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2 | CLEARVIEW ANNUAL REPORT 2020
CLEARVIEW WEALTH LIMITED | 3
ContentsSection PageChairman’s address 2Managing Director’s report 4Directors’ report 6Operating and financial review 12Operating segment review 27Remuneration report 50Auditor’s independence declaration 71Financial report 72Directors’ declaration 160Independent auditor’s report 161Shareholders’ information 167Directory 169Financial calendarAnnual General Meeting12 November 2020Half year end31 December 2020Half year result announcement21 February 2021Year end30 June 2021Annual ReportAugust 2021Dates are subject to change. Chairman’s
address
Geoff Black
To our customers and shareholders:
This is my inaugural Chairman’s letter and I am pleased to
provide an update on the Group’s performance for the year
ended 30 June 2020 and share some reasons why I am excited
about serving you and working closely with the ClearView
Board and Senior Management Team to help guide this
dynamic company through the challenging period ahead.
There is no question that these are extraordinary times.
The COVID-19 health, economic and social crisis has
fundamentally changed how we live, work and interact.
Since March, the majority of ClearView staff have been working
from home continuing to serve our customers effectively. The
ease and speed at which the organisation was able to transition
to a remote working environment is a testament to the resilience
of staff and the Group’s robust systems and processes.
COVID-19 response
Thousands of Australians are experiencing financial and
emotional hardship at this time, including many of our
customers and their families.
I am proud that ClearView acted quickly and decisively
from the onset of COVID-19 to support our customers by
implementing a range of generous, practical measures. These
include:
1.
2.
3.
4.
Allowing LifeSolutions policyholders to waive monthly
premiums for up to three months, due to financial hardship
caused by involuntary unemployment.
Enabling policyholders to put all or part of their cover on
hold for up to 12 months, without having to go through the
underwriting process again to reinstate cover.
Ensuring healthcare workers are not prevented from
accessing life insurance (in accordance with the Financial
Services Council’s Frontline Healthcare Worker initiative).
Paying out $8.8 million to over 900 superannuation
members through the COVID-19 economic response early
release of superannuation program to date since the
program started in April 2020.
5.
Diligently adhering to our policy of not applying specific
exclusions for claims arising from a pandemic event.
2 | CLEARVIEW ANNUAL REPORT 2020
These measures have been well received, with a good number
of policyholders accessing these options.
While ClearView has felt the economic impact of COVID-19,
the full medium-to-long-term impact is unclear. Clearly the
pressures on household budgets and mental illness associated
with these stresses will impact future performance and the
business has been proactive in addressing these issues through
increased customer and adviser engagement.
Why ClearView?
Given my background and broad financial services experience,
I have a deep knowledge and understanding of life insurance,
wealth management and financial advice.
Financial matters such as wealth creation, retirement planning
and life insurance can be complex and, while ClearView is working
hard to simplify products and service, consumer access to high
quality professional advice is critical.
I decided to join the ClearView Board and subsequently take on
the role of Chairman because I believe ClearView is a dynamic,
purpose-driven company, that is in a position to meet customer
expectations in respect to their wealth creation, financial
protection and financial advice needs.
ClearView is in a unique position to seize opportunities created
by regulatory and structural change. It is not hindered by
bureaucracy and legacy, and can play a key role in leading the
industry through this challenging period.
With some major banks and institutions exiting wealth
management, there is a clear path to the many aspirational
Australian households that need professional financial advice to
protect and manage their wealth.
They need sound advice to understand financial principles
and navigate their way through complex legislation, financial
strategies and products.
ClearView is committed to partnering with advisers to see more
Australians receive quality advice; protect, grow and manage their
wealth; and ultimately achieve their goals.
In the unfortunate event of accident, injury, sickness or premature
death, ClearView exists to pay claim entitlements.
CHAIRMAN’S ADDRESS
In FY20, ClearView provided $95.7 million in claim entitlements to
customers and their families. We were there for them when they
needed us.
In FY20, ClearView continued to invest in governance and risk
management, adding resources that strengthen its capability and
expertise, under the Group’s new Chief Risk Officer.
Difficult market conditions
The financial services industry continues to grapple with major
challenges including unprecedented regulatory and structural
change and severe underperformance, due largely to escalating
income protection (IP) claims.
While ClearView remains well-positioned to meet its obligations
to staff, customers and other stakeholders, the Group’s financial
performance has been adversely impacted by rising claims and
reinsurance costs.
Against this industry backdrop, ClearView has taken steps to
reset the business with a focus on long-term sustainability. This
has unfortunately necessitated quite significant pricing changes
to existing IP policies, as we transition to a new sustainable
product suite. In March, the Group launched an innovative
Indemnity 60 IP option designed as a more affordable
alternative to the existing indemnity products in the market.
To date, this has been well received by advisers.
ClearView continues to invest in its infrastructure and, during the
year, a number of critical IT projects commenced including the
implementation of a new life policy administration platform. This
platform is a key foundation to delivering high quality products
supported by best-in-market customer service.
ClearView has made good progress improving its adviser
footprint through its LaVista and Matrix brands. With the
challenges facing advisers, ClearView is well positioned due to
the depth of its experience.
FY21 will be a transitional year for ClearView, as it seeks to
consolidate its infrastructure and deliver fit-for-purpose products
that meet customer expectations and generate sustainable
returns for shareholders.
In coming months, the business will unveil a simplified mission
statement, with a sharper focus on serving the customer;
refreshed corporate values and a reinvigorated Group strategy.
Corporate governance
The need for financial services companies to build consumer
confidence and trust in the sector has never been greater.
A priority for the Board is to ensure that ClearView’s stated values
are upheld to foster a strong, customer-centric culture.
In order to do so, ClearView must maintain a sharp focus on
corporate governance and ensure the right policies, processes and
frameworks are in place.
In response to the increasing regulatory focus on governance,
culture, remuneration and accountability, the Board and
management are committed to enhancing the Group’s risk
management framework to ensure robust practices, and drive
changes in the mindsets and behaviours of all staff to embed a
sound risk culture across the organisation.
Capital management and dividends
In light of the adverse impact due to COVID-19, challenging
market conditions, and APRA supervisory guidance, no FY20
dividend has been declared. APRA has also asked that life
insurers consider limiting discretionary capital distributions in the
coming months given these conditions.
Furthermore, ClearView does not intend to undergo any on-
market share buy-back activity in the current environment. One
of the Board’s key priorities is prudent capital management.
The decision not to declare a FY20 dividend is understandably
disappointing, especially given that no FY19 dividend was paid.
From a Group perspective, capital requirements are driven
by the need to strengthen our position in uncertain times.
Consequently, part of the Tier 2 capital raising that is being
actively investigated will be used to repay debt and provide
capital management flexibility.
I am pleased that since the onset of COVID-19, ClearView has
managed to successfully retain its people and at the same time
started to invest for the future.
However, ClearView will not pay staff bonuses for the 2019/20
Financial Year.
Acknowledgments
On behalf of the Board, I would to like thank Bruce Edwards for
his dedication and contribution to ClearView during his tenure as
Chairman. His insights will be missed and we wish him well in his
retirement.
At the same time, it is an honour to welcome Jennifer Lyon to
the ClearView Board as an Independent Non-executive Director.
Jennifer is a respected, experienced actuary, entrepreneur and
Director, who adds a new voice and perspective.
Since its inception, ClearView has strived to foster a diverse and
inclusive workplace. In FY20, the Group continued to progress
towards this goal, lifting the number of women on the Senior
Management Team to three, up from two in 2019. It also
reported that 48% of managers across the business are female.
Furthermore, ClearView now offers 16 weeks of paid parental
leave and 10% of non-manager employees work part-time.
Finally, I would like to acknowledge Simon and his team for their
ongoing dedication and commitment.
Together, I look forward to taking the business forward and
working through the challenges and opportunities on the road
ahead.
Geoff Black
Chairman
CLEARVIEW WEALTH LIMITED | 3
Managing
Director’s report
Simon Swanson
ClearView is well-positioned to meet its obligations to its customers,
staff and shareholders, with a strong balance sheet and recurring
revenue base, and a clear vision and strategy to become a leading
diversified financial services company.
Despite extremely difficult market conditions, compounded
by COVID-19, ClearView continued to invest in technology,
governance and risk management; support its aligned financial
advisers; and expand its IFA relationships, in the year ending 30
June 2020.
While ClearView remains profitable, we are not immune to the
challenges facing the broader industry. The life insurance sector is
under enormous pressure, due to a myriad of factors including rising
claims and lapses, large reinsurance cost increases and record low
interest rates.
In the year ending 31 March 2020, the life insurance industry risk
products lost $1.65 billion, largely attributable to a $1.4 billion loss
on income protection (IP). This extended five-year industry IP losses
to nearly $3 billion.
The group’s flagship LifeSolutions product was added to 60
Approved Product Lists (APLs), boosting the number of financial
planning groups that can recommend ClearView to 592, up 11%
from the previous financial year, meaning that over 4,000 financial
advisers can recommend ClearView products and services.
Our Wealth Management solutions are currently on 49 APLs, with
a strong pipeline of potential advice groups. In addition, there is
the opportunity to tap ClearView’s life insurance relationships.
While Life Insurance remains the group’s key profit driver,
ClearView is also focused on accelerating the development of its
Wealth Management business, and building out a self-sustaining
Financial Advice business. We see an opportunity to meet rising
demand for simple, effective superannuation and investment
solutions that not only satisfy the evolving needs of consumers but
drive practice efficiencies for financial advisers.
Our goal is to bridge the space between industry funds, which
generally offer lower fees and limited features, and wrap
platforms, which offer extensive product choice and functionality
for higher fees.
We want to own that middle ground by delivering fit-for-purpose
wealth management solutions and a superior customer and
financial adviser experience, without unnecessary complexity
and cost.
Our focus is on partnering with financial advisers to serve
Australia’s growing aspirational middle class.
Clear direction, amidst challenging
conditions
ClearView’s FY20 result was adversely impacted by a deterioration
in life insurance claims, particularly income protection (IP) and
lump sum death claims, and included material changes to claim
assumptions.
This reinforces the importance of APRA’s IDII sustainability
measures to stem losses and improve industry sustainability.
ClearView is supportive of APRA’s intervention and we are
undertaking a body of work to address fundamental issues with
the design and pricing of IDII products, and ensure the profitable,
sustainable long-term growth of our Life Insurance business.
As part of this, ClearView made an early decision to cease the sale
of Agreed Value IP contracts in mid-March and moved swiftly to
launch a simplified Indemnity 60 IP option, as a cost effective
alternative to the existing indemnity payment type.
A comprehensive review of the LifeSolutions series is underway
and work has commenced on optimising IP claims management
including rehabilitation and return-to-work outcomes.
As a relatively young and nimble organisation, ClearView has acted
decisively to address challenges presented by both deteriorating
industry profitability and COVID-19.
In April, we faced some criticism for responding too quickly when
we announced changes to LifeSolutions pricing. We are now seeing
steep premium rate changes across the industry.
While being the first-to-market is an advantage in most
circumstances, when it comes to price increases, there is a risk of
first mover disadvantage. We weighed up that risk, and shifted our
focus to policy retention to manage price changes and COVID-19
impacts, including providing alternatives to customers to improve
premium affordability. We believe we acted responsibly to reprice for
sustainability because the industry cannot continue on its current
trajectory.
That said, with the rapid onset of the COVID-19 pandemic - and the
subsequent economic and social upheaval - our size and distinct
lack of legacy enabled us to adjust our plans and proactively
respond by, for example, capping certain IP price rises, in light of the
operating environment.
4 | CLEARVIEW ANNUAL REPORT 2020
MANAGING DIRECTOR’S REPORT
We also implemented a range of COVID-19 measures, including a
three-month premium waiver, to support customers experiencing
severe financial hardship to keep valuable cover in place.
These two measures alone cost the business $1.3 million (after tax).
Encouragingly, in the second half of 2019/20, the business
experienced a significant improvement in lapse performance,
reflecting the implementation of retention strategies.
As at 30 June 2020, ClearView also adopted material changes to
claim assumptions, in expectation of an increase in IP claims, due
to a likely increase in the incidence of mental health type claims
off the back of COVID-19 and the potential difficulty of helping
claimants return to work.
These changes, in particular to IP claim termination rates,
adversely impacted our FY20 result by -$5.9 million.
These unexpected, short-term costs are the practical implication
of being a client-centric, purpose-driven organisation.
There is a very human side to COVID-19 to which ClearView is
sensitive. Part of the strengthening of reserves speaks specifically
to the potential longer-term impacts of the COVID-19 pandemic
on Australians in terms of financial stress and economic
dislocation, mental health and, tragically, even suicide. We of
course hope this does not eventuate. We have worked to ensure
our teams have both the capability and capacity to manage the
complexity of these issues in an effective and empathetic manner.
Our steadfast commitment is to support our customers and pay
claim entitlements as quickly as possible. Similarly, we remain
focused on supporting our staff through this pandemic.
Being able to keep our teams together, without the need to cut
salaries or make redundancies, has been personally rewarding.
Importantly, it will see ClearView emerge from this crisis intact
and strongly positioned to capitalise on opportunities borne out
of regulatory and structural change, demographic shifts and
disruption.
The exit of the institutions from life insurance, wealth
management and personal advice creates enormous
opportunities for ClearView.
In the short-term, life insurance sales are expected to plateau,
with consumers on edge over a potential secondary COVID-19
wave plus shifting industry dynamics such as changes to adviser
remuneration, tougher education and training requirements, and
shrinking financial adviser numbers.
However, over the long-term, as we continue to do the things we
do exceptionally well: simple, transparent products; strong advice
relationships; and excellent customer and adviser service, we will
be rewarded.
FY21 is expected to be a transitional year for ClearView.
Progress is underway on key IT projects including the
development of a new policy administration system and
underwriting rules engine. The business is also maintaining a
sharp focus on governance and risk culture, as we implement key
recommendations from the Royal Commission and other reforms
including design and distribution obligations (DDO).
On behalf of financial advisers, ClearView will continue to pursue
sensible public policy that strengthens consumer protections.
Our three key advocacy priorities remain stable life insurance
commission rates; tax deductibility of advice fees; and the end
of limited life insurance APLs so all advisers can choose the most
appropriate life insurance solutions for their clients.
ClearView supports the Australian Securities and Investments
Commission’s (ASIC) recent decision to delay commencing
its review of life insurance advice, under the Life Insurance
Framework (LIF).
Irrespective of COVID-19, we believe it is still too soon to review
the effectiveness of the LIF reforms, given it will take some time
for their impact to be apparent. Any review should examine
the contribution that recent regulation has made to Australia’s
underinsurance problem. Low increases to in-force premium
portfolios across the industry suggest that the gap between the
level of cover people need and the level of cover they have is fast
becoming a chasm, given that CPI and aged-based price increases
should boost the value of inforce portfolios (all things being equal).
Furthermore, any review should only take place after the noise
from COVID-19 has fully dissipated.
Reflecting on the past year, COVID-19 has shown us the incredible
resilience of the financial services industry, and its people, backing
up just 18 months after the conclusion of the Royal Commission.
Since March, the vast majority of ClearView staff have been
working effectively from home while financial advisers can now
deliver advice remotely.
Trends that we once thought would take years, like the
widespread adoption of video conferencing technology, have
happened in months.
COVID-19 has also highlighted the importance of professional
advice, evidenced by the 2.6 million workers who withdrew over
$42 billion from their super, under the Government’s Coronavirus
early release scheme.
Many of these people will have withdrawn funds at the worst
possible time, locking in market losses, and leaving themselves
exposed to poor retirement outcomes.
As an organisation that is passionate about making professional
advice accessible to more Australians, ClearView’s focus is on
achieving profitable, sustainable growth and being around for the
long-term for our staff, customers and financial advisers.
I would like to thank the ClearView team for their contribution,
during this difficult financial year. I would also like to acknowledge
our financial advice partners who work tirelessly to help their
clients access COVID-19 government support benefits, make
smart informed decisions, and stay on course towards their goals
and objectives.
Thank you for your ongoing support.
Simon Swanson
Managing Director
CLEARVIEW WEALTH LIMITED | 5
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 2020 (the financial year):
Directors
The following persons were Directors of ClearView
during the financial year and since the end of
the financial year unless otherwise noted:
Current directors
The biographies for the Directors of ClearView are
detailed below.
Geoff Black (Appointed as Director on 25 November
2019 and appointed Chairman on 1 July 2020)
Geoff Black BCom
•
•
•
Bruce Edwards (Former Chairman -
Resigned as Director on 1 July 2020)
David Brown (Resigned as Director
on 25 November 2019)
• Gary Burg
• Michael Alscher
• Nathanial Thomson
•
•
•
Jennifer Lyon (Appointed as Director on 1 July 2020)
Simon Swanson (Managing Director)
Susan Young
6 | CLEARVIEW ANNUAL REPORT 2020
Independent non-executive Chairman
Geoff has over 30 years’ experience in life insurance
and wealth management and is currently a director
of Platypus Asset Management and was Head of
Business Development at RGA Australia from 2015
until April 2019. Prior to joining RGA Australia, he
held senior executive positions at TAL Australia and
was formerly Managing Director of PrefSure Life
and Lumley Life Limited. Geoff holds a Bachelor
of Commerce from the University of Canterbury,
Graduate Diplomas in Management and Financial
Planning and is a Certified Practicing Accountant.
Geoff was appointed to the Board on 25 November
2019 and appointed as Chairman of the Board on 1
July 2020. Geoff is also a member of the Board Audit
Committee, Board Risk and Compliance Committee
and the Nomination and Remuneration Committee.
DIRECTORS’ REPORT Gary Burg B.ACC (Wits), MBA (Wits)
Michael Alscher BCom
Independent non-executive Director
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, 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,
Director of Intega Group Limited, Australian Clinical
Laboratories Pty Limited, 24-7Healthcare 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 Metro Performance Glass Limited.
Since 22 October 2012 Michael has served as
a Non-Executive Director and as an Alternate
Director to Nathanial Thomson at different times,
with the most recent appointment as Non-
Executive Director being effective 20 November
2018. Michael currently serves as a member of
the Nomination and Remuneration Committee.
Nathanial Thomson BCom (Hons), LLB (Hons)
Jennifer Lyon BSc (Maths) (Hons), FIAA, GAICD
Non-executive Director
Independent 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, 24-7 Healthcare Pty Limited
and Australian Clinical Laboratories Pty Limited.
Nathanial was appointed to the Board on 22
October 2012, currently serves as a member of
the Nomination and Remuneration Committee
and was previously a member of the Board
Audit and Compliance Committee and the
Board Risk and Compliance Committee.
Jennifer is an experienced actuary, small business
owner and Director, and until recently served as a
Director of recruitment firm SKL Executive. Jennifer
has also formerly held a number of senior and
Director positions including non-executive Director
and President of the Actuaries Institute of Australia,
Managing Director of Qed Actuarial, a specialist
actuarial recruitment firm, a Director of Hall &
Lyon which managed the distribution of actuarial
education material, and worked at AMP and Towers
Perrin in superannuation and financial services.
Jennifer has also served on the Board of ClearView’s
Superannuation Trustee Board, ClearView Life Nominees
Pty Ltd since 1 July 2014 (until her appointment,
acted as Chairperson). Jennifer was appointed to
the Board 1 July 2020 and is a member and Chair
of the Board Risk and Compliance Committee, and
a member of the Board Audit Committee, and the
Nomination and Remuneration Committee.
CLEARVIEW WEALTH LIMITED | 7
DIRECTORS’ REPORTDIRECTORS’ REPORT 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 is Governor
of WWF Australia and previously served on the board
of the Westmead Institute for Medical Research.
Susan was appointed to the Board on 14 December
2016 and is a member and Chair of the Board Audit
Committee and Nomination and Remuneration
Committee, and a member and former Chair of the
Board Risk and Compliance Committee. She also
serves as a Non-Executive Director on a number
ClearView subsidiary Boards including on its
superannuation trustee board, and held the position as
its Chairperson from July 2014 until December 2016.
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 from 22 October
2012 until his resignation 25 November 2019.
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 was previously a director of the Australian
Literacy and Numeracy Foundation and
former Chairman of ANZIIF’s Life, Health and
Retirement Income Faculty Advisory Board.
Simon was effectively the founder of ClearView
in its current form and was appointed as
Managing Director on 26 March 2010.
Former 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 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 from 22
October 2012 and was appointed Chairman
of the Board from18 May 2016 until his
resignation effective 1 July 2020.
8 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT Former Company Secretary
Athol Chiert, BCOM, BACC, CA was appointed Chief Financial
Officer on 4 November 2008 and was also the Company
Secretary until 15 November 2019. 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 committee
member on a number of not for profit organisations.
Company Secretary
Judilyn Beaumont, B.Bus, LLB joined ClearView in November
2019 as General Counsel and Company Secretary.
Appointed a Solicitor of NSW in 2001, Judilyn has extensive
legal experience in the financial services industry acquired
across private practice, regulatory and in-house roles. These
roles have encompassed life insurance, superannuation,
financial planning and investments.
From 2013-2019 Judilyn worked in-house at Suncorp,
commencing as Senior Lawyer (Suncorp Life) and most
recently holding the position of Executive Manager Legal
– Insurance and Marketplace Advisory, Finance Legal &
Advice (Suncorp Group). In this role she provided end-to-end
business support, from product development to marketing
and distribution.
Earlier in her career, she was a Senior Associate at Freehills
in their financial services team, a Solicitor at Blake Dawson
Waldron (now Ashurst) and earlier still, a Lawyer at the
Australian Securities and Investment Commission where
she provided advice on a range of matters including large
regulatory investigations, development of regulatory policy
and managed investment schemes.
CLEARVIEW WEALTH LIMITED | 9
DIRECTORS’ REPORTDIRECTORS’ REPORT 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
Gary Burg
Company
UCW Limited
Michael Alscher
Cardno Limited
Intega Group Limited
Period of Directorship
24 March 2016 - current
6 November 2015 – current
20 August 2019 – current
Nathanial Thomson
Cardno Limited
6 November 2015 – 28 January 2016; and
24 May 2016 – current
Meetings of Directors
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended
30 June 2020, 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
10
16
6
16
16
16
-
16
16
10
16
3
16
13
16
-
16
16
4
6
2
6
-
6
-
6
-
4
6
1
6
-
4
-
6
-
5
6
1
6
-
6
-
6
-
5
6
-
6
-
4
-
6
-
5
8
-
8
6
8
-
8
-
5
8
-
8
5
8
-
8
-
Geoff Black1
Bruce Edwards
David Brown2
Gary Burg
Michael Alscher3
Nathanial Thomson
Jennifer Lyon4
Susan Young
Simon Swanson
1
2
Geoff Black was appointed independent non-executive director on 25 November 2019.
David Brown resigned as a director effective 25 November 2019.
3 Michael Alscher was appointed to Nomination and Remuneration Committee on 1 September 2019.
4
Jennifer Lyon was appointed independent non-executive director on 1 July 2020.
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
Geoff Black
Bruce Edwards
David Brown
Gary Burg
Michael Alscher1
Nathanial Thomson1
Jennifer Lyon
Susan Young
Simon Swanson
Fully Paid Ordinary Shares
Executive Share Plan Shares
50,000
617,040
-
10,918,090
-
-
27,212
83,092
5,550,000
-
-
-
-
-
-
-
10,000,000
1 Mr Alscher and Mr Thomson represent the interests of CCP Bidco Pty Limited and its Associates that non-beneficially hold 399,543,860 shares.
10 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT
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 71.
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in
section 2 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 section 2.6 to the financial statements do not compromise the
external auditor’s independence, based on advice received from the Board Audit Committee, for the following reasons:
•
•
All non-audit services comply with the ClearView audit independence policy and have been reviewed and approved to
ensure that they do not impact the integrity and objectivity of the auditor; and
None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct
APES 110 ‘Code of Ethics for Professional Accountants’ issued by the Accounting Professional & Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the
Company, acting as advocate for the Company or jointly sharing economic risks and reward.
Annual Corporate Governance Statement
ClearView is committed to achieving high corporate governance standards. In accordance with the 3rd edition ASX Corporate
Governance Council’s Principles and Recommendations, the Company’s annual Corporate Governance Statement, as approved
by the Board, is published and available on the Company’s website at: www.clearview.com.au/about-clearview/corporate-
governance.
CLEARVIEW WEALTH LIMITED | 11
DIRECTORS’ REPORTDIRECTORS’ REPORT Operating and financial review
ClearView Wealth Limited (ClearView or the Company) is an
APRA-registered non-operating holding company (NOHC) of
regulated wholly-owned subsidiaries that offer life insurance,
superannuation, investments and financial advice.
The subsidiaries of the ClearView Group hold a number of
licences enabling them to operate across three core business
segments:
•
•
•
Life Insurance: ClearView Life Assurance Limited (CLAL)
manufactures ClearView products under a retail life
insurance Australian Financial Services (AFS) licence.
CLAL’s LifeSolutions product is its single, contemporary
product series for retail customers that is only available
through financial advisers;
Wealth Management: ClearView Financial Management
Limited (CFML),ClearView Life Nominees Pty Limited
and CLAL manufactures wealth management products
(managed investments and superannuation) under
AFS licensees and a registrable superannuation entity
(RSE) trustee licence. These investment and retirement
solutions are also distributed through financial advisers;
and
Financial Advice: ClearView’s financial advice
subsidiaries are market leading providers of licensing
solutions to financial advisers. These feature two AFS
Licensed dealer groups providing traditional dealer group
licensing support together with the recently launched
LaVista Licensee Solutions which provides outsourced
B2B licensee services to other AFS Licensees.
This capability and licence structure enabling the Group to
operate across all three segments is now relatively unique in
the Australian market.
Strategy
The growth of Australia’s non-bank financial services sector
is underpinned by favourable, long-term fundamentals
including:
•
•
•
•
Economic and population growth;
Compulsory superannuation;
Demand for life insurance, wealth management and
financial advice; and
An aging population with significant wealth and risk
management (‘life insurance’ type) needs.
Furthermore, rising household debt-to-income levels
reinforce the need for quality advice and life insurance. The
steady increase in debt levels in Australia has been driven by
stagnant wage growth, easing constraints on bank lending
and the structural decline in the level of nominal interest
rates allowing borrowers to service larger loans.
Australia’s compulsory retirement savings system alongside
lifecycle demands like private school education and home
12 | CLEARVIEW ANNUAL REPORT 2020
deposits is driving demand for wealth management
products and advice.
Retirees need assistance with pension draw-down
management, investment management and allied products
and services such as longevity management and sequencing
risk management.
COVID-19, which is a respiratory illness caused by a new
virus, was declared a world-wide pandemic by the World
Health Organisation in early 2020. COVID-19, as well as
measures to slow the spread of the virus, have since had a
significant impact on global economies and equity, debt and
commodity markets.
Whilst there is relative uncertainty as to how COVID-19 will
unfold, including the social and economic consequences,
the longer term fundamentals and need for the products
across the business segments remains in-tact. The potential
shorter-term impacts and outcomes of COVID-19, including
allowances and assumptions that have been made in
relation to the pandemic are detailed later in the report.
As a diversified financial services group of companies
referred to above, ClearView has three core business
segments:
•
•
•
Life Insurance: Managing risks that can undermine
one’s financial position, security and wealth due to a loss
of income, unexpected costs or out living financial/family
resources;
Wealth Management: Accumulation and preservation of
wealth to achieve personal goals and objectives such as
a comfortable retirement; and
Financial Advice: Critical to most Australians in order to
manage their financial affairs soundly.
Our core strategy is to partner with financial advisers to
help Australians protect and grow their wealth. We are
committed to expanding our distribution footprint by
delivering quality products and exceptional service to
customers. Our key competitive advantage is supported by:
•
•
•
•
Deep relationships with independent financial advisers
(IFAs);
Simplicity of infrastructure and systems relative to the
complexity of competitors;
Demonstrable and differentiated understanding of
financial advice; and
Ability to offer integrated life insurance and wealth
management solutions.
The product strategy is based on simplicity and being easy to
do business with:
•
Offering a sustainable product and pricing with limited
legacy issues. ClearView has already built the first
iteration of the life product of the future in its Simple
IP60 product.
DIRECTORS’ REPORT •
•
A simple Wealth product. Financial advisers face an increased cost to service clients - efficient operations and
strong compliance measures in financial adviser practices is far more valuable than endless investment choices.
WealthFoundations is well positioned to capitalise on the need for financial advisers to drive efficiency.
Future state: a risk and wealth offering, combined sales effort leveraging distribution, and a focus on making product
experience simple and efficient for financial advisers who need to maintain a sharp focus on practice efficiency meeting
customer needs.
FY21 is a base transitional year with a focus on the profitable, sustainable growth of our life insurance business. Key focus areas
for FY21 include customer retention, effective claims management, product design and pricing. This is reflected below:
FY21 key focus areas
Retention
• Build customer loyalty by offering
best sustainable alternatives
• Maintain strong adviser relationships
with aligned view of sustainability
•
•
Increase engagement and strengthen
relationships with customers
Focused on service and enhanced
customer retention initiatives
Claims
Pricing and Product Design
• Pricing changes implemented April 2020
(flows through on policy renewal) –
focus on profitable segments
• Changes to product design and
features – launch of IP60 product
• APRA IDII sustainability measures
including APRA DI action plan
• Build out of WealthFoundations product
and integration into life insurance
Reinsurance and Capital
Building
Customer
Loyalty and
Sustainable
Products
• To best assist customers in their
•
IP incurred claims treaty implemented
time of need
• Optimise resourcing and case management –
IP specialists supported by external partners
•
Implement analytics and early
intervention techniques to improve IP
claims outcomes (return to work)
• System automation and investment to streamline
(enhance and improve) customer experience
• Permanent capital solution under
investigation – Tier 2 Capital
• Reinsurance price changes to
ensure adequate margins earned
across the supply chain
•
IP product redesign in conjunction
with reinsurer
CLEARVIEW WEALTH LIMITED | 13
DIRECTORS’ REPORTDIRECTORS’ REPORT ClearView’s strategy at a glance
Our mission is to deliver effective, sustainable products and services while
being easy to do business with for financial advisers and customers
ClearView Today: Sustainability of
the Life Insurance Business
Focused execution of management plans for:
Retention, claims, pricing, product design,
reinsurance, capital and risk management
Life for Tomorrow: The Path to
the ClearView of the Future
Design, Build and Implement
New Customer Solutions on an
integrated end-to-end PAS*
Customer
Wealth for Tomorrow: Accelerating
Wealth as ClearView’s Growth Engine
Grow the wealth business and
bring diversification and scale
to ClearView of the Future
Financial Advice: Implement Path
to Parity
Grow an independently sustainable and
profitable financial advice business
Governance | Risk | Compliance
People | Culture
Technology
*Policy administration system
14 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT The path to the future
Life Insurance
• Design, Build and Implement New Customer
Solutions on an integrated end-to-end PAS*
• Risk and wealth integrated offer, combined
sales effort leveraging distribution
•
Industry shifts (over time) to rational
competitor pricing, increasing life sales
and sustainable product features; which
• Leads to improvement in underlying
profit margins and return on capital
Financial Advice
• Strategic Advice to middle to
upper income customers
• Best in class systems
• Effective risk management capability
• Strategic advice makes us different
• Effective B2B service offer for those
seeking a ‘stand alone’ position
ClearView
of the Future
Wealth Management
• Operate in the centre between
industry funds and wrap platforms
• Target advisers who write both life
insurance and wealth management
• Simplicity, transparency and efficiency
are the hallmark of our product solutions
• WealthFoundations is well positioned
to capitalise on the need for financial
advisers to drive efficiency
Risk Management
• Our people are at the centre of
our risk management strategy
• Our risk management systems are
designed to deliver sustainable
outperformance for all our
stakeholders be they our customers,
partners, people, financial advisers,
regulators and shareholders
• Our systems and processes are forward
looking to anticipate risks as they emerge
* Policy administration system
Our focus is on developing and embedding a governance and risk management framework with effective risk management
controls that become an enabler for greater company focus, discipline, accountability and performance.
CLEARVIEW WEALTH LIMITED | 15
DIRECTORS’ REPORTDIRECTORS’ REPORT
Regulatory environment and changes
The financial services industry has faced unprecedented regulation, scrutiny and disruption over the past few years. Given the
broader life insurance industry performance (in particular losses on income protection products) and extremely difficult market
conditions, in response, the Australian Prudential Regulation Authority (APRA) has recently intervened to start forcing structural
change.
ClearView is committed to meeting its obligations to all stakeholders including clients, advisers, shareholders and regulators.
In the face of shifting client and regulator expectations, ClearView continues to improve its products, processes and systems
while building out the expertise and capabilities of our people. We are fully supportive of sensible public policy and changes
designed to improve consumer outcomes.
Royal Commission
The Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
(Royal Commission), released on 4 February 2019, contained 76 recommendations (and a range of related observations) which
have significant implications for financial services entities. The proposed recommendations aim to raise the bar on ethical
behaviour and accountability in financial services and rebuild trust in the sector.
The Treasurer has released an ‘Implementation Roadmap’ outlining a timetable for the introduction of legislative reform
addressing the Royal Commission recommendations. Many reforms have been released by Treasury as draft legislation but a
number are now law. ClearView has identified a number of key regulatory matters, which will have an impact on the industry
including:
•
•
•
•
•
•
Design and Distribution Obligations (DDO) and Product Intervention Powers;
Life insurance-related reforms including the application of unfair contract terms to insurance and treating claims handling
and settlement as a financial service;
Superannuation-related legislative reforms including Protecting Your Super, and Putting Members’ Interests First;
Scrutiny on the management of conflicts of interest.
Increased focus on the subjective notion of fairness and ‘community expectations’; and
Advisers are now subject to a Code of Ethics and will need to meet higher educational requirements. This is expected to
result in a certain cohort of advisers leaving the industry.
ClearView continues to push for open life insurance Approved Product Lists (APLs) to give all financial advisers autonomy to
choose the most appropriate solution for their clients based on their personal circumstances, needs and goals. The industry has
made some progress in this area and further progress will lead to substantial benefit for consumers, advisers and ClearView.
16 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT Risk culture and remuneration
Risk management
ClearView’s Risk Management Framework (RMF) enables the Group to develop and implement strategies, policies, and
procedures to manage both financial and non-financial risks, including the governance that enables the Board and
Management’s oversight of these risks. The RMF incorporates the requirements of APRA’s Prudential Standard CPS 220 Risk
Management (CPS 220). The following diagram illustrates the key elements of the RMF:
ClearView Risk Management Framework
Business Strategy
Risk Management Framework (RMF)
Risk Management Strategy
Material Risks
Risk Appetite
Strategic Priorities and trade-offs
k
s
i
R
Governance
Role of the Board and Committees
Resources
3 Lines of defence model
R
i
s
k
Risk Management Process (RMP)
Risk Categories
Policies
Processes
Monitoring
The RMF is supported by three Board-approved documents:
•
•
•
The Risk Appetite Statement (RAS) articulates the material risks that the Group is exposed to and specifies the type and
level of risk ClearView is willing to accept in pursuit of strategic, business and financial objectives, giving consideration to
the interests of members and policyholders. For further detail, see ‘ClearView’s Material Risks’.
The Risk Management Strategy (RMS) describes the Group’s strategy for managing current and emerging material risks,
including an outline of risk management policies and processes and the risk governance structure.
The Group Business Plan identifies and considers the material risks associated with ClearView’s strategic objectives with a
rolling three-year duration.
An Internal Capital Adequacy Assessment Process (ICAAP) is a key element of the RMF. An integrated approach to capital
adequacy and risk management is adopted to ensure ClearView holds adequate levels of capital appropriate to the Group’s risk
profile and risk appetite. This involves risk management practices such as stress testing to understand, manage and quantify
the Group’s risks. The outcomes of these are used to inform risk decisions, set capital buffers and assist in strategic planning.
CLEARVIEW WEALTH LIMITED | 17
DIRECTORS’ REPORTDIRECTORS’ REPORT ClearView has adopted a three lines of defence approach to
risk management whereby all employees are responsible
for identifying and managing risk and operating within the
Group’s risk profile and appetite. The first line of defence
comprises the business units which have ownership of
risks and are responsible for day-to-day risk management
decision-making involving risk identification, assessment,
mitigation, monitoring and management. The second line of
defence is the Group’s Risk and Compliance function which
assists the Board, BRCC and senior management team (SMT)
in the ongoing development and maintenance of the RMF to
ensure that it is appropriate to the Group’s size, business mix
and complexity. The third line of defence is the internal audit
function that provides independent assurance to the Board,
regulators, and other stakeholders on the effectiveness of risk
management, internal controls and governance.
Review of the Risk Management Framework
Risk management is an integral part of the Group’s
management process and the independent risk function plays
an important role in robust business decisions. In support of
this, the Board established a standalone Chief Risk Officer
(CRO) role and ClearView appointed a CRO in October 2019.
In response to the increasing regulatory focus on Governance,
Culture, Remuneration and Accountability, the Board and
management are committed to uplifting the Group’s RMF
to ensure robust risk management practices, that continues
to embed a sound risk culture across the organisation. The
following initiatives are underway to achieve these objectives.
Governance Risk and Culture (GRC) Risk
Transformation Program
Enhancing the Risk Management Framework
Over the past year, the Board has set clear expectations on
the delivery of the GRC Risk Transformation Program that has
been established to enhance the Group’s Risk Management
Framework to ensure it remains robust, fit-for-purpose for the
Group’s size and complexity, as well as supporting its strategy
in delivering balanced and sustainable outcomes for members,
policyholders and investors. This includes incorporating
enhanced risk management practices and anticipating
and responding to regulatory change and regulatory and
community expectations.
A number of key initiatives are in progress including further
investment in the risk and compliance function that oversee
the Group’s financial and non-financial risk management,
and first line risk resources in business areas to strengthen
risk ownership, skills and capabilities across the three lines of
defence. Enhancements have also been made to the Group
Risk Management Strategy and Group Risk Appetite Statement,
with work continuing to operationalise the risk metrics to
foresee potential emerging risks, trends and issues across
the Group’s material risk types and to provide deeper insights
to inform decision-making. Management are taking active
steps to continue to improve the robustness of governance
and reporting of all material financial and non-financial risks.
This includes further investment in risk systems that will
improve risk identification, reporting and data collection to
better understand the root causes of issues, incidents and
complaints.
Having a strong risk culture across the Group
ClearView places high priority on having a culture where
governance, risk management and compliance are integral
to day-to-day management decisions. The Board and
Management recognise the importance of, and the role
they play in, setting and embedding the desired risk culture,
ensuring ClearView’s risk culture is one of accountability,
ownership and constructive challenge and in cascading
the ‘tone from the top’. Assessing and understanding the
drivers of risk culture has been a key priority of the Board
and Management. The Board and Management continue
to progress the development of a sound risk culture
framework, including the methodology to formally and
consistently measure this across the Group. In addition,
progress continues with enhancing the Group Remuneration
Framework to ensure risk-related behaviours and outcomes
are reflected in remuneration outcomes.
ClearView’s material risks
ClearView’s RAS clearly articulates the material risks
that the Group is exposed to and specifies the type and
level of risk ClearView is willing to accept in pursuit of its
strategic, business and financial objectives. The RAS outlines
ClearView’s material risks from a strategic, customer,
business and financial perspective and includes both Financial
and Non-Financial Risks.
18 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT The material risk categories for ClearView are as follows:
Financial Risks
Non-Financial Risks
•
Insurance Management
• Operational
• Sustainability
• Liquidity and Credit
• Capital Management (Including Reinsurance)
•
Investment Management and Market Risk
(Interest Rate, Asset Liability Management)
• Outsourcing and Supplier Management
•
Information Security & Data Management
• Compliance
• Strategic
• Culture and Conduct
• Reputational
• Business Continuity, Disaster
Recovery and Pandemic
• Environmental, Social and Governance
For each material risk, ClearView has set out the following:
•
•
The maximum level of risk (risk tolerance) that it is willing to operate within, expressed as a risk limit and based on its risk
appetite, risk profile and capital strength. Risk tolerances translate risk appetite into operational limits for the day-to-day
management of material risks, where possible.
The process for ensuring that risk tolerances are at an appropriate level, based on an estimate of the impact if risk
tolerance is breached, and the likelihood that each material risk is realised.
The process for monitoring compliance with each risk tolerance and for taking appropriate action if it is breached; and the
timing and process for review of the risk appetite and risk tolerances.
Remuneration
ClearView continues to review its remuneration framework with the intention of aligning it with the BEAR regime (on the basis
it would apply to ClearView). Treasury published a draft proposal known as the Financial Accountability Regime (FAR) in January
2020. The current FAR roadmap has the revised draft emerging around the end of the FY20 financial year. The plan is for the
framework to be applied in two stages. ClearView is also closely monitoring the regulatory guidance and changes recently
issued by APRA.
In the interim, the remuneration framework continues to be developed and changes have been made to senior management
team remuneration structures including deferral arrangements for short- term bonuses (from FY20) and appropriate vesting
arrangements (including deferral mechanisms) for long-term incentives (also for new issues).
CLEARVIEW WEALTH LIMITED | 19
DIRECTORS’ REPORTDIRECTORS’ REPORT FY20 results overview
The world is grappling with unprecedented circumstances
including significant economic, social and health challenges
caused by the COVID-19 pandemic. ClearView is not immune
to these challenges, however, in these difficult times, we are
fortunate to have a sound business model, strong Balance
Sheet and a recurring revenue base that creates a level of
security for our staff, customers, adviser network and other
stakeholders.
ClearView Life’s insurance business key attributes both current
and in relation to COVID-19 include:
•
•
•
Operates in the retail life insurance segment;
Offers risk insurance products that provide 24/7 worldwide
cover without pandemic exclusions;
A diversified customer base (87% of inforce portfolio
written via financial advisers); and
• Does not participate in the group life insurance segment.
The majority of the revenue base is generated from premiums
and fees charged in respect to in-force life insurance
policyholders, funds under management and financial adviser
services and licensing.
In the current environment, ClearView’s relatively strong
Balance Sheet and liquidity position supports its ability
to continue meeting its obligations to policyholders and
customers.
