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Bupa Asia Pacific Doing Well Down Under

Posted on May 03, 2011 by Sergio Ulloa ()  | Tags: Australia, Bupa Australia

Bupa Asia Pacific, Australia's largest privately owned health insurer, has delivered exceptional results for 2010. The company reported a 26 percent rise in after-tax profits as a result of pronounced increase in premium revenue coupled with a recovery in investment income. Bupa Asia Pacific was established in 2008 as a $2.4 billion (US$2.63 billion) merger between Bupa Australia and MBF Australia Limited. The acquisition of MBF made Bupa the largest private provider of health insurance in the country. Today Bupa Asia Pacific covers over 3.2 million members in Australia, across an array of brands including, MBF, Blink Optical, HBA and Mutual Community. According to Bupa's latest accounts filed with the Australian Securities & Investments Commission (ASIC), earnings for the company increased $48 million (US$52.5m) to a total of $228 million (US$249.4m) for the year ending December 31. Revenue earned from health insurance underwriting rose by over $280 million (US$306m) to $4.24 billion (US$4.6b), a 7 percent increase for the year. These results followed an increase in claims made by Bupa policyholders, costing the company $3.65 billion (US$ 3.9b), a 5.6 percent increase on 2009's expenses. In 2010, Bupa Asia Pacific sold MBF's previous life insurance and wealth management business operations to Clearview Wealth Limited, a financial services group, for $204 million. Bupa then acquired Peak Health Management and eye-care business, Health Eyewear, for around $10 million (US$11m) in total. The accounts further reveal that Bupa Asia Pacific paid $211 million (US$230.8m) in dividends to its parent company, down from $332 million (US$363m) in 2009, the first year following the MBF merger. Bupa experienced a $31 million (US$34m) rebound in investment income during the year, rising up to $119 million (US$130m), which after assorted costs and expenses, gave the insurer a pre-tax profit of $331.5 million (US$362.6m) for 2010, $90 million (US$98.5m) ahead of 2009's total. The company filed $97.5 million (US$106.6m) in tax together with a $5 million (US$5.5m) loss from discontinued operations, all of which totaled cumulative earnings of $228 million (US$249.4m). The health insurance industry is closely regulated in Australia. The premium amount which private insurers can charge customers is directly monitored by the Federal Government. Every year, insurance companies provide the government with details of whether and how much they plan to alter their health coverage premiums in order to protect their business and guarantee that they remain a solvent operation in Australia. Once those rates are calculated and granted permission, they are systematically applied from April 1 of the following year. Bupa's accounts, along with those of its rival Australian insurers, have benefited from the recent substantial (almost 6 percent in 2009) industry-wide increase in the accepted cost of health insurance in the country. According to the accounts, about $17 million (US$18.6) of the rise in Bupa's profits can be attributed to the increase in premium revenue. Last month the company was permitted by the government to further raise their premiums again. Their projected average premium increase of 5.14 percent, however, remains the lowest of the principal health funds in Australia. Private health insurance companies in Australia have traditionally operated within narrower profit margins than the global insurance industry average and remain more concerned with maintaining good underwriting and long term viability in the country. Companies must hold minimum levels of capital above prudential requirements to make certain they can meet their obligations to policy holders and continue to operate. Increasing premiums grants the insurers necessary capital to more adequately cover any adverse events, potential volatility in benefits, as well as to enable further investments and expansion in their business. These factors will eventually improve the quality of service for insurance policyholders in Australia. Private health insurance coverage is not mandatory for Australians. The Australian healthcare system features both state and private-run institutions. Medicare was established in 1983 to provide Australians with free universal coverage for medical treatment in addition to a scalable reimbursement scheme for outpatient services. The Pharmaceutical Benefits Scheme is also prepared to subsidize medical prescriptions. Australia apportions around 8.5% of its GDP towards healthcare, on par with other OECD countries. The Medicare system remains principally funded through general revenue. Those above a certain income who remain exclusively on Medicare are liable for a Medicare Levy Surcharge, which is assessed at 1% of taxable income. The Australian Government has introduced incentives and insurance rebates to encourage more people to obtain private health coverage to ease both the financial and structural burden that the large numbers of aging patients are placing on the public healthcare system. The measures introduced in the past decade have had their desired effect with more Australians investing in their own health then ever before. The insurance industry has grown significantly as a result. Bupa has been a successful player in the Australian insurance market for many years. The British based company has in fact seen its successful business in the Asia-Pacific region take on a more prominent role in the company's overall growth strategy. Bupa is expecting challenging conditions to continue in its traditional established markets in the UK and the USA. Operations are expected to grow in the emerging economies, particularly in the populous Asian, Middle Eastern and Latin America regions, where there has been an increasing demand for quality health insurance coupled with a growing middle class that can afford such services. Insurance Company Mentioned Bupa BUPA British United Provident Association (BUPA) was established more than 60 years ago in the UK and is now has ten million customers in over 190 countries, and over 52,000 employees around the world. Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.
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