Emergence of growth
Annual Report 2016
Contents
2
3
4
5
8
Financial Highlights
FY16 Results Summary
Our Values
Chairman’s Letter
Managing Director’s Report
12 Directors’ Report
19 Operating and Financial Review
Financial Calendar
Annual General Meeting
10 November 2016
Half Year End
31 December 2016
Half Year Result Announcement
February 2017
Year End
30 June 2017
Annual Report
August 2017
56
Remuneration Report
Dates are subject to change.
71 Auditor’s Independence Declaration
72
Financial Report
153 Directors’ Declaration
154 Independent Auditor’s Report
156 Shareholders’ Information
158 Directory
1 ClearView Annual Report 2016
ClearView Wealth Limited
2016 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
Embedded Value4
Value of New Business5
Net Asset Value6
Reported diluted EPS (cps)
Underlying diluted EPS (cps)
Dividend Per Share (cps)
FY16
24.5
2.7
1.5
28.7
(0.5)
28.2
(1.0)
27.2
5.5
32.7
(9.1)
23.6
624.1
19.0
411.8
4.27
4.92
2.5
FY15 % Change9
15.3
1.8
4.4
21.5
(0.6)
20.9
(0.4)
20.5
1.0
21.5
(9.0)
12.5
494.1
15.8
336.8
2.36
3.85
2.1
+60%
+50%
-66%
+33%
N.M.
+35%
N.M
+33%
N.M
+52%
N.M
+89%
+16%
+20%
+8%
+81%
+28%
+19%
Life Insurance
Wealth Management
Financial Advice
In-force Premium7
Funds Under Management8
Financial Advisers
160
120
$M
80
40
0
150.7
105.7
10.9
34.1
115.7
71.0
9.6
35.1
87.5
45.2
5.6
36.7
62.1
21.0
2.9
38.1
FY13
FY14
FY15
FY16
Old Book
Direct
LifeSolutions
2.2
2.4
1.8
$B
1.2
0.6
0.0
0.06
2.13
0.20
0.80
1.90
0.11
0.61
1.53
0.23
1.66
0.41
1.30
1.25
1.18
1.07
FY13
FY14
FY15
FY16
Old Book
WealthSolutions
WealthFoundations
External Platforms
2.2
240
200
160
120
80
40
0
102
81
21
FY13
117
98
19
FY14
235
89
221
82
127
138
12
FY15
8
FY16
Employed
ClearView Self-Employed
Matrix Self-Employed
1
2
3
4
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 consolidated 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).
Embedded Value at 4% discount rate margin, including a value for future franking credits, franking credits included in the net worth and ESP loans; % movement to FY15 adjusted for the
$50m Entitlement Offer completed in June 2016
Value of New Business at 4% discount rate margin.
5
6 % movement to FY15 adjusted for the $50 million entitlement offer completed in June 2016.
7
8
In-force premium is defined as annualised premium in-force at the date based on policy risk commencement date.
FUM includes Funds Under Management (ClearView Master Trust, WealthFoundations and ClearView Managed Investment Schemes), Funds Under Administration on WealthSolutions
and FUM in ClearView MIS platform funds on external platforms.
9 % movement to FY15 adjusted for the $50 million entitlement offer completed in June 2016.
ClearView Annual Report 2016 2
ClearView Wealth Limited FY16 Results Summary
Strong Growth in Distribution Footprint Building Profit Base, with High Wallet Share in Life Insurance Sales on
Penetrated APLs... with Ability to Leverage Life Insurance IFA channels for Wealth distribution
ClearView Aligned Advisers
(# Advisers)
240
200
160
120
80
40
0
221
82
235
89
139
146
117
102
FY13
FY14
FY15
FY16
ClearView
Matrix
Non-Aligned
Advisers - Life
(# of Active APLs with
ClearView Products)
Non-Aligned
Advisers - Wealth
(# of Active APLs with
ClearView Products)
Underlying NPAT1
300
250
200
150
100
50
0
256
191
119
74
FY13
FY14
FY15
FY16
10
8
6
4
2
0
9
5
1
1
FY13
FY14
FY15
FY16
30
25
20
$M
15
10
5
0
27.2
13.8
13.4
19.7
10.6
20.5
10.6
9.1
9.9
16.0
7.5
8.5
FY13
FY14
FY15
FY16
1H
2H
2.2
Coupled with Strong Growth and Diversity in Sales of Contemporary Product
Wealth Contemporary Product Net Flows2
Life Insurance New Business4
Total Life New Business by Channel for FY16
400
$M
200
182
106
76
153
68
85
0
FY13
FY14
1H
335
176
159
FY16
275
150
125
FY15
2H
50
$M
25
39.2
21.0
34.5
17.5
17.0
18.2
27.4
14.5
12.9
19.4
9.5
9.9
Direct
12%
Aligned
33%
0
FY13
FY14
FY15
FY16
IFA
55%
1H
2H
2.2
Leading to Growth in the In-force Base Underpinning Embedded Value Growth
Wealth Management In-Force FUM3
Life In-Force Premium5
Embedded Value ($M)6
2.4
1.8
$B
1.2
0.6
0.0
2.13
1.90
1.66
1.53
FY13
FY14
FY15
FY16
$M
150
120
90
60
30
0
150.7
115.7
87.5
62.1
FY13
FY14
FY15
FY16
700
600
500
400
300
200
100
0
624
92
40
492
494
69
36
389
445
57
29
359
365
50
24
291
FY13
FY14
FY15
FY16
Embedded Value
ESP Loans
Franking Credits
1
2
3
4
5
6
2.2
2.2
Underlying NPAT consists of consolidated 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.
Wealth Contemporary Product Net Flows is defined as inflows less redemptions into FUM but excludes management fees outflow and ClearView Master Trust product net flows given
that the product is not marketed to new customers.
FUM includes Funds Under Management (ClearView Master Trust, WealthFoundations and ClearView Managed Investment Schemes), Funds Under Administration on WealthSolutions
and FUM in ClearView MIS platform funds on external platforms.
Life insurance new business or sales represents the amount of new annual written premium sold during the period, net of policies cancelled from inception and excludes age
based/CPI increases.
In-force premium is defined as annualised premium in-force at the balance date.
Embedded Value at 4% discount rate margin, including a value for future franking credits, franking credits included in the net worth and ESP loans; Franking credits in the net
worth have been restated in prior periods.
3 ClearView Annual Report 2016
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.’
ClearView Annual Report 2016 4
ClearView Wealth Limited Chairman’s Letter
Client focus
I am pleased to report in my first Annual Report letter to shareholders that last year ClearView made life insurance claims cash
payments totalling $33.6 million to 358 customers and their families at a time of great need. Our customers are Australians
who take responsibility for their own future by purchasing our insurance policies either directly or more usually with assistance
from a financial adviser. Paying claims is our business. We are very careful to design policies that meet the essential insurance
needs of our customers but at an affordable price. By doing this we make an important contribution to the Australian
community and to the Australian economy.
ClearView has a strong client focused culture. We believe that our values and culture lead to open and transparent
partnerships based on mutual trust and cooperation with all stakeholders. People deserve quality help and support to plan
and manage their financial futures. This means we also provide superannuation and wealth management products and
services for our customers to attain their financial goals. We do this by helping to build and protect the financial futures of
our customers and their families. We continue to work hard to ensure our people are engaged and equipped to deliver on
our promises.
Results Overview
In recent years ClearView has made significant investments in its business to enable it to grow more strongly in the future.
These investments have reduced past profits but increase our sustainable future profits. While ClearView will continue to invest
in growth for the foreseeable future, the drag on profit has started to abate and earnings have begun to accelerate. ClearView
is a business with strong earnings momentum and a growing market share.
ClearView’s preferred profit measure, Underlying NPAT1 grew 33% to $27.2 million in FY16 (FY15: $20.5 million). This increase
in Underlying NPAT was above the mid-point of a guidance range provided to the market at the end of May 2016 at the time of
the share entitlement offer.
ClearView achieved strong financial results and growth in key operating metrics in FY16 in its two largest segments:
•
•
Life Insurance Operating NPAT increased 60% to $24.5 million, driven by growth in in-force premiums, and new
LifeSolutions business written by advisers2. Life insurance is the key profit driver and most advanced division in ClearView.
Wealth Management Operating NPAT increased 50% to $2.7 million, reflecting an improved contribution to profitability as
the new contemporary products are now providing support to the growth and development costs being incurred. Wealth
management is the least advanced division, given the recently completed ‘build phase’ and material investment in the new
platform and products in FY15.
Embedded value is up 16% to $624.1 million3, with the Value of New Business3 up 20% to $19 million. The strong Value of
New Business reflects that ClearView is generating significant value for shareholders through its growth and the quality of its
products and services.
Capital Management
At the end of May 2016, the Company announced the launch of a $50 million fully underwritten 1 for 10.2 pro-rata share
entitlement offer to eligible shareholders. Proceeds from the capital raising were used to fully pay down $45.5 million in debt
under a $50 million Debt Funding Facility, with the remaining $4.5 million retained as capital for growth.
ClearView is now fully capitalised with Common Equity Tier 1 capital to fund its current business plans and anticipated medium
term growth, with some additional capital flexibility over the medium term.
The $50 million Debt Funding Facility remains in place to provide future capital funding in the event that medium to longer
term growth is materially above that currently anticipated or if other opportunities arise.
1
2
3
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 consolidated 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
LifeSolutions (Advised) sales increased 26% but were partly offset by an intentional shift in focus of the Non-Advice (Direct) business from lower to the mid socioeconomic demographic.
Embedded Value and Value of New Business at 4% discount rate margin. Embedded Value includes franking credits and ESP loans. Embedded Value percentage movement to FY15
adjusted for the impacts of the $50m capital raising completed in June 2016.
5 ClearView Annual Report 2016
5 ClearView Annual Report 2016
ClearView Wealth Limited
ClearView Wealth Limited
ClearView Annual Report 2016 6
ClearView Wealth Limited Chairman’s Letter
Continued
Dividends and DRP
The Board has declared a fully franked final dividend of 2.5 cents per share (cps) for FY16 (FY15: 2.1cps), with a record date of
16 September 2016 and a payment date of 30 September 2016. There was no interim dividend paid in FY16 (FY15: nil).
Chart 1: Dividend (Cents Per Share)
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2.2
21.6
10.5
14.5
1.8
2.0
2.1
2.5
FY13
FY14
FY15
FY16
Ordinary
Special1
2.2
This 19% rise in the FY16 Final Dividend reflects the Group’s stronger earnings profile and represents approximately 60% of the
FY16 Underlying NPAT, in line with the Company’s dividend policy of a 40%-60% payout ratio. As outlined to the market at the
time of the capital raising, the dividend reinvestment plan (DRP) will not operate in relation to the FY16 Final Dividend.
Board and Governance
In May 2016, Dr Gary Weiss resigned as Chairman of the Board and as a Director of ClearView, resulting in my appointment
as Chairman. Jennifer Newmarch also resigned as a Director in May 2016 to fulfill a new role and ensure the continued
independence of a majority of the Board.
The Board of ClearView is grateful for the significant contribution that Gary has played in founding and helping to build
ClearView over the past five years. On behalf of the Board, I wish to thank both Gary and Jennifer for their significant
contributions during their tenure as directors.
Majority Shareholding
ClearView has a 52.9% majority shareholder, CCP Bidco Pty Limited and its Associated entities (Crescent).
The Board is aware that Crescent would consider selling its shares in ClearView and is likely to entertain future control
proposals. The Board has been soliciting and will evaluate proposals in the interests of all shareholders. The Board has
appointed Morgan Stanley to assist in evaluating any strategic options or proposals that are received. However, there is no
certainty that any such proposals will be received.
We will continue to keep our shareholders informed of developments in accordance with our continuous disclosure
reporting obligations.
5 ClearView Annual Report 2016
ClearView Wealth Limited
ClearView Wealth Limited
ClearView Annual Report 2016 6
1
In accordance with the Implementation Agreement entered into between the Company and CCP Bidco Pty Limited in September 2012, ClearView declared a special unfranked dividend
of 2.2 cps.
Chairman’s Letter
Continued
Strategy and Outlook
ClearView’s strategy continues to be refined but remains focused on being:
•
•
A 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 and the
convergence of superannuation and life insurance products.
ClearView pursues this strategy with a genuine focus on culture and values. ClearView prides itself on its values: persistence,
collaboration, integrity and authenticity. This has led ClearView to be a client oriented organisation and has allowed the
business to win clients through relationships, product innovation and service. After the past 3 years of investment, ClearView’s
initial goal of achieving 5% of the long term life insurance profit pool, building a material wealth management business,
and a high quality financial advice business providing strategic advice to its clients are now becoming increasingly tangible
and realistic.
On behalf of the ClearView Board, I thank you, our customers, partners and shareholders for your ongoing support for
ClearView. I would also, of course, like to thank all our employees and management for their diligent contributions to our
daily operations and skillful execution of our strategy and business plans. Lastly, I wish to thank my fellow Directors for their
advice and active involvement in support of the business during the year.
Bruce Edwards
Chairman
24 August 2016
7 ClearView Annual Report 2016
ClearView Wealth Limited Managing Director's Report
The 2016 financial year was a milestone year in the growth and development of ClearView Wealth Limited. It marked the
transition from the investment or building phase of ClearView to the growth phase where we begin to see the fruits of that
investment in a strong operational and earnings performance.
Having completed the initial phases of that ‘J Curve’ investment in FY15, we are now seeing our businesses move up the
earnings curve, particularly in the Advised Life insurance segment, which was the first component in the ClearView investment
phase in FY12.
Life Insurance
The Australian Life Insurance industry has been growing at double-digit rates over the past ten years. It is forecast to grow
at 7.6% compound annual growth rate through to 2029 based on forecast robust population growth, increased market
penetration of insurance and economic growth. The individual life insurance market, on which ClearView is focused (60% of
total market), is forecast to grow at 9.4% pa compound growth1.
Against this backdrop and in the context of ClearView’s substantial three-year strategic investment in the Advised Life market,
this segment was the strong performer for the Group in FY16.
Life Insurance Operating NPAT increased 60% to $24.5 million, driven by growth in in-force premiums, up 30% to $150.7
million, with new business written increasing 14% to $39.2 million2. In-force premium growth was driven by the LifeSolutions
product suite, which in turn was propelled by the broadening out of distribution to the IFA segment.
Sales through IFAs (excluding ClearView and Matrix aligned advisers) account for an increasing share of life insurance sales,
which demonstrates the success of the Company’s distribution strategy. Where ClearView has been on an open Authorised
Product List (APL) for more than 12 months, it has increased its wallet share given it takes time to penetrate the APLs and
change adviser behaviours.
Non-Advice (Direct) sales were down 36% to $4.5 million (FY15: $7.0 million), impacted by the closure of Your Insure to refocus
the business towards mid-market consumers. This negative growth was a function of the closure of Your Insure (which
targeted lower socioeconomic customers) offset by a 26% growth in sales (to $2.7 million) through ClearView’s Strategic
Partners (which targets mid-market consumers). This refocus of sales efforts is consistent with ClearView’s strategy to focus
on long term profitable segments, and will create increased shareholder value in the medium term, but required a significant
reorganisation in FY16.
ClearView continues to work diligently to successfully drive profitable growth. We are committed to ongoing innovation in the
life insurance market and expanding our distribution reach and embedding growth via the third party IFA market.
Incremental investment continues in our core life advice market and product portfolio with the launch of an improved adviser
portal in 2H16. The next step is to upgrade the online quote system and application process making it easier for IFAs to do
business with ClearView.
The election created uncertainty as to the timing and impacts of the proposed life insurance regulatory reforms. However, if
these reforms are implemented and increased access to vertically integrated APLs is achieved, ClearView will enjoy a significant
expansion in its addressable market and will be able to provide clients of these larger institutions with the opportunity to
benefit from ClearView’s products and services.
Overall, we expect ClearView’s Advised Life Insurance segment to continue to perform strongly for the forseeable future due to
ongoing investment, and the compound effect of new business wins and expansion in APL representation.
Wealth Management
Wealth Management Operating NPAT increased 50% to $2.7 million (FY15: $1.8 million), with increased FUM, up 12% to $2.1
billion, while net inflows were $212 million, up 90%.
ClearView’s approach to the wealth management market is consistent with its approach to the life insurance market where we
are focused on providing clients with best in class services in an efficient manner.
1
2
Source: Plan for Life, Rice Warner
LifeSolutions (Advised) sales increased 26% but were partly offset by an intentional shift in focus of the Non-Advice (Direct) from lower to the mid socioeconomic demographic.
ClearView Annual Report 2016 8
ClearView Wealth Limited Managing Director's Report
Continued
The ClearView challenge to the Wealth Management market is two to three years behind its position in the Life Insurance
market. Given ClearView’s initial focus on life insurance, it has only begun investing significantly in its wealth offering in the past
24 months starting with the acquisition of the Matrix wealth-focused adviser network in FY15.
ClearView has two scalable platforms – WealthSolutions, a high-end, full wrap platform that allows investment flexibility
and efficient and effective management; and WealthFoundations, developed in conjunction with Financial Synergy to serve
mid-level clients. We have also more recently included ClearView’s platform funds on an external platform, which we see as a
significant opportunity to broaden out this offering to further support the adviser network.
ClearView has been investing in technology to assist advisers in client management and administration. ClearView believes
that it now has scalable technology in its wealth platforms that meets its objective of being a strong flexible provider of wealth
management solutions to advisers and clients.
ClearView operates its funds management business by managing an in-house research process that, for a fee, develops
model portfolios of various ClearView funds and independent asset manager funds. Model portfolios allow the ClearView
adviser network and independent IFAs to efficiently meet the investment needs of their clients by developing well-researched
portfolios of asset managers with a particular focus. It also earns a margin on ClearView FUM.
ClearView also helps clients invest in, or allocate assets to funds managed by third party asset managers. ClearView does
not currently directly manage investments in underlying assets and outsources this function to third party specialist
asset managers.
In FY17, ClearView will continue to build out its wealth management business to leverage the investments it has made over
the past 24 months. It has the ability to utilise the distribution network that has been built in life insurance with the number
of third party APLs with which ClearView wealth products are placed increasing to 9 as at 30 June 2016.
Financial Advice
Financial Advice Operating NPAT decreased 66% to $1.5 million (FY15: $4.4 million), partly driven by a change in the allocation
of net dealer group support costs entirely to our ClearView dealer group (previously partly absorbed by the Life Insurance
segment).
Funds under Management and Advice (FUMA) are up 4% to $8.2 billion, while Premiums Under Advice (PUA) were up 15% to
$215 million. These increases are reflective of the net increase in adviser numbers and the change in the adviser mix between
periods. Financial advisers have increased 6% to 235.
ClearView has built a strong adviser network in our dealer groups that was initially built by attracting high quality Life Insurance
focused advisers to the ClearView dealer group. This shifted to recruiting more Wealth Management focused advisers into the
network and this was a key driver behind acquiring the Matrix dealer group in FY15.
The adviser network has been built because we have not chosen to pay shelf space fees and volume based rebates in the third
party IFA market and we have also been precluded from placing our manufactured products on certain APLs (given that there
are restricted APL structures in the market).
The aligned advisers have helped ClearView build a strong adviser network and gain credibility in the market – no targets are
placed on adviser recruitment. ClearView has a strategy of building a high quality financial advice business providing strategic
advice for clients.
Regulation
In March 2016 ClearView wrote a submission to the Senate Economics Legislation Committee of the Federal Parliament
commenting on the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016.
Our comments on the Bill were in the context of the broader objective of improving consumer outcomes with respect to
both financial advice and life insurance products and services. In short, ClearView broadly supported the intent and detail
of the proposed Bill but was and continues to be of the view that restricting substantive reform only to the area of adviser
remuneration, while allowing industry to 'write its own ticket' on key industry practice issues (protect incumbency) such as
9 ClearView Annual Report 2016
ClearView Wealth Limited Managing Director's Report
Continued
Approved Product Lists (APLs) and a Life Insurance Code of Conduct, will lead to a failure in terms of ensuring better outcomes
for Australian consumers.
There are four areas that ClearView contends need to be addressed to ensure good public policy outcomes with respect to life
insurance. In summary, these are:
1. Changes to adviser remuneration
We broadly support the reduction in upfront commissions and changes to commission clawback arrangements as originally
proposed by the Government before the election. We consider however, that all grandfathering relief for life product sales
should cease by 2021. This is critical to ensure that poor behaviour connected to advisers leaving clients in old legacy products
to preserve their volume based/lapse rates bonuses is eradicated.
2. Opening up of APLs
The Approved Product List Industry Standard (APL Standard), being formulated by the Financial Services Council (FSC) is
ineffective in advancing product choice, competition or consumer outcomes. As currently drafted, it requires that all life
insurers include only more than one product on their APL. We are concerned that APLs are currently utilised by vertically
integrated financial services businesses as a means for restricting competition to primarily the products owned by those
same businesses. This restricts the products that are available to consumers who engage with those businesses and begs the
question as to whether appropriate products are being recommended that are in the client’s best interest. We do not consider
that the proposed APL Standard will address this inherent conflict of interest.
ClearView is of the view that every APL should include all life insurance products issued by insurers regulated by APRA. This
would ensure that advisers are not inherently conflicted, that consumers are provided with financial advice that is in their best
interests and to ensure that the life insurer meets its duty of utmost good faith to the consumer. Given there are only eleven
life insurers (in comparison to the hundreds of fund choices that most platforms accommodate) it is reasonable that client’s
best interests are protected in this way and are mandated.
3. The development of an effective Life Code
ClearView supports a sensible industry Code of Conduct (Code). The industry has been charged with the responsibility of
preparing the draft Code, the first version of which was released for consultation in December 2015. ClearView believes that
this draft code has lacked sufficient engagement with consumer and financial rights groups and does not protect consumer’s
best interests appropriately but supports and entrenches incumbency. ClearView has been engaging more closely with the
industry bodies in relation to the Code in particular in relation to governance arrangements, procedures with respect to
non-compliance and transparency with respect to the way the Code operates and consumer’s rights. ClearView believes
that the industry should work with ASIC to get it approved in accordance with RG183 and ASIC should ensure that the Code
is contractually enforceable by consumers and that the content is meaningful. ClearView believes that this will bring about
critical changes in behavior in the financial services industry and improve the trust in and the reputation of financial advisers
more generally. Pleasingly, in the last few weeks we have been encouraged by some developments to strengthen the
proposed code.
4. Enhanced adviser education
ClearView strongly supports current initiatives to enhance the professional, ethical and education standards of financial
advisers. We consider that increasing education standards is critical to ensuring that advisers are appropriately trained and
possess the necessary skills and expertise to provide sound, quality financial advice to their clients.
The recent federal election caused the proposed life insurance reforms with respect to changes to commission caps and
clawbacks. We hope for a resumption of the reform process and proposed changes with respect to enhancing adviser
education as soon as possible after parliament is recalled.
ClearView has performed and will continue to perform strongly in the segments of the Life Insurance market that are
genuinely open and benefit from the adviser of quality financial advisers that are focused on clients best interests. However,
ClearView Annual Report 2016 10
ClearView Wealth Limited Managing Director's Report
Continued
there remains a significant proportion of the life insurance industry that cannot benefit from ClearView’s innovative products
and focus on consumers due to tied distribution and closed APLs. We believe that this lack of competition in these segments
with tied distribution is bad for the consumer and over time we believe that regulation that supports the consumer objectives
set out above will be needed to address these issues.
I mentioned in my 2015 Managing Director’s Report that no amount of regulation will alone drive good quality strategic advice.
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 strategic financial plan for the customer. Whilst
early in its journey, ClearView has focused on rolling out the strategic advice model to its adviser base to achieve the best
interests of their clients. A cultural focus is key.
Outlook
We are even more excited about the prospects for ClearView in 2017 than we were in 2016. Material earnings growth has
been confirmed in the 2016 result and we look forward to leveraging our hard work and patient investment to drive strong,
sustainable long-term profitable growth well into the future. Through successful execution of our strategy, supported by
our corporate culture and values, we will progressively move closer to achieving our vision of becoming Australia’s best life
insurance, wealth management and financial advice business.
The people of ClearView have been instrumental in delivering a material increase in earnings in 2016 and putting us on course
for ongoing strong earnings growth. I commend them for living the ClearView values, executing our strategic plans, meeting
challenges head-on and delivering great service that always puts customer interests first. These are the things that drive
success. On behalf of the management team I would like to take this opportunity to thank all ClearView employees for their
professionalism, expertise and dedication in 2016.
Simon Swanson
Managing Director
24 August 2016
11 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
The Directors of ClearView Wealth Limited (ASX:CVW, ClearView or the Company) submit their report, together with the
financial report of the consolidated entity (the Group) for the year ended 30 June 2016 (the financial year):
Directors
The following persons were Directors of ClearView during the whole financial year and since the end of the financial year unless
otherwise noted:
• Bruce Edwards (Chairman)
• Dr Gary Weiss (Chairman, resigned 17 May 2016)
• Andrew Sneddon
• David Brown
• Gary Burg
•
Jennifer Newmarch (resigned 17 May 2016)
• Michael Alscher
• Michael Lukin (Alternate to Mr Alscher)
• Nathanial Thomson
• Simon Swanson (Managing Director)
The biographies for the Directors of ClearView are detailed below.
Current Directors
Bruce Edwards BSc, MA, FIAA
Independent Non-executive Chairman
Bruce is a qualified actuary with over 25 years in actuarial consulting, including five years as Managing Director of KPMG
Actuaries. In recent years, Bruce has held directorships with a number of life and general insurance companies and
superannuation fund trustees, and has acted as Chairman for three life insurance distribution companies. Bruce is a director of
Munich Re in Australia (a life and general reinsurance business and a direct general insurance company). Bruce also lectures in
actuarial studies at Macquarie University and is a Past President and active member of the Rotary Club of Sydney.
Bruce was appointed to the Board on 22 October 2012 and was the Chairman of the ClearView Board Audit Committee,
the Board Risk and Compliance Committee and the Nomination and Remuneration Committee, up until his appointment
as Chairman of the Board on 18 May 2016. Bruce remains a member of the Board Audit Committee, the Board Risk and
Compliance Committee and the Nomination and Remuneration Committee.
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 the former Chairman of 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 was an Alternate Director from 26 March 2013 until his appointment as Director on 3 December 2013. Andrew
has served as a member on the Board Audit Committee, Board Risk and Compliance Committee and the Nomination and
Remuneration Committee before he was appointed as Chairman of each of these committees on 18 May 2016.
