Why is the Medibank (ASX:MPL) share price underperforming NIB (ASX:NHF) lately?

Medibank shares have been underperforming NIB.

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ASX share price movement represented by doctor pressing digitised screen with array of icons including one entitled health insurance

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The Medibank Private Limited (ASX: MPL) share price has been underperforming the NIB Holdings Limited (ASX: NHF) share price in recent weeks. What has been happening?

Over the last month, the Medibank share price is down by 3.3% while the NIB share price has fallen by less than 1%.

There is a much bigger difference over the last year, with Medibank shares up 29% compared to NIB shares going up by 57%.

Recent updates

Some of the biggest influences on the movement of businesses can be the updates they release.

NIB

For NIB, two of the most recent updates have been news from the ACCC and its FY21 result.

The ACCC has authorised Honeysuckle Health and NIB to form and operate a health services buying group. The Honeysuckle Health buying group intends to collectively negotiate and manage contracts with healthcare providers, including medical practitioners and hospitals, on behalf of NIB and other private health insurers and other healthcare payers (such as travel insurance companies) who join the group. However, this authorisation has been granted with a condition that major insurers Medibank, Bupa, HCF and HIF in WA are not allowed to join.

NIB’s FY21 result showed group underlying revenue increased by 2.9% to $2.6 billion, while the claims expense rose 2.5% to $2 billion. Total group expenses fell 8.8% to $362.1 million. Group underlying operating profit increased 39.5% to $204.9 million, while net profit after tax (NPAT) rose by 84.5%.

NIB said it was expecting similar market conditions in FY22 when compared to FY21. Australian resident health insurance net policyholder growth is expected for FY22 to be in the range of 2% to 3%. Growth in the New Zealand business is expected to be consistent with recent years.

The business has exposure to travel insurance. International travel is now seemingly on track to open sooner than previously expected.

It also said that, while it was a small step, its joint venture with Tasly allows it to have a licence to sell health insurance in China and it made its first sales in July. NIB called this opportunity over the long-term “considerable”.

Medibank

Turning to updates from Medibank which could have influenced the Medibank share price in recent times.

The FY21 result was the latest major update from the biggest private health insurer. However, it didn’t demonstrate quite as much profit growth as NIB.

It said that revenue from external customers rose 2.1% to $6.9 billion, health insurance operating profit grew by 14.4% to $538.6 million and total underlying net profit rose by 8.5% to $398.7 million. The continuing operations net profit after tax went up 39.8% to $441.2 million.

Are either of the private health insurers opportunities?

Brokers aren’t convinced either of them are going to rise much over the next year.

For example, Morgans currently rates both the NIB share price and the Medibank share price as a hold.

Morgan’s price target for Medibank is $3.28, while the price target for NIB is $6.81. Based on those numbers, it implies that broker thinks NIB shares will essentially be the same price in a year, but Medibank shares could fall by around 5%.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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