who | world health organization - 3 · manual adjustments 30,936 (30,936) hiis vs cpp claim...

2

Contents Global Oversight Committee (GOC) Chairman’s Report ............................................................... 3

Certification of the Financial Statements for the year ended 31 December 2019 .................... 11

Letter of Transmittal ................................................................................................................... 12

Opinion of the External Auditor ................................................................................................. 13

Statement I: Statement of Financial Position ............................................................................. 16

Statement II: Statement of Financial Performance .................................................................... 17

Statement III: Statement of Changes in Net Assets/Equity ........................................................ 18

Statement IV: Statement of Cash Flow ....................................................................................... 19

Statement V: Comparison of Budget and Actual Amounts ........................................................ 20

Notes to the financial statements .............................................................................................. 21

1 Reporting entity ................................................................................................................ 21

2 Basis of preparation and presentation ............................................................................. 21

3 Significant accounting policies .......................................................................................... 23

4 Supporting information to the Statement of Financial Position ....................................... 26

5 Supporting information to the Statement of Financial Performance ............................... 38

6 Supporting information to the Comparison of Budget and Actual Amounts ................... 42

7 Related party and other senior management disclosures ................................................ 43

8 Events after the Reporting Date ....................................................................................... 43

3

Global Oversight Committee (GOC) Chairman’s Report

I am pleased to present the Staff Health Insurance (SHI) Fund Annual Report for the year 2019. The financial statements, accounting policies and notes have been prepared in compliance with International Public Sector Accounting Standards (IPSAS), WHO’s Financial Regulations and SHI Rules.

The SHI Fund is a separate entity and SHI’s financial statements are reported separately from WHO’s financial statements. The SHI Fund financial statements identify separately the following SHI accounting entities (referred to in this report as “participating entities”): • World Health Organization (WHO) • International Agency for Research on Cancer (IARC) • International Computing Centre (ICC) • UNITAID • Pan American Health Organization (PAHO) • Trust Fund for the Joint United Nations programme on HIV/AIDS (UNAIDS) Fund participants from these six entities reached 40,618 members in 2019 which is a slight increase from the 40,301 members in 2018. The split between active staff and their dependents and retirees and their dependents remains constant at 77% and 23% respectively. Highlights of revenue, expense and financial analysis is included in this report in order to provide a complete picture of the SHI Fund for 2019. The statutory components of the financial report have been audited by the Organization’s External Auditor, the Republic of the Philippines Commission of Audit, whose opinion is included in the financial report.

Overall Results for 2019

The overall increase in net assets in 2019 was US$ 180.5 million. This excellent result can be explained by the surplus of contributions over claims (as shown in both Table 1 and Note 5.1) together with an exceptional net investment return of US$ 115.9 million. The overall balance has been booked to the participating entities to reduce their unfunded liabilities and is reflected in both Statement II: Statement of Financial Performance and Note 5.7.

Contributions totalled US$ 164.2 million in 2019 (US$ 143.8 million in 2018) which included the rate increase of 4% for 2019.

Although claims increased by 3% in 2019 to US$ 93.7 million as compared to US$ 91.1 million in 2018, the increase due to medical inflation (1.3%) was far less when compared with increases seen when reviewing relative market trends. This is a reflection of the significant cost containment initiatives undertaken by the Secretariat, as noted by the Fund actuaries Aon Consulting.

4

The absolute dollar increase in claims paid in 2019 also reflects higher participation in the Fund and an increase in the number of hospitalizations (particularly in HQ and PAHO). It is also notable that there was a reduction in the number of high-cost medical cases (>US$ 50,000) from 276 (worth US$ 30.9 million) in 2018 to 245 (worth US$ 27.3 million) in 2019.

Figure 1 shows that regular contributions have been increasing faster than claims, reflecting both the annual rate increases and cost containment.

Administrative costs for the year totalled US$ 5.9 million which represents 3.6% of total contributions collected and remains lower than the 6.0% ceiling allowed for under SHI Rule F.6.5.

In US$'000 CONTRIBUTIONS CLAIMS PAIDSURPLUS /

DEFICIT

Activ e Staff and Eligible Family Members 84,638 42,525 42,113

Former Staff/Surv iv ors and Eligible Family Members 45,783 50,484 (4,702)

Operational sub-total 130,421 93,009 37,412

25% of Activ e Staff Contributions earmarked for Former Staff 28,213 28,213 Surplus/(Deficit) on Organization Share for Former Staff carried ov er 1,876 1,876 Second-Tier Contributions (PAHO region) 1,136 1,136 Prior Year adjustments 22 (675) 697 Manual adjustments 30,936 (30,936) HIIS v s CPP Claim adjustments (30,031) 30,031 Medicare Premiums 405 (405) Temporary Staff (Appendix C) 277 20 257 Current Year adjustments 277 1,330 (1,053)

161,944 93,664 68,280 PAHO Supplementary Contributions 2,225 2,225 Total 164,169 93,664 70,505

Table 1 - Contributions and Claims paid

0%

10%

20%

30%

40%

50%

60%

70%

80%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Figure 1 - Claims/Regular Contributions as %

5

Former Staff

Claims paid in respect of former staff exceeded contributions received by US$ 4.7 million (compared with US$ 6.0 million in 2018 and US$ 9.4 million in 2017). This category has been in deficit for several years, though the gap is closing following recent annual contribution rate increases and significant cost containment efforts. It should be noted that this former staff operational deficit is globally covered on an annual basis through application of SHI Rule F.8.4.

The initial 2019 contributions/claims relationship is shown in Figure 2 which demonstrates that the deficit for former staff is generated by HQ, PAHO and WHO-PAHO, noting that the bubble size is based on the value of claims. WHO-PAHO represents all Americas-based former staff employed under WHO contracts (including those who worked in regions other than HQ). However, HQ’s deficit is more than covered by the 25% of HQ active staff contributions (set aside in accordance with SHI Rule F.8.4) as can be seen in Figure 3.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0

Contributions(US$ millions)

Claims (US$ millions)

Figure 2 - 2019 Former Staff Surplus/Deficit

HQ

UNAIDS

UNITAID

ICC

IARC

AFRO

WHO-PAHO

PAHO

EMRO

EURO

SEARO

WPRO

Deficit

Surplus

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0

Contributions(US$ millions)

Claims (US$ millions)

Figure 3 - 2019 Former Staff Surplus/Deficit - after including earmarked 25% Active Staff contributions

HQ

UNAIDS

UNITAID

ICC

IARC

AFRO

WHO-PAHO

PAHO

EMRO

EURO

SEARO

WPRO

Deficit

Surplus

6

The Americas (i.e. both PAHO and WHO-PAHO) is the only region where the 25% provision is insufficient to cover the corresponding former staff operational deficit. This is even after considering PAHO’s supplementary contributions which are levied at 4% on staff payroll. Both PAHO and WHO-PAHO are therefore subsidized by the other regions, as in previous years. More information on this segmentation is available in Note 5.1.

Investment performance

The SHI Fund investments yielded 12.4% in 2019 compared to a -2.9% return in 2018. This represented a net gain of US$ 115.9 million (compared to a net loss of US$ 30.3 million in 2018). The net gain of the SHI investments was slightly ahead of the portfolio benchmarks with equity investments increasing by 27.8%, and the fixed income investments by 7.0%.

The SHI investment portfolio is structured with a long-term time horizon to match the long term nature of its future expenditure. Annual investment market returns are variable, and so years of higher and lower performance are to be expected.

The strong 2019 investment return figures should be viewed in in the long term, with the long term cumulative SHI Fund investment return since 2003 at 4.9%, compared to a long-term target of 4.5% (refer to Figure 4).

s

The equity and fixed income investments are managed by external fund managers, whose appointment and performance is closely managed by the WHO Treasury unit and monitored by

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

% Return

Figure 4 - SHI Fund Investment performance

TARGET

7

the independent expert advisors in the Advisory Investment Committee. The total funds invested has increased by US$ 176.1 million, with the relative allocations among the asset classes as follows: fixed income securities 64%; equities 25%; and cash 11%.

Table 2 provides a summary of the SHI investments at 31 December 2019, and the investment returns during 2019 (based on the average balances throughout the year).

