Medibank has been hit by higher health insurance claims

Sebastien Bozon/AFP/Getty Images

Claims on health insurance are growing faster than the premiums gathered by Medibank.

Medibank’s half-year profit was up 1.9% to $231.9 million mainly due to strong investment income offsetting lower operating profit for its health insurance business. The result was within expectations.

Premium revenue for the six months to December was $3.118 billion, up 1.2%, but health insurance operating profit fell 8.2% to $249.4 million, from $271.7 million.

Health claims rose 1.5% to $2.589.9 million and gross margins slipped 0.3% to 16.9%.

However, Medibank reaffirmed its full year outlook for health insurance operating profit of about $490 million.

CEO Craig Drummond said he’s committed to strengthening the core business.

“In the first half we have reorientated Medibank to sharpen the focus on our customers,” he said.

“I’m encouraged by the early progress we have made, but we recognise there is more to do.”

However, Medibank is suffering from underperformance in both customer acquisition and the number of members leaving for other funds.

The number of policy holders fell 2.6% to about 4.7 million.

In August last year, Medibank posted a 46.4% rise in full year profit to $417.6 million.

The company today declared a fully franked interim dividend of 5.25 cents a share.

Detail on the half year results:

Source: Medibank

Last week Medibank increased its premiums by an average of 4.6%.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.