2009 GMHBA Annual Report - GMHBA Health Insurance

GMHBA Limited60-68 Moorabool Street, Geelong Vic 3220PO Box 761, Geelong Vic 3220Ph: 1300 4 GMHBA (46422)Fax: (03) 5221 4582Email: service@GMHBA.com.auWebsite: GMHBA.com.auGMHBA is a registered not-for-profitHealth Benefits OrganisationABN 98 004 417 092GMHBA Limited is a public company limited byguarantee and incorporated in Australia.Registered office and principal place of business:60-68 Moorabool Street, Geelong Victoria 3220GMHBAANNUALREPORT2009

When a group of determined cement workersbanded together in the late 1920s to negotiatewith hospitals for free treatment, they couldhardly have imagined what they wouldeventually create. GMHBA was officiallylaunched on August 13, 1934 as an open fundto all. Since then, GMHBA has continued togrow and prosper.Now with 75 years’ experience, GMHBALimited (GMHBA) has been an integral part ofregional Australia’s social and economic fabricfor generations. We are an important elementof many local communities; we value our rolewithin them, and we remain committed totheir future.CONTENTSOUR MISSIONSupporting the health of our communities for generationsGMHBA Performance Snapshot 3How GMHBA Compares 4Chairman’s Report 51Chief Executive’s Report 6Board of Directors 7 - 8Executive Team Management 9 -10Strategic Intents 11 - 15Financial Report 16 - 52Directors’ ReportIndependent Audit DeclarationCorporate Governance StatementIncome Statement for the year ended 30 June 2009Balance Sheet as at 30 June 2009Statement of Changes in Equity for the year ended 30 June 2009Cash Flow Statement for the year ended 30 June 20092GMHBA aims to be a trusted partner with ourmembers enabling them to access quality privatehealth care. We have a grassroots communityfocus and a proactive approach to health care andhealth education. GMHBA is a mutual, not-forprofitorganisation, committed to maintaininghealth cover that is for people, not for profit.OURPHILOSOPHYNotes to the Financial Statement for the year ended 30 June 2009Directors’ Declaration for the year ended 30 June 2009Independent Audit ReportPrincipal Registered Office, Branch Locations Affiliations and Agency

BOARDOF DIRECTORSGMHBA’s Board of Directors is experienced, with longstanding members whounderstand the business of health insurance. GMHBA has displayed industryleadership in the important area of diversity of Board appointments, and as aresult we have a Board with a broad range of skills, knowledge and experience.The varied background of the directors, which includes medical, legal, financialand business expertise obtained in a variety of commercial and communitysettings, means the Board has the abillity to govern GMHBA in the bestinterest of its members.Michael J. DowlingKSJ, B.Ec., FCA, SFCDA, Dip CD.Chairman since 2001Director since 1998Chairman Nomination & RemunerationCommitteeMember Strategy CommitteeChartered AccountantDirector – Dowling CorporateConsulting Pty LtdDeputy Chancellor – Deakin UniversityGerald MillerBA, LLB. GAICDDirector since 2007Member Audit & ComplianceCommitteeMember Investment CommitteeLawyerRegistered PsychologistDirector - Maryville Aged Care Inc.Director - The Geelong College LtdLeanne RoweResigned 29 October 2008AM, MBBS, Dip RACOG, FRACGPFAICD MD.Director since 2004Chair Health Services CommitteeGeneral PractitionerImmediate Past Chairman - RoyalAustralian College of GeneralPractitionersDeputy Chancellor – Monash UniversitySeated: Sue Renkin, Michael J. Dowling, Russell H. Elliott, Gerald MillerStanding: James E. Walsh, Kenneth E. Jarvis, Heather L. Wellington, Mark W. SibreeRussell H. ElliottB.Sc., M. Ed., MAICD.Director since 2001Chairman Investment CommitteeUniversity ConsultantExecutive Director – Russell Elliott andAssociates Pty LtdKey Associate – Phillips KPA Pty LtdKenneth E. JarvisOAM, KSJ, B. App. Sc, (Hons), Dip OR.Director since 2004Member Audit & ComplianceCommitteeMember Strategy CommitteeExecutive Chairman – Aerolite QuarriesPty LtdExecutive Chairman – Jakape Pty LtdExecutive Chairman – Zambelli RWP Pty LtdDirector – Aviation AustraliaDevelopment LtdPresident – Geelong Club LtdSue RenkinRN, MBA, MAICD, FCDADirector since 2009Chief Executive – Open Family AustraliaManaging Director – intuitively focussed p/lChairman – Monash Centre forSynchrotron Science Advisory BoardChairman – Monash Institute forNanosciences Advisory BoardDirector – General Practice (VIC)Director – Northern HealthHeather L. WellingtonMBBS, B. Med. Sci., BHA, FRACMA,LLB, FAICD.Director since 1998Member Health Services CommitteeMember Nomination & RemunerationCommitteeLawyerMedical PractitionerDirector – HPA Consulting Pty LtdConsultant – DLA Phillips Fox LawyersChairman – IPG LtdMark W. SibreeBSc (Hons), MBA, MACS, FAICD.Director since 2004Chairman Strategy CommitteeMember Investment CommitteeTrustee of CEDACorporate Strategy AdvisorExecutive Director – Mutual StrategiesPty Ltd7 8James E. WalshB.Com, MBA, CA, MAICD.Director since 2005Chairman Audit & ComplianceCommitteeMember Nomination & RemunerationCommitteeChartered AccountantDirector – Godfrey Hirst Australia Pty LtdDirector – The Geelong Chamber ofCommerce

EXECUTIVEMANAGEMENT TEAMGMHBA’s Executive Management team has a history of success, and an ability todeliver quality membership growth, strong financial performance, markedlyenhanced operational capacity and excellence in customer service. Themanagement team has the experience to successfully integrate and understandthe issues relating to products, customer service, human resources, processesand procedures.9Mark Valena – Chief ExecutiveMark Valena is an experienced BusinessExecutive. He came to the helm atGMHBA in early 2008 following sevenyears as the CEO of Medical DefenceAssociation Victoria. MDAV wasVictoria’s largest medical professionalindemnity insurer (with an 18%national market share) and as a notfor-profitorganisation, in a highlyregulated insurance market operatingin the health sector, provided a soundexperience base for his current roleat GMHBA. Mark has significantexperience in the negotiation andimplementation of mergers andbusiness transitions at MDAV, NRMAand Fortis Insurance. Through thesetransitions Mark was able to create anenvironment of goodwill and navigatethrough many complex agendasleading to retention of members andemployees. Mark is an AustralianChartered Accountant who has aBachelor of Business and aGraduate Certificate in Innovation &Service Management.Michael Carroll – Financecompleted a Graduate Diploma inApplied Corporate Governance withChartered Secretaries Australia.Jonathan Crabtree – Strategy &InnovationJonathan has significant experiencein marketing, technology & businessstrategy. His career spans directorshipsof several service based businesses tosenior marketing roles at organisationssuch as Tattersalls and Telstra. Jonathandeveloped products/services fromconcept to market and is adept atcorporate communication strategiesfrom branding through to budgetplanning, advertising and promotions.Jacqueline Armitage – Member ServicesJacqueline is a professional CustomerService Executive with over 30 yearsAustralian and Asian experience anda proven track record in managingmulti-site operations for ‘blue chip’organisations. Jacqueline’s successin her field is attributed to herability to develop both strategic andtactical solutions to improve quality,productivity and customer satisfaction.was responsible for a diverse groupof services. James has a Diploma ofApplied Science from Lincoln Instituteof Health Sciences, a Bachelor ofProsthetics and Orthotics from LaTrobeUniversity, and an MBA from theUniversity of NSW. James is also amember of the Executive Committee ofthe G21 Health and Wellbeing Pillar.Tim Boyd – Human ResourcesTim is a Human Resource practitionerwith over 16 years experience in HRgeneralist roles and has specialist skillsin Learning and Development andOrganisational Development functions.Tim has had a long career inAutomotive Development with a largemulti national manufacturer in rolesranging from HR consultancy, Learningand Organisational Development andinternational experience in the AsiaPacific region. Tim’s experience inAsia Pacific has developed an abilityto understand organisational culturesand build relationships based on trustand respect. Tim currently managesthe Human Resources team at GMHBAproviding a comprehensive range of HR10Seated: James Arnott, Jacqueline Armitage, Mark ValenaStanding: Tim Boyd, Michael Carroll, Jonathan CrabtreeMichael Carroll is a Business Executivewith over 26 years experience. He isresponsible for the Finance Divisionincluding supervision of the Company’sInvestments. His role at GMHBAalso incorporates that of companySecretariat, with compliance as anothermajor responsibility. Michael isaccredited with a Bachelor of Business(Accounting) from SwinburneUniversity, he is a Certified PracticingAccountant, has completed his MBA atDeakin University in 2004 and in 2007This ensures customers’ expectationsare consistently met and oftenexceeded.James Arnott – Benefits ManagementJames Arnott is a Business Executivewith over 20 years experience. Hisbusiness unit is responsible for HealthServices, Claims Audit, ProductDevelopment and Marketing. Jamespreviously worked with CaulfieldGeneral Medical Centre and The AlfredHospital for over 13 years where heservices to the organisation.

