MAV INSURANCE 2006 ANNUAL REPORT - mav.asn.au · 4 MAV INSURANCE ANNUAL REPORT 2005/06 MAVIC...

MAVINSURANCE2006 ANNUAL REPORT

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MAVINSURANCE2006 ANNUAL REPORT

LEADING THE WAY TO A SAFER FUTURE

INCORPORATING CIVIC MUTUAL PLUS & THE MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

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2 Welcome

4 Year in Review

7 Chair’s Report

8 MAV Insurance Committee

10 Civic Mutual Plus

16 Risk Management

18 Municipal Officers’ Fidelity Guarantee Fund

20 Civic Workers Plus

21 General Insurance Broking

22 Governance

24 CMP Members

25 Fidelity Members

26 Glossary

27 Financial Report

CONTENTS

MAV INSURANCE ANNUAL REPORT 2005/06 1

Published byMunicipal Association of VictoriaLevel 12, 60 Collins StreetMelbourne VIC 3000Telephone: 03 9667 5555Facsimile: 03 9667 5550GPO Box 4326Melbourne 3001Email: [email protected]: www.mav.asn.au

EditorPaula Hurley

DesignFrank Design Pty Ltd

PhotographySteven Diffey Photography

CORPORATE LISTINGSActuaryCumpston Sarjeant Pty Ltd

AuditorPKF

BankersAustralia and New Zealand Banking Group Ltd Commonwealth Bank of AustraliaTreasury Corporation of VictoriaUBS Global Asset Management (Australia) Ltd

Contract ManagersAAR Capital Pty Ltd

Scheme and Fund ManagerJardine Lloyd Thompson Pty Ltd

SolicitorsFreehillsMaddocksMiddleton LawyersSecombs Solicitors

Legal Panel CMP SchemeThe firms on the Legal Panel are experiencedin defending public liability and professionalindemnity claims brought against councils.

Allocated panel firms (public liability)Hunt & Hunt – North Central Rural Ligeti Partners – Geelong/Ballarat Phillips Fox – South West RuralWisewoulds – Eastern Rural

Professional indemnity claims - VictoriaPhillips FoxMoray & Agnew

Loss Adjusting Panel CMP Scheme -VictoriaANPA Investigation Services Echelon Loss AdjustingG Hughes & AssociatesLee Kelly & AssociatesQuest Investigation Services

Loss Adjusting Panel CMP Scheme -Tasmania Crawford & CoThomas Whayman & McCarthy

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The Community Insurance scheme hascontinued to provide not-for-profitcommunity groups with liability insurancecoverage for a competitive market price. The lead taken by MAV Insurance to enterthis market has provided significant benefitsto the community sector, with the re-entry ofseveral major insurance groups into thismarket segment. MAV Insurance remainscommitted to offering this product to ensurethe continued availability of insurance coverthat operates effectively and competitively forthe not-for-profit community groups sector.

Meanwhile, members of the MunicipalOfficers’ Fidelity Guarantee Fund haveimproved both claims and risk managementperformance significantly during the year. This can partly be attributed to the significantefforts devoted by members to the risk area,in tandem with numerous support initiativesprovided by MAV Insurance.

The expansion of insurance products formembers continues, with the application toestablish a self-insurance scheme for workcover expected to progress during 2007 tothe point of application. Having nowcompleted the research and established abusiness case, MAV Insurance stronglybelieves the establishment of Civic WorkersPlus self-insurance scheme will providecouncils with substantial benefits. It willensure that Victoria has the safest possiblework places and work practices for theprotection of local government employeesand contractors, and will result in substantialreduction in the total cost of workers'compensation to councils.

During the year, one of our long servingindependent committee members, NickRenton, decided to retire. Nick wasappointed to the committee in 1995 and theinsurance businesses have benefited greatlyfrom his skill, knowledge and experience. Wewould like to express our deep appreciationto Nick for his 11 years of service to theinsurance committee and the members.

We also take this opportunity to congratulatethe MAV Insurance Committee, SchemeManager, Contract Manager and staff onanother successful year. Finally, we mustthank all members of Civic Mutual Plus andthe Municipal Officers’ Fidelity GuaranteeFund for their continued support andongoing efforts to mitigate insurance risks in a proactive and committed manner.Together we are achieving significant resultsin reducing claims, reducing costs andcreating a safer, more productive Victoria.

ROB SPENCE CEO

AND

GEOFF LAKE PRESIDENT

2 MAV INSURANCE ANNUAL REPORT 2005/06

“CATASTROPHIC EVENTS REPRESENT A SIGNIFICANT RISKCHALLENGE FORMEMBERS, AND... MAV INSURANCE HAS BEEN PROACTIVEIN ENSURING MEMBERS HAVEMAXIMUM POSSIBLEPROTECTION”

MAV Insurance has continued to provide itsmembers with secure and cost effectivepublic and product liability, professionalindemnity and fidelity insurance, togetherwith risk management and claims servicesthrough its operating divisions, Civic MutualPlus (CMP) and the Municipal Officers'Fidelity Guarantee Fund.

Reliability, product consistency, costeffectiveness and longevity are hallmarks ofMAV Insurance, and our efforts during2005/06 demonstrated our strongcommitment to meet local government'sinsurance needs, even during difficultinsurance market conditions.

Looking after the long-term interests ofmembers is central to the operatingprinciples of MAV Insurance. This is reflectedin the agreement with the VictorianManaged Insurance Authority, which hasseen the removal of 'hold harmless clauses'in contracts between the State and localgovernment insurers. While this problem hascaused unnecessary irritation for many years,we now have a sensible outcome thatensures each party takes responsibility for itsown negligence.

In addition, MAV Insurance has continued to provide active support to the StateGovernment to ensure the positive initiativescoming out of tort reforms are not weakenedor negated.

Catastrophic events represent a significantrisk challenge for members, and in an erawhere policy exclusions by re-insurers arebeing added to policy wording or the list ofexclusions widened, MAV Insurance hasbeen proactive in ensuring members havemaximum possible protection.

Efforts to understand the impacts of climatechange on the operations of members andtheir future risk profiles, together with anunderstanding of the requirements forinsurance protection from terrorist activities,have been part of the strategic developmentprocess undertaken by the MAV InsuranceCommittee during the year. Looking forward,we will see some major activities progressedby MAV Insurance to further enhance ourwork in this important risk management area.

WELCOME

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HOLD HARMLESS PROVISIONS

After years of negotiations, an agreement was reached betweenCivic Mutual Plus and the Victorian Managed Insurance Authority to remove long-standing and potentially onerous 'hold harmless'provisions from contracts. This development was welcomed by CMP and MAV, and had positive flow-on effects for members.

AUDIT PROCESS IMPROVEMENTS

Improvements to the management of the annual risk managementaudit of CMP council members were well received. The audit results indicated that councils are working hard to improve riskmanagement practices, notably in the area of playgroundmaintenance, however, swimming pool management continues to present a challenge.

RISK MANAGEMENT AWARDS

Hepburn Shire Council was the winner of the 2005 CMP VictorianRisk Management Excellence Award, submitting a comprehensiveguide to managing risks associated with public events. TheTasmanian award winner was Burnie City Council, which put forward a framework for recognising and addressing risks linked to operational projects, particularly in the early planning phase.

CIVIC WORKERS PLUS

Efforts continued towards the establishment of a workcover self-insurance scheme in Victoria. Such a scheme would deliversignificant cost savings to councils, as well as benefits such asreductions in claims frequency and severity. The MAV is building on the knowledge gained from a previous application to theVictorian WorkCover Authority to establish such a scheme, whichwas unsuccessful, and is confident that the requirements forapproval can be satisfied.


MAVICLong-serving Chair of the MAV Insurance Committee (MAVIC), Anne Murphy, resigned from the position, though hermembership of the committee continued. John Warburtoncommenced as Chair of MAVIC.

CMP WEBSITE

The Civic Mutual Plus website was launched atwww.cmp.asn.au and feedback from members has been verypositive. The site provides ready access to general informationabout the scheme, as well as a secure members-only sectionwith items such as CMP circulars, risk management material,forms and presentations. Further enhancements are planned inthe coming year.

SPORTING GROUNDS

A committee was formed to develop strategies for managingsporting grounds affected by the continuing drought. A jointinitiative of the Australian Football League, Cricket Australia,councils and CMP, the committee developed plans forcommunicating with users about deteriorating ground conditions.

TORT REFORM

The impact of recent tort reforms was seen in several courtcases, with judgments against plaintiffs suing councils afterdiving accidents. However, other cases have highlighted adegree of ongoing ambiguity in relation to the definition of foreseeable risk.

COMMUNITY GROUPS

The community insurance scheme continued to provideaffordable, effective public liability insurance for over 1000 not-for-profit groups across metropolitan, regional and rural Victoria.

YEAR IN REVIEW

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CHAIR’SREPORT

The combined result for this year ($2.145million) and the accumulated surplus at 30June 2006 ($10.546 million) were impactednegatively by the introduction of the newInternational Financial Reporting Standards(IFRS), a change in actuarial standards andan increase in risk rating for collections fromreinsurers. Notwithstanding these changes,the underlying performance of the CMPbusiness continued to improve and 2006can be adjudged as another successful year.

As a mutual insurance organisation whichexists for its members, CMP relies veryheavily on arranging reinsurance of asignificant part of the risks it covers formembers. As we have seen in the past, withexamples such as FAI/HIH and Independent,reinsurers occasionally fail. Although the riskof failure is always present, the committeeaddresses this risk by continuing to build anappropriate retained surplus and monitoringits reinsurers. The committee also has apolicy of only reinsuring its risk with insurersthat have a Standard & Poors rating of A (or as otherwise agreed) and each reinsurer must hold an equivalent of a least US$25 million in unencumberedpolicyholders’ funds.

I am personally very pleased to be amember of MAVIC and to be able to makea contribution to what are unquestionablyexcellent, proven insurance programsprovided for its members. Our programsonly work as well as they do because of thestrong commitments made by a number ofpeople and organisations and the supportreceived from you, the members.

In closing, I would like to acknowledge thework of Jardine Lloyd Thompson, ourscheme manager, the work of our actuariesand other professional advisers, thecontribution of MAV people, particularly Rob Spence and Allan Holmes, and the verystrong and enthusiastic support of my fellowmembers of MAVIC.

JOHN WARBURTON CHAIRMAV INSURANCE COMMITTEE


“OUR PROGRAMS ONLY WORK AS WELLAS THEY DO BECAUSEOF THE STRONGCOMMITMENTS MADE BY A NUMBER OF PEOPLE ANDORGANISATIONS AND THE SUPPORTRECEIVED FROM YOU,THE MEMBERS.”

My term as Chair commenced on 1 August2005 with the retirement of Anne Murphy, whowas Chair of the MAV Insurance Committee(MAVIC) since its inception in 1993.

On behalf of the committee I would like tothank Anne for the significant contributionshe made to the creation and ongoingviability of the Civic Mutual Plus LiabilityScheme (CMP) and the Municipal Officers’Fidelity Guarantee Fund over her term. It ispleasing that Anne has remained a memberof the committee and continues tocontribute her knowledge and skill.

There have been a number of achievementsduring the year that have benefitedmembers and their communities, notably:

• CMP premium increases were held in linewith inflation this year. With recent lowerclaims trends and the current softeningworld insurance market we are confidentour insurance program will continue todeliver on its long-term aim, to provideongoing first-class insurance cover atreasonable premiums over the years

• premiums arranged by the committee fornot-for-profit community groups’ liabilityinsurance fell by 5% for the 2006 year

• negotiations with the Victorian ManagedInsurance Authority resulted in anagreement between the two insurers thatwill see ‘hold harmless’ clauses incontracts between state and localgovernment no longer required by eitherinsurer. This is a sensible outcome to aproblem that has caused unnecessaryirritation for many years.

A major strength of all MAVIC programs isthe emphasis on appropriate riskmanagement activities across all areas. Theincreased emphasis by the committee onrisk management initiatives for the fidelityfund in particular has received strongsupport from members. It was pleasing tosee that the results of these riskmanagement activities have resulted inclaims during the 2006 financial year beingat their lowest for many years. This resultreversed a previously concerning trend.


