Good morning, everyone. My name's 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 peoples 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 peoples 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, and responsibility.
We're committed to building trusted relationships with First Nations peoples 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 peoples 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 Nichols, 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 re-election 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 is chair of the Audit Committee. Sitting next to Gerard is Tracy Batten, who is chair of the Board's People and Remuneration Committee. Sitting next to Tracy is Peter Everingham, who is also standing for re-election 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 two board-endorsed candidates standing for election as directors today, namely Lisa McIntyre and Jacqueline Hay. 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 and 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 provided 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 two to seven. 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 two to seven 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 has 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 prioritise 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 finalisation of our COVID customer give-back program with a final cash give-back to customers of AUD 228 million.
This brings our total COVID support package to AUD 1.71 billion, the largest of any health insurer in Australia, and it fulfills our promise made five 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 everyday health services more affordable and accessible for our customers through our Members' Choice Advantage and NoGAP 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 non-resident health insurance businesses, with health insurance operating profit up 7.1% to AUD 741.5 million. Our Medibank Health business is now contributing around 10% of our earnings, with segment profit up 27% to AUD 76.7 million. Medibank Group continues to be a resilient business with a strong capital position, and this year, shareholders received dividends of AUD 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 is under a great deal of pressure from an aging population, the prevalence of chronic disease, and ongoing workforce challenges. It must change if it is 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 AUD 50 million over five 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 have seen enrollments double across our clinician-led and everyday well-being programs. Our NoGAP program has grown to 41 sites nationally, helping more than 10,000 Medibank customers save over AUD 7 million in out-of-pocket costs to date. This year, we partnered with doctors to open Australia's first NoGAP private hospital in Melbourne, Adeney Private Hospital. We've also been reinventing healthcare 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 four 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.
have 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 are 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 have 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 have 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 four-day workweek 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 applied 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 zero 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 two of our long-standing board directors, Linda Nichols and David Fagan, both of whom will retire at the end of this meeting. Linda and David have 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. 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 U.K., 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's brought meaningful insight and impact to our work, and he's made a valuable contribution to Medibank. 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 I am very pleased that the board is recommending shareholders vote for the election of two highly credentialed and experienced directors, Dr. Lisa McIntyre and Jacqueline Hay, 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 personalised healthcare 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. To you, our shareholders, thank you for your continued support. Together, we're building a stronger Medibank and a healthier 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 healthcare 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 AUD 33 million in Live Better Rewards and saved more than AUD 28 million in out-of-pocket costs through our Members' Choice Advantage and NoGAP networks. 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. Because we're giving customers more of the support they want, engagement with these services is rising, and customer advocacy is at a three-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 FY30 aspirations. This includes our aim to double the number of people we engage with in their health and well-being to around 10 million. It is 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 two years. Switching rates are up, with many funds acquiring customers through high-cost aggregator channels, and lapse rates have increased. These higher-cost tactics have pushed up operating expenses and premium increases for many funds. Unlike others, we have stayed disciplined in how we have grown, and we have positive momentum in our core business. In FY25, we grew net resident policyholders by 27,900, or 1.4%, double last year's rate. In non-resident, we added 10,500 policy units, up 3.1%. We have continued to improve how we operate over the past eight years, taking out more than AUD 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 FY2030, we aim to significantly increase Medibank Health segment earnings to at least AUD 200 million. Through this growth, we aim to grow policyholder market share each year in a disciplined way, to at least 26.8% in FY2030. 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 are not 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. 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. Lastly, we are 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 AUD 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 FY25, 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 three 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 home care, equivalent to nearly three average-sized private hospitals.
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 AUD 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. It is another example of how Medibank is driving the health transition and taking pressure off critical resources needed to support people with acute needs.
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 are driving change within it across both private and public systems. 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. Healthcare costs have continued to outstrip inflation, and productivity in healthcare, 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 FY26 relative to FY25. 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 FY26, 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 FY25. Our FY26 claims per policy unit growth outlook of 2.6%-2.9% remains unchanged.
Our non-resident business continues to perform well. We sustained customer growth in the first quarter of FY26, and we are on track to deliver solid gross profit growth in FY26. Medibank Health, which includes our well-being, primary care, and community and acute care segments, remains on track to deliver low double-digit organic operating profit growth in FY26. These services are well positioned in growing sectors with strong potential to serve more of our existing health insurance customers. Finally, we expect to complete the acquisition of Better Medical by early 2026. This will take our total M&A investment between FY24 and FY26 to [AUD 219 million], which is towards the top end of our stated AUD 150 million-AUD 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. It is not just what we do; it is 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. 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. We cannot 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. 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.