•
•
•
•
•
•
•
Net shareholder cash position of $212 million - shareholder
capital is conservatively invested in the large institutional
Australian banks, with a focus on retaining a strong and
conservative cash position.
The majority of our shareholder capital is not exposed to
mark-to-market movements.
Past policy acquisition costs of $347 million are reflected
on Balance Sheet and this asset converts to cash as future
premiums are collected (subject to lapse risk). This asset is
not counted for regulatory capital purposes under the APRA
capital standards.
Embedded Value (EV) of $643.4 million or 95.3 cents per
share at 30 June 2020. The EV calculation reflects the cash
flow generation from the in-force portfolios.
ClearView Life was recently rated BBB+, Outlook Stable IFS
rating by Fitch.
ClearView Life’s LifeSolutions product range is heavily
reinsured with Swiss Re Life and Heath Australia (Swiss
Re). An incurred claims treaty is now in place to protect
reinsurance recoveries for both lump sum and income
protection claims to manage the counterparty risk.
ClearView has in a place a $60 million Debt Funding Facility,
which had been fully drawn down as at 30 June 2020.
The Facility was recently extended for a further three-year
period, with a new maturity date of 1 April 2024.
20 | CLEARVIEW ANNUAL REPORT 2020
COVID-19 specific responses
ClearView assessed certain stress test scenarios, as part
of its response to managing risk in relation to COVID-19.
The projections included a ‘Base’ (Pre-COVID-19) case,
a ‘Plausible COVID-19’ case (reasonably foreseeable,
conservative scenario), and a ‘Severe COVID-19’ case (severe
scenario).
These scenarios considered business impacts (both capital
and profitability) from COVID-19, including direct COVID-19
claims impacts (based on assumed infection, mortality
and morbidity rates), indirect claims impacts (economic
downturn induced), asset value impacts, adverse impact on
delivery of key projects, reduced sales and elevated lapses,
and premium suspension impacts.
ClearView Life’s regulatory capital position is resilient to each
of these scenarios.
Despite substantial uncertainty in relation to the impacts of
COVID-19 (for example, the impact of the second wave in
Victoria and the removal of government support measures),
based on the current available data and trends in Australia,
the ‘baseline’ view is that it seems unlikely that there will
be a high number of direct COVID-19-related insured death
claims. We note that mortality to date has tended to be
in the older uninsured segment of the population and the
number of cases has been relatively lower in Australia to
this point. As such, the secondary economic impacts appear
to be the key risk areas. This is likely to drive an increase in
claims and lapses in the months ahead.
Given the evolution of the COVID-19 pandemic and the
operating environment, initial scenarios have been updated
as part of the Business Plan process. Four key environmental
factors were considered as part of this process:
•
•
•
•
Economic impacts of the pandemic (recession and
unemployment rates);
Structural changes to ClearView’s distribution channels
and size of the market;
Return of rational pricing and longer term sustainability
of margins (over time) within the life insurance industry
amidst regulatory intervention; and
Increased costs of doing business (reinsurance,
regulatory and compliance costs).
Profitability can be sensitive within each scenario, in
particular to claims and lapse assumptions.
ClearView’s response includes:
•
•
Focus on customer retention (including investment in a
retention team) to manage price changes and COVID-19
impacts by providing alternatives to customers to
improve premium affordability;
New product development, starting with the alternative
Indemnity 60 life product;
DIRECTORS’ REPORT •
•
•
•
•
•
•
Increase claims management resourcing, deeper engagement with claimants and enhancing systems support;
Broaden distribution footprint to enter the larger addressable IFA market;
Simple WealthFoundations product (integrated with life) aimed at IFAs seeking practice efficiency;
Path to parity in Financial Advice to build a commercially sustainable business;
Reprice to profitable segments over time (stay ahead of the curve);
Material changes to the claims assumptions at 30 June 2020, including an allowance for shorter-term overlays to reflect
expected COVID-19 related IP claims (incidence and terminations) and an increase in complex claims; and
Changes to the lapse assumption to allow for shorter-term shock lapse overlays in response to price changes and
secondary economic impacts from COVID-19.
Further details are provided later in the report.
ClearView has successfully implemented its business continuity plan, asking employees to work from home to prioritise their
health and safety. This occurred relatively seamlessly by implementing robust processes to enable staff to operate effectively
and efficiently from home.
ClearView also notes the following initiatives for customers as part of its COVID-19 response:
•
•
•
•
•
No specific exclusions for claims arising from a pandemic event;
Worldwide cover, meaning our customers are covered should something happen outside Australia;
Healthcare workers are not prevented from accessing life insurance (in accordance with the Financial Services Council’s
Frontline Healthcare Worker initiative);
LifeSolutions policies allow monthly premiums to be waived for up to three months, due to financial hardship caused by
involuntary unemployment; and
Policyholders can put all or part of their cover on hold for up to 12 months, without having to go through the underwriting
process again to reinstate cover
The ClearView Crisis Management Team and the Board are meeting regularly to monitor the situation and are well prepared to
take further corrective or remedial actions as required.
CLEARVIEW WEALTH LIMITED | 21
DIRECTORS’ REPORTDIRECTORS’ REPORT Overview of financial result
The ClearView Group achieved the following results for the year ended 30 June 2020.
After Tax Profit by Segment, $M
Life Insurance
Wealth Management
Financial Advice
Listed
Business Unit Underlying NPAT2 Prior to Claims
Assumption Changes
Claims assumption changes
Reported Underlying NPAT2
Policy liability discount rate effect3
Amortisation of acquired intangibles
FY20
$M
16.7
3.6
2.3
FY19
$M
23.8
3.6
1.0
(2.0)
(1.5)
20.6
(5.9)
14.7
2.2
-
26.9
(1.8)
25.1
6.6
(1.2)
Impairments4
(2.6)
(18.9)
%
Change1
2H FY20
$M
1H FY20
$M
%
Change1
(30)%
0%
130%
33%
(23)%
Large
(41)%
Large
Large
Large
Large
Large
8.0
1.9
1.7
8.7
1.7
0.6
(1.3)
(0.7)
(8)%
12%
Large
86%
10.3
(5.9)
4.4
2.6
-
(2.6)
-
(1.2)
3.2
10.3
-
-
Large
10.3
(0.4)
-
-
-
-
(57)%
Large
Large
Large
Large
Large
9.9
Large
(3.8)
(3.8)
-
(1.2)
13.1
4.0
Large
643.4
672.7
(4%)
643.4
669.0
452.7
439.1
3%
452.7
449.4
2.08
2.34
0.62
3.94
235%
(41%)
0.53
0.72
1.55
1.62
(4%)
1%
(66%)
(56%)
Cost out program implementation costs
Other costs5
Reported Profit After Tax
Embedded value6
Net asset value7
Reported diluted EPS (cps)8
Underlying diluted EPS (cps)8
1 % movement, FY19 to FY20; 2H FY20 to 1H FY20; 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 incurred disabled lives claims reserves and costs considered unusual to the Group’s ordinary activities.
3
The policy liability discount rate effect is the result of changes in the long-term discount rates used to determine insurance policy liabilities and the incurred IP disabled lives claims
reserves. The life insurance policy liability (based on AIFRS) and IP incurred disabled lives reserves are discounted using market discount rates that typically vary at each reporting date
and create volatility in the policy liabilities and the disabled lives claims reserves, and consequently, earnings. ClearView reports this volatility separately.
4
Impairments:
FY20 – Impairment to receivables from ClearView Retirement Plan (CRP) due to write down of DTA in CRP from a reduction in accumulated tax losses carried forward ($2.6 million).
FY19 – Impairment related to certain software development costs (obsolete or reduced functionality) ($6 million) and the carrying values of goodwill and client books in the Financial
Advice cash generating unit ($12.9 million).
5
Other Costs:
FY20 - related to costs associated with the HUB24 transaction ($1.2 million). Further costs to be incurred in FY21 as project progresses.
FY19 - related to costs associated with Direct Remediation Program ($0.9 million), Royal Commission costs ($1.5 million) and retention bonus payments paid to key individuals in
September 2018 ($1.4 million).
6
Embedded Value at 4% discount rate margin, including a value for future franking credits, accrued franking credits and Employee Share Plan (ESP) loans. Embedded Value at 30 June
2020 includes various assumption changes. Refer to further detail in the sections that follow.
Net Asset Value as at 30 June 2020 excluding ESP Loans.
Impacted by ESP shares vested/forfeited during the period and changes to the number of ESP shares ‘in the money’ given the changes in ClearView’s share price period on period.
7
8
Underlying NPAT, the Board’s key measure of Group profitability and basis for dividend payment decisions, decreased 41% to
$14.7 million (FY19: $25.1 million) and fully diluted Underlying EPS decreased 41% to 2.34 cps (FY19: 3.94 cps).
Reported NPAT, increased 230% to $13.1 million (FY19: $4.0 million) and reported diluted EPS increased 235% to 2.08 cps
(FY19: 0.62 cps).
The decline in FY20 profitability was predominantly driven by poor underlying claims performance in the life insurance segment
($12.5 million adverse impact) and material changes that were made to claims assumptions in FY20, including an allowance to
reflect an expected increase in COVID-19 related claims ($5.9 million adverse impact).
The result reflects broader industry trends and should be viewed in the context of overall industry performance, amidst
extremely difficult market conditions. For the year ending 31 March 2020, the life insurance industry risk products lost $1.65
22 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT
billion, largely attributable to a $1.4 billion loss on income
protection (IP). This extended five-year industry IP losses to
nearly $3 billion.
COVID-19 is also likely to drive a further increase in IP claims
from the secondary economic impacts of pandemic (and
social and health challenges).
Reconciling items ($M)
(Net of Tax)
Policy liability discount rate effect
Amortisation of acquired intangibles
Impairments
Cost out implementation costs
In response to deteriorating performance across the industry,
the Australian Prudential Regulation Authority (APRA) has
recently intervened to start forcing structural change.
Other costs
Total
FY20
2.2
-
FY19
6.6
(1.2)
(2.6)
(18.9)
-
(1.2)
(1.6)
(3.8)
(3.8)
(21.1)
In light of the recent ClearView claims experience as
noted above, material changes were made to the claims
assumptions at 30 June 2020. The changes in claims
assumptions adversely impacted the incurred claims reserves
and FY20 result as follows:
•
•
•
IP claims termination assumption change (change in
claims basis) (-$3.1 million)
IP COVID-19 termination assumption change (-$1.2
million); and
Incurred but not reported (IBNR) assumption changes (IP
and Lump Sum) (-$1.6 million).
On a like for like basis, excluding the impacts on claims
assumption changes on each reporting period, Underlying
NPAT would have reduced by 23% to $20.6 million (FY19:
$26.9 million).
There was a significant improvement in lapse performance
in 2H FY20, reflecting the implementation of repricing and
customer retention strategies (including distribution initiatives
that were implemented in FY19).
Details of the benefits of expense management in the current
environment (and related government grants) are provided in
the following section.
The impacts on the FY20 result in light of the Group’s
COVID-19 response include the grant of premium waivers for
financial hardship requests and capping of certain IP price
rises (-$1.3 million).
Items that have been identified by the Board as not
representative of underlying business performance are not
included in Underlying NPAT. The determination of these
items was made after consideration of their nature and
materiality and is applied consistently from period-to-period.
Items not included in Underlying NPAT primarily result from
costs relating to major restructuring initiatives, impacts on
policy liability and disabled lives incurred claims reserves
from changes in discount rates, impairments of assets,
amortisation of acquired intangibles and other transactions
outside the ordinary course of business.
The following items impacted the reported NPAT and comprised
the items outlined in the table above:
Policy liability and disabled lives reserves discount rate
effect
The policy liability discount rate effect is the result of changes
in the long-term discount rates used to determine insurance
policy liabilities and the incurred IP disabled lives claims
reserves. The life insurance policy liability (based on AIFRS)
and IP incurred disabled lives reserves are discounted using
market discount rates that typically vary at each reporting
date and create volatility in the policy liabilities and the
disabled lives claims reserves, and consequently, earnings.
ClearView reports this volatility separately.
For policy liability, this 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.
For the incurred IP disabled lives claims reserves, this
represents a change in the claims costs given the discounting
of the incurred claims reserves at market discount rates.
In 2H FY20, ClearView invested in assets including inflation-
linked bonds to duration match this liability (asset/ liability
management). The extent that this investment impacted
earnings with movements in long-term rates has also been
reported below the line to offset the above-mentioned
liability (claims cost) impact from changes in discount rates.
In January 2020, a $29.5 million investment was made, with
a hedge loss of $0.2 million after tax being incurred.
The net impact of the increase in long-term discount rates
over FY20 caused an increase in after-tax reported profit of
+$2.2 million (FY19: +$6.6 million).
Amortisation of acquired intangibles
Amortisation of intangibles (FY19: $1.2 million) is associated
with the acquisition of wealth management and life
insurance businesses from Bupa, and financial advice
businesses, ComCorp and Matrix Planning Solutions. These
are reported separately to remove the non-cash effect of the
write-off of these acquired intangibles.
The reduction in the amortisation between periods is related
to the acquisition of businesses from Bupa given these client
books have now been written off in full. The balance of the
CLEARVIEW WEALTH LIMITED | 23
DIRECTORS’ REPORTDIRECTORS’ REPORT acquired intangibles held in the Financial Advice segment were
fully impaired as part of the impairment testing completed in June
2019.
Impairments
Impairment of carrying value of tax credit asset (FY20
impact)
The ClearView superfund, the ClearView Retirement Plan (CRP)
has recognised a deferred tax asset for tax credits related to
accumulated tax losses carried forward. Pursuant to the funding
arrangement with ClearView Life, the CRP has also recognised
a corresponding liability owed to ClearView Life of the same
amount. These amounts relate to insurance premiums paid by
members via rollover.
As previously communicated, there is currently insufficient taxable
income in the CRP to utilise these tax credits. While strategies to
utilise the carried forward losses in the CRP are well-progressed (a
project as part of the broader wealth strategy), there is a risk this
recovery is delayed or not fully achieved, which could result in an
impairment of the carrying value of the asset.
In FY20, the carried forward assessed losses needed to be
adjusted by the net current pension exempt income (ECPI) and
net of the pension Foreign Income Tax Offset under the Tax Act
prior to determining the carried forward tax losses position. As
such, these assessed losses were reduced with the net impact
being an impairment of the deferred tax asset recognised by
the CRP of $2.6 million (as the losses are no longer considered
recoverable). As a result, the liability owed by the CRP has been
reduced by $2.6 million, and ClearView Life’s receivable is reduced
by the same amount. This has resulted in an impairment of the
receivable from the CRP at 30 June 2020.
The carrying value of the asset within the Group at 30 June 2020
is $15.5 million.
Capitalised software impairment (FY19 impact)
In accordance with the impairment testing requirements under
AASB 136 – Impairment of Assets, and subsequent to the FY19
IT strategy review, the carrying values of ClearView’s capitalised
software were revised.
As a result, certain software development costs were impaired
at 30 June 2019 for obsolete or reduced functionality, or had
their useful life reduced due to changes in the direction of the
information technology strategy. This resulted in a software
impairment of $6.0 million (after tax) at 30 June 2019.
An additional amortisation expense of $1.5 million was also
recognised in FY19 due to the reduced useful life of the existing
software intangibles and associated acceleration of amortisation
(based on a revised intangible asset amortisation policy and the
expected future benefits expected to be received).
The carrying value of capitalised software cost is $6.0 million at 30
June 2020 (FY19: $8.6 million).
24 | CLEARVIEW ANNUAL REPORT 2020
Impairment of acquired Financial Advice client books
and goodwill (FY19 impact)
In accordance with the impairment testing requirements under
AASB 136 – Impairment of Assets, and subsequent to the dealer
group review in FY19, the carrying values of goodwill and client
books in this segment were revised. Goodwill and the client books
were assessed and tested based on a discounted cash flow model
(value-in use). This was prepared assuming a set of assumptions
including the repricing of dealer services fees and the removal of
grandfathered rebates and related revenue streams (over time).
Based on the testing performed, the $7.9 million carrying value
of goodwill and $4.9 million of client books in the Financial Advice
cash generating unit was impaired at 30 June 2019. The total
impairment of both these assets ($12.9 million) was reported as a
cost considered unusual to the group.
Based on impairment testing, the net assets of the Financial
Advice segment are now included in the Embedded Value
calculations, with an overall net reduction of $28.3 million in June
2019 (including previously reported value of franking credits of
$7.7 million) in the Embedded Value at 30 June 2019.
Cost out program implementation costs (FY19 impact)
These relate to the upfront implementation costs associated with
the cost out program in 2H FY19 and includes redundancy costs,
IT transformation costs and an onerous rent provision. These
costs are associated with a major restructuring initiative and are
considered unusual to the ordinary activities.
Costs unusual to ordinary activities
Costs that are considered unusual to ClearView’s ordinary
activities are not reflected as part of Underlying NPAT.
In FY19, these related to costs associated with the Direct
Remediation Program ($0.9 million after tax), Royal Commission
costs ($1.5 million after tax) and retention bonus payments paid
to key individuals in September 2018 ($1.4 million after tax).
In FY20, ClearView incurred a $0.7 million cost in relation to
the settlement of a contractual commitment with a ClearView
Financial Advice practice. Furthermore, on entering into
contractual agreements with financial advisers of ClearView
Financial Advice more broadly, certain client books were
transferred to the relevant financial advisers with payments
being made weekly over a three year period which resulted in the
revenue ($0.8 million) being recognised upfront.
The net impact of the new arrangements entered into therefore
broadly offset each other in FY20. A further amount of $0.3 million
of revenue is likely to be recognised upfront in FY21 on finalisation
of the remaining contracts.
(See Financial Advice result for more information)
DIRECTORS’ REPORT Cost base, technology review and changes
Total cash costs of $79.3 million (FY19: $90.8 million) in FY20 reflect a reduction in cash costs of $11.5 million (-13%). This was
driven by the cost out program implemented in the 2H FY19 and other benefits as outlined below.
The comprehensive IT strategy review that was completed in 2H FY19 assessed the Group’s technology; scoped the future
technology needs of our business; and established a clear development roadmap for a robust, scalable platform that can grow
as the business grows.
ClearView continues to explore the implementation of a new life insurance Policy Administration System (PAS) and
Underwriting Rules Engine (URE), with a proof of concept successfully completed for the PAS in 2H FY20 (formal
implementation assessment and plan now underway) and the selection of a URE provider complete (implementation phase in
progress). The design, build and implementation of new customer solutions on an integrated end-to-end PAS is a key strategic
focus. Further details on the PAS project will be provided as it progresses.
There was a substantial reduction in IT capital expenditure in 2H FY20 (including IT program office related head count). This,
coupled with the impacts of changes to the capitalisation policy in FY19, resulted in a lower quantum of the total costs incurred
that has been capitalised on the Balance Sheet. Operating costs expensed, therefore, reduced by $7.6 million (-9%) to $77.2
million (FY19: $84.8 million), which is reflected in the following chart.
Chart 1: Cash cost expense analysis FY19 vs FY20 cost base
90.8
6.0
7.1
1.6
76.1
(3.3)
(3.2)
(2.5)
(2.1)
0.5
1.2
1.9
79.3
(2.5)
(0.8)
(0.6)
5.0
2.0
2.1
70.2
FY19 PCP
Cash Costs
Staff
Costs
Bonus
Benefit
ESP/
LTIP
Software
Amortisation
Advice
Remediation
IaaS
Upgrade
Cost Overlap
JobKeeper
Travel &
Entertainment
Loan
Impairments
Other
FY20
Cash Costs
Amortisation
Advice remediation
CAPEX
Increase
Decrease
Material cost reductions in FY20 include:
•
•
•
•
Staff and related savings from the cost implementation program across functional and shared services areas (-$3.3
million);
In light of the adverse impact of COVID-19, challenging market conditions and industry performance, no FY20 bonuses are
payable (-$3.2 million);
Reduction in employee share plan and longer term incentive costs in FY20 (-$2.5 million); and
Reduction in software amortisation costs (-$2.1 million).
Partially offset by:
•
Advice remediation costs from ongoing compliance monitoring and file reviews in the Financial Advice business – now
completed (+$0.5 million);
CLEARVIEW WEALTH LIMITED | 25
DIRECTORS’ REPORTDIRECTORS’ REPORT •
Increase in credit loss provisions for ESP loans on Balance Sheet (-$1.2 million) and adviser loans (-$0.7 million); and
• Duplication of costs from the upgrade of core IT infrastructure in FY20 (+$1.2 million).
Work is close to completion on upgrading ClearView’s core IT infrastructure including desktop technology. The company has
consolidated its data centres and is transitioning suppliers, which will deliver a more robust and effective IT infrastructure as a
service.
As the managed services costs associated with the new Infrastructure as a service environment were implemented (during the
transition phase), there has been a short-term cost overlap with the incumbent IT managed services in 2H FY20.
The focus of these changes is to ensure that ClearView can improve both client and adviser service and adapt to ongoing
industry changes in a fast, effective manner.
Key expense reductions related to COVID-19 and managing the business during this period include:
•
•
Opting into the JobKeeper program based on the eligibility of meeting the basic decline in turnover test by the centralised
employment entity in the group, ClearView Administration Services Pty Limited (CAS). CAS received a JobKeeper benefit of
$2.5 million to 30 June 2020 and is expected to be eligible to participate in the program until the end of September based
on the legislation in place at the date of the report; and
Reduction in travel, conference and entertainment expenditure in light of the restrictions in place from COVID-19 (-$0.8 million)
but was predominantly offset by the increased annual leave and long service leave costs (+$0.6 million) over this time.
The business is now focused on effective cost management and executing its renewed IT strategy and road map. A
reinvestment is also being made into the business with the further investment in claims (area of focus given the resourcing
needs for IP claims), strengthening of the risk and compliance team to support ongoing regulatory change and retention
initiatives.
The table below reconciles the FY20 operating expenses analysed in Chart 2 with the reported operating expenses in the
annual financial statements.
Chart 2: Reconciliation of operating expenses to reported operating expenses per financial statements
Reconciliation of operating expenses to reported operating expenses per financial statements
Operating expenses per chart 1
Custody and investment management expenses
Depreciation and software amortisation
Stamp duty
Depreciation of right of use assets
Medical costs
Interest expense
Reinsurance technology costs
Wealth management project
Cost out program implementation costs
Recoverable adviser related costs
Direct remediation and Royal Commission costs
Impairments
Retention bonuses
Expense associated with buy out of adviser contractual arrangement
Other expenses
Operating expenses per financial statements
FY20
$M
77.2
9.3
(5.7)
9.9
(1.6)
1.5
1.5
0.5
2.0
-
2.5
-
2.6
-
0.7
2.1
FY19
$M
84.8
9.8
(7.8)
10.4
-
2.2
0.7
-
-
5.4
2.4
3.4
-
2.1
-
1.1
102.5
114.6
26 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORTDIRECTORS’ REPORT Operating segment review
Life Insurance
The FY20 financial performance is detailed below.
Life Insurance result:
12 Months to June 2020 ($M)¹
Gross life insurance premiums
Interest income
Net claims incurred
Reinsurance premium expense
Commission and other variable expenses
Operating expenses
Movement in policy liabilities
BU Operating NPBT
Income tax (expense) / benefit
BU Operating NPAT
Interest expense on corporate debt (after tax)
Underlying NPAT
Policy liability discount rate effect (after tax)
Impairments
Cost Out Program Implementation Costs
Direct Remediation Program and Royal
Commission Costs
Other costs
Reported NPAT
2019
2020
%
1H
2H
FY19
1H
2H
FY20
Change2
117.0
116.6
233.6
124.2
126.5
250.7
7%
1.5
1.4
2.9
1.0
1.3
2.3
(20%)
(17.0)
(34.1)
(30.6)
(26.9)
7.1
17.0
(5.1)
11.9
-
11.9
2.2
-
-
-
-
14.1
(18.9)
(37.5)
(25.6)
(25.0)
(35.9)
(71.6)
(56.2)
(51.9)
(22.6)
(41.1)
(24.3)
(24.4)
(35.5)
(45.3)
(22.4)
(21.6)
(58.1)
(86.4)
(46.7)
(46.1)
3.9
14.9
(4.8)
10.1
-
10.1
4.4
(5.0)
(1.5)
(2.0)
(0.9)
5.1
11.0
31.9
(9.9)
22.0
-
22.0
6.6
(5.0)
(1.5)
(2.0)
(0.9)
19.2
(0.3)
12.4
(3.7)
8.7
-
8.7
(0.4)
-
(0.1)
(0.5)
-
7.7
0.6
3.5
(1.4)
2.1
(0.3)
1.7
2.6
(2.6)
(0.5)
0.1
0.3
1.7
0.3
15.9
(5.1)
10.8
(0.4)
10.4
2.2
(2.6)
(0.6)
(0.4)
0.3
9.4
62%
21%
(20%)
(11%)
(98%)
(50%)
(48%)
(51%)
Large
(53%)
(68%)
(47%)
(63%)
(81%)
Large
(52%)
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 FY19 to FY20.
CLEARVIEW WEALTH LIMITED | 27
DIRECTORS’ REPORTDIRECTORS’ REPORTDIRECTORS’ REPORT Life Insurance
Underlying Life Insurance NPAT, decreased by 53% to $10.4 million (FY19: $22.0 million). Reported NPAT, decreased by
52% to $9.4 million (FY19: $19.2 million).
Chart 3: Analysis of BU Operating NPAT FY18- FY20:
Life AoP ($M)
Expected Underlying NPAT1
Claims Experience
Lapse Experience
Expense Experience
Other
BU Operating NPAT before claims assumptions
Claims Assumption Changes
BU Operating NPAT
2020
1H
2H
FY20
FY19
FY18
15.5
(4.7)
(1.4)
0.3
(1.1)
8.6
-
8.6
15.3
(7.8)
0.1
(0.1)
0.6
8.1
(5.9)
2.2
30.8
(12.5)
(1.3)
0.2
(0.5)
16.7
(5.9)
10.8
31.9
(3.4)
(5.6)
1.1
(0.2)
23.8
(1.8)
22.0
32.2
(5.5)
(2.1)
0.5
0.9
26.0
-
26.0
The FY20 result was impacted by a deterioration in claims, in particular IP incidence and termination experience, and an
increase in death related claims across the portfolio. However, there was a significant improvement in lapse performance in
2H FY20, reflecting the implementation of repricing and retention strategies. This resulted in a lapse profit of $0.1 million in 2H
FY20.
As at 30 June 2020, material changes had been made to the claims assumptions, in light of the adverse experience. These
changes are explained below.
On a like for like basis, excluding the impacts on claims assumption changes in each reporting period, Underlying NPAT would
have reduced by 30% to $16.7 million (FY19: $23.8 million).
ClearView’s focus remains on retention initiatives (in light of the repricing and COVID-19 impacts), claims management,
continuing to review our pricing profile and addressing the fundamental issues with IP products offered in the market.
Chart 4: Claims experience ($m)
0.4
(0.9)
(0.3)
0.2
1.0
0.4
0.2
0.4
0.2
1.6
(3.7)
(1.9)
(351)
Individual
Disability
Income
Insurance2 ($m)
(381)
(368)
(4.9)
(0.3)
(5.2)
(1.4)
(1.9)
(2.2)
(5.5)
(63)
(2.5)
(12.1)
(4.7)
(3.9)
(18.5)
(1,106)
(1,046)
Poor IP experience
across the industry.
2015
2016
2017
2018
2019
2020
LifeSolutions Lump Sum
LifeSolutions Income Protection
Non-advice/Old book
1
2
Expected Underlying NPAT of $30.8 million reflects expected profit margins on in-force portfolios based on actuarial assumptions.
Individual Disability Income Losses for relevant year end period. For FY20 the Individual Disability Income Losses is for the 9 months ended 31 March 2020 as the June 2020 quarterly
result not available. Source: APRA Quarterly Life Insurance Performance statistics March 2020
28 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT The adverse claims experience can be broken down as
follows:
to be appropriate and satisfy the regulatory intent and
requirements of this initiative.
•
•
•
•
Changes to the claims assumptions of $5.9 million (FY19:
$1.8 million)
ClearView LifeSolutions lump sum portfolio adverse
experience of $1.5 million in FY20 (FY19: $0.1 million
adverse experience);
ClearView LifeSolutions IP portfolio reflects adverse
experience of $7.1 million in FY20 (FY19: $3.1 million
adverse experience); and
Direct portfolios (closed to new business) reflects adverse
experience in FY20 of $3.9 million (FY19: $0.2 million
adverse experience).
FY20 included some adverse claims experience across the
ClearView LifeSolutions lump sum portfolio. Prior to this,
the experience had been broadly neutral over a five-year
period, albeit with some volatility between periods. ClearView
continues to have significant reinsurance support for its
LifeSolutions portfolio including an incurred claims treaty to
manage the reinsurer concentration risk.
The direct portfolios, including the book that was closed to
new business in FY17, has reflected a deteriorating trend over
the more recent years, noting that the surplus reinsurance
program of the portfolio acquired from Bupa in 2010 retains
more risk than the ClearView LifeSolutions products but has
historically reflected claims profits over a longer period of
time, albeit with some volatility between periods.
For the year ending 31 March 2020, the life insurance industry
risk products lost $1.65 billion, largely attributable to a $1.4
billion loss on income protection (IP). This extended five-year
IP losses to nearly $3 billion.
The poor performance in IP is being driven by underpricing
and generous benefits that have not kept up with societal
trends.
APRA recently completed an individual disability income
insurance (IDII) thematic review which involved asking
companies to conduct a self- assessment in relation to
strategy and governance, pricing and profitability, improving
data quality and resourcing.
In December 2019, APRA imposed several IDII sustainability
measures on the industry including certain changes to
policies offered and Pillar 2 capital charges on life insurance
companies and friendly societies that sell IP products.
ClearView is supportive of APRA’s initiatives to strengthen
consumer protections, improve the design of life insurance
products and encourage more Australians to gain adequate
cover. Based on its understanding of APRA’s position,
ClearView has prepared an IDII action plan that includes a
body of work required to ensure our IDII products continue
APRA’s measures require the industry to examine the
appropriateness and sustainability of their products and
take necessary action to satisfy the requirements of all
stakeholders by 30 June 2021, or risk further action which
may include additional capital charges and/or ‘Directions’ to
cease writing IP insurance.
ClearView has the ability to implement changes relatively
quickly, particularly in relation to issues associated with terms
and benefits offered by the market for IP products. ClearView
has already commenced a comprehensive review of its
LifeSolutions IP product series with a focus on product pricing
and design.
ClearView ceased the sale of Agreed Value contracts for IP
in mid-March and launched a new indemnity type IP option
in 2H FY20 to offer a lower maximum monthly benefit at a
lower premium rate. Although it is early days, this product has
been positively received by the market with sales of $0.5m in
2H FY20.
Furthermore, the customer retention strategies that have
been adopted include providing consumers with alternatives
such as reduced indexation benefits or shifts to alternative
product features that keeps the premiums more affordable
(relative to the price increases adopted).
The premium rate changes were implemented from April
2020 to reflect increased claim costs, revised claims
assumptions on IP products and changes in reinsurance costs.
ClearView has started to implement early intervention
techniques to improve claims outcomes and is increasing
claims resourcing levels to ensure appropriate case
management by claims assessors. A further assessment of
technology automation is also underway.
IP claims are likely to increase in the COVID-19 environment
and ClearView expects to see an increase on mental illness
claims. This is reflected in ClearView’s shorter term overlay
assumptions adopted.
The material changes to the claims assumptions adopted at
30 June 2020 (and included in both the policy liability and EV
calculations) are as follows:
•
•
•
•
Increased IP claims cost by 35% (gross of reinsurance)
Increased LifeSolutions (Death full cover) claims cost by
25%
Increased Legacy and Non-advice (Death full cover)
claims cost by 20%; and
Allowance made for shorter term overlays to reflect
expected COVID-19 related claims (incidence and
terminations)
CLEARVIEW WEALTH LIMITED | 29
DIRECTORS’ REPORTDIRECTORS’ REPORT These changes in assumptions, in particular to the IP claims termination rates and incurred but not reported (IBNR)
assumptions, adversely impacted FY20 result by -$5.9 million (FY19: -$1.8 million). The breakdown is as follows:
•
•
•
IP claims termination assumption change (change in claims basis) (-$3.1 million);
IP COVID-19 termination assumption change (-$1.2 million); and
IBNR* assumption changes (IP and Lump Sum) (-$1.6 million).
The actuarial best-estimate assumptions adopt a long-term view and are based on expectations that claims experience will
average out over time.
Chart 5: Lapse experience ($m)
0.2
0.5
0.3
0.8
(0.6)
0.1
0.6
(0.7)
(0.5)
(1.2)
(0.4)
(2.1)
(1.4)
(0.4)
(2.0)
0.2
2015
2016
2017
2018
(0.2)
0.6
(1.7)
(1.3)
2020
(2.9)
(2.0)
(0.6)
(5.5)
2019
LifeSolutions Lump Sum
LifeSolutions Income Protection
Non-advice/Old book
The adverse lapse experience (relative to the lapse assumptions in the Life Insurance policy liability determined at 30 June 2019)
across products resulted in an experience loss in HY20 of $1.4 million (HY19: $2.9 million loss).
This is broken down as follows:
•
•
•
ClearView LifeSolutions lump sum portfolio reflects adverse experience in FY20 of $0.2 million (FY19: $2.9 million adverse
experience);
ClearView LifeSolutions IP portfolio reflects adverse experience in FY20 of $1.7 million (FY19: $2.0 million adverse experience); and
Direct portfolios (closed to new business) reflects positive experience in FY20 of $0.6 million (FY19: $0.6 million adverse
experience)
The business has experienced a significant improvement in lapse performance in 2H FY20 reflecting the retention strategies and
benefits from the distribution initiatives implemented in FY19.
Further changes have also been made to the lapse rate assumptions to allow for shorter-term shock lapse overlays to reflect price
changes and any secondary economic impacts from COVID-19. The shock lapses assumed were as follows:
•
•
5% in FY21 and 2.5% in FY22 for LifeSolutions; and
2.5% for the closed books in FY21.
Other points to note:
• Non-deferred expense experience profit in FY20 ($0.2 million).
•
•
Investment earnings are impacted by the reallocation of shareholder capital to the Life Insurance segment (given the increased
capital requirements as the portfolio grows) but offset by lower interest rates on physical cash between periods.
Subsequent to the half-year end, ClearView invested $29.5 million across its CFML funds: Macquarie True Index Fund which
invests in very high quality bonds, principally issued by Australian Governments; and the Vanguard Inflation Linked Fund which
invests in CPI-linked, very high quality Australian government bonds. This has been done to help achieve asset/ liability matching.
30 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT •
•
•
•
•
•
•
•
•
The increased reinsurance expense reflects changes to reinsurer pricing and is also aligned to the growth in in-force
portfolios (which reflects the upfront reinsurance support provided in the first year of a policy by the reinsurer).
In order to manage ClearView’s financial exposure to its reinsurer ClearView entered into an incurred claims treaty with its
main reinsurer Swiss Re Life and Health Australia (Swiss Re) in December 2019 for its lump sum portfolio. Under the treaty,
ClearView LifeSolutions lump sum claims are settled on a comprehensive earned premium and incurred claims basis.
Each quarter, Swiss Re will settle the incurred but not reported claims (IBNR) and reported but not admitted claims (RBNA)
based on best estimate assumptions, consistent with ClearView’s statutory and regulatory reported results and based on
the applicable Australian Accounting Standards (excluding risk margins, profit margins and capital margins). As at 30 June
2020, $35.6 million had settled under the treaty.
Subsequent to year-end ClearView also entered into an incurred claims treaty with Swiss Re Life for its IP portfolio.
Under the treaty, ClearView LifeSolutions IP claims are substantially settled on an earned premium and incurred claims
basis. Each quarter, Swiss Re will settle a substantial component of the outstanding income protection claims liabilities, the
incurred but not reported claims (IBNR) and reported but not admitted claims (RBNA) based on best estimate assumptions,
consistent with ClearView statutory and regulatory reported results and based on the applicable Australian Accounting
Standards (excluding risk margins, profit margins and capital margins).
A further $74 million will be received from Swiss Re on entering the income protection incurred claims treaty. Swiss Re will
be retaining the duration and matching risk on the incurred claims treaty.
ClearView pays an interest charge on the liabilities related to the settlement of the incurred liabilities. This cost started
to come through in 2H FY20 on the lump sum incurred claims treaty, but will increase further on implementation of the
IP incurred claims treaty. This has been included in the increased reinsurance costs assumptions in the embedded value
calculations at 30 June 2020.
As a result of entering into the new treaty, ClearView is winding down the limits on the $70 million irrevocable letter of
credit issued by a major Australian bank on behalf of Swiss Re. ClearView will be able to increase the dollar limit on the
letter of credit in the future, subject to Swiss Re having sufficient capacity at that time.
Lower life insurance initial commission in FY20 was driven by the implementation of the LIF reforms (the upfront
commission cap reduced to 80% in calendar year 2018, 70% in calendar year 2019 and 60% in calendar year 2020)
coupled with reduced new business volumes. These acquisition costs are deferred and amortised within the policy liability
over the expected life of the policies, in accordance with accounting standards.
Changes in variable expenses relate to stamp duty and medical policy acquisition costs driven by changes in new business
volumes between periods.
Chart 6: Life Insurance key performance indicators
Life Insurance Underlying NPAT1 ($m)
LifeSolutions New Business Sales2 ($m)
Life Insurance In-Force Premiums3 ($m)
24.5
24.9
12.4
12.2
26.1
13.6
23.8
1.8
10.1
12.1
12.7
12.5
11.9
16.7
5.9
2.1
8.7
40.3
19.7
42.3
19.7
39.2
17.3
20.6
22.6
21.9
34.7
19.0
15.7
24.3
10.1
14.2
FY16
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY20
1H
2H
Claim assumption changes
1H
2H
270.7
252.6
234.9
214.8
224.7
189.5
184.2
146.1
150.7
105.7
10.9
34.1
10.7
32.7
9.6
30.9
8.8
28.9
8.3
27.5
FY16
FY17
FY18
FY19
FY20
Old Book
Direct
LifeSolutions
1
Underlying NPAT consists of consolidated profit after tax adjusted for amortisation (not including capitalised software), the effect of changing discount rates on insurance policy liabilities
and costs considered unusual to the Group’s ordinary activities.
2
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.
3
In-force premium is defined as annualised premium in-force at the balance date.
CLEARVIEW WEALTH LIMITED | 31
DIRECTORS’ REPORTDIRECTORS’ REPORT ClearView LifeSolutions is now on 592 APLs (up 11% on 532 in FY19). Formerly aligned licensees and advisers are starting
to broaden their APLs, due to changing client expectations and the consolidation or closure of larger dealer groups. Gaining
access to larger licensees will materially expand ClearView’s distribution footprint over time.
•
•
•
•
•
In-force premiums increased 7% to $270.7 million in FY20. The Life Insurance in-force movement is driven by the net
impacts of new business, premium rate increases, lapse and CPI/aged-based variances.
The Life Insurance in-force portfolio at 30 June 2020 is made up of ClearView LifeSolutions, ($234.9 million; +9%); non-
advice ($8.3 million; -5%) and the Old Life Book ($27.5 million -5%).
The mix of products making up the in-force portfolio has changed materially with the flagship product ClearView
LifeSolutions, now representing 87% of total in-force premiums. This links to the margin shifts across the portfolio.
The direct business was closed in 2H FY17 which means the in-force portfolio is in run off.
Gross premiums increased 7% to $250.7 million with sales of contemporary life insurance products down 38% to $24.2
million.
The advised retail life insurance market has numerous challenges that are impacting sales in the short- to-medium-term. Key
contributors to reduced industry new business volumes include:
•
•
•
•
Bank distribution withdrawal (bank referral network reduction);
Life specialists ageing and retiring (as part of overall adviser exits);
The need for advisers to devote more time to FASEA (studying not selling); and
LIF commission reductions, making it less worthwhile for advisers (costs versus effort).
Life insurance APLs are finally beginning to open up, which is creating opportunities for ClearView to do business with more
IFAs. Restricted life insurance APLs have historically been used by institutionally-owned licensees to channel clients into in-
house product and prevent aligned advisers from recommending competitor products. However, the exit of the banks from life
insurance and personal advice has forced many former institutionally-aligned advisers to join boutique AFSLs or establish their
own AFSL.
ClearView’s strong presence and reputation in the IFA market, as well as its diversified model, positions it to strongly support
advisers and forge new relationships. The addressable IFA market is becoming larger with open APLs, however, this is currently
being obscured by irrational competitor pricing, shrinking IFA life sales and unsustainable product features.
In the shorter-term the industry dynamic appears to be a limiting factor to life sales, but the industry repricing cycle has
commenced coupled with the reworking of product features. The longer-term sales effort is likely to expand beyond pure risk
advisers. The shift of risk-focused financial advisers to holistic strategic advice opens an avenue for a simple and effective
wealth management solution. The existing ClearView distribution ‘scale’ is waiting to be utilised in a dual-purpose way to
service customers. This is reflected in our distribution footprint:
• Growing list of 49 Wealth APLs for WealthFoundations; and
•
Presence on 592 Life Insurance APLs.
For the year to 30 June 2020, the IFA market represented 90% of ClearView LifeSolutions sales, compared to 83% in FY19.
The widening of the distribution landscape and potential opening of APLs, coupled with the narrowing in supply of
manufacturers due to market consolidation, positions ClearView well in the advised life insurance market which is expected to
benefit from changes in the group and direct life insurance markets.
32 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORTDIRECTORS’ REPORT Operating segment review
Wealth Management
The FY20 financial performance is detailed below.
