Annual Report 2017
ClearView Results FY17 v FY16
%
$30.4m
2
Underlying NPAT 1
$661.9m
%
Embedded Value 8
4 . 9 %
1
Sony Life
October 2016
Life Insurance
Advised sales
$40.3m
including
$28.9m
from IFA channel
16%
34%
APLs
343
$24.9m
UNPAT
2%
2 ClearView Annual Report 2017
ClearView Wealth Limited
Contents
Section
Financial highlights
FY17 Results summary
Chairman’s Letter
Managing Director’s Report
Directors’ Report
Operating and Financial Review
Remuneration Report
Auditor’s Independence Declaration
Financial Report
Directors’ Declaration
Independent Auditor’s Report
Shareholders’ Information
Directory
Page
4
5
6
8
10
16
48
65
66
147
148
153
155
Financial calendar
FY17 Dividend Payment
29 September 2017
Annual General Meeting
10 November 2017
Half Year End
31 December 2017
Half Year Result Announcement
February 2018
Year End
30 June 2018
Annual Report
August 2018
Dates are subject to change.
Wealth Management
$3.9m
UNPAT
44%
$205m Net inflows
17%
$2.5b
FUM
Financial Advice
$2.2m
UNPAT
47%
243
Advisers
$8.9b
FUMA
$237m
Premiums
under advice
ClearView Wealth Limited
ClearView Annual Report 2017 3
2017 Financial highlights
After Tax Profit by Segment, $m
Life Insurance
Wealth Management
Financial Advice
Listed entity and other
Underlying NPAT1
Other adjustments11
NPATA4
Amortisation5
Reported NPAT
Embedded Value2
Value of new business2
Net asset value3
Reported diluted EPS (cps) 7
Underlying diluted EPS (cps)7
DPS (cps)8
FY17
24.9
3.9
2.2
(0.7)
30.4
(9.0)
21.4
(8.2)
13.2
661.9
16.7
415.6
2.11
4.88
2.75
FY16 % Change6
24.5
2.7
1.5
(1.5)
27.2
5.5
32.7
(9.1)
23.6
624.1
19.0
411.8
4.27
4.92
2.50
2%
44%
47%
53%
12%
Large
(36%)
10%
(44%)
8%
(12%)
4%
(51%)
(1%)
10%
Underlying NPAT growth adversely impacted in short term by implementing an enhanced actuarial IP10 claims
reserving basis and lapse experience on IP10 portfolio following price increases to improve long-term profitability
+12%
30.4
2.6
27.2
+21%
33.0
1.1
+25%
34.1
Key decisions to
support long-term
strategy
40
35
30
25
20
15
10
5
0
Actual Underlying
NPAT FY16
Actual Underlying
NPAT FY17
IP10 Claims
Reserving
Basis Change9
Adjusted Underlying
NPAT FY17
(Post Balance
Sheet Strengthening)
IP10 Lapse
Loss
Adjusted Underlying
NPAT FY17
1
2
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 (EV) and Value of New Business (VNB) at 4% discount rate margin. EV includes a value for future franking credits, accrued franking credits and ESP loans; EV %
movement FY16 to FY17 adjusted for the FY16 cash dividend paid of $16.5m in September 2016 less ESP related items (-$6.2m).
Net Asset Value as at 30 June 2017 excluding ESP Loans; % increase adjusted for the FY16 cash dividend paid of $16.5m in September 2016 less ESP related items (-$6.2m).
NPATA is reported net profit after tax adjusted to exclude the non-cash amortisation of acquired intangibles (not including capitalised software).
Amortisation is amortisation of acquired intangibles (not including depreciation and amortisation of software).
Impacted by the effect of 59m shares issued in June 2016 as part of $50m Entitlement Offer.
DPS is dividend per share.
Enhancement in estimate in relation to IP claims in the course of payment pre 30 June 2016.
Income protection policies.
Other adjustments includes costs considered unusual to normal activities (includes $2.4m Direct closure provision) and changes in long term discount rates used to determine the
insurance policy liabilities ($13.7m ‘swing’ between periods).
3
4
5
6 % movement FY16 to FY17, unless otherwise stated.
7
8
9
10
11
4 ClearView Annual Report 2017
ClearView Wealth Limited FY17 Results summary
Growth in distribution footprint building profit base... leveraging Life Insurance IFA channels for Wealth distribution
Active Life APLs with ClearView Products
Active Wealth APLs with ClearView Products
Aligned financial advisers
350
300
250
200
150
100
50
0
343
256
191
119
74
FY13
FY14
FY15
FY16
FY17
35
30
25
20
15
10
5
0
30
9
5
1
1
FY13
FY14
FY15
FY16
FY17
245
210
175
140
105
70
35
0
235
243
89
91
221
82
102
81
21
FY13
117
98
19
FY14
127
138
143
12
FY15
8
FY16
9
FY17
Employed
ClearView Self-Employed
Matrix Self-Employed
Growth and diversity in sales of contemporary product
Life Insurance contemporary new business2
Wealth contemporary product net flows1
Total Life New Business by channel
50
40
30
$m
23.6
20
17.0
40.3
34.6
27.5
350
300
250
200
182
$m
153
353
335
275
10
0
FY13
FY14
FY15
FY16
FY17
150
100
50
0
FY13
FY14
FY15
FY16
FY17
$m
45
40
35
30
25
20
15
10
5
0
42.3
5%
68%
39.2
12%
55%
34.5
20%
42%
27.4
14%
38%
19.4
13%
23%
64%
48%
38%
33%
27%
FY13
FY14
FY15
FY16
FY17
Aligned
IFA
Direct
2.2
2.2
2.2
Growth in the in-force base underpinning Embedded Value growth
Life in-force Premium4
Wealth Management FUM3
Embedded Value ($M)5
$m
200
160
120
80
40
0
189.5
146.1
150.7
105.7
10.9
34.1
10.7
32.7
87.5
45.2
5.6
36.7
62.1
21.0
2.9
38.1
115.7
71.0
9.6
35.1
FY13
FY14
FY15
FY16
FY17
3.0
2.5
2.0
$b
1.5
1.0
0.5
0.0
1.53
0.23
1.30
1.66
0.41
1.25
1.90
0.11
0.61
1.18
0.12
0.06
2.50
0.30
1.08
2.13
0.20
0.80
1.07
1.00
FY13
FY14
FY15
FY16
FY17
700
600
500
400
300
200
100
0
662
104
37
624
92
40
522
492
494
69
36
389
445
57
29
359
365
50
24
291
FY13
FY14
FY15
FY16
FY17
Old Book
Direct
LifeSolutions
Old Book
WealthSolutions
Embedded Value
ESP Loans
Franking Credits
2.2
2.2
WealthFoundations
External Platforms
1
2
3
4
5
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.
LifeSolutions contemporary 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. Includes non-advice sales that were discontinued in FY17.
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.
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, accrued franking credits and ESP loans; % movement FY16 to FY17 adjusted for the FY16 cash
dividend paid of $16.5m in September 2016 less ESP related items ($6.2m).
ClearView Annual Report 2017 5
ClearView Wealth Limited Chairman’s Letter
Bruce Edwards
Chairman
ClearView’s management team and staff executed the
company’s strategic plan with commitment and enthusiasm
in 2017.
The group’s core purpose continues to be building and
protecting the financial futures of customers and their
families by partnering with financial advisers.
In the 2017 financial year, ClearView delivered another
strong profit result and remains on track to achieve its
strategic goals of:
• Targeting 5% of the long-term life insurance profit pool;
• Building a material wealth management business; and
•
Building a high quality financial advice business providing
strategic advice to clients.
Another key focus during the year was fostering closer
relations with Sony Life which acquired a 14.9 per cent
shareholding in ClearView in October 2016.
The welcome emergence of Sony Life as the group’s major
strategic partner followed Crescent Capital’s announcement
that it intended to sell its shares in the company.
During the year, ClearView and Sony Life also entered
a mutually-beneficial Cooperation Agreement which
formalised both parties’ commitment to sharing knowledge
and experiences, and working together to drive efficiencies
and growth.
The Cooperation Agreement, which remains in place
for so long as Sony Life holds at least 10 per cent of the
issued share capital in ClearView, enables ClearView
to benefit from Sony Life’s expertise in a range of
areas including product development, distribution
and marketing, technology and adviser training.
Other key areas of focus include:
•
•
Expanding ClearView’s distribution network in the
IFA channel;
Enhancing the quality of financial advice provided
by aligned advisers; and
• Recruiting high quality, skilful aligned advisers.
As our relationship with Sony Life progresses, it’s increasingly
clear that both organisations share much in common
including a client-first focus and a strong commitment
to delivering quality products and quality advice.
Since its inception in 1979, Sony Life has promoted the value
of advice and life insurance to provide financial security and
stability for customers.
Similarly, ClearView firmly believes that financial advisers
play an important personal, social and economic role.
They transform lives by providing objective advice and
ongoing support to help clients get, and keep, their
financial house in order and achieve their financial goals.
But the environment advisers operate in is increasingly
regulated and rapidly changing.
The advice industry has been subject to numerous
inquiries and ongoing reforms. Life Insurance Framework
legislation will come into effect on 1 January 2018
and tough new professional standards laws begin
on 1 January 2019 starting with new advisers
requiring a degree before being able to advise.
In response, advisory firms are lifting education and training
standards, improving the disclosure and transparency of their
remuneration and becoming more professional.
ClearView is committed to supporting the IFA community and
our aligned advisers on this journey.
Across the group’s two dealer groups, Matrix Planning
Solutions and ClearView Financial Advice, a growing number
of advisers are adopting a holistic fee-based model.
The Financial Advice business is driving the development and
implementation of a strategic advice program, designed to
help advisers diversify and grow their revenue by expanding
the scope of their advice to cover life insurance, budgeting
and cashflow management, superannuation, retirement
planning, estate planning and aged care.
The strategic advice program also supports ClearView’s
agenda to capitalise on synergies arising from the
convergence of life and wealth products.
6 ClearView Annual Report 2017
ClearView Wealth Limited Chairman’s Letter
Continued
Long-term strategy
ClearView’s 2017 financial result reflects the company’s
strong future with growth in sales, adviser relationships, funds
under management and inforce premium, underpinning the
company’s profile and driving embedded value.
The result also demonstrated that ClearView is willing and
able to make difficult decisions to support the company’s
long-term strategy, despite the short-term impact.
Income protection price increases introduced in October
2016 were necessary for the prudent management of margin
over time but led to higher lapses in the short-term. We also
strengthened the reserving basis for income protection claims
in the course of payment. Both decisions adversely impacted
ClearView’s 2017 profit result but position the company
strongly for an exciting future.
During the year, ClearView also closed its Direct Life Insurance
business, after a comprehensive review of the business and
the broader Direct life insurance landscape found the outlook
for the sector had changed considerably.
This move allows the group to focus on building stronger
relationships with the financial adviser network.
Profit, dividends and capital
I’m pleased to report that ClearView’s Underlying Net Profit
After Tax1 increased by 12 per cent to $30.4 million in the
year to 30 June 2017. This represented 4.88 cents per share.
Embedded Value of $662.0 million at 30 June 2017 included
franking credits and Employee Share Plan loans.
The Board has declared a fully franked final dividend of 2.75
cents per share for FY17 with a record date of 13 September
2017 and a payment date of 29 September 2017.
FY17 Dividend
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2.0
2.1
2.75
2.5
FY14
FY15
FY16
FY17
At the end of the 2016 financial year, the group noted that it
did not expect to raise further capital to support its organic
growth plans and that continues to be the case. There are no
plans to raise additional capital in the latest business plan.
Board appointments and Sony Life
In December 2016, Mr Satoshi Wakuya, General Manager,
Head of Business Development Division for Sony Life joined
the ClearView Board alongside experienced financial services
executive Ms Susan Young.
Both Mr Wakuya and Ms Young are experienced Directors who
have quickly taken on their new role and responsibilities.
Complementing the appointment of Mr Wakuya, two Sony
Life executives were seconded to ClearView during the year,
as part of the Cooperation Agreement.
Acknowledgements
On behalf of the Board, I would like to thank our customers,
advisers, strategic partners and shareholders for their ongoing
support. Importantly, I would like to recognise the work of
ClearView’s senior management team and staff.
Personally, I would like to thank the Directors of the group
for their ongoing advice and support.
Bruce Edwards
Chairman
1
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.
ClearView Annual Report 2017 7
ClearView Wealth Limited Managing
Director's Report
Simon Swanson
Managing Director
The 2017 financial year was another significant and
I am proud to say that Matrix and CFA financial advisers
exciting year in the ClearView story with strong sales
are empowered to use their professional judgement and
into the group’s flagship Life Insurance product,
experience to examine their clients’ needs and, where
LifeSolutions, driving significant growth in the in-force
a product is appropriate, recommend the most optimal
book; strong Wealth Management inflows; progress
investment and/or life insurance solutions. Matrix and
in lobbying for customer-focused reforms; and the
CFA financial advisers, like most of the IFAs we partner
establishment of many important relationships.
with, enjoy a broad investment Approved Product List
Over 340 third party financial planning groups can now
(APL) and a completely open life insurance APL.
recommend LifeSolutions to their clients - up from 256 in
Unfortunately, that still isn’t the case for institutionally-
2016, and an increasing number of Independent Financial
aligned financial advisers who are limited to the life insurers
Advisers (IFAs) recommend ClearView’s contemporary wealth
on the APL set by their institutional parent, which too often
platforms and products.
primarily carry related-party products.
Our strategy and acute focus remains on partnering with
ClearView continues to lobby for all financial advisers and
financial advisers and strategic partners to help Australians
their clients to have product choice in life insurance through
protect and grow their wealth, achieve their goals and secure
open APLs.
a comfortable financial future.
As a diversified financial services company, we understand
the personal, social and economic benefits of Australians
having a financial plan tailored to their needs; well-
constructed and appropriately monitored life insurance
protection; and an effective investment management
strategy which is executed according to their financial plan.
We partner with financial advisers to help their clients save,
invest and plan for the future, provide for their families,
make intelligent financial decisions and ultimately retire
with confidence. ClearView offers a range of professionally-
managed investment management solutions and our life
insurance products provide financial protection and peace
of mind against the risk of premature death, critical illness,
disability and accidents.
Our strategy and acute focus remains
on partnering with financial advisers
and strategic partners to help
Australians protect and grow their
wealth, achieve their goals and secure
a comfortable financial future.
Since inception, ClearView has been precluded from the APLs
of institutional licensees that have a ‘pay-to-play’ model and
demand hefty payments for APL inclusion because we refuse
to pay shelf space fees. Open APLs should be mandated to
crack down on these insidious conflicts of interest, foster
competition and significantly improve the culture of vertically-
integrated institutions in order to increase the financial
In 2017, the number of financial advisers across our
services industry’s contribution to all Australians.
aligned dealer groups, Matrix Planning Solutions (Matrix) and
ClearView Financial Advice (CFA), swelled to 243. Matrix was
named the 2017 Licensee of the year by global independent
research house Coredata.
Diversified financial services
ClearView is firmly on track to achieve its strategic goal of
targeting 5 per cent of the long-term life insurance profit pool.
8 ClearView Annual Report 2017
ClearView Wealth Limited LifeSolutions sales rose 16 per cent to $40.3 million in FY17,
Being a relatively young, nimble player, ClearView has been
of which 72 per cent, or $28.9 million, came from the IFA
able to make and implement decisions quickly and capture
channel. IFA support jumped 34 per cent during the period,
timely opportunities that support the company’s long-term
bolstering in-force premium by 26 per cent to $189.5 million.
vision and growth.
The group’s 2017 annual results also show significant
In 2017 examples included the introduction of income
progress in building a material Wealth Management
protection price increases to ensure sustainability of product
business and a high quality Financial Advice business.
profitability; the adoption of an enhanced actuarial claims
Wealth Management Underlying NPAT rose 44 per cent to
$3.9 million in the year to 30 June 2017, driven by strong
reserving basis on the income protection portfolio; and the
closure of the Direct Life Insurance business.
inflows into contemporary products.
The Board concluded that the Direct Life Insurance landscape
In Financial Advice, the development and roll-out of a
strategic advice program is helping the group’s aligned
financial advisers broaden and refine their client value
had changed considerably in the past few years with multiple
factors including increasing client acquisition costs and rising
consumer expectations impacting the sector’s outlook.
proposition, better meet the needs of their clients and
These factors, when combined with society’s increasing
grow their revenue.
Sony Life
expectations of financial services companies and heightened
regulatory scrutiny, meant that the appropriate decision was
to close the Direct Life Insurance business.
Of all the relationships strengthened and forged this year,
none is more significant than the emergence of Sony Life
as a major strategic shareholder.
Our partnership with Sony Life, and the Cooperation
Agreement currently in place, positions ClearView strongly to
continue competing effectively in an increasingly competitive
environment. Our cultural similarities, particularly our shared
focus on financial advisers and their clients, provide a strong
foundation for a mutually-beneficial long-term relationship.
In recent years, heightened M&A activity has seen a number
of international players enter the Australian market and
others are keen to join.
ClearView has the right strategy,
people and processes in place to
continue successfully achieving
profitable, sustainable growth.
While the income protection price increase resulted in
some short-term lapse losses and the move to an enhanced
actuarial claims reserving basis adversely impacted the
group’s reported Underlying NPAT, these decisions have
been made from a position of strength because we want to
be around for the long-term to meet our commitments to
Through our strategic partnership with Sony Life, both parties
our customers, financial advisers, staff and shareholders.
benefit from open sharing and cooperation on a range of
matters including product development, distribution and
Outlook
marketing, technology and innovation.
I’m excited about the opportunities that lie ahead in 2018
In addition to the Sony Life partnership, ClearView has a
and I believe that ClearView has the right strategy, people
competitive advantage as a relative newcomer with no
and processes in place to continue successfully achieving
material legacy issues. LifeSolutions was launched in 2012
profitable, sustainable growth.
and our contemporary wealth products are supported by
modern technology.
ClearView’s strong performance in FY17 reflects the
significant investment made in the group’s three core
The absence of out-dated product lines on old systems allows
business segments in recent years. We continue to reap the
us to focus on providing exceptional products and service to
rewards of our investment and the hard work of ClearView’s
new and existing clients.
That said, ClearView is not immune to some of the challenges
facing the broader industry such as regulatory change,
subdued growth, and deterioration in lapse rates and claims
but our strong relationships with financial advisers and
the embedded value in our widening distribution footprint
continues to underpin our growth profile.
We are confident about the future as we are singularly-
focused on the needs of our customers.
talented management and staff. On behalf of the
management team, I would like to thank ClearView’s
staff for their dedication and great work in 2017.
Simon Swanson
Managing Director
ClearView Annual Report 2017 9
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 2017 (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)
• Andrew Sneddon
• David Brown
• Gary Burg
• Michael Alscher
• Michael Lukin (Alternate to Mr Alscher)
• Nathanial Thomson
• Satoshi Wakuya (appointed 14 December 2016)
• Simon Swanson (Managing Director)
• Susan Young (appointed 14 December 2016)
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 TGR BioSciences Pty Limited and
Elastagen Pty Limited and the former Chairman of Traditional
Therapy Clinics Limited, Fusion Payments Limited and
ServiceRocket Inc. Andrew is the Australian representative
Director of ServiceRocket International Pty 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
served as Chairman of the Board Risk and Compliance
Committee and the Nomination and Remuneration
Committee between 18 May 2016 and 30 June 2017,
and is currently Chairman of the Board Audit Committee.
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 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 Alinta Energy Limited and Global Capital Holdings
10 ClearView Annual Report 2017
ClearView Wealth Limited
Directors’ Report
Continued
(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.
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.
Satoshi Wakuya Bachelor of Liberal Arts
Non-executive Director
Satoshi is the General Manager, Head of Business
Development Division for Sony Life. Satoshi has over 10 years’
experience in the life insurance industry in Japan and has
held a number of senior management positions within Sony
Life’s ultimate parent company, Sony Corporation. Prior to
joining Sony, Satoshi held roles within the Japanese Ministry
of Foreign Affairs and Sumitomo Mitsui Banking Corporation in
which he engaged in Japan’s governmental loan aid and forex
operations that developed his financial business background.
Satoshi was appointed to the Board on 14 December 2016.
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.
ClearView Wealth Limited
ClearView Annual Report 2017 11
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.
Susan Young BA (Hons), MA, FGIA, FCIS, MAICD, JP
Independent Non-executive Director
Susan has over 30 years’ experience in senior executive
roles internationally, with 15 years of experience in
investment banking, followed by senior management roles
in the corporate and professional services sector. She retired
as a Partner of Spencer Stuart, and previously held operational
management roles as both a divisional CFO and Joint Venture
CEO/President for a Lend Lease Group company. Susan
currently serves on the board of the Westmead Institute
for Medical Research and is Governor of WWF Australia.
She has served as a Non-executive Director on ClearView’s
superannuation trustee board over the last 6 years, including
holding the position as its Chairperson over the last 2 years.
Susan was appointed Chair of the Nomination and
Remuneration Committee and Board Risk and Compliance
Committee on 1 July 2017, and is a member of the Board
Audit Committee.
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 20 years experience
in the finance industry including holding directorships on
investee and subsidiary entities. Athol commenced his
professional career as an accountant with Arthur Andersen.
Appointed Actuary of ClearView Life
Assurance Limited
Ashutosh Bhalerao B.Ec, FIAA is the Appointed Actuary
of ClearView Life Assurance Limited (ClearView Life). Ash
joined ClearView as Deputy Appointed Actuary in January
2014 and was appointed to his current role on 5 June 2014.
Ash has 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 is the Chief
Actuary and Risk Officer of ClearView. Greg has over 30
years’ experience specialising in life insurance and funds
management and has held a number of 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 has been a member of various regulatory,
industry and professional committees and Boards, including
past and ongoing membership of committees of the Institute
of Actuaries of Australia and the International Actuarial
Association, and has advised regulators and published a
number of professional and industry papers and articles.
Greg has a wealth of experience in the areas of risk and
capital management, financial management and reporting,
and product pricing and management.
12 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Directorships of other listed companies
Directorships of other listed companies held by Directors in the three years preceding the end of the financial year are
as follows:
Name
Company
Period of Directorship
Andrew Sneddon
Traditional Therapy Clinics Limited
24 February 2015 – 4 August 2016
Gary Burg
UCW Limited
24 March 2016 - current
Innate Immunotherapeutics Limited
19 September 2013 – ongoing
Michael Alscher
Cover-More Group Limited
14 November 2013 – 30 April 2015
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
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 2017, 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
10
10
10
4
4
10
10
10
9
9
9
10
4
4
10
5
5
5
5
-
-
-
2
-
5
5
4
4
-
-
-
2
-
5
5
5
5
-
-
-
2
-
5
5
4
4
-
-
-
2
-
4
4
-
4
-
4
-
2
-
4
4
-
4
-
4
-
2
-
Bruce Edwards
Andrew Sneddon
David Brown
Gary Burg
Michael Alscher1
Nathanial Thomson
Satoshi Wakuya2
Susan Young2
Simon Swanson
1 Michael Lukin is an alternate director to Mr Alscher. Mr Lukin did not attend any meetings on behalf of Mr Alscher in the financial year.
2 Mr Wakuya and Ms Young were appointed as Directors on 14 December 2016.
ClearView Annual Report 2017 13
ClearView Wealth LimitedDirectors’ ReportContinued 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
Andrew Sneddon
Bruce Edwards
David Brown
Gary Burg
Michael Alscher1
Michael Lukin1
Nathanial Thomson1
Satoshi Wakuya2
Susan Young
Simon Swanson
Fully Paid Ordinary Shares
Executive Share Plan Shares
124,621
588,262
-
10,918,090
-
-
-
-
79,217
4,549,021
-
-
-
-
-
-
-
-
-
10,000,000
1 Mr Alscher (alternate Mr Lukin) and Mr Thomson represent the interests of CCP Bidco Pty Limited and its Associates that non-beneficially hold 252,897,269 shares.
2 Mr Wakuya represents the interest of Sony Life Insurance Co., Ltd that hold 98,067,795 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 2017.
Series
Participant
Grant Date
Opening Balance (1 July 2016)
No. of Shares
Issued
No. of Shares
Forfeited/
Exercised
Series 55
Contractor Participant
14-Jun-17
1,300,000
Total (Contractor Participant)
1,300,000
-
-
No. of Shares
Total
60,743,527
1,300,000
1,300,000
Forfeited
Exercised
Closing Balance (30 June 2017)
Exercised
Closing Balance (24 August 2017)
-
-
(3,693,143)
(3,693,143)
(2,143,307)
(2,143,307)
1,300,000
(5,836,450)
56,207,077
(500,000)
(500,000)
(6,336,450)
55,707,077
For details of the ESP see Note 27 of the notes to the financial statements.
As at the date of this report, ClearView has a total of 56,207,077 ESP shares on issue of which 30,577,174 have been issued to
select financial advisers. In addition to being one of the few non-bank aligned participants in the market, the Group has to date
been able to offer such financial advisers the opportunity to participate in the overall performance of ClearView through share
ownership in the Company.
In accordance with the provisions of the ESP, during the financial year 1,300,000 shares were granted to financial advisers
with the grant dates set out above. 2,143,307 vested ESP shares were exercised during the financial year, of which 1,361,987
were transferred to the participants personal holdings and 781,320 of which were sold via an off market transfer to repay
outstanding ESP loans attached to the vested ESP shares with the balance been paid to the participant. 3,693,143 ESP shares
did not vest during the financial year and have been forfeited. These unvested shares were sold via an off market transfer with
the full proceeds of the sale being received by the Company.
Subsequent to 30 June 2017 a further 500,000 contractor participant ESP shares were exercised.
14 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued 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.
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’s independence declaration
and non-audit services
The Directors have received an independence declaration
from the auditors, a copy of which is on page 65.
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.
ClearView Annual Report 2017 15
ClearView Wealth LimitedDirectors’ ReportContinued Directors’ Report
Operating and Financial Review
Business overview
ClearView Wealth Limited is an ASX-listed diversified financial services company which partners with financial advisers
and strategic partners to help Australians protect and grow their wealth, and achieve their financial goals.
ClearView’s current operating structure which comprises of three core business segments: Life Insurance, Wealth Management
and Financial Advice, was established in 2010 but the origins of the company date back to 1976.
Life Insurance
ClearView manufactures products for the Advised Life
Insurance market which refers to life insurance products
placed by financial advisers.
ClearView competes in a subset of Australia’s $15.8bn1 life
(risk) insurance market, namely the $9.5bn1 individual risk
market (excluding group life).
Our product suite is branded LifeSolutions. Policies are issued
by ClearView Life or via the ClearView Retirement Plan
(ClearView’s superannuation fund).
In FY17, ClearView exited the Non-Advice (Direct) market
segment, which represented only a small percentage of sales
and revenue, which will allow us to focus on the Advised Life
Insurance market.
Financial Advice
ClearView operates two Australian Financial Services
Licences ClearView Financial Advice (CFA) and Matrix
Planning Solutions (Matrix).
CFA and Matrix provide licensing services and business
support to 243 financial advisers. They, in turn, provide
quality financial advice to retail clients.
Recently, Matrix was named the 2017 Licensee of the Year
by independent research house CoreData.
In FY17, ClearView began work on a Strategic Advice
program, designed to help practices implement a holistic
advice proposition. This program aims to coach advisers
to better look after their clients’ total financial needs and
meet their ongoing regulatory obligations while diversifying
and increasing their revenue.
Wealth Management
ClearView is a provider of wealth management products in
Australia’s $1.1+ trillion2 retail funds management industry.
Our product suite includes:
WealthSolutions – A comprehensive superannuation and
retirement income investment and administration platform issued
via the ClearView Retirement Plan and an IDPS. The platform’s
investment menu includes a Separately Managed Account option.
