A major new player in the health insurance market took centre stage last week when Axa Asia Pacific finally sold its private health insurance operations, HBA and Mutual Community. (HBA is a major insurer in Victoria, while Mutual Community holds a big share of the SA market.)

The new player is BUPA, the British United Provident Association. It’s the leading private health insurer in the UK, and has nearly five million customers in 190 countries, with revenues of more than $6.5 billion.

BUPA entered the Australian health insurance industry when it took control of a private hospital in Sydney last July. 

But Axa didn’t sell to BUPA. CEO Les Owen, impatient at the slow pace the health insurance division divestment was taking, sold it to his company’s investment advisers, Macquarie Bank, for $595 million. The bank has to pay $58 million on completion of the deal in August, with a further $537 million due six months later.

In that period Macquarie will seek to sell the equity to “ a consortium of investors”, including BUPA. The British mutual is expected to end up controlling the health insurance division.

The sale gives Axa the right to share in any profits Macquarie gains from floating or selling the health insurance business in 18 months. 

Mr Owen said he decided to sell the business to free up capital and extend the company’s wealth management business, possibly through acquisitions. “This move represents the best combination of maximising value for Axa shareholders and positioning Axa Health Insurance to realise its long-term future potential,” Mr Owen said.

It’s a pretty good deal, according to analysts. Axa got a fair price, and it stands to share in the profits of any sale in the short-term. It may also give Axa the boost it’s been looking for in wealth management. In recent years the company has fallen behind its competitors in the wealth management area, and was beaten by ING in the race to partner ANZ Banking Group.

BUPA says its future goals are to expand its Australian market. Dean Holden, its MD of international business, said BUPA has “a potential interest” in extending private health insurance coverage beyond hospitals, to include GPs and other medical services.

Currently, such an expansion is restricted by Australian regulations as it could pose a serious threat to public health care. BUPA’s arrival is likely to stir some heated debate in Australia. Its ambitions, and the emerging battle for market share between the three major players – the Axa assets, MBF and Medibank Private – will shape the health insurance industry over the next couple of years.