Directors’ Report
Effects of changes in discount rates and tax impacts (+$5.6 million)
• Includes the impact of changes in the discount rates on the income protection claims reserves and related projected cost in the EV calculations. • Includes the tax related and timing benefit in FY24 from the impacts of the change in assumptions on the AIACF impairment and changes in the loss component. Franking credit, ESP loan and other changes (-$1.8 million) • The franking credit movement effectively reflects the impact of movements in the value of future tax payments, noting the reduction in the franking account balance due to the payment of the fully franked dividends during the year. • Given non-recourse nature of the ESP loans, $0.9 million is considered as part of the EV calculations at 30 June 2024 (ESP loans have been valued at issue price per ESP share) 1 .
Chart 9: Embedded Value sensitivity analysis @ 4%DM
Inflation -0.5%;+0.5%
5.0
-4.9
Risk-free rate +1%;-1%
-19.9
22.1
-13.8
13.8
Expenses +10%;-10%
-16.2
18.0
Discontinuance Rates +1%;-1%
-30.4
30.4
Claims +10%;-10%
-30
-20
-10
0
10
20
30
Industry Outlook • The Australian life insurance market is increasingly attractive with an improved regulatory outlook, structural reforms (in line with the changes to design and pricing of income protection policies) and a significant underinsurance gap. • There has also been significant market consolidation by the larger multinational players. • There has been significant change across the industry due to the implementation of the new accounting standard, AASB 17.
1 ESP loans are a non-recourse loan that is accounted for as an option and not reported as a receivable on the Balance Sheet as at the reporting date. Based on the 90 day VWAP share price of 57.74 cents per share at 30 June 2024, of the remaining 6.1 million ESP shares on issue (and included in the total shares on issue of 651.0 million), 2.1 million ESP shares are considered to be in the money with a ESP loan recoverable balance of $0.9 million. 4.0 million out of the money ESP shares could therefore be bought back, thereby reducing the shares on issue to 647.0 million shares. As such, $0.9 million of ESP loans have been added to the net assets and 647.0 million shares on issue have been used for the purposes of calculating the net asset value per share. On a fully diluted basis, net of 2.6 million treasury shares, a further 9.1 million performance and restricted rights can be converted into ordinary shares - these have been excluded for the purposes of the calculation.
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ClearView Wealth Limited
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