26 Mar 2014

Abbott selling Medibank Private

7:12 pm on 26 March 2014

The Australian Government will go ahead with the multi-billion-dollar sale of the nation's biggest health insurer Medibank Private.

Finance Minister Mathias Cormann has announced the Government-owned company will be sold through an initial public offering in the next financial year, 2014-15.

A woman walks past a Medibank Private office in Sydney.

A woman walks past a Medibank Private office in Sydney. Photo: AFP

He said the details were yet to be finalised, but that an independent scoping study had found no evidence that insurance premiums would increase as a result of the privatisation.

The Government has previously said it wanted to sell Medibank Private at the "right time" to maximise the sale price.

But Senator Cormann would not say how much he thought the insurer was worth.

"It wouldn't be appropriate for me to speculate on what sale price may or may not be achieved," he said.

"I'm not going to put a figure on it. Obviously, our objective is to maximise net proceeds from the sale."

He said that no one investor would be able to buy more than a 15 per cent share in the insurer, as stipulated in the Medibank Sale Act passed by Parliament in 2006.

Medibank was valued then by the Howard government at more than $A4 billion but the price has more recently been estimated at around half that.

Whatever the proceeds, Senator Cormann said the Government wants to spend the earnings on infrastructure.

"Our stated intention is to recycle the capital that is freed up from the sale of Medibank to invest in productivity enhancing infrastructure," the Minister said.

But the proposed purchase would be revealed only in the 13 May budget, he added.

Medibank's chairwoman Elizabeth Alexander has welcomed the Government's decision.

"To our many customers, please be assured we remain focused on delivering excellent value and service," she said in a statement.

The Finance Minister said the study had confirmed the Coalition's view that there was no "compelling" reason for the Government to be in the health insurance business.

He said it also would remove the "inherent conflict" posed by the Government's involvement as both market regulator and market participant.