ClearView Annual Report 2016 12
ClearView Wealth Limited Directors’ Report
Continued
David Brown BCom, MSc, Dip Inv, Dip Mktg, ASIP, MAICD, F Fin
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 for National Superannuation Fund Ltd in Papua New Guinea and a director of the PNG Institute of
Directors, 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 Chairman of the
Australian Private Equity and Venture Capital Association Pty Limited.
David was appointed to the Board on 22 October 2012 and currently serves as a member of the Board Audit Committee and
the Board Risk and Compliance Committee.
Gary Burg B.ACC (Wits), MBA (Wits)
Independent Non-executive Director
Gary has significant experience in building life insurance businesses in South Africa and in Australia. Gary is Chairman of UCW
Limited, an ASX listed company and is also a director of 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, and currently serves as a member of the Board Audit Committee, the
Board Risk and Compliance Committee and the Nomination and Remuneration Committee.
Michael Alscher BCom
Non-executive Director
Michael is the Managing Partner and founder of Crescent Capital Partners Management Pty Limited. Prior to founding Crescent
Capital Partners, 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 the current Chairman of Cardno Limited, Director of Australian Clinical Laboratories Pty
Limited and National Dental Care Pty Limited. He is also a former Chairman and Director of Cover-More Group Limited and
a former Director of LifeHealthCare Group Limited and Metro Performance Glass 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 Australian Private Equity
and Venture Capital Association Limited (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 served as Alternate Director to Jennifer Newmarch from 1 July 2013 until his appointment was revoked on her
resignation. Michael was appointed as Alternate Director to Michael Alscher on 18 May 2016.
13 ClearView Annual Report 2016
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 former director of Metro Performance Glass Limited, prior to its listing on the ASX, and is currently a director of Cardno
Limited, National Dental Care Pty Limited and National Home Doctor Service Pty Limited.
Nathanial was appointed to the Board on 22 October 2012 and currently serves as a member of the Nomination and
Remuneration Committee. Nathanial has previously served as a member of the Audit, Risk and Compliance Committee up until
30 June 2014.
Simon Swanson BEC, BBus, ANZIIF (Fellow), CIP, FCPA
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 led the team that founded ClearView in its current form and was appointed as Managing Director on 26 March 2010.
Former Directors
Dr Gary Weiss LLB (Hons), LLM and JSD
Independent Non-executive Chairman
(resigned 17 May 2016)
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.
Gary was appointed to the Board on 22 October 2012 and acted as Chairman from 1 July 2013 until his resignation on 17 May
2016. Gary was a member of the Board Audit Committee, Board Risk and Compliance Committee and the Nomination and
Remuneration Committee.
ClearView Annual Report 2016 14
ClearView Wealth Limited Directors’ Report
Continued
Jennifer Newmarch BSc (Maths) (Hons), FIA
Non-executive Director (resigned 17 May 2016)
Jenny is a Portfolio Manager with First State Super. Previously, Jenny was an Investment Director with ROC Capital Partners Pty
Ltd and a Senior Vice President for the 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 also worked for Watson Wyatt Worldwide in
Madrid and Manchester.
Jenny holds a Bachelor of Science majoring in mathematics with Honours from Imperial College London and is a Fellow of the
UK Institute of Actuaries.
Jenny served as a Director on the Board between 1 July 2013 and 17 May 2016.
Company Secretary
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 16 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.
Former Company Secretary
Chris Robson BA, LLB (Hons), LLM (resigned 11 November 2015) held the position of Company Secretary from 4 April 2011
until his resignation on 11 November 2015. Chris also held the position as General Counsel at ClearView and 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.
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 over
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 Actuary and Risk Officer
Greg Martin B.A, FIAA, FFIN, FAICD, CERA Greg is the Chief Actuary and 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, 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.
15 ClearView Annual Report 2016
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
Dr Gary Weiss
(Resigned
17 May 2016)
Company
Period of Directorship
Ariadne Australia Limited
28 November 1989 – ongoing
Mercantile Investment Company Limited
Non-executive Director 6 March 2012 –
25 February 2015
Premier Investments Limited
11 March 1994 – ongoing
Pro-Pac Packaging Limited
Ridley Corporation Limited
Tag Pacific Limited
28 May 2012 - ongoing
21 June 2010 – ongoing
1 October 1988 – ongoing
Thorney Opportunities Limited
21 November 2013 – ongoing
The Straits Trading Company
(Listed on the Singapore Exchange)
1 June 2014 - ongoing
Andrew Sneddon
Innate Immunotherapeutics Limited
19 September 2013 – ongoing
Traditional Therapy Clinics Limited
24 February 2015 – 4 August 2016
Gary Burg
3Q Holdings Limited
29 March 2012 – 11 September 2013
Michael Alscher
Cover-More Group Limited
14 November 2013 – 30 April 2015
UCW Limited
24 March 2016 - current
LifeHealthCare Group Limited
8 November 2013 – 23 February 2015
Metro Performance Glass Limited
31 March 2015 – 10 June 2016
Cardno Limited
6 November 2015 – current
Nathanial Thomson
Cover-More Group Limited
14 November 2013 – 2 December 2013
Cardno Limited
6 November 2015 – 28 January 2016; and
24 May 2016 – current
Meetings of Directors
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended
30 June 2016, and the number of meetings attended by each Director were as follows:
Board
Board Audit
Committee
Board Risk and
Compliance
Committee
Nomination and
Remuneration
Committee
Eligible to
Eligible to
Eligible to
Eligible to
Attend
Attended
Attend
Attended
Attend
Attended
Attend
Attended
10
10
10
8
10
8
10
10
10
10
9
9
8
10
6
8
10
10
5
5
5
4
1
-
-
-
-
5
3
4
4
1
-
-
-
-
5
5
5
4
1
-
-
-
-
5
3
4
4
1
-
-
-
-
4
4
-
3
1
-
-
4
-
4
3
-
3
1
-
-
4
-
Bruce Edwards
Andrew Sneddon
David Brown
Dr Gary Weiss1
Gary Burg
Jennifer Newmarch2
Michael Alscher
Nathanial Thomson
Simon Swanson
1
2
Dr Gary Weiss resigned on 17 May 2016.
Ms Jennifer Newmarch resigned on 17 May 2016. Michael Lukin was an alternate director to Ms Newmarch during the period until her resignation on 17 May 2016, and was appointed as an
alternate director to Mr Alscher on 18 May 2016. Mr Lukin attended 6 meetings on behalf of Ms Newmarch. Mr Lukin attended 0 meetings on behalf of Mr Alscher. His attendance in these
respects have been included in the table shown above.
ClearView Annual Report 2016 16
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 Weiss1
Andrew Sneddon
Bruce Edwards
David Brown
Gary Burg
Jennifer Newmarch2
Michael Alscher3
Michael Lukin2,3
Nathanial Thomson3
Simon Swanson
Fully paid ordinary shares
Executive share plan shares
-
124,621
588,262
-
10,918,090
-
-
-
-
-
-
-
-
-
-
-
-
-
4,549,021
10,000,000
Dr Weiss is an Executive Director of Ariadne Australia Limited which holds 25,450,635 shares. Dr Weiss resigned as a Director on 17 May 2016.
Jennifer Newmarch (alternate Mr Lukin) represented the interests of ROC Capital that hold 63,828,309 shares. Ms Newmarch resigned as a Director on 17 May 2016.
1
2
3 Mr Alscher (alternate Mr Lukin) and Mr Thomson represent the interests of CCP Bidco Pty Limited and its Associates that non-beneficially hold 348,002,872 shares.
Shares Issued Under the Executive Share Plan
The following table sets out the shares issued under the Executive Share Plan (ESP) during the year ended 30 June 2016.
Series
Opening Balance
(1 July 2015)
Series 50
Series 51
Series 52
Series 54
Total (Senior
Management)
Series 49
Series 53
Total (Contractor
Participant)
Forfeited/Cancelled
Reallocated
Exercised
Closing Balance
(30 June 2016)
Participant
Grant Date
No. of Shares
Issued
No. of Shares
Reallocated/
Exercised
No. of Shares
Bought Back
and Cancelled
No. of Shares
Total
58,371,348
Senior Management
30-Jul-15
77,320
Senior Management
23-Dec-15
1,204,063
Senior Management
27-Apr-16
295,603
Senior Management
20-Jun-16
-
1,576,986
-
-
-
79,601
79,601
Contractor Participant
30-Jul-16
2,709,452
300,000
Contractor Participant
27-Apr-16
1,494,140
-
4,203,592
300,000
-
-
-
-
-
-
-
-
77,320
1,204,063
295,603
79,601
1,656,587
3,009,452
1,494,140
4,503,592
-
-
-
-
-
-
-
-
-
-
-
-
(2,438,648)
(2,438,648)
(379,601)
(969,751)
-
-
(379,601)
(969,751)
5,780,578
(969,751)
(2,438,648)
60,743,527
For details of the ESP see Note 29 of the notes to the financial statements.
As at the date of this report, ClearView has a total of 60,743,527 ESP shares on issue of which 34,348,386 have been issued to
select financial advisers. ClearView has to date been able to offer such financial advisers the opportunity to participate in the
overall performance of ClearView through participation in the ESP.
In accordance with the provisions of the ESP, during the financial year 5,780,578 shares were granted to senior management
and financial advisers with the grant dates set out below. During the reporting period, the Company also conducted an
17 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
off market employee share scheme buyback for a total of 2,438,648 shares within the 10/12 limit as permitted under the
Corporations Act.
Allowing for the off market buy-back, reallocation of forfeited ESP shares and exercise of 969,751 ESP shares the net increase in
ESP shares on issue was 2,372,179.
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 Group 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 Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191,
dated 24 March 2016 and in accordance with that Corporations Instrument 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 71.
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 Board 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. In accordance with the 3rd edition ASX Corporate
Governance Council’s Principles and Recommendations, the Company’s annual Corporate Governance Statement, as approved
by the Board, is published and available on the Company’s website at:
www.clearview.com.au/about-clearview/corporate-governance.
ClearView Annual Report 2016 18
ClearView Wealth Limited Directors’ Report
Continued
Operating and Financial Review
Business Overview
ClearView Wealth Limited and its subsidiaries (ClearView) operate financial services businesses that specialise in the
manufacture of life insurance and wealth management products and provides quality financial advice on investment,
superannuation and retirement options, as well as life insurance.
While the origins of the company date back to 1976, the current operating form comprising three business segments was
established in 2010.
ClearView Wealth Limited
Life Insurance
Wealth Management
Financial Advice
Product Disclosure Statement and Policy Document
Issue 2
ClearView LifeSolutions is issued by ClearView Life Assurance Limited: ABN 12 000 021 581, AFS Licence No. 227682.
28 December 2015
ClearView LifeSolutions Super is issued by ClearView Life Nominees Pty Limited: ABN 37 003 682 175, AFS Licence No. 227683,
as trustee of the ClearView Retirement Plan ABN 45 828 721 007.
Super and Pension
Additional Information Brochure
Date issued: 15 September 2014
ClearView Life Nominees Pty Limited ABN 37 003 682 175 AFSL 227683 as Trustee for the ClearView Retirement Plan ABN 45 828 721 007. USI: CVW0001AU.
Issued By
Investments
Investor Direc ted Portfolio Service (IDPS) Guide
This is an Investor Direc ted Portfolio Service (IDPS) Guide and is issued by the operator ClearView Financial Management Limited (CFML) ABN 99 067 544 549 AFSL
Date issued 1 Oc tober 2015
227677.
ClearView provides financial advice services
to retail customers through its wholly-
owned subsidiaries Clearview Financial
Advice (CFA) and Matrix Planning Solutions
(Matrix).
CFA and Matrix have a combined total of
235 advisers who are focused on quality of
advice in order to retain clients and meet
compliance obligations.
ClearView initially built its aligned planner
network from FY11 to FY13 by attracting
high quality advisers that focused on selling
life insurance products.
In FY14 and FY15, it shifted to recruiting
more wealth management focused advisers
into the network – this was a key driver
behind acquiring Matrix.
ClearView has built a strong adviser network
and gained credibility in the market – no
targets are placed on adviser recruitment.
ClearView creates products that compete
in the Advised and Non-Advice (Direct)
segments of the $15.4 billion Australian life
(risk) insurance market1.
ClearView competes in a subset of this
broader market, primarily the $9.2 billion
individual risk market (excluding group life)1.
The Advised Life market segment comprises
life insurance products placed by financial
advisers.
The ClearView advice product suite is
branded LifeSolutions and policies are
issued directly by ClearView Life or via the
ClearView Retirement Plan (the ClearView
Superannuation fund).
The Non Advice (Direct) market segment
comprises life insurance products that
are sold directly to consumers via direct
marketing, telemarketing, call centre
referrals or online campaigns. This business
was intentionally repositioned in FY16 to
target sales to mid-market consumers, and
activities reorganised to deliver operational
and sales efficiencies.
ClearView provides wealth management
products in the ~$1 trillion+ retail segment of
the Australia funds management industry5.
The ClearView products are:
Master Trust – life investment contracts
issued by ClearView Life. These are no longer
marketed to new customers.
WealthSolutions – a superannuation and
retirement income wrap issued via the
ClearView Retirement Plan and an IDPS2.
Includes recent launch of SMA3 capability.
WealthFoundations – life investment
contracts issued by ClearView Life. Product
is based on model portfolios and includes
superannuation and allocated pension
products issued by the ClearView Retirement
Plan.
MIS4 – products issued by ClearView
Financial Management Limited (CFML) as
the ASIC licensed Responsible Entity and
includes ClearView platform funds available
on WealthSolutions and more recently on
external platforms.
Given the potential convergence of life
insurance and wealth management,
and in line with its integrated strategy,
ClearView launched a new compliant and
functional wealth platform in FY15 to host
WealthFoundations and (post migration) the
Master Trust and MIS products
Plan for Life data as at 31 March 2016
1
Investor Directed Portfolio Service
2
3
Separately Managed Accounts
4 Managed Investment Schemes
5
ABS 5655.0 data as at March 2016 (unconsolidated). Retail segment based on management estimates.
19 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
ClearView is successfully positioned as a highly focused challenger brand in these market segments following the conclusion of
a three-year strategic investment phase to build sustainable foundations for profitable scale and growth.
The ClearView strategy, described in detail in the next section, is a high-growth one of targeting 5% of the long-term life
insurance profit pool, building a material wealth management business and a high quality financial advice business.
The 2016 financial year marked the commencement of the transition from a ‘build’ phase to a ‘growth’ phase and the FY16
financial results reflect the 'J curve' emergence of strong, profitable and sustainable growth, and significant traction towards
achieving its near and medium-term strategic goals.
ClearView generates its revenue through the provision and distribution of life insurance, superannuation and investment
products, and through the provision of financial advice and support services to financial advisers.
Majority Shareholding
ClearView is listed on the Australian Securities Exchange with a 52.9% majority shareholding held by CCP Bidco Pty Limited and
its Associates (Crescent).
The ClearView Board is aware that Crescent would consider selling its shares in ClearView and is likely to entertain future
control proposals. The Board has been soliciting and will evaluate proposals in the interests of all shareholders. The Board
has appointed Morgan Stanley Australia Securities Limited (Morgan Stanley) to assist in evaluating any strategic options or
proposals. However, there is no certainty that any proposals will be received.
The Company will update the market at appropriate intervals and also advise of any material developments in accordance with
its continuous disclosure reporting obligations.
Prudential Regulation
ClearView competes in highly regulated markets and is supervised by:
•
•
the Australian Prudential Regulation Authority (APRA), the prudential regulator of the Australian financial services
industry including insurance companies and most of the superannuation industry; and
the Australian Securities and Investments Corporation (ASIC), which is Australia’s corporate, markets and financial
services regulator.
Both organisations are independent Commonwealth Government bodies with extensive regulatory powers.
ClearView has the required licences and integrated businesses to be a strong disrupter in the Australian life insurance and
wealth management markets. The diagram below shows the regulated Group entities. ClearView is regulated as a Non
Operating Holding Company by APRA under the Life Insurance Act 1995 and, via its subsidiaries, it holds an APRA life insurance
licence, an APRA registrable superannuation entity (RSE) licence, an ASIC funds manager responsible entity (RE) licence and
operates two dealer groups (ASIC financial adviser licences).
Key Licence Holding Entities in ClearView Group
ClearView Wealth Limited (NOHC)
ClearView Life Assurance Limited
(Life Company)
ClearView
Life Nominees Pty Ltd (RSE)
ClearView Financial Management
Limited (RE)
ClearView
Financial Advice
Pty Limited
(AFSL)
Matrix Planning
Solutions
Limited (AFSL)
‘Life Insurance’
‘Financial Advice’
‘Wealth Management’
ClearView Annual Report 2016 20
ClearView Wealth Limited Directors’ Report
Continued
Material Business Risks
ClearView’s operations expose it to a variety of financial and non-financial risks. Risk management is an integral part of the
Group’s management process and the Board reviews material business risks on a regular basis.
The Board has adopted a formal Risk Management and Capital Strategy (RM and CS) and a structured Risk Management
Framework (RMF) to assist it in identifying and managing the company’s key risks, particularly those that have the potential to
impact the Company’s future financial prospects and strategic imperatives. The RM and CS and RMF are fundamental to the
business decisions of the Company, including resource allocation decisions and prioritisation of activities.
Details of the Group’s risk management practices including risk mitigation strategies are set out in Note 5 to the Financial
Statements on page 99 of this 2016 Annual Report.
Strategy
There are several important elements that complement and support our corporate strategy. Our Vision and Mission overarch
our strategy and our Values and beliefs underpin it, while our competitive strengths and our integrated business model that is
free of material legacy issues help drive strong growth momentum as we pursue our strategy.
We are:
•
•
•
a team of passionate people with deep expertise in life insurance, wealth and advice (we are experts)
one of a small number of life insurance and superannuation licensees in the Australian market… and unlike many others
we have no material legacy technology and pricing issues (unencumbered)
willing to have a go at doing things differently to offer great products and services to hardworking Australians. (doing it
differently for the benefit of hardworking Australians).
What do we believe?
We believe that our values and culture lead to open and transparent partnerships based on mutual trust and cooperation with
all stakeholders:
•
•
•
People deserve quality help and support to plan and manage their financial future
Products and services should be fair, understandable and accessible anywhere, anytime
Our business is a people business. Relationships matter to us so we put our customers (advisers, partners, and end
customers) at the centre of our business and service proposition
•
We work hard to ensure our people are engaged and equipped to deliver on our promises.
Our purpose:
Building and protecting the financial futures of our customers and their families is too important to leave to those who
don’t care.
Values:
Our Values are our guiding principles on which we will not compromise. It’s the way we are and the way we do things. Our
culture is centred on four values:
•
•
•
•
Persistence – we never give up on our people, our customers, our partners and the moments that matter. If there’s a
better way to do something, we’ll find it
Collaboration – we are like-minded, passionate people who turn up every day to share, help and be better than yesterday
… together
Integrity – a handshake, giving your word, committing, promising and then actually delivering, matter
Authenticity – we never compromise when selecting our people – only positive, honest, open, genuine people need apply.
What you see is what you get with ClearView.
21 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
Competitive Strengths
Our competitive strengths include:
•
•
the integrated structure of our business model that combines life insurance and wealth management and differentiates
ClearView from other entrepreneurial players
strong relationships - building focus with Independent Financial Advisers (IFAs) through an emphasis on product innovation
and service
•
no material legacy issues such as pricing, back books and systems.
ClearView is well positioned to gain from market disruption around life insurance reforms with a potential stepped change in
distribution profile if proposed reforms are implemented. Over-consolidation in the life insurance and wealth management
markets over the past 15 years where substantial market share has been ‘purchased’ by the larger incumbents has opened up
the opportunity for a fresh, innovative new entrant focused on servicing IFAs.
Legacy issues such as multiple administration platforms and older, higher-margin in-force portfolios often afflict traditional,
larger institutional competitors, making it difficult for them to drive new products and innovation. This creates opportunities
for a challenger such as ClearView, which operates a differentiated business with limited legacy issues.
Our Purpose
Building and protecting the financial futures of our customers and their families is too important to leave to those who don’t care
As an industry disrupter without legacy issues, our strategy is focused on winning market share within profitable niches by delivering
innovative products and a high level of service
Strategy
Expand Distribution Presence
Expand distribution presence across the independent financial adviser and direct channels
• Demonstrate competitiveness of products and services
•
Improve penetration on open APLs carrying ClearView products for more than 12 months to grow wallet share
of those APLs1
Expand distribution reach by placing products on new open APLs1
Prepare for increased access to individual IFA market from potential regulatory change to open previously tied
APLs1
Leverage off life insurance distribution success to broader IFA market for wealth management products
Evolve direct strategy with focus on the mid-market segment
•
•
•
•
Increase Profitability
Target profitable markets with innovative product offerings
•
•
•
Focus next phase of Life and Wealth product development on upgrading Direct life offering via simplified
product aimed at mid-market customers
Capitalise on structural competitive advantage by offering life insurance through superannuation to drive
convergence of Life and Wealth product offerings
Refine dealer group offering with a focus on strategic advice
Improve Efficiency and Reach
Goals
Target 5% of
the long-term
life insurance
profit pool
Build a
material
wealth
management
business
Improve efficiency and reach of our operations to expand margins over time
•
•
•
Ensure our people are highly engaged
Enhance back office to increase automation and improve efficiency
Enhance life insurance front-end to improve customer service and
adviser efficiency
Build a high quality
financial advice
business providing
strategic advice to
clients
Our Values
Persistence Collaboration Integrity Authenticity
1
APLs is approved product lists.
ClearView Annual Report 2016 22
ClearView Wealth Limited Directors’ Report
Continued
Operating Review
Life Insurance
Approach
Over the past four years, ClearView has built a strong foundation for ongoing growth as a life insurance manufacturer in the
advice based market:
•
•
•
•
developed the LifeSolutions product in FY12 that included innovative features that compared favourably with
competing products
implemented ongoing refinements and upgraded product features that have resulted in consistent top quartile
product ratings for LifeSolutions
focused on entering the advice market through adviser relationships, service and features
built the CFA adviser network after being precluded from placing Life Insurance products on third party Approved Product
Lists (APLs) given:
•
•
restricted APL structures in the market that have limited access to the larger vertically integrated institutions APLs to
date
a clear choice not to pay material shelf space fees or volume bonuses that to date have been common in the IFA
market.
•
expanded distribution capability in the past two years driven by the inclusion of LifeSolutions on third party APLs:
•
sales through IFAs (excluding CFA and Matrix advisers) account for an increasing share of life insurance sales,
demonstrating success of the distribution strategy.
•
upgraded and automated systems and processes under a continuous improvement program to drive operational
efficiencies and increase ease of doing business:
•
recently launched an upgraded adviser portal, and improved client retention toolkit, correspondence processes
and commission automation
•
implemented adviser-led continuous improvement service strategy
The Life Insurance advice business enjoys a positive growth and profitability outlook as it develops scale, and the expense
overruns decrease and prospectively eliminate over the medium term.
ClearView also sells directly to consumers via partners such as Bupa (direct market):
•
acquired a profitable in-force Non-Advice portfolio (circa $41 million) in June 2010 with strong cash flow generation1
•
•
the in-force portfolio acquired was a "clean" porfolio and had no intermediated business
is now largely closed to new business (minor sales and policy increases only) and its strong cash flow generation is
being invested in growth
•
•
•
built a direct call centre team in Parramatta to help drive and manage growth in sales volumes
invested in Your Insure, a start-up operation in Melbourne, in August 2014 to further target selling direct life insurance to
the lower socio demographic customer with the intention of providing a lower cost access point to this market segment
while sales to the lower socio demographic grew very strongly from FY12, ClearView decided in FY16 to intentionally reduce
sales volumes and cease funding Your Insure given the structural shift in that demographic and consequent impacts on
profitability from adverse lapse trends:
1
Portfolio was written through predecessor entities NRMA Life and MBF Life
23 ClearView Annual Report 2016
ClearView Wealth Limited
Directors’ Report
Continued
•
•
this decision reflects organisational lessons learned and illustrates ClearView’s long-term decision-making to drive value
creation, focus on eliminating potential legacy issues and its flexibility and adaptability to market changes
this business is now focused on meeting the needs of the mid-market segment that does not seek advice but requires
more sophisticated products than typical Direct insurance offerings.
ClearView has commenced to refocus its Direct business to target mid-market customers, coupled with reorganising operations
to deliver operational and sales efficiency.
Performance
The following graphs reflect the performance of the Life Insurance business over the past four financial years (and is reflective
of the approach adopted and growth profile of the business).
Chart 1: Life Insurance Segment Performance FY13 - FY16
Active Life APLs with ClearView
Products
300
200
100
0
256
191
119
74
FY13
FY14
FY15
FY16
Life In-Force Premium1
160
120
$M
80
40
0
150.7
105.7
10.9
34.1
115.7
71.0
9.6
35.1
87.5
45.2
5.6
36.7
62.1
21.0
2.9
38.1
FY13
FY14
FY15
FY16
Old Book
Direct
LifeSolutions
Life New Business2
Life BU Operating NPAT3
2.2
40
30
$M
20
10
0
39.2
4.5
34.7
34.5
7.0
27.5
27.4
3.8
23.6
19.4
2.4
17.0
FY13
FY14
FY15
FY16
LifeSolutions
Direct
2.2
$M
25
20
15
10
5
0
24.5
12.4
12.1
15.3
8.0
7.3
10.8
6.1
4.7
8.4
4.4
4.0
FY13
FY14
FY15
FY16
1H
2H
2.2
1
2
3
4
In-force premium is defined as annualised premium in-force at the balance date.
Life insurance new business or sales represents the amount of new annual written premium sold during the period, net of policies cancelled from inception and excludes age
based/CPI increases.
Life BU Operating NPAT represents the Underlying NPAT4 of the Life Insurance business unit before taking into account the interest costs associated with corporate debt.
Underlying NPAT consists of consolidated net profit after tax adjusted for amortisation (not including capitalised software), the effect of changing discount rates on insurance policy
liabilities and costs considered unusual to the Group’s ordinary activities.
ClearView Annual Report 2016 24
ClearView Wealth Limited
Directors’ Report
Continued
Products
The main product is LifeSolutions, sold through the aligned adviser and IFA channels. A simpler product suite is sold through
the Direct channel but will be replaced with a subset of LifeSolutions in FY17 to align with the shift in focus to mid-market.
Chart 2: Life Insurance Sales by Product FY16
FY16 Sales
($M)
YoY Growth
FY16
In-force
Premiums
($M)
YoY Growth
Primary Distribution Channel
Key Coverage Riders
LifeSolutions
34.7
26%
105.7
49%
IFA 62%
Aligned 38%
4.5
(36%)
10.9
13%
Strategic Partners
59%
CVW
27%
YI1
14%
n.a.
n.a.
