Transcript - Joint Press Conference - Medibank Private Share Offer

Senator the Hon Mathias Cormann
Minister for Finance

Mr George Savvides
Managing Director, Medibank Private


Date: Monday, 20 October 2014

Medibank Private Share Offer prospectus

BRIAN TYSON: Good morning everyone and welcome to the formal launch of the Medibank Private Share Offer. My name is Brian Tyson from Newgate Communications and I will be your MC for this morning's event. In a moment I will welcome the Minister for Finance Senator the Honourable Mathias Cormann to take the stage. He will formally launch the Share Offer and take you through the key elements of the IPO. The Minister will be followed by a presentation from the Managing Directors of Medibank Private, Mr George Savvides. At that point we will convene a Q&A panel comprising the Minister, Mr Savvides and representatives from the three joint lead managers, Deutsche Bank, Goldman Sachs and Macquarie Capital. It is my pleasure now to introduce formally the Minister for Finance Senator the Honourable Mathias Cormann, Minister.

MATHIAS CORMANN: Good morning everyone. This morning I am pleased to officially launch the prospectus for Medibank Private and the Medibank Private Share Offer. From today, Australians can access the prospectus at The indicative price range for Medibank Private shares has been set at $1.55 to $2 per share.

A price cap for retail investors means that Australian residents who apply for shares will not pay any more than $2 per share even if the price paid by institutional investors ends up being higher.

The Medibank Private Share Offer prospectus is a detailed document that outlines all aspects of the company's commercial operations.

Everyone considering an investment in Medibank Private should read it carefully before making a decision on whether to invest.

Today's release of the prospectus formally marks the start of the actual sale process in which Medibank Private will transition from Government to private ownership.

The Government has structured the Medibank Private Share Offer in order to achieve all of our specific sale objectives which are to contribute to an efficient; competitive and viable private health insurance industry, to maintain service and quality levels for Medibank Private customers including in regional and rural Australia; to ensure the sale process treats Medibank Private employees in a fair manner including through the preservation of accrued entitlements; to minimise any post sale residual risks and liabilities to the Government and having regard through all of the above objectives to maximize the net sale proceeds from the sale.

As you would be aware, the Coalition has long been committed to the sale of Medibank Private. Medibank Private is a commercial business, operating in a well functioning, well regulated and competitive private health insurance market with 34 private health funds. There is no market failure in private health insurance and as such there is no longer a compelling reason for the Federal Government to own Medibank Private. The time has come in the company's evolution to ensure the private in Medibank Private reflects its status as a commercial entity.

The sale of Medibank Private will provide the company with full commercial independence and access to capital markets and as such give it more flexibility as it pursues future growth opportunities and opportunities to further improve its service offering to its customers. This share offer will also deliver a better outcome for competition in the private health insurance industry. It will remove the Government's inherent conflict in being both the owner of the private health insurance industry largest market participant as well as the industry's regulator. It will ensure that Medibank Private is competing on a level playing field with the 33 other private health insurers. The Australian health care industry is an integral part of the Australian economy, representing about $147 billion or approximately 9.7 per cent of our Gross Domestic Product in financial year 2013-14. Private health insurance is a key component of that health system with over one half of all Australians now covered by private health insurance. Medibank Private is a very well known business that has been providing private health insurance for almost 40 years. It provides cover for over 3.8 million people across Australia through its two brands: Medibank and AHM.

