ClearView results
FY18 v FY17
5%
Advised sales
$42.4m
including
$33.8m
from IFA chanel
APLS
419
22%
$26.1m
UNPAT
5%
$32.4m
Underlying NPAT
$701m
Embedded value
7%
6%
$5.2m
UNPAT
31%
$2.79b
FUM
12%
$207m
Net inflows
$1.8m
UNPAT 20%
$270m
Premiums
under advice
$9.6b
FUMA
233
Financial
advisers
Life InsuranceWealth ManagementGroupFinancial Advice Contents
Section
Page
Financial highlights
FY18 results summary
Chairman’s address
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
4
5
6
8
11
19
57
75
76
151
152
157
159
Financial calendar
FY18 dividend payment
28 September 2018
Annual General Meeting
8 November 2018
Half year end
31 December 2018
Half year result announcement
February 2019
Year end
30 June 2019
Annual Report
August 2019
Dates are subject to change.
CLEARVIEW WEALTH LIMITED | 3
2018 Financial highlights
After tax profit by segment, $m
Life Insurance
Wealth Management
Financial Advice
Listed entity and other
Underlying NPAT2
Other adjustments3
NPATA4
Amortisation5
Reported NPAT6
Embedded value7
Value of new business8
Net asset value9
Reported diluted EPS (cps)10
Underlying diluted EPS (cps)10
DPS (cps)11
FY18
26.1
5.2
1.8
(0.7)
32.4
(1.8)
30.6
(4.0)
26.6
701.1
12.0
444.3
4.14
5.03
3.00
FY17
% change1
24.9
3.9
2.2
(0.7)
30.4
(9.0)
21.4
(8.2)
13.2
661.9
16.7
415.6
2.11
4.88
2.75
5%
31%
(20%)
NM
7%
Large
43%
Large
102%
6%
(28%)
7%
95%
3%
9%
Underlying NPAT1 ($m)
Fully diluted Underlying EPS and DPS7 (cps)
$m
35
30
25
20
15
10
5
0
32.4
17.1
30.4
15.2
27.2
13.8
19.7
20.5
10.6
10.6
9.1
9.9
13.4
15.2
15.3
FY14
FY15
FY16
FY17
FY18
1H
2H
6
5
4
3
2
1
0
Impact of FY16
$50m capital raising
Impact of FY14
$45m capital raising
4.92
4.88
5.03
4.41
3.85
2.0
2.1
(0.5)
2.5
2.75
3.0
FY14
FY15
FY16
FY17
FY18
EPS
DPS
1. % movement, FY17 to FY18 unless otherwise stated.
2.
Underlying NPAT consists of consolidated profit after tax adjusted for amortisation (not including capitalised software), the effect of changing discount rates on
insurance policy liabilities and costs considered unusual to the Group’s ordinary activities.
Other adjustments include costs considered unusual to normal activities (includes $0.8m strategic review costs) and changes in long term discount rates used
to determine the insurance policy liabilities ($5.0m ‘swing’ between periods).
3.
4. NPATA is reported net profit after tax adjusted to exclude the non-cash amortisation of acquired intangibles (not including capitalised software).
5. Amortisation is amortisation of acquired intangibles (not including depreciation and amortisation of software).
6.
Reported NPAT of $26.6m, up 102%, impacted by changes in long term discount rates used to determine the insurance policy liabilities ($5.0m ‘swing’ between
periods); represents a non-cash timing difference in the release of profit over time and has no impact on underlying earnings.
Embedded Value at 4% discount rate margin, including a value for future franking credits, accrued franking credits and Employee Share Plan (ESP) loans.
Value of New Business (VNB) at 4% discount rate margin. Adversely impacted in 2H by the hybrid commission model under the LIF reforms (noting VNB will
improve as the commission cap reduces from 80% to 60% over the next few years).
Net Asset Value as at 30 June 2018 excluding ESP Loans; % movement FY17 to FY18.
9.
10. Adversely impacted by the dilutive effect of shares issued under the DRP, ESP shares vested/forfeited during the period partially offset by a decrease in the
7.
8.
number of ESP shares ‘in the money’ given the decrease in ClearView’s share price period on period.
11. DPS is dividend per share.
4 | CLEARVIEW ANNUAL REPORT 2018
FY18 Results summary
Growth in distribution footprint broadening out via the IFA market
Active Life APLs with ClearView products
Active Wealth APLs with ClearView products
Aligned financial advisers
450
400
350
300
250
200
150
100
50
0
419
343
256
191
119
FY14
FY15
FY16
FY17
FY18
45
36
27
18
9
0
44
30
9
5
1
1
235
243
233
89
91
99
221
82
245
210
175
140
$m
117
105
70
35
0
127
138
143
125
98
19
FY14
12
FY15
8
FY16
9
FY17
9
FY18
FY14
FY15
FY16
FY17
FY18
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
$m
50
40
30
20
10
0
40.3
42.4
34.6
27.5
23.6
FY14
FY15
FY16
FY17
FY18
$m
350
300
250
200
150
100
50
0
335
353
333
275
153
FY14
FY15
FY16
FY17
FY18
$m
45
40
35
30
25
20
15
10
5
0
42.4
42.3
5%
80%
68%
39.2
12%
55%
34.5
20%
42%
27.4
14%
38%
48%
38%
33%
27%
20%
FY14
FY15
FY16
FY17
FY18
Aligned
IFA
Direct
2.2
2.2
Growth in the in-force base underpinning growth profile
Life in-force premium4
Wealth Management FUM3
Embedded Value ($M)5
240
200
160
$m
120
80
87.5
45.2
40
5.6
36.7
115.7
71.0
9.6
35.1
224.8
184.2
189.5
146.1
150.7
105.7
10.9
34.1
10.7
32.7
9.6
30.9
0
FY14
FY15
FY16
FY17
FY18
Old Book
Direct
LifeSolutions
3.0
2.5
2.0
$b
1.5
1.0
0.5
0.0
2.50
0.06 0.12
0.30
2.13
1.90
0.11
0.61
0.20
0.80
1.08
2.79
0.19
0.41
1.29
1.18
1.07
1.00
0.90
1.66
0.41
1.25
FY14
FY15
FY16
FY17
FY18
Old Book
WealthSolutions
WealthFoundations
External Platforms
700
600
500
400
300
200
100
0
624
92
40
662
104
37
492
522
701
112
32
557
494
69
36
389
445
57
29
359
FY14
FY15
FY16
FY17
FY18
Embedded Value
ESP Loans
Franking Credits
2.2
2.2
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.
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 Employee Share Plan (ESP) loans.
CLEARVIEW WEALTH LIMITED | 5
Chairman’s address
To our customers and shareholders:
Some benefits can already be seen.
For example, from the launch of the revamped AQUA life
insurance platform in January to the end of May, 805 health
and lifestyle questionnaires had been completed over the
phone, making it faster and more convenient for customers to
apply for, and secure, cover.
This tele-interview service and other AQUA features, including
enhanced eQuote and eApplication functionality, are reducing
the administration burden on financial advisers.
In April we merged all our wealth business on to a single
platform so we are now in the enviable position of having one
platform for all our wealth business, one platform for all our
life insurance business and one platform for all our advice
business. This simplifies future product development.
Financial results
In FY18, ClearView’s management team and employees
continued to execute the company’s strategic plan, leading to
a solid full year result notwithstanding some claims and lapse
volatility.
Underlying Net Profit After Tax (NPAT), the Board’s key
measure of Group profitability and also used for dividend
payment decisions, increased 7% to $32.4 million (FY17:
$30.4 million). The 2H Underlying NPAT increased 12% to
$17.2 million, reflecting the strong fundamentals in the
underlying operating businesses and further emergence of
sustainable growth, offset by the adverse claims and lapse
experience.
The Embedded Value (EV) has increased by 6% to $701
million or $1.05 per share (including ESP loans and franking
credits). The EV was negatively impacted in FY18 by the
claims and lapse experience.
The FY18 result reflects material growth in funds under
management (FUM) and inforce premium, underpinning
ClearView’s future prospects.
In the last financial year, ClearView’s management team
and staff continued to execute the company’s strategic plan,
despite the uncertainty around the group’s ownership.
Both ClearView and Sony Life enjoyed some early benefits
from our Cooperation Agreement which was in place for
most of 2017/18, however, we concurrently pursued other
strategies to position ClearView for the next phase of growth.
The financial services industry is experiencing revolutionary
change and this creates both opportunities and challenges.
ClearView is able to respond quickly because it does not have
a substantial legacy portfolio and because it has built strong
relationships with financial advisers.
Looking ahead we see opportunities to build on current
products and existing relationships.
We continue investing heavily in technology to facilitate these
opportunities. Two areas of focus include:
•
•
Strengthening our ties with independent financial advisers
by offering them access to our excellent licensee support
services. This will provide the scale to enable us to further
enhance our dealer services for the benefit of existing and
new users; and
Leveraging the convergence of life insurance and wealth
management through the release of significant product
enhancements.
You will hear more on these initiatives over the next twelve
months.
Technology investment
ClearView sharpened its focus on driving efficiencies across
the business in 2018 by simplifying and streamlining
processes, consolidating technology platforms and increasing
automation.
This strategy supports our mission to partner with financial
advisers to help more Australians grow and protect their
wealth. It positions ClearView for future growth with the
ability to scale up and meet the increasing demands and
expectations of advisers and their clients.
6 | CLEARVIEW ANNUAL REPORT 2018
Bruce Edwards Chairman
CHAIRMAN’S REPORT (CONTINUED)
Dividends and capital
The Board has declared a fully franked final dividend of 3
cents per share for FY18 up 9% on FY17. This reflects a
full year 2018 dividend payout ratio of just over 60% of
underlying NPAT and is in line with the company’s dividend
policy.
Shares under the Dividend Reinvestment Plan (DRP) will be
issued at a fixed price of $1.05, consistent with ClearView’s
DRP rules, and represents a 9% discount of the 90 day volume
weighted average price of $1.14.1
Substantial shareholders have committed to participate in the
DRP at a fixed price of $1.05 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%).
As at 30 June 2018, the Group held $14.7 million of capital
reserves above our internal benchmarks.
ClearView is fully-capitalised with Common Equity Tier 1
capital to fund its current business plans and anticipated
medium-term growth.
Industry and regulatory changes
The past year has been characterised by an extraordinary
level of merger, demerger and acquisition activity, intense
media scrutiny and ongoing digital disruption, against the
backdrop of the current Royal Commission.
On 1 January 2018, the Life Insurance Framework (LIF)
legislation came into effect, with changes to life insurance
commission payments and advisers’ remuneration being
progressively implemented over the next two years.
A key objective of LIF is to ensure better consumer outcomes.
As such, ClearView is working hard to enhance its products
and services, and maintain effective systems and processes,
to deliver an excellent customer experience.
The industry is also currently preparing for the introduction of
higher professional education and training standards as well
as significant superannuation changes.
I am proud of the way the management team has remained
focused on core business activities despite all of the
distractions.
Sony Life
During the year, ClearView terminated its Cooperation
Agreement with Sony Life. This decision was made by the
Board acting in the best interests of the company, after Sony
Life failed to make a takeover offer for ClearView by the April
1 As at 17 August 2018
25 option deadline, under the terms of its arrangement with
Crescent Capital.
Despite the end of our Cooperation Agreement, Sony Life
remains a committed shareholder in ClearView, noting that
under the terms of the Option Agreement entered into with
Crescent Capital they are not permitted to dispose of their
shareholding. Their participation in the DRP is testament to
their commitment to their shareholding in ClearView.
Acknowledgements
On behalf of the Board, I would like to acknowledge Simon
and his team for their hard work and contribution to
ClearView’s strong FY18 result. I would also like to thank our
customers, financial advice partners and shareholders for
their ongoing support.
Personally, I would like to recognise my fellow Directors for
their counsel and support throughout the year.
Bruce Edwards
Chairman
CLEARVIEW WEALTH LIMITED | 7
To our shareholders, customers and advisers:
ClearView passed a number of important milestones this
year.
We continued to serve customers in partnership with
financial advisers, grew funds under management by $295
million and paid around $94 million in claim entitlements.
Our flagship LifeSolutions product is on 419 Approved
Product Lists (APLs) and our wealth management solutions
are on 44 APLs.
This year, a key focus for the business was streamlining
systems and processes, and ensuring the right product mix.
As a company, we are committed to only manufacturing and
distributing products that represent a fair deal for customers
and shareholders. With fairness as our guide, we don’t offer
products with a low pay-out ratio such as funeral insurance
or consumer credit insurance.
On the systems and technology front, significant
enhancements to our life insurance platform, AQUA, were
rolled out in January including an intuitive new-look front-
end and integrated quote and application tools to fast-track
the LifeSolutions application process and implement Tele-
Underwriting and Tele-Interviewing.
The AQUA upgrade, which formed part of a broader ongoing
technology program, has resulted in more than 40 tele-
interviews conducted per week and a 30 per cent reduction
in paper applications.
In April, we completed our multi-year Wealth Migration
program on schedule. This transition united all of ClearView’s
wealth customers on a single, scalable platform, providing
richer online functionality, greater investment choice and the
option to self-service.
The success of AQUA and the Wealth Migration program
position ClearView strongly for future growth with further
developments in the pipeline.
To ensure all our projects align with the company’s broader
strategic goals and priorities, this year ClearView established
a formal prioritisation committee to determine the most
effective use of resources. This committee, which I chair,
is responsible for ensuring our resources are directed to
projects that will drive our long-term profitability.
8 | CLEARVIEW ANNUAL REPORT 2018
Big four inquiries
The financial services industry is at a 20-year inflection point.
As the subject of ongoing reform for many decades the
industry has almost become numb to regulatory change but
the current level of scrutiny is not normal. It is extremely
unusual.
This unparalleled regulatory activity will most certainty lead
to once in a generation change and it’s being driven by four
landmark inquiries and reports:
•
•
•
•
Banking and Financial Services Royal Commission
Parliamentary Joint Committee (PJC) Report on the life
insurance industry
Superannuation Productivity Commission
APRA Prudential Inquiry into the Commonwealth Bank of
Australia
The financial services industry is currently adjusting to
increasing disintermediation as the financial link between
product manufacturers and financial advisers is eroded
with commissions on investment and superannuation
products banned, life insurance commissions ratcheting
down and pressure for grandfathered rebates and other
sales incentives to go. Yet product manufacturers still need
to support financial advisers to run more efficient businesses
and see more clients, as a vibrant advice industry is in the
nation’s best interests.
Our focus remains on partnering with financial advisers to
help more Australians grow and protect their wealth and
achieve their goals.
We are committed to helping advisers adapt to change,
achieve efficiency gains in their practices and identify trends
and opportunities.
Changing economic conditions
An emerging trend throughout Australia is poor job security
and the casualisation of the workforce.
Part-time workers now account for 1 in 3 workers, up 2 per
cent since 2012, while the under-employment rate has risen
to 9.1% over the same period, according to the Australia
Institute.
Simon Swanson Managing DirectorManaging Director’s report The report, which tracked and benchmarked the journey
of around 500 income protection, trauma and total and
permanent disablement (TPD) claims customers, found
ClearView delivers a superior customer experience,
particularly in application and assessment speed, accurate
and timely payment, and clear communications.
In terms of claims staff, the report commended ClearView
for being a “standout” company with a “high-performing
culture”. Customers described the team as responsive,
knowledgeable and easy to deal with.
MANAGING DIRECTOR’S REPORT (CONTINUED)
This development has the potential to derail the retirement
dreams of many Australians.
Furthermore, young people joining the workforce today
are likely to change careers multiple times, yet the current
superannuation system was designed at a time when
workers often had full-time employment in a single industry,
if not for a single employer, for their whole lives.
The changing nature of work highlights the enormous need
for Australians to plan ahead and seek professional advice
to protect and grow their wealth for the future. This will also
require companies like ClearView to adapt both their product
and services to this changing environment.
Corporate culture
In light of current regulatory activity, I would like to touch
briefly on corporate culture.
The ‘Big four’ inquiries have been a public relations disaster
for the banking and financial services sector, showing the
need for sensible reform to better protect consumers.
All claims
100
90
80
70
93.1
75.5
Oct 2017
Apr 2018
It has also highlighted the importance of culture.
Apr 2017
A strong, positive culture that champions the client and
strives for continuous improvement is a great asset that
drives performance.
But poor culture destroys brands, relationships and
businesses.
ClearView
Industry
Top company
Licensee of the Year Award
Matrix Planning Solutions was named the 2018 Licensee of
the Year by data insights company, CoreData Research, with
As a relatively young company, ClearView has had a unique
ClearView Financial Advice also performing strongly.
opportunity to build and nurture a dynamic, innovative
culture - backed by a recruitment policy that is set on
attracting skilful, highly-motivated people with a growth
mindset. Similarly, in our advice business, the focus is on
building a network of passionate like-minded professionals
who are committed to providing quality advice in the best
interest of clients.
In the past eight years, ClearView has grown rapidly to
This is the second year in a row that Matrix has received
this Award, which recognises excellence in licensee services
based on responses from around 1,500 advisers across the
industry.
CoreData cited the Dealer Group’s unified and stable culture
as a key point of difference that allowed advisers to flourish
in the midst of regulatory change and disruption.
employ 333 staff. The Dealer Group partners with 233
No. 1 in overall adviser satisfaction
aligned financial advisers.
ClearView received the highest overall adviser satisfaction
According to our latest employee engagement survey,
rating in the 2018 Investment Trends Planner Risk Report for
conducted in June, our employees strongly support the clear
the second consecutive year.
set of values in place at ClearView. Our people are energised
by our customer focus, capacity for change and market
ClearView was also ranked first in six out of 12 categories
including underwriting, brand/reputation, BDM support and
disruptor strategy.
product.
Our internal research is validated and supported by external
research.
No. 1 in claims customer satisfaction
ClearView achieved the highest overall client satisfaction
rating for claims management in Beddoes Institute’s
May 2018 Claims Journey Study Report; a considerable
improvement on our already strong performance in 2017.
Strategic opportunities
At ClearView, we are not afraid to try new things.
Acquiring established licensee Matrix in 2014 was a
calculated risk which has been highly successful and
rewarding. Despite thorough due diligence, there is always a
chance with any merger that there’ll be a cultural mismatch
and quality practices will leave.
CLEARVIEW WEALTH LIMITED | 9
MANAGING DIRECTOR’S REPORT (CONTINUED)
It is extremely pleasing that almost four years after the
platform rebates to remove any incentive to keep clients
Matrix deal not a single original practice has left to join
in legacy products; and
another licensee.
In 2018/19, ClearView will continue exploring and
capitalising on growth opportunities, including:
1. Self-licensing trend and demand for licensee
support
ClearView will launch a Dealer-to-Dealer (D2D) offering in
the first half of 2018/19 to provide a range of services such
as audits and compliance, investment research, technology
and ongoing training and professional development, to the
growing number of advice firms that hold their own AFSL.
The D2D unit will also provide specialist assistance to aligned
advisers who want to gain their own AFSL.
•
Australian Financial Services Licensing (AFSL) reforms.
ClearView has consistently engaged key policy makers for
sensible customer-centric reforms. We are pleased that
our advocacy efforts have contributed to positive changes
including to group life insurance introduced in the Treasury
Laws Amendment (Protecting Your Superannuation Package)
Bill 2018.
Outlook
Unfortunately, Sony Life – which acquired a 14.9 per cent
stake in ClearView from Crescent Capital Partners in 2016 -
was unable to make a takeover bid for ClearView by the April
25 option deadline, however, Sony Life remains a committed
2. Rise of non-institutional platforms and managed
strategic shareholder.
accounts
Independently-owned platform providers continue to grab
the lion’s share of platform inflows and take market share
from the institutional incumbents, with Strategic Insights
listing Hub24, Netwealth and ClearView as the three fastest
Looking forward, we know that a key measure of our success
will be the customer and shareholder value we create over
the long term. This value will be a result of our ability to
execute our strategy and meet our medium-to-long term
goals.
growing superannuation and investment administration
I am extremely proud of what ClearView has achieved in
the past year and I’m excited about the future. Our strong
performance in FY18 is a reflection of the quality of our
people, strategy, priorities and processes.
Simon Swanson
Managing Director
providers^.
Our WealthFoundations and WealthSolutions platforms,
which feature a range of internally-managed model
portfolios/managed accounts, are currently supported by a
small but growing number of boutique AFSLs in addition to
our aligned dealer group. Furthermore, ClearView managed
accounts are now on a small number of external platforms
including Hub24.
3. LifeSolutions upgrade
The intended upgrade of our flagship LifeSolutions
product series in the first half of FY19 will include a raft of
enhancements. These include a market first Relapse Benefit
feature along with redefining several income protection
definitions to remove the barriers of customers returning
to work. It also includes a full review of medical definitions
and continues ClearView’s tradition of adding significant
value to customers and making it easier to do business with
ClearView.
4. Promoting sensible financial services reform
ClearView continues to advocate for sensible public policy,
particularly in relation to:
• Unrestricted life insurance APLs;
•
Extending the opt-in requirements for group life
insurance inside superannuation to all fund members;
•
The introduction of a cut-off date for grandfathered
10 | CLEARVIEW ANNUAL REPORT 2018
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 2018 (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 (Resigned as Director on 1 March 2018)
• David Brown
• Gary Burg
• Michael Alscher (Resigned as Director and appointed as Alternate to Mr Thomson on 1 March 2018)
• Michael Lukin (Alternate to Mr Alscher until revocation on 1 March 2018)
• Nathanial Thomson
•
•
•
Satoshi Wakuya
Simon Swanson (Managing Director)
Susan Young
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.
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 recently stepped down from being a Director
of the PNG Institute of Directors. He is 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.
CLEARVIEW WEALTH LIMITED | 11
Gary Burg B.ACC (Wits), MBA (Wits)
Michael Alscher BCom
Independent non-executive Director
Alternate 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 (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 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, Australian Clinical Laboratories Pty
Limited, National Media Services Group Pty Limited and
National Dental Care Pty Limited. He is also a former
Chairman and Director of Cover-More Group Limited and
LifeHealthCare Group Limited and a former Director of
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 until 1 March 2018. Michael
has since then been appointed as Alternate Director to
Nathanial Thomson effective 1 March 2018.
Nathanial Thomson BCom (Hons), LLB (Hons)
Satoshi Wakuya Bachelor of Liberal Arts
Non-executive Director
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,
Australian Clinical Labs 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 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.
12 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) Simon Swanson BEC, BBus, ANZIIF (Fellow), CIP,
FCPA
Managing Director
Simon is an internationally experienced financial
services executive having worked for over 35 years
across life insurance, funds management, general
insurance and health insurance. He has successfully
led the largest life insurer (CommInsure, Sovereign
and Colonial) in three countries and spent half of his
career in the Asia Pacific region. Simon is a former
Chairman of ANZIIF’s Life, Health and Retirement
Income Faculty Advisory Board and former director of
the Australian Literacy and Numeracy Foundation.
Simon led the team that founded ClearView in its
current form and was appointed as Managing Director
on 26 March 2010.
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 a Governor of
WWF Australia. She has served as a non-executive
Director on ClearView’s superannuation trustee
board over the last 7 years, including holding
the position as its Chairperson for two years.
Susan was appointed to the Board on 14 December
2016 and is a member of each of the Board
Committees. She was appointed Chairperson of the
Nomination and Remuneration Committee and Board
Risk and Compliance Committee on 1 July 2017, and
Chairperson of the Board Audit Committee on 25
August 2017.
CLEARVIEW WEALTH LIMITED | 13
DIRECTORS’ REPORT (CONTINUED) Former Directors
Andrew Sneddon BEC, CA
Michael Lukin BSc (AppMaths) (Hons), CFA, AIAA
Former independent non-executive Director
Former alternate 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 was the former Chairman of TGR BioSciences Pty
Limited, Elastagen Pty Limited, Traditional Therapy Clinics
Limited, Fusion Payments Limited and ServiceRocket
Inc. Andrew was also the former non-executive
Director of Innate Immunotherapeutics Limited.
Andrew was a member and Chairperson of the Board Audit
Committee, Board Risk and Compliance Committee and
the Nomination and Remuneration Committee during his
tenure and resigned from the Board on 1 March 2018.
Michael is the Managing Partner 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 served as Alternate Director to Jennifer
Newmarch and Mr Alscher during his tenure and his
appointment as Alternate Director to Mr Alscher was
revoked on 1 March 2018.
14 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) 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 and was part of the team that
founded ClearView in its current form. 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. Athol is a supporter and
contributor to a number of not for profit organisations.
Elizabeth Briggs, BMedia LLB was appointed Company
Secretary on 4 April 2018. She is also the General Counsel
of ClearView. Elizabeth has over 10 years’ experience
working in financial services working across the life
insurance, superannuation, wealth management and
financial advice sectors. Elizabeth joined ClearView in 2012
and prior to this worked in funds management and in private
practice. Her experience extends to advising multinational
organisations across Europe and the United States.
Elizabeth is a member of the Law Society of NSW and ASFA,
a mentor of junior lawyers through the NSW Law Society
and supporter and contributor to a number of not for
profit organisations.
Appointed Actuary of ClearView Life
Assurance Limited
Ashutosh Bhalerao B.Ec, FIAA is the Appointed Actuary
of ClearView Life Assurance Limited (ClearView Life).
Ashutosh joined ClearView as Deputy Appointed Actuary
in January 2014 and was appointed to his current role on
5 June 2014. Ashutosh has over 20 years experience in the
financial services industry, specialising in life insurance.
In the five years prior to joining ClearView, Ashutosh was
the Appointed Actuary for Swiss Re Life & Health Australia
Limited. Ashutosh has also held other senior actuarial roles
with TAL Limited, Challenger Limited and AMP Limited. He
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.
CLEARVIEW WEALTH LIMITED | 15
DIRECTORS’ REPORT (CONTINUED) Directorships of other listed companies
Directorships of other listed companies held by Directors in the three years preceding the end of the financial year are
as follows:
Name
Company
Andrew Sneddon
(Resigned 1 March 2018)
Traditional Therapy Clinics Limited
Innate Immunotherapeutics Limited
Gary Burg
UCW Limited
Period of Directorship
24 February 2015 – 4 August 2016
19 September 2013 – 4 May 2018
24 March 2016 - current
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
Nathanial Thomson
Cardno Limited
Cardno Limited
6 November 2015 – current
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 2018, and the number of meetings attended by each Director are 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
8
4
8
8
4
8
8
8
8
8
3
6
8
4
8
7
8
8
5
4
5
5
-
-
-
5
-
5
3
3
5
-
-
-
5
-
4
3
4
4
-
-
-
4
-
4
2
2
4
-
-
-
4
-
4
3
-
4
-
-
4
-
4
2
-
4
-
-
4
-
Bruce Edwards
Andrew Sneddon1
David Brown
Gary Burg
Michael Alscher2, 3
Nathanial Thomson
Satoshi Wakuya
Susan Young
Simon Swanson
1 Mr Sneddon resigned as a non-executive director effective 1 March 2018.
2
Mr Alscher resigned as non-executive director effective 1 March 2018 and his attendance as non-executive director has been included in the table above.
Mr Alscher was appointed as Alternate Director for Mr Thomson effective 1 March 2018 and he did not attend any meetings on behalf of Mr Thomson in the
financial year.
Mr Lukin’s appointment as Alternate Director for Mr Alscher was revoked effective 1 March 2018 and he did not attend any meetings on behalf of Mr Alscher in
the financial year.
3
16 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
Directors’ shareholdings
The following table sets out each Director’s relevant interest in shares and rights or options in shares of the Company
or a related body corporate as at the date of this report.
Director
Bruce Edwards
David Brown
Gary Burg
Michael Alscher1
Nathanial Thomson1
Satoshi Wakuya2
Susan Young
Simon Swanson
Fully Paid Ordinary Shares
Executive Share Plan Shares
599,900
-
10,918,090
-
-
-
80,783
4,639,019
-
-
-
-
-
-
-
10,000,000
1 Mr Alscher and Mr Thomson represent the interests of CCP Bidco Pty Limited and its Associates that non-beneficially hold 257,900,632 shares.
2 Mr Wakuya represents the interest of Sony Life Insurance Co., Ltd that hold 99,326,068 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 2018.
Series
Participant
Grant date
Opening balance (1 July 2017)
Forfeited
Exercised
Closing balance (30 June 2018)
No. of
shares
issued
No. of shares
forfeited/
exercised
No. of
shares
total
56,207,077
-
-
(2,521,437)
(2,521,437)
(4,682,045)
(4,682,045)
-
(7,203,482)
49,003,595
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 49,003,595 ESP shares on issue of which 23,522,207 have been issued to
select financial advisers. No new shares were granted to financial advisers in the year ended 30 June 2018.
During the financial year, 4,682,045 vested ESP shares were exercised with the outstanding ESP loan balance proceeds being
received by the Company. During the financial year, the forfeited 2,521,437 ESP shares were sold via an off-market transfer
with the full proceeds of the sale being received by the Company.
CLEARVIEW WEALTH LIMITED | 17
DIRECTORS’ REPORT (CONTINUED) 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 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 75.
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor
are outlined in Note 10 to the financial statements.
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person
or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 10 to the financial statements do not compromise
the external auditor’s independence, based on advice received from the Board Audit Committee, for the following reasons:
•
•
All non-audit services comply with the ClearView audit independence policy and have been reviewed and approved to
ensure that they do not impact the integrity and objectivity of the auditor; and
None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct
APES 110 “Code of Ethics for Professional Accountants” issued by the Accounting Professional & Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the
Company, acting as advocate for the Company or jointly sharing economic risks and reward.