WealthFoundations – A simple superannuation and retirement
income investment and administration solution issued by the
ClearView Retirement Plan and underwritten by ClearView Life.
WealthFoundations offers a range of model portfolios.
Managed investments - Actively-managed pooled investment
funds issued by ClearView Financial Management Limited (CFML)
as the ASIC-licenced Responsible Entity. These funds are available
on WealthSolutions and selected external platforms.
1
2
Plan for Life data as at 31 March 2017.
ABS 5655.0 data as at March 2017 (unconsolidated). Retail segment based on management estimates.
16 ClearView Annual Report 2017
ClearView Wealth Limited
Business strategy
ClearView’s growth strategy is focused on:
• Capturing 5% of the long-term life insurance profit pool;
•
Establishing a material wealth management business; and
• Building a high quality financial advice business.
In FY17, ClearView continued to deliver strong growth and the company remains on track to achieve its near and medium-term
strategic goals.
ClearView generates its revenue by manufacturing and distributing life insurance, superannuation and investment products,
and providing licensing and support services to financial advisory practices.
Our purpose
To partner with financial advisers to build
and protect the financial futures of clients and their families.
Strategy
Win market share within profitable niches by delivering innovative products
and exceptional service.
Expanding distribution presence
Expand our
distribution
footprint in
the IFA market
•
•
•
•
Build awareness of ClearView’s brand and capabilities
Demonstrate competitiveness of products and services
Expand existing IFA relationships and increase penetration
of existing APLs1
Develop new IFA relationships and see ClearView products
placed on new APLs1
• Cross sell products
Increase profitability
Target profitable
market segments
with innovative
products
•
•
Capitalise on structural competitive advantage by offering
life insurance through superannuation to leverage convergence
of product offerings
Expand dealer group offering with a focus on strategic advice and
improved adviser business efficiency
Improve efficiency and reach
Enhance
margins
over time
•
•
•
Ensure staff and advisers are highly engaged
Enhance back office to increase automation and drive efficiency
Enhance life insurance front-end to improve customer service and
adviser efficiency
Goals
1
2
3
Target 5% of
the long-term
life insurance
profit pool
Build a
material
wealth
management
business
Build a high
quality financial
advice business
providing
strategic advice
to clients
1
Approved Product Lists.
ClearView Annual Report 2017 17
ClearView Wealth LimitedDirectors’ ReportContinued Sony Life
The Board announced in October 2016 that Sony Life
Insurance Co., Ltd (Sony Life) had acquired a 14.9% stake in
ClearView from major shareholder, Crescent Capital Partners
and its Associates (Crescent).
In January 2017, ClearView and Sony Life entered into
a mutually-beneficial Cooperation Agreement to share
information and increase their coordination to drive
efficiency and growth.
In relation to the Cooperation Agreement, ClearView
is focused on:
•
•
Expanding its distribution footprint in the independent
financial adviser (IFA) market;
Continuously enhancing the quality of advice provided
by the Group’s aligned advisers;
• Recruiting skilled advisers into the dealer group; and
•
Exploring the development and use of relevant
technology, products and services.
To facilitate the sharing of knowledge and explore
opportunities to leverage from each organisation, two Sony
Life employees were seconded to ClearView in February 2017.
The Cooperation Agreement is effective for so long
as Sony Life holds at least 10% of the issued share capital
in ClearView.
In December 2016, Mr Satoshi Wakuya, General Manager,
Head of Business Development Division for Sony Life, was
appointed to the ClearView Board as a Non-executive
Director. Mr Satoshi Wakuya has over 10 years’ experience in
the life insurance industry in Japan and has held a number of
senior management positions with Sony Life’s ultimate parent
company Sony Corporation.
Prudential regulation
ClearView competes in highly regulated markets and is
supervised by the following organisations:
• The Australian Prudential Regulation Authority (APRA); and
•
The Australian Securities and Investments Commission
(ASIC).
Both organisations are independent Commonwealth
Government bodies with extensive regulatory powers.
Regulated Group entities are shown in the diagram below. ClearView is regulated as a Non-Operating Holding Company (NOHC)
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 Australian
Financial Services Licensees (AFSLs).
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
Life insurance regulatory changes
ClearView supports the recently enacted Bill and regulations
in respect to life insurance remuneration arrangements. We
believe that the life insurance reforms will provide greater
certainty and stimulus for the industry in the long-run.
However, there are additional areas that need to be
addressed to ensure good public policy outcomes, including:
1.
2.
All grandfathering relief in respect to adviser remuneration
should cease by 2021 to discourage poor behaviour such
as leaving clients in legacy products to preserve volume
based/lapse rate bonuses.
Financial advisers should have access to all life insurance
products issued by APRA-regulated insurance companies.
This requires all Approved Product Lists (APL) to be
open. Unrestricted APLs will ensure that advisers are
18 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued 3.
4.
5.
not inherently conflicted but instead are able to provide
objective advice in their clients’ best interests. ClearView’s
position is that, given there are only around 11 APRA-
regulated insurers operating in the Advised Life Insurance
market, open APLs must be mandated to protect
consumers and support professional adviser culture
and outcomes.
The industry should work with ASIC to get the Life Code
of Conduct approved in accordance with RG 183 to ensure
that it is meaningful and contractually enforceable by
consumers. This would lead to critical behavioural change
in the financial services industry and go a long way to
improving the industry’s reputation.
Adviser education standards should be raised to ensure
that advisers are appropriately trained and possess the
necessary skills and expertise to provide sound, quality
financial advice. ClearView strongly supports reforms to
enhance the professional, ethical and education standards
of financial advisers.
Group insurance should be offered on an “opt-in” basis
and the current automatic acceptance, “opt-out” model
should be disbanded. Requiring super fund members to
consciously “opt-in” for insurance cover will maximise
the probability of them understanding the level and type
of cover they have, and gaining adequate protection
and value for money. It would lead to a substantial
improvement in the understanding of members regarding
what they are, and are not, covered for. It would also stop
the current cross subsidies within the existing model.
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 processes and the Board continuously
reviews material business risks.
The Board has adopted a formal Risk Management and
Capital Strategy (RMCS) and a structured Risk Management
Framework (RMF) to ensure the early identification of risks
and adequate management of key risks, particularly those
with the potential to impact the Company’s future financial
prospects and strategic imperatives.
The RMCS and RMF are fundamental to business decisions
including resource allocation 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 93.
Competitive strengths
The Australian life insurance industry has recently been in
a state of flux due to stagnant sales, worsening lapses rates,
mounting claims and ongoing regulatory and public scrutiny;
all against a backdrop of merger and acquisition activity.
Intense consolidation over the past 15 years, driven by
the desire of the large incumbents to ‘purchase’ market
share, created the need for new entrants to increase choice
and competition.
The large vertically-integrated institutions chronically
underinvested in their life insurance businesses during
this period.
Many of these businesses are therefore afflicted by legacy
issues such as multiple administration platforms and old
higher-margin in-force portfolios, making it difficult for them
to innovate. This has created opportunities for challengers
like ClearView which are nimble and operate with no material
legacy issues.
ClearView has an integrated business model that positions
it well to be an effective disrupter in the Australian life
insurance and wealth management industry.
The larger institutions are increasingly focused on returning
to core business lines, with an emergence of foreign
institutions looking to invest in the Australian life insurance
industry. This is likely to drive investment back into the life
insurance sector. ClearView remains well-positioned with
its strategic shareholder, Sony Life.
ClearView is also strongly positioned to capitalise on the
current market disruption, particularly around life insurance
reforms. The market is still dominated by institutionally-
owned AFSLs with limited APLs, precluding open competition.
Regulatory pressure on AFSLs to open up risk APLs is
increasing. ClearView continues to lobby for reforms to
increase competition and open risk APLs which would in turn
lead to a stepped change in its distribution profile. Our key
competitive strengths include:
•
•
•
The integrated structure of our business model which
combines life insurance, wealth management and
financial advice;
The strength of our relationships with the IFA community
which have been developed by delivering innovative
solutions and exceptional service; and
No material legacy issues such as pricing, products
and systems.
ClearView Annual Report 2017 19
ClearView Wealth LimitedDirectors’ ReportContinued Operating review
Life Insurance
ClearView has built a strong foundation for ongoing growth
in the Advised Life Insurance market.
Our strategy is focused on expanding our IFA footprint by
delivering superior products, features and service through
strong adviser relationships.
From a standing start in FY12, LifeSolutions has become
a well-regarded and highly competitive product that’s
recognised for its innovative features.
Ongoing refinements and product upgrades have resulted
in consistent top quartile product ratings for LifeSolutions.
Our approach
Recruit quality advisers into our aligned dealer groups
and, based on merit, earn the right for LifeSolutions
to be sold to their clients.
Exit from Direct Life Insurance
In FY17, ClearView closed its Direct operation for a range
of reasons including:
•
•
•
Changes in market’s attitude and appetite for telephone
based non-advice models – no longer economically viable
or socially acceptable due to increasing client acquisition
costs, rising consumer expectations and likely heightened
regulatory scrutiny.
Immaterial contribution to group but with considerable
future investment required to continue business line.
Improves focus on ClearView’s three core segments:
Advised Life Insurance, Wealth Management and
Financial Advice.
Historically, ClearView distributed a suite of life insurance,
accidental death, injury, funeral and trauma products through
its Direct channel. Sales were predominantly made via an
outbound call centre model with leads gathered including
from distribution agreements with strategic partners.
Continue to avoid paying material shelf space fees and
volume bonuses to licensees because the pay-to-play
model doesn’t lead to optimal client outcomes.
Since HY15, Direct sales have progressively reduced
due to a deliberate decision to exit the lower socio
demographic market.
Gain inclusion on new third party APLs while increasing
our share of wallet on existing APLs.
ClearView continues to work with several strategic
partners for personal advice referrals.
Upgrade systems and automate manual back-office
processes as part of a continuous improvement program
to drive operational efficiencies and ensure it’s easy for
advisers to do business with us.
Key findings
•
•
•
The Direct outbound and “lead generation” model
is no longer economically viable or socially acceptable.
A comprehensive strategic review initially led to the
closure of the outbound call centre and ultimately
the full exit from inbound activity.
Direct operations will take a fundamentally different
approach in the future – we have the ability to re-enter
the market at a later time off a “clean” base.
•
•
•
•
20 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Performance
The following graphs illustrate the performance of the Life Insurance business and the growth profile of the business.
Chart 1: Life Insurance segment performance
Active Life APLs with ClearView Products
Life In-Force Premium1
Life New Business2
350
300
250
200
150
100
50
0
343
256
191
119
74
FY13
FY14
FY15
FY16
FY17
$m
200
160
120
80
40
0
189.5
150.7
105.7
146.1
$M
10.9
34.1
10.7
32.7
87.5
45.2
5.6
36.7
62.1
21.0
2.9
38.1
115.7
71.0
9.6
35.1
FY13
FY14
FY15
FY16
FY17
50
40
30
20
10
0
42.3
2.0
40.3
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
FY17
Old Book
Direct
LifeSolutions
LifeSolutions
Direct
Sales diversification
ClearView’s distribution universe consists of two national
aligned dealer groups and a rapidly growing network of IFAs.
The main distribution channel for LifeSolutions has
strategically shifted to the IFA channel as part of a strategy to
rapidly diversify sales and create material embedded growth.
Chart 2: Life Insurance sales by channel Type
$m
45
40
35
30
25
20
15
10
5
0
42.3
5%
68%
39.2
12%
55%
34.5
20%
42%
27.4
14%
38%
19.4
13%
23%
64%
48%
38%
33%
27%
FY13
FY14
FY15
FY16
FY17
Aligned
IFA
Direct
2.2
2.2
Our journey
2.2
• ClearView entered the Advised market in 2012.
•
•
•
•
After being precluded from APLs, ClearView focused
on recruiting advisers to its aligned dealer groups and
working hard to earn the right for LifeSolutions to be
sold by advisers.
The aligned groups (Matrix and CFA) provide a strong sales
base but third party APLs represent an increasing share
of sales, reinforcing the competitiveness of LifeSolutions.
In FY14, the distribution strategy shifted to focus on
expanding third party IFA sales which now account for
72% of LifeSolutions sales.
ClearView is still in the earlier stages of penetrating
the IFA channel but continues to gain access to new APLs
and increase its share of wallet on existing APLs, especially
where LifeSolutions has been on the APL for greater than
12 months.
• Sales growth continues to outperform the market.
•
Significant, future organic growth opportunities will come
from the maturation of relatively new APLs; access to
new APLs; and subject to a successful lobbying outcome,
the potential opening up of APLs that are currently closed
or restricted via regulatory reforms.
1
2
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.
ClearView Annual Report 2017 21
ClearView Wealth LimitedDirectors’ ReportContinued FY18 Priorities
•
•
•
Expanded distribution reach and embedded growth via the third party IFA market.
Invest incrementally in the core life advice market and product portfolio. This includes upgrading the online quote,
application system and investment in the back office to make it easier for financial advisers to do business with us.
Continue lobbying for sensible reforms and good public policy such as unrestricted APLs. If open APLs are mandated and
advisers are able to recommend all APRA-regulated insurers, there will be a stepped change in ClearView’s distribution
universe. ClearView will be able to reach institutionally-aligned advisers.
•
Further enhance ClearView’s reputation and pay all genuine claims as quickly as possible.
The following table outlines ClearView’s life cycle of maturing an APL in the independant adviser market:
Stage 1
Stage 2
Stage 3
Stage 4
Get on third party APL
Educate individual advisers
about ClearView product
Advisers write test policies
Advisers place meaningful
business with ClearView
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 3 - 6 months.
Typically 3 - 6 months.
•
•
•
•
•
•
•
•
•
•
Non-institutionally
aligned AFSL
Unrestricted APL
IT / administration
capabilities
ClearView leverages
relationships with
gate openers to get
on APL
No ability to get on
closed APLs currently
(requires regulatory
change)
On APL
Knowledgeable
BDMs
Marketing support
and material
ClearView BDMs meet
with individual advisers
BDMs promote the
strength of ClearView’s
products, features and
service
•
•
•
•
•
•
BDMs establishing
trust and rapport
with advisers
Advisers write a small
number of policies
to gauge the quality
of underwriting,
administration
and service
During this stage, they
are testing ClearView’s
customer service and
underwriting processes
Strong pipeline of AFSLs in Stage 2 and Stage 3
Ongoing process but
uptick in support around
1-2 years
Successful test
policies written
with ClearView
Advisers discover that
ClearView is a quality
product provider and
begin to write meaningful
business
Share of wallet increases
over time
22 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued
Wealth Management
ClearView’s strategy is to provide first-class, exceptional
investment and administration services. This is consistent
with our approach in Life Insurance.
ClearView is gaining traction in Wealth Management,
although this segment is tracking behind the Life Insurance
business given the company’s initial focus on Life Insurance.
The group only began focusing on its wealth offering in FY15,
having established a foundation in the life insurance market.
While 98% of inflows into ClearView’s contemporary wealth
solutions come from the aligned adviser network, the Group
has commenced work to broaden its Wealth Management
distribution footprint. This includes further investment in
contemporary platforms to improve back office efficiency
and automation.
Performance
The following graphs illustrate the performance of the Wealth
Management business and the growth profile of the business.
Chart 1 – Wealth Management segment performance FY13-FY17
Active Wealth APLs with ClearView Products
Wealth In-Force FUM1
35
30
25
20
15
10
5
0
30
9
5
1
1
FY13
FY14
FY15
FY16
FY17
3.0
2.5
2.0
$b
1.5
1.0
0.5
0.0
1.53
0.23
1.30
1.66
0.41
1.25
1.90
0.11
0.61
1.18
0.12
0.06
2.50
0.30
1.08
2.13
0.20
0.80
1.07
1.00
FY13
FY14
FY15
FY16
FY17
Old Book
WealthSolutions
WealthFoundations
External Platforms
2.2
Wealth Net Flows2
Wealth Underlying NPAT3
$m
250
200
150
100
50
0
-50
212
205
3.8
112
2.4
17.0
-16
23.6
-8
FY13
FY14
FY15
FY16
FY17
2.2
$m
8
6
4
2
0
6.6
2.8
3.8
5.9
2.9
3.0
3.9
2.3
1.6
2.7
1.4
1.3
1.8
0.7
1.1
FY13
FY14
FY15
FY16
FY17
1H
2H
1
2
3
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 Underlying NPAT consists of consolidated net profit after tax adjusted for amortisation (not including capitalised software) and costs considered unusual to the Group’s ordinary
activities.
ClearView Annual Report 2017 23
ClearView Wealth LimitedDirectors’ ReportContinued Products
Our journey
•
•
WealthSolutions – A full-service wrap platform that
enables investors to access all major asset classes
and a wide range of managed funds and direct
equities. The platform provides consolidated tax
and portfolio reporting, empowering advisers to
effectively manage their client’s accounts.
WealthFoundations – Launched in FY15 for mid-level
clients, this platform features 14 professionally-managed
investment strategies. Advisers can choose the strategy,
or combination of strategies, that best meets their
clients’ needs. This product aims to capitalise on the
convergence of life and superannuation by providing
a cross-selling opportunity for life insurance clients.
•
External platforms – From FY16, ClearView
MIS platform funds have been placed on
selected external third party platforms.
In addition to the contemporary product suite,
ClearView operates a Master Trust issued by the
ClearView Retirement Plan and ClearView Life.
This product is not open to new clients.
Our investment management approach
ClearView’s investment team builds and actively
manages a range of model portfolios (including SMAs1),
which are made up of strategically selected independent
asset manager funds.
Key benefits of model portfolios are:
•
•
•
•
Advisers can efficiently meet the investment needs
of their clients by providing well-researched, diversified
multi-manager portfolios that are designed to meet
specific investment objectives, for example, asset
protection or moderate risk;
Top quartile performance, leading to growing acceptance
among advisers;
Flexible, simple fee structure with ClearView earning
a margin on funds under management by negotiating
discounted wholesale asset management fees from
portfolio managers and earning a model portfolio fee; and
Access to specialist wholesale funds managed by
independent fund managers for advisers and their clients.
• Acquisition of wealth-focused dealer group Matrix in FY15.
•
Launch of contemporary WealthFoundations platform
in FY15.
• Ongoing development and refinement of wealth products.
•
•
•
•
Contemporary products including the development
of SMA capabilities to support both aligned and
third-party advisers.
The ability to place inhouse model portfolios on
external platforms.
Growth in the number of third party APLs carrying
ClearView wealth products increasing to 30 by
leveraging the life insurance distribution network.
ClearView is a positive net flow business (material to
its FUM balances). This has been driven by:
•
•
•
The launch of new, client-focused products and the
placement of in-house model portfolios on external
platforms;
Material investment in FY15 to build a compliant and
functional platform coinciding with the launch of
WealthFoundations; and
Stronger inflows and scale benefits for WealthSolutions
with continued support for WealthFoundations, albeit
at a slower pace.
FY18 Priorities
•
•
•
•
•
Leverage off the life insurance distribution network
to establish relationships with IFAs and get on third
party APLs.
Roll out the ClearView platform funds into the external
platform market.
Continue investing in our contemporary platform to round
out the product suite and improve back office efficiency
and automation.
Migrate the Master Trust business onto the contemporary
platform over time to enhance the client experience
(project commenced in 2H FY17).
Capture opportunities from the convergence of life and
wealth by providing and developing products that improve
adviser efficiency and customer experience.
1
Separately Managed Account.
24 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued
Financial Advice
•
•
•
•
•
•
Aligned Network
Primarily self-employed advisers
operating under the CFA and Matrix
licences
At 30 June 2017, 243 advisers (91
Matrix and 152 CFA)
Focused on recruiting professional
advisers with the right cultural fit
but no targets are in place
CFA and Matrix have $8.9 billion
of FUMA1 and $237 million of
Premiums Under Advice (PUA)2
Intention to gradually roll out the
strategic advice program across the
network and support the business
efficiency of adviser practices
Strong compliance focus and
committed to helping advisers to
adapt to regulatory changes and
transition to the ‘new advice world’
The geographical spread of the ClearView financial advisers is outlined in the
diagram below:
Geographical Adviser Composition
26
13
4
44
105
15
36
Our journey
FY18 Priorities
•
•
Recruit quality, professional advisers by continuously
refining and improving the dealer services proposition.
Support existing advisers to grow their businesses,
including the development and rollout of the strategic
advice program.
•
•
•
•
•
•
The aligned advice network was originally focused on
attracting specialist risk advisers.
In FY14 and FY15, that focus shifted to recruiting holistic
advisers who provided advice on both life and wealth.
That focus was the primary driver behind the acquisition
of Matrix Planning Solutions in 2014.
In FY17, ClearView began work on a Strategic Advice
program, designed to help practices develop and
implement a holistic advice proposition that looked
after a client’s total financial needs.
Matrix was named 2017 Licensee of the Year by global
independent research house CoreData.
Strong compliant culture is embedded in the Group’s
aligned network of advisers.
1
2
FUMA includes FUM and funds under advice that are externally managed and administered.
Premiums Under Advice is life insurance in-force premium that are externally managed and administered (Third Party Products) and in-force LifeSolutions premium.
ClearView Annual Report 2017 25
ClearView Wealth LimitedDirectors’ ReportContinued FY17 Results overview
Overview of result
The ClearView Group achieved the following results for the year ended 30 June 2017:
After Tax Profit by Segment, $M
Life Insurance
Wealth Management
Financial Advice
Listed Entity and Other
Underlying NPAT1
Other adjustments9
NPATA4
Amortisation5
Reported NPAT
Embedded Value2
Value of new business2
Net asset value3
Reported diluted EPS (cps)7
Underlying diluted EPS (cps)7
DPS (cps)8
Chart 1: Group performance FY13-FY17
Underlying NPAT1 ($M)
Embedded Value2 ($M)
32.0
24.6
17.2
16.0
0.2
0.8
6.6
8.4
9.8
2.4
-5.0
19.7
3.5
5.9
10.8
(0.5)
FY13
FY14
30.4
2.2
3.9
24.9
27.2
1.5
2.7
24.5
(0.5)
(1.0)
FY16
(0.5)
(0.2)
FY17
20.5
4.4
1.8
15.3
(0.6)
(0.4)
FY15
Life Insurance
Wealth Management
Financial Advice
Listed Entity
Interest expense (After Tax)
FY17
$M
24.9
3.9
2.2
(0.7)
30.4
(9.0)
21.4
(8.2)
13.2
FY16
$M
24.5
2.7
1.5
(1.5)
27.2
5.5
32.7
(9.1)
23.6
661.9
624.1
16.7
19.0
415.6
411.8
2.11
4.88
2.75
4.27
4.92
2.50
%
Change6
2%
44%
47%
53%
12%
Large
(36%)
10%
(44%)
8%
(12%)
4%
(51%)
(1%)
10%
700
600
500
400
300
200
100
0
662
104
37
624
92
40
522
492
494
69
36
389
445
57
29
359
365
50
24
291
FY13
FY14
FY15
FY16
FY17
Embedded Value
ESP Loans
Franking Credits
1
2
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 (EV) and Value of New Business (VNB) at 4% discount rate margin. EV includes a value for future franking credits, accrued franking credits and ESP loans; EV %
movement FY16 to FY17 adjusted for the FY16 cash dividend paid of $16.5m in September 2016 less ESP related items (-$6.2m).
Net Asset Value as at 30 June 2017 excluding ESP Loans; % increase adjusted for the FY16 cash dividend paid of $16.5m in September 2016 less ESP related items (-$6.2m).
NPATA is reported net profit after tax adjusted to exclude the non-cash amortisation of acquired intangibles (not including capitalised software).
Amortisation is amortisation of acquired intangibles (not including depreciation and amortisation of software).
Impacted by the effect of 59m shares issued in June 2016 as part of $50m Entitlement Offer.
DPS is dividend per share.
Other adjustments includes costs considered unusual to normal activities (includes $2.4m Direct closure provision) and changes in long term discount rates used to determine the
insurance policy liabilities ($13.7m ‘swing’ between periods).
3
4
5
6 % movement FY16 to FY17, unless otherwise stated.
7
8
9
26 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Underlying net profit after tax (UNPAT) - $30.4 million
(+12%)
The FY17 result reflects strong fundamentals in the Group’s
underlying operating businesses and the delivery of strong,
profitable and sustainable growth:
•
•
•
Life Insurance remains the key profit driver with further
expansion of the IFA distribution footprint leading to
strong Advised sales and a material increase in the
in-force portfolio which is underpinning the company’s
growth profile.
Wealth Management is a net flow positive business
with growth in earnings now emerging, following the
recently-completed ‘build phase’.
Financial Advice is committed to building a high quality
aligned advice business and helping advisers run more
efficient and profitable practices.
The FY17 result includes the impact of key decisions to
support the longer-term strategy. They are detailed below:
•
The LifeSolutions adverse claims experience
includes the impact of adopting an enhanced
actuarial claims reserving basis (statistical model)
on the income protection (IP) portfolio in FY17(-$2.6
million1). While the IP2 portfolio remains profitable,
this was a key driver in the adverse overall “swing”
in claims experience between FY17 and FY16.
•
•
IP2 price increases (10% on average) were implemented
in October 2016 following market price increases, to
ensure prudent management of margin over time but
has resulted in some short-term elevated lapses on the
IP portfolio (-$1.1 million3). IP price changes improves
the long-term sustainability of product profitability.
Closure of the Direct operation reflects changes in the
market’s attitude and appetite for non-advice models.
A review of the business concluded that the model is no
longer economically viable or socially acceptable due
to increasing client acquisition costs, rising consumer
expectations and likely heightened regulatory scrutiny.
The closure of the Direct business, which made an
immaterial contribution to the overall group, allows
ClearView to sharpen its focus on Advised Life Insurance.
The waterfall chart below reflects the company’s underlying performance.
Chart 2: Adjusted UNPAT - Year ended 30 June 2017
+12%
30.4
2.6
27.2
+21%
33.0
1.1
+25%
34.1
Key decisions to
support long-term
strategy
40
35
30
25
20
15
10
5
0
Actual Underlying
NPAT FY16
Actual Underlying
NPAT FY17
IP2 Claims
Reserving
Basis Change1
Adjusted Underlying
NPAT FY17
(Post Balance
Sheet Strengthening)
IP2 Lapse
Loss3
Adjusted Underlying
NPAT FY17
1
2
3
Enhancement in estimate in relation to IP claims in the course of payment pre 30 June 2016.
Income protection policies.
FY17 income protection portfolio lapse loss.
ClearView Annual Report 2017 27
ClearView Wealth LimitedDirectors’ ReportContinued UNPAT is the Board’s main measure of Group profitability
and a key factor in dividend payment decisions.
In FY17, UNPAT increased 12% to $30.4 million (FY16: $27.2
million). Adjusted UNPAT ($34.1m, +25%) removes the
impact of the adoption of an enhanced actuarial IP claims
reserving basis and lapse losses on the IP portfolio.
Results highlights include:
•
•
•
•
Life Insurance UNPAT up 2% to $24.9 million (FY16:
$24.5 million) compared to expected growth of 24%2.
Lower-than-expected growth attributable to adverse
impact on FY17 UNPAT from prudent decisions made
by the Board to support the Group’s long term strategy
(including the adoption of an enhanced IP claims
reserving basis and IP price increases). A long term
pricing strategy was implemented in 1H FY17 (10% price
increases) to manage margin but has caused some short
term elevated lapses. The expected growth of 24% would
have been broadly in line with FY17 inforce portfolio
growth. Importantly, the underlying performance of the
Life Insurance segment remains strong with in-force book
growth of 26% and sales of the flagship LifeSolutions
product up 16%. The IFA distribution footprint continues
to expand, diversifying sales and creating material
embedded growth.