062250 MAV 2006 ARs FA 21/12/06 12:59 PM


CR ROD FYFFEAppointed 2004 Current and past positions held

MAV Board rep of Rural North CentralRegion

Councillor, Greater Bendigo CityCouncil 1996 to present

Mayor of Greater Bendigo 2003-2005

ALLAN GARCIAAppointed 2003 Current and past positions held

CEO Local Government Association of Tasmania (LGAT)

LGAT representative

CR GEOFF LAKEAppointed 2004 Current and past positions held

MAV President

Councillor Monash City Council 2000to present

Mayor Monash City Council 2002-03and 2003-04

Vice President Australian LocalGovernment Association

COMMITTEE MEMBER WHORETIRED 2005/06

NICK RENTON

MICHAEL KENNEDYAppointed 1995 Current and past positions held

CEO, Mornington Peninsula Shire 1999to present

Chairman, LifeSaving Victoria 2004 topresent

CEO Boroondara City Council 1995 -1999

CEO Shire of Hastings 1993 - 1994

ADRIAN NYEAppointed March 2004 Current and past positions held

Management consultant

Chairman, Victorian ManagedInsurance Authority

Chairman, Showground Nominees PtyLtd, Melbourne ShowgroundsRedevelopment Joint Venture

Director, Victorian WorkCover Authority

ROB SPENCEAppointed 1998 Current and past positions held

CEO, MAV

CEO, Brimbank City Council 1994 -1997

CEO, City of Footscray 1992 - 1994

Director of Municipal Operations,Office of Local Government

CR DICK GROSSAppointed 2005 Current and past positions held

Councillor City of Port Phillip 1996 topresent

Mayor City of Port Phillip 1998 - 2000,2004

Chair MAV Future of Local GovernmentGroup


JOHN WARBURTONAppointed 1995 COMMITTEE CHAIRMAN AUG 2005 - PRESENT

Current and past positions held

Director, Vision Super (formerly LocalAuthorities Super)

Director, Australian WealthManagement Limited

Trustee, Melbourne Exhibition andConvention Centre Trust

Chairman, Port of HastingsCorporation

Deputy Chair, Victorian ManagedInsurance Authority 1996 to 2000

ANNE MURPHYAppointed 1993 COMMITTEE CHAIRMAN 1993 - AUG 2005

Current and past positions held

Past President MAV

Principal Anne Murphy Strategy andFacilitation

RON FARRELLAppointed 2001 Current and past positions held

Non-Executive Director, VictorianManaged Insurance Authority

General Manager, Australian EagleInsurance Co Ltd

Chairman and Non Executive Director,Utilities Insurance Co Pty Ltd

Non Executive Director, connect.com.auPty Ltd

Non Executive Director, MetropolitanFire & Emergency Services Board

MAVINSURANCECOMMITTEEAS AT 30 JUNE 2006

The MAV Insurance Committee acts as a committee ofmanagement and an advisory body to the MAVManagement Board on insurance, financial and othermatters impacting on the CMP Scheme and theMunicipal Officers’ Fidelity Guarentee Fund. While thecommittee is accountable to the MAV ManagementBoard, it has delegated powers to administer the schemeand fund on behalf of all members for each insuranceyear. The committee operates in accordance with a set of rules approved by the MAV Management Board.

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RESULTSThe CMP financial result for 2006 improvedon the 2005 year, which was negativelyimpacted by the introduction of tort reformand the deadline set for lodging claims.

The operating surplus for the 2005/06financial year was $1,941,013 (2005$1,257,354). This result increased the netasset (equity) position of the scheme from$8.3 million in 2005 to $10.2 million at theend of 2006 financial year.

The claims expense for 2006 was back tomore normal levels from the heights of 2005.

The introduction of Australian equivalent tothe International Financial ReportingStandards (AIFRS) has led to a significantincrease in the reporting responsibilities forthe scheme. In addition, the introduction ofAIFRS has caused the scheme’s net asset(equity) position to reduce by $1.7 million.This reduction is caused by the additionalrisk margin required when calculatingprovision for claims. Details of the causeand effect of these changes are at note 2(o)in the financial statements.

CMP WEBSITE

The CMP website was launched in September2005 (www.cmp.asn.au). Designed as a toolto improve communication, provide readyaccess to information and reduce mailingcosts, the site has been regularly utilised bymembers, who have provided very positivefeedback.

The website features two areas - the first ispublicly accessible and covers generalinformation about CMP, including schemestructure, administration, services and keycontacts. The password-protected MembersOnly section features CMP circulars, legaldecisions, risk management manual andclaims management manual, Best PracticeForum minutes, handouts and presentations,as well as downloadable claim forms.

Work is currently underway to developfurther enhancements to the Members Onlysection, providing individual members withcustomised information, such as liabilityaudit results.

CLAIMS & TECHNICALCOMMITTEE

The Claims and Technical Committee wasestablished to assist the MunicipalAssociation of Victoria Insurance Committeeto fulfill its responsibilities of claimsmanagement and claims settlements, the interpretation of technical insuranceissues, client risk management initiativesand services to clients and local government generally.

Key activities of the committee during2005/06 included:

• reviewing the contribution formulae formembers

• negotiating out of the indemnity and holdharmless provisions with State governmentdepartments and community groups

• establishing the policy on fidelitysubrogation for members

• increasing reinsurance and limits ofindemnity from $2m to $5m

• reviewing the financial security of re-insurers and excess insurers

• reviewing actuarial reports relating to totalfund contributions and surpluses

• recommending changes to the MAV Actas it affects the insurance businesses.

SPORTING GROUNDS COMMITTEE

The Sporting Grounds Committee wasestablished in response to concerns aboutthe deteriorating condition of councilsporting fields due to the continuingdrought. A joint initiative between the CMP,Australian Football League, CricketAustralia, sporting insurance brokers JLTSport and several councils, the Committeewas convened to assist councils, clubs andland managers address issues related to theuse of sports fields.

One of the key aims was to develop agreedcommunication strategies and protocolsbetween councils and sporting groups ininstances where sports activities had to bepostponed, transferred or cancelled due topoor ground conditions. The committeeestablished clear trigger points for makingsuch decisions and then communicating themto ground users in a timely, effective manner.

The committee commenced work onrecommendations for lease agreements thatclearly define the respective responsibilitiesof councils, clubs and associations forground inspections, safety determinationsand maintenance work.

IMPACT OF TORT REFORM

The positive impact of recent tort reformswas seen in a number of court cases in2005/06. In several instances in whichcouncils were sued for compensation afterdiving accidents, judgements were madeagainst the plaintiffs on the basis that therisks were apparent. However, the conceptof reasonably foreseeable risk was cloudedby some further cases in which councilswere found to have at least particalresponsibility where changes to theenvironment such as flooding or theinstallation of equipment had occurred.

While CMP is pleased that the applicationof tort reforms has provided greater clarityand improved legal outcomes for councils,thereby helping to contain insurance costs,we continue to be concerned aboutambiguity in relation to obvious risks.

HOLD HARMLESSPROVISIONS

For some time CMP has been greatlyconcerned about the contractual risks facedby members when entering into agreementsthat contain onerous indemnity clauses knownas hold harmless provisions. These provisionsare technically complex and create thepotential for members to be unknowinglyunder-insured, risking claims of millions of dollars.

Following years of negotiations with variousparties, MAV and CMP achieved some keybreakthroughs which markedly improved thesituation. An agreement was reached betweenCMP and the Victorian Managed InsuranceAuthority (VMIA) that hold harmless provisionswould not be requested in contracts, resultingin both parties assuming responsibility for theirown risks to third parties.

The removal of complexity and uncertainty hasdelivered real benefits to members, not only interms of time saved but also in peace of mindfor community organisations.

On a larger scale, the arrangement betweenCMP/VMIA also produced positive results in the commercial area. For example,VicHealth’s grant agreement with localgovernment, which had been the subject of protracted discussions, was quicklyconcluded when the hold harmless clauseswere removed.


CIVIC MUTUAL PLUS

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TOTAL 758

Animals 32

Arts & culture 121

Children & family 24

Community business 88

Community care 45

Community care/ 27

Comm events & festivals 349

Education 8

Environment conservation 19

Indigenous 5

Multicultural 83

Older people 44

Public safety 3

Recreation & leisure 135

Regional development 26

Science & technology 1

Special education 5

Women 2

Youth 8

TOTAL 1025

Human services

& heritage

COMMUNITY ORGANISATIONSINSURED AS AT 2005/06

Animals 34

Arts & culture 106

Children & family 22

Community business 84

Community care 41

Community care/ 24

Comm events & festivals 148

Education 10

Environment conservation 16

Indigenous 3

Multicultural 76

Older people 40

Public safety 3

Recreation & leisure 116

Regional development 25

Science & technology 1

Special education 4

Women 1

Youth 4

TOTAL 758

Human services

& heritage

COMMUNITY ORGANISATIONS RENEWALSAS AT 2005/06

MAV INSURANCE ANNUAL REPORT 2005/06 1312 MAV INSURANCE ANNUAL REPORT 2005/06

COMMUNITY GROUPS INSURANCE SCHEMEThe MAV Insurance Community Groups Scheme once again providedover 1000 not-for-profit groups withaffordable and effective products andpublic liability insurance. Participants in the scheme came from a diverserange of community sectors andinterests, from arts and craftsassociations to residential street party committees, multicultural socialgroups to historical associations. For more information visit:www.communityinsurance.com.au.

QUEENSCLIFFEMARITIME MUSEUM

The Queenscliffe Maritime Museum is apopular destination for tourists andhistory buffs visiting the beautifulBellarine Peninsula. The large collectionof artefacts brings Queenscliffe’s richmaritime history to life and includes asuperbly restored lifeboat, a colourfulfishermen’s shed and many interestingnavigation aids, charts and photographs.

As a not-for-profit organisation open 7 days a week, hosting over 10,000visitors a year and relying on the servicesof some 36 volunteers, the Museumrequired suitable public liability insuranceat a reasonable cost. In the face ofrapidly rising premiums, the managementcommittee sought assistance from theQueencliffe Borough, which pointed ittowards the MAV Community GroupsInsurance Scheme.

Since signing up to the scheme in 2003, the Museum has been able to rely on the convenience, affordabilityand peace of mind that it provides, and visitors have continued to enjoy learning about Queenscliffe’s fascinatingmaritime heritage.

QUEENSCLIFFEMARITIMEMUSEUM

MILLINERYASSOCIATION OF AUSTRALIA

THE MILLINERYASSOCIATION OF AUSTRALIA

The Millinery Association of Australia is a national not-for-profit group thatruns a range of hat parades, classesand exhibitions throughout the year. Its goal is to not only promote thehistory, beauty and functionality of hats, but to educate budding millinersand the general public on the skill and craftsmanship involved in producing a unique item of head apparel.

Several years ago the Association was struggling to maintain its regularcalendar of events in the face of sharplyrising insurance premiums. Fortunately,a member of the executive heard aboutthe MAV Community Groups InsuranceScheme and within a short time suitablepublic liability insurance was in place.This development provided thereassurance needed for the Associationto expand its program of promotionaland educational activities.

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14 MAV INSURANCE ANNUAL REPORT 2005/06MAV INSURANCE ANNUAL REPORT 2005/06 15

The above graph depicts the accumulated surplus as atthe end of each 30 June financial year.

Unfortunately the HIH/Independent collapse, and theretrospective impact of the non-feasance decision onpast years had a combined detrimental effect on thecombined accumulated surplus, especially for the 01/02financial year, however due to the full reinsuranceprogram the scheme has recovered to record anaccumulated surplus of $10.2M as at 30 June 2006.

LATE REPORTEDCLAIMS NEGATIVELYIMPACT ON CMP

Late reported claims have always been an issue for public liability insurers,including CMP, in terms of trying tomeasure exposure and liabilities under a policy at any one point in time. The numbers of claims reported to anyliability insurer during the actual first 12 month period of the policy bears littleresemblance to the claims as they unfoldover the ensuing years.

An examination of the claims data sincethe commencement of CMP highlightsthe reduction in the number of claimsover the years and also highlights theincrease in the average amount of theclaims. While it is too early to see anytrends resulting from the recent tortreforms, it is clear the benefits of the risk management programsundertaken by members can be seen in the reducing claim numbers.

A further complication is that latereported claims are often difficult todefend when there are no records of theincident. In many cases changes haveoccurred since the date of the allegedincident and the date of the report,including changes to personnel, the siteof an incident, court precedents andother legislative reforms. This addsfurther complexity, making such casesparticularly problematic to defend.