At the indicative price range of $1.55 to $2 per share, the indicative market capitalisation of Medibank Private once listed would be between $4.269 billion and $5.508 billion, placing it among the top 100 companies on the Australian Securities Exchange. We are pleased that more than 750,000 Australians pre-registered to receive the Medibank Private Share Offer prospectus. Those Australian residents who pre-registered their interest in receiving a prospectus and applied for shares in the general public offer can be allocated an amount of shares up to 15 per cent higher than general public offer applicants who did not pre-register. Eligible Medibank Private and AHM policy holders who pre-registered and applied for shares in the policy holder offer can be allocated an amount of shares up to 30 per cent higher than general public offer applicants who did not pre-register. Eligible Medibank Private and AHM policy holders who did not pre-register are still eligible to apply for shares of course in the policy holder offer and can still be allocated an amount of shares up to 15 per cent higher than general public offer applicants who did not pre-register. The important point here is though that the eligible policy holder preference will be limited to one per policy. Potential investors who have not already requested a prospectus can do so by calling 1800 998 778 or by visiting

The general public offer will open to Australian retail investors on Tuesday 28 October 2014. Retail investors will then have until Friday 14 November 2014 to apply and pay for shares. The retail offer structure gives retail investors three avenues to apply for shares. Firstly people can apply and pay for shares online via the share offer website. Secondly they can apply by post using the application form and pre-paid envelope that accompanies the prospectus. Or thirdly, brokers can apply directly via their broker. More than 30 Australian brokers have been invited to participate in a broker firm process where the brokers can commit to purchasing a bulk allocation of Medibank Private shares on behalf of their clients. Broker firm bids will be due on Wednesday 29 October 2014.

In addition to the retail offer, the Government is also offering Medibank Private shares to domestic and international institutions through an intuitional offer. No decisions will be made on the split of share allocations between the retail institutional offers until the share offer has been completed. The final price for the Medibank Private shares and the number of shares that investors will receive based on the allocation criteria is expected to be announced byTuesday 25 November 2014. After the retail offer has closed and the institutional offer has been conducted by way of a book build. We expect the Medibank Private shares will begin trading on the ASX on a conditional and deferred settlement basis on Tuesday 25 November 2014 subject to market conditions. Subject to the prospectus forecast being delivered and certain other factors, the Medibank board expects to pay a fully frank dividend for the seven months to 30 June 2015 of 4.9 cents per share based on the number of shares on issue at the time of listing.

Today the next stage of the information campaign will commence to inform people across Australia that the prospectus is now available. The campaign will run across television, newspaper, radio and digital advertisements. The dedicated website at and the information line 1800 998 778 where Australians can ask questions or request a prospectus if they haven't already done so. Investors will be able to apply for shares as I have said from Tuesday 28 October 2014until the offer closes on Friday 14 November 2014.
I would now like to show you the television advertisements which will be running from today which let people know that the prospectus is now available.


The Medibank Private share offer is an exciting opportunity for Australians to participate in the future of Medibank Private. It is my great pleasure now to introduce the Managing Director of Medibank Private, Mr Savvides to provide some more detail about the Company.

GEORGE SAVVIDES: Well thank you Minister and welcome everyone today. I can certainly say that we're very pleased to be here along with the Board of Medibank and our management team. We're very excited about what the future brings, and we're certainly ready to move forward. I'd like to provide you with an overview now of the investment proposition within the prospectus and with our story, and we're keen to share it with you.

Medibank is a market leader in an attractive and growing sector. Australia's largest private health insurer, built around a highly recognisable and long established brand. We've started from a great position as we move to the ASX, and Medibank is Australia's largest health insurer. In a market of 34 players we have 29.1 per cent market share and we cover 3.8 million people.

Many of you are aware of the positive healthcare and private health insurance industry fundamentals that surround our business and our marketplace. The health care economy in Australia is strong and stable and has shown good growth over the past decade, a sector where limited investment opportunities for Australians exist, and hence our entrée into the top 100 that we believe will be very much welcomed.

In Australia we have four times more policyholders than life insurers in the private health insurance sector. My little throwaway line there is that when it comes to life insurance and health insurance, health is larger than life.

Health is a growing sector, 7.9 per cent average growth in the sector over the decade, and private health insurance plays a very important role in complimenting the public health system in Australia. More than half of Australians have a private cover product and 47% of Australians have hospital cover. The private health insurance industry has produced stable and consistent premium revenue growth and relatively low claims volatility in the 10 years that we'll show in the prospectus.