Wealth Management UNPAT up 44% to $3.9 million
(FY16: $2.7 million). Growth in earnings is emerging
following material investment in the contemporary
wealth platform and products in FY15. The contemporary
products continue to build to scale with FUM increasing
17% and net flows of $353 million (+5%).
Financial Advice UNPAT up 47% to $2.2 million (FY16:
$1.5 million). Changes to the revenue model and
disciplined expense control drove the increase in UNPAT,
notwithstanding the acquisition of a practice, increased
compliance (and related) costs and investment in the
development and roll out of the strategic advice program.
Listed UNPAT incurred a loss of $0.7 million (FY16: -$1.5
million). A decrease in investment earnings was broadly
offset by a related reduction in after-tax interest expenses
given the repayment of $45.5 million of corporate debt
in 2H FY16. The proceeds of a $50 million capital raising
in June 2016 was used to repay the debt. The improved
performance was driven by a reduction in listed entity
costs and an R&D development tax rebate in relation to
FY16 (+$0.3 million).
Other adjustments and amortisation
The additional items below impacted the statutory net profit
after tax. Reconciling items are outlined in the following table.
Reconciling Items ($M)
(Net of Tax)
Amortisation of intangibles
Policy liability discount rate
effect
Costs Associated with Sony
Life becoming strategic
shareholders
FY17
(8.2)
(5.9)
%
Change1
10%
FY16
(9.1)
7.8
Large
(0.7)
(0.4)
Large
Your Insure impairment
Direct closure provision
Total
-
(1.9)
(2.4)
-
Large
Large
(17.2)
(3.6)
Large
•
•
Amortisation of intangibles ($8.2 million) is associated
with the acquisition of the wealth management and life
insurance businesses from Bupa, the ComCorp financial
advice business and Matrix Planning Solutions. 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 UNPAT.
The policy liability discount rate effect is the result
of changes in the long-term discount rates used to
determine 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
increase in long-term discount rates over FY17 caused
an adverse after-tax impact of -$5.9 million (FY16:
decrease in long-term discount rates +$7.8 million).
•
Costs that are considered unusual to ClearView’s ordinary
activities, and therefore not reflected as part of UNPAT,
related to:
•
Expenses incurred on the evaluation of strategic
options and Sony Life becoming a new strategic
shareholder ($0.7 million after tax). Ongoing costs
associated with the Cooperation Agreement between
ClearView and Sony Life will continue to be considered
unusual to ordinary activities in FY18.
1 % change represents the movement from FY16 to FY17.
2
3
Expected Underlying NPAT of $29.3m (+24% FY16 to FY17) reflects expected profit margins on in-force portfolios based on actuarial assumptions.
In respect of pre 30 June 2016 IP claims.
28 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued
•
•
The closure of ClearView’s Direct operation
($2.4 million after tax).
FY16 costs related to the write-off of ClearView’s
investment in Your Insure, which incurred a net
of tax cost of $1.9 million.
Reported NPAT and Earnings per share (EPS)
Reported NPAT decreased 44% to $13.2 million (FY16: $23.6
million) and reported diluted EPS decreased 51% to 2.11
cps (FY16: 4.27 cps). EPS calculations have been negatively
impacted by an adverse swing of $13.7 million (after-tax)
from the impact of changes in the long-term discount rates
on policy liabilities between periods coupled with the FY17
impact of the shares issued in the $50 million capital raising
in June 2016.
Fully diluted Underlying EPS was broadly in line with the prior
period at 4.88 cps (FY16: 4.92 cps). This was driven by an
increase in UNPAT of $3.2 million offset by the impact from
the shares issued under the capital raising (as noted above).
Operating expenses overview
Chart 3: Operating expense analysis FY16 vs FY17 Cost Base
3.0
1.3
0.1
0.7
0.7
78.1
75.5
1.0
2.1
$m
85
80
75
70
65
60
Fu nctional costs
Direct Life
H Y16 M anage m ent Restructure
FY16 Cost Base
Distribution
Financial A dvice Support Costs
Projects & Softw are A m ortisation
Shared Services/Listed
FY17 Cost Base
The waterfall chart above shows a 3% increase in the
operating cost base from $75.5 million in FY16 to $78.1
million in FY17. Key components of the movement included:
•
•
Management restructure HY16 – Restructure costs
incurred in HY16 relating to management changes in
October 2015. Related savings flowing from 2H FY16.
Functional costs – Increased costs in functional areas
to support business growth including administration, call
centre, claims and underwriting. This reflects underlying
volume growth in both new business and the in-force
base. Functional costs also include the incremental
growth in IT support given the increasing number
of software applications including costs associated
with the automation of Life Insurance correspondence,
new general ledger platform and the data warehouse.
•
Exit of Direct Life Insurance – Lower fixed cost base
given strategic decision to reduce exposure to the Direct
business. Annualised costs savings of approximately $4
million are expected from the closure of the business.
ClearView Annual Report 2017 29
ClearView Wealth LimitedDirectors’ ReportContinued
•
•
•
Distribution costs – Increased business development
costs reflecting a larger Life Insurance distribution
presence to support the broader IFA footprint.
Investment in Wealth Management’s ‘front-end’
to support business growth following the launch
of contemporary platform and products remained
broadly consistent between periods.
Financial Advice support costs – Increased dealer
services costs associated with the acquisition of an
advisory practice under contractual arrangements,
investment in the development and roll out of a strategic
advice program and ongoing compliance, partially offset
by the benefit of transitioning employed planners to a
self-employed model.
Project costs and software amortisation – An upgrade
of the general ledger to a cloud-based solution resulted
in additional costs in FY17. Software amortisation
costs also increased as projects passed go-live dates,
in particular the correspondence and data warehouse
projects. A project to migrate the Master Trust onto the
contemporary wealth platform commenced in 2H FY17
with cost benefits and efficiencies expected to flow from
late FY18. Provision for the wealth migration of $1.1
million remains on balance sheet at 30 June 2017
and is expected to be progressively utilised in FY18.
•
Shared services / Listed entity – Increased shared
services and business support costs should reduce on
a per customer basis as the business grows and achieves
further scale. Listed entity costs have reduced given
changes in Board size and composition plus a reduction
in investor relations costs in FY17.
Expense over-runs
ClearView has consistently invested in operations
ahead of revenue to support growth including prioritising
incremental costs above those required for ClearView’s
current scale (expense overruns) to build capability for the
future. This includes initial start-up costs and business
investment costs that are being incurred prior to achieving
scale. As ClearView continues to grow, the remaining expense
overruns are likely to be absorbed.
Expense overruns initially depress reported profits but
begin to unwind as scale is achieved and underlying profit
is realised as the in-force portfolio increases. In FY17, the
non-deferred expense overruns across the Life Insurance
and Wealth Management ‘manufacturing’ businesses had
a negative impact on UNPAT of $3.1 million (FY16: $5.2
million). The movements between segments are shown in
the corresponding graph which indicates that cost overruns
continue to be absorbed.
Chart 4: Non-deferred expense over-runs FY16 – FY17
10
8
6
4.5
$m
4
2
0
-2
1.2
0.4
9.1
4.6
2.7
4.0
2.7
5.2
3.1
Life Insurance
Wealth Management
Total
FY15
FY16
FY17
30 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Given the current size of ClearView’s in-force business,
these overruns are predominantly driven by:
•
•
Significant investment in LifeSolutions. These overruns
have progressively reduced ($0.4 million in FY17 versus
$4.5 million in FY15) as LifeSolutions continues to grow
and achieves scale.
Investment in WealthFoundations and the contemporary
wealth platform in FY15. WealthSolutions continues
to build scale (FUM +34%) with WealthFoundations
now contributing to growth and development costs
(FUM +50%). Expense overruns decreased in FY17
due to increased FUM balances and a reduction in the
Wealth Management operating cost base (-9%). A key
driver of the overrun is that the expense allowances
for the Master Trust are higher than contemporary
products, in particular WealthSolutions where IT and
administration is outsourced. As the Master Trust
business runs off, albeit at a slower rate than anticipated,
this has an adverse impact on the expense overruns
until WealthFoundations achieves scale to support the
cost base. Costs associated with the contemporary
platform will be shared with the Master Trust once
the migration project is completed. Expense overruns
should therefore improve further as WealthFoundations
FUM builds and the migration project is completed.
The elimination of expense overruns along with achieving
the business’ growth ambitions remains a key focus of
management and the Board.
Operating expense reconciliation
The table below reconciles the operating expenses analysed in Chart 3 (page 29) with reported operating expenses in the
annual financial statements.
Reconciliation of operating expenses
Operating expenses per waterfall chart
Custody and investment management expenses
Depreciation and software amortisation
Reinsurance technology costs
Stamp duty
Medical costs
Interest expense
Loss on disposal of assets
Costs associated with Sony Life becoming a strategic shareholder
Direct closure provision / Your Insure impairment
Recoverable Financial Advice compliance costs
Other expenses on consolidation of unit trusts
Operating expenses per financial statements
FY17
$m
78.1
8.1
FY16
$m
75.5
6.8
(5.3)
(4.7)
1.2
6.7
1.7
0.3
-
1.0
3.4
0.8
1.6
0.7
4.8
1.3
1.5
(0.3)
0.5
2.7
-
0.6
97.6
89.4
ClearView Annual Report 2017 31
ClearView Wealth LimitedDirectors’ ReportContinued Segment analysis - Life Insurance
Life Insurance UNPAT increased 2% to $24.9 million (FY16: $24.5 million), compared to expected
growth of 24%3. Lower-than-expected growth attributable to adverse impact on FY17 UNPAT from
prudent decisions made by the Board to support the Group’s long term strategy (including the adoption
of an enhanced IP claims reserving basis and IP price increases).
2016
2017
%
12 Months to June 2017 ($m)1
Gross life insurance premiums
Interest income
Net claims incurred
Reinsurance premium expense
Commission and other variable expenses
Operating expenses
Movement in policy liabilities
Underlying NPBT
Income tax (expense) / benefit
Underlying NPAT
Amortisation of intangibles
Policy liability discount rate effect (after tax)
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
2H
FY16
73.4
138.3
1.4
2.8
(11.3)
(16.8)
(24.0)
(22.0)
16.9
17.6
(5.2)
12.4
(1.4)
7.1
(18.8)
(30.8)
(45.9)
(44.2)
33.5
34.9
(10.4)
24.5
(2.8)
7.8
29.5
1H
84.4
1.2
(11.8)
(20.3)
(27.8)
(24.2)
16.7
18.2
(5.5)
12.7
(1.4)
(6.9)
2H
FY17 Change2
93.3
177.7
28%
1.1
2.3
(18%)
(13.2)
(24.0)
(29.9)
(23.7)
13.8
17.4
(5.2)
12.2
(1.4)
(25.0)
(44.3)
(57.7)
(47.9)
30.5
35.6
(10.7)
24.9
(2.8)
33%
44%
26%
8%
(9%)
2%
2%
2%
0%
1.0
(5.9)
(177%)
4.4
11.9
16.2
(45%)
Reported NPAT
11.4
18.1
Analysis of Profit ($m)
Expected Underlying NPAT3
Claims experience
Lapse experience
Expense experience
Other
Underlying NPAT
Key Statistics And Ratios ($m)
New business
LifeSolutions
Non-Advice
In-force premium
LifeSolutions
Non-advice (closed to new business)
Cost to income ratio
2016
2017
%
1H
11.4
1.7
(0.2)
(0.9)
0.1
2H
FY16
1H
2H
FY17 Change2
12.3
(0.7)
0.7
(0.2)
0.3
23.7
14.2
15.1
29.3
24%
1.1
0.5
(1.2)
0.4
(0.6)
(0.7)
(0.3)
0.1
(1.3)
(1.3)
(0.1)
(0.2)
(1.9)
(278%)
(2.0)
(505%)
(0.4)
(63%)
(0.1)
(128%)
12.1
12.4
24.5
12.7
12.2
24.9
2%
2016
1H
18.2
15.7
2.5
2H
FY16
21.0
19.0
2.0
39.2
34.7
4.5
1H
22.1
20.6
1.5
2017
%
2H
FY17 Change2
20.2
19.7
0.5
42.3
40.3
8%
16%
2.0
(56%)
132.0
150.7
150.7
171.0
189.5
189.5
86.7
45.3
105.7
105.7
126.1
146.1
146.1
45.0
45.0
44.9
43.4
43.4
26%
38%
(3%)
34.2% 30.0% 32.0% 28.7% 25.4% 27.0%
1
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.
2 % change represents the movement from FY16 to FY17.
3
Expected Underlying NPAT of $29.3m (+24% FY16 to FY17) reflects expected profit margins on in-force portfolios based on actuarial assumptions.
32 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Key performance indicators
Major components of the movement in in-force premium from $150.7 million (at 30 June 2016) to $189.5 million in FY17
are illustrated in the waterfall chart below.
Chart 1: Life Insurance in-force movement ($m)
220
195
42.3
(22.6)
189.5
$m
170
15.9
3.2
150.7
145
120
O pening
CPI / A ge
IP Pricing Increase
N e w Business
Lapses
Closing
•
•
Non-advice in-force book (closed to new business)
is $10.7 million (-2%). The old Direct book had (business
written pre-2011) in-force premium of $32.7 million (-4%)
as at 30 June 2017.
Non-advice sales dropped 56% in FY17, reflecting the
intentional decision to exit the lower socio-demographic
markets and subsequently to close the Direct business
to new business.
Notable points
•
•
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. IP price increases were
implemented and increased the in-force book by $3.2
million for those policies that subsequently renewed.
The product mix making up the in-force book has changed
significantly with LifeSolutions’ in-force premium now
$146.1 million as at 30 June 2017 (+38%), representing
77% of the total life insurance in-force book (links to the
margin shifts across the overall portfolio).
• LifeSolutions sales growth reflecting:
•
•
•
Continued market outperformance with new business
premium up 16% to $40.3 million;
Focus on expanding IFA distribution network and
embedded growth with LifeSolutions now available
on 343 APLs, up 34%; and
Strong growth and market outperformance in Advised
market with 72% of LifeSolutions sales generated from
IFA channel (IFA sales +34%).
ClearView Annual Report 2017 33
ClearView Wealth LimitedDirectors’ ReportContinued
Results review
The following graphs reflect the planned profit margins inherent in the in-force portfolio and actual results achieved.
Expected Life Insurance Underlying NPAT1 ($m)
Life Insurance Underlying NPAT2 ($m)
30
25
20
15
10
5
0
29.3
15.1
14.2
23.7
12.3
11.4
19.2
9.9
9.3
15.1
8.3
6.8
30
25
20
15
10
5
0
24.5
24.9
12.4
12.2
12.1
12.7
15.3
8.0
8.0
7.3
7.3
10.8
6.1
4.7
FY14
FY15
FY16
FY17
FY14
FY15
FY16
FY17
1H
2H
1H
2H
Claims Experience ($m)
Lapse Experience ($m)
Expense Experience ($m)3
1.5
0.5
1.1
1.0
1.5
0.5
0.1
0.5
-0.5
-1.5
-2.5
0.1
-0.5
(0.9)
(1.9)
(2.0)
FY14
FY15
FY16
FY17
-1.5
-2.5
FY14
FY15
FY16
FY17
2.5
1.5
0.5
-0.5
-1.5
-2.5
-3.5
-4.5
-5.5
(0.4)
(1.2)
(4.5)
(4.5)
FY14
FY15
FY16
FY17
Claims experience
Average claims experience
Lapse experience
Average lapse experience
Expense experience
Notable points
•
Expected UNPAT of $29.3m in FY17 is up 24%1 reflecting:
•
•
Expected profit margins on the in-force portfolios
based on actuarial assumptions; and
Strong growth in the in-force portfolios (+26%)
partially offset by the run-off of the higher margin
old book.
Actual Life Insurance UNPAT up 2% to $24.9 million
compared to expected growth of 24%. Lower-than-
expected growth attributable to adverse impact on FY17
UNPAT from prudent decisions made by the Board to
support the Group’s long term strategy (including the
adoption of an enhanced IP claims reserving basis and IP
price increases). The expected growth of 24% would have
been broadly in line with FY17 inforce portfolio growth.
This is discussed in further detail below.
•
The underlying performance of the Life Insurance
segment remains very strong with in-force book growth
of 26% and LifeSolutions sales up 16%. This is largely
due to the expanding IFA4 distribution footprint resulting
in an increasingly diversified sales profile and material
embedded growth.
Expected Underlying NPAT of $29.3m (+24% FY16 to FY17) reflects expected profit margins on in-force portfolios based on actuarial assumptions.
Life Insurance 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.
Non deferred expenses.
IFAs are independent financial advisers that write ClearView products that are placed on third party dealer group approved product lists.
•
1
2
3
4
34 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued
•
Adverse claims experience relative to the claims
assumptions in the Life Insurance policy liability
(determined at 30 June 2016) resulted in an experience
loss of $1.9 million (after tax) relative to planned margins
($1.1 million profit in FY16). Consequently, there was an
adverse swing of $3 million between periods.
•
•
•
•
The adverse experience on the LifeSolutions portfolio
(-$2.1 million) was partially offset by the positive net
experience on the Direct portfolios which are closed
to new business (+$0.2 million).
LifeSolutions’ adverse claims experience was
driven mainly by the IP portfolio (-$3.7 million) with
lump sum reflecting a claims profit ($1.5 million).
A material component of the IP claims loss arose
from the adoption of an enhanced actuarial claims
reserving basis which had an adverse impact (-$2.6
million1) in FY17. Notwithstanding this, the IP
portfolio remains profitable.
Actuarial claims assumptions have been updated
to better reflect expected claims costs. As a result,
the projected cost of IP claims has increased (post
the reserving base changes) which is offset by a
decrease in the projected cost of lump sum claims.
Claims assumptions therefore had an overall net
immaterial impact on the LifeSolutions portfolio.
Given the current size of the Life Insurance portfolio
and the reinsurance arrangements in place, which
vary by product, some statistical claims volatility can
be expected period-to-period. The claims experience
is expected to average out over time based on
actuarial best-estimate assumptions. The graph
on the previous page outlines the overall net claims
performance which broadly has nil impact over
a four-year period (+$0.1 million).
•
Lapse experience loss relative to assumptions in the Life
Insurance policy liability (determined at 30 June 2016)
with an experience loss of $2.0 million in FY17 against
planned margins ($0.5 million profit in FY16), reflect an
adverse swing of $2.5 million between periods. Notable
points include:
•
LifeSolutions portfolio had an overall adverse lapse
experience loss relative to assumptions in FY17
(-$1.6 million);
•
•
•
IP price increases implemented to help
manage margin over time but resulted in
some short-term elevated lapses (-$1.1
million). IP price increases are designed to
improve the long-term product profitability;
LifeSolutions lapse actuarial assumptions
were reshaped to better reflect actual and
expected experience. This has an overall net
immaterial impact on the future projected
profitability or the Embedded Value; and
Old Direct book (business written pre-2011)
recorded a neutral lapse experience in FY17 while
the Non-advice portfolio experienced lapse losses
(-$0.4 million) albeit a significant improvement on
FY16. Both portfolios are closed to new business.
•
•
•
•
Although expense overruns initially depress reported
profits, they should eliminate as scale is achieved
thereby increasing underlying profit on the growing
in-force portfolio.
•
Non-deferred expense experience loss decreased
from $1.2 million in FY16 to $0.4 million in FY17,
demonstrating that expense overruns are being
absorbed as scale is achieved.
Investment earnings were impacted by falling
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 related
capital requirements).
The increased reinsurance expense is aligned to the
growth in in-force portfolios given the upfront reinsurance
support provided in year one of a policy by the reinsurer.
Growth in Life Insurance initial commission in FY17 was
driven by the upfront variable commission cost related
to higher new business volumes. These acquisition costs
are deferred and amortised within the policy liability
over the expected life of the policies, in accordance
with accounting standards. From 1 January 2018, life
insurance reforms will be implemented with caps on
upfront commission.
•
An increased variable expenses related to stamp duty
and medical policy acquisition costs driven by increased
new business volumes.
1
Enhancement in estimate in relation to IP claims in the course of payment pre 30 June 2016.
ClearView Annual Report 2017 35
ClearView Wealth LimitedDirectors’ ReportContinued
Segment analysis - Wealth Management
Wealth Management UNPAT up 46% to $3.9 million (FY16: $2.7 million). Earnings growth is now emerging
following recently-completed ‘build’ phase. Positive net flow business with $353 million flowing into
contemporary products.
12 Months to June 2017 ($m)1
Fund management fees
Interest income
Variable expense3
Funds management expenses
Operating expenses
Underlying NPBT
Income tax (expense)/benefit
Underlying NPAT
Amortisation of intangibles
Reported NPAT
2016
2017
%
1H
15.7
0.2
(3.4)
(3.5)
(7.7)
1.3
0.0
1.3
(2.6)
(1.3)
2H
FY16
15.4
0.2
(3.3)
(3.4)
(7.5)
1.3
0.1
1.4
(2.7)
(1.3)
31.1
0.4
(6.7)
(6.9)
(15.2)
2.6
0.1
2.7
(5.3)
(2.6)
1H
16.3
0.2
(3.3)
(4.1)
(7.0)
2.1
(0.4)
1.6
(2.6)
(0.9)
2H
16.5
0.2
(3.2)
(4.0)
(6.8)
2.6
(0.3)
2.3
(1.8)
0.5
FY17 Change2
32.8
6%
0.3
(12%)
(6.5)
(8.1)
(13.8)
4.6
(2%)
18%
(9%)
78%
(0.7)
(768%)
3.9
46%
(4.4)
(0.5)
(17%)
(82%)
Key Statistics And Ratios ($m)
1H
2H
FY16
1H
2H
FY17 Change2
2016
2017
%
Net Flows
Master Trust
WealthSolutions
WealthFoundations
External Platforms
Total FUM ($b)
Master Trust
WealthSolutions
WealthFoundations
External Platforms
Cost to Income Ratio
101.2
111.1
212.3
59.5
145.4
204.9
(58.1)
(64.5)
(122.6)
(81.5)
(66.3)
(147.8)
112.7
46.6
-
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
92.4
54.5
2.13
1.07
0.80
0.20
0.06
86.6
42.1
12.3
2.28
1.03
0.93
0.25
0.07
112.5
199.1
45.7
53.5
2.50
1.00
1.08
0.30
0.12
87.8
65.8
2.50
1.00
1.08
0.30
0.12
49.0% 48.7% 49.0% 42.9% 41.4% 42.1%
(3%)
21%
6%
(5%)
21%
17%
(7%)
34%
50%
117%
1
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.
2 % change represents the movement from FY16 to FY17.
3
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.
36 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Key performance indicators
Chart 1: Wealth Management in-force FUM movement FY16 – FY17
0.20
0.09
2.13
0.15
0.20
2.50
0.07
0.04
0.01
3.0
2.5
2.0
1.5
1.0
0.5
O pening FU M 1 Jul 2016
W ealth Solutions N etflo w
W ealth Fou 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
Others
Closing FU M 30 Ju ne 2017
•
•
FUM up 17% to $2.5 billion at 30 June 2017 with $1.5
billion in contemporary products including ClearView
platform funds on external platforms. Top quartile
investment performance across ClearView models
remains key to attracting flows and supporting the
Master trust FUM given that product is not actively
marketed to new customers.
Wealth Management was $205 million net flow
positive in FY17 (-3%) with material net flows (relative
to FUM balances) into contemporary products (+5%).
This reflected:
•
•
•
•
WealthSolutions net inflows of $199 million (+6%);
FUM of $1.08 billion (+34%)
WealthFoundations net inflows of $88 million (-5%);
FUM of $0.3 billion (+50%)
External platform net inflows of $66 million (+21%);
FUM of $0.12 billion (+117%)
Master trust net outflows of $148 million (+21%); FUM
including closed MISs of $1.0 billion (-7%)
Results review
Notable points
•
•
Wealth Management segment profitability is primarily
driven by fees earned from FUM in inhouse product less
expenses incurred.
The positive impact on net fee income from FUM
growth (+17%) was offset by margin compression
from the gradual run-off of the Master trust product
being replaced by lower margin new business written
in new contemporary products (fee income +6% overall).
•
•
•
•
Master Trust is effectively a closed book with a portion
of FUM in pension phase
Investment market performance key to supporting
Master Trust FUM
Investment market performance of 9% on FUM
compared to a 4% investment return in FY16
Margin compression and run off from the Master Trust
book is assumed in Embedded Value (EV) calculations
•
To date, WealthSolutions and WealthFoundations have
primarily been distributed by aligned advisers:
•
•
These products will be rolled out further across the
Matrix dealer group as well as the IFA market
Expanding Wealth Management’s distribution footprint
broadly commenced in FY17 with WealthFoundations
now available on 30 third-party APLs (+233%)
• Decrease in variable expenses driven by:
•
•
Inter-segment advice fee (50bps) paid to Financial
Advice on Master trust FUM (in line with average
Master Trust FUM); and
Partially offset by higher platform fees payable
on WealthSolutions (in line with growth in average
WealthSolutions FUM).
ClearView Annual Report 2017 37
ClearView Wealth LimitedDirectors’ ReportContinued
•
•
Funds management expenses increased in line with
the expanded wealth product range (WealthFoundations
launch and MIS growth on platforms) and increased FUM
between periods.
Decrease in operating expenses (-9%) driven by
a reduction in wealth administration functions due to
greater efficiencies from growth in WealthFoundations
and MIS FUM. Front-end costs to support business growth
has remained broadly consistent (notwithstanding
a 5% increase in contemporary new product new
flows). The Master trust migration project commenced
in 2H FY17 with cost benefits expected to flow through
in late FY18. IT support and shared services costs
allocated to the segment reduced in FY17 and have been
absorbed by growth in the Life Insurance segment.
•
Expense overruns (after tax) decreased to $2.7 million
in FY17 (FY16: $4.0m) driven by higher FUM balances
(+17%) and a lower Wealth Management operating
cost base (-9%). This is explained in further detail in
the expense overrun section on page 30.
•
The tax benefit of $0.7 million in FY17 (FY16: $0.9 million)
included:
• Exempt fees in the Master trust product range; and
•
Positive impact from a tax benefit arising from
superannuation insurance premium deductions.
•
Reduced investment earnings given the reallocation of
shareholder cash between segments and lower market
interest rates.
38 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued
Segment analysis - Financial Advice
Financial Advice UNPAT up 47% to $2.2 million (FY16: $1.2 million) driven by net change in revenue
model and disciplined expense control notwithstanding ongoing investment in strategic advice program
and compliance costs.
2016
2017
%
12 Months to June 2017 ($m)1
Net financial planning fees
Interest and other income
Operating expenses
Underlying NPBT
Income tax (expense) / benefit
Underlying NPAT
Amortisation of intangibles
Reported NPAT
Key Statistics And Ratios
FUMA ($b)4
PUA ($m)3
Financial advisers
Chart 1: FY17 - Key Performance Indicators
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
16.7
0.3
(7.2)
(14.9)
1.1
(0.3)
0.8
(0.5)
0.3
2016
2H
8.2
215
235
2.1
(0.6)
1.5
(1.0)
0.5
FY16
8.2
215
235
1H
9.1
0.5
(7.9)
1.7
(0.5)
1.2
(0.5)
0.7
1H
8.5
223
243
2H
8.8
0.1
FY17 Change2
17.9
7%
0.6
102%
(7.4)
(15.3)
3%
53%
42%
47%
0%
3.2
(0.9)
2.2
(1.0)
1.2
140%
1.5
(0.4)
1.0
(0.5)
0.5
2017
%
2H
8.9
237
243
FY17 Change2
8.9
237
243
9%
10%
3%
Adviser Force - Aligned Advisers
Premiums Under Advice ($M)3
FUMA ($B)4
245
210
175
140
105
70
35
0
235
243
89
91
221
82
102
81
21
FY13
117
98
19
FY14
127
138
143
12
FY15
8
FY16
9
FY17
250
200
150
100
50
0
65
56
9
173
111
61
ClearView
PUA
Matrix
PUA
237
167
70
Total
10
8
6
4
2
0
3.8
3.4
0.4
5.1
3.2
1.9
ClearView
FUMA
Matrix
FUMA
8.9
6.5
2.4
Total
Employed
ClearView Self-Employed
Matrix Self-Employed
LifeSolutions
Premiums Under Advice
FUM
FUA
•
•
Aligned adviser numbers across CFA and Matrix up 3%
to 243.
