rt health fund annual report 2012

2012 Annual Report

Railway & Transport Health Fund Ltd (ABN 93 087 648 744)

Chair’s Report 01CEO’s Report 03Corporate Governance 05Directors’ Report 08Auditor’s Independence Declaration 15Financial Statements 17

Contents

Railway & Transport Health Fund Ltd (ABN 93 087 648 744)Railway & Transport Health Fund Ltd (ABN 93 087 648 744)

1

Chair’s Report

It is my great privilege to report to you, on behalf of the board of directors, on the operations and results of rt health fund for the year ended 30 June 2012.

For the past two financial years, the board and management have been focused on instituting a strong operational, underwriting and reporting platform. The results achieved during this time have provided the board with great confidence that the sustainability and resilience of the fund have been significantly enhanced. The fund’s key prudential and financial measures of capital adequacy, solvency and operational efficiency are all strong, and demonstrate a return to stability following the financial loss of FY10.

The result for FY12 is a surplus of $8.4 million, which has markedly improved the fund’s solvency and capital measures. Although rt is a not-for-profit fund, owned by its members, it is required to earn and retain a surplus, which ensures that it is financially sound and able to continue paying benefits. This year’s result places the fund firmly within the prudential parametres required by the industry regulator.

The result has been achieved despite a small reduction in the size of the fund’s membership for the second year, and represents the combined effect of appropriate price setting with a reduction in the cost of claims made by the current membership.

The strong growth strategy pursued prior to FY10 attracted a broader, non-traditional membership to the fund which, in some cases, was more likely to make large claims within a short time of joining. The actions taken over the past two years have resulted in some of those members choosing to leave the fund, and as a result, claiming activity is returning to a more historically normal pattern. Carefully sourced, moderate levels of growth in fund membership are a key focus over the coming years, and with the new analytical capability within the fund, the impact of that growth can be carefully monitored.

Other important contributors to the FY12 result have been:• Realisationoffurtheroperationalimprovements

resulting from the FY11 organisational restructure.• Greatlyenhancedbusinessanalysis,

underwriting and modelling capabilities through restructure and recruitment.

• Improvedcapabilitiesinbenefitcostmanagementthrough claims analysis and investigation.

• AdvancesinITinfrastructuretoenablebetterdelivery of services to members and information to the board and management.

From this strong operational and financial position, the fund was able to restrict average contribution increases during the year to the second lowest level in the past decade, and is well positioned to seek a similarly low level of increase in the coming year. The board carefully monitors the balance between prudential soundness (and therefore the longevity of the fund) with the size of contribution increases, and the impact of those increases on our members. A significant challenge for a not-for-profit fund such as ours is that its role is to help members cover the costs of services provided by a healthcare industry that, for the main part, is aggressively profit focused. Assisting members to meet escalating healthcare costs, while keeping contributions as low as possible, is an ongoing challenge for the board.

One of the ways the fund participates in the management of healthcare costs is through membership of the Australian Health Services Alliance (AHSA), an organisation that negotiates hospital contracts with private hospitals and day surgeries on behalf of a consortium of funds. The AHSA is the third largest purchaser of healthcare services in Australia, giving member funds the ability to leverage vastly increased negotiating power. In addition to our membership of the AHSA, the fund’s CEO, Matthew Moore, was elected to the AHSA board during the year, enhancing the fund’s role within this important organisation.


Heading goes heresub head

Basic Hospital Cover is not designed to pay

benefits for treatment received in a private hospital. If you are interested in cover for private hospital

treatment take a look at our Private Hospital Cover or

Fit & Healthy Hospital Cover.

I reported last year that work had commenced on rebuilding our Brisbane member care centre following the floods. Like many organisations and individuals, the fund suffered significant property damage in the floods and repair works took many months to commence due to the scale of the disaster and demand on resources. I am pleased to report that the office was reopened in November 2011, and now provides a greatly improved environment for our members and staff in Brisbane. In May 2012, we took the opportunity to rename the Brisbane office, Thallon House, in honour of one of Queensland’s most significant railway commissioners, James Forsayth Thallon. Thallon was chosen as a man who represented many admirable qualities as well as a dedication to issues of care, health and wellbeing. We were very fortunate to have several members of the Thallon family attend a small dedication ceremony to declare the new Thallon House open.

The board added an new committee during the year: the Business Development Committee. This committee was created to provide specific advice, guidance and assistance to the board through assessing the development and implementation of strategic business initiatives. I look forward to the work of the committee providing advice to the board in the future development of the fund.

I would like to extend the sincere thanks of the board and management to the members of rt health fund for your ongoing commitment and belief in the fund and the values it represents. It is indeed a unique privilege to participate in an organisation now entering its 124th year of operations, and it is the members of the fund that continue to make the organisation relevant today.

I would like to acknowledge the efforts of CEO, Matthew Moore, his executive team and the staff of rt health fund who all demonstrate an unwavering commitment to the goals of the fund and to the service of our members. And I would like to thank my fellow directors for their continued leadership and focus on best practice governance of the fund.

I look forward to the year ahead, confident that the fund has established a sound foundation for continued improvements in services and operations, and that it will remain a valuable organisation in the lives of the members whom it has served for so long.

Bob Scheuber AM

Chair


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I would like to extend the sincere thanks of the board and management to the members of rt health fund for your ongoing commitment and belief in the fund and the values it represents.

Chair’s Report (cont)


3

CEO’s Report

It is a great pleasure to report to you on the key activities and strong, positive financial and prudential results achieved during the past year.

The significant areas of focus that have contributed to this year’s strong result have included:

Improvements in operational efficienciesAny organisation dedicated to remaining competitive and relevant must maintain a focus on improving its operational efficiencies and service delivery. Throughout the year, the team has made significant improvements in several key areas, including:• Achievingconsistentresultsinfastandaccurate

claims processing.• Increasingthefund’scapabilityinthemanagement

of medical claims and administrative costs, particularly in the area of benefits management to ensure funds are expended correctly.

• IncreasinginvolvementwiththeAustralianHealthServices Alliance (AHSA) to improve hospital contracting and reduce pressure on contribution increases.

• Continuingenhancementofskills,capabilitiesand technologies in the areas of data analysis and modelling.

• EnhancingtheprovisionofITandinfrastructureto enable improved service provision and management decision-making.

• Replacingthefund’soutdatedfinancesystem.• Focusingonprogramstoenhancestaff

knowledge, skills and expertise across all areas of the organisation.

Improvements in member services and benefitsA significant focus has been placed on product and benefit improvement during the year, and will continue into the coming year. The range of covers currently offered by the fund has remained static for some years, and requires redevelopment to keep pace with market demand and current industry

practice. The first release of new cover options occured in December 2011 with the launch of a new mid-level hospital cover. Additional product range changes are to be introduced in the coming year.

In addition, a range of benefit enhancements were introduced in April 2012, designed to improve benefits for members. Among the enhancements made were increased benefits across a number of commonly-claimed dental services, and benefits designed to assist members pursue healthy and preventative lifestyle options, such as increased benefits for dietician consultations (to aid weight management) and new benefits for nicotine replacement therapies (to help people quit smoking).

Improvements in capital adequacy and solvencyThe economic environment of the past few years has presented new challenges to most organisations and individuals, and provided a complex operating and investment environment. Despite this, the fund has performed extremely well and is reporting strong financial and prudential results.

Within this context, the fund has maintained a conservative investment strategy, carefully balancing risks and rewards to ensure its capital is not exposed to unnecessary levels of market volatility.

Within its property holdings, the fund is realising favourable rental yields from floors not occupied by its staff in Surry Hills and Brisbane, as was envisaged in the strategic plan for the fund’s property portfolio.

Other significant eventsIntroduction of rebate income testingThisCommonwealthGovernmentlegislativechangerepresents one of the most significant, and potentially disruptive, changes to the health insurance legislative environment for more than a decade. The change removes automatic eligibility for the government’s 30% rebate on private health insurance from all members and introduces a sliding-scale rebate


4

level, based on income. In essence, the higher a person’s income, the lower the level of rebate they may be entitled to. The lead time to introduce the communications, operational changes, technology and training to implement the change was very short, with the announcement being made by the government in April 2012 and implementation on 1 July 2012. This had a significant impact on the resources and operations of the fund during that time.