34.1
(3%)
Non-Advice
(Direct)
Old Book/Legacy
Products
Sales Diversification
•
•
•
•
•
•
•
•
•
Term Life
TPD
Trauma
Income Protection
Term Life
Accidental Death
Minor other covers
Term Life
Minor other covers
The Life distribution focus has strategically shifted to the IFA channel to rapidly diversify sales and create material embedded
growth as depicted below.
Chart 3: Life Insurance Sales by Channel Type FY13-FY16
40
30
$M
20
19.4
13%
23%
39.2
12%
55%
34.5
20%
42%
27.4
13%
39%
10
0
64%
48%
38%
33%
FY13
FY14
FY15
FY16
Aligned
IFA
Direct
•
The aligned adviser network (CFA and Matrix) provides a strong sales base, with third party APLs (IFAs) representing an
increasing share of sales over time, which demonstrates the competitiveness of these products.
2.2
•
Growth in sales since 2014 is driven by a clear decision to build out the distribution footprint to the broader IFA market:
•
•
ClearView is early in the process of penetrating the IFA channel
ClearView continues to increase its wallet share of open APLs on which LifeSolutions is sold, especially where it has been
on the APL for greater than 12 months
1
YI is sales through Your Insure that ceased operations in FY16.
25 ClearView Annual Report 2016
ClearView Wealth Limited
Directors’ Report
Continued
•
LifeSolutions sales growth continues to outperform the market, with sales through the IFA channel continuing to grow
each year.
•
There are significant future organic growth opportunities to be derived from three sources:
• The maturation of APLs recently joined
• Gaining access to new APLs
•
Potentially gaining access to tied/closed APLs via regulatory reforms1.
•
The Direct category reflects the intentional slowdown in new business given strategic decision to commence exiting the
lower socio-demographic market in FY16.
FY17 Priorities
ClearView is not relying on its past successes but is focused on continuing to leverage its initial successes in the Life Insurance
market by:
•
•
Expanding distribution reach and embedding growth via the third-party IFA market
Incrementally investing in the core life advice market and product portfolio such as the launch of an improved adviser
portal in 2H16. The focus is now shifting to upgrading the online quote system and application process to drive increased
ease of doing business for the financial advisers
•
Enhancing the Direct offering to preferred mid-market customers2
If regulatory changes are implemented, in particular increased access to vertically integrated APLs, ClearView will have a step
change in its addressable market and will be able to provide clients of these institutions with the opportunity to potentially
benefit from ClearView’s products and services1.
1
2
Requires regulatory change and potentially industry support
This has had some short term impact on sales volumes in FY16
ClearView Annual Report 2016 26
ClearView Wealth Limited
Directors’ Report
Continued
Wealth Management
Approach
ClearView’s approach to the wealth management market is consistent with its approach to the life insurance market – focused
on providing clients with best in class services in an efficient manner.
ClearView's wealth management business is two to three years behind its position in the Life Insurance market given its initial
focus on life insurance that meant it only began investing significantly in its wealth offering from FY15 (after success in the Life
Insurance market) including:
• acquiring a wealth-focused distribution network (Matrix) in October 2014
•
•
implementing a new contemporary platform
investing in and refining products (WealthFoundations and WealthSolutions SMA1 offering)
In FY16, ClearView continued to build out the wealth management business to leverage the material investment made in FY15
and has:
•
new, contemporary wealth products on offer to the advice-based market including the development of an SMA1 capability
on WealthSolutions and the placement of ClearView MIS2 platform funds on external (third party) platforms
•
•
the wealth management business now has the right services and product mix to support the Matrix distribution and
broader IFA market
ClearView’s platform funds offering can be rolled out to the third party external platform market to broaden out the
offering to further support the adviser network
•
the ability to leverage off its life insurance distribution network, with the number of third party APLs carrying ClearView
wealth products increasing to 93
•
recently commenced the broadening out of distribution to the third party IFA market. In FY16, 99% of new business
flows into contemporary wealth product is currently sourced from CFA and Matrix advisers
•
invested further in the new platform to improve back office efficiency and automation
Over the past four years ClearView has moved from a neutral net flow business to a positive net flow business:
•
•
•
Driven by the launch of new, customer-focused and market-leading products into the advice market and the placement of
ClearView’s platform funds (with related investment models) on an external platform
material investment ($3.2 million after tax) was made in FY15 in building out a new compliant and functional platform
coupled with the launch of WealthFoundations and provisioning of certain costs for the migration of the Master Trust
product onto the new platform
WealthSolutions continues to build to scale, and with WealthFoundations now providing some support to the growth and
development costs; non-deferred expense overruns reduced to $4.0m in FY16 (FY15: $4.6m)
1
Separately Managed Accounts
2 Managed Investment Schemes
3
As at 30 June 2016
27 ClearView Annual Report 2016
ClearView Wealth Limited
Directors’ Report
Continued
The following graphs reflect the performance of the Wealth Management business over the past four financial years:
Chart 1: Wealth Management Segment Performance FY13 - FY16
Active Wealth APLs with ClearView Products
Wealth In-Force FUM1
10
8
6
4
2
0
9
5
1
1
FY13
FY14
FY15
FY16
2.4
1.8
$B
1.2
0.6
0.0
0.06
2.13
0.20
0.80
1.90
0.11
0.61
1.53
0.23
1.66
0.41
1.30
1.25
1.18
1.07
FY13
FY14
FY15
FY16
Old Book
WealthSolutions
WealthFoundations
External Platforms
Wealth Net Flows2
2.2
Wealth BU Operating NPAT3
250
200
150
$M
100
50
0
-50
212
7.0
112
3.8
23.6
-8
2.4
17.0
-16
FY13
FY14
FY15
FY16
Products
2.2
$M
8
6
4
2
0
6.6
2.8
3.8
5.9
2.9
3.0
2.7
1.4
1.3
1.8
0.7
1.1
FY13
FY14
FY15
FY16
1H
2H
2.2
ClearView’s contemporary wealth products on offer to the advice-based market are:
•
•
•
1
2
3
4
WealthSolutions - platform that provides high-end clients with a full wrap platform that allows them to invest in various
asset classes (including directly in shares), access tax and portfolio returns reports while advisers efficiently manage their
client's accounts
WealthFoundations - developed in FY15 to service mid-level clients and is based on model portfolios that allow 14
investment strategies to be implemented and permits the adviser network to efficiently meet the investment needs of its
clients. It is intended to leverage off the life insurance cross-sell opportunity and the regulatory structure within ClearView
to allow the new wealth product to include some innovation and differentiation
External Platforms - ClearView MIS5 platform funds placed on external (third party) platforms that commenced in FY16
(including the ability to use the ClearView model portfolios)
FUM includes Funds Under Management (ClearView Master Trust, WealthFoundations and ClearView Managed Investment Schemes), Funds Under Administration on WealthSolutions
and FUM in ClearView MIS platform funds on external platforms.
FUM net flows is defined as inflows less redemptions into FUM but excludes management fees outflow.
Wealth BU Operating NPAT represents the Underlying NPAT4 of the Wealth Management business unit before taking into account the interest costs associated with corporate debt.
Underlying NPAT consists of consolidated net 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.
5 Managed Investment Schemes.
ClearView Annual Report 2016 28
ClearView Wealth Limited Directors’ Report
Continued
The Master Trust product relates to life investment contracts issued by ClearView Life. The product is effectively in run-off as it
is no longer marketed to new customers.
ClearView operates its wealth management business by managing an in-house research process that develops model
portfolios (including SMAs1) of various ClearView funds and independent asset manager funds. Model portfolios:
•
•
•
allow the ClearView adviser network to efficiently meet the investment needs of its clients by developing well-researched
portfolios of asset managers with a particular focus (for example, asset protection, balanced risk portfolios, moderate
risk portfolios)
have performed strongly and are increasingly accepted by advisers. ClearView charges a model portfolio fee and earns a
margin on the ClearView FUM2 by negotiating discounted wholesale asset management fees from portfolio managers
allows ClearView to help clients invest in and allocate assets to specialist/sector funds managed by third party asset
managers. ClearView does not currently directly manage investment in underlying assets (this is outsourced to third party
asset managers).
ClearView’s focus on providing clients with best-in-class wealth products and services has resulted in growing FUM net flows as
shown in the table below.
Chart 2: Wealth Management Key Performance Metrics FY16
FUM (A$B)
Net Flows (A$M)
FY16
YoY Growth
FY16
YoY Growth
Primary Distribution
Channel
Key Offering
WealthSolutions
0.80
32%
188
15%
• Aligned Advisers
•
IFAs (just starting)
WealthFoundations
0.20
81%
92
(17%)
• Aligned Advisers
•
IFAs (just starting)
External platforms
0.06
n.m.
55
n.m.
• Aligned Advisers
1.07
(9%)
(123)
(25%)
•
Not currently
marketed to
member base
Master Trust /
Legacy Products
FY17 Priorities
•
•
•
•
•
•
•
Wrap platform for
superannuation and other
high net worth clients
A$250K+ investable assets
Self-directed portfolio
management
14 model portfolios
A$100K - A$400K investable
asset accounts targeted
ClearView MIS platform funds
offered on external wrap
platforms
Legacy wealth product -
currently in run-off
ClearView is focused on growing its wealth management business to leverage the investments it has made over the past
two years:
•
•
•
•
1
2
servicing and concentrating on increasing penetration through the CFA and Matrix dealer groups
continue to leverage off the life insurance distribution network by expanding the number of third party APLs with which
ClearView wealth products are placed
rolling out the ClearView platform funds into the external platform market to allow further participation in the funds
management margin
investing further in the new contemporary platform to improve back office efficiency and automation, with the Master Trust
business to be migrated onto the platform over time to improve the customer experience (planned for FY17).
Separately Managed Accounts
FUM includes Funds Under Management (ClearView Master Trust, WealthFoundations and ClearView Managed Investment Schemes), Funds Under Administration on WealthSolutions
and FUM in ClearView MIS platform funds on external platforms.
29 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
Financial Advice and Distribution
Approach
As shown in the diagram below, ClearView’s approach to distribution has evolved as it has grown:
•
•
•
•
•
it initially built its aligned planner network from FY11 to FY13 as it focused on attracting high quality life insurance advisers
In FY14 and FY15, the focus shifted to recruiting more wealth management aligned advisers into the network, which was a
primary driver for acquiring Matrix
Over the past two years, attention has moved to gaining access to third party APLs (IFAs) to broaden distribution outside of
its own dealer groups
ClearView has had only limited access to vertically integrated institutional APLs to date, which account for more than 40%
of the market1. Regulations that may preclude shelf space fees and open up APLs are currently under consideration by the
industry (regulatory change may be required)
For direct to consumer distribution, ClearView is primarily focused on working through strategic partners and client sources
that have strong credibility with mid-market demographic groups.
Chart 1: Overview of ClearView’s Distribution Approach
Deliberate and Disciplined Approach to Expanding Distribution
LifeSolutions and WealthSolutions
Launched
WealthSolutions updated and
WealthFoundations Launched
Build Aligned Adviser Network
Expand Distribution Focus to IFAs
Onboard Wealth Focused Advisers
•
Build distribution channel of advisers
specialising in writing risk products
to drive volume and acceptance of
product
•
Once traction is gained, expand
distribution to IFAs to drive market
share; this is achieved by ClearView
product gaining access to third party
APLs
•
•
Wealth focused advisers onboarded
to drive adoption and acceptance of
ClearView's wealth products
Matrix acquisition in October 2014
accelerated this process
Adviser Force - Aligned Advisers
Geographical Adviser Composition
Non-Aligned Advisers - Life
Non-Aligned Advisers - Wealth
240
200
160
120
80
40
0
235
89
221
82
26
102
81
21
FY13
117
98
19
FY14
127
138
12
FY15
8
FY16
Employed
ClearView Self-Employed
Matrix Self-Employed
11
4
(# of Active APLs with ClearView
Products)
(# of Active APLs with ClearView
Products)
42
103
16
33
300
250
200
150
100
50
0
256
191
119
74
FY13
FY14
FY15
FY16
10
8
6
4
2
0
9
5
1
1
FY13
FY14
FY15
FY16
ClearView has strong growth embedded in its expanding distribution footprint and product range:
• Early in the penetration curve of APLs
• ClearView continues to improve its penetration on open APLs it has been selling on for more than 12 months
1
Source: Internal ClearView estimates
ClearView Annual Report 2016 30
ClearView Wealth Limited Directors’ Report
Continued
•
•
The wallet share of these APLs is expected to continue to grow alongside growing wallet share on open APLs that are
still maturing
If regulatory change occurs and tied APLs become open, then ClearView will potentially gain access to the new APLs that
represent a material component of the Individual IFA market
Distribution network
ClearView’s distribution network comprises a strong, national aligned adviser network and a growing network of IFA advisers
who recommend ClearView products
Aligned Network
IFA Channel
•
Primarily self-employed advisers operating under
ClearView and Matrix licenses
• At 30 June 2016, 235 advisers (146 CFA and 89 Matrix)
•
•
•
Growth in aligned advisers has slowed (over time) as
ClearView has shifted growth focus to the IFA channel
CFA and Matrix have $8.2bn of FUMA1 and $215 million of
Premiums Under Advice (PUA)
Focus on the roll out of strategic advice to the adviser
network
•
•
•
•
•
Increasingly driving sales growth through IFAs that have
ClearView products on their APLs
Rapid growth in IFA life insurance sales as ClearView
increases its penetration
IFA sales achieved to date are predominantly through
‘seasoned’2 APLs
Number of active APLs holding ClearView life insurance
products increased to 256, with the number holding
wealth products increasing to 9
Recent APL wins to deliver embedded sales growth as
these are penetrated over time.
FY17 Priorities
FY17 Priorities
•
•
•
Continued focus on selectively recruiting high quality
advisers who have the right cultural fit for ClearView and
Matrix, with a focus on quality over quantity
Continued focus on building a high quality financial advice
business providing strategic advice for clients
•
•
Expand wealth distribution to the broader IFA market
by leveraging off success of the model adopted in Life
Insurance
Improved penetration of LifeSolutions sales through APLs
on which it is placed.
Continued strong compliance focus including the shift to
strategic advice given regulatory changes and assisting
advisers transition into the ‘new world’.
•
Increase number of APLs on which LifeSolutions is placed
Chart 2: Financial Advice In-force PUA and FUMA and New Business Flows into Contemporary Products FY13-FY16
Premiums Under Advice ($M)3
FUMA ($B)1
LifeSolutions Sales by Adviser Type
Wealth Contemporary Net Flows
250
200
150
100
50
0
59
54
5
156
104
52
ClearView
PUA
Matrix
PUA
215
158
57
Total
10
8
6
4
2
0
3.3
3.1
0.2
4.9
3.0
1.9
ClearView
FUMA
Matrix
FUMA
8.2
6.1
2.1
Total
LifeSolutions
Premiums Under Advice
FUM
FUA
40
30
$M
20
10
0
34.7
21.6
27.5
14.5
23.6
10.5
13.1
13.0
31.1
16.9
4.3
12.6
FY13
FY14
FY15
FY16
Aligned
IFA
2.2
350
300
250
$M
200
182
182
153
153
150
100
335
55
92
188
275
112
163
FY13
FY14
FY15
FY16
WealthSolutions
WealthFoundations
External Platforms
1
2
3
FUMA includes FUM and funds under advice that are externally managed and administered
APLs on which ClearView has been placed for greater than 12 months
Premiums Under Advice is life insurance in-force premium that are externally managed and administered (Third Party Products) and in-force LifeSolutions premium
31 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
Chart 3: Process For Growing Footprint Takes Time – Recent APL Wins Provide Sustainable Embedded Growth
Key Growth Step 1
Key Growth Step 2
Key Growth Step 3
Key Growth Step 4
Get ClearView Products on
Third Party APL
Educate Individual Advisers
Advisers Write Test Policies
Advisers Begin to Write
Meaningful Sales and
Revenue In-Force Policy
h
t
g
n
e
L
e
m
i
t
f
o
-
e
r
P
s
e
t
i
s
u
q
e
r
i
n
o
i
t
p
i
r
c
s
e
D
Up to 12 months
Ongoing process. Typically
three to six months.
Ongoing process. Typically
three to six months.
Multiple years
•
IT / administration
capabilities
• Open access
•
•
ClearView possesses
necessary IT / admin
capabilities to get on
APL
No ability to get on
closed APLs currently
(requires regulatory
change)
• On APL
•
•
•
Need BDMs and
product literature
ClearView BDMs meet
with individual advisers
to brief them on product
This is essentially the
BDMs ‘selling’ the
advisers on the strength
of ClearView’s products,
features and services
•
•
•
•
•
•
Advisers have met
BDMs (typically
several times)
Advisers write a small
number of test policies
to look and see quality
of underwriting,
administration and
overall service levels
Will begin to test
relationship of customer
service personnel and
underwriting process
Successful test
policies written
with ClearView
Advisers see ClearView as
an appropriate product
for their clients and write
meaningful business
Increase share of new
business over time
APLs predominantly in these phases
ClearView Annual Report 2016 32
ClearView Wealth Limited
Directors’ Report
Continued
FY16 Results Overview
Overview of Result
The ClearView Group achieved the following results for the year ended 30 June 2016:
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
NPATA6
Amortisation
Reported NPAT
Embedded Value3
Value of New Business4
Net Asset Value5
Reported diluted EPS (cps)
Underlying diluted EPS (cps)
Dividend Per Share (cps)
Chart 1: Group Performance FY13-FY16
FY16
$M
24.5
FY15
$M
15.3
2.7
1.5
28.7
(0.5)
28.2
(1.0)
27.2
5.5
32.7
(9.1)
23.6
1.8
4.4
21.5
(0.6)
20.9
(0.4)
20.5
1.0
21.5
(9.0)
12.5
624.1
494.1
19.0
15.8
411.8
336.8
4.27
4.92
2.5
2.36
3.85
2.1
%
Change7
+60%
+50%
-66%
+33%
N.M.
+35%
N.M
+33%
N.M
+52%
N.M
+89%
+16%
+20%
+8%
+81%
+28%
+19%
Underlying NPAT2 ($M)
Embedded Value3 ($M)
30
23
16
9
2
-5
16.0
0.2
0.8
6.6
8.4
19.7
3.5
5.9
10.8
(0.5)
27.2
1.5
2.7
24.5
20.5
4.4
1.8
15.3
(0.6)
(0.4)
(0.5)
(1.0)
FY13
FY14
FY15
FY16
Life Insurance
Wealth Management
Financial Advice
Listed Entity
Interest expense (After Tax) Underlying NPAT
700
600
500
400
300
200
100
0
624
92
40
492
494
69
36
389
445
57
29
359
365
50
24
291
FY13
FY14
FY15
FY16
Embedded Value
ESP Loans
Franking Credits
1
2
3
Total Operating Earnings (After Tax) represents the Underlying NPAT of the business units before taking into account the interest costs associated with corporate debt
Underlying NPAT consists of consolidated net 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.
Embedded Value at 4% discount rate margin, including a value for future franking credits, franking credits included in the net worth and ESP loans; % movement to FY15 adjusted for the
$50m Entitlement Offer completed in June 2016
Value of New Business at 4% discount rate margin
4
5 % movement to FY15 adjusted for the $50 million entitlement offer completed in June 2016
6
7
NPATA is reported net profit after tax adjusted to exclude the non-cash amortisation of acquired intangibles (not including capitalised software)
Change represents the movement from FY15 to FY16.
33 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
Underlying net profit after tax (Underlying NPAT)
FY15 concluded a successful three-year strategy focused on building ClearView’s market position, with growth now emerging
in FY16:
•
•
•
•
•
FY13 – FY15 reflects the ‘build’ phase with significant investment made in building out a platform for growth
The ‘build’ phase drove significantly greater capacity than immediate requirements (expense overruns). As the business
develops scale, expense overruns decrease and create operating leverage
Strong FY16 earnings reflect the emergence of growth given the transition of ClearView from ‘build’ phase to ‘growth’ phase
Underlying NPAT growth of 33% is in line with market guidance provided and in the mid-point of the range of 30%-35%
The strong growth and diversity in sales of contemporary product is leading to growth in the in-force base that is
underpinning Embedded Value growth.
The FY16 result includes the impacts of key decisions to support medium term growth and the longer-term strategy:
•
•
•
a senior management team restructure in October 2015 (and consequential downstream staff changes) to shift the focus
of the business from the ‘build’ to the ‘growth’ phase (upfront termination costs of $1.0m were incurred in 1H FY16, with
net savings being progressively earned from 2H FY16)
an intentional slowdown in non-advice new business, in particular the direct life insurance channel that targeted lower
socio economic customers, driven by adverse lapse experience. This led to a 36% decline in new business volumes to $4.5m
and a drag on the overall life insurance Value of New Business included in the Embedded Value calculations
a material investment in FY15 in new wealth products and contemporary platform, with growth and development costs
starting to now be supported by FUM as these products build to scale over time.
The Underlying NPAT waterfall chart below reflects the result by operating segment.
Chart 2: UNPAT Waterfall
9.2
0.9
0.1
2.9
0.6
27.2
23.6
20.4
20.5
30
25
20
$m
15
10
5
0
FY15 U N PAT
Life Insurance1
W ealth M anage m ent1
Financial A dvice1
Listed1
Interest expense
FY16 U N PAT
1
BU Operating NPAT of each segment
ClearView Annual Report 2016 34
ClearView Wealth Limited Directors’ Report
Continued
Underlying NPAT increased 33% to $27.2 million (FY15: 20.5 million) predominantly due to strong growth in the Life Insurance
segment. Underlying NPAT is the Board’s key measure of Group profitability and also used for dividend payment decisions.
Key highlights from the results are as follows:
•
•
•
•
Life Insurance Operating NPAT increased 60% to $24.5 million (FY15: $15.3 million). Life Insurance is the key profit
driver, the most advanced segment in the growth phase and is demonstrating strong J-curve economics. The strong
growth in broadening the distribution footprint in the IFA market is building the profit base.
Wealth Management Operating NPAT increased 50% to $2.7 million (FY15: $1.8 million). Wealth Management is the
least advanced segment, given the recently completed ‘build’ phase and material investment in the new contemporary
platform and products in FY15. There is an improved contribution to Operating NPAT in FY16 as WealthSolutions continues
to build to scale with WealthFoundations FUM now providing some support to the growth and development costs being
incurred. Furthermore, there is a positive impact from tax benefits arising from superannuation insurance premium
deductions that is captured in the Wealth Management segment.
Financial Advice Operating NPAT decreased 66% to $1.5 million (FY15: $4.4 million). While Matrix increased its
contribution (+$0.2 million part contribution in FY15), the overall decline was partially due to a change in the allocation of
net dealer group support costs entirely to CFA (previously partly absorbed by the Life Insurance segment). A higher cost
base (strategic advice and compliance costs coupled with increased marketing and IT allocations to the Financial Advice
segment) and the run-off of internal advice fees earned on Master Trust FUM also contributed to the lower result.
Listed Underlying NPAT incurred a loss of $1.5 million (FY15:-$1.0 million) driven by after-tax interest expense of $1.0
million on corporate debt (FY15: $0.4 million) on the $50 million corporate debt facility. The $45.5 million drawn under
the corporate debt facility was repaid from proceeds of a $50 million 1 for 10.2 pro-rata accelerated renounceable share
entitlement capital raising in June 2016.
Other Adjustments and Amortisation
The following additional items impacted the statutory net profit after tax, and comprised the reconciling items outlined in the
table below:
Reconciling Items ($M)
(Net of Tax)
Amortisation of intangibles
Policy liability effect from change in discount rates
Matrix deal and integration costs
Your Insure impairment
Strategic review costs
Total Reconciling Items (After Tax)
2016
2015
%
Change1
(9.1)
(9.0)
1%
7.8
-
(1.9)
(0.3)
(3.6)
2.9
Large
(1.9)
(100%)
-
-
Large
Large
(8.0)
(55%)
•
•
Amortisation of intangibles ($9.1 million) is associated with the acquisition of the wealth management and life insurance
businesses from Bupa, the ComCorp financial advice business, and Matrix dealer group. 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 Underlying NPAT.
The policy liability discount rate 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. The decrease in long term discount
rates over the last 12 months caused a positive after tax impact of $7.8 million (FY15: $2.9 million).
1 % change represents the movement from FY15 to FY16
35 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
•
Costs that are considered unusual to the ordinary activities of the Group and are therefore not reflected as part of
Underlying NPAT. In FY16, these costs related to:
•
expenses incurred to date on the evaluation of strategic options or proposals in relation to the potential change in major
shareholder ($0.3 million after tax)
•
the write-off of ClearView’s investment in Your Insure, which incurred a net of tax cost of $1.9 million1.
The FY15 costs related to the deal and integration costs associated with the merger of Matrix ($1.9 million).
Reported NPAT and Earnings per Share
Reported NPAT increased by 89% to $23.6 million (FY15: $12.6 million).
Reported diluted earnings per share increased 81% or 1.91 cents per share (cps) to 4.27 cps (FY15: 2.36 cps). Fully diluted
Underlying earnings per share increased 28% or 1.07 cps to 4.92 cps (FY15: 3.85 cps).
Year on year Earnings Per Share (EPS) calculations have been adversely impacted by recent share issues exceeding 20 million
shares in total:
•
•
•
annualised impact of the Matrix performance based shares issued in FY15 (4.4 million shares)
weighted average number of shares issued in June 2016 under the capital raising (2.8 million shares)
impact of shares issued under the Dividend Reinvestment Plan (DRP) (13 million shares) in relation to prior period dividends.
Operating Expenses Overview
Chart 3: Operating Expense Analysis FY15 vs FY16 Cost Base
4.6
1.4
0.1
1.0
75.5
0.6
1.0
0.4
0.8
70.1
2.1
80
70
60
$m
50
40
30
20
W ealth Migration Provisioned
FY15 Cost Base
FY16 M anage m ent Restructure
M atrix D ealer Group
Fu nctional Costs
Direct Life
Distribution
D ealer Group Support Costs
Projects
Shared Services/Listed
FY16 Cost Base
1
ClearView invested in the Your Insure start-up operation via a Convertible Note funding arrangement in August 2014 to target selling direct life insurance to the lower socio
demographic customers.
