vhi annual report 2005 · psychology/business from university college cork, ireland. mr. collins...

CONTENTS

Board of Directors 3

Chairman’s Review 7

Operations Review 11

Executive Management Team 21

Report of the Directors 25

Report of the Auditors 29

Accounts 33

Comparative Results and Graphs 49

Gallery of Events 53

2 Vhi Healthcare Annual Report & Accounts 2005

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BOARD OFDIRECTORS

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1 BERNARD COLLINS (CHAIRMAN)

Bernard Collins is Chief ExecutiveOfficer of Lifemed ConsultingLimited. Mr. Collins received a B.A.Honours in Applied IndustrialPsychology/Business fromUniversity College Cork, Ireland. Mr.Collins maintains positions at boardlevel on many other companies inIreland and in the USA. He servedfor 10 years as Vice President ofInternational Operations at BostonScientific Corporation until 2003. (*)

2 PAT FARRELL, MMII

Chief Executive, Irish BankersFederation;Member, Financial ServicesConsultative Industry Panel,Chairperson, Audit Committee (#)

3 KEVIN MOYNIHAN, FCA

Principal, Kevin G. Moynihan &Company Chartered Accountants;Chairman, Killarney TechnologyInnovation Centre 2003/2005;Chairman, Chambers of Commerceof Ireland - Taxation Committee1993-95; Chairman, SouthernRegion Chambers of Commerce ofIreland 1992/93; President,Killarney Chamber of Commerce1991-93.

4 JOSEPH O'LEARY, FCCA

Partner – Patrick McNamara &Associates – Auditors, Accountantsand Taxation Consultants; PastMember of the National Council forEducation Awards (N.C.E.A.); IrishRegion President of the CharteredAssociation of Certified Accountants(A.C.C.A.) 1994/95; Past Member ofthe Irish Region Executive of theChartered Association of CertifiedAccountants.

5 LIAM TWOHIG, B.COMM, FCA

Managing Partner, Baker TillyO’Hare, Chartered Accountants andBusiness Advisors; Past President,German-Irish Chamber of Industryand Commerce; Member, Instituteof Chartered Accountants inIreland, Disciplinary AppealsCommittee. (#)

6 HUMPHREY MURPHY

Managing Director, Global StainlessLtd.; Member of Governing Body,University College Cork 1997-2000,2000-2003, 2004 to date; ChairmanUCC Audit Committee 2000-to date;Member, Cork Airport Authority;Member of Cork Chamber ofCommerce. (*)

7 BARONESS JULIA NEUBERGER, DBE

Liberal Democrat member, House ofLords; Trustee Booker PrizeFoundation; Honorary Fellow, RoyalCollege of Physicians; Former ChiefExecutive, King’s Fund; FormerRabbi, South London LiberalSynagogue; Consultant, CloreDuffield Foundation; Member,Advisory Committee, Trustees ofSainsbury Centre for Mental Health;Member, Central Ethical ComplianceGroup, Unilever; Former Member,Medical Research Council. (**)

8 JIM KELLY

Director, KBC Asset Management;Chairman, Fold HousingAssociation Ireland; Fellow,Pensions Management Institute;Former Chief Executive, MercerHuman Resource Consulting;Founder Director, Pension &Investment Consultants Ltd.;Former Chairman, RetirementPlanning Council of Ireland. (**)

9 CHRISTY COONEY

Master of Education;Assistant Director General FÁS;Director , Páirc an ChrócaighTeoranta; Member, BroadcastingComplaints Commission; Chairman,GAA Council 2001-2003.

10 GILLIAN BOWLER FMII, FMGT

Chairman, Budget Travel Ltd.;Chairman, Failte Ireland; Chairman,Irish Life & Permanent, Plc.; Non-Executive Director, Grafton Group;Non-Executive Director, ClearChannel Ireland; Board Member,Michael Smurfit Graduate School ofBusiness, UCD; Board Member,Social Innovations Ireland. (*)

11 PATRICIA ENNIS, B.ARCH, FRIAI

Managing Director, Kildare Architects Ltd. (#)


(#) denotes Member of Audit Committee(*) denotes Member of Remuneration Committee(**) denotes new appointments to the Board

Mr Phil Flynn stepped down from the Board in February 2005. Mr Flynn was first appointed to the Board in May 1996.

Moscow, Russia.


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CHAIRMAN’SREVIEW





The Dynamic HealthcareEnvironment in Ireland The Healthcare environment in Irelandis currently on the cusp of substantialchange. Decisions taken in recent yearsby the Government to reform andreshape the provision, delivery,regulation and funding of healthcareare now impacting on all organisationsinvolved in the healthcare industry. The Government has signalled clearlythat it intends to separate policy fromoperational issues and in doing so hasestablished the Health ServicesExecutive to manage the operationalissues. The Government has alsoindicated that it wants to see theprivate sector more involved in theprovision of healthcare services and tothis end has provided generous taxincentives to developers to build newprivate hospitals. This policy will resultin the creation of significant amounts ofnew capacity. Thirdly, the Governmenthas also stated that it intends tochange the nature of its relationshipswith the provision of private healthinsurance and has announced itsintention to bring appropriatelegislation before the Oireachtas in theautumn to effect a change in VhiHealthcare's corporate structure.These significant changes inGovernment policy, together withincreased competition in themarketplace and enhanced regulationby the Health Insurance Authority andthe Irish Financial Services RegulatoryAuthority will dictate the direction ofthe healthcare industry in theimmediate future.

Vhi Healthcare is committed tosupporting the improvement ofhealthcare services and to doing so inthe most cost-effective manner. Ourprimary goal is to represent theinterests of our members in these twinobjectives while running the businesseffectively.

In my review I intend to focus on threeissues which are central to the futureviability of this business:

1. The decision of the Board to charge a true community rated price to members at the premium rate review on 1st September 2004.

2. The absolute necessity for the immediate introduction of Risk Equalisation.

3. The future corporate structure of Vhi Healthcare.

These issues are inter-related. In theOperations Review the Chief Executivehas set out the details of what has beena successful, highly innovative butchallenging year for the business.

Premium Rate ReviewSeptember 2004It has been consistent Governmentpolicy since 1994 that a RiskEqualisation fund was essential oncecompetition entered this CommunityRated market. Competition arrived in1996 and a Risk Equalisation fundshould have been established in 1998but the decision to do so was deferredby Government. In the interveningyears the Board of Vhi Healthcare haspassed on to its members higherpremium rate increases than shouldhave been necessary in order tomaintain the financial viability of thebusiness and the stability of the overallmarket. The members of VhiHealthcare were carrying the cost ofthe community health risk while ourcompetitor was reaping large windfallprofits through only carrying the costsassociated with a younger membership.Clearly this situation was not onlyinequitable, it was also untenable overany length of time. Repeated calls forthe immediate introduction of RiskEqualisation, both to the Governmentand the Health Insurance Authority,brought no response.

At the premium rate review of 1stSeptember 2004 the Board made thedecision to charge a true communityrated premium to members on thebasis that members were entitled tosuch a rate in a community ratedmarket. The Board made this decisionin the full knowledge that this wouldresult in a material drop in profits in2004/05 and mounting losses insubsequent years unless the businesshad access to transfers from a RiskEqualisation fund. This trading patterncould be financed out of reserves for alimited timespan but in a relativelyshort period the business would ceaseto be viable.

This decision was not taken lightly bythe Board. Quite apart from theresponsibility to be fair to members theBoard was satisfied that, in acommunity rated market, the businesscould not remain viable in the longerterm unless members could enjoy agenuine community rated price. Thisrationale was clearly outlined to theMinister for Health & Children whenapproval was sought forimplementation of the relatively lowprice increase of 3% with effect from1st September 2004.

Risk EqualisationThe decision by the Tánaiste on 27 June2005 not to approve therecommendation of the HealthInsurance Authority to implement RiskEqualisation transfers is both hugelydisappointing and potentially disastrousfor the future stability of the Irishhealth insurance market. While VhiHealthcare respects that it is theTánaiste's prerogative to have the finalsay on the introduction of RiskEqualisation, it is nonethelessfrustrating that this crucial mechanismis still not in place despite the evidencepresented by the HIA to support itsimplementation. Indeed, the HIA


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recommendation follows theconclusions of many other expertgroups who have also studied thismarket e.g, the Advisory Group on RiskEqualisation established by theGovernment in 1998; the Society ofActuaries in 2002; the CompetitionAuthority in 2002; The York HealthInsurance Consortium in 2003; and FGSConsulting and DKM EconomicConsultants, both in 2005.

All of these independent reportsconcurred on several key issues, including:

• A health insurance market with openenrolment and community rating,but without Risk Equalisation, cannot be dynamically stable.

• The insurer with the higher ageprofile (Vhi Healthcare) in suchcircumstances will faceprogressively more seriousfinancial difficulties includingpressure to raise premiums as itsclient base ages.

• There will not be meaningfulcompetition since market entrantswill have no incentive to competefor most of Vhi Healthcare's older,more vulnerable clients.

• Overall market pricing will behigher than it needs to be.

• Insurers with younger age profileswill instead be incentivised toaggressively target lower risksegments, 'cherry-pick' youngerpeople, enjoy lower claim costsand earn windfall profits.

I want to take this opportunity to urgethe Tánaiste to reconsider her decisionand accept the recommendation of theHIA and put Risk Equalisation intooperation with effect from 1 January2006 as a matter of basic equity. Failureto do so will undoubtedly result in thelong term collapse of community ratingin Ireland and with it, the principle oflifelong, affordable health insurance.

The Board has written a detailed letterto the Tánaiste setting out the veryserious implications that her decisionhas, both for the members of VhiHealthcare and the continued viabilityof the business itself. This letter canbe read on our website at www.vhi.ie.The Directors have decided not to passthe cost of financing community ratingon to the members of Vhi Healthcare inthe absence of Risk Equalisation but tofinance this out of reserves for as longas this remains possible. The Boardtook time to reflect fully on the verydifficult decision which they had tomake and consulted with financial andeconomic advisers, members throughthe members advisory council, staff atall levels and others on a collective andindividual basis. The Board wereunanimous in the decision taken.

Corporate StructureVhi Healthcare was established byspecific legislation as a statutory bodyin 1957. This legislation (andsubsequent amendments) imposesunnecessary constraints on the type ofbusiness strategy which anorganisation of the current size andvitality of Vhi Healthcare should pursue.The Board of Vhi Healthcare has calledon the Government to extend thefreedom and powers of Vhi Healthcareto allow it compete more effectively andexpand the range of products andservices it provides. The Governmenthas responded positively to thisapproach. These changes can be madewithout any effective change ofownership of Vhi Healthcare.

