Southern Cross – Financial Results
15 September 2008
Southern Cross – Financial Results
Southern Cross Medical Care Society achieved premium income of $523.3 million in the year ended 30 June 2008, while claims totaled $464.2 million. For every dollar of premium income received, the Society paid out 89.6 cents in claims.
Industry data shows total claims settled by New Zealand health insurers in the year to 30 June 2007 were worth $657 million. Southern Cross accounted for 71% of all those claims.
Southern Cross Medical Care Society Chief Executive Officer, Dr Ian McPherson, said today the claims to premium ratio was one of the highest by New Zealand health insurers and one he doubted any other health insurer could match.
“This result continues our track record of recent years where we are managing to keep premiums as affordable as possible while ensuring we can meet the claims paid for treatment. As a not-for-profit, our focus is always on our customers, not shareholders. This is demonstrated by the fact that our ratio compares very favourably with the performance of our most prominent for-profit competitor whose reported average ratio at September 2007 was below 60 cents in the dollar.”
Dr McPherson said claims rose by $64.7 million or 16.2% during the financial year while premium income rose by $32.4 million or 6.6%.
Claiming patterns mirrored those of earlier years where older members continued to get the most benefit from their health insurance. Members over 60 accounted for 43% of total claims paid by the Society. Total claims for this age group were worth $199 million while premiums received amounted to only $197.2 million in the 12 months to 30 June 2008.
The Society saw membership grow by 9,242 to 834,967, continuing the positive trend of the past two years. Strong support from the corporate sector was a contributor, with 83% of new members belonging to employer health insurance schemes. The Society’s gain in membership accounted for 72% of the total increase in New Zealanders covered by health insurance in the 12 months to 30 June 2008.
“We’re very pleased to see continued support from employers, particularly given the fact that they are forced to pay fringe benefit tax on subsidised health insurance. It’s all the more pleasing given the extra costs they are facing with KiwiSaver contributions and the provision of four weeks annual leave.”
Operating expenses were $72.1 million, an increase of 5.3% on the prior year. Dr McPherson said the result was good taking into account inflation, membership growth and improved service levels for claims settlement.
The Society’s investment portfolio remains sound at $413.5 million. During the financial year, interest rates rose rapidly leaving some of the Society’s longer-term investments invested at less favourable rates than those in the current market. The mark-to-market value of the investment portfolio saw an unrealised $14.7 million write down, but because investments are held to maturity, this write-down is expected to be reversed in future years.
The write-down and the increase in the claims to premium ratio contributed to the Society achieving a modest surplus of $7.8 million for the year.
Dr McPherson said the result was slightly under budget, but appropriate considering the Society’s level of reserves. These increased by 2.5% to $329.3 million, reflecting the Society’s commitment to maintaining a strong solvency position. Southern Cross is rated A+ by Standard & Poor’s and has held this rating for six consecutive years.
About Southern Cross:
Southern Cross Healthcare is one of New Zealand’s best known and most trusted brands, offering a broad range of health-related services to New Zealanders since the early 1960s. The Southern Cross Healthcare group consists of two separate organisations – Southern Cross Medical Care Society offering health insurance and related services, and Southern Cross Health Trust, operating 10 wholly-owned hospitals and three joint venture hospitals along with Southern Cross Travel Insurance.