Medibank Private Limited (MPL) Earnings Call Transcript

Good morning, everyone. My name is Mike Wilkins. And on behalf of Medibank's Board of Directors, I'm pleased to welcome you to our Annual General Meeting for 2025 here in Melbourne. Before we begin, I want to acknowledge the traditional custodians of the land we gather on today, the Wurundjeri Woi-wurrung people, and pay my respects to their elders past and present. I also extend that respect to all aboriginal and Torres Strait Islander people across the many nations where Medibank's customers, people and communities live and work. At Medibank, we recognize the depth of cultural knowledge, care and custodianship that First Nations people have carried for tens of thousands of years. Their enduring connection to country continues to shape how we think about health and well-being, community responsibility. We're committed to building trusted relationships with First Nations people by listening deeply partnering with respect and taking meaningful action that strengthens cultural safety, advances health equity, improves health and well-being and supports self-determination. May this meeting be guided by respect, openness and a shared commitment to creating a healthy future for all people who call our great Country home. Today's meeting is being held in a hybrid format. So I'd like to thank all shareholders for joining us today, both those of you in the room and those joining virtually through our live stream. Welcome. A quorum of members is present, and I now formally declare the meeting open. The Notice of Meeting has been sent to members, and I'll take it as read. Joining me on the stage today is the Medibank Board of Directors, and I'd like to introduce them to you. On your far left, my far right, is Linda Nicholls, who is Chair of the Investment and Capital Committee seated next to Jay Weatherill. Jay is sitting next to Kathryn Fagg, who's standing for reelection today. And of course, sitting next to Kathryn is our Chief Executive Officer, David Koczkar. On your far right, my far left is David Fagan, who is Chair of the Risk Management Committee; and he's sitting next to Gerard Dalbosco, who's Chair of the Audit Committee. Sitting next to Gerard is Tracey Batten, who is Chair of the Board's People and Remuneration Committee. And sitting next to Tracey is Peter Everingham, who is also standing for reelection today. Finally, to your immediate right of me is our Company Secretary, Mei Ramsay. Also joining us today in the front row of the auditorium seating are the 2 Board-endorsed candidates standing for election as Directors today, namely Lisa McIntyre and Jacqueline Hey. At this stage of the meeting, I'd like to briefly run through some procedural details. For those attending virtually, if you experience any technical difficulties during the meeting, please call the number on the screen. A recording will be also available on our website after the meeting. If the AGM needs to be adjourned at any time due to technical or other reasons, we'll provide further instructions via information on our website and the ASX. To provide shareholders the greatest possible opportunity to vote, I now formally open the polls on all resolutions. I also now formally cast all votes for proxies I hold on all resolutions in accordance with the directions by shareholders or as set out in the Notice of Meeting. Medibank's share registry, Computershare, has given me a report of the proxy voting instructions received for items 2 to 7. As advised in the proxy form, open proxy votes held by me as Chair of the meeting on all resolutions have been cast in favor of each resolution and the indicative results of the proxies received on Items 2 to 7 are now displayed on the screen behind me. I'll provide more detailed instructions regarding voting and the asking of questions later in the meeting. What I'd like to do now is to begin with some reflections on our 2025 financial performance, and I'll then ask David for his comments. The past decade has been one of great transition for Medibank from government-owned to publicly listed, from traditional services to more digital solutions and from health insurer to health company. What's remained constant, however, has been our work to deliver on our purpose, helping Australians live healthier, better lives. This purpose came into sharper focus this financial year, as many people continued to face daily cost of living pressures and economic uncertainty, while still choosing to prioritize their health and well-being. We've maintained our focus on delivering more value to our customers through our products and services. This year, the Board oversaw the finalization of our COVID customer giveback program with a final cash give back to customers of $228 million. This brings our total COVID support package to $1.71 billion, the largest of any health insurer in Australia, and it fulfills our promise made 5 years ago that we would not profit from COVID. We did that because it was the right thing to do and because our customers deserve a health partner that supports their well-being, both physically and mentally. We've kept premium increases below inflation and well below those of our major competitors. We've made every day health services more affordable and accessible for our customers through our Members Choice Advantage and no-gap networks, 24/7 online health support services and our Live Better rewards program. Customers have recognized our commitment to deliver what they want most with more people be they families, students or workers choosing Medibank or AHM to support their health. We saw continued growth in both the resident and nonresident health insurance businesses with health insurance operating profit up 7.1% to $741.5 million. Our Medibank Health business is now contributing around 10% of our earnings, with segment profit up 27% to $76.7 million. Medibank Group continues to be a resilient business with a strong capital position, and this year, shareholders received dividends of $0.18 per share fully franked, and that was an 8.4% increase on the 2024 financial year. Ladies and gentlemen, Australia's health system is one of the best in the world, but it's under a great deal of pressure from an aging population, the prevalence of chronic disease and ongoing workforce challenges. It must change if it's to continue to support our community both now and into the future. The Board is proud that Medibank is helping lead the health transition. We're investing $50 million over 5 years to improve mental health prevention, access and innovation. We've expanded our range of prevention programs designed to help our