Medibank Private’s shares have shot up more than 7 per cent as the company revealed it has managed to stem some of its decline in customer numbers.
Medibank continued to shed market share during 2017, down 63 basis points, but the rate of decline was reduced as the company lowered the price on some insurance products.
At the same time, the number of complaints against Australia’s largest health insurer almost halved, from 60.7 per cent for the quarter ending September 2016 to 35.6 per cent in the June 2017 quarter following investments in improving its handling of customer complaints.
Medibank was the most complained-about health insurer in Australia last year.
The company is flagging flat overall market growth in the coming years as fewer Australians take up health insurance. At the same time, it expects to continue to lose market share until the process stabilises in 2019.
Presenting its annual results on Friday, the insurer reported a 7.6 per cent lift in net profit to $449.5 million.
Its health insurance division saw its operating earnings fall 2.6 per cent to $497.5 million during the year, reflecting higher management costs from its investment in improving its customer services, and IT system expenses.
It had forecast operating profit from its health insurance division would come in at $490 million for the period.
The company’s shares were up 6.3 per cent at $2.86 at 10.34 am AEST on Friday, having jumped as much as 7.4 per cent in early trading.
Chief executive Craig Drummond told analysts on Friday morning that he expected some regulatory relief from the government in the coming year, particularly in terms of costs for prostheses.
In terms of participation rates, Mr Drummond said more needed to be done to encourage people to take up private health insurance.
“A 15 per cent reduction in PHI (private health insurance) could lead to a collapse in the public hospital system,” he said. “We need to ensure there are more incentives for people to take up PHI”.
This was despite premium revenues inching up 1.2 per cent to $6.245 billion.
During the period, the number of Medibank policy holders fell 1.3 per cent to 1,776,100.
Medibank declared a final dividend of 6.75 cents per share, taking the full-year dividend to 12 cents, an increase on the 11 cents per share the company paid in 2016. The final dividend is payable on September 28.
Mr Drummond said he while he was pleased with the result, which was slightly ahead of the insurer’s forecast.
“We had to focus on the core of our business and get the basics right,” he said, adding that the company expected “continued improvement” in slowing the market share declines.
He added management expenses, which blew out by 10.2 per cent ot $568.4 million, would also reduce in 2018.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.