Southern Cross Medical Care annual surplus soars 38%

BUSINESSDESK: Southern Cross Medical Care Society, the insurance arm of the not-for-profit health group, lifted its annual surplus 38% after a bottleneck in claims after the 2011 Canterbury earthquake that levelled the country's second-biggest city.

The net surplus rose to $39 million in the 12 months ended June 30, from $28.3 million a year earlier, the Auckland-based society says. Premium revenue rose 6.7% to $706.8 million, outpacing the 4.9% increase in net claims expense of $605.5 million.

"A significant contributor to this was lower claims costs from the Canterbury region in the first quarter, driven primarily by the temporary closure of several private surgical facilities in the city following the devastating February 2011 earthquake," chairman Graeme Hawkins says in his report.

"Claims costs across the membership surged in the final quarter, hitting a record high for the month of May. Claims cost growth is forecast to continue at high levels during 2013." 

Last week, the health insurer lifted the amount members can claim on prescriptions by between 50% and 100%, effective from September 17.

Southern Cross Medical is increasing the cover based on forecast growth in claims made through its electronic system and after Health Minister Tony Ryall announced a hike in prescription charges to $5 per item from its existing $3 from next year.

Southern Cross Medical paid out 85.7 cents in claims for every $1 received in premiums, down from 87.1 cents, and funded 171,000 elective surgical procedures, up from 158,000 a year earlier.

Chief executive Ian McPherson says the insurer has accepted the government's decision not to look at offering tax rebates on premiums for older New Zealanders and says the group will look at ways to increase access to private healthcare.

The insurer kept its market share steady at 61%, even as membership slipped 1.6% to 822,422.

Southern Cross Medical had $373.4 million in reserves as at June 30, above the mid-point of its target solvency range and equating to about seven months of claims.

Like other insurers, Southern Cross Medical is coming under prudential supervision by the Reserve Bank and will be subject to new solvency requirements set to be issued by the end of the year.