ClearView Annual Report 2016 36
ClearView Wealth Limited
Directors’ Report
Continued
The waterfall chart on the previous page shows an 8% increase in the operating cost base over the year from $70.1 million in
FY15 to $75.5 million in FY16. The key components of the movement were:
•
•
•
•
•
•
•
•
•
Wealth Migration Provisioned – No further migration costs were incurred in FY16. The project to migrate the Master Trust
product onto the new platform was initially deferred from FY15 to reprioritise and bring forward some other development
projects, and to reduce the overall expected costs and impacts of the migration when implemented (given the incremental
investment in the new platform in FY16). A provision of $1.3 million remains on Balance Sheet at 30 June 2016
Matrix Dealer Group – costs related to the annualised effect of the Matrix acquisition completed in October 2014
FY16 Management Restructure – upfront restructure costs incurred in 1H FY16 relating to management changes in
October 2015, with savings flowing from 2H FY16
Functional Costs – related to increases in functional areas to support business growth, including administration, call centre,
claims and underwriting costs, and reflect underlying volume growth. These costs also include growth and development
costs, software amortisation and other functional costs related to the new wealth platform system incurred after the
launch of WealthFoundations in October 2014. These were partially offset by the completion of the amortisation of the first
phase of software costs associated with the launch of LifeSolutions in FY12
Direct Life – lower variable costs driven by lower new business volumes reflecting the decision to shift focus to targeting
the mid-market demographic
Distribution – distribution/front end costs include the option cost associated with Executive Share Plan (ESP) shares issued
to financial advisers and the continued build out of the Life Insurance business development team. Distribution also
includes the increased investment in the Wealth Management “front end” to support business growth after the launch of
WealthFoundations in FY15
Dealer Group Support Costs – reflect adviser support services costs. The net increase was driven by increased compliance
(and related) costs and an investment in the roll out of the strategic advice model, partially offset by the benefit of
transitioning employed planners into the self-employed model
Projects – costs related to the net decrease in project scoping costs expensed between periods
Shared Services/Listed1 – FY16 increase related to IT infrastructure and support costs (move to a new virtual desktop in
FY16) and additional group compliance costs, partially offset by a reduction in the group marketing spend
Expense overruns
ClearView has been investing in operating costs ahead of revenue to generate its growth. This includes an investment in
incremental costs above those 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 initially depress reported profits, but as these overruns begin to unwind as scale is achieved, underlying profit
realised through the in-force portfolios increases. In the financial year to 30 June 2016, the non-deferred expense overruns
across the business had a negative impact on Underlying NPAT of $5.2 million (FY15: $8.1 million). The movements between
segments are shown in the graph on the next page and indicates that cost overruns are starting to be absorbed.
1
Shared services cost increases and business support costs should reduce on a per customer basis as the scale of the business increases. This includes the spreading of the costs of the
shared services functions as the business grows.
37 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
Chart 4: Non-Deferred Expense Overruns by Segment FY14 - FY16
10
8
6
$m
4
2
0
-2
8.1
7.7
5.2
4.5
4.5
4.6
4.0
2.1
1.2
1.1
0.0
1.0
Life Insurance
Wealth Management
Financial Advice
Total
FY14
FY15
FY16
Given the current size of the in-force business, these overruns are predominantly driven by:
•
•
•
The significant investment made in LifeSolutions and the Non-Advice business. As the business builds to scale these are
starting to unwind. The reduction in FY16 was also partly due to a change in the allocation of net dealer group support
costs entirely to the Financial Advice segment (previously partly absorbed by the Life Insurance segment), with a related
increase in the Financial Advice segment; LifeSolutions continues to build scale, with some overruns being incurred in the
Non-Advice business given the intentional reduction in volumes in FY16
The investment in FY15 in WealthFoundations and the new wealth platform. WealthSolutions continues to build to scale
with WealthFoundations now providing some (limited) support to the growth and development costs incurred. These
should improve as the WealthFoundations FUM builds and the Master Trust product is migrated onto the new platform
The shared service infrastructure costs supporting the business segments that require scale to be achieved across the
business units over time.
The elimination of expense overruns, along with the growth ambitions of the business, remains a key focus of management
and the Board.
ClearView Annual Report 2016 38
ClearView Wealth Limited Directors’ Report
Continued
Operating Expense Reconciliation to Annual Report
The following table reconciles the operating expenses analysed in Chart 3 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
Custody and Investment Managment Expenses
Depreciation and Software Amortisation
Reinsurance Technology Costs
Stamp Duty
Medical Costs
Interest Expense
Loss on disposal of assets
Strategic Review Costs
Your Insure Impairment
Matrix Deal and Integration Costs
Operating expenses per financial statements
2016
$M
75.5
7.4
(4.7)
0.7
4.8
1.3
1.5
(0.3)
0.5
2.7
-
89.4
2015
$M
70.1
7.3
(3.8)
0.5
3.4
1.0
0.5
-
-
-
2.3
81.3
39 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
Segment Analysis - FY16 Life Insurance Result
Life Insurance Operating NPAT increased 60% to $24.5 million (FY15: $15.3 million), reflecting the emergence
of profit from the growth in underlying in-force portfolios.
12 Months to June 2016 ($M)2
Gross life insurance premiums
Interest income
Net claims incurred
Reinsurance premium expense
Commission and other variable expenses
Operating expenses
Movement in policy liabilities
Business Unit Operating NPBT
Income tax (expense) / benefit
Business Unit Operating NPAT
Amortisation of intangibles
Policy liability discount rate effect
Reported NPAT
Analysis of Profit
Planned Business Unit Operating NPAT
Claims experience
Lapse experience
Expense experience
Other
Actual Business Unit Operating NPAT
Key Statistics And Ratios ($M)
New Business
LifeSolutions
Non Advice
In-Force
LifeSolutions
Non Advice
Old Book
New Book
1H
49.6
1.5
(8.5)
(8.1)
(17.6)
(21.2)
14.8
10.5
(3.2)
7.3
(1.5)
3.6
9.4
1H
9.3
0.1
(0.2)
(2.2)
0.3
7.3
1H
17.0
13.2
3.8
2015
2H
FY15
55.5
105.1
1.5
3.0
(9.4)
(10.8)
(18.2)
(21.9)
14.6
11.3
(3.3)
8.0
(1.4)
(0.7)
(17.9)
(18.9)
(35.8)
(43.1)
29.4
21.8
(6.5)
15.3
(2.9)
2.9
1H
64.9
1.4
(7.5)
(14.0)
(21.9)
(22.2)
16.6
17.3
(5.2)
12.1
(1.4)
0.7
2016
%
2H
FY16 Change1
73.4
138.3
1.4
2.8
32%
(6%)
5%
63%
28%
3%
14%
60%
60%
60%
(3%)
(18.8)
(30.8)
(45.9)
(44.2)
33.5
34.9
(10.4)
24.5
(2.8)
(11.3)
(16.8)
(24.0)
(22.0)
16.9
17.6
(5.2)
12.4
(1.4)
7.1
5.9
15.3
11.4
18.1
29.5
93%
7.8
169%
2016
%
2H
FY16 Change1
12.3
(0.7)
0.7
(0.2)
0.3
23.7
23%
1.1
0.5
(1.2)
0.4
NM
NM
NM
NM
1H
11.4
1.7
(0.2)
(0.9)
0.1
12.1
12.4
24.5
60%
FY15
19.2
(0.1)
0.1
(4.5)
0.6
15.3
2015
2H
9.9
(0.2)
0.3
(2.3)
0.3
8.0
2015
2H
FY15
17.5
14.3
3.2
34.5
27.5
7.0
1H
18.2
15.7
2.5
2016
%
2H
FY16 Change1
21.0
19.0
2.0
39.2
34.7
14%
26%
4.5
(36%)
101.4
115.7
115.7
132.0
150.7
150.7
57.5
43.9
35.8
8.1
71.0
44.7
35.1
9.6
71.0
44.7
35.1
9.6
86.7
45.3
34.7
10.6
105.7
105.7
45.0
34.1
10.9
45.0
34.1
10.9
30%
49%
1%
(3%)
13%
Cost to income ratio
42.7% 39.5% 41.0% 34.2% 30.0% 32.0%
1 % change represents the movement from FY15 to FY16
2
Shareholder view excludes the life investments contracts (i.e. unit linked business) and deconsolidates retail unit trusts and reflects fees earned by the
shareholder less expenses incurred. Inter-segment revenues/expenses are not eliminated in the shareholder view.
ClearView Annual Report 2016 40
ClearView Wealth Limited Directors’ Report
Continued
FY16 - Key Performance Indicators
The following waterfall chart shows the major components of the movement in in-force premium from $115.7 million (as at 30
June 2015) to $150.7 million over the year to 30 June 2016:
Chart 1: Life Insurance Movement in In-Force FY15 - FY16
39.2
150.7
15.9
160
140
$m
120
115.7
11.7
100
80
Opening
CPI / Age
New Business
Lapses
Closing
Key points to note are as follows:
•
•
•
In-force premium growth was driven by strong new business growth, with lapses partially offset by age-based premium
increases and inflation (CPI) increases on insurance benefits
LifeSolutions in-force premium was $105.7 million as at 30 June 2016 (+49%), representing 70% of the total life insurance
in-force book
The new Non-Advice in-force book is $10.9 million (+13%); with the Old Direct Book (business written pre 2011) in-force
premium of $34.1 million (-3%) as at 30 June 2016
•
LifeSolutions continued to grow in FY16, with new business premium increasing 26% over the prior year to $34.7 million:
•
distribution for LifeSolutions expanded further, with 62% of new business ($21.6 million) generated from third party
APLs, up 49%
•
the LifeSolutions product is now placed on 256 APLs, up 34%, reflecting a deliberate broadening of the distribution base
•
Non-Advice life insurance sales volumes were down 36% in FY16 following an intentional shift in focus away from the lower
to the mid socio demographic segment:
•
Strategic Partner new business increased 26% to $2.7 million, with sales to the lower socio demographic reducing to
$1.8 million (down 62%).
FY16 Result Review - Analysis of Profit
•
Actuarial planned Business Unit Underlying NPAT up 23% to $23.7 million:
•
•
related to the expected profit margins on the in-force portfolios based on actuarial assumptions
reflects the strong growth in the in-force portfolios (+30%) partially offset by the run-off of the higher margin Old Direct
Book (business written pre 2011)
41 ClearView Annual Report 2016
ClearView Wealth Limited
Directors’ Report
Continued
•
Positive claims experience profit (after tax) of $1.1 million compared to an experience loss in FY15 of $0.1 million (relative to
planned margins):
•
•
•
•
driven by the LifeSolutions portfolio (+$0.6 million) and the Old Direct Book (+$0.7 million)
partially offset by adverse experience on the New Non-Advice portfolio (-$0.2 million)
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
LifeSolutions premium grows, with higher reinsurance arrangements in place, the relative claims volatility is expected to
reduce from period to period
•
Positive lapse experience profit relative to the rates assumed in the life insurance policy liability (determined at 30 June
2015), with an experience profit of $0.5 million (after tax) in FY16 (relative to planned margins) ($0.1 million profit in FY15):
•
•
•
LifeSolutions portfolio continues to reflect positive lapse experience relative to assumptions in FY16 (+$1.1 million)
Old Direct Book (business written pre 2011) now reflects positive experience (+$0.5 million), given the assumption
changes made in June 2014
New Non-Advice portfolio reflects lapse losses incurred from new business written via certain channels. In particular,
the distribution and product profile has been highly geared to the lower socio demographic segment resulting in some
continued adverse lapse experience (-$1.1 million)
•
While expense overruns initially depress reported profits, they should eliminate as scale is achieved, thereby increasing
underlying profit realised on the growing in-force portfolio.
•
•
Non-deferred expense experience loss declined from $4.5 million in FY15 to $1.2 million in FY16, demonstrating that
expense overruns are being absorbed as the scale of the business increases
The reduction in FY16 was also partly due to a change in the allocation of net dealer group support costs entirely to
the Financial Advice segment (previously partly absorbed by the Life Insurance segment), with a related increase in the
Financial Advice segment
•
Investment earnings is driven by the reduction in interest rates over the year, partially offset by the reallocation of
shareholder cash to the life insurance segment (given the growth in the business and its related capital requirements)
FY16 Result Review - Other Explanations
•
•
•
•
Increased reinsurance expense is aligned to the growth in in-force portfolios given the upfront reinsurance support provided
in the first year of a policy by the reinsurer
The growth in life insurance initial commission in FY16 was driven by the upfront variable commission cost related to
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
An override initial commission was paid from LifeSolutions to the CFA dealer group in FY16 since the life company
is no longer absorbing part of the dealer group support costs
An increase in variable expenses that was driven by the stamp duty and medical policy acquisition costs related to
increased new business volumes
ClearView Annual Report 2016 42
ClearView Wealth Limited
Directors’ Report
Continued
Segment Analysis FY16 - Wealth Management Result
Wealth Management Operating NPAT increased 50% to $2.7 million (FY15: $1.8 million). This is the
least advanced segment, given its recently completed ‘build’ phase and a material investment in new
contemporary platform and products in FY15
12 Months to June 2016 ($M)3
Funds management fee income
Interest income
Variable expense²
Funds management expenses
Operating expenses
Business Unit Operating NPBT
Income tax (expense) / benefit
Business Unit Operating NPAT
Amortisation of intangibles
Reported NPAT
2015
2016
%
1H
15.2
0.3
(3.5)
(3.3)
(7.4)
1.3
(0.2)
1.1
(2.6)
(1.5)
2H
FY15
16.1
0.2
(3.7)
(3.2)
(8.5)
0.9
(0.2)
0.7
(2.6)
(1.9)
31.3
0.5
(7.2)
(6.5)
(15.9)
2.2
(0.4)
1.8
(5.2)
(3.4)
1H
15.7
0.2
(3.4)
(3.5)
(7.7)
1.3
-
1.3
(2.6)
(1.3)
2H
15.4
0.2
(3.3)
(3.4)
(7.5)
1.3
0.1
1.4
(2.7)
(1.3)
FY16 Change1
31.1
(1%)
0.4
(29%)
(6.7)
(6.9)
(15.2)
2.6
(7%)
6%
(4%)
18%
0.1
(126%)
2.7
(5.3)
(2.6)
50%
2%
(24%)
Key Statistics And Ratios ($M)
1H
2H
FY15
1H
2H
FY16 Change1
2015
2016
%
Net Flows
Master Trust
WealthSolutions
WealthFoundations
External Platforms
Total FUM ($B)
Master Trust
WealthSolutions
WealthFoundations
External Platforms
Cost to income ratio
25.7
85.8
111.5
101.2
111.1
212.3
90%
(99.1)
(64.6)
(163.7)
(58.1)
(64.5)
(122.6)
(25%)
72.8
51.9
0.0
1.77
1.22
0.50
0.05
-
90.5
59.9
0.0
1.90
1.18
0.61
0.11
-
163.3
112.7
111.8
0.0
1.90
1.18
0.61
0.11
-
46.6
0.0
1.98
1.11
0.72
0.15
-
75.3
45.8
54.5
2.13
1.07
0.80
0.20
0.06
188.0
15%
92.4
54.5
2.13
1.07
0.80
0.20
0.06
(17%)
Large
12%
(9%)
32%
81%
Large
48.7% 52.8% 50.8% 49.0% 48.7% 49.0%
1 % change represents the movement from FY15 to FY16.
2
Variable expense include the platform fee payable on WealthSolutions and the internal advice fee payable to the Financial Advice segment on the Master
Trust product.
Shareholder view excludes the life investments contracts (i.e. unit linked business) and deconsolidates retail unit trusts and reflects fees earned by the shareholder less expenses
incurred. Inter-segment revenues/expenses are not eliminated in the shareholder view.
3
43 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
KY16 - Key Performance Indicators
Chart 1: Wealth Management Movement In-Force FY15 - FY16
2.5
0.09
0.08
0.19
0.05
2.13
0.06
2.0
1.90
0.12
1.5
O pening FU M 1 Jul 2015
W ealthSolutions N etflo w
W ealthFou n dations N etflo w
M aster Trust N etflo w
External Platfor m s N etflo w
M arket M ove m ent
M anage m ent Fees/Other
Closing FU M 20 Ju n 2016
•
•
ClearView grew in-force FUM 12% to $2.13 billion as at 30 June 2016, with $1.06 billion in the new contemporary products,
including the placement of ClearView platform funds on an external platform
ClearView was $212 million net flow positive in FY16, representing a significant improvement in net flows over prior periods
(net outflow of circa $150 million in FY12 prior to the launch of the new products). Overall, this reflects:
•
•
WealthSolutions net inflows of $188 million (+15%); in-force FUM of $0.8 billion (+31%)
WealthFoundations net inflows of $93 million (-17%); in-force FUM of $0.2 billion (+81%)
• External platform net inflows of $55 million (N.M.)
•
Master Trust net outflows of $123 million (-25%); in-force FUM, including closed MISs, of $1.1 billion (-9%)
•
WealthSolutions and WealthFoundations products have to date primarily been sold via the ClearView dealer groups:
•
•
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
expanding the footprint to distribute the WealthSolutions and the newly launched WealthFoundations product more
broadly commenced in FY16
FY16 Results Review
This result reflects the following:
•
•
Wealth Management segment profitability is primarily driven by fees earned from FUM in ClearView product, less
expenses incurred
the positive impact on net fee income from the increase in FUM (+12%) was offset by the margin compression from
the gradual run-off of the Master Trust product that is being replaced by lower margin new business written in the
WealthSolutions and WealthFoundations products (fee income down 1% overall):
•
•
Master Trust product is effectively a closed book with a portion of the FUM in the pension phase
investment market performance plays a key role in supporting Master Trust FUM
ClearView Annual Report 2016 44
ClearView Wealth Limited
Directors’ Report
Continued
•
investment market performance on the ClearView FUM was 3.8% per annum in FY16 (noting that there was some
market volatility between periods) comparing to 9.7% per annum in FY15
•
the margin compression and the run off of the Master Trust business is assumed in the Embedded Value calculations
•
the reduction in variable expenses is driven by:
•
•
the inter segment advice fee (50bps) paid to Financial Advice on Master Trust FUM (in line with the average Master Trust
and FUM levels)
partially offset by an increase in the platform fees payable on WealthSolutions (in line with the average WealthSolutions
FUM levels and account balances)
•
•
funds management expenses increased in line with the expanded wealth product range (launch of WealthFoundations)
and increased FUM levels between periods
the 4% operating expense reduction was driven by the impact of migration costs provisioned in FY15, mainly offset by
the incremental development, software amortisation and growth costs for the WealthFoundations product and related
new platform incurred post launch (October 2014), along with an increased shared services cost allocation to the Wealth
Management segment in FY16 related to the growth in business activities:
•
expense overruns (after tax) decreased to $4.0 million in FY16 (FY15: $4.6 million) as WealthSolutions continued to
build to scale and increased average FUM in WealthFoundations provided support to the growth and development costs
incurred
• a tax benefit of $0.9 million in FY16 included:
•
•
exempt fees in the Master Trust product range (+$0.2 million)
a positive impact from a tax benefit arising in FY16 from superannuation insurance premium deductions (+$0.4 million)
• prior period over provisions (+$0.3 million)
The tax benefits that arose in FY16 (that is, excluding prior period over provisions) were predominantly offset in the Listed
segment (given some non-deductibility of certain expenses across the group) resulting in an overall effective group tax rate
that is broadly consistent between periods.
•
a reduction in investment earnings given the reallocation of shareholder cash between segments and lower market
interest rates.
45 ClearView Annual Report 2016
ClearView Wealth Limited
Directors’ Report
Continued
Segment Analysis FY16 - Financial Advice Result
Financial Advice Operating NPAT decreased 66% to $1.5 million. This was partly driven by a change in
the allocation of net dealer group support costs entirely to CFA (previously partly absorbed by the Life
Insurance segment).
12 Months to June 2016 ($M)2
Net financial planning fees
Interest and other income
Operating expenses
Business Unit Operating NPBT
Income tax (expense) / benefit
Business Unit Operating NPAT
Amortisation of intangibles
Matrix deal and integration costs (net of tax)
Reported NPAT
Key Statistics ($M)
FUMA ($B)4
PUA ($M)3
Financial Advisers
Chart 1: FY16 - Key Performance Indicators
2015
2016
%
1H
7.0
0.2
(4.6)
2.6
(0.7)
1.9
(0.4)
(0.3)
1.2
1H
7.4
160
216
2H
8.2
0.2
(4.8)
3.6
(1.1)
2.5
(0.5)
-
2.0
2015
2H
7.9
187
221
FY15
15.2
0.4
(9.4)
6.2
(1.8)
4.4
(0.9)
(0.3)
3.2
FY15
7.9
187
221
1H
8.5
0.2
(7.7)
1.0
(0.3)
0.7
(0.5)
-
0.2
1H
8.1
203
221
2H
8.2
0.1
FY16 Change1
16.7
10%
0.3
(26%)
(7.2)
(14.9)
59%
1.1
(0.3)
0.8
(0.5)
-
0.3
2.1
(66%)
(0.6)
(65%)
1.5
(66%)
(1.0)
-
11%
NM
0.5
(84%)
2016
%
2H
8.2
215
235
FY16 Change1
8.2
215
235
4%
15%
6%
Adviser Force - Aligned Advisers
Geographical Adviser Composition
Premiums Under Advice ($M)3
FUMA ($B)4
240
200
160
120
80
40
0
235
89
221
82
26
102
81
21
FY13
117
98
19
FY14
127
138
12
FY15
8
FY16
11
42
103
16
33
250
200
150
100
50
0
59
54
5
156
104
52
ClearView
PUA
Matrix
PUA
215
158
57
Total
10
8
6
4
2
0
3.3
3.1
0.2
4.9
3.0
1.9
ClearView
FUMA
Matrix
FUMA
8.2
6.1
2.1
Total
Employed
ClearView Self-Employed
Matrix Self-Employed
4
LifeSolutions
Premiums Under Advice
FUM
FUA
•
•
The number of financial advisers in CFA and Matrix increased 6% to 235 in FY16.
FUMA in the CFA and Matrix dealer groups increased 3% to $8.2 billion and Premiums Under Advice increased 15% to $215
million. The increase reflects the net increase in adviser numbers and the change in the adviser mix between periods:
•
Of the $8.2 billion FUMA in-force at June 30 2016, $1.06 billion was in ClearView contemporary wealth products and
$1.1 billion was in the Master Trust product.
•
Of the $215 million PUA in-force at 30 June 2016, $57 million was in the LifeSolutions product.
1 % change represents the movement from FY15 to FY16
2
Shareholder view excludes the life investments contracts (i.e. unit linked business) and deconsolidates retail unit trusts and reflects fees earned
by the shareholder less expenses incurred. Inter-segment revenues/expenses are not eliminated in the shareholder view.
Premiums Under Advice is life insurance in-force premium that are externally managed and administered (Third Party Products) and in-force LifeSolutions premium
FUMA includes FUM and funds under advice that are externally managed and administered
3
4
ClearView Annual Report 2016 46
ClearView Wealth Limited
Directors’ Report
Continued
FY16 Results Review
This result reflects the following:
•
Net financial planning fees increased 10% predominantly driven by:
•
the annualised impact of the Matrix merger (+$0.9 million), and LifeSolutions volume based payments paid to the
CFA dealer group in FY16 (given that dealer group support costs are no longer allocated to the Life Insurance segment
(+$2.2 million))
• partially offset by the run-off of the 50bps internal advice fee earned off the Master Trust FUM (-$0.6 million) and the
transition of employed planners to the franchised model (-$0.9 million)
•
recruitment of self-employed advisers has a limited impact on margin given the fee split arrangements for advisers
•
the $5.5 million operating expense increase in FY16 was predominantly driven by:
•
•
•
the reallocation of dealer group support costs to the Financial Advice segment from Life Insurance (+$3.6 million)
Annualised effect of the increase in dealer group support costs related to Matrix (given the timing of the aquisition in
FY15) (+$0.6 million)
the net increase in dealer group support costs driven by increased compliance (and related) costs and an investment in
the roll out of the strategic advice model, partially offset by the benefit of transitioning employed planners into the self-
employed model (+$0.1 million)
•
an increased cost allocation of marketing and IT services to the dealer group (+$1.1 million)
•
the overall reduction in profit was therefore predominantly driven by the combined net impact of:
•
•
•
•
the net change in the LifeSolutions volume based payments and the reallocation of dealer group support costs entirely
to CFA (previously partly absorbed by the Life Insurance segment) (-$1.0 million)
a full-year contribution from Matrix given its acquisition during FY15 (net of expense increase) (+$0.2 million)
the net impact of the transition of employed planners into the franchised model net of the cost benefits achieved
(-$0.2 million)
run-off of a 50bps internal advice fee earned on Master Trust FUM (-$0.4 million), an offset to the benefit from a lower
variable cost base in the Wealth Management segment
•
operating expense net impact as outlined above (-$1.5 million)
47 ClearView Annual Report 2016
ClearView Wealth Limited
Directors’ Report
Continued
Segment Analysis FY16 – Listed Entity / Other Result
The Listed Entity incurred a $1.5 million loss at the Underlying NPAT line driven by an after-tax interest
expense of $1.0 million on corporate debt that was repaid in June 2016.
12 Months to June 2016 ($M)2
Interest income
Operating expenses
Business Unit Operating NPBT
Income tax (expense) / benefit
Business Unit Operating NPAT
Interest expense on corporate debt (after tax)
Underlying NPAT
Matrix deal and integration costs (after tax)
Strategic review costs (after tax)
Your Insure impairment (after tax)
Reported NPAT
FY16 Result Review
This result reflects the following:
1H
0.6
(0.9)
(0.3)
(0.1)
(0.4)
-
(0.4)
(1.1)
-
-
2015
2016
%
2H
0.6
FY15
1.2
1H
0.6
2H
0.6
FY16 Change1
1.2
3%
(0.8)
(0.2)
-
(0.2)
(0.4)
(0.6)
(0.5)
-
-
(1.7)
(0.5)
(0.1)
(0.6)
(0.4)
(1.0)
(1.6)
-
-
(0.6)
(0.6)
(1.2)
(29%)
-
(0.2)
(0.2)
(0.5)
(0.7)
-
-
(1.9)
(2.6)
-
(0.3)
(0.3)
(0.5)
(0.8)
-
(0.4)
-
(1.2)
-
(107%)
(0.5)
(0.5)
(1.0)
(1.5)
380%
(23%)
175%
54%
-
(75%)
(0.4)
(1.9)
(3.8)
Large
Large
48%
(1.5)
(1.1)
(2.6)
•
•
•
•
•
the investment earnings on 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
increased investment earnings (+3%) arising from the additional draw down under the Debt Facility (and related cash
holdings) in FY16, offset by a reduction in term deposit rates on physical cash with some reallocation of physical cash
between segments (as noted earlier in the report)
lower operating expenses given nil allocation of shared service costs to the Listed segment in FY16 (change in basis
from FY15)
a tax charge of $0.5 million (FY15: $0.1 million) related to timing differences, partially offsetting tax benefits in other
segments (in particular the Wealth Management segment). This is predominantly driven by the non-deductibility of the
Employee Share Plan expense that is absorbed within the Listed segment. The Group effective tax rate for FY16 was broadly
consistent with FY15.