Medibank has an attractive financial profile as well. We've developed strategies that we've placed now for several years for disciplined forecast earnings growth. As evidenced today in the prospectus that you'll be able to access, where you'll see for the first time our FY14 results which show good performance, continuing on into our forecast year of FY15. Along with strong operating profit growth and for FY15 a high forecast return on equity is also forecast. Medibank Private represents an attractive financial profile supported by a debt free balance sheet.

We know investors will be interested in dividend policy proposed by the Board. Since our conversion to for-profit five years ago, we have delivered strong and steady dividend flow. You will see from the numbers in the prospectus that Medibank has produced a reliable cash flow generation and moved to a relatively low capital intensity base producing good return on capital employed. Our policy is to target a dividend payout ratio of between 70 per cent and 80 per cent of annual underlying NPAT and further details will be found in the prospectus.

Finally, I'm absolutely delighted to be able to have led for 13 years this great organisation and to be surrounded by a young, dynamic and very talented executive team. Supported by a very experienced governance Board led by our chair, Elizabeth Alexander, we are absolutely well-placed now to move to the public we're seeing ahead of us.

This is a scan of the marketplace in which we operate. Australia's healthcare expenditure as a nation against OECD standards is quite modest at under 10% of GDP. For a relatively wealthy nation there is more capacity to sustain this attractive growth profile of healthcare spending. At $147 billion in the FY13 year, around $100 million from government, state and federal, and the balance over $40 billion provided in the private health side, either through private health insurance or direct through private individuals expending on their healthcare.

Below the graph on the left you'll see the steady trend of the premium growth of the entire private health insurance sector, which in '14 was over $19 billion of premiums and a CAGR of 8.4 per cent over that 10 year runway, giving an attractive and steady healthy growth profile of the sector in which we have a 31 per cent share - a 29 per cent share sorry.

So within that also is a steady claims experience. There are no earthquakes or cyclones or floods in the experience of health insurers, given our short tail insurance paradigm and our light capital denominator producing return on equity for the sector of 18 per cent, and in our forecast forward Medibank a little ahead of that as well.

Our strategy. On this slide you see the five elements of our Group strategy, it underpins the long term shareholder growth that we are putting in place through the forecast and beyond.
Let me explain the five elements. Customer centred healthcare; a desire to build products and services that wrap themselves around the customer. The I in Medibank, apart from the share issue of the I and the dot in the advertising campaign, the I in Medibank is the customer and around the customer we bring health financing, the bank and knowledge of the healthcare system, the medical side. So our name is our mission and purpose for better health.

We develop those products with our customer centred healthcare theme. $0.87 in every dollar that we receive from our membership base, our customer base, is paid out in claims every year, and we procure those services through our contracting matrix across all of the healthcare providers in Australia, hospitals and other providers.
In health cost leadership as a strategy, we invest in a sophisticated approach to purchase at a competitive price and at the right level of quality which becomes an increasing continuous improvement endeavouring quality, the healthcare services that our customers need.

In operational excellence, we endeavour to drive down the operating costs of our business, and in that area we've had through our Fit for Purpose program over the last few years great gains in bringing our management expense cost ratio down from 10.5% to alongside the industry average. We continue to invest further in that as we go forward with further investments in IT to improve the operational efficiency and service delivery of our business.

As we blend customer centred healthcare and health cost leadership we end up with innovation which is reflecting our complimentary services business, again exemplified by the ability for Medibank to have won a couple of years ago the $1.3 billion Australian Defence Force contract to provide healthcare services to army, navy, air force, across all of the
garrisons in Australia. That exciting project becomes both an innovation environment for us, but also another way in which we bring all of our skills from our health insurance business to bear in other health funded environments in Australia, part of that $100 billion that I referred to earlier that are publicly funded from government.

