Medibank Private Full Year Result: MPL posts good result in a tough health care market

 Medibank Private Limited (MPL) reported group net profit of $449.5 million, better than markets had expected for the 2017 financial year. The headline result was boosted by stronger investment returns helping to offset lower revenue from its Medical health division. Medibank’s full year result was impacted by a fall in overall participation rate in the Australian Private Health care system as premiums continue to rise and churn (movement in and out of funds) grows. 

 Over the year, new acquisitions grew 6.4% but lapse rates (people leaving Medibank also increased to 6.7%). Medibank’s total market share fell over the year and the number of premium and services policy slowed to 3.6% in the second half from 4.5% in the second half of 2016. 

 In MPL’s Health Insurance division, the company has continued to invest in customer benefits online and over the phone (with call waits down 80% since the last quarter of 2016). But this did impact its full year profit that fell $13.2 million or 2.58% to $497.5 million after management costs increased 10.2%. Medibank paid a record $5.2 billion in benefits with 1.3 million hospital admissions and 500,000 surgical procedures while total net claims incurred was up 0.6% over the year. Premium revenues increased by 1.2% while gross margins were 17.1%, up from 16.6% last year. The Medibank Health unit (formerly Complementarity Services) saw operating profit rise to $35.7 million, while revenues declined by 3% as management expenses fell by 3.4%. 

 MPL’s net investment income increased by nearly 135% to $139.3 million due to higher equity market returns. Medibank expects its health insurance business to see flat growth year on year while expenses are expected to fall, especially from new productivity gains that should cut total expenses by around $20 million. 

 Medibank announced a final dividend to $0.0675, which was at the upper end of the company’s target range of 70-80% pay put of underlying NPAT with a 79% ratio. MPL will pay its dividend on 28 September 2017. 

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