1 % change represents the movement from FY15 to FY16
2
Shareholder view excludes the life investments contracts (i.e. unit linked business) and deconsolidates retail unit trusts and reflects fees earned
by the shareholder less expenses incurred. Inter-segment revenues/expenses are not eliminated in the shareholder view.
ClearView Annual Report 2016 48
ClearView Wealth Limited Directors’ Report
Continued
Statement of Financial Position
The Statement of Financial Position of the Group set out on page 74 reflects the following key metrics as at 30 June 2016:
•
•
•
•
Net assets increased 8%1 to $411.8 million (FY15: $336.8 million)
Net tangible assets increased 12% to $363.4 million ($403.0 million including ESP loans) (FY15: $280.8 million)
Net asset value per share (including ESP loans) of 68.6 cents per share (FY15: 64.0 cents per share)
Net tangible asset value per share (including ESP loans) of 61.2 cents per share (FY15: 54.4 cents per share).
Net assets increased by $74.9 million over the year comprising:
• a reported profit of $23.6 million
•
•
•
net impacts of the FY15 final dividend and the fully underwritten dividend reinvestment plan (DRP) (+$0.6 million). A further
12.9 million shares were 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
the net impact of the equity capital raising and the repayment of $45.5 million under the Debt Funding Facility, net of
capital raising costs incurred (+$49.6 million)
movements in the Executive Share Plan (ESP) Reserve due to the treatment of the ESP expense in accordance with the
accounting standards (+$1.1 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 2016 (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.
1
Adjusted for the $50 million Entitlement Offer completed in June 2016.
49 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
EV calculations at a range of risk discount margins is shown below.
Chart 1: Embedded Value Movement Analysis @ 4%DM
19.0
1.1
2.8
27.3
2.0
1.9
1.8
51.3
2.2
9.9
3.1
23.3
624.1
92.1
39.6
492.4
700
600
500
400
300
200
100
494.4
68.8
36.5
389.0
0
Your Insure/Strategic Revie w Costs
EV - 30 Ju ne 2015 (As Published)
N et Capital A pplied
FU M A m ark to m arket an d
I m pact of Claim s
Expected G ain
Value of N e w Business A d ded
Basis an d Assu m ption Changes
I m pact of Discontin uances
Listing Costs an d Interest Expense
I m pact of M aintenance Expenses
change in Business Mix
ESP Loans
Franking Credits
Total EV incl. ESP Loans & Franking Credits
Embedded Value
ESP Loans
Franking Credits
Risk Margin Over Risk Free: ($M), (Unless Stated Otherwise)
Life Insurance
Wealth Management
Financial Advice
Value of In-Force (VIF)
Net Worth
Total EV
ESP Loans
Total EV Incl. ESP Loans
Franking Credits:
Life Insurance
Wealth Management
Financial Advice
Net Worth
Total EV Incl. Franking Credits and ESP Loans
EV per Share Incl. ESP Loans (cents)
EV per Share Incl. Franking Credits and ESP Loans (cents)
• Net Capital Applied (+$51.3 million) - the net impact of the following:
3% DM 4% DM 5% DM
335.1
315.9
298.8
54.8
29.2
52.0
27.4
49.5
25.8
419.2
395.3
374.1
97.1
97.1
97.1
516.3
492.4
471.2
39.6
39.6
39.6
555.9
532.0
510.8
56.4
14.6
8.4
17.0
53.3
13.8
7.9
17.0
50.6
13.2
7.4
17.0
652.3
624.1
599.0
84.5
99.1
80.8
94.8
77.6
91.0
• The increase in the Share Base Payments reserve (+$1.7 million) driven by the recognition of the share based
payments expense and the net impact of the Dividend Reinvestment Plan (DRP) and related repayment of ESP loans by
participants given their ineligibility to participated in the DRP
• The net of costs of the pro rata accelerated renounceable share entitlement offer that was successfully completed in
June 2016 (+$49.6 million)
ClearView Annual Report 2016 50
ClearView Wealth Limited
Directors’ Report
Continued
• Your Insure/Strategic Review Costs: (-$2.2 million): This relates to the impact of the write off of the Your Insure investment
in FY16 (-$1.9 million) and the after tax costs associated with the strategic review (-$0.3 million)
• Expected gain: (+$27.3 million): Expected gain represents the unwind of the discount rate within the value of in-force and
investment earnings on net worth
• VNB added: (+$19.0 million): The value added by new business written over the period. This includes the net effect of the
proposed income protection price increases on LifeSolutions new business written in 2016 (+$4.3 million). The current value
of new business is suppressed by the growth costs incurred. The acquisition cost overruns should decrease as the business
grows, providing it with operating leverage. The Non-Advice business had a negative value of new business (-$5.9 million).
This was exacerbated by a slowdown in new business volumes given the adverse lapses in the lower socio-demographic
channel. The negative value arises as a result of the acquisition expenses relative to new business generated. The key
growth driver, LifeSolutions, continued to reflect strong growth in the VNB
• The claims experience (+$1.1 million): The claims experience in LifeSolutions and Old Book was favourable in FY16 and was
offset by adverse experience on the new Non-Advice portfolio
• The impact of lapses on the life insurance book and FUMA discontinuances: Discontinuances (+$2.8 million): The life
insurance lapses impact 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 lower discontinuance rates for the Wealth business, in particular the Master Trust Product and WealthSolutions that
reflected an improvement in discontinuance rates
• The adverse maintenance expense experience (+$2.0 million): This relates to the maintenance expense overruns versus the
long term unit costs assumed in the EV. Emerging life insurers 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 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 EV
• Expenses were impacted by the Group’s listed overhead costs and interest expense on corporate debt which are not
allowed for in the EV (-$1.9 million). The Debt Funding Facility was settled in June 2016 by utilising the proceeds of the
capital raising as noted earlier in the report
• FUMA mark-to-market and change in business mix (-$1.8 million): This is predominately driven by the net investment
performance on the funds under management and advice that resulted in lower fee income relative to expectations over
the period and a lower present value of future fees at the end of the period
• Basis and assumption changes (+$9.9 million): This includes the net effect of the proposed income protection price
increases on the LifeSolutions in-force portfolio at 30 June 2015 (+$6.3 million), capital reallocations by segment, model
enhancements, timing effects, actuarial assumption changes, capital base changes and the tax impacts on the policy
liability discount rate effect. Key assumption changes include improvements made to the discontinuance rates for the
Master Trust and WealthSolutions portfolios (+$3.3 million)
• ESP loans (+$3.1 million): This includes the loans provided to ESP participants which are treated as an off-balance sheet
item in accordance with the Share Base Payment standard. These loans are expected to be recovered from the ESP
participants when their shares vest
• Franking credits (+$23.3 million): This relates to the increase in the value of the current franking account balance together
with the future franking credits generated from the taxable profit of ClearView as the profits are earned.
51 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
Chart 2: Embedded Value (EV) Sensitivity Analysis @ 4%DM
Claims +10%;-10%
-11.9
11.9
Discontinuance Rates +1%;-1%
-17.7
Expenses +10%;-10%
-13.9
13.9
FUMA -10%; +10%
-7.0
7.0
Risk-free Rate +1%; -1%
-18.3
Inflation +0.5%;-0.5%
-4.0
4.3
19.8
21.0
-25
-20
-15
-10
-5
0
5
10
15
20
25
Dividends
The Directors declared a $16.45 million fully franked dividend in 2016 (2015: $12.30 million). This equates to 2.5 cents per
share (2015: 2.1 cents per share) and represents approximately 60% of the FY16 Underlying NPAT and is in line with the
Company’s dividend policy. The FY16 dividend represents a 19% increase in dividend per share over the prior year. No interim
dividend was paid during the year (2015: nil).
The Board seeks to pay dividends at sustainable levels and has a target payout ratio of between 40% and 60% of Underlying
NPAT. Furthermore, it is the Company’s intention to maximise the use of its franking account by paying fully franked dividends.
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
insurance policy liabilities between the half year period and year end. As a sufficient franking account balance is progressively
being established, the payment of interim dividends will continue to be considered.
For further details on the Company’s dividend policy (and related operation of the Dividend Reinvestment Plan (DRP)), refer to
the Capital Management section that follows.
Capital Management
The Company entered into a $50 million Debt Funding Facility in December 2014 to support short to medium term
funding needs.
It was always intended that the funding provided under the Debt Funding Facility would be replaced in due course with one or
more longer term capital solutions as the need for, and quantum of, longer term capital funding emerged. As at 30 June 2015,
the Company had drawn down $45.5 million of the Debt Funding Facility.
In May 2016, the Company announced the launch of a $50 million fully underwritten pro-rata accelerated renounceable
entitlement offer to eligible shareholders. The majority of the proceeds of that capital raising, which was fully subscribed
and settled just prior to the end of the financial year, were used to repay the Debt Funding Facility ($45.5 million), with the
remaining $4.5 million retained as capital for growth.
ClearView is now fully capitalised with Common Equity Tier 1 capital to fund its current business plans and anticipated medium
term growth, with some additional capital flexibility over the medium term.
The existing $50 million Debt Funding Facility will remain in place to provide future capital funding in the event that medium to
longer term growth is materially above that currently anticipated or other opportunities arise.
ClearView Annual Report 2016 52
ClearView Wealth Limited Directors’ Report
Continued
As foreshadowed at the time of the capital raising, the DRP has been suspended and will not operate in respect of the dividend
for the year ended 30 June 2016. The suspension of the DRP will be considered in future periods based on the capital position
of the Group at the time.
Capital Position
An analysis of reconciliation of the net assets in the Statement of Financial Position to the Group capital position after the
successful $50 million equity raising (as at 30 June 2016) 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
$m
$m
298.9
16.8
(6.8)
(4.7)
292.0
12.2
d
e
t
a
l
u
g
e
R
A
R
P
A
s
e
i
t
i
t
n
E
$m
322.1
(11.5)
310.6
t
n
e
m
e
g
a
n
a
M
h
t
l
a
e
W
$m
7.9
0.0
7.9
r
e
h
t
O
$m
6.4
0.0
6.4
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
17.5
25.3
347.4
64.3
411.8
(7.3)
(7.3)
(18.8)
(29.6)
(48.4)
10.2
18.1
328.7
34.7
363.4
Net Assets
Goodwill & Intangibles
Net Tangible Assets
Capital Base Adjustment:
Deferred Acquisition Costs (DAC)
(239.6)
0.1
0.0 (239.5)
0.0
0.0
0.0 (239.5)
0.0 (239.5)
Other Adjustments to Capital
Base
Regulatory Capital Base
Prescribed Capital Amount
Available Enterprise Capital
Internal Benchmarks
Working Capital
Risk Capital
Net Capital Surplus/Position
(0.2)
(0.1)
0.0
(0.3)
(0.1)
(0.1)
(0.1)
(0.4)
(0.7)
(1.1)
52.3
(7.1)
45.2
(9.9)
(31.5)
3.8
12.2
(3.5)
8.7
(1.1)
(3.6)
3.9
6.4
70.9
7.8
(2.6)
(13.3)
(5.0)
10.1
(0.7)
17.9
88.8
34.0
122.8
(5.7)
(18.9)
(0.0)
(18.9)
3.8
57.6
2.8
9.5
12.3
69.9
34.0
103.9
(2.6)
(13.6)
0.0
0.0
0.0
(13.6)
(17.4)
(31.0)
(0.0)
(35.1)
(1.9)
(5.9)
(7.8)
(42.9)
2.6
(40.3)
1.2
8.9
0.9
3.6
4.4
13.3
19.2
32.6
Under the APRA capital standards, adjustments are made to the Capital Base for various asset amounts that 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 APRA capital standards.
The regulated entities had $13.3 million of net assets in excess of internal benchmarks as at 30 June 2016. Internal
benchmarks exceed regulatory capital requirements and include capital held for the protection of ClearView’s regulatory
capital position for 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 that may be required 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 $13.6
million as at 30 June 2016 to fund anticipated new business growth over the medium term.
Internal benchmarks in the non-regulated entities include a further working capital reserve of $17.4 million as at 30 June 2016,
providing a combined total of $31 million that is set aside across the Group to fund anticipated new business growth over the
medium term.
53 ClearView Annual Report 2016
ClearView Wealth Limited
Directors’ Report
Continued
The net capital position of the Group as at 30 June 2016 represents a decrease of $0.1 million since 30 June 2015. This
decrease reflects the following key items:
• The Underlying NPAT for the year (+$27.2 million);
•
•
•
•
•
•
•
The net capital absorbed by the growth of the business over the period (-$42.2 million);
The decrease in the working capital reserve (+$17 million) 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, and the net impacts of capitalised software and
deferred tax (-$2.4 million);
Net impact of the FY15 underwritten DRP and share based payments expense on the Share Based Payments Reserve
(+$1.7 million);
The net impact of the equity capital raising and the repayment of $45.5 million under the Debt Funding Facility, net of
capital raising costs incurred (+$4.0 million);
The write off of the investment in Your Insure (-$1.9 million)
The after tax costs associated with the evaluation of strategic options or proposals in relation to potential change in
majority shareholder (-$0.3 million)
•
The net impacts of the tax effect on the change in policy liability discount rate (-$3.3 million); and
• The net impact of the on-market share buy back undertaken in FY16 (-$0.1 million).
Share Buyback
As has previously been stated, the Board considers that buying back shares in circumstances where the share price is below the
Company’s view of intrinsic value is in the best interests of ClearView shareholders.
The Board has determined to extend its share buyback (has been in place since 19 December 2014) for an additional 12
months to December 2016. The buyback arrangements currently in place will continue to apply. Since 30 June 2015, 83,572
shares have been bought back under the scheme.
In accordance with ClearView’s Executive Share Plan an additional 2,438,648 shares were bought back and cancelled to repay
loans granted to participants who ceased employment with ClearView during the year.
Outlook
The Long term market growth fundamentals remain sound:
•
•
Life Insurance: the Australian market is under-insured: growth driven by population increases, inflation and real
GDP growth
Wealth Management: long-term growth is underpinned by the compulsory saving regime for super (retirement savings) -
superannuation contribution guarantee is to be increased from the current 9.5% of income to 12% by July 2025
Short term there are a number of changes occurring in the Life Insurance market:
•
•
•
•
Pricing Cycle: industry participants have progressively increased prices (materially) over the last few years in both the group
life and income protection segments; this makes the core ClearView retail products more price competitive - opportunity to
increase pricing
Regulatory Changes: given the recent election there is some uncertainty as to timing and implementation. The potential
changes generally move the industry towards more open competition and assist a customer-focused challenger brand
such as ClearView
Regulatory Focus: given recent industry issues, the regulatory focus is demanding significant industry time and attention
Proposed Superannuation Changes: the proposed changes to superannuation rules potentially open up new opportunities
for non-superannuation products (for which ClearView has the required licences)
ClearView Annual Report 2016 54
ClearView Wealth Limited Directors’ Report
Continued
Life Insurance and Wealth Management are complementary products over the economic cycle:
•
•
Life Insurance: favourable given ‘fear’ can drive strong sales momentum
Wealth Management: impacts of the performance of investment markets on fee income and net investment flows;
ClearView portfolios are defensively tilted given the nature of the client base
ClearView remains in a strong position to continue growing, given the complementary nature of life insurance and wealth
management products over the economic cycle, with a particular focus on:
•
•
•
•
Leveraging off the embedded growth in the distribution network that has been built
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
Potential to benefit from the increased pricing cycle, in particular in the income protection market
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 has started to convert its strategic positioning into
material earnings growth. ClearView is implementing a high growth strategy with the goal of attaining 5% of the long term life
insurance profit pool, building a material wealth management business and a high quality financial advice business.
55 ClearView Annual Report 2016
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 2016.
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:
•
•
•
•
•
•
•
•
•
•
Bruce Edwards
(Chairman, Independent Non-executive Director)
Dr Gary Weiss (resigned 17 May 2016)
(Chairman, Independent Non-executive Director)
Andrew Sneddon
(Independent Non-executive Director)
David Brown
(Independent Non-executive Director)
Gary Burg
(Independent Non-executive Director)
Jennifer Newmarch (resigned 17 May 2016)
(Non-executive Director)
Michael Alscher
(Non-executive Director)
Michael Lukin
(Alternate Non-executive Director to Michael Alscher)
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
Christopher Blaxland-Walker
General Manager, Distribution
David Charlton
General Manager, ClearView Direct
Deborah Lowe
General Manager, People and Operations
(Appointed 21 October 2015)
Greg Martin
Chief Actuary and Risk Officer
Justin McLaughlin
Chief Investment Officer
Todd Kardash
Chief Executive Officer, Matrix Planning Solutions
Sarah Cummings
General Manager, Development
(Appointed 21 October 2015)
• Chris Robson
General Counsel and Company Secretary
(Ceased 11 November 2015)
• Tony Thomas
General Manager, Operations and Technology
(Ceased 21 October 2015)
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
ClearView Annual Report 2016 56
ClearView Wealth Limited
Directors’ Report
Continued
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 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;
•
•
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
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;
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;
•
•
Define various terms to ensure a common understanding;
and
Clarify what happens if this policy or associated
procedures are breached.
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 ClearView, 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 ClearView;
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
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
•
•
•
•
•
•
•
57 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
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;
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 base
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, Key
Performance Indicators (KPI's) 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 2016 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. 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 2016.
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 FY16, the award of the STI component for KMP is based on
the achievement of three company goals weighted, namely:
•
•
Underlying Net Profit after Tax (Underlying NPAT).
Underlying NPAT 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; and
• Value of New Business (VNB). The VNB is the measure of
the economic value of the profits expected to emerge for
new business net of the cost of supporting capital. VNB
is the increase in EV over the period due to new business
written over the relevant period.
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 and VNB
components are 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
ClearView Annual Report 2016 58
ClearView Wealth Limited Directors’ Report
Continued
range from 0% to 60% of Fixed Remuneration. In 2016,
KMP therefore received an STI bonus of 32.2% of their
Fixed Remuneration (in line with the target STI component)
representing 20.9% of their total remuneration. This was
based on achievement of the following:
Measure
Result2
Performance
score /
calibration
Total Operating Earnings
(after tax)1
Embedded Value (EV)
Value of New Business (VNB)
Bonus Payable as a
Percentage of Target
$28.8m
42%
13.7%
$25.3m
30%
28%
100%
100% 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.
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 advice 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 Advice 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 Advice 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 six
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
1
2
Total Operating Earnings (after tax) represents Underlying NPAT before interest expense on corporate debt. Interest cost is therefore excluded for the purpose of bonus calculations.
The result may vary from reported Underlying NPAT, EV and VNB given that for bonus calculations the impact of the capital raising, assumption and model changes between periods and
any impacts of key decisions made by the Board are excluded.
59 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
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.
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 PricewaterhouseCoopers (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 that
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 a key component of the
STI component is also aligned to the longer term, being the
Embedded Value and Value of New Business (refer to STI
section above).
As at the date of this report, the Board is aware that CCP
Bidco and its Associate’s would consider selling its shares in
ClearView and is likely to entertain future control proposals.
The Board has appointed Morgan Stanley to assist in
evaluating any strategic options or proposals. The sale by CCP
Bidco of its shares may trigger control provisions in the ESP.
As such any further considerations as to the ESP (including
further issues to KMP) will be made at the appropriate time.
The use of derivatives over ClearView Securities could distort
the proper functioning of performance and vesting conditions
of the ESP. Accordingly, derivatives over ClearView ESP shares
are not permitted to be held in relation to any ClearView
ESP shares that are unvested or the subject of a holding lock
under the ESP.
Executive Share Plan (ESP or Plan)
In accordance with the provisions of the Plan, as approved
by shareholders at the 2015 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 body corporates. Non-executive
Directors are ineligible to participate in the Plan in accordance
with the Plan Rules.
ClearView Annual Report 2016 60
ClearView Wealth Limited Directors’ Report
Continued
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 3 month
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.
•
immediately 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).
During 2013, interest was abolished on all ESP loans
for Participants.
Holding Lock
The shares granted under the ESP to participants are subject
to a holding lock restricting the holder from dealing with the
shares, unless otherwise provided under the Invitation. 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
Financial Assistance
• The ESP is terminated, or
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 in
accordance with the terms of the accompanying Invitation or
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
• 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 ESP 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.
61 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
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:
(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.
ClearView Annual Report 2016 62
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 2016:
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 16
30 Jun 15
30 Jun 14
30 Jun 13
30 Jun 12
295,828
253,640
190,301
172,278
143,182
23,615
27,235
28,263
12,572
20,533
20,867
13,880
19,738
19,738
1,876
16,014
16,014
22,336
19,241
19,241
2.50
-
4.39
4.27
4.92
624
94.8
95.0
95.0
2.10
-
2.43
2.36
3.85
494
84.7
80.0
95.0
2.00
-
3.13
3.10
4.41
445
81.6
59.0
80.0
1.80
2.20
0.46
0.46
3.65
365
80.5
46.0
59.0
1.80
-
5.46
5.24
4.53
N.M
N.M
50.0
46.0
1
2
3
Revenue from continuing operations excludes net fair value gains/losses in financial assets.
In accordance with the Implementation Agreement entered into between the Company and CCP Bidco, on 26 September 2012, ClearView declared an unfranked special dividend of 2.2
cents per share that was paid on 16 October 2012.
Embedded Value at 4% discount rate margin, including a value for future franking credits, franking credits included in the net worth and ESP loans. Franking credits have been included in
the net worth and prior periods have been restated to reflect this.
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
(2015: $1,000,000). Directors’ fees can be paid as superannuation contributions. The fee pool is the only source of
remuneration for Non-executive Directors.
63 ClearView Annual Report 2016
ClearView Wealth Limited Directors’ Report
Continued
The compensation of each Non-executive Director for the year ended 30 June 2016 is set out below:
2016
Salary
& Fees
$
Non-executive Directors
G Weiss1
B Edwards2
D Brown
G Burg
J Newmarch3
M Lukin3
N Thomson4
A Sneddon
M Alscher
Total
167,428
101,490
77,626
73,613
-
70,393
85,000
86,244
80,000
Short term employee benefits
Post
employment
Share based
payments
Total
Bonus
Non-
monetary
Termination
Payment
Superannua-
tion
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
$
15,906
-
7,374
6,993
-
-
-
-
-
Executive Share
Plan of total
remuneration
$
-
-
-
-
-
-
-
-
-
$
183,334
101,490
85,000
80,606
-
70,393
85,000
86,244
80,000
741,794
-
-
-
30,273
-
772,067
1 Mr Weiss resigned as Chairman and as a Director on 17 May 2016.
2 Mr Edwards was appointed as Chairman on 18 May 2016
3
4
Mr Lukin received fees as an alternate to Mrs Newmarch from 1 July 2015 to 17 May 2016. Mr Lukin and Mrs Newmarch have agreed they will receive no fees as a Director although
fees are payable to ROC Partners. Upon Mrs Newmarch's resignation on 17 May 2016 Mr Lukin was appointed as alternate Director to Mr Alscher.
Mr Thomson and Mr Alscher have agreed that they will receive no fees as a Director although fees are paid to Crescent Capital Partners Manangement Pty Limited of which they
are employees.
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
Superannua-
tion
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
$
17,352
-
7,374
6,941
-
-
-
-
-
Executive Share
Plan of total
remuneration
$
-
-
-
-
-
-
-
-
-
$
200,000
95,000
85,000
80,000
66,667
13,333
85,000
85,000
-
678,333
-
-
-
31,667
-
710,000
1
2
3
Mr Lukin received 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 2016 64
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 2016 is set out below:
Short term
employee benefits
Post
employment
Share based
payments
Total
Salary &
Fees
Bonus
Non-
monetary
Termination
Payment
Superannuation
Executive
Share Plan1
Performance
based
2016
S Swanson
A Chiert
C Robson2
G Martin
$
$
$
620,466
310,531
13,848
369,005
110,851
10,614
$
-
-
128,162
-
-
77,423
371,872
116,405
13,848
J McLaughlin
318,757
97,777
-
T Kardash
T Thomas3
D Charlton
294,394
93,123
10,614
115,031
-
283,666
85,128
-
-
C Blaxland-Walker
277,535
85,742
10,614
D Lowe4
S Cummings5
Total
236,186
258,737
74,838
78,600
-
-
-
-
-
172,096
-
-
-
-
$
19,308
19,308
14,109
34,933
26,109
34,980
7,969
19,308
27,408
31,408
19,308
$
-
48,300
%
32.2%
28.5%
$
964,153
558,078
-
0.0%
219,694
48,300
-
28.1%
22.1%
585,358
442,643
9,629
23.2%
442,740
-
0.0%
295,096
22,856
9,169
8,050
10,759
26.3%
23.1%
23.6%
24.3%
410,958
410,468
350,482
367,404
3,273,811 1,052,995
59,538
249,519
254,148
157,063
24.0% 5,047,074
1
2
3
4
5
Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued.
Ceased General Counsel and Company Secretary on 11 November 2015. Upon cessation of employment Mr Robson exercised 1 million ESP shares. 249,657 of these were bought back
and cancelled and the Company received $250,000 in cash in settlement of financial assistance granted.
Ceased General Manager, Operations and Technology on 21 October 2015. Upon cessation of employment Mr Thomas’ 1.5 million ESP shares were bought back and cancelled. 260,278
of these shares were exercised. 1,239,722 shares (83% of total granted ESP shares) were forfeited due to not meeting the vesting conditions. Of the 260,278 shares that were exercised,
166,451 were used to settle the financial assistance granted.
Appointed General Manager, People and Operations on 21 October 2015.
Appointed as General Manager, Development on 21 October 2015.
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
$
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
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
1
2
3
Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued.
Appointed General Manager, Distribution 13 October 2014.
Appointed Chief Executive Officer, Matrix Planning Solutions 13 October 2014.
