NIB Holdings Limited Annual Report 2013

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FY2013 Annual Report · NIB Holdings Limited

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2013
Annual
Report

Contents

Operating and Financial Review

Directors’ Report

Auditor’s Independence Declaration

Remuneration Report

Corporate Governance Statement

Financial Report

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Directors’ Declaration

Independent Auditor’s Report to the Members

Shareholder Information

Corporate Directory

108

109

111

113

2013 AnnuAl GenerAl MeetinG

The Annual General Meeting (AGM) of nib holdings
limited will be held on Tuesday, 29 October 2013 at
11.00am (Australian Eastern Daylight Time) at the
Fort Scratchley Multipurpose Centre, 1 Nobbys Road,
Newcastle NSW 2300.

Operating and Financial Review

For the year ended 30 June 2013

MeSSAGe FrOM tHe BOArD

FY13 was another solid year for the Group. Consolidated premium revenue grew 14.8%. EPS was 15.3 cps compared to
14.8 cps in the previous year with our return on equity an impressive 21.6%. And of course we made a significant acquisition
which expanded our operations into New Zealand.

Yet the year was not without its challenges especially in our Australian Residents Health Insurance (arhi) business. While
policyholder growth was an impressive 4.6%, high claims inflation and a lower than required premium increase saw our net profit
margin decline to 5.0% from 5.9% the previous year. Coupled with a series of unhelpful policy and regulatory changes, it was
generally a much tougher year within arhi.

The relative earnings weakness in our arhi business margin has long been anticipated given underlying claims inflation and
the regulatory restrictions we have upon our pricing. This environment largely explains our past and ongoing determination to
diversify into related businesses such as international workers and students, new markets such as New Zealand and adjacent
insurance product lines such as life and travel insurance. Together these non-arhi businesses contributed 24.0% of our operating
profit for FY13, up from 10.9% the previous year.

Our financial performance has allowed the Board to declare dividends totalling 10.0 cents per share (fully franked) for the year.
This represents a payout ratio of 65% of FY13 earnings. The final dividend of 5.0 cents per share will be paid to shareholders on
4 October 2013.

While growing and enhancing our arhi business remains our top priority, we plan to continue to invest in these newer businesses
and explore other opportunities. There are assets and capabilities within the nib Group that we are confident of leveraging
further to grow enterprise value. We’re particularly interested in exploiting some of the big trends within healthcare such as the
accelerating growth of cross international border medical treatment.

Since our listing we have achieved a cumulative average growth rate of 20.8% in our underwriting earnings. However we are now
operating in a different context. The market is more mature, competition more intense and as I’ve already mentioned, regulatory
pricing constraints make margin accretion problematic. Strategically, it means we must continue to innovate and pursue new
earnings streams if we are to recreate that steep earnings trajectory.

As part of our commitment to growth, during the year we decided to add to our senior Executive strength. Three new Executive
roles were created being CEO New Zealand, Group Manager Benefits and Provider Relations and Group Manager International
and New Business. Two of these Executives have already commenced and are having a positive impact with the third expected
to commence in late 2013.

I would like to thank my fellow Directors, our Executive Management team and our many employees, both in Australia and
New Zealand, for their dedication and contribution to another successful year for our business.

Yours sincerely,

Steve Crane
Chairman

2013 annual report
intrODuCtiOn

This report has been prepared in accordance with ASIC Regulatory Guide 247 Effective disclosure in an operating and financial
review.

reVieW OF GrOuP OPerAtiOnS

Operations and underlying drivers of performance

($m)

Net premium revenue

Net claims incurred

Gross margin

Management expense

Underwriting result

Other income

Other expenses

Operating profit

Net investment return

Finance costs

Profit before tax

Tax

NPAT

EPS (cps)

ROE (%)

Operating cash flow

2013

2012

1,290.4

(1,089.6)

200.8

15.6%

(127.0)

9.8%

73.8

5.7%

3.1

(7.6)

69.3

28.8

5.8%

(1.4)

96.7

(29.5)

67.2

15.3

21.6%

20.0

1,123.8

(949.2)

174.6

15.5%

(103.8)

9.2%

70.7

6.3%

3.6

(4.3)

70.0

25.6

6.0%

0.0

95.7

(28.0)

67.6

14.8

21.7%

134.6

Change

166.6

(140.4)

26.2

14.8

(14.8)

15.0

(23.2)

(22.4)

3.1

(0.5)

(3.3)

(0.7)

3.2

(1.4)

1.0

(1.5)

(0.4)

0.5

4.3

(12.9)

(78.3)

(1.1)

12.3

–

1.0

(5.4)

(0.7)

3.4

(114.6)

(85.1)

Group highlights included:

¾ We now provide health and medical insurance to more than one million people.

¾ Premium revenue up 14.8% to $1.3 billion.

¾ Acquisition of TOWER Medical Insurance Limited (TOWER Medical) in New Zealand for $80.6 million (including $7.9 million in

surplus capital), with acquisition costs of $3.4 million.

¾ Pre-tax underwriting result of $73.8 million versus $70.7 million in FY12.

¾ Consolidated net profit of $67.2 million versus $67.6 million in FY12.

¾ Earnings per share of 15.3 cps.

¾ Return on equity of 21.6% in line with 21.7% in FY12.

¾ Operating cash flow of $20.0 million down from $134.6 million due to significant impact of premium prepayments in FY12.

¾ Full year dividend: 10.0 cps, up 8.1%.

At a Group level, our Australian Resident Health Insurance (arhi) business remains our primary economic driver and for FY13
while policyholder growth was an impressive 4.6%, resulting in premium revenue growth of 8.4%, high claims inflation and a
lower than required 2012 premium increase saw our net profit margin decline to 5.0% from 5.9% the previous year. Coupled with
a series of unhelpful policy and regulatory changes, it was generally a much tougher year within arhi.

nib holdings limitedOperating and Financial Review continuedFor the year ended 30 June 2013

Group net underwriting profit of $73.8 million was up 4.3% from FY12, reflecting arhi net profit decline, more than offset by the
contribution of the improved performance of International Workers Health Insurance (iwhi) and International Students Health
Insurance (ishi), combined with the results for the seven months following the acquisition of TOWER Medical.

The improved performance of our international workers and students businesses, our acquisition of TOWER Medical in
New Zealand and adjacent insurance product lines such as life and travel insurance together contributed 8.1% of our operating
earnings for FY13 up from 2.6% the previous year.

The performance of these adjacent businesses is consistent with our business strategy to diversify future earnings. We expect
these operations will continue to make a material contribution to Group earnings in future years.

During the year, life and travel commissions increased to $1.9 million from $1.5 million. We continue to see an increase in the
number of our customers seeking to purchase complementary products from nib including general life and travel plans, funeral
fund, income protection and bill relief.

nib has announced it is looking to further broaden its business operations with the facilitation of access to cosmetic treatment.
Known as nib options, nib will leverage the brand and distribution to support and grow the market for cosmetic, dental and
surgical treatment both overseas and here in Australia. nib options expects to launch during FY14.

Delivering continued profitable growth for the business will remain a focus in FY14.

Gross profit drivers

26.7

200.8

68.5

3.4

2.3

2.7

4.8

1.3

0.9

260.0

240.0

220.0

)

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$

(

200.0

51.4

180.0

174.6

160.0

140.0

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60.8

1.8

34.4

20.8

6.5

2.0

18.8

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nib New Zealand has been included for the first time (acquisition was completed November 2012), with amounts shown being a
seven month result.

arhi claims and risk equalisation expenses are not fully covered by rate increases due to lower than preferred 2012 rate increase
(5.5%) and higher than expected claims inflation. The 2013 premium increase of 6.5% (effective 1 April 2013) should correct for
this however the rate of claims inflation was driven by increased utilisation and remains a concern.

2013 annual report

reVieW OF GrOuP OPerAtiOnS continued

NPAT Summary

)

m
$
(

95.0

90.0

85.0

80.0

75.0

70.0

65.0

60.0

26.7

0.4

2.9

0.4

67.6

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67.2

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FY13 NPAT was impacted by pre-tax costs associated with the TOWER Medical Insurance acquisition, including $3.4 million of
acquisition costs (one-off cost) and $1.4 million of finance costs (seven months) associated with debt facility.

Financial Position

($m)

Assets

Cash and cash equivalents

Receivables

Financial assets at fair value through profit or loss

Deferred acquisition costs

Property, plant and equipment

Intangible assets

Other assets

Total assets

Liabilities

Payables

Borrowings

Outstanding claims liability

Unearned premium liability

Premium payback liability

Other liabilities

Total liabilities

Net assets

Total equity

2013

2012

Change

143.1

53.7

351.8

27.2

41.7

91.3

5.3

714.1

101.0

62.4

81.4

93.4

40.2

9.5

387.9

86.7

80.2

356.8

8.9

42.1

38.9

4.3

617.8

86.7

2.6

75.0

141.7

0.0

10.3

316.2

326.2

301.6

326.2

301.6

56.4

(26.5)

(5.0)

18.3

(0.4)

52.4

1.0

96.3

(14.3)

(59.8)

(6.4)

48.3

(40.2)

0.8

(71.7)

24.6

65.1

(33.0)

(1.4)

205.6

(0.9)

134.6

23.3

15.6

(16.5)

(2,300.0)

(8.6)

34.1

7.8

(22.7)

8.1

nib holdings limitedOperating and Financial Review continuedFor the year ended 30 June 2013

Capital management through a combination of special dividends, a $75 million Capital Return, and an on-market share buy-back
in the period from listing saw available capital at a low of $13.3 million at 30 June 2012. During FY13, the acquisition of TOWER
Medical funded through a combination of debt and available capital, combined with full year dividends of 10.0 cps sees available
capital at 30 June 2013 at $14.8 million above our internal prudential targets.

Our investment portfolio delivered returns above our internal benchmarks for the year, primarily on the back of strong equity
market performance. Despite our exposure to equities being only approximately 7% of our entire portfolio, net investment return
for the 12 months was $28.8 million or 5.8%. As at 30 June 2013, our total investment assets were $529.6 million (including head
office building).

Group net profit after tax (NPAT) was $67.2 million, compared to $67.6 million last year. Our continued solid underwriting
performance and strong investment earnings delivered earnings per share of 15.3 cents and return on equity of 21.6%.

Our strong financial performance has allowed the Board to declare FY13 full year dividends of 10.0 cents per share, fully franked.
This compared with 9.25 cents per share for FY12. The FY13 full year dividend represents a payout ratio of 65% of full year NPAT,
and is consistent with our dividend policy of paying fully franked dividends representing 60% to 70% of full year NPAT.

Operating cash flow decreased to $20 million for the year ended 30 June 2013 (30 June 2012: $134.6 million), due to the high
number of policyholders prepaying their premiums in FY12 associated with income testing of the Australian Government Rebate.
To maintain their Australian Government Rebate, nib customers could elect to prepay their health insurance premiums for up
to 13 months. This resulted in approximately 26,000 nib policyholders prepaying their premiums prior to 1 July 2012. Cash flow
from financing decreased to $10.5 million (FY12: $179.1 million), reflecting less capital management initiatives and an increase in
proceeds from borrowings associated with the TOWER Medical acquisition.

AuStrAliAn reSiDentS HeAltH inSurAnCe

Financial performance and business review

($m)

Policyholder growth

Net premium revenue

Net claims incurred

Gross margin

Management expense

Underwriting result

arhi highlights:

2013

2012

4.6%

1,187.2

(1,030.0)

157.2

13.2%

(98.2)

8.3%

59.0

5.0%

4.7%

1,095.6

(935.7)

159.9

14.6%

(95.3)

8.7%

64.6

5.9%

Change

91.6

(94.2)

(2.7)

(2.9)

(5.6)

8.4

(10.1)

(1.7)

(3.1)

(8.6)

¾ Annual net policyholder growth of 4.6% (industry: 3.1%).

¾ Premium revenue growth up 8.4% to $1,187 million.

¾ Launched new product range allowing customers to tailor their health cover.

¾ Management expenses up just 3.1%, equating to a MER of 8.3%, lowest since ASX listing.

¾ Net underwriting profit of $59.0 million down 8.6% on FY12 on the back of high claims inflation.

FY13 was challenging for our arhi business. While policyholder growth was an impressive 4.6%, high claims inflation and a lower
than required 2012 premium increase saw our net profit margin decline to 5.0% from 5.9% the previous year. Coupled with a
series of unhelpful policy and regulatory changes, it was generally a much tougher year within arhi.

The relative earnings weakness in our arhi business margin has long been anticipated given underlying claims inflation and the
regulatory restrictions we have upon our pricing.

A higher than forecast claims expense which was not fully covered by our 1 April 2012 price increase, as well as one-off state
levy expenses ($2.3 million), all had an impact on our FY13 arhi net underwriting profit of $59.0 million. This result compared to
$64.6 million in the previous year. Despite this challenging backdrop, arhi’s FY13 net underwriting margin of 5.0% was at the
bottom end of our target net underwriting margin range of 5% to 5.5%. The premium pricing increase nib had approved this year
of 6.5%, effective 1 April 2013, will again see arhi at the bottom end of this range in FY14.

2013 annual report

AuStrAliAn reSiDentS HeAltH inSurAnCe continued

Financial performance and business review continued

arhi net policyholder growth was 4.6%, compared to the industry average of 3.1%. This was the 12th consecutive year arhi
policyholder growth exceeded the industry average. With just under 8% market share, our focus on organic growth continues
to yield results, with nib accounting for 11.3% of overall industry expansion for the year. While much of our organic growth
strategy in recent years has been to target customers aged under 40 years, we have also invested heavily in marketing and
product design to target customers aged 55 years and over. This focus and investment yielded positive results with 11.8% of all
policyholder sales in FY13 being in this target group (over 55 years of age), compared to 7.4% in FY12.

Product design and innovation has been the cornerstone of nib’s strategy in recent years. During March 2013, nib launched a
new product range that allows customers to tailor their health cover and benefits they wish to receive. The early results show that
average premium income per policyholder, policyholder migration, and new customer sales have improved since the launch of
the new product range, compared to the same period last year.

The amount of money we spend to acquire customers has increased over the last three years, primarily as a result of increased
competition. During this period we have seen a continuing trend for consumers to use retail brokers. During FY13, 31.8% of all
our sales were through retail brokers. Retail brokers will remain a key part of our distribution strategy, particularly in new markets
and niche segments.

Policyholder lapse remains a key focus for the business. Our lapse trend remains a concern and for FY13 our lapse rate was
10.1%, up from 9.6% in FY12. In an effort to arrest our lapse trend we have implemented a number of specific actions including
investing in an outbound call centre team to focus on high risk customers.

Claims expenses for our arhi business continued to grow for FY13 as a function of health and medical inflation and policyholder
growth. Claims expenses and levies totalled $862.6 million for the year; an increase of 11.2%. The rate of growth in our
contribution to the Risk Equalisation Trust Fund, a system that requires all health insurers to share the costs associated with older
and high cost customers slowed significantly during the year. This is due to a lower rate of growth in the overall pool, increase
in amount nib claimed from the pool and reduction in risk equalisation margin in outstanding claims provision. In FY13, our Risk
Equalisation expense was $167.4 million; an increase of 4.7% on FY12.

During FY13 we have also seen our hospital and ancillary expense inflation track higher than expectations. In terms of hospital
costs, inflation has been largely driven by an increase in utilisation and service costs associated with private hospitals and
day facilities. Ancillary claims inflation appears predominantly driven by an increase in dental utilisation following the Federal
Government’s scrapping of the Chronic Disease Dental Scheme in December 2012. This increase has been an industry-wide
trend.

Monitoring and managing costs as well as continually improving operational efficiencies remain priorities to ensure we maintain
our price competitiveness and achieve our target net underwriting margin. For FY13, our management expense ratio of 8.3%
was the lowest since listing on the ASX in 2007. This was achieved despite an increased investment in marketing activity to
support our organic growth strategy, which is reflected in our above-industry net policyholder growth for the year.

For FY14 and beyond, our strategy is to grow the arhi business at approximately 10% annual premium revenue growth through
building a national brand presence and with an emphasis on targeting those under 40 and those over 55, improving our
policyholder retention as well as other tactical niche opportunities such as Western Australia.

nib holdings limitedOperating and Financial Review continuedFor the year ended 30 June 2013internAtiOnAl StuDentS HeAltH inSurAnCe

Financial performance and business review

($m)

Policyholder growth

Net premium revenue

Net claims incurred

Gross margin

Management expense

Underwriting result

ishi highlights:

2013

2012

173.9%

132.4%

4.4

(3.4)

1.0

22.7%

(1.1)

24.5%

(0.1)

(1.8%)

3.0

(2.9)

0.1

4.5%

(1.5)

49.4%

(1.4)

(44.9%)

Change

1.4

(0.5)

0.9

0.4

1.3

45.7

(18.0)

641.8

27.8

94.2

¾ International student fundamentals strong with market expected to grow.

¾ Success with upstream distribution strategy.

¾ Very strong policyholder sales (FY13 net policyholder growth of 5,787 or 174%) means we are approaching critical mass for

the business.

¾ New pricing and product design strategy has improved claims experience.

Over the past three years we have been organically building our ishi business. As at 30 June 2013, nib provided health insurance
to more than 9,000 international student policies in Australia; up 174% on the previous year. Strong policyholder sales during the
year have been driven by targeting education agents, cultural missions and embassies.

We also made changes during the year to product pricing and developed a new product design strategy, which have resulted in
an improved ishi claims experience.

Overall this resulted in a small underwriting loss of $0.1 million for FY13, compared to a loss of $1.4 million in FY12.

With Australia being one of the world’s largest international student destinations and health insurance a prerequisite for student
visa entry, when combined with recent distribution strategy success, this is expected to grow and further generate earnings and
improve profitability in future years.

internAtiOnAl WOrKerS HeAltH inSurAnCe

Financial performance and business review

($m)

Policyholder growth

Net premium revenue

Net claims incurred

Gross margin

Management expense

Underwriting result

iwhi highlights:

¾ Policyholder growth of 9.7%.

¾ Premium revenue up 9.9% to $27.6 million.

¾ Net margin of 30.5%, still viewed as sustainable.

¾ Contributed 11.4% of Group net underwriting profit.

2013

9.7%

27.6

(11.8)

15.9

57.4%

(7.4)

26.9%

8.4

30.5%

2012

18.6%

25.2

(10.6)

14.5

57.5%

(7.1)

28.2%

7.5

29.8%

Change

2.4

(1.2)

1.4

(0.3)

0.9

9.9

(11.0)

9.0

(5.0)

12.8

2013 annual report

internAtiOnAl WOrKerS HeAltH inSurAnCe continued

Our iwhi business continues to perform well, highlighted by strong policyholder and revenue growth along with disciplined
cost control.

As at 30 June 2013, nib provided health cover to approximately 18,000 migrant worker policies in Australia, which is an increase
of 9.7% on the previous year. Despite a weakening Australian labour market and an uncertain domestic economic outlook, as at
30 June 2013 there were approximately 107,000 “457 visa” holders or skilled migrant workers in Australia. According to recent
Federal Government Department of Immigration and Citizenship forecasts, Australia’s “457 visa” intake is expected to grow by
2% to 4% for FY14 and FY15.

iwhi’s earnings have continued to make a material contribution to our pre-tax underwriting result. In FY13 iwhi’s net underwriting
result of $8.4 million accounted for more than 11% of our Group net underwriting result. As competition in the domestic arhi
market continues to intensify, we will continue to invest and grow the iwhi business to diversify Group earnings.

neW ZeAlAnD HeAltH inSurAnCe

Financial performance and business review

($m)

Net premium revenue

Net claims incurred

Gross margin

Management expense

Underwriting result

2013
7 months

2012

71.1

(44.4)

26.7

37.5%

(20.3)

28.5%

6.4

9.0%

–

Change

71.1

(44.4)

26.7

(20.3)

6.4

–

nib New Zealand highlights:

¾ nib acquired TOWER Medical in November 2012.

¾ New Board and Management team structure in place.

¾ Separation and transition of business going smoothly.

¾ Contributed $6.4 million (or 8.7%) to Group underwriting result in just seven months.

¾ EPS accretive year one (excluding acquisition costs and amortisation).

In line with our strategy of growing international earnings, nib acquired TOWER Medical in November 2012. The purchase price
of $80.6 million included $7.9 million in surplus capital. nib funded the acquisition through a combination of surplus capital and
debt. Our current gearing of 16.1% (debt to debt plus equity) is well below our internal capital target of not more than 30%, with
a tendency to a lower 20% level.

nib has been investigating opportunities in New Zealand for some time, and the acquisition of TOWER Medical met our strict
investment criteria in terms of strategic rationale and return on investment.

With market share of approximately 13%, TOWER Medical is New Zealand’s second largest health fund, and provides nib with
an opportunity to emulate the success we have achieved in Australia in recent years through brand building, product design
and outstanding customer service.

Since acquiring the business, nib has appointed a nib New Zealand Board, chaired by Alan Clarke, who has more than 30 years
experience in various senior management and board positions with a range of New Zealand and Australian-based health
and medical companies. In May, Rob Hennin was appointed as Chief Executive Officer New Zealand. Rob was the former
Vice President, Consumer Products, Acquisition, Insurance (Australia) for American Express and has more than 15 years
of experience in the finance and insurance sectors, which also includes senior management roles with Visa International
and Unilever.

A key priority has been the separation and transition of the business to nib. This critical post-acquisition work stream is going
smoothly and includes transferring employees and key management personnel, IT systems and customer information, as well
as nurturing and enhancing nib’s relationship with advisor and group customer distribution arrangements.

nib holdings limitedOperating and Financial Review continuedFor the year ended 30 June 2013

An extensive market research project was undertaken earlier this year to inform and further refine our business and organic
growth strategy for nib New Zealand. This research has strengthened our view of the potential to increase private health
insurance participation in New Zealand, which is currently 30% compared to Australia with 48%, and significantly grow market
share. Similar to the organic growth strategy nib led in Australia in 2006, this program will focus on brand investment, product
and online innovation, as well as a customer-centric culture, with a launch date set for late calendar 2013.

In addition to organic growth, opportunities exist in the New Zealand to further grow market share through merger and
acquisitions, as well as other product “white labelling”.

With the acquisition completed on 30 November 2012, the business contributed a seven-month result to FY13 Group earnings
consisting of premium revenue of $71.1 million and a net underwriting result of $6.4 million.

FY14 will be a year of significant investment in brand building and marketing to build the foundations for strong value creation in
future years.

BuSineSS StrAteGieS AnD PrOSPeCtS

nib’s Business Strategy sets out seven key levers which we believe will increase earnings and grow enterprise value.

1. Grow our arhi business organically at circa 10% annual premium growth (4-5% per annum policyholder growth) through

building national brand presence and with an emphasis on <40 market (Virgin Green), >55 market (Virgin Silver), other tactical
niche opportunities (e.g. Western Australia) and improved policyholder retention.

2. Position and develop our new business in New Zealand as a challenger and grow the market and our market share.

3. Grow our inbound international workers and students business and create a new product for insuring outbound long stay

Australians and New Zealanders.

4. Build a new business “nib options” to capture and commercialise burgeoning demand in Australia and Asia for medical travel

including cosmetic surgery.

5. Ensure across the nib Group that the design, payment and management of benefits better meets our strategic and

commercial objectives.

6. Pursue increased customer satisfaction, productivity and efficiency through continual process improvement and ongoing

investment in technology.

7. Actively develop a high performance organisational culture and the engagement of our people.

Aligned to nib’s Business Strategy, our key performance targets are:

¾ Consolidated premium growth.

¾ Net consolidated underwriting profit.

¾ Overseas and new business earnings.

¾ Net promoter score.

¾ Earnings per share.

¾ Return on equity.

¾ Total shareholder return.

2013 annual reportBuSineSS StrAteGieS AnD PrOSPeCtS continued

Principal risks and uncertainties

nib has established policies for the oversight and management of material business risks. Further information regarding how nib
recognises and manages risk is detailed in Principle 7 of our Corporate Governance Statement (pages 42 to 44). In addition nib’s
Risk Policy is available on our website at nib.com.au.

Principal risks and uncertainties include:

General economic conditions

Investment market performance

Competition in the health insurance
industry

Pricing risk

Risk equalisation trust fund
arrangements

Changes in government policy or
legislation

Merger or acquisition opportunities

nib’s performance is impacted by Australian economic conditions such as
inflation, interest rates, consumer and business spending and employment
rates which are outside nib’s control. nib cannot predict the impact of future
economic conditions on its business and profitability. The environment in which
nib operates may experience challenging conditions as a result of general
uncertainty about future Australian and international economic conditions.

A substantial proportion of nib’s profits are generated from its investment
portfolio. Consequently, investment performance significantly affects nib’s
profits and financial position.

The industry in which nib operates is competitive. The actions of competitors
could result in a reduction in the rate of growth of nib, a decline in the number
of people insured by nib and/or declining profit margins.

Australian health insurance premiums are required to be approved by the
Minister for Health. Historically, nib and other health funds have only raised
premiums once a year. There is a risk that nib’s application for a change in
its premium rates may only receive approval at a level lower than originally
requested, or may be rejected by the Minister. Such an amendment or rejection
may have a negative impact on nib’s operating and financial performance.

Since 1 April 2007 risk equalisation arrangements have applied to the registered
health insurance industry in Australia. These arrangements replaced the
previous reinsurance arrangements. Under these arrangements all registered
health insurers effectively provide reinsurance support so that the industry as
a whole shares the hospital costs of high risk groups irrespective of whether
those claims are attributable to a policyholder of a particular fund.

The business environment in which nib operates is heavily regulated. The
Australian Federal Government currently provides a number of regulatory
incentives to encourage participation by the public in private health insurance
including:

a. Federal Government Rebate;

b. Lifetime Health Cover; and

c. Medicare Levy Surcharge.

The Federal Government has and may in the future change these regulatory
incentives from time to time through changes to such things as policy and
legislation. There is a risk that such changes may have a negative impact on the
private health insurance industry and nib.

nib has a business strategy of pursuing merger and acquisition opportunities.
The pursuit of merger and acquisition opportunities carries with it risks and
there is no guarantee that such a strategy will be successful.

nib holdings limitedOperating and Financial Review continuedFor the year ended 30 June 2013Compliance with regulation

Estimation of claims provisions

Operational risk

Loss of key personnel

Tax treatment

Technology

Litigation and legal action

Future events

nib is subject to a high degree of regulation concerning how private health
insurers conduct their health insurance business. Private health insurers must
be registered and must comply with a variety of obligations in relation to the
conduct of that business including a requirement to have appointed actuaries,
compliance with prudential, solvency and capital adequacy standards,
exclusion of disqualified persons from management and a number of reporting
and notification obligations.

If nib does not comply with the regulatory requirements that apply to it, it may
suffer a penalty, such as a fine or an obligation to pay compensation. In some
cases, a regulator may cancel or suspend its authority to conduct business. A
significant failure to comply with regulatory requirements may also give rise to
adverse comment by the press and other industry commentators, negatively
affecting nib’s financial performance.

nib maintains provisions for claims incurred but not settled including claims
reported but not yet paid and claims incurred but not yet reported. Although
nib seeks to maintain claims provisions at a level to ensure a relatively high
probability of sufficiency, the establishment of appropriate provisions is an
inherently uncertain process.

nib is exposed to a variety of operational and general business risks. Exposure
to unexpected financial and non financial losses arising from the way in which
nib conducts its business operations may have an adverse effect on earnings
and assets of nib as well as its reputation.

nib’s success depends largely on its key personnel, including senior
management. The inability to access and retain services of a significant number
of such employees could disrupt nib’s business.

The Federal or State Governments may introduce further or increase taxes,
duties (including stamp duty on insurance policies) or other imposts or introduce
amendments to existing legislation which may result in an adverse impact on nib
and the health insurance industry.

The health insurance industry relies increasingly on technology to conduct an
efficient and cost effective business. nib faces the risk, in common with other
participants, that further technology changes will be required which could result
in an increase in costs. In addition, information technology systems risks include
complete or partial systems failure, lack of systems capacity, inadequacy to
meet changing business requirements, inappropriate or unauthorised systems
access and unsuccessful systems integrations. Any major failure or inadequacy
in the information technology systems could materially affect nib’s business.

At any time, nib could be involved in civil proceedings in courts of various
jurisdictions. nib may also be exposed to litigation in the future over claims
which may affect its business. To the extent that these risks are not covered
by nib’s insurance policies, litigation or the costs of responding to these legal
actions or suggested legal action could have a material adverse impact on nib’s
financial position, earnings and share price.

It is not possible to predict or identify all future events which may impact
adversely on nib’s profitability or financial position.

2013 annual reportBuSineSS StrAteGieS AnD PrOSPeCtS continued

FiVe YeAr SuMMArY

($m)

Consolidated Income Statement

Net premium revenue

Net claims incurred

Gross margin

Management expenses

Underwriting result

Other income

Other expenses

Operating profit

Net investment return

Finance costs

Profit before tax

Tax

NPAT

Consolidated Balance Sheet

Total assets

Equity

Debt

Share Performance

Number of shares

Weighted average number of shares – basic

Weighted average number of shares – diluted

Basic earnings per share

Diluted earnings per share

Share price at year end

Dividend per share – ordinary

Dividend per share – special

Dividend payout ratio

Other financial data

ROE (%)

Operating cash flow

cps

2013
$m

2012
$m

2011
$m

1,290.4

(1,089.6)

200.8

(127.0)

73.8

3.1

(7.6)

69.3

28.8

(1.4)

96.7

(29.5)

67.2

714.1

326.2

59.1

439.0

15.3

2.13

10.0

0.0

1,123.8

(949.2)

174.6

(103.8)

70.7

3.6

(4.3)

70.0

25.6

0.0

95.7

(28.0)

67.6

617.8

301.6

0.0

439.0

458.3

14.8

1.50

9.25

0.0

1,007.8

(848.7)

159.1

(97.6)

61.5

5.8

(7.5)

59.8

32.1

0.0

91.9

(26.5)

65.5

639.3

411.8

0.0

466.7

478.5

13.7

1.45

8.0

5.0

2010
$m

901.4

(767.9)

133.5

(86.4)

47.1

1.3

(5.8)

42.5

44.5

0.0

87.0

(25.4)

61.5

588.0

391.4

0.0

495.4

495.8

12.4

1.25

7.0

0.0

2009
$m

829.5

(707.5)

122.0

(81.9)

40.2

1.2

(7.9)

33.4

(1.8)

0.0

31.6

(7.8)

23.8

536.5

361.9

0.0

496.1

506.7

4.7

0.92

2.4

5.0

65.0%

60.0%

92.7%

56.4%

154.8%

21.6%

20.0

21.7%

134.6

16.5%

88.3

16.3%

66.3

6.6%

44.2

nib holdings limitedOperating and Financial Review continuedFor the year ended 30 June 2013

Directors’ Report

For the year ended 30 June 2013

The Directors of nib holdings limited (Company) present their
report on the consolidated entity (hereafter as the Group)
consisting of nib holdings limited and the entities it controlled
at the end of or during the year ended 30 June 2013.

In addition to these dividends, since the end of the financial
year the Directors have recommended the payment of a final
dividend of $22.0 million (5.0 cps ordinary dividend) to be paid
on 4 October 2013 out of retained profits at 30 June 2013.

DireCtOrS

The following persons were Directors of nib holdings limited
during the whole of the financial year and up to the date of
this report:

Steve Crane

Harold Bentley

Philip Gardner

Mark Fitzgibbon

Annette Carruthers

Christine McLoughlin

PrinCiPAl ACtiVitieS

The principal continuing activities of the Group consisted of
operating as an Australian private health insurer under the
Private Health Insurance Act 2007.

During the year, the Group commenced operating as a
New Zealand private health insurer following the acquisition
of TOWER Medical Insurance Limited (TOWER Medical) by
nib nzed limited (a wholly owned subsidiary of nib holdings
limited) effective 30 November 2012.

reVieW OF OPerAtiOnS

Information on the operations and financial position of the
Group and its business strategies and prospects is set out in
the Operating and Financial Review on pages 1 to 12 of this
Annual Report.