customers both be better and stay better. And this year, we have seen enrollments double across our clinician-led and everyday well-being programs. Our no-gap program has grown to 41 sites nationally, helping more than 10,000 Medibank customers save over $7 million in out-of-pocket costs to date. And this year, we partnered with doctors to open Australia's first no-gap private hospital in Melbourne, Adeney Private Hospital. We've also been reinventing health care delivery in South Australia through Amplar Health's innovative programs for SA Health, providing hospital care in hotel and home environments, which have supported 22,000 public patients since it started 4 years ago. These aren't isolated initiatives. They're part of a broader shift that we're driving in health from a system built around treatment to one focused on prevention, a transition from care delivered only in hospitals to being provided in homes and communities, a move to virtual health and personalized care options that give patients more choice and a focus on care built around people and their individual needs. The needs of our customers and patients are driving our strategy to grow as a health company. We've made targeted investments in well-being, primary care and hospital and acute care services, including our most recent announcement earlier this month about the agreement to acquire the Better Medical network of GP clinics and medical centers. This complements our majority interest in MyHealth Medical Group, which has a network of 105 primary care clinics across Eastern Australia. We've now received clearance from the ACCC for the Better Medical acquisition and subject to the usual conditions, completion is expected by early 2026. By meeting more of the health and well-being needs of our customers, we're strengthening our business, delivering meaningful change to our health system and creating greater value for shareholders. In addition to the ongoing investments to innovate and implement change that we've made within our business, Medibank continues to work closely with governments and health stakeholders to influence health policy reform in support of both the public and private systems and to drive the health transition. To better enable our people to lead this change, we've continued to challenge traditional ways of working to support better decision-making for our customers, giving our people greater autonomy, flexibility and accountability. More than 500 people from across the business are now participating in our 4-day work week trial. To date, independent research by Macquarie University into the trial shows significant and sustained improvements in employee engagement, job satisfaction and participant health and well-being whilst also maintaining business performance and customer outcomes. Throughout the year, the Board continued to work closely with David and the executive leadership team on Medibank's strategic priorities and programs, customer focus and governance, including overseeing the group's updated risk management strategy and its refreshed risk culture framework. As well, the Board remained focused on our environmental, social and governance strategy, including preparation for reporting against the Australian sustainability reporting standards in 2026. Our commitment to sustainability is embedded in our 2030 vision to deliver the best health and well-being for Australia, and it's implied throughout the day-to-day decisions we make across Medibank, AHM and Amplar Health. In June 2025, we marked the achievement of reaching our net 0 emissions targets for our Scope 1 and Scope 2 operations that we set in the 2021 financial year. However, given the changes in our business since that target was set, we've now developed an updated baseline for greenhouse gas emissions, and we're reassessing our targets and pathway to account for this. We also remain very committed to advancing diversity and inclusion across the business, as we believe that Medibank is a stronger business and a better business when it reflects the Australian communities and the customers that we support. As part of that commitment, we continue targeting at least 40% female representation across the group and senior executive teams and on our Board. Ladies and gentlemen, today marks the final meeting for 2 of our long-standing Board directors, Linda Nicholls and David Fagan, both of whom will retire at the end of this meeting. Linda and David played an integral role in Medibank's history over the past decade, helping to guide the company's transition from government ownership to the health company that it is today. And I want to recognize the important contributions that they've made to Medibank and I thank them sincerely for their service to our company. We wish both of them well for their future endeavors. As well, last week, Jay Weatherill was appointed as Australia's next High Commissioner to the United Kingdom; and as a consequence, he will retire from the Board on the 31st of December of this year. With his deep expertise in public policy and reform, Jay has brought meaningful insight and impact to our work, and he's made a valuable contribution to Medibank. And on behalf of the Board and on behalf of you, our shareholders, I'd like to congratulate Jay on his appointment. Well done, Jay. We continue to strengthen the Board to support the future needs of the business with experienced leadership and the right mix of skills. And so I'm very pleased that the Board is recommending shareholders vote for the election of two highly credentialed and experienced directors, Dr. Lisa McIntyre and Jacqueline Hey, both of whom bring a wealth of experience across financial services, consumer businesses, technology and health. Details of how to vote will be provided later in the meeting. Next year, Medibank turns 50. This is a milestone that invites reflection and ambition. We began as a government-owned insurer. Today, we're a health company helping millions of Australians live healthier lives. As we look ahead, our focus is clear: to continue supporting our customers, expanding our role in health and accelerating the health transition to a sustainable, inclusive and personalized health care system. On behalf of the Board, I want to thank our people for their ongoing work in support of our vision and to recognize the leadership of David Koczkar and his executive team. And to you, our shareholders, thank you for your continued support. Together, we're building a stronger Medibank and a healthy Australia. I'll now ask David to give us an update on Medibank's strategy, directions and insights into our current performance. David?

