The Medibank Private Ltd (ASX: MPL) share price is edging lower on Thursday morning.
At the time of writing, the private health insurer's shares are down slightly to $3.91.
This follows the release of its FY 2024 results before the market open.
Medibank share price falls on FY 2024 results release
- Group revenue up 4.7% to $8,175.8 million
- Group operating profit up 7.9% to $699.8 million
- Underlying net profit after tax up 14.1% to $570.4 million
- Total dividends up 13.7% to 16.6 cents per share
What happened during the year?
For the 12 months ended 30 June, Medibank reported a 4.7% increase in group revenue to $8,175.8 million. This reflects a solid performance from its key Health Insurance business, which delivered a 4% increase in premium revenue to $7,903 million.
This was driven by a combination of premium increases and a 0.7% or 14,400 increase in resident policyholders. The latter includes an 11,000 increase in the second half of FY 2024. However, this was short of its target of "1.5%-2.0% resident policyholder growth in FY24."
Growing far stronger was its non-resident policy units, which were up 25.1%. Management believes this demonstrates the important contribution of its non-resident insurance business to overall fund growth.
Medibank recorded a 7.9% lift in group operating profit to $699.8 million. This reflects a 6.3% increase in Health Insurance operating profit and strong growth in Medibank Health segment profit of 36.7%.
Net investment income increased by $43.6 million to $182.2 million. However, this was partially offset by $39.8 million of non-recurring costs for IT security uplift, and legal and other costs related to regulatory investigations and litigation associated with the 2022 cybercrime event. Management expects similar costs for these matters in 2025.
Underlying net profit after tax, which adjusts for movement in the COVID-19 equity reserve and normalisation of investment returns, increased 14.1% to $570.4 million in FY 2024.
This allowed the Medibank board to declare a fully franked final dividend of 9.4 cents per share, which brought its full year dividend to 16.6 cents per share. This is a 13.7% increase on FY 2023's dividends.
How does this compare to expectations?
According to a note out of Goldman Sachs, its analysts were expecting the company to report a full year underlying net profit after tax of $573.4 million and declare a final fully franked dividend of 9.5 cents per share.
As you can see above, the company has fallen a touch short of both estimates. This may explain why the Medibank share price is underperforming today.
Management commentary
Medibank CEO, David Koczkar, acknowledged that its policyholder growth was softer than expected. He said:
Resident PHI industry growth remained strong, and we continued to grow despite the ongoing competitive environment, with net resident policyholders up more than 14,000. While this is not what we set out to achieve, given the competitive market we remained disciplined about the best way to grow for the long term.
Momentum continued in our non-resident business, with net policy units up 69,000 or 25.1%. Standout growth in the student market reflects our strong university relationships – with Medibank the preferred provider of overseas student health cover for nearly half of Australian universities.
Outlook
No firm guidance was given for FY 2025.
However, in respect to resident health insurance, management warned that it "anticipate[s] moderating industry growth in FY25 relative to FY24."
It also expects claims per policy growth of around 2.7% and is targeting $10 million of productivity savings.
