A Risk Analysis Of Medibank Private Health Insurance Company In Comparison With QBE Insurance Group

Overview of Medibank Services

Medibank is considered has one of the best private health insurance company operating in Australia. Some of the main noted services has been seen to be taken into consideration with online health, telephone and initiatives for coaching programs in Australia. The important form of the investment activities of the company is seen to be taken into account with the investment activity in the community programs. The various types of the investment activities have been further seen to be based on the support provided to the local programs for promoting child healthcare activities. Some of the important aspects of the report has been able to cover risk analysis, evaluation of risks and control environment. The several types of the aspects of the executive report are further compared with QBE Insurance Group (Cannon & Bedard, 2017).

As per the capital management and dividends statements it is identified that the various type of the profile maintained for the strong financial risk profile are seen to be conducive to meet the financial commitments. From the risk analysis facts given in the annual report of the company it is discerned that the company’s total health insurance business related to the capital is seen to be business-related capital of 13.9 percent of premium revenue. Some of the inherent material business risks of the company has been seen to be taken into account with healthcare costs and utilisation, competition and customer retention, product pricing and design, improper claims, capital management, investment returns, healthcare provider agreements, information technology and regulation (Dennis, 2015). 

Inherent Risk	Control Measures
Increasing nature of the health care cost and utilisation are seen to be based on the several types of the factors which is related to the increasing healthcare costs and effect on the product margin. This has seen to erode the various type of the values which is seen to be related to the reducing cover (Hu, Chen, & We, 2016). Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Medibank is seen to be prompt enough for addressing the long-term affordability of the customer’s approach which has stated with the long-term affordability for the customers. The private health insurers and comparison of the data is done in the website, competing to attract and retain the members on price, channels and services.
The new entrants are seen to be having the option for partnering with the existing participants, which is major threat to the insurance business in Medibank	Medibank is seen to be continually assessing the product and the channel mix for the optimisation of the margins which is seen to be based on the ensuring competitive approach (Rathnayaka, Khan, & Amyotte, 2014).
The different types of the products may at times get mispriced or incorrectly designed which will be subject to government approval.	The product profitability is seen to be closely monitored and compared with the actuarially-derived costings.
The various types of the improper claims for the material source is further seen to be having several types of misrepresentation associated to the fraudulent and erroneous health claims done by the members and the service providers.	The company is able to manage such risk with payment integrity program focusing on the identification, recovery, prevention and the recovery of the improper claims (Hosseinpour & Jans, 2016).
The capital management team of the Medibank is seen to provide the significant nature of the factors resulted from investment portfolio which is seen to be subject to ten oral market risks.	These types of the market risks have been further seen to be classified with the interest exchange rates and market volatility which can have a significant effect on the income volatility. The company is able to manage such risk with the use of capital and investments which are seen to be in line with the varied factors associated to the risk appetite and investment (Habib, Jiang, Bhuiyan, & Islam, 2014). In addition, this, Medibank strives to reach the agreement of the risk based on the attaining a certain agreement with the providers, contingency plans which are seen to be in favour with the negotiation scenarios.
The information technology for Medibank has been seen to be prone to cyber-attacks and failure in the critical data, systems and processes.	The IT controls are under continuous review which are protected with the use of response tools and preventive measures. The government regulation and policy is further seen to be susceptible to changes potentially decreasing the effectiveness of the regulatory incentives resulting in the members reducing level of cover (Glover, Taylor, & Wu, 2017).

The risk management framework for Medibank is seen to clearly set out with the number of the factors which are clearly defined criteria for analysis. The evaluation and the prioritisation is done as per material business risks. Some of the main factors are included with the systematic risk consequence in compare to the impact on the clinical governance, safety, position, financial performance and health. The company is also able to set out the main criteria for assessment of the effectiveness of the control environment (Khalil, Saffar, & Trabelsi, 2015).

QBE Insurance Group Limited is considered as Australia’s one of the largest global insurers. The company has provided the different aspects for serving in areas such as “Australia, America, Europe and Asia Pacific region”. The financial ratio analysis is computed as per profitability, liquidity and Ratio for leverage and operating margin Analysis.  QBE is considered as the main competitor for Medibank (Kachelmeier, Majors, & Williamson, 2014). 

Profitability Ratio Analysis: –
	Medibank	QBE
Particulars	2016	2015	2014	2016	2015	2014
Revenue (A)	6741.8	5934.8	5648.7	14276	14922	16521
Net Profit/Loss (D)	417.6	285.3	130.8	844	687	742
Common Stock(H)	1579	1442	1394	10334	10560	11082
Net Profit Margin (D/A)	6.19%	4.81%	2.32%	5.91%	4.60%	4.49%
Return on Equity (A/H))	26%	20%	9.38%	8%	7%	7%

Investment Activities of Medibank

Based on the return on equity analysis Medibank is seen to be in a slightly better position in terms of return on equity. The competitor company QBE is able to achieve only 8% in 2014, 7% in 2015 and 7% in 2016. In compare to this Medibank has achieved 20% profitability ratio in 2015 and 26% profitability ratio in 2016.

The net profit margin analysis clearly shows that Medibank is in a better position in compare to its competitors. This is seen with the increasing net profit margin of 2.32% in 2014, 4.81% in 2015 and 6.19 in 2016. The risk of Medibank in terms of the Medibank is seen to be comparatively lesser than QBE insurance.

c) Short-Term Liquidity Ratio Analysis: –
	Medibank	QBE
	2016	2015	2014	2016	2015	2014
Total Current Assets (A)	2812.5	2726.6	2557.5	30103	31677	33336
Total Current Liabilities (F)	1518.5	1535	1463.9	31249	31616	33918
Current Ratio (A/F)	1.85	1.78	1.75	0.96	1.00	0.98

The short-term liquidity analysis depictions have been further able to show that Medibank has higher assets to cover the liabilities. This is seen to be evident with 1.75 in 2014, 1.78 in 2015 and 1.85 in 2016. It needs to be further discerned that the competitors company QBE has not been able to meet the liability requirement with only 0.96 current ratio in 2016. 