Thank you, Mike, and good morning to everyone joining us in Melbourne and on the live stream. I'll begin by also acknowledging the traditional owners and custodians of country throughout Australia and their connections to land, sea and community and pay my respects to their elders past, present and emerging. This morning, I'll share a few highlights from the past year, comment on the market and then talk about our strategy and our recent performance. We know many people continue to worry about the day-to-day cost of living pressures they face and feel more uncertain about the broader economy and what it might mean for their future. We see it as our essential role to drive the change required so health care can remain affordable and accessible for our customers, for our patients, and the wider community we serve. It's why we are leading the health transition. First and foremost, we have continued to deliver where it matters most for our customers. We stayed focused on improving value, meeting more of their health needs and supporting our health system's future. Our customers earned around $33 million in Live Better Rewards and save more than $28 million in out-of-pocket costs through our Members' Choice Advantage and no-gap networks. And as Mike said, our premium increase was significantly lower than our major competitors. And we kept our promise to not profit from COVID. We've worked hard to support everyday well-being by giving customers access to a wider array of prevention programs and virtual services. Now more than ever, we are playing an even greater role in our customers' health with more than half of Medibank policyholders engaging with us in their health and well-being. And because we're giving customers more of the support they want, engagement with these services is rising and customer efficacy is at a 3-year high. This is reflected in our better retention rates, which have outperformed the market this year. Our credibility as a trusted health partner to millions of customers is evident. And we have an exciting ambition to support even more people across Australia with their health and well-being as we accelerate our growth. Last month, we hosted our first health immersion showcasing Medibank as a health leader and detailing our new FY '30 aspirations. This includes our aim to double the number of people we engage with in health and well-being to around 10 million. It's a tangible marker for our 2030 vision to deliver the best health and well-being for Australia. Our unwavering focus on our customers and disciplined approach to running our business is driving continued strong growth momentum. While the economic environment remains challenging, resident market growth continues to be buoyant. Those new to the industry and younger people are driving sector growth, which is important for long-term sustainability. However, the industry is still seeing consequences of unsustainable competitive activity over the past 2 years. Switching rates are up with many funds acquiring customers through high-cost aggregated channels and lapse rates have increased. These higher cost tactics have pushed up operating expenses and premium increases for many funds. Unlike others, we've stayed disciplined in how we've grown, and we have positive momentum in our core business. In FY '25, we grew net resident policyholders by 27,900 or 1.4%, double last year's rate. And in nonresident, we added 10,500 policy units, up 3.1%. And we've continued to improve how we operate. Over the past 8 years, taking out more than $122 million in expenses to keep our costs down. This has kept our management expense ratio among the lowest in the market for a decade. As Mike referenced, we saw strong momentum in our Medibank Health business this year. Given the growth and the importance of this segment, the time is right to set new aspirations for our next phase. By FY '30, we aim to significantly increase Medibank Health segment earnings to at least $200 million. And through this growth, we aim to grow policyholder market share each year in a disciplined way to at least 26.8% in FY '30. And we are prepared to invest further in our health insurance business to increase this aspiration where this makes commercial sense. Integral to our strategy is continuing to strengthen our foundations, so we can grow fast and safe. We are continuing to uplift our approach to risk management, investing in more flexible technology platforms and scalable resilient security capabilities. For our people, 2025 has been a year of transformation, as we continue to reinvent work. Our Medibank customer service teams embedded our approach to supporting customers locally across the country. These 34 teams aren't just local, they are empowered to support customers through their whole experience, driving change and improvements for their communities. AHM has also transformed its customer service, so team members are more able to resolve queries and manage follow-up, which has seen a very positive impact on our people and customers. And we launched our Amplar Health Locals program bringing together clinical, nursing and allied health professionals into community-based teams. These self-managed teams are providing greater continuity of care for our patients. And lastly, we're proudly driving the change needed to support the health system for the long term through our ongoing investment in the health transition. We all agree Australia has one of the best health systems in the world, but it's under pressure. People are expecting more and are needing more support in their health and change can't come fast enough. Over the past decade, we've invested more than $300 million in health services to drive the health transition and deliver more value for customers. As one of Australia's largest health companies, we recognize prevention is key to improving outcomes and reducing costs over time. It's why our investment in prevention accounts for nearly half the industry's total spend. In FY '25, we expanded our primary care business and enhanced our virtual