65 ClearView Annual Report 2016
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 2016 and 30 June 2015:
Loans
Granted
$
Interest
charged1
$
Repay-
ments
$
Loan
Cancelled
$
Balance at
end
$
Highest in
period $
2016
S Swanson
A Chiert
G Martin
C Robson
J McLaughlin
T Kardash
T Thomas
D Charlton
C Blaxland-Walker
D Lowe
S Cummings
Total
2015
S Swanson
A Chiert
G Martin
C Robson
J McLaughlin
T Kardash
T Thomas
D Charlton
Balance at
beginning
6,233,453
1,342,787
1,512,138
480,984
808,897
762,729
899,700
517,150
737,643
Balance at
beginning
6,335,453
1,368,287
1,542,738
491,184
824,197
778,029
915,000
524,239
-
500,000
167,356
200,000
13,462,837
700,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(107,100)
(26,775)
(32,130)
-
-
-
6,126,353
6,233,453
1,316,012
1,342,787
1,480,008
1,512,138
(260,710)
(220,274)
-
480,984
(16,065)
(16,065)
-
-
792,832
746,664
808,897
762,729
(16,065)
(883,635)
-
899,700
(7,443)
(13,361)
-
(2,720)
-
-
-
-
509,707
724,282
517,150
737,643
500,000
500,000
364,636
364,636
(498,435)
(1,103,909) 12,560,493
(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
491,184
824,197
778,029
899,700
915,000
517,150
524,239
737,643
737,643
Loans
Granted
$
Interest
charged1
$
Repay-
ments
$
Loan
Cancelled
$
Balance at
end
$
Highest in
period $
C Blaxland-Walker
497,844
249,999
Total
13,276,971
249,999
-
(231,489)
- 13,295,481
1
In February 2013 the Board removed the interest payable on the limited recourse loans granted in relation to the ESP. The interest rate had until that point effectively acted as a
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
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 a key component of the STI component is also aligned to the
longer term, being the Embedded Value and Value of New Business
ClearView Annual Report 2016 66
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 732,907 shares (2015: 247,525) 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
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
Series 51a10
Series 51b10
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
Deborah Lowe / Sarah
Cummings
Deborah Lowe / Sarah
Cummings
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
0.20
0.23
0.27
0.19
0.22
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
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
196,271
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
16,718
19,372
21,883
30/05/2018
30/05/2019
30/05/2020
26/11/2018
26/11/2019
26/11/2020
0.96
71,197
23/12/2020
0.96
81,501
23/12/2021
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 Guiness Peat Group (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.
10 Deborah Lowe and Sarah Cummings became KMP on 21 October 2015.
67 ClearView Annual Report 2016
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 13 – 25 June 2010 Issue
Series 14 – 1 November 2010 Issue
Series 15 – 18 August 2011 Issue
Series 16- 6 October 2011 Issue
Series 17-1 March 2012
Series 24- 22 August 2012 Issue
Series 26- 16 April 2013 Issue
Nil1
Nil1
Nil2
Nil2
Nil2,4
Nil4
Nil4
Nil4
Nil4
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 35- 31 January 2014 Issue
Upon a change in control of the company
Series 36- 31 January 2014 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
Series 46- 30 March 2015 Issue
Series 47- 30 March 2015 Issue
Series 48- 30 March 2015 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
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
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
ClearView Annual Report 2016 68
ClearView Wealth Limited Directors’ Report
Continued
Series
Series 50a - 30 July 2015 Issue
Series 50b - 30 July 2015 Issue
Series 50c - 30 July 2015 Issue
Series 51a & 51b - 23 December 2015
Issue
Series 52 - 27 April 2016 Issue
Series 54 - 20 June 2016 Issue
Vesting Conditions
Performance Conditions
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
Upon a change in control of the company
Remain an employee of the company for 4 years from
Grant date of shares
Remain an employee of the company for 4 years from
Grant date of shares
Nil
Nil
Nil
Nil
Nil
Nil
1
2
3
4
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 progres-
sively 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: 100% of the shares may be sold on change of control, but 50% are held in escrow after employment for 1 year thereafter.
Change of control provision was triggered on 26 September 2012 by CCP Bidco obtaining a shareholding above 50%.
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
Directors and KMP as at 30 June 2016:
2016
B Edwards
G Burg
A Sneddon
S Swanson
A Chiert
D Charlton
J McLaughlin
T Kardash
G Martin
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
g
n
i
t
s
e
v
o
t
t
c
e
j
b
u
s
t
o
n
s
e
r
a
h
S
.
o
N
s
n
o
i
t
i
d
n
o
c
-
-
-
.
o
N
-
-
-
.
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
i
f
o
g
n
n
n
g
e
b
i
t
a
e
c
n
a
l
a
B
524,151
9,943,259
111,041
64,111
588,262
974,831 10,918,090
13,580
124,621
.
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
-
-
-
8,000,000 2,000,000 13,186,043
1,000,000
1,500,000
2,640,384
695,000
-
695,000
-
1,500,000
1,500,000
500,000
1,000,000
1,500,000
1,000,000
2,000,000
3,335,866
1,362,978 14,549,021
- 10,000,000
4,000,000
6,000,000
258,863
2,899,247
1,000,000
1,500,000
40,000
735,000
695,000
-
147,060
1,647,060
-
1,500,000
-
-
-
1,500,000
-
1,500,000
147,059
1,647,059
500,000
1,000,000
1,000,000
384,034 3,719,900 1,000,000
2,000,000
2,000,000
-
1,247,525
247,525
1,000,000
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
C Blaxland-Walker
247,525
1,000,000
1,247,525
S Cummings
254,000
D Lowe
-
-
-
254,000
209,402
45,432
508,834
463,402
-
523,505
64,940
588,445
523,505
-
-
-
-
69 ClearView Annual Report 2016
ClearView Wealth Limited
Directors’ Report
Continued
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.
KMP
Simon
Swanson
Notice period
by either the
employee or the
Company
Other
Term
Ongoing 6 months notice
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.
Target
Incentive
% of base
salary
Maximum
Incentive
% of base
salary
50%
60%
Athol Chiert
Ongoing 6 months
notice for the
first 3 years of
employment,
3 months notice
after 3 years.
Todd Kardash 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.
David
Charlton
Christopher
Blaxland-
Walker
Sarah
Cummings
Ongoing 13 weeks
Ongoing 13 weeks
Ongoing 13 weeks
Deborah Lowe Ongoing 13 weeks
For all terminations after the first 3 years of employment
an additional 26 week payment is payable.
30%
36%
In the case of redundancy, a severance payment of 13
weeks' 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).
30%
36%
30%
36%
For all terminations after the first 3 years of employment
an additional 26 week payment is payable.
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).
In the case of redundancy, a severance payment of 13
weeks’ 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).
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
Mr Bruce Edwards
Chairman
24 August 2016
ClearView Annual Report 2016 70
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 15, 20 Bond Street
Sydney NSW 2000
24 August 2016
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 2016, 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 Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited.
71 ClearView Annual Report 2016
ClearView Wealth Limited
2016 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
73
74
75
77
78
2 Application of new and revised Accounting Standards 78
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 plan
31 Dividends
32 Reconciliation of net profit for the year to net
cash flows from operating activities
33 Subsidiaries
34 Related party transactions
35 Financial instruments
36 Disaggregated information by fund
37 Investment in controlled unit trusts
38 Leases
39 Contingent liabilities and contingent assets
40 Capital commitments
41 Guarantees
42 Subsequent events
Directors’ Declaration
Independent Auditor’s Report
Shareholders’ Information
Directory
80
93
99
103
105
107
107
107
108
110
111
112
112
113
113
114
114
115
116
The Financial Report was authorised for issue by the Directors on 24 August 2016.
117
118
119
120
121
122
123
123
131
131
132
133
134
136
146
150
150
151
152
152
152
153
154
156
158
ClearView Annual Report 2016 72
ClearView Wealth Limited Consolidated statement of profit or loss and other
comprehensive income
For the year ended 30 June 2016
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
Loss from disposal of property, plant and equipment
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 before income tax expense
Income tax expense/(benefit)
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Earnings per share
Basic (cents per share)
Diluted (cents per share)
To be read in conjunction with the accompanying Notes.
Consolidated
Note
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
138,289
(30,146)
108,143
110,875
76,810
105,164
(18,361)
86,803
95,014
71,823
295,828
253,640
(4,670)
291,158
(44,484)
25,696
(109,382)
(89,440)
(13,802)
(287)
55,374
(10,796)
72,818
326,458
(32,951)
15,010
(87,044)
(81,255)
(12,847)
-
40,951
(7,367)
(56,383)
(109,198)
(14,768)
(27,968)
-
-
-
5
-
-
-
-
17,733
17,738
14,399
14,399
-
-
17,738
14,399
-
-
-
-
-
-
(5,848)
(3,023)
-
-
-
-
-
-
-
-
-
-
-
-
32,886
9,271
23,615
23,789
11,217
12,572
11,890
(1,537)
13,427
11,376
(482)
11,858
23,615
12,572
13,427
11,858
4.39
4.27
2.43
2.36
-
-
-
-
8
9
10
10
26
26
26
11
14
73 ClearView Annual Report 2016
ClearView Wealth Limited Consolidated statement of financial position
As at 30 June 2016
Assets
Cash and cash equivalents
Investments
Receivables
Fixed interest deposits
Reinsurers’ share of life insurance policy liabilities
Deferred tax assets
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
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
15
16
17
18
26
24
21
25
19
20
22
23
26
26
28
24
27
12
12
12
12
217,673
200,769
20,889
34,447
1,615,226
1,450,251
354,158
318,159
16,738
15,516
12,496
79,584
107,035
(703)
(2,233)
-
-
10,801
11,029
573
1,823
-
19,952
28,428
1,156
1,711
19,952
36,021
-
-
-
-
9,884
8,115
-
682
-
1,711
-
-
1,989,522
1,841,207
388,116
372,998
35,619
24,774
-
5,215
4,548
5,375
(203,830)
(156,641)
1,152,554
1,160,627
-
45,500
587,205
418,920
996
1,271
780
-
26
-
-
-
-
-
357
4,548
26
-
-
45,500
-
-
1,577,759
1,504,374
806
50,431
411,763
336,833
387,310
322,567
417,850
(12,344)
8,342
355,970
(23,659)
6,607
-
-
(2,085)
(2,085)
417,850
(57,887)
8,342
21,093
(2,085)
355,970
(54,314)
6,605
16,394
(2,085)
411,763
336,833
387,310
322,567
ClearView Annual Report 2016 74
ClearView Wealth Limited Consolidated statement of changes in equity
For the year ended 30 June 2016
General
reserve
Profit
reserve
Retained
losses
Attributable
to the
owners of
the parent
$’000
$’000
$’000
$’000
Share
capital
$’000
330,172
-
-
-
-
10,977
(70)
14,588
-
250
53
-
Executive
share plan
reserve
$’000
5,315
-
-
896
-
-
-
-
-
-
(154)
550
-
-
-
-
-
-
-
(2,085)
-
-
-
355,970
6,607
(2,085)
-
-
-
-
12,301
(35)
(75)
50,136
(579)
(249)
-
381
-
-
1,201
-
-
-
-
-
-
-
652
(118)
-
-
-
-
-
-
-
-
-
-
-
-
417,850
8,342
(2,085)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(25,254)
310,233
12,572
12,572
-
12,572
12,572
896
(10,977)
(10,977)
-
-
-
-
-
-
-
10,977
(70)
14,588
(2,085)
250
(101)
550
(23,659)
336,833
23,616
23,616
-
(12,301)
-
-
-
-
-
-
-
-
23,616
23,616
1,201
(12,301)
12,301
(35)
(75)
50,136
(579)
(249)
652
263
(12,344)
411,763
Consolidated
Balance at 1 July 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 acquisition
General reserve on acquisition of matrix
Holdings Limited
Shares issued during the year (Non ESP)
Shares issued during the year (ESP vested)
ESP loans settled through dividend
Balance at 30 June 2015
Profit for the year
Total comprehensive income for the year
Recognition of share based payments
Dividend paid
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
Share buy back (inclusive of costs)
Entitlement offer
Entitlement offer costs (net of tax)
ESP share buy back
ESP loans settled through dividend
ESP shares vested/(forfeited)
Balance at 30 June 2016
To be read in conjunction with the accompanying Notes.
75 ClearView Annual Report 2016
ClearView Wealth Limited Consolidated statement of changes in equity
For the year ended 30 June 2016
Continued
Company
Balance at 1 July 2014
Profit for the year
Total comprehensive loss 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 acquisition
General reserve on acquisition of matrix
Holdings Limited
Shares issued during the year (Non ESP)
Shares issued during the year (ESP vested)
ESP loans settled through dividend
Balance at 30 June 2015
Profit for the year
Total comprehensive loss for the year
Recognition of share based payments
Dividend paid
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
Share buy back (inclusive of costs)
Entitlement offer
Entitlement offer costs (net of tax)
ESP share buy back
ESP loans settled through dividend
ESP shares vested/(forfeited)
Balance at 30 June 2016
To be read in conjunction with the accompanying Notes.
Share
capital
$’000
330,172
-
-
-
-
10,977
(70)
14,588
-
250
53
-
Executive
share plan
reserve
$’000
5,315
-
-
896
-
-
-
-
-
-
(154)
550
General
reserve
$’000
-
-
-
-
-
-
-
-
(2,085)
-
-
-
Profit
reserve
Retained
losses
Attributable
to the
owners of
the parent
13,871
13,500
13,500
-
(10,977)
-
-
-
-
-
-
-
$’000
$’000
(52,672)
296,686
(1,642)
(1,642)
-
-
-
-
-
-
-
-
-
11,858
11,858
896
(10,977)
10,977
(70)
14,588
(2,085)
250
(101)
550
355,970
6,607
(2,085)
16,394
(54,314)
322,567
-
-
-
-
12,301
(35)
(75)
50,136
(579)
(249)
-
381
-
-
1,201
-
-
-
-
-
-
-
652
(118)
-
-
-
-
-
-
-
-
-
-
-
-
17,000
17,000
-
(12,301)
-
-
-
-
-
-
-
-
(3,573)
(3,573)
-
-
-
-
-
-
-
-
-
-
13,427
13,427
1,201
(12,301)
12,301
(35)
(75)
50,136
(579)
(249)
652
263
417,850
8,342
(2,085)
21,093
(57,887)
387,310
ClearView Annual Report 2016 76
ClearView Wealth Limited Consolidated statement of Cash Flows
For the year ended 30 June 2016
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
2016
$’000
2015
$’000
2016
$’000
415,100
385,911
(288,464)
(221,445)
-
-
(184,560)
(233,204)
16,526
33,659
(1,958)
14,941
33,152
(970)
5
(1,436)
9,620
-
-
311
(1,474)
Company
2015
$’000
-
(4,092)
12,799
-
-
279
(491)
Income taxes paid
(14,184)
(11,792)
(14,184)
(11,792)
Net cash (utilised) by operating activities
32
(23,881)
(33,407)
(7,158)
(3,297)
Cash flows from investing activities
Net cash movement due to investment in subsidary
-
(4,970)
(36,000)
(44,750)
Payments for investment securities
Proceeds from sales of investment securities
Acquisition of property, plant and equipment
Acquisition of capitalised software
Fixed interest deposits (invested)/redeemed
Loans granted
Convertible note drawn down
Dividends received from subsidiary
Loans granted (redeemed) with Group entities
Net cash (utilised) by investing activities
Cash flows from financing activities
Net movement in liability of non-controlling
interest in unit trusts
Proceeds from share issues (net of expenses)
Proceeds/(repayment) of loan borrowings
Share buy back (net of costs)
Repayment of ESP loans
Payments for ESP shares reallocated/vested
Dividends Reinvestment Plan costs
Net cash generated in financing activities
(2,313,367)
(1,707,797)
2,173,882
1,684,926
(452)
(6,375)
-
-
-
-
(3,006)
-
-
-
(15,343)
8,479
17,583
(4,221)
(1,328)
-
-
-
(612)
17,000
-
-
(1,328)
13,500
8,499
(9,502)
(117,160)
(55,560)
(11,131)
(1,654)
(5,510)
30,263
(162)
(612)
-
-
153,213
60,301
-
49,556
242
49,556
-
242
(45,500)
45,500
(45,500)
45,500
(75)
652
132
(35)
-
550
(83)
(73)
(75)
652
132
(35)
157,943
106,437
4,730
-
550
(83)
(73)
46,135
33,336
1,111
34,447
Net increase/(decrease) in cash and cash equivalents
16,904
17,470
(13,558)
Cash and cash equivalents at the beginning of the financial
year
15
Cash and cash equivalents at the end of the financial year
To be read in conjunction with the accompanying Notes.
200,769
183,299
217,673
200,769
34,447
20,889
77 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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 the below revised Accounting Standard issued by the Australian Accounting
Standards Board (AASB) that was mandatorily effective for an accounting period that begins on or after 1 July 2015
AASB 2015-3 ‘Amendments to
Australian Accounting Standards
arising from the Withdrawal of AASB
1031 Materiality’
This amendment completes the withdrawal of references to AASB 1031 in all
Australian Accounting Standards and Interpretations, allowing that Standard to
effectively be withdrawn.
ClearView Annual Report 2016 78
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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 2015-5 ‘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 January 2016
30 June 2017
AASB 16 ‘Leases’
1 January 2019
30 June 2020
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
relevant amending standards.
At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations (for which
Australian equivalent Standards and Interpretations have not yet been issued) were in issue but not yet effective.
Standard/Interpretation
Classification and Measurement of Share-based Payment Transactions
(Amendment to IFRS 2)
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
1 January 2018
30 June 2019
The potential effect of the revised Standards/Interpretations on the Groups financial statements has not yet been determined.
79 ClearView Annual Report 2016
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2016
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 and the separate
financial statements of the parent entity. 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 24 August 2016.
(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. 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:
•
•
•
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
Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191, dated 24 March 2016, and in
accordance with that Corporations Instrument, amounts in
the financial report are rounded off to the nearest thousand
dollars, unless otherwise indicated.
All amounts are presented in Australian dollars, unless
otherwise noted.
(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
ClearView Annual Report 2016 80
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
3. Significant accounting policies continued
•
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.
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.
When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies
into line with the Group’s accounting policies.
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
81 ClearView Annual Report 2016
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
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.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value at the
acquisition date, except that:
•
•
•
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
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
3. Significant accounting policies continued
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
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
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
ClearView Annual Report 2016 82
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
3. Significant accounting policies continued
ventures are incorporated in these consolidated financial
statements using the equity method of accounting, except
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
83 ClearView Annual Report 2016
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 Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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 and Managed Investment
Schemes 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 administration and model (SMA1) fee revenue earned
via 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.
1
Separately Managed Accounts.
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.
ClearView Annual Report 2016 84
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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
85 ClearView Annual Report 2016
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 Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
3. Significant accounting policies continued
(l) Reinsurance
Amounts paid to reinsurers under life insurance contracts
held by ClearView Life 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
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
ClearView Life 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 Annual Report 2016 86
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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 (or receivable) and deferred tax.
87 ClearView Annual Report 2016
Current Tax
The tax currently payable (or receivable) is based on taxable
profit for the year less tax instalments paid. 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 less any tax instalments paid.
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 Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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
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 Annual Report 2016 88
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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.
89 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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.
Financial assets 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 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:
Available for sale financial assets
Listed shares and listed redeemable notes held by the Group
that are traded in an active market are classified as AFS and
ClearView Annual Report 2016 90
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
3. Significant accounting policies continued
are stated at fair value. The Group also has investments in
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
91 ClearView Annual Report 2016
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
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
3. Significant accounting policies continued
risks and rewards of ownership of the asset to another party.
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.
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 35.
ClearView Annual Report 2016 92
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
3. Significant accounting policies continued
Other financial liabilities
• Assets arising from reinsurance contracts;
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
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
between acquisition and maintenance costs;
93 ClearView Annual Report 2016
• Recoverability of intangible assets;
•
Impairment of goodwill;
• Deferred tax assets; and
•
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 consideration factors such as reinsurer
counterparty and credit risk.
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
Impairment is recognised where there is objective evidence
that the Group 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
$16.9 million (2015: $26.1 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 $16.7 million (2015: $25.9 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:
• 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
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. The carrying value
of the Life Insurance Client Book as at 30 June 2016 is
$5.7 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 $4.4
million at 30 June 2016. 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 $6.6 million
at 30 June 2016.
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.
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 2016, based on the EV calculations, no impairment
was required to the carrying value of the intangible assets.
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.
ClearView Annual Report 2016 94
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
Recoverability of internally generated software
intangibles
The carrying amount of internally generated capitalised
software at the financial position date was $11.5 million
(2015: $9.9 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 2016.
Impairment of Goodwill
The carrying amount of goodwill at the reporting date was
$20.0 million (2015: $20.0 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.
Goodwill
The Group 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 Group 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.
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 In-force protfolios written to date and 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
2016, no impairment was required to the carrying value of
the goodwill.
Further information about Goodwill is detailed in Note 19.
95 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
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 Company that relate 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.
Actuarial methods and assumptions
The effective date of the actuarial report on life insurance policy liabilities and life investment policy liabilities is 30 June 2016.
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 Non-Advice Lump Sum (including the Old Book)
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
Accumulation
Accumulation
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.
(a) Actuarial assumptions used in the valuation of
life insurance policy liabilities
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 2.6%
(2015: 3.6%).
ClearView Annual Report 2016 96
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
Acquisition expenses: Per policy acquisition expense
assumptions were based on the actual acquisition expenses
incurred for the 12 months to 30 June 2016.
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 2016
business plan (2015: Based on the 2015 business plan).
Expense inflation of 2.5% p.a. (2015: 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. The primary underlying mortality tables
used were the AI-FSC 2004-2008 industry standard tables,
which were adjusted for industry experience and ClearView's
own experience.
Morbidity (TPD, Income Protection and Trauma): Rates
adopted vary by age, gender, and smoking status. The
primary rates adopted are based on the AI-FSC 2004-2008
and ADI-FSC-KPMG 2007 - 2011 industry standard tables,
which were adjusted for industry experience and ClearView's
own experience.
(b) Effects of changes in actuarial assumptions
(over 12 months to 30 June 2016)
Effect on
profit margins
Increase/
(decrease)
Effect on policy
liabilities
Increase/
(decrease)
$’000
$’000
18,707
(10,381)
-
-
1,114
19,821
-
-
-
(10,381)
Assumption category
Discount rates and
inflation
Maintenance expenses
Lapses
Mortality and
morbidity
Total
(c) 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
97 ClearView Annual Report 2016
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.
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 ClearView Life'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. It should be noted that the base tables
for the primary LifeSolutions portfolio were updated during
the year to use more up to date industry tables. These tables
are the AI-FSC 2004-2008 table for Lump Sum business and
the FSC-KPMG 2007-2011 Australian Disability Income tables
for disability income business.
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.
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
(d) Sensitivity analysis
ClearView Life 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, Income Protection and trauma cover depends on the incidence of
policyholders becoming disabled or suffering a “trauma” event such as a heart attack or stroke. Higher
incidence or claims duration 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.
The table below illustrates how outcomes during the financial year ended 30 June 2016 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
15,810
$’000
14,200
(17,947)
(16,600)
-
-
-
-
-
-
-
-
-
-
-
-
$’000
(11,067)
12,563
(3,959)
3,959
(2,295)
2,295
(1,165)
1,165
$’000
(9,940)
11,620
(1,315)
1,315
(1,901)
1,901
(1,165)
1,165
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 ClearView Life's experience in the current year in relation to those variables had been higher or
lower by 10% of that experienced.
ClearView Annual Report 2016 98
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
5. Risk Management
The Group’s activities expose it to a variety of risks, both
financial and non-financial. Key risks include:
• Risk impacts on and from our staff, our distribution
partners and suppliers and counterparties; and
• Asset risks, including market risk (interest rate risk and
• Requirements and objectives of our regulators.
equity price risk), credit risk and liquidity risk;
•
Insurance risk;
• Asset-liability mismatch risk;
• Expense and discontinuance (lapses, withdrawals
and loss of client) risks; and
• Non-financial risks - compliance, operational and
strategic risks
Risk management strategy and framework, 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 and Capital Strategy (RM and
CS) and Risk Management Framework (RMF) to assist it in
identifying and managing the key risks to achieving the
Group’s objectives. The RM and CS 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
controls identified as part of the risk assessment process.
KPMG is retained to provide outsourced internal audit services.
The RM and CS and RMF considers the key stakeholders in the
Group, beyond the shareholders, including:
• The benefit, security and expectations of policyholders,
members of the ClearView Retirement Plan and
investment product and advice clients;
The RM and CS 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 RM and CS and RMF
includes suitable monitoring mechanisms.
As part of the RM and CS 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:
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
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 35 Financial Instruments).
99 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
5. Risk Management continued
Insurance risk
The risks under the life insurance contracts written by ClearView Life 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
ClearView Life issues term life insurance contracts and
disability insurance contracts. The performance of ClearView
Life and its continuing ability to write business depends on
its ability to manage insurance risk. The Group's RM and CS
summarises its approach to insurance risk management.
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.
(b) Methods to limit manage or transfer insurance
risk exposures
Claims management
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 are
members of large international groups with sound
credit ratings.
ClearView Life periodically reviews its reinsurance
arrangements and retention levels.
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.
(c) Concentration of insurance risk
The insurance business of ClearView Life is principally written
on individual lives (not group business). Individual business
is not expected to provide significant exposure to risk
concentration. Nonetheless, insurance risk is concentrated
to the eastern seaboard of Australia and its capital cities.
The residual risk exposure is reduced through the use of
reinsurance and is subject to review by the reinsurer’s from
time to time.
ClearView Annual Report 2016 100
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
5. Risk Management continued
(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 ClearView Life'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 ClearView Life.
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
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; and
101 ClearView Annual Report 2016
• 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; and
• 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 Group 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 RM and CS
and RMF. Key elements of the RMF include:
• An internal Group risk and compliance teams.
The adequacy of the team’s resources are periodically
reviewed as the nature, size and complexity of
ClearView changes;
• A Breach and Incident Management process
which ensures that incidents are identified, reported
and assessed;
• Detailed compliance registers, reporting timetables and
due diligence processes;
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2016
Continued
5. Risk Management continued
• A detailed overall risk register which identifies the key
risks, mitigations and controls, inherent and residual risks,
and risk owners;
adequate financial resources to address losses arising
from the operational risks that may affect the ClearView
Retirement Plan.
In addition, the Group maintains 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.
• A fraud and cyber Risk Management Framework which
provides governance for the prevention, detection and
recovery in the case of attempted and materialised
internal and external fraud events;
• A monthly Risk Management and Compliance Committee
which focuses, among other items, on the RM and CS
and RMF;
•
Internal audit, whistleblowing policy and facilities,
detailed financial reconciliations and unit pricing
checking processes, detail IT development and
implementation processes;
• Comprehensive internal management information
reporting and monitoring, emerging risk exposures
reporting, staff training programs, staff recruitment
standards (including fit and proper standards);
• Annual Business Continuity and Disaster Recovery
Testing; and
•
Initiatives to ensure that an appropriate risk culture within
the business is maintained including, Board and Senior
Management Team focus, an adopted culture statement,
including risk management as a formal part of all key
business decisions, and appropriate risk management
supporting remuneration structures.