Fund Balance and Liability

The SHI engaged Aon Consulting to conduct an After Service Health Insurance (ASHI) actuarial valuation in accordance with generally accepted actuarial principles and practices. The accounting valuation results are based on the actuary’s understanding of the requirements of IPSAS 39.

The 31 December 2019 valuation results and the IPSAS 39 disclosures are split by regional office and entity. The defined benefit obligation and service cost are allocated to the regional offices and entities.

The contributions, claims, and headcount are all factored into the ASHI actuarial liability, and there was a favourable variance in 2019, compared to the previous actuarial valuation.

Figure 5 provides an overview of the Fund balance (or net assets) and long-term liability. The Fund balance as at 31 December 2019 is US$ 1,176.5 million (an increase of 18.1% over 2018) and is summarized in Table 3. The long-term liability is now estimated to be US$ 2,708.0 million as at 31 December 2019 (an increase of 10.4% over 2018). This leaves an unfunded deficit of US$ 1,564.7 million, after setting aside an amount of US$ 33.2 million to pay four months of combined in-service and after-service claims (under SHI Rule F.8.1). The unfunded deficit is shown in the accounts of participating entities.

Table 2 % Return WeightGOC-recommended weighting, effective

since 2013

Co-mingled cash 132.4 3.1% 11% 0% to 10%Fix ed Income 741.9 7.0% 64% 55% to 75%

Equities 297.5 27.8% 25% 25% to 35%

Total Investments 1,171.8 12.4% 100%

US$ millions 31 December

2019

8

Figure 5

The increase in the liability can be explained primarily by a decrease in discount rates (due mainly to a corresponding decrease in high-grade corporate bond rates). The impact of lower discount rates was partially offset by:

• decreases in assumed future medical costs (due primarily to favorable claims experience during 2019); and

• the net impact of plan amendments to mandate US Medicare coverage for US participants at the plan’s expense (with the impact of reduced claims reimbursed by the SHI and payment of Medicare premiums/penalties from the SHI producing a net decrease in expected plan costs).

Further information on the actuarial valuation (including assumptions used) is contained in Note 4.10.

20%

25%

30%

35%

40%

45%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

31-12-2014 31-12-2015 31-12-2016 31-12-2017 31-12-2018 31-12-2019

Fund

ed %

Amou

nt in

$M

illio

ns

Net Assets Unfunded Liability Funded %

Table 3 - Fund BalanceIn US$'000 Notes 31 December 2019

Actuarial requirement for future costs of former staff and surv iv or dependants 1,145.1 Actuarial requirement for future costs of activ e staff 1,562.9 Long-term liabilities 4.10 2,708.0 Prov ision for outstanding claims 4.9 33.2 Total Liability 2,741.2 less Receiv ables - non-current 4.6 (1,564.7) Fund Balance 1,176.5

9

As it may be of interest to some participants, the latest Fund balance can also be compared against the reserve required under SHI Rules F.8.2 and F.8.3 which is shown in Figure 6.

ASHI Liability – Funded Ratio

SHI’s funded ratio improved from 39% to 42% during 2019, and now sits at the highest level on record since SHI adopted IPSAS in 2012. This continues the trend over the past several years, demonstrating progress toward an eventual funding target of 100%, currently estimated to be achieved in 2035. The improvement in the funded ratio during 2019 reflects the following decisions taken as part of the SHI Governance model:

• contributions to the SHI fund intentionally exceed claims and administrative expenses, building up assets to help cover the existing actuarial deficit and the new benefit accruals needed (as staff meet the eligibility criteria for ASHI benefit entitlements with each year of service);

• a portion of the assets is invested in fixed income investments, which fluctuate in tandem with interest rates - this provides some measure of hedging when interest rates fall (as they did during 2019), mitigating funded ratio volatility; and

• the remaining assets are generally invested in equities, with a recent move in 2020 toward some real estate assets for diversification - over the long run, these asset classes historically have produced greater returns than fixed income.

The existing financial liability of the SHI Fund relates to funding the existing retirees and all those currently eligible to retire. AON has estimated this current eligibility liability at US$ 1,894.0 million. Funding the current eligibility liability will set the target funding ratio at approximately 70%, rather than 100% of the full long-term ASHI liability (according to IPSAS) and should be reached by 2030.

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,0001 2

Amou

nt in

$M

illio

ns

FIgure 6 - 2019 Comparison of ASHI Liability (including the Reserve required under SHI Rules F.8.2 and F.8.3) v Net Assets

Reserve required under SHI Rules F.8.2 and F.8.3 Remaining ASHI Liability required under IPSAS Net Assets

10

The SHI together with participating entities will continue to pursue three strategies to improve funding:

• ensure contributions exceed claims annually; • cost containment (through regular negotiations with health care providers to limit

medical inflation, case management, and a review of plan design); and • achieving the current target of a 4.5% investment return over a long term time horizon.

The GOC will continue to monitor the performance and the long term financing of SHI very closely, and will make further recommendations to the Director-General to improve the overall performance of the fund.

11

Certification of the Financial Statements for the year ended 31 December 2019

The accounts for the Staff Health Insurance Fund have been established, maintained and reported in accordance with International Public Sector Accounting Standards (IPSAS), the WHO Financial Regulations and the SHI Rules. The financial statements for the year ended 31 December 2019, together with the notes to the financial statements and supporting schedules, have been reviewed and approved.

Jane Stewart Pappas Samantha Bell-Shiers Comptroller, ad interim Head, Staff Health Insurance 6 April 2020

12

Letter of Transmittal

13

Opinion of the External Auditor

16

Staff Health Insurance - Statement I: Statement of Financial Position As at 31 December 2019

(In thousands of US dollars)

The section on significant accounting policies and the accompanying notes form part of the financial statements.

Notes 31 December 2019 31 December 2018

ASSETSCurrent assets

Cash and cash equiv alents 4.1 27,215 33,566 Short-term inv estments 4.2 95,358 37,688 Receiv ables - current 4.3 5,496 927 Receiv able from participants - net 4.4 416 280 Inter-entity receiv able 4.5 132,392 68,069

Total current assets 260,878 140,530

Non-current assetsReceiv ables - non-current 4.6 1,564,742 1,488,329 Long-term inv estments 4.2 1,101,470 960,394

Total non-current assets 2,666,212 2,448,723

TOTAL ASSETS 2,927,090 2,589,253

LIABILITIESCurrent liabilities

Financial liabilities 4.2 184,639 104,018 Other current liabilities 4.7 1,081 854 Deferred rev enue 4.8 162 47 Prov ision for outstanding claims 4.9 33,186 32,074

Total current liabilities 219,068 136,993

Non-current liabilitiesLong-term liabilities 4.10 2,708,022 2,452,260

TOTAL LIABILITIES 2,927,090 2,589,253

NET ASSETS/EQUITYReserv es - -

TOTAL NET ASSETS/EQUITY - - TOTAL LIABILITIES AND NET ASSETS/EQUITY 2,927,090 2,589,253

17

Staff Health Insurance - Statement II: Statement of Financial Performance

For the year ended 31 December 2019



Notes 2019 2018

REVENUEContributions - regular 5.1 161,944 141,157 Contributions - PAHO-administered asset transfer 5.1 2,225 2,647

TOTAL REVENUE 164,169 143,804

EXPENSESClaims paid 5.1 93,664 91,111 Amounts w ritten-off 5.2 1 1 Staff costs 5.3 5,041 5,004 Trav el 5.4 117 121 Other operating costs 5.5 733 468

TOTAL EXPENSES 99,557 96,705

Finance rev enue/(ex pense) 5.6 115,849 (30,320) Amounts booked to participating entities 5.7 180,461 16,778

NET SURPLUS/(DEFICIT) FOR THE YEAR - -

18

Staff Health Insurance - Statement III: Statement of Changes in Net Assets/Equity


There is no reported change in net assets/equity, due to the policy of booking any surplus back to the participating entities to reduce their unfunded liabilities (Notes 3.12 and 5.7). This policy will continue whilst there is an overall unfunded liability for the SHI.


