The Medibank Private Ltd (ASX: MPL) share price has been volatile in recent months. It has managed to rise slightly in 2022 – up 3.5% – but since 30 August 2022 it's actually down by 5.6%.
The last three years have been an interesting time for private health insurance businesses.
There was a lot of disruption caused by the COVID-19 pandemic. But, that also led to a number of elective surgeries being delayed, which may have helped increase Medibank's profit during this period.
FY22 saw net resident policyholder growth of 60,900 (or 3.2%). Revenue rose 3.2%, with operating profit rising 12.5% to $594.1 million. However, the actual net profit after tax (NPAT) fell 10.7%. That was after the net investment income of $120 million in FY21 turned into a net investment expense of $24.8 million in FY22, as investment markets plummeted in the last few months of FY22.
Underlying NPAT, which aims to remove that investment volatility, rose by 9.1% to $435.1 million. The annual dividend per share increased 5.5% to 13.4 cents.
FY23 outlook
Growth within the business could have a positive effect on the Medibank share price.
In terms of FY23 policyholder growth, it's expecting a rise of 2.7%. That's assuming a modest decline in the growth rate of industry participation.
Looking at the comments about claims, it's expecting the underlying net claims expense per policy unit to grow. The growth rate of 2.3% in FY22 is its "best indicator" of growth in FY23 among resident policyholders.
The company expects productivity with its management expenses to largely offset the inflation of expenses.
In terms of customer relief, it continues "to assess claims activity and any permanent net claims savings due to COVID will be given back to customers through additional support in the future".
Management is focused on growth for the business. It's looking at both organic growth and acquisition opportunities for Medibank Health and health insurance, supported by a "strong capital position". It had health insurance business-related capital of $983.7 million at 30 June 2022, which was at the top end of its targeted range.
It has unallocated capital of $148 million, which "provides flexibility to fund future inorganic growth" and it will "consider further capital management if suitable opportunities do not arise".
What do experts think of the Medibank share price?
The brokers Citi and Ord Minnett both rate Medibank as a buy. Both brokers thought the FY22 result was good.
Ord Minnett has a price target of $3.75 on the business, which implies a possible rise of around 5% over the next year.
Meanwhile, Citi has a price target of $4. That suggests that the Medibank share price could rise by more than 10% over the next year.
