no overlap of red spine allowed for fold crease
spine set up as 7 mm
Annual Report 2021
Better health
for better lives
Medibank Private Limited
ABN 47 080 890 259
Contents
About Medibank
2021 highlights
Chairman’s message
CEO’s message
Our strategy
Creating value for our stakeholders
Better for customers
Better for health
Better for people and communities
Our sustainability highlights
Operating and financial review
Directors
Executive leadership team
Corporate governance statement
Directors’ report
Remuneration report
Financial report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report
Shareholder information
Financial calendar
Corporate directory
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6
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131
133
133
Sustainability Report 2021
Building a
healthier future
This report is part of
our suite of reporting
for the 2021 financial
year. You can find more
information about our
performance in our
Full Year Results
Investor Presentation
& Sustainability Report
2021 full year
results
Investor presentation
David Koczkar – Chief Executive Officer
Mark Rogers – Chief Financial Officer
Medibank Private Limited
ABN 47 080 890 259
25 August 2021
Annual Report 2021
Better health
for better lives
Cover – Shelley and family enjoy a day in the park together
Financial calendar
Key dates
Full year results announcement
25 August 2021
Ex-dividend share trading commences
8 September 2021
Record date for final dividend
9 September 2021
Payment date for final dividend
30 September 2021
Annual general meeting
18 November 2021
Half year results announcement
February 2022
Payment date for interim dividend
March 2022
The above dates and payments are subject to confirmation.
Any change will be notified to the Australian Securities Exchange (ASX).
Corporate directory
Company
Share registry
Medibank Private Limited
Computershare Investor Services
Pty Limited
GPO Box 2975
Melbourne VIC 3001
Telephone:
1800 998 778 (within Australia)
+61 3 9415 4011 (outside Australia)
132 331 (within Australia)
computershare.com.au
+61 3 8622 5780 (outside Australia)
Registered Office
720 Bourke Street
Docklands Vic 3008
GPO Box 9999
Melbourne VIC 3001
Telephone:
medibank.com.au
Annual Report 2021 133
About Medibank
At Medibank, we believe in Better Health
for Better Lives. For 45 years, we’ve been
supporting millions of people in Australia
as one of the leading private health insurers.
We’re also changing into a health company
as we provide people with greater support
to manage their health and wellbeing.
We’re doing this by offering more choice to
customers about where they can receive their care,
more control over what they pay for it and innovating
to provide greater access to preventative healthcare.
We’re partnering with leaders in the health sector
– doctors, hospitals and research institutes – building
new care options that deliver quality care, and we’re
helping to reform Australia’s healthcare system so it
can continue supporting all Australians. We also offer
other insurance, including travel, pet and life, to make
things easier for our customers – because everyone
deserves to live their best quality of life.
Purpose
Better Health for Better Lives
Vision
Everyone in Australia deserves to live their best quality of life
– for themselves, their communities and future generations
Focus on our
customers and people
Strategic pillars
Grow our core
business
Transform into a
health company
Health Insurance
Diversified Insurance
Health Services
Our business
Health, Support, Value
Simple, Easy, Affordable
Travel
Pet
Life
Health and wellbeing
and preventative programs
Clinical homecare
Primary care investment and
health system navigation support
Car and home
Fund short-stay, no-gap programs
Customers First
Show Heart
One Team
Own It, Do It
Values
Annual Report 2021 1
2021 highlights
Customer
3.7m
total customers
at 30 June 2021
c. $300m
total COVID financial support
to date – includes $103 million
customer give back
82,500 (+4.6%)
reported net resident
policyholder growth
27.3%
market share
(up 37 basis points in FY21)
37.137.1 (+5.3) Medibank
43.043.0 (+1.8) ahm
customer advocacy
(average Service NPS)
c. 760k
interactions with Live Better
Rewards and Activities
$5.6b (+2%)
in claims paid
to customers
Services supported
1.11.1m+m+
25.925.9m+m+ 430430k+k+
hospital admissions
extras services
surgical procedures
Health services
$63m
c. 77,650650 (+32%)
preventative
health
investment
customers used
Medibank at Home
c.133133k k (+51%) 9595
900900++
customers engaged
with Member
Health Services
Myhealth
GP clinics
patients used
My Home Hospital
since January 2021 launch
All data is presented on a statutory basis
2 Medibank
Our performance
$441.2m (+39.8%)
Group net profit after tax
6.9
cents
per share
12.7
cents
per share
final ordinary dividend
total ordinary dividend
from continuing operations
fully franked
fully franked
$6,680.3m
Health Insurance
segment revenue
$283.8m
Medibank Health
segment revenue
$120.0m
net investment
income
Composition of
2021 segment
operating profit
94.594.5%
$538.6m
Health Insurance
5.55.5%
$31.4m
Medibank Health
c. $20m
in productivity
savings
83%
including around
33,866866 11,400400
employee engagement
employees
health professionals
Headcount at 30 June 2021
Annual Report 2021 3
Chairman’s message
Mike Wilkins AO
This year has again been challenging for people,
with the COVID pandemic continuing to make an
impact through a wide range of health, economic
and social factors. I am proud of how Medibank
and our people have supported our customers,
community and each other through these uncertain
times. This demonstrates the strength of the
Medibank team and their steadfast commitment
to our Better Health for Better Lives purpose.
During the year we published our first Modern Slavery
Statement which details our approach to preventing
modern slavery and human trafficking within
Medibank’s business operations and supply chain. We
also shared our progress in supporting greater health
equity and better health outcomes for Australia’s First
Peoples. We are taking this momentum and our strong
partnerships with Aboriginal and Torres Strait Islander
communities to inform the development of Medibank’s
5th Reconciliation Action Plan.
With this purpose driving our actions and decisions,
Medibank saw above market policyholder growth,
achieved record customer advocacy and maintained
strong employee engagement. We also made progress
in driving broader health system change to support its
sustainability for the future. This focus helped us deliver
a net profit after tax of $441.2 million for the 2021
financial year. The Board has determined a final ordinary
dividend of 6.9 cents per share, bringing the total fully
franked dividend for the year to 12.7 cents per share.
Our capital position remains strong, with the Board
maintaining a prudent approach to capital management.
At Medibank we believe that delivering on our
business goals and contributing in a positive way to
society do not need to be mutually exclusive. We’ve
demonstrated this through the record level of financial
support for customers in response to COVID, through
the leadership we have shown in getting behind the
nation’s vaccination drive, and through the ways we
seek to address the sustainability issues we can
impact that are most important to our customers,
people and community.
We listen to a diverse range of voices to guide our
actions in areas such as the environment, modern
slavery, and diversity and inclusion. This year we
undertook our first climate scenario analysis to
understand the risks and opportunities of climate
change. On top of our ongoing commitment to carbon
neutrality within our operations, we are now working
towards Net Zero by 2050, setting short, medium
and long-term science-based targets to reduce our
environmental footprint.
We also recognise the vital role that carers play in
providing unpaid support for family and friends who
are aged or living with an illness or disability. With a
significant number of our people providing such care
in the community, we are developing a comprehensive
support package to help them balance their work and
caring commitments.
What we have achieved this year is not only the result
of staying true to our purpose, but is also due to the
efforts of our leadership team and our people. Our
leadership team changed this year, with David Koczkar
appointed as Chief Executive Officer in May, following
the retirement of Craig Drummond. On behalf of
the Board, I’d like to thank Craig for his outstanding
contribution during his five years at the helm. The
Board and I look forward to working with David as
he and the leadership team take Medibank on the
next stage of its journey. I also want to acknowledge
former Chairman Elizabeth Alexander who retired
from the Board in October 2020. Elizabeth has been
instrumental in making Medibank the company it is
today and it is a privilege to succeed her as Chair.
While some of the uncertainty of the past year is set
to continue for a time, I am pleased that Medibank’s
ongoing transformation to a health company positions
us strongly to deliver for our customers, our community
and our shareholders. To my Board colleagues, the
Executive Leadership Team and everyone at Medibank,
thank you all for making this possible. And to our
shareholders, thank you for your continued support
of our company this year and into the future.
4 Medibank
CEO’s message
David Koczkar
For many of us, the 2021 financial year has not
been the year we anticipated, with COVID defying
expectations and with restrictions and lockdowns
continuing. Yet despite this, our team has risen
above the challenges of the past 12 months
to continue to deliver for our customers, our
community, and you – our shareholders.
We grew more in the past 12 months than we have
in over 10 years, our Medibank and ahm brands
both achieved their highest ever levels of customer
advocacy and we saw customers engaging with our
broader health offerings in record numbers. We were
disciplined in how we ran our business, continuing to
manage our costs.
We saw more and more people continuing to prioritise
their health and wellbeing and see more value in private
health, given the uncertainty around COVID and heightened
pressure on the public health system. Our investments
over the last few years have enabled us to step up and
provide broader support to our customers during this
period, while accelerating our growth at the same time.
Our COVID financial support package for customers
is the largest in our 45 year history. To date we’ve
provided around $300 million, including $103 million in
COVID permanent net claims savings we are currently
returning through premium relief. We stand by our
commitment not to profit from COVID and will continue
to return any related permanent net claims savings to
our customers. We're also supporting the government’s
80% vaccination target, working towards this with our
employees and rewarding eligible customers who are
fully vaccinated with 1,000 Live Better points.
This year we evolved our strategy to reflect our ongoing
transformation to a health company and prioritised
our efforts to more broadly support the health of our
customers, while growing our business and driving
broader system change.
We worked hard to give our customers more value
from our products and services, investing in technology
to simplify and personalise our customers’ experience.
We delivered our lowest average premium increase
in 20 years and helped customers save more than
$20.5 million in out-of-pocket costs through our
Members’ Choice Advantage network.
Our customers are trusting us to help them with their
broader health needs – whether it be through enrolling
in our preventative health programs, participating in
our health and wellbeing activities or accessing our
in-home care or telehealth services.
We partnered with doctors, hospitals and governments
to develop new models of care that offer people greater
choice about where to receive their care and how
much they pay for it; such as the short-stay, no-gap
program which expanded to seven hospitals this year.
We continued to advocate for the changes needed
to ensure the sustainability of our health system –
reforms to improve choice, value and patient outcomes.
At the heart of each of these achievements is the
incredible team of people we have at Medibank, who
once again have proved themselves to be adaptable,
resilient and committed to our purpose of Better
Health for Better Lives. This purpose has also seen
us evolve our environmental, social and governance
responsibilities, as we continued working to become a
more sustainable business. We introduced new ways
of working that have helped us to collaborate more
effectively, but it is the way that our people have looked
out for each other – the support that is integral to our
culture – that has helped us through this year.
This is my first year as CEO and I am indebted to
the many people who have supported me in my first
few months including Mike Wilkins and the Board.
In particular, I want to recognise former CEO Craig
Drummond who has been essential to our company’s
transformation over the past five years.
Thank you for supporting us. I believe we have an
exciting future ahead as we continue to grow and
broaden our business and transition into a health
company, committed to helping more people in
Australia access the care they need and supporting
them on their health journey.
Annual Report 2021 5
Our strategy
As we continue changing into a health
company, we’ve refined our strategy
to better reflect our approach to
helping our customers manage their
health and wellbeing.
It prioritises the work we are doing to provide
customers and patients with greater choice,
support and value. It acknowledges the importance
of empowering our people to deliver improved
customer experiences. And it marks our shift to
preventative health and innovative approaches to
patient-centred care, highlighting our role to help
transform and sustain health in Australia. It is
by succeeding in these areas that we will grow
the business and help people in Australia to have
Better Health for Better Lives.
Building a strong and connected business to drive broader
system change and sustainability
Focus on our
customers and people
Grow our core
business
Transform into a
health company
Deliver leading
customer experiences
Further differentiate
our customer offerings
Empower our people
Deliver more value
Be a partner of choice
Maintain cost discipline
Invest in prevention,
choice and better care
Build successful
standalone businesses
Bring benefits back
to our core business
Better Health for Better Lives
6 Medibank
Creating value for our stakeholders
We’re focused on creating sustainable long-term value for our customers,
our people, our shareholders and the broader community.
Customers
Employees
We’re supporting our customers to
manage their health and wellbeing.
We’re delivering affordable healthcare,
providing more choice in where people
can receive their care and investing in
preventative healthcare.
We’re helping customers better
navigate the health system and make
more informed healthcare choices.
We’re building an employee
experience that ensures our people
can be at their best, challenge and
improve how things are done and
feel more empowered.
We’re enabling them to enhance their
knowledge and skills and supporting
them to reach their health and
wellbeing goals.
GOALS
WORK
LIFE
Shareholders
Community
We’re committed to delivering
sustainable shareholder returns in a
way that also meets the expectations
of our customers and the community.
We’re delivering this through our
purpose-led culture supported by
a focus on performance, sustainability,
governance and risk management.
We’re targeting some of Australia’s
biggest health issues, prioritising
mental health support and preventative
health, and providing access to health
and wellbeing activities.
We’re also working to help close
the gap that exists for First Nations
people and playing our part in tackling
the impact of climate change on
human health.
CO2
Government
Health system
We’re working with government to
support Australia’s world-class dual
public private health system and
ensure its ongoing sustainability
for future generations.
We’re also advocating for our
customers, contributing to public
policy and helping deliver reform.
We’re working to reshape Australia’s
health system, partnering with
hospitals and doctors on innovative
ways of providing healthcare in the
home and community, targeting
chronic disease with prevention
programs and sharing information
with hospitals to help them improve
patient experiences.
Annual Report 2021 7
c. 760k
interactions with
Live Better Rewards
and Activities
Better for customers
Through our Live Better program, we’re
encouraging people to make better
health choices every day; rewarding
eligible customers for healthy actions
through our Live Better Rewards app,
supporting community events and
sharing online content.
This year, we integrated Live Better Rewards
into our My Medibank app. Customers can now
join the program, find and earn points at their
nearest Members’ Choice Advantage providers,
be rewarded for a weekly step goal and view
their points and rewards all within the one
app. Rewards can be redeemed for savings on
health cover or boosts to extras, alongside other
rewards. We had around 760,000 interactions
with our Live Better program, either through
people joining our rewards program or taking
part in activities, and there is so much more
ahead as we continue personalising the app
experience and expanding our partnerships to
provide greater health and wellbeing support.
8 Medibank
Better for customers
$$5.65.6bb
in claims paid
to customers
3.7m
customers
at 30 June 2021
37.1 (+5.3) Medibank
43.0 (+1.8) ahm
customer advocacy
(average Service NPS)
c. $$300300mm
total COVID financial support
to date – includes $103 million
customer give back
There are reasons we grew more over the
past 12 months than we have in over 10 years.
We listened to our customers and worked
hard to do things better, improving our services
and delivering greater value for both new
and existing customers.
With Medibank offering more health and
wellbeing support for customers and
ahm building upon its premise of simple,
straightforward and affordable health insurance,
our dual brands are giving people in Australia
real choice. Together they have grown our
market share to 27.3%.
We’ve paid $5.6 billion in claims this year.
We’re also returning $103 million in COVID
permanent net claims savings to our customers
through premium relief, in recognition of the
impact COVID restrictions had on people’s
ability to use their health insurance. We’ve
now provided around $300 million in COVID
customer support since March last year and
we will continue to assess known claims
savings and return any COVID related permanent
net claims savings back to our customers
through additional support in the future.
Stronger relationships,
simplified services
We’re working to better support our customers,
investing in our digital capabilities so we can
provide a more personalised experience, tailored
to their individual healthcare needs. We’re
spending more time talking with our customers
about their health, connecting them to relevant
prevention programs or general health support.
We checked in with almost 540,000 customers
to ensure they were on the cover best suited to
their needs. And we provided more support to
those who needed hospital treatment, assisting
20% of these customers through our Health
Concierge program this year.
We have big digital ambitions and this year
delivered a more seamless digital experience,
putting tools and information into our
customers’ hands so they could make more
informed decisions about their healthcare.
Annual Report 2021 9
c. 1.31.3mm
Medibank customers
registered for a
digital account
20%
of customers going
to hospital supported
through Health Concierge
c. 540540,000000
customer check-ins
We upgraded our My Medibank app making it
easier for customers to manage their cover,
book and claim for more services, access our
Live Better Rewards program and get health
information – all from the palm of their hand.
We were among the first health insurers
worldwide to launch a digital membership
card in Apple Wallet so customers could claim
on-the-spot through HICAPS terminals at
20,000 healthcare practices nationwide,
without having to carry their membership card;
complementing our Android phone offering.
We enhanced self-service options and digital
support tools, with online chat and messaging
options. And we’ve seen our customers respond
positively to these changes with around
1.3 million Medibank and ahm customers
registered for a digital account.
We gave our people more autonomy and
greater accountability to improve our customer
experience, changing the way our people worked
and improving the systems they used. We were
able to quickly manage retail shutdowns due to
COVID restrictions, moving retail team members
to supporting customers through our phone and
digital channels. We launched a new program
to make it easier for our customer team to tell
us what needed fixing, and then we fixed the
issues that they raised. While there’s more to be
done, we're pleased our customer advocacy is at
record levels, and for the fifth year running, our
share of industry complaints is well below our
market share. And for the second year running,
ahm was named Major Private Health Insurer
of the Year as part of the Roy Morgan Customer
Satisfaction Awards.
#jabdone
Paid community
leave and charity gift
voucher donations
to support employees
to get COVID
vaccinations
10 Medibank
We improved the claims and payments
experience for the thousands of healthcare
providers that we work with. Through our
payment integrity program, we’re working
to ensure we pay all customer and provider
claims correctly, implementing a new case
management approach this year. We’re
now developing a new self-service portal
for providers to make it easier to exchange
information and resolve any incorrect
payments quickly.
Providing greater value
We delivered our lowest average health
insurance premium increase in 20 years,
after postponing increases for six months
earlier in 2020 as part of our COVID support
package. We built stronger partnerships with
organisations like Amcal and Velocity, along
with hospitals, health professionals, corporates
and university partners to provide greater value
for our customers. We also added to our range
of life, pet and travel insurance options, with
ahm introducing car and home insurance this
year. Through our productivity program we’ve
delivered around $20 million in cost savings
this year and remain committed to managing
our own costs, targeting a further $40 million
in savings over the next three years.
1.81.8mm
customers are using Members’ Choice Advantage
which has delivered c. $20.5m in out-of-pocket savings
c. $$2020mm
in productivity savings
Annual Report 2021 11
900900++
patients used My Home Hospital
since January 2021 launch
Better for health
My Home Hospital is a window into the
future of healthcare. It’s delivering
hospital-level care to patients in
the comfort of their own home, by
bringing together innovative remote
monitoring technologies and a team
of in-home care professionals.
A Wellbeing SA service delivered by a joint venture
between Calvary and Medibank, it has now treated
more than 900 public patients in Adelaide and
Gawler for a range of conditions such as infections
requiring IV antibiotics, deep vein thrombosis, post-
operative care and supportive cancer treatment,
delivering positive patient experiences.
It illustrates our approach to improving the
experience and the affordability of the care
people receive when they enter the private and
public health systems. We’re collaborating with
governments, doctors and hospitals and harnessing
new technologies and innovations to build a new
style of care centred around the needs of patients.
We’re connecting our customers with more
treatment options and focussing on preventative
health opportunities. And in doing so, we’re helping
to change healthcare for the better in Australia.
12 Medibank
Better for health
c. 77,650650
(+32%)
customers used
Medibank at Home
347347
virtual
hospital
beds
c. 2.52.5mm
contacts supported
by our telehealth
services
Annual Report 2021 13
More choice in affordable care
Healthcare where you want it
We’re supporting doctors and hospitals to offer
patients a short-stay experience which allows
people to recuperate at home with support
from a multi-disciplinary care team, reducing
time spent in hospital – with no medical out-of-
pocket costs for our customers. This doctor-led
approach has seen patients in our no-gap joint
replacement program save more than $1,500
in out-of-pocket costs on average and is now
being offered by hospitals in Melbourne, Sydney,
Brisbane, Adelaide, Canberra and Perth.
We also announced a joint venture with 45
specialist doctors and surgeons to build a new
private hospital in Melbourne that will expand
the short-stay, no-gap model to additional
surgical procedures. The 30-bed hospital
will offer services in orthopaedics, ENT,
vascular, plastics, urology, general surgery,
gastroenterology, anaesthetics, oncology,
and radiology when it opens in 2023. We’re
investing in this approach so we can provide
our customers with greater choice and control
when it comes to how and where they access
healthcare and what it will cost.
Our Homecare business has continued to
grow, with more than 20,000 customers having
now received support from our Medibank at
Home program since launch. COVID continued to
drive demand, particularly for our Chemotherapy
at Home and Dialysis at Home programs, and
our Rehab at Home program is available to
eligible customers across the country.
Telehealth has kept up its momentum from last
year. Not only is it proving popular with younger
people, but it’s improving healthcare accessibility
for rural and regional customers. We’ve made a
major investment in upgrading the technology
platforms we use to provide telehealth services
so we can expand our support across digital
channels, including video and online chat.
We managed around 2.5 million phone and
digital contacts this year. In addition to our 24/7
general health and mental health services for
our customers, we delivered telehealth services
for 1800RESPECT, Beyond Blue, Victoria’s Nurse
on Call, and the NSW Mental Health Line. We
also supported the COVID health response with
helplines, contact tracing services, welfare
checks and mental health counselling.
No-gap joint replacement program
$$11,500500++
average out-of-pockets
saved by customers
44
average nights
in hospital saved
77,000000++
customers enrolled
in preventative
health programs
in FY21
1,385 kg
weight lost by
customers
Getting in early
– preventative health
Based on Australian public health data, around
3.3 million Medibank and ahm customers
are likely to have some health risk. We know
they want support to improve their health
and wellbeing, which is why we’re focused on
preventative care and embedding more health
expertise across our customer-facing teams.
Since 2015, we’ve supported more than 40,000
customers through nine preventative health
programs. This year our Better Knee, Better
Me program became a permanent program
after a successful trial partnership with the
University of Melbourne, which saw participants
losing 10.6 kgs on average. We launched our
Healthier Weight, Healthier Me: Type 2 Diabetes
pilot to examine whether type 2 diabetes can be
better managed through a personalised weight
loss and exercise program; and saw referrals
increase to Heart Health at Home, with 31% of
participants from regional and remote areas.
c.133133k k (+51%)
customers engaged with
Member Health Services
Almost 88kk
people got their
blood pressure checked
14 Medibank
We’re now integrating preventative health
activities into our Live Better Rewards app
and for the first time took a challenge to
customers, rewarding them for getting
their blood pressure checked.
Our ahm business is reimagining what a
simplified approach to health support for
customers can look like, this year experimenting
with ways to engage new customers in managing
their health and wellbeing, launching a program
offering lower priced access to health and
lifestyle services. We’re also working with
some of our corporate customers to develop
customised health support programs to
address the specific needs of their employees.
We’re serious about our commitment in
preventative healthcare, which is why we
invested in the Myhealth Medical Group this
year. This national group of GP clinics already
has a strong focus on prevention and the
wellbeing of patients, and our goal is to help
accelerate the business, supporting their
vision for a future of general practice that
better addresses the needs of Australia in
2021 and beyond.
Driving system reform
We know the challenges our health system
faces – an ageing population, increasing
chronic disease, rising demand for mental
health support and private health insurance
affordability concerns. We believe we have
a critical role to play in driving change in
Australia’s healthcare system to help address
these issues. It’s why we’re transforming into
a health company. We’re working to influence
change by engaging with governments and the
sector on system reform.
We’ve continued pursuing prostheses pricing
reform. As one of the largest drivers of health
insurance premium increases, reforms could
deliver up to $500 million in value back to
customers. We welcomed this year’s Federal
Budget announcement of potentially significant
changes to lower the costs of these medical
devices. We expect to see the impact of these
changes flow through over the next four years
and remain committed to returning prostheses
reform savings to our customers through lower
premium increases.
We’re actively engaging with the Federal
Government on reforms to private health
insurance designed to improve affordability
and value – supporting proposed changes
like the expansion of home and community-
based rehabilitation and mental health care,
and increasing the age of dependents to
encourage younger people and people with a
disability to maintain private health insurance.
As the longer-term impacts of the ongoing
COVID pandemic are felt with already long
elective surgery wait times extending even
further in the public system, more can and
should be done to improve healthcare delivery
and affordability. Encouraging more care in
homes and community settings especially for
those with chronic conditions, and accelerating
value-based funding to deliver better health
outcomes for patients can help achieve
meaningful industry change. As will incentivising
employers to fund private healthcare for their
employees and promoting greater cost and
quality transparency in the health system.
While we advocate on behalf of our millions of
customers, we do so knowing these reforms will
positively impact all Australians. Our healthcare
system is built upon the public and private systems
working together. It’s in everyone’s interests to
ensure both sides are strengthened to support
our healthcare needs now and in the future.
Challenges facing
our health system
Getting older
Chronic disease
Mental health
Affordability
Prostheses costs are around
3030% higher
than in NZ, France
or the UK
Private Healthcare Australia
Annual Report 2021 15
83%
employee
engagement
Better for people
and communities
Last year when the COVID outbreak
started, Mike and partner Colin realised
it was the right time for their family
to pack up and make a tree change.
Together with 8-year-old daughter
Maple and 18-year-old son Jack, they
moved from the hustle and bustle of
Sydney’s inner west to a small farm
on the South Coast of NSW, closer
to Mike’s parents, sister and brother.
Instead of tackling a 40 minute commute into
the office, Mike helps with homework, school
drop-off and pick-ups, as well as spending time
outdoors landscaping and attending to the farm.
Mike has enjoyed a better work/life balance
since the move and is even more productive.
He makes time to build strong connections
with his team with daily calls to touch base and
check-in, balancing screen time with walking
meetings and organising face-to-face time
together outside of the office.
Our pursuit of health and wellbeing is at the
heart of our business. We know when our
people feel good, they do their best work for
our customers and community. Our world
has changed and so has the way we work
and connect with our community.
16 Medibank
and communities
5151%
Group and
senior
executives
are women
4444%
of Board
(including CEO)
are women
6464%
employees
worked flexibly
++2626
employee
advocacy
0.00.0%
gender
pay gap
33 Aboriginal and
Torres Strait Islander
employees
We’re strengthening our focus around our
purpose, people and performance, to ensure our
people can be at their best, challenge and improve
how things are done and feel more empowered.
Our latest employee engagement survey shows
our people are engaged, inspired by our vision
and purpose and are optimistic about our future.
An employee experience fit
for the future
We’re building an employee experience that is
best in class. We’re focussing on how we better
connect and collaborate across the business,
embedding our new Future Fit way of working
that draws upon the lessons learnt in 2020 and
the success of our progressive support of flexible
working. We continued to prioritise our people’s
health and wellbeing, with many of our initiatives
focused on mental health support and staying
connected to one another.
We moved our learning and development
programs to a virtual model, which opened up
programs to people regardless of role or location.
Our Customer Obsessed program, which
connects employees to our customers so they
can better understand their needs, also took a
more digital focus due to COVID this year. Instead
of the usual range of activities that employees,
including Board members undertake, we utilised
calls and immersion sessions as face-to-face
opportunities were restricted.
We’re a diverse and inclusive business with a
team that reflects the customers and community
we support. We are a leading voice on gender
equality, and keeping ourselves accountable by
setting targets on pay equity and representation.
44% of our Board and more than half of our
Group and senior executives are women. We’ve
been working towards increasing the number of
First Nations people in our business and now
have 33 Aboriginal and Torres Strait Islander
team members. We’re also working to develop
a package to help a group of employees we
know need more support – those caring for
elderly parents or a family member with a
disability or chronic condition – a responsibility
held by 17% of our team members.
Our cultural pillars
Feel good
We know that fulfilling our
purpose starts with our
people. We are dedicated to
their health and wellbeing;
that they feel heard and
valued for who they are.
Impact bigger
We create a culture that is
rewarding and challenging so
that our people are inspired
to do meaningful work that
makes a real difference to our
customers and communities.
Step in step up
We innovate to find better ways of
working for our people so they feel
empowered to be at their best.
We are committed to strengthening
our performance edge in striving
to deliver our purpose.
Annual Report 2021 17
Building healthier communities
A big part of bringing our purpose to life is
helping all Australians feel healthy, both
physically and mentally. Through our support of
community partners and events and investment
in research, we’re targeting some of the most
prominent health issues facing Australians so
we can make a bigger impact.
Mental health doesn’t discriminate. It continues
to impact millions of Australians every day.
In response, we’re providing support through
accessible channels, using the knowledge and
expertise we’ve developed through our delivery
of telehealth counselling, including Beyond Blue,
the NSW Mental Health Line and 1800RESPECT.
We launched an online mental health portal with
information and resources connecting people to
support services and integrated Smiling Mind
into our Live Better app. We created tailored
support programs, including a workplace
resilience program for corporate partners
and a wellbeing initiative for international
high school students in partnership with
DE International (which is part of the NSW
Department of Education), and continue to
develop our plan to help address loneliness.
Employee volunteering 2.3%
We’re using our voice to call out issues of
domestic, family and sexual violence. We’ve
been delivering 1800RESPECT for more than
10 years and this year we launched our Disability
Pathways Project to improve the support we
provide people with disability experiencing
violence. We’re now exploring how to play a
bigger role with employees who use domestic
and family violence against others, developing
a sensitive response that prioritises the safety
of the person experiencing the violence.
We released our fourth Reconciliation Action
Plan progress report detailing our work to help
achieve equity in health and wellbeing outcomes
for Aboriginal and Torres Strait Islander people.
This year marks a decade of our relationship
with the Wadeye Indigenous community and we
got behind the Thamarrurr Youth Indigenous
Corporation’s 6,000km bike ride to spread
health and wellbeing messages to Indigenous
communities. We also worked to support our
health services teams and others to provide
culturally safe care, in partnership with the
Australian Indigenous Doctors’ Association.
64% of our employees participated in our
Cultural Awareness program, with the online
training module developed as part of the
Climate 3.3%
program, the most popular course of FY21.
286286k+k+
1800RESPECT
phone and web
chats answered
6464%
of employees
participated in our
Cultural Awareness
program
Mental health 5.8%
Indigenous
health equity
6.5%
Health & medical
research/training
36.1%
Climate 3.3%
Mental health 5.8%
Indigenous
health equity
6.5%
Health & medical
research/training
36.1%
$$1.11.1mm
invested in 11 research projects
with 35 organisations
Workplace giving 2.2%
Community
investment
Community health
sponsorships
19.6%
Employee volunteering 2.3%
Workplace giving 2.2%
Loneliness 14.8%
Community health
sponsorships
19.6%
Community donations
9.4%
Loneliness 14.8%
Community donations
9.4%
18 Medibank
Through our Medibank Better Health
Foundation, we collaborated with world-class
research teams and university partners on
research projects to improve the quality of life
and health outcomes for people in Australia.
New projects this year include working with
La Trobe University and the AFLW on ways to
reduce serious knee injuries among female
AFL players and exploring the relationship
between out-of-pocket costs and healthcare
outcomes, affordability and experience, in
partnership with Macquarie University.
With COVID impacting many of the community-
based events we support, we looked to online
channels to provide health and wellbeing
activities to inspire and engage all Australians.
We created our Live Better at Home program
in response to the first COVID restrictions, but
over the past year we’ve used the program
to deliver live interactive events through
social channels, including our Heavy Metal
Mindfulness, Sleep Better Live with Michael
Mosley and the World’s Fittest Dance Move
with Sydney Dance Company. We continued to
support our community partners even when
events couldn’t occur, and were then raring
to go when parkrun and Feel Good events
resumed around the country.
Carbon neutral
certified under the
Australian Government’s
Climate Active program
Sustainable business practices
We choose to partner with suppliers and
organisations that share our approach to
ethical conduct, environmental performance
and diversity and inclusion. We published
our first Modern Slavery Statement in 2020,
highlighting our work to address modern
slavery and human trafficking in our business
operations and supply chain. We also launched
a new employee training program focused
on sustainability when purchasing goods and
services, and continued our partnerships
with Supply Nation and Indigenous Defence
and Infrastructure Consortium (iDiC) to help
grow our Aboriginal and Torres Strait Islander
procurement opportunities.
We believe the environment plays a vital role
in the health and wellbeing of our people, our
customers and our community and we recognise
the science of climate change. We remain
committed to being environmentally responsible,
working to minimise our impact, maintain our
carbon neutral status and positively influence
our employees’ behaviour. To better understand
the risks and opportunities that climate change
presents, we conducted our first climate scenario
analysis as part of our alignment to the Task
Force on Climate-related Financial Disclosures
(TCFD) recommendations. We’re now working
to enhance our reporting and analysis and over
the next 12 months will be setting science-based
short, medium and long-term targets for our
business, as we work towards Net Zero by 2050.
Learn more about our progress on TCFD
and our journey towards sustainability in
our Sustainability Report 2021
100100k+k+
people engaged
with Smiling Mind's
Families program
Annual Report 2021 19
Our sustainability highlights
Ensure healthy lives
and promote wellbeing
for all ages
Material topics
– Affordable healthcare
– Trusted healthcare, customer-
centred products and services
– Healthcare innovation,
personalisation and choice
– Healthy and engaged
communities
– Supporting mental health
FY21 highlights
Provided c. $300m COVID financial support
for customers including returning $103m
in COVID permanent net claims savings to
customers through premium relief
c. 760k Live Better Rewards and Activities
interactions
Lowest average premium increase in 20 years
Extended the short-stay, no-gap model
of care to 7 hospitals across the country
Launched Healthy Mind website to connect
people to mental health information and support
Partnered with 45 doctors to develop a
new private hospital in Melbourne to
extend short-stay, no-gap procedures
c. 7,650 customers used Medibank at Home
Invested $63m in Myhealth medical group
of GP clinics
Managed c. 2.5m telephone and digital
health interactions
Supported 20% of customers going to
hospital through Health Concierge
133k+ customers engaged with a
Member Health Service (+51% on FY20)
370,197 COVID-related telehealth interactions
100k+ people utilised the Smiling Mind
Families program
Targets / next steps
Engage around 480k customers in
our Live Better Rewards and Activities,
preventative health programs and any
new care offerings developed
Expand support for the no-gap surgery program
to new surgery types and new locations
Deliver our telehealth services through
more digital channels and our customer
apps and integrate them with other health
services like primary care
Build new health and wellbeing offering
for the next generation of health consumers
Achieve gender equality
and empower all
women and girls
Material topic
– Diverse and inclusive workforce
Women represent 51% of Group and
senior leaders and 44% of our Board
0.0% gender pay gap
27% of parental leave taken by men
More than 70% of STEM roles
in Medibank are held by women
Employer of choice by WGEA, 6th year in a row
Recognised in the top 3 Best Australian
Workplaces for New Dads
Targets / next steps
Ensure at least 40% of senior leaders
and Board members are women
Maintain at least 40% women across
our manager workforce
Improve the representation of men in our
non-manager workforce
Review the gender pay gap annually to ensure
it is no greater that 1%
Deliver online domestic and family violence
training for our people and corporate partners
83% employee engagement
Targets / next steps
64% of employees worked flexibly
25% increase in employees attending
personal development courses
Published 1st Modern Slavery Statement
Paid community leave and charity gift
voucher donations to support employees
to get COVID vaccinations
Launched our Carers Support Network
Employee advocacy benchmark
+24 place to work
+19 products and services
Deliver $15m in productivity savings in FY22
Expand our preventative healthcare programs
to employees
Provide a market leading comprehensive and
targeted support carers package to improve
the engagement of employees with caring
responsibility for elderly parents, or a person
with a disability or chronic condition
Promote sustained, inclusive
and sustainable growth, full
and productive employment
and decent work for all
Material topics
– Sustainable supply chains
– Engaged purpose-led culture,
attract and retain talent
– Healthy and safe workers
– Privacy and data security
– Corporate governance
20 Medibank
FY21 highlights
Increased to 33 the number of employees who
identify as Aboriginal and Torres Strait Islander,
1% of all Medibank employees
64% of employees participated
in Cultural Awareness program
Launched our Aboriginal Employee Network
Published our interim RAP report
10 years partnering with the Wadeye
community in the NT
Made 1800RESPECT information
available in 37 languages
Improved access to 1800RESPECT
for people with a disability
Ranked joint 2nd on the Australian Network
on Disability Access and Inclusion index
Targets / next steps
Deliver our 5th Reconciliation Action Plan
Cultivate a disability confident culture
leading to an increase in the representation
and improved self-reported engagement
of employees with a disability
Develop our 2nd Accessibility and Inclusion Plan
Reduce inequality within
and among countries
Material topics
– Indigenous engagement
– Disability access
and inclusion
Take urgent action to combat
climate change and its impacts
Material topics
– Address climate change
through environmental
sustainability
1st climate scenario analysis
Maintained our carbon neutral status
for our scope 1, 2 and 3 emissions
Launched sustainable procurement
training module
$24.5m invested in green bonds
Launched 1st environmental Live Better
Rewards challenge for customers
Targets / next steps
Set short, medium and long-term
science-based targets
Establish Net Zero targets and pathways
Maintain carbon neutral status
for our scope 1, 2 and 3 emissions
Ongoing commitment to low carbon domestic
and international equity investments
Embed environmental sustainability into
plans for our new Melbourne workspace
Strengthen the means of
implementation and revitalise
the global partnership for
sustainable development
Material topics
– Contribute to public policy
– Ethical business
$1.1m invested in 11 health research projects
with 35 organisations
Advocated for healthcare system reform
Partnered with University of Melbourne
to research impact of out-of-pocket cost
transparency on patients and doctors
5 years of partnering with the Grattan Institute
Worked with La Trobe University and the
AFLW to help reduce knee injury among
female footballers
Supported the Continuity of Care Collaboration
#dontwaitmate campaign
Community partnerships
• parkrun Australia
• Smiling Mind
• Feel Good Program, Brisbane
• Dr Michael Mosley and The Fast 800 Program
• Beyond Blue
Aboriginal and Torres Strait Islander
partnerships
• Wadeye community, Northern Territory
• Adam Goodes’ iDiC (Indigenous
Defence and Infrastructure Consortium)
• Supply Nation
• Australian Indigenous Doctors’ Association
• Thamarrurr Indigenous Youth Corporation
Targets / next steps
Increase investment on research that
improves health experiences, outcomes
and affordability for all Australians
For the full list of highlights view our Sustainability Report 2021
Annual Report 2021 21
Operating and financial review
1. About Medibank
Medibank Private Limited (Medibank) is a leading private
health insurer in Australia. Our core business is Health
Insurance, whereby we underwrite and distribute private
health insurance policies under the Medibank and ahm
brands. Medibank Health complements our Health Insurance
business by leveraging our experience and expertise to provide
and coordinate health services to support our customers and
the community. Medibank Health also includes diversified
insurance products such as travel, life and pet. As we maintain
assets to satisfy our regulatory reserves, we also generate
investment income from our portfolio of investment assets.
Medibank was founded in 1976 as a private health insurer
owned and operated by the Australian Government. We have
operated on a for-profit basis since 2009, and on 25 November
2014, Medibank was sold by the Australian Government
by way of an initial public offering (IPO) and listed on the
Australian Securities Exchange. As at 30 June 2021, we
had 3,409 full-time equivalent (FTE) employees, including
1,094 health professionals (excluding employees in
associates and joint ventures).
2.1 Group summary income statement
Year ended 30 June ($m)
Group revenue from external customers1
Health Insurance operating profit
Medibank Health segment profit1
Segment operating profit
Corporate overheads
Group operating profit – continuing operations
Net investment income
Amortisation of intangibles
AASB 16 Leases transition adjustment
Other income/(expenses)
Profit before tax
Income tax expense
Group net profit after tax (NPAT) – continuing operations
Effective tax rate2
Earnings per share (EPS) (cents)2
Underlying NPAT3
Underlying EPS (cents)3
Dividend per share (cents)
Dividend payout ratio4
1. Excludes discontinued operations.
2. Calculated on total operations.
2. Financial and operating performance
References to “2020”, “2021” and “2022” are to the financial
years ended on 30 June 2020, 30 June 2021 and 30 June 2022
respectively, unless otherwise stated. The “Group” refers
to the consolidated entity, consisting of Medibank and its
subsidiaries.
Despite the challenging environment of the last year, our
business has proved resilient. Our people remain engaged,
our balance sheet remains strong, we have made good
progress in growing policyholder numbers, managing our
own expenses and setting up Medibank Health for growth.
2021
6,910.4
538.6
31.4
570.0
(41.7)
528.3
120.0
(4.6)
-
(11.4)
632.3
(191.1)
441.2
30.2%
16.0
398.7
14.5
12.7
87.7%
2020
6,769.6
470.6
27.8
498.4
(37.4)
461.0
2.4
(9.0)
3.3
(7.5)
450.2
(134.6)
315.6
29.9%
11.4
367.3
13.3
12.0
90.1%
Change
2.1%
14.4%
12.9%
14.4%
11.5%
14.6%
n.m.
(48.9%)
n.m.
52.0%
40.4%
42.0%
39.8%
30bps
39.8%
8.5%
8.5%
5.8%
(2.7%)
3. Underlying NPAT, which adjusts for the normalisation of investment income, is from continuing operations.
4. Dividend payout ratio based on underlying NPAT from total operations.
22 Medibank
Group operating profit from continuing operations increased
by $67.3 million or 14.6%, largely due to Health Insurance
operating profit, which increased by $68.0 million.
Net investment income was significantly higher than 2020
when investment markets were impacted by COVID-19,
increasing by $117.6 million to $120.0 million.
The combination of the above factors resulted in a
$125.6 million, or 39.8% increase in NPAT to $441.2 million
on a continuing basis. Underlying NPAT, which adjusts for
the normalisation of investment returns, increased 8.5%
or $31.4 million to $398.7 million.
The key reasons for the movements in the Health Insurance
and Medibank Health results, as well as net investment
income, are outlined in this report.
Health Insurance
Year ended 30 June ($m)
Premium revenue
Net claims expense (including risk equalisation)
Gross profit
Management expenses
Operating profit
Gross margin
Management expense ratio
Operating margin
The solid result in our Health Insurance business
demonstrates the benefit of the customer-led journey we
have been on for the last five years. During the year we saw
strong policyholder growth, improved retention, and we
continued our focus on managing our costs.
Health Insurance revenue grew 2.1% to $6,680.3 million
alongside strong policyholder growth. When adjusted for
our COVID-19 customer support measures of $226.0 million
in 2021 and $80.0 million in 2020, underlying revenue
grew 4.2% to $6,906.3 million.
There has been encouraging hospital participation growth
in the private health insurance market, with the Australian
Prudential Regulation Authority (APRA) data for the
12 months ending 30 June 2021 indicating an increase
of 95 basis points to 44.53%, and the number of people
with hospital cover increasing by approximately 245,000.
Customers are more focused on their health and
wellbeing and are less likely to switch providers which
has impacted favourably on our policyholder trajectory.
