Hcf Ties Up Manchester Unity

Sydney Morning Herald

Tuesday December 16, 2008

Danny John

THE three top health funds are on the point of controlling 70 per cent of the private health insurance market after members of NSW's Manchester Unity gave their overwhelming support to the latest merger in the sector.

Yesterday's vote by 78 per cent of MU's 90,000 policyholders on a $256 million tie-up with bigger rival HCF will see the combined Sydney group tighten its hold on third place behind the two giant players, Medibank Private and the merged BUPA-MBF group.

HCF, which intends to phase out the Manchester Unity brand over the next 12 to 18 months, will end up with an 11.5 per cent share of the national market, based on the number of people covered. The new not-for-profit group will have a total of 545,000 policyholders.

Both Medibank Private, which last week sealed a $367 million friendly takeover of Wollongong's Australian Health Management fund with its 158,000 members, and BUPA-MBF have market shares approaching 30 per cent each. Between them, they provide cover for 6 million people.

The "Big Three" funds have seen their control of the total market grow in percentage terms from 57 per cent just over a year ago to more than two-thirds now. Another 17 per cent lies in the hands of just four other funds, with the remainder held by another three dozen or so small specialised players.

Much of the latest consolidation has involved the medium-size players, all of which have operated in the biggest part of the market, NSW.

In each case, the $3.5 billion of deals - including last year's stock market listing of Newcastle's NIB - has involved the agreement of members to demutualise their respective fund and then vote on a merger or go public.

The mergers have resulted in one-off monetary bonuses for policyholders who have swapped what is in effect "shadow" shares in their funds - based on their years of membership and their type of cover - for cash payments.

That was one of the major factors influencing yesterday's vote by MU's members of whom 99 per cent of those who took part in the ballot gave their backing to HCF's takeover.

MU's 79,000 health fund members are to receive a minimum of $250 and a maximum of $7640 with the majority due to get $3000. Its 15,000 holders of life, disability and travel insurance will receive on average $3500 each.

The poll results now need to be approved by the Federal Court on Friday but that is expected to be a mere formality before HCF takes full control on Christmas Eve.

John Brogden, the former NSW Liberal leader who has been chief executive of MU for the last two years, told the Herald the vote was a "very heartening and strong endorsement" of the board's unanimous recommendation to merge with HCF.

© 2008 Sydney Morning Herald

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