The program was successfully launched, on time, with members being offered the opportunity to delay the onset of income testing by making a contribution payment in advance. In addition, members were also provided with the facility to nominate their rebate tier through the online member centre from the time the program launched, and can now choose or change rebate tiers as needed. rt was pleased to be one of the very few funds able to offer this service to members in time for the launch of the rebate changes.

Member satisfaction surveyThe fund participated in the industry member satisfaction survey this year for the seventh time with a record number of members taking the time to share their feedback on the fund’s performance. The results were positive with overall levels of member satisfaction being maintained, compared with the prior year, and significant improvements being recorded in the areas of member service and communication, in particular. We continue to focus on further improvements in these areas.

I would like to express my appreciation to the rt health fund team for their tireless commitment to the job in what is a constantly challenging environment. The team has performed exceptionally well in delivering on the FY12 strategy and achieving all that we set out to do.

I would like to thank the board, as the representatives of the fund’s membership, for their guidance and strong support as we have continued to work together to consolidate the operations and capital of the fund and ensure its ongoing viability.

As we head into the fund’s 124th year of operations we are in sound financial and operational position. For the year ahead the fund will be focused on further operational efficiencies, enhanced levels of member service, an increased focus on the special needs of the transport and electricity industries in particular and the launch of new and improved member benefits.

Matthew MooreCEO

I would like to express my appreciation to the rt health fund team for their tireless commitment to the job in what is a constantly challenging environment.

CEO’s Report (cont)


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Role of the boardThe board is responsible for the overall corporate governance of the fund, including determining its strategic direction and financial wellbeing, as well as guiding and monitoring its business and affairs on behalf of the members to whom it is accountable.

In summary, the board’s accountabilities and responsibilities include:•contributingtothedevelopmentof,approving,and

monitoring the implementation of strategy, including identifying and mitigating any risks that may harm the fund

•settingtheoveralldirection,financialobjectivesandoperational goals for the fund

•reviewingandapprovingtheannualbudgetandbusiness plan

•delegatingclearresponsibilityandauthoritytothe committees of the board and the CEO, and monitoring and regularly reviewing the performance of those who hold delegated powers

•ensuringthatthefundhaseffectiveprocessesandsystems in place to enable the board to monitor its performance and capabilities

•overseeingthefund’scorporategovernanceframework and ensuring effective communication with members and stakeholders

•monitoringthefinancialstateandperformanceofthe fund

•approvingthefund’sfinancialreporting,includingannual reports

•promotingandmaintainingorganisationalvaluesand a culture where transparent and timely information is shared between management and the board

•ensuringeffectivesystemsofinternalcontrolandinternal audit

•reviewingtheperformanceof,andmentoring, the CEO.

The board delegates responsibility for the day-to-day management of the fund to the CEO, and to executive management through the CEO, but remains responsible for overseeing the performance of the management team. To ensure that responsibility is clearly defined, the board has delegated a range of authorities to management through formal delegations. These include limited expenditure authority, and the authority to enter into certain contracts and to engage staff.

Board charterThe board has continued in 2011/12 to undertake key activities which will ensure all of its policies, practices and procedures reflect good governance and current corporate practice. In line with current best practice, the board’s charter outlines the fund’s approach to such issues as:•corporateculture•workplacehealthandsafety•codeofconduct•riskmanagement•audit•policiesandprocedures•ethicalstandardsandvalues•boardagenda•meetingprocedures•directors’inductionandtraining•boardanddirectors’evaluationandremuneration•chiefexecutiveofficer’sevaluationand

remuneration•capitalmanagement.

The directors recognise that adherence to the charter is fundamental in demonstrating that they are accountable to members and stakeholders, and that they are appropriately overseeing the future direction of the fund and managing its business risks.

CorporateGovernance


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Changes to election to the boardThe board has adopted a ‘fit and proper’ policy for nominees wishing to be elected to the board.

The policy is compliant with APRA regulations and consistent with the ASX guidelines.

Conflicts of interestDirectors are required to disclose on an ongoing basis any interests that could potentially conflict with those of the fund or its members. In accordance with the Corporations Act 2001, the board ensures that any director with a material personal interest in a matter being considered by the board must not be present when it is under discussion and may not vote on the matter. Processes have also been implemented to ensure any breaches of compliance, regulations or code of conduct by board members are identified.

Board committeesIn line with best practice corporate governance, the board has established standing committees as an efficient mechanism for considering detailed issues and making recommendations for consideration by the entire board. These committees adopt charters setting out the matters relevant to the composition, responsibilities and administration of each committee. Current committees of the board are:

Audit and RiskThe audit and risk committee is responsible for:•facilitatingtheindependenceoftheexternalaudit

process and addressing issues arising from the external audit process

•ensuringthefundmeetsitsobligationstoregulatory agencies

•directingtheinternalauditfunction,ensuringmaximum value to the fund

•ensuringthequalityandaccuracyofpublishedfinancial reports so they present a true and fair view of the fund’s financial position and comply with relevant statutory and regulatory requirements

•ensuringthefundadopts,maintainsandappliesappropriate accounting and business policies and procedures

•overseeingthefund’sinvestmentsensuringthe correct balance between liquidity, term of investments and interest rates

•overseeingthecapitalmanagementplan•ensuringthefundmaintainseffectiveinternal

control and risk management systems in order to safeguard its financial, physical and intellectual resources.

Remuneration, Nominations and ConstitutionThe remuneration, nominations and constitution committee is responsible for:•assistingtheboardtoachieveitsobjectives

of ensuring that rt has a board of effective composition, size and commitment to adequately discharge its responsibilities and duties

•establishingpoliciesandproceduresfortheannual performance evaluation of the board, each director and management, and recommending performance and salary reviews for the CEO

•reviewingandplanningprofessional development and succession with the board and executive management

•annualeducationprogramsforboardmembers•managingthe‘fitandproper’policyand

procedures for board appointees.

Corporate Governance (cont)


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Business Development The business development committee was established during the year and is responsible for:•reviewingthedevelopmentandimplementation

of strategic business development initiatives, and ensuring initiatives are consistent with the fund’s strategic plan

•reviewing,andwhereappropriate,makingrecommendations to the board on business growth and diversification opportunities

•respondingtoemergingissuesrelatedtobusinessdevelopment

•reviewinggeneralmarketconditionsandhowthesemay present or limit new business development opportunities

•reviewingandassessingappropriatebusinesscases and plans prepared by management

•monitoringtheoutcomesofbusinessdevelopmentinitiatives.

Board performanceA performance evaluation process has been established for the board, individual directors and key executives. Directors continue to undertake formal training through the Australian Institute of Company Directors (AICD) and Chartered Secretaries Australia (CSA), as required. All directors have attended training during the year and participated in PHIAC (Private Health Insurance Administration Council) and HIRMAA (Health Insurance Restricted Membership Association of Australia) industry and director education forums.


8

Directors’ ReportFor the year ended 30 June 2012

Your directors present their report on the company for the financial year ended 30 June 2012.

Company objectivesShort termTo operate as a private health insurer and to conduct a health benefits fund, or funds, for the purposes of carrying on health insurance and health related business for the benefit of members and their dependants.

Long term To operate as a private health insurer and to conduct a health benefits fund, or funds, for the purposes of carrying on health insurance and health related business for the benefit of members and their dependants.

Company strategyShort term To consolidate and enhance the efficient operations of the fund to improve the level of capital for long-term sustainability.

Long term To achieve a sustainable level of capital to enable the fund to meet current and future members’ and their dependants’ needs for private health insurance.

Principal activitiesThe principal activity of the company during the financial year was the provision of private health insurance. There were no significant changes in the nature of the company’s principal activities during the financial year.

Measuring performanceThe key measures of performances are the gross margin and loss ratio by product, state and channel, benefits paid by member, the management expense ratio and capital adequacy and solvency ratios.

DirectorsThe names of the directors in office at any time during or since the end of the year are:B Scheuber AMV ReynoldsD EllisR LedgerJ Pascoe (appointed 24/08/11)M PriorM ScanlanDirectors have been in office since the start of the financial year to the date of this report unless otherwise stated. Their qualifications, experience and special responsibilities are as follows:


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Bob Scheuber AM, FCPA, FAIM, MAICD, B Ec, B Bus

Chair

Age 57

Term Independent member-elected directorFirst appointed 24/10/2007 and last re-elected 17/11/2010

Committees Member, Audit and Risk Committee

Directorships Chair, QSuper Board of Trustees; Chair, QSL; Chair, CRC Rail Ltd

Experience Former CEO of Queensland Rail. Awarded Member of the Order of Australia (AM) in January 2008, for ‘service to the rail sector in Queensland, particularly through contributions to regulatory and operational reforms’. Chair of the board since 2009.

