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Why NIB (ASX:NHF) and Medibank (ASX:MPL) shares are beating the ASX 200

The share prices of Medibank Private Ltd (ASX: MPL) and NIB Holdings Limited (ASX: NHF) are both beating the ASX 200 (ASX: XJO) after premium increase news.

NIB premium increase

NIB announced it’s going to increase its health insurance premiums by an average of 4.10%, with the premium effective 1 April 2024. It noted the previous two increases of 2.72% in 2023 and 2.66% in 2022 were the two lowest increases in the last 20 years.

The NIB CEO Mark Fitzgibbon said NIB is very aware of household budgets being strained. He commented:

We’re doing our very best to maintain affordability yet spending is growing across healthcare, driven by an ageing population, the rise of chronic conditions and the cost of new technologies.

We’re not sitting back passively responding to inflationary pressure by just lifting premiums. We have a range of new measures designed to help members maintain good health as well as reduce out of pocket expenses.

Medibank premium increases

Medibank revealed its health insurance premiums will increase by an average of 3.31% on 1 April 2024. This increase, which applies to Medibank and ahm, is “below inflation and wage growth and remains below the 10-year historical industry average of 3.8%”.

The Medibank chief customer officer Milosh Milisavljevic said:

We know many households are doing it tough at the moment, and our focus has been to balance the impact of rising health costs with the need to keep premium affordable for our customers.

Premium increases are never welcome, which is why we have worked hard to ensure this year’s is as low as it can be, despite rising health costs in the private system. It’s also lower than the price rises seen in other insurances, such as car and house insurance.

Final thoughts on NIB and Medibank shares

If the number of policyholders keeps growing and the premiums go up, then there’s a good chance that profit will increase as well.

The market seemed pleased by the increases reported, and should help cover cost increases. I’m not sure they’re buys today, but healthcare spending has useful tailwinds, including an aging population.

Solid dividend yields and growing dividends are also helpful.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
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