Health funds seeking $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 prin- ciples 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 said 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.

“The merger would give us a truly national presence,” Mr Van Der Wielen said.

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. 4-placed NIB, said yesterday that Australia has 35 health insurers and doesn’t need that many.

Mr Fitzgibbon said he did not necessarily consider a tieup between HCF and HBF a competitive threat.