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HBF and HCF plan to merge

Western Australia’s largest health insurer, HBF, plans to merge with Sydney-based health insurer HCF, to create the largest not-for-profit health insurer in Australia.

Author Andrew Walton
Time to read 5 minutes

The two organisations have signed a Heads of Agreement agreeing on key principles of the proposed merger. Any merger between HBF and HCF requires approval by the HBF Board, the HBF Council and regulators. The HBF Council, a body which in essence has responsibility for ensuring that HBF members’ interests are protected, will be briefed fully on the details of the proposed merger at a special session before voting on whether to approve the merger in the coming months. Any merger would also be subject to a number of regulatory approvals, including from the ACCC and APRA, and other conditions. A similar process is required by HCF.

Any merger would see HBF and HCF combine to form Australia’s third biggest private health insurer, behind Medibank and Bupa, with a national market share of approximately 18.4 percent, 2.5 million members and total assets of $4.0 billion.

HBF CEO and Managing Director John Van Der Wielen said HBF had been reviewing its strategy to ensure it could continue to provide its policyholders with the best possible health cover in a competitive market.

Mr Van Der Wielen said that if all relevant approvals were obtained and the merger occurred, the increased scale and efficiencies of the combined group would enable HBF and HCF to better compete against the for-profit private health insurers.

“It’s no secret that we’ve been undertaking a review of HBF’s strategy, assessing how HBF could continue to provide members with the best possible health cover. Any merger or acquisition involving HBF would have to provide real benefits for our members and this is exactly what we believe a merger with HCF would deliver. This would be a true merger of equals that would mean we’re able to provide best-in-class health insurance.

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

HBF Chairman, Tony Crawford said that the Board believed the case for the merger with HCF was compelling.

“In combining Australia’s two largest not for profit health funds, this merger would bring together two companies with common values and a shared commitment to put members first,” Mr Crawford said.

"We wanted to be sure that under the terms of any merger the iconic HBF brand would be retained in WA, employees would be looked after and, crucially, HBF’s not-for-profit status would remain, meaning we continue to put members first, not shareholders.”

HBF’s Board and management commenced a strategic review in 2017 to consider how HBF could best serve the long-term interests of policyholders. This included attaining scale outside of Western Australia at a faster pace than had been possible to date, which would be necessary for HBF to remain competitive in the private health insurance sector in the future. In recent years, HBF has seen its health insurance operating margin decline from positive 6.2% margin in 2013 to a negative 1.7% margin in 2017 due to increasing competitive pressures and keeping average premium increases below national for-profit health insurers. This has been possible because of HBF’s strong financial position but would be unsustainable over an extended period.

Under the terms of the proposed merger HBF would retain the HBF brand in the state indefinitely. It would also maintain its branch network and continue to have a strong community presence such as through the hugely popular HBF Run for a Reason. In the immediate term, there would be no changes to existing services, benefits, or entitlements and the premium changes announced for 1 April 2018 would be unaffected. Over time, we believe that a merger would deliver lower premium increases and best-in-class health cover for members.

Key details of the proposed merger include:

  • Any merger would not require a cash outlay by either party or demutualisation of either HBF or HCF.
  • A merged entity would have a combined asset position of $4.0 billion, enabling reinvestment in the business and minimising future premium increases.
  • A merger would deliver real benefits for members through significant efficiencies.
  • If approved by the Councils of both organisations, the merger could be completed in the middle of the year following regulatory approvals, including the ACCC and APRA. Until these approvals are obtained, HBF and HCF will continue to operate as they currently do.
  • If approved, an entity will be established with a Board comprising equal numbers of Directors from HBF and HCF. All members of HBF’s Council will be offered the opportunity to maintain their governance roles over the merged group.
  • After any merger, there will be a transition period in which the operations of HBF and HCF will be combined.

For all media enquiries please contact:

Lauren Underhill/Jodi Eastman
Tel: 0438 925 050

FTI Consulting
Shaun Duffy
Tel: 0404 094 384

About HBF

HBF has been Western Australia’s leading health insurer for more than 75 years and remains one of the best known and respected brands in WA. With over a million members and 8% of the Australian health insurance market, it is the second largest not-for-profit health insurer in Australia.

Almost 90% of HBF’s members reside in Western Australia and have access to a range of free or subsidised health and wellness services, including free fitness training, health checks, flu vaccinations, weight loss programs and sleep apnoea services. HBF holds the franchise for the Friendlies Pharmacy group and provides a range of preventative health services free of charge or at discounted rates through Friendlies Pharmacies.

In addition to providing Hospital and Extras insurance, HBF sells HBF Life Insurance (underwritten by Zurich Financial Services Australia) and HBF home, car and travel insurance (underwritten by IAG).

Each year tens of thousands of Western Australians take part in the HBF Run for a Reason, the largest walking and running event in Western Australia and second only to the Sydney City to Surf nationally.

Key numbers as at June 2017:

  • Total members: 1,033,657
  • WA members: 921,587
  • Revenue: $1.62b
  • Benefits paid: $1.56b
  • Employees (FTE): 810

About HCF

HCF, Australia’s largest not-for-profit health fund protecting people since 1932, covers around 1.5 million members with health and life insurance, travel and pet insurance. On average over the last five years, HCF has paid out more cents in every dollar in premiums to members as benefits than the industry average.

With over 35,000 specialists participating in its Medical Gap Cover Scheme and approximately 10,000 providers participating in its 100% back More for You programs, HCF gives members access to quality healthcare with no gaps or minimal costs compared to non-participating providers. To empower members to put their health first, HCF also offers a range of health and lifestyle services including its My Health Guardian health management program, mobile Victor Chang Heart Health Checks and My Global Specialist second opinion service.

HCF’s national network of retail outlets and Australian-based call centres have earned multi-award winning status. HCF members also have access to low cost, high-quality services at HCF Dental Centres. Having invested more than $17 million to support \ health services research through the HCF Research Foundation, HCF is devoted to investing in the future of Australia’s health. To learn more about HCF go to hcf.com.au/about-us

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