There has been some criticismexpressed with regard to the derogationafforded to Vhi Healthcare from thenormal solvency requirements imposedon insurance undertakings. The Boardof Vhi Healthcare is on record asstating that it favours a level playingfield in all aspects of the healthinsurance market. The Minister hasindicated that she will bring forwardlegislation in September 2005 to

effectively change the corporatestructure of Vhi Healthcare to that of acommercial semi-state. While wewelcome this decision, the fact that it iscoupled with the decision not toactivate Risk Equalisation makes nosense to us. The decision not toactivate Risk Equalisation appears topostpone the date on which we will bein a situation to satisfy the solvencyrequirements imposed by IFSRA for aninsurance license. Furthermore, thereis no doubt but that, in the absence ofRisk Equalisation, Vhi Healthcare couldnot possibly furnish robust financialprojections to IFSRA, another pre-conditionfor obtaining an insurance license.

Board and Advisory GroupsI would very much like to thank myfellow Board members for theirenthusiasm and support during whathas been a very eventful year. I wouldlike to especially welcome our two newBoard members, Baroness JuliaNeuberger and Mr Jim Kelly, both ofwhom commenced office from 1February 2005. I am sure they will playa significant role in helping us face thechallenges ahead.

I would also like to acknowledge theoutstanding contribution made by MrPhil Flynn over the last nine years. MrFlynn was first appointed in May 1996and served two terms in office withdistinction until his decision to stepdown in February 2005.

Vhi Healthcare is very fortunate toreceive the support and advice providedby two voluntary committees, namelythe Members Advisory Council and theMedical Advisory Group. Both of thesecommittees play a major role inproviding expert advice andcommunication on matters thatpositively impact on our service tomembers. We greatly appreciate thetime and effort, which the members ofthese committees put in to help withthe running of our business.


Our EmployeesThe year under review presented uswith many challenges. The response ofmanagement and staff to thesechallenges has been outstanding. Itgoes without saying that the quality ofour service to customers is hugelydependent on the enthusiasm, skill andcommitment of our employees, and ispivotal to the success of theorganisation. The fact that VhiHealthcare retains almost 80% of themarket after eight years of competitionis testament to this effort.

TributeI would like to pay tribute to thecontribution made by our friend andcolleague Ms Kiran Manekar whopassed away during the year. Amember of our Software Developmentteam based in Kilkenny, Kiran is deeplymissed by her friends and colleagues atVhi Healthcare. Our sincere sympathygoes to all who knew her, andespecially to her family in India. Mayshe rest in peace.

Looking aheadVhi Healthcare is budgeting for a loss inits current financial year, which runsfrom March 2005 to February 2006.This is not due to imprudentmanagement, inefficiency or failure tocontain its costs. On the contrary, VhiHealthcare prides itself on having oneof the most efficient operating cost topremium ratios in the insuranceindustry anywhere in the world and weplan to continuously improve this ratio.The projected loss is purely and simplyattributable to the delay in theimplementation of Risk Equalisation inthis community rated market. Asstated earlier the Board took thedecision in 2004 to charge a trueCommunity Rated premium to itsmembers, even though RiskEqualisation had not beenimplemented. We implemented apremium increase of just over 3% at a

time when medical inflation wasrunning in excess of 10%. This actionwas taken by the Board to protect thelong term viability of the business andto safeguard the legitimate interest ofmembers. Current projections indicatethat claims costs will increase by 15%in the current financial year.

There is no doubt but that theimplementation of Risk Equalisation isnecessary in order to stabilise ourfinances and set us back on the road torebuilding our reserves to acommercially acceptable level. TheTánaiste's decision of 27 June 2005 hasvery serious implications for our 1.56million members and Vhi Healthcare.We would urge the Tánaiste to considerthe wider implications of the delay intriggering the Risk EqualisationScheme, which is provided for in thelegislation, and the impact this delaywill have on community rating and thestability of the private health insurance market.

I have complete faith in the skill,enthusiasm and commitment of theBoard, Management and Staff of VhiHealthcare. I have no doubt that VhiHealthcare will consolidate its positionas leader in the Irish health insurancemarket and will continue to provideIrish consumers with the mostinnovative, best value for moneyproducts and services for many yearsto come.

Bernard CollinsChairman


OPERATIONSREVIEW





IntroductionThe year 2004/05 was one of completecontrast when one compares ourbusiness activities against our financialresults. In terms of achievement andinnovation, the year under review ranksas one of the most successful onrecord. We introduced a new range ofcore health insurance products,LifeStage Choices, to complement ourwell-established Plan A to E range.Multi Trip from Vhi Healthcare, whichwas introduced in February ‘04, metwith huge success and hasrevolutionised the travel insurancemarket. Other innovations included thelaunch of the new dental insuranceplan, Vhi DeCare Dental, and the onlineVhi Health Shop. On the administrationside, a new policy administrationsystem, which took two years todevelop, went live in July ’04.

Against this background it isdisappointing to record a materialreduction in surplus. In the currentfinancial year, the business will incur aloss. In his review, the Chairman hasoutlined the reason for this seriousposition and the absolute necessity forthe immediate introduction of RiskEqualisation. This situation can comeas no surprise to readers of our AnnualReport over recent years. We haveclearly set out the precarious financialoutlook for Vhi Healthcare and ourauditors have made specific referenceto the inevitability of deficits if theactivation of Risk Equalisation isdelayed.

Highlights of Year to 28February 2005• Total membership now 1.56

million, a record.• €752 million paid out in claims on

behalf of our members or €3million paid out every working day.

• New products brought to marketincluded: LifeStage Choices,offering a unique blend of hospitaland primary care cover; VhiDeCare Dental, the first and onlydental insurance product availablein Ireland.

• The launch of Multi Trip from VhiHealthcare in February ’04revolutionised the annual travelinsurance market. Sales in the firstyear totalled 150,000 members andcontinue at an average rate of 380new policies per day.

• Launch of Vhi Health Shop, anonline service to members and thegeneral public wishing to buyhealth related goods and servicesat competitive prices.

• 493,000 claims and 1.2 milliondoctor invoices were processed.

• 4.3 million customer contacts.• Significant service and benefit

enhancements including: theapproval of brand new facilities formembers at both Galway Clinicand Barringtons Hospital, Limerick

• Extension of student ratepremiums to all plans; andincreased maternity cover formembers of all plans from January2005.

Membership, Sales, andCustomer Service

Health InsuranceDuring the year new core product salesrose by more than 6% on the previousyear as over 67,000 new memberschose Vhi Healthcare as their insurer,with revenue from new sales

contributing almost €39 million topremium income. Overall membershipreached its highest ever level with 1.56million members insured (A-E, Options,B with Excess, LifeStage Choices andPlan P) which generated a totalpremium income of almost €869million by the end of February 2005.

Our diversification strategy ensuredthat in 2004/05 we were the onlyinsurer in Ireland to offer individuallytailored products to corporatecustomers in the form of our uniqueTotal Healthcare Solutions. The abilityto mix and match products to suitemployee needs and employers’budgets has provided Vhi Healthcarewith the means to both retain membersand attract new business.

Sales of our new LifeStage Choicesplans have been particularlyencouraging, with total sales fromlaunch date in October to the end ofFebruary some 46% over target. This isnot surprising given the fact that theseproducts offer the most features, mostflexibility, and best prices in themarket. For instance, our Family PlanPlus offering has proven to beparticularly popular with the typicalpremium for a family of two adults andtwo children being 10%-13% cheaperthan equivalent rival products.

Other Products & ServicesRevenue from our non-core productsand services has added considerably tothe company bottom line during2004/05. Membership of our primarycare product HealthSteps went up by34% and HealthSteps revenueincreased by 31% for the period. Theseimpressive results were helped by thedecision to both reduce HealthStepspremiums and increase benefit levelsfor policies renewing from April 2004.


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Just one year after the launch of MultiTrip from Vhi Healthcare, sales inexcess of €5 million have beenreported, with over 150,000 memberstaking out cover. These figures farexceed original expectations. It is nowrecognised by independent experts thatVhi’s entry into this market cut the costof travel insurance by up to 50% insome cases. It is estimated thatalready, Vhi Healthcare has gained a26% share of the multi-trip travelinsurance market.

Meanwhile, new sales of Global, ourhealth insurance product for thoseembarking on long overseas trips, alsoexceeded target by 36%.

In the area of Corporate Solutions,revenue increased by over 80% on theprevious year with both OccupationalHealth and Employee AssistanceProgramme products experiencingsignificant expansion of their clientbase. For instance, more than 10,000people alone are covered under EAP(Employee Assistance Programme).

During the year we launched VhiDeCare Dental, our unique dentalinsurance product. This is a jointventure with DeCare International, thelargest dental insurance provider in theUS. Dental insurance is a new conceptfor the Irish consumer and the successof the product is dependent on raisingthe awareness and the level of planningfor dental care in Ireland up tointernational standards.

Late in 2004 Vhi Healthcare launchedits unique, online Vhi Health Shop, anew service enabling our members andthe general public to purchase healthrelated goods and services online atcompetitive prices through our websitewww.vhi.ie. A wide selection of itemscan be bought ranging from treadmills,pedometers and exercise bikes tomother and baby items and contact

lenses. In addition to keen prices,goods purchased online are deliveredfree to members and this has ensuredthat business on Vhi Health Shop hasbeen brisk in the first few months oftrading. We are confident that this newand innovative service will experiencestrong growth over the next few years.

Customer ServiceVhi Healthcare is renowned for theexcellence of its customer service. Wehave no shareholders and exist solelyto serve the needs of our customers.Contact with our members has alwaysbeen given top priority. During the yearwe focused on improving both thefrequency and the quality ofcommunications with our members.

Over the twelve month period we hadmore than 4.3 million contacts with ourmembers through telephone, email,mail, text message or through personalcallers to our offices in Dublin, DunLaoghaire, Cork, Limerick, Galway andKilkenny.

