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Primary financial statements

Statement by the Accountable Authority, Chief Executive and Chief Financial Officer

In our opinion, the attached financial statements for the year ended 30 June 2020 comply with subsection 42(2) of the Public Governance, Performance and Accountability Act 2013 (PGPA Act), and are based on properly maintained financial records as per subsection 41(2) of the PGPA Act.

In our opinion, at the date of this statement, there are reasonable grounds to believe that the Australian Reinsurance Pool Corporation will be able to pay its debts as and when they fall due.

This statement is made in accordance with a resolution of the Members.

Signed for and on behalf of and in accordance with a resolution of the Members.

Financial statements signatures

Statement of Comprehensive Income for the period ended 30 June 2020

Notes

2020

$’000

2019

$’000

Premium revenue

1.1A

220,876

190,833

Outwards retrocession premium expense

1.1A

(65,827)

(64,801)

Commonwealth guarantee fee

1.1A

(55,000)

(55,000)

Net premium revenue

100,049

71,032

Claims expense

Retrocession and other recoveries revenue

Net claims incurred

Retrocession commission income

1.1B

3,023

5,149

Acquisition costs

1.2G

(1,739)

(1,619)

Other operating expenses

1.2G

(6,908)

(7,694)

Underwriting result

94,425

66,868

Investment income

1.1C

9,650

13,533

Other income

1.1D

11

30

Finance charges

1.2E

(16)

(3)

Operating result before capital holding fee

104,070

80,428

Capital holding fee

1.2D

(35,000)

(35,000)

Operating result

69,070

45,428

The above statement should be read in conjunction with the accompanying notes.

Statement of Financial Position as at 30 June 2020

Notes

2020

$’000

2019

$’000

ASSETS

Financial assets

Cash and cash equivalents

2.1A

1,775

1,099

Trade and other receivables

2.1B

59,787

57,034

Investments

2.1C

571,500

504,100

Deferred insurance assets

2.1D

34,226

33,613

Total financial assets

667,288

595,846

Non-financial assets

Leasehold improvements

2.2A

1,842

481

Plant and equipment

2.2A

113

150

Intangibles

2.2A

218

17

Work in progress

2.2A

181

Other non-financial assets

2.2B

64

113

Total non-financial assets

2,237

942

Total assets

669,525

596,788

LIABILITIES

Unearned liabilities

Unearned premium liability

2.3A

112,300

98,828

Unearned commission liability

2.3A

936

2,097

Total unearned liabilities

113,236

100,925

Payables

Suppliers

2.4A

33,640

33,094

Other payables

2.4B

54

223

Total payables

33,694

33,317

Provisions

Employee provisions

3.1A

570

480

Other provisions

2.5A

122

745

Total provisions

692

1,225

Interest bearing liabilities

Leases

2.6A

1,376

Total interest bearing liabilities

1,376

Total liabilities

148,998

135,467

Net assets

520,527

461,321

EQUITY

Accumulated reserves

Asset revaluation reserve

60

60

Claims handling reserve

37,252

34,864

Reserve for claims

483,215

426,397

Total equity

520,527

461,321

The above statement should be read in conjunction with the accompanying notes.

Statement of Changes in Equity for the period ended 30 June 2020

Accumulated
reserves

Asset
revaluation
reserve

Claims
handling
reserve

Reserve for
claims

Total
equity

2020

$’000

2019

$’000

2020

$’000

2019

$’000

2020

$’000

2019

$’000

2020

$’000

2019

$’000

2020

$’000

2019

$’000

Opening balance
at 1 July

60

60

34,864

25,098

426,397

400,735

461,321

425,893

Adjustment on initial application of AASB 16

136

136

Adjusted opening balance at 1 July

60

60

34,864

25,098

426,533

400,735

461,457

425,893

Income and expenses

Net operating result

69,070

45,428

69,070

45,428

Total income
and expenses

69,070

45,428

69,070

45,428

Asset revaluation reserve

Transfers between equity components

Transfer to
reserves

(69,070)

(45,428)

2,388

9,766

66,682

35,662

Transactions with owners

Distributions
to owners

(10,000)

(10,000)

(10,000)

(10,000)

Closing balance
at 30 June

60

60

37,252

34,864

483,215

426,397

520,527

461,321

The above statement should be read in conjunction with the accompanying notes.

Accounting Policy

Transactions with Government as owners

Pursuant to section 38(3)(a) of the Terrorism Insurance Act 2003 (TI Act), the Minister may give written direction to require ARPC to make payments to the Commonwealth designed to ensure that sections 35 and 36 do not result in a competitive advantage for ARPC. Pursuant to section 38(3)(b) of the TI Act, the Minister may give written direction to require ARPC to make payments to the Commonwealth in the nature of dividends. A direction was given by the Minister on 4 September 2019, to pay to the Commonwealth a sum of $90 million in the nature of a combined fee ($55 million Commonwealth guarantee fee and $35 million capital holding fee) (s.38(3)(a)) and a sum of $10 million as a temporary dividend (s.38(3)(b)). ARPC has made payments to the Commonwealth during 2020 totalling $100 million (2019: $100 million).

Reserves

The intention of the Government in establishing ARPC was that premiums would be used to fund a reserve pool. The reserve for claims has been created to enable ARPC to build up the required pool.

Cash Flow Statement for the period ended 30 June 2020

Notes

2020
$’000

2019
$’000

OPERATING ACTIVITIES

Cash received

Premiums

248,729

211,917

Commission

3,313

5,655

Interest

11,060

13,280

Other cash received

11

30

Total cash received

263,113

230,882

Cash used

Retrocession payments

68,074

67,319

Employees

4,008

3,807

Suppliers

3,501

5,154

Government

90,709

90,743

Net GST paid

18,138

14,721

Interest payments on lease liabilities

13

Total cash used

184,443

181,744

Net cash from operating activities

78,670

49,138

INVESTING ACTIVITIES

Cash received

Proceeds from maturities of term deposits

1,395,600

1,368,200

Total cash received

1,395,600

1,368,200

Cash used

Placement of term deposits

1,463,000

1,407,600

Purchase of property, plant and equipment

204

19

Purchase of externally developed software

36

181

Total cash used

1,463,240

1,407,800

Net cash used by investing activities

(67,640)

(39,600)

FINANCING ACTIVITIES

Cash used

Principal payments of lease liabilities

354

-

Distributions to owners

10,000

10,000

Total cash used

10,354

10,000

Net cash used by financing activities

(10,354)

(10,000)

Net increase/(decrease) in cash held

676

(462)

Cash and cash equivalents at the
beginning of the reporting period

1,099

1,561

Cash and cash equivalents at the
end of the reporting period

2.1A

1,775

1,099

The above statement should be read in conjunction with the accompanying notes.