Annual Corporate Governance Statement
ClearView is committed to achieving high corporate governance standards. In accordance with the 3rd edition ASX Corporate
Governance Council’s Principles and Recommendations, the Company’s annual Corporate Governance Statement, as approved
by the Board, is published and available on the Company’s website at: www.clearview.com.au/about-clearview/corporate-
governance.
18 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) 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 $16.2bn1 life (risk) insurance market,
namely the $9.8bn1 individual risk market (excluding group life). ClearView has to date,
chosen intentionally not to participate in the group life insurance market.
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, allowing us to focus on the advised life
insurance market.
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.
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 233 financial advisers.
In turn, they provide quality financial advice to retail clients.
For the second year in a row, Matrix was named the 2018 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.
1
2
Plan for Life data as at 31 March 2018.
ABS 5655.0 data as at March 2017 (unconsolidated). Retail segment based on management estimates.
CLEARVIEW WEALTH LIMITED | 19
DIRECTORS’ REPORT (CONTINUED) Business strategy
ClearView generates its revenue by manufacturing and distributing life insurance, superannuation and investment products,
and providing licensing and support services to financial advisory practices.
ClearView’s growth strategy is focused on building a quality life insurance, wealth management and financial advice business,
to help customers manage, grow and protect their financial well being.
Goals
5% of
the long-term
life insurance
profit pool
Building a
material wealth
management
business
Building a high quality
financial advice business
providing strategic
advice to clients
We will achieve our goals by providing advisers and the clients they serve with:
•
•
•
Fair products - for customers and shareholders;
Personalised, efficient and effective service; and
Strong and empathetic relationships.
Our Strategy is focused on:
Strategy
Win market share within profitable niches by delivering
innovative products and exceptional service.
Expanding distribution presence
Increase profitability
Improve efficiency and reach
Expand our distribution
footprint in the IFA market
Target profitable market segments
with innovative products
Enhance margins
over time
•
•
•
•
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
•
•
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 holistic advice
and improved adviser business
efficiency with the potential to
provide back-end services in
the dealer group market (D2D
offering)
•
•
•
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
1 Approved Product Lists.
20 | CLEARVIEW ANNUAL REPORT 2018
123DIRECTORS’ REPORT (CONTINUED)
Group overview
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).
Life insurance and superannuation regulatory changes
Four major inquiries are driving unprecedented regulatory activity:
•
•
•
•
Banking and Financial Services Royal Commission
Parliamentary Joint Committee (PJC) Report on the life insurance industry
Superannuation Productivity Commission
APRA Prudential Inquiry into the Commonwealth Bank of Australia
ClearView is supportive of any reform agenda designed to boost competition, drive efficiency and deliver improved consumer
outcomes. We believe open Approved Product Lists (APLs) should be mandated as an important step to ensure conflicts of
interest are properly managed.
ClearView also fully supports changes to group life insurance inside superannuation contained in the Treasury Laws
Amendment (Protecting Your Superannuation Package) Bill 2018.
We believe that the reforms will help ensure young workers and those with low account balances don’t pay for cover they don’t
want or need.
However, we believe the reforms should be extended to require all members to consciously opt-in for group insurance. This
would result in a substantial improvement in members understanding what they are and aren’t covered for, and lead to more
Australians seeking professional advice, either via their super fund or a third party.
CLEARVIEW WEALTH LIMITED | 21
Life InsuranceWealth ManagementFinancial AdviceClearView 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)ClearView Wealth Limited (NOHC)DIRECTORS’ REPORT (CONTINUED) ClearView also maintains that there are additional areas
that need to be addressed to ensure good public policy
outcomes, including:
Competitive strengths
Integrated business model
As a relatively young diversified financial services company,
with an integrated business structure that encompasses
Life Insurance, Wealth Management and Financial Advice,
ClearView is differentiated from other newcomers, the
majority of whom focus on a single area.
Strong IFA relationships
ClearView has a sharp focus on the Independent Financial
Adviser (IFA) market. It has developed strong IFA
relationships by consistently delivering smart, customer-
centric products and excellent service.
Non-institutional ownership
As dissatisfaction with, and distrust of, large financial
institutions grows, consumers and financial advisers alike are
increasingly seeking to form relationships with customer-
centric non-bank organisations.
ClearView is ideally-positioned to attract advisers and
customers looking for objective service and advice.
Nimble size and no material legacy issues
ClearView stands to gain from market disruption, particularly
around life insurance reforms with a stepped change in
distribution profile expected to occur if institutionally-
aligned licensees are forced to adopt open APLs and with the
introduction of a ban on shelf-space fees.
Furthermore, an extended period of consolidation in the
Australian life insurance and wealth management industry,
has created the need for a fresh, innovative entrant focused
on servicing IFAs.
Legacy issues such as multiple administration platforms;
out-dated, expensive products; and older, higher margin
in-force portfolios in run-off often stifle the ability of larger
institutional competitors to innovate and adapt to change.
This creates opportunities for ClearView given our relatively
small size and differentiated business model with limited
legacy issues.
1. Unrestricted life insurance APLs
Good progress was made this year in relation to our
advocacy efforts for open life insurance APLs.
Open APLs must be mandated to give financial advisers the
ability to recommend the most appropriate client solution,
based on all life insurance products issued by APRA-
regulated insurance companies.
They are a first and important step for vertically-integrated
financial services companies to manage conflicts of interest,
better protect consumers and champion professional advice.
2. Sunset clause on grandfathered rebates
ClearView has pushed for an end to grandfathered platform
rebates, which still form a significant proportion of licensee
remuneration and act as an incentive to keep clients in
outdated platforms.
While we supported the grandfathering relief contained
in the Future of Financial Advice (FoFA) Act, we believe a
deadline should have been applied. We believe this should be
implemented by 2020 with a three-year sunset clause.
3. Higher education requirements
ClearView broadly supports the Financial Adviser
Standards and Ethics Authority’s (FASEA) higher education
requirements. Greater guidance is still required in a number
of areas including bridging courses, government traineeships
and the professional year.
4. Life Code of Conduct
More work must be done 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.
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 of the 30 June
2018 Annual Report.
22 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) Awards
ClearView was recognised by a number of leading research and ratings agencies in 2017/2018 including Canstar, Investment
Trends, CoreData, Money Magazine, Dexx&r and Money Management.
st1
st1
st1
Overall Adviser
Satisfaction1
Australia’s leading
Licensee2
Claims customer
satisfaction3
AQUA
Upgraded LifeSolutions
eQuote and eApplication4
Highly rated
WealthFoundations
and WealthSolutions5
1
2
3
Investment Trends 2017 and 2018 Planner Risk Report.
CoreData 2017 and 2018 Licensee Report.
Rated Number 1 in claims customer satisfaction in the Beddoes Institute’s Industry Claims Journey Study which tracked the experience of 500 customers
across the industry who have had an income protection, trauma or TPD claim.
4 AQUA launched in January 2018.
5
Chant West 2018 rating of 4 Apples for ClearView WealthFoundations Super and Pension, and ClearView WealthSolutions Super and Pension.
A 4 Apples rating reflects a “high quality fund”.
CLEARVIEW WEALTH LIMITED | 23
DIRECTORS’ REPORT (CONTINUED)
FY18 Results overview
Overview of result
The ClearView Group achieved the following results for the year ended 30 June 2018:
After tax profit by segment, $M
Life Insurance
Wealth Management
Financial Advice
Listed entity and other
Underlying NPAT2
Other adjustments3
Reported NPAT4
Embedded Value5
Value of new business6
Net asset value7
Underlying diluted EPS (cps)8
DPS (cps)9
FY18
$M
26.1
5.2
1.8
(0.7)
32.4
(5.8)
26.6
FY17
$M
24.9
3.9
2.2
(0.7)
30.4
(17.2)
13.2
701.1
661.9
12.0
16.7
444.3
415.6
5.03
3.00
4.88
2.75
%
change1
5%
31%
(20%)
0%
7%
66%
102%
6%
(28%)
7%
3%
9%
Underlying NPAT, Reported NPAT, earnings per share (EPS) and dividends per share (DPS)
Chart 1: Segment performance FY14-FY18
Life Insurance underlying NPAT ($m)
Wealth Management underlying NPAT ($m)
Financial Advice underlying NPAT ($m)
Impacted by claims volatility
and lapse experience - fit within
assumptions in longer term
24.5
24.9
26.1
15.3
12.4
12.2
13.6
$m
10.8
8.0
6.1
4.7
7.3
12.1
12.7
12.5
FY14
FY15
FY16
FY17
FY18
Significant investment in
contemporary platform and
products n FY15 with growth
now emerging
5.9
2.9
3.0
5.2
2.6
2.6
3.9
2.3
1.6
2.7
1.4
1.3
1.8
0.7
1.1
FY14
FY15
FY16
FY17
FY18
8
6
4
2
0
$m
30
25
20
15
10
5
0
Change in expense allocation
basis, broadly neutral result
period to period, adjusting for
abnormal items
4.4
2.5
1.8
1.9
3.5
1.7
1.8
2.2
1.0
1.2
1.8
0.8
1.0
1.5
0.8
0.7
FY14
FY15
FY16
FY17
FY18
$m
5
4
3
2
1
0
1H
2H
1H
2H
1H
2H
1. % movement, FY17 to FY18 unless otherwise stated.
2.
Underlying NPAT consists of consolidated profit after tax adjusted for amortisation (not including capitalised software), the effect of changing discount rates on
insurance policy liabilities and costs considered unusual to the Group’s ordinary activities.
Other adjustments include non-cash amortisation, costs considered unusual to normal activities (includes $0.8m strategic review costs) and changes in long
term discount rates used to determine the insurance policy liabilities ($5.0m ‘swing’ between periods).
Reported NPAT of $26.6m, up 102%, impacted by changes in long term discount rates used to determine the insurance policy liabilities ($5.0m ‘swing’ between
periods); represents a non-cash timing difference in the release of profit over time and has no impact on underlying earnings.
Embedded Value at 4% discount rate margin, including a value for future franking credits, accrued franking credits and Employee Share Plan (ESP) loans.
Value of New Business (VNB) at 4% discount rate margin. Adversely impacted in 2H by the hybrid commission model under the LIF reforms (noting VNB will
improve as the commission cap reduces from 80% to 60% over the next few years).
Net Asset Value as at 30 June 2018 excluding ESP Loans.
Adversely impacted by the dilutive effect of shares issued under the DRP, ESP shares vested/forfeited during the period partially offset by a decrease in the
number of ESP shares ‘in the money’ given the decrease in ClearView’s share price period on period.
3.
4.
5.
6.
7.
8.
9. DPS is dividend per share.
24 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
Chart 2: Underlying NPAT, EPS and DPS performance FY14-FY18
Underlying NPAT ($m)
Fully diluted underlying EPS and DPS (cps)
$m
35
30
25
20
15
10
5
0
32.4
17.1
30.4
15.2
27.2
13.8
19.7
20.5
10.6
10.6
9.1
9.9
13.4
15.2
15.3
FY14
FY15
FY16
FY17
FY18
1H
2H
6
5
4
3
2
1
0
Impact of FY16
$50m capital raising
Impact of FY14
$45m capital raising
4.92
4.88
5.03
4.41
3.85
2.0
2.1
(0.5)
2.5
2.75
3.0
FY14
FY15
FY16
FY17
FY18
EPS
DPS
Underlying NPAT, the Board’s key measure of Group profitability and basis for dividend payment decisions increased 7% to
$32.4 million (FY17: $30.4 million), 2H FY18 Underlying NPAT up 12% to $17.1 million (HY17:$15.2 million):
•
Life Insurance Underlying NPAT up 5% to $26.1 million (FY17: $24.9 million):
•
•
•
•
In FY18, there was an adverse claims experience of $5.5 million (FY17: $1.9 million). Adopting a longer term view,
overall net adverse claims performance is mainly attributed to the income protection (IP) portfolio, with the lump sum
portfolio having a net neutral experience over the same five-year period. Claims assumptions have been updated for
the IP portfolio at June 2018, with the expectation that overall claims performance will fit within best estimate claims
assumptions (as at 30 June 2018) over the longer term. Due to the small size and nature of the portfolio, volatility has
a material short-term impact on profitability.
In FY18, there was an adverse lapse experience of $2.1 million (FY17: $2.0 million). LifeSolutions has been broadly
neutral over a five-year period, with the more recent adverse experience driven by the LifeSolutions lump sum
portfolio. The repositioning and repricing of the LifeSolutions lump sum product in 1H FY19, coupled with the impact
of the life insurance (LIF) reforms, is expected to improve lapse performance so it is in line with best estimate lapse
assumptions (as at 30 June 2018) over the longer term.
Life Insurance remains the key profit driver. Our expanding distribution footprint and strong new business volumes led
to a material increase in the in-force portfolio which underpins the growth profile.
The in-force book has grown 19% in FY18 and LifeSolutions sales are up 5%. The IFA distribution footprint continues to
expand, diversifying sales and creating embedded growth.
• Wealth Management Underlying NPAT up 31% to $5.2 million (FY17: $3.9 million)
•
•
•
Wealth Management is a strong, net flow positive business with material growth in earnings. The business will
continue to benefit from the shift away from larger institutions and banks, along with increasing demand for
competitive investment administration platforms and products, albeit with some competitive pricing pressures in
response to industry scrutiny.
Growth in earnings follows material investment in the contemporary wealth platform and products in FY15.
FUM increased 12% in FY18 with net flows of $333 million into new contemporary products (material relative to FUM).
Material net flows will lead to comparable market share growth in FUM which is a key profit driver.
•
Financial Advice Underlying NPAT down 20% to $1.8 million (FY17: $2.2 million)
•
•
Committed to building a high quality aligned advice business and assisting advisers run more efficient and profitable
practices.
Underlying NPAT is down 20%, but the prior year result includes the recovery of certain compliance costs incurred.
Adjusting for this item recognised in FY17, Underlying NPAT has remained broadly neutral year-on-year.
CLEARVIEW WEALTH LIMITED | 25
DIRECTORS’ REPORT (CONTINUED)
ClearView has strong growth embedded in its expanding distribution footprint and product range – this underpins the growth
profile:
•
•
Maturation of existing Life Insurance approved product lists (APLs) and gaining access to new APLs. If the transition to open
APLs occurs through regulatory change, the addressable market will expand materially for the LifeSolutions product; and
Continued significant investment in building a wealth platform and products (since FY15), with the ability to leverage off
the Life Insurance distribution network over time.
Reported NPAT increased to $26.6 million (FY17: $13.2 million) and reported diluted EPS increased by 95% to 4.14 cps (FY17:
2.11 cps). Underlying NPAT increased to $32.4 million (FY17: $30.4 million) and fully diluted Underlying EPS increased by 3% to
5.03 cps (FY17: 4.88 cps). EPS calculations have been impacted by:
• Growth in Underlying NPAT of 7%;
•
•
Positive swing of $5.0 million (after-tax) from the impact of changes to the long-term discount rates on policy liabilities
between periods;
Reduction in amortisation of the intangibles associated with the acquisition of businesses from Bupa in 2010 given certain
client books acquired have now been written off;
•
Reduction in the number of ESP shares given the decrease in ClearView’s share price since June 2017; and
• Dilutive effect of shares issued under the DRP and ESP shares vested/forfeited during the period.
The Board declared a fully franked FY18 dividend of $20.0 million (2017: $18.1 million). This equates to 3.00 cents per share
(2017: 2.75 cents per share), representing just over 60% of 2018 UNPAT in line with the company’s dividend policy (+9%
increase).
Other adjustments and amortisation
The following additional items impacted the statutory NPAT and comprised the reconciled items outlined in the following table.
•
•
•
Amortisation of intangibles ($4.0 million) is associated with the acquisition of wealth management and life insurance
businesses from Bupa, ComCorp and Matrix Planning Solutions. These are reported separately to remove the non-cash
effect of the write-off of these acquired intangibles. However, amortisation associated with capitalised software is reported
as part of Underlying NPAT.
The policy liability discount rate effect is the result of 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 FY18 caused
an adverse after-tax impact of -$0.9 million (FY17: -$5.9 million).
Costs that are considered unusual to ClearView’s ordinary activities and therefore not reflected as part of Underlying
NPAT predominantly include expenses incurred as ongoing costs associated with the Cooperation Agreement between
ClearView and Sony Life. These costs are expected to cease from the end of July 2018, being the date of termination of the
Cooperation Agreement.
26 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) Operating expenses
The chart below shows a 4% increase in the operating cost base from $77.1 million in FY17 to $80.2 million in FY18.
Chart 3: Operating expense analysis FY17 vs FY18 cost base
2.4
0.9
0.5
1.7
1.4
80.2
(3.8)
77.1
75.5
100
80
60
40
20
$m
0
FY17 Cost Base
Fu nctional costs
Direct Life
Distribution
Financial A dvice Support Costs
Projects & Softw are A m ortisation
Shared Services/Listed
FY18 Cost Base
Key components of the movements include:
•
•
•
•
•
•
Functional costs – costs increased in functional areas that support business growth including administration, the call
centre, claims and underwriting. This reflects underlying volume growth in both new business and the in-force base.
Direct Life Insurance exit – the closure of the direct business has reduced costs by $3.8 million vs the prior comparable
period. This is driven by a reduction in the fixed cost base, coupled with the volume-based cost structure (call centre agents
and related costs).
Distribution costs – increased business development costs reflect a larger Life Insurance distribution presence to support
the broader independent financial adviser (IFA) footprint. Investment in Wealth Management distribution to support
business growth remains broadly consistent between periods.
Financial Advice support costs – driven by the increase in operational and compliance head count, system costs and
investment in strategic advice and dealer licensee services model, partially offset by lower conference costs. Dealer group
overheads include staff, marketing, rent, professional indemnity insurance and shared services allocation.
Project costs and software amortisation – software amortisation costs have increased as projects are delivered. For
example, a project to migrate the Master Trust product onto a contemporary wealth platform was completed in 2H FY17.
Cost benefits and efficiencies from the migration are expected to flow into FY19.
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 increased given higher investor relations costs
incurred coupled with the allocation of insurance costs in FY18 to the listed segment.
CLEARVIEW WEALTH LIMITED | 27
DIRECTORS’ REPORT (CONTINUED) The table below reconciles the operating expenses analysed in Chart 3 (page 27) with reported operating expenses in the
annual financial statements.
Reconciliation of operating expenses to reported operating expenses per financial statements
Operating expenses per chart
Custody and investment management expenses
Depreciation and software amortisation
Reinsurance technology costs
Stamp duty
Medical costs
Interest expense
Strategic review costs
Direct closure provision
Recoverable adviser related costs
Other expenses on consolidation of unit trusts
Operating expenses per financial statements
Expense Overruns
FY18
$M
FY17
$M
80.2
9.5
(6.4)
77.1
8.1
(5.3)
0.5
8.8
2.1
0.4
1.1
-
3.6
1.9
1.2
6.7
1.7
0.3
1.0
3.4
1.8
1.6
101.7
97.6
ClearView has consistently invested in operations ahead of revenue to support growth. This includes prioritising incremental
costs above those required for ClearView’s scale (expense overruns) to build capability for the future. In this context, initial
start-up costs and business investment costs are being incurred prior to achieving scale. As ClearView continues to grow, the
remaining expense overruns are likely to be absorbed.
Expense overruns initially lower reported profits but this reverses as scale is achieved, the in-force portfolio increases and
underlying profit is realised. In FY18, the non-deferred expense overruns across the Life Insurance and Wealth Management
‘manufacturing’ businesses had a negative impact on UNPAT of $2.5 million (FY17: $3.1 million). The movements between
segments are shown in the corresponding graph.
Chart 5: Non-deferred expense overruns FY15-FY18
10
8
6
9.1
5.2
4.5
$m
4
4.6
4.0
3.0
2.7
3.1
2.5
2
0
-2
1.2
0.4
(0.5)
Life Insurance
Wealth Management
Total
FY15
FY16
FY17
FY18
28 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) The increase in the Life Insurance in-force premium over time
has progressively reduced expense overruns with the actual
Life Insurance non-deferred overruns reflecting an experience
profit of $0.5 million for the year.
Investment in WealthFoundations and the contemporary
wealth platform is however causing overruns in the Wealth
Management segment. WealthSolutions continues to build
scale (FUM +12%) with WealthFoundations now contributing
to growth and development costs (FUM +37%). Expense
overruns marginally increased in FY18 as a result of costs
incurred on the Wealth migration project completed in 2H
FY18. This situation should improve now that costs associated
with the migration project have been incurred and the costs
of the contemporary platform now being shared.
A driver is also 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, this will impact expense
overruns until WealthFoundations can support its cost base.
The elimination of expense overruns along with achieving
the business’ growth ambitions remains a key focus of
management and the Board.
CLEARVIEW WEALTH LIMITED | 29
DIRECTORS’ REPORT (CONTINUED) Operating segment review
Life Insurance
Approach
ClearView set out to create a customer-focused business with a reputation for excellent customer service, innovative products
and professional advisers. ClearView has built a firm foundation for ongoing growth in the advised life insurance market:
•
•
LifeSolutions, launched in 2011, is ClearView’s core life insurance product with features that compare favourably with
competitors;
Continuous product upgrades has ensured LifeSolutions is consistently ranked in the first and second industry quartiles for
features and price;
• A sharp focus on relationships combined with a service-oriented approach has resulted in strong adviser support;
•
•
Recognised as a customer-focused challenger, largely due to a leadership position on open APLs and a deliberate decision
not to pay material shelf space fees or volume bonuses for inclusion on APLs; and
Making system enhancements that are designed to speed up the application process, drive operational efficiencies and
boost productivity.
Where are we today?
The Life Insurance growth strategy is focused on capturing 5% of the long-term profit pool by delivering competitive products
and services, primarily to the IFA market.
30 | CLEARVIEW ANNUAL REPORT 2018
in cash reservesNet assets in capital reserves including $371m$98mZERO$72mTotal incurred claims liabilitiesin financial year 2017Life insurance inforce premiumIP claimants engaged in rehabilitation compared with an industry average of 6%*25%Litigations or investigationsLife claimsLifeSolutions portfolio is reinsured with Swiss ReHighest capital coverageratio of Australian registered life insurers 75%25%2%10%OtherTerminalillnessLife insurance50%Income protection13%Trauma646152474242Trauma claimsAverage claim agePlanner SatisfactionNo. 1 for overall planner satisfactionby Investment Trends^Customers and their families paid benefits 600$189.5mBreakdown of claims lodged in FY17IP claimsHighly-rated by Investment Trends, DEXX&R/Money Management/Canstar/Money Magazine/Beddoes InstituteAQUA integrated eQuote and eApp platform Established infrastructure and distribution 12Ranked fi rst and second quartile on IRESS Established in 2011DIRECTORS’ REPORT (CONTINUED) The core of ClearView’s success has been its strong growth in life insurance new business flows and in-force premiums.
However, it takes some time for this to be reflected in the financial results. When ClearView was established in 2011, it was
effectively a start up in the life advice market. As a new player, it has laid a solid foundation for future success by building
competitive products (with some innovation) and establishing a distribution network.
Increasing new business flows and market share was the next step. Over the period from 2013, ClearView’s share of new
policies written in the IFA channel rose steadily from a standing start, just over 8%, which resulted in material growth in the
in-force portfolio over time.
ClearView’s distribution universe currently consists of two national aligned dealer groups and a rapidly growing network of IFAs.
The Life Insurance distribution strategy has shifted over time to incorporate the valued IFA channel which is an important lever
to grow and diversify sales:
•
The aligned adviser network (CFA and Matrix) provides a solid distribution base, but the IFA market represents ClearView’s
largest, fastest growing sales channel.
• Growth in sales since 2014 has been the result of building out the IFA footprint:
• ClearView is still relatively early in the process of penetrating the IFA channel;
• ClearView continues to increase its wallet share of existing APLs over time; and
•
LifeSolutions sales growth continues to outperform the market (+5% growth in a declining market).
It is evident there is a significant lag time in relation to the profitability cycle when building a distribution network.
ClearView will continue to gain market share from the maturation of current APLs and by accessing new APLs. A step-change in
ClearView’s addressable market is expected if open APLs are implemented by the industry (regulatory change is required in this
regard).
In summary it is expected organic growth opportunities will be derived from three sources:
•
The maturation of relatively recent APLs;
• Access to new APLs; and
•
The potential opening up of APLs (should this be implemented).
ClearView has recently completed significant enhancements to its life insurance quote and application system. These include
a new-look user face that is supported by an integrated eQuote and eApplication system. This means that the application
process and related tele-interviewing and tele-underwriting processes have been streamlined. These enhancements (launched
in January 2018) underpin our life insurance platform, AQUA – which stands for Adviser Quote Underwriting and Apply.
Looking forward
ClearView has strong momentum embedded in its expanding distribution footprint which will drive future growth. In FY19, key
focus areas will include:
• Maturation of the existing Life Insurance APLs and gaining access to new APLs;
•
•
•
•
•
Lobbying for change and opening up of competition - if the transition to open APLs occurs, the addressable market will
expand materially for ClearView;
Further investment in systems and product upgrades to improve competitiveness, back-office services, efficiency and
automation;
Capturing opportunities from the convergence of life and wealth by providing products that improve adviser efficiency and
customer experience;
Completion of the direct remediation program that commenced in FY18 ; and
In line with ClearView’s regular program of review and enhancement, ClearView is undergoing a product and pricing review
which will be completed in 1H FY19. The competitiveness of premium rates (in particular for part of the lump sum portfolio)
have changed over time and will be addressed with price changes as part of the product review.
CLEARVIEW WEALTH LIMITED | 31
DIRECTORS’ REPORT (CONTINUED)
Financial Performance
The FY18 financial performance is discussed below.
Life Insurance financial result:
12 Months to 30 June 2018 ($M)1
1H
2H
FY17
1H
2H
FY18
Change2
2017
2018
%
177.7
104.7
110.5
215.2
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)
Reported NPAT
84.4
1.2
(11.8)
(20.3)
(27.8)
(24.2)
16.7
18.2
(5.5)
12.7
(1.4)
(6.9)
4.4
93.3
1.1
(13.2)
(24.0)
(29.9)
(23.7)
13.8
17.4
(5.2)
12.2
(1.4)
1.0
11.8
2.3
(25.0)
(44.3)
(57.7)
(47.9)
30.5
35.6
(10.7)
24.9
(2.8)
(5.9)
16.2
1.1
(16.9)
(27.2)
(33.7)
(24.3)
14.2
17.9
(5.4)
12.5
(1.4)
(0.7)
10.4
1.2
2.3
(16.0)
(30.0)
(30.0)
(24.9)
(32.9)
(57.2)
(63.7)
(49.2)
21%
(2%)
32%
29%
10%
3%
8.9
23.1
(24%)
19.6
(6.0)
13.6
(1.4)
(0.2)
12.0
37.5
(11.4)
26.1
(2.8)
(0.9)
6%
7%
5%
0%
(85%)
22.4
39%
Analysis of Profit ($M)
Expected Underlying NPAT3
Claims experience
Lapse experience
Expense experience
Other
Underlying NPAT
2017
2018
%
1H
2H
FY17
1H
2H
FY18
Change2
14.2
(0.6)
(0.7)
(0.3)
0.1
12.7
15.1
(1.3)
(1.3)
(0.1)
(0.2)
12.2
29.3
(1.9)
(2.0)
(0.4)
(0.1)
24.9
16.0
(3.2)
(0.8)
0.2
0.2
16.2
(2.3)
(1.3)
0.3
0.7
32.2
(5.5)
(2.1)
0.5
0.9
12.5
13.6
26.1
10%
Large
8%
Large
Large
5%
2017
2018
%
Key Statistics And Ratios ($M)
1H
2H
FY17
1H
2H
FY18
Change2
New business
LifeSolutions
Non-Advice
In-force premium
LifeSolutions
Non-advice (closed to new business)
22.1
20.6
1.5
171.0
126.1
44.9
20.2
19.7
0.5
189.5
146.1
43.4
42.3
40.3
2.0
189.5
146.1
43.4
22.6
22.6
0.0
209.9
167.5
42.4
19.7
19.7
0.0
42.4
42.4
0%
5%
0.0
(99%)
224.8
224.8
184.2
184.2
40.6
40.6
19%
26%
(7%)
Cost to income ratio
28.7% 25.4% 27.0% 23.2% 22.5% 22.9%
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 FY17 to FY18.
3
Expected Underlying NPAT of $32.2 million (+10% FY17 to FY18) reflects expected profit margins on in-force portfolios based on actuarial assumptions.
32 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
ClearView has generated solid Underlying NPAT growth (adjusting for claims volatility between periods) driven by growth across
in-force life insurance portfolios. ClearView also generates positive cash flows from its in-force portfolio which are subsequently
reinvested into new business generation.
ClearView reinvests these cash flows each year at an appropriate ROE hurdle but given the quantum of new business written
relative to the size of the in-force book to date, the cash flows generated have been insufficient to fund new business growth,
known as upfront capital strain. This strain has reduced materially since the ‘start up’ phase with ClearView now approaching
self-funding capability from the in-force portfolio flows.
The following graphs illustrate the performance of the Life Insurance business and the growth profile of the business.
