Health insurer Medibank Private on block for $4bn

THE nation’s biggest health fund will be put up for sale to mum-and-dad investors within weeks.

THE nation’s biggest health fund will be put up for sale to mum-and-dad investors within weeks as the Abbott government sells off Medibank Private in a public share offer that could recoup up to $4 billion.

A special offer to Medibank’s 3.8 million members is possible during the final phase of the sale plan before the terms of the offer are released in October.

While the government insists the fund’s policyholders have no ownership rights, it is considering special arrangements for the members as it talks to investment banks about the likely share price.

The sale is a key part of the ­Coalition’s infrastructure policy, with the proceeds meant to go into a new fund to pay state governments an incentive to sell public assets to finance new roads and other projects.

Finance Minister Mathias Cormann announced the public share offer late yesterday, saying there was no “compelling policy reason” to keep the asset in public hands.

But Labor finance spokesman Tony Burke and health spokeswoman Catherine King warned the sale could increase health insurance premiums while hurting competition.

Medibank paid $450 million in dividends to the commonwealth last year but its ultimate ownership is being disputed following questions over how it was set up as a public insurer.

The fund’s first general manager, Ray Williams, earlier this year likened the privatisation to “theft”, but the government has rejected claims that members have a claim to ownership.

“Medibank policyholders purchase health insurance, not a share in Medibank. The government on behalf of taxpayers is the owner of Medibank,” Senator Cormann told The Weekend Australian.

“Any special arrangement for Medibank policyholders in the context of the sale of Medibank Private will be announced as part of the Medibank share offer prospectus.”

The prospectus is expected to be lodged with the corporate regulator by the end of October but potential investors will be able to register their interest towards the end of next month.

The government says Medibank Private is expected to list on the Australian Securities Exchange in December and that likely investors can apply for shares directly or through their stockbroker.

Australian Shareholders Association chairman Ian Curry noted the sale of insurers like the NRMA and the AMP had distributed shares to members who had financed the companies over many years. “You could say this is unfair in that it hasn’t followed those previous cases,” Mr Curry said of the Medibank plan.

“It’s not a crime but it does ignore the people who have made Medibank what it is today.”

While other government reforms risk a blockade in the Senate, the asset sale can go ahead without a vote in parliament because Labor did not repeal legislation passed a decade ago to authorise the privatisation.

Yesterday’s announcement restarts a sale process put on hold by former prime minister John Howard before the 2007 election.

Medibank collected $5.8bn last year, about $1500 from each member on average, but its profits have varied and its dividend payments have swung wildly according to political demands.

The insurer generated $1.3bn in profits before tax in the four years to June 2013.