Our unique blend of skills in our people have [inaudible] our workforce in health professionals sitting alongside of our insurance professionals. A very talented blend of broad sophistication that focuses itself around the health system and better ways to provide services for members, and to be able to continue to invest in reforming and improving the health system. All four of those levers drive shareholder value as we improve on all four, the outcome of which produces improved shareholder value.

These are the results that you'll see in summary at least in the prospectus that was lodged this morning. You can see in these results some positive trends for the company. Revenue growth underpinned by what I said earlier, the fundamentals, good healthcare fundamentals, of the sector, we've seen $5.6 billion revenue achieved for our health insurance business in FY14, up 5.7 per cent and forecast to go to $6 billion, a growth of 6.2 per cent in the forecast year FY15.

Pleasing as well our margins, our gross margins, have improved to 13.5 per cent in the financial year '14 against an industry trend that has seen material decline in margins. So we've improved and the rest of the industry average has come down in that year FY14. We continue to forecast improving margins on a steady basis in the FY15 result.

Our management expense cost ratio from 10.5 per cent to 9.2 per cent in FY14 and continues to go down another 50 basis points in FY15 to 8.7 per cent, bringing us alongside of industry average, but note our commitment to continue to invest in operational cost efficiencies continues into the future. Then mostly importantly our operating margins up significantly by 0.7 per cent to 4.4 per cent above industry average and continuing to grow above in the forecast year by another half a percentage to 4.9 per cent. So the trend line is a healthy one for the business and we're very pleased about where we are in our cycle.

Dividend payout ratio for FY16, 70 per cent to 75 per cent as indicated in the prospectus and as I said earlier, the Board policy has a target of 70 per cent to 80 per cent beyond that. Return on equity of 18.4 per cent and a gearing of 0 per cent as we go forward, a strong foundation for the business.

Some of these graphs that we've extracted from the prospectus highlight the improving trend in both revenue and profitability in the sector. Over $1 billion of revenue growth for the Group in the three years to '14, continuing to grow in the year and also the underlying growth in the dark blue of the health insurance business. The proportion now in the health insurance, our core business, is the most material part of our profit engine and shareholder value engine in the business.

On the profit side on the right, healthy profit growth. The removal of discontinued businesses such as our immigration contract showing the underlying performance of our core business, strong pathway, strong growth around - nearly $100 million of growth in profit from '13 to '15 in the forecast projection.

So we come to the conclusion before we take some questions. Medibank has an attractive dividend policy. As mentioned earlier, we've established a record of consistent dividends over the five years since we've been converted to for-profit. As outlined in the prospectus, we will target a payout ratio between 70 per cent and 75 per cent in FY16, with a Board policy of 70% to 80% in the year.

Subject to the forecast in the financial information set out in the prospectus being achieved and other relevant factors, the Board expects to pay a fully-franked dividend of $0.049 per share for the seven months to 30 June 2015. This equates to an implied FY15 dividend yield of between 4.2 per cent and 5.4 per cent based on a simple annualisation. Dividends are expected to be fully-franked and interim dividends to be paid once we establish our full year cycle will be around March, and final dividends will be paid around September.
So in conclusion, in the last 38 years Medibank has grown to become one of Australia's most iconic brands and a trusted name in healthcare for many Australians. Having led the market for 34 years, we now bring those credentials and the future business to the ASX, making it possible for policyholders and the broader investment community to share in our future.
We look forward to the opportunity that this share offer and our top 100 listing is bringing to the company and we thank you for your presence this morning.

BRIAN TYSON: Thank you Mr. Savvides. I would know like to formally introduce our panel for this morning, in addition to Minister Cormann and Mr. Savvides, the panel today consists of representatives from the three Joint Lead Managers. Firstly, on Mr. Savvides left, representing Deutsche Bank is the Managing Director and Chief Executive Officer, Mr. James McMurdo, from Goldman Sachs next to him, Chief Executive Officer in Australia and New Zealand, Mr. Simon Rothery and from Macquarie Capital, the Australian and New Zealand head, Mr. Robin Bishop.

