Medibank shares experienced a significant drop after Citi analyst Nigel Pittaway reported that the company’s first-half underlying net profit of $298 million fell short of estimates by 2 to 4 per cent. The shortfall was primarily attributed to weaker-than-expected results in its private health insurance (PHI) segment, coupled with increased merger and acquisition costs, and higher lease interest expenses. Medibank is a leading private health insurer and healthcare provider serving Australians.
Underlying earnings per share (EPS) also disappointed, coming in at 10.8¢, which was below both Citi’s and the broader market’s consensus forecasts. While PHI margins remained flat at 16.2 per cent, growth was reportedly skewed towards lower-margin products, impacting overall profitability. There was some positive movement however, as Medibank Health profit increased by 27.9 per cent to $51 million, partially offsetting the shortfall in other areas.
Pittaway noted that the interim dividend of 8.3¢ per share aligned with consensus expectations, and the company’s capital position remains robust. Looking ahead, the analyst suggested that the planned 5.1 per cent increase in premium rates could provide support for margins in future periods. Despite this potential tailwind, investors reacted negatively to the news, with Medibank shares last trading down by 6.3 per cent.
