Medibank Private chief executive Craig Drummond has again warned revenue in the first four months of the financial year is running below expectations. And he warned that 2017 will be a year of fixing the problem, so investors have been told not to expect any pleasant surprises, probably more costs.
APRA released December quarter data on the health insurance industry last month. This shows that private health insurance penetration fell for the first time in 10 years. While the percentage of Australian residents that had private hospital insurance only fell 0.1 per cent to 47.2 per cent, this will be of great concern to the Government given that falling coverage rates inevitably sees the healthcare burden fall back onto the public system.
Neutral rating retained as Citi adjusts EPS forecasts (slightly) upon marking-to-market led by stronger bonds (lower yields) and stronger equities. The analysts cannot help but conclude this stock looks expensive given the industry's challenged outlook.
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.
Macquarie believes the loss of the Garrison contract is a setback and anticipates lower FY20 guidance for the Medibank Private health division. The broker believes further acquisitions are required to soften the earnings impact of a potential 2% average price rise and the lost earnings from the contract.