DiViDenDS

Dividends paid to shareholders during the financial year were
as follows:

2013
$000

2012
$000

Final dividend for the year
ended 30 June 2012 of
5.0 cents per fully paid ordinary
share, made up of 5.0 cps
ordinary dividend (2011:
9.0 cents made up of 4.0 cps
ordinary dividend and 5.0 cps
special dividend) per fully paid
share paid on 5 October 2012

Interim dividend for the year
ended 30 June 2013 of
5.0 cents (2012: 4.25 cents) per
fully paid share paid 5 April 2013

21,949

42,006

21,950

43,899

18,912

60,918

Subject to franking credit availability, the Board’s position is
that future ordinary dividends will reflect a dividend payout
ratio of 60% to 70% of earnings with additional capacity to
pay special dividends as part of future capital management.

SiGniFiCAnt CHAnGeS in tHe StAte
OF AFFAirS

Significant changes in the state of the affairs of the Group
during the financial year were as follows:

On 30 November 2012, nib nzed limited (a wholly owned
subsidiary of nib holdings limited, incorporated on 31 October
2012) acquired 100% of the issued share capital of TOWER
Medical, New Zealand’s second largest private health
insurer for $80.6 million. The acquisition was funded through
a combination of available capital and a NZD$70 million
(AUD$55.0 million) senior debt facility.

MAtterS SuBSequent tO tHe enD
OF tHe FinAnCiAl YeAr

Since 30 June 2013, nib has announced it is looking to further
broaden its business operations with the facilitation of access
to cosmetic treatment. Known as nib options, nib will leverage
the brand and distribution to support and grow the market for
cosmetic, dental and surgical treatment both overseas and
here in Australia. nib options expects to launch in FY14.

Except for the new acquisition discussed above, no other
matter or circumstance has arisen since 30 June 2013 that
has significantly affected, or may significantly affect:

a. the Group’s operations in future financial years; or

b. the results of those operations in future financial years; or

c. the Group’s state of affairs in future financial years.

liKelY DeVelOPMentS AnD
exPeCteD reSultS FrOM
OPerAtiOnS

Additional comments on expected results on operations of
the Group are included in this Annual Report under Operating
and Financial Review on pages 1 to 12.

Further information on likely developments in the operations
of the Group have not been included in this Annual Report
because the Directors believe it would be likely to result in
unreasonable prejudice to the Group.

2013 annual reportinFOrMAtiOn On DireCtOrS

Details of the qualifications, experience, special responsibilities and interests in shares and performance rights of the Directors
are as follows:

Steve Crane

Chairman, Independent Non-Executive Director

BCommerce, FAICD,
SF Fin

Experience and expertise

A Director since 28 September 2010, appointed Chairman on 1 October 2011. Approximately 40 years of
financial market experience, as well as an extensive background in publicly-listed companies. Previously the
Chief Executive of BZW Australia and ABN AMRO. Member of the CIMB (Australia) Advisory Council.

Other current directorships

A Director of Transfield Services Limited, Bank of Queensland Limited, APA Group and the Taronga
Conservation Society Australia. He is also Chairman of Global Valve Technology Limited.

Former directorships in the last three years

Director of APA Ethane Limited.

Subsidiary boards and special responsibilities

Chairman of the Board. A Director of nib health funds limited and IMAN Australian Health Plans Pty Limited.

Interests in shares and performance rights

Indirect: 200,000 ordinary shares in nib holdings limited held by Depeto Pty Limited.

Mark Fitzgibbon

Managing Director/Chief Executive Officer

MBA, MA, ALCA, FAICD

Experience and expertise

Joined nib health funds limited in October 2002 as Chief Executive Officer (CEO). Previously CEO of the
national and peak industry bodies for licensed clubs. Before that, held several CEO positions in local
government, including General Manager of Bankstown Council between 1995 and 1999.

Other current directorships

A Director of the Australian Health Insurance Association Ltd.

Former directorships in the last three years

Director of the Newcastle Knights Rugby League Football Club and Australian Health Services Alliance.

Subsidiary boards and special responsibilities

Managing Director/Chief Executive Officer. A Director of nib health funds limited, nib nzed limted, nib health
care services pty limited, nib servicing facilities pty limited, TOWER Medical Insurance Limited, IMAN
Australian Health Plans Pty Limited, nib options pty limited and RealSurgeons Pty Ltd.

Interests in shares and performance rights

Direct: 893,930 ordinary shares in nib holdings limited.

Indirect: 568,621 ordinary shares in nib holdings limited held by Fitz Family fund.

235,952 performance rights under FY11-FY14 Long-Term Incentive Plan which may vest from
1 September 2014.

217,546 performance rights under FY12-FY15 Long-Term Incentive Plan which may vest from
1 September 2015.

331,765 performance rights under FY13-FY16 Long-Term Incentive Plan which may vest from
1 September 2016.

Harold Bentley

Independent Non-Executive Director

MA Hons, FCA, FCIS,
FCSA

Experience and expertise

A Director since 7 November 2007. Has over 20 years experience in the insurance sector. Formerly the
Chief Financial Officer of Promina Group Ltd and an Audit Manager of PricewaterhouseCoopers specialising
in finance and insurance companies.

Other current directorships

None

Former directorships in the last three years

None.

Subsidiary boards and special responsibilities

A Director of nib health funds limited, nib nzed limited, TOWER Medical Insurance Limited and IMAN
Australian Health Plans Pty Limited. Chairman of the Audit Committee. Member of the Investment
Committee and the Risk and Reputation Committee. Chairman of the nib nzed limited Audit Committee.
Chairman of the TOWER Medical Insurance Limited Board, Audit, Risk and Compliance Committee.

Interests in shares and performance rights

Indirect: 100,000 ordinary shares in nib holdings limited held by Sushi Sake Pty Limited.

nib holdings limitedDirectors’ Report continuedFor the year ended 30 June 2013Dr Annette Carruthers

Independent Non-Executive Director

MBBS (Hons), FRACGP,
FAICD, GradDipAppFin

Experience and expertise

A Director since 20 September 2007. A general medical practitioner with comprehensive experience in
patient care and clinical risk management. Directorships and representative positions in a range of national,
state and regional health care organisations. Conjoint senior lecturer in the School of Medicine & Public
Health at the University of Newcastle. Member NSW Medical Experts Committee Avant Pty Ltd.

Other current directorships

A Director of Aged Care Investment Services (the Trustee for the AMP Managed Aged Care Investment
Trusts), Hunter Infrastructure and Investment Advisory Board and the NSW Board of the Medical Board
of Australia.

Former directorships in the last three years

Director of National Heart Foundation of Australia (NSW Division), National Heart Foundation of Australia and
Haematology and Oncology Clinics of Australia.

Subsidiary boards and special responsibilities

A Director of nib health funds limited (since 2003), nib health care services pty limited, nib nzed limited,
TOWER Medical Insurance Limited, IMAN Australian Health Plans Pty Limited, The Heights Private Hospital
Pty Limited and nib options pty limited. Chairman of the Risk and Reputation Committee. Member of Audit
Committee and the People and Remuneration Committee. Member of the Tower Medical Insurance Limited
Board, Audit, Risk and Compliance Committee.

Interests in shares and performance rights

Direct: 1,000 ordinary shares in nib holdings limited.

Indirect: 71,500 ordinary shares in nib holdings limited held by Carruthers Future Fund Pty Ltd.

Philip Gardner

Independent Non-Executive Director

B.Comm, CPA, CCM,
FAICD, JP

Experience and expertise

A Director since 28 May 2007. Current Chief Executive Officer of The Wests Group Australia.

Other current directorships

A Director of Newcastle Airport Limited.

Former directorships in the last three years

None.

Subsidiary boards and special responsibilities

A Director of nib health funds limited (since 2005) and IMAN Australian Health Plans Pty Limited. Chairman
of the Investment Committee. Member of the Audit Committee and the People and Remuneration
Committee.

Interests in shares and performance rights

Indirect: 108,000 ordinary shares in nib holdings limited held by Sutton Gardner Pty Ltd.

Christine McLoughlin

Independent Non-Executive Director

BA/LLB (Hons), FAICD

Experience and expertise

A Director since 20 March 2011. Over 25 years experience as a financial services and legal executive with
iconic brands in financial services (AMP and IAG), telecommunications (Optus) and professional services
industries in Australia, the UK and Asia.

Other current directorships

Director of Whitehaven Coal Limited, Westpac’s Insurance Businesses and St James Ethics Centre. Deputy
Chairman of The Smith Family.

Former directorships in the last three years

Director of the AMP Foundation, TAC (Transport Accident Commission) and The Australian Nuclear Science
and Technology Organisation (ANSTO).

Subsidiary boards and special responsibilities

A Director of nib health funds limited, nib nzed limited, TOWER Medical Insurance Limited and IMAN
Australian Health Plans Pty Limited. Chairman of the People and Remuneration Committee. Member of the
Risk and Reputation Committee. Member of the Tower Medical Insurance Limited Board, Audit, Risk and
Compliance Committee.

Interests in shares and performance rights

Indirect: 77,500 shares in nib holdings limited held by Dundas Street Investments Pty Ltd.

2013 annual reportCOMPAnY SeCretArieS

The Company Secretary is Mrs Michelle McPherson BBUS (Accounting) (UTS), CA, GAICD. Mrs McPherson was appointed to
the position of Company Secretary on 1 September 2008. She is currently the Chief Financial Officer and Deputy Chief Executive
Officer of the Group, a Director of the Newcastle Port Corporation, the Hunter Valley Research Foundation and Hunter Valley
Grammar School, a member of the advisory board to the Faculty of Business and Law at the University of Newcastle and a
member of the University of Newcastle Foundation Advisory Board.

Ms Roslyn Toms BA (Hons) (UCAN,UTS)/ LLB (UNSW)) also serves as a Company Secretary. Ms Toms was appointed as
a Company Secretary on 29 April 2013. She is currently General Counsel of the Group and is also responsible for Risk &
Compliance and serves as a Company Secretary of other nib Group companies. Ms Toms has over ten years’ experience
as a lawyer in business, government and private practice.

MeetinGS OF DireCtOrS

The number of meetings of the Group’s Board of Directors and of each Board committee held during the year ended 30 June
2013, and the numbers of meetings attended by each Director were:

NAME

S Crane2

M Fitzgibbon2

H Bentley

A Carruthers

P Gardner

C McLoughlin

Board1

Audit Committee

Risk and
Reputation
Committee

People and
Remuneration
Committee

Investment
Committee

Held

Attended

Held

Attended

Held

Attended

Held

Attended

Held

Attended

–

1. Seven of the Board meetings that took place were unscheduled meetings.
2. Attendance at Committee meetings in an ex-officio capacity.

nib’s Non-Executive Directors participated in a number of site visits, work related functions and staff events during the course of
the year in Newcastle, Sydney and Auckland.

reMunerAtiOn rePOrt

The Remuneration Report is set out on pages 19 to 34 of the Annual Report and forms part of this Report.

enVirOnMentAl reGulAtiOn

The Group is not subject to any specific environmental regulation and has not breached any general legislation regarding
environmental matters.

SHAreS unDer PerFOrMAnCe riGHtS

Unissued ordinary shares of nib holdings limited under performance rights at the date of this report are as follows:

Date performance rights granted

Expiry date

27 May 2011

21 December 2011

19 November 2012

1 September 2014

1 September 2015

1 September 2016

Issue price
of shares

Number under
performance right

nil

412,534

392,307

553,236

Shares may be issued or acquired on-market at the election of the Company. It is anticipated the performance rights will be
satisfied through on-market share purchases administered by the nib Holdings Ltd Share Ownership Plan Trust.

No performance right holder has any right under the performance rights to participate in any other share issue of the Company
or any other entity.

nib holdings limitedDirectors’ Report continuedFor the year ended 30 June 2013nOn-AuDit SerViCeS

The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Group are important.

Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services during the year
are disclosed in Note 33 – Remuneration of Auditors.

The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is
satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as
set out in Note 33, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following
reasons:

¾ all non-audit services have been reviewed by the Audit Committee to ensure that they did not impact the impartiality and

objectivity of the auditor.

¾ none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics

for Professional Accountants.

inSurAnCe OF OFFiCerS

During the financial year, the Group paid a premium in respect of a contract insuring the Directors and Officers of the Group
against liability incurred as such a Director or Officer, other than conduct involving wilful breach of duty in relation to the Group, to
the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and
the amount of the premium.

AuDitOr’S inDePenDenCe DeClArAtiOn

A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on
page 18.

CHieF exeCutiVe OFFiCer/CHieF FinAnCiAl OFFiCer DeClArAtiOn

The Chief Executive Officer and the Chief Financial Officer have given the declarations to the Board concerning the
Group’s financial statements required under section 295A(2) of the Corporations Act 2001 and Recommendation 7.3 of the
ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.

rOunDinG OF AMOuntS

The company is of a kind referred to in ASIC Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the Directors’ Report and Financial Report. Amounts in the Directors’
Report and Financial Report have been rounded off to the nearest thousand dollars in accordance with that Class Order.

This report is made in accordance with a resolution of the Directors.

On behalf of the Board,

Steve Crane
Director

Newcastle
23 August 2013

Harold Bentley
Director

2013 annual reportAuditor’s Independence Declaration

For the year ended 30 June 2013

Auditor’s Independence Declaration

As lead auditor for the audit of nib holdings limited for the year ended 30 June 2013, I declare that to
the best of my knowledge and belief, there have been:

no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and

no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of nib holdings limited and the entities it controlled during the period.

John Campion
Partner
PricewaterhouseCoopers

Newcastle
23 August 2013

PricewaterhouseCoopers, ABN 52 780 433 757
PricewaterhouseCoopers Centre, 26 Honeysuckle Drive, PO Box 798, NEWCASTLE NSW 2300
T: +61 2 4925 1100, F: +61 2 4925 1199, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

nib holdings limited

Remuneration Report

For the year ended 30 June 2013

MeSSAGe FrOM tHe BOArD

The Board remains committed to ensuring that nib’s remuneration practices are properly aligned with shareholder value
creation over the short and long term. The Board has taken into account shareholder feedback in continuing to ensure our
practices work to appropriately attract, motivate, reward and retain executives.

Dear Shareholder,

We are pleased to present our 2013 Remuneration Report (Report) which covers the remuneration arrangements for our
Executives for the financial year ending 30 June 2013 (FY13) and summarises some of the changes we are proposing to make for
the coming year. The People and Remuneration Committee (Committee) has continued to monitor our remuneration frameworks,
policies and practices to ensure they align with the Group’s strategic objectives, recent acquisition in New Zealand, planned
growth in adjacent businesses, market expectations and regulatory requirements. Being open to engaging with our shareholders
and taking account of shareholder feedback is an important part of this process.

Financial Year Ended 30 June 2013

As with our 2012 Report, to help shareholders understand how we remunerate our senior executives we have again included
a table (page 24) showing actual remuneration awarded to the Managing Director & Chief Executive Officer (MD/CEO) and
Executives during FY13. This supplements our statutory disclosures shown on page 30.

During the year, we implemented the changes detailed in last year’s Remuneration Report. In summary:

¾ The MD/CEO’s contractual and remuneration arrangements were varied to be more aligned with market benchmarks of
companies of comparable market capitalisation and revenue. Total Fixed Remuneration (TFR) was increased by 8% and
long-term incentives (LTI) to 80% of TFR (from 55%) bringing his overall package in line with the benchmark median. Over the
longer term we plan to move his total remuneration closer to the 75th percentile of the benchmark reflecting the expansion
of the business due to a number of strategic initiatives, including the recent acquisition of TOWER Medical Insurance Limited
(TOWER Medical) in New Zealand. We will again seek shareholder approval at the upcoming AGM for the MD/CEO’s LTI
Grant for the coming year.

¾ The Key Performance Indicators (KPIs) for all Executives included 20% for a measurable leadership component and 80%

linked to:

– Consolidated premium revenue.

– Consolidated underwriting profit.

– International business underwriting profit.

– Net promoter score (NPS), a measure of customer satisfaction.

– Earnings per share (EPS).

¾ 30% of STI payments for the FY13 year to Executives will be deferred into shares for one year to focus Executives on

sustained Group performance. This also serves as a retention mechanism.

¾ The LTI performance hurdles continued to be linked to EPS and TSR.

For the nib Group, FY13 was a year of strong top line growth, disciplined cost control, improved earnings per share, stable return
on equity at 21.6% and success in broadening our business operations into New Zealand. Overall, FY13 saw nib produce a solid
result in a challenging competitive environment and this is reflected in the remuneration of our Executives, notably:

¾ STI awards as a percentage of maximum are determined against set performance indicators were above last year; the MD/

CEO STI award was 41.5% and for the other Executives an average of 45.5% reflecting the overall performance of the Group
over the year (refer to page 26).

¾ The duration of the LTI was altered from three to four years in the FY11 grant in recognition of changing market practice.
This results in there being no vesting of LTI for Executives in FY14, with the FY11 grant eligible for vesting in FY15. Eligible
Executives received shares in September 2012 following vesting of the FY10-FY12 LTI.

¾ The Board amended targets for the key financial indicators to have consideration of the acquisition of TOWER Medical

midway through the financial year. This included assessment of the key New Zealand integration performance metrics in the
leadership component of the MD/CEO and other relevant Executives.

¾ The acquisition of TOWER Medical resulted in three current nib Non-Executive Directors taking on additional roles as

Directors of the Group’s New Zealand subsidiaries. While these Directors serve on these international boards, they will receive
additional fees. These are outlined on page 33.

2013 annual reportMeSSAGe FrOM tHe BOArD continued

The Upcoming Financial Year (FY14)

In light of the growth of nib’s business, the acquisition of TOWER Medical in New Zealand and our longer term strategy
to grow adjacent business we have strengthened our Executive team by creating three new senior Executive roles being
CEO New Zealand, Group Manager Benefits and Provider Relations and Group Manager International and New Business.
For these Executives to achieve an STI award, they will each be required to meet KPIs that are tailored to align with enterprise
value creation.

For the FY14 LTI grants we will make three key changes:

¾ Measuring the TSR performance against the ASX200 (previously ASX300) to reflect the Board’s expectations of performance,

the company’s size and shareholder feedback.

¾ Setting long term EPS hurdles annually (as flagged last year).

¾ Amending the LTI Plan Rules to allow for board discretion to be used in a change of control scenario rather than automatic

vesting.

Shareholders at the 2013 AGM will have the opportunity to vote on the proposed FY14 LTI grant for the MD/CEO and the
proposed increase in the Non-Executive Director (NED) fee pool from $1.1 million to $1.5 million. The increase in the NED pool will
provide sufficient scope for possible Board expansion and ongoing flexibility over the next five years.

We last conducted an independent remuneration review and benchmarking exercise in 2012 and we will do this again in 2014 to
review the Group’s short term and long term incentive programs, and benchmarking our Executive and Non-Executive Director
remuneration to a defined comparator group. The principles in defining the relevant peer group used in our last review are set out
on page 23.

As Chairman of our People and Remuneration Committee, I will continue to consider all aspects of the Group’s remuneration
framework to ensure it meets the expectations of our external stakeholders while continuing to motivate, retain and reward
our employees. We will continue to engage with our key stakeholders regarding remuneration. As always, we welcome your
feedback on our progress.

Yours sincerely,

Christine McLoughlin
People and Remuneration Committee Chairman

nib holdings limitedRemuneration Report continuedFor the year ended 30 June 2013COntentS

Key terms used in this Report

Who this Report covers

Performance drives remuneration at nib

Key features of our remuneration for the financial year
ended 30 June 2013

Our remuneration governance

Actual remuneration received for the financial year
ended June 2013

Executive reward at nib

How reward was linked to performance this year

Terms of Executive contracts

Detailed disclosure of Executive remuneration
(statutory tables)

Non-Executive Director remuneration

Detailed disclosure of Non-Executive remuneration
(statutory tables)

WHO tHiS rePOrt COVerS

KeY terMS uSeD in tHiS rePOrt

FY12

financial year ended 30 June 2012

FY13

financial year ended 30 June 2013

FY14

financial year ended 30 June 2014

Group nib holdings limited consolidated entity

KMP

key management personnel (those Directors and
executives who have responsibility for planning,
directing and controlling the activities of nib, either
directly or indirectly)

KPI

LTI

key performance indicator

long-term incentive

LTIP

long-term incentive plan

NPAT net profit after tax

STI

TFR

TSR

short-term incentive

total fixed remuneration

total shareholder return

This Report presents the remuneration arrangements for nib’s key management personnel.

Executive Director

Mark Fitzgibbon

Managing Director/Chief Executive Officer (MD/CEO)

Other Executives

Michelle McPherson

Deputy Chief Executive Officer/Chief Financial Officer (DCEO/CFO)

Rhod McKensey

Group Manager Australian Residents Health Insurance (GMARHI)

Rob Hennin

Brendan Mills

Chief Executive Officer – New Zealand (CEO NZ) (commenced 6/5/2013)

Chief Information Officer (CIO)

Matthew Henderson

Group Executive Corporate & International Business (GECIB) (to 8/2/2013)

Justin Vaughan

Group Manager Benefits & Provider Relations (commenced 1/8/2013, after the end of the financial year)

Independent Non-Executive Directors

Steve Crane

Harold Bentley

Chairman

Chairman Audit Committee, Chairman Board Audit Risk and Compliance Committee New Zealand,
Director New Zealand subsidiaries

Annette Carruthers

Chairman Risk and Reputation Committee, Director New Zealand subsidiaries

Philip Gardner

Chairman Investment Committee

Christine McLoughlin

Chairman People and Remuneration Committee, Director New Zealand subsidiaries

2013 annual reportPerFOrMAnCe DriVeS reMunerAtiOn At nib

The Remuneration Report shows how nib’s actual performance is linked to the payments to our Executives. Across a range
of metrics nib has performed strongly and consistently since listing and has achieved sustained policyholder growth ahead of
industry average.

Sustained growth in underwriting profit combined with effective capital management has seen strong performance in the key
metrics of EPS and TSR as reflected in the graphs below.

Earnings per share since listing

)
s
p
c

(

e
r
a
h
s

r
e
p
s
t
n
e
c

FY08*

FY09

FY10

FY11

FY12

FY13

* 2008 underwriting result normalised for demutualisation and listing costs.

Total shareholder return since listing
450

nib

All Ords Accumulation Index

S&P/ASX 200 Accumulation Index

S&P/ASX 300 Accumulation Index

275.3%

(2.4%)
(3.7%)
(4.1%)

400

350

300

250

200

150

100

0
Nov 07

Aug 08

Jun 09

Apr 10

Feb 11

Dec 11

Oct 12

Aug 13

Source: IRESS (as at 9 August 2013).

Since nib’s listing on ASX in November 2007, the Total Shareholder Return (TSR) of the S&P/ASX All Ordinaries, S&P/ASX 200
and S&P/ASX 300 indices have performed broadly in line with each other (S&P/ASX All Ordinaries: -4.1%, S&P/ASX 200: -2.4%,
S&P/ASX 300: -3.7%), compared to nib (TSR of 275.3%). Assumes capital returns and dividends are re-invested at the
payout date.

nib holdings limitedRemuneration Report continuedFor the year ended 30 June 2013

KeY FeAtureS OF Our reMunerAtiOn
FOr tHe FinAnCiAl YeAr enDeD
30 June 2013

In FY13, we implemented the changes that we set out
in our FY12 Remuneration Report. We believe that nib’s
remuneration arrangements are now more aligned with
current best practice.

The following changes were made to Executive remuneration
for FY13:

¾ MD/CEO – Increased Total Fixed Remuneration (TFR) by
8%, monetised car allowance ($55,000) and increased
LTI from 55% to 80% of TFR to bring in line with the
benchmark median.

¾ CFO/DCEO – Increased TFR by 4% and monetised car

allowance ($25,000).

¾ GMARHI – Increased TFR by 4%, monetised car allowance
($15,000), increased STI from 40% to 50% of TFR and
increased LTI from 25% to 30% of TFR.

Executives are required to use their personal motor vehicles
for business purposes and our past practice was to reimburse
motor vehicle operating expenses (a car allowance). This
allowance has now been incorporated into Total Fixed
Remuneration and no separate reimbursement of motor
vehicle operating expenses is paid.

The Board determined a pro-rata FY13 STI award for Matthew
Henderson on redundancy based on an assessment of
performance at the time. The STI was fully paid in cash on a
pro-rata basis and represented an estimate at the time paid.

Our reMunerAtiOn GOVernAnCe

The People and Remuneration Committee (Committee)
has been established by the Board and reviews and makes
recommendations to the Board on the remuneration
strategy for the Group. The Committee seeks advice from
external remuneration consultants and specialists.

The Committee has responsibilities in the areas of
remuneration, diversity, human resources strategy, succession
planning and employee engagement. The Committee Charter
is available on the nib website. The Committee is comprised
of independent, Non-Executive Directors only.

In fulfilling its duties, the Committee engages an
independent remuneration consultant every second year
to provide benchmarking of market remuneration levels for
Executives and Non-Executive Directors. No remuneration
recommendations were made by external advisors during
FY13, due to the two year review cycle.

A key element of the benchmarking process is the
identification of the relevant peer group.

Details of the principles used in determining the peer group
when we conducted our last review in 2012 were as follows:

¾ By sector – focus on financial services, healthcare,

consumer discretionary, as well as technology based
services and commercial services. This filter eliminated
sectors such as resources, materials and manufacturing
companies.

¾ Financial metrics:

– Market capitalisation between approximately half and

twice the size of nib.

– Revenues – companies that fell within the above market
capitalisation ranges with revenue more than twice nib’s
revenue were excluded.

¾ This resulted in a peer group comprising 28 companies.

nib will again look to define the most relevant peer group,
in light of our size and business mix, when the FY14 review
is undertaken.

2013 annual reportACtuAl reMunerAtiOn reCeiVeD FOr tHe FinAnCiAl YeAr enDeD 30 June 2013

Actual remuneration paid during FY13 included vesting of the FY10 LTI grant and payment of the FY12 STI. The LTI granted in
FY10 fully vested on achieving EPS performance hurdles. Only a partial FY12 STI was paid reflecting the operating result as
measured against KPIs for the year.

Executive KMP remuneration details prepared in accordance with statutory requirements and accounting standards are
contained in the Detailed disclosure of Executive remuneration (statutory tables) (page 30) of this Report.

The diagram below outlines the remuneration structure for the Executives covered in this Report for FY13.

Total potential reward

Total fixed remuneration
(cash salary,
superannuation
plus benefits

Short-term incentive
(STI), being cash and
deferral into shares (from
FY13 STI plan, previously
shares held in escrow)

Long-term
incentive (LTI) being
performance rights

Total potential reward

Fixed

Variable

The table below shows the key elements of total reward in FY13 as the cash elements actually received by each Executive in
FY13 as well as the value of equity held in escrow (not subject to forfeiture conditions), and equity from former years that vested
in FY13 and which was originally reported under accounting standards in the year it was granted.

Mark Fitzgibbon

Michelle McPherson

Rhod McKensey

Rob Hennin (from 6/5/13)

Brendan Mills4

Matthew Henderson (to 8/2/13)5

STI applicable to the FY12 year
paid in Sept 2012 (FY13)2

Total fixed
remuneration1
$

Cash
$

Shares held in
escrow
$

LTI vested in
FY133
$

671,700

436,800

405,000

44,926

250,000

256,257

101,039

71,564

40,500

–

26,127

63,847

43,303

17,891

10,125

–

500

7,183

485,709

155,239

107,555

–

Total reward
(received or
available)
$

1,301,751

681,494

563,180

44,926

276,627

327,287

2,064,683

303,076

79,002

748,503

3,195,265

1. Total fixed remuneration comprises Cash Salaries and fees and superannuation.
2. FY12 STI paid in the FY13 year.
3. Value of shares issued during the year on exercise of performance rights. Reflects a movement in share price from $1.13 (at grant date) to $1.60 (at vesting)

at 100% vesting.

4. FY12 Cash STI paid in FY13 for Brendan Mills in relation to his position as Chief Information Officer was $2,000.
5. Includes FY13 STI based on estimate at time of redundancy and fully paid in cash.

nib holdings limitedRemuneration Report continuedFor the year ended 30 June 2013exeCutiVe reWArD At nib

Fixed remuneration

nib’s Executive reward is designed to attract, reward and
motivate Executives, as well as align their interests with
shareholders.

Fixed remuneration for Executives is determined with
reference to a benchmarking process and consideration
of the expertise of the individual in the role.

The objective of Executive remuneration arrangements is to
ensure that nib’s remuneration practices are properly aligned
with shareholder value creation over the short and long term,
and that these practices work to appropriately motivate,
reward and retain executives.

The remuneration framework provides a mix of fixed and
variable remuneration with a blend of short-term and
long-term incentives. There are three components of total
remuneration:

¾ fixed remuneration, comprising base remuneration

package, benefits and superannuation;

¾ short-term incentives based on predetermined Key

Performance Indicator (KPI) targets established by the
Board and an assessment of leadership; and

¾ longer-term incentives based on predetermined TSR
and EPS performance established by the Board.

Our remuneration mix

The FY13 target remuneration mix was as follows:

33%

20%

17%

15%

Fixed remuneration includes cash salary, superannuation and
benefits. The fixed remuneration may be salary packaged at
no additional cost to the company.

Short-term incentives for the financial year
ended 30 June 2013

20% referable to a leadership assessment for each
executive and 80% of the STI was determined with
reference to verifiable financial and NPS (customer
advocacy) performance.

The Board is responsible for assessing the performance of
the MD/CEO and the MD/CEO is responsible for assessing
the performance of the other executives (with approval
of the resulting STI awards by the Board following a
recommendation from the Committee).

The actual level of STI paid to each Executive is determined
at the end of the financial year based on the Executives’
achievement of specific KPIs and an annual performance
review. The cash component of the bonuses is payable on
or before 15 September each year in respect of the prior
financial year.

17%

24%

Each Executive has a target STI opportunity. From FY13,
30% of the awarded STI each year must be deferred into
shares for one year.

19%

21%

18%

100%

y
t
i
n
u
t
r
o
p
p
o
n
o
i
t
a
r
e
n
u
m
e
r

t
e
g
r
a
t

90%

80%

70%

60%

50%

40%

30%

20%

10%

42%

50%

56%

61%

MD/CEO

DCEO/CFO

GMARHI

CEO NZ

CIO

GECIB

Longer-term performance incentives opportunity

Short-term performance incentives opportunity – deferred into shares for 1 year

Short-term performance incentives opportunity – cash

Base remuneration package and benefits

Variations in target remuneration mix between the executive
roles are reflective of the responsibilities of the roles.

FY13 Maximum
potential STI as a
% of TFR

Proportion of
actual FY13 STI to
be deferred into
shares for 1 year

60%

50%

40%

30%

Mark Fitzgibbon

Michelle McPherson

Rhod McKensey

Rob Hennin1

Brendan Mills

Matthew Henderson2

1. FY13 STI will be paid as part of a 14 month FY14 STI
2. FY13 STI paid on redundancy for Matthew Henderson was awarded 100%

as cash. No portion was issued as performance shares.

The specific KPIs and weighting for FY13 for the MD/CEO and
DCEO/CFO which constitutes 80% of their total STI are:

KPI

Consolidated premium revenue

Consolidated underwriting profit

International business
underwriting profit

NPS

EPS

Mark
Fitzgibbon
(MD/CEO)

Michelle
McPherson
(DCEO/CFO)

10%

50%

10%

20%

10%

50%

10%

20%

2013 annual report

exeCutiVe reWArD At nib continued

Short-term incentives for the financial year
ended 30 June 2013 continued

The weighting for each of the other KMP has been
determined by the MD/CEO and approved by the Committee.

The short-term performance targets for verifiable financial
performance nominate three levels of award (25%, 75%,
100%) with pro-rata awards occurring where results fall
between these levels.

Following the acquisition of TOWER Medical during the
year, Rob Hennin was appointed as Chief Executive Officer,
New Zealand on 6 May 2013. Given less than two months
remaining in the FY13 year at the date of appointment, it
was determined that the first STI measurement period for
Mr Hennin would be from 6 May 2013 to 30 June 2014.

