WELLINGTON - New Zealand's largest health insurer Southern Cross Medical Care Society today announced an annual operating deficit of $2.8 million.
Southern Cross chairman Bryan Kensington hailed the result as a "return to financial sustainability" for the friendly society which last year posted a $41.2 million loss and saw its reservesdwindle from $222.5 million to $184.5 million.
This year, after investment income and amortisation of goodwill, the society made a modest surplus of $15.7 million which had boosted the society's group reserves to $195 million.
During the 12 months ended June 30, the society's operating result had significantly improved and its balance sheet had strengthened, Mr Kensington said in a statement.
"While there is more work to be done, in terms of improving operational efficiencies, the 2003 result is a significant achievement," he said.
The society aroused the ire of many of its older members last year when it moved to single-year bands for its premiums resulting in increases for about 80 per cent of members, with some paying up to 95 per cent more for their cover.
The society said the change was necessary to return it to viability.
Last year Mr Kensington defended plans to raise premiums saying that previously reimbursed claims represented an unsustainable 96 cents in every premium dollar collected.
Today Mr Kensington said the ratio of claims to premiums this year at 87 per cent was the "major factor" in the society's improved financial result.
Southern Cross chief executive Ian McPherson said: "A firm foundation for the future was established during the 2003 financial year which will ensure that Southern Cross members continue to benefit equitably from their health insurance."
Mr Kensington said the society, which has over 800,000 members, plans "to increase its reserves to a level consistent with recognised solvency and capital adequacy".
He said in the absence of a New Zealand solvency standard for health insurers, the society had adopted Australian standards.
Mr Kensington said the underlying strength of the Southern Cross balance sheet had been further reflected in the A+ insurer financial strength rating confirmed by Standard & Poor's in February.
Southern Cross holds its annual general meeting on October 9.
