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T.J. Smith |
Chief Executive
Officer’s Report |
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| The operating environment during 2008/09 was tougher than we expected but it could have been a lot worse. While our investment portfolios bore the brunt of the economic downturn, we remained profitable and increased premium income in both our health and life insurancebusinesses and grew our fund membership by 4%. |
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Total revenue for the Group was
$1,319 million, including $129 million
from Manchester Unity from the date
of acquisition. Group surplus after tax
was $21.5 million, (and a donation
of $1 million to the HCF Health and
Medical Foundation). Total assets,
including those acquired with
Manchester Unity, reached almost
$1,142 million at 30 June.
HCF continues to achieve industry
leading results in membership growth,
customer satisfaction and a management
expense ratio lower than other funds.
The successful merger with Manchester
Unity adds a significant expansion of
the HCF Group customer base and
expands our range of services with the
addition of financial services, retirement
and aged care facilities.
We are proud to introduce “MyHealth
Guardian”, a personalised, web based
health management system. The new
program, representing an investment
of $100 million, over five years, is
available to 1.3 million HCF group
members at no additional cost.
Invitations to selected members
commenced in May and we now have
more than 11,000 members enrolled.
Some 9,000 of the participating patients
have a chronic condition including
Diabetes, Coronary and Cardiac
disease, Kidney disease and Asthma.
We recognise the absolute imperative of
maintaining a prudent level of reserves
to allow us the flexibility to deal with
change in political and financial
environments and to take advantage of
opportunities, without raising additional
capital or increasing premiums.
This year we added $17 million to
Group reserves, which now total
$580 million and maintained the
solvency ratio to total assets at
almost twice the statutory minimum.
Operational Excellence
We remain firm in our commitment
to returning more for our members
in benefits while controlling expenses.
Despite the difficult operating
environment and heavy competition,
we reduced the HCF management
expense ratio (MER) from 7.9% to
7.8%. This is well below the industry
average and is the best of all major
funds. The Manchester Unity MER
is rapidly reducing with the impact
of improved processing systems.
Customer retention levels are stable
at 93.5%. Improving this figure is a
priority. Customer satisfaction remains
higher than comparative industry levels
at 95%, in line with last year’s result at
96%. We believe the slight downward
trend is due to a lack of consumer
confidence generally rather than
HCF specific issues.
Staff satisfaction engagement and
leadership indices all remain in the top
quartile of benchmark surveys. We are
working hard to improve these levels in
every business unit and have introduced
new training programs for team leaders
and project management improvement.
Technology continues to improve
efficiency and reduce staff time spent
on administration.
More for Our Members
Total health benefits paid were
$1.1 billion this year or 89.4% of annual
premiums. This remains significantly
above the average industry figure of 87%.
Total benefits to members increased by
$92 million.
The “MyHealth Guardian” program,
means our healthy members will gain
access to sophisticated information and
tools to improve their quality of life and
reduce the risk of future health problems.
Members whose health is at risk will be
better able to identify and manage these
risks, while those with chronic conditions
will receive additional support.
Recently HCF was awarded a national
five star rating by Canstar Cannex
for our hospital cover and package
cover health insurance products. This
prestigious award underlines our
commitment to providing more for
our members.
Life Insurance
HCF Life is an effective and successful, low cost, niche business. Its potential for growth is linked to the growth and retention of HCF members. Access to the health fund customer base enables HCF Life to grow without the need for incurring the costs and infrastructure required to compete directly in markets
dominated by the major life insurance
companies and banks.
Operating performance from the life
insurance business was again strong
achieving an underwriting surplus of
$8.6 million, 35% above plan and
3% above last year. Operating revenue
increased by 9% to $17.2 million,
9% higher than plan with claims
21% higher than last year at
$2.5 million and 77% of forecast.
HCF Life created shareholder value
of $8.8 million this year, 39% higher
than last year and 11% higher than
plan. Shareholder equity increased
marginally to $34.9 million. HCF Life
net result after tax was $0.07 million.
Annual premiums in force increased by
11% to $19.9 million and total sales by
annual premium were $3.2 million, 15%
higher than last year. Gross investment
return from financial markets was (0.58%)
for 2008/09 up on last year’s (0.62%).
Manchester Unity Group
(MU) Integration
The integration of MU within the
Group commenced on 1 January 2009
and is currently nearing completion.
The merger added around 78,000
memberships to HCF. Manchester Unity
owns and operates retirement villages
and aged care facilities, and offers
friendly society financial products as well
as private health insurance products.
The merged entity has brought additional
scale and scope to support efficient
operations and keep premiums as low
as possible. The integration of HCF and
Manchester Unity will result in 550,000
policy holders and brings the Group’s share
of the national private health insurance
market to 11.8% as at June 2009.
Systems and customer service
integration have been successfully
completed. Policies, claims processing,
revenue collection, membership, sales and benefits have been converted to the
HCF operating platform. MU members
now have access to HCF branches, the
Oral Health program and the HCF
dental centre network.
Retirement and Aged Care Services
(RACS) achieved satisfactory ratings
from the Aged Care Accreditation
Agency across all major priority areas.
The combined HCF Group is now the
third largest health insurer in Australia
and the largest not for profit fund,
after the proposed Medibank Private
conversion is completed. We are in a
strong position to continue our record of
success and to return more in benefits for
our members in the future. I am delighted
at the progress we have achieved in
integrating Manchester Unity operations
and want to acknowledge the work
of executives and key staff of both
organisations who have made the
transition as seamless as it has been. Our
continued success rests to a significant
extent on the excellence of our staff and
I thank all our people for their continued
efforts on behalf of our members.
T.J. Smith
Chief Executive Officer
28 September 2009, Sydney
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Our successful merger
with Manchester
Unity means we are
in a stronger position
to continue returning
more in benefits for
our members.
We paid $1.1 billion in
total health benefits,
89.4% of annual
premiums.
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Performance - Five Year Summaries
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Certain amounts have been reclassified to enable direct comparison between years.
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