Chart 1: Life Insurance key performance indicators
Active Life APLs1 with ClearView products
Life in-force premium2 ($M)
Life new business3 ($M)
450
400
350
300
250
200
150
100
50
0
419
343
240
200
160
256
191
119
$m
120
80
87.5
45.2
40
5.6
36.7
115.7
71.0
9.6
35.1
224.8
184.2
50
40
30
$m
23.6
189.5
146.1
150.7
105.7
10.9
34.1
10.7
32.7
9.6
30.9
27.5
14.3
12.1
11.5
13.2
20
10
0
42.4
19.7
40.3
19.7
22.6
20.6
34.7
19.0
15.7
FY14
FY15
FY16
FY17
FY18
0
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
FY17
FY18
Old Book
Direct
LifeSolutions
1H
2H
The fundamentals of the business continue to be strong with gross premiums up 21% to $215.2 million and Life Insurance
sales of contemporary products up 5% at $42.4 million:
2.2
2.2
•
•
•
There has been further broadening of the IFA footprint (sales of $33.8 million; +17%) with 80% of new Life business
originating from the IFA channel (68% in FY17);
LifeSolutions is now available on 419 APLs, up 22%; and
Further embedded growth in the distribution footprint.
As expected, the closure of the direct business impacted the overall growth rate of Life Insurance sales. Direct sales receded
from the 2H of FY17, as new business was slowed intentionally, marking the exit from direct sales ($2.0 million of sales was
achieved in FY17).
In the short-term, the impacts of regulatory reforms and media scrutiny have resulted in an industry slowdown in overall new
business volumes. Despite this, ClearView continues to outperform the market with continued growth in contemporary new
business sales (+5% in a declining market), albeit at a slower rate than previous years given the overall context of the market.
This is expected to unwind over the longer term as the regulatory focus shifts back to a more normalised environment.
In-force premiums increased 19% to $224.8 million in FY18. The Life Insurance in-force movement is driven by the net impacts
of new business, price increases, lapse and CPI/aged-based variances. This is reflected in the chart on the next page.
1 Approved Product Lists.
2
3
In-force premium is defined as annualised premium in-force at the balance date.
Life Insurance contemporary new business or sales represents the amount of new LifeSolutions annual written premium sold during the period,
net of policies cancelled from inception and excludes age-based/ CPI increases.
CLEARVIEW WEALTH LIMITED | 33
DIRECTORS’ REPORT (CONTINUED)
Chart 2: Life insurance in-force movement ($M)
42.4
224.8
(18.8)
10.0
1.7
189.5
$m
250
230
210
190
170
150
1 July 2017
CPI / Age
IP pricing increase
New business
Lapses
30 June 2018
The Life Insurance in-force portfolio at 30 June 2018 is made up of LifeSolutions, ($184.2 million; +26%); non-advice
($9.6 million; -10%) and the Old Life Book ($30.9 million -5%):
•
•
•
•
The mix of products making up the in-force portfolio has changed materially with LifeSolutions now representing
82% of total in-force premiums. This links to the margin shifts across the portfolio;
IP price increases were implemented in HY17 and increased the in-force book by $1.7 million for policies that
subsequently renewed in 1H FY18;
The direct business was closed to new business in 2H FY17 which means in-force portfolios are in run off; and
The increased scale of the in-force premium (+19%) is driven by sales of new contemporary products. This has
progressively reduced expense overruns with actual non-deferred overruns reflecting an experience profit of $0.5
million in FY18.
34 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
FY18 Life Insurance earnings
The Life Insurance segment result for the year ended 30 June 2018 is shown in the chart below:
Chart 3: Life Insurance Underlying NPAT analysis
32.2
75.5
(2.1)
(5.5)
0.5
1.0
26.1
35
30
25
20
15
10
5
$m
0
FY18 Expected U n derlying N PAT1
Claim s Volatility I m pact2
Lapse I m pact2
Expense I m pact2
Other2
FY18 Actual U n derlying N PAT
Underlying NPAT for Life Insurance was $26.1 million (+5%) compared to the expected Underlying NPAT of $32.2 million. The
expected Underlying NPAT reflects the anticipated FY18 profit margin release from the in-force life insurance portfolios, based
on best estimate long-term actuarial assumptions. The negative variance in performance can be broadly explained by material
claims volatility and adverse lapse experience.
Net claims of $32.9 million were up 32% on the prior year. The poor claims experience (relative to the claims assumptions in
the life insurance policy liability determined at 30 June 2017) across products resulted in an experience loss in FY18 of $5.5
million (FY17: $1.9 million loss). This is broken down by product as follows:
•
•
•
LifeSolutions Lump Sum portfolio reflects adverse experience in FY18 of $1.4 million (FY17: $1.6 million positive experience);
LifeSolutions IP portfolio reflects adverse experience of $1.9 million in FY18 (FY17: $1.1 million adverse experience after
adjusting for enhanced reserving basis – see below); and
Direct portfolios (closed to new business) reflects adverse experience in FY18 of $2.1 million (FY17: $0.2 million positive
experience).
1
2
Expected Underlying NPAT of $32.2 million (+10% FY17 to FY18) reflects expected profit margins on in-force portfolios based on actuarial assumptions adopted 30 June 2017.
Reflects actual experience for relevant item in the FY18 result and the difference between actual and expected experience for the relevant period.
CLEARVIEW WEALTH LIMITED | 35
DIRECTORS’ REPORT (CONTINUED)
The following graphs reflect the claims experience over the last five-years:
Chart 4: Claims experience ($M)
Total claims experience1
Total Claims Experience
LifeSolutions Lump sum claims experience1
Lump Sum Claims Experience
2.0
1.0
0
-1.0
$m
-2.0
-3.0
-4.0
1.1
0.0
0.1
1.7
36.8
(0.3)
(0.7)
(0.6)
(1.3)
(3.2)
(2.3)
$m
1.0
0.5
0.0
-0.5
-1.0
-1.5
0.3
0.3
0.1
0.2
0.8
0.9
0.7
36.8
(0.4)
(0.4)
(1.0)
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Claims experience
Average claims experience
Claims experience
Average claims experience
LifeSolutions Income protection claims experience1
Income Protection Claims Experience
Non-advice/Legacy claims experience1
Non-advice/Legacy Claims Experience
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
$m
0.0
(0.1)
0.1
0.1
0.1
0.1
-0.1
(1.1)
(1.0)
(1.6)
(1.6)
$1.0m
increase
in claims
reserving basis
$1.6m
increase
in claims
reserving basis
(0.3)
-0.2
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
$m
0.8
0.8
1.2
-0.0
(0.3)
(0.6)
(0.4)
(1.0)
(1.1)
(1.0)
Dec 13
Jun 14
Dec 15
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 13
Jun 14
Dec 15
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Claims experience
Incease in reserving basis
Average claims experience
Claims experience
Average claims experience
Key observations of the claims experience data are as follows:
•
•
•
•
Adopting a longer term view, overall net claims performance has an average $0.6 million adverse impact per half year that
is mainly attributed to the IP book, with the lump sum portfolio having a net neutral experience over the same five-year
period. Actuarial best-estimate assumptions adopt a long-term view and are based on expectations that claims experience
will average out over time;
The claims experience on the LifeSolutions lump sum portfolio has been profitable over the last five-years (average annual
experience profits of $0.3 million), albeit with some volatility between periods, in particular 2H FY18. Given the size of the
portfolio and reinsurance arrangements in place, some statistical volatility is normal;
Overall, the direct portfolios, including the book that was closed to new business in FY17, has an average annual experience
loss of $0.3 million over the preceding five-years. This offsets the profits made on the LifeSolutions lump sum portfolio.
It should also be noted that the surplus reinsurance program of the Old Book (acquired in 2010) retains more risk than
LifeSolutions products but has historically reflected claims profits over a long period of time, albeit with some volatility
between periods; and
An enhanced actuarial reserving basis was adopted for IP claims in FY17 resulting in a $2.6 million loss in the prior year.
The poor IP experience in the first half of FY17 and FY18 was driven predominantly by the incidence of claims (relative to
the enhanced basis adopted) with an improvement in performance in the second half of both financial years. Actuarial
claims assumptions have been further updated at June 2018 reflecting the longer term performance of the IP portfolio,
with an increase (+15%) in the projected claims costs of the IP portfolio that is expected to reduce the adverse experience
over time. This had an adverse impact of $5.4 million on Embedded Value at 30 June 2018.
Notwithstanding this however, the IP portfolio remains profitable and earns an appropriate ROE.
1 Experience measured against the assumptions applicable at each reporting date.
36 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
The adverse lapse experience (relative to the lapse assumptions in the Life Insurance policy liability determined at 30 June
2017) across products resulted in an experience loss in FY18 of $2.1 million (FY17: $2.0 million loss). This is broken down by
product as follows:
•
LifeSolutions lump sum portfolio reflects adverse experience in FY18 of $1.4 million (FY17: $0.5 million adverse experience);
•
•
LifeSolutions IP portfolio reflects adverse experience in FY18 of $0.4 million (FY17: $1.2 million adverse experience); and
Direct portfolios (closed to new business) reflects adverse experience in FY18 of $0.3 million (FY17: $0.3 million adverse
experience).
The following graphs reflect the lapse experience over the last five years:
Chart 5: Lapse experience ($M)
Total lapse experience1
Total Lapse Experience
LifeSolutions Lump sum lapse experience1
Lump Sum Lapse Experience
1.0
0.5
0.0
-0.5
-1.0
-1.5
$m
0.7
0.3
(0.2)
(0.2)
(0.5)
(0.5)
(0.7)
(0.8)
$m
(1.3)
(1.3)
0.3
0.6
0.3
0.3
0.7
0.1
(0.3)
(0.2)
(0.5)
36.8
(0.9)
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
-1.0
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Dec 13
Jun 14
Dec 14
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Lapse experience
Average lapse experience
Lapse experience
Average lapse experience
LifeSolutions Income protection lapse experience1
0.6
Non-advice/Legacy lapse experience1
Non-advice/Legacy Lapse Experience
$m
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
-1.0
-1.2
0.3
0.2
0.2
Policy renewal period
0.4
-0.0
(0.1)
(0.1)
(0.2)
(0.2)
(1.1)
$m
IP price increases
implemented
in Oct 2016
‘shock lapse’
from price
increases
Dec 13
Jun 14
Dec 15
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Lapse experience
Average lapse experience
(0.5)
(1.1)
(1.3)
0.0
-0.2
-0.4
-0.6
-0.8
-1.0
-1.2
-1.4
(0.2)
(0.2)
(0.3)
(0.3)
(0.1)
0.0
(0.2)
Exit from the
lower socio
demographic
market
Closure of
Direct business
Dec 13
Jun 14
Dec 15
Jun 15
Dec 15
Jun 16
Dec 16
Jun 17
Dec 17
Jun 18
Lapse experience
Average lapse experience
Key observations from the lapse data are as follows:
•
•
•
•
Adopting a longer term view, overall lapse experience has an average $0.4 million adverse impact per half year over a five-
year period. LifeSolutions has been broadly neutral across products over the five-year period, albeit with more recent losses
from the LifeSolutions lump sum portfolio;
LifeSolutions IP price increases were implemented in October 2016 to help manage the product’s ongoing margin. Lapse
rates trended upwards after the IP price increase for both lump sum and IP policies. This occurred because lump sum and
IP policies renewed on the new rates. Furthermore these policies are generally sold together and are therefore likely to
lapse at the same time. This response had largely washed through the portfolio by December 2017 with an improvement
in IP lapses in FY18;
There are suggestions of some heightened lapses in the lead up to the LIF reforms which went live on 1 January 2018, in
particular for policies with upfront commission. Prima facie, this is likely to be a short-term effect, but it is unlikely to have
immediately ceased post the implementation date, with some flow through into the 2H FY18 result;
The repositioning and repricing of the LifeSolutions lump sum product in CY18, coupled with the impact of the LIF
reforms, is expected to improve lapse performance so it is in line with best estimate lapse assumptions (as at 30 June
2018) over the longer term. The LIF reforms include a two-year responsibility period whilst there are indications that the
competitiveness of LifeSolutions’ lump sum premium rates have changed over time which has adversely impacted lapse
rates; and
1 Experience measured against the assumptions applicable at each reporting date.
CLEARVIEW WEALTH LIMITED | 37
DIRECTORS’ REPORT (CONTINUED)
•
ClearView made a strategic decision to exit the Direct business in FY17. Over time, lapse experience improved significantly
as ClearView exited the direct business and is likely to further recede with the run-off of the book. In the shorter term,
lapses may be impacted by the direct remediation program that is underway.
Operating expenses increased in the Life Insurance segment by 3% and is substantiated by:
•
•
•
Activities that support business growth and require an increase in front-end costs. This includes initiatives like broadening
the IFA footprint;
An increase in life insurance administration and back-end costs due to the growth in the in-force portfolio (+19%).
These administration costs include underwriting, claims, administration and contact centre costs; and
The closure of the Direct business has reduced costs by $3.8 million. This includes a reduction in the fixed cost base of
the business combined with the volume-based cost structure (i.e., call centre sales and quality assurance agents).
The retention team has been retained and integrated into the centralised operations to manage the in-force book.
Although expense overruns initially depressed reported profits, they have been eliminated in Life Insurance as scale is achieved,
thereby increasing underlying profit on the growing in-force portfolio. Non-deferred expense experience improved from a
$0.4 million loss in FY17 to a $0.5 million profit in FY18, demonstrating that expense overruns are being absorbed as scale is
achieved.
Other key points to note in the FY18 Life Insurance result:
•
•
•
•
•
•
Investment earnings are impacted 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 and reflects the upfront reinsurance
support provided in the first year of a policy by the reinsurer.
Growth in Life Insurance initial commission in FY18 was driven by the upfront variable commission cost related to higher
new business volumes in LifeSolutions. 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
have been implemented with caps on upfront commission.
In the short-term, the implementation of the LIF reforms will reduce profit margins given the shift to a hybrid commission
model but will unwind and improve as the upfront commission cap reduces from 80% to 60% over the next few years.
Lapse rates are likely to improve (post implementation of the reforms) given the increased clawback period. Furthermore,
the return on capital will also increase given the reduced capital requirements via lower upfront commissions paid to
advisers.
Increased variable expenses relate to stamp duty and medical policy acquisition costs driven by increased new business
volumes.
The strong growth in the in-force portfolios of contemporary products is partially offset by the run-off of the higher margin
Old Life insurance book. This has more recently become less of an impact given the proportion of LifeSolutions portfolio to
the overall in-force base (82%).
1
Life insurance framework.
38 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
Operating segment review
Wealth Management
Approach
While Life Insurance has been the key value driver, ClearView continues to invest significantly in Wealth Management product
development and systems given the opportunities ahead. ClearView has a relatively new status in Wealth Management but we
believe that convergence of life insurance and superannuation will be a significant driver of shareholder value creation over the
medium term.
Life
Life through
Superannuation
•
•
Platform
Standalone
Wealth
Advisers sell both life insurance and wealth management products to customers, they are a natural fit. Manufacturers that
have products in both markets have a clear advantage by maximising individual adviser relationships, and facilitating both life
insurance and superannuation sales. Life insurance (risk products) can be sold via superannuation on two common bases:
•
•
Platform-linked life insurance is life insurance that is sold as a benefit on a superannuation wealth account; and
Standalone life insurance sold within superannuation.
Both can provide the policyholder with a tax-effective way to buy life insurance:
•
•
Platform-linked sales require superannuation wealth products to be provided.
Tax credits on standalone life insurance requires both superannuation wealth accounts to generate the tax benefits and
administration flexibility to pay the credit.
ClearView is able to do both. Competitors (especially those with material legacy issues or those that are divesting their
businesses) cannot offer both easily (or at all), providing ClearView with a significant competitive advantage.
ClearView has intentionally chosen not to participate in the group life insurance market and will provide these products on an
individual basis through superannuation.
CLEARVIEW WEALTH LIMITED | 39
DIRECTORS’ REPORT (CONTINUED) Where are we today?
ClearView’s strategy is to build a material Wealth Management business by manufacturing and distributing
contemporary platforms and products, and leveraging existing Life Insurance relationships:
New contemporary technology platform
for WealthFoundations; Private label for
WealthSolutions
(Wealth migration of Master Trust Product
onto new platform completed in FY18)
Highly Rated by Chant West
Chant West 2018 rating of 4 Apples for ClearView WealthFoundations
Super and Pension, and ClearView WealthSolutions Super and Pension.
A 4 Apples rating reflects a “high quality fund”.
Established in
2011
Established in
2014
Model portfolios
Balance
Growth
Equity growth
Moderate
Conservative
Income
Growth
40 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) ClearView offers a range of contemporary wealth products, which are available through financial advisers:
•
•
WealthSolutions: A full service wrap platform that allows sophisticated clients to invest in various asset classes including
direct shares, access tax and portfolio performance reports, and efficiently manage their client’s accounts;
WealthFoundations: A slimmed-down platform for mid-level clients based on 14 multi-manager model portfolios that
are constructed and managed internally by ClearView’s in-house investment research team who leverage the expertise
of third-party fund managers. This product is ideally suited to traditional risk advisers looking to expand into wealth
management; and
•
External platforms: ClearView MIS platform funds are available on selected third-party platforms.
ClearView continues to maintain the Master Trust product that includes life investment contracts issued by ClearView Life.
The product is in run-off as it is no longer marketed to new customers.
ClearView’s Wealth Management business includes an in-house research and investment arm that builds and actively
manages a range of implemented model portfolios including Separately Managed Accounts (SMAs). ClearView’s model
portfolios invest in various independent asset manager funds.
Key benefits of model portfolios include:
•
Advisers can efficiently meet the investment needs of clients by recommending well-researched, well-constructed
diversified multi-manager portfolios that target clearly defined investment objectives (for example, asset protection,
retirement income, moderate risk and high growth);
• Advisers gain access to specialist asset managers who are not directly available to retail clients;
•
•
ClearView charges a model portfolio fee and earns a margin on Wealth Management FUM by using our scale to negotiate
wholesale asset management fees from underlying managers; and
Sharper focus on asset allocation, manager selection and portfolio management, as ClearView does not directly manage
investments in underlying assets (this is outsourced to third-party asset managers).
ClearView has followed a program of ongoing development and refinement of wealth products over time with contemporary
products including SMA capabilities to support both aligned and third-party advisers. ClearView also has the ability to place in-
house model portfolios on external platforms. Further system and product development is required to broaden out the product
offering to IFA market.
Looking forward
To capitalise on the Group’s significant investment in Wealth Management, key focus areas in FY19 include:
•
•
•
•
•
Increasing penetration of the aligned network (CFA4 and Matrix4) by delivering excellent service;
Leveraging the Life Insurance IFA distribution network to gain inclusion on additional third-party APLs;
Marketing ClearView platform funds in the external platform market to allow further participation in the funds
management margin;
Further investment in the contemporary platform and product in FY19 to improve competitiveness (including analysis of
fee rates in light of recent competitor price reductions), back office services, efficiency and automation to allow the broader
roll out to the IFA market over time. This will ensure that the product rating and pricing improves its competitiveness; and
Capturing opportunities from the convergence of Life Insurance and Wealth Management by providing products that
improve adviser efficiency, customer experience and reinforce ClearView’s competitive advantage in licensing solutions.
CLEARVIEW WEALTH LIMITED | 41
DIRECTORS’ REPORT (CONTINUED) Financial Performace
Wealth Management financial result:
12 Months to June ($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
Key Statistics And Ratios ($M)
Net Flows
Master Trust
WealthSolutions
WealthFoundations
External platforms
Total FUM ($b)
Master Trust
WealthSolutions
WealthFoundations
External Platforms
Cost to Income Ratio
2017
2018
%
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)
0.4
FY17
32.8
0.3
(6.5)
(8.1)
(13.8)
4.6
(0.7)
3.9
(4.4)
(0.5)
2017
1H
2H
FY17
59.5
145.4
204.9
(81.5)
(66.3)
(147.8)
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
1H
18.0
0.2
(3.3)
(4.7)
(7.0)
3.3
(0.7)
2.6
0.0
2.6
1H
163.6
(65.6)
103.9
66.0
59.3
2.73
0.96
1.22
0.38
0.18
2H
18.2
0.2
(3.2)
(4.8)
(7.5)
3.0
(0.4)
2.6
(0.1)
FY18 Change2
36.2
0.5
(6.4)
(9.5)
(14.5)
6.2
(1.1)
5.2
10%
49%
(1%)
17%
5%
34%
54%
31%
(0.1)
(98%)
2.5
5.1
Large
2018
%
2H
FY18 Change2
43.6
207.2
1%
(60.4)
(126.0)
(15%)
58.6
32.8
12.6
2.79
0.90
1.29
0.41
0.19
162.5
(18%)
98.8
71.9
2.79
0.90
1.29
0.41
0.19
12%
9%
12%
(9%)
19%
37%
58%
42.9% 41.4% 42.1% 38.9% 41.2% 40.0%
1
2
3
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.
% change represents the movement from FY17 to FY18.
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
42 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
ClearView has started to generate strong Underlying NPAT growth driven by strong net flows in contemporary products and
growth in FUM balances. ClearView began investing significantly in its Wealth Management business in FY15:
•
•
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.
This resulted in an adverse $3.2 million (after tax) impact on Underlying NPAT in FY15.
•
Stronger inflows and scale benefits for WealthSolutions with continued support for WealthFoundations.
ClearView now has a competitive product suite and a growing distribution network. As in Life Insurance, steadily increasing net
flows will lead to comparable market share growth in FUM which is a key profit driver.
The following graphs illustrate the performance and growth profile of the Wealth Management business.
Chart 1: Wealth Management key performance indicators
Active Wealth APLs1 with ClearView Products
Wealth In-Force FUM2 ($B)
Wealth Contemporary Net Flows3 ($M)
45
36
27
18
9
0
44
30
9
5
1
1
FY14
FY15
FY16
FY17
FY18
3.0
2.5
2.0
$b
1.5
1.0
0.5
0.0
2.50
0.06 0.12
0.30
2.13
1.90
0.11
0.61
0.20
0.80
1.08
2.79
0.19
0.41
1.29
1.18
1.07
1.00
0.90
1.66
0.41
1.25
FY14
FY15
FY16
FY17
FY18
Old Book
WealthSolutions
WealthFoundations
External Platforms
2.2
400
300
$m
200
100
0
353
212
335
176
159
141
333
104
229
275
150
125
153
68
85
FY14
FY15
FY16
FY17
FY18
1H
2H
2.2
ClearView is a positive net flow business. The proportion of the new contemporary product suites as a percentage of FUM
balances are starting to outweigh the decline of the very profitable Master Trust product. Wealth Management fees are up 10%
to $36.2 million and net flows in contemporary products are up 1% to $207 million, including an improvement in Master Trust
outflows:
• WealthSolutions recorded net inflows of $163 million (-18%).
• WealthFoundations recorded net inflows of $99 million (+12%).
• External platform net inflows of $72 million (+9%).
• Master Trust net outflows of $126 million (-15%).
Inflows represent a material portion of overall FUM balances. Gross inflows of $568.8 million was achieved in FY18
predominantly into contemporary products (+11%). Furthermore, the number of Wealth Management APLs has increased to
44, up 42% by leveraging the Advised Life Insurance distribution network. To date, WealthSolutions and WealthFoundations
have primarily been distributed by aligned advisers with efforts to expand the distribution footprint having commenced in FY17.
1 APLs are where ClearView products that are placed on third-party dealer group approved product lists.
2
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.
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.
3
CLEARVIEW WEALTH LIMITED | 43
DIRECTORS’ REPORT (CONTINUED)
FUM balances are up 12% to $2.79b at 30 June 2018. Wealth Management FUM movement is driven by the net impacts of net
flows, funds management fees and investment market movement-based variances. This is shown in the following graph.
Chart 2: Wealth Management FUM movement FY17 – FY18 ($B)
0.16
0.10
2.50
(0.13)
0.15
0.07
(0.05)
(0.02)
2.79
3.0
2.5
2.0
1.5
1.0
0.5
0.0
O pening FU M 1 Jul 2017
W ealthSolutions netflo w
W ealthFou n dations netflo w
External Platfor m s netflo w
M aster Trust netflo w
M arket m ove m ent
M anage m ent fees
Others
Closing FU M 30 Ju ne 2018
Wealth Management FUM is made up of WealthSolutions ($1.3 billion; +19%), WealthFoundations ($0.4 billion; +37%), External
Platforms ($0.2 billion; +57%) and Master Trust ($0.9 billion;-9%):
•
•
The mix of products making up the portfolio has changed materially with contemporary products (including ClearView
platform funds on external platforms) now representing 68% of total FUM. This links to the margin shifts across the
portfolio; and
Performance of investment markets remains key to attracting flows and supporting the Master Trust FUM given the product
is not actively marketed to new customers. Performance has lagged in the shorter term given the defensive positioning of
the portfolios that are currently under review.
FY18 Wealth Management earnings
The profitability of the Wealth Management segment is largely driven by fees earned from FUM less expenses incurred.
One of the key differences between Wealth Management and Life Insurance is the way costs are accounted for. In Wealth
Management, the customer acquisition costs are all expensed up front so any increase in wealth acquisition, distribution
and related upfront costs acts reduce reported earnings. However, the profit pool of Wealth Management is similar to Life
Insurance and as ClearView’s share of FUM starts to approach its share of net flows, its share of the industry profit pool will
increase significantly.
Underlying NPAT in FY18 was $5.2 million (+31%) and includes the positive impact on net fee income from FUM growth (+12%).
Investment market performance of 6% was achieved compared to a 5% investment return in FY17.
The Master Trust product is effectively a closed book with a portion of FUM in pension phase. The FY18 result includes impacts
from the margin compression of the gradual run-off of the Master Trust product that is being replaced by lower margin new
business written for new contemporary products (fee income +10% overall). The net flows of the new contemporary product
suites are starting to outweigh the profit drag of pension outflows with the above factors assumed in Embedded Value (EV)
calculations.
The decrease in variable expenses (-1%) can be attributed to a reduction in the inter-segment advice fee (50bps) paid
to Financial Advice on Master Trust FUM (in line with average Master Trust FUM). This reduction was partially offset by
higher platform fees payable on the WealthSolutions portfolio (in line with growth in average WealthSolutions FUM). Funds
management expenses increased in line with the expanded wealth product range (WealthFoundations launch and MIS growth
on platforms) and increased FUM between periods.
44 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) The increase in operating expenses (+5%) can be attributed to the costs
incurred to migrate the Master Trust product to the new platform along
with further investment to enhance the contemporary platform and
product (including increased technology and software amortisation
costs). The front-end costs to support business growth have remained
broadly consistent (notwithstanding an 11% increase in contemporary
product new flows). Distribution will expand further in the IFA market
after additional system and product upgrades are completed. There
has been a reduction in wealth administration costs due to greater
efficiencies from the increased scale of business and migration of the
Master Trust product onto a single administration platform (completed
at end of FY18), albeit with the cost benefits expected to flow through
from FY19.
Expense overruns (after tax) increased to $3.0 million in FY18 (FY17:
$2.7 million). The current overruns reflects the investment in the
contemporary platform and WealthFoundations product that is yet to
achieve scale relative to initial system and ramp up costs.
The tax expense includes a tax benefit of $0.8 million in FY18 (FY17:
$0.7 million) comprising exempt fees in the Master Trust product range
($0.2 million), the positive impact from a tax benefit arising from
superannuation insurance premium deductions ($0.6 million) and the
prior year’s favourable tax adjustments ($0.1 million).
Investment earnings are impacted by the reallocation of shareholder
cash between segments and movement in market interest rates
between periods.
CLEARVIEW WEALTH LIMITED | 45
DIRECTORS’ REPORT (CONTINUED) Operating segment review
Financial Advice
Approach
ClearView has focused on building an aligned financial adviser network with high quality IFAs. In its early years, ClearView was
precluded from participating in the IFA market through restricted APLs and prohibitive shelf space fees. ClearView therefore
chose to build its own dealer group with an open life insurance APL that allowed its new contemporary products to be
distributed to customers. ClearView focused carefully on recruiting high quality advisers into the network.
The institutional model of vertical integration within the banks became out of favour with consumers and financial advisers.
This created an opportunity for a client-centric, non-institutional challenger with a competitive dealer service that offered an
holistic advice framework, to partner with advice practices.
The ClearView dealer groups have, over time, developed into businesses that support advisers to transition from transactional
product-based advice, to holistic strategic advice which considers a client’s total financial needs and goals. Alongside
traditional dealer services, it provides practice management solutions, coaching and technology-based tools - helping advisers
shape, sell and price their value proposition - to achieve sustainable profit and growth.
Consolidation, regulatory uncertainty and increasing dissatisfaction among institutionally-aligned dealer groups is creating
further opportunities. However, ClearView remains focused on selectively recruiting high quality advisers who have the right
cultural fit for the ClearView and Matrix dealer groups.
It should also be noted that the current licensing regime is under the spotlight, with self-licensing gaining popularity in the
adviser market. ClearView is therefore positioning itself as a participant in the D2D model given it has the infrastructure,
services and systems for compliance, supervision and monitoring for those businesses that choose to self-license or join
boutique dealer groups. This is likely to expand the revenue base and services within the financial advice segment.
Where are we today?
ClearView has focused on building an aligned financial adviser network with high quality IFAs.
st1
st1
Australia’s leading
Licensee 20171
Australia’s leading
Licensee 20181
40
103
15
33
Aligned nework (Advisors #)
25
13
4
46 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
ClearView’s national dealer groups, ClearView Financial Advice (CFA) and Matrix Planning Solutions (MPS) segment their
advisers and operations into the following categories:
•
•
•
CFA employed advisers: These are the employed, salaried advisers. ClearView retains 100% of the fees charged to clients
and pays the advisers in accordance with Clearview’s remuneration policy. The number of employed advisers has steadily
declined over time with many transitioning to the self-employed model. ClearView has 9 employed advisers to date of this
report.