Wealth Management financial result:
12 Months to June 2020 ($M)¹
Fund management fees
Interest income
Funds management expenses
Variable expense³
Operating expenses
Underlying NPBT
Income tax (expense) / benefit
Underlying NPAT
Amortisation of acquired intangibles
Impairments
Cost Out Program Implemenation Costs
Wealth Project Costs
Other costs
Reported NPAT
2019
2020
%
1H
17.7
0.3
(4.9)
(3.0)
(7.5)
2.6
(0.5)
2.1
-
-
-
-
-
2.1
2H
16.7
0.2
(4.6)
(2.9)
(7.8)
1.7
(0.2)
1.5
(0.1)
(1.1)
(0.4)
-
(0.2)
(0.3)
FY19
34.4
0.5
(9.5)
(5.9)
(15.3)
4.3
(0.6)
3.6
(0.1)
(1.1)
(0.4)
-
(0.2)
1.8
1H
16.7
0.3
(4.8)
(2.8)
(7.4)
2.0
(0.3)
1.7
-
-
-
-
-
1.7
2H
15.8
0.2
(4.5)
(2.6)
(6.7)
2.1
(0.2)
1.9
-
-
-
FY20
Change2
32.5
0.5
(9.3)
(5.4)
(14.1)
4.1
(0.5)
3.6
-
-
-
(6%)
(5%)
(2%)
(8%)
(7%)
(3%)
(21%)
(0%)
N/A
N/A
N/A
(1.4)
(1.4)
Large
-
0.5
-
2.2
N/A
20%
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. Intersegment revenues/expenses are not eliminated in the shareholder view.
2 % change represents the movement from FY19 to FY20.
3
Variable expenses include the platform fee payable on WealthSolutions and the internal advice fee payable to the Financial Advice segment on the Master Trust product
Wealth Management
Wealth Management Underlying NPAT is broadly neutral at $3.6 million (FY19: $3.6 million) and Reported NPAT up 20% to
$2.2million (FY19: $1.8 million).
Fees earned on average FUM balances are the key profit driver in the segment. Investment earnings are impacted by the
reallocation of shareholder capital between segments and movement in market interest rates earned on the capital invested in
short-term deposits and fixed interest assets between periods.
ClearView does not invest directly in assets but outsources the selection and ongoing management of underlying shares and
securities to third party fund managers.
The FY20 result reflects a significant improvement in net inflows of $189 million in contemporary products ($25 million
outflows in FY19). Net outflows from the closed Master Trust product also improved to $94 million in FY20, down 31% on FY19
(net outflows of $137 million).
This resulted in an increase in FUM of 1% to $2.78 billion. Investment performance was broadly neutral in FY20 (FY19: 7%). The
mix of products making up the portfolio has changed materially with contemporary products now representing 75% of total
FUM.
Overall, a decrease in gross fee margin (1.16% vs 1.23%) and net fee margin earnings (0.68% vs 0.63%) led to a reduction in
fees to $32.5 million (down 6%):
•
WealthSolutions fee income fell 4% compared to an increase in average FUM balances of 1%. WealthSolutions fees are
down to $11.6 million (includes external platforms of $1.7 million) (FY19: $12 million). This was adversely impacted by a
reduction in the net average fee rate to 0.76% (vs 0.80% in FY19), reflecting price changes to position the product more
competitively.
CLEARVIEW WEALTH LIMITED | 33
DIRECTORS’ REPORTDIRECTORS’ REPORTDIRECTORS’ REPORT •
•
WealthFoundations fee income increased 11% to $4.7
million (FY19: $4.2 million) compared to an increase in
average FUM of 20%. This was adversely impacted by a
lower net average fee rate of 0.89% (vs 0.96% in FY19),
reflecting the launch of new products and price changes.
The Master Trust product is effectively a closed book with a
portion of FUM in pension phase. The FY20 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 down 11% to $16.3 million broadly in line with
average FUM balances (-12%) (FY19: $18.2 million)).
Key drivers to the margin changes were as follows:
•
•
•
Pricing changes adopted in 2H FY19 on the WealthSolutions
platform product;
Introduction of lower cost true index options in
WealthFoundations product; and
Changes in mix of business, between products and
investment options.
The repricing of the WealthSolutions platform product had two
main objectives:
•
•
Improve fee competitiveness, particularly given competitor
solutions and product positioning; and
Progressively enhance model portfolios and platform funds
to increase the suite of models available and create a
compelling value proposition for customers and advisers.
This resulted in a significant improvement in flows, with net
inflows of $67 million into WealthSolutions in FY20 (net outflows
of $29 million in FY19).
Further margin compression on the traditional wealth
management products are expected in FY21, both through further
changes in the mix of business coupled with price reductions
in light of the market environment and competitor product
positioning.
The current wealth management retail market continues to
be impacted by platform (product) pricing and technology
competition, technology cost and disintermediation (removal of
rebates).
Historically, wrap platforms have been the popular choice for
managing clients’ superannuation and investment products.
These platforms provided high levels of functionality along with
both investment and tax reporting capabilities. In contrast,
master trust platforms diminished in popularity due to lack of
functionality and competitive pricing.
ClearView’s response to these issues has been a major project
designed to:
•
•
•
Seek a modern replacement solution for its wrap
technology that is well priced in the market but provides
the ability for the wealth business to deliver simple and
effective investment products across platforms;
Have a technology capability that is able to provide a
simple master trust style product that is efficient for
advisers to meet customer needs;
Address and close out the tax credit issue in our superfund;
and
• Deliver new products to the market in the future.
ClearView has selected HUB24 Limited (HUB24) as its strategic
wrap platform provider following a comprehensive market
review. Under the arrangement, it is intended that the FUM
in the WealthSolutions platform product will be migrated
from the current WealthSolutions wrap platform to HUB24,
subject to trustee and responsible entity approvals that it is in
members’ and unit holders’ best interests, and all legal and
regulatory requirements are met. On transition of the FUM
to HUB24 there will be a net reduction in administration fees
in the platform business of circa $1.6 million (before tax) per
annum.
Furthermore, it is intended that ClearView’s primary
superannuation life insurance portfolio be transferred to
the HUB24 Superfund (and continue to be administered by
ClearView) in 1H FY21, subject to relevant trustee approvals
and regulatory requirements. On transition, this will resolve any
further build up of the tax credit receivable. This will then allow
for the utilisation of the assessed losses over time.
The partnership is expected to deliver on ClearView’s goals to
seek a modern replacement solution for the wrap technology,
substantially address the tax credit issue in the CRP and
deliver competitive new products in the future. Both parties
also intend to collaborate on future investment and insurance
product initiatives.
As previously announced, the overall proposal represents
a significant investment for ClearView with development,
transition and implementation costs expected to be up to a
net cost of $6 million. In FY20, $1.9 million of these costs were
incurred, with the balance expected to be incurred over FY21 as
the project progresses.
ClearView’s contemporary technology that runs and
administers the WealthFoundations and traditional master
trust style products remains with ClearView.
The effect of industry shifts is that simple but effective
investment products and platforms will allow financial advisers
to focus on financial advice and the product manufacturer to
focus on the delivery of effective solutions.
The WealthFoundations product is well positioned to capitalise
on the need for financial advisers to drive efficiency and
operate in the centre between industry funds and wrap
platforms. The product is administered on the ClearView
34 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT customised version of the contemporary IRESS technology system (efficient and scalable platform). The product strategy is driven
by simplicity, transparency and efficiency. The aim is to:
•
Provide customer value and flexibility by having the capacity to blend portfolios, compete comfortably on price and provide
more transparency than pooled solutions; and
• Drive practice efficiencies by being easy to do business.
The WealthFoundations product will target advisers who provide both life insurance and wealth management advice. Further
build out of the product will be required in FY21, including:
• Upgrade of current front-end usability;
•
•
Integration into our life insurance product; and
Build out of an ordinary (non-superannuation) simple product.
These costs are expected to be absorbed within historical capital expenditure run rate costs for the business.
Operating expenses fell 7% in FY20, largely attributable to a reduction in software amortisation costs and other group benefits
as previously outlined. The current cost base reflects the costs associated with the internal contemporary platform and
WealthFoundations product that is yet to achieve scale relative to initial system and operational costs.
The rationale behind ClearView’s wealth management strategy remains unchanged - the convergence of life insurance and
wealth management creates a unique opportunity for companies that manufacture and distribute both products.
ClearView’s contemporary Wealth Management solutions, which include a range of model portfolios and investment
administration platforms, are only accessible through financial advisers.
The IFA segment represents ClearView’s largest opportunity. Gaining support from the adviser network by offering quality
products and service is important for diversifying sales and growing FUM.
ClearView’s strategic objectives include:
•
Pursue an integrated growth strategy in life insurance and wealth management, reflecting customer needs and adviser
(distribution) trends. Given changes in the distribution landscape, the number of specialist life advisers appear to be
declining, with advisers providing a more broad based strategic advice service increasing.
• Diversify product and distribution exposure by offering both wealth and life insurance products.
•
•
Leverage its corporate and licensing construct and advantages;
Provide integrated (one-stop) solutions that are valued, well regarded and easy to understand, complemented by strong
service and relationship support;
• Develop back-office efficiency and scale, and front office ‘ease of doing business’ with ClearView (online and otherwise); and
•
Position ClearView’s products for broader distribution opportunities.
The unprecedented level of merger and acquisition activity in the Australia financial services industry in the past few years
has resulted in fewer companies providing both life insurance and wealth solutions. A number of ClearView’s key competitors
have, or are in the process of, divesting assets. This structural change, and the subsequent competitor distraction, provides a
significant competitive opportunity for ClearView.
Companies that offer both life insurance and wealth management solutions have a unique opportunity to maximise their
relationship with financial advisers and meet customers’ needs in a more tailored way.
The following graphs illustrate the performance of the Wealth Management business.
CLEARVIEW WEALTH LIMITED | 35
DIRECTORS’ REPORTDIRECTORS’ REPORT Chart 7: Wealth Management key performance indicators
Wealth Management Underlying NPAT1 ($m)
Net Flows2 ($m)
5.2
2.6
3.6
1.5
2.6
2.1
3.6
1.9
1.7
3.9
2.3
1.6
2.7
1.4
1.3
FY16
FY17
FY18
FY19
FY20
1H
2H
205
66
88
212
55
92
188
199
207
72
99
163
(123)
(148)
(126)
96
142
16
67
(94)
(20)
(137)
(162)
(29)
(12)
FY16
FY17
FY18
FY19
FY20
Master Trust
WealthSolutions
WealthFoundations
External Platforms
FUM3 ($B)
2.50
0.12
0.30
0.06
2.13
0.20
2.79
0.19
0.41
2.76
0.18
0.45
2.78
0.16
0.58
0.80
1.08
1.29
1.32
1.35
1.07
1.00
0.90
0.81
0.69
FY16
FY17
FY18
FY19
FY20
Master Trust
WealthSolutions
WealthFoundations
External Platforms
1
Underlying NPAT consists of consolidated profit after tax adjusted for amortisation (not including capitalised software), the effect of changing discount rates on insurance policy liabilities
and costs considered unusual to the Group’s ordinary activities.
2
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
FUM includes Funds Under Management (ClearView Master Trust, WealthFoundations and ClearView Managed Investment Schemes), Funds Under Administration on WealthSolutions
and FUM in ClearView MIS platform funds on external platforms.
FUM balances increased 1% to $2.78 billion at 30 June 2020 (average FUM balances are down 2%). Movement is driven by the
net impacts of net flows, funds management fees and investment market movement-based variances:
•
•
•
Made up of WealthSolutions ($1.3 billion; average FUM +1%), WealthFoundations ($0.6 billion; average FUM +20%),
External Platforms ($0.2 billion; average FUM -9%) and Master Trust ($0.7 billion; average FUM -12%).
The mix of products making up the portfolio has changed materially and this links to the margin shifts across the portfolio.
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. Investment market performance was broadly neutral compared to a 7%
investment return in FY19.
Inflows represent a material portion of overall FUM balances. Gross inflows of $456 million were achieved in FY20
predominantly into contemporary products (+57%).
36 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORTDIRECTORS’ REPORT Operating segment review
Financial advice
The FY20 financial performance is discussed below.
Financial Advice result:
12 Months to June 2020 ($M)1
Net financial planning fees
Interest and other income
Operating expenses
Underlying NPBT
Income tax (expense) / benefit
Underlying NPAT
Amortisation of acquired intangibles and
impairment
Cost Out Program Implementation Costs
Other net costs
Reported NPAT
2019
2020
%
2H
8.4
0.2
FY19
17.2
0.6
1H
8.8
0.2
2H
9.4
0.2
FY20
Change2
18.1
6%
0.4
(40%)
(7.2)
(16.4)
(8.5)
(7.2)
(15.7)
1.3
(0.4)
0.9
1.4
(0.4)
1.0
0.4
0.2
0.6
2.4
(0.8)
1.6
(4%)
97%
27%
2.8
(0.6)
2.3
127%
1H
8.8
0.4
(9.1)
0.1
(0.0)
0.1
(0.6)
(13.4)
(14.0)
-
-
-
-
-
(0.4)
(0.3)
(0.4)
(0.3)
(0.5)
(13.2)
(13.7)
(0.3)
(0.0)
(0.3)
-
0.3
0.1
1.7
0.1
2.0
N/A
(20%)
Large
Large
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 FY19 to FY20.
Financial Advice
Financial Advice Underlying NPAT $2.3 million (FY19: $1.0 million) and Reported NPAT reflects a profit of $2.0 million
(FY19 loss: $13.7 million).
Net financial planning fees increased by $0.9 million (+6%) to $18.1 million. Key drivers of the net fee increases are as follows:
•
•
•
Increase in membership fees driven by the successful implementation of the new pricing model (with limited impact to
overall adviser practice numbers) and the transition of older franchised agreements to the new pricing model;
Launch of LaVista with recruitment largely in line with expectations; and
Partially offset by reduction in grandfathered rebates (sunset date of January 2021 with ClearView having terminated
certain dealer service fee arrangements in HY20) that collectively contributed $1.1 million in FY20 (FY19: $1.4 million)
Changes to the remuneration and fee model in the dealer groups were introduced on 1 November 2019, representing a fairer,
more sustainable revenue base. The launch of the B2B outsourced licensee services offer (LaVista) also allows ClearView to
provide business support services to advisers who have obtained their own licences.
The fee income generated from membership fees (as a result of these changes) increased by $1.5 million, including a
contribution of $0.4 million from LaVista.
Interest income reflects the reallocation of shareholder capital between segments and changes in market interest rates
between periods.
Underlying NPAT was impacted by decreased operating expenses (-7%) driven by the cost benefits obtained across the group,
as previously noted. Scale in the segment is now at a stepped fixed cost phase, where addition of new staff occurs only once
when the next group of practices join and AFSL volumes have been reached.
ClearView has continued to enhance and rollout its front-end compliance and monitoring technology (Lumen) across the
dealer groups.
CLEARVIEW WEALTH LIMITED | 37
DIRECTORS’ REPORTDIRECTORS’ REPORTDIRECTORS’ REPORT
This is in line with the increased compliance and regulation required to ensure AFSLs and their authorised representatives
comply with their legal obligations. ClearView continues to perform both ‘front’ and back end compliance processes (including
file reviews) as part of its ongoing monitoring and compliance reviews under ‘business as usual’ functions. As part of this
ongoing compliance and audit process, ClearView finalised a back file review of a limited number of financial advisers
(including some that have left the dealer group) in FY20.
Costs were impacted in FY20 by the advice remediation program including compensation costs ($2.1 million in total including
program costs). The outstanding remediation programs have now been completed and exclude any potential recoverable
amounts from either the adviser or insurer. These costs have been included as part of Underlying NPAT in the full year result.
Costs that are considered unusual to ClearView’s ordinary activities are not reflected as part of Underlying NPAT.
In FY20, on entering into a new contractual agreement with a financial adviser of ClearView Financial Advice, the buy-out of
the contractual commitment of the buyer of last resort (BOLR) resulted in a $0.7 million cost to the Group. This effectively
allowed the financial adviser to retain and service his book and for ClearView to pay out the value between market value and
the contractual commitment under the previous arrangement. This reflected the last remaining contractual BOLR commitment
within the Group. This cost is considered unusual to the ordinary activities of the Group.
On entering into the new contractual agreements with financial advisers of ClearView Financial Advice more broadly, certain
clients were transferred to the relevant financial advisers with payments being made weekly over a three-year period. New
contracts were entered into with a view to simplifying the arrangements equitably for both ClearView and the adviser,
ensuring ongoing client best interest and fee for service duties are met as well as supports ongoing advice to the clients with
minimal disruption. Under AASB 15 – Revenue from contracts with customers, given the transfer of client books (performance
obligation) is completed on day one, the revenue has been recognised upfront, albeit the cash payments are deferred over
three years. As such, an amount of $0.8 million was recognised in FY20 (net of a credit loss provision).
The net impact of the new arrangements entered into therefore broadly offset each other in FY20. A further amount of $0.3
million of revenue is likely to be recognised upfront in FY21 on finalisation of the remaining contracts.
The ClearView and Matrix dealer groups, together have 212 financial advisers operating under their licences. LaVista has 16
adviser practices (52 advisers) using its services at Balance Sheet date, with a strong pipeline of financial advisers seeking to
utilise these services in future
235
8
138
243
9
143
233
9
125
2
229
8
118
89
91
99
101
264
52
6
93
113
FY16
FY17
FY18
FY19
FY20
Matrix Self Employed
ClearView Self Employed
Employed
LaVista
38 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT A key priority for the business has been the repositioning and repricing of the dealer group offering to create a sustainable
revenue model that better reflects the true cost of providing that support.
ClearView’s dealer groups have been consistently recognised for their commitment to advisers. In 2019, Matrix received the
prestigious CoreData Licensee of the Year Award for the third consecutive year, cementing its position as a leading provider of
services to financial advisers.
The key issues that continue to impact the financial performance of the segment include growing compliance costs,
risks managing advice sector exposure (resulting in select growth in adviser numbers) and a general reduction in adviser
productivity over time.
The future state for dealer groups requires the removal of grandfathered revenue streams which have supported their
economic value for some time.
ClearView’s grandfathered revenue streams of $1.1 million in FY20 are the net amounts retained (FY19: $1.4 million). These are
expected to cease from FY21. This excludes the financial support received from other ClearView entities, which are expected to
reduce substantially in FY20.
Some institutions are voluntarily selling or closing their dealer group businesses. At the same time a large number of
professional financial advisers are seeking to leave institutional dealer groups and gain their own Australian Financial Services
Licence (AFSL).
In response, ClearView has:
•
•
•
•
Launched LaVista, an outsourced B2B licensee services offer to meet the needs of the growing number of self-licensed
financial advisers and support services to third party dealer groups. This positions ClearView to capture opportunities arising
from structural change.
ClearView now offers comprehensive licensing and dealer services to professional financial advisers who want the backing
of a well-resourced company but don’t want to be aligned to a bank or institution.
Continued investment in the rollout and enhancement of front-end compliance and monitoring technology (Lumen) across
the dealer groups.
As part of the LaVista roll out and repositioning of its dealer groups over time, the intention is to replace the grandfathered
revenue streams by building a sustainable revenue base that allows the dealer groups and LaVista to continually invest
and support its financial adviser client base.
CLEARVIEW WEALTH LIMITED | 39
DIRECTORS’ REPORTDIRECTORS’ REPORT DIRECTORS’ REPORT
Operating segment review
Listed Entity/Other
The FY20 financial performance is discussed below.
Listed Entity/Other result:
12 Months to June 2020 ($M)1
Interest income
Operating expenses
BU Operating NPBT
Income tax (expense) / benefit
BU Operating NPAT
Interest expense on corporate debt (after tax)
Underlying NPAT
Cost Out Program Implementation Costs
Direct Closure, Remediation Program and Royal
Commission Costs
Other costs
Reported NPAT
2019
2020
%
1H
0.2
(0.7)
(0.5)
(0.0)
(0.5)
(0.2)
(0.7)
-
(0.4)
-
2H
0.2
FY19
0.4
(0.6)
(0.4)
(0.1)
(0.5)
(0.3)
(0.8)
(1.5)
-
-
(1.2)
(0.9)
(0.2)
(1.0)
(0.5)
(1.5)
(1.5)
(0.4)
-
1H
0.1
(0.6)
(0.5)
0.1
(0.4)
(0.3)
(0.7)
1.1
-
-
(1.1)
(2.2)
(3.4)
0.4
2H
0.1
(0.8)
(0.7)
0.1
(0.6)
(0.4)
(0.9)
(0.2)
0.3
(0.2)
(1.0)
FY20
Change2
0.2
(44%)
(1.4)
(1.2)
0.2
(1.0)
(0.6)
(1.6)
9%
29%
Large
(8%)
30%
4%
0.9
Large
0.3
(0.2)
(0.6)
Large
Large
(85%)
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. Certain costs incurred in 1H19 were reclassified between segments in 2H19 and are shown on a
net basis.
2 % change represents the movement from FY19 to FY20.
Listed Entity/Other financial result:
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.
The Listed segment financial results for the year ended 30 June 2020 are shown in the table above. Underlying NPAT was -$1.6
million (FY19: -$1.5 million) and Reported NPAT of -$0.6 million (FY19: -$3.4 million). Other notable items include:
Investment earnings reflect some reallocation of physical cash between segments and the reduction in interest rates between
periods. As at 30 June 2020, ClearView had drawn down $60 million under the Debt Funding Facility as follows:
•
•
•
$15 million to fund the cash component of the FY18 final dividend and the cash payment for purchasing ClearView shares
to support the ClearView SMT LTIP share plan (recognised as (treasury shares) in FY19;
$16 million in December 2019 in relation to the assigned tax receivable with further details provided below;
$19 million in relation to the corporate restructure ($12 million), to fund the project costs associated with the HUB24
transaction and for further funding of any tax credits until the issues have been resolved; and
•
$10 million for liquidity purposes
The ClearView Group holds a $15.5 million (non-current) receivable from its superfund, the ClearView Retirement Plan (CRP)
relating to contribution tax funding payments for tax benefits on the life insurance premiums. Due to the tax loss position in
the CRP, settlement of this amount is subject to the utilisation of tax losses. Various options are being considered and projects
well progressed which collectively indicate recovery is considered probable at this point in time.
For Group capital management and efficiency, $16 million of the tax receivable was assigned from ClearView Life to the listed
entity and funded through a $16 million draw down of the Debt Funding facility. The remaining balance of $0.5 million remains
between ClearView Life and the listed entity as at 30 June 2020. The Board is also actively investigating longer-term capital
solutions (such as the issue of Tier 2 subordinated notes) that is intended to repay at least part of the debt (see capital section
that follows).
40 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT DIRECTORS’ REPORT
Interest on corporate debt relating to loan establishment and the Debt Funding Facility is included in the result above with the
potential cost of a longer-term solution to flow through in due course. Interest charges associated with the incurred claims
treaty and letter of credit are reflected in the Life Insurance segment results.
Statement of financial position
The Group’s statement of financial position, which is set out on page 74, reflects the key metrics below.
Net assets at 30 June 2020 increased to $452.7 million (June 2019: $439.1 million) comprising:
•
•
Reported profit of $13.1 million;
Movements in the Share Based Payments Reserve due to the treatment of the ESP in accordance with the accounting
standards (+$0.9 million); and
•
Shares bought back under ClearView’s on market selective buy back arrangement (-$0.4 million).
Net asset value per share (including ESP loans) of 71.5 cents per share (June 2019: 69.2 cents per share).1
The net asset value per share is reflected above on a fully diluted basis, as ClearView ESP shares have been issued to employees
and contractor participants as at 30 June 2020 (in accordance with the ClearView ESP Rules).
Shares granted under the ESP carry rights to dividends and voting rights. 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.
In accordance with the provisions of the ESP, as at 30 June 2020, key management, members of the senior management
team, the managing director and contractor participants have acquired 43,590,602 ordinary shares.
Financial assistance amounting to $28,007,416 was made available to executives, senior employees and contractor
participants to fund the acquisition of shares under the ESP and is held as an off balance sheet receivable.
1
Given the lower share price in FY20 the current ESP shares issued are considered to be ‘out of the money’. Should the ESP shares be forfeited, there would be a reduction in the number of
ESP shares on issue, in addition to an equivalent reduction in the ESP loans that have otherwise been included and added back to the net assets based on the issue price of the ESP share
(ESP loan value). The effect would be a fully diluted net asset value per share increase of 0.5 cents to 72.0 cents per share.
CLEARVIEW WEALTH LIMITED | 41
DIRECTORS’ REPORTDIRECTORS’ REPORT Embedded Value
Life Insurance and Wealth Management are long-term businesses that involve long-term contracts with customers and
complex accounting treatments. Embedded Value (EV) represents the discounted value of the future net cash flows anticipated
to arise from the in-force life policies and investment client balances as at the valuation date.
As noted at the full year 2019 result, an Embedded Value calculation is no longer considered meaningful for the Financial
Advice segment. Only the net assets of the Financial Advice segment is now included in the Embedded Value calculations.
EV calculations at a range of risk discount margins (DM) is shown below.
Risk margin over risk free rate: ($M), (unless stated otherwise)
Life Insurance
Wealth Management
Financial Advice
Value of In Force (VIF)
Net worth
Total EV
ESP Loans
Total EV including ESP Loans
Franking credits @70%:
Life
Wealth
Financial Advice
Net worth (accrued franking credits)
Total Franking Credits
Total EV including franking credits and ESP loans
EV per share including ESP loans (cents)1
EV per share including ESP loans and franking credits (cents)
Chart 8: Embedded Value movement analysis
3% DM 4% DM 5% DM
485.4
450.7
422.7
49.1
46.7
44.5
-
-
-
534.5
497.3
467.2
20.9
20.9
20.9
555.4
518.2
488.1
28.0
28.0
28.0
583.4
546.2
516.1
67.4
11.3
-
23.8
102.5
62.7
10.7
-
23.8
97.2
58.5
10.1
-
23.8
92.5
685.9
643.4
608.5
86.5
101.6
80.9
95.3
76.5
90.2
672.6
0.6
31.1
(5.4)
(23.5)
(5.9)
(5.5)
664
(3.4)
(17.2)
643.4
541.9
29.1
101.6
Expected gain
EV - 30 June 2019
Net capital movements
(as published)
Value of new business
FY20 experience
items (June 2019 best
estimate assumptions)
Impact on FY20 results -
change in assumptions
538.8
518.2
28.0
97.2
28.0
97.2
June 2020 best estimate
Franking credit/ESP
EV - 30 June 2020 (pre June
assumption changes
loan changes
2020 assumption changes)
June 2020 COVID-19
impacts (change
in assumptions)
EV - 30 June 2020
EV
Franking Credits
ESP Loans
1
Given the decline in share price the current ESP shares issued are considered to be ‘out of the money’. Should the ESP shares be forfeited, there would be a reduction in the number of
ESP shares on issue, in addition to an equivalent reduction in the ESP loans that have otherwise been included and added back to the net assets based on the issue price of the ESP share
(ESP loan value). The effect would be a fully diluted net asset value per share increase of 0.5 cents to 72.0 cents per share.
42 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT EVs have been presented at different ‘discount margin’ rates
over the assumed long-term risk free rate reflected within the
underlying cash flows valued. ‘dm’ represents the discount rate risk
margin which refers to the margin above the assumed long term
risk free rate. The long-term risk free rate adopted for the FY20 EV is
2% (June 2019: 2%).
The key movements in the EV between June 2020 and June 2019
are described in detail below.
Net capital movements (+$0.6 million)
Shares bought in the on-market share buy-back program of
ClearView shares in 1H FY20 (-$0.4 million).
Movements in the Share Based Payments Reserve (+$1.0 million).
Expected gain (+$31.1 million)
Expected gain represents the expected unwind of the discount rate
within the value of in-force and investment earnings on net worth.
FY20 Movements (June 2019 Best Estimate Assumptions)
(-$34.8 million)
The value added by new business written (VNB) over the period
(-$5.4 million). The current value of new business is suppressed
by the acquisition costs incurred relative to lower new business
volumes.
Adverse claims experience loss (relative to planned margins)
predominately due to a deterioration in claims, in particular IP and
death claims. Included in the adverse experience (-$18.5 million)
is the impacts of the changes to claims assumptions at 30 June
(-$5.9 million) arising from a change in basis and allowance for
COVID-19 impacts. See further commentary on claims experience
on page 28 and further changes to claims assumptions are
discussed below.
The profitability for disability income business is expected to
improve over time given ClearView’s planned initiatives (including
repricing and product redesign aligned with the APRA action plan).
Life Insurance lapse impact of -$2.2 million. Retention strategies
and effects in life insurance are a key focus (in light of price
increases and COVID-19 impacts). There was a significant
improvement in lapse performance in FY20 driven by distribution
initiatives undertaken in FY19 and retention initiatives in FY20.
Recent adverse lapse experience and trend and changes to
assumptions as noted earlier in the report.
For the Wealth Management business, discontinuance rates
(outflows) were higher than expected (impact of -$1.0 million),
with a change in assumptions to reflect this shift. Changes in the
mix of businesses and lower investment performance (including
the impact of fee reductions due to the lower interest rate
environment), resulted in lower fee income relative to expectations
over the period (-$2.8 million) and a lower present value of future
fees at the end of the period.
Overall net expense impact of -$2.9 million. Listing and interest
costs on corporate debt were impacted by the Group’s listed
overhead costs, amounts drawn down under the corporate debt
facility and interest costs associated with the incurred claims which
are not allowed for in the EV. Maintenance expense experience
reflects the experience profit (+$0.3 million) in life insurance, given
the reduced cost base across the group. Costs considered unusual
to the business predominantly related to the wealth management
project and impairment of tax credit asset. The business is now
focused on effective cost management, coupled with a targeted
IT strategy and road map.
The balance includes the additional impact of model changes
(-$2.4 million).
June 2020 Best Estimate Assumption Changes including
COVID-19 impacts (-$20.6 million)
Claims rate assumptions were based on FSC-KPMG industry tables,
adjusted to ClearView’s experience (with assumptions reviewed on
an annual basis based on underlying claims experience). Claims
assumptions have been updated at 30 June 2020 including an
assessment of potential impacts from COVID-19. Material changes
to claims assumptions at 30 June 2020 include an increase IP
claims cost by 35%, death (full cover) claims cost (LifeSolutions by
25%; Closed portfolios by 20%) and an allowance for shorter term
overlays to reflect expected COVID-19 related claims (incidence
and terminations).
The EV impact includes the impact of the April 2020 price increases
to cover increased claims and reinsurance costs.
Lapse rates assumptions were based on historical experience,
adjusted for factors impacting future experience. Shock lapses
have been built into the EV, incorporating effects of April 2020 price
increases and COVID-19 overlays. A shock lapse assumption of
5% is adopted for LifeSolutions business over the next 12 months
and 2.5% is also included on the closed portfolios. This is in respect
to the price increases expected across the portfolio and potential
lapses from customers which have had a detrimental impact from
the economic impacts associated with COVID-19.
Further shock lapses of 2.5% are allowed for with respect to the
further proposed rate changes from May 2021 of 7% on average
across the LifeSolutions portfolio and 5-10% on closed portfolios
with partial benefits assumed from the retention program over
following 12 months thereafter.
The expected increases in reinsurance premiums (for business sold
prior to 1 March 2019) and costs associated with the incurred claims
treaty have been allowed for in the EV calculations. This will be
effective for policies renewing from 1 March 2021.
Wealth Management business has built in margin compression
given market pressures, in particular on traditional products.
The impact of the HUB24 project on margin earned on the
administration fee has also been built into the EV calculations.
Franking credit and ESP loan changes (-$5.5 million)
Net movement in ESP loans and franking credits between periods.
CLEARVIEW WEALTH LIMITED | 43
DIRECTORS’ REPORTDIRECTORS’ REPORT The franking credit movement effectively reflects the impact of movements in value of future tax payments and modelling
enhancements.
Given non-recourse nature of the ESP loans, $28 million is considered recoverable at 30 June 2020 (ESP loans have been valued at issue
price per ESP share).
Chart 9: Embedded Value sensitivity analysis @ 4%DM
Inflation -0.5%;+0.5%
-6.9
7.2
Risk-free rate +1%;-1%
-21.3
24.1
FUMA -10%;+10%
-4.4
4.4
Expenses +10%;-10%
-14.2
14.2
Discontinuance Rates +1%;-1%
-23.3
Claims +10%;-10%
-26.5
26.1
27.3
-30
-20
-10
00
10
20
30
Capital management
Capital Position at 30 June 2020
The following charts reflect the net capital position of the Group as at 30 June 2020:
Chart 10: Capital position as at 30 June 2020
452.7
418.8
(33.9)
67.9
(350.9)
Net assets
as at 30
June 20201
Less:
intangible
adjustments2
Less:
capital base
adjustments
Regulatory
capital base
34
4.2
(97.7)
Less:
reserved
capital3
Debt
funding
facility4
Net capital
position5
1.
2.
3.
4.
5.
Net Asset Value as at 30 June 2020 excluding ESP Loans. Net assets includes the deferred acquisition costs (DAC) component of insurance policy liabilities.
Intangible adjustments relate to goodwill, acquired intangibles and capitalised software. It also includes a $15.5m tax asset for tax credits within the ClearView Retirement Plan (CRP)
relating to insurance premiums paid via rollover. There is currently not sufficient taxable income in the CRP currently to utilise these tax credits. While strategies to utilise the carried
forward losses in the CRP are in progress there are risks and uncertainties involved. Furthermore, a project for the CRP (part of a broader wealth strategy) is well progressed.
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
(if applicable) to support the capital needs of the business beyond the risk reserving basis.
The Debt Facility is repayable on 1 April 2024. $60 million of the debt facility has been drawn down as at 30 June 2020.
ClearView has implemented an incurred claims treaty with Swiss Re for lump sum and income protection business, where claims (including reserve components) are paid when a claim is
incurred which reduces the concentration risk exposure. On implementation of the IP incurred claims treaty subsequent to year end, the existing $70 million limit on letter of credit (LoC)
to cover the remaining exposure above LPS 117 limits has been wound down. There is no Asset Concentration Risk charge under LPS 117 relating to the Swiss Re exposure as at 30 June
2020.
44 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT
Chart 11: Capital position at 30 June 2020 by segment and regulated entity
Capital position as at 30 June 2020 by segment and regulated entity
Group Capital Position ($M)
e
f
i
L
$M
Net assets at 30 June 2020
431.6
d
e
t
a
l
u
g
e
R
s
e
i
t
i
t
n
E
r
e
h
t
O
A
R
P
A
$M
$M
4.0
444.6
l
a
i
c
n
a
n
i
F
e
c
i
v
d
A
d
e
t
a
l
u
g
e
R
s
e
i
t
i
t
n
E
C
I
S
A
d
e
t
a
l
u
g
e
R
s
e
i
t
i
t
n
E
l
l
A
/
2
C
H
O
N
r
e
h
t
O
p
u
o
r
G
$M
$M
$M
$M
$M
10.3
18.1
462.7
(10.0)
452.7
h
t
l
a
e
W
$M
7.9
h
t
l
a
e
W
$M
8.9
Intangible adjustments
(4.0)
(1.6)
-
(5.6)
(0.1)
-
(0.1)
(5.7)
(28.2)
(33.9)
Net assets after intangible
adjustments
Capital base adjustment:
427.6
7.3
4.0
439.0
7.7
10.3
18.0
457.0
(38.2)
418.8
Deferred acquisition costs (DAC)
(346.6)
Other adjustments to capital base
Regulatory Capital Base
(3.1)
77.9
-
(0.1)
-
-
(346.6)
-
-
-
(346.6)
-
(346.6)
(3.2)
(0.1)
(0.9)
(1.0)
(4.2)
(0.1)
(4.3)
67.9
7.3
4.0
89.2
7.6
9.4
17.0
106.3
(38.3)
Prescribed Capital Amount
(21.5)
(3.4)
(3.5)
(28.4)
(5.0)
(1.3)
(6.3)
(34.7)
-
(34.7)
Available Enterprise Capital
56.4
3.9
0.6
60.8
2.6
8.1
10.7
71.5
(38.3)
33.2
Enterprise Capital Benchmark (ECB)
ECB offset
Risk Capital1
Excess/deficit over internal
benchmarks
Debt facility
Net capital position at
30 June 2020
(0.1)
-
(47.1)
(2.8)
-
-
(0.1)
-
-
-
(0.1)
-
(0.1)
(49.9)
(2.0)
(2.7)
(4.7)
(54.6)
(8.3)
(62.9)
9.2
1.1
0.6
10.8
0.6
5.4
6.0
16.8
(46.7)
(29.8)
34.0
34.0
9.2
1.1
0.6
10.8
0.6
5.4
6.0
16.8
(12.7)
4.2
1
2
As at 30 June 2020, risk capital is held in regulated entities at 97.5% probability of adequacy (POA). Risk capital at 99% POA is held in the NOHC².
NOHC is a non operating holding company regulated by APRA under the Life Insurance Act.
The net capital position of the Group, after including certain amounts drawn down under the Debt Funding Facility ($34
million), was $4.2 million at 30 June 2020 (see further commentary below).
ClearView has to date been fully capitalised with Common Equity Tier 1 capital.
The net capital position of the Group as at 30 June 2020 represents a decrease of $0.9 million since 30 June 2019. This reflects
the following key items:
•
•
•
•
The Underlying NPAT for the period (+$14.7 million);
Costs considered unusual to the normal activities of the business as disclosed separately earlier in the report (-4.0 million)
The new business funding costs (net of deferred acquisition cost amortisation) (-$6.9 million);
Change in admissible and deferred tax assets (-$2.2 million);
• Decrease in regulatory and risk capital (-$8.5 million) due to:
•
•
Reduction in the Asset Concentration Risk Charge subsequent to resolution of the issues to manage the credit
exposure to Swiss Re (+$4.3 million);
Movements in other capital reserves (-$12.8 million), particularly for insurance/liability risk reserves as a result of
adverse claims experience
•
Reduction in capital due to the treatment of the CRP tax credit assets, previously allowed for in the capital calculations as
an offset to ECB capital in FY19. Furthermore, the transfer of CRP tax credits from CLAL to CVW occurred in FY20 (-$12.5
million)
CLEARVIEW WEALTH LIMITED | 45
DIRECTORS’ REPORTDIRECTORS’ REPORT
•
Net Other movements and ESP related items (+$19.6
million) which compromises of:
•
•
•
On-market share buy-back program (further
commentary provided below) (-$0.4 million);
Draw down of the debt facility (+$19m);
ESP related items (+$1.0 million);
•
Tax effect of impact of changes in discount rates on policy
liabilities (-$1.1 million).
Key points to note:
•
•
•
•
•
•
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).
The $15.5 million receivable from the CRP has been
removed for capital purposes given the risks associated
with the potential recovery of the asset (notwithstanding
that there are projects underway to address and close out
the tax credit issue).
The drawdown of the debt facility of $26 million is not
included as an offset to this given it is likely that this
component of the Debt Funding Facility will be repaid out
of the proceeds when the tax credits are utilised (and
is therefore reflected as not being replaced by a more
permanent capital solution) and it also excludes the further
draw down of $10 million for liquidity purposes.
The regulated entities had $16.8 million of net assets in
excess of internal benchmarks as at 30 June 2020.
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.
A working capital reserve has historically been held to
support the capital needs of the business beyond the
risk-reserving basis. This included the net capital that was
required to support the medium-term new business plans
(in accordance with the Internal Capital Adequacy Process).
ClearView generates positive cash flows from in-force portfolios
which is subsequently reinvested into new business generation:
Now achieving underlying self-funding capability
(excluding allowances for COVID-19, Pillar 2 requirements
and assuming experience is line with FY20 best estimate
assumptions)
New Business capital utilisation is related to the upfront
costs associated with policy acquisition that is collected via
•
•
•
•
•
•
•
the premiums from policyholders over the life of the policy
– converts to cash over time subject to lapse risk. These are
referred to as deferred acquisition costs (DAC)1
In-force capital generation reflects a combination of the
Underlying NPAT2 achieved and DAC1 released (collected)
from the in-force portfolios in a particular financial year
Reduced capital needs over time reflects the growth in
in-force portfolio given increased scale of business from
start-up phase
New business capital needs driven by volumes and lower
upfront commission caps post implementation of the life
insurance reforms
Capital needs from a group perspective are driven by the
need to replace at least part of the debt with a permanent
capital solution ($34 million). Furthermore, part of the Tier
2 capital raising will also be used to fund or support the
regulated funding requirements of ClearView Life from
time to time.
The Board is now actively investigating the prospect of
an issue of Tier 2 Subordinated Notes (Notes) (subject to
the regulatory approval process and market conditions).
In anticipation a rating from Fitch was obtained in March
2020.
As noted earlier in the report, the Debt Funding Facility was
extended to 1 April 2024 in 2H FY20.
Fitch assigned ClearView a Long-term Issuer Default Rating
(IDR) of ‘BBB’. At the same time, Fitch assigned ClearView’s
operating subsidiary, ClearView Life, an Insurer Financial
Strength Rating (IFS) of BBB+. The outlooks for both ratings
are stable and were reaffirmed as ‘stable’ subsequent to
the onset of the pandemic.
Dividends and On-market 10/12 limit share buyback
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.
In light of the adverse impact due to COVID-19, challenging
market conditions, and APRA supervisory guidance, no FY20
dividend has been declared (FY19: $nil). The Australian
Prudential Regulation Authority (APRA) has also asked that life
insurers consider limiting discretionary capital distributions in
the coming months given these conditions.
In August 2019, the Board approved the recommencement of
its 10/12 limit on market buy-back program and extended it
for a further 12-month period until December 2020.
DAC is deferred acquisition costs.
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.
•
•
1
2
46 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT
Existing buy-back arrangements continue to apply and Blue Ocean Equities Pty Limited is the appointed broker for the program.
Since January 2014, the total number of shares bought back and cancelled under the scheme is 1,208,824 of which 615,000
shares have been bought back and cancelled in the year ended 30 June 2020 ClearView does not intend to undergo any
on-market share buy-back activity given the current environment and market conditions. One of the Board’s key priorities is
prudent capital management.
