2009 GMHBA Annual Report - GMHBA Health Insurance

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