Aligned FUMA up 9% to $8.9 billion and PUA3 up 10% to
$237 million. This growth is due largely to positive market
performance (impacts on FUMA) and change in adviser
numbers and composition:
•
•
Of the $8.9 billion in FUMA, $1.4 billion was in
contemporary inhouse Wealth Management products
and $1.0 billion was in the Master trust product
Of the $237 million PUA in-force, $70 million was
in LifeSolutions
1
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
2 % change represents the movement from FY16 to FY17
3
4
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
ClearView Annual Report 2017 39
ClearView Wealth LimitedDirectors’ ReportContinued
Results review
Notable points
•
Growth in net financial planning fees (7%) primarily
driven by:
•
•
•
Dealer service fees and membership revenue from
new practices (including practice acquired under
contractual arrangements) (+$0.3 million);
Higher internal sponsorship revenue from LifeSolutions
partially offset by run off of internal advice fee (50bps)
earned on Master trust FUM (+$0.9 million); and
Delegate and sponsorship revenue generated from
the annual dealer group conference (+$0.2 million).
•
Increased operating expense of $0.5 million in FY17 (+3%)
was primarily driven by:
•
•
•
Higher dealer group support costs due to the
acquisition of a practice, increased compliance
(and related) costs and investment in the development
and roll out of the strategic advice program, partially
offset by benefits associated with transitioning
employed planners to a self- employed model;
Increased dealer group conference costs, partially
offset by sponsorship revenue; and
Reduced allocation of marketing and other shared
services costs to the dealer group.
•
Interest and other income related to the reallocation
of shareholder cash between segments and lower
market interest rates. Other income includes the
potential recovery of certain compliance costs incurred
(+$0.3 million).
40 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued
Segment analysis – Listed Entity / Other Result
12 Months to June 2017 ($M)2
Interest income
Operating expenses
Operating earnings NPBT
Income tax (expense) / benefit
Operating earnings NPAT
Interest expense on corporate debt (after tax)
Underlying NPAT
Strategic review costs
Your Insure impairment
Direct closure provision
Reported NPAT
Result review
Notable points
•
•
•
•
Investment earnings on cash and investments held
in the listed and central services entities and in the
shareholders’ fund of ClearView Life, less 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.
Drop in investment earnings (-76%) is for the most part
offset by a related reduction in after-tax interest expenses
given the repayment of $45.5 million of corporate debt in
2H FY16. This was repaid using proceeds of a $50 million
1 for 10.2 pro-rata accelerated renounceable entitlement
offer in June 2016.
Lower operating expenses driven by a reduction in
directors’ fees and investor relations costs. There were
changes in Board size and composition between periods.
Tax benefit of $0.1 million (FY16: tax charge $0.2 million)
related to the research and development tax rebate
in FY16 (+$0.3 million) partially offset by the non-
deductibility of the Employee Share Plan expense that is
absorbed within the Listed segment. As such, the Group
effective tax rate for FY17 is 28%.
2016
1H
0.6
2H
0.6
FY16
1.2
(0.6)
(0.6)
(1.2)
-
(0.2)
(0.2)
(0.5)
(0.7)
-
(1.9)
-
-
(0.3)
(0.3)
(0.5)
(0.8)
(0.4)
-
-
-
(0.5)
(0.5)
(1.0)
(1.5)
(0.4)
(1.9)
-
1H
0.2
(0.4)
(0.2)
(0.1)
(0.3)
(0.1)
(0.4)
(0.5)
-
-
(2.6)
(1.2)
(3.8)
(0.9)
2017
2H
0.1
(0.6)
(0.5)
%
FY17 Change1
0.3
(76%)
(1.0)
(0.7)
(17%)
Large
0.3
0.2
(142%)
(0.2)
(0.1)
(0.3)
(0.1)
-
(2.4)
(2.8)
(0.5)
(0.2)
(0.7)
(0.6)
-
(2.4)
(3.7)
8%
(81%)
(53%)
54%
NM
NM
(2%)
Statement of financial position
The Group’s Statement of financial position, which is set
out on page 68, reflects the key metrics below.
•
Net assets, adjusting for the FY16 final cash dividend,
increased 4% to $415.6 million3 (June 2016: $411.8
million). Net assets increased by $3.8 million from
30 June 2016 comprising:
• Reported profit of $13.2 million;
•
•
•
FY16 final cash dividend (-$16.5 million). No dividend
reinvestment plan (DRP) was operative for the FY16
final dividend given that the $50 million capital raising
had recently been completed in June 2016;
Movements in the ESP Reserve due to the treatment
of the ESP expense in accordance with the accounting
standards (+$1.0 million), ESP loans settled through
the FY16 final dividend and ESP participant proceeds
from the sale of renounceable rights attached to ESP
holders in the capital raising (+$1.0 million); and
The proceeds from ESP shares sold via off-market
transfer in June 2017, including repayment of ESP
loans (+$5.1 million).
•
Net tangible assets increased to $371.0 million ($407.8
million including ESP loans) (June 2016: $363.4 million).
1 % change represents the movement from FY16 to FY17.
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.
Net Asset Value as at 30 June 2017 excluding ESP Loans; % increase adjusted for the FY16 cash dividend paid of $16.5m in September 2016 less ESP related items (-$6.2m).
3
ClearView Annual Report 2017 41
ClearView Wealth LimitedDirectors’ ReportContinued
•
•
Net asset value per share (including ESP loans) of 68.6
cents per share (June 2016: 68.6 cents per share).
Net tangible asset value per share (including ESP loans)
of 61.8 cents per share (June 2016: 61.2 cents per share).
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 2017 (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, investment client balances and advice client recurrent revenue as at the valuation date.
EV calculations at a range of risk discount margins is shown below.
Chart 1: Embedded Value Movement Analysis @ 4%DM
624.1
92.0
494.4
39.6
(16.5)
6.2
613.8
92.0
39.6
492.4
482.2
32.3
16.7
(1.9)
(2.0)
(4.1)
(3.1)
1.5
8.8
661.9
624.1
103.6
36.8
521.5
700
600
500
400
300
200
100
0
ESP Related Transactions
EV - 30 Ju ne 2016 (As Published)
EV After net capital applied
FY16 Cash Dividen d
Costs considered u n usual to
Expected G ain
I m pact of Claim s
Value of N e w Business A d ded
Franking Credits an d ESP Loans
Total EV incl. ESP Loans & Franing Credits
I m pact of M aintenance expenses
I m pact of Discontin uances
FU M A m ark to m arket
nor m al activities
Embedded Value
ESP Loans
Franking Credits
42 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Risk Margin Over Risk Free Rate:
($M), (Unless Stated Otherwise)
Life Insurance
Wealth Management
Financial Advice
Value of In-Force (VIF)
Net Worth
Total EV
ESP Loans
Total EV including ESP Loans
Franking Credits:
Life Insurance
Wealth Management
Financial Advice
Net Worth
Total EV including Franking Credits and ESP Loans
EV per Share including ESP Loans (cents)
EV per Share including Franking Credits and ESP Loans (cents)
3% DM 4% DM 5% DM
390.6
367.6
347.2
63.1
28.1
59.8
26.4
56.8
24.9
481.8
453.8
428.8
67.8
67.8
67.8
549.6
521.5
496.6
36.8
36.8
36.8
586.3
558.3
533.4
64.7
16.8
8.0
19.3
60.8
15.9
7.6
19.3
57.3
15.1
7.1
19.3
695.2
661.9
632.3
89.1
84.8
105.6
100.6
81.0
96.1
• Net capital applied (-$16.5 million): driven by the FY16
• Strategic review costs (-$0.7 million): This relates
final cash dividend paid in September 2016. The Dividend
Reinvestment Plan (DRP) was not operative for the FY16
final dividend
• ESP related items (+$6.2 million): Movements in the Share
Based Payments Reserve due to the treatment of the ESP
expense in accordance with the accounting standards,
ESP loans settled through the FY16 final dividend, ESP
participant proceeds from the sale of renounceable rights
attached to ESP holders in the FY16 capital raising and
from ESP shares sold via off-market transfer in June 2017
• Expected gain (+$32.3 million): Expected gain represents
the expected unwind of the discount rate within the value
of in-force and investment earnings on net worth
• VNB added (+$16.7 million): The value added by new
business written (Life Insurance and Wealth Management
products) over the period. 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 (Direct Life) business had a negative
value of new business (-$4.5 million). This was
exacerbated by a slow down in new business volumes
given the refocus in strategy followed by the closure of
the operation. LifeSolutions continues to be the key driver
given increased scale and volumes, albeit impacted by the
mix of business written (including commission type driven
by the upcoming LIF reforms)
to the FY17 strategic review costs incurred
on the evaluation of strategic options for the
potential change in major shareholder and Sony
Life becoming a new strategic shareholder
• Direct closure provision (-$2.4 million): The FY17
costs provided for relating to the closure of ClearView’s
Direct business
• The claims experience (-$1.9 million): Adverse claims
experience loss (after tax) of $1.9 million (relative to
planned margins) driven by the LifeSolutions portfolio
(-$2.1 million) partially offset by positive experience on
the closed Direct books (+$0.2 million). The LifeSolutions
adverse claims experience in FY17 includes the impact
(-$2.6 million) from the adoption of an enhanced
actuarial claims reserving basis on the IP portfolio. Claims
assumptions have been updated to reflect increased
projected cost of IP claims, offset by decrease in projected
cost of lump sum claims (overall net immaterial impact)
• The impact of lapses on the life insurance book and
FUMA discontinuances: (-$2.0 million): Life Insurance
lapse impact was driven by higher-than-expected lapses
for LifeSolutions (following the IP price increase). Lapses
on Non-Advice reflect an improvement given the books
are now closed to new business. For Wealth business,
discontinuance rates overall were close to expected,
notwithstanding an increase in outflows in the Master
Trust product (relative to FY16)
ClearView Annual Report 2017 43
ClearView Wealth LimitedDirectors’ ReportContinued • The adverse maintenance expense experience (-$3.2
million): This relates to 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 the business
gets to scale, these costs are progressively supported
by business volumes that creates operating leverage.
Expense overruns depress the EV growth 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
• Listing expenses and interest expense (-$0.9 million):
Expenses were impacted by the Group’s listed overhead
Chart 2: Embedded Value (EV) Sensitivity Analysis1 @ 4%DM
costs and line fee on corporate debt which are not allowed
for in the Embedded Value. The Debt Funding Facility
was settled in June 2016 by utilising the proceeds of the
capital raising. Debt Funding Facility remains in place.
•
FUMA mark-to-market (+$1.5 million): This is
predominantly driven by the net investment performance
on FUMA, which resulted in higher fee income relative
to expectations over the period and a higher present
value of future fees at the end of the period
• Other impacts (-$0.1 million): This relates to the net
impact of capital reallocations by segment, modelling
enhancements (including assumption changes),
restatements, timing effects and tax impacts of
the policy liability discount rate effect in the period.
Claims +10%;-10%
Discontinuance Rates +1%;-1%
-20.7
Expenses +10%;-10%
FUMA -10%; +10%
Risk-free Rate +1%; -1%
-20.9
-13.1
-13.2
-7.8
7.8
13.1
13.2
23.2
23.4
Inflation -0.5%;+0.5%
-5.0
5.2
-25
-20
-15
-10
-5
00
5
10
15
20
25
Dividends
The Board has declared a fully franked dividend in 2017 of
$18.14 million (2016: $16.45 million). This equates to 2.75
cents per share (2016: 2.5 cents per share), representing
approximately 60% of 2017 UNPAT in line with the Company’s
dividend policy (+10% increase in the dividend per share).
The Board seeks to pay dividends at sustainable levels and
has a target payout ratio of between 40% and 60% of UNPAT.
Furthermore, the Company intends to maximise the use of its
franking account by paying fully franked dividends.
As foreshadowed during the June 2016 capital raising, the
Dividend Reinvestment Plan (DRP) was suspended and did
not operate in respect to the FY16 final cash dividend. The
DRP has been reactivated for the FY17 final dividend and will
operate in accordance with the DRP rules below:
•
Shareholders will have the opportunity to reinvest into the
Company while retaining capital within the Group; and
•
Given the illiquidity of the shares, it is not considered
appropriate to minimise the dilutive impact of the DRP
through the on-market purchase of the number of shares
required to satisfy the DRP participation.
Substantial shareholders have committed to participate in the
DRP at a fixed price of $1.39 per share as follows:
•
•
Crescent Capital and its associates for its entire share of
the dividend; and
Sony Life for its share of the dividend to the extent that
its holding does not exceed 14.9% (given regulatory
approvals are required for Sony Life to increase its holding
above 15%).
No interim dividend was paid during the year (2016: Nil).
To date, the ability to pay an interim dividend has been
limited by the effect on tax paid of the changes in
long-term discount rates used to determine the insurance
1
Does not include the impact of management actions in response to sensitivities (for example, premium rate changes), or reinsurer response to sensitivities (for example,
reinsurer rate changes).
44 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued policy liabilities between the half year period and year
end. As a sufficient franking credit balance continues to be
progressively established, the payment of interim dividends
can be considered in future periods.
ClearView’s ability to pay a franked dividend depends upon
factors including profitability, availability of franking credits
and funding requirements which in turn may be affected by
trading and general economic conditions, business growth
and regulation. As such, no assurance can be given as to the
timing, extent and payment of dividends.
Capital position
ClearView is fully capitalised with Common Equity Tier 1
capital to fund its current business plans and anticipated
medium-term growth.
The Company entered into a new three-year, $60 million Debt
Facility Agreement with National Australia Bank in July 2017
for the following key reasons:
•
•
To provide future capital funding in the event that growth
is materially above what is currently anticipated;
To meet the liquidity needs of the Group or to capitalise
on other opportunities should they arise.
This replaced the $50 million facility that was due to expire
in December 2017.
The table below provides an analysis of reconciliation of the net assets in the Statement of Financial Position to the Group
capital position.
d
e
t
a
l
u
g
e
R
A
R
P
A
s
e
i
t
i
t
n
E
h
t
l
a
e
W
e
c
i
v
d
A
l
a
i
c
n
a
n
i
F
d
e
t
a
l
u
g
e
R
C
I
S
A
s
e
i
t
i
t
n
E
d
e
t
a
l
u
g
e
R
l
l
A
s
e
i
t
i
t
n
E
r
e
h
t
O
/
2
C
H
O
N
p
u
o
r
G
h
t
l
a
e
W
r
e
h
t
O
e
f
i
L
Group Capital Position ($M)
Net Assets
330.5
13.0
3.9
347.4
7.5
18.7
26.2
373.6
42.1
415.6
Goodwill & Intangibles
Net Tangible Assets
Capital Base Adjustment:
(10.1)
(3.7)
-
(13.8)
-
(8.4)
(8.4)
(22.2)
(22.4)
(44.7)
320.4
9.3
3.9
333.6
7.5
10.2
17.7
351.4
19.6
371.0
Deferred Acquisition Costs (DAC)
(272.0)
(0.2)
Other Adjustments to Capital
Base
(0.1)
(0.1)
-
-
(272.2)
-
(0.1)
(0.1)
-
-
-
(272.2)
-
(272.2)
(0.1)
(0.2)
(0.4)
(0.6)
Regulatory Capital Base
48.3
9.1
3.9
61.3
7.4
Prescribed Capital Amount
(10.6)
(3.5)
(3.1)
(17.2)
(5.0)
10.2
(0.4)
17.6
79.0
19.2
98.2
(5.4)
(22.6)
-
(22.6)
Available Enterprise Capital
37.7
5.6
0.9
44.1
2.4
9.8
12.3
56.4
19.2
75.6
Internal Benchmarks
Working Capital
Risk Capital1
Excess/Deficit over internal
Benchmarks
Debt Funding Facility
Net Capital Surplus/Position
(7.0)
(30.6)
(2.7)
(2.8)
(0.8)
(10.5)
-
-
-
(10.5)
(6.5)
(17.0)
-
(33.5)
(2.0)
(4.8)
(6.8)
(40.3)
(5.4)
(45.7)
0.1
-
0.1
0.1
-
0.1
0.1
-
0.1
0.2
-
0.2
0.4
-
0.4
5.0
-
5.0
5.4
-
5.4
5.6
-
5.6
7.3
12.9
-
-
7.3
12.9
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 in accordance with
APRA capital standards.
1
2
As at 30 June 2017, risk capital is held in regulated entities at 97.5% probability of adequacy (POA). Risk capital at 99% POA is held in the NOHC².
NOHC is a non operating holding company regulated by APRA under the Life Insurance Act.
ClearView Annual Report 2017 45
ClearView Wealth LimitedDirectors’ ReportContinued
The regulated entities had $5.6 million of net assets
in excess of internal benchmarks as at 30 June 2017.
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 $10.5 million as at 30 June 2017 to fund
anticipated new business growth over the medium-term.
Internal benchmarks in the non-regulated entities include a
further working capital reserve of $6.5 million as at 30 June
2017, providing a combined total of $17 million that is set
aside across the Group to fund anticipated new business
growth over the medium-term.
The net capital position of the Group as at 30 June 2017
($12.9 million) represents a decrease of $19.6 million since
30 June 2016. This decrease reflects the following key items:
• The Underlying NPAT for the year (+$30.4 million);
•
•
•
•
•
•
•
•
The net capital absorbed by the growth of the business
over the period (-$40.8 million);
The decrease in the working capital reserve (+$14.0
million) reflecting capital set aside to fund the anticipated
new business growth over the medium term;
Increase in regulatory and risk capital reserved due to
increasing new business volumes (-$6.8 million), and the
net impacts of capitalised software, acquired intangibles
and deferred tax (-$4.0 million);
Increase in asset concentration risk reserve given
increased reinsurance asset concentration (-$2.1 million);
Net impact of the share based payments expense
and other items on the Share Based Payments Reserve
(+$7.2 million);
The after tax costs associated with the evaluation of
strategic options and Sony Life becoming a new strategic
shareholder, after tax interest cost on debt and the Direct
Life insurance business closure provision (-$3.3 million);
The net impacts of the tax effect on the change in policy
liability discount rate (+$2.3 million); and
The net impact of the final FY16 cash dividend paid in
September 2016 (-$16.5 million).
46 ClearView Annual Report 2017
Share Buyback
The Board continues to believe 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 shareholders.
The Board has determined to extend its share buyback (has
been in place since 19 December 2014) until December 2017.
Existing buyback arrangements continue to apply. Since 30
June 2015, 83,572 shares have been bought back under the
scheme. No shares were bought back in the year ended 30
June 2017.
Outlook
Market outlook
• Long-term market growth fundamentals remain sound:
•
•
Life Insurance: The Australian market is under-insured;
growth is driven by population increases, inflation and
real GDP growth.
Wealth Management: Growth is underpinned
by compulsory retirement savings regime
(superannuation).
• Short-term challenges and opportunities exist:
•
•
•
Group Life Insurance: ClearView intentionally does
not participate in Group Life. The profitability of this
segment appears to be improving driven by material
price increases in recent years. Such increases have
improved the competitive position of ClearView’s retail
life products.
Retail Income Protection: Industry participants
have progressively increased prices driven by losses
on IP portfolio (should improve profitability of product
over time). ClearView increased prices in 1H FY17
to manage margin over time, resulting in some
short-term devalued lapse losses. Notwithstanding
the adoption of an enhanced claims reserving basis
on its portfolio in FY17, ClearView’s IP portfolio remains
profitable. Broader industry pricing cycle
and performance of IP portfolios continues
to be closely monitored.
Direct Life Insurance: There has also been changes
in the direct market’s appetite for telephone based
non-advice models. These are no longer economically
viable or socially acceptable due to increasing client
acquisition costs, rising consumer expectations and
likely heightened regulatory scrutiny. ClearView closed
its Direct Life operation to new business 2H of FY17.
ClearView Wealth LimitedDirectors’ ReportContinued
•
•
•
Regulatory changes: Key life insurance reforms will
commence on 1 January 2018. The changes generally
support more open competition and assist challenger
brands like ClearView.
M&A activity: The banks are increasingly focused on
returning to core business lines, and there has been
an emergence of foreign institutions looking to invest
in the Australian life insurance industry. This is likely to
drive investment in the life insurance sector. ClearView
remains well-positioned with its strategic shareholder,
Sony Life.
•
•
•
•
Superannuation scrutiny: Heightened government
and media scrutiny of the superannuation sector,
government policy changes, expected lower
investment returns over the short-to-medium term
and fee pressure. ClearView portfolios remain
defensively-tilted given the conservative nature of the
client base and near-term economic outlook. As an
integrated financial services company, ClearView is
well-positioned to take advantage of the convergence
of life insurance and wealth management.
Life Insurance and Wealth Management products are highly
complementary 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.
Business outlook
•
Life Insurance continues to be the key profit driver and
ClearView is strongly positioned to outperform the market
and generate material earnings growth, notwithstanding
some claims volatility between periods. The current focus
is on:
•
•
•
Leveraging the embedded growth in the Life Insurance
distribution network;
Capitalising on market disruption around life insurance
reforms due to the fact ClearView has no material
legacy issues; and
Increasing scale over time thereby progressively
reducing the expenses overruns and further improving
the cost-to-income ratio.
ClearView will continue to focus on building its Wealth
Management business to capitalise on the significant
investment made over the past two years.
The ClearView dealer groups are focused on rolling out
the strategic advice program and continue to assist
adviser practices improve efficiency and revenues.
ClearView will continue to leverage the Sony Life
relationship and Cooperation Agreement.
ClearView’s performance reflects strong momentum.
The Group maintains a positive outlook and is committed
to executing its high growth strategy which targets 5%
of the long-term life insurance profit pool and focuses on
building a material wealth management business and
high quality financial advice business.
Changes in state of affairs
There were no other significant changes in the state of affairs
of the Group during the year ended 30 June 2017.
ClearView Annual Report 2017 47
ClearView Wealth LimitedDirectors’ ReportContinued
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 2017.
Managing Director
•
Simon Swanson
Managing Director
Other Executive KMP
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 Framework;
•
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 Non-executive Directors of the Group and Company
during or since the end of the financial year were:
•
•
•
•
•
•
•
Christopher Blaxland-Walker
General Manager, Distribution
Athol Chiert
Chief Financial Officer and Company Secretary
Sarah Cummings
General Manager, Development
Todd Kardash
Chief Executive Officer, Matrix Planning Solutions
and ClearView Financial Advice
Deborah Lowe
General Manager, People and Operations
Greg Martin
Chief Actuary and Risk Officer
Justin McLaughlin
Chief Investment Officer
Former Executive KMP
Bruce Edwards
(Chairman, Independent Non-executive Director)
•
David Charlton
General Manager, ClearView Direct (Ceased 16 June 2017)
•
•
•
•
•
•
•
•
•
Andrew Sneddon
(Independent Non-executive Director)
David Brown
(Independent Non-executive Director)
Gary Burg
(Independent Non-executive Director)
Michael Alscher
(Non-executive Director)
Michael Lukin
(Alternate Non-executive Director to Michael Alscher)
Nathanial Thomson
(Non-executive Director)
Satoshi Wakuya (appointed 14 December 2016)
(Non-executive Director)
Susan Young (appointed 14 December 2016)
(Independent Non-executive Director)
The KMP of the Group and the Company in addition
to the Non-executive Directors during or since the end
of the financial year were:
48 ClearView Annual Report 2017
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 Framework
Remuneration Governance
ClearView’s Remuneration Policy (Policy) was updated on
1 July 2017 and is compliant with the obligations set out
by the Australian Prudential Regulatory Authority (APRA)
ClearView Wealth LimitedDirectors’ ReportContinued under Prudential Standards CPS 510 ‘Governance’ and
SPS 510 ‘Governance’. It also forms part of ClearView’s
Risk Management System and overall Risk Management
Framework (in accordance with the Prudential Standards).
The Board has approved this Policy and retains overall
responsibility for all remuneration decisions in respect to
persons relevant to each entity. The Policy is reviewed at least
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;
Identifying any material deviations of remuneration
outcomes from the intent of the Remuneration Policy,
including any unreasonable or undesirable outcomes
that flow from existing remuneration arrangements;
Reviewing and making annual recommendations to the
Board on the remuneration of the Managing Director,
Senior Management Team (SMT) members (all of whom
are KMP listed above) and other persons whose activities
may, in the Remuneration Committee’s opinion, affect the
financial soundness of ClearView;
Reviewing and making annual recommendations to
the Board on the remuneration structures, including
risk-adjusted performance targets, for those persons or
categories of persons which, in the Board’s opinion, could
individually or collectively affect the financial soundness
of 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
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;
•
•
Define various terms to ensure a common
understanding; and
Clarify what happens if this policy or associated
procedures are breached.
Relationship between Remuneration Policy and
Company Performance
The primary objectives of the Remuneration Policy are
to ensure that remuneration is competitive, aligned with
the Company’s business objectives in both the short term
and the long term, and appropriate for the results delivered
by the individual. In accordance with this objective, the
Company has structured remuneration packages to provide
an appropriate mix of fixed and performance based pay
components which are based on both the individual’s
performance and Group performance. By adopting a robust
approach to remuneration, the Group aims to attract and
retain top talent.
The remuneration framework is also designed to reward
prudent risk-taking, support effective risk management and
prioritise the long term financial soundness of the business
and its shareholders.
Total KMP remuneration is made up of three components:
•
Fixed Remuneration;
• Short Term Incentive (STI); and
• Long Term Incentive (LTI).
ClearView Annual Report 2017 49
ClearView Wealth LimitedDirectors’ ReportContinued 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 setting the 2017 Fixed Remuneration. Further details on
the engagement of independenct consultants is provided
later in the report.
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 FY17, the award of the STI component for KMP is based on
the achievement of three company goals weighted, as on the
table on the following page.
The design of remuneration structures and performance
conditions will reflect ClearView’s key risks, as relevant to
particular roles by:
•
•
•
•
Ensuring that the components of remuneration
appropriately balance risk and business outcomes,
having regard to the percentage of “at risk” to “not at
risk” remuneration that is, variable to fixed remuneration;
Using appropriate risk-adjusted objectives
in ClearView’s incentive awards for key persons
and categories of persons;
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 maximum contribution base.
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 2017 financial year.
50 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Company Goal
Description
1.
Underlying Net
Profit after Tax
(UNPAT)1
2.
Embedded
Value Growth
UNPAT is the Board’s key measure of group profitability and the
basis on which dividend payments are determined. It consists
of reported net profit after tax adjusted for amortisation
(not including capitalised software), the effect of changing
discount rates on insurance policy liabilities and costs which are
considered unusual to the Group’s ordinary activities.
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.
3.
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 Embedded Value over
the period due to new business written over the relevant period.
Min
%
Target
%
Max
%
%
Achieved
FY17
0%
50%
60%
46%
0%
25%
30%
25%
0%
25%
30%
21%
0%
100% 120%
92%
Overall, 92% of the target STI range was achieved based on the range of outcomes. The result may vary from
reported Underlying NPAT, Embedded Value and VNB given that for STI calculations the impacts of net capital raised,
cash dividend payments, assumption and model changes between periods and any impacts of key longer term decisions
made by the Board are excluded.
