A crackdown on improper health insurance claims is set to boost Medibank Private's full year profit.
Medibank Private says unaudited figures show its health insurance business made an operating profit of about $270 million in the six months to December 31, up from $173.5 million a year ago.
The strong result has led the insurer to upgrade its health insurance full year operating profit forecast, from above $370 million to in excess of $470 million.
Impressed investors drove Medibank shares almost 12 per cent higher, or 26 cents, to $2.50, up 25 per cent on the $2 retail investors paid for shares when it was privatised in November 2014.
The company said the improved outlook was a result of its crackdown on improper claims and a tightening of its payout system.
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"The operating profit result reflects better than expected claims expense outcomes as a consequence of Medibank's payment integrity program, improved hospital contracting and product and mix changes, as well as a slowdown in the growth of hospital utilisation rates," it said in a statement.
The insurance giant has been renegotiating hospital contracts as part of its bid to reduce claims.
A new contract with hospital operator Calvary Health Care in 2015 followed a bitter dispute in which Medibank Private declared it would no longer pay for 165 "highly preventable adverse events."
Bell Direct equities analyst Julia Lee said the insurer's actions are clearly paying off.
"There were less claims in the past six months, Medibank has been targeting costs and renegotiating with the hospitals," she said.
"It is a sign that its initiatives are working."
The insurer made a net profit of $285.3 million in the 2014/15 financial year.
It will release its finalised half year results on February 19.
