Document ID: chunk:federal_register_of_legislation:F2024L01525:body:0:p7
Version: federal_register_of_legislation:F2024L01525
Segment Type: other
Provision Reference: 
Character Range: 17844–20987

altered in a way that may affect its eligibility as a component of the capital base.

Common Equity Tier 1 Capital
 1.          Common Equity Tier 1 Capital comprises the highest quality components of capital that fully satisfy all of the following characteristics:
         1.           provide a permanent and unrestricted commitment of funds;
         2.           are freely available to absorb losses;
         3.           do not impose any unavoidable servicing charge against earnings; and
         4.           rank behind the claims of policy owners and other creditors in the event of winding-up of the issuer.
 2.          Common Equity Tier 1 Capital consists of the sum of:
         1.           paid-up ordinary shares issued by a private health insurer (whether listed on an exchange or unlisted) that meet the criteria in Attachment A to this Prudential Standard;
         2.           paid-up mutual equity interests issued by a mutually-owned private health insurer that meet the criteria in paragraph 1 of Attachment F to this Prudential Standard up to the limit specified in paragraph 4 of Attachment F;
         3.           retained earnings;
         4.           undistributed current year earnings (refer to paragraph 33 to 36 to this Prudential Standard);
         5.           accumulated other comprehensive income and other disclosed reserves (refer to paragraph 37 and 38 to this Prudential Standard);
         6.            technical provisions in surplus/(deficit) of those required by Prudential Standard HPS 340 Insurance Liability Valuation (HPS 340);[4] and
         7.           regulatory adjustments applied in the calculation of Common Equity Tier 1 Capital required under Attachment B to this Prudential Standard.
 3.          Current year earnings must take into account:
         1.           negative goodwill;
         2.           expected tax expenses; and
         3.           dividends when declared in accordance with Australian Accounting Standards.
 4.          Declared dividends for the purpose of paragraph 33(c) of this Prudential Standard may be reduced by the expected proceeds, as agreed in writing by APRA, of a Dividend Reinvestment Plan (DRP) to the extent that dividends are used to purchase new ordinary shares issued by the private health insurer. A private health insurer must review every six months the expected subscription for new ordinary shares under its DRP having regard to experience over previous years and reasonable expectations of the level of subscription that might apply in future. If a private health insurer identifies any material change in the expected level of future subscription for new ordinary shares under its DRP, it must notify APRA and obtain APRA's approval to a new amount by which declared dividends may be reduced for regulatory capital purposes.
 5.          Current year earnings include the full value of fee income not sourced from the insurer's health insurance policies provided that:
         1.           the fee income has either been received in cash or has been debited by the private health insurer to an account to be paid by the