Sound risk management practices acts as a gateway qualifying condition to the STI. Furthermore, underpinning the
achievement of the financial goals is sound business strategy, leadership, client focus, product development, superior services
and continuous improvement of systems and processes.
As outlined in the table, STI outcomes fall within a range of 0% to 120% of the Target STI with 100% pegged to achieving
target performance (as set out in the Board approved Business Plan). The resultant potential maximum STI awards for KMP
range from 0% to 60% of Fixed Remuneration as follows:
SMT Member
Simon Swanson
Athol Chiert
Christopher Blaxland-Walker
Deborah Lowe
Gregory Martin
Justin McLaughlin
Sarah Cummings
Todd Kardash
Target STI % Maximum STI % Minimum STI % Actual Achieved %
50%
30%
30%
30%
30%
30%
30%
30%
60%
36%
36%
36%
36%
36%
36%
36%
0%
0%
0%
0%
0%
0%
0%
0%
46%
28%
28%
28%
28%
28%
28%
28%
1 UNPAT for the purposes of bonus calculations excludes the after tax interest on corporate debt.
ClearView Annual Report 2017 51
ClearView Wealth LimitedDirectors’ ReportContinued
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)
Existing Employee Share Plan (ESP)
The Company has previously used its Employee
Share Plan as a long term incentive for key
employees and contractor participants.
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;
52 ClearView Annual Report 2017
•
•
•
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; and
Raise sufficient capital to fund the next phase of growth
for the business.
ClearView was therefore required to undergo a significant
transformation, that has been achieved over the last
seven 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 existing 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 was designed to recognise leaders
and reward those decisions and actions which have a direct
and positive impact on the results that ClearView delivers for
shareholders, at the time and in the future.
The Executive Share Plan (ESP) was established to assist in
the recruitment of the SMT and employees with deep life
insurance and wealth management experience, to execute on
a core strategy and thereby to show ClearView’s recognition
of the employees’ contribution, by providing an opportunity
to share in the future growth and profitability of ClearView.
The ESP was set up in the context of the “start up phase”
and the nature of the ClearView business at the time when
the scope and the timing of any future success of the
business was still unknown and uncertain. The ESP aligns
the interests of participants more closely with the interests
of shareholders including the extension of the ESP to financial
advisers in November 2011.
Benchmarking of the LTI for the SMT was last 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;
ClearView Wealth LimitedDirectors’ ReportContinued •
•
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, notwithstanding 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).
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.
Overview of the Existing 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 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.
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
ClearView Annual Report 2017 53
ClearView Wealth LimitedDirectors’ ReportContinued •
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, Mr Chiert
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).
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 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.
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.
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.
54 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued An outcome of the Aon Hewitt review highlighted that the
existing LTIP for the SMT is primarily vested and as such it was
necessary to consider what would represent an appropriate
new LTI, as part of the overall remuneration structure for SMT
members. The value of the existing LTIP rested in the interest
free component of the ESP loan backed plan, and receiving
dividends on the ESP shares that are financed by these ESP
loans. In considering a new LTI scheme, three key objectives
were focused on:
1.
2.
3.
Provides appropriate remuneration to the SMT to ensure
a component of remuneration remains delivered in equity
and is focused on longer term performance;
Acts as an incentive to remain employed at ClearView
(a delayed vesting mechanism); and
Alignment of the interests of the key management with
the interests of shareholders.
PricewaterhouseCoopers (PwC) was engaged by the
Remuneration Committee in 2017, to implement a new
LTIP structure for the SMT. This advice was used as a guide,
and was not a substitute for a thorough consideration of all
the issues (including potential change of major shareholder)
by the Remuneration Committee.
Taking into account current market practice the Board felt
that an LTI structure delivered via a grant of Performance
Rights would be the most appropriate structure to achieve the
key objectives. The LTI structure was approved by the Board,
on recommendation of the Remuneration Committee, on 21
June 2017. However, it was proposed that the first awards
under the new LTI would be made in FY18. The proposed
key terms of the new plan are set out in the table on the
following page.
•
“Control” is defined as Crescent Capital Partners and its
Associated Entities no longer holding 20% of the voting
rights of the Company.
(c) After 1 July 2015:
•
•
For ESP Shares issued to employee participants after
1 July 2015, unless stated otherwise in the participants
Invitation Offer, all performance and vesting conditions
in relation to these shares, are not deemed to have been
met upon a Change of Control.
“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.
Services from consultants – 2018 review and
new LTIP
The Remuneration Committee seeks and considers advice
from independent, external remuneration consultants where
appropriate. Remuneration consultants are engaged directly
by and report to the Remuneration Committee. The last
external review was completed in 2013.
Given that ClearView has grown significantly over the
last four years, it was considered appropriate for the
Remuneration Committee to engage Hewitt Associates Pty
Ltd. (Aon Hewitt) in 2017 to benchmark overall remuneration
for the SMT and non-executive Directors, with the intended
implementation of these recommendations for the 2018
financial year (with effect from 1 July 2017). The advice
from Aon Hewitt was used as a guide, and was not a
substitute for a thorough consideration of all the issues
by the Remuneration Committee.
The cost of the advice and assistance provided by Aon Hewitt
was $99,500 (excluding GST). Aon Hewitt was engaged by
and reported to the Chair of the Remuneration Committee.
The Board is therefore satisfied that the remuneration
recommendation made by the Remuneration Consultants
was free from undue influence by members of the KMP to
whom the recommendation related.
ClearView Annual Report 2017 55
ClearView Wealth LimitedDirectors’ ReportContinued Key Design Elements
Overview
1. Instruments
2. Eligibility
3. Quantum
Performance Rights – being a right to receive one share for no consideration, contingent on the
vesting conditions being met.
Open to nominated SMT members.
Each participant will have set LTI dollar value determined as part of their remuneration package.
This dollar value will be converted into a set number of Performance Rights based on an agreed
VWAP share price.
4. Performance Period
The Performance Rights will be subject to a 2 year performance period.
5. Vesting Conditions
The participants must remain employed by the ClearView Group as at the vesting date (30 June
2019), in addition to meeting performance based vesting conditions.
The specifics of the vesting conditions are still being finalised, with consideration being given to
the following structure:
• 50% of the Performance Rights will be measured against an Embedded Value target
•
50% of the Performance Rights will be measured against a relative Total Shareholder Return
target, based on an agreed basket of peer companies.
6. Change of Control
If there is a change of control event then the unvested Performance Rights will remain on foot
and continue to be tested against the Embedded Value performance hurdle and a continuing
employment service condition as noted above.
Performance rights to be granted as compensation
The proposed number of performance rights to be granted as compensation to each participant, as per the Board approvals
and is accordance with the new LTIP (as noted earlier in the Report), is as follows:
SMT Member
Simon Swanson1
Athol Chiert
Christopher Blaxland-Walker
Deborah Lowe
Gregory Martin
Justin McLaughlin
Sarah Cummings
Todd Kardash
Total
Number of LTI Performance Rights
1,142,857
357,143
285,714
114,286
428,571
250,000
71,429
285,714
2,935,714
1
Performance rights to be granted to Simon Swanson will be satisfied by the on-market purchase of ClearView ordinary shares. If these shares cannot be
purchased on-market, shareholder approval may be required for the grant of the performance rights at the 2017 AGM.
In recognition of the proposed implementation of the abovementioned LTIP, the Remuneration Committee considered it
appropriate for SMT members to be charged interest on ESP Loans attached to the existing LTIP. Interest will be charged
on these ESP Loans, commencing from 30 November 2017, at the 3 years BBSY rate plus a 1% margin.
56 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued
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 2017:
Revenue1 ($’000)
Net profit after tax ($’000)
Underlying Net Profit after Tax
Dividend (Final) (cents)
Dividend (Special) (cents)2
Basic EPS (cents)
Diluted EPS (cents)
Fully diluted Underlying EPS (cents)
Embedded Value3 ($m)
Embedded Value per share (cents)3
Share Price at the beginning of the year (cents)
30 Jun 17
30 Jun 16
30 Jun 15
30 Jun 14
30 Jun 13
333,503
295,828
253,640
190,301
172,278
13,150
30,362
23,615
27,235
12,572
20,533
13,880
19,738
1,876
16,014
2.75
-
2.20
2.11
4.88
662
100.6
95.0
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
Share Price at the end of the year (cents)
145.0
1
2
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.
3
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
(2016: $1,000,000). Directors’ fees can be paid as superannuation contributions. The fee pool is the only source of
remuneration for Non-executive Directors.
As noted earlier in the report AON Hewitt benchmarked the Non-executive Directors fees as part of their review. It was
concluded that notwithstanding that the comparable cost in total was considered appropriate, given the size and composition
of the Board, that on average ClearView pays a lower Board fee per Director. No change to Directors fees was recommended,
but it was noted if the Board size reduced going forward, that the fees per Board member would be reconsidered at that time.
ClearView Annual Report 2017 57
ClearView Wealth LimitedDirectors’ ReportContinued The compensation of each Non-executive Director for the year ended 30 June 2017 is set out below:
Short term employee benefits
Post
employment
Share based
payments
Total
2017
Salary
& Fees
$
Non-executive Directors
B Edwards
D Brown
G Burg
M Lukin1
N Thomson1
A Sneddon
M Alscher1
S Wakuya2
S Young3
Total
150,000
77,626
77,626
-
85,000
95,000
80,000
43,870
67,334
676,456
Bonus
Non-
monetary
Termination
Payment
Superannua-
tion
$
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
$
-
7,374
7,374
-
-
-
-
-
6,397
21,145
Executive Share
Plan of total
remuneration
$
-
-
-
-
-
-
-
-
-
-
$
150,000
85,000
85,000
-
85,000
95,000
80,000
43,870
73,731
697,601
1
2
3
Mr Lukin is an alternate Director to Mr Alscher. Mr Thomson and Mr Alscher have agreed they will receive no fees as a Director although fees are payable to Crescent Partners
Management Pty Ltd of which they are employees.
Mr Wakuya was appointed as a Director on 14 December 2016. Mr Wakuya has agreed he will receive no fees as a Director although fees are payable to Sony Life Insurance Co., Ltd.
Ms Young was appointed as a Director on 14 December 2016. Ms Young was also a Director of subsidiary ClearView Life Nominees Pty Limited for which $31,124 fees were received
during the financial year.
The compensation of each Non-executive Director for the year ended 30 June 2016 is set out below:
Short term employee benefits
Post
employment
Share based
payments
Total
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
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
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.
4
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.
58 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued
Managing Director and Senior Management Team remuneration
The compensation of each member of the KMP of the Group for the year ended 30 June 2017 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
2017
S Swanson
A Chiert
G Martin
$
$
$
635,610
292,121
13,980
380,556
104,915
10,876
385,204
110,425
13,980
J McLaughlin
328,732
92,504
-
T Kardash
D Charlton2
300,136
87,013
10,876
269,262
-
-
141,692
C Blaxland-Walker
315,841
86,857
10,876
D Lowe
274,168
79,160
S Cummings
285,456
78,736
-
-
-
-
-
$
-
-
-
-
-
$
19,616
19,616
34,991
26,417
34,943
18,861
19,616
32,631
19,616
$
-
48,300
48,300
-
19,564
21,680
8,697
16,100
13,592
%
30.4%
27.2%
26.8%
20.7%
$
961,327
564,263
592,900
447,653
23.6%
452,532
4.8%
451,495
21.6%
23.7%
23.2%
441,887
402,058
397,400
Total
3,174,965
931,731
60,588
141,692
226,307
176,233
23.5% 4,711,516
1
2
Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued.
Ceased General Manager, Direct on 16 June 2017. A termination payment of $141,692 was paid in July 2017.
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.
ClearView Annual Report 2017 59
ClearView Wealth LimitedDirectors’ ReportContinued
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 2017 and 30 June 2016:
2017
S Swanson
A Chiert
G Martin
J McLaughlin
T Kardash
D Charlton
Balance at
beginning
6,126,353
Loans
Granted2
$
-
1,316,012
742,573
1,480,008
1,084,952
792,832
495,117
746,664
535,816
509,707
-
C Blaxland-Walker
724,282
550,493
500,000
364,636
-
-
12,560,494
3,408,951
Interest
charged1
$
Repay-
ments
$
Loan
Cancelled
$
Balance at
end
$
Highest in
period $
-
-
-
-
-
-
-
-
-
-
(127,500)
(31,875)
(38,250)
(19,125)
(19,125)
(10,584)
(30,583)
(6,675)
(5,908)
-
-
-
-
-
-
-
-
-
5,998,853
6,126,353
2,026,710
2,026,710
2,526,710
2,526,710
1,268,824
1,268,824
1,263,355
1,263,355
499,123
509,707
1,244,192
1,244,192
493,325
358,728
500,000
364,636
(289,625)
- 15,679,820
Loans
Granted
$
Interest
charged1
$
Repay-
ments
$
Loan
Cancelled
$
Balance at
end
$
Highest in
period $
Balance at
beginning
6,233,453
1,342,787
1,512,138
480,984
808,897
762,729
899,700
517,150
737,643
-
-
-
-
-
-
-
-
-
-
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) 12,560,494
D Lowe
S Cummings
Total
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
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 perfor-
mance 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, notwithstanding 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. Given the proposed implementation of a new LTIP Post year end, these loans will become interest bearing from 30 November
2017 at 3 year BBSY rate plus a margin of 1%.
2
Limited recourse loans were granted to KMP ESP participants in May 2017. This limited recourse loan facility is secured by the ESP shares held and will become interest bearing from
30 November 2017 at 3 year BBSY rate plus a margin of 1%. This limited recourse facility is reflected as loans on balance sheet of the listed entity.
60 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Shares granted to KMP and equity holdings
During and since the end of the financial year no shares (2016: 732,907) 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:
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
Director, KMP, to
which the series
relates
Justin McLaughlin
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 38
Series 39
Series 40
Series 438
Series 448
Series 458
Series 51a10
Series 51b10
Athol Chiert
Greg Martin
Todd Kardash
David Charlton
David Charlton
David Charlton
Chris Blaxland-Walker
Chris Blaxland-Walker
Chris Blaxland-Walker
Deborah Lowe / Sarah
Cummings
Deborah Lowe / Sarah
Cummings
Fair value
at grant
date (pre-
modification1)
Fair value
at grant
date (post-
modification1)
Exercise
price per
share ($)
Aggregate
value at
grant date
($)
Expiry date
0.10
0.07
0.11
0.08
0.06
0.10
0.10
0.10
0.29
0.29
0.29
0.17
0.19
0.22
0.20
0.23
0.27
0.19
0.22
0.10
0.59
51,500
Change in Control
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
0.49
0.50
0.58
0.65
0.50
0.50
0.50
0.57
0.57
0.57
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
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
n/a
0.96
71,197
23/12/2020
n/a
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.
ClearView Annual Report 2017 61
ClearView Wealth LimitedDirectors’ ReportContinued
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:
Series
Vesting Conditions
Performance Conditions
Series 6 – 30 June 2008 Issue
Series 7 – 29 September 2009 Issue
Series 10 – 25 June 2010 Issue
Series 11 – 25 June 2010 Issue
Series 12 – 25 June 2010 Issue
Series 15 – 18 August 2011 Issue
Series 16- 6 October 2011 Issue
Series 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
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
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
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
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
62 ClearView Annual Report 2017
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
Nil
Nil
ClearView Wealth LimitedDirectors’ ReportContinued Series
Vesting Conditions
Performance Conditions
Series 52 - 27 April 2016 Issue
Series 54 - 20 June 2016 Issue
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
1
2
3
Change of control provision was triggered on 23 October 2009 by GPG increasing its shareholding above 50%.
In accordance with Mr Swanson’s employment contract, Mr Swanson is entitled to a long term incentive comprising 10 million Shares in accordance with the
ESP, and vesting progressively over three years from the commencement date of his contract as follows:
Series 10: 2 million shares at an issue price of 50 cents vesting on 26 March 2011 (vested);
Series 11: 4 million shares at an issue price of 58 cents vesting on 26 March 2012 (vested); and
Series 12: 4 million shares at an issue price of 65 cents vesting on 26 September 2012 (vested) on change of control of ClearView.
The Shares issued to Mr Swanson have vested progressively each year as outlined above.
Special condition relating to shares issued to KMP in Series 26: 100% of the shares may be sold on change of control, but 50% are held in escrow after
employment for 1 year thereafter.
4 Change of control provision was triggered on 26 September 2012 by CCP Bidco obtaining a shareholding above 50%.
Unless explicitly stated in the Participants Offer Documentation 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 2017:
s
n
o
i
t
i
d
n
o
c
g
n
i
t
s
e
v
o
t
t
c
e
j
b
u
s
s
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t
a
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c
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a
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i
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o
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n
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g
e
b
i
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e
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f
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n
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c
r
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h
t
o
t
e
N
-
588,262
- 10,918,090
-
-
124,621
79,217
-
588,262
- 10,918,090
-
-
124,621
79,217
-
-
-
-
d
e
t
s
e
v
e
c
n
a
l
a
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.
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n
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r
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-
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e
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o
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t
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b
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e
t
s
e
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.
o
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e
l
b
a
s
i
c
r
e
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e
-
-
-
-
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o
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l
b
a
s
i
c
r
e
x
e
d
n
a
d
e
t
s
e
V
-
-
-
-
2017
B Edwards
G Burg
A Sneddon
S Young
S Swanson
A Chiert
D Charlton
J McLaughlin
T Kardash
G Martin
- 10,000,000 14,549,021
1,000,000
1,500,000
2,899,247
695,000
-
735,000
-
1,500,000
1,647,060
500,000
1,000,000
1,647,059
1,000,000
2,000,000
3,719,900
C Blaxland-Walker
247,525
1,000,000
1,247,525
S Cummings
D Lowe
463,402
523,505
-
-
508,834
588,445
-
-
-
-
-
-
-
-
-
-
-
-
-
- 14,549,021
- 10,000,000
- 10,000,000
-
2,899,247
1,000,000
1,500,000
-
1,500,000
-
735,000
695,000
-
-
-
-
1,647,060
-
1,500,000
-
1,500,000
-
1,647,059
500,000
1,000,000
-
3,719,900
1,000,000
2,000,000
-
1,247,525
247,525
1,000,000
1,000,000
2,000,000
1,000,000
-
-
508,834
463,402
588,445
523,505
-
-
-
-
-
-
ClearView Annual Report 2017 63
ClearView Wealth LimitedDirectors’ ReportContinued
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
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%
Ongoing 12 months
notice for the
first 3 years of
employment, 6
months notice
after 3 years
Justin
McLaughlin
Christopher
Blaxland-
Walker
Sarah
Cummings
Ongoing 13 weeks
In the case of redundancy, a severance payment of 13
weeks’ base salary (or any greater payment required
under the National Employment Standards).
30%
36%
Ongoing 13 weeks
Deborah Lowe Ongoing 13 weeks
In the case of redundancy, a severance payment of 3
months’ base salary (or any greater payment required
under the National Employment Standards).
In the case of redundancy, a severance payment of 3
months’ base salary (or any greater payment required
under the National Employment Standards).
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 2017
64 ClearView Annual Report 2017
ClearView Wealth LimitedDirectors’ ReportContinued Auditor’s Independence Declaration
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Board of Directors
ClearView Wealth Limited
Level 15, 20 Bond Street
Sydney NSW 2000
24 August 2017
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 2017, 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
Max Murray
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited.
ClearView Wealth Limited
ClearView Annual Report 2017 65
2017 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
67
68
69
71
72
22 Payables
23 Provisions
24 Deferred tax balances
25 Policy liabilities
26 Issued capital
27 Share-based payments
28 Shares granted under the employee share plan
2 Application of new and revised Accounting Standards 72
29 Dividends
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 Reconciliation of net profit for the year to net
cash flows from operating activities
31 Subsidiaries
32 Related party transactions
33 Financial instruments
34 Disaggregated information by fund
35 Investment in controlled unit trusts
36 Leases
37 Contingent liabilities and contingent assets
38 Capital commitments
39 Guarantees
40 Subsequent events
Directors’ Declaration
Independent Auditor’s Report
Shareholders’ Information
Directory
74
87
93
97
99
101
101
101
102
104
105
106
106
107
107
108
108
109
110
The Financial Report was authorised for issue by the Directors on 24 August 2017.
111
112
113
115
116
117
125
126
126
127
128
130
140
144
144
145
146
146
146
147
148
153
155
66 ClearView Annual Report 2017
ClearView Wealth Limited
Consolidated statement of profit or loss and other
comprehensive income
For the year ended 30 June 2017
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
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
177,674
(43,130)
134,544
116,462
82,497
138,289
(30,146)
108,143
110,875
76,810
333,503
295,828
-
-
-
-
-
-
-
5
21,154
21,154
17,733
17,738
62,432
(4,670)
-
-
395,935
(72,206)
47,182
291,158
(44,484)
25,696
(120,510)
(109,382)
(97,570)
(13,637)
(89,440)
(13,802)
-
(287)
21,879
170
(100,419)
(44,593)
16,231
3,081
13,150
55,374
(10,796)
(56,383)
(14,768)
32,886
9,271
23,615
21,154
17,738
-
-
-
-
-
-
(5,680)
(5,848)
-
-
-
-
-
-
-
-
-
-
-
-
15,474
(2,034)
17,508
11,890
(1,537)
13,427
13,150
23,615
17,508
13,427
2.20
2.11
4.39
4.27
-
-
-
-
8
9
10
10
25
25
25
11
14
ClearView Wealth Limited
ClearView Annual Report 2017 67
Consolidated statement of financial position
For the year ended 30 June 2017
Consolidated
Note
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
Assets
Cash and cash equivalents
Investments
Receivables
Fixed interest deposits
Reinsurers’ share of life insurance policy liabilities
Current tax assets
Deferred tax asset
Property, plant and equipment
Goodwill
Intangible assets
Total assets
Liabilities
Payables
Current tax liabilities
Provisions
Life insurance policy liabilities
Life investment policy liabilities
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.
15
16
17
18
25
24
21
19
20
22
23
25
25
24
26
12
12
12
12
222,197
217,673
5,880
20,889
1,814,049
1,615,226
377,159
354,158
13,689
11,855
37,947
78,327
15,338
-
16,097
79,584
(703)
641
-
-
-
10,509
10,801
310
1,425
20,452
24,202
1,823
19,952
28,428
-
-
-
-
-
641
573
-
-
-
2,224,446
1,989,522
397,038
388,116
39,909
35,619
523
8,460
-
5,215
(207,632)
(203,830)
1,177,290
1,152,554
788,427
587,205
1,819
996
1,808,796
1,577,759
352
523
18
-
-
-
591
1,484
780
-
26
-
-
-
-
806
415,650
411,763
395,554
387,310
421,717
(15,648)
10,068
417,850
(12,344)
8,342
-
-
(487)
(2,085)
421,717
(61,379)
10,068
25,635
(487)
417,850
(57,887)
8,342
21,090
(2,085)
415,650
411,763
395,554
387,310
68 ClearView Annual Report 2017
ClearView Wealth Limited
Consolidated statement of changes in equity
For the year ended 30 June 2017
Consolidated
Balance at 1 July 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
Profit for the year
Total comprehensive income for the year
Recognition of share based payments
Dividend paid (inclusive of costs)
Entitlement offer costs related to prior year
ESP loans settled through dividend/sale of
renounceable rights
ESP shares vested/(forfeited)
Balance at 30 June 2017
To be read in conjunction with the accompanying Notes.
General
reserve
Profit
reserve
Retained
losses
Attributable
to the
owners of
the parent
$’000
$’000
$’000
$’000
Share
capital
$’000
355,970
-
-
-
-
12,301
(35)
(75)
50,136
(579)
(249)
-
381
Executive
share plan
reserve
$’000
6,607
-
-
1,201
-
-
-
-
-
-
-
652
(118)
(2,085)
-
-
-
-
-
-
-
-
-
-
-
-
417,850
8,342
(2,085)
-
-
-
(3)
(12)
-
-
-
1,012
-
-
1,011
-
-
-
-
-
-
3,882
(297)
1,598
421,717
10,068
(487)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(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
13,150
13,150
-
13,150
13,150
1,012
(16,454)
(16,457)
-
-
-
(12)
1,011
5,183
(15,648)
415,650
ClearView Wealth Limited
ClearView Annual Report 2017 69
Consolidated statement of changes in equity
For the year ended 30 June 2017
Continued
Company
Balance at 1 July 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
Profit for the year
Total comprehensive loss for the year
Recognition of share based payments
Dividend paid (inclusive of costs)
Entitlement offer costs related to prior year
ESP loans settled through dividend/sale of
renounceable rights
ESP shares vested/(forfeited)
Balance at 30 June 2017
To be read in conjunction with the accompanying Notes.
Share
capital
$’000
355,970
-
-
-
-
12,301
(35)
(75)
50,136
(579)
(249)
-
381
Executive
share plan
reserve
$’000
6,607
-
-
1,201
-
-
-
-
-
-
-
652
(118)
Profit
reserve
Retained
losses
Attributable
to the
owners of
the parent
$’000
$’000
General
reserve
$’000
(2,085)
16,391
(54,314)
322,567
-
-
-
-
-
-
-
-
-
-
-
-
17,000
(3,573)
17,000
(3,573)
-
(12,301)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,427
13,427
1,201
(12,301)
12,301
(35)
(75)
50,136
(579)
(249)
652
263
417,850
8,342
(2,085)
21,090
(57,887)
387,310
-
-
-
(3)
(12)
-
-
-
1,012
-
-
1,011
-
-
-
-
-
-
3,882
(297)
1,598
21,000
(3,492)
21,000
(3,492)
-
(16,454)
-
-
-
-
-
-
-
-
17,508
17,508
1,012
(16,457)
(12)
1,011
5,183
421,717
10,068
(487)
25,635
(61,379)
395,554
70 ClearView Annual Report 2017
ClearView Wealth Limited
Consolidated statement of Cash Flows
For the year ended 30 June 2017
Continued
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
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
472,320
415,100
-
5
(306,663)
(288,464)
-
-
(225,031)
(184,560)
17,529
23,040
(827)
16,526
33,659
(1,958)
(3,901)
10,028
-
-
154
(257)
(1,436)
9,620
-
-
311
(1,474)
Income taxes paid
(5,350)
(14,184)
(5,350)
(14,184)
Net cash (utilised)/generated by operating activities
30
(24,982)
(23,881)
674
(7,158)
Cash flows from investing activities
Net cash movement due to investment in subsidary
-
-
(23,000)
(36,000)
Payments for investment securities
Proceeds from sales of investment securities
Net cash paid for business combination
Acquisition of property, plant and equipment
Acquisition of capitalised software
Fixed interest deposits redeemed/(invested)
Loans granted
Convertible note drawn down
Dividends received from subsidiary
(1,967,063)
(2,313,367)
1,863,056
2,173,882
(2,200)
(240)
(7,072)
1,257
(4,585)
-
-
-
(1,654)
(5,510)
30,263
(162)
(612)
-
-
-
-
-
-
(3,409)
-
-
-
-
-
8,479
-
-
(612)
-
21,000
17,000
Net cash (utilised) by investing activities
(116,847)
(117,160)
(5,409)
(11,131)
Cash flows from financing activities
Net movement in liability of non-controlling interest in unit
trusts
Proceeds from share issues (net of expenses)
Repayment of loan borrowings
Share buy back (net of costs)
Share issue expenses/DRP costs
Repayment of ESP loans
Payments for ESP shares reallocated/vested
Cash dividend paid
156,627
153,213
-
-
-
(12)
1,012
5,183
49,556
(45,500)
(75)
(35)
652
132
-
-
-
-
(12)
1,012
5,183
(16,457)
-
(16,457)
-
49,556
(45,500)
(75)
(35)
652
132
-
Net cash generated in financing activities
146,353
157,943
(10,274)
4,730
Net increase/(decrease) in cash and cash equivalents
4,524
16,904
(15,009)
(13,558)
Cash and cash equivalents at the beginning of the financial
year
217,673
200,769
Cash and cash equivalents at the end of the financial year
15
222,197
217,673
20,889
5,880
34,447
20,889
To be read in conjunction with the accompanying Notes.
