Medibank appoints new chief

Medibank Private has appointed Craig Drummond as its next chief executive following the departure of George Savvides in April. Drummond was previously Group Executive of Finance and Strategy at National Australia Bank, where his responsibility was the 'strategic realignment and repositioning of the bank, its balance sheet and performance management systems,' the company said.

Prior to his role at NAB, Drummond was head of the Australian operations of Bank of America Merrill Lynch. Following his appointment in 2009, he helped return the business to profitability following the global financial crisis. Other posts include various senior roles at Goldman Sachs where he oversaw the merger of JBWere and Goldman Sachs Australia in 2003.

Medibank's chairman Elizabeth Alexander said Drummond 'has an outstanding reputation for his leadership capabilities, strategic thinking and business acumen. He brings with him deep experience in regulated service industries requiring a strong customer focus'.

We've been critical of current management in the past (see Medibank's slippery slope). Although recent results have been decent and Medibank's margins are now in line with the rest of the industry, we're happy to see a change of the guard.

We look forward to hearing more from Drummond himself at the full year result. In particular, we're interested in whether he'll continue Medibank's current strategy of investing in primary care and GPs to reduce chronic disease, rather than simply tackling claims when they arrive down the track.

Medibank's share price is hovering close to our recommended Sell price and the stock has a price-earnings ratio of 21. It isn't cheap, though we'll give the stock more leeway before officially downgrading. HOLD