Medibank Reports 27.5% Profit Rise and Advances Net Zero Strategy

Robust Profit Growth Amid Diversification

Medibank Private Limited (ASX:MPL) posted a strong set of full-year results for FY26, with net profit after tax soaring 27.5% to $638.7 million. This robust performance was underpinned by an 8.0% rise in Health Insurance revenue to $8.65 billion and a standout 31.3% jump in Medibank Health segment profit to $100.7 million. Operating profit for the group climbed 6.7% to $813.5 million, reflecting disciplined cost management and solid growth across core businesses.

Underlying net profit after tax, which adjusts for investment return normalisation and COVID-19 reserve movements, was up a more modest 2.9% to $636.8 million, signalling steady operational momentum despite a challenging economic backdrop. Earnings per share increased 27.5% to 23.2 cents, buoyed by the finalisation of the COVID-19 equity reserve in the prior year.

Health Insurance Holds Steady in Competitive Market

Medibank’s Health Insurance business demonstrated resilience, with premium revenue growing 4.6% to $8.59 billion and net claims expense rising in line. Gross profit advanced 4.6% to $1.46 billion, maintaining a stable gross margin of 17.0%. Operating profit increased 3.8% to $769.8 million, with expense ratio steady at 8.0% and operating margin flat at 9.0%. The company highlighted disciplined growth, lower utilisation rates, and improved risk equalisation outcomes as key contributors.

Resident policyholder numbers grew by 22,100 (1.1%), with Medibank brand growth doubling to 0.6%, while the ahm brand grew 2.4% despite reduced aggregator joins. The acquisition rate ticked up 10 basis points to 11.6%, and lapse rates rose 40 basis points to 10.5%, though Medibank expects to outperform the industry on retention. Non-resident policy units declined 2.3%, reflecting tighter migration settings and natural run-off, partially offset by growth in worker segments.

Medibank Health Accelerates Expansion with Better Medical

The Medibank Health segment, encompassing wellbeing, primary care, and community and acute care, delivered a 31.3% increase in segment profit to $100.7 million. Revenue surged 30.8% to $634.8 million, supported by strong organic growth and a six-month contribution from the Better Medical acquisition, which added $6.2 million to operating profit.

Primary care revenue rose 29.6%, with GP consultations up 26.7%, reflecting integration of Better Medical’s 61 clinics across multiple states. Community and acute care revenue jumped 48.8%, driven by increased patient numbers and expanded home hospital services. Despite a 180 basis point decline in gross margin to 51.5%, operating margin remained robust at 16.9%, aided by efficiency gains and a 140 basis point improvement in expense ratio.

Medibank plans to continue scaling its health services, focusing on prevention, primary care network synergies, and expanding virtual and community-based care offerings. The company also signaled appetite for further M&A to broaden geographic reach and capabilities in wellbeing and virtual care.

Investment Income and Capital Position

Net investment income declined 13.9% to $178.9 million, primarily due to a lower average Reserve Bank of Australia cash rate and reduced income from both growth and defensive portfolios. Underlying net investment income, adjusted for market normalisation, fell by $17.2 million to $176.2 million. Medibank’s investment portfolio stood at $3.4 billion as at 30 June 2026, with a strategic asset allocation favouring defensive assets.

The company’s capital position remains strong, with total equity rising 3.2% to $2.41 billion and a prescribed capital amount (PCA) coverage ratio improving to 1.9x. Health Insurance capital employed was stable at $1.32 billion, with a required capital ratio of 13.3%, above the 10-12% target range due to a temporary $250 million APRA supervisory adjustment following the 2022 cybercrime event. Medibank Health capital employed increased $147.8 million to $559.8 million, reflecting the Better Medical acquisition cost.

Dividend and Remuneration Highlights

The board declared a fully franked final dividend of 10.9 cents per share, payable on 8 October 2026, bringing the full-year dividend to 19.2 cents, a 6.7% increase over FY25. The dividend payout ratio of 83.0% falls within the company’s target range of 75-85% of underlying NPAT.

Executive remuneration for FY26 reflected solid company performance, with short-term incentive outcomes averaging 95% of target after a 5% downward risk adjustment due to areas identified for improvement in risk management. The 2024 long-term incentive plan vested at 75.1%, with strong results on earnings per share growth and total shareholder return hurdles, though market share growth vesting remains pending APRA data release.

Advancing Sustainability and Climate Strategy

Medibank updated its Net Zero Target and Pathway in 2026, committing to achieve net zero greenhouse gas emissions by 2050 across Scope 1, Scope 2 (market-based), and Scope 3 (excluding financed emissions). The company disclosed total absolute gross Scope 1 emissions of 49.4 tCO2-e and Scope 2 market-based emissions of 3,411.3 tCO2-e for the year.

Climate-related risks and opportunities have been integrated into Medibank’s governance and risk management frameworks, with scenario analyses indicating limited financial impact under both a Net Zero Transition and a Hot House scenario. The company emphasised ongoing investments in decarbonisation, renewable energy sourcing, and operational efficiency, alongside expanding virtual and personalised models of care as part of its sustainability strategy.

Legal Risks from 2022 Cybercrime Event

Medibank continues to face several legal proceedings related to the October 2022 cybercrime event, including civil penalty proceedings by the Australian Information Commissioner, a representative complaint under investigation by the Office of the Australian Information Commissioner, and consolidated consumer and shareholder class actions filed in federal and state courts. The company is defending all proceedings and has not recognised provisions given the uncertainty of outcomes and potential financial impacts.

Non-recurring cybercrime-related costs of $34.9 million were incurred in FY26, including IT security uplift and legal expenses. These costs are expected to decline to less than $20 million in FY27, primarily related to ongoing regulatory investigations and litigation.

What to Watch Next

Medibank’s FY27 outlook targets disciplined growth in resident policyholders, stable gross margins, and solid gross profit growth in non-resident health insurance. The Medibank Health segment is expected to grow profits by approximately 25%, including a full-year contribution from Better Medical. The company’s strong capital position supports further M&A activity, particularly in primary care and wellbeing sectors.

Investors should monitor regulatory developments related to the cybercrime litigation, progress on Net Zero emissions targets, and the evolving competitive landscape in private health insurance amid cost-of-living pressures. The continued expansion of Medibank Health’s integrated care offerings could also be a key driver of future earnings diversification and growth.