Mathias Cormann announces prospectus to be issued in October for the sale of Australia’s largest health insurer
The Abbott government expects “strong interest” in Medibank Private shares as it moves a step closer to floating Australia’s biggest health insurer on the stockmarket.
The finance minister, Mathias Cormann, said on Sunday a government advertising campaign would promote the opportunity for Australians to receive a prospectus and gain access to a larger share allocation than if they did not pre-register.
Pre-registration is open from now until 15 October. The prospectus containing more details about the share offer will be released in late October, before the expected listing of Medibank Private on the Australian sharemarket in December.
Cormann emphasised that the decision to press ahead with the sale of the government-owned insurer would be subject to market conditions, but was in line with long-standing Coalition policy.
In 2006 the parliament passed the Howard Coalition government’s legislation allowing a Medibank sale and the subsequent Rudd and Gillard Labor governments did not repeal this law. This means the forthcoming privatisation will not require fresh legislation to pass parliament.
Cormann would not comment on the proceeds the government expected to raise from the sale, but a parliamentary library summary said most estimates put the value of Medibank Private at “between $2.5-$4 billion or higher”.
The minister said sale proceeds would be “re-invested into productivity-enhancing infrastructure through the government’s asset recycling initiative”.
“We would encourage all Australians to now take up the opportunity to pre-register for their prospectus for the Medibank Private share offer,” he said at an event in Melbourne.
“We have made a judgment that market conditions are right which includes a judgment about the level of retail interest which we do expect to be strong.”
The government has launched a national campaign to promote the pre-registration process, including television, newspaper, radio and digital advertisements and a dedicated website.
The advertisements invite Australians to “share in the future of Medibank Private”.
“It’s Australia’s largest private health insurer. And soon, you’ll be able to own a share of it with the Medibank Private Share Offer,” the script says.
Cormann said the costs of the advertising campaign and the listing process were “in line with what would usually be the case with these sorts of commonwealth privatisations”.
The finance minister said Medibank Private provided health insurance cover for 3.8 million people in Australia through its two brands, Medibank and AHM.
Eligible policyholders with either brand who pre-registered and applied for shares would receive a greater preferential share allocation, he said.
Cormann said he believed Medibank Private would “perform even better in private hands” and he rejected suggestions the sale would lead to a reduction in the level of services to policyholders.
The minister also dismissed claims the sale would drive up premiums, saying Medibank Private would operate in a “highly competitive market” where it would compete for customers against 33 other health funds.
This would act as a “natural limit on Medibank’s ability to raise premiums beyond what is competitive” and the government would continue to regulate health funds’ requests to increase their premiums.
Cormann said there was no good policy rationale for the government to continue to own a private health insurance business.
“There is no reason as to why the government should be involved in that commercial competitive market and furthermore, by selling Medibank Private, we will remove the current conflict which the federal government is in by being both a regulator and the largest market participant,” he said.