The percentage of the maximum STI that was awarded and
the percentage that was unrealised is set out below. A more
detailed description of performance against STI KPIs is
shown on page 28 in How reward was linked to performance
in FY13.

were updated on 25 July 2013 to move away from automatic
vesting for LTIP offers from FY14 onwards.

Participation in the plan is at the Board’s discretion and no
individual has a contractual right to participate in the plan or
to receive any guaranteed benefits.

Recognising that performance rights have been awarded in
each year under the LTIP, it should be noted that the change
made in 2010 saw the duration of the LTI move from three
years to four years and as a consequence there will be no
vesting event in FY14.

Performance rights from 1 July 2010

Significant changes made to the LTIP from 1 July 2010 were:

¾ introducing of a relative total shareholder return (TSR)

which applies to half of the LTI allocation;

¾ extending the performance period to four years; and

¾ the requirement for 50% of the LTI to have a two year
escrow period which extends beyond termination.

The performance rights will vest in accordance with the
achievement of the following vesting conditions:

FY13 STI Bonus

FY12 STI Bonus

Vesting Condition 1

Vesting Condition 2

50% of the performance rights
(Tranche 1)

50% of the performance rights
(Tranche 2)

Total shareholder return targets
(TSR Hurdle) for the relevant
performance period are met

Earnings per share growth
targets (EPS Hurdle) for the
relevant performance period
are met

TSR Hurdle (Tranche 1)

The TSR Hurdle applies to half of the LTI allocation. The TSR
Hurdle measures the growth in the price of nib securities plus
nib cash distributions and compares this to the shareholder
returns from the peer group of companies. In order for the
Tranche 1 performance rights to vest, the TSR of nib will
be compared to companies in the S&P/ASX 300 (the peer
group) over the performance period. The peer group will be
the S&P/ASX 200 for grants from 1 July 2013 to reflect the
Board’s expectations of performance, the company’s size and
shareholder feedback.

The percentage of Tranche 1 performance rights that vest is
determined as follows:

nib’s TSR performance compared
to the relevant peer group

Performance Tranche 1
performance rights vesting

> = 75th percentile

100%

> = 50th percentile to 74th
percentile

Pro-rata straight line vesting
between 50% and 100%

< 50th percentile

Awarded Forfeited Awarded Forfeited
%

Mark Fitzgibbon

Michelle McPherson

Rhod McKensey

Brendan Mills

41.5%

54.4%

42.8%

Matthew Henderson1

43.5%

58.5%

45.6%

57.3%

56.5%

42.2%

37.7%

33.8%

30.5%

57.8%

62.3%

66.2%

69.5%

44.7% 55.3% 39.6% 60.4%

1. Based on estimate at time of redundancy and fully paid in cash.

Long-term incentives for the financial year
ended 30 June 2013

LTIs focus executives on sustained EPS and TSR
performance. LTIs granted in FY10 fully vested in
September 2012 as performance hurdles were met.

The nib LTIP is designed to align the interests of executives
and shareholders and to assist nib in the attraction, motivation
and retention of executives.

LTIP participants are granted performance rights which enable
the Executive to acquire shares in nib for nil consideration if
performance conditions are met and the employees are still
employed by nib at the end of the vesting period.

The vesting date may be accelerated at the Board’s
discretion in the event of death of a participant, cessation of
employment for other reasons; including total and permanent
disablement, redundancy and retirement. The vesting date
will also be accelerated on winding up, delisting, change of
control and reconstruction or amalgamation. The LTIP rules

nib holdings limitedRemuneration Report continuedFor the year ended 30 June 2013EPS Hurdle (Tranche 2)

The EPS Hurdle applies to 50% of the LTI allocation. Vesting
of performance rights in relation to the FY11 and FY12 LTIP is
subject to nib holdings limited EPS hurdle as follows:

EPS Hurdle:
CAGR from
base EPS

Base EPS

25% CAGR

20% CAGR

15% CAGR

10% CAGR

Nil to less than
10% CAGR

Percentage of
performance
rights vesting

FY11-FY14
LTIP

FY12-FY15
LTIP

100%

75%

50%

25%

12.4 cps

30.3 cps

25.7 cps

21.7 cps

18.2 cps

13.7 cps

33.4 cps

28.4 cps

23.9 cps

20.0 cps

nil

For the purpose of the calculation, 25% to 50% will be discrete thresholds, with
performance above the 50% entitlement calculated on a pro rata basis to a
maximum entitlement of 100%

For the FY13-FY16 LTIP the EPS CAGR hurdles were updated
to reflect the strategy and maturity of the business. As flagged
last year the EPS hurdles and performance levels for future
LTI grant will be set annually.

EPS Hurdle:
CAGR from base EPS

Percentage of
performance
rights vesting

FY13-FY16
LTIP

Base EPS

15% CAGR

12.5% CAGR

10% CAGR

7.5% CAGR

Nil to less than 7.5% CAGR

100%

75%

50%

25%

14.8 cps

25.8 cps

23.6 cps

21.6 cps

19.7 cps

nil

For the purpose of the calculation, 25% to 50% will be discrete thresholds, with
performance above the 50% entitlement calculated on a pro rata basis to a
maximum entitlement of 100%

If vesting conditions are met, the performance rights will
vest on 1 September following the end of the measurement
period. On the vesting date, executives who hold vested
performance rights will be either issued or transferred
shares in nib for each vested performance right. There is no
re-testing of performance.

One half of any shares awarded will be required to be held
in escrow for a period of two years even if termination of
employment occurs during that period.

The graph below shows the EPS performance of nib since listing, and demonstrates how challenging the future EPS targets are
for grants of LTI made in FY11, FY12 and FY13, and were updated to reflect the strategy and maturity of the business.

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

)
s
p
c
(

S
P
E

25% EPS
CAGR

15% EPS
CAGR

FY12 – FY15 LTIP

FY13 – FY16 LTIP

12.4

13.7

14.8

15.3

FY11 – FY14 LTIP

5.2

4.7

FY08 – FY10 LTIP
75% vested

FY09 – FY11 LTIP
100% vested

FY10 – FY12 LTIP
100% vested

2008*

2009

2010

2011

2012

2013

2014

2015

2016

25% vesting range

75% – 100% vesting range on a pro-rata basis

50% – 75 % vesting range on a pro-rata basis

EPS

There is no vesting event in respect of the FY13 result reflecting the move from three year LTI targets to four year LTI targets.

2013 annual report

HOW reWArD WAS linKeD tO PerFOrMAnCe tHiS YeAr

The components of remuneration that are linked to performance are the STI and the LTI plan. 80% of the STI award is determined
with reference to verifiable financial and NPS performance and 20% referable to a leadership assessment for each Executive.

The following table shows key performance indicators for the Group over the last five years:

Financial results

Consolidated premium revenue

Consolidated underwriting profit

International business underwriting profit

NPS

EPS

ROE

Share price at year end

Dividend per share

Dividend payout ratio

cps

2013
$m

2012
$m

2011
$m

1,290.4

1,123.8

1,007.8

73.8

14.7

16.9

15.3

21.6%

2.13

10.0

65.0%

70.7

6.1

12.4

14.8

21.7%

1.50

9.25

60.0%

61.5

1.7

–

13.7

16.5%

1.45

13.0

92.7%

2010
$m

901.4

47.1

0.0

–

12.4

16.3%

1.25

7.0

2009
$m

829.5

40.2

0.0

–

4.7

6.6%

0.92

7.4

56.4%

154.8%

Results against verifiable financial performance KPIs are detailed in the table below.

KPI

Result

Consolidated
premium revenue

Consolidated
underwriting profit

FY13 consolidated premium revenue up 14.8% on FY12.

No award for this KPI with arhi result impacted by higher than forecast dental claims, an unsatisfactory
1 April 2012 price increase and a one-off state levy payment and iwhi result impacted by lower than forecast
“457 visa” intake.

International business
underwriting result

No award for this KPI with International Workers Health Insurance result impacted by lower than forecast
“457 visa” intake.

NPS

EPS

Award reflects the solid progress we have made in creating a customer-focused culture.

Reward reflects profitability performance.

The graph below illustrates the relationship between payments made under the STI plan and growth in the underwriting result
and reflects lower STI awards as growth in the underwriting result has slowed in the FY12 and FY13 years.

STI payable in respect
of financial year ($000)

Underwriting
result ($m)

800.0

700.0

600.0

500.0

400.0

300.0

200.0

100.0

0.0

2008*

2009

2010

2011

2012

2013

STI

Underwriting result

* 2008 underwriting result normalised for demutualisation and listing costs

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

nib holdings limitedRemuneration Report continuedFor the year ended 30 June 2013

terMS OF exeCutiVe COntrACtS

The Board are progressively migrating nib Executives from historic fixed term contracts to open contracts in line with market
best practice. The one remaining Executive on a fixed term contract will be migrated to an open contract during FY14.

Executive contracts summarise employment terms and conditions, including remuneration arrangements and compensation.

The table below provides a summary of the agreements.

Service agreement
effective

1 July 2010

4 March 2011

6 May 2013

1 June 2012

Term of contract

Termination provision

Open contract with notice period

3 years ending 30 June 2014

Open contract with notice period

The agreement may be
terminated early by nib health
funds limited giving notice with
immediate effect or by the
relevant executive giving three
months notice.

Mark Fitzgibbon (MD/CEO)

Michelle McPherson (DCEO/CFO)

Rhod McKensey (GMARHI)

Rob Hennin (CEO NZ)

Brendan Mills (CIO)

Termination payments

Up until 30 June 2012, Executives were entitled to a payout of the remaining term of their service agreements upon termination
(other than for gross misconduct), up to a maximum of 12 months total fixed remuneration. For those Australian Executives with
open contracts, the Group may terminate the Executive’s contract with 12 months written notice and may make a payment in
lieu of all or part of the notice period. In the case of a New Zealand Executive, the Group may terminate the Executive’s contract
with nine months written notice and may make a payment in lieu of all or part of the notice period.

The Executive may also receive the following benefits upon termination:

¾ a pro rata STI payment based on the period of the financial year during which the Executive worked and the Board’s
assessment of the Executive’s performance against the key performance indicators as at the date of termination.

¾ the Board has discretion to determine that all or a portion of unvested performance rights of a participant of the LTIP are to be

vested upon termination.

The Group received member approval at the 2011 Annual General Meeting of the Group for the payment of termination benefits
which may exceed the 12 month salary limit on termination benefits under the Corporations Act 2001. The Board has since
determined that this approval will only be relied upon for people who were Executives at the date of approval. The only current
Executives this approval would be applicable to are Mark Fitzgibbon, Michelle McPherson and Rhod McKensey.

2013 annual reportn
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nib holdings limitedRemuneration Report continuedFor the year ended 30 June 2013

nOn-exeCutiVe DireCtOr reMunerAtiOn

Fees and payments to Non-Executive Directors reflect the
responsibilities of the position, market comparisons, and
the objective of the company to attract highly skilled and
experienced Non-Executive Directors. All Non-Executive
Directors are required to hold shares in the company to
align with shareholders’ interests.

Non-Executive Director fees

Fees and payments to Non-Executive Directors reflect the
responsibilities of the position and market comparisons.
Some nib holdings Directors are also paid fees for sitting on
the New Zealand subsidiary boards which includes additional
work unique to that regulatory environment and additional
travel. Non-Executive Directors’ fees are reviewed annually
by the Committee and approved by the Board. Every second
year there is an external review, last done in 2012.

Non-Executive Directors’ fees are determined within the
$1,100,000 aggregate Directors fee pool limit, which was
approved by shareholders in September 2007. Directors
fees and superannuation are paid out of this pool. Additional
compensation of travel allowances, non-monetary benefits
and retirement benefits are not included in this pool.

It is proposed that the Non-Executive Director fee pool
increase from $1.1 million to $1.5 million to provide sufficient
scope for possible board expansion and flexibility over the
next five years. The 2013 AGM will provide shareholders with
the opportunity to vote on this proposal.

The following fees (inclusive of superannuation) for the
Australian boards and committees have applied:

2013
$

2012
$

Base fees

Chairman

Other Non-Executive Directors

215,000

93,500

196,270

89,871

Additional fees*+

Audit Committee

Chairman

Member

Investment Committee

Chairman

Member

Risk and Reputation
Committee

Chairman

Member

People and Remuneration
Committee

Chairman

Member

22,000

11,000

15,000

9,000

22,000

11,000

22,000

11,000

20,600

10,330

20,600

10,330

20,600

10,330

20,600

10,330

* The Chairman of the Board does not receive additional fees for involvement in

committees.

+ No fees are paid to any Non-Executive Director for membership of the

Nomination Committee.

The following fees (inclusive of superannuation) for the
New Zealand boards and committees have applied:

2013
$

2012
$

NZ Base fees

Chairman

Member

NZ Board, Audit, Risk and
Compliance Committee

Chairman

Member

56,693

32,369

8,156

–

From 1 July 2012, Directors’ fees were increased by an
average of 4% and Chairman’s fee was increased to
$215,000.

Refer to Principle 2 in the Corporate Governance Statement
for committee membership.

Share ownership by Non-Executive Directors

Directors are required to hold a minimum of 50% of the total
annual base Director’s fee to be accumulated within three
years of appointment based on the share price and fees
at the date of joining the Board. All current Non-Executive
Directors comply with this requirement as at 30 June 2013,
with four Non-Executive Directors, including the Chairman,
holding shares with a value of more than 100% of the total
annual base Director’s fee.

Retirement allowances for Directors

There are no retirement allowances for Non-Executive
Directors other than for Directors appointed by nib health
funds limited before 24 November 2005.

Annette Carruthers is the only current Non-Executive Director
that is eligible for a retirement allowance.

Annette Carruthers is entitled to a lump sum retirement. The
benefit is calculated based on 80% of the average Director’s
fee (paid from any company in the Group) for the last three
years multiplied by a factor based on years of service. The
factor based on years of service was frozen at 24 November
2005. The factor for A Carruthers is 0.71.

At 30 June 2013, the following retirement benefits were
provided for:

Annette Carruthers

$68,624

2013 annual report

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nib holdings limitedRemuneration Report continuedFor the year ended 30 June 2013

Corporate Governance Statement

For the year ended 30 June 2013

This Corporate Governance Statement for nib holdings limited
(nib) sets out details of nib’s corporate governance practices
for the year ended 30 June 2013 (FY13).

The nib Board and management are committed to achieving
and demonstrating the highest standards of corporate
governance and ensuring compliance with the ASX Corporate
Governance Council’s Corporate Governance Principles and
Recommendations.

Further information about nib’s governance policies and
practices are available from the corporate governance
information section on the nib shareholder website,
nib.com.au/shareholders

PrinCiPle 1 – lAY SOliD
FOunDAtiOnS FOr MAnAGeMent
AnD OVerSiGHt

1.1 Functions reserved to the Board and

delegations to management.

The nib Board has a number of important responsibilities
under the Corporations Act, ASX Listing Rules and nib’s
Constitution.

The responsibilities of the nib Board and management are
identified in the following ways:

Board Charter

The nib Board is responsible for the governance of the nib
group. The Board Charter sets out the role and responsibilities
of the Board, the responsibilities that have been delegated to
committees of the Board or to management, as well as the
membership and the operation of the Board.

Specifically, the Charter reserves the following specific
responsibilities to the Board:

¾ Strategy – overseeing the development of nib’s corporate

strategy, reviewing and approving strategy plans and
performance objectives consistent with the corporate
strategy, reviewing the assumptions and rationale
underlying the strategy plans and performance objectives,
and monitoring the implementation of the strategy plans.

¾ Oversight of management – appointment and (if

appropriate) removal of senior executives, including the
Chief Executive Officer (CEO), the Chief Financial Officer
and Company Secretary, approving senior executive
remuneration policies and practices and monitoring
performance.

¾ Shareholders – facilitating the effective exercise of

shareholder rights, and effective communication with
shareholders and reporting to shareholders.

¾ Other stakeholders – establishing and monitoring

policies governing nib’s relationship with other
stakeholders and the broader community.

¾ Ethics – actively promoting ethical decision making, and
establishing and maintaining a Code of Conduct to guide
nib Directors and employees in meeting standards of
practice necessary to maintain confidence in nib’s integrity.

¾ Oversight of financial and capital management
– reviewing and approving nib’s annual and half yearly
financial reports, establishing and overseeing nib’s
accounting and financial management systems, capital
management and the dividend policy.

¾ Compliance and risk management – establishing
and overseeing nib’s system for compliance and risk
management.

The Board Charter is available on our website, nib.com.au.

Board Committee Charters

The nib Board currently has five standing committees
(Audit Committee, People and Remuneration Committee,
Nomination Committee, Risk and Reputation Committee and
the Investment Committee). The Board has delegated certain
responsibilities to these standing committees. The details of
their responsibilities are set out in the committee charters.

The committee charters are available on our website,
nib.com.au.

Following the acquisition of TOWER Medical Insurance
Limited (TOWER Medical) in November 2012, three current
Non-Executive Directors of nib were appointed as Directors of
the Group’s New Zealand subsidiaries.

The governance requirements for the New Zealand operations
require that TOWER Medical’s Board comprises a majority
of independent Non-Executive Directors, including one
New Zealand resident.

A further governance requirement for TOWER Medical is that
TOWER Medical establish an audit committee. Accordingly,
the Board of TOWER Medical has one standing committee,
the Board Audit, Risk and Compliance Committee (BARCC).
The details of the responsibilities of BARCC are detailed in
its charter.

Delegation of Authority

The Managing Director & CEO of nib is responsible for the day
to day management of the business and its operations, with
the Board delegating authority to the Managing Director &
CEO to perform this function. The Managing Director & CEO
has, in turn, approved sub delegations of authority for nib
management. Any matters that fall outside of the delegations
of authority must be brought to the Board for approval.

1.2 nib has, in this statement, set out the

process for evaluating the performance
of senior executives.

In accordance with clause 2.3 of the Board Charter, the Board
regularly monitors the performance of senior executives
and the implementation of strategy against measurable and
qualitative indicators. The performance of the Managing
Director & CEO is evaluated and assessed by the Board,
assisted by the People and Remuneration Committee, each
year. This process was followed in FY13.

2013 annual report ¾ The Managing Director & CEO conducts performance
reviews of nib senior executives (key management
personnel) by comparing performance against agreed
measures, examining the effectiveness and quality of the
individual, both as a divisional leader and in their individual
capacity, and assessing whether various expectations of
stakeholders have been met. This process was followed
for FY13.

1.3 nib provides the information indicated
in the Guide to reporting on Principle 1.

nib complies with Recommendations 1.1, 1.2 and 1.3.

The following information is available on our website,
nib.com.au:

¾ Board Charter.

¾ Committee Charters for the Audit Committee, People
and Remuneration Committee, Risk and Reputation
Committee, Nomination Committee and Investment
Committee.

PrinCiPle 2 – StruCture tHe BOArD
tO ADD VAlue

2.1 nib’s Board comprises a majority of

independent Directors.

There are currently six Directors on nib’s Board; five Non-
Executive Directors, all of whom are independent, and one
Executive Director, being the nib CEO, who is also appointed
as the Managing Director. The Board Charter requires that all
Directors should bring an independent judgment to bear on
all Board decisions.

At the date of this report, the Board comprises:

Mr Steve Crane (Chairman; Non-Executive Director/
independent)
Appointed: 28 September 2010 / Appointed as
Chairman: 1 October 2011

Mr Mark Fitzgibbon (Managing Director & CEO)
Appointed: 28 May 2007

Mr Harold Bentley (Non-Executive Director/Independent)
Appointed: 7 November 2007

Dr Annette Carruthers (Non-Executive Director/Independent)
Appointed: 20 September 2007

Mr Philip Gardner (Non-Executive Director/Independent)
Appointed: 28 May 2007

Ms Christine McLoughlin (Non-Executive Director/
Independent)
Appointed: 20 March 2011

The Director’s profiles appear at page 14 of this Annual Report.

Directors’ Independence

In accordance with the ASX Corporate Governance Principles
and Recommendations, the Board is comprised of a majority
of independent, Non-Executive Directors. As noted previously,
the Board Charter requires that all Directors bring an
independent judgment to bear on all Board decisions.

The Board has adopted specific principles in relation to
Directors’ independence, which are set out in the Board
Charter. These state that, when determining independence,
a Director must be a Non-Executive Director and the Board
should consider whether the Director:

¾ is free from any business or other relationship which could,
or could reasonably be perceived to, materially interfere
with the Director’s independent exercise of their judgment;

¾ is a substantial shareholder of nib or an officer of,

or otherwise associated directly with, a substantial
shareholder of nib;

¾ is, or has been employed in, an executive capacity by

nib or any other group member within three years before
commencing to serve on the Board;

¾ within the last three years, has been a principal of a

material professional adviser or a material consultant to
nib or any other group member, or an employee materially
associated with the service provided, is a material supplier
or customer of nib of any other group member, or an
officer of or otherwise associated directly or indirectly with
a material supplier or customer; or

¾ has a material contractual relationship with nib or another

group member other than as a Director of nib.

A professional adviser, consultant, supplier or customer will
be considered to have a material contractual relationship with
nib if:

¾ from the perspective of a nib Director, the business

relationship is significant (directly or indirectly) to their own
circumstances.

¾ from the perspective of nib, the relationship is one that

has the potential, if disrupted, to have a significant impact
on nib’s business operations as assessed by the other
Directors.

On appointment, each Director is required to provide
information to the Board to assess their independence as
part of their consent to act as a Director. The Board regularly
assesses the independence of each Director in light of the
interests disclosed by them. Each independent Director must
provide the Board with all relevant information and keep this
information up to date.

The Board has determined that all current Non-Executive
Directors, including the Chairman, are independent and free
of any relationship which may conflict with the interests of nib
and the Group in accordance with the approved criteria for
assessing independence.

nib holdings limitedCorporate Governance Statement continuedFor the year ended 30 June 2013Conflicts of interest

Directors must avoid conflicts of interest except in those
circumstances permitted by the Corporations Act 2001.
Directors are required to disclose any conflicts of interest
in matters considered by the Board and, unless the Board
resolves otherwise, must not participate in Board discussions
or vote on the matter.

2.5 nib discloses in its Nomination Charter

and in this statement, the process for
evaluating the performance of the Board,
its committees and individual Directors.

The Nomination Charter sets out the responsibilities,
composition, structure, membership requirements and
procedures for appointing members to the Board.

2.2 nib’s Chairman is an independent Director.

Selection and appointment of Directors

The nib Board Charter requires the Chairman to be an
independent Non-Executive Director. Mr Steve Crane, who
is an independent Non-Executive Director, was appointed
Chairman of nib on 1 October 2011.

The Chairman’s specific responsibilities include (as set out in
the Charter):

¾ leading the Board in reviewing and discussing Board

matters;

¾ chairing Board meetings and other shareholder meetings;

¾ ensuring the efficient organisation and conduct of the

Board’s function;

¾ briefing all Directors in relation to issues arising at Board

meetings;

¾ facilitating effective contribution by all Directors and

monitoring Board performance;

¾ overseeing that membership of the Board is skilled and

appropriate for nib’s needs;

¾ promoting constructive relations between Board members

and between the Board and management;

¾ ensuring that independent Directors meet separately
at least annually to consider, among other things,
management’s performance; and

¾ reviewing corporate governance matters with the

Company Secretary and reporting on those matters to
the Board.

2.3 At nib, the role of the Chairman and CEO
is not exercised by the same individual.

As previously noted, Mr Steve Crane is the Chairman and
Mr Mark Fitzgibbon is the Managing Director & CEO.

2.4 The nib Board has established a

Nomination Committee.

The Nomination Committee is a standing committee of the nib
Board. The Nomination Committee includes all Non-Executive
Directors. The Nomination Committee assists the Board and
makes recommendations on the selection and appointment
of directors, the process of evaluating Director performance,
the composition of the Board, and succession planning for
the Board. The Committee ensures that Directors bring a
variety of perspectives, experiences, skills and diversity in the
best interests of nib.

When a vacancy on the Board arises, the Nomination
Committee identifies candidates with appropriate skills,
experience and expertise and makes recommendations
to the Board. When the Board considers that a suitable
candidate has been found, that person is appointed by the
Board, either to fill a casual vacancy or as an addition to the
Board, in accordance with nib’s Constitution. The Director
must stand for election by shareholders at the next Annual
General Meeting (AGM).

Non-Executive Directors receive a letter of appointment
setting out the terms and conditions of their appointment.
Directors are expected to participate in any induction or
orientation programs on appointment, and any continuing
education or training arranged for them.

Appointment and re-election of Directors

At each AGM, there must be an election of Directors and
at least one Director (excluding the Managing Director)
must retire, including any Director who has been appointed
since the previous AGM. Retiring Directors are eligible for
re-election. A Director must retire from office at least every
three years.

Before each AGM, the Board will assess the performance of
any Director standing for re-election and will determine their
recommendation to shareholders on the re-election of the
Director. The Board (excluding the Chairman) conducts the
review of the Chairman.

Evaluation of Board and committee performance

The Board undertakes an annual self-assessment of its
collective performance, the performance of the Chairman,
individual Directors and of its committees. The performance
assessment process conducted in FY13 was conducted
in-house. The Chairman formally discusses the results of
the review with the individual Directors. At that meeting,
the Chairman and the individual Director also discuss the
effectiveness of the Board and its contribution to the Group,
Board discussion, and the composition of the Board and
committees.

Each of the Board’s committees reviews their performance
from time to time, or whenever there are major changes to
the committee structure of nib. The Audit Committee, People
and Remuneration Committee and Risk and Reputation
Committee all undertook a self-assessment in 2013. As part
of this exercise, each committee also sought the input of
management and external stakeholders who regularly attend
committee meetings.

2013 annual report3.2 nib has a Diversity Policy in place and

discloses the Diversity Policy on our
website, nib.com.au. The Diversity Policy
includes the requirement for the Board
to establish measurable objectives
for achieving gender diversity and for
the Board to assess annually both the
objectives and progress in achieving them.

nib’s Diversity Policy sets out our approach to diversity in
the workplace and provides a framework to achieve nib’s
diversity goals.

The Board and management believe that nib’s commitment to
this policy contributes to achieving nib’s corporate objectives
and embeds the importance and value of diversity within the
culture of nib.

nib believes that the promotion of diversity on the Board, in
senior management and within all levels of the nib Group:

¾ broadens the pool for recruitment of high quality directors

and employees;

¾ is likely to support employee retention;

¾ through the inclusion of a variety of skill-sets, is likely to
encourage greater innovation and improve the quality of
decision-making, productivity and teamwork;

¾ enhances customer service and market reputation through
a workforce that respects and reflect the diversity of our
customers; and

¾ is in line with best practice corporate governance

responsibilities.

Independent professional advice and access to
company information

Following consultation with the Chairman, Directors and
Board committees have the right, in connection with their
duties and responsibilities, to seek independent professional
advice at nib’s expense and have the right of access to all
relevant information in relation to nib and to senior executives.
At the time of appointment, each Director enters into a Deed
of Access, Insurance and Indemnity with nib.

2.6 nib provides the information indicated in
the Guide to reporting on Principle 2.

nib complies with Recommendations 2.1, 2.2, 2.3, 2.4, 2.5
and 2.6.

The following information is available on our website,
nib.com.au:

¾ Board Charter.

¾ Committee Charters for the Audit Committee, People
and Remuneration Committee, Risk and Reputation
Committee, Nomination Committee and Investment
Committee.

PrinCiPle 3 – PrOMOte etHiCAl AnD
reSPOnSiBle DeCiSiOn MAKinG

All employees, including the Board and senior management,
are expected to uphold the highest levels of integrity and
professional behaviour in their relationships with the Group’s
stakeholders. A summary of the Group’s core codes and
policies, which apply to all employees, are set out in this
Corporate Governance Statement. These policies and codes
are available on the nib website, nib.com.au.

3.1 nib has a Code of Conduct in place

and discloses the code on our website,
nib.com.au.

nib has adopted a Code of Conduct which applies to all
Directors, officers, employees, contractors, consultants and
associates of nib and all entities within the Group. The Code
of Conduct sets out ethical standards and rules of the Group
and provides a framework to guide compliance with legal
and other obligations to stakeholders. The Code of Conduct
is reviewed annually and was last amended on 25 July 2013.
The Code of Conduct is available on our website, nib.com.au.

nib holdings limitedCorporate Governance Statement continuedFor the year ended 30 June 20133.3 The nib Board has set measurable objectives for achieving gender diversity in accordance

with its Diversity Policy and discloses progress towards achieving them.

The Board of nib is committed to achieving diversity in accordance with its Diversity Policy. Set out are the measurable objectives
set by the Board for achieving gender diversity.

Objective

Details

Timeframe

Results as at 30 June 2013

Recruitment
and selection

Ongoing

Ensure that employees and Directors
are selected from diverse candidate
pools. A shortlist will be compiled for
all management, executive and Board
positions with at least one serious female
candidate to be present on every shortlist. If
this is not possible, there must be objective
reasons to support this. Candidates will be
interviewed by a diverse group of people
through the process.

Our recruitment team are focused on providing
guidance to hiring managers throughout the process to
ensure diversity is considered with particular focus on
Management level positions.

Upon review of the recruitment statistics for the quarter,
it shows that we have had higher levels of female
applicants, females interviewed and females successful
in positions excluding team leader and manager levels.

An equal amount of males and females were successful
at the team leader and manager level.

At the executive level in the period since the last
annual report to the date of this report, two executive
appointments have been made with the Chief Executive
Officer New Zealand commencing on 6 May 2013 and
the Group Manager Benefits and Provider Relations
commencing on 1 August 2013. The recruitment process
for these two positions saw the following demographics:

Chief Executive Officer and Group Manager Benefits and
Provider Relations

¾ Overall Candidates – 13 male (86%), two female (14%)

– 15 in total

¾ Shortlist for interview – four male (80%), one female

(20%)

Flexible work
practices

Develop a flexible work practices policy
and engender a culture of support for
flexible work practices where possible and
required.

June 2012

The Flexible Work Practices Policy was developed and
rolled out to the business during FY13.

Further to the formal Individual Flexible Arrangements
(IFAs) in place with employees, a number of strategies
are in place to support flexible working arrangements
for employees including:

¾ Working from home either on a permanent or

intermittent basis.

¾ Flexible working hours (start/finish time) to cater for
child care responsibilities, sporting commitments,
changes in family circumstances etc.

¾ Tertiary study and exam leave.
¾ Shift and rostering preferences.
¾ Gradual return from parental leave.

Educate managers on strategies for
supporting and managing flexible work
arrangements successfully.

October
2012

Rollout of the Flexible Work Practices Policy included
education for managers on supporting and managing
flexible work arrangements successfully.

2013 annual reportMeasurable objectives set by the Board for achieving gender diversity continued

Objective

Details

Timeframe

Results as at 30 June 2013

Representation Set goals, timeframes and succession

June 2016

plans to improve the number of women in
management roles in the business. At a
minimum:

¾ 40% of manager and team leaders;
¾ 30% of business unit managers;
¾ 30% of Executives;
¾ Two Non-Executive Directors; and
¾ One member of the People and

Remuneration Committee.

Development
and Succession

Introduce mentoring, coaching and
succession programs that support and
encourage women to expand their skills as
part of their professional development and
to prepare them to take on management or
executive roles.

¾ 59% of managers and team leaders are women;
¾ 28% of business unit managers are women;
¾ 20% of Executives are women;
¾ Two female Non-Executive Directors on the Board; and
¾ Two female Non-Executive Directors are on the

People and Remuneration Committee.

The strengthening of our executive resulting in one
additional Executive during FY13 and two further
Executives in FY14 will result in nib not achieving the
target of 30% of executives being female by June 2014.

The recruitment process for these roles adhered to
our approach set out under recruitment and selection,
however based on merit the female candidates were not
the preferred candidates.

The Board remains committed to this target for executives
and has identified a revised timeframe of June 2016.

June 2012 With the introduction of formal succession planning
we have identified a number of women as potential
successors for key management positions. We are
currently assessing and/or implementing development
plans for these employees.

