Morgan Stanley suspects a 2% cap on premium increases in 2020 and 2021 is a most likely outcome for private health insurers. Private health has emerged as a key policy debate in the upcoming federal election.
The broker suspects the industry will underperform again in 2019, despite multiples de-rating to substantially below historical averages.
Regulated profit pools make up around 90% of Medibank Private’s earnings and, the broker notes, the ADF contract loss is a major blow to the company’s ambitions to double non-insurance earnings.
Target is reduced to $2.15 from $2.30. Underweight rating maintained. Industry view: In-Line.
Target price is $2.15.Current Price is $2.62. Difference: ($0.47) – (brackets indicate current price is over target). If MPL meets the Morgan Stanley target it will return approximately -22% (excluding dividends, fees and charges – negative figures indicate an expected loss).