All eyes will be on the Medibank Private Ltd (ASX: MPL) share price and the NIB Holdings Limited (ASX: NHF) share price on Friday after one of its rivals released a disappointing half year update.
What has happened?
Leading health insurer BUPA has just reported its first half results for FY 2019.
As the company's Australian business has an estimated 26% share of the local private health insurance market, its result could provide investors with a rough idea of how both Medibank and NIB are performing.
According to a note out of Goldman Sachs, BUPA's ANZ segment experienced a 1% decline in revenue during the six months to June 30 compared to the prior corresponding period.
Whilst this was slightly underwhelming, its bottom line performance really caught the eye. And not in a good way.
BUPA's ANZ segment posted a 45% decline in underlying profit during the first half in constant currency terms. This poor performance was attributed to both its Australian Health Insurance business and also its Australian Aged Care business.
The latter was impacted by lower occupancy rates, higher costs, and regulatory actions. Which is something that shareholders of fellow aged care providers Estia Health Ltd (ASX: EHE) and Japara Healthcare Ltd (ASX: JHC) might want to take note of.
Whereas the former was impacted by flat premium growth in constant currency terms and the deterioration of its combined ratio from 93% to 95%. Goldman notes that this equates to "a c.5% 'net margin' relative to the c.7% achieved as of the year to June-2018 based on APRA data."
BUPA advised that the margin deterioration was due to the annual premium rate increase being at a lower level than claims inflation.
And looking ahead, BUPA warned that "the operating environment will remain challenging in some of our markets, especially in Australia and Chile."
All in all, I feel this is food for thought for shareholders ahead of their respective result releases later this month.
