The Courier-Mail

Medibank beats profit guide

- EVAN SCHWARTEN

MEDIBANK Private shares surged more than 13 per cent after higher premiums and profit margins saw the insurer beat its full-year profit guide.

The shares were one of the best performers on a disappoint­ing day for the markets yesterday.

Medibank, which was publicly floated by the Abbott Government in November, made a net profit of $285.3 million for the year to June 30, beating the $258 million profit the company flagged in its prospectus ahead of its listing.

The result is more than double the $130.8 million Medibank made last year and up 13 per cent on an underlying basis.

Since its listing, Medibank has focused on reining in the amount of money it pays out in claims by playing hardball with hospital operators and cutting down on inappropri­ate claims.

Premium revenue was up 5.1 per cent to $5.9 billion, while the company lifted its gross profit margin to 14.2 per cent, from 13.5 per cent previously.

Medibank shares rose 27¢ or 13 per cent to $2.28 with more than 103 million shares changing hands. The stock listed in November last year at $2 a share.

The revenue Medibank received from premiums was less than the company had forecast – a fact Medibank boss George Savvides (pictured) attributed to the move to lower levels of cover. He said the speed of premium rises across the health insurance sector in recent years was pushing many customers to lower their level of cover.

“We’re recognisin­g that customers are concerned about affordabil­ity of health cover and we have seen cover reductions during the year,” he said.

The company also announced a fully-franked 5.3 cent final dividend, up from the 4.9 per cent distributi­on the company had forecast.

For the year ahead, the company said it would target an operating profit above $370 million, up from $332 million in 2014/15.

Mr Savvides said the company would continue to focus on cutting costs and improving its claims management process in the year ahead.

“As an industry, it is important that we focus on both quality and affordabil­ity to ensure that we maintain a strong and sustainabl­e Australian healthcare system,” he said.

Medibank’s float in November netted the Government $5.7 billion but, after an initial rally, the company’s shares have weakened in recent months amid concerns about whether management could pull off the cost-cutting program.

The cost cutting efforts have drawn it into conflict with hospitals operator Calvary, which has accused Medibank of attempting to bully it with a “take it or leave it” approach in contract negotiatio­ns.

But Mr Savvides said it would continue to focus on costs as it looks to lift its profit margins, which have lagged behind other competitor­s in the industry.

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