CFA self-employed advisers: These advisers pay CFA a fee to operate under its AFSL and utilise the Group’s support
services. CFA provides a range of services to these advisers including compliance, practice management solutions, IT
support and software. Traditionally, CFA advisers have focused on life insurance advice but there is emerging growth in
wealth management. CFA has 125 financial advisers at the date of this report.
MPS self-employed advisers: These advisers pay MPS a fee to operate under the Matrix AFSL and utilise the Group’s
support services. MPS provides a range of services to these advisers including compliance, practice management solutions,
IT support and software. Traditionally, MPS advisers have focused on wealth management advice. Matrix advisers received
shares as consideration for the acquisition of MPS in 2014. The performance-based shares vested in FY18, noting that the
shares are no longer held in trust and have been issued to the vendors MPS. MPS has 99 financial advisers at the date of
this report.
The following represents the graphical representation of ClearView’s aligned adviser network:
Looking forward
Key measures in Financial Advice include:
•
•
•
The retention of compliant practices and attracting quality firms to join the business with a continued focus on quality not
quantity;
The training and development of advisers including helping them transition to the new financial education standards; and
In light of regulatory changes, broaden out the back-end service offering to the independent dealer group market by
entering the D2D market.
Financial Performance
Financial Advice financial result:
12 months to June ($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 ($M)
FUMA ($b)4
PUA ($m)3
Financial advisers
2017
2018
%
1H
8.6
0.5
(7.4)
1.7
(0.5)
1.2
(0.5)
0.7
1H
8.5
233
243
2H
8.3
0.1
FY17
16.9
0.6
(7.0)
(14.4)
1.5
(0.4)
1.0
(0.5)
0.5
2017
2H
8.9
237
243
3.2
(0.9)
2.2
(1.0)
1.2
FY17
8.9
237
243
1H
8.8
0.2
(7.6)
1.3
(0.4)
1.0
(0.6)
0.4
1H
9.3
247
246
2H
8.7
0.3
FY18 Change2
17.4
3%
0.5
(26%)
(7.7)
(15.3)
6%
1.3
(0.4)
0.8
(0.5)
0.3
2.6
(20%)
(0.8)
(18%)
1.8
(20%)
(1.1)
14%
0.7
(47%)
2018
%
2H
9.6
270
233
FY18 Change2
9.6
270
233
7%
14%
(4%)
1
Shareholder view excludes the life investments contracts (i.e. unit linked business) and deconsolidates retail unit trusts and reflects fees earned by the
shareholder less expenses incurred. Inter-segment revenues/expenses are not eliminated in the shareholder view.
2 % change represents the movement from FY17 to FY18.
3
Premiums Under Advice is life insurance in-force premium that are externally managed and administered (Third Party Products) and in-force LifeSolutions
premium
FUMA includes FUM5 and funds under advice that are externally managed and administered.
FUM includes Funds Under Management (ClearView Master Trust, WealthFoundations and ClearView Managed Investment Schemes), Funds Under
Administration on WealthSolutions and FUM in ClearView MIS platform funds on external platforms.
4
5
CLEARVIEW WEALTH LIMITED | 47
DIRECTORS’ REPORT (CONTINUED) Chart 1: FY18 - Key performance indicators
FUMA ($B)2
Premiums Under Advice ($M)1
Adviser Force - Aligned advisers4
10
8
6
4
2
0
4.2
3.6
0.6
5.4
3.4
2.0
ClearView
FUMA
Matrix
FUMA
FUM
FUA
9.6
7.0
2.6
Total
300
240
180
120
60
0
77
66
11
193
126
67
ClearView
PUA
Matrix
PUA
270
192
78
Total
LifeSolutions
Premiums Under Advice
235
243
233
89
91
99
221
82
245
210
175
140
$m
117
105
70
35
0
127
138
143
125
98
19
FY14
12
FY15
8
FY16
9
FY17
9
FY18
Employed
ClearView Self-Employed
Matrix Self-Employed
The FUMA movement in the dealer group is driven by the net impacts of net flows, funds management fees and investment
market movement-based variances. Premiums under advice (PUA) is driven by the net impacts of new life insurance business,
price increases, lapse and CPI/aged-based variances. Financial Advice FUMA is $9.6 billion at 30 June 2018, up 7% with PUA of
$270 million, up 14%:
•
•
•
FUMA was positively impacted by the movement in investment markets, change in adviser numbers and composition
period to period (including changes in underlying practices licenced by the dealer groups);
PUA is impacted by the net impact of adviser recruitment, composition and changes in underlying practices;
Of the $9.6 billion in FUMA, $1.9 billion was in contemporary in-house products and $0.9 billion was in the Master Trust
product (FY17: $9.3 billion, $1.5 billion);
• Of the $270 million PUA in-force, $78 million was in LifeSolutions (FY17: $237 million, $70 million); and
•
Financial advisers decreased 4% to 233 with a continued focus on selectively recruiting high quality advisers that have the
right cultural fit.
FY18 Financial Advice earnings
Key drivers of financial performance in the Financial Advice segment are as follows:
• Net adviser service fees and membership fees earned;
•
Financial support from ClearView’s manufacturer businesses;
• Grandfathered platform rebates; and
•
Dealer service fees (DSF) earned on the new contemporary platforms. (As the FUM increases on these platforms this is
expected to continue to grow as grandfathered rebates run off).
Underlying NPAT was $1.8 million (-20%) but would have been broadly flat period-to-period if the abnormal other income
items are excluded. Notable items include:
• Growth in net financial planning fees (+3%) with marginal increases across all key revenue line items;
•
•
1
2
3
Increased operating expenses of $15.3 million in FY18 (+6%) which was driven by the increase in operational and
compliance head count, system costs and investment in strategic advice and D2D services model, partially offset by lower
conference costs. Dealer group overheads include staff, marketing, rent, professional indemnity insurance and shared
services allocation; and
Interest relates reflect the reallocation of shareholder cash between segments and changes in market interest rates
between periods.
Premiums Under Advice is life insurance in-force premium that are externally managed and administered (Third Party Products) and in-force LifeSolutions
premium.
FUMA includes FUM3 and funds under advice that are externally managed and administered.
FUM includes Funds Under Management (ClearView Master Trust, WealthFoundations and ClearView Managed Investment Schemes), Funds Under
Administration on WealthSolutions and FUM in ClearView MIS platform funds on external platforms.
4 Aligned advisers are licenced by the ClearView Financial Advice Pty Ltd and Matrix Planning Solutions Ltd dealer group.
48 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) Operating segment review
Listed Entity/Other
Approach
This segment includes the Investment earnings on cash and investments held in the listed and central services entities and in
the shareholders’ fund of ClearView Life, less costs associated with maintaining a listed entity. The Company manages capital
at the listed entity level in accordance with its Internal Capital Adequacy Assessment Process (ICAAP) policy.
FY18 Listed Entity/Other Earnings
Listed Entity/Other financial result:
12 months to June 2018 ($M)1
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
Direct closure provision
Reported NPAT
2017
2018
%
1H
0.2
(0.4)
(0.2)
(0.1)
(0.3)
(0.1)
(0.4)
(0.5)
0.0
(0.9)
2H
0.1
(0.6)
(0.5)
0.3
(0.2)
(0.1)
(0.3)
(0.1)
(2.4)
(2.8)
FY17
0.3
(1.0)
(0.7)
0.2
(0.5)
(0.2)
(0.7)
(0.6)
(2.4)
(3.7)
1H
0.1
(0.7)
(0.6)
(0.1)
(0.7)
(0.2)
(0.8)
(0.3)
0.0
(1.1)
2H
0.2
(0.5)
(0.2)
0.5
0.3
(0.2)
0.1
(0.5)
0.0
(0.4)
FY18 Change2
0.3
(1.2)
(0.8)
9%
18%
22%
0.4
152%
(0.4)
(0.3)
(0.7)
(0.8)
(23%)
65%
(0%)
34%
0.0
Large
(1.5)
(60%)
The Listed segment financial results for the year ended 30 June 2018 are shown in the previous table. Underlying NPAT was
-$0.7 million (broadly flat).
Notable items include:
•
•
•
•
Investment earnings which are broadly in line between periods, albeit with some reallocation of physical cash between
segments;
Higher expenses given the increased investor relations costs coupled with the allocation of insurance costs in FY18 to the
listed segment, noting changes to Board composition between periods;
Interest on corporate debt relating to loan establishment and line fees on the $60 million NAB debt facility that was
refinanced in June 2017. This reflects the increased costs of the facility given the movement in interest rates; and
Tax benefits (+$0.6m) driven by the research and development grant and a deferred tax benefit arising from the tax
deduction of costs associated with the performance rights issued to the Senior Management Team (SMT) in FY18.
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 FY17 to FY18.
CLEARVIEW WEALTH LIMITED | 49
DIRECTORS’ REPORT (CONTINUED) Statement of financial position
The Group’s Statement of financial position, which is set out on page 78, reflects the key metrics below.
• Net assets at 30 June 2018 increased to $444.3 million (June 2017: $415.6 million) comprising:
•
•
•
•
Reported profit of $26.6 million;
FY17 net cash dividend (-$6.0 million);
Movements in the Share Based Payments Reserve due to the treatment of the ESP in accordance with the accounting
standards (+$2.2 million), ESP loans settled through the FY17 final dividend (+$0.8 million); and
The proceeds from ESP shares sold via off-market transfer, including repayment of ESP loans and the impact of the
sale of vested shares (+$5.0 million).
• Net tangible assets increased to $399.1 million ($431.4 million including ESP loans) (June 2017: $371.0 million);
• Net asset value per share (including ESP loans) of 71.3 cents per share (June 2017: 68.6 cents per share); and
• Net tangible asset value per share (including ESP loans) of 62.2 cents per share (June 2017: 61.8 cents per share).
The net asset value per share and net tangible asset value per share are reflected above on a fully diluted basis, as ClearView
ESP shares have been issued to employees and contractor participants as at 30 June 2018 (in accordance with the ClearView
ESP Rules). The ClearView ESP shares on issue have a corresponding non-recourse loan from ClearView to facilitate the
purchase of ClearView ESP shares by the participants. The shares and loans are not reflected in the statutory accounts as they
are accounted for as an option in accordance with Australian Accounting Standards. If the loan is not repaid, the relevant
ClearView ESP shares are cancelled or reallocated in accordance with the ClearView ESP Rules.
Embedded Value
Life Insurance and Wealth Management are long-term businesses that involve long-term contracts with customers and
complex accounting treatments. Embedded Value (EV) represents the discounted value of the future net cash flows anticipated
to arise from the in-force life policies, investment client balances and advice client recurrent revenue as at the valuation date.
50 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
EV calculations at a range of risk discount margins (DM) is shown below.
Risk margin over risk free rate: ($M), (unless stated otherwise)
3% DM 4% DM 5% DM
Life Insurance
Wealth Management
Financial Advice
Value of In-Force (VIF)
Net Worth
Total EV
ESP Loans
Total EV Incl. ESP Loans
Franking Credits:
Life Insurance
Wealth Management
Financial Advice
Net Worth
Total EV Incl. Franking Credits and ESP Loans
EV per Share Incl. ESP Loans (cents)
EV per Share Incl. Franking Credits and ESP Loans (cents)
429.4
404.2
381.9
70.6
27.1
66.7
24.9
63.2
23.0
527.0
495.8
468.1
60.8
60.8
60.8
587.9
556.6
528.9
32.3
32.3
32.3
620.2
588.9
561.2
70.1
19.0
8.4
20.7
65.9
18.0
7.7
20.7
62.3
17.1
7.2
20.7
738.3
701.1
668.4
92.8
88.1
84.0
110.5
104.9
100.0
The key movement in EV between FY17 and FY18 is described in detail below. Net capital applied (+$1.3 million) driven by:
•
•
•
FY17 final cash dividend (-$18.1 million) paid in September 2017 with $12.2 million reinvested as part of the Dividend
Reinvestment Plan;
Movements in the Share Based Payments Reserve including ESP shares sold via off-market transfer (+$5.0 million),
treatment of the ESP in accordance with the accounting standards (+$2.2 million), and ESP loans settled through the FY17
final dividend (+$0.8 million); and
Costs considered unusual to the ordinary activities predominantly related to expenses incurred in relation to the associated
Cooperation Agreement between ClearView and Sony Life. These costs are expected to cease from the end of July 2018,
being the date of termination of the Cooperation Agreement (-$0.8 million).
Expected gain (+$36.2 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 (+$12.0 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. LifeSolutions continues to be the key driver of VNB given increased
scale and volumes, albeit in the short term VNB has been adversely impacted due to the aquisition costs incurred and the
hybrid commission model under the LIF reforms (noting VNB will improve as the upfront commission cap reduces from
80% to 60% over the next few years).
The claims experience (-$5.5 million):
•
•
Adverse claims experience loss (relative to planned margins) across all products. The loss for the second half of FY18 of
-$2.3 million was lower than the first half loss of -$3.2 million;
Adopting a longer term view, the overall net adverse claims performance is mainly attributed to the IP portfolio, with the
lump sum portfolio having a net neutral experience over a five-year period. Claims assumptions have been updated for
the IP portfolio at June 2018, with the expectation that overall claims performance will fit within best estimate claims
assumptions (as at 30 June 2018) over the longer term.
CLEARVIEW WEALTH LIMITED | 51
DIRECTORS’ REPORT (CONTINUED) The impact of lapses on the life insurance book and FUMA discontinuances (-$3.5 million):
• Life Insurance lapse impact of -$2.9 million was mainly driven by higher-than-expected lapses for LifeSolutions arising
from heightened lapses in lead up to the 1 January 2018 regulatory changes, the tail-end of the effect of income
protection price increases implemented in HY17 and a drift in the competitive position of LifeSolutions lump sum premium
rates. LifeSolutions lapse rates have been broadly neutral over a five-year period. The repositioning and repricing of the
LifeSolutions lump sum product in CY18, coupled with the impact of the LIF reforms (given the increased clawback period),
is expected to improve lapse performance to be in line with best estimate lapse assumptions (as at 30 June 2018) over the
longer term.
•
For the Wealth Management business, discontinuance rates overall were slightly higher than expected overall resulting in a
-$0.6 million impact.
FUMA mark to market and business mix (+$2.2 million):
• The EV increased by $2.2 million due to the business mix and 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.
Maintenance, listing and interest expenses (-$1.4 million):
• Maintenance expense overruns versus the long-term unit costs assumed. Emerging life insurers invest and incur overhead
costs ahead of “getting to scale”. The maintenance 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, it is expected that the expense overruns will
be eliminated, thereby increasing underlying profit margins on the in-force portfolio and removing the drag on the EV.
• Listing and interest expenses were impacted by the Group’s listed overhead costs and line fee on corporate debt which are
not allowed for in the EV
Change in assumptions (-$6.5 million):
• This includes a -$5.4 million impact due to claims assumption changes mainly to reflect higher expected claims cost for
LifeSolutions IP and non-advice business. Significant product upgrade and pricing repositions planned for 1HFY19. This will
include updated reinsurance terms and inforce policy pricing changes. Actuarial assumptions updated reflected in current
prospective profit margins and EV for inforce. Objective for pricing and reinsurance on inforce is to have a broadly neutral
impact. In addition, this includes a -$1.1 million impact due to expected pricing changes on the Funeral Plan business to
provide better value at older ages.
ESP loans/franking credits and other items (+$4.4 million):
• Reflects the net movement in ESP loans and franking credits between periods. The balance includes modelling
enhancements, one-off reinsurance impacts, restatements, timing effects and tax impacts of the policy liability discount
rate effect in the period.
Chart 2: Embedded Value movement analysis @ 4%DM
Inflation -0.5%;+0.5%
-5.5
5.8
Rate-free rate +1%;-1%
-22.9
FUMA -10%;+10%
-8.2
8.2
Expenses +10%;-10%
-14.5
14.5
Discontinuance Rates +1%;-1%
-23.4
26.1
26.2
Claims +10%;-10%
-16.6
16.7
-25
-20
-15
-10
-5
00
5
10
15
20
25
52 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) Dividends
The Board has declared a fully franked dividend in 2018 of $20.05 million (2017: $18.14 million). This equates to 3.00 cents
per share (2017: 2.75 cents per share), representing approximately 60% of FY18 Underlying NPAT in line with the company’s
dividend policy (+9% 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 Underlying
NPAT. Furthermore, it is the Company’s intention to maximise the use of its franking account by paying fully franked dividends.
The Company’s DRP (Dividend Reinvestment Plan) will operate for the FY18 dividend in accordance with the DRP rules below:
•
•
•
Shareholders will have the opportunity to reinvest into the Company while retaining capital within the Group;
Given Clearview’s preference to retain capital, it is not considered appropriate to minimise the dilutive impact of the DRP
through the on-market purchase of the number of shares to satisfy the DRP participation; and
It is the intention to seek support for any shortfall in shareholder participation by underwriting the shortfall to maintain the
capital base within the group. This will be reconsidered in future years given the cash flow profile of the business.
Substantial shareholders have committed to participate in the DRP at a fixed price of $1.05 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 shareholding above 15%).
No interim dividend was paid during the year (2017: Nil). To date, the ability to pay an interim dividend has been limited by the
effect on tax paid of the changes in the long-term discount rates used to determine the insurance policy liabilities between
the half-year and year-end. As a sufficient franking credit balance has been progressively established, the payment of interim
dividend can be considered in future periods.
ClearView’s ability to pay a franked dividend depends upon factors including its profitability, the availability of franking credits
and its funding requirements which in turn may be affected by trading and general economic conditions, business growth, and
regulation. Accordingly, no assurance can be given as to the timing, extent and payment of dividends.
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 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; and
To meet the liquidity needs of the Group or to capitalise on other opportunities should they arise. This replaced the $50
million facility that was due to expire in December 2017.
Chart 1: Capital Position as at 30 June 2018
Capital Position ($m) – 30 June 2018
Reserved capital ($m)1 – 30 June 2018
500
400
$m
300
200
100
0
399.1
27.2
(306.7)
100
80
$m
60
40
20
0
24.3
92.5
(77.8)
14.7
50.1
3.4
77.8
Net Tangible Assets
Less: Capital
Base Adjustments
Regulatory
Capital Base
Less: Reserved Capital
Capital Surplus
PCA
Risk Capital
Working Capital Reserve
Reserved Capital
1
Reserved capital includes the minimum regulatory capital, risk capital which is additional capital held to address the risk of breaching regulatory capital and a
working capital reserve held to support the capital needs of the business beyond the risk reserving basis.
CLEARVIEW WEALTH LIMITED | 53
DIRECTORS’ REPORT (CONTINUED)
Chart 2: Capital Position as at 30 June 2018 by Regulated Entities and Segment
e
c
n
a
r
u
s
n
I
e
f
i
L
t
n
e
m
e
g
a
n
a
M
h
t
l
a
e
W
$M
$M
373.2
12.2
(13.5)
(4.8)
359.8
7.4
d
e
t
a
l
u
g
e
R
A
R
P
A
s
e
i
t
i
t
n
E
$M
389.5
(18.3)
371.1
r
e
h
t
O
$M
4.0
0.0
4.0
Net Assets
Goodwill & Intangibles
Net Tangible Assets
Capital Base Adjustment:
Deferred Acquisition Costs (DAC)
(304.7)
0.0
0.0 (304.7)
Other Adjustments to Capital Base
(1.6)
(0.0)
Regulatory Capital Base
53.5
7.4
0.0
4.0
(1.7)
64.8
e
c
i
v
d
A
l
a
i
c
n
a
n
i
F
d
e
t
a
l
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C
I
S
A
s
e
i
t
i
t
n
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d
e
t
a
l
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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
$M
$M
$M
$M
$M
17.3
25.1
414.6
29.7
444.3
(7.8)
(7.8)
(26.1)
(19.1)
(45.2)
9.5
17.3
388.5
10.7
399.1
0.0
0.0
9.5
0.0 (304.7)
0.0 (304.7)
0.0
(1.7)
(0.3)
(2.0)
17.3
82.1
10.3
92.5
t
n
e
m
e
g
a
n
a
M
h
t
l
a
e
W
$M
7.8
0.0
7.8
0.0
0.0
7.8
Prescribed Capital Amount
(11.8)
(3.4)
(3.4)
(18.6)
(5.0)
(0.7)
(5.7)
(24.3)
0.0
(24.3)
Available Enterprise Capital
41.6
3.9
0.6
46.2
2.8
8.8
11.7
57.8
10.3
68.2
Enterprise Capital Benchmark (ECB)
Working Capital
Risk Capital
(5.7)
0.0
0.0
(5.7)
0.0
0.0
0.0
(5.7)
2.3
(3.4)
(35.9)
(2.7)
0.0
(38.6)
(2.3)
(3.1)
(5.4)
(44.0)
(6.0)
(50.1)
Net Capital position as at 30 June
2018
0.0
1.2
0.6
1.8
0.5
5.7
6.2
8.1
6.6
14.7
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.
The regulated entities had $8.1 million of net assets in excess of internal benchmarks as at 30 June 2018.
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 of $3.4 million as at 30 June 2018 to fund anticipated new business
growth over the medium-term. The Group has $14.7 million of net assets in excess of internal benchmarks at 30 June 2018.
1 As at 30 June 2018, risk capital is held in regulated entities at 97.5% probability of adequacy (POA). Risk capital at 99% POA is held in the NOHC².
2 NOHC is a non operating holding company regulated by APRA under the Life Insurance Act.
54 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
The net capital position of the Group as at 30 June 2018 represents a decrease of $1.8 million since 30 June 2017.
This decrease reflects the following key items:
•
•
•
•
•
•
•
•
•
The Underlying NPAT for the year (+$32.4 million);
The net capital absorbed by the growth of the business over the period (-$33.6 million);
The decrease in the working capital reserve (+$13.6 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 (-$7.5 million), and the net
impacts of capitalised software, acquired intangibles and deferred tax (-$6.0 million);
Decrease in asset concentration risk reserve given reinsurance asset concentration limits have changed over the period
(+$1.4 million);
The net impacts of the movements in the Share Based Payments reserve due to the treatment of the ESP in accordance
with accounting standards, ESP loans settled through the FY17 dividend and the proceeds from ESP shares sold via off
market transfer, including the repayment of ESP loans (+$8.0 million);
The after tax costs predominantly associated with the Sony Life Cooperation Agreement and after tax interest cost on debt
(-$1.1 million);
The net impacts of the tax effect on the change in policy liability discount rate (+$0.4 million); and
The net impact of the final FY17 cash dividend paid in September 2017 (-$6.0 million).
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 (which has been in place since 19 December 2014) until December
2018. 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 2018.
Outlook
Market outlook
•
•
•
•
•
•
•
•
Long-term market growth fundamentals remain sound driven by population increases, inflation and real GDP growth
and underpinned by a compulsory retirement savings regime (superannuation).
Short-term challenges and opportunities include:
Life Insurance Reforms (LIF) implemented on 1 January 2018 - changes include reduced commissions and new
clawback provisions that will have a short term impact on profit margins, but overall will increase return on equity and
improve margins as upfront commission caps reduce to 60% over the next few years.
Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 – features fee caps and changes to
group life insurance inside superannuation. ClearView does not participate in group life but continues to advocate for
reforms requiring all members to consciously opt-in for group insurance.
Banking and Financial Services Royal Commission – ongoing hearings and potential recommendations likely to create
further disruption to existing revenue streams and industry structures. Industry-wide reputational damage is impacting
financial services.
Parliamentary Joint Committee (PJC) Report on the life insurance industry - the reform agenda is designed to boost
competition, drive efficiency and deliver improved consumer outcomes. ClearView has advocated for open life insurance
APLs as an important step to ensuring conflicts of interest are properly managed. This would lead to a step-change in
ClearView’s distribution profile if open life insurance APLs are mandated.
Heightened M&A activity - as banks refocus on their core business lines, there has been an emergence of foreign
institutions investing in the Australian life insurance industry along with a trend towards banks demerging their wealth
operations. This is likely to drive investment in the industry and boost competition leading to improved consumer
outcomes.
Retail Income Protection - industry participants have progressively increased prices driven by losses on IP portfolios.
ClearView increased prices in HY17 (10% on average) to manage margins, resulting in some short-term elevated lapses
which is subsiding. The broader industry pricing cycle and performance of IP portfolios continues to be closely monitored.
CLEARVIEW WEALTH LIMITED | 55
DIRECTORS’ REPORT (CONTINUED) •
Scrutiny on Direct Life Insurance Sales Practices - ClearView closed its Direct Life operation to new business in FY17
given a number of issues associated with the direct distribution (non-advice) channel. ClearView is currently undertaking a
Direct Remediation Program to compensate a number of Direct Life insurance customers who may have been affected by
inappropriate sales practices. Provision for the remediation program has already been made and it is not expected to have
a material further financial impact on the Group.
Business outlook
•
•
Life Insurance remains the key profit driver. The underlying performance remains strong with the expanding distribution
footprint and strong new business volumes leading to a material increase in the in-force portfolios which underpins the
growth profile, noting:
•
Maturation of existing Life Insurance APLs and gaining access to new APLs. If transition to open life insurance APLs
occurs, addressable market will expand materially.
ClearView is focused on offering both life insurance and wealth management products that can maximise adviser
relationships and further cementing its position with quality advisers by offering dealer group services to third party dealer
groups (D2D):
•
•
Positioning itself as a participant in the D2D market given it has infrastructure, services and systems for compliance,
supervision and monitoring for those third party dealer groups that choose to self license or currently have their own
licence; and
Continued significant investment in building a contemporary wealth management platform and products (noting
competitive pricing pressures) with ability to leverage off ClearView’s Life Insurance distribution network over time.
•
The Group maintains a positive outlook and is well positioned to outperform the market and generate material growth in
Group FY19 Underlying NPAT (versus FY18), noting:
•
•
There can be some claims volatility between periods and shorter term lapse impacts; and
Difficult regulatory backdrop with increased media scrutiny – Royal Commission hearings to take place in September
may impact on consumer sentiment in short to medium term (including overall industry sales volumes).
Changes in state of affairs
There were no other significant changes in the state of affairs of the Group apart from than those discussed above, during the
year ended 30 June 2018.
56 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
Other Executive KMP
•
•
•
•
•
•
•
•
Christopher Blaxland-Walker
General Manager, Distribution
Athol Chiert
Chief Financial Officer and Company Secretary
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
Elizabeth Briggs (Appointed 4 April 2018)
General Counsel and Company Secretary
Louise Hulley (Appointed 4 April 2018)
General Manager, Technology
Former Executive KMP
•
Sarah Cummings (Ceased 31 January 2018)
General Manager, Development
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 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 2018.
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:
•
•
•
•
•
•
•
•
•
Bruce Edwards
(Chairman, Independent Non-executive Director)
Andrew Sneddon (Resigned 1 March 2018)
(Independent Non-executive Director)
David Brown
(Independent Non-executive Director)
Gary Burg
(Independent Non-executive Director)
Michael Alscher
(Alternate Non-executive Director to Mr Thomson)
Michael Lukin (Revoked 1 March 2018)
(Alternate Non-executive Director to Michael Alscher)
Nathanial Thomson
(Non-executive Director)
Satoshi Wakuya
(Non-executive Director)
Susan Young
(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:
Managing Director
•
Simon Swanson
Managing Director
CLEARVIEW WEALTH LIMITED | 57
DIRECTORS’ REPORT (CONTINUED)
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).
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)
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
58 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
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 Board (on recommendation
of the Remuneration Committee).
For FY18, 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.
For FY19, personal targets and objectives will be set for the
KMP by the Managing Director, in addition to Company goals.
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 2018 financial year.
The sources were the Financial Industry Remuneration
Group (FIRG) and Aon Hewitt reports. Both are primary
providers of data and the most appropriate for roles in the
industry in which ClearView operates. The benchmarking
reports were used as a guide, and were not a substitute for
thorough consideration of all the issues by the Remuneration
Committee.
No formal consulting advice was sought from independent
external research houses and Remuneration Consultants
in setting the 2018 Fixed Remuneration.
CLEARVIEW WEALTH LIMITED | 59
DIRECTORS’ REPORT (CONTINUED) 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
FY18
0%
50%
60%
0%
0%
25%
30%
0%
0%
25%
30%
0%
1 UNPAT for the purposes of bonus calculations excludes the after tax interest on corporate debt.
0%
100% 120%
0%
Overall 0% 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.
The FY18 STI was based on financial outcomes that were adversely impacted by the poor claims and lapse experience across
each of the key contributors to the STI calculation. This resulted in no STI being made payable to the SMT. However, this
does not reflect the numerous achievements made in FY18 that will underpin the future financial results. The underlying
performance remains strong with the expanding distribution footprint and strong new business volumes leading to a material
increase in the in-force portfolios which underpins the growth profile.
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. 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.
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
Elizabeth Briggs
Louise Hulley
Deborah Lowe
Gregory Martin
Justin McLaughlin
Sarah Cummings
Todd Kardash
60 | CLEARVIEW ANNUAL REPORT 2018
Target STI % Maximum STI % Minimum STI % Actual Achieved %
50%
30%
30%
30%
30%
30%
30%
30%
30%
30%
60%
36%
36%
36%
36%
36%
36%
36%
36%
36%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
DIRECTORS’ REPORT (CONTINUED)
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;
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 originally performed
by PricewaterhouseCoopers (PwC), an independent
Remuneration Consultant, in February 2013.