COMMUNITYCONNECTEDTo develop mutually beneficial relationships with communitiesSUCCESSTHROUGHINNOVATIONTo innovate for differentiation and growth13CommunityThe sustainability of communities inwhich GMHBA operates is important toGMHBA and we are continually lookingfor new ways to make a real and lastingcontribution.GMHBA’s commitment to supportingthe health and wellbeing of Australian’shas led to a number of significantinitiatives over the past 12 monthsincluding:• A partnership with the Bendigo BankCommunity Enterprises, enablinglocal communities to fund projects tobenefit their community.• Staff casual dress days, with a staffdonation matched by the company,benefiting organisations such as Makea Wish Foundation, Scope, LifesavingAustralia and Lifeline.• Funding of a business partnershipscoordinator with BacLinks to enablethat organisation to grow itsmembership base and therefore domore in connecting businesses tocommunity needs.• Community Benefits programs thatprovide a donation to not-for-profitorganisations when new membersjoin and nominate the not-for-profitorganisation.• A partnership with United Way,including funding of United Way’sannual marketing materials andsponsorship of crucial fundraisingevents.Staff have embraced assistingcommunities by participating incompany initiated volunteeringopportunities. In partnership withBacLinks, an organisation thatfacilitates matching the needs ofcommunity organisations with theabilities of business, formal staffvolunteering increased by more than150 hours. Staff have also contributeda percentage of their regular salarythrough a workplace giving programwith United Way.ay.Member WellnessGMHBA has a number of wellness andchronic disease management programswhich are designed to assist ourmembers to manage their health.One such program is for our memberswith Diabetes or Cardiac Disease. Ourmembers who participated in theprogram have received the followinghealth benefits:• Reduction in blood pressure;• Reduced blood glucose(diabetics only);• Reduced body mass index; and• Reduced total cholesterol.A reduction in these physiologicalmeasurements goes a long way toreducing the incidence of thecatastrophic co-morbidities, such asblindness, kidney failure, amputation,stroke and death, that can accompanydiabetes and cardiac disease.Staff WellnessAs a company that supports the healthof our communities, this includes thehealth of our own staff.Last financial year, GMHBA trialled a 12week staff wellness program, based onthe principles of apparent age, asespoused by Dr. John Tickell. Theprogram was successful in achievingthe following health improvements:• Participants achieved an onaverage 2.81 year lowering of theirapparent age;• There was a 4% increase in VO2 max,which is an indicator of fitness;• There was a 24% increase in strength(measured using push ups, sit upsand squats);• There was a 1.78cm improvement inflexibility;• Resting and recovery heart rateslowered by 3bpm across the group;and• 89% of participants either maintainedor improved their apparent age.In light of these positive results, theprogram is now available on anongoing basis for all staff.Much has been written about theglobal financial crisis. Yet history showsus that during times of economicdownturn, innovation can sweepaway older business models and lay aplatform for renewal and growth.GMHBA was created out of the greatdepression back in 1934. For 75 yearsGMHBA has successfully responded tochanges to the business environment.Innovation is at the core of our strategy.Health insurance is increasingly seento be a commodity and one healthfund typically looks and operates likeanother. Marketing costs are on therise, as are claims costs resulting inrelatively low industry underwritingmargins. Furthermore, increasinglyinformed customers are betterequipped to compare and change fundsthan ever before.Simplicity is increasingly beingchallenged by complexity. GMHBAbelieves it is better to out-think thanout-spend our competitors. Ourprimary goal is to improve our productsand service levels while keepingpremiums affordable for our members.Therefore innovations that focus onsimplicity, enhance service levels andhelp us grow efficiently are a highpriority.GMHBA aims to be recognised forleveraging cost effective innovationthat benefit our members. In therelatively conservative health insuranceindustry it may be rare to even declarea strategic intent of ‘Success ThroughInnovation’.Based on emerging service andtechnology trends, GMHBA alsoundertakes numerous ‘Beta’experiments to explore potential areasof business advantage. Examplesinclude ‘tweeting’ members, creatinghealth related widgets and creatingiPhone friendly content right throughto establishing interactive content onsocial media sites.Based on the outcome of suchexperiments, we assess what worksand discard what doesn’t. Examplesof GMHBA innovation which passedfrom idea to implementation includeweb chat and Skype, both of which arenow fully integrated into our memberservice technologies.Innovation has an equal focus onproduct, service, operational andmanagerial innovation.While innovation can be ongoingand incremental in effect, strategicinnovation is also important at GMHBA.Importantly we believe we’re welladvanced down a path of communityengagement that will help ensure ahealthy future for both GMHBA and ourmembers, for decades to come.14• Bushfire Appeal staff donationmatched dollar for dollar by GMHBA.

ENABLINGCAPABILITYTo align capability so as to effectively execute strategyGMHBA Limited ABN 98 004 417 09215Enabling capability underpinsthe delivery of the other strategicintents; focusing on delivery throughtechnology and developing employees.To ensure GMHBA can deliver onstrategy, we must have the relevanttools and employees with the rightskills, combined to be effective.Performance ManagementWe have revised our performancemanagement system to support thedevelopment and delivery of targets.We have shifted to a performancemanagement system with an emphasison action that is goal driven, whereresults count and productivity is valued.Technology UpgradeGMHBA embarked on a serviceupgrade project in the latter half of theyear. The project saw the introductionof a multi-media contact centre system,which allows GMHBA a greaterservice ‘reach’ by offering prospectivemembers and members alike, severalways to contact us; via phone, email,and web chat.Website ImprovementsThe GMHBA website provides essentialself service facilities to members, aswell as presenting the informationand on-line quoting required forprospective members to join GMHBAon-line with ease.The layout of the GMHBA websiteunderwent a facelift during 2008,providing improved navigation anda refreshed design. The updatehas provided increased membersatisfaction, with feedback confirmingthat members can now locate relevantinformation quicker and more easily.Prospective members are now stayingon the GMHBA website longer wheninvestigating GMHBA and our products.Project ManagementGMHBA has implemented anorganisational wide projectmanagement discipline andmethodology to ensure we can deliverour strategy on time, on quality andto budget. The disciplined projectmanagement philosophy has increasedthe speed and quality of projectdelivery across the organisation. Tofacilitate the project methodology,GMHBA has established a ProjectOffice with the purpose to assist inthe consolidation, tracking, progressreporting and status of GMHBAprojects and programs against anumber of key quality areas. This hasled to the completion of a numberof projects with a direct impact onour internal efficiencies, membersatisfaction and service.GMHBA LimitedABN 98 004 417 092Financial ReportFor the year ended 30 June 200916 17

GMHBA Limited ABN 98 004 417 092GMHBA Limited ABN 98 004 417 092CONTENTSThis page left intentionally blankPAGEMembers of the Board of Directors 20 19Directors’ Report 21 20 –- 22 21Lead Auditor’s Independence Declaration 23 22Corporate Governance Statement 24 23 –- 25 24Income Statement for the year ended 30 June 2009 26 25Balance Sheet as at 30 June 2009 27 26Statement of Changes in Equity for the year ended 30 June 2009 28 27Cash Flow Statement for the year ended 30 June 2009 29 28Notes to the Financial Statements for the year ended 30 June 2009 30 29 –- 49 48Directors’ Declaration for the year ended 30 June 2009 50 49Independent Audit Report 51 50 –- 52 51Principal Registered Office, Branch Locations, Affiliations and Agency 53 521819 18