Before we start the Q and A there are some ground rules, we will take questions both from the room and over the phone, if you have a question in the room can you please raise your hand and we have a couple of microphones circulating, a microphone will be brought to you I will then nominate you in turn and if you could please clearly introduce yourself, your organisation and importantly to whom you would like to direct your question.

We have around 20 minutes for Q and A, can I now please invite the first question.

JOURNALIST: Greg Roberts, Australian Associated Press. Just with the words pending market conditions, the current situation, the current volatility, is that something that would make that anxious about trading if that doesn't change soon?

MATHIAS CORMANN: I might ask the JLM's to answer that question.

JAMES MCMURDO: Ok, I'll go. Look obviously volatility last week was pretty pronounced, we are watching that, but at the same time we have had very, very strong response to the marketing campaign so far, you have seen the number of people who have pre-registered has been quite strong, 750,000 and the institutional response, both locally and offshore has been exceptionally strong.

MATHIAS CORMANN: If I might just also add here, from the Governments point of view, we have obviously been acting on advice, we have monitored very carefully what the market conditions are before making the decision to proceed with the sale, we've acted on advice from our joint lead managers that market conditions are right to proceed with the sale right now, which is why we're proceeding today. As indicated certainly the strong interest in the context of the pre-registration period was very pleasing in that context. I might just add one more point here, we are maintaining flexibility obviously all throughout the sale process. If there was an unexpected deterioration in market conditions, the Government can make relevant decisions to adjust either the quantum or other aspect of the sale process at any one point of the process.

BRIAN TYSON: Thank you, another question please.

JOURNALIST: Hi George, John Durie from The Australian. I've only just had a quick look at the figures, but it looks like operating profit in financial year 2014 is down a fair bit from the previous year. Could you explain why that is, please?

GEORGE SAVVIDES: In the stat accounts you'll see the aggregate, that we also removed in our restructuring costs our - the former immigration contract, which is not part of our future. So the results that you'll see in the prospectus, in terms of removing the one-off, show a very steady growth in our core business, which is our private health insurance business. It dominates our profit-making and that is the basis upon which we're projecting the future.

JOURNALIST: Hi, Neal Woolrich from the ABC. This is a question for the joint lead managers as well. I see the indicative price earnings ratio is 16 to 21 times so, just on that basis, it looks fairly fully priced. Are you sort of - in the current environment as well, with the current market conditions, are you risking pricing some people out of this prospectus?

GEORGE SAVVIDES: I think as James alluded to, the price range as been set based on very strong feedback that we've had from the institutional and the retail market today including the level of pre-registrations and also feedback from the retail brokers and international and domestic institutions. The JLMs have also put out pre-offer research and we've had feedback again from institutions on the back of that research and the price range that has been set is within the boundaries of the research that has been put out from the Joint Lead Managers. You've also got a health care sector which has both publically listed private health insurance stocks and health sector stocks and we think that the range that we've set for Medibank is indicative of the sector.

BRIAN TYSON: Are there any more questions from the room? We have a number of people on the line as well, but we'll take ones from the room.

JOURNALIST: Just quickly, in terms of that strong interest, how much foreign interest does that include?

GEORGE SAVVIDES: Well obviously the retail pre-registration is all domestic Australian residents. There is a roadshow about to begin, with our Chief Executive about to head off for a four week institutional roadshow and that will dictate the level foreign interest. There are obviously restrictions on individual foreign ownership, but we expect a lot of interest from offshore.
It's a large company, by any standard, it's a highly performing company, it's a very attractive sector, so we're very confident of getting a strong, institutional interest from offshore. But, equally, we think this is very much down the fairway for Australian institutions to invest and Australian retail. So I think there'll be a strong interest from all sorts.

