Financial Analysis Report: Medibank Pvt. Ltd. Performance Review

This report provides a financial analysis of Medibank Private Ltd., examining its financial performance, capital structure, and factors affecting its viability. The analysis includes an executive summary, introduction, and discussion of financial reports, issues, and the company's operational background. It...Read More

MANAGING FINANCIAL
RESOURCES

EXECUTIVE SUMMARY
To manage the financial resources of a health insurance company industry there is need
to analyse the available sources and funds for the business. Hence, it can be managed by offering
the satisfactory Medicare services to its client. However, it the present assessments there will be
discussion based on the financial stability and capital structure of Medibank Private Ltd. Thus,
such financial analysis will help the operational managers in the firm in executing the all the
activities in the business. Hence, In accordance with financial statements of te firm the
stakeholders will be benefited with the fruitful informations relevant with the profit gathered by
the firm in the year 2016 and 2017 as well as the liquidity of the firm in meeting the debts of in
time. Thus, these factors indicates the growth of the organisation as well as benefits in term of
making investments. Hence, the stakeholders of the investors of the firm will be able to make the
valuable investments in the entity which in turn analysing the dividend policies as well as returns
they will going to have over such investments.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1 Financial reports of Medibank Pvt. Ltd. And operational background....................................1
2. Background and scope of the analysis....................................................................................5
3. Financial issues and financial situation of Medibank Pvt Ltd................................................6
4. Factors affecting viability of Medibank Pvt Ltd.....................................................................7
5. Analysis of the financial ratios of Medibank Pvt Ltd.............................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Managing resources of an organisation is an important task in order to maintain and
increase financial performance of the company. Effectual management of resources can result in
high profitability and high growth of market share of the company. Managing financial resources
includes planning, organising and controlling financial resources of the company. In order to
manage resource efficiently, analysis and interpretation of financial reports is necessary so that
trends of the financial health of the company. In the present report financial performance of
Medibank Pvt. Ltd has been analysed and interpreted. The report includes attachment of
financial reports of the company along with the interpretation and suggestions. It clearly explains
the background of the entity and scope of the overall analysis. In this report financial issues and
financial situations that are faced by the business that may have significant impact on its
financial performance are also explained. Financial performance has been analysed using ratio
analysis tool along with explaining the factors that may affect the financial viability of the
company.
TASK 1
1 Financial reports of Medibank Pvt. Ltd. And operational background
Financial performance report
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Financial performance report or balance sheet of an organisation helps in analysing its
financial performance which includes value of total assets the company is holding with and the
value of amount it is owing to outsiders and shareholders (Ashwell, 2014). This report provides
useful information to the internal and external users of the company about whether the company
has enough resources to pay off its liabilities or not. The information in financial performance
also helps management in assessing financial ratios of the company.
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Interpretation: Financial report of Medibank pvt Ltd. Provides information regarding its assets
including current and non-current, its liabilities including current and non-current and it equity
capital. From the given data in the report it is easy to compare financial performance of the
company from its past year. It is clearly visible form the above report that its financial
performance has been improved than that of lase year. However, trade receivables of the
company has increased that also increases the risk of bad debts.
Consolidated statement of comprehensive income
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Income statement of the company provides information regarding earning capacity of the
firm and the amount of tax that is paid by the firm (Eckles, Hoyt and Miller, 2014). Income
statement helps in determining the gross profit margin and net profit margin of the company.
Interpretation: From the report it can be seen that revenues of the company has been increased
in 2017 than that of 2016 along with other incomes. However, it also shows increase in amount
of expenses from last year. The amount of income tax paid by the company has also increased
due to increase in profit. It can be said that although the expenses of the company have increases,
but earnings of the company has not been hampered and has shown an increase in profit.
Consolidated statement of changes in equity
From the report of changes in equity, the information that is useful for the users is
amount of dividend paid by the company and change in the amount of share holding (Baxter,
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Bedard, Hoitash and Yezegel, 2013). From the above statement it can be seen that the amount of
dividends paid during 2017 is more than the amount of dividend paid in 2016. This means
company is loyal towards its shareholders and distributes enough profits among them. This
creates positive image of the company in front of its shareholders which are considered as the
owners of an entity. The amount of retained earnings is also showing increases from past two
years.
The overall financial performance and financial position of Medibank pvt. Ltd shows that
the business is growing in each passing year. Financial position of the company is strong and
growing every year. This growth of company represents the efficiency of its management and its
employees.
2. Background and scope of the analysis
Medibank pvt Ltd. belongs from private health insurance and disease management
industry based in Australia. The company was privatised in 2014. The organisation was
previously running as not for profit organisation and but it became for profit organisation later on
and started paying dividends to Federal Government (McNeil, Frey and Embrechts, 2015). Main
products of the company are health insurance, life insurance, travel insurance, workplace health
promotion, pet insurance, workplace health management and the company also provides the
facility of health call centres. This facility enables the company to have direct interaction with its
customers that increases transparency among the business unit and its customers. The main
purpose of the Medibank is better health for better lives. It focuses on providing facilities that
may contribute to the better health of its customers by providing the best services and advices to
its customers (Embrechts and Hofert, 2014).