19

Staff Health Insurance - Statement IV: Statement of Cash Flow For the year ended 31 December 2019



2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES Surplus/(Deficit) for the year - - Non-cash movements

(Increase)/decrease in receiv ables - current (4,568) 4,715 (Increase)/decrease in receiv able from participants - net (136) 90 (Increase)/decrease in Inter-entity receiv able (64,324) (51,679) (Increase)/decrease in receiv ables - non-current (76,413) 474,963 Increase/(decrease) in other current liabilities 227 176 Increase/(decrease) in deferred rev enue 116 (41) Increase/(decrease) in prov ision for outstanding claims 1,112 (61) Increase/(decrease) in long-term liabilities 255,762 (458,124)

Net cash flows provided by (used in) operating activities 111,775 (29,960)

CASH FLOWS FROM INVESTING ACTIVITIES (Increase)/decrease in short-term inv estments (57,671) 20,623 (Increase)/decrease in long-term inv estments (141,076) (246) Increase/(decrease) in financial liabilities 80,620 3,791

Net cash flows provided by (used in) investing activities (118,126) 24,168

Net increase/(decrease) in cash and cash equivalents (6,351) (5,792)

Cash and cash equivalents at beginning of year 33,566 39,357

Cash and cash equivalents at end of year 27,215 33,566

20

Staff Health Insurance - Statement V: Comparison of Budget and Actual Amounts




EXPENSESFinal

Biennium Budget

2018 Expense

2019 Expense

Biennium Expense

Balance NotesPercentage

Implementation

Staff costs 11,536 5,004 5,041 10,046 1,490 6.1 87%Trav el 120 121 117 238 (118) 6.2 198%Other operating costs 1,080 468 733 1,201 (121) 6.3 111%Total budgeted ex penditure 12,736 5,593 5,892 11,485 1,251 90%Claims paid - 91,111 93,664 184,775 - 6.4 -Amounts w ritten-off - 1 1 3 - 6.5 -Total non-budgeted ex penditure - 91,112 93,665 184,777 - -Total 12,736 96,705 99,557 196,262 1,251 -

21

Notes to the financial statements

1 Reporting entity The Staff Health Insurance (SHI) Fund is a fund of the World Health Organization (WHO). It is treated as a multi-employer plan for various participating entities. WHO has had its own independent SHI scheme since 1 January 1960.

The SHI Rules state that SHI’s basic objective is to provide for the reimbursement of a major portion of the expenses for medically recognized health care incurred by staff members, and other persons admitted as participants to the SHI and provided by health care providers who must be licensed and authorized by the health authorities of their country of practice.

The Global Oversight Committee (GOC) of the SHI Fund oversees the SHI and advise the WHO Director-General on SHI operations and management, finance and investments, audit and control, benefits and best practices, rules and governance.

The SHI Secretariat is based in WHO Headquarters at Avenue Appia 20, 1211 Geneva 27, Switzerland.

2 Basis of preparation and presentation The financial statements of the SHI have been prepared on the accrual basis of accounting in accordance with International Public Sector Accounting Standards (IPSAS). Where IPSAS do not address a particular issue, the appropriate International Financial Reporting Standard (IFRS) has been applied.

These Financial Statements were prepared under the assumption that the SHI is a going concern and will continue in operation and will meet its mandate for the foreseeable future (IPSAS 1).

These financial statements are presented in United States dollars (US$) and all values are rounded to the nearest thousands ($’000).

Functional currency and translation of foreign currencies The functional and reporting currency of the SHI is the US$. Foreign currency transactions are translated into US$ at the prevailing United Nations Operational Rates of Exchange (UNORE). The UNORE are set once a month, and revised mid-month if there are significant exchange rate fluctuations relating to individual currencies. Assets and liabilities in currencies other than US$ are translated into US$ at the prevailing UNORE month-end closing rate. Resulting gains or losses are accounted for in the Statement of Financial Performance. The non US$ denominated assets and liabilities in the investment portfolios are translated into US$ at the month-end closing rate used by the custodian.

22

Materiality and the use of judgments and estimates Materiality1 is central to SHI’s financial statements. The SHI process for reviewing accounting materiality provides a systematic approach to the identification, analysis, evaluation, endorsement and periodic review of decisions taken involving the materiality of information, spanning a number of accounting areas. The financial statements include amounts based on judgments, estimates and assumptions by management. Changes in estimates are reflected in the period in which they become known.

Financial Statements2

In accordance with IPSAS 1, a complete set of financial statements has been prepared as follows:

• Statement of Financial Position • Statement of Financial Performance • Statement of Changes in Net Assets/Equity • Statement of Cash Flow • Comparison of Budget and Actual Amounts • Notes, comprising a summary of significant accounting policies and other relevant information.

1 Omissions or misstatements of items are material if they could, individually or collectively, influence the decisions or assessments of users made on the basis of the financial statements. 2 The financial statements are rounded to the thousands of US dollars. Comparative figures have been adjusted, as a result rounding differences may occur.

23

3 Significant accounting policies SHI applies the WHO accounting rules and has adopted the IPSAS since January 2012.

A financial accounting valuation of the WHO After Service Health Insurance plan is performed annually in application of IPSAS 39.

Cash and Cash Equivalents

Cash and cash equivalents are held at nominal value and comprise cash at banks, collateral deposits, commercial papers, money market funds and short-term bills and notes. All investments that have a maturity of three months or less from the date of acquisition are included as cash and cash equivalents. This includes cash and cash equivalents held in the portfolios managed by external investment managers.

Investments and financial instruments

Financial assets or financial liabilities at fair value through surplus or deficit are financial instruments that meet either of the following conditions: 1) they are held for trading; or 2) they are designated by the entity upon initial recognition as at fair value through surplus or deficit. Financial instruments in this category are measured at fair value and any gains or losses arising from changes in the fair value are accounted for through surplus or deficit and included within the Statement of Financial Performance in the period in which they arise. All derivative instruments, such as swaps, currency forward contracts or options are classified as held-for-trading except for designated and effective hedging instruments as defined under IPSAS 29 (Financial Instruments: Recognition and Measurement). Financial assets in the externally managed portfolios designated upon initial recognition as at fair value through surplus or deficit are classified as current assets or non-current assets according to the time horizon of the investment objectives of each portfolio. If the time horizon is less than or equal to one year, they are classified as current assets, and if it is more than one year, they are classified as non-current assets. Due to the large number of individual securities within each portfolio, at any given time there might be a minority of securities with a maturity profile that is different from the time horizon of the objectives of that portfolio.

Bank deposits and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Accrued revenue related to interest, dividends and pending cash to be received from investments are included herein. Bank deposits and other receivables are stated at amortized cost calculated using the effective interest rate method, less any impairments. Interest revenue is recognized on the effective interest rate basis, with the exception of short-term receivables for which the recognition of interest would be immaterial.

Other financial liabilities include accrued expenses and payables relating to investments and are recognized initially at fair value, and subsequently measured at amortized cost using the effective interest method other than for short-term liabilities where the recognition of interest would be immaterial.

Financial instruments are allocated between current and non-current. This is based on the investment time horizons of each of the investments and is shown in the Statement of Financial Position. All of the financial instruments in the investment portfolios other than those classified in the categories detailed above are classified as non-current due to the long-term investment horizon of the portfolios.

24

Receivables Receivables are recorded at their estimated realizable value. Accounts receivable is classified as non-current if the receivable is due after one year from the reporting date.

This includes an inter-entity receivable due to the SHI from the WHO, representing excess cash invested within co-mingled short-term investments.

Any write-off of SHI receivables will be in accordance with WHO accounting rules, and will be properly escalated to the appropriate Management level.

Other current liabilities Other current liabilities includes accrued liabilities which are financial liabilities in respect of goods or services that have been received by the SHI during the reporting period and which have not yet been invoiced.

Provisions and contingent liabilities Provisions are recognized for future liabilities and charges where the SHI has a present legal or constructive obligation as a result of past events and it is probable that the SHI will be required to settle the obligation.

Other commitments, which do not meet the recognition criteria for liabilities, are disclosed in the notes to the financial statements as contingent liabilities when their existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not wholly within the control of the SHI.

Revenue The main sources of revenue for the SHI include but are not limited to: • Contributions. Revenue is from contributions collected from participating entities and from both active and former staff of these entities to the SHI. Contributions are generally financed in the ratio of two-thirds by the participating entities to one-third by the participants. Where payment is due in the current accounting year, revenue is recognized in the current period. Where payment is due after the year end (as in the case of both Leave Without Pay and Extension periods concluding after the year end), the amount is reported as deferred revenue. • Finance revenues. Revenue is from income on externally managed investments, and interest on excess cash invested by the WHO within co-mingled short-term investments.