ClearView Wealth Limited
ClearView Annual Report 2017 71
Notes to the Financial Statements
For the year ended 30 June 2017
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 2016
AASB 2014-4 ‘Amendments to Australian Accounting
Standards – Clarification of Acceptable Methods of
Depreciation and Amortisation’
Introduces a rebuttable presumption that the use of
revenue-based amortisation methods for intangible assets
is inappropriate. Limited opportunity for presumption to be
overcome. Clarifies that revenue-based depreciation for property,
plant and equipment cannot be used.
AASB 2014-9 ‘Amendments to Australian Accounting
Standards – Equity Method in Separate Financial
Statements’
Allows the use of the equity method in separate financial
statements in the accounting for associates, joint ventures
and subsidiaries.
AASB 2015-1 ‘Amendments to Australian Accounting
Standards – Annual Improvements to Australian
Accounting Standards 2012-2014 Cycle’
Amendments to existing accounting standards, particularly in
relation to:
-IFRS 5 – guidance on changes in method of disposal
-IFRS 7 – clarifies ‘continuing involvement’ for servicing contracts
-IFRS 7 – clarifies offsetting disclosures are not specifically
required in interim financial statements, but may be included
under the general requirements of IAS 34
-IAS 19 – clarifies that discount rates used should be in the same
currency as the benefits are to be paid, and
-IAS 34 – clarifies that disclosures may be incorporated in the
interim financial statements by cross-reference to another part
of the interim financial report.
The amendments do not require any significant change to current
practice, but should facilitate improved reporting, including an
emphasis on only including material disclosures, clarity on the
aggregation and disaggregation of line items, the presentation
of subtotals, the ordering of notes and the identification of
significant accounting policies.
AASB 2015-2 ‘Amendments to Australian Accounting
Standards – Disclosure Initiative: Amendments
to AASB 101’
72 ClearView Annual Report 2017
ClearView Wealth Limited
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’
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 20222
30 June 2019
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.
2
The Group has elected to apply the temporary exemption available to insurance entities and defer the implementation of AASB 9 until IFRS 17 is applied in 2022.
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
IFRS 17 - Insurance Contracts
1 January 2021
30 June 2022
2.3 Impact of changes to Australian Accounting
AASB 15 ‘Revenue from Contracts with Customers’
Standards and interpretations
IFRS 17 ‘Insurance Contracts’
IFRS 17 requires insurance liabilities to be measured at
a current fulfilment value and provides a more uniform
measurement and presentation approach for all insurance
contracts. These requirements are designed to achieve
the goal of a consistent, principle-based accounting for
insurance contracts. The Australian equivalent of IFRS
17 will supersedes AASB 1038 Insurance Contracts
as of 1 January 2021.
The Directors of the Company anticipate that the application
of IFRS 17 in the future is likely to have a material impact on
the amounts reported and disclosures made in the Group’s
consolidated financial statements. The Group is in the process
of putting a project in place to implement the new standard
and it is therefore not practicable to provide a reasonable
estimate of the effect of IFRS 17 at this time.
AASB 15 establishes a single comprehensive model for
entities to use in accounting for revenue arising from
contracts with customers. AASB 15 will supersede the
current revenue recognition guidance including AASB 118
‘Revenue,’ AASB 111 ‘Construction Contracts’ and the related
Interpretations when it becomes effective.
The core principle of AASB 15 is that an entity should
recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled
in exchange for those goods or services. Specifically,
the Standard introduces a 5-step approach to revenue
recognition:
• Step 1: Identify the contract(s) with a customer
•
Step 2: Identify the performance obligations
in the contract
• Step 3: Determine the transaction price
ClearView Annual Report 2017 73
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
2. Application of new and revised accounting standards Continued
•
•
Step 4: Allocate the transaction price to the performance
obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies
a performance obligation
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’).
Under AASB 15, an entity recognises revenue when (or as)
a performance obligation is satisfied, that is when ‘control’ of
the goods or services underlying the particular performance
obligation is transferred to the customer.
AASB 15 applies to annual periods beginning on or after 1
January 2018. The Directors of the Company do not anticipate
that the application of AASB 15 in the future will have a
material impact on the amounts reported and disclosures
made in the Group’s consolidated financial statements.
However, it is not practicable to provide a reasonable
estimate of the effect of AASB 15 until the Group performs
a detailed review.
AASB 16 ‘Leases’
AASB 16 provides a comprehensive model for the
identification of lease arrangements and their treatment
in the financial statements of both lessees and lessors.
The accounting model for lessees will require lessees to
recognise all leases on balance sheet, except for short-term
leases and leases of low value assets.
AASB 16 applies to annual periods beginning on or after 1
January 2019. The Directors of the Company do not anticipate
that the application of AASB 16 in the future will have a
material impact on the amounts reported and disclosures
made in the Group’s consolidated financial statements.
However, it is not practicable to provide a reasonable
estimate of the effect of AASB 16 until the Group performs
a detailed review.
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
The financial statements were authorised for issue by the
Directors on 24 August 2017.
(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
74 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
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
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
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
ClearView Annual Report 2017 75
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
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
acquiree are measured in accordance with AASB 2
‘Share-based Payment’ at the acquisition date; and
assets (or disposal groups) that are classified as held for
sale in accordance with AASB 5 Non current assets Held
for Sale and Discontinued Operations are measured in
accordance with that Standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment,
the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum
of the consideration transferred, the amount of any non-
controlling interests in the acquiree and the fair value of the
acquirer’s previously held interest in the acquiree (if any),
the excess is recognised immediately in profit or loss as a
bargain purchase gain.
Non-controlling interests that are present ownership interests
and entitle their holders to a proportionate share of the
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.
76 ClearView Annual Report 2017
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
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
at cost as established at the date of the acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated
to each of the Group’s cash-generating units (or groups of
cash-generating units) that is expected to benefit from the
synergies of the combination.
A cash-generating unit to which goodwill has been allocated
is tested for impairment annually, or more frequently when
there is indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than
its carrying amount, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the unit pro rata
based on the carrying amount of each asset in the unit.
Any impairment loss for goodwill is recognised directly in the
statement of profit or loss and other comprehensive income.
An impairment loss recognised for goodwill is not reversed in
subsequent periods.
On disposal of the relevant cash-generating unit,
the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
The Group’s policy for goodwill arising on the acquisition
of an associate is described at (f) below.
(f) Investments in associates and joint ventures
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in
the financial and operating policy decisions of the investee
but is not control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to
the net assets of the joint arrangement. Joint control is the
contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or joint
ventures are incorporated in these consolidated financial
statements using the equity method of accounting, except
when the investment, or a portion thereof, is classified as
held for sale, in which case it is accounted for in accordance
with AASB 5. Under the equity method, an investment
in an associate or a joint venture is initially recognised in
the consolidated statement of financial position at cost
and adjusted thereafter to recognise the Group’s share of
the profit or loss and other comprehensive income of the
associate or joint venture. When the Group’s share of losses
of an associate or a joint venture exceeds the Group’s interest
in that associate or joint venture (which includes any long-
term interests that, in substance, form part of the Group’s
net investment in the associate or joint venture), the Group
discontinues recognising its share of further losses. Additional
losses are recognised only to the extent that the Group has
incurred legal or constructive obligations or made payments
on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted
for using the equity method from the date on which the
investee becomes an associate or a joint venture. On
acquisition of the investment in an associate or a joint
venture, any excess of the cost of the investment over the
Group’s share of the net fair value of the identifiable assets
and liabilities of the investee is recognised as goodwill, which
is included within the carrying amount of the investment.
Any excess of the Group’s share of the net fair value of
the identifiable assets and liabilities over the cost of the
investment, after reassessment, is recognised immediately in
profit or loss in the period in which the investment is acquired.
The requirements of AASB 139 are applied to determine
whether it is necessary to recognise any impairment loss
with respect to the Group’s investment in an associate or
a joint venture. When necessary, the entire carrying
amount of the investment (including goodwill) is tested for
impairment in accordance with AASB 136 Impairment of
Assets as a single asset by comparing its recoverable amount
(higher of value in use and fair value less costs to sell) with its
carrying amount, any impairment loss recognised forms part
of the carrying amount of the investment. Any reversal of that
impairment loss is recognised in accordance with AASB 136
to the extent that the recoverable amount of the investment
subsequently increases.
The Group discontinues the use of the equity method from
the date when the investment ceases to be an associate or
a joint venture, or when the investment is classified as held
for sale. When the Group retains an interest in the former
associate or joint venture and the retained interest is a
financial asset, the Group measures the retained interest
at fair value at that date and the fair value is regarded as
its fair value on initial recognition in accordance with AASB
139. The difference between the carrying amount of the
associate or joint venture at the date the equity method was
discontinued, and the fair value of any retained interest and
any proceeds from disposing of a part interest in the associate
or joint venture is included in the determination of the gain or
loss on disposal of the associate or joint venture. In addition,
the Group accounts for all amounts previously recognised in
other comprehensive income in relation to that associate or
ClearView Annual Report 2017 77
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
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.
Premium 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
78 ClearView Annual Report 2017
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.
Management fee revenue
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.
Dividend and interest revenue
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.
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
Distribution income
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.
(i) Goods and services tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
•
•
Where the amount of GST incurred is not recoverable
from the taxation authority, it is recognised as part of
the cost of acquisition of an asset or as part of an item
of expense; or
For receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables.
Cash flows are included in the cash flow statement on
a gross basis. The GST component of cash flows arising from
investing and financing activities which is recoverable from,
or payable to, the taxation authority is classified within
operating cash flows.
(j) Principles underlying the conduct of life
insurance business
The life insurance operations of the Group are conducted
within separate statutory funds as required by the Life
Insurance Act 1995 (Life Act) and are reported in aggregate
with the shareholders’ funds in the statement of profit or
loss and other comprehensive income, statement of financial
position, statement of changes in equity and statement
of cash flows. The life insurance operations consist of the
provision of life insurance and life investment contracts.
Life insurance contracts involve the acceptance of significant
insurance risk. Insurance risk is defined as significant if,
and only if, an insured event could cause an insurer to pay
significant benefits in any scenario, excluding scenarios that
lack commercial substance. Insurance contracts include
those where the insured benefit is payable on the occurrence
of a specified event such as death, injury or disability caused
by accident or illness. The insured benefit is not linked to the
market value of the investments held by the Group, and the
financial risks are substantially borne by the Group.
Any contracts issued by the Group and regulated under the
Life Act that do not meet the definition of a life insurance
contract are classified as life investment contracts. Life
investment contracts include investment-linked contracts
where the benefit is directly linked to the market value of the
investments held in the particular investment linked fund.
While the underlying assets are registered in the name of
ClearView Life Assurance Limited (ClearView Life) and the
investment-linked policy owner has no direct access to
the specific assets, the contractual arrangements are such
that the investment-linked policy owner bears the risks and
rewards of the fund’s investment performance.
A component of the life investment contracts includes a
minimum unit price guarantee. ClearView Life derives fee
income from the administration of investment linked funds.
Life investment contracts do not contain any discretionary
participation features (i.e. those where the amount or timing
of allocation of the profit from the underlying investments is
at the discretion of the insurer).
ClearView Annual Report 2017 79
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
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.
(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.
80 ClearView Annual Report 2017
(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.
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
Life insurance contracts
(r) Share based payment arrangements
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.
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.
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 28.
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.
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
ClearView Annual Report 2017 81
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
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
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.
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.
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 and Client Books
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
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.
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.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss,
An internally-generated intangible asset arising from
development (or from the development phase of an internal
82 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
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.
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.
(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
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.
(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.
ClearView Annual Report 2017 83
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
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.
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.
Onerous contracts
Effective interest method
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.
(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.
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
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:
•
•
•
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
84 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
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.
For financial assets carried at amortised cost, the amount of
the impairment loss recognised is the difference between the
asset’s carrying amount and the present value of estimated
future cash flows, discounted at the financial asset’s original
effective interest rate.
For financial assets that are carried at cost, the amount of
the impairment loss is measured as the difference between
the asset’s carrying amount and the present value of the
estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Such impairment
loss will not be reversed in subsequent periods.
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.
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.
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.
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.
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
ClearView Annual Report 2017 85
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the
risks and rewards of ownership of the asset to another party.
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.
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.
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
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
86 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 3. Significant accounting policies continued
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 33.
Other financial liabilities
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;
• Assets arising from reinsurance contracts;
• Recoverability of intangible assets;
•
Impairment of goodwill;
• Deferred tax assets; and
•
Contingent consideration for the acquisition
of Matrix Planning Solutions 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
ClearView Annual Report 2017 87
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 4. Critical accounting judgments and key sources of estimation uncertainty continued
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.
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
$10.4 million (2016: $16.9 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 $10.2 million (2016: $16.7 million).
These intangible assets arose on the acquisition of ClearView
Group Holdings Pty Limited (CVGH), Community and Corporate
Pty Limited (CCFA) and Matrix Planning Solutions Limited
(Matrix). 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.
88 ClearView Annual Report 2017
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 2017 is
$2.8 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 was written off at 15%
per annum on a straight line basis. The triggers that were
considered in testing for annual impairment for the Wealth
Client Book were as follows:
•
Investment returns;
• Maintenance costs;
• Outflows; and
• Discount rates.
During the year the Wealth Management Client Book was
fully amortised.
The Financial Advice Client Book is written off on a straight
line basis over 10 years. The carrying value is $7.4 million
at 30 June 2017.
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
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
4. Critical accounting judgments and key sources of estimation uncertainty continued
30 June 2017, 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.
Recoverability of internally generated software
intangibles
The carrying amount of internally generated capitalised
software at the financial position date was $13.8 million
(2016: $11.5 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 the 2018
financial year, with the project already commenced.
No impairment was required to the carrying values of
internally generated software as at 30 June 2017.
Impairment of goodwill
The carrying amount of goodwill at the reporting date
was $20.5 million (2016: $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. This is also expected to
result in the increased profitability of the 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 portfolios 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
2017, no impairment was required to the carrying value of
the goodwill.
ClearView Annual Report 2017 89
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 4. Critical accounting judgments and key sources of estimation uncertainty continued
Further information about Goodwill is detailed in Note 19.
Deferred tax asset – timing Differences
The Board has considered that it is probable that sufficient
taxable income will be available against which deductible
temporary differences can be utilised.
Deferred tax asset – Capital Losses
ClearView Life has amounts of realised and unrealised capital
losses within its superannuation business in its No. 2 and
No.4 Statutory Funds. The Board has considered the likelihood
of the recovery of these losses and their fair value, and has
concluded that it is appropriate to reduce the deferred tax
asset (DTA) held in respect of those capital losses below the
nominal full recovery amount. This has been implemented
via placing a cap on the recognised DTA. The DTA relating to
capital losses are estimated to be utilised in the foreseeable
future and is expressed as a percentage of the value of
investments held. The same methodology has been adopted
for unit pricing purposes and this financial report.
In addition to the above, the Group has accumulated capital
losses that arose within the 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 2017.
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
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
90 ClearView Annual Report 2017
Method
Profit carrier
Projection
Projection
Projection
Projection
Projection
Projection
Accumulation
Accumulation
Premiums
Premiums
Premiums
Premiums
Premiums
Premiums
n/a
n/a
Key assumptions used in the calculations of life insurance
policy liabilities are as follows:
Discount rates: Discount rates are based on a yield curve
derived from Commonwealth Government bond market
yields as at the valuation date, plus an illiquidity adjustment
based on the difference between these yields and BBSW
swap rates as at the valuation date. As an indication,
the resulting average effective discount rate adopted
was 3.0% (2016: 2.6%).
Acquisition expenses: Per policy acquisition expense
assumptions were based on the actual acquisition expenses
incurred for the 12 months to 30 June 2017.
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 2017
business plan (2016: Based on the 2016 business plan).
Expense inflation of 2.5% p.a. (2016: 2.5% p.a.) was assumed.
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 4. Critical accounting judgments and key sources of estimation uncertainty continued
Lapses: Rates adopted vary by product, duration, age,
commision type 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 2017)
Effect on
profit margins
Increase/
(decrease)
Effect on policy
liabilities
Increase/
(decrease)
$’000
$’000
(5,672)
-
(1,862)
1,419
(6,115)
3,912
-
-
-
3,912
Assumption category
Discount rates and
inflation
Maintenance expenses
Lapses
Mortality and
morbidity
Total
(c) Processes used to select assumptions
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.
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 as well
as industry experience to arrive at a best estimate of future
lapse rates.
Discount rate
(d) Sensitivity analysis
Benefits under life insurance contracts are not contractually
linked to the performance of the assets held. As a result, the
life insurance policy liabilities are discounted for the time
value of money using discount rates that are based on current
observable, objective rates that relate to the nature, structure
and term of the future obligations. The discount rate is based
on Commonwealth Government bond rates adjusted for the
value of the illiquidity of the policy liability. The effect of this
approach is unchanged from that adopted last valuation.
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.
Maintenance expenses and inflation
Maintenance expenses are set having regard to the cost base
ClearView Annual Report 2017 91
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 4. Critical accounting judgments and key sources of estimation uncertainty continued
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 2017 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
17,213
$’000
15,155
(19,605)
(17,261)
-
-
-
-
-
-
-
-
-
-
-
-
$’000
(12,049)
13,723
(4,479)
4,479
(2,436)
2,436
(1,382)
1,382
$’000
(10,608)
12,082
(1,536)
1,536
(2,169)
2,169
(1,382)
1,382
Change in
variable
+ 100 bp
- 100 bp
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.
The Group’s activities expose it to a variety of risks,
both financial and non-financial. Key risks include:
• Asset risks, including investment market risk (interest rate
risk and equity price risk), investment management risk,
credit risk and liquidity risk;
• Asset-liability mismatch risk;
• Expense and discontinuance (lapses, withdrawals
and loss of client) risks; and
• Non-financial risks - regulatory environment, operational,
resilience and strategic risks.
•
Insurance risk;
92 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 5. Risk management
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 (RMCS)
and Risk Management Framework (RMF) to assist it in
identifying and managing the key risks to achieving the
Group’s objectives. The RMCS 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 RMCS 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;
• Risk impacts on and from our staff, our distribution
partners and suppliers and counterparties; and
• Requirements and objectives of our regulators.
The RMCS 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
Insurance risk
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 RMCS and RMF includes suitable
monitoring mechanisms.
As part of the RMCS 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 33 Financial Instruments).
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.
ClearView Annual Report 2017 93
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 5. Risk management continued
(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 RMCS
summarises its approach to insurance risk management.
(b) Methods to limit manage or transfer insurance
risk exposures
Reinsurance
ClearView Life purchases reinsurance to limit its exposure
to accepted insurance risk. ClearView Life cedes to specialist
reinsurance companies a proportion of its portfolio for
certain types of insurance risk. This serves primarily to
reduce the net liability on large individual risks and provide
protection against large losses. The reinsurers used are
regulated by the Australian Prudential Regulation Authority
(APRA) and are members of large international groups with
sound credit ratings.
ClearView Life periodically reviews its reinsurance
arrangements and retention levels.
Underwriting procedures
Underwriting decisions are made using the underwriting
procedures reflected in ClearView Life’s underwriting
systems and detailed in ClearView Life’s underwriting manual.
Such procedures include limits as to delegated authorities
and signing powers. The underwriting process is subject to
ClearView Life’s internal control processes and is subject to
review by the reinsurers from time to time.
Claims management
Strict claims management procedures help ensure the timely
and correct payment of claims in accordance with policy
conditions, as well as limiting exposure to inappropriate
and fraudulent claims.
(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.
(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);
94 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 5. Risk management continued
• 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
• 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 – regulatory environments,
operational, resilience and 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 RMCS and
RMF. Key elements of the RMF include:
•
Internal Group risk and compliance team.
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;
• A detailed overall risk register which identifies the key
risks, mitigations and controls, inherent and residual risks,
and risk owners;
• 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 RMCS
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 and monitoring
of Risk Culture Indicators.
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 Annual Report 2017 95
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
5. Risk management continued
• ClearView Life Nominees is required to maintain
an Operational Risk Financial Requirement (ORFR)
as determined in accordance with Superannuation
Prudential Standard 114. SPS 114 requires that the
trustee maintains adequate financial resources to
address losses arising from the operational risks
that may affect the ClearView Retirement Plan.
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.
96 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 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
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 of:
Insurance Risk
Asset Risk
Asset Concentration Risk
Operational Risk
Aggregation benefit
LPS110 CLAL Minimum
Prescribed Capital Amount
2017
$’000
3,832
-
3,832
-
(2,950)
2017
$’000
330,456
(10,110)
320,346
(50)
-
-
(272,002)
856
(12)
844
71.3
-
(12)
-
-
-
-
48,320
(10,604)
37,716
4.6
(2,753)
(1,669)
(1,435)
(5,676)
929
-
2017
$’000
2,467
-
2,467
(2)
-
(193)
2,272
(556)
1,716
4.1
-
(344)
-
(212)
-
-
ClearView Life
Assurance
Limited
2017
$’000
347,286
(13,761)
2017
$’000
10,531
(3,651)
6,880
333,525
(56)
-
-
6,824
(2,965)
3,859
2.3
-
(139)
-
(2,826)
-
-
(108)
(2,950)
(272,195)
58,272
(14,137)
44,135
4.1
(2,753)
(2,164)
(1,435)
(8,714)
929
-
(12)
(10,604)
(556)
(2,965)
(14,137)
ClearView Annual Report 2017 97
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 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
ClearView Life
Assurance
Limited
2016
$’000
2016
$’000
2016
$’000
2016
$’000
2016
$’000
Net Assets (Common Equity Tier 1 Capital)
6,319
298,875
3,973
12,871
322,038
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)
-
6,319
(6,847)
292,028
-
(2,950)
(167)
-
-
3,973
(2)
-
-
(239,555)
55
3,369
(20)
3,349
52,306
(7,146)
45,160
4,026
(554)
3,472
(4,650)
8,221
(11,497)
310,541
(82)
-
-
8,139
(2,931)
5,208
(251)
(2,950)
(239,500)
67,840
(10,651)
57,189
Capital Adequacy Multiple
165.1
7.3
7.3
2.8
6.4
Prescribed capital amount comprises of:
Insurance Risk
Asset Risk
Asset Concentration Risk
Operational Risk
Aggregation benefit
LPS110 CLAL Minimum
Prescribed Capital Amount
-
(20)
-
-
-
-
(2,193)
(1,098)
-
(4,504)
649
-
-
(376)
-
(178)
-
-
-
(173)
(2,193)
(1,667)
-
-
(2,758)
(7,440)
-
-
649
-
(20)
(7,146)
(554)
(2,931)
(10,651)
98 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 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;
•
•
•
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 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 Annual Report 2017 99
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 7. Segment information continued
Information regarding these segments is provided on the following page. Segment profit or loss represents the profit or loss
earned by each segment including the allocation of directly attributable costs of each segment and an allocation of central
services costs according to an expense allocation model which allocates costs across each segment. The allocation model
excludes the allocation of investment revenue as these are directly recorded against the relevant segments. This is the
measure reported to the Board for the purposes of resource allocation and assessment of segment performance.
The accounting policies of the reportable segments are the same as the Company’s accounting policies described in Note 3.
Segment revenue
Life Insurance
Wealth Management
Financial Advice
Listed entity/Other
Total Revenue
Inter-Segment Revenue
Consolidated Revenue
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2017
$’000
2016
$’000
136,913
117,665
107,095
314
110,963
107,590
97,380
1,258
-
(5,688)
(22,796)
-
-
(3,836)
(17,527)
-
136,913
111,977
84,299
314
110,963
103,754
79,853
1,258
Consolidated segment revenue
361,987
317,191
(28,484)
(21,363)
333,503
295,828
2017
Total operation 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
effect (net of tax)2
Strategic review costs (net of tax)3
Direct closure provision (net of tax)5
Reported profit/(loss)
2016
Total operation 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
effect (net of tax)2
Your Insure Impairments4
Strategic review costs (net of tax)3
Reported profit/(loss)
Life
Insurance
Wealth
Management
Financial
Advice
Listed Entity/
Other
24,867
-
24,867
(2,833)
(5,918)
-
-
3,942
-
3,942
(4,378)
-
-
-
2,231
-
2,231
(980)
-
-
-
16,116
(436)
1,251
24,512
-
24,512
(2,833)
7,749
-
-
2,714
-
2,714
(5,254)
-
-
-
1,479
-
1,479
(1,048)
-
-
-
29,428
(2,540)
431
(503)
(175)
(678)
-
-
(683)
(2,420)
(3,780)
(442)
(1,028)
(1,470)
-
-
(1,898)
(336)
(3,704)
Total
30,537
(175)
30,362
(8,191)
(5,918)
(683)
(2,420)
13,150
28,263
(1,028)
27,235
(9,135)
7,749
(1,898)
(336)
23,615
1
2
3
4
5
The amortisation of the intangibles is associated with the acquisition of wealth and life insurance businesses from Bupa, 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 relation to the evaluation of strategic options and Sony Life becoming a new strategic 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 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
in FY16. 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 the period in relation to the Direct closure. The costs are considered unusual to the ordinary activities of the Group and therefore not reflected as part of
Operating Earnings (after tax).
100 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 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
Consolidated
2017
$’000
76,918
38,470
1,074
2016
$’000
79,043
31,575
257
116,462
110,875
Company
2016
$’000
2017
$’000
-
-
-
-
-
-
5
5
Consolidated
Company
2017
$’000
23,267
17,529
41,701
82,497
2016
$’000
36,660
16,526
23,624
76,810
2017
$’000
154
2016
$’000
733
21,000
17,000
-
-
21,154
17,733
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
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
32,402
8,130
40,532
49,120
1,012
798
845
26,638
7,439
34,077
47,338
1,083
1,322
966
Total employee costs and directors’ fees
51,775
50,709
Other expenses
Interest expense and other costs of finance
Costs associated with Sony Life becoming a strategic
shareholder
827
978
1,472
480
346
-
346
12
-
-
629
641
257
978
Direct closure costs
Your Insure impairment
Total other expenses
Total operating expenses
3,458
-
5,263
97,570
-
3,458
2,702
4,654
89,440
-
4,693
5,680
449
-
449
19
-
-
726
745
1,472
480
-
2,702
4,654
5,848
ClearView Annual Report 2017 101
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 10. Operating expenses continued
Depreciation and amortisation expenses
Depreciation expenses
Software amortisation
Amortisation of acquired intangibles
Consolidated
2017
$’000
639
4,808
8,190
2016
$’000
700
3,967
9,135
Total amortisation and depreciation expenses
13,637
13,802
Company
2016
$’000
2017
$’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 - compliance
Other non-audit services - consulting
Consolidated
2017
$
2016
$
Company
2016
$
2017
$
318,000
303,000
104,200
97,500
99,400
99,400
127,600
127,600
-
-
545,000
530,000
104,200
106,050
91,000
106,050
46,400
34,000
26,800
358,386
-
-
310,976
191,945
135,976
-
-
97,500
91,000
34,000
-
-
Total remuneration for non-audit services
821,812
316,945
268,826
125,000
Total remuneration
11. Income tax
1,366,812
846,945
373,026
222,500
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
a) Income tax recognised in profit or loss
Income Tax expense/(benefit) comprises:
Current tax expense
Deferred tax expense
4,827
322
Over provided in prior years – current tax expense
(2,860)
(3,640)
(1,179)
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
Increase/(decrease) in deferred tax liability
792
3,081
292
823
1,115
(82)
9,271
427
(275)
152
102 ClearView Annual Report 2017
12,759
(1,709)
(1,833)
234
52
300
(12)
8
802
(2,034)
(1,537)
263
591
854
308
-
308
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 11. Income Tax continued
b) Tax losses
Unused tax losses for which no deferred tax asset has been
recognised
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
54,293
83,096
32,635
32,635
Potential tax benefit
11,956
14,853
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:
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
c) Reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense
16,231
32,886
15,474
11,890
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 assessable income
Non deductible expenses
Non-deductible amortisation expenses
Under/(over) provision in prior years
Other
Income tax expense/(benefit) attributable to shareholders
Income tax expense/(benefit) attributable to policyholders
Income tax expense/(benefit)
5,092
4,105
-
-
21,323
6,397
36,992
11,098
15,474
4,642
11,890
3,567
-
(601)
406
2,449
(463)
(15)
8,173
(5,092)
3,081
-
(6,300)
(5,101)
(546)
472
2,740
(388)
-
13,376
(4,105)
9,271
-
-
-
(376)
-
-
-
-
(3)
-
(2,034)
(1,537)
-
-
(2,034)
(1,537)
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
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
27,610
24,286
27,610
24,286
ClearView Annual Report 2017 103
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 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 31.