GMHBA Limited ABN 98 004 417 092MEMBERS OF THE BOARD OF DIRECTORSFor the year ended 30 June 2009, the directors of the Company at any time during or since theend of the financial year are:Michael J. Dowling, KSJ, B.Ec., FCA, SFCDA, DipCD.Chairman since 2001Director since 1998Chairman Nomination & Remuneration CommitteeMember Strategy CommitteeChartered AccountantDirector – Dowling Corporate Consulting Pty LtdDeputy Chancellor – Deakin UniversityHeather L. Wellington, MBBS, B. Med. Sci.,BHA, FRACMA, LLB, FAICD.Director since 1998Member Health Services CommitteeMember Nomination & Remuneration CommitteeLawyerMedical PractitionerDirector – HPA Consulting Pty LtdChairman – IPG LtdConsultant – DLA Phillips Fox LawyersKenneth E. Jarvis, OAM, KSJ, B App. Sc (Hons),Dip OR.Director since 2004Member Audit & Compliance CommitteeMember Strategy CommitteeExecutive Chairman – Aerolite Quarries Pty LtdExecutive Chairman – Jakape Pty LtdExecutive Chairman – Zambelli RWP Pty LtdChairman – Geelong Club LtdDirector – Aviation Australia Development LtdPresident – Geelong Club LtdGerald Miller, BA, LLB. GAICD.Director since 2007Member Audit & Compliance CommitteeMember Investment CommitteeLawyerRegistered PsychologistDirector – Maryville Aged Care Inc.Director – The Geelong College LtdSue Renkin, RN, MBA, MAICD, FCDA.Director since 2009Chief Executive – Open Family AustraliaManaging Director – intuitively focussed p/lChairman – Monash Centre for Synchrotron ScienceAdvisory BoardChairman – Monash Institute for NanotechnologyAdvisory BoardDirector – General Practice (VIC)Director – Northern HealthMark W. Sibree, BSc (Hons), MBA, MACS, FAICD.Director since 2004Chairman Strategy CommitteeMember Investment CommitteeTrustee of CEDACorporate Strategy AdvisorExecutive Director – Mutual Strategies Pty LtdJames E. Walsh, B.Com, MBA, CA, MAICD.Director since 2005Chairman Audit & Compliance CommitteeMember Nomination & Remuneration CommitteeChartered AccountantDirector – Godfrey Hirst Australia Pty LtdDirector – The Geelong Chamber of CommerceRussell H. Elliott, B.Sc., M. Ed., MAICD.Director since April 2001Chairman Investment CommitteeUniversity ConsultantExecutive Director – Russell Elliott and AssociatesPty LtdKey Associate – Phillips KPA Pty LtdLeanne Rowe, AM, MBBS, Dip RACOG, FRACGP,FAICD, MD. Resigned 29 October 2008Chair Health Services CommitteeGeneral PractitionerImmediate Past Chairman – Royal AustralianCollege of General PractitionersDeputy Chancellor – Monash UniversityCHIEF EXECUTIVE:Mark Valena, BBus (Acc), CA, MAICD.EXECUTIVE MANAGER FINANCE & COMPANYSECRETARY:Michael Carroll, BBus (Acc), CPA, MBA, FCIS.AUDITORS:KPMG147 Collins StreetMelbourne Victoria 3000SOLICITORS:Harwood Andrews Lawyers70 Gheringhap StreetGeelong Victoria 3220BANKERS:Commonwealth Bank of AustraliaCnr Moorabool & Malop StreetsGeelong Victoria 3220GMHBA Limited ABN 98 004 417 092DIRECTORS’ REPORTThe Directors submit their report on the financial statements of GMHBA Limited (Company) for theyear ended 30 June 2009, made out in accordance with a resolution of the Directors.DirectorsThe Directors of the Company at the date of this report are:Michael Joseph DowlingRussell Henry ElliottKenneth Edward JarvisGerald MillerSue RenkinMark William SibreeJames Edmund WalshHeather Louise WellingtonThe qualifications, expertise and special responsibilities of Directors are set out on page 19 ofthese financial reports.Principal ActivitiesThe principal activity of the Company for the financial year ended 30 June 2009 was the provisionof benefits against claims by Fund members relating to hospital, dental and paramedical services.The Company, being not-for-profit, does not earn taxable income and is therefore not subject toincome taxation. The profit for the year was $7,960,038. Refer Note 1(p).Review of OperationsA review of the operations and results of the Company during the financial year are set out in theChairman’s Report on page 5.Significant Changes in the State of AffairsDuring the year, GMHBA Ltd acquired the assets and liabilities of the United Ancient Order ofDruids Friendly Society Ltd Health Fund. The acquisition date was 1 October 2008.Matters Subsequent to the End of the Financial YearThere were no post-balance date events of any significance affecting or which may affect:(a) the operations of the Company;(b) the results of these operations; or(c) the state affairs of the Company in financial years subsequent to this financial year.Environmental RegulationsThe Company is not subject to any significant environmental regulation.Information on DirectorsAll Directors are Fund members of the Company. No Director has received any benefit since theend of the previous financial year, by reason of any contract with the Company or with a firm ofwhich he or she is a member or with a company in which the Director has a substantial interest,with the exception of the Director benefits that may be deemed to have arisen in relation to thefollowing transactions entered into in the ordinary course of business:- As Fund members of the health fund conducted by the Company.1920

GMHBA GMHBA Limited Limited ABN 98 ABN 00498 417 004 092 417 092MEMBERS MEMBERS OF THE OF THE BOARD BOARD OF OF DIRECTORSFor the For year the ended year ended 30 June 30 June 2009, 2009, the directors the directors of the of Company the Company at at time any during time during or since or since the theend of end the of financial the financial year are: year are:Michael Michael J. Dowling, J. Dowling, KSJ, B.Ec., KSJ, B.Ec., FCA, SFCDA, FCA, SFCDA, Dip Dip Mark W. Mark Sibree, W. Sibree, BSc (Hons), BSc (Hons), MBA, MBA, MACS, MACS, FAICD. FAICD.CD. CD.Director Director since 2004 since 2004Chairman Chairman since 2001 since 2001Director Director since 1998 since 1998Chairman Chairman Strategy Strategy Committee CommitteeMember Member Investment Investment Committee CommitteeChairman Chairman Nomination Nomination & Remuneration & Remuneration Committee Committee Trustee Trustee of CEDA of CEDAMember Member Strategy Strategy Committee CommitteeChartered Chartered Accountant AccountantCorporate Corporate Strategy Strategy Advisor AdvisorExecutive Executive Director Director – Mutual – Mutual Strategies Strategies Pty Ltd Pty LtdDirector Director – Dowling – Dowling Corporate Corporate Consulting Consulting Pty Ltd Pty LtdDeputy Deputy Chancellor Chancellor – Deakin – Deakin University University James James E. Walsh, E. Walsh, B.Com, B.Com, MBA, MBA, CA, MAICD. CA, MAICD.Director Director since 2005 since 2005Heather Heather L. Wellington, L. Wellington, MBBS, MBBS, B. Med. B. Sci., Med. Sci.,BHA, FRACMA, BHA, FRACMA, LLB, FAICD. LLB, FAICD.Director Director since 1998 since 1998Member Member Health Health Services Services Committee CommitteeChairman Chairman Audit & Audit Compliance & Compliance Committee CommitteeMember Member Nomination Nomination & Remuneration & Remuneration Committee CommitteeChartered Chartered Accountant AccountantDirector Director – Godfrey – Godfrey Hirst Australia Hirst Australia Pty Ltd Pty LtdMember Member Nomination Nomination & Remuneration & Remuneration Committee Committee Director Director – The – Geelong The Geelong Chamber Chamber of Commerce of CommerceLawyer LawyerMedical Medical Practitioner PractitionerDirector Director – HPA – Consulting HPA Consulting Pty Ltd Pty LtdChairman Chairman – IPG – Ltd IPG LtdConsultant Consultant – DLA – Phillips DLA Phillips Fox Lawyers Fox LawyersRussell Russell H. Elliott, H. Elliott, B.Sc., B.Sc., M. Ed., M. MAICD. Ed., MAICD.Director Director since April since 2001 April 2001Chairman Chairman Investment Investment Committee CommitteeUniversity University Consultant ConsultantExecutive Executive Director Director – Russell – Russell Elliott Elliott and Associates and AssociatesKenneth Kenneth E. Jarvis, E. Jarvis, OAM, OAM, KSJ, B KSJ, App. B Sc App. (Hons), Sc (Hons), Pty Ltd Pty LtdDip OR. Dip OR.Key Associate Key Associate – Phillips – Phillips KPA Pty KPA Ltd Pty LtdDirector Director since 2004 since 2004Member Member Audit & Audit Compliance & Compliance Committee CommitteeMember Member Strategy Strategy Committee CommitteeExecutive Executive Chairman Chairman – Aerolite – Aerolite Quarries Quarries Pty Ltd Pty LtdExecutive Executive Chairman Chairman – Jakape – Jakape Pty Ltd Pty LtdExecutive Executive Chairman Chairman – Zambelli – Zambelli RWP Pty RWP Ltd Pty LtdChairman Chairman – Geelong – Geelong Club Ltd Club LtdDirector Director – Aviation – Aviation Australia Australia Development Development Ltd LtdLeanne Leanne Rowe, Rowe, AM, MBBS, AM, MBBS, Dip RACOG, Dip RACOG, FRACGP, FRACGP,FAICD, FAICD, MD. Resigned MD. Resigned 29 October 29 October 2008 2008Chair Chair Health Health Services Services Committee CommitteeGeneral General Practitioner PractitionerImmediate Immediate Past Chairman Past Chairman – Royal – Royal Australian AustralianCollege College of General of General Practitioners PractitionersDeputy Deputy Chancellor Chancellor – Monash – Monash University UniversityPresident President – Geelong – Geelong Club Ltd Club LtdCHIEF CHIEF EXECUTIVE: EXECUTIVE:Gerald Gerald Miller, Miller, BA, LLB. BA, GAICD. LLB. GAICD.Mark Valena, Mark Valena, BBus BBus (Acc), (Acc), CA, MAICD. CA, MAICD.Director Director since 2007 since 2007Member Member Audit & Audit Compliance & Compliance Committee CommitteeMember Member Investment Investment Committee CommitteeLawyer LawyerEXECUTIVE EXECUTIVE MANAGER MANAGER FINANCE FINANCE & COMPANY & COMPANYSECRETARY: SECRETARY:Michael Michael Carroll, Carroll, BBus BBus (Acc), (Acc), CPA, MBA, CPA, MBA, FCIS. FCIS.Registered Registered Psychologist PsychologistDirector Director – Maryville – Maryville Aged Care Aged Inc. Care Inc.Director Director – The – Geelong The Geelong College College Ltd LtdAUDITORS: AUDITORS:KPMG KPMG147 Collins 147 Collins Street StreetSue Renkin, Sue Renkin, RN, MBA, RN, MBA, MAICD, MAICD, FCDA. FCDA. Melbourne Melbourne Victoria Victoria 3000 3000Director Director since 2009 since 2009Chief Executive Chief Executive – Open – Open Family Family Australia Australia SOLICITORS: SOLICITORS:Managing Managing Director Director – Intuitively – Intuitively Focussed Focussed Pty Ltd Pty Ltd Harwood Harwood Andrews Andrews Lawyers LawyersChairman Chairman – Monash – Monash Centre Centre for Synchrotron for Synchrotron Science Science 70 Gheringhap 70 Gheringhap Street StreetAdvisory Advisory Board BoardGeelong Geelong Victoria Victoria 3220 3220Chairman Chairman – Monash – Monash Institute Institute for for NanotechnologyAdvisory Advisory Board BoardDirector Director – General – General Practice Practice (VIC) (VIC)Director Director – Northern – Northern Health HealthBANKERS: BANKERS:Commonwealth Bank of Bank Australia of AustraliaCnr Moorabool Cnr Moorabool & Malop & Malop Streets StreetsGeelong Geelong Victoria Victoria 3220 322020212022

