Modest Increase to Southern Cross Reserves

12 September 2006
Media Release

Modest Increase to Southern Cross Reserves

The Southern Cross Medical Care Society is in a healthy financial position to the year ended 30 June 2006, with reserves now standing at $280.2 million.

Appropriate solvency standards for the organisation have been maintained, ensuring the not-for-profit organisation’s ongoing stability, a position recognised in the current Standard and Poor’s A+ rating.

The decision by the Southern Cross Medical Care Society not to increase base premium rates for around 80% of adult members last year has been a factor in the financial result. A modest surplus of $10 million was achieved, in comparison to a net surplus of $31.8 million in the prior year.

The Chairman of the Society, Dr John Matthews, said a successful year for us is one where we achieve the right equilibrium between premium income and claims.

“This year, the Society earned $472 million in premiums and returned $398 million to members through payment of claims – an excellent ratio of 84.4%.

“Our ability to pay out this ratio is directly linked to our status as a not-for-profit Friendly Society. We are not here to make a profit to be returned to shareholders. We are here to ensure we provide appropriate cover at an affordable price and to manage the business responsibly to ensure it remains financially stable and sustainable.

“It is good to report we have achieved both.”

Southern Cross Healthcare Group Chief Executive, Dr Ian McPherson said, “We achieved this result while not only holding base premiums for most members, but also rolling out the Low Claims and Founding Members Rewards. These two initiatives saw total savings of $35 million for members.

“We continued to make progress on our review of policies and benefits, taking every opportunity to improve our services.

“And in this period we saw an increase in demand for care, as well as higher costs claimed for that care. As at September 2005, total claim costs escalated by 8.5%. In fact, members’ claims for surgical procedures rose even higher – by 11.8%.”

This resulted in the Society’s necessity to raise members’ premiums in the current 2006/07 financial year by an average of 6.5%.

This increase in claims costs is supported by HFANZ industry data. As at 30 June 2006, national health insurance claims increased by $48 million to $564.7 million. Claims by Southern Cross Medical Care Society members accounted for 71% of that, with the Society covering $398.3 million worth of health care in the previous 12 months.

Dr McPherson said, “This is a good outcome for the year. It means members are getting what they expect from their Society - access to treatment when they need it - even though the cost of that treatment has continued to rise year-on-year.

“Our most pressing priority has been, and will continue to be, serving our members well in an increasingly pressured health care environment.”

ENDS

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