Medibank warns of ‘challenging’ market conditions continuing

Medibank Private has flagged a soft start to the year as it warns of a persistently “challenging” market environment.

Medibank chief executive Craig Drummond announcing the company's annual results in Melbourne earlier this year. (Stuart McEvoy/The Australian)

Medibank Private has warned investors its start to the fiscal year has not met expectations amid a persistently “challenging” market environment.

In prepared remarks to be read at the group’s (MPL) annual general meeting today, chief executive Craig Drummond said an industry slowdown last year — which revealed the lowest rate of revenue growth in a decade — had shown no signs of letting up.

“I expect that the environment will continue to be challenging,” he said.

“On the revenue side, we expect market growth to slow in response to ongoing affordability concerns and slowing population growth.

“Our lowest average premium increase in four years, which we applied to premiums in April this year, will also have an impact.”

Mr Drummond added the group had realised premium revenue growth of just 1.3 per cent through the first four months of fiscal 2017, while its core operating division is expected to book flat earnings for the full year.

“In the first four months of this financial year, revenue has been slightly below our initial expectations,” he said.

“That said, we expect the 2017 Health Insurance operating profit to be broadly in line with last year’s result, excluding the 2016 claims provision release of $20m, which equates to a Health Insurance operating profit of approximately $490m.”