Medibank up for sale

Medibank Private will soon be up for sale, with Finance Minister Mathias Cormann announcing that investors are now able to pre-register for shares.

Senator Cormann said it had always been the intention of the Coalition Government to sell-off the asset, “There is absolutely no good reason for the Federal Government to own a private health insurance business today,” he said. “Medibank Private is a commercial business operating in a well-functioning, well-regulated market with 34 private health funds.”

The sale will be supported by a government-funded advertising campaign, but Senator Cormann has declined to comment on just how much will be spent on raising the profile of the float.

Those who pre-register will be able to purchase more shares than those who don’t and members of the fund who pre-register will receive a greater preferential share allocation. Pre-registration closes on 15 October, with the prospectus expected to be available by the end of October and will be floated on the Australian Stock Exchange earmarked for December.

The sale of the government-owned health fund is expected to raise $4 billion before costs are deducted. It is the intention to sell off 100 per cent of the shares, with the money raised to be used to fund infrastructure projects.

Australian Shareholders’ Association chairman, Ian Curry, thought it would be considered a win-win for all involved, if the price is right. “I think it’ll probably be over-subscribed, but again we don’t know how many shares are going to be offered and at what price, and what the likely return is on those shares. That’ll be the determinant of the take-up.”

However, there is concern in the medical fraternity with the Victorian president of the Australian Medical Association, Tony Bartone, expressing concern that the sale would shift the focus of Medibank from healthcare to profitability. “We have concerns of the effects that it might have on premiums going forward. Significant cost pressures might be reflected in bottom line need to drive profit and that might certainly spell increased premiums for policy holders,” Dr Bartone said.



Opinion: No benefits for members

Medibank customers hoping for a windfall when the company is floated will have to think again, with no free shares offered to loyal members of the fund.

Other health funds which have been floated, such as NIB and MBF, have offered a sweetener to members in the form of free shares, which can be worth over $1000 depending on your policy and share price of the fund. But despite members calling for free shares with the argument that their policy contributions have underpinned the value of the business, a spokeswoman for the share offer said “Medibank Private’s policyholders have no interests or property rights in assets comprising Medibank Private’s health benefits fund. Policyholders have paid premiums in order to be covered by private health insurance for the term of their policies.”

The offer of free shares for members is often seen as a thank you for continuing to pay premiums and is certainly the norm in demutalisations of groups, with NIB, AMP and NRMA all offering billions of dollars of shares to members. The difference with this offering seems to be that despite what you may have been led to believe, you have for years just been a customer of Medibank and not an exclusive ‘member’.

When you look back at the floating of NIB in 2007, which did indeed reap dividends for its members, the joy was short-lived, with premiums increasing. In fact, NIB topped the charts for premium increases last year, posting an average increase of 7.99 per cent, compared to the average for other funds which was 6.2 per cent. So, perhaps it’s time for all those covered by Medibank to remember that, they are customers and, as such, are entitled to shop around for alternative cover.

Do you think the Government is right to sell-off Medibank or should it be retained as a profitable and valuable asset? After costs are deducted, will it raise enough money to fund worthwhile infrastructure projects? Do you think Medibank customers should receive free shares?

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