A formal mentoring program was rolled out in 2010
and continues on a more informal basis. Individual
performance plans include mentoring as a development
tool. We are looking at how we can continue to support
mentoring with a review and update of formal mentoring
program.

Employee professional career development is discussed
and documented within their individual performance
review and plans and we continue a number of programs
on our Learning Curriculum to help develop employees
and source external training to develop specific skills and
knowledge.

Employees also have access to Education Assistance
which provided financial support towards formal
education to broaden job-related academic knowledge or
obtain professional certification.

nib holdings limitedCorporate Governance Statement continuedFor the year ended 30 June 2013

3.4 nib has in this statement, set out the

¾ the appointment, remuneration, independence,

proportion of women employees across
the whole of the organisation, women in
senior executive positions and women on
the Board.

competence and performance of nib’s external audit
function;

¾ the integrity of nib’s financial statements and other material

regulatory documents;

nib’s commitment to diversity is reflected in the composition
of the current Board and Executive management.

At 30 June 2013, 72.3% of nib’s total workforce was female.

3.5 nib provides the information indicated in
the Guide to reporting on Principle 3.

nib complies with Recommendations 3.1, 3.2, 3.3, 3.4 and 3.5.

The following information is available from our website,
nib.com.au:

¾ Code of Conduct.

¾ Diversity Policy.

PrinCiPle 4 – SAFeGuArD inteGritY
in FinAnCiAl rePOrtinG

4.1 The Board of nib has established an Audit

Committee.

The Audit Committee is a standing committee of the nib
Board. The Audit Committee operates in accordance with
its charter. The Audit Committee Charter is available on our
website, nib.com.au.

4.2 nib’s Audit Committee:

consists only of Non-Executive Directors
consists only of independent Directors
is chaired by an independent Director,

who is not Chairman of the Board

The Audit Committee includes members who have
appropriate financial experience and understanding of
the private health insurance industry. There are currently
three members of the Audit Committee: Mr Harold Bentley
(Committee Chairman), Dr Annette Carruthers and Mr Philip
Gardner. The Board Chairman is not a member of the
Committee and attends meetings in an ex-officio capacity.

Details of the skills, experience and expertise of the Audit
Committee members is set out on page 14 of this Report.

The Audit committee held nine meetings in FY13.

4.3 nib’s Audit Committee has a formal

charter.

The Audit Committee Charter sets out the role and
responsibility of the Audit Committee.

The role of the Audit Committee is to assist the Board by
reviewing and making recommendations to the Board in
relation to:

¾ compliance with relevant financial reporting standards
and ASX listing obligations and accounting policies
adopted by nib;

¾ the propriety of related party transactions (if any); and

¾ monitoring compliance with nib’s capital management

plan.

In fulfilling its role, the Audit Committee:

¾ receives regular reports from management, the external
auditors, the Appointed Actuary and, if required, the
internal auditors;

¾ meets with external auditors and the Appointed Actuary
on a regular basis and has issued a standing invitation
to the external auditor to attend all meetings of the Audit
Committee;

¾ reviews the processes that the Managing Director & CEO
and the Chief Financial Officer have in place to support
their certifications to the Board;

¾ reviews any significant disagreements between the

auditors and management, irrespective of whether they
have been resolved;

¾ meets separately with the external auditors and the
Appointed Actuary at least twice a year without the
presence of management; and

¾ provides the external auditors and the Appointed Actuary
with a clear line of direct communication at any time
to either the Chairman of the Audit Committee or the
Chairman of the Board.

The Audit Committee has authority, within the scope of its
responsibilities, to seek any information it requires from any
employee or external party, including the Appointed Actuary.

The Audit Committee Charter is available on our website,
nib.com.au.

TOWER Medical’s BARCC Charter sets out the roles and
responsibilities of BARCC. The role of the BARCC is to assist
the Board in relation to:

¾ the appointment, remuneration, independence,

competence and performance of nib’s external and
internal audit function;

¾ the integrity of nib’s financial statements and other material

regulatory documents;

¾ TOWER Medical’s systems and procedures for compliance

with relevant legal and regulatory requirements;

¾ the monitoring of solvency and compliance with TOWER

Medical’s Capital Management plan; and

¾ the propriety of related party transactions (if any).

2013 annual reportPrinCiPle 5 – MAKe tiMelY AnD
BAlAnCeD DiSClOSure

5.1 nib has written policies designed to ensure
compliance with the ASX Listing Rule
disclosure requirements and to ensure
accountability at a senior executive level
for that compliance and disclosure of those
policies or summary of those policies.

nib has a Disclosure and Communication Policy and
Disclosure and Materiality Guidelines, which are provided to
all officers and relevant employees upon appointment and are
available on the nib website. nib has established a Disclosure
Committee which is responsible for managing nib’s disclosure
obligations under the ASX Listing Rules. The Disclosure
Committee comprises the Managing Director & CEO, Chief
Financial Officer, General Counsel & Company Secretary,
Corporate Affairs & Investor Relations Manager.

nib is committed to providing relevant up-to-date information
to its shareholders and other stakeholders in accordance
with its obligations under the ASX Listing Rules and the
Corporations Act. In meeting its continuous disclosure
obligations, nib works to ensure that its announcements
are presented in a factual, clear and balanced way and that
all shareholders have equal and timely access to material
information concerning nib.

nib’s Company Secretaries have been nominated as the
persons responsible for communications with the ASX.

in a dedicated place and in an easy-to-navigate manner. All
information disclosed to the ASX is posted on the shareholder
website soon after release to the market by the ASX.

Shareholder participation

The Board of nib is committed to communicating effectively
with shareholders and making it easy to participate in general
meetings. Shareholders may elect to receive information
electronically as it is posted on nib’s shareholder website
(the website provides information about how to make this
election). Alternatively, a shareholder may elect to receive
company reports and shareholder documents, such as the
notice of annual general meeting, by post.

Shareholders are encouraged to attend the AGM and use the
opportunity to ask questions at the meeting. If a shareholder
is unable to attend the AGM, the shareholder can appoint a
proxy to attend and vote on their behalf/or using any other
means included in the notice of meeting. Questions can be
lodged prior to the AGM by completing the relevant form
accompanying the notice of meeting. nib responds in writing
to any shareholder who submits a written question. Notices of
meeting and accompanying explanatory notes aim to clearly,
concisely and accurately set out the nature of the business to
be considered at the meeting. nib places notices of general
meetings and accompanying explanatory material on the nib
website. In 2012, shareholders were also able to view the
AGM via a webcast available on nib’s website. Shareholders
will be able to watch and listen to the business of the 2013
AGM by webcast from the nib website.

5.2 nib provides the information indicated in
the Guide to reporting on Principle 5.

6.2 nib provides the information indicated in
the Guide to reporting on Principle 6.

nib complies with Recommendations 5.1 and 5.2.

nib complies with Recommendations 6.1 and 6.2.

The following information is available on our website,
nib.com.au:

nib’s Disclosure and Communication Policy is available on our
website, nib.com.au.

¾ nib’s Disclosure and Communication Policy.

¾ Disclosure and Materiality Guidelines.

PrinCiPle 7 – reCOGniSe AnD
MAnAGe riSK

PrinCiPle 6 – reSPeCt tHe riGHtS
OF SHAreHOlDerS

6.1 nib has a Disclosure and Communication
policy in place for promoting effective
communication with shareholders
and encouraging their participation at
general meetings. The Disclosure and
Communication Policy is available on
our website.

nib’s Disclosure and Communication Policy sets out the way
in which nib communicates to shareholders.

The Board and management aim to ensure that shareholders
are informed of all information necessary to fully assess the
performance of the Group. nib has a dedicated shareholder
website that can be found at nib.com.au/shareholders.
This website provides relevant information for shareholders

7.1 nib has established policies for the

oversight and management of material
business risks. The Risk Policy is available
on our website, nib.com.au.

Management is responsible for designing, implementing and
reporting on the adequacy of nib’s risk management and
internal control system. The Board has established a Risk
and Reputation Committee and the committee’s role includes
reviewing and making recommendations to the Board in
respect of nib’s system of risk management.

There are three members of the Risk and Reputation
Committee: Dr Annette Carruthers (Committee Chairman),
Harold Bentley and Ms Christine McLoughlin. Details of the
skills, experience and expertise of the Risk and Reputation
Committee members is set out on page 14 of this Annual
Report.

nib holdings limitedCorporate Governance Statement continuedFor the year ended 30 June 2013The Risk and Reputation Committee held four meetings
in FY13.

The key risks as identified and managed by nib are detailed
at pages 10 to 11 of the Operating and Financial Review.

nib’s Risk Policy and Risk Management Framework have
been developed to enable the Board to have reasonable
assurance that:

¾ established corporate and business strategies and

objectives are achieved;

¾ risk exposures are identified and adequately monitored

and managed;

¾ significant financial managerial and operating information

is accurate, relevant, timely and reliable; and

¾ there is an adequate level of compliance with policies,

standards, procedures and applicable laws, regulations
and licences.

nib’s risk policy and risk management framework is based
on the Australian/New Zealand Standard (AS/NZS ISO
31000:2009) for risk management and also the internationally
recognised Committee of Sponsoring Organisations of the
Treadway Commission (COSO) Enterprise Risk Management
Framework.

The Board and senior management consider and set nib’s
strategic and operational objectives as part of the annual
strategy and budget planning review. As part of the strategy
setting, the Board and senior management consider
these obligations in the context of nib’s risk appetite – the
acceptable balance of growth, risk and return for nib. There
may be a number of different strategies designed to achieve
desired growth and return goals, each having different risks.

As a means of informing the business of the outcomes
expected from the strategy, the Board and senior
management develop key performance indicators and risk
assessments for each objective. These are intended to
provide the Board with greater assurance that nib remains
within its strategy and risk appetite and provides guidance
about nib’s ability to achieve its objectives.

The risk management framework includes the Board’s
statement of risk appetite for the four main types of risk that
are likely to affect nib’s ability to deliver its strategic objectives.
At a high level these are:

¾ Financial Risk – the risks associated with achieving nib’s
financial targets, including revenue and income growth,
and capital management targets. These risks include
model risk, credit risk, liquidity risk, market risk, investment
risk, pricing risk and claims risk.

¾ Operational Risk – the risk that arises from normal

operations, project management, inadequate or failed
internal processes, people, systems, fraud or from external
events.

¾ Strategic Risk – the risk of changing government policies

and new legislation on nib’s business (sovereign risk),
strategic plan risk, reputation risk and product design.

¾ Regulatory and Compliance Risk – the risk of failing to
comply with nib’s legal and regulatory requirements and
nib’s internal policies and procedures.

7.2 nib’s Board has required management
to design and implement the risk
management and internal control systems
to manage nib’s material business risks
and to report to the Board on whether
those risks are being managed effectively.

The Board and the Risk and Reputation Committee receive
regular reports on key enterprise risks that may impede nib in
meeting its business objectives. During FY13, management
provided reports to support the Risk and Reputation
Committee’s and the Board’s assessment of the effectiveness
of nib’s risk management framework and the management
of material business risks. In addition, the Audit Committee
monitors the Group’s financial risks and reports to the Board
on the adequacy of the Group’s internal controls as they
apply to financial reporting, financial management systems,
accounting and business policies to minimise any financial
risks.

In addition to monthly compliance statements, quarterly
internal control questionnaires are completed by all divisional
and business unit managers (except the CFO). The quarterly
reports are reviewed by nib’s finance team as part of nib’s six
monthly and annual reporting and to achieve compliance with
section 295A of the Corporations Act and Recommendation 7.3.

The Managing Director & CEO and Chief Financial Officer
provide annual formal statements to the Board to the
effect that:

¾ nib’s financial reports are complete and present a true and
fair view, in all material respects, of the financial condition
and operational results of nib and are in accordance with
relevant accounting standards; and

¾ nib’s practices are founded on a sound system of risk

management and internal compliance and control which
implements the policies adopted by the Board and nib’s
risk management and internal compliance and control is
operating efficiently and effectively in all material respects.

Internal audit

nib has a dedicated internal audit function that assists with the
identification and control of key enterprise risks. The internal
audit function for FY13 was performed by Lawler Partners.
The internal auditor provides an independent and objective
internal audit review of nib’s risks and key controls and how
nib’s processes and technology are operated and managed
to provide the best outcomes for nib.

The nib Strategic Internal Audit plan for the year is developed
using a risk based approach. The annual cycle includes a risk
assessment from which the annual plan is developed by the

2013 annual reportinternal auditors in conjunction with the Risk and Reputation
Committee and nib management to ensure alignment with
identified key enterprise risks. An assurance map that links
key risks with the relevant assurance providers forms the
basis of the internal audit plan, and internal audit reviews
performed ensure nib identifies opportunities for process
improvement.

Internal audit reports in relation to key enterprise risks are
also considered at meetings of the Risk and Reputation
Committee.

Representatives from the internal auditors regularly attend
meetings of the Risk and Reputation Committee to present
internal audit report and answer questions from the committee.

7.3 nib’s Board has received assurance from
the Chief Executive Officer and Chief
Financial Officer that a declaration in
accordance with s295A of the Corporations
Act is founded on a sound system of risk
management and internal control and that
the system is operating effectively in all
material respects in relation to reporting
financial risks.

In August 2013, the Board of nib received a statement in
relation to FY13 full year report and results from the Managing
Director & CEO and the Chief Financial Officer covering the
matters set out in section 295A of the Corporations Act and
in accordance with Recommendation 7.3.

7.4 nib provides the information indicated in
the Guide to reporting on Principle 7.

nib complies with Recommendations 7.1, 7.2, 7.3 and 7.4.
The Board and its standing committees have received reports
from management in accordance with Recommendations 7.2
and 7.3.

nib’s Risk Policy is available on our website, nib.com.au.

PrinCiPle 8 – reMunerAte FAirlY
AnD reSPOnSiBlY

8.1 The nib Board has established a People

and Remuneration Committee.

The People and Remuneration Committee is a standing
committee of the nib Board. The People and Remuneration
Committee operates in accordance with its charter. The
People and Remuneration Committee Charter is available on
our website, nib.com.au.

8.2 nib’s People and Remuneration Committee
is structured so that it consists of only of
independent Non-Executive Directors, has
an in independent Chairman and has at
least three members.

private health insurance industry. There are three members
of the People and Remuneration Committee: Ms Christine
McLoughlin (Committee Chairman), Dr Annette Carruthers
and Mr Philip Gardner.

Details of the skills, experience and expertise of the People
and Remuneration Committee members is set out on page 14
of this Annual Report.

The People and Remuneration Committee held six meetings
in FY13.

8.3 nib clearly distinguishes the structure of
Non-Executive Directors’ remuneration
from that of Executive Directors and senior
executives.

The People and Remuneration Committee reviews
remuneration of senior executives and Non-Executive
Directors every year. Every second year, the committee
engages an independent remuneration consultant in relation
to executive remuneration and market rates to assist it in
making recommendations to the Board for nib’s remuneration
practices and the structure of Non-Executive Directors’
remuneration and the remuneration of senior executives.

The remuneration of senior executives (who are key
management personnel), including the Managing Director
& CEO, have the following remuneration components:

¾ base salary;

¾ statutory entitlements (including superannuation and long

service leave, as applicable);

¾ a short-term incentive (subject to performance thresholds);

and

¾ a long-term incentive (subject to performance thresholds).

Further information in relation to nib’s remuneration practices
for Executives is provided as part of the Remuneration Report
(page 25 of this Annual Report).

Remuneration for Non-Executive Directors is fixed. Board
and committee fee rates are reviewed by the People and
Remuneration Committee and approved by the Board. The
total annual remuneration paid to Non-Executive Directors
must not exceed the fee pool set by shareholders at the
AGM. The current maximum annual remuneration was set
at $1.1 million by shareholders in September 2007. Further
information in relation to nib’s remuneration practices
for Non-Executive Directors is provided as part of the
Remuneration Report (page 33 of this Annual Report).

8.4 nib provides the information indicated in
the Guide to reporting on Principle 8.

nib complies with Recommendations 8.1, 8.2, 8.3 and 8.4.

The following documents are available from our website,
nib.com.au:

¾ People and Remuneration Committee Charter.

The People and Remuneration Committee includes members
who have appropriate experience and understanding of the

¾ nib Trading Policy.

nib holdings limitedCorporate Governance Statement continuedFor the year ended 30 June 2013Financial Report

For the year ended 30 June 2013

COntentS

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements:

1. Summary of Significant Accounting Policies

2. Critical Accounting Judgements and Estimates

3. Actuarial Assumptions and Methods

4. Risk Management

5. Segment Reporting

6. Revenue and Other Income

7. Expenses

Income Tax

9. Cash and Cash Equivalents

10. Receivables

20. Outstanding Claims Liability

21. Unearned Premium Liability

22. Unexpired Risk Liability

23. Current Tax Liabilities

24. Provision for Employee Entitlements

25. Premium Payback Liability

26. Deferred Tax Liabilities

27. Contributed Equity

28. Retained Profits

29. Reserves

30. Dividends

31. Commitments for Expenditure

32. Contingent Liabilities

33. Remuneration of Auditors

34. Notes to the Statement of Cash Flows

35. Controlled Entities

11. Financial Assets at Fair Value through Profit or Loss 79

36. Events Occurring after the Balance Sheet Date

12. Reinsurance and Other Recoveries Receivable

13. Deferred Acquisition Costs

14. Available-for-Sale Financial Assets

15. Deferred Tax Assets

16. Property, Plant and Equipment

17. Intangible Assets

18. Payables

19. Borrowings

37. Related Parties

38. Business Combination

39. Key Management Personnel Disclosures

40. Share-Based Payments

41. Solvency and Capital Adequacy Reserves

42. Earnings per Share

43. Parent Entity Financial Information

44. Company Details

100

101

102

104

105

106

107

2013 annual reportConsolidated Income Statement

For the year ended 30 June 2013

Premium revenue

Outwards reinsurance premium expense

Net premium revenue

Claims expense

Reinsurance and other recoveries revenue

RETF levy

State levies

Decrease / (increase) in premium payback liability

Claims handling expenses

Net claims incurred

Acquisition costs

Other underwriting expenses

Underwriting expenses

Underwriting result

Other income

Other expenses

Operating profit

Finance costs

Investment income

Investment expenses

Profit before income tax

Income tax expense

Profit for the year

Earnings per share for profit from continuing operations attributable to the ordinary
equity holders of the company

Basic earnings per share

Diluted earnings per share

Earnings per share for profit attributable to the ordinary equity holders of the company

Basic earnings per share

Diluted earnings per share

Notes

2013
$000

2012
$000

1,291,111

1,123,808

(708)

–

1,290,403

1,123,808

(896,985)

(765,436)

333

(167,430)

(28,811)

3,266

(16,497)

–

(159,980)

(23,823)

–

(17,390)

(1,106,124)

(966,629)

(52,237)

(58,267)

(110,504)

(36,080)

(50,368)

(86,448)

73,775

70,731

3,098

(7,615)

69,258

(1,382)

29,983

(1,199)

96,660

(29,503)

67,157

3,556

(4,270)

70,017

–

26,500

(860)

95,657

(28,017)

67,640

Cents

15.3

14.8

The above Consolidated Income Statement should be read in conjunction with the accompanying notes.

nib holdings limited

Consolidated Statement
of Comprehensive Income

For the year ended 30 June 2013

Profit for the year

67,157

67,640

Notes

2013
$000

2012
$000

Other comprehensive income

Items that may be reclassified to profit or loss

Exchange differences on translation of foreign operations

Change in fair value of available for sale financial assets

Income tax related to these items

Items that will not be reclassified to profit or loss

Revaluation of land and buildings

Income tax related to these items

Other comprehensive income for the year, net of tax

29(b)

1,347

530

(271)

153

(46)

1,713

–

1,245

(374)

871

Total comprehensive income for the year attributable to equity holders of
nib holdings limited

68,870

68,511

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

2013 annual report

Consolidated Balance Sheet

Ast at 30 June 2013

ASSETS

Current assets

Cash and cash equivalents

Receivables

Financial assets at fair value through profit or loss

Reinsurance and other recoveries receivable

Deferred acquisition costs

Total current assets

Non-current assets

Receivables

Deferred acquisition costs

Available-for-sale financial assets

Deferred tax assets

Property, plant and equipment

Intangible assets

Total non-current assets

Total assets

LIABILITIES

Current liabilities

Payables

Borrowings

Outstanding claims liability

Unearned premium liability

Current tax liabilities

Provision for employee entitlements

Premium payback liability

Total current liabilities

Non-current liabilities

Borrowings

Deferred tax liabilities

Unearned premium liability

Provision for employee entitlements

Premium payback liability

Total non-current liabilities

Total liabilities

Net assets

EQUITY

Contributed equity

Retained profits

Reserves

Total equity

Notes

2013
$000

2012
$000

143,056

53,672

351,786

11,778

560,373

–

15,448

2,735

2,529

41,722

91,270

86,673

70,208

356,774

–

2,140

515,795

10,000

6,711

2,206

2,124

42,104

38,905

153,704

102,050

714,077

617,845

100,953

3,300

81,406

90,092

3,669

2,090

8,287

86,690

2,594

74,993

135,867

6,884

2,144

–

289,797

309,172

59,149

2,501

3,333

1,217

31,927

98,127

–

5,799

1,276

–

7,075

387,924

316,247

326,153

301,598

27,906

295,212

3,035

326,153

27,581

271,954

2,063

301,598

The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.

nib holdings limited

Consolidated Statement of Changes in Equity

For the year ended 30 June 2013

Contributed
Equity
$000

Retained
Profits
$000

Notes

Reserves
$000

Total Equity
$000

Balance at 1 July 2012

42,193

367,595

2,002

411,790

Profit for the year

Revaluation of property, net of tax

Total comprehensive income for the year

Transactions with owners in their capacity as owners:

Capital return and transaction costs, net of tax

Share buy-back

Shares acquired by the nib Holdings Ltd Share Ownership Plan
Trust

Share buyback – performance rights and bonus share rights

Employee performance rights – value of employee services

Dividends paid

–

(9,123)

(4,964)

(525)

–

67,640

–

67,640

(66,288)

(36,075)

–

(60,918)

(14,612)

(163,281)

–

871

–

(1,069)

259

–

(810)

67,640

871

68,511

(75,411)

(41,039)

(525)

(1,069)

259

(60,918)

(178,703)

Balance at 30 June 2012

27,581

271,954

2,063

301,598

Balance at 1 July 2012

27,581

271,954

2,063

301,598

Profit for the year

Gain on revaluation of land and buildings, net of tax

Revaluation of available for sale financial assets, net of tax

Movement in foreign currency translation, net of tax

Total comprehensive income for the year

29(b)

Transactions with owners in their capacity as owners:

Shares acquired by the nib Holdings Ltd Share Ownership Plan
Trust

27(d)

Issue of shares held by nib Holdings Ltd Share Ownership Plan
Trust to employees

Employee performance rights – value of employee services

Dividends paid

27(d)

29(b)

30(a)

–

(628)

953

–

325

67,157

–

67,157

–

(43,899)

–

107

371

1,235

1,713

–

(877)

136

–

(741)

67,157

107

371

1,235

68,870

(628)

136

(43,899)

(44,315)

Balance at 30 June 2013

27,906

295,212

3,035

326,153

The above Consolidated Statement of Change in Equity should be read in conjunction with the accompanying notes.

2013 annual report

Consolidated Statement of Cash Flows

For the year ended 30 June 2013

Cash flows from operating activities

Receipts from policyholders and customers (inclusive of goods and services tax)

Payments to policyholders, suppliers and employees (inclusive of goods and services tax)

Notes

2013
$000

2012
$000

1,271,741

1,189,656

(1,239,834)

(1,048,789)

31,907

140,867

Dividends received

Interest received

Distributions received

Transactions costs relating to acquisition of subsidiary

Interest paid

Income taxes paid

Net cash inflow from operating activities

34(b)

Cash flows from investing activities

Proceeds from disposal of other financial assets at fair value through profit and loss

Payments for other financial assets at fair value through profit and loss

Proceeds from sale of investment properties

Proceeds from sale of property, plant and equipment and intangibles

Payments for property, plant and equipment and intangibles

Proceeds from sale of Eye Care business

Payment for acquisition of subsidiary, net of cash acquired

Net cash inflow (outflow) from investing activities

Cash flows from financing activities

Proceeds from borrowings

Payments for share buy-back

Payments for capital return

Payments for employee performance & bonus share rights

Shares acquired by the nib Holdings Ltd Share Ownership Plan Trust

Dividends paid to the company's shareholders

Net cash inflow (outflow) from financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the year

Effects of exchange rate changes on cash and cash equivalents

Cash and cash equivalents at the end of the year

Reconciliation to Consolidated Balance Sheet

Cash and cash equivalents

Borrowings – overdraft

11,597

9,789

(3,422)

(1,481)

(28,433)

20,036

229,963

(171,741)

10,000

–

(8,946)

–

(35,293)

23,983

55,013

–

(628)

(43,899)

10,486

54,505

84,079

1,172

12,714

8,816

–

(8)

(27,795)

134,631

134,116

(167,265)

10,000

(5,730)

250

–

(28,585)

–

(41,039)

(75,585)

(1,069)

(525)

(60,918)

(179,136)

(73,090)

157,169

–

16,17

38(b)

27(d)

30(a)

139,756

84,079

34(a)

143,056

(3,300)

139,756

86,673

(2,594)

84,079

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

nib holdings limited

Notes to the Consolidated
Financial Statements

For the year ended 30 June 2013

1. SuMMArY OF SiGniFiCAnt ACCOuntinG POliCieS

The principal accounting policies adopted in the preparation
of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years
presented, unless otherwise stated. The financial statements
are for the consolidated entity consisting of nib holdings
limited and its subsidiaries.

a. Basis of preparation

These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards (and interpretations issued by the Australian
Accounting Standards Board and the Corporations Act 2001.
nib holdings limited is a for-profit entity for the purpose of
preparing the financial statements.

i. Compliance with IFRS

The consolidated financial statements of nib holdings limited
Group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).

ii. Historical cost convention

These financial statements have been prepared under the
historical cost convention, as modified by the revaluation
of available-for-sale financial assets, financial assets and
liabilities at fair value through profit or loss, certain classes of
property, plant and equipment and investment properties.

iii. Critical accounting estimates

The preparation of financial statements requires the use
of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of
applying the Group’s accounting policies. The areas involving
a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the financial
statements are disclosed in Note 2.

iv. Comparative information

When the presentation or classification of items in the financial
statements is amended, comparative amounts have been
reclassified.

Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated
from the date that control ceases.

The acquisition method of accounting is used to account for
the acquisition of subsidiaries by the Group (refer to Note 1(o)).

Intercompany transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries are changed where
necessary to ensure consistency with the policies adopted by
the Group.

ii. Employee Share Trust

The Group has formed a trust to administer the Group’s
executive management Short-Term Incentive and Long-
Term Incentive share plans. This trust is consolidated, as the
substance of the relationship is that the trust is controlled by
the Group.

Shares held by the nib Holdings Ltd Share Ownership Plan
Trust are disclosed as treasury shares and deducted from
contributed equity.

c. Segment reporting

Operating segments are reported in a manner consistent with
the internal reporting provided to Executive management.
The chief operating decision maker, who is responsible
for allocating resources and assessing performance of
the operating segments, has been identified as the Chief
Executive Officer/Managing Director.

d. Foreign currency translation

i. Functional and presentation currency

Items included in the financial statements of each of the
Group’s entities are measured using the currency of the
primary economic environment in which the entity operates
(‘the functional currency’). The consolidated financial
statements are presented in Australian dollars, which is nib
holdings limited’s functional and presentation currency.

b. Principles of consolidation

ii. Transactions and balances

i. Subsidiaries

The consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of nib holdings limited
(“parent entity”) as at 30 June 2013 and the results of all
subsidiaries for the year then ended. nib holdings limited and
its subsidiaries together are referred to in this financial report
as the Group.

Subsidiaries are all entities over which the parent has the
power to govern the financial and operating policies, generally
accompanying a shareholding of more than one-half of the
voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are
considered when assessing whether the Group controls
another entity.

Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from
the translation at period end exchange rates of monetary
assets and liabilities denominated in foreign currencies are
recognised in profit or loss, except when they are deferred
in equity as qualifying cash flow hedges and qualifying net
investment hedges or are attributable to part of the net
investment in a foreign operation.

Foreign exchange gains and losses that relate to borrowings
are presented in the income statement, within finance costs.

2013 annual report1. SuMMArY OF SiGniFiCAnt ACCOuntinG POliCieS continued

All other foreign exchange gains and losses are presented in
the income statement on a net basis within other income or
other expenses.

The Group bases its estimates on historical results, taking into
account the type of customer, the type of transaction and the
specifics of each arrangement.

Non-monetary items that are measured at fair value in a
foreign currency are translated using the exchange rates at
the date when the fair value was determined. Translation
differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss. For example,
translation differences on non-monetary assets and liabilities
such as equities held at fair value through profit or loss are
recognised in profit or loss as part of the fair value gain or loss
and translation differences on non-monetary assets such as
equities classified as available-for-sale financial assets are
recognised in other comprehensive income.

iii. Group companies

The results and financial position of foreign operations (none
of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:

Revenue is recognised for the major business activities as
follows:

i. Premium revenue

Premium revenue comprises premiums from private health
insurance contracts held by policyholders.

Premium revenue is recognised when it has been earned.
Premium revenue is recognised from the attachment date
over the period of the contract. The attachment date is from
when the insurer accepts the risk from the insured under the
insurance contract. Revenue is recognised in accordance
with the pattern of the incidence of risk expected over the
term of the contract.

The proportion of the premium received or receivable not
earned in the income statement at the reporting date is
recognised in the balance sheet as an unearned premium
liability.

¾ assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;

Premiums on unclosed business are brought to account
using estimates based on payment cycles nominated by the
policyholder.

¾ income and expenses for each income statement and
statement of comprehensive income are translated at
average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the
transactions); and

¾ all resulting exchange differences are recognised in other

comprehensive income.

On consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated
as hedges of such investments, are recognised in other
comprehensive income. When a foreign operation is sold or
any borrowings forming part of the net investment are repaid,
the associated exchange differences are reclassified to profit
or loss, as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of
the foreign operation and translated at the closing rate.

e. Revenue recognition

Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are
net of amounts collected on behalf of third parties.

The Group recognises revenue when the amount of revenue
can be reliably measured, it is probable that future economic
benefits will flow to the entity and specific criteria have been
met for each of the Group’s activities as described below.

ii. Investment income

Net fair value gains or losses on financial assets classified as
at fair value through profit or loss are recognised in the period.

Rental revenue from leasing of investment properties is
recognised in the period in which it is receivable, as this
represents the pattern of service rendered through the
provision of the properties.

iii. Interest income

Interest income is recognised using the effective interest
method. When a receivable is impaired, the Group reduces
the carrying amount to its recoverable amount, being the
estimated future cash flow discounted at the original effective
interest rate of the instrument, and continues unwinding the
discount as interest income. Interest income on impaired
loans is recognised using the original effective interest rate.

f. Unexpired risk liability

At each reporting date, the adequacy of the unearned
premium liability is assessed by considering current estimates
of all expected future cash flows relating to future claims
against current private health insurance contracts.

If the sum of the present value of the expected future cash
flows relating to future claims plus the additional risk margin to
reflect the inherent uncertainty in the central estimate exceeds
the unearned premium liability, less related intangible assets
and related deferred acquisition costs, then the unearned
premium is deemed to be deficient, with the deficiency being
recorded in the income statement. The Group applies a risk

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013margin to achieve the same probability of sufficiency for future
claims as is achieved by the estimate of the outstanding
claims liability, refer to Note 1(h).

g. Outwards reinsurance

Premiums ceded to reinsurers under insurance contracts held
by the Group are recognised as an outwards reinsurance
expense and are recognised in the income statement from
the attachment date over the period of indemnity of the
reinsurance contract in accordance with the expected pattern
of the incidence of risk ceded.

h. Outstanding claims liability

The liability for outstanding claims is measured as the central
estimate of the expected future payments against claims
incurred but not settled at the reporting date under private
insurance contracts issued by the Group, with an additional
risk margin to allow for the inherent uncertainty in the central
estimate.

