MBF 2006-2007 results highlight financial strength

Release date: 14 September 2007

MBF Australia Limited ("MBF") today released its financial results for the year ended 30 June 2007, reporting an increase of $117 million in health benefit payments and its fifth successive profit increase, underscoring the Group's financial strength ahead of its proposed demutualisation and listing in 2008.

During the year, MBF achieved a 23.5 per cent rise in net profit to $223.5 million, taking retained earnings to $1.141 billion - an increase of $729 million since 2001-2002. All of MBF's business units - the MBF Australia and MBF Alliances health insurance businesses and the MBF Life and ClearView Retirement Solutions financial services businesses -- contributed to the Group's positive performance in 2006-2007.

Underlining strong customer value and support, total health benefits increased $117 million to $1.872 billion. As at 30 June 2007, the Group's health insurance division provided health insurance to more than 1.9 million Australians representing a national market share of 18%, making MBF the largest non-government private health insurer in Australia.

MBF Managing Director and Chief Executive Officer, Mr Eric Dodd, said the Group had again reported an excellent financial result with a substantial health insurance underwriting profit of $69.9 million. This underwriting profit was achieved while premium increases were again below the industry average in 2007.

Mr Dodd said the Group was excited about its future prospects with its industry leading financial strength and strong growth potential through the continued implementation of a business strategy that addresses customers' health, financial and lifestyle security needs.

"The combination of financial strength and a business strategy of growth and diversification means MBF is in an ideal position to take the next logical step in demutualising and becoming a listed organisation," Mr Dodd said.

"We have been preparing to take this next big step in the MBF Group's development for some time and, over the past five years, we have adopted disciplines that would be expected of a listed entity.

"Importantly, the quality of our results in 2006-2007 and in recent years means we can approach demutualisation and listing with the confidence of having an effective business strategy in place, a diverse offering and an intense focus on customer value and service."

Highlights of the MBF Group's 2006-2007 financial results include:

• Net cost of private health insurance benefits was $1.872 billion representing an increase in benefits of $117 million.
• Hospital benefits totalled $1,200 million - an increase of $102 million, or 9.3%.
• Benefits for in-hospital medical services totalled $200 million - an increase of $20 million, or 11.1%.
• Ancillary benefits for services such as dental care, optical and physiotherapy totalled $472 million - a small decrease of $5 million, or 1.0%. This was driven by demand and not benefit limits.
• MBF Life business unit achieved a net profit of $8.6 million, an increase of $2.8 million from 2005-2006.
• ClearView Retirement Solutions experienced record sales growth with funds under management of $2.141 billion -- $313 million more than at 30 June 2006.

"In 2006-2007, the MBF Group made excellent progress in implementing our business strategy and extending our offering of trusted solutions which protect our customers' health and financial well being," Mr Dodd said.

"Over recent years, our strategy has broadened from the provision of private health protection and is now focussed on helping our customers to take control of their health and wellbeing. This refocussing is vital because managing the healthcare costs of an ageing population will be of great importance to the Australian economy and to the community."

Mr Dodd said the MBF Group had continued to implement operational improvements in anticipation of a potential move towards demutualisation and listing. These operational improvements include:

• Successful introduction of a new computer operating platform for the Group's core private health insurance business to provide enhanced business agility and flexibility
• Upgraded risk management capability with resources to provide high quality data on day-to-day business activities
• Implementation of a ‘competency framework' to match skills, jobs and people
• Introduction of the Office of the Chief Medical Officer led by Dr Christine Bennett to make preventative health and disease management part of MBF's core private health insurance activities

"I know the Group is up to the task of further improving customer value, improving our ability to compete and participating in the expected rationalisation of the private health insurance industry," Mr Dodd said.

Contact: David Jones MBF Public Affairs 0417 232 246

MBF Australia Limited Business Highlights in 2006-2007

In 2006-2007, MBF Australia Limited made significant progress in pursuing its business purpose to provide trusted solutions that protect and enhance health and financial wellbeing.

In following a business strategy of growth and diversification, the MBF Group comprises a number of entities with an expanded offering to address customers' health, financial and lifestyle protection needs. Private health insurance remains the Group's core business.

Business highlights of the year in review included:

Private health insurance - MBF Australia and MBF Alliances

• An increase of $117 million in benefits for customers' healthcare with total benefits in 2006-2007 of $1,872 million.
• Updated business strategy to tailor health insurance and financial products for key market segments.
• Completed national introduction of a new private health insurance computer system for MBF Australia with rollout to MBF Alliances planned for FY08.
• Continued development of MBF in2life with a view to ultimately rewarding customers for taking greater control of their health and wellbeing.
• Introduced four more health management programs - back pain, arthritis, congestive heart failure and obstructive lung disease - under ‘broader health cover' changes.
• Through MBF Australia and MBF Alliances, the Group provided private health insurance to more than 1.9 million people with a combined national market share of 18%.
• Strong financial performance enabled MBF Australia and MBF Alliances to hold premium increases in 2007 to an average 4.39% -- less than the 4.52% industry average.
• Redesigned the MBF website to provide enhanced customer self-service and access to health information.

Life insurance - MBF Life

• MBF Life achieved a net profit after tax of $8.6 million and at 30 June 2007 had 66,633 customers with a retention rate of nearly 92%.
• Inforce premiums totalled $34.2 million in 2006-2007, up $1.8 million on the previous year.

Financial planning - ClearView Retirement Solutions

• ClearView funds under management reached $2.1 billion, an increase of 17% on 2005-2006.
• Funds under advice grew by 15% to reach $2.819 billion in 2006-2007.
• New business sales reached $469 million in 2006-2007, an increase of 29% on the previous year.
• Achieved $98 million in sales in June 2007 alone in the lead up to arrangements to simplify the national superannuation system.

Snapshot of MBF Australia Limited Financial Performance

Private Health Insurance
(MBF Australia and MBF Alliances)

Underwriting profit

Financial Services