GMHBA Limited ABN 98 004 417 092CORPORATE GOVERNANCE STATEMENTFOR THE YEAR ENDED 30 JUNE 2009The Board of GMHBA Limited has a governance framework to ensure that the Board complies withthe relevant requirements of the Corporations Act 2001, the Company’s Constitution, the PrivateHealth Insurance Act 2007 and Associated Rules and embodies relevant corporate governancebest practice.The Company is committed to achieving the highest practicable standards of corporategovernance. This statement provides an overview of the main corporate governance practices thatwere in place throughout the financial year.Code of conductThe code of conduct has been established as the basis for ethical and professional conductnecessary to meet the expectation of Fund members and other stakeholders. As theseexpectations will change over time, the code is subject to regular review.The main purpose of a code of conduct is to provide a common understanding of the Company’sexpectations in regard to ethical and professional conduct and to assist Directors in dischargingtheir obligations. Achieving this objective will also deliver other benefits to the Company.Conflict of interestSubject to the provisions of the Corporations Act and the Company’s Constitution, the Board isempowered to regulate its meetings and proceedings, including the processes it will apply ininstances of a declared, actual or perceived conflict of interest.Board CommitteesThe Board Committees in operation throughout the year were:Audit & Compliance CommitteeThe role of the Committee is to oversee the establishment and maintenance of a framework ofinternal control, to monitor the audit and actuarial function ensuring regulatory compliance andadvise on appropriate ethical standards for the management of the Company. This enables thecommittee to give the Board additional assurance regarding the quality and reliability of financialinformation prepared for use by the Board in determining policies or for inclusion in financialreports.Nomination & Remuneration CommitteeThe role of the Committee is to assist the Board of Directors in fulfilling its responsibilities fordetermining and reviewing compensation arrangements for Directors and senior management,succession planning and the appointment and removal of Directors.GMHBA Limited ABN 98 004 417 092CORPORATE GOVERNANCE STATEMENTFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)Internal control frameworkThe Board acknowledges that it is responsible for the overall internal control framework, butrecognises that no cost effective internal control system will preclude all errors and irregularities.To assist in discharging this responsibility, the Board has instigated an internal control frameworkthat can be described under four headings:• Effectiveness and efficiency of operations• Reliability of reporting• Compliance with applicable laws & regulations• Code of conductInternal audit functionThe internal audit function assists the Board in ensuring compliance with these internal controls.The Audit & Compliance Committee is responsible for approving the program of internal audit to beconducted each financial year and for the scope of the work to be performed. The internal auditfunction, while operationally reporting to the Chief Executive, also reports to the Audit &Compliance Committee. The Committee meets with the internal auditor on a regular basis.Business risk managementThe Audit & Compliance Committee provides advice to the Board and reports on the status ofbusiness risks to the Company through an integrated risk management plan aimed at ensuringrisks are identified, assessed and appropriately managed.The risk management process involves ensuring:• Strategic, operational and financial risks are identified• The systems are in place to monitor and manage the risks• Reporting systems are in place• The risk management systems are operating effectively• Compliance with relevant legislation• Compliance with the code of ethical conductA comprehensive insurance program provides protection against major risk exposures that cannotbe eliminated by appropriate risk management practices.Investment CommitteeThe role of the Committee is to advise on the Company’s total investment portfolio, managed bothinternally and externally.Strategy CommitteeThe role of the Committee is to assist the Board of Directors in identifying and establishingGMHBA’s future strategic direction in line with the Company’s Mission and Vision statements.Health Services CommitteeThe role of the Committee is to assist the Board of Directors in fulfilling their responsibilities inrelation to ensuring that all health services initiatives comply with the Company’s mission,specifically working as a trusted partner to improve Fund members’ health.24 2325 24

GMHBA Limited ABN 98 004 417 092INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2009NOTE 20092008$’000$’000Revenue from operating activitiesPremium income 191,355 164,530Total revenue from operating activities 191,355 164,530Expenses from operating activitiesBenefits paid to Fund members 9 (160,814 ) (138,047)Payments to Health Benefits Reinsurance Trust Fund (7,406 ) (6,876)Total cost of fund benefits (168,220 ) (144,923)Gross underwriting result 23,135 19,607Management expensesEmployee benefits expenses (8,459 ) (6,813)Depreciation (497 ) (526)Other management expenses (9,350 ) (8,375)Total management expenses (18,306 ) (15,714)Net underwriting result 4,829 3,893Revenue from outside the operating activitiesInvestment income 7,892 5,962Investment unrealised gains/(losses) 397 (8,824)Investment realised losses (5,207 ) -Other income 49 19Total Revenue/(Expenses) from outside the operatingactivities 3,131 (2,843)Profit for the year 2 7,960 1,050GMHBA Limited ABN 98 004 417 092BALANCE SHEET AS AT 30 JUNE 2009Current assetsNOTE 2009$’0002008$’000Cash and cash equivalents 3 7,472 3,569Trade and other receivables 4 9,654 8,646Financial assets 5 126,117 122,682Other assets 6 81 -Total current assets 143,324 134,897Non-current assetsFinancial assets 5 4,011 -Property, plant and equipment 7 5,358 4,903Total non-current assets 9,369 4,903Total assets 152,693 139,800Current liabilitiesTrade and other payables 8 3,191 4,287Provisions 9 30,085 28,376Other liabilities 10 28,092 24,010Total current liabilities 61,368 56,673Non-current liabilitiesProvisions 9 103 75Total non-current liabilities 103 75Total liabilities 61,471 56,748Net assets 91,222 83,052EquityRetained earnings 90,275 82,315Asset revaluation reserve 947 737Total equity 91,222 83,052The above Income Statement should be read in conjunction with the accompanying notes.26 25The above Balance Sheet should be read in conjunction with the accompanying notes.27 26