The Board subsequent to this review decided in
February 2013 to:
•
•
•
Remove any cap on the issue of shares under the ESP to
retain the flexibility to use it as a recruitment tool for both
employees and financial advisers;
Remove the interest on the loans that had until this
date been capitalised and treated as part of the limited
recourse principal, except that after tax dividends
on Shares issued under the ESP was applied towards
reduction of the loan; and
Issue further grants to participants where
considered appropriate (aligned to the overall
remuneration review of the SMT members by PwC).
These further LTI grants were issued in a “lump sum”
rather than on the basis of an annual grant and were
aligned to the achievement of an increase in the share
price of ClearView.
The interest rate on the limited recourse loans had to that
point effectively acted as an in built performance hurdle.
The Board decided to remove the interest rate on the loans
for all participants given that the interest imposed was
significantly diluting the efficacy of the ESP as an employee
recruitment and retention tool, in particular for those staff
receiving the earlier grants of ESP shares and to achieve
its purpose given the start up phase of the business at the
time. The Board believed, 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).
CLEARVIEW WEALTH LIMITED | 61
DIRECTORS’ REPORT (CONTINUED) 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-execuive 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
62 | CLEARVIEW ANNUAL REPORT 2018
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).
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.
DIRECTORS’ REPORT (CONTINUED) 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.
(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.
Services from consultants - 2018 review and new
LTIP
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.
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.
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.
Given ClearView’s recent growth, it was considered
appropriate for the Remuneration Committee to engage AON
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 and future financial years (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.
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:
CLEARVIEW WEALTH LIMITED | 63
DIRECTORS’ REPORT (CONTINUED)
1. Provides appropriate remuneration to the SMT to ensure
a component of remuneration remains delivered in equity and is focused on longer term performance;
2.
Acts as an incentive to remain employed at ClearView
(a delayed vesting mechanism); and
3.
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.
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. The first awards under the new LTI were made in FY18.
The key terms of the LTIP plan are set out in the table below.
Performance rights granted as compensation
The number of performance rights granted as compensation to each participant, as per the Board approvals and is accordance
with the 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
Todd Kardash
Elizabeth Briggs
Louise Hulley
Total
2018 issue
1,142,857
357,143
285,714
114,286
428,571
250,000
285,714
44,643
44,643
2019 issue2
718,899
224,656
179,725
71,890
269,587
157,259
179,725
129,897
129,897
2,953,571
2,061,533
Key Scheme Details
Description
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. The awards also have the ability to be cash settled in certain
circumstances.
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, being the share price at grant date and a notional value applied to the award,
based on typical performance or valuation discounts derived from remuneration consultants
research.
4. Performance Period
The Performance Rights are be subject to a performance period that ends on 30 June 2019.
1
Performance rights to be granted to Simon Swanson can 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 Annual General Meeting.
2. Number of performance rights approved to be issued to participants in July 2018 but not yet granted.
64 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) Key Scheme Details
Description
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 include:
•
•
50% of the Performance Rights will be measured against an Embedded Value target as set
out in the FY18 Business Plan and measured immediately after the financial year 30 June
2019. At 90% achievement of embedded value, 50% of the awards will vest with straight line
vesting between 90% and 100%.
50% of the Performance Rights will be measured against a relative Total Shareholder Return
target, based on an agreed basket of peer companies (ranked against the S&P ASX 200
Diversified Financials Index). To measure the performance against the TSR condition:
• The TSR of the companies in the peer group is calculated for the relevant period, with the
share price at the start and end based on a 5 day VWAP price; and
• The companies in the peer group are ranked according to their TSR performance.
CleaView’s TSR is calculated for the relevant period and ranked based on its percentile
performance against the peer group. The number of rights that vest are determined
according to a vesting scale: at less than the 50th percentile no rights vest, at the 50th
percentile 50% vests and at the 75th percentile 100% vests. Straight line vesting applies
between the 50th and 75th percentiles.
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. The TSR falls away in these circumstances.
Sales of ESP Shares
From August 2018, the Board resolved that interest would only be charged on vested shares. The Board further resolved and
acknowledged, given the length of time between the initial ESP share issues, that management are likely to start selling vested
shares on the ASX during the appropriate trading windows going forward.
Retention Plan
Given the decision to end the Collaboration Agreement with Sony Life, the Board has taken into consideration that there is a
period of uncertainty and there may be external competition for key ClearView employees. Retaining skilled and dedicated
employees is paramount to maintaining momentum in the business and navigating the industry maelstrom. As such, the
Board has agreed to a retention plan to retain key individuals to:
• Ensure ClearView retains its existing senior management team as this is considered critical to the continuation of the
outperformance of ClearView in the medium term;
• Maintain momentum and navigate the industry disruption that will inevitably now take time to settle given the level of
change and uncertainty that has been generated; and
• Alleviate uncertainty and counter external competition.
The terms of the retention plan are as follows:
• Retention pool of $1.8 million for KMP;
• Payable on 1 September 2018; and
• A Clawback agreement will be put in place (prior to payment) prorated over a two year period to 31 August 2020.
The proposed retention payments to KMP employees is as follows:
CLEARVIEW WEALTH LIMITED | 65
DIRECTORS’ REPORT (CONTINUED) SMT Member
Simon Swanson
Athol Chiert
Greg Martin
Justin McLaughlin
Christopher Blaxland-Walker
Todd Kardash
Deborah Lowe
Elizabeth Briggs
Louise Hulley
Total
Retention Payment
300,000
210,000
210,000
180,000
200,000
200,000
180,000
160,000
160,000
1,800,000
The Board also endorsed retention payments for a small number of key individuals which will also be paid on 1 September
2018 with clawback agreement to 31 August 2019. This amounts to a further payment of $0.3 million. The full retention cost
of $2.1 million will be a cost that will be incurred in FY19, and as it is a cost considered unusual to the ordinary activities will be
reported as such, below the line in the FY19 financial result.
Consequences of ClearView’s performance on shareholder wealth
The following tables set out the summary information about the Group’s earnings and movements in shareholder wealth for
five years to 30 June 2018:
Revenue1 ($’000)
Net profit after tax ($’000)
Underlying Net Profit after Tax
Dividend (Final) (cents)
Basic EPS (cents)
Diluted EPS (cents)
Fully diluted Underlying EPS (cents)
Embedded Value2 ($m)
Embedded Value per share (cents)2
Share Price at the beginning of the year (cents)
30 Jun 18
30 Jun 17
30 Jun 16
30 Jun 15
30 Jun 14
372,207 333,503
295,828
253,640
190,301
26,596 13,150
32,353 30,362
23,615
27,235
12,572
20,533
13,880
19,738
3.00
4.33
4.14
5.03
701
104.9
145.0
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
Share Price at the end of the year (cents)
116.0 145.0
1 Revenue from continuing operations excludes net fair value gains/losses in financial assets.
2
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.
66 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
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 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
(2017: $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. The fees per Board member would be
reconsidered at the appropriate time.
CLEARVIEW WEALTH LIMITED | 67
DIRECTORS’ REPORT (CONTINUED) The compensation of each Non-executive Director for the year ended 30 June 2018 is set out below:
Short term
employee benefits
Post
employment
Share based
payments
Total
Salary
& Fees
2018
$
Non-executive Directors
B Edwards
D Brown
G Burg
M Lukin 1
N Thomson2
A Sneddon3
M Alscher 4
S Wakuya5
S Young
Total
150,000
77,626
85,000
-
85,000
58,145
53,333
80,000
86,758
675,862
Bonus
$
Non-
monetary
Termination
Payment
Superannuation
$
$
$
Executive Share
Plan of total
remuneration
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,374
-
-
-
-
-
-
8,242
15,616
-
-
-
-
-
-
-
-
-
-
150,000
85,000
85,000
-
85,000
58,145
53,333
80,000
95,000
691,478
1 Mr Lukin received no fees as an Alternate Director. Mr Lukin’s appointment as Alternate Director for Mr Alscher was revoked 1 March 2018.
2 Mr Thomson has agreed that he will receive no fees as a Director although fees are payable to Crescent Partners Pty Limited of which he is an employee.
3 Mr Sneddon resigned as a Director on 1 March 2018.
4
Mr Alscher resigned as a Director and was appointed as an Alternate Director to Mr Thomson on 1 March 2018. During he tenure as a Director Mr Alscher
agreed that he will receive no fees as a Director although fees are payable to Crescent Partners Pty Limited of which he is an employee. Mr Alscher receives no
fees as an Alternate Director.
5 Mr Wakuya has agreed he will receive no fees as a Director although fees are payable to Sony Life Insurance Co., Ltd
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
Salary
& Fees
2017
$
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
Superannuation
$
$
$
Executive Share
Plan of total
remuneration
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,374
7,374
-
-
-
-
-
6,397
21,145
-
-
-
-
-
-
-
-
-
-
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.
68 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
Managing Director and Senior Management Team remuneration
The compensation of each member of the KMP of the Group for the year ended 30 June 2018 is set out below:
Short term
employee benefits
Post
employment
Share based payments
Total
Salary &
Fees
Bonus
Non-
monetary
Termination
Payment
Superan-
nuation
Executive
Share Plan1
$
$
$
$
$
$
Long Term
Incentive
Plan
$
Perfor-
mance
based
%
$
2018
S Swanson
A Chiert
G Martin
J McLaughlin
T Kardash
678,756
398,456
414,564
337,897
344,160
C Blaxland-Walker
347,566
D Lowe
S Cummings2
303,577
178,314
E Briggs3
L Hulley4
Total
264,673
22,321
255,732
21,657
-
-
-
-
-
-
-
-
14,635
11,476
14,635
-
11,476
11,476
4,764
-
-
-
-
-
-
-
-
-
-
20,032
20,032
20,032
26,833
20,032
20,032
23,432
-
352,859
33.1% 1,066,282
48,300
110,269
26.9% 588,533
48,300
132,322
28.7% 629,853
-
77,188
17.5% 441,918
19,564
88,215
22.3% 483,447
8,697
88,215
20.4% 475,986
16,100
35,286
13.4% 383,159
144,976
13,092 13,496
-
3.9%
349,878
-
-
20,032
4,830
5,333
10.2%
317,189
21,347
-
5,333
8.9%
304,069
3,523,695
43,978
68,462
144,976 204,896
159,287
895,020
21.8% 5,040,314
Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued.
Ceased General Manager, Development on 31 January 2018.
1
2
3 Appointed as General Counsel and Company Secretary on 4 April 2018. Bonus relates to period from 1 July 2017 to 3 April 2018.
4 Appointed as General Manager, Technology on 4 April 2018. Bonus relates to period from 1 July 2017 to 3 April 2018.
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
Salary &
Fees
$
Bonus
$
Post
employment
Share based
payments
Non-
monetary
Termination
Payment
Superannuation
Executive
Share Plan1
Performance
based
$
$
$
$
Total
$
2017
S Swanson
A Chiert
G Martin
T Kardash
D Charlton2
635,610
292,121
13,980
380,556
104,915
10,876
385,204
110,425
13,980
J McLaughlin
328,732
92,504
-
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.
CLEARVIEW WEALTH LIMITED | 69
DIRECTORS’ REPORT (CONTINUED)
Share Based Payments Granted As Compensation
Limited recourse loans have been granted by the Company to the ESP Participants to fund the acquisition of shares under
the ESP.
The following tables outlines the ESP loans made to KMP or their related entities as at 30 June 2018 and 30 June 2017:
2018
S Swanson
A Chiert
G Martin
J McLaughlin
T Kardash
C Blaxland-Walker
D Lowe
S Cummings
E Briggs
L Hulley
Total
2017
S Swanson
A Chiert
G Martin
J McLaughlin
T Kardash
D Charlton
Balance at
beginning
Loans
Granted
$
Interest
charged1,2
$
Repay-
ments
$
Loan
Cancelled
$
Balance at
end
$
Highest in
period
$
5,998,853
2,026,710
2,526,710
1,268,824
1,263,355
1,244,192
493,325
358,728
147,998
69,628
15,398,323
Balance at
beginning
6,126,353
-
-
-
-
-
-
-
-
-
-
-
100,700
(145,750)
47,018
(36,438)
61,385
(43,725)
29,972
(21,863)
30,578
(21,863)
30,564
(18,183)
8,356
6,056
1,067
494
(7,630)
(6,754)
(2,289)
(2,186)
-
-
-
-
-
-
-
-
-
-
5,953,803
5,998,853
2,037,290
2,037,290
2,544,370
2,544,370
1,276,933
1,276,933
1,272,070
1,272,070
1,256,573
1,256,574
494,051
358,030
494,051
358,728
146,776
147,998
67,936
69,628
316,190
(306,681)
- 15,407,832
Loans
Granted2
$
Interest
charged1
$
Repay-
ments
$
Loan
Cancelled
$
Balance at
end
$
Highest in
period
$
-
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
D Lowe
S Cummings
Total
500,000
364,636
-
-
12,560,494
3,408,951
-
-
-
-
-
-
-
-
-
-
(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
1
2
In February 2013 the Board removed the interest payable on the limited recourse loans granted in relation to the ESP. The interest rate had until that point
effectively acted as a performance hurdle. The Board decided to remove the interest rate on the loans for all participants given that the interest imposed
was significantly diluting the efficacy of the ESP shares and to achieve its purpose given the start up phase of the business at the time. The Board believed,
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.
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 became
interest bearing from 30 November 2017 at 3 year month rate plus a margin of 1%. This limited recourse facility is reflected as loans on balance sheet of the
listed entity.
70 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED) Shares granted to KMP and equity holdings
During and since the end of the financial year no shares (2017: Nil) were granted by the Company to KMP under the ESP.
The following table outlines the ESP shares issued to KMP or their related entities as at the date of this report:
Director, KMP, to
which the series
relates
Justin McLaughlin
Athol Chiert / Justin
McLaughlin
Simon Swanson
Simon Swanson
Simon Swanson
Greg Martin
Todd Kardash
Share series
Series 61,2,6,8
Series 71,2,6,8
Series 101,3,6,8
Series 111,4,6,8
Series 121,5,6,8
Series 151,5,6,8
Series 161,5,6,8
Series 161,5,6,8
Chris Blaxland-Walker
Series 16 1, 8,6,10
Series 267
Series 267
Series 267
Series 438
Series 448
Series 458
Series 51a9
Series 51b9
Louise Hulley
Athol Chiert
Greg Martin
Todd Kardash
Chris Blaxland-Walker
Chris Blaxland-Walker
Chris Blaxland-Walker
Deborah Lowe / Sarah
Cummings/ Elizabeth
Briggs
Deborah Lowe / Sarah
Cummings/ Elizabeth
Briggs
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
0.10
0.29
0.29
0.29
0.20
0.23
0.27
0.10
0.59
51,500
30/06/2013
0.10
0.11
0.08
0.06
0.13
0.13
0.13
0.13
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
0.50
0.57
0.57
0.57
1.01
1.01
1.01
98,057
224,074
323,295
241,927
196,271
127,366
127,366
19,105
29/09/2014
26/03/2015
26/03/2015
26/03/2015
01/07/2015
01/09/2016
01/09/2016
01/09/2016
289,798
Change in control
289,798
Change in control
144,899
Change in control
16,718
19,372
21,883
25/11/2018
25/11/2019
25/11/2020
0.19
n/a
0.96
86,453
23/12/2020
0.22
n/a
0.96
98,966
23/12/2021
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.
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.
Vesting conditions have been met up to the date of this report.
Elizabeth Briggs became KMP on 4 April 2018.
8
9
10 Louise Hulley became KMP on 4 April 2018.
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
Nil1
Nil1
Nil2
Nil2
Nil2,4
Nil
Nil
Nil
Nil
Nil
CLEARVIEW WEALTH LIMITED | 71
DIRECTORS’ REPORT (CONTINUED)
Series
Vesting Conditions
Performance Conditions
Series 15 – 18 August 2011 Issue
Series 16- 6 October 2011 Issue
Series 24- 22 August 2012 Issue
Series 26- 16 April 2013 Issue
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
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
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%.
72 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
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.
LTIP Awards
The following LTIP Awards were in existence at the end of the current reporting period:
Tranche
Issue Date
Number
Grant date
Vesting date
Vesting
conditions
Fair value at
grant date
1A
1B
2A
2B
6 October 2017
1,432,143
6 October 2017
1,432,143
20 October
2017
20 October
2017
30 June 2019
Embedded Value
(EV) target
30 June 2019 Total shareholder
return (TSR)
performance
4 April 2018
44,643
4 April 2018
30 June 2019
Embedded Value
(EV) target
4 April 2018
44,643
4 April 2018
30 June 2019 Total shareholder
return (TSR)
performance
$1.38
$0.03
$1.38
$0.03
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 2018:
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
e
r
a
h
S
.
o
N
-
-
g
n
i
t
s
e
v
o
t
t
c
e
j
b
u
s
.
o
N
s
n
o
i
t
i
d
n
o
c
t
o
n
s
e
r
a
h
S
t
a
e
c
n
a
l
a
B
i
f
o
g
n
n
n
g
e
b
i
.
o
N
r
a
e
y
l
a
i
c
n
a
n
fi
.
o
N
n
o
i
t
a
s
n
e
p
m
o
c
s
a
d
e
t
n
a
r
G
.
o
N
r
a
e
y
l
a
i
c
n
a
n
fi
f
o
d
n
e
e
c
n
a
l
a
B
g
n
i
t
s
e
v
o
t
t
c
e
j
b
u
s
.
o
N
s
n
o
i
t
i
d
n
o
c
d
l
e
h
e
c
n
a
l
a
B
.
o
N
s
e
g
n
a
h
c
r
e
h
t
o
t
e
N
-
588,262
- 10,918,090
11,638
599,900
- 10,918,090
-
-
d
e
t
s
e
v
e
c
n
a
l
a
B
.
o
N
d
n
e
r
a
e
y
t
a
-
-
t
e
y
t
o
n
t
u
b
d
e
t
s
e
V
.
o
N
e
l
b
a
s
i
c
r
e
x
e
-
-
.
o
N
e
l
b
a
s
i
c
r
e
x
e
d
n
a
d
e
t
s
e
V
-
-
2018
B Edwards
G Burg
S Swanson
A Chiert
S Young
J McLaughlin
T Kardash
G Martin
- 10,000,000 14,549,021
1,000,000 1,500,000 2,899,247
-
-
79,217
- 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
D Lowe
E Briggs
L Hulley
523,505
157,052
-
-
588,445
172,450
-
150,000
164,706
-
-
-
-
-
-
-
-
-
-
-
-
89,998 14,639,019
- 10,000,000
- 10,000,000
- 2,899,247 1,000,000 1,500,000
- 1,500,000
1,566
80,783
-
-
-
-
- 1,647,060
- 1,500,000
- 1,500,000
- 1,647,059
500,000 1,000,000
- 1,000,000
14,241 3,734,141 1,000,000 2,000,000
- 2,000,000
- 1,247,525
247,525 1,000,000
- 1,000,000
-
588,445
523,505
304
172,754
157,052
-
-
-
164,706
-
150,000
-
-
-
-
-
150,000
CLEARVIEW WEALTH LIMITED | 73
DIRECTORS’ REPORT (CONTINUED)
Key terms of employment contracts
The following contractual and other arrangements are in place in respect of the KMP as at the date of this report.
Notice period
by either the
employee or the
Company
Other
Term
Ongoing 12 months
In the case of redundancy, a severance payment of 13
weeks' base salary (or any greater payment required
under the National Employment Standards (NES)).
Target
Incentive
% of base
salary
Maximum
Incentive
% of base
salary
50%
60%
KMP
Simon
Swanson
Athol Chiert
Ongoing 6 months
notice for the
first 3 years of
employment,
3 months notice
after 3 years
For all terminations after the first 3 years of employment
an additional 26 week payment is payable.
30%
36%
Christopher
Blaxland-
Walker
Ongoing 12 months
In the case of redundancy, a severance payment of 13
weeks' base salary (or any greater payment required
under the NES).
30%
36%
Deborah Lowe Ongoing 6 months
Elizabeth
Briggs
Ongoing 6 months
Greg Martin
Ongoing 6 months
Justin
McLaughlin
Ongoing 12 months
notice for the
first 3 years of
employment,
6 months notice
after 3 years
Louise Hulley
Ongoing 6 months
Todd Kardash Ongoing 12 months
In the case of redundancy, a severance payment of 13
weeks' base salary (or any greater payment required
under the NES).
In the case of redundancy, a severance payment of 13
weeks' base salary (or any greater payment required
under the NES).
In the case of redundancy, a severance payment of 13
weeks' base salary (or any greater payment required
under the NES).
30%
36%
30%
36%
30%
36%
For all terminations after the first 3 years of employment
an additional 26 week payment is payable.
30%
36%
In the case of redundancy, a severance payment of 13
weeks' base salary (or any greater payment required
under the NES).
In the case of redundancy, a severance payment of 13
weeks' base salary (or any greater payment required
under the NES).
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
22 August 2018
74 | CLEARVIEW ANNUAL REPORT 2018
DIRECTORS’ REPORT (CONTINUED)
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
22 August 2018
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 2018, 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.
2018 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
77
78
79
81
82
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 82
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
84
95
100
104
106
108
108
108
108
111
112
112
113
113
113
114
114
115
116
The Financial Report was authorised for issue by the Directors on 22 August 2018.
117
118
119
120
121
121
131
131
132
133
134
137
145
149
149
150
150
150
150
151
152
157
159
76 | CLEARVIEW ANNUAL REPORT 2018
Consolidated statement of profit or loss
and other comprehensive income
For the year ended 30 June 2018
Consolidated
Note
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
Continuing operations
Revenue from continued operations
Premium revenue from insurance contracts
Outward reinsurance expense
Net life insurance premium revenue
Fee and other revenue
Investment income
Operating revenue before net fair value gains on financial
assets
Net fair value gains on financial assets
Net operating revenue
Claims expense
Reinsurance recoveries revenue
Commission and other variable expenses
Operating expenses
Depreciation and amortisation expense
Change in life insurance policy liabilities
Change in reinsurers’ share of life insurance liabilities
Change in life investment policy liabilities
Movement in liability of non-controlling interest in controlled
unit trusts
Profit 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.
8
9
10
10
25
25
25
11
14
215,171
(56,741)
158,430
127,744
86,033
177,674
(43,130)
134,544
116,462
-
-
-
-
-
-
-
-
82,497
23,845
21,154
372,207
333,503
23,845
21,154
41,195
62,432
-
-
413,402
(94,161)
61,244
395,935
(72,206)
47,182
(129,903)
(120,510)
(101,687)
(10,432)
17,234
4,599
(97,570)
(13,637)
21,879
170
(72,041)
(100,419)
(55,733)
(44,593)
23,845
21,154
-
-
-
-
-
-
(2,735)
(5,680)
-
-
-
-
-
-
-
-
-
-
32,522
5,926
26,596
16,231
3,081
13,150
21,110
(1,085)
22,195
15,474
(2,034)
17,508
26,596
13,150
22,195
17,508
4.33
4.14
2.20
2.11
-
-
-
-
CLEARVIEW WEALTH LIMITED | 77
Consolidated statement of financial position
For the year ended 30 June 2018
Assets
Cash and cash equivalents
Investments
Receivables
Fixed interest deposits
Reinsurers’ share of life insurance policy liabilities
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.
Consolidated
Note
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
15
16
17
18
26
24
21
19
20
22
23
25
25
24
26
12
12
12
12
176,363
222,197
8,047
5,880
2,057,192
1,814,049
412,359
377,159
43,088
98,685
38,243
10,979
1,150
20,452
24,710
37,947
78,327
15,338
10,509
1,425
20,452
24,202
17,682
13,689
-
-
-
-
179
310
-
-
-
-
-
-
2,470,862
2,224,446
438,267
397,038
31,106
39,909
8,146
6,634
523
8,460
(197,116)
(207,632)
1,198,780
1,177,290
976,079
788,427
2,924
1,819
2,026,553
1,808,796
9,241
8,145
26
-
-
-
1,042
18,454
352
523
18
-
-
-
591
1,484
444,309
415,650
419,813
395,554
438,289
(9,274)
12,509
-
2,785
421,717
(15,648)
10,068
-
(487)
438,289
(64,969)
12,509
31,200
2,785
421,717
(61,379)
10,068
25,635
(487)
444,309
415,650
419,813
395,554
78 | CLEARVIEW ANNUAL REPORT 2018
Consolidated statement of changes in equity
For the year ended 30 June 2018
Consolidated
Balance at 1 July 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
Profit for the year
Total comprehensive income for the year
Recognition of share based payments
Recognition of LTIP ESP payments
(including tax)
Dividend paid (inclusive of costs)
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
ESP loans settled through dividend
ESP shares vested/(forfeited)
Transfers
Share
based
payments
reserve
$’000
8,342
-
-
1,012
-
-
Share
capital
$’000
417,850
-
-
-
(3)
(12)
-
1,011
-
-
-
-
-
12,217
(36)
-
4,391
-
-
-
985
1189
-
-
-
771
(504)
-
(2,085)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,187
2,085
2,785
3,882
(297)
421,717
10,068
1,598
(487)
Balance at 30 June 2018
438,289
12,509
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(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
26,596
26,596
-
-
(18,136)
-
-
-
-
(2,085)
(9,274)
26,596
26,596
985
1,189
(18,136)
12,217
(36)
771
5,074
-
444,309
CLEARVIEW WEALTH LIMITED | 79
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
Company
Balance at 1 July 2016
Profit for the year
Total comprehensive profit/(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
ESP shares vested/(forfeited)
Balance at 30 June 2017
Profit for the year
Total comprehensive profit/(loss) for the year
Recognition of share based payments
Recognition of LTIP ESP payments
(including tax)
Dividend paid (inclusive of costs)
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
ESP loans settled through dividend
ESP shares vested/(forfeited)
Transfers
Share
based
payments
reserve
$’000
8,342
-
-
1,012
-
-
1,011
(297)
Share
capital
$’000
417,850
-
-
-
(3)
(12)
-
3,882
421,717
10,068
-
-
-
-
-
12,217
(36)
-
4,391
-
-
-
985
1,189
-
-
-
771
(504)
-
Balance at 30 June 2018
438,289
12,509
To be read in conjunction with the accompanying Notes.
Profit
reserve
Retained
losses
Attributable
to the
owners of
the parent
$’000
$’000
General
reserve
$’000
(2,085)
21,090
(57,887)
387,310
-
-
-
-
-
-
1,598
(487)
-
-
-
-
-
-
-
-
1,187
2,085
2,785
21,000
(3,492)
21,000
(3,492)
-
(16,454)
-
-
-
-
-
-
-
-
17,508
17,508
1,012
(16,458)
(12)
1,011
5,183
25,636
(61,379)
395,554
23,700
(1,505)
23,700
(1,505)
-
-
(18,136)
-
-
-
-
-
-
-
-
-
-
-
-
(2,085)
22,195
22,195
985
1,189
(18,136)
12,217
(36)
771
5,074
-
31,200
(64,969)
419,813
80 | CLEARVIEW ANNUAL REPORT 2018
Consolidated statement of cash flows
For the year ended 30 June 2018
Consolidated
Note
2018
$’000
2017
$’000
2018
$’000
Cash flows from operating activities
Receipts from clients 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
Income taxes paid
610,882
472,320
(347,754)
(306,663)
-
-
(299,786)
(225,031)
20,441
25,306
(1,129)
(3,502)
17,529
23,040
(827)
(5,350)
Net cash (utilised)/generated by operating activities
32
4,457
(24,982)
-
(280)
17,890
-
-
145
(419)
(3,502)
13,834
Company
2017
$’000
-
(3,901)
10,028
-
-
154
(257)
(5,350)
674
Cash flows from investing activities
Net cash movement due to investment in subsidary
-
-
(35,200)
(23,000)
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/(repaid)
Dividends received from subsidiary
Net cash (utilised) by investing activities
(1,402,009)
(1,967,063)
1,253,078
1,863,056
-
(2,200)
(426)
(10,263)
(20,358)
(2,124)
(240)
(7,072)
1,257
(4,585)
-
-
-
-
-
-
(57)
-
-
23,700
(182,102)
(116,847)
(11,557)
-
-
-
-
-
-
(3,409)
21,000
(5,409)
Cash flows from financing activities
Net movement in liability of non-controlling interest in unit
trusts
131,920
156,627
Share issue expenses
Repayment of ESP loans
ESP shares vested/(forfeited)
Dividend paid (net of costs)
-
771
5,074
(5,954)
(12)
1,012
5,183
-
-
771
5,074
-
(12)
1,012
5,183
(16,457)
(5,954)
(16,457)
Net cash generated in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial
year
15
Cash and cash equivalents at the end of the financial year
To be read in conjunction with the accompanying Notes.
131,811
146,353
(45,834)
4,524
222,197
217,673
176,363
222,197
(109)
2,167
5,880
8,047
(10,274)
(15,009)
20,889
5,880
CLEARVIEW WEALTH LIMITED | 81
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
There were no new and revised standards and interpretation have been adopted and have affected the amount reported in
these financial statements.
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 2019
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 2018. For annual
reporting periods beginning before 1 January 2018, an entity may early adopt either AASB 9 (December 2009) or AASB 9 (December 2010) and the
relevant amending standards.
At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations (for which
Australian equivalent Standards and Interpretations have not yet been issued) were in issue but not yet effective.