Vhi Healthcare has made a seriousinvestment in upgrading IT systems toenable improved member contact. Theimplementation of an emailmanagement system has allowed us tomanage emails more consistently andproductively. This new system allows usto log, monitor, answer and report onour extensive email traffic. Althoughemail traffic has grown by 50% year onyear for the last five years, this systemhas meant that the email handlingteam size has not had to increase tocope with the greater volumes. Allincoming phone calls to our state-of-the-art call centre in Kilkenny are nowbeing recorded to facilitate on-goingtraining of staff and assessment ofquality customer service at this facility.This new feature is having a majorimpact on the quality of information weprovide to members and is vital toensure consistency of service.

This reputation for customer serviceexcellence has led to many accolades inrecent years. The year 2004/05 was noexception as the Vhi Healthcare contactcentre team received the IndustryChampion Award at the European CallCentre Awards 2004 held in the UK. Theaward was in recognition of excellentcustomer service delivery and reflectsthe high standard, which Vhi Healthcarehas reached within the call centreindustry in Ireland and Europe. Inaddition, Vhi Healthcare won a NationalQuality and Business Excellence Award,hosted by the Excellence Ireland QualityAssociation, in recognition ofoutstanding achievements andcommitment to continuousimprovement. More than 90% oftelephone calls to our customer serviceline were answered within ten seconds,and the person who answers the phonecan deal with the majority of queries.

Health Services for MembersDuring 2004/05 Vhi Healthcare paid outmore than €752 million in claimsbenefit on behalf of its members – onaverage that’s €3 million every workingday. No other health insurer in Irelandcomes near to providing this level ofbenefit to its members.

Vhi Healthcare aims to provide accessto the most modern, affordable, andbest practice healthcare availabletoday. In the competitive environment inwhich we now operate, and faced withever increasing medical costs andclaims volumes, we strive to ensurethat the cost of providing for suchservices is well contained. This couldnot be achieved without the partnershipof a wide range of healthcare providers,principally hospitals and doctors.

The worldwide trend towards providingmore services on a daycare basis is thepreferred way of ensuring more costeffective care in a medically appropriateand best practice environment. Last


year more than 65% of all claims paidby Vhi Healthcare were provided in adaycare setting. This figure compareswith just 38% of claims in 1996 and hasmeant a saving to our members of inexcess of €100 million per annum.

We engage in a process of continuousnegotiation with a wide variety ofproviders. Over the past year a total of107 medical facilities had agreementson fees with Vhi Healthcare, of which 37were private hospitals. In addition, 99%of all hospital consultants agreed toaccept Vhi Healthcare fees in fullsettlement for services provided tomembers. Vhi Healthcare also agreedfees with a further 149 nursing homes,23 MRI centres, 13 laboratory anddiagnostic radiology centres, 6ambulance companies and a PET/CTscanning facility. Achieving theseagreements provides for our memberscertainty and peace of mind fromfinancial worry and enables us toaccurately predict our payout foraccommodation, technical andprofessional fees. No other insurerengages in a depth of negotiations withmedical providers comparable to VhiHealthcare.

New facilities approved by VhiHealthcare for use by membersincluded the state-of-the-art GalwayClinic, two new MRI centres inTullamore and Sligo, and BarringtonsHospital and Medical Centre inLimerick, which has become the firststand-alone daycare facility to providesurgical and diagnostic treatment forVhi Healthcare members in the Mid-West. Contrary to the claims made bysome property developers, VhiHealthcare does not stand in the way ofthe development of new hospitalcapacity. We are not in the businesshowever, of using the subscriptions ofour members to provide comfort fordevelopers. We will only extend coverfacilities to those that bring competitiveprices to the market.

In addition to the new products andservices brought to market (as set outpreviously) and the new facilitiesapproved, we also increased the rangeof benefits available under existingproducts and services including:

• Increased Maternity Grants – formembers of all plans renewing onor after 1 January 2005;

• Increased benefits towards Pre &Post natal, and Child HomeNursing;

• Student membership ratesextended to all plans, from October2004 renewals;

• MRI benefit increases for in-patient and outpatient scans,together with approval of newscanning facilities at TullamoreGeneral Hospital and Sligo GeneralHospital.

• PET/CT scan facilities approved formembers of plans A-E and Optionsplans A-E at Blackrock Clinic,Dublin. The PET/CT scannerenables more precision in locatingcancer.

We carry out ongoing patientsatisfaction research to ensure thathigh levels of satisfaction are enjoyedby members, particularly in areas suchas accommodation, medical andnursing care, levels of general comfortand efficiency in claims handling. Ourmost recent research data shows thatthree in four members requiring daysurgery in a private hospital wereadmitted within four weeks of referral.

To further enhance quality service inclaims handling, Vhi Healthcare hasinitiated a programme to implement anew claims system designed to supportautomated claims processing in amulti-product environment. The newsystem will deliver benefits in terms ofimproved flexibility, responsiveness,efficiency and higher quality. This is amajor project and work will becompleted in several phases over thenext 18 months.

Financial ResultsVhi Healthcare operates as a ‘not-for-profit’ organisation. In effect thismeans that any surplus generated atthe end of the financial year is placed infree reserves, which provide protectionfor members and allow reinvestment inimproved benefits and services.

The key elements of the financialresults were:

• Surplus after tax decreased by94% from €62.3 million to €3.9million. The reduction in surplusresults from the fact that the priceincrease in September ’04 did notmatch the rate of increase in claimcosts and the fact that RiskEqualisation will not be activated in2005. The low increase in premiumrates in 2004 was due to two factors:

1. The surplus recorded in 2003/04was exceptional and exceeded the target surplus, which was €40 million (i.e. 5% of premium income). The Board decided and announced on the publication of the results that the excess surplus be returned to members by way of a reduction in premium increase at 1st September 2004. This decision reduced the rate of increase in premiums by approximately 2.5 percentage points.


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2. The Board further decided that, in a community rated market, the members of Vhi Healthcare had a right to enjoy a true community rated premium. They had been denied this since1996, when competition enteredthis market due to the absence of a Risk Equalisation fund. Members of Vhi Healthcare had been asked to pay higher premiums in order to maintain stability within the market. Thisdecision reduced the rate of increase in premiums at September ‘04 by a once-off 4 percentage points.

The actual increase in premiumswas approximately 3% on 1stSeptember 2004, after theseadjustments. Vhi Healthcarecannot charge a true communityrated premium and remainfinancially viable in the absence ofRisk Equalisation. The materialdecrease in profits experienced inthe year to February 28, 2005, willbe followed by financial losses inthe year to February 28, 2006, andsubsequent years, unless RiskEqualisation is introduced. In theirlast two reports, the auditors havedrawn attention to the likelihood ofdeficits being incurred in futureyears with consequent seriousimpact on the financial position ofthe business.

• Earned premium of €868.7m wasgenerated during the year,representing an 8% increase overthe previous year. This mainlyreflected the follow through ofpremium rate increases from theprevious year but also included theincrease in membership ofapproximately 7,000. Total healthinsurance membership at 28thFebruary 2005 was 1.56 millionpersons.

• Claims costs increased by 13.4%during 2004/05. The principalreasons for this growth includedthe cost of new medical technologyand new medical facilities comingon-stream; double-digit increasesin public hospital pay bed charges;and the rate of general medicalinflation running in excess of 10%per annum.

• The Unexpired Risk Reserve hasincreased by €53.4m from €50.8mto €104.2m. This reserve arisesfrom the decision by the Board toprovide for losses anticipated oncontracts renewed, or to berenewed, up to September 2006.This decision takes into accountthe fact that the premium increaseof 3% from September 2004 is notsufficient to provide a surplus in2005/06.

• Operating expenses came in at8.6% of premium income. Thiswas a slight increase on the ratioof 8.3% recorded in the previousyear, which was achieved afterthree successive years of reductionfollowing a high of 11.8% in 2001.The principal reason for thisincrease was that the new policyadministration system went live inJuly ’04 and thus the firstdepreciation charge was recordedin this financial year. VhiHealthcare continues to be one ofthe most efficient insurancecompanies in the world with themajority of insurers reportingexpense ratios well in excess of12% of premium income.

Technology DevelopmentA brand new policy administration,renewal and billing system (RAB) wasimplemented in July 2004. The newsystem took two years to develop as ajoint development between VhiHealthcare and an internationalsoftware development company. Thesystem is now available as a healthinsurance package. Vhi Healthcare willreceive royalties from sales. One saleto a UK health insurer has beenfinalised to date.

Costing €26.4 million, RAB technologyallows Vhi Healthcare to:

• Facilitate the speedier introductionof new products and services

• Improve daily customer service toindividual and group members

• Reduce costs through automationof manual processes.

The development of RAB has requiredmajor investment in terms of people,planning, design, infrastructure andfinance. Delivering a system designedto cater for what is now a multi-productmarket has been a significantchallenge, but the decision to do so isone which we feel will prove to be wellworthwhile. We will continue to developand enhance our service to customersby providing web based self-servicefacilities for our individual andcorporate group scheme members.

Work has now commenced on thedevelopment of our new claims systemand, as part of this development, a newworkflow system has been designedwhich will further automate manualprocesses and provide improved serviceresponse for members enquiring aboutthe status of their claim.

Investment in technology will continueto play a central role in the continuousimprovement of efficiency and


customer service in Vhi Healthcare.The importance of technology can beappreciated when one considers thatwe received approximately €900 millionfrom 1.56 million customers almostentirely by monthly instalments, weprocess €3 million of claims eachworking day and we service 4.3 millionmember contacts each year.

Human Resources andFacilities DevelopmentWe employ 890 (or 809 whole timeequivalent) people in six locationsthroughout Ireland. Almost 70% of ouremployees are aged between 18 and 40.

Vhi Healthcare regards the training anddevelopment of its employees as key tothe continuing success of theorganisation. Indeed, one of ourprincipal core values recognises that‘people are our greatest asset’. Assuch, the investment in our people ontraining and development isconsiderable and our retention rate of96% ensures that we are notunnecessarily training new recruitswith all of the associated costs. It is ourbelief that investing in the training anddevelopment of our people is crucial tothe long-term success of the business,and plays an essential role in retainingquality employees.

During 2004/05 Vhi Healthcare, inassociation with the National College ofIreland, provided a customised,accredited course of study for some 28Group Scheme Account Managersentitled “Consultative Selling”. Inaddition all managers and team leaderscompleted a leadership developmentcourse in the Irish ManagementInstitute in Dublin. Currently we have16 employees studying forqualifications in Project Managementthrough the Information SystemsExamination Board (ISEB). Two seniormanagers attended the Advanced

Management Programme in theINSEAD International Business Schoolin Fontainebleau near Paris, while afurther senior manager participated inthe Management DevelopmentProgramme run by the InternationalFederation of Health Plans. Staff at alllevels are supported in pursuing thirdlevel and professional qualifications.