Roads & footpaths $48,085,949

$28,917,686

Natural $900,441

Other $11,768,764

Person $3,319,495

Construction $1,550,225

Environmental $7,374,328

Leisure $12,945,081

Building $4,698,167

Roads & footpaths 4128

939

Natural 85

Other 585

Person 145

Construction 253

Environmental 864

Leisure 732

Building 345

Professionalindemnity

Professionalindemnity

PAID $100,182,172

PLUS O/S $40,427,333

TOTAL $140,609,505

TOTAL 8075

INCURRED CLAIMS

NUMBER OF CLAIMS

93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04

Scheme Deficits

Scheme surplus

(reinsurance has been renewed through to 2008)

-6000000

-4000000

-2000000

0

2000000

4000000

6000000

8000000

10000000

1,893,100

8,820,022

2,680,6702,413,455

4,067,375

3,102,069

-551,386

-3,128,114-3,281,003

-3,936,915-4,474,190

04/05 05/06

615,532

2,013,305

YEAR BY YEAR SCHEME PERFORMANCE

(1)This diagram shows the year-by-year performance of the scheme with regard to the position as at 30 June 2006.

(2)Effective from 30 June 1998, full re-insurance was introduced and from 1998 the surpluses, per year, are effectively ‘guaranteed’.

(3)The aggregate position as at 30 June 2006 is a consolidated scheme surplus of $10,233,920.

(4)Tasmanian Councils joined the scheme in June 1996.

(5)Each year is a separate independent insurance year.

Scheme carrying first $2M Full reinsurance

93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04

-4,000,000

-2,000,000

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

8,612,554

5,821,466

-2,400,557

-756,474

2,867,000

2,422

763,000

1,450,0001,644,000

3,287,000

1,007,000

12,000,000

04/05 05/06

9,994,908 10,233,920

ACCUMULATED SURPLUS

(at end of each financial year)

CLAIM TRENDS – ACTUAL INCURRED (PAIDS AND OUTSTANDINGS)

INSURANCE YEAR AS AT THE END AS AT THE END AS AT THE ENDOF FIRST OF THE SECOND OF JUNE 2006

12 MONTHS 12 MONTHS

1993/1994 Paid $125,452 $1,117,445 $9,285,641

(12 Months) O/S $1,625,406 $2,117,735 $187,491

$1,750,858 $3,235,180 $9,473,132

(1195 Claims) (1385 Claims) (1430 Claims)

1994/1995 Paid $106,136 $758,321 $9,620,689

(9 Months) O/S $1,893,998 $3,405,312 $39,479

$2,000,134 $4,163,633 $9,660,168


1995/1996 Paid $131,416 $1,159,607 $9,657,836

(12 Months) O/S $3,424,475 $4,791,866 $223,837

$3,555,891 $5,951,473 $9,881,673


1996/1997 Paid $418,258 $1,629,196 $11,381,487

(12 Months) O/S $4,860,994 $4,779,580 $814,166

$5,279,252 $6,408,776 $12,195,653


1997/1998 Paid $156,404 $1,143,713 $9,130,332

(12 Months) O/S $3,359,981 $6,059,481 $786,455

$3,516,385 $7,203,194 $9,916,787


1998/1999 Paid $196,416 $1,395,533 $11,053,178

(12 Months) O/S $3,979,233 $4,044,996 $1,163,544

$4,175,649 $5,440,529 $12,216,721


1999/2000 Paid $238,627 $1,700,810 $9,305,406

(12 Months) O/S $3,659,999 $5,124,696 $901,657

$3,898,626 $6,825,506 $10,207,062


2000/2001 Paid $230,442 $1,445,463 $13,179,115

(12 months) O/S $3,771,101 $7,282,941 $3,810,068

$4,001,543 $8,728,404 $16,989,183


2001/2002 Paid $101,895 $1,147,278 $7,735,326

(12 months) O/S $5,262,025 $5,932,095 $8,442,190

$5,363,920 $7,079,374 $16,177,517


2002/2003 Paid $239,745 $1,536,477 $5,359,264

(12 months) O/S $3,142,290 $4,675,668 $2,925,130

$3,382,035 $6,212,145 $8,284,394

(163Claimis) (294 Claims) (356 Claims)

062250 MAV 2006 ARs FA 21/12/06 12:59 PM Page 14


AUDIT PROCESS

Further improvements were made to the riskmanagement audit process this year. Auditsbegan earlier, which significantly reducedlast-minute workloads, and more guidancematerial was provided throughout theprocess, giving members a betterunderstanding of the requirements. On theday of the relevant audit, CMP provideddetailed reports outlining recommendationsto further reduce the member’s riskexposures.

Results from the 2005/06 audit show animprovement in risk managementcompliance scores, up to 68% from 63% in2004/05. One of the key reasons for thiswas the improvement in the management ofplayground assets through regular and well-documented inspections. However, thissame improvement cannot be seen in themanagement of municipal swimming pools,which continue to be an area of concern.Results from previous audits indicated that44% of Victorian councils and 33% ofTasmanian councils had still not followed up on the recommendations made by RoyalLife Saving Society Australia in the 2000/01audits of all municipal swimming pools.

MEMBER FEEDBACK ON THE IMPROVEDAUDIT PROCESS

“There has been a huge improvement withthe documentation and support givenleading up to the audit… the level ofknowledge, professionalism and supportfrom CMP Risk Managers is a great help.”Moonee Valley City Council

“We were happy with the CMP audit processthis year. It gave us a very clear way forwardand highlighted areas for improvement.” Ballarat City Council

“The prompt provision of preliminary auditresults provided us with the opportunity toimprove systems between the initial auditand the cut off date. (It was) a very valuableexercise for our organisation and resulted inan increase of 8% compliance.”Buloke Shire Council

“The process was very efficient and, as anew person to council, it provided a goodbackground to our risks, the systems wehave in place and how we manage them.”Sorell Council, Tasmania

RISK MANAGEMENT AWARDS

The winner of the CMP Victorian RiskManagement Excellence Award for 2005was Hepburn Shire Council. Hepburn’ssubmission was a fully developed andimplemented events risk managementprogram. With a significant number ofpublic events held in Hepburn Shire, astrategy was developed to reduce risk ofinjury and minimise damage to councilassets. The Risk Management for Eventsguide documented the co-ordination ofvarious council resources and servicesthrough one end-to-end process, coveringissues such as liability insurance for eventorganisers and stall holders, road closures,permits, building regulations andenvironmental health issues.

The program has been successfully appliedto a number of events run in Hepburn Shireand can easily be adapted for use by othermunicipalities. In fact a number of councilshave contacted Hepburn Shire Council forcopies of the guide.

The winner of the CMP Tasmanian RiskManagement Excellence Award was BurnieCity Council. The prize included an allexpenses paid trip to next year’s Risk andInsurance Management conference in NewOrleans. Burnie’s submission detailed thecouncil’s efforts to develop a framework formanaging operational works, with a focuson identifying and understanding risk at theoutset of the project. Their risk assessmentprocess included provisions for managingpublic safety and mitigating environmentaland occupational health and safety risksassociated with council projects. Itdemonstrated a proactive and practicalapplication of the Australian riskmanagement standard AS4360.

Representing the 2005 award winners,Robert Knight, Manager ofOrganisational Development forHepburn Shire Council, attended theRisk and Insurance ManagementSociety conference in Hawaii in Apriland shared his observations:

No particular ‘best practice’ modelsstood out at the conference as theindustry tends to be reactive rather thanproactive, however Australia and NewZealand, which have adopted standardsfor performance, are leaders in riskmanagement. There were significantlessons from the natural disasters inAmerica - after Hurricanes Katrina andWilma, 98% of losses were attributed toconstructors failing to follow the relevantbuilding codes.

The collective model of insurance,managed by CMP on MAV’s behalf, isunique. Much interest was shown inhow effective such a model can be,particularly by public entities attendingthe conference.

MAV and CMP are to be congratulatedfor instigating this special initiative. This award is significant, relevant andmeaningful. Genuine opportunities forexternal recognition… are important asthey assists councillors, managementand staff to value the contributions madeby everyone in their efforts to do goodwork in the communities they serve.


RISK MANAGEMENT

ChillOut Festival Daylesford.Photo courtesy of The Advocate

062250 MAV 2006 ARs FA 21/12/06 12:59 PM Page 16


ABOUT THE FUND

The Municipal Officers’ Fidelity GuaranteeFund is a non-discretionary mutualinsurance fund that provides fidelityinsurance for local government and otherstate authorities.

Fidelity insurance is a special risk insurancewhich indemnifies members of the fundagainst a loss of money or other propertyduring a nominated period as a result of thedishonesty or fraud of a person while he orshe is continuously employed by a member.

The fund is administered by the MAV with specialist claims and other insuranceassistance provided under contract byJardine Lloyd Thompson Pty. Ltd. In2005/06 the fund had 103 members and continued to offer good value formoney. Claims can be notified up to 18 months after the event - most insurersoffer a maximum of six months and manyeven less.

From 1 July 2005 all council members weresubject to a minimum sum insured of$500,000 each and every claim. All memberswere subject to an excess of $1,500.

RESULTSThe result for the 2005/06 financial yearwas an operating surplus of $203,881(2005 deficit $238,289). This majorturnaround in the result from 2005 is due to the MAV Insurance Committeerestructuring the fund, resulting in anincrease in the minimum sums insured forcouncil members to $500,000, as well asthe risk management effort by membersresulting in lower claims.

The net asset position (equity) of the fundhas improved to $311,697 from $107,816in 2005.

The introduction of Australian equivalents toInternational Financial Reporting Standards(AIFRS) has led to a significant increase inthe reporting responsibilities for the fund. In addition, the introduction of AIFRS hascaused the fund’s net asset (equity) positionto reduce by $39,000. This reduction is caused by the additional risk marginrequired when calculating provision forclaims. Details of the cause and effect of these changes are at note 2(o) in thefinancial statements.

CLAIMSThere were two claims notified during the2006 financial year. The total claims cost of $96,969 (2005 $352,786) was asignificant improvement over previous years.Both claims related to cash handling.

It is imperative that management ensure stronginternal controls are in place within theirorganisation and that internal auditors arechecking that these controls are appropriate,robust and are working effectively.

REINSURANCEThe fund reinsures with Swiss Re for a suminsured cover of $500,000. The fund carriesthe first $100,000 of each claim with SwissRe taking the risk over the next $400,000.Where a member requests cover above$500,000 the fund facilitates this requestswith Swiss Re for facultative insurance. A number of members have cover in excess of $1 million.

ACTUARYThe MAV Insurance Committee hasappointed an independent actuary toprovide actuarial advice and assistance in relation to the fund. Due to the size of the fund formal actuarial reviews areundertaken every two years which is lessoften than occurs for Civic Mutual Plus. The last actuarial review was undertaken in December 2004.

PREMIUMSIn the 2006 financial year the fund introduceda minimum sum insured of $500,000, eachand every claim, for its council members. Thiswas due in part to market conditions as wellas the level of losses caused by fraud withinmember councils.

The fund had managed to maintainpremiums at the same level over many yearswith only moderate increases for the 2004and 2005 years. This had occurred eventhough the fund has had to bear largeincreases in reinsurance premium and asignificant increase in claims.

As a result of the increase to the sumsinsured, premiums also increased for councilmembers. Premiums and sums insured fornon-council members were maintained.

Reinsurance premiums also increasedsignificantly for the 2006 year. The ability ofthe fund to protect its members againstsignificant increases in reinsurance in thefuture has been compromised in recent yearsby an adverse claims experience.

It is pleasing to note that claims for the 2006financial year have reduced significantly andthis should have a favourable impact onfuture reinsurance premiums and thereforefuture member premiums

RISK MANAGEMENT

There is no doubt that good riskmanagement practices can be appliedeffectively to contain premium levels. This is particularly the case when seeking annualquotations on price and scope of coverfrom re-insurers to the fund. The fund’sefforts to assist members to improve riskmanagement practices had a positiveimpact on claims.

Information obtained in recent risk reviewsresulted in a better understanding ofmembers’ risks and helped to identify the types of risk management programsrequired within their organisations. In particular we believe that the fund’sencouragement of the member auditcommittees to get involved in the riskmanagement function has provided greaterawareness about the challenges of dealingwith fraud and crime.

Through the collaborative effort of fundmembers we have significantly improved theeffectiveness of the controls employed withinmember organisations, thereby lowering risk.A continuation of this trend will see asignificant improvement to the fund’sreinsurance purchasing power in future years.


MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND

062250 MAV 2006 ARs FA 21/12/06 12:59 PM Page 18


GENERAL INSURANCE BROKING For many years the Municipal Association of Victoria operatedan insurance broking business for the local government sectorcalled ‘MAV Insurance Broking Services’. An agreementbetween the Municipal Association of Victoria and Jardine LloydThompson (JLT) was signed on 17 July 1987 whereby JLTagreed to pay certain fees to MAV, in consideration of the useof the business name ‘MAV Insurance Broking Services’, theopportunity to earn brokerage on insurance contracts for clientsintroduced by MAV and the accessing of certain information.