Thank you, David. We have now reached the formal business of our meeting. As today's meeting is being held both in person and virtually, I will 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 will 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. Your selection will be highlighted, and the vote is automatically recorded. There is no need to press the submit or enter button. You do have the ability to change your vote at any time until I declare voting closed.
There are seven 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 two to seven 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 two to seven 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'll be an area to type in your question. Once you've finished 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 will 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 will be introduced by the operator before you ask your question. While waiting in the queue, you will still be able to hear the meeting. If you have a question about the virtual meeting technology, please contact the helpline that is now displayed on your screen.
For those attending in person today, if you have a personal matter to discuss about your health insurance, please visit the information booth in the foyer and discuss this with a specialist advisor for either Medibank or AHM. 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. We will 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 statements and reports. This item is not subject to a vote and therefore does not require you to cast a vote. The Medibank financial statements for the year ended 30th 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 Lathwaite, who is available to respond to questions about the conduct of the audit of the accounts. We'll now move on to items two through five, which are the re-election of Kathryn Fagg and Peter Everingham, and the election of Lisa McIntyre and Jacqueline Hay 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 re-election. 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 Nichols 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 re-election or election, but they will be available for questions during the discussion period later in the meeting. A biography of each of the candidates is contained in the notice of meeting. Your board, with each director standing for re-election abstaining on the recommendations for their own re-election, recommends unanimously that you vote for the re-election 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 30th 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 seven, 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 interests of the Chief Executive Officer with the interests 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 30th 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 three-year performance period ending on 30th 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 three years. Vested rights will be exercised automatically and convert to shares which the Chief Executive Officer will receive in equal annual tranches over that three-year holding period. The shares which are to 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 malice and clawback provisions, as outlined in the notice of meeting.
The vesting outcome of the performance rights will be detailed in the remuneration report following the conclusion of the performance period on 30th June 2028. Any shares granted during the holding period will be detailed in the remuneration reports for the financial years ended on 30th 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 room. 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 a 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 then return to your question. Are there any questions in the room? Microphone one.
Chair, may I introduce Peter Redd from the Australian Shareholders Association?
Morning, Mr. Redd.
Good morning. Today, I hold proxies from 348 shareholders, almost 3 million shares. Over the last three years, you've reported non-claim expenses have increased from 12.4% of revenue to 13.9% of revenue, all by over AUD 250 million. Whilst you report AUD 10 million in savings, are your increases of non-claim expenses of concern?
No, I don't believe so, Mr. Redd. As David mentioned, we're very conscious about our cost base.
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 Nichols, ensuring that Medibank has developed into a key business in the health area of Australia. 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, are skilled humans remaining in control? How is the AI use managed, and how have customers reacted?
Thank you for that question. I'll make a couple of comments, and David may then seek 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, though, 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 and 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, Mark, 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. It is very much about how we work with artificial intelligence and other technologies to support the care of our patients whilst being a human-to-human business. I think that's an important path for us, and we'll remain very careful about how we maintain a human involvement in that experience.
Thank you. I see we have a question at microphone three.
Chair, may I introduce shareholder Carol Jean?
Hello. I'm asking a question about why you spend members and shareholders' money duplicating services that are already offered by the government. 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 government-supported helplines for both nursing, for example, nurse- on- call, and for mental health support. A quick internet search, I found six general mental health support lines, 15 more specific helplines 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 five years in mental health, that is something that is still lacking in terms of what the government is supporting with all of this. 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, are 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.
Thank you. 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 has 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.
Yeah, thanks for the question. We have a different approach to the triage services if you're a Medibank customer or AHM customer versus the provision of the services we provide to government contracts. 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 how we would provide that service under government contract, where there are multiple providers supporting those government services.
Got a couple of people coming to microphones. Microphone two.
Chairman, may I introduce Peter Redd, shareholder?
Morning, Mr. Redd.
Chairman, I have a question in relation to the director elections, if I may.
Certainly.
I noted that two of the directors have some reasonable size votes against them, Peter Everingham and Jackie Hay 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 advisors that voted against their election or large institutional shareholders? Perhaps just to enlighten us as to if you have any knowledge of that. Thank you.