health capabilities and scaled our proactive care. Earlier this month, we announced we entered into an agreement to acquire Better Medical, a network of 61 GP and medical clinics in Victoria, Queensland, South Australia and Tasmania. It marks the next stage in Medibank's almost 20-year journey of investing in health services. It builds upon the work we've been doing with MyHealth to enable GPs and their teams to provide more proactive and connected care to their patients, including the new model of primary care, we're trialing across 3 MyHealth clinics in Western Sydney. With strong early results, we believe this model could be scaled nationally under the My Medicare Reform agenda. While hospitals will remain essential for acute care within the next decade, home and community will become the center of health. We are well placed to support this shift through our Amplar Health Network, already delivering local care at national scale. This year, Amplar saved around 177,000 hospital bed days through homecare equivalent to nearly 3 average sized private hospitals. And we continued supporting hospital partners to deliver more value and choice for customers. Our financial investment in hospital partnerships more than doubled from last year. In addition, we paid our partners almost $37 million during the year to fund strategic initiatives, to drive the health transition and enable more personalized models of care. Mike mentioned our work supporting the public system in Adelaide. As part of this, we began delivering an innovative out-of-hospital transition care service at a hotel on behalf of the South Australian government. Having visited the service last month, I can say it's not just a waiting room, it's a place where people get the care they need to get better and return to their home. And it's another example of how Medibank is driving the health transition and taking pressure off critical resources needed to support people with acute needs. And we are doing this because it's what our customers and partners want and it's what our health system needs. We are not just expanding in health, we're driving change within it across both private and public systems. And we are continuing to partner with others who share our commitment to driving the health transition. I will now share some insights into current market dynamics and our recent performance. Health care costs have continued to outstrip inflation and productivity in health care, like many sectors across the country, is sluggish, with Australia slow to adopt many of the health trends we see across the world. This reinforces the need to continue to work together to drive the health transition so we can keep private health affordable and accessible. Despite cost of living pressures, the private health insurance industry has remained resilient, and we continue to anticipate moderating industry growth in FY '26 relative to FY '25. While there are signs of competitor intensity easing in some segments, switching levels remain elevated, and aggregator volumes have increased across the industry. In the first quarter of FY '26, we have maintained our disciplined approach to growth and delivered strong resident policyholder growth in line with expectations, as we aim to grow market share in a disciplined way, including further volume growth in the Medibank brand. Retention across both brands has remained strong, reflecting our continued focus on meeting the needs of our customers. As expected, hospital claims growth for this quarter has been impacted by private hospital arrangements that were negotiated in FY '25. Our FY '26 claims per policy unit growth outlook of 2.6% to 2.9% remains unchanged. Our nonresident business continues to perform well, with sustained customer growth in the first quarter of FY '26, and we are on track to deliver solid gross profit growth in FY '26. Medibank Health, which includes our well-being, primary care and Community & Acute Care segments remains on track to deliver low double-digit organic operating profit growth in FY '26. These services are well positioned in growing sectors with strong potential to serve more of our existing health insurance customers. And finally, we expect to complete the acquisition of Better Medical by early 2026. This will take our total M&A investment between FY '24 and FY '26 to $218 million, which is towards the top end of our stated $150 million to $250 million target range. We continue to explore further opportunities in our target segments where this creates long-term value. I'll end by restating what makes us different and how we create value. We support our customers across their whole journey in health, helping them be better, stay better and get better. But it's not just what we do, it's how we do it. By connecting the parts of our business, we deliver more than the sum of those parts, providing what customers want, building trust and growing as a health company. This has delivered long-term value for customers and shareholders, diversified earnings and built a more resilient business. This approach continues to drive our strategy. In summary, we are a strong, growing business, and we are excited about the future. Our insurance and health businesses offer clear pathways for future growth and value. And we will continue advocating for our customers and driving the health transition this country needs to improve productivity and keep our health system one of the best in the world. But we can't do this without our people. Together, we're aiming to be Australia's healthiest workplace. Our people are the backbone of Medibank, of AHM and of Amplar Health. Our teams work incredibly hard every day with energy and commitment for our customers and our purpose, and I thank them for their dedication. And of course, thank you to our shareholders for your ongoing support. Our passion to serve our customers is unwavering, and our commitment to the Medibank 2030 vision to create the best health and well-being for Australia continues to drive us forward. I'll now hand back to Mike. Thank you.