Subsequently, in June 1993, the MAV agreed to remove therequirement for JLT to trade as “MAV Insurance BrokingServices”, but all other provisions of the 1987 agreementremained.

The MAV receives commission from JLT for the duration of theagreement. The commission is calculated at the rate of 22.5%per annum of all fees payable to JLT by underwriters, insurersand clients in respect of clients introduced by the MAV and inrespect of all clients which are local government bodies, as wellas 22.5% of the related investment income.

During the 2005/06 financial year the MAV receivedcommission under this agreement from the following insurancebusiness lines:

2006 2005

Liability $ 225,000 $ 225,000

Property $ 550,000 $ 493,000

Other $ 472,865 $ 413,000

TOTAL COMMISSION $1,247,865 $1,131,000

Investment Income $68,300 $60,000

TOTAL $1,316,165 $1,191,000


CIVIC WORKERS PLUSA challenge was issued by the chief executive officers of MAVmembers to the MAV to establish a workers’ compensation self-insurance scheme for the benefit of Victorian local government.The level of self-insurance in local government across Australiahas grown in recent years, with workers’ compensation self-insurance schemes now operating in Queensland, New SouthWales, South Australia and Western Australia.

These schemes have substantially reduced the cost of workerscompensation to councils and improved risk managementpractices and return-to-work statistics. The MAV stronglybelieves that a similar scheme in Victoria will offer councilssubstantial benefits, including occupational health and safety, areduction in claims frequency and severity, improved claims andinjury management and consequent cost savings.

The MAV previously made an application for self-insurance tothe Victorian WorkCover Authority (VWA) in 1996/97 andagain in 2002. The latter was deferred while the VictorianWorkCover Authority undertook a review of the scheme as awhole and the self-insurance scheme in particular. Thosereviews were completed in 2005/06.

The MAV commenced work to submit a new application to theVWA. With the knowledge gleaned from the previous applicationprocess and the benefit of consultation with the VWA, the MAV isconfident that the timing of a new application is appropriate andthat all the requirements of the VWA can be satisfied.

Most of the research and consultation with councils that wasconducted previously is still relevant and the general structureof the proposed self-insurance scheme, to be known as CivicWorkers Plus (CWP), is not intended to alter.

In the coming year the MAV will provide councils with acomprehensive proposal setting out full details of the proposedscheme and will conduct an information session. It is expectedthat councils will be required to signal their participation orotherwise in the scheme during that time.

In addition, it is planned that a statewide risk managementsystem will be implemented across the sector to ensure allcouncils, their staff and councillors are protected as far aspossible from the potential of accident and personal liability.

062250 MAV 2006 ARs FA 21/12/06 12:59 PM Page 20


GOVERNANCE


MAV INSURANCE COMMITTEE

MAVIC has oversight for the operation of the insurance schemes,and monitors MAV’s compliance with its Australian FinancialServices Licence (AFSL). It is comprised of members with technicalinsurance skill and knowledge and representatives of the MAV Boardand local government.

MAV INSURANCE COMMITTEE SITTING FEES

The MAV makes provision for independent committee members toreceive a sitting fee for each meeting attended.

In 2005/06 the sitting fee was:

• Chair: $750• Independent Committee members: $500

In addition, an allowance of $1,030 was paid to the independentcommittee members for attendance at other insurance relatedmeetings, such as the Claims and Technical Committee.

GOVERNANCE STRUCTURE FOR MAV INSURANCE

MUNICIPAL ASSOCIATION ACT 1907

The Act defines the purpose of the MAV and establishes theMAV as a corporation with perpetual succession, and requires it to provide and manage a public liability scheme for local government and empowers it to establish a fidelityinsurance fund.

BOARD OF MANAGEMENT AND MAV RULES

The Board of Management has delegated authority andresponsibility for the operation of the MAV Insurance business(Civic Mutual Plus and the Municipal Officers’ FidelityGuarantee Fund) to the MAV Insurance Committee. The MAVrules provide the overarching framework for the operation ofthe fidelity fund.

DEED OF ESTABLISHMENT

The Deed sets out how the scheme is to operate as a mutualliability fund. It includes rules as to eligibility and obligations ofthe participants. It requires the formation of a managementcommittee, MAV Insurance Committee (MAVIC), and formalisesauthorities, duties and powers of delegation by the committeeand provides guidance as to the day-to-day operation of theinsurance business.

MAV INSURANCE RULES

The committee has delegated authority from the MAV Boardand is made up of 10 members of which four are independentinsurance experts, one is a council CEO, two MAV boardmembers, one a representative of LGAT and the President andCEO of the MAV. The committee oversees the day-to-dayoperations of the MAV Insurance business with the assistance of the Contract Manager.

SCHEME MANAGER

The Scheme Manager operates the liability insurance businessand provides services to the fidelity fund in accordance with theprovisions of the Scheme Management Agreement.

MAV INSURANCE - STRATEGIC OVERVIEW

MAV Insurance has established a strategic framework withinwhich Civic Mutual Plus and the Municipal Officers FidelityGuarantee Fund operate. This strategic framework, along withall related documentation and policy matters, is reviewed atleast annually.

The documentation making up the strategic frameworkincludes:

• MAV Insurance strategic plan• reinsurance management strategy• business and operational plan• scheme management agreement• operational policies.

RISK MANAGEMENT AND COMPLIANCE

In addition to the requirements of the Municipal Association Act1907, the Deed of Establishment and MAV Insurance Rules, theMAV must comply with regulations and obligations applicableto statutory and public bodies including the Information PrivacyAct 2000, Whistleblowers Protection Act 2001 and Freedom ofInformation Act 1982.

The MAV is also required to comply with the provisions of itsAustralian Financial Services Licence (AFSL). The MAV hasestablished a significant compliance and governance structureto ensure it meets its obligations under the AFSL.

This structure includes:

• compliance and risk management strategy• compliance and risk management plan• compliance and risk analysis table• disaster recovery and business continuity plan.

An electronic risk management and compliance systemoperates within MAV Insurance to ensure compliance with itsAFSL obligations. Compliance with this system is audited by theMAV’s independent internal auditor and findings are reportedto both the MAV Insurance Committee and the MAV Board ofManagement.

AUDIT COMMITTEE & INTERNAL AUDITOR

The Audit Committee is an independent committee establishedat the direction of the MAV Board of Management in 2004.The internal auditor is an external independent audit firm thatundertakes an agreed program of internal audit and AFSLcompliance.

The MAV Insurance Committee closely co-operates with theAudit Committee to ensure there is a clear understanding of theinsurance risks and the risk mitigation that occurs.

MAV INSURANCE COMMITTEE ATTENDANCE

Aug Sept Oct Dec Feb April June TOTAL

John Warburton ✔ ✔ ✔ ✔ ✔ ✔ ✘ 6/7

Ron Farrell ✔ ✔ ✔ ✔ ✔ ✔ ✔ 7/7

Cr Rod Fyffe ✘ ✔ ✘ ✔ ✘ ✘ ✔ 3/7

Allan Garcia ✔ ✘ ✔ ✘ ✘ ✘ ✔ 3/7

Cr Dick Gross ✘ ✘ ✔ ✘ ✘ ✔ ✔ 3/7

Michael Kennedy ✔ ✘ ✔ ✔ ✔ ✔ ✔ 6/7

Cr Geoff Lake ✘ ✘ ✘ ✘ ✔ ✘ ✘ 1/7

Anne Murphy ✔ ✔ ✔ ✘ ✔ ✔ ✘ 5/7

Adrian Nye ✔ ✔ ✔ ✔ ✔ ✔ ✘ 6/7

Nick Renton ✘ ✔ ✔ ✔ – – – 3/4

Rob Spence ✔ ✘ ✔ ✘ ✔ ✘ ✔ 4/7

September was the special meeting to approve financials.

062250 MAV 2006 ARs FA 21/12/06 12:59 PM Page 22

MAV INSURANCE ANNUAL REPORT 2005/06 2524 MAV INSURANCE ANNUAL REPORT 2005/06

CMP MEMBERSCOUNCILS

Alpine Shire

Ararat Rural City

Ballarat City

Banyule City

Bass Coast Shire

Baw Baw Shire

Bayside City

Benalla Rural City

Boroondara City

Brimbank City

Buloke Shire

Cardinia Shire

Casey City

Central Goldfields Shire

Colac-Otway Shire

Corangamite Shire

Darebin City

East Gippsland Shire

Frankston City

Gannawarra Shire

Glen Eira City

Glenelg Shire

Golden Plains Shire

Greater Bendigo City

Greater Dandenong City

Greater Geelong City

Greater Shepparton City

Hepburn Shire

Hindmarsh Shire

Hobsons Bay City

Horsham Rural City

Hume City

Indigo Shire

Kingston City

Knox City

Latrobe City

Loddon Shire

Macedon Ranges Shire

Manningham City

Mansfield Shire

Maribyrnong City

Maroondah City

Melbourne City

Melton Shire

Mildura Rural City

Mitchell Shire

Moira Shire

Monash City

Moonee Valley City

Moorabool Shire

Moreland City

Mornington Peninsula Shire

Mount Alexander Shire

Moyne Shire

Murrindindi Shire

Nillumbik Shire

Northern Grampians Shire

Port Phillip City

Pyrenees Shire

Queenscliffe Borough

South Gippsland Shire

Southern Grampians Shire

Stonnington City

Strathbogie Shire

Surf Coast Shire

Swan Hill Rural City

Towong Shire

Wangaratta Rural City

Warrnambool City

Wellington Shire

West Wimmera Shire

Whitehorse City

Whittlesea City

Wodonga City

Wyndham City

Yarra City

Yarra Ranges Shire

Yarriambiack Shire

OTHERAUTHORITIES

Bendigo Cemeteries Trust

Central Highlands Water

Citywide Service Solutions PtyLtd

Coliban Region WaterAuthority

Corangamite Regional LibraryCorporation

Crowlands Water Supply Co-operative

East Gippsland Water

Eastern Regional Libraries

First Mildura Irrigation Trust

Geelong Cemeteries Trust

Glenelg Region WaterAuthority

Goulburn Region ValleyWater Authority

Lower Murray Water

Melbourne Wholesale FishMarket

Municipal Association ofVictoria

North East Region WaterAuthority

Portland Coast Region WaterAuthority

Queen Victoria Market

South Gippsland RegionWater Authority

South West Water Authority

Tanjil Bren Water Co-op Ltdand Committee ofManagement - RecreationReserve

West Gippsland RegionalLibrary Corporation

Western Region WaterAuthority

Westernport Region WaterAuthority

Grampians Wimmera MalleeWater Authority

FIDELITY FUND MEMBERSCOUNCILS

VICTORIANAlpine Shire

Ararat Rural City

Ballarat City

Banyule City

Bass Coast Shire

Baw Baw Shire

Bayside City

Benalla Rural City

Boroondara City

Brimbank City

Buloke Shire

Campaspe Shire

Cardinia Shire

Casey City

Central Goldfields Shire

Colac-Otway Shire

Corangamite Shire

Darebin City

East Gippsland Shire

Frankston City

Gannawarra Shire

Glenelg Shire

Glen Eira City

Golden Plains Shire

Greater Bendigo City

Greater Geelong City

Greater Shepparton City

Hepburn Shire

Hindmarsh Shire

Hobsons Bay City

Horsham Rural City

Hume City

Indigo Shire

Kingston City

Knox City

Latrobe City

Loddon Shire

Macedon Ranges Shire

Manningham City

Mansfield Shire

Maibyrnong City

Maroondah City

Melbourne City

Melton Shire

Mildura Rural City

Mitchell Shire

Moira Shire

Monash City

Moonee Valley City

Moorabool Shire

Moreland City

Mornington Peninsula Shire

Mount Alexander Shire

Moyne Shire

Murrindindi Shire

Nillumbik Shire

Northern Grampians Shire

Port Phillip City

Pyrenees Shire

Queenscliffe Borough

South Gippsland Shire

Southern Grampians Shire

Stonnington City

Strathbogie Shire

Surf Coast Shire

Swan Hill Rural City

Towong Shire

Wangaratta Rural City

Warrnambool City

Wellington Shire

West Wimmera Shire

Whitehorse City

Whittlesea City

Wodonga City

Wyndham City

Yarra City

Yarra Ranges Shire

Yarriambiack Shire

TASMANIAN Break O’Day

Brighton

Burnie City

Central Coast

Central Highlands

Circular Head

Clarence City

Derwent Valley

Devonport City

Dorset

Flinders

George Town

Glamorgan/Spring Bay

Glenorchy City

Hobart City

Huon Valley

Kentish

Kingborough

King Island

Latrobe

Launceston City

Meander Valley

Northern Midlands

Sorell

Southern Midlands

Tasman

Waratah-Wynyard

West Coast

West Tamar

NON-COUNCILBODIES

VICTORIANEastern Regional LibrariesCorporation

Goulburn Valley RegionalLibrary Corporation

Municipal Association ofVictoria

North Central GoldfieldsLibrary Service

Victorian Water IndustryAssociation Inc.