Member of rt health fund since 1991.

Victoria Reynolds Dip HR Mgt, GAICD, MAHRI, MWOB

Deputy Chair

Age 60

Term Independent appointed directorFirst appointed 21/09/2005 and last reappointed 19/08/2012

Committees Chair, Remuneration, Nominations and Constitution Committee

Directorships None

Experience Consultant, Human Resources and Industrial Relations.

FormerGeneralManager,HumanResourcesforRail Infrastructure Corporation, concluding 22 years with NSW Rail. Awarded Premier’s Silver Award for Excellence in service delivery. Former chair of the board from 2005 to 2009 overseeing significant constitutional and governance changes.


Bob Scheuber Victoria Reynolds


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Dennis Ellis MAICD

Age 66

Term Independent member-elected directorFirst appointed 21/09/2005 and last reappointed 23/11/2011

Committees Member, Remuneration, Nominations and Constitution Committee

Directorships None

Experience Former senior Vice President of RTBU. Retired after 34 years with QR National and Queensland Rail

Since 2005, provided significant contribution to constitutional and governance changes, including Fit and Proper Person policies and procedures.


Robert Ledger BElec, Grad Dip Sys Eng, GAICD

Age 64

Term Independent member-elected directorFirst appointed 21/09/2005 and last reappointed 17/11/2010

Committees Member, Remuneration, Nominations and Constitution Committee

Directorships None

Experience Former Fleet Engineer, passenger fleet maintenance for NSW Railways. Retired after 40 years with NSW Rail.

Since 2005 instrumental in writing and revising the constitution, and involved in the review of the capital management policy, the strategic plan and numerous board policies.


Dennis Ellis Robert Ledger


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Julie Pascoe BA, Grad Dip (Mktg), GAICD, MAMSRS

Age 51

Term Independent appointed directorAppointed 24/08/2011

Committees Member, Business Development Committee

Directorships Director – Pasko Pty Ltd trading as CorporatePropertyGroup

Director – Barnardo’s Children Services

Former member and Chair of People and Culture Committee, Church Resources Charitable Trust Foundation

Experience Director of Marketing – marketing strategist and business manager.

Over 20 years in senior management covering a portfolio of industries with emphasis on building strong brands and ensuring high levels of organisational performance and competence.

Michael Prior M Com, Grad Dip Applied Finance (SIA), CPA, CTA, FINSIA, MAICD

Age 53

Term Independent appointed directorFirst appointed 25/05/2006 and last reappointed 15/04/2012

Committees Chair, Audit and Risk Committee, Member, Business Development Committee

Directorships Director – Woods Cottage Foundation Ltd

Former independent member of finance and investmentcommitteefortheboardofGrainGrowersAssociation of Australia

Experience Private consultant

Over 30 years in finance industry including as former CFOCMCMarketsAsiaPacific,andpreviouslyGMoperational risk and compliance with CBA.


Michael PriorJulie Pacoe


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Mike Scanlan MBA, BEng, Grad Dip Mgt, FAICD, FAIM, FCILT, FAMI, MIE

Age 57

Term Independent member-elected directorAppointed 18/11/2009

Committees Member, Audit and Risk Committee, Chair, Business Development Committee

Directorships Chair – Westwood Superannuation Fund

Director – Railways Credit union

Former director of each of Heritage Train Company, Translink Advisory Board, Queensland Tourism Industry Council Board, City Trans Management Committee, and International Public Transport Association

Experience Private consultant

Over 34 years with Queensland Rail including a variety of business unit senior executive positions.


Matthew W Moore BA, MAICD

Chief Executive Officer

Matthew was appointed CEO on 25 October 2010 having joined the rt team as operations manager in 2007, moving to the new role of general manager strategy, policy and innovation in 2009.

He was appointed a Director of the Australian Health Service Alliance Ltd on 17 November 2011 and is a member of its Audit Committee.

He has worked in senior executive positions within the private health insurance industry for more than 20 years. These included head of strategy at Medibank Private, then at MBF where he established and implemented fraud and risk analysis systems. As principal of an innovative business services organisation, he provided outsourced administration and IT&T services to small and medium-sized health funds both in Australia and overseas.

Mark Dayhew BBus, CPA, AAII, CIP

Chief Financial Officer

Mark was appointed Chief Financial Officer in August 2010. He brings a depth of more than 30 years’ experience in the insurance industry, including over 15 years in senior executive roles. Mark’s specialisation covers financial systems, risk management, corporate governance and financial reporting.

John Hartigan BComm, CA, FCIS, GAICD, FCSA

Company Secretary

John was appointed Company Secretary in May 2010. He is a fellow of Chartered Secretaries Australia, a chartered accountant and graduate member of the Institute of Company Directors. He has over 17 years’ experience in corporate governance and secretariat practice in listed and unlisted public companies.

Mike Scanlan


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Operating resultsThe surplus to members of the company for the financial year ended 30 June 2012 amounted to $8,446,000 (2011: $3,131,000).

Review of operationsA gross margin of 18.9% generated during the year is higher than in 2011, being 13.5%. This result reflected fewer members making hospital benefit claims over the year.

Membership decreased by 2.6% over the twelve months to 30 June 2012.

Management expenses were marginally lower than prior years as a percentage of contribution income, being 11.1% (2011: 12.0%). Following the move to the new head office in Surry Hills, the fund consolidated expenditure, reviewed internal structures and continued streamlining processes to gain operational efficiencies.

Investment income was higher than in the prior year, due to an increase in term deposit rates that was able to be achieved. The managed fund returns however experienced a downturn with the poor performance of the local equity market that had been influenced by the events in overseas markets.

Significant changes in state of affairsNo significant changes in the company’s state of affairs occurred during the financial year.

After balance date eventsNo matters or circumstances have arisen since the end of the financial year which significantly affected, or may significantly affect, the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

Future development, prospects and business strategiesThe company will continue to pursue the business activities as a registered health benefits organisation and in health related businesses.

Environmental issuesThe company’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory.

Dividends paid or recommendedAs the company is a company limited by guarantee and a not-for-profit organisation, no dividends have been paid, declared or recorded.

OptionsAs the company is limited by guarantee, no options over issued shares or interests in the company were granted during or since the end of the financial year and accordingly there were no options outstanding at the date of this report.

Indemnifying officers or auditorDuring or since the end of the financial year, the company has paid insurance premiums to insure all directors and officers of the company against liabilities for costs and expenses incurred by them to the extent permitted by the Corporations Act 2001 in defending legal proceedings arising from their conduct while acting in the capacity of director or officer of the company, other than conduct involving a wilful breach of duty in relation to the company.

The contract of insurance prohibits disclosure of the nature of the liabilities and the amount of the premium.

No indemnities have been given or insurance premiums paid during or since the end of the financial year for any person who is or has been an auditor of the company.

Proceedings on behalf of companyNo person has applied for leave of court to bring proceedings on behalf of the company or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

The company was not a party to any such proceedings during the year.


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Rounding of amountsThe entity has applied relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report and directors’ report have been rounded off to the nearest $1,000.

Meetings of directors During the financial year, a total of 23 meetings of directors (including committees of directors) were held. Attendances by each director during the year were as follows

Director Meetings Committee Meetings

Audit & Risk Committee

Remuneration, Nominations

& Constitution Committee

BusinessDevelopment Committee

Name E A E A E A E A

B Scheuber 12 12 5 5 – – – –

V Reynolds 12 10 – – 4 4 – –

D Ellis 12 11 – – 4 4 – –

R Ledger 12 12 – – 4 4 – –

J Pascoe 11 10 – – – – 2 2

M Prior 12 12 5 5 – – 2 2

M Scanlan 12 12 5 5 – – 2 2

Table Key: E Number of meetings eligible to attend A Number of meetings attended

Auditor’s independence declarationA copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 8 and forms part of this report.

