Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Medibank Pvt Ltd (ASX:MPL, Financial) delivered a solid financial result with a 6.3% increase in health insurance operating profit to $692.3 million.
- The company achieved a 14.1% increase in underlying net profit after tax, reaching $570.4 million.
- Medibank Health segment profit rose by 36.7% to $60.4 million, driven by strong organic growth and contributions from Myhealth.
- The company announced an additional $305 million in COVID give back to customers, bringing total customer support to $1.46 billion.
- Medibank Pvt Ltd (ASX:MPL) maintained a strong capital position, declaring a final fully franked ordinary dividend of $0.094 per share.
Negative Points
- Management expenses increased by 30 basis points, reflecting higher sales commissions and cost inflation.
- The competitive market environment led to a modest increase in customer lapses and higher acquisition costs.
- Despite growth, the net resident policyholder growth of 0.7% was below the company's expectations.
- The company faced ongoing challenges with hospital claims, particularly in non-surgical areas such as mental health and rehab.
- Cybersecurity costs related to the previous cybercrime incident continue to impact financials, with an expected similar spend in FY25.
Q & A Highlights
Medibank Pvt Ltd (ASX:MPL) Earnings Call Highlights
Q: Can you provide context around the 2.7% claims growth target and whether it includes any additional charges from the proposed New South Wales private and public change?
A: Yes, the 2.7% target considers the potential impact of the New South Wales private and public change, although it is currently viewed as a risk rather than a certainty. - David Koczkar, CEO
Q: What do you think FY24 industry growth was, and how should we think about the management expense ratio in residents for FY25?
A: We expect growth to be broadly in line with the 1.9% seen in the previous 12 months. The biggest opportunity for us is growth in the Medibank brand, which largely comes through direct channels, so we don't expect a material impact on the management expense ratio for FY25. - David Koczkar, CEO and Mark Rogers, CFO
Q: How did the trend of same-day hospital admissions impact hospital claims for the full year?
A: The trend of shifting from overnight to same-day procedures continues, although it hasn't been material in the last six months. This trend is considered in our hospital negotiations, especially in light of the government review of private hospitals. - David Koczkar, CEO
Q: Can you unpack the non-resident health insurance growth outlook, especially considering the cap on international students?
A: We are strong in the overseas student market, particularly with first-year universities, and less reliant on vocational visas. We also see growth potential in the worker segment and life cycle management from students to workers. - Mark Rogers, CFO and David Koczkar, CEO
Q: How do you think your customer give backs are aiding policyholder retention?
A: The give backs have been one of the drivers for lower lapse rates, especially in the Medibank brand. The most recently announced give-back hasn't yet landed in customers' bank accounts, so its full impact is yet to be seen. - David Koczkar, CEO and Mark Rogers, CFO
Q: What structural savings are you seeing that have been cautious on and not locked into your 2.7% growth?
A: Extras claims are the most significant driver for FY25. We are still seeing claims being about 8% below expectations in the last six months, and we are taking a cautious approach to how we monetize those savings. - David Koczkar, CEO
Q: How do you see the competitive intensity in the market affecting your policyholder growth guidance for FY25?
A: We expect some normalization of competitive intensity during FY25 but anticipate it might take another one to two years to fully play out. We are focused on long-term growth, particularly in target markets with lower lapse rates and better retention. - David Koczkar, CEO
Q: Can you comment on the corporate health and wellbeing market growth and the legislative changes driving it?
A: We have a reasonable share in the corporate health and wellbeing market and are looking to disrupt it with proactive solutions. Increasing regulatory requirements for safe workplaces and employee expectations are driving growth in this market. - David Koczkar, CEO
Q: What is your outlook on pricing and claims inflation in the industry?
A: Claims inflation has been variable over time, driven by specific events. The biggest driver in FY24 was softer utilization growth in non-surgical claims. Different insurers may approach this differently, and our hospital contracting approach and customer demographics also play a role. - Mark Rogers, CFO and David Koczkar, CEO
Q: How long do you expect the cyber costs to continue?
A: We expect similar cyber costs in FY25, around $40 million, with the majority related to IT security uplift. By the end of FY25, most of the technology uplift work will be complete, and costs in FY26 will largely be associated with litigation. - Mark Rogers, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