West Gippsland RegionalLibrary Service

Whitehorse ManninghamRegional Library Corporation

Yarra Plenty Regional LibraryService

TASMANIAN

Local GovernmentAssociation of Tasmania

WATERAUTHORITIES

VICTORIAN

Central Gippsland RegionWater Authority

Central Highlands RegionWater Authority

Coliban Region Water Authority

East Gippsland Water Authority

First Mildura Irrigation Trust

Goulburn Valley WaterAuthority

Lower Murray Urban & RuralWater Authority

North East Water Authority

South Gippsland RegionWater Authority

Wannon Region Water Authority

Western Region Water Authority

Westernport Region WaterAuthority

TASMANIAN

Esk Water Authority

Rivers and Water SupplyCommission

Hobart Regional WaterAuthority

Cradle Coast Water Authority

062250 MAV 2006 ARs FA 21/12/06 12:59 PM Page 24


AFSL – Australian Financial Services Licence ALGA – Australian Local Government AssociationAPRA – Australian Prudential Regulation AuthorityASIC – Australian Securities and Investment Commission CMP – Civic Mutual Plus JLT – Jardine Lloyd ThompsonLGAT – Local Government Association of Tasmania MAV – Municipal Association of VictoriaMAVIC – Municipal Association of Victoria Insurance Committee

GLOSSARY

062250 MAV 2006 ARs FA 21/12/06 12:59 PM Page 26

26 MAV INSURANCE πANNUAL REPORT 2005/06

MAVINSURANCEFINANCIALREPORT 2006

062250 MAV 2006 ARs FA 2 21/12/06 2:25 PM Page 50

MAV INSURANCE FINANCIAL REPORT 2005/06 27

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2006

COMBINED CIVIC MUTUAL PLUS MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND

2006 2005 2006 2005 2006 2005NOTE $ $ $ $ $ $

Premium revenue 3 31,001,410 30,360,081 30,286,543 29,894,014 714,867 466,067

Catastrophe insurance expense (21,872,399) (23,128,011)(21,466,600) (22,869,187) (405,798) (258,824)

NET INCOME BEFORE CLAIMS 9,129,012 7,232,070 8,819,943 7,024,827 309,069 207,243

Claims expense 4(a) (11,106,894) (24,055,535) (11,009,925) (23,702,749) (96,969) (352,786)

Reinsurance and other recoveries 3 7,604,111 21,562,318 7,505,366 21,554,168 98,745 8,150

NET CLAIMS EXPENSE 11 (3,502,783) (2,493,217) (3,504,559) (2,148,581) 1,776 (344,636)

UNDERWRITING RESULT 5,626,229 4,738,853 5,315,384 4,876,246 310,845 (137,393)

Investment income 3 929,077 848,927 901,397 824,861 27,680 24,066

Administration and general expenses 4(b) (4,410,412) (4,568,715) (4,275,768) (4,443,753) (134,644) (124,962)

OPERATING SURPLUS (DEFICIT) 2,144,894 1,019,065 1,941,013 1,257,354 203,881 (238,289)

The accompanying notes form an integral part of these statements.

072250 MAV INS FR FA 21/12/06 2:21 PM Page 27

28 MAV INSURANCE FINANCIAL REPORT 2005/06

BALANCE SHEET AS AT 30 JUNE 2006

STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2006


2006 2005 2006 2005 2006 2005NOTE $ $ $ $ $ $

CURRENT ASSETS

Cash Assets 7(a) 21,077,195 21,490,703 20,662,556 21,138,197 414,639 352,506

Receivables 8 43,893,253 39,881,151 43,259,933 39,359,092 633,320 522,059

TOTAL CURRENT ASSETS 64,970,448 61,371,854 63,922,489 60,497,289 1,047,959 874,565

NON-CURRENT ASSETS

Receivables 8 47,967,122 51,970,077 47,967,122 51,970,077 - -

TOTAL NON-CURRENT ASSETS 47,967,122 51,970,077 47,967,122 51,970,077 - -

TOTAL ASSETS 112,937,570113,341,931111,889,611112,467,366 1,047,959 874,565

CURRENT LIABILITIES

Payables 3,180,370 3,054,772 3,117,321 2,994,159 63,050 60,613

Premiums in advance 9 30,724,013 29,975,891 30,158,800 29,503,755 565,212 472,136

Provision for claims Outstanding 10(a) 15,830,519 17,054,589 15,722,519 16,820,589 108,000 234,000

TOTAL CURRENT LIABILITIES 49,734,902 50,085,252 48,998,640 49,318,503 736,262 766,749

NON-CURRENT LIABILITIES

Provision for claims outstanding 10(a) 52,657,050 54,855,955 52,657,050 54,855,955 - -

TOTAL NON-CURRENT LIABILITIES 52,657,050 54,855,955 52,657,050 54,855,955 - -

TOTAL LIABILITIES 102,391,952 104,941,207101,655,690 104,174,458 736,262 766,749

NET ASSETS 10,545,618 8,400,724 10,233,921 8,292,908 311,697 107,816

EQUITY 10,545,618 8,400,724 10,233,921 8,292,908 311,697 107,816


Balance at beginning of year 8,400,724 7,381,659 8,292,908 7,035,554 107,816 346,105

Surplus/(deficit) from ordinary activities 2,144,894 1,019,065 1,941,013 1,257,354 203,881 (238,289)

BALANCE AT END OF YEAR 10,545,618 8,400,724 10,233,921 8,292,908 311,697 107,816



CASH FLOW STATEMENT STATEMENT FOR THE YEAR ENDED 30 JUNE 2006


2006 2005 2006 2005 2006 2005NOTE $ $ $ $ $ $

CASH FLOW FROMOPERATING ACTIVITIES

RECEIPTS

Premiums and fees 32,907,052 36,596,434 32,070,990 35,840,969 836,062 755,465

Investment income 932,222 843,766 909,248 819,011 22,974 24,755

Excesses and recoveries 12,427,791 15,318,370 12,336,046 15,294,304 91,745 24,066

PAYMENTS

Suppliers (33,141,575) (31,689,965)(32,316,835) (31,238,227) (824,740) (451,738)

Claim payments (13,538,998) (16,413,015) (13,475,090) (16,176,865) (63,908) (236,150)

NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 7(b) (413,508) 4,655,590 (475,641) 4,539,192 62,133 116,398

NET INCREASE/ (DECREASE) IN CASH HELD (413,508) 4,655,590 (475,641) 4,539,192 62,133 116,398

Cash at beginning of year 21,490,703 16,835,113 21,138,197 16,599,005 352,506 236,108

CASH AT END OF YEAR 7(a) 21,077,195 21,490,703 20,662,556 21,138,197 414,639 352,506




1. CORPORATE INFORMATION

The combined financial report of MAV Insurance for the year ended 30 June 2006 was authorised for issue in accordance with a resolution ofthe directors of the Municipal Association of Victoria (MAV) on the date shown on the attached statement by directors.

MAV Insurance is the insurance division of the MAV. The MAV is an association incorporated by an Act of the Parliament of Victoria known as theMunicipal Association Act 1907.

The nature of the operations and principal activities of MAV Insurance are the provision of public liability, professional indemnity and fidelityinsurance to its members and community groups within its council member boundaries.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial report is a general purpose financial report which has been drawn up in accordance with Australian Accounting Standards,Mandatory Professional Reporting Requirements (Urgent Issues Group Interpretations) and other relevant requirements.

The principal accounting policies adopted in preparing the financial report are stated to assist in a general understanding of the financial report.Accounting policies have been consistently applied unless otherwise indicated.

The financial report is presented in Australian dollars.

The accounts have been prepared on the accruals basis using historical costs and, except where stated, do not take into account currentvaluations of assets.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial ReportingStandards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies withInternational Financial Reporting Standards (IFRS)

This is the first financial report prepared based on AIFRS and comparatives for the year ended 30 June 2005 have been restated accordingly.Reconciliations of AIFRS equity at 1 July 2004 and 30 June 2005 and profit for 30 June 2005 to the balances reported in the 30 June 2005financial report are detailed in Note 2 (o) below.

(c) The basis of the combined report

The combined financial report relates to the insurance activities of the Municipal Association of Victoria being its controlled entities the LocalGovernment Mutual Liability Insurance Scheme (trading as Civic Mutual Plus - CMP) and the Municipal Officers’ Fidelity Guarantee Fund.

The presentation of the combined balances is for management purposes only. The two entities are separate independent legal entities.

The effects of all transactons between entities in the combined entity have been eliminated.

The financial statements of the entities are prepared for the same reporting period as the Municipal Association of Victoria, using consistentaccounting policies.

(d) Income tax

The entities are exempt from income tax, in accordance with sections 50-10 and 50-25 of the Income Tax Assessment Act 1997.

(e) Investment income

Investment income consists of interest which is recognised on a time proportionate basis that takes into account the effective yield on the financialasset and movements in unit values in cash and fixed interest funds which are carried at fair value through the income statement.

(f) Premiums

Premiums comprise amounts charged to members of the schemes for policy cover, net of amounts returned to members as bonuses. The earnedportion of premiums received is recognised as revenue. Premiums are treated as earned from date of attachment of risk. The pattern ofrecognition over the policy is based on time, which is considered to closely approximate the pattern of risks undertaken.

(g) Premiums receivable

During the month of June each year, the CMP scheme issues premium notices to scheme members. The risk attaches to the premiums in the nextaccounting period and accordingly the revenue is recognised each following year commencing 1 July. Prior to each balance date members havecommitted to participate in the scheme and the fund for the ensuing year and accordingly the premiums are disclosed in the balance sheet as‘contributions receivable’ with an offsetting liabilty described as ‘contributions billed in advance’.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006




(h) Claims

Claims incurred expense and liability for outstanding claims are recognised in respect of direct business. The liability covers claims incurred butnot yet paid, claims incurred but not yet reported, and the anticipated direct and indirect costs of settling those claims. Claims outstanding areassessed by reviewing individual claim files and estimating claims not notified and settlement costs using statistical and actuarial techniques. Theliability for outstanding claims is measured as the present value of the expected future payments, reflecting the fact that all the claims do nothave to be paid out in the immediate future. The expected future payments are estimated on the basis of the ultimate cost of settling claims,which is affected by factors arising during the period to settlement such as normal inflation and superimposed inflation.

The level of claims in the 2005 financial year was higher than normal due to the reforms to the Laws of Tort passed by the State Government ofVictoria and the deadline set for lodging claims.

Superimposed inflation refers to factors such as trends in court awards, for example increases in the level and period of compensation for injury.The expected future payments are then discounted to a present value at the reporting date using discount rates based on the investmentopportunities available to the organisation on the amounts of funds sufficient to meet claims as they became payable. Details of rates appliedare disclosed in note 16.

(i) Other financial assets

Investments are valued at net market value at balance date. Investment income includes interest received and receivable on investments andchanges in net market values of investments in cash and bond unit trusts at call. The schemes have adopted a policy of investing in secureinvestments backed by fixed interest securities of amounts and terms broadly matching its liabilities for claims and unearned contributions.

(j) Cash flows

For the purposes of the statement of cash flows, cash includes cash on hand and deposits held at call with banks and investments in cash-backed unit trusts net of outstanding bank overdrafts.

(k) Reinsurance and other recoveries receivable

Reinsurance and other recoveries receivable on paid claims, reported claims not paid, claims incurred but not reported and unexpired riskliabilities are recognised as revenue. Recoveries receivable are assessed in a manner similar to the assessment of outstanding claims. Recoveriesare measured as the present value of the expected future receipts, calculated on the same basis as the liability for outstanding claims. The levelof reinsurance and other recoveries in the 2005 financial year was higher than normal due to the reforms to the Laws of Tort passed by the StateGovernment of Victoria and the deadline set for lodging claims.

(l) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be reliably measured.The following specific recognition criteria must also be met before revenue is recognised:

(i) premiums - recognised in the period the fund is at risk

(ii) future reinsurance and other recoveries - on an accruals basis

(iii) investment income - on an accruals basis including adjustments to bring values of cash-backed unit trusts to account as investment income.