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
Advice and Matrix Planning Solutions are also required
to maintain minimum regulatory capital as required by
ASIC; and
• 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
ClearView Annual Report 2016 102
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
6. Capital adequacy (ClearView Life Assurance Limited)
ClearView Life Assurance Limited (ClearView Life) 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
2016
$’000
6,319
-
2016
$’000
298,875
(6,847)
6,319
292,028
-
(2,950)
(167)
-
-
(239,555)
3,369
(20)
3,349
165.1
-
(20)
-
-
-
-
52,306
(7,146)
45,160
7.3
(2,193)
(1,098)
-
(4,504)
649
-
2016
$’000
3,973
-
3,973
(2)
-
55
4,026
(554)
3,472
7.3
-
(376)
-
(178)
-
-
ClearView Life
Assurance
Limited
2016
$’000
322,038
(11,497)
2016
$’000
12,871
(4,650)
8,221
310,541
(82)
-
-
8,139
(2,931)
5,208
2.8
(251)
(2,950)
(239,500)
67,840
(10,651)
57,189
6.4
-
(173)
-
(2,193)
(1,667)
-
(2,758)
(7,440)
-
-
649
-
(20)
(7,146)
(554)
(2,931)
(10,651)
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 ClearView Life Minimum
Prescribed Capital Amount
103 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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
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)
50,238
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
267,773
(9,954)
257,819
(420)
(2,950)
(186,195)
68,254
(10,000)
58,254
6.8
(1,895)
(1,444)
-
Operational Risk
Aggregation benefit
-
(3,538)
(162)
(2,767)
(6,466)
-
519 -
-
LPS110 ClearView Life Minimum
(714)
-
-
-
Prescribed Capital Amount
(734)
(5,766)
(561)
(2,939)
(10,000)
ClearView Annual Report 2016 104
519
(714)
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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;
105 ClearView Annual Report 2016
•
•
•
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,
seven ClearView managed funds and recently launched
Separately Managed Account (SMA) offering. It also
provides a number of model portfolios managed by
ClearView for superannuation and non superannuation
investors;
WealthFoundations - Life investment contracts issued
by ClearView Life. Products include superannuation
and allocated pension products, issued via the ClearView
Retirement Plan. WealthFoundations includes a menu of
14 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 and recently an
external platforms.
(c) Financial Advice
ClearView provides financial advice services through its
wholly owned subsidiaries ClearView Financial Advice (CFA)
and Matrix Planning Solutions (Matrix). CFA and Matrix provide
dealer group services to it's employed financial advisers as
well as 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 2016
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.
External Revenue
Inter-Segment Elimination
Consolidated Revenue
2016
$’000
2015
$’000
2016
$’000
2015
$’000
2016
$’000
2015
$’000
Segment revenue
Life Insurance
Wealth Management
Financial Advice
Listed entity/Other
110,963
103,754
79,853
1,258
89,802
98,521
64,050
1,267
Consolidated segment revenue
295,828
253,640
(16,220)
(5,143)
21,363
-
-
(13,557)
(2,776)
16,333
-
-
94,743
98,611
101,216
1,258
76,245
95,745
80,383
1,267
295,828
253,640
2016
Total operating earnings after tax
Interest expense on corporate debt (after tax)
Underlying net profit/(loss) after tax
Amortisation of acquired intangibles1
AIFRS policy liability discount rate effect2
Your Insure Impairment4
Strategic Review costs5
Income tax effect
Reported profit/(loss)
2015
Total operating earnings after tax
Interest expense on corporate debt (after tax)
Underlying net profit/(loss) after tax
Amortisation of acquired intangibles1
AIFRS policy liability discount rate effect2
Matrix deal and integration costs3
Income tax effect
Reported profit/(loss)
Life
Insurance
Wealth
Management
Financial
Advice
Listed Entity/
Other
24,512
-
24,512
(2,833)
11,070
-
-
(3,321)
29,428
15,278
-
15,278
(2,833)
4,162
-
(1,248)
15,359
2,714
-
2,714
(5,254)
-
-
-
-
1,479
-
1,479
(1,048)
-
-
-
-
(442)
(1,028)
(1,470)
-
-
(1,898)
(480)
144
(2,540)
431
(3,704)
1,801
-
1,801
(5,256)
-
-
-
(3,455)
4,398
-
4,398
(914)
-
(434)
130
3,180
(610)
(334)
(944)
-
-
(1,824)
256
(2,512)
Total
28,263
(1,028)
27,235
(9,135)
11,070
(1,898)
(480)
(3,177)
23,615
20,867
(334)
20,533
(9,003)
4,162
(2,258)
(862)
12,572
1
2
3
4
5
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 Earnings (after tax).
The policy liability discount rates effect is the result of the changes in long term discount rates used to determine the insurance policy liability. 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.
Certain costs were recognised in the prior period in relation to the deal and integration costs associated with the merger of Matrix. 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 Earnings (after tax).
ClearView made an investment in Your Insure, a start-up operation in Melbourne, in August 2014 to target selling direct life insurance to the lower socio
demographic customers. ClearView agreed to provide funding to Your Insure which was structured as a Convertible Note. The investment in Your Insure
has been written off, with a net of tax cost of $1.9 million being incurred. 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 Earnings (after tax).
Certain costs were recognised in relation to the evaluation of strategic options and proposals associated with the potential changes of major shareholder. The costs are considered
unusual to the ordinary activities of the Group and are therefore not reflected as part of Operating Earnings (after tax).
ClearView Annual Report 2016 106
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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
Strategic review costs
Your Insure imparment
Total other expenses
Total operating expenses
107 ClearView Annual Report 2016
Consolidated
2016
$’000
79,556
31,062
257
2015
$’000
63,658
31,249
106
110,875
95,013
Company
2015
$’000
2016
$’000
-
-
5
5
-
-
-
-
Consolidated
Company
2016
$’000
36,660
16,526
23,624
76,810
2015
$’000
36,169
14,941
20,713
71,823
2016
$’000
733
2015
$’000
899
17,000
13,500
-
-
17,733
14,399
Consolidated
Company
2016
$’000
2015
$’000
2016
$’000
26,638
7,439
34,077
26,923
7,217
34,140
47,338
44,102
1,083
1,322
966
50,709
1,472
480
2,702
4,654
896
590
1,050
46,638
477
-
-
477
89,440
81,255
449
-
449
19
-
-
726
745
1,472
480
2,702
4,654
5,848
2015
$’000
1,290
-
1,290
423
-
-
833
1,256
477
-
-
477
3,023
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
10. Operating expenses continued
Depreciation and amortisation expenses
Depreciation expenses
Software amortisation
Amortisation of acquired intangibles
Consolidated
2016
$’000
700
3,967
9,135
2015
$’000
653
3,190
9,003
Total amortisation and depreciation expenses
13,802
12,847
Company
2015
$’000
2016
$’000
-
-
-
-
-
-
-
-
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 - 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:
Decrease/(Increase) in deferred tax asset
(Decrease)/Increase in deferred tax liability
Consolidated
2016
$
2015
$
2016
$
Company
2015
$
303,000
293,700
97,500
100,000
99,400
98,700
127,600
107,600
-
-
-
-
530,000
500,000
97,500
100,000
91,000
34,000
97,000
32,500
191,945
160,000
91,000
34,000
-
97,000
32,500
-
316,945
289,500
125,000
129,500
846,945
789,500
222,500
229,500
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
12,759
234
(3,640)
(82)
9,271
427
(275)
152
12,021
(682)
(83)
(40)
(1,833)
300
(12)
8
(639)
157
-
-
11,216
(1,537)
(482)
(761)
38
(723)
308
-
308
157
-
157
ClearView Annual Report 2016 108
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
11. Income Tax continued
b) Tax losses
Unused tax losses for which no deferred tax asset has been
recognised
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
83,096
88,291
32,635
32,635
Potential tax benefit
14,853
15,372
9,790
9,790
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:
c) Reconciliation 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:
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)
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
32,886
4,105
36,992
11,098
-
-
(546)
472
2,740
(388)
13,376
(4,105)
9,271
23,789
(1,600)
22,189
6,656
11,890
11,376
-
-
11,890
3,567
11,376
3,413
-
(5,101)
(4,051)
156
(199)
408
2,701
(106)
9,616
1,600
-
-
-
-
(3)
156
-
-
-
-
(1,537)
(482)
-
-
11,217
(1,537)
(482)
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.
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
24,286
16,065
24,286
16,065
109 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
11. Income tax continued
Relevance of tax consolidation to the Group
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.
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
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
Retained losses
Balance at the beginning of the financial year
(23,659)
(25,254)
(54,314)
(52,672)
Net profit/(loss) attributable to members of the parent entity
23,616
12,572
(3,573)
(1,642)
Dividend paid during the year
Balance at the end of the financial year
Executive share plan reserve
Balance at the beginning of the financial year
Recognition of share based payments
ESP loans settled through dividend
ESP shares vested/forfeited
Balance at end of the financial year
(12,301)
(10,977)
-
-
(12,344)
(23,659)
(57,887)
(54,314)
6,607
1,201
652
(118)
8,342
5,315
896
550
(154)
6,607
6,607
1,201
652
(118)
8,342
5,315
896
550
(154)
6,607
ClearView Annual Report 2016 110
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
12. Movements in reserves continued
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
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
-
-
-
-
(2,085)
-
(2,085)
-
-
-
-
-
(2,085)
(2,085)
16,394
17,000
13,871
13,500
(12,301)
(10,977)
21,093
16,394
(2,085)
-
(2,085)
-
(2,085)
(2,085)
13. Sources of profit (ClearView Life Assurance Limited)
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
Profit for ClearView Life Assurance Limited
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
17,007
4,708
13,741
4,786
165
(4,628)
10,381
32,261
4,293
18,192
2,931
2,931
819
819
35,192
19,011
73
97
35,265
19,108
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
111 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
14. Earnings per share
Earnings per share (cents)
Basic earnings
Diluted earnings
Basic earnings per share
Consolidated
2016
2015
4.39
4.27
2.43
2.36
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as
follows:
Profit for the year attributable to owners of the Company ($'000)
Earnings used in the calculation of basic earnings per share ($'000)
23,615
23,615
12,572
12,572
Weighted average number of ordinary shares for the purpose of basic earnings per share ('000's)
537,588
517,261
Diluted earnings per share
The earnings used in the calculation of diluted earnings per share are as follows:
Profit for the year attributable to owners of the Company ($'000)
Earnings used in the calculation of total diluted earnings per share
23,615
23,615
12,572
12,572
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)
537,588
517,261
15,691
15,693
553,279
532,954
15. Cash and cash equivalents
Cash at bank
Total cash and cash equivalents
Consolidated
Company
2016
$’000
2015
$’000
217,673
200,769
217,673
200,769
2016
$’000
20,889
20,889
2015
$’000
34,447
34,447
ClearView Annual Report 2016 112
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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
Loans receivable
Tax receivables
Other debtors
Total receivables
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
-
-
354,158
318,159
256,093
222,891
337,706
315,081
-
-
-
-
593,799
537,972
354,158
318,159
424,963
337,156
661,976
29,213
762,119
691,189
-
-
259,308
221,090
259,308
221,090
-
-
-
-
-
-
-
-
-
-
-
-
1,615,226
1,450,251
354,158
318,159
Consolidated
Company
2015
$’000
2016
$’000
2015
$’000
984
2,935
(683)
1,883
886
2,671
2,874
-
-
-
-
-
-
80
-
-
-
-
-
-
131
9,753
-
-
-
-
11,775
3,135
-
831
-
641
-
2016
$’000
773
3,254
(667)
2,232
888
509
3,824
-
3,722
641
1,562
16,738
15,516
12,496
9,884
$2.1 million (2015: $1.2 million) of Total consolidated receivables are expected to be recovered more than 12 months from the
reporting date and $4.9 million (2015: $4.7 million) of Total receivables for the Company are expected to be recovered more
than 12 months from the reporting date.
113 ClearView Annual Report 2016
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2016
Continued
18. Fixed interest deposits
Fixed interest bank term deposits
Consolidated
Company
2016
$’000
2015
$’000
79,584
107,035
2016
$’000
-
2015
$’000
8,115
Fixed interest term deposits, held at year end, yield an average fixed interest rate of 2.58% (2015: 3.11%)
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
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
19,952
-
19,952
19,952
19,952
4,858
15,094
19,952
4,858
19,952
-
-
-
-
-
-
-
-
-
-
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 the Company completes an impairment assessment at each reporting date. Further
details have been provided in Note 4.
ClearView Annual Report 2016 114
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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
8,147
1,500
37,461
2016
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
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
18,102
1,500
63,317
5,509
23,611
-
-
1,500
63,317
3,968
12,115
-
1,500
9,124
46,585
9,955
11,496
-
-
25,856
16,732
11,727
1,500
58,596
6,375
18,102
-
1,500
4,721
63,317
Balance at the beginning of the year
4,957
1,500
28,467
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
3,190
8,147
6,770
9,955
-
1,500
8,994
37,461
-
-
30,129
25,856
20
-
20
10
10
20
10
-
200
-
200
-
-
-
83,139
5,509
88,648
47,118
13,102
60,220
200
200
36,021
28,428
-
20
20
-
10
10
-
10
-
200
200
-
-
-
71,823
11,316
83,139
34,924
12,194
47,118
-
200
36,899
36,021
$’000
$’000
$’000
$’000
$’000
$’000
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.
115 ClearView Annual Report 2016
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2016
Continued
21. Property, plant and equipment
2016
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
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
Office
furniture
Office
equipment
Computer
hardware
Leasehold
improvements
$’000
$’000
$’000
$’000
Consolidated
Total
$’000
507
-
(75)
432
365
55
420
12
42
4
-
46
28
6
34
12
1,289
2,342
4,180
130
(4)
1,415
1,523
(211)
3,654
1,657
(290)
5,547
862
1,769
3,024
214
1,076
425
2,194
700
3,724
339
1,460
1,823
$’000
$’000
$’000
$’000
$’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
No property, plant and equipment is held by the Company.
ClearView Annual Report 2016 116
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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
Other creditors
Total payables
Consolidated
Company
2016
$’000
7,884
8,487
6,282
481
2,138
1,336
8,233
778
2015
$’000
7,180
5,142
6,162
613
701
943
3,834
199
35,619
24,774
2016
$’000
484
-
5
-
-
-
-
291
780
2015
$’000
295
-
12
-
-
-
-
50
357
$1.4 million (2015: $0.6 million) of Total consolidated payables are expected to be settled more than 12 months from the
reporting date and nil (2015: nil) of total payables of the Company are expected to be settled more than 12 months from the
reporting date.
117 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
23. Provisions
Current and non current
Make good provision
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
Employee leave provision 2
Balance at the beginning of the financial year
Provision acquired in a business combination
Additional provisions raised
Utilised during the period
Balance at the end of the financial year
Other provisions 3
Balance at the beginning of the financial year
Provision acquired in a business combination
Additional provisions raised
Utilised during the period
Unutilised provisions transferred during the period
Balance at the end of the financial year
Consolidated
2016
$’000
270
3,540
1,405
5,215
432
-
148
(89)
(221)
270
3,392
-
836
(688)
3,540
1,551
-
(237)
(102)
193
1,405
2015
$’000
432
3,392
1,551
5,375
316
21
438
(343)
-
432
2,772
50
2,052
(1,482)
3,392
500
82
1,386
(83)
(334)
1,551
Company
2015
$’000
2016
$’000
-
-
26
26
-
-
-
-
-
-
-
-
-
-
-
26
-
-
-
-
26
-
-
26
26
-
-
-
-
-
-
-
-
-
-
-
19
-
7
-
-
26
1
2
3
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 expect-
ed to be settled on vacating the leased premises on expiration of the relevant lease.
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 2016 118
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
24. Deferred tax balances
Deferred tax balances
Deferred tax assets
Deferred tax liabilities
Deferred tax assets
Arising on income and expenses 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
Arising on income and expenses recognised in profit or loss
Unrealised gains on investments
Prepaid expenses
Deferred tax liabilities
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
10,801
996
11,029
1,271
573
-
682
-
495
148
3,177
6,263
513
205
-
418
318
3,248
6,206
586
253
-
10,801
11,029
526
470
996
823
448
1,271
14
-
-
-
513
-
47
574
-
-
-
35
-
-
-
570
-
77
682
-
-
-
119 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
24. Deferred tax balances continued
2016
Gross deferred tax liabilities
Gross deferred tax assets
Total
2015
Gross deferred tax liabilities
Gross deferred tax assets
Total
2016
Gross deferred tax liabilities
Gross deferred tax assets
Total
2015
Gross deferred tax liabilities
Gross deferred tax assets
Total
Consolidated
Opening
balance
$’000
(1,271)
11,029
9,758
(1,225)
10,194
8,969
Transfers
from
subsidiaries
$’000
Sharehold-
er Equity
$’000
(Charge)/
Credit to
income
$’000
-
-
-
(8)
74
66
-
199
199
-
-
-
275
(427)
(152)
(38)
761
723
Closing
balance
$’000
(996)
10,801
9,805
(1,271)
11,029
9,758
Company
$’000
$’000
$’000
$’000
$’000
-
682
682
-
840
840
-
-
-
-
-
-
-
199
199
-
-
-
-
(308)
(308)
-
(158)
(158)
-
573
573
-
682
682
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 $83.1 million (tax effected $14.8 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
2016
$’000
-
-
2015
$’000
1,711
1,711
2016
$’000
-
-
2015
$’000
1,711
1,711
ClearView agreed to provide funding to Your Insure which was structured as a Convertible Note. Given the structural shift in
the lower socio demographic market and impacts on profitability (adverse lapses), the Board decided to cease funding Your
Insure during FY16. As a result of the above, the investment in Your Insure has been written off. ClearView incurred a total net
of tax cost of $1.9 million for the year ended 30 June 2016.
ClearView Annual Report 2016 120
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
26. Policy liabilities
(a) Reconciliation of movements in policy liabilities
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
Life investment policy liabilities
Opening gross life investment policy liabilities
Net increase in life investment policy liabilities reflected in the
income statement
1,160,627
1,122,364
54,836
109,198
Decrease in life investment policy liabilities due to management fee
reflected in the income statement
(23,139)
(24,207)
Life investment policy contributions recognised in policy liabilities
147,381
188,091
Life investment policy withdrawals recognised in policy liabilities
(187,151)
(234,819)
Closing gross life investment policy liabilities
1,152,554
1,160,627
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
(156,641)
(127,278)
8,185
11,588
(55,374)
(40,951)
(203,830)
(156,641)
948,724
1,003,986
2,233
(12,326)
10,796
3,872
(9,006)
7,367
703
2,233
949,427
1,006,219
1,134,514
1,152,578
(185,087)
(146,359)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 $114.8 million (2015: $74.4 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
121 ClearView Annual Report 2016
Consolidated
2016
$’000
242,510
265,333
2015
$’000
184,563
165,342
(984,868)
(709,743)
(477,025)
(359,838)
273,897
205,430
(203,128)
(154,408)
Company
2015
$’000
2016
$’000
-
-
-
-
-
-
-
-
-
-
-
-
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2016
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
524,610,834
355,970
495,044,922
330,172
2016
2016
2015
No. of Shares
$’000 No. of Shares
Company
2015
$’000
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
Share buy back (inclusive of costs)
Entitlement Offer
Entitlement offer costs (net of tax)
Performance based shares issued in relation to Matrix acquisition
Subscription of shares by O&B Limited
Shares issued during the year (ESP vested)
Balance at the end of the financial year
Executive share plan
Balance at the beginning of the year
Shares granted under employee share plan (note 29)
Shares forfeited during the year
Shares bought back during the year
Shares reallocated during the year
Shares exercised during the year
Executive balance at the end of the year
12,948,536
12,301
13,724,628
10,980
-
(83,572)
(35)
(75)
58,984,051
50,136
-
-
-
(579)
-
-
-
-
-
-
(70)
-
-
-
15,432,742
14,588
308,542
969,751
132
100,000
250
53
597,429,600
417,850 524,610,834
355,973
58,371,348
6,160,179
-
(2,438,648)
(379,601)
(969,751)
60,743,527
- 49,381,666
-
-
-
-
-
9,493,682
(104,000)
-
(300,000)
(100,000)
- 58,371,348
-
-
-
-
-
-
-
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 2016 122
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2016
Continued
28. Borrowings
Bank loan - secured1
Total borrowings
Current
Non-current
Consolidated
Company
2016
$’000
-
-
-
-
2015
$’000
45,500
45,500
-
45,500
2016
$’000
-
-
-
-
2015
$’000
45,500
45,500
-
45,500
1
On the 18 December 2014 the Company entered into a three year $50 million facility agreement with the Commonwealth Bank of Australia. $45.5 million that had been drawn down
under this the facility was fully repaid on 15 June 2016 using existing cash holdings and proceeds from the capital raising which was announced on 30 May 2016. As at the reporting date
the $50 million unused facility remains 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 41 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 2015 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 body corporates. 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 3 month
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.
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 in accordance with the terms of the accompanying
Invitation, or 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
immediately 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.
123 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
29. Share-based payments continued
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).
During 2013, interest was abolished on all ESP loans
for Participants.
Holding Lock
The shares granted under the ESP to participants are subject
to a holding lock restricting the holder from dealing with the
shares, unless otherwise provided under the Invitation. 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 share 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 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:
(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.
ClearView Annual Report 2016 124
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
29. Share-based payments continued
(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.
Administration of the ESP
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.
125 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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
Series 7 1,2,6,8
29/09/2009 KMP and SM
3,500,000
29/09/2009
Series 10 1,3,6,8
25/06/2010 MD
2,000,000
25/06/2010
Series 11 1,4,6,8
25/06/2010 MD
4,000,000
25/06/2010
Series 12 1,5,6,8
25/06/2010 MD
4,000,000
25/06/2010
Series 13 5
25/06/2010 SM
400,000
25/06/2010
Series 14
1/11/2010 SM
3,000,000
25/10/2010
Change in
Control
Change in
Control
Change in
Control
Change in
Control
Change in
Control
Change in
Control
Change in
Control
Series 15 5
Series 16 5
Series 17 5
Series 18
Series 19
Series 20
Series 21
Series 22
Series 23
18/08/2011 SM
3,000,000
1/07/2011
1/07/2016
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
3,950,000
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
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
0.10
0.07
0.11
0.08
0.06
0.10
0.07
0.10
0.10
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
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
ClearView Annual Report 2016 126
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
29. Share-based payments continued
Issue Date
Type of
Arrangement9
Number Grant date Expiry date
Fair value
at grant
date (pre
modifica-
tion1)
$
Fair value
at grant
date (post
modifica-
tion1)
$
Issue price
at grant
date
$
Series
Series 33
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
Series 34
29/11/2013 SM
75,000
29/11/2013
Series 35
31/01/2014 SM
75,000
31/01/2014
Series 36
31/01/2014 SM
75,000
31/01/2014
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
Series 49
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
30/07/2015 CP
3,009,452
30/07/2015
30/07/2020
Series 50a
30/07/2015 SM including KMP
25,773
30/07/2015
30/07/2019
Series 50b
30/07/2015 SM including KMP
25,773
30/07/2015
30/07/2020
Series 50c
30/07/2015 SM including KMP
25,774
30/07/2015
30/07/2021
Series 51a
23/12/2015 SM including KMP
602,032
23/12/2015
23/12/2020
Series 51b
23/12/2015 SM including KMP
602,031
23/12/2015
23/12/2021
Series 52
Series 53
Series 54
27/04/2016 SM including KMP
295,603
27/04/2016
27/04/2021
27/04/2016 CP
1,494,140
27/04/2016
27/04/2021
20/06/216 SM including KMP
79,694
20/06/2016
20/06/2021
0.61
0.61
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
0.97
0.97
0.97
0.97
0.96
0.96
0.93
0.93
0.94
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
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
na
0.17
0.19
0.17
0.20
0.17
0.17
0.19
0.22
0.19
0.17
0.19
0.22
0.22
0.24
0.22
0.25
0.25
0.28
0.19
0.17
0.19
0.22
0.19
0.22
0.20
0.20
0.20
1
2
3
4
5
6
7
8
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 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.
Vesting conditions have been met up to the date of this report.
9
KMP = Key Management Personnel, SM = Senior Management, MD = Managing Director, CP = Contractor Participant
127 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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)
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
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
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
4.00
1.01
1.01
21.56
5.00
1.01
1.01
24.18
6.00
1.00
1.00
20.84
4.00
1.00
1.00
20.84
5.00
ClearView Annual Report 2016 128
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
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)
Series 48
Series 49
Series 50a
Series 50b
Series 50c
1.00
1.00
20.84
6.00
0.97
0.97
20.15
5.00
0.97
0.97
20.15
4.00
0.97
0.97
20.15
5.00
0.97
0.97
20.15
6.00
Series 51a
Series 51b
Series 52
Series 53
Series 54
0.96
0.96
20.03
5.00
0.96
0.96
20.03
6.00
0.93
0.93
20.31
5.00
0.93
0.93
20.31
5.00
0.94
0.94
20.55
5.00
The shares were priced using a binomial option pricing model with volatility based on the historical volatility of the share price.
Balance at the beginning of the financial year
Issued during the financial year
Forfeited during the year
Share bought back during the year
Exercised during the year
Reallocated during the year
2016
Weighted
average
exercise
price
Number of
shares
0.61
49,381,666
0.96
9,493,682
Number of
shares
58,371,348
6,160,179
-
-
(104,000)
(2,438,648)
(969,751)
(379,601)
0.73
0.50
-
(100,000)
-
(300,000)
Balance at the end of the financial year
60,743,527
0.64 58,371,348
2015
Weighted
average
exercise
price
0.56
0.90
0.74
-
0.55
0.55
0.61
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
6,160,179 shares granted were issued during the year of which 379,601 were reallocated from other series existing at the
beginning of the year, 969,751 were exercised and 2,438,648 were bought back and cancelled during the year. The net shares
issued on the ASX were therefore 60,743,527 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
1
Subject to qualifying circumstances as outlined in the ESP Plan Rules.