Our reported net resident policyholders increased by 82,500 or
4.6%. Adjusting for COVID-19 related suspensions, policyholder
growth was 3.5% with the Medibank and ahm brands growing
1.3% and 10.9% respectively. Our ahm brand continues to
attract younger customers which will have positive impacts on
the overall sustainability of the health system. The acquisition
rate was up 110 basis points, largely driven by strong growth
in the new to industry segment, particularly in the Medibank
brand. There was a significant improvement in customer
retention which improved 130 basis points, reflecting
improving customer advocacy across both brands and the
benefit of increasing product value and differentiation in the
Medibank brand. Our market share grew by 37 basis points
over the year and stands at 27.3% as at 30 June 2021.
4.6%
0.6%
0.8%
0.3%
2020
2021
6,545.6
6,680.3
Reported net resident policyholder growth
(5,531.6)
(5,610.8)
2021
1,014.0
1,069.5
2020
2019
(543.4)
(530.9)
2018
470.6
538.6
15.5%
16.0%
8.3%
7.9%
7.2%
8.1%
Change
2.1%
1.4%
5.5%
(2.3%)
14.4%
50bps
(40bps)
90bps
Reported net resident policyholder growth
FY21
FY20
FY19
FY18
4.6%
0.6%
0.8%
0.3%
0
1
2
3
4
5
Medibank’s net claims increased 1.4% and gross claims
expense increased 0.8%. This includes a $223.0 million
reduction in claims expense due to lower than expected
hospital and ancillary claims as a result of COVID-19, and
a decrease in the COVID-19 deferred claims liability. Risk
equalisation changed from a $7.9 million receivable in 2020
to a $24.6 million payable in 2021, reflecting our claims
growth continuing to be below industry growth and strong
policyholder growth in ahm which has a younger customer
demographic. Underlying claims per policy unit which
adjusts for both outstanding claims provision movements and
COVID-19 impacts grew 3.1%. Resident underlying claims
growth per policy unit was 2.5% with stable extras claims
growth and lower hospital claims growth of 2.5% reflecting
lower public hospital utilisation. Our COVID-19 claims
liability, which is in recognition of claims that have likely been
deferred during the pandemic, decreased to $223.8 million
(30 June 2020: $297.1 million), largely due to hospital
deferral assumptions moving from 100% to 59%.
Annual Report 2021 23
Operating and financial review
Health Insurance management expense ratio
2021
2020
2019
2018
2017
7.9%
8.3%
8.7%
8.8%
9.1%
Health Insurance management expense ratio
2021
2020
2019
2018
2017
7.9%
8.3%
8.7%
8.8%
9.1%
0
2
4
6
8
10
Our productivity agenda and increasing scale resulted in
our management expense ratio falling 40 basis points to
7.9%. Management expenses reduced by 2.3% due to lower
overseas sales commissions and operating costs. Overseas
sales commissions reduced by 41.2%, or $5.4 million, with
the closed borders reducing the number of new overseas
customers. Operating expenses were down 1.4% and reflect
productivity savings of approximately $20 million, partially
offset by cost inflation and volume impacts. We are targeting
productivity savings of approximately $40 million over the
next three years, including $15 million in 2022.
Our Health Insurance operating profit of $538.6 million was
14.4% higher than 2020, and the operating margin improved
90 basis points to 8.1%. Underlying operating profit increased
6.6% to $541.6 million and the underlying profit margin was
7.8%.
Medibank Health
The role of Medibank Health is to strengthen and complement
our core Health Insurance business, support long-term
customer retention and to build successful standalone
businesses. We build smarter healthcare models that focus
on giving patients choice, making care more affordable
and improving the health and wellbeing of all Australians.
It includes the provision of health management, telehealth
services for government and corporate customers, hospital
care in the home, wellbeing programs and diversified
insurance products. Our investments in associates and joint
ventures also form part of this segment. They include our
non-controlling investments in Myhealth (a leading operator
of primary care clinics), East Sydney Private Hospital and a
Medibank-Calvary joint venture to deliver My Home Hospital, a
Wellbeing SA service.
The external environment remains favourable to the long-
term prospects of Medibank Health, with increasing take up
of care delivery in the home, focus in the community on health
and wellbeing, and heightened pressure on the public health
system. Revenue increased 5.1% with increased demand
for in-home care and telehealth services, partly offset by
significantly lower travel insurance sales. Medibank Health
gross margin was stable at 41.2%.
24 Medibank
Management expenses increased 1.7% largely due to inflation,
however the management expense ratio improved 100 basis
points to 29.9% as a result of the strong revenue growth.
Operating profit improved 15.8% to $32.2 million and
Medibank Health segment profit, which includes our share
of the results of Myhealth and other investments, improved
12.9% to $31.4 million. Myhealth contributed $0.7 million,
while there was a loss (including interest income) of
$1.5 million in relation to the other investments. We
expect these losses to largely unwind in 2022.
Net investment income
Medibank’s investment portfolio was $3.0 billion as at
30 June 2021. This investment portfolio, which includes
$2.8 billion relating to the fund portfolio, provides liquidity
to cover insurance liabilities related to the Health Insurance
business and satisfies Medibank’s obligations to maintain
regulatory reserves to meet health claims and to fund
ongoing operations. It includes an elevated defensive
allocation of $326.8 million of assets to fund claims deferred
due to COVID-19, which sits outside our target allocation of
growth and defensive assets of 20% and 80% respectively.
Net investment income in 2021 was significantly higher
than 2020, increasing by $117.6 million to $120.0 million.
The increased income in the growth portfolio reflects strong
equity markets, and in the defensive portfolio the benefit of
narrowing credit spreads was offset by the lower interest
rate environment.
Our investment portfolio is subject to and compliant with our
Responsible Investment Policy. Domestic and international
equity investment portfolios remain aligned with socially
responsible investment principles.
2.2 Group financial position
Medibank’s net asset position increased by $108.3 million
or 6.0% to $1,906.1 million as at 30 June 2021.
Some of the major movements in the consolidated statement
of financial position include:
• A decrease in cash and cash equivalents driven by the
shift to longer duration financial assets.
• An increase in financial assets as a result of the shift
from cash and stronger returns.
• An increase in equity accounted investments due to the
acquisition of new associates and joint ventures during the
year. Refer to section 3 “Strategy and future prospects”
for further details about associates and joint ventures.
• An increase in provisions due to the recognition of the
$103.0 million customer give back provision relating to
the return of permanent COVID-19 net claims savings
to customers through premium relief announced by the
Group on 29 June 2021.
As at 30 June 2021, Medibank’s consolidated statement
of financial position remained debt free.
2.3 Capital management and dividends
Medibank’s capital management objective is to maintain a
strong financial risk profile and capacity to meet financial
commitments. As at 30 June 2021:
• Our total Health Insurance business-related capital was
$942.0 million; equivalent to 13.0% of premium revenue after
the allowance for determined but unpaid dividends. This
was at the top end of Medibank’s target range of 11%-13%.
• Non-fund required capital was $147.6 million.
• Unallocated capital surplus was $170.7 million.
above the outlook statement provided in our half year results
announcement, where we advised the market that the
dividend payout ratio was expected to be towards the top end
of our annual payout ratio range of between 75% and 85%
of underlying NPAT, and reflects our strong capital position.
2.4 Management changes
On 24 February 2021, Chief Executive Officer Craig Drummond
announced his retirement. Our Group Executive – Chief
Customer Officer David Koczkar was appointed as Managing
Director and Chief Executive Officer effective 17 May 2021.
In November 2018, APRA announced its intention to
harmonise the health insurance capital framework with
Life and General Insurance Capital (LAGIC) standards.
Since then, APRA has consulted with the industry and
undertaken a partial Quantitative Impact Study (QIS). APRA
is expected to release draft capital standards and a full QIS
by December 2021. Final standards are then due in mid-
2022 and planned to be effective from 1 July 2023. We are
well placed to implement this framework as our Capital
Management Policy is already closely aligned with LAGIC.
Dividends paid or payable in respect of profits from the
financial year totalled 12.7 cents per share fully franked,
amounting to $349.8 million comprising:
• An interim ordinary dividend of 5.8 cents per share fully
franked, amounting to $159.7 million paid on 25 March 2021
in respect of the six-month period ended 31 December 2020.
• A final ordinary dividend of 6.9 cents per share fully franked,
amounting to $190.0 million to be paid on 30 September
2021 in respect of the six-month period ended 30 June 2021.
The full year 2021 ordinary dividend of 12.7 cents per
share represents a 87.7% payout ratio of underlying NPAT,
normalising for investment market returns. This is slightly
Subsequent management changes were:
• Dr Andrew Wilson was appointed to the role of
Group Executive – CEO Health Services.
• Mark Rogers took on expanded accountability as
Group Executive – Chief Financial Officer & Group Strategy.
• Milosh Milisavljevic was appointed Group Executive –
Customer Portfolios, responsible for the Group’s consumer
products and services and provider partnerships.
• Rob Deeming was appointed Group Executive –
Customer & Brands, responsible for the Medibank
and ahm brands and customer channels as well as
digital platforms and capabilities.
3. Strategy and future prospects
Medibank’s purpose is Better Health for Better Lives. As an
organisation, we are committed to improving the health and
wellbeing of Australians and helping them lead better quality
lives. By working to provide affordable and quality health
outcomes, we seek to sustainably build our customer base and
grow shareholder value. With David Koczkar’s appointment
to CEO in May, our strategy has evolved but our customers
and people remain at the centre of everything we do.
Our strategy
Building a strong and connected business to drive broader system change and sustainability
Focus on our customers and people
Grow our core business
Transform into a health company
Deliver leading
customer experiences
Empower our people
Be a partner of choice
Further differentiate
our customer offerings
Deliver more value
Maintain cost discipline
Better Health for Better Lives
Invest in prevention,
choice and better care
Build successful
standalone businesses
Bring benefits back
to our core business
Annual Report 2021 25
Operating and financial review
During 2021 we saw a shift in Australians prioritising their
health and wellbeing given COVID-19 and heightened
pressure on the public system. This has resulted in private
health insurance becoming more compelling for many
Australians, including those who were previously uninsured.
We have continued to focus on differentiating and growing
our private health insurance business by leveraging our
dual brand strategy to create a competitive advantage. We
are also continuing our transformation into a health company.
We know that affordability continues to be an issue for
consumers and have worked hard to deliver our lowest
average premium increase in 20 years, with premiums rising
by an average of 3.25% from 1 April. Our focus has been
on making our business more efficient and to reduce and
eliminate unnecessary costs in the health system, so that
we can deliver greater value and choice for our customers.
We maintained strong cost discipline and have delivered
approximately $60 million of productivity savings over the
past three years. We will also target a further $40 million
in productivity across the next three financial years,
including $15 million in 2022.
We supported our customers during the COVID-19 pandemic
with a package of approximately $300 million to date,
including $195 million in support measures and $103 million
of permanent COVID-19 net claims savings we are returning
to customers through premium relief. We are committed to
returning all permanent net claims savings due to COVID-19
to our customers once they are known.
Customers are at the heart of what we do and we are working
to better support their healthcare needs by providing greater
choice, more personalised advice and helping to reduce out-
of-pocket medical costs.
My Home Hospital, a Wellbeing SA service delivered by a
joint venture between Calvary and Medibank, was launched
in January. It is a public hospital-level service that delivers
care to patients in the comfort and privacy of their own
homes. Since launch, the service has had more than 900
admissions, reducing pressure on the wider health system
while still providing the hospital-level care patients need.
We see an opportunity to utilise the market leading
technology platform behind My Home Hospital across
both public and private settings.
In March, Medibank and 45 specialist doctors formed an
entity to develop a new private hospital in Melbourne that
will provide short-stay surgical procedures. The investment
is aimed at supporting our doctor partners to deliver a
short-stay model of care that is already widely available at
scale in other health systems internationally and for which
there is a strong body of evidence. The entity will give patients
more choice in where their care is delivered, reduce out-of-
pocket medical costs, and most importantly deliver a great
customer experience. The facility is due to open in 2023.
26 Medibank
This investment follows our 49% investment in East Sydney
Private Hospital in August 2020 which provided funding to
the hospital and doctors to scale its short-stay model of care.
It also complements Medibank’s no-gap joint replacement
pilot that is underway in seven hospitals across Australia.
We have strengthened our focus on preventative and doctor-
led partnerships through the acquisition of a non-controlling
interest in the Myhealth Medical Group, a leading operator
of primary care clinics. Our investment will support GPs to
enhance the health and quality of life of their patients which
helps reduce high-cost hospital admissions and alleviate
pressure on the health system. The investment will also give
the GPs access to additional capabilities to improve data
analytics and information management and enable Myhealth to
continue its rapid growth. There were 95 Myhealth clinics at the
end of 2021 and further growth will be supported by investment
in greenfield practices and acquisition of existing practices.
These investments all demonstrate Medibank’s commitment
to putting patients at the centre of treatment, and supporting
healthcare providers to improve patient experience. We
will continue to invest and partner to evolve new models of
care in Australia, accessible to patients in both private and
public systems.
We also continue to deepen relationships with our customers
through other avenues. More customers are engaging with our
health offerings. Approximately 133,000 Medibank customers
engaged with a Member Health Service, representing a
51% increase on 2020. Around 20% of Medibank customers
admitted to hospital were supported by our Health Concierge
program in 2021, while there was a 32% increase in the
number of customers receiving a Medibank at Home service.
Our Live Better program continues to scale, with more
than 760,000 people joining our Live Better Rewards
program or taking part in Live Better activities, a 51%
increase since last year. In 2022 we will finish integrating the
Live Better app into the My Medibank app to provide a single
digital health experience across health insurance and health
and wellbeing – transforming our customer relationship from
‘one day’ to ‘every day’. We see further opportunities for Live
Better in the broader health and wellbeing market through
new partnerships and tapping into other market segments.
7,183 Medibank customers engaged in a preventative health
program in 2021, an increase of 23% from 2020. Our Healthier
Weight, Healthier Me: Type 2 Diabetes pilot is supporting
customers with this condition, which is one of the fastest
growing chronic diseases in Australia. The program offers an
evidence-based weight management program and aims to
improve management of the condition. Better Knee, Better
Me was made a permanent national program for all eligible
customers this year following the success of our two-year
pilot program combining personalised plans for exercise,
weight loss and pain management.
Our people have responded well under difficult circumstances
this year, navigating through lockdowns and other challenges
that COVID-19 has created. When retail stores were closed,
our team members were upskilled and redeployed to other
customer support channels. We introduced our new Future
Fit way of working that focuses on how employees connect
and collaborate across the business, drawing upon the
lessons learnt in 2020 and the success of our progressive
support of flexible working. We continued to prioritise our
people’s health and wellbeing, with many of our initiatives
focused on mental health support and staying connected
to one another.
The impact of COVID-19 in 2022 cannot be predicted with any
certainty; however, Medibank remains positioned for growth.
Our investment in our people, technology, and digitisation has
been critical to our business resilience, and stood us apart
from many of our competitors. In the year ahead, our focus
will shift more towards embedding and scaling our existing
health and wellbeing offers into our customers’ experience.
We will have an even sharper focus on enhancing value by
moderating health system cost growth, particularly in a post-
COVID-19 environment. Continuing to offer more choice to
our customers and reducing out-of-pocket costs remains a
priority, with clinically led, alternative ways of delivering care
a key part of the solution. To achieve this, we will continue
to strengthen and broaden our partnerships with healthcare
providers and corporates.
Our strategy is the right strategy for our business and will
continue to inform our decisions. Aligned with our evolved
strategy, some of the milestones have been revised and
are detailed below.
FY21 milestone scorecard
Pillars
Milestones
Focus on our
customers
and people
Grow the
core business
Customer advocacy: Service NPS (average)
FY21 FY22 benchmark1
Medibank 37.1
43.0
ahm
>35
>35
Employee advocacy: eNPS
FY21
Place to work
+30
Products & services +26
FY22 benchmark2
≥24
≥19
Net policyholder growth
FY213
+3.5% /
+64.3k
FY22⁴
c. 3%, including
continued growth in
the Medibank brand
Market share
Health Insurance productivity delivered
FY24 aspiration
FY21
27.3% Up 25-75 bps
FY21
c. $20m
FY22-FY24 target
$40m including
$15m in FY22
Transform into a
health company
Health and wellbeing
Medibank Health operating profit
(excluding Myhealth and other investments)
Customers
engaged with
Live Better5
FY21
c. 366k
FY22
c. 480k
FY21
$32.2m
FY22
Organically replace the reported FY18
$30m operating profit of Garrison by FY22
(tracking broadly in line on an underlying basis)
1. Benchmark reflects sustaining service levels while continuing to digitise the service delivery model.
2. FY22 benchmarks are based on the global average adjusted for Australian healthcare and financial insurance industry context.
3. Adjusted for suspensions and reactivations occurring as a result of COVID-19.
4. Assumes slowing participation growth compared to FY21.
5. Includes total customers who have engaged with our preventative health offering, including Live Better Rewards, Live Better activities,
preventative health programs and any new offerings developed.
Annual Report 2021 27
Operating and financial review
4. Material business risks
The material business risks which could affect Medibank’s operations, business strategies and financial prospects are
summarised below.
The COVID-19 pandemic has, and will continue to have in 2022, the potential to impact Medibank’s material and strategic
business risks. Medibank continuously monitors the uncertainty introduced by COVID-19 and its impact on its risk profile,
both on financial and non-financial risks. Ongoing and emerging risks related to the pandemic include the demand for
clinical services and therefore pressures on resourcing, attraction, retention and cost, and expectations regarding employee
vaccination. Where appropriate, Medibank has strengthened its governance, monitoring and internal control system to address
increased risk exposures caused by the pandemic in relation to its operational, financial and strategic risks.
Risk description
Risk management strategy
Material sustainability
categories
Strategic
The risk that we are
unable to identify
and execute the right
strategic initiatives
and projects on target
and on time that
deliver measurable
and agreed outcomes
to support our goals
Operational
The risk of financial
loss resulting from
inadequate or failed
internal processes,
people and systems or
from external events
Medibank’s strategic risks are identified and assessed as
part of our annual strategic planning process and endorsed
by the Board. Key strategic risks identified include loss
of private health insurance customers, healthcare costs
and utilisation, regulatory risk, and execution of non-
private health insurance growth. These risks influence the
prioritisation of investments and resources in the Corporate
Plan, which is approved by the Board. To effectively
understand and assess some key strategic risks that are
broad in nature (e.g. regulatory and customer risks), we
undertake detailed analysis on threats or opportunities
that specific scenarios may pose to our business.
We have established risk management policies and
procedures for identifying, assessing, monitoring and
reporting operational risks and controls. This includes
the important areas of information security, technology,
business continuity, outsourcing, fraud, people, and
health and safety risks. Management of operational
risk is overseen by divisional risk committees, the
Executive Risk Committee and the Board’s Risk
Management Committee.
Credit
The risk of financial loss
due to counterparties
failing to meet all
or part of their
contractual obligations
Exposure to this risk is primarily through Medibank’s
investment portfolio. This risk is managed through the
application of the Investment Management Policy. The effective
implementation of this policy is overseen by the Board’s
Investment and Capital Committee to ensure that credit risk
is managed in line with the risk appetite set by the Board.
Capital & liquidity
The risk of not being
able to meet financial
commitments as and
when they are due and
in complying with APRA
prudential standards on
solvency and liquidity
Medibank has a Board-approved Liquidity Management
Policy and a Board-endorsed plan designed to ensure it
meets or exceeds regulatory solvency requirements and
is able to meet all payments as and when they fall due.
Liquidity risk is managed by our treasury function through
daily cash management of cash flows and liquid asset
positions and projected future cash flows, supported
by actuarial forecasts that take into account anticipated
seasonality as well as stressed market conditions.
28 Medibank
Risk description
Risk management strategy
Material sustainability
categories
Market & investment
The risk of adverse
financial impact market
factors e.g. foreign
exchange rates, interest
rates and equity prices
Insurance
The risk of
misestimation of
incurred and expected
costs, frequency
and severity of
insured events
Clinical
The risk of unexpected,
adverse clinical
outcomes from a
health service provided
by Medibank, or a
third party acting on
behalf of Medibank
Regulatory compliance
Failure to comply
with regulatory
requirements
We have a Board-approved Investment Management Policy.
The Board’s Investment and Capital Committee oversees
the investment process and compliance with investment
mandates, performance against benchmarks and asset
allocation. Our strategic asset allocation is weighted
largely towards defensive assets and with limits applied
to illiquid assets.
The Board approves the Pricing Policy, which includes
pricing and profitability objectives and forms a key part of
the Capital Management Plan. Our objective is to support
customer growth through balancing the offer of competitive
value to all customers with profitability objectives and
the need to meet capital management and regulatory
requirements. Insurance risk is a key part of regular
portfolio monitoring and treatment plans are formulated
and implemented in response to any potential for deviation
from target measures.
Clinical risk arises from clinical services that Medibank
provides and procures, the provision of health-related
information, and customer health initiatives. We
have implemented a clinical governance and quality
management framework that defines the principles,
structures and processes that underpin service quality,
continuous improvement and patient safety. Our Chief
Medical Officer, supported by a clinical governance team,
provides oversight and assurance. The Risk Management
Committee and Board receive regular reporting on the
performance of clinical risk management.
We have established compliance management policies
and procedures for identifying and managing Medibank’s
regulatory obligations and incidents that may arise.
Management of compliance risk is overseen by divisional
risk committees, the Executive Risk Committee and the
Board’s Risk Management Committee.
Customer
health
Employee
health
Community
health
Environmental
health
Governance
For further information
about our material
categories please see our
Sustainability Report 2021.
Annual Report 2021 29
Directors
44%
are women
38%
were born
overseas
Top L to R: Mike Wilkins, David Koczkar, Tracey Batten. Middle L to R: Anna Bligh, Gerard Dalbosco, David Fagan.
Bottom L to R: Peter Hodgett, Linda Bardo Nicholls, Christine O'Reilly.
Name and title
Biography
Mike Wilkins AO
Chairman and
Independent
Non-executive Director
BCom, MBA, FAICD, FCA
Age: 64
Mike was appointed a director in May 2017 and Chairman effective 1 October 2020.
He is Chairman of the Nomination Committee and a member of the Investment and
Capital Committee and the People and Remuneration Committee.
Mike is the Chairman (since March 2020) and a director (since November 2016) of QBE Insurance
Group Limited. He is also a director of Scentre Group Limited (since April 2020).
Mike has more than 30 years of experience in financial services, predominantly in Australia and
Asia. He served as Managing Director and Chief Executive Officer at Insurance Australia Group
(November 2007 to November 2015), Managing Director and Chief Executive Officer at Promina
Group Limited and Managing Director at Tyndall Australia Limited. He also served as Acting
Chief Executive Officer (April 2018 to December 2018), Executive Chairman (April 2018 to June
2018) and a director (September 2016 to February 2020) of AMP Limited. He was previously
a director of Maple-Brown Abbott Limited, Alinta Limited, The Geneva Association and the
Australian Business and Community Network.
David Koczkar
David was appointed Chief Executive Officer in May 2021.
Chief Executive Officer
BCom, PG Dip Finance, MAICD
Age: 48
He commenced at Medibank in 2014, holding the roles of Chief Operating Officer from March
2014 and then Group Executive – Chief Customer Officer from September 2016, where he was
responsible for the Health Insurance and Diversified portfolios, Live Better and the ahm business.
David was also appointed Acting Chief Executive Officer between April 2016 and June 2016.
Prior to joining Medibank, David was the Group Chief Commercial Officer at Jetstar where he
was responsible for the airline group’s network management, sales and marketing, customer
channels and commercial operations, including as a director of Jetstar Pacific (Vietnam),
Jetstar Hong Kong and NewStar (Singapore) JV businesses.
David has more than 25 years of strategy, customer and commercial experience, including
previous work in the strategy consulting and financial services industries.
30 Medibank
Top L to R: Mike Wilkins, David Koczkar, Tracey Batten. Middle L to R: Anna Bligh, Gerard Dalbosco, David Fagan.
Bottom L to R: Peter Hodgett, Linda Bardo Nicholls, Christine O'Reilly.
Name and title
Biography
Dr Tracey Batten
Independent
Non-executive Director
MBBS, MHA, MBA,
FAICD, FRACMA
Age: 55
Tracey was appointed a director in August 2017. She is a member of the Risk Management
Committee and the People and Remuneration Committee.
Tracey has extensive experience in the health services sector, with strong commercial, business
and change leadership skills.
Tracey is currently a director of EBOS Group Limited (since July 2021), the National Institute of
Water and Atmospheric Research in New Zealand and the New Zealand Accident Compensation
Corporation, and a former director of Abano Healthcare Group.
Anna Bligh AC
Independent
Non-executive Director
BA (QLD)
Age: 61
Gerard Dalbosco
Independent
Non-executive Director
M.AppFin, B.Comm,
FCA, FFIN, GAICD
Age: 58
David Fagan
Independent
Non-executive Director
LLB, LLM, GAICD
Age: 64
Tracey was previously the Chief Executive of the Imperial College Healthcare NHS Trust in the United
Kingdom. In that role, Tracey focused on change leadership, in particular improving organisational
culture and strengthening patient safety and experience. Tracey also oversaw the implementation
of a range of digital initiatives as Chief Executive. Tracey is a former Chief Executive of St Vincent’s
Health Australia, which runs a group of public hospitals, private hospitals and aged care facilities.
Anna was appointed a director in December 2012. She is a member of the Investment and
Capital Committee and the People and Remuneration Committee.
Anna is currently the Chief Executive Officer of the Australian Banking Association and a director
of the International Banking Federation (IBFed).
Anna has extensive experience in leadership and public policy, including in the fields of healthcare,
finance, infrastructure and project management. She has held several roles in the Queensland
Government, including Premier, Treasurer, Minister for Finance, Minister for State Development,
Minister for Trade and Innovation and Minister for Education. She was also a member of the
Queensland Cabinet Budget Review Committee for 11 years. Anna was a director of Bangarra Dance
Theatre Australia (2012-2020) and is currently a non-executive director of Australian Plays Transform.
Gerard was appointed a director in May 2021. He is a member of the Audit Committee and the
Risk Management Committee.
Gerard held a number of senior leadership roles as a Partner of EY until September 2020.
His most recent role was Melbourne Managing Partner where he led a large team responsible
for EY’s go-to-market and client service strategies. Prior to this, Gerard held other roles at
EY including Asia Pacific Managing Partner – Markets and Co-Deputy CEO where he led EY’s
client-serving activities across the Asia Pacific market. He was also Oceania Managing Partner
and CEO, and Oceania Managing Partner of Transaction Advisory Services where he was
responsible for EY’s Transaction Advisory Services business across Oceania.
Gerard is currently Chair of Melbourne Archdiocese Catholic Schools and Co-Deputy Chair and
Chair of the Finance Committee of the Committee for Melbourne. He has previously held roles
as a director and Chair of the Finance & Audit Committee of Mercy Health & Aged Care, director
and member of the Finance Committee of Berry Street Victoria, and Chair of the National Gallery
of Victoria’s Business Council.
David was appointed a director in March 2014. He is Chairman of the Risk Management Committee
and a member of the Investment and Capital Committee and the Nomination Committee.
David is a highly experienced commercial lawyer. He held a variety of leadership positions at
Clayton Utz culminating in the role of Chief Executive Partner for nine years. In this role, David
had responsibility and accountability for leadership and transformation, strategy, finance,
stakeholder engagement, and governance, including risk management. During David’s tenure
as Chief Executive Partner, Clayton Utz entrenched itself as a first class top tier commercial
law firm. David also chaired the Medibank Privatisation Committee which operated during 2014
in preparation for the privatisation process. David is a former director and Chair of the Audit
Committee of The Global Foundation, a former director of Grocon Funds Management Group,
the Hilco Group and UBS Grocon Real Estate Investment Management Australia Pty Limited
and a former member of the advisory board of Chase Corporate Advisory.
David is currently a director of PayGroup Limited (since November 2017). He is Chair of BDO
Group Holdings Limited and a member of the ASIC Corporate Governance Consultative Panel.
Annual Report 2021 31
Directors
Name and title
Biography
Peter Hodgett
Independent
Non-executive Director
BSc (Hons)
Age: 66
Peter was appointed a director in June 2013. He is Chairman of the Investment and Capital
Committee and a member of the Audit Committee and the Nomination Committee.
He held a number of other non-executive directorships from 2008 and is currently a director
of the Leukaemia Foundation of Australia.
Previously, Peter worked for AMP for more than 20 years in a wide variety of business and
functional roles, including Chief Actuary during its demutualisation, General Manager of
Human Resources and Strategy, and as Global Director of Finance and Operations for
Henderson Global Investors in the United Kingdom.
Linda Bardo Nicholls
AO
Linda was appointed a director in March 2014. She is Chairman of the People and Remuneration
Committee and a member of the Nomination Committee.
Independent
Non-executive Director
BA, MBA (Harvard), FAICD
Age: 73
Linda has more than 30 years of experience as a senior executive and director in banking,
insurance and funds management in Australia, New Zealand and the United States.
She is currently Chairman of Japara Healthcare Limited (since March 2014) and a director
of Inghams Group Limited (since November 2016). Linda is also Chairman of the Board of
Melbourne Health and a member of the Museums Board of Victoria.
Christine O’Reilly
Independent
Non-executive Director
BBus
Age: 60
Linda’s previous directorships include Fairfax Media Limited (February 2010 to December 2018),
Pacific Brands Limited (October 2013 to July 2016), Sigma Pharmaceuticals Limited (December
2005 to December 2015) and Healthscope Limited, as Chairman (October 2008 to October 2010)
and a director (January 2000 to October 2010).
Christine was appointed a director in March 2014. She is Chairman of the Audit Committee
and a member of the Risk Management Committee and the Nomination Committee.
Christine is currently a director of Stockland (since August 2018), BHP Group Limited
(since October 2020), and the Baker Institute.
Christine has more than 30 years of financial and infrastructure experience both in Australia
and internationally in various roles including as Co-head of Unlisted Infrastructure at Colonial
First State Global Asset Management and Chief Executive and Managing Director of GasNet
Australia Group. Christine’s early career includes eight years in investment banking and audit
experience with Price Waterhouse, where she qualified as a chartered accountant. Her previous
directorships include CSL Limited (February 2011 to October 2020) and the Transurban Group
(April 2012 to October 2020).
Company Secretary
Name and title
Biography
Mei Ramsay
Group Executive –
Legal, Governance
& Compliance and
Company Secretary
BA, LLB, LLM
32 Medibank
Mei was appointed Group Executive – Legal, Governance & Compliance (previously Legal, Governance
& Regulatory Affairs) in September 2016 and has been the Company Secretary for Medibank
Private Limited since 2014. Mei previously held the position of Group General Counsel from 2011.
She is responsible for leading the legal and governance functions, including compliance,
regulatory affairs and company secretariat, and providing legal and corporate governance
advice to Medibank’s Board, Chief Executive Officer and senior management.
Mei has more than 25 years of experience in the legal profession, both as a senior in-house
legal adviser for multinational and international companies, as well as a private practitioner.
Prior to joining Medibank, Mei was the General Counsel and Company Secretary for the
Asia Pacific region at Cummins Inc, and before that held various senior legal positions at
Coles Myer Ltd and Southcorp Limited. Mei started her legal career at Arnold Bloch Leibler
and also worked as a Senior Associate at Minter Ellison.
Mei is currently the Vice President of the Association of Corporate Counsel (ACC) Australia,
a member of the Executive of the ACC GC100 and former Chair of the ACC GC100, and a
member of Chief Executive Women.
Executive
Leadership
Team
25%
are women
50%
were born overseas
Top L to R: David Koczkar, Kylie Bishop, Rob Deeming. Middle L to R: John Goodall. Milosh Milisavljevic, Mei Ramsay.
Bottom L to R: Mark Rogers, Andrew Wilson.
Name and title
Biography
Kylie Bishop
Group Executive –
People & Culture
Kylie has held the position of Group Executive – People & Culture with Medibank since 2013. She is a
registered psychologist, specialising in organisational psychology and is responsible for leading the
key people functions, as well as Environment, Social and Governance (ESG) across Medibank. This
includes culture, talent and capability, performance and rewards, shared services, talent acquisition,
workplace relations, health, safety and wellbeing, employee experience and community.
Rob Deeming
Group Executive –
Customer & Brands
Kylie is responsible for leading Medibank’s culture and new ways of working program focused
on purpose and inclusion, customer first and health & wellbeing. This includes leading the
design and build of a new Melbourne workspace to be delivered in 2024. Kylie began her career
in human resource consulting and prior to joining Medibank in 2010, held senior positions with
National Australia Bank (NAB).
Kylie is also currently a non-executive director of Melbourne Health and Basketball Victoria, and
was previously a director with Rugby Victoria.
Rob was appointed Group Executive – Customer & Brands in June 2021. He is responsible for
the Medibank and ahm brands and our customer channels, as well as our digital platforms and
capabilities. He is accountable for growing and sustaining Medibank’s consumer businesses,
and creating leading customer experiences to improve the advocacy, engagement and experience
for our customers. Prior to this role, Rob held the role of Senior Executive within Medibank since
August 2020 where he was responsible for leading ahm, Australia’s fastest growing private health
insurance brand.
Rob has extensive experience in entrepreneurial leadership, leading consumer brands and
growing digital-led businesses. Before joining Medibank Rob was the CEO of Billy, a multi
award-winning hardware/software business supporting older people living independently at
home across Australia and the US. In this role he built and led the vision, strategy and team
for the business alongside the two technical founders.
Rob also spent several years in commercial leadership roles at Jetstar and Qantas. At Jetstar, he
led the commercial teams that looked after the digital channels, as well as the ancillary products
and hotels businesses. Prior to this he was the CEO of the travel booking engine, Jetsetter, with
teams based in New York, Boston and London. Rob led the sale of Jetsetter to TripAdvisor in 2013.
Annual Report 2021 33
Executive Leadership Team
Name and title
Biography
John Goodall
Group Executive
– Technology &
Operations
John was appointed Group Executive – Technology & Operations in December 2016. He is
responsible for Medibank’s core IT platforms, property, procurement and operations with a focus
on leveraging our systems, processes and information to deliver improved, personalised digital
experiences for Medibank’s customers.
John has more than 25 years of experience working in and leading IT functions across the retail
and financial services industries and utilising technology to drive business growth and align
business systems and processes to customer needs.
Prior to joining Medibank, John held the role of General Manager Enterprise Technology at
Sportsbet, and before his time at Sportsbet he spent 20 years at GE Capital Australia and
New Zealand where he held a number of roles, including Chief Information Officer.
Milosh Milisavljevic
Group Executive –
Customer Portfolios
Milosh was appointed Group Executive – Customer Portfolios in June 2021. He is responsible for
Medibank‘s customer portfolios, including member health programs, Live Better and diversified
insurance portfolios. He is also accountable for growing and sustaining Medibank’s consumer,
corporate and overseas portfolios, managing our relationship with our provider network and
diversifying our propositions to improve the quality of life and health of our customers.
Milosh joined Medibank in 2016 and has held a number of roles, most recently as the Senior
Executive Customer Strategy & Portfolio. In these roles he led Medibank’s customer strategy,
commercial transformation, product innovation and portfolio management, strategic partnerships
and data science. Milosh has extensive experience leading customer focused and data driven
transformations across health, media and telecommunications industries, including proposition,
innovation and new business growth. Prior to joining Medibank, Milosh held senior roles at SEEK
and McKinsey & Company.
Mark Rogers
Group Executive –
Chief Financial Officer
& Group Strategy
Mark was appointed Group Executive – Chief Financial Officer & Group Strategy in May 2021.
Previous to this, he held the role of Group Executive – Chief Financial Officer since January 2017.
Mark is responsible for the finance, actuarial, treasury, internal audit and investor relations
functions across Medibank as well as strategy development and M&A.
He has more than 20 years of global experience across the healthcare, pharmaceuticals and
financial services sectors.
Before joining Medibank, Mark held the role of General Manager, Group Performance and
Planning at National Australia Bank (NAB) since 2013, where he was responsible for management
reporting, performance management, planning and forecasting, and capital allocation. Preceding
this, Mark was General Manager, Group Development. Prior to this, Mark was responsible for
Group Strategy and Development for the Mayne Group, a diversified healthcare, pharmaceuticals
and pharmacy business, where he was accountable for the management of the Group’s strategy,
capital management and mergers and acquisitions. Prior to that role, Mark led Group Investor
Relations at Mayne Group. Mark is a director of Private Healthcare Australia Limited and East
Sydney Private Hospital, and Chairman of Myhealth Medical Group.
Andrew was appointed Group Executive – CEO Health Services in May 2021. Previous to this,
he held the roles of Group Executive – Healthcare & Strategy since September 2016 and
Executive General Manager – Provider Networks & Integrated Care since 2013. He is responsible
for Medibank’s growing role as a broader health services provider. This includes responsibility for
the health services we deliver on behalf of business and government, including telehealth, virtual
healthcare, in-home care, and services into residential aged care. Andrew is also responsible for
Medibank’s hospital and healthcare investments and joint venture healthcare partnerships, which
support both Medibank customers and other Australians in acute care and community settings.
Andrew has 25 years of experience in the health system, and remains a practising clinician and
lecturer. He was a founder and Co-president of McKesson Asia-Pacific, which was acquired by
Medibank in 2010.
Andrew is a director of Calvary MHIH JV Pty Ltd, East Sydney Private Hospital and Myhealth
Medical Group. He is also a director of a joint venture between Medibank and specialists to
develop a private hospital facility in Kew, Melbourne.
Dr Andrew Wilson
Group Executive –
CEO Health Services
34 Medibank
Corporate governance statement
Medibank was founded in 1976 as a private health insurer
and was operated by the Australian Government. In 1998,
Medibank Private Limited became the operating entity with
the Commonwealth of Australia as the sole shareholder.
In 2014 the Australian Government sold Medibank by way
of an initial public offering, and divested all its shares in
Medibank. Medibank listed on the Australian Securities
Exchange (ASX) on 25 November 2014.
The Medibank Board is committed to improving our
customers’ experience and providing them with greater
value. In line with this, the Board seeks to ensure that
Medibank is properly managed to protect and enhance
shareholder interests, and that Medibank, its directors,
officers and employees operate in an appropriate
environment of corporate governance.
Governance structure
The Board has a framework in place for governing
Medibank. This includes adopting internal controls, risk
management processes and corporate governance policies
and practices, designed to promote responsible management
and ethical conduct.
During the year, Medibank had in place policies and practices
which comply with the recommendations in the ASX Corporate
Governance Council Corporate Governance Principles and
Recommendations (CGPRs), 4th edition. As a registered private
health insurer, Medibank also complies with a governance
standard issued by the Australian Prudential Regulation
Authority (APRA). The key corporate governance practices
applied at Medibank are described in this statement and the key
corporate governance policies are available on the corporate
governance section of our website at medibank.com.au.
The governance and performance of Medibank is overseen
by the Board elected by the shareholders.
Medibank Private Limited Board
Oversees management of Medibank on behalf of shareholders
Audit
Committee
Oversees
financial
reporting
Risk Management
Committee
Oversees current
and future risk
management
Investment and
Capital Committee
Oversees investment
and capital management
activities
People and Remuneration
Committee
Oversees key remuneration
and people policies
and practices
Nomination
Committee
Oversees board and
committee membership
and succession planning
Chief Executive Officer
Responsible for the day-to-day management of Medibank and implementation of the strategic objectives
Executive Leadership Team
Supports the Chief Executive Officer with running the business and delivering on the strategic objectives
Roles and responsibilities of the Board and management
The Board provides overall strategic guidance for Medibank
and effective oversight of management. Responsibility for
the governance of Medibank, including establishing and
monitoring key performance goals, rests with the Board.
The Board monitors the operational performance and
financial position of Medibank, as well as overseeing
the business strategy and approving strategic goals.
In performing its role, the Board is committed to ensuring
sound corporate governance practices.
The Board Charter, which is available on our website,
articulates the Board’s roles and responsibilities, its
membership and operation, and which responsibilities
may be delegated to committees or to management.
Specific responsibilities have been reserved by the Board in
key areas of: strategy (including approval and monitoring of the
corporate strategy and performance objectives); governance
(including disclosure); appointment, performance evaluation
and remuneration of the CEO and other senior executives,
including the Company Secretary; approving the Code of
Conduct and overseeing Medibank’s purpose, culture and
values; financial approvals and reporting; risk management,
compliance and workplace health and safety; and culture
(including diversity and inclusion). The Board has established
standing committees to assist in performing its responsibilities.
These committees examine particular issues in detail and
make recommendations to the Board. A description of these
committees can be found on pages 39 to 40.
Annual Report 2021 35
Corporate governance statement
The Chief Executive Officer (CEO) has responsibility for
managing the day-to-day affairs of Medibank. The CEO, with
the support of the Executive Leadership Team (ELT), manages
Medibank in accordance with the Board-approved Corporate
Plan, the corporate strategy and Medibank’s policies within
the risk appetite set by the Board. A detailed delegation
of authority framework defines the decision making and
expenditure limits that apply at various levels of management.
Key areas of focus for the Board in 2021
Corporate governance (including COVID-19)
• Oversight of COVID-19 impacts and response, including:
– Ensuring the health and wellbeing of our customers,
people and the community.
– Customer give backs and hardship policies.
– Accounting and regulatory responses, including in
relation to claims liability and capital stress testing.
– Business continuity management.
– Managing retail stores and offices in a safe manner.
• Oversight of the enhancement of the enterprise risk
and compliance management framework and risk and
compliance culture, including review and monitoring of
financial and non-financial material risks and emerging
risks and the coordination of the first independent
comprehensive review required by APRA Prudential
Standard CPS220.
• Oversight of environmental, social and governance
(ESG) strategy and the governance framework, including
implementing policies and processes to comply with the
4th edition of the CGPRs.
Strategy and execution
• Review of strategy, including transformation into a
health company and evaluation of opportunities to
execute on our strategic pillars and key objectives.
• Oversight of investments, partnerships and organic
growth initiatives to support execution of the strategy.
• Review and approval of the Corporate Plan, budget
and performance targets and oversight of business
performance against these targets.
People, remuneration and culture
• Selection of new Chairman and CEO and oversight
of transition.
• Review of Board composition and consideration of succession
planning, including selection of new non-executive director.
• Oversight of our people and our culture, including
monitoring of the remuneration framework and ensuring we
have a strong people agenda focused on skills development.
• Oversight of succession planning for the Executive
Leadership Team.
• Undertaking an external independent evaluation of the
Board, committees and non-executive directors.
36 Medibank
Structure and composition of the Board
The Board comprises nine directors in total – eight
non-executive directors, including a non-executive
Chairman, and the CEO.
The Chairman of the Board is responsible for providing
leadership to the Board and Medibank as a whole.
