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Medibank share price slumps as profits fall


The Medibank Private Ltd (ASX: MPL) share price has opened slightly lower this morning following the release of the insurer’s half-year results. Policyholder numbers were up for the period, however, profits were down on more claims payments. 

At the time of writing, Medibank shares are trading 1.01% lower at $2.95 apiece.

Premiums and benefit payments up

Medibank reported that it collected $3.3 billion in health insurance premium revenue, an increase of 2.3% over 1H19. This comes after delivering its lowest annual premium increase in 19 years of 3.27% which will be levied from 1 April 2020.

The insurer paid $2.9 billion in benefits to customers during the half, an increase of 5.6% from $2.7 billion in 1H19. Gross margin on insurance fell to 14.2% from 17.2%, while the operating margin decreased to 6.8% from 8.7%. 

Policyholder numbers grow

Medibank reported continued momentum in policyholder growth with a net increase of 11,700 resident policyholders and eight basis points of market share growth over the half-year. At the end of the half, Medibank had 1,807,700 policyholders, up 1.1% from 1,787,300 policyholders at 31 December 2018.  

Medibank reported the acquisition rate for Medibank branded insurance was 4.1%, unchanged from the prior corresponding half, with a lapse rate of 4.5% down from 4.8%.

For ahm branded insurance, the acquisition rate was 11.3%, up from 11% in the prior corresponding half, while the lapse rate was 7.2%, up from 6.9%.

Average annualised revenue per policy unit increased 1.6% to $1,407.50. 

Revenue up but profits down

Group revenue from external customers increased 2.7% to $3,421.5 million for the half compared to $3,330.8 million in 1H19, while the management expense ratio declined to 7.5% from 8.5%.

Group operating profit declined 20.9% to $218.8 million. Profit before tax was down 7.1% to $254.6 million from $274.1 million in 1H19. Net profit after tax from continuing operations declined 9% to $178.6 million from $196.3 million in 1H19.

Earnings per share came in at 6.5 cents, down 14.3% from 7.5 cents in the prior corresponding period. The interim dividend of 5.7 cents per share was unchanged from the prior corresponding half. This represents a payout ratio of 88% compared to a payout ratio of 67% in 1H19. 

Progress on strategic objectives

Medibank reports good progress on its objectives, which include stabilising policyholder numbers by the end of FY20 and growing numbers during FY21.

The insurer grew its market share by 8 basis points during the half, after increasing market share by 3 basis points in 2HFY19 and by 2 basis points in 1HFY19.

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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