(m)Comparative figures

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

(n) Catastrophe insurance

Catastrophe insurance relates to insurance premiums paid to reinsurers in accordance with the established reinsurance strategy of the entity andin order to protect the insurance businesses from catastrophic and unforseen claims.




(o) Impact of adoption of AIFRS

The impact of adopting AIFRS on the total equity and profit as reported under previous Australian Generally Accepted Accounting Principles(AGAAP) are illustrated below.

(i) Reconciliation of total equity as presented under previous AGAAP to that under AIFRS as at 1 July 2004


NOTE $’000 $’000 $’000

TOTAL EQUITY UNDER PREVIOUS (AGAAP) 8,974,659 8,612,554 362,105

Provision for claims outstanding aa (1,593,000) (1,577,000) (16,000)

TOTAL EQUITY UNDER AIFRS 7,381,659 7,035,554 346,105

(ii) Reconciliation of total equity as presented under previous AGAAP to that under AIFRS as at 30 June 2005


NOTE $’000 $’000 $’000

TOTAL EQUITY UNDER PREVIOUS (AGAAP) 10,141,724 9,994,908 146,816

Provision for claims outstanding aa (1,741,000) (1,702,000) (39,000)

TOTAL EQUITY UNDER AIFRS 8,400,724 8,292,908 107,816

aa. Net claims

In accordance with paragraph 5.1.8 of the revised accounting standard AASB 1023 for the reporting year ending 30 June 2006 a riskmargin is required to be added to the central estimate of the present value of expected future payments. AASB 1047 requires disclosure ofthe impact of adopting this standard in the 2006 financial statements. Actuarial advice from the independent actuary to MAV Insurance hasrecommended a risk margin of 20% for the net unexpired risk liability. The risk margin has been included in accordance with AIFRS from 1July 2004 and the required adjustments are reflected in the ‘Reconciliation of operating surplus’ and the ‘Reconciliations of total equity’shown above.

(iii) Reconciliation of operating surplus for the year ended 30 June 2005


NOTE $’000 $’000 $’000

OPERATING SURPLUS/(DEFICIT) (AGAAP) 1,167,065 1,382,354 (215,289)

Net Claims aa (148,000) (125,000) (23,000)

TOTAL EQUITY UNDER AIFRS (1,019,065) 1,257,354 (238,289)

(iv) Explanation of material adjustments to the cash flow statements

There are no material differences between the cash flow statement presented under AIFRS and the cash flow statement presented under previousAGAAP.





2006 2005 2006 2005 2006 2005NOTE $ $ $ $ $ $

3. REVENUE FROM ORDINARY ACTIVITIES

REVENUES FROM OPERATING ACTIVITIES

Premiums 31,001,410 30,360,081 30,286,543 29,894,014 714,867 466,067

Reinsurance and other recoveries 7,604,111 21,562,318 7,505,366 21,554,168 98,745 8,150

TOTAL REVENUE FROM OPERATING ACTIVITIES 38,605,521 51,922,399 37,791,909 51,448,182 813,612 474,217

REVENUES FROM NON-OPERATING ACTIVITIES

Investment income 929,077 848,927 901,397 824,861 27,680 24,066

TOTAL REVENUE FROM OUTSIDE THE OPERATING ACTIVITIES 929,077 848,927 901,397 824,861 27,680 24,066

TOTAL REVENUE FROM ORDINARY ACTIVITIES 39,534,598 52,771,326 38,693,306 52,273,043 841,292 498,283

4(a)CLAIMS EXPENSES

Paid 14,529,869 17,620,147 14,306,900 17,407,261 222,969 212,886

Outstanding claims at end of financial year (10) 68,487,569 71,910,544 68,379,569 71,676,544 108,000 234,000

Outstanding claims at beginning of financial year (71,910,544) (65,475,156) (71,676,544) (65,381,056) (234,000) (94,100)

TOTAL CLAIMS EXPENSES 11,106,894 24,055,535 11,009,925 23,702,749 96,969 352,786

4(b)ADMINISTRATION & GENERAL EXPENSES

The following items have been recognised in the operating surplus (deficit):

Stamp duty 1,770,909 1,968,553 1,770,909 1,968,553 - -

Audit fees 39,960 36,090 36,960 33,300 3,000 2,790

Administration 776,047 601,294 768,107 591,247 7,940 10,047

Actuary and legal fees 253,180 202,611 237,826 176,836 15,354 25,775

Scheme management fee 1,740,316 1,590,167 1,631,966 1,503,817 108,350 86,350

Scheme contribution to excess (170,000) 170,000 (170,000) 170,000 - -

TOTAL EXPENDITURE 4,410,412 4,568,715 4,275,768 4,443,753 134,644 124,962

5. AUDITOR’S REMUNERATION

Amounts payable or due and payable for audit services:

AUDIT OF THE ENTITY 39,960 36,090 36,960 33,300 3,000 2,790





2006 2005 2006 2005 2006 2005$ $ $ $ $ $

6 SCHEME MANAGEMENT FEES

Included within administration and general expenses are management fees for:

Risk management and administrative services 4(b) 1,740,316 1,590,167 1,631,966 1,503,817 108,350 86,350

Claims management 4(a) 1,423,895 1,301,046 1,335,245 1,230,396 88,650 70,650

TOTAL SCHEME MANAGEMENT FEES 3,164,211 2,891,213 2,967,211 2,734,213 197,000 157,000

7 NOTES TO STATEMENT OF CASH FLOWSCOMBINED CIVIC MUTUAL PLUS MUNICIPAL OFFICERS’

FIDELITY GUARANTEE FUND2006 2005 2006 2005 2006 2005

$ $ $ $ $ $

(a) Cash at balance date as shown in the statement of cash flows isreconciled to the related items inthe financial position as follows:

Cash at bank 7,092,850 10,953,580 7,083,678 10,946,309 9,172 7,271

Other financial assets 13,984,345 10,537,123 13,578,878 10,191,888 405,467 345,235

TOTAL CASH 21,077,195 21,490,703 20,662,556 21,138,197 414,639 352,506

(b) Reconciliation of net cash used in operating activities to operating surplus/(deficit)

Surplus/(deficit) for year 2,144,894 1,019,065 1,941,013 1,257,354 203,881 (238,289)

CHANGES IN ASSETS AND LIABILITIES

(Increase)/decrease in accounts receivable 930,843 (5,618,194) 1,042,104 (5,626,708) (111,261) 8,514

Increase/(decrease) in accounts payable (137,826) 48,261 (140,263) 28,386 2,437 19,875

(Increase)/decrease in provision for reinsurance recoveries (279,266) 1,999,581 (279,266) 1,999,581 - -

Increase/(decrease) in outstanding claims (3,820,274) 6,435,390 (3,694,274) 6,295,490 (126,000) 139,900

Increase/(decrease) in unearned revenue 748,121 771,487 655,045 585,089 93,076 186,398

CASH FLOWS USED IN/FROM OPERATIONS (413,508) 4,655,590 (475,641) 4,539,192 62,133 116,398



2006 2005 2006 2005 2006 2005NOTE $ $ $ $ $ $

8 RECEIVABLESFuture reinsurance and other recoveries receivable 2(k) 78,423,222 80,695,205 78,423,222 80,695,205 - -

Discount to present value (13,146,356) (11,115,162) (13,146,356) (11,115,162) - -

65,276,866 69,580,042 65,276,866 69,580,042 - -

Premiums receivable 2(g) 24,299,302 22,241,911 23,678,049 21,722,562 621,253 519,349

Other receivables 2,284,207 29,275 2,272,140 26,565 12,067 2,710

TOTAL RECEIVABLES 91,860,375 91,851,228 91,227,055 91,329,169 633,320 522,059

Represented by:CURRENT 43,893,253 39,881,151 43,259,933 39,359,092 633,320 522,059

NON-CURRENT 47,967,122 51,970,077 47,967,122 51,970,077 - -

TOTAL 91,860,375 91,851,228 91,227,055 91,329,169 633,320 522,059

9 PREMIUMS IN ADVANCEContributions billed in advance 2(g) 30,724,013 29,975,891 30,158,800 29,503,755 565,212 472,136

10 (a) OUTSTANDING CLAIMSCentral estimate 76,331,070 77,821,049 76,241,070 77,626,049 90,000 195,000

Discount to present value (13,010,444) (10,756,547) (13,010,444) (10,756,547) - -

63,320,626 67,064,502 63,230,626 66,869,502 90,000 195,000

Claims handling costs 3,049,643 3,105,042 3,049,643 3,105,042 - -

Risk margin 10(b) 2,117,300 1,741,000 2,099,300 1,702,000 18,000 39,000

TOTAL OUTSTANDING CLAIMS 68,487,569 71,910,544 68,379,569 71,676,544 108,000 234,000

Comprising:CURRENT 15,830,519 17,054,589 15,722,519 16,820,589 108,000 234,000

NON-CURRENT 52,657,050 54,855,955 52,657,050 54,855,955 - -

TOTAL CLAIMS PROVISION 68,487,569 71,910,544 68,379,569 71,676,544 108,000 234,000

10 (b) RISK MARGIN - PROCESS FOR DETERMINING RISK MARGIN

Figures for private insurers published by APRA in October 2005 showed an average risk margin of 15.7% for public and product liabilityoutstanding claims, and 11.3% for professional indemnity. Based on these averages, and on three actuarial publications, Cumpston Sarjeant PtyLtd, the appointed actuary, recommended that risk margins be adopted to give an overall risk margin of 15% for outstanding claims, in theabsence of reinsurance. After allowing for the extent of reinsurance for each year, Cumpston Sarjeant Pty Ltd calculated risk margins for eachyear, in total being 2.4% of gross outstanding claims. They recommended a risk margin of 20% for the net unexpired risk liability. These riskmargins give a probability of approximately 75% that the provisions including the risk margins will prove adequate to meet the relevant liabilities.

10 (c) COMBINED RECONCILIATION OF MOVEMENT IN DISCOUNTED OUTSTANDING CLAIMS LIABILITY

2006 2005GROSS REINSURANCE NET GROSS REINSURANCE NET

NOTE $ $ $ $ $ $

Outstanding claims brought forward 71,910,544 69,580,042 2,330,502 65,475,156 63,645,325 1,829,831

Changes in assumptions (i) (1,234,000) (1,264,000) 30,000 605,000 608,000 (3,000)

Increase in claims incurred/recoveries anticipated 12,340,894 8,868,111 3,472,783 23,450,535 20,954,318 2,496,217

Incurred claims recognised in income statement 11,106,894 7,604,111 3,502,783 24,055,535 21,562,318 2,493,217

Claim payments/recoveries during the year (14,529,869) (11,907,287) (2,622,582) (17,620,147) (15,627,601) (1,992,546)

Outstanding claims carried forward 68,487,569 65,276,866 3,210,703 71,910,544 69,580,042 2,330,502

(i) Significant changes in assumptions relate to the actuarial reassessment of future investment earnings and the average delay in reinsurance receipts.