The expected future payments include those in relation to
claims reported but not yet paid and claims incurred but not
yet reported, together with allowances for Risk Equalisation
Trust Fund consequences and claims handling expenses.

i. Premium payback liability

For health premium payback business an additional unearned
premium liability has been established representing the
accrued amount of premium expected to be repaid to certain
New Zealand health insurance policyholders. This liability is
discounted at the risk-free rate and a liability adequacy test
has been performed incorporating a risk margin on some
components to cover uncertainty in the central estimate.

Reinsurance and other recoveries
receivable

Reinsurance and other recoveries receivable on paid claims,
reported claims not yet paid, incurred but not reported (IBNR),
and unexpired risk liabilities are recognised as revenue.

Recoveries receivable are assessed in a manner similar
to the assessment of outstanding claims. Recoveries are
measured as the present value of the expected future
receipts, calculated on the same basis as the liability for
outstanding claims.

k. Acquisition costs

Acquisition costs incurred in obtaining health insurance
contracts are deferred and recognised as assets where they
can be reliably measured and where it is probable that they
will give rise to premium revenue that will be recognised in
the consolidated income statement in subsequent reporting
periods.

Deferred acquisition costs are amortised systematically
in accordance with the expected pattern of the incidence
of risk under the insurance contracts to which they relate.
This pattern of amortisation corresponds to the earning
pattern of the corresponding premium revenue.

l. Risk equalisation trust fund levy

The Risk Equalisation Trust Fund Levy is accrued based on
the industry survey of eligible paid claims to be submitted to
PHIAC. If a Private Health insurer notifies PHIAC of a material
variation in paid claims which can be quantified, the Group
adjusts the risk equalisation expense.

m. Income tax

The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.

Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amount
in the consolidated financial statements. However, the
deferred income tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit
or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by
the reporting date and are expected to apply when the related
deferred income tax asset is realised or the deferred income
tax liability is settled.

Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those
temporary differences and losses.

Deferred tax liabilities and assets are not recognised for
temporary differences between the carrying amount and
tax bases of investments in controlled entities where the
parent entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences
will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to
offset and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.

nib holdings limited and its wholly-owned Australian
controlled entities implemented the tax consolidation. As a
consequence, these entities are taxed as a single entity and
the deferred tax assets and liabilities of these entities are set
off in the consolidated financial statements.

Current and deferred tax is recognised in profit or loss,
except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the
tax is also recognised in other comprehensive income or
directly in equity, respectively.

2013 annual report1. SuMMArY OF SiGniFiCAnt ACCOuntinG POliCieS continued

i. Investment allowance

Companies within the Group may be entitled to claim
special tax deductions for investments in qualifying assets
(investment allowances). The Group accounts for such
allowances as tax credits, which means that the allowance
reduces income tax payable and current tax expense.
A deferred tax asset is recognised for unclaimed tax credits
that are carried forward as deferred tax assets.

n. Leases

Leases of property, plant and equipment where the Group
has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised
at the lease’s inception at the lower of the fair value of the
leased property and the present value of the minimum lease
payments. The corresponding rental obligations, net of
finance charges, are included in other short-term and long-
term payables. Each lease payment is allocated between
the liability and finance cost. The finance cost is charged to
the profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance
of the liability for each period. The property, plant and
equipment acquired under finance leases are depreciated
over the shorter of the asset’s useful life and the lease term.

Leases in which a significant portion of the risk and rewards
of ownership are not transferred to the Group as lessee
are classified as operating leases. Payments made under
operating leases (net of any incentives received from the
lessor) are charged to the profit or loss on a straight-line basis
over the period of the lease.

Lease income from operating leases where the Group is the
lessor is recognised in the profit or loss on a straight-line basis
over the lease term.

o. Business combinations

The acquisition method of accounting is used to account for
all business combinations, including business combinations
involving entities or businesses under common control,
regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a
subsidiary comprises the fair values of the assets transferred,
the liabilities incurred and the equity interests issued by the
Group. The consideration transferred also includes the fair
value of any contingent consideration arrangement and the
fair value of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination, are with
limited exceptions, measured initially at their fair values at
the acquisition date. On an acquisition-by-acquisition basis,
the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net identifiable assets.

The excess of the consideration transferred, the amount
of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in
the acquiree over the fair value of the Group’s share of the net
identifiable assets acquired is recorded as goodwill. If those
amounts are less than the fair value of the net identifiable
assets of the subsidiary acquired and the measurement of
all amounts has been reviewed, the difference is recognised
directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is
deferred, the amounts payable in the future are discounted to
their present value as at the date of exchange. The discount
rate used is the entity’s incremental borrowing rate, being
the rate at which a similar borrowing could be obtained
from an independent financier under comparable terms
and conditions.

Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair
value recognised in profit or loss.

p. Impairment of assets

Goodwill and intangible assets that have an indefinite useful
life and are not subject to amortisation are tested annually
for impairment, or more frequently if events or changes
in circumstances indicate that they might be impaired.
Other assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for
the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher
of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the
cash inflows from other assets or groups of assets (cash-
generating units). Non-financial assets other than goodwill
that suffered an impairment are reviewed for possible reversal
of the impairment at each reporting date.

q. Assets backing private health insurance

liabilities

As part of the investment strategy the Group actively
manages its investment portfolio to ensure that a portion
of its investments mature in accordance with the expected
pattern of future cash flows arising from private health
insurance liabilities.

Following the acquisition of TOWER Medical, with the
exception of property, plant and equipment, and the
investment in unlisted equity securities, the Group has
determined that all financial assets of nib health funds
limited and TOWER Medical are held to back private health
insurance liabilities.

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013i. Investments and other financial assets

The Group classifies its financial assets into financial assets at
fair value through profit or loss and available for sale financial
assets, (refer to Note 1(v)).

a. Financial assets at fair value through profit or loss

Financial assets are designated at fair value through profit or
loss. Initial recognition is at fair value, being acquisition cost,
in the balance sheet and subsequent measurement is at fair
value with any resultant fair value gains or losses recognised
in the profit or loss.

Details of fair value for the different types of financial assets
and liabilities are listed below:

1. Cash and cash equivalents, and bank overdrafts are

carried at face value of the amounts deposited or drawn.
The carrying amounts of cash assets and bank overdrafts
approximate their fair value. For the purpose of the
presentation in the consolidated statement of cash flows,
cash includes cash on hand, deposits held at call with
financial institutions, net of bank overdrafts;

2. Shares, fixed interest securities, options and units in

trusts listed on stock exchanges are initially recognised
at cost and the subsequent fair value adjustment is taken
as the quoted bid price of the instrument at the balance
sheet date.

3. Derivatives are categorised as held for trading unless they

are designated as hedges.

All purchases and sales of financial assets that require
delivery of the asset within the timeframe established by
regulation or market convention (“regular way” transactions)
are recognised at trade date, being the date on which the
Group commits to buy or sell the asset.

In cases where the point between trade and settlement
exceeds this time frame, the transaction is recognised at
settlement date. Financial assets are derecognised when
the rights to receive future cash flows from the assets
have expired, or have been transferred, and the Group has
transferred substantially all the risks and rewards of ownership.

Investments and other financial assets of nib holdings limited
are also designated as at fair value through the profit or loss
as they are managed and their performance is evaluated on a
fair value basis, in accordance with a documented investment
policy, and information is provided internally on that basis to
the entity’s Key Management Personnel.

ii. Investment properties

Certain freehold land and buildings are classified as
investment properties where they are held for the purposes
of resale or where they are leased to external parties.

Investment properties are initially recorded at fair value
being acquisition cost. Costs incurred subsequent to initial
acquisition are capitalised when it is probable that future
economic benefits in excess of the originally assessed
performance of the asset will flow to the Group.

Subsequent to initial recognition as assets and once
completed, investment properties are revalued to fair value
as determined by external independent valuers, on a periodic
basis, but at least every three years. Investment properties
are maintained at a high standard and, as permitted by
accounting standards, the properties are not depreciated.

Changes in fair value are recognised in the profit or loss as
part of investment income.

iii. Amounts due from policyholders

Amounts due from policyholders are initially recognised at
fair value, being the amounts due. They are subsequently
measured at fair value which is approximated by taking this
initially recognised amount and reducing it for impairment
as appropriate.

A provision for impairment of receivables is established
when there is objective evidence that the Group will not
be able to collect all amounts due according to the original
terms of the receivables. The amount of the provision is the
difference between the asset’s carrying amount and the value
of estimated future cash flows. The impairment charge is
recognised in the profit or loss.

r. Derivative financial instruments

Derivatives are initially recognised at fair value, being generally
the transaction price on the date a derivative contract is
entered into, and are subsequently remeasured to their fair
value at the end of each reporting period. The method of
recognising the resulting gain or loss depends on whether
the derivative is designated as a hedging instrument and the
nature of the item being hedged. Derivatives which are not
part of a hedging relationship are valued at fair value through
profit or loss, and are included in investment income.

For derivatives traded in an active market, the fair value of
derivatives presented as assets is determined by reference
to published closing bid price quotations and the fair value of
derivatives presented as liabilities is determined by reference
to published closing ask price quotations. For derivatives
that are not traded or which are traded in a market that is
not sufficiently active, fair value is determined using generally
accepted valuation techniques.

All derivatives entered into by the Group are classified as held
for trading as the Group does not apply hedge accounting.

s. Cash and cash equivalents other than

those included in assets backing private
health insurance liabilities

For the purpose of the presentation in the consolidated
statement of cash flows, cash and cash equivalents includes
cash on hand, deposits held at call with financial institutions,
other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible
to known amounts of cash and which are subject to an
insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current
liabilities on the balance sheet.

2013 annual report1. SuMMArY OF SiGniFiCAnt ACCOuntinG POliCieS continued

Receivables other than those included in
assets backing private health insurance
liabilities

Trade and other receivables are recognised initially at
fair value and subsequently measured at amortised cost
using the effective interest rate method, less provision for
impairment.

Collectability of trade and other receivables is reviewed on
an ongoing basis. Debts which are known to be uncollectible
are written off by reducing the carrying amount directly.
An allowance account (provision for impairment) is used
where there is objective evidence that the Group will not be
able to collect all amounts due according to the original terms
of the receivables.

The amount of the impairment loss is recognised in profit
or loss within other expenses. When a receivable for which
an impairment allowance had been recognised becomes
uncollectible in a subsequent period, it is written off against
the allowance account. Subsequent recoveries of amounts
previously written off are credited against other expenses in
profit or loss.

u. Non-current assets (or disposal groups)

held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use.
They are measured at the lower of their carrying amount and
fair value less costs to sell, except for assets such as deferred
tax assets, assets arising from employee benefits, financial
assets and investment property that are carried at fair value
and contractual rights under insurance contracts, which are
specifically exempt from this requirement.

An impairment loss is recognised for any initial or subsequent
write-down of the asset (or disposal group) to fair value
less costs to sell. A gain is recognised for any subsequent
increases in fair value less costs to sell of an asset (or disposal
group), but not in excess of any cumulative impairment
loss previously recognised. A gain or loss not previously
recognised by the date of the sale of the non-current asset
(or disposal group) is recognised at the date of derecognition.

Non-current assets (including those that are part of a
disposal group) are not depreciated or amortised while they
are classified as held for sale. Interest and other expenses
attributable to the liabilities of a disposal group classified as
held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets
of a disposal group classified as held for sale are presented
separately from the other assets on the balance sheet. The
liabilities of a disposal group classified as held for sale are
presented separately from other liabilities on the balance sheet.

A discontinued operation is a component of the entity that
has been disposed of or is classified as held for sale and
represents a separate major line of business or geographical
area of operations, and is part of a single co-ordinated plan
to dispose of such a line of business or area of operations, or
is a subsidiary acquired exclusively with a view to resale. The
results of discontinued operations are presented separately in
the statement of comprehensive income.

v. Available-for-sale financial assets

Available-for-sale financial assets, comprising principally
marketable equity securities, are non-derivatives that are
either designated in this category or not classified in any of
the other categories. They are included in non-current assets
unless management intends to dispose of the investment
within 12 months of the reporting date. Investments are
designated as available-for-sale if they do not have fixed
maturities and management intends to hold them for the
medium to long term.

Initial recognition is at fair value, being acquisition cost, in the
balance sheet and subsequent measurement is at fair value
with any resultant fair value gains or losses recognised in other
comprehensive income. When securities classified as available-
for-sale are sold, the accumulated fair value adjustments
recognised in other comprehensive income are reclassified to
profit or loss as gains and losses from investment.

The Group assesses at the end of each reporting period
whether there is objective evidence that a financial asset or
group of financial assets is impaired. In the case of equity
securities classified as available-for-sale, a significant or
prolonged decline in the fair value of a security below its cost
is considered as an indicator that the securities are impaired.
If any such evidence exists for available-for-sale financial
assets, the cumulative loss – measured as the difference
between the acquisition cost and the current fair value,
less any impairment loss on that financial asset previously
recognised in profit or loss – is reclassified from equity and
recognised in profit or loss as a reclassification adjustment.
Impairment losses recognised in profit or loss on equity
instruments classified as available-for-sale are not reversed
through profit or loss.

w. Property, plant and equipment

Land and buildings (except for investment properties – refer
to Note 1(q)(ii)) are shown at fair value, based on periodic, but
at least triennial, valuations by external independent valuers,
less subsequent depreciation for buildings. Any accumulated
depreciation at the date of revaluation is eliminated against
the gross carrying amount of the asset and the net amount
is restated to the revalued amount of the asset. All other
property, plant and equipment are stated at historical cost
less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can
be measured reliably. The carrying amount of a replaced
part is derecognised. All other repairs and maintenance are
charged to profit or loss during the reporting period in which
they are incurred.

Increases in the carrying amounts arising on the revaluation of
land and buildings are credited, net of tax, to other reserves
in the shareholders’ equity. To the extent that the increase
reverses a decrease previously recognised in profit or loss,
the increase is first recognised in profit or loss. Decreases that
reverse previous increases of the same asset are first charged
against the revaluation reserves directly in equity to the extent
of the remaining reserve attributable to the asset; all other
decreases are charged to profit or loss.

Land is not depreciated. Depreciation on other assets is
calculated using the straight-line method to allocate their cost
or revalued amounts, net of their residual values, over their
estimated useful lives, as follows:

Buildings

Plant and equipment

Leasehold improvements

25 to 40 years

3 to 20 years

3 to 5 years

The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate at each reporting date. An
asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (see Note 1(p)).

Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in profit
or loss. When revalued assets are sold, it is Group policy to
transfer the amounts included in other reserves in respect of
those assets to retained earnings.

x. Intangible assets

i. Goodwill

Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included in
intangible assets. Goodwill is not amortised. Instead, goodwill
is tested for impairment annually, and is carried at cost less
accumulated impairment losses.

ii. Software

Costs incurred in developing products or systems and
costs incurred in acquiring software and licences that
will contribute to future period financial benefits through
revenue generation and/or cost reduction are capitalised to
software. Costs capitalised include external direct costs of
materials and service and direct payroll and payroll related
costs of employees’ time spent on the project. Amortisation

is calculated on a straight-line basis over periods generally
ranging from two and a half years to five years.

iii. Brands and trademarks

Brands and trademarks acquired with IMAN have an
infinite useful life and are carried at cost less accumulated
impairment losses.

Brands and trademarks acquired with TOWER Medical
Insurance Limited (TOWER Medical) have a useful life of
two years and are carried at their fair value at the date of
acquisition less accumulated amortisation and impairment
losses.

iv. Customer Contracts

Customer contracts acquired as part of a business
combination are recognised separately from goodwill. The
customer contracts are carried at their fair value at the date
of acquisition less accumulated amortisation and impairment
losses. Amortisation is calculated based on the timing of
projected cash flows of the contracts over their estimated
useful lives, which is approximately four years for IMAN and
10 years for TOWER Medical.

y. Payables

These amounts represent liabilities for goods and services
provided to the Group prior to the end of the financial year
which are unpaid. These amounts are unsecured and are
usually paid within 30 days of recognition.

z. Borrowings

Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the
borrowings using the effective interest method. Fees paid
on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw down occurs. To the
extent there is no evidence that it is probable that some or
all of the facility will be drawn down, the fee is capitalised as
a prepayment for liquidity services and amortised over the
period of the facility to which it relates.

Borrowings are removed from the balance sheet when the
obligation specified in the contract is discharged, cancelled
or expired. The difference between the carrying amount of
a financial liability that has been extinguished or transferred
to another party and the consideration paid, including
any non-cash assets transferred or liabilities assumed, is
recognised in profit or loss as other income or finance costs.

Borrowings are classified as non-current liabilities as the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.

2013 annual report1. SuMMArY OF SiGniFiCAnt ACCOuntinG POliCieS continued

aa. Employee benefits

i. Short-term obligations

Liabilities for wages and salaries, including non-monetary
benefits and annual leave are recognised in payables in
respect of employees’ services up to the reporting date and
are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non-accumulating sick leave
are recognised when the leave is taken and measured at the
rate paid or payable.

ii. Other long-term employee benefit obligations

The liability for long service leave is the amount of the future
benefit that employees have earned in return for their service
in the current and prior periods. The liability is calculated
using expected future increases in wage and salary rates
and expected settlement dates, and is discounted using
the rates attached to Commonwealth Government Bonds
at the balance sheet date which have the maturity dates
approximating to the terms of nib’s obligations.

iii. Bonus plans

A liability for employee benefits in the form of bonus plans
is recognised in other creditors when at least one of the
following conditions is met:

¾ there are formal terms in the plan for determining the

amount of the benefit, or

¾ the amounts to be paid are determined before the time of

completion of the financial report, or

¾ past practice gives clear evidence of the amount of the

obligation.

Liabilities for bonus plans are expected to be settled within
12 months and are measured at the amounts expected to be
paid when they are settled.

iv. Retirement benefit obligations

Directors’ retirement benefits are provided for in the financial
statements. Non-Executive Directors of nib health funds
limited employed before 24 November 2005 are entitled
to a lump sum retirement benefit based on number of
years’ service. Non-Executive Directors commencing after
24 November 2005 are not entitled to retirement benefits.

v. Termination benefits

Liabilities for termination benefits, not in connection with the
acquisition of an entity or operation, are recognised when a
detailed plan for the terminations has been developed and
a valid expectation has been raised with those employees
affected that the terminations will be carried out without
possibility of withdrawal. The liabilities for termination
benefits are recognised as current provisions, as liabilities
for termination benefits are expected to be settled within
12 months of reporting date.

vi. Share-based payments

Share-based compensation benefits are provided to
employees via the nib holdings limited Long-Term Incentive
Plan, the Employee Share Acquisition (tax exempt) Plan, the
nib Salary Sacrifice Plan and Matching Plan and the Short-
Term Performance Incentive. Information relating to these
plans is set out in Note 40.

The fair value of performance rights granted under the nib
holdings Long-Term Incentive Plan is recognised as an
employee benefit expense with a corresponding increase
in equity. The total amount to be expensed is determined
by reference to the fair value of the performance rights
granted, which includes any market performance conditions
but excludes the impact of any service and non-market
performance vesting conditions and the impact of any
non-vesting conditions. Non-market vesting conditions are
included in assumptions about the number of performance
rights that are expected to vest. The total expense is
recognised over the vesting period, which is the period over
which all of the specified vesting conditions are to be satisfied.
At the end of each period, the Group revises its estimate of
the number of performance rights that are expected to vest
based on the non-marketing vesting conditions. It recognises
the impact of the revision to original estimates, if any, in profit
or loss, with a corresponding adjustment to equity.

The nib holdings Long-Term Incentive Plan is administered
by the nib Holdings Ltd Share Ownership Plan Trust; see
Note 1(b)(ii). When the performance rights are exercised,
the trust transfers the appropriate amount of shares to the
employee.

Under the Employee Share Acquisition (tax exempt) Plan, the
nib Salary Sacrifice Plan and Matching Plan and the Short-
Term Performance Incentive, shares are acquired on-market
and expensed.

bb. Contributed equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from
the proceeds.

If the entity reacquires its own equity instruments, for example
as the result of a share buy-back, those instruments are
deducted from equity and the associated shares are cancelled.
No gain or loss is recognised in the profit or loss and the
consideration paid including any directly attributable incremental
cost (net of income taxes) is recognised directly in equity.

cc. Dividends

Provision is made for the amount of any dividend declared,
being appropriately authorised and no longer at the discretion
of the entity, on or before the end of the financial year but not
distributed at balance date.

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013dd. Earnings per share

i. Basic earnings per share

Basic earnings per share is calculated by dividing:

¾ the profit attributable to equity holders of the company,

excluding any costs of servicing equity other than ordinary
shares.

¾ by the weighted average number of ordinary shares

outstanding during the financial year.

ii. Diluted earnings per share

Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into
account:

¾ the after income tax effect of interest and other financing

costs associated with dilutive potential ordinary shares; and

¾ the weighted average number of additional ordinary

shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.

ee. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the
amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is
recognised as part of the cost of acquisition of the asset or
as part of the expense.

Receivables and payables are stated inclusive of the amount of
GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other
receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or financing
activities which, are recoverable from, or payable to the
taxation authority, are presented as operating cash flow.

ff. Reverse acquisition accounting policy

Post demutualisation, the formation of the Group has been
accounted for as a business combination. AASB 3 Business
Combinations deals with the bringing together of separate
businesses into one reporting entity. When a new entity (legal
entity) is formed to effect a business combination, an entity
that existed before the combination must be identified as the
acquirer. This is commonly referred to as a reverse acquisition.

nib health funds limited has been deemed to be the
accounting acquirer of nib holdings limited (the legal parent).

Accordingly, under the reverse acquisition requirements of
AASB 3, the consolidated financial statement of nib holdings
limited are the continuing accounts of nib health funds limited
as accounting acquirer of the legal parent.

funds limited were recorded at fair value and the assets and
liabilities of nib health funds limited were maintained at their
book value. The impact of transactions between entities in the
Group is eliminated in full.

gg. Parent entity financial information

The financial information for the parent entity, nib holdings limited,
disclosed in Note 43 has been prepared on the same basis as
the consolidated financial statements, except as set out below.

i. Investments in subsidiaries, associates and joint

venture entities

Investments in subsidiaries, associates and joint venture
entities are accounted for at cost in the financial statements
of nib holdings limited. Dividends received from associates
are recognised in the parent entity’s profit or loss, rather
than being deducted from the carrying amount of these
investments.

ii. Tax consolidation legislation

nib holdings limited and its wholly-owned Australian controlled
entities have implemented the tax consolidated legislation.

The head entity, nib holdings limited, and the controlled
entities in the tax consolidated group account for their own
current and deferred tax amounts. These tax amounts are
measured as if each entity in the tax consolidated group
continues to be a standalone taxpayer in its own right.

In addition to its own current and deferred tax amounts,
nib holdings limited also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused
tax losses and unused tax credits assumed from controlled
entities in the tax consolidated group.

The entities have also entered into a tax funding agreement
under which the wholly-owned entities fully compensate nib
holdings limited for any current tax payable assumed and
are compensated by nib holdings limited for any current
tax receivable and deferred tax assets relating to unused
tax losses or unused tax credits that are transferred to nib
holdings limited under the tax consolidation legislation. The
funding amounts are determined by reference to the amounts
recognised in the wholly-owned entities’ financial statements.

The amounts receivable/payable under the tax funding
agreement is due upon receipt of the funding advice from
the head entity, which is issued as soon as practicable after
the end of each financial year. The head entity may also
require payment of interim funding amounts to assist with its
obligations to pay tax instalments.

Assets or liabilities arising under tax funding agreements with
the tax consolidated entities are recognised as current amounts
receivable from or payable to other entities in the Group.

Any difference between the amounts assumed and amounts
receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-
owned tax consolidated entities.

2013 annual report1. SuMMArY OF SiGniFiCAnt ACCOuntinG POliCieS continued

hh. Rounding of amounts

The company is of a kind referred to in Class order 98/100,
issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the
Financial Report. Amounts in the Financial Report have been
rounded off in accordance with that Class order to the nearest
thousand dollars, or in certain cases, the nearest dollar.

ii. New accounting standards and

interpretations

Certain new accounting standards and interpretations have
been published that are not mandatory for 30 June 2013
reporting periods. The Group’s assessment of the impact of
these new standards and interpretations is set out below.

i. AASB-9 Financial Instruments and AASB 2009-11
Amendments to Australian Accounting Standards
arising from AASB 9 (effective from 1 January 2015)

AASB 9 Financial Instruments addresses the classification
and measurement of financial assets and is likely to affect the
Group’s accounting for its financial assets. The standard is
not applicable until 1 January 2015 but is available for early
adoption. The Group is yet to assess its full impact. However,
initial indications are that it may affect the Group’s accounting
for its available-for-sale financial assets, since AASB 9 only
permits the recognition of fair value gains and losses in other
comprehensive income if they relate to equity investments
that are not held for trading. The Group has not yet decided
when to adopt AASB 9.

ii. AASB 10 Consolidated Financial Statements, AASB 11
Joint Arrangements, AASB 12 Disclosure of Interests
in Other Entities, revised AASB 127 Separate Financial
Statements, AASB 128 Investments in Associates
and Joint Ventures, AASB 2011-7 Amendments to
Australian Accounting Standards arising from the
Consolidation and Joint Arrangements Standards
and AASB 2012-10 Amendments to Australian
Accounting Standards – Transition Guidance and
Other Amendments (effective for years beginning on
or after 1 January 2013)

In August 2011, the AASB issued a suite of five new and
amended standards which address the accounting for
joint arrangements, consolidated financial statements and
associated disclosures.

AASB 10 replaces all of the guidance on control and
consolidation in AASB 127 Consolidated and Separate Financial
Statements, and Interpretation 12 Consolidation – Special
Purpose Entities. The core principle that a consolidated entity
presents a parent and its subsidiaries as if they are a single
economic entity remains unchanged, as do the mechanics
of consolidation. However the standard introduces a single
definition of control that applies to all entities. It focuses on the
need to have both power and rights or exposure to variable
returns before control is present. Power is the current ability to
direct the activities that significantly influence returns. Returns
must vary and can be positive, negative or both. There is also

new guidance on participating and protective rights and on
agent/principal relationships. The Group does not expect the
new standard to have a significant impact on its composition.

AASB 11 introduces a principles based approach to accounting
for joint arrangements. The focus is no longer on the legal
structure of joint arrangements, but rather on how rights and
obligations are shared by the parties to the joint arrangement.
Based on the assessment of rights and obligations, a joint
arrangement will be classified as either a joint operation or
joint venture. Joint ventures are accounted for using the equity
method, and the choice to proportionately consolidate will no
longer be permitted. Parties to a joint operation will account
their share of revenues, expenses, assets and liabilities in
much the same way as under the previous standard. AASB
11 also provides guidance for parties that participate in joint
arrangements but do not share joint control. As the Group is
not party to any joint arrangements, this standard will not have
any impact on its financial statements.

AASB 12 sets out the required disclosures for entities reporting
under the two new standards, AASB 10 and AASB 11, and
replaces the disclosure requirements currently found in AASB
128. Application of this standard by the Group will not affect
any of the amounts recognised in the financial statements, but
will impact the type of information disclosed in relation to the
company’s investments.

Amendments to AASB 128 provide clarification that an entity
continues to apply the equity method and does not remeasure
its retained interest as part of ownership changes where a
joint venture becomes an associate, and vice versa. The
amendments also introduce a “partial disposal” concept. The
Group is still assessing the impact of these amendments.

The Group will adopt the new standards from their operative
date. They will therefore be applied in the financial statements
for the annual reporting period ending 30 June 2014.

iii. AASB 13 Fair Value Measurement and AASB

2011-8 Amendments to Australian Accounting
Standards arising from AASB 13 (effective for
years beginning on or after 1 January 2013)

AASB 13 was released in September 2011. It explains how to
measure fair value and aims to enhance fair value disclosures.
The company has yet to determine which, if any, of its current
measurement techniques will have to change as a result of the
new guidance. It is therefore not possible to state the impact, if
any, of the new rules on any of the amounts recognised in the
financial statements. However, application of the new standard
will impact the type of information disclosed in the notes to the
financial statements. The Group does not intend to adopt the new
standard before its operative date, which means that it would be
first applied in the annual reporting period ending 30 June 2014.

There are no other standards that are not yet effective and
that are expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future
transactions.

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 20132. CritiCAl ACCOuntinG JuDGeMentS AnD eStiMAteS

The Group makes estimates and assumptions in respect of
certain key assets and liabilities. Estimates and judgments are
continually evaluated and are based on historical experience
and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. The
key areas in which critical estimates are applied are described
below.

Estimated impairment of goodwill

The Group annually tests whether goodwill has suffered any
impairment, in accordance with the accounting policy stated
in Note 1(p)). The recoverable amounts of cash-generating
units have been determined based on value-in-use calculation.
These calculations require the use of assumptions. Refer to
Note 17 for details of these assumptions.

The ultimate liability arising from claims made
under private health insurance contracts

Provision is made at the period end for the liability for
outstanding claims which is measured as the central
estimate of the expected payments against claims incurred
but not settled at the reporting date under private health
insurance contracts issued by the Group. The expected future
payments include those in relation to claims reported but
not yet paid and claims incurred but not yet reported. This
‘central estimate’ of outstanding claims is an estimate which
is intended to contain no intentional over or under estimation.
For this reason the inherent uncertainty in the central estimate
must also be considered and a risk margin is added. The
estimated cost of claims includes allowances for Risk
Equalisation Trust Fund (RETF) consequences and claims
handling expense. The Group takes all reasonable steps to
ensure that it has appropriate information regarding its claims
exposures. However, given the uncertainty in establishing
claims provisions, it is likely that the final outcome will prove to
be different from the original liability established.

In calculating the estimated cost of unpaid claims the Group
uses estimation techniques based upon statistical analysis
of historical experience. Allowance is made, however, for
changes or uncertainties which may create distortions in
the underlying statistics or which might cause the cost of
unsettled claims to increase or reduce when compared with
the cost of previously settled claims, including changes in
the Group’s processes which might accelerate or slow down
the development and/or recording of paid or incurred claims,
compared with the statistics from previous periods.

Deferred acquisition costs

In accordance with AASB 1023 General Insurance Contracts,
acquisition costs which lead to future benefits are recognised
as assets where they can be reliably measured and where
it is probable that they will give rise to premium revenue that
will be recognised in the income statement in subsequent
reporting periods.

These deferred acquisition costs are amortised systematically
in accordance with the pattern of the incidence of risk under
the related insurance contract.

nib incurs up front commission costs that will give rise to
future premium revenue and are able to be directly associated
with a particular insurance contract. These costs are deferred
and amortised over the life of the insurance contract.

For the arhi business there are two key assumptions required
to recognise the acquisition costs over the life of the insurance
contract:

1. The period of the insurance contract is assumed to be the
average length of insurance for nib policyholders who are
the subject of an upfront commission.

2. The average length of insurance for nib policyholders who
are the subject of an upfront commission is calculated
by extrapolating historical lapse rates for that group of
policyholders.

In order to allow for the inherent distortion created by
extrapolating historical data the extrapolated life of
policyholders used to determine the average contract life has
been truncated to 10 years.

The calculation is determined taking into account one month
of actual post balance date claims.

Premium payback liabilities

The risk margin is based on an analysis of the past experience
of the Group. This analysis examines the volatility of past
payments that is not explained by the model adopted to
determine the central estimate. This past volatility is assumed
to be indicative of the future volatility. The central estimates
are calculated gross of any risk equalisation recoveries.
A separate estimate is made of the amounts that will be
recoverable from or payable to the RETF based upon the
gross provision.

Details of specific assumptions used in deriving the
outstanding claims liability at year end are detailed in Note 3.

