Medibank targets hospitals to cut costs

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MEDIBANK Private’s shares have fallen after it reaffirmed its full year guidance and posted a $151.2 million half-year net profit in its debut as a share market listed company.

THE newly-listed health insurer’s stock was down five cents, or 1.95 per cent, at $2.51 at 1100 AEDT, having finished its first day of trading at $2.14 last November.

Medibank said headwinds were hurting the industry, with rising healthcare costs challenging affordability, pushing customers to change providers, resulting in product downgrades and churn. Medibank chief executive George Savvides said the company was on track to achieve its prospectus forecast for a net profit of $258 million for the 2014/15 financial year and to pay its first dividend in September. The net profit was up nearly 11 per cent, compared with more subdued revenue growth of 3.8 per cent and premium revenue growth of 5.2 per cent. That indicated the cost cutting that was promised when the company first floated had boosted the result, with its operating margin rising from 4.5 per cent to 5.9 per cent. “The level of product downgrading and churn across the industry is a clear sign that affordability remains an important issue for customers, Mr Savvides said. “We are addressing rising healthcare costs through our cost leadership initiatives and a disciplined focus on finding efficiencies and reducing management expenses.” MEDIBANK BOOSTS PROFIT BY CUTTING COSTS * Interim net profit up 10.8 per cent to $151.2 million * Revenue up 3.8 per cent to $3.15 billion * No interim dividend