Signed in accordance with a resolution of the board of directors:

R SCHEUBER

ChairDated this 19th day of September 2012, Sydney, NSW

Directors’ Report (cont)


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Auditor’s Independence Declaration


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Financial Statements

17

Statement of Comprehensive Income 18Statement of Financial Position 19Statement of Changes in Equity 20Statement of Cash Flows 21Notes to the Financial Statements 22Directors’ Declaration 54Independent Auditor’s Report 55

18


Statement of Comprehensive IncomeFor the year ended 30 June 2012

Note2012

$’0002011

$’000

Premium revenue 3 86,660 80,126

Claims expense (87,631) (84,167)

Risk Equalisation Trust Fund income 8,018 6,652

GapandAccessGaprefund 10,293 9,173

State levies (940) (939)

Net claims incurred (70,260) (69,281)

Unexpired risk liability decrease – 2,219

Claims handling expenses 4 (5,342) (4,913)

Other underwriting expenses 4 (4,316) (4,738)

Underwriting expenses (9,658) (7,432)

Underwriting result 6,742 3,413

Investment revenue 3 1,629 1,206

Change in fair value of investment property 3 – (1,658)

Change in fair value of investments in equity instruments 3 (117) 109

Loss on sale of property – (127)

Other revenue 3 192 188

Surplus attributable to members before tax 8,446 3,131

Income tax expense 1a. – –

Surplus attributable to members after tax 8,446 3,131

Other comprehensive income – –

Total comprehensive income attributable to members 8,446 3,131

19


Statement of Financial PositionAs at 30 June 2012

Note2012

$’0002011

$’000

Current assets

Cash and cash equivalents 7 3,840 3,352

Trade and other receivables 8 7,438 5,631

Financial assets 9 30,830 23,043

Other current assets 10 120 97

Total current assets 42,228 32,123

Non-current assets

Intangible assets 11 531 644

Property, plant and equipment 12 10,913 10,487

Investment property 13 6,540 6,540

Total non-current assets 17,984 17,671

Total assets 60,212 49,794

Current liabilities

Trade and other payables 14 1,701 1,725

Short-term provisions 15 9,331 10,586

Other current liabilities 16 11,791 8,551

Total current liabilities 22,823 20,862

Non-current liabilities

Long-term provisions 15 67 56

Total non-current liabilities 67 56

Total liabilities 22,890 20,918

Net assets 37,322 28,876

Equity

Reserves 18 767 767

Retained earnings 36,555 28,109

Total equity 37,322 28,876

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Retained earnings

$’000

Asset revaluation reserve

$’000Total

$’000

Balance at 1 July 2010 24,018 1,727 25,745

Surplus for the year 3,131 – 3,131

Transfer from sale of property 960 (960) –

Other comprehensive income – – –

Balance at 30 June 2011 28,109 767 28,876

Surplus for the year 8,446 – 8,446

Other comprehensive income – – –

Balance at 30 June 2012 36,555 767 37,322

Statement of Changes in EquityFor the year ended 30 June 2012

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Note2012

$’0002011

$’000

Cash flow from operating activities

Receipts from members’ premiums 89,248 81,219

Benefits paid to members (72,506) (67,683)

Receipts from tenants 192 153

Payments to suppliers and employees (9,536) (9,914)

Interest received 1,629 1,206

Net cash provided by operating activities 22 9,027 4,981

Cash flows from investing activities

Proceeds from disposal of investments 60,954 65,662

Payment for purchase of investments (68,500) (71,019)

Proceeds from disposals of property, plant and equipment 5 3,979

Payment for property, plant and equipment (783) (7,870)

Payment for intangibles (215) (374)

Net cash used in investing activities (8,539) (9,622)

Cash flows from financing activities

Net cash provided by financing activities – –

Net increase/(decrease) in cash held 488 (4,641)

Cash at beginning of year 3,352 7,993

Cash at end of year 7 3,840 3,352

Statement of Cash FlowsFor the year ended 30 June 2012


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Notes to the Financial StatementsFor the year ended 30 June 2012

Note 1: Statement of significant accounting policiesThe financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The financial report covers Railway & Transport Health Fund Limited as an individual company. Railway & Transport Health Fund Limited is a company limited by guarantee, incorporated and domiciled in Australia.

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). A statement of compliance with International Financial Reporting Standards cannot be made due to the company applying the not-for-profit sector specific requirements contained in the AIFRS.

All amounts presented within the financial report are in Australian dollars unless otherwise stated.

The following is a summary of the material accounting policies adopted by the company in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Basis of PreparationThe accounting policies set out below have been consistently applied to all years presented, unless otherwise stated.

Reporting Basis and ConventionsThe financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

Accounting Policiesa. Income taxThe company is a private insurer within the meaning of the Private Health Insurance Act 2007 and is exempt from income tax assessment under section 50-30 of the Income Tax Assessment Act 1997.

b. RevenuePremium revenue is recorded on an accruals basis, reflecting contributions received adjusted for the opening and closing contributions in advance and in arrears. Contributions received in advance are recorded as a liability and contributions in arrears (to the extent recoverable) are recorded as an asset. Premiums on unclosed business are brought to account using estimates based on payment cycles nominated by the member.− Interest revenue is recognised on a proportional

basis taking into account the interest rates applicable to the financial assets.

− Revenue from the rendering of a service is recognised upon the delivery of the service to the members.

− Lease income from operating leases where the company is the lessor is recognised in the income statement on a straight-line basis over the lease term.

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

− All revenue is stated net of the amount of goods andservicestax(GST).


23

c. Claims Claims are recorded as an expense in the period in which the service has been provided to the member. The cost of claims therefore represents the claims paid during the period, adjusted for the opening and closing provision for un-presented and outstanding claims. The provision for un-presented and outstanding claims provides for claims received but not assessed and claims incurred but not received. The provision is based on an actuarial assessment taking into account historical patterns of claim incidence and processing. No discounting is applied to the provision due to the generally short period between claim incidence and settlement. The provision also provides for the expected payment to, or receipt from, the Risk Equalisation Trust Fund (RETF) in relation to the amount provided for un-presented and outstanding claims. The provision also allows for an estimate of operating expenses to cover the cost of processing the claims.

In addition to the provision for un-presented and outstanding claims, an unearned premium liability is also provided for to meet the costs, including claims handling costs that will arise under current insurance contracts. The unearned premium liability is calculated by considering current estimates of the present value of expected future cash flows arising from the rights and obligations under current insurance contracts.

d. Risk equalisationAmounts receivable from the RETF are recorded in the statement of financial performance in the period for which the receipts relate. Any amounts due at the balance date in relation to the period are brought to account as assets.

e. Outstanding claims liabilityProvision is made at the year 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 insurance contracts issued by the company. 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 that is intended to contain no intentional over- or underestimation. For this reason, the inherent uncertainty in the central estimate must also be considered and a risk margin is added. Actual results could differ from the 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.

f. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

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

If 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 then the premium is deemed to be deficient. The company applies a risk margin to achieve the same probability of sufficiency for future claims as achieved by the estimate of the outstanding claims liability.

Note 1: Statement of significant accounting policies (cont) h. Unclosed businessUnclosed business is recognised on the balance sheet at year end on premiums in arrears. This is calculated as the remainder of the premium payable.

i. Assets backing private health insurance liabilitiesAs part of the investment strategy, the company 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. The board has adopted a conservative approach to maintain its investment portfolio in cash and interest rate securities, except for a maximum of 10% of non-investment property assets in Australian Equities.

With the exception of property, plant and equipment, the company has determined that all assets are held to back private health insurance liabilities and their accounting treatment is fair value through the profit and loss in accordance with the policy set out in Note 1 (j). Previously fixed interest rate securities were held to maturity. There is no movement in fair value for both the current and prior year between these classifications and therefore the reclassification is considered immaterial.

j. Financial instrumentsInitial recognition and measurementFinancial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transactions costs, except where the instrument is classified as ‘at fair value through profit or loss’ in which case transaction costs are expensed to profit or loss immediately.

Classification and subsequent measurementFinancial instruments are subsequently measured at either; fair value, amortised cost (using the effective interest rate method) or cost. ‘Fair value’ represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

‘Amortised cost’ is calculated as:− the amount at which the financial asset or financial

liability is measured at initial recognition;− less principal repayments;− plus or minus the cumulative amortisation of the

difference, if any, between the amount initially recognised and the maturity amount calculated using the ‘effective interest method’; and

− less any reduction for impairment.

The ‘effective interest method’ is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.

24


Notes to the Financial Statements (cont)

Financial assets at fair value through profit and lossFinancial assets are classified at ‘fair value through profit or loss’ when they are held for trading for the purpose of short-term profit taking, or where they are derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with charges in carrying value being included in profit or loss.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost.

Loans and receivables are included in current assets, except for those that are not expected to mature within 12 months after the end of the reporting period, which will be classified as non-current assets.

