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Publications |
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Topics in this section Private Patients' Hospital Charter Insure? Not Sure? (pdf format) Operations Of The Private Health Insurers Annual Report Financial and Statistical tables of past Operations Annual Reports |
PublicationsOperations Of The Private Health Insurers Annual Report 2006-07Part BOperations ReviewFinancial StatisticsThe industry recorded a surplus of $1,288 million before tax in 2006–07 (2005–06: $984 million). The surplus after tax and extraordinary items was $1,222 million, an increase from $926 million in 2005–06. This result for the industry represents 11.0% of contribution income (2005–06: 9.0%). Of the $1,288 million before tax surplus, health related business and other revenue comprised $672 million (2005–06: $446 million), with the remaining $616 million as underwriting surplus (2005–06: $538 million). The underwriting surplus represents a net margin result of 5.6% of contribution income. Contribution income reached $11,127 million, up from $10,261 million in 2005–06. This increase is primarily due to increases in premiums charged. On an industry average, premiums were increased by 4.52% in 2007 compared with 5.68% in 2006. As with previous years, the increase in premiums occurred in April resulting in a lag in implementation. The full effect of the 2007 increases will be more apparent in the financial year ending 30 June 2008. Of the $11,127 million contribution income earned by the industry, $9,432 million, or 84.8% (2005–06: 85.3%), was paid as benefits. This amount includes $126 million (2005–06: $113 million) paid to the New South Wales and Australian Capital Territory governments as state levies that entitle privately insured patients to emergency ambulance transport within Australia without further charge. A further $6,847 million (2005–06: $6,350 million) was paid as hospital treatment benefits and $2,459 million (2005–06: $2,403 million) as general treatment benefits. The rate at which benefit outlays grew in 2006–07 was more than in the previous year, with benefit outlays growing by $679 million (7.8%) over the year. The growth in outlays is a factor of increasing utilisation, cost of services, and membership (see Benefits per service page 53). In 2006–07, management expenses were $1,068 million (2005–06: $962 million), the first time ever they exceeded the $1 billion mark. When measured as a percentage of contribution income, management expenses were 9.6% in 2006–07, compared with 9.4% in 2005–06. Individual organisations’ management expense ratios continued to vary markedly from the industry average. The range of management expenses varied from a low of 1.3% to a high of 18.6% (10) of contribution income. Both PHIAC and the Department of Health and Ageing continue to scrutinise those funds with abnormally high management expenses. The benefit outlays experience for the industry is volatile when compared to premiums, with movements in the claims ratio of greater than 5% common. Notwithstanding the moderation in the growth rate of benefits outlays, it is likely that continuation of the rate at which outlays are growing will maintain upward pressure on premiums. The capital base of the industry grew by $1,140 million during 2006–07 to $5,368 (2005–06: $4,227 million). This change includes the operating result of $1,225 million, dividend payments of $56.7 million, and other movements in paid-up capital and reserves. (10) Excludes Onemedifund due to establishment costs. The industry capital base is comprised of 5.0% contributed equity, 92.7% retained surpluses and 2.3% reserves. The prudential reserves needed by individual organisations to provide a buffer against unforeseen events will vary according to their risk profile, and include such factors as size, investment mix and rates of contribution. The assets of the industry are invested mainly in Australian interest bearing assets and Australian equities, with minor holdings in cash, Australian property and overseas equities. Figure 18. Asset investment classes
Policy holder liabilities comprise 86.3% of the $3,037 million total liabilities amount. The value of contributions paid in advance totals $1,352 million and represents the equivalent of 120 days of cover¬––an indicator that most policy holders renew their health insurance for short periods many times each year.
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