Medibank Private has delivered a full-year profit well ahead of its prospectus forecast and will pay its maiden dividend as it shrugged off recent downbeat commentary from analysts about the company’s short-term challenges.

Much of the revenue growth in health insurance – which contributes 90 per cent of the Medibank’s total revenue – was underpinned by the Federal Government approved 6.5 per cent increase premiums in April. Managing director George Savvides said the company would continue to focus on cutting costs and improving its claims management process in the year ahead.

The company lifted its gross profit margin to 14.2 per cent, from 13.5 per cent previously.

The lacklustre growth in membership is weaker than growth in the broader market, suggesting Medibank’s competitors, such as Bupa and nib, are winning customers at Medibank’s expense.

On a day where the S&P/ASX 200 (ASX: XJO) is down another 1.4%, Medibank’s shares have soared 10.5%.

Heading into the result announcement the share price has been under serious pressure.

The shares traded as low as $1.99 earlier in the week, falling below the $2 per share retail investors paid in the float and well down from the high of $2.59 it reached in February. The government capped premium increases at 6.5 percent for the year.

The earnings numbers come as Medibank is locked in a fierce fight with Catholic private hospital operator Calvary Health Care over a range of affordability and care issues.

Medibank declared a fully franked 5.3¢ dividend on Friday.

The company posted a full year net profit of 1.8 million, beating its own prospectus forecast of $258.2 million.

The result is more than double the $130.8 million Medibank made last year and up 13 per cent on an underlying basis. The year-ago figure was held back by $134.7 million in pre-tax expenses for the sale of a business unit, and the reorganisation of its complementary services operation.