One of Australia’s largest private health insurers has incurred a large profit slump, with the industry struggling to attract young members.
One of Australia’s largest private health insurers has incurred a large profit slump, with the industry struggling to attract young members.

Reasons behind major insurer’s profit slide

Australia's largest health insurer Medibank Private has incurred almost a 30 per cent profit plunge, with the industry grappling to maintain younger members since the onset of COVID-19.

For the 2020 financial year ending June 30, Medibank posted a net profit after tax of $315.6 million, a 27.9 per cent slump compared with the previous corresponding period.

The private health insurance industry was initially tipped to benefit from the pandemic, as restrictions on elective hospital surgeries were expected to drive down the number of claims paid to members by a health provider.

Medibank chief executive Craig Drummond said that commentary about the industry had not occurred, with the majority of elective surgeries ultimately taking place.

"While significant savings were projected by some commentators at the beginning of the crisis, this has not eventuated," he said.

"While claims have largely returned back to normal levels, albeit some elective surgery in Victoria is now paused, if there are additional permanent savings we will stick by our promise and return them to customers."

Medibank chief executive Craig Drummond says the industry hasn’t benefited from restrictions on elective hospital surgeries. Picture: John Feder/The Australian
Medibank chief executive Craig Drummond says the industry hasn’t benefited from restrictions on elective hospital surgeries. Picture: John Feder/The Australian

Medibank has recorded a $297 million liability on its balance sheet for suspended surgeries and services that were initially planned pre COVID-19.

The group has also issued a final dividend of 6.3 cents per share, which is down 14.9 per cent from what was paid to shareholders in 2019.

Industry figures released by the Australian Prudential Regulation Authority on Tuesday revealed premium revenue growth for the June quarter had fallen by 1.4 per cent.

APRA's figures also flagged membership numbers in younger age demographics were continuing to decline.

Medibank said its health insurance premium revenue had increased 1.3 per cent to $6.6 billion for the period, while benefits payable to members rose 2.5 per cent to $5.5 billion.

 

Elizabeth Alexander is retiring from the company’s board. Picture: Aaron Francis/The Australian
Elizabeth Alexander is retiring from the company’s board. Picture: Aaron Francis/The Australian

"Health has never been more important to Australians, and this is demonstrated by our ability to grow our resident policyholder numbers by 10,600 in financial year 2020 at a time of significant uncertainty," Mr Drummond said.

Coinciding with its financial results, Medibank has also named Mike Wilkins as its new chairman. He will on September 30 replace Elizabeth Alexander, who is retiring from the company's board.

Ms Alexander has been at the helm of insurer for the past seven years and led the company through its public listing on the Australian Stock Exchange in 2014.

Mr Wilkins is the current chairman of QBE Insurance Group and is a former chief executive of Insurance Australia Group, the country's largest underwriter of general insurance.

Originally published as Reasons behind major insurer's profit slide


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