Coalition Government Rejects nib’s Proposal; Four Health Insurance Stocks In Focus

A leading health insurance provider of Australia, nib Holdings Limited (ASX: NHF) has called on the federal government to abolish its universal healthcare system, Medicare, and make private health insurance compulsory for Australians. Health Minister, Mr Greg Hunt has rejected the proposition completely and informed that the Coalition government will stand by Medicare forever.

nib’s Managing Director, Mr Mark Fitzgibbon, suggested the government to pay the health insurance premiums of only those Australians that are unable to afford it. The Labor party also rejected the nib’s idea, calling Medicare as a key to Australia’s health system.

What is Medicare?

Medicare is a healthcare scheme offered by the Australian government that enable residents to obtain healthcare treatment at a minimal or no cost. The Australian government funds Medicare by charging a Medicare levy of 2 per cent from the working Australians that pay income tax. Medicare offers several healthcare benefits, including free or subsidised treatment from health professionals and free accommodation as a Medicare patient in a public hospital.

However, the healthcare scheme does not cover private patient hospital costs, medical and hospital costs incurred overseas, ambulance services and medical services which are not clinically necessary.

Why nib is Demanding Abolishment of Medicare?

According to nib, the private health insurers in Australia are facing challenges amid the monopoly enjoyed by the government through the Medicare system. Mr Fitzgibbon believes that the private health insurance industry will face a tough future with the narrowing ratio of taxpayers to retirees and the ageing population. More and more people are relying on Medicare in Australia, and the private insurance is becoming out of reach. In the wake of the current situation, Mr Fitzgibbon thinks that there is a better way to deliver more efficient and fairer universal healthcare services.

ASX-Listed Health Insurance Stocks

Let us have a look at some of the health insurance companies listed on the Australian Stock Exchange in some detail below:

nib Holdings Limited

A trusted international health partner, nib Holdings Limited (ASX: NHF) offers health and medical insurance to more than 1.5 million New Zealand and Australian residents. The Group helps people transact with healthcare systems, make more informed healthcare decisions and live healthier lives. Besides health insurance, the Group is also the third largest travel insurer of Australia and a global distributor of travel insurance.

Operational Performance

In May this year, the Group informed that it has concluded the purchase of QBE’s travel insurance business at a final purchase price of $24.2 million. Mr Fitzgibbon stated that the acquisition has strengthened the nib’s position in the domestic travel insurance market. According to him, as over 60 per cent of travel insurance claims are health or medical-related, it allows the nib’s travel business to tap into the Group’s hospital and provider networks.

Financial Performance

The Group posted its financial results for the six months to 31 December 2018 in February this year. nib declared an underlying operating profit of 114.3 million dollars which was 18.6 per cent more than the previous first half result. The underlying revenue and the net profit after tax improved 10.9 per cent and 4.8 per cent to $1.2 billion and $74.3 million, respectively during the period.

Stock Performance

The Group’s stock is trading at AUD 8.095 today with a rise of 1.952 per (as at 12:59 PM AEST, 24 July 2019). The market cap of NHF was recorded at ~AUD 3.62 billion at the time of writing the report. The stock has generated an enormous return of 55.64 per cent on a YTD basis and a return of 44.93 per cent in the last one year.

Medibank Private Limited

An Australian-headquartered private health insurer, Medibank Private Limited (ASX: MPL) provides private health insurance through its ahm and Medibank brands. The aim of the company is to create a market leading health services offering for its customers.

Operational Performance

In March 2019, the company entered into an Agreement with 1st Group Limited (ASX: 1ST) which enabled the Medibank’s customers to use 1st Group’s online appointment booking platform, MyHealth1st for booking appointments with Medibank’s Members’ Choice Advantage dental network.

Financial Performance

The company released its 2019 half year results in February 2019. The company reported that its NPAT declined 15.4 per cent to $207.7 million during the first half year of FY19 while its operating profit improved 2.4 per cent to $293 million relative to the prior corresponding period.

Stock Performance

MPL’s stock is trading at AUD 3.605 on the ASX today, up by ~0.7 per cent with a market cap of AUD 9.91 billion (as at 12:59 PM AEST, 24 July 2019). The 52-week high and low value of MPL was noted as AUD 3.680 and AUD 2.290, respectively. The stock has generated a YTD return of 43.20 per cent.

ClearView Wealth Limited

An ASX-listed diversified financial services company, ClearView Wealth Limited (ASX: CVW) help Australians protect and build their wealth by partnering with financial advisers. The Group has three main business segments, including Financial Advice, Wealth Management and Life Insurance. Under its life insurance segment, the Group offers Life Cover, Total and Permanent Disability (TPD) Cover, Trauma Cover, Income Protection Cover, Business Expense Cover and Child Cover.

Recent Update

On 18th July 2019, the Group provided an update on its FY19 expected results and a strategic business update with a focus on 2H FY19. The Group reported an expected Underlying NPAT of $25.1m for the year ended 30 June 2019. The Group has completed an IT strategy review and material cost transformation program in 2H FY19. Also, it has terminated a few poor performing life insurance distribution relationships, enhancing and repricing its wealth management and life insurance products.

Financial Performance

The Group, on 27th February 2019, released a condensed consolidated financial report for the half year ended 31 December 2018. The Group reported a fall in the Underlying NPAT by 13 per cent to $13.3 million during the period against the HY18 figure of $15.3 million. Also, its Life Insurance Underlying NPAT was 5 per cent down to $11.9 million.

Stock Performance

The stock of the Group last traded on 22nd July 2019 on ASX at AUD 0.665. The stock has delivered a negative return of 26.11 per cent on YTD basis. However, it has generated a return of 71.51 per cent in the last ten years.

AMP Limited

A wealth management company, AMP Limited (ASX: AMP) offers solutions and services across superannuation, life insurance, financial advice, investing, banking, self-managed superannuation funds (SMSFs), retirement income and investment management. Under its life insurance service, the company covers individuals against sickness or injury anywhere in the world.

Operational Performance

Recently, the company informed through an ASX announcement that the sale of AMP Life to Resolution Life is highly unlikely due to the condition precedent for Reserve Bank of New Zealand approval. AMP Life is the company’s ANZ’s wealth protection and mature businesses.

Financial Performance

The company declared its Q1 19 cashflows update on 2nd May 2019 that highlighted that the Australian wealth management net cash outflows amounted to AUD 1.8 billion in Q1 19. The company informed that the AMP Bank increased deposits by AUD 218 million with a large growth in retail deposits during the period. However, the total loan book of the AMP Bank also grew by AUD 127 million to AUD 20.1 billion. AMP Capital reported 4% increase in AUM to A$194.6 billion majorly due to stronger investment markets.

Source: Company’s Report (2nd May 2019)

Stock Performance

The stock of the company is trading at AUD 1.807, up by 3.55% (as at 12:59 PM AEST, 24 July 2019). It has delivered a negative return of 28.48 % on YTD basis.


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