Fair valueFair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

ImpairmentAt the end of each reporting period, the entity assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income.

De-recognitionFinancial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset.

Each class of property, plant and equipment is carried at cost or fair value, less, where applicable, any accumulated depreciation and impairment losses.

PropertyFreehold land and buildings are shown at their fair value (being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction). Valuations are performed whenever the directors believe there has been a material movement in the value of the assets.

Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation reserve in equity. Decreases that offset previous increases of the same asset are charged against the related revaluation reserve directly in equity; all other decreases are charged to the statement of comprehensive income.

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 re-valued amount of the asset.

Plant and equipmentPlant and equipment are measured on the cost basis less depreciation and impairment losses.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

25


Note 1: Statement of significant accounting policies (cont)Subsequent 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 company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

DepreciationThe depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over their useful lives to the company commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

Class of fixed asset Depreciation rate

Buildings 2%

Computer equipment 25%

Motor vehicles 12.5%

Plant and equipment 5-20%

Leasehold improvements 20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet 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.

Gainsandlossesondisposalsaredeterminedbycomparing proceeds with the carrying amount. These gains or losses are included in the income statement.

When re-valued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

k. Investment propertyInvestment property, comprising freehold office complexes, is held to generate long-term rental yields. All tenant leases are on an arm’s length basis. Investment property is carried at fair value, determined by independent valuers, and adjusted to reflect the current market value of the property. Changes in fair value of investment property are reflected in the statement of comprehensive income for the year.

l. Impairment of assetsAt each reporting date, the company reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

m. Intangible assetsComputer softwareComputer software has a finite useful life and is carried at cost, less any accumulated amortisation and impairment losses. Amortisation is calculated on a straight-line basis to allocate the cost of the software over its useful life, being three years.

n. LeasesLeases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the company are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments including any

26



guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

o. Provisions Provisions are recognised when the company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

p. Employee benefitsProvision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

q. Goods and Services Tax (GST)Revenues, expenses and assets are recognised net oftheamountofGST,exceptwheretheamountofGSTincurredisnotrecoverablefromtheAustralianTaxationOffice.Inthesecircumstances,theGSTis recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are showninclusiveofGST.

Cash flows are presented in the cash flow statement onagrossbasis,exceptfortheGSTcomponentofinvesting and financing activities, which are disclosed as operating cash flows.

r. Comparative figuresWhen required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

s. Rounding of amountsThe entity has applied relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report and directors’ report have been rounded off to the nearest $1,000.

t. New accounting standards for application in future periodsAt the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the fund.

Management anticipates that all of the relevant pronouncements will be adopted in the fund’s accounting policies for the first period beginning after the effective date of the pronouncement.

Information on new standards, amendments and interpretations that are expected to be relevant to the Fund’s financial statements is provided below.

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Fund’s financial statements.

27


28


Note 1: Statement of significant accounting policies (cont) AASB 9 Financial Instruments (effective from 1 January 2013)AASB 9 aims to replace AASB 139 Financial Instruments: Recognition and Measurement in its entirety. The replacement standard AASB 9 is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and de-recognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning 1 January 2013. Further chapters dealing with impairment methodology and hedge accounting are still being developed.

The fund’s management have yet to assess the impact that this new standard on the fund’s consolidated financial statements. However, they do not expect to implement AASB 9 until all of its chapters have been published and they can comprehensively assess the impact of all changes.

AASB 13 Fair Value Measurements (AASB 13)AASB 13 does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It is applicable for annual periods beginning on or after 1 January 2013. The Fund’s management have yet to assess the impact of this new standard.

AASB 2011-9 Amendments to Australian Accounting Standards Presentation of Items of Other Comprehensive Income (AASB 101 Amendments)The AASB 101 amendments require an entity to group items presented in other comprehensive income into those that, in accordance with other AASBs: (a) will not be reclassified subsequently to profit or loss and (b) will be reclassified subsequently to profit or loss when specific conditions are met. It is applicable for annual periods beginning on or after 1 July 2012. The Fund’s management expects this will change the current presentation of items in other

comprehensive income; however, it will not affect the measurement or recognition of such items.

Amendments to AASB 119 Employee Benefits (AASB 119 Amendments)The AASB 119 Amendments include a number of targeted improvements throughout the Standard. The main changes relate to defined benefit plans. They:• eliminatethe‘corridormethod’,requiringentities

to recognise all gains and losses arising in the reporting period in other comprehensive income

• streamlinethepresentationofchangesinplanassets and liabilities

• enhancethedisclosurerequirements,includinginformation about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in them.

The amended version of AASB 119 is effective for financial years beginning on or after 1 January 2013. The Fund’s management have yet to assess the impact of this revised standard on the Fund’s consolidated financial statements.

Amendments to IAS 32 Financial Instruments: Presentation and IFRS 7 Financial Instruments DisclosuresThe amendments to IAS 32 add application guidance to address inconsistencies in applying IAS 32’s criteria for offsetting financial assets and financial liabilities. Qualitative and quantitative disclosures have been added to IFRS 7 relating to gross and net amounts of recognised financial instruments that are (a) set off in the statement of financial position and (b) subject to enforceable master netting arrangements and similar agreements, even if not set off in the statement of financial position. The amendments are applicable for annual periods beginning on or after 1 January 2014. The Fund’s management have yet to assess the impact of these amendments. The company does not anticipate the early adoption of any of the above Australian Accounting Standards.


29


u. Critical accounting estimates and judgmentsThe directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the company. The key areas in which critical estimates are applied are as described below:

Outstanding claims provisionProvision is made at the year-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 insurance contracts issued by the company. 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 that is intended to contain no intentional over- or underestimation. 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 the Risk Equalisation Trust Fund (RETF) consequences andclaimshandlingexpense.Giventheinherentuncertainty in establishing claims provisions, it is likely that actual results will differ from the original estimate.

In calculating the estimated cost of unpaid claims the company uses estimation techniques based upon statistical analysis of historical data. Allowance is made, however, for changes or uncertainties which may distort 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 to the company’s processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared with statistics from previous periods. The calculation was determined as at 30 June 2012, taking into account one month of actual post balance date claims.

The risk margin has been based on an analysis of the past experience of the company. The analysis examined the volatility of past payments, which has not been explained by the model adopted to determine the central estimate. This past volatility has been assumed to be indicative of 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 the RETF based upon the gross provision.

Details of specific key estimates and judgements used in deriving the outstanding claims liability at year end are detailed in notes 2 and 15.

Unexpired risk liabilityThe provision for unexpired risk liability is determined as the excess of benefits, risk equalisation, state levies, claims-related expenses, plus a risk margin over the premiums for the relevant period. Projected benefits, risk equalisation, state levies and claims-related expenses were determined from projections adjusted for recent experience compared to projected and based on no membership growth.

Details of specific key estimates and judgements used in deriving the unexpired risk liability at year end are detailed in note 15e.

Impairment of financial and non-financial assetsThe company assesses impairment at each reporting date by evaluating conditions specific to the company that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

v. Adoption of the financial reportThe financial report was authorised for issue on 19th September 2012 by the board of directors.

30


Note 2: Actuarial assumptions and methodsActuarial methodsThe outstanding claims estimate is derived based on three valuation classes, namely hospital, medical and general treatment services.

In calculating the estimated cost of unpaid claims a chain ladder method is used, this assumes that the development pattern of the current claims will be consistent with historical experience. Where deemed necessary, manual adjustments were made to the outstanding claims by ‘service month’ to produce an appropriate estimate of incurred claims for the service month.

Actuarial assumptionsThe following assumptions have been made in determining the outstanding claims liability based on inputs from management and advice from the Appointed Actuary.

2012 2011

Variables Hospital%

Medical%

General treatment%

Hospital%

Medical%

General treatment%

Portion paid to date 94.1 96.2 97.1 92.7 92.5 97.2

Expense rate 6.89 6.89 6.89 7.59 7.59 7.59

Discount rate – – – – – –

Risk equalisation rate (11.81) (11.81) (11.81) (11.5) (11.5) –

Risk margin 5.00 5.00 5.00 18.17 18.17 18.17

The risk margin of 5.00% (2011: 18.17%) of the underlying liability has been estimated to equate to a probability of adequacy greater than 75% (2011: 95%).

Process used to determine assumptionsA description of the processes used to determine these assumptions is provided below.

