Medibank Private has boosted its annual profit by almost half to $417.6 million but the health insurer is losing customers and says it needs to provide better value so it can arrest a fall in its market share.
Medibank's profit for the 12 months to June 30 lifted as its revenue from insurance premiums rose four per cent to $6.17 billion and claims paid out rose by just one per cent to $5.15 billion.
The private health giant said it had benefited from buying healthcare services more efficiently than in the past, a focus on management costs, and lower-than-expected hospital utilisation rates across the industry.
The company said the timing of elective surgeries may have been the reason why fewer people went to hospital in the first half of the financial year.
Despite the rise in profit, recently appointed chief executive Craig Drummond said the increase in premium revenue had been soft and was disappointing.
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The number of policyholders at the close of the financial year was down 2.5 per cent at 1.80 million, from 1.846 million a year earlier, as customers found it harder to afford the increase in premiums and dropped their cover. Health insurers generally were also finding it harder to attract new customers.
More customers were switching insurers, and that had contributed to Medibank's loss of market share.
"While the market experienced the lowest growth in the last decade, there are also, clearly, things that we at Medibank can do better," Mr Drummond, who has been CEO for just seven weeks, said on Friday.
"Over the last couple of years, the business has had a strong focus on improving financial performance (after the float in November 2014) but we have probably under-invested in our customer offering.
"We have to show our customers that they are getting value, and we need to make Medibank easier to deal with."
Mr Drummond said that towards that end, executive bonuses would be linked to customer satisfaction, and in September Medibank would launch a significant product investment program..
Medibank expects the operating result of its health insurance business in fiscal 2017 will be hit by slowing market growth, continued market share loss and the lower rise in premiums: 5.64 per cent in 2016 compared to 6.59 per cent in 2015.
Shares in Medibank Private dropped 14 cents, or 4.7 per cent, to $2.84.
MEDIBANK ANNUAL PROFIT SURGES
* Full-year profit up 46.4pc to $417.6m
* Revenue up 2.5pc to $6.7bn
* Final dividend of six cents per share, fully franked. Total for year 11 cents. Inaugural dividend of 5.3 cents in 2015 was for seven months from December 2014 to June 2015