Expenses Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrences of liabilities that result in decreases in net assets/equity. Expenses are recognized when claims are due (delivery principle) and not when cash or its equivalent is paid.

25

Provision for outstanding claims The Provision for outstanding claims is estimated for the settlement of four months of combined in-service and after-service claims (in accordance with SHI Rule F.8.1).

In accounting for the Provision for outstanding claims, an actuarial valuation is generally needed.

Long-term liabilities Long-term liabilities are post-employment health care benefits paid after separation for service rendered.

In accounting for Long-term liabilities:

- an actuarial valuation is needed to determine a discounted liability; and - an entity accrues a liability and an expense as employees render service.

The portion of the SHI covering former staff is a defined, post-employment benefit subject to all requirements for defined benefit plans contained in IPSAS 39, “Employee Benefits”.

Statement of Cash Flow The Statement of Cash Flow (Statement IV) is prepared using the indirect method.

Budget comparison SHI’s budgets are approved by the WHO Director-General (based on the recommendation of the Global Oversight Committee) on the full accrual basis of IPSAS. In addition, budgets are prepared on a biennial basis.

Amounts booked to participating entities Any surplus is booked back to the participating entities to reduce their unfunded liabilities, thus there is no reported change in net assets/equity (Statement III). This policy will continue whilst there is an overall unfunded liability for the SHI.

26

4 Supporting information to the Statement of Financial Position

Cash and cash equivalents Cash and cash equivalents are held by investment managers on behalf of the SHI. They include cash and other financial assets with original maturity dates of three months or less from the date of acquisition. A and B refer to mandates managed by different Fund managers.

Investments and financial instruments The SHI investment portfolios are periodically reviewed by the World Health Organization Advisory Investment Committee to ensure that the level of returns and the level of investment risk are appropriate for the Fund. The long-term funds are managed by external fund managers who invest primarily in government and corporate bonds, and in equities. The fixed income portfolio of investments is hedged in the proportions 50% US$, 30% CHF, 20% EUR to match the currencies of the Fund’s liabilities. During 2019 one fixed income mandate was terminated and the funds were redistributed to one of the other fixed income mandates and to the passive global bond index fund. The proportions of fixed income investments in active and passive investment strategies are now approximately equal. During 2019, US$ 50 million was transferred from the passive equity fund to the active equity fund. The proportions of equities investments in active and passive strategies are approximately 40% and 60% respectively.

In US$'000Long-term

fixed income portfolio A

Long-term fixed income portfolio B

Long-term global bond index fund

Equity portfolio

Externally managed

Staff Health Insurance portfolios

CASH AND CASH EQUIVALENTS 10,204 17,011 - - 27,215

In US$'000Long-term




Equity portfolio

Externally managed


INVESTMENTS UNDER CURRENT ASSETSCash and cash equiv alents 10,204 17,011 - - 27,215 Short-term inv estments

Financial assets at fair v alue through surplus or deficit -- held for trading 4,481 2,124 - - 6,605 Bank deposits and receiv ables 87,286 1,468 (1) - 88,753

Total inv estments under current assets 101,971 20,603 (1) - 122,573

INVESTMENTS UNDER NON-CURRENT ASSETSLong-term inv estments

Financial assets at fair v alue through surplus or deficit -- upon initial recognition 267,833 166,427 369,748 297,462 1,101,470 Total inv estments under non-current assets 267,833 166,427 369,748 297,462 1,101,470

FINANCIAL LIABILITIES UNDER CURRENT LIABILITIESFinancial liabilities

Financial liabilities at fair v alue through surplus or deficit for trading (3,899) (1,358) - - (5,257) Pay ables and accruals (161,328) (18,053) (1) - (179,382)

Total financial liabilities under current liabilities (165,227) (19,411) (1) - (184,639) TOTAL INVESTMENTS - NET 204,577 167,619 369,746 297,462 1,039,404

27

Short-term investments

Short-term investments are held by investment portfolios on behalf of the SHI. These include financial assets at fair value through surplus or deficit held for trading, and bank deposits and receivables. “Financial assets at fair value through surplus or deficit – held for trading” include fixed income securities and derivative instruments held to cover projected liabilities and any unexpected cash requirements. Receivables include accrued income on investments and receivables from trade sales to settle.

Long-term investments

Long-term investments are placed in accordance with the approved WHO Investment Policy, and are invested in high-quality, medium-dated and long-dated, government, agency and corporate bonds, and global equities. As the investment horizon of the externally managed portfolios is more than one year, the financial assets at fair value through surplus or deficit upon initial recognition in the portfolios are classified as long-term investments.

Financial liabilities

Financial liabilities disclosed under “Financial liabilities at fair value through surplus or deficit for trading” include derivative transactions such as foreign exchange forward contracts and interest rate swaps. Financial liabilities disclosed under “Payables and accruals” relate to other financial liabilities from investments including the trade purchases made before 31 December 2019 and settled after that date.

In US$'000Long-term




Equity portfolio

Externally managed


SHORT-TERM INVESTMENTS

Financial assets at fair v alue through surplus or deficit -- held for trading 4,481 2,124 - - 6,605

Bank deposits and receiv ables 87,286 1,468 (1) - 88,753

Total 91,767 3,592 (1) - 95,358

In US$'000Long-term




Equity portfolio

Externally managed


LONG-TERM INVESTMENTS

Financial assets at fair v alue through surplus or deficit -- upon initial recognition 267,833 166,427 369,748 297,462 1,101,470

In US$'000Long-term




Equity portfolio

Externally managed


FINANCIAL LIABILITIES

Financial liabilities at fair v alue through surplus or deficit for trading 3,899 1,358 - - 5,257

Pay ables and accruals 161,328 18,053 1 - 179,382

Total 165,227 19,411 1 - 184,639

28

Fair value hierarchy

The fair value hierarchy is the categorization of market pricing indicating the ease of realizing the value of investments held as shown below.

Most of the financial instruments held have quoted prices (unadjusted) in active markets and are classified as Level 1 valuations. Derivative instruments that are “over the counter” are classified as Level 2 because their fair value is observable either directly (i.e. as a price) or indirectly (i.e. derived from prices). The instruments shown under the Level 2 fair value measurement category consist of the derivative contracts in the externally managed portfolios.

Risk management

The SHI investments are exposed to financial risks including credit risk, interest rate risk, foreign exchange risk and investment price risk. In accordance with the Financial Regulations, funds not required for immediate use may be invested. All investments are carried out within the framework of investment policies approved by the Director General. All portfolios are managed by external managers who manage funds in accordance with a defined mandate. The WHO Advisory Investment Committee reviews regularly the investment policies, and the investment performance and risk for each investment portfolio. This Committee is comprised of external investment specialists and can make recommendations to the Director General.

Nature of financial instruments

Investments are categorised as follows:

- Long-term fixed income – comprising funds managed by external investment managers as defined in the approved Investment Policy – these are invested in high-quality medium-dated and long-dated, government, agency, and corporate bonds.

- Equities – Comprising either funds or pooled funds invested in global equities managed by external investment managers as defined in the approved Investment Policy.

Credit risk

The SHI investments are widely diversified to limit credit risk to any individual investment counterparty. Investments are placed with a wide range of counterparties using minimum credit quality limits and

Level 1 Level 2 Level 3 Total

Cash and cash equiv alents 4,050 - - 4,050

Short-term inv estmentsFinancial assets at fair v alue through surplus or deficit -- held for trading - 3,321 - 3,321

Long-term inv estmentsFinancial assets at fair v alue through surplus or deficit -- upon initial recognition 369,748 - - 369,748

Financial liabilitiesFinancial liabilities at fair v alue through surplus or deficit for trading - - - -

Total 373,798 3,321 - 377,118

29

maximum exposure limits by counterparty (and by groups of related counterparties) established in investment mandates. These limits are applied both to the portfolios managed internally by the WHO Treasury unit, and also to the portfolios managed by external investment managers. The WHO Treasury unit monitors the total exposure to counterparties across all internally and externally managed portfolios to ensure that total counterparty exposures across portfolios are tracked and managed.

