Media releases

March 17, 2004

Medibank Private business turnaround remains 'on track'

Australia's largest private health insurer, Medibank Private, delivered a positive financial result for the half-year to 31 December 2003.

The not-for-profit fund produced a surplus of $11.2 million for the 2004FY half-year, representing a modest net profit improvement of $8.4 million over the prior half-year.

Medibank Private Managing Director, George Savvides, said that the fund had maintained a strategy of delivering a business recovery program put in place by its Board since mid-2002 to restore and maintain profitability, while seeking to contain member premiums at a sustainable level.

"Medibank Private has achieved a sound financial result at the half-year mark against the challenging backdrop of cost increases in the provision of health services and the rising benefit payments being made on behalf of members", Mr Savvides said.

"Importantly Medibank Private's financial turnaround remains firmly on track. But there is clearly still more to be done - in particular in better managing member benefit outlay growth and fostering ecommerce initiatives to obtain core business efficiencies.

"During this financial year Medibank Private has driven cost efficiencies across key parts of the business, whilst bolstering customer service levels and launching a refreshed brand."

The fund's Management Expense Ratio, (its management expenses as a percentage of contribution income), fell to 8.8 per cent for the half-year, down from 9.3 per cent for the year ended 30 June 2003.

Mr Savvides said this was an outstanding result for the fund, which had pared its Management Expense Ratio back from 13.9 per cent for the year ended 30 June 2000.

Overall membership levels remained relatively stable, with the fund retaining industry market share leadership at 29.4 per cent (at 31 December 2003). Mr Savvides said the 'refreshed' Medibank Private brand launched last September had already delivered welcome results and a positive reaction, in particular from newly-joined young members.

Investment income for the half-year was $22.8 million and Contribution Income was $1,183.6 million. Return on Reserves was 2.9 per cent at 31 December 2003.

Member benefits paid for the six-month period increased by 7.4 per cent to $1,090.8 million as a result of volume growth of member claiming and the increased unit cost of services charged by hospitals and medical and ancillary providers. The fund still returned more than 90 cents in each dollar of premium income in benefit payments on behalf of members for the period.

"In light of increasing benefit outlay pressures, Medibank Private is focused on becoming an even more efficient and performance-oriented purchaser of health services on behalf of its members, ensuring it purchases health services for members at competitive prices", Mr Savvides said.

"This has become a major corporate priority for Medibank Private, and is a responsible approach being developed by the nation's leading health fund."

Improved member servicing had also occurred through technological upgrades within the fund's in house call centre network, whilst a brand and design refit had occurred in almost one third of the 100 plus national retail branch network over the past year.

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