23/10/2007 - 15:39

HBF records $216m surplus amid strong growth

23/10/2007 - 15:39

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Perth-based health insurance and financial services player HBF has revealed a 36 per cent increase in underlying profitability, boosted by strong investment market returns.

Perth-based health insurance and financial services player HBF has revealed a 36 per cent increase in underlying profitability, boosted by strong investment market returns.

The not-for-profit's surplus hit $216 million for the year ended June 30, which was up from $89.5 the previous year.
The 2006-07 result included a one-off $60 million inclusion in general reserves following strategic decision to close the HBF Future Health Benefit scheme devised for long-term members.

Return on investments climbed 68 per cent to $89 million from $53 million the previous corresponding period.

Members' contributions and premium revenue jumped 7per cent to $882.1 million from $824.7 million, just below the rise in claims and well ahead of a 4.5 per cent increase in prices.

HBF CEO Rob Bransby said that claims grew 7.4 per cent for the period to $742 million.

"Forecasts show that rising health and technology costs and the ageing population could push our benefit claims to $1 billion within five years," Mr Bransby said in a statement.

Below is a full statement from HBF:

The HBF Group has recorded a net surplus of $216 million for the 2006/2007 financial year. The result includes a one-off $60 million write-back into general reserves and a strong return of $89 million on investments.

HBF CEO Rob Bransby said he was delighted with the result, which laid the groundwork for the many challenges and opportunities ahead.

"The results show we have increased our benefits to members, grown our product range and maximised our return on investments, making us well placed for the future," he said.

"The past financial year has been primarily about preparing ourselves for future challenges, including increased health and technology costs, an ageing population, new legislation and changes in the marketplace."

"HBF Group's $216 million surplus includes a $198 million surplus generated by HBF Health, the part of HBF Group which runs its health insurance business.

Mr Bransby said HBF Health's surplus included $77 million from record investment returns and $60 million from a write-back into general reserves of funds set aside for HBF's Future Health Benefit scheme, which we decided not to pursue.

"The Future Health Benefit scheme was devised to reward members long-term loyalty by helping them meet their future health costs once they reached a certain age," he says.

"However, since we initially developed the scheme there have been significant changes in the marketplace and we decided it was best that funds set aside for the scheme were placed in our general reserves, so they could go towards members' future health claims, regardless of their age or length of membership."

Return on investments
The HBF Group earned $89 million on investments funds held in reserve over the past year, an increase of $35 million over the previous year.

"While we have been able to capitalise on strong returns on investments over the past few years, we are mindful that we cannot rely on this buoyant investment market to continue indefinitely. As such, we are focussed on building HBF's financial position into the future to ensure our long term sustainability," Mr Bransby said.

Record benefits
Mr Bransby said the rapid growth in health claims continues to be HBF's biggest area of concern.

The HBF Group paid a record $742 million in claims to members in the past financial year, an increase of $50 million or 7.4% over the previous year.

"Forecasts show that rising health and technology costs and the ageing population could push our benefit claims to $1 billion within five years," Mr Bransby said.

"We are very mindful of the impact of this growth in claims, which is why we are focussing on ways we can keep premiums affordable while ensuring members have access to appropriate health care now and into the future."

Administration costs
Once more HBF kept its administration costs to 9.3% of contributions, which is one of the lowest administration ratios in the health insurance industry.

HBF achieved an A minus rating by credit rating agency Standard and Poor's - which is the highest rating that the agency gives to the private health insurance industry.

New technology
Mr Bransby said HBF would implement major changes to its health insurance operation over the next 12 months with the introduction of electronic claiming for ancillary health services.

As part of this, HBF has entered into an agreement with HICAPS to provide electronic claiming services for physiotherapists, dentists, optometrists, podiatrists (excluding surgery) and chiropractors from April 2008.

Once the new service is launched, HBF will consider whether to extend the service to other ancillary healthcare providers and additional electronic payment vendors.

In addition, HBF will be introducing an electronic quoting system for dental and optical providers, so quotes can be generated on the spot for members to calculate their exact out of pocket costs for future treatment.

Manual claiming services will continue to be available to providers who do not use HICAPS and for members who prefer to use this method of claiming.

"Electronic ancillary claiming will greatly reduce our Service Centre queues and is expected to take the pressure off frontline employees so they can spend time having more meaningful interactions with members," Mr Bransby said.

"Members and providers are keen for HBF to have electronic ancillary claiming as it enables payment at the point of service, without the need to submit claim forms."

HBF is also upgrading and building new service centres as part of its member focus.

SNAPSHOT OF HBF HEALTH PAYMENTS

Record health benefit payments in 2006/2007
Total health benefits $644m, up $40m or 7%
Hospital benefits $478m, up $36m or 8%
Essentials benefits $163m, up $4m or 2%
Ambulance benefits $3.7m, up $81k or 2%

Biggest areas of growth in hospital benefits:
- Orthopaedic ($91.3m, up $6.4m)
- General surgery ($77.8m, up $5.5m)
- Obstetrics ($43.7m, up $3m)
- Public hospital ($32.5m, up $4.2m)
- Ophthalmology ($17.6m, up $1.5m)
- Neurosurgery ($16.7m, up $1.8m)

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