The credit risk and liquidity risk for cash and cash equivalents are minimized by investing only in major financial institutions which have strong investment grade credit ratings from primary credit rating agencies. The WHO Treasury unit regularly reviews the credit ratings of the approved financial counterparties and takes prompt action in the event of any credit rating downgrade. The credit risk of the investments under externally managed portfolios are monitored by the investment managers and they are summarised as follows.

Interest rate risk

The SHI fixed income investments are exposed to interest rate risk. The metirc of investment duration is a measure of sensitivity to changes in market interest rates, and the effective average duration of the investments of the SHI at 31 December 2019 was 7.1 years for the long-term investments.

Fixed income derivative instruments may be used by external investment managers to manage interest rate risk under strict investment guidelines. These interest rate instruments are used for portfolio duration management and for strategic interest rate positioning.

Average rating of the top 2 ratings Asset value

AAA 186,824

AA+ 4,299

AA 30,080

AA- 15,962

A+ 42,692

A 52,915

A- 24,715

BBB+ 32,625

BBB 9,244

BBB- 28,499

Rated 427,855

Not rated 609,211

Grand total 1,037,066

30

The interest rate swaps held in the SHI portfolios as at 31 December 2019 are summarised below.

Currency Local currency '000 US$'000 equivalent Pay/Receive Maturity

CAD 3,900 2,979 Pay Floating / Receiv e Fix ed Dec 2029

CAD 3,200 2,445 Pay Floating / Receiv e Fix ed Jun 2029

CAD 1,100 840 Pay Floating / Receiv e Fix ed Oct 2029

CNY 2,700 386 Pay Floating / Receiv e Fix ed Apr 2024

CNY 23,900 3,417 Pay Floating / Receiv e Fix ed Jul 2024

CNY 2,300 329 Pay Floating / Receiv e Fix ed Apr 2024

CNY 32,700 4,675 Pay Floating / Receiv e Fix ed Jun 2024

CNY 12,400 1,773 Pay Floating / Receiv e Fix ed Jul 2024

CZK 2,300 101 Pay Floating / Receiv e Fix ed Jan 2029

EUR 300 335 Pay Fix ed / Receiv e Floating Mar 2022

EUR 3,300 3,683 Pay Fix ed / Receiv e Floating Jun 2030

EUR 100 112 Pay Fix ed / Receiv e Floating Dec 2025

EUR 8,700 9,710 Pay Fix ed / Receiv e Floating Dec 2039

EUR 200 223 Pay Floating / Receiv e Fix ed Jun 2025

EUR 8,400 9,375 Pay Floating / Receiv e Fix ed Mar 2025

EUR 1,300 1,451 Pay Floating / Receiv e Fix ed Jun 2029

GBP 800 1,048 Pay Fix ed / Receiv e Floating Mar 2022

GBP 500 655 Pay Floating / Receiv e Fix ed Dec 2039

GBP 600 786 Pay Floating / Receiv e Fix ed Mar 2039

GBP 9,500 12,451 Pay Fix ed / Receiv e Floating Sep 2021

GBP 4,200 5,505 Pay Floating / Receiv e Fix ed Jun 2025

GBP 2,150 2,818 Pay Fix ed / Receiv e Floating Mar 2030

GBP 500 655 Pay Fix ed / Receiv e Floating Dec 2039

ILS 1,800 520 Pay Floating / Receiv e Fix ed Apr 2029

ILS 1,000 289 Pay Floating / Receiv e Fix ed Jan 2024

ILS 1,200 347 Pay Floating / Receiv e Fix ed Apr 2029

ILS 300 87 Pay Floating / Receiv e Fix ed May 2029

JPY 90,000 822 Pay Fix ed / Receiv e Floating Jun 2029

JPY 1,460,000 13,337 Pay Fix ed / Receiv e Floating Dec 2021

KRW 1,289,000 1,110 Pay Floating / Receiv e Fix ed Mar 2029

KRW 96,600 83 Pay Floating / Receiv e Fix ed Jun 2029

KRW 1,004,000 865 Pay Floating / Receiv e Fix ed Mar 2024

MXN 6,300 343 Pay Floating / Receiv e Fix ed Jan 2023

MXN 1,500 82 Pay Floating / Receiv e Fix ed Feb 2027

NZD 1,350 904 Pay Floating / Receiv e Fix ed Feb 2020

SEK 1,000 107 Pay Floating / Receiv e Fix ed Jun 2029

USD 6,200 6,200 Pay Floating / Receiv e Floating Mar 2020

USD 42,900 42,900 Pay Fix ed / Receiv e Floating Jun 2020

USD 39,100 39,100 Pay Fix ed / Receiv e Floating Sep 2021

USD 25,600 25,600 Pay Fix ed / Receiv e Floating Dec 2021

USD 42,300 42,300 Pay Floating / Receiv e Floating Mar 2022

USD 8,000 8,000 Pay Floating / Receiv e Floating Apr 2022

USD 10,200 10,200 Pay Floating / Receiv e Floating Jun 2022

USD 7,100 7,100 Pay Floating / Receiv e Floating Apr 2023

USD 12,600 12,600 Pay Floating / Receiv e Floating Sep 2024

USD 1,700 1,700 Pay Fix ed / Receiv e Floating Apr 2025

USD 2,500 2,500 Pay Fix ed / Receiv e Floating May 2025

USD 1,300 1,300 Pay Floating / Receiv e Floating May 2029

USD 4,200 4,200 Pay Fix ed / Receiv e Floating Dec 2029

USD 4,300 4,300 Pay Fix ed / Receiv e Floating Jan 2030

USD 400 400 Pay Fix ed / Receiv e Floating Feb 2030

USD 200 200 Pay Fix ed / Receiv e Floating Mar 2030

USD 2,000 2,000 Pay Floating / Receiv e Fix ed Dec 2042

USD 2,500 2,500 Pay Floating / Receiv e Fix ed Dec 2045

31

Forward foreign exchange contracts and other derivative financial instruments held within the externally managed investment portfolios

In accordance with the investment guidelines set up for each externally managed portfolio, the external investment managers use forward foreign exchange contracts, futures contracts and interest rate swap contracts to manage the currency and interest rate risk of groups of securities within each portfolio.

The forward foreign exchange contracts within the externally managed investment portfolios are summarised below.

A 1% appreciation (or a 1% depreciation) in the relative value of the U.S. Dollar against the above forward foreign exchange contracts would result in an increase (or decrease) in the unrealized loss on these contracts by less than US$ 30 thousand.

Local currency '000 US$'000 equivalent Local currency '000 US$'000 equivalent

AUD 4,502 3,166 CHF 109,181 112,903

CAD 11,273 8,694 CLP 29,553 39

CNY 19,043 2,732 CNY 660 95

COP 4,415 1 IDR 4,269,654 307

DKK 66,832 10,102 RUB 19,635 315

EUR 25,213 28,332

GBP 13,179 17,469

HKD 1,133 145

ILS 307 89

JPY 4,700,597 43,301

KRW 117,900 102

MXN 2,440 132

NOK 2,520 287

NZD 154 104

PEN 2,083 628

PLN 649 171

SEK 1,995 213

SGD 347 258

THB 20,865 697

TWD 4 -

Total 116,623 Total 113,659

Net sold amounts Net purchased amounts

32

Futures contracts

The futures contracts held within the externally managed portfolios are summarised below.

