MBF said on Friday it plans to demutualise and list on the Australian stock market next year in a float that could value the private health insurer at more than A$1.5bn.

The decision to move ahead with the float follows interest from Bupa, the UK’s largest private health insurer, which had been considering a bid for the private group in an effort to treble its size in Australia. Combining the two would create Australia’s biggest private health insurer, with 1.8m policyholders and more than a quarter of the market.

However, MBF said after careful consideration its board had decided to demutualise.

John Conde, MBF chairman, said that decision had been endorsed by the insurer’s governing body, the MBF Council, although policyholders would also need to vote on the proposal.

”The board believes that demutualising is in the best interests of policyholders, that it will maximise MBF’s future growth potential and enhance its ability to compete in a rapidly changing environment,” Mr Conde said.

Bupa is understood to have approached MBF early last month.

MBF’s board subsequently issued a statement confirming it had had approaches, although it declined to identify parties involved. It said at that time that a listing remained its preferred option.

MBF is Australia’s largest privately held health insurer with a 19 per cent market share, while Bupa commands a 10 per cent share.

The sector has historically been dominated by mutuals and state-run groups.

The Australian government plans to sell off Medibank, the state insurer that dominates the sector with a 27 per cent market share.

Bupa entered the Australian market five years ago when it teamed up with Macquarie Bank to buy Australia’s third-ranked health insurer for A$595m from Axa Asia Pacific.

MBF said on Friday that its current structure meant there were limits to its ability to access capital in order to grow. It said a listing is expected to occur in 2008.