Major health funds motion $4b merger
HCF and HBF, Australia’s third and fifth biggest health insurers, have agreed in principle to a merger that would create a $4 billion company with a near 20 per cent market share.
The merged entity would be the biggest health insurer behind Medibank and Bupa. Sydney-based HCF and HBF, which is Western Australia’s largest health insurer, have signed a heads of agreement setting out the key principles of a merger.
If approved by regulators and the councillors of HCF and HBF, the merger could be completed by mid-year and create a company with an 18.4 per cent market share.
“This merger of equals would provide a significant increase in size which will enable greater benefits to be passed on to members, ” HCF chief executive Sheena Jack said in a statement yesterday.
“Strategically, this merger would create a truly national player with combined strength to grow both brands and better compete in what is a challenging industry.”
HBF chief executive John Van Der Wielen the combination of HCF and HBF, which are both not-for profit insurers, would enable the combined group to better compete against the for-profit health insurers.
“Up to now, HBF and HCF have been strong in different states: HBF is one of Western Australia’s best loved brands but is much less recognised in other states,” Mr Van Der Wielen said.
‘The merger would give us a truly national presence.”
HBF said that in recent years its health insurance operating margin had fallen from a positive 6.2 per cent to a negative 1.7 per cent because of increasing competition and the fund keeping its premium increases below that of the national for-profit health insurers. Mark Fitzgibbon, the managing director of No. 4placed NIB, said yesterday that Australia has 35 health insurers and doesn’t need that many.
“There’s a strong case for consolidation,” he said.
Mr Fitzgibbon said he did not necessarily consider a tieup between HCF and HBF a competitive threat.
“If that’s the start of more widespread interest in consolidation, I’d regard that as a good thing,” he said.