Proportion paid to dateThe proportion paid to date summarises the application of the chain ladder method (over the 12 months to 30 June 2012) to determine the total expected incurred in each service month.

The proportion paid to date has been determined with one month’s paid claims hindsight.


31


Discount rateAs 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. An increase in the proportion assumed paid to date would lead to more claims being paid earlier and therefore a decrease in the liability.

Expense rateClaims handling expenses were calculated by reference to past experience of total claims handling costs as a percentage of total past payments. An increase or decrease in this expense would have a corresponding effect on the claims expense.

Risk equalisation allowanceIn simplified terms, each private health insurer 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 and in respect of high cost claims. This is an allowance made in respect of the claims incurred but not yet paid. An increase or decrease in this expense would have a corresponding effect on the claims expense.

Risk marginThe risk margin has been based on an analysis of the past experience of the company. 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 future volatility and has been set at a level estimated to equate to a probability of adequacy greater than 75 % (2011: 95%). An increase or decrease in this expense would have a corresponding effect on the claims expense.

The probability of adequacy implied by the risk margin (2012: 5.00%) has been determined with one month’s paid claims hindsight. The 2011 provision was prepared using one month’s paid claim hindsight.

Sensitivity analysis – insurance contractsSummaryThe company 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 company.

32


Note 2: Actuarial assumptions and methods (cont)

Variables

Movement in variable

%

Adjustments on Surplus

$‘000

Adjusted amount

included in Statement of

Comprehensive Income

$‘000

Adjustments on Equity$‘000

Adjusted amount

included in Statement

of Financial Position

$‘000

Grossoutstandingclaims provision

+10 (842) (842) (842) (842)

-10 842 842 842 842

Expense rate +10 (55) (55) (55) (55)

-10 55 55 55 55

Discount rate – – – – –

– – – – –

Risk equalisation rate +10 102 102 102 102

-10 (102) (102) (102) (102)

Risk margin +10 (40) (40) (40) (40)

-10 40 40 40 40

Surplus2012

$’000

Equity2012

$’000

Recognised amounts in the financial statements 8,446 37,322


33


2012$’000

2011$’000

Note 3: RevenuePremium revenue 86,660 80,126

Investment revenue 1,629 1,206

Change in fair value of investment property – (1,658)

Change in fair value of investments in equity instruments (117) 109

Other revenue

Rental income 187 186

Other income 5 2

Total other revenue 192 188

Note 4: ExpensesExpenses by function

Claims handling expenses 5,342 4,913

Other underwriting expenses 4,316 4,738

Total expenses (excluding direct claims expenses) 9,658 9,651

Expenses by nature

Employee benefits 5,342 4,913

Depreciation and amortisation 662 451

Other expenses 3,654 4,287

Total expenses (excluding direct claims expenses) 9,658 9,651

34


2012$’000

2011$’000

Note 5: Key management personnel compensationShort-term employee benefits

Salary and fees 1,332 1,050

Bonus – 73

Non-cash benefits 16 14

1,348 1,137

Post-employment benefits

Superannuation 119 105

Termination benefits 65 159

Total key management personnel compensation 1,532 1,401

During the year ended 30 June 2011 the fund completed an organisational restructure which involved the appointment of a number of new executives, some of which were for part year only. During 2012 the whole year compensation costs were incurred, including additional costs to cover one executive currently on maternity leave. The amount also includes compensation paid to directors of the company.

Note 6: Auditors’ remunerationRemuneration of the auditor for:

– Audit services 73 70

– Non audit services – –

Total auditor’s remuneration 73 70

Note 7: Cash and cash equivalentsCash on hand 2 2

Cash at bank 3,838 3,350

3,840 3,352


35


2012$’000

2011$’000

Note 8: Trade and other receivablesCurrent

Premiums in arrears 885 977

Less provision for impairment (181) (87)

Medicare rebate 2,833 1,866

Risk equalisation trust fund (“RETF”) quarterly receivable 3,031 2,233

Unclosed business 443 439

Other receivables 427 203

7,438 5,631

All amounts of receivables are deemed short term. The carrying value of short-term receivables is considered a reasonable approximation to fair value. All of the trade and other receivables have been reviewed for indicators of impairment; some of the unimpaired receivables are past due as at the reporting date. The age of financial assets is as follows:

Past due but not impaired (days overdue)Gross

amountPast due and

impairedNet

amount

< 30 31 - 60 >60 $’000 >90 $’000

Premiums in arrears

2012 570 105 210 885 (181) 704

2011 700 119 158 977 (87) 890

36


2012$’000

2011$’000

Note 9: Financial assetsCurrent

Financial assets at fair value through profit or loss

– held-for-trading Australian listed shares 851 939

– term deposits 29,979 21,120

– floating rate notes – 984

30,830 23,043

Note 10: Other current assets

Current

Prepayments 120 97

120 97


37


2012$’000

2011$’000

Note 11: Intangible assetsComputer software

At cost 1,232 1,017

Accumulated amortisation (701) (373)

Total computer software 531 644

Total intangible assets 531 644

Computer software$’000

Balance at 30 June 2010 261

Additions 374

Disposals (1)

Transfer from property, plant & equipment 236

Amortisation charge (226)

Amounts written off –

Balance at 30 June 2011 644

Additions 215

Disposals –

Transfer from property, plant & equipment –

Amortisation charge (328)

Amounts written off –

Carrying amount at 30 June 2012 531

38


2012$’000

2011$’000

Note 12: Property, plant and equipmentLand

At fair value 2,863 2,863

Accumulated depreciation – –

Land 2,863 2,863

Buildings

At fair value 7,038 6,958

Accumulated depreciation (148) (8)

Total buildings 6,890 6,950

Motor vehicles

At cost 28 20


Total Motor Vehicles 25 6

Plant & equipment

At cost 1,600 958


Total office furniture and equipment 1,135 668

Total property, plant and equipment 10,913 10,487


39


Land$’000

Buildings$’000

Motor Vehicle

$’000

Plant & Equipment

$’000Total

$’000

Balance at 1 July 2010 6,019 5,449 9 832 12,309

Additions – 7,438 – 432 7,870

Disposals (1,340) (1,235) – (181) (2,756)

Transfer to intangibles – – – (236) (236)

Transfer to investment property (1,816) (4,670) – – (6,486)

Depreciation expense – (43) (3) (179) (225)

Accumulated depreciation written back on revaluation

– 11 – – 11

Balance at 30 June 2011 2,863 6,950 6 668 10,487

Additions – 80 28 674 782

Disposals – – (20) (28) (48)

Transfer to intangibles – – – – –

Transfer to investment property – – – – –

Depreciation expense – (140) (3) (191) (334)

Accumulated depreciation written back on revaluation

– – 14 12 26

Carrying amount at 30 June 2012 2,863 6,890 25 1,135 10,913

No impairment charge has been recognised during the year.

40


Note2012

$’0002011

$’000

Note 13: Investment propertyInvestment property 6,540 6,540

6,540 6,540

Balance at beginning of year 6,540 3,112

Transfer from property, plant & equipment – 6,486

Disposals – (1,400)

Fair value adjustments – (1,658)

Balance at end of year 6,540 6,540

Note 14: Trade and other payablesCurrent

Sundry payables and accrued expenses 1,258 1,286

Unclosed business contributions 443 439

1,701 1,725

Note 15: ProvisionsCurrent

Employee benefits (a) 463 402

Member rewards (b) 450 318

Outstanding claims (c) 8,418 9,866

Unexpired risk liability (d) – –

9,331 10,586

Non-Current

Employee benefits (a) 67 56

67 56


41


Employee Benefits

$’000

Member rewards

$’000

Outstanding claims$’000

Total$’000

Movements in provisions

Balance at 1 July 2011 458 318 9,866 10,642

Amounts used during the year (143) (3) (5,319) (5,465)

Amounts raised during the year 215 194 3,871 4,280

Amounts reversed during the year – (59) – (59)

Balance at 30 June 2012 530 450 8,418 9,398

(a) Provision for employee benefitsA provision has been recognised for employee entitlements relating to annual and long service leave for employees. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based upon historical data. The measurement and recognition criteria for employee benefits have been included in note 1.

(b) Provision for member rewardsA provision has been recognised for a member rewards program, which was introduced during the prior year. This provides for incentives offered to new members for joining as well as existing members for continued loyalty.

