expenses
incurred. Overall FUM increased by 15%, with positive net
flows of $112 million in FY15, compared to net outflows of
$8 million in the prior period. This predominantly reflects
the successful introduction of the WealthFoundations
(a competitive mid-market wealth product) in October
2014 and the continued growth of WealthSolutions;
Given that new business is written into WealthSolutions
and WealthFoundations at lower margins than the
existing in-force Master Trust products, fee income
increased by 3% over the prior year. The margin
compression and the run off of the Master Trust business
is assumed in the Embedded Value calculations;
WealthSolutions and WealthFoundations products have
primarily been sold to date via the ClearView dealer group.
The distribution of these products is expected to be rolled
out further given the increased Matrix adviser distribution
footprint and the ability to expand the distribution to
third party APLs. The focus on servicing the ClearView and
Matrix dealer groups to distribute the WealthSolutions and
the newly launched WealthFoundations product more
broadly commenced in FY15. This resulted in an increased
front end cost base;
Increased cost base (+52%) given the investment in
both the build out of a new platform (including the costs
incurred/provisioned for the subsequent migration of the
Master Trust product onto the new platform over time)
and the incremental development and growth costs
associated with WealthFoundations ($4.5 million of costs
incurred) . The increase also includes further investment in
distribution as noted above. WealthSolutions continues to
build to scale. This impacted on both the cost to income
ratio (up to 51%) and the expense overruns (up to $4.6
million from $2.1 million in FY14);
The internal advice fee represents inter segment advice
fee (50bps) paid to financial advice on Master Trust FUM;
the reduction is in line with average FUM;
Funds management expenses increased given
the expanded wealth product range (launch of
WealthFoundations) and increased FUM levels
between periods;
ClearView Annual Report 2015 34
ClearView Wealth Limited
Directors’ Report
Continued
•
•
Given the growth in WealthSolutions FUM and the
outsourced variable cost structure to the platform
provider, platform fees increased in line with the
average WealthSolutions FUM levels and average
account balances;
A tax benefit of $0.2 million is included in the Wealth
Management result (exempt fees in the Master Trust
product range), but is offset in the Listed segment (given
no deductibility of expenses); overall the Group has a 30%
effective tax rate which is consistent between periods; and
•
A reduction in investment earnings given the reallocation
of shareholder cash between segments.
Financial Advice
Financial Advice Operating NPAT has increased by $0.9 million
(+27%) compared with that for the year ended 30 June 2014.
This result reflects the following:
•
•
•
•
•
There has been growth in the number of self employed
advisers in the ClearView advice business driven by
recruitment of advisers into the ClearView dealer group as
well as the merger with Matrix. The expanded distribution
footprint has the ability to deliver significant revenue
synergies given ClearView’s market proven products.
Funds Under Management and Advice (FUMA) levels
increased over the period driven by the positive
performance of investment markets and the further
recruitment of self employed advisers. The merger with
Matrix materially expands the distribution footprint of
ClearView.
Net financial planning fees are up 21% driven by the
Matrix merger. The recruitment of self employed advisers
into ClearView has had limited impact on margin to date
due to the adviser split arrangements (number of advisers
excluding Matrix is up 19%). Matrix contributed a net
retained margin of $2.8 million in FY15;
The financial advice fees expense includes the transition
of employed planners to the self employed model (this
causes a reduction in operating expenses but an increase
in the financial advice fees expense given the split
arrangements now in place);
The consolidation of the Matrix dealer group for the first
time in the result. This had a positive Operating NPAT
impact of $0.8 million for the period from 10 October
2014, but this result included some one-off tax and other
benefits of $0.2 million; and
•
Cost base increase of 20%, predominantly relates to the
consolidation of Matrix for the first time; the operating
35 ClearView Annual Report 2015
expenses benefited from the transition of employed
planners into the self employed model and some back
office scale efficiencies achieved post the integration of
Matrix but was partially offset by the further investment
in adviser support services (across the broader group) to
support a larger adviser base in the merged businesses.
Listed Entity/Other
Listed Operating NPAT has decreased by $0.1 million (-34%)
compared with that for the year ended 30 June 2014. This
result reflects the following:
•
•
•
•
The investment earnings on the cash and investments
held in the listed and central services entities and in
the shareholders fund of ClearView Life, less the costs
associated with maintaining a listed entity. The Company
manages capital at the listed entity level in accordance
with its Internal Capital Adequacy Assessment Process
(ICAAP) policy;
An increase in investment earnings (+24%) given the
timing of the $45 million capital raising in 2H of FY14 and
draw downs under the Debt Funding Facility, partially
offset by the purchase consideration paid for the Matrix
acquisition ($7.75 million) and the reallocation of
shareholder cash between segments;
Cost base increase of 45% driven by the allocation of
a component of shared services overhead to the listed
entity in FY15 (+$0.5 million); and
Tax expense of $0.1 million (FY14: $0.3 million) related
to timing differences, partially offsetting tax benefits
in the Wealth Management segment. The Group has
an effective tax rate of 30% (consistent with the prior
comparable period).
Statement of Financial Position
The Statement of Financial Position of the Group as set out on
page 61 reflects the following key metrics as at 30 June 2015:
•
•
•
Net assets of $336.8 million (June 2014: $310.2 million)
representing a 9% increase over the prior comparable
period;
Net tangible assets of $280.8 million (June 2014: $268.4
million) ($317.3 million including ESP loans) representing a
7% increase over the prior comparable period;
Net asset value per share (including ESP loans) of 64.0
cents per share (June 2014: 62.3 cents per share)
representing an increase of 3% over the prior comparable
period; and
ClearView Wealth Limited Directors’ Report
Continued
•
Net tangible asset value per share (including ESP loans)
of 54.4 cents per share (June 2014: 54.6 cents per share)
representing a decrease over the prior comparable period.
The decrease was driven by the acquired intangibles
and goodwill from the Matrix transaction and related
accounting treatment.
•
•
Net assets were impacted during the year by (+$26.6 million):
Movements in the Executive Share Plan Reserve due to
the treatment of the ESP expense in accordance with the
accounting standards (+$0.9 million); and
Subscription for shares by O&B Limited for cash
consideration in accordance with the subscription deed
entered into as part of the Matrix acquisition (+$0.3
million).
• A reported profit of $12.5 million outlined above;
•
•
•
Net impacts of the FY14 final dividend and the fully
underwritten dividend reinvestment plan (DRP) (+$0.4
million). A further 13.7 million shares was issued under
the DRP. The net positive impact of the dividend declared
relates to the repayment of ESP loans in accordance with
the plan rules;
15.4 million shares issued (+$14.6 million) as contingent
consideration for the purchase of Matrix (subject to
performance conditions);
Recognition of a General Reserve in relation to the
valuation of the contingent consideration for the purchase
of Matrix (-$2.1 million);
The net asset value per share and net tangible asset value
per share are reflected above on a fully diluted basis, as
ClearView ESP shares have been issued to employees and
contractor participants as at 30 June 2015 (in accordance
with the ClearView ESP Rules). The ClearView ESP shares on
issue have a corresponding non-recourse loan from ClearView
to facilitate the purchase of ClearView ESP shares by the
participants. The shares and loans are not reflected in the
statutory accounts as they are accounted for as an “option”
in accordance with Australian Accounting Standards. If the
loan is not repaid, the relevant ClearView ESP shares are
cancelled or reallocated in accordance with the ClearView
ESP Rules.
Embedded Value
Life Insurance and Wealth Management are long term businesses that involve long term contracts with customers and
complex accounting treatments. Embedded Value (EV) represents the discounted value of the future net cash flows anticipated
to arise from the in-force life policies and investment client balances as at the valuation date.
EV calculations at a range of risk discount margins is shown below:
Risk margin over risk free:
Life Insurance
Wealth Management
Financial Advice
Value of In-Force (VIF)
Net Worth
Total EV
ESP Loans
Total EV Incl. ESP Loans
Imputation Credits:
Life Insurance
Wealth Management
Financial Advice
3% dm
$m
261.5
43.1
30.8
335.4
71.9
407.3
36.5
443.8
41.3
11.1
8.5
4% dm
$m
246.9
41.2
29.0
317.1
71.9
389.0
36.5
425.5
38.8
10.6
8.2
5% dm
$m
234.0
33.3
28.5
295.8
71.9
367.7
36.5
404.2
36.5
8.4
8.2
Total EV Incl. Imputation Credits and ESP Loans
EV per Share Incl. ESP Loans (cents)
EV per Share Incl. Imputation Credits and ESP Loans (cents)
504.7
483.1
457.3
76.1
86.6
73.0
82.9
69.3
78.4
ClearView Annual Report 2015 36
ClearView Wealth Limited Directors’ Report
Continued
The EV movement analysis is as follows:
Embedded Value (EV) Movement Analysis @ 4%DM
15.8
(0.1)
(0.2)
1.4
1.3
389.0
23.8
(7.2)
(1.2)
400
390
380
$m
370
360
350
340
330
320
310
359.0
4.7
355.4
(8.3)
300
@ 4 % d m (As Published)
I m pact M atrix Acqusition
N et Capital A pplied
EV after N et capital an d
Expected G ain
Value of N e w Business A d ded
I m pact of M aint. Expense
I m pact of Claim s
I m pact of Discontin uance
I m pact of M atrix Acqusition
EV - Ju ne 2014
FU M A m ark to m arket &
EV - 30 Ju ne 2015 @ 4 % d m
Other I m pacts
Listing Costs
Change in business m ix
•
Net Capital Applied (-$8.3 million): The net impact of the
following:
•
•
•
•
The cash consideration of the Matrix merger and
deal and integration costs (net of tax), the Dividend
Reinvestment Plan (DRP) and related repayment of
ESP loans by participants given their ineligibility to
participate in the DRP under the Plan Rules
Matrix Merger (+$4.7 million): The impact of the Financial
Advice Client Book acquired as part of the Matrix merger
that partially offsets the cash component paid as noted
above;
Expected gain (+$23.8 million): Expected gain represents
the unwind of the discount rate within the value of in-
force and investments earnings on net worth;
Value of New Business (VNB) (+$15.8 million): The
value added by new business written over the period.
The current value of new business is suppressed by the
start up and growth costs incurred. The acquisition cost
overruns should decrease as the business grows, providing
it with operating leverage;
•
•
The claims experience (relative to actuarial assumptions)
(-$0.1 million): The claims experience of LifeSolutions
was favourable in FY15. There was some adverse claims
experience on the old book and new non-advice book.
Given the current small size of the insurance portfolio,
some claims volatility from period to period is to be
expected;
The impact of lapses on the life insurance book and
FUMA discontinuance (-$0.2 million): The life insurance
lapses impact (+$0.5 million) was driven by better than
expected lapses for the LifeSolutions product and the old
book partially offset by lapse rates for the new non-advice
business being higher than expected. The balance of the
impact was due to higher discontinuance rates for the
Wealth and Financial Advice business (-$0.7 million) –
some of this loss is reflected in the value of new business
in respect of some business that has been upgraded from
the old book to new products;
37 ClearView Annual Report 2015
ClearView Wealth Limited
Directors’ Report
Continued
•
The adverse maintenance expense experience: (-$7.2
million): This relates to the maintenance expense
overruns versus the long term unit costs assumed in the
EV. Emerging life insurers and wealth managers invest
and incur overhead costs ahead of “getting to scale”.
The expense rates assumed in the EV are based on
longer term unit costs, as opposed to current “expense
overrun” levels. As business gets to scale, these costs are
progressively supported by business volumes that creates
operating leverage. Expense overruns depress the growth
in EV initially; these are eliminated as scale is achieved,
thereby increasing underlying profit margins on the in-
force portfolio and removing the drag on the growth of EV.
The Financial Advice business had a positive maintenance
expense variance (+$2.1 million) that reduced the
overruns in Life Insurance (-$4.1 million) and Wealth
management (-$4.8 million). The increase in Wealth
•
•
•
management overruns was driven by the investment in
a new platform and WealthFoundations. The acquisition
costs overruns are reflected within, and reduce, the value
of new business added;
Expenses were impacted by the Group’s listed overhead
costs which are not allowed for in the Embedded Value
(-$1.2 million);
FUMA Mark-to-Market (+$1.4 million): The net investment
performance on the funds under management resulted in
higher fee income relative to expectations over the period
and a higher present value of future fees at the end of the
period; and
Basis and Assumption Changes ($+1.3 million): This
includes the net effect of capital reallocations by
segment, model enhancements, timing effects, actuarial
assumption changes, capital base changes and the non-
cash ESP expenses.
While the EV measures are determined in the context of the Group’s business as a going concern, they do not include
any additional value in respect of future new business that may be written after the valuation date. The EV measure uses
assumptions related to future experience. A sensitivity analysis on the key assumptions in the EV is outlined below:
Embedded Value (EV) Sensitivity Analysis @ 4%DM
Inflation +0.5%;-0.5%
-3.2
3.3
Risk-free rate +1%;-1%
-13.8
15.5
FUMA -10%;+10%
-6.2
6.4
Expenses +10%; -10%
-13.4
Discontinuance/
Lapse Rate
+1%; -1%
-14.6
Claims +10%;-10%
-12.8
13.4
12.7
16.6
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
ClearView Annual Report 2015 38
ClearView Wealth Limited Capital Management
Debt Funding Facility
On 18 December 2014, the Company entered into
a three year, $50 million revolving facility (Debt Funding
Facility) with the Commonwealth Bank of Australia (CBA).
The Board has determined that entering into the Debt
Funding Facility is both the most cost effective and efficient
way to support the current funding needs of ClearView over
the short to medium term.
It is intended that the funding provided under the Debt
Funding Facility will be replaced in due course with one or
more longer term capital solutions as the need for, and
quantum of, longer term capital funding emerges. As such
the net capital position of the Group after amounts drawn
down under the Debt Funding Facility is $32.7 million at 30
June 2015.
As at 30 June 2015, the Company has drawn down $45.5
million of the Debt Funding Facility. Refer to note 28 for
further details of the Debt Funding Facility.
Directors’ Report
Continued
Dividends
The Directors have declared a fully franked dividend in 2015
of $12.30 million (2014: $10.98 million). This equates to 2.1
cents per share (2014: 2.0 cents per share) and represents
approximately 60% of the 2015 UNPAT and is in line with the
Company’s dividend policy (+5% increase in the dividend per
share over the prior year). No interim dividend was paid during
the year (2014: nil). For further details on the Company’s
dividend policy (and related Dividend Reinvestment Plan
(DRP)) refer to Capital Management section below.
The Board seeks to pay dividends at sustainable levels and
has a target payout ratio of between 40% and 60% of UNPAT.
Furthermore, it is the intention to maximise the use of its
franking account by paying fully franked dividends (refer to
commentary on interim dividends that follows).
ClearView’s ability to pay a franked dividend depends upon
factors including its profitability, the availability of franking
credits and its funding requirements which in turn may
be affected by trading and general economic conditions,
business growth and regulation. Accordingly, no assurance
can be given as to the timing, extent and payment of
dividends.
No interim dividend was paid during the year. The ability to
pay fully franked interim dividends has to date been limited
by the availability of franking credits and the effect on tax
paid of the changes in long term discount rates used to
determine the insurance policy liabilities between the half
year period and year end. As a sufficient franking account
balance is progressively established, the payment of interim
dividends will continue to be considered.
The FY15 Final Dividend will continue to operate in
accordance with the DRP that:
•
•
Provides shareholders the opportunity to reinvest into the
Group’s fast growing life insurance business, while at the
same time retaining capital within the Group; and
Given the illiquidity of the shares, it was not considered
appropriate to minimise the dilutive impact of the DRP
through the on market purchase of the number of shares
required to satisfy the DRP participation.
The major shareholders, Crescent Capital and its associates,
have committed to participate in the DRP at the fixed price of
95 cents per share.
39 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
Capital Position
An analysis of reconciliation of the net assets in the Statement of Financial Position to the Group capital position after amounts
drawn down under the Debt Funding Facility as at 30 June 2015 is outlined in the table below:
e
c
n
a
r
u
s
n
I
e
f
i
L
t
n
e
m
e
g
a
n
a
M
h
t
l
a
e
W
d
e
t
a
l
u
g
e
R
A
R
P
A
s
e
i
t
i
t
n
E
r
e
h
t
O
$m
$m
$m
$m
247.6
13.9
3.3
264.8
t
n
e
m
e
g
a
n
a
M
h
t
l
a
e
W
$m
8.1
e
c
i
v
d
A
i
l
a
n
a
n
i
F
d
e
t
a
l
u
g
e
R
C
I
S
A
s
e
i
t
i
t
n
E
d
e
t
a
l
u
g
e
R
l
l
A
s
e
i
t
i
t
n
E
r
e
h
t
O
/
C
H
O
N
p
u
o
r
G
$m
$m
$m
$m
$m
16.5
24.5
289.4
47.5
336.8
Net Assets
Goodwill & Intangibles
(5.3)
(4.7)
-
(10.0)
-
(7.7)
(7.7)
(17.7)
(38.3)
(56.0)
Net Tangible Assets
Capital Base Adjustment:
242.4
9.2
3.3
254.9
8.1
8.7
16.8
271.7
9.2
280.9
Deferred Acquisition Costs (DAC)
(186.0)
(0.2)
(0.4)
(0.1)
-
-
(186.2)
-
(0.4)
(0.1)
-
-
-
(186.2)
-
(186.2)
(0.1)
(0.5)
(4.3)
(4.8)
Other Adjustments to Capital
Base
Regulatory Capital Base
Prescribed Capital Amount
Available Enterprise Capital
Internal Benchmarks
Working Capital
Risk Capital
Excess/(Deficit) over Internal
Benchmarks
56.0
(5.8)
50.2
9.0
3.3
68.3
8.0
8.7
16.7
85.0
4.9
89.8
(3.5)
(0.7)
(10.0)
(5.0)
(0.7)
(5.7)
(15.7)
(2.3)
(18.0)
5.5
2.6
58.3
3.0
8.0
11.0
69.2
2.6
71.8
(21.6)
(22.8)
(1.9)
(3.4)
(2.5)
(26.0)
-
-
-
(26.0)
(22.0)
(48.0)
0.0
(26.1)
(2.1)
(4.7)
(6.8)
(33.0)
(3.7)
(36.7)
5.9
0.2
0.1
6.1
0.9
3.3
4.2
10.3
(23.1)
(12.8)
Debt Funding Facility
-
-
-
-
-
-
-
-
Excess after Debt Funding Facility
5.9
0.2
0.1
6.1
0.9
3.3
4.2
10.3
45.5
22.4
45.5
32.7
Under the APRA capital standards, adjustments are made
to the Capital Base for various asset amounts which are
deducted, for example intangibles, goodwill and deferred tax
assets (net of deferred tax liabilities). ClearView’s capital is
currently rated Common Equity Tier 1 capital in accordance
with the APRA capital standards.
The regulated entities have $10.3 million of net assets
in excess of its internal benchmarks as at 30 June 2015.
Internal benchmarks exceed regulatory capital requirements
and include capital held for the protection of ClearView’s
regulatory capital position in respect of risk outcomes where
the regulatory capital cannot be readily accessed and to
protect the various regulated entities’ regulatory licences.
Furthermore, a working capital reserve is the capital held to
support the capital needs of the business beyond the risk
reserving basis. This includes the net capital anticipated to
be needed to support the medium term new business plans
(in accordance with the Internal Capital Adequacy Process).
Internal benchmarks include a working capital reserve in the
regulated entities of $26 million as at 30 June 2015 to fund
anticipated new business growth over the medium term.
Internal benchmarks in the non-regulated entities include a
further working capital reserve of $22 million as at 30 June
2015, therefore totalling $48 million that is set aside across
the Group, to fund anticipated new business growth over
the medium term. Life insurance currently has high upfront
costs – but from year two generates positive cash flows.
While ClearView remains a high growth company (relative
to the in-force portfolio) it will likely remain a negative
cash flow business and require net capital funding. This is
reserved for under the Group’s ICAAP basis and is reviewed
over a three year forward period on a continuous basis. The
ClearView ICAAP has to date been conservatively reserved for
on the basis that there is no changes to the variable upfront
ClearView Annual Report 2015 40
ClearView Wealth Limited
Share Buy-back
As has previously been stated, the Board of ClearView
considers that buying back shares in circumstances where the
share price is materially below the Company’s view of intrinsic
value is in the best interests of ClearView shareholders.
The Board has determined to extend, for an additional 12
months, its share buy-back that has been in place since 19
December 2013. The buy-back arrangements currently in
place will continue to apply. No further shares have been
bought back since 30 June 2014.
Events subsequent to balance date
Dividends
On 25 August 2015, the Group proposed a final dividend of
$12.30 million representing 2.1 cents per share fully franked.
The record date for determining entitlement to the dividend
is 3 September 2015 and the dividend will be paid on 17
September 2015. Since the dividend has not been declared
at year end it has not been recognised as payable in these
accounts.
Changes in state of affairs
Other than discussed above, there were no other significant
changes in the state of affairs of the Group during the year
ended 30 June 2015.
Directors’ Report
Continued
commission model (part of the proposed life insurance
industry reforms as noted earlier in the report). Currently,
there is still significant uncertainty of the final form of the
proposed changes and continues to be closely monitored,
including the impacts on the capital requirements of
the Group.
The net position of the Group after amounts drawn down
under the Debt Funding Facility as at 30 June 2015 represents
an increase of $7.1 million since 30 June 2014. This increase
since 30 June 2014 reflects the following key items:
• The Underlying NPAT for the year (+$20.5 million);
•
•
•
•
•
•
•
•
•
The net capital absorbed by the growth of the business
over the period (-$35.2 million);
The increase in the working capital reserve (-$2.0m)
reflecting capital set aside to fund the anticipated new
business growth over the medium term;
Increase in risk capital reserved due to increasing new
business volumes, the Matrix merger and the net impacts
of capitalised software (-$11.9 million);
Net impact of the underwritten DRP and the increase in
the ESP reserve (+$1.3 million);
Net impact of the shares issued as part of the Matrix
acquisition (+$12.8 million);
Goodwill and intangibles raised on the acquisition of
Matrix, that are excluded from net tangible assets
(-$20 million);
The draw down of $45.5 million under the CBA Debt
Funding Facility (+$45.5 million);
The after tax deal and integration costs associated with
the merger of Matrix (-$1.9 million); and
The net impacts of the tax effect on the change in policy
liability discount rate and other movements in the capital
base (-$2.0 million).
41 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
Remuneration Report
This Remuneration Report, which forms part of the Directors’
Report, sets out information about the remuneration of
ClearView’s Directors and its Key Management Personnel
(KMP) for the financial year ended 30 June 2015.
The term “KMP” refers to those persons having authority
and responsibility for planning, directing and controlling the
activities of the consolidated entity, directly or indirectly,
including any Director of the consolidated entity.
The prescribed details for each person covered by this report
are detailed below under the following headings:
• Details of the Directors and KMP;
• Overview of Remuneration Strategy and Objectives;
•
•
Remuneration Policy including the relationship between
the Remuneration Policy and Company performance;
Remuneration of Directors and KMP including share based
payments granted as compensation; and
• Key terms of employment contracts.
Details of the Directors and KMP
The Directors of the Group and Company during or since the
end of the financial year were:
•
•
•
•
•
•
•
•
•
•
Dr Gary Weiss
(Chairman, Independent Non-executive Director)
Andrew Sneddon
(Independent Non-executive Director)
Bruce Edwards
(Independent Non-executive Director)
David Brown
(Independent Non-executive Director)
Gary Burg
(Independent Non-executive Director)
Jennifer Newmarch
(Non-executive Director)
Michael Alscher
(Non-executive Director)
Michael Lukin
(Alternate Non-executive Director)
(Alternate Director to Jennifer Newmarch)
Nathanial Thomson
(Non-executive Director)
Simon Swanson
(Managing Director)
The KMP of the Group and the Company in addition to the
Directors during or since the end of the financial year were:
•
•
•
•
•
•
•
•
Athol Chiert
Chief Financial Officer and Company Secretary
Chris Robson
General Counsel and Company Secretary
David Charlton
General Manager, ClearView Direct
Greg Martin
Chief Actuary and Risk Officer
Justin McLaughlin
Chief Investment Officer
Todd Kardash
General Manager, Distribution (until 10 October 2014).
Appointed Chief Executive Officer, Matrix Planning
Solutions 13 October 2014.
Tony Thomas
General Manager, Operations and Technology
Christopher Blaxland-Walker
General Manager, Distribution (Appointed 13 October
2014)
Overview of Remuneration Strategy and Objectives
ClearView’s remuneration approach has the following
objectives:
• Attract, retain and motivate skilled employees;
• Reward and recognise employees for strong performance;
•
•
•
Reward employees in a way that aligns remuneration with
prudent risk-taking and the long-term financial soundness
of the business, and with gains to its shareholders;
Maintain a competitive, yet financially-viable salary
structure; and
Clarify responsibilities and decision-making authority in
relation to remuneration at ClearView.
Remuneration Policy
ClearView’s current Remuneration Policy was updated in
June 2015 and is compliant with the obligations set out
by the Australian Prudential Regulatory Authority (APRA)
under Prudential Standards CPS 510 ‘Governance’ and
SPS 510 ‘Governance’. It also forms part of ClearView’s
Risk Management System and overall Risk Management
Framework (in accordance with the Prudential Standards).
The Board has approved this policy and retains overall
responsibility for all remuneration decisions in respect to
persons relevant to each entity. The Policy is reviewed at least
ClearView Annual Report 2015 42
ClearView Wealth Limited Directors’ Report
Continued
once every three years. Any changes to the Policy must also
be approved by the Board.
ClearView has an established Group Nomination and
Remuneration Committee (Remuneration Committee)
which, among other things, is responsible for overseeing the
remuneration and human resource practices for the Group.
Key responsibilities of the Remuneration Committee are as
follows:
•
•
•
•
•
•
•
•
Reviewing and recommending to the Board ClearView’s
Remuneration Policy, including its effectiveness and
compliance with legal and regulatory requirements, on a
regular basis;
Identifying any material deviations of remuneration
outcomes from the intent of the Remuneration Policy,
including any unreasonable or undesirable outcomes that
flow from existing remuneration arrangements;
Reviewing and making annual recommendations to the
Board on the remuneration of the Managing Director,
Senior Management Team (SMT) members (all of whom
are KMP listed above) and other persons whose activities
may, in the Remuneration Committee’s opinion, affect the
financial soundness of ClearView;
Reviewing and making annual recommendations to
the Board on the remuneration structures, including
risk-adjusted performance targets, for those persons or
categories of persons which, in the Board’s opinion, could
individually or collectively affect the financial soundness
of the institution, ensuring that due regard is given to the
balance between the achievement of business objectives
and the associated risk;
Reviewing and making annual recommendations to the
Board on the remuneration structures of external persons
retained directly by ClearView under contract whose
activities, individually or collectively, may affect the
financial soundness of the institution;
Reviewing compliance with the relevant regulatory and
prudential requirements;
Ensuring it has the necessary experience and expertise in
setting remuneration and sufficient industry knowledge
and/or external advice to allow for effective alignment of
remuneration with prudent risk-taking, supplementing its
expertise with appropriate external expert advice;
Reviewing and recommending to the Board (and if
required to shareholders) any short-term and long-term
incentive payments for the Managing Director and Senior
Management Team (SMT); and
•
Reviewing and providing recommendations to the
43 ClearView Annual Report 2015
Board (and if required to shareholders) in relation to
any termination benefits for Non-executive directors,
Managing Director, other SMT members and key persons
which exceed one year’s average base salary as defined in
the Corporations Act 2001.
ClearView’s Remuneration Policy is in place to:
• Outline employee obligations and ClearView’s obligations;
•
Set out roles, responsibilities and accountabilities of the
KMP;
• Set out clear reporting and controls;
•
•
Define various terms to ensure a common understanding;
and
Clarify what happens if this policy or associated
procedures are breached.
Relationship between Remuneration Policy and
Company Performance.
The primary objectives of the Remuneration Policy are to
ensure that remuneration is competitive, aligned with the
Company’s business objectives in both the short term and
the long term, and appropriate for the results delivered
by the individual. In accordance with this objective, the
Company has structured remuneration packages to provide
an appropriate mix of fixed and performance based pay
components which are based on both the individual’s
performance and Group performance. By adopting a robust
approach to remuneration, the Group aims to attract and
retain top talent.
The remuneration framework is also designed to reward
prudent risk-taking, support effective risk management and
prioritise the long term financial soundness of the business
and its shareholders.
Total KMP remuneration is made up of three components:
•
Fixed Remuneration;
• Short Term Incentive (STI); and
• Long Term Incentive (LTI).
The design of remuneration structures and performance
conditions will reflect ClearView’s key risks, as relevant to
particular roles by:
•
•
Ensuring that the components of remuneration
appropriately balance risk and business outcomes, having
regard to the percentage of “at risk” to “not at risk”
remuneration that is, variable to fixed remuneration;
Using appropriate risk-adjusted objectives in ClearView’s
incentive awards for key persons and categories of
persons;
ClearView Wealth Limited Directors’ Report
Continued
•
•
Appropriate use of long-term incentives to ensure
performance can be suitably validated and the
consequence of the risk to which ClearView has been
exposed can be fully assessed; and
Ensuring any sign-on and termination payments with
respect to Directors, SMT members and other key
personnel, comply with legislative requirements, are
appropriate and prudent and contain suitable hurdles.
Fixed Remuneration
Fixed Remuneration is made up of base remuneration
and superannuation. Base salary includes cash salary and
any salary sacrifice items. The Group provides employer
superannuation contributions of 10% of each KMP’s
superannuation salary, capped at the relevant concessional
contribution limit.
The Fixed Remuneration is based on each employee’s
experience, qualifications, capability and responsibility and
not to specific performance conditions. An employee’s
responsibility includes accountabilities, delegations, KPIs and
risk profiles. To ensure an employee’s Fixed Remuneration is
competitive, it is benchmarked against median salary survey
results from a group of comparable Australian financial
service companies. Fixed Remuneration is reviewed annually,
following the end of the 30 June performance year.
Independent market remuneration data was purchased from
two independent sources and reviewed to benchmark the
Fixed Remuneration for KMP for the 2015 financial year. The
sources were the Financial Industry Remuneration Group
(FIRG) and Aon Hewitt reports. Both are primary providers
of data and the most appropriate for roles in the industry
in which ClearView operates. ClearView also purchased
additional data from Mercer for specialist roles. The
benchmarking reports were used as a guide, and were not a
substitute for thorough consideration of all the issues by the
Remuneration Committee.
No formal consulting advice was sought from independent
external research houses and Remuneration Consultants in
2015.
Any increase to individual remuneration for the Managing
Director, SMT and any other person whose activities may, in
the Remuneration Committee’s opinion, affect the financial
soundness of ClearView, must be approved by the Board on
the recommendation of the Remuneration Committee after
engaging and taking advice, where appropriate.
Short Term Incentive (STI) plan
The STI plan for KMP aims to provide a common motivation
to act in the best interests of the Company to reach or
exceed Company goals for the financial year. They are based
on rewarding an individual with a bonus calculated as a
percentage of Fixed Remuneration. Company performance
targets are set for the KMP by the Remuneration Committee.
For FY15, the award of the STI component for KMP is based
on the achievement of two company goals equally weighted,
namely:
•
•
Underlying Net Profit after Tax (UNPAT). UNPAT is the
Board’s key measure of group profitability and the basis
on which dividend payments are determined. It consists
of reported net profit after tax adjusted for amortisation
(not including capitalised software), the effect of changing
discount rates on insurance policy liabilities and costs
which are considered unusual to the Group’s ordinary
activities; and
Embedded Value growth. Life insurance and wealth
management are long term businesses that involve long
term contracts with customers and complex accounting
treatments. Embedded Value calculations are used as
key measures to assess the performance of the business
from period to period. An Embedded Value represents the
discounted value of the future cash flows anticipated to
arise from the in-force life policies and investment client
balances as at the valuation date.
Underpinning the achievement of the financial goals is sound
business strategy, leadership, client focus, an appropriate
product and superior service and continuing development of
systems and processes. Furthermore, the EV component is
longer term in nature.
STI outcomes fall within a range of 0% to 120% of the Target
STI with 100% pegged to achieving target performance (as
set out in the Board approved Business Plan). The resultant
potential maximum STI awards for KMP range from 0% to
60% of Fixed Remuneration. In 2015, KMP therefore received
an STI bonus of 36.1% of their Fixed Remuneration (in line
with the target STI component) representing 24.0% of their
total remuneration. This was based on achievement of the
following:
•
•
UNPAT – Actual UNPAT of $20.5 million; and
EV – Actual EV growth of 8.6%1;
1 Growth rate for the bonus calculation was the reported EV excluding assumption and model changes, and the Matrix acquisition.
ClearView Annual Report 2015 44
ClearView Wealth Limited Directors’ Report
Continued
105% of the target STI range was achieved based on the
range of achieved outcomes.