In-house training focused on the needto provide training for more than 300frontline staff required to operate thenew renewal and billing (RAB) system.Our in-house training team had todesign and implement a programmethat would enable all 300 end users toperform their role to a precisestandard. In practice, the logistics wereimmense. This training took place infive locations countrywide requiringcustomised training for each person forfive to eights days within a period ofeight weeks.

In all some 13,592 hours training wasprovided during this time, with thetraining team working six days perweek to complete this mammoth task.A very high level of commitment by allinvolved resulted in the successfulimplementation of the RAB project.

A major programme to upgrade andmodernise facilities at the head officein Dublin was initiated and will continuethroughout 2005. The upgrading offacilities will deliver many benefitsincluding more efficient use ofworkspace, improved communications,greater flexibility through modulardesign, and a more employee-friendlywork environment.

Brand Development During 2004/05 our brand awarenessactivities centred on themes promotingwellness and healthy lifestyles tosupport the proposition ‘When you needus, we’re there’.

Communications activities included:

• Advertising: A high profileadvertising campaign featuring ournew LifeStage Choices suite ofplans, which focused on how VhiHealthcare provides support andreassurance to members at eachstage in their life. A series ofadvertisements also featured thenew Vhi DeCare Dental insuranceplans; the first dental plans oftheir type in Ireland.

• Direct to Member communications:Over 250,000 pre-renewal circularswere issued to members duringthe year to highlight productlaunches and benefitimprovements. In addition aquarterly magazine, "It’s All AboutLiving", was issued and sent tomembers at renewal datecontaining articles on healthyliving, special offers for members,and details of improved services.

• New Products and Services: Inkeeping with its diversificationstrategy, Vhi Healthcare held high-profile launches to mark theintroduction of exciting newproducts and services to themarket including the unique VhiDeCare Dental, Multi Trip from VhiHealthcare, LifeStage Choices, andthe online Vhi Health Shop.


• Total Healthcare Solutions: Duringthe year Vhi Healthcare unveiled itsunique Total Healthcare Solutionstailored package to corporatecustomers, which allowsbusinesses great flexibility to mixand match products and servicesto fit with organisation andemployee requirements.

• Sponsorships: These includedhealth and fitness activities suchas Vhi Dance Blitz 2004 – anexciting dance convention offeringIrish people a fun opportunity tolearn dance steps from leadinginternational choreographers;Galway Bay 10 – Ireland’s largestcharity road race, with proceeds inaid of Cancer Care West. Businesssponsorships included a EuropeanHealthcare Conference–‘Transforming Healthcare in thenew Europe’ - hosted in Dublin;and Chamber of CommerceBusiness Excellence Awards inassociation with Chambers inCork, Dundalk, Kilkenny, Mayo andWaterford.

• ‘Fit for Fun’: In association withthe Irish Rugby Football Union, VhiHealthcare continued to build onthe success of the previous year byextending this unique programmeto include schools in the Connachtarea. This six-week programmedelivers on improvement tochildren’s movement skills andflexibility through encouragingprimary school children to be moreactive and embrace healthierlifestyles.

During 2004/05 significantenhancements were made to ourhealth portal www.vhi.ie aimed atstrengthening our online presence,providing more value to our customerswhile at the same time promotingawareness and knowledge on health issues.

Adding new features such as ‘Ask theParenting Expert’; a smoking cessationprogramme; the Vhi Health Shop; andmore streamlined access to joiningplans online, has also seen our web-based revenues increase threefold overthe previous year.

The number of registered sitemembers increased during the year bymore than 34% to 94,000 with the sitecontinuing to receive almost 200,000visits per month. As many as 33,000members log in each month to avail ofa wide range of exclusive member onlyservices such as competitions andspecial discounts. The popularity ofinternet shopping is expected to growsignificantly in Ireland over the next fewyears and with three in four Vhimembers having regular access to theinternet we are optimistic thatwww.vhi.ie will continue to be the mostpopular health information portal inIreland.

Social ResponsibilityVhi Healthcare recognises theimportance of sharing responsibility forthe continued good health and qualityof life throughout Ireland. Ourcommitment to providing support forour members and the wider communityin Ireland is in keeping with ourcorporate values and our visionstatement (i.e. ‘working together forthe wellbeing of customers’). Wesupport our members throughout theirlife stages in a proactive way toencourage healthy living, preventillness, and in the event of illness,ensure access to the best quality andmost appropriate care available.

In addition to providing lifelong accessto quality healthcare, we ensure thatour business operations help to impactpositively on the wider community.

We recycle all of our paper, glass, drinkcans, print cartridges, used batteriesand redundant equipment. During theyear we sent more than 203,360 kgs ofpaper to be recycled which was enoughto save 2,117 trees.

In 2004/05 Vhi Healthcare employeesraised a total of €17,750 throughvoluntary salary deduction, which wassent directly to 57 different registeredcharities operating nationally andinternationally. In addition, a corporatecharitable donation of €20,000 wasmade to the Paediatric Diabetic Unit,Tallaght Hospital.

In January 2005, Vhi Healthcare raised€138,000 in aid of the families andvictims of the Asian Tsunami Disaster.This total was raised through employeecash donations, a donation from thebusiness, and also through a voluntary‘work a day for free’ campaign by VhiHealthcare employees. The proceedswere donated directly to the Irish RedCross Asian Disaster Fund.

For a number of years now we haveprovided support to communitiesthrough involvement with JuniorAchievement / Young Enterpriseprimary and secondary schoolprogrammes. These programmes aredesigned to help young people developan awareness of skills, which will beimportant not just for school but alsofor their future life. Each year VhiHealthcare employees volunteer tocoach young people on a wide variety ofsubjects and skills including personaleconomics, cookery, success skills, andenvironmental awareness. Studentsalso learned to identify their own skills,participate in mock interviews, improveinterview techniques and curriculumvitae preparations. Through associationwith Junior Achievement we hope toencourage students to appreciate thevalue and importance of staying in fulltime education and the concept oflifelong learning.


OutlookVhi Healthcare will continue to set thepace as the market leader for healthinsurance in Ireland. This is due in nosmall part to the skill and commitmentof its staff; the quality and diversity ofits products and services; the efficiencyof its customer service; theorganisation of its distributionchannels, and last but not least theloyalty and trust of generations ofmembers.

The decision taken in April 2005 by theHealth Insurance Authority torecommend to the Tánaiste andMinister for Health and Children thatRisk Equalisation should commencewas a very welcome one and good newsfor the Irish consumer and thecontinuation of community ratedproducts in Ireland. The subsequentindication by the Tánaiste that sheintended to accept this recommendationand activate Risk Equalisation on 1stJuly was very encouraging. In light ofthese developments and the on-goingstruggle over 8 years to achieve a levelplaying field, the decision by theTánaiste on 27 June 2005 not to activateRisk Equalisation was a major setbackfor our business, our members and, webelieve, the health insurance market.At no stage during the course ofdeliberations, after receiving therecommendation of the HIA, did theTánaiste invite a submission or seekconsultation with Vhi Healthcare.

The implications of the decision not toactivate Risk Equalisation are set out inthe Chairman's Review and in the letterfrom the Board to the Tánaiste(available on www.vhi.ie).

Vhi Healthcare is committed toensuring that all monies received froma Risk Equalisation fund will be usedfor the benefit of our members and thehealthcare market in Ireland.

For Vhi Healthcare to really thrive in acompetitive market it needs thecommercial freedom to operate withoutthe rigid controls inherent in its currentstructure as a statutory body. Wewelcome the decision of the Tánaiste toaddress this issue in September 2005.

We are committed to placing ourcustomers at the forefront of ourbusiness strategy. Vhi Healthcareexists solely to service the needs of itsmembers. We will continue to combineexcellent customer service with thebest products and services available inthe market.

Vincent SheridanChief Executive



12.45pm

Drumcondra, Dublin 9.

12.45pm

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1 VINCENT SHERIDAN, B.COMM, FCA,CHIEF EXECUTIVE

Vincent Sheridan joined VhiHealthcare in April 2001, with 28years experience in the insuranceindustry. He is a director of FBDHoldings Plc and was formerly adirector of the Irish Stock Exchangefor nine years to June 2004. He iscurrently Vice-President of theInstitute of Chartered Accountantsin Ireland and a council member ofthe International Federation ofHealth Plans and the FinancialReporting Council in the UK.

2 MICHAEL OWENS, DIRECTOR,HUMAN RESOURCES

Michael Owens has a BA inIndustrial Relations and is aChartered Fellow of CIPD. He joinedVhi Healthcare in August 1999 andhas over 26 years experience inhuman resources management inlight engineering, paper and print,commercial retailing and insurance.

3 WILLIE SHANNON, BBS, FCA,DIRECTOR, FINANCE

William Shannon is a graduate ofTCD, having obtained the BBS in1974. He qualified as a charteredaccountant in 1977 with ArthurAndersen and joined a large firm ofinsurance brokers in 1987 as GroupFinancial Controller. He wassubsequently appointed GroupFinance Director in 1989. He joinedVhi Healthcare as Director ofFinance in 2002. He serves onseveral committees in the Instituteof Chartered Accountants. He isalso a past Chairman of the FinanceCommittee of the InsuranceInstitute of Ireland and PastPresident of the FinancialExecutives Association.

4 DR BERNADETTE CARR MD, FRCPI,MPH, LFOM, MEDICAL DIRECTOR

Bernadette Carr is a physician andepidemiologist with extensiveclinical and research experience. Agraduate of UCC, her qualificationsinclude: Fellowship in UCLA 1989,Doctorate in Medicine TCD 1992,Licentiate of Faculty ofOccupational Medicine 1991, andMasters Public Health 1994. Shewas elected to Fellowship Of theRoyal College of Physicians inIreland 1996. Bernadette joined Vhiin 1994 as Medical Director and herresponsibilities include: providerrelations, contract negotiations andclaims.

5 JOHN CREEDON, DIRECTOR,INFORMATION TECHNOLOGY

John Creedon has a BSc inComputer Applications from DublinCity University and a Diploma inSystems Analysis from TrinityCollege, Dublin. He held a numberof senior positions in Vhi Healthcareprior to his current appointment in1996 and is responsible for allinformation technology services.