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20091. Summary of significant accounting policiesGMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)1. Summary of significant accounting policies (continued)The Company’s financial statements are a general purpose financial report prepared inaccordance with the requirements of the Corporations Act 2001 and the Australian AccountingStandards (AASBs) (including Australian Interpretations) adopted by the Australian AccountingStandards Board (AASB).AASB amendmentAffectedstandard(s)Nature of changeto accounting policyApplicationdate ofstandardApplicationdate forGMHBAThe Company’s financial statements were authorised for issue on 25 August 2009 by the GMHBALimited Board. The signatories on the authorisation were the Chairman of the Board, Michael JDowling and the Chairman of the Audit & Compliance Committee, James E Walsh.The Company’s financial statements were prepared in accordance with the historical costsconvention, except for the following:• Financial instruments are measured at fair value through the income statement• Land and Buildings are recorded at fair value with movements in value taken to an assetrevaluation reserve• Connect Rewards benefit provision is carried at present valueThe presentation currency used for the preparation of these financial reports is Australian dollars.AASB 101: Presentation ofFinancial Statements.AASB 2007-8 Amendments toAustralian AccountingStandards arising from AASB101.AASB 2009 – 5 ImprovementProject.AASB 2009 – 2 Amendments toAustralian AccountingStandards- Improvingdisclosures about FinancialInstruments.Upon adoption, it will impact the presentation of theincome statement, and statement of recognisedincome and expense, and may affect thepositioning of the statement of changes in equity.Retrospective application will be required.This Standard is the culmination of the IASB’s firstAnnual Improvements Project, which involved theIASB accumulating what it believes are non-urgentbut necessary improvements to InternationalFinancial Reporting Standards (IFRS’s) andprocessing these amendments collectively.This Amending Standard will impact the disclosureprovided regarding Financial Instruments.1 January 20091 January 20091 January 200930 June 201030 June 201030 June 2010International Financial Reporting Standards (“IFRS”) refer to the overall framework of standardsand pronouncements approved by the International Accounting Standards Board. IFRS forms thebasis of AASBs. This financial report of the Company complies with IFRS. The current IFRSstandard for insurance contracts does not include a comprehensive set of recognition andmeasurement criteria. The International Accounting Standard Board continues to work on a projectto issue a standard that does include such criteria. Until the issuance of that standard, the financialreports of insurers in different countries that comply with IFRS may not be comparable in terms ofthe recognition and measurement of insurance contracts.The following standards, amendments to standards and interpretations have been identified asthose which may impact the entity in the period of initial application that are available for earlyadoption at 30 June 2009, but have not been applied in preparing this financial report:(a)Use of estimates and judgementsThe preparation of financial statements requires management to make judgements,estimates and assumptions that affect the application of accounting policies and the reportedamounts of assets, liabilities, income and expenses. Actual results may differ from theseestimates. Estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which the estimate isrevised and in any future periods affected.In particular, information about significant areas of estimation uncertainty and criticaljudgements in applying accounting policies that have the most significant effect on theamount recognised in the financial statements are described in the following notes:Claims outstanding, see note 1(j)AASB amendmentAASB 3: BusinessCombinations.AASB 127: Consolidated andSeparate Financial Statements.Affectedstandard(s)Nature of changeto accounting policyAdjustment to carrying amounts of assetsand liabilities that arose under businesscombinations.(If AASB 3 is adopted early, AASB 127must be adopted for the same period.)Application dateof standardApplication datefor GMHBA01 July 2009 30 June 2010(b)Liability Adequacy Test, see note 1(k)Connect Reward benefits, see note 1(l)Determination of fair valuesA number of the Group’s accounting policies and disclosures require the determination of fairvalue, for both financial and non-financial assets and liabilities. Fair values have beendetermined for measurement and/or disclosure purposes based on the following methodsand where applicable, further information about the assumptions made in determining fairvalues is disclosed in the notes specific to that asset or liability.30 2931 30

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)1. Summary of significant accounting policies (continued)(b)Determination of fair values (continued)(i)(ii)Term Deposits, Debentures, Bank Bonds and NotesThe fair value of these investments is based on their listed market price, if available. Ifa listed market price is not available, then fair value is estimated by discounting thedifference between the contractual forward price and the current forward price for theresidual maturity of the contract using a market interest rate (based on governmentbonds). These investments are held for a set term and rolled over at maturity.Equity investments and unit trustsFor securities listed in an active market, fair value is determined by reference topublished bid price quotations. For investments in unlisted investment trusts the fairvalue is determined with reference to the quoted redemption price provided by theTrustee.GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)1. Summary of significant accounting policies (continued)(g)DepreciationProperty, plant and equipment, other than land, is depreciated using either the diminishingvalue method or the straight line method over the period during which benefits are expectedto be derived from the asset. Profits and losses on disposal of property, plant and equipmentare taken into account in determining the profit for the year. The following rates ofdepreciation are applied:2009%2008%Buildings 1.5 1.5Furniture & Fittings 10.0 10.0Office Equipment 15.0 to 40.0 15.0 to 40.0Motor Vehicles 22.5 22.5(c)(d)(e)(f)(iii) Land and buildingsThe Company engaged Landlink Property Group Pty Ltd, a valuations and advisoryservices company which employs accredited independent valuers, to determine thefair value of its land and buildings. Fair value is determined directly by reference tomarket based evidence, which is the amounts for which the assets could beexchanged between a knowledgeable willing buyer and a knowledgeable willing sellerin an arm’s length transaction as at the valuation date. The effective dates of thevaluations were 30 June 2009 for the Geelong properties.Cash and cash equivalentsFor the purposes of the Cash Flow Statement, cash includes cash on hand and bankdeposits at call within 90 days.Trade and other receivablesThe Premium receivable as at 30 June 2009 consists of:(i) Actual cash premium receipts for periods in advance of the reporting date; plus(ii) Forecast premiums receivable from policyholders at 30 June 2009.Property, plant and equipmentLand and buildings are recorded at valuation (buildings are subsequently subject todepreciation) and plant and equipment are recorded in the financial statements at cost lessaccumulated depreciation. The Company engages an appropriately qualified person toundertake a full valuation of its land and buildings at intervals not greater than three years(see 1 (b)(iii)).Recoverable amount of non-current assetsNon-current assets, except for investments and land and buildings are recorded in thefinancial statements at cost less accumulated depreciation. The carrying values of all noncurrentassets are reviewed by management at regular intervals to ensure that they are notstated at amounts in excess of their recoverable amounts. Except where stated, recoverableamounts are not determined using discounted cash flows. Management has reviewed theassets and are of the opinion that there has been no impairment of the asset’s current valueswithin the asset classes.(h)(i)(j)Employee benefitsSalaries and wages and annual leaveLiabilities for salaries and wages and annual leave are recognised, and are measured as theamount unpaid at the reporting date based on remuneration rates expected to apply whenthe obligation is settled, including on-costs, in respect of employees’ services up to that date.Long service leaveA liability for long service leave is recognised, and is measured as the present value ofexpected future payments to be made in respect of services provided by employees up to thereporting date. Consideration is given to the expected future wage and salary levels,experience of employee departures and periods of services. Expected future payments arediscounted using interest rates on national government guaranteed securities with terms tomaturity that match, as closely as possible, the estimated future cash flows.Health benefits risk equalisation trust fundUnder the provisions of the Private Health Insurance Risk Equalisation Policy Rules 2007,hospital benefits are submitted to the Risk Equalisation trust fund and shared amongst allhealth benefit funds in the following circumstances:Where a fund has directly paid these benefits, which are proportionally less than the averageof other funds in the State, it is required to pay to the Risk Equalisation Trust Fund anamount equivalent to the shortfall. Conversely, where the direct payment is proportionallygreater than the average, the difference is paid to the Company from the Risk EqualisationTrust Fund. Eligible claims are assessed on a quarterly basis.Claims outstandingClaims that have been incurred by Fund members, but not yet presented to the Company forreimbursement, are estimated based on the claims experience in previous accountingperiods. Outstanding claims are not discounted as they are usually settled within six monthsof the reporting date. The provision is calculated in accordance with the principles of thechain ladder method which can be used under the prudential regulations of the PrivateHealth Insurance Industry.32 3133 32