Well, thank you, David. We've now reached the formal business of our meeting. As today's meeting is being held both in person and virtually, I'll first run through the meeting procedures. As this is a shareholder meeting, only shareholders, their attorneys, proxies and corporate representatives may vote and ask questions. I'll now firstly go through the voting procedures. Those of you present in person who are entitled to vote have been provided a handheld device to cast your vote. Instructions on how to vote using the devices are on the screen behind me. Your smart card should already be in the device and a list of resolutions should be displayed on your keypad screen. Use the blue trackball to highlight the resolution you wish to vote on. To vote for the resolution, press the green square button; to vote against, press the red triangle or if you wish to abstain from voting, press the blue trackball. Once you've selected your voting option, you can move to the next resolution by scrolling with the blue trackball. If you need any assistance, please raise your device and a Lumi representative will assist you. Now for those attending virtually. If you're eligible to vote, a voting icon will appear on your screen's navigation menu. Once you click on this icon, you'll see the resolutions on your screen. To cast your vote, select one of the options: For, Against or Abstain, for each resolution. The selection will be highlighted and the vote is automatically recorded. There's no need to press a submit or enter button. But you do have the ability to change your vote at any time until I declare voting closed. There are 7 items of business before the company's meeting this morning, and these are set out in the Notice of Meeting, which you would have received. Items 2 to 7 are to be voted on and determined by a poll. As indicated earlier, the polls are open, and I would encourage you to vote early. The indicative results of the proxies received on items 2 to 7 are again displayed on the screen behind me. The polls will close shortly before the end of this meeting, and I'll give you advance notice ahead of the closing of voting. Later in the meeting, eligible persons attending in person and virtually will be given the opportunity to ask questions. For those attending in person today, you'll be entitled to ask a question if you hold a Lumi handheld device or a red card or a blue card provided by Computershare. If you'd like to ask a question later in the meeting, I'll invite you to move to one of the microphones around the meeting room. However, for now, please remain in your seats. Now for those attending virtually, if you wish to submit a written question, click the messaging icon, which can be found on the navigation menu on your screen. At the top, there will be an area to type in your question. Once you finish typing your question, press send. A copy of the submitted questions, along with any written responses from the Medibank AGM team can be viewed by selecting My Messages. I'll endeavor to address as many of the more frequently raised questions and comments as possible during the course of the meeting, and I'll either answer or pass the question to the person most appropriate to answer. In the interest of time, we may need to summarize questions that are particularly lengthy or moderate questions to avoid duplication. If you wish to ask an audio question, click the Request to Speak icon at the top right-hand corner of the broadcast window. You'll be redirected to a new page on which you will be able to confirm your name and enter the topic of your question. Click submit request and then click join queue to be connected and follow the audio prompts. If prompted, select allow in the pop-up to grant access to your microphone. You'll be introduced by the operator before you ask your question. While waiting in the queue, you'll still be able to hear the meeting. If you have a question about the virtual meeting technology, please contact the help line that's now displayed on your screen. For those attending in person today who have personal matters to discuss about your health insurance, please visit the information booth in the foyer and discuss this with a specialist adviser from either Medibank or AHM. And if you have a health-related question, members of our Amplar Health team are here also to help. Now let's move to the formal items of business. I'll now present all items of business and then provide an opportunity for questions after all items of business have been introduced. The first item of business is consideration of the financial statement and reports. This item isn't subject to a vote, and therefore, doesn't require you to cast a vote. The Medibank financial statements for the year ended 30 June 2025, the Director's report and the auditor's report were released to the ASX and published in the annual report