The Managing Director sets specific key individual objectives
for the KMP which support the achievement of Company
goals. The individual performance targets are linked to a
KMP’s position and/or team objectives and reflect the level of
risk that ClearView is exposed to by the individual’s actions.
Whilst the quantum of KMP STI is determined by Company
goals, the Managing Director is responsible for assessing the
performance of KMP and for recommending the total STI to
be paid. Therefore, the Managing Director may recommend
STI payments below or over and above the specified
company outcomes in the case of below target or exceptional
performance respectively. The Managing Director’s
recommendations are presented to the Remuneration
Committee for consideration and recommendations are
made to the Board for approval. It is only when Board
approval has been obtained that STI bonuses are payable.
Given that the target STI component is considered moderate
in the industry in which the Group operates it has to date not
been considered appropriate to introduce deferral provisions
for the STI component.
Background to Long Term Incentive Plan (LTIP)
ClearView in its current form was created by the acquisition
and successful integration of the life insurance, wealth
management and financial advice businesses acquired from
MBF Holdings Pty Limited (Bupa Australia) on 9 June 2010
(the Acquisition).
Key attributes of the Acquisition were as follows:
•
•
•
Potential to use the platform acquired to create a new
non-bank owned life insurance and wealth management
company that could bring innovation to the market and
challenge the incumbents;
No material legacy issues, enabling speed to market; and
No material exposure to group life, pre global financial
crisis income protection or capital guaranteed products.
ClearView was required to undertake a significant
transformation to:
•
•
Build out a new management team with a track record in
growing life insurance, wealth management and financial
advice businesses;
Develop and launch advise based products providing
access to new market segments;
•
•
•
•
Utilise the strong cash flow generated by the in-force
portfolios at the time of the Acquisition to fund the initial
growth phase in the Advised Life market and stem the
outflows in the acquired Wealth Management in-force
portfolios;
Expand into the independent financial advice market,
with products having the quality to be included on the
Approved Product Lists of third party dealer groups;
Reinvest in its Non-Advice (Direct) life insurance business
with the build out of a call centre capability and focusing
on establishing long term distribution partnerships; and
Raise sufficient capital to fund the next phase of growth
in both the Advised and Non-Advice segments of the life
insurance market.
ClearView was therefore required to undergo a significant
transformation, that has been achieved over the last
four years with the development of systems, launch of
LifeSolutions (full suite of life insurance advice products),
WealthSolutions (ClearView Wrap platform) and
WealthFoundations (wealth mid-market product), the
recruitment of employees, experienced self employed
financial advisers and distribution partners.
ClearView has an ownership-based compensation scheme for
the Senior Management Team (SMT), key management and
revenue generators of the Group to assist in the recruitment,
rewarding, retention and motivation of employees. This
scheme is designed to recognise leaders and reward those
decisions and actions which have a direct and positive impact
on the results that ClearView delivers for shareholders, at the
time and in the future.
The Executive Share Plan (ESP) was established to assist in
the recruitment of the SMT and employees with deep life
insurance and wealth management experience, to execute on
a core strategy and thereby to show ClearView’s recognition
of the employees’ contribution, by providing an opportunity
to share in the future growth and profitability of ClearView.
The ESP was set up in the context of the “start up phase” and
the nature of the ClearView business at the time when the
scope and the timing of any future success of the business
was still unknown and uncertain. The ESP aligns the interests
of participants more closely with the interests of shareholders
including the extension of the ESP to financial advisers in
November 2011.
In July 2012, ClearView received a takeover offer from
CCP Bidco Pty Limited (CCP Bidco), a consortium of investors
including Crescent Capital Management Pty Limited.
45 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
The new shareholders brought with them extensive
experience in the financial services industry, in particular
life insurance and wealth management and a strong
commitment to support the management team and
execution of the agreed strategy for growth. Subsequent
to the change in shareholder, benchmarking of the LTI for
the SMT was performed by PwC, an independent
Remuneration Consultant, in February 2013.
The Board subsequent to this review decided in February
2013 to:
•
•
•
Remove any cap on the issue of shares under the ESP to
retain the flexibility to use it as a recruitment tool for both
employees and financial advisers;
Remove the interest on the loans that had until this
date been capitalised and treated as part of the limited
recourse principal, except that after tax dividends
on Shares issued under the ESP was applied towards
reduction of the loan; and
Issue further grants to participants where considered
appropriate (aligned to the overall remuneration review of
the SMT members by PwC). These further LTI grants were
issued in a “lump sum” rather than on the basis of an
annual grant and were aligned to the achievement of an
increase in the share price of ClearView.
The interest rate on the limited recourse loans had to this
point effectively acted as an in built performance hurdle. The
Board decided to remove the interest rate on the loans for all
participants given that the interest imposed was significantly
diluting the efficacy of the ESP as an employee recruitment
and retention tool, in particular for those staff receiving the
earlier grants of ESP shares and to achieve its purpose given
the start up phase of the business at the time. The Board
believed, nothwithstanding the removal of the interest rate on
the loans, that the long term interests are aligned given that
value is only attributed to participants through an increase
in the share price and that 50% of the STI component is also
aligned to the longer term, being the Embedded Value (refer
to STI section above).
The use of derivatives over ClearView Securities could distort
the proper functioning of performance and vesting conditions
of the ESP. Accordingly, derivatives over ClearView shares
are not permitted to be held in relation to any ClearView
shares that are unvested or the subject of a holding lock
under the ESP.
Overview of the Executive Share Plan (ESP or Plan)
In accordance with the provisions of the Plan, as approved
by shareholders at the 2012 Annual General Meeting, the
ownership-based compensation scheme allows participation
in the Plan of:
•
•
Employee Participants - These participants are key
managers, members of the Senior Management Team
and the Managing Director; and
Contractor Participants - These participants are financial
advisers.
Eligible Employees under the Plan Rules therefore include
both Employee Participants and Contractor Participants of
the Company and its related bodies corporate. Non-executive
Directors are ineligible to participate in the Plan in accordance
with the Plan Rules.
Offer and Consideration
Under the ESP, the Board may invite Eligible Employees to
participate in an offer (Offer) of fully paid ordinary shares in
ClearView, subject to the terms of conditions of the ESP. Each
ClearView Share is issued at a price to be determined by the
Board prior to making an Offer and this price is set out in the
invitation (Invitation) to Eligible Employees. This price may be
the market price of a Share (as defined in the ESP Rules) on
the date of the Invitation. Taking into account the liquidity,
volatility, and the average trading activities of the ClearView
Shares, the Board determined in February 2013 that it is
appropriate and reasonable for ClearView to adopt the
Volume Weighted Average Price (VWAP) over a 90 day period
to determine the market value of the ClearView Shares for the
purposes of ESP issues. This has been implemented for all ESP
Share issues since that date. Prior to this, no ESP Shares were
issued at a price below 50 cents per share, being the price at
which the original capital raising was completed in June 2010.
Restrictions on Offer
Shares may not be offered under the ESP to an Eligible
Employee if that Eligible Employee would hold, after the
issue of the Shares, an interest in more than 5% of the issued
Shares of ClearView or be able to control the voting rights of
more than 5% of the votes that might be cast at a general
meeting of ClearView.
As at the date of this Report, the Board has not set a limit
on the number of Shares that may be issued under the
Plan. The Board or Board Authorised Delegates approve the
issue of new ESP shares and monitors the overall quantum
of ESP shares on issue, relative to the interests of existing
shareholders and the overall objectives of the business.
Financial Assistance
The Company may provide financial assistance to an Eligible
Employee for the purposes of subscribing for Shares under the
ClearView Annual Report 2015 46
ClearView Wealth Limited Directors’ Report
Continued
ESP. The financial assistance will be a limited recourse loan
equal to the purchase value of the Shares and is repayable as
follows:
conditions (if any) attaching to the Shares issued prior to 14
February 2013 have been satisfied (or waived) a holding lock
will cease to have effect if:
•
•
•
For Share issues prior to 14 February 2013 - within 60
days (or a longer period determined by the Board in its
discretion) after the 5th anniversary of the grant of the
financial assistance (unless it is required to be repaid at an
earlier date owing to the operation of the Rules); or
For Share issues after 14 February 2013 - within 60
days (or a longer period determined by the Board in its
discretion) after all performance and vesting criteria
have been met; or
For Shares issues after 1 May 2014, 2 months (or a period
determined by the Board at it's discretion) immediately
following the 6th anniversary of the grant of the financial
assistance.
The financial assistance will become immediately repayable
in the event of certain “disqualifying circumstances” including
failure to meet performance or vesting conditions, cessation
of the Employee Participant’s employment in circumstances
defined in the ESP Rules or termination of the Contractor
Participant’s contract with a Group Company for the provision
of services. For Employee Participants, the financial assistance
is secured over the shares and rights attached to the shares.
The Board has delegated authority to Mr Swanson and Mr
Thomson to approve granting an extension to the loan
term of all ESP participants who remain employees at the
expiration of their loan term for a period until a Change in
Control of the Company (as defined in the ESP Rules).
Until 14 February 2013, the interest rate on the loans was
the Reserve Bank of Australia cash rate plus a margin of 25
basis points per annum, compounded semi annually. Interest
until this date has been capitalised and treated as part of the
limited recourse principal, except that after tax dividends on
shares issued under the ESP is applied towards reduction of
the loan balance.
In February 2013 the Board decided to remove the interest
rate on the loans for all Participants (other than the Managing
Director that required Shareholder approval). On 6 November
2013, at the 2013 AGM, Shareholders approved the removal
of interest on the Managing Directors loan, so as to align with
the interest rate which applies to equivalent loans made to
other participants in the Plan.
Holding Lock
•
The Board accepts a disposal request (as defined in the
ESP Rules) (Disposal Request); or
• 5 years have passed from the Acquisition Date; or
If the Participant:
•
•
is an Employee Participant, their employment with the
Group ceases, or
is a Contractor Participant, their contractor agreement is
terminated; or
• The ESP is terminated, or
• The holding lock period otherwise ceases;
provided that the Financial Assistance and any interest that
has been accrued have been repaid.
For shares issues from 14 February 2013 the Holding Lock
ceases on vesting or forfeiture of Shares.
The holding lock is imposed through the share registry and in
accordance with the ASX Listing Rules. Participants will not be
able to sell their shares on ASX or have an off-market transfer
registered (and are also otherwise prohibited from dealing in
the shares) while the holding lock is in place.
If the participant is a Contractor Participant, following the
removal of the holding lock over the Shares of the participant,
the participant may not sell, or otherwise deal with, any such
Shares without the prior written consent of the Company,
which consent the Company may give or withhold in its
absolute discretion and which consent may be given subject
to conditions.
Eligible Employees are entitled under the ESP Rules to make
a Disposal Request provided the performance and vesting
conditions have been met (or waived). The holding lock
applicable to their ESP shares will cease to have effect upon
the Board (in its absolute discretion) accepting the Disposal
Request. ClearView may dispose of these ESP shares on behalf
of the participant in one or more of the following ways (at the
discretion of the Board):
•
•
Reallocate the Shares to give effect to acquisitions by
other Eligible Employees under the ESP;
Sell to the Company in accordance with buy-back
provisions of the Corporations Act; or
• Offer or sell to buyers on the ASX.
The shares granted under the ESP to participants are subject
to a holding lock restricting the holder from dealing with the
shares. Where all performance conditions and/or vesting
The amount payable by these Eligible Employees to ClearView
following such a disposal is the amount outstanding in
relation to the financial assistance, including accrued interest.
47 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
The Eligible Employees may retain any surplus proceeds.
There are no Disposal Requests outstanding as at the date of
this report.
Change of Control
Under the ESP Rules, all performance and vesting conditions
in relation to Shares held by an Eligible Employee who is an
Employee Participant are deemed to have been satisfied
upon a Change of Control unless stated otherwise in the
participants invitation offer. A Change of Control is defined
under the ESP Rules as being:
(a) Until 14 February 2013:
•
•
•
A person who did not Control the Company at the date of
issue of the Plan Shares gains Control of the Company (but
only if the person is not itself Controlled by another person
who Controlled the Company at the date of issue); or
Other circumstances occur which the Board determines
in its absolute discretion are analogous to a Control
transaction and justify removal of Performance Conditions
and/or Vesting Conditions,
“Control” is defined as where a person and its related
bodies corporate holds more than 50% of the Shares in
ClearView.
(b) After 14 February 2013:
• 12 months after a Change of Control; or
•
•
Circumstances occur which the Board determines in its
absolute discretion are analogous to a Control transaction
and justify removal of Performance Conditions and/or
Vesting Conditions.
“Control” is defined as Crescent Capital Partners and its
Associated Entities no longer holding 20% of the voting
rights of the Company.
The above provisions concerning change of control apply
only to Employee Participants and not Contractor Participants
under the ESP.
(c) After 1 July 2015:
•
For ESP Shares issued to employee participants after
1 July 2015, unless stated otherwise in the participants
Invitation Offer, all performance and vesting conditions
in relation to these shares, are not deemed to have been
met upon a Change of Control.
ClearView Annual Report 2015 48
ClearView Wealth Limited Directors’ Report
Continued
Consequences of ClearView’s performance on shareholder wealth
The following tables set out the summary information about the Group’s earnings and movements in shareholder wealth for
five years to 30 June 2015:
Revenue1 ($’000)
Net profit after tax ($’000)
Underlying Net Profit/(loss) after Tax
Total Operating Earnings after Tax
Dividend (Final) (cents)
Dividend (Special) (cents)2
Basic EPS (cents)1
Diluted EPS (cents)
Fully diluted Underlying EPS (cents)
Embedded Value3 ($m)
Embedded Value per share (cents)3
Share Price at the beginning of the year (cents)
Share Price at the end of the year (cents)
30 Jun 15
30 Jun 14
30 Jun 13
30 Jun 12
30 Jun 11
253,640
190,301
172,278
143,182
136,019
12,572
20,533
20,867
13,880
19,738
19,738
1,876
16,014
16,014
22,336
19,241
19,241
8,665
19,317
19,317
2.10
-
2.43
2.36
3.85
389
73.0
80.0
95.0
2.00
-
3.13
3.10
4.41
359
71.2
59.0
80.0
1.80
2.20
0.46
0.46
3.65
291
69.4
46.0
59.0
1.80
-
5.46
5.24
4.53
269
65.0
50.0
46.0
1.80
-
2.12
2.10
4.59
n/a
n/a
52.0
50.0
3
1 Revenue from continuing operations excludes net fair value gains/losses in financial assets.
2
In accordance with the Implementation Agreement entered into between the Company and CCP Bidco, on 26 September 2012, ClearView declared an un-
franked special dividend of 2.2 cents per share that was paid on 16 October 2012.
EV calculated at a 4% discount rate margin. Previously reported EV of $279m at 30 June 2013 and $265m at 30 June 2012 adjusted for dividends, net capital
applied, cash takeover bid related costs and the estimated reduction in the discount rate margin to 4% (for comparative purposes). The 2011 EV has been
excluded given changes to discount rates, dividends and net capital applied.
The EV at each reporting date excludes any value for future growth, potential value of franking credits, costs associated with being listed on the ASX, short
term prospective growth and development costs and ESP loans outstanding at balance date. EV per share calculations has been adjusted to include ESP loans
outstanding at balance date.
Remuneration of Directors and KMP
Non-executive Directors’ Remuneration
Non-executive Directors are remunerated by way of one base fee (inclusive of Superannuation Guarantee) that is based on
market rates for comparable companies for the time, commitment and responsibilities undertaken by Non-executive Directors.
The level of remuneration for each Non-executive Director is set by the Remuneration Committee, within the total annual
remuneration limits approved by the Company and the shareholders at a general meeting. Any increase to individual Non-
executive Director remuneration must be approved by the Board on the recommendation of the Remuneration Committee
after engaging and taking advice, where appropriate. All reasonable out of pocket expenses incurred in connection with
a Director’s duties on behalf of ClearView Wealth are reimbursed. There is no direct link between Non-executive Directors’
remuneration and the annual results of ClearView Wealth or its related entities. The Non-executive Director remuneration
is based on the role of the individual director, their membership on Board Committees, and directorships of other ClearView
entities.
Non-executive Directors are not entitled to participate in equity schemes of the Company, and are not entitled to receive
performance-based bonuses. Non-executive directors are not entitled to retirement benefits other than in respect of any
superannuation entitlements.
The present limit on aggregate remuneration for Non-executive directors is $1,000,000 including superannuation (2014:
$1,000,000). Directors’ fees can be paid as superannuation contributions. The fee pool is the only source of remuneration for
Non-executive Directors.
49 ClearView Annual Report 2015
ClearView Wealth Limited
Directors’ Report
Continued
The compensation of each Non-executive Director for the year ended 30 June 2015 is set out below:
Short term employee benefits
Post
employment
Share based
payments
Total
2015
Salary
& Fees
$
Non-executive Directors
G Weiss
B Edwards
D Brown
G Burg
J Newmarch1
M Lukin1
N Thomson2
A Sneddon
M Alscher3
Total
182,648
95,000
77,626
73,059
66,667
13,333
85,000
85,000
-
Bonus
Non-
monetary
Termination
Payment
Superannu-
ation
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
$
17,352
-
7,374
6,941
-
-
-
-
-
Executive
Share Plan of
total remu-
neration
$
Performance
based
%
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
95,000
85,000
80,000
66,667
13,333
85,000
85,000
-
710,000
678,333
-
-
-
31,667
-
1
2
3
Mr Lukin receives fees as an alternate to Mrs Newmarch from 1 May 2015. Mr Lukin and Mrs Newmarch have agreed they will receive no fees as a Director
although fees are payable to ROC Partners. Mrs Newmarch received fees until 30 April 2015.
Mr Thomson has agreed that he will receive no fees as a Director although fees are paid to Crescent Capital Partners Manangement Pty Limited of which he is
an employee.
Mr Alscher agreed that he would receive no fees for his services as a Director and Crescent Capital Partners Management Pty Limited agreed to receive
no directors fees in respect of Mr Alscher’s directorship for the 2015 financial year.
ClearView Annual Report 2015 50
ClearView Wealth Limited
Directors’ Report
Continued
The compensation of each Non-executive Director for the year ended 30 June 2014 is set out below:
Short term employee benefits
Post
employment
Share based
payments
Total
2014
Salary
& Fees
$
Non-executive Directors
G Weiss1
B Edwards
D Brown
G Burg
J Newmarch2
J Fallick4
M Lukin2
N Thomson3
A Sneddon4
M Alscher5
Total
183,066
95,000
77,803
73,227
40,000
-
40,000
121,230
85,000
-
715,326
Bonus
Non-
monetary
Termination
Payment
Superannu-
ation
$
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
$
16,934
-
7,197
6,773
-
-
-
-
-
-
30,904
Executive
Share Plan of
total remu-
neration
$
Performance
based
%
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
95,000
85,000
80,000
40,000
-
40,000
121,230
85,000
-
746,230
1 Dr Weiss was appointed Chairman on 1 July 2013 and his fees were increased to $200,000 per annum from that date.
2
Mr Lukin was paid fees as an alternate to Mrs Newmarch from 1 January 2014. Mr Lukin and Mrs Newmarch have agreed they will receive no fees as a Director
although fees were paid to Macquarie Investment Management Limited of which they were employees until 6 June 2014 (from which date they are now paid
to ROC Partners). Mrs Newmarch was paid fees until 31 December 2013.
Mr Thomson has agreed that he will receive no fees as a Director although fees are paid to Crescent Capital Partners Management Pty Limited of which he is an
employee. Mr Thomson fees include an additional payment of $36,230 for special duties in the year ended 30 June 2014.
Mr Sneddon was appointed Alternate Director to Mr Fallick on 26 March 2013. Mr Sneddon was paid fees as an alternate to Mr Fallick from 26 March 2013
until 3 December 2013. On the resignation of Mr Fallick on 3 December 2013, Mr Sneddon’s appointment as Alternate was revoked and he was appointed as a
Director on 3 December 2013 at which time he started receiving his own Non-executive Director fees.
Mr Alscher agreed that he would receive no fees for his services as a Director and Crescent Capital Partners Management Pty Limited agreed to receive
no directors fees in respect of Mr Alscher’s directorship for the 2014 financial year.
3
4
5
51 ClearView Annual Report 2015
ClearView Wealth Limited
Directors’ Report
Continued
Managing Director and Senior Management Team Remuneration
The compensation of each member of the KMP of the Group for the year ended 30 June 2015 is set out below:
Short term
employee benefits
Post
employment
Share based
payments
Salary & Fees
Bonus
Non-monetary
Superannuation
Executive
Share Plan1
Performance
based
2015
S Swanson
A Chiert
C Robson
G Martin
J McLaughlin
T Kardash3
T Thomas
D Charlton
E Singfield
$
605,083
356,144
307,161
358,513
309,343
279,064
334,123
268,192
-
$
317,951
112,291
96,843
117,965
99,691
93,388
105,376
84,859
-
$
12,020
6,534
-
12,020
-
9,080
-
-
-
C Blaxland-Walker2
266,500
84,689
Total
3,084,123
1,113,053
9,080
48,734
$
19,467
19,467
19,467
35,092
26,268
35,672
23,408
19,467
6,487
19,467
$
-
48,300
-
48,300
-
18,412
36,780
20,405
-
5,018
%
33.3%
29.6%
22.9%
29.1%
22.9%
25.7%
28.4%
26.8%
0.0%
23.3%
Total
$
954,521
542,736
423,471
571,890
435,302
435,616
499,687
392,923
6,487
384,754
224,262
177,215
27.8% 4,647,387
Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued.
1
2 Appointed General Manager, Distribution 13 October 2014.
3 Appointed Chief Executive Officer, Matrix Planning Solutions 13 October 2014.
The compensation of each member of the KMP of the Group for the year ended 30 June 2014 is set out below:
Short term
employee benefits
Post
employment
Share based
payments
Salary & Fees
Bonus
Non-
monetary
Superannuation
Executive
Share Plan1
Performance
based
$
591,210
347,500
299,980
364,992
307,493
269,887
301,331
206,343
280,843
$
310,541
109,526
94,590
115,049
96,935
85,255
95,297
68,027
32,312
$
11,575
6,534
-
11,575
-
8,635
-
-
-
$
17,725
17,725
17,725
25,327
24,526
17,725
17,725
17,661
20,845
$
5,687
48,300
-
48,300
-
24,150
36,181
2,230
-
%
33.8%
29.8%
22.9%
28.9%
22.6%
27.0%
29.2%
23.9%
9.7%
Total
$
936,738
529,585
412,295
565,243
428,954
405,652
450,534
294,261
334,000
2,969,579
1,007,532
38,319
176,984
164,848
26.9%
4,357,262
2014
S Swanson
A Chiert
C Robson
G Martin
J McLaughlin
T Kardash
T Thomas
D Charlton3
E Singfield2
Total
1
Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued. This includes modification to the inputs due to the removal
of interest on the ESP loans (in relation to S Swanson ESP shares).
Cessation of employment on 1 May 2014.
2
3 Appointed 1 May 2014.
ClearView Annual Report 2015 52
ClearView Wealth Limited
Directors’ Report
Continued
Share Based Payments Granted As Compensation
Limited recourse loans have been granted by the Company to the ESP participants to fund the acquisition of shares under
the ESP.
The following tables outlines the ESP loans made to KMP or their related entities as at 30 June 2015 and June 2014:
2015
S Swanson
A Chiert
G Martin
C Robson
J McLaughlin
T Kardash
T Thomas
D Charlton
C Blaxland-Walker
Total
2014
S Swanson
A Chiert
G Martin
C Robson
J McLaughlin
T Kardash
T Thomas
D Charlton
Total
Loans
Granted
$
Interest
charged
$
Repay-
ments
$
Loan
Cancelled
$
Balance at
end
$
Highest in
period $
Balance at
beginning
6,335,453
1,368,287
1,542,738
491,184
824,197
778,029
915,000
524,239
497,844
Balance at
beginning
6,431,753
1,392,362
1,571,628
500,814
838,642
792,474
-
-
-
-
-
-
-
-
249,999
-
-
-
-
-
-
-
-
915,000
524,239
11,527,673
1,439,239
13,276,971
249,999
Loans
Granted
$
Interest
charged
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(102,000)
(25,500)
(30,600)
(10,200)
(15,300)
(15,300)
(15,300)
(7,089)
(10,200)
-
-
-
-
-
-
-
-
-
6,233,453
6,335,453
1,342,787
1,368,287
1,512,138
1,542,738
480,984
808,897
762,729
899,700
517,150
491,184
824,197
778,029
915,000
524,239
737,643
737,643
(231,489)
- 13,295,481
-
Repay-
ments
$
(96,300)
(24,075)
(28,890)
(9,630)
(14,445)
(14,445)
-
-
Loan
Cancelled
$
Balance at
end
$
Highest in
period $
-
-
-
-
-
-
-
-
6,335,453
6,431,753
1,368,287
1,392,362
1,542,738
1,571,628
491,184
824,197
778,029
500,814
838,642
792,474
915,000
915,000
524,239
524,239
(187,785)
- 12,779,127
-
53 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
Shares granted to KMP and equity holdings
During and since the end of the financial year an aggregate of 247,525 shares (2014: 2,195,000) were granted by the Company
to KMP under the ESP.
The following table outlines the ESP shares issued to KMP or their related entities as at the date of this report:
Director, KMP, to
which the series
relates
Fair value at
grant date
(pre-modifi-
cation1)
Fair value at
grant date
(post-modi-
fication1)
Exercise
price per
share ($)
Aggregate
value at
grant date
($)
Expiry date
Justin McLaughlin
0.10
0.10
0.59
51,500
Change in Control
Share series
Series 61,2,6,9
Series 71,2,6,9
Series 101,3,6,9
Series 111,4,6,9
Series 121,5,6,9
Series 151,5,9
Series 161,5,9
Athol Chiert/Justin
McLaughlin
Simon Swanson
Simon Swanson
Simon Swanson
Greg Martin/Chris
Robson
Todd Kardash
Series 161,5,8,9
Chris Blaxland-Walker
Series 267
Series 267
Series 267
Series 31
Series 32
Series 38
Series 39
Series 40
Series 438
Series 448
Series 458
Athol Chiert
Greg Martin
Todd Kardash
Tony Thomas
Tony Thomas
David Charlton
David Charlton
David Charlton
Chris Blaxland-Walker
Chris Blaxland-Walker
Chris Blaxland-Walker
0.07
0.11
0.08
0.06
0.10
0.10
0.10
0.29
0.29
0.29
0.17
0.19
0.17
0.19
0.22
0.15
0.18
0.21
0.10
0.11
0.08
0.06
0.13
0.13
0.13
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0.49
0.50
0.58
0.65
0.50
0.50
0.50
0.57
0.57
0.57
0.61
0.61
0.75
0.75
0.75
1.01
1.01
1.01
98,057
Change in Control
224,074
Change in Control
323,295
Change in Control
241,927
Change in Control
294,000
127,366
127,366
1/07/2016
1/09/2016
1/09/2016
289,798
Change in Control
289,798
Change in Control
144,899
Change in Control
123,873
Change in control
140,797 1 Year Post change
in control
38,230
44,307
50,054
12,385
14,775
16,975
30/05/2018
30/05/2019
30/05/2020
26/11/2018
26/11/2019
26/11/2020
1
2
3
4
5
6
7
8
9
On the 14th February 2013, the Board approved a change to the rules of the ESP which changed the interest rate charged on the financial assistance granted
to the ESP Participants from the RBA official cash rate plus 25 basis points to zero percent. This resulted in changes to the inputs of the option pricing model
which had an impact on the fair value of the option at the date of the change.
Change of control provision was triggered on 23 October 2009 by GPG increasing its shareholding above 50%. As a result, the vesting conditions for employees
that were issued shares prior to the date of change of control were accelerated.
Shares vested 1 year from date of commencement of employment on 26 March 2011.
Shares vested 2 years from date of commencement of employment on 26 March 2012.
Change of control provision was triggered on 26 September 2012 by CCP Bidco obtaining a shareholding above 50%.
The Board approved granting an extension of the loan term until such time as there is a change of control in the Company.
Special condition relating to shares issued to KMP in Series 26: the shares may be sold on change of control with 50% of the funds held for in escrow for a
period of 12 months.
Chris Blaxland-Walker became KMP on 13 October 2014.
Vesting conditions have been met up to the date of this report.
ClearView Annual Report 2015 54
ClearView Wealth Limited Directors’ Report
Continued
The following table summaries the performance and vesting conditions for shares issues to Employee Participants under the
ESP as at the date of this report are:
Vesting Conditions
Performance Conditions
Series
Series 6 – 30 June 2008 Issue
Series 7 – 29 September 2009 Issue
Series 10 – 25 June 2010 Issue
Series 11 – 25 June 2010 Issue
Series 12 – 25 June 2010 Issue
Series 15 – 18 August 2011 Issue
Series 16 – 6 October 2011 Issue
Series 26- 16 April 2013 Issue
Nil1
Nil1
Nil2
Nil2
Nil2,4
Nil4
Nil4
Upon a change in control of the company3
Series 27- 16 April 2013 Issue
First year anniversary upon the change in control
Series 31- 14 October 2013 Issue
Upon a change in control of the company
Series 32- 14 October 2013 Issue
First year anniversary upon the change in control
Series 38- 30 May 2014 Issue
Series 39- 30 May 2014 Issue
Series 40- 30 May 2014 Issue
Series 43- 26 November 2014 Issue
Series 44- 26 November 2014 Issue
Series 45- 26 November 2014 Issue
Remain an employee of the company for 4 years from
Grant date of shares
Remain an employee of the company for 5 years from
Grant date of shares
Remain an employee of the company for 6 years from
Grant date of shares
Remain an employee of the company for 4 years from
Grant date of shares
Remain an employee of the company for 5 years from
Grant date of shares
Remain an employee of the company for 6 years from
Grant date of shares
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1
2
3
Change of control provision was triggered on 23 October 2009 by GPG increasing its shareholding above 50%.
In accordance with Mr Swanson’s employment contract, Mr Swanson is entitled to a long term incentive comprising 10 million Shares in accordance with the
ESP, and vesting progressively over three years from the commencement date of his contract as follows:
Series 10: 2 million shares at an issue price of 50 cents vesting on 26 March 2011 (vested);
Series 11: 4 million shares at an issue price of 58 cents vesting on 26 March 2012 (vested); and
Series 12: 4 million shares at an issue price of 65 cents vesting on 26 September 2012 (vested) on change of control of ClearView.
The Shares issued to Mr Swanson have vested progressively each year as outlined above.
Special condition relating to shares issued to KMP in Series 26: 50% of the shares may be sold on change of control, 50% can be sold after employment for 1
year thereafter and are held in escrow.
4 Change of control provision was triggered on 26 September 2012 by CCP Bidco obtaining a shareholding above 50%.
55 ClearView Annual Report 2015
ClearView Wealth Limited Directors’ Report
Continued
All unvested Shares will automatically vest in accordance with the rules of the Plan upon a change of control as outlined above.
The following table outlines the fully paid ordinary shares of the Company (including those held under the ESP) owned by the
KMP as at 30 June 2015:
o
t
t
c
e
j
b
u
s
s
e
r
a
h
S
s
n
o
i
t
i
d
n
o
c
g
n
i
t
s
e
v
.
o
N
-
-
-
g
n
i
t
s
e
v
o
t
t
c
e
j
b
u
s
.
o
N
s
n
o
i
t
i
d
n
o
c
t
o
n
s
e
r
a
h
S
t
a
e
c
n
a
l
a
B
i
f
o
g
n
n
n
g
e
b
i
.
o
N
r
a
e
y
l
a
i
c
n
a
n
fi
.
o
N
n
o
i
t
a
s
n
e
p
m
o
c
s
a
d
e
t
n
a
r
G
.
o
N
r
a
e
y
l
a
i
c
n
a
n
fi
f
o
d
n
e
e
c
n
a
l
a
B
g
n
i
t
s
e
v
o
t
t
c
e
j
b
u
s
d
l
e
h
e
c
n
a
l
a
B
.
o
N
s
e
g
n
a
h
c
r
e
h
t
o
t
e
N
-
511,367
-
9,700,741
-
108,333
12,784
524,151
242,518
9,943,259
2,708
111,041
.
o
N
s
n
o
i
t
i
d
n
o
c
-
-
-
d
e
t
s
e
v
e
c
n
a
l
a
B
.
o
N
d
n
e
r
a
e
y
t
a
-
-
-
t
e
y
t
o
n
t
u
b
d
e
t
s
e
V
.
o
N
e
l
b
a
s
i
c
r
e
x
e
-
-
-
d
n
a
d
e
t
s
e
V
.
o
N
e
l
b
a
s
i
c
r
e
x
e
-
-
-
2015
B Edwards
G Burg
A Sneddon
S Swanson
A Chiert
D Charlton
- 12,000,000 13,108,334
1,000,000
1,500,000
2,640,384
695,000
-
695,000
J McLaughlin
-
1,500,000
1,500,000
T Kardash
G Martin
T Thomas
C Robson
500,000
1,000,000
1,500,000
1,000,000
2,000,000
3,333,772
1,500,000
-
1,688,556
-
1,000,000
1,000,000
-
-
-
-
-
-
-
-
-
-
77,709 13,186,043
- 10,000,000
8,000,000 2,000,000
-
2,640,384
1,000,000
1,500,000
-
1,500,000
-
695,000
695,000
-
-
-
-
1,500,000
-
1,500,000
-
1,500,000
-
1,500,000
500,000
1,000,000
1,000,000
2,094
3,335,866
1,000,000
2,000,000
2,000,000
38,953
1,727,509 1,500,000
-
-
18,000
1,018,000
-
1,000,000
1,000,000
-
-
-
-
-
C Blaxland-Wakler
-
1,000,000 1,000,000
247,525
-
1,247,525
247,525
1,000,000 1,000,000
Key terms of employment contracts
The following contractual and other arrangements are in place in respect of the KMP as at the date of this report.