11 NET CLAIMS INCURRED2006 2005

CURRENT YEAR PRIOR YEAR TOTAL CURRENT YEAR PRIOR YEAR TOTAL$ $ $ $ $ $

COMBINED

Gross claims and related expenses - undiscounted 20,858,271 (7,497,481) 13,360,790 22,178,205 (55,143) 22,123,062

Discount (3,995,548) 1,741,652 (2,253,896) (3,396,298) 5,328,771 1,932,473

Gross claims and related expenses - discounted 16,862,723 (5,755,829) 11,106,894 18,781,907 5,273,628 24,055,535

Reinsurance and other recoveries - undiscounted (17,342,365) 4,875,876 (12,466,489) (17,300,332) (873,633) (18,173,965)

Discount 3,212,803 1,649,575 4,862,379 1,431,914 (4,820,267) (3,388,353)

Reinsurance and other recoveries - discounted (14,129,562) 6,525,451 (7,604,111) (15,868,418) (5,693,900) (21,562,318)

NET CLAIMS INCURRED 2,733,161 769,622 3,502,783 2,913,489 (420,272) 2,493,217

CIVIC MUTUAL PLUS

Gross claims and related expenses - undiscounted 20,761,302 (7,497,481) 13,263,821 21,825,419 (55,143) 21,770,276

Discount (3,995,548) 1,741,652 (2,253,896) (3,396,298) 5,328,771 1,932,473

Gross claims and related expenses - discounted 16,765,754 (5,755,829) 11,009,925 18,429,121 5,273,628 23,702,749

Reinsurance and other recoveries - undiscounted (17,243,620) 4,875,876 (12,367,744) (17,292,182) (873,633) (18,165,815)

Discount 3,212,803 1,649,576 4,862,379 1,431,914 (4,820,267) (3,388,353)

Reinsurance and other recoveries - discounted (14,030,817) 6,525,452 (7,505,366) (15,860,268) (5,693,900) (21,554,168)

NET CLAIMS INCURRED 2,734,937 769,623 3,504,559 2,568,853 (420,272) 2,148,581

MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND

Gross claims and related expenses - undiscounted 96,969 - 96,969 352,786 - 352,786

Discount - - - - - -

Gross claims and related expenses - discounted 96,969 - 96,969 352,786 352,786

Reinsurance and other recoveries - undiscounted (98,745) - (98,745) (8,150) - (8,150)

Discount - - - - - -

Reinsurance and other recoveries - discounted (98,745) - (98,745) (8,150) - (8,150)

NET CLAIMS INCURRED (1,776) - (1,776) 344,636 - 344,636


12.CLAIMS DEVELOPMENT TABLE - CIVIC MUTUAL PLUS

ACCIDENT YEAR 2002 2003 2004 2005 2006 TOTALNOTE $ $ $ $ $ $

GROSS ESTIMATE OF ULTIMATE CLAIMS COSTAt end year of accident 21,666,297 20,194,583 20,602,497 18,375,690 19,426,057

One year later 18,851,675 18,948,794 18,799,966 17,546,887

Two years later 17,899,824 16,345,749 16,772,897

Three years later 25,953,475 14,715,087

Four years later 21,240,415

Current estimate of cumulative claims cost 21,240,415 14,715,087 16,772,897 17,546,887 19,426,057 89,701,343

Cumulative payments (9,792,256) (6,671,767) (3,336,218) (1,510,256) (183,631) (21,494,128)

Outstanding claims - undiscounted 11,448,159 8,043,320 13,436,679 16,036,631 19,242,426 68,207,215

DISCOUNT (14,320,204)

Claims handling expense 2,728,289

2001and prior 11,764,269

TOTAL GROSS OUTSTANDING CLAIMS 10(a) 68,379,569

MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND - TOTAL GROSS OUTSTANDING CLAIMS 10(a) 108,000

COMBINED GROSS OUTSTANDING CLAIMS 10(c) $68,487,569

NET ESTIMATE OF ULTIMATE CLAIMS COST

At end year of accident - 2,035,718 3,048,847 2,125,606 2,182,437

One year later 700,829 1,667,854 2,431,922 1,847,897

Two years later 741,020 991,622 1,245,405

Three years later 2,184,106 1,156,060

Four years later 1,409,752

Current estimate of cumulative claims cost 1,409,752 1,156,060 1,245,405 1,847,897 2,182,437 7,841,552

Cumulative payments (416,581) (824,042) (516,235) (591,620) (166,323) (2,514,801)

Outstanding claims - undiscounted 993,171 332,018 729,170 1,256,277 2,016,114 5,326,750

DISCOUNT (2,201,459)

Claims handling expense 213,070

2001 and prior (235,658)

TOTAL GROSS OUTSTANDING CLAIMS - CIVIC MUTUAL PLUS 3,102,703

MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND - TOTAL NETOUTSTANDING CLAIMS 108,000

COMBINED NET OUTSTANDING CLAIMS 10 (c) $3,210,703






13 FINANCIAL INSTRUMENTS INTEREST RATE RISK EXPOSURE

The Group’s exposure to interest rate risk and the effective average interest rate for the classes of financial assets are set out below:


NON-INTEREST FLOATING NON-INTEREST FLOATING NON-INTEREST FLOATING EARNING INTEREST RATE EARNING INTEREST RATE EARNING INTEREST RATE

2006$ $ $ $ $ $

FINANCIAL ASSETS

Bank - 7,092,850 - 7,083,678 - 9,172

Cash investments - 13,984,345 - 13,578,878 - 405,467

Receivables 91,860,375 - 91,227,055 - 633,320 -

TOTAL FINANCIAL ASSETS 91,860,375 21,077,195 91,227,055 20,662,556 633,320 414,639

Weighted average interest rate 5.6% 5.6% 5.6%

2006

FINANCIAL LIABILITIES

Outstanding claims 68,487,569 - 68,379,569 - 108,000 -

Unearned premiums/subscriptions 30,724,013 - 30,158,800 - 565,212 -

Accounts payable 3,180,370 - 3,117,322 - 63,050 -

TOTAL FINANCIAL LIABILITIES 102,391,952 - 101,655,691 - 736,262 -

Weighted average interest rate 0% 0% 0%

2005

FINANCIAL ASSETS

Bank - 10,953,580 - 10,946,309 - 7,271

Cash investments - 10,537,123 - 10,191,888 - 345,235

Receivables 91,851,228 - 91,329,169 - 522,059 -

TOTAL FINANCIAL ASSETS 91,851,228 21,490,703 91,329,169 21,138,197 522,059 352,506

Weighted average interest rate 5.8% 5.8% 5.4%

2005

FINANCIAL LIABILITIES

Outstanding claims 71,910,544 - 71,676,544 - 234,000 -

Unearned premiums/subscriptions 29,975,891 - 29,503,755 - 472,136 -

Accounts payable 3,054,772 - 2,994,159 - 60,613 -

TOTAL FINANCIAL LIABILITIES 104,941,207 - 104,174,458 - 766,749 -

Weighted average interest rate 0% 0% 0%

The carrying amounts of financial assets and financial liabilities represent their approximate net fair value.

All maturity dates are within 12 months.



COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

14. INSURANCE CONTRACTS - RISK MANAGEMENT

Risk management objectives and policies for mitigating insurance risk

The Association’s local government mutual liability insurance scheme (trading as Civic Mutual Plus) is established by legislation contained in theMunicipal Association Act 1907. Membership is available to local government councils and prescribed bodies. The scheme operates in Victoriaand Tasmania to provide a claims management service to members in respect of their potential and actual liabilities. A member may seekindemnity from the scheme in respect of a claim.

Actuarial models, using information from the scheme’s management information systems are used to confirm contributions and monitor claimpatterns. Past experience and statistical methods are used as part of the process.

The principal risk is that the frequency and severity of claims is greater than expected. Civil liability risk events are, by their nature, random, andthe actual number and size of events during any one year may vary from those estimated using established statistical techniques.

Objectives in managing risk arising from insurance and policies for mitigating those risks

The scheme has an objective to control insurance risk, thereby reducing the volatility of its operating surplus. In addition to the inherentuncertainty of civil liability risks, which can lead to variability in the loss experience, operating surpluses can also be affected by external factors,such as competition and movements in asset values.

The scheme relies on a strong relationship with its members and actively encourages them to adopt practices of risk management that reduce theincidence of claims to the scheme.

Reinsurance strategy

The scheme adopts a conservative approach towards management of risk and does this by utilising various risk transfer options. The MAVInsurance Committee determines the level of risk, which is appropriate for the scheme, having regard to ordinary concepts of prudence andregulatory constraints. The risk transfer arrangements adopted by the scheme include the utilisation of commercial reinsurance / excessarrangements.

These risk transfer arrangements assist the scheme to limit exposures to large single claims and catastrophic events. These programs arereviewed each year to ensure they continue to meet the risk needs of the scheme.

Terms and conditions of membership

Membership of the scheme is offered to eligible bodies and renewed annually on 30 June. Payment of the annual contribution confirmscontinuation of membership. Termination of membership is subject to at least 90 days written notice of intention as laid out by the scheme rules.Once a claim is accepted and indemnity granted, each claim is handled individually, based on the circumstances peculiar to the claim.

Product features

The scheme operates in Victoria and Tasmania. Should a claim be accepted the scheme provides indemnity to the member in respect of theircivil liabilities for $300 million public/products liability and $200 million professional indemnity insurance, subject to any excess, for any claimincurred anywhere throughout the world.

Operating surpluses arise from the total contributions charged to members less the amounts paid to cover claims and the expenses incurred bythe scheme.

Management of risks

The key insurance risks that affect the scheme are contribution risk, and claims experience risk.

Contribution risk is the risk that the scheme does not charge contributions appropriate for the indemnity cover it provides. The scheme partiallymanages contribution risk through a proactive approach to risk management that addresses all material risks, both financial and non-financial.There are no specific terms and conditions that are expected to have a material impact on the financial statements.

Claims experience risk is managed through the non-financial risk assessment and risk management and reinsurance management process.Claims experience risk is monitored on an ongoing basis to ensure that any adverse trending is addressed. The scheme is able to reduce theclaims experience risk of severe losses through the reinsurance program and by managing the concentration of insurance risks.

Concentration of insurance risks

Insurance risk is managed by taking a long-term approach to setting the annual contribution rates that eliminates price fluctuations, throughappropriate investment strategy, reinsurance and by maintaining an active statewide risk management profile. It is vital that the scheme keepsabreast of changes in the general economic, legal and commercial environment in which it operates.

Interest rate risk

The reinsurance indemnity contracts contain no clauses that expose the scheme directly to interest rate risk. The reinsurance contracts are long-term arrangements, reviewed and payable annually.



Credit risk

The scheme is exposed to credit risk on insurance contracts as a result of exposure to reinsurers. The credit risk to reinsurers is managed throughthe scheme regularly monitoring the financial rating of the reinsurers both prior to and during the reinsurance program.

15. ACCOUNTING ESTIMATES AND JUDGEMENTS

The scheme makes estimates and judgements in respect of certain key assets and liabilities. Estimates and judgements are continually reviewedand are based on past experience and other factors, including expectations of future events that are believed to be reasonable under thecircumstances. The key areas in which critical estimates and judgements are applied are described below.

a) Estimation of outstanding claims liability

Provision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claimsincurred but not yet reported to the scheme.

The scheme takes all reasonable steps to ensure that it has appropriate information regarding its claims exposure. However, given the uncertaintyin establishing claims provisions, it is likely that the final outcome may be different from the original liability established.

Provisions are calculated gross of all recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers and anythird party.

The determination of an appropriate outstanding claims provision involves:

(i) establishing a case estimate for each reported claim at year-end taking into account legal advice where appropriate on larger claims

(ii) a development allowance of 25% on the net outstanding balance of reported claims and confirmed as appropriate by the actuary

(iii) allowance for incurred but not reported claims as confirmed by the actuarial review on 30 June 2006

(iv) an allowance of 4% for claim settlement expenses, as assumed by the actuary

(v) allowances for discount at 5.9%, as assumed by the actuary

(vi) a risk margin of 20% of net outstanding claims after the effect of reinsurance has been applied, as assumed by the actuary.

Details of specific actuarial assumptions used in deriving the outstanding claims liability at year-end are detailed in note16.

b) Assets arising from reinsurance contracts

Assets arising from reinsurance contracts were estimated for each accident year, from the payments to date and estimated outstanding claimshistory at 30 June 2006, taking into account the reinsurance terms applying to that accident year. In calculating the present value of reinsurancerecoveries, allowance was made for an average recovery delay of 3.5 months, as assumed by the actuary.

In accordance with the actuarial recommendations an allowance was made for non-recoveries from relevant insurers.

16. ACTUARIAL ASSUMPTIONS AND METHODS

Actuarial assumptions

The following assumptions have been made in determining the outstanding claims liabilities:

2006 2005

KEY ACTUARIAL ASSUMPTIONS

Case estimate development 25.0% 25.0%

Wage inflation 4.0% 4.0%

Claim administration expense 4.0% 4.0%

Superimposed inflation 2% 2%

Discount rate 5.9% 5.2%

Risk margin 20% 20%





16. ACTUARIAL ASSUMPTIONS AND METHODS (continued)

Process used to determine actuarial assumptions

A description of the processes used to determine the above key actuarial assumptions is provided below.

Civic Mutual Plus (CMP) has provided public and professional indemnity insurance to local government bodies in Victoria and Tasmania since30/9/1993. The actuary was supplied aggregate data on claims from each year’s cover at each balance date, together with details for eachclaim at various dates, including 30/6/2006. The individual claim payments and case estimates reconciled closely with totals in CMP’s financialstatements for each year of cover. The actuary made estimates of gross outstanding claims with four differential actuarial methods - payments perperson incurred, developed claims incurred, developed case estimates and estimated claims incurred but not reported. The actuary selected thelast of these methods, including a 25% allowance for case estimate development, for use in estimating outstanding claims. Payments wereprojected with a payment pattern, based on past experience, assuming an average delay of 4.8 years from the middle of the accident year.Estimates of outstanding non-reinsurance recoveries were made by a recoveries per person insured method.

