Shares in Medibank (ASX: MPL) were up around 9% at the open after the country's biggest health insurer reported a 13.8% boost in 1H FY25 underlying net profit to $299 million, which beat consensus by 5%.
Underscoring today’s result was a 4.1% increase in health insurance premium revenue and a 37% increase in net investment income, with the latter reflecting particularly strong international equities performance and foreign exchange benefits.
Customer sign-ups in the non-resident segment for the period were up 12.6%, while customer growth in the local market rose 0.9%.
The group paid a fully franked interim dividend of 7.8 cents per share up 8.3%.
Medibank also announced a further $160 million to customers via another COVID cash give back, which brings the company's total COVID financial support package to a record $1.62 billion to date.
Healthy insurance sector
While the group’s main health insurance business made an operating profit of $349 million, up 10%, Medibank Health's earnings were up 41% to $37.6 million.
Commenting on today’s results, CEO David Koczkar told investors that the health insurance market remained strong, while cost-of-living pressures resulted in a modest increase in the number of customers across the industry lapsing and switching funds.
“Net resident policyholders are up 18,500 for the past 12 months. Our growth over this half was more than double what it was this time last year,” said Koczkar.
“Despite some recent reductions in visa approvals, the non-resident market remains solid, with our policy units up 38,900 in the last year. This growth of 12.6% was largely driven by the student segment.”
Other key numbers for today include:
- Revenue was up 6.1% to $4,270.7 million.
- Gross profit of $131.1 million was up 79.3%.
- Segment operating profit was up 12.5% to $386.8 million.
- Reported net profit after tax was down 0.8% to $340.3 million.
- Net investment income was up 37.0% to $114.5 million.
- Underlying earnings per share (EPS) were 10.8c, up 13.8%.
Outlook
While no earnings guidance was provided for FY25, management expects resident health insurance claims per policy unit growth of 2.4% to 2.6% for FY 2025 - lower than its previous expectation of 2.7% - due to moderating industry growth relative to FY24 for resident health insurance.
Within the resident health insurance sector, the group is aiming to grow market share in FY26 and expects FY25 management expenses of around $650 million, including $10 million of productivity savings.
In the non-resident health insurance space, the group expects policy unit and solid gross profit growth to continue in 2H FY25.
Meanwhile, Medibank Health is targeting average organic profit growth above 15% per annum between FY24 and FY26, plus a 12-month contribution from Myhealth in FY25.
With the guidance looking slightly ahead of consensus operationally, Barrenjoey expects consensus upgrades for the private health insurer.
Medibank Private has a market cap of $12 billion making it the ASX's 48th largest stock; the share price is up 20% in one year and 16% year to date.
MPL is in a strong bullish trend confirmed by multiple indicators. Specifically, the 5-day moving average of the stock price is above the 50-day moving average.
Consensus is Moderate Buy.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.