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.
12. Movements in reserves
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
Retained losses
Balance at the beginning of the financial year
(12,344)
(23,659)
(57,887)
(54,314)
Net profit/(loss) attributable to members of the parent entity
13,150
23,616
(3,492)
(3,573)
Dividend paid during the year
Balance at the end of the financial year
Executive share plan reserve1
Balance at the beginning of the financial year
Recognition of share based payments
ESP loans settled through dividend/sale of renounceable rights
Proceeds from sale of ESP shares vested/forfeited (net of tax)
Balance at end of the financial year
(16,454)
(12,301)
-
-
(15,648)
(12,344)
(61,379)
(57,887)
8,342
1,012
1,011
(297)
10,068
6,607
1,201
652
(118)
8,342
8,342
1,012
1,011
(297)
10,068
6,607
1,201
652
(118)
8,342
1
The above executive share plan reserve relates to share options granted by the Company to employee and contractor participants under the ClearView Executive Share Plan (Plan). Further
information about the Plan is set out in Note 27.
104 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
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 Reserve1
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
-
-
-
-
-
-
-
-
21,089
21,000
16,391
17,000
(16,454)
(12,301)
25,635
21,090
Balance at the beginning of the financial year
(2,085)
(2,085)
(2,085)
(2,085)
Proceeds from sale of ESP shares vested/forfeited (net of tax)
Balance at end of the financial year
1,598
(487)
-
(2,085)
1,598
(487)
-
(2,085)
1
The general reserve comprises:
•
•
The general reserve is not an item of other comprehensive income and the items in the general reserve will not be reclassified subsequently to profit or loss.
A fair value adjustment (-$2.1 million) for contingent consideration in relation to the acquisition of Matrix Planning Solutions Limited; and
The profit on sale of forfeited ESP shares ($1.6 million) where the shares were sold via an off market transfer with the proceeds being received by the Company.
13. Sources of profit (ClearView Life Assurance Limited)
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
Components of profit related to movements in life insurance
liabilities
Planned profit margins released
Profit arising from the difference between actual investment income
and expected interest on policy liabilities
Profit arising from the difference between actual and expected
experience
Impact of change in economic assumptions
Life insurance
Components of profit related to movements in life investment
liabilities
Expected profit margin
Life investment
Profit for the statutory funds
Profit for the shareholders fund
21,683
4,187
17,007
4,708
(4,182)
165
(2,739)
18,949
10,381
32,261
2,812
2,812
21,735
13
2,931
2,931
35,192
73
Profit for ClearView Life Assurance Limited
21,748
35,265
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
ClearView Annual Report 2017 105
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
14. Earnings per share
Earnings per share (cents)
Basic earnings (cents)
Diluted earnings (cents)
Basic earnings per share
Consolidated
2017
2016
2.20
2.11
4.39
4.27
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as
follows:
Profit for the year attributable to owners of the Company ($'000)
Earnings used in the calculation of basic earnings per share ($'000)
13,150
13,150
23,615
23,615
Weighted average number of ordinary shares for the purpose of basic earnings per share ('000's)
597,808
537,588
Diluted earnings per share
The earnings used in the calculation of diluted earnings per share are as follows:
Profit for the year attributable to owners of the Company ($'000)
Earnings used in the calculation of total diluted earnings per share
13,150
13,150
23,615
23,615
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)
597,808
537,588
25,550
15,691
623,358
553,279
15. Cash and cash equivalents
Cash at bank
Total cash and cash equivalents
Consolidated
Company
2017
$’000
2016
$’000
222,197
217,673
222,197
217,673
2017
$’000
5,880
5,880
2016
$’000
20,889
20,889
106 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 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
Related party receivables
Loans receivable
Other debtors
Total receivables
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
-
-
377,159
354,158
262,428
256,093
433,603
337,706
-
-
-
-
696,031
593,799
377,159
354,158
448,086
357,944
424,963
337,156
806,030
762,119
-
-
311,988
259,308
311,988
259,308
-
-
-
-
-
-
-
-
-
-
-
-
1,814,049
1,615,226
377,159
354,158
Consolidated
2017
$’000
392
3,909
(800)
2,036
10,317
3,622
3,298
-
4,530
8,612
2,031
2016
$’000
773
3,254
(667)
2,232
888
509
3,824
-
567
3,722
995
Company
2016
$’000
2017
$’000
-
-
-
-
-
-
-
-
-
-
-
-
30
6,472
3,774
3,409
4
80
11,775
-
-
-
37,947
16,097
13,689
11,855
$5.6 million (2016: $2.1 million) of Total consolidated receivables are expected to be recovered more than 12 months from the
reporting date and $3.4 million (2016: $4.9 million) of Total receivables for the Company are expected to be recovered more
than 12 months from the reporting date.
ClearView Annual Report 2017 107
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
18. Fixed interest deposits
Fixed interest term deposits
Consolidated
Company
2017
$’000
2016
$’000
78,327
79,584
2017
$’000
-
2016
$’000
-
Fixed interest term deposits, held at year end, yield an average fixed interest rate of 2.37% (2016: 2.58%)
19. Goodwill
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
Gross carrying amount
Balance at the beginning of the financial year
19,952
19,952
Additional amount recognised through acquisition of business1
500
-
Balance at the end of the financial year
20,452
19,952
Net book value
Balance at the beginning of the financial year
Balance at the end of the financial year
19,952
20,452
19,952
19,952
-
-
-
-
-
-
-
-
-
-
1
In August 2016 the Group acquired the business of an adviser under pre-existing contracted arrangements. $0.5 million of goodwill was recognised on this acquisition.
As required under accounting standards the Group completes an impairment assessment at each reporting date. As at 30 June
2017, no impairment was required to the carrying value of goodwill. Further details have been provided in Note 4.
108 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 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
12,115
1,500
46,585
20. Intangible assets
2017
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
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
23,611
1,500
63,317
7,072
30,683
-
1,500
1,700
65,017
4,808
16,923
-
1,500
8,190
54,775
11,496
13,760
-
-
16,732
10,242
18,102
5,509
23,611
1,500
63,317
-
-
1,500
63,317
$’000
$’000
$’000
$’000
$’000
$’000
Balance at the beginning of the year
8,147
1,500
37,461
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
3,968
12,115
-
9,124
1,500
46,585
9,955
11,496
-
-
25,856
16,732
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.
ClearView Annual Report 2017 109
20
-
20
20
-
20
-
-
200
-
200
-
-
-
88,648
8,772
97,420
60,220
12,998
73,218
200
200
28,428
24,202
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
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 21. Property, plant and equipment
2017
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
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
Office
furniture
Office
equipment
Computer
hardware
Leasehold
improvements
$’000
$’000
$’000
$’000
Consolidated
Total
$’000
432
17
-
449
420
15
435
14
46
35
-
81
34
17
51
30
1,415
3,654
5,547
107
12
1,534
70
-
3,724
229
12
5,788
1,076
2,194
3,724
226
1,302
381
2,575
639
4,363
232
1,149
1,425
$’000
$’000
$’000
$’000
$’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
No property, plant and equipment is held by the Company.
110 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 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
2017
$’000
5,180
12,127
6,962
566
2,298
1,194
11,239
343
2016
$’000
7,884
8,487
6,282
481
2,138
1,336
8,233
778
39,909
35,619
2017
$’000
292
-
10
-
-
-
-
50
352
2016
$’000
484
-
5
-
-
-
-
291
780
$0.9 million (2016: $1.4 million) of Total consolidated payables are expected to be settled more than 12 months from the
reporting date and nil (2016: nil) of total payables of the Company are expected to be settled more than 12 months from the
reporting date.
ClearView Annual Report 2017 111
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 23. Provisions
Current and non current
Make good provision
Employee leave provisions
Provision for restructuring
Other provisions
Total
Make good provision1
Balance at the beginning of the financial year
Additional provisions raised
Utilised during the period
Non-utilised provisions transferred
Balance at the end of the financial year
Employee leave provision2
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
419
3,849
3,031
1,161
8,460
270
149
-
-
419
270
3,540
20
1,385
5,215
432
148
(89)
(221)
270
-
-
-
18
18
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26
24
(10)
(22)
18
-
-
-
26
26
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26
-
-
-
26
Balance at the beginning of the financial year
3,540
3,392
Provision acquired in a business combination
Additional provisions raised
Utilised during the period
Balance at the end of the financial year
Provision for Restructuring3
Balance at the beginning of the financial year
Additional provisions raised
Utilised during the period
Balance at the end of the financial year
Other provisions4
Balance at the beginning of the financial year
Additional provisions raised
Utilised during the period
Unutilised provisions transferred during the period
Balance at the end of the financial year
-
890
(581)
3,849
20
3,458
(447)
3,031
1,385
24
(344)
96
1,161
-
836
(688)
3,540
122
-
(102)
20
1,429
(237)
-
193
1,385
1
2
3
4
The provision for make good represents the accrued liability for expected costs in relation to the restoration of leased premises on the termination of the lease. The provisions are
expected to be settled on vacating the leased premises on expiration of the relevant lease.
The provision for 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.
The provision for restructuring relates to the expected costs in relation to the closure of Direct business.
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.
112 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 24. Deferred tax balances
Deferred tax assets
Deferred tax assets
Deferred tax liabilities
Deferred tax assets
Arising on income 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 expenses recognised in profit or loss
Unrealised gains on investments
Prepaid expenses
Other
Deferred tax liability
Consolidated
2017
$’000
2016
$’000
10,509
1,819
10,801
996
440
15
4,329
5,265
267
193
-
495
148
3,177
6,263
513
205
-
10,509
10,801
512
1,307
-
1,819
526
470
-
996
Company
2016
$’000
573
-
14
-
-
-
513
-
46
573
-
-
-
-
2017
$’000
310
591
28
-
-
-
267
-
15
310
-
-
591
591
ClearView Annual Report 2017 113
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 24. Deferred tax balances continued
2017
Gross deferred tax liabilities
Gross deferred tax assets
Total
2016
Gross deferred tax liabilities
Gross deferred tax assets
Total
2017
Gross deferred tax liabilities
Gross deferred tax assets
Total
2016
Gross deferred tax liabilities
Gross deferred tax assets
Total
Opening
balance
$’000
(996)
10,801
9,805
(1,271)
11,029
9,758
Transfers
from
subsidiaries
$’000
Sharehold-
er Equity
$’000
-
-
-
-
-
-
-
-
-
-
199
199
$’000
$’000
$’000
-
573
573
-
682
682
-
-
-
-
-
-
-
-
-
-
199
199
Consolidated
(Charge)/
Credit to
income
$’000
(823)
(292)
(1,115)
275
(427)
(152)
$’000
(591)
(263)
(854)
-
(308)
(308)
Closing
balance
$’000
(1,819)
10,509
8,690
(996)
10,801
9,805
Company
$’000
(591)
310
(281)
-
573
573
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 $54.3 million (tax effected $11.9 million) consolidated and $32.6 million
(tax effected $9.8 million) for the Company. Refer to Note 11 for further details.
114 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 25. Policy liabilities
(a) Reconciliation of movements in policy liabilities
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
Life investment policy liabilities
Opening gross life investment policy liabilities
Net increase in life investment policy liabilities reflected in the
income statement
1,152,554
1,160,627
100,419
54,836
Decrease in life investment policy liabilities due to management fee
reflected in the income statement
(22,503)
(23,139)
Life investment policy contributions recognised in policy liabilities
175,231
147,381
Life investment policy withdrawals recognised in policy liabilities
(228,411)
(187,151)
Closing gross life investment policy liabilities
1,177,290
1,152,554
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
(Increase)/decrease in reinsurance assets reflected in the income
statement
Closing balance
Net policy liabilities at balance date
(203,830)
(156,641)
18,077
8,185
(21,879)
(55,374)
(207,632)
(203,830)
969,658
948,724
703
2,233
(15,871)
(12,326)
(170)
10,796
(15,338)
703
954,320
949,427
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 $65.5 million (2016: $69.2 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
Consolidated
2017
$’000
292,852
353,242
2016
$’000
242,510
265,333
(1,201,508)
(984,868)
(555,414)
(477,025)
332,444
273,897
(222,970)
(203,128)
Company
2016
$’000
2017
$’000
-
-
-
-
-
-
-
-
-
-
-
-
ClearView Annual Report 2017 115
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
25. 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.
26. Issued capital
Issued and fully paid ordinary shares
Balance at the beginning of the financial year
597,429,600
417,850
524,610,834
355,970
2017
2017
2016
No. of Shares
$’000
No. of Shares
Company
2016
$’000
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
Dividend costs
Share buy back (inclusive of costs)
Entitlement offer
Entitlement offer costs related to prior year
Entitlement offer costs (net of tax)
-
-
-
-
-
-
-
-
-
(3)
-
-
(12)
-
12,948,536
12,301
-
-
(83,572)
(35)
-
(75)
58,984,051
50,136
-
-
-
(579)
132
Shares issued during the year (ESP vested/forfeited)
5,836,450
3,882
969,751
Balance at the end of the financial year
603,266,050
421,717
597,429,600
417,850
Executive share plan
Balance at the beginning of the year
Shares granted under employee share plan (note 27)
Shares forfeited during the year
Shares reallocated during the year
Shares exercised during the year
Balance at the end of the financial year
60,743,527
1,300,000
(3,693,143)
-
(2,143,307)
56,207,077
-
-
-
-
-
-
58,371,348
6,160,179
(2,438,648)
(379,601)
(969,751)
60,743,527
-
-
-
-
-
-
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 27.
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.
116 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
27. 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 (SMT) 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.
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, Mr Chiert
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).
As noted in the Renumeration Report it is intended that
ESP loans become interest bearing for SMT members from
30 November 2017
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
ClearView Annual Report 2017 117
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 27. Share-based payments continued
• 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.
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
118 ClearView Annual Report 2017
(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.
(c) After 1 July 2015:
•
•
For ESP Shares issued to employee participants after
1 July 2015, unless stated otherwise in the participants
Invitation Offer, all performance and vesting conditions
in relation to these shares, are not deemed to have been
met upon a Change of Control
“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.
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 27. Share-based payments continued
Share-based payment arrangements
The following share-based payment arrangements were in existence during the current and comparative reporting periods:
Issue Date
Type of
Arrangement8
Number Grant date Expiry date
30/06/2008 KMP
500,000
30/06/2008
Change in
Control
29/09/2009 KMP and SM
3,500,000
29/09/2009
29/09/2014
Series
Series 66
Series 72
Series 103,10
Series 114,10
Series 125,10
Series 155
Series 165
Series 175
Series 18
Series 19
Series 20
Series 21
Series 22
Series 23
Series 245
Series 25
Series 267
25/06/2010 MD
25/06/2010 MD
25/06/2010 MD
18/08/2011 SM
6/10/2011 SM
1/03/2012 SM
1/03/2012 CP
3/04/2012 CP
3/04/2012 CP
25/05/2012 CP
29/06/2012 CP
6/08/2012 CP
22/08/2012 SM
21/12/2012 CP
16/04/2013 SM
2,000,000
25/06/2010
26/03/2015
4,000,000
25/06/2010
26/03/2015
4,000,000
25/06/2010
26/03/2015
3,000,000
1/07/2011
1/07/2016
3,950,000
1/09/2011
1/09/2016
2,150,000
1/03/2012
1/03/2017
2,500,000
10/02/2012
10/02/2017
600,000
15/03/2012
15/03/2017
700,000
3/04/2012
3/04/2017
2,325,000
7/05/2012
7/05/2017
1,000,000
29/06/2012
29/06/2017
4,600,000
6/08/2012
6/08/2017
450,000
22/08/2012
22/08/2017
1,300,000
21/12/2012
21/12/2017
2,650,000
12/04/2013
Series 27
16/04/2013 SM
150,000
12/04/2013
Series 28
Series 29
Series 30
Series 31
16/04/2013 CP
31/05/2013 CP
27/06/2013 CP
14/10/2013 SM
566,667
12/04/2013
12/04/2018
1,700,000
31/05/2013
31/05/2018
750,666
27/06/2013
27/06/2018
1,175,000
14/10/2013
Series 32
14/10/2013 SM
1,175,000
14/10/2013
Series 33
29/11/2013 SM
75,000
29/11/2013
50% Change
in Control;
50% 1 year
after
1 year post
Change in
Control
Change in
Control
1 year post
Change in
Control
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
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.50
0.54
0.55
0.58
0.57
0.57
0.69
0.68
0.64
0.61
0.61
0.61
0.10
0.07
0.11
0.08
0.06
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
n/a
0.10
0.10
0.11
0.08
0.06
0.13
0.13
0.11
0.15
0.16
0.17
0.17
0.16
0.21
0.19
0.20
0.29
0.27
0.22
0.22
0.21
0.17
0.19
0.17
ClearView Annual Report 2017 119
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 27. Share-based payments continued
Issue Date
Type of
Arrangement8
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 34
29/11/2013 SM
75,000
29/11/2013
1 year post
Change in
Control
Change in
Control
1 year post
Change in
Control
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
8-Jul-19
26/11/2014 SM including KMP
181,518
26/11/2014
25-Nov-18
26/11/2014 CP
2,413,368
26/11/2014
25-Nov-19
26/11/2014 SM including KMP
181,518
26/11/2014
25-Nov-19
26/11/2014 SM including KMP
181,518
26/11/2014
25-Nov-20
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
Series 55
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
20/06/2016 SM including KMP
79,694
20/06/2016
20/06/2021
14/06/2017 CP
1,300,000
14/06/2017
14/06/2022
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
1.38
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
na
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
0.30
1
2
3
4
5
6
7
On the 14th February 2013, the Board approved a change to the rules of the ESP which changed the interest rate charged on the financial assistance granted to the ESP Participants from
the RBA official cash rate plus 25 basis points to zero percent. This resulted in changes to the inputs of the option pricing model which had an impact on the fair value of the option at the
date of the change.
A Change of Control provision was triggered on 23 October 2009 by GPG increasing its shareholding above 50%. As a result, the vesting conditions for 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.
8
KMP = Key Management Personnel, SM = Senior Management, MD = Managing Director, CP = Contractor Participant.
120 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 27. 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 15
Series 16
Series 17
Series 18
Series 19
0.50
0.50
31.49
3.00
0.50
0.51
35.35
3.00
0.50
0.50
36.70
3.00
0.50
0.50
37.06
4.95
0.50
0.50
36.47
4.95
Series 20
Series 21
Series 22
Series 23
Series 24
0.50
0.50
36.61
5.00
0.50
0.49
36.94
4.95
0.50
0.49
37.33
5.00
0.54
0.53
37.85
5.00
0.55
0.54
37.99
3.00
Series 25
Series 26
Series 27
Series 28
Series 29
0.58
0.58
35.21
5.00
0.57
0.57
35.92
5.99
0.57
0.57
35.92
4.99
0.69
0.69
35.92
4.99
0.68
0.68
36.81
5.00
Series 30
Series 31
Series 32
Series 33
Series 34
0.64
0.64
36.90
5.00
0.61
0.61
22.20
5.00
0.61
0.61
22.20
6.00
0.61
0.61
22.11
5.00
0.61
0.61
22.11
6.00
Series 35
Series 36
Series 37
Series 38
Series 39
0.65
0.65
22.01
5.00
0.65
0.65
22.01
6.00
0.65
0.65
22.01
5.00
0.75
0.75
21.12
4.00
0.75
0.75
21.12
5.00
Series 40
Series 41
Series 42
Series 43
Series 44
0.75
0.75
21.12
6.00
0.75
0.75
21.12
5.00
0.79
0.79
16.78
5.00
1.01
1.01
19.79
4.00
1.01
1.01
21.56
5.00
Series 45
Series 46
Series 47
Series 48
Series 49
1.01
1.01
24.18
6.00
1.00
1.00
20.84
4.00
1.00
1.00
20.84
5.00
1.00
1.00
20.84
6.00
0.97
0.97
20.15
5.00
ClearView Annual Report 2017 121
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 27. 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 50a
Series 50b
Series 50c
Series 51a
Series 51b
0.97
0.97
20.15
4.00
0.97
0.97
20.15
5.00
0.97
0.97
20.15
6.00
0.96
0.96
20.03
5.00
0.96
0.96
20.03
6.00
Series 52
Series 53
Series 54
Series 55
0.93
0.93
20.31
5.00
0.93
0.93
20.31
5.00
0.94
0.94
20.55
5.00
1.38
1.38
20.11
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
2017
Weighted
average exercise
price
0.64
1.38
1.32
Number of
shares
58,371,348
6,160,179
-
-
(2,438,648)
0.82
-
(969,751)
(379,601)
Number of
shares
60,743,527
1,300,000
(3,693,143)
-
(2,143,307)
-
2016
Weighted
average exercise
price
0.61
0.96
-
0.73
0.50
-
0.64
Balance at the end of the financial year
56,207,077
0.61
60,743,527
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
In accordance with the provisions of the ESP, during the financial year 1,300,000 shares were granted to financial advisers
with the grant dates set out above. 2,143,307 vested ESP shares were exercised during the financial year, of which 1,361,987
were transferred to the participants personal holdings and 781,320 of which were sold via an off market transfer to repay
outstanding ESP loans attached to the vested ESP shares with the balance being paid to the participant. 3,693,143 ESP shares
did not vest during the financial year and have been forfeited. These unvested shares were sold via an off market transfer with
the full proceeds of the sale being received by the Company.
The following table outlines the vesting conditions and performance conditions of share based payment arrangements in
existence during the period.
Employee participants
Series
Vesting Conditions
Performance Conditions
Series 6 – 30 June 2008 Issue
Series 7 – 29 September 2009 Issue
Series 10 – 25 June 2010 Issue
Series 11 – 25 June 2010 Issue
Series 12 – 25 June 2010 Issue
Series 15 – 18 August 2011 Issue
Series 16 - 6 October 2011 Issue
Nil1
Nil1
Nil2
Nil2
Nil2,4
Nil4
Nil4
122 ClearView Annual Report 2017
Nil
Nil
Nil
Nil
Nil
Nil
Nil
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 27. Share-based payments continued
Series
Vesting Conditions
Performance Conditions
Series 17 - 1 March 2012
Series 24 - 22 August 2012 Issue
Nil4
Nil4
Series 26 - 16 April 2013 Issue
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
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
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
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
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
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%.
ClearView Annual Report 2017 123
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 27. Share-based payments continued
Contractor participants
Series
Vesting conditions 1
Performance
conditions
Series 18 – 1 March 2012 Issue 4 years and 346 days from the date of issue and achievement of specific
Nil
target
Series 19 – 3 April 2012 Issue
Series 21 – 25 May 2012 Issue
4 years and 346 days from the date of issue and achievement of specific
target
4 years and 347 days from the date of issue and achievement of specific
target
Series 22 – 29 June 2012 Issue
5 years from the date of issue and achievement of specific target
Series 23 – 6 August 2012 Issue 5 years from the date of issue and achievement of specific target
Series 25 – 21 December 2012
Issue
Series 28 – 16 April 2013 Issue
5 years from the date of issue and achievement of specific target
4 years and 361 days from the date of issue and achievement of specific
target
Series 29 – 31 May 2013 Issue
5 years from the date of issue and achievement of specific target
Series 30 – 27 June 2013 Issue
5 years from the date of issue and achievement of specific target
Series 37 – 31 January 2014
Issue
Series 41 – 30 May 2014 Issue
Series 42 – 9 July 2014 Issue
5 years from the date of issue and achievement of specific target
5 years from the date of issue and achievement of specific target/balanced
scorecard
5 years from the date of issue and achievement of specific target/balanced
scorecard
Series 44 – 26 November 2014
Issue
5 years from the date of issue and achievement of specific target/balanced
scorecard
Series 47 – 30 March 2015
Issue
5 years from the date of issue and achievement of specific target/balanced
scorecard
Series 49 – 30 July 2015 Issue
5 years from the date of issue and achievement of specific target/balanced
scorecard
Series 53 – 27 April 2016 Issue
5 years from the date of issue and achievement of balanced scorecard
Series 55 – 14 June 2017 Issue
5 years from the date of issue and achievement of balanced scorecard
1
Subject to qualifying circumstances as outlined in the ESP Plan Rules.
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
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 had previously announced that it had considered several alternatives in relation to its major shareholder, Crescent
Capital Partners and its Associates (Crescent) selling down its 52.9% shareholding. This process resulted in Sony Life Insurance
Co., Ltd (Sony Life) becoming a new strategic shareholder in October 2016 following their agreement with Crescent to acquire
a 14.9% stake in ClearView.
124 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 27. Share-based payments continued
Shares that were fortfeited during the year
The following table shows the shares that were fortfeited due to the vesting conditions not being met.
Date
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
Total
Number of share cancelled
Cancelled from
75,000
161,238
39,604
125,000
189,873
400,000
1,000,000
302,160
40,470
116,145
109,180
111,375
378,203
149,867
424,164
32,910
18,350
19,604
3,693,143
Series 46, 47 and 48
Series 52
Series 43
Series 46, 47 and 48
Series 42
Series 46
Series 41
Series 19
Series 23
Series 25
Series 25
Series 30
Series 30
Series 37
Series 37
Series 37
Series 23
Series 43
Shares that were exercised during the year
The following table shows the shares that were exercised due to the vesting conditions being met.
Date
5/04/2017
16/06/2017
16/06/2017
16/06/2017
16/06/2017
23/06/2017
Total
Number of share exercised
Exercised from
700,000
89,307
450,000
150,000
500,000
254,000
2,143,307
Series 20
Series 43
Series 21
Series 17
Series 21
Series 16, 38, 39 and 40
28. Shares granted under the executive share plan
In accordance with the provisions of the ESP, as at 30 June 2017, key management, members of the senior management
team, the managing director and contractor participants have acquired 56,207,077 (2016: 60,743,527) ordinary shares.
Shares granted under the ESP carry rights to dividends and voting rights. Financial assistance amounting to $36,780,762
(2016: $39,618,401) 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 27.
ClearView Annual Report 2017 125
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 29. Dividends
Dividend payments on Ordinary shares
2016 final dividend (2016: 2015 final dividend) (cps)
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
2017
$’000
Per share
2016
$’000
Per share
2.50
2.50
16,454
16,454
2.10
2.10
12,301
12,301
2017 final dividend (2016: 2016 final dividend) (cps)
2.75
18,136
2.50
16,454
Dividend franking account
Amount of franking credit available for use in subsequent financial
years
-
27,610
-
24,286
1
2
The impact on the dividend franking account for the final dividend declared is expected to reduce the franking account by $7.8 million (2016: $7.1 million). There are no other income tax
consequences for dividends not recognised in the statement of financial position.