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)1. Summary of significant accounting policies (continued)GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)1. Summary of significant accounting policies (continued)(j)Claims outstanding (continued)AASB 1023 requires a risk margin be applied to allow for the inherent uncertainty in thecentral estimate. GMHBA adopted a risk margin of 6% giving in excess of 90% probability ofadequacy.The risk margin has been based on an analysis of the past experience of the Company byour Appointed Actuary on the adequacy of the provision over the prior two years.The liability for outstanding claims provides for claims received but not assessed and claimsincurred but not received. The liability is based on an actuarial assessment taking intoaccount historical patterns of claim incidence and processing.The liability also allows for an estimate of claims handling costs which include internal andexternal costs incurred in connection with the negotiation and settlement of the claimsdepartment and any part of the general administrative costs directly attributable to the claimsfunction. The allowances for the claims handling cost at 30 June 2009 is 5% of the claimsliability.(l)(m)Connect Reward benefitsThe Company operates a Connect Reward benefits entitlement for Fund members who haveat least one year of eligible combined (hospital and ancillary) membership. Fund membersreceive an additional annual allocation of benefits as long as their eligible cover ismaintained. In addition, the ‘Connect Rewards’ product entitles eligible combined Fundmembers to accumulate annual allocations, which they can use to claim additional benefits.Provision is made for the future liability for claims under the Connect Rewards entitlements.The Company has provided for the total eligible benefit to combined Fund members as at30 June 2009 with due allowance for both expected timing of payments and foregone benefitentitlements on the basis that it is likely that not all Fund members will use their fullentitlement. This allowance is reviewed periodically and the provision is currently 75% of thefull Connect Reward entitlement in respect of membership up to 30 June 2009.Comparative informationWhere necessary, comparative figures have been adjusted to conform to changes inpresentation for the current financial year.(k)Liability Adequacy TestUnder AASB 1023 the Company is required to perform a Liability Adequacy Test todetermine whether the carrying amount of insurance liabilities is adequate based onexpected future cash flows. The test is carried out with the inclusion of a risk margin and isundertaken at the level of portfolio contracts that are subject to broadly similar risks and aremanaged together as a single portfolio. Any deficiency arising is recognised by writing downany related intangible assets, then the related deferred acquisition costs with any remainingbalance being recognised as an unexpired risk liability.The Liability Adequacy Test is required to be performed to determine whether the unearnedpremium liability (premiums in advance) is adequate to cover the present value of expectedcash flows relating to future claims arising from rights and obligations under currentinsurance coverage plus an additional risk margin to reflect the inherent uncertainty in thecentral estimate. The risk margin adopted was 2.5% which corresponds to a 70% probabilityof adequacy. The reason these percentages differ from those adopted in determining theoutstanding claims liability is that the former is in effect an impairment test used only toassess the sufficiency of net premium liabilities whereas the latter is an accounting policymeasurement used in determining the carrying value of the outstanding claims liability.If the present value of the expected future cash flows relating to future claims plus theadditional risk margin to reflect the inherent uncertainty in the central estimate exceeds theunearned premium liability less related intangible assets and related deferred acquisitioncosts then the unearned premium is deemed to be deficient.The Liability Adequacy Testing as at 30 June 2009 did not result in any adjustment, as asurplus was identified.(n)(o)(p)(q)(r)Unearned premium liabilityPremiums received or receivable up to the end of the financial year are recorded as revenuefor the period from the date of the attachment of risk. Premiums received prior to 30 June2009 relating to the period beyond 30 June 2009 are recognised an Unearned PremiumLiability. Also, forecast premiums receivable from policyholders at 30 June 2009 arerecognised as unclosed business premiums.Trade and Other PayablesLiabilities are recognised for amounts payable in the future for goods and services receivedat balance date, whether or not billed to the Company. The company’s payables are allconsidered short term.Income taxThe Company is exempt from income tax by virtue of Section 50-30 item 6.3 of the IncomeTax Assessment Act.Rounding of amountsThe Company is an entity to which Australian Securities and Investment Commission ClassOrder 98/100 applies and amounts have been rounded off in accordance with that ClassOrder. All amounts shown in the financial statements are expressed to the nearest $1,000.InvestmentsInvestments comprise assets held to back insurance liabilities. All investments are managedand performance evaluated on a fair value basis for both external and internal reportingpurposes in accordance with a documented investment management strategy.All investments are determined to be assets backing insurance liabilities and accordingly aredesignated as fair value through income statement upon initial recognition. They are initiallyrecorded at fair value being the cost of acquisition excluding transaction costs and aresubsequently remeasured to fair value at each reporting date.34 3335 34

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)1. Summary of significant accounting policies (continued)GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)1. Summary of significant accounting policies (continued)(r)Investments (continued)Changes in the fair value from the previous reporting date (or cost of acquisition excludingtransaction costs if acquired during the financial period) are recognised as realised orunrealised investment gains or losses in profit or loss. Purchases and sales of investmentsare recognised on a trade date basis, being the date on which a commitment is made topurchase or sell the asset.(v)AASB 3 – Business CombinationsDuring the year, GMHBA Ltd acquired the assets and liabilities of the United Ancient Orderof Druids Friendly Society Ltd Health Fund. The acquisition date was 1 October 2008.GMHBA paid $4,356,547 for the assets and liabilities of the United Ancient Order of DruidsFriendly Society Ltd Health Fund. The components were as follow:(s)Transaction costs for purchases of investments are expensed as incurred and presented inthe income statement as investment expenses on assets backing insurance liabilities.Investments are derecognised when the rights to receive future cash flows from the assetshave expired, or have been transferred, and substantially all the risks and rewards ofownership have transferred.Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow tothe Company and the recognition can be reliably measured. The following specificrecognition criteria must also be met before revenue is recognised.Premium IncomePremium income is recognised in the Income Statement from the attachment date, as soonas there is a basis on which it can be reliably measured. Revenue is recognised inaccordance with the pattern of the incidence of risk expected over the term of the contract.Assets 2009$’000Cash 314Receivables 1,155Investments 5,276Other Assets 196Total assets 6,941LiabilitiesPayables 45Provisions 1,423Other Liabilities 1,116Total Liabilities 2,584The proportion of premium received or receivable not earned in the Income Statement at thereporting date is recognised in the Balance Sheet as unearned premium liability.Net Assets 4,357(t)Asset revaluation reserveThe reserve represents increments/decrements from the revaluation of the Company’s landand buildings.(u)LeasesThe Company has several operating leases. The lease payments are recognised as anexpense in the Income Statement on a straight line basis over the term of the lease.36 3537 36

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)20092008$’000$’0002. ProfitProfit for the year includes the following specificexpenses:Amounts paid or due and payable for audit services 100 90- the auditors received no other benefitsNet loss on disposal of non-current assets - 26Rental expenses on operating leases 406 3973. Cash and cash equivalentsCash on hand 96 88Cash at bank 7,376 3,4817,472 3,5694. Trade and other receivablesUnclosed premium earned 1,200 1,031Unclosed premium unearned 798 7201,998 1,751Accrued investment income 1,914 2,345Other debtors 198 125Federal government rebate 5,544 4,4259,654 8,6465. Financial assetsCurrentBank Term Deposits 122,594 74,003Debentures 3,021 4,995Bank Bonds 502 4,563Negotiable Certificate Deposit - 5,506Portfolio Credit Linked Note - 2,000Managed funds – equities - 25,899Managed funds – fixed interest & property - 5,716At fair value 126,117 122,682GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)6. Other assets2009$’0002008$’000Prepayments 81 -81 -7. Property, plant and equipmentFreehold land at valuation 1,955 1,665Land at valuation 1,955 1,665Buildings at valuation 1,745 1,874Less accumulated depreciation - 201,745 1,854Furniture and fittings at cost 1,209 1,205Less accumulated depreciation 841 694368 511Office equipment at cost 3,371 2,960Less accumulated depreciation 2,223 2,1121,148 848Motor vehicles at cost 29 30Less accumulated depreciation 8 521 25Capital Work in Progress 121 -Less accumulated depreciation - -121 -Total 5,358 4,903Cost 126,117 122,564Non-currentTerm Deposits 4,011 -At fair value 4,011 -Cost 4,011 -38 3739 38