Standard/Interpretation
Classification and Measurement of Share-based Payment Transactions
(Amendment to IFRS 2)
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
1 January 2018
30 June 2019
AASB 17 - Insurance Contracts
1 January 2021
30 June 2022
82 | CLEARVIEW ANNUAL REPORT 2018
Notes to the Financial Statements For the year ended 30 June 2018
2. Application of new and revised accounting standards Continued
2.3 Impact of changes to Australian Accounting
•
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 9 ‘Financial Instruments’
AASB 9 Financial Instruments replaces AASB 139 Financial
Recognition and Measurement. AASB 9 includes revised
guidance on the classification and measurement of financial
instruments, including a new expected credit loss model
for calculation of impairment on financial assets, and new
general hedge accounting requirements. It also carries
forward guidance on recognition and derecognition of
financial instruments from AASB 139. The standard will
become mandatory for reporting periods beginning on or
after 1 January 2018.
The adoption of AASB 9 changes the Group’s accounting
for impairment losses for financial assets by replacing AASB
139’s incurred loss approach with a forward-looking expected
credit loss (“ECL”) approach. AASB 9 requires an allowance to
be recognised for ECLs on all loans and other debt financial
assets not held at FVPL. ECLs are based on the difference
between the contractual cash flows due in accordance with
the contract and the cash flows that are expected to be
received. The shortfall is then discounted at an approximation
to the asset’s original effective interest rate.
The Group has undertaken an assessment of the impact
to classification and measurement and the accounting for
impairment losses under the new standard below:
•
The Group’s investments are designated at fair value
through profit or loss on initial recognition and are
subsequently remeasured to fair value at each reporting
date. The Group’s other financial instruments (i.e. loans,
receivables and payables) are held at amortised cost.
Under the current business model, the adoption of
AASB 9 does not materially change the accounting for
investments and other financial instruments;
For Contract assets and Trade and Other Receivables,
the Group will adopt the simplified approach to calculate
ECLs based on lifetime expected credit losses. A provision
model has been established based on historical credit loss
experience, adjusted for forward-looking factors specific
to the debtors and the economic environment. There is
currently no indication that a material lifetime expected
credit loss would be recognised upon initial adoption of
the standard.
•
For other debt financial assets (such as adviser loans),
the ECL impact analysis is based on the 12-month ECL.
The 12-month ECL is the portion of lifetime ECLs that
results from default events on a financial instrument
that are possible within 12 months after the reporting
(or assessment) date. However, when there has been
a significant increase in credit risk since origination, the
allowance will be based on the lifetime ECL. The Group
has assessed its loans and other receivables under the
12-month ECL model and there is currently no indicators
that the expected credit losses would be material upon
adoption of the standard.
Upon initial adoption of the standard it is the Group’s policy
to recognise any initial increase in allowance through opening
retained earnings with any future impairment allowances
recognised through profit or loss, however the adoption of
AASB 9 is not expected to result in any material adjustment
on initial adoption.
AASB 15 ‘Revenue from Contracts with Customers’
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
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
AASB 15 applies to annual periods beginning on or after 1
January 2018.
CLEARVIEW WEALTH LIMITED | 83
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 2. Application of new and revised
accounting standards Continued
AASB 15 introduces a single model for the recognition
of revenue based on when control of goods and services
transfers to a customer. Revenues derived under the
Insurance Contracts and Financial Instruments standards,
which represents a large proportion of the Groups revenue,
are excluded from AASB 15 and hence, that revenue is not
impacted by the adoption of the standard.
The Group has assessed its contracts with customers and
the key revenues impacted by the adoption of the standard
are derived from contracts entered into with clients to
provide advisory services and asset management services.
Our assessment of these contracts and the requirements
under the standard regarding the estimation and constraint
of variable consideration noted that the transaction price is
highly susceptible to factors outside ClearView’s influence
such as client retention, changes in-force premiums, flows
of funds under management and investment market
movements.
Prior experience with contracts of this nature is considered of
little predictive value in determining the transaction price and
it is the Group’s view that these revenues are constrained until
those uncertainties are resolved over the passage of time.
This earnings pattern is consistent will the Group’s current
accounting policy and does not result in any material changes
upon initial recognition.
The Group intends to adopt the modified approach under
which the standard from the date of initial application. Under
this approach opening balance of equity is adjusted at the
date of initial application but prior year comparatives not. The
adoption of AASB 15 does not result in a material adjustment
opening retained earnings.
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 Group is not currently a party to any
material leases which would be in place as at the first
reporting period subsequent to initial adoption of AASB 16.
It is not practicable to provide an estimate of the effect of
AASB 16 until the Group enters into a lease agreement which
extends beyond the first reporting period affected by the new
Accounting Standard.
3. Significant accounting policies
(a) Statement of compliance
These financial statements are general purpose financial
statements which have been prepared in accordance with
the Corporations Act 2001, Accounting Standards and
Interpretations, and comply with other requirements of
the law.
The financial statements comprise the consolidated
financial statements of the Group and the separate
financial statements of the parent entity. For the purpose
of preparing the consolidated financial statements,
the Company is a for-profit entity. Accounting Standards
include Australia Accounting Standards. Compliance with
Australian Accounting Standards ensures that the financial
statements and notes of the Company and the Group comply
with International Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the
Directors on 22 August 2018.
(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:
84 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies Continued
•
•
•
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity
can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the
asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset
or liability.
The Company is a company of the kind referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, dated 24 March 2016, and in
accordance with that Corporations Instrument, amounts in
the financial report are rounded off to the nearest thousand
dollars, unless otherwise indicated.
All amounts are presented in Australian dollars, unless
otherwise noted.
(c) Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and entities controlled
by the Company and its subsidiaries. Control is achieved when
the Company:
• has power over the investee;
•
is exposed, or has rights, to variable returns from its
involvement with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control
listed above.
When the Company has less than a majority of the voting
rights of an investee, it has power over the investee when
the voting rights are sufficient to give it the practical ability
to direct the relevant activities of the investee unilaterally.
The Company considers all relevant facts and circumstances
in assessing whether or not the Company’s voting rights in
an investee are sufficient to give it power, including:
•
•
•
•
the size of the Company’s holding of voting rights relative
to the size and dispersion of holdings of the other
vote holders;
potential voting rights held by the Company, other vote
holders or other parties;
rights arising from other contractual arrangements; and
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.
CLEARVIEW WEALTH LIMITED | 85
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies continued
(d) Business combinations
Acquisitions of businesses are accounted for using the
acquisition method. The consideration transferred in a
business combination is measured at fair value which is
calculated as the sum of the acquisition-date fair values
of assets transferred by the Group, liabilities incurred by the
Group to the former owners of the acquiree and the equity
instruments issued by the Group in exchange for control of
the acquiree. Acquisition-related costs are recognised in profit
or loss as incurred.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value at the
acquisition date, except that:
•
•
•
deferred tax assets or liabilities and liabilities or assets
related to employee benefit arrangements are recognised
and measured in accordance with AASB 112 Income
Taxes and AASB 119 Employee Benefits respectively;
liabilities or equity instruments related to share-based
payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into to
replace share-based payment arrangements of the
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.
86 | CLEARVIEW ANNUAL REPORT 2018
Where the consideration transferred by the Group in a
business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent
consideration is measured at its acquisition-date fair value.
Changes in the fair value of the contingent consideration that
qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against
goodwill. Measurement period adjustments are adjustments
that arise from additional information obtained during the
“measurement period” (which cannot exceed one year from
the acquisition date) about facts and circumstances that
existed at the acquisition date.
The subsequent accounting for changes in the fair
value of contingent consideration that do not qualify
as measurement period adjustments depends on how
the contingent consideration is classified. Contingent
consideration that is classified as equity is not remeasured
at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent
consideration that is classified as an asset or liability is
remeasured at subsequent reporting dates in accordance
with AASB 139, or AASB 137 “Provisions, Contingent
Liabilities and Contingent Assets”, as appropriate, with the
corresponding gain or loss being recognised in profit or loss.
Where a business combination is achieved in stages,
the Group’s previously held equity interest in the acquiree
is remeasured to fair value at the acquisition date (i.e. the
date when the Group attains control) and the resulting gain
or loss, if any, is recognised in profit or loss. Amounts arising
from interests in the acquiree prior to the acquisition date
that have previously been recognised in other comprehensive
income are reclassified to profit or loss where such treatment
would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional
amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during
the measurement period (see above), or additional assets
or liabilities are recognised, to reflect new information
obtained about facts and circumstances that existed as at
the acquisition date that, if known, would have affected the
amounts recognised as at that date.
(e) Goodwill
Goodwill arising on an acquisition of a business is carried
at cost as established at the date of the acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated
to each of the Group’s cash-generating units (or groups of
cash-generating units) that is expected to benefit from the
synergies of the combination.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies continued
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.
(f) 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
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 portfolio management fees
earned via the platform is recognised on an accrual fees
(such as model and SMA account) 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.
(g) Leasing
Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as
operating leases.
The Group as lessee
Operating lease payments are recognised as an expense
on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset are
consumed. Contingent rentals arising under operating leases
are recognised as an expense in the period in which they
are incurred.
In the event that lease incentives are received to enter
into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as
a reduction of rental expense on a straight-line basis, except
where another systematic basis is more representative of
the time pattern in which economic benefits from the leased
asset are consumed.
CLEARVIEW WEALTH LIMITED | 87
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies continued
(h) 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.
(i) 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.
88 | CLEARVIEW ANNUAL REPORT 2018
A component of the life investment contracts includes a
minimum unit price guarantee. ClearView Life derives fee
income from the administration of investment linked funds.
Life investment contracts do not contain any discretionary
participation features (i.e. those where the amount or timing
of allocation of the profit from the underlying investments is
at the discretion of the insurer).
In accordance with AASB 1038 “Life Insurance Contracts”,
financial assets backing policy liabilities are designated at fair
value through profit and loss. ClearView Life has determined
that all assets held within the statutory funds back policy
liabilities. Financial assets backing policy liabilities consist
of high quality investments such as cash, equities, fixed
income securities, property trusts and infrastructure assets.
The management of financial assets and policy liabilities is
closely monitored to ensure that investments are appropriate
given the expected pattern of future cash flows arising from
the policy liabilities.
(j) 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.
(k) 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.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies continued
(l) Policy acquisition costs
Life insurance contracts
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.
(m) 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. These
expenses are related to non-participating business as
ClearView Life only write this category of business.
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 for part of the year. 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).
(n) Policy liabilities
Policy liabilities consist of life insurance policy liabilities and
life investment policy liabilities.
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.
(o) 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.
(p) 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.
CLEARVIEW WEALTH LIMITED | 89
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies continued
(q) Share based payment arrangements
Share-based payment transactions of the Company
Equity-settled share-based payments to employees and
others providing similar services are measured at the fair
value of the equity instruments at the grant date. Details
regarding the determination of the fair value of equity-settled
share-based transactions are set out in Note 27 and 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.
(r) 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
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
90 | CLEARVIEW ANNUAL REPORT 2018
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.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case
the current and deferred tax are also recognised in other
comprehensive income or directly in equity, respectively.
Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is
included in the accounting for the business combination.
(s) 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
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies continued
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.
(t) 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.
An internally-generated intangible asset arising from
development (or from the development phase of an internal
project) is recognised if, and only if, all of the following have
been demonstrated:
•
•
The technical feasibility of completing the intangible asset
so that it will be available for use or sale;
The intention to complete the intangible asset and use
or sell it;
• The ability to use or sell the intangible asset;
•
•
•
How the intangible asset will generate probable future
economic benefits;
The availability of adequate technical, financial and other
resources to complete the development and to use or sell
the intangible asset; and
The ability to measure reliably the expenditure
attributable to the intangible asset during
its development.
The amount initially recognised for internally-generated
intangible assets is the sum of the expenditure incurred from
the date when the intangible asset first meets the recognition
criteria listed above. Where no internally-generated intangible
asset can be recognised, development expenditure is
recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the
same basis as intangible assets that are acquired separately.
Amortisation is charged to the statement of profit or loss and
other comprehensive income on a straight-line basis over
periods generally ranging from 3 to 5 years. Management
reviews the appropriateness of the amortisation period
on an annual basis.
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.
(u) 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
CLEARVIEW WEALTH LIMITED | 91
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies continued
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.
(v) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the
amount of the obligation.
The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation
at the end of the reporting period, taking into account the
risks and uncertainties surrounding the obligation. When a
provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present
value of those cash flows (where the effect of the time value
of money is material).
When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
Onerous contracts
Present obligations arising under onerous contracts are
recognised and measured as provisions. An onerous contract
is considered to exist where the Group has a contract under
which the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be
received from the contract.
Restructurings
A restructuring provision is recognised when the Group has
developed a detailed formal plan for the restructuring and
has raised a valid expectation in those affected that it will
carry out the restructuring by starting to implement the plan
or announcing its main features to those affected by it. The
measurement of a restructuring provision includes only the
direct expenditures arising from the restructuring, which
are those amounts that are both necessarily entailed by the
restructuring and not associated with the ongoing activities
of the entity.
92 | CLEARVIEW ANNUAL REPORT 2018
(w) Financial instruments
Financial assets and financial liabilities are recognised
when a group entity becomes a party to the contractual
provisions of the instrument. Financial assets and financial
liabilities are initially measured at fair value. Transaction costs
that are directly attributable to the acquisition or issue of
financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or
loss) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in
profit or loss.
Financial assets
Financial assets are classified into the following specified
categories: financial assets ‘at fair value through profit or
loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available¬for-
sale’ (AFS) financial assets and ‘loans and receivables’.
The classification depends on the nature and purpose of
the financial assets and is determined at the time of initial
recognition. All regular way purchases or sales of financial
assets are recognised and derecognised on a trade date
basis. Regular way purchases or sales are purchases or sales
of financial assets that require delivery of assets within the
time frame established by regulation or convention in
the marketplace.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash receipts
(including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected
life of the debt instrument, or (where appropriate) a shorter
period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified as
at FVTPL.
Financial assets at FVTPL
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
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies continued
•
It is a derivative that is not designated and effective
as a hedging instrument.
A financial asset other than a financial asset held
for trading may be designated as at FVTPL upon initial
recognition if:
•
•
•
Such designation eliminates or significantly reduces
a measurement or recognition inconsistency that
would otherwise arise; or
The financial asset forms part of a group of financial
assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis,
in accordance with the Group’s documented risk
management or investment strategy, and information
about the grouping is provided internally on
that basis; or
It forms part of a contract containing one or more
embedded derivatives, and AASB 139 Financial
Instruments: Recognition and Measurement permits
the entire combined contract (asset or liability) to be
designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any
gains or losses arising on remeasurement recognised in
profit or loss. The net gain or loss recognised in profit or
loss incorporates any dividend or interest earned on the
financial asset and is included in the “net fair value gains and
losses” line item in the statement of profit or loss and other
comprehensive income. Fair value is determined based on
the process in accordance with the policy adopted by the
custodian on the reporting date.
Held-to-maturity investments
Bills of exchange and debentures with fixed or determinable
payments and fixed maturity dates that the Group has the
positive intent and ability to hold to maturity are classified as
held-to maturity investments. Held-to-maturity investments
are measured at amortised cost using the effective interest
method less any impairment.
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.
objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset,
the estimated future cash flows of the investment have
been affected.
For financial assets carried at amortised cost, the amount of
the impairment loss recognised is the difference between the
asset’s carrying amount and the present value of estimated
future cash flows, discounted at the financial asset’s original
effective interest rate.
For financial assets that are carried at cost, the amount of
the impairment loss is measured as the difference between
the asset’s carrying amount and the present value of the
estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Such impairment
loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by
the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount
is reduced through the use of an allowance account. When
a trade receivable is considered uncollectable, it is written
off against the allowance account. Subsequent recoveries
of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the
allowance account are recognised in profit or loss.
When an AFS financial asset is considered to be impaired,
cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss
in the period.
For financial assets measured at amortised cost, if, in a
subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed through
profit or loss to the extent that the carrying amount of the
investment at the date the impairment is reversed does not
exceed what the amortised cost would have been had the
impairment not been recognised.
In respect of AFS equity securities, impairment losses
previously recognised in profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent
to an impairment loss is recognised in other comprehensive
income and accumulated under the heading of investments
revaluation reserve. In respect of AFS debt securities,
impairment losses are subsequently reversed through profit
or loss if an increase in the fair value of the investment can be
objectively related to an event occurring after the recognition
of the impairment loss.
Impairment of financial assets
Derecognition 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
The Group derecognises a financial asset when the
contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the
CLEARVIEW WEALTH LIMITED | 93
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
3. Significant accounting policies continued
risks and rewards of ownership of the asset to another party.
If the Group neither transfers nor retains substantially all
the risks and rewards of ownership and continues to control
the transferred asset, the Group recognises its retained
interest in the asset and an associated liability for amounts
it may have to pay. If the Group retains substantially all the
risks and rewards of ownership of a transferred financial
asset, the Group continues to recognise the financial asset
and also recognises a collateralised borrowing for the
proceeds received.
On derecognition of a financial asset in its entirety,
the difference between the asset’s carrying amount and
the sum of the consideration received and receivable and
the cumulative gain or loss that had been recognised in other
comprehensive income and accumulated in equity
is recognised in profit or loss.
On derecognition of a financial asset other than in its entirety
(e.g. when the Group retains an option to repurchase part of
a transferred asset), the Group allocates the previous carrying
amount of the financial asset between the part it continues
to recognise under continuing involvement, and the part it
no longer recognises on the basis of the relative fair values
of those parts on the date of the transfer. The difference
between the carrying amount allocated to the part that
is no longer recognised and the sum of the consideration
received for the part no longer recognised and any
cumulative gain or loss allocated to it that had been
recognised in other comprehensive income is recognised
in profit or loss. A cumulative gain or loss that had been
recognised in other comprehensive income is allocated
between the part that continues to be recognised and the
part that is no longer recognised on the basis of the relative
fair values of those parts.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences
a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Group are
recognised as equal to the proceeds received, net of direct
issue costs.
Repurchase of the Company’s own equity instruments is
recognised and deducted directly in equity. No gain or loss
is recognised in profit or loss on the purchase, sale, issue or
cancellation of the Company’s own equity instruments.
94 | CLEARVIEW ANNUAL REPORT 2018
Financial liabilities
Financial liabilities are classified as either financial liabilities
“at FVTPL” or “other financial liabilities”.
Financial liabilities at FVTPL
Financial liabilities are classified at FVTPL when the financial
liability is either held for trading or it is designated as at
FVTPL. A financial liability is classified as held for trading if:
•
•
•
It has been incurred principally for the purpose of
repurchasing it in the near term; or
On initial recognition it is part of a portfolio of identified
financial instruments that the Group manages together
and has a recent actual pattern of short-term profit
taking; or
It is a derivative that is not designated and effective
as a hedging instrument.
A financial liability other than a financial liability held
for trading may be designated as at FVTPL upon initial
recognition if:
•
•
•
Such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would
otherwise arise; or
The financial liability forms part of a group of financial
assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis,
in accordance with the Group’s documented risk
management or investment strategy, and information
about the grouping is provided internally on that basis; or
It forms part of a contract containing one or more
embedded derivatives, and AASB 139 “Financial
Instruments: Recognition and Measurement” permits
the entire combined contract (asset or liability) to be
designated at FVTPL.
Financial liabilities at FVTPL are stated at fair value,
with any gains or losses arising on remeasurement recognised
in profit or loss. The net gain or loss recognised in profit or
loss incorporates any interest paid on the financial liability
and is included in the “other gains and losses” line item in
the statement of profit or loss. Fair value is determined in the
manner described in Note 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.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 3. Significant accounting policies continued
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; and
• Deferred tax assets.
Life insurance policy liabilities
Life insurance policy liabilities are, in the majority of cases,
determined using an individual policy-by-policy calculation.
Where material liabilities are not determined by individual
policy valuation, they are computed using statistical
or mathematical methods, which are expected to give
approximately the same results as if an individual liability
were calculated for each contract. The calculations are made
by suitably qualified personnel on the basis of recognised
actuarial methods, with due regard to relevant actuarial
principles. The methodology takes into account the risks
and uncertainties of the particular classes of life insurance
business written.
The key factors that affect the estimation of these liabilities
and related assets are:
•
•
•
•
The cost of providing benefits and administering these
insurance contracts;
The costs incurred in acquiring the policies, including
commissions, underwriting and policy issue costs;
Mortality and morbidity experience on life insurance
products; and
Discontinuance experience, which affects ClearView Life’s
ability to recover the cost of acquiring new business over
the term of the contracts.
In addition, factors such as regulation, competition, interest
rates, taxes, securities market conditions and general
economic conditions affect the level of these liabilities.
Details of specific actuarial policies and methods are set
out further below.
Assets arising from reinsurance contracts
Assets arising from reinsurance contracts are computed
using the same methods as used for insurance policy
liabilities. In addition, the recoverability of these assets is
assessed on a periodic basis to ensure that the balance is
reflective of the amounts that will ultimately be received,
taking into consideration factors such as reinsurer
counterparty and credit risk.
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
$6.4 million (2017: $10.4 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
CLEARVIEW WEALTH LIMITED | 95
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 4. Critical accounting judgments and key sources of estimation uncertainty continued
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 $6.2 million (2017: $10.2 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.
The Life Insurance Client Book was written off over 8 years
on a straight line basis. The triggers that were considered in
testing for annual impairment for the Life Insurance Client
Book were as follows:
• Mortality and morbidity (claims);
• Maintenance costs;
• Persistency (lapse); and
• Discount rates.
During the year the Life Insurance Client Book was fully
amortised. In the prior 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 $6.2 million
at 30 June 2018.
Triggers that need to be considered in testing for annual
impairment for the Financial Advice Client Book are
as follows:
•
Investment returns;
• Maintenance costs;
• Outflows; and
• Discount rates.
ClearView prepares an Embedded Value for the Group
at each reporting period. The Embedded Value is prepared
at a reportable segment level (CGUs). The Embedded
Value measure is used as a proxy for the value in use.
The Embedded Value methodology is used to test the
acquired intangibles for any impairment triggers. As at 30
June 2018, 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 $18.3 million
(2017: $13.8 million).
At each reporting period the internally generated software
is assessed for any impairment triggers. If any such
indication exists, the recoverable amount of the asset shall
be estimated. The impairment indicators for the software
intangible are defined as:
•
•
•
•
The ability of the software to provide the functionality
required from the business to use the asset;
The software is being utilised for the purposes that
it was designed;
The availability of alternative software that the business
has available; and
Product mix - The entity no longer sells the products that
are administered on the policy administration system or
utilises the provided functionality.
Capitalised software costs include those associated with the
implementation of a new compliant and functional wealth
platform, the launch of WealthFoundations that is hosted on
the new platform and any development costs associated with
the Master Trust and MIS products. The Master Trust and MIS
products were migrated onto the new platform in the 2018
financial year.
No impairment was required to the carrying values of
internally generated software as at 30 June 2018.
Impairment of goodwill
The carrying amount of goodwill at the reporting date
was $20.5 million (2017: $20.5 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.
96 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 4. Critical accounting judgments and key sources of estimation uncertainty continued
Goodwill
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
2018. 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 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 and competitive 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. As at 30
June 2018, no impairment was required to the carrying value
of the goodwill.
Further information about Goodwill is detailed in Note 19.
Deferred tax asset – timing differences
The Board has considered that it is probable that sufficient
taxable income will be available against which deductible
temporary differences can be utilised.
CLEARVIEW WEALTH LIMITED | 97
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 4. Critical accounting judgments and key sources of estimation uncertainty continued
The methods used for the major product groups are as
follows:
Related Product Group
Method
Profit
carrier
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
Projection
Premiums
Projection
Premiums
Projection
Premiums
Projection
Premiums
Projection
Premiums
Fund 2 Investments
Fund 4 Investments
Accumulation
Accumulation
n/a
n/a
These life insurance and life investment policy liability
determinations are also consistent with the requirements
of the relevant Prudential Standards and the Life Insurance
Act 1995. Life insurance policy liabilities have been calculated
in a way which allows for the systematic release of planned
margins as services are provided to policyholders and
premiums are received.
The projection method uses the discounted value of future
policy cash flows (premiums, expenses and claims) plus a
reserve for expected future profits. The policy liabilities for life
investment contracts are determined as the fair value of the
policyholders’ accounts under the accumulation method with
no future profit reserve.
(a) Actuarial assumptions used in the valuation of
life insurance policy liabilities
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 2018)
Effect on
profit margins
Increase/
(decrease)
Effect on policy
liabilities
Increase/
(decrease)
$’000
$’000
5,666
(3,488)
-
-
(6,369)
(704)
-
-
-
(3,488)
Assumption category
Discount rates and
inflation
Maintenance expenses
Lapses
Mortality and
morbidity
Total
Key assumptions used in the calculations of life insurance
policy liabilities are as follows:
Discount rate
(c) Processes used to select assumptions
Discount rates: Discount rates are based on a yield curve
derived from Commonwealth Government bond market
yields as at the valuation date, plus an illiquidity adjustment
based on the difference between these yields and BBSW
swap rates as at the valuation date. As an indication,
the resulting average effective discount rate adopted
was 2.7% (2017: 3.0%).
Acquisition expenses: Per policy acquisition expense
assumptions were based on the actual acquisition expenses
incurred for the 12 months to 30 June 2018.
Benefits under life insurance contracts are not contractually
linked to the performance of the assets held. As a result, the
life insurance policy liabilities are discounted for the time
value of money using discount rates that are based on current
observable, objective rates that relate to the nature, structure
and term of the future obligations. The discount rate is based
on Commonwealth Government bond rates adjusted for the
value of the illiquidity of the policy liability. The effect of this
approach is unchanged from that adopted last valuation.
Maintenance expenses and inflation
Maintenance expense and inflation: The per policy
maintenance expense assumptions were based on the longer
term per policy unit costs implied by ClearView Life’s 2018
business plan. Expense inflation of 2.5% p.a. (2017: 2.5% p.a.)
was assumed.
Maintenance expenses are set having regard to the cost base
in the three year Board adopted business plan. Per policy
maintenance expenses are assumed to increase in the future
with inflation, at a rate that allows for basic price increases
(CPI).
98 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 4. Critical accounting judgments and key sources of estimation uncertainty continued
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 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.
(d) Sensitivity analysis
ClearView Life conducts sensitivity analyses to quantify the exposure to risk of changes in the key underlying variables such as
discount rates, expenses, mortality, morbidity and lapses. The valuations included in the reported results and ClearView Life’s
best estimate of future performance are calculated using certain assumptions about these variables. The movement in any
key variable may impact the reported performance and net assets of ClearView Life and the consolidated entity and as such
represents a risk.
Variable
Impact of movement in underlying variable
Interest Rate
Risk
Expense Risk
Mortality
Rates
Morbidity
Rates
Lapses
The life insurance policy liabilities are calculated using a discount rate that is derived from market interest
rates. Changes in market interest rates will affect the present value of cash flows and profit margins in the
policy liabilities, which in turn will affect the profit and shareholder equity. The change in interest rates would
also impact the emerging profit via its impact on the investment returns on the assets held to back the
liabilities.
An increase in the level (or inflation) of expenses over the assumed levels will decrease emerging profit.
However, a change in the base expense assumptions adopted for the policy liability is unlikely to impact
the current policy liability determination as such a change is absorbed into the policy liability profit margin
reserve in the first instance.
For life insurance contracts providing death benefits an increased rate of mortality would lead to higher levels
of claims, increasing associated claims cost and thereby reducing emerging profit. However, a change in the
mortality assumptions adopted for the policy liability is unlikely to directly impact the current policy liability
determination as such a change is absorbed into the policy liability profit margin reserve in the first instance.
The cost of claims under TPD, Income Protection and trauma cover depends on the incidence of policyholders
becoming disabled or suffering a “trauma” event such as a heart attack or stroke. Higher incidence or claims
duration would increase claim costs, thereby reducing profit and shareholder equity. The impact on the policy
liability of a change in morbidity assumptions is as per mortality above.
Lapse risk represents the extent to which policyholders choose not to renew their policy, and allow it to
lapse. An increase in the lapse rates will have a negative effect on emerging profit owing to the loss of future
revenue, including that required to recover acquisition costs. The impact on the policy liability of a change in
lapse assumptions is as per mortality above.
CLEARVIEW WEALTH LIMITED | 99
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 4. Critical accounting judgments and key sources of estimation uncertainty continued
The table below illustrates how outcomes during the financial year ended 30 June 2018 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
17,720
$’000
16,039
(20,061)
(18,157)
-
-
-
-
-
-
-
-
-
-
$’000
(12,404)
14,042
(5,660)
5,660
(2,687)
2,687
(1,580)
$’000
(11,227)
12,710
(1,737)
1,737
(2,440)
2,440
(1,580)
Change in
variable
+ 100 bp
- 100 bp
110.0%
90.0%
110.0%
90.0%
110.0%
1,580
* 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.
90.0%
1,580
-
-
5. Risk management
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;
•
Insurance 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.
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
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
100 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
5. Risk management continued
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).
Insurance risk
The risks under the life insurance contracts written by ClearView Life are exposed to various key variables. The table below
provides an overview of the key insurance contract types and exposure variables.
Type of contract
Detail of contract workings
Nature of compensation
for claims
Key variables that affect the
timing and uncertainty
Non-participating life insurance
Benefits paid on death or ill
Benefits defined by the
contracts with fixed terms
health that are fixed and not at
insurance contract are
(Term Life and Disability)
the discretion of the issuer
determined by the contract
obligation of the issuer and
Mortality
Morbidity
Discontinuance rates
are not directly affected by the
Expenses
performance of the underlying
assets or the performance of
the contracts as a whole
Policy Terms
Premium Rates
Insurance risks are controlled through the use of underwriting procedures, appropriate premium rating methods and
approaches, appropriate reinsurance arrangements, effective claims management procedures and sound product terms
and conditions due diligence.