Discussion of this report focuses on the financial performance and financial profitability
analysis of Medibank Pvt. Ltd. Scope of this report is in broad sense that covers he overall
analysis of Medibank including its financial performance, issues that are faced the business that
may have effect on its financial performance.
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3. Financial issues and financial situation of Medibank Pvt Ltd
Being a health insurance company, it has to face various issues in the market like
competition, involvement of government, trust of public in insurance companies, decline in share
market and share price etc. Medibank in the industry of health insurance is one of the largest
company with a high market share (Taylor, 2016). However, market share of medibank has been
declining rapidly from last many years due to result in increase in competition and various
problems within the company. Though it is seen that the market share of the company is has
shown an increasing trend from last few years and this is also visible from the performance of
the company in last two years which is already been discussed above.
Illustration 1: market share
(Why is Medibank Private losing so much market share? 2017)
The chart clearly shows that market share of the company has started declining from
2011 and still continues to decline till 2016. However, financial reports of the company of 2107
has showing growth in its performance.
Other issues that can have significant impact on the financial performance of Medibank pvt. Ltd.
Are as follows:
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Connecting with customers: The most important factor that can affect insurance industry is
connectivity with their customers (Baruch and Gregoriou, 2017). Buyers of insurance will prefer
to buy insurance from those companies only who are showing growth in past years as insurance
amount is invested in share market and the risk of which is to be borne by insurance buyers
ultimately. Therefore, Medibank need to have strong connection with its customers in order to
increase sales of its products.
Competition for business: There are many health insurance providing companies in the industry
including public companies and private companies. So there is a tough competition between the
companies in selling their products and services (Why is Medibank Private losing so much
market share? 2017). However, facility of internet has benefited public at large to compare and
analyze different products of various companies. Therefore, agents of companies cannot mislead
their customers and must have competitive and dynamic online presence.
4. Factors affecting viability of Medibank Pvt Ltd
In context with the operational performance of Medibank Private Ltd. Where the firm
will be affected by various financial factors such as:
Branding and Products: The functional activities of this organisation can be described as
it mainly deals in facilitating the health insurance cover to the citizens of Australia. Hence, it has
highly satisfied its clients with the insurance services. However, in context with the financial
viability of Medibank Private Ltd will be affected by its brand image and operational functions
which must be improved.
Market Positioning: Financial position of the firm is quite favourable as well as it is
highly appreciable that the firm has the good strength of 29.1% market such as more than 3
million citizens have obtained the insurance cover from such organisation (Cole, Giné and
Vickery, 2017). Thus, in context with making favourable earning there is need to enhance the
operational functioning of the firm.
Impacts of GFC: There will be impact of the Global Financial Crisis with which the
firms suffers from the financial crisis as well as the reductions in the profitability and growth of
the entity (Global Financial Crisis – What caused it and how the world responded, 2017).
Hence, in Order to have safe run in financial year there is need to make beneficiary reserves
which will help in the future that the firm will be able to make payments to its shareholders.
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Supply chain: In making the insurance of people there is need to bring promptness and
adequacy in the operational activities such as delivering the adequate health cover to citizens
(Pradhan and et.al., 2017). In order to make improvements in profitability of the firm there is
need to invite more consumers as well as have the favourable capital structure in the
organisation.
5. Analysis of the financial ratios of Medibank Pvt Ltd
In accordance with the financial stability of the firm with help of various statements such
as income statements, changes in equity and the balance sheet for the year 2016-2017 which in
turn reflect the growth, profitability of Medibank Private Ltd. Hence, the following table will
describe the ratio analysis of such data set which in turn helps the stakeholders in measuring the
ability of this health insurance company in meeting the debts on time as well as growth in the
long run. Thus, it will be fruitful for the internal business as to make changes in the operational
performance as well as introducing innovative services in the market (Post and Byron, 2015).