Selective buy-back
As approved by Shareholders at the ClearView 2019 Annual General Meeting (AGM) and disclosed on market, ClearView
undertook a selective buy-back of unvested Executive Share Plan (ESP) Shares in November 2019. 365,504 were selectively
bought back and cancelled on the terms outlined in the ClearView AGM Notice of Meeting, Appendix 3C and Appendix 3F. These
announcements are under the Shareholders tab on the ClearView website.
Employee Share Scheme buy-back
As approved by the Board and disclosed on market, ClearView undertook an Employee Share Scheme buy-back of unvested ESP
Shares in June 2020. 1,300,564 shares were bought back and cancelled on the terms outlined in the Appendix C, Appendix E
and Appendix 3F. These announcements are under the Shareholders tab on the ClearView website.
CLEARVIEW WEALTH LIMITED | 47
DIRECTORS’ REPORTDIRECTORS’ REPORT COVID-19 Response
Unprecedented circumstances including significant economic, social and health challenges caused by COVID-19 pandemic.
ClearView has acted swiftly to address challenges presented by COVID-19. ClearView’s response is outlined below:
Focused efforts around six priorities
Protect our people
and customers
• Monitoring and implementation of national health guidelines – communicate with
full transparency
• Provided assistance to customers – premium waivers, suspension of cover, accessibility for
health workers and capping of certain cohorts of IP price increases
• Successfully implemented the business continuity plan in March 2020
• Asked all our employees to work from home in order to ensure their health and safety
• This occurred relatively seamlessly with no material disruption to our operations or service
Model our capital
exposure, stress test
P&L and liquidity
• Assessed certain stress test scenarios
• Projections included a ‘Base’ (Pre-COVID-19) case, a ‘Plausible COVID-19’ case (reasonably
foreseeable, conservative scenario), and a ‘Severe COVID-19’ case (severe scenario).
• Stress scenarios considered business impacts (both capital and profitability) from COVID-19,
• Regulatory capital position appears resilient to each of these scenarios.
• These continue to be closely monitored with scenarios updated as part of the Business Plan
process – four key environmental factors were considered as part of this process
• Take a customer centric view to this situation to ensure we build trust, loyalty through and
beyond this crisis
Defend against
revenue declines
• Pivot resources to pockets of need including lapses and claims management
in the environment
• Shifted focus to policy retention, including providing alternatives to customers to improve
premium affordability
• Crisis Management Team and Board are meeting regularly to monitor the situation
and are well prepared to take further corrective or remedial actions as required should
situation deteriorate beyond stress scenarios
Stabilise operations
to ‘new normal’
• Increased adviser engagement
• Stabilise services, appropriately manage lapses and claims
• Build operational contingency plans for all aspects of business
• Front line facilities, costs, technology
Conserve capital
and cash flow
• No FY20 bonuses across the business
• ClearView does not intend to undergo any on-market share buy-back activity given the
current environment and market conditions.
• No FY20 final dividend – APRA has requested that life insurers consider limiting
discretionary capital distributions
• $60m debt funding facility extended to 1 April 2024
• Tier 2 Subordinated Note issue actively under consideration (longer term capital solution)
• Expenses closely monitored and opted into JobKeeper program
Play Offence,
not just defence
• Define how we will outperform through and beyond the crisis
• Product/service/customer investments
• Prepare for ‘bounceback’ and recovery
• FY21 is a base transitional year with a focus on sustainability of our life business
• Plan for and leverage a ‘leap-frog’ change in customer behaviours – reset of strategy to
ClearView of the future
48 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT Outlook
•
The world is facing unprecedented circumstances
including significant economic, social and health
challenges caused by the COVID-19 pandemic. In these
difficult times, and whilst ClearView is not immune to
the challenges faced, we are fortunate to have a sound
business model, strong Balance Sheet and recurring
revenue base that creates a level of security for our
customer base, adviser network and stakeholders.
•
•
•
•
•
•
•
•
FY21 is a base transitional year with a focus on the
profitable, sustainable growth of the life insurance
business: Group Underlying NPAT guidance of
$20m-$24m in FY21 is provided.
Key potential impacts that are critical to achievement
of guidance is repricing1 and the secondary economic
impacts of COVID-19, in particular the flow on effects to
IP claims and affordability of premiums. While estimates
and allowances have been made in the updated claims
and lapse assumptions used, given the fluidity of the
COVID-19 pandemic and operating environment potential
impacts from any further deterioration in economic
conditions or unanticipated delays in the development
of a vaccine, the actual experience relative to the revised
assumptions adopted will need to be closely monitored.
As the industry shifts (over time) to rational competitor
pricing, increasing life sales and sustainable product
features, this will lead to improvement in underlying profit
margins and return on capital.
Initiatives are now underway to achieve more sustainable
IP claims and pricing outcomes - (APRA IDII Sustainability
Measures) that could lead to a return of rationality to
the market which is important for the achievement of
improved margins.
Repricing commenced in April 2020 (comes through
annual policy renewal cycle) with a focus on retention
and income protection claims management.
ClearView is also focused on accelerating the
development of Wealth Management business, and a
self-sustaining Financial Advice business.
ClearView has an Embedded Value of 95 cents per share
that reflects the discounted cash flows of the in-force
portfolios (including updating the assumptions for the
potential impacts of COVID-19).
ClearView does not intend to undergo any on-market
share buy-back activity given the current environment
and market conditions (in line with APRA communications
to consider limiting discretionary capital distributions)
•
•
No FY20 dividend has been declared in light of the above
and to preserve capital.
ClearView is actively investigating a Tier 2 debt issuance
(subject to market conditions and regulatory approvals)
with the intention of repaying at least part of the Debt
Funding Facility and to fund or further support the needs
of the regulated entities from time to time.
ClearView’s current actions to build customer loyalty, simplify
and improve products, and invest in technology are focused
on ensuring ClearView is easy for advisers and customers to
do business with.
This strategy is likely to underpin medium-to-long term
performance improvement objectives.
Today’s landscape is changing rapidly due to ongoing
consolidation by larger international players, the exit of the
banks from personal advice and the introduction of new
legislation. There are more changes ahead as the industry
commences the implementation of the Royal Commission
into Misconduct in the Banking, Superannuation and Financial
Services Industry Final Report recommendations and the
regulatory reform agenda.
For a customer-centric company like ClearView it also creates
opportunities to better support our increasing number of
customers and advisers.
The fundamental purpose and need for quality life insurance
and wealth management products, and professional advice,
has not changed. Australia’s ageing population, compulsory
superannuation system and rising household debt levels
underpins demand for ClearView’s high quality products and
services.
While there are many challenges ahead, ClearView is focused
on delivering value for our customers and helping them
navigate life’s ups and downs to achieve their goals.
Changes in state of affairs
In a COVID-19 context, ClearView notes the recent
developments in Victoria, including the declaration of a State
of Disaster with effect from 2 August 2020, where the related
business effects remain highly uncertain.
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 2020.
1
Repricing commenced April 2020. Further planned rate changes from May 2021 of 7% on average across the LifeSolutions portfolio and 5-10% on closed portfolios have been allowed
for in policy liabilities and EV calculations at 30 June 2020.
CLEARVIEW WEALTH LIMITED | 49
DIRECTORS’ REPORTDIRECTORS’ REPORT DIRECTORS’ REPORT
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 2020.
Managing Director
•
Simon Swanson
Managing Director
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:
•
•
•
•
•
•
•
•
Geoff Black
(Appointed Independent Non-executive Director on 25
November 2019; Appointed as Chairman on 1 July 2020)
Bruce Edwards (Resigned 1 July 2020)
(Former Chairman)
David Brown (Resigned 25 November 2019)
(Former Independent Non-executive Director)
Gary Burg
(Independent Non-executive Director)
Jennifer Lyon (Appointed on 1 July 2020)
(Independent Non-executive Director)
Michael Alscher
(Non-executive Director)
Nathanial Thomson
(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:
Other Executive KMP
•
•
•
Judilyn Beaumont (Appointed 11 November 2019)
General Counsel and Company Secretary
Christopher Blaxland-Walker
General Manager, Distribution
Athol Chiert
Chief Financial Officer
Company Secretary (Ceased 15 November 2019)
• Orla Cowan (Appointed 8 October 2019)
Chief Risk Officer
•
•
•
•
Todd Kardash
General Manager, Licensee Services
Deborah Lowe
General Manager, People and Operations
Greg Martin
General Manager, Strategy (Commenced 5 September 2019)
Chief Actuary and Risk Officer (Ceased 5 September 2019)
Justin McLaughlin
Chief Investment Officer
• Hicham Mourad (Appointed 2 March 2020)
General Manager, Technology
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;
Maintain a competitive, yet financially-viable salary
structure; and
Clarify responsibilities, accountability and decision-making
authority in relation to remuneration at ClearView.
50 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT
DIRECTORS’ REPORT
Remuneration Framework
Remuneration Governance
ClearView’s Remuneration Policy (Policy) was updated in 2019
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
expertise with appropriate external expert advice;
•
•
Reviewing and recommending to the Board (and if
required to shareholders) any short-term and long-term
incentive payments for the Managing Director and Senior
Management Team (SMT); and
Reviewing and providing recommendations to the
Board (and if required to shareholders) in relation to any
termination benefits for Non-executive Directors, Managing
Director, other SMT members and key persons which exceed
one year’s average base salary as defined in the Corporations
Act 2001.
ClearView’s Remuneration Policy is in place to:
•
•
Outline employee obligations and ClearView’s obligations;
Set out roles, responsibilities and accountabilities of the KMP;
• Set out clear reporting and controls;
•
•
Define various terms to ensure a common
understanding; and
Clarify what happens if this policy or associated procedures
are breached.
Relationship between Remuneration Policy and
Company Performance
The primary objectives of the Remuneration Policy are
to ensure that remuneration is competitive, aligned with the
Company’s business objectives in both the short term and
the long term, and appropriate for the results delivered by the
individual. In accordance with this objective, the Company has
structured remuneration packages to provide an appropriate
mix of fixed and performance based pay components which
are based on both the individual’s performance and Group
performance. By adopting a robust approach to remuneration,
the Group aims to attract and retain top talent.
The remuneration framework is also designed to reward prudent
risk-taking, support effective risk management and prioritise
the long term financial soundness of the business and its
shareholders.
Total KMP remuneration is made up of three components:
•
Fixed Remuneration;
• Short Term Incentive (STI); and
• Long Term Incentive (LTI).
ClearView is closely monitoring the regulatory guidance and
expectations issued by APRA. These have been considered to-
date in setting the FY21 fixed remunerations. Formal consulting
advice was sought from Godfrey Remuneration Group, an
independent remuneration consulting group in setting the 2021
Fixed Remuneration. Further details are provided in the sections
that follow. The remuneration policy and internal policies will
continuously be reviewed to ensure ongoing compliance with
regulatory changes as more information becomes known and
the changes are due to take effect.
CLEARVIEW WEALTH LIMITED | 51
DIRECTORS’ REPORTDIRECTORS’ REPORT 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 and deferrals 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 2020 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.
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 FY20, the award of the STI component for KMP was based on the achievement of one company goal, as per the following
table and awards based on personal targets and objectives.
Company Goal
Description
Min
%
Target
%
Max
%
%
Achieved
FY20
Operating
Earnings
(after tax) 2020
Pool Value
Consists of consolidated profit after tax adjusted for
amortisation (not including capitalised software), the effect
of changing discount rates on insurance policy liabilities, costs
considered unusual to the Group’s ordinary activities and
interest on corporate debt (after tax).
0%
100% 120%
0%
52 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT As outlined in the table, STI outcomes for FY20 fall within a range of 0% to 120% of the individual Target STI with 100% pegged to
achieving target performance (as set out in the Board approved Business Plan). The resultant potential maximum STI awards for KMP
range from 0% to 60% of Fixed Remuneration as follows:
SMT Member
Simon Swanson
Athol Chiert
Christopher Blaxland-Walker
Deborah Lowe
Gregory Martin
Justin McLaughlin
Todd Kardash
Orla Cowan
Judilyn Beaumont
Hicham Mourad
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%
Any payment of KMP bonuses is recommended by the Remuneration Committee and approved by the Board.
Overall in FY20 0% of the target STI pool for the company goal was achieved based on the range of financial outcomes. The FY20
result was adversely impacted by poor claims experience in the life insurance business. Further details on the FY20 results has been
provided in the Operating and Financial Review. Whilst KMP had personal targets and objectives in FY20, given the company results,
each KMP was assessed as not meeting their personal targets and objectives, hence 0% of the personal target was achieved. This
resulted in no STI being made payable to the SMT.
Sound risk management practices act 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. It was envisaged that a deferral mechanism for STI would be introduced for
the FY20 performance period. However, this was delayed due to the uncertainty around their interaction with upcoming regulatory
requirements (specifically FAR and CPS511).
For FY21 the value of KMP incentives will be determined by both company goals and personal targets, with objectives set for the
KMP by the Managing Director. The Group has chosen to implement deferral arrangement for FY21 for the STI and LTI components
for KMP. These will be in place for FY21 and reinforce the Company’s approach to risk management. Further details on the FY21
framework review is provided later in the report.
Long Term Incentive Plan (LTIP)
Background
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).
ClearView was required to undergo a significant transformation, that has been achieved over the last ten 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 implemented an ownership-based compensation scheme for the Senior Management Team (SMT), key management and
revenue generators of the Group to assist in the recruitment, rewarding, retention and motivation of employees. This scheme 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.
CLEARVIEW WEALTH LIMITED | 53
DIRECTORS’ REPORTDIRECTORS’ REPORT 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 Board decided to initially 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 were aligned given that value was only
attributed to participants through an increase in the share
price and that a key component of the STI component
was at the time also aligned to the longer term, being the
Embedded Value.
However, based on the changes in the nature of the business
over time, in 2017 the Board determined that interest would
only be payable on loan extensions for fully vested ESP
shares for Employee Participants and then subsequently
implemented this approach for Contractor Participants in
June 2019.
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 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
54 | CLEARVIEW ANNUAL REPORT 2020
managers, members of the Senior Management Team
and the Managing Director; and
•
Contractor Participants - These participants are
financial advisers.
Eligible Employees under the Plan Rules therefore include
both Employee Participants and Contractor Participants of
the Company and its related body corporates.
Non-executive Directors are ineligible to participate in the
Plan in accordance with the Plan Rules.
Offer and consideration
Under the ESP, the Board may invite Eligible Employees
to participate in an offer (Offer) of fully paid ordinary shares
in ClearView, subject to the terms of conditions of the ESP.
Each ClearView Share is issued at a price to be determined
by the Board prior to making an Offer and this price is set
out in the invitation (Invitation) to Eligible Employees. This
price may be the market price of a Share (as defined in the
ESP Rules) on the date of the Invitation. Taking into account
the liquidity, volatility, and the average trading activities
of the ClearView Shares, the Board determined in February
2013 that it is appropriate and reasonable for ClearView
to adopt the Volume Weighted Average Price (VWAP) over
a 3 month period to determine the market value of the
ClearView Shares for the purposes of ESP issues. This has
been implemented for all ESP Share issues since that date.
Prior to this, no ESP Shares were issued at a price below 50
cents per share, being the price at which the original capital
raising was completed in June 2010.
Restrictions on offer
Shares may not be offered under the ESP to an Eligible
Employee if that Eligible Employee would hold, after the
issue of the Shares, an interest in more than 5% of the issued
Shares of ClearView or be able to control the voting rights of
more than 5% of the votes that might be cast at a general
meeting of ClearView.
As at the date of this Report, the Board has not set a limit
on the number of Shares that may be issued under the
Plan. The Board or Board Authorised Delegates approve the
issue of new ESP shares and monitors the overall quantum
of ESP shares on issue, relative to the interests of existing
shareholders and the overall objectives of the business. No
shares have been issued under the Plan since July 2017.
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:
DIRECTORS’ REPORT •
•
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.
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):
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 Employee 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
•
•
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:
•
5 years have passed from the Acquisition Date; or
(a) Until 14 February 2013:
If the Participant:
•
•
is an Employee Participant, their employment with
the Group ceases, or
is a Contractor Participant, their contractor agreement
is terminated; or
• The ESP is terminated, or
• The holding lock period otherwise ceases;
provided that the Financial Assistance and any interest that
has been accrued have been repaid.
For Share issues from 14 February 2013 the Holding Lock
ceases on vesting or forfeiture of Shares.
The holding lock is imposed through the share registry and
in accordance with the ASX Listing Rules. Participants will not
be able to sell their ESP Shares on ASX or have an off-market
transfer registered (and are also otherwise prohibited from
dealing in the shares) while the holding lock is in place.
If the participant is a Contractor Participant, following the
removal of the holding lock over the Shares of the participant,
the participant may not sell, or otherwise deal with, any such
Shares without the prior written consent of the Company,
•
•
•
A person who did not Control the Company at the date of
issue of the Plan Shares gains Control of the Company (but
only if the person is not itself Controlled by another person
who Controlled the Company at the date of issue); or
Other circumstances occur which the Board determines
in its absolute discretion are analogous to a Control
transaction and justify removal of Performance Conditions
and/or Vesting Conditions.
‘Control’ is defined as where a person and its
related bodies corporate holds more than 50% of the
Shares in ClearView.
(b) After 14 February 2013:
• 12 months after a Change of Control; or
•
•
Circumstances occur which the Board determines in its
absolute discretion are analogous to a Control transaction
and justify removal of Performance Conditions and/or
Vesting Conditions.
Control’ is defined as Crescent Capital Partners and its
Associated Entities no longer holding 20% of the voting
rights of the Company.
CLEARVIEW WEALTH LIMITED | 55
DIRECTORS’ REPORTDIRECTORS’ REPORT (c) After 1 July 2015:
•
•
For ESP Shares issued to employee participants after 1 July 2015, unless stated otherwise in the participants Invitation Offer, all
performance and vesting conditions in relation to these shares, are not deemed to have been met upon a Change of Control.
Control’ is defined as Crescent Capital Partners and its Associated Entities no longer holding 20% of the voting rights of the
Company.
The above provisions concerning change of control apply only to Employee Participants and not Contractor Participants under the
ESP.
Services from consultants - 2018 review and new LTIP
The Remuneration Committee seeks and considers advice from independent, external remuneration consultants where appropriate.
Remuneration consultants are engaged directly by and report to the Remuneration Committee.
In 2017, it was considered appropriate for the Remuneration Committee to engage AON Hewitt Associates Pty Ltd. (Aon Hewitt) to
benchmark overall remuneration for the SMT and non-executive Directors. 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 was primarily vested and as such it was
necessary to consider what would represent an appropriate new LTI, as part of the overall remuneration structure for SMT members.
The value of the existing LTIP rested in the interest free component of the ESP loan backed plan, and receiving dividends on the ESP
shares that are financed by these ESP loans. In considering a new LTI scheme, three key objectives were focused on:
1.
Providing appropriate remuneration to the SMT to ensure a component of remuneration remains delivered in equity and is
focused on longer term performance;
2.
Acting 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, with subsequent awards
made in FY19 and FY20. Further details on the proposed FY21 award has been provided later in the report.
56 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT The key terms of the rules of the LTIP Plan are outlined below:
Key Plan Details
Description
1. Instruments
Awards of performance rights or options subject to the terms and conditions set out in the
ClearView Wealth Limited Long Term Incentive Plan Rules.
2. Eligibility
Open to eligible employees by invitation of the Board from time to time.
3. Amount of the Award
The amount payable for the grant of each Award or how such amount is calculated, as well as the
exercise price (if any) will be determined at each series.
4. Terms of Awards
Participant’s rights
Prior to an Award being exercised a Participant is not entitled to notice of, or to vote or attend
at, a meeting of the shareholders of the Company and receive any dividends declared by the
Company by virtue of holding an Award.
Restriction of dealing
A Participant may not sell, assign, transfer, grant a Security Interest over or otherwise deal with
an Award that has been granted to them, unless the Board in its absolute discretion so approves
or the relevant dealing is effected by force of law on death or legal incapacity to the Participant’s
legal personal representative
Prohibition on hedging
A Participant must not enter into any arrangement for the purpose of hedging their economic
exposure to an unvested Award that has been granted to them.
Listing
Unless determined otherwise by the Board in its absolute discretion, an Award granted under the
Plan will not be quoted on the ASX or any other recognised exchange.
5. Vesting Conditions
The vesting conditions will be determined from time to time at each series.
An Award will vest when a Vesting Notice in respect of that Award is given or is deemed to be
given to the Participant. A Vesting Condition for an Award may, subject to the Corporations
Act, the Listing Rules and any other applicable laws and regulations, be waived by the Board by
written notice to the relevant Participant and on such terms and conditions as determined by the
Board and set out in that notice.
6. Exercise of Awards
An Award may only be exercised when all Vesting Conditions and all Exercise Conditions
applicable to that Award are satisfied or have been waived by the Company and the Company
has provided a Confirmation Notice to the Participant.
7. Settlement of Awards
The Board may determine the preferred settlement mechanism (ie Cash Settled or Equity Settled)
in its absolute discretion.
8. Shares to rank pari
passu and listing
All Resulting Shares will rank pari passu in all respects with the Shares of the same class for the
time being on issue except for any rights attaching to the Shares by reference to a record date
prior to the date of the allotment or transfer of the Resulting Shares.
CLEARVIEW WEALTH LIMITED | 57
DIRECTORS’ REPORTDIRECTORS’ REPORT Key Plan Details
9. Forfeiture
Description
a) Leaver
If a Participant becomes a Leaver:
i) they will retain all of their vested Awards; and
ii) if the Participant becomes a Leaver as a result of death or total permanent disability, they will
retain all of their unvested Awards; or
iii) in all other circumstances, all of their unvested Awards will be forfeited on a date determined
by the Board, unless the Board provides express written consent that the Participant may retain
any or all of their unvested Awards.
If the Participant is entitled to retain any or all of their unvested Awards, those Awards will be
subject to the terms and conditions that the Participant held those Awards prior to becoming
a Leaver, or such other terms and conditions as the Board communicates in writing to the
Participant.
b) Failure to satisfy Vesting Conditions and Exercise Conditions
Unless otherwise stated in the Invitation or determined by the Board in its absolute discretion,
an Award which has not yet vested or has not yet been exercised will be forfeited immediately
on the date that the Board determines (acting reasonably and in good faith) that any applicable
Vesting Conditions or Exercise Conditions have not been met or cannot be met by the relevant
date.
10. Disposal Restrictions If the Rules or a Participant’s Invitation provide that any Resulting Shares are subject to any
11. Change of Control
Event
12. Size and duration
restrictions as to the disposal or other dealing by a Participant for a period, the Board may
implement any procedure it deems appropriate to ensure the compliance by the Participant with
this restriction, including but not limited to imposing an ASX Holding Lock (where applicable) on
the Resulting Shares or using an employee share trust to hold the Resulting Shares during the
relevant restriction period.
Notwithstanding any other provisions of the Rules but subject to applicable laws and the terms
of a Participant’s Invitation, if a Change of Control Event occurs, or the Board determines for the
purpose of this Plan that such event is likely to occur, the Board may in its absolute discretion
determine (having regard to, amongst other factors, the performance of the Company against
targets in the Vesting Conditions at that time, the period of time that has elapsed between the
Grant Date and the date of the Change of Control Event, and the circumstances of the Change of
Control Event) the manner in which any or all of the Participant’s Awards will be dealt with.
Unless the Board determines otherwise, the Company will not issue an Invitation to an Eligible
Participant under these Rules if the aggregate of the total number of Shares that would be issued
under that Invitation and the number of Shares which could be issued were each outstanding
offer or grant made within the 3 years preceding the Invitation with respect to Shares, units of
Shares and options or rights to acquire unissued Shares, under this Plan or any other employee
incentive scheme of the Company to be accepted or exercised and the number of Shares issued
in the 3 years preceding the Invitation, pursuant to this Plan or any other employee incentive
scheme of the Company, would exceed 5% of the total number of issued Shares at that time.
58 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT Performance rights granted as compensation
The number of performance rights granted as compensation to each participant, in accordance with the LTIP is as follows:
SMT Member
2018 issue¹ 2019 issue² 2020 issue4
Total
Unvested4
Vested³
Forfeited
Simon Swanson5
1,142,857
718,899
897,868
2,759,624
897,868
791,246
1,070,510
Athol Chiert
357,143
224,656
280,584
862,383
280,584
247,265
334,534
Christopher Blaxland-
Walker
Deborah Lowe
Gregory Martin
285,714
179,725
224,467
689,906
224,467
197,812
267,627
114,286
71,890
196,408
382,584
196,408
79,125
107,051
428,571
269,587
336,700
1,034,858
336,700
296,717
401,441
Justin McLaughlin
250,000
157,259
196,408
603,667
196,408
173,085
234,174
Todd Kardash
285,714
179,725
224,467
689,906
224,467
197,812
267,627
Total
2,864,285
1,801,741
2,356,902
7,022,928
2,356,902
1,983,062
2,682,964
1
2
3
4
5
Number of performance rights issued to participants in October 2017 and April 2018.
Number of performance rights issued to participants in September 2018.
Number of shares vested based on actual achievement as approved by the Board in August 2019.
Number of performance rights issued to participants in August 2019 which has a vesting date of 30 June 2022, they remain unvested as at 30 June 2020.
Vested performance rights allocated to Simon Swanson were satisfied by the on-market purchase of ClearView ordinary shares.
Key terms of 2018 and 2019 Issue
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 had the ability to be cash settled in certain
circumstances.
Invitations were made to nominated SMT members as outlined in the previous table.
Each participant was set an LTI dollar value determined as part of their remuneration package. This
dollar value was 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 were subject to a performance period that ended on 30 June 2019.
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 included:
•
•
50% of the Performance Rights were 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 would vest with straight line
vesting between 90% and 100%.
50% of the Performance Rights were 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 were 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 were ranked according to their TSR performance.
ClearView’s TSR was calculated for the relevant period and ranked based on its
percentile performance against the peer group.
The number of rights that vested were 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 applied between the 50th and 75th
percentiles.
CLEARVIEW WEALTH LIMITED | 59
DIRECTORS’ REPORTDIRECTORS’ REPORT Key Scheme Details
Description
6. Change of Control
If there is a change of control event then the unvested Performance Rights would 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. This
was not relevant in the circumstances.
Achievement of the performance rights was as follows:
Vesting condition
Outcome
Embedded Value target at
30 June 2019
Achievement of 97% of
Embedded Value target
Vesting
scale
85%
TSR target
Total
Below the 50th percentile
0%
Weighting
Allocation of
CVW shares
50%
50%
42.5%
0%
42.5%
This resulted in the awarding of 42.5% of the performance rights issued with the balance being forfeited. This resulted in the
allocation of 2.1 million shares held in the ESS Trust to participants as outlined in the table on the previous page. The remaining
2.7 million shares held in the ESS Trust are available for future issues (see sections that follow).
Key terms of 2020 Issue
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 for the FY20 issue was based on being equity settled
(determinant right).
Invitations were made to nominated SMT members as outlined in the table on page 59.
Each participant has a set LTI dollar value determined as part of their remuneration package. This
dollar value was converted into a set number of Performance Rights at grant date based on an
agreed value per share, being 90% of the Embedded Value per share of $0.99³.
4. Performance Period
The Performance Rights are subject to a performance period that ends on 30 June 2022.
5. Vesting Conditions
The participants must remain employed by the ClearView Group as at the vesting date (30 June
2022), in addition to meeting performance based vesting conditions.
The specifics of the vesting conditions include:
•
•
100% of the Performance Rights will be measured against an Underlying NPAT target for the
year ended 30 June 2022 (adjusted for interest on corporate debt), as set out in the three
year FY20 Business Plan and measured immediately after the financial year 30 June 2022.
At 90% achievement of the Underlying NPAT target, 0% of the Awards will vest with straight
line vesting between 90% and 100%.
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 Underlying NPAT performance hurdle and a continuing
employment service condition as noted above.
7. Exercise Conditions
In addition to the vesting conditions, an annual review will be conducted following the year
ended 30 June 2022 to 5 business days after the 30 June 2025 audited results are released to
assess if any breaches or instances of misconduct have been identified from 1 July 2019 to this
date. If the exercise conditions are not met, all or part of the Award may be forfeited, having
taken into consideration the period, magnitude and impact of the event, breach, or misconduct
being considered.
1
2
Performance rights to be granted to Simon Swanson were satisfied by the on-market purchase of ClearView ordinary shares.
Number of performance rights approved on 21 August 2019 were issued at a grant date of 21 August 2019, based on a share understanding with the employees. Formal letters were
issued and signed in August 2020 given time taken to set deferral mechanism.
3
Embedded Value at 30 June 2019 4% discount rate margin, including a value for future franking credits, accrued franking credits and Employee Share Plan (ESP) loans.
60 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT Services from consultants - 2021 review
In 2020, it was considered appropriate for the Remuneration Committee to engage Godfrey Remuneration Group (GRG) to
benchmark overall remuneration for the SMT and non-executive Directors. The advice from GRG was used as a guide, and was
not a substitute for a thorough consideration of all the issues by the Remuneration Committee.
GRG was also engaged to provide options for the evolution of the remuneration framework for FY21. As a result of the GRG
review, a deferral mechanism has now also been introduced for STI purposes and the deferral period implemented for LTIP (as
part of the overall remuneration structure for SMT members) was also reviewed.
It was decided to implement a deferred short term variable remuneration plan using restricted rights. This now allows
the intended implementation of a deferral for the STI (40% payable three years post the measurement period), to ensure
appropriate risk management and conduct over that time. The STI (including the deferred component) can be granted as
indeterminate rights and the Board can therefore exercise discretion as to how the STI is paid (either in cash or in shares).
Deferred portions are payable regardless of employment status unless the clawback policy has been invoked. The quantum of
the SMT awards in FY21 will be predominantly linked to the completion of key projects and initiatives that will impact on the
longer term sustainability and performance of the business. 20% will be based on financial performance, 60% on business
initiatives and 20% on personal goals. As noted previously, FY21 is considered a key transitional year. Further details on the
updated remuneration framework will be provided in the FY21 Annual Report.
Performance Rights – 2021 Issue
The GRG review recommended the continued adoption of the existing LTI Plan. The number of performance rights that were
approved to be granted by the Remuneration Committee as compensation to each participant on 21 August 2020 is as follows:
SMT Member
Simon Swanson
Athol Chiert
Christopher Blaxland-Walker
Deborah Lowe
Gregory Martin
Justin McLaughlin
Todd Kardash
Judilyn Beaumont
Orla Cowan
Hicham Mourad
Total
2021 issue
1,199,632
374,885
299,908
262,420
449,862
262,420
299,908
149,954
149,954
149,954
3,598,897
CLEARVIEW WEALTH LIMITED | 61
DIRECTORS’ REPORTDIRECTORS’ REPORT The key terms of the FY21 issue under the LTIP scheme are as follows:
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 for FY21 will be indeterminate rights and have the
ability to be cash settled.
Invitations to nominated SMT members as outlined in the previous table.
Each participant has a set LTI dollar value determined as part of their remuneration package.
This dollar value is converted into a set number of Performance Rights at grant date based on an
agreed value per share (67 cents per share which is calculated based on a $450 million market
capitalisation of the Company).
4. Performance Period
The Performance Rights are subject to a performance period that ends on 30 June 2024.
5. Vesting Conditions
The participants must remain employed by the ClearView Group as at the vesting date (30 June
2024), in addition to meeting performance based vesting conditions.
The specifics of the vesting conditions include:
•
100% of the Performance Rights will be measured against the Total Shareholder Return (TSR)
target for the year ended 30 June 2024. The TSR target will be based on a 25% compound
return and measured immediately after the financial year 30 June 2024.
6. Change of Control
If there is a change of control event then the unvested Performance Rights will remain on foot
and continue to be tested against the Total Shareholder Return performance hurdle and a
continuing employment service condition as noted above.
7. Exercise conditions
In addition to the vesting conditions, an annual review will be conducted following the year
ended 30 June 2024 to 5 business days after the 30 June 2027 audited results are released to
assess if any breaches or instances of misconduct have been identified. If the exercise conditions
are not met, all or part of the Award may be forfeited, having taken into consideration the period,
magnitude and impact of the event, breach, or misconduct being considered.
Further details on the FY21 framework will be provided in the FY21 Remuneration Report.
Consequences of ClearView’s performance on shareholder wealth
The following tables set out the summary information about the Group’s earnings and movements in shareholder wealth for
five years to 30 June 2020:
Revenue1 ($’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)
Share Price at the end of the year (cents)
30 Jun 20
30 Jun 19
30 Jun 18
30 Jun 17
30 Jun 16
410,339
385,755
372,207
333,503
295,828
13,081
14,738
3,959
25,090
26,596
32,353
13,150
30,362
23,615
27,235
-
2.08
2.08
2.34
643
95.3
66.0
27.5
-
0.63
0.62
3.94
673
99.4
116.0
66.0
3.00
4.33
4.14
5.03
670
100.3
145.0
116.0
2.75
2.20
2.11
4.88
630
95.6
95.0
145.0
2.50
4.39
4.27
4.92
591
89.8
95.0
95.0
1
2
Revenue from continuing operations excludes net fair value gains/losses in financial assets.
Embedded Value at 4% discount rate margin, including a value for future franking credits, franking credits included in the net worth and ESP loans. Excluding EV attributed to the financial
advice business. Franking credits have been included in the net worth and prior periods have been restated to reflect this.
62 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT 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
(2019: $1,000,000). Directors’ fees can be paid as superannuation contributions. The fee pool is the only source of
remuneration for Non-executive Directors.
The compensation of each Non-executive Director for the year ended 30 June 2020 is set out below:
Short term
employee benefits
Post
employment
Share based
payments
Total
Salary
& Fees
2020
$
Non-executive Directors
B Edwards1
150,000
Bonus
$
D Brown2
G Burg
N Thomson4
M Alscher4
S Young
G Black3
J Lyon5
Total
32,344
85,000
85,000
84,167
70,000
46,899
-
553,409
1 Mr Edwards resigned as Director on 1 July 2020.
2 Mr Brown resigned as Director on 25 November 2019.
3 Mr Black appointed as Director on 25 November 2019.
-
-
-
-
-
-
-
-
-
Non-
monetary
Termination
Payment
Superannuation
Executive
Share Plan
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,073
-
-
-
25,000
4,455
-
32,528
150,000
35,417
85,000
85,000
84,167
95,000
51,354
-
585,937
-
-
4 Mr Thomson and Mr Alscher have agreed they will receive no fees as Director although fees are payable to Crescent Partners Management Pty Ltd of which they are employees.
5 Ms Lyon appointed on 1 July 2020, no remuneration in FY20.
CLEARVIEW WEALTH LIMITED | 63
DIRECTORS’ REPORTDIRECTORS’ REPORT
The compensation of each Non-executive Director for the year ended 30 June 2019 is set out below:
Short term
employee benefits
Post
employment
Share based
payments
Total
Salary
& Fees
2019
$
Non-executive Directors
B Edwards
150,000
Bonus
$
D Brown
G Burg
N Thomson1
M Alscher1
S Wakuya²
S Young3
Total
77,626
85,000
85,000
49,077
31,111
70,000
547,814
-
-
-
-
-
-
-
-
Non-
monetary
Termination
Payment
Superannuation
Executive
Share Plan
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,374
-
-
-
-
25,000
32,374
-
-
-
-
-
-
-
-
150,000
85,000
85,000
85,000
49,077
31,111
95,000
580,188
1
Mr Alscher’s appointment as alternate Director to Mr Thomas was revoked and he was appointed as Director on 20 November 2018. Mr Thomson and Mr Alscher have agreed they will
receive no fees as Director although fees are payable to Crescent Partners Management Pty Ltd of which they are employees.
2 Mr Wakuya resigned as Director on 20 November 2018.
3
In the 2019 Remuneration Report, salary sacrificed superannuation amount has been included as salary. The table above has been amended to reflect the amount as superannuation.
Managing Director and Senior Management Team remuneration
The compensation of each member of the KMP of the Group for the year ended 30 June 2020 is set out below:
Short term
employee benefits
Post
employment
Share based payments
Total
Salary &
Fees
Bonus
Retention
Bonus
Non-
monetary
Superannu-
ation
2020
$
$
$
$
$
Long
Service
Leave
$
Executive
Share Plan5
$
Long Term
Incentive
Plan6
$
Perfor-
mance
based
%
$
S Swanson
A Chiert
G Martin
J McLaughlin
T Kardash
709,776
403,475
419,842
348,537
361,520
C Blaxland-Walker
358,482
D Lowe
J Beaumont1
O Cowan2
H Mourad3
E Briggs4
Total
336,970
246,925
283,117
116,462
19,200
3,604,308
-
-
-
-
-
-
-
-
-
-
-
-
- 15,905
21,002
10,350
- 12,044
- 15,905
21,002
21,002
-
-
25,973
- 62,657
25,000
- 72,893
21,002
-
-
-
-
(18,860)
7,833
5,520
6,198
1,395
678
21,002
15,175
15,578
7,270
1,402 (34,602)
6,639
6,944
5,717
5,747
5,848
5,692
273
261
131
-
-
-
-
-
50,667 6.26%
807,700
15,833 3.44%
458,993
19,000 3.92%
482,693
11,083 2.83% 391,310
12,667 2.70%
467,591
4,808
12,667 3.66%
475,700
19,874
11,083 7.67%
402,454
-
-
-
-
- 0.00%
267,893
- 0.00%
305,154
- 0.00%
125,258
- 0.00%
(32,182)
(18,860) 201,028
195,410
13,001
24,682
133,000 3.79% 4,152,564
1
2
3
4
5
6
Appointed as General Counsel and Company Secretary on 11 November 2019.
Appointed as Chief Risk Officer on 8 October 2019. An induction bonus of $50,000 has been included in O Cowan’s salary for the year.
Appointed as General Manager, Technology on 2 March 2020.
Ceased General Counsel and Company Secretary on 24 July 2019.
Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued.
For details, refer to LTIP Awards.
64 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT
The compensation of each member of the KMP of the Group for the year ended 30 June 2019 is set out below:
Revised
Short term
employee benefits
Post
employment
Share based payments
Total
Salary &
Fees1
Bonus
Retention
Bonus
Non-
monetary2
2019
$
$
$
$
Termi-
nation
Payment
$
Superan-
nuation
$
Long
Service
Leave1
$
Employee
Share Plan3
$
Long Term
Incentive
Plan4
$
Perfor-
mance
based
%
$
S Swanson
A Chiert
G Martin
J McLaughlin
T Kardash
677,195
404,517
427,132
337,683
340,970
C Blaxland-Walker 353,707
D Lowe
E Briggs
L Hulley
Total
346,025
291,475
206,794
-
-
-
-
-
-
-
-
-
300,000
15,235
- 20,531 13,572
-
804,549 60.3% 1,831,082
210,000
11,806
- 20,531
8,522
40,250
251,422 53.2%
947,048
210,000
15,235
- 20,531
8,351
40,250
301,705 53.9% 1,023,204
180,000
-
- 27,333
7,511
-
175,995 48.9%
728,522
200,000 64,999
- 25,019
6,893
43,816
201,137 50.4%
882,834
200,000 102,707
- 20,531
7,290
15,792
201,137 46.3%
901,164
180,000
7,364
- 20,531
7,215
29,307
80,455 43.2%
670,898
160,000
160,000
-
- 20,531
7,475
8,792
106,440 46.3%
594,714
- 144,734 16,754
4,548
-
- 30.0%
532,830
3,385,500
1,800,000 217,346 144,734 192,292 71, 376
178,207 2,122,841 50.6% 8,112,295
1
In the 2019 Remuneration Report, annual and long service leave has been included in Salary instead being separately disclosed. The table above has been amended to reflect the
corrected disclosure.
2
In the 2019 Remuneration Report, non-monetary benefits were understated and the values of two individuals have been amended in the table above. A total of $144,094 was
understated reflecting additional car benefits including FBT costs.
Benefit calculated under the Binomial model in respect of the future value of the ESP shares issued.
For details, refer to LTIP Awards.
3
4
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. Loan extensions have been provided as outlined earlier in the report.
The following tables outlines the ESP loans made to KMP or their related entities as at 30 June 2020 and 30 June 2019:
2020
S Swanson
A Chiert
G Martin
J McLaughlin
T Kardash
C Blaxland-Walker
D Lowe
E Briggs
Total
Balance at
beginning
Loans
Granted
$
Interest
charged1
$
Repay-
ments
$
Loan
Cancelled
$
Balance at
end
$
Highest in
period
$
5,967,271
2,030,070
2,537,946
1,281,524
1,268,972
1,257,195
487,053
144,673
14,974,704
-
-
-
-
-
-
-
-
-
103,656
26,467
35,289
22,261
17,644
17,644
-
-
222,962
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,070,927
6,070,927
2,056,537
2,056,537
2,573,235
2,573,235
1,303,785
1,303,785
1,286,616
1,286,616
1,274,839
1,274,839
487,053
487,053
(144,673)
-
144,673
(144,673)
15,052,992
CLEARVIEW WEALTH LIMITED | 65
DIRECTORS’ REPORTDIRECTORS’ REPORT
2019
S Swanson
A Chiert
G Martin
J McLaughlin
T Kardash
C Blaxland-Walker
D Lowe
E Briggs
L Hulley
Total
Balance at
beginning
Loans
Granted
$
Interest
charged1
$
Repay-
ments
$
Loan
Cancelled
$
Balance at
end
$
Highest in
period
$
5,953,803
2,024,514
2,525,704
1,268,824
1,262,851
1,247,103
494,051
146,776
67,936
15,049,802
-
-
-
-
-
-
-
-
-
-
172,468
(159,000)
45,306
(39,750)
59,942
(47,700)
36,960
(23,850)
29,971
(23,850)
29,929
(19,836)
1,326
394
(8,324)
(2,497)
1,225
(69,161)
-
-
-
-
-
-
-
-
-
5,967,271
5,967,271
2,030,070
2,030,070
2,537,946
2,537,946
1,281,524
1,281,524
1,268,972
1,268,972
1,257,195
1,257,195
487,053
494,051
144,673
146,776
-
67,936
377,521
(393,968)
- 14,974,710
1
Interest is charged on vested shares for SMT participants as resolved by the Board.