(c) Provision for outstanding claims

2012$’000

2011$’000

Outstanding claims – central estimate of the expected future payment for claims incurred 8,410 8,678Risk equalisation component (910) (918)

Claims handling expense 517 589

Gross outstanding claims liability 8,017 8,349

Risk margin (i) 401 1,517

Net outstanding claims liability 8,418 9,866

42


Note 15: Provisions (cont)(i) Risk marginThe risk margin of 5.00% (2011: 18.17%) of the underlying liability has been estimated to equate to a probability of adequacy greater than 75 % (2011: 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 that is intended to contain no intentional over or underestimation. For this reason the inherent uncertainty in the central estimate must also be considered.

The risk margin has been based on an analysis of the past experience of the company. 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 future volatility.

The outstanding claims estimate is derived based on three valuation classes, namely hospital, medical and general treatment services. Diversification benefits within a valuation class are implicitly allowed for through the model adopted. The determination of the risk margin has also implicitly allowed for diversification between valuation classes, based on an analysis of past correlations in deviations from the adopted model.

The outstanding claims provision has been estimated using a chain ladder method, based on historical experience and future expectations as to claims. The calculation was determined taking into account one month of actual post balance date claims.

As claims for private health insurers 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.

Changes in the gross outstanding claims can be analysed as follows:

2012$’000

2011$’000

Grossoutstandingclaimsatbeginningofperiod 8,678 6,708

Risk equalisation component (918) (718)

Administration component 589 461

Central estimate at beginning of period 8,349 6,451

Change in claims incurred for the prior year (424) 658

Claims paid in respect of the prior year (7,925) (7,109)

Claims incurred during the year (expected) 78,921 73,958

Claims paid during the year (expected) (70,511) (65,280)

Central estimate at end of period 8,410 8,678

Administration component 517 589

Risk equalisation component (910) (918)

Gross outstanding claims at end of period 8,017 8,349


43


(d) Provision for unexpired risk liability

Unearned premium

$’000

Unearned unclosed business

$’000

Constructive obligation

$’000Total

$’000

2012

Premium (1) 11,791 443 57,322 69,556

Related deferred member acquisition costs – – – –

Premium less related DMAC (2) 11,791 443 57,322 69,556

Outflows

Central estimate of future benefits 9,781 366 47,671 57,818

Central estimate of future management expenses 705 27 3,431 4,163

Risk margin 524 20 2,555 3,099

Total outflows (3) 11,010 413 53,657 65,080

Total deficiency (3) – (2) – – – –

Total unexpired risk liability (3) – (1) – – – –

Total unexpired risk liability – – – –

2011

Premium (1) 8,551 439 57,371 66,361

Related deferred member acquisition costs – – – –

Premium less related DMAC (2) 8,551 439 57,371 66,361

Outflows

Central estimate of future benefits 7,299 379 48,738 56,416

Central estimate of future management expenses 651 33 4,380 5,064

Risk margin 398 21 2,656 3,075

Total outflows (3) 8,348 433 55,774 64,555

Total deficiency (3) – (2) – – – –

Total unexpired risk liability (3) – (1) – – – –

Total unexpired risk liability – – – –

The current year liability adequacy test has identified a surplus and as such no provision for unexpired risk liability has been recognised.

The liability adequacy test for sufficiency is determined as the excess of projected benefits, risk equalisation, state levies, claims-related expenses, plus a risk margin over the projected contributions, less intangible assets and related deferred member acquisition costs for the relevant period.

44


Note 15: Provisions (cont)The provision for unexpired risk liability is determined as the excess of benefits, risk equalisation, state levies, claims-related expenses plus a risk margin over the projected contributions for the relevant period. Projected contributions, benefits, risk equalisation, state levies and claims-related expenses were determined on a best estimate basis with no membership growth.

The risk margin of 5.00% for annual reporting (2011: 5.00%) is applied to the benefits, risk equalisation, state levies and claims-related expenses cash flows. The risk margin is to provide a 75% level of adequacy (2011: 75%). The risk margin has been based on an analysis of the past experience of the company. This analysis examined the volatility of past loss ratios. The adopted risk margin is based on past volatility, plus allowances for uncertainty from the economic environment and changes in the risk profile

2012$’000

2011$’000

Note 16: Other liabilitiesCurrent

Premium received in advance 11,791 8,551

11,791 8,551

It is noted that the contributions in advance has increased by $3,240k as at 30 June 2012. This increase is mainly due to the changes in the Private Health Insurance Rebate Scheme which came into effect from 1 July 2012.

Note 17: Members’ guaranteeThe company is limited by guarantee and hence has no contributed equity. If the company is wound up, the constitution states that all funds, property and assets that remain after payment of outstanding claims, debts and liabilities shall be applied to another organisation or institution having objects similar to Railway & Transport Health Fund Limited, providing similar services which prohibits the distribution of income and assets to its members, and which is exempt from payment of income tax. If the company is wound up and cannot meet its debts, the constitution states that each member is required to contribute a maximum of $10 toward meeting any outstanding obligations of the company.


45


2012$’000

2011$’000

Note 18: ReservesCurrent

Revaluation reserve 767 767

Movement of reserves

Balance at beginning of year 767 1,727

Transfer from sale of property to retained earnings – (960)

Balance at end of year 767 767

The asset revaluation reserve records the revaluations of non-current assets.

Note 19: Capital and leasing commitmentsOperating lease commitments

Non-cancellable operating leases contracted for but not capitalised in the financial statements

Payable – minimum lease payments

– not later than 12 months 18 26

– later than 12 months but not later than 5 years – 18

– greater than 5 years – –

18 44

The operating lease commitments relate to a non-cancellable premises lease entered into for the operation of the office in Newcastle.

Note 20: Contingent liabilities and contingent assetsThe company does not have any contingent liabilities or assets at 30 June 2012.

Note 21: Solvency reserve

Health benefits fund capital (a) 37,322 28,876

Less: Solvency reserve (b) (11,261) (18,422)

Excess assets 26,061 10,454

(a) This balance represents the capital available at year end to satisfy the solvency reserve required in accordance with the Solvency Standard as set by PHIAC.

(b) The solvency reserve for the company has been calculated in accordance with the Solvency Standard as set by PHIAC and represents the minimum reserve required to be maintained by the company.

46


2012$’000

2011$’000

Note 22: Cash flow informationReconciliation of cash flow from operations with surplus after income tax

Surplus/(loss) after income tax 8,446 3,131

Non-cash flows in surplus

Depreciation and amortisation 662 451

Write-off of assets 16 182

Unexpired risk liability movement – (2,219)

Fair value adjustment of investment property – 1,658

Fair value adjustment of investments in equity 117 (109)

Net (gain)/loss on disposals of property – (15)

Changes in assets and liabilities

(Increase)/decrease in trade and term debtors (2,163) (957)

(Increase)/decrease in other assets (23) 24

(Decrease)/increase in payables (24) (226)

Increase in provisions (1,244) 1,691

Increase in other liabilities 3,240 1,370

Cash flows from operations 9,027 4,981

Note 23: Events after the balance sheet dateNo matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.


47


Note 24: Financial instruments measured at fair value(a) Financial risk managementThe company’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable, bills and leases.

The totals for each category of financial instrument, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows:

2012$’000

2011$’000

Financial assets

Cash and cash equivalents 3,840 3,352

Loans and receivables 7,438 5,631

Fair value through profit and loss investments

– listed securities 851 939

– term deposits 29,979 21,120

– floating rate notes – 984

42,108 30,026

Financial liabilities

Financial liabilities at amortised cost

– trade and other payables 1,701 1,725

– other liabilities 11,791 8,551

13,492 10,276

The company does not have any derivative instruments at 30 June 2012.

The Audit and Risk Committee has been delegated responsibility by the board of directors for, among other issues, monitoring and managing financial risk exposures of the company. An investment policy has been developed in order to comply with PHIAC’s requirements.

The fund’s overall investment strategy seeks to assist the fund in meeting its financial targets, while minimising potential adverse effects on financial performance. The main risks the company is exposed to through its financial instruments have been addressed below, including market risks, liquidity risks, credit risks and insurance risks.

48


Note 24: Financial instruments measured at fair value (cont)Market risks(i) Interest rate riskExposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The company is also exposed to earnings volatility on floating rate instruments.