Ratio Analysis Of
Medibank Private Ltd
PARTICULARS FORMULAS 2016
RATIO
S 2017
RATIO
S
Asset Efficiency Ratio
Asset Turnover Sales 6257 3.78 6326 3.73
Ratio Average Total Assets 1654 1695.5
Times Debtors Turnover Sales 6257 47.58 6326 39.43
Average Trade Debtors 131.5 160.45
Capital Structure Ratios
Interest Coverage Ebit 417.6 0.76 449.5 0.71
Ratio Net Finance Costs 546 629
Debt To Equity Ratio Liabilities 3266 206.84 3463 201.34
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% %
Equity 1579 1720
Equity Ratio Equity 1579 48.35% 1720 49.67%
Assets 3266 3463
Liquidity Ratios
Quick Ratio Current Assets-Inventory 2812.5 1.85 3000.4 1.92
C L 1518.5 1564.7
Current Ratio Current Assets 2812.5 1.85 3000.4 1.92
C L 1518.5 1564.7
Profitability Ratios
Return On Assets Profit 417.6 24.63% 449.5 24.56%
Average Total Assets 1695.5 1830
GP Profit 417.6 6.67% 449.5 7.11%
Sales 6257 6326
ROE Profit Available To Owners 418 48.72% 450 48.36%
Average Equity 858 930.5
Interpretation: On the basis of above listed ratio analysis of Medibank Private Ltd which
evaluate the profitability, growth and liquidity of the firm. Hence, it can be said that the helath
insurance company business is need to make the improvements in the operational activities and
adopt changes in enhancing the services. However, in consideration with the asset efficiency
ratio of the firm on the basis of two years analysis the asset turnover ratio for 2016 is 3.78 and in
2017 it is 3.73. Hence, the Times Debtors Turnover ratio for the year 2016 is 47.58 and for 2017
it is 39.43. However, The capital structure of this entity in both years can be analysed with the
help of interest coverage ratio for the year 2016 is 0.76 and for 2017 it is 0.71. Hence, the current
ratio of the firm in the year 2016 is 1.85 and in 2017 it is 1.92 which indicates that, in the current
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this industry have acquired more current assets which in turn reflects the in such ratios. Thus, the
profitability ratio of Medibank Private Ltd. The ROA for 2016 is 24.63% and in 2017 it is
24.56% thus it can be said that in the current year firm is receiving less interest over average
assets. The GP margin for 2016 is 6.67% and in 2017 it is 7.11% it can be said that in 2017 the
firm is having better profitability as compared with previous year.
Non-Financial performance:
In term of monetary transactions terms of monetary transactions firm makes profits and
reserves for future. Hence, the non financial performances are those activities which in turn
operational activities apart from profitable means (Istrate and Badea, 2017). Hence, it can be said
that Medibank need to develop such kinds of services in order to fetch attraction of its consumers
as well as improving the strength of the organisation.
CONCLUSION
In the present assessment the study was based on the measurements over the financial
statements such as profit and loss index, Financial position as well as ratio analysis of the
Medibank Private Ltd's annual reports. Hence, such reporting techniques helps the managers in
the health insurance company in analysing the strength of the firm and make the necessary
changes in the operational functions. Further, it will also help the external investors in making
the valuable investments in order to rise the capital structure of the firm.
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REFERENCES
Books and journals
Ashwell, M., 2014. Managing Financial Resources. Developing Skills for Business Leadership,
pp.401.
Baruch, Y. and Gregoriou, A., 2017, January. The impact of people management: Employees’
satisfaction role in predicting financial performance. In Academy of Management
Proceedings(Vol. 2017, No. 1, pp. 10557). Academy of Management.
Baxter, R., Bedard, J. C., Hoitash, R. and Yezegel, A., 2013. Enterprise risk management
program quality: Determinants, value relevance, and the financial crisis. Contemporary
Accounting Research. 30(4). pp.1264-1295.
Cole, S., Giné, X. and Vickery, J., 2017. How does risk management influence production
decisions? Evidence from a field experiment. The Review of Financial Studies. 30(6).
pp.1935-1970.
Eckles, D. L., Hoyt, R. E. and Miller, S. M., 2014. Reprint of: The impact of enterprise risk
management on the marginal cost of reducing risk: Evidence from the insurance
industry. Journal of Banking & Finance. 49. pp.409-423.
Embrechts, P. and Hofert, M., 2014. Statistics and quantitative risk management for banking and
insurance. Annual Review of Statistics and Its Application. 1. pp.493-514.
Istrate, C. and Badea, D., 2017, July. Financial management of insurance companies in the
context of the new regime Solvency II. In Proceedings of the International Conference
on Business Excellence (Vol. 11, No. 1, pp. 625-636). De Gruyter Open.
McNeil, A. J., Frey, R. and Embrechts, P., 2015. Quantitative risk management: Concepts,
techniques and tools. Princeton university press.
Post, C. and Byron, K., 2015. Women on boards and firm financial performance: A meta-
analysis. Academy of Management Journal. 58(5). pp.1546-1571.
Pradhan, R.P., and et.al., 2017. Is there a link between economic growth and insurance and
banking sector activities in the G-20 countries?. Review of Financial Economics. 33.
pp.12-28.
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Taylor, M., 2016. Risky ventures: financial inclusion, risk management and the uncertain rise of
index-based insurance. In Risking Capitalism (pp. 237-266). Emerald Group Publishing
Limited.
Online
Why is Medibank Private losing so much market share? 2017. [online] Available
through :<https://www.rivkin.com.au/news/investing/2016/11/30/why-is-medibank-
private-losing-so-much-market-share-116891.aspx:>
Global Financial Crisis – What caused it and how the world responded. 2017. [Online].
[Available through] :<https://www.canstar.com.au/home-loans/global-financial-crisis/>.
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