(a) Risk management objectives and policies for
mitigating insurance risk
ClearView Life issues term life insurance contracts and
disability insurance contracts. The performance of ClearView
Life and its continuing ability to write business depends
on its ability to manage insurance risk. The Group’s 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 reinsurers 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;
CLEARVIEW WEALTH LIMITED | 101
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 5. Risk management continued
•
Formal internal policy document and Product
Disclosure Statement due diligence review and
sign-off processes; and
• Budgeting and expense management reporting and
management processes;
• Modelling of anticipated client loss rates and ongoing
• The ability to re-price products (change premium rates
monitoring of discontinuance rates;
and fees) on most products in the event of adverse claims
and/or other product experience.
It is noted that similar processes and controls apply to the
pricing and terms and conditions applicable to the investment
products issued by ClearView Life.
Asset-Liability mismatch risk
Asset-liability mismatch risk arises to the extent to which
the assets held by the Group to back its liabilities (especially
its policy liabilities and investment contract liabilities) do
not closely match the nature and term of those liabilities.
In practice, the market risk and credit risk exposures of the
Group primarily relate to the extent that the Group retains a
net exposure with respect to these risks – that is the extent
to which the liabilities and their values do not mirror the
variation in asset values. In this context it is noted:
• The investment linked liabilities of the ClearView Life
directly link the underlying assets held to support those
liabilities, with the primary market risks and credit risks
passed on to the policyholder and unit trust investors (as
discussed above);
• The assets held to support the capital guaranteed units in
the ClearView Life No.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
• Adoption of appropriate business retention
strategies; and
• Maintaining strong distribution partner relationships.
Non-Financial Risks – regulatory environment,
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
• 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:
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.
102 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
5. Risk management continued
Capital management and reserving
In terms of regulatory requirements:
• ClearView Life is subject to minimum regulatory capital
requirements, as determined by the Appointed Actuary
in accordance with APRA Life Insurance Prudential
Standards, in respect of the principal financial risks
exposures retained by ClearView Life;
• ClearView Financial Management, ClearView Financial
Advice and Matrix Planning Solutions are also required
to maintain minimum regulatory capital as required by
ASIC; and
• ClearView Life Nominees is required to maintain
an Operational Risk Financial Requirement (ORFR)
as determined in accordance with Superannuation
Prudential Standard 114. SPS 114 requires that the
trustee maintains 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.
CLEARVIEW WEALTH LIMITED | 103
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 6. Capital adequacy (ClearView Life Assurance Limited)
ClearView Life Assurance Limited (ClearView Life) is subject to minimum capital regulatory capital requirements in accordance
with Australian Prudential Regulation Authority (APRA) Life Insurance Prudential Standards. ClearView Life is required to
maintain adequate capital against the risks associated with its business activities and measure its capital to the “Prudential
Capital Requirement” (PCR).
ClearView Life has in place an Internal Capital Adequacy Assessment Process (ICAAP), approved by the Directors, to ensure it
maintains required levels of capital within each of its statutory and general funds. The capital adequacy position at balance
date for ClearView Life, in accordance with the APRA requirements, is as follows:
Capital position
Statutory fund
Statutory fund
Statutory fund
No. 1
No. 2
No. 4
Shareholder’s
Fund
Australian non-
participating
Australian non-
participating
Australian non-
participating
ClearView Life
Assurance
Limited
2018
$’000
3,832
-
3,832
2018
$’000
373,248
(13,486)
359,762
-
(1,643)
(3,450)
-
-
(304,658)
382
(19)
363
20.1
-
(19)
-
-
-
-
53,461
(11,849)
41,612
4.5
(4,115)
(2,678)
-
(6,509)
1,453
-
2018
$’000
1,221
-
1,221
-
-
-
1,221
(14)
1,208
93.9
-
(5)
-
(9)
-
-
2018
$’000
11,013
(4,827)
6,186
(34)
-
-
6,152
(3,425)
2,727
1.8
-
(429)
-
(2,996)
-
-
2018
$’000
389,314
(18,313)
371,001
(1,677)
(3,450)
(304,658)
61,216
(15,307)
45,910
4.0
(4,115)
(3,131)
-
(9,514)
1,453
-
(19)
(11,849)
(14)
(3,425)
(15,307)
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
104 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 6. Capital adequacy (ClearView Life Assurance Limited) continued
Statutory fund
Statutory fund
Statutory fund
No. 1
No. 2
No. 4
Shareholder’s
Fund
Australian non-
participating
Australian non-
participating
Australian non-
participating
Net Assets (Common Equity Tier 1 Capital)
Goodwill and intangibles
Net tangible assets
Capital base adjustments
Deferred tax assets
Investment in subsidiaries
Policy liability
Regulatory capital base
Prescribed Capital Amount (PCA)
Available Enterprise Capital (AEC)
Capital Adequacy Multiple
Prescribed capital amount comprises 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 WEALTH LIMITED | 105
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 7. Segment information
AASB 8 requires operating segments to be identified on the
basis of internal reports about components of the Group that
are regularly reviewed by the chief operating decision maker
in order to allocate resources to the segment and to assess
its performance.
The information reported to the Group’s Board of Directors,
being the chief operating decision maker, for the purpose
of resource allocation and assessment of performance
is focused on the products and services of each
reporting segment.
The principal activities and the Group’s reportable segments
under AASB 8 are as follows:
• Life Insurance;
• Wealth Management;
•
Financial Advice; and
• Listed Entity/Other.
(a) Life Insurance (“protection” products)
ClearView provides life insurance protection products through
its wholly owned subsidiary ClearView Life. The products
provided by ClearView Life include:
•
•
A comprehensive range of life protection products
distributed via both CFA and Matrix financial advisers and
third party, external advisers (IFAs). The product suite,
LifeSolutions, was launched in December 2011 and is
a high quality advice based product suite, providing top
quartile benefits and terms at market competitive prices.
LifeSolutions includes term life, permanent disability,
trauma and critical illness benefits, parent cover, child
cover, accident covers, income protection and business
expense covers. Policies can be issued directly or via the
ClearView Retirement Plan as superannuation;
A range of Non-Advice life protection products sold
through direct marketing, telemarketing, call centre
referrals, or online. Products include term life, accidental
death, injury covers, trauma and critical illness and
funeral insurance.
(b) Wealth Management (“investment” products)
ClearView provides wealth management products via four
primary avenues:
•
•
Master Trust - Life investment contracts issued by
ClearView Life. Products include ordinary savings,
superannuation and allocated pension products, with the
latter two provided via the ClearView Retirement Plan;
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
106 | CLEARVIEW ANNUAL REPORT 2018
in December 2011. WealthSolutions includes a
menu of approximately 250 investment funds, ASX
listed shares, term deposits, 8 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.
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.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 7. Segment information continued
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
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2018
$’000
2017
$’000
160,702
126,350
114,546
343
136,913
111,977
112,783
314
-
-
-
-
(29,734)
(28,484)
-
-
160,702
126,350
84,812
343
136,913
111,977
84,299
314
Consolidated segment revenue
401,941
361,987
(29,734)
(28,484)
372,207
333,503
2018
Underlying net profit/(loss) after tax
Amortisation of acquired intangibles1
AIFRS policy liability discount rate effect
(net of tax)2
Strategic review cost (net of tax)3
Reported profit/(loss)
2017
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)4
Life
Insurance
Wealth
Management
Financial
Advice
Listed Entity/
Other
26,085
(2,833)
(906)
-
5,163
(90)
-
-
1,780
(1,121)
-
-
22,346
5,073
659
24,867
(2,833)
(5,918)
-
-
3,942
(4,378)
2,231
(980)
-
-
-
-
-
-
(676)
-
-
(806)
(1,481)
(678)
-
-
(683)
(2,420)
(3,781)
Total
32,352
(4,044)
(906)
(806)
26,596
30,362
(8,191)
(5,918)
(683)
(2,420)
13,150
Reported profit/(loss)
16,116
(436)
1,251
1
2
3
4
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 underlying net profit 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 under-
lying earnings. This movement in policy liability creates a cash flow tax effect.
Certain costs were recognised predominantly in relation to Cooperation Agreement entered into with Sony Life and 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
Underlying NPAT.
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 Underlying NPAT.
CLEARVIEW WEALTH LIMITED | 107
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 8. Fee and other revenue
Financial advice fees
Funds management fees
Other income
Total fee and other revenue
9. Investment income
Interest income
Dividend income
Distribution income
Total investment income
10. Operating expenses
Consolidated
2018
$’000
83,379
43,312
1,053
2017
$’000
76,918
38,470
1,074
127,744
116,462
Company
2017
$’000
2018
$’000
-
-
-
-
-
-
-
-
Consolidated
Company
2018
$’000
25,202
20,441
40,390
86,033
2017
$’000
23,267
17,529
41,701
82,497
2018
$’000
145
2017
$’000
154
23,700
21,000
-
-
23,845
21,154
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’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
36,113
9,505
45,618
50,713
1,880
376
819
32,402
8,130
40,532
49,120
1,012
798
845
Total employee costs and directors’ fees
53,788
51,775
Other expenses
Interest and other costs of finance
Strategic review costs
Direct restructure and remediation costs
Total other expenses
Total operating expenses
Depreciation and amortisation expenses
Depreciation expenses
Software amortisation
Amortisation of acquired intangibles
Total amortisation and depreciation expenses
108 | CLEARVIEW ANNUAL REPORT 2018
1,129
1,152
-
2,281
827
978
3,458
5,263
101,687
97,570
677
5,711
4,044
639
4,808
8,190
10,432
13,637
595
-
595
10
-
-
559
569
419
1,152
-
1,571
2,735
-
-
-
-
346
-
346
12
-
-
629
641
257
978
3,458
4,693
5,680
-
-
-
-
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 10. Operating expenses continued
Remuneration of auditors
Auditor of the parent entity
Audit and review of financial reports
Audit of APRA and ASIC regulatory returns
Audit of Managed Investment Schemes
Total remuneration for audit services
Preparation and lodgement of tax returns
Other non-audit services - taxation advice
Other non-audit services - compliance
Other non-audit services - consulting
Consolidated
2018
$
2017
$
Company
2017
$
2018
$
323,350
318,000
105,750
104,200
101,350
99,400
130,100
127,600
-
-
-
-
554,800
545,000
105,750
104,200
133,450
106,050
133,450
106,050
121,950
46,400
121,950
26,800
417,134
358,386
135,400
310,976
-
-
-
135,976
Total remuneration for non-audit services
807,934
821,812
255,400
268,826
Total remuneration
11. Income tax
a) Income tax recognised in profit or loss
Income Tax expense/(benefit) comprises:
Current tax expense
Deferred tax expense
1,362,734
1,366,812
361,150
373,026
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
6,564
(203)
4,827
322
(398)
(379)
(1,709)
52
Over provided in prior years – current tax expense
(1,566)
(2,860)
(1,269)
(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
b) Tax losses
Unused tax losses for which no deferred tax asset has been
recognised
1,131
5,926
(176)
1,105
929
792
3,081
961
802
(1,085)
(2,034)
292
823
1,115
131
451
582
263
591
854
40,998
54,293
32,635
32,635
Potential tax benefit
10,627
11,956
9,790
9,790
The prima facie income tax expense/(benefit) on pre-tax accounting profit from operations reconciles to the income tax
expense in the financial statements as follows:
c) Reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense
32,522
16,231
21,110
15,474
Policyholder tax (expense) credit recognised as part of the change in
policyholder liabilities in determining profit before tax
5,991
5,092
-
-
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
CLEARVIEW WEALTH LIMITED | 109
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 11. Income tax continued
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)
d) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and
not recognised in net profit or loss or other comprehensive income but
directly debited or (credited) to equity:
Consolidated
Company
2018
$’000
38,513
11,554
2017
$’000
21,323
6,397
2018
$’000
21,110
6,333
2017
$’000
15,474
4,642
-
(765)
121
1,213
(206)
-
11,917
(5,991)
5,926
-
(7,110)
(6,300)
(601)
406
2,449
(463)
(15)
8,173
(5,092)
3,081
-
-
-
-
-
-
(308)
-
(376)
-
(1,085)
(2,034)
-
-
(1,085)
(2,034)
Current tax
Deferred tax
-
(294)
-
-
-
-
-
-
The ability of the Company to continue to pay franked dividends is dependent upon the receipt of franked dividends from its
investment assets and the group itself paying tax.
Franking account
The balance of the franking account after allowing for tax payable in
respect of the current year’s profit, the receipt of franked dividends
recognised as receivables and the payment of any dividends
recognised as a liability at the reporting date.
Relevance of tax consolidation to the Group
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
29,520
27,610
29,520
27,610
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 includes subsidiaries as 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.
110 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 11. Income tax continued
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
Retained losses
Balance at the beginning of the financial year
(15,648)
(12,344)
(61,379)
(57,887)
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
Net profit/(loss) attributable to members of the parent entity
Transfer from General Reserve3
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
Proceeds from sale of ESP shares vested/forfeited (net of tax)
Balance at end of the financial year
Profit Reserve
Balance at the beginning of the financial year
Net profit attributable to the parent entity
Dividend paid during the year
Balance at end of the financial year
General Reserve2
Balance at the beginning of the financial year
Transfer to retained losses3
Gain on sale of unvested ESP shares (net of tax)
Balance at end of the financial year
26,595
(2,085)
13,150
-
(18,136)
(16,454)
(1,505)
(2,085)
-
(3,492)
-
-
(9,274)
(15,648)
(64,969)
(61,379)
10,068
2,174
771
(504)
8,342
1,012
1,011
(297)
10,068
2,174
771
(504)
8,342
1,012
1,011
(297)
12,509
10,068
12,509
10,068
-
-
-
-
-
-
-
-
25,635
23,700
21,089
21,000
(18,136)
(16,454)
31,200
25,635
(487)
2,085
1,187
2,785
(2,085)
-
1,598
(487)
(487)
2,085
1,187
2,785
(2,085)
-
1,598
(487)
1
2
3
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.
The general reserve comprises the profit on sale of forfeited ESP shares ($2.8 million) where the shares were sold via an off market transfer with the proceeds
being received by the Company. 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.
$2.1m had previously been recognised in the general reserve in relation to a fair value adjustment for contingent consideration on the acquisition of Matrix
Planning Solutions Limited. During the year the contingency period ended with the consideration (ClearView Wealth Limited Shares held in Trust) being
released to the beneficiaries of the Trust. Subsequent to this, the general reserve was transferred to retained earnings.
CLEARVIEW WEALTH LIMITED | 111
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
13. Sources of profit (ClearView Life Assurance Limited)
Components of profit related to movements in life insurance
liabilities
Planned profit margins released
Profit arising from 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
Profit for ClearView Life Assurance Limited
14. Earnings per share
Earnings per share (cents)
Basic earnings (cents)
Diluted earnings (cents)
Basic earnings per share
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
24,816
3,835
21,683
4,187
(5,913)
(4,182)
2,441
25,179
(2,739)
18,949
2,623
2,623
2,812
2,812
27,828
21,735
1
13
27,829
21,748
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated
2018
2017
4.33
4.14
2.20
2.11
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as
follows:
Profit for the year attributable to owners of the Company ($'000)
Earnings used in the calculation of basic earnings per share ($'000)
26,596
26,596
13,150
13,150
Weighted average number of ordinary shares for the purpose of basic earnings per share ('000's)
614,309
597,808
Diluted earnings per share
The earnings used in the calculation of diluted earnings per share are as follows:
Profit for the year attributable to owners of the Company ($'000)
Earnings used in the calculation of total diluted earnings per share
26,596
26,596
13,150
13,150
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)
614,309
597,808
28,414
25,550
642,723
623,358
112 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 15. Cash and cash equivalents
Cash at bank
Total cash and cash equivalents
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
Company
2018
$’000
2017
$’000
176,363
222,197
176,363
222,197
2018
$’000
8,047
8,047
2017
$’000
5,880
5,880
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
-
-
412,359
377,159
303,467
262,428
545,055
433,603
-
-
-
-
848,522
696,031
412,359
377,159
483,205
393,339
448,086
357,944
876,544
806,030
-
-
332,126
311,988
332,126
311,988
-
-
-
-
-
-
-
-
-
-
-
-
2,057,192
1,814,049
412,359
377,159
Consolidated
2018
$’000
391
6,148
(956)
2,512
2017
$’000
392
3,909
(800)
2,036
917
10,317
6,643
4,050
-
8,638
10,736
4,009
43,088
3,622
3,298
-
4,530
8,612
2,031
Company
2017
$’000
2018
$’000
-
-
-
-
-
-
31
6,464
7,719
3,468
-
-
-
-
-
-
-
30
6,472
3,774
3,409
4
37,947
17,682
13,689
$7.8 million (2017: $5.6 million) of Total consolidated receivables are expected to be recovered more than 12 months from the
reporting date and $0.01 million (2017: $3.4 million) of Total receivables for the Company are expected to be recovered more
than 12 months from the reporting date.
CLEARVIEW WEALTH LIMITED | 113
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
18. Fixed interest deposits
Fixed interest term deposits
Consolidated
Company
2018
$’000
2017
$’000
98,685
78,327
2018
$’000
-
2017
$’000
-
Fixed interest term deposits, held at year end, yield an average fixed interest rate of 2.39% (2017: 2.37%)
19. Goodwill
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
Gross carrying amount
Balance at the beginning of the financial year
20,452
19,952
Additional amount recognised through acquisition of business1
-
500
Balance at the end of the financial year
20,452
20,452
Net book value
Balance at the beginning of the financial year
Balance at the end of the financial year
20,452
20,452
19,952
20,452
-
-
-
-
-
-
-
-
-
-
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
2018, no impairment was required to the carrying value of goodwill. Further details have been provided in Note 4.
114 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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
16,923
1,500
54,775
20. Intangible assets
2018
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
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
30,683
1,500
65,017
10,263
40,946
-
-
1,500
65,017
5,711
22,634
-
1,500
4,044
58,819
13,760
18,312
-
-
10,242
6,198
23,611
1,500
63,317
7,072
30,683
-
1,500
1,700
65,017
$’000
$’000
$’000
$’000
$’000
$’000
20
-
20
20
-
20
-
-
200
-
97,420
10,263
200
107,683
-
-
-
73,218
9,755
82,973
200
200
24,202
24,710
20
-
20
20
-
20
-
-
200
-
200
-
-
-
88,648
8,772
97,420
60,220
12,998
73,218
200
200
28,428
24,202
Balance at the beginning of the year
12,115
1,500
46,585
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
4,808
16,923
-
1,500
8,190
54,775
11,496
13,760
-
-
16,732
10,242
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 WEALTH LIMITED | 115
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 21. Property, plant and equipment
2018
Gross carrying amount
Balance at the beginning of the financial
year
Additions
Transfers
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
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
Office
furniture
Office
equipment
Computer
hardware
Leasehold
improvements
$’000
$’000
$’000
$’000
Consolidated
Total
$’000
449
123
-
572
435
36
471
101
81
8
-
89
51
16
67
22
1,534
3,724
5,788
159
-
1,693
136
(24)
3,836
426
(24)
6,190
1,302
2,575
4,363
171
1,473
454
3,029
677
5,040
220
807
1,150
$’000
$’000
$’000
$’000
$’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
No property, plant and equipment is held by the Company.
116 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 22. Payables
Trade payables
Reinsurance premium payable
Employee entitlements
Life insurance premiums in advance
Life investment premium deposits
Lease incentive in advance
Payables to controlled entities
Outstanding investment settlements
Other creditors
Total payables
Consolidated
Company
2018
$’000
4,881
2017
$’000
5,180
15,162
12,127
5,021
672
856
847
-
6,962
566
2,298
1,194
2018
$’000
197
-
6
-
-
-
-
9,035
2,766
11,239
901
343
-
3
31,106
39,909
9,241
2017
$’000
292
-
10
-
-
-
-
-
50
352
$1.6 million (2017: $0.9 million) of Total consolidated payables are expected to be settled more than 12 months from the
reporting date and nil (2017: nil) of total payables of the Company are expected to be settled more than 12 months from the
reporting date.
CLEARVIEW WEALTH LIMITED | 117
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 23. Provisions
Current and non current
Make good provision
Employee leave provisions
Provision for restructuring
Provision for remediation
Other provisions
Total
Make good provision1
Balance at the beginning of the financial year
Additional provisions raised
Utilised during the period
Unutilised provisions transferred
Balance at the end of the financial year
Employee leave provision2
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
374
4,342
-
1,815
103
6,634
419
136
(49)
(132)
374
419
3,849
1,408
1,623
1,161
8,460
270
149
-
-
419
-
-
-
-
26
26
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18
18
(10)
-
26
-
-
-
-
18
18
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26
24
(10)
(22)
18
Balance at the beginning of the financial year
3,849
3,540
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
Unutilised provisions transferred
Balance at the end of the financial year
Provision for remediation4
Balance at the beginning of the financial year
Additional provisions raised
Utilised during the period
Balance at the end of the financial year
Other provisions5
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
1,093
(600)
4,342
1,407
-
(1,172)
-
-
1,623
576
(385)
1,815
1,161
95
(1,153)
-
103
890
(581)
3,849
20
1,834
(447)
-
1,407
-
1,623
-
1,623
1,385
24
(248)
-
1,161
1
2
3
4
5
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.
The provision for remediation relates to the direct remediation program, remaining compensation and consulting costs as at 30 June 2018.
Other provisions related 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 wealth platform.
118 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 24. Deferred tax balances
Deferred tax assets
Deferred tax liabilities
Deferred tax assets
The balance comprises temporary differences attributable to:
Accruals not currently deductible
Depreciable and amortisable assets
Provisions not currently deductible
Unrealised losses carried forward
Capital business expense
Rental lease incentives
Share trust funding costs
Deferred tax asset
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Unrealised gains on investments
Prepaid expenses
Fees not delivered
Research and Development Capitalised assets
Deferred tax liability
Consolidated
Company
2018
$’000
10,979
(2,924)
2017
$’000
10,509
(1,819)
2018
$’000
179
(1,042)
2017
$’000
310
(591)
519
1,606
3,195
4,825
139
132
563
440
15
4,329
5,265
267
193
-
40
-
-
-
43
-
-
-
139
267
-
-
-
-
10,979
10,509
179
310
396
526
960
1,042
2,924
512
1,307
-
-
1,819
-
-
-
1,042
1,042
-
-
-
591
591
Consolidated
2018
Gross deferred tax liabilities
Gross deferred tax assets
Total
2017
Gross deferred tax liabilities
Gross deferred tax assets
Total
2018
Gross deferred tax liabilities
Gross deferred tax assets
Total
2017
Gross deferred tax liabilities
Gross deferred tax assets
Total
Opening
balance
$’000
(1,819)
10,509
8,690
(996)
10,801
9,805
$’000
(591)
310
(281)
-
573
573
Transfers
from
subsidiaries
$’000
Sharehold-
er Equity
$’000
-
-
-
-
-
-
-
294
294
-
-
-
$’000
$’000
-
-
-
-
-
-
-
-
-
-
-
-
(Charge)/
Credit to
income
$’000
(1,105)
176
(929)
(823)
(292)
(1,115)
$’000
(451)
(131)
(582)
(591)
(263)
(854)
Closing
balance
$’000
(2,924)
10,979
8,055
(1,819)
10,509
8,690
Company
$’000
(1,042)
179
(863)
(591)
310
(281)
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 $41 million (tax effected
$10.6 million) consolidated and $32.6 million (tax effected $9.8 million) for the Company. Refer to Note 11 for further details.
CLEARVIEW WEALTH LIMITED | 119
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 25 Policy liabilities
(a) Reconciliation of movements in policy liabilities
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
Life investment policy liabilities
Opening gross life investment policy liabilities
Net increase in life investment policy liabilities reflected in the
income statement
1,177,290
1,152,554
72,041
100,419
Decrease in life investment policy liabilities due to management fee
reflected in the income statement
(22,150)
(22,503)
Life investment policy contributions recognised in policy liabilities
269,366
175,231
Life investment policy withdrawals recognised in policy liabilities
(296,766)
(228,411)
Closing gross life investment policy liabilities
1,198,780
1,177,290
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
(207,632)
(203,830)
27,750
18,077
(17,234)
(21,879)
(197,116)
(207,632)
1,001,664
969,658
(15,338)
(18,300)
(4,599)
703
(15,871)
(170)
(38,243)
(15,338)
963,421
954,320
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 $59.4 million (2017: $65.5 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
2018
$’000
350,316
449,010
2017
$’000
292,852
353,242
(1,384,891)
(1,201,508)
(585,565)
(555,414)
350,205
332,444
(235,360)
(222,970)
Company
2017
$’000
2018
$’000
-
-
-
-
-
-
-
-
-
-
-
-
(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.
120 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
26. Issued capital
2018
2018
2017
No. of Shares
$’000
No. of Shares
Company
2017
$’000
Issued and fully paid ordinary shares
Balance at the beginning of the financial year
603,266,050
421,717
597,429,600
417,850
Dividend Reinvestment Plan
Dividend Reinvestment Plan Costs
Dividend costs
Entitlement offer costs related to prior year
8,789,480
12,217
-
-
-
(36)
-
-
-
-
-
-
-
-
(3)
(12)
Shares issued during the year (ESP vested/forfeited)
7,203,482
4,391
5,836,450
3,882
Balance at the end of the financial year
619,259,012
438,289
603,266,050
421,717
Executive share plan
Balance at the beginning of the year
Shares granted under employee share plan (note 27)
Shares forfeited during the year
Shares exercised during the year
Balance at the end of the financial year
56,207,077
-
(2,521,437)
(4,682,045)
49,003,595
-
-
-
-
-
60,743,527
1,300,000
(3,693,143)
(2,143,307)
56,207,077
-
-
-
-
-
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.
27. Share based payments
Executive Share Plan
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:
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.
•
•
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
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:
CLEARVIEW WEALTH LIMITED | 121
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 27. Share based payments continued
•
•
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
• 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
122 | CLEARVIEW ANNUAL REPORT 2018
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.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
27. Share based payments continued
•
“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.
Long Term Incentive Plan
Since October 2017, ClearView operates the ClearView Long
Term Incentive Plan (LTIP). The LTIP underpins the Group’s
strategy of rewarding performance and retaining its key
talent.
Offer and consideration
Under the LTIP, the Board may invite Eligible Employees to
participate in an offer of performance rights in ClearView
(Awards). Each Award represents a right to receive one
ordinary share in the capital of the Company (Share) or to
receive a cash payment equal to the value of one ordinary
share, subject to the rules of the LTIP Plan (LTIP Rules) and
the terms and conditions which an Eligible Employee is invited
to participate in the Plan (Invitation).
Vesting and exercise conditions
The Awards are divided into two equal tranches. Each tranche
is subject to separate vesting conditions. The rights will vest
on the earlier of 30 June 2019 (“Vesting Date”) and the
2nd anniversary of the Offer Date (i.e. 6 October 2019) only
where the Eligible Employees Recipient (Recipient) remains
employed by the Company and the vesting conditions are
satisfied.
The Awards are not subject to any Exercise Conditions. A
Recipient will be able to exercise their vested Awards, in
accordance with the LTIP Rules upon receiving a vesting
notice.
Settlement mechanism
Upon exercise the Board will determine whether the Awards
will be Equity Settled and/or Cash Settled.
If an Award is to be Equity Settled, the Company will arrange
for the Recipient to receive the requisite number of shares.
If an Award is to be Cash Settled, the Recipient will receive a
cash payment equal to:
•
•
the volume weighted average share price (VWAP) at which
the Company’s Shares were traded on the ASX in the 90
days up to and including the day on which the Award
is validly exercised, or as otherwise determined by the
Board (acting reasonably); or
if the cash payment is calculated at a time of a Change
of Control Event, the price per share paid by the entity
acquiring the Company under the Change of Control
Event, or such other higher amount as otherwise
determined by the Board (acting reasonably).
Change of control and expiry date
On the occurrence of a ‘Change of Control Event’ (as defined
in the LTIP Rules, which includes when a bona fide takeover
bid is made to the holders of Shares), the Board may in its
absolute discretion determine (having regard to various
factors) the manner in which any or all of the Recipient’s
Award to be dealt with.
The expiry date of the Award is the fifth (5th) anniversary of
the Grant Date of the Award.
Employee share trust (EST)
The Board may elect to use on such terms and conditions
as determined by the Board in its absolute discretion an
employee share trust for the purposes of holding Shares
before or after the exercise of an Award or delivering any
shares under these Rules. Under an employee share trust
structure, the trustee of the employee share trust would be
registered as the legal owner of the shares but the recipient
would be the beneficial owner.
Administration of the LTIP and EST
The LTIP and EST (where used) is administrated by the Board.
The Board may make rules and regulations for its operation
that are consistent with the rules of the LTIP.
The Company pays all costs and expenses of operating the
LTIP and EST (where used) as well as the funding for the EST
(where used). Employees are liable for any brokerage and tax
payable associated with their participation in the Awards.
CLEARVIEW WEALTH LIMITED | 123
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 27. Share based payments continued
Termination of the LTIP
The Board may resolve at any time to terminate, suspend,
or reinstate the operation of the LTIP.