6 TONY MCSWEENEY, DIRECTOR,INDIVIDUAL AND CORPORATEBUSINESS

Tony McSweeney, a member of theMarketing Institute of Ireland,joined Vhi Healthcare from the lifeand pensions industry in 1996. He isresponsible for customer services,customer administration, sales andour corporate solutions business.

7 DECLAN MORAN, DIRECTOR,MARKETING AND BUSINESSDEVELOPMENT

Declan Moran has a BSc inComputer Science and is a Fellowof the Institute of Actuaries since1994. He joined Vhi Healthcare in1997 from the life and pensionsindustry and is responsible for theexpansion of Vhi Healthcare'sproduct line, development of newmarkets and the provision ofactuarial expertise within theorganisation.



15.45pm

Granard, Co.Longford.

15.45pm

REPORT OFTHE DIRECTORS





The Directors have pleasure insubmitting their 48th Annual Report inaccordance with Section 20 (1) of theVoluntary Health Insurance Act 1957.The Accounts of the Board and therelated notes which form part of theAccounts are included in this report,and have been prepared in accordancewith accounting standards generallyaccepted in Ireland and comply with theEuropean Communities (InsuranceUndertakings: Accounts) Regulations,1996 .

1. Principal ActivitiesThe Voluntary Health Insurance Boardis a statutory corporation establishedby the Voluntary Health Insurance Act1957 and has as its objective theprovision of a financing system forprivate health care, carried out on amutual assistance basis.

2. ResultsThe results for the year are set out inthe Income and Expenditure Account.

3. Business Review and FutureDevelopmentsA review of business transacted duringthe year, together with the Board’sviews of likely future developments iscontained in the Chairman’s Statement.

4. Directors’ ResponsibilitiesThe directors are required to prepareaccounts for each financial period, whichgive a true and fair view of the state ofaffairs of the Board and of the surplus ordeficit of the Board for that period.

In preparing those accounts, theDirectors are required to:

• Select suitable accounting policiesand then apply them consistently.

• Make judgements and estimatesthat are reasonable and prudent.

• Prepare the accounts on the goingconcern basis unless it isinappropriate to presume that theBoard will continue in business.

The Directors are responsible forkeeping proper books of account, whichdisclose with reasonable accuracy atany time the financial position of theorganisation and to enable them toensure that the accounts are preparedin accordance with accountingstandards generally accepted in Irelandand comply with the EuropeanCommunities (Insurance Undertakings:Accounts) Regulations 1996. They arealso responsible for safeguarding theassets of the organisation and hencefor taking reasonable steps for theprevention and detection of fraud andother irregularities.

5. Corporate GovernanceThe Directors support the principles ofCorporate Governance outlined in theCombined Code of CorporateGovernance. The Financial ReportingCouncil revised the Combined Code onCorporate Governance in July 2003.While not itself a listed company, theBoard has sought to comply with theprovisions of the Code that areapplicable, having regard to theConstitution of Voluntary HealthInsurance Board, and hence reportsbelow on compliance throughout theyear with the Code.

The Directors consider that the Boardhas in place the procedures to complywith the provisions laid out in section 1of the Combined Code: Principles ofGood Governance and Code of BestPractice, except in respect of theappointment and terms of office ofDirectors, which are the responsibilityof the Minister for Health and Children.For this reason, the Board does nothave a Nomination Committee or aSenior Independent Director.

Board of DirectorsThe roles of Chairman and ChiefExecutive are separate and the Board isentirely comprised of non-ExecutiveDirectors. All Directors are appointedby the Minister for Health and Childrenfor 5 year terms of office.

The Board meets seven times annuallyand has a formal schedule of mattersspecifically reserved to it for decisionwhich includes approval of the overallstrategic plan, annual budgets, annualreport and accounts and majorcorporate activities. Board papers aresent to each member in sufficient timebefore meetings. Appropriate trainingand briefing is available to all directorson appointment to the Board, withfurther training available subsequently,as required. The Board has alsodrawn up procedures for Directors totake independent professional advice.All Directors have access to the adviceand services of the Secretary. TheBoard has Directors Liability insurancecover in place. The Board has put inplace a process for appraisal of itsperformance.

The Board reviews the arrangements inplace that allow employees to raise anyconcerns about possible wrongdoingsin financial reporting or other matters.If required, it will ensure thatappropriate investigation and follow-upaction is taken.

The Board has appointed an AuditCommittee which is comprised of threenon-Executive Directors. The AuditCommittee meets at least four times ayear and reviews the annual accounts,internal control and compliancematters and the effectiveness ofinternal and external audit. Themembers of the Audit Committee alsoaddress the issue of risk, the purposeof which is to ensure that appropriaterisk management procedures andreporting protocols are in place.


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The Audit Committee makesrecommendations to the Board inrelation to the appointment of theexternal auditors and assess theirobjectivity and independence. Theexternal audit plan and findings fromthe audit of the financial statementsare also reviewed. The main roles andresponsibilities of the Audit Committeeare set out in written terms ofreference and are available on request.

The Audit Committee has a process inplace to ensure the independence ofthe audit is not compromised, whichincludes monitoring the nature andextent of services provided by externalauditors through its annual review offees paid to the external auditors foraudit and non-audit services.

The Board has also appointed aRemuneration Committee comprisingof three non-Executive Directors. Thiscommittee is responsible forrecommending candidates for seniormanagement appointments andremuneration policies.

Internal ControlThe Board has given effect to therecommendations of Internal Control:Guidance for Directors on theCombined Code (The TurnbullGuidance) which was published inSeptember 1999.

The Directors are responsible for theBoard’s system of internal control andfor reviewing its effectiveness. Theyhave assigned responsibility for theimplementation of this system toExecutive Management.

The system of internal control providesreasonable, but not absolute,assurance of:

The safeguarding of assets againstunauthorised use or disposition; andthe maintenance of proper accountingrecords and the reliability of theinformation they produce, for bothinternal use and publication.The key elements of the system are:

• Formal policies, procedures andorganisational structures are inplace which support themaintenance of a strong controlenvironment.

• The business strategy, planningand budgetary process includesanalysis of the major businessrisks which affect theorganisation. Risk assessment is acontinuous process on which theBoard places significant emphasis.

• A comprehensive set ofmanagement information andperformance indicators isproduced promptly on a monthlybasis using a series of interrelatedbalanced scorecards. This enablesprogress against longer termobjectives and annual budgets tobe monitored, trends to beevaluated and variances to beacted upon. Detailed budgets areprepared annually in the context oflonger term strategic plans andare updated regularly.

• Accounting procedures aredocumented, transaction cyclesare defined, accounting timetablesare detailed, automated interfacesare controlled, review andreconciliation processes arecarried out, duties are segregatedand authorisation limits arechecked. Experienced andqualified staff have been allocatedresponsibility for all majorbusiness functions.

Going ConcernThe accounts have been prepared onthe going concern basis and, inaccordance with the requirements ofthe Combined Code, the directorsreport that they have satisfiedthemselves that the Board is a goingconcern, having adequate resources tocontinue in operational existence forthe foreseeable future. In forming thisview the directors have reviewed theBoard’s budget for 2005/2006 and themedium term plans as set out in thecorporate strategy of the Board. In thisregard, attention is directed to Note 9of the Accounts.

6. Directors’ RemunerationAnnual remuneration levels for theChairman and each Director have beenset by Government at €15,237 and€10,158 respectively. The Directors donot receive any other remuneration nordo they have any service agreements orcontracts with the Board.

7. Safety, Health & Welfareat Work Act, 1989The Board has a health and safetypolicy in existence which is fully inaccordance with the specificrequirements of the above Act. The Board recognises the value ofconsultation with staff on matters ofhealth, safety and welfare.

The Directors are pleased to report thatno serious accidents occurred to anymembers of staff or visitors to itspremises during the year.

8. Prompt Payment ofAccounts Act, 1997Voluntary Health Insurance Board isincluded as a listed purchaser of goodsand services in the schedule to thePrompt Payments of Accounts Act,1997. The Directors acknowledge theirresponsibility for ensuring compliance,in all material respects, with the


provisions of the Act. The Board’spayment practice is one of ensuringthat properly completed and agreedinvoices for goods and servicessupplied to the Board will bedischarged within the prescribedpayment period. Procedures have beenimplemented which provide reasonableassurance against material non-compliance with the Act.

9. Books of AccountThe Directors are responsible forensuring that proper books of accountare maintained by the Board and thishas been achieved by the employmentof appropriately qualified accountingpersonnel and by maintainingappropriate accounting systems. The books of account are located at thehead office of the Board at VHI House,Lower Abbey Street, Dublin 1.

10. AuditorsThe auditors Deloitte & Touche,Chartered Accountants, continue in officein accordance with Section 19 (2) of theVoluntary Health Insurance Act 1957.

On behalf of the Board:

Bernard Collins Pat FarrellChairman Director

4 July 2005


REPORT OFTHE AUDITORS





Independent Auditors’report to the Directors ofthe Board of the VoluntaryHealth Insurance BoardWe have audited the accounts ofVoluntary Health Insurance Board forthe year ended 28 February 2005 whichcomprise of the Income andExpenditure Account, the BalanceSheet, the Cash Flow Statement, thestatement of accounting policies andthe related notes 1 to 18. Theseaccounts have been prepared under theaccounting policies set out therein.

This report is made solely to theDirectors of the Board of VoluntaryHealth Insurance Board in accordancewith Section 19 of the Voluntary HealthInsurance Act 1957. Our audit workhas been undertaken so that we mightstate to the Directors those matters weare required to state to them in anauditors’ report and for no otherpurpose. To the fullest extentpermitted by law, we do not accept orassume responsibility to anyone otherthan the Board and the Directors as abody for our audit work, for this report,or for the opinions we have formed.

Respective responsibilitiesof Board and AuditorsThe directors are responsible forpreparing the Annual Report including,as set out in the Statement of Directors’Responsibilities, the preparation of theaccounts in accordance with applicableIrish law and accounting standards. Ourresponsibilities, as independentauditors, are established in Ireland bystatute, the auditing standards aspromulgated by the Auditing PracticesBoard in Ireland and by ourprofession's ethical guidance.

We report to you our opinion as towhether the accounts give a true andfair view.

We review whether the corporategovernance statement reflects theBoard’s compliance with the nineprovisions of the 2003 FRC Codespecified for our review and we report ifit does not. We are not required to forman opinion on the effectiveness of theBoard’s corporate governanceprocedures or its internal controls.

