With high earnings visibility and growth, a strong balance sheet and dividend yield of 3.7% fully franked, we continue to recommend Medibank a Buy. Medibanks core business delivers revenue and earnings from the core Health Insurance Business (HIB), it both increased strongly and drove an operating profit result of $329m which was 7% ahead of prospectus forecast. In the HIB gross profit margin improved by 70bps to 14.2% (1H15:13.9%). This sustained margin improvement which was not expected and is the key driver of earnings upgrades in FY16 and beyond. This sustainable margin improvement follows years of investment and research into claims management processes and would not have been possible without the millions of dollars spent on systems improvements leading into last year’s IPO. Net claims expense inclusive of risk equalisation grew by just 4.3% which is an outstanding result relative to recent industry data that has shown claims inflation well in advance of 7%. Healthcare analyst John Hester provides a video summary of Medibank Private (MPL) following their FY15 result announcement. Watch it here:


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