Notice period
by either the
employee or the
Company
Other
Term
Ongoing 6 months notice
KMP
Simon
Swanson
Athol Chiert
Ongoing 6 months
notice for the
first 3 years of
employment,
3 months notice
after 3 years.
Todd Kardash Ongoing 13 weeks
If, in the 6 months following a change of control,
Mr Swanson’s remuneration or his duties and
responsibilities are reduced through no fault of
his own, then Mr Swanson will have a right to
terminate the contract with immediate effect. In
this case, and in addition to vesting of Mr Swanson’s
ESP Shares, the Company will be obliged to pay Mr
Swanson 6 months base salary plus the maximum
short term incentive amount for that calendar year.
For all terminations after the first 3 years of
employment an additional 26 week payment is
payable.
Target
Incentive
% of base
salary
Maximum
Incentive
% of base
salary
50%
60%
30%
36%
In the case of redundancy, a severance payment
of 3 months’ base salary (or any greater payment
required under the National Employment
Standards).
30%
36%
ClearView Annual Report 2015 56
ClearView Wealth Limited
Directors’ Report
Continued
KMP
Term
Notice period
by either the
employee or the
Company
Other
Chris Robson
Ongoing 13 weeks
Greg Martin
Ongoing 13 weeks
Justin
McLaughlin
Ongoing 12 months
notice for the
first 3 years of
employment, 6
months notice
after 3 years.
Tony Thomas
Ongoing 13 weeks
David
Charlton
Ongoing 13 weeks
Christopher
Blaxland-
Walker
Ongoing 13 weeks
In the case of redundancy, a severance payment
of 3 months’ base salary (or any greater payment
required under the National Employment
Standards).
In the case of redundancy, a severance payment
of 3 months’ base salary (or any greater payment
required under the National Employment
Standards).
For all terminations after the first 3 years of
employment an additional 26 week payment is
payable.
In the case of redundancy, a severance payment
of 3 months’ base salary (or any greater payment
required under the National Employment
Standards).
In the case of redundancy, a severance payment
of 3 months’ base salary (or any greater payment
required under the National Employment
Standards).
In the case of redundancy, a severance payment
of 3 months’ base salary (or any greater payment
required under the National Employment
Standards).
Target
Incentive
% of base
salary
Maximum
Incentive
% of base
salary
30%
36%
30%
36%
30%
36%
30%
36%
30%
36%
30%
36%
All current Directors are subject to re-election by shareholders at least every 3 years. All current KMP contracts provide for an
annual review of Fixed Remuneration.
Signed in accordance with a resolution of the Board of Directors made pursuant to s298(2) of the Corporation Act 2001.
On behalf of the Directors
Dr Gary Weiss
Chairman
25 August 2015
57 ClearView Annual Report 2015
ClearView Wealth Limited Auditor’s Independence Declaration
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
550 Bourke Street
GPO Box 78
Melbourne 3000
Australia
DX 10307SSE
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
The Board of Directors
Clearview Wealth Limited
Level 12, 20 Bond Street
Sydney NSW 2000
25 August 2015
Dear Directors
ClearView Wealth Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of ClearView Wealth Limited.
As lead audit partner for the audit of the financial statements of Clearview Wealth Limited for the financial
year ended 30 June 2015, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Peter A. Caldwell
Partner
Chartered Accountant
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited.
ClearView Annual Report 2015 58
ClearView Wealth Limited
2015 Financial Report Contents
Statement of Profit or Loss and
other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the financial statements
1 General information
60
61
62
64
65
2 Application of new and revised Accounting Standards 65
22 Payables
23 Provisions
24 Deferred tax balances
25 Convertible note
26 Policy liabilities
27 Issued capital
28 Borrowings
29 Share-based payments
3 Significant accounting policies
4
Critical accounting judgments and key sources
of estimation uncertainty
5 Risk management
6 Capital Adequacy
7 Segment information
8 Fee and other revenue
9
Investment Income
10 Operating expenses
11 Income tax
12 Movements in reserves
13 Sources of profit
14 Earnings per share
15 Cash and cash equivalents
16 Investments
17 Receivables
18 Fixed interest deposits
19 Goodwill
20 Intangible assets
21 Property, plant and equipment
30 Shares granted under the employee share plans
31 Dividends
32 Reconciliation of net profit for the year to net
cash flows from operating activities
33 Subsidiaries
34 Business combinations
35 Related party transactions
36 Financial Instruments
37 Disaggregated information by fund
38 Investment in controlled unit trusts
39 Leases
40 Contingent liabilities and contingent assets
41 Capital commitments
42 Guarantees
43 Subsequent events
Directors’ Declaration
Independent Auditor’s Report
Shareholders’ Information
Directory
69
82
89
93
95
97
97
97
98
100
101
102
102
103
103
104
104
105
106
The Financial Report was authorised for issue by the Directors on 25 August 2015.
107
108
109
110
111
112
113
113
120
120
121
122
123
125
127
136
140
140
141
142
142
142
143
144
146
150
59 ClearView Annual Report 2015
ClearView Wealth Limited Consolidated statement of profit or loss and other
comprehensive income
For the year ended 30 June 2015
Continuing operations
Revenue from continued operations
Premium revenue from insurance contracts
Outward reinsurance expense
Net life insurance premium revenue
Fee and other revenue
Investment income
Operating revenue before net fair value gains on financial
assets
Net fair value gains on financial assets
Net operating revenue
Claims expense
Reinsurance recoveries revenue
Commission and other variable expenses
Operating expenses
Depreciation and amortisation expense
Change in life insurance policy liabilities
Change in reinsurers’ share of life insurance liabilities
Change in life investment policy liabilities
Movement in liability of non-controlling interest in controlled
unit trusts
Profit/(loss) before income tax expense
Income tax expense/(benefit)
Total comprehensive income/(loss) for the year
Attributable to:
Equity holders of the parent
Earnings per share
Basic (cents per share)
Diluted (cents per share)
Underlying earnings per share
Basic (cents per share)
Diluted (cents per share)
To be read in conjunction with the accompanying Notes.
Consolidated
Note
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
8
9
10
10
26
26
26
11
14
105,164
(18,361)
86,803
95,014
71,823
76,785
(10,344)
66,441
59,098
64,762
253,640
190,301
72,818
80,442
326,458
(32,951)
15,010
(87,044)
(81,255)
(12,847)
40,951
(7,367)
270,743
(25,929)
11,680
(45,654)
(60,732)
(10,823)
34,228
(9,994)
(109,198)
(126,385)
(27,968)
(15,651)
-
-
-
-
14,399
14,399
-
14,399
-
-
-
-
-
-
-
687
687
-
687
-
-
-
(3,023)
(1,145)
-
-
-
-
-
-
-
-
-
-
23,789
11,217
12,572
21,483
7,603
13,880
11,376
(482)
11,858
(458)
(138)
(320)
12,572
13,880
11,858
(320)
2.43
2.36
3.97
3.85
3.13
3.10
4.46
4.41
-
-
-
-
-
-
-
-
ClearView Annual Report 2015 60
ClearView Wealth Limited Consolidated statement of financial position
As at 30 June 2015
Assets
Cash and cash equivalents
Investments
Receivables
Fixed interest deposits
Reinsurers’ share of life insurance policy liabilities
Deferred tax asset
Property, plant and equipment
Convertible note
Goodwill
Intangible assets
Total assets
Liabilities
Payables
Current tax liabilities
Provisions
Life insurance policy liabilities
Life investment policy liabilities
Borrowings
Liability to non-controlling interest in controlled unit trusts
Deferred tax liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained losses
Executive Share Plan Reserve
Profit reserve
General reserve
Total equity
To be read in conjunction with the accompanying Notes.
Consolidated
Note
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
15
16
17
18
26
24
21
25
19
20
22
23
26
26
28
24
27
12
12
12
12
200,769
183,299
34,447
1,111
1,450,251
1,336,769
318,159
257,892
15,516
107,035
(2,233)
11,876
88,759
(3,872)
11,029
10,194
1,156
1,711
19,952
36,021
1,347
301
4,858
36,899
9,884
8,115
-
682
-
1,711
-
-
16,353
25,179
-
840
-
301
-
-
1,841,207
1,670,430
372,998
301,676
24,774
25,069
4,548
5,375
4,622
3,588
(156,641)
(127,278)
1,160,627
1,122,364
357
4,548
26
-
-
45,500
-
45,500
418,920
330,607
1,271
1,225
-
-
349
4,622
19
-
-
-
-
-
1,504,374
1,360,197
50,431
4,990
336,833
310,233
322,567
296,686
355,970
(23,659)
6,607
-
(2,085)
330,172
(25,254)
5,315
-
-
355,970
(52,672)
6,605
14,749
(2,085)
330,172
(52,672)
5,315
13,871
-
336,833
310,233
322,567
296,686
61 ClearView Annual Report 2015
ClearView Wealth Limited Executive
share plan
reserve
General
reserve
Profit
reserve
Retained
losses
Attributable
to the
owners of
the parent
$’000
$’000
$’000
$’000
Consolidated statement of changes in equity
For the year ended 30 June 2015
Consolidated
Balance at 1 July 2013
Profit for the year
Total comprehensive income for the year
Recognition of share based payments
Dividend paid
Dividend Reinvestment Plan
Capital raised (net of costs)
Share buyback (inclusive of costs)
ESP loans settled through dividend
ESP shares vested
Balance at 30 June 2014
Profit for the year
Total comprehensive income for the year
Recognition of share based payments
Dividend paid
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
Performance based shares issued in relation
to Matrix Holdings Limited acquisition
General reserve on aquisition of Matrix
Holdings Limited
Shares issued during the year (Non ESP)
Shares issued during the year (ESP vested)
ESP loans settled through dividend
Share
capital
$’000
277,565
-
-
-
-
8,157
44,889
(439)
-
-
330,172
-
-
-
-
10,977
(70)
14,588
$’000
4,127
-
-
905
-
-
-
-
403
(120)
5,315
-
-
896
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
250
53
-
-
(154)
550
(2,085)
-
-
-
Balance at 30 June 2015
355,970
6,607
(2,085)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30,977)
250,715
13,880
13,880
-
(8,157)
-
-
-
-
-
13,880
13,880
905
(8,157)
8,157
44,889
(439)
403
(120)
(25,254)
310,233
12,572
12,572
-
(10,977)
-
-
-
-
-
-
12,572
12,572
896
(10,977)
10,977
(70)
14,588
(2,085)
250
(101)
550
(23,659)
336,833
ClearView Annual Report 2015 62
ClearView Wealth Limited Consolidated statement of changes in equity
For the year ended 30 June 2015
Continued
Company
Balance at 1 July 2013
Loss for the year
Total comprehensive loss for the year
Recognition of share based payments
Dividend paid
Dividend Reinvestment Plan
Capital raised (net of costs)
Share buyback (inclusive of costs)
ESP loans settled through dividend
ESP shares vested
Balance at 30 June 2014
Profit for the year
Total comprehensive income for the year
Recognition of share based payments
Dividend paid
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
Performance based shares issued in relation
to Matrix Holdings Limited acquisition
General reserve on aquisition of Matrix
Holdings Limited
Shares issued during the year (Non ESP)
Shares issued during the year (ESP vested)
ESP loans settled through dividend
Share
capital
$’000
277,565
-
-
-
-
8,157
44,889
(439)
-
-
330,172
-
-
-
-
10,977
(70)
14,588
Executive
share plan
reserve
$’000
4,127
-
-
905
-
-
-
-
403
(120)
5,315
-
-
896
-
-
-
-
General
reserve
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
250
53
-
-
(154)
550
(2,085)
-
-
-
Profit
reserve
Retained
losses
Attributable
to the
owners of
the parent
$’000
$’000
22,028
(52,352)
251,368
-
-
-
(8,157)
-
-
-
-
-
(320)
(320)
-
-
-
-
-
-
-
(320)
(320)
905
(8,157)
8,157
44,889
(439)
403
(120)
13,871
(52,672)
296,686
11,858
11,858
-
(10,977)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,858
11,858
896
(10,977)
10,977
(70)
14,588
(2,085)
250
(101)
550
Balance at 30 June 2015
355,970
6,607
(2,085)
14,749
(52,672)
322,567
63 ClearView Annual Report 2015
ClearView Wealth Limited Consolidated statement of Cash Flows
For the year ended 30 June 2015
Cash flows from operating activities
Receipts from client and debtors
Payments to suppliers and other creditors
Receipts from/(payments to) Group entities
Withdrawals paid to life investment clients
Dividends and trust distributions received
Interest received
Interest on borrowings and other costs of finance
Consolidated
Note
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
385,911
215,189
-
-
(221,445)
(162,483)
-
-
(233,204)
(222,073)
14,941
33,152
(970)
14,702
31,831
-
(4,092)
12,799
-
-
279
(491)
(5,139)
3,704
-
-
419
(5)
3,090
2,069
Income taxes paid
(11,792)
(6,205)
(11,792)
Net cash (utilised)/generated by operating activities
32
(33,407)
(129,039)
(3,297)
Cash flows from investing activities
Net cash movement due to investment in subsidary
(4,970)
-
(44,750)
(23,000)
Payments for investment securities
(1,707,797)
(1,853,406)
(3,006)
Proceeds from sales of investment securities
Acquisition of property, plant and equipment
Acquisition of capitalised software
1,684,926
1,831,488
(452)
(6,375)
(570)
(4,702)
-
-
-
-
-
-
-
Fixed interest deposits (invested)/redeemed
(15,343)
(33,478)
17,583
(14,730)
Loans granted/redeemed
Convertible note drawn down
Dividends received from subsidiary
Loans granted (redeemed) to Group entities
Net cash (utilised) by investing activities
(4,221)
(1,328)
-
-
(360)
(300)
-
-
-
(1,328)
13,500
8,499
-
(300)
-
(8,499)
(55,560)
(61,328)
(9,502)
(46,529)
Cash flows from financing activities
Net movement in liability of non-controlling interest in unit
trusts
Proceeds from share issues (net of expenses)
Proceeds from loan borrowings
Proceeds from capital raising
Share buy back (net of costs)
Repayment of ESP loans
Payments for ESP shares reallocated
Dividends Reinvestment Plan costs
Net cash generated by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial
year
60,301
95,251
242
45,500
-
-
550
(83)
(73)
-
-
44,889
(439)
403
(101)
-
106,437
17,470
140,003
(50,364)
15
183,299
233,663
Cash and cash equivalents at the end of the financial year
200,769
183,299
To be read in conjunction with the accompanying Notes.
-
241
45,500
-
-
550
(83)
(73)
46,135
33,336
1,111
34,447
-
-
-
44,889
(439)
403
(101)
-
44,752
292
819
1,111
ClearView Annual Report 2015 64
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
1. General information
ClearView Wealth Limited (the Company or Consolidated Entity) is a limited company incorporated in Australia. The address of
its registered office is disclosed in the Directory at the back of the Annual Report. The principal activities of the Company and its
subsidiaries (the Group) are described in Note 7.
2. Application of new and revised accounting standards
The following new and revised Australian Accounting Standards and Interpretations have been adopted in the current year and
have affected the amounts reported in these financial statements.
2.1 New and revised AASBs affecting amounts reported and/or disclosures in the financial statements
In the current financial year, the Group has applied a number of new and revised AASBs issued by the Australian Accounting
Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 July 2014
AASB 2012-3 ‘Amendments to
Australian Accounting Standards -
Offsetting Financial Assets and Financial
Liabilities’
Interpretation 21 ‘Levies’
AASB 2013-3 ‘Amendments to
AASB 136 – Recoverable Amount
Disclosures for Non-Financial
Assets’
AASB 2013-4 ‘Amendments to
Australian Accounting Standards
– Novation of Derivatives
and Continuation of Hedge
Accounting’
AASB 2013-5 ‘Amendments to
Australian Accounting Standards
– Investment Entities’
AASB 2012-3 adds application guidance to AASB 132 Financial Instruments:
Presentation to address inconsistencies identified in applying some of the
offsetting criteria of AASB 132.
As the Group does not have any offsetting arrangements in place, the application
of the amendments has not had any material impact on the disclosures or on the
amounts recognised in the consolidated financial statements.
This Interpretation confirms that a liability to pay a levy is only recognised when
the activity that triggers the payment occurs.
The adoption of this amendment does not have any material impact on the Group.
AASB 2013-3 amends the disclosure requirements in AASB 136 Impairment of
Assets.
The amendments include the requirement to disclose additional information
about the fair value measurement when the recoverable amount of impaired
assets is based on fair value less costs of disposal.
The adoption of this amendment does not have any material impact on the Group
or its disclosures.
AASB 2013-4 amends AASB 139 to permit the continuation of hedge accounting
in specified circumstances where a derivative, which has been designated as a
hedging instrument, is novated from one counterparty to a central counterparty
as a consequence of laws or regulations.
As the Group does not utilise hedge accounting, the application of the
amendments has not had any material impact on the disclosures or on the
amounts recognised in the consolidated financial statements.
These amendments define an investment entity and require that, with limited
exceptions, an investment entity does not consolidate its subsidiaries or apply
AASB 3 Business Combinations when it obtains control of another entity. These
amendments require an investment entity to measure unconsolidated subsidiaries
at fair value through profit or loss in its consolidated and separate financial
statements. These amendments also introduce new disclosure requirements for
investment entities to AASB 12 and AASB 127.
The Group has reviewed its classification of its subsidiaries and all have been
identified and accounted for under AASB 3 Business Combinations. This change
in the accounting standards has not changed the Group’s accounting for these
entities. This change has therefore not had a material impact on the disclosures or
on the amounts recognised in the consolidated financial statements.
65 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
2. Application of new and revised accounting standards continued
AASB 1031 ‘Materiality’
AASB 2013-9 ‘Amendments to
Australian Accounting Standards
– Conceptual Framework,
Materiality and Financial
Instruments’
The revised AASB 1031 is an interim standard that cross-references to other
Standards and the Framework (issued December 2013) that contain guidance on
materiality.
AASB 1031 will be withdrawn when references to AASB 1031 in all Standards and
Interpretations have been removed. The adoption of this amendment does not
have any material impact on the Group or its disclosures.
The Standard contains three main parts with Part A adopted in the FY14. Part
B takes effect in the FY15. This makes amendments to particular Australian
Accounting Standards to delete references to AASB 1031 and also makes minor
editorial amendments to various other standards.
The adoption of this amendment does not have any material impact on the Group
or its disclosures.
ClearView Annual Report 2015 66
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
AASB 2014-1 ‘Amendments to
Australian Accounting Standards’ (Part
A: Annual Improvements 2010-2012
and 2011-2013 Cycles)
The Annual Improvements to AASBs 2010 - 2012 and 2011 – 2013 have made
a number of amendments to AASBs. The amendments that are relevant to the
Group are:
The amendments to AASB 2 (i) change the definitions of ‘vesting condition’
and market condition’; and (ii) add definitions for ‘performance condition’ and
‘service condition’ which were previously included within the definition of ‘vesting
condition’. The amendments to AASB 2 are effective for sharebased payment
transactions for which the grant date is on or after 1 July 2014.
The amendments to AASB 3 clarify that contingent consideration that is classified
as an asset or a liability should be measured at fair value at each reporting date,
irrespective of whether the contingent consideration is a financial instrument
within the scope of AASB 9 or AASB 139 or a non-financial asset or liability.
Changes in fair value (other than measurement period adjustments) should be
recognised in profit and loss. The amendments to AASB 3 are effective for business
combinations for which the acquisition date is on or after 1 July 2014.
The amendments to AASB 8 (i) require an entity to disclose the judgements made
by management in applying the aggregation criteria to operating segments,
including a description of the operating segments aggregated and the economic
indicators assessed in determining whether the operating segments have ‘similar
economic characteristics’; and (ii) clarify that a reconciliation of the total of the
reportable segments’ assets to the entity’s assets should only be provided if the
segment assets are regularly provided to the chief operating decision-maker.
The amendments to AASB 116 and AASB 138 remove perceived inconsistencies
in the accounting for accumulated depreciation/amortisation when an item of
property, plant and equipment or an intangible asset is revalued. The amended
standards clarify that the gross carrying amount is adjusted in a manner
consistent with the revaluation of the carrying amount of the asset and that
accumulated depreciation/amortisation is the difference between the gross
carrying amount and the carrying amount after taking into account accumulated
impairment losses.
The amendments to AASB 124 clarify that a management entity providing key
management personnel services to a reporting entity is a related party of the
reporting entity. Consequently, the reporting entity should disclose as related
party transactions the amounts incurred for the service paid or payable to the
management entity for the provision of key management personnel services.
However, disclosure of the components of such compensation is not required
The adoption of these amending standards does not have a material impact on
the consolidated financial statements.
67 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
2. Application of new and revised accounting standards continued
2.2 Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not
yet effective.
Standard/Interpretation
AASB 9 ‘Financial Instruments’, and the relevant amending standards1
AASB 15 ‘Revenue from Contracts with Customers’ and AASB 2014-5
‘Amendments to Australian Accounting Standards arising from AASB 15’
AASB 2014-3 ‘Amendments to Australian Accounting Standards –
Accounting for Acquisitions of Interests in Joint Operations’
AASB 2014-4 ‘Amendments to Australian Accounting Standards –
Clarification of Acceptable Methods of Depreciation and Amortisation’
AASB 2014-9 ‘Amendments to Australian Accounting Standards – Equity
Method in Separate Financial Statements’
AASB 2014-10 ‘Amendments to Australian Accounting Standards – Sale
or Contribution of Assets between an Investor and its Associate or Joint
Venture’
AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual
Improvements to Australian Accounting Standards 2012-2014 Cycle’
AASB 2015-2 ‘Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 101’
AASB 2015-3 ‘Amendments to Australian Accounting Standards arising
from the Withdrawal of AASB 1031 Materiality’
AASB 2015-4 ‘Amendments to Australian Accounting Standards – Financial
Reporting Requirements for Australian Groups with a Foreign Parent’
AASB 2015-5 ‘Amendments to Australian Accounting Standards –
Investment Entities: Applying the Consolidation Exception’
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
1 January 2018
1 January 2018
30 June 2019
30 June 2019
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 July 2015
30 June 2016
1 July 2015
30 June 2016
1 January 2016
30 June 2017
1 The AASB has issued the following versions of AASB 9 and the relevant amending standards;
•
•
•
AASB 9 ‘Financial Instruments’ (December 2009), AASB 2009-11 ‘Amendments to Australian Accounting Standards arising from AASB 9’, AASB 2012-6
‘Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures’
AASB 9 ‘Financial Instruments’ (December 2010), AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)’,
AASB 2012-6 ‘Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosure’.
In December 2014 the AASB issued AASB 2014-9 ‘Amendment to Australian Accounting Standards – Conceptual Framework, Materiality and Financial
Instruments’, Part C – Financial Instruments. This amending standard has amended the mandatory effective date of AASB 9 to 1 January 2017. For annual
reporting periods beginning before 1 January 2017, an entity may early adopt either AASB 9 (December 2009) or AASB 9 (December 2010) and the rele-
vant amending standards.
At the date of publication, there have been no IASB standards or IFRIC interpretations that are issued but not effective.
ClearView Annual Report 2015 68
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies
(a) Statement of compliance
These financial statements are general purpose financial
statements which have been prepared in accordance with
the Corporations Act 2001, Accounting Standards and
Interpretations, and comply with other requirements of
the law.
The financial statements comprise the consolidated financial
statements of the Group. For the purpose of preparing the
consolidated financial statements, the Company is a for-profit
entity. Accounting Standards include Australia Accounting
Standards. Compliance with Australian Accounting Standards
ensures that the financial statements and notes of the
Company and the Group comply with International Financial
Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the
Directors on 25 August 2015
(b) Basis of preparation
The consolidated financial statements have been prepared on
the basis of historical cost, except financial instruments that
are measured at revalued amounts or fair values at the end of
each reporting period, as explained in the accounting policies
below. Historical cost is generally based on the fair values of
the consideration given in exchange for goods and services.
All amounts are presented in Australian dollars, unless
otherwise noted. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating
the fair value of an asset or a liability, the Group takes into
account the characteristics of the asset or liability if market
participants would take those characteristics into account
when pricing the asset or liability at the measurement date.
Fair value for measurement and/or disclosure purposes in
these consolidated financial statements is determined on
such a basis, except for share-based payment transactions
that are within the scope of AASB 2, leasing transactions that
are within the scope of AASB 117, and measurements that
have some similarities to fair value but are not fair value, such
as net realisable value in AASB 2 or value in use in AASB 136.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based
on the degree to which the inputs to the fair value
measurements are observable and the significance of the
inputs to the fair value measurement in its entirety, which are
described as follows:
69 ClearView Annual Report 2015
•
•
•
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the asset
or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset
or liability.
The Company is a company of the kind referred to in ASIC
Class Order 98/100, dated 10 July 1998, and in accordance
with that Class Order amounts in the financial report are
rounded off to the nearest thousand dollars, unless otherwise
indicated.
(c) Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and entities controlled
by the Company and its subsidiaries. Control is achieved when
the Company:
• has power over the investee;
•
is exposed, or has rights, to variable returns from its
involvement with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control
listed above.
When the Company has less than a majority of the voting
rights of an investee, it has power over the investee when
the voting rights are sufficient to give it the practical ability to
direct the relevant activities of the investee unilaterally. The
Company considers all relevant facts and circumstances in
assessing whether or not the Company’s voting rights in an
investee are sufficient to give it power, including:
•
•
•
•
the size of the Company’s holding of voting rights relative
to the size and dispersion of holdings of the other vote
holders;
potential voting rights held by the Company, other vote
holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that
the Company has, or does not have, the current ability
to direct the relevant activities at the time that decisions
need to be made, including voting patterns at previous
shareholders’ meetings.
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income
and expenses of a subsidiary acquired or disposed of during
the year are included in the consolidated statement of profit
or loss and other comprehensive income from the date the
Company gains control until the date when the Company
ceases to control the subsidiary.
Profit or loss and each component of other comprehensive
income are attributed to the owners of the Company and to
the non-controlling interests. Total comprehensive income of
subsidiaries is attributed to the owners of the Company and
to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
on initial recognition for subsequent accounting under AASB
139, when applicable, the cost on initial recognition of an
investment in an associate or a joint venture.
(d) Business combinations
Acquisitions of businesses are accounted for using the
acquisition method. The consideration transferred in a
business combination is measured at fair value which is
calculated as the sum of the acquisition-date fair values of
assets transferred by the Group, liabilities incurred by the
Group to the former owners of the acquiree and the equity
instruments issued by the Group in exchange for control of
the acquiree. Acquisition-related costs are recognised in profit
or loss as incurred.
When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies
into line with the Group’s accounting policies.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value at the
acquisition date, except that:
All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
Changes in the Group’s ownership interests in
existing subsidiaries
Changes in the Group’s ownership interests in subsidiaries
that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The
carrying amounts of the Group’s interests and the non-
controlling interests are adjusted to reflect the changes in
their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests
are adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to
owners of the Company.
When the Group loses control of a subsidiary, a gain or
loss is recognised in profit or loss and is calculated as the
difference between (i) the aggregate of the fair value of the
consideration received and the fair value of any retained
interest and (ii) the previous carrying amount of the assets
(including goodwill), and liabilities of the subsidiary and any
non-controlling interests. All amounts previously recognised
in other comprehensive income in relation to that subsidiary
are accounted for as if the Group had directly disposed of
the related assets or liabilities of the subsidiary (that is,
reclassified to profit or loss or transferred to another category
of equity as specified/permitted by applicable AASBs). The
fair value of any investment retained in the former subsidiary
at the date when control is lost is regarded as the fair value
•
•
•
deferred tax assets or liabilities and liabilities or assets
related to employee benefit arrangements are recognised
and measured in accordance with AASB 112 Income
Taxes and AASB 119 Employee Benefits respectively;
liabilities or equity instruments related to share-based
payment arrangements of the acquiree or share-
based payment arrangements of the Group entered
into to replace share-based payment arrangements of
the acquire are measured in accordance with AASB 2
‘Share¬based Payment’ at the acquisition date; and
assets (or disposal groups) that are classified as held for
sale in accordance with AASB 5 Non current assets Held
for Sale and Discontinued Operations are measured in
accordance with that Standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment,
the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum
of the consideration transferred, the amount of any non-
controlling interests in the acquiree and the fair value of the
acquirer’s previously held interest in the acquiree (if any), the
excess is recognised immediately in profit or loss as a bargain
purchase gain.
Non-controlling interests that are present ownership interests
and entitle their holders to a proportionate share of the
ClearView Annual Report 2015 70
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
entity’s net assets in the event of liquidation may be initially
measured either at fair value or at the non-controlling
interests’ proportionate share of the recognised amounts
of the acquiree’s identifiable net assets. The choice of
measurement basis is made on a transaction-by transaction
basis. Other types of non-controlling interests are measured
at fair value or, when applicable, on the basis specified in
another Standard.
Where the consideration transferred by the Group in a
business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent
consideration is measured at its acquisition-date fair value.
Changes in the fair value of the contingent consideration that
qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against
goodwill. Measurement period adjustments are adjustments
that arise from additional information obtained during the
“measurement period” (which cannot exceed one year from
the acquisition date) about facts and circumstances that
existed at the acquisition date.
The subsequent accounting for changes in the fair value of
contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent
consideration is classified. Contingent consideration that
is classified as equity is not remeasured at subsequent
reporting dates and its subsequent settlement is accounted
for within equity. Contingent consideration that is classified
as an asset or liability is remeasured at subsequent reporting
dates in accordance with AASB 139, or AASB 137 “Provisions,
Contingent Liabilities and Contingent Assets”, as appropriate,
with the corresponding gain or loss being recognised in profit
or loss.
Where a business combination is achieved in stages, the
Group’s previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date (i.e. the date
when the Group attains control) and the resulting gain or
loss, if any, is recognised in profit or loss. Amounts arising
from interests in the acquiree prior to the acquisition date
that have previously been recognised in other comprehensive
income are reclassified to profit or loss where such treatment
would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts
for the items for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement
71 ClearView Annual Report 2015
period (see above), or additional assets or liabilities are
recognised, to reflect new information obtained about facts
and circumstances that existed as at the acquisition date
that, if known, would have affected the amounts recognised
as at that date.
(e) Goodwill
Goodwill arising on an acquisition of a business is carried
at cost as established at the date of the acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated
to each of the Group’s cash-generating units (or groups of
cash-generating units) that is expected to benefit from the
synergies of the combination.
A cash-generating unit to which goodwill has been allocated
is tested for impairment annually, or more frequently when
there is indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than
its carrying amount, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the unit pro rata
based on the carrying amount of each asset in the unit. Any
impairment loss for goodwill is recognised directly in the
statement of profit or loss and other comprehensive income.
An impairment loss recognised for goodwill is not reversed in
subsequent periods.
On disposal of the relevant cash-generating unit, the
attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
The Group’s policy for goodwill arising on the acquisition of an
associate is described at (f) below.
(f) Investments in associates and joint ventures
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in
the financial and operating policy decisions of the investee
but is not control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to
the net assets of the joint arrangement. Joint control is the
contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or joint
ventures are incorporated in these consolidated financial
statements using the equity method of accounting, except
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
when the investment, or a portion thereof, is classified as
held for sale, in which case it is accounted for in accordance
with AASB 5. Under the equity method, an investment
in an associate or a joint venture is initially recognised in
the consolidated statement of financial position at cost
and adjusted thereafter to recognise the Group’s share of
the profit or loss and other comprehensive income of the
associate or joint venture. When the Group’s share of losses
of an associate or a joint venture exceeds the Group’s interest
in that associate or joint venture (which includes any long-
term interests that, in substance, form part of the Group’s net
investment in the associate or joint venture), the Group
discontinues recognising its share of further losses. Additional
losses are recognised only to the extent that the Group has
incurred legal or constructive obligations or made payments
on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted
for using the equity method from the date on which the
investee becomes an associate or a joint venture. On
acquisition of the investment in an associate or a joint
venture, any excess of the cost of the investment over the
Group’s share of the net fair value of the identifiable assets
and liabilities of the investee is recognised as goodwill, which
is included within the carrying amount of the investment.
