Stronger investment returns helped Medibank Private overcome continued pressure on health premiums and eke out a small rise in profits, even though it suffered from pushback from some policyholders as it bedded down a new information technology (IT) system.
In the December half, the company reported a 1.9 per cent rise in net profit to $231.9 million as it battled a continued decline in policyholder numbers, which is showing few signs of slowing.
Medibank had warned of challenging trading conditions at its annual general meeting of shareholders last year.
While health insurance premium revenue rose 1.2 per cent to $3.1 billion, industry-wide volumes continued to slow, it said, "which is indicative of the challenging conditions currently being experienced".
"However, underperformance relative to the market in both customer acquisition and lapse impacted growth," it said. "Medibank brand volumes were down with customer experience negatively impacted by issues associated with the embedding of the new IT system."
Net investment income rose to $76.8 million from $18.6 million, thanks to higher sharemarket returns and stronger credit markets, which helped to offset the lower cash rate, it said.
The interim dividend was raised to 5.25c from 5c as earnings a share rose to 8.4c from 8.3c.
As the new IT system was bedded down, the number of policyholder complaints had declined, the company said. It remains the subject of internal focus since both policy lapses and acquisitions were affected adversely by these issues, it said.
For the full year to June, Medibank maintained its operating profit forecast at $490 million, which was based on a flat performance of its health insurance operations.
In the half, claims expense rose 1.5 per cent, outpacing the 1.2 per cent rise in premium income which - with higher management expenses squeezing the operating profit for the half - fell 8.2 per cent ot $249.4 million.
It also benefited from a $52.1 million 'refund' from the risk equalisation pool between health insurers, which aims to share some of the risk of the sickest patients across the health insurance system.
This left the gross margin for the half at 16.9 per cent, down from 17.2 per cent a year earlier, with the operating margin falling to 8 per cent from 8.8 per cent.
Total policyholder numbers fell to 1.78 million down from 1.82 million with the deterioration pronounced at the Medibank brand (down to 1.48 million from 1.55 million) as the lower-priced AHM brand raised policy holders by 8 per cent.
The 2.3 per cent slide in policyholder numbers during the half was little changed from the 2.5 per cent drop recorded last financial year.
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