Some policies issued by the Group have a premium payback
(PPB) feature. PPB policies entitle customers to receive
a refund of premiums paid to the Group, less any claims
made, once the policy has been in force for a specified
period. Provision is made at the period end for the liability for
premium payback claims. It is calculated on a policy-by-policy
basis, comparing premiums received and claims paid to date.
The provision is discounted to allow for expected lapses and
investment income, and GST recoveries.

A risk margin at 95% probability of sufficiency was estimated
by assuming there are no future lapses. Most of the PPB
reserve is held in respect of a group of customers where the
historical lapse rate is already very low. Details of specific
assumptions used in deriving the premium payback liability at
year end are detailed in Note 3.

2013 annual report3. ACtuAriAl ASSuMPtiOnS AnD MetHODS

a. Outstanding Claims

Actuarial methods

The outstanding claims estimate for Australian segments is derived based on three valuation classes, namely hospital and
prostheses services combined, Medical services, and General Treatment. For the New Zealand segment the outstanding claims
estimate is derived based on two valuation classes, surgical and medical. This analysis is supplemented by more granular
analysis within classes as appropriate.

In calculating the estimated cost of unpaid claims for the Australian Residents Health Insurance (arhi), two methods are used.
For service months April 2013 and earlier for hospital and medical, and for all months for general treatment, a chain ladder
method is used; this assumes that the development pattern of the current claims will be consistent with historical experience.
For hospital and medical, for the service months of May 2013 and June 2013 the Bornhuetter-Ferguson method is used, which
progressively blends payment experience and prior forecasts of incurred costs.

For International Workers Health Insurance (iwhi) and International Students Health Insurance (ishi) a chain ladder method is used
for all service months for the valuation of the cost of unpaid claims.

In calculating the estimated cost of unpaid claims for the New Zealand Health Insurance Business (nib nzed), two methods are
used. For service months April 2013 and earlier, a chain ladder method is used; this assumes that the development pattern of the
current claims will be consistent with historical experience. For the service months of May 2013 and June 2013 the Bornhuetter-
Ferguson method is used, which progressively blends payment experience and prior forecasts of incurred costs.

Actuarial assumptions

The following assumptions have been made in determining the outstanding claims liability for claims incurred 12 months to the
following dates:

Hospital
%

93.3%

1.8%

0.0%

30.8%

5.0%

76.5%

1.8%

0.0%

5.0%

89.3%

8.0%

0.0%

10.0%

Surgical
%

89.1%

1.7%

0.0%

13.5%

2013

Medical
%

88.4%

1.8%

0.0%

30.8%

5.0%

84.2%

1.8%

0.0%

5.0%

86.9%

8.0%

0.0%

10.0%

Medical
%

77.8%

1.7%

0.0%

13.5%

Ancillary
%

96.1%

1.8%

0.0%

5.0%

98.7%

1.8%

0.0%

5.0%

87.0%

8.0%

0.0%

10.0%

Hospital
%

91.8%

2.2%

0.0%

32.6%

5.0%

85.2%

2.2%

0.0%

5.0%

85.8%

8.0%

0.0%

10.0%

2012

Medical
%

88.4%

2.2%

0.0%

32.6%

5.0%

83.6%

2.2%

0.0%

5.0%

86.8%

8.0%

0.0%

10.0%

Ancillary
%

95.8%

2.2%

0.0%

5.0%

95.5%

2.2%

0.0%

5.0%

83.6%

8.0%

0.0%

10.0%

Surgical
%

Medical
%

N/A

Australian Residents Health
Insurance

Assumed proportion paid to date

Expense rate

Discount rate

Risk equalisation rate

Risk margin

International Students Health
Insurance

Assumed proportion paid to date

Expense rate

Discount rate

Risk margin

International Workers Health
Insurance

Assumed proportion paid to date

Expense rate

Discount rate

Risk margin

NZ Health Insurance

Assumed proportion paid to date

Expense rate

Discount rate

Risk margin

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

Sensitivity analysis – insurance contracts

i. Summary

The Group conducts sensitivity analysis to quantify the
exposure to risk of changes in the key underlying variables.
The valuations included in the reported results are calculated
using certain assumptions about these variables as disclosed
above. The movement in any key variable will impact the
performance and equity of the Group. The tables below
describe how a change in each assumption will affect the
insurance liabilities:

Variable

Impact of movement in variable

Chain Ladder
Development
Factors

Bornhuetter-
Ferguson Unpaid
Factors

Expense rate

An increase or decrease in the chain
ladder factors would lead to a higher
or lower projection of the ultimate
liability and a corresponding increase or
decrease in claims expense respectively.

An increase or decrease in the level of
unpaid would lead to a higher or lower
projection of the ultimate liability and a
corresponding increase or decrease on
claims expense respectively.

An estimate for the internal costs of
handling claims is included in the
outstanding claims liability. An increase
or decrease in the expense rate
assumption would have a corresponding
impact on claims expense.

Risk equalisation An estimate for the risk equalisation cost

Risk margin

is included in the outstanding claims
liability. An increase or decrease in the
risk equalisation allowance would have a
corresponding impact on RETF Levy.

An estimate of the amount of uncertainty
in the determination of the central
estimate. An increase or decrease in the
risk margin would have a corresponding
impact on claims expense.

The risk margin of 5.0% for arhi and ishi (2012: 5.0%), 10%
for iwhi (2012: 10%) and 13.5% for nib nzed of the underlying
liability has been estimated to equate to a probability of
adequacy of approximately 95% for each individual segment.
This equates to a probability of adequacy for the Group of
greater than 95%.

Process used to determine assumptions

A description of the processes used to determine these
assumptions is provided below:

i. Chain Ladder Development Factors

Chain ladder development factors were selected based
on observations of historical claim payment experience.
Particular attention was given to the development of the most
recent 12 months.

ii. Bornhuetter-Ferguson Unpaid Factors

Bornhuetter-Ferguson Unpaid Factors were selected based
on historical patterns of payment (by development) to ultimate
incurred claims. That is, the proportion of ultimate incurred
claims to be paid by development month is selected based
on observations from the historical development. This “unpaid
proportion” is then multiplied by a prior forecast of incurred
claims for each service month to determine the outstanding
claims estimate.

iii. Expense rate

Claims handling expenses were calculated by reference
to past experience of total claims handling costs as a
percentage of total past payments.

iv. Discount rate

As claims for health funds are generally settled within one
year, no discounting of claims is applied as the difference
between the undiscounted value of claims payments and the
present value of claims payments is not likely to be material.

v. Risk equalisation allowance

In simplified terms, each organisation is required to contribute
to the risk equalisation pool or is paid from the pool to
equalise their hospital claims exposure to members aged
over 55 years of age and in respect of high cost claims.
This is the allowance made in respect of the claims incurred
but not yet paid.

vi. Risk margin

The risk margin has been based on an analysis of the past
experience of the Group. This analysis examined the volatility
of past payments that has not been explained by the model
adopted to determine the central estimate. This past volatility
has been assumed to be indicative of the future volatility and
has been set at a level estimated to equate to a probability of
adequacy of 95% (June 2012: 95%).

2013 annual report
3. ACtuAriAl ASSuMPtiOnS AnD MetHODS continued

ii. Impact of key variables

Profit
2013
$000

67,157

Movement in
variable

Adjustments
$000

Adjusted
amounts
$000

Adjustments
$000

+0.5%

-0.5%

+2.0%

-2.0%

+1.0%

-1.0%

+2.5%

-2.5%

+1.0%

-1.0%

(4,003)

4,006

(3,061)

3,063

(644)

647

(1,086)

1,086

(743)

746

63,154

71,163

64,096

70,220

66,513

67,804

66,071

68,243

66,414

67,903

(4,003)

4,006

(3,061)

3,063

(644)

647

(1,086)

1,086

(743)

746

Equity
2013
$000

326,153

Adjusted
amounts
$000

322,150

330,159

323,092

329,216

325,509

326,800

325,067

327,239

325,410

326,899

Recognised amounts in the financial statements

Variable

Chain Ladder Development Factors

Bornhuetter-Ferguson Unpaid Factors

Expense rate

Risk equalisation allowance

Risk margin

b. Premium payback liability

Actuarial methods

A number of TOWER Medical’s health insurance policies have a benefit whereby policyholders receive a proportion of premiums
paid less claims received over the life of their policy, “premium payback”, if certain conditions are met. This liability represents a
long term health insurance contract liability. The liability was determined based on the discounted value of accumulated excess
of premiums over claims at an individual policy level, adjusted for GST recoveries and expected future lapses.

Actuarial assumptions

The following assumptions have been made in determining the premium payback liability:

Lapse rate until three years from premium payback date

Lapse rate within three years of premium payback date

Expense rate

Discount rate for succeeding and following year

Risk margin

The risk margin has been estimated to equate to a 95% probability of adequacy.

2013

2.0% – 10.0%

0.0% – 1.0%

0.0%

3.0% – 3.5%

6.8%

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

Sensitivity analysis – premium payback liability

i. Summary

Variable

Impact of movement in variable

Lapse rate

Discount rate

Rate used in calculating the discounted provision to allow for expected lapses, based on historical
experience. An increase or decrease in the lapse assumption would have a corresponding impact
on profit.

Rate used in calculating the discounted provision to allow for expected investment income, based on the
current yields on New Zealand government debt (risk free rates). An increase or decrease in the discount
rate assumption would have a corresponding impact on profit.

Risk margin

An estimate of the amount of uncertainty in the determination of the central estimate. An increase or
decrease in the risk margin would have an inverse impact on profit.

ii. Impact of key variables

Recognised amounts in the financial statements

Profit
2013
$000

67,157

Variable

Lapse rate

Discount rate

Risk margin

Movement in
variable

Adjustments
$000

Adjusted
amounts
$000

Adjustments
$000

+1.0%

-1.0%

+1.0%

-1.0%

+1.0%

-1.0%

725

(782)

1,194

(1,317)

(275)

275

67,882

66,375

68,351

65,840

66,882

67,432

725

(782)

1,194

(1,317)

(275)

275

Equity
2013
$000

326,153

Adjusted
amounts
$000

326,878

325,371

327,347

324,836

325,878

326,428

2013 annual report

4. riSK MAnAGeMent

The financial condition and operation of the Group are affected by a number of key financial risks including insurance risk,
interest rate risk, credit risk, market risk, liquidity risk, financial risk and fiscal risk, and non-financial risks including sovereign
risk, operational risk, regulatory and compliance risk. Notes on the Group’s policies and procedures in respect of managing
the financial risks are set out in this note below.

a. Objectives in managing risks arising from private health insurance contracts and policies for

mitigating those risks

nib’s Board of Directors determines the Group’s overall risk appetite and approves the risk management strategies, policies
and practices to ensure that risks are identified and managed within the context of this appetite.

The Group’s risk management framework manages risks through:

¾ The establishment of the Audit Committee and the Risk and Reputation Committee to assist the Board in the execution of its

responsibilities:

¾ The Audit Committee’s responsibilities include:

– reviewing the annual reports and other financial information distributed externally;

– recommending the appointment and remuneration of the external auditor;

– reviewing the performance and independence of the external auditor; and

– reviewing the Group’s systems and procedures for compliance with legal and regulatory requirements as they relate

to the integrity of the Group’s financial statements and other material regulatory documents.

¾ The Risk and Reputation Committee’s responsibilities include:

– assisting the Board to review the effectiveness of the Group’s system of internal control;

– recommending the appointment and remuneration of the internal auditor;

– reviewing the performance and independence of the internal auditor;

– monitoring the risk management system; and

– reviewing the Group’s systems and procedures for compliance with legal and regulatory requirements other than those

monitored by the Audit Committee.

¾ The Group’s internal policies and procedures designed to mitigate such risks:

¾ The maintenance and use of management information systems which provide up to date, reliable data on the risks which

the business is exposed to at any point in time.

¾ Actuarial models, using information from the management information systems, are used to calculate premiums and

monitor claims patterns. Past experience and statistical methods are used as part of the process.

¾ A rigorous approach to product design to mitigate the risk of the Group being exposed to adverse selection.

¾ Maintenance of reserves in excess of solvency and capital adequacy regulatory requirements.

¾ An investment strategy which delivers a diversified portfolio with a heavier weighting to defensive assets versus growth assets.

¾ The maintenance of defined underwriting processes where applicable.

¾ Internal audit which provides independent assurance to senior management and Directors regarding the adequacy of controls

over activities where the risks are perceived to be high.

¾ Regular risk and compliance reporting.

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013 ¾ The application of standards for solvency and capital adequacy legislated under division 140 and 143 of the Private Health

Insurance Act 2007 (the Act):

– The Solvency and Capital Adequacy Standards are established under the Act, and are an integral component of the

prudential reporting and management regime for registered private health insurers.

– These standards impose a two tier capital requirement on private health insurers with each tier considering the capital

requirements in a different set of circumstances.

– The first tier – solvency – is intended to ensure the basic solvency of the fund (that is, in the unlikely event of a wind-up); at
any time on a run-off, the fund’s financial position is such that the insurer will be able to meet, out of the fund’s assets, all
liabilities incurred for the purposes of the fund as those liabilities become due.

– The second tier – capital adequacy – is intended to secure the financial soundness of the health benefits fund on a

going concern basis, in particular its ability to remain solvent for at least the next three years. It is expected that in most
circumstances this second tier will provide an additional buffer of capital above the minimum solvency requirement.

¾ The New Zealand business is subject to the application of solvency standards for non life business issued by the Reserve
Bank of New Zealand which require a margin to be maintained over minimum solvency capital as a condition of TOWER
Medical’s insurance license.

b. Insurance risk

In addition to the risk management policies and procedures adopted to manage insurance risk set out in Note 4(a) the provision
of private health insurance in Australia is governed by the Act. Private health insurance business (arhi) is the primary focus of
the Act which governs the provision of Complying Health Insurance Products (CHIPS). Under the Act, Registered Private Health
Insurers may also provide health-related business as prescribed, and nib provides International Students Cover (ishi) and
International Workers Cover (iwhi) in this respect. The industry in Australia, is shaped by a number of regulatory factors:

¾ Community Rating: The principle of community rating prevents private health insurers from improperly discriminating
between people who are or who wish to become insured, on the basis of their health status, age, race, gender, religious
beliefs, sexuality, frequency of need of health care, lifestyle or claims history. Community rating applies to CHIP (arhi) and ishi,
but not to iwhi.

¾ Risk Equalisation: The risk equalisation scheme seeks to share the risks among all registered health insurers by

averaging out the cost of hospital treatment across the industry. Money is then transferred from private health insurers with
younger healthier members with lower average claims payments (such as nib) to those insurers with older and less healthy
membership and which have higher average claims payments. The scheme applies to all health insurance business (CHIP)
but does not apply to ishi or iwhi.

¾ Coverage Requirements: The Act limits the types of treatments that private health insurers can offer as part of their

health insurance business (CHIP). ishi products coverage requirements are set out in a Deed between the insurer and the
Commonwealth, while the health services offered under iwhi cover are largely at the discretion of the insurer.

¾ Premium Approval: Under the Act, insurers can only increase CHIP premiums with the approval of the Minister. The Minister
must approve the amounts unless they are is satisfied that the change would be contrary to the public interest. Insurers can
ordinarily only seek one premium increase per annum. ishi products can raise premiums in line with the requirements set out
in the Deed, which is also ordinarily annually and requires notification to the Department of Health and Ageing. iwhi product
premiums are not regulated by the Act or under any Deed with the Commonwealth.

In New Zealand, private health insurance is governed by the Insurance (Prudential Supervision) Act 2010 which requires an
insurer to be licensed and requires a licensed insurer to:

¾ Maintain and disclose a financial strength rating;

¾ Maintain a fit and proper policy, which apply to Directors and other relevant officers;

¾ Maintain a risk management program;

¾ Have an appointed actuary and ensure the actuarial information contained in or used in the preparation of financial statements

is reviewed by the appointed actuary; and

¾ Maintain a solvency margin over the minimum solvency capital required under the solvency standards for non life business

issued by the Reserve Bank of New Zealand.

2013 annual report4. riSK MAnAGeMent continued

c. Market risk

i. Fair value interest rate risk

The Group’s main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to
cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk if the borrowings are
carried at fair value. The Group’s borrowings at variable rate were denominated in New Zealand Dollars.

The interest rate swaps have the effect of converting risk from the Premium Payback Liability. Under the interest rate swaps, the
Group agrees with other parties to exchange, at specified intervals (mainly monthly), the difference between fixed contract rates
and floating rate interest amounts calculated by reference to the agreed notional principal amounts.

As at the end of the reporting period, the Group had the following variable rate borrowings and interest rate swap contracts
outstanding:

Bank loans

Interest rate swaps (notional principal amount)

Net exposure to cash flow interest rate risk

An analysis by maturities is provided at Note 4(e).

2013

2012

Weighted
average
interest rate
%

4.1%

5.7%

Weighted
average
interest rate
%

–

Balance
$000

59,149

(2,117)

57,032

Balance
$000

–

The Group’s other interest rate risks arise from receivables, financial assets at fair value through profit and loss and cash and
cash equivalents. Receivables arising from the deferred settlement of discontinued operations sold are subject to 90-day
bank bill rates. All other receivables are non-interest bearing. There is an interest-bearing component of financial assets at fair
value through profit and loss. nib receives advice from its asset consultant, JANA Implemented Consulting and TOWER Asset
Management Limited. The Group has adopted an investment strategy that delivers a diversified portfolio with a heavier weighting
to defensive assets versus growth assets. Defensive assets consist of Australian and overseas fixed interest investments and
cash and cash equivalents.

The table below summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.

Interest Rate Risk

-100bps

+100bps

-100bps

+100bps

2013

2012

Carrying
amount
$000

Profit
$000

Equity
$000

Profit
$000

Equity
$000

Carrying
amount
$000

Profit
$000

Equity
$000

Profit
$000

Equity
$000

Financial assets

Cash and cash equivalents

143,056

(1,001)

1,001

86,673

Other receivables

17,151

(120)

120

120 26,809

(607)

(188)

(607)

(188)

607

188

607

188

Financial assets at fair value through
profit or loss

Unlisted equity securities

Financial liabilities

Bank loans

Premium payback liability

Total Increase / (decrease)

351,786

3,544

(3,492)

(3,492) 356,774

2,458

(2,458)

2,735

–

2,206

–

(59,149)

414

(40,214)

(1,140)

(414)

909

(414)

909

–

1,697

(1,876)

1,663

(1,663)

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

ii. Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from foreign currency translation risk through
its subsidiaries located in New Zealand. Foreign exchange gains or losses arising on translation of the Group’s foreign operations
to the Group’s Australian dollar presentation currency are recognised directly in equity in accordance with the policy set out in
Note 1(d). The Group does not hedge this risk.

The table below summarises the sensitivity of the Group’s equity to a 10% strengthening and weakening of the Australian dollar
against the New Zealand dollar, with all other variables held constant.

Foreign Exchange Risk

Shareholders equity exposure

Loan from parent entity to nib nzed limited

Total Increase / (decrease)

iii. Price risk

2013

2012

-10%

+10%

-10%

+10%

Exposure
$000

Equity

$000

Exposure
$000

Equity

$000

8,029

(803)

17,518

(1,752)

25,547

(2,555)

803

1,752

2,555

–

The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified on the
balance sheet as either available-for-sale or at fair value through profit or loss. The Group is not exposed to commodity price risk.

To manage its price risk the Group has adopted an investment strategy which delivers a diversified portfolio with a heavier
weighting to defensive assets versus growth assets.

Post-tax profit for the year would increase/decrease as a result of gains/losses on equity securities classified as at fair value
through profit or loss. Other components of equity would increase/decrease as a result of gains/losses on equity securities
classified as available-for-sale. As the fair value of the available-for-sale financial assets would still be above cost, no impairment
loss would be recognised in profit and loss as a result of the decrease in the unit price.

The table below summarises the sensitivity of the Group’s financial assets to price risk.

Other Price Risk

-10% unit price

+10% unit price

-10% unit price

+10% unit price

2013

2012

Carrying
amount
$000

Profit
$000

Equity
$000

Profit
$000

Equity
$000

Carrying
amount
$000

Profit
$000

Equity
$000

Profit
$000

Equity
$000

Financial assets

Financial assets at fair value through
profit or loss

351,786

(2,744)

1,754

1,754 356,774

(3,512)

3,512

Unlisted equity securities

2,735

–

(191)

–

191

2,206

–

(154)

–

154

Total Increase / (decrease)

(2,744)

(2,935)

1,754

1,945

(3,512)

(3,666)

3,512

3,666

Methods and assumptions used in preparing sensitivity analysis

The post-tax effect on profit and equity of movements in both interest rate and price has been calculated using ‘reasonably
possible’ changes in the risk variables, based on recent interest rate and market movements.

An interest rate change of 100 basis points will directly affect interest received on cash and cash equivalents and other
receivables. An interest rate change of 100 basis points will inversely affect the unit price of fixed interest investments; this
change has been calculated by multiplying the average duration of underlying investments in each portfolio by the interest rate
change. All other investments are not directly affected by interest rate changes but would be revalued through profit or loss as
their unit price changes.

2013 annual report

4. riSK MAnAGeMent continued

d. Credit risk

Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, financial assets and deposits with
banks and financial institutions, favourable derivative financial instruments, as well as credit exposures to policyholders, Medicare
Australia (Health Insurance Contribution (HIC) rebate) and entities that have purchased discontinued operations under deferred
settlement terms. nib only deals with major banks in Australia and New Zealand which are independently rated with a minimum
rating of ‘A-1’. nib receives advice from its asset consultants, JANA Implemented Consulting, who provide a rating of investment
managers to nib as part of their advice. Credit risk for premium receivables are minimal due to the diversification of policyholders.
The HIC rebate receivable is due from a government organisation under legislation.

A deferred settlement arrangement is in place for the sale of the Newcastle Private Hospital for $30 million payable in three
instalments on 9 July 2011, 9 July 2012 and 9 July 2013, with $10 million outstanding at 30 June 2013. The deferred settlement
arrangement is covered by a mortgage over the property. Other deferred settlement credit risks are covered by bank guarantees
from the purchaser. The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date
is the carrying amount, net of any provisions for impairment loss, as disclosed in the balance sheet and notes to the financial
statements. The Group does not have any material credit risk to any single debtor or group of debtors under financial instruments
entered into.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit
ratings (if available) or to historical information about counterparty default rates.

2013
$000

2012
$000

211

16,665

275

17,151

26,805

–

26,809

143,056

86,673

49,700

100,000

2,234

–

115,197

78,013

46,955

15,643

4,139

697

105,527

44,815

39,530

10,985

4,909

843

312,578

306,609

Other Receivables

Counterparties without external credit rating

Group 1 – new debtors (less than 6 months)

Group 2 – existing debtors (more than 6 months) with no defaults in the past

Group 3 – existing debtors (more than 6 months) with some defaults in the past. All defaults
were fully recovered.

Total Other Receivables

Cash at Bank and short-term bank deposits

A-1

Financial assets at fair value through profit or loss

Short term deposits

A-1

Derivative financial instruments

Interest-bearing securities

AAA

BBB

Sub Inv Grade

Unclassified

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

e. Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close-out market positions. The Group manages
liquidity risk by continuously monitoring forecast and actual cash flows and holds a high percentage of highly liquid investments.

The bank overdraft within borrowings comprises the closing positive balances of the bank account, adjusted for unpresented
cheques and outstanding deposits. There are no overdraft facilities.

Maturities of financial liabilities

The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the
reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Group at 30 June 2013

≤ 1 month
$000

1 – 3 months
$000

3 – 12 months
$000

1 – 5 years
$000

>5 years
$000

Financial Liabilities

Trade creditors

Other payables

Borrowings

Group at 30 June 2012

Financial Liabilities

Trade creditors

Other payables

Borrowings

3,575

48,747

3,300

55,622

4,873

34,951

2,594

42,418

–

3,258

614

3,872

–

2,140

–

2,140

–

1,822

1,899

–

66,591

–

Total
Contractual
Cash flows
$000

Carrying
amount
$000

3,575

52,082

72,327

3,575

52,082

62,449

127,984

118,106

4,873

37,091

2,594

4,873

37,091

2,594

44,558

2013 annual report4. riSK MAnAGeMent continued

f. Fair value measurement

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.

AASB7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy:

a. quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

b. inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices)

or indirectly (derived from prices) (level 2); and

c. inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

The following tables present the Group’s assets and liabilities measured and recognised at fair value at 30 June 2013 and
30 June 2012.

Group at 30 June 2013

Assets

Cash and cash equivalents and deposits at call

Financial assets at fair value through profit or loss

Short term deposits

Derivative financial instruments

Securities

Available-for-sale financial assets

Unlisted equity securities

Total assets

Group at 30 June 2012

Assets

Cash and cash equivalents and deposits at call

Financial assets at fair value through profit or loss

Short term deposits

Derivative financial instruments

Securities

Available-for-sale financial assets

Unlisted equity securities

Total assets

Level 1
$000

Level 2
$000

Level 3
$000

Total
$000

143,056

49,700

2,234

299,135

–

494,125

86,673

100,000

–

256,062

–

442,735

–

717

2,735

3,452

–

712

2,206

2,918

–

143,056

49,700

2,234

299,852

2,735

497,577

86,673

100,000

–

256,774

2,206

445,653

The fair value of financial instruments traded in active markets (such as financial assets at fair value through profit and loss) is
based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the
current bid price. These instruments are included in level 1.

The fair value of financial instruments that are not traded in active markets (for example available-for-sale financial assets) is
determined using valuation techniques. The Group use a variety of methods and makes assumptions that are based on market
conditions existing at each balance date. These instruments are included in level 2.

The carrying value less impairment provision of other receivables and payables are assumed to approximate their fair values due
to their short-term nature.

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

5. SeGMent rePOrtinG

a. Description of segments

Management has determined the operating segments based on the reports reviewed by the MD/CEO that are used to make
strategic decisions.

The MD/CEO considers the business from both a geographic and product perspective and has identified four reportable
segments. Health Insurance consists of nib’s core product offering within the Australian private health insurance industry (arhi).
Health Related consists of two separate segments – International Students Health Insurance (ishi) and International Workers
Health Insurance (iwhi). On 30 November 2012, nib entered the New Zealand market after acquiring TOWER Medical Insurance
Limited (TOWER Medical), New Zealand’s second-largest private health insurer.

Although the ishi segment does not meet the quantitative thresholds required by AASB 8, management has concluded that
the segment should be reported, as it is closely monitored by the MD/CEO as a potential growth segment and is expected to
contribute to Group revenue in the future.

b. Segment information provided to Executive management

The segment information provided to the MD/CEO for the reportable segments is as follows:

Premium revenue

Outwards reinsurance premium expense

Net premium revenue

Claims expense

Reinsurance and other recoveries revenue

RETF levy

State levies

Decrease / (increase) in premium payback liability

Claims handling expenses

Net claims incurred

Acquisition costs

Other underwriting expenses

Underwriting expenses

2013

Health
Insurance
Australia
$000

International
Students
Australia
$000

International
Workers
Australia
$000

Health
Insurance
New Zealand
7 months
$000

Total
$000

1,187,237

–

1,187,237

4,387

–

4,387

(833,754)

(3,393)

–

(167,430)

(28,811)

–

(14,682)

(1,044,677)

(37,466)

(46,054)

(83,520)

–

(38)

(3,431)

(807)

(228)

(1,035)

28,348

(708)

27,640

(12,119)

333

–

(1,118)

(12,904)

(2,760)

(3,551)

(6,311)

71,139

1,291,111

–

(708)

71,139

1,290,403

(47,719)

(896,985)

–

3,266

(659)

333

(167,430)

(28,811)

3,266

(16,497)

(45,112)

(1,106,124)

(11,204)

(8,434)

(52,237)

(58,267)

(19,638)

(110,504)

Underwriting result

59,040

(79)

8,425

6,389

73,775

Depreciation and amortisation

5,820

–

1,048

2,183

9,051

Total segment assets

Total segment liabilities

Insurance liabilities

Outstanding claims liability

Unearned premium liability

Premium payback liability

Total

518,872

253,766

71,160

80,591

–

151,751

146,284

665,156

68,200

321,966

10,246

12,834

40,214

63,294

81,406

93,425

40,214

215,045

2013 annual report

5. SeGMent rePOrtinG continued

b. Segment information provided to Executive management continued

2012

Health
Insurance
Australia
$000

International
Students
Australia
$000

International
Workers
Australia
$000

Health
Insurance
New Zealand
$000

Premium revenue

Outwards reinsurance premium expense

Net premium revenue

1,095,640

–

1,095,640

3,010

–

3,010

25,158

–

25,158

Claims expense

(751,942)

(2,876)

(10,618)

Reinsurance and other recoveries revenue

RETF levy

State levies

Decrease / (increase) in premium payback liability

Claims handling expenses

Net claims incurred

Acquisition costs

Other underwriting expenses

Underwriting expenses

–

(159,980)

(23,823)

–

(15,860)

(951,605)

(33,471)

(45,947)

(79,418)

–

(74)

(2,950)

(891)

(521)

(1,412)

–

(1,456)

(12,074)

(1,718)

(3,900)

(5,618)

Underwriting result

64,617

(1,352)

7,466

Depreciation and amortisation

5,519

–

1,720

Total segment assets

Total segment liabilities

Insurance liabilities

Outstanding claims liability

Unearned premium liability

Premium payback liability

Total

578,282

309,161

74,993

141,666

–

216,659

–

Total
$000

1,123,808

–

1,123,808

(765,436)

–

(159,980)

(23,823)

–

(17,390)

(966,629)

(36,080)

(50,368)

(86,448)

70,731

7,239

578,282

309,161

74,993

141,666

–

216,659

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

c. Other segment information

The MD/CEO assesses the performance of the operating segments based on net margin. This measurement basis excludes the
effects of non-recurring expenditure from the operating segments such as integration costs. Furthermore, investment income
and expenditure, and other income and expenses including financing costs, are not allocated to segments as this type of activity
is driven by the central treasury function, which manages the cash position of the Group.

No information regarding assets and liabilities for individual Australian segments is provided to the MD/CEO.

i. Segment underwriting result

A reconciliation of segment underwriting result to operating profit before income tax is provided as follows:

Segment underwriting result

Other income

Other expenses

Finance costs

Investment income

Investment expenses

Profit before income tax from continuing operations

ii. Segment assets

2013
$000

73,775

3,098

(7,615)

(1,382)

29,983

(1,199)

96,660

2012
$000

70,731

3,556

(4,270)

–

26,500

(860)

95,657

Assets backing insurance liabilities have been included in segment assets reported. Assets held in nib holdings limited and
nib nzed limited are not allocated to segments.

Reportable segments’ assets are reconciled to total assets as follows:

Segment assets

Unallocated assets:

Cash and cash equivalents

Receivables

Available for sale financial assets

Deferred tax assets

Plant, property and equipment

Total assets as per the balance sheet

iii. Segment liabilities

2013
$000

2012
$000

665,156

578,282

43,511

34,410

2,735

2,529

755

2,206

2,124

714,077

617,845

The Group’s borrowings are not considered to be segment liabilities but rather managed by the treasury function.