Any excess of the Group’s share of the net fair value of
the identifiable assets and liabilities over the cost of the
investment, after reassessment, is recognised immediately in
profit or loss in the period in which the investment is acquired.
The requirements of AASB 139 are applied to determine
whether it is necessary to recognise any impairment loss with
respect to the Group’s investment in an associate or a joint
venture. When necessary, the entire carrying amount of the
investment (including goodwill) is tested for impairment in
accordance with AASB 136 Impairment of Assets as a single
asset by comparing its recoverable amount (higher of value in
use and fair value less costs to sell) with its carrying amount,
Any impairment loss recognised forms part of the carrying
amount of the investment. Any reversal of that impairment
loss is recognised in accordance with AASB 136 to the extent
that the recoverable amount of the investment subsequently
increases.
The Group discontinues the use of the equity method from
the date when the investment ceases to be an associate or
a joint venture, or when the investment is classified as held
for sale. When the Group retains an interest in the former
associate or joint venture and the retained interest is a
financial asset, the Group measures the retained interest at
fair value at that date and the fair value is regarded as its fair
value on initial recognition in accordance with AASB 139. The
difference between the carrying amount of the associate or
joint venture at the date the equity method was discontinued,
and the fair value of any retained interest and any proceeds
from disposing of a part interest in the associate or joint
venture is included in the determination of the gain or loss
on disposal of the associate or joint venture. In addition,
the Group accounts for all amounts previously recognised
in other comprehensive income in relation to that associate
or joint venture on the same basis as would be required
if that associate or joint venture had directly disposed of
the related assets or liabilities. Therefore, if a gain or loss
previously recognised in other comprehensive income by
that associate or joint venture would be reclassified to profit
or loss on the disposal of the related assets or liabilities, the
Group reclassifies the gain or loss from equity to profit or loss
(as a reclassification adjustment) when the equity method is
discontinued.
The Group continues to use the equity method when an
investment in an associate becomes an investment in a
joint venture or an investment in a joint venture becomes an
investment in an associate. There is no remeasurement to fair
value upon such changes in ownership interests.
When the Group reduces its ownership interest in an
associate or a joint venture but the Group continues to use
the equity method, the Group reclassifies to profit or loss
the proportion of the gain or loss that had previously been
recognised in other comprehensive income relating to that
reduction in ownership interest if that gain or loss would be
reclassified to profit or loss on the disposal of the related
assets or liabilities.
When a group entity transacts with an associate or a joint
venture of the Group, profits and losses resulting from
the transactions with the associate or joint venture are
recognised in the Group’s consolidated financial statements
only to the extent of interests in the associate or joint venture
that are not related to the Group.
(g) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Fee revenue is recognised when:
• The amount can be measured reliably;
•
It is probable that the future economic benefit associated
with transactions will flow to the entity; and
• The stage of completion can be measured reliably.
ClearView Annual Report 2015 72
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
Premium revenue
Dividend and interest revenue
Premium revenue only arises in respect of life insurance
contracts. Premiums with a regular due date are recognised
as revenue on a due basis. Premiums with no due date are
recognised as revenue on a cash received or receivable basis.
Unpaid premiums are only recognised as revenue during
the days of grace and are included as Premiums Receivable
(part of Receivables) in the statement of financial position.
Premiums due after, but received before, the end of the
financial year are shown as Life Insurance Premium in
Advance (part of Payables) in the statement of financial
position.
Premiums and contributions on life investment contracts are
treated as deposits and are reported as a movement in life
investment contract liabilities.
Dividend revenue from investments is recognised when the
Group’s right to receive payment has been established.
Interest revenue is recognised when it is probable that the
economic benefits will flow to the Group and the amount of
revenue can be measured reliably. Interest revenue is accrued
on a time basis, by reference to the principal outstanding and
at the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying
amount on initial recognition.
Investment Income
Income on investment units and shares is deemed to accrue
on the date the distributions are declared to be effective.
Management fee revenue
Distribution income
Fee revenue comprising management fee revenue with
respect to life investment contracts is recognised in the
statement of profit or loss and other comprehensive
income on an accrual basis as the services are provided.
A single management fee is applied for each Investment
Option, which is based on the value of the assets held in
each Investment Option. The fee is calculated each time
an Investment Option is valued, but before the unit price is
declared. The fee is treated as a reduction in the investment
contract liabilities.
Trustee and administration fee revenue earned on the Wrap
platform is recognised on an accrual basis to the extent that it
is probable that the income benefit will flow to the Group and
the revenue can be reliably measured. Ongoing fee revenue is
recorded over the effective period in which customers’ funds
are invested in products on the Wrap platform.
Financial advice revenue
Financial advice revenue is recognised on an accrual basis
to the extent that it is probable that the income benefit will
flow to the Group and the revenue can be reliably measured.
Ongoing trail revenue is recorded over the effective period in
which customers’ funds are invested in products.
Distribution income from investments in unit trusts is
recognised on a receivable basis as of the date the unit value
is quoted ex-distribution.
Rental Income
The Group’s policy for recognition of revenue from operating
leases is described in (h) below.
(h) Leasing
Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as
operating leases.
The Group as lessee
Operating lease payments are recognised as an expense
on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset are
consumed. Contingent rentals arising under operating leases
are recognised as an expense in the period in which they are
incurred.
In the event that lease incentives are received to enter
into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as
a reduction of rental expense on a straight-line basis, except
where another systematic basis is more representative of
the time pattern in which economic benefits from the leased
asset are consumed.
73 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
(i) Goods and services tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
•
•
Where the amount of GST incurred is not recoverable
from the taxation authority, it is recognised as part of
the cost of acquisition of an asset or as part of an item
of expense; or
For receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables.
Cash flows are included in the cash flow statement on
a gross basis. The GST component of cash flows arising from
investing and financing activities which is recoverable from,
or payable to, the taxation authority is classified within
operating cash flows.
(j) Principles underlying the conduct of life
insurance business
The life insurance operations of the Group are conducted
within separate statutory funds as required by the Life
Insurance Act 1995 (Life Act) and are reported in aggregate
with the shareholders’ funds in the statement of profit or
loss and other comprehensive income, statement of financial
position, statement of changes in equity and statement
of cash flows. The life insurance operations consist of the
provision of life insurance and life investment contracts.
Life insurance contracts involve the acceptance of significant
insurance risk. Insurance risk is defined as significant if,
and only if, an insured event could cause an insurer to pay
significant benefits in any scenario, excluding scenarios that
lack commercial substance. Insurance contracts include
those where the insured benefit is payable on the occurrence
of a specified event such as death, injury or disability caused
by accident or illness. The insured benefit is not linked to the
market value of the investments held by the Group, and the
financial risks are substantially borne by the Group.
Any contracts issued by the Group and regulated under the
Life Act that do not meet the definition of a life insurance
contract are classified as life investment contracts. Life
investment contracts include investment-linked contracts
where the benefit is directly linked to the market value of
the investments held in the particular investment linked
fund. While the underlying assets are registered in the name
of ClearView Life Assurance Limited (ClearView Life) and
the investment-linked policy owner has no direct access to
the specific assets, the contractual arrangements are such
that the investment-linked policy owner bears the risks and
rewards of the fund’s investment performance.
A component of the life investment contracts includes a
minimum unit price guarantee. ClearView Life derives fee
income from the administration of investment linked funds.
Life investment contracts do not contain any discretionary
participation features (i.e. those where the amount or timing
of allocation of the profit from the underlying investments is
at the discretion of the insurer).
In accordance with AASB 1038 “Life Insurance Contracts”,
financial assets backing policy liabilities are designated at fair
value through profit and loss. ClearView Life has determined
that all assets held within the statutory funds back policy
liabilities. Financial assets backing policy liabilities consist of
high quality investments such as cash, equities, fixed income
securities, property trusts and infrastructure assets. The
management of financial assets and policy liabilities is closely
monitored to ensure that investments are appropriate given
the expected pattern of future cash flows arising from the
policy liabilities.
(k) Claims
Life insurance contracts
Claims incurred relate to life insurance contracts and are
treated as expenses. Claims are recognised upon notification
of the insured event. The liability in respect of claims includes
an allowance (estimate) for incurred but not reported claims
and an allowance (estimate) for expected declinature of
notified claims. Claims are shown gross of reinsurance
recoverable. Any reinsurance recoveries applicable to the
claims are included in receivables.
Life investment contracts
There is no claims expense in respect of life investment
contracts. Surrenders and withdrawals which relate to life
investment contracts are treated as a movement in life
investment contract liabilities. Surrenders and withdrawals
are recognised as at the date of redemption of policy units,
which occurs once all documentation has been provided and
completed.
ClearView Annual Report 2015 74
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
(l) Reinsurance
Amounts paid to reinsurers under life insurance contracts
held by the Company are recorded as an outward reinsurance
expense and are recognised in the statement of profit or
loss and other comprehensive income from the reinsurance
premium payment due date. Reinsurance recoveries
receivable on claims incurred are recognised as revenue.
Recoveries are assessed in a manner similar to the
assessment of life insurance contract liabilities. Recoveries
are measured as the present value of the expected future
receipts, calculated on the same basis as the life insurance
contract liabilities.
(m) Policy acquisition costs
The policy acquisition costs incurred are recorded in the
statement of profit or loss and other comprehensive income
and represent the fixed and variable costs of acquiring new
business. The policy acquisition costs include commission,
policy issue and underwriting costs, and related costs.
The acquisition costs incurred in relation to life insurance
contracts are capitalised in the valuation of policy liabilities.
(n) Basis of expense apportionment
All expenses of the life insurance business incurred by
ClearView Life and charged to the statement of profit or loss
and other comprehensive income have been apportioned in
accordance with Part 6, Division 2 of the Life Act.
The basis is as follows:
•
•
Expenses relating specifically to either the ClearView
Life shareholder’s fund or a particular statutory fund are
allocated directly to the respective funds. Such expenses
are apportioned between policy acquisition costs and
policy maintenance costs with reference to the objective
when each expense is incurred and the outcome achieved.
Other expenses are subject to apportionment under
section 80 of the Life Act and are allocated between the
funds in proportion to the activities to which they relate.
They are apportioned between policy acquisition costs
and policy maintenance costs in relation to their nature as
either acquisition or maintenance activities. Activities are
based on direct measures such as time, head counts and
business volumes.
•
Life investment contracts are held within statutory funds
No.2 and No.4. Life insurance contracts are principally
75 ClearView Annual Report 2015
held within statutory fund No.1, except for a small, closed
book of rider insurance covers held in statutory fund
No.2. The allocation of expenses between the primary life
investment or life insurance contracts is inherent in the
allocation to the statutory funds, as described above. The
apportionment basis is in line with the principles set in
the Life Insurance Prudential Standard valuation standard
(Prudential Standard LPS340 Valuation of Policy Liabilities).
All expenses relate to non-participating business as the
Company only writes this category of business.
(o) Policy liabilities
Policy liabilities consist of life insurance policy liabilities and
life investment policy liabilities.
Life insurance contracts
The value of life insurance policy liabilities is calculated
using the Margin on Services methodology. Under this
methodology, planned profit margins and an estimate of
future liabilities are calculated separately for each related
product group, with future cash flows determined using
best estimate assumptions and discounted to the reporting
date. Profit margins are systemically released over the
term of the policies in line with the pattern of services to be
provided. The future planned profit margins are deferred and
recognised over time by including the value of the future
planned profit margins within the value of the policy liabilities.
Further details of the actuarial assumptions used in these
calculations are set out in Note 4.
Life investment contracts
Life investment policy liabilities are valued at fair value,
which is based on the valuation of the assets held within the
unitised investment linked policy investment pools.
(p) Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that
are readily convertible to known amounts of cash, which are
subject to an insignificant risk of changes in value.
(q) Employee benefits
A liability is recognised for benefits accruing to employees in
respect of wages and salaries, annual leave and long service
leave when it is probable that settlement will be required and
they are capable of being measured reliably.
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
Liabilities recognised in respect of short-term employee
benefits, are measured at their nominal values using the
remuneration rate expected to apply at the time
of settlement.
Liabilities recognised in respect of long term employee
benefits are measured as the present value of the estimated
future cash outflows to be made by the Group in respect of
services provided by employees up to reporting date.
Termination benefit
A liability for a termination benefit is recognised at the earlier
of when the entity can no longer withdraw the offer of the
termination benefit and when the entity recognises any
related restructuring costs.
(r) Share based payment arrangements
Share-based payment transactions of the Company
Equity-settled share-based payments to employees and
others providing similar services are measured at the fair
value of the equity instruments at the grant date. Details
regarding the determination of the fair value of equity-settled
share-based transactions are set out in Note 29.
The fair value determined at the grant date of the equity-
settled share-based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s
estimate of equity instruments that will eventually vest,
with a corresponding increase in equity. At the end of each
reporting period, the Group revises its estimate of the number
of equity instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised in profit
or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the equity-
settled employee benefits reserve.
Equity-settled share-based payment transactions with
parties other than employees are measured at the fair value
of the goods or services received, except where that fair
value cannot be estimated reliably, in which case they are
measured at the fair value of the equity instruments granted,
measured at the date the entity obtains the goods or the
counterparty renders the service.
(s) Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current Tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit before tax as reported
in the consolidated statement of profit or loss and other
comprehensive income because of items of income or
expense that are taxable or deductible in other years and
items that are never taxable or deductible. The Group’s
current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the
reporting period.
Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax
bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for
all deductible temporary differences to the extent that it is
probable that taxable profits will be available against which
those deductible temporary differences can be utilised. Such
deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition (other
than in a business combination) of assets and liabilities in
a transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not
recognised if the temporary difference arises from the initial
recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future. Deferred tax assets
arising from deductible temporary differences associated
with such investments and interests are only recognised
to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the
temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
ClearView Annual Report 2015 76
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
liability is settled or the asset realised, based on tax rates (and
tax laws) that have been enacted or substantively enacted by
the end of the reporting period. The measurement of deferred
tax liabilities and assets reflects the tax consequences that
would follow from the manner in which the Group expects,
at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
on a straight-line basis over their estimated useful lives. The
estimated useful life and amortisation method are reviewed
at the end of each reporting period, with the effect of any
changes in estimate being accounted for on a prospective
basis. Intangible assets with indefinite useful lives that are
acquired separately are carried at cost less accumulated
impairment losses.
Deferred tax liabilities and assets are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case
the current and deferred tax are also recognised in other
comprehensive income or directly in equity, respectively.
Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is
included in the accounting for the business combination.
(t) Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses.
Depreciation is recognised so as to write off the cost or
valuation of assets (other than freehold land and properties
under construction) less their residual values over their useful
lives, using the straight-line method. The estimated useful
lives, residual values and depreciation method are reviewed
at the end of each reporting period, with the effect of any
changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any
gain or loss arising on the disposal or retirement of an item
of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying
amount of the asset and is recognised in profit or loss.
(u) Intangible assets - Software
Intangible assets acquired separately
Intangible assets with finite lives that are acquired separately
are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised
77 ClearView Annual Report 2015
Internally-generated intangible assets - research
and development expenditure
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
An internally-generated intangible asset arising from
development (or from the development phase of an internal
project) is recognised if, and only if, all of the following have
been demonstrated:
•
•
The technical feasibility of completing the intangible asset
so that it will be available for use or sale;
The intention to complete the intangible asset and use or
sell it;
• The ability to use or sell the intangible asset;
•
•
•
How the intangible asset will generate probable future
economic benefits;
The availability of adequate technical, financial and other
resources to complete the development and to use or sell
the intangible asset; and
The ability to measure reliably the expenditure
attributable to the intangible asset during its
development.
The amount initially recognised for internally-generated
intangible assets is the sum of the expenditure incurred from
the date when the intangible asset first meets the recognition
criteria listed above. Where no internally-generated intangible
asset can be recognised, development expenditure is
recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the
same basis as intangible assets that are acquired separately.
Amortisation is charged to the statement of profit or loss and
other comprehensive income on a straight-line basis over
periods generally ranging from 3 to 5 years. Management
reviews the appropriateness of the amortisation period on an
annual basis.
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no
future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible
asset, measured as the difference between the net disposal
proceeds and the carrying amount of the asset are recognised
in profit or loss when the asset is derecognised.
carrying amount that would have been determined had
no impairment loss been recognised for the asset (or cash-
generating unit) in prior years. A reversal of an impairment
loss is recognised immediately in profit or loss, unless the
relevant asset is carried at a revalued amount, in which case
the reversal of the impairment loss is treated as a revaluation
increase.
(v) Impairment of tangible and intangible assets other
than goodwill
At the end of each reporting period, the Group reviews the
carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if
any). When it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which
the asset belongs. When a reasonable and consistent basis
of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise
they are allocated to the smallest group of cash-generating
units for which a reasonable and consistent allocation basis
can be identified. Intangible assets with indefinite useful lives
and intangible assets not yet available for use are tested
for impairment at least annually, and whenever there is an
indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using
a discount rate that reflects current market assessments
of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have
not been adjusted. If the recoverable amount of an asset
(or cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or cash-
generating unit) is reduced to its recoverable amount.
An impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation
decrease.
When an impairment loss subsequently reverses, the carrying
amount of the asset (or cash generating unit) is increased
to the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the
(w) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the
amount of the obligation.
The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation
at the end of the reporting period, taking into account the
risks and uncertainties surrounding the obligation. When a
provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present
value of those cash flows (where the effect of the time value
of money is material).
When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
Onerous contracts
Present obligations arising under onerous contracts are
recognised and measured as provisions. An onerous contract
is considered to exist where the Group has a contract under
which the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be
received from the contract.
Restructurings
A restructuring provision is recognised when the Group has
developed a detailed formal plan for the restructuring and
has raised a valid expectation in those affected that it will
carry out the restructuring by starting to implement the plan
or announcing its main features to those affected by it. The
measurement of a restructuring provision includes only the
direct expenditures arising from the restructuring, which
are those amounts that are both necessarily entailed by the
restructuring and not associated with the ongoing activities
of the entity.
ClearView Annual Report 2015 78
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
(x) Financial instruments
Financial assets and financial liabilities are recognised
when a group entity becomes a party to the contractual
provisions of the instrument. Financial assets and financial
liabilities are initially measured at fair value. Transaction costs
that are directly attributable to the acquisition or issue of
financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or
loss) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in
profit or loss.
Financial Assets
Financial assets are classified into the following specified
categories: financial assets ‘at fair value through profit or
loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available¬for-
sale’ (AFS) financial assets and ‘loans and receivables’. The
classification depends on the nature and purpose of the
financial assets and is determined at the time of initial
recognition. All regular way purchases or sales of financial
assets are recognised and derecognised on a trade date
basis. Regular way purchases or sales are purchases or sales
of financial assets that require delivery of assets within the
time frame established by regulation or convention in the
marketplace.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash receipts
(including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected
life of the debt instrument, or (where appropriate) a shorter
period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified as at
FVTPL.
•
•
•
•
•
It has been acquired principally for the purpose of selling it
in the near term; or
On initial recognition it is part of a portfolio of identified
financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-
taking; or
•
It is a derivative that is not designated and effective as
a hedging instrument. A financial asset other than a
financial asset held for trading may be designated as
at FVTPL upon initial recognition if:
Such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would
otherwise arise; or
The financial asset forms part of a group of financial
assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis,
in accordance with the Group’s documented risk
management or investment strategy, and information
about the grouping is provided internally on that basis; or
It forms part of a contract containing one or more
embedded derivatives, and AASB 139 Financial
Instruments: Recognition and Measurement permits
the entire combined contract (asset or liability) to be
designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any
gains or losses arising on remeasurement recognised in
profit or loss. The net gain or loss recognised in profit or
loss incorporates any dividend or interest earned on the
financial asset and is included in the “net fair value gains and
losses” line item in the statement of profit or loss and other
comprehensive income. Fair value is determined based on the
bid price determined at 7:00pm in accordance with the policy
adapted by the custodian on the reporting date.
Held-to-maturity investments
Bills of exchange and debentures with fixed or determinable
payments and fixed maturity dates that the Group has the
positive intent and ability to hold to maturity are classified as
held-to maturity investments. Held-to-maturity investments
are measured at amortised cost using the effective interest
method less any impairment.
Financial assets at FVTPL
Available for sale financial assets
Financial assets are classified as at FVTPL when the financial
asset is either held for trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if:
Listed shares and listed redeemable notes held by the Group
that are traded in an active market are classified as AFS and
are stated at fair value. The Group also has investments in
79 ClearView Annual Report 2015
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
unlisted shares that are not traded in an active market but
that are also classified as AFS financial assets and stated at
fair value (because the directors consider that fair value can
be reliably measured). Fair value is determined in the manner
described in Note 5. Gains and losses arising from changes in
fair value are recognised in other comprehensive income and
accumulated in the investments revaluation reserve, with the
exception of impairment losses, interest calculated using the
effective interest method, and foreign exchange gains and
losses on monetary assets, which are recognised in profit or
loss. Where the investment is disposed of or is determined
to be impaired, the cumulative gain or loss previously
accumulated in the investments revaluation reserve is
reclassified to profit or loss.
Dividends on AFS equity instruments are recognised in profit
or loss when the Group’s right to receive the dividends is
established.
The fair value of AFS monetary assets denominated in a
foreign currency is determined in that foreign currency and
translated at the spot rate at the end of the reporting period.
The foreign exchange gains and losses that are recognised in
profit or loss are determined based on the amortised cost of
the monetary asset. Other foreign exchange gains and losses
are recognised in other comprehensive income.
Loans and receivables
Trade receivables, loans, and other receivables that have
fixed or determinable payments that are not quoted in an
active market are classified as “loans and receivables”. Loans
and receivables are measured at amortised cost using the
effective interest method, less any impairment. Interest
income is recognised by applying the effective interest
rate, except for short-term receivables when the effect of
discounting is immaterial.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for
indicators of impairment at the end of each reporting period.
Financial assets are considered to be impaired when there is
objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset,
the estimated future cash flows of the investment have been
affected.
For financial assets carried at amortised cost, the amount of
the impairment loss recognised is the difference between the
asset’s carrying amount and the present value of estimated
future cash flows, discounted at the financial asset’s original
effective interest rate.
For financial assets that are carried at cost, the amount of
the impairment loss is measured as the difference between
the asset’s carrying amount and the present value of the
estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Such impairment
loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by
the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount
is reduced through the use of an allowance account. When
a trade receivable is considered uncollectable, it is written
off against the allowance account. Subsequent recoveries
of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the
allowance account are recognised in profit or loss.
When an AFS financial asset is considered to be impaired,
cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss in the
period.
For financial assets measured at amortised cost, if, in a
subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed through
profit or loss to the extent that the carrying amount of the
investment at the date the impairment is reversed does not
exceed what the amortised cost would have been had the
impairment not been recognised.
In respect of AFS equity securities, impairment losses
previously recognised in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent
to an impairment loss is recognised in other comprehensive
income and accumulated under the heading of investments
revaluation reserve. In respect of AFS debt securities,
impairment losses are subsequently reversed through profit
or loss if an increase in the fair value of the investment can be
objectively related to an event occurring after the recognition
of the impairment loss.
Derecognition of financial assets
The Group derecognises a financial asset when the
contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the
risks and rewards of ownership of the asset to another party.
ClearView Annual Report 2015 80
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
If the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the
transferred asset, the Group recognises its retained interest
in the asset and an associated liability for amounts it may
have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset,
the Group continues to recognise the financial asset and
also recognises a collateralised borrowing for the proceeds
received.
On derecognition of a financial asset in its entirety, the
difference between the asset’s carrying amount and the
sum of the consideration received and receivable and
the cumulative gain or loss that had been recognised in
other comprehensive income and accumulated in equity is
recognised in profit or loss.
On derecognition of a financial asset other than in its entirety
(e.g. when the Group retains an option to repurchase part of
a transferred asset), the Group allocates the previous carrying
amount of the financial asset between the part it continues
to recognise under continuing involvement, and the part it
no longer recognises on the basis of the relative fair values
of those parts on the date of the transfer. The difference
between the carrying amount allocated to the part that is no
longer recognised and the sum of the consideration received
for the part no longer recognised and any cumulative gain
or loss allocated to it that had been recognised in other
comprehensive income is recognised in profit or loss. A
cumulative gain or loss that had been recognised in other
comprehensive income is allocated between the part that
continues to be recognised and the part that is no longer
recognised on the basis of the relative fair values of those
parts.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a
residual interest in the assets of an entity after deducting all
of its liabilities. Equity instruments issued by the Group are
recognised as equal to the proceeds received, net of direct
issue costs.
81 ClearView Annual Report 2015
Repurchase of the Company’s own equity instruments is
recognised and deducted directly in equity. No gain or loss
is recognised in profit or loss on the purchase, sale, issue or
cancellation of the Company’s own equity instruments.
Financial liabilities
Financial liabilities are classified as either financial liabilities
“at FVTPL” or “other financial liabilities”.
Financial liabilities at FVTPL
Financial liabilities are classified at FVTPL when the financial
liability is either held for trading or it is designated as at
FVTPL. A financial liability is classified as held for trading if:
•
•
It has been incurred principally for the purpose of
repurchasing it in the near term; or
On initial recognition it is part of a portfolio of identified
financial instruments that the Group manages together
and has a recent actual pattern of short-term profit
taking; or
It is a derivative that is not designated and effective as a
hedging instrument. A financial liability other than a financial
liability held for trading may be designated as at FVTPL upon
initial recognition if:
•
•
•
Such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would
otherwise arise; or
The financial liability forms part of a group of financial
assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis,
in accordance with the Group’s documented risk
management or investment strategy, and information
about the grouping is provided internally on that basis; or
It forms part of a contract containing one or more
embedded derivatives, and AASB 139 “Financial
Instruments: Recognition and Measurement” permits
the entire combined contract (asset or liability) to be
designated at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with
any gains or losses arising on remeasurement recognised in
profit or loss. The net gain or loss recognised in profit or loss
incorporates any interest paid on the financial liability and
is included in the “other gains and losses” line item in the
statement of profit or loss. Fair value is determined in the
manner described in Note 36.
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
3. Significant accounting policies continued
Other financial liabilities
between acquisition and maintenance costs;
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.
• Assets arising from reinsurance contracts;
• Recoverability of intangible assets;
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
•
Impairment of goodwill;
• Deferred tax assets; and
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period.
The effective interest rates is the rate that exactly discounts
estimated future cash payments through the expected life of
the financial liability, or where appropriate a shorter period, to
the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group’s obligations are discharged, cancelled or
they expire. The difference between the carrying amount of
the financial liability derecognised and the consideration paid
and payable is recognised in profit or loss.
4. Critical accounting judgments and
key sources of estimation uncertainty
In the application of the Group’s accounting policies the
Directors are required to make judgments, estimates and
assumptions about carrying values of assets and liabilities
that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which
form the basis of making the judgments. Actual results may
differ from these estimates.
The 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 if the
revision affects only that period or in the period of the revision
and future periods if the revision affects both current and
future periods.
The critical judgments that the Directors have made in the
process of applying the Group’s accounting policies and in
the application of Australian Accounting Standards that have
a significant effect on the financial report and estimates
include:
•
Life insurance policy liabilities, including the actuarial
methods and assumptions and allocation of expenses
•
Contingent consideration for the acquisition of Matrix
Holdings Limited.
Life insurance policy liabilities
Life insurance policy liabilities are, in the majority of cases,
determined using an individual policy-by-policy calculation.
Where material liabilities are not determined by individual
policy valuation, they are computed using statistical
or mathematical methods, which are expected to give
approximately the same results as if an individual liability
were calculated for each contract. The calculations are made
by suitably qualified personnel on the basis of recognised
actuarial methods, with due regard to relevant actuarial
principles. The methodology takes into account the risks
and uncertainties of the particular classes of life insurance
business written.
The key factors that affect the estimation of these liabilities
and related assets are:
•
•
•
•
The cost of providing benefits and administering these
insurance contracts;
The costs incurred in acquiring the policies, including
commissions, underwriting and policy issue costs;
Mortality and morbidity experience on life insurance
products; and
Discontinuance experience, which affects ClearView Life’s
ability to recover the cost of acquiring new business over
the term of the contracts.
In addition, factors such as regulation, competition, interest
rates, taxes, securities market conditions and general
economic conditions affect the level of these liabilities. Details
of specific actuarial policies and methods are set out further
below.
Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are computed using
the same methods as used for insurance policy liabilities.
In addition, the recoverability of these assets is assessed
on a periodic basis to ensure that the balance is reflective
of the amounts that will ultimately be received, taking into
ClearView Annual Report 2015 82
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
consideration factors such as reinsurer counterparty and
credit risk.
Impairment is recognised where there is objective evidence
that the Company may not receive amounts due to it and
these amounts can be reliably measured.
Recoverability of acquired intangible assets
The carrying amount of intangible assets acquired in a
business combination at the financial position date was
$26.1 million (2014: $30.1 million).
Intangible assets acquired in a business combination are
identified and recognised separately from goodwill where
they satisfy the definition of an intangible asset. Subsequent
to initial recognition, intangible assets acquired in a
business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the
same basis as intangible assets acquired separately.
At each reporting date ClearView is required to assess
whether there is any indication that the intangibles may be
impaired. Triggers for impairment are identified and approved
for each cash generating unit (CGU). Further details have been
provided in each relevant section below.
Client Book – Intangible
The carrying amount of the Client Book - Intangible as at the
financial position date was $25.9 million (2014: $30.1 million).
These intangible assets arose on the acquisition of ClearView
Group Holdings Pty Limited (CVGH), Community and Corporate
Pty Limited (CCFA) and Matrix Holdings Limited (Matrix
Holdings). The intangibles represent the value of the in-force
insurance and investment contracts, and value of the existing
financial advice and funds management revenues (the Client
Books). Each Client Book has its own assessment of useful life
depending on the nature of the clients in each segment and
their relative characteristics, based on age, demographics
and type of product to which it relates. The policy adopted to
write-off the Client Books resembles the anticipated ageing
profile of the revenue stream. ClearView identifies its CGUs at
the segment reporting level (lowest level of cash generating
units). The CGUs identified are as follows:
useful life and amortisation method. As a result of the annual
assessment, the useful life of the Life Insurance Client Book
has been changed from 12 years to 8 years due to a change
in the lapse rate assumption at 30 June 2014 on the pre
2011 Life Insurance in-force portfolio and therefore in the
estimated ageing profile of the book. In line with the Group’s
accounting policy, this has been accounted for prospectively,
and will be written off over the remaining 4 years of its useful
life. This has resulted in an increase in the amortisation
expense for the period of $1.4 million. The carrying value
of the Life Insurance Client Book as at 30 June 2015 is $8.5
million.
Triggers considered in testing for annual impairment for the
Life Insurance Client Book are as follows:
• Mortality and morbidity (claims);
• Maintenance costs;
• Persistency (lapse); and
• Discount rates.
The Wealth Management Client Book is written off at 15%
per annum on a straight line basis. The carrying value is $6.3
million at 30 June 2015. Triggers that need to be considered
in testing for annual impairment for the Wealth Client Book
are as follows:
•
Investment returns;
• Maintenance costs;
• Outflows; and
• Discount rates.
The Financial Advice Client Book is written off on a straight
line basis over 10 years. The carrying value is $11.1 million at
30 June 2015.
Triggers that need to be considered in testing for annual
impairment for the Financial Advice Client Book are as follows:
•
Investment returns;
• Maintenance costs;
• Outflows; and
• Discount rates.
• Life Insurance;
• Wealth Management; and
•
Financial Advice.
The Life Insurance Client Book had, until 30 June 2014,
been written off on a straight line basis over 12 years.
At each reporting date, an assessment is made of both the
ClearView prepares an Embedded Value for the Group at
each reporting period. The Embedded Value is prepared
at a reportable segment level (CGUs). The Embedded
Value measure is used as a proxy for the value in use. The
Embedded Value methodology is used to test the acquired
intangibles for any impairment triggers. As at 30 June 2015,
based on the EV calculations, no impairment was required to
83 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
the carrying value of the intangible assets.
Goodwill
Further information about the Embedded Value (and the
movement over the year) is provided in the “Operating and
Financial Review” in the Directors Report and further details
on intangible assets is detailed in Note 20.
