Medibank (ASX:MPL) share price backtracks as profit slips

Medibank dropped its first-half results today. Here are the details.

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Key points

  • Medibank shares are falling on the back of a mixed performance for the first half of FY22
  • The company's bottom line dipped 2.7% to $220.2 million
  • The board declared a fully franked interim dividend of 6.1 cents per share, up 5.2% on the prior corresponding period

The Medibank Private Ltd (ASX: MPL) share price is slipping on Friday afternoon. This comes after the private health insurer announced its first-half results for financial year 2022.

At the time of writing, Medibank shares are swapping hands for $3.065, down 3.31%.

Medibank share price slides on mixed H1 FY22 results

The Medibank share price is heading south today following a softened performance by the company. Here are the key financial numbers for the six months ending 31 December 2021:

  • Group revenue from external customers of $3.58 billion, up 4% on the prior corresponding period (H1 FY21 $3,442.2 million);
  • Group net profit after tax (NPAT) of $220.2 million, down 2.7% (H1 FY21 $226.4 million);
  • Earnings per share (EPS) of 7.7 cents, up 4.4% (H1 FY21 7.4 cents); and
  • Fully franked interim dividend of 6.1 cents per share (cps), up 5.2% (H1 FY21 5.8 cps).

How did Medibank perform in H1 FY22?

Medibank recorded a relatively resilient financial performance against the backdrop of the COVID-19 pandemic.

Resident policyholders lifted by 1.5% or 28,100 over the six-month period. Management noted that much of this growth continues to be driven by younger people and those who haven't held private health insurance previously.

In addition, Medibank reported high levels of customer advocacy, with Service NPS up for both Medibank (+8.9) and ahm (+2.2) compared to 30 June 2021. NPS is the net promoter score, used to measure customer loyalty and satisfaction.

The group achieved operating profit growth in both its Health Insurance and Medibank Health businesses. These numbers surged to $26.3 million (up 10.3%), and $6.9 million (up 36.7%), respectively.

While group operating profit was up 12.3%, this had been offset by a $40.9 million or 57% decrease in net investment income. This dragged down Medibank's bottom line, with NPAT decreasing 2.7% to $220.2 million.

What did management say?

CEO David Koczkar touched on the results possibly impacting the Medibank share price today, saying:

Today we have delivered a strong result showing that our focus on our customers and our strategy to grow as a health company is working.

Health remains the key issue that concerns people in Australia. This focus has seen a positive shift in attitudes towards private health insurance and has seen continued policyholder growth across both the Medibank and ahm brands.

Koczkar also said elective surgery restrictions during the pandemic had taken a toll.

Now is the right time for governments to minimise future use of restrictions to elective surgery. These restrictions for surgeries have impacted the quality of life for our customers and increased the pressure in the health system.

While some surgeries may be called elective, for our customers they are anything but. The recent easing of restrictions on some surgeries is welcome but we believe a plan is needed to avoid these restrictions for patients in the future.

What's the outlook for Medibank?

For the current second half, Medibank will continue to assess claims activity. Any permanent net claims savings due to COVID-19 will be given back to customers through additional support programs.

In terms of policyholder numbers, the company is striving to reach 3.1% to 3.3% policyholder growth in FY22.

Underlying average net claims expense per policy unit is forecast to be around 2.3% among resident policyholders.

Medibank stated that it remains on track to deliver $15 million in productivity savings in FY22. In total, management expenses are predicted to come in at roughly $530 million for the full year.

Medibank share price snapshot

It's been a tough start to 2022 for the Medibank share price. It's down 8% year to date and 4.5% over the past month. However, it is up 11% over the past year.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has gained 2.5% over the past 12 months but is down 6% this year to date.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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