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Southern Cross On Sound Financial Footing

7 September 2005

Southern Cross On Sound Financial Footing

Southern Cross Medical Care Society has reported a net surplus of $31.8 million for the year ended June 30, 2005 after returning $378.6 million to Members through claims.

The Chairman of the Society, Dr John Matthews, said today the surplus sees the not-for-profit organisation remaining on a sound financial footing, enabling it to honour commitments to use its financial strength to continue to benefit Members.

“Our financial stability is a very important contributor to our ability to implement our Founding Members Reward along with our Low Claims Rewards which we signalled to Members in October last year and which came into effect from May of this year.”

The Founding Members Reward applies for two years for those who have had continuous Membership of the Society since before 1982. Qualifying members will experience premium discounts worth $13 million each year. The Low Claims Reward is expected to generate a further $22 million in premium reductions to eligible Members in a 12 month period.

Higher investment and other income, at $25.9 million compared to $15.4 million in the prior year was a contributor to the surplus, which includes a $12.0 million operating surplus.

Dr Matthews said the Society’s sound financial position had been further strengthened with reserves increasing from $238.4 million at the beginning of the financial year to $270.2 million at June 30.

“Our Members can continue to have the confidence that our reserves remain well in line with solvency targets adopted by the Board based on standards used by Australian health insurers.”

Group Chief Executive, Dr Ian McPherson, said the Society took in $484.6 million in premiums and paid out 78% or $378.6 million in claims.

“Our claims to premium ratio was slightly lower than average this year and that was an influencing factor in the decision made in February to hold or reduce premiums for some 500,000 of our Members with effect from May of this year.”

Dr McPherson said a claims to premium ratio in excess of 80% was the historical norm. The Society expected claims would return to those levels in 05/06 financial year, particularly with the increase in policy benefits following an extensive policy review in the year.

Operating expenses, at $68 million, increased by $11.4 million, reflecting what Dr McPherson described as an “intensive year for the organisation”.

That included $5 million in projects relating to various aspects of upgrading policy benefits and policy documents. Other costs included the analysis and development of Founding Member and Low Claims Rewards, projects associated with consolidation of the Society’s IT infrastructure and the introduction of internet payment options.

The expense increase also reflected project costs associated with the development of activa, New Zealand’s first health management account, launched post balance date to enable New Zealanders to better manage the $2 billion they spend annually on everyday health maintenance and care.

“Southern Cross is in a strong financial position to continue to give promised benefits back to members, deliver a high standard of service and remain innovative in the health care market, said Ian McPherson.

ENDS

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