Medibank Private starts turnaround after 2001-2002 loss
Australia’s largest private health insurance company, Medibank Private Limited, today reported a $175.5 million loss for the 12 months to June 2002 but says an extensive recovery program has it on track to move towards a break even result this year.
The company said the loss, which followed a surplus of $105.9 million the previous year, was due to a big increase in claims payments and a significant drop in investment income.
Claims increased from $1,636 million to $1,967 million in a year marked by a significant increase in utilisation and in the cost of health services.
Investment income, which has previously supported operating performance, fell from a $26.4 million surplus last year to a $12.9 million loss following a dramatic fall in world equity markets, particularly since September 11, 2001.
“Medibank Private has a detailed recovery program in place to restore profitability while maintaining competitive premiums,” said Chairman Allan Thomson.
Key features include:
- Significant cost cutting, with the company’s management expense ratio (costs expressed as a percentage of contribution income) falling from 12.2% to 10.6% in the year to June, equivalent to a reduction of $25 Million over the year. Costs in this area will continue to fall in the coming year, with an MER target approaching 9%.
In further steps to turn the financial performance around, Medibank Private is this week advising customers:
- It will close one of its unprofitable products, which is now subsidised by members who hold profitable products, and offer affected members two months to plan their migration to other Medibank Private products. The product, one of Medibank Private’s First Choice Saver products, is held by about 4% of members.
Longer term, Mr Thomson said Medibank Private is committed to simplifying its product range and presenting its private health insurance products in plain English as a response to customer concerns that private health insurance is too difficult to understand.
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