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Australian insurers HBF, HCF propose merger

Two Australian insurers are considering a merger of equals, which could create a A$4 billion entity with a market share of 18.4%.

HBF Health Funds Inc. and The Hospitals Contribution Fund of Australia Ltd, or HCF, have signed a heads of agreement outlining the key principles of the proposed merger.

The new entity will have a combined asset position of A$4 billion, enabling reinvestment in the business and minimizing future premium increases, the organizations said. The merger will not require a cash outlay by either party or demutualization of either HBF and HCF. Further, the new entity will be established with a board comprising equal number of directors from both organizations.

HBF and HCF will also retain their not-for-profit business model following the merger.

The proposed merger could be completed in the middle of 2018, subject to regulatory and board approvals, among others. If approved, the new entity will become the third-largest private health insurer in Australia, behind Medibank Pvt. Ltd. and Bupa Australia Health Pty Ltd.

Under the terms of the merger, HBF will indefinitely retain its brand in Western Australia, where it operates. The group believes the move will allow it to expand its presence nationwide.