MATHIAS CORMANN: And well importantly, just to add here, the pre-prospectus research was obviously also informed by the traditional non-deal roadshow which involved a lot of interaction with investors overseas. The important point here to make though again also is that in the Medibank Private Sale Act which governs the sale process there is a limit of 15 per cent for individual investor ownership so that obviously will put a cap on how much any individual invests whether domestic or foreign can invest in Medibank Private.

BRIAN TYSON: Another question from the room.

JOURNALIST: Thanks. Thank you. It's Helen Brown, ABC News. Also I'd like to ask the advisors, you've talked about the strong institutional interest from offshore. I'm wondering about - with this roadshow coming up - what kind of interest do you think you will get from the domestic sphere and the $2 cap, do you think that will entice people to the offer?

JAMES MCMURDO: Well the $2 cap gives a cap for retail so it can't be any higher for retail that's important so people know the maximum amount they can be paying. In terms of the global interest, it has been very very strong. We have a very comprehensive roadshow booked, both domestically and offshore so we expect strong demand from offshore and we have good engagement and strong interest domestically from the institutional market.

JOURNALIST: So sorry, to follow up what is the interest from offshore [ inaudible] is it something specifically for an Australian investor?

JAMES MCMURDO: I think they are very familiar with the Australian healthcare system. The hold it in high regard. It's been very very successful place for people to have invested and that's probably the biggest theme that we've encountered.

SIMON ROTHERY: Yeah I think the structure of the healthcare sector and the private health insurance business in Australia relative for example to the US system is very attractive to offshore investors.

BRIAN TYSON: Thank you, another question from the room?

JOURNALIST: Hi it's Pat McGrath also from the ABC, there's a few of us. The promised and forecasted dividend for next year on earnings that haven't happened yet. What are the risks around making that kind of promise and Glenn Stevens recently commented on the rise of the high dividends obviously I think 80 per cent of net profit being promised as part of that dividend. What are the risks in terms of scaring off those investors who are looking for reinvestment rather than an attractive an attractive payout?

GEORGE SAVVIDES: Not sure I understood that question, sorry could you just restate that question?

JOURNALIST: What are the risks around promising, I think it was 4.9 per cent dividend through earnings that haven't occurred yet and is one of those risks scaring off investors who would prefer to see reinvestment rather than a dividend product?

GEORGE SAVVIDES: Well the prospectus will fully explain the broad risks around the basic parameter in which the forecast is produced. But obviously investors who are looking at an IPO of Medibank for the first time, an initial offering looking for some kind of commitment from the Board about the earnings going forward least for the period to June 30 next year and it is on that basis that we attract people to buy the stock.

MATHIAS CORMANN: Let me add here that the approach taken here in this prospectus is entirely consistent with usual practice. If this was any other IPO, other than a privatisation, it would be the exact same approach.

GEORGE SAVVIDES: And just on the question of the appeal of the dividend. I think it's probably fair to say that we believe a dividend yield in the order of 4 to 4.5 per cent fully franked is going to be very attractive for investors.

BRIAN TYSON: Take another question from the room.

JOURNALIST: This is a question for the JLMs. It is Brett Foley from Bloomberg News. Just in relation to that $2 cap for the retail. Can you talk us through the likelihood that the price aren't going to exceed the top of the indicative range and how that would work. What sort of conditions would lead to that?

SIMON ROTHERY: Well I think it's relatively straightforward. The institutional bookbuild has a price range, which is a structure that would allow them to bid over that range if they wish. If, ultimately, the price determined is above $2 from the bookbuild process, the institutional market will pay that higher price, but the retail market will be capped at $2.

JOURNALIST: And just a view from you, given market conditions, there's a likelihood you think, that that component will come in above that?

SIMON ROTHERY: We think there will be a lot of interest from institutional and retail investors but I think it is too early to speculate on what the final price will be.