Oh, thank you for that. Yes, I do note those votes. Difficult for me to comment on the individual circumstances, particularly in terms of proxy advisors, 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. As a result of that, the board had no hesitation in recommending Peter for re-election. 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. 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 in a career that spanned health, technology, insurance, and eLearning. We believe that her expertise in strategy will also be particularly useful to our board. We have been very thoughtful about all of this. I do acknowledge where the votes are, but they are still significantly in favor of our candidates. I again recommend all shareholders vote for their election.
We have a question from microphone three.
Chair, may I introduce shareholder Ian Hamilton?
Morning, Mr. Hamilton.
Good morning. 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'll take your questions on board, and one of the team will get back to you over the next few days with those answers.
Yeah. Also, the annual report said net resident and non-resident 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?
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 false growth because we would have just seen further churn and change. We chose to be disciplined in where we went. 1.4% was a significant uplift on where we were domestically one 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 is lower than it was previously. We still believe 3.1% is a very good outcome for all of 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 our overseas cover to our domestic cover as well.
With the voting figures that you put up, 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 the shares on issue have voted.
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 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 will vote, and Mr. Ed 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.
With the directors, they're all listed as independent directors. Could 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 director's fees. We are not employees. We are not part of management. We do have a specific governance responsibility, which we take very, very seriously.
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're all independent.
Microphone one, please.
May I reintroduce Peter Redd from the Australian Shareholders Association?
Thanks, Mr. Redd.
Good morning again. Yes, I have questions for both Dr. McIntyre and Ms. Hey. Perhaps Ms. Hay first. Ms. Hey was a director of Qantas Airways through a particularly turbulent period around the COVID-19 pandemic. Do the lessons coming out of this period, particularly regarding executive remuneration and strategy and workforce management, have relevance to Medibank? And given her experience in consumer businesses, what else does she believe she brings to the Medibank board?
Thanks, Mr. Redd. I think I addressed a few of those points earlier, but I will ask Jackie to address your specific points.
Thank you.
Can you hear me?
Yes.
Thank you, Mr. Redd. Appreciate the question. Two parts of it. Firstly, on Qantas, over 15 years in my board roles, I've had some good times and some tough times, and I had both of those on Qantas. I think when things go according to plan, you certainly learn and get different capabilities as a director. When things do not go according to plan, then maybe you learn even more and your capability set and your knowledge and your experience becomes broader when things do not go as expected when they do. I think there is a lot of what I have experienced at Qantas that can apply to Medibank. I think there is also experience from my previous boards. I've had nearly 12 years in financial services, most particularly as a director and as chair of Bendigo and Adelaide Bank.
There I saw complex financial products, offerings to millions of customers, including insurance, dealing with communities and government, dealing with the evolution of non-financial risk with APRA and many other regulators. I'm on a superannuation board today, so I'm still experiencing all of those things. I think as a director and as a person, you're a sum of your parts, and you hopefully bring all of that to every opportunity that's in front of you. I know I'm very privileged to be given an opportunity today. Hopefully that addresses your question, but I'm happy to go further if there's any more.
That's good. Thank you.
Thanks, Jacque.
With the microphone working, Dr. McIntyre has a wide range of experience across the health sector, which includes her current directorships. Given Medibank's growth strategy focusing on primary healthcare, does she see other opportunities in the health sector?
Does she believe she can contribute to expanding Medibank's growth strategies?
Thanks. I mentioned earlier that we think Jackie will make a great contribution, particularly in terms of our strategy. Jackie, I'll let you speak for yourself. Sorry, Lisa. I beg your pardon.
Thank you. I think that's a—you've given me a softball question, actually. One of the reasons I'm delighted to be standing here and offering myself to be elected to this board is because I feel very deeply about the role that Medibank plays and is planning to continue to play in the health transition. Medibank has the capability and its people, as far as I can tell initially, and in the ambition that it holds to do this. I have spent 35 years in the health sector, and I'm very aware that there are changes, positive changes that need to be made.
Both Mike and David talked about the pressure the health sector is under. Australia has a great health system, but it's under huge pressure. I'm really hoping I can bring my knowledge of medical devices, medical research, other private health insurers, and so on to continue that. I love this ambition that the company has, and I'm delighted to have an opportunity to do that.
Thanks, Lisa. Mr. Redd, did you have another question?
Yeah, I'd wanted to ask some questions of your directors seeking re-election, as I haven't had the opportunity to speak to that, if you don't mind. With Ms.