Recoverability of internally generated software
intangibles
The carrying amount of internally generated capitalised
software at the financial position date was $9.9 million (2014:
$6.8 million)
At each reporting period the internally generated software
is assessed for any impairment triggers. If any such
indication exists, the recoverable amount of the asset shall
be estimated. The impairment indicators for the software
intangible are defined as:
•
•
•
•
The ability of the software to provide the functionality
required from the business to use the asset;
The software is being utilised for the purposes that it was
designed;
The availability of alternative software that the business
has available; and
Product mix - The entity no longer sells the products that
are administered on the policy administration system or
utilises the provided functionality.
Capitalised software costs include those associated with the
implementation of a new compliant and functional wealth
platform and the launch of WealthFoundations that is hosted
on the new platform. The intention is to migrate the Master
Trust and MIS products onto the new platform in due course.
No impairment was required to the carrying values of
internally generated software as at 30 June 2015.
Impairment of Goodwill
The carrying amount of goodwill at the reporting date was
$20.0 million (2014: $4.9 million).
Determining whether goodwill is impaired requires an
estimation of the value-in-use of the cash-generating units
to which the goodwill has been allocated. The value-in-use
calculation requires the entity to estimate the future cash
flows expected to arise from the cash-generating unit and
a suitable discount rate in order to determined the present
value of those cash flows.
CFA acquired the business of CCFA on 9 April 2009.
Goodwill arose in respect of the amount of consideration
paid that related to the expected cost synergies, revenue
growth, improved referral source penetration, future market
development and the assembled work force and ingrained
experience of personnel. These assets are not recognised
separately from goodwill as the future economic benefits
arising from them are not capable of being measured
separately.
CCFA was acquired in 2009 as the first step of the Group
in developing a presence in the wealth management and
financial advice industry. The goodwill that arose on the
acquisition has at the reporting date been allocated to the
Financial Advice CGU. The Group tests for impairment at each
reporting date.
The Company acquired Matrix Holdings Limited (Matrix
Holdings) and its subsidiaries Matrix Planning Solutions
Limited (MPS or Matrix) and Matrix Planning Investments Pty
Ltd (MPI) on 10 October 2014.
Goodwill arose in respect of the amount of consideration paid
attributable to the expected revenue synergies and other
benefits from combining the assets and activities of Matrix
with those of the Group. The expanded number of supportive
advisers has the potential to deliver revenue synergies given
ClearView’s market proven products. The impact of achieving
the revenue targets (in accordance with the deal) is also
expected to result in the increased profitability of the dealer
group. The goodwill that arose on acquisition has at reporting
date been allocated across the financial advice, life insurance
and wealth management CGU’s of the Group.
The Board believes that any reasonable possible change in
the key assumptions on which the recoverable amount is
based would not cause the aggregate carrying amount
to exceed the aggregate recoverable amount of the cash
generating unit.
The FoFA reforms became effective on 1 July 2013 and
focussed on improving the quality of financial advice,
particularly product recommendations to retail clients.
To further progress and clarify the initial reforms, the
Government introduced certain regulations which came into
effect in July 2014 which were subsequently disallowed on
19 November 2014. Only certain provisions contained in
the disallowed regulations were later released and became
effective on 15 December 2014, resulting in the following:
ClearView Annual Report 2015 84
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
•
•
•
•
Grandfathering concession – which clarifies that when
advisers move between licensees with their clients, they
can continue to receive grandfathered remuneration;
Fee disclosure statements – advisers must provide an
annual Fee Disclosure Statement to all clients with whom
they have an ongoing service arrangement, regardless of
the date the relationship commenced (this was previously
limited to post 1 July 2013 clients under the disallowed
regulations);
Opt-in requirement –which requires an adviser to seek
confirmation from the client every two years that they are
happy to renew their ongoing fee arrangement is now in
effect (it was previously postponed under the disallowed
regulations). This requirement only applies to clients who
commenced with their adviser on or after 1 July 2013. The
first opt-in notices were required to be issued from 1 July
2015; and
Best interest duty – reverted to its original drafting by
reinstating the ‘catch all’ element of the ‘safe harbour’
provision (previously the ‘catch-all’ element was removed
under the disallowed regulations).
The progress of the implementation of the regulatory reforms
will continue to be monitored and the impact assessed as
these regulations are rolled out and the practicalities of the
reforms unfold.
ClearView prepares an Embedded Value for the Group at
each reporting period. The Embedded value is prepared at a
reportable segment level (CGU).
The goodwill recognised in the Financial Advice CGU is
tested for impairment triggers using the Embedded Value
methodology.
The goodwill recognised on acquisition of Matrix within the
Life Insurance and Wealth Management CGU's is tested for
impairment triggers by comparing the carrying value of the
goodwill to the forecast incremental Value of New Business
expected to be generated in the Life Insurance and Wealth
Management CGU’s based on the anticipated new business
flows in accordance with the approved Business Plan. As at 30
June 2015, no impairment was required to the carrying value
of the goodwill.
Further information about Goodwill is detailed in Note 19.
Deferred tax asset – Timing Differences
The Board has considered that it is probable that sufficient
taxable income will be available against which deductible
temporary differences can be utilised.
Deferred tax asset – Capital Losses
ClearView Life has amounts of realised and unrealised capital
losses within its superannuation business in its No. 2 and
No.4 Statutory Funds. The Board has considered the likelihood
of the recovery of these losses and their fair value, and has
concluded that it is appropriate to reduce the deferred tax
asset (DTA) held in respect of those capital losses below the
nominal full recovery amount. This has been implemented
via placing a cap on the recognised DTA. The DTA relating to
capital losses are estimated to be utilised in the foreseeable
future and is expressed as a percentage of the value of
investments held. The same methodology has been adopted
for unit pricing purposes and this financial report.
In addition to the above, the Group has accumulated capital
losses that arose within the parent entity related to the losses
realised on the historic disposal of a subsidiary entity. At the
current time, no DTA is recognised in respect of these losses.
This is discussed further in Note 24.
Contingent consideration for the acquisition of Matrix
Holdings Limited
As part of the Merger Implementation Deed entered into
between the parties on 29 August 2014, a component of the
purchase consideration was determined to be contingent
on the satisfaction of a number of Performance Conditions
(including the performance of the acquired entity).
The initial measurement of the fair value of contingent
consideration is based on an assessment of the facts and
circumstances that existed at acquisition date. As the
consideration is contingent upon a number of performance
factors, each factor is given weighting depending on the
probability of each criterion being achieved. The probability-
weighted average of payouts associated with each possible
outcome (‘probability-weighted payout approach’ ) requires
taking into account the range of possible outcomes, the
payouts associated with each possible outcome and the
probability of each outcome arising.
85 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
The table below outlines the performance conditions and probability of each outcome arising:
Performance Condition
At least 75% of Matrix representatives at the date of the offer remain Matrix representative for 3 years
after the completion of the transaction
At least 90% of Matrix representatives adopt the following common processes:
Probability
100%1
100%2
• Utilisation of the ClearView dealergroup platform; and
• Adoption of common advice processes
Achievement of Gross Annual Revenue (GAR) targets by Matrix representatives in accordance with the
Merger Implementation Deed
85.72%3
1 Probability assumed to be 100% as 90% of advisers have signed on for a 3 year period as part of the bid conditions.
2 Probability assumed to be 100% as an integration program is in place to move over 90% of Matrix advisers to the CWT X Plan system by 31 December 2015.
3 This probability is calculated as the likelihood that the GAR targets will be met under various scenarios.
The fair value of contingent consideration as at the financial position date was $12.5 million. This includes a fair value
adjustment of $2.1 million which has been determined by application of the probability of the likelihood of occurrence to the
total possible contingent consideration.
Actuarial methods and assumptions
The effective date of the actuarial report on life insurance policy liabilities and life investment policy liabilities is 30 June 2015.
The actuarial report was prepared by the ClearView Life Appointed Actuary, Ashutosh Bhalerao. The actuarial report indicates
that the Appointed Actuary is satisfied as to the accuracy of the data upon which the policy liabilities have been determined.
The methods used for the major product groups are as follows:
Related Product Group
Fund 1 Old Book Lump Sum
Fund 1 Old Book Income Protection
Fund 1 Non-Advice Lump Sum
Fund 1 LifeSolutions Lump Sum Ordinary
Fund 1 LifeSolutions Lump Sum Super
Fund 1 LifeSolutions Income Protection Ordinary
Fund 1 LifeSolutions Income Protection Super
Fund 2 Old Book Lump Sum
Fund 2 Investments
Fund 4 Investments
Method
Profit carrier
Projection
Projection
Projection
Projection
Projection
Projection
Projection
Projection
Accumulation
Accumulation
Premiums
Premiums
Premiums
Premiums
Premiums
Premiums
Premiums
Premiums
n/a
n/a
These life insurance and life investment policy liability
determinations are also consistent with the requirements of
the relevant Prudential Standards and the Life Insurance Act
1995. Life insurance policy liabilities have been calculated
in a way which allows for the systematic release of planned
margins as services are provided to policyholders and
premiums are received.
The projection method uses the discounted value of future
policy cash flows (premiums, expenses and claims) plus a
reserve for expected future profits. The policy liabilities for life
investment contracts are determined as the fair value of the
policyholders’ accounts under the accumulation method with
no future profit reserve.
ClearView Annual Report 2015 86
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
(b) Actuarial assumptions used in the valuation of
life insurance policy liabilities
(c) Effects of changes in actuarial assumptions (over
12 months to 30 June 2015)
Key assumptions used in the calculations of life insurance
policy liabilities are as follows:
Discount rates: Discount rates are based on a yield curve
derived from Commonwealth Government bond market
yields as at the valuation date, plus an illiquidity adjustment
based on the difference between these yields and BBSW swap
rates as at the valuation date. As an indication, the resulting
average effective discount rate adopted was 3.6% (2014:
4.1%).
Acquisition expenses: Per policy acquisition expense
assumptions were based on the actual acquisition expenses
incurred for the 12 months to 30 June 2015.
Maintenance expense and inflation: The per policy
maintenance expense assumptions were based on the longer
term per policy unit costs implied by ClearView Life’s 2015
business plan (2014: Based on the 2014 business plan).
Expense inflation of 2.5% p.a. (2014: 2.5% p.a.) was assumed.
Lapses: Rates adopted vary by product, duration, age and
premium frequency, and have been based on an analysis of
ClearView Life’s experience over recent years with allowance
for expected trends.
Mortality: Rates adopted vary by product, age, gender, and
smoking status and have been based on ClearView Life’s
mortality experience. The underlying mortality table used was
IA95-97, including allowance for selection.
Morbidity (TPD and Trauma): Rates adopted vary by age,
gender, and smoking status and have been based on
known industry experience plus advice from ClearView Life’s
reinsurers.
Effect on
profit margins
Increase/
(decrease)
Effect on policy
liabilities
Increase/
(decrease)
$’000
$’000
7,438
-
(207)
-
7,231
(4,290)
-
-
-
(4,290)
Assumption category
Discount rates and
inflation
Maintenance expenses
Lapses
Mortality and
morbidity
Total
(d) Processes used to select assumptions
Discount rate
Benefits under life insurance contracts are not contractually
linked to the performance of the assets held. As a result, the
life insurance policy liabilities are discounted for the time
value of money using discount rates that are based on current
observable, objective rates that relate to the nature, structure
and term of the future obligations. The discount rate is based
on Commonwealth Government bond rates adjusted for the
value of the illiquidity of the policy liability. The effect of this
approach is unchanged from that adopted last valuation.
Maintenance expenses and inflation
Maintenance expenses are set having regard to the cost base
in the three year Board adopted business plan excluding short
term growth and development costs.
Per policy maintenance expenses are assumed to increase in
the future with inflation, at a rate that allows for basic price
increases (CPI).
Acquisition expenses
Per policy acquisition expenses were derived from the analysis
of acquisition expenses adopted for this financial report.
Taxation
It has been assumed that current tax legislation and rates
continue unaltered.
87 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
Mortality and morbidity
Appropriate base tables of mortality and morbidity are
chosen for the type of products written. An investigation into
the actual experience of the insurance portfolio over recent
years is performed annually and the Company’s mortality
and morbidity experience is compared against the rates
in the base tables. Where the data is sufficient to be fully
statistically credible, the base table is adjusted to reflect the
portfolio’s experience. Where data is insufficient to be fully
statistically credible, the base table is adjusted having regard
to the extent of the credibility of the portfolio’s experience,
the overall experience of the industry known and advice from
ClearView’s reinsurers.
Lapse
An investigation into the actual lapse experience of ClearView
Life over the most recent years is performed and statistical
methods are used to determine appropriate lapse rates. An
allowance is then made for any trends in the data to arrive at
a best estimate of future lapse rates.
(e) Sensitivity analysis
The Company conducts sensitivity analyses to quantify the exposure to risk of changes in the key underlying variables such as
discount rates, expenses, mortality, morbidity and lapses. The valuations included in the reported results and ClearView Life’s
best estimate of future performance are calculated using certain assumptions about these variables. The movement in any
key variable may impact the reported performance and net assets of ClearView Life and the consolidated entity and as such
represents a risk.
Variable
Impact of movement in underlying variable
Interest Rate Risk
Expense Risk
Mortality Rates
Morbidity Rates
Lapses
The life insurance policy liabilities are calculated using a discount rate that is derived from market
interest rates. Changes in market interest rates will affect the present value of cash flows and profit
margins in the policy liabilities, which in turn will affect the profit and shareholder equity. The change
in interest rates would also impact the emerging profit via its impact on the investment returns on the
assets held to back the liabilities.
An increase in the level (or inflation) of expenses over the assumed levels will decrease emerging profit.
However, a change in the base expense assumptions adopted for the policy liability is unlikely to impact
the current policy liability determination as such a change is absorbed into the policy liability profit
margin reserve in the first instance.
For life insurance contracts providing death benefits an increased rate of mortality would lead to higher
levels of claims, increasing associated claims cost and thereby reducing emerging profit. However, a
change in the mortality assumptions adopted for the policy liability is unlikely to directly impact the
current policy liability determination as such a change is absorbed into the policy liability profit margin
reserve in the first instance.
The cost of claims under TPD and trauma cover depends on the incidence of policyholders becoming
totally and permanently disabled or suffering a “trauma” event such as a heart attack or stroke. Higher
incidence would increase claim costs, thereby reducing profit and shareholder equity. The impact on the
policy liability of a change in morbidity assumptions is as per mortality above.
Lapse risk represents the extent to which policyholders choose not to renew their policy, and allow it to
lapse. An increase in the lapse rates will have a negative effect on emerging profit owing to the loss of
future revenue, including that required to recover acquisition costs. The impact on the policy liability of a
change in lapse assumptions is as per mortality above.
ClearView Annual Report 2015 88
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
The table below illustrates how outcomes during the financial year ended 30 June 2015 in respect of the key actuarial
variables, would have impacted the reported life insurance policy liabilities, profit and equity for that financial year.
Variable
Interest rates
Mortality and morbidity
Lapses
Maintenance expenses
Impact on policy liabilities
Impact on net profit and
shareholder equity
Gross of
reinsurance
Net of
reinsurance
Gross of
reinsurance
Net of
reinsurance
$’000
13,409
$’000
11,229
(15,397)
(12,844)
-
-
-
-
-
-
-
-
-
-
-
-
$’000
(9,386)
10,778
(2,307)
2,307
(1,566)
1,566
(1,288)
1,288
$’000
(7,860)
8,991
(1,256)
1,256
(1,392)
1,392
(1,288)
1,288
Change in
variable
+100bp
-100bp
110.0%
90.0%
110.0%
90.0%
110.0%
90.0%
* Note: The interest rate sensitivities show the change to policy liabilities and profit from a change in the discount rate by adding or subtracting 1% from the yield
curve adopted. The other sensitivities show how different the policy liabilities and reported profit would have been if the Company’s experience in the current year
in relation to those variables had been higher or lower by 10% of that experienced.
5. Risk Management
The Group’s activities expose it to a variety of risks, both
financial and non-financial. Key risks include:
controls identified as part of the risk assessment process.
KPMG is retained to provide outsourced internal audit services.
•
Asset risks, including market risk (interest rate risk and
equity price risk), credit risk and liquidity risk;
The RMS and RMF considers the key stakeholders in the Group,
beyond the shareholders, including:
•
Insurance risk;
• Asset-liability mismatch risks;
•
Expense risks; and client discontinuance (lapses,
withdrawals and lost client) risks; and
• Operational risk, compliance risk and strategic risk.
•
•
The benefit, security and expectations of policyholders,
members of the ClearView Retirement Plan and
investment product and advice clients.
Risk impacts on and from our staff, our distribution
partners and suppliers and counterparties.
• Requirements and objectives of our regulators.
Risk management strategy, roles and responsibilities
Risk management is an integral part of the Group’s
management process. The Group’s Board has adopted a
formal Risk Management Strategy (RMS) and structured risk
management framework (RMF) to assist it in identifying and
managing the key risks to achieving the Group’s objectives.
The RMS and RMF are fundamental to the business decisions
of the Group, including resource allocation decisions and
prioritisation of activities.
The Risk and Compliance Committee, on behalf of the Board,
monitors the operation of the RMF and facilitates review of
the key process and procedures underlying the RMF. Internal
audit activities are focused on key risks and on the key risk
The RMS specifies the Board’s risk appetite and tolerance
standard which guides the Group in its decisions as to the
acceptance, management and rejection of risks. A risk register
is maintained that identifies the key risks of the Group by
type, impact and likelihood, and indicates the key process and
mechanisms to control, mitigate or transfer those risks within
the allowed tolerances. The RMS and RMF includes suitable
monitoring mechanisms.
As part of the RMS and RMF, the Group has adopted an
Internal Capital Adequacy Assessment Process (ICAAP) with
respect to supporting the residual risk exposures retained by
the Group and the ongoing capital needs of the Group.
The key risks are discussed in more detail below:
89 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
5. Risk Management continued
Asset risks
The primary asset risks borne by the Group relate to the
financial assets of the Company and its operating subsidiaries
excluding those in the non-guaranteed investment linked
funds in ClearView Life’s statutory fund No.4 (referred to
below as ClearView assets). The primary financial risks related
to the financial assets in the non-guaranteed investment
linked funds in ClearView Life’s statutory fund No.4 are borne
Insurance risk
by policyholders as the investment performance on those
assets is passed through, in full, to the policyholders (referred
to below as Policyholder assets). Nonetheless, the Company
has a secondary exposure to the Policyholder assets and off-
balance sheet client funds, via the impact on the fees charged
by the Group which vary with the level of Policyholder and
client funds under management and under administration,
as well as related reputational exposure (for further detail on
Asset risks refer to Note 36 Financial Instruments).
The risks under the life insurance contracts written by the Company are exposed to various key variables. The table below
provides an overview of the key insurance contract types and exposure variables.
Type of contract
Detail of contract workings
Nature of compensation
for claims
Key variables that affect the
timing and uncertainty
Non-participating life insurance
Benefits paid on death or ill
Benefits defined by the
contracts with fixed terms
health that are fixed and not at
insurance contract are
(Term Life and Disability)
the discretion of the issuer
determined by the contract
obligation of the issuer and
Mortality
Morbidity
Discontinuance rates
are not directly affected by the
Expenses
performance of the underlying
assets or the performance of
the contracts as a whole
Policy Terms
Premium Rates
Insurance risks are controlled through the use of underwriting procedures, appropriate premium rating methods and
approaches, appropriate reinsurance arrangements, effective claims management procedures and sound product terms and
conditions due diligence.
(a) Risk management objectives and policies for
mitigating insurance risk
are members of large international groups with sound credit
ratings.
ClearView Life issues term life insurance contracts and
disability insurance contracts. The performance of the
Company and its continuing ability to write business depends
on its ability to manage insurance risk. The Company’s RMS
summarises its approach to insurance risk management.
(b) Methods to limit manage or transfer insurance
risk exposures
Reinsurance
ClearView Life purchases reinsurance to limit its exposure to
accepted insurance risk. ClearView Life cedes to specialist
reinsurance companies a proportion of its portfolio for certain
types of insurance risk. This serves primarily to reduce the
net liability on large individual risks and provide protection
against large losses. The reinsurers used are regulated by
the Australian Prudential Regulation Authority (APRA) and
ClearView Life periodically reviews its reinsurance
arrangements and retention levels.
Underwriting procedures
Underwriting decisions are made using the underwriting
procedures reflected in ClearView Life’s underwriting systems
and detailed in ClearView Life’s underwriting manual. Such
procedures include limits as to delegated authorities and
signing powers. The underwriting process is subject to
ClearView Life’s internal control processes and is subject to
review by the reinsurers from time to time.
Claims management
Strict claims management procedures help ensure the timely
and correct payment of claims in accordance with policy
conditions, as well as limiting exposure to inappropriate and
fraudulent claims.
ClearView Annual Report 2015 90
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
5. Risk Management continued
(c) Concentration of insurance risk
The insurance business of the Company is principally
written on individual lives (not group business). Individual
business is not expected to provide significant exposure to
risk concentration. Nonetheless, the residual risk exposure
is reduced through the use of reinsurance and is subject to
review by the reinsurer’s from time to time.
(d) Pricing risk, and terms and conditions of
insurance contracts
The key risk controls in respect of pricing and policy terms and
conditions include:
•
•
•
•
•
Review of product pricing by the Appointed Actuary of
ClearView Life, including annual analysis of experience
and product line profitability in the annual ClearView Life
Financial Condition Report;
Formal Appointed Actuary Board reporting on new product
pricing, reinsurance and terms and conditions;
Assessment by the Company’s reinsurers of the pricing
adopted, including the offer of corresponding reinsurance
terms;
Formal internal policy document and Product Disclosure
Statement due diligence review and sign-off processes;
and
The ability to re-price products (change premium rates
and fees) on most products in the event of adverse claims
and/or other product experience.
It is noted that similar processes and controls apply to the
pricing and terms and conditions applicable to the investment
products issued by the Company.
Asset-Liability Mismatch Risk
Asset-liability mismatch risk arises to the extent to which
the assets held by the Group to back its liabilities (especially
its policy liabilities and investment contract liabilities) do
not closely match the nature and term of those liabilities.
In practice, the market risk and credit risk exposures of the
Group primarily relate to the extent that the Group retains a
net exposure with respect to these risks – that is the extent
to which the liabilities and their values do not mirror the
variation in asset values. In this context it is noted:
•
The investment linked liabilities of the ClearView Life
directly link the underlying assets held to support those
91 ClearView Annual Report 2015
•
•
liabilities, with the primary market risks and credit risks
passed on to the policyholder and unit trust investors (as
discussed above).
The assets held to support the capital guaranteed units
in the ClearView Life No.2 and No.4 statutory funds are
maintained, in accordance with the Board’s investment
Policy and Guidelines, in high quality, short dated fixed
interest assets and cash. Asset-liability risk is substantially
reduced via this means.
Similarly, assets held to support the policy liabilities and
risk capital of the ClearView Life No.1 statutory fund are
maintained, in accordance with the Board’s investment
Policy and Guidelines, in high quality, short dated fixed
interest assets and cash that closely match those policy
liabilities and capital reserves.
Expense and Discontinuance Risks
Expense risks and discontinuance risks involve:
•
•
The extent to which the expenses of the business are not
maintained at a level commensurate with premium and
fee flows of the business, including the level of business
growth and new business and client acquisition;
The extent to which the rate of loss of policyholders,
investment clients and other customers exceed
benchmark standards and pricing targets, result in the loss
of future profit margins, current period expense support,
and loss of opportunity to recover historic acquisition costs
incurred.
The risks are principally managed via the Group’s:
•
•
Budgeting and expense management reporting and
management processes;
Modelling of anticipated client loss rates and ongoing
monitoring of discontinuance rates;
•
Adoption of appropriate business retention strategies; and
• Maintaining strong distribution partner relationships.
Non-Financial Risks – Compliance, Operational
& Strategic Risks
The Company has exposure to a number of operational,
compliance and strategic risks. The management of these
risks forms a substantial part of the focus of the RMS and RMF.
Key elements of the RMF include:
•
Formal internal Risk and Compliance functions within the
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Advice and Matrix Planning Solutions are also required to
maintain minimum regulatory capital as required by ASIC.
•
ClearView Life Nominees is required to maintain an
Operational Risk Financial Requirement (ORFR) as
determined in accordance with Superannuation Prudential
Standard 114. SPS 114 requires that the trustee maintains
adequate financial resources to address losses arising
from the operational risks that may affect the ClearView
Retirement Plan.
Nonetheless, the Group maintains additional capital reserves
in accordance with its Board adopted ICAAP that retains
capital reserves to support its retained risk exposures, ensures
there is a low likelihood that the Group (and its regulated)
subsidiaries will breach their regulatory requirements, and has
sufficient capital to manage its near term business plans and
provide a buffer (capital and time) to take action to deal with
reasonably foreseeable adverse events that may impact the
businesses. These additional reserves are partly held within
the subsidiaries where the key risks reside, and partly in a
central reserve within the parent entity.
Continued
5. Risk Management continued
Group;
•
•
•
•
•
•
•
A specific focus area of the Risk and Compliance
Committee;
A risk and control self assessment process undertaken by
each business unit.
Detailed compliance registers, reporting timetables,
breach and incident reporting and due diligence
processes;
Internal audit, whistleblowing policy and facilities,
detailed financial reconciliations and unit pricing.
Checking processes, detail IT development and
implementation processes;
Maintain sound process documentation and monitoring
of outsource service provider service performance
and standards;
Comprehensive internal management information
reporting and monitoring, emerging risk exposures
reporting, staff training programs, staff recruitment
standards (including fit and proper standards); and
Maintaining an appropriate risk culture within the
business, including Board and Senior Management
Team focus, and including risk management as a formal
part of all key business decisions, and appropriate risk
management supporting remuneration structures. Within
this content the business operates a Risk Management
and Compliance Committee and a Risk Management
Forum with representatives from across the business.
Capital management and reserving
In terms of regulatory requirements:
•
ClearView Life is subject to minimum regulatory capital
requirements, as determined by the Appointed Actuary
in accordance with APRA Life Insurance Prudential
Standards, in respect of the principal financial risks
exposures retained by ClearView Life.
•
ClearView Financial Management, ClearView Financial
ClearView Annual Report 2015 92
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
6. Capital adequacy
ClearView Life Assurance is subject to minimum capital regulatory capital requirements in accordance with Australian
Prudential Regulation Authority (APRA) Life Insurance Prudential Standards. ClearView Life is required to maintain adequate
capital against the risks associated with its business activities and measure its capital to the “Prudential Capital Requirement”
(PCR).
ClearView Life has in place an Internal Capital Adequacy Assessment Process (ICAAP), approved by the Directors, to ensure it
maintains required levels of capital within each of its statutory and general funds. The capital adequacy position at balance
date for ClearView Life, in accordance with the APRA requirements, is as follows:
Capital position
Statutory fund
Statutory fund
Statutory fund
No. 1
No. 2
No. 4
Shareholder’s
Fund
Australian non-
participating
Australian non-
participating
Australian non-
participating
2015
$’000
6,246
-
6,246
-
(2,950)
2015
$’000
247,649
(5,260)
242,389
(352)
-
-
(186,033)
3,296
(734)
2,562
4.5
56,004
(5,766)
50,237
9.7
2015
$’000
3,039
-
3,039
(2)
-
(162)
2,875
(561)
2,314
5.1
2015
$’000
10,839
(4,694)
6,145
(66)
-
-
6,079
(2,939)
3,140
2.1
Net Assets (Common Equity Tier 1 Capital)
Goodwill and intangibles
Net tangible assets
Capital base adjustments
Deferred tax assets
Investment in subsidiaries
Policy liability
Regulatory capital base
Prescribed Capital Amount (PCA)
Available Enterprise Capital (AEC)
Capital Adequacy Multiple
Prescribed capital amount comprises:
Insurance Risk
Asset Risk
-
(1,895)
-
-
(20)
(852)
(399)
(172)
Asset Concentration Risk
-
-
-
-
ClearView Life
Assurance
Limited
2015
$’000
267,772
(9,954)
257,818
(420)
(2,950)
(186,195)
68,253
(10,000)
58,253
6.8
(1,895)
(1,444)
-
Operational Risk
Aggregation benefit
LPS110 CLAL Minimum
Prescribed Capital Amount
-
(3,538)
(162)
(2,767)
(6,466)
-
519 -
-
(714)
-
-
-
519
(714)
(734)
(5,766)
(561)
(2,939)
(10,000)
93 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
6. Capital adequacy continued
Statutory fund
Statutory fund
Statutory fund
No. 1
No. 2
No. 4
Shareholder’s
Fund
Australian non-
participating
Australian non-
participating
Australian non-
participating
Net Assets (Common Equity Tier 1 Capital)
Goodwill and intangibles
Net tangible assets
Capital base adjustments
Deferred tax assets
Investment in subsidiaries
Policy liability
Regulatory capital base
Prescribed Capital Amount (PCA)
Available Enterprise Capital (AEC)
Capital Adequacy Multiple
Prescribed capital amount comprises:
Insurance Risk
Asset Risk
Asset Concentration Risk
Operational Risk
Aggregation benefit
LPS110 CLAL Minimum
Prescribed Capital Amount
2014
$’000
4,649
-
4,649
-
(1,450)
2014
$’000
201,713
(5,480)
196,233
(382)
-
-
(146,767)
3,199
(2,363)
836
1.4
-
(77)
-
-
-
(2,286)
(2,363)
49,084
(4,088)
44,996
12.0
(1,247)
(576)
-
(2,614)
349
-
2014
$’000
2,455
-
2,455
(2)
-
(84)
2,369
(626)
1,743
3.8
-
(440)
-
(186)
-
-
2014
$’000
9,848
(1,241)
8,607
(59)
-
-
8,548
(2,923)
5,625
2.9
-
(267)
-
(2,656)
-
-
ClearView Life
Assurance
Limited
2014
$’000
218,665
(6,721)
211,944
(443)
(1,450)
(146,851)
63,200
(10,000)
53,200
6.3
(1,247)
(1,360)
-
(5,456)
349
(2,286)
(10,000)
(4,088)
(626)
(2,923)
ClearView Annual Report 2015 94
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
7. Segment information
AASB 8 requires operating segments to be identified on the
basis of internal reports about components of the Group that
are regularly reviewed by the chief operating decision maker
in order to allocate resources to the segment and to assess its
performance.
The information reported to the Group’s Board of Directors,
being the chief operating decision maker, for the purpose
of resource allocation and assessment of performance is
focused on the products and services of each reporting
segment.
The principal activities and the Group’s reportable segments
under AASB 8 are as follows:
• Life Insurance;
• Wealth Management;
•
Financial Advice; and
• Listed Entity/Other.
(a) Life Insurance (“protection” products)
ClearView provides life insurance protection products through
its wholly owned subsidiary ClearView Life. The products
provided by ClearView Life include:
•
•
A comprehensive range of life protection products
distributed via both CFA and Matrix financial advisers and
third party, external advisers (IFAs). The product suite,
LifeSolutions, was launched in December 2011 and is a
high quality advice based product suite, providing top
quartile benefits and terms at market competitive prices.
LifeSolutions includes term life, permanent disability,
trauma and critical illness benefits, parent cover, child
cover, accident covers, income protection and business
expense covers. Policies can be issued directly or via the
ClearView Retirement Plan as superannuation;
A range of Non-Advice life protection products sold
through direct marketing, telemarketing, call centre
referrals, or online. Products include term life, accidental
death, injury covers, trauma and critical illness and funeral
insurance.
(b) Wealth Management (“investment” products)
ClearView provides wealth management products via four
primary avenues:
•
Master Trust - Life investment contracts issued by
ClearView Life. Products include ordinary savings,
superannuation and allocated pension products, with the
latter two provided via the ClearView Retirement Plan;
95 ClearView Annual Report 2015
•
•
•
WealthSolutions - A superannuation and retirement
income wrap (issued via the ClearView Retirement Plan)
and an Investor Directed Portfolio Service (IDPS) Wrap
(provided by CFML). This is offered via the WealthSolutions
platform which was launched in December 2011.
WealthSolutions includes a menu of approximately
250 investment funds, ASX listed shares, term deposits
and seven ClearView managed funds. It also provides a
number of model portfolios managed by ClearView for
superannuation investors;
WealthFoundations - Life investment contracts issued
by ClearView Life. Products include superannuation and
allocated pension products, issued via the ClearView
Retirement Plan. This is offered via the WealthFoundations
platform which was launched in October 2014.
WealthFoundations includes a menu of 16 investment
options with transparent investment in underlying funds;
and
Managed Investment Schemes (MIS) - Products are
issued via ClearView Financial Management Limited
(CFML) as the ASIC licensed Responsible Entity and include
MIS products available on ClearView’s WealthSolutions
platform.
(c) Financial Advice
ClearView provides financial advice services through its wholly
owned subsidiaries ClearView Financial Advice (CFA) and
Matrix Planning Solutions (MPS). CFA has historically employed
a number of salaried financial advisers. CFA and MPS provide
dealer group services to a number of self employed financial
advisers.