The Chairman’s other key responsibilities are outlined
in the Board Charter.
The current Chairman is Mike Wilkins AO, an independent
non-executive director who has served as Chairman since
1 October 2020 and on the Board since May 2017. Prior to
Mike Wilkins’ appointment, Elizabeth Alexander served as
Chairman and as an independent, non-executive director
until her retirement effective 1 October 2020. The current
CEO is David Koczkar, who commenced in the role on
17 May 2021. Previously, Craig Drummond served as CEO
until his retirement effective 17 May 2021.
Biographies of the directors, including their skills, experience
and year of appointment, are set out on pages 30 to 32 of the
annual report. Details of directors’ attendance at Board and
committee meetings during the year ended 30 June 2021 are
on page 48. The length of service of the non-executive directors
ranges from three months to eight years and eight months.
Independence
Directors are expected to bring an independent judgement
to bear on all Board decisions. A director is considered
independent if they are a non-executive director who is not
a member of management and are free of any business
or other relationship that could materially interfere with
the exercise of their unfettered and independent judgement
or could reasonably be perceived to do so.
Each director provides periodic updates of their interests,
positions, associations and relationships, and all directors
must keep the Board advised on an ongoing basis of any
interest that could potentially conflict with those of Medibank.
Directors will be required to abstain from participating in
discussions or voting on any matters in which they have,
or may be perceived to have, a material personal interest.
The Board regularly assesses the independence of each
director in light of the interests disclosed. The Board
has assessed the interests, positions, associations and
relationships of each director as at the date of this statement.
It has determined that all non-executive directors satisfy the
independence criteria recommended by the ASX Corporate
Governance Council and prescribed by APRA.
To provide an opportunity for independent discussion, the
non-executive directors meet without management present
at the commencement of each Board meeting.
Appointment and re-election of directors
Medibank’s Constitution provides that a director may be
appointed by the Board, and if so, is subject to election
by shareholders at the annual general meeting (AGM)
following their appointment if they wish to remain a director
(other than the CEO). Individuals may also be nominated
by shareholders to stand for election as a director at the
AGM. The Constitution requires an election of directors at
each AGM, and a director must retire and may stand for
re-election by the third AGM following the director’s election.
Gerard Dalbosco will stand for election at the upcoming AGM,
having been appointed on 21 May 2021. Further information
about Gerard is set out on page 31 of the annual report,
and in the notice of annual general meeting.
Before appointing a person as a director, the Board
undertakes checks as to that person’s character, experience
and background, including criminal and bankruptcy checks.
Medibank has a Fit and Proper Policy that complies with
APRA’s Fit and Proper Prudential Standard. This standard
requires that a person in a position of responsibility, including
a director, be assessed prior to appointment (or in some
cases, as soon as possible after appointment) and on an
ongoing basis as to whether the person meets the fit and
proper requirements. The person must have the appropriate
skills, experience and knowledge to perform the role and
act with the requisite character, diligence, honesty, integrity
and judgement.
Upon appointment, each non-executive director enters into a
service agreement setting out the terms of their appointment.
This includes the requirement to build a shareholding in
Medibank in order to align the interests of directors with those
of shareholders. The Minimum Shareholding Policy requires
non-executive directors to acquire shares equal to the value
of one year’s base fee after tax over a period of five years.
As part of the appointment process, Medibank enters into a
deed of indemnity, insurance and access with each director.
Each director is indemnified against liability in connection
with their role as a director and Medibank is required to
maintain a directors’ and officers’ insurance policy. The
deed confirms and extends the director’s general law rights
of access to Board papers and other records of Medibank.
Remuneration policies and practices applying to non-
executive directors are detailed in the remuneration
report from page 50.
Director induction, continuing education and
access to information
The Board is committed to enhancing the capabilities of
each director and the performance of the Board generally.
Upon joining the Board, all new non-executive directors
undertake a tailored induction program. This includes
meetings with the Chairman, CEO, ELT and senior leaders
on Medibank’s business, strategy and operation.
The Board is provided with ongoing professional development
opportunities during the year to maintain the skills and
knowledge needed to effectively perform their role. This
involves formal briefing sessions on a range of subjects by
key stakeholders, including regulators and industry experts,
to provide deeper insights on industry context and trends.
This also includes visits to Medibank’s retail stores, customer
engagement, conference attendance, and participation in the
management-led Executive Risk Committee and Divisional
Risk Committees. The professional development program
is periodically reviewed by the Nomination Committee to
ensure it meets the needs of the directors.
The directors have complete and open access to the CEO,
ELT and senior management following consultation with the
CEO. A director may, following consultation with and consent
from the Chairman, seek independent professional advice at
Medibank’s expense in respect of any matter connected with
the discharge of the director’s responsibilities. Directors also
have direct access to the advice and services of the Company
Secretary, who is accountable to the Board through the
Chairman, and advises the Board and the Chairman on all
governance matters.
Board skills, experience and diversity
The Nomination Committee regularly reviews the balance
of skills, experience, independence, knowledge and diversity
of the Board, and is committed to ensuring that the directors
collectively have the appropriate skills mix. The evolution
of the mix of skills and diversity of the Board is a long-
term process and must reflect the current and emerging
challenges for the organisation.
The Nomination Committee takes into account the
organisation’s strategic areas of focus, customer needs and
external environment, including stakeholder sentiment, and
assesses these various factors to ensure that an appropriate
balance of skills and diversity is achieved on the Board.
• Expertise and experience in developing and implementing
strategy and financial and risk management are seen as
critical skills required for the Board to be able to effectively
govern and oversee the organisation. As a result, these
skills are widely held by the Board members.
• Our core business of the provision of private health
insurance products with an unwavering focus on our
customers means that the Board must have skills and
experience in the insurance sector as well as in customer
facing businesses for Medibank to be successful. Board
members have expertise in both these areas from a
number of different industry sectors, including the general
insurance and healthcare sectors.
• Our vision to become a health company and our recent
acquisitions in the healthcare delivery sector make it critical
for the Board to have members with experience in the
delivery of health services. This is captured in the collective
experience of our directors, ranging from operational
expertise through to strategic oversight.
Annual Report 2021 37
Corporate governance statement
• Health industry reform is not only inevitable, but also vital
for the ongoing sustainability of our healthcare system.
To play a role in this area, the Board must have members
with experience and expertise in both building and
maintaining government relations and influencing policy
creation. Once again the Board has a number of highly
experienced individuals in this area.
• Finally, the Board has identified as critical enablers, skills
in human resources and remuneration and technology,
and has ensured that the Board has covered these areas
of expertise in constituting the current Board.
The skills and expertise that the Board has identified as
relevant to the performance of its role and the success of the
organisation, along with the collective strength of the Board
for each skill, are summarised in the Board skills matrix.
The very nature of diversity means that not all members of
the Board have all the skills listed below to the same degree.
However, the Board believes the current mix of expertise
and experience of members of the Board creates a diverse
range of views and perspectives, and results in the Board
providing effective governance, oversight and strategic
leadership for Medibank.
During the reporting period, the Nomination Committee
considered the mix of skills on the Board given the above
considerations, and appointed Mr Gerard Dalbosco to the
Board effective 21 May 2021. Mr Dalbosco brings a high
level of financial skills and not-for-profit health experience
to the Board.
Board skills matrix
Strategy
Developing and implementing organisational
strategies, and appropriately challenging
management on delivery of strategic objectives
Financial and capital management
Proficiency in financial accounting and
reporting, corporate finance, internal
financial controls, corporate funding and
capital management and investments, and
understanding of associated risks
Risk management, governance
and compliance
Establishing risk management frameworks,
setting the risk appetite, and overseeing
organisational risk culture
Overseeing operations in a complex regulated
environment, and demonstrating commitment
to the highest governance standards
Insurance and healthcare sector experience
Knowledge, experience and expertise in the
insurance industry and healthcare sector
38 Medibank
Customer experience and marketing
Developing product and/or customer
management strategies, and experience
in marketing
Human resources and executive
remuneration
Understanding the link between strategy,
culture, performance, long-term shareholder
value creation and remuneration outcomes
Government relations and public policy
Interacting with government and regulators
and being involved in public policy decisions
Technology
Understanding technology and innovation, and
overseeing development and implementation
of initiatives to enhance productivity and
customer experiences
Board performance evaluation
The Nomination Committee is responsible for reporting
on the evaluation of the performance of the Chairman,
Board, committees and individual directors to the Board.
The evaluation is conducted annually either through an
internal review process or an external process.
In 2021, the Board undertook an independent external
review of the performance of the Board, committees and
non-executive directors (including the Chairman). The
evaluation was primarily conducted through in-depth one-
on-one interviews with the directors and ELT members.
The Board discussed the external consultancy’s report and
recommendations, and identified a number of opportunities
to enhance its efficiency and effectiveness, including further
opportunities to improve the Board’s operating rhythm,
particularly in the context of the impact of the pandemic,
and continuing to focus on Board renewal and diversity as
part of director succession planning.
Committees of the Board
The Board has established five standing committees to
assist in the execution of its responsibilities – the Audit
Committee, Risk Management Committee, Investment and
Capital Committee, People and Remuneration Committee
and Nomination Committee. Each committee is governed by
a charter setting out the committee’s role, responsibilities,
membership and processes. The membership, roles and
responsibilities of each committee are summarised in the
table below. The charters can be accessed on our website.
The relevant qualifications and experience of the members
of each committee can be found in the director biographies
on pages 30 to 32 of the annual report. The number of
meetings of each committee, and the individual attendance
of their members, are provided on page 48.
Committee
membership as at
25 August 2021
Audit Committee
• Christine O’Reilly
(Chairman)
• Gerard Dalbosco1
• Peter Hodgett
Composition
Key roles and responsibilities
• At least three members, all of whom
• Overseeing and reviewing the integrity of external
are non-executive directors, a majority
of whom are independent directors
and at least one of whom is a member
of the Risk Management Committee.
• Structured so that members are all
financially literate, and between them
have accounting and financial expertise
and experience and an understanding
of Medibank’s industries.
• The chairman must be an independent
non-executive director, and must not
be the chairman of the Board (but the
chairman of the Board may sit on the
committee).
financial reporting and financial statements.
• Endorsing and recommending the appointment
and removal of, and reviewing the terms of
engagement, performance and independence
of external auditors.
• Reviewing management processes for
compliance with relevant laws, regulations
and other accounting and external reporting
requirements.
• Overseeing and reviewing internal and
external audit processes and the internal
control framework.
Risk Management
Committee
• David Fagan
(Chairman)
• Tracey Batten
• Gerard Dalbosco2
• Christine O'Reilly
• At least three members, all of whom
are non-executive directors, a majority
of whom are independent directors
and at least one of whom is a member
of the Audit Committee.
• Structured to have the necessary
knowledge and a sufficient understanding
of Medibank’s industries.
• Approving and recommending to the Board the
adoption of policies and procedures on risk
oversight and management to ensure effective
risk management systems are in place.
• Ensuring that Medibank has in place a robust
risk management framework and procedure
to support the effective identification and
management of risks.
• The chairman must be an independent
non-executive director, and must not
be the chairman of the Board (but the
chairman of the Board may sit on the
committee).
• Evaluating the adequacy and effectiveness of the
management and reporting and control systems
associated with material risks.
• Establishment and monitoring of Medibank’s
overall risk appetite.
• Monitoring and review of Medibank's risk culture.
• Oversight of, and monitoring progress against,
Medibank's sustainability strategy.
• Oversight and prior endorsement of the
appointment and replacement of the
Chief Risk Officer.
Investment and
Capital Committee
• At least three members, all of whom
• Assisting and advising the Board on capital
are non-executive directors.
and investment related matters.
• Peter Hodgett
(Chairman)
• Anna Bligh
• David Fagan
• Mike Wilkins
• The chairman must be an independent
non-executive director, appointed by
the Board.
• Overseeing the investment strategy and
Capital Management Policy.
• Monitoring the effectiveness of the investment
process.
• Authorising delegated investment decisions.
1. Gerard Dalbosco was appointed a member of the Audit Committee on 21 May 2021, following Mike Wilkins’ retirement from the committee. Mike Wilkins
was a member of the committee from 1 October 2020 until his retirement effective 21 May 2021, replacing Elizabeth Alexander who was a member
of the committee during the period from 1 July 2020 until her retirement effective 1 October 2020.
2. Gerard Dalbosco was appointed a member of the Risk Management Committee on 21 May 2021, following Mike Wilkins’ retirement from the committee.
Mike Wilkins was a member of the committee during the period from 1 July 2020 until his retirement effective 21 May 2021. Separately, Elizabeth
Alexander was a member of the committee during the period from 1 July 2020 until her retirement effective 1 October 2020.
Annual Report 2021 39
Corporate governance statement
Committee
membership as at
25 August 2021
People and
Remuneration
Committee
• Linda Bardo Nicholls
(Chairman)
• Tracey Batten
• Anna Bligh
• Mike Wilkins3
Nomination
Committee
• Mike Wilkins
(Chairman)4
• David Fagan
• Peter Hodgett
• Linda Bardo Nicholls
• Christine O'Reilly
Composition
Key roles and responsibilities
• At least three members, all of whom
• Reviewing and overseeing people and
are non-executive directors, a majority
of whom are independent directors
and at least one of whom is a member
of the Risk Management Committee.
• The chairman must be an independent
non-executive director, appointed by
the Board.
organisational culture strategies, including
employee engagement, values and behaviours.
• Reviewing the remuneration framework and
arrangements for the non-executive directors,
CEO and ELT.
• Reviewing executive succession planning,
talent management, industrial relations
and diversity strategies.
• Reviewing and overseeing key incentive
schemes and equity incentive plans.
• Recommending to the Board the measurable
objectives for diversity.
• Reviewing and monitoring Medibank’s health,
safety and wellbeing performance.
• At least three members, all of whom
• Director selection and appointment.
are independent directors.
• The chairman of the Board will be the
chairman of the committee.
• Director induction and professional development.
• Board composition.
• Board succession planning and renewal.
• Performance evaluation of the Board,
committees and individual directors.
3. Mike Wilkins was appointed a member of the People and Remuneration Committee effective 21 May 2021.
4. Mike Wilkins was appointed Chairman of the Nomination Committee effective 1 October 2020. Elizabeth Alexander was a member and Chairman
of the committee during the period from 1 July 2020 until her retirement effective 1 October 2020.
Executive Leadership Team
Values and ethical standards
Central to the Board’s governance framework is a culture
of integrity and ethical behaviour based on Medibank’s key
values: Customers First; Own It, Do It; Show Heart; and One
Team. These values are intended to guide the way employees
work together and engage with customers, business partners,
governments and the wider community, and are supported
by a range of policies and procedures. Our values are further
articulated on our website and in our Sustainability Report.
The CEO, supported by the ELT, is responsible for the
day-to-day management and performance of Medibank.
ELT members have a clear understanding of their roles
and responsibilities through position descriptions and
a structured performance management system. Profiles and
accountabilities for ELT members are set out on pages 33
to 34. Each ELT member has entered into a service
agreement with Medibank which sets out the terms of their
employment. Remuneration policies and practices applying to
the ELT are detailed in the remuneration report from page 50.
The remuneration report (from page 50) contains the
performance measures applied to ELT members and the
process for the annual evaluation of their performance.
A performance evaluation was undertaken during 2021
in accordance with that process for each ELT member,
noting that Rob Deeming and Milosh Milisavljevic had
their 2021 performance evaluated against the positions
they held prior to joining the ELT.
40 Medibank
Key Policies
Details of key policies supporting our commitment to integrity and ethical behaviour are set out below.
Copies of each policy can be found on our website.
Purpose
Key provisions
Code of
Conduct
Medibank employees are
required to conduct their
activities ethically and
with integrity. The Code of
Conduct sets out the ethical
standards that are expected
of all directors, managers,
employees and contractors
in their dealings with
customers, suppliers and
each other.
Requires directors, managers, employees
and contractors to behave with high
standards of personal integrity, and in
a manner that:
• complies with applicable laws,
standards and internal policies;
• promotes health, safety and wellbeing;
• fosters relationships of trust,
accountability and transparency;
• avoids conflicts of interest (including
not offering or accepting inducements,
secret commissions or bribes); and
• respects privacy and protects
confidential information.
Breaches and reporting
Sets out different
approaches to dealing
with breaches of the
Code, depending on the
circumstances – including
raising concerns with
immediate or senior
managers, the People &
Culture team, the CEO, or
via the Whistleblower Policy.
Breaches of the Code of
Conduct are reported to the
People and Remuneration
Committee.
Whistleblower
Policy
Anti-Bribery
and
Corruption
Policy
Medibank is committed to a
culture where our people are
encouraged to speak up if
something doesn’t look right,
and to support them when
they do. The Whistleblower
Policy establishes what is
reportable conduct, how to
contact Medibank Alert, and
the protections available to
whistleblowers.
Medibank has zero tolerance
for bribery and corruption.
The Anti-Bribery and
Corruption Policy describes
conduct that is prohibited
for directors, employees
and contractors when
conducting business on
behalf of Medibank, and how
breaches can be reported.
Share Trading
Policy
The Share Trading Policy
describes restrictions on
buying and selling Medibank
shares for the Board, the ELT,
senior executives and other
Medibank employees.
Sets out the types of conduct that can be
disclosed, who may make a disclosure under
the policy and what to include in a report.
Sets out support and protection available
to whistleblowers, and the processes
for managing whistleblower complaints
(including key roles and responsibilities).
Provides details of
the Medibank Alert
whistleblower service, which
is available through an
external provider, enabling
whistleblowers to report
anonymously or limit who is
informed of their identity.
Requires that directors, employees and
contractors:
• not offer, pay or accept inducements,
bribes, kickbacks, secret commissions
or improper payments, or engage in
corrupt business practices;
• not accept gifts, hospitality or anything
of value which may have obligations
attached;
• not offer or give anything of value, or
solicit any inducement, that may conflict
with their work or duties to Medibank; and
• ensure approved grants and donations
are appropriately recorded.
Prohibits directors, executives and
employees from dealing in Medibank or
other securities if they possess inside
information.
Prohibits trading by directors, executives and
certain restricted employees in Medibank
securities during blackout periods, which
apply in the lead-up to the release of financial
results and at other times as required.
Breaches of the policy
are reported to the Risk
Management Committee.
Requires requests for
bribes or facilitation
payments to be reported
to the Chief Risk Officer.
Requires other breaches
or potential breaches to
be reported to the Chief
Risk Officer or the
Whistleblower Hotline.
Breaches of the policy
are reported to the Risk
Management Committee.
Details the penalties at
law for breaches of insider
trading laws and the
consequences as a director
or employee for a breach
of law and the policy.
Annual Report 2021 41
Corporate governance statement
Ethical conduct is also supported by a range of other
corporate policies, including in the areas of conflicts of
interest, health, safety and wellbeing and modern slavery.
Copies of these policies are also available on our website.
The Health, Safety and Wellbeing Policy underpins our
objective of preventing injury and illness through a culture
of health promotion, injury prevention and early intervention.
Medibank has a health and safety management system
in place to ensure it meets legislative requirements and
proactively addresses its key risks in health and safety.
Diversity and inclusion
Medibank is committed to creating an inclusive culture that
acknowledges and embraces difference in all its forms and
ensures that every voice is heard. Medibank recognises that
all employees are different, and these differences benefit
our employees, shareholders, customers and the community.
The Board has adopted a Diversity and Inclusion Policy
that supports and facilitates an inclusive environment.
The policy outlines the role of the People and Remuneration
Committee in recommending to the Board measurable
objectives for diversity and annually assessing progress
against these. The policy is reviewed annually and is available
on Medibank’s corporate website. A Diversity and Inclusion
Strategy supports the policy and sets out the measurable
objectives established by the Board.
The Board emphasises the importance of having a gender
diverse leadership team, which is supported by Medibank’s
commitment to having and maintaining at least 40 percent
female representation in the Group and senior executive
population. As at end June 2021 the actual representation
was 51%.
In June 2021, Medibank completed the reporting of its gender
equality indicators under the Workplace Gender Equality Act
2012 (Cth). The reports can be accessed on the corporate
website. As at end June 2021, the respective proportions of
men and women on the Board, in senior executive positions
and across the organisation were as follows:
Position
Board (including CEO)
Group Executives (including CEO)1
Senior executives2
Group and senior executive total
Senior managers
Other managers
Non-managers
Overall (excluding Board)
Women
4
2
25
27
106
334
2,288
2,755
Men
5
6
20
26
112
305
650
1,093
Other
2
8
10
% Women
44%
25%
56%
51%
49%
52%
77%
70%
1. Group Executive positions refer to the CEO and the Executive Leadership Team (ELT). All of the ELT report directly to the CEO.
2. Senior executive positions include all roles classified as senior executives as part of Medibank’s broad based banding framework. As at 30 June 2021,
they represent the 45 most senior positions in the Group outside of Group Executive roles.
42 Medibank
In 2020 the Board set measurable objectives for achieving diversity at Medibank, including gender diversity, and committed
to reporting progress achieved against these in the 2021 corporate governance statement. The table below shows our
progress against these objectives:
Measurable objective
Progress towards achievement
Medibank will remain committed
to ensuring a representation of
at least 40% women across our
senior leadership population,
and at least 40% of women on
the Medibank Board.
Medibank will aim to improve
the gender balance across our
manager and non-manager
population by maintaining at least
40% women across our manager
workforce and improving the
representation of men in our
non-manager workforce.
Medibank will continue its focus on
increasing the representation and
self-reported engagement of:
• Aboriginal and Torres Strait
Islander employees (with a target
set of at least 32 employees); and
• Employees with a disability.
As at June 2021, women represented 51% of Group and senior executives,
with the number of women at senior executive level increasing by 3% to 56%.
Female representation on the Medibank Board was still above target at 44%
(including the CEO), a decrease from 56% in FY20.
Women represented 50% of all manager roles (excluding Group and senior
executives) and 77% of non-manager positions (compared to 78% in FY20).
This was largely driven by our Healthcare & Strategy division where women
made up 84% of non-manager roles (compared to other divisions where
women represented 70%). This is characteristic of the broader Australian
health workforce, which is comprised of 79.6% women1.
In FY21, the number of employees identifying as Aboriginal and Torres Strait
Islander increased to 33 people (up from 16 people in FY20), which equates to
1% of Medibank employees. Our employee survey showed the engagement score
for this cohort was 6.9 which is lower than the Medibank average of 7.8.
We launched a Cultural Awareness program, including online, face-to-face and
immersive experiences, as well as bespoke content related to our health operations.
64% of our people participated in the program. We also launched our Aboriginal
Employee Network, which aims to create a safe space for Aboriginal and Torres
Strait Islander people and to help grow, develop and retain our Aboriginal
and Torres Strait Islander workforce.
In FY21, 4% of employees identified as having a disability, down from 6% in FY20.
Engagement for this group was consistent with the Medibank average of 7.8.
We continued to focus on inclusion of people with disabilities through our
Accessibility and Inclusion Plan, and ranked 2nd in the 2020 Australian Network
on Disability Index. We worked to improve the process for workplace adjustments
for people with disability and ensured that our digital platforms and retail spaces
are accessible for customers with a disability.
Medibank will improve the support
available to employees with caring
responsibilities for elderly parents,
people with a disability or chronic
condition.
In FY21, we launched a Carers Support Network, the first stage of a broader
targeted carers support package we are developing to assist the significant
proportion of employees (17%, as measured by our employee engagement survey)
who have caring responsibilities; either elderly parents, or a family member with
a disability or chronic condition.
1. Workplace Gender Equality Agency (2020). Australia’s gender equality scorecard.
Annual Report 2021 43
Corporate governance statement
For 2022, the Board has set the following measurable
objectives for achieving diversity at Medibank, including gender
diversity, and is committed to reporting progress achieved
against these in the 2022 corporate governance statement:
1.
2.
3.
4.
Medibank will remain committed to ensuring a
representation of at least 40% women across
our senior leadership population, and at least
40% women on the Medibank Board.
Medibank will aim to improve the gender
balance across our manager and
non-manager population by maintaining at
least 40% women across our manager
workforce and improving the representation
of men in our non-manager workforce.
Medibank will continue to focus on the
representation of Aboriginal and Torres Strait
Islander employees with a target set of at least 42
employees (approx. 1.4% of our organisation) and
their improved self-reported engagement through
the delivery of a new Reconciliation Action Plan.
Medibank will cultivate a disability confident
culture leading to an increase in the
representation and self-reported engagement
of employees with a disability.
5.
Medibank will provide a market leading
comprehensive and targeted support carers
package to improve the engagement of employees
with caring responsibility for elderly parents,
or a person with a disability or chronic condition.
Market and shareholder communication
Market disclosure
We promote investor confidence and the rights of shareholders
by ensuring the immediate disclosure of market sensitive
information regarding Medibank. The measures to further
these commitments are detailed in the Disclosure and
Communication Policy approved by the Board, which is
available on our website.
This policy is designed to facilitate compliance with
Medibank’s obligations under the ASX Listing Rules and
the Corporations Act 2001 (Cth) by assigning authorisation
processes for market announcements and reserving certain
matters for approval by the Board. The policy also requires the
Board to receive copies of material market announcements
promptly after they have been made. Processes for
engagement with analysts and investors are detailed in the
policy as well as the assignment of spokespersons for market
and media communications. Awareness and compliance is
promoted by compulsory periodic online employee training
and additional information sessions for those likely to
become aware of potentially market sensitive information.
44 Medibank
The Board is supported by a management Disclosure Committee
responsible for considering potentially market sensitive
information and monitoring Medibank’s disclosure processes
and reporting framework. The Disclosure Committee Charter
is available within the Disclosure and Communication Policy.
Medibank’s full year financial reports are audited, and our
half year financial reports reviewed, by our external auditor.
For other periodic corporate reports, such as the Annual
Report and Sustainability Report, relevant subject matter
experts confirm the factual accuracy of relevant statements;
final reports are also reviewed by senior executives who
have the knowledge and skills to verify the accuracy of the
information. Periodic corporate reports are reviewed and
where appropriate, approved by the Board prior to publication.
Information about Medibank and its governance
Our website provides information about Medibank and
its corporate governance, and an investor centre that
provides information specifically for prospective and existing
Medibank shareholders which links to Medibank’s results,
investor presentations, annual reports, share price, ASX
announcements and AGM materials. We also maintain a
shareholder calendar of upcoming events within the investor
centre, along with information to assist investors in managing
their shareholdings. Medibank’s share register is managed by
Computershare Investor Services Pty Limited which provides
an accessible online platform for shareholders to access and
manage their shareholdings.
Medibank encourages shareholders to receive communications
securely by email for reasons of speed, security, environmental
friendliness and cost reductions. If a shareholder so elects,
Medibank will communicate with them via email and other
electronic channels, including providing notices of meetings
and facilitating online voting on the AGM resolutions.
Investor engagement
We conduct briefings, meetings, telephone calls and webcasts
for institutional and retail investors, analysts and proxy
advisors to provide a greater understanding of the business
and results. Investor briefings and ad hoc meetings with
institutional and retail investors, analysts and proxy advisors
provide a forum for two-way communications between
Medibank and the investment community. During the year,
we participated and presented at a number of conferences
and investor events, including the Citi Australia and
New Zealand Annual Investment Conference in October
2020, the UBS Australasia Conference in November 2020,
the Morgan Stanley Private Healthcare Forum in April 2021
and the Macquarie Australia Conference in May 2021.
We generally communicate with the investment community
through the CEO, the Group Executive – Chief Financial
Officer & Group Strategy and the Senior Executive
– Investor Relations.
We also communicate through the Chairman for governance
and remuneration issues and the Company Secretary and
Group Executive – People & Culture for environmental,
social and governance issues. Feedback from engagement
with the investor community is communicated to the Board
at each Board meeting.
In all communications with investors, analysts and media,
only publicly available information and information that is
not market sensitive is discussed. In order to ensure that
all shareholders have equal and timely access to material
information concerning Medibank, advance notification of
investor and analyst results briefings is announced via the
ASX. The briefing materials are released first via the ASX
and then on the investor centre section of our website,
together with a recording of the half and full year results
briefing. We also release the materials for new and
substantive investor and analyst presentations to the
ASX before the presentation starts.
Shareholder meetings
The Board encourages shareholders to attend the AGM and
to take the opportunity to ask questions. Given the health
risks and government restrictions associated with the
COVID-19 pandemic, the Board has decided to hold the 2021
AGM virtually. Shareholders will be able to attend, participate
and vote in the AGM via an online platform. The meeting is
also accessible via a live webcast, and then made available
on our website. All substantive resolutions at the meeting
are decided by a poll.
The external auditor attends the AGM and is available at the
meeting to answer questions relevant to the auditor’s report.
We provide shareholders with a clear and concise notice of
meeting, setting out the business to be considered, including
all material information relevant to the election or re-election
of directors. These materials, together with the presentations
at the AGM and the voting results, are released to the ASX
and then made available on our website.
Integrity of financial reporting
The Board has a strong commitment to the integrity and
quality of its financial reporting and its systems for risk
management, compliance and internal control.
The role of the Audit Committee is to provide an objective,
non-executive review of the effectiveness of Medibank’s
internal control, financial reporting and risk management
framework, to assist the Board in carrying out its accounting,
auditing, and financial reporting responsibilities. Details
of the composition and key roles and responsibilities of
the Audit Committee are set out on page 39.
In addition to the members of the Audit Committee,
any director may attend Audit Committee meetings.
Representatives of management and the Senior Executive
– Internal Audit may attend Audit Committee meetings
by standing invitation, and the Chief Actuary and external
auditors are invited as required.
Financial reporting assurances
The preparation of the full year and half year financial
statements is subject to a detailed process of review and
approval by the Board supported by the Audit Committee.
As required under section 295A of the Corporations Act 2001
(Cth), the Board receives a declaration from the CEO and
the CFO that the financial records of the company have been
properly maintained and that the financial statements and
notes comply with accounting standards and give a true and
fair view of the consolidated entity’s financial position and
performance for the financial period. This includes a written
declaration that their opinion has been formed on the basis
of a sound system of risk management and internal control
which is operating effectively in all material respects.
This declaration was received by the Board prior to
approving the financial statements for the half year ended
31 December 2020 and the full year ended 30 June 2021.
Internal audit
Medibank has an internal audit function. The purpose of
the internal audit function is to provide the Board and Audit
Committee with an independent evaluation of the adequacy
and the effectiveness of Medibank’s financial and risk
management framework. The rolling 12-month Internal
Audit Plan, which is approved by the Audit Committee, is
developed using a risk-based approach and is driven by
Medibank’s strategy, risk profile and assurance priorities.
The Internal Audit Charter provides the internal audit team
unrestricted access to review all activities of the business. The
internal audit function is supplemented by the engagement of
external subject matter experts when required.
The head of the internal audit function is the Senior Executive
– Internal Audit. To ensure the independence of the internal
audit function, the role reports directly to the Audit Committee
chairman, with a direct communication line to the CEO and
administrative reporting line to the Group Executive – Chief
Financial Officer & Group Strategy. The Senior Executive –
Internal Audit (in addition to their standing invitation to attend
Audit Committee meetings) reports to each Audit Committee
meeting on progress against the rolling 12 month Internal
Audit Plan, audit findings and recommendations, business
insights and the status of management actions.
Risk management
Medibank’s risk management framework encompasses
the systems, structures, policies, processes and people
that manage risks across the business. It guides risk
management activities across the business to effectively
identify, assess, manage, monitor and report risks.
Annual Report 2021 45
Corporate governance statement
The framework is implemented through the three lines of
defence model and its effectiveness is assessed by the
internal audit function on an annual basis with a full
comprehensive review on a three yearly basis in accordance
with the Risk Management Committee Charter and
APRA Prudential Standard CPS220, with these reports
being provided to and reviewed by the Risk Management
Committee. Both annual and three yearly reviews of the
framework were completed in 2021. The Risk Management
Committee reviews the documents comprising the risk
management framework at least yearly and regularly
monitors the framework’s effectiveness.
A key component of the framework is the definition of
Medibank’s risk appetite by the Board which informs
management's decision making process. The annual and
three yearly reviews of the framework consider whether
the framework is sound and Medibank is operating with
due regard to the risk appetite set by the Board.
Medibank continues to operate and strengthen enterprise
risk management practices in alignment with the
requirements outlined in the APRA Prudential Standard
CPS220 – Risk Management.
Material risks
Material business risks are those risks deemed to have
a significant impact on Medibank’s operations, financial
prospects and business objectives. These are discussed
in the operating and financial review on pages 28 to 29 of
the annual report. The material risks are strategic, credit,
capital and liquidity, market and investment, insurance,
clinical, operational and regulatory compliance.
Environmental, social and governance risks
Medibank’s risk management framework also applies
to environmental, social and governance (‘ESG’) risks.
Medibank’s material ESG topics, as identified in our social
and governance framework, have been mapped to our
material categories in the operating and financial review
on pages 28 to 29 of the annual report.
Medibank commissioned an independent external review to
assess our exposures to climate change risks in line with
the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD). The review did not identify
material exposures at this time for Medibank; however, the
outcomes of the review, and Medibank’s response, have been
reported on page 53 of our Sustainability Report. Further
detail on Medibank’s approach to sustainability and ESG
issues can also be found in our Sustainability Report.
Governance
The Board has overall responsibility for Medibank’s risk
management framework including setting the risk appetite
for Medibank. The Board reviews the risk management
framework at least annually and satisfies itself that
management has developed and implemented a sound
46 Medibank
system of risk management and internal control to
effectively manage risk across the business in line
with regulatory and statutory requirements.
The Risk Management Committee assists the Board in
overseeing the implementation of the risk management
framework. Currently, the committee comprises four
non-executive directors, at least one of whom is a member
of the Audit Committee. The chairman of the committee
is an independent non-executive director who is not the
chairman of the Board. Committee members are appointed
based on their qualifications and experience to ensure that
the committee can adequately discharge its duties.
Risk management plays an important role in remuneration
outcomes. For an incentive award to be made to any
employee, a risk, compliance and behaviour gateway must be
achieved. Further, all employees have a risk KPI incorporated
into their performance scorecard under the company-wide
‘I Perform Better’ performance framework. More information
on the relationship between risk and remuneration can be
found in the remuneration report on pages 58 to 59.
The Board is further assisted by the Investment and
Capital Committee, which oversees the implementation
and monitoring of the investment strategy and Capital
Management Policy approved by the Board, including
monitoring the effectiveness of the investment process in
achieving optimum return relative to risk. The Executive Risk
Committee and Divisional Risk Committees are management
committees that assist the CEO with the oversight of risk
management activities across the business to ensure material
risks are managed in line with the approach defined in the risk
management strategy and the risk appetite set by the Board.
Medibank has adopted a three lines of defence approach
to define risk management roles, responsibilities and
accountability:
First line: Management is accountable for identifying,
assessing, monitoring and managing material risks in the
business. They are responsible for decision making and the
execution of business activities, whilst managing risk to
ensure it is in line with the Board’s risk appetite and strategy.
Second line: The enterprise risk and compliance functions
provide objective advice and challenge to the first line on risk
and control activities and provide assurance and guidance
on the design and implementation of appropriate risk
management activities.
Third line: The internal audit function provides independent
assurance to the Audit Committee and the Board on the
adequacy and effectiveness of the risk management
framework, financial reporting processes and internal control
and compliance systems operating in the first and second line.
This corporate governance statement is accurate and up to
date as at 25 August 2021 and has been approved by the Board.
Directors’ report
For the financial year ended 30 June 2021
The directors of Medibank Private Limited (Medibank) present
their report on the consolidated entity consisting of Medibank
and the entities it controlled (collectively referred to as the
Group) for the year ended 30 June 2021.
References to 2020 and 2021 are to the financial years
ended on 30 June 2020 and 30 June 2021 respectively unless
otherwise stated.
Directors
The names of directors in office during the year and up to
the date of this directors’ report, unless stated otherwise,
are as follows:
Current:
• Mike Wilkins AO – Chairman
• David Koczkar – Chief Executive Officer
(appointed effective 17 May 2021)
• Dr Tracey Batten
• Anna Bligh AC
• Gerard Dalbosco (appointed effective 21 May 2021)
• David Fagan
• Peter Hodgett
• Linda Bardo Nicholls AO
• Christine O’Reilly
Former:
• Elizabeth Alexander AO (retired effective 1 October 2020)
• Craig Drummond (ceased as Chief Executive Officer
effective 17 May 2021)
Mike Wilkins AO commenced as Chairman effective
1 October 2020, following the retirement of Elizabeth
Alexander AO. Gerard Dalbosco commenced as a director
effective 21 May 2021.
Principal activities
The principal activities of the Group during the financial year
were as a private health insurer, underwriting and distributing
private health insurance policies under its two brands,
Medibank and ahm. Medibank is also a provider of health-
related services through the Medibank Health businesses,
which capitalise on Medibank’s experience and expertise,
and support the Health Insurance business. There were no
significant changes in the nature of those activities during
the year.
Operating and financial review
Details of the operating and financial review of the Group
including a review of operations during the year and results
of those operations is included in the operating and financial
review on pages 22 to 29.
Significant changes in state of affairs
There were no significant changes in the state of affairs
of the Group during the year.
Events since end of financial year
No matter or circumstance has arisen since the end of
the financial year that has significantly affected, or may
significantly affect, Medibank’s operations, or the results
of those operations, or Medibank’s state of affairs in future
financial years. Details of subsequent events are set out
in Note 20(d).
Future developments
Details of developments in Medibank’s operations in future
financial years and the expected results of those operations
are included in the operating and financial review on pages
25 to 27.
Dividends
Dividends paid or determined by Medibank during and since
the end of the year are set out in Note 6 to the financial
statements and further set out below:
• A fully franked final ordinary dividend of 6.30 cents
per share was determined in respect of the six-month
period to 30 June 2020 and paid on 24 September 2020
to shareholders registered on 3 September 2020.
• A fully franked interim ordinary dividend of 5.80 cents
per share was determined in respect of the six-month
period to 31 December 2020 and paid on 25 March 2021
to shareholders registered on 4 March 2021.
• A fully franked final ordinary dividend of 6.90 cents per
share has been determined in respect of the six-month
period to 30 June 2021, payable on 30 September 2021
to shareholders registered on 9 September 2021.
Directors’ qualifications, experience
and special responsibilities
Details of the qualifications, experience and special
responsibilities of each director in office as at the date
of this report are set out on pages 30 to 32 and form
part of the directors’ report.
Annual Report 2021 47
Directors’ report
For the financial year ended 30 June 2021
Directors’ attendance at meetings
The table below shows the number of Board and committee meetings held and the number of meetings attended
by directors during the year.
Director
Board
(scheduled)
Board
(unscheduled)
Audit
Committee
Mike Wilkins
Elizabeth Alexander6
Dr Tracey Batten
Anna Bligh
Gerard Dalbosco7
Craig Drummond8
David Fagan
Peter Hodgett
David Koczkar9
Linda Bardo Nicholls
Christine O’Reilly
A
10
3
10
10
1
8
10
10
2
10
10
B
10
3
10
10
1
8
10
10
2
10
10
A
8
8
8
6
8
8
8
8
B
8
8
8
6
8
8
8
8
A
2
2
1
5
5
B
52
2
4*
1*
1
4*
5*
5
1*
4*
5
Risk
Management
Committee
B
A
53
5
2
2
6
6
3*
5*
6
4*
1*
4*
6
6
6
5
5
5
Investment
and Capital
Committee
A1
5
Nomination
Committee
B
A
44
3
1
1
3*
1*
4
4
4
4
4
4
4
4
4
4
People and
Remuneration
Committee
B
A
45
1
1*
4
4
1*
3*
4*
3*
1*
4
3*
4
B
5
1*
5*
4
5*
5
5
1*
5*
4*
A Indicates the number of meetings held during the time the director held office or was a member of the committee during the year.
B Indicates the number of meetings attended during the period.
* Indicates that the director attended committee meetings as an invitee.
1 Includes one unscheduled meeting of the Investment and Capital Committee.
2 Mike Wilkins was appointed a member of the Audit Committee effective 1 October 2020 and retired as a member of that committee effective 21 May 2021.
He attended 2 meetings as a member and 3 as an invitee.
3 Mike Wilkins retired as a member of the Risk Management Committee effective 21 May 2021. He attended 4 meetings as a member and 1 as an invitee.
4 Mike Wilkins was appointed a member of the Nomination Committee effective 1 October 2020. He attended 3 meetings as a member and 1 as an invitee.
5
Mike Wilkins was appointed a member of the People and Remuneration Committee effective 21 May 2021. He attended 1 meeting as a member and 3 as an invitee.
6 Elizabeth Alexander retired as a director effective 1 October 2020.
7 Gerard Dalbosco was appointed as a director and a member of the Risk Management Committee and Audit Committee effective 21 May 2021.
8 Craig Drummond retired as a director effective 17 May 2021.
9 David Koczkar was appointed as a director effective 17 May 2021.
In addition, ad-hoc committees were convened for special
purposes, including in relation to financial reporting,
selection of the new Chairman and Chief Executive Officer
and other matters.
Directors’ interests in securities
The relevant interests of directors in Medibank securities
at the date of this directors’ report were:
Options and performance rights
During the financial year, 3,168,794 performance rights
were issued to senior executives pursuant to Medibank’s
Performance Rights Plan. No performance rights have
been issued since the end of the financial year up to the
date of this directors’ report.
During the financial year, 1,980,272 performance rights
became eligible to vest and were exercised. Further
information regarding performance rights is included
in the remuneration report from page 50.
48 Medibank
Director
Mike Wilkins
David Koczkar
Elizabeth Alexander1
Dr Tracey Batten
Anna Bligh
Gerard Dalbosco
Craig Drummond2
David Fagan
Peter Hodgett
Linda Bardo Nicholls
Christine O’Reilly
Performance
rights
590,232
1,488,044
Ordinary
shares
100,000
793,689
124,786
50,000
44,623
24,432
1,313,839
47,016
67,800
45,000
69,930
1. Elizabeth Alexander retired from the Board effective 1 October 2020,
and her ordinary shareholding information is as at that date.
2. Craig Drummond retired from the Board effective 17 May 2021, and his
ordinary shareholding information is as at that date. Craig Drummond’s
performance rights information reflects the lapsing of performance
rights in accordance with Medibank’s Performance Rights Plan as set
out in the ASX announcement dated 9 July 2021.
Environmental regulation
The Group’s operations are not subject to any particular
or significant environmental regulation under either
Commonwealth or State law.
Indemnification and insurance of
directors and officers
The Medibank Constitution permits Medibank to indemnify,
to the maximum extent permitted by law, every person who
is or has been a director, secretary, officer or senior manager
of the Group. The indemnity applies to liabilities incurred by a
person in the relevant capacity (except liability for legal costs).
The indemnity may however also apply to certain legal costs
incurred in obtaining advice or defending legal proceedings.
