Private health insurers Medibank Private Ltd (ASX: MPL) and NIB Holdings Ltd (ASX: NHF) are leading the ASX 200 (INDEXASX: XJO) higher, each up 10% this morning.
About Medibank and NIB
NIB Holdings and Medibank Private are two of Australia’s largest private health insurers. Medibank operates the low-cost ahm brand, whilst NIB operates the corporate health insurer GU Health Insurance.
Premiums and Dividends
These two companies have risen today as a result of the Coalition winning the election over the weekend. Prior to the election, Labor had proposed policies regarding the premiums that health insurers could charge. They proposed to limit premium increases to 2% per year for the next two years.
Had this gone ahead, this could have pressured what are already tight margins for the health insurers. For context, the average industry premium increase in 2019 was 3.25%.
Although Labor’s plan will now not go ahead, it should be noted that NIB and Medibank’s most recent premium increases were the lowest they had been in 16 and 18 years respectively. The need for affordability is still putting pressure on health insurers and may mean that premium increases will be low for the foreseeable future.
Medibank and NIB also offer fully franked dividend yields of 4.4% and 3.5% respectively. As with the banks, these two companies are also likely being boosted by the fact that franking credits will not be changed.
With these factors combined, Medibank and NIB have experienced the largest rise on the ASX 200 today.
Are They a Buy?
As mentioned, premium increases are currently the lowest they have been for some time, so although they may not be capped at 2%, growth may still be lower than it has been for the last decade. These two companies may make a good investment for dividend income, but I think there are better options for growth shares.
For two growth share ideas, check out the companies in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