Shares granted to KMP and equity holdings
During and since the end of the financial year no shares (2019: 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 6 1,2,6,8
Series 7 1,3,6,8
Series 10 1,3,6,8
Series 11 1,4,6,8
Series 12 1,5,6,8
Series 15 1,5,6,8
Series 16 1,5,6,8
Series 16 1,5,6,8
Chris Blaxland-Walker
Series 26 7
Series 26 7
Series 26 7
Series 43
Series 44
Series 45
Series 51a
Series 51b
Athol Chiert
Greg Martin
Todd Kardash
Chris Blaxland-Walker
Chris Blaxland-Walker
Chris Blaxland-Walker
Deborah Lowe
Deborah Lowe
Fair value
at grant
date (pre-
modification1)
Fair value
at grant
date (post-
modification1)
Exercise
price per
share ($)
Aggregate
value at
grant date
($)
Expiry date9
0.10
0.07
0.11
0.08
0.06
0.10
0.10
0.10
0.29
0.29
0.29
0.20
0.23
0.27
0.19
0.22
0.10
0.59
51,500
Change in Control
0.10
0.11
0.08
0.06
0.13
0.13
0.13
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0.49
0.50
0.58
0.65
0.50
0.50
0.50
0.57
0.57
0.57
1.01
1.01
1.01
0.96
0.96
98,057
Change in Control
224,074
Change in Control
323,295
Change in Control
241,927
Change in Control
196,271
Change in Control
127,366
Change in Control
127,366
Change in Control
289,798
Change in control
289,798
Change in control
144,899
Change in control
16,718
Change in Control
19,372
Change in Control
21,883
26/11/2020
49,733
Change in control
57,586
Change in control
1
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.
2
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.
Expiry represents either the relevant vesting or holding lock period.
3
4
5
6
7
8
9
66 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT
The following table summarises the performance and vesting conditions for shares issues to Employee Participants under the
ESP as at the date of this report are:
Series
Vesting Conditions
Performance Conditions
Series 6 – 30 June 2008 Issue
Series 7 – 29 September 2009 Issue
Series 10 – 25 June 2010 Issue
Series 11 – 25 June 2010 Issue
Series 12 – 25 June 2010 Issue
Series 15 – 18 August 2011 Issue
Series 16- 6 October 2011 Issue
Series 24- 22 August 2012 Issue
Series 26- 16 April 2013 Issue
Nil1
Nil1
Nil2
Nil2
Nil2,4
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
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
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1
2
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.
3
4
Special condition relating to shares issued to KMP in Series 26: 100% of the shares may be sold on change of control, but 50% are held in escrow after employment for 1 year thereafter.
Change of control provision was triggered on 26 September 2012 by CCP Bidco obtaining a shareholding above 50%.
CLEARVIEW WEALTH LIMITED | 67
DIRECTORS’ REPORTDIRECTORS’ REPORT 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
As as the end of the current reporting period, 2,356,902 performance rights granted under the LTIP scheme were in existence.
They are subject to a performance period that ends on 30 June 2022.
Shares held by Directors and KMP
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 2020:
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
s
e
g
n
a
h
c
r
e
h
t
o
t
e
N
.
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
-
617,040
-
-
-
27,212
- 10,918,090
617,040
50,000
27,212
50,000
-
- 10,918,090
-
-
-
-
t
e
y
t
o
n
t
u
b
d
e
t
s
e
V
.
o
N
e
l
b
a
s
i
c
r
e
x
e
d
e
t
s
e
v
e
c
n
a
l
a
B
.
o
N
d
n
e
r
a
e
y
t
a
-
-
-
-
-
-
-
-
.
o
N
e
l
b
a
s
i
c
r
e
x
e
d
n
a
d
e
t
s
e
V
-
-
-
-
- 10,000,000 14,700,000
1,000,000 1,500,000 2,924,512
-
-
83,092
850,000 15,550,000
- 10,000,000
- 10,000,000
297,754 3,222,266 1,000,000 1,500,000
- 1,500,000
-
83,092
-
-
-
-
-
-
-
-
-
-
-
2020
B Edwards
G Black
J Lyon
G Burg
S Swanson
A Chiert
S Young
J McLaughlin
- 1,500,000 1,647,060
- 173,085
1,820,145
- 1,500,000
- 1,500,000
T Kardash
G Martin
500,000 1,000,000 1,667,059
1,000,000 2,000,000 3,825,117
C Blaxland-Walker
247,525 1,000,000 1,247,525
D Lowe
523,505
-
588,445
-
-
-
-
197,811 1,864,870
500,000 1,000,000
- 1,000,000
296,717 4,121,834 1,000,000 2,000,000
- 2,000,000
197,811 1,445,336
247,525 1,000,000
- 1,000,000
79,125
667,570
523,505
-
-
-
68 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT
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
KMP
Simon
Swanson
Target
Incentive
% of base
salary
Maximum
Incentive
% of base
salary
50%
60%
30%
36%
In the case of redundancy, a severance payment
of 13 weeks' base salary (or any greater payment
required under the National Employment Standards
(NES)).
For all terminations after the first 3 years of
employment an additional 26 week payment is
payable.
Athol Chiert
Ongoing 6 months
notice for the
first 3 years of
employment, 3
months notice
after 3 years
Ongoing 12 months
Christopher
Blaxland-
Walker
Deborah Lowe Ongoing 6 months
Greg Martin
Ongoing 6 months
Justin
McLaughlin
Ongoing 6 months
Todd Kardash Ongoing 12 months
Orla Cowan
Judilyn
Beaumont
Hicham
Mourad
Ongoing 13 weeks notice
for the first year
of employment,
26 weeks notice
thereafter.
Ongoing 13 weeks
Ongoing 13 weeks
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).
In the case of redundancy, a severance payment
of 26 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%
30%
36%
30%
36%
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%
CLEARVIEW WEALTH LIMITED | 69
DIRECTORS’ REPORTDIRECTORS’ REPORT 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
Geoff Black
Chairman
25 August 2020
70 | CLEARVIEW ANNUAL REPORT 2020
DIRECTORS’ REPORT
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
25 August 2020
Dear Directors
Auditor’s Independence Declaration to 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 and its subsidiaries for the financial year ended 30 June 2020, 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 Asia Pacific Limited and the Deloitte Network.
CLEARVIEW WEALTH LIMITED | 71
DIRECTORS’ REPORT
2020 financial report contents
Consolidated statement of profit or loss and other
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the Financial Statements
1. About this report
(a) General Information
(b) Statement of compliance
(c) Basis of preparation
(d) Basis of consolidation
(e) Business combinations
(f) Materiality
(g) Significant accounting policies
(h) Critical judgements and estimates
(i) Risk management
(j) Coronavirus (COVID-19) impact
2. Results for the year
2.1
Segment performance
2.2
Earnings per share
2.3 Dividends
2.4
Fee and other revenue
2.5
Investment income
2.6 Operating expenses
2.7
Taxes
3. Receivables, payables and investments
3.1 Receivables
3.2
Payables
3.3
Investments
3.4
Financial Risk Management
4. Non-financial assets and liabilities
4.1 Goodwill and intangibles
73
74
75
77
79
79
79
79
79
80
81
81
81
82
85
90
91
93
94
94
95
95
97
101
102
102
103
105
112
113
4.2
Recoverability of intangible assets and goodwill
114
4.3
Provisions
5. Life insurance and investment contracts
5.1
Accounting for life insurance
and investment contracts
116
118
119
5.2
Disaggregated information
by Statutory Fund
5.3
Sources of profit
5.4
Policy liabilities
5.5
Capital adequacy
5.6
Actuarial methods and assumptions
5.7
Critical accounting judgements and
key sources of estimation uncertainty
121
123
124
125
127
130
6. Capital structure and capital risk management 131
6.1
Issued capital
6.2 Movements in reserves
6.3
Shares granted under the executive share plan
6.4
Borrowings
6.5
Capital risk management
7. Employee disclosures
7.1
Key management personnel compensation
7.2
Share based payments
8. Related parties and other Group entities
8.1
Equity interests in subsidiaries
8.2
Transactions between the Group and
its related parties
8.3
Investment in controlled unit trusts
9. Other disclosures
9.1 Notes to the Consolidated Statement of
cash flows
9.2
Contingent liabilities and contingent assets
9.3
Capital commitments
9.4 Guarantees
9.5 New accounting standards
9.6 Other significant accounting policies
9.7
Subsequent events
Directors’ Declaration
Independent Auditor’s Report
Shareholders’ Information
Directory
132
132
133
133
134
136
137
137
148
149
150
152
153
154
154
156
156
157
159
159
160
161
167
169
The Financial Report was authorised for issue by the Directors on 25 August 2020.
72 | CLEARVIEW ANNUAL REPORT 2020
Consolidated statement of profit or loss
and other comprehensive income
For the full year ended 30 June 2020
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
Consolidated
Note
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
259,993
(85,803)
174,190
130,206
105,943
243,114
(71,613)
171,501
123,116
91,138
410,339
385,755
-
-
-
3,947
1,641
5,588
-
-
-
-
8,029
8,029
2.4
2.5
Net fair value gains on financial assets
(123,848)
68,082
-
-
Net operating revenue
Claims expense
Reinsurance recoveries revenue
Commission and other variable expenses
Operating expenses
Depreciation and amortisation expense
Impairment
Change in life insurance policy liabilities
Change in reinsurers’ share of life insurance liabilities
Change in life investment policy liabilities
Movement in liability of non-controlling interest in controlled
unit trusts
Profit/loss before income tax expense
Income tax (expense) benefit
Total comprehensive income/loss for the year
Attributable to:
Equity holders of the parent
Earnings per share
Basic (cents per share)
Diluted (cents per share)
To be read in conjunction with the accompanying Notes.
286,491
453,837
5,588
8,029
(194,538)
(116,257)
136,429
80,345
(125,548)
(127,718)
-
-
-
-
-
-
(102,519)
(114,561)
(5,771)
(4,521)
(7,269)
(9,006)
-
(21,509)
5,361
(1,564)
(7,411)
17,066
6,498
6,583
13,081
1,319
19,212
(95,896)
(64,840)
4,926
(967)
3,959
-
-
-
-
-
-
-
(37,681)
-
-
-
-
(183)
(34,173)
505
322
1,463
(32,710)
13,081
3,959
322
(32,710)
2.08
2.08
0.63
0.62
-
-
-
-
2.6
2.6
2.6
5.4
5.4
5.4
2.7
2.2
CLEARVIEW WEALTH LIMITED | 73
Consolidated statement of financial position
For the full year ended 30 June 2020
Consolidated
Note
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
186,443
200,197
14,160
11,038
2,013,797
1,981,312
409,083
389,078
40,672
118,534
128,543
11,759
494
1,363
12,511
5,969
38,786
104,515
95,669
8,848
934
-
12,511
8,893
20,105
3,404
-
-
-
-
880
237
-
-
-
-
-
-
-
-
2,520,085
2,451,665
444,228
403,757
35,092
51,955
2,175
7,030
1,804
2,178
7,320
-
(59,341)
(151,652)
1,185,326
1,152,535
834,092
933,155
1,186
60,000
2,122
15,000
2,067,364
2,012,613
1,135
2,175
847
-
-
-
-
6,857
2,177
24
-
-
-
-
265
60,000
64,422
803
15,000
24,861
452,721
439,052
379,806
378,896
447,448
(13,290)
14,584
-
446,043
449,855
450,228
(26,372)
(105,479)
(105,479)
16,087
-
12,177
19,274
3,979
11,901
18,952
3,294
3,979
3,294
452,721
439,052
379,806
378,896
Assets
Cash and cash equivalents
Investments
Receivables
Fixed interest deposits
Reinsurers’ share of life insurance policy liabilities
Deferred tax asset
Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets
Total assets
Liabilities
Payables
Current tax liabilities
Provisions
Lease liabilities
Life insurance policy liabilities
Life investment policy liabilities
Liability to non-controlling interest in controlled unit trusts
Deferred tax liabilities
Borrowings
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.
3.3
3.1
5.4
2.7
4.1
4.1
3.2
2.7
4.3
5.4
5.4
2.7
6.1
6.2
6.2
6.2
6.2
74 | CLEARVIEW ANNUAL REPORT 2020
Consolidated statement of changes in equity
For the full year ended 30 June 2020
Share
based
payments
reserve
General
reserve
Profit
reserve
Retained
losses
Attributable
to the
owners of
the parent
Consolidated
Restated balance as at 1 July 2018
Profit for the year
Total comprehensive income for the year
Recognition of share based payments
Dividend paid (inclusive of costs)
Share
capital
$’000
438,289
-
-
-
-
Dividend Reinvestment Plan (inclusive of costs)
11,119
ESP loans settled through dividend
ESP shares vested/(forfeited)
Treasury shares
Balance at 30 June 2019
Profit for the year
Total comprehensive income for the year
Recognition of share based payments
ESP shares vested/(forfeited)
Shares bought back
Allocation of treasury shares
Balance at 30 June 2020
To be read in conjunction with the accompanying Notes.
$’000
12,509
$’000
2,785
-
-
2,889
-
-
746
(57)
-
-
-
-
-
-
-
509
-
-
821
(4,186)
446,042
16,087
3,294
-
-
-
-
(373)
1,779
447,448
-
-
437
(161)
-
(1,779)
14,584
-
-
-
685
-
-
3,979
$’000
$’000
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,282)
443,301
3,959
3,959
-
(20,048)
-
-
-
-
3,959
3,959
2,889
(20,048)
11,119
746
1,273
(4,186)
(26,371)
439,052
13,081
13,081
-
-
-
-
13,081
13,081
437
524
(373)
-
(13,290)
452,721
CLEARVIEW WEALTH LIMITED | 75
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Company
Balance at 1 July 2018
Profit for the year
Total comprehensive loss for the year
Recognition of share based payments
Dividend paid (inclusive of costs)
Dividend Reinvestment Plan
ESP loans settled through dividend
ESP shares vested/(forfeited)
Balance at 30 June 2019
Profit for the year
Total comprehensive income for the year
Recognition of share based payments
ESP shares vested/(forfeited)
Shares bought back
Balance at 30 June 2020
To be read in conjunction with the accompanying Notes.
Share
based
payments
reserve
General
reserve
Profit
reserve
Retained
losses
$’000
12,509
$’000
2,785
-
-
(1,297)
-
-
746
(57)
-
-
-
-
-
-
509
$’000
31,200
(64,969)
7,800
(40,510)
7,800
(40,510)
-
(20,048)
-
-
-
-
-
-
-
-
Attributable
to the
owners of
the parent
$’000
419,814
(32,710)
(32,710)
(1,297)
(20,048)
11,119
746
1,273
Share
capital
$’000
438,289
-
-
-
-
11,119
-
821
450,228
11,901
3,294
18,952
(105,479)
378,896
-
-
-
-
(373)
-
-
437
(161)
-
-
-
-
685
-
322
322
-
-
-
-
-
-
-
-
322
322
437
524
(373)
449,855
12,177
3,979
19,274
(105,479)
379,806
76 | CLEARVIEW ANNUAL REPORT 2020
Consolidated statement of cash flows
For the full year ended 30 June 2020
Consolidated
Note
2020
$’000
2019
$’000
2020
$’000
Cash flows from operating activities
Receipts from client and debtors
Payments to suppliers and other creditors
Receipts from/(payments to) Group entities
Withdrawals paid to life investment clients
Dividends and trust distributions received
Incurred claims treaty settlements
Interest received
Interest on borrowings and other costs of finance
Income taxes paid
Company
2019
$’000
-
(4,500)
22,602
-
-
-
229
(712)
677,711
583,827
(320,000)
(327,441)
-
-
(297,568)
(344,563)
99,662
35,611
3,704
(2,219)
(5,359)
63,516
-
27,900
(1,461)
-
(5,391)
3,919
-
-
-
79
(920)
(12,576)
(5,359)
(12,576)
Net cash (utilised)/generated by operating activities
191,542
(10,798)
(7,672)
5,043
Cash flows from investing activities
Net cash movement due to investment in subsidiary
-
-
(18,506)
(14,400)
Payments for investment securities
Proceeds from sales of investment securities
Acquisition of property, plant and equipment
Acquisition of capitalised software
Fixed interest deposits redeemed/(invested)
Loans (granted) / repayments received
Dividends received from subsidiary
Net cash (utilised) by investing activities
Cash flows from financing activities
(1,379,094)
(1,859,117)
1,228,745
2,008,545
(280)
(2,048)
(14,000)
1,614
-
(399)
(6,076)
(5,830)
623
-
-
-
-
-
-
-
-
-
-
-
(16,000)
-
(102)
7,800
(165,063)
137,746
(34,506)
(6,702)
Net movement in liability of non-controlling interest in unit trusts
(85,532)
(107,764)
Treasury shares
Repayment of ESP loans
ESP shares vested / (forfeited)
Sale of ESP shares
Share buyback (net of costs)
Dividend paid (net of costs)
Debt drawn down
Net cash generated/(utilised) in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
To be read in conjunction with the accompanying Notes.
-
-
-
674
(374)
-
45,000
(4,186)
746
1,273
-
-
(8,183)
15,000
(40,232)
(103,114)
(13,753)
200,197
23,834
176,363
186,444
200,197
-
-
-
-
674
(374)
-
45,000
45,300
3,122
11,038
14,160
-
(4,186)
746
1,273
-
-
(8,183)
15,000
4,650
2,991
8,047
11,038
CLEARVIEW WEALTH LIMITED | 77
Notes to the Financial Statements
For the full year ended 30 June 2020
78 | CLEARVIEW ANNUAL REPORT 2020
1. About this report(a) General Information 79(b) Statement of compliance 79(c) Basis of preparation 79(d) Basis of consolidation 79(e) Business combinations 80(f) Materiality 81(g) Significant accounting policies 81(h) Critical judgements and estimates 81(i) Risk management 82(j) Coronavirus (COVID-19) impact 85 NOTES TO THE FINANCIAL STATEMENTS
1. About this report
(a) 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 2.1.
(b) 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 comprise Australian Accounting
Standards. Compliance with Australian Accounting Standards
ensures that the financial statements and notes of the
Company and the Group comply with International Financial
Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the
Directors on 25 August 2020.
(c) 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 16, and
measurements that have some similarities to fair value but are
not fair value, such as net realisable value in AASB 102 or value
in use in AASB 136.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
•
•
•
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or
liability.
The Company is a company of the kind referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, dated 24 March 2016, and in accordance
with that Corporations Instrument, amounts in the financial
report are rounded off to the nearest thousand dollars, unless
otherwise indicated.
All amounts are presented in Australian dollars, unless
otherwise noted.
(d) 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;
CLEARVIEW WEALTH LIMITED | 79
NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
•
•
•
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.
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 9, when applicable, the cost on initial recognition of an
investment in an associate or a joint venture.
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
80 | CLEARVIEW ANNUAL REPORT 2020
(e) 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.
NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
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.
•
•
•
•
the amount in question is significant because of its
size or nature;
it is important for understanding the results of the
ClearView group;
it helps explain the impact of significant changes in the
ClearView group; and/or
it relates to an aspect of the ClearView group’s operations
that is important to its future performance.
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.
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.
(f) Materiality
Information has only been included in the financial report to
the extent that it has been considered material and relevant to
the understanding of the financial statements. A disclosure is
considered material and relevant if, for example:
(g) Significant accounting policies
The significant accounting policies adopted in the preparation
of the financial report are contained in the notes to the financial
statements to which they relate. All accounting policies have
been consistently applied to the current year and comparative
period, unless otherwise stated.
(h) Critical judgements and estimates
In the application of the Group’s accounting policies, the
Directors are required to make judgements, 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 judgements. 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 judgements 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 (section 5.7);
• Assets arising from reinsurance contracts (section 5.7);
• Recoverability of intangible assets and goodwill (section 4.2);
• Deferred tax assets (section 2.7);
•
Further details on the potential impacts of COVID-19 are
provided in section 1 (j).
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NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
(i) Risk management
The Group’s Board has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Board Risk and Compliance Committee is responsible for developing and monitoring the Group’s risk management policies.
The committee reports regularly to the board of directors on its activities.
The Board Risk and Compliance Committee oversees how management monitors compliance with the Group’s risk management
policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
The Board Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc
reviews of risk management controls and procedures, the results of which are reported to the audit committee.
The Risk Appetite Statement (RAS) outlines ClearView’s material risks from a strategic, customer, business and financial
perspective and is divided across both Financial and Non-Financial Risks. ClearView’s Risk Appetite Statement clearly articulates
the material risks to which ClearView is exposed and specifies the type and level of risk ClearView is willing to accept in pursuit of
its strategic, business and financial objectives.
The RAS is a key component of the overall Risk Management Framework. The material risk categories for ClearView are as follows:
•
Insurance management
• Sustainability
• Liquidity and credit
• Capital management (Including Reinsurance)
•
Investment management and market risk (Interest rate, asset liability management)
• Operational
• Outsourcing and supplier management
•
Information security and data management
• Compliance
• Strategic
• Culture and conduct
• Reputational
• Business continuity, disaster recovery and pandemic
Some of the key material risk categories are discussed in more detail below:
Insurance management
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
Mortality
Morbidity
obligation of the issuer and
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
82 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
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.
(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 (claims volatility and systemic
risks in the short term). The reinsurers used are regulated by
the Australian Prudential Regulation Authority (APRA) and
are members of large international groups with sound credit
ratings.
the eastern seaboard of Australia and its capital cities. The
risk exposure is reduced through the use of reinsurance as
covered above.
(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 advice on new product
pricing, new reinsurance arrangements and changes in
pricing, terms and conditions and reinsurance arrangements;
• Offer of corresponding reinsurance terms by reinsurers which
provides an implicit check on the pricing;
•
Formal internal policy document and Product Disclosure
Statement due diligence review and sign-off processes; and
• The ability to re-price products (change premium rates and
fees) on most products in the event of adverse claims and/or
other product experience.
It is noted that similar processes and controls apply to the pricing
and terms and conditions applicable to the investment products
issued by ClearView Life.
ClearView Life periodically reviews its reinsurance
arrangements and retention levels.
Liquidity and credit risks
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 risk of financial loss to the Group if a counterparty to a
financial instrument fails to meet its contractual obligations, and
arises principally from the Group exposures from its key debtors
and investments in debt securities.
The key risk controls includes:
•
•
An incurred claims treaty with the main reinsurer is in place
where lump sum claims are settled on a comprehensive
earned premium and incurred claims basis (including incurred
but not reported claims (IBNR) and reported but not admitted
claims (RBNA) based on best estimate assumptions consistent
and based on the applicable Australian Accounting Standards
(excluding risk margins, profit margins, and capital margins).
ClearView has subsequent to year end implemented a similar
arrangement for its income protection business;
A letter of credit (LOC) has been issued in favour of ClearView
Life with a major Australian bank on behalf of the main
reinsurer. The LOC is issued as a performance guarantee
directed towards mitigating any loss which might be incurred
by ClearView Life to secure its regulatory obligations in the
event that the reinsurer was to fail to meet its reinsurance
obligations under its reinsurance contract. Given an incurred
CLEARVIEW WEALTH LIMITED | 83
NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
claims treaty has been implemented for income protection
business, the limit on the LOC is being wound down.
ClearView will be able to increase the dollar limt on the LOC
in the future, subject to Swiss Re having sufficient capacity at
that time.
Assessment of credit risk exposures arising from investment
activities 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.
Specific capital reserves are held against credit risk under
the regulatory capital requirements of the Group and
its subsidiaries including ClearView Life and credit risk is
considered within the Group’s and individual company’s ICAAP
(refer to below for further discussion).
The Group’s approach to managing liquidity is to ensure, as
far as possible, that it will have sufficient liquidity to meet its
liabilities when they are due, under both normal and stressed
conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation. To this end, the Group
aims to maintain a high level of cash and cash equivalents
and other highly marketable debt investments which are
monitored by the CIC.
The Group also monitors the level of expected cash inflows
on trade and other receivables together with expected cash
outflows on trade and other payables.
The Group has a debt funding facility that contains certain
loan covenants. Under the agreement, the covenant
is monitored on a regular basis and reported to ensure
compliance with the facility agreement.
•
•
•
•
•
Capital management and reserving
In terms of regulatory requirements:
• ClearView Life is subject to minimum regulatory capital
requirements, 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.
84 | CLEARVIEW ANNUAL REPORT 2020
In addition, the Group holds additional capital reserves over
regulatory capital in accordance with its Board adopted
ICAAP. This is to ensure that there is a low likelihood that
the Group (and its regulated) subsidiaries will breach
their regulatory requirements and so that the Group 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.
Investment management and market risk (Interest
rate, asset liability management)
(a) Asset risks
The primary asset risks borne by the Group relate to the
financial assets of the Company and its operating subsidiaries
excluding those in the non-guaranteed investment linked
funds in ClearView Life’s statutory fund No.4 (referred to
below as ClearView assets). The primary financial risks related
to the financial assets in the non-guaranteed investment
linked funds in ClearView Life’s statutory fund No.4 are
borne by policyholders as the investment performance on
those assets is passed through, in full, to the policyholders
(referred to below as Policyholder assets). Nonetheless, the
Company has a secondary exposure to the Policyholder
assets and off-balance sheet client funds, via the impact
on the fees charged by the Group which vary with the
level of Policyholder and client funds under management
and under administration, as well as related reputational
exposure (for further detail on Asset risks refer to section 3).
(b) 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 guaranteed investment account 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 and the extent to which the
variation in asset values do not mirror the variation in liability
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
NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
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, fixed interest assets
and cash that generally closely match the duration and
inflation characteristics of those policy liabilities and
capital reserves. See further details on the investments
made to match the incurred disabled lives reserves made
elsewhere in the report.
Outsourcing and supplier management
The Group aims to minimise the vendor risk and operational
risks arising from the use of a third party platform activities
that would normally be undertaken by ClearView through
initial and ongoing due diligence and oversight throughout
the supplier life cycle.
Business continuity, disaster recovery and pandemic
risk
ClearView is exposed to the risk of disruption to its business
operations and IT systems from a host of disasters that vary
in degree from minor to catastrophic. Business continuity
is the process of getting the entire business back to full
functionality after a crisis. Disaster recovery differs in that it
is the process of getting all-important IT infrastructure and
operations up and running following an outage.
A key element of the Business Continuity Plan (BCP) is the
disaster recovery plan, which focuses on the recovery of
ClearView’s IT system after a crisis event. Recovery Points
and Recovery Timeframes for various business processes and
IT systems are defined in the ClearView BCP plan. They are
closely monitored and managed within tolerance through
agreed action plan.
In addition, the Crisis Management Team (CMT) will consider
the approach to pandemic phases and threat levels that is
most appropriate to ClearView’s operations and will develop
a response using the current BCP as a baseline, taking into
account all information available to them and the specific set
of circumstances.
The BCP has been successfully implemented in March 2020 as
part of the COVID-19 response.
Culture and conduct
A sound risk culture is integral to the Group’s risk
management framework. The Group’s approach to ensure
effective risk management includes:
•
•
governance and conduct frameworks are in place to foster
an ethical and positive culture through communications,
education including online training, remuneration
framework designed to promote accountability,
encourage and reward appropriate behaviours;
active monitoring staff’s attitude towards risk and if
required, taking appropriate steps to improve it supported
by a range of controls and processes including various HR
policies and surveys conducted.
(j) Coronavirus (COVID-19) impact
Background
COVID-19, which is a respiratory illness caused by a new
virus, was declared a world-wide pandemic by the World
Health Organisation in early 2020. COVID-19, as well as
measures to slow the spread of the virus, have since had a
significant impact on global economies and equity, debt and
commodity markets. The Group has considered the impact of
COVID-19 and other market volatility in preparing its financial
statements.
While the specific areas of judgement as noted on page 81
of the report have not changed, the impact of COVID-19 has
resulted in the application of further judgement within those
identified areas. Given the dynamic and evolving nature of
COVID-19, and limited recent experience of the economic
and financial impacts of such a pandemic, changes to the
estimates and outcomes that have been applied in the
measurement of the Group’s assets and liabilities may arise in
the future. Other than adjusting events that provide evidence
of conditions that existed at the end of the reporting period,
the impact of events that arise after the reporting period will
be accounted for in future reporting periods.
Impact of COVID 19 and processes applied
Forward-looking information, including an explanation of the
scenarios that were considered in determining the Group’s
assumptions for the purposes of calculating its insurance
policy liabilities and expected credit loss (ECL) provisions in
the financial statements have been outlined below.
Noting the wide range of possible scenarios and
macroeconomic outcomes, and the relative uncertainty of
how COVID-19 and its social and economic consequences will
flow, these scenarios represent reasonable and supportable
forward-looking views as at the reporting date.
At the onset of the pandemic, ClearView assessed certain
stress test scenarios that included a ‘Base’ (Pre-COVID-19)
case, a ‘Plausible COVID-19’ case (reasonably foreseeable,
conservative scenario), and a ‘Severe COVID-19’ case (severe
scenario).
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NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
These stress scenarios considered business impacts (both capital
and profitability) from COVID-19, including direct COVID-19
claim impacts (based on assumed infection, mortality and
morbidity rates), indirect claims impacts (economic downturn
induced), asset value impacts, adverse impact on delivery of
key projects, reduced sales and elevated lapses and premium
suspension impacts.
ClearView Life’s regulatory capital position is resilient to each
of these scenarios. Profitability can be sensitive within each
scenario, in particular to claims and lapse assumptions and
relative to the allowances made in policy liailities versus the
actual experience that emerges.
Whilst there is substantial uncertainty of the impacts of
COVID-19 (for example, the second wave in Victoria, or removing
government support measures thereafter), based on the
current available data and trends in Australia, the ‘baseline’
view is that it seems unlikely that there will be a high number
of direct COVID-19 related insured death claims cases (noting
that mortality to date has tended to be in the older uninsured
part of the population). The number of cases has been relatively
lower in Australia to this point. As such, the secondary economic
impacts appear to be the key risk areas. This is likely to drive an
increase in IP claims (and for IP claims for longer durations) and
lapses in the months ahead.
Given the evolution of the COVID-19 pandemic and the
operating environment, the initial scenarios have been updated
as part of the Business Plan process. Four key environmental
factors were considered as part of this process:
•
•
•
•
•
Economic impacts of the pandemic (recession and
unemployment rates);
Potential impacts of the pandemic on claims (both number
of claims as well as terminations for income protection
claims);
Structural changes to ClearView’s distribution channels and
the size of the market;
Return of rational pricing and longer term sustainability of
margins (over time) within the life insurance market amidst
regulatory intervention; and
Increased costs of doing business (reinsurance, regulatory
and compliance costs).
ClearView’s response includes:
•
•
Retention focus (including investment in a retention team) to
manage price changes and COVID-19 impacts, by providing
alternatives to customers (including reducing overall portfolio
risk);
New product development to provide more affordable
alternatives to customers (for example, Simple IP 60 product
that was recently launched);
86 | CLEARVIEW ANNUAL REPORT 2020
•
•
•
•
Claims management, implementation of automated
systems (over time) and a focus on resourcing;
Reprice to profitable segments over time (stay ahead of the
curve);
Material changes to the claims assumptions at 30 June
2020, including an allowance for shorter term overlays to
reflect expected COVID-19 related IP claims (incidence and
terminations) and an increase in complex claims; and
Changes to the lapse assumption to allow for shorter term
shock lapse overlays in response to price changes and
secondary economic impacts from COVID-19.
The ClearView Crisis Management Team and the Board are
meeting regularly to monitor the situation and are well prepared
to take further corrective or remedial actions as required.
As a consequence of COVID-19 and in preparing these financial
statements, management therefore:
•
•
•
•
•
•
Re-evaluated whether there were any additional areas of
judgement or estimation uncertainty that was required over
and above that disclosed below;
Updated its economic outlook and potential secondary
impacts of the pandemic on the economy (for example,
links to higher unemployment/ underemployment and lower
financial incentive to return to work) – principally for the
purposes of inputs into its assumptions for policy liabilities
and ECL calculations through the application of forward
looking information, but also for input into the impairment
analysis of financial and non-financial asset classes and
disclosures such as fair value disclosures of financial assets
and liabilities;
Reviewed external market information to identify other
COVID-19 related impacts (for example guidance from
the Institute of Actuaries of Australia and various industry
papers);
Completed analysis of the higher risk occupation classes and
propensity to lapse within its advised life insurance portfolio
to inform assumptions;
Assessed the carrying values of its assets and liabilities and
determined the impact thereon as a result of market inputs
and variables impacted by COVID-19;
Ran multiple stress testing scenarios, which are an integral
component of Group’s risk management framework and a
key input to the capital adequacy assessment process, to
assess the potential impacts of the COVID-19 pandemic to
assist in the organisation’s prudent risk management; and
•
Considered the impact of COVID-19 on the Groups’ financial
statement disclosures.
NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
Consideration of the statements of financial position and
further disclosures
Key statements of financial position items and related
disclosures that have been impacted by COVID-19 were as
follows:
Policy liabilities
In response to COVID-19 the Group undertook a review of best
estimate assumptions, with a particular focus on claims and
lapses to determine impacts and implications from COVID-19.
With respect to the health and economic implications of
COVID-19, whilst there is uncertainty, there is expected to
be an increase in claims cost over the next two years. The
following was taken into account in proposing a specific claims
overlay for COVID-19 as part the best estimate assumptions
adopted:
Death Claims
Australia for the most part, has been less affected by the direct
mortality impact of COVID-19, on a relative basis to the rest
of the developed world, measured by confirmed cases, active
cases and deaths at the date of this report.
A resurgence of cases (as can be seen by the recent experience
in Victoria) is contingent on the effectiveness of contact tracing
and targeted isolation in pockets where cases re-emerge. Given
that outside of Victoria there has not been a broader second
wave, with stronger contract tracing in other states where
there has been clusters of outbreaks, it is expected that direct
COVID-19 deaths will be minimal (noting that the predominant
impact has been on the older demographic which is broadly
part of the uninsured population) and therefore no increase
in death claims (outside of the change in claims assumption
basis) was included for the direct mortality impacts of the
pandemic.
However, there is an expectation that there will be an increase
in suicides in the general population due to an increase in
stress, anxiety and mental health related conditions. This
has been evident with an increase in the number of calls to
LifeLine, Kids helpline and Beyond Blue of pre-pandemic levels.
This is expected to disproportionately affect the younger
demographic and specific occupations (tourism, retail,
hospitality) which have been hardest hit by the pandemic.
Whilst not directly noted in Australia, there has been an
increase in suicide incidences from front line workers (doctors,
nurses) overseas who have close experience of COVID-19.
For suicides, it has been assumed that there is an increase in
claims costs in FY21 with a lesser impact in FY22, which has
been adopted as a COVID-19 overlay and applied to the best
estimate assumptions.
Trauma Claims
For Trauma insurance, there may be co-morbidities from
COVID-19 (for example, a higher propensity to have a heart
attack or stroke) but this is expected to be lower given the
more limited infection rate in Australia. There may also be an
indirect impact if preventive treatment is being delayed, but this
is becoming less significant as social distancing rules are being
relaxed in most states. No explicit overlay has therefore been
allowed for COVID-19 related Trauma claims.
TPD Claims
For TPD insurance, whilst most cases of COVID-19 are mild and
infected people recover within a shorter duration (less than
a month), from a morbidity perspective, those who recover
from severe cases may suffer lasting effects on their health
including permanent lung damage or PTSD from ICU. This will
be ultimately impacted by the levels of infection rates across
Australia (ClearView has a more limited exposure to Victoria than
it does to NSW and Queensland). The economic consequences
of COVID-19 are also expected to lead to an increase in complex
claims (such as mental illness and chronic pain).
For TPD insurance, it has been assumed that there is a material
increase in these claims in FY21 with a lesser impact in FY22,
which has been adopted as a COVID-19 overlay and applied to
the best estimate assumptions.
Income Protection Claims
With respect to IP claims incidence rates (number of claims
received) and impacts from COVID-19, the increase will mainly
relate to more complex conditions where the claimant could
have potentially remained in the work force or returned to work,
but there is now less incentive given the economic environment
(including the higher unemployment rate).
There are various published papers estimating as to how
incidence rates vary with economic conditions. Furthermore, the
exposure to higher risk type occupations can also be estimated.
On balance based on the assumptions adopted for increased
unemployment rates, this implies additional incidence and
number of claims, with an increase of 21% in FY21 and 15% in
FY22 being adopted as a COVID-19 overlay and applied to the
best estimate assumptions.
With respect to IP claims termination rates (the duration
a claimant stays on claim for), COVID-19 is expected to
indirectly increase the duration of IP claims, that is reduce the
claims termination rates (linked to higher unemployment/
underemployment and lower financial incentive to return to
work).
This impacts both the incurred claims reserves held for past
claims and future incurred claims costs. The impacts arise
CLEARVIEW WEALTH LIMITED | 87
NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
due to longer durations for claims (which would vary by
occupations), loss of opportunities to work part-time during
rehabilitation, which would increase the cost of partial claims
and length of claims, inability to work due to self-isolation
for conditions that would not ordinarily prevent work and
implications of lock down on managing claims (increased
stress for claims staff, deferral of treatment etc.).
Based on the 2018 Group Long Term Disability Experience
Study Report by the Group Long-Term Disability Committee of
the Society of Actuaries, the ‘actual to expected termination’
rate fell by approximately 10% for small companies, when
the US unemployment increased from 5% to 10% during the
global financial crisis. This suggests that for a scenario such
as the one experienced currently (where underemployment
is also likely to rise dramatically), a 15% reduction in
termination rates is possible.
In addition, another paper titled ‘Recessions and Disability
Experience around the world’ by Peter Banthorpe for the UK
Institute and Faculty of Actuaries, showed that the ‘actual
to expected’ rate for Australian terminations dropped by
12% between mid-2007 and Dec 2009 when unemployment
increased by 2%.
This results in a change in termination rate assumption (given
the occupation profile which is more weighted towards a
lower to average risk occupation mix), of 20% reduction in
FY21 and a 15% reduction in FY22. This would increase the
cost of claims by approximately a further 15% in FY21 and
7% in FY22. This has been adopted as a COVID-19 overlay and
applied to the best estimate assumptions. For disabled life
reserves (DLRs), based on an analysis of occupation mix and
causes of claim, the same overlay has been adopted.
Lapses
A detailed analysis was completed on the in-force portfolio by
inforce premium, number of lives and the percentage split by
cohort of the premium rate increase expected over the next
12 months. There is limited data on shock lapses from pricing
changes, noting that ClearView’s prior experience has been
minimal from prior premium rate changes. The shock lapses
have been assumed to increase as the premium rate increase
becomes higher.
COVID-19 impacts on premium affordability), and 2.5% for
the closed portfolios (allowance for COVID-19 impacts).
Loans and other financial assets
In response to COVID-19 the Group undertook a review of
loans and receivables and other financial asset exposures,
as applicable, and the ECL for each. The review considered
the macroeconomic outlook, customer credit quality, the
type of collateral held, exposure at default, and the effect
of payment deferral options as at the reporting date. The
ECL methodology, SICR thresholds, and definition of default
remained consistent with prior periods. The model inputs,
including forward-looking information, scenarios and
associated weighting were however revised.
Right-of-use assets
Included in the right-of-use assets at 30 June 2020 is the
Group’s property leases. Given the impact of COVID-19, the
right of use assets were subject to impairment testing which
concluded that no material impairment was required.
Intangible assets
Consistent with the Groups accounting policies, the Group has
tested goodwill for impairment and has reviewed the carrying
value of its finite life intangible assets at the reporting date for
indicators of impairment and, where applicable, reviewed the
measurement of the carrying value of such intangible assets.
The goodwill recognised within the Life Insurance and
Wealth Management CGU’s is tested for impairment triggers
using the embedded value methodology by comparing the
carrying value of goodwill to the embedded value of the
in-force portfolios written to date. The embedded value
is a calculation that represents the economic value of the
shareholder capital in the business and the future profits
expected to emerge from the business currently in-force
expressed in today’s dollars. No account is taken of future
new business in the embedded value calculations.
The estimated embedded value of the business as at 30
June 2020 has been calculated based on the following key
assumptions and estimates:
• Mortality and morbidity (claims)
Given the observed lapse rates over the last year, and
considering the effect of sum insured indexation, the current
baseline ‘long-term’ expected lapse rate assumptions remain
appropriate.
•
Investment returns;
• Persistency (lapse);
• Outflows;
In respect of the price rate changes expected over the
next 12 months, a shock lapse assumption of 5% has been
adopted for LifeSolutions business (including an allowance for
• Maintenance costs; and
• Discount rates.
88 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
1. About this report continued
The embedded value uses assumptions that are consistent with those adopted for policy liabilities in this financial report. As
such, given the review of the assumptions adopted (as outlined in the previous pages) and the EV calculations completed at
balance date (incorporating these new assumptions adopted), the assessment has incorporated a consideration of COVID-19.
Debt covenants
Debt-related covenants were assessed to determine whether there were any breaches for which disclosure is required.
As at the reporting date, the Company had a $60 million facility agreement with the National Australia Bank that has been fully
drawn down as at the balance date. The facility is repayable on 1 April 2024. The facility was renewed for a further three year
period in April 2020.
As part of the renewal of the facility, the margins paid on the facility was renegotiated. From the date of renewal, interest on
the loan accrues at BBSY plus a margin of 0.95% per annum (FY19: 0.80%), and is payable monthly. Furthermore, a line fee of
0.80% per annum (FY19: 0.65%) is payable on the facility on a quarterly basis.
The covenants of the facility agreement state that the Group’s debt must not exceed 35% of the Group’s total debt and equity
and the Group’s EBITDA (excluding policyholder net profit and removing any effects from the adoption of AASB16) must not
be less than 3x interest expense. In the recent renewal, a Review Event was also added based on the capital base of the life
company, ClearView Life. This has been set as a minimum PCA ratio of 1.5x (excluding Pillar 2 and reinsurance concentration
risk charges for a period of two years from the date of the facility renewal). The covenants are calculated on six monthly basis
under the terms of the facility agreement. As part of the COVID-19 response, a waiver was sought from National Australia Bank
such that these covenants are calculated on an annual basis for FY20. Notwithstanding this waiver, based on the results to 30
June 2020, ClearView has been operating within its covenants under the terms of the Facility Agreement (as calculated on a six
monthly basis). The Group has therefore not identified any breaches at 30 June 2020 nor at the time at which these financial
statements were authorised for issue.
