Medibank profit jumps 46pc despite record pay out

Friday, 19 Aug 2016 06:56:21 | Stephen Letts

Medibank paid out a record $5.1 billion in claims last year. (Reuters: David Gray)

Australia's dominant health insurer Medibank Private has put slow industry growth and a shrinking market share for its premium product behind to post a 46 per cent rise in full year profit to $417.6 million.

The rise in profit was driven by an improved underlying profit in the operation of the health insurance business, and a lower than expected uptake of expensive hospital services by customers.

Health insurance operating profit rose by more than 50 per cent to $510.7 million, well ahead of the consensus forecast from analysts of around $470 million.

The company paid out a record $5.1 billion in claims last year, but the rate of claims inflation was limited to just 1 per cent.

Significantly, Medibank managed to increase its margin from 14.2 per cent to 16.6 per cent as the ongoing cost-cutting program delivered a better than expected outcome.

However the insurance business still faces significant headwinds.

In its filing to the ASX, the company noted industry growth continued to slow amid ongoing affordability challenges from passing on of rising costs to customers.

Medibank noted its own growth had been impacted by a "below market performance in both the acquisition and lapse of members".

While the volumes of Medibank's higher margin premium lines of insurance were down, there was growth in the cheaper "ahm" brand, albeit at a slower rate.

"Member switching between health insurers increased further in the period and the Medibank brand's underperformance in this segment was the largest contributor to the market share reduction in 2016," the company said.

The full year dividend of 11 cents per share was declared, compared to the inaugural single payment of 5.3 cents in the first seven months of the company's operation after listing.

AustraliaPlus

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Medibank profit jumps 46pc despite record pay out

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