Long position

Products Exchange Net No. of contracts

Eurodollar 3 month Futures MAR 2020 CME 14

Eurodollar 3 month Futures JUN 2020 CME 28

Eurodollar 3 month Futures DEC 2020 CME 28

Eurodollar 3 month Futures JUN 2021 CME 28

Euribor 3 month Futures MAR 2021 ICE 30

Euribor 3 month Futures JUN 2021 ICE 31

Sterling 3 month Futures MAR 2020 ICE 38

Sterling 3 month Futures SEP 2020 ICE 38

Sterling 3 month Futures MAR 2021 ICE 38

Short-Term Euro-BTP Futures MAR 2020 EUREX 76

US 2 y ear T-Note Futures MAR 2020 CME 147


US Ultra T-Bond Futures MAR 2020 CME 42

German 5 y ear Gov ernment Note (BOBL) Futures MAR 2020 EUREX 3

Italian 10 y ear Gov ernment Bond (BTP) Futures MAR 2020 EUREX 64

French 10 y ear Gov ernment Bond (OAT) Futures MAR 2020 EUREX 10

Australian 10 y ear Gov ernment Bond Futures MAR 2020 ASX 48

Japanese 10 y ear Bond Futures MAR 2020 JPX 7

Short position

Products Exchange Net No. of contracts

Eurodollar 3 month Futures MAR 2021 CME 23

Euribor 3 month Futures MAR 2020 ICE 30

Euribor 3 month Futures JUN 2020 ICE 31


US Ultra 10 y ear T-note Futures MAR 2020 CME 16

US T-Bond Futures MAR 2020 CME 3

German 2 y ear T-Bill (Schatz) Futures MAR 2020 EUREX 358

German 10 y ear Gov ernment Note (BUND) Futures MAR 2020 EUREX 131

UK Long Gilt Futures MAR 2020 ICE 22

Australian 10 y ear Gov ernment Bond Futures MAR 2020 ASX 4

Canadian 10 y ear Bond Futures MAR 2020 MONTREAL 10

Future Put option FEB 2020 1 y r Midcurv e 9850 CME 81

Future Call option FEB 2020 1 y r Midcurv e 9850 CME 81

Future Call option FEB 2020 T-Note 1300 CME 12

Future Put option FEB 2020 T-Note 1275 CME 6

Future Put option FEB 2020 T-note 1270 CME 12

Future Call option FEB 2020 T-note 1305 CME 6

Note 1 : ASX is an ex change in Australia. CME refers to Chicago Mercantile Ex change Group.

EUREX refers to the Eurex Ex change. ICE refers to Intercontinental Ex change. JPX refers to Japan Ex change Group.

33

Receivables – current Total current receivables amounted to US$ 5.496 million as at 31 December 2019, primarily due from the Pan American Health Organization (PAHO).

Receivable from participants - net The net receivable from participants amounted to US$ 416 thousand as at 31 December 2019, and is related to 20% of medical expenses to be recovered from participants following direct payments.

For active staff members and their participating family members, direct payment may be made to a health care provider for the full amount of an individual medical bill, where the full amount of the medical bill equals at least 15% of a staff member's net monthly salary. The staff member’s share of expenses (normally 20% + non-reimbursable expenses) is recovered over 3 months’ salaries.

Inter-entity receivable This is a net receivable due to the SHI from the WHO, representing excess cash invested within co-mingled short-term investments. The inter-entity receivable increased in 2019 primarily because further SHI funds were invested in co-mingled WHO short-term investments.

In US$'000 31 December 2019 31 December 2018RECEIVABLES - CURRENT

Former staff (Organization Share) Staff Health Insurance contributions duePan American Health Organization (PAHO) 5,322 -

Former staff (Former staff Share) Staff Health Insurance contributions dueUnited Nations Joint Staff Pension Fund (UNJSPF) 121 121

Contribution to cover administrative expensesInternational Computing Centre (ICC) 52 49

General operating costs - regions paid in advance - 757 Total 5,496 927

In US$'000 31 December 2019 31 December 2018

RECEIVABLE FROM PARTICIPANTS - NETWorld Health Organization (WHO) 374 251 International Computing Centre (ICC) 9 3 International Drug Purchase Facility (UNITAID) 12 10 Pan American Health Organization (PAHO) 2 - Trust Fund for the Joint United Nations Programme on HIV/AIDS (UNAIDS) 19 16

Total 416 280

34

Receivables – non-current

Total non-current receivables amounted to US$ 1.565 billion as at 31 December 2019, representing the entity share of the unfunded long-term liability for future healthcare costs, as determined by Aon Consulting, professional actuaries, with computation presented in Note 4.10.

Other current liabilities Total balance of other current liabilities as at 31 December 2019 is US$ 1.081 million. This consists mainly of accruals made for investment management fees, IT project fees and other consultant fees.

Deferred revenue Unrealized contributions for future years (related to both Extensions and Leave Without Pay) worth US$ 162 thousand were received in 2019.

Provision for outstanding claims As at 31 December 2019, an amount of US$ 33.186 million has been estimated by Aon Consulting, professional actuaries, for settlement of four months of combined in-service and after-service claims.


RECEIVABLES - NON-CURRENTWorld Health Organization (WHO) 1,084,024 1,129,754 International Agency for Research on Cancer (IARC) 88,476 69,537 International Computing Centre (ICC) 71,047 54,086 International Drug Purchase Facility (UNITAID) 15,736 10,535 Pan American Health Organization (PAHO) 270,249 168,772 Trust Fund for the Joint United Nations Programme on HIV/AIDS (UNAIDS) 35,209 55,646

Total 1,564,742 1,488,329


OTHER CURRENT LIABILITIESVoided claim pay ments (pending repay ment) 41 23 Inv estment management fees 567 336 IT project fees 235 4 Insurance cards - 2 Other consultant fees 238 216 General operating costs - regions - 273

Total 1,081 854


PROVISION FOR OUTSTANDING CLAIMSWorld Health Organization (WHO) 21,566 23,486 International Agency for Research on Cancer (IARC) 399 383 International Computing Centre (ICC) 1,157 663 International Drug Purchase Facility (UNITAID) 250 276 Pan American Health Organization (PAHO) 8,553 5,762 Trust Fund for the Joint United Nations Programme on HIV/AIDS (UNAIDS) 1,261 1,504

Total 33,186 32,074

35

Long-term liabilities The Defined Benefit Obligations as at 31 December 2019 were determined by Aon Consulting, professional actuaries, based on personnel data and past payment experience provided by SHI. At 31 December 2019, the Defined Benefit Liabilities amounted to US$ 2.708 billion for After Service Health Insurance.

In 2013, the SHI Governance approved that a full actuarial study should only be undertaken every 3 years, with lighter studies in interim years. It must be noted that the actuarial valuation as at 31 December 2019 is a full study, whereby all assumptions have been updated including census data.

Below are the disclosures required for After Service Health Insurance as at 31 December 2019 under IPSAS 39.


LONG-TERM STAFF LIABILITIESWorld Health Organization (WHO) 2,031,401 1,921,792 International Agency for Research on Cancer (IARC) 124,129 99,842 International Computing Centre (ICC) 81,845 64,335 International Drug Purchase Facility (UNITAID) 21,962 15,164 Pan American Health Organization (PAHO) 330,113 226,792 Trust Fund for the Joint United Nations Programme on HIV/AIDS (UNAIDS) 118,572 124,335

Total 2,708,022 2,452,260

US$'000

Reconciliation of Defined Benefit ObligationDefined Benefit Obligation at 31 December 2018 2,452,260

Serv ice Cost for 2019 91,431 Interest on Defined Benefit Obligation for 2019 66,123 (Actual After Serv ice Gross Benefit Pay ments and Medicare Reimbursements in 2019) (51,513) (Actual After Serv ice Admin Ex penses in 2019) (3,153) Actual Contributions by After Serv ice Participants in 2019 15,261 Plan Amendments (28,964) (Gain)/Loss on Defined Benefit Obligation Due to Financial Assumption Changes 363,330 (Gain)/Loss on Defined Benefit Obligation Due to Other Demographic Changes (196,753)

Defined Benefit Obligation at 31 December 2019 2,708,022

Reconciliation of AssetsAssets at 31 December 2018, Gross of F.8.1 Reserv e 996,005

(Actual Total SHI Gross Benefit Pay ments and Medicare Reimbursements for 2019) (93,665) (Actual Total SHI Administrativ e Ex penses for 2019) (5,892) Actual Total SHI Participant Contributions during 2019 53,645 Actual Total SHI Organization Contributions during 2019, ex cluding 4% pay roll lev y for PAHO 106,423 4% of Pay Contributions and Retroactiv e Transfers for PAHO during 2019 2,225 Interest on Gross SHI Assets for 2019 30,406 Gain/(Loss) on Plan Assets during 2019 87,319

Assets at 31 December 2019 1,176,465

36

US$'000

Reconciliation of F.8.1 ReserveF.8.1 Reserv e at 31 December 2018 32,074

Interest on F.8.1 Reserv e for 2019 903 (Gain)/Loss on F.8.1 Reserv e during 2019 209

F.8.1 Reserve at 31 December 2019 33,186 Assets at 31 December 2019, Net of F.8.1 Reserve 1,143,279

Reconciliation of Funded StatusDefined Benefit Obligation (DBO)