(d) Listed Entity/Other
This represents the investment earnings on the cash and
investments held in the listed and central services entities
and in the shareholders fund of ClearView Life, less the costs
associated with maintaining a listed entity and interest
expense on corporate debt. The Group manages capital at the
listed entity level in accordance with its ICAAP policy.
Asset segment information has not been disclosed because
the allocation of assets is not used for evaluating segment
performance and deciding the allocation of resources to
segments.
Asset segment information is critical to the performance of
each company and their respective regulatory obligations and
is managed at a company level.
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
7. Segment information continued
Information regarding these segments is provided on the following page. Segment profit or loss represents the profit or loss
earned by each segment including the allocation of directly attributable costs of each segment and an allocation of central
services costs according to an expense allocation model which allocates costs across each segment. The allocation model
excludes the allocation of investment revenue as these are directly recorded against the relevant segments. This is the
measure reported to the Board for the purposes of resource allocation and assessment of segment performance.
The accounting policies of the reportable segments are the same as the Company’s accounting policies described in Note 3.
Segment revenue
Life Insurance
Wealth Management
Financial Advice
Listed entity/Other
External Revenue
Inter-Segment
2015
$’000
2014
$’000
2015
$’000
2014
$’000
2015
$’000
89,802
98,521
64,050
1,267
68,744
91,717
28,733
1,107
-
2,776
19,679
-
-
89,802
1,778
101,297
17,174
-
83,729
1,267
Total
2014
$’000
68,744
93,494
45,907
1,107
Consolidated segment revenue
253,640
190,301
22,455
18,952
276,095
209,252
2015
Total operating earnings after tax
Interest expense on corporate debt
(after tax)
Underlying net profit/(loss) after tax
Amortisation of acquired intangibles
AIFRS policy liability discount rate effect
Matrix deal and integration costs
Income tax effect
Reported profit/(loss)
2014
Underlying net profit/(loss) after tax
Amortisation of acquired intangibles
AIFRS policy liability discount rate effect
Income tax effect
Reported profit/(loss)
Life
Insurance
Wealth
Management
Financial
Advice
Listed Entity/
Other
15,278
-
15,278
(2,833)
4,162
-
(1,248)
15,359
10,845
(1,417)
2,202
(661)
10,969
1,801
-
1,801
(5,256)
-
-
-
(3,455)
5,873
(5,256)
-
-
617
4,398
-
4,398
(914)
-
(434)
130
3,180
3,466
(796)
-
70
(610)
(334)
(944)
-
-
(1,824)
256
(2,512)
(446)
-
-
-
2,740
(446)
Total
20,867
(334)
20,533
(9,003)
4,162
(2,258)
(862)
12,572
19,738
(7,469)
2,202
(591)
13,880
The policy liability discount rates effect is the result of the changes in long term discount rates used to determine the insurance policy liabilities. The life insurance
policy liability (based on AIFRS) is discounted using market discount rates that typically vary at each reporting date and create volatility in the policy liabilities and
consequently earnings. ClearView separately reports this volatility which represents a timing difference in the release of profit and has no impact on underlying
earnings. This movement in policy liability creates a cash flow tax effect.
ClearView Annual Report 2015 96
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
8. Fee and other revenue
Financial advice fees
Funds management fees
Other income
Total fee and other revenue
9. Investment income
Interest income
Dividend income
Distribution income
Total investment income
10. Operating expenses
Administration expenses
Administration and other operational costs
Custody and investment management expenses
Total administration expenses
Employee costs and directors' fees
Employee expenses
Share based payments
Employee termination payments
Directors’ fees
Total employee costs and directors’ fees
Other expenses
Interest expense
Total other expenses
Total operating expenses
Depreciation and amortisation expenses
Depreciation expenses
Software amortisation
Amortisation of Acquired Intangibles
Total amortisation and depreciation expenses
97 ClearView Annual Report 2015
Consolidated
2015
$’000
63,658
31,249
106
2014
$’000
28,514
30,445
139
95,013
59,098
Company
2014
$’000
2015
$’000
-
-
-
-
-
-
-
-
Consolidated
Company
2015
$’000
36,169
14,941
20,713
71,823
2014
$’000
34,159
14,702
15,901
64,762
2015
$’000
899
13,500
-
2014
$’000
687
-
-
14,399
687
Consolidated
2015
$’000
2014
$’000
26,923
7,217
34,140
20,160
6,115
26,275
44,102
32,514
896
590
1,050
46,638
477
477
905
152
884
34,455
2
2
Company
2014
$’000
341
-
341
20
-
-
784
804
-
-
2015
$’000
1,290
-
1,290
423
-
-
833
1,256
477
477
81,255
60,732
3,023
1,145
653
3,190
9,004
475
2,880
7,468
12,847
10,823
-
-
-
-
-
-
-
-
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
10. Operating expenses continued
Remuneration of auditors
Auditor of the parent entity
Audit and review of financial reports
Audit of APRA and ASIC regulatory returns
Audit of Managed Investment Schemes
Total remuneration for audit services
Preparation and lodgement of tax returns
Other non-audit services - taxation advice
Other non-audit services - compliance
Other non-audit services - consulting
Total remuneration for non-audit services
Total remuneration
11. Income tax
a) Income tax recognised in profit or loss
Income Tax (benefit)/expense comprises:
Current tax expense
Deferred tax expense
Over provided in prior years – Current tax expense
Under provided in prior years – Deferred tax expense
Income tax expense/(benefit)
Deferred income tax expense/(benefit) included in income tax
expense comprises:
(Increase)/decrease in deferred tax asset
Increase in deferred tax liability
b) Tax losses
Unused tax losses for which no deferred tax asset has been
recognised
Consolidated
2015
$
2014
$
2015
$
Company
2014
$
293,700
265,700
100,000
95,000
98,700
107,600
86,100
98,200
-
-
-
-
500,000
450,000
100,000
95,000
97,000
32,500
103,500
-
-
20,000
160,000
130,000
289,500
253,500
-
-
-
-
-
-
-
-
-
-
789,500
703,500
100,000
95,000
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
12,021
(682)
(83)
(40)
11,216
(761)
38
(723)
8,961
(144)
(1,178)
(36)
7,603
(258)
78
(180)
(639)
157
-
-
(391)
253
-
-
(482)
(138)
157
-
157
253
-
253
88,291
104,156
32,635
32,635
Potential tax benefit
15,372
16,959
9,790
9,790
ClearView Annual Report 2015 98
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
11. Income Tax continued
The prima facie income tax expense/(benefit) on pre-tax accounting profit from operations reconciles to the income tax
expense in the financial statements as follows:
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
c) Reconiliation of income tax expense to prima facie tax payable
Profit before income tax expense
Policyholder tax (expense) credit recognised as part of the change in
policyholder liabilities in determining profit before tax
Profit before income tax excluding tax charged to policyholders
Prima facie tax calculated at 30%
Tax effect of amounts which are non deductible/assessable in
calculating taxable income:
Shareholder impact of life insurance tax treatment
Franking credits on dividends received
Non-deductible transaction costs
Non assessable income
Non deductible expenses
Non-deductible amortisation expenses
Other
Income tax expense/(benefit) attributable to shareholders
Income tax expense/(benefit) attributable to policyholders
Income tax expense/(benefit)
23,789
(1,600)
22,189
6,656
(22)
-
156
(199)
408
2,701
(84)
9,616
1,600
11,217
21,484
1,481
22,966
6,890
11,376
-
11,376
3,413
(458)
-
(458)
(138)
-
-
-
-
-
-
-
(2)
-
-
-
(4,051)
156
-
-
-
-
(295)
320
2,170
-
9,083
(1,481)
7,603
(482)
(138)
-
-
(482)
(138)
The ability of the Company to continue to pay franked dividends is dependent upon the receipt of franked dividends from its
investment assets and the group itself paying tax.
Franking account
The balance of the franking account after allowing for tax payable in
respect of the current year’s profit, the receipt of franked dividends
recognised as receivables and the payment of any dividends
recognised as a liability at the reporting date.
Relevance of tax consolidation to the Group
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
16,065
10,562
16,065
10,562
ClearView Wealth Limited and its wholly-owned Australian resident entities have formed a tax consolidated group with
effect from 1 February 2007 and are therefore taxed as a single entity from that date. The members in the ClearView tax
consolidated group are identified in Note 33.
Under the Tax Act, ClearView Wealth Limited being the head company of the tax consolidated group is treated as a life
insurance company for income tax purposes as one of the subsidiary members of the tax consolidated group is a life insurance
company.
99 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
11. Income tax continued
Entities within the tax consolidated group have entered into a tax sharing and funding agreement with the head entity. This
agreement has been amended to reflect the changes in the structure of the tax consolidated group and a life insurer becoming
part of the group. These amendments were executed on 20 August 2010.
Under the terms of the tax funding arrangement, ClearView Wealth Limited and each of the entities in the tax consolidated
group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax
asset of the entity.
The tax funding agreement also provides for the head entity to make payments for tax losses of a group member that is
determined in accordance with the provisions of the agreement. Settlement for these amounts is based on the extent to which
the losses are utilised.
The tax sharing arrangement between members of the tax consolidated group provides for the determination of the allocation
of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should
leave the tax-consolidated group. The effect of the tax sharing agreement is that each member’s liability for tax payable by the
tax consolidated group is limited to the amount payable to the head entity under the tax funding arrangement.
On 10 October 2014, Matrix Planning Solutions Limited and Matrix Planning Investments Pty Limited joined the ClearView
Wealth Limited tax consolidated Group. Both entities have also adhered to the ClearView Wealth Limited Tax Sharing and
Funding Agreement on the same day.
12. Movements in reserves
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
Retained losses
Balance at the beginning of the financial year
(25,254)
(30,977)
(52,672)
(52,352)
Net profit/(loss) attributable to members of the parent entity
Dividend paid during the year
Balance at the end of the financial year
Executive share plan reserve
12,572
(10,977)
13,880
(8,157)
-
-
(320)
-
(23,659)
(25,254)
(52,672)
(52,672)
Balance at the beginning of the financial year
5,315
4,127
5,315
4,127
Recognition of share based payments
ESP loans settled through dividend
ESP shares vested
Balance at end of the financial year
Profit Reserve
Balance at the beginning of the financial year
Net profit attributable to the parent entity
Dividend paid during the year
Balance at end of the financial year
General Reserve
Balance at the beginning of the financial year
Retained earnings reserve on Aquisition of Matrix
Balance at end of the financial year
896
550
(154)
6,607
905
403
(120)
5,315
896
550
(154)
6,607
905
403
(120)
5,315
-
-
-
-
-
(2,085)
(2,085)
-
-
-
-
-
-
-
13,871
11,858
22,028
-
(10,977)
(8,157)
14,749
13,871
-
(2,085)
(2,085)
-
-
-
ClearView Annual Report 2015 100
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
13. Sources of profit
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
Components of profit related to movements in life insurance
liabilities
Planned profit margins released
Profit arising from difference between actual investment income
and expected interest on policy liabilities
Profit arrising from the difference between actual and expected
experience
Impact of IFRS change in economic assumptions
Life insurance
Components of profit related to movements in life investment
liabilities
Expected profit margin
Life investment
Profit for the statutory funds
Profit for the shareholders fund
13,741
4,786
10,669
3,963
(4,628)
(5,017)
4,293
18,192
2,772
12,387
819
819
19,011
97
6,291
6,291
18,678
122
Profit for ClearView Life Assurance Limited
19,108
18,800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
101 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
14. Earnings per share
Earnings per share
Basic earnings (cents)
Diluted earnings (cents)
Basic earnings per share
Consolidated
2015
2014
2.43
2.36
3.13
3.10
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as
follows:
Profit for the year attributable to owners of the Company ($'000)
Earnings used in the calculation of basic earnings per share ($'000)
12,572
12,572
13,880
13,880
Weighted average number of ordinary shares for the purpose of basic earnings per share ('000's)
517,261
442,878
Diluted earnings per share
The earnings used in the calculation of diluted earnings per share are as follows:
Profit for the year attributable to owners of the Company ($'000)
Interest on ESP loans after tax ($'000)
Earnings used in the calculation of total diluted earnings per share
12,572
13,880
-
-
12,572
13,880
The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted
average number of ordinary shares used in the calculation of basic earnings per share as follows:
Weighted average number of ordinary shares used in the calculation of basic earnings per
share (000's)
Shares deemed to be dilutive in respect of the employee share plan (000's)
Weighted average number of ordinary shares used in the calculation of diluted earnings per
share (all measures) (000's)
517,261
442,878
15,693
5,088
532,954
447,966
15. Cash and cash equivalents
Cash at bank
Total cash and cash equivalents
Consolidated
Company
2015
$’000
2014
$’000
200,769
183,299
200,769
183,299
2015
$’000
34,447
34,447
2014
$’000
1,111
1,111
ClearView Annual Report 2015 102
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
16. Investments
Equity securities
Investment in Group Companies
Held directly
Held indirectly via unit trust
Debt securities/fixed interest securities
Held directly
Held indirectly via unit trust
Property/Infrastructure
Held directly
Held indirectly via unit trust
Total investments
17. Receivables
Trade receivables
Outstanding life insurance premium receivable
Provision for outstanding life insurance premiums
Accrued dividends
Investment income receivable
Outstanding settlements
Prepayments
Receivables from controlled entities
Other debtors
Loans receivable
Total receivables
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
-
-
318,159
257,892
222,891
233,817
315,081
266,685
-
-
-
-
537,972
500,502
318,159
257,892
661,976
609,402
29,213
32,008
691,189
641,410
-
-
221,090
194,857
221,090
194,857
-
-
-
-
-
-
-
-
-
-
-
-
1,450,251
1,336,769
318,159
257,892
Consolidated
2015
$’000
984
2,935
(683)
1,883
886
2,671
2,874
-
831
3,135
2014
$’000
436
2,140
(656)
1,851
1,014
3,057
2,294
-
891
849
Company
2014
$’000
2015
$’000
-
-
-
-
-
-
131
-
-
-
-
-
-
7
9,753
16,346
-
-
-
-
15,516
11,876
9,884
16,353
$2.0 million (2014: $0.4 million) of Total consolidated receivables are expected to be recovered more than 12 months from the
reporting date and nil (2014: nil) of Total receivables for the Company are expected to be recovered more than 12 months from
the reporting date.
103 ClearView Annual Report 2015
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2015
Continued
18. Fixed interest deposits
Fixed interest bank term deposits
Consolidated
2015
$’000
2014
$’000
107,035
88,759
Company
2014
$’000
25,179
2015
$’000
8,115
Fixed interest term deposits, held at year end, yield an average fixed interest rate of 3.11% (2014: 3.55%)
19. Goodwill
Gross carrying amount
Balance at the beginning of the financial year
Additional amount recognised through acquisition of business1
Balance at the end of the financial year
Net book value
Balance at the beginning of the financial year
Balance at the end of the financial year
Consolidated
2015
$’000
4,858
15,094
19,952
4,858
19,952
2014
$’000
4,858
-
4,858
4,858
4,858
Company
2014
$’000
2015
$’000
-
-
-
-
-
-
-
-
-
-
1
On 10 October 2014 the company acquired Matrix Holding Limited. $15.1 million of goodwill was recognised on the acquisition. Further details have been
provided in Note 4.
As required under accounting standards at each reporting date the Company assesses whether there is an indication of
impairment. Further details have been provided in Note 4.
ClearView Annual Report 2015 104
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
20. Intangible assets
Capitalised
software
$’000
CWT
software
$’000
Client
book
$’000
Matrix
Website
$’000
Matrix
Brand
$’000
Total
$’000
Consolidated
Balance at the beginning of the year
4,957
1,500
28,467
2015
Gross carrying amount
Balance at the beginning of the financial
year
Acquired directly during the year
Balance at the end of the financial year
Accumulated amortisation and
impairment losses
Amortisation expense in the current
year
Balance at the end of the financial year
Net book value
Balance at the beginning of the financial
year
Balance at the end of the financial year
2014
Gross carrying amount
Balance at the beginning of the financial
year
Acquired directly during the year
Balance at the end of the financial year
Accumulated amortisation and
impairment losses
11,727
1,500
58,596
6,375
18,102
-
1,500
4,721
63,317
3,190
8,147
6,770
9,955
-
1,500
8,994
37,461
-
-
30,129
25,856
7,024
4,703
11,727
1,500
58,596
-
-
1,500
58,596
Balance at the beginning of the year
2,077
1,268
21,231
Amortisation expense in the current
year
Balance at the end of the financial year
Net book value
Balance at the beginning of the financial
year
Balance at the end of the financial year
2,880
4,957
232
1,500
7,236
28,467
4,947
6,770
232
-
37,365
30,129
-
20
20
-
10
10
-
10
-
200
200
-
-
-
71,823
11,316
83,139
34,924
12,194
47,118
-
200
36,899
36,021
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67,120
4,703
71,823
24,576
10,348
34,924
42,544
36,899
$’000
$’000
$’000
$’000
$’000
$’000
As part of the purchase of Matrix during the period, a number of additional intangible assets were purchased. This included an
additional client book, and the Matrix brand and website. As the brand has an indefinite life, this will not be amortised, however
will be assessed for impairment at each reporting date. For further details on the acquisition of Matrix, refer to Note 34.
The intangible assets are amortised over their expected useful lives. As required under accounting standards at each reporting
date the Company assesses whether there is an indication of impairment. Further details have been provided in Note 4.
105 ClearView Annual Report 2015
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2015
Continued
21. Property, plant and equipment
2015
Gross carrying amount
Balance at the beginning of the financial
year
Acquired on acquisition of subsidiary
Additions
Balance at the end of the financial year
Accumulated depreciation/
amortisation and impairment
Balance at the beginning of the financial
year
Acquired on aquisition of subsidiary
Depreciation expense
Balance at the end of the financial year
Net book value
Balance at the end of the financial year
2014
Gross carrying amount
Balance at the beginning of the financial
year
Additions
Written off
Balance at the end of the financial year
Accumulated depreciation/
amortisation and impairment
Balance at the beginning of the financial
year
Depreciation expense
Balance at the end of the financial year
Net book value
Balance at the end of the financial year
No property, plant and equipment is held in the Company.
Office
furniture
Office
equipment
Computer
hardware
Leasehold
improvements
$’000
$’000
$’000
$’000
Consolidated
Total
$’000
502
-
5
507
274
-
91
365
142
28
-
14
42
22
2
4
28
14
1,026
2,160
3,716
-
263
1,289
669
-
193
862
427
10
172
2,342
10
454
4,180
1,404
2,369
-
365
1,769
2
653
3,024
573
1,156
$’000
$’000
$’000
$’000
$’000
474
28
-
502
182
92
274
228
23
5
-
28
21
1
22
6
676
351
(1)
1,026
569
100
669
357
1,974
186
-
2,160
1,122
282
1,404
3,147
570
(1)
3,716
1,894
475
2,369
756
1,347
ClearView Annual Report 2015 106
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
22. Payables
Trade payables
Reinsurance premium payable
Employee entitlements
Life insurance premiums in advance
Life investment premium deposits
Lease incentive in advance
Outstanding investment settlements
Amounts in controlled entities
Other creditors
Total payables
Consolidated
2015
$’000
7,180
5,142
6,162
613
701
943
3,834
-
199
2014
$’000
4,700
3,749
4,902
641
2,544
1,135
7,233
-
165
24,774
25,069
Company
2014
$’000
67
-
18
-
-
-
-
264
-
349
2015
$’000
295
-
12
-
-
-
-
-
50
357
$0.5 million (2014: $0.9 million) of Total consolidated payables are expected to be settled more than 12 months from the
reporting date and nil (2014: nil) of total payables of the Company are expected to be settled more than 12 months from the
reporting date.
107 ClearView Annual Report 2015
ClearView Wealth Limited Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
Notes to the Financial Statements
For the year ended 30 June 2015
Continued
23. Provisions
Current and non current
Make good provision
Provision for restructuring
Employee leave provisions
Other provisions
Total
Make good provision 1
Balance at the beginning of the financial year
Provision acquired in a business combination
Additional provisions raised
Utilised during the period
Non-utilised provisions transferred
Balance at the end of the financial year
Provision for restructuring 2
Balance at the beginning of the financial year
Additional provisions raised
Utilised during the period
Balance at the end of the financial year
Employee leave provision 3
432
122
3,392
1,429
5,375
316
21
438
(343)
-
432
155
50
(83)
122
316
155
2,772
345
3,588
310
-
119
(16)
(97)
413
768
-
(613)
155
Balance at the beginning of the financial year
2,772
2,303
Provision acquired in a business combination
Additional provisions raised
Utilised during the period
Balance at the end of the financial year
Other provisions 4
Balance at the beginning of the financial year
Provision acquired in a business combination
Additional provisions raised
Unutilised provisions reversed during the period
Unutilised provisions transferred during the period
Balance at the end of the financial year
50
2,052
(1,482)
3,392
345
82
1,336
-
(334)
1,429
-
804
(335)
2,772
93
-
232
20
-
345
1
2
3
4
The provision for make good represents the accrued liability for expected costs in relation to the restoration of leased premises on the termination of the lease.
The provisions are expected to be settled on vacating the leased premises on expiration of the relevant lease.
The provision for restructuring relates to the expected cost of rebranding the financial advice business.
The provision for employee leave represents annual leave and long service leave entitlements accrued by employees. The provisions are expected to be utilised
in accordance with the pattern of consumption of employees utilising their leave entitlements.
Other provisions relate to provision for future project work that has been commissioned and for which the work is yet to commence. This relates predominantly
to the migration of the old Wealth Management portfolio to the new weath platform.
ClearView Annual Report 2015 108
-
-
-
26
26
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19
-
7
-
-
26
-
-
-
19
19
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
64
-
(45)
-
-
19
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
24. Deferred tax balances
Deferred tax
Deferred tax assets
Deferred tax liabilities
Deferred tax assets
Amounts recognised in profit or loss
Accruals not currently deductible
Depreciable and amortisable assets
Provisions not currently deductible
Unrealised losses carried forward
Capital business expense
Rental lease incentives
Other
Deferred tax asset
Deferred tax liabilities
Amounts recognised in profit or loss
Unrealised gains on investments
Prepaid expenses
Deferred tax liability
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
11,029
1,271
10,194
1,225
682
-
840
-
418
318
3,248
6,206
586
253
-
597
202
2,258
6,119
858
160
-
11,029
10,194
823
448
877
348
1,271
1,225
35
-
-
-
570
-
77
682
-
-
-
15
-
-
-
825
-
-
840
-
-
-
109 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
24. Deferred tax balances continued
2015
Gross deferred tax liabilities
Gross deferred tax assets
Total
2014
Gross deferred tax liabilities
Gross deferred tax assets
Total
2015
Gross deferred tax liabilities
Gross deferred tax assets
Total
2014
Gross deferred tax liabilities
Gross deferred tax assets
Total
Consolidated
Opening
balance
$’000
Transfers
from
subsidiaries
$’000
(Charge)/
Credit to
income
$’000
(1,225)
10,194
8,969
$’000
(1,147)
9,937
8,790
(8)
74
66
(38)
761
723
$’000
$’000
-
-
-
(78)
257
179
Closing
balance
$’000
(1,271)
11,029
9,758
$’000
(1,225)
10,194
8,969
Company
$’000
$’000
$’000
$’000
-
840
840
-
-
-
$’000
$’000
-
1,093
1,093
-
-
0
-
(158)
(158)
$’000
-
(253)
(253)
-
682
682
$’000
-
840
(840)
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax
benefit through future taxable profits is probable. Unused tax losses for which no deferred tax assets have been recognised are
attributable to tax losses of a capital nature of $88.2 million (tax effected $15.4 million) consolidated and $32.6 million (tax
effected $9.8 million) for the Company. Refer to Note 11 for further details.
25. Convertible note
Convertible note
Convertible note
Consolidated
Company
2015
$’000
1,711
1,711
2014
$’000
301
301
2015
$’000
1,711
1,711
2014
$’000
301
301
The Company has entered into a Convertible Note (CN) agreement with Your Insure Pty Limited (Your Insure) to provide funding
by way of a convertible note up to an amount of $3.3 million. The funding is provided on a draw down basis based on the
achievement of pre determined milestones. The CN allows for the Company to convert into a shareholding of 50% in Your
Insure at the discretion of the Company, but not before the business of Your Insure becomes self funding for a period of 6
months. The CN has an expiry date of 30 June 2019.
The CN is accounted for as a debt instrument with an embedded equity derivative. As the business of Your Insure has recently
commenced (start up operation) no value has been attributed to the embedded equity derivative as the equity value of the
business does not exceed the face value of the debt instrument.
Refer Note 40 for the funding commitment profile and for further details.
ClearView Annual Report 2015 110
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
26. Policy liabilities
(a) Reconciliation of movements in policy liabilities
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
Life investment policy liabilities
Opening gross life investment policy liabilities
Net increase in life investment policy liabilities reflected in the
income statement
1,122,364
1,175,346
109,198
126,385
Decrease in life investment policy liabilities due to management fee
reflected in the income statement
(24,207)
(25,154)
Life investment policy contributions recognised in policy liabilities
188,091
67,859
Life investment policy withdrawals recognised in policy liabilities
(234,819)
(222,072)
Closing gross life investment policy liabilities
1,160,627
1,122,364
Life insurance policy liabilities
Opening gross life insurance policy liabilities
Movement in outstanding claims
Decrease in life insurance policy liabilities reflected in the income
statement
Closing gross life insurance policy liabilities
Total gross policy liabilities
Reinsurers' share of life insurance policy liabilities
Opening balance
Movement in outstanding reinsurance
Decrease/(increase) in reinsurance assets reflected in the income
statement
Closing balance
Net policy liabilities at balance date
Current
Non-current
(127,278)
(97,734)
11,588
4,684
(40,951)
(34,228)
(156,641)
(127,278)
1,003,986
995,086
3,872
(9,006)
7,367
(1,072)
(5,050)
9,994
2,233
3,872
1,006,219
998,958
1,152,578
1,110,035
(146,359)
(111,076)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Included in life investment policy liabilities are contracts for which there is a guarantee that the unit price will not fall. The
amount of the gross policy liabilities for such contracts is $74.4 million (2014: $87.7 million).
(b) Components of net life insurance policy liabilities
Future policy benefits
Future expenses and commissions
Less future revenues
Best estimate liability
Present value of future planned profit margins
Net life insurance policy liabilities
111 ClearView Annual Report 2015
Consolidated
2015
$’000
184,563
165,342
2014
$’000
190,442
119,872
(709,743)
(588,548)
(359,838)
(278,234)
205,430
154,827
(154,408)
(123,407)
Company
2014
$’000
2015
$’000
-
-
-
-
-
-
-
-
-
-
-
-
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2015
Continued
26. Policy liabilities continued
(c) Disclosures on asset restrictions, managed assets and trustee activities
Restrictions on assets
Investments held in the life statutory funds (Funds) can only be used within the restrictions imposed under the Life Insurance
Act 1995. The main restrictions are that the assets in a Fund can only be used to meet the liabilities and expenses of that
Fund, to acquire investments to further the business of the Fund or as a distribution when solvency and capital adequacy
requirements are met for that Fund. The shareholder can only receive a distribution from a Fund if the capital adequacy
requirements continue to be met after the distribution.
27. Issued capital
Issued and fully paid ordinary shares
Balance at the beginning of the financial year
495,044,922
330,172 411,312,192
277,565
2015
2015
2014
No. of Shares
$’000 No. of Shares
Company
2014
$’000
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
Share buy back (inclusive of costs)
Share Placement
Enitlement Offer
Capital raising costs (net of tax)
Subscription for shares by O&B Limited
Shares issued during the year (ESP vested)
Balance at the end of the financial year
Executive share plan
13,724,628
10,977
14,064,082
8,157
-
-
-
-
-
(70)
-
-
(510,252)
- 30,769,232
- 39,192,724
-
-
-
-
216,944
-
(439)
20,000
25,475
(586)
-
-
-
308,542
100,000
250
53
524,610,834
355,970 495,044,922
330,172
Performance based shares issued in relation to Matrix acquisition
15,432,742
14,588
Balance at the beginning of the year
49,381,666
- 41,867,333
Shares granted under employee share plan (Note 29)
Shares forfeited during the year
Shares reallocated during the year
Shares exercised during the year
9,493,682
(104,000)
(300,000)
(100,000)
-
-
-
-
7,731,277
-
-
(216,944)
Executive balance at the end of the year
58,371,348
- 49,381,666
-
-
-
-
-
-
In accordance with AASB 2, Share-Based Payments the shares issued under the Executive Share Plan are treated as options and
are accounted for as set out in Note 29.
The Company does not have a limited amount of authorised capital and issued shares do not have a par value. Fully paid ordinary
shares carry one vote per share and carry the rights to dividends.
ClearView Annual Report 2015 112
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2015
Continued
28. Borrowings
Bank loan - secured1
Total borrowings
Current
Non-current
Consolidated
2015
$’000
45,500
45,500
-
45,500
2014
$’000
-
-
-
-
2015
$’000
45,500
45,500
-
45,500
Company
2014
$’000
-
-
-
-
1
On the 18 December 2014 the Company entered into a three year $50 million facility agreement with the Commonwealth Bank of Australia. As at the reporting
date, the Company has drawn down $45.5 million on the facility, with $4.5 million of unused credit facilities available for immediate use. Interest on the loan
accrues at BBSY plus a margin of 0.7% per annum, and is payable monthly. Furthermore, a line fee of 0.4% per annum is payable on the facility on a quarterly
basis. The facility is secured by a number of cross guarantees, refer to Note 42 for details.
29. Share-based payments
ClearView operates the ClearView Executive Share Plan
(ESP or Plan). In accordance with the provisions of the Plan,
as approved by shareholders at the 2012 Annual General
Meeting, the ownership-based compensation scheme allows
participation in the Plan of:
•
•
Employee Participants - These participants are key
managers, members of the Senior Management Team
and the Managing Director; and
Contractor Participants - These participants are financial
advisers.
Eligible Employees under the Plan Rules therefore include
both Employee Participants and Contractor Participants of
the Company and its related bodies corporate. Non-executive
Directors are ineligible to participate in the Plan in accordance
with the Plan Rules.
Offer and Consideration
Under the ESP, the Board may invite Eligible Employees to
participate in an offer (Offer) of fully paid ordinary shares
in ClearView, subject to the terms of conditions of the ESP.
Each Share is issued at a price to be determined by the
Board prior to making an Offer and this price is set out in the
invitation (Invitation) to Eligible Employees. This price may be
the market price of a Share (as defined in the ESP Rules) on
the date of the Invitation. Taking into account the liquidity,
volatility, and the average trading activities of the ClearView
Shares, the Board determined in February 2013 that it is
appropriate and reasonable for ClearView to adopt the
Volume Weighted Average Price (VWAP) over a 90 day period
to determine the market value of the ClearView Shares for the
purposes of ESP issues. This has been implemented for all ESP
Share issues since that date. Prior to this, no ESP Shares were
issued at a price below 50 cents per share, being the price at
which the original capital raising was completed in June 2010.
113 ClearView Annual Report 2015
Restrictions on Offer
Shares may not be offered under the ESP to an Eligible
Employee if that Eligible Employee would hold, after the
issue of the Shares, an interest in more than 5% of the issued
Shares of ClearView or be able to control the voting rights of
more than 5% of the votes that might be cast at a general
meeting of ClearView.
As at the date of this Report, the Board has not set a limit
on the number of Shares that may be issued under the
Plan. The Board or Board Authorised Delegates approve the
issue of new ESP shares and monitors the overall quantum
of ESP shares on issue, relative to the interests of existing
shareholders and the overall objectives of the business.
Financial Assistance
The Company may provide financial assistance to an Eligible
Employee for the purposes of subscribing for Shares under the
ESP. The financial assistance will be a limited recourse loan
equal to the purchase value of the Shares and is repayable as
follows:
•
•
•
For Share issues prior to 14 February 2013 - within 60
days (or a longer period determined by the Board in its
discretion) after the 5th anniversary of the grant of the
financial assistance (unless it is required to be repaid at an
earlier date owing to the operation of the Rules); or
For Share issues after 14 February 2013 - within 60
days (or a longer period determined by the Board in its
discretion) after all performance and vesting criteria
have been met; or
For Shares issues after 1 May 2014, 2 months (or a period
determined by the Board at it's discretion) immediately
following the 6th anniversary of the grant of the financial
assistance.
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
29. Share-based payments continued
The financial assistance will become immediately repayable
in the event of certain “disqualifying circumstances” including
failure to meet performance or vesting conditions, cessation
of the Employee Participant’s employment in circumstances
defined in the ESP Rules or termination of the Contractor
Participant’s contract with a Group Company for the provision
of services. For Employee Participants, the financial assistance
is secured over the shares and rights attached to the shares.