JOURNALIST: Will that lead to more than $5.5 billion being made if

MATHIAS CORMANN: I think you are getting into hypotheticals now. Obviously the process that we are engaging in now is to allow market forces to determine the market value of Medibank Private. The book build process with institutional investors is an important part of that from the Government's point of view and that wouldn't surprise you. Any seller wants to get as much as possible in the context of selling a valuable asset. Now what we have said though in that context is that we are providing certainty for retail investors. No retail investor will pay more than $2 per share. But as far as investment by institutional investors is concerned, we will let market forces essentially play out and at the end of that process, we will make a determination based on the quality and the extent of the interest from institutional investors as to what the final price will be. But obviously from where we sit now, we are not in a position to speculate. We are at the beginning of the sale process.

BRIAN TYSON: Okay we will take some questions from over the phone now. Could I please remind you to introduce yourself through organisation and whom you would like to address the question. First question, please.

JOURNALIST: Thank you. I've got a question for the Minister. One of the big risks of this company is Government regulation, on two fronts. One, you could change various rebates and other measures which could damage this company incredibly. The other one is that you could actually do something proactive to make the level of private health insurance much higher. I think it's only 55% of the population. Minister, could you give us some reassurances you won't be changing regulations affecting this company for the next several years and also, would you be doing anything to try and promote the industry and get more people in private health insurance?

MATHIAS CORMANN: Well Tony I invite you to read the prospectus carefully. As you would expect us to do, relevant disclosures on these matters are in the prospectus. Let me make the general point that the current Australian Government of course is very supportive of private health insurance and the important role it plays as part of our broader health system in helping to facilitate affordable and timely access to high quality health care. What we have said and we are on the record as saying is that we would seek to restore the private health insurance rebate when it is fiscally responsible and fiscally affordable to do so. And beyond that of course at any one point in time Governments might consider reforms to improve the system. We don't have any reforms planned or underway that would in any way impact on the timing of this sale, but let me just make the general point and again all of this is covered in the prospectus that our Government is of course a Government that is strongly supportive of the role of private health insurance as part of our health system.

BRIAN TYSON: Another question over the phone.

JOURNALIST: Good morning. I wanted to direct this to the JLMs. At the top end of the price range, Medibank will be more expensive that the other health insurer, I wonder if you could outline why you think Medibank is worth more than NIB?

JAMES MCMURDO: Look I mean I think at this point we're probably not going to outline that and it's just going to be determined by the market. We do think there's potential for investors to value it at a premium to NIB. It's obviously a bigger business, it's a national business and feedback we've had has been very positive. The market will determine where the pricing will go to.

BRIAN TYSON: Okay, are there any final questions? Yes, one more.

JOURNALIST: Pat McGrath from the ABC again. Just as we flick through those risks there was no mention of potential legal action from policy holders who claim equity in Medibank. Is that the latest advice? Okay, I was reading it on my phone sorry I didn't see the exact details, what are the risks there?

MATHIAS CORMANN: Well let me just say on behalf of the Commonwealth, we are very confident in our legal position. Policy holders in Medibank Private purchase private health insurance. They don't purchase a share in Medibank Private. That is really the same with any other business. If you go to McDonalds and buy some burgers, you buy burgers you don't buy a share in McDonalds. Really here the people who purchase private health insurance with Medibank Private purchase private health cover. All of the shares in Medibank Private are held by the Commonwealth and the Commonwealth is entitled to sell those shares.

BRIAN TYSON: Last question.

JOURNALIST: Neal Woolrich from the ABC again. Question for Mr Savvides. George I think you mentioned before, you lead the company for 13 years. I suppose once you become a publically listed company, there corporate governance – 10 years. What are your own plans as far as your on succession plans.

GEORGE SAVVIDES: Well we certainly are investing in succession planning. We've got a very talented team of executives in the business. It's been a delight to have been at the lead of this business for the period of 13 years. I am contracted to go forward and to deliver the promises that were made in the prospectus - implied in the prospectus. I'll be there to make sure the shareholders get the returns that they expect in buying shares in Medibank.

BRIAN TYSON: Thank you everyone. That concludes this morning's event. I would like to thank you all again for coming and have a good morning. Thank you.