Medibank Private (MPL): This morning, Australia’s largest health insurer reported its half-year 2026 results, which showed MPL’s disciplined approach to volume growth wins over the long-term. The HNW Portfolio currently holds a 2.5% weight in MPL.

Key Points:

  • Record Profits Flat: Medibank recorded flat net profits of $298 million, driven by a 6% increase in insurance profits being offset by lower investment returns, a pleasing outcome. Over the half, premiums increased by 4%, and impressively increased the number of resident policyholders by 1.9% to over 2.02 million customers.
  • Medibank Health: Increased profits by 29% and now contributes 10% of profits, following increased uptake of Live Better Rewards and financial wellbeing policies, with primary care benefitting from an acquisition that added 61 clinics to Medibank’s 100 established clinics. Over half of MPL had 14,400 patients treated at home rather than in hospitals, an increase of 13%, having the capacity to have patients being treated or recover from surgery at home differentiates MPL from competitors.
  • Lower Investment Income: MPL’s investment portfolio returned $95 million over the year, representing a decrease of 17% on last year, driven by a lower RBA cash rate. With every +25bps in the cash rate, MPL is set to make $7 million more in profit.
  • Balance Sheet Clean: MPL is debt-free with a net cash position of $420M
  • Record Dividend: MPL announced a fully franked dividend of 8.3 cents per share, representing 6.4% growth on last year (See Below). The payout ratio represented a 76% payout of profits, at the low end of the target range of 75-85%.
  • Guidance: MPL management did not provide explicit guidance but did state that they expect moderate increases to both policyholders and gross profit, driven by productivity savings across the business.

Portfolio Strategy: We own MPL in the Portfolio as MPL’s healthcare earnings are defensive, and it is a well-run business. Despite its high market share, MPL’s gross margins and management expense ratios are higher than those of others in the industry, reflecting its recent past operating as a government department. However, management has been slowly taking costs and improving margins. Over the medium term, MPLs moving to improve their digital health experience and having patients treated at home rather than in private hospitals will drive profit growth, expand margins, and be a good outcome for recovering patients.

MPL finished down 5% to $4.52 but was up +6% yesterday on news that private health premiums would increase 5.1% over the coming year.