Fagg, noting that you've been a director of Medibank for three years and you're now also a director of the National Australia Bank, would you reflect on any differences that your approach as a director now compared to the time when you were a director of companies that actually made stuff?
I think we made stuff as well, Mr. Redd. We make health or health to make health for our customers, but I'll go to Kathryn .
Could you just clarify?
So what he was asking, I think, if I get it.
Business and a business that manufactures things such as Boral and other businesses, Incitec Pivot, quite a few years ago now. They're all businesses that actually produced things when out the door and were sold to customers.
Very good. Thank you. I do understand the question.
It is perhaps helpful just to take a moment to describe where I've come from in my career. I originally studied engineering, chemical engineering, and that was all about working in industry. I went to McKinsey, management consulting, and worked across industries. I went into banking with ANZ before I did other things as well. I guess through my career, I've had the experience of working across industries. I think once you work across industries, you see there are enormous similarities, in fact, in what organizations are needing to do. In terms of my other educational qualifications, I've got a master's degree in organizational behavior, which is all about what is important to get organizations to work very well.
I believe myself, and I continually get feedback from my colleagues, that it's that breadth of experience that really makes a difference to what you can bring to a board. A very simple example that I would use is the safety journey that has been at the forefront of industrial companies for the last 20 years or so, and the Japanese production system. Guess what? That's a fundamentally helpful way to think about how you run big organizations really well operationally. I know David's got an airlines background as well, and we often talk about the similarities. You can learn so much from bringing eyes from different industries into a new sphere. It's something that I'm very pleased that I can bring to the table.
Thank you. For Mr.
Everingham, he had previous experience in the digital sector, and you're also a member of the Medibank Investment and Capital Committee. I'd wonder if you'd comment on the constraints involved in a business such as Medibank compared to that required for success in the digital sector, with a more perhaps adventurous attitude required?
I think the prior business I've been involved in have not had the capital, which Medibank has to be such a great custodian of and be so careful with. I think in this case here, we're having sort of more prudent, more diligent processes still, and I've been sort of pleased to see how well that is managed through Linda's leadership and our experts. My prior businesses, the capital I've had employed has more been working capital and going to technology directly.
The importance here is we're making very good use of the returns we get on funds sitting outside the business.
Thank you.
Thank you. As there are no further questions from the floor at the moment, I'll now move to written questions that have been submitted in advance of or during this meeting. Are there any written questions?
Chair, we have a question from shareholder Anne [Nancarrow]. I'm suggesting that you rotate the AGM between the various cities in each state. That way, more of us could attend in person. Some other companies do this, so please consider the idea. I await your reply with interest.
Ms. [Nancarrow], thank you for your suggestion. I think it's a valid suggestion, which we will take on board.
I would say, though, that having hybrid meetings does democratize and allow more people to actually participate than the more traditional just face-to-face meeting. Each year we assess the AGM and how it's effective for our shareholders, so we will certainly take your suggestion on board.
Chair, we have two questions from shareholder Natasha Lee. She asks, "While you have acknowledged that with female board representation at 33%, this is below world best practice of 40%, however, I would also ask the board be mindful to ensuring the board is more representative of the community with other forms of diversity beyond female representation."
Ms. Lee, thank you for your question on that, and I am pleased that with Jackie and Lisa joining us, we will be over 40% female representation on our board. However, I agree with your premise.
I think diversity for me is all about diversity of thought, and that's the most important thing that we can have on our board. I believe that you've just heard from a couple of our directors with very different backgrounds who do approach things differently, and that just adds to the overall richness of the discussion that we are able to have around the board table.
Chair, a question from shareholder Amber Humphries. "Why can interest be rolled over into reinvestment instead of depositing periodic interest sums into my bank account?"
Ms. Humphries, I think you're asking about a dividend reinvestment plan if I kind of go through all of that, because we obviously pay dividends, not interest, as Medibank.
A dividend reinvestment plan is something that we discuss from time to time around the Medibank board table, but at this stage, we do not believe that there is sufficient demand from our shareholders to introduce that. On that basis, we have no current plans for a dividend reinvestment plan, but we will continue to pay half-yearly dividends, and I am pleased to acknowledge that the AUD 0.18 dividend that we paid this year was in fact an 8.4% increase over the dividend that we paid in respect of the 2024 year.
Chair, a question from shareholder Sally Sow. "Do you buy back small parcels of shares directly from the shareholders?"
Ms. Sow, no, we do not have any plans, and we do not currently purchase small parcels of shares directly from shareholders.
