The Australian Prudential Regulation Authority (APRA) has released the quarterly private health insurance (PHI) publications for December 2020, summarising the industry's key financial and membership statistics.
Like other industries, the PHI industry was hit hard by the COVID-19 pandemic last year, with negligible premium growth and weaker investment earnings leading to a drop in profit.
APRA revealed that net margins dropped by 2.0 percentage points to 1.9% in the year ended December 31, 2020, mainly due to the deferral of the April 2020 premium increases and other concessions provided to policyholders.
Investment earnings were significantly weaker than in the previous 12 months, reflecting the negative impacts of the COVID-19-driven market volatility in the earlier part of the year. As a result, industry net profit after tax dropped by 61.2% to $558.2 million.
The industry continued to take a hit from the unstable environment in the fourth quarter of the year, with hospital utilisation remaining below pre-COVID-19 levels contributing to limited claims growth (up 1.6% to $5.7 billion).
Meanwhile, an increase in premium revenue (up 4.0%) following the October 2020 price increase, and stronger investment earnings due to stronger performance by equities led to increased profits during the quarter, improving gross margins.
APRA also reported a small increase in membership levels in the PHI industry, with hospital membership growing by 34,801 persons after increasing by 104,106 persons in the previous quarter.