The Medibank Private Ltd (ASX: MPL) share price has tumbled today after the company reported its 2020 full-year results for the 2020 financial year (FY2020). At the time of writing, Medibank shares are down 3.50% to $2.76 after closing at $2.86 yesterday.
What did Medibank report for FY20 today?
The coronavirus pandemic has hit the company hard.
Medibank reported total revenue from ordinary activities of $6.785 billion, down 6% from FY19’s $7.219 billion. Premium revenues actually increased by 1.3% to $6.546 billion. But insurance claims increased by 3.2% and as a result, health insurance profits fell to $470.6 million.
Overall, net profit after tax (NPAT) fell 31.3% to $315.6 million, down from $458.7 million in FY19.
Earnings per share also fell 31.3% from the 16.7 cents in FY2019 to 11.4 cents in FY20. The company noted that the decision to postpone the 3.27% annual premium increase for policyholders (as well as other coronavirus-related hardship measures) has cost it around $80 million.
The company also told investors that the expected savings from the pause in elective surgery that was a consequence of the pandemic have not materialised. Here’s what Medibank CEO Craig Drummond had to say on this matter:
While significant savings were projected by some commentators at the beginning of the crisis, this has not eventuated. The industry regulator APRA has said the vast majority of surgeries and extras services disrupted through COVID-19 will ultimately take place. In preparation for this, we have accrued a $297 million balance sheet liability.
What about dividends?
Medibank also announced a final, fully franked dividend of 6.3 cents per share to be paid on 24 September. This is down 14% from FY19’s final dividend but brings the total level of dividends paid in FY20 to 12 cents per share. That’s an 8.4% decrease from the 13.1 cents per share the company paid out in FY19. It also represents a payout ratio of 90% of earnings, up from FY19’s 80%. Medibank noted that its annual target payout ratio is normally 75–85% of earnings, but clearly, the company decided that the circumstances that 2020 has brought warranted the highest payout possible.
In a spot of good news, Medibank also reported that its market share of the Australian private health insurance market has grown by 4 basis points over the year. It now stands at 26.9% of the overall market as of 30 June 2020. That number includes both the Medibank and AHM brands that Medibank owns.
Medibank gets a new chair
In other news, Medibank also announced the retirement of its current chair Elizabeth Alexander. Ms Alexander will retire from the board at the end of September and will be replaced by Mike Wilkins. Recently, Mr Wilkins had stepped in as acting CEO of the embattled AMP Limited (ASX: AMP). That was after the wealth manager was engulfed in the scandals that arose from the 2018 banking royal commission. But now he is set to join Medibank as chair when Ms Alexander steps down.
Overall, it isn’t a great day to be a Medibank shareholder. The Medibank share price is down more than 18% over the past year and is less than 13% off of the 52-week low of $2.45 that the company hit back in April today.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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