and on the company's website. We'll take questions on this item following the introduction of all items of business. As usual, the company's auditor, PricewaterhouseCoopers, is represented today in the meeting room by Marcus Laithwaite, who is available to respond to questions about the conduct of the audit of the accounts. We'll now move on to items 2 through 5, which are the reelection of Kathryn Fagg and Peter Everingham, and the election of Lisa McIntyre and Jacqueline Hey as Non-Executive Directors. As stated in the Notice of Meeting, under our constitution, Kathryn and Peter retire at the end of this meeting and being eligible, offer themselves for reelection. Lisa and Jacqueline have been recommended for election by the Board to fill the vacancies arising upon the retirement of our long-serving Directors, Linda Nicholls and David Fagan at the conclusion of this meeting. Being eligible, Lisa and Jacqueline also offer themselves for election. The candidates won't be providing a formal address to the meeting today in relation to their reelection or election, but they will be available for questions during the discussion period later in the meeting. Biographies of each of the candidates is contained in the Notice of Meeting. Your Board, with each Director standing for reelection abstaining on the recommendations for their own reelection, recommends unanimously that you vote for the reelection or election of each candidate. Now moving to our sixth item of business, which relates to the remuneration report, which is put to the meeting in accordance with the Corporations Act. The resolution is to adopt the remuneration report for the year ended 30 June 2025. Medibank aims to reward executives fairly for delivering the company's strategy in a manner that meets community and customer expectations and delivers sustainable shareholder returns. The remuneration report provides extensive disclosure of Director and Executive remuneration and is set out on Pages 50 to 71 of our annual report. Under the Corporations Act, this vote is advisory only. However, as Directors, we give serious consideration to the voting results and comments made upon this item when we review the company's remuneration policies. The Board recommends unanimously that you vote to adopt the remuneration report. Now turning to Item 7. This resolution is to approve the grant of performance rights to David Koczkar, our Chief Executive Officer, to be issued under Medibank's 2026 long-term incentive plan. Medibank's long-term incentive plan is detailed in the remuneration report. It's designed to align the interest of the Chief Executive Officer with the interest of shareholders, and to this end, puts a significant portion of his remuneration at risk. The value of the rights proposed to be granted remains at 175% of the CEO's total fixed remuneration for the financial year ended 30 June 2026. Following the Board's annual review of the performance hurdles and vesting conditions attaching to the performance rights certain changes were made to the conditions and their corresponding weighting. The rights proposed to be granted along with details of the vesting conditions are set out in the Notice of Meeting. It's important to understand that the performance rights only vest and become available for conversion to Medibank shares for the Chief Executive on the achievement of performance hurdles, which are aligned with shareholder interests. If the performance hurdles are met at the end of the 3-year performance period ending on 30 June 2028, then the rights will vest. Any rights which vest will then be subject to a pre-exercise holding period of up to a further 3 years. Vested rights will be exercised automatically and convert to shares when the Chief Executive Officer -- which the Chief Executive Officer will receive in equal annual tranches over that 3-year holding period. The shares, which would be allocated on the exercise of vested rights, must be purchased on market. No dividends are paid on the rights. However, for the rights that are exercised, the Chief Executive will be granted additional Medibank shares equal in value as determined by the Board to the dividends that would have been paid during the period between the vesting date and the relevant exercise date on Medibank shares equal in number to the rights being exercised. Vested rights and shares granted remain subject to malus and clawback provisions, as outlined in the Notice of Meeting. Vesting outcome of the performance rights will be detailed in the remuneration report following the conclusion of the performance period on 30 June 2028. Any shares granted during the holding period will be detailed in the remuneration reports for the financial years ended on 30 June 2029 to 2031 inclusive. Your Board, other than David Koczkar, recommends unanimously that you vote in favor of this resolution.

