Medibank profit slides as claims expenses increase; Wilkins named as new chair

Medibank Private chief executive Craig Drummond has said predictions that private health insurers would make significant savings during the COVID-19 pandemic have not played out in reality, with the company reporting a net profit fall of 31 per cent for 2020.

"While significant savings were projected by some commentators at the beginning of the crisis, this has not eventuated," Mr Drummond said in a statement to investors on Thursday morning.

“While significant savings were projected by some commentators at the beginning of the crisis, this has not eventuated”: Medibank chief executive Craig Drummond. Credit:Louie Douvis

"The industry regulator APRA has said that the vast majority of surgeries and extra services disrupted through COVID-19 will ultimately take place. In preparation for this we have accrued a $297 million balance sheet liability."

The $8 billion health fund reported premium revenues up 1.3 per cent for the year to $6.5 billion.

Net profit after tax from all operations, both continuing and non-continuing, decreased 31 per cent to $315 million. This was impacted by a reduction in operating profit for health insurance claims, which decreased 13 per cent to $470.6 million.

Medibank paid out $5.5 billion in claims in 2020, with a 3.2 per cent increase in net claims compared to 2019.

Income across the company's investment portfolios also plummeted as the pandemic hit world markets. Net investment income came in at $2.4 million for the year, a drop of more than $100 million on last year's figures.

The company's health management arm Medibank Health, which includes telehealth and at-home care services, was a bright spot in the numbers. Operating profit jumped 25.8 per cent for the year to $27.8 million.

Medibank also announced the appointment of a new chairman on Thursday morning, with QBE Insurance chairman Mike Wilkins to take over from long-standing chair Elizabeth Alexander on September 30.

Ms Alexander had served as chairman since March 2013 and said she was proud to have overseen Medibank's transition to life as a listed company.

In briefing notes to shareholders, the company said that despite the challenging COVID-19 conditions, Medibank had a strong balance sheet and had been able to support members financially during this time.

Mr Drummond highlighted the company had been able to grow resident policyholders by 10,400 in 2020 despite significant uncertainty.

Medibank Private declared a final dividend of 6.3c, a 14.9 per cent decrease on 2019.

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