Further, the Medibank Constitution permits Medibank to
maintain and pay insurance premiums for a director and
officer liability insurance covering every person who is or
has been a director, secretary, officer or senior manager
of the Group, to the extent permitted by law.
Consistent with the provisions in Medibank’s Constitution,
Medibank has entered into deeds of indemnity, insurance
and access with current and former directors and secretaries
of the Group. Under these deeds, Medibank:
• Indemnifies current and former directors and secretaries
against liabilities incurred as a director or secretary, as the
case may be, to the maximum extent permitted by law.
• Maintains a directors’ and officers’ insurance policy
covering current and former directors and secretaries
against liabilities incurred in their capacity as directors
or secretaries, as the case may be. Disclosure of the
insurance premium and the nature of the liabilities covered
by the insurance are prohibited by the contract of insurance.
• Grants current and former directors and secretaries access
to Medibank’s records for the purpose of defending any
relevant action.
The amounts paid or payable for services provided
by PwC were:
Year ended 30 June
Audit fees
Assurance services fees:
Audit of regulatory
compliance returns
Accounting and other
assurance services
Total Audit and other
assurance services fees
Non-audit service fees
Total
2021
$
1,570,108
2020
$
1,581,094
231,830
342,264
15,530
64,260
1,817,468
199,517
2,016,985
1,987,618
-
1,987,618
Based on advice provided by the Audit Committee, the directors
are satisfied that the provision of non-audit services during
the year by PwC is compatible with the general standard
of independence for auditors imposed by the Corporations
Act, and that the provision of the non-audit services did not
compromise the auditor independence requirements of the
Corporations Act, for the following reasons:
• All non-audit services provided were approved in
accordance with the process set out in Medibank’s policies,
including being reviewed by the Audit Committee Chair to
ensure that provision of the services did not impact the
integrity and objectivity of the auditor.
• The non-audit services provided do not undermine the
general principles relating to auditor independence
as set out in APES 110 Code of Ethics for Professional
Accountants issued by the Accounting Professional and
Ethical Standards Board.
Remuneration report
The remuneration report on pages 50 to 74 forms part
of the directors’ report.
Auditor’s independence declaration
Rounding of amounts
A copy of the auditor’s independence declaration given
by PricewaterhouseCoopers (PwC) in relation to its
compliance with independence requirements of section
307C of the Corporations Act is set out on page 122.
Non-audit services
During the year, PwC, the Group’s external auditor,
performed certain other services to the Group in
addition to its statutory responsibilities as auditor.
The amounts contained in this directors’ report and in the
financial report have been rounded to the nearest hundred
thousand dollars (where rounding is applicable) unless
specifically stated otherwise under the relief available
pursuant to ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191. Medibank is an
entity to which that relief applies.
This report is made in accordance with a resolution
of the directors.
Mike Wilkins AO
Chairman
David Koczkar
Chief Executive Officer
Annual Report 2021 49
Remuneration report
For the financial year ended 30 June 2021
Dear Shareholder,
On behalf of the Board, I am pleased to present Medibank’s
remuneration report for 2021 which describes how non-
executive directors and Executive Leadership Team (ELT)
members are paid. Included in this report are the variable
remuneration outcomes for the ELT, which were determined
after considering the Company’s results and the individual
performance of our executives.
Our remuneration strategy has been developed to ensure
remuneration is fair and competitive, and in 2021 the Board
has continued to focus on a governance framework that
rewards responsible behaviours, aligns remuneration with
regulatory requirements and has regard for the expectations
of our customers, shareholders and the community.
In his previous role as Medibank’s Chief Customer Officer,
David has been a champion for our customers and has played
an instrumental role in the growth and re-positioning of
Medibank. The Board is now working with David to progress
our strategy of becoming a broader health company.
Changes to the Executive Leadership Team
and key management personnel
Following the CEO transition, changes were made to the
structure of the ELT to ensure Medibank continues to focus
on providing greater choice for our customers, as well as
working with our partners to be a driver of change within the
health system. The key changes are outlined below, with all
appointments completed prior to 30 June 2021:
As an organisation providing insurance and healthcare with
a clear purpose of ‘Better Health for Better Lives’, the Board
is proud of how Medibank has continued to support our
customers, employees and the broader community through
these challenging times.
• Milosh Milisavljevic was appointed to the role of Group
Executive – Customer Portfolios. Milosh’s experience leading
customer transformations across various industries will
be instrumental to strengthening Medibank’s products and
services for our customers, and our provider relationships.
Medibank has supported our customers through the
pandemic with initiatives totalling around $300 million in
financial support to date, the largest in our 45 year old history.
This includes the return of $103 million of permanent net
claims savings due to COVID-19 through premium relief.
These initiatives are part of Medibank’s standing commitment
to return all permanent net claims savings due to COVID-19
to our customers once they are known. Our employees
showed great resilience during 2021 delivering high quality
services and support throughout lockdowns and other
challenges created by the pandemic. During the year we
continued to prioritise our employee’s health and wellbeing,
with initiatives focused on mental health support and staying
connected to one another through the launch of our new
Future Fit way of working. As stated last year, Medibank has
been able to support our employees and customers without
accessing any form of taxpayer-funded government relief.
Chief Executive Officer transition
In February 2021, after nearly five years as Chief Executive
Officer (CEO), Craig Drummond announced his intention
to retire. The significant improvement in our dual brand
proposition, customer acquisition and retention, brand
advocacy and the expansion into delivering a broad suite
of health services, demonstrate the strength and diversity
that has been created at Medibank under Craig’s leadership.
Craig has left the company in a much stronger position,
on a clear strategic path, with a great team and accordingly
has been deemed a ‘good leaver’ by the Board.
Following the announcement of Craig’s retirement, the
Board was pleased to appoint David Koczkar as Medibank’s
Chief Executive Officer, effective from 17 May 2021.
• Rob Deeming was appointed to the role of Group Executive
– Customer & Brands. Rob’s entrepreneurial spirit combined
with his experience leading consumer brands and growing
digital businesses will be key to continuing to grow the
Medibank and ahm brands and our customer channels.
• Dr Andrew Wilson took on an expanded accountability
as Group Executive – CEO Health Services. Andrew’s
experience and expertise within the health sector is an
asset to the company and he is well placed to oversee our
growth in becoming a broader health services provider.
• Mark Rogers took on an expanded accountability as Group
Executive – Chief Financial Officer (CFO) & Group Strategy.
Mark’s knowledge of our company, our sector and the
broader market, as well as his previous experience in
strategy development and mergers and acquisitions will be
beneficial to expanding our role in health, including through
future inorganic growth.
Following the changes to Medibank’s ELT composition and
changes in ELT operation effective 1 July 2021, the Board
assessed which ELT members had the requisite authority
and responsibility within the Medibank Group to meet the
definition of key management personnel (KMP) as set out
in AASB 124 – Related Party Disclosures for the purposes of
our remuneration reporting obligations. As a result of these
changes, from 1 July 2021, Medibank’s Executive KMP will
now include the following roles: CEO, Group Executive – CFO
& Group Strategy, Group Executive – CEO Health Services
and Group Executive – Customer Portfolios. Please note that
the newly established Group Executive – Customer & Brands
position is not recognised as a KMP under the accounting
standard and is therefore not included in this report.
50 Medibank
Changes to the Board
After joining the Medibank Board in October 2008 and serving
as Chairman since March 2013, Elizabeth Alexander retired
from Medibank on 1 October 2020. During her tenure, Elizabeth
led Medibank through its highly successful public listing in 2014
and helped reposition the company for growth as it pursues
a strategy of developing into a broader health company.
Following Elizabeth’s retirement, Mike Wilkins was appointed
as the Chairman on 1 October 2020 and Gerard Dalbosco
joined the Board as a non-executive director on 21 May 2021.
These performance outcomes resulted in STI awards for ELT
members that averaged 80% of their maximum opportunity.
However, with consideration of the challenging social and
economic environment of the pandemic and the expectations
of our shareholders, customers and the broader community,
the Board exercised its discretion to reduce ELT incentive
outcomes resulting in STI awards for ELT members that
averaged 70% of their maximum opportunity. A similar
reduction was applied to the Company-wide incentive pool. In
the Board’s view, final incentive awards reflect an appropriate
outcome based on Medibank’s 2021 performance.
Remuneration decisions at a glance
Long-term incentives
• All ELT members met their individual risk, compliance
and behaviour gateways for 2021.
• Discretion was exercised to reduce 2021 short-term
incentive (STI) outcomes for ELT members from an
average of 80% of their maximum opportunity, to 70%.
• 32% vesting of Medibank’s 2019 long-term incentive (LTI)
in line with the terms of grant.
• Adjustments to ELT remuneration aligned with recent
appointments – further details in section two of this report.
• Non-executive director fees maintained at their current
levels and within the cap approved by shareholders at
the 2018 annual general meeting.
Short-term incentives
Despite the challenging environment, the resilience of
our business and our highly engaged people have enabled
Medibank to deliver a solid operational and financial
performance aligned to our values and purpose of ‘Better
Health for Better Lives’. In assessing Medibank’s 2021
performance against our STI measures, the Board adjusted
outcomes to normalise for unbudgeted COVID-19 related
impacts (both negative and positive) outside of management’s
control to ensure that executives did not benefit from windfall
gains. Following this assessment, Group operating profit and
Brand Net Promoter Score (NPS) performance both exceeded
target expectations, while Health Insurance revenue growth
landed just below target expectations.
Medibank’s 2019 LTI was tested following the completion
of the performance period on 30 June 2021 and resulted
in a vesting outcome of 32% in line with the terms of grant.
This outcome reflects no vesting against the earnings per
share compound annual growth rate (EPS CAGR) measure,
and partial vesting against the relative total shareholder
return (TSR) measure, with a performance rank at the
57th percentile against our comparator group.
ELT remuneration and non-executive director fees
The remuneration settings for ELT members recently
appointed to new or changed positions were adjusted
following a review of benchmark data, with details of
these changes outlined in section two of this report. For
the second consecutive year, non-executive director fees
have been maintained at their current levels. The Board
considered this to be an appropriate outcome with
consideration of the current economic conditions and
social environment of the pandemic and the positioning
of non-executive directors against the benchmark data.
Shareholders are encouraged to vote to adopt the report
at our annual general meeting in November.
Yours sincerely,
Linda Bardo Nicholls AO
Chairman, People and Remuneration Committee
Annual Report 2021 51
Remuneration report
For the financial year ended 30 June 2021
Contents
1.
Key management personnel overview
8.
2021 actual remuneration
2.
Summary of remuneration outcomes
3.
Medibank’s remuneration strategy
4.
5.
6.
7.
Remuneration governance
4.1 The role of Board in remuneration
4.2 Executive remuneration policies
Risk and remuneration
5.1 Risk culture
5.2 Alignment of remuneration with prudent risk-taking
5.3 Consequence management
Executive remuneration components
6.1 2021 target remuneration mix
6.2 Total fixed remuneration
6.3 Short-term incentive
6.4 Long-term incentive
Linking remuneration and performance in 2021
7.1 2021 STI performance scorecard
7.2 Medibank’s 2021 financial performance
7.3 2021 STI awards
7.4 2019 LTI Plan outcomes
9.
Statutory remuneration tables
9.1 Statutory remuneration table
9.2 Performance-related remuneration statutory table
10. Executive Leadership Team equity awards
10.1 ELT equity award transactions
10.2 ELT members’ ordinary shareholdings
11. Non-executive director remuneration strategy
and framework
11.1 Non-executive director remuneration
11.2 Non-executive director superannuation
11.3 Shareholding policy for non-executive directors
12. Non-executive director statutory remuneration table
13. Non-executive director ordinary shareholdings
14. Medibank’s comparator groups
1. Key management personnel overview
Medibank’s key management personnel (KMP) includes all non-executive directors and executives
who have authority and responsibility for planning, directing and controlling the activities of Medibank.
In 2021, KMP were as follows:
Executive Leadership Team (ELT) member
David Koczkar1
Chief Executive Officer
Full-year
Kylie Bishop
Group Executive
– People & Culture
Full-year
John Goodall
Group Executive –
Technology & Operations
Full-year
Milosh Milisavljevic
Group Executive
– Customer Portfolios
From 22 June 2021
Mei Ramsay
Group Executive – Legal, Governance
& Compliance and Company Secretary
Full-year
Mark Rogers
Group Executive – Chief Financial
Officer & Group Strategy
Full-year
Andrew Wilson
Group Executive –
CEO Healthcare Services
Full-year
1. David Koczkar was in the position of Chief Customer Officer until his appointment as Chief Executive Officer on 17 May 2021.
52 Medibank
Non-executive directors
Mike Wilkins2
Chairman
Full-year
Tracey Batten
Non-executive director
Full-year
Anna Bligh
Non-executive director
Full-year
Gerard Dalbosco3
Non-executive director
From 21 May 2021
David Fagan
Non-executive director
Full-year
Peter Hodgett
Non-executive director
Full-year
Linda Bardo Nicholls
Non-executive director
Full-year
Christine O’Reilly
Non-executive director
Full-year
Former KMP
Elizabeth Alexander4
Retired Chairman
Retired 1 October 2020
Craig Drummond5
Retired Chief Executive Officer
Ceased as CEO on 17 May 2021
2. Mike Wilkins was a non-executive director for the full year and was appointed Chairman on 1 October 2020.
3. Gerard Dalbosco commenced as a non-executive director on 21 May 2021.
4. Elizabeth Alexander retired from the position of Chairman on 1 October 2020.
5. Craig Drummond retired from the position of Chief Executive Officer and Managing Director on 17 May 2021,
however remained employed through to 30 June 2021.
Annual Report 2021 53
Remuneration report
For the financial year ended 30 June 2021
2. Summary of remuneration outcomes
Key remuneration outcomes for ELT members and non-executive directors during the year are summarised below,
with more detailed information contained throughout the report.
Executive Leadership Team (ELT) member
Component
Outcomes
Fixed
remuneration
• Following a review of benchmark data the fixed remuneration for ELT members recently
appointed to new or changed positions are as follows:
– David Koczkar – $1,500,000
– Milosh Milisavljevic – $780,000
– Mark Rogers – $1,000,000
– Andrew Wilson – $1,000,000
Short-term
incentive
(STI)
• STI awards for ELT members reflected Group operating profit and Brand Net Promoter Score (NPS)
performance exceeding target expectations, while Health Insurance revenue growth landed just
below target expectations.
• Discretion was exercised to reduce the 2021 STI outcomes for ELT members from an average
of 80% of their maximum opportunity, to 70%.
• 50% of STI awards for ELT members deferred for 12 months in the form of performance rights.
• Changes to the 2022 target and maximum STI percentages for ELT members recently appointed
to new or changed positions are as follows:
– David Koczkar – 100% target / 150% maximum
– Milosh Milisavljevic – 65% / 100%
– Mark Rogers – 65% / 120%
– Andrew Wilson – 65% / 120%
Long-term
incentive
(LTI)
• Medibank’s 2019 LTI was tested following the completion of the performance period on
30 June 2021 and resulted in a vesting outcome of 32% in line with the terms of grant.
• This outcome reflects no vesting against the earnings per share compound annual growth rate
(EPS CAGR) measure, and partial vesting against the relative total shareholder return (TSR)
measure, with a performance rank at the 57th percentile against our comparator group.
• Changes to the 2022 LTI opportunity percentages for ELT members recently appointed to
new positions are as follows:
– David Koczkar – 150%
– Milosh Milisavljevic – 65%
Former
Chief Executive
Officer (CEO)
• In line with the terms of Medibank STI and LTI plans and on the basis of being a 'good leaver',
Craig Drummond’s variable remuneration was treated as follows:
– Full entitlement to a 2021 STI award on the basis of being employed for the entire performance
year. 50% of Craig’s STI award will be paid in cash in September 2021, and 50% awarded as
deferred cash, due to vest in September 2022.
– Craig’s outstanding 2019, 2020 and 2021 LTI performance rights will be retained on a pro-rata
basis and remain in restriction subject to the original performance hurdles.
– Craig will retain 253,972 of his 761,920 2021 LTI performance rights; 443,352 of his 665,028 2020
LTI performance rights; and all 790,720 of his 2019 LTI performance rights.
Non-executive directors
Component
Decisions
Non-executive
director fees
• Non-executive director base and committee fees have been maintained at current levels for the
second consecutive year.
• Based on this decision, Medibank’s aggregate non-executive director fee spend will remain at
$1,940,000 in 2022.
• The total fee pool approved by shareholders at the annual general meeting in 2018 remains unchanged.
54 Medibank
3. Medibank’s remuneration strategy
At Medibank, we believe that remuneration is a key influencer
of behaviour and can be used as a tool to reinforce our culture.
Our people are guided by our strong set of values which are
anchored to the core pillars of our culture – our purposes,
our people and customers and our performance. We focus
on our values every day to ensure we do the right thing by
our customers, employees and the community.
Our remuneration strategy has been developed to focus ELT
members on responsibly executing Medibank’s strategy,
role-modelling behaviours that strengthen our values-based
culture and achieving business objectives that increase value
for our customers and shareholders. Supporting this strategy,
our remuneration framework is designed to link reward to
business outcomes, individual performance and behaviour,
and to support Medibank’s long-term financial soundness
and risk management framework.
The diagram below illustrates the relationship between
Medibank’s remuneration strategy, reward framework
and the timeline of when 2021 remuneration is delivered
to ELT members.
Medibank’s remuneration strategy
Focus ELT members on responsibly executing Group strategy to increase customer
and shareholder value with behaviours aligned with Medibank’s values and purpose
Attract and retain
key talent through
competitive and fair
fixed remuneration
Incentivise
high performance
through variable,
at risk payments
Reward ELT members for
the achievement of business
outcomes aligned with
Medibank’s culture
Align the interests of ELT
members with increasing
long-term customer and
shareholder value
Medibank’s total target reward framework
Total fixed
remuneration
(TFR)
• Determined with reference to capability, experience, the complexity of the role, as well as median pay levels
of Medibank’s comparator group
• Paid on a fortnightly basis in base salary and superannuation
Gateways
Performance measures
Delivery
Short-term
incentive
(STI)
Long-term
incentive
(LTI)
• Individuals must pass a risk,
compliance and behaviour
gateway to be eligible for
an STI or LTI award
• Financial Gateway (STI only)
– Medibank must achieve
a baseline Group operating
profit target for an STI to
be awarded
• Group operating profit
• Health Insurance revenue growth
• Brand Net Promoter Score (NPS)
• Role-specific metrics
• Earnings per share compound annual growth rate
• Relative total shareholder return
• Growth of Medibank’s private health insurance
market share
• 50% cash
• 50% performance
rights deferred
for 12 months
• Three-year deferred
performance rights
2021 remuneration timeline
FY21
FY22
FY23
TFR
Base salary + super
STI
Cash
Deferred
Relative total shareholder return
LTI
Earnings per share compound annual growth rate
Private Health Insurance market share growth
50%
50%
35%
35%
30%
date earned
date granted
eligible for payment or vesting
Annual Report 2021 55
Remuneration report
For the financial year ended 30 June 2021
4. Remuneration governance
4.2 Executive remuneration policies
Medibank has a robust governance framework in place to
ensure that our remuneration and performance practices are
fair, reasonable and aligned with the requirements outlined in
our risk management framework. Our governance framework
also considers regulatory compliance, customer outcomes,
community expectations and the delivery of sustainable
shareholder value.
4.1 The role of the Board in remuneration
The People and Remuneration Committee (P&RC) is a
committee of the Board. The diagram below outlines the role
of the P&RC in assisting and advising the Board on people
and culture policies and practices, including remuneration.
While there are four permanent members of the P&RC,
a standing invitation exists to all non-executive directors
to attend meetings. The Chief Executive Officer (CEO) and
Group Executive – People & Culture are also invited to attend
P&RC meetings, except where matters associated with their
own performance or remuneration are considered. Specific
governance activities with respect to the P&RC include
regular reviews of the P&RC Charter to ensure consideration
of changing regulations, guidelines and best practice and an
annual audit of committee minutes against the P&RC Charter.
For P&RC meeting attendance information, refer to the table
on page 48 of the directors’ report.
4.2.1 Performance evaluation of ELT members
At the outset of each performance year, the Board determines
the measures against which ELT members will be assessed.
The measures are a combination of Medibank (Company)
and role-specific performance measures that are aligned
to the achievement of Medibank’s customer and financial
milestones set out in the annual report. Aligned with
Medibank’s Group-wide performance framework ‘I Perform
Better’, the role-specific measures for ELT members are
known as ‘Big Goals’ (an acronym for Bold, Impactful Goals).
Big Goals are designed to be ambitious, aspirational and shift
expectations from delivering at a base level against core job
requirements to driving strong, impactful performance. The
Big Goals adopted by each ELT member then form the basis
for the Big Goals adopted by their leadership team members
and their respective teams to ensure all employees across the
Group are working towards a shared and consistent strategy.
At the completion of the performance year, ELT members
are individually assessed against the risk, compliance and
behaviour gateway which is outlined in section 6.3. ELT
members are then attributed an outcome against a 5-point
rating scale (with a minimum rating of 3 required to receive
a short-term incentive (STI) award) that assesses ELT
member performance and behaviours against business
outcomes and achievement of role-specific performance
measures. The individual performance ratings of ELT
members are then combined with performance against
Company measures to determine STI outcomes.
Reviewing and overseeing
Medibank’s key people and
organisational strategies,
including employee
engagement, values,
behaviours and diversity
and inclusion
Ensuring that Medibank’s
remuneration practices
are consistent with the
risk management
framework and drives
appropriate behaviours
P&RC
Reviewing employee
remuneration arrangements
with consideration for
behaviours, regulatory
compliance, customer
outcomes, community
expectations and
shareholder value
Reviewing and monitoring
Medibank’s strategies
for executive succession,
talent acquisition
and retention
Reviewing and monitoring
Medibank’s health, safety
and wellbeing strategy
and performance,
workplace relations
and payroll integrity
Independent remuneration
consultant
• KPMG provides information
to assist the P&RC in making
remuneration decisions
and recommendations
to the Board
• The work undertaken by
KPMG in 2021 did not
constitute a remuneration
recommendation
56 Medibank
With respect to fixed remuneration adjustments,
consideration is given to role-specific performance,
experience, the complexity of the role and Medibank’s market
comparator group. Additional detail on STI performance
measures are included in sections 6 and 7 of this report and
further information on fixed remuneration levels for ELT
members is outlined in section 6.2.
The CEO provides his performance assessment of each ELT
member to the Board for consideration. The Chairman, in
consultation with the Board, assesses the performance,
behaviour and conduct of the CEO. The Board has ultimate
discretion over final individual performance outcomes
for all ELT members to ensure alignment with Medibank
performance, customer outcomes, community and
shareholder expectations.
4.2.2 Clawback of executive performance-based
remuneration
Medibank has an Executive Remuneration Clawback Policy
that provides discretion to the Board to reduce, cancel, or
recover (clawback) any performance-based awards made
to a senior executive employee in certain circumstances
and subject to applicable laws, including the following:
• Serious misconduct, fraud or dishonesty by the employee.
• Any behaviour, act or omission by the employee that impacts
on the Group’s reputation or long-term financial soundness.
• A material misstatement of the Group’s financial statements.
The Executive Remuneration Clawback Policy provides that if
any of these events have occurred in the previous five financial
years the Board may, in its absolute discretion, withhold
an employee’s performance-based payments, require the
repayment of all, or part of, previous performance-based
awards, lapse previously deferred and unvested performance-
based rewards, or otherwise alter an employee’s
remuneration subject to applicable laws. In addition to a
stand-alone policy, Medibank’s remuneration clawback
provisions are outlined in executive employment contracts
and employee equity offer documentation.
4.2.3 Executive shareholding requirements
ELT members are subject to a Minimum Shareholding Policy
that is designed to strengthen their alignment with customers
and shareholders by requiring them to hold Medibank
shares with a value equivalent to 100% of their annual fixed
remuneration within five years of appointment to the ELT.
The policy does not require an ELT member to purchase shares,
however they are restricted from selling their vested employee
equity holdings (other than to satisfy income tax obligations)
until they meet the minimum shareholding requirement.
All Medibank shares and unvested performance rights that
are subject to a tenure-based hurdle held by, or on behalf
of, the ELT member (for example within a family trust or
self-managed superannuation fund where they are the
beneficial owner) will count towards satisfaction of the
minimum shareholding requirement.
• The Board becomes aware of any other action or behaviour
that it determines (acting in good faith) has resulted in the
employee receiving an inappropriate benefit.
As at 30 June 2021, progress towards the minimum
shareholding requirement for each ELT member is
provided below:
ELT member
David Koczkar
Kylie Bishop
John Goodall
Milosh Milisavljevic
Mei Ramsay
Mark Rogers
Andrew Wilson
Minimum
shareholding
requirement $1
Value of eligible
shareholdings as
at 30 June 2021 $2
1,500,000
580,000
555,000
780,000
555,000
1,000,000
1,000,000
2,508,057
1,339,834
467,494
45,719
652,919
1,085,555
2,927,740
Minimum
shareholding
requirement timeline
Requirement satisfied
Requirement satisfied
5 December 2021
22 June 2026
Requirement satisfied
Requirement satisfied
Requirement satisfied
1. Minimum shareholding requirement based on ELT members’ total fixed remuneration (TFR) as at 30 June 2021.
2. Holding value is calculated with reference to the total number of eligible shares or performance rights held by each ELT member, multiplied by the closing
price of Medibank’s shares on 30 June 2021 ($3.16).
3. Craig Drummond ceased to be a KMP on 17 May 2021 and was therefore no longer subject to this policy as at 30 June 2021.
Annual Report 2021 57
Remuneration report
For the financial year ended 30 June 2021
4.2.4 Share Trading Policy
5.1 Risk culture
We have a Share Trading Policy to ensure that all employees
understand their obligations in relation to dealing in Medibank
shares. The Share Trading Policy describes restrictions
on buying and selling Medibank shares for non-executive
directors and other Medibank employees.
In addition, non-executive directors, ELT members, all
senior leaders and employees with potential access to inside
information are deemed to be ‘Restricted Employees.’ They are
required to seek approval before dealing in Medibank shares
and are subject to share trading blackouts prior to financial
result announcements and other times, as required. The policy
also prohibits employees from entering into transactions
relating to Medibank shares which limit their economic risks,
including in relation to the long-term incentive (LTI) Plan and
equity-based component of the STI Plan.
Our Share Trading Policy can be found within the corporate
governance section on our website.
4.2.5 Termination provisions in ELT member contracts
All current ELT members are employed under ongoing
contracts with notice periods set at three months (employee)
and six months (employer), or in the case of the CEO, six
months (employee) and six months (employer). Termination
provisions included in ELT member contracts are limited to
six months payment of fixed remuneration, in lieu of notice.
If an ELT member is assessed by the Board as a ‘good leaver’
(meaning they cease employment by reason of death, serious
disability, permanent incapacity, retirement, redundancy or
with Board approval), the cash STI award in respect of the
performance year in which they leave would be paid on a
pro rata basis at the end of the STI performance period. The
deferred component of the STI award will be paid in cash
(rather than performance rights) on a pro rata basis with
payment deferred until 12 months following the payment of
the cash component. Any previously deferred STI remains
restricted until the applicable vesting date, unless determined
otherwise by the Board. Performance rights issued as LTI
are retained on a pro rata basis by a ‘good leaver’. Retained
performance rights remain unvested and subject to the
same vesting conditions that will be assessed at the end of
the performance period. Further details of the termination
provisions that relate to the STI and LTI plans are detailed
in section 6 of this report.
5. Risk and remuneration
A key focus for Medibank’s Board and People and
Remuneration Committee (P&RC) is ensuring our
remuneration policies and practices are consistent with
our risk management framework, aligned with prudent
risk taking and support the effective management of
financial and non-financial risks.
58 Medibank
An engaged culture is contingent on alignment between
purpose, values, behaviours and strategic direction. With a focus
on ensuring we do the right thing for our people, customers
and community, Medibank’s purpose and values provide
guidance for the behaviours we expect of our employees. Our
strong purpose and values focus is the cornerstone of our
organisational culture and has been consistently positive over a
seven-year cultural transformation. This builds on Medibank’s
Code of Conduct which sets out the way we work at Medibank
and outlines practical principles and standards of behaviour and
conduct which are expected of all Medibank employees.
As further guidance, Medibank’s risk culture framework clearly
articulates the behaviours employees are expected to exhibit
from a risk culture perspective. As an organisation, we are
committed to not only complying with legal obligations, but
also acting ethically and responsibly in relation to our people,
customers and the community. The behaviours that support
our risk culture include:
We actively challenge risk decisions to
ensure benefit for our customers, our
employees, our brand and our shareholders
We escalate risk issues without fear
or favour
We all own risk issues
We expect that all our risk and reward
discussions are viewed through our
values and business goals
We learn from our experiences and
mistakes to ensure we do better
5.2 Alignment of remuneration with prudent
risk taking
We believe that the effective alignment of remuneration
with the risk appetite set by the Board is critical to our
remuneration strategy and framework. Under Medibank’s
Group-wide performance framework ‘I Perform Better’, at the
end of each financial year all employees are assessed against
their personal scorecard, which is a combination of financial
and non-financial measures, including performance against
their risk, compliance and behaviour obligations. Through the
performance assessment process, both positive and negative
risk, compliance and behaviour outcomes are considered as
part of a holistic performance assessment. Employees are
then attributed an outcome against a 5-point rating scale
(with a minimum rating of 3 required to receive a short-term
incentive (STI) award) that focuses on behaviours, business
outcomes and achievement of role-specific performance
measures. This then informs remuneration and performance-
based incentive outcomes for the period.
The management of financial and non-financial risks by senior
executives is reviewed by the Risk Management Committee
(RMC). As part of this review the RMC considers the effective
operation of divisional risk committees, incident identification,
audit findings, remediation actions, health and safety, and
feedback on risk culture from employees. In addition, the
Chief Risk Officer, Group Executive – People & Culture and
Group Executive – Legal, Governance & Compliance are
specifically tasked with notifying the Board of any relevant risk
and compliance outcomes and/or conduct which may impact
performance and remuneration outcomes for ELT members
(including the CEO) and other senior executives.
Further, as outlined throughout this report, Medibank’s
executive reward framework includes long-term deferral
across both our STI Plan and long-term incentive (LTI) Plan to
ensure risk outcomes are considered over extended periods.
5.3 Consequence management
A well understood and consistently applied consequence
management process is a key part of our risk culture and
ensures risk, compliance and behaviour outcomes are aligned
with remuneration outcomes. Consequences of employees
breaching Medibank’s Code of Conduct are clearly articulated
and may include an employee attending further training
or counselling, a formal written warning being applied, or
in certain circumstances, termination of employment. The
issue of a final written warning automatically results in the
employee being given an ‘unsatisfactory’ performance rating
for the relevant performance period, meaning the individual
is ineligible for any performance-based reward outcome or
fixed remuneration increase. Medibank’s individual incentive
plan rules also clearly articulate that failure to meet the risk,
compliance and behaviour gateway in any given performance
period will consequently lead to ineligibility for an incentive
award for a period of 12 months and potential termination.
In 2021, 19 employees were issued with final written warnings
following a breach of Medibank’s Code of Conduct, or another
Medibank Group policy. In all cases, each employee received
a performance rating of ‘unsatisfactory’ and was ineligible
for any applicable performance-based incentive or fixed
remuneration increase. A further 12 individuals in 2021
had their employment terminated following an incident
of misconduct.
Further details on consequence management can be found
in our Sustainability Report 2021.
6. Executive remuneration components
Target remuneration for Executive Leadership Team
(ELT) members is designed to reward sustained business
performance with behaviours aligned with Medibank’s values
and purpose that benefits both customers and shareholders.
The Board aims to find a balance between:
• Fixed and at-risk remuneration.
• Short-term and long-term remuneration.
• Remuneration delivered in cash and deferred equity.
6.1 2021 target remuneration mix
The 2021 target remuneration mix for Medibank’s ELT
members is shown below.
David
Koczkar1
Kylie
Bishop
John
Goodall
Mei
Ramsay
Mark
Rogers
Andrew
Wilson
43.5%
14.1% 14.1%
28.3%
46.5%
12.8% 12.8%
27.9%
46.5%
12.8% 12.8%
27.9%
46.5%
12.8% 12.8%
27.9%
43.5%
14.1% 14.1%
28.3%
43.5%
14.1% 14.1%
28.3%
Former ELT member
Craig
Drummond
28.6%
14.3% 14.3%
42.8%
Fixed
STI cash
Deferred
STI (equity)
LTI
(equity)
1. David Koczkar’s remuneration mix reflects his Chief Customer Officer
position which is applicable to the 2021 performance period.
2. Milosh Milisavljevic has been excluded from this list as his 2021 target
remuneration mix reflects his former position as Senior Executive
Customer Strategy & Growth.
6.2 Total fixed remuneration (TFR)
This is the fixed portion of remuneration and includes base
salary and employer superannuation contributions. Fixed
remuneration is determined with reference to the executive’s
capabilities, experience, the complexity of the role, as well
as median pay levels for similar roles at companies in the
ASX 11-100 (excluding mining and energy companies).
This ensures that fixed remuneration is set at competitive
levels and enables Medibank to attract and retain high
quality executives. Further details of Medibank’s comparator
group of companies is outlined in section 14 of this report.
Annual Report 2021 59
Remuneration report
For the financial year ended 30 June 2021
The table below outlines the current TFR settings for ELT
members as at 30 June 2021. The TFR for David Koczkar,
Milosh Milisavljevic, Mark Rogers and Andrew Wilson reflect
adjustments to their fixed remuneration following their
recent appointments and a review of benchmark data.
6.2.1 Total fixed remuneration
ELT member
David Koczkar1
Kylie Bishop
John Goodall
Milosh Milisavljevic2
Mei Ramsay
Mark Rogers3
Andrew Wilson4
Former ELT member
Craig Drummond
30 June 2021 $
1,500,000
580,000
555,000
780,000
555,000
1,000,000
1,000,000
1,534,000
1. This represents David Koczkar’s TFR as at 30 June 2021 following his
appointment as Chief Executive Officer. David’s previous TFR of $960,000
was used for the purposes of calculating his 2021 short-term incentive
and long-term incentive awards.
2. This represents Milosh Milisavljevic’s TFR as at 30 June 2021 following
his appointment as Group Executive – Customer Portfolios. Milosh’s 2021
short-term incentive and long-term incentive awards were calculated
based on his TFR prior to his appointment as a KMP.
3. This represents Mark Rogers’ TFR as at 30 June 2021 following his
expanded accountability as Group Executive – Chief Financial Officer
& Group Strategy. Mark’s previous TFR of $925,000 was used for the
purposes of calculating his 2021 short-term incentive and long-term
incentive awards.
4. This represents Andrew Wilson’s TFR as at 30 June 2021 following his
expanded accountability as Group Executive – CEO Health Services.
Andrew’s previous TFR of $960,000 was used for the purposes of
calculating his 2021 short-term incentive and long-term incentive awards.
6.3 Short-term incentive (STI)
STI is an at-risk element of remuneration, which is designed
to reward executives for the creation of customer and
shareholder value during the financial year. Executives must
pass two separate gateways to participate in the plan. Once
both gateways are achieved, executives have the opportunity
to earn a percentage of their fixed remuneration as an
incentive, based on company and individual performance.
6.3.1 STI gateways
For an STI award to be made to an ELT member, the
following gateways must be achieved:
Risk, compliance and behaviour gateway
Individually assessed, the risk, compliance and behaviour
gateway requires ELT members to:
• Adhere to Medibank’s Code of Conduct which covers
standards of behaviour and conduct which includes
anti-harassment, anti-discrimination and anti-bribery and
corruption obligations. Our Code of Conduct requires all
employees to not only comply with our legal obligations,
but also to act ethically and responsibly in relation to
our customers, colleagues and the community.
60 Medibank
• Complete all mandatory compliance training which includes
privacy, cyber-security, health and safety, bullying and
harassment, bribery and corruption and meeting our legal,
ethical and governance requirements.
• Ensure that the risks in respect of their position are well
managed. Multiple factors are considered when assessing
risk management (including environment, social and
corporate governance and climate risks where relevant),
which differ based on an executive’s role. Common
elements include the effective operation of divisional
risk committees, incident identification, audit findings,
remediation actions, health and safety, and feedback
on risk culture from employees.
Assessment of the risk, compliance and behaviour gateway
is also subject to feedback provided by the Chief Risk Officer,
Group Executive – People & Culture and Group Executive –
Legal, Governance & Compliance as outlined in section 5.2.
Financial gateway
• Assessed at the Group level, Medibank must achieve a
baseline of financial performance as determined by the
Board for the performance period. In 2021, this baseline
financial performance was a Group operating profit target.
6.3.2 STI performance measurement
The Board determines challenging levels of performance for
each Medibank and role-specific STI performance measure.
When setting performance expectations, the Board considers
numerous factors, including Medibank’s strategic objectives,
prior year performance, the external environment, customer
outcomes and shareholder expectations. The Board also
ensures that performance levels are set for the current year
in the context of achieving longer term customer and financial
strategic goals. Further detail on each performance measure
is outlined in section 7.1.
At the completion of the performance year, an assessment
is first made on the achievement of the STI gateways. If
achieved, ELT members are then assessed against the
company and role-specific performance measures to
determine STI award outcomes. As an example, for an ELT
member to achieve a target STI award, performance against
Medibank and role-specific measures must be at the target
level of performance as set by the Board (for that element
of the award) and delivered with behaviours aligned with
Medibank’s purpose and values.
For an ELT member to achieve a stretch STI award (therefore,
award at maximum), performance against all Medibank
and role-specific measures must be at or above stretch
performance as set by the Board (for that element of the
award) and delivered with behaviour aligned with Medibank’s
purpose and values. This would represent exceptional
performance, well above that of Medibank’s strategic plan.
6.3.3 Key features of the STI Plan
Over what period is
performance assessed?
How are STI payments
delivered?
The STI performance period is the financial year 1 July to 30 June.
50% of STI awarded to ELT members is paid as cash, with the remaining 50% deferred
for 12 months (deferred STI). Deferred STI is provided in the form of 12-month deferred
performance rights.
When are STI payments
made?
The cash component of STI is paid following the release of audited financial results,
with performance rights for the deferred STI component granted shortly thereafter.
What method is used to
determine the number of
performance rights granted
to each participant as part
of the deferred STI?
Performance rights under the STI plan are granted at face value. The deferred STI value
for each ELT member is divided by the volume weighted average share price (VWAP) of
Medibank shares to determine the number of units granted.
For the 2021 deferred STI component the VWAP will be calculated on the 10 trading days
up to and including 16 September 2021.
Are deferred STI
performance rights
entitled to receive a
dividend payment?
What gateways apply
to the STI plan?
What are the performance
measures under the
STI plan?
Deferred STI performance rights do not attract dividends during the deferral period.
To align participant outcomes with shareholders, on vesting of these performance rights
additional Medibank shares are granted to ensure each participant receives a benefit
equivalent to any dividends paid during the deferral period.
For an STI award to be made to an ELT member, both the risk, compliance and behaviour
gateway, and the financial gateway must be achieved. Further detail on these gateways
is outlined in section 6.3.1.
Performance measures under the STI plan are determined by the Board at the
commencement of each performance period. For 2021, the performance measures were:
• Group operating profit (excluding investment income).
• Health Insurance premium revenue growth.
• Brand Net Promoter Score (NPS).
• Role-specific metrics.
Further detail on each performance measure is outlined in section 7.1.
Does Medibank disclose
STI performance targets?
Section 7.1 of this report provides a detailed description of Medibank’s STI performance
measures and a description of how the organisation has performed against each measure
in 2021. Actual target values are not disclosed as this is considered to be commercially
sensitive information.
Does Medibank have
a clawback policy that
applies to the STI plan?
Medibank has an Executive Remuneration Clawback Policy that provides discretion to the
Board to reduce, cancel, or recover (clawback) any award made under the STI plan to an
ELT member in certain circumstances subject to applicable laws. Further detail on this
policy is outlined in section 4.2.2.
What happens to STI
entitlements if an ELT
member leaves Medibank?
If an ELT member is a ‘good leaver’ (meaning they cease employment by reason of death,
serious disability, permanent incapacity, retirement, redundancy, or with Board approval),
pro rata payment of STI applies.
In what circumstances are
STI entitlements forfeited?
Section 4.2.5 provides additional information on the treatment of STI for people deemed
as ‘good leavers’ by the Board.
In the event an ELT member is not considered a ‘good leaver’ (meaning they cease
employment for any reason other than death, serious disability, permanent incapacity,
retirement, redundancy or with Board approval), the ELT member will forfeit any payment
under the STI plan, including any unvested deferred STI grants, unless otherwise
determined by the Board.
Annual Report 2021 61
Remuneration report
For the financial year ended 30 June 2021
6.3.4 Annual STI opportunity
The target and maximum annual STI opportunity as a percentage of TFR for ELT members is outlined in the table below.
ELT member
David Koczkar1
Kylie Bishop
John Goodall
Mei Ramsay
Mark Rogers
Andrew Wilson
Former ELT member
Craig Drummond
2021
Target
Maximum
65%
55%
55%
55%
65%
65%
100%
100%
100%
100%
100%
100%
100%
150%
1. David Koczkar’s 2021 target and maximum STI opportunity reflects his previous position as Chief Customer Officer and is applicable for the
2021 performance period.
2. Milosh Milisavljevic’s 2021 STI opportunity is based on his previous position as Senior Executive Customer Strategy & Growth prior to his
appointment as a KMP and is excluded from this table.
6.4 Long-term incentive (LTI)
LTI is an at-risk element of remuneration designed to reward executives for delivering sustainable business performance
over the long term. Given the nature of the private health insurance industry and the fact that it is highly regulated, the
Board considers it appropriate to measure long term performance over a three-year period. Each year executives are eligible
to receive an LTI which is calculated as a percentage of their fixed remuneration. This incentive is subject to performance
hurdles that will be tested at the end of the three-year performance period. Based on performance against these hurdles
a percentage of the incentive will be retained by the executive with the remainder being forfeited.
6.4.1 Key features of the LTI Plan
What is the aim of the
LTI plan?
The Medibank LTI Plan is designed to:
• Align the interests of ELT members more closely with the interests of customers and
shareholders, by providing an opportunity for those executives to receive an equity
interest in Medibank through the granting of performance rights.
• Assist in the motivation, retention and reward of ELT members over the three-year
deferral period.
What is the performance
period for 2021 LTI plan?
The performance period for the 2021 LTI plan is three financial years commencing 1 July
2020. A three-year performance period strikes a balance between providing a reasonable
period to align reward with shareholder return and the LTI acting as a vehicle for executive
motivation and retention.
What are performance
rights?
Performance rights issued to ELT members under the LTI plan are conditional rights for
the participant to subscribe for fully paid ordinary shares in Medibank.
