financial benefit includes any consideration or payment of any kind in respect of the transfer, but does not include any benefit to a policy holder, or other insured person, arising under the policy that insures the person.
market value means the value of the business concerned if it were disposed of to an unrelated purchaser bidding in a market on an ordinary commercial basis for business of the kind disposed of, without any sort of discount or incentive for the business being offered.
not‑for‑profit insurer means an insurer which is not registered as a for profit insurer.
Merger and acquisition under section 33 of the Act
(1) If a private health insurer (the transferee insurer) and one or more other private health insurers (the transferor insurers) enter into an arrangement (the arrangement) under which some or all of the policies that are referable to a health benefits fund or funds (transferring funds) of the transferor private health insurer or transferor private health insurers, are to become referable to a health benefits fund or funds (receiving funds) of the transferee insurer, in accordance with section 33 of the Act, the following rules apply.
(2) The transferor insurer(s) and the transferee insurer must make a written and dated record of the arrangement which is signed on behalf of each party to the arrangement.
(3) The arrangement must do the following:
(a) identify the transferring fund or funds; and
(b) identify the receiving fund or funds; and
(c) identify the date, or means of determining the date, on which the arrangement is to take effect, which must not be before APRA approves the arrangement in writing (the transfer date); and
(d) state, for each transferring fund:
(i) whether all of the policies are to become referable to a receiving fund; and
(ii) if not all of the policies are to become referable to a receiving fund, specify the policy group or groups for the policies which are to become referable to a receiving fund on the transfer date; and
(e) if there is more than one receiving fund, specify for each receiving fund which policy group’s or groups’ policies are to become referable to the receiving fund on the transfer date;
(f) for each receiving fund, specify the assets of, and liabilities incurred for the purposes of, a transferring fund which are to become assets of, and become treated as liabilities incurred for the purposes of, the receiving fund on the transfer date; and
(g) provide for carrying out the requirements under the general law for the transfer of the assets and liabilities which are to be transferred under the arrangement, including obtaining relevant third‑party consents, novations of agreement and execution and lodgement of documents for execution; and
(h) without limiting the generality of paragraph (g), in relation to each asset the transfer of which to a transferee insurer at law requires registration and the transfer of which will not be complete in law on the transfer date, impose on the transferor insurer obligations to:
(i) provide all such assistance in obtaining registration as the transferee may reasonably require whether before or after the transfer date, including, without limitation, provide assistance in responding to requisitions from a registrar of titles; and
(ii) from the transfer date until registration of the transferee’s title, hold the asset on trust for the transferee on the terms set out in Schedule 1; and
(i) in relation to an asset which cannot be transferred under the general law, impose on the transferor insurer obligations to hold the asset on trust for the transferee insurer on the terms set out in Schedule 1; and
(j) without limiting the generality of paragraph (g) in relation to each liability, the transfer of which will not be completed on the transfer date, impose on each transferee insurer obligations to:
(i) take all such steps as the transferor insurer may reasonably require, whether before or after the transfer date, to achieve transfer of the liability if such transfer is possible under the general law; and
(ii) indemnify the transferor insurer against any claims made on or after the transfer date which are allegedly based on the liability with the obligation to indemnify being conditional on the transferor insurer responding to the claim in such manner as the transferee insurer may reasonably require, including, without limitation, allowing the transferee insurer at its own expense to settle the claim, take over any litigation to defend the claim, or both; and
(k) without limiting the generality of paragraph (g), provide for access for each transferee insurer to such of the business records of the transferring fund as the transferee insurer may require to act as private health insurer for the transferred policies.
(4) The specifications required by subrule (3) may be:
(a) by listing particular assets or liabilities; or
(b) by reference to categories of assets or liabilities; or
(c) by a combination of (a) and (b).
(5) If the proposed transfer of policies involves any form of financial benefit to any person, the arrangement must state the details of the financial benefit, whether or not the person to benefit is a party to the arrangement.
(6) If the proposed transfer of policies involves the transfer of policies referable to the health benefits fund of a not‑for‑profit insurer to the health benefits fund of a for profit insurer, and the transferor insurer has, or will have if the application is approved, any interest in the transferee insurer, the application for approval must provide a statement by an appropriately qualified person, independent of the insurers involved, certifying as to what would be the market value if the transfer involved the sale of the transferor insurer's health insurance business.
(7) In subrule (6), health insurance business means the assets and liabilities proposed to be transferred under the arrangement referred to in subrule (2).
