Medibank chief shrugs off sale talk
He said Medibank had been living with speculation about its ownership for years and was instead focused on challenging market conditions, such as the growth of insurance comparison sites and member downgrades and dropoffs as government income-testing of private health insurance bites.
"We don't sit around waiting for somebody to say who should own the shares," Mr Savvides said. "It's just part of the journey of being a government business enterprise."
While Labor does not support a sale, the Coalition recently reaffirmed its support for one. The Greens have said they would consider a sale if the proceeds were directed at the public health sector.
Medibank's 2012 annual report flagged that it would pay the government a special dividend of $300 million, on top of a $91 million ordinary dividend. If Medibank's board approves the proposed special dividend, this will mean the government has extracted $850.6 million in surplus capital from Medibank since it converted to "for-profit" status in 2009.
Medibank's net profit slumped 57 per cent to $126.6 million in the 2012 financial year, due to higher claims costs and a sharp fall in investment income. But revenue reached a record high for a second year running - $5.4 billion.
Medibank has 4500 employees and 3.7 million customers, or more than a quarter of the market. Next is Bupa Australia, with 3.5 million members.
Mr Savvides' comments follow remarks by Medibank's former chairman, Paul McClintock, that the government's ownership is an "aberration".
Bupa's chief executive for Australia and New Zealand, Dean Holden, was quoted as saying that "to make Medibank a true competitor in the open market is a very positive thing".
NIB has described the privatisation of Medibank as "inevitable" and tipped the private health insurance system to grow by 3 per cent to 3.5 per cent a year, with government measures having only a "moderate impact".
Frequently Asked Questions about this Article…
There has been market speculation about a possible sale (privatisation) of government-owned Medibank. Political parties are split: the Coalition has reaffirmed support for a sale, Labor does not support it, and the Greens say they would consider a sale only if proceeds were directed to the public health sector. Medibank's management says the company is focused on running the business rather than ownership speculation.
In the 2012 financial year Medibank's net profit fell 57% to $126.6 million, driven by higher claims costs and a sharp fall in investment income, while revenue reached a record $5.4 billion. Investors should note the drop in profitability alongside record revenue and management commentary on cost and market pressures.
Medibank's 2012 annual report flagged a proposed special dividend of $300 million in addition to a $91 million ordinary dividend. If the board approves the special dividend, the government will have extracted about $850.6 million in surplus capital from Medibank since it converted to for‑profit status in 2009.
Medibank has about 3.7 million customers and 4,500 employees, representing more than a quarter of the market. The next largest provider mentioned is Bupa Australia with around 3.5 million members.
Medibank is facing competitive and market challenges including the growth of insurance comparison websites and customer downgrades and drop‑offs linked to government income‑testing of private health insurance. Management has said these issues are part of the operating environment they are focused on.
Reactions in the industry have been largely supportive of a move to the open market: Medibank’s former chairman Paul McClintock called government ownership an "aberration," Bupa's Australia & NZ CEO Dean Holden said making Medibank a true competitor in an open market would be very positive, and NIB described privatisation as "inevitable."
NIB has forecast that the private health insurance system could grow by about 3% to 3.5% per year, and said recent government measures will only have a "moderate impact" on that growth.
Medibank managing director George Savvides said the company has been used to speculation about its ownership for years but is instead focused on dealing with challenging market conditions. He said, "We don't sit around waiting for somebody to say who should own the shares," calling it part of the journey of being a government business enterprise.
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