Vhi Healthcare reports surplus after tax of €7.4m in 2011
By Finfacts Team
Mar 21, 2012 - 2:55 PM

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Vhi Healthcare, the State health insurer, today reported a surplus after tax of €7.4m for the twelve months to 31st December 2011 compared to a deficit after tax of € 3.1m in 2010 and a deficit after tax of €41.7 m in 2009.

According to Bernard Collins, chairman, Vhi: “2011 was a difficult year for both Vhi Healthcare and the private health insurance market however a number of business strategies driven by the Board and the management team are helping to put Vhi Healthcare back on a sustainable footing for the future."

VHI Healthcare said its hospital insurance business continues to be loss-making but that it is creating the financial environment to achieve long-term sustainability. It has reserves of €295m, but it will need an extra cash injection of up to €250m to satisfy the Central Bank regulatory rules for insurers, mandated by the European Commission.

The company, which has 1.2m customers, said the cost of private beds in public hospitals have increased by 41% since 2009.

Commenting on the financial results Declan Moran, chief executive, said: “The Board of Vhi Healthcare has directed that we build on the cost containment initiatives we have pursued over the last three years . As a result of tough negotiation with providers combined with a firm focus on reducing administration costs and driving efficiencies right across the business, savings of nearly €200m have been obtained since 2009. For phase 2 of this initiative Vhi Healthcare has now engaged Milliman consultants to carry out a Utilisation Management Review of our claims and advise if further efficiencies can be achieved in this way . The review will provide a detailed report on the advantages and disadvantages of moving towards greater utilisation management, a cost benefit analysis and a detailed plan on how this might be achieved including the timelines involved, costs and potential savings if any that could be achieved .”

  • Earned Premium for 2011 came to €1.314bn, down 1.6% on 2010;
  • Total claims incurred for 2011 amounted to €1.234bn. This figure is down 5.6% on the previous year mainly due to the effects of cost containment initiatives including agreed reductions in rates payable to private hospitals (6%) and consultant fees (15%). "In addition, there were significant savings made as more procedures are being delivered in day-care settings than ever before, at a lower cost. Savings have also been recouped by the Claims Special Investigations Unit which investigates instances of incorrect or inappropriate invoicing of customers by healthcare providers";
  • The ratio of claims spend to income earned reduced from 95.1% in 2010 to 90.8% by the end of 2011. In simple terms this means that of every €100 received in premium income almost €91 is paid out to provide medical care for  customers;
  • Operating costs continued to decline and at €88.4m are 10% lower than they were three years ago. Expressed as a percentage of premium income, Vhi Healthcare’s operating expense ratio of 6.3% remains significantly lower than those of its competitors;
  • The ratio of free reserves to premium income at the end of December 2011 stood at 22.3% -down half of one per cent on the previous year. However, at €295m the free reserves are still considerably higher than any other health insurer and we have over €780m in liquid assets;
  • Investment income showed a negative return of €23.5m during the year compared to gains of €22.5m the previous year. This was accounted for mainly by losses incurred on subordinated bank debt.

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