The facility has been secured by a number of cross guarantees, refer to section 9.4 for details.
Life investment policy liabilities and investments backing life investment policy liabilities
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. The investments backing policy liabilities are also valued at their fair value as there
would otherwise be an accounting mismatch between the assets are held against investment policy liabilities
Risk management
The Group’s risk management framework continues to be applied and monitored against the impact of COVID-19 on the
Group’s risk profile. Non-financial risks emerging from movement restrictions, and remote working by our staff, counterparties,
clients and suppliers, are being identified, assessed, managed and governed through timely application of the Group’s risk
management framework.
CLEARVIEW WEALTH LIMITED | 89
90 | CLEARVIEW ANNUAL REPORT 2020
2. Results for the yearThis section provides information about the Group’s financial performance in the period, including:2.1 Segment performance 912.2 Earnings per share 932.3 Dividends 942.4 Fee and other revenue 942.5 Investment income 952.6 Operating expenses 952.7 Taxes 97 NOTES TO THE FINANCIAL STATEMENTS
2. Results for the year
2.1 Segment performance
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, child cover, accident covers, income protection and
business expense covers. Policies can be issued directly or via
the ClearView Retirement Plan as superannuation; and
An in-force portfolio of Non-Advice life protection products
that were previously sold through direct marketing, and
related channels. Products include term life, accidental
death, injury covers, trauma and critical illness and funeral
insurance. These products are no longer marketed to
customers. The direct life insurance business was closed in
May 2017.
(b) Wealth Management (‘investment’ products)
ClearView provides wealth management products via four
primary avenues:
•
•
Master Trust - Life investment contracts issued by ClearView
Life. Products include ordinary savings, superannuation and
allocated pension products, with the latter two provided via
the ClearView Retirement Plan;
WealthSolutions - A superannuation and retirement income
wrap (issued via the ClearView Retirement Plan) and an
Investor Directed Portfolio Service (IDPS) Wrap (provided
by CFML). This is offered via the WealthSolutions platform
which was launched in December 2011. WealthSolutions
includes a broad menu of investment funds, ASX listed
shares, term deposits, ClearView managed funds and
Separately Managed Account (SMA) offering. It also provides
a number of model portfolios managed by ClearView for
superannuation and non superannuation investors. A new
wealth management product was recently launched on
the HUB24 platform including a broad menu of investment
funds with access to the ClearView model portfolios;
•
•
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 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). Our comprehensive financial
advice offering features two aligned dealer groups providing
traditional licensing and dealer services plus the recently
launched LaVista Licensee Solutions (LaVista) which provides
outsourced B2B licensee services to other Australian Financial
Services Licensees (AFSLs).
(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.
CLEARVIEW WEALTH LIMITED | 91
NOTES TO THE FINANCIAL STATEMENTS
2. Results for the year continued
2.1 Segment performance continued
The accounting policies of the reportable segments are the same as the Company’s accounting policies.
Segment revenue
Life Insurance
Wealth Management
Financial Advice
Listed entity/Other
Total Revenue
Inter-Segment Revenue
Consolidated Revenue
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2020
$’000
2019
$’000
176,420
143,443
116,441
199
174,353
129,185
110,348
352
-
-
-
-
(26,164)
(28,483)
-
-
176,420
143,443
90,277
199
174,353
129,185
81,865
352
Consolidated segment revenue
436,503
414,238
(26,164)
(28,483)
410,339
385,755
Underlying profit is the Groups key measure of business performance and is disclosed below by segment:
2020
Underlying net profit/(loss) after tax
AIFRS policy liability discount rate effect¹
Impairments²
Cost out program implementation costs³
Wealth project costs³
Direct Remediation Program, Direct Closure
Provision and Royal Commission Costs³
Other costs³
Reported profit/(loss)
2019
Underlying net profit/(loss) after tax
Amortisation of acquired intangibles4
AIFRS policy liability discount rate effect¹
Cost out program implementation costs³
Impairments²
Royal Commission and direct remediation
costs³
Other costs³
Reported profit/(loss)
Life
Insurance
Wealth
Management
Financial
Advice
Listed Entity/
Other
10,443
2,148
(2,607)
(574)
-
(337)
279
9,352
21,994
-
6,638
(1,547)
(4,952)
(2,060)
(900)
19,173
3,621
2,280
(1,607)
-
-
-
(1,366)
-
-
2,255
3,635
(90)
-
(397)
(1,081)
-
(205)
1,862
-
-
(321)
-
-
83
2,042
1,005
(1,121)
-
(402)
(12,890)
-
-
-
895
-
337
(195)
(569)
(1,544)
-
-
(1,471)
-
(324)
(330)
-
(13,738)
(3,339)
Total
14,738
2,148
(2,607)
-
(1,366)
-
167
13,081
25,090
(1,211)
6,638
(3,817)
(18,923)
(2,384)
(1,435)
3,958
1
The policy liability discount rate effect is the result of changes in the long-term discount rates used to determine insurance policy liabilities and the incurred IP disabled lives claims
reserves. The life insurance policy liability (based on AIFRS) and IP incurred disabled lives reserves are discounted using market discount rates that typically vary at each reporting date and
create volatility in the policy liabilities and the disabled lives claims reserves, and consequently, earnings. ClearView reports this volatility separately.
2
Impairments:
•
•
FY20 – Impairment to receivables from ClearView Retirement Plan (CRP) due to write down of DTA in CRP from a reduction in accumulated tax losses carried forward ($2.6 million).
FY19 – Impairment related to certain software development costs (obsolete or reduced functionality) ($6 million) and the carrying values of goodwill and client books in the
Financial Advice cash generating unit ($12.9 million).
These costs are considered unusual to the ordinary activities of the Group and are therefore not reflected as part of Underlying NPAT.
3
Certain costs were recognised in relation to the cost out program implementation costs, Wealth project costs, the Royal Commission, direct remediation program and retention bonuses.
These costs are considered unusual to the ordinary activities of the Group and are therefore not reflected as part of Underlying NPAT. Amounts stated are after tax.
4
The amortisation of the intangibles is associated with the acquisition of wealth and life insurance businesses from Bupa, ComCorp financial advice business and Matrix dealer group. These
are separately reported to remove the non-cash effect of the write-off of these acquired intangibles. However, amortisation associated with capitalised software is reported as part of
underlying net profit after tax.
92 | CLEARVIEW ANNUAL REPORT 2020
2. Results for the year continued
2.2 Earnings per share
Earnings per share (cents)
Basic earnings (cents)
Diluted earnings (cents)
Basic earnings per share
NOTES TO THE FINANCIAL STATEMENTS
Consolidated
2020
2019
2.08
2.08
0.63
0.62
Basic earnings per share is calculated based on profit attributable to shareholders of ClearView Wealth Limited and the
weighted average number of ordinary shares outstanding. The earnings and weighted average number of ordinary shares
used in the calculation of basic earnings per share are as follows:
Profit for the year attributable to owners of the Company ($'000)
Earnings used in the calculation of basic earnings per share ($'000)
13,081
13,081
3,959
3,959
Weighted average number of ordinary shares for the purpose of basic earnings per share ('000's)
628,653
623,778
Diluted earnings per share
Diluted earnings per share is based on profit attributable to shareholders of ClearView Wealth Limited and the weighted
average number of ordinary shares outstanding after adjustments for the effects of all dilutive potential ordinary shares,
such as options and performance rights issued under the employee share plan. The earnings used in the calculation of
diluted earnings per share are as follows:
Profit for the year attributable to owners of the Company ($'000)
Earnings used in the calculation of total diluted earnings per share
13,081
13,081
3,959
3,959
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)1
Weighted average number of ordinary shares used in the calculation of diluted earnings per
share (all measures) (000's)
628,653
623,778
-
13,300
628,653
637,077
1
Performance rights have been determined to be dilutive, however as the performance rights are fully backed by treasury shares there is no dilutive effect on the value of ClearView
Wealth Limited’s shares.
CLEARVIEW WEALTH LIMITED | 93
NOTES TO THE FINANCIAL STATEMENTS
2. Results for the year continued
2.3 Dividends
Dividend payments on Ordinary shares
2019 final dividend (2019: 2018 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
2020 final dividend (2019: 2019 final dividend) (cps)
Dividend franking account
Amount of franking credit available for use in subsequent
financial years
Consolidated and Company
2020
$’000
Per share
2019
$’000
Per share
-
-
-
-
-
-
3.00
3.00
20,048
20,048
-
-
34,014
28,272
The Directors have not declared a dividend for the year ended 30 June 2020 (2019: Nil).
2.4 Fee and other revenue
Financial advice fees
Funds management fees
Other income
Total fee and other revenue
Revenue from contracts from customers
Consolidated
2020
$’000
88,595
39,905
1,706
2019
$’000
81,155
41,501
460
130,206
123,116
Company
2019
$’000
-
-
-
-
2020
$’000
-
-
3,947
3,947
Revenue from contracts with customers arises primarily from the provision of investment management and financial advisory
services. Revenue is recognised when control of services is transferred to the customer at an amount that reflects the
consideration which ClearView is entitled to in exchange for the services provided. As the customer simultaneously receives and
consumes the benefits as the service is provided, control is transferred over time. Accordingly, revenue is recognised over time.
Fee rebates provided to customers are recognised as a reduction in fee revenue.
Investment management and related fees
Fees are charged to customers in connection with the provision of investment management and other related services. These
performance obligations are satisfied on an ongoing basis, usually daily, and recognised when it becomes highly probable that the
performance obligations will be met and a reversal will not occur in the future.
Financial advice fees
Financial advice fees consist of commissions and fee-for-service revenue and are earned for providing customers with financial
advice and performing related advisory services. These performance obligations are a series of distinct services that are
substantially the same and have the same pattern of transfer. Accordingly, revenue is recognised over time.
A substantial majority of the financial advisory fees received are paid to advisers. Financial advisory fees are presented gross of
the related cost which is presented in Fees and commission expenses in the Consolidated income statement.
94 | CLEARVIEW ANNUAL REPORT 2020
2. Results for the year continued
2.5 Investment income
Interest income
Dividend income
Distribution income
Total investment income
Dividend income - accounting policy
NOTES TO THE FINANCIAL STATEMENTS
Consolidated
Company
2020
$’000
20,376
13,233
72,334
105,943
2019
$’000
27,856
26,275
37,007
91,138
2020
$’000
141
1,500
-
2019
$’000
229
7,800
-
1,641
8,029
Dividend income from investments is recognised when the Group’s right to receive payment has been established.
Interest income - accounting policy
Interest income 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.
Distribution income - accounting policy
Distribution income from investments in unit trusts is recognised on a receivable basis as of the date the unit value is
quoted ex-distribution.
2.6 Operating expense
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
Administration expenses
Administration and other operational costs
50,007
41,075
4,648
3,440
Custody and investment management expenses
9,298
9,517
-
-
Total administration expenses
Employee costs and directors' fees
Government grant - JobKeeper payments
Employee expenses
Share based payments
Employee termination payments (excluding cost out program)
Directors’ fees
Total employee costs and directors’ fees
Other expenses
Interest and other costs of finance
Royal Commission and direct remediation costs
Cost out program implementation costs
Total other expenses
Total operating expenses
59,305
50,592
4,648
3,440
(2,551)
-
43,075
50,547
287
483
862
2,812
188
857
42,156
54,404
1,058
-
-
706
3,406
5,453
-
10
-
-
622
632
491
-
-
1,058
9,565
102,519
114,561
491
5,771
-
10
-
-
617
627
304
-
150
454
4,521
CLEARVIEW WEALTH LIMITED | 95
NOTES TO THE FINANCIAL STATEMENTS
2. Results for the year continued
2.6 Operating expense continued
Depreciation and amortisation expenses
Depreciation expenses
Software amortisation
Amortisation of acquired intangibles
Depreciation of right-of-use assets
Impairment
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
722
4,965
6
1,576
680
7,113
1,211
-
-
21,508
-
-
-
-
-
-
-
-
-
37,681
Total amortisation and depreciation expenses
7,269
30,512
-
37,681
Consolidated
2020
$
2019
$
Company
2019
$
2020
$
Remuneration of auditors
Auditor of the parent entity
Audit and review of financial reports
Audit of APRA and ASIC regulatory returns
Audit of Managed Investment Schemes
Total remuneration for audit services
Preparation and lodgement of tax returns
Other non-audit services - taxation advice
Other non-audit services - compliance
Other non-audit services - consulting
Total remuneration for non-audit services
Total remuneration
Accounting for JobKeeper
280,500
144,500
298,410
127,680
75,000
130,910
500,000
557,000
104,500
114,000
-
80,500
65,000
94,000
104,200
-
-
94,000
96,500
9,000
-
-
104,200
114,000
-
-
584,770
-
-
80,000
10,000
20,000
250,000
778,770
115,000
134,000
750,000
1,335,770
209,500
238,200
The Group has recognised JobKeeper under AASB 120 Accounting for Government Grants and Disclosure of Government
Assistance because they are being provided by the Government in return for compliance with conditions relating to the
operating activities of the Group. In return for the ‘JobKeeper’ payments, the Group must pay the amounts on to employees
that have temporarily been stood down as a result of COVID-19.
Government grant income is only recognised when there is reasonable assurance that the Group will comply with the
conditions attaching to them, and the grant will be received. Conditions for receiving the job keeper payments include:
• The employer must be eligible, i.e. they must have applied the rules for eligibility correctly, and
• The employer must have paid requisite salaries to employees (minimum of $1,500 per fortnight).
It is the Groups policy to net off JobKeeper government grant income against salaries expense.
96 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
2. Results for the year continued
2.7 Taxes
Income tax
a) Income tax recognised in profit or loss
Income Tax expense/(benefit) comprises:
Current tax expense/(benefit)
Deferred tax expense/(benefit)
Over provided in prior years – current tax expense/(benefit)
Under provided in prior years – deferred tax expense/(benefit)
Income tax expense/(benefit)
b) Tax losses
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
(621)
(3,545)
(2,215)
(202)
(6,583)
542
673
(980)
733
968
732
(1,237)
(56)
56
(364)
(923)
(804)
627
(505)
(1,464)
Unused tax losses for which no deferred tax asset has been
recognised
48,288
32,635
32,635
32,635
Potential tax benefit
11,877
9,790
9,790
9,790
The prima facie income tax expense/(benefit) on pre-tax accounting profit from operations reconciles to the income tax
expense in the financial statements as follows:
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
c) Reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense
6,498
4,926
(183)
(34,173)
Policyholder tax (expense) credit recognised as part of the change in
policyholder liabilities in determining profit before tax
Profit before income tax excluding tax charged to policyholders
Prima facie tax calculated at 30%
Tax effect of amounts which are non deductible/assessable in
calculating taxable income:
Dividends received from subsidiaries
Non assessable income
Non deductible expenses
Over (under) provision in prior years
Other
12,459
6,904
18,957
5,687
11,830
3,549
-
(183)
(55)
-
(34,173)
(10,252)
-
(818)
935
(4)
76
-
(450)
(2,340)
(629)
4,560
391
-
-
-
-
-
-
11,304
(176)
-
Income tax expense/(benefit) attributable to shareholders
5,876
7,871
(505)
(1,464)
Income tax expense/(benefit) attributable to policyholders
(12,459)
(6,904)
-
-
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:
(6,583)
968
(505)
(1,464)
Current tax
Deferred tax
-
-
-
(77)
-
-
-
-
CLEARVIEW WEALTH LIMITED | 97
NOTES TO THE FINANCIAL STATEMENTS
2. Results for the year continued
2.7 Taxes continued
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.
Deferred tax balances
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 derived
Research and development capitalised assets
Deferred tax liability
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
34,014
28,272
34,014
28,272
391
3,064
3,180
4,800
176
-
148
376
1,623
3,263
3,405
79
100
-
55
-
825
-
-
-
-
51
-
106
-
79
-
-
11,759
8,847
880
236
-
461
459
265
385
474
459
803
1,185
2,122
-
-
-
265
265
-
-
-
803
803
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 $48.3 million (tax effected $11.9 million) consolidated and $32.6 million (tax effected $9.8
million) for the Company.
Taxation
Income tax expense represents the sum of the tax currently payable (or receivable) and deferred tax. The Group’s current tax and
deferred tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period or the
relevant period in which the liability is settled or the asset realised. Current tax is net of any tax instalment paid.
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.
98 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
2. Results for the year continued
2.7 Taxes continued
Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax
bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for
all deductible temporary differences to the extent that it is
probable that taxable profits will be available against which
those deductible temporary differences can be utilised. Such
deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition (other
than in a business combination) of assets and liabilities in
a transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not
recognised if the temporary difference arises from the initial
recognition of goodwill.
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.
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.
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.
Relevance of tax consolidation to the Group
ClearView Wealth Limited and its wholly-owned Australian
resident entities have formed a tax consolidated group with
effect from 1 February 2007 and are therefore taxed as a
single entity from that date. The members in the ClearView tax
consolidated group includes subsidiaries as identified in 8.1.
Under the Tax Act, ClearView Wealth Limited being the head
company of the tax consolidated group is treated as a life
insurance company for income tax purposes as one of the
subsidiary members of the tax consolidated group is a life
insurance company.
Entities within the tax consolidated group have entered into
a tax sharing and funding agreement with the head entity.
This agreement has been amended to reflect the changes in
the structure of the tax consolidated group and a life insurer
becoming part of the group. These amendments were
executed on 20 August 2010.
Under the terms of the tax funding arrangement,
ClearView Wealth Limited and each of the entities in the
tax consolidated group has agreed to pay a tax equivalent
payment to or from the head entity, based on the current
tax liability or current tax asset of the entity.
The tax funding agreement also provides for the head
entity to make payments for tax losses of a group member
that is determined in accordance with the provisions of the
agreement. Settlement for these amounts is based on the
extent to which the losses are utilised.
The tax sharing arrangement between members of the
tax consolidated group provides for the determination
of the allocation of income tax liabilities between the
entities should the head entity default on its tax payment
obligations or if an entity should leave the tax-consolidated
group. The effect of the tax sharing agreement is that each
member’s liability for tax payable by the tax consolidated
group is limited to the amount payable to the head entity
under the tax funding arrangement.
CLEARVIEW WEALTH LIMITED | 99
NOTES TO THE FINANCIAL STATEMENTS
2. Results for the year continued
2.7 Taxes continued
Critical accounting estimates and key sources of uncertainty
Deferred tax asset – timing differences
The Board has considered that it is probable that sufficient taxable income will be available against which deductible
temporary differences can be utilised.
Deferred tax asset – Capital Losses
ClearView Life has amounts of realised and unrealised capital losses within its superannuation business in its No. 2 and No.
4 Statutory Funds. ClearView has a Deferred Tax Asset (DTA) policy in place to cap the upper limit on the deferred tax asset
amount recognised on balance sheet. This DTA cap is based on the capital losses estimated to be utilised in the foreseeable
future and is expressed as a percentage of the value of the investments held. Any amount exceeding the cap will not be
recognised on balance sheet. The same methodology has been adopted for unit pricing purposes and this financial report.
As at the reporting date, the DTA cap has impacted the DTA amount recognised in respect of the carried forward realised and
unrealised capital losses and it is likely that these losses can be fully recovered in the foreseeable future. There are therefore
unrecognised DTA on these losses.
In addition to the above, the Group has accumulated capital losses that arose within the Company. At the current time, it is
unlikely that the capital losses can be recouped and no DTA is recognised in respect of these losses.
Tax credits on insurance premiums
Since 2017, the income tax expenses and charges in the ClearView Retirement Plan (CRP) were no longer sufficient to support the
tax benefits and credits on the insurance premiums paid by policyholders via LifeSolutions Super rollovers in full. As a result, part
of the premium (tax credit) is currently supported by ClearView Life Assurance Limited (CLAL) and ClearView Wealth Limited Group
(CWL) shareholders and is carried as a receivables in the financial statements as at balance date of $15.5 million (2019: $12.5
million). This is after a write down of $2.6 million in the current year due to an error in the carried forward tax losses amounts in
the CRP’s prior years’ income tax returns.
Due to the tax loss position in CRP, settlement of this amount is subject to the utilisation of tax losses. Various options are being
considered and projects well progressed which collectively indicate recovery is considered probable at this point in time.
On this basis, it is expected that the receivable amounts will be recoverable.
100 | CLEARVIEW ANNUAL REPORT 2020
CLEARVIEW WEALTH LIMITED | 101
3. Receivables, payables and investments This note provides information about the Group’s receivables, payables and investments including:• an overview of the financial instruments held by the Group• accounting policies• information about determining the fair value of the instruments, including judgements and estimation uncertainty involved.3.1 Receivables 1023.2 Payables 1023.3 Investments 1033.4 Financial Risk Management 105 NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments
3.1 Receivables
Trade receivables
Outstanding life insurance premium receivable
Consolidated
2020
$’000
265
8,755
2019
$’000
327
7,809
Provision for outstanding life insurance premiums
(1,032)
(1,043)
Accrued dividends
Investment income receivable
Outstanding settlements
Prepayments
Receivables from controlled entities
Related party receivables
Loans receivable
Provision for loans receivable
Other debtors
Total receivables
Receivables - accounting policy
497
254
2,367
2,816
-
16,312
8,380
(3,680)
5,738
40,672
1,418
496
1,056
3,201
-
13,396
10,113
(1,372)
3,385
38,786
Company
2019
$’000
2020
$’000
-
-
-
-
-
-
47
2,574
15,425
3,632
(1,938)
365
20,105
-
-
-
-
-
-
17
158
-
3,570
(356)
15
3,404
Receivables are measured at amortised cost, less any allowance for Expected Credit Losses (ECL’s), except for prepayments which are
measured at historical cost.
The Group has recognised ECL’s of $3.7 million (Company $1.9 million) on loans receivable, including individually assessed loss
allowances of $1.2 million. There were no other material ECL’s on financial assets at the balance date.
The Group applies a simplified approach to calculating ECL’s therefore, the Group does not track changes in credit risk, but instead
recognises a loss allowance based on lifetime ECL’s at each reporting date. The group has established a provision matrix that is based
on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
3.2 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
Payables - accounting policy
Consolidated
Company
2020
$’000
6,428
2019
$’000
5,451
23,268
36,494
-
126
571
-
-
3,594
1,105
3,739
877
469
780
-
2,935
1,210
2020
$’000
958
-
6
-
-
-
53
-
118
2019
$’000
345
-
5
-
-
-
6,410
-
97
35,092
51,955
1,135
6,857
Payables are measured at the nominal amount payable. Given the short term nature of most payables, the nominal amount
payable approximates fair value.
102 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments continued
3.3 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
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
-
-
409,083
389,078
205,189
242,920
701,607
673,425
-
-
-
-
906,796
916,345
409,083
389,078
306,131
441,715
590,755
369,950
896,886
811,665
-
-
210,115
253,302
210,115
253,302
-
-
-
-
-
-
-
-
-
-
-
-
Total investments
2,013,797
1,981,312
409,083
389,078
Accounting policy – financial instruments
Recognition and derecognition of financial assets and liabilities
Financial assets and financial liabilities are recognised at the date the Group becomes a party to the contractual provisions
of the instrument. At initial recognition, financial assets are classified as and subsequently measured at fair value through
profit or loss, fair value through other comprehensive income (OCI), and amortised cost. The classification of financial assets
at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for
managing them.
Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire, or are
transferred. A transfer occurs when substantially all the risks and rewards of ownership of the financial asset are passed to an
unrelated third party. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled
or expires.
Financial assets and liabilities
Financial assets measured at fair value through profit or loss
Financial assets measured on initial recognition as financial assets measured at fair value through profit or loss are initially
recognised at fair value, determined as the purchase cost of the asset, exclusive of any transaction costs. Transaction costs are
expensed as incurred in profit or loss. Any realised and unrealised gains or losses arising from subsequent measurement at fair
value are recognised in profit or loss in the period in which they arise.
The Group has elected to use their fair value option for investments as there would otherwise be an accounting mismatch as
the assets are held against investment policy liabilities.
Financial assets at amortised cost (debt instruments)
The Group measures financial assets at amortised cost if both of the following conditions are met:
•
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cash flows; and
CLEARVIEW WEALTH LIMITED | 103
NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments continued
3.3 Investments continued
•
The contractual term of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to
impairment testing. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost includes trade receivables and loans receivables.
Impairment of financial assets
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. The Group recognises an allowance for
expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss.
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash
flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected
cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the
contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in
credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the
next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group
does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.
The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking
factors specific to the debtors and the economic environment.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases,
the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is
unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a
net basis, to realise the assets and settle the liabilities simultaneously.
FV 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).
104 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments continued
3.3 Investments continued
Financial assets
2020
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
2019
Equity Securities
Fixed Interest Securities
Unit Trusts
Total
Financial Liabilities
2020
Life investment policy liability
Total
2019
Life investment policy liability
Total
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
205,189
-
-
306,131
1,502,477
-
1,707,666
306,131
242,920
-
-
441,715
1,296,678
-
-
-
-
-
-
-
-
205,189
306,131
1,502,477
2,013,797
242,920
441,715
1,296,678
1,539,598
441,715
- 1,981,313
-
-
-
-
1,185,326
1,185,326
1,152,535
1,152,535
-
-
-
-
1,185,326
1,185,326
1,152,535
1,152,535
3.4 Financial Risk Management
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.
(a) 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.
CLEARVIEW WEALTH LIMITED | 105
NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments continued
3.4 Financial Risk Management continued
(b) Market 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 RMS;
Investing ClearView’s assets in accordance with the Board approved Investment Policy and Guidelines; and
By holding capital reserves in accordance with the Company’s ICAAP with respect to the residual interest rate risk exposure
retained, in addition to the regulatory capital reserves held within ClearView Life in respect of interest rate risk.
Equity price risk
Equity price risk is the risk that the fair value of investments in equities decreases or increases as a result of changes in market
prices, whether those changes are caused by factors specific to the individual share price or factors affecting all equity
instruments in the market. As at 30 June 2020, 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 reserves are held in accordance with the ICAAP with respect to the Group’s residual fee risk
exposure.
(c) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. Credit risk exposures arising from investment activities are assessed by the Group’s internal investment management
committee (the ClearView Investment Committee (CIC) appointed by the Board) prior to investing ClearView assets into any
significant financial asset. The ongoing credit standing of material investments are monitored by the CIC. The CIC is charged
with maintaining the credit quality of ClearView assets within the Board’s investment guidelines.
The large majority of debt assets invested in by the Group on behalf of policyholders and clients (including Policyholder
assets) are managed under mandates with appointed funds managers. Those mandates include credit rating, diversification
and maximum counterparty exposure rules and standards that are to be met. The funds managers adherence to those
requirements are subject to ongoing monitoring by the funds managers, and are separately monitored by the Group’s
custodian. Formal compliance reporting is monitored monthly by the CIC.
Credit risk arising from other third party transactions, such as reinsurance recovery exposures and exposure to outsource
service providers, are assessed prior to entering into financial transactions with those parties, are approved by the Board where
material, and are monitored by appropriate mechanisms on an ongoing basis. For further details on the Swiss Re concentration
risk issue and solutions implemented to manage the exposure, see page 83.
The Group does not expect any of its material counterparties to fail to meet their obligations and other than separately
disclosed in this report does not currently 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.
106 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments continued
3.4 Financial Risk Management continued
The Group does have significant credit risk exposure to counterparties but these counterparties have a high credit rating.
The following table reflects the shareholder financial assets with credit risk exposure monitored by the CIC. It excludes policy
holder financial assets and therefore represents shareholder assets invested in interest bearing securities at the balance date.
Cash and cash equivalents and debt securities/fixed interest
securities
Rating
AAA to AA-
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
271,966
202,898
271,966
202,898
14,160
14,160
11,038
11,038
In addition to the credit risk exposures above, the Group’s balance sheet as at 30 June 2020 reflects a $128.5 million (2019:
$95.7 million) exposure to Swiss Re Life & Health Australia Ltd in relation to reinsurer’s share of policy liabilities. Credit risk
associated with receivables is considered minimal. The main receivables balance is in relation to receivables from outstanding
premiums receivable, accrued dividends, loans receivable, prepayments, outstanding settlements and related party
receivables. The concentration of other receivables is spread across the various debtors with no single significant debtor except
for related party receivables. Further details on the related party receivable recoverability is outlined in section 8.6.
(d) Liquidity risk
Liquidity risk is primarily the risk that the Group will encounter difficulty in meeting its obligations due to an inability to realise
some or all of its assets in order to fund its cash flow needs, including the payment of amounts to its policyholders, members
and clients. A secondary risk relates to the risk of the illiquidity of the external (including off balance sheet) funds its clients
invest in, which may result in restricted fee flows to the Group and/or reputational damage via association.
The primary risk is controlled through focusing the Group’s assets, as well as policyholder and member assets and the
investment of client funds controlled by ClearView Life, into assets which are highly marketable and readily convertible into
cash. In addition, the Group maintains suitable cash holdings at call and an appropriate overdraft facility.
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 product options list and Approved Product
List, which restricts the external funds available to investment managers and funds that are assessed to be reputable and
financially sound.
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.
CLEARVIEW WEALTH LIMITED | 107
NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments continued
3.4 Financial Risk Management continued
2020
Receivables
Outstanding life insurance premiums
net of provision
Accrued dividends
Investment income and distribution
income
Loan receivables
Prepayments
Related party receivable
Total
2019
Receivables
Outstanding life insurance premiums
net of provision
Accrued dividends
Investment income and distribution
income
Loan receivables
Prepayments
Related party receivable
Total
2020
Trade receivables
Receivables from controlled entities
Loan receivables
Related party receivables
Total
2019
Trade receivables
Receivables from controlled entities
Loan receivables
Total
Consolidated
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
$’000
5,517
7,674
497
254
684
1,830
887
17,343
3,154
6,738
1,418
496
629
1,938
850
15,223
$’000
90
42
-
-
85
277
-
494
52
27
-
-
176
647
-
902
$’000
2,147
$’000
473
7
-
-
-
-
-
147
573
3,928
136
-
15,425
2,874
19,962
1,531
1
-
-
3,970
451
-
5,953
31
-
-
-
3,966
165
12,546
16,700
Over
5 years
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
12
1,999
-
-
2,011
19
158
-
177
$’000
17
-
-
-
17
5
-
-
5
$’000
384
-
-
-
384
6
-
-
6
$’000
$’000
-
575
1,694
15,425
17,694
1
-
3,214
3,215
-
-
-
-
-
-
-
-
-
Total
$’000
8,227
7,723
497
254
4,844
2,816
16,312
40,673
4,768
6,766
1,418
496
8,741
3,201
13,396
38,786
Company
Total
$’000
413
2,574
1,694
15,425
20,106
31
158
3,214
3,404
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.
108 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments continued
3.4 Financial Risk Management continued
2020
Payables
Current tax liabilities
Provisions
Reinsurance payable1
Total
2019
Payables
Current tax liabilities
Provisions
Reinsurance payable1
Total
2020
Payables
Current tax liabilities
Provisions
Total
2019
Payables
Current tax liabilities
Provisions
Total
Consolidated
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
10,814
-
701
23,268
34,783
13,425
-
1,095
36,494
51,014
$’000
993
2,175
2,022
-
$’000
$’000
$’000
17
-
-
-
-
-
1,723
1,283
1,301
-
-
-
5,190
1,740
1,283
1,301
479
2,178
1,876
-
223
-
1,250
-
2,007
1,497
-
-
4,533
2,230
2,747
83
-
846
-
929
Less than
3 months
3 to 6
months
6 months
to a year
1 year
and over
Over
5 years
$’000
1,135
-
-
1,135
6,747
-
-
6,747
$’000
$’000
$’000
$’000
-
2,175
35
2,210
109
2,177
24
2,310
-
-
812
812
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
11,824
2,175
7,030
23,268
44,297
15,460
2,178
7,321
36,494
61,453
Company
Total
$’000
1,135
2,175
847
4,157
6,856
2,177
24
9,057
1
Reinsurance payable represents reinsurance premium payable on reinsurance due in respect of life insurance premium.
CLEARVIEW WEALTH LIMITED | 109
NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments continued
3.4 Financial Risk Management 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.
2020
Financial assets
Variable interest rate instruments:
Cash and cash equivalents
Fixed interest securities
Total
2019
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
0.05
1.42
0.10
2.58
153,432
90,409
243,841
98,383
104,515
202,898
0.05
-
0.10
-
14,160
-
14,160
11,038
-
11,038
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% (2019: 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.
110 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
3. Receivables, payables and investments continued
3.4 Financial Risk Management continued
The following table illustrates the effect on 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
2020
$’000
±884
2019
$’000
±281
2020
$’000
±884
2019
$’000
±281
2020
$’000
±49
2019
$’000
±39
2020
$’000
±49
2019
$’000
±39
±0.5% (2019: ±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.
(j) Foreign currency risk management
Foreign currency risk is the risk that the market value of future cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates. The Group undertakes certain investments denominated in foreign currencies, hence is exposed to the
effects of exchange rate fluctuations. However, the foreign currency risk is borne by the policyholder and the shareholder has no
direct exposure to foreign currency.
Forward foreign exchange contracts
The Group currently does not make use of forward foreign exchange contracts.
CLEARVIEW WEALTH LIMITED | 111
112 | CLEARVIEW ANNUAL REPORT 2020
4. Non-financial assets and liabilitiesThis note provides information about the Group’s non-financial assets and liabilities, including:• specific information about each type of non-financial asset and non-financial liability • Goodwill and intangibles • Provisions• accounting policies• information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved.4.1 Goodwill and intangibles 1134.2 Recoverability of intangible assets and goodwill 1144.3 Provisions 116 4. Non-financial assets and liabilities
4.1 Goodwill and intangibles
2020
Gross carrying amount
Goodwill
$’000
Capitalised
software
$’000
Balance at the beginning of the financial year
20,452
Acquired directly during the year
Balance at the end of the financial year
Accumulated amortisation and impairment
losses
Balance at the beginning of the year
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
2019
Gross carrying amount
-
20,452
7,941
-
7,941
47,022
1,964
48,986
38,365
4,965
43,330
12,511
12,511
Goodwill
$’000
8,657
5,656
Capitalised
software
$’000
NOTES TO THE FINANCIAL STATEMENTS
Consolidated
Total
intangibles
$’000
Matrix Brand
$’000
200
-
112,239
1,964
Client
Book
$’000
65,017
-
65,017
200
114,203
64,979
6
64,985
38
32
Client
Book
$’000
-
-
-
200
200
Matrix Brand
$’000
103,344
4,971
108,315
8,895
5,888
Total
intangibles
$’000
Balance at the beginning of the financial year
20,452
40,946
65,017
Acquired directly during the year
Balance at the end of the financial year
-
20,452
6,076
47,022
-
65,017
200
-
200
106,163
6,076
112,239
Accumulated amortisation and impairment
losses
Balance at the beginning of the year
Amortisation expense in the current year
Impairment 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
-
-
7,941
7,941
20,452
12,511
22,634
7,113
8,618
38,365
18,312
8,657
58,819
1,211
4,949
64,981
6,198
36
-
-
-
-
81,453
8,326
13,567
103,345
200
200
24,710
8,893
As required under accounting standards the Group completes an impairment assessment at each reporting date. As at
30 June 2020, no impairment charge was recognised (2019: $21.5 million was recognised in relation to goodwill ($7.9 million),
capitalised software ($8.6 million)) and client books ($4.9 million). This is discussed further in section 4.2.
CLEARVIEW WEALTH LIMITED | 113
NOTES TO THE FINANCIAL STATEMENTS
4. Non-financial assets and liabilities continued
4.1 Goodwill and intangibles continued
Goodwill and Intangibles accounting policy
Goodwill
Goodwill acquired in a business combination is recognised at
cost and subsequently measured at cost less any
accumulated impairment losses. The cost represents the
excess of the cost of a business combination over the fair
value of the identifiable assets acquired and liabilities
assumed.
Capitalised costs
Costs are capitalised when the costs relate to the creation
of an asset with expected future economic benefits which
are capable of reliable measurement. Capitalised costs are
amortised on a straight-line basis over the estimated useful
life of the asset, commencing at the time the asset is first
put into use or held ready for use, whichever is the earlier.
Client books
Client book intangibles represent the value of the in-force
insurance and investment contracts, and value of the
existing financial advice and funds management revenues.
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.
Amortisation
Intangible assets with finite useful lives are amortised on a
straight-line basis over the useful life of the intangible asset.
The estimated useful lives are generally:
2020
2019
Software
Up to 3 years
Up to 3 years
Client books
6–10 years
6–10 years
Brand
Goodwill
indefinite
indefinite
indefinite
indefinite
Impairment testing
Goodwill and intangible assets that have indefinite useful
lives are tested at least annually for impairment. Other
intangible assets are reviewed for impairment whenever
events or changes in circumstances indicate that the
carrying amount may not be recoverable.
For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units or CGUs). An
impairment loss is recognised when the goodwill carrying
amount exceeds the CGU’s recoverable amount.
4.2 Recoverability of intangible assets
and goodwill
Goodwill and client book intangibles
The goodwill and intangibles primarily arose from the
acquisition of ClearView Group Holdings Pty Limited in June
2010, the business of Community and Corporate Pty Limited
in April 2009 and Matrix Planning Solutions Limited in
October 2014 as well as other business combinations where
ClearView Wealth Limited was the acquirer.
The goodwill that arose on acquisition was allocated
across the Financial Advice, Life Insurance and Wealth
Management CGU’s of the Group based on the expected
synergies expected to be gained by each CGU within the
Group. At the balance date goodwill was allocated $4.0
million to the Life Insurance segment and $8.5 million to
the Wealth Management segment.
The goodwill recognised within the Life Insurance and
Wealth Management CGU’s is tested for impairment
triggers using the embedded value methodology by
comparing the carrying value of goodwill to the in-force
portfolios written to date.
The recoverable amount for the Wealth Management
and Life Insurance CGU’s has been determined based on
the embedded value calculations as at 30 June 2020.
The embedded value is a calculation that represents the
economic value of the shareholder capital in the business
and the future profits expected to emerge from the business
currently in-force expressed in today’s dollars. No account
is taken of future new business in the embedded value
calculations.
The estimated embedded value of the business has
been calculated based on the following key assumptions
and estimates:
• Mortality and morbidity (claims)
•
Investment returns;
• Persistency (lapse);
• Outflows;
• Maintenance costs; and
• Discount rates.
114 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
4. Non-financial assets and liabilities continued
4.2 Recoverability of intangible assets and goodwill continued
The embedded value uses assumptions that are consistent
with those adopted for policy liabilities in this financial report.
See section 5.6 for actuarial estimates and assumptions and
section 1 (j) for the potential impacts of COVID-19 that has
been taken into accounting in setting these assumptions.
As at 30 June 2020, no impairment was required to the
carrying value of goodwill within the Life Insurance and
Wealth Management CGU’s. The carrying value of the
Financial Advice Goodwill and client book intangibles was
fully impaired in the 2019 financial year.
Capitalised software impairment
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
is estimated. The impairment indicators for software
intangibles 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 Group no longer sells the products
that are administered on the PAS or utilises the provided
functionality.
As at 30 June 2020, no impairment was required to the
carrying value of capitalised software.
CLEARVIEW WEALTH LIMITED | 115
NOTES TO THE FINANCIAL STATEMENTS
4. Non-financial assets and liabilities continued
4.3 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
Balance at the beginning of the financial year
Additional provisions raised
Utilised during the period
Balance at the end of the financial year
Provision for Restructuring3
Balance at the beginning of the financial year
Additional provisions raised
Utilised during the period
Balance at the end of the financial year
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
Balance at the end of the financial year
Consolidated
2020
$’000
565
4,762
82
46
1,575
7,030
508
138
(81)
-
565
4,115
1,983
(1,336)
4,762
2019
$’000
508
4,115
1,800
625
272
7,320
374
137
(3)
-
508
4,342
832
(1,059)
4,115
1,800
-
-
1,800
(1,718)
-
82
1,800
625
8
(587)
46
272
1,803
(500)
1,575
1,815
888
(2,078)
625
103
392
(223)
272
Company
2019
$’000
2020
$’000
-
-
-
-
847
847
-
-
-
-
24
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24
833
(10)
847
26
17
(19)
24
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 expect-
ed to be settled on vacating the leased premises on expiration of the relevant lease.
The provision for employee leave represents annual leave and long service leave entitlements accrued by employees. The provisions are expected to be utilised in accordance with the
pattern of consumption of employees utilising their leave entitlements.
The provision for restructuring relates to the expected costs in relation to the IT transformation project and onerous lease provision.
The provision for remediation relates to the direct remediation program, remaining compensation and program costs not yet paid as at 30 June 2020.
Other provisions relates to advice remediation, ad-hoc clients restitutions, and wealth program project of works.
116 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
4. Non-financial assets and liabilities continued
4.3 Provisions continued
Accounting policy - Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount
of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision
is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those
cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is
considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the
contract exceed the economic benefits expected to be received from the contract.
Restructurings
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and
has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or
announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct
expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring
and not associated with the ongoing activities of the entity.
CLEARVIEW WEALTH LIMITED | 117
118 | CLEARVIEW ANNUAL REPORT 2020
5. Life insurance and investment contractsThe Group’s life insurance activities are conducted through its registered life insurance company ClearView Life Assurance Limited. This section explains how ClearView Life Assurance measures its life insurance and investment contracts, including the methodologies and key assumptions applied. It also details the key components of the profits that are recognised in respect of the life insurance contracts and the sensitivities of those profits to variations in assumptions.5.1 Accounting for life insurance and investment contracts 1195.2 Disaggregated information by Statutory Fund 1215.3 Sources of profit 1235.4 Policy liabilities 1245.5 Capital adequacy 1255.6 Actuarial methods and assumptions 1275.7 Critical accounting judgements and key sources of estimation uncertainty 130 NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts
5.1 Accounting for life insurance and investment contracts
Principles underlying the conduct of
life insurance business
The life insurance operations of the Group are conducted
within separate statutory funds as required by the Life
Insurance Act 1995 (Life Act) and are reported in aggregate
with the shareholders’ funds in the statement of profit or
loss and other comprehensive income, statement of financial
position, statement of changes in equity and statement
of cash flows. The life insurance operations consist of the
provision of life insurance and life investment contracts.