Reportable segments’ liabilities are reconciled to total liabilities as follows:

Segment liabilities

Unallocated liabilities:

Payables

Bank loans

Current tax liabilities

Deferred tax liabilities

Total liabilities as per the balance sheet

2013
$000

2012
$000

321,966

309,161

639

59,149

3,669

2,501

202

–

6,884

–

387,924

316,247

2013 annual report

6. reVenue AnD OtHer inCOMe

Premium revenue

Outwards reinsurance premiums

Net premium revenue

Other Income

Sundry income

Investment income

Interest

Net realised gain on financial assets at fair value through profit or loss

Net unrealised gain on financial assets at fair value through profit or loss

Dividends

7. exPenSeS

Expenses by function

Claims handling expenses

Acquisition costs

Other underwriting expenses

Other expenses

Finance costs

Investment expenses

2013
$000

2012
$000

1,291,111

1,123,808

(708)

–

1,290,403

1,123,808

3,098

3,556

9,811

15,365

4,728

12,455

9,908

4,100

29,983

26,500

2013
$000

2012
$000

16,497

52,237

58,267

7,615

1,382

1,199

17,390

36,080

50,368

4,270

–

860

Total expenses (excluding direct claims expenses)

137,197

108,968

Expenses by nature

Employee costs

Depreciation and amortisation

Finance costs

Net loss on disposal of property, plant and equipment

(Appreciation)/impairment of property, plant and equipment

Operating lease rental expenses

Marketing expenses

Marketing expenses - commissions

Merger and acquisition costs

Electronic claims processing fees

Consultancy fees

Legal expenses

Share registry expenses

Investment expenses

Other

Total expenses (excluding direct claims expenses)

56,366

9,072

1,382

–

2,938

22,456

13,855

3,566

3,607

2,703

403

1,684

1,199

17,963

137,197

50,517

7,263

–

(454)

2,667

21,416

3,063

3,435

2,789

555

1,541

860

15,223

108,968

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

8. inCOMe tAx

a. Income tax expense

Recognised in the income statement

Current tax expense

Deferred tax expense

Under (over) provided in prior years

Income tax expense is attributable to:

Profit from continuing operations

Aggregate income tax expense

Notes

2013
$000

2012
$000

25,136

4,348

29,503

23,859

4,230

(72)

28,017

29,503

28,017

Deferred income tax expense included in income tax expense comprises:

Decrease in deferred tax assets

Increase in deferred tax liabilities

301

4,047

4,348

3,258

972

4,230

b. Numerical reconciliation of income tax expense to prima facie tax payable

Profit from continuing operations before income tax expense

96,660

95,657

Tax at the Australian tax rate of 30% (2012: 30%)

28,998

28,697

Tax effect of amounts which are not deductible (taxable) in calculating taxable income:

Differences in foreign tax rates

Net assessable trust distributions

Other deductible expenses

Non-deductible merger and acquisition costs

Non-deductible entertainment expenses

Other non-deductible expenses

Adjustments for current tax of prior periods

Imputation credits and foreign tax credits

Income tax expense

c. Tax expense relating to items of other comprehensive income

Foreign currency translations

Gain on revaluation of land and buildings

Change in value of available for sale financial assets

d. Amounts recognised directly to 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:

Net deferred tax – debited (credited) directly to equity

(104)

149

(263)

1,070

101

(513)

29,503

112

159

317

–

132

(397)

(72)

(507)

28,017

–

374

–

374

–

(174)

29(b)

27(a)

2013 annual report

9. CASH AnD CASH equiVAlentS

Cash at bank and cash on hand

Short term deposits and deposits at call

a. Risk exposure

2013
$000

57,408

85,648

143,056

2012
$000

36,181

50,492

86,673

The Group’s exposure to interest rate risk is discussed in Note 4(c)(i). The maximum exposure to credit risk at the reporting date
is the carrying amount of each class of cash and cash equivalents mentioned above.

10. reCeiVABleS

Current

Premium receivable

Health Insurance Contribution (HIC) rebate receivable

Other receivables

Provision for impairment loss

Prepayments

Non-Current

Other receivables

2013
$000

2012
$000

5,940

29,292

17,151

(938)

2,227

53,672

4,405

47,434

16,809

(366)

1,926

70,208

–

10,000

The Health Insurance Contribution (HIC) rebate abnormally increased in the prior year as a result of a high level of prepayments of
premium revenue in May and June 2012.

a. Impaired receivables

As at 30 June 2013 current receivables of the Group with a nominal value of $0.938 million (2012: $0.366 million) were impaired.
The individually impaired receivables relate to premium receivables.

The ageing of these receivables is as follows:

1 to 3 months

3 to 6 months

Over 6 months

Movements in the provision for impairment of receivables are as follows:

At 1 July 2012

Provision for impairment acquired with subsidiary

Provision for impairment recognised during the year

Receivables written off during the year as uncollectible

Unused amount reversed

2013
$000

451

127

360

938

2013
$000

366

173

399

–

938

2012
$000

267

366

2012
$000

240

–

126

–

366

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

b. Past due but not impaired

As of 30 June 2013 and 2012 no receivables were past due but not impaired.

c. Interest rate risk

Information about the Group’s exposure to interest rate risk in relation to other receivables is provided in Note 4.

d. Fair value and credit risk

Due to the short-term nature of current receivables, their carrying amount is assumed to approximate their fair value.

The fair values and carrying values of non-current receivables are as follows:

Other receivables

2013

Carrying
Amount
$000

–

Fair Value
$000

–

2012

Carrying
Amount
$000

10,000

Fair Value
$000

10,000

The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above.

e. Risk exposure

The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivable mentioned above.
The Group holds a mortgage over the property for the deferred settlement of the Newcastle Private Hospital. Refer to Note 4 for
more information on the risk management policy of the Group and the credit quality of the Group’s receivables.

11. FinAnCiAl ASSetS At FAir VAlue tHrOuGH PrOFit Or lOSS

Financial assets are designated at fair value through profit or loss and include the following:

Equity securities

Interest-bearing securities

Short term deposits

Derivative financial instruments – interest rate swap contracts

2013
$000

39,207

260,645

49,700

2,234

2012
$000

50,165

206,609

100,000

–

351,786

356,774

Changes in fair values of financial assets at fair value through profit or loss are recorded in investment income in profit or loss
in Note 6.

a. Risk exposure

Information about the Group’s exposure to price risk and interest rate risk is provided in Note 4.

12. reinSurAnCe AnD OtHer reCOVerieS reCeiVABle

Expected future reinsurance recoveries undiscounted

on claims paid

on outstanding claims

Reinsurance and other recoveries receivable on incurred claims

2013
$000

102

(21)

2012
$000

–

2013 annual report

13. DeFerreD ACquiSitiOn COStS

Current

Deferred acquisition costs

Non-current

Deferred acquisition costs

Movements in the deferred acquisition costs are as follows:

Balance at beginning of year

Deferred acquisition costs acquired with subsidiary

Acquisition costs deferred during the year

Amortisation expense

Exchange differences

See Note 1(k) for more information.

14. AVAilABle-FOr-SAle FinAnCiAl ASSetS

Available-for-sale financial assets include the following classes of financial assets:

Unlisted equity securities

a. Unlisted securities

Notes

2013
$000

11,778

15,448

2013
$000

8,851

7,628

18,080

(7,894)

561

27,226

2012
$000

2,140

6,711

2012
$000

–

9,599

(748)

–

8,851

2013
$000

2012
$000

2,735

2,206

Unlisted securities are traded in inactive markets. Their fair value is determined based on valuation techniques and the price of
shares traded, where available, during the financial year ended 30 June 2013.

b. Impairment and risk exposure

None of the financial assets are either past due or impaired.

All available-for-sale assets are denominated in Australian currency. For an analysis of the sensitivity of available-for-sale financial
assets to price risk refer to Note 4.

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

15. DeFerreD tAx ASSetS

The balance comprises temporary differences attributable to:

Notes

2013
$000

2012
$000

Depreciation

Employee benefits

Outstanding claims

Unrealised losses on investments

Premium payback liabilities

Other

Doubtful debts

Asset revaluation

Provisions

Merger and acquisition costs

Sub-total other

Total deferred tax assets

Set-off of deferred tax liabilities pursuant to set-off provisions

Net deferred tax assets

Deferred tax assets to be recovered within 12 months

Deferred tax assets to be recovered after more than 12 months

143

2,006

337

–

10,882

13,368

163

1,808

175

2,181

289

1,684

418

277

–

2,668

104

240

731

377

1,452

15,549

4,120

(13,020)

2,529

5,444

10,105

15,549

(1,996)

2,124

2,275

1,845

4,120

Movements

Depreciation
$000

Share issue
expenses
$000

Employee
benefits
$000

Outstanding
claims
$000

Demutual-
isation
costs
$000

Unrealised
losses on
investments
$000

Premium
payback
reserves
$000

At 1 July 2011

432

505

1,632

416

1,034

1,526

(1,034)

(1,249)

–

277

(Charged)/credited to
the income statement

(Charged)/credited
directly to equity

At 30 June 2012

At 1 July 2012

(Charged)/credited to
the income statement

(Charged)/credited
directly to other
comprehensive income

Acquisition of subsidiary

At 30 June 2013

(143)

(505)

–

289

(146)

–

143

–

1,684

418

1,684

418

230

(81)

–

2,006

337

–

Other
$000

Total
$000

2,033

7,578

(381)

(3,258)

(200)

1,452

(200)

4,120

–

277

–

1,452

4,120

(277)

(909)

882

(301)

–

789

11,002

10,882

(201)

596

11,134

2,181

15,549

2013 annual report

16. PrOPertY, PlAnt & equiPMent

Fair value/Cost

Balance at 1 July 2011

Additions

Disposals

Revaluations

Balance at 30 June 2012

Balance at 1 July 2012

Additions

Acquisition of subsidiary

Disposals

Revaluations

Exchange differences

Balance at 30 June 2013

Depreciation and impairment losses

Balance at 1 July 2011

Depreciation charge for the year

Disposals

Revaluations

Balance at 30 June 2012

Balance at 1 July 2012

Depreciation charge for the year

Disposals

Revaluations

Exchange differences

Balance at 30 June 2013

Carrying amounts

At 30 June 2012

At 30 June 2013

Land &
Buildings
$000

Plant &
Equipment
$000

Leasehold
Improvements
$000

38,415

–

(209)

38,206

–

8,445

1,500

(321)

–

9,624

2,012

206

(106)

–

2,660

181

(180)

–

2,661

179

–

(188)

–

Total
$000

49,520

1,681

(501)

(209)

50,491

2,244

206

(294)

38,358

11,755

2,652

52,765

(642)

(1,297)

–

1,907

(32)

(1,179)

–

(5,335)

(1,343)

220

–

(1,685)

(385)

173

–

(6,458)

(1,897)

(6,458)

(1,488)

103

–

(1)

(1,897)

(333)

188

–

(7,662)

(3,025)

393

1,907

(8,387)

(3,000)

291

(1)

(1,157)

(7,844)

(2,042)

(11,043)

38,174

37,201

3,166

3,911

764

610

42,104

41,722

a. Valuations of land and buildings

The valuation basis of land and buildings is fair value being the amounts for which the properties could be exchanged between
willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same
location and condition. Freehold land and buildings at 22 Honeysuckle Drive was valued by a member of the Australian Property
Institute as at 18 June 2012. Other freehold land and buildings were independently valued by a member of the Australian
Property Institute as at 30 June 2013. It is the opinion of the Directors that these valuations represent the fair value of the
properties at 30 June 2013.

b. Carrying amounts that would have been recognised if land and buildings were stated at cost

If freehold land and buildings were stated at cost on an historical cost basis, the amounts would be as follows:

Cost

Accumulated depreciation

Net book amount

2013
$000

41,529

(6,133)

35,396

2012
$000

41,479

(4,901)

36,578

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

17. intAnGiBle ASSetS

Fair value/Cost

Balance at 1 July 2011

Additions

Disposals

Balance at 30 June 2012

Balance at 1 July 2012

Additions

Acquisition of subsidiary

Disposals

Exchange differences

Balance at 30 June 2013

Amortisation and impairment losses

Balance at 1 July 2011

Amortisation charge for the year

Disposals

Balance at 30 June 2012

Balance at 1 July 2012

Amortisation charge for the year

Disposals

Exchange differences

Balance at 30 June 2013

Carrying amounts

At 30 June 2012

At 30 June 2013

Goodwill
$000

Software
$000

Brands and
Trandemarks
$000

Customer
Contracts
$000

25,447

–

25,447

–

25,189

–

1,879

52,515

–

24,426

4,049

(15)

28,460

6,707

2,341

–

188

37,696

(16,752)

(3,272)

(20,013)

(3,729)

–

(3)

(23,745)

4,044

–

2,360

–

176

6,580

–

(732)

–

(8)

(740)

Total
$000

57,010

4,049

(15)

61,044

6,707

48,152

–

3,606

119,509

4,044

3,093

–

4,044

3,093

–

18,262

–

1,363

22,718

(1,160)

(966)

–

(17,912)

(4,238)

(2,126)

(22,139)

(2,126)

(1,615)

–

(13)

(22,139)

(6,076)

–

(24)

(3,754)

(28,239)

25,447

52,515

8,447

13,951

4,044

5,840

967

18,964

38,905

91,270

a. Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segments.

Goodwill

At 30 June 2013

At 30 June 2012

Health
Insurance
Business
Australia
$000

7,067

International
Students
Australia
$000

International
Workers
Australia
$000

Health
Insurance
New Zealand
$000

–

18,380

27,068

–

Total
$000

52,515

25,447

The recoverable amount of a CGU is determined based on a value-in-use calculation, and the recoverable amount exceeds the
carrying value of the goodwill. The value-in-use calculation uses cash flow projections based on financial budgets and forecast
forward projections approved by management covering a three-year period.

2013 annual report

17. intAnGiBle ASSetS continued

b. Key assumptions used for value-in-use calculations

The assumptions used for the cash flow projections for the first three years are in line with the current Board approved budget
and forecast forward projections. Key assumptions include membership growth, claims ratio and the discount factor.

Membership growth is calculated by forecasting the number of sales each month based on budgeted advertising and
promotions spend, less the number of expected lapses each month. Claims ratios are targeted that generate price increases that
maintain price competitiveness, cover expected increases in claims costs, do not adversely affect the funds capital adequacy
position and enable funding of future business growth.

Cash flows beyond the three-year period are extrapolated to 10 years assuming a conservative growth factor of zero. The Group
has applied a post-tax discount rate to discount the forecast future attributable post tax cash flows. The discount rate applied of
9.0% represents the 10-year Australian bond rate of 3.74% plus a risk adjustment of 5.26%. This equates to a pre-tax discount
rate of 12.05%.

18. PAYABleS

Outwards reinsurance expense liability – premiums payable to reinsurers

Trade creditors

Other payables

RETF payable*

Annual leave payable

2013
$000

230

3,575

52,082

41,215

3,851

100,953

2012
$000

–

4,873

37,091

41,384

3,342

86,690

* Risk Equalisation Trust Fund (RETF) Levy represents expenses incurred under Risk Equalisation Trust Fund arrangements which are provided for within the legislation

to support the principle of community rating.

a. Amounts not expected to be settled within the next 12 months

Annual leave payable is accrued annual leave. The entire amount is presented as current, since the Group does not have an
unconditional right to defer settlement. However, based on past experience, the Group does not expect all employees to take the
full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not to be
expected to be taken within the next 12 months.

Annual leave obligation expected to be settled after 12 months

2013
$000

506

2012
$000

599

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 201319. BOrrOWinGS

Current

Bank overdraft

Non-current

Bank loans (secured)

2013
$000

2012
$000

3,300

2,594

59,149

–

The bank overdraft comprises the closing positive balance of the bank account, adjusted for unpresented cheques and
outstanding deposits.

The Group has a line-of-credit facility for corporate credit cards issued to nib employees for a total of $2.0 million. Outstanding
amounts as at 30 June 2013 are included in Current Liabilities – Payables under Trade Creditors.

a. Secured liabilities

nib nzed limited, a wholly owned subsidiary of nib holdings limited, has a NZ$70 million variable rate term loan facility in
relation to the acquisition of TOWER Medical Insurance Limited with maturity and repayment at the end of three years being
30 November 2015.

The bank loan is secured by the shares in nib nzed limited and a negative pledge that imposes the following covenants on the
Group. The negative pledge states that the Group will ensure that the following financial ratios are met:

i. The Group Gearing Ratio will not be more than 35%.

ii. The Group Net Tangible Assets will not be less than $180,000,000.

As at 30 June 2013 the Group Gearing Ratio was 16.1% and the Group Net Tangible Assets were $234.9 million.

nib holdings limited has provided a guarantee and indemnity to the ANZ Bank New Zealand on behalf of nib nzed limited in
respect of the NZD$70 million term loan facility.

nib holdings limited has subordinated any amounts owing to it from nib nzed limited and TOWER Medical in favour of all other
creditors of these companies.

b. Risk exposure

Information on the sensitivity of the Group’s profit and equity to interest rate risk on borrowings is provided in Note 4.

2013 annual report

20. OutStAnDinG ClAiMS liABilitY

a. Outstanding claims liability

Outstanding claims – central estimate of the expected future payment for claims incurred

Risk Margin

Claims handling costs

Gross outstanding claims liability

Outstanding claims – expected payment to the *RETF in relation to the central estimate

Risk Margin

Net outstanding claims liability

2013
$000

63,048

3,771

1,220

68,039

12,731

636

81,406

2012
$000

55,780

2,941

1,320

60,041

14,240

712

74,993

* Risk Equalisation Trust Fund (RETF) Levy represents expenses incurred under Risk Equalisation Trust Fund arrangements which are provided for within the legislation

to support the principle of community rating

b. Risk margin

The risk margin of 5.0% (2012: 5.0%) for Australian Residents Health Insurance (arhi),and International Students Health Insurance
(ishi), and 10% (2012: 10%) for International Workers Health Insurance (iwhi) of the underlying liability has been estimated to
equate to a probability of adequacy of approximately 95% (2012: 95%).

The central estimate of outstanding claims (including those that have been reported but not yet settled and which have been
incurred but not yet reported) is an estimate which contains no intentional over or under estimation. For this reason the inherent
uncertainty in the central estimate must also be considered.

The risk margins have been based on an analysis of the past experience of the Group. This analysis examined the volatility of
past payments that has not been explained by the model adopted to determine the central estimate. This past volatility has been
assumed to be indicative of the future volatility.

In calculating the estimated cost of unpaid claims for the arhi, two methods are used. For service months April 2013 and
earlier for hospital and medical, and for all months for general treatment, a chain ladder method is used; this assumes that the
development pattern of the current claims will be consistent with historical experience. For hospital and medical, for the service
months of May 2013 and June 2013 the Bornhuetter-Ferguson method is used, which progressively blends payment experience
and prior forecasts of incurred costs.

For iwhi and ishi a chain ladder method is used for all service months for the valuation of the cost of unpaid claims.

As claims for health funds are generally settled within one year, no discounting of claims is usually applied as the difference
between the undiscounted value of claims payments and the present value of claims payments is not likely to be material.
Accordingly, reasonable changes in assumptions would not have a material impact on the outstanding claims balance.

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013
Changes in the gross outstanding claims can be analysed as follows:

Gross outstanding claims at beginning of period

Administration component

Risk margin

Central estimate at beginning of period

Change in claims incurred for the prior year

Claims paid in respect of the prior year

Claims incurred during the year (expected)

Claims paid during the year

Outstanding claims acquired with subisidiary

Effect of changes in foreign exchange rates

Central estimate at end of period

Administration component

Risk margin

Gross outstanding claims at end of period

21. uneArneD PreMiuM liABilitY

Current

Unearned premium liability

Non-current

Unearned premium liability

Movements in the unearned premium liability are as follows:

Unearned premium liability as at 1 July

Unearned premium liability acquired with subsidiary

Deferral of premiums on contracts written in the period

Earning of premiums written in previous periods

Unearned premium liability as at 30 June

2013
$000

60,041

(1,320)

(2,941)

55,780

(2,056)

(62,869)

893,219

(831,088)

9,400

662

63,048

1,220

3,771

68,039

2012
$000

53,805

(1,317)

(2,594)

49,894

(666)

(49,228)

765,926

(710,146)

–

55,780

1,320

2,941

60,041

2013
$000

2012
$000

90,092

135,867

3,333

5,799

Notes

2013
$000

141,666

12,566

80,859

(141,666)

93,425

2012
$000

65,202

–

141,666

(65,202)

141,666

Unearned premium liability was abnormally high in 2012 as a result of a high level of prepayments of premium revenue in May
and June 2012.

22. unexPireD riSK liABilitY

No deficiency was identified as at 30 June 2013 and 2012 that resulted in an unexpired risk liability needing to be recognised.

2013 annual report

23. Current tAx liABilitieS

Current tax payable

24. PrOViSiOn FOr eMPlOYee entitleMentS

Current

Long service leave

Termination benefits

Retirement benefits

Non-Current

Long service leave

2013
$000

2012
$000

3,669

6,884

2013
$000

1,878

143

2,090

1,217

2012
$000

1,475

603

2,144

1,276

Amounts not expected to be settled within the next 12 months

The current provision for long service leave and retirement benefits includes all unconditional entitlements where employees
have completed the required period of service and also those where employees are entitled to pro-rata payments in certain
circumstances. The entire amount is presented as current, since the Group does not have an unconditional right to defer
settlement. However, based on past experience, the Group does not expect all employees to take the full amount of the provision
or require payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid
within the next 12 months.

Long service leave obligation expected to be settled after 12 months

Retirement benefit obligation expected to be settled after 12 months

2013
$000

1,686

1,755

2012
$000

1,223

1,289

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

25. PreMiuM PAYBACK liABilitY

Current

Premium payback liability

Non current

Premium payback liability

Movements in the premium payback liability are as follows:

Premium payback liability acquired with subisidiary

New funding

Benefits paid

Other

Exchange differences

Balance at 30 June

2013
$000

2012
$000

8,287

31,927

2013
$000

40,545

3,512

(6,563)

(169)

2,889

40,214

–

2012
$000

–

Notes

See Note 1(i) for more information for accounting policies in relation to premium payback liability.

a. Risk exposure

For information on actuarial assumptions and methods and sensitivity to profit and equity refer to Note 3(b).

Information about the Group’s exposure to interest rate risk in relation to premium payback liability is provided in Note 4(c)(i).

2013 annual report

26. DeFerreD tAx liABilitieS

The balance comprises temporary differences attributable to:

Prepayments

Deferred acquisition costs

Income receivables

Customer contracts

Unrealised gains on investments

Unrealised foreign exchange gains

Borrowing costs

Total deferred tax liabilities

Notes

2013
$000

7,528

6,444

1,139

271

2012
$000

1,435

260

290

–

15,521

1,996

Set-off of deferred tax liabilities to set-off provisions

Net deferred tax liabilities

Deferred tax liabilities to be settled within 12 months

Deferred tax liabilities to be settled after more than 12 months

(13,020)

2,501

3,572

11,949

15,521

Prepayments
$000

Deferred
acquisition
costs
$000

Income
receivable
$000

Customer
contracts
$000

Unrealised
gains on
investments
$000

Unrealised
foreign
exchange
gains
$000

Borrowing
costs
$000

(4)

–

1,435

435

(175)

260

580

(290)

290

1,435

260

290

–

3,805

(164)

(748)

1,139

152

2,136

7,528

–

473

6,429

6,444

–

1,139

–

(17)

288

–

271

(1,996)

–

411

1,585

1,996

Total
$000

1,024

972

1,996

–

4,047

–

913

8,565

15,521

Movements

At 1 July 2011

(Charged)/credited to the
income statement

At 30 June 2012

At 1 July 2012

(Charged)/credited to the
income statement

(Charged)/credited directly to
other comprehensive income

Acquisition of subsidiary

At 30 June 2013

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

27. COntriButeD equitY

a. Share capital

Ordinary shares

Fully paid

Other equity securities

Treasury shares

Total contributed equity

2013
$000

2012
$000

28,106

(200)

(525)

27,906

27,581

b. Movements in share capital

Date

Details

No of shares

Price $

$000

1 July 2011

Opening balance

21 July 2011

Capital return

Transactions costs arising on capital return

Deferred tax credit recognised directly to equity

Reverse acquisition adjustment for capital return

Shares bought back on-market and cancelled

Reverse acquisition adjustment for share buy-back

Jan 2012

Feb 2012

Mar 2012

Apr 2012

30 June 2012

Balance

30 June 2013

Balance

Reverse acquisition accounting policy

466,733,110

–

(230,155)

(8,508,479)

(14,000,000)

(4,990,294)

–

439,004,182

–

439,004,182

0.16

$1.49

$1.48

$1.46

$1.54

42,193

(75,004)

(581)

174

66,288

(344)

(12,593)

(20,420)

(7,682)

36,075

28,106

–

28,106

Post demutualisation, the formation of the Group has been accounted for as a business combination. AASB 3 Business
Combinations deals with the bringing together of separate businesses into one reporting entity. When a new entity (legal entity) is
formed to effect a business combination, an entity that existed before the combination must be identified as the acquirer. This is
commonly referred to as a reverse acquisition where nib health funds limited has been deemed to be the accounting acquirer of
nib holdings limited (the legal parent).

Accordingly, under the reverse acquisition requirements of AASB 3, the consolidated financial statement of nib holdings limited
are the continuing accounts of nib health funds limited as accounting acquirer of the legal parent.

The financial information incorporates the assets and liabilities of all entities deemed to be acquired by nib health funds limited,
including nib holdings limited and the results of these entities for the period from which those entities are accounted for as being
acquired by nib health funds limited. The assets and liabilities of the entities acquired by nib health funds limited were recorded at
fair value and the assets and liabilities of nib health funds limited were maintained at their book value. The impact of transactions
between entities in the Group is eliminated in full.

2013 annual report

27. COntriButeD equitY continued

c. Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the
number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon
a poll each share is entitled to one vote.

d. Treasury shares

Treasury shares are shares in nib holdings limited that are held by the nib Holdings Ltd Share Ownership Plan Trust (trust) for the
purpose of issuing shares under the Group’s Executive management Short-Term Incentive and Long-Term Incentive share plans.
See Note 40 for more information.

Date

Details

1 July 2011

Opening balance

Acquisition of shares by the Trust

30 June 2012

Balance

Jul 2012

Aug 2012

Sep 2012

Feb 2013

Mar 2013

Apr 2013

May 2013

Jun 2013

Acquisition of shares by the Trust

Employee share issue – LTIP

Employee share issue – STI

Acquisition of shares by the Trust

30 June 2013

Balance

e. Share buy-back

No. of shares

–

338,000

169,000

125,000

(561,070)

(49,492)

14,744

$000

–

525

254

208

(877)

(76)

95,158

200

During 2012, the company cancelled 27,728,928 ordinary shares purchased on-market as part of the Group’s capital
management initiatives announced in the 2008 Annual Report. This has been finalised. The shares were acquired for
$41,039,234 at an average price of $1.49 per share, with prices ranging from $1.44 to $1.54. Of the total cost of $41,039,234,
$4,964,727 was deducted from ordinary share equity and the remaining $36,074,507 was deducted from retained profits
representing the portion of shares assumed to be purchased from policyholders under the reverse acquisition requirements of
AASB 3 Business Combinations.

f. Capital risk management

The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can
continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.

nib health funds limited

nib health funds limited is required to comply with the Solvency and Capital Adequacy Standards under Schedule 2 and 3 of the
Private Health Insurance (Health Benefits Fund Administration) Rules 2007, the Rules are made for the purposes of Part 4-4 of
the Private Health Insurance Act 2007.

To comply with the capital adequacy standard nib health funds limited must ensure that at all times the value of capital equals or
exceeds the capital adequacy requirement (Section 5.1 of the Capital Adequacy Standard), failure to do so represents a breach
of the Private Health Insurance Act 2007.

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013
nib health fund limited has a capital management plan which establishes a benchmark for capital held in excess of the regulatory
requirement; the aim is to keep a sufficient buffer in line with the Board’s attitude to and tolerance for risk. The benchmark capital
adequacy coverage ratio is 1.3x (2012: 1.3x).

Any capital in excess of the benchmark, taking a 12-month forward looking view, will be reduced by way of dividend to
nib holdings limited. nib health funds limited paid dividends of $16,000,000 in November 2012, $26,500,000 in December 2012
and $26,500,000 in June 2013 to nib holdings limited.

The surplus assets over benchmark at 30 June 2013 and 30 June 2012 were as follows:

Total Assets nib health funds limited

Capital Adequacy Requirement

Surplus Assets for Capital Adequacy

Capital Adequacy Coverage Ratio

Internal benchmark

Internal benchmark requirement

Surplus assets over internal benchmark

2013
$000

497,127

375,880

121,247

1.32

1.30

488,644

8,483

2012
$000

556,392

419,691

136,701

1.33

1.30

545,598

10,794

Refer to Note 36 regarding proposed changes to their regulatory capital requirement.

TOWER Medical Insurance Limited

TOWER Medical Insurance Limited (TOWER Medical) is required to comply with the Solvency Standards for non life insurance
business published by the Reserve Bank of New Zealand. The Solvency Standards were introduced in New Zealand under the
Insurance (Prudential Supervision) Act 2010 and became effective from 31 December 2012. The Solvency Standards determine
the Minimum Solvency Capital required. A requirement of TOWER Medical’s insurance license is that it maintains capital above
the Minimum Solvency Capital.

TOWER Medical has a capital management plan which establishes a benchmark for capital held in excess of the Minimum
Solvency Requirement; the aim is to keep a sufficient buffer in line with the Board’s attitude to and tolerance for risk. The
benchmark capital adequacy coverage ratio is 1.75x.

Any capital in excess of the benchmark, taking a 12-month forward looking view, will be reduced by way of dividend to nib nzed
limited. TOWER Medical paid dividends of $7,618,560 in December 2012 and $5,610,580 in June 2013 to nib nzed limited.

The surplus assets over benchmark at 30 June 2013 is as follows:

Actual Solvency Capital

Minimum Solvency Capital

Solvency Capital

Capital Adequacy Coverage Ratio

Internal benchmark

Internal benchmark requirement

Surplus assets over internal benchmark

2013
$000

18,879

8,526

10,353

2.21

1.75

14,921

3,958

2012
$000

–

2013 annual report27. COntriButeD equitY continued

nib holdings limited

The Group is targeting a return on equity of 15%, and the return on equity as at 30 June 2013 is 21.6%. (2012: 21.7%).
While improvement to return on equity can be made through increased profitability, it is also important that capital be
managed appropriately, therefore, if funds are not required for strategic reasons the Group will consider a range of capital
management initiatives.

On 30 November 2012 nib nzed limited (a wholly owned subsidiary of nib holdings limited, incorporated on 31 October 2012)
acquired 100% of the issued share capital of TOWER Medical Insurance Limited (TOWER Medical), New Zealand’s second
largest private health insurer for $80.6 million. The acquisition was funded through a combination of available capital and a
NZD$70 million (AUD$55.0 million) senior debt facility.

At 30 June 2013, the Group had available capital of $14.8 million above our internal benchmark (after allowing for the payment
of a final dividend of 5.0 cents per share, totalling $22.0 million, in October 2013).

Below is a reconciliation of total assets to available capital as at 30 June 2013:

Total assets

Less: nib health fund capital required (based on projection over next 12 months)

TOWER Medical capital required

TOWER Medical intangibles

International Workers intangibles

Other liabilities

Final dividend

Available capital

28. retAineD PrOFitS

Balance at the beginning of the year

Net profit

Transfer to share capital

Dividends

Balance at the end of the financial year

2013
$000

714.1

(505.4)

(102.0)

(41.6)

(24.2)

(4.1)

(22.0)

14.8

2013
$000

271,954

67,157

–

(43,899)

295,212

2012
$000

367,595

67,640

(102,363)

(60,918)

271,954

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 201329. reSerVeS

a. Reserve comprises

Revaluation surplus - property, plant and equipment

Available-for-sale financial assets

Share-based payments

Share-based payments exercised

Foreign currency translation

b. Movements in reserves

Revaluation surplus – property, plant and equipment

Balance at the beginning of the year

Property revaluation – gross

Deferred tax

Balance at the end of the financial year

Available-for-sale financial assets

Balance at the beginning of the year

Revaluation – gross

Deferred tax

Balance at the end of the financial year

Share-based payments

Balance at the beginning of the year

Performance right expense

Transfer to share-based payments exercised reserve on exercise of performance rights

Balance at the end of the financial year

Share-based payments exercised

Balance at the beginning of the year

Transfer from share-based payments reserve on exercise of performance rights

Exercise of performance rights

Issue of shares held by nib Holdings Ltd Share Ownership Plan Trust to employees

Balance at the end of the financial year

Foreign currency translation

Balance at the beginning of the year

Currency translation differences arising during the year – gross

Deferred tax

Balance at the end of the financial year

2013
$000

1,870

865

204

(1,139)

1,235

3,035

2013
$000

1,763

153

(46)

1,870

494

530

(159)

865

625

136

(557)

204

(819)

557

–

(877)

(1,139)

–

1,347

(112)

1,235

Notes

2012
$000

1,763

494

625

(819)

–

2,063

2012
$000

892

1,245

(374)

1,763

494

–

494

872

259

(506)

625

(256)

506

(1,069)

–

(819)

–

2013 annual report

29. reSerVeS continued

c. Nature and purpose of reserves

Revaluation surplus – property, plant and equipment

The property, plant and equipment revaluation surplus is used to record increments and decrements on the revaluation of
non-current assets as described in Note 1(w).