During the 2001 financial year two of the participants in the scheme’s reinsurance program, FAI/HIH and Independent, were placed into thehands of liquidators. These companies were part of the reinsurance programs in fund years from 1994 to 1998. The MAV Insurance Committeecontinues to constantly monitor the position with a view to ensuring that the scheme takes all reasonable steps to protect its position and tomaximise potential recoveries.

The liquidators of FAI/HIH have indicated that an initial distribution to creditors will occur soon. However, no final date or confirmation of anyamount is available. In accordance with the committee’s prudent approach to reserving within the actuarial calculation of the central estimate ofreinsurance recoveries, the estimated future recoveries from FAI/HIH were assumed to be 10% of the debt due. During the financial year, TheUnderwriting Insurance Company of the UK, a company under management runoff, responded positively to the concerns about their ability tomeet their liabilities to CMP. Within the actuarial calculation of the central estimate of reinsurance, the estimated future recoveries from TUICwere assumed to be 75% of the debt due.

Estimates of reinsurance recoveries were made from projected gross payments and non re-insurance recoveries, allowing for the differentinsurance treaties applying to each year and assuming an average 3.5 months delay in the receipt of reinsurance recoveries. Recoveries from FAI/HIH were assumed to be 10% and Independent were assumed to be zero. Recoveries from TUIC were assumed to be 75% of those due.Based on the yields of medium term Commonwealth bonds at 30/6/2006 the discount rate was assumed to be 5.9% pa. Based on the actualexpense rates of CMP, claim administration expenses were assumed to be 4% of the net claim payments.

Based on averages for private insurers by APRA, and on three actuarial publications the actuary recommended that risk margins be adoptedintended to give an overall risk margin of 15% for outstanding claims, in the absence of reinsurance. After allowing for the extent of reinsurancefor each year the actuary calculated risk margins for each year, in total being 2.4% of gross outstanding claims liabilities. The actuary consideredthat these risk margins are likely to give a probability of about 75% that the provisions including the risk margins will prove adequate to meet therelevant liabilities. Unexpired risk liabilities were estimated by bringing gross claim incurred estimates for each of the 10 years to 30/6/2003 to 2006/07 values using Victorian average weekly earnings adjusting for membership changes and fitting a trend line to the 10 years. The trendvalue for 2002/03 was projected to 2006/07, assuming a 20% drop due to tort reform, superimposed inflation at 2% pa and populationgrowth at 1% pa. After allowing for reinsurance costs and a risk margin of 20%, no premium deficiency was apparent.

VARIABLE IMPACT OF MOVEMENT IN VARIABLE

Wage inflation Expected future payments are inflated to take account of inflationary increases. An increase or decrease in the assumed levels of economic inflation would have a corresponding impact on claims expense, with particular reference to longer tail claims.

Superimposed inflation In addition to the general economic inflation rate an amount is superimposed to take account of non-economic inflationary factors, such as increases in court awards. Such rates of superimposed inflation are specific to the model adopted. An increase or decrease in the assumed levels of superimposed inflation would have a corresponding impact on claims expense, with particular reference to longer tail claims.

Discount rate The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money. An increase or decrease in the assumed discount rate will have an opposing impact on total claims expense.

Case estimate development Case estimates are initially established in accordance with established guidelines and by reference to the known facts. Where new information becomes available the initial case estimate will change. This development movement is applied to open claims and will have a corresponding impact on claims expense.



16. ACTUARIAL ASSUMPTIONS AND METHODS (continued)

CIVIC MUTUAL PLUS

Variable Current Rate Change Gross of Operating Total accumulatedvariable reinsurance surplus funds after the impact

to of applying variable

% % $ $ $

Base value at 30 June 2006 14,222,250 1,941,013 10,233,921

Interest rate pa 5.9% 8.9% 19,112,000 1,979,000 10,272,000

2.9% 8,433,000 1,930,000 10,223,000

Inflation rate pa 4.0% 7.0% 13,985,000 1,917,000 10,210,000

2.9% 14,459,000 1,964,000 10,257,000

TUIC recovery 75.0% 100.0% 14,938,000 3,743,000 12,036,000

50.0% 13,506,000 139,000 8,432,000

Contribution increase 4.0% 5.0% 14,222,000 1,941,000 10,234,000

3.0% 14,222,000 1,941,000 10,234,000

17. CONTINGENT ASSET

Reinsurance share of profit

CMP, in conjunction with similar local government self insured mutual liability schemes around Australia, has entered into a profit-sharingarrangement with its primary reinsurers, based on the national local government claims experience. The arrangement enables any surplus per eachyear over the five-year reinsurance period to be shared between the various schemes and the reinsurers on a proportional basis.

No amount is payable until June 2007 and some of the surplus can only be redeemed on the commutation of the reinsurance policy. The actuary has calculated the potential value of the CMP scheme’s profit share for the first three years of the five-year program, at balancedate, to be $7.139million (2005 $3.4 million)

There is significant potential for future events to impact the profit share receivable and a number of variable factors involved in the finaldetermination of the scheme’s profit share. Accordingly, the directors are not satisfied at 30 June 2006 that the potential benefit is an asset that is probable of receipt and reliably measurable. The financial statements do not include any value attributable to the potential share of profit.The position will be monitored on an annual basis.

18. CONTINGENT LIABILITY

MAV Insurance provides cover to members up to a sum insured of $2 million each and every claim and then arranges for insurance cover foreach member with various insurers up to a sum insured of $300 million each and every claim. The $2 million sum insured provided by MAVInsurance is reinsured through the international reinsurance market. There is uncertainty as to whether a portion of the premium paid to overseasbased insurers for the insurance cover provided to each member in excess of the $2 million sum insured provided by MAV Insurance is subject towithholding tax. If withholding tax is payable the amount of the withholding tax liability has been estimated at $50,000. There is significantuncertainty in relation to whether a withholding tax liability exists and if so as to the amount of any such liability.





19.RELATED PARTIES

The Municipal Association of Victoria is a body corporate established under the Municipal Association Act 1907 to provide services for and therepresentation of local government authorities in Victoria. The Association and its wholly-owned controlled entities, including MAV Insurance,trade with its members in the normal course of business and at an arm’s length basis. The discreet nature of these transactions is not material.Total expenses of $565,494 (2005 $472,000) were payable to the Municipal Association of Victoria being payment for administrative support,and overseeing the management of the insurance activities, including the conduct of bi-monthly committee meetings. Other than this there wereno material related party transactions during the year.

Committee members during the year

J. Warburton (independent Chairperson from 1 August 2005)

A. Murphy (independent Chairperson up to 31 July 2005)

Cr G. Lake (MAV President) Resigned September 2006

A. Garcia (LGAT Representative)

N. Renton (independent) Resigned 31 December 2005

R. Farrell (independent)

A. Nye (independent)

M. Kennedy (CEO, Mornington Peninsula Shire Council)

R. Spence (CEO, MAV)

Cr R. Fyffe (MAV Representative)

Cr R. Gross (MAV Representative)

Key management personnel remuneration COMBINED CIVIC MUTUAL PLUS MUNICIPAL OFFICERS’

FIDELITY GUARANTEE FUND2006 2005 2006 2005 2006 2005

$ $ $ $ $ $

Independent committee members receive remuneration for meetings. Chairperson receives $750 per committee meeting and other independent committee members receive $500 per committee meeting plus $1,030 per annum for Claims and Technical Committee and other meetings.

Short-term remuneration of key management personnel 90,950 87,750 90,950 87,750 - -

Loans to committee members

No loans were made to or are payable by committee members.

Other transactions

There were no other material transactions with committee members.

Insurance

The activities of the MAV Insurance Committee members are covered by the MAV directors’ and officers’ indemnity insurance policy, effected bythe MAV.



STATEMENT BY DIRECTORS

In the opinion of the directors of the Municipal Association of Victoria:

(d) the accompanying income statement is drawn up so as to give a true and fair view of the results of Civic Mutual Plus and the Municipal Officers’Fidelity Guarantee Fund for the year ended 30 June 2006;

(e) the accompanying balance sheet is drawn up so as to give a true and fair view of the state of affairs of Civic Mutual Plus and the MunicipalOfficers’ Fidelity Guarantee Fund as at that date;

(f) at the date of this statement there are reasonable grounds to believe that Civic Mutual Plus and the Municipal Officers’ Fidelity Guarantee Fundwill be able to pay debts as and when they fall due; and

The financial statements have been made out in accordance with applicable accounting standards and other mandatory professional reportingrequirements.

Signed in accordance with the resolution of directors.

Richard Gross John ChandlerPresident Director

MelbourneOctober 2006

STATEMENT BY COMMITTEE OF MANAGEMENT

In the opinion of the members of the MAV Insurance Committee:

(a) the accompanying income statement is drawn up so as to give a true and fair view of the results of Civic Mutual Plus and the Municipal Officers’Fidelity Guarantee Fund for the year ended 30 June 2006;

(b) the accompanying balance sheet is drawn up so as to give a true and fair view of the state of affairs of Civic Mutual Plus and the MunicipalOfficers’ Fidelity Guarantee Fund as at that date;

(c) at the date of this statement there are reasonable grounds to believe that Civic Mutual Plus and the Municipal Officers’ Fidelity Guarantee Fundwill be able to pay debts as and when they fall due; and

The financial statements have been made out in accordance with applicable accounting standards and other mandatory professional reportingrequirements.

Signed in accordance with the resolution of committee members

John Warburton Rob SpenceMAV Insurance Committee Chairman MAV Chief Executive Officer

Melbourne October 2006



COMBINED FINANCIAL STATEMENTSINDEPENDENT AUDIT REPORT INDEPENDENT AUDIT REPORT TO THE MEMBERS OF LOCAL GOVERNMENT MUTUAL LIABILITY INSURANCE SCHEME ANDMUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND

Scope

We have audited the individual financial statements of the Local Government Mutual Liability Insurance scheme (‘the scheme’) and the MunicipalOfficers’ Fidelity Guarantee Fund (‘the fund’) for the financial year ended 30 June 2006 as set out on pages 27 to 43. The MunicipalAssociation of Victoria is responsible for the financial statements. We have conducted an independent audit of these financial statements in orderto express an opinion on them to the respective members of the scheme and the fund.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial reportsare free of material mis-statement. Our procedures included examination, on a test basis, of evidence supporting the amounts and otherdisclosures in the financial statements, and the evaluation of accounting policies and significant accounting estimates. These procedures havebeen undertaken to form an opinion whether, in all material respects, the financial reports are presented fairly in accordance with accountingstandards and other mandatory professional requirements (Urgent Issues Group Consensus Views) and statutory requirements in Australia so asto present a view which is consistent with our understanding of the scheme’s and the fund’s financial positions, and the results of their operationsand their cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit opinion

In our opinion,

(a) the financial statements of the scheme are properly drawn up:

(i) so as to give a true and fair view of the scheme’s state of affairs as at 30 June 2006 and its profit and cash flows for the financial yearended on that date;

(ii) in accordance with the provisions of the Trust Deed dated 31 August 1993;

(iii) in accordance with applicable accounting standards and other mandatory professional reporting requirements; and

(b) the financial report of the fund presents fairly the financial position of the fund as at 30 June 2006 and the results of its operations and its cashflows for the year then ended.

PKF R. A. Dean Partner

Chartered AccountantsA Victorian Partnership

Melbourne October 2006



OTHER INFORMATION

Legal form

MAV Insurance is the insurance division of the Municipal Association of Victoria. The Municipal Association of Victoria is an AssociationIncorporated by the Municipal Association of Victoria Act 1907.

Domicile:

Melbourne, Australia

Address of registered office:

Level 12, 60 Collins Street, Melbourne, 3000, Victoria, Australia

Principal place of business

Level 1, 468 St. Kilda Road, Melbourne 3004, Victoria, Australia

Nature of the operation and principal activities:

The Municipal Association of Victoria has the power provided to it by the Municipal Association of Victoria Act 1907 to establish Civic MutualPlus and the Municipal Officers’ Fidelity Guarantee Fund in order to provide public liability, professional indemnity and fidelity insurance to localgovernment and water authorities.

Number of employees

Nil


MAV INSURANCE 2006 ANNUAL REPORT - mav.asn.au · 4 MAV INSURANCE ANNUAL REPORT 2005/06 MAVIC...

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Transcript of MAV INSURANCE 2006 ANNUAL REPORT - mav.asn.au · 4 MAV INSURANCE ANNUAL REPORT 2005/06 MAVIC...