Southern Cross Health Society membership at 30 year high
Southern Cross Health Society Group (“Group”) today released its annual financial results, reporting significant membership growth as more New Zealanders move to prioritise their health through the pandemic.
Southern Cross Health Society (“Society”) is a not-for-profit Friendly Society and New Zealand’s largest health insurer. The Society welcomed 20,000 net new members this year, bringing the membership to 908,000.
This is its seventh straight year of growth and represents the largest membership in 30 years. Half of all new health insurance members were acquired in the final quarter of the year.
Southern Cross Health Society CEO Nick Astwick says this growth shows the great value New Zealanders place on health insurance, which provides assurance they can access healthcare when they need it.
“Covid-19 has certainly cast a light on how New Zealanders value and access healthcare. We’re seeing a rise in the number of people who see health insurance as a very important part of their wraparound health support,” he said.
“It’s also very pleasing to see more business customers investing in health insurance for their people this year. Employees consistently rate health insurance as one of the most highly valued workplace benefits, in an increasingly tight labour market,” Astwick said.
Astwick says despite Covid-19 causing ongoing fluctuations in claims received, Society reported a five-year average of 86 per cent of premiums going to paying claims.
“We paid $1.08 billion in claims out of $1.35 billion received in premiums last year. Over the past five years we returned $5.03 billion in claims out of $5.82 billion received in premiums – which represents more than 86 per cent of premiums that go to paying claims. This compares favourably to the New Zealand industry average (excluding Southern Cross) of only 65 per cent of premiums returned in claims.”
Astwick says this is the Southern Cross difference.
“As a not-for-profit Friendly Society, without overseas shareholders or investors to return dividends to, we can focus on maximising funding healthcare costs and delivering on our purpose of empowering members to live well for longer,” he said.
“Our unique position as a not-for-profit Friendly Society has allowed us to be with our members more than ever this year, increasing our efforts to provide them with access to the support and services they value.
“Launched in December 2021 Better ‘22 delivered free GP consultations with CareHQ (our virtual GP consultation service in partnership with ProCare), up to three mental health and wellbeing consultations with Raise, and free ‘flu vaccinations.”
Astwick also said recognising households are facing increasing pressure, the Southern Cross team has actively encouraged conversations with members to make sure they are on the right plan for their financial circumstances.
“As New Zealand’s largest health insurer, we know the role affordable health insurance plays in empowering New Zealanders to live better, healthier lives. As life or personal circumstances change so too can health insurance. Of the members we have proactively reached out to this year, one in five have made changes to their policies, by changing their product or increasing excesses to reduce premium levels.”
The Group also delivered a higher-than-expected surplus of $90 million for the year in review. Of this, $108 million is the operating surplus, which is offset by a $17 million loss on investments1. The Society’s average Group surplus over the past five years is $34.5 million, representing 2.9 per cent of premium income over the same period.
Astwick says the high surplus is due to a much lower volume of health insurance claims received over the year, owing to the impact of Covid-19 as members were unable to access treatment due to lockdowns, illness in the community and reduced provider capacity.
“We’re expecting to see much higher claims costs and volume next year, as those who delayed seeking treatment will now seek access to healthcare. This, combined with a challenging high inflation environment, would usually indicate a need to adjust premiums upwards at a sharper rate.
“We’re seeking to avoid significant premium volatility for our members, so we will apply a large portion of the surplus toward keeping premium increases as low as possible. This will lessen the effect of inflationary pressures in these times.”
In its 25th year, the Health Society Affiliated Provider programme continues to deliver savings for members. Southern Cross estimates the programme has saved up to $200 million in healthcare service costs to date, which would have otherwise contributed to further premium increases. Astwick said Society will continue to develop the Affiliated Provider programme to help moderate costs.
While this year has seen losses on the Society’s investment portfolio, it comes off the back of strong gains in prior years.
“Market conditions have significantly reduced the returns on global equities and bonds which means our investment performance has not been as strong this year, generating a loss of $17 million. However, over the five years since we adopted our new strategic asset allocation, our investment portfolio has yielded an additional one per cent per annum over and above the very conservative portfolio it replaced,” said Astwick.
Southern Cross Medical Care Society Chair Murray Jordan says the surplus has helped bolster Group reserves.
“This year we’re reporting a total Group Reserves figure of $613.8 million2. This result, along with our strong market position, not-for-profit ethos and strong brand presence has helped Society retain its A+ S&P financial strength rating.”
Snapshot figures – FY22
• 908,176 members, including 20,394 net new members
o Highest membership in 30 years
o Seventh straight year of growth
• Southern Cross Health Society Group surplus of $90 million
o $108 million is operating surplus3
o $17 million loss on investments
o Five-year average Group surplus of $34.5 million
• This year’s higher than expected surplus is due to a much lower volume of health insurance claims incurred over the year due to the impact of Covid-19
• $1.08 billion in claims paid out of $1.35 billion received in premiums
• $5.03 billion returned in claims over past five years, out of $5.82 billion received in premiums – representing more than 86 per cent of premiums returned to members in claims
• 62% of the health insurance market4 but pay over 70.4% of the value of all health insurance claims paid in New Zealand, with a five-year average of 72.5%
• Society Investments suffered a loss of $17.3 million, with total investments at $716.3 million5 by the end of the year
• Five-year average investment return of $15.6 million. Over the five years since Southern Cross Health Society adopted its new strategic asset allocation, our investment portfolio has yielded an additional one per cent per annum over and above the very conservative portfolio it replaced
• Standard and Poor’s A+ financial strength rating
In the year ended 30 June 2022, the Society paid three million claims, including:
• 256,461 surgical procedures
• 520,021 specialist consultations
• 579,170 prescriptions
• 631,739 GP visits
Other than the Society Group surplus, all indicators above relate to the Southern Cross Health Society only.
For further information:
View a video summary of the Annual Report.
See the Southern Cross Health Society Annual Report Summary by visiting: southerncross.co.nz/annualreport