Medibank share price plummets 9% on higher FY20 claims

The Medibank Private Ltd (ASX: MPL) share price is one to watch on the ASX this morning following revised FY20 guidance from the insurer.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Medibank Private Ltd (ASX: MPL) share price has been hammered down more than 9% in early trade, following revised FY20 guidance this morning.

The Aussie health insurer reported higher than expected claims since the start of the FY20 financial year, which has resulted in a $21 million under provision from the group's 30 June 2019 claims reserve.

Medibank's actual 2.4% underlying claims growth per policy unit in FY19 is an increase from the 2.0% reported. Medibank is now forecasting this trend increase in claims per policy unit in 2H 2019 to continue in FY20.

The news has seen the Medibank share price come under strong pressure in early trade as the company revises its FY20 outlook.

The health insurer cited higher private hospital payments as the biggest catalyst for the claims increase. Medibank's earnings will be affected by "challenging" conditions, despite an uptick in policyholders to start the year.

Management is "confident" that it is on track to stabilise Medibank brand policyholder volumes by the financial year-end.

There were no other changes to outlook comments from the company's FY19 results.

What does this mean for the Medibank share price?

The Medibank share price will be under pressure on this revised FY20 outlook news, after a strong trading year so far. Medibank shares opened at $3.40 per share having surged 36.00% higher since the start of January, but have plummeted to $3.09 at the time of writing, a 9.12% drop.

The company's shares currently boast a 4.23% dividend yield with a market cap of $8.54 billion. 

Fellow ASX health insurers QBE Insurance Group Ltd (ASX: QBE) and NIB Holdings Limited (ASX: NHF) could also be under pressure this morning.

Foolish takeaway

It's been a strong year for the Medibank share price so far, but the revised guidance could change that this morning.

It's worth watching Medibank shares in this morning's trade, following a quiet Melbourne Cup Tuesday.

Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why 29Metals, Brainchip, Platinum, and Premier Investments shares are falling today

These ASX shares are having a tough time on hump day.

Read more »

Man with his head in his head because of falling share price.
Share Fallers

Why 29Metals, Atlas Arteria, IDP Education, and Mineral Resources shares are falling

These ASX shares are having a tough time on Tuesday. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why ALS, EOS, NRW, and Patriot Battery Metals are dropping today

These ASX shares are starting the week in the red.

Read more »

A man looking at his laptop and thinking.
Technology Shares

Why are these ASX tech shares getting smashed today?

Owners of these two stocks are missing out today.

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why AGL, Brickworks, IGO, and New Hope shares are dropping today

These ASX shares are having a poor session. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Amcor, Arafura, Brainchip, and South32 shares are tumbling today

These ASX shares are having a tough time on hump day. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Aussie Broadband, Liontown, Metals Acquisition, and Seek shares are falling

These ASX shares are having a poor session. But why?

Read more »