Media releases

December 15, 2000

Consumers: major beneficiaries of Medibank Private's healthy results

Medibank Private now provides health insurance
cover to around 3 million Australians - up from 2 million in November
last year.
For the 1999-2000 financial year, Medibank Private yielded a surplus
of almost $100 million surplus. This reflects strong underwriting
performance, and continued strong investment strategies. Over 87
per cent of the surplus is attributable to investments.
Medibank Private remains the largest private health
insurer and is a not-for-profit registered health benefits organisation.
In the 1999-2000 financial year, the company strengthened
its statutory reserves, increasing its break-even contributions to
3.3 months (or $451.9 million) as of 30 June, 2000 (up from 3.1 months
in 1998-99). Over the same period, industry reserves increased from
2.9 months to 3.3 month. New solvency and capital adequacy arrangements
will begin to take effect from 1 January. This result provides a sound
position from which to begin managing against the new regime.
Medibank Private is one of a few private health
insurers to be upgraded to an "A" Standard & Poors credit rating,
reflecting the company's strong financial position. It was upgraded
from a BBB rating in May 2000. Being in a strong financial position
means the company can contain premiums and pursue new initiatives
and programs on behalf of its members and to grow the business.

Market share

Medibank Private now has 30.7 per cent share of
the private health insurance market (hospital and ancillary products)
- up on 27.1 per cent for 98-99.
Always dominant in the Victorian market (where
its share has consistently held at around 42 per cent), Medibank Private
now also has the largest market share of any private health insurance
fund in NSW which until the middle of this year was the MBF stronghold.
Medibank Private now has over 26.7 per cent of that market.
The organisation has increased its market share
(total fund) in Queensland where it has 37.2 per cent of the market
Tasmania (35.1 per cent), SA (22.7 per cent), and WA (17.4 per cent).
Investment income
Medibank Private has a history of sound financial
investment. Our investment performance has been the most successful
in the industry over many years. This is again reflected in this year's
surplus of which 87 per cent can be attributed to investment returns.
Medibank Private structure
Medibank Private separated from the Health Insurance
Commission three years ago when it became a public company and Government
Business Enterprise. At that time a highly commercial Board of Directors
was appointed.
Separation provided the organisation with greater
vigour, focus and direction and saw the establishment of a national
network of retail centres, cash payment and lodgement agencies.
In September 1999 a new Managing Director was appointed,
Mark Burrowes. The Managing Director and Board have refocussed and
honed Medibank Private into a more commercial and market responsive
Mark Burrowes had previously worked both in Australia
and overseas in senior executive functions for two international companies,
the Colonial Group and prior, Shell Australia, in Canada. Mr Burrowes
has taken a very strategic approach to his new role and has galvanised
the company around its new strategies.
The organisation was restructured in early 2000
to ensure alignment of structures with strategy and to reflect changes
in business practices and the industry environment. New managers were
added to the team at the top (see separate overview).
Performance has been enhanced with retail centres
being refocussed on sales and service to the almost 3 million people
Medibank Private covers.
Federal Government 30 Per Cent Rebate and Lifetime
Health Cover
The Federal Government 30 Per Cent Rebate introduced
in early 1999 helped to stabilise and reinvigorate private health
insurance membership. Together with the introduction of the Federal
Government's Lifetime Health Cover (LHC) initiative, a huge surge
in fund membership was experienced in 1999-2000.
LHC meant that people who took out hospital cover
before 31 years of age and maintained that membership would be entitled
to maintain a base-rate premium throughout their lifetime.
Mr Burrowes made Lifetime Health Cover an immediate
priority for the organisation in reviewing strategy in late 1999.
Medibank Private introduced its Sales Intensity Program (SIP) to take
advantage of the one-off opportunity to grow membership and market
share. In addition, the organisation refocussed on business development,
sales and marketing in order to increase its private health insurance
leadership and market share.
Less urgent programs were put on hold while the
company focussed on LHC-related issues. Membership sales and services
were expanded - joining via the Internet was launched, kiosks were
located in shopping centres, shopping hours were extended and additional
staff were taken on to man the organisation's call centres and retail
outlets. Few other private health insurance organisations used kiosks,
which proved an effective mechanism to join new members.
The company also launched a range of new, innovative
'packaged' products, which provided members with combined hospital,
and extras cover. Under the brand name of "PackagePlus", this suite
of products provides members with cover which can be selected to suit
their life-stage. These products have been highly successful.
While its competitors became active about marketing
closer to the LHC deadline, Medibank Private ran an intensive and
prominent marketing campaign to build brand and market awareness throughout
the January-June 2000 period.
The hallmark of Medibank Private's success has
been its ability to differentiate itself from its competitors. It
has proved to be flexible and nimble in its approach - critical in
dynamic markets such as private health insurance and financial services.
Medibank Private is second to none in the industry
and has proven it is capable of taking advantage of the external environment
to drive positive growth.

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