Life insurance contracts involve the acceptance of significant
insurance risk. Insurance risk is defined as significant if,
and only if, an insured event could cause an insurer to pay
significant benefits in any scenario, excluding scenarios that
lack commercial substance. Insurance contracts include
those where the insured benefit is payable on the occurrence
of a specified event such as death, injury or disability caused
by accident or illness. The insured benefit is not linked to the
market value of the investments held by the Group, and the
financial risks are substantially borne by the Group.
Any contracts issued by the Group and regulated under the
Life Act that do not meet the definition of a life insurance
contract are classified as life investment contracts. Life
investment contracts include investment-linked contracts
where the benefit is directly linked to the market value of the
investments held in the particular investment linked fund.
While the underlying assets are registered in the name of
ClearView Life Assurance Limited (ClearView Life) and the
investment-linked policy owner has no direct access to
the specific assets, the contractual arrangements are such
that the investment-linked policy owner bears the risks and
rewards of the fund’s investment performance.
A component of the life investment contracts includes a
minimum unit price guarantee. ClearView Life derives fee
income from the administration of investment linked funds.
Life investment contracts do not contain any discretionary
participation features (i.e. those where the amount or timing
of allocation of the profit from the underlying investments is
at the discretion of the insurer).
In accordance with AASB 1038 ‘Life Insurance Contracts’,
financial assets backing policy liabilities are designated at fair
value through profit and loss. ClearView Life has determined
that all assets held within the statutory funds back policy
liabilities. Financial assets backing policy liabilities consist of
high quality investments such as cash, equities, fixed income
securities, property trusts and infrastructure assets. The
management of financial assets and policy liabilities is closely
monitored to ensure that investments are appropriate given
the expected pattern of future cash flows arising from the
policy liabilities.
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.
Claims
Life insurance contracts
Claims incurred relate to life insurance contracts and are
treated as expenses. Claims are recognised upon notification
of the insured event. The liability in respect of claims includes
an allowance (estimate) for incurred but not reported claims
and an allowance (estimate) for expected declinature of
notified claims. Claims are shown gross of reinsurance
recoverable. Any reinsurance recoveries applicable to the
claims are included in receivables.
Life investment contracts
There is no claims expense in respect of life investment
contracts. Surrenders and withdrawals which relate to life
investment contracts are treated as a movement in life
investment contract liabilities. Surrenders and withdrawals
are recognised as at the date of redemption of policy units,
which occurs once all documentation has been provided
and completed.
CLEARVIEW WEALTH LIMITED | 119
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.1 Accounting for life insurance and investment contracts continued
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.
Policy acquisition costs
The policy acquisition costs incurred are recorded in the
statement of profit or loss and other comprehensive income
and represent the fixed and variable costs of acquiring new
business. The policy acquisition costs include commission,
policy issue and underwriting costs, and related costs.
The acquisition costs incurred in relation to life insurance
contracts are capitalised in the valuation of policy liabilities.
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 held within
statutory fund No.1. 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).
Policy liabilities
Policy liabilities consist of life insurance policy liabilities and
life investment policy liabilities.
Life insurance contracts
The value of life insurance policy liabilities is calculated
using the Margin on Services methodology. Under this
methodology, planned profit margins and an estimate of
future liabilities are calculated separately for each related
product group, with future cash flows determined using
best estimate assumptions and discounted to the reporting
date. Profit margins are systematically 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 section 5.6.
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.
120 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.2 Disaggregated information by Statutory Fund
Abbreviated income statement
Shareholders
Statutory
Statutory
Statutory
Fund
Fund No.1
Fund No.2
Fund No.4
Total
ClearView Life Assurance Limited
2020
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
Abbreviated statement of financial position
Australian Non-Participating
$’000
$’000
-
-
8
6
-
-
18,832
63,238
$’000
259,993
(85,803)
19,143
65,158
(7)
(67,687)
(67,813)
14,203
190,678
7
-
-
-
-
-
-
(194,538)
136,429
5,361
(7,457)
(1,564)
-
(10,579)
3,122
-
-
(32)
(17,817)
(125,447)
(10,604)
11,215
(492)
1,579
3,462
7,379
$’000
-
-
193
4
-
$’000
259,993
(85,803)
110
1,910
61
197
176,271
(194,538)
136,429
5,361
(1,564)
(107,598)
14,361
(5,414)
-
-
-
-
-
-
197
(1)
196
8,947
611
1,087
10,841
2020
$’000
$’000
$’000
$’000
$’000
Shareholders
Fund
Statutory
Fund No.1
Statutory
Fund No.2
Statutory
Fund No.4
Total
ClearView Life Assurance Limited
Australian Non-Participating
Investments in controlled unit trusts
Investments in unit trusts
Policy liabilities ceded under reinsurance
Other assets
Total assets
Gross policy liabilities – Life insurance contracts
Gross policy liabilities – Investment insurance contracts
Other liabilities
Total liabilities
Net assets
Shareholder’s retained profits
Opening retained profits
Operating profit
Capital transfer between funds
Shareholder’s retained profits
Shareholder’s capital
Total equity
-
-
-
569
569
-
-
180
180
389
-
926
1,181,153
1,182,079
29,542
128,543
242,913
400,998
(59,341)
-
-
-
-
1,398
13,234
29,542
128,543
258,105
2,315
1,194,387
1,598,269
-
-
(59,341)
-
1,307
1,184,019
1,185,326
28,716
(30,625)
431,623
440
1,990
31,326
1,747
1,186,009
1,157,311
568
8,378
440,958
(73,289)
241,021
196
-
(73,093)
73,482
8,949
4,700
254,668
176,955
389
431,623
1,458
611
8,691
1,087
(1,700)
(3,000)
368
200
568
6,778
1,600
8,378
177,881
10,841
-
188,722
252,237
440,958
CLEARVIEW WEALTH LIMITED | 121
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.2 Disaggregated information by Statutory Fund continued
Abbreviated income statement
2019
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
Abbreviated statement of financial position
2019
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
$’000
$’000
$’000
$’000
Australian Non-Participating
-
-
-
5
-
5
-
-
-
-
-
-
5
(2)
3
243,114
(71,613)
-
2,870
-
174,371
(116,257)
80,346
1,319
-
-
9
7
(4)
12
-
-
-
-
-
20,150
60,346
29,002
243,114
(71,613)
20,159
63,228
28,998
109,498
283,886
-
-
-
(116,257)
80,346
1,319
-
(9,622)
(86,274)
(95,896)
19,212
(131,161)
27,830
(8,655)
-
-
19,212
(23)
(21,816)
(153,000)
(9,633)
10,070
1,408
(2,132)
19,610
(719)
19,175
437
(724)
18,891
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
-
476
1,153,420
1,157,346
Australian Non-Participating
Policy liabilities ceded under reinsurance
-
95,669
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
122 | CLEARVIEW ANNUAL REPORT 2020
5,244
8,694
-
-
4,859
4,859
3,835
194,508
290,177
(151,652)
-
38,908
(112,744)
402,921
-
701
-
95,669
9,940
210,393
1,177
1,163,360
1,463,408
-
374
345
719
458
-
(151,652)
1,152,161
1,152,535
909
45,021
1,153,070
1,045,904
10,290
417,504
(68,293)
221,846
3
-
(5,000)
(73,290)
77,125
19,175
1,200
-
242,221
160,700
3,835
402,921
1,021
437
(1,200)
-
258
200
458
9,414
(724)
-
-
8,690
1,600
163,988
18,891
-
(5,000)
177,879
239,625
10,290
417,504
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.3 Sources of profit
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
Components of profit related to movements in life insurance
liabilities
Planned profit margins released
Profit arising from the difference between actual investment income
and expected interest on policy liabilities
Profit arising from the difference between actual and expected
experience1
Impact of change in economic assumptions
Life insurance
Components of profit related to movements in life investment
liabilities
Profit arising from life investment contracts1
Life investment
Profit for the statutory funds
Profit for the shareholders fund
Profit for ClearView Life Assurance Limited
1
Includes costs considered unusual to the ordinary activities relevant to the segment.
22,675
3,292
23,786
4,774
(22,758)
(18,944)
5,737
8,947
9,559
19,175
1,699
1,699
(287)
(287)
10,646
18,887
196
3
10,841
18,891
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
CLEARVIEW WEALTH LIMITED | 123
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.4 Policy liabilities
Reconciliation of movements in policy liabilities
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
Life Investment Policy Liabilities
Opening gross life investment policy liabilities
Net increase/(decrease) in life investment policy liabilities reflected
in the income statement
Decrease in life investment policy liabilities due to management fee
reflected in the income statement
1,152,535
1,198,780
7,572
95,896
(18,903)
(20,159)
Life investment policy contributions recognised in policy liabilities
277,442
153,132
Life investment policy withdrawals recognised in policy liabilities
(233,320)
(275,114)
Closing gross life investment policy liabilities
1,185,326
1,152,535
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 reinsurer’s share of life insurance policy liabilities
Movement in outstanding reinsurance
Decrease/(increase) in reinsurance assets reflected in the income
statement
Movement in reinsurer's share of incurred claims liability
Closing reinsurer’s share of life insurance policy liabilities
Net policy liabilities at balance date
Components of net life insurance policy liabilities
(151,652)
(197,116)
97,672
(5,361)
46,783
(1,319)
(59,341)
(151,652)
1,125,985
1,000,883
(95,669)
(70,049)
1,564
(38,243)
(38,214)
(19,212)
35,611
-
(128,543)
(95,669)
997,442
905,214
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated
2020
$’000
517,050
602,316
2019
$’000
317,336
482,115
(1,670,028)
(1,399,856)
(550,662)
(600,405)
362,778
353,083
(187,884)
(247,322)
Company
2019
$’000
2020
$’000
-
-
-
-
-
-
-
-
-
-
-
-
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
124 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.4 Policy liabilities continued
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.
5.5 Capital adequacy
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
Net Assets (Common Equity Tier 1 Capital)
Goodwill and intangibles
Net tangible assets
Capital base adjustments
Deferred tax assets
Deferred acquisition costs
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
Statutory fund
Statutory fund
Statutory fund
No. 1
No. 2
No. 4
Shareholder’s
Fund
Australian non-
participating
Australian non-
participating
Australian non-
participating
2020
$’000
388
-
388
-
-
388
(3)
385
129.4
-
(3)
-
-
-
-
2020
$’000
431,623
(4,020)
427,603
(3,127)
(346,580)
77,897
(21,496)
56,401
3.6
(11,697)
(5,152)
-
(7,804)
3,157
-
2020
$’000
569
-
569
-
-
569
(18)
551
31.6
-
(15)
-
(3)
-
-
ClearView Life
Assurance
Limited
2020
$’000
440,958
(5,620)
435,338
(3,190)
(346,580)
85,569
(24,912)
60,657
3.4
(11,697)
(5,605)
-
2020
$’000
8,378
(1,600)
6,778
(63)
-
6,715
(3,395)
3,320
2.0
-
(435)
-
(2,960)
(10,767)
-
-
3,157
-
(3)
(21,496)
(18)
(3,395)
(24,912)
CLEARVIEW WEALTH LIMITED | 125
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.5 Capital adequacy continued
Statutory fund
Statutory fund
Statutory fund
No. 1
No. 2
No. 4
Shareholder’s
Fund
Australian non-
participating
Australian non-
participating
Australian non-
participating
Net Assets (Common Equity Tier 1 Capital)
Intangible adjustments2
Net tangible assets after intangible
adjustments
Capital base adjustments
Deferred tax assets
Investment in subsidiaries
Deferred acquisition costs
Other adjustments to capital base1
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
2019
$’000
3,836
-
3,836
2019
$’000
402,921
(5,112)
397,809
2019
$’000
458
-
458
-
(1,590)
(3,450)
-
-
386
(34)
352
11.4
-
(34)
-
-
-
-
-
(336,303)
(12,547)
47,368
(19,966)
27,403
2.4
(6,720)
(3,854)
(4,284)
(7,293)
2,185
-
(34)
(19,966)
-
-
-
-
457
(5)
452
91.4
-
(4)
-
(1)
-
-
(5)
ClearView Life
Assurance
Limited
2019
$’000
417,505
(8,480)
409,024
(1,631)
(3,450)
(336,303)
(12,547)
55,094
(23,266)
31,828
2.4
(6,720)
(4,272)
(4,284)
2019
$’000
10,291
(3,368)
6,924
(41)
-
-
-
6,882
(3,260)
3,622
2.1
-
(380)
-
(2,880)
(10,175)
-
-
2,185
-
(3,260)
(23,266)
1
Regulatory capital includes a $12.5 million inadmissible asset reserve for tax credits within the ClearView Retirement Plan (CVRP) relating to insurance premiums paid via rollover. There is
currently not sufficient taxable income in the CVRP currently to utilise these tax credits. While strategies to utilise the carried forward losses in the CVRP are in progress there are risks and
uncertainties involved. Furthermore, a project for the CVRP (part of a broader wealth strategy review), has commenced. For this reason an offset is held against the ECB risk reserve for
$12.5 million.
2
Intangible adjustments relate to capitalised software.
126 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.6 Actuarial methods and assumptions
Actuarial methods and assumptions
The effective date of the actuarial report on life insurance policy
liabilities and life investment policy liabilities is 30 June 2020. The
actuarial report was prepared by the ClearView Life Appointed
Actuary, Ashutosh Bhalerao. The actuarial report indicates that
the Appointed Actuary is satisfied as to the accuracy of the data
upon which the policy liabilities have been determined.
The methods used for the major product groups are as follows:
Related Product Group
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
The projection method uses the discounted value of future policy
cash flows (premiums, expenses and claims) plus a reserve for
expected future profits. The policy liabilities for life investment
contracts are determined as the fair value of the policyholders’
accounts under the accumulation method with no future profit
reserve.
(a) Actuarial assumptions used in the valuation of life
insurance policy liabilities
Key assumptions used in the calculations of life insurance policy
liabilities are as follows:
Discount rates: Discount rates are based on a yield curve derived
from Commonwealth Government bond market yields as at
the valuation date, plus an adjustment for illiquidity premium
which is based on a formula driven by 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 1.1% (2019: 1.4%).
Acquisition expenses: Per policy acquisition expense
assumptions were based on the actual acquisition expenses
incurred for the 12 months to 30 June 2020.
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 2021
business plan. Expense inflation of 1.0% p.a. (2019: 1.4% p.a.)
was assumed.
Lapses: Rates adopted vary by product, duration, age,
commission type and premium frequency, and have been based
on an analysis of ClearView Life’s experience over recent years
with allowance for expected trends. Whilst there have been no
changes to best estimate lapse assumptions at 30 June 2020,
there is an expectation of higher lapses driven by affordability
related concerns from COVID-19 and ClearView’s recent repricing
activity. This short term elevation in lapses is allowed for in the
reported best estimate liability and present value of future profit
margins.
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. The mortality claims assumptions have been
updated to take into account recent observed 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. The
morbidity claims assumptions have been updated at 30 June
2020 to take into account recent observed experience.
COVID-19: Whilst there is a significant level of uncertainty and
limited data, there is an expectation of higher mortality and
morbidity related claims with respect to COVID-19. This short
term elevation in claims is allowed for in the reported best
estimate liability and present value of future profit margins. See
section 1 (j) for further details.
CLEARVIEW WEALTH LIMITED | 127
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.6 Actuarial methods and assumptions continued
(b) Effects of changes in actuarial assumptions
(over 12 months to 30 June 2020)
Taxation
Effect on
profit margins
Increase/
(decrease)
Effect on policy
liabilities
Increase/
(decrease)
$’000
$’000
Assumption category
Discount rates and inflation
15,005
(8,196)
Maintenance expenses
Lapses
Mortality and morbidity
Total
-
(49,759)
(103,763)
(138,517)
-
-
8,429
233
(c) Processes used to select assumptions
Discount rate
Benefits under life insurance contracts are not contractually
linked to the performance of the assets held. As a result, the
life insurance policy liabilities are discounted for the time
value of money using discount rates that are based on current
observable, objective rates that relate to the nature, structure
and term of the future obligations. The discount rate is based
on Commonwealth Government bond rates adjusted for the
value of the illiquidity of the policy liability. The effect of this
approach is unchanged from that adopted last valuation.
Maintenance expenses and inflation
Maintenance expenses are set having regard to the cost base
in the three year Board adopted business plan. Per policy
maintenance expenses are assumed to increase in the future
with inflation, at a rate that allows for basic price increases
(CPI).
Acquisition expenses
Per policy acquisition expenses were derived from the analysis
of acquisition expenses adopted for this financial report.
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.
128 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.6 Actuarial methods and assumptions continued
Variable
Impact of movement in underlying variable
Interest Rate
Risk
Expense Risk
Mortality
Rates
Morbidity
Rates
Lapses
The life insurance policy liabilities are calculated using a discount rate that is derived from market interest rates.
Changes in market interest rates will affect the present value of cash flows and profit margins in the policy
liabilities, which in turn will affect the profit and shareholder equity. The change in interest rates would also
impact the emerging profit via its impact on the investment returns on the assets held to back the liabilities.
An increase in the level (or inflation) of expenses over the assumed levels will decrease emerging profit.
However, a change in the base expense assumptions adopted for the policy liability is unlikely to impact
the current policy liability determination as such a change is absorbed into the policy liability profit margin
reserve in the first instance.
For life insurance contracts providing death benefits an increased rate of mortality would lead to higher levels
of claims, increasing associated claims cost and thereby reducing emerging profit. However, a change in the
mortality assumptions adopted for the policy liability is unlikely to directly impact the current policy liability
determination as such a change is absorbed into the policy liability profit margin reserve in the first instance.
The cost of claims under TPD, Income Protection and trauma cover depends on the incidence of policyholders
becoming disabled or suffering a ‘trauma’ event such as a heart attack or stroke. Higher incidence or claims
duration would increase claim costs, thereby reducing profit and shareholder equity. Similar to mortality above,
a change in the morbidity assumptions is absorbed in the policy liability profit margin in the first instance. For
policyholders who are currently on claim there is no profit margin. Therefore, any change in claims costs due to
a change in expectation around claims duration is reflected through a change in the policy liability.
Lapse risk represents the extent to which policyholders choose not to renew their policy, and allow it to
lapse. An increase in the lapse rates will have a negative effect on emerging profit owing to the loss of future
revenue, including that required to recover acquisition costs. The impact on the policy liability of a change in
lapse assumptions is as per mortality above.
The table below illustrates how outcomes during the financial year ended 30 June 2020 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
18,510
$’000
17,717
(16,809)
(16,089)
-
-
-
-
-
-
-
-
-
-
-
-
$’000
(12,957)
11,766
(7,986)
7,986
(2,850)
2,850
(1,980)
1,980
$’000
(12,402)
11,262
(2,209)
2,209
(2,708)
2,708
(1,980)
1,980
Change in
variable
+ 100 bp
- 100 bp
110.0%
90.0%
110.0%
90.0%
110.0%
90.0%
* Note: The interest rate sensitivities show the change to policy liabilities and profit from a change in the discount rate by adding or subtracting 1% from the yield curve adopted. The other
sensitivities show how different the policy liabilities and reported profit would have been if ClearView Life’s experience in the current year in relation to those variables had been higher or
lower by 10% of that experienced.
CLEARVIEW WEALTH LIMITED | 129
NOTES TO THE FINANCIAL STATEMENTS
5. Life insurance and investment contracts continued
5.7 Critical accounting judgements and key sources of estimation uncertainty
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.
COVID-19
In response to COVID-19 the Group undertook a review of best estimate assumptions, with a particular focus on claims and
lapses to determine impacts and implications from COVID-19.
With respect to the health and economic implications of COVID-19, whilst there is uncertainty, there is expected to be an
increase in claims cost over the next two years. ClearView has made an estimation on the likely implications of COVID-19 at 30
June 2020. Refer to section 1 (j) for further details.
130 | CLEARVIEW ANNUAL REPORT 2020
CLEARVIEW WEALTH LIMITED | 131
6. Capital structure and capital risk managementThis sections provides information in relation to the Group’s capital structure and financing facilities6.1 Issued capital 1326.2 Movements in reserves 1326.3 Shares granted under the executive share plan 1336.4 Borrowings 1336.5 Capital risk management 134 NOTES TO THE FINANCIAL STATEMENTS
6. Capital structure and capital risk management
6.1 Issued capital
2020
2020
2019
No. of Shares
$’000
No. of Shares
Company
2019
$’000
Issued and fully paid ordinary shares
Balance at the beginning of the financial year
631,817,448
450,229
619,259,012
438,289
Dividend Reinvestment Plan (inclusive of costs)
-
-
10,593,144
11,119
Shares bought back
(615,000)
(374)
-
Shares issued during the year (ESP vested/forfeited)
-
-
1,965,292
-
821
Balance at the end of the financial year
631,202,448
449,855
631,817,448
450,229
Executive share plan
Balance at the beginning of the financial year
Shares forfeited during the year
Shares exercised during the year
Balance at the end of the financial year
45,256,670
(1,666,068)
-
43,590,602
-
-
-
-
49,003,595
(1,781,633)
(1,965,292)
45,256,670
-
-
-
-
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 section 7.2.
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.
6.2 Movements in reserves
Retained losses
Balance at the beginning of the financial year
(26,371)
(9,274)
(105,479)
(64,969)
Change on initial application of AASB 9
-
(1,008)
-
-
Restated balance as at beginning of the financial year
(26,371)
(10,282)
(105,479)
(64,969)
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
Net profit/(loss) attributable to members of the parent entity
13,081
3,959
-
(20,048)
-
-
(40,510)
-
(13,290)
(26,371)
(105,479)
(105,479)
16,087
437
-
(161)
(1,779)
14,584
12,509
2,889
746
(57)
-
11,901
437
-
(161)
-
12,509
(1,297)
746
(57)
-
16,087
12,177
11,901
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
ESP shares vested/(forfeited)
Allocation of treasury shares
Balance at end of the financial year
132 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
6. Capital structure and capital risk management continued
6.2 Movements in reserves continued
Profit Reserve
Balance at the beginning of the financial year
Net profit attributable to the parent entity
Dividend paid during the year
Balance at end of the financial year
General Reserve2
Balance at the beginning of the financial year
ESP shares vested/(forfeited)
Balance at end of the financial year
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
-
-
-
-
-
-
-
-
18,952
322
-
31,200
7,800
(20,048)
19,274
18,952
3,294
685
3,979
2,785
509
3,294
3,294
685
3,979
2,785
509
3,294
1
2
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 section 7.2.
The general reserve comprises the profit on sale of forfeited ESP shares ($4 million) where the shares were sold via an off market transfer with the proceeds being received by the Compa-
ny. 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.
6.3 Shares granted under the executive share plan
In accordance with the provisions of the ESP, as at 30 June 2020, key management, members of the senior management
team, the managing director and contractor participants have acquired 43,590,602 (2019: 45,256,670) ordinary shares. Shares
granted under the ESP carry rights to dividends and voting rights. Financial assistance amounting to $27,742,029 (2019:
$29,120,042) was made available to executives, senior employees and contractor participants to fund the acquisition of shares
under the ESP.
During the year, no performance rights issued to SMT members were vested. 2,057,242 shares vested on 30 June 2019 were
allocated from the ESS trust and 2,783,324 shares continued to be held in the ESS trust for future issues.
6.4 Borrowings
Financing Facilities
The Group has access to the following facilities:
Bank Guarantees
– amount used
Overdraft and credit
– amount used
– amount unused
Bank Facility
– amount used
– amount unused
Consolidated
2020
$’000
2019
$’000
2020
$’000
Company
2019
$’000
1,598
1,598
-
-
2,000
2,000
-
-
-
-
-
-
60,000
-
15,000
45,000
60,000
-
15,000
45,000
CLEARVIEW WEALTH LIMITED | 133
NOTES TO THE FINANCIAL STATEMENTS
6. Capital structure and capital risk management continued
6.4 Borrowings continued
As at the reporting date, the Company had a $60 million
facility agreement with the National Australia Bank that has
been fully drawn down as at the balance date. The facility
is repayable on 1 April 2024. The facility was renewed for a
further three year period in April 2020.
As part of the renewal of the facility, the margins paid on the
facility were renegotiated. From the date of renewal, interest
on the loan accrues at BBSY plus a margin of 0.95% per
annum (FY19: 0.80%), and is payable monthly. Furthermore, a
line fee of 0.80% per annum (FY19: 0.65%) is payable on the
facility on a quarterly basis.
The covenants of the facility agreement state that the Group’s
debt must not exceed 35% of the Group’s total debt and
equity and the Group’s EBITDA (excluding policyholder net
profit and removing any effects from the adoption of AASB
16) must not be less than 3x interest expense. In the recent
renewal, a Review Event was also added based on the capital
base of the life company, ClearView Life. This has been
set as a minimum PCA ratio of 1.5x (excluding Pillar 2 and
reinsurance concentration risk charges for a period of two
years from the date of the facility renewal). The covenants are
calculated on six monthly basis under the terms of the facility
agreement. As part of the COVID-19 response, a waiver was
sought such that these covenants are calculated on an annual
basis for FY20. Notwithstanding this waiver, based on the
results to 30 June 2020, ClearView has been operating within
its covenants under the terms of the Facility Agreement (as
calculated on a six monthly basis). The Group has therefore
not identified any breaches at 30 June 2020 nor at the time at
which these financial statements were authorised for issue.
The facility has been secured by a number of cross guarantees,
refer to section 9.4 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 2019. There is an additional $0.25 million credit card
facility with National Australia Bank in the name of ClearView
Administration Services Pty Limited.
6.5 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 section 6.2).
To date, $60 million of the Debt Funding Facility has been
drawn down as follows:
•
•
•
$15 million drawn down to fund the cash component of the
FY18 final dividend and the cash payment for purchasing
ClearView shares to support the ClearView SMT LTIP share
plan (recognised as (treasury shares)) in FY19;
$16 million was drawn down in December 2019 in relation
to the assigned tax receivable from CRP;
$19 million in relation to the corporate restructure ($12
million), to fund the costs associated with the wealth
management project and for further funding of CRP tax
credits as may be considered from time to time; and
•
$10 million for liquidity purposes
ClearView generates positive cash flows from in-force portfolios
which is subsequently reinvested into new business generation:
•
•
•
•
Now achieving underlying self-funding capability (excluding
allowances for COVID-19, Pillar 2 requirements and
assuming experience is line with FY20 best estimate
assumptions)
New Business capital utilisation is related to the upfront
costs associated with policy acquisition that is collected via
the premiums from policyholders over the life of the policy
– converts to cash over time subject to lapse risk. These are
referred to as deferred acquisition costs (DAC).1
In-force capital generation reflects a combination of the
Underlying NPAT2 achieved and DAC1 released (collected)
from the in-force portfolios in a particular financial year.
Reduced capital needs over time reflects the growth in in-
force portfolio given increased scale of business from start-
up phase.
1
2
DAC is deferred acquisition costs.
Underlying NPAT consists of consolidated profit after tax adjusted for amortisation (not including capitalised software), the effect of changing discount rates on insurance policy liabili-
ties and costs considered unusual to the Group’s ordinary activities.
134 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
6. Capital structure and capital risk management continued
6.5 Capital risk management continued
•
•
•
•
•
Capital needs from a group perspective are driven by the need to replace at least part of the debt with a permanent capital
solution ($34 million). Furthermore, part of the Tier 2 capital raising will also be used to fund or support the regulated funding
requirements of ClearView Life from time to time.
As noted earlier in the report, the Debt Funding Facility was extended to 1 April 2024 in 2H FY20.
For ClearView’s medium-to-long term capital solutions, the Board is actively considering alternative capital management
initiatives.
The Board is now actively investigating the prospect of an issue of Tier 2 Subordinated Notes (Notes) (subject to the regulatory
approval process and market conditions). In anticipation a rating from Fitch was obtained in March 2020.
Fitch assigned ClearView a Long-term Issuer Default Rating (IDR) of ‘BBB’. At the same time, Fitch assigned ClearView’s
operating subsidiary, ClearView Life, an Insurer Financial Strength Rating (IFS) of BBB+. The outlooks for both ratings are stable
and were reaffirmed as ‘stable’ subsequent to the onset of the pandemic.
Dividends and On-market 10/12 limit share buyback
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.
In light of the adverse impact due to COVID-19, challenging market conditions, prudent capital management and in line with
APRA communications to consider limiting discretionary capital distributions, no FY20 dividend has been declared (FY19: $nil).
In August 2019, the Board approved the recommencement of its 10/12 limit on market buy-back program and extended it for
a further 12-month period until December 2020.
Existing buy-back arrangements continue to apply and Blue Ocean Equities Pty Limited is the appointed broker for the program.
Since January 2014, the total number of shares bought back and cancelled under the scheme is 1,208,824 of which 615,000
shares have been bought back and cancelled in the year ended 30 June 2020.
However, ClearView does not intend to undergo any on-market share buy-back activity given the current environment and
market conditions. One of the Board’s key priorities is prudent capital management.
Selective buy-back
As approved by Shareholders at the ClearView 2019 Annual General Meeting (AGM) and disclosed on market, ClearView
undertook a selective buy-back of unvested Executive Share Plan (ESP) Shares in November 2019. 365,504 were selectively
bought back and cancelled on the terms outlined in the ClearView AGM Notice of Meeting, Appendix 3C and Appendix 3F. These
announcements are under the Shareholders tab on the ClearView website.
Employee Share Scheme buy-back
As approved by the Board and disclosed on market, ClearView undertook an Employee Share Scheme buy-back of unvested ESP
Shares in June 2020. 1,300,564 shares were bought back and cancelled on the terms outlined in the Appendix C, Appendix E
and Appendix 3F. These announcements are under the Shareholders tab on the ClearView website.
CLEARVIEW WEALTH LIMITED | 135
136 | CLEARVIEW ANNUAL REPORT 2020
7. Employee disclosuresThis section provides information on the remuneration of key management personnel and the Group’s employee share plan7.1 Key management personnel compensation 1377.2 Share based payments 137 NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures
7.1 Key management personnel compensation
Transactions with KMP
Key management personnel compensation
Details of Key Management Personnel compensation are disclosed in the Directors’ Report on pages 50 to 69 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
2020
$
2019
$
4,339,884
5,888,896
240,936
352,642
157,682
2,301,047
4,738,502
8,542,585
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.
In accordance with AASB 9, an expected credit loss (ECL) of $1.9 million (2019: $0.4 million) was recognised against the limited
recourse loans given the decrease in ClearView’s share price subsequent to the issue of the loans. The loans were granted up to a
maximum of $1 per vested ESP share held.
7.2 Share based payments
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.
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.
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 2018 Annual General Meeting, the ownership-based compensation scheme allows participation in the Plan of:
•
Employee Participants - These participants are key managers, members of the Senior Management Team (SMT) and the
Managing Director; and
•
Contractor Participants - These participants are financial advisers.
CLEARVIEW WEALTH LIMITED | 137
NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures continued
7.2 Share based payments continued
Eligible Employees under the Plan Rules therefore include
both Employee Participants and Contractor Participants of
the Company and its related body corporates. Non-executive
Directors are ineligible to participate in the Plan in accordance
with the Plan Rules.
Offer and consideration
Under the ESP, the Board may invite Eligible Employees to
participate in an offer (Offer) of fully paid ordinary shares
in ClearView, subject to the terms of conditions of the ESP.
Each Share is issued at a price to be determined by the
Board prior to making an Offer and this price is set out in
the invitation (Invitation) to Eligible Employees. This price
may be the market price of a Share (as defined in the ESP
Rules) on the date of the Invitation. Taking into account the
liquidity, volatility, and the average trading activities of the
ClearView Shares, the Board determined in February 2013
that it is appropriate and reasonable for ClearView to adopt
the Volume Weighted Average Price (VWAP) over a 3 month
period to determine the market value of the ClearView Shares
for the purposes of ESP issues. This has been implemented for
all ESP Share issues since that date.
Restrictions on offer
Shares may not be offered under the ESP to an Eligible
Employee if that Eligible Employee would hold, after the
issue of the Shares, an interest in more than 5% of the issued
Shares of ClearView or be able to control the voting rights of
more than 5% of the votes that might be cast at a general
meeting of ClearView.
As at the date of this Report, the Board has not set a limit
on the number of Shares that may be issued under the
Plan. The Board or Board Authorised Delegates approve the
issue of new ESP shares and monitors the overall quantum
of ESP shares on issue, relative to the interests of existing
shareholders and the overall objectives of the business.
•
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).
ESP loans to SMT members became interest bearing at 3 months
BBSY rate plus a margin of 1% from 30 November 2017. Since
1 August 2018, the limited recourse loans secured by unvested
shares held by SMT members have become interest free.
Holding lock
The shares granted under the ESP to participants are subject
to a holding lock restricting the holder from dealing with the
shares, unless otherwise provided under the Invitation. Where
all performance conditions and/or vesting conditions (if any)
attaching to the Shares issued prior to 14 February 2013 have
been satisfied (or waived) a holding lock will cease to have
effect if:
•
The Board accepts a disposal request (as defined in the
ESP Rules) (Disposal Request); or
• 5 years have passed from the Acquisition Date; or
If the Participant:
•
•
is an Employee Participant, their employment with the
Group ceases, or
is a Contractor Participant, their contractor agreement is
terminated; or
Financial Assistance
• The ESP is terminated, or
The Company may provide financial assistance to an Eligible
Employee for the purposes of subscribing for Shares under
the ESP. The financial assistance will be a limited recourse
loan equal to the purchase value of the Shares and is
repayable in accordance with the terms of the accompanying
Invitation, or as follows:
• 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.
•
For Share issues prior to 14 February 2013 - within 60
days (or a longer period determined by the Board in its
discretion) after the 5th anniversary of the grant of the
financial assistance (unless it is required to be repaid at
an earlier date owing to the operation of the Rules); or
The holding lock 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.
138 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures continued
7.2 Share based payments continued
If the participant is a Contractor Participant, following the
removal of the holding lock over the Shares of the participant,
the participant may not sell, or otherwise deal with, any such
Shares without the prior written consent of the Company,
which consent the Company may give or withhold in its
absolute discretion and which consent may be given subject to
conditions.
Eligible Employees are entitled under the ESP Rules to make
a Disposal Request provided the performance and vesting
conditions have been met (or waived). The holding lock
applicable to their ESP shares will cease to have effect upon
the Board (in its absolute discretion) accepting the Disposal
Request. ClearView may dispose of these ESP shares on behalf
of the participant in one or more of the following ways (at the
discretion of the Board):
•
•
Reallocate the Shares to give effect to acquisitions by other
Eligible Employees under the ESP;
Sell to the Company in accordance with buy-back provisions
of the Corporations Act; or
• Offer or sell to buyers on the ASX.
The amount payable by these Eligible Employees to ClearView
following such a disposal is the amount outstanding in relation
to the financial assistance, including accrued interest. The
Eligible Employees may retain any surplus proceeds.
Change of control
Under the ESP Rules, all performance and vesting conditions
in relation to Shares held by an Eligible Employee who is an
Employee Participant are deemed to have been satisfied upon
a Change of Control unless stated otherwise in the participants
invitation offer. A Change of Control is defined under the ESP
Rules as being:
(a) Until 14 February 2013:
•
•
A person who did not Control the Company at the date of
issue of the Plan Shares gains Control of the Company
(but only if the person is not itself Controlled by another
person who Controlled the Company at the date of issue);
or
Other circumstances occur which the Board determines
in its absolute discretion are analogous to a Control
transaction and justify removal of Performance Conditions
and/or Vesting Conditions;
•
‘Control’ is defined as where a person and its related bodies
corporate holds more than 50% of the
Shares in ClearView.
(b) After 14 February 2013:
• 12 months after a Change of Control; or
•
•
Circumstances occur which the Board determines in its
absolute discretion are analogous to a Control transaction
and justify removal of Performance Conditions and/or
Vesting Conditions.
‘Control’ is defined as Crescent Capital Partners and its
Associated Entities no longer holding 20% of the voting
rights of the Company.
(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.
CLEARVIEW WEALTH LIMITED | 139
NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures continued
7.2 Share based payments continued
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 tranches but may be subject
to separate vesting conditions. The rights will vest 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 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.
Termination of the LTIP
The Board may resolve at any time to terminate, suspend,
or reinstate the operation of the LTIP.
140 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures continued
7.2 Share based payments continued
Share-based payment arrangements
The following share-based payment arrangements were in existence during the current and comparative reporting periods:
Issue Date
Type of
Arrangement8
Number Grant date
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
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 KMP
2,000,000
1/07/2011
1/07/2015
Series 165,6
6/10/2011 KMP and SM
2,450,000
1/09/2011
1/09/2016
Series 186
Series 216
Series 236
1/03/2012 CP
25/05/2012 CP
6/08/2012 CP
2,500,000
10/02/2012
10/02/2017
1,375,000
7/05/2012
7/05/2017
1,281,650
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
300,000
21/12/2012
21/12/2017
Series 266,7
16/04/2013 KMP and SM
2,575,000
12/04/2013 50% Change in
Control; 50% 1
year after
Series 276
16/04/2013 SM
75,000
12/04/2013
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
828,335
31/05/2013
31/05/2018
637,463
27/06/2013
27/06/2018
275,000
14/10/2013
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
Change in
Control
1 year post
Change in
Control
Change in
Control
1 year post
Change in
Control
Series 37
Series 38
Series 39
Series 40
Series 41
Series 42
Series 43
31/01/2014 CP
30/05/2014 SM
30/05/2014 SM
30/05/2014 SM
30/05/2014 CP
9/07/2014 CP
1,473,283
31/01/2014
31/01/2019
605,000
30/05/2014
30/05/2018
621,667
30/05/2014
30/05/2019
621,667
30/05/2014
30/05/2020
285,925
30/05/2014
30/05/2019
3,384,195
9/07/2014
8/07/2019
26/11/2014 SM including KMP
2,027,282
26/11/2014
25/11/2018
and CP
0.59
0.49
0.50
0.58
0.65
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
0.65
0.75
0.75
0.75
0.75
0.79
1.01
0.10
0.07
0.11
0.08
0.06
0.10
0.10
0.12
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
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
0.15
0.17
0.21
0.19
0.20
0.29
0.27
0.22
0.22
0.21
0.17
0.19
0.17
0.20
0.17
0.17
0.19
0.22
0.19
0.17
0.19
CLEARVIEW WEALTH LIMITED | 141
NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures continued
7.2 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 44
Series 45
Series 46
Series 47
Series 47
Series 48
Series 49
26/11/2014 KMP and SM
132,013
26/11/2014
25/11/2019
26/11/2014 KMP and SM
132,013
26/11/2014
25/11/2020
30/03/2015 SM
30/03/2015 SM
30/03/2015 CP
30/03/2015 SM
30/07/2015 CP
75,000
30/03/2015
30/03/2019
75,000
30/03/2015
30/03/2020
826,587
30/03/2015
30/03/2020
75,000
30/03/2015
30/03/2021
2,658,419
30/07/2015
30/07/2020
Series 50a
30/07/2015 SM
25,773
30/07/2015
30/07/2019
Series 50b
30/07/2015 SM
25,773
30/07/2015
30/07/2020
Series 50c
30/07/2015 SM
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
27/04/2016 CP
134,365
27/04/2016
27/04/2021
1,279,156
27/04/2016
27/04/2021
20/06/2016 SM including KMP
79,601
20/06/2016
20/06/2021
14/06/2017 CP
800,000
14/06/2017
14/06/2022
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
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
8
9
On the 14th February 2013, the Board approved a change to the rules of the ESP which changed the interest rate charged on the financial assistance granted to the ESP Participants from
the RBA official cash rate plus 25 basis points to zero percent. This resulted in changes to the inputs of the option pricing model which had an impact on the fair value of the option at the
date of the change.
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.
KMP = Key Management Personnel, SM = Senior Management, MD = Managing Director, CP = Contractor Participant.
Expiry date represents either the relevant vesting or holding lock period.
142 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures continued
7.2 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)
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 18
Series 21
Series 23
0.50
0.50
31.49
3.00
0.50
0.51
35.35
3.00
0.50
0.50
37.06
4.95
0.50
0.49
36.94
4.95
0.54
0.53
37.85
5.00
Series 24
Series 25
Series 26
Series 27
Series 28
0.55
0.54
37.99
3.00
0.58
0.58
35.21
5.00
0.57
0.57
35.92
5.99
0.57
0.57
35.92
4.99
0.69
0.69
35.92
4.99
Series 29
Series 30
Series 31
Series 32
Series 35
0.68
0.68
36.81
5.00
0.64
0.64
36.90
5.00
0.61
0.61
22.20
5.00
0.61
0.61
22.20
6.00
0.65
0.65
22.01
5.00
Series 36
Series 37
Series 38
Series 39
Series 40
0.65
0.65
22.01
6.00
0.65
0.65
22.01
5.00
0.75
0.75
21.12
4.00
0.75
0.75
21.12
5.00
0.75
0.75
21.12
6.00
Series 41
Series 42
Series 43
Series 44
Series 45
0.75
0.75
21.12
5.00
0.79
0.79
16.78
5.00
1.01
1.01
19.79
4.00
1.01
1.01
21.56
5.00
1.01
1.01
24.18
6.00
Series 46
Series 47
Series 48
Series 49
Series 50a
1.00
1.00
20.84
4.00
1.00
1.00
20.84
5.00
1.00
1.00
20.84
6.00
0.97
0.97
20.15
5.00
0.97
0.97
20.15
4.00
Series 50b
Series 50c
Series 51a
Series 51b
Series 52
0.97
0.97
20.15
5.00
0.97
0.97
20.15
6.00
0.96
0.96
20.03
5.00
0.96
0.96
20.03
6.00
0.93
0.93
20.31
5.00
Series 53
Series 54
Series 55
0.93
0.93
20.31
5.00
0.94
0.94
20.55
5.00
1.38
1.38
20.11
5.00
CLEARVIEW WEALTH LIMITED | 143
NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures continued
7.2 Share based payments continued
The shares were priced using a binomial option pricing model with volatility based on the historical volatility of the share price.