Ratio for leverage and operating margin Analysis: –
	Medibank	QBE
	2016	2015	2014	2016	2015	2014
Revenue (C)	6,742	5,935	5,649	14,276	14,922	16,521
Net Profit/Loss (D)	418	285	131	844	687	742
Total Liabilities (K)	1,688	1,699	1,580	31,249	31,616	33,918
Shareholder’s Equity (J)	1,579	1,442	1,394	10,334	10,560	11,082
Operating Income (L)	352	377	313	559	-16	332
Total Current Assets (A)	2,813	2,727	2,558	30,103	31,677	33,336
Leverage Ratio (J/K)	1.07	1.18	1.13	3.02	2.99	3.06
Operating Margin (L/C)	5.23%	6.35%	5.54%	3.92%	-0.11%	2.01%

The depictions made as per the leverage ratio has shown that QBE Insurance is in a better position. This is evident with 3.06 in 2014, 2.99 in 2015 and 3.02 in 2016. The Medibank leverage ratio on the other hand is seen to be decreasing with 1.13 in 2014, 1.18 in 2015 and 1.07 in 2016 (Curtis, Humphrey, & Turley, 2016).

Some of the other ration interpretations are stated below as follows:

Efficiency Ratio Analysis: –
	Medibank	QBE
	2016	2015	2014	2016	2015	2014
Revenue	6,742	5,935	5,649	14,276	14,922	16,521
Expenses	6265.3	6285	6279.1	1922	2137	2274
Efficiency Ratio	93%	106%	111%	13%	14%	14%

Interest Coverage Ratio Analysis: –
	Medibank	QBE
	2016	2015	2014	2016	2015	2014
EBIT	546	397	217	1,072	953	931
Interest Expenses	128.7	111.3	86.1	228	260	182
Efficiency Ratio	24%	28%	40%	21%	27%	20%

The depictions made on the operating margin is further able to show that Medibank is in a better position than its competitors. This is evident with 2.01% in 2014, 1.11% in 2015 and 3.92% in 2016. It is seen that the Medibank has a higher operating margin.

Earnings per share Analysis: –
	Medibank	QBE
	2016	2015	2014	2016	2015	2014
Basic EPS	15	10.4	4.7	62	50	57

Solvency Ratio Analysis: –
	Medibank	QBE
	2016	2015	2014	2016	2015	2014
Long Term Debt	169	164	117	3,474	3,529	3,581
Equity	1578.7	1442	1393.9	10334	10560	11082
Debt Equity Ratio	9.34	8.80	11.96	2.97	2.99	3.09

Conclusion

As per the depictions made in the study Medibank is seen to be prompt enough for addressing the long-term affordability of the customer’s approach which is stated with the long-term affordability for the customers. The private health insurers and comparison of the data is seen to be done in the website competing to attract and retain the members on price, channels and services.  Medibank strives to reach the agreement of the risk based on the attaining a certain agreement with the providers, contingency plans which are seen to be in favour with the negotiation scenarios. The information technology for Medibank is seen to be prone to cyber-attacks and failure in the critical data, systems and processes.

References

Cannon, N. H., & Bedard, J. C. (2017). Auditing challenging fair value measurements: Evidence from the field. Accounting Review, 92(4), 81–114. https://doi.org/10.2308/accr-51569

Curtis, E., Humphrey, C., & Turley, W. S. (2016). Standards of innovation in auditing. Auditing, 35(3), 75–98. https://doi.org/10.2308/ajpt-51462

Dennis, I. (2015). Auditing theory. Auditing Theory. https://doi.org/10.4324/9781315762395

Glover, S. M., Taylor, M. H., & Wu, Y. J. (2017). Current practices and challenges in auditing fair value measurements and complex estimates: Implications for auditing standards and the academy. Auditing, 36(1), 63–84. https://doi.org/10.2308/ajpt-51514

Habib, A., Jiang, H., Bhuiyan, M. B. U., & Islam, A. (2014). Litigation risk, financial reporting and auditing: A survey of the literature. Research in Accounting Regulation, 26(2), 145–163. https://doi.org/10.1016/j.racreg.2014.09.005

Hosseinpour, M., & Jans, M. (2016). Categorizing identified deviations for auditing. In CEUR Workshop Proceedings (Vol. 1757, pp. 125–129).

Hu, K. H., Chen, F. H., & We, W. J. (2016). Exploring the key risk factors for application of cloud computing in auditing. Entropy, 18(8). https://doi.org/10.3390/e18080401

Kachelmeier, S. J., Majors, T., & Williamson, M. G. (2014). Does intent modify risk-based auditing? Accounting Review, 89(6), 2181–2201. https://doi.org/10.2308/accr-50835

Khalil, S., Saffar, W., & Trabelsi, S. (2015). Disclosure Standards, Auditing Infrastructure, and Bribery Mitigation. Journal of Business Ethics, 132(2), 379–399. https://doi.org/10.1007/s10551-014-2321-6

Rathnayaka, S., Khan, F., & Amyotte, P. (2014). Risk-based process plant design considering inherent safety. Safety Science, 70, 438–464. https://doi.org/10.1016/j.ssci.2014.06.004