Available-for-sale financial assets

Changes in the fair value of investments, such as equities, classified as available-for-sale financial assets, are taken to the
available-for-sale revaluation reserve as described in Note 1(v). Amounts are recognised in profit and loss when the associated
assets are sold or impaired.

Share-based payments

The share-based payments reserve is used to recognise the fair value of performance rights and bonus share rights issued to
employees but not exercised.

Share-based payments exercised

The share-based payments exercised reserve is used to recognise the difference between fair value of performance rights and
bonus share rights accumulated in the share based payments reserve and cost of exercising the rights.

Foreign currency translation

Exchange rate differences arising on translation of foreign controlled entities are recognised in other comprehensive income as
described in Note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss
when the net investment is disposed of.

30. DiViDenDS

a. Ordinary shares

Final dividend for the year ended 30 June 2012 of 5.0 cents per fully paid ordinary share, made up of
5.0 cps ordinary dividend (2012: 9.0 cents per fully paid ordinary share, made up of 4.0 cps ordinary
dividend and 5.0 cps special dividend) paid on 5 October 2012

Fully franked based on tax paid @ 30%

21,949

42,006

2013
$000

2012
$000

Interim dividend for the year ended 30 June 2013 of 5.0 cents (2012: 4.25 cents) paid on 2 April 2013

Fully franked based on tax paid @ 30%

Total dividends provided for or paid

b. Dividends not recognised at year end

In addition to the above dividends, since the end of the year the Directors have recommended the
payment of an ordinary interim dividend of 5.0 cents per fully paid ordinary share (2012: 5.0 cents
ordinary dividend), fully franked based on tax paid at 30%. The aggregate amount of the proposed
dividend expected to be paid on 4 October 2013 out of retained profits at 30 June 2013, but not
recognised as a liability at the end of the year, is

21,950

43,899

18,912

60,918

2013
$000

2012
$000

21,950

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

c. Franked dividends

The franked portion of the final dividends recommended after 30 June 2013 will be franked out of existing franking credits or out
of franking credits arising from the payment of income tax in the year ending 30 June 2013.

2013
$000

2012
$000

Franking credits available for subsequent financial years to equity holders of parent entity based on a tax
rate of 30%

22,157

16,499

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:

a. Franking credits that will arise from the payment of the amount of the provision for income tax;

b. Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and

c. Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

31. COMMitMentS FOr exPenDiture

a. Operating lease commitments

Commitments for minimum lease payments in relation to non-cancellable operating leases are
payable as follows:

– not longer than one year

– longer than one year and not longer than five years

– longer than five years

b. Capital expenditure commitments

Payable:

– not longer than one year

c. Remuneration commitments

Commitments for the payment of salaries, wages and other remuneration under long-term
employment contracts in existence at the reporting date but not recognised as liabilities.

– not longer than one year

2013
$000

2012
$000

2,242

3,277

1,004

6,523

2013
$000

421

2013
$000

2,211

4,113

1,056

7,380

2012
$000

260

2012
$000

2,419

2,084

32. COntinGent liABilitieS

nib holdings limited has provided a guarantee and indemnity to the ANZ Bank New Zealand on behalf of nib nzed limited in
respect of the NZD$70 million term loan facility.

nib holdings limited has provided a guarantee and indemnity to the National Australia bank on behalf of IMAN Australian Health
Plans Pty Limited in respect of transactional banking services. Liability under the indemnity is limited to $3,028,885.

nib health funds limited has given an undertaking to extend financial support to nib servicing facilities pty limited and nib health
care services pty limited by subordinating repayment of debts owed by the entities to nib health funds limited, in favour of all
other creditors. This undertaking has been provided as a result of each of these subsidiaries experiencing deficiencies of capital
and reserves, and is intended to enable the entities to continue their operations and fulfil all financial obligations now and in the
future. The undertaking is provided for a minimum period of twelve months from 23 August 2013, or if earlier, to the date of sale
of the entities should this occur.

nib holdings limited and nib health funds limited have indemnified the trustee under the nib demutualisation overseas
policyholders and unverified policyholders trust deed dated 19 July 2007, in respect of all liabilities, costs and expenses incurred
in execution of the trust. The trust was wound up and all trust funds were distributed during the 2011 financial year.

2013 annual report33. reMunerAtiOn OF AuDitOrS

a. PricewaterhouseCoopers Australia

1. Audit services

2013
$000

2012
$000

Audit and review of financial report and other audit work under the Corporations Act 2001

Total remuneration for audit services

435,450

341,200

2. Non-audit services

Audit-related services

Audit of regulatory returns

Total remuneration for audit-related services

Taxation services

Tax compliance services

International tax consulting and tax advice on mergers and acquisitions

Total remuneration for taxation services

Other services

Accounting advice and support

Review of regulatory returns

Total remuneration for other services

31,210

42,300

95,684

21,524

117,208

13,000

13,862

26,862

105,660

–

105,660

21,000

20,045

41,045

Total remuneration for non-audit services

175,280

189,005

Total remuneration of PricewaterhouseCoopers Australia

610,730

530,205

b. Network firms of PricewaterhouseCoopers Australia

1. Audit services

Audit and review of financial report and other audit work under the Corporations Act 2001

Total remuneration for audit services

2. Non-audit services

Taxation services

Tax compliance services

International tax consulting and tax advice on mergers and acquisitions

Total remuneration for taxation services

Other services

Review of regulatory returns

Total remuneration for other services

Total remuneration for non-audit services

Total remuneration of network firms of PricewaterhouseCoopers

166,622

36,978

168,291

205,269

9,424

214,693

381,315

–

Total auditors’ remuneration

992,045

530,205

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

2012
$000

86,673

(2,594)

84,079

2012
$000

67,640

(4,331)

(454)

259

7,263

–

(20,989)

–

(8,851)

4,231

85,924

–

(4,011)

–

7,882

2013
$000

67,157

(8,840)

–

136

9,072

20,766

(81)

(10,178)

11,067

(51,238)

(3,356)

(3,224)

(6,703)

(4,617)

34. nOteS tO tHe StAteMent OF CASH FlOWS

a. Reconciliation of cash

For the purpose of the statement of cash flows, cash includes cash on hand and in banks net of outstanding bank overdrafts.
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items on the balance
sheet as follows:

Cash and cash equivalents

Bank overdraft

Notes

2013
$000

143,056

(3,300)

139,756

b. Reconciliation of profit after income tax to net cash inflow from operating activities

Profit for the year

Net (gain)/loss on disposal of non-current assets

Fair value (gain)/loss on other financial assets through profit or loss

Impairment loss on property, plant and equipment

Non-cash employee benefits expense – share-based payments

Depreciation and amortisation

Amortisation of borrowing costs

Net exchange differences

Change in operating assets and liabilities, net of effect from purchase of controlled entity

Decrease (increase) in receivables

Decrease (increase) in reinsurance receivables

Decrease (increase) in deferred acquisition costs

Decrease (increase) in deferred tax assets

Increase (decrease) in trade payables and unearned premium liability

Increase (decrease) in premium payback liability

Increase (decrease) in current tax payable

Increase (decrease) in deferred tax liabilities

Increase (decrease) in provisions

Net cash flow from operating activities

20,036

134,631

Unearned premium liability was abnormally high in 2012 as a result of a high level of prepayments of premium revenue in May
and June 2012.

2013 annual report

35. COntrOlleD entitieS

The consolidated financial statements incorporate the assets, liabilities and results of the following controlled entities in
accordance with the accounting policy described in Note 1(b):

nib holdings limited

nib health funds limited

nib servicing facilities pty limited

nib health care services pty limited

The Heights Private Hospital pty limited

IMAN Australian Health Plans Pty Limited

nib nzed limited

Tower Medical Insurance Limited

nib holdings limited also controls the following trusts:

¾ nib Holdings Ltd Share Ownership Plan Trust.

¾ nib salary sacrifice plan and matching plan trust.

Percentage of shares held

Place of
Incorporation

2013
%

2012
%

Australia

New Zealand

100

N/A

36. eVentS OCCurrinG AFter tHe BAlAnCe SHeet DAte

In July 2012, the Private Health Insurance Administration Council (PHIAC) released proposed changes to their regulatory capital
requirements for industry consultation. An updated proposed standard for a second round of consultation was issued by PHIAC
in June 2013. The Group submitted a response to the proposed standard in July 2013 and is awaiting further information from
PHIAC.

Since 30 June 2013, nib has announced it is looking to further broaden its business operations with the facilitation of access
to cosmetic treatment. Known as nib options, nib will leverage the brand and distribution to support and grow the market for
cosmetic, dental and surgical treatment both overseas and here in Australia. nib options expects to launch in FY14.

There have not been any other matters or circumstances that have arisen since the end of the financial year that has significantly
affected, or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the
Group in future financial years.

37. relAteD PArtieS

a. Related party transactions with key management personnel

There were no related party transactions during the year, as there were no transactions where either party had the presence of
control, joint or significant influence to affect the financial and operating policies of either entity.

b. Transactions with associated companies

There were no associated company transactions during the years ended 30 June 2013 and 2012.

100

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 201338. BuSineSS COMBinAtiOn

a. Purchase consideration

Details of the purchase consideration are as follows:

Purchase consideration

Cash

Total purchase consideration

The fair values of the assets and liabilities recognised as a result of the acquisition are as follows:

Cash and cash equivalents

Receivables

Deferred acquisiton costs

Financial assets at fair value through profit and loss: Interest-bearing securities

Financial assets at fair value through profit and loss: Derivative financial assets

Deferred tax assets

Property, plant and equipment

Intangible assets: customer contracts

Intangible assets: brand names

Intangible assets: software

Payables

Unearned premium liability

Outstanding claims liability

Premium payback liability

Provision for employee entitlements

Net identifiable assets acquired

Add: Goodwill

Net assets acquired

$000

80,648

Fair value
$000

45,355

3,936

7,628

37,079

2,556

2,569

206

18,262

2,360

2,341

(3,092)

(12,566)

(10,222)

(40,545)

(408)

55,459

25,189

80,648

The goodwill is attributable to the high profitability of the acquired business. None of the goodwill is expected to be deductible for
tax purposes.

There were no acquisitions in the year ending 30 June 2012.

i. Acquisition related costs

Acquisition related costs of $3,421,887 relating to the acquisition are included in other expenses in profit or loss and in operating
cash flows in the statement of cash flows.

ii. Revenue and profit contribution

The acquired business contributed to revenues of $71,138,724 and net profit of $6,138,551 to the Group for the period from
30 November 2012 to 30 June 2013.

If the acquisition had occurred on 1 July 2012, consolidated revenue and profit for the year ended 30 June 2013 are estimated
to have been $1,338,423,724 and $70,797,184 respectively, based on historical TOWER Medical management accounts.

iii. Acquired receivables

The fair value of acquired receivables is $3,936,182. The gross contractual amount for trade receivables due is $4,109,584, of
which $173,402 is expected to be uncollectible and has been fully provided for at acquisition.

101

2013 annual report38. BuSineSS COMBinAtiOn continued

b. Purchase of consideration – cash outflow

Outflow of cash to acquire subsidiary, net of cash acquired

Cash consideration

Less: Cash balances acquired

Outflow of cash – investing activities

39. KeY MAnAGeMent PerSOnnel DiSClOSureS

a. Key management personnel compensation

Short-term employee benefits

Post-employment benefits

Other long-term benefits

Termination benefits

Share-based payments

$000

80,648

(45,355)

35,293

2013
$000

2012
$000

3,073,817

3,286,697

188,077

29,729

323,551

560,924

271,192

26,056

375,578

935,060

4,176,098

4,894,583

Detailed remuneration disclosures are provided in the Remuneration Report on pages 19 to 34.

b. Equity instrument disclosures relating to Key Management Personnel

i. Performance rights provided as remuneration and shares issued on exercise of such performance rights

Details of performance rights provided as remuneration and shares issued on the exercise of such performance rights, together
with terms and conditions of the performance rights, can be found in the Remuneration Report on pages 19 to 34.

ii. Performance rights holdings

The numbers of performance rights over ordinary shares in the company held during the financial year by each executive of nib
holdings limited are set out below.

Other
forfeitures

Balance
at the end of
the year

Vested and
exercisable

2013

Mark Fitzgibbon

Michelle McPherson

Rhod McKensey

Rob Hennin

Brendan Mills

Balance
at start of
the year

723,778

315,204

182,375

–

Matthew Henderson

106,370

Granted as
compensation

331,765

107,871

75,013

–

38,587

49,515

Exercised

(270,280)

(86,385)

(59,851)

–

(155,885)

785,263

336,690

197,537

–

38,587

–

Total

1,327,727

602,751

(416,516)

(155,885)

1,358,077

Unvested

785,263

336,690

197,537

–

38,587

–

1,358,077

–

2012

Mark Fitzgibbon

Michelle McPherson

Melanie Kneale

Rhod McKensey

Matthew Henderson

Brendan Mills

Total

Balance
at start of
the year

Granted as
compensation

866,861

317,889

258,911

195,290

55,344

–

217,546

109,766

64,995

51,026

–

Exercised

(360,629)

(112,451)

(188,408)

(77,910)

–

Other
forfeitures

Balance
at the end of
the year

Vested and
exercisable

Unvested

–

723,778

315,204

–

(135,498)

–

81,859

–

182,375

106,370

–

723,778

315,204

–

182,375

106,370

–

1,694,295

508,328

(739,398)

(135,498)

1,327,727

81,859

1,327,727

102

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013iii. Share holdings

The number of shares in the company held during the financial year by each Director of nib holdings limited and other Key
Management Personnel of the Group, including their personally related parties, are set out below. There were no shares received
during the reporting period on the exercise of performance rights.

2013

Ordinary shares

Directors of Group

Harold Bentley

Annette Carruthers

Steve Crane

Philip Gardner

Christine McLoughlin

Other Key Management Personnel of the Group

Mark Fitzgibbon

Michelle McPherson

Rhod McKensey

Rob Hennin

Brendan Mills

Matthew Henderson1

1. Other changes represent that at 30 June 2013 they are no longer a KMP.

2012

Ordinary shares

Directors of Group

Keith Lynch1

Harold Bentley

Annette Carruthers

Steve Crane

Philip Gardner

Christine McLoughlin

Other Key Management Personnel of the Group

Mark Fitzgibbon

Michelle McPherson

Melanie Kneale2

Rhod McKensey

Matthew Henderson

Brendan Mills

1. Keith Lynch retired as a Chairman and Director on 30 September 2011.
2. Other changes represent that at 30 June 2012 they are no longer a KMP.

Balance
at the start
of the year

Granted
during the
year as
compensation

Other
changes
during
the year

Balance
at the end
of the year

70,000

72,500

115,175

108,000

57,500

1,261,142

334,717

114,748

–

24,852

2,210

–

30,000

–

84,825

–

20,000

100,000

72,500

200,000

108,000

77,500

331,409

108,460

73,723

–

313

4,500

(130,000)

1,462,551

(30,000)

–

(6,710)

413,177

188,471

–

25,165

–

Balance
at the start
of the year

Granted
during the
year as
compensation

Other
changes
during
the year

Balance
at the end
of the year

125,951

70,000

58,200

100,000

104,862

37,500

843,130

189,247

60,910

13,823

–

468,012

145,470

135,456

100,925

2,210

(125,951)

–

14,300

15,175

3,138

20,000

–

70,000

72,500

115,175

108,000

57,500

(50,000)

1,261,142

–

334,717

(196,366)

–

24,852

–

114,748

2,210

24,852

103

2013 annual report40. SHAre-BASeD PAYMentS

a. Long-term incentive plan (LTIP)

Performance rights to acquire shares in nib holdings limited are granted to Executives under the Long Term Incentive Plan (LTIP).
Information relating to the LTIP is included in the Remuneration Report on pages 19 to 34.

On 18 May 2012, the nib Holdings Ltd Share Ownership Plan Trust was formed to administer the Group’s Executive management
Short-Term Incentive and Long-Term Incentive Share Plans. This Trust has been consolidated in accordance with Note 1(b)(ii).

Set out below is a summary of performance rights granted under the plan:

2013

Grant date

Expiry date

28/01/2010

31/12/2014

27/05/2011

1/09/2014

21/12/2011

1/09/2015

19/11/2012

1/09/2016

2012

Grant date

Expiry date

30/06/2009

31/12/2012

28/01/2010

31/12/2014

27/05/2011

1/09/2014

21/12/2011

1/09/2015

Balance at
start of the
year
Number

Granted
during the
year
Number

Exercise
price

416,516

467,878

443,333

–

602,751

–

Balance at
start of the
year
Number

Granted
during the
year
Number

Exercise
price

–

657,539

498,375

538,381

–

508,328

Exercised
during the
year
Number

(416,516)

–

Exercised
during the
year
Number

(657,539)

(81,859)

Forfeited
during the
year
Number

Balance at
the end of
the year
Number

Vested and
exercisable
at end of
the year
Number

–

(55,344)

(51,026)

(49,515)

–

412,534

392,307

553,236

–

Forfeited
during the
year
Number

Balance at
the end of
the year
Number

Vested and
exercisable
at end of the
year
Number

–

416,516

467,878

443,333

–

81,859

–

(70,503)

(64,995)

1,327,727

602,751

(416,516)

(155,885)

1,358,077

1,694,295

508,328

(739,398)

(135,498)

1,327,727

81,859

b. Employee Share Acquisition (tax exempt) Plan (ESAP)

The plan rules were adopted on 11 January 2008 and amended on 3 December 2009. On 6 September 2010, eligible
employees were offered the opportunity to receive part of their salary in the form of shares. All permanent employees who
were an employee as at 6 September 2010 and the date shares were allocated to employees were eligible to participate in the
scheme. Employees may elect not to participate in the scheme.

ESAP is administered by the Board. Shares granted to the employees by the Board were acquired on-market via a third party
trustee plan company.

Under the plan, participating employees were allocated an aggregate market value up to $1,000 worth of fully paid ordinary
shares in nib holdings limited. Subsequent offers under ESAP are at the Board’s discretion.

Shares issued under the scheme may not be sold until the earlier of three years after issue or cessation of employment. In all
other respects shares rank equally with other fully-paid ordinary shares on issue.

Number of shares purchased on market under the plan to participating employees

288,712

81,887

The shares were allocated on 11 October 2012 after nib’s FY12 results presentation at a volume weighted average price of $1.71.

2013

2012

104

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

c. nib Salary Sacrifice Plan and Matching Plan

The plan rules were adopted on 1 February 2011. On 3 December 2009 business unit managers were offered the opportunity
to receive part of their salary in the form of shares, with an additional amount of shares contributed by the Company. Employees
may elect not to participate in the scheme.

The plan is administered by the Board. Shares granted to the employees by the Board were acquired on-market via a third party
trustee plan company.

Under the plan, participating employees were allocated an aggregate market value up to $10,000 worth of fully paid ordinary
shares in nib holdings limited, made up of $5,000 salary sacrifice and $5,000 matching company component. Subsequent offers
under the plan are at the Board’s discretion.

Shares issued under the scheme may not be sold until the earlier of three or seven years after issue, or cessation of employment.
In all other respects shares rank equally with other fully paid ordinary shares on issue.

2013

2012

Number of shares purchased on market under the plan to participating employees

64,210

111,794

d. Short-Term Performance Incentive (STI)

All eligible employees have a STI opportunity. For the MD/CEO and CFO the maximum target bonus opportunity is 60% of
the base remuneration package with 30% of the calculated entitlement awarded as performance shares to be held in escrow
for one year. For the GMARHI the maximum target bonus opportunity is 50% of the base remuneration package with 30%
of the calculated entitlement deferred into shares for one year. For other Executives the maximum entitlement is 40% of the
remuneration package with 30% of the calculated entitlement awarded as performance shares to be held in escrow for one year.

On 18 May 2012 the nib Holdings Ltd Share Ownership Plan Trust was formed to administer the Group’s Executive management
Short-Term Incentive and Long-Term Incentive Share Plans. This Trust has been consolidated in accordance with Note1(b) (ii).

Shares issued by the trust to the employees are acquired on-market prior to the issue. Shares held by the trust and not yet
issued to employees at the end of the reporting period are shown as treasury shares in financial statements; see Note 27(d).

Shares were purchased on market and brokerage fees are borne by nib health funds limited.

e. Expenses arising from share-based payments transactions

Shares purchased on market under employee share scheme

Performance rights granted under LTIP

Shares purchased on market under STI

nib salary sacrifice plan and matching plan trust deed

2013
$000

493

136

126

834

2012
$000

121

259

160

164

704

41. SOlVenCY AnD CAPitAl ADequACY reSerVeS

nib health funds limited Solvency Reserve, as per the Private Health Insurance (Health Benefits Fund Administration) Rules 2007,
is $116.244 million. Total Health Benefits Fund Assets are $497.127 million, representing a surplus of $121.247 million over the
sum of the Solvency Reserve and total Health Benefits Fund Liabilities ($259.636 million). This equates to a solvency coverage
ratio of 1.32x and a solvency/capital risk multiple of 2.04.

nib health funds limited Capital Adequacy Reserve, as per the Private Health Insurance (Health Benefits Fund Administration)
Rules 2007, is $116.244 million. Total Health Benefits Fund Assets are $497.127 million, representing a surplus of $121.247 million
over the sum of the Capital Adequacy Reserve and total Health Benefits Fund Liabilities ($259.636 million). This equates to a
capital adequacy coverage ratio of 1.32x and a capital adequacy/risk multiple of 2.04.

TOWER Medical Insurance Limited (TOWER Medical) has capital (net assets) of $40.556 million. After this capital is adjusted
for deductions required under the Reserve Bank of New Zealand Solvency standard for non life business TOWER Medical
has solvency capital of $18.879 million. This compares to a minimum solvency capital required under the solvency standard of
$8.526 million representing a solvency surplus of $10.353 million equating to a solvency ratio of 2.21x.

105

2013 annual report
42. eArninGS Per SHAre

a. Basic earnings per share

Profit from continuing operations attributable to the ordinary equity holders of the company

Profit from discontinued operations

Profit attributable to the ordinary equity holders of the company

b. Diluted earnings per share

Profit from continuing operations attributable to the ordinary equity holders of the company

Profit from discontinued operations

Profit attributable to the ordinary equity holders of the company

c. Reconciliations of earnings used in calculating earnings per share

Basic earnings per share

Profit from continuing operations

Profit attributable to the ordinary equity holders of the company used in calculating
basic earnings per share

Diluted earnings per share

Profit attributable to the ordinary equity holders of the company used in calculating basic
earnings per share

Profit attributable to the ordinary equity holders of the company used in calculating
diluted earnings per share

d. Weighted average number of shares used as the denominator

Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share

Adjustments for calculation of diluted earnings per share:

Performance rights and bonus share rights

2013
cents

15.3

–

15.3

2013
cents

15.3

–

15.3

2013
$000

2012
cents

14.8

–

14.8

2012
cents

14.8

–

14.8

2012
$000

67,157

67,640

67,157

67,640

67,157

67,640

67,157

67,640

2013
Number

2012
Number

439,004,182

458,305,148

–

Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share

439,004,182

458,305,148

e. Information concerning the classification of shares

i. Performance rights

Performance rights granted to employees under the nib holdings Long-Term Incentive Plan are considered to be potential
ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are
dilutive. The performance rights have not been included in the determination of basic earnings per share. Details relating to the
performance rights are set out in Note 39.

The total 1,358,077 performance rights granted (2012 – 1,327,727) are not included in the calculation of diluted earnings
per share because they are contingently issuable ordinary shares and conditions were not satisfied at 30 June 2013. These
performance rights could potentially dilute basic earnings per share in the future.

106

nib holdings limitedNotes to the Consolidated Financial Statements continuedFor the year ended 30 June 2013

43. PArent entitY FinAnCiAl inFOrMAtiOn

a. Summary financial information

The individual financial statements for the parent entity show the following aggregate amounts:

Balance Sheet

ASSETS

Current assets

Total assets

LIABILITIES

Current liabilities

Total liabilities

NET ASSETS

EQUITY

Share Capital

Share-based payments

Retained Profits

Total Equity

Profit or loss for the year

Total comprehensive income

2013
$000

2012
$000

41,197

476,741

42,340

458,834

3,443

7,026

473,298

451,808

297,178

(935)

177,055

473,298

297,178

(194)

154,824

451,808

66,131

28,841

66,131

28,841

b. Contingent liabilities of the parent entity

Refer to Note 32.

44. COMPAnY DetAilS

nib holdings limited is a company limited by shares, incorporated and domiciled in Australia. The registered office of the
company is:

22 Honeysuckle Drive
NEWCASTLE NSW 2300

The Financial Report was authorised for issue by the Directors on 23 August 2013. The company has the power to amend
and reissue the Financial Report.

107

2013 annual report

Directors’ Declaration

For the year ended 30 June 2013

In the Director’s opinion:

a. the financial statements and notes set out on pages 45 to 107 are in accordance with the Corporations Act 2001, including:

i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting

requirements; and

ii. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the

financial year ended on that date; and

b. there are reasonable grounds to believe that nib holdings limited will be able to pay its debts as and when they become due

and payable.

Note 1(a) confirms that financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.

The Directors have been given declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A
of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors.

On behalf of the Board,

Steve Crane
Director

Newcastle, NSW
23 August 2013

Harold Bentley
Director

108

nib holdings limited
Independent Auditor’s Report

To the members of nib holdings limited

Independent auditor’s report to the members of nib holdings
limited

Report on the financial report
We have audited the accompanying financial report of nib holdings limited (the company), which
comprises the balance sheet as at 30 June 2013, the income statement and statement of comprehensive
income, statement of changes in equity and statement of cash flows for the year ended on that date, a
summary of significant accounting policies, other explanatory notes and the directors’ declaration for
nib holdings limited group (the consolidated entity). The consolidated entity comprises the company
and the entities it controlled at year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.

Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.

PricewaterhouseCoopers, ABN 52 780 433 757
PricewaterhouseCoopers Centre, 26 Honeysuckle Drive, PO Box 798, NEWCASTLE NSW 2300
T: +61 2 4925 1100, F: +61 2 4925 1199, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

109

2013 annual report

Auditor’s opinion
In our opinion:

(a)

the financial report of nib holdings limited is in accordance with the Corporations Act 2001,
including:

(i)

(ii)

giving a true and fair view of the consolidated entity's financial position as at 30 June
2013 and of its performance for the year ended on that date; and

complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.

(b)

the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 1.

Report on the Remuneration Report
We have audited the remuneration report included in pages 19 to 34 of the directors’ report for the
year ended 30 June 2013. 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.

Auditor’s opinion
In our opinion, the remuneration report of nib holdings limited for the year ended 30 June 2013,
complies with section 300A of the Corporations Act 2001.

PricewaterhouseCoopers

John Campion
Partner

Newcastle
23 August 2013

110

nib holdings limitedIndependent Auditor’s Report continuedTo the members of nib holdings limited

Shareholder Information

The shareholder information set out below was applicable as at 30 August 2013.

A. DiStriButiOn OF equitY SeCuritieS

Analysis of numbers of equity security holders by size of holding:

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

There were 3,662 holders of less than a marketable parcel of ordinary shares.

B. equitY SeCuritY HOlDerS

The 20 largest quoted equity security holders

The names of the 20 largest holders of quoted equity securities are listed below:

Name

JP Morgan Nominees Australia Limited

RBC Investor Services Australia Nominees Pty Limited (PI Pooled A/C)

National Nominees Limited

Citicorp Nominees Pty Limited

HSBC Custody Nominees (Australia) Limited

BNP Paribas Nominees Pty Ltd ACF Pengana (DRP A/C)

Citicorp Nominees Pty Limited (Colonial First State Inv A/C)

JP Morgan Nominees Australia Limited (Cash Income A/C)

BNP Paribas Noms Pty Ltd (DRP)

RBC Investor Services Australia Nominees Pty Limited (GSAM A/C)

Suncorp Custodian Services Pty Limited (SGAEAT)

UBS Wealth Management Australia Nominees Pty Ltd

Jemon Pty Ltd (Bar Beach Super Fund A/C)

Fitzy (NSW) Pty Ltd (Fitz Family Fund A/C)

Mr Mark Anthony Fitzgibbon

Questor Financial Services Limited (TPS RF A/C)

BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)

Computershare Plan Co Pty Ltd (NHF LTP Control A/C)

RBC Investor Services Australia Nominees Pty Limited (Piselect)

Warbont Nominees Pty Ltd (Accumulation Entrepot A/C)

Unquoted equity securities

Class of
equity security

67,277

83,866

11,624

932

163,745

Ordinary shares

Number held

28,228,933

18,461,080

14,639,559

10,934,885

10,725,571

7,945,120

3,445,803

3,171,239

2,847,400

1,356,270

974,022

947,366

600,000

568,621

550,323

540,735

488,428

468,913

414,443

307,571

Percentage of
issued shares
%

6.43

4.21

3.33

2.49

2.44

1.81

0.78

0.72

0.65

0.31

0.22

0.14

0.13

0.12

0.11

0.09

0.07

107,616,282

24.51

Number
on issue

Number
of holders

Performance rights issued under the nib holdings Long-Term Incentive Plan

1,358,077

111

2013 annual reportC. SuBStAntiAl HOlDerS

Substantial holders in the company are set out below:

Perpetual Limited

D. VOtinG riGHtS

Number held

Percentage of
issued shares
%

40,467,864

9.22

The voting rights attaching to each class of equity securities are set out below:

Ordinary shares

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.

Performance rights

No voting rights.

e. SeCuritieS SuBJeCt tO VOluntArY eSCrOW

Shares taken as Short-Term Incentive bonus held in escrow are detailed below:

Class of equity security

Date escrow period ends

Ordinary shares

7 September 2013

Number of shares

44,992

112

nib holdings limitedShareholder Information continuedCorporate Directory

DireCtOrS

Chairman
Steve Crane

Managing Director/Chief Executive Officer
Mark Fitzgibbon

Harold Bentley
Annette Carruthers
Philip Gardner
Christine McLoughlin

COMPAnY SeCretArieS

Michelle McPherson
Roslyn Toms

exeCutiVe MAnAGeMent

Managing Director/Chief Executive Officer
Mark Fitzgibbon

Deputy Chief Executive Officer and
Chief Financial Officer
Michelle McPherson

Group Manager Australian Residents Health Insurance
Rhod McKensey

Chief Information Officer
Brendan Mills

Chief Executive Officer – nib New Zealand
Rob Hennin

Group Manager Benefits and Provider Relations
Justin Vaughan

nOtiCe OF AnnuAl
GenerAl MeetinG

The Annual General Meeting of nib holdings limited
will be held at the Fort Scratchley Multipurpose Centre,
1 Nobbys Road, Newcastle at 11.00am (AEDT) on
Tuesday, 29 October 2013.

A formal Notice of the Meeting is being distributed with the
Annual Report.

SHAre reGiSter

Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000

1300 664 316

StOCK exCHAnGe liStinG

nib holdings limited shares (nhf) are listed on the Australian
Securities Exchange.

PrinCiPAl reGiStereD OFFiCe
in AuStrAliA

22 Honeysuckle Drive
Newcastle NSW 2300

13 14 63

AuDitOr

PricewaterhouseCoopers
PricewaterhouseCoopers Centre
26 Honeysuckle Drive
Newcastle NSW 2300

leGAl ADViSerS

King & Wood Mallesons
Level 61, Governor Philip Tower
1 Farrer Place
Sydney NSW 2000

BAnKerS

St George Bank
4-16 Montgomery Street
Kogarah NSW 2217

WeBSite ADDreSS

nib.com.au

#RM-1220

113

2013 annual reportd

nib.com.au

nib holdings limitedCorporate DirectoryFor the year ended 30 June 2013