We read the other informationcontained in the Annual Report andconsider the implications for our reportif we become aware of any apparentmisstatement or material inconsistencieswith the accounts. The other informationcomprises only the Directors’ Report,which includes the corporategovernance statement, the Chairman’sReview, the Operations Review and theComparative Results table.

Basis of audit opinionWe conducted our audit in accordancewith the auditing standards issued bythe Auditing Practice Board andgenerally accepted in Ireland. An auditincludes examination, on a test basis,of evidence relevant to the amounts anddisclosures in the accounts. It alsoincludes an assessment of thesignificant estimates and judgmentsmade by the Board in the preparation ofthe accounts and of whether theaccounting policies are appropriate tothe circumstances of the Board,consistently applied and adequatelydisclosed.

We planned and performed our audit soas to obtain all the information andexplanations which we considerednecessary in order to provide us withsufficient evidence to give reasonableassurance that the accounts are freefrom material misstatement, whethercaused by fraud or other irregularity orerror. In forming our opinion weevaluated the overall adequacy of thepresentation of information in theaccounts.

Other Technical Provisions– Unexpired Risk ReserveIn forming our opinion, we haveexamined the amount of €104.2mincluded in other technical provisions,and the assumptions on which theprovision is based. We have alsoconsidered the disclosures made innote 9 to the accounts with regard tothe provision and with regard to theincreased likelihood of deficits beingincurred in future years, in the event ofrisk equalisation not being introduced,with consequent serious implicationsfor the financial viability of the Board.In view of the significance of theuncertainties inherent in both theprovision and the likelihood of furthersignificant deficits being incurred infuture years should risk equalisationnot be introduced, we consider thatthese matters should be drawn to yourattention. Our opinion is not qualified inthis respect.

OpinionIn our opinion the accounts give a trueand fair view of the state of the affairsof the Board as at 28 February 2005and of the surplus of the Board for theyear then ended.

Deloitte & ToucheChartered Accountants and RegisteredAuditorsDublin

4 July 2005


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21.45pm

Tralee, Co.Kerry.

21.45pm

ACCOUNTS





Basis of PreparationThe accounts are prepared inaccordance with accounting standardsgenerally accepted in Ireland, theEuropean Communities (InsuranceUndertakings: Accounts) Regulations,1996 and the Statement ofRecommended Practice on Accountingfor Insurance Business (SORP) asadopted by the Association of BritishInsurers.

The following are the principalaccounting policies adopted:

Basis of AccountingThe accounts are prepared under thehistorical cost convention modified bythe revaluation of investments.

Premiums Written Gross premiums written consist of thepremium income receivable frommembers in respect of policiescommencing in the financial year.

Unearned premiums represent theproportion of premiums written in theyear that relate to the unexpired termof policies in force at the balance sheetdate, calculated on a timeapportionment basis.

Claims IncurredClaims incurred comprise claims andrelated expenses paid in the year andchanges in provisions for outstandingclaims, including provisions for theestimated cost of claims incurred butnot reported and related handlingexpenses. The provisions foroutstanding claims are based onactuarial methods of calculationapproved by the Board’s consultingactuaries, Watson Wyatt LLP.

Unexpired RisksProvision is made, based oninformation available at the balancesheet date, for any estimatedunderwriting deficits related tounexpired risks after taking intoaccount relevant investment return.

Tangible AssetsTangible fixed assets are stated at costless accumulated depreciation.Depreciation is calculated so as to writeoff the cost of the assets over theirestimated useful lives on a straight linebasis as follows:

Motor vehicles4 yearsComputer equipment and software4 yearsFurniture, fittings and office equipment5 years

Expenditure incurred on thedevelopment of computer systemswhich is substantial in amount and isconsidered to have an economic benefitto the Board lasting more than one yearinto the future is capitalised anddepreciated over the period in whichthe economic benefits are expected toarise. This period is subject to amaximum of four years. In the eventof uncertainty regarding its futureeconomic benefit, the expenditure ischarged to Income and ExpenditureAccount.

InvestmentsInvestments in listed securities,including investments in Governmentand Government guaranteed stocks,are stated at market value. Marketvalue represents the middle marketprice less accrued interest at thebalance sheet date. Realisedgains/losses on investmenttransactions are determined on anaverage cost basis and recorded in theIncome and Expenditure Account.

Land and buildings are valued annuallyon an open market value basis.Valuations are made by independentprofessionally qualified valuers. Allproperties occupied by the Board aremaintained in a continual state ofsound repair. As a result, theDirectors consider that the economiclives and residual values of theseproperties are such that anydepreciation is insignificant and istherefore not provided.

Investment IncomeInterest on fixed interest stocks andbank deposits is taken to includeincome as earned on a day-to-daybasis. Income from equities is includedon the basis of dividends receivedduring the financial year.

Investment ReturnOperating surplus is reported on thebasis of longer term investment return.The longer term investment return iscalculated based on rates which arereviewed annually and reflect bothhistorical experience and the Directors’current expectations for investmentreturns. The short term fluctuation ininvestment return, representing thedifference between the longer termreturn and the actual return, isincorporated in arriving at surplusbefore taxation.

The allocation of investment returnfrom the non-technical account to thetechnical account is based on thelonger term return on investmentsattributable to the insurance business.


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Pension CostsThe expected cost of providing pensionsto employees is charged to the Incomeand Expenditure Account, at asubstantially level percentage ofpayroll, over the employees expectedservice lives. Any difference betweenthe amount so charged and the amountcontributed to pension funds isincluded as a provision in the accounts.

The disclosures required under thetransitional arrangements of FRS 17:Retirement Benefits, for the year ended28 February 2005 are shown in note 18.

Deferred TaxationDeferred taxation is provided on timingdifferences between the taxablesurplus of the Board and its surplus asstated in the accounts. The provisionsare made at the tax rates that areexpected to apply in the periods inwhich the timing differences areexpected to reverse.



Income and Expenditure Account Year to end of February

Technical Account: Health Insurance

Notes 2005 2004Continuing Activities €'000s €'000s

Earned Premium: 1

Gross premiums written 896,731 840,493

Change in the provision for unearned premiums (28,052) (37,501)

868,679 802,992

Allocated investment return transferred from the non-technical account 23,910 24,890

892,589 827,882

Claims incurred:

Claims paid 715,282 638,381

Change in the provision for claims 37,167 24,943

752,449 663,324

Other technical provisions:

Unexpired risk reserve 9 53,424 15,641

Net operating expenses 2 74,968 66,322

Balance on the health insurance technical account 11,748 82,595


Income and Expenditure Account Year to end of February

Non-Technical Account: Health Insurance

Notes 2005 2004Continuing Activities €'000s €'000s

Balance on the health insurance technical account 11,748 82,595

Longer term investment return 3 23,910 24,890

Allocated investment return transferred tothe health insurance technical account (23,910) (24,890)

Operating surplus 11,748 82,595

Short term fluctuations in investment return 3 (7,351) (10,910)

Surplus on ordinary activities before taxation 4,397 71,685

Taxation on surplus on ordinary activities 4 (510) (9,379)

Surplus on ordinary activities after taxation carried to reserves 5 3,887 62,306

The accounts were approved by the Board on 4th July 2005, and signed on its behalf by:



Balance Sheet As at 28th February

Notes 2005 2004€'000s €'000s

Assets

InvestmentsLand and buildings 6 36,700 31,850Other financial investments 7 664,287 604,202

DebtorsDebtors from members arising out of insurance operations 374,674 332,269Other debtors 6,573 521

Other AssetsTangible assets 8 16,863 18,173Cash at bank and in hand 7,405 1,596

Prepayments and accrued incomeAccrued interest 6,385 5,651

Total Assets 1,112,887 994,262

Liabilities

ReservesGeneral reserve 281,925 278,038

Technical provisionsProvision for unearned premiums 423,466 395,414Claims outstanding 285,363 248,196Other technical provisions 9 104,215 50,791

Deferred taxation 10 881 1,041

CreditorsBank overdraft 5,490 4,860Creditors and accruals 11 11,547 15,922

Total Liabilities 1,112,887 994,262

The accounts were approved by the Board on 4th July 2005, and signed on its behalf by:



Cash Flow Statement Year to end of February

Notes 2005 2004€'000s €'000s

Net cash inflow from operating activities 12 85,055 143,289

Taxation paid (8,241) (10,513)

Capital expenditure (10,916) (8,387)

65,898 124,389

Cash flows were invested as follows:

Increase/(decrease) in cash holdings 5,179 (2,466)

Net portfolio investment 13&15 60,719 126,855

Net investment of cash flows 14 65,898 124,389


Notes to the Accounts

1 Earned premiumThe insurance business of the Board is substantially health insurance and earned premium relates mainly to this class of business. Amounts from ancillary products are minimal. All business written is in the Republic of Ireland.

2 Net operating expenses 2005 2004€'000s €'000s

Administrative expenses 58,519 52,636Acquisition costs 16,449 13,686

74,968 66,322

Employee Information 2005 2004The average number of persons, including part time employees, employed by the Board was: 796 763

Staff costs were: 2005 2004€'000s €'000s

Wages and salaries 36,885 32,086Social security costs 3,891 3,521Pension costs 3,620 3,322

The Chief Executive is retained on a consultancy basis. The initial five year period dating from April 2001 has been extended for a further three years to April 2009. Total fees paid to the Chief Executive and included in operating expenses in the year to 28 February 2005, amounted to €378,200. (February 2004: €353,000).

3 Investment return(a) Longer term investment returnThe rates of investment return underlying the calculation of the longer term investment return are set out below. 2005 2004

% %Land and buildings 5.2 6.0Shares in listed securities 7.2 7.5Debt securities/fixed interest securities 3.7 4.5Deposits with credit institutions 3.0 3.0

(b) Comparison of longer term investment return with actual return 2005 2004€'000s €'000s

Actual return:Income from land and buildings 154 169Income from other investments 18,423 18,383(Losses)/gains on realisation of investments (2,098) 234Unrealised gains/(losses) on investments 887 (3,964)Investment management expenses (807) (842)

16,559 13,980

Longer term investment return 23,910 24,890Short term fluctuations (7,351) (10,910)

A transfer of the full amount of the longer term investment return has been made from the non-technical account to thetechnical account on the basis that the reserves of the Board are lower than the solvency margin level considered desirablewithin the health insurance industry and therefore all reserves are deemed to be in support of the technical provisions.