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginningand end of the financial year are set out below:Land Buildings Furniture Office Motor Capital Total&Fittings Equipment VehiclesWIP$’000 $’000 $’000 $’000 $’000 $’000 $’000Carrying amount at 1 July 2008 1,665 1,854 511 848 25 0 4,903Additions - - 4 627 - - 631Additions Hi Software Dev WIP - - - - - 121 121Disposals - - - - - - -Revaluations 290 (80 ) - - - - 210Depreciation - (29 ) (147) (317 ) (4) - (497)Write Offs - - - (10) - - (10)Carrying amount at 30 June 2009 1,955 1,745 368 1,148 21 121 5,358Land Buildings Furniture Office Motor Capital Total&Fittings Equipment VehiclesWIP$’000 $’000 $’000 $’000 $’000 $’000 $’000Carrying amount at 1 July 20071,335906 92 01,4656574,455Additions 200 539 3 294 56 - 1,092Disposals - - - - (108 ) - (108)Revaluations - - - - - - -Depreciation - (20 ) (149 ) (342 ) (15 ) - (526)Write Offs - - - (10) - - (10)Carrying amount at 30 June 2008 1,665 1,854 511 848 25 0 4,903GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)9. ProvisionsCurrent2009$’0002008$’000Outstanding claims 12,755 10,592Risk margin 2,166 1,61014,921 12,202Connect Reward benefits 14,351 15,324Employee annual leave 534 533Employee long service leave 279 31730,085 28,376Non-currentEmployee long service leave 103 75103 75The reconciliation of the provisions of the 2009 financial year are asfollows:Outstanding claims including risk marginBalance at beginning of year 12,202 11,824Add claims incurred 161,125 133,407Less claims paid (158,406) (133,029)14,921 12,2022009$’0002008$’0008. Trade and other payablesHealth Benefits Risk Equalisation / Reinsurance Trust Fund 976 1,978Creditors and accruals 2,215 2,3093,191 4,287Claims IncurredGross Claims - undiscountedCurrent 159,213 139,669Prior 1,601 (1,622)Total 160,814 138,047Current year claims relate to claim events that occurred in the current financial year. Prior yearclaims relate to a reassessment of the claim events that occurred in all previous financial periods.A major component of the prior year movement is the release of risk margins in respect of claimspayments settled during the year. In order to maintain strong reserves, much of this release istransferred to current reserves for which the development of claims is less mature and there ismuch greater uncertainty attaching to the ultimate cost of claims.Insurance contracts.Insurance contracts are defined as those containing significant insurance risk at the inception ofthe contract or those where at the inception of the contract there is a scenario with commercialsubstance where the level of insurance risk may be significant over time. The significance ofinsurance risk is dependant on both the probability of an insurance event and the magnitude of itspotential effect.403941 40

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)9. Provisions (continued)Insurance contracts (continued)Once a contract has been classified as an insurance contract, it remains an insurance contract forthe remainder of its lifetime, even if the insurance risk reduces significantly during this period. TheCompany has determined that all current contracts with policyholders are insurance contracts.Underwriting insurance contracts expose the Company to liquidity risk through payment obligationsof unknown amounts on unknown dates. Liquidity risk is the risk of having insufficient cashresources to meet payment obligations.The assets held to back insurance liabilities consist largely of money market securities, fixedinterest investments and other highly liquid assets. Asset management is designed to ensureconsistency between forecasted claims payment obligation and asset maturity profiles.Management of liquidity risk is incorporated into GMHBA’s risk management strategy.Risk ManagementGMHBA management operation is accountable for the growth and preservation of the riskdevelopment agenda. The risk management structure offers a level of assurance that theCompany’s risks are administered thoroughly and astutely.The structure is inclusive of a Risk Management Plan, which is the process of planning,organising, directing and controlling the resources and activities of an organisation in order tominimise the adverse effects of accidental losses to that organisation at least possible cost. It isrecognised as an integral part of good management practice, which involves a process consistingof steps which when undertaken in sequence, enable continual improvement in decision-making.Risk management is as much about identifying opportunities as avoiding or mitigating losses.The risk management plan defines management responsibilities and the processes involved inmitigating any qualitative and quantitative risks through a set of developed guidelines. The riskmanagement plan is subject to a formal review process to ensure continued effectiveness.GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)Connect Reward benefits 20092008$’000$’000Balance at beginning of year 15,324 14,458Add Benefits accrued 3,002 4,363less Benefits utilised (3,975) (3,497)14,351 15,324Employee annual leaveBalance at beginning of year 533 545Add annual leave incurred 589 454Less annual leave paid (588) (466)534 533Long service LeaveBalance at beginning of year 393 381Add long service leave incurred 67 94Less long service leave paid (78) (82)382 39310. Other liabilitiesPremiums in advance 27,294 23,290Unclosed business Premium 798 72028,092 24,01011. Notes to the Cash Flow Statement(a) Reconciliation of net cash provided by operatingactivities to operating profit:Operating profit 7,960 1,050Depreciation 497 526Net loss on sale of non-current assets 10 26Revaluation of Investments 117 8,942(Increase) in receivables (1,008) (1,190)(Increase) in investments (515) (117)(Increase)/decrease in other assets (81) 40(Decrease)/increase in payables (1,096) 2,421Increase in provisions 1,738 1,243Increase in other liabilities 4,082 1,875Net cash provided by operating activities 11,704 14,81642 414342

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)(b)Reconciliation of cashFor the purposes of the cash flow statement, cashincludes cash on hand and bank deposits at callwithin 90 days, net of any outstanding bank overdraft.Cash at the end of the financial year as shown in thecash flow statement is reconciled to the related itemsin the Balance Sheet:2009$’0002008$’000Cash on hand 96 88Cash at bank 7,376 3,4817,472 3,569(c)Standby arrangementsGMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)13. Contingent liabilitiesThere are no contingent liabilities.14. Related partiesKey Management PersonnelUnder AASB 124 “Related Party Disclosures” financial disclosures will be required for the KeyManagement Personnel. Under the standard Key Management Personal (KMP) are defined as:“Those people having authority and responsibility for planning, directing and controlling theactivities of the entity, directly or indirectly, including any director whether (executive orotherwise) of that entity.”Under AASB 124, non-disclosing entities must provide a breakdown of their total remuneration oftheir KMP in aggregate for the comparative period.The Company has no credit standby arrangements orloan facilities.12. CommitmentsCompensation of Key Management Personnel - Directors2009$2008$LeasesThe following is a schedule by years of futureminimum rental payments required under operatingleases that have non-cancellable lease terms inexcess of one year as at 30 June 2009.Due:Not later than one year 416 347Later than one year but not later than five years 361 452777 799Short term benefits 312,650 314,476Compensation of Key Management Personnel - ManagementShort term benefits 1,361,856 1,137,845Eligible Termination Payments - 100,000DirectorsThe names of persons who were Directors of the Company at any time during the financial yearare as follows:Russell Henry ElliottGerald MillerJames Edmund WalshMichael Joseph DowlingLeanne RoweHeather Louise WellingtonKenneth Edward JarvisMark William Sibree44 4345 44

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)15. Financial instrumentsInterest rate risk disclosuresThe Company’s exposure to interest rate risk is set out below:2009 NOTE Floating/FixedinterestrateInterest Maturing in:1 year or less Over 1 to 5yearsNon-interestbearingFinancial assets $’000 $’000 $’000 $’000 $’000Cash 3 7,472 - 7,472Receivables 4 - - 9,654 9,654Bank term deposits 5 122,594 4,011 126,605Debentures 5 3,021 3,021Bank bonds 5 502 502TotalGMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)16. Market RiskMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuatebecause of changes in market factors. Market risk comprises three types of risk: currency risk (dueto fluctuations in foreign exchange rates), interest rate risk (due to fluctuations in market interestrates) and price risk (due to fluctuations in market prices). The following policies and proceduresare in place to mitigate the company’s exposure to market risk.• A risk management plan and investment plan setting out the assessment and determinationof what constitutes market risk for the company.• The Investment Committee is responsible for compliance with the investment plan which itmonitors for any exposures or breaches. It is also the role of the Investment Committee todetermine action plans in mitigation of market risk.Currency risk7,472 126,117 4,011 9,654 147,254Weighted average interest rate % 7.50 4.38Financial liabilitiesPayables 8 - 3,191 3,1913,191 3,191Net financial assets 7,472 126,117 4,011 6,463 144,0632008 Floating/FixedinterestrateInterest Maturing in:1 year or less Over 1 to 5yearsNon-interestbearingFinancial assets $’000 $’000 $’000 $’000 $’000Cash 3 3,569 - - - 3,569Receivables 4 - - - 8,646 8,646Bank term deposits 5 74,003 74,003Debentures 5 4,995 4,995Bank bonds 5 4,563 4,563Negotiable certified deposit 5 5,506 5,506Portfolio credit linked note 5 2,000 2,000Managed investments 5 - - 31,615 31,6153,569 91,067 - 40,261 134,897Weighted average interest rate % 7.38 (24.63)Financial liabilitiesPayables 8 - - - 4,287 4,287Total4,287 4,287Net financial assets 3,569 91,067 - 35,974 130,610Currency risk is the risk that the fair value of future cashflows of a financial instrument will fluctuatebecause of changes in foreign exchange rates.The company does not have any direct foreign investments and therefore no foreign exchange raterisk.Interest rate riskInterest rate risk is the risk that the value of future cash flows of a financial instrument will fluctuatebecause of changes in market interest rate. The company invests primarily in financial instrumentswith fixed interest rates which expose the company to fair value interest rate risk.The following table illustrates the sensitivity of the net result for the year ended 30 June 2009 to areasonably possible change in interest rates of + / -1% (2008: + / - 1%). These changes areconsidered to be reasonably possible based on observation of current market conditions. Thecalculations are based on the company’s financial instruments held at balance sheet date, with allother variables held constant.2009 2008$’000 $’000+1% -1% +1% -1%Money Market SecuritiesNet result (650) 661 (444) 451The company actively manages its investments in high quality liquid fixed interest securities andcash for the duration of the fixed interest period, which should be taken into consideration whenconsidering the impact of the above movement.46 4547 46

GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)16. Market Risk (continued)Price riskPrice risk is the risk that the fair value of future cash flows of a financial instrument will fluctuatebecause of changes in market prices, whether those changes are caused by factors specific to theindividual financial instrument or its issuer, or factors affecting all similar financial instrumentstraded on the market.Due to extreme market volatility of the equity markets for the period July 2008 to October 2008, thecompany decided to divest from the equity market. The investment and audit committee along withthe Board continue to monitor the market conditions. The company investments at reporting dateare mainly composed of term deposits. As at 30 June 2009 the company exposure to price risk hasbeen minimised.Credit riskCredit risk is the risk that one party to a financial instrument will cause financial loss to the otherparty by failing to discharge an obligation.Credit risk in relation to trade receivables is considered low as the balance is largely unearned.Measurement is based on unbiased support and taking into account past experience. TheCompany minimises concentrations of credit risk by undertaking transactions with a large numberof customers/contributors. The Company is not materially exposed to any individual customer,however is exposed to credit risk through insurance, reinsurance and investments.Credit risk in respect of insurance and reinsurance receivables is actively monitored through therisk management plan which includes analysis of claiming patterns.The Company developed and adopted an investment plan to maximise return of the investmentportfolio within defined risk categories. The Company minimises concentrations of investment riskby undertaking direct investment transactions with a wide variety of suitably rated financialinstitutions.The Standard & Poor’s Credit rating as at 30 June 2009 for each class of instrument held are:Term Deposits -A-1+Debentures -A-1+Bank Bonds - A-2GMHBA Limited ABN 98 004 417 092NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (CONTINUED)17. Capital ManagementThe capital structure of the company consists of cash reserves and investments representingmember funds. Operating cash flows are used to maintain and increase the company’sinvestments. The company’s investments at reporting date are mainly composed of term deposits.Due to extreme market volatility of the equity markets for the period July 2008 to October 2008, thecompany decided to divest from the equity market. The investment and audit committee along withthe Board continue to monitor the market conditions. The company does not have any externalborrowings.The company manages its capital to ensure it will be able to continue as a going concern andprotect member funds. Capital reserves have increased as follows:$ %Year ‘000 Increase2007 82,002 25.11%2008 83,052 1.28%2009 91,222 9.84%The company is subject to externally imposed capital requirements under the Private HealthInsurance Act 2007 and aims to maintain capital reserves at a sufficient level to meet Board policyreserving at 10% of total assets above the statutory capital adequacy requirement. At 30 June2009 the excess capital reserves over the statutory requirement was $68,332,000 which is 74.9%above the statutory requirement.Solvency requirementGMHBA’s Solvency Reserve, as per the Private Health Insurance (Health Benefits FundAdministration) Rules 2007, is $13,597,000. Total Net Assets are $91,222,000 representing anexcess of $77,625,000 over the solvency reserve18. Company informationGMHBA Limited is a public company limited by guarantee. If the Company is wound up, theconstitution states that each Company member is required to contribute a maximum of $20towards meeting any outstanding obligations of the Company. At 30 June 2009 the number ofCompany members was 7 (2008: 8).48 4749 48

GMHBA Limited ABN 98 004 417 092MEMBERS OF THE BOARD OF DIRECTORSFor the year ended 30 June 2009, the directors of the Company at any time during or since theend of the financial year are:Michael J. Dowling, KSJ, B.Ec., FCA, SFCDA, DipCD.Chairman since 2001Director since 1998Chairman Nomination & Remuneration CommitteeMember Strategy CommitteeChartered AccountantDirector – Dowling Corporate Consulting Pty LtdDeputy Chancellor – Deakin UniversityHeather L. Wellington, MBBS, B. Med. Sci.,BHA, FRACMA, LLB, FAICD.Director since 1998Member Health Services CommitteeMember Nomination & Remuneration CommitteeLawyerMedical PractitionerDirector – HPA Consulting Pty LtdChairman – IPG LtdConsultant – DLA Phillips Fox LawyersKenneth E. Jarvis, OAM, KSJ, B App. Sc (Hons),Dip OR.Director since 2004Member Audit & Compliance CommitteeMember Strategy CommitteeExecutive Chairman – Aerolite Quarries Pty LtdExecutive Chairman – Jakape Pty LtdExecutive Chairman – Zambelli RWP Pty LtdChairman – Geelong Club LtdDirector – Aviation Australia Development LtdPresident – Geelong Club LtdGerald Miller, BA, LLB. GAICD.Director since 2007Member Audit & Compliance CommitteeMember Investment CommitteeLawyerRegistered PsychologistDirector – Maryville Aged Care Inc.Director – The Geelong College LtdSue Renkin, RN, MBA, MAICD, FCDA.Director since 2009Chief Executive – Open Family AustraliaManaging Director – Intuitively Focussed Pty LtdChairman – Monash Centre for Synchrotron ScienceAdvisory BoardChairman – Monash Institute for NanotechnologyAdvisory BoardDirector – General Practice (VIC)Director – Northern HealthMark W. Sibree, BSc (Hons), MBA, MACS, FAICD.Director since 2004Chairman Strategy CommitteeMember Investment CommitteeTrustee of CEDACorporate Strategy AdvisorExecutive Director – Mutual Strategies Pty LtdJames E. Walsh, B.Com, MBA, CA, MAICD.Director since 2005Chairman Audit & Compliance CommitteeMember Nomination & Remuneration CommitteeChartered AccountantDirector – Godfrey Hirst Australia Pty LtdDirector – The Geelong Chamber of CommerceRussell H. Elliott, B.Sc., M. Ed., MAICD.Director since April 2001Chairman Investment CommitteeUniversity ConsultantExecutive Director – Russell Elliott and AssociatesPty LtdKey Associate – Phillips KPA Pty LtdLeanne Rowe, AM, MBBS, Dip RACOG, FRACGP,FAICD, MD. Resigned 29 October 2008Chair Health Services CommitteeGeneral PractitionerImmediate Past Chairman – Royal AustralianCollege of General PractitionersDeputy Chancellor – Monash UniversityCHIEF EXECUTIVE:Mark Valena, BBus (Acc), CA, MAICD.EXECUTIVE MANAGER FINANCE & COMPANYSECRETARY:Michael Carroll, BBus (Acc), CPA, MBA, FCIS.AUDITORS:KPMG147 Collins StreetMelbourne Victoria 3000SOLICITORS:Harwood Andrews Lawyers70 Gheringhap StreetGeelong Victoria 3220BANKERS:Commonwealth Bank of AustraliaCnr Moorabool & Malop StreetsGeelong Victoria 3220204950

GMHBA Limited ABN 98 004 417 092PRINCIPAL REGISTERED OFFICE AND BRANCH LOCATIONS:60 – 68 Moorabool Street, Geelong, Victoria, 3220. Ph: 1300 4 GMHBA (46422)P.O. Box 761, Geelong, Victoria, 3220. Fax: (03) 5221 4582Email: service@GMHBA.com.auWebsite: GMHBA.com.auBRANCH LOCATIONS:GEELONG AREABELMONT178 High StreetNORLANENEWCOMBOTHER AREASBALLARATBellpost Shopping CentreAnakie RoadBellarine VillageQueenscliff Road62 Bridge MallBENDIGOCOLACShop 11a, Fountain CourtMitchell Street178 Murray StreetHAMILTON182 Gray StreetMELBOURNE441 Little CollinsPORTLAND112a Percy StreetWARRNAMBOOL114 Lava StreetPERTHAFFILIATIONS:Suite 7 168 St GeorgesTerrace PerthGMHBA is a member of:- The Australian Health Insurance Association- The Australian Health Service Alliance- The International Federation of Health Plans- The Geelong Chamber of Commerce- The Committee for Geelong- The Victorian Employers’ Chamber of Commerce and IndustryAGENCY:GMHBA is an Agent for:- Allianz Insurance5153 52