Vhi inside p1-24 pdf

Chairman’s ReviewDerry HusseyChairmanThe year under review has seenVhi Healthcare continue toprovide effective and efficienthealthcare insurance to themajority of the insuredpopulation. However, it wasalso both a frustrating andchallenging year for VhiHealthcare.Despite the considerableindependent expert support forrisk equalisation, frustratingly,we are still waiting for it to be implemented. Inthe meantime the operation of community ratingwithout risk equalisation since 1996 has meantthat our competitor has amassed extra windfallprofits of up to €100 million. This should havebeen available to the risk equalisation fund forthe benefit of all those who pay for healthinsurance - 1.5 million of whom are VhiHealthcare members. This issue will be fullyreviewed later in this statement.RESULTSIn the year to 28 February 2003 the organisationachieved a level of performance which hasallowed it to maintain its solvency margin in anenvironment which was extremely challenging.Net profit at €33.8 million or 4.9% of turnoverwas €19 million ahead of the previous year whenthe margin achieved was only 2.5%.The principal reasons for this improvement were:(a) membership grew slightly, by 1%, and thistogether with subscription increases resultedin subscription income increasing by €91million or 15.3%. This compares to a growthin claims of €75 million or 14.3%.(b) administration costs were held at almost thesame level as the previous year, so that theynow constitute only 8.4% of premiumincome, down from 9.7% last year. This ratiocompares favourably with any insurancecompany in the world and is a credit to themanagement and staff at Vhi Healthcare.(c) investment income grew by almost €9 millionor 55.6%. Because of its inadequate capitalbase, Vhi Healthcare has pursued a highlyconservative investment policy and in thepast 12 months this strategy has provedextremely beneficial.It is important to point out that all surplusesearned by Vhi Healthcare are retained for thebenefit of members. Despite the satisfactoryresults our reserves are still well short of the levelof 40% of premium income which in commercialterms is regarded as the minimum level at whichinsurance companies should operate.It is also important to note that these resultshave been achieved following a significant 18%premium increase in September 2002, of whichalmost a quarter was due to the absence of riskequalisation. Vhi Healthcare would like toacknowledge the support of its members, bothindividuals and corporate group schemes. Muchof the credit for these results is due to theircontinued loyalty to Vhi Healthcare.UNEXPIRED RISK RESERVEIn preparing the accounts for the year to 28February 2002, the Board allocated €15 millionto an unexpired risk reserve. This provision wasto cover anticipated losses arising from increasedclaims costs that were not covered by the priceincrease applied in September 2001. A further6