4 Taxation 2005 2004€'000s €'000s

The taxation charge in the income and expenditure account comprises:Corporation taxation - charge 670 10,041Deferred taxation - credit (160) (662)

510 9,379

Factors affecting the current taxation charge for the period

The tax assessed for the period is higher than the standard rate of corporation tax in Ireland of 12.5% (2004: 12.5%) for the year ended 28 February 2005.The differences are explained below: 2005 2004

€'000s €'000sSurplus on ordinary activities before tax 4,397 71,685Surplus on ordinary activities multiplied by standard rate of corporation tax of 12.5% (2004: 12.5%) 549 8,961Effects of Expenses (deductible)/not deductible for tax purposes (260) 697Depreciation in excess of capital allowances for period 221 81Adjustments to tax charge in respect of previous periods 160 302Current tax charge for period 670 10,041

5 Surplus for year 2005 2004€'000s €'000s

The surplus for the year is stated after charging:Depreciation of tangible fixed assets 8,896 5,780Board remuneration 107 110Auditors remunerationAudit fee 124 120Audit related fees 17 25Non audit fees 105 173

6 Investments: land and buildings 2005 2004€'000s €'000s

Valuation:At 1 March 31,850 31,050Additions 3,329 474Gain on revaluation 1,521 326At end of year 36,700 31,850

Land and buildings included above are occupied by the Board for its own activities and are mainly freehold.

Land and buildings were valued at 28 February 2005 at open market value. These valuations were made by Thornton & Partners,Hamilton Osborne King, DTZ Sherry Fitzgerald, Chambers Chartered Surveyors and O'Keeffe Auctioneers.

If the land and buildings had not been revalued they would have been included at the following amounts which represent the lowerof cost or net realisable value:

2005 2004€'000s €'000s

Opening Cost 16,237 15,763Closing Cost 19,565 16,237



7 Other financial investments 2005 2005 2004 2004Market Value Cost Market Value Cost

€'000s €'000s €'000s €'000sShares in listed securities 7,139 6,500 3,277 3,000Debt securities/fixed interest securities 641,773 642,930 591,078 591,239Loans secured by mortgages 122 122 165 165Deposits with credit institutions 15,253 15,253 9,682 9,682

664,287 664,805 604,202 604,086

8 Tangible Assets Fixtures, Computer Motor furnishings Equipment & Office

vehicles and fittings Equipment Total€'000s €'000s €'000s €'000s

CostAt 1 March 2004 2,338 4,786 40,386 47,510Additions 403 616 6,793 7,812Disposals (665) (15) (456) (1,136)At 28 February 2005 2,076 5,387 46,723 54,186

DepreciationAt 1 March 2004 (1,227) (3,576) (24,534) (29,337)Charge for the year (503) (764) (7,629) (8,896)Eliminated in respect of disposals 523 17 370 910At 28 February 2005 (1,207) (4,323) (31,793) (37,323)Net book value at 28 February 2005 869 1,064 14,930 16,863Net book value at 29 February 2004 1,111 1,210 15,852 18,173

9 Other technical provisionsThe amount of €104,215,000 provided for at 28 February 2005 is in respect of losses anticipated on contracts that the Board willbe obliged to incept or renew arising from the commitment of the Board to a certain level of price increase effective from 1September 2005 and anticipated increases in the cost of providing healthcare benefits. These losses are expected to be incurred inthe period between September 2005 and August 2006. The charge of €53,424,000 represents the increase in the provision over theamount of €50,791,000 which was included in the Balance Sheet at 29 February 2004.

The decision with regard to the price increase reflects the current healthcare insurance environment. Projected cost increases arisefrom certain changes expected in the healthcare environment in Ireland, notably the anticipated opening of a number of significantnew facilities.

The Board's consulting actuaries Watson Wyatt LLP have confirmed that the amount of the provision is a reasonable estimate of theseexpected losses.

The introduction of risk equalisation is a key requirement for the continuing viability of the community rated system of private healthinsurance which is currently in operation in this country. In April 2005, the Health Insurance Authority (HIA) recommended to theTánaiste and Minister for Health and Children that risk equalisation be activated. On 27 June 2005, the Tánaiste announced herdecision not to implement the recommendation of the HIA at this time. The continuing absence of risk equalisation is reflected in the provision.

A further impact of this decision is to increase the likelihood of Vhi incurring significant losses in future years. In suchcircumstances, and if the absence of risk equalisation continued to be financed out of the reserves of VHI, then a situation wouldarise where the business could no longer be considered viable.



10 Deferred Taxation

Provision has been made in respect of deferred taxation for the following timing differences:2005 2004

€'000s €'000sUnrealised loss/(gain) on investment valuation 65 (14)Other timing differences (946) (1,027)Total provision (881) (1,041)

11 Creditors and accruals 2005 2004€'000s €'000s

Corporation tax - 1,836PAYE and PRSI 885 911Other creditors 1,175 2,245Accruals 9,487 10,930

11,547 15,922

12 Reconciliation of operating surplus to net cash flow from operating activities 2005 2004€'000s €'000s

Surplus on ordinary activities before taxation 4,397 71,685Depreciation charges 8,896 5,780Unrealised (gains)/losses on investments (887) 3,964Increase in health insurance technical provisions 118,643 78,085Increase in debtors from members arising out of insurance operations (42,405) (23,251)(Increase)/decrease in debtors and prepayments (1,050) 4,313(Decrease)/increase in creditors and accruals (2,539) 2,713Net cash inflow from operating activities 85,055 143,289

13 Movement in opening and closing portfolio investments 2005 2004€'000s €'000s

Net cash inflow/(outflow) for the period 5,179 (2,466)Portfolio investments 60,719 126,855Movement arising from cash flows 65,898 124,389Changes in market values (635) (4,289)Total movement in portfolio 65,263 120,100Portfolio investments and cash in hand at 1 March 600,939 480,839Portfolio investments and cash in hand at 28 February 666,202 600,939



14 Movement in cash and portfolio investments At 1 March Cash Changes to At 28 February2004 flow market value 2005

€'000s €'000s €'000s €'000sCash at bank and in hand (3,264) 5,179 - 1,915Shares in listed securities 3,277 3,500 362 7,139Debt securities and other fixed interest securities 591,078 51,692 (997) 641,773Loans secured by mortgages 166 (44) - 122Deposits with credit institutions 9,682 5,571 - 15,253

600,939 65,898 (635) 666,202

15 Analysis of cash flows for headings netted in the cash flow statement 2005 2004€'000s €'000s

Portfolio investments Purchase of shares in listed securities 3,500 -Purchase of fixed interest securities 1,091,452 1,603,530Purchase of deposits with credit institutions 716,522 822,342Sale of shares in listed securities - -Sale of fixed interest securities (1,039,761) (1,475,837)Sale of deposits with credit institutions (710,950) (823,158)

60,763 126,877Repayment of mortgage loans (44) (22)Net cash outflow on portfolio investments 60,719 126,855

16 Capital Commitments 2005 2004€'000s €'000s

Capital expenditure contracted for - 2,974Capital expenditure approved but not contracted for - 3,000

17 Related Party DisclosuresThere have been no transactions with related parties which require disclosure under Financial Reporting Standard 8.



18 Retirement benefitsThe Board operates a defined benefit pension scheme. The assets of the scheme are held in a separate trusteeadministered fund. Contributions to the scheme are charged to the income and expenditure account so as to spread thecost of pensions over employees working lives with the Board.

The pension charge for the year was €3,620,000 (2004: €3,322,000). The pension cost is determined by an independentqualified actuary, using the projected unit credit method of funding. The most recent actuarial valuation was at 28February 2003. The principal assumptions used in the actuarial valuation were that investment returns will exceed salaryincreases by 1.75% and pensioner increases by 2.75%.

At the date of the latest actuarial valuation, 28 February 2003, the market value of the scheme's assets was €49,600,000and the actuarial value of these assets represented 81% of the benefits that had accrued to members after allowing forexpected future increases in earnings and pensions. The funding rate was increased with effect from 1 May 2003 to reflectchanged investment conditions and actuarial advice confirms that the current levels of contributions payable to the scheme,together with existing assets, are adequate to secure members benefits over the expected remaining service lives of theparticipating employees. The actuarial reports are available for inspection by members of the scheme but not for publicinspection. A prepayment of €236,000 (2004: accrual €79,000) is included in the balance sheet at year end.

FRS 17 disclosureThe disclosures required under the transitional arrangements of FRS 17 ‘Retirement Benefits’ have been calculated byqualified independent actuaries. In addition to pension entitlements, the Board also provides certain benefits to retirees inrespect of health insurance cover. The disclosures in relation to the pension scheme are based on the most recent fullactuarial valuation at 28 February 2003 updated to 28 February 2005.

The major assumptions used in respect of the pension scheme are: 2005 2004% %

Rate of increase in salaries 4.0 4.0Rate of increase in pensions in payment 3.25 3.25Discount rate 4.90 5.25Inflation assumption 2.25 2.25

Long-term expected rates of return at 28 February were: 2005 2004% %

Equities 7.2 7.5Fixed interest 3.7 4.5Property 5.2 6.0Other 3.0 3.0

The assets in the pension scheme at market value were: 2005 2004€'000s €'000s

Equities 59,197 49,400Fixed interest 11,309 11,600Property 4,641 4,100Other 2,847 1,100Total market value of assets 77,994 66,200Present value of scheme liabilities (101,273) (86,800)Deficit in the scheme (23,279) (20,600)Unfunded health insurance premium provision (6,557) (5,700)Net retirement benefits deficit (29,836) (26,300)Related deferred tax asset 3,730 3,288Net retirement benefits liability (26,106) (23,012)



18 Retirement benefits (continued) 2005 2004

Total assets €'000s €'000sTotal assets excluding retirement benefits liability 1,112,887 994,262Retirement benefits liability (26,106) (23,012)

Total assets including retirement benefits liability 1,086,781 971,250

Reserves Reserves excluding retirement benefits liability 281,925 278,038Retirement benefits liability (26,106) (23,012)

Reserves including retirement benefits liability 255,819 255,026

If FRS 17 had been fully adopted, the following amounts would have been reflected in the financial statements

2005 2004Income and Expenditure Account €'000s €'000sCharged to net operating expensesCurrent service cost 3,233 2,600Past service cost - -Death in service cost 130 100Other retirement benefits 530 400