The Board has delegated authority to Mr Swanson and Mr
Thomson to approve granting an extension to the loan
term of all ESP participants who remain employees at the
expiration of their loan term for a period until a Change in
Control of the Company (as defined in the ESP Rules).
Until 14 February 2013, the interest rate on the loans was
the Reserve Bank of Australia cash rate plus a margin of 25
basis points per annum, compounded semi annually. Interest
until this date has been capitalised and treated as part of the
limited recourse principal, except that after tax dividends on
shares issued under the ESP is applied towards reduction of
the loan balance.
In February 2013 the Board decided to remove the interest
rate on the loans for all Participants (other than the Managing
Director that required Shareholder approval) given that the
interest imposed was significantly diluting the efficacy of the
ESP as an employee retention tool, in particular for those staff
receiving the earlier grants of ESP shares. On 6 November
2013, at the 2013 AGM, Shareholders approved the removal
of interest on the Managing Directors loan, so as to align with
the interest rate which applies to equivalent loans made to
other participants in the Plan.
Holding Lock
The shares granted under the ESP to participants are subject
to a holding lock restricting the holder from dealing with the
shares. Where all performance conditions and/or vesting
conditions (if any) attaching to the Shares issued prior to 14
February 2013 have been satisfied (or waived) a holding lock
will cease to have effect if:
•
The Board accepts a disposal request (as defined in the
ESP Rules) (Disposal Request); or
• 5 years have passed from the Acquisition Date; or
If the Participant:
•
•
is an Employee Participant, their employment with the
Group ceases, or
is a Contractor Participant, their contractor agreement is
terminated; or
• The ESP is terminated, or
• The holding lock period otherwise ceases;
provided that the Financial Assistance and any interest that
has been accrued have been repaid.
For shares issues from 14 February 2014 the Holding Lock
ceases on vesting or forfeiture of Shares.
The holding lock is imposed through the share registry and in
accordance with the ASX Listing Rules. Participants will not be
able to sell their shares on ASX or have an off-market transfer
registered (and are also otherwise prohibited from dealing in
the shares) while the holding lock is in place.
If the participant is a Contractor Participant, following the
removal of the holding lock over the Shares of the participant,
the participant may not sell, or otherwise deal with, any such
Shares without the prior written consent of the Company,
which consent the Company may give or withhold in its
absolute discretion and which consent may be given subject
to conditions.
Eligible Employees are entitled under the ESP Rules to make
a Disposal Request provided the performance and vesting
conditions have been met (or waived). The holding lock
applicable to their ESP shares will cease to have effect upon
the Board (in its absolute discretion) accepting the Disposal
Request. ClearView may dispose of these ESP shares on behalf
of the participant in one or more of the following ways (at the
discretion of the Board):
•
•
Reallocate the Shares to give effect to acquisitions by
other Eligible Employees under the ESP;
Sell to the Company in accordance with buy-back
provisions of the Corporations Act; or
• Offer or sell to buyers on the ASX.
The amount payable by these Eligible Employees to ClearView
following such a disposal is the amount outstanding in
relation to the financial assistance, including accrued interest.
The Eligible Employees may retain any surplus proceeds.
There are no Disposal Requests outstanding as at the date of
this report.
Change of Control
Under the ESP Rules, all performance and vesting conditions
in relation to Shares held by an Eligible Employee who is an
Employee Participant are deemed to have been satisfied
upon a Change of Control unless stated otherwise in the
participants invitation offer. A Change of Control is defined
under the ESP Rules as being:
ClearView Annual Report 2015 114
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
29. Share-based payments continued
(a) Until 14 February 2013:
Administration of the ESP
•
•
•
A person who did not Control the Company at the date of
issue of the Plan Shares gains Control of the Company (but
only if the person is not itself Controlled by another person
who Controlled the Company at the date of issue); or
Other circumstances occur which the Board determines
in its absolute discretion are analogous to a Control
transaction and justify removal of Performance Conditions
and/or Vesting Conditions,
“Control” is defined as where a person and its related
bodies corporate holds more than 50% of the Shares in
ClearView.
The ESP is administered by the Board. The Board may make
rules and regulations for its operation that are consistent
with the rules of the ESP. The Company pays all costs and
expenses of operating the ESP. Employees are liable for any
brokerage and tax payable associated with their participation
in the ESP.
Termination of the ESP
The Board may resolve at any time to terminate, suspend or
reinstate the operation of the ESP for the issue of shares in
future.
(b) After 14 February 2013:
• 12 months after a Change of Control; or
•
•
Circumstances occur which the Board determines in its
absolute discretion are analogous to a Control transaction
and justify removal of Performance Conditions and/or
Vesting Conditions.
“Control” is defined as Crescent Capital Partners and its
Associated Entities no longer holding 20% of the voting
rights of the Company.
The above provisions concerning change of control apply
only to Employee Participants and not Contractor Participants
under the ESP.
(c) After 1 July 2015:
•
For ESP Shares issued to employee participants after 1 July
2015, unless stated otherwise in the participants invitation
offer, all performance and vesting conditions in relation to
these shares, are not deemed to have been met upon a
Change of Control.
115 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
29. Share-based payments continued
Share-based payment arrangements
The following share-based payment arrangements were in existence during the current and comparative reporting periods:
Series
Issue Date
Type of
Arrangement9
Number Grant date Expiry date
Series 6 1,2,6,8
30/06/2008 KMP
500,000
30/06/2008
Change in
Control
Series 7 1,2,6,8
29/09/2009 KMP and SM
3,500,000
29/09/2009
29/09/2014
Series 10 1,3,6,8
25/06/2010 MD
2,000,000
25/06/2010
26/03/2015
Series 11 1,4,6,8
25/06/2010 MD
4,000,000
25/06/2010
26/03/2015
Series 12 1,5,6,8
25/06/2010 MD
4,000,000
25/06/2010
26/03/2015
Series 13 5
25/06/2010 SM
400,000
25/06/2010
1/06/2015
Series 14
Series 15 5
Series 16 5
Series 17 5
Series 18
Series 19
Series 20
Series 21
Series 22
Series 23
1/11/2010 SM
18/08/2011 SM
6/10/2011 SM
1/03/2012 SM
1/03/2012 CP
3/04/2012 CP
3/04/2012 CP
25/05/2012 CP
29/06/2012 CP
6/08/2012 CP
3,000,000
25/10/2010
1/10/2015
3,000,000
1/07/2011
1/07/2016
3,950,000
1/09/2011
1/09/2016
2,150,000
1/03/2012
1/03/2017
2,500,000
10/02/2012
10/02/2017
600,000
15/03/2012
15/03/2017
700,000
3/04/2012
3/04/2017
2,325,000
7/05/2012
7/05/2017
1,000,000
29/06/2012
29/06/2017
4,600,000
6/08/2012
6/08/2017
Series 24 5
22/08/2012 SM
450,000
22/08/2012
22/08/2017
Series 25
21/12/2012 CP
1,300,000
21/12/2012
21/012/2017
Series 26 7
16/04/2013 SM
2,650,000
12/04/2013
Series 27
16/04/2013 SM
150,000
12/04/2013
50% Change
in Control;
50% 1 year
after
1 year post
Change in
Control
Series 28
Series 29
Series 30
Series 31
16/04/2013 CP
31/05/2013 CP
27/06/2013 CP
14/10/2013 SM
566,667
12/04/2013
12/04/2018
1,700,000
31/05/2013
31/05/2018
750,666
27/06/2013
27/06/2018
1,175,000
14/10/2013
Series 32
14/10/2013 SM
1,175,000
14/10/2013
Series 33
29/11/2013 SM
75,000
29/11/2013
Series 34
29/11/2013 SM
75,000
29/11/2013
Change in
Control
1 year post
Change in
Control
Change in
Control
1 year post
Change in
Control
Fair value
at grant
date (pre
modifica-
tion1)
$
Fair value
at grant
date (post
modifica-
tion1)
$
Issue price
at grant
date
$
0.59
0.49
0.50
0.58
0.65
0.53
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.54
0.55
0.58
0.57
0.57
0.69
0.68
0.64
0.61
0.61
0.61
0.61
0.10
0.07
0.11
0.08
0.06
0.10
0.07
0.10
0.11
0.09
0.12
0.12
0.13
0.13
0.13
0.17
0.16
0.16
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0.10
0.10
0.11
0.08
0.06
0.15
0.09
0.13
0.13
0.11
0.15
0.16
0.17
0.17
0.16
0.21
0.19
0.20
0.29
0.27
0.22
0.22
0.21
0.17
0.19
0.16
0.19
ClearView Annual Report 2015 116
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
29. Share-based payments continued
Series
Series 35
Issue Date
Type of
Arrangement9
Number Grant date Expiry date
31/01/2014 SM
75,000
31/01/2014
Series 36
31/01/2014 SM
75,000
31/01/2014
Change in
Control
1 year post
Change in
Control
Series 37
Series 38
Series 39
Series 40
Series 41
Series 42
Series 43
Series 44
Series 44
Series 45
Series 46
Series 47
Series 47
Series 48
31/01/2014 CP
30/05/2014 SM
30/05/2014 SM
30/05/2014 SM
30/05/2014 CP
9/07/2014 CP
2,453,333
31/01/2014
31/01/2019
737,000
30/05/2014
30/05/2018
737,000
30/05/2014
30/05/2019
737,000
30/05/2014
30/05/2020
1,950,000
30/05/2014
30/05/2019
4,560,760
9/07/2014
08/07/2019
26/11/2014 SM including KMP
181,518
26/11/2014
25/11/2018
26/11/2014 CP
2,413,368
26/11/2014
25/11/2019
26/11/2014 SM including KMP
181,518
26/11/2014
25/11/2019
26/11/2014 SM including KMP
181,518
26/11/2014
25/11/2020
30/03/2015 SM including KMP
141,667
30/03/2015
30/03/2019
30/03/2015 SM including KMP
141,667
30/03/2015
30/03/2020
30/03/2015 CP
1,550,000
30/03/2015
30/03/2020
30/03/2015 SM including KMP
141,666
30/03/2015
30/03/2021
Fair value
at grant
date (pre
modifica-
tion1)
$
Fair value
at grant
date (post
modifica-
tion1)
$
Issue price
at grant
date
$
0.65
0.65
0.65
0.75
0.75
0.75
0.75
0.79
1.01
1.01
1.01
1.01
1.00
1.00
1.00
1.00
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0.18
0.20
0.18
0.17
0.19
0.22
0.19
0.20
0.15
0.18
0.18
0.21
0.22
0.25
0.25
0.28
1
2
3
4
5
6
7
On the 14th February 2013, the Board approved a change to the rules of the ESP which changed the interest rate charged on the financial assistance granted
to the ESP Participants from the RBA official cash rate plus 25 basis points to zero percent. This resulted in changes to the inputs of the option pricing model
which had an impact on the fair value of the option at the date of the change.
A Change of Control provision was triggered on 23 October 2009 by GPG increasing its shareholding above 50%. As a result, the vesting conditions for employ-
ees that were issued shares prior to the date of change of control were accelerated.
Shares vested 1 year from date of commencement of employment on 26 March 2011.
Shares vested 2 years from date of commencement of employment on 26 March 2012.
Change of control provision was triggered on 26 September 2012 by CCP Bidco obtaining a shareholding above 50%.
The Board approved granting an extension of the loan term until such time as there is a change of control in the Company.
Special condition relating to shares issued to KMP in Series 26: the shares may be sold on change of control with 50% of the funds held for in escrow for a
period of 12 months.
Vesting conditions have been met up to the date of this report.
8
9 KMP = Key Management Personnel, SM = Senior Management, MD = Managing Director, CP = Contractor Participant
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
117 ClearView Annual Report 2015
Series 6
Series 7
Series 10
Series 11
Series 12
0.59
0.58
25.26
3.00
0.49
0.55
30.24
1.75
0.50
0.54
28.78
2.75
0.58
0.63
28.78
2.75
0.65
0.71
28.78
2.75
Series 13
Series 14
Series 15
Series 16
Series 17
0.53
0.57
28.78
2.94
0.50
0.52
29.71
2.94
0.50
0.50
31.49
3.00
0.50
0.51
35.35
3.00
0.50
0.50
36.70
3.00
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
29. Share-based payments continued
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Series 18
Series 19
Series 20
Series 21
Series 22
0.50
0.50
37.06
4.95
0.50
0.50
36.47
4.95
0.50
0.50
36.61
5.00
0.50
0.49
36.94
4.95
0.50
0.49
37.33
5.00
Series 23
Series 24
Series 25
Series 26
Series 27
0.54
0.53
37.85
5.00
0.55
0.54
37.99
3.00
0.58
0.58
35.21
5.00
0.57
0.57
35.92
5.99
0.57
0.57
35.92
4.99
Series 28
Series 29
Series 30
Series 31
Series 32
0.69
0.69
35.92
4.99
0.68
0.68
36.81
5.00
0.64
0.64
36.90
5.00
0.61
0.61
22.20
5.00
0.61
0.61
22.20
6.00
Series 33
Series 34
Series 35
Series 36
Series 37
0.61
0.61
22.11
5.00
0.61
0.61
22.11
6.00
0.65
0.65
22.01
5.00
0.65
0.65
22.01
6.00
0.65
0.65
22.01
5.00
Series 38
Series 39
Series 40
Series 41
Series 42
0.75
0.75
21.12
4.00
0.75
0.75
21.12
5.00
0.75
0.75
21.12
6.00
0.75
0.75
21.12
5.00
0.79
0.79
16.78
5.00
Series 43
Series 44
Series 45
Series 46
Series 47
1.01
1.01
19.79
5.00
1.01
1.01
19.79
6.00
1.00
1.00
20.84
4.00
1.00
1.00
20.84
5.00
1.01
1.01
19.79
4.00
Series 48
1.00
1.00
20.84
6.00
The shares were priced using a binomial option pricing model with volatility based on the historical volatility of the share price.
ClearView Annual Report 2015 118
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
29. Share-based payments continued
Balance at the beginning of the financial year
Issued during the financial year
Forfeited during the year
Exercised during the year
Reallocated during the year
2015
Weighted
average
exercise
price
Number of
shares
0.56
41,867,333
0.90
0.74
0.55
0.55
7,731,277
-
(216,944)
-
Number of
shares
49,381,666
9,493,682
(104,000)
(100,000)
(300,000)
Balance at the end of the financial year
58,371,348
0.61 49,381,666
2014
Weighted
average
exercise
price
0.54
0.70
-
0.65
-
0.56
The above reconciles the outstanding shares granted under the executive share plan at the beginning and end of the
financial year.
Shares that were granted in the current year
9,493,682 shares granted issued during the year of which 404,000 were reallocated from other series existing at the
beginning of the year and 100,000 were exercised during the year. The net shares issued on the ASX were therefore
8,989,682 ESP shares.
The following table outlines the vesting conditions and performance conditions of share based payment arrangements in
existence during the period.
Series
Vesting conditions 1
Performance
conditions
Series 18 – 1 March 2012 Issue
Series 19 – 3 April 2012 Issue
Series 20– 3 April 2012 Issue
Series 21– 25 May 2012 Issue
4 years and 346 days from the date of issue and achievement of
specific sales target
4 years and 346 days from the date of issue and achievement of
specific sales target
5 years from the date of issue and achievement of specific sales
target
4 years and 347 days from the date of issue and achievement of
specific sales target
No
No
No
No
Series 22– 29 June 2012 Issue
5 years from the date of issue and achievement of specific sales target
No
Series 23– 6 August 2012 Issue
5 years from the date of issue and achievement of specific sales target
Series 25– 21 December 2012 Issue 5 years from the date of issue and achievement of specific sales target
Series 28– 16 April 2013 Issue
4 years and 361 days from the date of issue and achievement of
specific sales target
Series 29– 31 May 2013 Issue
5 years from the date of issue and achievement of specific sales target
Series 30– 27 June 2013 Issue
5 years from the date of issue and achievement of specific sales target
Series 37– 31st January 2014 Issue 5 years from the date of issue and achievement of specific sales target
Series 41– 30th May 2014 Issue
5 years from the date of issue and achievement of specific sales target
Series 42– 9th July 2014 Issue
5 years from the date of issue and achievement of specific sales target
Series 44– 26th November 2014
Issue
5 years from the date of issue and achievement of specific sales target
No
No
No
No
No
No
No
No
No
Series 47– 30th March 2015 Issue
5 years from the date of issue and achievement of specific sales target
No
1
Subject to qualifying circumstances as outlined in the ESP Plan Rules.
119 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
The vesting conditions in the ESP stipulate that shares issued in terms of the Plan to employees participants will automatically
vest with a change of control of the Company. The change of control provisions do not apply to shares issued in terms of the
plan to contractor participants or shares issued to employee participants subsequent to 1 July 2015.
On 26 September 2012, CCP Bidco’s off-market takeover bid for all the ordinary shares in ClearView became unconditional
which resulted in accelerating the vesting of the shares in the ESP at that time, including all Series 10 to 24 which had been
issued to employee participants prior to the change of control. Series 7 was issued prior to 23 October 2009, where the change
of control provision was triggered upon GPG obtaining control of ClearView.
Continued Shares that were cancelled during the year
No shares were cancelled during the year.
The following table shows the shares that were reallocated due to the cessation of the employment of a participant
of the plan.
Date
26/11/2014
30/03/2015
30/03/2015
30/03/2015
Number of shares reallocated
Reallocated from
Reallocated to
300,000
34,667
34,667
34,666
404,000
Series 13 Series 43, 44 and 45
Series 38
Series 39
Series 40
Series 46
Series 46 and 47
Series 48
30. Shares granted under the executive share plans
In accordance with the provisions of the ESP, as at 30 June 2015, key management, members of the senior management
team, the managing director and contractor participants have acquired 58,371,348 (2014: 49,381,666) ordinary shares. Shares
granted under the ESP carry rights to dividends and voting rights. Financial assistance amounting to $36,464,292 (2014:
28,744,723) was made available to executives, senior employees and contractor participants to fund the acquisition of shares
under the ESP. For details of the ESP refer to Note 29.
31. Dividends
Dividend payments on Ordinary shares
2014 final dividend (2014: 2013 final dividend)
Total dividends on ordinary shares paid to owners of the Company
Dividends not recognised in the consolidated statement of
financial position
Dividends declared since balance date
Consolidated and Company
Per share
2015
$’000
Per share
2.0
2.0
10,977
10,977
1.8
1.8
2014
$’000
8,157
8,157
2015 final dividend (2014: 2014 final dividend)
2.1
12,301
2.0
10,980
Dividend franking account
Amount of franking credit available for use in subsequent
financial years
-
16,065
-
10,562
1
2
The impact on the dividend franking account for the final dividend declared is expected to reduce the franking account by $5.2 million (2014: $4.7 million).
There are no other income tax consequences for dividends not recognised in the statement of financial position.
The total 2015 final dividend declared but not recognised in the statement of financial position is estimated based on the total number of ordinary shares on
issue as at the date of this report. The actual amount recognised in the consolidated financial statements for the year ending 30 June 2015 will be based on
the actual number of ordinary shares on issue on the record date.
The Directors declared that there will be a final fully franked dividend paid for the year ended 30 June 2015 of $12.30 million
(2014 : $10.98 million).
ClearView Annual Report 2015 120
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
32. Reconciliation of net profit for the year to net cash flows from
operating activities
Consolidated
Company
2014
$’000
(320)
-
-
-
905
-
-
(269)
-
202
253
259
-
1,039
2,069
Net profit/(loss) for the year
Fair value gains on financial assets at fair value through profit and
loss
Loss on disposal of property, plant and equipment
Amortisation and depreciation
Employee share plan expense
Other non cash items
Interest and dividend received from controlled entity
Reinvested trust distribution income/interest income
Movements in liabilities to non-controlling interest in controlled unit
trust
Decrease/(increase) in receivables
Decrease/(increase) in deferred tax asset
Increase/(decrease) in payables
Increase/(decrease) in policy liabilities
Increase/(decrease) in current tax liability
2015
$’000
2014
$’000
2015
$’000
12,572
13,880
11,858
-
-
-
896
-
(72,818)
(80,442)
28
-
12,847
10,823
896
27
-
905
130
-
(13,500)
(23,675)
(17,863)
27,968
15,651
(2,119)
(789)
3,077
8,653
(74)
1,695
(179)
1,071
(75,749)
1,039
(620)
-
(1,906)
158
(109)
-
(74)
Net cash (utilised)/generated by operating activities
(33,407)
(129,039)
(3,297)
121 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
33. Subsidiaries
Name of Entity
Parent entity
Principal Activity
Parent
Entity
Country of
incorporation
2015
%
2014
%
Ownership interest
ClearView Wealth Limited (CWL)
Holding Company
-
Australia
Subsidiaries
ClearView Group Holdings Pty Limited (CGHPL)
Holding Company
CWL
Australia
ClearView Life Assurance Limited (CLAL)
Life Company
CGHPL
Australia
ClearView Financial Management Limited (CFML)
Responsible Entity
CGHPL
Australia
ClearView Life Nominees Pty Limited (CLNPL)
Trustee
ClearView Administration Services Pty Limited (CASPL)
ClearView Financial Advice Pty Limited (CFAPL)
Matrix Planning Solutions Limited (MPS)
Affiliate Financial Planning Pty Limited
Controlled unit trusts
International Fixed Interest Fund
Fund of Funds Australian Equity Fund
Bond Fund
Fund of Funds International Equity Fund
Property Fund
Money Market Fund
Infrastructure Fund
Emerging Markets Fund
CVW Platinum International Shares Fund
CVW Hyperion Australian Shares Fund
CVW Vanguard Listed International Infrastructure
Fund
CVW Vanguard Emerging Markets Fund
CVW Plato Australian Shares Fund
CVW MFS International Shares Fund
Administration
Service Entity
Financial Advice
Financial Advice
Dormant
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
CLAL
CWL
CWL
CWL
CFA
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
95
59
68
93
83
81
69
72
98
84
96
97
79
64
100
100
100
100
100
100
-
100
95
67
73
90
86
84
76
77
-
-
-
-
-
-
ClearView Administration Services Pty Limited was incorporated to centralise the administrative responsibilities of the group
which include salary disbursements and settling all non-directly attributable overhead expenditure. ClearView Administration
Services Pty Limited recoups all expenditure by virtue of a management fee from the various group companies and operates on
a cost recovery basis (in accordance with an inter group agreement).
ClearView Annual Report 2015 122
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
34. Business Combinations
Acquisition of Matrix Holdings Limited
On 10 October 2014, the Company acquired 100% of the voting shares of Matrix Holdings Limited (Matrix Holdings), a company
based in Australia specialising in financial advice. Matrix Holdings held two wholly owned subsidiaries, Matrix Planning Solutions
Limited (MPS or Matrix) and Matrix Planning Investments Pty Ltd (MPI).
The Company acquired Matrix Holdings, as the dealer group (operated through MPS) will expand the Group’s financial advice
business. The consolidated financial statements include the results of Matrix for the period from acquisition date on 10th
October 2014. The Company entered into a pre-acquisition Put Option Deed with O&B Limited (O&B) with the ability to put
100% of Matrix Holdings shares back to O&B for a nominal amount. Per the Put Option Deed, the Company was required to
restructure the entities before the option could be exercised (resulting in MPS being directly owned by the Company). The
entities were restructured and the put option was exercised on the 27th November 2014. As at 30 June 2015, the Company
owns 100% of MPS and MPI and retains no interest in Matrix Holdings.
Settlement of the acquisition occurred on 10 October 2014, with the issuance of ClearView shares into trust held by Pacific
Custodians Pty Limited (a subsidiary of Link Market Services Limited) and the cash payment being made to Pacific Custodians
Pty Limited. The consideration paid was as follows:
Purchase consideration
Cash to acquire shares
Contingent Consideration – ClearView shares
Total purchase consideration
Fair Value of net assets acquired
Goodwill on acquisition
$’000
7,750
12,511
20,261
(5,167)
15,094
As part of the Merger Implementation Deed entered into the by the parties on 29 August 2014, a component of the purchase
consideration was determined to be contingent based on a number of Performance Conditions (including the performance
of the acquired entity). A fair value adjustment has been made to the value of the shares as part of the purchase due to
these contingencies. The fair value adjustment totalled $2.1 million and has been included (as a deduction) in the contingent
consideration value disclosed above.
The assets and liabilities arising from the acquisition are as follows:
Fair Value
$’000
2,780
110
1,299
75
38
20,035
24,337
Assets
Cash and cash equivalents
Fixed interest deposits
Receivables
Deferred tax asset
Property, plant and equipment
Goodwill and Intangibles
Total assets
123 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
34. Business Combinations continued
Liabilities
Payables
Deferred tax liability
Provisions
Borrowings
Total liabilities
Net assets
Analysis of cash flows on acquisition
Net cash acquired with the subsidiary
Cash paid
Net cash outflow
Fair Value
$’000
408
10
658
3,000
4,076
20,261
Fair Value
$’000
2,780
(7,750)
(4,970)
Goodwill and intangibles include the value of in-force business (Client Book), brand and website, broken down as follows:
Goodwill and intangibles
Client Book
Brand
Website
Goodwill
Total
Fair Value
$’000
4,720
200
20
15,094
20,034
From the date of acquisition, Matrix has contributed $27.1 million of revenue, $0.8 million in underlying net profit after tax,
and a reported net profit of $0.5 million after tax. The reported profit includes $0.4 million ($0.3 million net of tax) in one-
off expenses in relation to the acquisition. If the acquisition had taken place at the beginning of the period, revenue from
continuing operations would have been $38.3 million and a loss from continuing operations for the period after tax would have
been $0.7 million. This loss included $0.9 million ($0.6 million net of tax) in one-off expenses in relation to the purchase before
acquisition date and $0.4 million ($0.3 million net of tax) after acquisition date as noted above.
The goodwill recognised is primarily attributed to the expected revenue synergies and other benefits from combining the assets
and activities of Matrix with those of the Group. The achievement of the performance based revenue targets are expected to
result in the increased profitability of the dealer group. The goodwill recognised, has therefore been allocated across the three
cash-generating units (CGU’s) of the Group, based on the expected benefits for each CGU. For further details regarding the
expected benefits of the acquisition, refer to the Directors’ Report.
The total transaction costs of $2.3 million (pre-tax) have been expensed across the Group and are included in operating
expenses in the statement of profit or loss and are part of the operating cash flows in the statement of cash flows.
ClearView Annual Report 2015 124
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
35. Related party transactions
(a) Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 33 to the financial statements.
(b) Transactions with KMP
Key management personnel compensation
Details of Key Management Personnel compensation are disclosed in the Directors’ Report on pages 42 to 57 of the Annual
Report. The aggregate compensation made to Key Management Personnel (KMP) of the Company and the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Share based payments
Total
(c) Transactions between the Group and its related parties
Other related parties include:
• Entities with significant influence over the Group
• Associates, and
• Subsidiaries
Consolidated
2015
$
2014
$
4,924,245
4,730,756
255,929
177,215
207,888
164,848
5,357,389
5,103,492
Balances and transaction between the Company and its subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related
parties during the financial year ended 30 June 2015 are disclosed below:
•
Directors fees were paid to Cresent Capital Partners Pty Limited the manager of the parent entity’s majority shareholder CCP
Bidco Pty Limited.
The ultimate parent entity in the Group is ClearView Wealth Limited which is incorporated in Australia.
125 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
35. Related party transactions continued
Outstanding balances between the Group and its related parties
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ClearView Wealth Limited
- (4,544,452)
(143,569)
(355,800)
(65,178) (4,634,875)
(8,891) (9,752,765)
ClearView Life Assurance Limited
4,544,452
-
133,977
429,256
ClearView Financial Management Limited
143,569
(133,977)
-
41,784
ClearView Financial Advice Pty Limited
355,800
(429,256)
(41,784)
Matrix Planning Solutions Limited
65,178
-
-
-
-
-
-
-
-
ClearView Admin Services Pty Limited
4,634,875 (5,430,633)
(234,018)
(594,859)
(312,103)
ClearView Life Nominees Pty Limited
8,891
-
543,666
-
-
5,430,633
- 10,538,318
234,018
(543,666)
(258,272)
594,859
312,103
-
-
-
-
479,619
377,281
- (1,936,738)
-
552,557
2014
$
$
$
$
$
$
$
9,752,765 (10,538,318)
258,272
(479,619)
(377,281) 1,936,738
(552,557)
-
$
ClearView Wealth Limited
- 3,607,064
(204,676)
1,482,662
-
2,692,043
5,607
7,582,700
ClearView Life Assurance Limited
(3,607,064)
-
(142,272)
(439,841)
- (4,760,145)
- (8,949,322)
ClearView Financial Management Limited
204,676
142,272
-
(54,282)
- (1,703,004)
282,628 (1,127,710)
ClearView Financial Advice Pty Limited
(1,482,662)
439,841
54,282
Matrix Planning Solutions Limited
-
-
-
-
-
ClearView Admin Services Pty Limited
(2,692,043)
4,760,145
1,703,004
657,702
ClearView Life Nominees Pty Limited
(5,607)
-
(282,628)
-
-
-
-
-
(657,702)
- (1,646,241)
-
-
-
-
-
-
-
4,428,808
(288,235)
(7,582,700) 8,949,322 1,127,710 1,646,241
- (4,428,808)
288,235
-
(d) Transactions other than financial instrument transactions
No Director has entered into a material contract with the Company or the ClearView Group since the end of the previous
financial year and there were no material contracts involving Directors’ interests existing at year end. Other transactions with
directors, executives and their related parties are conducted on arm’s length terms and conditions, and are deemed trivial or
domestic in nature. These transactions are in the nature of personal investment, life insurance policies and superannuation.
ClearView Annual Report 2015 126
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2015
Continued
36. Financial instruments
(a) Management of Financial Instruments
The financial assets of the Group (other than shareholder cash holdings) are managed by specialist investment managers who
are required to invest the assets allocated in accordance with directions from the Board. BNP Paribas acts as master custodian
on behalf of the Group and, as such, provides services including physical custody and safekeeping of assets, settlement of
trades, collection of dividends and accounting for investment transactions. Daily operating bank accounts and shareholder
cash are managed within the Group by the internal management and finance department.
(b) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset and
financial liability are disclosed in Note 3(x).
(c) Capital risk management
The Group maintains capital to protect customers, creditors and shareholders against unexpected losses to a level that is
consistent with the Group’s risk appetite. The Group’s capital structure consists of ordinary equity comprising issued capital,
retained earnings and reserves (as detailed in Notes 12 and 27). The capital structure remains unchanged from the previous
financial period.
(d) Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined in accordance with the fair value hierarchy.
Fair Value Hierarchy
The table below summarises financial instruments carried at fair value, by valuation method. The different levels have been
defined as follows:
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within level 2 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
•
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Financial assets
2015
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
2014
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
127 ClearView Annual Report 2015
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
222,891
-
-
661,977
565,383
-
788,274
661,977
233,817
-
-
641,410
461,542
-
695,359
641,410
-
-
-
-
-
-
-
-
222,891
661,977
565,383
1,450,251
233,817
641,410
461,542
1,336,769
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
36. Financial instruments continued
Financial Liabilities
2015
Life investment policy liability
Total
2014
Life investment policy liability
Total
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
1,160,627
1,160,627
1,122,364
1,122,364
-
-
-
-
-
-
-
-
1,160,627
1,160,627
1,122,364
1,122,364
(e) Categories of financial instruments
The Company has investments in the following categories of financial assets and liabilities:
Financial assets
Investment in group companies
Cash and cash equivalents
Fixed interest deposits
Life insurance investment assets
Loans and receivables
Total
Financial liabilities
Net Policyholder liabilities
Payables
Borrowings
Current tax liabilities
Provisions
Total
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
-
-
318,159
257,892
200,769
183,299
107,035
88,759
1,450,251
1,336,769
34,447
8,115
-
1,111
25,179
-
15,516
11,876
9,884
16,353
1,773,571
1,620,703
370,605
300,535
1,001,753
991,214
24,774
45,500
4,548
5,375
25,069
-
4,622
3,588
1,081,950
1,024,493
-
357
-
4,548
26
4,931
-
349
-
4,622
19
4,990
(f) Financial risk management objectives
The primary asset risks borne by the Company relate to the
financial assets of the Company and its operating subsidiaries
excluding those in the non-guaranteed investment linked
funds in ClearView Life’s statutory fund No.4 (referred to
below as ClearView assets). The primary financial risks related
to the financial assets in the non-guaranteed investment
linked funds in ClearView Life’s statutory fund No.4 are borne
by policyholders as the investment performance on those
assets is passed through, in full, to the policyholders (referred
to below as Policyholder assets). Nonetheless, the Company
has a secondary exposure to the Policyholder assets and off-
balance sheet client funds, via the impact on the fees charged
by the Company which vary with the level of Policyholder and
client funds under management and under administration, as
well as related reputational exposure.
