Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Medibank Private to encounter strong political headwinds
Medibank Private (ASX:MPL) delivered a healthy set of numbers for the half year to December 31, 2024, posting an underlying net profit after tax (NPAT) of $299 million, up 14 per cent compared with the previous corresponding period, with earnings growth across all business segments.
For shareholders, who have enjoyed a 15 per cent rise in the share price over the past year (it closed on Tuesday at $4.30), the health insurer announced an interim fully franked dividend of 7.8 cents a share, an 8.3 per cent increase and a payout ratio of 72 per cent of underlying net profit.
Significantly, this payout ratio sits below Medibank’s annual target payout range of 75 to 85 per cent, suggesting potential for a stronger final dividend if the performance momentum continues.
Group operating profit increased 13 per cent to $360 million, driven by the health insurance segment’s operating profit of $349 million (up 10 per cent) and a particularly strong performance from the Medibank health segment, which saw its profit jump 41 per cent.
CEO David Koczkar (pictured) was upbeat about the result, telling shareholders that Medibank continued to deliver more value to customers, investing in their experiences and providing them with greater support in their health.
“Our strong result this half reflects our customer focus and the benefits of our disciplined approach. It shows our momentum, the deep relationships we have with our customers and our strength as a health company.
“This is giving us the capacity to do more for our customers, to support health providers and to invest in the health transition that Australia needs.”
He said Medibank was returning a further $160 million as part of its post-COVID ‘give-back’ program that would take its total customer support to a record $1.62 billion.
“We’re playing a greater role in the health of our customers, delivering access to personalised models of care. As community concern has grown about the cost of living, health system capacity and mental health, we are addressing all three,” Koczkar said.
Koczkar’s optimistic note notwithstanding, private health insurance remains a political football with all insurers having to walk the tightrope of ongoing government and public opprobrium about rising private health insurance premiums against maximising returns to shareholders.
The last private health insurance premium increase was, on average, 3.73 per cent from April 1, 2025, a number that disguised the fact four of the five big insurers – NIB, Bupa, HCF and Medibank – had increases above the average at 5.79 per cent, 5.1 per cent, 4.95 per cent and 3.99 per cent, respectively. Moreover, the 3.73 per cent increase was only approved after health insurers submitted their application to Canberra three times.
It’s not just a question of premiums. Health Minister Mark Butler has told private health insurers that they will be forced to contribute more out of earnings to help struggling private hospital operators if Labor wins the election – a policy position hardly likely to endear him to the industry.
On a different front, National Seniors Australia (NSA) wants an incoming federal government to have an in-depth independent inquiry into the private health system.
Rising premiums significantly impact older people, says NSA chief executive officer Chris Grice, with many developing health conditions at a time when their income is reducing.
“Concerns about the value of private health interventions have prompted NSA, in our federal election priorities, to call on candidates to support an in-depth independent inquiry into the private health system. Despite several previous reviews, nothing has changed.”
Medibank is positioning itself as a growing and differentiated health company, targeting multiple avenues of growth across insurance, primary and virtual care and corporate health and well-being.
It also wants to deepen its relationships with customers, supporting their whole health needs, delivering more value and choice, and driving change in the health system, with Koczkar emphasising that the organisation is well-placed to navigate industry cycles.
He might be right. The half-year result did demonstrate resilience in a challenging economic environment, while its strategic investments in health services position it well for future growth beyond traditional health insurance. But none of that will prevent private health insurance continuing to find itself in the political cross hairs – a reality all investors must factor into any decision to buy or sell Medibank Private.