Total operating charge 3,893 3,100

Credit/(charge) to other incomeInterest in scheme liabilities (4,969) (3,800)Expected return on scheme assets 4,641 3,600

(328) (200)Net reduction in operating surplus (4,221) (3,300)

Statement of total recognised gains and lossesActual return less expected return on scheme assets 3,110 8,800Experience gains and losses on scheme liabilities 2,119 (6,900)Changes in demographic and financial assumptions (8,138) (10,800)

Actuarial loss (2,909) (8,900)Deferred tax credit 442 1,100

Total actuarial loss (2,467) (7,800)



18 Retirement benefits (continued) 2005 2004

Movement in net deficit during the yearNet defecit in scheme at start of year (23,012) (15,312)Current service cost (3,233) (2,600)Death in service cost (130) (100)Contributions 3,594 3,400Past service cost - -Interest on scheme liabilities (4,969) (3,800)Expected return on scheme assets 4,641 3,600Actuarial loss (2,909) (8,900)Deferred tax credit 442 1,100Other retirement benefits (530) (400)Net deficit at end of year (26,106) (23,012)

2005 2004 2003History of experience gains and lossesDifference between expected and actual return on assets 3,110 8,800 (19,900)% of scheme assets 4% 13% (40%)

Experience gains and losses on scheme liabilities 2,119 (6,900) 4,500% of scheme liabilities 2% (8%) 7%

Actuarial loss 2,909 (8,900) (22,000)% of scheme liabilities (3%) (10%) (35%)


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COMPARATIVERESULTS ANDGRAPHS





2001 2002 2003 2004 2005

€'000s €'000s €'000s €'000s €'000s

Earned premium 548,059 596,594 687,583 802,992 868,679

Claims incurred 471,370 520,502 595,169 663,324 752,449

Unexpired risks reserve - 15,279 19,871 15,641 53,424

Operating expenses 64,904 57,782 58,095 66,322 74,968

Investment return 24,931 15,864 24,684 13,980 16,559

Taxation charge 8,557 4,189 5,308 9,379 510

Surplus for the year 28,159 14,706 33,824 62,306 3,887

Surplus / Income Ratio 5.1% 2.5% 4.9% 7.8% 0.4%

Reserves 167,200 181,907 215,732 278,038 281,925

Minimum solvency 98,901 107,240 120,860 135,053 152,677

Financial Ratios % % % % %

* Solvency margin level 30.5 30.5 31.4 34.6 32.5

Claims (including URR) as a % of earned premium 86.0 89.8 89.4 84.6 92.8

Operating expenses as % of earned premium 11.8 9.7 8.4 8.3 8.6

* Minimum solvency margin as shown above is calculated in accordance with the provisions of the 1976 EU Non-LifeRegulations, with which Vhi Healthcare is not

currently required to comply.

The Board strives to achieve a solvency margin level equivalent to 40% of earned premium, which is considered by the Irish Financial Services Regulatory Authority(IFSRA) to be the recommended minimum level.


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Vhi Healthcare's target is to achieve a5% margin of surplus to revenue inorder to allow us achieve a 40%solvency margin (over a period of time),the minimum recommended by IFSRA.

Vhi Healthcare is a not for profitorganisation with a surplus being generatedonly to achieve the IFSRA solvencymargins and allow reinvestment in improvedbenefits and services for our members.

The average cost of treatment in a daycare setting can be between 10% and20% of the cost of an inpatient setting.Thus the drive to day care settingsensures better value for memberspremiums.

IFSRA have indicated that they wouldnormally require a 40% solvency ratio i.e.the ratio of reserves to premium income.Currently Vhi Healthcare is at 32.5%,below the minimum recommended by IFSRA.

Despite increasing competition more Irishpeople choose Vhi Healthcare as theirhealth insurer. Membership stands atover 1.56 million people and is still growing.

Vhi Healthcare prides itself on having oneof the lowest administration costs torevenue ratios of any health insurer in theworld. Currently the ratio stands at 8.6%compared to a worldwide norm of 12%and over 13% for some of ourcompetitors.

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MEMBERSHIP GROWTH: 48 YEAR HISTORY


Despite increasing competitionmore Irish people choose Vhi Healthcare as their healthinsurer. Membership stands atover 1.56 million people and isstill growing.


GALLERY OFEVENTS





1 IRFU and Vhi Healthcare tacklekids’ health with ‘Fit for Fun’Programme. The IRFU/VhiHealthcare "Fit for Fun"programme aims to assist primaryschools by encouraging children tobe more active and to embracehealthier lifestyles. The IRFU/VhiHealthcare "Fit for Fun"programme has been runningsince September, 2003, and hasvisited over 100 primary schoolsthroughout the country, involvingover 4,000 school children in total.Pictured with Irish rugby star,Brian O'Driscoll, are Dr BernadetteCarr, Medical Director, VhiHealthcare and Vincent Sheridan,Chief Executive, Vhi Healthcare.

2 Vhi gets you dancing on the streets!Get funky.. get fit….burn fat…. VhiDance Blitz 2004 saw renowneddance choreographer and fitnessinstructor Jane Shortall bringingher frenzied feast of dance to thestreets of Dublin.

3 Canadian guru reveals how tomaximise organisationalperformance: Canadian guruDanielle Pratt, pioneer of a newapproach to help companiesmaximise employee performancewas the keynote speaker at a VhiCorporate Solutions Conference inconjunction with Michael SmurfitSchool of Business in UCD. MsPratt explained how her "HealthyScorecard" has assisted leadingmultinationals worldwide toengage employees and driveorganisational performance.

4 Galway Bay Corporate Challenge:Fair City’s Ross and Lorcan helpedlaunch the Vhi Healthcaresponsored charity challenge in aidof Cancer Care West. VhiHealthcare sponsored the GalwayBay 10, Ireland’s largest charityroad race. All monies raised fromthe event went to Cancer CareWest, a charity organisation that ishelping to support the costs ofbuilding and servicing the InisAoibheann Lodge and ARC(Aftercare, Research andCouncilling) at University Hospital Galway.

5 Vhi Charitable Donation 2004: VhiHealthcare made a €20,000donation to the Paediatric DiabetesUnit in Tallaght Hospital. Thedonation went towards organisinginformation evenings on diabetes inchildren for parents. Pictured atthe launch of a parenting eveningare Professor Hoey and Dr.Bernadette Carr, Medical Director,Vhi Healthcare, in Tallaght Hospital.

6 Launch of Vhi Health Shop: The VhiHealth Shop was launched inNovember, 2004, and offers ourmembers and the general publicexceptional value on a wide range ofhealth and lifestyle products. Picturedat the launch is Declan Moran,Director of Marketing and BusinessDevelopment, Vhi Healthcare.

7 Vhi Healthcare are proud sponsorsof the Dundalk Chamber BusinessExcellence Awards which aim torecognise individuals andcompanies who excel in providinghigh-quality customer service thatbenefits customers and makesDundalk a better place to dobusiness. The Awards alsoencourage companies large andsmall to continually improve andgrow their business. Pictured atthe Awards is Margaret Byrne,Account Manager, Vhi Healthcare.

8 Each year Cork Chamber ofCommerce organise a fun familyday at Fota House which seesparents, children and teenagerstreated to a host of entertainmentincluding magic shows, stiltwalkers, a puppet show, balloonmodelling, bouncy castle, facepainting all to the sounds of sambaand jazz music. The event issupported by Vhi Healthcare andBarry's Tea.

9 Vhi Healthcare sponsor the annualMayo Chamber of CommerceBusiness Excellence Awardswhich encourage local companiesto strive for business excellenceand continuously improve theiroperations.

10 Walk This Way: Andrew Varley,Vice-President, HESC and AislingNolan, Vhi Corporate solutions are

pictured at the launch of Slí 2 in conjunction with the Irish HeartFoundation. Slí 2 is a workplace-based scheme that is based around a series of motivationalsigns designed to promote physicalactivity, particularly walking.

11 Vhi DeCare Dental launched amajor oral health campaign called'A Smile a Day' in September,2004. The campaign was designedto raise oral health awareness andinstil good oral health habits.

12 Vhi Healthcare launched aninnovative new health insuranceoffering, LifeStage Choices inOctober 2004. LifeStage Choicesconsists of three different healthinsurance options from whichcustomers can choose a plan mostrelevant to their life-stage.Pictured at the launch are DeclanMoran, Director of Marketing andBusiness Development, andVincent Sheridan, Chief Executive,Vhi Healthcare.

13 Vhi Healthcare's on-goingcommitment to businessexcellence was recognised at theNational Quality & ExcellenceAwards 2004, where we won theRecognition of Excellence Award. Pictured receiving the Award isTom Bailey, Senior Quality Analyst,Vhi Healthcare.

14 2004 saw further innovation withthe launch of Vhi DeCare Dental,Ireland's first dental insuranceplans. According to US healthstatistics people with dentalinsurance are twice as likely tovisit the dentist than those withoutdental insurance. Vhi DeCareDental provides individuals andfamilies with access to affordable,regular dental care.

15 Multi trip from Vhi Healthcare hascaptured 26% of the multi trip travelinsurance market in its first year ofbusiness. Since the launch of Multitrip from Vhi Healthcare, thedynamics of the travel insurancemarket have changed significantly,with demand for multi trip policiesincreasing from 25% in 2003 to 40%today at the expense of the traditionalsingle trip insurance policy.


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Main bankersAIB Bank plcBank of Ireland

AuditorsDeloitte & Touche

SolicitorsMcCann FitzGerald

Consulting ActuariesWatson Wyatt LLP

Voluntary Health Insurance BoardAn Bord Árachais Sláinte Shaorálaigh

KilkennyIDA Business Park, Purcellsinch,Dublin Road

DublinVhi House, Lower Abbey Street, Dublin 1

CorkVhi House, 70 South Mall

Dun Laoghaire35/36 Lower George's Street

GalwayVhi House, 10 Eyre Square

LimerickGardner House, Charlotte Quay

Offices open: 9am-5pm, Monday-FridayTelephone: Callsave 1850 44 44 44Lines open: 8am-8pm, Monday-Friday,9am - 2pm, Saturday

FaxKilkenny: (056) 7761741Dublin: (01) 7994091Cork: (021) 4277901Dun Laoghaire: (01) 2843076Galway: (091) 564307Limerick: (061) 310361

Website: www.vhi.ieEmail: [email protected]


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vhi annual report 2005 · psychology/business from university college cork, ireland. mr. collins...

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