What method is used to
determine the number of
performance rights granted
to each participant?
Each performance right entitles the ELT member to subscribe for one ordinary share if the
performance hurdles are met at the conclusion of the performance period. No amount is
payable by the participant upon exercise of the performance rights once they have vested.
Performance rights under the LTI plan are granted at face value. Each ELT member receives
a percentage of their fixed remuneration in LTI (refer to section 6.4.2 for details). This amount
is then divided by the face value of Medibank shares.
For the 2021 LTI plan, the number of performance rights granted to each ELT member was
determined using the volume weighted average price of Medibank shares on the ASX during
the 10 trading days up to and including, 30 June 2020. This average price was $3.02.
What gateways apply to
the LTI plan?
For an LTI award to be granted to an ELT member, the risk, compliance and behaviour
gateway must be met prior to grant. Further detail on this gateway is outlined in section 6.3.1.
62 Medibank
What are the performance
hurdles under the 2021
LTI plan?
Performance rights issued under the 2021 LTI plan are subject to three separate
performance hurdles:
• 35% of the performance rights are subject to a performance hurdle based on Medibank’s
earnings per share compound annual growth rate (EPS CAGR) over the performance
period. The starting point for EPS will be calculated using Medibank’s underlying profit
as at 30 June 2020 and the performance period for the EPS performance hurdle will run
for three years from 1 July 2020 through to 30 June 2023. Further detail on the profit
measure used in the calculation of EPS is provided in section 6.4.3.
• 35% of the performance rights are subject to a relative total shareholder return (TSR)
performance hurdle, measured over the performance period. Medibank’s relative TSR will
be compared to a comparator group comprising companies with a market capitalisation
positioned within the ASX 11-100 (excluding mining and energy companies).
• 30% of the performance rights are subject to a performance hurdle based on the growth
of Medibank’s private health insurance market share (as reported by APRA) over the
performance period.
These performance hurdles were chosen by the Board as they are aligned with the
interests of our customers and shareholders and represent well understood and
transparent mechanisms to measure performance and provide a strong link between
executive reward and shareholder wealth creation.
The performance hurdles under the 2021 LTI plan have threshold levels which need
to be achieved before vesting commences. Details of these thresholds are outlined
in the vesting schedule in section 6.4.3.
When do the performance
rights vest?
Performance hurdles are assessed as soon as practicable after the completion of the
relevant performance period. The number of performance rights that vest (if any) will
be relative to the achievement against the performance hurdles. See section 6.4.3 for
the vesting schedule associated with each performance hurdle.
Are the performance
hurdles re-tested?
No. Performance hurdles are only tested once at the end of the performance period.
Any performance rights that remain unvested at the end of the performance period are
immediately forfeited.
Are LTI performance
rights entitled to receive
a dividend payment?
LTI performance rights do not attract a dividend during the performance period, as they
are still subject to performance hurdles that will determine the number of rights that
convert to ordinary Medibank shares.
Does Medibank have
a clawback policy that
applies to the LTI plan?
Medibank has an Executive Remuneration Clawback Policy that provides discretion to the
Board to reduce, cancel, or recover (clawback) any award made under the LTI Plan to an
ELT member in certain circumstances subject to applicable laws. Further detail on this
policy is outlined in section 4.2.2.
What happens to LTI
entitlements if an ELT
member leaves Medibank?
In what circumstances
are LTI entitlements
forfeited?
If an ELT member is a ‘good leaver’ (meaning they cease employment by reason of death,
serious disability, permanent incapacity, retirement, redundancy, or with Board approval),
a portion of the performance rights held (granted, but not vested) by that participant on
cessation of employment will be forfeited on a pro rata basis according to a formula which
takes into account the length of time the participant has held the performance rights
relative to the performance period for the grant. The retained performance rights will
remain unvested and will be tested at the end of the performance period against the
existing performance hurdles.
LTI entitlements are forfeited if performance hurdles are not met. In the event an ELT
member is not considered a ‘good leaver’ (meaning they cease employment for any reason
other than death, serious disability, permanent incapacity, retirement, redundancy or with
Board approval), the performance rights held (granted, but not vested) by that participant
on cessation of employment will be automatically forfeited.
Annual Report 2021 63
Remuneration report
For the financial year ended 30 June 2021
The annual LTI allocation value as a percentage of TFR for ELT members is outlined in the table below.
6.4.2 Annual LTI allocation
ELT member
David Koczkar1
Kylie Bishop
John Goodall
Mei Ramsay
Mark Rogers
Andrew Wilson
Former ELT member
Craig Drummond
2021
LTI allocation value as % of TFR
65%
60%
60%
60%
65%
65%
150%
1. David Koczkar’s 2021 LTI opportunity reflects his previous position as Chief Customer Officer and is applicable for the 2021 performance period.
2. Milosh Milisavljevic’s 2021 LTI opportunity is based on his previous position as Senior Executive Customer Strategy & Growth prior to his appointment
as a KMP and is excluded from this table.
6.4.3 LTI hurdles explained
2021 TSR performance rights (35% of award)
Each year, the Board reviews the LTI targets and vesting
conditions in the context of Medibank’s operating
environment. The Board is committed to setting targets
which are appropriately challenging for management to
meet while not being unattainable and which ultimately
support the delivery of strong outcomes for our customers
and shareholders. For the 2021 LTI offer, the Board also
considered the uncertainty surrounding the economic
and social impact of COVID-19 on Medibank’s operating
environment and the PHI landscape more broadly.
2021 EPS performance rights (35% of award)
In this context, the Board approved maintaining a threshold
EPS CAGR target of 3% for the 2021 LTI grant. The number
of EPS performance rights that vest on achievement of the
threshold EPS CAGR target has been increased by the Board
to 50% of the EPS performance rights. The EPS CAGR target
that must be met for 100% of the EPS performance rights
to vest has been reduced by the Board to 7%. This change
was made to achieve a more appropriate balance between
the goals of attainability and challenge. Details of the vesting
schedule are outlined in the table below:
Medibank’s EPS CAGR over
the performance period
Percentage of EPS
performance rights that vest
Less than 3% EPS CAGR
At 3% EPS CAGR
Between 3% and
7% EPS CAGR
7% EPS CAGR or greater
Nil
50%
Straight-line pro rata vesting
between 50% and 100%
100%
Medibank’s performance against the EPS hurdle is calculated
based on the compound annual growth rate (CAGR) of
Medibank’s EPS over the performance period. EPS is based
on underlying profit, which adjusts statutory net profit after
tax (NPAT) where appropriate, for short-term outcomes that
are expected to normalise over the medium to longer term,
most notably in relation to the level of gains or losses from
investments, due to the limited control that management
has over these outcomes.
64 Medibank
Medibank’s TSR will be compared against companies within
the ASX 11-100 (excluding mining and energy companies),
which is the same comparator group used for executive and
non-executive remuneration benchmarking. For any of the
2021 TSR performance rights to vest, Medibank must achieve
the threshold TSR ranking over the performance period.
The percentage of the 2021 TSR performance rights that
vest, if any, will be based on Medibank’s TSR ranking at the
end of the performance period, as set out in the following
vesting schedule:
Medibank’s TSR rank in
the 2021 comparator group
Percentage of TSR
performance rights that vest
Less than 50th percentile
Equal to 50th percentile
Greater than 50th and up to
75th percentile
At or above 75th percentile
Nil
50%
Straight-line pro rata vesting
between 50% and 100%
100%
The TSR of Medibank and other companies within the
comparator group, expressed as a compound annual rate
of return, will be comprised of:
a) The change in share price of each company over the
performance period. The change in share price is
calculated using the volume weighted average price
(VWAP) of each entity over the 20 trading days leading up
to and including the performance period start and end
dates. The VWAP at the end of the performance period
will be adjusted for any stock splits that occur during
the performance period.
b) The value of all dividends and other shareholder benefits
paid by each company during the performance period
assuming that:
i.
The dividends and shareholder benefits are reinvested
in the relevant company at the closing price of the
securities on the date the dividend or shareholder
benefit was paid.
ii. Franking credits are disregarded.
The entities comprising the 2021 comparator group are
determined at the commencement of the performance
period. If the ordinary shares or stock of a member of the
2021 comparator group is not quoted on the ASX at the
end of the performance period (for example if the member
has been delisted for any reason), then it will be excluded
from calculations of the TSR calculation, unless the Board,
acting in good faith and in its absolute discretion, determine
otherwise. In exercising its discretion, the Board may have
regard to such matters it deems relevant including (but not
limited to) the length of time that the member was quoted
on the ASX during the performance period.
2021 market share performance rights (30% of award)
The Board approved maintaining a threshold private health
insurance (PHI) market share growth target of 25 basis points.
To maintain the balance between the goals of attainability and
challenge, the number of market share performance rights
that vest on achievement of the threshold target has been
increased to 50% of the market share performance rights.
The PHI market share growth target that must be met for
100% of the market share performance rights to vest has
been maintained at 75 basis points. Details of the vesting
schedule are set out below:
Medibank’s PHI market share
growth
Percentage of market share
performance rights that vest
Less than 25 basis points
Equal to 25 basis points
Greater than 25 basis points
and up to 75 basis points
At or above 75 basis points
Nil
50%
Straight-line pro rata vesting
between 50% and 100%
100%
7. Linking remuneration and performance 2021
7.1 2021 short-term incentive (STI) performance scorecard
The following table details the 2021 STI performance scorecard measures, weightings and assessment
as applied to the Chief Executive Officer (CEO) and other Executive Leadership Team (ELT) members.
Measure
Description
Weighting
Other ELT
members
CEO
2021
performance
assessment
Risk,
compliance
and behaviour
gateway
Individually assessed, ELT members must adhere to Medibank’s
Code of Conduct, ensure that the risks in respect of their position
are well managed and complete all mandatory compliance
training. Medibank’s Code of Conduct requires all employees
to not only comply with our legal obligations, but also to act
ethically and responsibly in relation to our customers,
colleagues and the community.
The management of risks (including environment, social
and corporate governance and climate risks where relevant)
is reviewed by the Risk Management Committee and considers
the effective operation of divisional risk committees, incident
identification, audit findings, remediation actions, health
and safety, feedback on risk culture from employees, and
feedback provided by the Chief Risk Office, Group Executive
– People & Culture and Group Executive – Legal, Governance
& Compliance as outlined in section 5.2.
Gateway Gateway
All achieved
Financial
gateway
Medibank must achieve a baseline of financial performance,
as determined by the Board for the performance period.
In 2021, this baseline financial performance was a Group
operating profit target.
Gateway Gateway
Met
Annual Report 2021 65
Remuneration report
For the financial year ended 30 June 2021
Measure
Description
Group operating
profit
Group operating profit represents the core financial measure
for the annual STI Plan and reflects the Board’s belief that
it is the best measure of underlying business performance
and value created for customers and shareholders over the
performance period.
Health Insurance
premium
revenue growth
Measured alongside the core metric of Group operating
profit, the focus of this measure is sustainable and profitable
revenue growth to ensure optimal value creation for customers
and shareholders.
Brand Net
Promoter
Score (NPS)
Brand NPS is a key customer advocacy metric that measures
the likelihood of people recommending Medibank or ahm to
their families and friends.
Weighting
Other ELT
members
CEO
2021
performance
assessment
45%
35%
Above target
20%
25%
Below target
20%
20%
Above target
Role-specific
big goals
Aligned to one or more of the following milestones:
1. Customer and employee advocacy – Continue to achieve
a high level of advocacy by delivering exceptional experiences
for our customers and employees.
2. Health and wellbeing differentiation – Double the uptake
of Medibank’s Live Better and Health Assist programs
by FY22 while ensuring every customer has at least one
personalised health interaction through the year.
3. Health insurance growth – We aim to increase market
share and achieve total policyholder growth in excess of 3%,
including an expectation of growing the Medibank brand
by c. 1% during FY21.
4. In-home care – More than 300 virtual hospital beds by the
end of FY22.
5. Medibank Health – By FY22 organically replace the
reported FY18 $30m operating profit of Garrison.
6. Productivity – FY21 productivity target of $20 million
and additional $30 million during FY22-FY23.
15%
20%
Ranging
between
‘on-track’
to ‘ahead
of target’
66 Medibank
7.2 Medibank’s 2021 financial performance
Medibank’s 2021 annual financial performance is provided in the table below in addition to the average 2021 STI award
achieved by ELT members, as a percentage of maximum opportunity. This table illustrates the relationship between the
key indicators of shareholder wealth creation and STI outcomes for ELT members
Measure
Health Insurance premium revenue growth
Group operating profit1
Group net profit after tax (NPAT)
Dividend
Share price as at 1 July
Share price as at 30 June
Average ELT STI as a percentage
of maximum opportunity
2021
2.1%
$528.3m
$441.2m
12.7 cents p/s
$2.99
$3.16
2020
1.3%
$461.0m
$315.0m
12.0 cents p/s
$3.49
$2.99
2019
2.4%
$558.7m
$458.7m
13.1 cents p/s
$2.92
$3.49
2018
1.2%
$548.8m
$445.1m
12.7 cents p/s
$2.80
$2.92
2017
1.2%
$500.5m
$449.5m
12.0 cents p/s
$2.95
$2.80
70%
0%
56%
58%
44%
1. 2019 Group operating profit of $558.7 million includes $30.2 million of operating profit attributable to discontinued operations.
7.3 2021 STI awards
The table below provides a summary of STI awards for the 2021 performance year. As outlined earlier in the report,
in assessing Medibank’s 2021 performance against our STI measures, the Board adjusted outcomes to normalise for
unbudgeted COVID-19 related impacts (both negative and positive) outside of management’s control to ensure that
executives did not benefit from windfall gains. Further to this assessment, the Board exercised discretion to reduce
the 2021 STI outcomes for ELT members from an average of 80% of their maximum opportunity, to 70%.
ELT member
David Koczkar
Kylie Bishop
John Goodall
Mei Ramsay
Mark Rogers
Andrew Wilson
Former ELT member
Craig Drummond1
Total STI
achieved
$
729,792
395,792
353,758
353,758
670,810
662,592
STI
cash (50%)
$
364,896
197,896
176,879
176,879
335,405
331,296
STI deferred
(50%)
$
364,896
197,896
176,879
176,879
335,405
331,296
Total STI
achieved as
% of target
117.0%
124.1%
115.9%
115.9%
111.6%
106.2%
Total STI
achieved
as % of max
opportunity
76.0%
68.2%
63.7%
63.7%
72.5%
69.0%
1,742,624
871,312
871,312
113.6%
75.7%
1. The deferred component of Craig Drummond’s 2021 STI outcome will be awarded as deferred cash, due to vest in September 2022.
2. The 2021 STI outcome for Milosh Milisavljevic was based on his performance and remuneration settings prior to becoming a KMP on 22 June 2021
and has therefore not been included in this table.
7.4 2019 Long-term incentive plan outcomes
The performance period for the 2019 LTI plan concluded on 30 June 2021. The table below outlines the final outcome
against each performance hurdle and associated vesting percentage for each hurdle, and the plan.
Performance hurdle
EPS CAGR
Relative TSR
Total 2019 LTI vesting percentage
Weighting
50%
50%
Outcome
-2.8%
57th percentile
Vesting percentage
0%
64%
32%
Medibank’s 2019 LTI was tested following the completion of the performance period on 30 June 2021. Both performance
hurdles were assessed in line with the terms of the plan and the Board did not use discretion in determining the final
outcome. The performance rights under the 2019 LTI Plan that did not vest as a result of the performance hurdle
outcomes not being met, lapse immediately.
The 2020 and 2021 LTI Plans remain in restriction and will be assessed against their performance hurdles at the
completion of the 2022 and 2023 financial years respectively.
Annual Report 2021 67
Remuneration report
For the financial year ended 30 June 2021
8. 2021 actual remuneration (Non-IFRS disclosure)
The table below represents the 2021 ‘actual’ remuneration for ELT members and includes all cash payments made in
relation to 2021, in addition to deferred short-term incentive (STI) awards that vested in 2021.
Statutory remuneration disclosures prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards
differ to the numbers presented below, as they include (among other benefits) expensing for equity grants that are yet to
realise or may never be realised. The statutory remuneration table in respect of the ELT members is presented in section 9.
Base salary
and
superannuation
$
1,011,923
580,000
540,731
555,000
895,220
960,000
Cash STI for
performance
to 30 June
2021
$
364,896
197,896
176,879
176,879
335,405
331,296
Total cash
payments
in relation
to 2021
$
1,376,819
777,896
717,610
731,879
1,230,625
1,291,296
Deferred
equity awards
that vested in
20211
$
503,064
283,113
259,159
258,618
378,433
523,759
Total
2021 actual
remuneration
$
1,879,883
1,061,009
976,769
990,497
1,609,058
1,815,055
Equity awards
that lapsed in
20212
$
283,546
170,359
162,617
162,076
213,725
315,424
1,534,000
871,312
2,405,312
1,699,960
4,105,272
1,187,878
ELT member
David Koczkar
Kylie Bishop
John Goodall
Mei Ramsay
Mark Rogers
Andrew Wilson
Former ELT member
Craig Drummond
1. Deferred equity awards that vested in 2021 relate to the 2018 LTI performance rights that vested during the year and the deferred STI
performance rights in respect to the 2019 performance year that vested during the year.
2. Equity awards that lapsed in 2021 relate to the portion of the 2018 long-term incentive (LTI) performance rights that lapsed following the
testing of the performance hurdles in July 2020.
3. Milosh Milisavljevic’s 2021 actual remuneration was primarily based on his remuneration settings prior to becoming a KMP on 22 June 2021
and has therefore not been included in this table.
9. Statutory remuneration tables
9.1 Statutory remuneration table
The following table has been prepared in accordance with Section 300A of the Corporations Act 2001 and details the statutory
accounting expense of all remuneration-related items for the ELT members. In contrast to the table in section 8 that details
2021 actual remuneration, the table below includes accrual amounts for equity awards being expensed throughout 2021 that
are yet to, and may never be realised by the ELT member.
Short-term
benefits
Post-employment
benefits
Long-term
benefits
Equity-based
benefits
Other
ELT member
Financial
year
Salary
$1
STI
$
Other
$
Non-monetary
benefits
$2
Superannuation
$
Leave
$3
Deferred
STI
$4
Performance
rights
$5
Termination
benefits
$
Total
remuneration
$
2021 1,027,440
364,896
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
919,211
-
537,080
197,896
555,459
-
533,772
176,879
530,146
21,818
-
-
4,772
-
503,674
176,879
503,330
-
838,236
335,405
759,523
-
963,798
331,296
935,307
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,895
19,444
13,387
13,209
18,191
12,721
212
-
14,460
14,224
17,457
13,246
22,936
16,273
22,650 174,791
21,174
58,896
25,365
40,266
25,192
40,978
25,365
17,029
25,192
15,821
740
-
8
-
25,365
40,362
25,192
50,019
21,802 191,358
21,174
84,014
25,096
33,501
25,192
25,593
-
-
-
-
-
-
-
-
-
-
-
-
-
-
512,839
230,115
284,154
123,040
265,642
110,038
1,762
-
265,642
109,952
458,958
178,851
498,587
225,710
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,121,511
1,248,840
1,098,148
757,878
1,036,878
693,918
29,312
-
1,026,382
702,717
1,863,216
1,056,808
1,875,214
1,228,075
David
Koczkar
Kylie
Bishop
John
Goodall
Milosh
Milisavljevic6
Mei
Ramsay
Mark
Rogers
Andrew
Wilson
68 Medibank
ELT member
Financial
year
Salary
$1
Former ELT member
Short-term
benefits
Post-employment
benefits
Long-term
benefits
Equity-based
benefits
Other
STI
$
Other
$
Non-monetary
benefits
$2
Superannuation
$
Leave
$3
Deferred
STI
$4
Performance
rights
$5
Termination
benefits
$
Total
remuneration
$
Craig
Drummond
Total ELT
remuneration
2021 1,555,477
871,312
2020 1,567,526
-
2021 5,981,295 2,459,335
2020 5,770,502
-
-
-
-
-
15,364
19,296
120,902
108,413
25,096
51,868
871,312
1,227,715
25,192
47,723
-
663,660
171,479 549,183
871,312
3,515,299
168,308
323,044
-
1,641,366
-
-
-
-
4,618,144
2,323,397
13,668,805
8,011,633
1. Salary includes annual base salary paid on a fortnightly basis and accrued but untaken annual leave entitlements which are expected to be taken
in the next 12 months.
2. Non-monetary benefits may include death, total and permanent disablement insurance, salary continuance insurance, subsidised Medibank health
insurance and fringe benefits that are on the same terms and conditions that are available to all employees of the Group.
3. Long-term leave comprises an accrual for long service leave and accrued but untaken annual leave entitlements which are not expected to be taken
in the next 12 months. The significant year-on-year movements in this expense for David Koczkar and Mark Rogers reflect adjustments to their fixed
remuneration following their new appointments and additional untaken annual leave entitlements accrued during the year.
4. Deferred STI is in relation to Craig Drummond’s deferred component of his 2021 STI which will be awarded as deferred cash (rather than performance
rights) and vest in September 2022, in accordance with Medibank’s Executive STI plan rules.
5. Performance rights include equity-based remuneration incurred during the relevant financial year. The values are based on the grant date fair value
amortised on a straight-line basis over the performance period and any reversals required by AASB 2 Share-based Payments.
6. The remuneration figures disclosed for Milosh Milisavljevic reflect the period from his commencement as a KMP on 22 June 2021.
9.2 Performance-related remuneration statutory table
The following table provides an analysis of the non-performance-related (fixed remuneration) and performance-related
(short-term incentive (STI) and long-term incentive (LTI)) components of the 2021 remuneration mix for Medibank’s ELT
members as detailed in the ‘statutory remuneration table’.
Non-performance-related
Performance-related remuneration
Financial
year
Fixed
remuneration1
Cash
STI
Deferred
STI2
2021
2021
2021
2021
2021
2021
2021
58.6%
56.1%
57.3%
77.7%
56.9%
57.4%
55.7%
17.2%
18.0%
17.1%
16.3%
17.2%
18.0%
17.7%
8.6%
9.0%
8.5%
0.0%
8.6%
9.0%
8.8%
LTI3
15.6%
16.9%
17.1%
6.0%
17.3%
15.6%
17.8%
ELT member
David Koczkar
Kylie Bishop
John Goodall
Milosh Milisavljevic
Mei Ramsay
Mark Rogers
Andrew Wilson
Former ELT member
Craig Drummond
2021
35.7%
18.9%
18.9%
26.6%
Total
performance-related
remuneration
41.4%
43.9%
42.7%
22.3%
43.1%
42.6%
44.3%
64.4%
1. Fixed remuneration includes the accounting expense from all columns of the ‘statutory remuneration table’ other than ‘cash STI’, ‘performance rights’
and ‘deferred STI’.
2. Deferred STI includes the 2021 accounting expense of the 2021 deferred STI components within the ‘performance rights’ and ‘deferred STI’ columns
of the ‘statutory remuneration table’.
3. LTI includes the 2021 accounting expense of the 2019, 2020 and 2021 LTI component within the ‘performance rights’ column of the ‘statutory
remuneration table’.
Annual Report 2021 69
Remuneration report
For the financial year ended 30 June 2021
10. Executive Leadership Team (ELT) equity awards
10.1 ELT equity award transactions
Details of 2021 ELT equity award transactions and outstanding holdings granted in previous years are set out below.
Units
granted
Grant
date
Vesting and
exercise date1
Unit price
at grant $2
Fair value
at grant $3
Units
%
Units
%
$
Units
Vested
Lapsed
Other changes
Unvested balance
at 30 June 20214
ELT member
Award type
David Koczkar
2021 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
Kylie Bishop
2021 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
John Goodall
2021 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
Milosh Milisavljevic5
2021 LTI performance rights
2020 LTI performance rights
2019 LTI performance rights
206,622
180,346
86,766
203,264
198,284
115,230
100,578
44,567
117,524
119,132
110,264
96,242
38,159
112,370
113,718
42,980
36,814
30,154
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
06/12/2018
Mei Ramsay
2021 LTI performance rights
110,264
26/11/2020
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
Mark Rogers
2021 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
Andrew Wilson
2021 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
Former ELT member
Craig Drummond6
2021 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
96,242
38,159
112,370
113,340
199,088
150,288
65,102
152,576
149,458
206,622
180,346
82,346
214,432
220,576
761,920
665,028
202,404
790,720
830,684
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
01/07/2021
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
3.02
3.46
2.91
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
86,766
100
219,518
99,142
50
283,546
99,142
50
283,546
44,567
100
112,755
59,566
50
170,359
59,566
50
170,359
38,159
100
96,542
56,859
50
162,617
56,859
50
162,617
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
38,159
100
96,542
56,670
50
162,076
56,670
50
162,076
65,102
100
164,708
74,729
50
213,725
74,729
50
213,725
82,346
100
208,335
110,288
50
315,424
110,288
50
315,424
202,404
100
512,082
415,342
50
1,187,878
415,342
50
1,187,878
(761,920)
(665,028)
(790,720)
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
2.20
2.23
1.91
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Units
206,622
180,346
$
455,395
402,172
203,264
387,218
115,230
100,578
253,967
224,289
117,524
223,883
110,264
96,242
243,022
214,620
112,370
214,065
42,980
36,814
30,154
110,264
96,242
94,728
82,095
57,443
243,022
214,620
112,370
214,065
199,088
150,288
438,790
335,142
152,576
290,657
206,622
180,346
455,395
402,172
214,432
408,493
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1. The vesting and exercise dates represent the earliest possible date the performance rights may vest, being the end of the performance period. The actual
vesting and exercise date will be at a time and manner determined by the Board, with Medibank to notify the holder at that time. Any performance rights
that do not vest at this point will immediately expire.
2. The unit price at grant represents the price used to determine the number of units granted, in line with Medibank’s methodology of granting equity awards
at face value. Unit prices have been rounded to the nearest cent.
3. The fair value at grant has been based on a valuation by independent external consultants in accordance with accounting standard AASB 2 Share-based
Payments. The fair values for the 2019, 2020 and 2021 long-term incentive (LTI) grants are used for accounting purposes only as all LTI grants are made
using the face value, as outlined in section 6.4. Unit prices have been rounded to the nearest cent.
70 Medibank
10. Executive Leadership Team (ELT) equity awards
10.1 ELT equity award transactions
Details of 2021 ELT equity award transactions and outstanding holdings granted in previous years are set out below.
Units
granted
Grant
date
Vesting and
exercise date1
Unit price
at grant $2
Fair value
at grant $3
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
2.20
2.23
1.91
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
2.20
2.23
-
1.91
1.90
Milosh Milisavljevic5
2021 LTI performance rights
2020 LTI performance rights
2019 LTI performance rights
Mei Ramsay
2021 LTI performance rights
110,264
26/11/2020
ELT member
Award type
David Koczkar
2021 LTI performance rights
Kylie Bishop
2021 LTI performance rights
John Goodall
2021 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
2020 LTI performance rights
2019 deferred STI performance rights
2019 LTI performance rights
2018 LTI performance rights
Mark Rogers
2021 LTI performance rights
Andrew Wilson
2021 LTI performance rights
Former ELT member
Craig Drummond6
2021 LTI performance rights
206,622
180,346
86,766
203,264
198,284
115,230
100,578
44,567
117,524
119,132
110,264
96,242
38,159
112,370
113,718
42,980
36,814
30,154
96,242
38,159
112,370
113,340
199,088
150,288
65,102
152,576
149,458
206,622
180,346
82,346
214,432
220,576
761,920
665,028
202,404
790,720
830,684
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
06/12/2018
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
26/11/2020
28/11/2019
28/11/2019
06/12/2018
27/12/2017
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
01/07/2021
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
01/07/2023
01/07/2022
18/09/2020
01/07/2021
01/07/2020
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
3.02
3.46
2.91
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
3.02
3.46
3.41
2.91
2.77
Units
-
-
86,766
-
99,142
-
-
44,567
-
59,566
-
-
38,159
-
56,859
-
-
-
-
-
38,159
-
56,670
-
-
65,102
-
74,729
-
-
82,346
-
110,288
-
-
202,404
-
415,342
Vested
Lapsed
Other changes
Unvested balance
at 30 June 20214
%
-
-
$
-
-
100
219,518
100
112,755
Units
-
-
-
-
-
-
-
-
283,546
99,142
Units
%
-
-
-
-
50
-
-
-
-
$
-
-
-
-
283,546
-
-
-
-
170,359
59,566
50
170,359
-
-
96,542
-
-
-
-
-
-
-
-
-
-
-
-
-
162,617
56,859
50
162,617
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
162,076
56,670
50
162,076
100
96,542
100
164,708
-
-
-
-
-
-
-
-
-
-
-
-
-
213,725
74,729
50
213,725
-
-
208,335
-
-
-
-
-
-
-
-
-
-
-
-
-
315,424
110,288
50
315,424
-
-
512,082
-
-
-
-
-
-
-
-
-
-
-
-
-
1,187,878
415,342
50
1,187,878
(761,920)
(665,028)
-
(790,720)
-
-
50
-
-
-
50
-
-
100
-
50
-
-
-
-
-
-
50
-
-
-
50
-
-
100
-
50
-
-
100
-
50
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Units
206,622
180,346
-
$
455,395
402,172
-
203,264
387,218
-
115,230
100,578
-
-
253,967
224,289
-
117,524
223,883
-
110,264
96,242
-
-
243,022
214,620
-
112,370
214,065
-
42,980
36,814
30,154
110,264
96,242
-
-
94,728
82,095
57,443
243,022
214,620
-
112,370
214,065
-
199,088
150,288
-
-
438,790
335,142
-
152,576
290,657
-
206,622
180,346
-
-
455,395
402,172
-
214,432
408,493
-
-
-
-
-
-
-
-
-
-
-
-
1. The vesting and exercise dates represent the earliest possible date the performance rights may vest, being the end of the performance period. The actual
4. The unvested balance has been determined by multiplying the balance of short-term incentive (STI) performance rights at 30 June 2021 by the unit
vesting and exercise date will be at a time and manner determined by the Board, with Medibank to notify the holder at that time. Any performance rights
price at grant, and the balance of LTI performance rights at 30 June 2021 by the fair value at grant.
that do not vest at this point will immediately expire.
2. The unit price at grant represents the price used to determine the number of units granted, in line with Medibank’s methodology of granting equity awards
at face value. Unit prices have been rounded to the nearest cent.
3. The fair value at grant has been based on a valuation by independent external consultants in accordance with accounting standard AASB 2 Share-based
Payments. The fair values for the 2019, 2020 and 2021 long-term incentive (LTI) grants are used for accounting purposes only as all LTI grants are made
using the face value, as outlined in section 6.4. Unit prices have been rounded to the nearest cent.
5. Milosh Milisavljevic’s equity award transactions reflect his holdings following his commencement as a KMP on 22 June 2021.
6. Craig Drummond ceased to be a KMP on 17 May 2021 and therefore Craig’s unvested balance as at 30 June 2021 has been adjusted to reflect
no further holdings as a KMP. Details of how Craig’s LTI performance rights have been treated on the basis of being a “good leaver” are detailed
in section 2 of this report.
Annual Report 2021 71
Remuneration report
For the financial year ended 30 June 2021
10.2 ELT members’ ordinary shareholdings
Details of the ordinary shareholdings of ELT members and their related parties are provided in the table below.
ELT member
David Koczkar
Kylie Bishop
John Goodall
Milosh Milisavljevic3
Mei Ramsay
Mark Rogers
Andrew Wilson
Former ELT member
Craig Drummond4
Balance
30 June 2020
Shares received
on vesting of
performance rights1
Net movement of
shares due to other
changes2
Balance
30 June 2021
721,988
360,889
83,415
-
109,243
199,352
728,368
732,578
191,701
107,109
97,566
-
97,377
144,178
198,132
(120,000)
(44,000)
(33,040)
14,468
-
-
-
793,689
423,998
147,941
14,468
206,620
343,530
926,500
631,261
(1,363,839)
-
1. Shares received on the vesting of deferred STI performance rights include the additional Medibank shares credited to ELT members upon the vesting of the 2019
deferred STI performance rights as a benefit equivalent to any dividends paid during the deferral period. For further information, please refer to section 6.3.3.
2. Net movement of shares relates to acquisition and disposal transactions by the ELT member and their related parties during the year.
3. Milosh Milisavljevic’s ordinary shareholdings reflect his holdings and movements following his commencement as a KMP on 22 June 2021.
4. Craig Drummond ceased to be a KMP on 17 May 2021 and therefore Craig’s balance as at 30 June 2021 has been adjusted to reflect no further holdings as a KMP.
11. Non-executive director remuneration and framework
Non-executive director fees are determined by the Board and
reflect the role, market benchmarks and Medibank’s objective
to attract highly skilled and experienced independent non-
executive directors. All non-executive directors are required
to hold shares in Medibank to align with shareholder interests.
11.1 Non-executive director remuneration
Component Delivered
Description
Base fee
Cash and
superannuation
Committee
fees
Cash and
superannuation
The base fee represents
remuneration for service on
the Medibank Board. The
base fee for the Chairman
represents the entire
remuneration for that role.
Committee fees represent
remuneration for chairing,
or membership of, Board
committees.
11.1.1 Non-executive director fee cap
Under Medibank’s Constitution, the total fees paid in any
financial year to all non-executive directors for their services
(excluding, for these purposes, the salary of any executive
director) must not exceed, in aggregate, the amount fixed
at Medibank’s annual general meeting in 2018 at $2,300,000
per annum (fee cap).
72 Medibank
11.1.2 2021 and 2022 non-executive director
remuneration
Under Medibank’s Constitution, the Board is responsible for
determining the total amount paid to each non-executive director
as remuneration for their services. In making this determination,
the Board has taken into account the level of work required
for the role and has regard to the median remuneration paid
to non-executive directors of companies positioned within
the ASX 11-100 (excluding mining and energy companies).
Following the annual benchmarking exercise and the
position of non-executive directors against the median of the
benchmark group, non-executive director base and committee
fees have been maintained at their current levels for 2022.
Based on the composition of the Board, non-executive director
fee spend for 2022 will be $1,940,000 against the approved
cap of $2,300,000. Non-executive director fees applicable
throughout 2021 and 2022 are set out in the table below:
Position
Chairman
Non-executive directors
Committee chairman fees
Audit Committee
Risk Management Committee
People and Remuneration Committee
Investment and Capital Committee
Committee membership fees
Audit Committee
Risk Management Committee
People and Remuneration Committee
Investment and Capital Committee
2021 & 2022 $
445,000
165,000
40,000
40,000
40,000
40,000
20,000
20,000
20,000
20,000
11.2 Non-executive director superannuation
11.3 Shareholding policy for non-executive directors
Medibank meets its obligations under the Superannuation
Guarantee legislation by paying superannuation contributions
in respect of non-executive directors to their nominated
complying superannuation funds up to the concessional
contribution limits. Superannuation contributions for non-
executive directors are drawn from the overall fees paid
to non-executive directors.
Medibank has a Minimum Shareholding Policy that requires
non-executive directors to acquire shares with a value equal
to one year’s base fee after tax over a period of five years.
Non-executive directors do not participate in, or receive,
any performance-based remuneration as part of their
role and do not participate in any equity plans that operate
within Medibank.
As permitted under the Superannuation Guarantee legislation,
people with multiple employers can elect to be exempt from
the superannuation guarantee where contributions are likely
to take them over the annual concessional contribution cap.
If a non-executive director applies and receives an exemption
from superannuation guarantee payments, Medibank will
make those payments in cash.
As at 30 June 2021, all non-executive directors have either
met the minimum shareholding requirement, or are on
track to do so, within the five-year period. Further details
of current non-executive director shareholdings are
provided in section 13.
12. 2021 non-executive director remuneration statutory table
Non-executive director
Mike Wilkins
Tracey Batten
Anna Bligh
Gerard Dalbosco2
David Fagan
Peter Hodgett
Linda Bardo Nicholls
Christine O’Reilly
Former non-executive director
Elizabeth Alexander3
Total non-executive director
remuneration
Short-term
benefits
Post-employment
benefits
Financial
year
Cash salary and fees
$
Non-monetary1
$
Superannuation
$
Total
$
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
377,228
188,655
187,935
188,655
187,934
188,654
20,882
-
206,270
207,061
206,270
207,061
187,456
198,026
225,865
217,346
107,435
427,250
3,954
3,612
2,581
2,729
3,296
3,119
-
-
2,736
2,618
3,849
3,728
3,014
2,888
2,765
2,602
9,434
-
9,352
17,922
17,854
17,923
17,854
17,922
1,984
-
19,596
19,671
19,596
19,672
18,127
8,551
-
9,385
6,112
21,174
390,534
210,189
208,370
209,307
209,084
209,695
22,866
-
228,602
229,350
229,715
230,461
208,597
209,465
228,630
229,333
122,981
448,424
1,707,275
1,822,708
31,629
21,296
110,475
132,220
1,849,379
1,976,224
1. Non-monetary benefits may include death, total and permanent disablement insurance, salary continuance insurance, subsidised Medibank health
insurance and fringe benefits that are on the same terms and conditions that are available to all Medibank employees.
2. Gerard Dalbosco’s 2021 remuneration reflects his commencement date as a non-executive director of 21 May 2021.
3. Elizabeth Alexander’s 2021 remuneration reflects her retirement date from the Medibank Board of 1 October 2020.
Annual Report 2021 73
Remuneration report
For the financial year ended 30 June 2021
13. Non-executive director ordinary shareholdings
Non-executive director
Mike Wilkins
Tracey Batten
Anna Bligh
Gerard Dalbosco3
David Fagan
Peter Hodgett
Linda Bardo Nicholls
Christine O’Reilly
Balance
30 June
2020
Acquired
during the
year
Other
changes
59,013
50,000
44,623
-
47,016
67,800
45,000
69,930
40,987
-
-
-
-
-
-
-
-
-
-
24,432
-
-
-
-
Balance
30 June
2021
100,000
50,000
44,623
24,432
47,016
67,800
45,000
69,930
Minimum
shareholding
requirement
$1
Value of eligible
shareholdings
as at 30 June
2021 $2
Minimum
shareholding
requirement
timeline
222,500
82,500
82,500
82,500
82,500
82,500
82,500
82,500
316,000 Requirement satisfied
158,000 Requirement satisfied
141,009 Requirement satisfied
77,205
21 May 2026
148,571 Requirement satisfied
214,248 Requirement satisfied
142,200 Requirement satisfied
220,979 Requirement satisfied
Former non-executive director
Elizabeth Alexander4
124,786
- (124,786)
- Not applicable
-
Not applicable
1. Minimum shareholding requirement based on annual non-executive director base fees for 2021 and an assumed tax rate of 50%.
2. Value has been calculated with reference to the total number of eligible shares held by each non-executive director, multiplied by the closing
price of Medibank’s shares on 30 June 2021 ($3.16).
3. Gerard Dalbosco commenced as a non-executive director on 21 May 2021 and therefore his balance at the time of joining the Medibank Board
is reflected in the ‘other changes’ column.
4. Elizabeth Alexander ceased to be a KMP on 1 October 2020 and therefore Elizabeth’s balance at 30 June 2021 has been adjusted to reflect
no further holdings as a KMP.
14. Medibank’s comparator group
As outlined throughout this report, Medibank uses a
comparator group for the purposes of benchmarking
executive and non-executive director remuneration and
for the assessment of Medibank’s relative total shareholder
return (TSR) performance under its long-term incentive
(LTI) plan. Medibank’s comparator group is the ASX 11-100,
excluding mining and energy companies. In any given year,
there may be changes in the mining and energy companies
excluded from Medibank’s comparator group due to
companies either falling outside the ASX 11-100 or
companies no longer being considered exclusively as
a mining or energy company.
74 Medibank
Financial report
Consolidated financial
statements
Notes to the
financial statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
page 76
page 77
page 78
page 79
Section 1
Basis of
preparation
page 80
1. Basis of
preparation
Section 2
Operating
performance
page 81
2. Segment
information
3. Insurance
underwriting
result
4. Deferred
acquisition costs
5. Unearned premium
liability
6. Shareholder
returns
Section 3
Investment portfolio
and capital
page 92
Section 4
Other assets
and liabilities
page 103
Section 5
Other
page 111
7. Investment
portfolio
8. Financial risk
management
9. Working capital
10. Contributed equity
and reserves
11. Property, plant
and equipment
12. Intangible assets
13. Provisions
and employee
entitlements
14. Leases
15. Income tax
16. Group structure
17. Related party
transactions
18. Share-based
payments
19. Auditor’s
remuneration
20. Other
Signed reports
Directors’ declaration
Auditor's independence declaration
Independent auditor’s report
page 121
page 122
page 123
Annual Report 2021 75
Consolidated statement of comprehensive income
For the financial year ended 30 June 2021
Continuing operations
Revenue
Health Insurance premium revenue
Medibank Health revenue
Other income
Expenses
Claims expense
Medical services expense
Employee benefits expense
Office and administration expense
Marketing expense
Information technology expense
Professional service expense
Depreciation and amortisation expense
Finance expense
Share of net profit/(loss) from equity accounted investments
Note
2021
$m
2020
$m
2(b) 3(a)
3(a)
13(a)(ii)
16(b)
6,691.1
219.3
6,910.4
6,554.7
214.9
6,769.6
1.8
7.4
(5,557.9)
(34.0)
(439.9)
(79.0)
(81.4)
(72.3)
(9.6)
(122.0)
(2.8)
(1.0)
(6,399.9)
(5,486.6)
(27.0)
(429.0)
(82.6)
(94.1)
(72.1)
(7.5)
(126.9)
(3.4)
-
(6,329.2)
Profit before net investment income and income tax
512.3
447.8
Net investment income
Profit for the year before income tax
Income tax expense
Profit for the year from continuing operations
Discontinued operations
Profit/(loss) after tax for the year from discontinued operations
Profit for the year
Other comprehensive income, net of tax
Items that will not be reclassified to profit or loss
Actuarial gain/(loss) on retirement benefit obligation
Total comprehensive income for the year, net of tax, attributable to members
of the parent arising from:
Continuing operations
Discontinued operations
Total operations
Basic and diluted earnings per share attributable to ordinary equity holders
of the Company
Continuing operations
Total operations
6(b)
6(b)
The above statement should be read in conjunction with the accompanying notes.