We've now introduced all items of business, and we're ready to respond to questions. We'll first begin with questions from the meeting. If you hold a Lumi handheld device or a red card or a blue card provided by Computershare and you'd like to ask a question, please make your way to one of the microphones around the room. At the microphone, please provide your name to the attendant and wait for them to introduce you by name to the meeting. Once introduced, please ask your question clearly into the microphone. So we can enable as many people as possible to ask questions, please limit your questions to two and keep them short and concise. If you have further questions, we'll take questions from other shareholders, and we can return to your question. Are there any questions in the room? Microphone 1.

Chair, may I introduce Peter Aird from the Australian Shareholders Association.

Today, I hold proxies from 348 shareholders, almost 3 million shares. Over the last 3 years, you reported non-claim expenses have increased from 12.4% of revenue to 13.9% of revenue or by over $250 million. Whilst you report $10 million in savings, are your increases of non-claim expenses of concern?

No, I don't believe so, Mr. Aird. As David mentioned, we're very conscious about our cost base. So I think one of the key drivers of all of that, though, is for the first time during the 2025 financial year, we did consolidate the MyHealth business, which did add to the overall cost base of the organization. Previously, we had shareholdings in that, but it was equity accounted. So it was a single line item appearing in our income statement as opposed to now a full consolidation. I think that makes up most of that number.

Thank you. I was going to also acknowledge the work done by the retiring directors, David Fagan and Linda Nicholls, ensuring that Medibank has developed into a key business in the health area of Australia. So thank you for both of those work. One other question at this stage. You've indicated that you are using AI to assist with patient care. Given AI models have a tendency to hallucinate, while skilled humans remain control, how is the AI use managed and how our customers react?

Well, thank you for that question. I'll make a couple of comments and David may then speak to add to it. We believe that AI is a business productivity enabler, but it's people that still deliver, particularly for Medibank. What we have done as an organization though is we've set very clear policies and guardrails around where we will and will not use AI in our business. And we monitor those very, very closely. A couple of examples where we are using AI, which I think come to the benefit of our people: In terms of the Amplar health care work that we're doing in South Australia, our hospital in the home nurses are actually using AI to augment what they're doing in terms of wound care and assessing that, and we find that that's been greatly beneficial to our customers. Likewise, we're using AI to help our customers to navigate some of the more usual issues or questions that they have for Medibank. However, David, I don't know whether there's anything else you want to add to that?

No. Thanks, Mike. And thanks for the question. I think we've been using AI as part of our customer experience for more than 15 years, different types of technologies. Our philosophy is that they are going to support our people connecting with our customers and providing care for our patients. When you look at the increasing demands of health in the future, we simply won't have enough people to support the needs of the community. And so very much, it's about how we work with artificial intelligence and other technologies to support the care of our patients whilst being a human-to-human business. And I think that's an important path for us and we remain very careful about how we maintain the human involvement in that experience.

Thank you. I see we have question on Microphone 3.

Chair, may I introduce shareholder, [ Carol Jane ].

I'm asking a question about why you spend members' and shareholders' money duplicating services that already offered by the government. And I'm thinking in particular of your 24/7 Medibank mental health support line and your 24/7 Medibank nurse support line. There are already numerous governments supported help lines for both nursing, for example, nurse on-call and for mental health support. A quick Internet search, I've found 6 general mental health support lines, 15 more specific help lines for certain situations. Why are you offering these services when there's already a plethora of services already available to everyone, which are provided by the government.

Thank you for that. A couple of comments, if I can, on that. We believe, particularly with the investment that we're making over the next 5 years in mental health, that is something that is still lacking in terms of what the government is supporting with all of this. And we are looking to actually continue to support our Medibank and AHM customers through all of that process. Nurse on-call and doctor on-call, for that matter, additional services that are available to our customers, which we find beneficial to them and they get value from them. I would add to that, that in addition to providing those to our customers, we also are actually providing those services through a number of the areas that you talked about for the government. However, the demand for those services outstrips what our customers may want, so we wanted to make sure that we were providing first and foremost, for our customers.

Just a follow-up question. I do realize that you act as a subcontractor for providing some of those services to government. If your members do call your specific Medibank private services, are they just put through to a general call center and the person who answers the phone just answers it differently, depending upon what number it's come through? Or do you have specific dedicated staff to your Medibank private branded telephone support lines?

I'll pass that question to David, because I don't know the answer.

Yes. Thanks for the question. We have a different approach to our triage services if you're a Medibank customer or aging customer versus the provision of the services we provide to government contract. Certainly, if you're a Medibank customer, you'll be asked your membership number, and we are trying to provide a level of service that really actually our customers are looking for. That's quite separate from we would provide that service in the government contract where there are multiple providers supporting those government services.

Microphone 2.

Chairman, may I introduce [ Peter Ray ], shareholder.

I have a question in relation to the Director elections, if I may?

Certainly.

I noted the two of the directors have some reasonable sized votes against them, Peter Everingham, and Jacqueline Hey in particular, with almost 20%. I'm just wondering if you're aware of where those against votes may have come? Are there any particular proxy advisers that weighted against their election or large institutional shareholders? Perhaps just to enlighten us as to if you have any knowledge of that.