Inactiv e 1,145,104 Activ e 1,562,917

Total DBO 2,708,022

ASHI Plan Assets(Gross SHI Plan Assets Administered by WHO) (1,176,465) Offset for WHO F.8.1 Reserv e 33,186

Net ASHI Plan Assets Administered by WHO (1,143,279)

Net (Surplus)/Deficit (Note 4.6) 1,564,742 Current (Asset)/Liability - Noncurrent (Asset)/Liability 1,564,742

Annual Expense for Calendar Year 2019Serv ice Cost 91,431 Interest on (Surplus)/Deficit 36,620 Past Serv ice (Credit)/Cost (28,964)

Total Expense Recognized in Statement of Financial Performance 99,087

Medical Sensitivity Analysis

31 December 2019 Defined Benefit ObligationCurrent Medical Inflation Assumption Minus 1% 2,163,247 Current Medical Inflation Assumption 2,708,022 Current Medical Inflation Assumption Plus 1% 3,452,467

Current Discount Rate Assumption Minus 1% 3,467,417 Current Discount Rate Assumption 2,708,022 Current Discount Rate Assumption Plus 1% 2,161,091

Approx imate Duration of Defined Benefit Obligation (y ears) 27

Expected Accounting Contributions during 2020Contributions by /for Activ e Staff, Net of Claims/Admin Costs 75,234 Contributions by WHO for Inactiv es 34,493

Total 109,727

37

Key assumptions and methods

Measurement date-

Discount rate----

Medical Cost Increases by Nationality Region of Staff Member

-

-

-

-

Annual general inflation----

Europe - Non-UNAIDS - 1.3%

The Americas - 2.2%Other Countries - 2.2%

Inflation rates are based on the U.N. common assumptions (for long-duration plans) of 1.1% Switzerland, 1.8% Euro Zone, and 2.2% for the United States as directed by the U.N. System Task Force on Accounting Standards.

Europe - UNAIDS - 1.3%

Europe - Initial Increase 3.10%, Long-term Increase 3.10%, Year Long-term Increase Reached 2020.

Other Countries - Initial Increase 6.00%, Long-term Increase 4.00%, Year Long-term Increase Reached 2034.

USA - Initial Increase 4.80%, Long-term Increase 3.85%, Year Long-term Increase Reached 2032.

The Americas (excluding USA) - Initial Increase 6.00%, Long-term Increase 3.85%, Year Long-term Increase Reached 2035.

SHI bases its discount rates on the yields on high-grade corporate bonds. SHI uses a yield curve approach, which reflects the expected cash flows and assumed currency exposure (specific to the ASHI) for each grouping of offices.

The l iabil ity is assumed to be incurred in CHF, EUR, and US$, based on the approximate l iabil ity mix for each grouping of offices and the following yield curves:

- Switzerland - SIX Swiss Exchange curve- Euro Zone - iBoxx Euro Zone curve- United States - Aon AA Above Median curve

The discount rates for the 31 December 2019 valuation are based on the geographic locations of the offices. In all regions, the resulting rate is rounded to the nearest 0.1%.

31 December 2019

Europe - Non-UNAIDS - 0.6% (decrease from 1.3% in prior valuation)

The Americas - 3.5% (decrease from 4.5% in prior valuation)Other Countries - 3.7% (decrease from 4.7% in prior valuation)

Europe - UNAIDS - 1.8% (decrease from 2.7% in prior valuation)

38

5 Supporting information to the Statement of Financial Performance

Contributions and claims paid The revenue of the SHI consists of a first tier of contributions received in respect of both active and former staff (of which one third is paid by the participants and two-thirds by WHO).

A region, or any other office administered by WHO, shall be required to add a second tier of contributions to the SHI throughout the year following any calendar year in which the claims reimbursed to its active staff total more than 75% of the first tier contributions. The amount by which these claims exceed the 75% ceiling is defined as the regional deficit. It is this amount that must be recovered by the SHI through the second tier of contributions. Historically, this has only been applicable to the PAHO region.

A decision was made in 2011 to ensure long-term sustainability of the SHI by increasing the funding level for the SHI unfunded liability, through higher rates of contributions. An increase of 4% per year (compounded rate) in the rates of contributions and lump sum rates has been applied since 2012. The situation is monitored closely on a yearly basis by the SHI Governance, and the rates are reviewed and revised as and when necessary.

SHI’s main purpose is to provide for the reimbursement of a major portion of the expenses for medically recognized health care incurred by staff members, and other persons admitted as participants to the SHI and provided by health care providers who must be licensed and authorized by the health authorities of their country of practice.

Underlying contributions were higher in 2019 at US$ 161.944 million than in 2018 (US$ 141.157 million), reflecting mainly the rate increase approved by the SHI Governance but also increased participation in the Fund. As in 2018, PAHO transferred supplementary contributions (primarily arising from a 4% levy on staff payroll) to the SHI Fund. These amounted to US$ 2.225 million in 2019 (US$ 2.647 million in 2018).

Claims increased in 2019 to US$ 93.664 million (US$ 91.111 million in 2018) mainly due to medical inflation (1.3%), albeit this was far less when compared to relative market trends. There was also higher participation in the Fund as noted above and an increase in the number of hospitalizations (particularly in HQ and PAHO). It is also notable that there was a reduction in the number of high-cost medical cases (>US$ 50,000).

A segmental breakdown of both contributions and claims paid can be found on the next page.

39

In

US$

'000

SEGM

ENTA

L BR

EAKD

OWN

OF B

OTH

CONT

RIBU

TION

S AN

D CL

AIM

PAI

D H

eadq

uarte

rs

Trus

t Fun

d fo

r the

Joi

nt

Unite

d Na

tions

Pr

ogra

mm

e on

HIV

/AID

S (U

NAID

S)

Inte

rnat

iona

l Dr

ug

Purc

hase

Fa

cilit

y (U

NITA

ID)

Inte

rnat

iona

l Co

mpu

ting

Cent

re (I

CC)

Inte

rnat

iona

l Ag

ency

for

Rese

arch

on

Canc

er (I

ARC)

Regi

onal

Of

fice

for

Afric

a

Regi

onal

Of

fice

for t

he

Amer

icas

(W

HO-P

AHO)

Pan

Amer

ican

He

alth

Or

gani

zatio

n (P

AHO)

Regi

onal

Of

fice

for t

he

East

ern

Med

iterr

anea

n

Regi

onal

Of

fice

for

Euro

pe

Regi

onal

Of

fice

for

Sout

h-Ea

st

Asia

Regi

onal

Of

fice

for t

he

Wes

tern

Pa

cific

TOTA

L

Activ

e St

aff a

nd E

ligibl

e Fa

mily

Mem

bers

- 75%

of F

irst-T

ier C

ontrib

ution

s29

,790

6,99

3

1,22

2

2,42

6

1,66

0

15,1

82

-

8,

834

6,

598

4,

397

3,

792

3,

744

84

,638

- Clai

ms

paid

(17,

152)

(3,0

29)

(653

)

(1,9

36)

(645

)

(2,7

25)

-

(10,

635)

(1,8

37)

(1,0

16)

(1,2

41)

(1,6

56)

(42,

525)

Activ

e St

aff a

nd E

ligibl

e Fa

mily

Mem

bers

- op

erati

onal

sub-

total

12,6

38

3,

965

56

9

490

1,

014

12

,457

-

(1,8

01)

4,76

2

3,38

1

2,55

1

2,08

8

42,1

13

- S

econ

d-Ti

er C

ontrib

ution

s-

-

-

-

-

-

-

1,

136

-

-

-

-

1,

136

- S

upple

men

tary

Contr

ibutio

ns-

-

-

-

-

-

-

2,

225

-

-

-

-

2,

225

Ac

tive

Staf

f and

Elig

ible

Fam

ily M

embe

rs s

ub-to

tal

12,6

38

3,

965

56

9

490

1,

014

12

,457

-

1,56

0

4,76

2

3,38

1

2,55

1

2,08

8

45,4

74

Fo

rmer

Staf

f/Sur

vivo

rs a

nd E

ligibl

e Fa

mily

Mem

bers

- Firs

t-Tier

Con

tributi

ons

19,2

15

49

6

74

38

731

4,

804

5,

437

7,

983

1,

683

1,

055

2,

298

1,

968

45

,783

- Clai

ms

paid

(24,

595)

(226

)

(48)