Requirements in relation to a merger or acquisition
(1) The parties to an arrangement must submit to APRA with an application for approval of the arrangement:
(a) a copy of the arrangement;
(b) a business plan (the Business Plan) for each receiving fund covering the period of the first 36 months of operation from the transfer date including the following:
(i) a statement of the liabilities incurred for the purposes of, and assets of, the fund at the transfer date; and
(ii) a budget statement for the fund for each month of the period of the Business Plan, setting out in detail:
(A) the projected income and expenditure for the fund; and
(B) the projected assets and liabilities at the end of each month; and
(C) the projected solvency and capital adequacy position of the fund at the end of each month; and
(iii) the ratio that the projected amount of the management and administrative expenses in respect of the conduct of the fund bears to the estimated amount of premiums paid to that fund; and
(iv) summary of proposed changes, if any, to the insurer’s marketing plan including strategies and costs associated with the implementation of the arrangement and promotion of the fund; and
(v) the estimated number of policy holders of the fund at the end of each month; and
(vi) summary of any proposed changes to the insurer’s contractual procedures and arrangements with health service providers and other service providers; and
(vii) summary of any proposed changes to benefits and premiums; and
(c) for each receiving fund, a statement by an officer for the transferee insurer (the certification of compliance) confirming that the board, or other governing body, of the insurer has considered the arrangement and is of the view that the arrangement meets, and the operation of the receiving fund from the transfer date in accordance with the arrangement will meet, the requirements of:
(i) the Act and the PHI Act; and
(ii) any Regulations; and
(iii) the Rules made under the Act and the PHI Act; and
(d) for each receiving fund, a report from the transferee insurer’s appointed actuary (the actuary’s report) which provides the opinion of the actuary:
(i) that the aspects of the Business Plan which provide the information required in paragraph (b) are well‑founded; and
(ii) that the assets and liabilities that would be transferred to the receiving fund or funds represent a reasonable estimate of what would be, immediately before the arrangement takes effect:
(A) if there is one transferring fund—the net asset position of the transferring funds; and
(B) if there is more than one transferring fund—the sum of the net asset positions of each of the funds;
(iii) about how the arrangement will affect the ability of the insurer to comply with:
(A) the solvency standard; and
(B) the capital adequacy standard,
in relation to each of the relevant funds of the insurer at each of the following times:
(C) the transfer date; and
(D) any time over the first 36 months after the transfer date; and
(E) any time within the foreseeable future of operation of the funds beyond 36 months after the transfer date; and
(iv) about what effects the arrangement is likely to have on the premiums for, and benefits under:
(A) each policy group of the policies which are referable to the transferring fund immediately before the restructure; and
(B) each policy group of the policies which are referable to a receiving fund immediately before the restructure,
at each of the following times:
(C) the transfer date; and
(D) any time over the first 36 months after the transfer date; and
(E) any time within the foreseeable future of operation of the funds beyond 36 months after the transfer date; and
(e) for each transferring fund, a statement by an officer for the transferor insurer (the certification of compliance) confirming that the board, or other governing body, of the insurer has considered the arrangement and is of the view that the arrangement meets, and the operation of the receiving fund from the transfer date in accordance with the arrangement will meet, the requirements of:
(i) the Act and the PHI Act; and
(ii) any Regulations; and
(iii) the Rules; and
(f) a report from the transferor insurer’s appointed actuary (the actuary’s report) which provides the opinion of the actuary:
(i) that the assets and liabilities that would be transferred to the receiving fund or funds represent a reasonable estimate of what would be, immediately before the arrangement takes effect:
(A) if there is one transferring fund—the net asset position of the transferring fund; and
(B) if there is more than one transferring fund—the sum of the net asset positions of each of the funds; and
(ii) that for each transferring fund to which subparagraph 33(1)(b)(i) of the Act applies, the net asset position of the fund immediately after the arrangement takes effect will not be greater than zero; and
(iii) about how the arrangement will affect the ability of the insurer to comply with:
(A) the solvency standard; and
(B) the capital adequacy standard,
at each of the following times:
(C) the transfer date; and
(D) any time over the first 36 months after the transfer date; and
(g) a copy of the statement, if any, issued by a party to the arrangement in accordance with subsection 93‑20(2) of the PHI Act about any proposed change of the rules of the transferor private health insurer associated with the arrangement; and
(h) a copy of any statement issued by a party to the arrangement in accordance with subsection 93‑20(4) of the PHI Act about the aspect of the arrangement which involves the proposed change in funds to which policies are referable; and
(i) a summary of any submissions in writing (including email or other electronic form) to a private health insurer party to the arrangement from a policy holder of a policy of a fund conducted by the insurer in relation to any aspect of the arrangement regardless of whether the submission was made in response to a statement issued under subsection 93‑20(2) or subsection 93‑20(4) of the PHI Act or otherwise.
(2) Prior to the transfer date, each party to the arrangement must, except to the extent provided for in the Act, procure any amendment of its constitution and any of its rules required for the arrangement to take place.
Note: The Act contains relevant provisions in section 34.
(3) Prior to the transfer date, each party to the arrangement must take all steps required under any other law of the Commonwealth, a State or a Territory required for the arrangement to take place.
Criteria for approving or refusing a merger or acquisition
(1) For the purposes of paragraph 33(3)(b) of the Act, a proposed distribution of assets and liabilities between receiving funds under a proposed arrangement is not fairly distributed if the proposed distribution will cause, or may contribute to causing, a transferee insurer to be in breach of:
(a) the Act or the PHI Act; or
(b) any Regulations; or
(c) any of the Rules; or
(d) a solvency direction that applies to the private health insurer; or
(e) a capital adequacy direction that applies to the private health insurer,
at one or more of the following times:
(f) the transfer date; or
(g) any time within the first 36 months after the transfer date; or
(h) any time within the foreseeable future of operation of the restructuring funds beyond 36 months after the transfer date.
(2) Subrule (1) is not an exhaustive statement of criteria for refusing an application under section 33 of the Act and does not prevent APRA from taking into account considerations other than those referred to in subrule (1) to form a view that a proposed distribution between receiving funds of assets and liabilities is fairly distributed for the purposes of paragraph 33(3)(b) of the Act.
(3) When considering whether a distribution between receiving funds pursuant to a restructure is fairly distributed for the purposes of paragraph 33(3)(b) of the Act, the relevant matters APRA may take into account include, but are not limited to, the matters referred to in subrule (1).
(4) In considering an application under subsection 33(2) of the Act, APRA must take into account statements made in:
(a) the application; and
(b) the arrangement; and
(c) the certifications of compliance; and
(d) the actuaries’ reports,
but is not bound by those statements and may make its own inquiries which may include, without limitation, obtaining other actuarial advice.