Media releases

November 22, 2001

Medibank Private reports 2000-2001 annual results

Australia's largest private health fund, Medibank Private, has reported a $105.9 million surplus for 2000-01 - up just over $6 million on last year's result.

However, Medibank Private managing director, Mark Burrowes, cautioned that the fund's trading results have dipped since June 30 due to a much higher than expected increase in the number of claims.

In addition, Medibank Private's investment income - which has underpinned the fund's financial performance for the most of the last decade - also dropped due to a decline in global investment markets. This situation has been further exacerbated by the events of September 11.

Said Mr Burrowes: "With the influx of almost one million people into the fund during the Lifetime Health Cover (LHC) period in 2000 and heavy industry promotion of gap products in 2001, there has been a dramatic lift in claims, particularly since waiting periods on claims by new members expired.

"During the 2000-01 financial year, benefit pay-outs increased from $1.1 billion in 1999-00 to over $1.6 billion.

"This trend has continued unabated with a 13 per cent increase in benefits paid out in the four months to October 2001 compared with the four months to June.

"Contribution levels, however, are not matching spiralling claims."

Medibank Private is currently working hard at creating greater efficiencies by reducing its costs. "We need to take the necessary action to achieve greater sustainability," said Mr Burrowes.

Medibank Private's key results for 2000-01 included:

  • An operating surplus of $105.9 million, slightly up on last year's $99.8 million
  • Market share of 30.7 per cent compared with 29.7 per cent a year previously
  • Reserves of $557.9 million compared with $451.9 million last year
  • A return on reserves of 23.5 per cent
  • A net cash flow from operating activities of $231.8 million
  • The number of persons covered totalled over 3 million (this includes overseas members)
  • Total benefits paid $1.6 billion, up on the $1.1 billion paid out in 99-00
  • 68% of medical claims are no or known gap, compared to 40% a year earlier

Commenting on the results, Mr Burrowes, said they provide the first full-year picture of the impact of the LHC campaign that ran between January and mid-July last year.

The operating surplus included a contribution from the underlying private health insurance business while investment income - the cornerstone of operating results in the previous five years - only contributed one quarter of the operating surplus this year.

While the result was assisted by the lag between new members joining and being able to claim, results also clearly reflect the success of LHC in delivering a platform from which to build sustainability.

Medibank Private now covers almost three million Australians and has revenue of $2 billion annually - ranking it among Australia's top 100 companies. In the 2000-01 financial year, the health fund increased its national market share from 29.7 per cent to 30.7 per cent.

Mr Burrowes said: "We've reinforced our position as market leader and recorded a 6.4 per cent growth in membership since the LHC influx of new members.

"The past financial year also saw Medibank Private become market leader in NSW and Queensland, making it the health fund of choice in each of the eastern seaboard states."

During 2000-01, the health fund undertook several key initiatives, which have reinforced its market leader position and helped deliver increased value to members and providers.

The success of our GapCover arrangements has continued to grow during this period, with over 68 per cent of in-hospital and day surgery medical services by the end of this period attracting no or reduced member out of pocket expenses. This figure compares with
40 per cent in the year prior.

Also key to Medibank Private retaining market leadership has been a key focus on creating an e-business platform for electronic transaction processing with key hospital and other provider groups.

Says Mr Burrowes: "In addition to this, our groundbreaking on-line alliance with the Cochrane Consumer Network now offers members access to globally-sourced quality, evidence-based health information.

"In fact, with the successful implementation of Cochrane Consumer Network, we are the first private health insurance fund in Australia to use technology to inform and educate members with health information."

Mr Burrowes believes the future is about creating more sustainability, predictability and efficiency in the industry and building on the success of LHC for members, providers and private health funds.

It is for this very reason that Medibank Private is moving away from the notion of just being a payer of bills and is positioning itself more towards health solutions and being a member advocate, assisting members navigate their way through the complexities of the health system.

"The future will see Medibank Private continuing to be at the forefront of exciting and innovative developments and looking to lead the way in changing how the community thinks about private health insurance and its role during wellness, not just during illness," he said.

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