The total 2017 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 2018 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 2017 of $18.14 million
(2016: $16.45 million).
30. 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 provisions
Movements in liabilities to non-controlling interest in controlled unit
trust
(Increase)/decrease in receivables
Decrease/(increase)/ in deferred tax asset
Increase/(decrease) in payables
Increase/(decrease) in policy liabilities
Increase/(decrease) in current tax liability
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
13,150
23,615
17,508
13,427
(62,432)
-
4,670
287
13,637
13,802
-
-
-
-
-
-
1,012
(306)
-
1,083
(16)
1,012
1,083
-
-
-
(21,000)
(17,000)
(32,041)
(26,625)
3,035
44,593
2,381
14,768
(17,563)
1,115
4,761
4,893
1,164
721
(47)
115
(53,446)
(5,189)
-
-
-
2,306
263
(579)
-
1,164
674
(421)
2,381
-
(1,971)
109
423
-
(5,189)
(7,158)
Net cash (utilised)/generated by operating activities
(24,982)
(23,881)
126 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 31. Subsidiaries
Name of Entity
Parent entity
Principal Activity
Parent
Entity
Country of
incorporation
2017
%
2016
%
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)
Administration
Service Entity
ClearView Financial Advice Pty Limited (CFAPL)
Advice Company
Matrix Planning Solutions Limited (MPS)
Affiliate Financial Planning Pty Limited
Advice Company
Non operating
Controlled unit trusts
CVW Pimco International Bonds Fund
CVW Schroder Equity Opportunities Fund
CVW Fixed Interest Fund
CVW SSGA International Shares Fund
CVW Listed Property Fund
CVW Cash Fund
CVW CFS Infrastructure Fund
CVW RARE 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
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
47
58
93
51
72
56
56
30
92
99
98
77
21
100
100
100
100
100
100
100
100
96
54
62
93
69
75
59
65
99
90
98
98
81
33
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).
ClearView Annual Report 2017 127
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 32. 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 31 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 48 to 64 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
Limited recourse loans
Consolidated
2017
$
2016
$
4,843,740
5,128,138
389,144
176,233
533,940
157,063
5,409,117
5,819,141
Limited recourse loans were granted to KMP ESP participants in May 2017. This limited recourse loan facility is secured by the
ESP shares held and will become interest bearing from 30 November 2017 at 3 year BBSY rate plus a margin of 1%. This limited
recourse facility is reflected as loans on balance sheet of the listed entity.
(c) Transactions between the Group and its related parties
Other related parties include:
• Entities with significant influence over the Group;
• Associates; and
• Subsidiaries.
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 2017 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; and
•
Directors fees were paid to Sony Life Insurance Co., Ltd.
The ultimate parent entity in the Group is ClearView Wealth Limited which is incorporated in Australia.
128 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 32. Related party transactions continued
Outstanding balances between the Group and its related parties
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-
(3,667,738)
(523,676)
(992,035)
211,021 (1,486,965)
(13,276)
(3,773,887)
- (10,246,556)
3,667,738
-
167,090
634,285
(7,358)
4,424,191
-
-
-
8,885,946
523,676
(167,090)
-
66,280
-
314,793
(158,366)
- 756,350
1,335,643
992,035
(634,285)
(66,280)
-
7
1,027,033
(211,021)
7,358
-
(7)
-
497,443
1,486,965 (4,424,191)
(314,793)
(1,027,033)
(497,443)
13,276
-
158,366
3,773,887
-
-
-
-
(756,350)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,318,510
293,773
-
(4,776,495)
-
-
-
171,642
3,773,887
(756,350)
10,246,556
(8,885,946)
(1,335,643) (1,318,510)
(293,773)
4,776,495
(171,642)
(3,773,887) 756,350
-
2017
ClearView
Wealth Limited
ClearView Life
Assurance
Limited
ClearView
Financial
Management
Limited
ClearView
Financial Advice
Pty Limited
Matrix Planning
Solutions
Limited
ClearView
Admin Services
Pty Limited
ClearView Life
Nominees
Pty Limited
ClearView
Retirement Plan
CFML Managed
Investment
Schemes
ClearView Annual Report 2017 129
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
32. Related party transactions continued
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-
(6,616,997)
(12,747)
128,517
(271,757)
(4,847,916)
(153,512)
6,616,997
-
127,116
607,712
(8,657)
4,474,005
-
12,747
(127,116)
-
(47,953)
-
223,538
(571,495)
(128,517)
(607,712)
47,953
-
(25,734)
926,358
84,777
271,757
8,657.00
-
25,734.00
-
313,518
-
4,847,916 (4,474,005)
(223,538)
(926,358)
(313,518)
-
(21,257)
153,512
-
571,495
(84,777)
-
21,257
-
11,774,412 (11,817,173)
510,279
(297,125)
(619,666)
1,110,760
(661,487)
-
-
-
-
-
-
-
-
-
(11,774,412)
- 11,817,173
-
-
-
(510,279)
297,125
619,666
-
(1,110,760)
-
-
661,487
-
2016
ClearView
Wealth Limited
ClearView Life
Assurance
Limited
ClearView
Financial
Management
Limited
ClearView
Financial Advice
Pty Limited
Matrix Planning
Solutions
Limited
ClearView
Admin Services
Pty Limited
ClearView Life
Nominees
Pty Limited
(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.
33. 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.
130 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
33. Financial instruments continued
(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 26).
The Group has access to a $60 million Debt Funding Facility
as at the date of this report. This was put in place in July 2017
Fair Value Hierarchy
for 3 years to replace the facility that was in place at 30 June
2017 (and due to expire in December 2017). The $60 million
3 year debt facility provides the Group with further capital
support and to meet liquidity needs from time to time.
As at 30 June 2017, the Company has not drawn down
any amount under the Debt Funding Facility.
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.
The table below summarises financial instruments carried at fair value, by valuation method. The different levels have been
defined as follows:
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within level 2 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
•
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Financial assets
2017
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
2016
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
Financial Liabilities
2017
Life investment policy liability
Total
2016
Life investment policy liability
Total
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
262,428
-
-
448,086
1,103,535
-
1,365,963
448,086
256,093
-
-
424,963
934,170
-
1,190,263
424,963
-
-
-
-
1,177,290
1,177,290
1,152,554
1,152,554
-
-
-
-
-
-
-
-
-
-
-
-
262,428
448,086
1,103,535
1,814,049
256,093
424,963
934,170
1,615,226
1,177,290
1,177,290
1,152,554
1,152,554
ClearView Annual Report 2017 131
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 33. Financial instruments continued
(e) Categories of financial instruments
The Group has investments in the following categories of financial assets and liabilities:
Financial assets
Investment in group companies
Cash and cash equivalents
Fixed interest deposits (held to maturity deposits)
Life insurance investment assets (FVTPL)
Loans and receivables
Current tax assests
Total
Financial liabilities
Policyholder liabilities
Payables
Current tax liabilities
Provisions
Total
Consolidated
Company
2017
$’000
2016
$’000
2017
$’000
2016
$’000
-
-
377,159
354,158
222,197
217,673
5,880
20,889
78,327
79,584
1,814,049
1,615,226
-
-
-
-
37,947
16,097
13,689
11,855
-
641
-
641
2,152,520
1,929,221
396,728
387,543
954,320
949,427
39,909
35,619
523
8,460
-
5,215
1,003,212
990,261
-
352
523
18
893
-
780
-
26
806
(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 RMCS;
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.
132 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 33. 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 2017,
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.
ClearView Annual Report 2017 133
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 33. Financial instruments continued
The following table reflects the shareholder financial assets with credit risk exposure monitored by the CIC:
Consolidated
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
156,319
169,921
156,319
169,921
5,880
5,880
20,889
20,889
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 and debt securities/fixed interest
securities
Rating
AAA to AA-
In addition to the credit risk exposures above, the Group had
a $15.3 million (2016: $0.7 million payable) exposure to Swiss
Re Life & Health Australia Ltd in relation to reinsurer’s share of
policy liabilities. Credit risk associated with receivables is con-
sidered 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.
134 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 33. Financial instruments continued
The following tables summarise the realisation profile of financial assets at the reporting date. There were no financial assets
past due or impaired at the reporting date other than those provided for.
Consolidated
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
2017
Receivables
Outstanding life insurance premiums net of
provision
Accrued dividends
Investment income and distribution income
Loans
Prepayments
Related party receivables
Total
2016
Receivables
Current tax assets
Outstanding life insurance premiums net of
provision
Accrued dividends
Investment income and distribution income
Loans
Total
$’000
5,152
3,078
2,036
10,317
1,234
1,910
756
$’000
692
25
-
-
80
834
-
24,483
1,631
3,088
-
2,558
2,232
888
601
9,367
19
641
25
-
-
336
1,021
$’000
432
$’000
38
6
-
-
-
-
-
1,450
5,579
554
3,774
6,216
-
-
5,617
6
-
3
-
-
-
-
-
-
-
Over
5 years
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
640
649
1,781
1,781
364
364
2017
Trade receivables
Amounts from controlled/associated entities
Loan receivables
Related party receivables
Total
2016
Trade receivables
Current tax assets
Amounts from controlled/associated entities
Total
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
19
6,472
-
-
6,491
14
-
6,928
6,942
$’000
15
-
-
-
15
17
641
-
658
$’000
$’000
$’000
-
-
-
3,774
3,774
25
-
-
25
-
-
3,409
-
3,409
24
-
4,847
4,871
-
-
-
-
-
-
-
-
-
Total
$’000
6,314
3,109
2,036
10,317
8,343
3,298
4,530
37,947
3,113
641
2,586
2,232
888
3,722
13,182
Company
Total
$’000
34
6,472
3,409
3,774
13,689
80
641
11,775
12,496
ClearView Annual Report 2017 135
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 33. 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
2017
Payables
Current tax liabilities
Provisions
Reinsurance payable1
Total
2016
Payables
Provisions
Reinsurance payable1
Total
2017
Payables
Current tax liabilities
Provisions
Total
2016
Payables
Provisions
Total
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
$’000
153
523
1,204
-
$’000
321
-
784
-
Over
5 years
$’000
84
-
$’000
830
-
2,895
2,070
-
-
Total
$’000
27,782
523
8,460
12,127
48,892
1,518
1,091
5,025
2,154
62
703
-
765
35
1,791
-
1,338
585
-
84
27,061
1,793
-
5,215
8,487
1,826
1,923
1,877
40,763
$’000
26,394
-
1,507
12,127
39,104
25,542
343
8,487
34,372
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
352
-
-
352
776
-
776
$’000
$’000
$’000
$’000
-
523
18
541
4
26
30
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Company
Total
$’000
352
523
18
893
780
26
806
1
Reinsurance payable represents reinsurance premium payable on reinsurance due in respect of life insurance premium.
136 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 33. 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
2017
$’000
2016
$’000
Fair value
hierarchy
Valuation techniques and key
inputs
Equity Securities
262,428
256,093
Level 1
Fixed Interest Securities
448,086
424,963
Level 2
Unit Trusts
Total
1,103,535
934,170
Level 1
1,814,049 1,615,226
(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
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
1,598
1,272
-
-
2,000
2,000
-
-
50,000
50,000
-
-
-
-
-
-
-
-
-
-
As at the reporting date the Company had a $50 million facility agreement with the Commonwealth Bank of Australia.
This facility was unused and available for immediate use. Interest on the loan accrued at BBSY plus a margin of 0.7% per
annum, and was payable monthly. Furthermore, a line fee of 0.4% per annum was payable on the facility on a quarterly basis.
The facility was secured by a number of cross guarantees, refer to Note 38 for details.
On 25 July 2017 the Facility with the Commonwealth Bank of Australia was terminated and the Company entered into a facility
with National Australia Bank, refer to Note 40 for further details.
ClearView Life Assurance Limited has a $2 million overdraft facility with National Australia Bank at a benchmark interest rate
of 8.12% 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 2017. There is
an additional $0.25 million credit card facility with National Australia Bank in the name of ClearView Administration Services
Pty Limited.
ClearView Annual Report 2017 137
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 33. 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.
2017
Financial assets
Variable interest rate instruments:
Cash and cash equivalents
Fixed interest securities
Total
2016
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
0.62
2.37
77,992
78,327
156,319
0.62
-
5,880
-
5,880
1.54
2.58
90,337
79,584
169,921
1.54
20,889
-
-
20,889
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% (2016: 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.
138 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 33. 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
2017
$’000
±496
2016
$’000
±520
2017
$’000
±496
2016
$’000
±520
2017
$’000
±21
2016
$’000
±73
2017
$’000
±21
2016
$’000
±73
±0.5% (2016: ±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.
ClearView Annual Report 2017 139
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
34. Disaggregated information by fund
Abbreviated income statement
2017
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
-
-
-
19
-
19
-
-
-
-
-
-
19
(6)
13
177,365
(43,080)
-
2,274
-
136,559
(72,706)
47,417
21,896
170
-
309
(50)
808
876
20
1,963
500
(235)
(17)
-
-
-
21,695
61,339
33,266
116,300
-
-
-
-
177,674
(43,130)
22,503
64,508
33,286
254,841
(72,206)
47,182
21,879
170
(6,070)
(94,349)
(100,419)
(106,842)
(478)
(19,153)
(126,473)
26,494
(7,913)
(4,337)
5,331
2,798
(638)
24,974
(3,226)
18,581
994
2,160
21,748
140 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 34. Disaggregated information by fund continued
Abbreviated statement of financial position
2017
Investments in subsidiaries and controlled unit trusts
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
-
47,307
1,128,970
1,179,227
Australian Non-Participating
Policy liabilities ceded under reinsurance
-
15,108
Other assets
Total assets
Gross policy liabilities – Life insurance contracts
Gross policy liabilities – Investment insurance
contracts
Other liabilities
Total liabilities
Net assets
Shareholder’s retained profits
Opening retained profits
Operating profit
Capital transfer between funds
Dividend paid
Shareholders' retained profits
Shareholders' capital
Total equity
128,839
143,947
(207,681)
230
739
-
15,338
18,003
149,577
48,276
1,146,973
1,344,142
49
-
(207,632)
-
47,030
1,130,260
1,177,290
21,172
(1,270)
6,182
27,198
(186,509)
45,809
1,136,442
330,456
2,467
10,531
1,996
4,946
-
-
1,114
1,114
3,832
(30,306)
167,675
13
-
(18,000)
(48,293)
52,125
18,581
7,000
-
193,256
137,200
3,832
330,456
3,773
994
(2,500)
-
2,267
200
2,467
996,856
347,286
152,413
21,748
-
11,271
2,160
(4,500)
-
(18,000)
8,931
1,600
156,161
191,125
10,531
347,286
ClearView Annual Report 2017 141
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 34. Disaggregated information by fund continued
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
142 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 34. Disaggregated information by fund continued
Abbreviated statement of financial position
2016
Investments in subsidiaries and controlled unit trusts
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
-
49,267
1,104,494
1,156,711
Australian Non-Participating
Policy liabilities ceded under reinsurance
-
(1,184)
Other assets
Total assets
Gross policy liabilities – Life insurance contracts
Gross policy liabilities – Investment insurance
contracts
Other liabilities
Total liabilities
Net assets
Shareholder’s retained profits
Opening retained profits
Operating profit
Dividend paid
Shareholders' retained profits
Shareholders' capital
Total equity
114,659
113,475
(204,378)
481
2,997
-
(703)
20,318
141,373
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
975,344
322,038
(13,379)
135,449
73
32,226
(17,000)
(30,306)
36,625
-
167,675
131,200
6,319
298,875
2,839
934
-
3,773
200
3,973
9,239
2,031
134,148
35,265
-
(17,000)
11,271
1,600
152,413
169,625
12,871
322,038
ClearView Annual Report 2017 143
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 35. Investment in controlled unit trusts
Name
Controlled unit trusts
CVW Pimco International Bonds Fund
CVW Schroder Equity Opportunities Fund
CVW Fixed Interest Fund
CVW SSGA International Shares Fund
CVW Listed Property Fund
CVW Cash Fund
CVW CFS Infrastructure Fund
CVW RARE 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
36. 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
2017
Consolidated
2016
Type
$’000
%
$’000
%
Debt
Equities
Debt
Equities
Property
Debt
Property
Equities
Equities
Equities
Property
Equities
Equities
Equities
21,890
111,715
339,119
101,746
25,882
226,100
145,571
102,814
19,434
11,937
10,585
7,897
41,722
9,865
95.65
46.76
57.71
92.89
51.26
72.16
55.59
56.25
30.32
92.49
98.57
98.06
77.43
20.71
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
1,176,277
1,153,761
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
Consolidated
2017
$’000
2,007
3,356
-
2016
$’000
2,591
6,144
-
5,363
8,735
Company
2016
$’000
2017
$’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.
144 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 36. 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
2017
$’000
2016
$’000
2017
$’000
Company
2016
$’000
109
310
419
37
233
270
-
-
-
-
-
-
37. 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.
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).
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
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
The Board had previously announced that it had considered
several alternatives in relation to its major shareholder,
Crescent Capital Partners and its Associates (Crescent) selling
down its 52.9% shareholding. This process resulted in Sony
Life Insurance Co., Ltd (Sony Life) becoming a new strategic
shareholder in October 2016 following their agreement with
Crescent to acquire a 14.9% stake in ClearView.
The Board has appointed Morgan Stanley Australia Securities
Limited (Morgan Stanley) to assist in evaluating any strategic
options and potential future proposals in relation to a change
in control.
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.
ClearView Annual Report 2017 145
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued 38. Capital commitments
The Group has committed to the following capital commitments subsequent to the year end.
Technology projects
Total
Consolidated
Company
2017
$’000
385
385
2016
$’000
1,360
1,360
2017
$’000
-
-
2016
$’000
-
-
39. 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.
40. Subsequent events
Dividends
On 24 August 2017, the Group proposed a final dividend of $18.14 million representing 2.75 cents per share fully
franked. The record date for determining entitlement to the dividend is 13 September 2017 and the dividend will be
paid on 29 September 2017. Since the dividend has not been declared at year end it has not been recognised as payable
in these accounts.
Debt facility agreement
On 25 July 2017 the Company entered into a $60 million facility agreement with National Australia Bank. As at the date of
this Annual Report the facility is unused and available for immediate use. Interest on the loan accrues at BBSY plus a margin
of 0.67% per annum, and is payable quarterly. Furthermore, a line fee of 0.65% per annum is payable on the facility on a
quarterly basis. The facility is secured by the following cross guarantees
• ClearView Group Holdings Pty Limited
ACN 107 325 388
• ClearView Administration Services Pty Limited
ACN 135 601 875
• ClearView Financial Management Limited
ACN 067 544 549
• Matrix Planning Solutions Limited
• ClearView Financial Advice Pty Ltd
ACN 087 470 200
ACN 133 593 012
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.
146 ClearView Annual Report 2017
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued
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 2017
ClearView Annual Report 2017 147
ClearView Wealth LimitedNotes to the Financial StatementsFor the year ended 30 June 2017Continued Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report to the
members of ClearView Wealth Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of ClearView Wealth Limited (the “Company”) and its
subsidiaries (the “Group”) which comprises the consolidated statement of financial position
as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive
income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the company and Group’s financial position as at 30
June 2017 and of their financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are
in the Auditor’s
Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and
Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our
other ethical responsibilities in accordance with the Code.
further described
We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of the Company, would be in the same terms if given
to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited.
148 ClearView Annual Report 2017
ClearView Wealth LimitedIndependent Auditor’s Report
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report for the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How the scope of our audit responded to
the Key Audit Matter
Actuarial Valuations
As at 30 June 2017 the Group’s life
insurance policy liabilities are $(207.6)
million calculated on the basis of
recognised actuarial methods and
assumptions, as disclosed in note 4.
Significant management judgement is
involved, including assumptions that
have been identified as having high
estimation uncertainty and include:
Appropriateness of assumptions
used in valuations, especially in
respect of ClearView experience
vs market experience;
Accuracy of the expense
allocation basis and its impact
on the policy liability;
Basis of determination of the
Best Estimate Liabilities and
Liabilities
Profit
the policy
components
liabilities;
Margin
of
Allowances for discretions; and
Quality of data used for the
valuation.
Valuation of Intangibles
As at 30 June 2017 the Groups
carrying amount of intangible assets
and goodwill was $44.7 million as
disclosed in note 4. The intangible
assets are allocated to three cash-
generating units (CGUs) which are
tested separately for impairment.
The Entity performs an Embedded
Value (EV) calculation to support its
impairment analysis. As a result of the
In conjunction with our actuarial specialists
our procedures included, but were not limited
to:
• Assessing the valuation methodology,
valuation process and the valuation
model to ensure compliance with
APRA’s Life Prudential Standard 340,
“Valuation of Policy Liabilities”;
• Validating the assumptions used by
management (including interest rates,
lapse rates, mortality, morbidity and
expense ratios);
• Comparing model outputs to results
of experience studies for
reasonableness;
• Evaluating the appropriate technical
review, peer review;
• Assessing a sample of valuation
calculations for reasonableness;
• Assessing management’s expense
allocation basis, including the
allocation to statutory funds and
determination of policy liability;
• Challenging the appropriateness of
management’s selection of profit
carriers and product groupings in
respect of the policy liabilities; and
• Assessing the appropriateness of the
disclosures in note 25 to the financial
statements.
In conjunction with our valuation specialists
our procedures included, but were not limited
to:
• Assessing the methodology used by
management;
• Evaluating their documented basis for
key assumptions used in the EV
calculation;
ClearView Annual Report 2017 149
ClearView Wealth LimitedIndependent Auditor’s Report
acquisition of Matrix, management are
also leveraging the use of the EV to
support the carrying value of goodwill
and intangibles.
The evaluation of the recoverable
amount of the intangible assets
requires significant judgement in
determining the key assumptions
supporting the expected future cash
flows of the business.
The key assumptions include:
Life
insurance
intangible:
morbidity/ mortality rates, lapse
rates,
rates,
discount
maintenance costs; and
and
Wealth management
intangible:
financial planning
investment returns, lapse rates
and maintenance costs.
• Reviewing management’s assessment
of indicators of impairment by:
•
•
•
•
•
•
•
to
plans,
Challenging the identification of
the CGU’s;
Comparing assumptions used in
historical
the model
future business
performance,
strategy
the
and
assumptions used in the policy
liability calculation;
Challenging the key assumptions
utilised in the model including the
revenue and expense growth
rates and the discount rate by
comparing them to corroborating
support
historical
including
results, economic and other
forecasts;
Performing a sensitivity analysis
on
to
the key assumptions
the assessment of
support
impairment indicators and
its
impact on the headroom in the
EV;
Testing on a sample basis the
mathematical accuracy of the
discounted cash
flow model,
agreeing budgeted cash flows to
the latest Board approved budget
and assessing the performance
against budget/forecasts in prior
periods;
Assessing the assumptions for the
Value of New Business (‘VNB’)
factors supporting the goodwill
impairment analysis; and
Assessing the appropriateness of
the disclosures in notes 19 and 20
to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises
the information included in the Group’s annual report for the year ended 30 June 2017,
but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially
inconsistent with the financial report or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
150 ClearView Annual Report 2017
ClearView Wealth LimitedIndependent Auditor’s Report
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the 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 the financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of
the Group to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or to cease operations, or has no realistic alternative but to
do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a
whole is free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with the
Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We
also:
Identify and assess the risks of material misstatement of the financial report,
whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the director’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
ClearView Annual Report 2017 151
ClearView Wealth LimitedIndependent Auditor’s Report
Evaluate the overall presentation, structure and content of the financial report,
including the disclosures, and whether the financial report represents the
underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of
the entities or business activities within the Group to express an opinion on the
financial report. We are responsible for the direction, supervision and performance
of the Group’s audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were
of most significance in the audit of the financial report of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in page 48 to 64 of the Directors’
Report for the year ended 30 June 2017.
In our opinion, the Remuneration Report of ClearView Wealth Limited, for the year ended
30 June 2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
DELOITTE TOUCHE TOHMATSU
Max Murray
Partner
Chartered Accountants
Sydney, 24 August 2017
152 ClearView Annual Report 2017
ClearView Wealth LimitedIndependent Auditor’s Report
Shareholders’ Information
As at 04 August 2017
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
3
CCP Bidco Pty Ltd and Associates1
Perpetual Corporate Trust Limited
Sony Life Insurance Co., Ltd2
No. of shares
as per notice
% of issued
capital
252,897,269
63,828,308
98,067,795
38.4%
9.7%
14.9%
1
2
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 38.4% holding of CCP Bidco in the table above.
Sony Life Insurance Co., Ltd’s (Sony Life) 14.9% shareholding is held through its custodian, HSBC Custody Nominees (Australia) Limited.
Twenty largest shareholders (as at 04 August 2017)
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
Perpetual Corporate Trust Limited
Citicorp Nominees Pty Limited
CCP Trusco 4 Pty Limited
CCP Bidco Pty Ltd
CCP Bidco Pty Limited
CCP Trusco 5 Pty Limited
CCP Trusco 1 Pty Limited
BNP Paribas Noms Pty Ltd
Portfolio Services Pty Ltd
Pacific Custodians Pty Limited
Perpetual Corporate Trust Ltd
J P Morgan Nominees Australia Limited
RBC Investor Services Australia Nominees Pty Ltd
CCP Trusco 3 Pty Limited
Mr Simon Swanson
UBS Nominees Pty Ltd
CCP Trusco 4 Pty Limited
CCP Trusco 2 Pty Limited
Salamanca Group Trust (Switzerland) SA
No. of shares
as per notice
% of issued
capital
130,265,304
19.75
48,631,777
32,337,594
31,657,567
30,300,523
24,541,899
22,440,451
20,671,919
20,100,002
17,945,796
15,432,642
15,196,532
13,915,895
11,954,858
11,812,524
10,000,000
10,000,000
9,892,405
9,843,771
8,235,295
7.37
4.90
4.80
4.59
3.72
3.40
3.13
3.05
2.72
2.34
2.30
2.11
1.81
1.79
1.52
1.52
1.50
1.49
1.25
ClearView Wealth Limited
ClearView Wealth Limited
ClearView Annual Report 2017 153
Shareholders’ Information
As at 04 August 2017
Ordinary share capital
There are 659,473,127 fully paid ordinary shares held by 1,910 shareholders. All the shares carry one vote per share.
Distribution of shareholders
The distribution of Shareholders as at 31 July 2017 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 $1.4350 per unit
Shares under voluntary escrow
There are no shares subject to voluntary escrow as at 30 June 2017.
Total holders
353
493
299
548
217
Units
143,598
1,414,522
2,261,631
16,755,299
638,898,077
1,910
659,473,127
% of issued
capital
0.02
0.21
0.34
2.54
96.88
100.00
Minimum
parcel size
349
Holders
168
Units
7,745
154 ClearView Annual Report 2017
ClearView Wealth Limited
Auditors
Deloitte Touche Tohmatsu
Stock Listing
ClearView Wealth Limited is listed on
the Australian Securities Exchange (ASX)
under the ASX code “CVW”.
Annual Corporate
Governance Statement
The ClearView Annual Corporate
Governance Statement may be viewed
at www.clearview.com.au/about-
clearview/corporate-governance
Directory
Current Directors
Bruce Edwards (Chairman)
Andrew Sneddon
David Brown
Gary Burg
Michael Alscher
Michael Lukin
(Alternate to Mr Alscher)
Nathanial Thomson
Satoshi Wakuya
Susan Young
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
ClearView Wealth Limited
ClearView Annual Report 2017 155
ClearView Wealth Limited
ABN 83 106 248 248
www.clearview.com.au
ASX code CVW
CVM_0630 08/17