Thank you for that. Yes, I do note those votes. Difficult for me to comment on the individual circumstances, particularly in terms of proxy advisers where their recommendations are proprietary between them and their shareholders and their customers. However, what I can say is that in respect of both Peter, we are also aware that he is on a Board that has had some recent press, and I think that may have driven some matters. In terms of that, I can't comment on that specific matter, but I can comment on the contribution that Peter makes to the Medibank Board. His contributions are consistently thoughtful. They're constructive and they're aligned with our commitment to good governance. And as a result of that, the Board had no hesitation in recommending Peter for reelection. In terms of Jackie, we went through a significant process as we did with Lisa in terms of looking at the skill set that we feel we need to have on our Board. You asked about Jackie. She brings broad experience across consumer, financial services and technology sectors. And we think that she's going to make a meaningful contribution to Medibank's governance and strategic agenda. I'd encourage that people consider the full breadth of that experience that she can bring when focusing on the vote that they make today. And as I mentioned in my address, the board unanimously supports Jackie coming to the Board. To round it out because I'll do that, I might also mention that Lisa brings broad professional experience and a career that spanned health, technology, insurance and e-learning. And we believe that her expertise and strategy will also be particularly useful to our Board. So we've been very thoughtful about all of this. I do acknowledge the -- where the votes are, but they are still significantly in favor of our candidates, and I again recommend all shareholders vote for their election. We have a question from microphone 3.

Chair, may I introduce shareholder, [ Ian Hamilton ].

Page 13 of the annual report said 100% of electricity consumption is procured through renewable resources. Does this include electricity consumed in data centers? How much water for cooling do your data centers use annually? Do you graph and publish this information on an annual basis to look for usage trends.

Mr. [ Hamilton ] I'll comment generally and then may look to some of our management team as well. I think when we said that we have procured 100% renewables, we mean that, that's through our energy suppliers. Don't ask me who they are, but I can find that one out for you. I don't know off the top of my head, the other statistics that you've asked. However, in our data book, which does accompany our sustainability report, there is significant data around a number of those areas. However, if you like, I will take your questions on Board and one of the team will get back to you over the next few days with those answers.

Yes. Also, the annual report said net resident and nonresident policy growth of 1.4% and 3.1%. Are these figures in line with population increases? And do you have a plan to contact new arrivals directly to explain the need for private health insurance, dangers associated with living in Australia, which might trigger off these needs and the benefits of your products?

Well, what we're talking about is the increase that we saw in our respective customer bases there. David mentioned during his presentation that our growth, particularly our domestic growth had been disciplined in terms of the way in which we were seeking to gain new customers. There are a number of unsustainable ways in which we could have increased that number, but I think that would have been forced growth because we would have just seen further churn and change. So we chose to be disciplined in where we went. 1.4% was a significant uplift on where we were domestically 1 year ago. So we were very pleased with that. In terms of the international growth, you would be aware that the migration to this country has been slowed over the last few years. So it's lower than it was previously. But we still believe 3.1% is a very good outcome for all that. Most people coming to Australia and particularly international students need to actually take out health cover before they're able to get a visa. We and others provide that health cover to them so that they're well aware of needing to have it and in fact, they have to have it before they can come to the country. For those that then are able to stay, we find that a number convert from overseas -- our overseas cover to our domestic cover as well.

With the voting figures that you put up, they were the percentages of the votes cast. What proportion of the total votes do they represent?

Off the top of my head, I think we had about 67% or 68% of shares on issue have voted.

Do you expect that to increase more with people still here or -- will it get up to 100% or not likely?

I don't think we'll get to 100%. I think the percentages that we -- that I've just talked about are pretty consistent with the percentages that we've seen over the last few years. There are, however, people in the auditorium who'll vote and Mr. Aird indicated that he has 2-plus million votes, I'm not sure whether he's voted already or whether he's intending to vote at the end of proceedings.

And with the Directors, they're all listed as Independent Directors, would you explain to people who don't know the difference between Independent and Dependent Directors?

Thank you. Independent Directors are just what they suggest. We have no employment or other ties to the organization apart from receiving Directors' fees. We are not employees, we are not part of management. We do have a specific governance responsibility, which we take very, very seriously. And I'm proud to say that all of the directors, myself included, are assessed each year in terms of our independence, and I can confirm that, that assessment did indicate that we are all independent. Microphone 1, please.

May I reintroduce Peter Aird from the Australian Shareholders Association.

Yes, I have questions for both Dr. McIntyre and Ms. Hey. Perhaps, Ms. Hey first. Ms. Hey was a Director of Qantas Airways through a particular turbulent period around the COVID-19 pandemic. There were lessons from this period, particularly regarding executive remuneration and strategy and workforce management, which have relevance to Medibank. And given her experience in consumer businesses, what else does she believe she brings to the Medibank Board.