2020
2019
Weighted
average exercise
price
Number of
shares
Weighted
average exercise
price
Number of
shares
45,256,270
-
Balance at the beginning of the financial year
Issued during the financial year
Forfeited during the year
Exercised during the year
0.55
49,003,595
-
-
(1,666,068)
0.76
(1,781,633)
-
-
(1,965,292)
Balance at the end of the financial year
43,590,602
0.64
45,256,270
The above reconciles the outstanding shares granted under the executive share plan at the beginning and end of the
financial year.
0.57
-
1.03
0.63
0.55
Shares that were granted in the current year
As at the date of this report, ClearView has a total of 43,590,602 ESP shares on issue. No new shares were granted in the year
ended 30 June 2020.
During the financial year, no ESP shares were exercised and 1,666,068 forfeited ESP shares were bought back and cancelled.
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
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 24 - 22 August 2012 Issue
Nil1
Nil1
Nil2
Nil2
Nil2,4
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
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 Issue5
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
Performance
Conditions
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
144 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures continued
7.2 Share based payments continued
Series
Vesting Conditions
Performance
Conditions
Series 40 - 30 May 2014 Issue
Remain an employee of the company for 6 years from Grant date of
shares
Nil
Series 43 - 26 November 2014 Issue5 Remain an employee of the company for 4 years from Grant date of
Nil
Series 44 - 26 November 2014 Issue
Series 45 - 26 November 2014 Issue
Series 46 - 30 March 2015 Issue5
Series 47 - 30 March 2015 Issue
Series 48 - 30 March 2015 Issue
Series 50a - 30 July 2015 Issue5
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
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
1
2
3
4
5
Change of control provision was triggered on 23 October 2009 by GPG increasing its shareholding above 50%.
In accordance with Mr Swanson’s employment contract, Mr Swanson is entitled to a long term incentive comprising 10 million Shares in accordance with the ESP, and vesting progres-
sively over three years from the commencement date of his contract as follows:
Series 10: 2 million shares at an issue price of 50 cents vesting on 26 March 2011 (vested);
Series 11: 4 million shares at an issue price of 58 cents vesting on 26 March 2012 (vested); and
Series 12: 4 million shares at an issue price of 65 cents vesting on 26 September 2012 (vested) on change of control of ClearView.
The Shares issued to Mr Swanson have vested progressively each year as outlined above.
Special condition relating to shares issued to KMP in Series 26: 100% of the shares may be sold on change of control, but 50% are held in escrow after employment for 1 year thereafter.
Change of control provision was triggered on 26 September 2012 by CCP Bidco obtaining a shareholding above 50%.
Vested as at the date of the report.
CLEARVIEW WEALTH LIMITED | 145
7. Employee disclosures continued
7.2 Share based payments continued
Contractor participants
Series
Vesting conditions 1
NOTES TO THE FINANCIAL STATEMENTS
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 21 – 25 May 2012 Issue
4 years and 347 days 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 43 - 26 November 2014
Issue
5 years from the date of issue and achievement of specific target/balanced
scorecard
Series 47 – 30 March 2015
Issue
5 years from the date of issue and achievement of specific target/balanced
scorecard
Series 49 – 30 July 2015 Issue
5 years from the date of issue and achievement of specific target/balanced
scorecard
Series 53 – 27 April 2016 Issue
5 years from the date of issue and achievement of balanced scorecard
Series 55 – 14 June 2017 Issue
5 years from the date of issue and achievement of balanced scorecard
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1
Subject to qualifying circumstances as outlined in the ESP Plan Rules.
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 issues 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.
146 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
7. Employee disclosures continued
7.2 Share based payments continued
Shares that were forfeited during the year
The following table shows the shares that were forfeited due to the vesting conditions not being met.
Date
15/11/2019
17/06/2020
Total
LTIP Awards
Number of share cancelled
365,504
1,300,564
1,666,068
Cancelled from
Series 42, 43, 53
Series 31, 32, 38, 39, 40,
51a, 51b, 54
As at the end of the current reporting period, 2,356,902 performance rights granted under the 2020 LTIP scheme were in
existence. They are subject to a performance period that ends on 30 June 2022.
The key inputs into the valuation model for the current and previous performance rights tranches are as follows:
Share price at grant date
Exercise price
Present value of future expected dividends
Dividend yield
Anticipated performance right life (years)
2020¹
0.61
Nil
0.04
-
3
2019¹
1.03
Nil
-
2.91%
0.83
2018¹
1.48
Nil
-
1.86%
1.18
1
50% of the 2018 and 2019 tranches were measured against an EV target and 50% against a TSR target. The 2020 target is based on an underlying NPAT target in the year 2022.
For further details on the LTI plan details and the vesting and forfeiture of the SMT performance rights refer to page 53 of the
remuneration report.
CLEARVIEW WEALTH LIMITED | 147
148 | CLEARVIEW ANNUAL REPORT 2020
8. Related parties and other Group entitiesThis section provides information on the Group’s structure and how it affects the financial position and performance of the Group as a whole. In particular, there is information about:8.1 Equity interests in subsidiaries 1498.2 Transactions between the Group and its related parties 1508.3 Investment in controlled unit trusts 152 NOTES TO THE FINANCIAL STATEMENTS
8. Related parties and other Group entities
8.1 Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries.
Name of Entity
Parent entity
Principal Activity
Parent
Entity
Country of
incorporation
2020
%
2019
%
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
ClearView Life Nominees Pty Limited (CLNPL)
Trustee
ClearView Administration Services Pty Limited
(CASPL)
Administration
Service Entity
ClearView Financial Advice Pty Limited (CFAPL)
Advice Company
Matrix Planning Solutions Limited (MPS)
Affiliate Financial Planning Pty Limited
Advice Company
Non operating
ClearView Employee Share Trust (CVEST)
Trustee
Lavista Licensee Solutions Pty Limited (LVSTA)
Advice Company
Controlled unit trusts
CVW Index Fixed Interest Fund
CVW Schroder Equity Opportunities Fund
CVW Fixed Interest Fund
CVW Index International Shares Fund
CVW Listed Property Fund
CVW Money Market Fund (previously CVW Cash
Fund)
CVW First Sentier Investors Infrastructure Fund
(previously CVW CFS Infrastructure Fund)
CVW RARE Emerging Markets Fund
CVW Antipodes Global Fund
CVW Hyperion Australian Shares Fund
CVW Index Infrastructure and Property Fund
CVW Index Emerging Markets Fund
CVW Index Australian Shares Fund
CVW Stewart Investors Worldwide Sustainability
Fund
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
CWL
CWL
CWL
CWL
CWL
CFA
CWL
CWL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
CLAL
Australia
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
Wholesale Fund
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
CLAL
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
42
58
96
56
84
54
45
25
100
100
100
88
43
43
54
95
61
70
57
47
23
100
100
100
81
45
CASPL was incorporated to centralise the administrative responsibilities of the group which includes being the employer of all
staff within the Group. 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).
CWL is regulated as a Non-Operating and Holding Company by the Australian 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 | 149
NOTES TO THE FINANCIAL STATEMENTS
8. Related parties and other Group entities continued
8.2 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 2020 includes Directors fees were paid to Crescent Capital Partners Pty Limited the manager
of the parent entity’s majority shareholder CCP Bidco Pty Limited.
The ultimate parent entity in the Group is ClearView Wealth Limited which is incorporated in Australia.
Outstanding balances between the Group and its related parties
d
e
t
i
m
i
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a
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l
a
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e
g
a
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A
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i
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i
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o
S
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n
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x
i
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m
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$
i
n
o
i
t
a
r
t
s
i
n
m
d
A
w
e
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r
a
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l
C
i
i
s
e
e
n
m
o
N
e
f
i
L
w
e
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r
a
e
l
C
i
e
e
s
n
e
c
i
L
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t
s
i
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a
L
s
n
o
i
t
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l
o
S
$
d
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i
m
i
L
y
t
P
$
t
n
e
m
e
r
i
t
e
R
w
e
V
r
a
e
l
C
i
d
e
g
a
n
a
M
L
M
F
C
n
a
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P
$
d
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i
L
y
t
P
s
e
c
i
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r
e
S
$
571,713
780,875
574,833
511,218
(53,464)
5,451
130,267 15,425,037
2020
ClearView Wealth
Limited
ClearView Life
Assurance Limited
ClearView
Financial
Management
Limited
ClearView
Financial Advice
Pty Limited
Matrix Planning
Solutions Limited
ClearView Admin
Services Pty
Limited
ClearView Life
Nominees Pty
Limited
Lavista Licensee
Solutions Pty
Limited
(571,713)
-
(229,108)
(621,184)
13,121
(3,200,881)
-
(780,875)
229,108
-
(37,218)
-
(292,672)
196,876
(574,833)
621,184
37,218
(511,218)
(13,121)
-
-
-
-
(1,222,758)
-
(160,907)
53,464
3,200,881
292,672 1,222,758
160,907
-
-
-
-
1,048
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,048)
-
-
(5,451)
(130,267)
-
-
-
-
(196,876)
-
-
(887,124)
-
-
-
-
-
-
-
-
ClearView
(15,425,037)
Retirement Plan1
CFML Managed
Investment
Schemes
-
s
e
m
e
h
c
S
t
n
e
m
t
s
e
v
n
I
$
-
-
l
a
t
o
T
$
17,945,930
(4,609,765)
-
- 887,124
202,343
-
-
-
-
-
-
-
-
(1,139,189)
-
-
-
-
(685,246)
4,931,730
(202,327)
(131,315)
-
(15,425,037)
-
(887,124)
(17,945,930)
4,609,765
(202,343) 1,139,189
685,246 (4,931,730)
202,327
131,315 15,425,037 887,124
-
150 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
8. Related parties and other Group entities continued
8.2 Transactions between the Group and its related parties continued
d
e
t
i
m
i
L
h
t
l
a
e
W
w
e
V
r
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ClearView Wealth
-
(5,098,974)
1,055,051
364,567
282,174
(2,878,825)
15,593
8,776
t
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(6,251,638)
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
Lavista Licensee
Solutions Pty
Limited
ClearView
Retirement Plan1
CFML Managed
Investment
Schemes
5,098,974
-
(345,515)
(661,055)
7,651
(2,434,891)
-
- 12,546,734
-
14,211,898
(1,055,051)
345,515
-
(43,970)
-
(87,033)
191,021
-
- 849,443
199,925
(364,567)
661,055
43,970
(282,174)
(7,651)
-
-
-
-
(1,685,187)
-
730,058
2,878,825
2,434,891
87,033 1,685,187
730,058
(15,593)
-
(191,021)
(8,776)
-
- (12,546,734)
-
-
-
-
(849,443)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,344,729)
-
-
-
440,233
-
6,355,878
-
-
(206,614)
-
-
(8,776)
-
-
- (12,546,734)
-
(849,443)
6,251,638 (14,211,898)
(199,925) 1,344,729
(440,233)
(6,355,878)
206,614
8,776 12,546,734 849,443
-
1
The non-current receivable from ClearView Retirement Plan relates to the contribution tax funding payments for tax benefits on the life insurance premium. Due to the tax loss position in
ClearView Retirement Plan, settlement of this amount is subject to the utilisation of tax losses. Under an arrangement with HUB24 Limited, it is intended that ClearView Retirement Plan’s
superannuation life insurance division be transferred to the HUB24 Super Fund. Subsequent to the transfer, ClearView Retirement Plan should be in a net taxable position to utilise the tax
losses.
Related party tax assets
The ClearView Group holds a $15.5 million (non-current) receivable from its superfund, the ClearView Retirement Plan (CRP)
relating to contribution tax funding payments for tax benefits on the life insurance premiums. This is after a write down of $2.6
million in the current year due to an error in the carried forward tax losses amounts in the CRP’s prior years’ income tax returns.
Due to the tax loss position in the CRP, settlement of this amount is subject to the utilisation of tax losses. Various options are
being considered and projects well progressed which collectively indicate recovery is considered probable at this point in time.
For Group capital management and efficiency, $16 million of the tax receivable was assigned from ClearView Life to the listed
entity and funded through a $16 million draw down of the Debt Funding facility. The remaining balance of $0.5 million remains
between ClearView Life and the listed entity as at 30 June 2020. The Board is also actively investigating longer-term capital
solutions (such as the issue of Tier 2 subordinated notes) that is intended to repay at least part of the debt.
CLEARVIEW WEALTH LIMITED | 151
NOTES TO THE FINANCIAL STATEMENTS
8. Related parties and other Group entities continued
8.2 Transactions between the Group and its related parties continued
Related party investments
The ClearView Life Assurance Limited Statutory Fund 1 has invested $29.5 million in Macquarie True Index Fund (which invests
in very high quality bonds, principally issued by Australian Governments); and the Vanguard Inflation Linked Fund (which
invests in CPI-linked, very high quality Australian government bonds) via ClearView WealthSolutions Investments. ClearView
WealthSolutions Investments is an IDPS administered and operated by ClearView Financial Management Limited with
Avanteos Investments Limited as custodian. This has been done to achieve asset/ liability matching.
Corporate reorganisation
During the year, ClearView Group has undertaken a corporate re-organisation to flatten and simplify the group structure and to align
with evolving regulatory requirements. In this process, ClearView Wealth Limited purchased all the shares in:
•
•
ClearView Life Nominees Pty Limited from ClearView Life Assurance Limited for a consideration of $3.6 million (net asset value);
and
ClearView Financial Management Limited from ClearView Group Holdings Pty Limited for a consideration of $8.1 million (net asset
value).
The proceeds from these transactions were used to provide capital funding to ClearView Life Assurance Limited Statutory Fund No. 1.
As a result of the re-organisation, both ClearView Life Nominees Pty Limited (the trustee for ClearView Retirement Plan) and
ClearView Financial Management Limited (Responsible Entity for ClearView Managed Investments and ClearView Pooled Funds)
became directly owned by ClearView Wealth Limited, the ultimate parent company of the ClearView Group.
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.
8.3 Investment in controlled unit trusts
Consolidated
2020
Consolidated
2019
Type
$’000
%
$’000
%
Name
Controlled unit trusts
CVW Index Fixed Interest Fund
CVW Schroder Equity Opportunities Fund
CVW Fixed Interest Fund
CVW Index International Shares Fund
CVW Listed Property Fund
Debt
Equities
Debt
Equities
Property
79,645
92,118
378,597
111,775
13,415
CVW Money Market Fund (previously CVW Cash Fund)
Debt
118,402
CVW First Sentier Investors Infrastructure Fund
(previously CVW CFS Infrastructure Fund)
CVW RARE Emerging Markets Fund
CVW Antipodes Global Fund
CVW Hyperion Australian Shares Fund
CVW Index Infrastructure and Property Fund
CVW Index Emerging Markets Fund
CVW Index Australian Shares Fund
CVW Stewart Investors Worldwide Sustainability Fund
Property
91,243
Equities
Equities
Equities
Property
Equities
Equities
Equities
47,735
45,569
15,071
25,160
17,303
60,371
85,675
100.00
41.93
57.65
96.47
56.36
84.05
54.01
44.74
25.17
100.00
100.00
100.00
88.21
43.45
42,744
109,351
312,295
86,649
20,151
201,032
122,087
53,593
46,727
13,738
11,334
5,932
43,801
84,463
100.00
43.42
54.43
95.11
61.44
70.14
56.67
46.59
22.96
100.00
100.00
100.00
81.37
44.58
Total
1,182,079
1,153,897
152 | CLEARVIEW ANNUAL REPORT 2020
CLEARVIEW WEALTH LIMITED | 153
9. Other disclosures9.1 Notes to the Consolidated Statement of cash flows 1549.2 Contingent liabilities and contingent assets 1549.3 Capital commitments 1569.4 Guarantees 1569.5 New accounting standards 1579.6 Other significant accounting policies 1599.7 Subsequent events 159 NOTES TO THE FINANCIAL STATEMENTS
9. Other disclosures
9.1 Notes to the Consolidated Statement of cash flows
Net profit/(loss) for the year
Consolidated
Company
2020
$’000
13,081
2019
$’000
3,959
2020
$’000
2019
$’000
322
(32,710)
Fair value gains on financial assets at fair value through profit and loss
117,222
(68,082)
Amortisation and depreciation
Employee share plan expense
Other non cash items
Interest and dividend received from controlled entity
Movement in provision
5,693
287
-
-
(935)
Movements in liabilities to non-controlling interest in controlled unit trust
(13,532)
(Increase)/decrease in receivables
Decrease/(increase)/ in deferred tax asset
Increase/(decrease) in payables
Increase/(decrease) in policy liabilities
Increase/(decrease) in deferred tax liability
Increase/(decrease) in current tax liability
30,515
2,889
-
-
(2,058)
64,840
(4,204)
1,329
24,186
(3,566)
(2,911)
(15,087)
92,228
(58,207)
(936)
(2)
-
(5,967)
-
-
-
287
-
37,681
2,889
-
(1,500)
(7,800)
-
-
-
-
(1,272)
11,394
(643)
(4,326)
-
(538)
(2)
(58)
(385)
-
-
(5,967)
5,044
Net cash (utilised)/generated by operating activities
191,542
(10,800)
(7,672)
Cash and cash equivalents – accounting policy
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.
9.2 Contingent liabilities and contingent assets
There may be 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.
Buyback arrangements
ClearView previously had contractual arrangements with a limited number of financial advice businesses to purchase their book of
business at an agreed multiple to recurring revenues subject to certain conditions being met. This buy-back arrangement is known
as Buyer of Last Resort (BOLR). During the financial year, ClearView’s last remaining BOLR arrangement was settled and terminated.
There no other BOLR arrangements currently in existence.
154 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
9. Other disclosures continued
9.2 Contingent liabilities and contingent assets continued
Industry and regulatory compliance investigations
ClearView is subject to review from time to time by regulators.
ClearView’s principal regulators are APRA, ASIC and
AUSTRAC, although other government agencies may have
jurisdiction depending on the circumstances. The reviews and
investigations conducted by regulators may be industry-wide
or specific to ClearView and the outcomes of those reviews
and investigations can vary and may lead, for example, to
enforcement actions and the imposition of charges, penalties,
variations or restrictions to licences, the compensation of
customers, enforceable undertakings or recommendations
and directions.
Client remediation
ClearView has undertaken the remediation programs in
relation to its closed Direct Life insurance business and a
retrospective review of life insurance advice in its dealer
groups. These remediation programs are now complete
and compensation has been paid to affected customers
where possible. The costs of completing the programs have
historically been expensed (over time). Insurance recoveries
of $1.5 million (in relation to the program costs incurred
under the direct remediation program) have been raised as a
receivable on Balance Sheet at 30 June 2020 and recovery is
considered probable at this point in time. Insurance recoveries
have been settled in relation to the life insurance advice
remediation program.
The costs of remediation do not include amounts for potential
recoveries from advisers or insurers (other than as stated
above).
Letter of credit
ClearView is the beneficiary of a $70 million irrevocable letter
of credit issued by Australia and New Zealand Banking Group
Limited (ANZ) on behalf of Swiss Re Life and Health Australia
(Swiss Re). This was increased from $45 million to $70 million
as part of the COVID-19 response.
ClearView is required to manage the level of financial
exposure to its reinsurer in accordance with APRA’s
regulations in relation to Asset Exposure Limits. The letter of
credit is issued as a performance guarantee directed towards
mitigating any loss which might be incurred by ClearView
to secure its regulatory obligations in the event that Swiss
Re was to fail to meet its reinsurance obligations under its
reinsurance contract. Subsequent to year end, ClearView
has entered into an incurred claims treaty for income
protection products with Swiss Re to manage the reinsurance
concentration risk exposure. As a result of entering into the
new incurred claims treaty, ClearView is winding down the
$70 million limit on the irrevocable letter of credit, but will
be able to increase the limit in the future subject to Swiss Re
having sufficient capacity at the time.
Off balance sheet items – ESP loans
In accordance with the provisions of the ESP, as at 30 June
2020, key management, members of the senior management
team, the managing director and contractor participants have
acquired 43,590,602 ordinary shares.
Shares granted under the ESP carry rights to dividends and
voting rights. Financial assistance amounting to $28,007,416
was made available to executives, senior employees and
contractor participants to fund the acquisition of shares
under the ESP and is held as an off balance sheet receivable.
Given the non-recourse nature of the loans and the current
CVW share price, the off balance sheet loan is not considered
recoverable as at 30 June 2020.
Stamp Duty
ClearView Life has recently identified that it has mistakenly
overpaid excess insurance duty in respect of some of its life
cover. The overpayment arose as a result of ClearView’s
understanding of the view of the particular State’s duty
treatment in accordance with their jurisdictions. ClearView has
not passed on the duty paid on premiums for the life cover to
policyholders and will be lodging a request for an extension
of time to lodge objections relating to the period 1 February
2015 to 30 June 2016 and request a refund of overpayment
in respect of that period. It is noted that the extension of
time to lodge objections is subject to an absolute discretion
of the Commissioner of the relevant State. In addition, a
further objection may also be lodged to grant an extension
to lodge objections for a further extended period. At the
balance date, it is not probable to recognise a future economic
benefit and the amount for certain period is not capable of
reliable measurement. Furthermore, disclosure of any further
information would be prejudicial to the interests of the Group.
Other
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 Company in the ordinary course of business has provided
a letter of financial support to its subsidiary ClearView
CLEARVIEW WEALTH LIMITED | 155
NOTES TO THE FINANCIAL STATEMENTS
9. Other disclosures continued
Administration Services, the centralised administration entity of the group.
Other than the above, the Directors are not aware of any other contingent liabilities in the Group at the year end.
9.3 Capital commitments
The Group has committed to the following capital commitments subsequent to the year end.
Technology projects and service agreements
Total
9.4 Guarantees
Consolidated
2020
$’000
5,426
5,426
2019
$’000
3,195
3,195
Company
2019
$’000
-
-
2020
$’000
-
-
The facility entered into with the National Bank of Australia 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 Limited1
ACN 067 544 549
• Matrix Planning Solutions Limited1
ACN 087 470 200
• ClearView Financial Advice Pty Ltd1
ACN 133 593 012
The guarantees are supported by collateral (in the form of the shares) of the entities.
156 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
9. Other disclosures continued
9.5 New 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.
New and revised AASBs affecting amounts reported and/
or disclosures in the financial statements
The Group has adopted all of the new and revised Standards and
Interpretations issued by the Australian Accounting Standards
Board (the AASB) that are relevant to their operations and
effective for an accounting period that begins on or after 1 July
2019. New and revised Standards and amendments thereof and
Interpretations effective for the current year that are relevant to
the Group include:
Standard/Interpretation
AASB 16 Leases
Impact of changes to Australian Accounting Standards
and interpretations adopted in the current year
AASB 16 Leases
The Group has adopted AASB 16 from 1 July 2019. The standard
replaces AASB 117 ‘Leases’ and for lessees eliminates the
classifications of operating leases and finance leases. Except for
short-term leases and leases of low-value assets, right-of-use
assets and corresponding lease liabilities are recognised in the
statement of financial position. Straight-line operating lease
expense recognition is replaced with a depreciation charge for
the right-of-use assets (included in operating costs) and an
interest expense on the recognised lease liabilities (included in
finance costs). For classification within the Statement of cash
flows, the interest portion is disclosed in operating activities
and the principal portion of the lease payments are separately
disclosed in financing activities.
Impact of adoption
AASB 16 was adopted using the ‘modified retrospective’
approach and as such the comparatives have not been restated.
The effect on the adoption of AASB 16 as at 1 July 2019 is
outlined in the table that follows.
Assets
Right of use asset
Total
Liabilities
Lease liability
Provisions (onerous lease)
Payables (lease incentive in advance)
Total
Reconciliation from operating lease commitments
disclosures at 30 June 2019 to the opening lease
liability at 1 July 2019
Lease commitments as at 30 June 2019
Contracts reassessed
Short term leases
Discounted using the incremental
borrowing rate (1.8%)
$’000
2,982
2,982
4,346
(584)
(780)
2,982
3,900
680
(205)
(29)
Opening lease liability at 1 July 2019
4,346
The main type of right of use asset recognised by the Group
relates to property leases.
Certain property leases are currently being finalised. The new
lease agreement for ClearView Sydney head office premises
was signed subsequent to year end. The lease liability will be
measured and the corresponding right of use asset will be
recognised in FY21.
The Group has elected not to recognise a right-of-use asset and
corresponding lease liability for short-term leases with terms of
12 months or less, leases that expire within 12 months of initial
application and leases of low-value assets. Lease payments on
these assets are expensed to profit or loss as incurred.
Right-of-use assets
A right-of-use asset is recognised at the commencement date
of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted
for, as applicable, any lease payments made at or before the
commencement date net of any lease incentive received,
any initial direct costs incurred, and except where included in
the cost of inventories, an estimate of costs expected to be
incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
CLEARVIEW WEALTH LIMITED | 157
NOTES TO THE FINANCIAL STATEMENTS
9. Other disclosures continued
9.5 New accounting standards continued
Right-of-use assets are depreciated on a straight-line basis
over the lease term or the estimated useful life of the asset,
whichever is the shorter. Where the consolidated entity expects
to obtain ownership of the leased asset at the end of the lease
term, the depreciation is over its estimated useful life. Right-
of-use assets are subject to impairment or adjusted for any
remeasurement of lease liabilities.
The following table details the carrying amount of right of use
assets at 1 July 2019 and the movements during the period:
Upon adoption of AASB 16 at 1 July 2019
Depreciation
Right of use asset at 30 June 2020
Lease liabilities
$’000
2,982
(1,619)
1,363
A lease liability is recognised at the commencement date of
a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the
lease, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Lease payments comprise of fixed
payments less any lease incentives receivable, variable lease
payment that depend on an index or a rate, amounts expected
to be paid under residual value guarantees, exercise price of a
purchase option when the exercise of the option is reasonably
certain to occur, and any anticipated termination penalties.
The variable lease payments that do not depend on an index or
a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using
the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future
lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase
option and termination penalties. When a lease liability is
remeasured, an adjustment is made to the corresponding
right-of-use asset, or to profit or loss if the carrying amount of
the right-of-use asset is fully written down.
The following table details the carrying amount of lease
liabilities at 1 July 2019 and the movements during the
period:
Upon adoption of AASB 16 at 1 July 2019
Interest expense
Payments made
Lease liability at 30 June 2020
$’000
4,346
17
(2,559)
1,804
Standards and Interpretations in issue not yet adopted
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
AASB 17 -
Insurance Contracts
Effective for
annual reporting
periods
beginning on or
after
Expected to be
initially applied
in the financial
year ending
1 January 2022
30 June 2023
Impact of changes to Australian Accounting Standards
and interpretations in issue not yet adopted
AASB 17 Insurance Contracts
AASB 17 Insurance Contracts (AASB 17) introduces significant
changes to accounting for life insurance contracts and the
reporting and disclosures in relation to those contracts.
AASB 17 does not change the underlying economics or cash
flows of the life insurance business, however, there will
be significant changes to the measurement of insurance
contract liabilities including the amount of deferred
acquisition costs and the profit emergence profiles from life
insurance contracts.
Since the standard was issued, various implementation
matters have been raised by stakeholders and the
International Accounting Standards Board (IASB) is currently
considering certain targeted amendments to the standard.
The IASB issued the amendments to IFRS 17, ‘Insurance
contracts’, on 25 June 2020, together with an amendment to
IFRS 4, so that eligible insurers can still apply IFRS 9 alongside
IFRS17. This concluded the IASB’s targeted amendments to
IFRS 17 which aimed to ease implementation of the standard.
IFRS 17 should be applied to annual reporting periods
beginning on or after 1 January 2023, with earlier application
permitted, and the amendments should applied at the same
time.
In addition to the financial reporting impacts, regulators are
considering their response to the new standard which may
lead to changes in the determination of capital requirements,
income tax and prudential reporting.
Due to the complexities of the requirements, evolving
interpretations and the potential changes to the original
standard, it is not yet practicable to quantify the financial
158 | CLEARVIEW ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
9. Other disclosures continued
9.5 New accounting standards continued
impact on ClearView’s life insurance business. In some cases,
the final impact of the requirements will not be determined
until any amendments, interpretations and regulatory
responses to the new standard are determined. ClearView is
in the initial phase of the IFRS 17 project and is continuing to
develop its implementation plans for the adoption of AASB
17.
9.6 Other significant accounting policies
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 cost.
9.7 Subsequent events
Incurred claims treaty
In addition to the incurred claims treaty ClearView entered
into with its reinsurer Swiss Re Life and Health Australia (Swiss
Re) in December 2019 for its lump sum portfolio, subsequent
to year end ClearView also entered into an incurred claims
treaty with Swiss Re for its income protection portfolio.
Under the treaty, ClearView LifeSolutions IP claims are
substantially settled on an earned premium and incurred
claims basis. Each quarter, Swiss Re will settle a substantial
component of the outstanding income protection claims
liabilities, the incurred but not reported claims (IBNR) and
reported but not admitted claims (RBNA) based on best
estimate assumptions, consistent with ClearView statutory
and regulatory reported results and based on the applicable
Australian Accounting Standards (excluding risk margins,
profit margins and capital margins).
A further $74 million will be received from Swiss Re on
entering the income protection incurred claims treaty. Swiss
Re will be retaining the duration and matching risk under the
terms of the incurred claims treaty.
The interest charge started to come through in 2H FY20 on
the lump sum incurred claims treaty, but will increase further
on implementation of the IP incurred claims treaty.
As a result of entering into the new treaty, ClearView is
winding down the limits on the $70 million irrevocable letter
of credit issued by a major Australian bank on behalf of Swiss
Re. ClearView will be able to increase the dollar limit on
the letter of credit in the future, subject to Swiss Re having
sufficient capacity at that time.
COVID-19
In a COVID-19 context, ClearView notes the recent
developments in Victoria, including the declaration of a State
of Disaster with effect from 2 August 2020, where the related
business effects remain highly uncertain.
New lease arrangements
The Group has entered into a formal lease agreement
in relation to a 5 year lease for 3445 square meters of
office space for its head office in Sydney at a cash cost of
$3,874,500 p.a. The lease commences on 1 May 2021 with
additional option term of 5 years.
The Group has entered into a heads of agreement in relation
to a 4 year lease for 408 square meters of office space in
Brisbane at a cost of $261,120 p.a. The heads of agreement
is non-binding and the final terms of the lease are still being
negotiated.
CLEARVIEW WEALTH LIMITED | 159
Directors’ Declaration
The Directors declare that:
(a) In the Directors’ opinion, there are reasonable grounds to
believe that the Company will be able to pay its debts as
and when they become due and payable;
(b) In the Directors’ opinion, the attached financial statements
and notes thereto are in accordance with the Corporations
Act 2001, including the compliance with accounting
standards and giving a true and fair view of the financial
position and the performance of the Company and the
consolidated entity;
(c) In the Directors’ opinion, the financial statements and
notes thereto are in accordance with International Financial
Reporting Standards issued by the International Accounting
Standards Board as disclosed in section 1 ; 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 Geoff Black
Chairman
25 August 2020
160 | CLEARVIEW ANNUAL REPORT 2020
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 Reports
Opinion
We have audited the financial reports of ClearView Wealth Limited (the “Company”) and
its subsidiaries (the “Group”) which comprise the Group and the Company’s statements of
financial position as at 30 June 2020, the statements of profit or loss and other
comprehensive income, the statements of changes in equity and the statements 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 reports of the Group and the Company are in
accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group and the Company’s financial position as at
30 June 2020 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 &
Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) that are relevant to our audit of the financial reports
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 (the “directors”), 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 Asia Pacific Limited and the Deloitte Network.
CLEARVIEW WEALTH LIMITED | 161
INDEPENDENT AUDITOR’S REPORT
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report of the Group 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
Insurance policy liabilities
As at 30 June 2020 the Group’s life
insurance policy liabilities balance
totalled $(59.3) million, calculated
based of recognised actuarial methods
and assumptions, as disclosed in Note
5.4.
There is a high degree of management
judgment and estimation uncertainty
associated with the valuation of the
policy liabilities.
Key areas of judgement include:
• Lapse rates;
• Discount rates;
• Expense allocation
assumptions;
• Economic assumptions –
inflation and indexation; and
Impact of COVID-19.
•
In conjunction with our actuarial specialists
our procedures included, but were not limited
to:
• Assessing
the appropriateness of
valuation methodology,
valuation
process and valuation model used to
determine
policy
liabilities to ensure compliance with
APRA’s Life Prudential Standard 340,
“Valuation of Policy Liabilities”;
insurance
the
• Evaluating the design and operating
relevant controls
effectiveness of
relating to the policy valuations;
• Testing on a sample basis the accuracy
of outstanding claims by tracing claims
estimate and claims payments to third
party evidence;
• Testing the mathematical accuracy of
the valuation model;
• Assessing the valuation methodology
and key assumptions
(including
interest rates, lapse rates, mortality,
morbidity and expense ratios and the
impact of COVID-19);
• Comparing model outputs to results
of experience studies for
reasonableness;
• Reviewing the reasonableness of the
reserves and
in
year’s changes
analysis of profit conducted by
management; and
• Assessing the appropriateness of the
disclosures in Note 5.4 to the financial
statements.
Carrying value of intangible assets,
including goodwill
As at 30 June 2020 the Group’s
goodwill balance totalled $12.5 million
and the capitalised software balance
totalled $5.7million as disclosed in
Note 4.1.
In conjunction with our valuation specialists
our procedures included, but were not
limited to:
162 | CLEARVIEW ANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT
Goodwill has been recognised as a
result of the Group’s historical
acquisitions, representing the excess of
the purchase consideration over the
fair value of assets and liabilities
acquired. Goodwill is required to be
tested annually for impairment by
comparing it carrying amount with its
recoverable amount with ClearView
performing an Embedded Value (“EV”)
calculation to support its impairment
assessment.
In addition, AASB 136 Impairment of
Assets, requires identifiable intangible
assets to be assessed for indicators of
impairment and if indicators of
impairment exist then the recoverable
amount for the asset needs to be
estimated.
The evaluation of indicators of
impairment and the recoverable
amount requires significant judgement
in determining the key assumptions
supporting the expected future cash
flows and the utilisation of the relevant
assets.
The key EV assumptions as disclosed in
Note 4.2 include:
• Life insurance intangible:
morbidity/mortality rates, lapse
rates, discount rates,
maintenance costs; and
• Wealth management intangible:
investment returns, lapse rates
and maintenance costs.
Recoverability of asset derived
from unused tax losses
As at 30 June 2020, the Group’s
receivable balance includes a
receivable of $15.5 million from
ClearView Retirement Plan (‘CVRP’).
This related to contribution tax funding
payments paid by ClearView on behalf
of CVRP and recoverable from CVRP
upon its utilisation of tax losses against
taxable income.
The recoverability of the receivable is
dependent on CVRP generating
taxable income through the successful
execution of the ClearView wealth
• Obtaining an understanding of the
relevant processes and controls
associated with ClearView’s
impairment assessment and the
preparation of the valuation model
used to assess the recoverable
amount of ClearView’s CGUs;
• Challenging the identification of
impairment indicators of the
intangible assets;
• Assessing and challenging the
identification of CGU’s and allocation
of goodwill and cash flows for the
purposes of assessing the value in
use of the cash generating units;
• Agreeing forecast cash flows to latest
Board approved forecast and
assessed the historical accuracy of
forecasting by ClearView;
• Testing the mathematical accuracy of
the model;
• Evaluating managements
methodologies and their documented
basis for key assumptions utilised in
the valuation model as described in
Note 4.2 and ensured the
methodologies applied are consistent
with the relevant accounting
standards;
• Performing sensitivity analysis on the
key drivers of growth rates used in
the cash flow forecasts and discount
rate used;
• Assessing the appropriateness of the
disclosures in Note 4.1 and Note 4.2
to the financial statements.
In conjunction with our taxation specialists
our procedures included, but were not limited
to:
• Obtaining the tax schedules prepared
the
by management
contribution tax funding payments by
their
CVRP
appropriateness and compliance with
applicable tax legislation;
challenging
supporting
and
• Assessed
the
assumptions
and
methodologies used by ClearView in
determining the recoverability of the
receivable;
CLEARVIEW WEALTH LIMITED | 163
INDEPENDENT AUDITOR’S REPORT
strategies and the potentially the
transition of CVRP LifeSolutions Super
to HUB24 as disclosed in Note 2.7.
• Assessing the probability with regards
to the ability of CVRP to generate
sufficient future taxable income; and
• Assessing the appropriateness of the
disclosures in Note 2.7 to the financial
statements.
Other Information
The directors are responsible for the other information. The other information comprises
the information included in the Group and Company’s annual report for the year ended 30
June 2020, but does not include the financial reports and our auditor’s report thereon.
Our opinion on the financial reports 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 reports, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially
inconsistent with the financial reports 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.
Responsibilities of the Directors for the Financial Reports
The directors are responsible for the preparation of the financial reports that give 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 reports that give a true and fair view and are free from
material misstatement, whether due to fraud or error.
In preparing the financial reports, the directors are responsible for assessing the ability of
the Group and the Company to continue as going concerns, 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 the Company or to cease operations,
or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Reports
Our objectives are to obtain reasonable assurance about whether the financial reports as
a whole are 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 the financial reports.
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 reports,
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
164 | CLEARVIEW ANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT
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 or the Company’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 directors’ 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 or the Company’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 reports 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 or the Company to cease to continue as
going concerns.
• Evaluate the overall presentation, structure and content of the financial reports,
including the disclosures, and whether the financial reports represent the
underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of
the entities or business activities within the Group to express an opinion on the
Group 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, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were
of most significance in the audit of the Group 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 pages 50 to 70 of the Directors’
Report for the year ended 30 June 2020.
CLEARVIEW WEALTH LIMITED | 165
INDEPENDENT AUDITOR’S REPORT
In our opinion, the Remuneration Report of ClearView Wealth Limited, for the year ended
30 June 2020, 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, 25 August 2020
166 | CLEARVIEW ANNUAL REPORT 2020
Shareholders’ Information
As at 18 August 2020
Substantial shareholders
As at the date of this Annual Report, the following entities have notified ClearView that they hold a substantial holding
in shares.
No. of shares
as per notice
% of issued
capital
399,543,860
74,450,844
101,254,639
59.21%
11.03%
15.01%
Rank
Name
CCP Bidco Pty Ltd and Associates1
Perpetual Corporate Trust Limited
Sony Life Insurance Co., Ltd2
1
2
3
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 11.03% is therefore included in the 59.21% holding of CCP Bidco in the table above.
Sony Life Insurance Co., Ltd’s (Sony Life) 15.01% shareholding is held through its custodian, HSBC Custody Nominees (Australia) Limited and under the
Option Agreement signed with Crescent and therefore also included in the 59.21% holding of CCP Bidco in the table above.
Twenty largest shareholders (as at August 2020)
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 Bidco Pty Ltd
CCP Trusco 4 Pty Limited
Citicorp Nominees Pty Limited
CCP Bidco Pty Limited
CCP Trusco 5 Pty Limited
CCP Trusco 1 Pty Limited
Portfolio Services Pty Ltd
BNP Paribas Noms Pty Ltd
CCP Trusco 3 Pty Limited
CCP Trusco 2 Pty Limited
Portfolio Services Pty Ltd
Mr Simon Swanson
Accuro Trust (Switzerland) SA
Perpetual Corporate Trust Ltd
J P Morgan Nominees Australia Pty Limited
National Nominees Limited
Wintol Pty Ltd
Avanteos Investments Limited
No. of shares
as per notice
% of issued
capital
138,196,412
20.48
66,950,844
57,302,851
43,582,632
36,799,260
33,786,569
30,893,528
28,458,809
18,300,838
17,755,002
16,262,175
13,551,813
10,304,057
10,000,000
8,235,295
7,500,000
6,962,912
6,801,710
10,849,382
5,550,000
9.92
8.49
6.46
5.45
5.01
4.58
4.22
2.71
2.63
2.41
2.01
1.53
1.48
1.22
1.11
1.03
1.01
1.61
0.82
CLEARVIEW WEALTH LIMITED | 167
SHAREHOLDERS’ INFORMATION
Ordinary share capital
There are 674,793,050 fully paid ordinary shares held by 1,675 shareholders. All the shares carry one vote per share.
Distribution of shareholders
The distribution of Shareholders as at 18 August 2020 is as follows:
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Total
Unmarketable parcels
Minimum $500.00 parcel at $0.3350 per unit
Shares under voluntary escrow
There are no shares subject to voluntary escrow as at 30 June 2020.
Total holders
294
396
256
506
223
Units
92,751
1,163,817
1,961,675
17,187,815
654,386,992
1,675
674,793,050
% of issued
capital
0.01
0.17
0.29
2.55
96.98
100.00
Minimum
parcel size
Holders
Units
1,493
345
155,794
168 | CLEARVIEW ANNUAL REPORT 2020
Directory
Current Directors
Geoff Black (Chairman)
Gary Burg
Jennifer Lyon
Michael Alscher
Nathanial Thomson
Susan Young
Simon Swanson
Managing Director
Simon Swanson
Company Secretary
Judilyn Beaumont
Appointed Actuary
Ashutosh Bhalerao
Chief Risk Officer
Orla Cowan
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 3, 60 Carrington Street
Sydney NSW 2000
GPO Box 2975
Melbourne VIC 3001
Telephone:
1300 850 505
+61 3 9415 4000
Facsimile:
+61 3 9473 2500
www.computershare.com.au
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
CLEARVIEW WEALTH LIMITED | 169
ClearView Wealth Limited
ABN 83 106 248 248
GPO Box 4232
Sydney NSW 2001
T 132 979
clearview.com.au
ASX code CVW
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