Chair, from Natasha Lee, her second question, shareholder.
I note that the company is reviewing its investment strategy in anticipation of future RBA cash rate cuts. However, there seems to have been a switch out of Australian equities to international equities over the year. While I'm aware that, for instance, the NASDAQ stocks have done very well recently, this seems a risky move. Could you explain your logic?"
Ms. Lee, first, I think we need to talk about the overall investment strategy that Medibank follows, which is a very conservative approach. In fact, what we did over the course of the year is we reduced our overall exposure to equities, and that's a combination of Australian and international equities, partially because of the capital charge that our regulator imposes on us, but partially also because we did have some concerns around frothiness of markets.
In terms of having had that reduction, we then have slightly tilted, but it's only slight, to international equities. The overall investment that we have in equities this year is lower than we had last year.
Chair, we have two questions from shareholder Stephen Main. "Could you please disclose how many shareholders voted for and against the remuneration report in the poll results so we can see retail shareholder sentiment and gain insight into the chronically low turnout rate? Did even 1% of shareholders vote by proxy on this item? How hard did you work to get the retail vote out today?"
Mr.
Main, I don't know the answer to your question, but I think that the premise behind it is not necessarily accurate in terms of how many shareholders voted, because as you're aware, a number of shareholders have their interests in superannuation, and Medibank has a number of major superannuation funds as shareholders. Also, a number of people actually hold their shares through custodians. In terms of a vote, that custodian would show us one vote rather than the underlying shareholders that may be behind that vote. It is almost impossible for me to be able to answer your question. What I can say is that we did not make any significant efforts beyond what we have currently done for previous years in terms of the vote for our remuneration report, which I do note is very positive.
Chair, Mr. Main's second question.
Mike Wilkins recently announced he will be retiring as chair of QBE Insurance at the 2026 AGM next May. Is it fair for shareholders to assume that he won't ever be standing for election again at a public company board, or does he plan to run again and seek another three-year term at Medibank when his current term expires?"
Mr. Main, yes, you're quite right. We announced last Friday that I would be standing down as chair at QBE after nine years on that board. In terms of other boards, will I ever run again? I do currently sit on two other boards, so the answer for that is probably yes, depending on Myhealth and how my colleagues feel about that.
In terms of Medibank, concentrated on what it's doing at the moment, and frankly, a further decision around my continuing as a director will be something that I will discuss with my colleagues over the course of the next year.
Chair, Mr. Main's final question. "The Medibank constitution has a rare board entrenchment provision, which requires external board candidates to be supported by 100 shareholder signatures or 5% of total issued capital just to get on the ballot. This explains why Medibank has never had an external board nominee during its tenures as a public company. Will the chair undertake to review this provision and propose a constitutional amendment at next year's AGM so that it is like more than 90% of Australian public companies and allows any shareholder to self-nominate for the board?"
Mr.
Main, we did make several constitutional changes only a year ago, and our research at that stage showed that we were in line with a number of publicly listed companies. I'll take your question on board, but frankly, if it was only one change to the constitution, I'm not sure that that is something that we would want to do. I think it's far better to bring a number of changes if we believe that the constitutions are out of date.
Chair, we have no further written questions.
Thank you. As there are no further written questions, I'll now move to audio questions via the Loomi platform. Are there any audio questions? I'm told that we have no audio questions.
As we appear to be getting to the end of our questions, just a reminder that voting will shortly close, and so I ask shareholders and proxies to please finalize your votes. I now invite the audience in the meeting room today to ask any final questions that they may have. I'm not seeing any further questions in the room. We have now reached the end of the formal business of the meeting. Voting will shortly close, and so I ask shareholders and proxies to please finalize your votes. I'll once again display the indicative results of the proxies received on items two to seven. Once the voting's been finalized and the final report's been issued, we'll release these outcomes to the ASX and publish them on Medibank's website, where you'll be able to access them this afternoon.
I'll now allow a short period for people to finalize their votes. There's still a few people I can see voting. I now close the polls. Oh, we're still going. Okay, I now close the polls. On behalf of the board, I thank all of you for your attendance today and for your continuing support for Medibank. The business of this meeting being complete, I now declare the meeting closed. For those shareholders who are joining us here in Melbourne, my fellow directors and I now invite you to join us and the executives in the foyer for refreshments. For those who've attended online today, I thank you again for your attendance and wish you all a good day. Thank you.