Private Health Insurance Industry

A great analysis by the government on Australia private health insurance.
http://www.apra.gov.au/PHI/PHIAC-Ar...on-in-the-Australian-PHI-market_June-2015.pdf

Market Share is one of the biggest factors affecting Medibank's valuation at the moment.
In 2011, its market share is about 31%. vs BUPA 27% vs Nib 8%
In 2016, its share declines to 27.6% vs BUPA 27% vs Nib 9%
While the small players grow from 16% to 19%.

Without doubt, Medibank market share declines on average, by 0.68% per year.
However,  Australia population is still growing at 1.4% per year, partially offset by decline in participation rate of 0.5% from 2015 to 2016, due to rising premium rate in comparison to CPI.
In my opinion, health insurance industry still grows at between 0.5 to 0.9% per year.
The future is about cost-leadership through flexibility in offering, with trend pointing to increasing exclusive and excess/co-op policy demand.(more customized, only pay for what you need or pay as you receive treatment)

In terms of cost reduction, the current gross margin at 16.6% is probably about as high as it gets, as BUPA only has 15-16 % and NIB 13-14%.

Great thing done by MPL: significant cost reduction, recognition of premium rise vs CPI (affordability issue), defensive investment

Things to watch for: small players eat away the market share, less room for cost improvement, customers complaints/service.

In my opinion, Medibank is still a good investment, because the industry is growing at 0.5 to 0.9% per year, so losing market share is not an imminent problem (its profit will still perform reasonably well) but rather a long-term one.
The message from the directors seems to show that Medibank does prioritize customer service as No.1.

Let's see how well they can serve the customers.