76 Medibank
7(a)
120.0
2.4
632.3
450.2
15(a)
(191.1)
441.2
(134.6)
315.6
-
(0.6)
441.2
315.0
0.4
0.4
(0.2)
(0.2)
441.6
-
441.6
Cents
16.0
16.0
315.4
(0.6)
314.8
Cents
11.5
11.4
Consolidated statement of financial position
As at 30 June 2021
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value
Deferred acquisition costs
Tax receivable
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred acquisition costs
Deferred tax assets
Equity accounted investments
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Claims liabilities
Unearned premium liability
Tax liability
Customer give back provision
Provisions and employee entitlements
Total current liabilities
Non-current liabilities
Trade and other payables
Claims liabilities
Unearned premium liability
Provisions and employee entitlements
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Note
9(b)
7(b)
4
11
12
4
15(c)
16(b)
9(c)
3(b)
5
13(c)
13
9(c)
3(b)
5
13
2021
$m
2020 (restated)1
$m
671.7
215.9
2,311.9
33.6
6.2
18.8
3,258.1
101.7
345.3
47.5
85.9
77.1
8.2
665.7
871.4
207.1
1,994.7
34.5
-
22.9
3,130.6
112.2
363.7
43.6
90.2
-
7.4
617.1
3,923.8
3,747.7
338.2
622.4
697.0
-
103.0
94.7
1,855.3
70.2
9.1
60.4
22.7
162.4
320.2
628.3
671.1
57.7
-
82.9
1,760.2
84.2
10.9
75.0
19.6
189.7
2,017.7
1,949.9
1,906.1
1,797.8
10(b)
85.0
22.3
1,798.8
1,906.1
85.0
22.4
1,690.4
1,797.8
1. Restatement reflects the change in accounting policy for Software as a Service (SaaS) intangible assets detailed in Note 20(a).
The above statement should be read in conjunction with the accompanying notes.
Annual Report 2021 77
Consolidated statement of changes in equity
For the financial year ended 30 June 2021
Balance at 1 July 2019
Restatement1
Balance at 1 July 2019 (restated)
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Dividends paid
Acquisition and settlement of share-based payment, net of tax
Share-based payment transactions
Balance at 30 June 2020
6(a)(i)
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Dividends paid
Acquisition and settlement of share-based payment, net of tax
Share-based payment transactions
Balance at 30 June 2021
6(a)(i)
Note
Contributed
equity
$m
85.0
-
85.0
Reserves
$m
24.4
-
24.4
Retained
earnings
$m
1,821.3
(16.1)
1,805.2
-
-
-
-
-
-
85.0
-
-
-
-
-
-
85.0
-
-
-
315.0
(0.2)
314.8
-
(3.2)
1.2
22.4
-
-
-
-
(5.3)
5.2
22.3
(429.6)
-
-
1,690.4
441.2
0.4
441.6
(333.2)
-
-
1,798.8
Total
equity
$m
1,930.7
(16.1)
1,914.6
315.0
(0.2)
314.8
(429.6)
(3.2)
1.2
1,797.8
441.2
0.4
441.6
(333.2)
(5.3)
5.2
1,906.1
1. Restatement reflects the change in accounting policy for Software as a Service (SaaS) intangible assets detailed in Note 20(a).
The above statement should be read in conjunction with the accompanying notes.
78 Medibank
Consolidated statement of cash flows
For the financial year ended 30 June 2021
Cash flows from operating activities
Premium receipts
Medibank Health receipts
Other receipts
Payments for claims and levies
Payments to suppliers and employees
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Interest received
Investment expenses
Proceeds from sale of financial assets
Purchase of financial assets
Net purchase of equity accounted investments
Loan to associate
Purchase of plant and equipment
Purchase of intangible assets
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Purchase of shares to settle share-based payment
Lease principal and interest payments
Dividends paid
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
The above statement should be read in conjunction with the accompanying notes.
Note
2021
$m
2020
$m
9(d)
16(b)
16(b)
14
6(a)(i)
6,798.8
234.9
3.8
(5,542.7)
(762.5)
(250.1)
482.2
16.0
(4.6)
1,081.1
(1,289.6)
(71.0)
(2.9)
(10.9)
(24.2)
(306.1)
6,522.7
299.3
5.5
(5,233.2)
(827.9)
(194.0)
572.4
27.8
(4.6)
1,648.4
(1,533.1)
-
-
(3.2)
(26.1)
109.2
(5.6)
(37.0)
(333.2)
(375.8)
(3.8)
(33.3)
(429.6)
(466.7)
(199.7)
214.9
871.4
656.5
671.7
871.4
Annual Report 2021 79
Notes to the consolidated financial statements
30 June 2021
Section 1. Basis of preparation
Overview
This section outlines the basis on which the Group’s financial statements are prepared.
Specific accounting policies are described in the note to which they relate.
Note 1: Basis of preparation
(a) Corporate information
Medibank Private Limited (“Medibank”) is a for-profit
company incorporated in Australia, whose shares are
publicly traded on the Australian Securities Exchange (ASX).
The financial statements of Medibank for the financial year
ended 30 June 2021 were authorised for issue in accordance
with a resolution of the directors on 25 August 2021. The
directors have the power to amend and reissue the financial
statements.
(b) Basis of preparation
The financial statements are general purpose financial
statements which:
• Are for the consolidated entity (“the Group”) consisting
of Medibank (“parent entity”) and its subsidiaries.
Refer to Note 16(a) for the full group structure.
• Have been prepared in accordance with Australian
Accounting Standards, other authoritative pronouncements
of the Australian Accounting Standards Board (AASB),
International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board
(IASB) and the Corporations Act 2001.
• Have been prepared under the historical cost convention,
with the exception of financial assets measured at fair
value and claims liabilities and lease liabilities which are
measured at the present value of expected future payments.
• Are presented in Australian dollars, which is Medibank’s
functional and presentation currency.
• Have been rounded in accordance with ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument
2016/191 to the nearest hundred thousand dollars unless
otherwise stated.
• Include a change in accounting policy for configuration
and customisation costs incurred in implementing
Software-as-a-Service (SaaS) arrangements.
Refer to Note 20(a) for further information.
• Adopt all new and amended accounting standards
that are mandatory for 30 June 2021 reporting periods.
Refer to Note 20(a) for further information.
• Do not apply any pronouncements before their operative
date. Refer to Note 20(b) for further information on the
new standards and interpretations which have been issued
but are not effective for 30 June 2021 reporting periods.
• Include, where necessary, updates to prior year
comparatives for changes in classification of amounts
in the current reporting period.
(c) Critical accounting estimates and judgements
The preparation of financial statements requires the use
of certain critical accounting estimates. It also requires
management to exercise judgement in the process of
applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements, are disclosed in the following notes:
• Note 3: Insurance underwriting result.
• Note 4: Deferred acquisition costs.
• Note 12: Intangible assets.
• Note 15: Income tax.
80 Medibank
Section 2. Operating performance
Overview
This section explains the operating results of the Group for the year, and provides insights into the Group’s result
by reference to key areas, including:
• Results by operating segment.
• Insurance underwriting result.
• Shareholder returns.
Note 2: Segment information
Segment Reporting Accounting Policy
Operating segments are identified based on the separate financial information that is regularly reviewed by the Chief
Operating Decision Maker (CODM). The term CODM refers to the function performed by the Chief Executive Officer (CEO)
in assessing performance and determining the allocation of resources across the Group.
(a) Description of segments
Segment information is reported on the same basis as the
Group’s internal management reporting structure at the
reporting date. Transactions between segments are carried out
on an arm’s length basis and are eliminated on consolidation.
The Group is not reliant on any one major customer.
For the financial year ended 30 June 2021, the Group was
organised for internal management reporting purposes
into two reportable segments, Health Insurance and
Medibank Health.
Health Insurance
Offers private health insurance products including
hospital cover and ancillary cover, as stand-alone
products or packaged products that combine the
two. Hospital cover provides members with health
cover for hospital treatments, whereas ancillary
cover provides members with health cover for
healthcare services such as dental, optical and
physiotherapy. The segment also offers health
insurance products to overseas visitors and
overseas students.
Medibank Health
Derives its revenue from a range of activities
including contracting with government
and corporate customers to provide health
management and in-home care services, as well
as providing a range of telehealth services in
Australia. In addition, the Group distributes travel,
life and pet insurance products on behalf of other
insurers as part of a broader strategy to retain
members and leverage its distribution network.
Private Health Insurance Premium Revenue Recognition
Accounting Policy
Premium revenue is measured at the fair value of the
consideration received or receivable and is recognised on a
straight-line basis between the date Medibank accepts the
insurance risk and the date the premium has been paid up to.
Premium revenue is classified as an unearned premium liability
in the consolidated statement of financial position when it relates
to future financial periods.
Medibank Health Revenue Recognition Accounting Policy
Medibank Health revenue is recognised when services are
provided to the customer and at an amount the Group will be
entitled to receive in relation to providing the services. A contract
liability is recognised within trade and other payables in the
consolidated statement of financial position when the Group has
an obligation to transfer services to a customer for which it has
already received consideration from the customer (or an amount
of consideration is receivable). Contract liabilities are recognised
as Medibank Health revenue when the services are provided.
Annual Report 2021 81
(b) Segment information provided to the CEO
The CEO measures the performance of the Group's reportable segments based on the operating profit of the segments.
The segment information provided to the CEO for the year ended 30 June 2021 is as follows:
Health Insurance
Medibank Health
$31.4m
$470.6m
$6,545.6m
$538.6m
$6,680.3m
$27.8m
$283.8m
$270.0m
2020
2021
2020
2021
Revenue
Operating profit
Revenue from
continuing operations
Operating profit
from continuing operations
30 June 2021
Revenues
Total segment revenue
Inter-segment revenue
Note
2(c)(iii)
Health
Insurance
$m
Medibank
Health
$m
Total
$m
6,680.3
-
283.8
(53.7)
6,964.1
(53.7)
Revenue from external customers from continuing operations
6,680.3
230.1
6,910.4
Operating profit from continuing operations
538.6
31.4
570.0
Items included in segment operating profit:
Depreciation and amortisation
Interest income from loans to associates
Share of profit/(loss) from equity accounted investments
30 June 2020
Revenues
Total segment revenue
Inter-segment revenue
(104.8)
-
-
(8.3)
0.2
(1.0)
(113.1)
0.2
(1.0)
16(b)
Health
Insurance
$m
Medibank
Health
$m
Note
Total
$m
6,545.6
-
270.0
(46.0)
6,815.6
(46.0)
Revenue from external customers from continuing operations
6,545.6
224.0
6,769.6
Operating profit from continuing operations
470.6
27.8
498.4
Items included in segment operating profit:
Depreciation and amortisation
(105.2)
(7.9)
(113.1)
82 Medibank
Notes to the consolidated financial statements30 June 2021
(c) Other segment information
(i) Segment operating profit or loss
A reconciliation of the operating profit from continuing operations to the profit for the year before income tax from continuing
operations of the Group is as follows:
Total segment operating profit from continuing operations
Unallocated to operating segments:
Corporate operating expenses
Group operating profit from continuing operations
Net investment income
Acquisition intangible amortisation
Mergers and acquisitions expenses
Other income/(expenses)
AASB 16 Leases transition adjustment
Note
2021
$m
570.0
2020
$m
498.6
7(a)
(41.7)
(37.4)
528.3
461.0
120.0
(4.6)
(5.5)
(5.9)
-
2.4
(9.0)
(1.3)
(6.2)
3.3
Profit for the year before income tax from continuing operations
632.3
450.2
(ii) Other items
(iii) Loyalty program
Segment private health insurance premium revenue is
after $10.8 million (2020: $9.1 million) of transfers between
the Group’s other operating segments in relation to the
loyalty program.
(iv) Segment assets and segment liabilities
No information regarding segment assets and segment
liabilities has been disclosed, as these amounts are not
reported to the CEO for the purpose of making strategic
decisions.
(v) Geographic information
Segment revenue based on the geographical location of
customers has not been disclosed, as the Group derives
all of its revenues from its Australian operations.
Segment operating profit excludes the following:
• Corporate operating expenses of $41.7 million (2020:
$37.4 million) relating to the Group's corporate function.
• Net investment income, which comprises:
– Interest and distribution income and related investment
management expenses (refer to Note 7(a)), as this
arises from investments which are managed by
a central treasury function.
– Net gains and losses on disposals of and fair value
movements on financial assets and liabilities (refer
to Note 7(a)), as they are not indicative of the Group's
long-term performance.
• Acquisition intangible amortisation of $4.6 million
(2020: $9.0 million) not allocated to segments.
• Expenses in relation to mergers and acquisitions
which are not allocated to the operating activities
of the Group’s segments.
• Other income/(expenses) of $5.9 million (2020: $6.2 million)
which do not relate to the current year’s trading activities
of the Group’s segments, comprising primarily net
sublease rent.
Annual Report 2021 83
Note 3: Insurance underwriting result
This note presents the Group’s insurance underwriting result and provides information on the Group’s claims liabilities,
which comprise the outstanding claims liability, the COVID-19 claims liability and the provision for bonus entitlements.
2021 underwriting result after expenses
$6,680.3m
100%
$(5,610.8)m
84.0%
$(531.1)m
8.0%
$538.6m
8.1%
Private health insurance premium revenue
Net claims incurred
Underwriting expenses
Underwriting result after expenses
Insurance Contracts Accounting Policy
An insurance contract arises when the Group accepts
significant insurance risk from another party by agreeing
to compensate them from the adverse effects of a specified
uncertain future event. The significance of insurance risk
depends on both the probability and magnitude of an
insurance event.
Once insurance cover has been classified as an insurance
contract, it remains an insurance contract for the remainder
of its lifetime, even if the insurance risk significantly reduces
during the period. With the exception of travel, life and pet
insurance, for which the Group does not act as an underwriter,
all other types of insurance cover are insurance contracts.
A specific COVID-19 claims liability has been recorded for
deferred claims that were a result of surgeries and other
health services being restricted for policyholders during the
COVID-19 pandemic period. Medibank has an obligation to
settle these claims as they become known in future periods.
(a) Insurance underwriting result
Private health insurance premium revenue
Claims expense
Claims incurred
(Increase)/decrease in COVID-19 claims liability
State levies
Net Risk Equalisation Special Account rebates/(payments)
Net claims incurred excluding claims handling costs
Movement in claims handling costs on outstanding claims liabilities
Net claims incurred
Underwriting expenses
Underwriting result after expenses
Note
(i)
(ii)
(iv)
(iii)
2021
$m
6,680.3
2020
$m
6,545.6
(5,606.2)
73.3
(53.3)
(24.6)
(5,610.8)
0.2
(5,610.6)
(5,190.8)
(297.1)
(51.6)
7.9
(5,531.6)
(0.8)
(5,532.4)
(531.1)
(542.6)
538.6
470.6
(i) Private health insurance premium revenue is after
$10.8 million (2020: $9.1 million) of transfers between
the Group’s other operating segments in relation to the
loyalty program and $103.0 million (2020: nil) in relation to
premium relief granted as part of the customer give back.
(ii) Claims incurred are prior to elimination of transactions
with the Group’s other operating segments of
$52.7 million (2020: $45.8 million).
(iii) Net claims incurred consists of amounts paid and
payable to hospital, medical and ancillary providers
which consists of claims paid and payable, changes
in claims liabilities, change in amounts receivable
from and payable to the Risk Equalisation Special
Account, applicable state levies, costs incurred in health
management services and the COVID-19 claims liability.
(iv) This balance relates to the COVID-19 claims liability.
Refer to Note 3(b) for further information.
84 Medibank
Notes to the consolidated financial statements30 June 2021
Health Insurance Premium Revenue Recognition
Accounting Policy
Premium revenue is recognised in the consolidated
statement of comprehensive income when the amount
can be reliably measured and it is probable that future
economic benefits will flow to the entity. Premium revenue
is measured at the fair value of the consideration received
or receivable and is recognised on a straight-line basis
between the date Medibank accepts the risk from the
insured under the insurance contract and the date the
premium has been paid up to.
Premium revenue includes the movement in the premiums
in arrears which is assessed based on past experience of
the likelihood of collection. Premium revenue is classified
as an unearned premium liability in the consolidated
statement of financial position when it relates to future
financial periods.
The Australian Government contributes a rebate towards
eligible policyholder’s premium and pays this directly to
the Group.
This rebate is recognised within premium revenue in
the consolidated statement of comprehensive income.
Rebates due from the government but not received at
balance date are recognised as trade and other receivables
in the consolidated statement of financial position.
Net Risk Equalisation Special Account Levies and
Rebates Accounting Policy
Under legislation, all private health insurers must
participate in the Risk Equalisation Special Account in
which all private health insurers share the cost of the
eligible claims of members aged 55 years and over, and
claims meeting the high cost claim criteria.
The Australian Prudential Regulation Authority (APRA)
determines the amount payable to or receivable from the
Risk Equalisation Special Account after the end of each
quarter. Estimates of amounts payable or receivable are
provided for periods where determinations have not yet
been made. This includes an estimate of risk equalisation
for unpresented and outstanding claims.
(b) Gross claims liability
Current
Outstanding claims liability – central estimate
COVID-19 claims liability
Risk margin
Claims handling costs
Claims liability – provision for bonus entitlements
Gross claims liability
Non-current
Outstanding claims liability – central estimate
Risk margin
Claims handling costs
Claims liability – provision for bonus entitlements
Gross claims liability
Note
(i,ii)
(vi)
(i,iii)
(iv)
(v)
(c)
(i,ii)
(i,iii)
(iv)
(v)
(c)
2021
$m
347.2
223.8
33.2
8.5
612.7
9.7
622.4
1.8
0.2
-
2.0
7.1
9.1
2020
$m
284.4
297.1
27.1
8.6
617.2
11.1
628.3
2.1
0.2
0.1
2.4
8.5
10.9
Claims Liability Accounting Policy
The outstanding claims liability provides for claims received
but not assessed and claims incurred but not received. It is
based on an actuarial assessment that considers historical
patterns of claim incidence and processing. It is measured
as the central estimate of the present value of expected
future payments arising from claims incurred at the end
of each reporting period under insurance cover issued
by the Medibank health fund, plus a risk margin reflecting
the inherent uncertainty in the central estimate.
The expected future payments are discounted to present
value using a risk-free rate.
The liability also allows for an estimate of claims handling
costs, which comprise all direct expenses of the claims
department and general administrative costs directly
attributable to the claims function. These include internal
and external costs incurred from the negotiation and
settlement of claims.
Annual Report 2021 85
Claims Liability Accounting Policy continued
COVID-19 Claims Liability
The COVID-19 claims liability is based on the best
estimate, taking into account relevant risks and
uncertainties, of expenditure required to settle claims
deferred as a result of surgeries and other health
services restricted for policyholders during the COVID-19
pandemic. Medibank has an obligation to settle these
claims as they become known in future periods. The
liability is calculated by comparing the difference between
the actual and expected volume of insured surgical and
non-surgical procedures since the commencement of
restrictions in March 2020 (the COVID-19 period). The
expected claims level is based on the estimated underlying
claims growth per Single Equivalent Unit per policy (PSEU)
that would have occurred if the COVID-19 pandemic did
not eventuate, taking into account changes in the customer
base during the COVID-19 period. The key judgements and
inputs to determine the expected claims level are detailed
in Note 3(b)(vi).
Key estimate
The outstanding claims liability estimate is based on the hospital, ancillary and overseas claim categories.
Hospital and overseas
Calculated using statistical methods adopted for all service months but with service levels
for the most recent service month (hospital) or two service months (overseas) being based
on the latest forecast adjusted for any observed changes in payment patterns.
Ancillary
Calculated using statistical methods adopted for all service months.
The critical assumption in determining the outstanding claims liability is the extent to which claim incidence and
development patterns are consistent with past experience. Adjustments are then applied to reflect any unusual or
abnormal events that may affect the estimate of claims levels such as major variability to claims processing volumes.
The process for establishing the outstanding claims liability involves consultation with internal actuaries (including the
Chief Actuary), claims managers and other senior management. The process includes monthly internal claims review
meetings attended by senior management.
(i) Outstanding
The central estimate is an estimate of the level of the outstanding claims liability.
claims liability
– central
estimate
Key estimate
The central estimate is based on statistical analysis of historical experience which assumes an
underlying pattern of claims development and payment. The final selected central estimate is based
on a judgemental consideration of this analysis and other qualitative information, such as claims
processing delays. The central estimate excludes the impact of the Risk Equalisation Special
Account. A separate estimate is made of levies payable to and recoveries from the Risk Equalisation
Special Account.
(ii) Discounting
The outstanding claims liability central estimate is discounted to present value using the three-month
risk-free rate of 0.03% per annum which equates to a reduction in the central estimate of less than
$0.1 million (2020: 0.10%, less than $0.1 million).
(iii) Risk margin
An overall risk margin considers the uncertainty surrounding the outstanding claims liability.
The risk margin applied to the Group’s outstanding claims central estimate (net of risk equalisation)
at 30 June 2021 is 9.4% (2020: 9.2%).
Key estimate
The risk margin is based on an analysis of past experience, including comparing the volatility
of past payments to the adopted central estimate. The risk margin has been estimated to
equate to the Group’s objective of achieving a probability of adequacy of at least 95% (2020: 95%).
The risk margin is not applied to the COVID-19 claims liability. Relevant risks and uncertainties
have been taken into account in determining the best estimate of the COVID-19 claims liability.
(iv) Claims
handling costs
The allowance for claims handling costs at 30 June 2021 is 2.5% of the outstanding claims liability
(2020: 3.0%).
86 Medibank
Notes to the consolidated financial statements30 June 2021 (v) Claims liability
– provision
for bonus
entitlements
Certain private health insurance products (Package Bonus, Ultra Bonus and Membership Bonus)
include benefits that carry forward. Package Bonus carries forward unused benefit entitlements
in a calendar year for five calendar years. Membership Bonus carries forward unused benefit
entitlements in a calendar year for 10 calendar years. Ultra Bonus carries forward unused benefit
entitlements without limit.
The Group’s claims liabilities include a provision to cover expected future utilisation of these
benefit entitlements of the current membership.
Key estimate
The bonus provision includes the total entitlement available to members under the terms of the
relevant insurance policies, less any amounts utilised, with a probability of utilisation based on past
experience and current claiming patterns applied. The true cost of these entitlements cannot be
known with certainty until any unclaimed entitlements are processed.
(vi) COVID-19
claims
liability
The liability relates to claims deferred as a result of surgeries and other health services restricted
for policyholders during the COVID-19 pandemic. At 30 June 2020, this impacted health services
for hospital, ancillary and overseas claims. At 30 June 2021, the COVID-19 liability includes hospital
claims of $220.2 million, which includes surgical and non-surgical claims, and ancillary claims
of $3.6 million.
Key estimate – Hospital
The liability is calculated by comparing the difference between the actual and expected volume
of insured surgical and non-surgical procedures since the commencement of restrictions in
March 2020 (the COVID-19 period). Utilisation of the liability has been assessed by geography
and modality (claim type) and occurs where actual claims exceed expected claims.
Risks and uncertainties have been taken into account in the measurement of the liability and are
reflected in the key inputs and judgements.
The key judgements and inputs into this liability include:
• Statistical analysis of the expected claims level at the Single Equivalent Unit per policy (PSEU)
during the COVID-19 period.
• The expected claims level is based on the estimated underlying claims growth per PSEU that
would have occurred if the COVID-19 pandemic did not eventuate. It has then been applied to the
average actual number of PSEUs during the COVID-19 period. The extent of claims deferred has
varied by geography based on the extent of COVID-19 restrictions.
• The expected rate at which deferred insured surgical and non-surgical procedures will be caught
up, which is based on the analysis and expert opinion of the Chief Medical Officer and internal
analysis. The expected claims deferral rate is analysed based on modality and is 85% (2020: 100%)
for surgical claims and 50% (2020: 100%) for non-surgical claims.
(c) Reconciliation of movement in claims liabilities
Balance at 1 July
Claims incurred during the period
Increase/(decrease) in COVID-19 claims liability
Claims paid during the period
Amount (over)/under provided on central estimate1
Risk margin
Claims handling costs
Movement in discount rate
Balance at 30 June
Note
(i)
2021
$m
639.2
5,496.1
(73.3)
(5,414.4)
(22.0)
6.1
(0.2)
-
631.5
2020
$m
377.6
5,120.0
297.1
(5,180.8)
22.3
1.7
0.8
0.5
639.2
Note: Movement includes both current and non-current. Claims incurred and claims settled exclude levies and rebates.
1. The over provision recognised in the current year includes $19.8 million attributable to the COVID-19 period and has been recognised within the
COVID-19 liability as at 30 June 2021 at the applicable deferral rate. Refer to Note 3(c)(i).
Annual Report 2021 87
(i) Reconciliation of movement in COVID-19 claims liability
The table below provides a reconciliation of the movement in the COVID-19 claims liability during the year.
Balance at 1 July 2020
Amount over/(under) provided from central estimate
Change in expected deferral rate
Net (utilisation)/deferral during the period
Balance at 30 June 2021
(d) Impact of changes in key variables on the
claims liabilities
Outstanding claims liability
The central estimate, discount rate, risk margin and weighted
average term to settlement are the key outstanding claims
variables. A 10% increase/decrease in the central estimate
would result in a $24.4 million decrease/increase to profit after
tax and equity (2020: $20.1 million). A 1% movement in other
key outstanding claims variables, including discount rate, risk
margin and weighted average term to settlement, would result in
an insignificant decrease/increase to profit after tax and equity.
COVID-19 claims liability
The following describe the individual impacts of changes
in the key estimate on the COVID-19 claims liability:
• A 4% increase/decrease in the expected claims level
would result in a $67.0 million decrease/increase to
profit after tax and equity (2020: $44.8 million).
Hospital
$m
234.4
19.8
(73.1)
39.1
220.2
Ancillary
$m
62.7
-
-
(59.1)
3.6
Total
$m
297.1
19.8
(73.1)
(20.0)
223.8
• An increase/decrease of 10 percentage points in the
adopted deferral rate for COVID-19 hospital claims would
result in a $26.8 million decrease/increase to profit after
tax and equity (2020: $16.4 million). The reasonable possible
range for the hospital deferral assumption is 75-100%
for surgical claims (2020: 90-100%) and 30%-70% for
non-surgical claims (2020: 90-100%).
(e) Insurance risk management
The Group provides private health insurance products including
hospital cover and ancillary cover, as stand-alone products
or packaged products that combine the two, for Australian
residents, overseas students studying in Australia and overseas
visitors to Australia. These services are categorised as two
types of contracts: hospital and/or ancillary cover.
The table below sets out the key variables upon which the
cash flows of the insurance contracts are dependent.
Type of contract
Detail of contract workings
Nature of claims
Key variables that affect
the timing and uncertainty
of future cash flows
Hospital cover
Ancillary cover
Defined benefits paid for hospital
treatment, including accommodation,
medical and prostheses costs.
Hospital benefits defined
by the insurance contract
or relevant deed.
Claims incidence and
claims inflation.
Defined benefits paid for ancillary
treatment, such as dental, optical
and physiotherapy services.
Ancillary benefits defined by
the insurance contract
or relevant deed.
Claims incidence and
claims inflation.
Insurance risks and the holding of capital in excess of prudential requirements are managed through the use of claims
management procedures, close monitoring of experience, the ability to vary premium rates, and risk equalisation.
Mechanisms to manage risk
Claims
management
Strict claims management ensures the timely and correct payment of claims in accordance with policy
conditions and provider contracts. Claims are monitored monthly to track the experience of the portfolios.
Experience
monitoring
Monthly financial and operational results, including portfolio profitability and prudential capital
requirements, are reported to management committees and the Board. Results are also monitored
against industry for insurance risks and experience trends as published by the regulator, APRA.
Monitoring of claims experience during the COVID-19 period included daily and weekly dashboard reports.
88 Medibank
Notes to the consolidated financial statements30 June 2021 Prudential capital
requirements
All private health insurers must comply with prudential capital requirements to provide a buffer
against certain levels of adverse experience. The Board has a target level of capital which exceeds
the regulatory requirement.
Ability to vary
premium rates
Risk equalisation
The Group can vary future premium rates subject to the approval of the Minister for Health.
Private health insurance legislation requires resident private health insurance contracts to meet
community rating requirements. This prohibits discrimination between people on the basis of their
health status, gender, race, sexual orientation, religious belief, age (except as allowed under Lifetime
Health Cover provisions), increased need for treatment or claims history. To support these restrictions,
all private health insurers must participate in the Risk Equalisation Special Account.
Concentration
of health risk
The Group has health insurance contracts covering hospital and ancillary cover, and private health
insurance for overseas students and visitors to Australia. There is no significant exposure to
concentrations of risk because contracts cover a large volume of people across Australia.
COVID-19 claims
liability
The Group’s Capital Management Policy requires a sufficient level of capital to be held by the Group.
The Group also created a sub-portfolio within the Health Fund Investment Portfolio with the express
purpose of funding the COVID-19 claims liability.
Note 4: Deferred acquisition costs
Movements in the deferred acquisition costs are as follows:
Balance at 1 July
Costs deferred during the year
Amortisation expense
Balance at 30 June
Note: Movement includes both current and non-current.
2021
$m
78.1
42.3
(39.3)
81.1
2020
$m
79.6
36.6
(38.1)
78.1
Deferred Acquisition Costs Accounting Policy
Costs incurred in obtaining health insurance contracts
are deferred and recognised as assets where they can be
reliably measured and where it is probable that they will
give rise to premium revenue that will be recognised in
the consolidated statement of comprehensive income in
subsequent reporting periods.
Deferred acquisition costs are amortised systematically
over the average expected retention period of the insurance
contracts to which they relate. This is in accordance with
the expected pattern of the incidence of risk under the
insurance contracts to which they relate and corresponds
to the earning pattern of the corresponding actual and
expected premium revenue. The Group amortises these
costs on a straight-line basis over a period of four years
(2020: four years). The recoverability of deferred acquisition
costs is considered as part of the liability adequacy test
(refer to Note 5). Deferred acquisition costs which are
not included in this test are separately assessed for
recoverability in accordance with the Group’s accounting
policy set out in Note 20(c).
Key judgement and estimate
The amortisation period of four years has been determined
based on the average expected retention period of
members. The actual retention period of a member can
be longer or shorter than four years. The straight-line
method systematically follows the initial period of customer
tenure with some customers remaining with Medibank
over a longer period of time. The Group maintains data
on the retention period of all members, and performs a
retention period analysis of those who are subject to these
acquisition costs to ensure the period of amortisation
remains appropriate.
Annual Report 2021 89
Note 5: Unearned premium liability
Movement in the unearned premium liability is as follows:
Balance at 1 July
Deferral of premium on contracts written during the year
Earnings of premiums deferred in prior years
Balance at 30 June
Note: Movement includes both current and non-current.
2021
$m
746.1
682.4
(671.1)
757.4
2020
$m
770.6
658.3
(682.8)
746.1
The expected cash outflows and the risk margin in the 30 June 2021 liability adequacy testing (LAT) includes the impacts
of COVID-19. The LAT did not result in the identification of any deficiency as at 30 June 2021 and 2020. The LAT is not
sensitive to reasonably plausible changes in key assumptions applied.
Unearned Premium Liability Accounting Policy
The proportion of premium received that has not been
earned at the end of each reporting period is recognised
in the consolidated statement of financial position as an
unearned premium liability. The unearned premium liability
is released to the consolidated statement of comprehensive
income as revenue in accordance with Note 3(a) over the
term of the insurance cover.
Unexpired Risk Liability Accounting Policy
A liability adequacy test is required to be performed in
respect of the unearned premium liability and insurance
contracts renewable before the next pricing review
(constructive obligation). The purpose of the test is to
determine whether the insurance liability, net of related
deferred acquisition costs, is adequate to cover the present
value of expected cash outflows relating to future claims
arising from rights and obligations under current insurance
coverage. An additional risk margin is included in the test
to reflect the inherent uncertainty in the central estimate.
The liability adequacy test is performed at the level of a
portfolio of contracts that are subject to broadly similar
risks and that are managed together as a single portfolio.
The unearned premium liability is deemed to be
deficient where:
Present value of the
expected future cash
outflows relating to
future claims
add
Additional risk margin
to reflect the inherent
uncertainty in the
central estimate
Unearned premium
liability
less
greater
than
Related intangible
assets
=
Deficiency
less
Related deferred
acquisition costs
The entire deficiency is recorded immediately in the
statement of comprehensive income. The deficiency is
recognised first by writing down any related intangible
assets and then related deferred acquisition costs, with
any excess being recorded in the consolidated statement
of financial position as an unexpired risk liability.
Deferred acquisition costs which are not included in this
test are separately assessed for recoverability and are
amortised in accordance with the Group’s accounting
policy set out in Note 4.
Note 6: Shareholder returns
(a) Dividends
(i) Dividends paid or payable
2021
2020 final fully franked dividend
2021 interim fully franked dividend
2020
2019 final fully franked dividend
2019 final fully franked special dividend
2020 interim fully franked dividend
90 Medibank
Cents per fully
paid share
6.30
5.80
7.40
2.50
5.70
$m
Payment date
173.5
159.7
24 September 2020
25 March 2021
203.8
68.9
157.0
26 September 2019
26 September 2019
26 March 2020
Notes to the consolidated financial statements30 June 2021
(ii) Dividends not recognised at the end of the reporting period
On 25 August 2021, the directors determined a final fully franked ordinary dividend for the six months ended 30 June 2021 of
6.90 cents per share. The dividend is expected to be paid on 30 September 2021 and has not been provided for as at 30 June 2021.
(iii) Franking account
Franking credits available at 30 June 2021 for subsequent reporting periods based on a tax rate of 30% are $324.2 million
(2020: $215.7 million).
(iv) Calculation of dividend paid
Medibank’s target dividend payout ratio for the 2021 financial year is 75-85% (2020: 75-85%) of full year normalised net profit
after tax (underlying NPAT). Normalised net profit after tax is calculated based on statutory net profit after tax adjusted for
short-term outcomes that are expected to normalise over the medium to longer term, most notably in relation to the level of
gains or losses from investments and movement in credit spreads, and for one-off items, especially those that are non-cash,
such as impairments.
Profit for the year – after tax
Normalisation for growth asset returns
Normalisation for defensive asset returns – credit spread movement
Underlying NPAT
2021
$m
441.2
(31.2)
(11.3)
398.7
2020
$m
315.0
43.2
8.5
366.7
Dividends Accounting Policy
A liability is recorded for any dividends determined on or before the reporting date, but that have not been distributed
at that date.
(b) Earnings per share
Attributable to ordinary equity holders of the Company
Profit for the year attributable to ordinary equity holders of the Company ($m)
Basic and diluted earnings per share attributable to ordinary equity holders of the Company (cents)
2021
2020
441.2
16.0
315.0
11.4
Attributable to continuing operations
Profit for the year attributable to ordinary equity holders of the Company ($m)
Basic and diluted earnings per share attributable to ordinary equity holders of the Company (cents)
441.2
16.0
315.6
11.5
Weighted average number of ordinary shares used in calculating basic and diluted earnings per share 2,754,003,240 2,754,003,240
Basic Earnings Per Share Accounting Policy
Basic earnings per share (EPS) is calculated by dividing
the profit attributable to equity holders of Medibank,
excluding any costs of servicing equity other than
ordinary shares, by the weighted average number of
ordinary shares outstanding during the reporting period,
adjusted for bonus elements in ordinary shares issued
during the reporting period and excluding treasury shares.
Diluted Earnings Per Share Accounting Policy
Diluted EPS adjusts the figures used in the determination
of basic EPS to take into account:
• The after income tax effect of any interest and other
financing costs associated with dilutive potential
ordinary shares.
• The weighted average number of additional ordinary
shares that would have been outstanding assuming
the conversion of all dilutive potential ordinary shares.
Annual Report 2021 91
Section 3. Investment portfolio and capital
Overview
This section provides insights into the Group’s exposure to market and financial risks and outlines how these risks are
managed. This section also describes how the Group’s capital is managed.
Note 7: Investment portfolios
This note contains information on the Group’s net investment
income and the carrying amount of the Group’s investments.
Medibank has established two investment portfolios for
managing its investment assets, the Health Fund Investment
Portfolio and the Non-Health Fund Investment Portfolio.
The Chief Financial Officer (CFO) is responsible for the
management of the Health Fund Investment Portfolio in
accordance with the requirements of the Board approved
Capital Management Policy, APRA regulatory requirements
and the overall objective of achieving a capital base that is
both stable and liquid. The asset allocation of Medibank’s
Health Fund Investment Portfolio is skewed towards defensive
assets (less risky and generally lower returning) rather than
growth assets (riskier but potentially higher returning). The
Board reviewed and has maintained the short-term target
asset allocation for the Health Fund Investment Portfolio at
20%/80% for growth and defensive assets. The long-term
target asset allocation remains at 25%/75% for growth and
defensive assets. During, and because of, the COVID-19
pandemic, the Fund created a sub-portfolio of the Health
Fund Investment Portfolio (the Short-term Operational Cash
sub-portfolio) consisting of exclusively defensive assets with
the express purpose of funding the COVID-19 liability and
customer give back provision. Given its short-term nature,
this sub-portfolio is managed separately from the Target
Asset Allocation (TAA) framework. This portfolio is permitted
to invest in bank deposits, short-term domestic money
market securities with a minimum credit rating of A-1+ and
Fixed Income securities with a minimum credit rating of AA-.
The Non-Health Fund Investment Portfolio is designed to
provide the Group with additional liquidity and financial
flexibility. The CFO is responsible for the management of
the Non-Health Fund Investment Portfolio in accordance
with the Board’s approved Investment Management Policy,
investment strategy and delegation from the Investment
and Capital Committee. This portfolio resides outside of
the health fund and is not subject to the same regulatory
requirements as the Health Fund Investment Portfolio.
The Non-Health Fund Investment Portfolio is permitted to
invest in bank deposits, short-term domestic money market
securities with a minimum credit rating of A-1+ and Fixed
Income securities with a minimum credit rating of AA-.
This note provides information on the net investment income
and the carrying amounts of the investment assets residing
in the Health Fund Investment Portfolio (including the
sub-portfolio) and the Non-Health Fund Investment Portfolio.
Health Fund
Investment
Portfolio
Non-Health
Fund Investment
Portfolio
Total
641.5
179.0
(37.3)
1,823.4
(179.0)
37.3
52.9
-
-
111.2
-
-
-
164.1
488.5
2,953.4
588.6
179.0
(37.3)
1,712.2
(179.0)
37.3
488.5
2,789.3
Portfolio composition 30 June 2021 ($m)
Cash portfolio
Cash and cash equivalents (as reported in the statement of financial position)1, 2
Cash investments with longer maturities
Less cash allocated to the Fixed income portfolio
Fixed income portfolio
Fixed income (as reported in the statement of financial position)3
Less cash investments with longer maturities
Cash allocated to the Fixed income portfolio
Growth portfolio
Equities and investment trusts
Total investment portfolio
92 Medibank
Notes to the consolidated financial statements30 June 2021 Health Fund
Investment
Portfolio
Non-Health
Fund Investment
Portfolio
Portfolio composition 30 June 2020 ($m)
Cash portfolio
Cash and cash equivalents (as reported in the statement of financial position)1, 2
Cash investments with longer maturities
Fixed income portfolio
Fixed income (as reported in the statement of financial position)3
Less cash investments with longer maturities
Growth portfolio
Equities and investment trusts
Total investment portfolio
676.5
185.0
1,480.7
(185.0)
466.8
2,624.0
Total
847.0
185.0
170.5
-
47.2
-
1,527.9
(185.0)
-
217.7
466.8
2,841.7
1. Cash and cash equivalents as reported in the statement of financial position also include operational cash of $30.2 million (2020: $24.4 million).
2. Cash and cash equivalents in the Health Fund Investment Portfolio includes $178.2 million (2020: $236.5 million) in relation to the Short-term
Operational Cash sub-portfolio.
3. Fixed income in the Health Fund Investment Portfolio includes $148.6 million (2020: $60.6 million) relating to the Short-term Operational Cash
sub-portfolio.
The Health Fund Investment Portfolio excluding the Short-term Operational Cash sub-portfolio comprises the following:
Growth
Australian equities
International equities
Property
Infrastructure
Defensive
Fixed income
Cash
Portfolio
composition
30 June
2021
Portfolio
composition
30 June
2020
Target
asset
allocation
4.8%
6.0%
6.9%
2.1%
19.8%
6.3%
6.5%
7.0%
0.3%
20.1%
5.0%
6.0%
7.0%
2.0%
20.0%
57.8%
22.4%
80.2%
100.0%
53.0%
26.9%
79.9%
100.0%
60.0%1
20.0%1
80.0%
100.0%
Health Fund Investment Portfolio
Australian equities
$119.3m
Cash
$552.1m
Infrastructure
$52.5m
International equities
$147.4m
Property
$169.3m
Fixed income
$1,421.9m
1. During the period, the target Fixed Income allocation increased to 60% (2020: 52%) and the target Cash allocation reduced to 20% (2020: 28%).
Financial Assets at Fair Value Accounting Policy
Investments in listed and unlisted equity securities held
by Medibank’s health insurance fund are accounted for
at fair value through profit or loss (FVTPL). Fixed income
investments held by Medibank’s health insurance fund
are also accounted for at FVTPL, as the Group applies the
fair value option to eliminate an accounting mismatch.
Transaction costs relating to these financial assets are
expensed in the consolidated statement of comprehensive
income. These assets are subsequently carried at fair value,
with gains and losses recognised within net investment
income in the consolidated statement of comprehensive
income. Financial assets at FVTPL, consist of externally
managed equity trusts and direct mandates, and an
internally managed fixed income portfolio.
Fixed income investments not held by Medibank’s health
insurance fund are accounted for at fair value through
other comprehensive income (FVOCI), as the objective
of these assets is to collect contractual cash flows and
to sell the assets if required, and the contractual cash
flows are solely payments of principal and interest.
Annual Report 2021 93
Financial Assets at Fair Value Accounting Policy continued
These assets are initially and subsequently carried
at fair value, with gains and losses recognised within
equity in other comprehensive income until the asset
is derecognised. When the assets are derecognised, the
cumulative gain or loss previously recognised in other
comprehensive income is reclassified from equity to
profit or loss as a reclassification adjustment. Interest
income accrues using the effective interest method
and is included within net investment income in the
consolidated statement of comprehensive income.
For financial assets classified at FVOCI, the Group applies
the general impairment approach under AASB 9, which
requires recognition of a loss allowance based on either
12-month expected credit losses or lifetime expected
credit losses depending on whether there has been a
significant increase in credit risk since initial recognition.
Expected credit losses do not reduce the carrying amount
of the financial asset in the statement of financial position,
which remains at fair value. Instead, a loss allowance
is recognised in other comprehensive income as the
accumulated impairment amount.
Key judgement and estimate
Fair value measurement may be subjective, and investments
are categorised into a hierarchy depending on the level of
subjectivity involved. The hierarchy is described in Note 7(b).
The fair value of level 2 financial instruments is determined
using a variety of valuation techniques, which make
assumptions based on market conditions existing at the
end of each reporting period. Valuation methods include
quoted market prices or dealer quotes for similar
instruments, yield curve calculations using the mid yield,
vendor or independent developed models.