129 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
29. Share-based payments continued
Series
Vesting conditions 1
Performance
conditions
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
Series 47– 30th March 2015 Issue
5 years from the date of issue and achievement of specific sales target
Series 49– 30th July 2015 Issue
Series 53– 27th April 2016 Issue
5 years from the date of issue and achievement of specific sales
target
5 years from the date of issue and achievement of specific sales
target
No
No
No
No
No
No
No
No
No
No
No
No
Unless otherwise stated in the Invitation Letter to an individual employee participant, the vesting conditions in the ESP rules
stipulate that shares issued in terms of the Plan to employees participants will either automatically vest with a change of
control of the Company (for shares issued prior to 14 February 2013) and for all other shares 12 months after a change in
control. The change of control provisions do not apply to shares issued in terms of the plan to contractor participants.
On 26 September 2012 CCP Bidco Pty Limited and its Associates (CCP Bidco), 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.
The Board is aware that CCP Bidco would entertain selling its shares in ClearView and is likely to entertain future control proposals.
Shares that were cancelled during the year
The following table shows the shares that were cancelled due to cessation of the employment of the participant.
Date
3/06/2016
3/06/2016
3/06/2016
3/06/2016
3/06/2016
3/06/2016
3/06/2016
24/06/2016
Total
Number of shares cancelled
Cancelled from
100,000
246,279
233,970
150,000
1,500,000
150,000
34,000
24,399
2,438,648
Series 7
Series 15
Series 16
Series 26 and 27
Series 31 and 32
Series 33 and 34
Series 38, 39 and 40
Series 38, 39 and 40
1
Subject to qualifying circumstances as outlined in the ESP Plan Rules.
ClearView Annual Report 2016 130
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
29. Share-based payments continued
Shares that were reallocated 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
30/07/2015
20/06/2016
Total
Number of shares reallocated
Reallocated from
Reallocated to
300,000
Series 50 and 55
79,601 Series 38, 39 and 40
Series 49
Series 54
379,601
Shares that were exercised during the year
The following table shows the shares that were exercised due to cessation of the employment of the participant.
Date
3/06/2016
3/06/2016
Total
Number of shares exercised
Exercised from
753,721
216,030
969,751
Series 15
Series 16
30. Shares granted under the executive share plan
In accordance with the provisions of the ESP, as at 30 June 2016, key management, members of the senior management
team, the managing director and contractor participants have acquired 60,743,527 (2015: 58,371,348) ordinary shares.
Shares granted under the ESP carry rights to dividends and voting rights. Financial assistance amounting to $39,618,401
(2015: $36,464,292) 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
2015 final dividend (2015: 2014 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
2016
$’000
Per share
2015
$’000
Per share
2.1
2.1
12,301
12,301
2.0
2.0
10,977
10,977
2016 final dividend (2015: 2015 final dividend)
2.5
16,454
2.1
12,301
Dividend franking account
Amount of franking credit available for use in subsequent
financial years
-
24,286
-
16,065
1
2
The impact on the dividend franking account for the final dividend declared is expected to reduce the franking account by $7.1 million (2015: $5.2 million). There are no other income tax
consequences for dividends not recognised in the statement of financial position.
The total 2016 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 2017 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 2016 of $16.45 million
(2015 : $12.30 million).
131 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
32. Reconciliation of net profit for the year to net cash flows from
operating activities
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
Movement in provision for doubtful debts
Movements in liabilities to non-controlling interest in controlled
unit trust
Decrease/(increase) in receivables
(Increase)/decrease in deferred tax asset
Increase/(decrease) in payables
(Decrease)/increase in policy liabilities
(Decrease)/increase in current tax liability
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
23,615
12,572
13,427
11,858
4,670
(72,818)
287
28
13,802
12,847
1,083
(16)
-
896
27
-
-
-
-
1,083
-
-
-
-
896
-
(17,000)
(13,500)
(26,625)
(23,675)
2,381
14,768
-
27,968
(421)
2,381
-
(620)
-
-
721
(47)
115
(53,446)
(5,189)
(2,119)
(1,971)
(1,906)
(789)
3,077
8,653
(74)
109
423
-
(5,189)
(7,158)
158
(109)
-
(74)
(3,297)
Net cash (utilised)/generated by operating activities
(23,881)
(33,407)
ClearView Annual Report 2016 132
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
33. Subsidiaries
Name of Entity
Parent entity
Principal Activity
Parent
Entity
Country of
incorporation
2016
%
2015
%
Ownership interest
ClearView Wealth Limited (CWL)
Holding Company
-
Australia
Subsidiaries
ClearView Group Holdings Pty Limited (CGHPL)
Holding Company
CWL
ClearView Life Assurance Limited (CLAL)
Life Company
CGHPL
ClearView Financial Management Limited (CFML)
Responsible Entity
CGHPL
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
Dealer Group
Dealer Group
Non operating
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
Australia
Australia
Australia
100
100
100
100
100
100
100
100
96
54
62
93
69
75
59
65
99
90
98
98
81
33
100
100
100
100
100
100
100
100
95
59
68
93
83
81
69
72
98
84
96
97
79
64
CASPL was incorporated to centralise the administrative responsibilities of the group which include salary disbursements and
settling all non-directly attributable overhead expenditure. CASPL 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).
Controlled unit trusts are not members of the tax consolidated group. Members of the ClearView tax consolidated group
include the parent entity and its subsidiaries.
CWL is regulated as a Non-Operating and Holding Company by the Australia Prudential Regulation Authority (APRA) under
the Life Insurance Act 1995, and via its subsidiaries, holds an APRA life insurance licence (CLAL), and APRA registrable
superannuation entity (RSE) licence (CLN), an ASIC funds manager responsible entity (RE) licence (CFML) and operates two ASIC
financial adviser licences (CFA and MPS).
133 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
34. 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 xx to xx 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
2016
$
2015
$
5,128,138
4,924,245
533,940
157,063
255,929
177,215
5,819,141
5,357,389
Balances and transactions 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 2016 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.
ClearView Annual Report 2016 134
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
34. Related party transactions continue
Outstanding balances between the Group and its related parties
h
t
l
a
e
W
w
e
V
r
a
e
l
C
i
d
e
t
i
m
i
L
$
l
a
i
c
n
a
n
i
F
w
e
V
r
a
e
l
C
i
t
n
e
m
e
g
a
n
a
M
e
f
i
L
w
e
V
r
a
e
l
C
i
d
e
t
i
m
i
L
e
c
n
a
r
u
s
s
A
$
e
c
i
v
d
A
l
a
i
c
n
a
n
i
F
i
w
e
V
r
a
e
l
C
d
e
t
i
m
i
L
y
t
P
$
d
e
t
i
m
i
L
$
i
g
n
n
n
a
l
P
x
i
r
t
a
M
d
e
t
i
m
i
L
s
n
o
i
t
u
l
o
S
$
n
o
i
t
a
r
t
s
i
n
m
d
A
i
y
t
P
s
e
c
i
v
r
e
S
i
w
e
V
r
a
e
l
C
e
f
i
L
w
e
V
r
a
e
l
C
i
y
t
P
s
e
e
n
m
o
N
i
d
e
t
i
m
i
L
$
d
e
t
i
m
i
L
$
l
a
t
o
T
$
2016
ClearView Wealth Limited
- (6,616,997)
(12,747)
128,517
(271,757)
(4,847,916)
(153,512) (11,774,412)
ClearView Life Assurance Limited
6,616,997
-
127,116
607,712
(8,657)
4,474,005
- 11,817,173
ClearView Financial Management Limited
12,747
(127,116)
-
(47,953)
-
223,538
(571,495)
(510,279)
ClearView Financial Advice Pty Limited
(128,517)
(607,712)
47,953
-
(25,734)
926,358
84,777
297,125
Matrix Planning Solutions Limited
271,757
8,657
-
25,734
-
313,518
-
619,666
ClearView Administration Services
Pty Limited
4,847,916 (4,474,005)
(223,538)
(926,358)
(313,518)
-
(21,257) (1,110,760)
ClearView Life Nominees Pty Limited
153,512
-
571,495
(84,777)
-
21,257
-
661,487
2015
$
$
$
$
$
$
$
11,774,412 (11,817,173)
510,279
(297,125)
(619,666)
1,110,760
(661,487)
-
$
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 Administration 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
9,752,765 (10,538,318)
258,272
(479,619)
(377,281)
1,936,738
(552,557)
-
(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.
135 ClearView Annual Report 2016
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. 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 the 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).
It was always intended that the funding provided under the Debt Funding Facility would be replaced in due course with one or
more longer term capital solutions as the need for, and quantum of, longer term capital funding emerged. As at 30 June 2015,
the Company had drawn down $45.5 million of the Debt Funding Facility.
In May 2016 the Company announced the launch of a $50 million fully underwritten pro-rata accelerated renounceable
entitlement offer to eligible shareholders. The majority of the proceeds of that capital raising, which was fully subscribed
and settled just prior to the end of the financial year, were used to repay the Debt Funding Facility ($45.5 million), with the
remaining $4.5 million retained as capital for growth.
ClearView is now fully capitalised with Common Equity Tier 1 capital to fund its current business plans and anticipated medium
term growth, with some additional capital flexibility over the medium term.
(d) Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined in accordance with the fair value hierarchy.
ClearView Annual Report 2016 136
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. Financial instruments continued
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).
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
256,093
-
-
424,963
934,170
-
1,190,263
424,963
222,891
-
-
661,977
565,383
-
788,274
661,977
-
-
-
-
-
-
-
-
256,093
424,963
934,170
1,615,226
222,891
661,977
565,383
1,450,251
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
-
-
-
-
1,152,554
1,152,554
1,160,627
1,160,627
-
-
-
-
1,152,554
1,152,554
1,160,627
1,160,627
Financial assets
2016
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
2015
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
Financial Liabilities
2016
Life investment policy liability
Total
2015
Life investment policy liability
Total
137 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. Financial instruments continued
(e) Categories of financial instruments
The Group has investments in the following categories of financial assets and liabilities:
2016
Financial assets
Investment in group companies
Cash and cash equivalents
Fixed interest deposits
Life insurance investment assets
Loans and receivables
Total
Financial liabilities
Policyholder liabilities
Payables
Borrowings
Current tax liabilities
Provisions
Total
Consolidated
Company
2016
$’000
2015
$’000
2016
$’000
2015
$’000
-
-
354,158
318,159
217,673
79,584
200,769
107,035
1,615,226
1,450,251
20,889
-
-
34,447
8,115
-
16,738
15,516
12,496
9,884
1,929,221
1,773,571
387,543
370,605
949,427
1,001,753
35,619
-
-
5,215
24,774
45,500
4,548
5,375
990,261
1,081,950
-
780
-
-
26
806
-
357
45,500
4,548
26
50,431
(f) Financial risk management objectives
(g) Market risk
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.
Market risk is the risk that financial assets will be affected
by changes in interest rates, foreign exchange rates and
equity prices.
Interest rate 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 Group through:
•
•
•
Maintaining the level of interest rate exposure within the
tolerances set by the Board in the RM and CS;
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.
ClearView Annual Report 2016 138
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. Financial instruments continued
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 2016,
ClearView’s shareholder related assets were not invested in
equities and therefore 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 Group 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 monies
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 Group's residual fee
risk exposure.
(h) Credit risk
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 Group'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.
The CIC is charged with maintaining the credit quality of
ClearView assets within the Board’s investment guidelines.
The large majority of debt assets invested in by the Group
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 Group'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 ClearView's outsourced custodian).
The Group 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 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.
139 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. Financial instruments continued
The following table reflects the shareholder financial assets with credit risk exposure monitored by the CIC:
Consolidated
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
169,921
178,007
20,889
39,474
-
-
-
3,088
-
-
169,921
181,095
20,889
-
3,088
42,562
The Group'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.
Under the terms of the Group'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 Group's Approved Product List, which
restricts the external funds available for use by the Group's
advisers and planners to investment platform providers that
are assessed to be reputable and financially sound.
Cash and cash equivalents/fixed interest securities
Rating
AAA to AA-
A+ to A-
BBB+ to BBB-
Credit risk associated with receivables is considered minimal.
The main receivables balance is in relation to receivables from
outstanding premiums receivable, accrued dividends, loans
receivable, prepayments and outstanding settlements. The
concentration of other receivables is spread across the various
debtors with no single significant debtor.
(i) Liquidity risk
Liquidity risk is primarily the risk that the Group 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 Group and/or reputational
damage via association.
The primary risk is controlled through focusing the Group's
assets, as well as policyholder and member assets and the
investment of client funds controlled by ClearView Life, into
assets which are highly marketable and readily convertible
into cash. In addition, the Group maintains suitable cash
holdings at call and an appropriate overdraft facility.
ClearView Annual Report 2016 140
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. 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.
2016
Receivables
Current tax assets
Outstanding life insurance premiums net of
provision
Accrued dividends
Investment income and distribution income
Reinsurance receivable1
Loans
Total
2015
Receivables
Outstanding life insurance premiums net of
provision
Accrued dividends
Investment income and distribution income
Reinsurance receivable1
Loans
Total
2016
Trade receivables
Current tax receivables
Amounts from controlled/associated entities
Total
2015
Trade receivables
Amounts from controlled/associated entities
Total
Consolidated
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
3,088
-
2,558
2,232
888
31,217
601
$’000
$’000
$’000
$’000
19
641
25
-
-
130
336
6
-
3
-
-
-
-
-
-
-
-
-
-
-
-
(1,555)
(15,360)
(15,135)
640
1,781
364
Total
$’000
3,113
641
2,586
2,232
888
(703)
3,722
40,584
1,151
(906)
(13,579)
(14,771)
12,479
4,246
2,229
1,883
886
19,313
668
192
21
-
-
721
262
29,225
1,196
44
3
-
-
268
-
-
-
-
-
-
-
4,750
2,252
1,883
886
(6)
(4,702)
(17,559)
(2,233)
1,259
1,299
1,106
110
3,405
(3,328)
(17,449)
10,943
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
-
6,928
6,942
14
5,118
5,132
17
641
-
658
15
-
15
25
-
-
25
28
-
28
24
-
4,847
4,871
74
4,635
4,709
-
-
-
-
-
-
-
Company
Total
$’000
80
641
11,775
12,496
131
9,753
9,884
1
Reinsurance share of life insurance receivables are reflected in accordance with the likely settlement of the underlying claims to which they relate.
141 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. 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 principal cash flows.
Consolidated
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
2016
Payables
Provisions
Reinsurance payable 1
Total
2015
Payables
Provisions
Reinsurance payable 1
Total
2016
Payables
Provisions
Total
2015
Payables
Provisions
Total
$’000
35
1,791
-
$’000
1,338
585
-
$’000
84
1,793
-
1,826
1,923
1,877
40,763
Total
$’000
27,061
5,215
8,487
$’000
25,542
343
8,487
34,372
18,346
111
5,142
23,599
$’000
62
703
-
765
119
76
-
558
4,014
-
528
813
-
4,743
4,572
1,341
83
361
-
444
19,634
5,375
5,142
34,699
Company
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
776
-
776
357
-
357
$’000
$’000
$’000
$’000
4
26
30
-
26
4,574
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
780
26
806
357
26
4,931
1
Reinsurance payable represents reinsurance premium payable on reinsurance due in respect of life insurance premium.
ClearView Annual Report 2016 142
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. Financial instruments continued
The following table gives information about how the fair values of the 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
2016
$’000
2015
$’000
Fair value
hierarchy
Valuation techniques and key
inputs
Equity Securities
256,093
222,891
Level 1
Fixed Interest Securities
424,963
661,977
Level 2
Unit Trusts
Total
934,170
565,383
Level 1
1,615,226
1,450,251
(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
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
1,272
942
-
2,000
2,000
-
45,500
50,000
4,500
-
-
-
-
-
-
-
-
-
-
The Company entered into a three year $50 million facility agreement with the Commonwealth Bank of Australia. As at the
reporting date, this facility is unused and 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 41 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 2016. There is
an additional $0.25 million credit card facility with National Australia Bank in the name of ClearView Administration Services
Pty Limited.
143 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. 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 and credit spread risks, 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 shareholder's exposure to interest rate risk at the balance sheet date by the earlier of contractual
maturities or re-pricing.
2016
Financial assets
Variable interest rate instruments:
Cash and cash equivalents
Fixed interest securities
Total
2015
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
1.54
2.58
1.74
3.11
90,337
79,584
169,921
71,433
107,035
178,468
1.54
-
1.35
3.40
20,889
-
20,889
34,447
8,115
42,562
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% (2015: 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 2016 144
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
35. 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
2016
$’000
±520
2015
$’000
±343
2016
$’000
±520
2015
$’000
±343
2016
$’000
±73
2015
$’000
±123
2016
$’000
±73
2015
$’000
±123
±0.5% (2015: ±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.
Forward foreign exchange contracts
The Group currently does not make use of forward foreign exchange contracts.
145 ClearView Annual Report 2016
ClearView Wealth Limited
Notes to the Financial Statements
For the year ended 30 June 2016
Continued
36. Disaggregated information by fund
Abbreviated income statement
2016
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
Shareholders
Fund
Statutory
Fund No.1
Statutory
Fund No.2
Statutory
Fund No.4
Total
$’000
$’000
$’000
$’000
$’000
Australian Non-Participating
-
-
-
104
-
104
-
-
-
-
-
-
104
(31)
137,959
(30,095)
-
330
(51)
870
2,821
1,103
-
-
22,268
69,409
138,289
(30,146)
23,138
73,437
-
64
(18,161)
(18,097)
110,685
(44,034)
25,461
55,375
(10,796)
2,316
(450)
235
(1)
-
73,516
-
-
-
-
-
(4,373)
(52,010)
186,621
(44,484)
25,696
55,374
(10,796)
(56,383)
(90,732)
45,959
(13,733)
(434)
(19,919)
(111,085)
(2,707)
3,642
1,587
444
44,943
(9,678)
73
32,226
935
2,031
35,265
ClearView Annual Report 2016 146
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
36. Disaggregated information by fund continued
Abbreviated statement of financial position
Shareholders
Fund
Statutory
Fund No.1
Statutory
Fund No.2
Statutory
Fund No.4
Total
ClearView Life Assurance Limited
Australian Non-Participating
2016
Investments in controlled unit trusts
$’000
2,950
$’000
$’000
$’000
$’000
-
49,267
1,104,494
1,156,711
Policy liabilities ceded under reinsurance
-
(1,184)
114,659
113,475
(204,378)
481
2,997
-
(703)
20,318
141,374
52,745
1,124,812
1,297,382
548
-
(203,830)
-
49,175
1,103,379
1,152,554
18,978
(951)
8,562
26,620
3,400
6,350
-
-
31
31
(185,400)
48,772
1,111,941
6,319
298,875
3,973
12,871
(13,379)
135,449
73
-
(17,000)
(30,306)
36,625
32,226
-
-
167,675
131,200
6,319
298,875
2,839
934
-
-
3,773
200
3,973
9,239
2,032
-
-
11,271
1,600
975,344
322,038
134,148
35,265
-
(17,000)
152,413
169,625
12,871
322,038
Other assets
Total assets
Gross policy liabilities – Life insurance contracts
Gross policy liabilities – Investment insurance
contracts
Other liabilities
Total liabilities
Net assets
Shareholders' retained profits
Opening retained profits
Operating profit
Capital transfer between funds
Dividend paid
Shareholders' retained profits
Shareholders' capital
Total equity
147 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
36. Disaggregated information by fund continued
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
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 2016 148
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
36. Disaggregated information by fund continued
Abbreviated statement of financial position
2015
Investments in controlled entities
ClearView Life Assurance Limited
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 – Life investment contracts
Other liabilities
Total liabilities
Net assets
Shareholders' retained profits
Opening retained profits
Operating profit
Capital transfer between funds
Dividend paid
Shareholders' retained profits
Shareholders' capital
Total equity
149 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
37. 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
Total
38. Leases
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Total
Lease committments relate to:
Consolidated
2016
Consolidated
2015
Type
$’000
%
$’000
%
Debt
Equities
Debt
Equities
Property
Debt
Property
Equities
Equities
Equities
Property
Equities
Equities
Equities
25,422
115,966
332,846
84,315
47,854
232,183
111,422
106,321
13,419
9,012
6,784
6,562
46,936
14,719
95.89
53.77
61.77
93.44
68.80
75.43
59.34
64.60
98.98
89.97
97.68
97.83
80.66
33.04
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
1,153,761
1,162,579
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
Consolidated
2016
$’000
2,591
6,144
-
8,735
2015
$’000
2,367
3,045
18
5,430
Company
2015
$’000
2016
$’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; and
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 2016 150
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
38. 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
2016
$’000
2015
$’000
2016
$’000
Company
2015
$’000
37
233
270
100
333
433
-
-
-
-
-
-
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 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).
The ClearView Board is aware that CCP Bidco Pty Limited and
its Associates (Crescent) would consider selling its shares in
ClearView and is likely to entertain future control proposals.
The Board has been soliciting and will evaluate proposals in
the interests of all shareholders. The Board has appointed
Morgan Stanley Australia Securities Limited (Morgan Stanley)
to assist in evaluating any strategic options and proposals.
Under the terms of the engagement with Morgan Stanley,
there are a range of circumstances and related outcomes
that may result in a success fee being payable to Morgan
Stanley by the Company. Due to the uncertainty of these
circumstances arising no value can be reliably placed on the
existing liability at the date of this report.
Other than the above, the Directors are not aware of any
other contingent liabilities in the Group at the year end.
39. 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 book of business in the coming financial
151 ClearView Annual Report 2016
ClearView Wealth Limited Notes to the Financial Statements
For the year ended 30 June 2016
Continued
40. Capital commitments
The Group has committed to the following capital commitments subsequent to the year end.
Technology projects
Your Insure1
Total
Consolidated
2016
$’000
1,360
-
1,360
2015
$’000
1,645
1,589
3,234
Company
2015
$’000
-
-
-
2016
$’000
-
-
-
1
ClearView Wealth Limited was, subject to the achievement of certain performance conditions required to provide funding to Your Insure up to a maximum limit of $3.3 million on a draw
down basis. At 30 June 2015 $1.6 million was available to be drawn down subject to the achievement of certian performance hurdles. Due to a decision to cease funding of Your Insure
in the current financial year, there are no further committments to Your Insure as at the balance date.
41. 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.
42. Subsequent events
Dividends
On 24 August 2016, the Group proposed a final dividend of $16.45 million representing 2.5 cents per share fully franked. The
record date for determining entitlement to the dividend is 16 September 2016 and the dividend will be paid on 30 September
2016. 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 2016 152
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
Mr Bruce Edwards
Chairman
24 August 2016
153 ClearView Annual Report 2016
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 2016, 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 73 to 153.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for a 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 2016 154
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 2016 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 56 to 70 of the directors’ report for the
year ended 30 June 2016. 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
2016, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Peter A. Caldwell
Partner
Chartered Accountants
Melbourne, 24 August 2016
155 ClearView Annual Report 2016
ClearView Wealth Limited
Shareholders’ Information
As at 11 August 2016
Substantial shareholders
As at the date of this Annual Report, the following entities have notified ClearView that they hold a substantial holding
in shares.
Rank
Name
1
2
CCP Bidco Pty Ltd and Associates
Perpetual Corporate Trust Limited
No. of shares
as per notice
% of issued
capital
348,002,872
63,828,308
52.9%
9.7%
1
Crescent Capital Partners Management Pty Limited represent the interests of CCP Bidco Pty Limited (CCP Bidco) and Perpetual Corporate Trust Limited (Perpetual) as manager. Perpetual’s
9.7% is therefore included in the 52.9% holding of CCP Bidco in the table above.
Twenty largest shareholders (as at 11 August 2016)
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CCP Bidco Pty Ltd
Perpetual Corporate Trust Limited
Citicorp Nominees Limited
CCP Trusco 4 Pty Limited
CCP Bidco Pty Limited
CCP Trusco 5 Pty Limited
CCP Trusco 1 Pty Limited
Portfolio Services Pty Ltd
HSBC Custody Nominees (Australia) Limited
BNP Paribas Noms Pty Ltd
J P Morgan Nominees Australia Limited
Pacific Custodians Pty Limited
Perpetual Corporate Trust Ltd
CCP Trusco 3 Pty Limited
RBC Investor Services Australia Pty Limited
Mr Simon Swanson
UBS Nominees Pty Ltd
CCP Trusco 4 Pty Limited
CCP Trusco 2 Pty Limited
RBC Investor Services Australia Nominees Pty Limited
No. of shares
as per notice
% of issued
capital
125,406,126
19.05
48,631,777
34,755,015
31,657,567
24,541,899
22,440,451
20,671,919
17,945,796
17,418,020
17,150,105
16,699,132
15,432,641
15,196,532
11,812,524
11,153,653
10,000,000
10,000,000
9,892,405
9,843,771
8,320,000
7.39
5.28
4.81
3.73
3.41
3.14
2.73
2.65
2.61
2.54
2.34
2.31
1.79
1.69
1.52
1.52
1.50
1.50
1.26
ClearView Annual Report 2016 156
ClearView Wealth Limited Shareholders’ Information
As at 11 August 2016
Ordinary Share Capital
There are 658,173,127 fully paid ordinary shares held by 1,789 shareholders. All the shares carry one vote per share.
Distribution of shareholders
The distribution of Shareholders as at 11 August 2016 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 $0.96 per unit
Shares under voluntary escrow
There are no shares subject to voluntary escrow as at 30 June 2016.
Total
holders
264
462
290
552
221
Units
79,332
1,342,570
2,158,948
16,334,522
638,257,755
1,789
658,173,127
% of issued
capital
0.01
0.20
0.33
2.48
96.97
100.00
Minimum
parcel size
521
Holders
186
Units
16,616
157 ClearView Annual Report 2016
157 ClearView Annual Report 2016
ClearView Wealth Limited
ClearView Wealth Limited Directory
Current Directors
Bruce Edwards (Chairman)
Andrew Sneddon
David Brown
Gary Burg
Michael Alscher
Michael Lukin
(Alternate to Mr Alscher)
Nathanial Thomson
Simon Swanson
Managing Director
Simon Swanson
Company Secretary
Athol Chiert
Appointed Actuary
Ashutosh Bhalerao
Chief Actuary and
Risk Officer
Greg Martin
Registered Office
and Contact Details
Level 15, 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 4, 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
Auditors
Deloitte Touche Tohmatsu
Stock Listing
ClearView Wealth Limited is listed on
the Australian Securities Exchange (ASX)
under the ASX code “CVW”.
2016 Corporate
Governance Statement
The ClearView Annual Corporate
Governance Statement may be viewed
at www.clearview.com.au/page/
shareholders/corporate-governance
ClearView Wealth Limited
ClearView Annual Report 2016 158
ClearView Wealth Limited
ABN 83 106 248 248
www.clearview.com.au
ASX code CVW
6
1
/
7
0
2
1
5
0
_
M
V
C