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
Issue price
at grant
date
$
Expiry
date9
Fair value
at grant
date (pre
modifica-
tion1)
$
Fair value
at grant
date (post
modifica-
tion1)
$
Series
Series 66
30/06/2008 KMP
500,000
30/06/2008
30/06/2013
Series 72,6
29/09/2009 KMP and SM
2,600,000
29/09/2009
29/09/2014
Series 103,6
25/06/2010 MD
2,000,000
25/06/2010
26/03/2015
Series 114,6
25/06/2010 MD
4,000,000
25/06/2010
26/03/2015
Series 125,6
25/06/2010 MD
4,000,000
25/06/2010
26/03/2015
Series 155,6
18/08/2011 SM
2,000,000
1/07/2011
1/07/2015
Series 165,6
Series 175,6
Series 186
Series 196
Series 206
Series 216
Series 226
Series 236
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
2,900,000
1/09/2011
1/09/2016
150,000
1/03/2012
1/03/2017
2,500,000
10/02/2012
10/02/2017
600,000
15/03/2012
15/03/2017
700,000
3/04/2012
3/04/2017
2,325,000
7/05/2012
7/05/2017
1,000,000
29/06/2012
29/06/2017
4,600,000
6/08/2012
6/08/2017
Series 245,6
22/08/2012 SM
300,000
22/08/2012
22/08/2017
Series 256
21/12/2012 CP
1,300,000
21/12/2012
21/12/2017
Series 266,7
16/04/2013 SM
2,575,000
12/04/2013
Series 276
16/04/2013 SM
75,000
12/04/2013
50% Change
in Control;
50% 1 year
after
1 year post
Change in
Control
Series 28
Series 29
Series 30
Series 31
16/04/2013 CP
31/05/2013 CP
27/06/2013 CP
14/10/2013 SM
566,667
12/04/2013
12/04/2018
1,700,000
31/05/2013
31/05/2018
1,625,666
27/06/2013
27/06/2018
275,000
14/10/2013
Change in
Control
1 year post
Change in
Control
Change in
Control
1 year post
Change in
Control
Series 32
14/10/2013 SM
275,000
14/10/2013
Series 35
31/01/2014 SM
75,000
31/01/2014
Series 36
31/01/2014 SM
75,000
31/01/2014
124 | CLEARVIEW ANNUAL REPORT 2018
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
0.65
0.65
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
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
0.20
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 27. Share based payments continued
Issue Date
Type of
Arrangement8
Number Grant date
Issue price
at grant
date
$
Expiry
date9
Fair value
at grant
date (pre
modifica-
tion1)
$
Fair value
at grant
date (post
modifica-
tion1)
$
Series
Series 37
Series 38
Series 39
Series 40
Series 41
Series 42
Series 43
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
656,334
30/05/2014
30/05/2018
656,334
30/05/2014
30/05/2019
656,333
30/05/2014
30/05/2020
1,950,000
30/05/2014
30/05/2019
4,560,760
9/07/2014
8/07/2019
26/11/2014 SM including KMP
181,518
26/11/2014
25/11/2018
26/11/2014 SM including KMP
2,594,886
26/11/2014
25/11/2019
and CP
26/11/2014 SM including KMP
181,518
26/11/2014
25/11/2020
30/03/2015 SM including KMP
141,667
30/03/2015
30/03/2019
30/03/2015 SM including KMP
141,667
30/03/2015
30/03/2020
30/03/2015 CP
1,550,000
30/03/2015
30/03/2020
30/03/2015 SM including KMP
141,667
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
25,773
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
602,032
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
20/06/216 SM including KMP
79,601
20/06/2016
20/06/2021
14/06/2017 CP
1,300,000
14/06/2017
14/06/2022
0.65
0.75
0.75
0.75
0.75
0.79
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
na
na
0.17
0.17
0.19
0.22
0.19
0.17
0.19
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.
9
Expiry date represents either the relevant vesting or holding lock period.
CLEARVIEW WEALTH LIMITED | 125
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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)
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
126 | CLEARVIEW ANNUAL REPORT 2018
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 35
Series 36
0.64
0.64
36.90
5.00
0.61
0.61
22.20
5.00
0.61
0.61
22.20
6.00
0.65
0.65
22.01
5.00
0.65
0.65
22.01
6.00
Series 37
Series 38
Series 39
Series 40
Series 41
0.65
0.65
22.01
5.00
0.75
0.75
21.12
4.00
0.75
0.75
21.12
5.00
0.75
0.75
21.12
6.00
0.75
0.75
21.12
5.00
Series 42
Series 43
Series 44
Series 45
Series 46
0.79
0.79
16.78
5.00
1.01
1.01
19.79
4.00
1.01
1.01
21.56
5.00
1.01
1.01
24.18
6.00
1.00
1.00
20.84
4.00
Series 47
Series 48
Series 49
Series 50a
Series 50b
1.00
1.00
20.84
5.00
1.00
1.00
20.84
6.00
0.97
0.97
20.15
5.00
0.97
0.97
20.15
4.00
0.97
0.97
20.15
5.00
Series 50c
Series 51a
Series 51b
Series 52
Series 53
0.97
0.97
20.15
6.00
0.96
0.96
20.03
5.00
0.96
0.96
20.03
6.00
0.93
0.93
20.31
5.00
0.93
0.93
20.31
5.00
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 27. Share based payments continued
Inputs into the model
Grant date share price ($)
Anticipated vesting price ($)
Expected volatility (%)
Anticipated option life (years)
Series 54
Series 55
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
Exercised during the year
Balance at the end of the financial year
2018
2017
Weighted
average exercise
price
Number of
shares
Weighted
average exercise
price
0.61
60,743,527
-
1,300,000
1.39
0.53
0.57
(3,693,143)
(2,143,307)
56,207,077
0.64
1.38
1.32
0.82
0.61
Number of
shares
56,207,077
-
(2,521,437)
(4,682,045)
49,003,595
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
As at the date of this report, ClearView has a total of 49,003,595 ESP shares on issue of which 23,522,207 have been issued to
select financial advisers. No new shares were granted to financial advisers in the year ended 30 June 2018.
During the financial year, 4,682,045 vested ESP shares were exercised with the outstanding ESP loan balance proceeds being
received by the Company. During the financial year, the forfeited 2,521,437 ESP 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 Condi-
tions
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
Nil1
Nil1
Nil2
Nil2
Nil2,4
Nil4
Nil4
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
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
CLEARVIEW WEALTH LIMITED | 127
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 27. Share-based payments continued
Series
Vesting Conditions
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
Performance Condi-
tions
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1
2
3
Change of control provision was triggered on 23 October 2009 by GPG increasing its shareholding above 50%.
In accordance with Mr Swanson’s employment contract, Mr Swanson is entitled to a long term incentive comprising 10 million Shares in accordance with the
ESP, and vesting progressively over three years from the commencement date of his contract as follows:
Series 10: 2 million shares at an issue price of 50 cents vesting on 26 March 2011 (vested);
Series 11: 4 million shares at an issue price of 58 cents vesting on 26 March 2012 (vested); and
Series 12: 4 million shares at an issue price of 65 cents vesting on 26 September 2012 (vested) on change of control of ClearView.
The Shares issued to Mr Swanson have vested progressively each year as outlined above.
Special condition relating to shares issued to KMP in Series 26: 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%.
128 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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 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
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.
CLEARVIEW WEALTH LIMITED | 129
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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
11/09/2017
11/09/2017
11/09/2017
11/09/2017
11/09/2017
11/09/2017
11/09/2017
11/09/2017
11/09/2017
11/09/2017
11/09/2017
11/09/2017
Total
Number of share cancelled
148,515
371,665
55,476
317,633
500,000
164,075
40,982
50,503
537,975
64,937
202,423
67,253
2,521,437
Cancelled from
Series 43, 44, 45
Series 29
Series 37
Series 37
Series 41
Series 41
Series 42
Series 42
Series 42
Series 42
Series 42
Series 42
Shares that were exercised during the year
The following table shows the shares that were exercised due to the vesting conditions being met.
Date
9/08/2017
28/08/2017
11/09/2017
10/11/2017
25/01/2018
26/03/2018
4/05/2018
7/05/2018
7/06/2018
Total
LTIP Awards
Number of share exercised
Exercised from
500,000
300,000
259,530
2,000,000
90,820
33,855
1,000,000
297,840
200,000
4,682,045
Series 23
Series 23
Series 23
Series 23
Series 25
Series 25
Series 22
Series 19
Series 23
The following LTIP Awards were in existence at the end of the current reporting period:
Tranche Issue Date
Number
Grant date
Vesting date
Vesting conditions
Fair value at
grant date
1A
1B
2A
2B
6 October 2017
1,432,143 20 October 2017
30 June 2019
Embedded Value (EV) target
$1.38
6 October 2017
1,432,143 20 October 2017
30 June 2019
Total shareholder return
(TSR) performance
$0.03
4 April 2018
4 April 2018
44,643
44,643
4 April 2018
30 June 2019
Embedded Value (EV) target
$1.38
4 April 2018
30 June 2019
Total shareholder return
(TSR) performance
$0.03
130 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 28. Shares granted under the executive share plan
In accordance with the provisions of the ESP, as at 30 June 2018, key management, members of the senior management
team, the managing director and contractor participants have acquired 49,003,595 (2017: 56,207,077) ordinary shares.
Shares granted under the ESP carry rights to dividends and voting rights. Financial assistance amounting to $32,270,871
(2017: $36,780,762) 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.
29. Dividends
Dividend payments on Ordinary shares
2017 final dividend (2017: 2016 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
2018
$’000
Per share
2017
$’000
Per share
2.75
2.75
18,136
18,136
2.50
2.50
16,454
16,454
2018 final dividend (2017: 2017 final dividend) (cps)
3.00
20,048
2.75
18,136
Dividend franking account
Amount of franking credit available for use in subsequent
financial years
29,520
27,610
1
2
The impact on the dividend franking account for the final dividend declared is expected to reduce the franking account by $8.6 million (2017: $7.8 million).
There are no other income tax consequences for dividends not recognised in the statement of financial position.
The total 2018 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 2019 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 2018 of $20.05 million
(2017: $18.14 million).
CLEARVIEW WEALTH LIMITED | 131
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 30. Reconciliation of net profit for the year to net cash flows from
operating activities
Net profit/(loss) for the year
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
26,596
13,150
22,195
17,508
Fair value gains on financial assets at fair value through profit and
loss
(41,194)
(62,432)
-
-
-
-
2,174
1,012
-
-
10,432
2,174
23
-
13,637
1,012
(306)
-
(23,700)
(21,000)
(49,681)
(32,041)
(1,826)
55,733
3,035
44,593
-
-
-
(5,685)
(17,563)
5,163
635
(9,474)
9,101
7,623
4,457
1,115
4,761
4,893
1,164
(24,982)
131
249
-
7,622
13,834
-
-
-
2,306
263
(579)
-
1,164
674
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
Net cash (utilised)/generated by operating activities
132 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 31. Subsidiaries
Name of Entity
Parent entity
Principal Activity
Parent
Entity
Country of
incorporation
2018
%
2017
%
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
Controlled unit trusts
International Fixed Interest Fund
Fund of Funds Australian Equity Fund
Bond Fund
Fund of Funds International Equity Fund
Property Fund
Money Market Fund
Infrastructure Fund
Emerging Markets Fund
(Previously CVW Platinum International Shares
Fund) CVW Antipodes Global Fund
CVW Hyperion Australian Shares Fund
CVW Vanguard Listed International Infrastructure
Fund
CVW Vanguard Emerging Markets Fund
CVW Plato Australian Shares Fund
(Previously CVW MFS International Shares Fund)
CVW Stewart Investors Worldwide Sustainability
Fund
Advice Company
Non operating
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
CLAL
CWL
CWL
CWL
CFA
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
95
42
56
93
67
70
50
49
21
94
99
99
77
21
100
100
100
100
100
100
100
100
96
47
58
93
51
72
56
56
30
92
99
98
77
21
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 WEALTH LIMITED | 133
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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 57 to 74 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
2018
2017
4,311,997
4,843,740
365,488
1,054,307
389,144
176,233
5,731,792
5,409,117
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 became interest bearing from 30 November 2017 at 3 month 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 2018 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.
134 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 2018
ClearView
Wealth Limited
ClearView Life
Assurance
Limited
ClearView
Financial
Management
Limited
ClearView
Financial Advice
Pty Limited
Matrix Planning
Solutions
Limited
ClearView
Administration
Services Pty
Limited
ClearView Life
Nominees
Pty Limited
32. Related party transactions continued
Outstanding balances between the Group and its related parties
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i
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$
- (3,757,852)
1,089,188
604,816 (278,190)
(242,824)
14,567 7,718,520
- 5,148,224
3,757,853
-
(239,290)
(637,743)
9,220 (4,338,103)
-
-
- (1,448,063)
(1,089,188)
239,290
-
(36,002)
-
(327,725)
231,459
-
916,510
(65,656)
(604,816)
637,743
36,002
278,190
(9,220)
-
-
-
- (1,207,563)
-
(335,579)
242,824
4,338,103
327,725
1,207,563
335,579
(14,567)
-
(231,459)
ClearView
(7,718,520)
-
-
Retirement Plan
CFML Managed
Investment
Schemes
-
-
(916,510)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- (1,138,634)
-
(66,609)
- 6,451,794
-
(246,026)
- (7,718,520)
-
(916,510)
-
-
-
-
(5,148,224) 1,448,063
65,656 1,138,634
66,609 (6,451,794)
246,026 7,718,520
916,510
-
CLEARVIEW WEALTH LIMITED | 135
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
32. Related party transactions continued
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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
177,057
(992,035)
634,285
66,280
211,021
(7,358)
-
-
7
(7)
(1,027,033)
-
(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)
2017
ClearView
Wealth Limited
ClearView Life
Assurance
Limited
ClearView
Financial
Management
Limited
ClearView
Financial Advice
Pty Limited
Matrix Planning
Solutions
Limited
ClearView
Administration
Services Pty
Limited
ClearView Life
Nominees
Pty Limited
ClearView
Retirement Plan
CFML Managed
Investment
Schemes
(10,246,556)
8,885,946
(177,057)
1,318,510
293,773
(4,776,495)
171,642
3,773,887
756,350
-
(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.
136 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
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.
(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 3 year facility was put in
place in July 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 2018, 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.
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
2018
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
2017
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
303,467
-
-
483,205
1,270,520
-
1,573,987
483,205
262,428
-
-
448,086
1,103,535
-
1,365,963
448,086
-
-
-
-
-
-
-
-
303,467
483,205
1,270,520
2,057,192
262,428
448,086
1,103,535
1,814,049
CLEARVIEW WEALTH LIMITED | 137
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 33. Financial instruments continued
Financial Liabilities
2018
Life investment policy liability
Total
2017
Life investment policy liability
Total
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
-
-
-
-
1,198,780
1,198,780
1,177,290
1,177,290
-
-
-
-
1,198,780
1,198,780
1,177,290
1,177,290
(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
Total
Financial liabilities
Policyholder liabilities
Payables
Current tax liabilities
Provisions
Total
Consolidated
Company
2018
$’000
2017
$’000
2018
$’000
2017
$’000
-
-
412,359
377,159
176,363
222,197
8,047
5,880
98,685
78,327
2,057,194
1,814,049
-
-
-
-
43,088
37,947
17,682
13,689
2,375,330
2,152,520
438,088
396,728
963,421
954,320
31,106
39,909
8,145
6,634
523
8,460
-
9,241
8,145
26
1,009,306
1,003,212
17,412
-
352
523
18
893
(f) Financial risk management objectives
The primary asset risks borne by the Company relate to the financial assets of the Company and its operating subsidiaries
excluding those in the non-guaranteed investment linked funds in ClearView Life’s statutory fund No.4 (referred to below as
ClearView assets). The primary financial risks related to the financial assets in the non-guaranteed investment linked funds
in ClearView Life’s statutory fund No.4 are borne by policyholders as the investment performance on those assets is passed
through, in full, to the policyholders (referred to below as Policyholder assets). Nonetheless, the Company has a secondary
exposure to the Policyholder assets and off-balance sheet client funds, via the impact on the fees charged by the Company
which vary with the level of Policyholder and client funds under management and under administration, as well as related
reputational exposure.
138 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 33. Financial instruments continued
(g) Market risk
(h) Credit risk
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.
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 2018,
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.
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 WEALTH LIMITED | 139
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 33. Financial instruments continued
The following table reflects the shareholder financial assets with credit risk exposure monitored by the CIC
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
169,406
156,319
169,406
156,319
8,047
8,047
5,880
5,880
holdings at call and an appropriate overdraft facility.
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
$38.2 million (2017: $15.3 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
140 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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.
2018
Receivables
Outstanding life insurance premiums net of
provision
Accrued dividends
Investment income and distribution income
Loans
Prepayments
Related party receivables
Total
2017
Receivables
Outstanding life insurance premiums net of
provision
Accrued dividends
Investment income and distribution income
Loans
Prepayments
Related party receivables
Total
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Consolidated
Over
5 years
$’000
-
-
-
-
Total
$’000
11,042
5,194
2,514
917
$’000
1,770
$’000
1,185
2
-
-
-
-
-
$’000
7,645
5,167
2,514
917
442
2,169
917
$’000
442
25
-
-
172
671
-
4,019
5,498
604
10,735
748
-
462
7,719
14,864
-
-
4,050
8,636
604
43,088
19,771
1,310
6,539
5,152
3,078
2,036
10,317
1,234
1,910
756
692
25
-
-
80
834
-
24,483
1,631
432
6
-
-
38
-
-
-
1,450
5,579
554
3,774
6,216
-
-
5,617
-
-
-
-
-
-
-
-
6,314
3,109
2,036
10,317
8,343
3,298
4,530
37,947
Company
2018
Trade receivables
Amounts from controlled/associated entities
Loan receivables
Related party receivables
Total
2017
Trade receivables
Amounts from controlled/associated entities
Loan receivables
Related party receivables
Total
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
$’000
$’000
$’000
$’000
6
6,464
-
-
6,470
19
6,472
-
-
6,491
5
-
-
-
5
15
-
-
-
15
8
-
-
3,468
3,476
-
-
-
3,774
3,774
13
-
7,719
-
7,732
-
-
3,409
-
3,409
-
-
-
-
-
-
-
-
-
-
Total
$’000
32
6,464
7,719
3,468
17,683
34
6,472
3,409
3,774
13,689
CLEARVIEW WEALTH LIMITED | 141
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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
2018
Payables
Current tax liabilities
Provisions
Reinsurance payable1
Total
2017
Payables
Current tax liabilities
Provisions
Reinsurance payable1
Total
2018
Payables
Current tax liabilities
Provisions
Total
2017
Payables
Current tax liabilities
Provisions
Total
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
85
-
963
-
$’000
486
8,146
1,883
-
$’000
570
-
$’000
1,487
-
1,685
1,149
-
-
10,515
2,255
2,636
1,048
153
523
1,204
-
321
-
784
-
830
-
84
-
2,895
2,070
-
-
1,518
1,091
5,025
2,154
$’000
13,315
-
954
15,162
29,431
26,394
-
1,507
12,127
39,104
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
7,843
-
-
7,843
352
-
-
352
$’000
81
8,146
26
8,253
-
523
18
541
$’000
1,316
-
-
1,316
-
-
-
-
$’000
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
15,943
8,146
6,634
15,162
45,885
27,782
523
8,460
12,127
48,892
Company
Total
$’000
9,241
8,146
26
17,413
352
523
18
893
1
Reinsurance payable represents reinsurance premium payable on reinsurance due in respect of life insurance premium.
142 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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
2018
$’000
2017
$’000
Fair value
hierarchy
Valuation techniques and key
inputs
Equity Securities
303,467
262,428
Level 1
Fixed Interest Securities
483,205
448,086
Level 2
Unit Trusts
Total
1,270,519
1,103,535
Level 1
2,057,191 1,814,049
(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
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
1,598
1,598
-
-
2,000
2,000
-
-
60,000
50,000
-
-
-
-
-
-
-
-
-
-
As at the reporting date the Company had a $60 million facility agreement with the National Bank Australia.
This facility was unused and available for immediate use. Interest on the loan accrued at BBSY plus a margin of 0.67% per
annum, and was payable monthly. Furthermore, a line fee of 0.65% 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.
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 2018. There is
an additional $0.25 million credit card facility with National Australia Bank in the name of ClearView Administration Services
Pty Limited.
CLEARVIEW WEALTH LIMITED | 143
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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.
2018
Financial assets
Variable interest rate instruments:
Cash and cash equivalents
Fixed interest securities
Total
2017
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
0.61
2.39
0.62
2.37
70,723
98,683
169,406
77,992
78,327
156,319
0.60
-
0.62
-
8,047
-
8,047
5,880
-
5,880
Interest rate sensitivity analysis for floating rate financial instruments
The sensitivity analysis below has 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% (2017: 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.
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
2018
$’000
+537
2017
$’000
±496
2018
$’000
+537
2017
$’000
±496
2018
$’000
+28
2017
$’000
±21
2018
$’000
±28
2017
$’000
±21
±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.
144 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
33. Financial instruments continued
(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.
34. Disaggregated information by fund
Abbreviated income statement
2018
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 life investment policy liabilities
Change in reinsurers’ share of life insurance 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
-
-
-
12
-
12
-
-
-
-
-
-
12
(11)
214,905
(56,696)
-
2,293
-
160,502
(94,161)
61,244
17,185
266
(45)
15
5
-
241
-
-
49
-
-
22,135
54,977
11,333
88,445
-
-
-
215,171
(56,741)
22,150
57,287
11,333
249,200
(94,161)
61,244
17,234
-
(7,705)
(64,336)
(72,041)
4,829
(113,424)
36,175
(10,983)
(230)
(36)
(7,681)
8,272
-
4,599
(19,804)
(133,264)
4,305
(2,260)
32,811
(4,982)
1
25,192
591
2,045
27,829
CLEARVIEW WEALTH LIMITED | 145
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 34. Disaggregated information by fund continued
Abbreviated statement of financial position
2018
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
3,450
$’000
$’000
$’000
$’000
-
433
1,198,109
1,201,992
Australian Non-Participating
Policy liabilities ceded under reinsurance
-
38,243
-
-
38,243
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
3,129
6,579
-
-
2,747
2,747
3,832
163,446
201,689
(197,116)
(904)
13,992
179,663
(471)
1,212,101
1,419,898
-
-
(197,116)
-
383
1,198,397
1,198,780
25,557
(2,075)
2,691
28,920
(171,559)
(1,692)
1,201,088
1,030,584
373,248
1,221
11,013
389,314
(48,293)
193,256
1
-
(20,000)
(68,293)
72,125
25,192
3,400
-
221,848
151,400
3,832
373,248
2,267
591
8,931
2,045
156,161
27,829
(1,837)
(1,563)
-
-
1,021
200
1,221
-
(20,000)
9,413
1,600
163,989
225,325
11,013
389,314
146 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 34. Disaggregated information by fund continued
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
CLEARVIEW WEALTH LIMITED | 147
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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
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
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
148 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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 Antipodes Global Fund
(Previously 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 Stewart Investors Worldwide Sustainability Fund
(Previously CVW MFS International Shares Fund)
Total
36. Leases
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Total
Lease committments relate to:
Consolidated
2018
Consolidated
2017
Type
$’000
%
$’000
%
Debt
Equities
Debt
Equities
Property
Debt
Property
Equities
Equities
Equities
Property
Equities
Equities
Equities
19,741
112,758
356,281
96,536
21,465
222,097
146,017
90,883
31,656
17,736
14,701
10,520
44,284
13,867
95.45
42.36
55.70
92.99
66.51
70.19
50.29
48.72
21.08
93.72
99.00
98.70
77.49
20.70
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
1,198,542
1,176,277
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
Consolidated
2018
$’000
2,168
2,606
4,337
2017
$’000
2,007
3,356
5,363
Company
2017
$’000
-
-
-
2018
$’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.
In respect of non-cancellable operating leases the following liabilities have been recognised:
Make good provision (note 23)
Current
Non-current
Total
Consolidated
2018
$’000
2017
$’000
2018
$’000
Company
2017
$’000
100
274
374
109
310
419
-
-
-
-
-
-
CLEARVIEW WEALTH LIMITED | 149
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED) 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.
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.
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
less than the cost to the Group. Due to the uncertainty
of these circumstances arising no value can be reliably
placed on the contingent liability.
The Company in the ordinary course of business has
guaranteed the obligations of one of its subsidiaries
in respect of its obligations for leasehold premises.
The Company has guaranteed the obligations of one
of its subsidiaries in respect of employee entitlements
of employees who were previously employed by MBF
Holding Pty Limited (Bupa Australia).
The Group has contractual agreements with a limited number
of advisers to purchase the adviser’s business should the
Other than the above, the Directors are not aware of any
other contingent liabilities in the Group at the year end.
38. Capital commitments
The Group has committed to the following capital commitments subsequent to the year end.
Technology projects
Total
Consolidated
Company
2018
$’000
5,526
5,526
2017
$’000
385
385
2018
$’000
-
-
2017
$’000
-
-
39. Guarantees
The facility entered into with the National Australia Bank is guaranteed jointly and severally by:
• 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 guarantees are supported by collateral (in the form of the shares) of the entities.
40. Subsequent events
Dividends
On 22 August 2018, the Group proposed a final dividend of $20.05 million representing 3.00 cents per share fully
franked. The record date for determining entitlement to the dividend is 12 September 2018 and the dividend will be
paid on 28 September 2018. Since the dividend has not been declared at year end it has not been recognised as payable
in these accounts.
The Directors are not aware of any other matter or circumstance not otherwise dealt with in this report or the financial
statements that has significantly, or may significantly; affect the operations of the Group, the results of those operations
or the state of the affairs of the Group in future financial years.
150 | CLEARVIEW ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
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
22 August 2018
CLEARVIEW WEALTH LIMITED | 151
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (CONTINUED)
Independent Auditor’s Report
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 2018, 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 2018 and of their financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
Basis for Opinion
those standards are
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under
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
in
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.
152 | CLEARVIEW ANNUAL REPORT 2018
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
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 2018 the Group’s life
insurance policy liabilities are $(197.1)
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
components
the policy
liabilities;
Margin
of
Allowances for discretions; and
Quality of data used for the
valuation.
Valuation of Intangibles
As at 30 June 2018 the Groups
carrying amount of intangible assets
and goodwill was $45.2 million as
disclosed in note 4. The intangible
assets are allocated to three cash-
generating units (CGUs) which are
tested separately for impairment.
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;
reviewing the reasonableness of the
year’s changes
reserves and
analysis of profit conducted by
management;
in
• 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 WEALTH LIMITED | 153
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
The Entity performs an Embedded
Value (EV) calculation to support its
impairment analysis.
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,
discount
rates,
maintenance costs; and
Wealth management
and
financial planning
intangible:
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
the model
historical
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
its
indicators and
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; 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 2018,
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.
154 | CLEARVIEW ANNUAL REPORT 2018
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
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.
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.
CLEARVIEW WEALTH LIMITED | 155
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
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 57 to 74 of the Directors’
Report for the year ended 30 June 2018.
In our opinion, the Remuneration Report of ClearView Wealth Limited, for the year ended
30 June 2018, 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, 22 August 2018
156 | CLEARVIEW ANNUAL REPORT 2018
Shareholders’ Information
As at 3 August 2018
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
257,900,632
65,091,098
99,326,068
38.6%
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 38.6% 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 August 2018)
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
CCP Trusco 4 Pty Limited
Citicorp Nominees Pty Limited
CCP Bidco Pty Limited
CCP Bidco Pty Ltd
CCP Trusco 5 Pty Limited
CCP Trusco 1 Pty Limited
BNP Paribas Noms Pty Ltd
Portfolio Services Pty Ltd
J P Morgan Nominees Australia Limited
CCP Trusco 3 Pty Limited
CCP Trusco 2 Pty Limited
National Nominees Limited
Portfolio Services Pty Ltd
Mr Simon Swanson
Salamanca Group Trust (Switzerland) SA
Wintol Pty Ltd
Australian Foundation Investment Company Limited
Avanteos Investment Limited
No. of shares
as per notice
% of issued
capital
144,905,579
21.68%
65,091,098
42,327,004
33,681,012
32,848,053
30,899,994
30,035,374
27,668,287
21,900,002
18,300,838
17,925,239
15,810,448
13,175,374
11,036,385
10,304,057
10,000,000
8,235,295
6,302,827
5,704,350
4,639,019
9.74%
6.34%
5.04%
4.92%
4.62%
4.49%
4.14%
3.25%
2.74%
2.68%
2.37%
1.97%
1.65%
1.54%
1.50%
1.23%
0.94%
0.85%
0.69%
CLEARVIEW WEALTH LIMITED | 157
SHAREHOLDERS’ INFORMATION AS AT AUGUST 2018 (CONTINUED)
Ordinary share capital
There are 668,262,607 fully paid ordinary shares held by 1,815 shareholders. All the shares carry one vote per share.
Distribution of shareholders
The distribution of Shareholders as at 31 July 2018 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 $1.10 per unit
Shares under voluntary escrow
There are no shares subject to voluntary escrow as at 30 June 2018.
Total holders
320
441
280
547
227
Units
109,478
1,283,457
2,135,680
17,847,234
646,886,758
1815
668,262,607
% of issued
capital
0.02
0.19
0.32
2.67
96.80
100
Minimum
parcel size
455
Holders
200
Units
16,117
158 | CLEARVIEW ANNUAL REPORT 2018
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)
David Brown
Gary Burg
Michael Alscher
(Alternate to Mr Thomson)
Nathanial Thomson
Satoshi Wakuya
Susan Young
Simon Swanson
Managing Director
Simon Swanson
Joint Company
Secretaries
Athol Chiert
Elizabeth Briggs
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 | 159
ClearView Wealth Limited
ABN 83 106 248 248
www.clearview.com.au
ASX code CVW
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