The fair value of level 3 financial instruments is determined
using inputs that are not based on observable market data.
(a) Net investment income
Net investment income is presented net of investment management fees in the consolidated statement of comprehensive income.
Interest1
Trust distributions
Investment management expenses
Net gain/(loss) on fair value movements on financial assets
Net gain/(loss) on disposal of financial assets
Net investment income
2021
$m
17.7
38.0
(4.7)
47.8
21.2
120.0
2020
$m
29.7
29.5
(4.6)
(53.0)
0.8
2.4
1. Includes interest income of $0.7 million (2020: $1.7 million) relating to financial assets at fair value through other comprehensive income
(Non-Health Fund Investments).
Net Investment Income Accounting Policy
Gains or losses arising from changes in the fair value of
the financial assets at FVTPL category are presented in the
consolidated statement of comprehensive income within
net investment income in the period in which they arise.
Trust distribution income derived from financial assets
at FVTPL is recognised in the consolidated statement
of comprehensive income as part of net investment income
when the Group’s right to receive payments is established.
Interest income from financial assets accrues using
the effective interest method and is also included in net
investment income.
(b) Fair value hierarchy
The fair value of the Group’s investments is measured according to the following fair value measurement hierarchy:
• Level 1: Quoted prices (unadjusted current bid price) in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices).
• Level 3: Inputs for the asset or liability that are not based on observable market data.
94 Medibank
Notes to the consolidated financial statements30 June 2021 The following tables present the Group’s financial assets measured and recognised at fair value on a recurring basis.
30 June 2021
Financial assets at fair value through profit or loss
Australian equities1
International equities1
Property1
Infrastructure1
Fixed income
Financial assets at fair value through other
comprehensive income – Fixed income
Balance at 30 June 2021
30 June 2020
Financial assets at fair value through profit or loss
Australian equities1
International equities1
Property1
Infrastructure1
Fixed income
Financial assets at fair value through other
comprehensive income – Fixed income
Balance at 30 June 2020
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
-
-
-
-
82.0
119.3
147.4
-
-
1,630.2
-
82.0
111.2
2,008.1
-
-
-
-
97.9
-
97.9
146.8
151.6
162.5
-
1,382.8
47.2
1,890.9
-
-
169.3
52.5
-
-
221.8
-
-
-
5.9
-
-
5.9
119.3
147.4
169.3
52.5
1,712.2
111.2
2,311.9
146.8
151.6
162.5
5.9
1,480.7
47.2
1,994.7
1. Australian equities, international equities, property and infrastructure are indirectly held through unit trusts.
The following table presents the changes in level 3
financial instruments during the period.
Balance at 1 July 2020
Acquisitions
Net unrealised gain/(loss)
on fair value movements
Transfer from level 21
Balance at 30 June 2021
Infrastructure
$m
5.9
44.0
Property
$m
-
-
Total
$m
5.9
44.0
2.6
-
52.5
1.5
4.1
167.8
169.3
167.8
221.8
1. During the period, $167.8 million of property financial assets were
transferred from level 2 into level 3 due to changes in the observability
of inputs.
The valuation of unlisted infrastructure and property assets
is based on unit prices provided by investment managers.
A 10% increase/decrease in the redemption price would
decrease/increase the fair value of the financial asset
by $22.2 million.
The Group’s other financial instruments, being trade and
other receivables and trade and other payables, are not
measured at fair value. The fair value of these instruments
has not been disclosed, as due to their short-term nature,
their carrying amounts are assumed to approximate their
fair values.
The Group did not measure any financial assets or
financial liabilities at fair value on a non-recurring basis
at 30 June 2021.
The Group recognises transfers into and transfers out of
fair value hierarchy levels from the date of effect of the
transfer. There were no transfers between level 1 and
level 2 during the year.
Fair value measurements using significant
unobservable market data (level 3)
As at 30 June 2021, the Group classified $52.5 million of
infrastructure financial assets (2020: $5.9 million) and
$169.3 million of property financial assets (2020: nil) as
level 3 financial instruments. These instruments are held
in unlisted unit trusts and are valued at the redemption
value per unit as reported by the managers of such funds.
These investments are classified within level 3 of the fair
value hierarchy as they are not based on observable market
data as they trade infrequently and therefore have limited
price transparency.
Annual Report 2021 95
Note 8: Financial risk management
This note reflects risk management policies and procedures
associated with financial instruments and capital and insurance
contracts. The Group’s principal financial instruments
comprise cash and cash equivalents, which are short-term
money market instruments, fixed income (floating rate notes,
asset-backed securities, syndicated loans, fixed income
absolute return funds and hybrid investments), property,
infrastructure, Australian equities and international equities.
other than risk management be undertaken, unless
explicitly approved by the Investment and Capital Committee.
The Group was in compliance with this policy during the
current and prior financial year.
The main risks arising from the Group’s financial instruments
are interest rate risk, foreign currency risk, price risk, credit
risk and liquidity risk.
A strategic asset allocation is set and reviewed at least
annually by the Board, which establishes the maximum and
minimum exposures in each asset class. Transacting in
individual instruments is subject to delegated authorities and
an approval process which is also established and reviewed by
the Investment and Capital Committee. At no time throughout
the period will trading of derivative instruments for purposes
Primary responsibility for consideration and control of
financial risks rests with the Investment and Capital
Committee under the authority of the Board. The Board
reviews and agrees policies for managing each of the risks
identified, including the setting of limits for trading in
derivatives, foreign currency contracts and other instruments.
Limits are also set for credit exposure and interest rate risk.
(a) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in market prices.
(i) Interest rate risk
Description
The risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes
in market interest rates.
At balance date, the Group had exposure to the risk of changes in market interest rates in respect of its
cash and cash equivalents and fixed income investments. Both classes of financial assets have variable
interest rates and are therefore exposed to cash flow movements if these interest rates change.
Exposure
At balance date, the Group’s cash and cash equivalents (2021: $671.7 million, 2020: $871.4 million) and
fixed income investments (2021: $1,823.4 million, 2020: $1,527.9 million) were exposed to Australian
variable interest rate risk. The Group regularly analyses its interest rate exposure and resets interest
rates on longer-term investments every 90 days on average. At balance date, the Group’s fixed income
investments had a modified duration of 0.5 years (2020: 0.6 years).
Sensitivity
50 bps increase/decrease in interest rates for the entire reporting period, with all other variables remaining
constant, would have resulted in a $4.4 million increase/decrease to profit after tax and equity (2020:
$3.9 million). The sensitivity analysis has been conducted using assumptions from published economic data.
(ii) Foreign currency risk
Description
The risk that the fair value of a financial instrument will fluctuate because of changes in foreign
exchange rates.
All of the Group’s investments with a non-AUD currency exposure are fully economically hedged,
except for International equities which are unhedged (2020: 50% target hedge ratio).
At 30 June 2021, $147.4 million (2020: $76.0 million) of the international equities portfolio, within
financial assets at fair value through profit or loss, had net exposure to foreign currency movements.
A 10% increase/decrease in foreign exchange rates, with all other variables remaining constant, would
have resulted in a $11.5 million decrease/increase to profit after tax and equity (2020: $5.9 million)
in the AUD valuation of international equities. Balance date risk exposures represent the risk exposure
inherent in the financial instruments.
Exposure
Sensitivity
96 Medibank
Notes to the consolidated financial statements30 June 2021 (iii) Price risk
Description
The risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market prices, whether those changes are caused by factors specific to the individual financial
instrument or its issuer, or factors affecting all similar financial instruments traded in the market.
The Group is exposed to price risk in respect of its fixed income investments primarily due to movements
in credit spreads. This risk is managed through active management of credit exposures and credit spread
duration.
The Group’s equity price risk arises from investments in property, infrastructure, Australian equities and
international equities. It is managed by setting and monitoring objectives and constraints on investments,
diversification plans and limits on investments in each country, sector and market.
Sensitivity
These investments are exposed to short-term fluctuations in price with their fair value movements
being recorded in the consolidated statement of comprehensive income. Price risk is managed by taking
a longer-term view of the investment portfolio.
The following sensitivity analysis is based on the equity price risk exposures on average balances at
balance date. It shows the effect on profit after tax and equity if market prices had moved, with all other
variables held constant.
Australian equities
International equities
Property
Infrastructure
2021
$m
2020
$m
+10.0%
8.7
10.1
11.6
2.1
-10.0%
(8.7)
(10.1)
(11.6)
(2.1)
+10.0%
9.5
11.1
10.9
1.1
-10.0%
(9.5)
(11.1)
(10.9)
(1.1)
In relation to fixed income investments, a 25 bps increase/decrease in credit spreads, with all other
variables remaining constant, would have resulted in a $5.9 million decrease/increase to profit after
tax and equity (2020: $6.1 million). Balance date risk exposures represent the risk exposure inherent
in the financial instruments.
(b) Credit risk
(i) Cash and cash equivalents and financial assets at fair value through profit or loss
Description
The risk of potential default of a counterparty, with a maximum exposure equal to the carrying amount
of these instruments. Credit risk arises from the financial assets of the Group and credit risk exposure
is measured by reference to exposures by ratings bands, country, industry and instrument type.
Exposure
The Investment Management Policy limits the majority of internally managed credit exposure to A-
or higher rated categories for long-term investments, and A2 or higher for short-term investments
(as measured by external rating agencies such as Standard & Poor’s). Departures from this policy and
the appointment of external managers require Board approval.
The Group does not have any financial instruments to mitigate credit risk and all investments are
unsecured (except for covered bonds, asset-backed securities and mortgage-backed securities).
However, the impact of counterparty default is managed through the use of Board approved limits
by counterparty and rating and diversification of counterparties.
Sensitivity
The Group’s cash and fixed income portfolio is subject to counterparty exposure limits. These limits
specify that no more than 50% (2020: 25%) of the cash portfolio can be invested in any one counterparty
bank and no more than 10% (2020: 10%) in any one counterparty corporate entity. In the Group’s fixed
income portfolio, the maximum amounts that can be invested in any one counterparty bank and any
one counterparty corporate entity are 50% (2020: 50%) and 15% (2020: 15%) of the portfolio respectively.
As at 30 June 2021 and 2020, the counterparty exposure of the Group was within these limits.
Annual Report 2021 97
(ii) Trade and other receivables
Description
Due to the nature of the industry and value of individual policies, the Group does not request any collateral
nor is it the policy to secure its premiums in arrears and trade and other receivables. The Group regularly
monitors its premiums in arrears and trade and other receivables, with the result that exposure to bad
debts is not significant. The credit risk in respect to premiums in arrears, incurred on non-payment
of premiums, will only persist during the grace period of 63 days as specified in the Fund Rules when
the policy may be terminated. The Group is not exposed to claims whilst a membership is in arrears,
although a customer can settle their arrears up to the 63 day grace period and a claim for that arrears
period will be paid. Trade and other receivables are monitored regularly and escalated when they fall
outside of terms. The use of debt collection agencies may be used to obtain settlement.
Exposure
There are no significant concentrations of premium credit risk within the Group.
(iii) Counterparty credit risk ratings
The following tables outline the Group’s credit risk exposure
at 30 June 2021 by classifying assets according to credit
ratings of the counterparties. AAA is the highest possible
rating. Assets that fall outside the range AAA to BBB are
classified as non-investment grade.
The table highlights the short-term rating as well as the
equivalent long-term rating bands as per published Standard
& Poor’s correlations. The Group’s maximum exposure
to credit risk at balance date in relation to each class of
recognised financial asset is the carrying amount of those
assets in the consolidated statement of financial position.
Short-term
Long-term
2021
Cash and cash equivalents
Premiums in arrears
Trade and other receivables
Financial assets
Australian equities
International equities
Property
Infrastructure
Fixed income
Financial assets at fair value through
other comprehensive income
Total
2020
Cash and cash equivalents
Premiums in arrears
Trade and other receivables
Financial assets
Australian equities
International equities
Property
Infrastructure
Fixed income
Financial assets at fair value through
other comprehensive income
Total
A-1+
AAA
$m
-
-
-
-
-
-
-
183.2
A-1+
AA
$m
671.7
-
-
-
-
-
-
528.4
-
183.2
111.2
1,311.3
-
-
-
-
-
-
-
81.1
836.4
-
-
-
-
-
-
483.6
-
81.1
47.2
1,367.2
A-1
A
$m
-
-
-
-
-
-
-
293.0
-
293.0
35.0
-
-
-
-
-
-
328.6
-
363.6
A-2
BBB
$m
-
-
-
B & below
BB & below
$m
-
-
-
Not rated
$m
-
8.5
207.4
Total
$m
671.7
8.5
207.4
-
-
-
-
301.3
-
301.3
-
-
-
-
-
-
-
271.9
-
271.9
-
-
-
-
7.9
-
7.9
119.3
147.4
169.3
52.5
398.4
119.3
147.4
169.3
52.5
1,712.2
-
1,102.8
111.2
3,199.5
-
-
-
-
-
-
-
-
-
-
-
10.8
196.3
146.8
151.6
162.5
5.9
315.5
871.4
10.8
196.3
146.8
151.6
162.5
5.9
1,480.7
-
989.4
47.2
3,073.2
Within the not rated fixed income portfolio, $398.4 million (2020: $290.1 million) is invested in unrated unit trusts,
of which the majority of the underlying securities held are investment grade assets and Senior Loans.
98 Medibank
Notes to the consolidated financial statements30 June 2021 Note 9: Working capital
The Group’s working capital balances are summarised in this note.
(a) Capital management
Medibank’s health insurance fund is required to maintain
sufficient capital to comply with APRA’s solvency and capital
adequacy standards. The solvency standard aims to ensure
that the fund has enough cash or liquid assets to meet all
of its liabilities as they become due, even if the cash flow is
‘stressed’. The standard consists of a requirement to hold
a prescribed level of cash, and also mandates a Liquidity
Management Plan.
The capital adequacy standard aims to ensure that there
is sufficient capital within a health insurance fund to enable
the ongoing conduct of the business of the fund.
(b) Trade and other receivables
The standard consists of a requirement to hold a prescribed
level of assets to be able to withstand adverse experience,
and also mandates a Capital Management Policy. The Capital
Management Policy includes target capital levels, capital
trigger points and corrective action plans.
The health insurance fund is required to comply with these
standards on a continuous basis and report results to APRA
on a quarterly basis. The fund has been in compliance with
these standards throughout the year.
The Board has established a Capital Management Policy
for the health insurance fund. Capital is managed against
this policy and performance is reported to the Board on
a monthly basis.
Premiums in arrears
Allowance for impairment loss
Trade receivables
Allowance for impairment loss
Government rebate scheme
Risk Equalisation Special Account
Accrued revenue
Other receivables
Note
(i)
(ii)
9(c)
2021
$m
13.2
(4.7)
8.5
59.0
(2.2)
56.8
133.8
-
13.2
3.6
150.6
2020
$m
14.9
(4.1)
10.8
51.4
(3.2)
48.2
124.2
6.5
14.7
2.7
148.1
Total trade and other receivables
215.9
207.1
Note: Government rebate scheme is non-interest bearing and generally on 15-day terms.
Past due but not considered impaired
(i) Premiums in arrears past due but not impaired at 30 June
2021 for the Group are $8.5 million (2020: $10.8 million).
(ii) Trade receivables past due but not impaired at 30 June
2021 for the Group are $8.3 million (2020: $3.7 million).
Each business unit of the Group has reviewed their
individual debtors and is satisfied that payment will
be received in full.
Trade and Other Receivables Accounting Policy
Trade and other receivables are:
Other balances within trade and other receivables do not
contain impaired assets and are not past due. It is expected
that these other balances will be received when due.
• Recognised initially at fair value.
• Subsequently measured at amortised cost using the effective interest method, less an allowance for impairment loss.
• Presented as current assets except for those with maturities greater than 12 months after the reporting period.
• Non-interest bearing.
• Generally due for settlement within 7 - 30 days.
Annual Report 2021 99
Trade and Other Receivables Accounting Policy continued
Collectability of trade receivables is reviewed on an ongoing basis. For trade receivables, the Group applies the simplified
impairment approach under AASB 9, which requires expected lifetime losses to be recognised from initial recognition
of the receivables. Expected lifetime losses are assessed based on historical bad and doubtful debt roll rates adjusted
for forward looking information, where required. When a trade receivable for which an impairment allowance has been
recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Any impairment
loss on trade receivables is recognised within other expenses in the consolidated statement of comprehensive income.
Subsequent recoveries of previously written off trade receivables are credited against other expenses in the consolidated
statement of comprehensive income. Any impairment loss on premiums in arrears is offset against premium revenue.
(c) Trade and other payables
Current
Trade creditors1
Other creditors and accrued expenses2
Lease liabilities1
Risk Equalisation Special Account
Other payables3
Total current
Non-current
Lease liabilities1
Other payables3
Total non-current
Note
14
9(b)
14
2021
$m
239.9
55.6
28.1
7.7
6.9
338.2
65.3
4.9
70.2
2020
$m
230.2
53.8
27.9
-
8.3
320.2
81.3
2.9
84.2
Terms and conditions relating to the above financial instruments:
1. Trade creditors and lease liabilities are non-interest bearing and are normally settled up to 30 days.
2. Other creditors and accrued expenses are non-interest bearing.
3. Other payables include a contract liability in relation to the loyalty program. Refer to the accounting policy in Note 20(c).
Trade and Other Payables Accounting Policy
Trade and other payables, with the exception of lease liabilities, are:
• Recognised initially at their fair value.
• Subsequently measured at amortised cost using the effective interest method.
• Unsecured.
• Presented as current liabilities unless payment is not due within 12 months from the reporting date.
Refer to Note 14 for the accounting policy for lease liabilities.
(d) Reconciliation of profit after income tax to net cash flow from operating activities
Profit for the year
Depreciation
Depreciation of right-of-use assets
Amortisation of intangibles assets
Amortisation of deferred acquisition costs
Net realised loss/(gain) on financial assets
Net unrealised loss/(gain) on financial assets
Interest income
Trust distribution reinvested
Investment expenses
Interest paid – leases
AASB 16 transition adjustment – recognition of finance subleases
Non-cash share-based payments expense
Share of loss/(profit) from associates and joint ventures
100 Medibank
Note
11
11,14
12
4
14
20(a)(ii)
16(b)
2021
$m
441.2
13.3
27.2
42.2
39.3
(21.2)
(47.8)
(17.7)
(38.0)
4.7
2.8
-
5.2
1.0
2020
$m
315.0
13.2
27.0
48.6
38.1
(0.8)
53.0
(29.7)
(29.5)
4.6
3.4
3.3
1.2
-
Notes to the consolidated financial statements30 June 2021
Change in operating assets and liabilities – continuing operations:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in deferred acquisition costs
Decrease/(increase) in other assets
Decrease/(increase) in net deferred tax liabilities/assets
(Decrease)/increase in trade and other payables
(Decrease)/increase in unearned premium liability
(Decrease)/increase in claims liabilities
(Decrease)/increase in income tax liability/receivable
(Decrease)/increase in provisions and employee entitlements
Change in operating assets and liabilities – discontinued operations:
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions and employee entitlements
Note
2021
$m
(8.8)
(42.3)
6.2
4.3
15.7
11.3
(7.7)
(63.9)
115.2
-
-
-
2020
$m
9.9
(36.7)
(5.4)
(95.5)
(38.6)
(23.5)
261.6
36.3
8.6
66.9
(47.6)
(11.0)
Net cash inflow from operating activities
482.2
572.4
Cash and Cash Equivalents Accounting Policy
Cash and cash equivalents are stated at amortised cost which approximates fair value and include cash on hand,
short-term bank bills and term deposits, commercial paper, negotiable certificate of deposit, and other short-term
highly liquid investments with original maturities of three months or less that are readily convertible to known amounts
of cash and which are subject to an insignificant change in value.
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include all
cash assets, net of outstanding bank overdrafts.
(e) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty
in raising funds to meet cash commitments associated with
financial instruments. It may result from either the inability
to sell financial assets quickly at their fair values; or a
counterparty failing on repayment of a contractual obligation;
or insurance liability falling due for payment earlier than
expected; or inability to generate cash inflows as anticipated.
In order to maintain appropriate levels of liquidity, the Health
Fund Investment Portfolio’s target asset allocation is to
hold 20% (2020: 28%) of its total investment assets in cash/
bank deposits and highly liquid short-term money market
instruments and fixed income securities. The Non-Health
Fund Investment Portfolio provides the Group with additional
liquidity and financial flexibility over and above the Fund’s
target allocation.
Trade payables and other financial liabilities mainly originate
from the financing of assets used in ongoing operations
such as property, plant and equipment and investments in
working capital. These assets are considered by the Group
in the overall liquidity risk. To monitor existing financial
liabilities as well as to enable an effective overall controlling
of future risks, the Group has established comprehensive
risk reporting that reflects expectations of management
of expected settlement of financial liabilities.
The tables on the following page reflect all contractually
fixed pay-offs for settlement and interest resulting from
recognised financial liabilities as at 30 June 2021, as well as
the respective undiscounted cash flows for the respective
upcoming fiscal years. Cash flows for financial liabilities
without fixed amount or timing are based on the conditions
existing at 30 June 2021.
Annual Report 2021 101
2021
Other trade and other payables1
Lease liabilities2
Total trade and other payables
Claims liabilities
COVID-19 claims liability3
Total claims liabilities
2020
Other trade and other payables1
Lease liabilities2
Total trade and other payables
Claims liabilities
COVID-19 claims liability3
Total claims liabilities
Under 6
months
$m
6 to 12
months
$m
309.4
16.1
325.5
376.7
63.5
440.2
292.1
15.3
307.4
310.3
145.7
456.0
0.7
15.4
16.1
21.9
160.3
182.2
0.2
14.5
14.7
20.9
151.4
172.3
1 to 2
years
$m
1.1
29.7
30.8
5.5
-
5.5
0.4
27.8
28.2
6.5
-
6.5
Over 2
years
$m
Total
contractual
cash flows
$m
Carrying
amount
$m
3.8
36.4
40.2
3.6
-
3.6
2.5
58.2
60.7
4.4
-
4.4
315.0
97.6
412.6
407.7
223.8
631.5
295.2
115.8
411.0
342.1
297.1
639.2
315.0
93.4
408.4
407.7
223.8
631.5
295.2
109.2
404.4
342.1
297.1
639.2
1. Contractual cash flows greater than 6 months primarily relate to the loyalty program.
2. Refer to Note 14 for further information on lease liabilities.
3. Refer to Note 3(b) for further information on the COVID-19 claims liability.
It is not possible for a company primarily transacting in
insurance business to predict the requirements of funding
with absolute certainty. The theory of probability is applied
based on past observed practices. The amounts and
maturities in respect of insurance liabilities are therefore,
based on management’s best estimate which incorporates
statistical techniques and past experience. It is not possible
for the Group to predict the ongoing restrictions on surgeries
and other health services due to COVID-19 which could result
in the maturity profile of the claims liability extending beyond
12 months.
Note 10: Contributed equity and reserves
(a) Contributed equity
Contributed equity consists of 2,754,003,240 fully paid ordinary
shares at $0.03 per share. Ordinary shares entitle their
holder to one vote, either in person or by proxy, at a meeting
of Medibank, and in a winding up or reduction of capital,
the right to repayment of the capital paid up on the shares.
Ordinary shares entitle their holders to receive dividends and,
in the event of winding up Medibank or reduction of capital,
entitle their holders to participate in the distribution of the
surplus assets of Medibank.
(b) Reserves
Reserve
2021
$m
2020
$m
Nature and purpose of reserve
Equity reserve
17.8
17.8
During the 2009 financial year, the parent entity entered into a restructure
of administrative arrangements, which gave rise to an equity reserve
representing the difference between the book value of the net assets
acquired from Medibank Health Solutions Pty Ltd (formerly Health
Services Australia Pty Ltd) and the total purchase consideration.
Share-based
payments reserve
4.5
4.6
The share-based payments reserve is used to record the cumulative
expense recognised in respect of performance rights issued to key
management personnel. Refer to Note 18 for further information.
Total
22.3
22.4
102 Medibank
Notes to the consolidated financial statements30 June 2021 Section 4. Other assets and liabilities
Overview
This section provides insights into the operating assets used and liabilities incurred to generate the Group’s operating result.
Note 11: Property, plant and equipment
(a) Closing net book amount
Closing net book amount
Plant and equipment
Leasehold improvements
Assets under construction
Right-of-use assets
Total property, plant and equipment
Note
14
2021
$m
10.2
23.7
4.5
63.3
101.7
(b) Reconciliation of the net book amount at the beginning and end of the period
Plant and
equipment
$m
Leasehold
improvements
$m
Assets under
construction
$m
2021
Gross carrying amount
Balance at 1 July 2020
Additions
Transfers in/(out)
Balance at 30 June 2021
Accumulated depreciation and impairment
Balance at 1 July 2020
Depreciation expense
Balance at 30 June 2021
2020
Gross carrying amount
Balance at 1 July 2019
Additions
Transfers in/(out)
Disposals
Balance at 30 June 2020
Accumulated depreciation and impairment
Balance at 1 July 2019
Depreciation expense
Disposals
Balance at 30 June 2020
Closing net book amount
As at 30 June 2021
As at 30 June 2020
15.0
6.2
1.7
22.9
(8.9)
(3.8)
(12.7)
14.3
0.3
0.4
-
15.0
(5.5)
(3.4)
-
(8.9)
10.2
6.1
92.8
1.0
1.2
95.0
(61.8)
(9.5)
(71.3)
90.2
1.3
1.7
(0.4)
92.8
(52.0)
(9.8)
-
(61.8)
23.7
31.0
(c) Property, plant and equipment capital expenditure commitments
Capital expenditure contracted for at the end of the reporting period but not
recognised as liabilities
3.0
4.4
(2.9)
4.5
-
-
-
2.3
2.8
(2.1)
-
3.0
-
-
-
-
4.5
3.0
2021
$m
0.2
2020
$m
6.1
31.0
3.0
72.1
112.2
Total
$m
110.8
11.6
-
122.4
(70.7)
(13.3)
(84.0)
106.8
4.4
-
(0.4)
110.8
(57.5)
(13.2)
-
(70.7)
38.4
40.1
2020
$m
-
Annual Report 2021 103
Property, Plant and Equipment Accounting Policy
Refer to Note 14 for the accounting policy for
right-of-use assets.
Property, plant and equipment is stated at historical cost
less depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.
Subsequent costs are recognised as an asset when
it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and
maintenance costs are charged to the consolidated
statement of comprehensive income during the
reporting period in which they are incurred.
Depreciation
Depreciation is calculated using the straight-line method
over the estimated useful life or lease term as follows
Plant and equipment
Leasehold improvements
Assets under construction
3 – 15 years
the lease term
not depreciated until in use
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
Disposal
The gain or loss on disposal of property, plant and
equipment is calculated as the difference between the
carrying amount of the asset at the time of disposal and
the net proceeds on disposal (including incidental costs).
These gains or losses are included in the consolidated
statement of comprehensive income.
Note 12: Intangible assets
2021
Gross carrying amount
Balance at 1 July 2020
Additions
Transfers in/(out)
Balance at 30 June 2021
Accumulated amortisation and impairment
Balance at 1 July 2020
Amortisation expense
Balance at 30 June 2021
2020
Gross carrying amount
Balance at 1 July 2019
Restatement1
Balance at 1 July 2019 (restated)
Additions
Transfers in/(out)
Balance at 30 June 2020
Accumulated amortisation and impairment
Balance at 1 July 2019
Restatement1
Balance at 1 July 2019 (restated)
Amortisation expense
Balance at 30 June 2020
Closing net book amount
As at 30 June 2021
As at 30 June 2020
Customer
contracts and
relationships
$m
Goodwill
$m
Software
$m
Assets under
construction
$m
282.9
-
-
282.9
(78.4)
-
(78.4)
282.9
-
282.9
-
-
282.9
(78.4)
-
(78.4)
-
(78.4)
204.5
204.5
89.7
-
-
89.7
(81.4)
(4.6)
(86.0)
89.7
-
89.7
-
-
89.7
(72.4)
-
(72.4)
(9.0)
(81.4)
3.7
8.3
430.7
4.1
20.7
455.5
(306.0)
(37.6)
(343.6)
426.4
(34.6)
391.8
2.5
36.4
430.7
(280.5)
14.1
(266.4)
(39.6)
(306.0)
111.9
124.7
Total
$m
829.5
23.8
-
853.3
26.2
19.7
(20.7)
25.2
-
-
-
(465.8)
(42.2)
(508.0)
38.2
(1.8)
36.4
26.2
(36.4)
26.2
-
-
-
-
-
837.2
(36.4)
800.8
28.7
-
829.5
(431.3)
14.1
(417.2)
(48.6)
(465.8)
25.2
26.2
345.3
363.7
1. Restatement reflects the change in accounting policy for Software as a Service (SaaS) intangible assets detailed in Note 20(a).
104 Medibank
Notes to the consolidated financial statements30 June 2021 (a) Impairment tests for goodwill – key assumptions and judgements
Below is a cash generating unit (CGU) level summary of the Group’s goodwill allocation and the key assumptions made in
determining the recoverable amounts.
Health Insurance
Medibank Health Telehealth
Medibank Health Home Care
Goodwill
allocation
$m
96.2
11.1
97.2
2021
Growth
rate
%
2.5
1.0
2.5
Pre-tax
discount
rate %
10.5
11.3
11.3
Goodwill
allocation
$m
96.2
11.1
97.2
2020
Growth
rate
%
2.5
2.5
2.5
Pre-tax
discount
rate %
10.7
11.3
11.3
Growth rates
and discount
rates
The growth rate disclosed above represents the weighted average growth rate used to extrapolate cash
flows beyond the budget period. The growth rate does not exceed the long-term average growth rate for the
business in which the CGU operates as per industry forecasts.
In performing the recoverable amount calculations for each CGU, the Group has applied post-tax discount
rates to discount the forecast future attributable post-tax cash flows. The equivalent pre-tax discount rates
are disclosed above. The discount rates used reflect specific risks relating to the relevant CGU.
Health
Insurance
CGU
The recoverable amount is based on a value-in-use calculation, which uses a three year cash flow projection
per the Group’s Corporate Plan approved by the Board. Cash flows beyond the Corporate Plan period are
extrapolated using the estimated growth rates, with a terminal value assumed in the calculations.
Key assumptions
• Forecast revenue comprising estimated change in the number of members and future premium
revenue rate rises.
• Forecast claims and operating expenses.
Medibank
Health
Telehealth
CGU
The recoverable amount is based on a value-in-use calculation, which uses a three year cash flow
projection per the Group’s Corporate Plan approved by the Board. Cash flows that are beyond this
period, but within the period that management can reliably estimate, are extrapolated using the
estimated growth rates. No terminal value has been assumed in the calculations.
Key assumptions
• Forecast revenue for the market sector and specific forecasts for key customer contracts.
• Forecast direct expenses and allocated corporate costs.
• Period over which to assess the forecasts.
The key assumption in the Medibank Health Telehealth CGU is the cash flow forecast. The ability to meet
these cash flows, which are based on the Group’s Corporate Plan, could impact the recoverability of the
CGU. The business model of the CGU is contract based by nature and the forecast cash flows contain
assumptions around expected contract renewals, new wins and losses. This cash flow estimate assumes
that current contract renewal options will be exercised by the customers. This assumption is based on
management’s past experience and knowledge of the market in which the CGU operates.
Medibank
Health Home
Care group
of CGUs
Home Care comprises acquired and internally developed in-home care businesses. Goodwill has been allocated
to the Home Care CGUs as the Group derives strategic and operational synergies, and the Group monitors
business performance at the combined Home Care level. The recoverable amount is based on a value-in-use
calculation, which uses a three year cash flow projection per the Group’s Corporate Plan approved by the
Board. Cash flows that are beyond this period, but within the period that management can reliably estimate,
are extrapolated using the estimated growth rates with a terminal value assumed in the calculations.
Key assumptions
• Forecast revenue based on market sector growth, customer contracts and specific volume forecasts
for geographic areas.
• Forecast direct expenses and allocated corporate costs.
• Continued synergies from:
– Single go-to-market approach.
– Integration of the chronic diseases management and rehab at home programs.
– Workforce management.
Annual Report 2021 105
Medibank
Health Home
Care group
of CGUs
continued
The key assumption in the Medibank Health Home Care group of CGUs is the cash flow forecast. The ability
to meet these cash flows, which are based on the Group’s Corporate Plan, could impact the recoverability
of the CGUs. The business model of the Home Care group of CGUs is volume and contract based and the
forecast cash flows contain assumptions including volumes of services performed across geographic areas
and expected contract renewals, new wins and losses. The cash flow forecast assumes that service volumes
will increase based on geographic growth and new contracts. This assumption is based on management’s
past experience and knowledge of the market in which the CGUs operate.
There are no reasonably possible changes in key assumptions that could have resulted in an impairment loss for the Health
Insurance CGU, Medibank Health Telehealth CGU or the Medibank Health Home Care group of CGUs in the current or prior
financial year.
Impairment Accounting Policy
Goodwill and intangible assets that have an indefinite
useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events
or changes in circumstances indicate that they might
be impaired. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher
of an asset’s fair value less costs of disposal and its value-
in-use. In assessing value-in-use, the estimated future
cash flows are discounted to their present value using
a discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the
cash inflows from other assets or groups of assets called
cash-generating units (CGUs). Goodwill is allocated to the
CGU, or group of CGUs, at which the goodwill is monitored
and where the synergies of the combination are expected.
(b) Intangible assets capital expenditure commitments
Capital expenditure contracted for at the end of the reporting period
but not recognised as liabilities
Intangible Assets Accounting Policy
2021
$m
2020
$m
1.9
1.7
Accounting policy
Key estimates
Goodwill is not amortised but it is tested for impairment
annually, or more frequently if events or changes in
circumstances indicate that it might be impaired, and is
carried at cost less accumulated impairment losses.
Refer to Note 12(a) above for further
information on the assumptions used in
the recoverable amount calculations.
The estimated useful lives are based on
projected product lifecycles and could
change significantly as a result of technical
innovations and competitor actions.
Software intangibles are carried at cost less
accumulated amortisation and impairment losses.
Costs incurred in acquiring software and licences
(including external direct costs of materials and service
and direct payroll-related costs of employees’ time spent
on the project) are capitalised where there is control
of the underlying software asset and where they will
contribute to future financial benefits, through revenue
generation and/or cost reduction.
Amortisation is calculated on a straight-line basis
over the expected useful lives of the software
(1.5 to 10 years) and is recognised in depreciation
and amortisation expense in the consolidated
statement of comprehensive income.
Goodwill
Software
106 Medibank
Notes to the consolidated financial statements30 June 2021
Customer
contracts and
relationships
Customer contracts and relationships acquired as
part of a business combination are carried at their
fair value at the date of acquisition less accumulated
amortisation and impairment losses.
Amortisation is calculated on a straight-line basis
over the expected useful lives (5 to 12 years) and is
recognised in depreciation and amortisation expense in
the consolidated statement of comprehensive income.
Customer contracts and relationships are
assessed for indicators of impairment
whenever events or changes in circumstances
indicate that the carrying amount may not be
recoverable.
A key assumption in assessing customer
contracts and relationships for impairment
is the retention of the underlying contracts.
Assumptions are made around renewal of
these contracts, associated cash flows based
on contracted renewal options and the Group’s
commercial and strategic long-term plans.
Note 13: Provisions and employee entitlements
Note
13(c)
13(a)
13(b)
13(a)
13(b)
Current
Customer give back provision
Employee entitlements
Provisions
Total current
Non-current
Employee entitlements
Provisions
Total non-current
(a) Employee entitlements
(i) Employee entitlements provision
Employee entitlements
Current
Non-current
Total employee entitlements
This provision incorporates annual leave, long service leave, termination payments and bonus plans.
(ii) Employee benefits expense
Included in the Group’s employee benefits expense are the following:
Superannuation expense
Other long-term benefits expense
Termination benefits expense
Share-based payment expense
2021
$m
103.0
69.7
25.0
197.7
13.0
9.7
22.7
2021
$m
69.7
13.0
82.7
2021
$m
30.4
5.4
3.7
5.2
2020
$m
-
52.5
30.4
82.9
12.6
7.0
19.6
2020
$m
52.5
12.6
65.1
2020
$m
29.7
5.0
2.7
1.2
Annual Report 2021 107
Employee Entitlements Accounting Policy
Short-term
obligations
Liabilities for wages and salaries, including non-monetary benefits, are recognised in respect
of employees’ services up to the end of the reporting period and are measured at the amounts
expected to be paid when the liabilities are settled.
Other long-term
employee benefit
obligations
Liabilities for employee entitlements includes long service leave and annual leave which are not
expected to be settled wholly within 12 months after the end of the period. The liabilities
are measured at the present value of expected future payments using the projected unit credit
method, taking into account:
• Expected future wage and salary levels.
• Experience of employee departures.
• Periods of service.
Expected future payments are discounted using market yields at the end of the reporting period,
using corporate bonds with terms to maturity that closely match the estimated future cash outflows.
The obligations are presented as current liabilities in the consolidated statement of financial position
if the Group does not have an unconditional right to defer settlement for at least 12 months after the
reporting date, regardless of when the actual settlement is expected to occur.
Bonus plans
Liabilities for bonuses are based on a formula that takes into consideration the performance of the
employee against targeted and stretch objectives, the profit of the Group and other financial and
non-financial key performance indicators. The Group recognises a provision when it is contractually
obliged or where there is a past practice that has created a constructive obligation.
Termination
benefits
Termination benefits are payable when employment is terminated by the Group before the normal
retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits.
The Group recognises termination benefits at the earlier of the following dates:
• When the Group can no longer withdraw the offer of those benefits.
• When the Group recognises costs for a restructuring that is within the scope of
AASB 137 Provisions, Contingent Liabilities and Contingent Assets and involves the payment
of termination benefits.
In the case of an offer made to encourage voluntary redundancy, the termination benefits are
measured based on the number of employees expected to accept the offer. Benefits falling due
more than 12 months after the end of the reporting period are discounted to present value.
(b) Provisions
Balance at 1 July 2020
Additional provision
Amounts utilised during the year
Reversal of unused provision
Balance at 30 June 2021
Balance comprised of:
Current
Non-current
Commissions
$m
8.1
7.5
(6.7)
-
8.9
Make good
$m
4.5
0.5
-
-
5.0
Workers
compensation
$m
4.8
1.6
(1.1)
-
5.3
Corporate
loyalty benefits
$m
6.7
3.2
(2.0)
(0.9)
7.0
Other
$m
13.1
3.2
(7.7)
(0.1)
8.5
Total
$m
37.2
16.0
(17.5)
(1.0)
34.7
8.9
-
2.2
2.8
1.4
3.9
7.0
-
5.5
3.0
25.0
9.7
108 Medibank
Notes to the consolidated financial statements30 June 2021 (i) Commissions provision
This provision relates to estimated commissions payable
to third parties in relation to the acquisition of health
insurance contracts.
(ii) Make good provision
In accordance with certain lease agreements, the Group
is obligated to restore leased premises to their original
condition at the end of the lease term. Due to the long-term
nature of the liability, there is uncertainty in estimating the
ultimate amount of these costs. The provision has been
discounted to take into account the time value of money
throughout the remaining term of the lease.
(iii) Workers compensation provision
The Group is self-insured for workers’ compensation claims.
Provisions are recognised based on claims reported and
an estimate of claims incurred but not reported. These
provisions are determined on a discounted basis, using
an actuarial valuation performed at each reporting date.
The Group has entered into $10.0 million (2020: $8.8 million)
of bank guarantees in relation to its self-insured workers
compensation obligations.
(iv) Corporate loyalty benefits provision
This provision relates to estimated incentives payable
to third parties in relation to the acquisition of Corporate
health insurance contracts.
(c) Customer give back provision
A customer give back provision of $103.0 million has been
recognised at 30 June 2021 (2020: nil). This provision relates
to the return of permanent COVID-19 savings to customers
through premium relief announced by the Group on 29 June
2021. The provision has been recognised within Health
Insurance premium revenue in the consolidated statement
of comprehensive income and is expected to be utilised via
a one-time cash payment to former eligible policyholders or
a one-time reduction in future premiums payable by active
eligible policyholders within the next 12 months.
Note 14: Leases
(a) Group as a lessee
Leases are entered into as a means of acquiring access
to corporate and retail property. Rental payments are
generally fixed, with differing clauses to adjust the rental
to reflect increases in market rates. These clauses include
fixed incremental increases, market reviews and inflation
escalation clauses during a lease on which contingent
rentals are determined. No operating leases contain
restrictions on financing or other leasing activities.
Provisions Accounting Policy
Provisions are recognised when:
• The Group has a present legal or constructive
obligation as a result of past events.
• It is probable that an outflow of resources will be
required to settle the obligation.
• The amount has been reliably estimated.
Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the
likelihood that an outflow will be required in settlement
is determined by considering the class of obligations as
a whole. A provision is recognised even if the likelihood
of an outflow with respect to any one item included in the
same class of obligations may be small.
Provisions are measured at the present value of
management’s best estimate of the expenditure required
to settle the present obligation at the end of the reporting
period. Expected future payments are discounted using
market yields at the end of the reporting period using
corporate bonds with terms to maturity that match, as
closely as possible, the estimated future cash outflows.
The increase in the provision due to the passage of time
is recognised as interest expense.
(d) Contingent liabilities
From time to time, the Group is exposed to contingent
liabilities which arise from the ordinary course of business,
including:
• Losses which might arise from litigation.
• Investigations from internal reviews and by regulatory
bodies such as the ACCC, ASIC or APRA into past conduct
on either industry-wide or Medibank specific matters.
It is anticipated that the likelihood of any unprovided
liabilities arising is either remote or not material.
The Group leases unused office space under non-cancellable
leases agreements. The leases have varying terms, escalation
clauses and renewal rights.
As at 30 June 2021, management have determined it is not
reasonably certain that any of its leases will be extended
or terminated.
Annual Report 2021 109
The table below sets out the carrying amounts of the right-of-use asset and the movements during the year.
Balance at 1 July
Net additions
Depreciation expense
Balance at 30 June
The table below sets out the carrying amounts of the lease liabilities and the movements during the year.
Balance at 1 July
Additions
Accretion of interest
Lease payments
Balance at 30 June
Balance comprised of:
Current
Non-current
2021
$m
72.1
18.4
(27.2)
63.3
2021
$m
109.2
18.4
2.8
(37.0)
93.4
2020
$m
88.0
11.1
(27.0)
72.1
2020
$m
132.5
6.6
3.4
(33.3)
109.2
28.1
65.3
27.9
81.3
The maturity profile of the Group's lease liabilities based on contractual undiscounted payments is provided in Note 9(e).
Leases Accounting Policy
As a lessee
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease by determining whether:
• The contract involves the use of an identified asset.
