It's been one of those meandering, indecisive sessions for the Australian share market so far this Thursday. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has added 0.02% to its value, after spending time in both positive and negative territory thus far. But let's talk about what's going on with Medibank Private Ltd (ASX: MPL) shares.
Unlike the broader market, investors seem to know what they want to do with Medibank shares. This ASX 200 private health insurance stock closed at $5.15 a share yesterday afternoon. But this morning, those same shares opened at $5.19 before dropping rapidly. The company fell as low as $4.83 a share this morning (a drop worth 6.5% at the time) before settling at the current $4.86 share price. That's still down 5.5% for the day thus far.
This substantial drop in Medibank shares comes after the company posted its latest full-year earnings this morning, covering the 2025 financial year.
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What did Medibank report this morning?
At first glance, Medibank's results looked very positive.
The company reported group revenue from external customers of $8.6 billion for the 12 months to 30 June 2025, up 5.2% from FY2024's $8.16 billion.
Meanwhile, group operating profits came in at $762.4 million, an 8.9% rise over the previous year.
That allowed Medibank to post a net profit before tax of $728.8 million, up 2.4% from last year's profit of $711.7 million.
That translated into an underlying net profit after tax of $618.7 million, up 8.5% year on year. On an earnings per share (EPS) basis, that came in at an EPS of 22.5 cents, also up 8.5% from the 20.7 cents recorded for FY2024. On a net profit after tax attributable to shareholders basis, the number was $500.8 million, up 1.7%.
As a result, Medibank announced a final dividend of 10.2 cents per share for the period, an 8.51% hike over 2024's final dividend of 9.4 cents per share. As is typical for Medibank, this dividend will come with full franking credits attached.
This takes Medibank's full-year payouts to 18 cents per share, up 8.4% from last year's total of 16.6 cents per share. That represents an unchanged payout ratio of 80.1%.
Here's some of what Medibank CEO David Koczkar had to say about these numbers:
Our focus remains on delivering what counts most for our customers. We have improved value as cost-of-living pressures persist and supported their health and wellbeing in more ways. We are also driving the change needed to support the health system for the future. The health insurance market remains buoyant, with customer numbers at record levels. Net policyholder growth of 1.4% in our resident business, up 27,900, is double last year. Momentum in the second half sets us up well for the year ahead…
The result today demonstrates the progress we've made. It also highlights the momentum underway to support what is next – for our customers, our growth as a health company, and for accelerating the change needed to keep the Australian health system among the best in the world.
So why are Medibank shares dropping 6% today?
Considering the above numbers, why might investors be hitting the sell button on Medibank shares this Thursday? Well, it might have something to do with what the company said about FY2026.
In an outlook for the current fiscal year, Medibank told investors that it anticipates "moderating industry growth relative to FY25". Not exactly unbridled optimism.
Despite today's drop for Medibank shares, this ASX 200 stock remains up a healthy 29.55% year to date. The shares are also up 26.55% over the past 12 months.
At current pricing, Medibank shares are trading on a trailing dividend yield of 3.53%, and with a price-to-earnings (P/E) ratio of 27.35.
