Stock Spotlight: Medibank Private Ltd (ASX:MPL)

About Medibank Private Ltd

Medibank Private Limited provides private health insurance and health services in Australia. The company operates in two segments, Health Insurance and Medibank Health. The Health Insurance segment provides private health insurance products, including hospital cover that offers members with health cover for hospital treatments; and ancillary cover, which provides members with health cover for healthcare services, such as dental, optical, and physiotherapy. This segment also offers health insurance products to overseas visitors and overseas students. The Medibank Health segment provides health management and in-home care services, as well as a range of telehealth services to government and corporate customers; and distributes travel, life, and pet insurance products. It underwrites its health insurance products under the Medibank and ahm brands. The company was founded in 1976 and is based in Docklands, Australia.

Key Stats

Source: Yahoo Finance. Data as of 31/07/25.

Growth Potential

• On valuation grounds relative to the current share price, MPL trades fair value.
• MPL is a quality business with a high quality management team.
• MPL is targeting to grow customers in line with market rate in 2H25 but pleasingly the Company is looking to gain market share in FY26 (this is an upgrade from previous target of growing in line with the market).
• Given Australia’s growing and ageing population, there will be increased demand for health care services. This will add additional pressure on Australia’s public health care system and the Federal budget and an increased dependence on private health care insurers. NHF offers exposure to the business model of providing a funding mechanism for the high-growth health care sector. Healthcare spending is expected to grow at 5-10% per annum, so without significant tax hikes, the government cannot afford for people to shift back to the public healthcare system.
• Given underlying increases in average premium rates of around 5 - 6% p.a., some policyholder growth (especially at the 30-34-year-old segment), we estimate that MPL offers close to low double-digit underlying growth in the medium term.
• Potential to improve the company’s expense ratio.
• Room for industry-wide benefits such as losses from risk equalization funds as nonprofitable players are consolidated.
• Incentives and benefits encourage PHI take-up. They include 1. Tax benefits and penalties for Australian residents (via Lifetime Health Cover, Medicare Levy Surcharge and means tested rebate); and 2. Shorter wait times, a choice of specialist doctor/hospital and coverage of ancillary health services support.
  

Key Risks

• Intensifying competition between top 6 players, putting policy growth targets at risk and any increases in expected marketing spend going forward will no doubt add further strain on earnings growth.
• Policyholders decline unexpectedly, despite the incentives and Australian Government struggling with the rapid increase in healthcare spending and health services demand.
• Registered health insurers cannot increase premium rates without approval from the Government/Minister for Health/PHIAC/APRA. This leaves NHF’s ROE and margins exposed to a political process and pressures if the company is deemed too profitable.
• Regulatory changes especially relating to any changes to tax incentives and benefits which encourage take up of PHI.
• Higher than expected lapse rates and claims inflation as a result of poor insurance policy design, aging population, and costs of new medical equipment, procedures and treatments.
• Poor negotiations with healthcare providers such as private hospital operators leading to unfavourable contractual terms.
• Lower than expected investment returns.