The strongest membership growth in 5 years coupled with growth in marketshare has enabled Medibank Private, Australia's largest private health insurer, to post a record profit of $295.2 million for the year to 30 June 2007 on revenues that grew 8.6% to $3.1 Billion.
This result is a 47.5% increase over last year's record result, and marks the fifth successive year the health fund has increased profitability. Underwriting performance has remained strong, increasing by 52.1% to $152.6 million.
Underpinning the result is excellent growth in new memberships, with Medibank Private experiencing its best rate of membership growth since Lifetime Health Cover was introduced in July 2000. Marketshare in terms of memberships grew to 28.75%, lifting total membership by 5% to 3.1 million people covered.
Medibank Private Managing Director George Savvides said a fifth consecutive year of profit growth will ensure the provision of affordable private health cover into the future.
"The last five years of profitability has built a sound operating platform to drive a strong, sustainable future. In FY07 Medibank Private has delivered an improved financial performance in what is a highly competitive industry.
"Our members have seen in the past what happens when we don't get the fundamentals right. This result shows their investment in their own health is safeguarded for the future. Medibank Private is prudentially strong, and well positioned for whatever opportunities or challenges that may arise.
"However it is also important to remember that approximately half the profit result is derived from an exceptionally strong FY07 investment result, and that the underwriting margin of 5% represents in dollars just 3 weeks of benefit claims," he said.
A key achievement for Medibank Private is managing to grow profit while containing growth in membership premiums, according to Mr Savvides.
"In FY07 Medibank delivered its third consecutive year of reduced premium increases while at the same time improving its underwriting profit. I think this illustrates the clear relationship between the financial integrity of the fund and premium volatility.
"We aim to be sensible and sustainable in our premium increases, and clearly our members feel the fund has got its product and pricing mix right," he said.
Medibank Private Chairman Paul McClintock said the board was very pleased with the performance of the health fund during the year.
"George Savvides, the senior management team and our staff have delivered an exceptional performance over this past year.
"One of the goals the board set for Medibank Private in FY07 was to grow membership and to grow marketshare. With the assistance of improved customer service and innovative products that have attracted a significant proportion of younger members, marketshare growth has been achieved, and I am proud to say that over three million Australians and overseas visitors are now Medibank Private members.
"If membership trends continue, by the end of the calendar year we will have our three millionth resident member, which will be a terrific milestone for the company." Mr McClintock said.
Other factors in the success of the fund during the year have been our effort to control costs in a sector where cost increases are the norm, Mr Savvides continued.
"Medibank Private faces significant cost pressures that are unique to the health industry. Technological advances, while often leading to better health outcomes, are hugely expensive, and utilisation rates continue to increase.
"Hospital episodes increased by 5.5%, producing an increase in member benefits which were up 8% to $2.6 billion.
"We have worked hard to contain these costs through better purchasing, but it is something that has to be constantly managed. One thing we are pleased about is that management expenses as a share of premium revenue have decreased to 9.6%, despite major IT infrastructure and other business investment.
"Looking to the future we will start to see a return on this investment, particularly in the area of our major business systems renewal project, phase one of which is set to go live later this year and will help drive efficiencies in our claims and benefits management.
"In the longer term projects such as our betterhealth suite of health management programs will help members manage chronic disease, and we expect that this will ultimately prevent hospital claims further down the track," he said.
Mr Savvides finished by saying that the key to Medibank Private's success will be maintaining the focus on member value.
"Strong membership growth with marketshare growth will often lead to a stronger
financial position, but to truly guarantee our future it is essential that members feel they are genuinely better off with Medibank Private."
ENDS
For further information please contact:
James Connors - T. (03) 8622 5163 or 0433 992 677
E: james_connors@medibank.com.au