(67)

(510

)

(1,2

58)

(6,6

92)

(13,

092)

(851

)

(208

)

(1,5

69)

(1,3

68)

(50,

484)

Form

er S

taff/S

urvi

vors

and

Elig

ible

Fam

ily M

embe

rs -

oper

ation

al su

b-tot

al(5

,380

)

27

1

25

(2

8)

22

1

3,54

6

(1,2

55)

(5,1

09)

832

84

7

729

60

0

(4,7

02)

- 25%

of A

ctive

Staf

f Firs

t-Tier

Con

tributi

ons

earm

arke

d for

For

mer

Staf

f9,

930

2,

331

40

7

809

55

3

5,06

1

-

2,94

5

2,19

9

1,46

6

1,26

4

1,24

8

28,2

13

Fo

rmer

Sta

ff/Su

rviv

ors

and

Elig

ible

Fam

ily M

embe

rs s

ub-to

tal

4,55

0

2,60

2

433

78

0

774

8,

606

(1

,255

)

(2

,164

)

3,

031

2,

313

1,

993

1,

848

23

,511

Surp

lus/

(Def

icit)

on

Orga

niza

tion

Shar

e pr

ovis

ion

for F

orm

er S

taff

carr

ied

over

*(2

,017

)

2,

592

43

0

923

11

1

1,75

3

(3,6

25)

-

608

1,

236

(3

33)

19

7

1,87

6

Prior

Yea

r adju

stmen

ts **

- Con

tributi

ons

18

-

-

-

-

7

-

(3

)

-

-

0

-

22

- Clai

ms

paid

(1)

-

-

-

-

(1)

-

672

4

-

1

0

67

5

Prio

r Yea

r adj

ustm

ents

sub

-tota

l17

-

-

-

-

5

-

669

4

-

2

0

69

7

Curre

nt Ye

ar a

djustm

ents

***

- Con

tributi

ons

185

6

0

-

0

40

-

-

10

29

1

6

277

- C

laim

s pa

id1,

571

(2

90)

-

(1

,249

)

34

110

(4

5)

(1

,268

)

48

(11)

(239

)

7

(1,3

30)

Curr

ent Y

ear a

djus

tmen

ts s

ub-to

tal

1,75

6

(283

)

0

(1,2

49)

34

15

1

(45)

(1,2

68)

58

18

(238

)

13

(1

,053

)

To

tal

16,9

44

8,

875

1,

432

94

5

1,93

4

22,9

72

(4

,925

)

(1

,204

)

8,

463

6,

948

3,

974

4,

147

70

,505

Sum

mar

yTO

TAL

Cont

ribut

ions

57,1

20

12

,419

2,13

3

4,19

7

3,05

5

26,8

46

1,

812

23

,120

11,0

98

8,

183

7,

021

7,

164

16

4,16

9

Clai

ms

paid

(40,

176)

(3,5

44)

(702

)

(3,2

51)

(1,1

21)

(3,8

74)

(6,7

37)

(24,

324)

(2,6

35)

(1,2

35)

(3,0

47)

(3,0

17)

(93,

664)

Surp

lus/

(Def

icit)

16,9

44

8,

875

1,

432

94

5

1,93

4

22,9

72

(4

,925

)

(1

,204

)

8,

463

6,

948

3,

974

4,

147

70

,505

*** C

urre

nt Y

ear a

djus

tmen

ts: t

hese

repr

esen

t bot

h co

ntrib

ution

s an

d cla

ims

for A

ppen

dix C

sta

ff (i.

e. s

taff

mem

bers

on

tem

pora

ry a

ppoin

tmen

ts o

f 60

days

or l

ess

and

paid

on a

dail

y ba

sis),

refu

nds

and

claim

s re

bate

s as

well

as

Med

icare

pre

mium

s.

* Sur

plus

/(Def

icit)

on

Orga

niza

tion

Shar

e pr

ovis

ion

for F

orm

er S

taff

carr

ied

over

: this

repr

esen

ts th

e ex

cess

or d

efici

t org

aniza

tion

shar

e co

ntrib

ution

s ar

ising

from

the

prov

ision

s cr

eate

d by

all p

artic

ipatin

g en

tities

(exc

ept P

AHO)

with

rega

rds

to th

eir fo

rmer

sta

ff, n

oting

that

the

requ

ired

orga

nizat

ion

shar

e co

ntrib

ution

s wi

ll alre

ady

be in

clude

d in

the

Firs

t-Tier

con

tribu

tions

.

** P

rior Y

ear a

djus

tmen

ts: t

hese

repr

esen

t con

tribu

tions

, ref

unds

and

clai

ms

reba

tes

relat

ing to

pre

vious

yea

rs.

40

Amounts written-off The amount written-off relates to the unsuccessful recovery from a deceased former staff member (and his estate) of 20% of medical expenses following a direct payment.

Staff costs Total staff costs reflect salary costs of HQ and Regional staff processing claims.

There was a 1% increase in 2019, due to the phasing of recruitment in both 2018 and 2019 of the Claims Management Officer, Compliance Officer and IT system support.

Travel Travel costs decreased by 3% in 2019 and missions were to brief participants, work closely with the SHI Regional teams, discuss administrative matters with BFOs and enhance/establish agreements with major health care providers.

Other operating costs Other operating costs have increased in 2019, mainly due to the phasing of IT project fees (US$ 320 thousand) and extra actuarial fees (US$ 90 thousand) for a full census update and ad hoc funding analyses requested by the SHI Governance. These increases were offset by other administrative cost savings.

In US$'000 31 December 2019 31 December 2018STAFF COSTS

HQ 4,049 3,881 Regional Offices 992 1,123

Total 5,041 5,004

41

Finance revenue/(expense) SHI Fund investments yielded 12.4% in 2019, compared to -2.9% in 2018.

Global stocks generated the best returns in a decade, boosted by aggressive central bank stimulus measures and easing trade tensions towards the end of the year. The current economic expansion became the longest in US history and US stocks rose to record highs led by technology shares in December as the US and China scaled back their trade dispute.

Government and corporate bonds yielded strong returns as central banks around the world cut interest rates in an attempt to soften the negative effects of a trade war. After raising rates in 2018, the US Federal Reserve cut rates three times in 2019. Many other central banks followed suit, and the European Central Bank reduced rates further into negative territory.

Amounts booked to participating entities Any surplus is booked back to the participating entities to reduce their unfunded liabilities. This policy will continue whilst there is an overall unfunded liability for the SHI.

A surplus of US$ 180.461 million was booked back to participating entities for 2019. This was reflected in the net asset data submitted to Aon Consulting, professional actuaries, for use in the actuarial valuation in determining the liability of each participating entity for After Service Health Insurance benefits.

In US$'000 31 December 2019 31 December 2018FINANCE REVENUE/(EXPENSE)

Income/(loss) on equity inv estments (ex t. Managed) 66,613 (20,774) Income/(loss) on fix ed income inv estments (ex t. Managed) 47,823 (9,436) Interest on ex cess cash inv ested w ithin co-mingled WHO Short-Term Inv estments 2,619 1,180 Inv estment income/(ex pense) 117,056 (29,031) Ex change gain/(loss) 14 (41) Inv estment management fees (1,221) (1,249)

Total 115,849 (30,320)

42

6 Supporting information to the Comparison of Budget and Actual Amounts (Statement V)

The original 2018/19 biennium budget was approved by the Director-General on 27 June 2017 following the eighth SHI Global Oversight Committee meeting.

Staff costs The budget includes staff costs for the SHI unit in Headquarters, and for claims processing in the Regional Offices. There was an underspend against the biennium budget, due to both the retirement of several experienced HQ claims processors with subsequent downgraded replacements, and the delayed recruitment of staff (such as the Claims Management Officer, Compliance Officer and IT system support). There were also some savings in both the EMRO and EURO regions.

Travel There was an overspend against the biennium budget, with reference to the costs disclosed in Note 5.4.

Other operating costs There was an overspend against the biennium budget, with reference to the costs disclosed in Note 5.5.

Claims paid There is no approved budget available for claims paid in 2019. The nature of the SHI operation is such that only one very large claim is needed to distort the outcome, plus this amount is largely dependant on other variables such as h

who | world health organization - 3 · manual adjustments 30,936 (30,936) hiis vs cpp claim...

Documents