Australia's biggest health insurer, Medibank Private, has defied industry trends of people dropping their private medical cover to chisel out a small increase in profit.

Key points: Medibank has beaten market expectations with a 3pc rise in net profit to $458 million

Medibank has beaten market expectations with a 3pc rise in net profit to $458 million The health insurer added 30,000 customers over the year and grew its market share for the first time in a decade

The health insurer added 30,000 customers over the year and grew its market share for the first time in a decade The proportion of Australians with private health insurance has slipped to its lowest level in a decade

Medibank's full-year net profit rose 3 per cent to $458 million.

Underlying profit — which strips out one off gains and losses — also rose almost 3 per cent to $447 million, comfortably beating analyst expectations of a sharp fall.

Medibank added a net 15,000 new customers over the year, a strong result given private health insurance cover has now dropped to it lowest level since 2007.

Medibank chief executive Craig Drummond said it was a "good quality result".

"The ongoing strong recovery of the Medibank brand has seen policyholder growth in all four quarters of the financial year for the first time in four years."

Growth was largely delivered by Medibank luring customers away from other insurers, rather than new customers embracing private health insurance.

The big insurer grew its market share by 0.5 percentage points to just under 27 per cent.

That is not a huge increase, but important in a game won or lost on fine margins and, perhaps more significantly, Medibank's first increase in overall market share in a decade.

The most recent data from the insurance regulator, APRA, revealed another 30,000 Australians had dumped their private health insurance in the first three months of the year.

Growth for the sector elusive

Medibank's premium revenue increased by 2.3 per cent over the year, ahead of the broader consumer measure of inflation, which was just under 2 per cent, and roughly in line with wage growth.

The operating profit in the health insurance business rose by just 1.3 per cent to $542.5 million, while investment income was boosted by solid returns from the first half of the year, up 7.5 per cent to $103 million.

Mr Drummond forecast private health insurance across the sector would remain flat over 2020, with Medibank sales expected to stabilise before growing again in 2021.

The Medibank boss noted that, despite the re-election of the Federal Government at the May election removing the threat of a cap on premiums proposed by Labor, the industry still expected premium inflation to be low for some time.

This was likely to lead to an increase in mergers among the 37 private health insurers in the market, he said.

"I would expect to see a number of small and medium size private health insurers run into difficulties," Mr Drummond added.

Shares bounce

The company will pay a full-year dividend of 13 cents per share, marginally up on last year.

JP Morgan analyst Siddharth Parameswaran said the result was slightly softer than his forecast.

"The company showed some growth in policyholders … [but] still a slight under-performance due to mix of sales geared towards lower value policies," he said.

However, most investors liked what they saw, with shares jumping more than 4 per cent on opening to $3.53 (at 10:05am AEST).

