After successfully steering Australia's largest private health insurer, Medibank Private Ltd (ASX: MPL), through the ASX's largest initial public offering (IPO) of 2014, CEO George Savvides will step down from top job sooner rather than later.
In an announcement to the ASX this morning, Medibank Chair, Elizabeth Alexander AM, said the board and Mr Savvides had agreed to bring forward his retirement by a huge 15 months, to March 2016.
"George has had a remarkable career with Medibank, steering the company through many years of Government ownership, culminating in last year's IPO and the first year as a listed company in which the prospectus earnings forecast was comfortably exceeded," Ms Alexander said. "He will be leaving the company with a strong balance sheet, a very capable and focused executive team and strong momentum in the business."
Medibank shares were sold to policyholders, institutions and the general public in 2014 for between $2 and $2.10, valuing the company around $6 billion. However, with the company easily beating its cost-cutting forecasts, Medibank shares soon rallied. It currently has a worth of $6.91 billion.
"I consider it an absolute privilege to have led the nation's largest health insurer for more than 13 years," Mr Savvides said. "I firmly believe that now is the time to give a new generation of leaders the opportunity to build on the strong platform that now exists."
Ms Alexander said the company had some "excellent internal candidates to succeed George as CEO", but will undertake a formal process for the appointment of Medibank's next leader.
Buy, Hold or Sell?
Today, Medibank shares fell 1.4% on the news, trading as low as $2.51. Current prices place Medibank shares on a price-earnings ratio (P/E) of 24x and price-book ratio (P/B) of 5x. That compares to NIB Holdings Limited's (ASX: NHF) P/E of 20x and P/B of 4x. Larger general insurers such as QBE Insurance Group Ltd (ASX: QBE) and Insurance Australia Group Limited (ASX: IAG) also appear cheaper than Medibank. Therefore, I wouldn't be in a rush to buy Medibank shares at today's prices.