• The Group has the right to direct the use of the asset
The Group recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial
amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to restore the
underlying asset less any lease incentives received.
The right-of-use asset is subsequently depreciated using
the straight-line method from the commencement date to
the earlier of the end of the useful life of the right-of-use
or the end of the lease term. In addition, the right-of-use
is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the Group’s
incremental borrowing rate. In determining the incremental
borrowing rate, the following components are considered:
• Reference rate (incorporating currency, environment, term).
• Financing spread adjustment (incorporating term,
indebtedness, entity, environment).
• Lease specific adjustment (incorporating asset type).
The interest expense recognised on the lease liability is
measured at amortised cost using the effective interest
method. The lease liability is remeasured when there is
a change in future lease payments, with a corresponding
adjustment made to the carrying amount of the right-of-use
asset (or profit or loss if the carrying amount of the right-
of-use asset has been reduced to zero).
The Group has elected not to recognise right-of-use assets
and lease liabilities for leases of low value assets. The Group
recognises the lease payments associated with these leases
as an expense on a straight-line basis over the lease term.
b) Group as a Lessor
Finance lease receivables of $7.0 million have been
recognised by the Group at 30 June 2021 (2020: $8.9 million).
These are presented within other assets in the consolidated
statement of financial position. The Group recognised income
of $1.1 million (2020: $2.3 million) for the year with respect
to subleasing of its right-of-use assets.
Leases Accounting Policy
As a lessor
The Group acts as an intermediate lessor for two of its
four subleases. The Group’s interest in the head lease
and sublease are accounted for separately. At the sublease
commencement, the Group determines whether it is a finance
or operating lease by assessing whether the lease transfers
substantially all of the risks and rewards of ownership to the
lessee, with reference to the right-of-use asset arising from
the head lease, not with reference to the underlying asset.
110 Medibank
Notes to the consolidated financial statements30 June 2021 Section 5. Other
Overview
This section includes additional information that must be disclosed to comply with Australian Accounting Standards,
the Corporations Act 2001 and the Corporations Regulations.
Note 15: Income tax
Tax consolidation legislation
Medibank and its wholly-owned Australian controlled
entities are members of a tax consolidated group. As a
consequence, these entities are taxed as a single entity
and the deferred tax assets and liabilities of these entities
are offset in the consolidated financial statements.
The entities in the tax consolidated group entered into a
tax sharing agreement which limits the joint and several
(a) Income tax expense
liability of the wholly-owned entities in the case of a default
by the head entity, Medibank.
The entities have also entered into a tax funding agreement
under which the wholly-owned entities fully compensate
Medibank for any current tax payable and are compensated
by Medibank for any current tax receivable.
Continuing operations
Current tax
Deferred tax1
Adjustment for tax of prior period
Income tax expense reported in the statement of comprehensive income
2021
$m
182.2
8.6
0.3
191.1
2020
$m
226.8
(93.9)
1.7
134.6
1. Prior period includes deferred tax of $89.1 million in relation to the COVID-19 claims liability. Refer to Note 3(b) for further information on the COVID-19
claims liability.
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit for the year from continuing operations before income tax expense
Tax at the Australian tax rate of 30%
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non-deductible expenses
Tax offset for franked dividends
Other items
Adjustment for tax of prior period
Income tax expense reported in the statement of comprehensive income
2021
$m
632.3
2020
$m
450.2
189.7
135.1
2.8
(1.2)
(0.5)
190.8
0.3
191.1
-
(1.8)
(0.4)
132.9
1.7
134.6
Annual Report 2021 111
(c) Deferred tax assets and liabilities
Deferred tax balances comprise temporary differences attributable to items:
Recognised in the income statement
Trade and other receivables
Financial assets at fair value through profit or loss
Deferred acquisition costs
Property, plant and equipment
Intangible assets
Trade and other payables
Employee entitlements
Claims liabilities1
Provisions2
Business capital costs
Other (liabilities)/assets
Recognised in the income statement
Recognised directly in other comprehensive income
Actuarial loss on retirement benefit obligation
Recognised directly in other comprehensive income
Net deferred tax (liabilities)/assets
2021
$m
2020 (restated)3
$m
2.0
(28.4)
(24.3)
(19.6)
(13.0)
30.6
24.8
72.2
40.6
0.3
0.3
85.5
0.4
0.4
85.9
2.1
(16.0)
(23.4)
(22.8)
10.6
34.5
19.5
95.0
11.4
0.5
(0.6)
89.6
0.6
0.6
90.2
1. Includes deferred tax of $67.1 million (2020: $89.1 million) in relation to the COVID-19 claims liability. Refer to Note 3(b) for further information on the
COVID-19 claims liability.
2. Includes deferred tax of $30.9 million (2020: nil) in relation to the customer give back provision. Refer to Note 13(c) for further information.
3. Restatement reflects the change in accounting policy for Software as a Service (SaaS) intangible assets detailed in Note 20(a).
Income Tax Accounting Policy
Current Taxes Accounting Policy
The current income tax charge is calculated on the basis
of the tax laws enacted or substantively enacted at the end
of the reporting period. Management periodically evaluates
positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation,
and establishes provisions where appropriate.
Deferred Taxes Accounting Policy
Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted at the end
of each reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred
income tax liability is settled. Deferred income tax is provided
on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the
consolidated financial statements, other than for the following:
• Where they arise from the initial recognition of goodwill.
• Where they arise from the initial recognition of an
asset or liability in a transaction other than a business
combination that at the time of the transaction affects
neither accounting nor taxable profit or loss.
• For temporary differences between the carrying amount
and tax bases of investments in controlled entities where
the parent entity is able to control the timing of the
reversal of temporary differences and it is probable that
the differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Current and deferred tax is recognised in the profit or loss,
except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
Offsetting balances
Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and
settle the liability simultaneously. Deferred tax assets and
liabilities are offset when there is a legally enforceable right
to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority.
Key judgement
The deferred tax asset in relation to the COVID-19 claims liability has been recognised in the consolidated statement
of financial position. Recognition is on the basis that the Group can demonstrate that:
• The temporary difference will reverse when the expected deferred claims are incurred.
• Sufficient profits are forecast to exist to utilise the tax asset in the future.
112 Medibank
Notes to the consolidated financial statements30 June 2021 Note 16: Group structure
(a) Group structure
The consolidated financial statements incorporate the following entities. All entities, unless otherwise stated,
are 100% controlled.
Medibank Private Limited
Australian Health
Management Group
Pty Ltd
Medibank Health
Solutions
Pty Ltd
Medibank Private
Employee Share
Plan Trust1
Medibank
Health Solutions
Telehealth
Pty Ltd
Integrated Care
Services
Pty Ltd
Medi Financial
Services
Pty Ltd
Live Better
Management
Pty Ltd
MH Investment
Holdings
Pty Ltd
MH Solutions
Investments
Pty Ltd
HealthStrong
Pty Ltd
Home Support
Services
Pty Ltd
Calvary MHIH JV
Pty Ltd
(50%)
East Sydney Day
Hospital Pty Ltd
(49%)
Adeney Private
Hospital Pty Ltd
(49%)
Myhealth Medical
Holdings Pty Ltd
(49%)
These subsidiaries are wholly owned by Medibank Health Solutions Pty Ltd and have been granted relief from the necessity to prepare financial reports
in accordance with the ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
These entities are equity accounted investments. Refer to Note 16(b) for further information.
1. Refer to Note 18(a) for further information on the Employee Share Plan Trust.
Consolidation Accounting Policy
Subsidiaries are all those entities over which the Group has
control. The Group controls an entity when it is exposed to,
or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through
its power over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially
at their fair values at the acquisition date. The excess
of the consideration transferred and the amount of any
non-controlling interest in the acquiree over the fair value
of the Group’s share of the net identifiable assets acquired,
is recorded as goodwill.
The acquisition method of accounting is used to account
for the acquisition of subsidiaries. The consideration
transferred for the acquisition of a subsidiary comprises
the fair value of the assets transferred and the liabilities
incurred. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities
Intercompany transactions, balances and unrealised
gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless
the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries
are consistent with the policies adopted by the Group.
Annual Report 2021 113
(b) Equity accounted investments
As at 30 June 2021 the Group held the following investments in associates and joint ventures:
Name of company
East Sydney Day Hospital Pty Ltd(i)
Calvary MHIH JV Pty Ltd(ii)
Myhealth Medical Holdings Pty Ltd(iii)
Adeney Private Hospital Pty Ltd(iv)
Principal
activity
Short-stay hospital
Medical services
Medical services
Short-stay hospital
Place of
incorporation
Australia
Australia
Australia
Australia
Type
Associate
Joint Venture
Associate
Associate
The following table shows the Group’s aggregated interests in equity accounted investments.
Balance at 1 July
Net additions1
Share of net profit/(loss) for the year
Balance at 30 June
Ownership interest %
2021
49%
50%
49%
49%
2021
$m
-
78.1
(1.0)
77.1
2020
-
-
-
-
2020
$m
-
-
-
-
1. Net additions during the period include purchases of equity accounted investments ($82.6 million) and proceeds from sale of equity accounted
investments ($11.6 million).
(i) East Sydney Day Hospital Pty Ltd – Associate
(iii) Myhealth Medical Holdings Pty Ltd – Associate
On 6 August 2020, MH Solutions Investments Pty Ltd acquired
a 49% shareholding in East Sydney Day Hospital Pty Ltd
(ESPH) for $8.8 million, of which $4.4 million is recognised
as a current payable and due 12 months following completion.
The purchase agreement contains an additional $10.8 million
contingent consideration that is subject to ESPH achieving
certain earnings targets over three years. The fair value of
this contingent consideration is $2.7 million at 30 June 2021
and has been recorded as a non-current provision in the
consolidated statement of financial position.
An interest-bearing three-year loan of $2.9 million was
also advanced to ESPH on acquisition.
(ii) Joint venture with Calvary Hospital
On 29 September 2020, MH Investment Holdings Pty Limited
acquired a 50% shareholding in Calvary MHIH JV Pty Ltd
for $2.7 million. This joint venture was determined to be
the successful bidder on a tender for the South Australian
Government’s “My Home Hospital” program during the period.
On 31 March 2021, MH Solutions Investments Pty Ltd
acquired a 49% shareholding in Myhealth Medical Holdings
Pty Ltd for $68.6 million. The Group subsequently reduced
its shareholding to 43% on the same day for proceeds of
$11.6 million, before increasing its shareholding again to
49% on 1 April for consideration of $5.9 million. The net
consideration paid for the 49% investment is $62.9 million.
(iv) Adeney Private Hospital Pty Ltd – Associate
On 9 March 2021, MH Solutions Investments Pty Ltd acquired
a 49% shareholding in Adeney Private Hospital Pty Ltd
(APH) for $1.0 million, to develop a hospital in Victoria for
short-stay surgical procedures. As part of the purchase
agreement, the Group may make future equity purchases
in APH up to $8.0 million over the next 3 years. These future
equity purchases are contingent on APH achieving certain
milestones in the development of the hospital and therefore
will only be recognised when the milestones are achieved.
Parent Entity Financial Information Accounting Policy
The Group’s associates and joint ventures, which are
entities over which the Group has significant influence or
joint control, are accounted for using the equity method.
Under this method, the investment associate or joint
venture is initially recognised at cost and is increased or
decreased to recognise the Group’s share of profit or loss.
Equity accounting of losses is restricted to the Group’s
interest in the associate or joint venture. The Group’s
share of profit or loss for the period is reflected in the
consolidated statement of comprehensive income.
Investments in associates and joint ventures are tested for
impairment if an event occurs that has an impact on the
estimated future cash flows from the net investment.
114 Medibank
Notes to the consolidated financial statements30 June 2021 (c) Parent entity financial information
(i) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Statement of financial position
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders' equity
Issued capital
Reserves
Equity reserve
Share-based payment reserve
Retained earnings
Total shareholders' equity
Profit for the year
Total comprehensive income
2021
$m
2020 (restated)1
$m
3,186.5
3,794.7
1,832.2
1,980.2
3,053.3
3,632.6
1,731.7
1,917.6
85.0
85.0
6.3
4.5
1,718.7
1,814.5
432.7
432.7
6.3
4.5
1,619.2
1,715.0
311.4
311.4
1. Restatement reflects the change in accounting policy for Software as a Service (SaaS) intangible assets detailed in Note 20(a).
(ii) Guarantees entered into by parent entity
(iii) Contingent liabilities of the parent entity
Refer to Note 13(d) for details of the contingent liability
of the parent entity.
The parent entity has entered into $10.0 million
(2020: $8.5 million) of bank guarantees in relation to its
self-insured workers compensation obligations. Refer to
Note 13(b)(iii) for further information on the provision for
workers compensation. The parent entity also provided
guarantees in respect of service obligations assumed by
members of the Group. No liability has been recognised
in relation to these guarantees by the parent entity or the
Group as the fair value of the guarantees is not material.
(iv) Parent entity capital expenditure commitments
Capital expenditure contracted for at the end of the reporting period
but not recognised as liabilities
Property, plant and equipment
Intangible assets
2021
$m
2020
$m
0.2
1.6
-
1.5
Parent Entity Financial Information Accounting Policy
The financial information for the parent entity, Medibank, has been prepared on the same basis as the consolidated
financial statements, except as set out below:
• Investments in subsidiaries are accounted for at cost less accumulated impairment losses in the financial
statements of Medibank.
• Assets or liabilities arising under tax funding arrangements with the tax consolidated entities are recognised
by Medibank as current assets or current liabilities.
Annual Report 2021 115
Note 17: Related party transactions
(a) Transactions with equity accounted investments
Transactions with equity accounted investments
Claims incurred
Services provided
Interest received
Outstanding balances with related parties
Amounts payable
Amounts receivable
Loan receivable
2021
$m
(2.9)
1.7
0.2
-
1.5
2.9
2020
$m
-
-
-
-
-
-
The Group has entered into the following transactions with its equity accounted investments during the year:
• Payment of policyholder claims. These transactions are under normal commercial terms.
• Interest-bearing three-year loan of $2.9 million advanced to ESPH on acquisition.
• Reimbursement of costs incurred.
(b) Key management personnel remuneration
Total remuneration for key management personnel of the Group during the financial year are set out below:
Short-term benefits
Post-employment benefits
Long-term benefits
Share-based payments
Total key management personnel
2021
$
10,300,436
281,954
1,420,495
3,515,299
15,518,184
2020
$
7,722,918
300,528
323,044
1,641,366
9,987,856
(c) Transactions with other related parties
Certain key management personnel hold director positions in other entities, some of which transacted with the Group
during the 2021 financial year. All transactions that occurred were in the normal course of business on terms and conditions
no more favourable than those available on an arm’s length basis.
116 Medibank
Notes to the consolidated financial statements30 June 2021 Note 18: Share-based payments
(a) Share-based payments arrangements
Performance rights to acquire shares in Medibank are
granted to Executive Leadership Team (ELT) and Senior
Executive Group (SEG) members as part of Medibank’s
short-term incentive (STI) and long-term incentive (LTI)
plans. The plans are designed to:
• Align the interests of employees participating in the
plan more closely with the interests of customers and
shareholders by providing an opportunity for those
employees to receive an equity interest in Medibank
through the granting of performance rights.
• Assist in the motivation, retention and reward of ELT
and SEG members.
Performance rights granted do not carry any voting rights.
Medibank has an Employee Share Plan Trust to manage
its share-based payments arrangements. Shares allocated
by the trust to the employees are acquired on-market prior
to allocation. The Trust held nil shares at 30 June 2021.
(i) LTI offer
Under the LTI Plan, performance rights were granted to
members of the ELT and SEG as part of their remuneration.
Performance rights granted under the LTI Plan are subject
to the following performance hurdles:
• 35% of the performance rights will be subject to
a vesting condition based on Medibank’s earnings
per share compound annual growth rate (EPS CAGR)
over the performance period.
• 35% of the performance rights will be subject to a relative
total shareholder return (TSR) vesting condition, measured
over the performance period against a comparator group
of companies.
• 30% of the performance rights will be subject to a
performance hurdle based on the growth of Medibank’s
private health insurance market share (as reported
by APRA) over the performance period.
Each performance hurdle under the LTI Plan has a threshold
level of performance which needs to be achieved before
vesting commences. Details of these thresholds are outlined
in the remuneration report. The vesting conditions for
performance rights in grants will be tested over a three-year
performance period commencing on 1 July of the relevant
period. The vesting conditions must be satisfied for the
performance rights to vest. On satisfaction of the vesting
conditions, each performance right will convert into a fully
paid ordinary share on a one-for-one basis.
The number of rights granted in the 2021 grants were
determined based on the monetary value of the LTI award,
divided by the volume-weighted average share price of
Medibank shares on the ASX during the 10 trading days up
to and including 30 June 2020. This average price was $3.02.
(ii) Annual STI offer
Under the Group’s STI Plan, 50% of STI awarded to ELT
members is paid in cash after the announcement of financial
results. The remaining 50% is deferred for 12 months in the
form of performance rights granted under the Performance
Rights Plan. Vesting of deferred performance rights is
conditional on the participant remaining employed by
Medibank until the end of the 12-month deferral period.
On vesting of the performance rights, each performance right
will convert into a share on a one-for-one basis, subject to any
adjustment required to ensure that the participant receives
a benefit equivalent to any dividends paid by Medibank during
the deferral period.
The number of rights to be granted will be determined
based on the monetary value of the STI award, divided by
the volume-weighted average share price over the 10 trading
days up to and including the payment date of cash STI.
Share-based Payment Accounting Policy
The fair value of the performance rights is recognised as an
employee benefits expense, with a corresponding increase
in equity. The total amount to be expensed is determined
by reference to the fair value of the performance rights
granted, which includes any market performance conditions
and the impact of any non-vesting conditions, but excludes
the impact of any service and non-market performance
vesting conditions. Non-market vesting conditions are
included in assumptions about the number of performance
rights that are expected to vest.
The total expense is recognised over the period in which the
performance and/or service conditions are fulfilled (the vesting
period), ending on the date on which the relevant employees
become fully entitled to the award (the vesting date).
At the end of each reporting period, the Group revises its
estimates of the number of awards that are expected to vest
based on the non-market vesting conditions. The impact
of the revision to original estimates, if any, is recognised in
profit or loss, with a corresponding adjustment to equity.
Annual Report 2021 117
(b) Performance rights – Group
Outstanding at 1 July
Granted
Forfeited
Exercised
Lapsed
Outstanding at 30 June
Exercisable at 30 June
Note
(i)
(ii)
(iii)
Number of equity
instruments
2020
8,430,879
3,338,273
(594,482)
(1,068,721)
(1,167,876)
8,938,073
-
2021
8,938,073
3,168,794
(624,784)
(1,980,272)
(1,422,769)
8,079,042
-
(i) Forfeited relates to instruments that lapsed on cessation of employment.
(ii) Performance rights are exercised as soon as they vest.
(iii) Lapsed relates to instruments that lapsed on failure to meet the performance hurdles.
(c) Fair value of performance rights granted
Below is a summary of the fair values of the 2020 and 2021
LTI plans and the key assumptions used in determining
the valuation. The fair value was determined in consultation
with the Group’s professional service advisors, KPMG
including key inputs and the valuation methodology for
the performance rights granted. The fair value at grant date
differs for each grant primarily due to the Medibank share
price on that grant date and for the TSR performance rights,
the Medibank share price relative to the comparator group.
Grant date
Date of commencement of
service and performance period
Expected vesting date
Fair value at grant date
TSR
performance rights
EPS
performance rights
Market share
performance rights
2021
1 July 2020
2020
1 July 2019
2021
1 July 2020
2020
1 July 2019
2021
1 July 2020
2020
1 July 2019
1 July 2020
1 July 2019
1 July 2020
1 July 2019
1 July 2020
1 July 2019
30 June 2023 30 June 2022 30 June 2023 30 June 2022 30 June 2023 30 June 2022
$2.80
$1.58
$2.80
$2.54
$2.54
$1.09
Share price at grant date
Dividend yield (per annum effective)
Franking rate
Risk free discount rate (per annum)
$2.97
4.0%
100.0%
0.3%
$3.21
4.0%
100.0%
0.6%
$2.97
4.0%
100.0%
n/a
$3.21
4.0%
100.0%
n/a
$2.97
4.0%
100.0%
n/a
$3.21
4.0%
100.0%
n/a
Valuation method
Monte Carlo
simulation
model
Monte Carlo
simulation
model
Black-Scholes
option pricing
methodology
Black-Scholes
option pricing
methodology
Black-Scholes
option pricing
methodology
Black-Scholes
option pricing
methodology
Volatility assumptions (per annum)
Medibank
Comparator group average
Correlation between
comparator companies' TSR
28%
35%
25%
20%
23%
25%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
118 Medibank
Notes to the consolidated financial statements30 June 2021 Note 19: Auditor's remuneration
During the year the following fees were paid or payable for services provided by the auditor of Medibank, its related practices and
non-related audit firms:
PricewaterhouseCoopers Australia (PwC):
Amounts received or due and receivable by the Company's auditor for:
– An audit or review of the financial report of the Company and any other entity
within the Group
Other assurance services in relation to the Company and any other entity within the Group:
– Audit of regulatory compliance returns
– Accounting and other assurance services
Other services in relation to the Company and any other entity within the Group:
– Other non-audit services
Total remuneration of PwC
2021
$
2020
$
1,570,108
1,581,094
231,830
15,530
342,264
64,260
199,517
-
2,016,985
1,987,618
Note 20: Other
(a) New and amended standards adopted
(i) Adopted in the current period
During the period, the IFRS Interpretations Committee
(IFRIC) issued a final agenda decision, ‘Configuration or
Customisation Costs in a Cloud Computing Arrangement
(IAS 38 Intangible Assets)’. The agenda decision clarifies
when configuration and customisation costs incurred in
implementing a Software as a Service (‘SaaS’) arrangement
can be recognised as an intangible asset and if not, over
what time period the expenditure is expensed.
Medibank has implemented this guidance retrospectively
as a change in accounting policy and has recognised the
following adjustments in the prior year financial statements
of the Group and Parent Entity as follows:
• A decrease in intangible assets as at 1 July 2019
of $22.3 million (Parent Entity: $20.1 million).
• An increase in deferred tax assets as at 1 July 2019
$6.2 million (Parent Entity: $5.9 million).
• A decrease in retained earnings as at 1 July 2019
of $16.1 million (Parent Entity: $14.2 million).
There are no other material impacts as a result of this change
in accounting policy.
The following standards became effective for the annual
reporting period commencing on 1 July 2020 but did not
have a material impact on the Group’s accounting policies
or on the consolidated interim financial report.
• AASB 2018-7 Amendments to Australian Accounting
Standards – Definition of Material
• Amendments to References to the Conceptual Framework
in IFRS Standards
• AASB 2020-4 Amendments to Australian Accounting
Standards – Covid-19-Related Rent Concessions
(ii) Adopted in the previous period
The Group adopted AASB 16 Leases on 1 July 2019 using the
modified retrospective approach. The net impact after tax
of initially applying AASB 16 was recognised as a decrease
of $4.7 million to the opening balance of retained earnings
at 1 July 2019.
(b) New accounting standards and interpretations
not yet adopted
Certain new accounting standards have been published
that are not mandatory for 30 June 2021 reporting periods,
but will be applicable to the Group in future reporting periods.
The Group’s assessment of the impact of these new standards
is set out below.
(i) AASB 17: Insurance Contracts
AASB 17 Insurance Contracts is effective for reporting periods
beginning on or after 1 January 2023 and will replace AASB 4
Insurance Contracts, AASB 1023 General Insurance Contracts
and AASB 1038 Life Insurance Contracts. The Group will apply
AASB 17 for the annual period beginning 1 July 2023.
The standard introduces a new general measurement model
for accounting for insurance contracts. However, a simplified
premium allocation approach, similar in nature to the Group’s
existing measurement basis under AASB 1023 is permitted in
certain circumstances (such as for short-duration contracts).
The Group has a comprehensive project underway to assess
the potential impact on its consolidated financial statements.
This includes identifying changes to the Group’s accounting
policies, reporting requirements, systems, processes and
controls and consideration of industry interpretations and
regulatory responses.
Annual Report 2021 119
The final impact of AASB 17 is currently being evaluated
by the Group. The Group expects to apply the simplified
premium allocation approach to all of its insurance contracts
and therefore the measurement basis is not expected to
significantly change. The key estimates and judgements in
relation to the measurement of the Group’s claim liabilities are
expected to remain largely the same under the new standard,
albeit with some differences in their application. However, it is
expected that under AASB 17 there will be substantial changes
in presentation of the financial statements and disclosures.
(c) Other accounting policies
(ii) Other accounting standards or amendments that
will become applicable in future reporting periods
Other accounting standards or amendments that will
become applicable in future reporting periods are not
expected to have a material impact on the Group’s
accounting policies or on the consolidated financial report.
Impairment of Tangible and Intangible Assets (other than Goodwill) Accounting Policy
Assets other than goodwill and financial assets classified at fair value through other comprehensive income, are tested
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs of disposal and its value-in-use. In assessing
value-in-use, the estimated future cash flows are discounted to their present value using a discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets (CGUs).
Financial Assets and Financial Liabilities Accounting Policy
The Group’s financial assets consist of cash and cash equivalents, financial assets at fair value and trade and other
receivables. Management determines the classification of its financial assets at initial recognition based on the business
model test and cash flow characteristics. Purchases and sales of financial assets are recognised on trade-date – the date
on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have been transferred. The Group’s financial liabilities comprise
trade and other payables. Financial liabilities are classified and measured at amortised cost and derecognised when
the Group’s contractual obligations are discharged, cancelled or expired.
Goods and Services Tax (GST) Accounting Policy
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or
as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated
statement of financial position.
Cash flows are presented on a gross basis. The GST component of cash flows arising from investing or financing activities
which are recoverable from, or payable to, the taxation authority, are presented as operating cash flows. Commitments
and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
Loyalty Program Accounting Policy
Where the amount of health insurance premium revenue includes a loyalty component, revenue is allocated to this
component based on the relative estimated stand-alone selling price. The component of loyalty revenue is initially deferred
as a liability on the consolidated statement of financial position, and subsequently recognised in the consolidated statement
of comprehensive income upon redemption when Medibank is obliged to provide the specified goods or services itself.
(d) Events occurring after the reporting period
There have been no events occurring after the reporting period which would have a material effect on the Group’s
financial statements at 30 June 2021.
120 Medibank
Notes to the consolidated financial statements30 June 2021 Directors' declaration
The directors declare that, in the opinion of the directors:
(a) the financial statements and notes set out on pages 75
to 120 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the Group’s financial
position as at 30 June 2021 and of its performance
for the financial year ended on that date; and
complying with Australian Accounting Standards, the
Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
Note 1(b) confirms that the financial statements also
comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
This declaration has been made after receiving the
declarations required to be made to the directors by the
Chief Executive Officer and Chief Financial Officer in
accordance with section 295A of the Corporations Act 2001
for the year ended 30 June 2021.
This declaration is made in accordance with a resolution
of the directors.
(b) there are reasonable grounds to believe that the
Company will be able to pay its debts as and when
they become due and payable.
On behalf of the Board,
Mike Wilkins AO
Chairman
25 August 2021
Melbourne
David Koczkar
Chief Executive Officer
Annual Report 2021 121
Auditor's independence declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Medibank Private Limited for the year ended 30 June 2021, I declare
that to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Medibank Private Limited and the entities it controlled during the
period.
CJ Heath
Partner
PricewaterhouseCoopers
Melbourne
25 August 2021
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
122 Medibank
Independent auditor’s report
To the members of Medibank Private Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Medibank Private Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2021 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated statement of financial position as at 30 June 2021
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Annual Report 2021 123
Independent auditor’s report
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Key audit matters
Our audit focused on where the
Group made subjective
judgements; for example,
significant accounting estimates
involving assumptions and
inherently uncertain future
events.
We performed:
• An audit of the financially
Amongst other relevant topics, we
communicated the following key
audit matters to the Audit
Committee:
• Estimation of the COVID-19
claims liability
• Estimation of the outstanding
claims liability
significant component of the
Group, being the Health
Insurance segment.
•
•
Specific audit procedures
over significant risks and
financially significant
balances of the Medibank
Health segment.
Impairment test of goodwill
allocated to the Home Care
Cash Generating Unit (CGU)
• Reliance on automated
processes and controls
These are further described in the
Key audit matters section of our
report.
For the purpose of our audit we
used overall Group materiality of
$27 million, which represents
approximately 5% of the Group’s
profit before tax.
We applied this threshold,
together with qualitative
considerations, to determine the
scope of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the
effect of misstatements on the
financial report as a whole.
We chose Group profit before tax
because, in our view, it is the
benchmark against which the
performance of the Group is most
commonly measured.
We utilised a 5% threshold based
on our professional judgement,
noting it is within the range of
commonly acceptable thresholds.
124 Medibank
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Estimation of the COVID-19 claims liability
(Refer to Note 3) $223.8m
The COVID-19 claims liability relates to a
constructive obligation arising from the Group’s
commitments to pass back to customers unforeseen
financial gains arising from the temporary closure of
elective surgery and reduced access to ancillary
services as a result of restrictions imposed in
response to the Coronavirus pandemic (COVID-19).
The COVID-19 claims liability is calculated by
comparing the difference between the actual and
expected volume of insured surgical and non-surgical
procedures since the commencement of restrictions
in March 2020 (the COVID-19 period). Utilisation of
the COVID-19 claims liability is assessed by
geography and modality (claim type) and occurs
where actual claims exceed expected claims.
The COVID-19 claims liability is included in the
financial statement line item titled ‘Claims liabilities’
recognised on the consolidated statement of financial
position but does not form part of the outstanding
claims liability (refer to the Key Audit Matters titled
‘Estimation of outstanding claims liability’).
We considered this a key audit matter due to the:
● significant uncertainties impacting the Group’s
estimate of the liability, including:
o the impact and variability of disruptions to
planned insured surgeries and other insured
procedures arising from COVID-19
restrictions and lock-downs
o an absence of historical precedent on which
to analyse data due to the impact of
COVID-19 on claims patterns in the current
and future periods
o determining the proportion of claims not
incurred due to COVID-19 restrictions
o determining expected future claims
utilisation patterns.
We performed the following audit procedures, amongst
others:
●
Evaluated the design of the Group’s relevant
key controls over the COVID-19 provisioning
process.
● Developed an understanding of the Group’s
public announcements and commitments to
financial analysts, shareholders and
policyholders during the year.
●
●
●
●
Evaluated the Group’s accounting policy for
the deferral of claims due to the COVID-19
pandemic against applicable Australian
Accounting Standard requirements and
private health insurance industry practices.
Assessed, on a sample basis, significant data
inputs used in the Group’s modelling and
estimation of the COVID-19 claims liability
(including relevance and reliability of data,
appropriateness of data in the context of the
applicable financial reporting framework, and
potential indicators of management bias).
Analysed claims patterns across key claims
attributes (e.g. hospital versus ancillary claims
and surgical versus non-surgical).
Together with PwC actuarial experts, we:
o Assessed significant assumptions applied
by the Group in determining the impact of
continued COVID-19 restrictions on claims
deferred to future periods, including
consideration of practices adopted across
the private health insurance industry.
o
Considered the appropriateness of the
Group’s methodologies used to determine
claims deferred to future periods.
o On a sample basis, performed
recalculations over the mathematical
accuracy of the Group’s COVID-19 claims
liability model.
Annual Report 2021 125
Independent auditor’s report
Key audit matter
How our audit addressed the key audit matter
•
reasonableness of disclosure of the COVID-19
claims liability within the financial report.
o Assessed the reasonableness of disclosure
of the COVID-19 claims liability in the
financial report against the requirements
of the applicable Australian Accounting
Standards.
Estimation of the outstanding claims liability
(Refer to Note 3) $390.9m
We performed the following audit procedures, amongst
others:
The liability for outstanding claims relates to claims
incurred during the financial year or prior periods but
either not assessed or received by the Group at year
end.
The liability for outstanding claims is estimated by the
Group as a central estimate but, as is the case with
any accounting estimate, there is a risk that the
ultimate claims paid will differ from the initial
estimates. There is also additional uncertainty
relating to the continued impact of the COVID-19
pandemic on claims patterns.
A risk margin is applied by the Group to reflect the
uncertainty in the estimate. The central estimate and
risk margin combined, which are estimated based on
judgements and actuarial expertise, are intended to
achieve an actuarially defined probability of adequacy
(PoA) of 95% (2020: 95%).
The estimation of the outstanding claims liability
involves complex and subjective judgements about
future events, both internal and external to the
business. Primarily, judgement is required by the
Group in order to estimate the:
●
●
●
●
type and amount of claims incurred during the
last two months of financial year but not
received or processed by year end
speed of processing claims by providers issuing
claims on behalf of policyholders
claims cost inflation and medical trends
impacting utilisation of benefits by members
impact of the COVID-19 pandemic on claims
patterns.
Controls design and operating effectiveness
● We evaluated the design of the Group’s
relevant key controls over the claims reserving
process (including data reconciliation, data
inputs, data quality, and the Group’s review of
the estimate) and assessed whether these
controls were operating effectively throughout
the year.
The use of actuarial expertise
Together with PwC actuarial experts, we:
●
●
Assessed, on a sample basis, significant data
inputs used in the Group’s modelling and
measurement of the central estimate
(including relevance and reliability of data,
appropriateness of data in the context of the
applicable financial reporting framework, and
potential indicators of management bias).
Considered whether the Group’s actuarial
methodologies were consistent with actuarial
practices and those used in the industry.
● On a sample basis, performed recalculations
over the mathematical accuracy of the Group’s
actuarial models.
●
•
Assessed the significant actuarial assumptions
used by the Group in forecasting expected
claims particularly those relating to the two
months prior to the year end. This included
comparing the significant actuarial
assumptions to the Group’s historical
experience, observable market trends,
environmental factors, estimated payment
patterns, member claiming patterns, and our
industry knowledge.
Considered the impact on the estimate of
reasonably plausible alternative assumptions
such as changes in service levels, payment
history, recent claims trends, and COVID-19
environmental factors.
126 Medibank
Key audit matter
How our audit addressed the key audit matter
We considered this a key audit matter because of the
significant judgement required by the Group in
estimating claims liabilities, including continued
uncertainty on member claiming patterns due to
impact of the COVID-19 pandemic, and because a
small change in assumptions can result in a material
change in the estimated liability and corresponding
charge to profit for the year.
Impairment test of goodwill allocated to
Home Care Group of Cash Generating Unit
(CGU)
(Refer to Note 12) $97.2m
The Group recognised goodwill of $97.2 million in
respect of the acquisition of a number of in-home care
businesses. This goodwill has been allocated to a Cash
Generating Unit (CGU) referred to as the Home Care
CGU (Home Care).
An impairment test of Home Care is performed
annually by the Group by comparing the carrying
value of Home Care to the recoverable amount.
We considered this to be a key audit matter due to
the:
●
●
●
financial significance of the goodwill allocated
to Home Care which accounts for 48% of the
goodwill balance recognised by the Group
recoverable amount of Home Care is
determined using a value-in-use model that
requires significant judgement by the Group to
estimate future cash flows based on a number of
key assumptions, including revenue forecasts
and expected synergies
judgements and assumptions applied by the
Group in performing the impairment test,
including cash flows forecasts related to the
realisation of planned strategic objectives for
Home Care over the next three years, discount
rates and growth rates.
●
●
Assessed the Group’s approach to setting the
risk margin in accordance with the
requirements of Australian Accounting
Standards, including an assessment of the
reasonableness of the Group’s actuarial
calculation of the PoA.
Assessed the reasonableness of disclosure of
the outstanding claims liability in the financial
report against the requirements of the
applicable Australian Accounting Standards.
Claims received after the year end
● We considered whether actual claiming
activity after year end supported the key
assumptions used by the Group to estimate the
outstanding claims liability at year end.
We performed the following procedures, amongst
others:
● Developed an understanding of the process by
which the projected future cash flows of Home
Care were developed, including consideration of
expected operational, productivity and financial
synergies, and realisation of planned strategic
objectives.
●
●
●
●
●
Considered the level of business performance
monitoring by the Group and assessed whether
the monitoring was performed at the Home Care
level.
Compared the cash flows included in the
impairment assessment with the three-year
business plan presented to and approved by the
Board.
Considered whether the cash flow forecasts were
reasonable and were based on supportable
assumptions, by comparing the forecasts to actual
cash flows from previous years.
Considered the impact on the impairment test of
reasonably plausible alternative assumptions such
as achieving cash flow forecasts and changes in
the discount rate.
Compared the growth rate assumed in the cash
flow projections extrapolated beyond three years
to industry research.
Annual Report 2021 127
Independent auditor’s report
Key audit matter
How our audit addressed the key audit matter
●
Assessed the reasonableness of disclosure of the
impairment test for Home Care goodwill in the
Group financial report against the requirements
of the applicable Australian Accounting
Standards.
Together with PwC valuation experts, we:
● Developed an understanding of the Group’s
impairment test methodology, including testing
judgements and assumptions.
●
●
●
Evaluated the valuation methodology supporting
the Group’s impairment analysis against
applicable Australian Accounting Standards.
Evaluated the Group’s discount rate assumptions
to market data, comparable data, and industry
research.
Tested the mathematical accuracy of the
value-in-use model.
Reliance on automated processes and
controls
We developed an understanding of the Group’s IT
governance framework as well as the internal controls
designed to mitigate the risk of fraud or error over:
The Group utilises a number of complex and
interdependent Information Technology (IT) systems
to capture, process and report a high volume of
transactions.
We considered this a key audit matter because the:
●
●
●
●
program development and changes
access to programs and data
computer operations
business process.
•
•
•
operations and financial reporting processes of
the Group are heavily reliant on IT systems
Together with PwC IT specialists, we performed the
following procedures, amongst others:
underlying IT controls over business processes
are significant to the financial reporting process
data migration activities which occurred during
the year impacted the key IT processes, systems,
and controls relevant to the financial reporting
process.
● Evaluated the design and tested the operating
effectiveness of a sample of key IT controls that
are relevant to the financial reporting process and
our audit
● Considered the risks of the system
implementation and data centre migration
activities applicable to the financial reporting
process and tested controls, where relevant.
128 Medibank
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2021, but does not include the
financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other
information we obtained included the Operating and Financial Review and the Directors' Report. We
expect the remaining other information to be made available to us after the date of this auditor's
report.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
Annual Report 2021 129
Independent auditor’s report
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 50 to 74 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the remuneration report of Medibank Private Limited for the year ended 30 June 2021
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the remuneration report, based on our audit conducted in
accordance with Australian Auditing Standards.
PricewaterhouseCoopers
CJ Heath
Partner
Melbourne
25 August 2021
130 Medibank
Shareholder information
The shareholder information below is current as at 25 August 2021.
Distribution of equity securities
Size of shareholding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 & over
Total
Unmarketable parcels
Number of
shareholders
44,044
140,796
14,750
6,919
192
206,701
Number of
shares
39,603,488
396,285,686
101,734,221
147,081,574
2,069,298,271
2,754,003,240
There were 874 holdings of less than a marketable parcel ($500) of shares (142 shares based on a market price
of $3.53 per share) and such holders held a total of 23,944 shares.
20 largest shareholdings
Number of
shares
% of
issued capital
CITICORP NOMINEES PTY LIMITED
1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
2
3
CITICORP NOMINEES PTY LIMITED
4 NATIONAL NOMINEES LIMITED
5 BNP PARIBAS NOMINEES PTY LTD
6 BNP PARIBAS NOMS PTY LTD
7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
8 BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
9
10 NETWEALTH INVESTMENTS LIMITED
11 THE SENIOR MASTER OF THE SUPREME COURT
12 NAVIGATOR AUSTRALIA LTD
13 AUSTRALIAN EXECUTOR TRUSTEES LIMITED
14 BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
15 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
16 NETWEALTH INVESTMENTS LIMITED
17 BNP PARIBAS NOMS PTY LTD
18 NATIONAL NOMINEES LIMITED
19 NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>
20 AMP LIFE LIMITED
Total
844,196,960
515,398,135
269,831,924
144,394,624
64,160,779
52,703,501
23,213,664
20,179,643
13,969,892
6,541,236
6,500,000
6,150,413
6,054,833
5,412,538
5,267,074
3,609,344
3,433,369
3,413,056
3,322,276
3,013,952
2,000,767,213
30.65
18.71
9.80
5.24
2.33
1.91
0.84
0.73
0.51
0.24
0.24
0.22
0.22
0.20
0.19
0.13
0.12
0.12
0.12
0.11
72.65
Annual Report 2021 131
Shareholder information
Substantial shareholders
As at 25 August 2021, the following holders had provided a substantial shareholding notice:
Number of shares % of issued capital
224,049,642
165,843,215
8.13
6.02
Name of holder
BlackRock Group
The Vanguard Group
Voting rights
At a general meeting of the Company, every shareholder
present (including virtually present) or by proxy, attorney
or representative has one vote on a show of hands and,
on a poll, one vote for each share held.
On-market purchases of shares
During the financial year ended 30 June 2021, 2,017,497
Medibank ordinary shares were purchased on market at
an average price of $2.76 for the purposes of Medibank’s
employee incentive schemes.
On-market share buy-back
There is no current on-market share buy-back.
132 Medibank
Contents
About Medibank
2021 highlights
Chairman’s message
CEO’s message
Our strategy
Creating value for our stakeholders
Better for customers
Better for health
Better for people and communities
Our sustainability highlights
Operating and financial review
Directors
Executive leadership team
Corporate governance statement
Directors’ report
Remuneration report
Financial report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report
Shareholder information
Financial calendar
Corporate directory
1
2
4
5
6
7
8
12
16
20
22
30
33
35
47
50
75
76
77
78
79
80
121
122
123
131
133
133
Financial calendar
Key dates
Full year results announcement
25 August 2021
Ex-dividend share trading commences
8 September 2021
Record date for final dividend
9 September 2021
Payment date for final dividend
30 September 2021
Annual general meeting
18 November 2021
Half year results announcement
February 2022
Payment date for interim dividend
March 2022
The above dates and payments are subject to confirmation.
Any change will be notified to the Australian Securities Exchange (ASX).
Corporate directory
Company
Share registry
Medibank Private Limited
Registered Office
720 Bourke Street
Docklands Vic 3008
GPO Box 9999
Melbourne VIC 3001
Telephone:
132 331 (within Australia)
+61 3 8622 5780 (outside Australia)
medibank.com.au
Computershare Investor Services
Pty Limited
GPO Box 2975
Melbourne VIC 3001
Telephone:
1800 998 778 (within Australia)
+61 3 9415 4011 (outside Australia)
computershare.com.au
Annual Report 2021 133
no overlap of red spine allowed for fold crease
spine set up as 7 mm
Annual Report 2021
Better health
for better lives
Medibank Private Limited
ABN 47 080 890 259