Weighted Average

Effective Interest Rate

%

Floating Interest Rate

$’000Within Year

$’000

Fixed Interest Rate Maturing

1 to 5 years$’000

Total$’000

2012

Financial Assets

Cash and cash equivalents 5.26 – 3,840 – 3,840

Receivables 0.00 – 7,438 – 7,438

Investments 5.79 – 29,979 – 29,979

Total Financial Assets – 41,257 – 41,257

2011

Financial Assets

Cash and cash equivalents 4.23 – 3,352 – 3,352

Receivables 0.00 – 5,631 – 5,631

Investments 5.95 984 21,120 – 22,104

Total Financial Assets 984 30,103 – 31,087


49


The following table illustrates sensitivities to the company’s exposures to changes in interest rates. The table indicates the impact on how surplus and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables.

2012 2011$’000 $’000 $’000 $’000

Interest rate movement +2.00% -2.00% +2.00% -2.00%

Impact on net result for the year 511 (511) 383 (383)

Impact on equity 511 (511) 383 (383)

(ii) Foreign currency riskThe fund is not exposed to any material foreign currency risk.

(iii) Commodity price riskThe fund is not exposed to any material commodity price risk.

Liquidity riskLiquidity risk arises from the possibility that the company might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The company manages this risk through the following mechanisms:− preparing forward-looking cash flow analysis in relation to its operational, investing and financing activities− monitoring undrawn credit facilities− obtaining funding from a variety of sources− maintaining a reputable credit profile− managing credit risk related to financial assets− investing only in surplus cash with major financial institutions− comparing the maturity profile of financial liabilities with the realisation profile of financial assets

The tables below reflect an undiscounted contractual maturity analysis for financial liabilities. Financial guarantee liabilities are treated as payable on demand since the company has no control over the timing of any potential settlement of the liabilities.

Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates and does not reflect management’s expectations that banking facilities will be rolled forward.

50


Note 24: Financial instruments measured at fair value (cont)Financial liability and financial asset maturity analysis

Due within < 1yr$’000

1 – 5yrs$’000

> 5yrs$’000

Total$’000

2012

Financial liabilities due for payment

Trade and other payables (excluding estimated annual leave) 1,701 – – 1,701

Other liabilities 11,791 – – 11,791

Total contractual outflows 13,492 – – 13,492

Total expected outflows 13,492 – – 13,492

Financial assets — cash flows realisable

Cash and cash equivalents 3,840 – – 3,840

Trade, term and loans receivables 7,438 – – 7,438

Held-for-trading investments 30,830 – 30,830

Total anticipated Inflows 42,108 – – 42,108

Net inflow on financial instruments 28,616 – – 28,616

2011

Financial liabilities due for payment

Trade and other payables (excluding estimated annual leave) 1,725 – – 1,725

Other liabilities 8,551 – – 8,551

Total contractual outflows 10,276 – – 10,276

Total expected outflows 10,276 – – 10,276

Financial assets — cash flows realisable

Cash and cash equivalents 3,352 – – 3,352

Trade, term and loans receivables 5,631 – – 5,631

Held-for-trading investments 23,043 – – 23,043

Total anticipated Inflows 32,026 – – 32,026

Net inflow on financial instruments 21,750 – – 21,750

Credit riskExposure to credit risk relating to financial assets arises from the potential non-performance by counter parties of contract obligations that could lead to a financial loss to the fund.

Management monitors credit risk by actively assessing the rating quality and liquidity of counter parties. The table below demonstrates the translation of grading used to assess the investments held by the fund.


51


PHIAC Grade Standard & Poor’s Moody’s AM Best Fitch

1 AAA Aaa A++ AAA

2 AA+ / AA / AA- Aa1/ Aa2 / Aa3 A+ AA+ / AA / AA-

3 A+ / A / A- A1 / A2 / A3 A / A- A+ / A / A-

4 BBB+ / BBB / BBB- Baa1 / Baa2 / Baa3 B++ / B+ BBB+ / BBB / BBB-

5 BB+ or below Ba1 or below B or below BB+ or below

Unrated – – – –

During the year ended 30 June 2011 the company revised its investment policy to remove thresholds placed on investments based on credit ratings. All ratings are assessed on an individual basis by management prior to approval of investments.

Analysis of Standard & Poor’s Ratings:AAA to AA- Encompasses the major Australian banks and the Australian government.A+ to A- Enables exposure to the regional Australian banks that offer good risk/rewards.BBB+ to BBB- Provides for greater exposure to regional Australian banks and hybrid securities, but a maximum of 30% is set

as a prudent level when combined with liquidity requirements.Unrated Enables access to a wide range of ASX-listed non-bank securities, such as credit unions and building societies.

The investment policy adopted by the fund is designed to meet the standards set by PHIAC. Below is an analysis of the credit risk as it stands at year end.

PHIAC Grading 1$’000

2$’000

3$’000

4$’000

5$’000

Unrated$’000

Total$’000

2012

Cash & cash equivalents – 3,838 – – – 2 3,840

Fair value investments – 16,248 6,599 6,118 – 1,865 30,830

Total – 20,086 6,599 6,118 – 1,867 34,670

% of total 0% 58% 19% 18% 0% 5%

Maximum allowable per investment policy N/A N/A N/A N/A N/A N/A2011

Cash & cash equivalents – 2,915 – – – 437 3,352

Fair value investments – 9,073 7,022 1,993 – 4,955 23,043

Total – 11,988 7,022 1,993 – 5,392 26,395

% of total 0% 45% 27% 8% 0% 20%

Maximum allowable per investment policy N/A N/A N/A N/A N/A N/A

52


Note 24: Financial instruments measured at fair value (cont)Insurance RiskThe provision of private health insurance in Australia is governed by the Act and shaped by a number of regulatory factors.

The first is the principle of community rating. This principle prevents private health insurers from discriminating between people on the basis of their health status, age, race, sex, and sexuality, the frequency that a person needs treatment, or claims history. The second is risk equalisation, which supports the principle of community rating.

Private health insurance averages out the cost of hospital treatment across the industry. The risk equalisation scheme transfers money from private health insurers with younger healthier members with lower average claims payments to those insurers with an older and less healthy membership, which have higher average claims payments.

(b) Net fair valuesThe fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying values as presented in the balance sheet. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction.

Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgment and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash flow analysis and other valuation techniques commonly used by market participants.


53


2012 Net carrying value

$’000Net fair value

$’000

2011 Net carrying value

$’000Net fair value

$’000

Financial assets

Cash and cash equivalents (i) 3,840 3,840 3,352 3,352

Trade and other receivables (i) 7,438 7,438 5,631 5,631

Investments: fair value to profit or loss (iii) 30,830 30,830 23,043 23,043

Total financial assets 42,108 42,108 32,026 32,026

Financial liabilities

Trade and other payables (i) 1,701 1,701 1,725 1,725

Other liabilities (ii) 11,791 11,791 8,551 8,551

Total financial liabilities 13,492 13,492 10,276 10,276

(i) Cash and cash equivalents, trade and other receivables and trade and other payables are short-term instruments in nature whose carrying value is equivalent to fair value.

(ii) Other liabilities are comprised of contributions in advance and exclude amounts provided for relating to unexpired risk liability, outstanding claims liability and employee benefits, which are not considered to be financial instruments.

(iii) Financial assets measured at fair value in the statement of financial position are grouped into three levels of fair value hierarchy. This grouping is determined based on the lowest level of significant inputs used in fair value measurement, as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (i.e. as prices) or indirectly (i.e. derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The financial assets held at fair value, fall entirely within Level 1 as at 30 June 2012.

Note 25: Company detailsThe registered office and principal place of business of the company is:Railway & Transport Health Fund LimitedABN 93087 648 744Eveleigh House1 Buckingham StreetSURRY HILLS NSW 2010


54

Directors’ Declaration

The directors of the company declare that:

1. the financial statements and notes, as set out on pages 18 to 53, are in accordance with the Corporations Act 2001 and:

a. comply with Accounting Standards and the Corporations Regulations 2001; and b. give a true and fair view of the financial position as at 30 June 2012 and of the performance

for the year ended on that date of the company.

2. in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the board of directors.

R SCHEUBER

ChairDated this 19th day of September 2012Sydney, NSW


55

Independent Auditor’s Report


56

Independent Auditor’s Report (cont)

Head officeSydney1 Buckingham Street Surry Hills NSW 2010

NewcastleShop 2, 28 Donald Street Hamilton NSW 2303

Brisbane59A Melbourne Street South Brisbane QLD 4101

Contact usTel 1300 886 123 Fax 1300 887 123 [email protected] www.rthealthfund.com.au

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Documents

rt health fund annual report 2012