(g) Market risk
Market risk is the risk that financial assets will be affected by
changes in interest rates, foreign exchange rates and
equity prices.
ClearView Annual Report 2015 128
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
36. Financial instruments continued
Interest rate risk
(h) Credit risk
Interest rate risk arises on ClearView’s assets which are
invested in fixed interest funds and cash. Interest rate risk is
managed by the Company through:
•
•
•
Maintaining the level of interest rate exposure within the
tolerances set by the Board in the RMS;
Investing ClearView’s assets in accordance with the Board
approved Investment Policy and Guidelines; and
By holding capital reserves in accordance with the
Company’s ICAAP with respect to the residual interest rate
risk exposure retained, in addition to the regulatory capital
reserves held within ClearView Life in respect of interest
rate risk.
Equity price risk
Equity price risk is the risk that the fair value of investments
in equities decreases or increases as a result of changes in
market prices, whether those changes are caused by factors
specific to the individual share price or factors affecting
all equity instruments in the market. As at 30 June 2015,
ClearView’s shareholder related assets were not exposed to
equity price risk.
In contrast to this, the Policyholder assets and other client
funds under management and under administration, involve
significant investment in equities. As noted above, the
Policyholder asset risks are borne by the policyholders. The
Company is exposed to secondary risks on its management
and advice fees that are driven by the total funds under
management and administration, as well as reputational risks
from poor investment returns.
The investment of the Policyholder assets and client moneys
controlled by ClearView is undertaken in accordance with
the Investment Policy and Guidelines approved by the Board,
which inter alia stipulates the investment allocation mix, the
portfolio’s risk characteristics, management response plans
and the use of derivatives.
To the extent required, capital reserve are held in accordance
with the ICAAP with respect to the Company’s residual fee risk
exposure.
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to
the Group. Credit risk exposures arising from investment
activities are assessed by the Company’s internal investment
management committee (the ClearView Investment
Committee (CIC) appointed by the Board) prior to investing
ClearView assets into any significant financial asset. The
ongoing credit standing of material investments are
monitored by the CIC, with the CIC charged to maintain
the credit quality of ClearView assets within the Board’s
investment guidelines.
The large majority of debt assets invested in by the Company
on behalf of policyholders and clients (including Policyholder
assets) are managed under mandates with appointed
funds managers. Those mandates include credit rating,
diversification and maximum counterparty exposure rules
and standards that are to be met. The funds managers
adherence to those requirements are subject to ongoing
monitoring by the funds managers, and are separately
monitored by the Company’s custodian. Formal compliance
reporting is monitored monthly by the CIC.
Credit risk arising from other third party transactions,
such as reinsurance recovery exposures and exposure to
outsource service providers, are assessed prior to entering
into financial transactions with those parties, are approved by
the Board where material, and are monitored by appropriate
mechanisms on an ongoing basis (for example, a quarterly
monitoring and compliance reporting process in respect of
the Company’s outsourced custodian).
The Company does not expect any of its material
counterparties to fail to meet their obligations and does not
require collateral or other security to support these credit risk
exposures.
Specific capital reserves are held against credit risk under the
regulatory capital requirements of ClearView Life (LAGIC) and
credit risk is considered within the Company’s ICAAP.
The Group does have significant credit risk exposure to
counterparties but these counterparties have a high credit
rating. The table below shows the maximum exposure to
credit risk at the reporting date. It is the opinion of the Board
that the carrying amounts of these financial assets represent
the maximum credit risk exposure at the balance sheet date.
The table reflects the credit risk exposure facing the Group.
129 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
36. Financial instruments continued
Cash and cash equivalents and debt securities/fixed interest
securities
Rating
AAA to AA-
A+ to A-
BBB+ to BBB-
BB+ and below
Unrated1
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
866,819
806,992
39,474
23,272
99,844
22,591
2,288
8,973
73,420
20,723
3,138
9,195
1,000,515
913,468
-
1,005
-
3,794
44,273
-
-
301
3,018
26,591
1. Unrated relate to term deposits invested in Australian Credit Union Institutions which are APRA Regulated ADIs.
Under the terms of the Company’s products (issued via
ClearView Life and ClearView Financial Management) the
payment of unit fund redemptions to policyholders and unit
trust investors may be delayed, if necessary, until funds are
available. To date no such delays have been imposed.
The risks in respect of external (third party) funds are
controlled via the Company’s Approved Product List, which
restricts the external funds available for use by the Company’s
advisers and planners to investment platform providers that
are assessed to be reputable and financially sound.
Credit risk associated with receivables is considered minimal.
The main receivables balance is in relation to receivables from
premiums receivable, accrued dividends, loans receivable,
prepayments and outstanding settlements. Other receivables
balances relate predominantly to management fees from
external unit trusts. The concentration is spread across the
various debtors with no single significant debtor.
(i) Liquidity risk
Liquidity risk is primarily the risk that the Company will
encounter difficulty in meeting its obligations due to an
inability to realise some or all of its assets in order to fund
its cash flow needs, including the payment of amounts to
its policyholders, members and clients. A secondary risk
relates to the risk of the illiquidity of the external (including
off balance sheet) funds its clients invest in, which may result
in restricted fee flows to the Company and/or reputational
damage via association.
The primary risk is controlled through focusing the Company’s
assets, as well as policyholder and member assets and the
investment of client funds controlled by the Company, into
assets which are highly marketable and readily convertible
into cash. In addition, the Company maintains suitable cash
holdings at call and an appropriate overdraft facility.
The Company’s cash flow requirements are reviewed and
forecast daily for a one week forward period. This assessment
takes into account the timing of expected cash flows, the
likelihood of significant benefit outflows over the short term
and known significant one-off payments.
ClearView Annual Report 2015 130
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
36. Financial instruments continued
The following tables summarise the realisation profile of financial assets at the reporting date. There were no financial assets
past due or impaired at the reporting date other than those provided for.
Consolidated
2015
Receivables
Outstanding life insurance premiums net of
provision
Accrued dividends
Investment income and distribution income
Reinsurance receivable 1
Loans
Prepayments
Total
2014
Receivables
Outstanding life insurance premiums net of
provision
Accrued dividends
Investment income and distribution income
Reinsurance receivable 1
Loans
Prepayments
Total
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
$’000
$’000
$’000
$’000
4,246
1,358
1,883
886
19,313
668
1,835
192
517
-
-
721
262
171
30,189
1,863
Total
$’000
4,750
2,252
1,883
886
44
355
-
-
268
22
-
-
-
-
-
-
(6)
(4,702)
(17,559)
(2,233)
1,259
109
1,761
1,106
593
110
166
3,405
2,874
(2,713)
(17,283)
13,817
4,354
1,485
1,851
1,014
4,342
143
1,679
-
-
-
-
26
-
-
-
3
-
-
-
3,477
4,726
(16,417)
82
528
119
4
307
83
14,868
4,087
4,875
(16,024)
-
-
-
-
-
198
-
198
4,383
1,485
1,851
1,014
(3,872)
849
2,294
8,004
Company
2015
Trade receivables
Amounts from controlled/associated entities
Total
2014
Trade receivables
Amounts from controlled/associated entities
Total
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
$’000
$’000
$’000
$’000
14
9,753
9,767
2
7,847
7,849
15
-
15
2
-
2
28
-
28
3
8,499
8,502
74
-
74
-
-
-
-
-
-
-
-
-
Total
$’000
131
9,753
9,884
7
16,346
16,353
1
Reinsurance share of life insurance receivables are reflected in accordance with the likely settlement of the underlying claims to which they relate.
131 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
36. Financial instruments continued
The following tables summarise the maturity profile of the Group and the Company’s financial liabilities all of which are non-
interest bearing. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Company can be required to pay. The tables include both interest and principle cash flows.
2015
Payables
Current tax liabilities
Provisions
Reinsurance payable 1
Total
2014
Payables
Current tax liabilities
Provisions
Reinsurance payable 1
Total
2015
Payables
Current tax liabilities
Provisions
Total
2014
Payables
Current tax liabilities
Provisions
Total
Consolidated
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
$’000
18,346
-
111
5,142
23,599
20,101
-
320
3,749
$’000
119
4,548
76
-
$’000
558
-
4,014
-
$’000
528
-
813
-
4,743
4,572
1,341
53
4,622
25
-
233
-
3,243
-
933
-
-
-
24,170
4,700
3,476
933
Over
5 years
$’000
83
-
361
-
444
-
-
-
-
-
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
357
-
-
357
-
-
-
-
$’000
$’000
$’000
$’000
-
4,548
26
4,574
349
4,622
19
4,990
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
19,634
4,548
5,375
5,142
34,699
21,320
4,622
3,588
3,749
33,279
Company
Total
$’000
357
4,548
26
4,931
349
4,622
19
4,990
1
Reinsurance payable represents reinsurance premium payable on reinsurance due in respect of life insurance premium.
ClearView Annual Report 2015 132
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
36. Financial instruments continued
The following table gives information about how the fair values of these financial assets and financial liabilities are determined
(in particular, the valuation techniques and inputs used, significant unobservable inputs and the relationship of unobservable
inputs to fair value).
Fair value as at
2015
$’000
2014
$’000
Fair value
hierarchy
Valuation techniques and key
inputs
Equity Securities
222,891
233,817
Level 1
Fixed Interest Securities
661,977
641,411
Level 2
Unit Trusts
Total
565,383
461,544
Level 1
1,450,251
1,336,772
(j) Financing Facilities
Quoted bid prices in an
active market
The fair value of Fixed
Interest Securities are
based on a discounted
cash flow model using a
yield curve appropriate to
the remaining maturity of
the investment.
Quoted bid prices in an
active market
Significant
unobservable
inputs
Relationship
of unobserv-
able inputs
to fair value
n/a
n/a
n/a
n/a
n/a
n/a
The Group has access to the following facilities:
Bank Guarantees
– amount used
Overdraft and Credit
– amount used
– amount unused
Bank Revolving Facility
– amount used
– amount unused
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
942
1,084
-
-
2,000
2,250
45,500
4,500
-
-
-
-
-
-
-
-
-
-
-
-
The Company entered into a three year $50 million facility agreement with the Commonwealth Bank of Australia. As at
the reporting date, the Company has drawn down $45.5 million on the facility, with $4.5 million of unused credit facilities
available for immediate use. Interest on the loan accrues at BBSY plus a margin of 0.7% per annum, and is payable monthly.
Furthermore, a line fee of 0.4% per annum is payable on the facility on a quarterly basis. The facility is secured by a number of
cross guarantees, refer to Note 42 for details.
ClearView Life Assurance Limited has a $2 million overdraft facility with National Australia Bank at a benchmark interest rate
of 10.76% p.a calculated daily. Any overdrawn balance in excess of the overdraft will incur an additional margin of 1.5% p.a
above the benchmark interest rate. The bank overdraft is short-term in nature and was unutilised at 30 June 2014. There is an
additional $0.25 million credit card facility with National Australia Bank in the name of ClearView Administration Services Pty
Limited.
133 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
36. Financial instruments continued
Interest rate risk management
The Group’s activities expose it to the financial risk of changes in interest rates. Floating rate instruments expose the Group to
cash flow risk, whereas fixed interest rate instruments expose the Group to fair value interest rate risk. The Board monitors the
Group’s exposures to interest rate risk.
The tables below detail the Group’s exposure to interest rate risk at the balance sheet date by the earlier of contractual
maturities or re-pricing.
2015
Financial assets
Variable interest rate instruments:
Cash and cash equivalents
Fixed interest securities
Total
2014
Financial assets
Variable interest rate instruments:
Cash and cash equivalents
Fixed interest securities
Total
Consolidated
Company
Weighted
average
interest
rate
Less than 6
months
Weighted
average
interest
rate
Less than 6
months
%
$’000
%
$’000
1.74
3.11
3.33
3.55
71,433
107,035
178,468
64,959
88,759
153,718
1.35
3.40
2.50
3.43
34,447
8,115
42,562
1,111
25,179
26,290
Interest rate sensitivity analysis for floating rate financial instruments
The sensitivity analysis below have been determined based on the Group’s exposure to interest rates at the reporting date and
the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period,
in the case of instruments that have floating interest rates. A 0.5% (2014: 0.5%) increase or decrease is used when reporting
interest risk internally to key management personal and represents management’s assessment of the reasonably possible
change in interest rates.
ClearView Annual Report 2015 134
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
36. Financial instruments continued
The following table illustrates the effect for the Group from possible changes in market risk that are reasonably possible based
on the risk the Group was exposed to at reporting date:
Effect on
operating profit
Effect on
securities
Effect on
operating profit
Effect on securities
Consolidated
Consolidated
Company
Company
2015
$’000
±343
2014
$’000
±379
2015
$’000
±343
2014
$’000
±379
2015
$’000
±123
2014
$’000
±43
2015
$’000
±123
2014
$’000
±43
±0.5% (2014: ±0.5%)
The method used to prepare the sensitivity analysis has not changed in the year. Based on the market exposure management
believe that the interest rate variation above is considered appropriate in the current environment.
Fair value sensitivity analysis for fixed rate financial instruments
The Group does account for fixed rate financial assets and liabilities at fair value through profit and loss. Therefore a change in
long term interest rates at reporting date would affect profit and loss.
(k) Foreign currency risk management
Foreign currency risk is the risk that the market value of future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group undertakes certain investments denominated in foreign currencies, hence is
exposed to the effects of exchange rate fluctuations. However, the foreign currency risk is borne by the policyholder and the
shareholder has no direct exposure to foreign currency.
USD
GBP
EUR
YEN
Forward foreign exchange contracts
The Group currently does not make use of forward foreign exchange contracts.
Change
in AUD
relative
to foreign
currency
Effect on
net assets/
INV return
($)
$’000
-18%
-12%
-1%
-2%
-
-
-
-
135 ClearView Annual Report 2015
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2015
Continued
37. Disaggregated information by fund
Abbreviated income statement
2015
Life insurance premium revenue
Outwards reinsurance expense
Fee revenue
Investment revenue
Net fair gains/(losses) on financial assets at fair value
Net revenue and income
Claims expense
Reinsurance recoveries
Change in life insurance policy liabilities
Change in reinsurers' share of life insurance liabilities
Change in life investment policy liabilities
Other expenses
Profit for the year before income tax
Income tax expense
Net profit attributable to members of ClearView Life
Assurance Limited
ClearView Life Assurance Limited (Company)
Shareholders
Fund
Statutory
Fund No.1
Statutory
Fund No.2
Statutory
Fund No.4
Total
$’000
$’000
$’000
$’000
$’000
Australian Non-Participating
-
-
-
251
-
251
-
-
-
-
-
104,811
(18,293)
-
353
(68)
956
2,998
1,434
-
89,516
(32,901)
15,010
40,822
(7,367)
85
2,760
(50)
-
129
-
-
-
23,251
78,251
31,385
132,887
-
-
-
-
105,164
(18,361)
24,207
82,934
31,470
225,414
(32,951)
15,010
40,951
(7,367)
-
(3,214)
(105,984)
(109,198)
(112)
(79,460)
139
(42)
25,620
(7,684)
(600)
(975)
1,559
(23,116)
(103,288)
3,787
(3,296)
28,571
(9,463)
97
17,936
584
491
19,108
ClearView Annual Report 2015 136
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
37. Disaggregated information by fund continued
Abbreviated statement of financial position
2015
Investments in controlled entities
ClearView Life Assurance Limited (Company)
Shareholders
Fund
Statutory
Fund No.1
Statutory
Fund No.2
Statutory
Fund No.4
Total
$’000
2,950
$’000
$’000
$’000
$’000
-
53,985
1,108,594
1,165,529
Australian Non-Participating
Policy liabilities ceded under reinsurance
-
(2,487)
105,670
103,183
(156,747)
254
2,680
-
(2,233)
16,952
128,640
56,919
1,125,546
1,291,936
105
-
(156,642)
-
53,785
1,106,841
1,160,626
12,281
(10)
7,866
20,179
(144,466)
53,880
1,114,707
1,024,163
3,338
6,288
-
-
42
42
6,246
247,649
3,039
10,839
267,773
(6,476)
117,513
97
-
(7,000)
(13,379)
19,625
17,936
-
-
135,449
112,200
6,246
247,649
2,255
584
-
-
2,839
200
3,039
8,748
491
-
-
9,239
1,600
122,040
19,108
-
(7,000)
134,148
133,625
10,839
267,773
Other assets
Total assets
Gross policy liabilities – Life insurance contracts
Gross policy liabilities – Investment insurance
contracts
Other liabilities
Total liabilities
Net assets
Shareholder’s retained profits
Opening retained profits
Operating profit
Capital transfer between funds
Dividend paid
Shareholder’s retained profits
Shareholder’s capital
Total equity
137 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
37. Disaggregated information by fund continued
Abbreviated income statement
ClearView Life Assurance Limited (Company)
Shareholders
Fund
Statutory
Fund No.1
Statutory
Fund No.2
Statutory
Fund No.4
Total
Australian Non-Participating
2014
Life insurance premium revenue
Outwards reinsurance expense
Fee revenue
Investment revenue
Other revenue
Net fair gains/(losses) on financial assets at fair value
Net revenue and income
Claims expense
Reinsurance recoveries
Interest on loan
Change in life insurance policy liabilities
Change in life investment policy liabilities
Change in reinsurers' share of life insurance liabilities
Other expenses
Profit for the year before income tax
Income tax (expense)/benefit
Net profit attributable to members of ClearView Life
Assurance Limited
$’000
-
-
-
$’000
76,440
(10,313)
-
484
2,304
-
-
68,431
(25,929)
11,680
-
34,234
-
-
484
-
-
(310)
-
-
-
-
174
(52)
122
$’000
$’000
360
(46)
1,157
2,056
(6)
(84)
-
-
23,997
61,737
(131)
61,646
3,437
147,249
-
-
-
(6)
-
-
-
-
$’000
76,800
(10,359)
25,154
66,581
(137)
61,562
219,601
(25,929)
11,680
(310)
34,228
-
(2,837)
(123,547)
(126,384)
(9,994)
(61,034)
17,388
(5,217)
12,171
-
-
(9,994)
(1,293)
(15,617)
(77,944)
(699)
910
211
8,085
(1,789)
6,296
24,948
(6,148)
18,800
ClearView Annual Report 2015 138
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
37. Disaggregated information by fund continued
Abbreviated statement of financial position
ClearView Life Assurance Limited (Company)
Shareholders
Fund
Statutory
Fund No.1
Statutory
Fund No.2
Statutory
Fund No.4
Total
$’000
1,450
-
12,881
14,331
-
-
9,682
9,682
4,649
(6,598)
122
-
-
(6,476)
11,125
Australian Non-Participating
$’000
$’000
$’000
$’000
-
60,646
1,062,781
1,124,877
(3,991)
88,314
84,323
119
2,152
-
(3,872)
17,711
121,058
62,917
1,080,492
1,242,063
(127,328)
49
-
(127,279)
-
60,159
1,062,204
1,122,363
9,938
254
8,440
28,314
(117,390)
60,462
1,070,644
1,023,398
201,713
2,455
9,848
218,665
98,342
12,171
7,000
-
117,513
84,200
2,044
211
-
-
2,255
200
2,455
9,452
6,296
(7,000)
-
8,748
1,100
9,848
103,240
18,800
-
-
122,040
96,625
218,665
4,649
201,713
2014
Investments in controlled entities
Policy liabilities ceded under reinsurance
Other assets
Total assets
Gross policy liabilities – Life insurance contracts
Gross policy liabilities – Investment insurance
contracts
Other liabilities
Total liabilities
Net assets
Shareholder’s retained profits
Opening retained profits
Operating profit
Capital transfer between funds
Dividend paid
Shareholder’s retained profits
Shareholder’s capital
Total equity
139 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
Notes to the Financial Statements
For the year ended 30 June 2015
For the year ended 30 June 2015
Continued
Continued
38. Investment in controlled unit trusts
Name
Controlled unit trusts
International Fixed Interest Fund
Fund of Funds Australian Equity Fund
Bond Fund
Fund of Funds International Equity Fund
Property Fund
Money Market Fund
Infrastructure Fund
Emerging Markets Fund
CVW Platinum International Shares Fund
CVW Hyperion Australian Shares Fund
CVW Vanguard Listed International Infrastructure
Fund
CVW Vanguard Emerging Markets Fund
CVW Plato Australian Shares Fund
CVW MFS International Shares Fund
39. Leases
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Total
Lease committmens relate to:
Consolidated
2015
Consolidated
2014
Type
$’000
%
$’000
%
Debt
Equities
Debt
Equities
Property
Debt
Infrastructure
Equities
Equities
Equities
Infrastructure
Equities
Equities
Equities
27,454
113,451
322,339
104,388
46,381
239,571
114,709
106,922
8,734
5,924
4,752
4,852
47,819
15,283
95.23
59.26
68.47
93.10
83.14
80.77
69.11
71.56
97.99
83.95
96.36
96.69
78.70
63.88
30,287
171,983
308,253
106,918
48,009
244,259
109,970
103,748
-
-
-
-
-
-
1,162,579
1,123,427
95.65
75.48
82.25
92.50
89.46
88.84
84.15
80.37
-
-
-
-
-
-
Consolidated
2015
$’000
2,367
3,045
18
5,412
2014
$’000
1,897
2,650
-
4,547
Company
2014
$’000
2015
$’000
-
-
-
-
-
-
-
-
•
•
•
ClearView Group’s offices in various locations. Under these arrangements ClearView generally pays rent on a periodic basis
at rates agreed at the inception of the lease.
Tools of trade cars utilised by employees in the performance of their work responsibilities. The Group does not have an
option to purchase the leased assets at expiry of the leases.
Printers and copiers utilised in the business. The Group does not have an option to purchase the leased assets at expiry of
the leases.
ClearView Annual Report 2015 140
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2014
Continued
39. Leases continued
In respect of non-cancellable operating leases the following liabilities have been recognised:
Make good provision (Note 23)
Current
Non-current
Total
Consolidated
2015
$’000
2014
$’000
2015
$’000
Company
2014
$’000
100
333
433
46
270
316
-
-
-
-
-
-
book of business in the coming financial year at a price that
is not yet determined and that includes deferred uncertain
components. It is possible that the market value or resale
value of such a business purchased may be less than the cost
to the Group. Due to the uncertainty of these circumstances
arising no value can be reliably placed on the contingent
liability.
The Group has term deposits that back financial guarantees
issued by National Australia Bank in favour of landlords for
leased premises in relation to rental deposits of $105,852
(2014: $303,329).
The Group has term deposits to back financial guarantees
issued by Westpac Bank in favour of landlords for leased
premises in relation to rental deposits of $941,615 (2014:
$780,946)
The Company in the ordinary course of business has
guaranteed the obligations of one of its subsidiaries in respect
of its obligations for leasehold premises.
The Company has guaranteed the obligations of one of
its subsidiaries in respect of employee entitlements of
employees who were previously employed by MBF Holding Pty
Limited (Bupa Australia).
Other than the above, the Directors are not aware of any
other contingent liabilities in the Group at the year end.
40. Contingent liabilities and contingent assets
There are outstanding claims and potential claims against
the ClearView Group in the ordinary course of business.
The ClearView group does not consider the outcome of any
such claims known to exist at the date of this report, either
individually or in aggregate is likely to have a material effect
on its operations or financial position. The Directors are of
the opinion that provisions are not required in respect of
these matters, as it is not probable that a future sacrifice
of economic benefits will be required or the amount is not
capable of reliable measurement.
Certain subsidiaries act as trustee for various trusts. In this
capacity, the subsidiaries are liable for the debts of the trusts
and are entitled to be indemnified out of the trust’s assets for
all liabilities incurred on behalf of the trusts.
In the ordinary course of business, certain ClearView
subsidiaries enter into various types of investment contracts
that can give rise to contingent liabilities. It is not expected
that any significant liability will arise from these transactions
as any losses or gains are offset by corresponding gains or
losses on the underlying exposure.
The Group has contractual agreements with a limited number
of advisers to purchase the adviser’s business should the
adviser want to sell their business and on the satisfaction of
certain criteria. The terms and conditions provide that on the
satisfaction of specific requirements, the adviser’s book of
business will be purchased for a price based on the adviser’s
recurring income stream from the Group. It is anticipated
that one or more advisers may initiate the purchase of their
141 ClearView Annual Report 2015
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2015
Continued
41. Capital commitments
The Group has committed to the following capital commitments subsequent to the year end.
Technology projects
Your Insure 1
Total
Consolidated
2015
$’000
1,645
1,589
3,234
2014
$’000
300
2,700
3,000
Company
2014
$’000
-
-
-
2015
$’000
-
-
-
1
ClearView Wealth Limited will provide funding to Your Insure up to a maximum limit of $3.3 million on a draw down basis. As at the balnce date $1.7 million of
the facility is still available to be drawn down subject to the achievement of set performance hurdles.
42. Guarantees
The facility entered into with the Commonwealth Bank of Australia is guaranteed jointly and severally by:
• ClearView Wealth Limited
• ClearView Group Holdings Pty Limited
ACN 106 248 248
ACN 107 325 388
• ClearView Administration Services Pty Limited
ACN 135 601 875
• ClearView Financial Management Limited*
• Matrix Planning Solutions Limited*
• ClearView Financial Advice Pty Ltd*
ACN 067 544 549
ACN 087 470 200
ACN 133 593 012
*These entities provide a limited guarantee. The recovery granted from the guarantee is limited to the extent that it does not
result in the entities breaching their Australian Financial Services Licence conditions.
The guarantees are supported by collateral (in the form of the shares) of the entities.
43. Subsequent events
Dividends
On 25 August 2015, the Group proposed a final dividend of $12.30 million representing 2.1 cents per share fully franked. The
record date for determining entitlement to the dividend is 3 September 2015 and the dividend will be paid on 17 September
2015. Since the dividend has not been declared at year end it has not been recognised as payable in these accounts.
The Directors are not aware of any other matter or circumstance not otherwise dealt with in this report or the financial
statements that has significantly, or may significantly; affect the operations of the Group, the results of those operations or the
state of the affairs of the Group in future financial years.
ClearView Annual Report 2015 142
ClearView Wealth Limited
Directors’ Declaration
The Directors declare that:
(a) In the Directors’ 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;
(b) In the Directors’ opinion, the attached financial
statements and notes thereto are in accordance with
the Corporations Act 2001, including the compliance
with accounting standards and giving a true and fair
view of the financial position and the performance of the
Company and the consolidated entity;
(c) In the Directors’ opinion, the financial statements and
notes thereto are in accordance with International
Financial Reporting Standards issued by the International
Accounting Standards Board as disclosed in Note 3; and
(d) The Directors have been given the declarations required
by section 295A of the Corporations Act 2001. Signed
in accordance with a resolution of the Directors made
pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the Directors
Dr Gary Weiss
Chairman
25 August 2015
143 ClearView Annual Report 2015
ClearView Wealth Limited Independent Auditor’s Report
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
GPO Box 78
Melbourne 3000
Australia
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
Independent Auditor’s Report
to the members of ClearView Wealth Limited
Report on the Financial Report
We have audited the accompanying financial report of ClearView Wealth Limited, which comprises
the consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit
or loss and other comprehensive income, the consolidated statement of cash flows and the
consolidated statement of changes in equity for the year ended on that date, notes comprising a
summary of significant accounting policies and other explanatory information, and the directors’
declaration of the consolidated entity, comprising the company and the entities it controlled at the
year’s end or from time to time during the financial year as set out on page 60 to 143.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of a financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of a financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error. In Note 3, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International Financial
Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the entity’s
preparation of the financial report that gives a true and fair view, in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited.
ClearView Annual Report 2015 144
ClearView Wealth Limited
Independent Auditor’s Report
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of ClearView Wealth Limited, would be in the same terms if
given to the directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of ClearView Wealth Limited is in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at
30 June 2015 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial statements also comply with International Financial Reporting Standards as disclosed
in Note 3.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 42 to 57 of the directors’ report for the
year ended 30 June 2015. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of ClearView Wealth Limited for the year ended 30 June
2015, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Peter A. Caldwell
Partner
Chartered Accountants
Melbourne, 25 August 2015
145 ClearView Annual Report 2015
ClearView Wealth Limited
Shareholders’ Information
As at 6 August 2015
Substantial shareholders
As at the date of this Annual Report, the following entities have notified ClearView that they hold a substantial holding
in shares.
No. of shares
as per notice
% of issued
capital
310,076,859
62,447,883
52.9%
10.7%
Rank
Name
1
2
1
CCP Bidco Pty Ltd and Associates
Macquarie Investment Management Limited
Crescent Capital Partners Management Pty Limited represent the interests of CCP Bidco Pty Limited (CCP Bidco) and Macquarie Investment Management
Limited (MIML) as manager. MIML’s 10.7% is therefore included in the 52.9% holding of CCP Bidco in the table above.
Twenty largest shareholders (as at 6 August 2015)
Rank
Name
No. of shares
as per notice
% of issued
capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CCP Bidco Pty Ltd
Macquarie Investment Management Limited
Citicorp Nominees Pty Limited
CCP Trusco 4 Pty Limited
Portfolio Services Pty Ltd
CCP Bidco Pty Limited
CCP Trusco 5 Pty Limited
CCP Trusco 1 Pty Limited
Pacific Custodians Pty Limited
Macquarie Investment Management Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
CCP Trusco 3 Pty Limited
BNP Paribas Noms Pty Ltd
National Nominees Limited
Mr Simon Swanson
CCP Trusco 4 Pty Limited
CCP Trusco 2 Pty Limited
CCP Bidco Pty Limited
Salamanca Group Trust (Switzerland) SA
92,294,252
47,580,009
33,525,225
30,972,903
25,450,635
24,011,127
21,955,128
20,224,844
15,432,642
14,867,874
14,824,553
13,718,621
11,557,052
10,495,016
10,011,121
10,000,000
9,678,460
9,630,878
7,503,034
7,500,000
15.76
8.12
5.72
5.29
4.34
4.10
3.75
3.45
2.63
2.54
2.53
2.34
1.97
1.79
1.71
1.71
1.65
1.64
1.28
1.28
ClearView Annual Report 2015 146
ClearView Wealth Limited Shareholders’ Information
As at 6 August 2015
Ordinary Share Capital
There are 585,768,954 fully paid ordinary shares held by 1,795 shareholders. All the shares carry one vote per share.
Distribution of shareholders
The distribution of Shareholders as at 6 August 2015 is as follows:
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Unmarketable parcels
Minimum $500.00 parcel at $0.80 per unit
Shares under voluntary escrow
There are no shares subject to voluntary escrow as at 30 June 2015.
Total
holders
279
498
292
522
204
Units
94,481
1,483,340
2,227,847
15,761,273
566,202,013
1,795
585,768,954
% of issued
capital
0.02
0.25
0.38
2.69
96.66
100.00
Minimum
parcel size
535
Holders
189
Units
19,833
147 ClearView Annual Report 2015
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ClearView Annual Report 2015 148
ClearView Wealth Limited This page has been left blank intentionally.
149 ClearView Annual Report 2015
149 ClearView Annual Report 2015
ClearView Wealth Limited
ClearView Wealth Limited
ClearView Annual Report 2015 150
ClearView Wealth Limited Auditors
Deloitte Touche Tohmatsu
Stock Listing
ClearView Wealth Limited is listed on
the Australian Securities Exchange (ASX)
under the ASX code “CVW”.
Annual Corporate
Governance Statement
The ClearView Annual Corporate
Governance Statement may be viewed
at www.clearview.com.au/page/
shareholders/corporate-governance
Directory
Directors
Dr Gary Weiss (Chairman)
Andrew Sneddon
Bruce Edwards
David Brown
Gary Burg
Jennifer Newmarch
Michael Alscher
Michael Lukin
(Alternate to Mrs Newmarch)
Nathanial Thomson
Simon Swanson
Managing Director
Simon Swanson
Company Secretaries
Chris Robson
Athol Chiert
Appointed Actuary
Ashutosh Bhalerao
Chief Actuary and
Risk Officer
Greg Martin
Registered Office
and Contact Details
Level 12, 20 Bond Street
Sydney NSW 2000
GPO Box 4232
Sydney NSW 2001
Telephone: +61 2 8095 1300
Facsimile: +61 2 9233 1960
Email: ir@clearview.com.au
Website: www.clearview.com.au
Share Registry
For all enquiries relating to
shareholdings, dividends and related
matters, please contact the share
registry:
Computershare Investor
Services Pty Limited
Level 3, 60 Carrington Street
Sydney NSW 2000
GPO Box 2975
Melbourne VIC 3001
Telephone:
1300 850 505
+61 3 9415 4000
Facsimile:
+61 3 9473 2500
www.computershare.com.au
149 ClearView Annual Report 2015
ClearView Wealth Limited
ClearView Wealth Limited
ClearView Annual Report 2015 150
ClearView Wealth Limited
ABN 83 106 248 248
www.clearview.com.au
ASX code CVW