Southern Cross Pays $20 Million More in Claims

Media Release
6 September 2007

Southern Cross Pays $20 Million More in Claims

Claims at Southern Cross Medical Care Society were $418 million in the 12 months to 30 June 2007, a $20 million increase over the prior financial year. These claims represent 85 cents for every $1 of the $492 million the Society earned in premium income over the same period.

This continues a positive trend for the Society. In the five years prior, Southern Cross paid out $2 billion to members in claims or an average of 85 cents in every $1 of premiums.

Industry data shows total claims settled by New Zealand health insurers in the year to 30 June 2007 were worth $590 million. Southern Cross accounted for 71% of those claims.

Southern Cross Medical Care Society Chief Executive, Dr Ian McPherson said, “for our Members, this is a good outcome as they are accessing care when they need it and their insurance is helping to cover the cost of that care. We note that health insurance claims continue to increase in number along with the cost of those claims”.

Dr McPherson said demand for health insurance continued to increase with the Society’s membership increasing by 17,356 in the financial year, setting a record for growth in the last five year period. New members, coupled with fewer cancellations, resulted in the Society ending the year with 825,725 members.

“These increases tell us that there is a growing appreciation of the value of health insurance, particularly given the very high demands being placed on the public system.”

Dr McPherson said the Society’s gain in membership accounted for 90% of the total increase in New Zealanders covered by health insurance in the 12 months to 30 June 2007.

At 30 June 2007, 1.377 million New Zealanders had health insurance. Southern Cross has 60% share of this market.

In the financial year recorded, the Society’s operating expenses were $66.5 million, $6.8 million lower than the previous financial year. This contributed to a surplus of $43.9 million.

“This is a positive result for our members because as a not for profit, this surplus is available to offset premium increases in future years”, said Dr McPherson.

As previously reported, the Medical Care Society wrote off $20 million in investment in subsidiaries in the 2006 financial year, a sum which principally related to the research, technology, development and launch costs for establishing Activa – costs funded from investment capital. This year there has been a provision to further write down $6 million.

Dr McPherson said the Activa investment has given Southern Cross technology, health partner and merchant relationships which are being built on to benefit members.

“Activa is showing encouraging progress in the corporate sector and has met its targeted budget.”

Despite ongoing nervousness about global credit, the Medical Care Society’s investment portfolio, in excess of $400 million, is in a sound position. This contributed $24.5 million towards our total surplus figure.

The Society’s reserves stood at $324.1 million, reflecting very sound financial stability and the organisations commitment to maintain a strong solvency position.

Southern Cross is rated A+ by Standard & Poor’s and has held this rating for five consecutive years.

ENDS

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